City of Waco v. Mann, 7564.

• Decision Date: 10 May 1939
• Docket Number: No. 7564.,7564.
• Citation: 127 S.W.2d 879
• Parties: CITY OF WACO et al. v. MANN, Atty. Gen.
• Court: Texas Supreme Court

Page 879

127 S.W.2d 879

CITY OF WACO et al. v. MANN, Atty. Gen.

No. 7564.

Supreme Court of Texas.

May 10, 1939.

Original mandamus proceeding by the City of Waco, Tex., and others against Gerald C. Mann, Attorney General of the state of Texas to compel the respondent to approve and certify to the State Comptroller certain bonds which the City of Waco sought to issue and sell.

Writ issued.

Allan D. Sanford, City Atty., and Geo. W. Morrow, Asst. City Atty., both of Waco, for relators.

Gerald C. Mann, Atty. Gen., and Clarence C. Crow, Geo. W. Barcus, and A. S. Rollins, Asst. Attys. Gen., for respondent.

SHARP, Justice.

The City of Waco and its officials seek to compel, by original mandamus proceedings, the Honorable Gerald C. Mann, Attorney General of the State of Texas, to approve and certify to the State Comptroller certain bonds which the City of Waco is attempting to issue and sell.

It is shown that there has been presented to the Attorney General, for his approval and certification, an issue of $219,000 Waco, Texas, Refunding Bonds, Series A, and an issue of $419,000 Waco, Texas, Refunding Bonds, Series B, all of which refunding bonds are proposed to be used for the purpose of refunding valid outstanding bonds of the City of Waco, which bear a higher rate of interest.

The Attorney General has declined to approve such issues of refunding bonds on account of questions raised by the buyers of same, and his first reason for such refusal is as follows: "1. Section 5 of Article XI of the Constitution of Texas [Vernon's Ann.St.] provides that no debt shall ever be created by any city unless at the same time provision be made to assess and collect annually a sufficient sum to pay the interest thereon and create a sinking fund of at least two per cent. thereof. In the present instance the City of Waco, in its tax levy ordinance adopted September 13, 1938, failed to levy any taxes for interest and sinking funds of some $977,000 of outstanding bonds maturing during the years 1939 to 1943, inclusive, and constituting part of bonds originally issued in the aggregate amount of $1,240,000. This figure does not include the $12,500 bonds maturing July 1, 1939, for the payment of which there is at present a sufficient amount in the sinking fund. All of said bonds for which the City failed to levy taxes for interest and sinking fund payments bear interest at the rate of five per centum per annum, and the annual interest on the $977,000 bonds is $48,850. The two per cent. sinking fund requirement based upon the $1,240,000 bonds originally issued is $24,800, and the total interest and sinking fund requirement for the current year is, therefore, $73,650, which amount based upon the present assessed valuation of $47,463,110 would require a tax levy of $.1552 on each $100 of assessed valuation. The tax levy ordinance adopted September 13, 1938, contained levies for the general fund, library, park and recreation purposes and for outstanding bonds other than those not provided for as set forth above totalling $1.75 on the $100 of the assessed valuation. There is also included in said taxing ordinance a levy of $.70 on the $100 of the assessed valuation for the maintenance and support of public free schools. Article 212 of the Charter of the City of Waco limits the tax for municipal purposes to $1.85 on each $100 of assessed valuation, provided the levy for the support and maintenance of public free schools will automatically reduce the levy for municipal purposes so that total taxes shall never exceed two and fifty one-hundreths per cent. for any one year. It is apparent, therefore, that if the tax of $.1552 necessary to provide interest and sinking fund requirements for the bonds maturing during the years 1939 to 1943 as set out above had been included in the tax levy ordinance adopted September 13, 1938, the City of Waco would have exceeded the limit prescribed by Article 212 of the Charter, and as a consequence there would have been no further tax levying power for additional bonds."

It is undisputed that the original bonds executed by the City of Waco, and for part of which these refunding bonds are proposed to be issued, were validly issued, and that they are an outstanding indebtedness against the City of Waco.

