Argued March 30, 1936. On July 8, 1929, the City of Philadelphia enacted an ordinance providing for the creation of a loan in the sum of $50,500,000, and authorized the mayor, city controller and city solicitor, or any two of them, to borrow, for the purposes mentioned in the ordinance, at such times and in such proportions of the amount authorized as they might determine. The city now proposes to issue $5,000,000 of that authorized loan. Plaintiff's bill, here on original jurisdiction, seeks to enjoin the proposed issue on the ground that it is in violation of section 8 of article IX of the Constitution in that it exceeds the debt limitation therein set forth.
The facts are as follows: The present assessed value of taxable property in the city upon which a loan may be issued is $3,618,863,241. Ten per cent of that amount, the limit of the city's possible debt at this time, is $361,886,324. The funded debt of the city after sinking fund credits are deducted is $450,188,900, which shows a funded indebtedness exceeding the 10% debt limit by $88,302,576. Allowing all other credits and deductions authorized by law, the net funded debt of the city exceeds the 10% debt limit by an amount over $30,000,000. In 1929 when the loan of 50,500,000 was authorized, the assessed value of city property for taxable purposes was above $4,660,000,000, and the proposed issue, of which $37,800,000 has actually been issued, was then within the debt limit after deducting all credits.
Section 8 of article IX of the Constitution, which the proposed issue of $5,000,000 is supposed to violate, reads as follows: "The debt of any . . . municipality . . . shall never exceed seven per centum upon the assessed value of the taxable property therein, but the debt of *Page 35 the City of Philadelphia may be increased in such amount that the total city debt of said city shall not exceed ten per centum upon the assessed value of the taxable property therein." The first case to construe this provision wasBrooke v. Phila., 162 Pa. 123. That was a proceeding to declare invalid a proposed loan of $6,000,000 as exceeding the constitutional limitation. It was there said ". . . that the real debt of the city is the authorized debt." This was followed in 1914, some 20 years later, by the more important decision in McGuire v. Phila., 245 Pa. 287, which was heard on original jurisdiction to enjoin the city from making a loan in excess of the constitutional limitation. Therein this constitutional provision and the Act of 1874 were considered. The bill for injunction showed that 7% of the property valuation assessed was $108,000,000. The then indebtedness was $106,000,000. The city had a lawful borrowing capacity of $2,000,000. It proposed to borrow under proper procedure $8,600,000. In defending the proposed loan as constitutional it was averred, inter alia, that the city had authorized but not issued a loan of $6,750,000. This item alone, if deducted from the indebtedness, gave it ample borrowing power. The city contended that the authorized but unissued loans were not part of its debt. In its brief, the argument was made that an authorized loan which has not been acted upon cannot in any sense be said to constitute a part of the city's debt, since the money embraced in such loan is not owing until it has, in fact, been borrowed. This court held that it did constitute a part of the debt and that the loan of $8,600,000 was void under the Constitution. In the opinion of the court, Justice BROWN, afterwards Chief Justice, stated that an authorized debt must be considered as a debt within the meaning of the constitutional provision. These cases establish that bonds which have been authorized but not issued are, nevertheless, a debt, and must be so considered in municipal financing under article IX, section 8. If it is a debt at that time, *Page 36 it follows that it is the assessment of the taxable property at that time which must measure its validity. It would seem that whatever may be the viewpoint on the proper construction of this provision that these cases set the matter at rest in the present contest. But it is urged that a literal or strict construction inevitably forces a different conclusion, and that the question presented by the plaintiff as to whether or not a proposed bond issue valid at the time of authorization may be enjoined because the value of the city's taxable property has since declined, would then have to be answered in the affirmative.
If the words of this provision, "the debt . . . shall never exceed" or "shall not exceed" a fixed percentage of the assessment, be given a literal interpretation, we are compelled to say that though municipal bonds are validly issued and outstanding they become void in the hands of innocent purchasers at any time the decrease in assessed value brings the total outstanding municipal indebtedness beyond the figure arrived at by applying the percentage fixed in the Constitution to the assessments. As the present debt of the City of Philadelphia exceeds that limitation by over $30,000,000 because of a decline in the assessed value of taxable property, the bonds representing this excess would be void. If this is true as to the city, over the entire State many more millions of dollars of municipal bonds would be placed in jeopardy, and the whole structure of municipal financing would be endangered.
Heretofore, validly authorized bonds have been considered binding obligations in the hands of their holders without suspicion of a possibility that a subsequent decline in assessed value might render them invalid under our Constitution. This understanding we encouraged by our decisions in the Brooke and McGuire cases and, based upon these decisions, statutes were passed which fostered such conception. Administrative officers of municipalities strengthened it by honoring outstanding *Page 37 bonds without reference to a decline in assessments during the period between the authorization and the maturity of the issues. If we are now to adopt this new and needlessly strict interpretation, we would strike down a universal conception of the factors which determine the validity of municipal obligations. The bondholders, whose rights have been impinged, would probably take steps to ascertain whether there had not been an impairment of a contract and whether the operation of our constitutional provision did not collide with relevant provisions of the Federal Constitution. Contracts between an individual and a municipal corporation are impaired whenever the right to enforce them by legal process is taken away or essentially lessened. All governmental bodies are as much bound by their contracts as are individuals, and if they deprive their obligees of the right to enforce obligations it is repudiation with all the wrong and reproach which that term implies whether the repudiator be the State, a municipality or an individual. It is not difficult to imagine what might happen if the Federal Constitution was held violated to the detriment of this provision of our Constitution.
