City Council of City of Tahlequah, Application of

• Decision Date: 03 May 1955
• Docket Number: No. 36799,36799
• Citation: 285 P.2d 418
• Parties: Application of the CITY COUNCIL OF THE CITY OF TAHLEQUAH, Oklahoma, Acting for and in behalf of The City of Tahlequah, for the Approval of $1,200,000 Natural Gas Revenue Bonds of 1955.
• Court: Oklahoma Supreme Court

Page 418

285 P.2d 418

1955 OK 136

Application of the CITY COUNCIL OF THE CITY OF TAHLEQUAH,

Oklahoma, Acting for and in behalf of The City of

Tahlequah, for the Approval of

$1,200,000 Natural Gas Revenue

Bonds of 1955.

No. 36799.

Supreme Court of Oklahoma.

May 3, 1955.

Rehearing Denied June 7, 1955.

Application for Leave to File Second Petition for Rehearing

Denied July 19, 1955.

Syllabus by the Court.

1. Section 27, article 10, of the Constitution, prescribes the manner and means municipalities must follow and comply with to exercise the power granted them by section 6, article 18, of the Constitution, and such manner and means is exclusive.

2. Under article 10, section 27, of the Constitution of this State, any contract of any city incurring an indebtedness for any purpose named therein which required the assent of the voters therefor is void, unless such city, before or at the time of incurring such indebtedness, shall provide for the collection of an annual tax in addition to the other taxes provided for by the Constitution sufficient to pay the interest on such contracted indebtedness as it falls due and to constitute a sinking fund for the payment of the principal thereof within 25 years from the time of contracting the same.

3. All portions of 11 O.S.Supp.1953 §§ 449.1 to 449.20 purporting to authorize certain cities and towns to become indebted in excess of the amount fixed in Oklahoma Constitution, Art. X, sec. 26, without complying with all provisions of section 27 thereof are unconstitutional and void.

Application by City Council of City of Tahlequah, Oklahoma, for approval of bonds for purchase of natural gas distribution system, the same to be paid from revenue derived from operation of said public utility. Application denied.

Eugene Carr, Tahlequah, George J. Fagin, Oklahoma City, for applicant.

Henry M. Vance, C. F. Bliss, Tahlequah, Thomas L. Gibson, Muskogee, Don Welch, Madill, for protestants.

DAVISON, Judge.

This is an original proceeding in this court seeking the approval of Natural Gas Revenue Bonds in a total principal amount of $1,200,000 proposed to be issued by the City of Tahlequah, Oklahoma, under authority of 11 O.S.Supp.1953, § 449.1 et seq. The parties will be referred to as applicant and protestants.

On April 6, 1954, at an election held in said city, the issuance of $1,200,000 worth of Gas Revenue Bonds was approved by a majority of the tax paying voters of the City of Tahlequah, Oklahoma. Other proceedings were had, in conformity with 11 O.S.Supp.1953, §§ 449.1 to 449.20, Title 11, Chapter 8, Session Laws of Oklahoma 1953. This proceeding was then filed in this court in compliance with sec. 449.18 seeking the approval of the bonds sought to be issued. Proper notice of the application was given and, within the time allowed, a protest was filed by various residents and taxpayers of said city, a member of the city council and the mayor thereof.

The principal argument advanced by the protestants is that the 1953 act, supra, is in violation of the Oklahoma Constitution, Art. X, sec. 27. It is pointed out and argued that said constitutional provision imposes three requirements for the validity of a proposed bond issue under the authority thereby conferred upon municipal corporations, as follows:

1st--The utility proposed to be purchased or constructed must be owned exclusively by the city or town;

2nd--The bond issue must be approved at an election;

3rd--The city or town shall provide for the collection of an annual tax sufficient to pay the indebtedness contracted and the interest thereon in a certain specified manner.

We will first consider the proposition argued in connection with the last enumerated requirement. It has heretofore been determined by this court that the constitutional provision, Article X, sec. 27, is self-executing, providing an exclusive manner in which a municipality may become indebted for the purposes stated and that the same may not be abridged or extended by the legislature. State ex rel. Edwards v. Miller, 21 Okl. 448, 96 P. 747; City of Sapulpa v. Land, 101 Okl. 22, 223 P. 640, 35 A.L.R. 872; Williams v. City of Norman, 85 Okl. 230, 205 P. 144; State ex rel. Edwards, Inc., v. Keith, 179 Okl. 563, 66 P.2d 1059.

Art. X, sec. 27, Oklahoma Constitution provides that,

'Any incorporated city or town in this State may, by a majority of the qualified property tax paying voters of such city or town, voting at an election to be held for that purpose, be allowed to become indebted in a larger amount than that specified in section twenty-six, for the purpose of purchasing or constructing public utilities, or for repairing the same, to be owned exclusively by such city: Provided, That any such city or town incurring any such indebtedness requiring the assent of the voters as aforesaid, shall have the power to provide for, and, before or at the time of incurring such indebtedness, shall provide for the collection of an annual tax in addition to the other taxes provided for by this Constitution, sufficient to pay the interest on such indebtedness as it falls due, and also to constitute a sinking fund for the payment of the principal thereof within twenty-five years from the time of contracting the same.'

In the instant case the bonds were proposed to be issued for the purpose of purchasing and installing a natural gas distribution system in said city. The bonds are not general obligations of the municipality but are payable from funds to be accumulated by income from the use and operation of the gas distribution system. No part is to be paid from money derived from ad valorem taxes. For that reason, no provision is made in the bonds or the proceedings in connection therewith for the levy of a tax to pay said bonds or the interest thereon. In that respect they are in violation of the above quoted section of the Constitution.

We have not heretofore been confronted with the identical situation here involved but we have had occasion to pass upon the same general question in cases involving other public utility financing by cities. In the case of Burch v. City of Pauls Valley, 201 Okl. 78, 201 P.2d 247, 248, the proposed bonds were to be issued for the purpose of improving and...