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Show r. - . PROyO (UTAH) ;S U N DAY HERA L p, S UND'AY, OCTOBER "11, 1936 PAGEF1VB ES IN FOUR-MLE w: , a in ; ! sorasrceif I M - 1 i i i - . f . J . t. - Bill 1 : 1 Z . u t ft states, it can take as long as it wants to complete the job, and even then it is not obligated to turn over a completed plant and .distribution system, when the $850,000 is all gone. Nowhere in ac contract is the City protected against such a contingency. Under such a setup as is disclosed in the two proposed ordinances, can Provo City afford to authorize the City officials to undertake such a gigantic task where such vast sums of money are involved, in-volved, when the hazard of the undertaking is all with the city. I submit that we, as taxpayers of Provo City, should vote against both ordinances. If, at some time in the future, a proper i- . -. , ! . ,i .m.itghlD pnntrart can DC . i survey nas oeeri ma tie, ana a unu "-"' 5 entered into for the construction of a power plant, and it can l be shown that such a plant would save the City any money, naturally enough the taxpayers would be interested in securing I it. I am not saying that I would be against such a proposition. A What I am saying is that the setup as now proposed is not fair 1 to the citizens of Provo. It is an undertaking which we should not venture into until we know more about what the consequences will be. In two very large and expensive advertisements (it would be interesting to know who is paying for these ads)( the City Attorney has sought to drag the Supreme Court of Utah into this controversy, in order to make it appear that the Supreme Court has held that the proposed contract between the Bonding Company and Provo City creates no obligation on the part of the City to pay the money back, unless the Power plant is a success that is, unless the City obtains the money from the net revenues of the power plant. In support of his contention, the City Attorney cites and relies upon the case of Barnes vs. Lehi City which was decided by the State Supreme Court, April 23, 1929. Any person, able to read the English language, would In one glance at the decision in this case be thoroughly convinced that the contract in the Lehi City case wnicn me supreme wu'i had under consideration, is in no way or manner analogous to the contract Provo City proposes to enter into under the two l ordinances in question. In the Lehi City case the City entered into a conditional sales contract with the Fairbanks Morse Company Com-pany for the purchase of certain generating machinery. Under the contract the Machinery Company retained the title to the property until all of the payments for the purchase price were made. At any time the City failed to make the payments when due, the Company could repossess Jthe machinery. The question in the case was: Whether this contract created a debt against the City of Lehi which is prohibited by the State Constitution; k and the Supreme Court held that it was not. In the Lehi case no bonds were signed, and there was no obligation on the part of the City to do anything except to pay the installments on the purchase price of the machinery, and under the express terms of the contract when the City failed to do this, the Machinery , Company's only remedy was to keep the payments it had received ' and take back the machinery. Now thi is not what Provo City proposes to do in the instant in-stant case at all. The City is proposing to borrow $850,000 from . the Bonding Company and sign bonds for the payment of this amount, and pay interest at the rate of four and one-half percent per annum. With this money the City will purchase a power plant, and it will be owned outright by the City; and both the plant and the revenues derived therefrom will belong to the City, the City's only obligation being to pay the purchase price. Three cases have been decided by the State Supreme Court, since the Lehi City case. They are referred to in the City At- torny's advertisement in the Provo Herald of October 9th. Why the City Attorney would cite these cases in support of the contention con-tention that Provo City, under the two ordinances in question, is n t creating a debt against the City is beyond all comprehension, because ine need not be a lawyer, he need only to be able to read the English language to sec for himself that these latter cases not only do not support the City Attorney's contention, but they are square in point against the view he expresses in tne adver-tiement. The first case referred to by the City Attorney is Fjeldsted , vs. Ogden City, decided March 22, 1933. In this case the Ogden City Commission attempted to do exactly what the Provo City Commission is attempting to do under the two ordinances, except in the Ogden City case, the money from the bonds was to be used to make improvements on the water works system, instead of to build a municipal power plant and distribution system. In both cases, revenue bonds were to be issued. In both cases the net revenues from the system were to be impounded in special funds for the purpose of paying off the bonds, and no other funds of the City were to be used to pay off the bonds. The wording of the contract in the two cases is almost identical. The Curt