N.M. Const. art. IX, § 12
No city, town or village shall contract any debt except by an ordinance, which shall be irrepealable until the indebtedness therein provided for shall have been fully paid or discharged, and which shall specify the purposes to which the funds to be raised shall be applied, and which shall provide for the levy of a tax, not exceeding twelve mills on the dollar upon all taxable property within such city, town or village, sufficient to pay the interest on, and to extinguish the principal of, such debt within fifty years. The proceeds of such tax shall be applied only to the payment of such interest and principal. No such debt shall be created unless the question of incurring the same shall, at a regular election for councilmen, aldermen or other officers of such city, town or village, or at any special election called for such purpose, have been submitted to a vote of such qualified electors thereof as have paid a property tax therein during the preceding year, and a majority of those voting on the question by ballot deposited in a separate ballot box when voting in a regular election, shall have voted in favor of creating such debt. A proposal which does not receive the required number of votes for adoption at any special election called for that purpose, shall not be resubmitted in any special election within a period of one year. For the purpose, only, of voting on the creation of the debt, any person owning property within the corporate limits of the city, town or village who has paid a property tax therein during the preceding year and who is otherwise qualified to vote in the county where such city, town or village is situated shall be a qualified elector. (As amended November 3, 1964.)
The 1964 amendment, which was proposed by Senate Rules Committee substitute for H.J.R. Nos. 10 and 18 (Laws 1963) and adopted at the general election held on November 3, 1964, with a vote of 65,791 for and 53,237 against, inserted provisions for special elections in the third sentence and added the last two sentences.
Cross references. — For registration and qualification of voters, see N.M. Const., art. VII, § 1.
For county and municipal debt limit, see N.M. Const., art. IX, § 13.
For refunding bonds, see N.M. Const., art. IX, § 15.
Comparable provisions. — Idaho Const., art. VIII, § 3.
Utah Const., art. XIV, §§ 3, 4.
Section and enabling statutes constitutional. — The operable provisions of this section as interpreted by the New Mexico supreme court and the classifications and requirements of the enabling statutes for creation of municipal indebtedness, 3-30-2, 3-30-3, 3-30-6 NMSA 1978, rationally promote legitimate state interests and are constitutionally justified. Snead v. City of Albuquerque, 663 F. Supp. 1084 (D.N.M. 1987), aff'd, 841 F.2d 1131 (10th Cir. 1987), cert. denied, 485 U.S. 1009, 108 S. Ct. 1475, 99 L. Ed. 2d 704 (1988).
N.M. Const., art. VII, § 1 and 1964 amendment can be construed harmoniously. — The provisions of N.M. Const., art. VII, § 1, do not provide that a person otherwise qualified to vote can have but one place to vote in all elections, or that he can be a resident of but one precinct with fixed territorial boundaries. N.M. Const., art. VII, § 1 expressly directs that the legislature "shall regulate the manner, time and places of voting". There is nothing in this directive which says that voting precincts must be geographically identical for all elections, or that an elector is entitled to cast his vote at the same place in all elections. That additional electors may now vote, in municipal bond elections, cannot be held to apply to or affect the general voter qualifications set forth in N.M. Const., art. VII, § 1. The voter qualifications expressly recited in § 1 remain exactly the same. This section makes no provision for or mention of municipal bond elections, or the qualifications of electors at such elections. The provision of the constitution relating to elector qualifications, which is affected by and to which the amendment does apply, is the provision previously contained in this section, concerning the qualifications of electors at elections on the question of incurring municipal indebtedness. The ratification of an amendment to this provision requires only a simple majority of the votes which are cast on the question, and this majority was attained. City of Raton v. Sproule, 1967-NMSC-141, 78 N.M. 138, 429 P.2d 336.
Effect of section. — This section inhibits cities, towns and villages from entering into contracts which would, or might, create obligations resting upon future contingencies, and the amount of which is not fixed, definite and certain at time the contract is made. Thus, sewer construction debt for which town may become liable must be fixed, definite and certain in amount at time it is incurred. Henning v. Town of Hot Springs, 1939-NMSC-029, 44 N.M. 321, 102 P.2d 25.
