Opinion
15544.
SEPTEMBER 5, 1946.
Validation of revenue certificates. Before Judge Hawkins. Cobb Superior Court. May 11, 1946.
R. M. Reed, for plaintiff in error.
H. G. Vandiviere, Solicitor-General, H. S. Willingham, James A. Branch Jr., and Sumter M. Kelley, contra.
1. There is no merit in the contention that the City of Smyrna is without authority to combine its water-works system with its sewerage system because one is a proprietary function and the other a governmental function.
2. The ordinance and contract in question are not invalid as being in violation of the rule that "one council may not by an ordinance bind itself or its successors so as to prevent free legislation in matters of municipal government."
3. The ordinance in question does not violate article one, section one, paragraph twenty-three of the Constitution of Georgia.
4. Nor do the ordinance and contract in question violate article seven, section seven, paragraph one of the Constitution of Georgia.
5. It can not be held as a matter of law that the rate fixed in the instant case amounts to a taking of property without due process of law.
6. The attempted combination of the water-works and sewerage systems is not in violation of article one, section one, paragraph two of the Constitution of Georgia.
7. There is no merit in the contention that the charter of the City of Smyrna does not authorize the issuance of revenue certificates or the contract here executed. When the Revenue Certificate Law of 1937 and the Constitution of 1945 were adopted, the provision of each as to revenue certificates became a part of the charter of every municipality of the State.
No. 15544. SEPTEMBER 5, 1946.
The Mayor and Council of the City of Smyrna passed an ordinance combining the city's water-works system with its sewerage system, placing a certain valuation on the combined system, and authorizing the issuance of $215,000 water and sewerage revenue anticipation certificates for the purpose of adding to, extending, and improving the system. The ordinance pledged seventy-five percent of the income from the system to the payment of the principal and interest on the certificates. It also authorized the execution of a contract between the City of Smyrna and Cobb County, whereby the city obligated itself to construct jointly with Cobb County a ten-inch water main to join in with a water main owned by the City of Atlanta, and thereafter to maintain and operate this water main jointly with Cobb County, and to pay Cobb County eight cents per one thousand cubic feet of water used by the city.
Prior to the adoption of this ordinance, the City of Smyrna owned its water-works and sewerage systems, maintaining and operating them as separate entities. No charge was made by the city for the use of its sewerage facilities. A minimum charge of $1.35 per month for 3000 gallons of water was charged by the city to the users of this commodity. The city's present water supply is inadequate, and it would be on the basis of procuring water from Cobb County that the City of Smyrna would issue and sell the revenue certificates.
By the ordinance combining the water-works and sewerage systems into one system, the city purportedly acted under the authority contained in Ga. L. 1937, p. 761 (Revenue Certificate Law), § 2 (a), which provided that "the term `undertaking' shall include the following revenue-producing undertakings or any combination of two or more of such undertakings, whether now existing or hereafter acquired or constructed." Acting under authority of § 2-d-1 of the amendment to the Revenue Certificate Law (Ga. L. 1939, p. 362), the city placed a valuation on the combined system of $40,000.
Under the ordinance, the city authorized the issuance of $215,000 water and sewerage revenue certificates to provide funds for adding to, extending, and improving the system, and pledged to the payment of the principal and interest on said certificates seventy-five percent of the moneys received by the city from the operation of the system. This pledged percentage was less than the actual percentage that the city would by law be authorized to pledge for this purpose.
The ordinance provided that the revenue certificates should not be a debt of the city, that the city should not be subject to any liability thereupon, that they should be payable only from revenues of the water-sewer system, and that no holder can compel the use of the city's taxing power or levy on any property of the city.
The ordinance further provided, and the city of covenanted thereunder, that, upon the completion of the additions and extensions to the water-works and sewerage system, it would put into effect, as an initial rate of charges and fees for the commodities and services furnished, a minimum monthly charge of $3 for 3000 gallons of water and 50 cents for the next 3000 gallons of water or fraction thereof, and 25 cents for every 1000 gallons or fraction thereof in excess of 6000 gallons per month, which charges would entitle the payor to the use of the city's sewerage facilities. In addition, the city covenanted by the terms of the ordinance at all times to prescribe and maintain a schedule of rates, fees, and charges for the services, facilities, and commodities to be furnished by its waterworks and sewerage system as would be necessary to produce funds sufficient to pay the principal and interest on the certificates and create a reserve for that purpose.
