Opinion
No. 24523
Decided February 7, 1934.
Constitutional law — Public bond issues — Fixing maturity of earliest installment not later than five years — Annat Law valid exception to Section 2293-12, General Code — Annual levy and tax collection for interest and final redemption — Section 11, Article XII, Constitution — Annat Law and Columbus sewage disposal plant bond ordinance, constitutional.
1. Paragraph 7 of Section 1 of Amended Substitute Senate Bill No. 38, passed by the First Special Session of the 90th General Assembly of Ohio, and known as the Annat Law, creates a valid exception to Section 2293-12, General Code, in permitting a political subdivision to fix the maturity of the earliest installment of a proposed bond issue at not later than five years after the earliest possible date of maturity.
2. Amended Substitute Senate Bill No. 38 is not in conflict with Section 11, Article XII of the Constitution of Ohio, requiring any political subdivision of the state proposing to issue bonds to provide for the annual levy and collection of taxes sufficient to pay the interest on such bonds and to provide for their final redemption at maturity, and is constitutional.
3. Ordinance No. 314-33, as amended by Ordinance No. 328-33, passed by the council of the city of Columbus, Ohio, pursuant to Amended Substitute Senate Bill No. 38, fixing February 1, 1940, as the maturity date of the first installment of a bond issue to pay the city's proportionate cost of constructing a sewage disposal plant and its appurtenances, is not in conflict with Section 11 of Article XII of the Constitution of Ohio, and is constitutional, since the ordinance provides for the annual levy and collection of taxes sufficient to pay the interest on such bonds and for their final redemption at maturity.
IN MANDAMUS.
This is an original action in mandamus, brought by the city of Columbus, Ohio, in the role of relator, against George F. Ketterer, Wyatt L. Millikin and W. Herbert Dailey, as members of the finance committee of the council of the city of Columbus, respondents, to require them to prepare, execute and sell certain municipal bonds in the sum of $2,720,000, as directed by an ordinance of such city.
The petition sets out the respective capacities of the parties and states that the action is brought pursuant to a resolution of the council of the city of Columbus.
It is further alleged that in 1927 the director of health of the state of Ohio issued orders, approved by the public health council of the state of Ohio, ordering the city of Columbus to install such works or means as might be necessary for collecting and disposing of the city's sewage, in a manner to correct the pollution of the Scioto river and Alum creek, caused by such sewage.
The petition next avers that Title II of the National Industrial Recovery Act, passed by the Congress of the United States, and approved in June of 1933 (Title 40, Section 401 et seq., U.S. Code), contemplates a comprehensive program of public works, including a provision authorizing the President to grant municipalities for projects within the contemplation of the act an amount not exceeding thirty per cent. of the cost of labor and material used upon such projects, and that to participate in this act the city of Columbus made application to the proper federal authorities for such grant in connection with the construction of the proposed sewage disposal plant and appurtenances, at an estimated total cost of $3,400,000, which application was approved and a contract then entered into between the proper authorities of the city of Columbus and the proper federal authorities, pursuant to the National Industrial Recovery Act.
The petition further describes the various steps taken by the council of the city of Columbus in furtherance of such project, namely: The adoption of a resolution, declaring it necessary to issue and sell bonds aggregating $2,272,000 to pay the city's proportion of the cost of constructing the named improvement, and providing for the submission of the question to a vote of the qualified electors of the city at an election to be held on November 7, 1933, pursuant to the National Industrial Recovery Act and Amended Substitute Senate Bill No. 38 passed by the General Assembly of the state of Ohio.
The petition then relates that the clerk of the council certified a copy of such resolution to the auditor of Franklin county, Ohio, and that the auditor filed with the council the average annual levy required for such bond issue; that the council duly adopted a resolution directing the clerk of such council to certify this resolution to the board of elections of Franklin county.
The resolution last referred to set out the average tax levy necessary for the payment of the bonds described as estimated by the county auditor, the number of years during which the bonds should run, and fixed the maturity of the earliest installments at not later than five years after the earliest possible date of maturity in accordance with said Amended Substitute Senate Bill No. 38. Included was a direction to the mayor of the city of Columbus to give public notice of the submission of such bond issue to the qualified electors of the city, as required by law, which notice is averred to have been properly given by publication.
It is next alleged that the question of issuing such bonds in the sum of $2,720,000 for the purpose described was in proper form submitted to a vote of the qualified electors of the city of Columbus at the general election held on November 7, 1933, and that, as certified by the board of elections, there were 49,779 votes for the bond issue and 19,820 against. The bond issue was so approved, upon a tax levy to be made outside the 15-mill limitation.
