In re Sch. Dist. No. 6, Paris & Wyoming Tps., Kent Cnty.

• Decision Date: 04 April 1938
• Docket Number: No. 144.,144.
• Citation: 284 Mich. 132,278 N.W. 792
• Parties: In re SCHOOL DIST. NO. 6, PARIS AND WYOMING TPS., KENT COUNTY.
• Court: Michigan Supreme Court

284 Mich. 132

278 N.W. 792

In re SCHOOL DIST. NO. 6, PARIS AND WYOMING TPS., KENT COUNTY.

No. 144.

Supreme Court of Michigan.

April 4, 1938.

Certiorari to Public Debt Commission.

Certiorari proceeding by School District No. 6, Paris and Wyoming Townships, Kent County, Mich., to review an order of the Public Debt Commission denying approval of a bond issue of school building bonds.

Order of the Public Debt Commission affirmed.

Argued before the Entire Bench.

Warner, Norcross & Judd, of Grand Rapids, and Miller, Canfield, Paddock & Stone, of Detroit ( Berry & Stevens, of Detroit, of counsel), for plaintiff.

Raymond W. Starr, Atty. Gen., and Edmund E. Shepherd and Arthur E. Kidder, Asst. Atty. Gen., for Public Debt Commission.

POTTER, Justice.

Certiorari by plaintiff to review an order of the Michigan Public Debt Commission of January 19, 1938, denying approval of a bond issue of school building bonds of $150,000 voted by the electors of plaintiff, to be dated March 1, 1937, payable $5,000 annually from 1938 to 1967, with interest at not to exceed 5 per cent. per annum.

September 10, 1937, application was made by plaintiff for a certificate showing compliance with Act No. 273, Pub.Acts 1925, as amended. The Public Debt Commission denied plaintiff's application and refused to issue its certificate. January 11, 1935, the school district requested a hearing before the commission. This was held January 19, 1938, when plaintiff's application was reconsidered and again denied by written order of the Public Debt Commission containing findings of fact and conclusions of law. There being no claim of fraud, the findings of fact are conclusive. Act No. 2, § 14, Pub.Acts 1937, Ex.Sess. It is sought to review the conclusions of law of the Public Debt Commission and the resulting order denying plaintiff's application.

Plaintiff's application and financial statements were regular and complied with the law, except as to the school district's ability to levy taxes to pay the bonds within the 15-mill limitation. The allocation of taxes for 1937-1938 is: School district-5.7 mills; township-7 mills; county-2.3 mills. There is a further tax levy of 7.075 mills for debt of plaintiff incurred before December 8, 1932, not subject to the 15-mill limitation. The board of education of plaintiff school district adopted a resolution as shown in the margin.¹ The amount necessary to pay the maturing principal and interest of the proposed bond issue during the fiscal year 1937-1938 would be $12,500; $5,000 principal and $7,500 interest. The tax rate necessary to cover such payments during 1937-1938 is approximately 2.63 mills, in addition to the 5.7 mills and the 7.075 mills levied by plaintiff for debt service during the fiscal year for obligations incurred prior to December 8, 1932. Appellant urges the necessary money could be raised by a tax of 8.33 mills, which could be lowered by a reduction in operating expenses. The commission held, as the school district could not be sure of either, it could not comply with Act No. 273, § 5, Pub.Acts 1925, as amended, requiring a sufficient tax levy to pay principal and interest of bonds, and refused to issue the certificate. In denying the certificate, the reasons set forth in the margin² were stated.

The Constitution of Michigan (1908) art. 10, § 21, provides:

‘The total amount of taxes assessed against property for all purposes in any one year shall not exceed one and one-half per cent of the assessed valuation of said property, except taxes levied for the payment of interest and principal on obligations heretofore incurred, which sums shall be separately assessed in all cases: Provided, That this limitation may be increased for a period of not to exceed five years at any one time, to not more than a total of five per cent of the assessed valuation, by a two-thirds vote of the electors of any assessing district, or when provided for by the charter of a municipal corporation: Provided further, That this limitation shall not apply to taxes levied in the year 1932.’

This constitutional provision initiated by the electors was adopted at the general election of November 8, 1932, and took effect December 8, 1932, in accordance with section 2, article 17, of the Constitution. Before the adoption of this amendment, there was no constitutional limitation on the power of school districts to levy taxes.

