District Bd. T. S. Trustees v. City of Lexington , 227 Ky. 7 ( 1928 )

I dissent from the decision of the court in so far as it holds unconstitutional chapter 155 of the Acts of 1926, and fails to define the duties of the city and county with respect to the maintenance of the institution. The majority opinion fairly and fully states the facts and history of the case, and I proceed at once to a consideration of the constitutional questions involved.

Chapter 155 of the Acts of 1926 is held invalid on the grounds that it offends sections 171, 181, and 181a of the Constitution of the state.

1. Sections 181 and 181a forbid the General Assembly from imposing taxes for the purposes of any county, city, town, or other municipal corporation. The same sections authorize the General Assembly to confer on the local authorities the power to assess and collect taxes for purely local purposes. The extent of the taxing power to be delegated to the governmental subdivisions, even for local purposes, is left to the Legislature. When the act in question is properly understood, it will be seen that sections 181 and 181a have no application to it. The Legislature has not attempted to levy taxes for the purposes of any county, city, town, or other municipal corporation. It has directed, empowered, and authorized the county and city to levy taxes annually for the maintenance of an institution for the promotion of the public health. The protection of the health of the people is of state-wide concern, as well as vital to each particular governmental unit. The health of the people, as Disraeli remarked, is the foundation of the power, progress, and prosperity of the state. In matters that serve a state-wide purpose and subserve a local need, the General Assembly is free to legislate, and the limitations of sections 181 and 181a of the Constitution do not apply. The state itself may act on such subjects and at the same time require action by the local agencies of the government, such as cities and counties. McDonald v. City of Louisville, 113 Ky. 429-438, 68 S.W. 413, 24 Ky. Law Rep. 271.

In the City of Louisville v. Commonwealth, 134 Ky. 488,121 S.W. 411, this court said:

"Section 181 of the Constitution refers to matters municipal. The State could as well have required the schools of Jefferson County, including Louisville, to have been under the supervision and control of the county fiscal court, and that body required to levy a fixed tax, or one between minimum and maximum rates, as have left the tax rate with the city council. The section in question does not pertain to municipal affairs, nor does it attempt to levy a tax therefor. It is competent for the State to administer its government through such agencies as the Legislature may choose, when the Constitution does not expressly provide otherwise."

Cf. City of Louisville v. Board of Education, 154 Ky. 316,157 S.W. 379.

The principle was first applied to taxation for the support of public schools, but it has likewise been applied to statutes for the encouragement of agriculture (Carman v. Hickman County,185 Ky. 630, 215 S.W. 408; Hendrickson v. Taylor County Farm Bureau, 196 Ky. 75, 244 S.W. 82), the collection and preservation of vital statistics (Furlong v. Darnaby, 206 Ky. 63, 257 S.W. 707, second appeal, 216 Ky. 475, 287 S.W. 913), the enforcement of state law (Duke v. Boyd County, 225 Ky. 112 7 S.W.2d 839), and for certain expenses in the operation of the House of Reform, as it affected particular counties (Lang v. Com., 190 Ky. 29, 226 S.W. 379).

It is plain that taxes may be levied for any public purpose, and, if the purpose is not purely local, but within the police power of the state as well, the Legislature may direct the governmental agencies in their respective limits to levy and collect taxes therefor. The preservation of the public health is a public duty, and one of the undisputed sources and subjects of the police power of the state, as is conceded in the majority opinion.

The case of Campbell County v. City of Newport, 174 Ky. 712,193 S.W. 1, L.R.A. 1917D, 791, is cited in support of the present decision. The opinion in that case clearly states what it decided. It was decided that Campbell county could not recover from the city of Newport a portion of the expense it had incurred in maintaining a juvenile court, "first because the suit was an attempt on the part of Campbell county to impose a tax on the property of the citizens of Newport without their consent, and, second, because it was an attempt to lay a tax on a part of the property of the county while exempting other like property in the county from the payment of the tax." It was not denied in that decision, but, on the contrary, it was declared, that the Legislature had power to establish juvenile courts for counties as well as cities and to authorize the county and city to levy a tax for the purpose of maintaining it. Cf. Furlong v. Darnaby, 206 Ky. 63,257 S.W. 707, Id., 216 Ky. 475, 287 S.W. 913. In Duke v. Boyd County,225 Ky. 112, 7 S.W.2d 839, it was held that the General Assembly could constitutionally compel a county to pay a fixed fee to a city policeman for the performance of a service to the commonwealth in the enforcement of the state law.

