Laverents v. City of Cheyenne

• Decision Date: 25 April 1950
• Docket Number: No. 2464,2464
• Citation: 67 Wyo. 187,217 P.2d 877
• Parties: LAVERENTS et al. v. CITY OF CHEYENNE et al.
• Court: Wyoming Supreme Court

Page 877

217 P.2d 877

67 Wyo. 187

LAVERENTS et al. v. CITY OF CHEYENNE et al.

No. 2464.

Supreme Court of Wyoming.

April 25, 1950.

Clyde M. Watts, Cheyenne, A. D. Walton, Cheyenne, for appellants.

George F. Guy, Cheyenne, Carleton A. Lathrop, Cheyenne, for respondents.

Rodney M. Guthrie, Newcastle, filed a brief amicus curiae.

BLUME, Justice.

This is an action brought by citizens and taxpayers of Cheyenne to test the validity of an ordinance of the City of Cheyenne under which, and pursuant to a vote of the people, the city proposes to issue revenue bonds in an amount not to exceed $1,100,000 for the purpose of constructing a sewerage disposal plant. The town of Newcastle has filed a brief in this case as amicus curiae.

We have heretofore held that a municipality has no power to issue revenue bonds without legislative authority. Whipps v. Town of Greybull, 56 Wyo. 355, 109 P.2d 805, 146 A.L.R. 596; Lakota Oil & Gas Co. v. City of Casper, 57 Wyo. 329, 116 P.2d 861; Jensen v. Town of Afton, 59 Wyo. 500, 143 P.2d 190. See also In the Matter of the Organization of the Sheridan County Power District v. Chicago, B. & Q. R. Co., 61 Wyo. 365, 157 P.2d 997. We have now a case before us involving revenue bonds duly authorized by the legislature.

Section 29-2702 of the statutes of Wyoming, part of Article 27, as amended by Chapter 129 of the Session Laws of Wyoming of 1949, provides among other things, as follows: 'Any municipality is authorized to construct, reconstruct, improve and extend, or acquire, improve, extend and operate a sewerage system, within or without the corporate limits of such municipality. * * * Any municipality may issue its revenue bonds for such purposes, payable solely from the revenues derived from the operation of such sewerage system by such municipality.' Section 29-2704, Wyo.Comp.St.1945 provides: 'All bonds issued under the provisions of this Act shall be payable solely from the revenues derived from the operation of such sewerage system and such bonds shall not, in any event, constitute an indebtedness of the municipality within the meaning of any constitutional provision or any constitutional or statutory limitation. It shall be plainly stated on the face of each bond that the same has been issued under the provisions of this Act and that it does not constitute an indebtedness of the municipality within any constitutional or statutory limitation.' Section 29-2705 provides: 'All revenues derived from the operation of such sewerage system shall be set aside as collected, and deposited in a special fund of such municipality and used only for the purpose of paying the cost of operating and maintaining such system, providing an adequate depreciation fund and paying the principal and interest on the bonds issued by the municipality under the provisions of this Act.' Section 29-2706, supra, provides: 'Any municipality borrowing money and improving or constructing or acquiring and improving a sewerage system under the provisions of this Act, is authorized and directed to charge and collect from the users of such system at a rate which shall be sufficient at all times to pay the cost of operating and maintaining such system, provide an adequate depreciation fund and pay the principal and interest on the bonds issued by the municipality under the provisions of this Act. Any municipality that owns and operates or that may hereafter own and operate a sewerage system constructed or acquired under the provisions of any law of this state may, by ordinance, provide that the users of such system shall pay a service rate sufficient to defray the cost of operating and maintaining such system, and of providing an adequate depreciation fund thereof and thereafter such municipality is authorized to charge and collect such service rate for such purpose but no tax or other charge shall thereafter be assessed against the users of such sewerage system for such purpose.' Section 29-2711, supra, provides for submitting the proposition of issuing such bonds to a vote of the people.

