181 S.W.2d 421 | Ky. Ct. App. | 1944
[EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] *822 Reversing.
This appeal is from a judgment approving the issue of $43,000 of bonds to fund a floating debt of the City of Newport, created by deficits in the revenue during the fiscal years of 1941, 1942 and 1943.
For the fiscal year 1941, it was estimated that the revenue of the City from all sources would be $717,921.85 and the anticipated expenditures equal to that sum. When the year had closed it was found that the actual collections were only $672,163.47, while the actual expenditures were $709,909.46, thus there was a deficit of $37,745.99. The tax rate levied for other than sinking fund on voted bonds was $1.455 instead of the maximum of $1.50 permitted by the constitution.
The deficit was ignored in the budget and computations for the fiscal year 1942. It was estimated that the income to be received that year would be $705,942.69 and the budget, disregarding the deficit of the previous year, was fixed at the same sum. The tax rate, excluding sinking fund requirements, was $1,268. At the end of the year it developed that the actual collections had been $686,218.07 and the expenditures $690,871.30. Thus there was a deficit for that year's operations of $4,652.60.
Both of these deficits were ignored in preparing the budget for the year 1943. The anticipated revenue and expenditures were estimated at $693,840. The tax rate was $1.44. The actual collections were $678,104.28 and the expenditures $678,543.67, a deficit of $439.39.
It is the aggregate of these three deficits for which the bonds are proposed to be issued. Although the deficit occurring in 1941 is very large, more than 5% of the estimated revenue, which itself had been placed at a higher figure than the law authorized, we are not prepared to say that it should not have been treated as a "casual deficit," inasmuch as the testimony is to the effect that considerable revenue was lost by reason of *823
the inability to collect taxes on property damaged or affected by floods, and the actual expenditures were about 10% less than the anticipated expenditures. The term "casual deficit" used in the Constitution (sec. 49) is synonymous with "failures in the revenue." State Budget Commission v. Lebus,
As pointed out in Fulton County Fiscal Court v. Southern Bell Telephone Telegraph Company,
The City justifies its action in not doing so by regarding the strict letter of the statutes, KRS
Section 159 of the Constitution declares that when any city or other taxing district is authorized to contract an indebtedness, it shall at the same time provide for the collection of an annual tax sufficient to pay same. That mandate has particular reference to bonds, but the spirit of the provision applies to all contracts creating a liability. A lawful deficit may be represented, as it is here, by a note to a bank and it is certainly an indebtedness. It is just as certain that if the maximum tax rate and the full extent of the revenue resources are not levied and exhausted, the duty devolves upon the officials to provide for the liquidation of that debt as it does for one which has been bonded. When that duty has not been performed and the current revenue *825
resources not exhausted, the debt should not receive the approval and sanction of the courts. Cf. Chestnut v. Bowling Green,
We are constrained to note the excessive and unwarranted estimates of the revenues. While it is testified generally that regard was had for anticipated delinquencies in the collection of the taxes, no figures are given and no ready basis afforded for computations of our own which would disclose to what extent that was done. On the face of the financial statements, there was an anticipation of 100% tax collections plus additions for anticipated collections of back taxes, the amounts for the three years being approximately $32,-000, $37,000 and $30,000, respectively. These were apparent duplications. See Coffman v. Central City,
We are of opinion that the circuit court should have refused to approve the issuance of bonds.
The judgment is reversed.
Whole Court sitting. *826