Eakin v. State ex rel. Capital Imp. Bd. of Managers of Marion County

• Decision Date: 15 February 1985
• Docket Number: No. 784S294,784S294
• Citation: 474 N.E.2d 62
• Parties: Harry EAKIN, Auditor of Marion County, Appellant, v. STATE ex rel. CAPITAL IMPROVEMENT BOARD OF MANAGERS OF MARION COUNTY, Appellee.
• Court: Indiana Supreme Court

Page 62

474 N.E.2d 62

Harry EAKIN, Auditor of Marion County, Appellant, v. STATE ex rel. CAPITAL IMPROVEMENT BOARD OF MANAGERS OF MARION COUNTY, Appellee.

No. 784S294.

Supreme Court of Indiana.

Feb. 15, 1985.

City-County Legal Div., John P. Ryan, Corp. Counsel, James B. Burroughs, Mark Dall, Indianapolis, for appellant.

G. Daniel Kelley, Jr., Stephen M. Terrell, Ice, Miller, Donadio & Ryan, Indianapolis, for appellee.

GIVAN, Chief Justice.

This cause comes before this Court pursuant to Ind.R.App.P. 4(A). The issues involve an attempt by the Capital Improvement Board (CIB) to refinance construction bonds which were first issued in 1982 to finance a substantial addition to the Indianapolis Convention Center.

The government of the City of Indianapolis and that of Marion County are unified. The legislative branch of the government is the City-County Council.

The Indiana General Assembly in 1981 enacted a series of statutes which provided a mechanism for the financing of the proposed expansion of the Indianapolis Convention Center including a sports stadium. The legislation granted to the City-County Council of Marion County the authority to impose certain excise taxes to repay the construction bonds which were to be let to finance the expansion.

The revenue scheme authorized by statute and enacted by the City-County Council consisted of three separate excise taxes. The first was a 1 percent tax on the sale of food and beverages sold for immediate consumption on or near the premises at retail establishments in Marion County. This tax was authorized by Ind.Code Sec. 6-9-12-1 et seq. (West Supp.1984). The second was a 5 percent tax on admissions to professional sporting events held in the Indianapolis Convention Center. This was premised on Ind.Code Sec. 6-9-13-1 et seq. (West 1982). The last tax was a hotel/motel tax which was based on Ind.Code Sec. 6-9-8-1 (West 1982).

The revenues collected under these taxes were to be placed in a trust fund, the Capital Improvement Board Fund (hereinafter "Fund"). This Fund and the operating revenues of the Indianapolis Convention Center are the only funds pledged to the retirement of the construction bonds. The bonds are payable solely from these sources. With this procedure in place, the CIB sold construction bonds totalling slightly more than $47,000,000 in 1982.

In an effort to respond to a lowering of interest rates, the CIB, the managers of the Indianapolis Convention Center and overseers of the Fund, passed a resolution in February, 1984, authorizing the issuance of two new series of bonds to refinance the 1982 bonds. Series A bonds, with a value of $55,000,000, were to be issued to refinance the old bonds. Series B bonds totalling $9,000,000 were to be used to convert short term debt into long term debt.

The Mayor of Indianapolis placed his required signature on the resolution. However, the Auditor of Marion County, Harry Eakin, refused to affix his signature to the bonds. This is required to attest to the seal of Marion County which in turn is required to issue the bonds. The CIB brought suit to mandate Eakin to attest to the seal. The trial court granted judgment in favor of the CIB and ordered Eakin to comply. Eakin then brought this appeal. We reverse.

Appellant Eakin contended at trial and in this appeal that the bonds in question are to be considered a debt of Marion County and that the face amounts of the bonds will place Marion County over the 2 percent limitation proscribed in Article 13, Sec. 1 of the Indiana Constitution. This section provides:

"Section 1. No political or municipal corporation in this State shall ever become indebted in any manner or for any purpose, to an amount, in the aggregate, exceeding two per centum on the value of the taxable property within such corporation, to be ascertained by the last assessment for State and county taxes, previous to the incurring of such indebtedness, and all bonds or obligations in excess of such amount given by such corporations shall be void: Provided, That in time of war, foreign invasion, or other great public calamity, on petition of a majority of the property owners, in number and value, within the limits of such corporation, the public authorities, in their discretion, may incur obligations necessary for the public protection and defense to such amount as may be requested in such petition."

