Opinion
No. 30300.
June 8, 1960. On Rehearing July 28, 1961.
Appeal from the Circuit Court for Volusia County, Robert H. Wingfield, J.
Fred R. Brannon, Jr., New Smyrna Beach, Hull, Landis, Graham French, Daytona Beach, and Patterson, Freeman, Richardson Watson, Jacksonville, for appellant.
William W. Judge, Daytona Beach, for appellee.
This case comes to us on appeal from a decree of the circuit judge denying the petition of the appellant to validate $1,500,000 of Waterworks and Electric Revenue Certificates.
By its charter, Chapter 22,408, Laws of Florida, Special Acts of 1943, as amended, the appellant owns and operates a waterworks and electric plant. It appears that the plant and system have now become inadequate and that extensions are imperative fully to meet the needs of the people.
There are outstanding Electric Revenue Certificates dated 1 January 1947 in the sum of $25,000 payable solely from the net revenue of the electric plant, Waterworks and Electric Revenue Certificates dated 1 December 1950 in the amount of $1,360,000, and Waterworks and Electric Revenue Certificates (Series 1955) issued 1 July 1955, in the sum of $1,616,000. All these certificates are payable solely from the net revenue of the water and electric systems. Also, the appellant has pledged $20,000 of that income annually toward the discharge of refunding bonds of the year 1941.
The resolution authorizing the issuance of the certificates in question prescribes all their features and stipulates that they shall be retired from the revenues, after, however, the allotments to take care of the prior obligations are made, and that the certificates contemplated shall not constitute general obligations, or bonds within the meaning of Sec. 6, Art. IX of the Constitution of Florida, F.S.A.
This court has often held that certificates of indebtedness could be issued to enlarge, or even construct, waterworks, electric plants and the like payable entirely from income of the utilities without complying with Sec. 6, Art. IX, supra, with reference to approval of freeholders who were qualified electors.
Were we to stop here, our decision would be immediately to validate and confirm the indebtedness. The chancellor declined to do that because he had the conviction that such a decision would conflict with the ruling of this court in Easterlin v. City of New Port Richey, Fla., 105 So.2d 361.
So, we are brought to a study of the relevant provisions of Chapter 22,408, supra, and a comparison of its provisions with the corresponding provisions of the charter of New Port Richey.
The charter vests the appellant with the power, among others, to erect and maintain waterworks and lighting plants and "to issue and sell bonds upon the public utilities owned and operated by the municipality, and to pledge said property and income therefrom, or either of them, for the payment thereof * * *." Sec. 7, Chapter 22,408, supra. (Italics supplied.)
Further in the charter the appellant is empowered to issue bonds but with the restriction "that no such bonds shall be issued except for the purpose indicated in Section 7 [supra], for the floating of the debt of the City, refunding of previous issues of bonds, establishment of public works and utilities, construction of necessary municipal buildings, and for the improvement of parks, highways and streets, and other municipal purposes as are of general benefit in their relation to the municipality * *." After this appears the significant language: "before the issue of any such bonds shall be made" an ordinance shall be passed describing the terms, conditions and amounts of the bonds, "which said ordinance proposing the issue * * * shall subsequently be approved by a majority vote of the electors of the City, who are qualified to vote as shown by the registration and tax books of the City, who vote thereon, at an election held for that purpose, at such time and in such manner as may be prescribed by law and the City ordinances." (Italics supplied.) Section 133.
It should be noted that the requirements are not the same as those specified in Sec. 6 of Art. IX, but it is plain that it was intended that bonds "upon" the utilities should be approved by the qualified electorate before their issuance.
The chancellor observed that the appellant had failed to submit to the people the question of the issuance of the bonds and that there was no provision in the charter for the issuance of revenue certificates without approval of freeholder-electors. He concluded on the authority of the decision of this court in Easterlin v. City of New Port Richey, supra, that there was no implied authority to issue the certificates without election, consequently he denied the appellant's petition.
In the cited case the city was empowered by its charter to supply water and purchase or construct a plant and acquire property for the erection and maintenance of waterworks. It had the power also to sell bonds for the purpose of building and repairing such waterworks.
The city undertook to accomplish the needed extension of the water system by the sale of revenue certificates payable from the income of the system. The charter contained a provision that issuance of bonds for the purpose was required to be approved by a majority of the qualified electors who were freeholders.
