Harper v. City Council of City of Richmond, 790763

• Citation: 261 S.E.2d 560,220 Va. 727
• Decision Date: 11 January 1980
• Docket Number: No. 790763,790763
• Court: Virginia Supreme Court
• Parties: Charles B. HARPER, Jr., et al. v. CITY COUNCIL OF the CITY OF RICHMOND et al. Record

Page 560

261 S.E.2d 560

220 Va. 727

Charles B. HARPER, Jr., et al. v. CITY COUNCIL OF the CITY OF RICHMOND et al.

Record No. 790763.

Supreme Court of Virginia.

Jan. 11, 1980.

Richard J. Knapp, II, Richmond (David M. Shapiro, Caudle & Shapiro, Richmond, on brief), for appellants.

C. Tabor Cronk, Asst. City Atty. (Conard B. Mattox, Jr., City Atty., Albert J. FitzPatrick, Asst. City Atty., on brief), for appellees.

Downtown Development Unlimited (A. J. Brent, Lee F. Davis, Jr., Christian, Barton, Epps, Brent & Chappell, Richmond, on brief), amicus curiae, for appellees.

Before CARRICO, HARRISON, COCHRAN, HARMAN, POFF and COMPTON, JJ.

COMPTON, Justice.

Under the Public Finance Act, Code §§ 15.1-170 to -227, provisions are made for judicial determination of the legality of all proceedings taken by the governing body of a political subdivision in connection with the authorization or issuance of bonds. See §§ 15.1-213 to -221. In this appeal, we review the trial court's ruling that a municipality's procedure for the issuance of general obligation bonds was valid.

In the fall of 1977, appellee City Council of the City of Richmond decided to include a new category, Downtown Redevelopment Program, in its program of proposed capital improvement projects. At that time, the City Council decided to add a new project called Downtown Development-Project One. The estimated City cost of Project One was $29 million. $16.8 million of the project was to be financed from the City's reserve fund for public improvements and the balance of $12.2 million was to be financed from the proceeds of the sale of general obligation bonds.

The objective of Project One is to redevelop the portion of downtown Richmond bounded by Broad, Fourth, Clay and Seventh Streets. Land is to be provided for public and private development in an effort to support and strengthen the downtown area of the City. It is intended that the development will broaden the City's potential for attracting conventions and will strengthen the tax base. Proposed components of the project include a convention and exhibition center, upgraded parking facilities, an atrium plaza, and street and sidewalk improvements.

On November 28, 1977, the City Council adopted a series of five bond ordinances to finance the cost of certain capital improvements totalling $32.2 million of which $12.2 million was for Project One. Only three of those ordinances, numbers 77-238-216, 77-239-217, and 77-240-218, are in issue here; for clarity these will be hereinafter referred to as Ordinances 1, 2 and 3 respectively. The three ordinances authorized the issuance of so-called "serial public improvement bonds" and included the sums of $8.835 million, $2.646 million and $719,000 for Project One. The ordinances provided that the bonds for Project One funds be dated January 15, 1978 to be payable serially in annual installments on January 15 of each year from 1979 to 1998. The ordinances further specified that the bonds would bear interest from their date, such interest to be payable semiannually on January 15 and July 15. Also on November 28, the City Council adopted resolutions providing for the sale, character and form of the bonds.

The sale of the bonds scheduled for January 11, 1978 was not held because of litigation which developed challenging City Council's action on November 28. A group of taxpayers sought to have a referendum held on the question whether the bonds should be issued and sold. In January of 1978, the trial court and this court both decided that no referendum was required. Thereafter, certain taxpayers filed a suit in the United States District Court for the Eastern District of Virginia challenging the validity of the provisions of the Richmond City Charter dealing with the referendum. Following an April 1978 District Court decision favorable to the City, the taxpayers appealed to the United States Court of Appeals for the Fourth Circuit which affirmed the District Court in a judgment that became final in November of 1978.

On December 18, 1978, the City Council adopted new resolutions fixing a January 3, 1979 sale date for the Project One bonds. On the day before the sale was to occur, a city taxpayer filed suit in the court below asking that the December 1978 resolutions be declared null and void and seeking to enjoin the issuance of the Project One bonds.

