Bugeja v. City of New York

• Citation: 266 N.Y.S.2d 80,24 A.D.2d 151
• Parties: Charles BUGEJA, Appellant, v. The CITY OF NEW YORK et al., Respondents.
• Decision Date: 09 December 1965
• Court: New York Supreme Court Appellate Division

Page 80

266 N.Y.S.2d 80

24 A.D.2d 151

Charles BUGEJA, Appellant, v. The CITY OF NEW YORK et al., Respondents.

Supreme Court, Appellate Division, Second Department.

Dec. 9, 1965.

Rubinton, Coleman & Ostrow, Brooklyn (Theodore D. Ostrow and Nathan Cooper, Brooklyn, of counsel), for appellant.

Leo A. Larkin, Corp. Counsel, New York City (Pauline K. Berger, New York City, of counsel), for respondents.

Before BELDOCK, P. J., and UGHETTA, RABIN, HOPKINS and BENJAMIN, JJ.

HOPKINS, Justice.

Chapter 440 of Laws of 1965 empowers the Mayor of the City of New York to authorize the issuance of serial bonds in the maximum principal amount of $255,800,000 in order to provide for the City's payment of its pension or retirement liabilities during fiscal year 1965. Chapter 440 declares that 'The maximum period of probable usefulness of the objects or purposes of such bonds shall be five years.' Appellant argues that (1) chapter 440 is unconstitutional because enacted without a home rule request (N.Y.Const., art. 9, § 2); and (2) a factual issue exists in support of his claim that the bond sale will cause the respondent City to exceed its constitutional debt limitation (N.Y.Const., art. 8, § 4, subd. [c]).

About plaintiff's second contention this court is of one mind. We find that he failed at Special Term to submit proof of any evidentiary fact which tended to contravene the prima facie validity of the net debt margin figure contained in the City comptroller's verified debt statement submitted by respondents (Local Finance Law, § 109.00; CPLR 4520).

However, we divide on the central issue whether chapter 440 in itself represents a constitutional exercise of legislative power.

We hold that chapter 440 is constitutional with respect to its object and its means.

With respect to its object, we hold that payment by New York City of its mandatory pension or retirement liabilities is a matter of state concern exempting Chapter 440 from the home rule article of the Constitution (N.Y.Const., art. 9, § 2; cf. Adler v. Deegan, 251 N.Y. 467, 167 N.E. 705; Robertson v. Zimmerman, 268 N.Y.52, 196 N.E. 740; New York Steam Corp. v. City of New York, 268 N.Y. 137, 197 N.E. 172, 99 A.L.R. 1157; Gaynor v. Marohn, 268 N.Y. 417, 198 N.E. 13; County Securities v. Seacord, 278 N.Y. 34, 15 N.E.2d 179; see, Richland, Constitutional City Home Rule in New York, 54 Col.L.Rev. 311 and 55 Col.L.Rev. 598). If the City's mandatory pension or retirement obligations are not paid, the City would be unable to maintain an efficient, modern civil service system. Because civil servants deal directly with such areas of undoubted state concern as education, public health, housing and transportation, the continuance of a sound civil service system is but an integral aspect of the state's interest in those fields.

With respect to the means provided by chapter 440, the power of the City to issue evidences of indebtedness constitutes an area of state concern (Salzman v. Impelliteri, 305 N.Y. 414, 113 N.E.2d 543; see, Richland, Constitutional City Home Rule in New York, 55 Col.L.Rev. 598, 619-620). In such an area, the Constitution contemplates enactment by the Legislature of special laws affecting the power of local governments to finance by issuance of evidences of indebtedness. (N.Y.Const. Const. art. 8, § 2, art. 9, § 2(c)(ii)(4), § 3(a)(3).)

Though we agree with our dissenting colleagues that the Constitution prohibits a city from incurring debts payable in the future for objects or purpose of 'purely transient usefulness' (Cherey v. City of Long Beach, 282 N.Y. 382, 390, 26 N.E.2d 945, 948, 127 A.L.R. 1210), we cannot hold that payments by the City of current pension or retirement liabilities involve payments of 'purely transient usefulness.' Municipal default in the payment of pension or retirement liabilities would undoubtedly jeopardize the continuing employment, and impair the future recruitment, of civil servants. It would signal the collapse of the City's civil service system, or at least it is within the judgment of the Legislature to foresee that result. Nor do we find any rational compulsion to hold that the City's mandatory pension or retirement liabilities must first be reduced to innumerable judgments before the Legislature may constitutionally enact a special law to enable the City to finance those fixed liabilities (Cherey v. City of Long Beach, 282 N.Y. 382, 389, 26 N.E.2d 945, 948, 127 A.L.R. 1210). Finally, unlike our dissenting colleagues, we neither detect in chapter 440 a clear usurpation by the Legislature of prohibited power (Ricker v. Village of Hempstead, 290 N.Y. 1, 47 N.E.2d 417, mot. for rearg. den., 290 N.Y. 862, 50 N.E.2d 245); nor do we find any warrant to go beyond the face of the statute in determining its constitutionality.

Accordingly, the order and judgment should be affirmed, without costs.

Order and judgment affirmed, without costs.

UGHETTA and RABIN, JJ., concur.

BELDOCK, P. J., and BENJAMIN, J., dissent with the following opinion:

We agree with the majority that the City's debt limit is not exceeded by the proposed bond issue. However, as we see it, the law authorizing this bond issue is invalid because it violates the provisions of the State Constitution dealing with home rule (art. 9, § 2) and restrictions on local indebtedness (art. 8, § 2).

With respect to section 2 of article 8 of the Constitution, the simple question is whether a segment of the City's current, ordinary expense budget may legally be singled out for deferred payment by a five-year bond issue, or whether all sections of such budget must be provided for out of current income.

With respect to Home Rule, the question is whether the special law authorizing this bond issue is invalid because it was enacted without a Home Rule request. This question, while seemingly procedural in nature, in fact goes to the heart of the issue of the City's autonomy with respect to its own governmental affairs--and particularly the management of its own budget.

Considering first the question of the City's right to issue bonds in order to obtain funds for current, ordinary budgetary needs, we have concluded that section 2 of article 8 of the Constitution denies such right and forbids such practice. That section restricts the issuance of municipal obligations to those contracted for municipal purposes, and for a period not longer than the period of probable usefulness of the object or purpose for which the indebtedness is to be contracted. As the majority concedes, that provision plainly forbids bond issues for objects or purposes of 'purely transient usefulness' (Cherey v. City of Long Beach, 282 N.Y. 382, 390, 26 N.E.2d 945, 948, 127 A.L.R. 1210). Put differently, it plainly bars the use of bond issues for the financing of current operating expenses of an ordinary, recurring nature.

The majority holds that the sole purpose of this bond issue is the financing of the City's pension liabilities for the year 1965; and that this purpose is not one of 'purely transient usefulness' because default in the payment of these liabilities would jeopardize the City's civil service and perhaps cause its collapse. This argument is without basis in fact.

It clearly appears from this record that the needs of the retirement systems are merely the pretext, not the reason for this bond issue. In actuality, as the City's papers admit, the true purpose of this bond issue is the bridging of a general gap in the City's total current, ordinary expense budget. This bond issue could readily have been denominated one intended to meet the needs of any of the City's manifold other services.

Nowhere does the City claim that the retirement systems are less than solvent or unable to meet their obligations. On the contrary, it points out that, by law, current pension needs have a priority position in the City budget; and it asks for the right to sell...