We decided in the cited case that the power to issue the bonds depended on the approving vote, which had not been held. We commented that there was no provision in the charter for bonds or certificates of indebtedness to be paid from the revenue from the improvement. We pause here to draw attention to the pertinent part of Section 7 of the appellant's charter empowering the appellant to sell "bonds upon" utilities and to pledge the property and the income from them to discharge the indebtedness. There appears some difference between the provisions of the charters of New Port Richey and of appellant but the underlying principle is the same because of the condition of approval. In the charter of New Port Richey there was no provision for payment of such indebtedness from revenue; by the present charter this may be done. But as we see it, there is fastened on the power of both the requirement of election.
It is true as appellant argues that this court has held that a city could incur obligations for improvement of its utilities and promise to retire the obligations from revenue without the necessity of an approval by freeholder-electors but the point here involved is not solved by those cases. It is a question, rather, whether or not a city may thus proceed in the face of a provision that bonds may be issued against its utility plants secured by a pledge of revenue provided they are approved at an election.
And we further agree with appellant that in the New Port Richey case we did not overrule such decisions.
Although it can be logically argued that the power to construct public utility plants carries with it the implied power to finance the construction, and although the court has approved the issuance of revenue certificates for the purpose of extending existing improvements, Boykin v. Town of River Junction, 124 Fla. 827, 169 So. 492, and in later cases for the sale of such certificates to finance the building of new plants, we do not understand that the provisions of the charter referring to bonds may be disregarded by designating the evidence of indebtedness certificates instead of bonds
So we are unable to adopt the view that despite the provisions of the appellant's charter which we have quoted, the appellant may, if it is decided not to issue "bonds" and hold an election for their approval, change the name of the obligation to "certificates" and finance the improvement without benefit of an approving vote.
We cannot agree that the distinction, in such circumstances, between a bond and a certificate is so pronounced as to justify the position. That would require too much emphasis on the title of the evidences of indebtedness, namely, bonds as distinguished from revenue certificates, and too little on the substance. The difference in name would not warrant the variance in procedure, as the object to be reached is the same and the plan of attaining it is essentially the same.
We do not hold that the appellant cannot expand its utility plant and pay the cost out of revenues simply because there is no express authority for that procedure, but we do hold that such authority cannot be implied in the face of the express provisions of the charter with reference to the method to be pursued. Sections 7 and 133, supra.
Affirmed.
TERRELL and HOBSON, JJ., concur.
ROBERTS, J., concurs specially.
DREW, THORNAL and O'CONNELL, JJ., dissent.
ROBERTS, J., concurs in the opinion and judgment but with the reservation that the city has the right to initiate a revenue certificate program under Chapter 180, F.S.A.
On Rehearing Granted
We granted rehearing and have heard further argument.
The factual situation and the contentions which produced the litigation, are adequately presented by the original opinion which attracted majority support for the view that the municipal charter provision authorizing the issuance of bonds to maintain the utility plants precluded the issuance of revenue certificates without an approving vote of the electors of the city. Upon further consideration of the matter, we now have the view that the proposed issue of revenue certificates is valid without the necessity of elector approval.
It is conceded that the proposed Waterworks and Electric Revenue Certificates do not in any respect directly or indirectly pledge any aspect of the taxing power of the City of New Smyrna Beach. Like hundreds of issues of similar municipal securities, including three prior issues of this particular city, the revenue certificates pledge merely the income from utilities plants. These are maintained by the City in a proprietary capacity. The proposed securities are lacking in any element that would classify them as "bonds" which would necessitate an approving freeholder election under Article IX, Section 6, Florida Constitution, F.S.A. Boykin v. Town of River Junction, 124 Fla. 827, 169 So. 492. The cases to support this proposition are legion
To preclude the application of the established rule, the trial judge relied on a fairly recent decision of this Court in Easterlin v. City of New Port Richey, Fla., 105 So.2d 361. While the writer dissented from the decision of the majority in the last cited case and we now have the view that certain aspects of that decision which collide with the instant opinion should be altered, we also find that there are aspects of the present case which may properly distinguish it from Easterlin.
