Pearl River Valley Water Supply Dist. v. Hinds County, 54387

• Decision Date: 25 January 1984
• Docket Number: No. 54387,54387
• Citation: 445 So.2d 1330
• Parties: PEARL RIVER VALLEY WATER SUPPLY DISTRICT, et al. v. HINDS COUNTY, et al.
• Court: Mississippi Supreme Court

Page 1330

445 So.2d 1330

PEARL RIVER VALLEY WATER SUPPLY DISTRICT, et al. v. HINDS COUNTY, et al.

No. 54387.

Supreme Court of Mississippi.

Jan. 25, 1984.

William N. Reed, Neil P. Olack, J. Brad Pigott, Watkins, Ludlam & Stennis, Jackson, for appellants.

Natie P. Caraway, David W. Clark, Wise, Carter, Child & Caraway, Jackson, Robert Brooks, Barnett & Brooks, Carthage, for appellees.

EN BANC.

WALKER, Presiding Justice, for the court:

Hinds County, Leake County and Roger Stewart, appellees and cross-appellants, hereinafter referred to as Hinds County, et al., initiated this action by bill of complaint, as amended, seeking an injunction, accounting and return of funds against the Pearl River Valley Water Supply District, et al.

BACKGROUND

On August 20, 1982, the Chancery Court of the First Judicial District of Hinds County entered its final judgment, permanently enjoining the Pearl River Valley Water Supply District from using any State ad valorem tax proceeds diverted to the District by Mississippi Code Annotated section 51-9-131 (1972) for any purpose other than paying, prepaying, redeeming or retiring bonds. The court also permanently enjoined the District from making a special levy under Mississippi Code Annotated section 51-9-139 (1972) in any year that the State ad valorem taxes paid to the District exceed the amount of the District's debt service.

The Pearl River Valley Water Supply District was created in 1958 with the Legislature's passage of the Pearl River Valley Water Supply District Law, ¹ Mississippi Code Annotated section 51-9-101, et seq. The District was formally established through petition to the Chancery Court of Hinds County. The voters of five counties--Hinds, Leake, Rankin, Madison and Scott--elected to make their counties members of the District.

The District is an agency of the State. Miss.Code Ann. Sec. 51-9-105 (1972). Its powers are prescribed by statute, Mississippi Code Annotated section 51-9-121 (1972), and exercised by a board of directors, Mississippi Code Annotated section 51-9-107 (Supp.1982). Although it is an agency of the State, the District does not receive an appropriation of money by the Legislature from the general fund of the State.

Mississippi Code Annotated section 51-9-133 (1972) authorized and empowered the District to issue bonds of the District for the purpose of paying the costs of acquiring, owning, constructing, operating, repairing, and maintaining the project.

Since construction of the reservoir was completed, the expenses of the District, including debt service on the bonds, i.e., interest and principal, have been defrayed by the following revenues, according to the District records:

(1) The avails of two mills of the State ad valorem tax collected in each of the five-member counties (State levy);

(2) The avails of a special tax levy by the District board on property in the five-member counties in an amount not to exceed two mills (the special levy);

(3) Real estate development and lease payments;

(4) Camping, garbage, water and sewer, and miscellaneous fees;

(5) Interest on investments; and

(6) Contractual payments by the City of Jackson.

In its brief, the District acknowledges that the proceeds of the special tax, i.e., the special tax levy cannot be used to pay operation and maintenance expenses of the District. The District also acknowledges that in the past, the proceeds from the State levy and the other revenues mentioned above have been used first to pay operation and maintenance expenses with the balance being applied toward payment of debt service on the bonds. Hinds County, et al object to this method and contend that the State levy tax proceeds can only be used for retirement of the District's bonded indebtedness.

As late as 1968, the District's budgeted revenue from the full State levy and full special levy exceeded the District's bond cost, i.e., principal and interest payments, by only about $5,800.00. However, the revenues to the District from the State's two-mill levy have been increasing steadily and in 1982 were projected to yield $1,470,000.00. By the year 1981, the revenues from the State's two-mill levy alone were sufficient to service the District's annual bond cost which is a relatively constant amount. For fiscal year 1983, the District anticipated that the revenues from the State two-mill levy alone, would exceed annual bond charges by $187,500.00.

