Ritchie v. City Council of Harrisville

The city of Harrisville has partially completed the construction of a municipal water supply and distribution system, the total cost thereof being $61,572.92, said sum to be derived from the following sources: $40,384.04 from the Federal government; $10,000 from the sale of general obligation bonds of the city of Harrisville; $1,188.88 from the general fund of the city; and the balance of $10,000 from the sale of revenue bonds issued pursuant to the provisions of Act No. 94, Pub. Acts 1933, as amended by Act No. 66, Pub. Acts 1935 (Comp. Laws Supp. 1935, § 2486-22 et seq., Stat. Ann. § 5.2731 et seq.).

Plaintiff, a taxpayer of the city, filed the bill of complaint herein to restrain the legislative body of the municipality from issuing and selling the revenue bonds to be issued as aforesaid. The trial court dismissed the bill of complaint and plaintiff appeals.

The principal and interest of the proposed issue is to be payable out of revenues to be derived from the operation of the completed project. Plaintiff contends that because part of the cost of such project is to be derived from the general fund of the city and part from the sale of general obligation bonds, the proposed revenue bonds create a debt in excess of the limitations imposed by 1 Comp. Laws 1929, 2091, 2092 (Stat. Ann. §§ 5.1886, 5.1887).

It is established beyond dispute that bonds payable solely from revenues of the particular utility involved are not debts within the meaning of constitutional^* and statutory limitations.Young v. City of Ann Arbor, 267 Mich. 241; Block v. City of Charlevoix,267 Mich. 255; Gilbert v. Traverse City, 267 Mich. 257;Attorney General, ex rel. Eaves, v. State Bridge Commission,277 Mich. 373; Michigan Gas Electric Co. v. City ofDowagiac, 278 Mich. 522.

The principal argument seems to be that these cases only apply in instances where the entire cost of the project is supplied by proceeds from the sale of revenue bonds. We can see no distinction between the case at bar and a case where an addition is made to an existing public project and the entire revenues thereof, after the addition is completed, are to be used in payment of principal and interest of bonds issued under the provisions of the cited statutes. Such a question was presented in Gilbert v. Traverse City, supra, and was decided adversely to the contentions of appellant. That decision controls the instant case.

The decree is affirmed, but without costs, as a public question is involved.

BUTZEL, C.J., and WIEST, BUSHNELL, SHARPE, POTTER, NORTH and McALLISTER, JJ., concurred.

^* See Const. 1908, art. 8, §§ 20, 24. — REPORTER.