"Service contract doctrine" not applicable. — The "service contract doctrine," which states that a contract which obligates a municipality to pay a third party at the end of a year for all services performed during that year is not a "debt" within the meaning of constitutional debt restrictions, is not applicable in New Mexico. Hamilton Test Systems, Inc. v. City of Albuquerque, 1985-NMSC-075, 103 N.M. 226, 704 P.2d 1102.
Nature of creditor irrelevant. — The intent and object to be accomplished was to safeguard the municipality and its citizens from ruinous taxation. The fact that an excessive indebtedness might be owing to an agency of the state instead of an individual does not alter the effect. State ex rel. State Hwy. Comm'n v. City of Aztec, 1967-NMSC-046, 77 N.M. 524, 424 P.2d 801.
Only limitations of section self-executing. — This section and N.M. Const., art. IX, § 13, are not self-executing in that they do not confer power upon municipalities to contract indebtedness, independent of legislative authorization. But these limitations upon the debt contracting power are self-executing. Lanigan v. Town of Gallup, 1913-NMSC-024, 17 N.M. 627, 131 P. 997.
In absence of legislation providing for an election, which must be followed, the authority to issue bonds at all is denied. Taos Cnty. Bd. of Educ. v. Sedillo, 1940-NMSC-026, 44 N.M. 300, 101 P.2d 1027.
Power of legislature to prescribe conditions under which municipality may issue bonds is only limited by this section, but not otherwise controlled. Varney v. City of Albuquerque, 1936-NMSC-010, 40 N.M. 90, 55 P.2d 40, 106 A.L.R. 222.
Debt limitations applicable only to specified governmental subdivisions. — When Sections 10, 11, 12 and 13 of Article IX of the constitution are considered together, it appears that its framers intended to apply debt limitations only to the specified governmental subdivisions and to leave to the sound discretion of the legislature whether to limit other government agencies created by the legislature. Albuquerque Metro. Arroyo Flood Control Auth. v. Swinburne, 1964-NMSC-206, 74 N.M. 487, 394 P.2d 998.
Liability of annexed area. — This section was not violated by Laws 1947, ch. 211 (repealed), subjecting annexed area to taxation for retiring preexisting indebtedness of the city in the creation of which owners of annexed lands had no part. Cox v. City of Albuquerque, 1949-NMSC-041, 53 N.M. 334, 207 P.2d 1017.
Municipal power to serve as trustee. — Subject to constitutional and statutory limitations upon this power, a municipality may constitute itself as trustee or agent of bondholders or certificate holders for purpose of making assessments and the enforcement and collection thereof when authorized by statute. Purcell v. City of Carlsbad, 126 F.2d 748 (10th Cir. 1942).
Town was not estopped to deny liability on sewer certificates issued by it without election required by constitution, though certificates recited compliance with requirements of law. Henning v. Town of Hot Springs, 1939-NMSC-029, 44 N.M. 321, 102 P.2d 25.
Municipal liability for unlawful disbursements. — Where bonds were made worthless by payment of other bonds out of numerical order, liability for the unlawful disbursement was not within statutory or constitutional limitations touching the creation and amount of municipal indebtedness. Fact that bonds were issued without submission to vote would not bar recovery on the bonds where sufficient assessments had been levied to meet indebtedness. Crist v. Town of Gallup, 1947-NMSC-012, 51 N.M. 286, 183 P.2d 156, superseded by statute, Hoover v. City of Albuquerque, 1954-NMSC-043, 58 N.M. 250, 270 P.2d 386.
Void municipal guarantee severable from assessment provision. — Guarantee of city to pay to holders of sewer certificates, payable out of assessments, any deficiency not met by the assessments, was void, in view of this section, because there was no election; but the guarantee was severable so certificate holders could compel enforcement of liens against properties benefited and equitable distribution of funds derived therefrom. City of Santa Fe v. First Nat'l Bank, 1937-NMSC-009, 41 N.M. 130, 65 P.2d 857.