The residential lessee population of the District by 1981 was approximately 5,000, and the District's "operation and maintenance" expenditures increased dramatically from $622,455.03 in 1972 to an estimate of $2,687.500.00 in 1982. A large portion of the District's budget during this period was spent furnishing services for the residential population, including utility service, police protection, fire protection, and street maintenance. Of these services furnished by the District to the lessees, there was no charge for the police protection, the fire protection, or the road and street maintenance. For many years the District provided free garbage pickup. The District has not charged the lessees for the police protection or for the road and street maintenance even though those lessees agreed, in their leases, to pay their pro-rata share of the cost of such services. The law provides for such charges; and it is patently unfair for the District's five-member counties to bear this burden. Miss.Code Ann. Sec. 51-9-121(t).

The amount by which the District's "operation and maintenance" expenditures have exceeded receipts from the residential and commercial "lease rental" payments has grown from $417,464.16 in 1972, to $747,435.00 in 1976, to $1,651,482.00 in 1980, to a projected $2,558,000.00 in 1983.

Studies commissioned by the District revealed that with the escalating "operation and maintenance" ² cost of the District and the leases executed by the District, that even when the District is fully developed, its revenues from the annual "lease rental" payments will pay only about one-half of the "operation and maintenance" expense of the District. It is evident that the District will never be self-sustaining if expenditures are not brought under control.

BILL OF COMPLAINT

Hinds County, et al's bill of complaint, as amended, had five separate counts, only two of which are pertinent to this opinion.

In Count I, Hinds County, et al charged that under the Pearl River Valley Water Supply District Law, Mississippi Code Annotated sections 51-9-101 et seq, the proceeds of the State two-mill levy (section 51-9-131) are required to be used solely for the purpose of paying bonds or the costs of bonds issued pursuant to the District Law. They further contended that the amount received annually by the defendant-appellant Pearl River Valley Water Supply District under such State levy exceeded the District's annual bond costs, that no special levy under section 51-9-139 could be properly imposed, and that the District may In Count II, Hinds County, et al contended that in making the determination of whether a special levy under section 51-9-139 was "necessary," and could thus be imposed, the District had not been giving Hinds County, or the other taxpayers of member counties, credit for substantial revenues, projected revenues and funds which were coming to the District or were available to the District, all in violation of the District Law and particularly of section 51-9-139.

apply the excess State levy revenues only to prepay bonds.

CHANCERY COURT'S DECREE

After hearing the matter on the merits, the chancellor entered the court's final decree, which provided in pertinent part as follows:

"(1) That defendant Pearl River Valley Water Supply District is permanently enjoined, effective November 1, 1982, from using any funds paid to such District by Hinds County or Leake County by virtue of Mississippi Code Section 51-9-131 for any purpose or use other than paying, prepaying, redeeming or retiring the bonds issued under the Water Supply District Law;

(2) That defendant Pearl River Valley Water Supply District be and hereby is permanently enjoined from making any further special levy or special levy request as authorized by Section 51-9-139 so long as the revenue of the two mills levy under Section 51-9-131 is equal to or exceeds the amount needed to pay the principal of, interest on and costs of the bonds issued under the Water Supply District Law; ...."

ASSIGNMENT OF ERROR AND LAW

The appellants, Pearl River Valley Water Supply District, et al have assigned, inter alia, that the chancellor erred in his construction of Mississippi Code Annotated section 51-9-131 and related provisions of the Pearl River Valley Water Supply Act. In making his ruling, the chancellor placed much stress on the wording of section 51-9-131 saying:

Section 51-9-131 is composed of only one short statement. It states two mills payable on or before February 1, 1961, and so long as any bonds issued hereunder are outstanding, the tax collector of said county shall pay into the depository selected by the said water district ... it goes on to state that the levy shall continue at not less than two mills on each county in the district so long as any bonds issued pursuant to this article remain outstanding. (Emphasis theirs).

It is clear to this Court that the intent of the Legislature was that the State levy of two mills would be used only for the payment of the principal of, interest on, and other charges in connection with said bonds. Likewise, the tax collector of the member counties was directed to pay said levy to the district for the purpose of paying off the bonds.

The Legislature then provided a safeguard by providing in Section 51-9-139 that in the event additional funds were needed in connection with the bonds, they might be raised by the special tax not to exceed two mills. The Defendants concede that this special tax can only be used for bond payments.

Significant to this Court is the...