The Easterlin opinion held for the proposition that if a municipal charter authorizes a city to construct, operate, and maintain a public utility, and in addition merely contains a provision which authorizes the issuance of bonds to be approved by freeholders as a method of accomplishing this charter power, then the authorizing provision regarding bonds should be construed as a complete prohibition against the fulfillment of this proprietary function by any other method of financing. Our analysis of other decisions leads us to the conclusion that implicit in the power to construct the utility is the power to finance it by any legitimate means. Mere authorization to issue bonds in the constitutional sense with freeholder approval essential, is not tantamount to an explicit prohibition against some other legitimate method of financing in the absence of expressed prohibitory language in the charter.
The trial judge and the original majority in this case relied upon Easterlin v. City of New Port Richey, supra.
The conclusion in that case cited for support the decision in North Shore Bank v. Town of Surfside, Fla., 72 So.2d 659, 663. This decision is cited to support the view that when the city was given the power to operate the utility and in another section of the charter was authorized to issue bonds subject to an election in order to construct or improve the utility, then the permissive "bond issuing provision" should be construed as excluding every method of financing otherwise recognized as legitimate. Take note that the "bond authorizing provisions", both in the New Port Richey Charter and in the New Smyrna Beach Charter are merely permissive. They are not stated to be exclusive nor do they expressly prohibit financing the utility by any other legitimate means. This prohibition is inferred by the majority in Easterlin merely out of the permissive authorization contained in the charter.
Let us now examine the Town of Surfside case to ascertain whether it supports the conclusion extracted from it in Easterlin.
A careful examination of Town of Surfside will reveal that the town proposed to issue certain improvement certificates to be paid out of revenues to be derived in the future from a "franchise tax", imposed upon Florida Power and Light Company. The town charter provided in substance that no election shall be required for the issuance of bonds "if the initial ordinance authorizes the issuance of bonds payable exclusively from the revenue of a municipal project." Note that the utilities improvement certificates were not payable from project revenue but rather from a "franchise tax." At the same time there was another charter provision which provided that "if the initial ordinance authorizes the issuance of bonds not payable exclusively from the revenue of a municipal project", then such bonds must be approved in an election called for the purpose. As pointed out in the Surfside opinion, if the security were to be paid entirely out of revenues no election was necessary. At the same time the charter contained a positive and explicit prohibition against the issuance of securities without an election if they were to be paid out of any revenue source other than that exclusively produced by the project. Inasmuch as the Surfside securities were to be paid from a "franchise tax" and not from revenue produced by the project, this Court held that there was "a positive prohibition in the charter against the issuance of such bonds absent the vote of the electorate." The Surfside judgment was grounded on the conclusion that a "franchise tax" could not possibly fall within the classification of revenue "exclusively" produced by the project.
The difference between this Court's opinion in Surfside and this Court's opinion in Easterlin simply is that in Surfside there was an expressed charter prohibition against the type of securities proposed. In Easterlin and in the instant case there was no expressed prohibition whatever. In Easterlin and originally here, this Court merely constructed a prohibition by inference out of certain permissive language authorizing the issuance of bonds. Such language doubtless could be found in substantially the same form in every city charter in the State. The Surfside opinion did not hold that the granting of a permissive power ipso facto precludes and prohibits the exercise of a proprietary municipal function by every otherwise legitimate means. It appears to me to be unfortunate that the Surfside opinion was given this interpretation in Easterlin. Despite the fact that the Easterlin opinion has been on the books for only two years, we must conclude that anything in that opinion inconsistent with the views we express herein are hereby modified.
In State v. City of Miami, Fla., 113 Fla. 280, 152 So. 6, we took cognizance of the fact that in the operation of a self-supporting revenue producing utility a municipality exercises a proprietary function. So long as the improvement of such a utility is financed by securities which are limited solely to anticipated revenues from the project, such securities do no violence to the prohibition against the issuance of bonds with the freeholders' consent. In the case last cited, it was explicitly held that a municipality could exercise this type of financing power whether or not it acted under special legislative authority given it so to do. In other words, the power to finance in this fashion was implicit in the power to maintain the utility.
In State v. City of Daytona Beach, 118 Fla. 29, 158 So. 300, we clearly held that when a municipality is endowed with the power to acquire certain public utilities then the very act of endowment implies that the city is given that power charged with a responsibility to manage and operate the plants and to deal with the earnings to the best advantage of the public service required to be rendered. Any prohibition or restriction upon such power must be expressly stated in the charter.
In State v. City of Key West, 153 Fla. 226, 14 So.2d 707, 708, the city was given the power to operate its electric system. It proposed the issuance of certain securities supported entirely by revenues derived from the system.
