dissenting. I am unable to agree with the majority’s conclusions upon the fifth and seventh points.
In holding that the proposed pledge of surplus utility revenues does not violate Amendment 10 the majority not only have disregarded the distressing financial experiences that brought about the adoption of that Amendment but also have in effect overruled our earlier decisions upon the subject. I regard those decisions as sound and would stand by them.
Before the adoption of Amendment 10 cities and counties were permitted to make purchases on credit and to pledge the expected revenues of future years as security for current obligations. It was then common knowledge, and is now familiar history, that many local governments traveled this avenue of deficit financing to the point of insolvency. Warrants and other scrip issued- by those local governments could not be paid immediately and at par, for cash was not available. The holder of public paper either had to sell it at a discount or keep it for months or years until its turn for payment was reached. In this situation public employees were compelled to work for a discounted salary. As might be expected, the cities and counties were overcharged for everything they bought, for the seller increased his price to offset the depreciated value of the public currency.
By their approval of Amendment 10 the people expressed their determination to bring about a sound system of local governmental financing. The amendment put the cities and counties upon a pay-as-you-go basis, limiting their permissible obligations to the revenues of the current year. The only exception in the amendment permitted the funding of existing indebtedness by means of a bond issue secured by a special three-mill tax levy. Later on Amendment 13 permitted cities to issue bonds, secured by a five-mill tax, for several specified public improvements, and still later Amendments 17 and 25 allowed the counties to issue bonds, secured by a five-mill tax, for the construction of courthouses, jails, and hospitals. And now Amendment 49 authorizes the issuance of bonds, secured by a five-mill tax levy, for the development of new industries.
Until today’s decision this court had adhered to the spirit of Amendment 10. One of the earlier cases, Johnson v. Dermott, 189 Ark. 830, 75 S. W. 2d 243, is almost identical with the case at bar. There the city of Dermott sought to pledge the surplus revenues from its electric light plant to secure a loan for the construction of a hospital — an improvement specifically permitted by Amendment 13. (In like manner the city of Batesville now seeks to pledge similar surplus revenues to secure a loan for a purpose permitted by Amendment 49.) We held that a profit from the operation of a municipally owned utility constituted income that might be used for general purposes, but it was subject to the restrictions of Amendment 10. This language in the opinion should control the case at bar:
“We conclude, therefore, that it is not beyond the power of the city to enter into a contract to erect a hospital and to segregate the revenues arising from the water and light systems and to pledge these excess revenues for that purpose. But this power may not be exercised in violation of Amendment 10 to the Constitution. Any contract which the city makes in regard to uncollected revenues from any source must be construed with reference to this amendment. Parties cannot, by pleadings or stipulations of any kind, abrogate this amendment which will be read into any contract which the city may make. This amendment provides that the fiscal affairs of counties, cities, and incorporated towns shall be conducted on a sound financial basis, and that no allowance shall be made ‘for any purpose whatsoever in excess of the revenues from all sources for the fiscal year in which said contract or allowance is made.’ Beyond this inhibition there is a lack of power to contract.”
The cases were reviewed in Williams v. Harris, 215 Ark. 928, 224 S. W. 2d 9, where the city of Clarksville wished to pledge surplus utility revenues for the payment of bonds to be issued for the attraction of a new industry. We held that the proposal violated the constitution in three respects: (a) It was for a purpose not authorized by the constitution; (b) it was “in an amount above the limit set by Amendment 10”; and (c) it involved a pledge of future utility revenues for an undertaking not connected with the utility. It is true, as the majority point out, that Amendment 49 has satisfied the first defect, the absence of constitutional authorization, but the other two objections still remain. Thus the majority’s holding is directly contrary to both of the cases just cited.
Amendment 49 was needed to accomplish its purpose, because there were several provisions in the constitution (not merely Amendment 10) that prevented the issuance of bonds to attract industry and the levy of a property tax to pay those bonds. By its language the amendment is directed only to the authorization of bond issues. Literally every sentence in this rather long amendment not only refers to, but also deals solely with, either the bonds themselves or the election at which they are to be voted upon. I find not one syllable in Amendment 49 to warn the voters that in approving the amendment they were partially repealing a basic safeguard previously placed upon local governmental financing. By the majority’s reasoning one might as well say that the guaranty of free speech was also repealed to the extent that such speech might interfere with the acquisition of new industry. Industrial development is a worthwhile purpose; Amendment 49 should be liberally construed. I cannot, however, share the majority’s belief that the people, in approving Amendment 49, meant to run roughshod over any other constitutional provision that might in practice hamper the most zealous of efforts to attract new industry.
