Commonwealth v. City Of Richmond

• Decision Date: 12 March 1914
• Citation: 116 Va. 69,81 S.E. 69
• Parties: COMMONWEALTH. v. CITY OF RICHMOND.
• Court: Virginia Supreme Court

(116 Va. 69)

81 S.E. 69

COMMONWEALTH.

v.CITY OF RICHMOND.

Supreme Court of Appeals of Virginia.

March 12, 1914.

1. Taxation (§ 217*)—Exemption—Municipal Property.

Where the separate annual receipts from a municipal auditorium, market houses, waterworks, and gasworks were less than the expense incurred in connection with each, when taken together with interest on outstanding indebtedness and on the investment, such property was exempt from taxation under Const. 1902, § 183, subsec. "a" (Code 1904, p. cclxvii), exempting property owned by cities and used wholly and exclusively for city purposes, as against a contention that the city was engagedin competitive business, was furnishing water and gas to consumers for compensation, and that some water and gas had been furnished beyond the city limits.

[Ed. Note.—For other cases, see Taxation, Cent. Dig. §§ 355, 356; Dec. Dig. § 217.*]

2. Taxation (§ 196*)—Exemption—Constitutional Provision.

The provision of Const. 1902, § 183 (Code 1904, p. cclxvii), exempting from taxation property owned by cities and used wholly and exclusively for city purposes, cannot be construed with the same degree of strictness that applies to provisions making exemptions contrary to the policy of the state, since as to such property exemption is the rule and taxation the exception.

[Ed. Note.—For other cases, see Taxation, Cent. Dig. § 314; Dec. Dig. § 196.*]

3. Taxation (§ 217*)—Exemption—"Wholly"—"Exclusively."

In Const. 1902, § 183 (Code 1904, p. cclxvii), exempting from taxation property owned by cities and used wholly and exclusively for city purposes, the word "wholly" is used in the same sense as in Code 1887, § 457, as amended (Laws 1895-96, c. 178), which statute is superseded by the constitutional provision, and adds nothing to the completeness or extensiveness of the word "exclusively, " since "wholly" is but a synonym of "exclusively, " its definition being "to the exclusion of other things"; and hence, where the use made of city property has direct reference to the purposes for which it was authorized to be owned and held, and tends to directly promote such purposes, such use is within the provision exempting the property from taxation, though revenue or profit is derived from it.

[Ed. Note.—For other cases, see Taxation, Cent. Dig. §§ 355, 356; Dec. Dig. § 217.*

For other definitions, see Words and Phrases, vol. 8, p. 7451; vol. 3, pp. 2552, 2553.)

4. Taxation (§ 217*)—Exemption—Property Devoted to "Public Use."

The test whether a use is a "public use, " within Const. 1902, § 183 (Code 1904, p. cclxvii), exempting from taxation certain property devoted to a public use, is whether a public trust is imposed upon the property, whether the public has a legal right to the use which cannot be gainsaid or denied or withdrawn by the owner.

[Ed. Note.—For other cases, see Taxation, Cent. Dig. §§ 355, 356; Dec. Dig. § 217.*

For other definitions, see Words and Phrases, vol. 6, pp. 5825-5837; vol. 8, p. 7774.]

Error to Hustings Court of Richmond.

Action by the Commonwealth against the City of Richmond. Judgment for defendant, and the Commonwealth brings error. Affirmed.

The Attorney General, for the Commonwealth.

H. R. Pollard, of Richmond, for defendant in error.

CARDWELL, J. The. commissioner of the revenue for the city of Richmond, in the mode prescribed by law, assessed taxes in favor of the commonwealth of Virginia for the year 1912, amounting to $35,640.50, upon certain properties and utilities owned by the city, including an auditorium building, waterworks, gasworks, and sewerage system, and certain grounds and buildings owned and used by the city for the use and operation of said properties and utilities, which are set out and described, and the separate values thereof stated, in the assessment made by the commissioner.

