the meaning of the Constitution, and cannot be incurred if the constitutional limit has been reached, or to the doctrine of those States in which it is held that current expenses payable from and within the revenues of the year do not constitute indebtedness, and that a contract may be made covering a term of years in each year's payment is within the revenues of the successive years. The Constitution of the State of Georgia declares that the debt hereafter incurred by any municipality shall not exceed seven per cent of the assessed value of taxable property and no municipality shall incur "any new debt" with certain exceptions without the assent of the voters at an election for the purpose.1 There are further provisions in the Constitution requiring municipalities incurring bonded indebtedness to provide for the assessment and collection of an annual tax sufficient to pay the principal and interest of the debt within thirty years, and prohibiting the incurring of "any debt " until provision therefor shall have been made by the municipal government. In applying these provisions it is held that the Constitution was framed and adopted in the light of the fact that it has always been the rule that salaries and all expenses of government are paid by the year out of taxes raised during the year in which the service to be compensated was rendered, and that the Constitution must therefore be understood as prohibiting a liability which is undertaken and which must be discharged at some time in the future, but which is not to be discharged by a tax levied within the year within which the liability is undertaken. But this is the only exception which is permissible under the language of the Constitution. The municipal authorities cannot be allowed to anticipate far into the future the needs and expenses during each year, and to fix in advance an amount which shall be paid for current expenses and make a contract under which the other contracting party has a right from year to year, by simple performance, to put himself in a position where he can demand of the authorities a discharge of the obligation. If such a resort were to be allowed, the Constitution would furnish no protection to the taxpayers. 1 Ga. Const., 1877, art. vii. § 7, par. 1. 2 Ga. Const., 1877, art. vii. § 7, par. 2; 10, par. 1. 3 In Dawson v. Dawson Water Works Co., 106 Ga. 696, 713, the court summarized its conclusion as follows: "Taking into consideration all of the provisions of the Constitution which deal with this subject of debts to be incurred by the public, and taking into consideration the matters of public history above referred to, we are But brought to these conclusions as to what was the intention of the framers of the Constitution in the matter of debts to be incurred by municipal corporations: (1) The word 'debt' is not to be construed in its broad and unrestricted sense, of a liability by one person to pay money or other thing of value to another. (2) A liability for a current expense can be incurred by a municipal corporation for any one year, provided there is, at the time of incurring the liability, a sufficient sum in the treas this conclusion obliged the court to go a step further. If a contract has been made for a supply of water or other necessity covering a term of years, and if the water is supplied subsequently to the first year, the supply is still of such a nature that it should be paid out of the revenues of the year during which it is received, and the municipality having accepted the benefit must pay therefor, the obligation to pay resting largely upon the principle of an implied contract to pay for necessary expenses out of the year's revenues during which such expenses are incurred. Hence the result followed that a contract such as was before the court obliged the court to give effect to its terms until it was repudiated by either party. 2 § 197. Cash in the City Treasury. — The cash in the city treasury affects the power to incur debt; as an immediate means of paying and discharging a liability presently incurred, it may fairly be claimed that, notwithstanding the obligation of the contract out of which the liability grows, the city is to the extent of such cash operating on a cash basis without incurring a debt within the meaning of the Constitution. We have already seen that contracts for current and ordinary expenses which are within the current revenues do not create indebtedness within the meaning of the Constitution, and that this principle is applied in many States to contracts calling for future periodical payments extending over a term of years. In those States where these rules are applied, if at the time of contracting the liability there is cash in the city treasury applicable to the discharge ury of the city which may lawfully be appropriated to the payment of the liability incurred, or if a sufficient sum to discharge the liability can be raised by taxation during the current year; and such a transaction would not create a debt within the meaning of that word as it is used in the Constitution. (3) It was the purpose of the Constitution to provide a system of finance for subordinate public corporations, under which there should be each year contracts made for the expenses of the year, and these were to be paid out of moneys arising from taxes levied during the year, that is, that each year's expense should be paid by taxes levied during the year, and no item of expense was to be paid except out of the taxes levied during the year in which the contract for such expense was made. (4) Any liability which was not to be discharged by money already in the treasury, or by taxes to be levied during the year in which the contract under which the liability arose was made, is a debt within the meaning of the Constitution, and cannot be incurred without the preliminary sanction of a popular vote, unless it be for a temporary loan to supply casual deficiencies of revenue." a As the sting of municipal debt is taxation, which is often the only and always the main resource or means of payment, a leading object of the constitutional debt limitation is to save the taxpayers from the burden of undue or heavy taxation. As cash on hand actually available to discharge liability incurred relieves or exonerates to that extent the municipality from the necessity of levying taxes to pay such liability, the doctrine of the courts stated in the text seems to the author to be a reasonable and sound exposition of the Constitution. Post, §§ 198, 199. 