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City of Challis v. Consent of Governed Caucus

Supreme Court of Idaho

September 25, 2015

THE CITY OF CHALLIS, an Idaho municipal corporation, Petitioner-Respondent,
v.
CONSENT OF THE GOVERNED CAUCUS, An Idaho unincorporated nonprofit association; and CLARENCE LEUZINGER, an individual, Respondents-Appellants

2015 Opinion No. 92

SUBSTITUTE OPINION, THE COURT'S PRIOR OPINION DATED AUGUST 20, 2015 IS HEREBY WITHDRAWN.

Appeal from the District Court of the Seventh Judicial District of the State of Idaho, Custer County. Hon. Alan C. Stephens, District Judge.

The judgment of the district court is reversed and the case is remanded for proceedings consistent with this opinion.

Sawtooth Law Offices, PLLC, Boise, for appellants. David P. Claiborne argued.

Moore Smith Buxton & Turcke, Chtd., Boise, for respondent. Paul J. Fitzer argued.

HORTON, Justice. Justices EISMANN and W. JONES, CONCUR. J. JONES, Chief Justice, dissenting. Justice BURDICK CONCURS.

OPINION

Page 486

HORTON, Justice.

This appeal from Custer County relates to proposed repairs and improvements to the City of Challis' (the City) water distribution system. In 2013, the City initiated a judicial confirmation proceeding seeking approval to incur $3.2 million in debt without a public vote. The Consent of the Governed Caucus (the Caucus) challenged the constitutionality of the City's request based upon Article VIII, section 3 of the Idaho Constitution. The district court granted the City's request and the Caucus appealed. We reverse.

I. FACTUAL AND PROCEDURAL BACKGROUND

The City maintains a drinking water distribution system. In December of 2011, the City commissioned the services of Riedesel Engineering to determine the present and future adequacy of the system with respect to laws and standards of the local fire authority, the Idaho Department of Environmental Quality (DEQ), and the United States Environmental Protection Agency. Riedesel Engineering issued its Challis Water System Facility Plan (the Riedesel Report) in February of 2012, outlining aspects of the water system that needed repair and improvement.

The City initiated this action on August 29, 2013, under Idaho's Judicial Confirmation Law, Idaho Code sections 7-1301, et seq. The City sought approval to incur $3.2 million in public indebtedness without a public vote for work on the City's water distribution system. On October 1, 2013, the Caucus appeared and challenged whether the indebtedness was " necessary" under the Idaho Constitution. An evidentiary hearing was held on January 17, 2014. At the hearing, the City presented testimony from its Mayor, Superintendent of Public Works, and Engineer. The Caucus presented testimony from an engineer it had retained.

Three components comprised the proposed work on the City's water system: (1) replacement

Page 487

of meters and installation of a new telemetry system, (2) construction of a new pipeline to the airport, and (3) replacement of aging pipes and fire hydrants in " Old Town." [1]

The metering and telemetry work calls for aging meters to be replaced with automatic meters and the system supervisory control and data acquisition (SCADA) system to be upgraded. Although the current metering and telemetry system is operational, the Riedesel Report identifies several advantages to the proposal. Replacement of the metering system will allow for accurate, year-round determination of water use, permit identification of service leaks, enable recovery of " lost water revenues," and encourage conservation. Installation of a new telemetry system will reduce staff time and improve monitoring capabilities, resulting in enhanced responsiveness to alarms and increased system security.

The airport component of the work calls for extending new six and eight inch mains, along with fire hydrants, to the airport. The airport is not currently tied into the City's water system, relying instead on an independent system supplied with well water. The Riedesel Report reflects that the primary deficiency of the current airport water system is inadequate water flow to meet design fire requirements. This has resulted in increased fire insurance premiums and concern about the potential negative impact on the City's economic attractiveness to businesses which may be considering locating operations within the City.