This Court held that the power to establish and operate the plant "would certainly imply the means to effect all powers expressly granted." We held that the securities were not bonds and that they could be issued without a vote of the freeholders. We think it of significance that in this case the charter of the City of Key West authorized the acquisition and operation of the plants. As the New Smyrna Beach Charter similarly provides, the Key West Charter provided that the City of Key West "shall have the right to issue and sell bonds for municipal purposes; * * *." It required that such bonds be approved by the qualified electors and they were limited in amount to a percentage of the assessed valuation of taxable property. There was no specific authorization to the City of Key West to issue the type of revenue securities validated by this Court's opinion. There was a provision which would authorize the issuance of bonds subject to an election for this purpose. Nevertheless, despite the permissive provision for the issuance of bonds subject to an election this Court validated the Key West revenue certificates without the necessity of an approving vote of the freeholders. It appears to me that the Key West decision in the light of the Key West Charter is clearly controlling in favor of the validity of the revenue certificates in the instant case.
I further think there may be a distinction implicit in the New Smyrna Beach Charter which places the instant case beyond the pale of Easterlin. In the charter here involved there is a provision to the effect that all general laws applicable to a municipal corporation which are not "in conflict with the charter shall be applicable to the City of New Smyrna Beach." Section 169.01, Florida Statutes, F.S.A., is certainly a general law which authorizes this type of financing. See State v. City of Miami, Fla., 76 So.2d 294. This charter further provided that "nothing contained in this act shall be construed as limiting the powers of the city commission to enact any ordinance or resolution not in conflict * * with the express provisions of this act."
Section 7 of the charter mentioned in the majority opinion contains the following:
"The enumeration of the particular powers herein shall not be held or deemed to be exclusive, but, in addition to the powers enumerated herein or implied hereby, the City shall have and may exercise all other powers which under the Constitution and Laws of Florida it would be competent for this paragraph specifically to enumerate."
Such comprehensive all-inclusive language was not a part of the New Port Richey Charter.
We have not overlooked Senate Bill 683 enacted by the 1961 Legislature. It amends Chapter 22408, Laws of Florida, Special Acts of 1943 regarding the power of New Smyrna Beach to issue securities of the instant type. It became effective May 22, 1961 and would not therefore influence the outcome of this litigation.
We, therefore, recede from the original opinion filed herein and upon rehearing granted the decree of the chancellor declining to validate the proposed issue of revenue certificates is hereby reversed.
It is so ordered.
ROBERTS, C.J., and O'CONNELL, JJ., concur.
DREW, J., concurs specially with opinion.
TERRELL and THOMAS, JJ., dissent and adhere to original opinion.
HOBSON, J., dissents.
In voting to deny the petition for rehearing in Easterlin v. City of New Port Richey, Fla., 105 So.2d 361, 363, I endeavored to make it quite clear that I concurred in the majority opinion prepared for the Court by Mr. Justice Thomas because of my conclusion that the charter of the City of New Port Richey, as I construed its pertinent provisions, prohibited the City from issuing bonds for the construction of a municipal lighting or water plant without an affirmative vote of its registered freeholders at an election held for that purpose, and I expressed the fixed view, basing my conclusion on North Shore Bank v. Town of Surfside, Fla., 72 So.2d 659, that "inasmuch as the charter of the City specifically provided the manner in which a public water supply could be financed, the power to do it in another manner cannot be implied." As far as I went in that opinion, I think I was correct but I am now convinced that I should have given more consideration and a more careful study to the holdings of this Court in the cases of State v. City of Miami, 113 Fla. 280, 152 So. 6, and State v. City of Daytona Beach, 118 Fla. 29, 158 So. 300, referred to in the foregoing opinion prepared for the Court by Mr. Justice THORNAL. I think my failure to do so contributed to the confusion and uncertainty as to the status of the law in this field created thereby. I agree that this matter should be straightened out now and the confusion which has been created by the opinion in the New Port Richey case, including the special concurring opinion on rehearing of the author, should be clarified and, to the extent necessary to ensure stability in the law, holdings in the New Port Richey case contrary to those pronounced in the foregoing opinion should be receded from. For these reasons I am privileged to concur in the opinion approving and validating the bonds here questioned. Judges make mistakes like everybody else. The fact that the mistake was recently made should not deter us in correcting it. On the contrary, we should hasten to do so as we have here.