Subsequently, on March 12, 1979, the City Council adopted a series of resolutions relating to the issuance, sale, character and form of the capital improvement bonds. Two of those resolutions, numbers 79-R36-48 and 79-R37-49, deal with Project One and are in issue here; for convenience they will be hereinafter referred to as A and B respectively.

Resolution B scheduled the sale of Project One bonds for October 17, 1979. Resolution A made "further provision" for the bond issue to finance $11,590,000 of the $12,200,000 authorized by Ordinances 1, 2 and 3. That resolution noted that $610,000 of the $12,200,000 in bonds to be dated January 15, 1978 would have matured on January 15, 1979, prior to the new date of sale. The resolution thus provided that the bonds should be dated January 15, 1978, and "payable in annual installments on January 15 of each year as follows: $610,000 in each of the years 1980 to 1998, inclusive." The resolution further provided that the bonds should bear interest from date to be payable semiannually on January 15 and July 15. To be noted is the fact that as a result of the postponement of the originally scheduled January 11, 1978 sale date, three interest payments due in accordance with Ordinances 1, 2 and 3 had become due and payable before the new sale date of October 17, 1979. Accordingly, Resolution B specified that "(c)oupons for interest with respect to periods which expire prior to the closing for the bonds will be detached before delivery to the successful bidder."

On March 13, 1979, the day following adoption of the resolutions, the City Council filed the instant proceeding by motion for judgment under Code § 15.1-214 ¹ seeking validation of the proceedings which had transpired in connection with the bonds. Appellants Charles B. Harper, Jr. and Albert L. Shear filed responsive pleadings as parties defendant asserting that Ordinances 1, 2 and 3, the December 1978 resolutions, and Resolutions A and B were null and void and without effect. There was no controversy as to the facts of the case and the issues were submitted to the trial court on defendants' motions for summary judgment. The court below, in an April 1979 written opinion, decided that all proceedings taken with relation to the authorization and issuance of the bonds were legal and valid. Subsequently, we awarded defendants an appeal from the trial court's May 1979 final decree, and placed the case on the privileged docket as required by Code § 15.1-219.

Defendants first contend the City Council failed to comply with Section 7.09 of the Richmond City Charter which sets forth in mandatory language certain requisites of an ordinance authorizing the issuance of bonds. That section provides:

Sec. 7.09. Contents of bond ordinance.

An ordinance authorizing the issuance of bonds shall include a statement of the purpose or purposes of the issue and if the purpose is to finance one or more capital improvement projects it shall describe each of them sufficiently for purposes of identification, and shall estimate the cost of the project or projects and the portion thereof to be defrayed from sources, specifying them, other than the proposed bond issue. The bond ordinance shall also include the amount of the proposed issue, a statement showing the proposed issue to be within the limitation of indebtedness as provided in section 7.03, the probable life of the (project) or the average probable life of the (projects) to be financed as determined by the council, the date of issue, the dates of the first and last serial maturities, the dates on which interest shall be paid, a declaration that principal of and interest on the proposed issue are to be paid from ad valorem taxes on real estate and tangible personal property and that the full faith and credit of the city are pledged to such payment, and the procedure for the sale of the proposed issue. All other matters relating to the authorization, issuance or sale of the bonds or notes may be provided by resolution.

Defendants note that where, as here, the purpose of the issue is to finance one or more capital improvement projects, the ordinance shall estimate the cost of the projects and the portion of the cost to be defrayed from sources, specifying them, other than the proposed bond issue. Defendants also note that Ordinances 1, 2 and 3 set forth the amount of funds from the issue to be contributed to Project One. But, they say, nowhere on the face of the enactments is either the balance of the costs to be defrayed from non-bond proceeds specified or an estimate of the cost of Project One set forth. Consequently, defendants urge, the ordinances are void.

The City Council responds to this argument by pointing to various portions of the bond ordinances and stating "that the twelve essential ingredients of (a) bond ordinance as set forth in Section 7.09 were complied with." We reject that contention.

We will not encumber this opinion by reciting the several detailed portions of the bond ordinances upon which the City Council relies to sustain its position. ² It is sufficient to say, as the defendants point out, that the bond ordinances do not contain a statement of either the estimated total cost of Project One or the portion of the cost to be financed from a specified source other than the bond proceeds. Accordingly, there has been a failure to include in the ordinances material information required by the City charter, and if this were the only issue in the case, the enactments in question would be declared null and void.

The City Council argues, however, that in "view...