The petition recites further that pursuant to the proceedings already set out the council of the city of Columbus passed Ordinance No. 314-33, as amended by Ordinance No. 328-33, authorizing the issuance of bonds in the sum stated, for the construction of the proposed improvement, and that the city auditor certified to the city council the estimated life of the improvement, as required by law.
This ordinance as amended fixed the date of such bonds at not later than December 15, 1933, and further fixed the date of maturity of the earliest installment, in the sum of $136,000, at February 1, 1940, and thereafter in equal annual installments of $136,000, so that the total amount is made payable in twenty equal annual installments of $136,000, beginning February 1, 1940, and ending February 1, 1959.
The ordinance also provided for an annual tax levy to discharge the bonds and pay the interest thereon.
Continuing, the petition alleges that, under the provisions of Amended Substitute Senate Bill No. 38, a certificate was obtained from the tax commission of Ohio that the city of Columbus was unable to issue such bonds subject to the limitations prescribed by law, which certificate further contained the required statement of the amount by which the indebtedness of the city would be reduced by the 31st day of December, 1938, based upon the aggregate principal amount of bonds maturing up to that time.
The averment then follows that the respondents refused to have such bonds, with interest coupons, properly prepared and executed, and refused to proceed with the sale thereof as directed by Section 5 of Ordinance No. 314-33.
A writ of mandamus is prayed for against the respondents, to require them to proceed with the preparation, issuance and sale of such bonds.
Copies of the various resolutions, notice of the resolution to submit the bond issue to popular vote, Ordinance No. 314-33, amending Ordinance No. 328-33, and the certificate of the tax commission of Ohio, heretofore referred to, are all attached to the petition as exhibits and made a part thereof.
The respondents filed a joint and several answer, in which they admit the allegations of the petition, and set up the defense that "Amended Senate Bill No. 38 is in conflict with the provisions of Section 11 of Article XII of the Constitution of Ohio;" that "ordinance No. 314-33 * * * as amended by ordinance No. 328-33 * * * is invalid" because "in conflict with the provisions of Section 11 of Article XII of the Constitution of Ohio and Section 2293-12 of the General Code of Ohio, by fixing the date of maturity of the earliest installment of said issue of bonds as February 1, 1940; and that Section I paragraph 7 of said Amended [Substitute] Senate Bill No. 38 does not authorize such a deferred maturity."
The relator filed a general demurrer to the answer, and the case is submitted for decision upon such demurrer.
Mr. John L. Davies, city attorney, for relator.
Mr. E.W. McCormick and Mr. Don W. Wiper, for respondents.
The demurrer to the answer requires a determination of three principal questions. First, Does paragraph 7 of Section 1 of Amended Substitute Senate Bill No. 38, commonly called the Annat Law, and hereinafter referred to as such, create an effective exception to Section 2293-12, General Code of Ohio? Second, Is the Annat Law unconstitutional in permitting the taxing authorities of political subdivisions in Ohio to fix the maturity of the earliest installment of a proposed bond issue at five years after the earliest possible date of maturity? Third, Is Ordinance No. 314-33, as amended by Ordinance No. 328-33, of the city of Columbus, passed in pursuance of the Annat Law unconstitutional because it definitely fixes the maturity of the earliest installment of its proposed bond issue for the construction of a sewage disposal plant and its appurtenances at five years after the earliest possible date of maturity?
We shall approach the subject with an historical preface. It may be judicially noted that during the fall of 1929 the United States began to sink into an economic depression, which reached distressing and momentous proportions, involving widespread unemployment among the people, a general disorganization of industry, and a prostration of agriculture, seriously affecting the public welfare. In an attempt to alleviate, in part, this continuing condition, the Congress of the United States, in June 1933, passed legislation known as the National Industrial Recovery Act (48 Stats. at L., 195), in which was appropriated a large sum of money for the purposes of the act.
To encourage a general and comprehensive program of public works throughout the Nation, Title II of the Act (Title 40, Section 401 et seq., U.S. Code) empowers the President, through an administrator or such other agencies as he may designate or create, to make money grants to states, municipalities or other public bodies for such projects as may be approved, in an amount not in excess of thirty per centum of the cost of the labor and materials employed upon the particular project.
That prompt advantage might be taken of this liberal offer of the federal government, many states, municipalities and other public bodies would find it necessary to issue and sell bonds to finance their proportionate share of the work to be done.
