Pbgh. Paving Co., for Use v. Pbgh. , 332 Pa. 563 ( 1938 )

The appellant, City of Pittsburgh, in a petition for reargument urges that reconsideration be given the question whether certain tax anticipation certificates issued by the Borough of Overbrook in 1928 for current expenses, which remained unpaid in 1929, should be included in calculating the councilmanic indebtedness of the Borough for the 1929 year. These certificates were issued between April 14th and December 31, 1928, in the aggregate amount of $23,900 and the proceeds of the loans thereby represented were used to pay current expenses of the Borough incurred during the year 1928. We approved, in the opinion filed in this case, the action of the court below in excluding this item in determining the amount of the councilmanic debt in 1929. The issue involved in the case was whether certain paving contracts entered into by the Borough prior to its annexation to the City of Pittsburgh, caused its councilmanic borrowing power to be exceeded.

While the petition sets forth that appellant does not question the validity of these certificates and it is conceded that temporary loans payable out of current revenues do not diminish borrowing power for the year then current, it is contended that when such indebtedness remains unpaid and is carried over into a subsequent year, it should thereafter be treated as councilmanic debt. It is insisted that this principle should be followed in the present case, since the Borough diverted to other purposes the taxes imposed to pay off this indebtedness, and made no provision in its 1929 budget to liquidate the item.

Appellant calls attention to the decision of this Court inPenna. P. L. Co. v. City of Bethlehem, 323 Pa. 313, in support of its position. In that case it appears that the municipality in each year over a five-year period "budgeted 100% of its current taxes while the actual collection of taxes was below that amount, and at the end of each year it borrowed to pay for that year's operating expenses." We condemned such a method of financing current expenses of a municipality, or of meeting a deficit therein incurred, and held it to be "a mere subterfuge to evade the constitutional prohibition," limiting the amount that may be borrowed without a vote of the electors to two per centum of the assessed valuation of its taxable property.

In the present case, the record clearly indicates that these loans were made by the Borough officials with the bona fide intention of making repayment of them in 1928 out of current revenues reasonably expected to be sufficient for that purpose. There is nothing to indicate an attempt at evasion of the law,particularly since the outstanding uncollected taxes for theyear 1928 were at all times in excess of the borrowings forthat year. In other words, there was a substantial margin of delinquent taxes for 1928 over the total of outstanding current expense loans.

It has been consistently held by this Court that if such loans do not overreach current revenues and do not extend beyond the present means of payment possessed by the municipality, then no debt is created in a constitutional sense. See Erie's Appeal, 91 Pa. 398; Georges Twp. v. Union Tr.Co., 293 Pa. 364; Athens Nat. Bank v. Ridgebury Twp., 303 Pa. 479; Scranton Elec. Co. v. Old Forge Boro., 309 Pa. 73; see also Kelley v. Baldwin, 319 Pa. 53. Of course, the taxes pledged for the payment of such loans cannot be used again as an asset in computing the municipal debt. See Ward v. Pittsburgh, 321 Pa. 414. However, it appears from the record that this was not done in the present case, as the credit allowed for delinquent taxes for 1928 was for such taxes not pledged for current expense loans.

For these reasons we are of opinion that the present case is clearly distinguishable upon its facts from the situation before us in Penna. P. L. Co. v. City of Bethlehem, supra, and it was not error for the court below to exclude the item of $23,900 in the computation of the Borough's councilmanic debt in 1929. Other reasons set forth in the petition as grounds for the granting of a reargument are without merit.

The petition is refused.