The Old Town work includes replacing old four inch pipes with larger water mains, installing new fire hydrants, looping dead end pipes, installing pressure reduction stations, and making roadway improvements. Although Old Town's water system is currently operational, the outdated system is subject to water main breakage and increased capacity is needed for fire protection purposes. Portions of the Old Town system do not meet current standards imposed by DEQ regulations. However, these regulations also provide that the City is not required to comply with these standards until new construction on the system takes place. In other words, the Old Town system is " grandfathered."

On February 5, 2014, the district court issued its Findings of Fact and Conclusions of Law, holding that the City could incur debt to finance the project without a confirmatory vote of the electorate. The district court entered judgment on March 19, 2014, and the Caucus timely appealed.

II. STANDARD OF REVIEW

" This Court defers to the factual findings of the district court unless those findings are clearly erroneous. This Court exercises free review of the district court's application of the relevant law to the facts. Constitutional issues are questions of law over which we also exercise free review." City of Idaho Falls v. Fuhriman, 149 Idaho 574, 576, 237 P.3d 1200, 1202 (2010) (quoting City of Boise v. Frazier, 143 Idaho 1, 2, 137 P.3d 388, 389 (2006)).

III. ANALYSIS

The Caucus' appeal asserts that Article VIII, section 3 of the Idaho Constitution forbids the City from incurring this debt without a confirmatory vote and that the district court's findings were clearly erroneous. We begin by considering the current status of our jurisprudence relating to this provision of the Idaho Constitution.

A. An overview of recent case law regarding Article VIII, section 3 of the Idaho Constitution.

" Cities in Idaho are generally barred from incurring debts or liabilities, in excess of the income and revenue provided for debts and liabilities in such year, unless they first conduct an election and secure voter approval of the proposed expenditure, as provided in Article VIII, § 3 of the Idaho Constitution." Fuhriman, 149 Idaho at 576-77, 237 P.3d at 1202-03. This constitutional provision contains an exception, known as the proviso clause, that no voter approval is required

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if the expenditure is for " ordinary and necessary expenses authorized by the general laws of the state . . . ." Idaho Const. art. VIII, § 3. The words " ordinary" and " necessary" are " read in the conjunctive." [2] Frazier, 143 Idaho at 4, 137 P.3d at 391.

In Frazier, this Court summarized the circumstances surrounding adoption of Article VIII, section 3 of Idaho's Constitution:

Article VIII, § 3 has been part of Idaho's Constitution since the beginning of statehood. The draft version of Article VIII, § 3 that was submitted to the 1889 Idaho Constitutional Convention was modeled after and nearly identical to Article XI, § 18 of the California Constitution of 1879. See 1 Proceedings and Debates of the Constitutional Convention of Idaho 1889, 589 (1912) (henceforth 1 Proceedings); Cal. Const. of 1879, Art. XI, § 18. The intention was to prevent local government entities from incurring debts without approval from the voters and a clear plan to retire those debts. Donald Crowley & Florence Heffron, The Idaho State Constitution 170 (1994).
Broadly speaking, Article VIII, § 3 imposes two requirements to be met by local governments before incurring indebtedness. The first requirement is a public election securing two-thirds of the vote, and the second is the collection of an annual tax sufficient to pay the debt within thirty years. The remainder of the section consists of exceptions to those requirements, beginning with the previously mentioned proviso clause and continuing with language added in a series of subsequent amendments not applicable to our analysis.
When the draft version of Article VIII, § 3 was presented to the constitutional convention, it was amended by the delegates to add the words " provided, that this section shall not be construed to apply to the ordinary and necessary expenses authorized by the general laws of the state." See Idaho Const. art VIII, § 3; 1 Proceedings at 584-94. Delegate William Claggett offered the original proviso clause. See 1 Proceedings at 586. Claggett explained his intent to the other delegates, stating: " [w]e all know that in the practical administration of county government, that there sometimes will be extraordinary expenses, I mean extraordinary expenses in the ordinary administration of affairs." Id. at 588. By way of example, Claggett mentioned the payment of witness fees. Id. Other delegates mentioned juror fees and criminal court expenses, id. at 590, the expense of controlling streams and ditches, id. at 592, and " any emergency" id. at 587.