Under the terms of the ordinance, the city further covenanted that, in the event of default, the holders of the certificates under certain conditions would have certain rights, among which were those authorized by the Revenue Certificate Law, which includes the right to appoint a receiver for the water-works and sewerage system.
The city's projected water supply was to be obtained from Cobb County. The salient facts pertaining to the contract under which the city was to obtain this water are:
1. Joint construction together with Cobb County of a ten-inch main, which main was to run to the City of Atlanta's water main — Cobb County having previously entered into a contract with the City of Atlanta to acquire water from the City of Atlanta for a period of thirty years.
2. After the construction of the ten-inch water main, to be maintained and operated jointly by the City of Smyrna and Cobb County, each was to pay its proportionate share of the operating and maintenance costs, and in addition the city was to pay $25 per month to the county for its portion of the salary and expenses of the engineer employed by the county to supervise the water main.
3. The city was to pay Cobb County 8 cents for each 1000 cubic feet or fraction thereof of water taken by the city from the ten-inch main.
4. The agreement was not to constitute a debt either of the city or of the county; nor was either to incur any pecuniary liability by virtue of the agreement, except as to the joint line — and then only to the extent of income from the water system or funds from the sale of revenue certificates.
After the passage of the ordinance described above, the Solicitor General of the Blue Ridge Judicial Circuit was properly notified of the intention of the City of Smyrna to issue the certificates; and a petition was brought by the Solicitor-General against the City of Smyrna, seeking to validate the certificates. Pursuant to an order properly granted, a hearing was set. The plaintiff in error filed his intervention in these proceedings, objecting to the confirmation and validation of the certificates on various grounds, hereinafter more fully set forth in the opinion, and seeking injunctive relief. The City of Smyrna filed its answer to the Solicitor-General's petition; and after argument by counsel for the parties, the court entered the following order:
"The above entitled case coming on for hearing, B. F. Reed Jr., a resident and taxpayer of the City of Smyrna, has presented and filed his intervention in opposition to the validation of the certificates, and having been made a party to the proceedings and the parties hereto having submitted the matter on verified pleadings, and after an investigation of the law and facts and after the argument of counsel, it is considered, ordered, and adjudged:
"(1) The City of Smyrna was authorized as a matter of fact and as a matter of law to combine its water system and its sewerage system into one system to be maintained and operated as the water and sewerage system of said city, and has taken all necessary and legal steps to so combine said systems, and such actions are hereby ratified, confirmed, and approved; and
"(2) That the City of Smyrna acting by and through its duly authorized officers are authorized to covenant and, pursuant to said covenant, to establish an initial rate of charges and fees for the commodities and services furnished by the water and sewerage system as set forth in the proceedings in this case, and the action taken on the part of such officials of said city in no wise violates article I, section I, paragraph III of the Constitution of the State of Georgia, or article I, section I, paragraph II of the Constitution of the State of Georgia; and
"(3) That the Revenue Certificate Law of 1937 is legal in all respects, and particularly (a) paragraph (a) of § 2 thereof, and that the said city acting pursuant thereto was authorized to combine its water and sewerage system and to place a valuation thereon and to issue the water and sewerage revenue anticipation certificates described in the petition and answer in this proceeding, and to pledge seventy-five per centum of the revenues of the combined system to the payment of the principal of and interest on said certificates; and particularly (b) § 8 of said Revenue Certificate Law is valid and the action of the City of Smyrna taken pursuant thereto, covenanting relative to the appointment of a receiver, in no wise conflicts or is in violation of article I, section I, paragraph XXIII of the Constitution of the State of Georgia; and
"(4) The City of Smyrna is authorized under the laws and Constitution of the State of Georgia to enter into a contract for a period of thirty years pertaining to a supply of water, and the contract so entered into is valid and binding in all respects on the parties thereto, and said contract and the obligations assumed thereunder in no way conflicts with Code, § 60-202; and further, the contract and the obligations assumed thereunder in no way violates article VII, section VII, paragraph I of the Constitution of the State of Georgia; and
"(5) That the City of Smyrna was and is legally authorized to and did take all proper and necessary steps to issue $215,000 water and sewerage revenue anticipation certificates, described in the petition and answer in this case; and that as a matter of law the said certificates are issued pursuant to a valid and binding ordinance of the City of Smyrna and pursuant to the laws and the Constitution of the State of Georgia, and the City of Smyrna be and is hereby authorized to issue said certificates; and
"(6) The said revenue certificates shall not be payable from or a charge upon any funds or property of the City of Smyrna other than the proportionate revenues pledged to the payment thereof, nor shall the city be subject to any pecuniary liability thereon, nor shall any such certificate constitute a charge, lien, or encumbrance upon any of its property except that part of the revenues pledged for the payment of the principal and interest of said certificates, which proportion of such revenues, to wit, seventy-five percent, are hereby adjudged to be security for said certificates; and
"(7) The said water and sewerage revenue anticipation certificates of said city, as described in the petition and answer herein, be and the same are hereby in each and every respect confirmed and validated, and the City of Smyrna is authorized and empowered to issue said certificates, and when so issued shall be binding obligations of the City of Smyrna in accordance with the provisions of the ordinance authorizing said certificates, all of which terms and provisions are hereby in each and every respect confirmed and validated; and
"(8) The objections, as set forth in intervenor's intervention, to the confirmation and validation of said certificates are without merit in law or in fact, and said intervention be and the same is hereby dismissed."