Act No. 273, §§ 5, 9, Pub.Acts 1925, 1 Comp.Laws 1929, §§ 2694, 2698, as amended by Act No. 2, Pub.Acts 1937, Ex.Sess., provides among other things:

‘Sec. 5. Whenever any money shall be borrowed by any municipality it shall be the duty of every officer of official body charged with any duty in connection with the determination of the amount of taxes to be raised or with the levying of such taxes, to include in the amount of taxes levied each year an amount sufficient to pay the annual interest on all such loans and any instalments of the principal thereof, falling due before the time of the following year's tax collection, and all payments required to be made to sinking funds. * * * No limitation in any statute or charter shall prevent the levy and collection of the full amount of taxes required by this section for the payment of debts, but nothing herein shall authorize the levy of a tax for any other purpose exceeding the existing tax limitation.’

‘Sec. 9. Before any municipality shall issue any bonds, or other obligations, * * * the officer having charge of its financial records shall transmit to the public debt commission a sworn statement showing the dates of issuance, purposes, amounts and maturities of all bonds or other indebtedness outstanding, the assessed valuation of all taxable property in the municipality, the total amount of general taxes and special assessments falling due during the preceding fiscal year, and the amount of such taxes and assessments delinquent at the time of making such statement, the condition of all sinking funds, whether the municipality is in default in the payment of any of its bonds or other obligations or interest thereon, and the extent of such default, the existing tax rate, and such other information as the public debt commission may require. (If) The public debt commission, upon the information and evidence received by the commission, shall determine that the proposed bonds or obligations comply with the requirements of this act, it shall make a certificate to that effect and forward the same to the officer of the municipality from whom the statement was received.’

Act No. 62, Pub.Acts 1933, as amended by Act No. 30, Pub.Acts 1934, Ex.Sess., provides in section 5 for the creation of a county tax allocation board, and its membership. Section 11 deals with the powers and duties of the board. Subdivision (e) provides: ‘The board shall approve minimum tax rates as follows: for the county, three mills; for school districts, four mills; for townships, one mill: Provided, That if the average tax rate levied for the operating purposes of any county or school district or township for its last three fiscal years shall be less than such minimum tax rate, such average tax rate shall be the minimum tax rate allowed to such local unit: Provided further, That no local unit shall be allowed a tax rate in excess of what would be required according to its proposed budget.’

Subdivision (f) provides: ‘The board shall divide the balance of the net limitation tax rate between all local units after due consideration of the needs of the several local units, the importance to the public of functions of local units which might have to be curtailed, the need of local units for construction or repair of public works, the proposed or accomplished transfer of functions from one local unit to others, and any other facts or matters concerning the operations of local units which the board may deem relevant: Provided, That no local unit shall be allowed a tax rate in excess of what would be required according to its proposed budget. The board shall approve a maximum tax rate for each local unit consisting of the minimum tax rate, if any, provided in subsection (e), added to the tax rate determined under this subsection.’

Act No. 236, Pub. Acts 1933, as amended by Act No. 249, Pub. Acts 1937, provides:

‘Sec. 32. Each school district shall apply the moneys received by it under the terms of this act on salaries of teachers and other employees, on tuition, on transportation, lighting, heating and ventilation and water service and on the purchase of textbooks and other supplies; and no part of said money shall be applied or taken for any purpose whatsoever except as above provided.’

‘Sec. 36. No school district shall be allotted or paid any sum under the provisions of this act in any year, unless it has voted to raise and there has been levied, in the fiscal year in which the allotment is made, at least a two and three-quarters mill tax on the local assessed valuation of the property within said district, for the purposes included in the operation cost of said district, determined as in this act provided, and has certified such fact to the superintendent of public instruction.’

The primary school interest fund may not be used for building a schoolhouse without the consent of a majority of the voters of the school district. 2 Cmmp.Laws 1929, § 7432, subd.(8).

Act No. 2, § 5, Pub.Acts 1937, Ex.Sess., provides: ‘Whenever any money shall be borrowed by any municipality it shall be the duty of every officer or official body charged with any duty in connection with the determination of the amount of taxes to be raised or with the levying of such taxes, to include in the amount of taxes levied each year an amount sufficient to pay the annual interest on all such loans and any installments of the principal thereof, falling due before the time of the following year's tax collection, and all payments required to be made to sinking funds.’

Section 14 of Act No. 2, Pub.Acts 1937, Ex.Sess.,...