Branch v. Oklahoma County Excise Board ( 1938 )

Oklahoma City made no levy for "current, expense fund," but made a levy of .9555 mill for "park fund," and a levy of .6143 mill for "library fund," for the fiscal year beginning July 1, 1937. These two levies were attacked by the protesting taxpayer as unauthorized. The protest on this point should have been sustained. The excise board contends that the protest was insufficient in allegation, but refused to allow a ruling to be made on its demurrer before the Court of Tax Review, so the sufficiency of the allegations is not really presented. Furthermore, there is little that could be alleged except to allege that such levies are illegal and unauthorized.

Prior to the amendment of article 10, section 9 of the Constitution, August 15, 1933, the Legislature had fixed maximum levies for current expense purposes, and also had provided for special funds to be levied for in excess of these maximums. Among these were library and park levies, which had been upheld by this court. Berryman v. Bonaparte, 155 Okla. 165, 11 P.2d 164. But the amendment necessarily abolished all such levies. The amendment provides that the total taxes for all purposes (county, school, city or town) on an ad valorem basis shall not exceed in any taxable year 15 mills on the dollar to be apportioned among the taxing subdivisions by the county excise board until such time as the regular apportionment is otherwise provided by the Legislature.

It is at once apparent that all special levies were abrogated until the Legislature should act. No power was given to the excise board to provide for a special levy of any kind, and the Legislature has not authorized cities to make special levies. It is, therefore, apparent that until the Legislature acts and fixes limitations and provides for special levy, no such thing as special levies exists. In Atchison, T. S. F. Ry. Co. v. Excise Board of Washington County, 168 Okla. 619 35 P.2d 274, we said that the constitutional amendment "clearly contemplates future legislative action and is clearly indicative of an intent that the prior acts relating to limitations in behalf of the various municipalities should not be controlling of the action of the excise board in its new responsibility."

It is contended that article 11, chapter 33, Session Laws of 1935, is authority for a special levy; but that law does not either in caption or body authorize a special levy. It merely provides for the inclusion of an item for public library purposes in the budget and provides it may equal the amount of a levy between one-half and two mills. Whether the Legislature could in this manner cripple the power given the excise board, we need not inquire, since the act refers to an appropriation to be made as a part of the general scheme and nowhere declares that this is to be a special levy. The appropriation is clearly intended to be a part of the general requirements But here the appropriation is made as a special not a general, item, and is to be financed by a special tax levy. The purpose so to do is made plain by the method used by the city.

Originally all appropriations here were placed under one head by the city. After the excise board fixed the millage available and as a consequence had returned the budget to the city, the city revised its budget and set up the library and park appropriation funds, and asked for tax levies therefor. The excise board approved a separate levy for each. These levies are, as claimed by the taxpayer, unauthorized and illegal. The protest as to each should have been sustained on that ground, since there is as yet no statutory authority therefor.

Until the Legislature created special levies for parks, library and other municipal purposes, this court repeatedly had held special levies therefor invalid, when, as here, appropriations were attempted to be made therefor outside of the current expense fund. See Acme Milling Co. v. Bonaparte,125 Okla. 15, 257 P. 284.

There is no difference in principle here. It follows, therefore, that since the levies are illegal the special appropriations to be financed thereby must fail also, since the city had provided no other revenues to finance these appropriations.

What I have said with respect to the illegality of the ad valorem levies to finance the special appropriations for park and library funds is in accord with the view of the majority. How, then, my associates can condemn these special levies as illegal and yet affirm the trial court's judgment denying the protest against these levies is beyond my comprehension.

The other contention made is that the city's appropriations for its current expenses should be reduced to a much greater extent than was made. It is claimed that total reduction of $251,166.92 should be made.

