City of Portland v. Welch

• Decision Date: 07 July 1936
• Citation: 59 P.2d 228,154 Or. 286
• Parties: CITY OF PORTLAND v. WELCH, County Assessor, et al. (GLEICHMAN et al., Interveners).
• Court: Oregon Supreme Court

59 P.2d 228

154 Or. 286

CITY OF PORTLAND v. WELCH, County Assessor, et al. (GLEICHMAN et al., Interveners).

Supreme Court of Oregon

July 7, 1936

In Banc.

Appeal from Circuit Court, Multnomah County; Fred W. Wilson, Judge.

Suit by the City of Portland, a municipal corporation, against H. U Welch, County Assessor for Multnomah County, Oregon, and others, wherein F. G. Gleichman, an employee of the City of Portland, in the capacity of fireman, personally, and as the representative of all other firemen of said City similarly situated, and others, intervened. From the decree, the defendants appeal.

Decree affirmed in so far as not inconsistent with opinion.

Provision in Tax Supervising and Conservation Commission Act authorizing tax commission to reject or reduce items in budgets of tax levying bodies within counties having population of more than 100,000 when budget estimates were not in excess of any constitutional or statutory limitation permitted commission to substitute its judgment for that of officials elected to determine governmental policy of municipality, and hence was unconstitutional, notwithstanding that commissioners took oath to secure efficient and economical administration of government in the county. Code 1930, §§ 69-1201 to 69-1217 (repealed, Laws 1939, ch. 273, § 15).

Frank S. Sever, Deputy Dist. Atty., of Portland (James R. Bain, Dist. Atty., of Portland, on the brief), for appellants H. U. Welch, A. A. Bailey, Martin T. Pratt, R. T. Cox, Mason L. Bigham and C. W. Weatherly.

Robert L. Sabin, Jr., of Portland, for appellant H. W. Welch, taxpayer.

Carl E. Davidson, Asst. Atty. Gen. (I. H. Van Winkle, Atty. Gen., on brief), for appellant I. H. Van Winkle.

Frank S. Grant, City Atty., and L. E. Latourette, Deputy City Atty., both of Portland, for respondent City of Portland.

Chris Boesen, of Portland (Green, Tanner & Boesen, of Portland, on brief), for interveners F. G. Gleichman and Gerald Royer.

BELT Justice.

This suit is prosecuted under and by virtue of the Declaratory Judgment Act (Code 1930, § 2-1401 et seq.), challenging the constitutionality of the Tax Supervising and Conservation Commission Act (chapter 208, p. 410, Oregon Laws 1921, Oregon Code 1930, §§ 69-1201 to 69-1217, inclusive), and for the purpose of obtaining the proper construction thereof in the event that it is held valid.

The purpose and object of the act is thus expressed in the title thereof, viz.: "Providing for the supervision, regulation, limitation and levy of taxes of counties having a population of more than 100,000, and of all municipal and quasimunicipal corporations therein having power to levy taxes, by a commission created for such purpose and making and keeping proper records of taxes and indebtedness of such counties and municipalities." The act embraces: "The county, and any city, town, port, school district, union high school district, road district, irrigation district, water district, dock commission, and of all other public and quasipublic corporations that have power to levy a tax within the county." Section 2(d), Code 1930, § 69-1202(d). The three tax commissioners are appointed by the Governor. It is the duty of the commission to compile statistics and other information concerning the bonded or other indebtedness of any municipality or quasi municipality within the county and to keep a record of expenditures of such municipalities. Under the provisions of the act all tax levying boards within the county are required to submit to the commission detailed estimates in their annual budgets, together with an estimate of the probable receipts of the municipal corporation "from all other sources than direct tax levy and bond issues during the fiscal year for which the budget has been prepared." (Section 69-1206.) The commission is directed to conduct a hearing upon the budget submitted, at which time any tax levying board is entitled to be heard. The tax commission is authorized, after hearing on the budget, to "approve, reject, or reduce the same or any items therein." When any changes have been made in the budget, the commission is directed to report in writing to the levying boards the results of its "findings, conclusions, and directions." Thereafter by formal order the tax commission directs the several levying boards in the county to levy a tax in accordance with its findings and conclusions for the purpose of meeting the necessary expenditures " which in the judgment of said commission should be made for the next ensuing fiscal year." The decision of the commission " as to the amount of tax" to be levied by each municipal corporation "shall be conclusive and binding upon such municipal corporation and the levying boards and officers thereof." (Italics ours.) Upon receipt of the order of the commission it is the duty of the several levying boards to "proceed forthwith to levy such tax," and if they fail so to do, the commission is authorized to direct the assessor to extend upon the tax roll the tax levy determined by the commission. Section 10 of the act (section 69-1210) provides penalties for a violation of the act. Section 15 (section 69-1215) provides that the tax commissioners shall take an oath that they, among other things, "will endeavor to secure economical expenditure of public funds sufficient in amount to afford efficient and economical administration of government in the county." No provision is made for an appeal from the decision of the commission as to the amount of tax to be levied.