held that Ogden City was not permitted to do this becaur-e su"h a contract would create an obligation, or a DEBT 4j ;'gain.t the City, which 13 prohibited by the State Constitution. In tht case, th1 Supreme Court , makes many references to the Lcni case, aixi shows how the Lehi City case cannot be Used aS an authority for pcrmittisg the City to enter into such a contract Sr Court says (83 Utah 293): In oider to approve the contentions of Ogden City in thi case, we would be required to enlarge the rule of the Haines Case and open the door to much borrowing by the municipalities of this State in violation of constitutional constitu-tional restrictions and limitations. IT MATTERS NOT HOW ANXIOUS PUBLIC OFFICIALS MAY BE TO BRING ABOUT DESIRABLE AND NECESSARY IMPROVEMENTS AND BETTERMENTS. SUCH IMPROVEMENTS, IM-PROVEMENTS, UNDER OUR CONSTITUTION AND LAW, MUST BE PAID FOR EITHER OUT OF REVENUES WITHIN THE TREASURY OR SUCH AS MAY BE LAWFULLY ANTICIPATED AS REVENUES OF THE CURRENT YEAR, OR THE DEBT INCURRED FOR SUCH IMPROVEMENTS MUST BE AUTHORIZED BY A MAJORITY VOTE OF THE QUALIFIED ELECTORS, and be within the constitutional limitations" V 0 The facts in the Barnes Case show that Lehi City had an electric light distributing system used to furnish the city with street lights, but its generating plant was inadequate and dilapidated. No income was procured from the system. The city made a contract with v Fairbanks, Morse & Co. for certain generating machinery, machin-ery, whereby the company retained title to the machinery machin-ery until paid, and agreed to accept installment payments pay-ments from the earnings of the plant. Any future administration ad-ministration of the city could, without violation of the contract, repudiate the transaction and refuse to continue con-tinue payments, and the only recourse available to the company would be to retain payments already made and repossess the generating machinery to which it retained re-tained title." "By the admitted facts in this case a large income from an existing waterworks system owned by the city is pledged to pay the principal and interest on the bonds; the greater part of the property to be purchased or improvements im-provements made will be incorporated or built into the existing waterworks system in such manner that it could not be thereafter segregated or withdrawn without with-out destruction of the new property and destructive impairment of the entire system; the city 19 irrevocably pledged to pay the bonds out of revenues of which the city is now the owner, and no future board of commissioners commis-sioners will have an option to repudiate the obligation or decline to carry out the terms of the contract. True, the fund out of which the bonds are to be paid is a special fund, but it is a special fund created by impounding im-pounding the revenues earned by property of whicn the . city is now the owner, and which, but for the contract, would be available for use by the city in meeting its other obligations." It is thua seen that the contract which Ogden City proposed to enter into is precisely the same kind of contract which Provo City is now attempting to enter into, because, keep in mind, that when this power plant and distributing system are constructed, they will belong absolutely to Provo City; they will not belong to the Contracting Company, or to the Bonding. Company, and the revenues procured from this plant and system will be Provo City's money; the City's only obligation is to set aside the net revenues for the payment of the purchase price. Ogden City proposed to do exactly the same thing, and the Supreme Court held this could not be done. Furthermore, in his opinion, Justice Folland goes on to say: "As already indicated, the contract approved by this court in Barnes vs. Lehi City was such a contract as could be abandoned or repudiated' at any future time by the governing authorities of the city, and the city would lose nothilng of its owned property or income and would be under no obligation to make further payment. pay-ment. The contractor would, under the express terms of the contract, take back its own property and retain the paid installments, which would represent merely the earnings from the contractor's property. No such results would follow here. There is no way left open for subsequent boards of commissioners to refuse to be bound by the DEBT OBLIGATION IMPOSED BY THE BONDS. The bondholders could not repossess the property purchased by the proceeds of the bonds. The improvements and betterments are to be so built into the existing system that they could not be segregated. On the other hand, the ordinance expressly provides that its terms and obligations may be enforced by appropriate appro-priate action in law or in equity. The city is bound to pay the interest on and principal of the bonds and may by court action be coerced to raise or maintain the water rates sufficiently to meet such obligations, and to continue con-tinue to divert revenues now owned by it, resulting from the operation of its waterworks system, into the special fund to pay the water revenue bonds and interest. THIS IS A LIABILITY VOLUNTARILY INCURRED BY THE CITY BY EXPRESS CANTRACT which it is bound to pay in money, AND THEREFORE A DEBT." "While we