The fundamental fallacy in the majority opinion, as I view it, lies in the assumption that the tuberculosis sanatorium is a purely county institution. This is illustrated by the statement that "the vital question in this case being as to whether the city of Lexington may be taxed for the purpose of a purely county institution, and that tax in effect levied by the fiscal court. This feature distinguishes the present case from those cited, supra, in which similar legislation was upheld." Again the majority opinion says "the county boundary is the territorial limit of the district and by inference the county is the taxing unit." The sanatorium, in my judgment, is not a county institution. It would be more accurately described as an independent institution of the state, established and maintained for a proper public purpose, of both local and state-wide concern. Such institutions may be supported by the state, or the state may require governmental agencies benefited by the services rendered by the institution, such as cities and counties where it is located, to contribute to its support and maintenance. That the county is not necessarily the sole taxing unit is clearly apparent. The circumstance that the county boundary describes the territorial limit of the district does not make it a county institution. When the district is composed of more than one county, such is not the fact. The county and the sanatorium district are separate entities, although the boundaries sometimes coincide. Separate institutions may exist within the same territorial limits. A corporate entity is a thing apart from a geographical boundary, although the latter defines the territory within which the former performs its functions. Whitt v. Wilson, 212 Ky. 281, 278 S.W. 609.

There are two taxing units or governmental agencies, invested with the power to tax, situated within the territorial limits of the same sanatorium district. One is the county of Fayette and the other is the city of Lexington. One is no more the exclusive taxing unit for the support of the district than the other, unless the Legislature makes it so. It has precisely the same right to require the city to levy a tax for the institution that it has to require such action by the county. If the Legislature has no power to compel the city to levy a tax, by a parity of reasoning it could not require the county to do so. But the decisions cited in the majority opinion clearly sustain the right of the Legislature to require either or both of the governmental agencies possessing the power of taxation to exercise that power on behalf of the state institution known as the tuberculosis sanatorium. I think the authorities and the reasoning that underlies them compel the conclusion that chapter 155 of the Acts of 1926 is not invalid by reason of anything contained in sections 181 or 181a of the Constitution or arising from the implications of those provisions. Nor do I believe that the authorities cited can be put aside or answered by saying that the tuberculosis sanatorium is a county institution, when in fact it is created and conducted under the authority of the state for the protection of the public health — an object that affects directly both the state at large and the local communities where it is maintained. It appears to me that it is distinctly and typically an institution created for the exact character of public service contemplated by those cases.

2. Section 171 of the Constitution provides, in substance, that taxes shall be levied and collected for public purposes only and shall be uniform upon all property of the same classsubject to taxation within the territorial limits of theauthority levying the tax. The majority opinion proceeds upon the assumption that the sole authority levying the tax is the county of Fayette. It is said that double taxation results because all the property in the city of Lexington is subject to taxation for the same purpose in the same year against the same owner by both the city and the county. The fallacy of the assumption appears when the facts are rightly understood. The tax is not levied for the city by the fiscal court, but by the legislative board of the city. The tax is levied for the county by the fiscal court and is uniform upon all property of the same class within the county which is the authority levying the tax, and it is levied and collected but once each year. It is levied and collected for a public purpose under direct authority of the General Assembly. The authority levying the tax in the city of Lexington is its legislative board, and the tax is levied but once each year for a public purpose, and is uniform upon all property of the same class within the city. It is likewise levied under direct authority of the General Assembly. This exact question was dealt with in the case of City of Louisville v. Commonwealth, 134 Ky. at page 497, 121 S.W. 413, where it was said:

"Section 171 of the Constitution requires that taxes must be uniform and assessed against all property within the territorial limits of the authority levying the tax. It is argued for appellant that, if the Legislature is levying this tax, it is not uniform upon all property within its authority, and that the city cannot be said to be levying the tax, because the city is left no discretion in the matter. Treated on its broader ground, we think the section was aimed to equalize the burden of taxation upon the subjects paying it and to be benefited by it. . . .

"But, if it be preferred to rest the matter upon the narrow ground — that is, whether the levy of the tax was made by the municipality — we think it can be done. The Legislature may and does provide for much of the State government through agencies such as counties and cities. . . . That the city or county is mandatorily required to levy a specific rate is not more objectionable as an infringement of power than if they were simply required to levy at some rate in their discretion. If the State can adopt an agency for carrying on some part of the government, it may delegate to the agency the power to do what is required of it. If it may delegate discretionary power, it may likewise delegate the power shorn of the discretion, as the latter is less than the former. It is not denied that the State can limit the rate of taxation in all these matters as to the maximum. So it can limit it as to the minimum. It is wholly discretionary with the Legislature, where the Constitution is silent upon the subject."