2 Ante, §§ 195, 196. of the obligation when it matures, then to the extent of such cash no debt is created within the meaning of the constitutional limitation. The issuing of a warrant payable from cash in the treasury is not the creation of a debt against the city, but merely an appropriation of a part of the cash on hand.2 Reuting v. Titusville, 175 Pa. St. 512; Earles v. Wells, 94 Wis. 285. In Addyston Pipe & Steel Co. v. Corry, 197 Pa. St. 41, the city had entered into a contract for the building of a sewer at a cost of $57,000, $9,300 of which was to be paid out of the general sewer fund and the remainder to be assessed upon the property benefited by the contemplated sewer. Speaking with reference to the amount which was payable from the sewer fund, the court said: "As to the $9,300 to be paid by the city out of the general sewer fund, there is nothing in the case stated to show that the amount was not then in the city treasury or payable and subsequently paid out of the current revenues. This item, therefore, did not increase the city's indebtedness in the prohibited sense. There is no constitutional restriction on municipal expenditure, provided it is paid as it goes. What is prohibited is the incurring of debt. If the city has money on hand or provides at the time a present means of raising it otherwise than by loan, it may contract for expenditure without restriction." In Brashear v. Madison, 142 Ind. 685, the city entered into a contract for the construction of a fire alarm system at a cost of $5,000. At the time when the contract was made it was already indebted beyond the limit fixed by the Constitution. It appeared, however, that there were funds in the treasury amounting to upwards of $50,000; that of this amount $44,000 was appropriated for the payment of interest upon the city indebtedness and for other necessary purposes, among which purposes was the item "fire $6,000," and that at the date of the contract about $28,000 of these current revenues were unexpended. So far as appeared, the $6,000 was lying in the treasury to be expended for fire purposes as the common council might judge best. It was held that the contract did not create indebtedness within the meaning of the Constitution. City Water Supply Co. v. Ottumwa, 120 Fed. Rep. 309, was a suit in equity to enjoin the city from creating a debt by carrying out contracts for the construction of water works at an expense of about $20,000. The debt of the city already exceeded the constitutional limit. It had on hand in a water fund about $14,000. In this situation the court held that the contract created indebtedness within the meaning of the Constitution, and was void, saying, "That the city over and above its other obligations for current expenses, does not have the money with which to pay on the contracts in question, is without doubt in my mind. It makes a showing that it can pay them out. But that is not the question. It hopes to pay out and perhaps without interest. It is making a liability. It does not have the money with which to meet the liability. But it says it has part of the money, and the balance from time to time it will receive by the collection of taxes. That is going in debt, just as much as the farmer who buys the adjoining tract of land, who pays part of the purchase price at the time, and expects to pay the balance soon from his collections. Whether a party is in debt does not depend upon his net worth. That is one definition of 'solvency,' but not of 'indebtedness.'" It will be observed that this case relates not to an ordinary and necessary current expenditure for a municipal supply, but to a debt incurred for what is usually a capital expenditure, that is, for a permanent improvement payable out of capital and not income or revenue, a distinction material to be kept in mind. 2 Springfield v. Edwards, 84 Ill. 626; Law v. People, 87 Ill. 385; Fuller v. Heath, 89 Ill. 296; Blanchard v. Benton, 109 Ill. App. 569; Dively v. Cedar Falls, 27 Iowa, 227. In Doon v. Cummins, 142 U. S. 366, Mr. Justice Gray, after citing the authorities, stated that the rule as settled by the Supreme Court of Iowa is that the "constitutional restriction includes not only municipal bonds, but all forms of indebtedness except warrants for money actually in the treasury, and perhaps contracts for ordinary expenses within the limits of the current revenues." any $198. Obligations Payable only from a Special Fund. In the case of streets, sewers, and other local improvements, which are payable from the proceeds of special assessments upon the property benefited thereby, a contract which provides that the contractor shall be paid from such assessments, that he shall have no right of recourse against the municipality or its property, or its general power of taxation, and that the only duty of the municipality shall be to levy, collect, and pay over the special assessments, does not create indebtedness on the part of the municipality within the meaning of the constitutional limitation, although the city is a party to the contract, although the money is payable through its general treasury, and although it issues certificates, warrants, or bonds payable out of such special fund for the payment of the cost of the improvement. Under such a contract no judgment in personam against the city for non-payment of the cost is justified, no charge can be enforced against its general assets, nor can a resort be had to general taxation for the purpose of satisfying the claim. When the rights of the contractor are so limited, there is no debt within the debt-limit provision of the Constitution.' These principles receive 16 N. Dak. 25; 111 N. W. Rep. 615; Kronsbein v. Rochester, 76 N. Y. App. Div. 494; Little v. Portland, 26 Oreg. 235; Addyston Pipe & Steel Co. v. Corry, 197 Pa. St. 41; Gable v. Altoona, 200 Pa. St. 15; Galveston v. Heard, 54 Tex. 420; Baker v. Seattle, 2 Wash. 576; Soule v. Seattle, 6 Wash. 315; Austin v. Seattle, 2 Wash. 667; Faulkner v. Seattle, 19 Wash. 320; ante, § 194; post, §§ 199, 200, 294; also chapter on Municipal Bonds. 