It might be urged, however, it would not be necessary to go so far since we have previous cases which decide that when a debt has validly taken form in its inception, subsequent changes cannot impair or nullify the debt when in existence: see Addyston Pipe, etc., v. City of Corry, 197 Pa. 41, 49;Gable v. Altoona, 200 Pa. 15, 21; Scranton Elec. Co. v. OldForge Boro., 309 Pa. 73, 78. Although we do not hesitate to reaffirm everything that was decided in those cases, clearly they would not avail as a check since the principles enunciated therein could be readily distinguished when sought to be applied to the instant problem. We point out, however, that if the constitutional provision be taken in a literal, absolute and realistic sense, such meaning leads to dangerous possibilities which we cannot escape. *Page 38
Since it is impossible to apply a literal meaning to this constitutional provision then an interpretation of the provision is inevitable. Under such circumstances the court is at liberty to take the most feasible view; one which is in harmony with the rules of construction applicable under the conditions such as here presented and one which works the least harm, for it is doubtful if any other municipality in the State is in a similar situation. We thought we had, by adherence to these rules, settled this interpretation in theMcGuire case, but plaintiff would now have us add to the words "never exceed seven per centum upon the assessed value of the taxable property therein . . . [and] . . . not exceed ten per centum upon the assessed value of the taxable property therein" the further clause "at the time the bonds are actually sold." The Constitution does not so read and plaintiff's interpretation does not conform to the rules of construction applicable where great hardship results. These rules prohibit the impracticable and unreasonable conclusion contended for by plaintiff and demand that it be practical and expedient: CooperManufacturing Co. v. Ferguson, 113 U.S. 137; U.S. v. Kirby,74 U.S. 482, 486; In re Griffon, Fed. Cas. No. 5815 [Chase, 364];People v. Crawley, 274 Ill. 139; Pub. Ser. Com. v. New YorkCent. R. Co., 185 N.Y. S. 267; and see the opinion of Mr. Justice SCHAFFER in Robert E. Dalzell v. John J. Kane et al.,Comrs. of the County of Allegheny, 321 Pa. 120, holding that a statute, impossible of performance as the legislature had written it, should be interpreted in a practical way.
Section 8 of article IX was intended as a curb on municipal extravagance, but it was not intended to straitjacket municipal financing, nor to disrupt and to plunge into chaos the internal management of the city's financial affairs. Under theMcGuire case we created a restriction on borrowing by treating the entire authorization as a debt even though the bonds were not issued. Having by this method reached the debt limit there may *Page 39 be no further borrowing for municipal improvements.* The complainant urges a second deadline. He contends that if an attempt is made to sell the bonds when the money is needed, the municipality is further curbed because there happens to be a subsequent recession in the appraised value of property taxable by the municipality. This contention involves the contradiction that at one moment and for one purpose the authorized debt is a valid debt of the municipality and at another moment and for another purpose is not. Such argument creates a complete barrier to progress and in an emergency leaves the city helpless. Vast improvements, such as the Locust and Broad Street Subways, mentioned in the city's paper books, would go unfinished and disintegrate, the money for their completion being completely wrapped up in an interdicted sale of the bonds. It would create an anomalous situation if we were to say that, after the people of Philadelphia, regularly called to the polls in November at great expense, had voted upon a bond issue, and signified their assent to an increase of indebtedness whose validity in all respects was then assured, the following January when the assessment came in that the proposed issue of bonds was void simply because of the casual incident of a decline in the assessed value of the property.
The interpretation which we gave to this constitutional provision in the McGuire and Brooke cases has acquired a status of a rule of property as to bonds that have been bought and sold, as to engagements entered *Page 40 into on the faith of it, and as to legally authorized but unissued bonds. By these decisions we erected a signpost for municipalities and all persons dealing with them. We there established a fixed date as of which to determine the validity of bonds. It is the assessed value of the property at the time of the authorization of the loan which is to be observed, and compliance with the debt limitation thus established being shown, the legal status of the loan is forever fixed. "When a rule has been deliberately adopted and declared, it ought not to be disturbed . . . by the same court, except for very urgent reasons and upon a clear manifestation of error": 1 Cooley,Constitutional Limitations, (8th ed.), 116.
