Washington Water Power Co. v. City of Coeur d'Alene, 1268.

• Decision Date: 13 December 1934
• Docket Number: No. 1268.,1268.
• Citation: 9 F. Supp. 263
• Parties: WASHINGTON WATER POWER CO. v. CITY OF COEUR D'ALENE, IDAHO, et al.
• Court: U.S. District Court — District of Idaho

9 F. Supp. 263

WASHINGTON WATER POWER CO. v. CITY OF COEUR D'ALENE, IDAHO, et al.

No. 1268.

District Court, D. Idaho, N. D.

December 13, 1934.

John P. Gray, W. F. McNaughton, and Robert H. Elder, all of Coeur d'Alene, Idaho, for plaintiff.

W. B. McFarland and C. H. Potts, both of Coeur d'Alene, Idaho, for defendants City of Coeur d'Alene, officers and City Council of said city.

Henry T. Hunt, Sp. Asst. to Atty. Gen., and John A. Carver, Dist. Atty., and E. H. Casterlin and Frank Griffin, Asst. Dist. Attys., all of Boise, Idaho, for defendant Harold L. Ickes, Federal Emergency Administrator of Public Works.

CAVANAH, District Judge.

The Washington Water Power Company engaged in generation and sale of electrical energy in the state of Idaho, and as a franchise holder and taxpayer in the city of Coeur d'Alene, brings this suit against the city and certain of its officers and the Administrator of the Federal Emergency Administration of Public Works to restrain their issuing, pledging, and selling certain bonds of the city and accepting and applying any loan or grant from the Federal Emergency Administration of Public Works for the construction of a municipal Diesel engine generating plant and electrical distribution system, and challenges the validity of the plan and proceedings upon the grounds that they are violative of the Fifth, Tenth, and Fourteenth Amendments of the Constitution of the United States and of section 3, article 8, of the Constitution of the State of Idaho, in that they deprive the plaintiff of its property without due process of law and an unlawful invasion of power reserved to the states and not delegated to the United States when enacting the National Industrial Recovery Act (48 Stat. 195), and that no power is granted to Congress to make a loan or grant of moneys of the United States to the city for the purpose of constructing the plant, and that the loan and grant involved are in excess of and outside the scope of the National Industrial Recovery Act, as they constitute the financing by the federal government of a purely local proprietory business.

The foundation of jurisdiction is the diversity of citizenship and a controversy arising under the Constitution and laws of the United States.

The defendants have moved to dismiss the bill, and we are confined to the averments of it, which are voluminous, when solving the questions presented. The essential facts as averred are: That the plaintiff is authorized to engage in the generation and distribution of electrical energy and as a public service corporation owns a hydroelectric power plant situated in the Spokane river at Post Falls, Idaho, about ten miles from the city of Coeur d'Alene, and several other plants situated on the river in the state of Washington, for the purpose of furnishing service to many of its customers and users of power in Northern Idaho and Eastern Washington, and are furnishing and do render electrical service to the territory in Idaho under authority of the Public Utilities Commission of the State; that it has expended more than $5,000,000 in the construction and improvement of its electrical facilities in Idaho, and has issued and has outstanding bonds and stocks and a substantial portion of its stocks have been sold to its customers and employees and other citizens residing in the territory in which it operates; that its net earnings have been decreased very substantially during the years of the depression by reason of taxes and operating expenses.

On October 19, 1903, the village of Coeur d'Alene, predecessor of the city, granted to the predecessor in interest of the plaintiff a franchise for furnishing, to the inhabitants of the village, electricity for lighting and other purposes for a period of fifty years. In 1930, the plaintiff purchased the system and operated it. Since acquiring it the plaintiff has expended more than $33,000 in improvement and reconstruction of the system, and $27,000 for installation of new transformers.

The rates charged for such service in Idaho are subject to regulation and control by the Public Utilities Commission of the state.

The city has a population of 8,297, and plaintiff does and its predecessor in interest has for more than thirty years furnished electrical service to all classes of customers in the city who number 2,377 and 332 additional customers residing in territory adjacent to the city. The investment plaintiff has in the city is more than $200,000, and it pays taxes to the government, state, county, and city in large amounts.

