Nelson County Fiscal Court v. McCrocklin
| Decision Date | 24 April 1917 |
| Citation | 194 S.W. 323,175 Ky. 199 |
| Parties | NELSON COUNTY FISCAL COURT ET AL. v. MCCROCKLIN. |
| Court | Kentucky Court of Appeals |
Appeal from Circuit Court, Nelson County.
Injunction suit by Less McCrocklin against the Nelson County Fiscal Court and others. From the judgment, the Fiscal Court appeals, and McCrocklin prosecutes a cross-appeal. Affirmed on original appeal, and on cross-appeal reversed as to a certain item.
Redford C. Cherry and Kelley & Kelley, all of Bardstown, for appellants.
J Smith Barlow, of Bardstown, for appellee.
Many of the questions arising on this record were determined by this court in the case of McCrocklin v. Nelson County Fiscal Court, which may be found reported in 174 Ky. 308, 192 S.W 494. In that case the questions came up on a motion to reinstate an injunction and were considered by the whole court, and all of the judges concurred in the opinion of the Chief Justice. When the case went back for final hearing by the circuit court, some new issues not involved in the injunction case, turning on questions of fact as well as questions of law, were brought into the case and decided by the lower court, and from its final judgment the case is here again on the appeal of the fiscal court, with a cross-appeal by McCrocklin.
At the very outset of this opinion, we wish to say that the principles of law announced by Chief Justice Settle in the former opinion are reaffirmed, and so it will be necessary to consider only such questions of law and fact as were not fully disposed of in the former opinion.
The lower court ruled that the fiscal court must annually take account of the amount reasonably necessary to defray the current and fixed expenses of the county in determining the amount that it could expend each year in improvements and for public purposes out of the sum that might be raised by the levy of that year within the constitutional limitations when there was added to this sum other available assets of the county due and collectible in the year. In other words, that the annual, fixed governmental expenses of the county must be treated in each year as a liability of the county to be paid out of the income for that year, as much so as if these fixed charges were debts created by the county during the year.
Of this ruling the county complains, insisting that in estimating the annual liabilities of the county the annual governmental expenses or fixed charges should not be computed as a liability or indebtedness of the county for the year, thus leaving the county the privilege of creating debts, excluding the current fixed expenses and charges, in any amount in its discretion not exceeding the total income of the year. In the former opinion, it was strongly intimated that the sum necessary to defray the annual governmental expenses of the county for salaries and the like, which are to be regarded as fixed charges against the county, must be treated as an indebtedness of the county in estimating the sum the county may have to expend for other legitimate purposes during the year, although this question was not considered at length in the opinion. It is, however, an important question not only to Nelson county but to all the other counties in the state and, being directly presented in this record, will receive the attention that its importance demands.
Section 157 of the Constitution fixes in plain terms the tax rate for towns, cities, counties, and taxing districts, and expressly provides that this tax rate shall not exceed at any time the amount mentioned in the section. This is the tax rate that the taxing authorities of the town, city, county, or taxing district may impose by virtue of their office without submitting the question to the people. After setting out this tax rate the section then reads:
This section lays down certain mandatory rules that fiscal courts, city councils, and other taxing authorities must observe. It is so plainly written and so easily understood that there is no room for two opinions about its meaning. In the first place, it limits the rate of tax that these taxing authorities may levy without the assent of the people; and, in the second place, it prohibits the county, city, town, taxing district, or other municipality from becoming indebted in any manner or for any purpose in any year in an amount exceeding the income and revenue provided for that year. In other words, it lays down a safe and sound business rule in the conduct of public affairs, and if this rule were strictly observed no county, city, town, taxing district, or other municipality could ever create in any year an indebtedness that could not be paid out of the income and revenue of that year. It would further follow from an observance of this rule that no county, city, town, or taxing district would ever have at the end of the year an indebtedness that could not be paid out of the income and revenues of the year, or an indebtedness that would have to be carried over to some other year, or taken care of in some other way. The difficulties gotten into by some cities, towns, and counties that now have outstanding large debts not created or authorized by a vote of the people, have resulted from the failure of fiscal courts, city councils, and other taxing authorities to observe the mandates of this section. Possibly some of this indebtedness in excess of the income was created under the authority of former opinions of this court which will be later noticed, and which seem to hold that fixed annual charges or current expenses may be excluded from consideration in determining the amount of indebtedness that may be incurred. But, plainly, as it seems to us, the requirements of section 157, that the indebtedness in any year shall not exceed the income of the year, cannot be carried out unless the current expenses or fixed charges of the county are estimated in determining the amount of the indebtedness. This can be demonstrated by a simple illustration. Let us suppose that the estimated income of a county for the year 1917, including all assets derivable from every source to which the county may look for revenue for the year, will be $25,000. Now, if this is the full limit of its expected income and revenue for the year from every source, this is the full amount that it can spend during the year for every purpose, because if its expenditures exceed this amount it is obvious that at the end of the year the county will have a debt that cannot be paid out of the income and revenue of the year. Everybody knows that every county has certain fixed current expenses that must be paid every year; for example, the salaries of the county officers, and the expenses necessary in maintaining public buildings and public institutions. These expenses must be and are paid out of the income and revenue of the county for the year, and if we should suppose that these expenses amount to $10,000, and that $10,000 of the income and revenue of the county was appropriated to their payment, there would be only $15,000 left to be appropriated to other county purposes. Let us suppose now that the fiscal court ignores these fixed charges against the county or takes no account of them in estimating the amount that it may expend in the creation of debts for county and governmental purposes, and these debts amount to $25,000. Clearly, at the end of the year there would be $10,000 of the indebtedness of the county unpaid, and equally clear that the county had exceeded in the creation of debts, by the sum of $10,000, the income and revenue of the county. There is no escape from this conclusion.
And yet, in the face of these incontrovertible facts, the argument is made that the county may expend in the creation of debts the full amount of its income and revenue for the year without taking any account of the sum that it has paid out of its income and revenue during the year for the purpose of defraying the fixed salaries of the officers of the county and other necessary charges against the county. What is the necessary result of this method of fiscal court management? There can be only one, and that is that at the end of the year the county will have a debt of $10,000 created during the year in excess of the income and revenue of the year.
Now how is this $10,000 debt to be paid? The practice pursued by some fiscal courts has been to issue bonds and...
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