Village of Moyie Springs v. Aurora Mfg. Co.

• Decision Date: 28 June 1960
• Docket Number: No. 8895,8895
• Citation: 353 P.2d 767,82 Idaho 337
• Parties: VILLAGE OF MOYIE SPRINGS, IDAHO, a municipal corporation, and Thelma Berger, Chairman of the Board of Trustees of the Village of Moyie Springs, Idaho, and Everett Witt, R. B. Dugal, Eva Mae Stephens and Jack M. Billingsley, constituting the Board of Trustees of the Village of Moyie Springs, Idaho, in their official capacities, respectively, as such, Plaintiff-Respondent, v. AURORA MANUFACTURING COMPANY, an Idaho corporation, Defendant-Appellant.
• Court: Idaho Supreme Court

Page 767

353 P.2d 767

82 Idaho 337

VILLAGE OF MOYIE SPRINGS, IDAHO, a municipal corporation, and Thelma Berger, Chairman of the Board of Trustees of the Village of Moyie Springs, Idaho, and Everett Witt, R. B. Dugal, Eva Mae Stephens and Jack M. Billingsley, constituting the Board of Trustees of the Village of Moyie Springs, Idaho, in their official capacities, respectively, as such, Plaintiff-Respondent, v. AURORA MANUFACTURING COMPANY, an Idaho corporation, Defendant-Appellant.

No. 8895.

Supreme Court of Idaho.

June 28, 1960.

Thomas A. Mitchell, Coeur d'Alene, for appellant.

W. W. Nixon, Bonners Ferry, for respondent.

TAYLOR, Chief Justice.

January 27, 1960, the parties entered into a contract for a lease by the plaintiff (respondent) to the defendant (appellant) of certain industrial property to be acquired by the village pursuant to and in conformity with ch. 265, S.L.1959, and ordinance No. 17, passed and adopted by the village pursuant to said act. Defendant refused to further perform the agreement upon the advice of counsel that the act authorizing the ordinance and contract is unconstitutional. The village and its trustees brought this action against defendant for a declaratory judgment adjudicating the rights of the parties and the constitutionality of the statute and ordinance.

The legislative intent is declared in § 2 of the act as follows:

'It is the intent of the Legislature, by the passage of this act, to authorize municipalities to acquire, own, lease or sell projects for the purpose of increasing and stabilizing employment, increasing career and job opportunities for Idahoans and Idaho graduates; increasing the utilization of raw materials, agriculture and other products and natural resources of this State, improve and furnish better health services and facilities, promote a sound balance in this State between agriculture, commerce and industry by inducing manufacturing, industrial and commercial enterprises to locate or expand in this State. It is intended that each project be self-liquidating. It is not intended hereby to authorize any municipality itself to operate any manufacturing, industrial or commercial enterprise. This act shall be liberally construed in conformity with the said intent.' Ch. 265, S.L.1959, § 2.

The powers conferred upon municipal corporations are set forth in § 3 of the act:

'In addition to any other powers which it may now have, each municipality shall have the following powers: (a) to acquire, whether by construction, purchase, gifts, or lease, one or more projects, which shall be located within this State and may be located within or without the municipality, or partially within or partially without the municipality, but which shall not be located more than fifteen miles outside of the corporate limits of the municipality; (b) to sell or lease or otherwise dispose of any or all of its projects upon such terms and conditions as the governing body may deem advisable and as shall not conflict with the provisions of this act; (c) to issue revenue bonds for the purpose of defraying the cost of acquiring, by construction and purchase, or either, any project, and to secure the payment of such bonds, all as hereinafter provided. No municipality shall have the power to operate any project as a business or in any manner except as lessor thereof.' Ch. 265, S.L.1959, § 3.

Other pertinent provisions of the act are as follows:

Section 4 authorizes the issuance by the municipality of bonds payable solely out of revenues derived from the project to finance which the bonds are issued; provides that the bonds shall not be a general obligation of the municipality within the meaning of art. 8, § 3, of the Constitution, nor a loan of credit of such municipality within the meaning of art. 12, § 4 of the Constitution; that the 'Bonds and interest coupons issued under authority of this act shall never constitute an indebtedness of the municipality within the meaning of any State constitutional provision or statutory limitation, and shall never constitute nor give rise to a pecuniary liability of the municipality or a charge against its general credit or taxing powers, and such fact shall be plainly stated on the face of each such bond.' Ch. 265, S.L.1959, § 4; that the bonds may be payable in installments over a period of time, not exceeding thirty years.