In Ohio the issuing of bonds by political subdivisions of the state is governed by the so-called Uniform Bond Act, comprising Sections 2293-1 to 2293-37, inclusive, General Code. Certain provisions of this act made a present bond issue by many municipalities and other public subdivisions impossible, and to remedy this situation and make it possible to submit proposed bond issues to a vote of the electorate at the election in November, 1933, the General Assembly, in September of 1933, enacted the Annat Law as an emergency measure, the intent and purpose of which is as expressed in Section I thereof, as follows:
"For the purpose of enabling municipal corporations and other subdivisions of Ohio to participate in federal aid provided by the "national industrial recovery act' enacted by the seventy-third congress of the United States, and for that purpose only, the taxing authority of any municipal corporation or any other subdivision provided for in said act is hereby authorized to issue bonds, during the effective period of said act, subject to the provisions of Sections 2293-1 to 2293-37, inclusive, of the General Code, except as hereinafter provided, and may be non-interest bearing for any number of consecutive years, beginning with the date of issue."
It is impracticable to set out here the Uniform Bond Act for comparison with the Annat Law. For the purpose of this opinion a synopsis of Section 1 of the Annat Law, as taken from relator's brief, should suffice to suggest some of its material departures from the Uniform Bond Act. Such synopsis is as follows:
"Paragraph 1 provides that if the Tax Commission of Ohio certifies that the municipal corporation or other subdivision of Ohio is unable to issue such bonds subject to the limitations prescribed by the Uniform Bond Act, then such political subdivision may issue bonds under this act in an amount not exceeding the amount by which the net indebtedness of such political subdivision may be reduced by the thirty-first day of December, 1938," etc.
"Paragraph 2 provides that such bonds shall not be subject to certain limitations of the Uniform Bond Act.
"Paragraph 3, that the question of issuing such bonds shall require only the affirmative vote of a majority of those voting upon the proposition.
"Paragraph 4, that if such bonds are purchased by the United States it shall not be necessary to advertise or offer the same for sale at a competitive bidding.
"Paragraph 5 provides that such bonds may not be issued until the proposed projects have been approved by the proper federal authorities and a contract entered into between the proper authorities of the subdivision and the proper federal authorities pursuant to the said National Industrial Recovery Act.
"Paragraph 6 provides how such proposed bond issue may be submitted at a primary or special election called for that purpose.
"Paragraph 7 changes the time when the resolution declaring the necessity for such bond issue, and setting forth additional facts as provided in Section 2293-19, shall be certified to the county auditor at least thirty days prior to the election; the auditor's certificate to the taxing authority shall be submitted not more than twenty-five days prior to such election and that such resolution shall be certified to the election authorities not more than twenty days prior to such election, and further provides: 'Such resolution may fix the maturity of the earliest installment not later than five years after the earliest possible date of maturity despite the prohibition contained in Section 2293-12 of the General Code of Ohio.'
"Paragraph 8 provides that such election shall be held as provided by the Uniform Bond Act, except that the publication of notice of such election shall be sufficient if made four times in one or more newspapers of general circulation in the subdivision."
The difference between paragraph 7 of Section 1 of the Annat Law and Section 2293-12, General Code, constitutes the most radical and material variance between the Annat Law and the Uniform Bond Act. Section 2293-12, General Code, reads:
"All bonds hereafter issued by any subdivision, or other political taxing unit, except bonds issued under the authority of article XVIII, section 10, of the constitution of Ohio, and except bonds as provided in section 2295-15 of the General Code, shall be serial bonds maturing in substantially equal semi-annual or annual installments. If issued with semi-annual maturities the first installment shall mature not earlier than the first day of March next following the 15th day of July next following the passage of the ordinance or resolution authorizing the issue of such bonds as provided in section 2293-26 of the General Code; and if issued with annual maturities, the first installment shall mature not earlier than the first day of the second September next following said 15th day of July. In either case the first installment shall mature not later than eleven months after said earliest possible date of maturity."
As noted, paragraph 7 of Section 1 of the Annat Law provides that "the resolution declaring the necessity for such bond issue * * * may fix the maturity of the earliest installment not later than five years after the earliest possible date of maturity despite the prohibition contained in section 2293-12 of the General Code of Ohio."
We cannot agree with the argument of the respondents that the language of paragraph 7 just quoted is insufficient to constitute an exception to Section 2293-12, General Code. Acts of the General Assembly are of equal dignity, and the latest expression on the same subject, when irreconcilable with previous expressions, is controlling. The clear legislative intent in the last sentence of paragraph 7 of Section 1 of the Annat Law is to create an express exception to Section 2293-12, and must be given the intended effect. Cochrel, a Minor, v. Robinson, 113 Ohio St. 526, 149 N.E. 871; 25 Ruling Case Law, 960.
