Opinion
July 28, 1950.
Appeal from the Circuit Court, Duval County, Bayard B. Shields, J.
Inman P. Crutchfield, Jacksonville, for appellants.
Austin Miller and Harry B. Fozzard, Jacksonville, for appellee.
The defendants below have appealed from a final decree entered in a declaratory judgment suit adjudicating that a certain contract as to which the plaintiff seeks an interpretation may be validly entered into by the City of Jacksonville, Florida.
According to the record the City of Jacksonville, acting by and through its City Commission, has voted to award a contract to Savannah Machine Foundry Company for the conversion of the former United States Crash Boat No. 249, owned by the City, into a boat for fire-fighting purposes and for a mobile fire station.
The legislative authority under which the City proposes to act in this regard reads, in part, as follows:
"Whereas, City of Jacksonville owns and operates waterfront electric generating plants and municipal docks and terminals valued at many millions of dollars; and
"Whereas, City of Jacksonville is a seaport which has many large and extensive waterfront terminals and facilities; and
"Whereas, in order to provide adequate fire protection for its properties and those of its citizens it is necessary to own, operate and maintain a fire boat or fire boats; Now, therefore,
"Be It Enacted by the Legislature of the State of Florida:
"Section 1. City of Jacksonville, a municipal corporation in Duval County, is hereby authorized and empowered to acquire, own, operate, lease, equip and maintain such fire boat or fire boats as said City may from time to time deem necessary or expedient for the adequate protection of its waterfront properties, and those of its citizens, and for such purposes to acquire the same by equipping of any boat or boats now owned by it or hereafter acquired or by purchase or under conditional sale or retained title contract or lease, with or without option to purchase, and to give such promissory note or notes or other evidences of indebtedness as it may deem necessary or expedient and to secure the same by a mortgage or mortgages on the said boat or boats. That said several evidences of indebtedness, contracts, leases, mortgages or otherwise shall provide that the sole security for the same shall be the said fire boat or fire boats and shall not be construed to be a general obligation or obligations of said City. That any such instrument or instruments shall be in such amount or amounts and at such rate or rates of interest, not exceeding six percent (6%) per annum, as, upon the recommendation of the City Commission of said City, may by ordinance be determined.
"Section 2. That any ordinance adopted under the provisions of this Act providing for deferred payments shall provide that at least one-tenth of the total expenditure authorized thereby shall be paid annually and such annual installments shall be set up by the budget-making authority in each of the annual budgets thereafter until the full amount of the expenditure authorized by said ordinance shall have been appropriated and paid.
"Section 3. That expenditures authorized in Section 1 hereof shall at no time exceed the total sum of Three Hundred Thousand Dollars ($300,000.00) and shall not be limited by the provisions of Chapter 21318, Laws of Florida, or an Act amendatory thereto * * *." Chapter 25912, Special Acts, Laws of Florida 1949.
The City of Jacksonville has duly adopted an ordinance pursuant to the foregoing act of the legislature which contains the following material provisions:
"Be It Ordained by the Mayor and City Council of the City of Jacksonville:
"Section 1. That the City Commission of the City of Jacksonville be, and it is hereby authorized and directed to convert the former U.S. Army crash boat Number PT 249 now known as the `Richard D. Sutton' and now owned by the City, into a boat equipped for firefighting purposes * * * in accordance with plans and specifications to be approved by the said City Commission and at a cost of not to exceed the sum of $250,000.00, and to advertise for bids and to enter into a contract for said purpose.
"Section 2. That the contract providing for said conversion shall provide that upon the completion of said conversion of said boat and its approval and acceptance by the City Commission, payments shall be made to the contractor in the following manner, that is to say: $25,000.00 of the contract price upon acceptance and approval, which sum shall be set up as an item in the annual budget for expenditure for the year 1950, and one-ninth of the balance of the said contract price each year for nine consecutive years, evidenced by nine certificates of indebtedness each to be dated as of the date of approval and acceptance of the conversion of said boat by the City Commission, and each bearing interest at the rate of three percentum (3%) per annum, said interest being payable semi-annually. Such certificates of indebtedness shall be chargeable solely to and paid solely out of the annual budgetary item set up for such purpose provided in and by said Chapter 25912 * * *."