Incidental use of property purchased by bond issue acceptable. — A municipality in its discretion may authorize its property to be used incidentally for a purpose other than that for which it is primarily purchased or constructed, if the use for incidental purposes does not interfere with the use for the primary purpose; if machinery which town proposed to install was necessary for present and reasonably anticipated needs for pumping water, for which it was authorized, fact that it proposed to use such equipment in connection with producing electricity or some other municipal use would not prevent its installation; otherwise, a town could be precluded from installing any kind of equipment that might be used incidentally for another purpose. Page v. Town of Gallup, 1920-NMSC-051, 26 N.M. 239, 191 P. 460.
"Debt" construed. — The "debt" whose creation is prohibited, or the amount of which is limited by this section, is one pledging general faith and credit of municipality, with consequent right in holders of such indebtedness to look to general taxing power for payment. State ex rel. Capitol Addition Bldg. Comm'n v. Connelly, 1935-NMSC-045, 39 N.M. 312, 46 P.2d 1097, 100 A.L.R. 878.
Obligations not engaging general taxing power not prohibited. — Revenue bonds or other state or municipal obligations which do not engage the general taxing power of the state, or a political subdivision thereof, are not within the prohibition of this section and N.M. Const., art. IX, § 13, either as to the requirement for approval of a popular referendum, or as exceeding constitutional limitation on indebtedness. Village of Deming v. Hosdreg Co., 1956-NMSC-111, 62 N.M. 18, 303 P.2d 920.
Revenue bonds, truly such, repayable from a special fund created for their retirement, payable solely and wholly from moneys derived from sources other than general taxation, do not constitute a general obligation on part of municipality. Wiggs v. City of Albuquerque, 1952-NMSC-013, 56 N.M. 214, 242 P.2d 865.
Special improvement bonds provided for under Laws 1947, ch. 122 (repealed), were not invalid on theory that they constituted a debt under this section. Stone v. City of Hobbs, 1950-NMSC-032, 54 N.M. 237, 220 P.2d 704.
Unconstitutional debt is not created by revenue bonds issued to improve and replace municipal waterworks to be paid from net revenues thereof. Seward v. Bowers, 1933-NMSC-056, 37 N.M. 385, 24 P.2d 253.
City may be empowered to make contract for sewer improvements, without approving vote of the qualified taxpayers, so long as obligation of repayment is confined to the property benefited. City of Santa Fe v. First Nat'l Bank, 1937-NMSC-009, 41 N.M. 130, 65 P.2d 857.
Paving bonds must be made payable out of moneys collected from assessments against the abutting lands and not otherwise. Munro v. City of Albuquerque, 1943-NMSC-050, 48 N.M. 306, 150 P.2d 733.
Providing for municipal payment if assessments insufficient requires referendum. — Town sewer certificates specifying payment from special assessments, or by town in case of deficiency, were debts for which election was required. Henning v. Town of Hot Springs, 1939-NMSC-029, 44 N.M. 321, 102 P.2d 25.
Giving mortgage on municipal property requires referendum. — Borrowing of money on security of property already belonging to municipality, without giving lender any recourse against body corporate or its property other than the particular property pledged to secure the money advanced, is the creation of indebtedness within prohibition of constitution if the constitutional limitation of municipal indebtedness is thereby exceeded. The mortgage lien on municipal auditoriums declared by Section 5-3-3 NMSA 1978 creates a "debt" within prohibition of this section, except as the creation of same may have received an approving vote by referendum. Wiggs v. City of Albuquerque, 1952-NMSC-013, 56 N.M. 214, 242 P.2d 865.
Refunding bonds. — Where proceeds of municipal bonds were to be placed in escrow and invested in United States bonds for the sole purpose of paying off indebtedness on existing municipal bonds, the refunding bonds could not be considered as an increase in the city's indebtedness within this section and N.M. Const., art. IX, § 13, even though some 10 years would lapse between issuance of refunding bonds and final payment of original bonds, and though original bonds would not be paid immediately upon their initial callable date. City of Albuquerque v. Gott, 1964-NMSC-027, 73 N.M. 439, 389 P.2d 207. For provision regarding refunding bonds, see N.M. Const., art. IX, § 15.
