McDonald v. City of Lexington
| Citation | 253 Ky. 585 |
| Parties | McDonald v. City of Lexington. |
| Decision Date | 23 March 1934 |
| Court | United States State Supreme Court — District of Kentucky |
1. Municipal Corporations; States. — Legislature and political subdivisions in creating public debt are required not only to raise by annual taxation money sufficient to discharge interest on bond issue, but also to annually and from inception of creation of debt to raise by taxation amount sufficient to amortize bond issue when it becomes due (Constitution, secs. 50, 159).
2. Municipal Corporations. — Electors' authorization of bond issue by city held not invalidated by failure to provide for sinking fund for first five years in ordinance providing for issuance of bonds, since electors were charged with notice of constitutional requirement of annual tax levy from beginning of bond issue period not only to pay interest but also to provide for sinking fund, and were presumed to have agreed under form of question submitted to them that annual taxes were to be for principal and interest throughout entire period (Ky. Stats., sec. 186c-1 et seq. and Ky. Stats. Supp. sec. 186c-6 et seq.; Constitution, secs. 50, 159).
3. Municipal Corporations. — City had authority to authorize by ordinance issuance of bonds pursuant to authorization by electors except in so far as ordinance failed to provide for sinking fund for first five years from inception of bond issue period (Ky. Stats., sec. 186c-1 et seq. and Ky. Stats. Supp. sec. 186c-6 et seq.; Constitution, secs. 50, 159).
Appeal from Fayette Circuit Court.
S.S. YANTIS for appellant.
J. PELHAM JOHNSTON and CHESTER D. ADAMS for appellee.
Affirming in part and reversing in part.
On the 11th day of September, 1933, the board of commissioners of the city of Lexington enacted an ordinance providing for the submission to the qualified voters of that municipality at the regular election to be held on November 7, 1933, the question whether the city should incur an indebtedness of $1,312,500, and should issue and sell its 4 per cent. bonds in said sum therefor, the money thus to be realized to be used for the purpose of the construction, installation, improvement, and repair, with the aid of the federal government under the provisions of the National Industrial Recovery Act (48 Stat. 195), of certain public works, to wit, a storm water sewer system, a sanitary sewer system, and a sewage disposal plant, a new public health center, a community center for white citizens, a community center for colored citizens, and a new city jail, the bonds and interest thereon to be paid by the levy of taxes of the city each year from 1934 to 1963. The ordinance provided that the question to be submitted to the qualified electors as to whether the indebtedness should be incurred and the bonds issued therefor or not should read as follows:
"Are you in favor of authorizing the City of Lexington to incur an indebtedness of $1,312,500.00 and issue its bonds therefor, payable at the rate of $52,500.00 each year, for a period of 25 years, beginning in the year 1939 and ending in the year 1963, and bearing interest at the rate of 4 per cent. per annum, payable semi-annually, until paid, and all to be paid, both principal and interest, out of taxes to be levied by the city annually during the period of 30 years beginning with the year 1934 and ending with the year 1963, on all real and personal property subject to taxation within the city, in order to provide funds for the construction, installation, equipment, improvement and repair of the following public works for the city, viz.:"
(here follows the list of public improvements to be constructed out of the money raised by the bonds).
The ordinance further provided that if the proposed indebtedness should be authorized by the requisite vote of the qualified electors, and if the indebtedness therein authorized be incurred and the bonds issued, "the amount of money necessary to be raised by taxation each year for the first 5 years after their issue, in order to meet the interest on same, shall be $52,500.00, and the amount of money necessary to be raised by taxation the 6th year in order to meet the interest on said bonds and to pay the $52,500.00 of principal of same that will then mature, will be $105,000.00, and the amount of money necessary to be raised by taxation anuually thereafter until the maturity of the last maturing of said bonds, for the purpose of meeting the amounts of said bonds that will mature during the year and the interest on all unpaid bonds, shall be progressively, $2,100.00 less than the amount required for the same purpose the year before." Pursuant to the ordinance, the question of incurring the indebtedness and issuing the bonds was submitted to the qualified voters of the city of Lexington at the election held on November 7, 1933, in the form prescribed by the ordinance. The requisite number of electors voted in favor of incurring said indebtedness and issuing said bonds. Pursuant to this vote, the board of commissioners of the city of Lexington on the 22d of January, 1934, duly enacted an ordinance authorizing and directing the mayor to issue and sell to the federal government the bonds authorized in the sum of $1,312,500. Among other things, this ordinance provided that the amount of money to be raised by taxation for the payment of the principal and interest of the bonds should be as we have more fully set out above in quoting a similar provision in the ordinance of the preceding September. Thereafter, and pursuant to section 186c-1 et seq. of the Kentucky Statutes and Ky. Stats. Supp. 1933, sec. 186c-6 et seq., this suit was brought in order to obtain the approval of a court of competent jurisdiction as to the validity of the proposed bond issue. The petition elaborately set out the various steps taken in the authorization and creation of the indebtedness here involved, and the issuance of the bonds therefor, and also the financial condition of the city of Lexington which disclosed that this bond issue was within constitutional limitations as to amount of indebtedness authorized to be incurred. The appellant as a citizen and taxpayer of the city of Lexington was made defendant and called upon, acting for himself and all other citizens and taxpayers of Lexington, to set up what objections he might have to the validity of this bond issue. Answer was filed and proof heard which sustained the allegations of fact set out in the petition, and thereupon judgment was entered upholding the validity of this bond issue and the ordinances in connection therewith. From that judgment, this appeal is prosecuted.
The sole question presented on this appeal is whether or not the board of commissioners of the city of Lexington in failing to provide for the raising of any sinking fund for this bond issue during the first five years of the bond issue period has violated section 159 of the Constitution, which reads:
"Whenever any city, town, county, taxing district or other municipality is authorized to contract an indebtedness, it shall be required, at the same time, to provide for the collection of an annual tax sufficient to pay the interest on said indebtedness, and to create a sinking fund for the payment of the principal thereof, within not more than forty years from the time of contracting the same."
In so far as the instant question is concerned, we have been cited to no case in this state construing section 159, nor have we by independent search been able to find such precedent. The provisions of section 159 of the Constitution first appeared in this Constitution of 1890. There was in...
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