In pursuance of the statute and the ordinance the City has advertised for bids and the appellee has submitted a bid of $182,500.00. Upon consideration of the bids the City Commission of the City of Jacksonville has voted to award the contract to the appellee as the lowest and best bidder.
Section 354 of the charter of the City of Jacksonville provides, among other things, that all warrants or vouchers drawn on the City Treasury shall be audited and signed by the City Auditor and that he shall countersign no warrant or voucher unless it be fully and legally due and payable. See section 9, Chapter 16493, Special Acts, Laws of Florida 1933. Section 358a of the Charter provides, among other things, that no contract for the expenditure of money by the City shall be valid until such contract shall have been endorsed by the City Auditor to the effect that the expenditure contemplated has been duly authorized and that provision has been made for the payment of the moneys provided therein to be paid. See section 6, chapter 5347, Laws of Florida 1903.
The City Auditor has refused to affix his endorsement to the contract, or to countersign the certificates of indebtedness proposed to be issued thereunder, because of his conclusion that the contract is not a legal and binding contract, in that the certificates of indebtedness provided thereby to be issued to the contractor in payment of his work for the conversion of the fire boat constitute bonds within the purview of section 6, Article IX of the Constitution, F.S.A., and have not been approved by a majority vote of the qualified electors of the City who are freeholders.
The present suit was brought to test the constitutional validity of the contract and the certificates of indebtedness to be issued thereunder, and at final hearing the chancellor entered a decree the pertinent parts of which are as follows:
"3. That Chapter 25912 providing that the city may finance the purchase or conversion of a fireboat on a deferred payment plan, particularly Section 2 of said Chapter, and that such deferred payments shall be set up in the annual budget each year until the full amount of the authorized expenditure shall have been appropriated and paid, is a valid and legal method of meeting current governmental needs out of annual budgetary appropriations and is a legal and valid exercise of Legislative power.
"4. That Ordinance No. BB-339 entitled `An Ordinance Authorizing the City Commission of the City of Jacksonville to Convert the Former U.S. Crash Boat Number PT 249 now Known as the `Richard D. Sutton' into a Boat to Be used for Firefighting purposes and Providing for the Financing of said Conversion' is a valid and legal enactment and a legal and valid exercise of Legislative power on the part of the City Council of said City.
"5. That the contract set out in the bill of complaint providing that upon the delivery of the said boat to the City part of the contract price shall be paid in cash and the deferred payments evidenced by certificates of indebtedness in the manner and form provided by Ordinance No. BB-339 is a valid and binding contract between City of Jacksonville and the petitioner, Savannah Machine Foundry Company.
"6. That the certificates of indebtedness evidencing the said several deferred payments payable as directed by said Chapter 25912 and said Ordinance No. BB-339, annually, over a period of nine years, out of authorized budgetary appropriations, do not constitute bonds within the purview and meaning of Section 6, Article IX of the Constitution and when issued in payment for said work will constitute valid and binding obligations of said city in the manner and form authorized by said Chapter 25912.
"7. That the defendant J.E. Pace as City Auditor of City of Jacksonville is authorized and directed to countersign the said contract and the said certificates as in and by the Charter of said City provided."
We find no error in this ruling. The expenditures to be made by the City of Jacksonville in acquiring a fire boat and mobile fire station to protect the property of its inhabitants and its own waterfront docks, terminals, electric generating plants and other like facilities valued at millions of dollars will constitute expenditures for a municipal purpose recognized as such by the legislature in the enactment of chapter 25912, supra, and the statute under which the City of Jacksonville was incorporated. See section 4, Article III, chapter 3775, Laws of Florida 1887. The moneys are not to be spent by the City for a bare municipal or proprietary function or purpose but are to be spent in the acquisition of a sorely needed facility to be used in the discharge of a necessary, basic and essential governmental requirement imposed on the City, that it protect the life, safety and property of its inhabitants. See 62 C.J.S., Municipal Corporations § 592, p. 1223; McQuillin on Municipal Corporations, 3rd Ed. Vol. 10, Sec. 28.06.