The intervenor excepted to this judgment.
1. In his brief filed in this case, the plaintiff in error has very conveniently grouped his contentions under seven divisions, and we will thus deal with the questions raised. It is first contended that the City of Smyrna can not combine its waterworks system with its sewerage system and operate the two as one. The argument is made that the water-works system is a proprietary and revenue-producing function, and that the sewerage system is a governmental function, and for this reason the two can not be combined into one system, notwithstanding any authority so to do by the terms of the Revenue Certificate Law (Ga. L. 1937, p. 761). As authority for the fact that this court has recognized the distinction between the proprietary functions and the governmental functions of a municipality, Aven v. Steiner Cancer Hospital, 189 Ga. 126 ( 5 S.E.2d 356), and Lawson v. Moultrie, 194 Ga. 699 ( 22 S.E.2d 592), are cited in the brief of the plaintiff in error, We, of course, recognize the difference between the proprietary and governmental functions of a municipality. However, we do not think that question is presented in the instant case. The Revenue Certificate Law of 1937, sections 2 (a) and 3, expressly authorizes the combination of water-works systems and sewerage systems for the purposes here contemplated. Article seven, section seven, paragraph five of the Constitution of 1945 (Ga. L. 1945, p. 71) contains the following language: "Revenue anticipation obligations may be issued by any county, municipal corporation, or political subdivision of this State, to provide funds for the purchase or construction, in whole or in part, of any revenue-producing facility which such county, municipal corporation, or political subdivision is authorized by the act of the General Assembly approved March 31st, 1937, known as the `Revenue Certificate Law of 1937,' as amended by the Act approved March 14, 1939, to construct and operate, or to provide funds to extend, repair, or improve any such existing facility." It follows that the Constitution itself expressly provides that water-works systems and sewerage systems may be combined in the identical manner undertaken in the instant case.
2. The plaintiff in error next contends that "the ordinance and contract here in issue, and the revenue certificates proposed to be issued in pursuance of the same, are also invalid as being in violation of the following well-established rule of this State: `One council may not by an ordinance bind itself or its successors so as to prevent free legislation in matters of municipal government' ( Williams v. City Council of West Point, 68 Ga. 816)." After conceding that this limitation is not applicable to proprietary functions, it is argued that the rule is applicable to the instant case for the reason that the sewerage system, a governmental function, is combined with the water-works system, a proprietary function. What has been said in division one of this opinion answers this argument of the plaintiff in error adversely to his contention.
3. The contention is made that, since the ordinance of the City of Smyrna authorizes the appointment of a receiver for the water and sewer system in the event of a default, it seeks to invade the realm of the judiciary, and is violative of article one, section one, paragraph twenty-three of the Constitution of the State of Georgia. This provision is as follows: "The legislative, judicial, and executive powers shall forever remain separate and distinct, and no person discharging the duties of one, shall, at the same time, exercise the functions of either of the others, except as herein provided." The identical question now raised was made in DeJarnette v. Hospital Authority of Albany, 195 Ga. 189 ( 23 S.E.2d 716), and Lawson v. Moultrie, supra. In both of those cases this court held that there was no merit in this contention. The argument is made that the ruling in those cases is not applicable to the instant case for the reason that in this case it is proposed to combine an existing sewerage system with a water-works system; that the operation of the sewerage system is a governmental function; and that this was not a fact in either the DeJarnette or the Lawson cases. Since we have in this case held that the Revenue Certificate Law of 1937 and the Constitution of 1945 confer upon municipalities express constitutional authority to combine sewer and water-works systems for the purposes here involved, this contention is without merit.