Purpose of tax provision. — The provision of this section, providing "for the levy of a tax, not exceeding 12 mills on the dollar" and sufficient to pay the municipal debt, was inserted with the object of providing against the repudiation by a municipality of the indebtedness incurred by the ordinance, and to fix a limitation upon the amount of a single debt for purposes not excepted from its operation. Lanigan v. Town of Gallup, 1913-NMSC-024, 17 N.M. 627, 131 P. 997.
Levy limitation inapplicable to debts for water and sewer systems. — The 12-mill levy limitation fixed by this section does not apply to debts contracted for purchase or construction of system for supplying water, or for a sewer system, for cities, towns or villages. Lanigan v. Town of Gallup, 1913-NMSC-024, 17 N.M. 627, 131 P. 997. For debt limit and exceptions therefrom, see N.M. Const., art. IX, § 13.
While it is true the proviso regarding indebtedness contracted for supplying water for municipalities appears at the end of N.M. Const., art. IX, § 13, in order to carry out the manifest intention of the framers of the constitution, the supreme court has held that the proviso is, in effect, an independent provision, and that neither the limitation contained in this section, limiting the amount of the tax levy, nor the limitation contained in N.M. Const., art. IX, § 13, limiting the amount to which a municipality may become indebted, affect the debt contracting power of a municipality with regard to indebtedness incurred for supplying water for the municipality. City of Truth or Consequences v. Robinson, 1954-NMSC-016, 58 N.M. 111, 266 P.2d 356.
Referendum not necessary for water and sewer systems. — Section 2402, 1897 C.L. (repealed), authorizing municipalities to contract indebtedness and issue bonds for specified purposes provided no debt was created, except for supplying water, without approval at regular election by majority of qualified elector-property owners was in full conformity, and in no way inconsistent, with this provision. Smith v. City of Raton, 1914-NMSC-017, 18 N.M. 613, 140 P. 109.
All other safeguards apply to water and sewer systems. — Only that part of this section which conflicts with the proviso of N.M. Const., art. IX, § 13, is inapplicable to a debt contracted for purpose of building or purchasing sewer or waterworks systems; and all other safeguards apply to such debts. Henning v. Town of Hot Springs, 1939-NMSC-029, 44 N.M. 321, 102 P.2d 25.
Levy limitation not affected by administrative statute. — Fact that an administrative statute (Laws 1919, ch. 47, now repealed) provided that revenue from municipally owned utilities should be used to pay bond interest and principal did not affect requirement of tax levy in this section. State ex rel. City of Roswell v. State Tax Comm'n, 1929-NMSC-070, 34 N.M. 303, 280 P. 258.
A. VOTER REQUIREMENTS.
Community property. — Married woman, otherwise a qualified elector, owning community property on which her husband paid tax, was qualified to vote in election on bond issue. Baca v. Village of Belen, 1925-NMSC-022, 30 N.M. 541, 240 P. 803.
Property owner whose mortgagee paid assessed tax as agent for him and property owner exempt from payment of tax under soldier exemption provided in N.M. Const., art. VIII, § 5, were persons "who [had] paid a property tax during the preceding year" within constitutional and statutory requirements and therefore were qualified electors in voting on general obligation bond for municipal improvements. Hair v. Motto, 1971-NMSC-001, 82 N.M. 226, 478 P.2d 554.
Vendors and vendees in real estate contracts were qualified electors in voting on general obligation bonds for municipal improvements. Hair v. Motto, 1971-NMSC-001, 82 N.M. 226, 478 P.2d 554.
B. PROCEDURES.
Double proposition improper. — Cities, towns and villages were not authorized to submit to voters the joint proposition of issuing bonds for double purpose of constructing a waterworks system and building a system of sewers, without providing for a separate vote upon each question. Lanigan v. Town of Gallup, 1913-NMSC-024, 17 N.M. 627, 131 P. 997.
Proposition contained single purpose. — Submission by city council to voters of proposition to issue bonds in a stated amount for purchase or erection of a system of waterworks was not a double proposition, but was to be construed in substance as a proposition to acquire waterworks, either by purchase or construction. City of Albuquerque v. Water Supply Co., 1918-NMSC-088, 24 N.M. 368, 174 P. 217, 5 A.L.R. 519.