On November 2, 1933, the city enacted an ordinance calling for an election for the purpose of submitting to the voters the proposition of the issuance of municipal bonds of $300,000 for the purpose of paying the costs and expenses of acquiring, by purchase or construction, a light and power plant and distribution system, and at the same time it also adopted an ordinance providing for the issuance of municipal bonds of $300,000 to pay the costs and expenses of acquiring, by purchase or by construction, a water system. The election was held submitting for approval the two propositions, which resulted in their approval by more than two-thirds vote. After the city council declared that the bond election had carried, it authorized the proper officers of the city to prepare an application to be made to the Federal Administration of Public Works for funds to construct the water system and light and power plant in the city. Pursuant to the direction of the council, the officers of the city, on December 14, 1933, filed with the Federal Administration of Public Works application wherein a loan was requested of $650,000, and a net loan of $475,000, which is alleged to exclude a 30 per cent. grant for the cost of labor and materials to be used in the construction of the electric and water systems. In the application it is stated that the total cost of the electric distribution and street lighting system is estimated to be $337,580, which is in excess of the amount of indebtedness authorized to be incurred for the purpose mentioned in the ordinance and the election held pursuant to the ordinance. Of the sum of $337,580 the total cost of labor and material is estimated at $276,512.91, and the contractor's profit thereon at $27,578.09, a total of $304,091, and other costs are estimated to be $44,480. Protest against the approval of the application was filed by the plaintiff with the Federal Administration of Public Works, but it was approved by the Administrator in the amount of $337,580 for the electrical system, of which sum part is to be a loan and part a grant. The city intends to enter into a contract, which it has already executed, with the Federal Administrator of Public Works for $337,580 and to issue and pledge its general obligation bonds as security for the amount of the loan and will construct the electrical system. Further it is alleged that the acts of the defendants will incur an indebtedness and create a liability exceeding the annual income and revenue of the city for that year without the assent of two-thirds of the voters and without provision being made for the collection of an annual tax for the interest on such indebtedness as it falls due and to constitute a sinking fund for the payment of the principal as provided in section 3 of article 8 of the Constitution of the State of Idaho. That under the laws of the state the Public Utilities Commission has power to regulate and supervise rates and service of the plaintiff in supplying power and light, and of any municipally owned utility, the mayor and council have exclusive power of regulation of rates and supervision of the service.

It is further alleged that prior to and during the campaign of the election at which the citizens voted on the proposition of issuing the bonds, an engineer employed by the city made an erroneous report as to the feasibility and cost of building a municipal light and power system by the city, and the cost of electric current to the consumers, which was by him at meetings held, and by publication given publicity, and that the voters were not advised of the omission of two sections of the city from distribution and service as disclosed in the report. Untrue statements are alleged as having been made and published by the chairman of the fire, light, and water committee of the city to the voters as to the cost of each system, not costing more than $300,000, and the kind of service to be rendered. The allegation appears that the properties and business of the plaintiff will suffer irreparable injury, disruption, and damage if it should lose the electric utility business of the city through the illegal acts of the defendants, and it asserts that the reason thereof is that if the municipal light system is erected it will be compelled either to enter into competition and suffer substantial losses in its operations, or abandon entirely its property and system in the city, which would result in discharging of a large number of employees. Its business consists in serving various users in large and small towns, rural districts, farms, mines, mills, and smelters, and pumping water for irrigation, and each class lends aid to plaintiff's ability to carry on the others and are incapable of withdrawal without impairment of plaintiff's ability to serve the others. That the plan, if consummated, with the aid of a grant and loan from the federal government will result in unemployment of its employees. The application to the Administrator is attached to the bill and it is alleged that there was attached thereto the engineer's report as to the type, expense of generation of electricity, and cost of the system which is erroneous in many respects; that it is the intention of the defendants first to construct a plant calculated primarily to serve the business sections and the more populous sections of the city, and that it will be unable to extend the service throughout the...