Oregon Advisory Opinions March 19, 1951: OAG 51-59 (March 19, 1951)

Oregon Attorney General Opinions

1951.

OAG 51-59.

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Dear Sir: You have asked us to examine a proposed bill relating to "limited annexation of territory to cities, for special purposes", and to advise you as to "this proposed bill and its contents in relation to its constitutionality and existing laws or new measures passed so far in this session."

We note that bills introduced in this session having some relation to the bill under consideration are the following: House Bill 279, limiting bonded and warrant indebtedness of cities; House Bill 377, making improvement warrants general obligations of a city; House Bill 429, relating to computation of the constitutional tax limitation upon taxing districts "subsequent to extension of boundaries"; and Senate Bill 173, amending municipal annexation procedure.

In answer to your question as to the constitutionality of the proposed law, we point out that it is not an independent act, complete in itself, but in the main depends upon, and operates through, existing statutes which it attempts to alter. It materially amends sections 110-809 and 110-811, O.C.L.A., without setting them out at length, in violation of section 22, Article IV, of the Oregon constitution. Section 110-809, O.C.L.A., limits a city's taxing power to laying an ad valorem tax applicable "to all the taxable property therein, as shown by the assessment roll last compiled by the assessor." Section 110-811, O.C.L.A., provides for the collection of taxes levied by a city. Section 9 of the proposed bill gives new power to a city to lay a tax on property outside its corporate limits, but makes no provision for assessment or collection thereof and is by no means a complete and independent tax law. The result is that, if effective at all, it would operate to amend existing assessment and taxation statutes. See Portland v. Portland Railroad Light and Power Co., 80 Or. 271, 297, 300, to the effect that a city possesses no inherent power to tax and that a property tax must be laid on an ad valorem basis.

The proposed law would operate also as an amendment of the Bancroft bonding law, now codified as chapter 21, Title 95, O.C.L.A., as amended, to which the bill refers by title merely (and incompletely, in subsection (4) of section 9, page 4), again in violation of section 22, Article IV, of the constitution. The Bancroft bonding law, enacted as Laws of Oregon 1893, page 171, was limited to improvements within incorporated cities. This is its title:

"To Provide for the Issuance of Bonds for the Improvement of Streets and Laying of Sewers in Incorporated Cities, and for the Payment of the Cost of such Improvement and Laying of Sewers by Installment."

It will be noted that sections 95-2101 to and including 95-2109, O.C.L.A., embodying the Bancroft bonding law, refer only to improvements within incorpo-

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rated cities and towns. There is a very good reason why the provisions of that law should not be applied to improvements made by a city outside its corporate limits for the benefit of persons other than its residents or property other than that which it can lawfully tax. The reason is that the Bancroft bonding law has consistently been construed by the supreme court of this state as constituting the bonds thereunder issued by a city general obligations of the city, compelling it to levy a tax to pay the bonds, whether or not it can collect the assessment for the improvement for which the bonds were issued. See State ex rel. v. Melville, 149 Or. 532, 547-550, 551, and authorities therein cited. The result of the proposed law would be to bond an "urban service" on the credit of property within the city, inasmuch as the attempt to empower the city to levy a tax on property outside its corporate limtis would, we believe, be held ineffectual, if properly challenged.

The meaning of section 10 of the bill is somewhat obscure. This section seems to permit residents of a "service annex" who are not registered electors of a city to vote on the question of whether or not the city shall issue bonds if "any part or all of the proceeds of the bonds is to be used in rendering an urban service to a service annex," or if the tax "will be imposed upon property in a service annex".

In either such case, says the bill, the "registered voters in the service annex shall be deemed to be voters of the city". This is an innovation in election procedure, implying amendment of existing laws as to qualifications of electors and the conduct of elections. In any event, it is obvious that the two conditions for permitting electors of a "service annex" to vote on a city bond issue would both be necessary to show any possible right of such electors to vote, and should not be stated in the alternative as now appearing in section 10.

If such an election were possible, there should be specific provision for the conduct thereof, rather than the vague direction that "the city council shall make the necessary provisions to enable them to vote upon the question as other city voters." It must be remembered that the electors of the service annex are not registered voters of the city, and the legal fiction by which this bill would attach a "service annex" to a city for a limited purpose would not alter the actual registration of voters. See sections 81-102, 81-103, 81-108, 81-111, 81-112, 95-301, 95-302, 95-303, and the last sentence of chapter 152, Oregon Laws 1941.

Section 14 of the act would authorize a city council, "as the tax levying board for each service annex," to levy as a tax on property in the service annex a charge determined as directed by section 13 of the bill, by estimating the revenues to be derived from the service annex "from rate, connection and other service or user charges for the fiscal year" and deducting "such total anticipated revenue from the cost as determined by subsection (3) of" section 13. Again, it must be pointed out that assessment of a tax on property must be made by the county assessor, on an ad valorem basis. The proponents of this bill have confused a tax with an assessment for improvements.

We assume that notice of these major defects is sufficient to indicate that a law such as proposed by the bill would be unworkable, if not wholly invalid. However, there are existing provisions of law, in chapter 1, Title 114, O.C.L.A., authorizing incorporated cities, "when the power to do so is conferred by or contained in their charter or act of incorporation," to sell utility services outside their corporate limits. These provisions have been interpreted and found valid by the supreme court, as evidenced in the annotation accompanying chapter 1 of Title 114, supra.