Constitutional amendments treated differently. — Where there is but one portion of a single section affected, and the object or purpose of the amendment is confined to the manner in which municipal indebtedness is incurred, the fact that two points of change are involved, the fact that either might have been presented to the electorate separately, and the fact that there may be reasons why an elector might have desired one change and not the other, are not in themselves sufficient to hold the adoption of the amendment invalid. City of Raton v. Sproule, 1967-NMSC-141, 78 N.M. 138, 429 P.2d 336.
Two-thirds vote constitutional. — Section 5-3-9 NMSA 1978 authorizing cities to issue bonds for construction of public auditorium, on two-thirds vote of legal voters, did not run counter to this section of the constitution; statute precluded issuance of such bonds under prior statute authorizing issuance of bonds for construction of public or needful buildings on majority vote. Varney v. City of Albuquerque, 1936-NMSC-010, 40 N.M. 90, 55 P.2d 40, 106 A.L.R. 222.
Illegal votes do not vitiate election. — Receiving by election officers at bond election of illegal or improper votes will not vitiate the election, unless it is shown affirmatively that the wrongful action changed the result. Sargent v. City of Santa Fe, 1918-NMSC-092, 24 N.M. 411, 174 P. 424.
Amendment presumed valid. — The presumption that the 1964 amendment to this section is valid cannot reasonably be overcome. 1964 Op. Att'y Gen. No. 64-142.
N.M. Const., art. VII, § 1, and 1964 amendment to this section can be construed to operate harmoniously without absurd or unjust results, since the former would apply to all elections for public officers and the latter would apply, as its language directs, "For the purpose, only, of voting on the creation of the debt". 1964 Op. Att'y Gen. No. 64-142.
When a city and a county build hospital jointly, they must issue their respective bonds separately. 1947 Op. Att'y Gen. No. 47-5071.
Application of funds to another use. — Where application of the proceeds of a bond issue, voted for construction and extension of the water and sewer systems, to the payment of preexisting indebtedness incurred for work done earlier on those systems was not contemplated by the electors in their consent to the current bond issue, such use constitutes a misapplication of the proceeds of such bond issue as a matter of law. 1958 Op. Att'y Gen. No. 58-234.
Power to become indebted to erect public building does not include power to become indebted to purchase such a building unless in connection with purchase building is so altered or reconstructed as to amount to erection of a new or different building. 1954 Op. Att'y Gen. No. 54-5957.
Indemnification contract unconstitutional. — Provision in a contract between a city and a beverage company under which the city agreed to indemnify the company against certain liabilities is unconstitutional under the debt restrictions of this section. 2000 Op. Att'y Gen. No. 00-04.
Obligations not engaging general taxing power not prohibited. — No constitutional requirement existed requiring a bond election for corporations formed pursuant to 11-1-1 NMSA 1978 et seq. and 14-40-75, 1953 Comp. et seq. (repealed), to issue and sell bonds to acquire a jointly owned public gas utility system. 1964 Op. Att'y Gen. No. 64-17.
Levy not necessary where water rents sufficient to meet debt. — Under provision for the levying of a tax to cover interest and to provide a sinking fund in case municipal bonds are issued, the levying and collection of the tax are not necessary, where the return from water rents are more than enough to meet those charges. 1916 Op. Att'y Gen. No. 16-1766.
School bond issue is not debt of city, town or village. 1916 Op. Att'y Gen. No. 16-1809.
Lease-purchase agreements. — Despite the language of 6-6-12 NMSA 1978 certain lease-purchase agreements may constitute the creation of debt within this section and N.M. Const., art. IX, §§ 10 and 11. 1969 Op. Att'y Gen. No. 69-39.
A contract in the nature of a lease-purchase or installment purchase agreement, with right of termination by lessee, used as a method of financing the possible purchase of personal property by public entities of the state is constitutional and does not constitute the creation of a debt. 1976 Op. Att'y Gen. No. 76-20.
Option to purchase property. — Constitution allows New Mexico to fit into the prevailing view that a mere option to purchase property by a municipality does not create an indebtedness. 1972 Op. Att'y Gen. No. 72-30.
