N.M. Const. art. IX, § 13
No county, city, town or village shall ever become indebted to an amount in the aggregate, including existing indebtedness, exceeding four per centum on the value of the taxable property within such county, city, town or village, as shown by the last preceding assessment for state or county taxes; and all bonds or obligations issued in excess of such amount shall be void; provided, that any city, town or village may contract debts in excess of such limitation for the construction or purchase of a system for supplying water, or of a sewer system, for such city, town or village.
Cross references. — For restrictions on county indebtedness, see N.M. Const., art. IX, § 10.
For restrictions on municipal indebtedness, see N.M. Const., art. IX, § 12.
Comparable provisions. — Utah Const., art. XIV, § 4.
Wyoming Const., art. XVI, § 5.
Evil aimed at by section was the proneness of municipalities, over-optimistic as to their futures, to adopt improvement programs in excess of their means of payment. Gutierrez v. Middle Rio Grande Conservancy Dist., 1929-NMSC-071, 34 N.M. 346, 282 P. 1, 70 A.L.R. 1261, cert. denied, 280 U.S. 610, 50 S. Ct. 158, 74 L. Ed. 653 (1930).
Conservancy assessments not debt contracted or incurred by city. — The Conservancy Act (Section 73-14-1 NMSA 1978 et seq.) authorized assessments against public corporations as such (73-16-2 NMSA 1978), required such assessments to be paid in not more than 10 annual installments (73-16-6 NMSA 1978), and required such installments to be paid by uniform tax upon all taxable property (73-16-15 NMSA 1978). A debt resulting from such assessments was not contracted or incurred by a city and hence did not violate this section. Gutierrez v. Middle Rio Grande Conservancy Dist., 1929-NMSC-071, 34 N.M. 346, 282 P. 1, 70 A.L.R. 1261, cert. denied, 280 U.S. 610, 50 S. Ct. 158, 74 L. Ed. 653 (1930).
Limitations are self-executing. — This section and N.M. Const., art. IX, § 12, are not self-executing in that they confer no power upon municipalities to contract indebtedness, independent of legislative authorization. Their limitations on the debt-contracting power, however, are self-executing. Lanigan v. Town of Gallup, 1913-NMSC-024, 17 N.M. 627, 131 P. 997.
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.
Joint proposition unlawful. — Cities, towns and villages are not authorized to submit to the voters therein the joint proposition of issuing bonds for 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 to fund purchase or erection of water system not joint. — When city council submits to voters a proposition to issue bonds in a stated amount for purchase or erection of system of waterworks, it is not a double proposition, and does not fall within the rule announced in Lanigan v. Town of Gallup, 1913-NMSC-024, 17 N.M. 627, 131 P. 997, but is to be construed as a proposition to acquire a waterworks system, 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.
Water pumping machinery used for other municipal use. — Where town contracted to purchase machinery necessary for present and reasonably anticipated needs for pumping water, out of money received from bonds issued after an election for construction of waterworks, fact that it also proposed to use such machinery in connection with another municipal use could not operate to prevent town from installing the machinery. Page v. Town of Gallup, 1920-NMSC-051, 26 N.M. 239, 191 P. 460.
"Become indebted" construed. — Construing this section with N.M. Const., art. IX, §§ 10 and 12, the phrase "become indebted" means in the light of its context "borrow money" or "contract debt". Gutierrez v. Middle Rio Grande Conservancy Dist., 1929-NMSC-071, 34 N.M. 346, 282 P. 1, 70 A.L.R. 1261, cert. denied, 280 U.S. 610, 50 S. Ct. 158, 74 L. Ed. 653 (1930).
Debt whose creation is prohibited or whose amount is limited in the constitution, is one pledging general faith and credit of subdivision with consequent right in holders of such indebtedness to look to general taxing power to satisfy their claims. State ex rel. Capitol Addition Bldg. Comm'n v. Connelly, 1935-NMSC-045, 39 N.M. 312, 46 P.2d 1097.
Revenue bonds not "debt". — The indebtedness created by revenue bonds or like municipal obligations are not the kind of "debt" framers of constitution had in mind and were talking about in N.M. Const., art. IX, § 12 and this section. Village of Deming v. Hosdreg Co., 1956-NMSC-111, 62 N.M. 18, 303 P.2d 920.
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 N.M. Const., art. IX, § 12 and this section 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.
Special improvement bonds. — 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.
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 N.M. Const., art. IX, § 12 and this section, even though some 10 years would lapse between issuance of refunding bonds and final payment of original bonds and 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.
