seen in dealing with obligations for ordinary current expenses of the municipality,' that obligations which are payable from the revenues of the current year do not constitute debt within the meaning of the Constitution, and it would naturally follow that these revenues are to be regarded as appropriated to the payment of current expenses, and as the current expenses do not constitute debt, the current revenues from taxes actually levied should not be considered or allowed as a deduction from the aggregate indebtedness; but the courts in Washington have held the very liberal rule that cash assets, which include not only cash in the treasury and taxes for the current year, but unpaid delinquent taxes, are to be regarded as available until the lien of the tax has been merged in the sale of the property, and until that time they are to be deducted in computing the indebtedness. We have seen elsewhere that damages for torts do not constitute indebtedness within the meaning of the constitutional limitation in such sense as to prevent the recovery of a judgment therefor and collection from the municipality. But when these damages have been reduced to judgment, such judgment becomes a debt of the city, and must be taken into consideration in determining the amount of its existing indebtedness.3 Special provisions of certain Constitutions require the application of special rules in computing the indebtedness for the purpose of these provisions. Thus the Constitution of Pennsylvania, besides declaring that the debt of any municipality shall never exceed seven per cent upon the assessed value of the property therein, provides that no municipality shall "incur any new debt or increase its indebtedness connection with the school building. It was held that it must be assumed that the balance of this fund would be required for the erection of the building, and that it could not be deducted in any form for the purpose of ascertaining the debt of the city. December. It was held that they could not be considered as in process of immediate collection so as to be deductible cash assets in determining the validity of the contract. Hermann v. Oconto, 110 Wis. 660. See also Balch v. Beach, 119 Wis. 77. Estimated revenues to be derived from liquor licenses, from a street railway tax, or licenses based on earnings, and some other like sources, but uncertain in amount, not in process of collection and collectible only at the will of the parties who seek the privileges for which the licenses were made, are not to be regarded as cash assets in such sense as to be deductible. Rice v. Supra, § 195, Current Expenses. 2 State v. Hopkins, 14 Wash. 59; Mullen v. Sackett, 14 Wash. 100; Eidemiller v. Tacoma, 14 Wash. 376, 382; Graham v. Spokane, 19 Wash. 447. But outstanding taxes will not be deducted unless the assessment was complete and the taxes actually collectible at the time when the debt in question was contracted. A contract was made in October. Taxes had been appor- Milwaukee, 100 Wis. 516. tioned by the Secretary of State to pay 3 Chicago v. McDonald, 176 Ill. 404, amounts due by the city to the State 418. See also Stone v. Chicago, 207 IIL in January following. They did not 492, 509. go into the hands of the collector until to an amount exceeding two per centum on such assessed valuation of property without the assent of the electors thereof at a public election." Under this provision, debts created by vote are to be treated and considered separately from debts created without a vote; and in determining whether the two per cent limitation has been exceeded, debts created by vote are to be deducted from the aggregate indebtedness of the municipality.' § 206 (136 b). City Stock and Bonds in Sinking Fund. The Constitution of New York (art. viii. sec. 11) was in 1884 amended, inter alia, by ordaining that "No county containing a city of over one hundred thousand inhabitants, or any such city, shall be allowed to become indebted for any purpose or in any manner to an amount which, including existing indebtedness, shall exceed ten per centum of the assessed valuation of the real estate of such county or city subject to taxation, as it appeared by the assessment rolls of the said county or city on the last assessment for State or county taxes prior to the incurring of such indebtedness; and all indebtedness in excess of such limitation, except such as may now exist, shall be absolutely void, except as herein otherwise provided. No such county or such city whose present indebtedness exceeds ten per centum of the assessed valuation of its real estate subject to taxation shall be allowed to become indebted in any further amount until such indebtedness shall be reduced within such limit." Construing this provision, it was held by the Court of Appeals that "city stock" (in effect bonds) of the city of New York held by the Commissioners of the Sinking Fund for that city is not an indebtedness of the city within the meaning of the constitutional provision, since such city stocks are not debts which the municipality can be called upon to pay, and that the indebtedness referred to in the Constitution is an indebtedness to be met in the future by taxation. Similar decisions have been made Coleman v. New Kensington, 140 Fed. Rep. 684; Keller v. Scranton, 202 Pa. 586. Debts assumed by a city in the purchase of property constitute part of the city's indebtedness. Waite v. Santa Cruz, 184 U. S. 302. Bank for Savings v. Grace, 102 N. Y. 313. After referring to the constitutional amendment and reviewing the legislation respecting the sinking fund of the city of New York, the