City of Louisville v. Board of Ed. of Louisville

• Decision Date: 21 June 1946
• Citation: 195 S.W.2d 291,302 Ky. 647
• Parties: CITY OF LOUISVILLE et al. v. BOARD OF EDUCATION OF LOUISVILLE.
• Court: Kentucky Court of Appeals

195 S.W.2d 291

302 Ky. 647

CITY OF LOUISVILLE et al. v. BOARD OF EDUCATION OF LOUISVILLE.

Court of Appeals of Kentucky

June 21, 1946

Appeal from Circuit Court, Jefferson County, Chancery Branch, First Division; Lawerence S. Speckman, Judge.

Suit by the Board of Education of Louisville, Ky. against the City of Louisville and others for a declaratory judgment as to whether school bonds proposed by plaintiff will be obligations of the city or the educational district thereof and whether net outstanding school bonds previously issued by the city must be regarded as bonds of the district, so as to be chargeable against its constitutional debt limitation. From an adverse judgment defendants appeal.

Reversed.

Gilbert Burnett and Alex P. Humphrey, both of Louisville, for appellants.

William T. Baskett, of Louisville, for appellee.

STANLEY Commissioner.

The Board of Education of Louisville deemed it desirable and necessary to raise $8,000,000 by the issuance of bonds for acquiring, erecting, improving and furnishing school property. It followed the procedure specified in KRS 162.080 and certified its action to the Board of Aldermen of the City of Louisville, which is the proper tax-levying authority, for appropriate action under the statute relating to the holding of a referendum election. The Board of Aldermen declined to comply until important legal questions should be judicially determined. This suit for a declaratory judgment is for that purpose.

The questions are whether the bonds, if authorized by the electorate, will be obligations of the City or of the Educational District; and if they should be held to be bonds of the District, whether or not the net outstanding school bonds previously issued by the City are to be likewise regarded so as to be a charge against the constitutional maximum limitations on its idebtedness. Since the boundaries of the educational district and the City are the same, and the property that would be subject to taxation to liquidate the bonds identical, the only practical difference would be the effect upon the limitation of the City or District to issue other bonds in the future.

The limitation on indebtedness of the City of Louisville is ten per cent of the assessed value of taxable property (Sec. 158 Ky. Const.), which was approximately $45,200,000 as of July 1, 1945. Deducting the present city indebtedness $28,300,000, there is a margin of approximately $16,900,000. The net outstanding bonds previously issued by the city for school purposes included in the present indebtedness amount to about $6,850,000. The limitation of the Board of Education, as a separate municipality, is two per cent on the taxable value of property (Sec. 158, Const.) and that was approximately $9,000,000 on July 1, 1945. The Board of Education has not heretofore issued any bonds. The City takes the position that its outstanding school bonds ($6,850,000) are to be deemed bonds of the District and a charge against its limitation, which would leave it a margin of only $2,150,000. The Board of Education contends that the outstanding school bonds of the city should not be charged up against its limitations at all. It further contends the proposed bonds, if authorized, will be obligations of the City of Louisville. If the present issue alone be deemed that of the educational district, there would be left a margin of only $1,000,000, and the Board insists that this would be a serious handicap to meeting the needs of further rehabilitation and improvement of its property and development required by the rapidly expanding city bondaries and population.

The circuit court declared it to be the duty of the Board of Aldermen to provide for holding the referendum election and issuance of the bonds should they be authorized by the voters, and if issued that they would constitute an obligation of the educational district and not of the city. He held that no part of the school bonds heretofore issued by the city shall be considered in fixing the limitation of the indebtedness of the educational district.

In 1934 the General Assembly enacted a comprehensive revision of the school laws, which became known as the School Code of 1934. Ch. 65, Acts of 1934. The present statutes relating to education, with a few exceptions, are based upon that Act. Note to Title XIII, Chapter 156, Kentucky Revised Statutes, Vol. 2, p. 664. The Act revolutionized many of the statutory provisions pertaining to educational organizations within the state and to their financing. Prior thereto the several statutes authorized various classes of cities to issue bonds for school purposes as their own obligations. The present outstanding school bonds of Louisville were approved in Bohannon v. City of Louisville, 193 Ky. 276, 235 S.W. 750, and Bullitt v. City of Louisville, 213 Ky. 756, 281 S.W. 1031. As the chancellor well says in his opinion in this case:

'There can be no doubt that the General Assembly in enacting KRS 160.010 and 160.020 intended and did establish an independent school district in the city of Lousville, free from the control of the City, which was a radical departure from the former acts. The present Board of Education under the Act became a separate and distinct municipality or political sub-division, as an arm of the state government, to function within and coterminous with the boundary of the city of Louisville; in a sense, a wheel within a wheel. Its purpose is to provide proper education facilities, such as buildings, equipment, courses of instuction and teachers, within its boundaries. It is a function exclusively delegated to it; therefore, it must of necessary be free within Constitutional limits to exercise that authority. Coppin v. Board of Education of City of Covington, 155 Ky. 387, 159 S.W. 937.'

With that viewpoint, the court appears to have been impelled by our decision in Board of Education of the City of Corbin v. City of Corbin, 301 Ky. 686, 192 S.W.2d 951, to hold that the bonds could not be issued as obligations of the City; hence they must be issued as obligations of the independent school district. In that case,...