4. The plaintiff in error contends that "the entire scheme comprising the ordinance, the proposed revenue certificates, and the contract between the City of Smyrna and Cobb County is in violation of article seven, section seven, paragraph one of the Constitution of Georgia," this being the debt-limitation clause of the Constitution. It is argued that the contract is for thirty years and obligates the City of Smyrna to construct jointly with the county a water main and to bear one-half the cost thereof; to bear one-half the maintenance and operating expense; to construct and maintain a small main connecting with the joint main; to pay $25 per month as its portion of the salary of an engineer; and to buy water and pay therefor 8 cents per one thousand cubic feet. It is insisted that each of these covenants on the part of the city is a direct pecuniary obligation, which constitutes a debt under the above-referred to debt-limitation clause of our State Constitution, and is without the approval of the voters.
Article seven, section six, paragraph one (a) of the Constitution of 1945 provides that contracts of the character of the one under consideration may be entered into by a municipality for a period not exceeding fifty years. In DeJarnette v. Hospital Authority of Albany, supra, this court was dealing with the act approved March 27, 1941 (Ga. L. 1941, p. 241), known as the Hospital Authorities Law. The court said: "The contract undertook to bind the county and the municipality each to pay to the hospital authority the sum of $100,000 in twenty annual installments of $5000 each, with interest. Under the terms of the contract these promises to pay were made unconditional." The contract in that case was held to be a violation of the debt-limitation clause of the Constitution.
In the instant case, the following provisions appear in the contract: "Both parties agree that this agreement and all undertakings and obligations herein contained shall not be deemed to constitute a debt of either party hereto or a pledge of the faith and credit of either party, and neither party shall have the right to compel any exercise of the taxing power of the respective political subdivisions to perform any term hereof or to pay any sums due hereunder, and neither party shall be subject to any pecuniary liability hereunder except as to the obligations of payment of the amounts due under the terms of this contract for the erection of the `project,' its operation and maintenance, and for the water furnished, and then only to the extent of funds available which have been either produced by the water-works system, or from the sale of revenue anticipation certificates issued against and secured by such revenues." In Miller v. Head, 186 Ga. 694 ( 198 S.E. 680), the Revenue Certificate Law of 1937 was under attack as being in violation of the debt-limitation clause of the Constitution. This court said: "All of these contentions are predicated upon the assumption that the revenue certificates will constitute a debt within the meaning of the foregoing provisions of the Constitution of this State. We can not concur in this view. The act is designed to provide for self-liquidating projects, and the revenue certificates therein contemplated are not to be a charge against the general credit of the county or municipality. The liability is to be satisfied only from revenues produced by the undertaking, and under the specific terms of the statute the political division will never be required to aid in its retirement with funds derived from any other source, and is in fact prohibited from doing so." This ruling appears to control the objections urged in the instant case adversely to the plaintiff in error.
5. It is contended by the plaintiff in error that the raise in water rates from $1.35 for 3000 gallons to $3 for 3000 gallons is arbitrary and confiscatory, and constitutes a taking of property without due process of law, in violation of article one, section one, paragraph three, of the Constitution of Georgia. The Revenue Certificate Law of 1937 vests in the municipal authorities the power to fix rates, and we can not say as a matter of law that the rate fixed in the instant case amounts to a taking of property without due process of law.
6. It is contended that the plaintiff in error now makes no use of the sewerage system, and that to combine the sewerage system with the water-works system will have the effect, in so far as the plaintiff in error is concerned, of favoring one class of persons, those who now use the sewerage system, to his detriment, in violation of article one, section one, paragraph two of the Constitution of Georgia. Under repeated rulings of this court, there is no merit in this contention. We consider it sufficient to cite only Georgia Railroad c. Co. v. Decatur, 137 Ga. 537 ( 73 S.E. 830, 40 L.R.A. (N.S.) 935).
7. The final contention made by the plaintiff in error is that "the charter of the City of Smyrna (Ga. L. 1931, pp. 955-988, as amended by Ga. L. 1943, pp. 1586-1592) does not authorize the issuance of revenue certificates or the entering of contracts such as the one sought to be executed between said city and Cobb County." When the Revenue Certificate Law of 1937 and the Constitution of 1945 were adopted, the provisions of each as to Revenue Certificates became a part of the charter of every municipality of this State. See DeJarnette v. Hospital Authority of Albany, supra. There is no merit in this contention.
From what has been said above, it follows that there was no error in dismissing the intervention and in upholding the validity of the water and sewerage revenue certificates.
Judgment affirmed. All the Justices concur.