Pursuant to the legislative enactment, the city authorities of the City of Cheyenne on March 14, 1949, adopted an ordinance, numbered 857 providing for the construction of a sewerage disposal plant for the City of Cheyenne, Wyoming, as an addition to the present sewer system and the issuance of revenue bonds in the amount hereinbefore set forth, the bonds to mature from 1951 to 1975 inclusive, and payable in the approximate sum of $40,000 to $48,000 each year. The ordinance provides among other things: 'said bonds shall be paid, principal and interest, solely out of the revenues to be derived from operating the sewerage system of said City, which revenues are hereby pledged for the purpose of paying the cost of operating and maintaining said plant and system, providing an adequate depreciation fund and paying the principal of and interest on such revenue bonds; and * * * it is proposed that the City shall charge and collect from the users of said sewerage system, service rates which shall be sufficient to make the payments, and * * * the City Council will adopt a supplemental ordinance containing such provisions as are permitted by the law under which such bonds shall be issued.' The ordinance further provided for submitting the question of the issuance of such revenue bonds to the people at an election to be held on April 19, 1949. Such election was accordingly held and the issuance of such bonds was duly approved by a majority vote of the electors voting at the election.

Thereupon plaintiffs herein brought a suit against the City of Cheyenne and its officials to restrain the issuance of the foregoing bonds, on the ground that such issue would cause the indebtedness of the city to exceed the amount of indebtedness permitted by Section 5, Article 16 of the Constitution of Wyoming, which insofar as applicable here is as follows: 'No city, town or village, or any sub-division thereof, or any sub-division of any county of the state of Wyoming, shall, in any manner, create any indebtedness exceeding 2 per centum on the assessed value of the taxable property therein; provided, however, that any city, town or village may be authorized to create an additional indebtedness, not exceeding 4 per centum on the assessed value of the taxable property therein as shown by the last preceding general assessment, for the purpose of building sewerage therein.' Trial in the case was had without jury and judgment was rendered by the District Court on September 28, 1949, denying the petition and prayer of the plaintiffs and dismissing it, and that defendants have judgments against the plaintiffs accordingly. From that judgment the plaintiffs have appealed to this court by direct appeal.

I. Counsel for the city claim that the revenue bonds proposed to be issued herein are not general obligation bonds of the city and hence not a debt within the contemplation of Section 5, Article 16 of our Constitution. Counsel for the plaintiffs on the contrary claim that these so-called revenue bonds are merely a subterfuge to evade the constitutional limitation above quoted; that the bonds become a present debt of the City of Cheyenne and when issued will exceed the constitutional limitation. That is the only question raised herein. Counsel argue that the court should stop wasteful extravagance of the city. Our function in that respect, however, is limited. As we stated in Donovan v. Owen, 52 Wyo. 479, 491, 76 P.2d 339, 343, 77 P.2d 617, speaking of an irrigation district: 'We have no power to arrogate to ourselves the right to become the economic or financial guardian of the district. We must be content with the humbler duty, imposed upon us by the Constitution, of declaring the law as we see it, just as we did in the case of Arnold v. Bond, 47 Wyo. 236, 34 P.2d 28.' In Interstate Power Co. v. Town of McGregor, 230 Iowa 42, 296 N.W. 770, 777, 146 A.L.R. 315, 324, the court calling attention to the fact that legislation authorizing revenue bonds had been enacted in 40 states says: 'Under this legislation projects of widely varying types have been so financed. The soundness or expedience of such legislation is a matter of which this court can take no cognizance, as this is a matter for the determination of the legislature.' The supreme court of Utah in Utah Power & Light Co. v. Ogden City, 95 Utah 161, 79 P.2d 61, 66, speaking of the same subject has this to say: 'How far the principle of this familiar transaction may be feasibly extended into the public utility field of cities and towns is rather a legislative question, embracing as it does complicated questions of engineering, finance, consumption, costs, earning capacity, etc. These matters are within the province of the municipal authorities, acting within the scope of their lawful powers. The governing bodies of cities and towns are the sole judges as to the wisdom, policy, and expediency of acquiring and operating public works. Courts do not interfere except in cases of clear excess or abuse of their lawful powers and authority.'

The 'special fund' doctrine, including the issuance of revenue bonds or certificates has been known and recognized for over half a century. Apparently the first case recognizing the doctrine is the case of In re Canal Certificates, 19 Colo. 63, 34 P. 274 decided in 1893. In that case the legislature provided for the issuance of certificates to pay for the construction of a canal. The court said: 'The expenses of construction of the canal in question are to be met in part by certificates of indebtedness. Both principal and interest of these certificates are only to be paid out of funds received for the carriage of water or in payment for lands. The act expressly provides against any indebtedness being incurred on the part of the state, and therefore is not in conflict with the constitutional provisions heretofore considered by this court, fixing a limitation upon state...