Mortgaging municipal property creates debt. — Borrowing of money on security of property already belonging to municipality, without giving bidder any recourse against body corporate or its property other than the particular property pledged to secure the money advanced, if the constitutional limitation of municipal indebtedness is thereby exceeded, is the creation of indebtedness within meaning of constitution; a city, to secure completion of its city hall, cannot contract to deed its uncompleted building and land in exchange for money for such completion, to rent the property where the rental amounts to interest on the amount advanced, and take an option to repurchase the property, where its debts exceed the constitutional limit, for the contract is in equitable effect a mortgage. Palmer v. City of Albuquerque, 1914-NMSC-058, 19 N.M. 285, 142 P. 929, 1915A L.R.A. 1106.
Intent of proviso. — It was the intention of the framers of the constitution that no restraints should be laid on municipalities in their efforts to procure a water supply, by either the purchase or construction of systems for such purpose, or of sewer systems. City of Truth or Consequences v. Robinson, 1954-NMSC-016, 58 N.M. 111, 266 P.2d 356.
No limitation upon amount of water system indebtedness. — Under the constitution, there is no limitation imposed upon amount of indebtedness which may be contracted for purpose of construction or purchase of a system for supplying water. City of Albuquerque v. Water Supply Co., 1918-NMSC-088, 24 N.M. 368, 174 P. 217, 5 A.L.R. 519.
Proviso also applies to tax levy provision. — The proviso of this section is not limited to that portion of the section which precedes it. While it is true the proviso regarding indebtedness contracted for supplying water for municipalities appears at the end of this section, in order to carry out the manifest intention of the framers of the constitution, the supreme court had held that the proviso is, in effect, an independent provision, and that neither the limitation contained in N.M. Const., art. IX, § 12, limiting the amount of the tax levy, nor the limitation contained in this section, 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.
Only conflicting part of N.M. Const., art. IX, § 12, is inapplicable to 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.
Revenue bonds for waterworks system. — Where a town, under the authority of Laws 1933, ch. 57 (repealed), issues revenue bonds for a loan for the betterment, replacement and improvement of its waterworks system, payable exclusively from net revenues derived from such municipal utility, it is clearly within the exemption of this section permitting debts in excess of the 4% limitation. Seward v. Bowers, 1933-NMSC-056, 37 N.M. 385, 24 P.2d 253.
Proviso not applicable to electric light system. — Removal of limitation upon indebtedness for supplying water or a sewer system is not applicable to electric light system. 1915 Op. Att'y Gen. No. 15-1701.
Section does not authorize borrowing. — New Mexico Const., art. IX, § 12 and this section give no authority for borrowing money, and in this respect are not self-executing. 1953 Op. Att'y Gen. No. 53-5778.
Voter qualifications for bond issue elections. — Only resident voters in a municipality who have paid property tax therein the preceding year may vote at election for a bond issue. 1938 Op. Att'y Gen. No. 38-1907.
Complete exemption from all calculations. — Municipal indebtedness for water and sewer systems is outside of the 4% limitation, and sewer bonds should not be considered as part of bonded indebtedness within constitutional limit even after such bonds are issued. 1938 Op. Att'y Gen. No. 38-1891.
Am. Jur. 2d, A.L.R. and C.J.S. references. — 56 Am. Jur. 2d Municipal Corporations, Counties, and Other Political Subdivisions §§ 592, 599.
Estoppel by recitals in bonds to set up violation of provision limiting indebtedness, 86 A.L.R. 1068, 158 A.L.R. 938.
Appropriation to meet obligation at time of its creation as affecting its character as an indebtedness within debt limitation, 92 A.L.R. 1299, 134 A.L.R. 1399.
Pledge or appropriation of revenue from utility or other property in payment therefor as debt within constitutional or statutory limitation, 96 A.L.R. 1385, 146 A.L.R. 328.
Taxation, limitation of power as to, as limitation of power to incur indebtedness, or vice versa, 97 A.L.R. 1103.
Disposition of revenues from operation of revenue-producing enterprise owned by municipal corporation, 103 A.L.R. 579, 165 A.L.R. 854.
Legislature's power to add to limitations prescribed by constitution limiting the public debt, 106 A.L.R. 231.
Ownership or operation of public utility by municipality or by private corporation (or individual) as basis of classification for legislative purpose, 109 A.L.R. 369.
Undelivered bonds or other obligations authorized but not delivered prior to adoption or effective date of debt limitation as affected by such limitation, 109 A.L.R. 961.
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.
20 C.J.S. Counties § 188; 64 C.J.S. Municipal Corporations §§ 1846 to 1855.