The most serious attack made on the Annat Law and the ordinance of the city of Columbus under consideration is that they are in conflict with Section 11 of Article XII of the Constitution of Ohio, adopted in 1912, which says:
"No bonded indebtedness of the state, or any political subdivisions thereof, shall be incurred or renewed, unless, in the legislation under which such indebtedness is incurred or renewed, provision is made for levying and collecting annually by taxation an amount sufficient to pay the interest on said bonds, and to provide a sinking fund for their final redemption at maturity."
The conclusion is inescapable that this section requires an annual levy and collection of taxes in a sufficient amount to pay the interest on public bonds, and to provide for their final redemption. However, the relator and the respondents are at hopeless odds on their interpretation of the section in other respects. Relator strongly maintains that this section is satisfied if provision is made for levying and collecting annually an amount sufficient to pay interest on the bonds, and to provide a fund to pay the principal at such maturity dates as may be designated within the authorized life of the bond issue. Consequently, the constitutional provision is not violated by permitting or fixing the maturity of the earliest installment of bonds at five years after the earliest possible date of maturity, so long as an annual tax levy and collection are made to pay the principal when due. The levying and collection of the tax need not be of an equal or substantially equal amount, because the Constitution does not say so. On the other hand, the respondents are equally sure that this section of the Constitution can only mean that such bonded "indebtedness shall be distributed equally during the years covering the life of the improvement or the period of indebtedness," as contemplated and provided by Section 2293-12, General Code. In other words, the annual tax levy and collection must be of a uniform or substantially uniform amount during the period over which the bond issue extends.
Under ordinary conditions and in so-called normal times a financial policy in line with the contention of the respondents would be a better and more approved practice, but the question with which we are confronted is, Does the constitutional provision under consideration imperatively demand such a construction or interpretation? We are of the opinion that it does not.
In taking this position we have perhaps adopted a liberal, but certainly not a radical, view, and we are confident our conclusion is supported by both reason and authority.
Constitutions are not lifeless or static instruments, whose interpretation is confined to the conditions and outlook which prevailed at the time of their adoption. Nor are they circumscribed by legislation previously adopted under them. They should be given a flexible interpretation such as will meet new conditions and circumstances as they arise, and which necessity may demand without doing violence to plain language employed or transgressing the clear bounds of reason. 8 Ohio Jurisprudence, 128 et seq.; 6 Ruling Case Law, 46 et seq. An example of this is found in the Uniform Bond Act itself, with which respondents appear to be satisfied.
When Section 11, Article XII, of the Constitution was adopted in 1912, sinking fund bonds were the only type of bonds known. Serial bonds came as a later and more approved development, and they are the kind prescribed by the Uniform Bond Act.
It is true that a Constitution is not a grant, but a limitation of power to legislative bodies, and no emergency constitutes an excuse for the adoption of legislation which the Constitution clearly prohibits. But an emergency may furnish the occasion for the exercise of power contained within the Constitution, not theretofore deemed necessary to invoke. This principle is ably expounded by Chief Justice Hughes in the recent case of Home Building Loan Assn. v. Blaisdell, 290 U.S., ___, 54 S.Ct., 231, 78 L.Ed., ___, upholding the constitutional validity of the Minnesota Mortgage Moratorium Law (Laws of Minnesota, 1933, chapter 339). The instant case, in our opinion, presents a situation for an appropriate application of the above rules.
The further contention is made that the Annat Law is unconstitutional because its terms would permit a political subdivision issuing bonds to postpone the levying and collection of taxes thereon for a period of five years.
If the law directed such procedure it would clearly be unconstitutional, because an annual levy and collection of taxes is imperative; but it does not. It is a permissive or enabling statute, requiring affirmative action in the issuance of bonds by the political subdivisions for whose benefit it was passed. One of the cardinal rules of construction is that a strong presumption exists in favor of the validity of legislative acts, and that a construction will be given them, when possible, to sustain their constitutionality. It is therefore not to be assumed that the Annat Law contemplates or invites any procedure on the part of political subdivisions which would eliminate an annual levy and collection of taxes to pay the interest on a bond issue and provide for its retirement at maturity. The authorities go so far as to hold that if a statute is susceptible of two constructions, one of which would render it unconstitutional and the other constitutional, it is the duty of the courts to adopt the latter construction and restrict its operation within constitutional limits. 8 Ohio Jurisprudence, 160; 25 Ruling Case Law, 1000.
We now come to a consideration of the ordinance of the city of Columbus, passed in pursuance of the Annat Law.