"A constitution is not to be made to mean one thing at one time and another at some subsequent time": 1 Cooley, op. cit., supra, at 124. Having adopted the meaning that the authorized debt is as much a debt as are outstanding bonds, it is no longer open to us to adopt a new meaning, especially where it is inevitable that untold hardship will follow. The inescapable conclusion from the McGuire case is that the sum total of the authorized bonds immediately became part of the debt of the city, and that the framers of the Constitution understood that the debt so created was to be gauged and measured by the then existing facts and was not to be destroyed, injured or subjected to change by future conditions, but was to be considered as having a fixed status determined as of the time that it was authorized. There are decisions of other states in accord with this thought: State ex rel. v. Gordon, 251 Mo. 303,310, 158 S.W. 683; Steinbrenner v. City of St. Joseph,258 Mo. 318, 226 S.W. 890; Lewis v. Brady, 17 Idaho 251; Herrinv. Erickson, 90 Mont. 259, 2 P.2d 296.
The legislature has passed various statutes giving to the constitutional provision a construction similar to that of the prior decisions. We stated in Montgomery v. Martin, 294 Pa. 25,39, that such interpretations, while not binding, are to be heeded and given judicial consideration: *Page 41 Moers v. City of Reading, 21 Pa. 188, 201, 202; Com. v.Mathues, 210 Pa. 372, 392.
By the Act of July 24, 1913, P. L. 976, section 1, it is provided that when a city has been authorized to incur debt, it shall be proper for such city to enter into contracts and to make necessary appropriations for such contracts without awaiting the actual issue of the loan or loans so authorized, or the receipt by the city of the money to be borrowed. In the City Charter Act of June 25, 1919, P. L. 581, section 9, of article XVII, a similar provision will be found permitting contracts to be paid out of moneys based on an appropriation out of loans authorized although the same may be unissued.
Again by the Act of June 5, 1915, P. L. 846, it is provided that it shall be lawful for the corporate authorities from time to time to use any money in their general fund for any purpose for which a loan shall have been authorized, and that they shall not be required to issue any authorized bonds until it is necessary to repay to the general fund such advances. See also the Act of June 25, 1919, P. L. 581, section 6 of article XVII.
Municipalities are thus enabled to conserve their financial strength by not immediately converting into cash the authorized debt, but in holding it in abeyance until absolutely necessary for municipal purposes. By so doing there is a saving of interest pending actual necessity for the funds. The city should not be compelled to immediately convert every bond issue into cash and pay interest on it, although it may not be called upon for years to expend it. Plaintiff's contention, if sustained, would cause a premature assumption of a large interest debt which could otherwise be postponed until some future time.
If we were to adopt plaintiff's view each and every benefit in municipal financing obtained under these acts may be nullified by a decrease in assessment. Complainant would make uncertain the replacing or providing of funds under these acts since he fixes the time the legality *Page 42 of the debt is determined at the date the obligation is sold and would have us say that the constitutional mandate may then preclude the sale. All municipal financing permissible under these acts would have to be discarded because of the effect upon engagements of this character of unpredictable, future fluctuations in assessments. Where a municipality seeks to take advantage of the methods of financing extended by these acts and attempts to hold unsold portions of legally authorized loans for reimbursement to the general fund or in payment of contracts, it will find itself unable to do either of these things because of the depreciation in the value of property.
The last assessed value mentioned in the Act of April 20, 1874, P. L. 65, section 2, as since amended by various acts the last of which is the Act of May 16, 1929, P. L. 1778, section 1, which is to be set forth in the certificate to be filed in court, can mean only the assessed valuation upon which the bonds were authorized. The certificate is required to set out the formalities incident to the then increase of indebtedness. This certification contains the indicia of validity. Under plaintiff's contention, no purchaser could safely buy municipal bonds unless, at the time of purchase, a financial statement of the municipality is then secured which must include all floating or other indebtedness from the time of authorization to the dates of purchase of bonds. No bonding house could safely recommend for sale any security of a municipality unless accompanied by such statement. It would no longer be the assessed value of the property less outstanding indebtedness to the time of the authorization which determines the constitutional question, but the financial statement up to the very date of purchase which would have to be considered.
These acts emphasize that the legality of a proposed bond issue within the meaning of the Constitution must be regarded as fixed and final for all purposes at the time *Page 43 of its authorization and cannot be declared illegal because of circumstances which may arise thereafter.
Once the assessment is fixed and a valid authorization is made in pursuance thereof, the actual issuance of the bonds is a mere ministerial function. A loan which is legal when authorized immediately becomes integrated as part of the city's debt for all purposes, and the actual issuance of the bonds pursuant thereto is not rendered illegal by reason of the fact that at that time the assessed value has decreased.
Bill dismissed; costs to be paid by the City of Philadelphia.
Mr. Justice SCHAFFER took no part in the decision of this case.
* Of course the city might, by appropriate action, as set forth in the Act of April 3, 1923, P. L. 50, section 1, section 3 and section 8, either cancel the authorized indebtedness and thereby release its borrowing power from the curb of the authorized debt, or it might divert the authorized debt to a new purpose. But while the authorized debt is on the city's books no new authorization may be made, and an intervening decrease in assessment before the cancellation could be accomplished and a new authorization set up, might withdraw from the city the power to replace the cancelled loan.