The majority opinion says that double taxation results upon the citizens of the city when they are taxed by the county and also by the city for the support of a single institution. But that does not constitute double taxation within any definition or delimitation that can be discerned in section 171 of the Constitution. The majority opinion, on this branch of the case, proceeds upon the same erroneous assumption heretofore indicated. It says:

"We have seen that the sanatorium is a county institution established and controlled by county agencies. In a district composed of a single county, the county is the geographical and political unit of the district."

The whole disagreement arises from confusion respecting the unit exercising the authority to levy a tax. The unit of taxation under the act in question is not the state or the sanatorium district. One unit of taxation selected by the General Assembly in this instance for raising a part of the revenue required is Fayette county, represented by the fiscal court, which has power to levy taxes for the entire county, and that, of course, includes the city of Lexington, which is wholly within that county. But the tax levied by the county is uniform, within constitutional limits, and pursuant to statutory authority. The other governmental unit chosen by the Legislature for the purpose of raising funds by taxation is the city of Lexington. Its legislative board levies the tax upon all property within that unit, within constitutional limits, and pursuant to the same statutory authority. Both taxes are uniform and equal upon all property within the limits of the authority levying the tax, and in literal and exact obedience to section 171. In paying his city taxes, the city taxpayer merely bears his portion of the city's burden. In paying the county tax, he contributes his share of the county's burden, and therefore, pays for another taxing authority. He is subject to two separate governmental authorities, each of which may lawfully levy a tax for a public purpose, and he is under like obligation to pay the taxes levied by each unit. That both taxes are required to support an institution of the state does not make it double taxation or taxing one man twice for the same purpose. He is taxed once to raise the city's contribution, and he is taxed again to raise the county's contribution, but both contributions are necessary to maintain the institution.

When considered in this light, and such is the true light as I see it, it is plain that the act does not infringe section 171 of the Constitution, but literally accords with it. The difference in the rate of levy required of the city and of the county does not destroy uniformity. There is no requirement of uniformity of taxation among governmental units. Each agency is free and independent of the other and unaffected by the duties, burdens or obligations of the other as such. A citizen of each unit owes like loyalty and support to each, and he may not escape his obligations to either by discharging them as to the other. One governmental unit or agency may not be heard to complain that another one has been granted more power or subjected to lesser burdens than are granted to or imposed upon it. Reasonable discrimination that works no injury is not condemned, where no provision of the Constitution is offended. 12 C. J. 1151; City of Louisville v. Com., 134 Ky. 488,121 S.W. 411; Hunter v. City of Louisville, 199 Ky. 834,252 S.W. 119.

Different rates in raising revenue may be applied in separate units of taxation, and classification based on reasonable distinctions is authorized by the Constitution. The classification of cities in this state is a reasonable basis for the exercise of the police power of the state [Jones v. Russell, 224 Ky. 390, 6 S.W.2d 460], and for the application of the powers of taxation. Indeed, it appears that there may be broader powers of classification in matters of taxation than in some other fields of legislation. Citizens' Tel. Co. v. Fuller, 229 U.S. 322, 33 S. Ct. 833,57 L. Ed. 1206; Magoun v. Ill. Trust Savings Bank, 170 U.S. 283,18 S. Ct. 594, 42 L. Ed. 1037; Raydure v. Board of Supervisors,183 Ky. 84, 209 S.W. 19; Associated Producers' Co. v. Board of Sup'rs, 202 Ky. 538, 260 S.W. 335; Swiss Oil Corporation v. Shanks, 208 Ky. 64, 270 S.W. 478, affirmed 273 U.S. 407,47 S. Ct. 393, 71 L. Ed. 709; Middendorf v. Goodale, 202 Ky. 118,259 S.W. 59; Metropolitan Life Ins. Co. v. City of Paris,138 Ky. 801, 129 S.W. 112; Smith v. Commonwealth, 175 Ky. 286,194 S.W. 367.

It is true that the sanatorium district is the unit of service and describes the territorial limits from which the patients may be received, but it is in no sense a unit of taxation or governmental subdivision with authority to tax. Its governing authority is a mere administrative board for the execution of a governmental purpose. The amount of money required to maintain the institution is determined, not by the district board or by the fiscal court, but by the necessities of the case. It depends upon the number of patients provided for and treated at the institution. If there are a great many patients, the maintenance expense will be commensurately large corresponding with the service supplied. Although the district board is authorized to receive and disburse public funds, it is responsible for the faithful discharge of its duties, and there is no prohibition in the Constitution against the appointment of an administrative board for such purposes. Craig v. O'Rear,199 Ky. 553, 251 S.W. 828.