Frazier, 143 Idaho at 3-4, 137 P.3d at 390-91.

Originally this Court interpreted the proviso clause " very narrowly," but as time went on this Court " interpreted the 'ordinary and necessary' language more broadly." Asson v. City of Burley, 105 Idaho 432, 441-42, 670 P.2d 839, 848-49 (1983). However, this Court returned to the proviso clause's original, narrow interpretation in Frazier and decided the case using a " bright-line rule" originally used in Dunbar v. Bd. of Comm'rs of Canyon Cnty., 5 Idaho 407, 412, 49 P. 409, 411 (1897). Fuhriman, 149 Idaho at 578, 237 P.3d at 1204; Frazier, 143 Idaho at 4, 137 P.3d at 391. This bright-line rule provides that " in order for an expenditure to qualify as 'necessary' under the proviso clause of Article VIII, § 3 there must exist a necessity for making the expenditure at or during such year." Id. (emphasis original) (quoting Frazier, 143 Idaho at 4, 137 P.3d at 391). " The required urgency can result from a number of possible causes, such as threats to public safety, the need for repairs, maintenance, or preservation of existing property, or a legal obligation to make the expenditure without delay." Id. (quoting Frazier, 143 Idaho at 6-7, 137 P.3d at 393-94). This Court reasoned that this rule aligns:

closely with the types of expenditures the delegates at the Idaho Constitutional Convention discussed when they debated Article VIII, § 3 of our state constitution. Those expenditures included unavoidable expenses, such as carrying on criminal trials and abating flood damage, that could

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not be delayed. We observe that the expenditures contemplated by the delegates involved immediate or emergency expenses, such as those involving public safety, or expenses the government entity in question was legally obligated to perform promptly.

Frazier, 143 Idaho at 4, 137 P.3d at 391 (citation omitted).

B. The district court erred by failing to apply the legal standard for determination of what constitutes a " necessary" expense under Article VIII, section 3 of the Idaho Constitution as articulated in Fuhriman and Frazier.

The district court did not discuss our decisions in Frazier and Fuhriman as to what constitutes a necessary expense.[3] Instead, the district court held that the expenditure need not be " urgent," stating:

an expense can be necessary without an immediate " urgency" or emergency if the repair is necessary for the good of the public health and safety. This Court finds that the proposed repairs do not need to be " urgent" in the sense that Respondents argue, but instead the repairs must be necessary under the meaning of the Idaho Constitution.

This statement is inconsistent with the legal principles articulated in Fuhriman and Frazier. In both cases, we repeatedly referred to the " urgency" of a necessary expense for which indebtedness may be incurred without an approving vote of the electorate. Fuhriman, 149 Idaho at 578-79, 237 P.3d at 1204-05; Frazier, 143 Idaho at 6, 137 P.3d at 393.

The Caucus argues the district court erred by failing to apply the principles articulated in these decisions, contending that there must be a necessity for making the expenditure during the year at issue. The City responds that the Caucus' " absolutist interpretation" ignores (1) the repair and maintenance and (2) public safety exceptions to Article VIII, section 3 of the Idaho Constitution, which apply without temporal limitation.

This Court has previously addressed the first exception claimed by the City. In Fuhriman, we expressly rejected the municipality's contention that expenses arising " in the ordinary administration of local government affairs, such as repairs [and] maintenance" are exempt from the " necessity-requires-urgency analysis." Fuhriman, 149 Idaho at 578-79, 237 P.3d at 1204-05. There, Idaho Falls sought to incur a long-term liability under a power sales agreement for the benefit of its municipal electric utility. Id. at 575-76, 237 P.3d at 1201-02. We held that the " ...


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