Payment of property tax prerequisite to voting. — In order to be able to vote in any municipal bond election, it is the universal requirement that the voters shall have paid their property tax during the preceding year. This requirement does not exist for voters in elections for public officers. 1953 Op. Att'y Gen. No. 53-5643.
"Property tax" construed. — The phrase "property tax," as used in this section, covers any kind of property. 1916 Op. Att'y Gen. No. 16-1766.
"The preceding year" construed. — As used in this section, the words "the preceding year" mean the period of time covering one year next preceding the election, and not the calendar year preceding the one in which the election is held. 1916 Op. Att'y Gen. No. 16-1756.
Prerequisite not met by payment of conservancy district assessment. — One who has paid a conservancy district assessment on property located in a municipality, but who has not paid an ad valorem property tax on property within the municipality during the preceding year, is not eligible to vote in a city bond election. 1962 Op. Att'y Gen. No. 62-51.
Voter qualifications on bond issues for sewers. — Ex-service men or heads of families whose property is exempt from taxation are not qualified to vote on municipal bond issues for sewers, but the wife who has community property on which her husband paid taxes is qualified, as are landowners who have paid tax the previous year, but not stockholders of corporation as such which has paid property tax. 1935 Op. Att'y Gen. No. 35-1104. For soldier exemption, see N.M. Const., art. VIII, § 5.
"Ballot box" mandatory. — The spirit of this section could be followed by the utilization of a separate voting machine for the bond election. However, this section does provide that a "separate ballot box" shall be used, and it is questionable whether in construing this language it would be wise to depart from the sense of the words actually used. Therefore, that portion of Laws 1951, ch. 192, § 3 (repealed), relating to the use of voting machines in bond elections should be regarded as inconsistent with this section, requiring separate ballot boxes, and for that reason separate ballot boxes should be used in all municipal bond elections. 1953 Op. Att'y Gen. No. 53-5643.
Proposition must contain two separate propositions. — Bond election for issuance of bonds for a sewer system and disposal plant does not contain two separate propositions. 1926 Op. Att'y Gen. No. 26-3900.
Law reviews. — For comment, "The Last Bastion Crumbles: All Property Restrictions on Franchises Are Unconstitutional," see 1 N.M. L. Rev. 403 (1971).
For article, "Ad Valorem Tax Status of a Private Lessee's Interest in Publicly Owned Property: Taxability of Possessory Interest in Industrial Projects under the New Mexico Industrial Revenue Bond Act," see 3 N.M. L. Rev. 136 (1973).
Am. Jur. 2d, A.L.R. and C.J.S. references. — 56 Am. Jur. 2d Municipal Corporations, Counties, and Other Political Subdivisions §§ 599 to 605.
Failure to comply with constitutional or statutory requirement that municipality, at or after incurring indebtedness, shall provide a tax for its payment, as affecting validity of indebtedness or obligations issued therefor, 90 A.L.R. 1240.
Legislature's power to add to or make more onerous conditions prescribed by constitution upon incurring of public debt, 106 A.L.R. 231.
Validity, construction and application of statute or ordinance requiring that judgments against municipalities be paid in order of their entry or in other particular sequence, 138 A.L.R. 1303.
Revenue or other bonds or instruments not creating indebtedness as within constitutional or statutory requirement of prior approval by electors of incurring of indebtedness by municipality, 146 A.L.R. 604.
Inclusion of several structures or units as affecting validity of submission of proposition to voters at bond election, 4 A.L.R.2d 617.
Validity of municipal bonds issue as against owners of property, annexation of which to municipality became effective after date of election at which issue was approved by voters, 10 A.L.R.2d 559.
Presumptions and burden of proof as to violation of or compliance with public debt limitation, 16 A.L.R.2d 515.
Inclusion of tax-exempt property in determining value of taxable property for debt limit purposes, 30 A.L.R.2d 903.
Rescission of vote authorizing school district or other municipal bond issue, expenditure or tax, 68 A.L.R.2d 1041.
Construction and effect of absentee voters' laws, 97 A.L.R.2d 257.
64 C.J.S. Municipal Corporations §§ 1846 to 1855.