Total appropriations authorized for the current expenses, other than park and library, are $3,376,718.88. Surplus cash on hand amounted to $970,669.06. We hold that this should be used to finance the general fund, and no part is required to be transferred to sinking fund. Deducting this amount from the total, we have a balance of $2,406,049.82 to be financed from sources other than cash on hand. Protestant claims that there was available from sources other than ad valorem taxes an income of $2,409,794.37 from miscellaneous sources and $38,617.04 from net 1936 taxes in process of collection. These two items lotal $2,448,411.41, an amount greatly in excess of the requirements of $2,406 049.82. It follows that the trial court correctly denied this protest.

The theory of the protestant below and here is stated thus:

"When surplus cash and legally estimated revenues other than tax equal or exceed the total estimates legally appropriated, there exists no need or authority of law for any tax levy and all tax levies imposed in excess of needs are illegal."

The excise board and the city agree to that proposition of law, stating it thus:

"When needs can be met without tax levy no 10 per cent. reserve necessary. The 10 per cent. reserve cannot be added to make levy necessary. * * *

"Since the city, as to its general fund, was able to finance all needs with a cash surplus and estimated income from miscellaneous sources, no tax levy was set up as to this fund, and the cases cited (by protestant) were, therefore, followed."

We have no right to change protestant's theory, especially when it is acquiesced in by the appellee here. He does not claim the right to have appropriations reduced where no tax levy is involved. Under his theory of the law and of the amount of money available for financing the budget without a tax levy, we see no reason for this court to attempt to change a theory accepted by both parties and to indulge in a useless computation of figures.

I do not agree with the construction of the law given in the majority opinion. Nor do I see the necessity for overruling the decision in the case of El Reno Wholesale Grocery Co. v. Taylor, 87 Okla. 140, 209 P. 749, and cases following it. In fact, that portion of the opinion is outside of the issues presented, as I see them. In each case here the parties admit the rule in those cases and none of them ask that the cases be overruled. I do not feel that this court is justified in announcing a rule that is in effect dictum.

I feel, however, that attention should be called to the error in the majority opinion in holding that there is a conflict between the rules announced many years ago in the El Reno Wholesale Grocery Co. Case and the case of Hines v. Dalton. When the needs of a municipal subdivision of the state are less or are equal to but do not exceed the total of the cash on hand and the estimated income from miscellaneous sources, the El Reno Wholesale Grocery Co. rule applies, and the only function the excise board performs is to approve appropriations to finance the needs. However, when the needs exceed the total of cash on hand and miscellaneous revenue and a part of the needs therefore must be financed by an ad valorem levy, the Hines v. Dalton rule applies. The excise board performs the function of levying a tax and under the statute must add to the appropriations a percentage for delinquent tax.

These two rules have stood for many years without causing confusion to the taxing officials of the counties of the state. The parties to this appeal do not contend there is a conflict between the rules or that they have caused confusion.

If, however, in a case where the rules are involved, this court should find it necessary to change or modify these rules, I am of the opinion that the El Reno Case rule should be permitted to stand unchanged and the Hines v. Dalton rule should be modified so as to require an addition to the appropriations of a reserve for delinquent tax, as the statute requires, and not a percentage of the total appropriations.

The El Reno Case and those following it are based upon sound principles of taxation.

Fundamental principles of our system of taxation involving ad valorem taxes are the following: Taxes must be levied for public purposes; such purposes must be distinctly stated in the act, resolution or ordinance levying the tax, and only so much tax as is necessary to meet such purposes can be levied.

"Before the local legislative body of the school district, town, or township here involved can exercise the taxing power under consideration, they must comply with Const. art. 10, sec. 19, and the respective sections of the statute, supra, and state directly the purpose for which the tax was levied by an estimate of their respective expenses. * * *" St. Louis S. F. R. Co. v. Tate, 35 Okla. 563, 569, 130 P. 941, 943.

"It is equally clear that a tax levy in excess of an amount necessary to produce the funds that are required is illegal and void." Grubb v. Smiley, 142 Okla. 19, 24, 285 P. 38, 43.