indicated in the Barnes vs. Lehi City case that the word 'debt' in construing constitutional restriction, has a meaning less broad and comprehensive than it bears in general usage, yet we think such word cannot be so, construed as to exclude an obligation, such as we have here, where the city cannot escape the OBLIGATION OBLIGA-TION AND MAY BE COMPELLED IO MAKE PAYMENT, PAY-MENT, EVEN THOUGH PAYMENT BE LIMITED TO A SPECIAL FUND.WHERE THE SPECIAL FUND IS MADE UP OF REVENUES FROM PROPERTY NOW OWNED BY THE CITY. But, if the ordinance did not so provide, yet the city for the strongest of reasons, after having received and spent the proceeds of the bonds, would be bound to discharge the debt." I have heretofore pointed out that the ordinance proposed to be entered into between Provo City and the Bonding Company also expressly provides that in the event of any default on the part of thcClty to pay-the interest on and the principal on the bonds when the same become due, that the Bonding Company may proceed either by law or in the equity to compel the City to do this. But as Justice Folland says, even if the ordinance did not so provide, the City, for the strongest reasons, would be bound to discharge the debt, after having received and expended the proceeds of the bonds. The City Attorney has also seen fit to refer to the case of Wadsworth vs. Santaquin City, decided December 14, 1933, (83 Utah 321). The Supreme Court, in this case, specifically held that: "A borrowing to be paid out of revenues earned by existing exist-ing water works system, or other utilities owned by. the City, created a debt in contemplation of Article 14, Section 3 of the Constitution." The holding in this case is absolutely contrary to the contention made by the City Attorney, and the quotation he makes from the decision is very inaccurate, and very misleading. It would have been more appropriate for the City Attorney to quote the following language from this decision by Mr. Justice Folland (Page 343): "Much stress is put on the fact that these revenue bonds are payable from a separate fund to be fed by income to be earned through thirty years. Recent history has shown that all too frequently anticipated revenues do not come up to expectation because of the shifting conditions which affect community life. Nevertheless, the bonds must be paid when due, or city credit will be impaired. With noiseless foot but steady tread the day of reckoning inevitably comes to demand its toll. To a city, no less than to a state or individual, untarnished credit and an honored name are of inestimable worth. w No wealth or power which may come to a community is of more lasting importance than the good name it maintains main-tains by keeping its faith unbroken in meeting all its engagements and obligations. In spite of the fact that full faith and credit of the city is not pledged to the payment of revenue bonds, no prudent city will permit its promise to pay to go unfulfilled where it has received re-ceived and enjoyed the fruits of the obligation. These facta but illustrate and emphasize the wisdom of the people in writing into their constitution the requirement that debts which cannot be paid from revenues of the current year must find authorization in a favorable majority vote of the qualified electors who also arc taxpayers." Now, I submit that in all fairness to the citizens of Provo, that the above case holds, beyond all controversy, that the contract con-tract Provo City is now proposing to enter into creates a debt against the City as binding as any debt or obligation could possibly be made. I submit further that it is little short of childish on the part of the citizens of Provo to be mislead into thinking the City can obligate itself, or bond fOf $850,000, and then escape the payment of this bond after it has received the money and spent the same for a power plant which when constructed con-structed will be the absolute property of the City. The City can no more do this than an individual can, and do not be fooled into thinking that the Bonding Company and the Contracting Company are simple-minded enough not to know this. But let us go even further and assume that this, money is going to be paid only out of the net revenues of the plant. Does that make any difference to the citizens of Provo? Won't the money have to come out of them just the same as it would if it were a general obligation? The answer emphatically is "yes," with this important im-portant distinction: If it were a general obligation all of the taxpayers would pay the money the large property owners as well as the small whereas, if it is a special Obligation, only those who consume electricity will be obligated. In other words, in one case the large property owners escape the payment of the obligation, and the home owners who use the electricity themselves, must pay it. Signed J. ROBT. ROBINSON (This advertisement written and paid for by J. Robert Robinson) .? jX T. "ST ""' ' " "M'll.MIImllllllllll'l' I I MOOWWWW . M "OM"" ' I The four-mile Roosevelt Raceway, the 16 curves of which will feel the drive of auto speed creations piloted by drivers from tore continents. Oct. 12. in the 400-mile George Yanderbilt Cup race. 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