court said: "This construction cannot lead to a diversion of the sinking fund, but to the accomplishment of its object. It satisfies also the intent of the constitu tional prohibition. That is aimed at an actual, not a theoretical, indebtedness, at a substantial liability which can be discharged only by the enforcement of a tax or an assessment which, when levied, will be a charge upon the taxpayer and a burden for him to remove; not a formal obligation which may remain as evidence of a once existing debt, but which can in no way be regarded as a present debt to be enforced, and which, if not before cancelled in the discretion of the commissioners, becomes waste paper by the mere efflux of time." by the courts of other States under similar constitutional provisions.1 In some cases it has also been held that cash belonging to the sinking fund should be deducted from the aggregate amount of indebtedness in determining whether the constitutional limit has been reached. But it has been decided in Pennsylvania that securities in the sinking fund which are not the city's own obligations are merely assets available to reduce the debt at some future period and cannot be deducted.3 2 § 207. The Assessed Value of Property and its Relation to Indebtedness. The usual constitutional debt-limit provisions have created a standard by which the validity of municipal indebtedness is to be determined. In that standard two factors are to be considered: one, the amount of the assessed value of property within the municipality; the other, the ratio between that assessed value and the debt already contracted or proposed to be contracted.* These provisions are limitations and not grants of power, and the power to incur debt exists, if at all, independently of them. Therefore the limitation does not become operative until there has been an assessment of the property in the municipality; and the facts that the municipality is newly organized and that there has not been 1 Kelly v. Minneapolis, 63 Minn. 125; Rice v. Milwaukee, 100 Wis. 516; Stone v. Chicago, 207 Ill. 492; Brooke v. Philadelphia, 162 Pa. 123; Bruce v. Pittsburg, 166 Pa. 152. 2 Stone v. Chicago, 207 Ill. 492; Rice v. Milwaukee, 100 Wis. 516; Kelly v. Minneapolis, 63 Minn. 125; Williamson v. Aldrich, 21 S. Dak. 13; 108 N. W. Rep. 1063. Brooke v. Philadelphia, 162 Pa. 123, where the court said: "There are, besides these, other securities, not those of the city, in the fund. As to these last, obviously, they remain in the fund, bound by the inviolable pledge which attached to them when they first became part of it. So far as concerns them, they have not yet been applied in payment or redemption of any part of the funded debt. An asset of the city, easily convertible into cash, they undoubtedly are, but as yet they have not operated to the reduction of the funded debt, to which purpose they were pledged. In effect, they only represent the savings of the city, set aside in anticipation of payment of the debt; as to any actual reduction of the debt by them, there has been none; the debt is still an outstanding liability unaffected by the savings, with only an increased ability on the part of the city to pay; an increase in ability measured by the cash value of the savings. When used in purchase of the debt, there is a release of the pledge, and a discharge of the obligation, to the amount of the purchase." If there is no power to sell such securities, and if they must be held and applied to the debt, the rule in Brooke v. Philadelphia, is so strict that it may not everywhere be adopted. Whether for the same reason which excludes other securities from consideration in arriving at the net amount of the debt, cash belonging to the sinking fund can be taken into account, quære? See supra, 205. Lake County v. Graham, 130 U. S. 674; s. c. ante, § 193; supra, § 204; and compare Gunnison County v. Rollins, 173 U. S. 255; Guthrie v. New Vienna Bank, 4 Okla. 194; Roger Mills County v. Hall Lith. Co., 8 Okla. 378. See on general subject of debt limitations in connection with municipal bonds and recitals therein, post, chapter on Municipal Bonds. any assessment of the property within its limits do not prevent it from incurring debt for the ordinary and necessary expenses of its organization.' It is, unless otherwise provided in the Constitution, the assessment which was in force at the time when the debt was incurred that controls, i. e., the assessment immediately preceding the incurring of the debt. It is not the assessment made within the same fiscal year, if it is not completed until after the debt is contracted. If the debt was within the limit at the time when it was incurred, warrants issued by the city for its payment are valid although the city had exceeded the limit when the warrants were issued. Where a vote is required, the validity of bonds issued pursuant to such vote is to be determined by the last assessed valuation of the property before the bonds are issued, not the last assessment before they are voted or directed to be issued. The "assessed 3 Roger Mills County v. Hall Lith. Co., 8 Okla. 378, overruling Guthrie v. New Vienna Bank, 4 Okla. 194. See also Coffin v. Kearney County, 114 Fed. Rep. 518; Hoffman v. Commissioners, 3 Okla. 325; Sauer v. McMurtry, 4 Okla. 447; McMurtry v. Commissioners, 6 Okla. 60; Roger Mills County v. Rowden, 8 Ókla. 406. In Childs v. Anacortes, 5 Wash. 452, it was held that if a city has been recently incorporated, it may, until a regular assessment for city purposes can be made, take the last assessment roll of the county as the basis of the valuation of property by which to measure its power to incur debt. Although a village forms part of a taxing district consisting of a town, and there is no separate assessment roll for the village, a statutory limitation on the power of the village is effective, and the value of the property within its limits is to be ascertained from an examination of the assessment roll of the town. Du Toit v. Belview, 94 Minn. 128. 