The case of Hines v. Dalton referred to did not discuss these fundamental principles, and the result of that case was to permit, for example, the addition of 10 per cent. to the amount of cash on hand, and thus permit the levy of a tax to insure the collection of cash already in the treasury. I am of the opinion that such result was never contemplated by the Legislature, and that the conclusion allowed the collection of a tax for no purpose. The case of Hines v. Dalton, as interpreted by the court here, would require "literally" the addition of 10 per cent. to an appropriation (before 1933) even if the municipality had cash on hand sufficient to meet every item thereof. The El Reno Case and kindred cases, recognizing the absurdity and illegality of such procedure, laid down the salutary rule that unless a tax was needed no necessity for reserve need be made.

The statute under consideration here (ch. 85, S. L. 1933, 68 Okla. St. Ann. sec. 290) does not require what the court in the majority opinion says must be done. The statute says that after deducting the cash on hand the excise board shall add areserve for delinquent tax, the amount of which shall be determined by the said board after taking into consideration the amount of uncollected taxes for the previous year immediately preceding the next preceding taxable year and the percentage of collections from sources other than ad valorem taxes for the two preceding taxable years; provided, that the reserve so added shall not exceed 20 per cent., or be less than 10 per cent.; provided, further, the amount of the reserve shall not be subject to review. There is nothing in that statute which compels the excise board to add 10 per cent. of the appropriations to the appropriations. But the mandate is to add a reserve for delinquent taxes.

We have held that the city has a discretion in determining what will be received from sources other than ad valorem taxes, and that this discretion cannot be controlled by the court except that it cannot estimate more than was received from the same sources the previous year.

In the case of Breeding v. Excise Board of Oklahoma County,180 Okla. 379, 69 P.2d 638, we specifically held that neither the excise board nor the Court of Tax Review could substitute its judgment for the judgment of the municipal board. Adding 10 to 20 per cent. to the appropriations to be financed by estimated income is equivalent to reducing the estimate therefor, and certainly is an arbitrary substitution of the excise board's judgment for that of the council.

Furthermore, the addition to the amount required by the statute is not for delinquent items of estimated income from miscellaneous sources, but is for delinquent tax.

Here the city received $2.583,935.73 from sources other than ad valorem taxes for the previous year. But in the exercise of its discretion, and, we must assume, after examining the nature of such income, it reduced its estimate to approximately $2,410,000. This was done by reducing certain items, such as income from the water department and others. Whether the city estimated that other items would bring an increase, we do not know, because it could not estimate more than was received the previous year. We do know, however, that it received a surplus of several hundred dollars in such receipts the previous year. The point is that the city, in the exercise of its judgment and discretion, based upon its experience, did adjust its tatal estimate downward to insure the collection of this income. This court would now say to the city: "Your estimate is still 10 per cent. too high. After you have reduced it in your sound judgment to the point where the receipt is assured, and no doubt thereby have allowed a margin for reserve, you must now abandon your descretion and arbitrarily reduce this estimate again." Before the excise board would be authorized to change this estimate it would be compelled to find from the experience of the past two years some justification therefor. There is no evidence to support such a conclusion.

One of the reasons allowing a margin between 10 per cent. and 20 per cent. to be added on to the amount receivable from taxes was to protect the estimate too. In other words, if the excise board decides that 10 per cent. of the tax levy would not protect the appropriations, it may add thereto up to 20 per cent. of the tax levy. I cannot conceive, however, that the Legislature intended to give the excise board the right to add 20 per cent. to that part of the estimate which can be financed by miscellaneous income, after the city officials have used their sound discretion and have reduced that estimated item of income to a figure far below the amount received the previous year. The effect of such action would be to say to the city: "You have overestimated your income one-sixth " There is nothing in the law to compel such action. Furthermore, if the statute be given such construction, it will permit the levy of a tax for no purpose and where no ne cessity exists. It would be contrary to fundamental taxing principles to follow it

I, therefore, respectfully dissent.