173 N.E. 810 | Ill. | 1930
Lead Opinion
Appellant, Frank J. Ward, a tax-payer, elector and resident of the city of Chicago, filed his bill in the superior court of Cook county to enjoin the city of Chicago and its *168 mayor and comptroller, appellees, from issuing certain certificates of indebtedness. Appellees demurred to the bill and their demurrer was sustained. This appeal is from the resulting decree, which dismissed the bill for want of equity.
The bill sets forth the ordinance adopted by the city council of Chicago under which it is proposed to issue the certificates in question. By its terms the mayor and comptroller are authorized, in accordance with the provisions of a statute of the State of Illinois entitled, "An act authorizing cities having a population of 500,000 or more, and owning or operating a waterworks system to issue certificates of indebtedness, payable solely from revenue derived from the operation thereof, for the purpose of improving and extending such waterworks system," (Cahill's Stat. 1929, chap. 24, par. 1093, sub-pars. 14-18,) to execute and issue, in behalf of the city of Chicago, waterworks certificates of indebtedness for a total aggregate principal sum of $12,000,000. The ordinance prescribes the form of the proposed certificates, which state on their face that they are to be paid solely from revenues derived from the waterworks system of the city of Chicago, that they are for the purpose of paying the cost of improving and extending the waterworks system, and that they do not constitute an indebtedness of the city within any constitutional or statutory limitation. The ordinance describes the improvements and extensions which it is proposed to make from the proceeds of the certificates, and provides that upon and after its passage the entire revenue received from the operation of the waterworks system of the city shall be deposited in a separate fund designated as the "water fund of the city of Chicago," which fund shall be used only in paying the cost of maintenance and operation of such system, obligations of the city heretofore issued that are payable by their terms from such revenue, whether in the form of certificates, bonds or otherwise, and the certificates issued under the ordinance. The bill alleges that the statute above referred *169 to, pursuant to which the ordinance was passed, violates the provisions of section 12 of article 9 of the constitution of the State of Illinois because the water certificates are a corporate indebtedness, and the General Assembly exceeded its power in providing in said statute that "certificates of indebtedness issued under the provisions of this statute shall be payable solely from the revenues derived from such waterworks system," and that "such certificates shall not in any event constitute an indebtedness of such municipality within the meaning of the constitutional provisions or limitations;" that the ordinance is consequently invalid, and that by reason of the invalidity of the statute and ordinance the certificates of indebtedness are not valid obligations of the city of Chicago and their sale or negotiation should be enjoined. It is alleged upon information that the city of Chicago was not at the time of the enactment of the statute, and is not now, indebted in any manner or for any purpose to an amount, including existing indebtedness and the amount of the proposed certificates, in the aggregate exceeding five per cent of the value of the taxable property therein ascertained by the last assessment for State and county taxes, and that the indebtedness of the city of Chicago is a great deal less than a sum equivalent to five per cent of the value of the taxable property therein ascertained by the last assessment for State and county taxes. The bill further alleges that the ordinance and the enabling act are void because the certificates are an indebtedness within the constitutional limitation, yet nevertheless neither the enabling act nor the ordinance provides for the collection of a direct annual tax, in accordance with the provision of section 12 of article 9 of the constitution.
Would the proposed certificates create an indebtedness against the city of Chicago within the meaning of the constitutional provision invoked by appellant? This court recently considered that provision in Maffit v. City ofDecatur,
It was contended in the Decatur case that the arrangement between the city and the water company was merely a scheme or device to evade the limitation prescribed by section 12 of article 9 of the constitution, and this court granted that if the contract in question created an indebtedness beyond the limitation so fixed it was void. We held, however, that no indebtedness was created, saying: "Undoubtedly that contract, in its main purpose, grew out of the city's need for additional facilities to supply its citizens with water throughout the entire year. Those facilities it was sought to provide by the construction of a larger dam and the acquisition of land for a reservoir. The city was, however, unable to pay for both of these improvements at the time. The city owned the dam, and although it might eventually acquire the reservoir site of the water company, it does not necessarily follow, under the terms of the contract, that it will do so. The only absolute and fixed right under the contract is that of the city to flood the land of the water company for a certain rate of compensation to be paid out of the water rates derived from the consumers of water residing in the city. There is no showing by appellant that an indebtedness is or will be created by this method of paying the water company which exceeds or will exceed the constitutional limit for the city. No obligation is imposed upon the city to pay the water company's compensation. If in any given year the company should fail to realize as its share of the water rates the minimum prescribed by the contract no liability on the part of the city to pay the deficit would arise. The city might choose to pay the deficit, but if it refused to do so no suit to recover it could be maintained by the company."
It is apparent that the general situation in the present case is similar to that in the Decatur case, and that the obligation which it is proposed to create here cannot be said to be, from the standpoint of the city, fundamentally different from the one which was there involved. There the city already *173 had a complete water system in operation, but the addition of new elements was necessary if it was to be made adequate to meet the city's growing needs. Here the proposed new elements take a different form but their purpose is the same. There the existing disposition of water rents was done away with and all moneys received from the system went into one fund, out of which certain operating expenses were taken. Although the value of the addition to the plant was no greater than that of the remainder of the plant exclusive of the addition, an apparently arbitrary percentage of nine-tenths of the remainder of this fund was then allotted to the water company which financed the addition. Here all revenue received from the water system is to be deposited in a separate fund, out of which are to be paid all maintenance and operating expenses, and the remainder is to be available to pay back those who finance the proposed extensions by purchasing the certificates. There the amount coming into the water fund was dependent upon rates fixed by the city, and the amount in the water fund here will be determined in the same manner. There compensation for the water company came solely from the water fund thus created and no obligation to pay was imposed upon the city. Here no portion of the plant is pledged for payment and holders of the certificates have no recourse save out of the proposed water fund. That the obligation of the city arose there out of a simple reciprocal contract, whereas here it would be represented by documents in the nature of negotiable notes, can make no difference so far as the question at issue is concerned. If no indebtedness within the constitutional inhibition was created there, no substantial reason exists for saying that any would be created here.
The main reliance of appellant is upon the case of City ofJoliet v. Alexander,
A number of other cases are cited by appellant, includingVillage of East Moline v. Pope,
The chancellor rightly dismissed the bill for want of equity, and the decree of the superior court is therefore affirmed.
Addendum
The foregoing opinion reported by Mr. Commissioner Edmunds is hereby adopted as the opinion of the court, and judgment is entered in accordance therewith
Decree affirmed.