No objection is made to the preliminary procedure leading up to its adoption, nor is it maintained that such procedure is not in conformity with the Annat Law. The point made is that the ordinance is unconstitutional because it exercises the permission granted by the Annat Law in providing for a bond issue the first installment of which falls due five years after the earliest possible date of maturity.
As previously stated, the ordinance, as amended, creates a bond issue in the total amount of $2,720,000, for the construction of a sewage disposal plant, with its appurtenances. It is stipulated that the bonds shall be dated not later than December 15, 1933, and that the first installment of $136,000 shall mature and be payable February 1, 1940; the remaining installments of $136,000 each maturing and becoming payable on February 1st of each succeeding year beginning in 1941 and ending in 1959. The issue bears interest at the rate of four per cent. per annum, payable semiannually, and is limited to a period of twenty-five years as prescribed by Section 2293-9, General Code, under Class C. The bonds are of the denomination of $1,000 each.
That part of the ordinance providing for an annual tax levy to pay the interest and principal of such bonds is as follows:
"For the purpose of providing necessary funds to pay the interest on the foregoing bonds promptly when and as the same fall due, and also to provide a fund sufficient to discharge the said serial bonds at maturity, there shall be and there is hereby levied on all taxable property in the City of Columbus, in addition to all other taxes a direct tax annually in an amount sufficient to provide funds to pay the interest on said bonds as and when the same shall fall due and also to provide a fund for the discharge of the principal of said serial bonds at maturity, which tax shall not be less than the interest and sinking fund tax required by Section 11 of Article XII of the Constitution. Said tax shall be levied outside of the 15 mill limitation."
From what has been said it follows that we are of the opinion that the Annat Law and the ordinance of the city of Columbus, Ohio, as amended, are both constitutional, and we so hold. Neither do we find them to contain such material imperfections as to warrant us in holding them invalid on any other ground.
It may be claimed that the interpretation given Section 11, Article XII, of the Constitution, makes for abuses on the part of tax levying authorities, by allowing them to impose an unequal amount of taxes throughout the different years covering the life of a particular bond issue.
Surely something should be left to the discretion and good judgment of such authorities. It is to be presumed that they will not exercise their powers harmfully within the possible limits of the Constitution. Besides, courts are not generally concerned with the policy or wisdom of legislative enactments, ordinances and the like, so long as they remain within constitutional bounds. 8 Ohio Jurisprudence, 291. et. seq.; Home Building Loan Assn. v. Blaisdell, supra; 25 Ruling Case Law, 1017.
Other objections are raised by the respondents, which we consider of minor import. It is contended that the Annat Law is unconstitutional because it permits the issuance of noninterest bearing bonds. Certainly the Constitution requires no annual levy and collection of taxes for interest when no interest is payable, and the question of noninterest bearing bonds is not involved in this case. Neither are we impressed with the contention that the Annat Law is in conflict with Section 2 of Article XII of the Constitution of Ohio. The Uniform Bond Act, as modified by the Annat Law, controls the issuing of bonds and the procedure leading up thereto by the various political subdivisions of the state, and we fail to see how other provisions of the General Code cited, relating to taxation, have application.
Insistence is also made that at the election in November, 1933, various bond issues were voted by the electorate of the city of Columbus in excess of the amount by which the net indebtedness of the city will be reduced by December 31, 1938, as certified by the tax commission of Ohio under paragraph 1, Section 1, of the Annat Law, and that consequently the bond issue involved in the instant case may be in excess of the authorized limit.
Such a situation does not appear from the pleadings, and we may not assume that it exists. In the event of its occurrence, the proper parties, who feel themselves aggrieved, can no doubt bring an appropriate action in a court of competent jurisdiction for an adjudication of their claims.
The only case in which this court has interpreted Section 11 of Article XII of the Constitution to any extent is that of Link v. Karb, Mayor, 89 Ohio St. 326, 104 N.E. 632, and we find nothing there in conflict with our present holding.
The demurrer to the answer is sustained.
Demurrer to answer sustained.
WEYGANDT, C.J., ALLEN, STEPHENSON, JONES, MATTHIAS and BEVIS, JJ., concur.
"The constitutionality of a law may be determined by its operative effect, though on its face it may be apparently valid." Castle v. Mason, 91 Ohio St. 296, 110 N.E. 463, Ann. Cas., 1917A, 164. While on their faces the Annat Act and the ordinance passed pursuant thereto are hereby held to be valid, should the council not comply with the constitutional requirement, by failing to make provision for the levy and collection annually of a sufficient amount to pay interest on and provide a sinking fund for the redemption of said bonds, its failure so to do would, by operative effect, contravene the provisions of Section 11, Article XII, heretofore quoted.