Section 5 provides that, the principal and interest of the bonds shall be secured by a pledge of the revenues out of which the bonds are made payable; the bonds may be secured by a mortgage covering all or any part of the project and a pledge of the lease of such project; the 'municipality shall not have the power to obligate itself except with respect to the project and the application of the revenues therefrom, and shall not have the power to incur a pecuniary liability or a charge upon its general credit or against its taxing powers.' Ch. 265, S.L.1959, § 5.

Section 6 provides that the governing body must determine the amount necessary each year to pay the principal and interest on the bonds and the amount necessary to be paid each year into any reserve fund which it may deem advisable to establish for the retirement of the bonds and the maintenance of the project, and unless the lease requires the lessee to maintain the project and carry proper insurance, the estimated cost of maintaining the project and keeping it properly insured. Prior to the issuance of such bonds, the municipality is required to lease or sell the project under an agreement conditioned upon the completion of the project and payment to the municipality of such rentals or payments as will be sufficient to pay the principal and interest on the bonds and to build and maintain a reserve deemed advisable in connection therewith and the cost of maintaining the project and keeping it properly insured, unless the agreement requires the lessee to maintain and insure the project.

Section 7 authorizes the refunding of the bonds when deemed necessary by the governing body.

Section 8 requires that the proceeds from the sale of bonds be applied only for the purpose for which the bonds were issued.

Section 9 provides that the municipality shall have no power to pay out of its general funds, or otherwise contribute any part of the cost of acquiring such project.

Section 10 makes the bonds legal investments for savings banks and insurance companies.

Section 11 is as follows:

'The bonds authorized by this act and the income from said bonds, all mortgages or other security instrument executed as security for said bonds, all lease agreements made pursuant to the provision hereof, and revenue derived from any lease or sale by the municipality thereof shall be exempt from all taxation by the State of Idaho, or by any subdivision thereof.' Ch. 265, S.L. 1959, § 11.

Section 12 includes a provision that the act shall not be construed as requiring a vote of the electors of the municipality prior to the issuance of such bonds.

The ordinance and the contract provide for the acquisition by the village of a site and the construction of an industrial plant, to be leased to the defendant and occupied and used by it in a private manufacturing enterprise, for a period of thirty years. At the end of the thirty-year period, the bonds being retired, the defendant lessee is given an option to renew the lease for another thirty years at an annual rental of $1000, or to purchase the leased assets for $10,000.

In the ordinance the estimated cost of the acquisition of the 'Manufacturing Project or Projects' is fixed at $10,000,000.

On this appeal the defendant seeks a determination by this court of the constitutionality of Chapter 265, Session Laws 1959. The constitutional provisions involved are as follows:

Art. 8, § 3:

'No county, city, town, township, board of education, or school district, or other subdivisions of the state, shall incur any indebtedness, or liability, in any manner, or for any purpose, exceeding in that year, the income and revenue provided for it for such year, without the assent of two-thirds of the qualified electors thereof voting at an election to be held for that purpose, nor unless, before or at the time of incurring such indebtedness, provisions shall be made for the collection of an annual tax sufficient to pay the interest on such indebtedness as it falls due, and also to constitute a sinking fund for the payment of the principal thereof, within twenty years from the time of contracting the same. Any indebtedness or liability incurred contrary to this provision shall be void: provided, that this section shall not be construed to apply to the ordinary and necessary expenses authorized by the general laws of the state.'

This section was amended by the people at the general election in November, 1950, by the addition thereto of the following:

'and provided further that any city or village may own, purchase, construct, extend, equip, within or without the corporate limits of such city or village, water systems and sewage collection systems, and water treatment plants and sewage treatment plants, and off street parking facilities, and, for the purpose of paying the cost thereof may, without regard to any limitation herein imposed, with the assent of two-thirds of the qualified electors voting at an election to be held for that purpose, issue revenue bonds therefor, the principal and interest of which to be paid solely from revenue derived from rates and charges for the use of, and the service rendered by, such systems, plants, and facilities as may be prescribed by law.'

Art 8, § 4:

'No county, city, town, township, board of education, or school district, or other subdivision, shall lend, or pledge the credit or faith thereof directly or indirectly, in any manner, to, or in aid of any individual, association or corporation, for any amount or for any purpose whatever, or become responsible for any debt, contract or liability of any individual,...