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City of Louisville v. Kesselring

May 1, 1953

CITY OF LOUISVILLE ET AL.
v.
KESSELRING



Duncan

DUNCAN, Justice. This appeal is from a judgment declaring the invalidity of a proposed issue of general obligation bonds of the City of Louisville in the amount of $4,000,000, the proceeds of which are to be expended for the benefit of the University of Louisville. Although adjudging all preliminary steps to have been properly taken, the lower court concluded that there was a fatal variance between the maturity schedule as set out in the ordinance calling the election and proposing the bonds and the ordinance enacted after the election authorizing the issuance and sale of the bonds.

We have carefully examined the record in the light of applicable constitutional and statutory provisions, and we specifically concur with the finding of the Chancellor that: (1) the court had jurisdiction of the subject matter and the parties; (2) the proposed bond issue did not exceed the authorized constitutional limit of bonded indebtedness of the City of Louisville; (3) the ordinance submitting the question of incurring the indebtedness and the issuance and sale of the bonds was properly enacted; (4) the submission ordinance was properly published prior to the election as required by law; (5) the submission ordinance was properly approved by the required number of voters at the general election held November 4, 1952; and (6) the University of Louisville is a municipal university within the meaning of KRS 165.010 and the purposes for which said bonds are proposed to be sold are authorized by KRS 165.100.

The sole questions remaining for consideration are: (1) In issuing serial bonds as opposed to term bonds, does the statute, KRS 165.080, authorizing the bonds for the benefit of a municipal university require that the complete schedule of serial maturities be set out in the ordinance proposing an election on the issue? (2) If the statute does not require it, but the proposing ordinance nevertheless sets out the schedule of maturities of serial bonds, is a subsequent variation in the issuing ordinance which does not materially affect the taxpayer fatal to validation? (3) May the city levy and collect an annual tax in excess of the sum provided by the proposing ordinance for the payment of interest and retirement of the bonds?

It is conceded that the schedule of maturities provided by Ordinance 214, enacted after the election, is different from the schedule set out in Ordinance 155, enacted prior to the election. It is not insisted that the city legislative authority acted capriciously in making the change. The reasons which prompted it are readily apparent from the affidavit of the bond consultant for the sinking fund of the city, which by agreement was considered as his evidence.

KRS 165.080, authorizing bonds for a municipal university, is an Act of 1924, Chapter 57, and requires the ordinance proposing the election to 'provide the date and maturity of the bonds, the rate of interest they shall bear and the total amount to be then issued, and shall contain the necessary details with reference to the execution and delivery of the bonds, their denominations, coupons to be attached, and taxes to be levied to pay interest and to create a sinking fund to retire the bonds at maturity'.

The same session, in providing for issuing local school bonds, Chapter 86, Acts of 1924, required the initial ordinance to contain 'the date and maturity of such bonds, the rate of interest they shall bear, and the total amount to be issued; and the ordinance shall also contain the necessary details in reference to the execution and delivery of said bonds, their denominations, coupons to be annexed, tax to be levied to pay the interest and a sinking fund to retire such bonds at maturity.'

In 1924, Kentucky municipalities were issuing term bonds and were building up sinking funds in anticipation of the entire issue being paid in a specified year. Thereafter, serial bonds, staggering the maturities from year to year throughout the term of the debt and amassing no sinking fund, became popular. The trend from term to serial bonds was recognized by the 1934 session of the General Assembly, which changed the statute authorizing local school bonds, Chapter 65, Article V, Section 42, Acts of 1934, now KRS 162.080. Under the 1934 Act, the ordinance proposing a local school issue among other things was required to 'fix the time the bonds shall run and, if a serial issue, the amount to mature at each time.' (Emphasis ours.)

It is significant that the change in the 1934 Act specifically required inclusion of the schedule of maturities in the ordinance calling an election where serial bonds were to be issued. The Legislature evidently concluded that such schedules were not necessary under the Act of 1924 or the specific requirement would not have been added by the Act of 1934. The statute relating to municipal universities is exactly comparable in ordinance requirements to the school issue Act of 1924 before its change to include the additional requirement for serial bonds. It reasonably follows that if the school issue Act before its repeal and amendment did not require the ordinance to contain the serial maturities the municipal university bond issue statute does not require such schedule.

In construing the statute here involved, we invoke the rule of contemporaneous construction which may be extended to the contemporaneous construction of another statute involving similar considerations. Volume 50, Am.Jur., Page 308, Section 318, Statutes.

In the case of Schumer v. Kenton County, 306 Ky. 667, 208 S.W.2d 960, this Court considered the validity of bonds for a county hospital. The authorizing statute, KRS 216.020, provided for an order submitting the question to the voters, which was required to 'provide the date and maturity of the bonds, the rate of interest they shall bear, and the total amount to be issued'. The argument was that the serial bonds to be issued were not included in the order calling the election and the requirement of the statute of the 'date and maturity of the bonds' was not met. Although the serial maturities were not set out in the order, we approved the procedure as a substantial compliance with the statute.

Under the proposing ordinance and the question submitted on the ballot, the voters, aside from the maturity schedule, knew the amount and purpose of the proposed indebtedness, the date of the bonds, the total time required to pay them, and the maximum interest rate. The issuing ordinance makes no change in these fundamental factors which ordinarily are the only ones taken into consideration by the voters.

We, therefore, conclude that a detailed schedule of maturities in the ordinance proposing the bond issue is not required by KRS 165.080. This leads us to a consideration of the second question as to whether such maturities, having been included in Ordinance 155, may be subsequently changed by Ordinance 214.

In State v. City of Miami, Fla., 1949, 41 So.2d 888, 889, the schedule of maturities was changed in the resolution ordering the issuance of the bonds and the contention was made there, as here, that the bonds were different from those which the voters had in mind when they voted to approve the issue. The Florida Court said:

'* * * freeholders approved the amount and purpose of the bonds, which were the same in both issues. Other requirements, such as denomination, maturities and series, are matters that may be imposed in the discretion of the issuing authority, so long ...


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