2 Lake County v. Standley, 24 Colo. 1; Culbertson v. Fulton, 127 Ill. 30; Lussem v. Sanitary District of Chicago, 192 IN. 404; Wilkinson v. Van Orman, 70 Iowa, 230. If the indebtedness is created by an issue of bonds, which are to be held in escrow and not delivered until certain work is done, e. g., a railroad completed, the indebtedness is only incurred at the time stipulated for the delivery of the bonds, and their validity is to be determined by the assessment next before the completion of the railroad and the delivery of the bonds. Colburn v. McDonald, 72 Neb. 5 431; State v. Tomahawk, 96 Wis. 73. There may be cases, we think, where this rule would not apply and where the delivery would relate back to the date of the escrow. For example, a city under statute authority executes bonds, advertises them for sale to be delivered in instalments as the city needs the money to pay for public improvements then in progress, and for that purpose pursuant to contract with the purchaser places the bonds in escrow to be delivered from time to time to the purchaser under the contract upon payment of the purchase money. In such a case we see no reason why the delivery upon payment would not relate back under the doctrine of relation to the time when the bonds were put in escrow. The assessment will be considered as valid for the purpose of the constitutional limitation, although the assessors did not make their report within the time fixed by the charter, if it is filed soon after that time, accepted and acted on, and taxes collected thereunder. Atlantic Trust Co. v. Darlington, 63 Fed. Rep. 76. 3 Culbertson v. Fulton, 127 Ill. 30; Wilkinson v. Van Orman, 70 Iowa, 230; State v. Cornwell, 40 S. Car. 26; Germania Sav. Bank v. Darlington, 50 S. Car. 337. Childs v. Anacortes, 5 Wash. 452; Western Town Lot Co. v. Lane. 7 S. Dak. 599. 5 Thomson-Houston El. Co. v. Newton, 42 Fed. Rep. 723; Dudley v. Lake County Com'rs, 80 Fed. Rep. 672, 677; Rathbone v. Board of Com'rs, 83 Fed value" means the value placed upon property for the purpose of taxation by officials appointed for that purpose, and not the actual or real or market value of the property.' The terms "assessment" assessors were directed to insert in a column marked "assessed value." All taxes were to be computed on the latter. It was held that under the latter statute the "assessed value" and not the "full value" was the criterion for determining the limit of indebtedness. Chicago v. Fishburn, 189 Ill. 367; but quare, whether such a view does not reduce the debt limit below the limit intended by the Constitution? Rep. 125; Board of Education v. Nat. L. Ins. Co., 94 Fed. Rep. 324; Lake County v. Sutliff, 97 Fed. Rep. 270, 281; Corning v. Meade County, 102 Fed. Rep. 57. But see State v. Babcock, 24 Neb. 640; Chicago, B. & Q. R. Co. v. Wilber, 63 Neb. 624. Where a statute declares that before any bond issued by a city shall be valid, it shall be presented to and registered by the State auditor, the indebtedness is incurred, not as of the date of such recording, but Construing the provision of the Iowa at the date of the execution and issue, Constitution prohibiting municipal infrom which time by their terms they debtedness to an amount exceeding five bear interest. Prickett v. Marceline, per cent "on the value of the taxable 65 Fed. Rep. 469. Where bonds were property" within the municipality, and invalid when issued by reason of defects a subsequent act of the legislature prohaving no connection with the consti- hibiting municipal corporations from tutional limit, and a statute was passed becoming indebted to an amount exceedvalidating them and imposing the debt ing one and one-fourth per centum "on upon the municipality, the assessed the actual value of the property" within value was held to be that immediately preceding the enactment of the statute and not that preceding the issue of the bonds. Massachusetts & S. Const. Co. v. Cane Creek Tp., 45 Fed. Rep. 336. But where warrants are invalid because they were issued for a debt incurred without a previous vote of the electors as required by the Constitution of Washington, a vote in ratification thereof relates back to and validates them as of the date of their issue, and the question whether they are within the constitutional limit of indebtedness is to be determined by the assessment roll immediately preceding the date of issue, and not by that immediately preceding the election to ratify and validate them. West v. Chehalis, 12 Wash. 369. See also Williams v. Shoudy, 12 Wash. 362. 1 Massachusetts & S. Const. Co. v. Cane Creek Tp., 45 Fed. Rep. 336; City Water Supply Co. v. Ottumwa, 120 Fed. Rep. 309; State v. Tolly, 37 S. Car. 551. At the time when the provision of the Illinois Constitution was adopted, the statute required the assessment of property at its actual value, though as matter of fact, by a custom sanctioned by the courts and every department of the government, the assessed value appearing in the rolls was far below the actual or full value. A statute subsequently enacted required the assessor to determine the fair cash value, and insert it in a column headed "full value." One-fifth of this amount the But the municipality, it was contended |