1 Vickrey v. Sioux City, 115 Fed. Rep. 437; Coleman v. New Kensington, 140 Fed. Rep. 684; Mankato v. Barber Asphalt Co., 142 Fed. Rep. 329; McGilvery v. Lewiston, 13 Idaho, 338; 90 Pac. Rep. 348; Springfield v. Edwards, 84 Ill. 626; Fuller v. Heath, 89 Ill. 296; Jacksonville R. Co. v. Jacksonville, 114 Ill. 562; Griswold v. East St. Louis, 47 Ill. App. 480; Blanchard v. Benton, 109 Ill. App. 569; Strieb v. Cox, 111 Ind. 299; Board, &c. v. Hill, 115 Ind. 316; Quill v. In- Certificates issued for the purpose dianapolis, 124 Ind. 292; New Albany of laying out or improving a public v. McCulloch, 127 Ind. 500; Laporte v. park and payable only out of assessGamewell Fire Alarmı Tel. Co., 146 Ind. ments upon the property benefited by 466; Board v. Harrell, 147 Ind. 500; the opening of the park do not conBoard v. Reeves, 148 Ind. 467; Davis stitute indebtedness within the meanv. Des Moines, 71 Iowa, 500; Tuttle v. ing of the constitutional limitation. Polk, 92 Iowa, 433; Clinton v. Walliker, Kansas City v. Ward, 134 Mo. 172; 98 Iowa, 655; Fort Dodge El. L. & Kelley v. Minneapolis, 63 Minn. 125. Power Co. v. Fort Dodge, 115 Iowa, An act to establish a dispensary for 568; Grunewald v. Cedar Rapids, 118 the city of Rome, Ga., allowed the Iowa, 222; Corey v. Fort Dodge, 133 dispensary commissioners to borrow Iowa, 666; 111 N. W. Rep. 6; Carletts- money and to make purchases on credit, burg v. Self, 25 Ky. Law Rep. 161; 74 and to pledge the proceeds of sales and S. W. Rep. 1064; Adams v. Ashland the stock on hand for the payment of (Ky.), 80 S. W. Rep. 1105; Lansing v. Van Gorder, 24 Mich. 456; Kansas City v. Ward, 134 Mo. 172; State v. Neosho, 203 Mo. 40; 101 S. W. Rep. 99; Atkinson v. Great Falls, 16 Mont. 372; State v. Helena, 24 Mont. 521; Vallelly v. Grand Forks Park Com'rs, these debts. It was held that this statute did not create a debt against the city, as persons contracting must look to these sources only for payment. Chamlee v. Davis, 115 Ga. 266. The awarding of damages for laying out a new road which by the express terms their natural and logical application where the city acts as the intermediary or instrument by which the improvement is effected, merely arranging for the improvement, contracting for the work, and collecting from the parties benefited the amount of the special assessment. It is eminently proper that under such circumstances the recourse of the contractor should be confined to the special assessments, because the private and local interests really dominate the general public interests of the city. But where the improvement is one which affects the welfare of the city at large and is not properly payable from a local assessment, different considerations arise. The city then is acting for the whole body of the people, and all the citizens receive the benefit of the improvement. A tax made for the improvement must, in justice, be laid upon the whole taxpayers of the body corporate, and if the improvement is to be paid for by taxation, recourse must be had to the general exercise of the power of taxation of the municipality. Even in an improvement of general interest to the city, it may, under some conditions, be possible to create a special fund out of which the expense of the improvement may be paid without creating indebtedness of the municipality. For example, it has been held that a contract under statutory authority with a person advancing money to complete a system of water works by which a special fund is created out of a certain percentage of the receipts of the water works, which fund is set apart for the liquidation of the moneys advanced without any obligation being assumed by the city except to make payment out of the special fund as it accrues, does not create indebtedness within the meaning of the constitutional provisions. of the statute are payable from the proceeds of a special assessment only, is not the creation of any debt, either present or contingent, but is in the nature of a sale for cash, the title remaining in the owner until payment is made. Com'rs of Highways v. Jackson, 165 Ill. 17. See also State v. Superior Ct. of Whatcom County, 42 Wash. 521. 1 Winston v. Spokane, 12 Wash. 524; post, §§ 199, 294. See also Kenyon v. Spokane, 17 Wash. 57; State v. Neosho, 203 Mo. 40; 101 S. W. Rep. 99. The fact that such special fund is not in existence at the time when the bonds are issued and the money borrowed, does not make expenditures incurred on the credit of the fund and which are only payable therefrom an indebtedness against the city. Faulkner v. Seattle, 19 Wash. 320. Following these cases, it was held, in On the like principle it was held State v. Whatcom County, 42 Wash. 521; 85 Pac. Rep. 256, that where an ordinance provided for a special assessment for the raising of compensation for property taken, the ordinance did not, by providing also that "any part of the compensation, damages, or costs that is not fully assessed against said property benefited shall be paid from the general fund of the city," put the taxpayers in a position to raise any question as to the limit of the municipal debt, especially when it appeared that, besides the provision in the ordinance for a special assessment, the city had also taken a penal bond from interested property owners conditioned that the city should not be called upon to contribute any funds to the cost of the improvement. Quære? In State v. Clausen, 40 Wash. 95, it was held that where a city is indebted to its constitu |