The original Tax Supervising and Conservation Commission Act was passed by the Legislature in 1919 (chapter 375, p. 662, Oregon Laws 1919), but, under its express terms, the tax commission had only "advisory jurisdiction" over tax levying boards. It is observed that the present act of 1921 is far more drastic in its provisions and is plainly couched in mandatory language.

The city of Portland challenged the constitutionality of the act in 1921, asserting it was a local law as applied to cities and in violation of article 11, § 2, of the Constitution of Oregon (Home Rule Amendment), but this court sustained the validity of the act. Tichner v. City of Portland, 101 Or. 294, 200 P. 466. Thereafter, the city, during a lapse of many years, submitted to the provisions of the act and apparently worked in harmony with the tax commission.

The present controversy arose when the tax commission made the following changes in the 1936 budget as submitted by the city of Portland: (1) Reduced various amounts for salaries of city officials. This reduction was substantially on a 12 1/2 percentage basis and amounted in the aggregate to $400,827.20. The city, by ordinance, had recently increased salaries of employees in various departments. It was the intention of the commission to restore the salaries to what they were prior to the enactment of the ordinance. (2) Rejected in its entirety an item of $77,000 for widening Eighty-Second avenue in the city of Portland. The commission in its report relative to the elimination of this item from the budget stated: "The amount of the city's liability has not been fixed either by a vote of the people or by the courts. This commission believes that there is sufficient money in the emergency fund together with possible transfers from other funds, to make payment on any claim that may be definitely determined during 1936." The record discloses, however, that certain property had been taken for street widening purposes although no condemnation proceedings were instituted. Property owners instituted actions for damages. The city estimated that the above amount would be necessary to satisfy such claims. (3) Reduced an item for sinking funds on bonded indebtedness. The city specified the sum of $902,000 as the amount needed, but the commission allowed only $875,000, (4) Reduced an item for paying interest on bonded indebtedness. The city estimated it would need $924,055.38 for such purpose. The commission allowed $766,608.72. Relative to these last two items the commission stated in its report: "All requests for allowances for delinquency and discounts were not approved because of the belief, based on receipts to date, that the 1936 tax collection, current and delinquent, would exceed the levies for that year and because the total of delinquent taxes outstanding exceed the current obligations by more than two million dollars."

After the tax commission refused to approve the budget as submitted by the city, an ordinance was enacted levying a tax sufficient to cover the above-mentioned items in controversy and also other items in the budget upon which there had been no disagreement. The assessor, however, refused to extend the levy as certified by the city, but did so in accordance with the findings and conclusions of the tax commission. Thereupon this proceeding was commenced. Gleichman and Royer, employees of the city of Portland, had previously filed a suit challenging the constitutionality of the act; but when the instant suit was commenced they were permitted to intervene.

The circuit court held the statute creating the tax commission unconstitutional "in so far as it gives said commission mandatory authority to levy taxes, cut out or reduce items in cases where the items in a budget will not cause a tax in excess of the limitations provided by law." The decree was based upon the legal proposition that the Legislature could not delegate to an appointive commission the power to levy a tax and that consequently "the action of such commission upon such budget is only advisory." In answer to specific questions propounded by the city, the court held that the commission had no authority to so revise the budget and that the levy made by the city was legal. At the conclusion of the...