A. M. CRAWFORD, Appellant,
CITY OF PRESCOTT, a Municipal Corporation, W. H. TIMERHOFF, FLOYD WILLIAMS, D. W. SHIVERS, ROY D. YOUNG, M. L. TRIBBY, and P. H. MILLER, Appellees
APPEAL from a judgment of the Superior Court of the County of Yavapai. Richard Lamson, Judge. Judgment reversed.
Messrs. Favour & Baker, for Appellant.
Mr. E. C. Locklear, for Appellees.
[52 Ariz. 473] McALISTER, C.J.
On the 18th of July, 1938, the mayor and common council of the City of Prescott, pursuant to the provisions of the Revenue Bond Act of 1934 (Laws 1934, Third Special Session, Chapter 11), as amended by chapter 12, Laws of 1937, passed a resolution expressing an intention to purchase certain real property located in that city for the purpose of converting it into a Civic Recreational Area and included in the resolution a provision submitting to the real property taxpayers of Prescott at a special election to be held on August 13, 1938, this question: Shall the mayor and common council of the City of Prescott be authorized to issue and sell its negotiable serial coupon bonds in the aggregate amount of $65,000 for the purpose of purchasing civic recreational sites and constructing thereon improvements of a recreational nature, the bonds to bear interest not exceeding 4 per cent. per annum, both principal and interest to be paid solely from the revenues pledged to the payment thereof?
A majority of those voting at that election was in favor of the issuance and sale of the bonds, and on October 7, 1938, while the mayor and common council were preparing to carry out this purpose, A. M. Crawford, a resident and taxpayer of the City of Prescott, filed in the Superior Court of Yavapai County a complaint setting up certain facts and praying that because of them the city and its officers be restrained
from issuing and selling its bonds and from pledging the gross income, revenues, rents and profits to be derived from the Civie Recreational Area in payment thereof.
The complaint, in addition to the foregoing, alleges these facts: That the assessed valuation of the taxable property located in the City of Prescott is $4,644,915 and the outstanding indebtedness of the city $815,279.99, [52 Ariz. 474] which consists entirely of bonds issued for the sole purpose of constructing water works and sewers; that the sum of $815,279.99 equals more than 15 per cent. of the assessed valuation of the property located within the city; that in consequence of this, if the officers of the city are permitted to issue and sell its bonds in the sum of $65,000 and pledge the gross income, revenues, rents and profits derived from the Civic Recreational Area purchased and built with those funds, the cost of maintenance of the Recreational Area and the obligation to pay the bonds will create an indebtedness against the city in excess of the limitation provided in section 8, article 9 of the Constitution of Arizona, and the plaintiff, a resident and real property owner and taxpayer, will be compelled to pay additional taxes to the city to take care of the indebtedness incurred by the issuance and sale of said bonds and for the upkeep of the Civic Recreational Area in question. The prayer was that the defendants be restrained from issuing and selling the bonds and from pledging for the payment thereof the gross income, revenues, rents and profits to be derived from the Civic Recreational Area constructed with the proceeds of the bonds.
To this complaint the defendants interposed a general demurrer which was sustained. Thereupon the court, following an announcement by the plaintiff that he would not amend but stand on his pleading, dismissed the complaint, and this is the order the plaintiff has brought here for review.
The constitutional provision limiting the amount for which an incorporated city or town may become indebted and upon which the claim of plaintiff is based, section 8, article 9, reads, so far as pertinent, as follows:
[52 Ariz. 475] "No county, city, town, school district, or other municipal corporation shall for any purpose become indebted in any manner to an amount exceeding four per centum of the taxable property in such county, city, town, school district, or other municipal corporation, without the assent of a majority of the property taxpayers, who must also in all respects be qualified electors, therein voting at an election provided by law to be held for that purpose,... provided, further, 'that any incorporated city or town, with such assent, may be allowed to become indebted to a larger amount, but not exceeding fifteen per centum additional, for supplying such city or town with water, artificial light, or sewers, when the works for supplying such water, light or sewers are or shall be owned and controlled by the municipality.'"
The resolution of intention was passed by the mayor and common council of the city and the assent of a majority of its taxpayers given for the purpose of issuing and selling the bonds pursuant to the provisions of the Revenue Bond Act of 1934, Chapter 11 of the Laws of the Third Special Session of that year, as amended by Chapter 12, Session Laws of 1937, and this means, as the bonds themselves should recite, that they are payable out of the income, revenues, rents and profits derived from the Civic Recreational Area to be constructed with their proceeds and not out of the city's revenue derived from any other source, including the property tax. Sections 13 and 16, Chapter 11, Third Special Session, 1934; sections 55z1 and 555z4, Revised Code Supplement, 1936. Appellant contends, however, that even though it be true that the bonds are payable solely from this source, they nevertheless constitute an obligation of the City of Prescott, and since its bonded indebtedness for water and sewerage is already more than 15 per cent. of its taxable property, the amount the foregoing provision of the Constitution permits it to incur for that purpose, the [52 Ariz. 476] issuance and sale of the bonds violates this constitutional limitation and is, therefore, prohibited.
This contention is unsound for two reasons: The first is that according to the allegations of the complaint the bonds, even though issued and sold as city obligations and made payable out of taxes levied and collected by the city, would not increase the city's indebtedness beyond the limitation fixed in section 8, article 9. While it is true that the $815,279.99 it now owes for its water and sewer bonds is more than 15 per cent. of $4,644,915, the present value of its taxable property, yet this sum, ...