The duty of the governmental agencies to provide funds is measured by the necessities of the situation and the extent of the affliction. Provision must be made annually to meet the conditions existing. If the number of patients become so large that the levies will not take care of them, further admittance to the institution must be denied until further provision can be made.

The majority opinion says the levy required of the city would constitute double taxation in its most pronounced form. In Commonwealth v. Walsh's Trustee, 133 Ky. 103,117 S.W. 398, cited in support of the statement, the court dealt with taxation by the Legislature alone, which was in no respect similar to the case here. In C. T. T. Co. v. Hopkins, 121 Ky. 850, 90 S.W. 594, 28 Ky. Law Rep. 846, also cited to the same point, the court held an ordinance of the city of Eminence invalid under section 171 because it authorized the city to tax the same privilege twice for the same year as against the same owner. The case is obviously dissimilar. In both cases a single sovereignty asserted a right to tax twice in the same year the same property against the same owner, while exempting other property. In Campbell County v. Newport, 174 Ky. 712,193 S.W. 1, L.R.A. 1917D, 791, is found a discussion of double taxation, and it is made perfectly clear that double taxation in the invidious sense, means taxing twice for the same purpose in the same year by the same taxing authority, part of the property in the territory in which the tax is laid without taxing all of it. There can be no double taxation in violation of the uniformity clause of the Constitution by reason of separate levies by distinct authorities.

The majority opinion concedes that the city and county could, by mutual consent and upon terms agreeable to both, if authorized by legislative authority, establish and maintain a joint tuberculosis sanatorium. Hunter v. City of Louisville,199 Ky. 834, 252 S.W. 119. Undoubtedly the concession accords with sound doctrine, but, as was said in the Louisville case (134 Ky. 488, at page 498, 121 S.W. 411, 413), if the Legislature "may delegate discretionary power" to a city or county, "it may likewise delegate the power shorn of the discretion, as the latter is less than the former."

The long line of opinions following that one established the doctrine that, if the General Assembly may authorize the cities and counties to perform certain functions, it has a right to require them to take action for proper public purposes not interdicted by the supreme law. Jones v. Russell, 224 Ky. 390,6 S.W.2d 460.

It is said that the institution is called into existence by the action of the county or its inhabitants, and that the city is not accorded any political rights or representation. It is also said that the city is accorded no privileges or benefits except such as it receives from the county, and as a political subdivision it cannot be seen that the city is at all interested in the institution. In so far as chapter 155 of the Acts of 1926 is concerned, the same thing could be said of the county. The county is not accorded any political rights or representation not equally accorded to the city; and, as a political subdivision, the county is not interested in the institution. All the county does under the act is to levy and collect a tax which is then paid to the district board. And the act directs the city to do exactly the same thing. The city is represented on the district board in the same way the county is represented. The institution in question was established before the act in question was passed, and now the city exercises as much authority concerning it as does the county. It is the people of the city as well as those of the county that are benefited by the work of the institution. So far as the potential patients are concerned, their rights are fixed by two facts, namely: That they be indigent and afflicted, and residents of the district. The people as a whole, considered either as residents of the city or county, are directly benefited by the removal of the afflicted from among them, and by the eradication of the dread disease, or at least by its concentration, restriction, and mitigation. It is the general benefit to the community as a whole, and not the rights of particular individuals to the service, that affords the foundation of the power and duty of the government to impose the burden of taxation. It is entirely beside the point to say that the power of the General Assembly is conditioned on any consent of the city or county or on any special benefit to them as political units. The primary power to legislate does not depend upon the permission of those upon whom the legislation may operate. The essential consent was given when the people reposed in the General Assembly the legislative power.

It must not be forgotten that the Legislature is the supreme lawmaking power in the state, circumscribed only by express constitutional limitations, and, when it acts within the scope of its power, the local governmental units, as well as the people, are bound by its action.

I think chapter 155 of the Acts of 1926 is constitutional and valid, and that the fiscal court and the city of Lexington are required to make levies for the tuberculosis sanatorium in accordance with the act; but, if the act is held invalid, then I think it necessarily follows that the fiscal court is under the whole duty of maintaining the institution, and should make a tax levy sufficient to maintain it and provide the hospital service for all those afflicted people who, under the law, may be entitled to it.

I am authorized to say that Chief Justice Clay concurs in this dissent.