The seventh point, involving the tax exemption of the new plant and its grounds, is not made absolutely clear by our prior decisions, but if the point is to be determined I think we should say that this property will be taxable. Were the matter left up to me I would not pass upon the question at all, for no justiciable issue is presented. The complaint merely asserts that the city has represented to Seiberling that the lands and facilities will be tax-exempt, and this representation is said to be contrary to the constitution. There is no actual controversy between these parties; we are simply being asked to give advice upon an abstract question of law that may arise if the taxing authorities seek to tax this property and if the city decides to resist the tax. It is not our duty, even under the declaratory judgment act, to pass upon academic questions. The majority, however, apparently think it best to give advice in this instance; so I must set forth my reasons for thinking it to be bad advice.
The constitution exempts “public property used exclusively for public purposes.” Const., Art. 16 § 5. Obviously the framers did not mean to exempt all public property, for in that event there would have been no need to insert the phrase, “used exclusively for public purposes.” The inclusion of that phrase demonstrates conclusively that the exemption does not embrace all publicly owned property; it must also be used exclusively for a public purpose.
The question was thoroughly considered in School District of Ft. Smith v. Howe, 62 Ark. 481, 37 S. W. 717, where the school district owned property which was rented to private tenants, with the rents being used for school purposes. In holding that the property was subject to taxation we said: “It seems clear that the intention was to exempt only that public property which in itself directly subserved some public purpose by actual use, as distinguished from property belonging to the public but not used by it, and from which a benefit accrues to the public, not by the immediate use thereof by the public, but indirectly through selling or renting the same to private parties. To illustrate: Some of these lots have buildings upon them, and are rented to different tenants. One may be rented to a grocer, another to a butcher, and another to a saloonkeeper. Although the object and effect of renting the property in such cases may be a benefit to the public, yet we cannot say that such property is used exclusively for public purposes. . . . The purpose for which these tenants use this property is their own private gain, and the fact that they pay rents to the public does not change the purpose of this use from a private to a public one.”
We have many other cases to the same effect, holding that the tax exemption must be strictly construed and that property falls within one of the exemptions only if it is actually used for the exempt purpose. Brodie v. Fitzgerald, 57 Ark. 445, 22 S. W. 29; Pulaski County v. First Baptist Church, 86 Ark. 205, 110 S. W. 1034; Burbridge v. Smyrna Baptist Church, 212 Ark. 924, 209 S. W. 2d 685; Hilger v. Harding College, 231 Ark. 686, 331 S. W. 2d 851. The only contrary decision, Hogue v. Housing Authority of North Little Rock, 201 Ark. 263, 144 S. W. 2d 49, was, like the case at bar, based upon expediency, as the dissenting opinion of Judge Frank Smith pointed out. The Hogue case cited none of our decisions to support its holding on this point. It has not been followed in later cases and does not, in my opinion, represent the law in Arkansas.
The majority disregard the constitutional requirement that the property be used exclusively for public purposes. Are we to say that Seiberling is not using the property at all, even though it is occupying it for the sole purpose of private gain? Of course not. Seiberling’s business will incidentally redound to the public’s benefit by reducing unemployment, but the same thing is true of any established business concern which owns or leases its site of operations. If the mere reduction of unemployment constitutes an exclusively public purpose then all the commercial property in the state should be declared to be exempt from ad valorem taxation.
Counsel for the appellees present a plausible argument to the effect that if the original purchase by the city and county can be justified as being for a public purpose it should follow that the use by Seiberling is also for a public purpose. This argument overlooks the fact that the constitutional reference to a tax-exempt public purpose is much narrower than many other senses in which the phrase may be used. For example, the power of eminent domain can be exercised only for a public purpose. Hence a railroad company is acting for a public purpose when it condemns a right of way for its tracks, but no one would suppose that the property is therefore tax-exempt after the railroad company acquires the title.
I regret that I cannot express more effectively my strong disagreement with the majority opinion in this case.
McFaddin, J., joins in this dissent.