Upon a petition filed by the city under the statute, alleging the said assessments to be erroneous, the hustings court of the city entered its order exonerating from taxation all of the property mentioned in the petition, and certified "that all of the said property assessed as aforesaid for state taxes for the year 1912 is property lawfully owned by the city of Richmond, and is by said city used wholly and exclusively for city purposes, in furnishing light, water, and sewerage to citizens and inhabitants of the city, who pay compensation therefor, all of which compensation is paid to the city treasurer and used for municipal purposes by the city, there being an exception in the matter of the American Locomotive Works, whose works are located outside of, but immediately adjacent to, the city limits, which is furnished with water from the city's surplus supply for compensation under like circumstances with the citizens and inhabitants of the city, and that the compensation received by the city is in excess of the cost of the maintenance of the light, water, and sewer systems." To this judgment the commonwealth applied for and obtained this writ of error.

In the petition for the writ of error the commonwealth abandons her contention, made in the trial court, that the "sewerage system of the city, total value $2,250, 000, taxes assessed thereon $7,875, " was subject to taxation by the commonwealth; so that the valuation of property belonging to the city on which the commonwealth now claims that taxes should be assessed, to wit, the auditorium building, market houses, waterworks, and gasworks, is $7,832, 500, and the tax assessed thereon $27,765.50.

This contention is rested upon the ground that from each, "the auditorium building, the market houses, the waterworks, and the gasworks, the city habitually receives and collects a net revenue largely in excess of the cost of maintaining these utilities, all of which is covered into the treasury of the city and used for its general purposes, which * * * renders each and every one of those properties liable to taxation under the express provision of the Constitution."

It is conceded in the argument here that the city of Richmond, under its charter, is authorized to own and operate the gasworks, waterworks, market houses, and an auditorium, which are sought to be taxed In this case, and that these different properties and utilities are "lawfully owned" by the city, and like all other property owned by it are used for city purposes; but it is insisted that, though these properties and utilities be held and used for a "governmental purpose, " whenever the city derives for such use a revenue or profit to be used in effecting the other public functions or purposes ofthe city, " such properties or utilities cease to be exonerated from taxation by the state.

We deem it proper to set out here the facts appearing in the record, with respect to the maintenance, uses made of the properties in question, and the revenue or profits derived therefrom, which facts are not controverted.

(1) The Auditorium. The average annual charge during the period of the last five years on the treasury of the city for the maintenance of the ground and building, exclusive of the average interest charge of $2,372.59, is $1,159.34, while the average annual receipts from the same period amount only to the sum of $273.01.

(2) Market Houses. The average annual charge during the period of the last five years on the city for maintenance of the grounds and buildings, exclusive of the annual interest charge on the cost of the same, is $10,232.80, while the average annual income from the receipts is $19,444.44, making a difference of $9,211.66, while the annual average interest charge on the sum invested by the city for the land and buildings is $9,862.40, thus showing an annual average deficit of expenses and costs over the revenues of $650.74.

(3) Waterworks. Taking the year 1911, it appears that the total receipts were $254,-122.48, while the city spent for maintenance, mains, meters, etc., $181,600.22, leaving a net income of $72,522.86, not taking into consideration, however, the interest on the outstanding indebtedness of the city chargeable against the said works, which interest on $1,370, 000 of 4 per cent, bonds outstanding in the year 1911 amounted to $54,800, leaving a net income of only $27,722, while, if 4 per cent, was charged on the whole cost of the works to and including that year, there would be a considerable annual deficit by reason of the operation of the said works.

(4) Gasworks. According to the annual report of the mayor of the city of Richmond, the net revenue from the gasworks for the year 1911, making no deductions on the bonded indebtedness of the city created to establish the plant, was $205,000, while the net annual income as ascertained by the special accountant was $38,769.70; but, making such deduction, the result would be practically the same as in the case of the waterworks.

In this connection stress is laid in the argument for the commonwealth upon certain facts appearing in the record as sustaining the theory that the city was engaged in "competitive business" in the matter of furnishing water and gas to consumers for compensation, and that the city had gone beyond its charter rights in furnishing water and gas to persons residing beyond its corporate limits. No sufficient reason is given or authority cited as sustaining the contention that the city had not the right to demand and receive reasonable compensation for water and gas furnished to consumers within its corporate limits—in fact, the charter of the city expressly authorizes it to do so. The circumstances and extent to which the city had departed, if at all, from its charter rights in furnishing water and gas to persons residing beyond its corporate limits, are as follows:

In September, 1909, the adjacent town of Barton Heights presented a petition to the council of the city of Richmond, setting forth that that town was then drilling an artesian well, which it expected would be completed within a few months, from which it anticipated to secure an ample supply of water...