The parties by stipulation agree to the following: The total assessed valuation of Marion County on the date of the refusal was $3,856,836,303 and that 2 percent of that total is $77,136,726; the current indebtedness excluding the $47,000,000 of 1982 bonds to be refinanced was $22,025,000; and, the two new bonds, coupled with the existing debt, would be in excess of the 2 percent limitation.

The trial court found the new bonds were not a debt within the scope of Article 13 and thus were not properly attributable to the total bonding limitation on Marion County. The trial court reached this conclusion on three alternative grounds. The court first found the 2 percent indebtedness limitation related solely to debts payable from ad valorem property taxes. The court concluded the limitation does not apply to debts payable from other revenue sources such as excise taxes. Secondly, the court found these bonds were within the "Special Funds" doctrine exception to the limitation. Bonds meeting the test of this exception are not counted as the debt of the local governmental unit. Lastly, the trial court found the taxing method was tantamount to revenue bonds and thus was outside the debt limitation. We disagree on all three grounds.

The first holding of the trial court places before this Court a question of first impression. The intent of the framers of the Constitution is paramount in determining the meaning of a provision. State Board of Tax Commissioners v. Key Motors Corp. (1980), Ind.App., 404 N.E.2d 52. To properly determine the meaning of a provision the Court should consider the purpose which induced the adoption. State ex rel. Black v. Burch (1948), 226 Ind. 445, 80 N.E.2d 294. The words of the Constitution must be presumed to have been carefully chosen so that each word has a meaning. Chadwick, Treasurer v. City of Crawfordsville (1940), 216 Ind. 399, 24 N.E.2d 937. The words of the Constitution should be construed in a manner consistent with their ordinary sense and their common meaning should be attributed to them. Tucker v. State (1941), 218 Ind. 614, 35 N.E.2d 270.

This Court in a prior decision concerning the purpose of Article 13 stated: "The purpose of the constitutional provision is to limit the public indebtedness, which would be a burden upon the public and payable out of taxes or by the sale of property." Edwards v. Housing Authority of the City of Muncie (1939), 215 Ind. 330, 338, 19 N.E.2d 741, 745. We believe this is still the purpose. The plain meaning of Article 13 is clear--a local governmental unit may not incur total indebtedness which exceeds 2 percent of the value of the taxable property within its boundaries. The intent of the framers was to construct limitation of indebtedness for the benefit of both present and future generations. It is through this limitation the interests of the generations are protected from being saddled with spending excesses. Any interpretation of Article 13 which ignores this principle is violative of the Article and must not be tolerated.

There are a number of financial liabilities in the public domain which are not included within the term "indebtedness" of Article 13. One type of liability not included is debts within the "special taxing district" exception. In Dortch v. Lugar (1971), 255 Ind. 545, 572, 266 N.E.2d 25, 42, the Court explained this exception:

"[T]he Legislature may create such special taxing districts for local public improvements and provide for the levy of special ad valorem taxes throughout the district based upon the benefit accruing to the property holders therein situated; the Legislature may determine the boundaries of such districts or delegate to an agency the power to so determine them, conforming or not to the political or governmental subdivision there located; the Legislature may designate the agency to perform the administrative functions necessary on behalf of the district; and obligations so incurred by such a district payable out of the special benefit ad valorem tax are not debts of a municipal corporation within the provisions of Art. 13, Sec. 1, of the Indiana Constitution." (Emphasis in original.)

This exception has been subdivided into two exceptions: The "Special Funds" doctrine and the revenue bond exception. Additionally, a contractual arrangement between the municipality and a provider of usual and necessary items, such as water or lights, which calls for the governmental unit to pay in monthly or annual installments, does not create a debt in the amount of the aggregate payments due over the life of the contracts. City of Valparaiso v. Gardner (1884), 97 Ind. 1. The CIB asks this Court to create a new exception to Article 13 by holding that indebtedness which looks to a revenue source other than ad valorem property taxes for repayment is not an indebtedness within the scope of Article 13.

The CIB first argues Article 13 is a single sentence document which speaks of two subjects, a debt limitation expressed in terms of property valuations and a debt escape clause also tied to property tax values. The CIB thus maintains the framers must have intended there to be a relationship between the level of the debt, the debt escape clause and the nature of the debt so limited. The CIB contends the intention of the framers was that the limitation should only apply to debts which have as their source of repayment the funds collected by the property tax. It is further argued that if the framers had intended the limitation to apply to all forms of revenue sources the framers would have used language to that...