The City of Waco is a home rule city, and derives its power to issue the bonds involved in this suit by virtue of the authority contained in Article 1175, paragraph 10, of the Revised Civil Statutes of 1925, and from its charter. Article 1175 of the Revised Civil Statutes in part reads:

"Cities adopting the charter or amendment hereunder shall have full power of local self-government, and among the other powers that may be exercised by any such city the following are hereby enumerated for greater certainty:

* * * * * *

"10. The power to control and manage the finances of any such city; to prescribe its fiscal year and fiscal arrangements; the power to issue bonds upon the credit of the city for the purpose of making permanent public improvements or for other public purposes in the amount and to the extent provided by such charter, and consistent with the Constitution of this State; provided, that said bonds shall have first been authorized by a majority vote by the duly qualified property tax-paying voters voting at an election held for that purpose. Thereafter all such bonds shall be submitted to the Attorney General for his approval, and the Comptroller for registration, as provided by law, provided that any such bonds after approval, may be issued by the city, either optional or serial or otherwise as may be deemed advisable by the governing authority. Whenever any city has heretofore been authorized, under any special charter, creating such city, to issue any bonds by the terms of such charter, the provisions of this chapter shall not be construed to interfere with the issuance of any such bonds under the provisions of any charter under which such bonds were authorized."

Article 202 of the charter of the City of Waco provides as follows: "It shall have power to issue bonds upon the city for the purpose of making permanent public improvements, or for any other public purposes, in such sums and in such amounts as may be found necessary or expedient; Provided that said bonds shall have been first authorized by a majority vote cast by the duly qualified taxpaying voters as shown by the last preceding tax rolls of the city, voting at an election held for that purpose; and provided further, that at the same time provision be made to assess and collect annually a sufficient sum to pay the interest thereon and create a sinking fund of at least two per cent. thereon; said bonds to bear interest at a rate not exceeding six (6) per cent. per annum."

It will be seen that Article 1175 grants unto cities adopting the charter or amendment thereunder full power of local government; and among other powers granted is the one which authorizes such cities to issue bonds provided by its charter and "consistent with the Constitution of this State."

The charter provides that at the time of issuance of bonds by the City, provision must be made "to assess and collect annually a sufficient sum to pay the interest thereon and create a sinking fund of at least two per cent. thereon." It will be observed that neither the Constitution nor the provisions of the charter require in express terms the levy of a fixed rate or tax to be levied and collected each year during the life of the bonds; but the charter does require that provision be made for the annual collection of a sufficient sum to pay the interest and create a sinking fund of at least two per cent. thereon. There is no definite sum fixed to be levied each year, and it leaves the fixing of such rate for each year to the taxing authorities of the City of Waco as the necessities of the bond issue may require. Values may fluctuate, and a fixed rate might in some years be insufficient, and in other years create a surplus not needed to liquidate the bonds as they mature.

The mere fact that the tax ordinance adopted by the Board of Commissioners of the City of Waco on September 13, 1938, did not specify a levy for interest and sinking fund purposes of some $977,000 of outstanding bonds, maturing during the years 1939 to 1943, inclusive, which constitute a part of the bonds originally issued by the City in the sum of $1,240,000, such fact does not affect the validity of the $219,000 Refunding Bonds, Series A, and the $419,000 Refunding Bonds, Series B, now proposed to be issued by the City of Waco, provided a sufficient tax is levied for the proposed refunding bonds and if there is a sufficient margin left in which a tax may be levied to service outstanding indebtedness. This record discloses that there were sufficient levies made to service the proposed refunding bonds, and that there was a sufficient margin of taxing power remaining to service all other outstanding bonds. It also appears that in the ordinance levying taxes for 1938 there was provided in the Contingent Bond Fund No. 52 a rate of $.0760, which will produce more than a sufficient amount of money to service the refunding bonds, and could be used for such purpose.

The courts of this State hold that when an issue of bonds is authorized, the tax to support it is automatically levied from year to year, where the law under which the bonds are issued specifically requires an adequate tax levy, whether a specified rate is fixed or not. The courts will assume that, in view of the provisions of the City charter requiring provision to be made, at the time when bonds are issued, to assess, levy, and collect annually a sufficient tax to pay the interest thereon and create a sinking fund of at least two per cent. thereof, such tax will automatically be annually assessed, levied, and collected by the taxing authorities of the City of Waco upon the taxable property of the City, whether specific provision is made in the...