The statute under which the City is empowered to act limits the expenditures for such improvements to a sum not in excess of $300,000 and prescribes that the fire boat upon which the contractor proposes to expend his labors shall constitute the sole security for any deferred payments of the obligation. Both the statute and the implementing ordinance provide that deferred payments shall not constitute general obligations of the City, and the implementing ordinance contains the express limitation that the certificates "shall be chargeable to and paid solely out of the annual budgetary item set up for such purpose provided in and by chapter 25912, Acts of Legislature, State of Florida, 1949."
With respect to the financial status of the City, the record advises us that the estimated expenditures of the City for the year 1950 (including a budgetary item of $28,375.00 to be applied toward the cost of converting the fire boat) will be the sum of $23,901,506.74. As to estimated revenues to meet these expenditures, the sum of $21,149,006.74 will be derived from the various municipal and proprietary activities of the City and the sum of $2,752,500 will be derived from ad valorem taxes collected pursuant to a 15-mill levy on taxable property located in the municipality. Of the 15 mills which are to be levied, only 5 mills will be levied for general governmental purposes. When the taxes are collected as the result of this levy the proceeds will be commingled with the moneys collected from other sources and used to meet the annual expenses of government, including, for a 9-year period, the "annual budgetary item" required to pay off the cost of acquiring the fire boat and mobile fire station.
As is apparent, the City is required by the statute and the ordinance to set up in its annual budget for a 9-year period an "ear-marked fund" to pay off the certificates which will evidence the unpaid indebtedness. To the extent, therefore, that the statute and ordinance prescribed that the fund shall be set up and maintained, and that the fire boat shall stand as sole security for the payment of the debt until the obligation is paid, it is plain that the plan for financing the fire boat contemplates that the holder of the certificates shall become, in all practical effects, a preferred, as well as a secured, creditor of the City with the legal right to move against the fire boat in satisfaction of the obligation in the event of default in payment; or to require of the City that it maintain and continue in its annual budget the agreed fund for retiring the obligation that it set aside from the revenues coming into its general fund derived from all sources a sufficient amount annually to meet the item, and that it pay the money in the fund over to the holder of the certificates. The plan does not contemplate, however, that the holder of the certificates may look to any sources other than the fire boat and the annual "ear-marked fund" for the satisfaction of his certificates or that he may ever coerce the City into levying an ad valorem tax against real property in the City and have the proceeds applied directly to the extinguishment of the debt.
In our opinion, the plan under which the City proposes to finance the acquisition of a fire boat and mobile fire station for a current governmental need is not violative of section 6, Article IX of the Constitution. For, as pointed out in the leading case of the County of Leon v. State, 122 Fla. 505, 165 So. 666, 669, the purpose of Section 6, Article IX of the Constitution "was not to hamper the ordinary powers of public authorities to enter into binding service or construction contracts for current governmental needs and requirements, such as the erection or repair of essential public edifices and the like, when done in due course of their authorized budgetary administration of public affairs. Its outstanding purpose was to lay a restraint only on the spendthrift tendencies of political subdivisions to load the future with obligations to pay for things the present desires, but cannot justly pay for as they go, thereby necessitating the involvement of the public credit in some form of funding or borrowing operation by which money can be realized on credit beyond the present means of payment so as to become available for disbursement in paying for considerations received in the present to be discharged out of public revenues anticipated to be realized or raised in the future." See Tapers v. Pichard, 124 Fla. 549, 169 So. 39; State ex rel. Houston v. Hillsborough County, 136 Fla. 503, 183 So. 157; State ex rel. Gallaway v. Henderson, 134 Fla. 731, 184 So. 654; Posey v. Wakulla County, 148 Fla. 115, 3 So.2d 799.
We conclude that the decree appealed from is free from error and hence should be affirmed.
It is so ordered.
CHAPMAN, HOBSON and ROBERTS, JJ., concur.
ADAMS, C.J., and TERRELL and THOMAS, JJ., dissent in part.
We dissent as to the appropriation of $2,752,500 derived from ad valorem taxes. This appropriation does not seem to be within the doctrine of Leon County v. State, 122 Fla. 505, 165 So. 666. Otherwise we concur in the opinion of Mr. Justice Sebring.