Matz v. City of Newport, Campbell County

• Decision Date: 23 June 1936
• Citation: 265 Ky. 126,95 S.W.2d 1071
• Parties: MATZ v. CITY OF NEWPORT, CAMPBELL COUNTY.
• Court: Kentucky Court of Appeals

95 S.W.2d 1071

265 Ky. 126

MATZ v. CITY OF NEWPORT, CAMPBELL COUNTY.

Court of Appeals of Kentucky

June 23, 1936

Appeal from Circuit Court, Campbell County.

Proceeding by the City of Newport, Campbell County, against Conrad Matz on behalf of himself and all taxpayers and citizens of Newport. From an adverse judgment, defendants appeal.

Affirmed.

Conrad G. Matz, of Newport, for appellants.

Louis Reuscher, of Newport, for appellee.

MORRIS Commissioner.

Appellee a city of the second class, operating under the commission plan of government, on June 2, 1936, by its commissioners adopted an ordinance authorizing the issuance of $250,000 of 4 per cent. bonds, maturing serially over a period of twenty years, provided that upon submission to a court of jurisdiction, as required by section 186c-6, Ky.Stats.1933 Supp., such court should approve its action. In the ordinance and by the petition and exhibits the following facts are exemplified:

The city is authorized under section 157 of the Constitution to levy a tax rate not exceeding $1.50 on each $100 valuation of the taxable property for the purpose of defraying governmental expenses. During the years 1932 to 1935 inclusive, the levied tax rate averaged $1.26, which the commissioners say they in good faith believed at each levying date would provide funds sufficient to meet all necessary governmental expenses, and would have done so but for unforeseen occurrences, to wit, the collections of water rents, revenues, and other income during the period named, fell off year by year, until the total amounted to $270,515.03, as of June 1, 1935, and during each of these years, in addition to the failures in revenue, certain unanticipated economic conditions arose, and not having been provided for, were required to be met. So at the date of the passage of the ordinance the city found itself with a floating indebtedness of $254,983.89, evidenced by outstanding warrants, bearing interest at from 4 1/2 to 6 per cent. per annum, the warrants in the main issued for money borrowed from time to time, and expended for necessary municipal expenses.

In November, 1935, the city of Clifton was, in the manner provided by section 3050a, Ky.Stats.1930, annexed by Newport, and the latter city inherited a floating indebtedness of $7,942.89, including two judgments against Clifton amounting to $1,232. Without an attempt to reconcile figures used in the ordinance with those pleadings and briefs, it is sufficient to say that Newport pleads and shows that its total floating indebtedness as of June 1, 1936, including that laid in its lap by Clifton, was approximately $260,431.26.

The city by its commissioners pleads its inability to meet payment of its floating indebtedness out of current revenues and incomes, and say that in their judgment the only recourse is to issue bonds as authorized by the ordinance, thus spreading the payment of its indebtedness over the period of twenty years, and securing a considerable saving in interest payments.

It is pleaded and amply shown that when Clifton was annexed there was a deficiency in its revenue collections and other income for the years in question of approximately $30,000. Newport acquired by annexation a taxable property value of about $3,000,000. The taxable value of Newport, during the years in which the debt was accrued, were for 1931 and 1932 more than $24,000,000; for 1933 to 1935, inclusive, more than $23,000,000; after annexation, the total taxable value was around $26,000,000. It was and is claimed in resolution and pleadings that at no time during the years mentioned, did the total indebtedness of Newport exceed 10 per cent. of the assessable property valuation as shown by the assessments next before the last assessment previous to the incurring of the indebtedness, and that none of the indebtedness incurred by each city in each year exceeded the income and revenues provided for the respective years; that all the debts were legally created for necessary governmental expenses.

After the passage of the ordinance, the city, undertaking to comply with section 186c-6 et seq., Ky.Stats.Supp.1933, and pursuing the course provided by section 639a-1 et seq., Civil Code of Practice, filed its petition seeking approval of its proposed bond issue, wherein the facts above detailed were substantially pleaded. Appellant, a citizen and taxpayer, was named as a party defendant and called upon to appear and defend for himself and for all others similarly situated, which he did, filing answer, showing that a bona fide controversy existed, admitting that he was without sufficient knowledge or information as to many facts alleged in petition as to taxable values, debts, etc., specifically calling upon the city to fully comply with section 186c-7, Statutes of 1933 Supp., as amended by chapter 21, Acts 1936.

The cause was submitted upon the pleadings, exhibits, and proof and the court after holding that the procedure was proper, that the court had jurisdiction, adjudged that it had been sufficiently alleged and shown by proof that the debts of the city of Newport, together with the inherited indebtedness of Clifton, were all lawfully created and were within the constitutional limitations and without the inhibitions; that each item of indebtedness aggregating $260,143.26 constituted legally contracted and binding obligations against Newport; that both cities had received value for the expenditures, same having been made for necessary governmental expenses contracted legally in the management of their respective municipal affairs. It was also found that the cities' authorities had observed due regard for the finances of the cities, and that the proceedings by which...