                                     No. 12263

         I N T E SUPREME C U T O THE STATE O MONTANA
              H           OR    F           F




BURLINGTON NORTHERN I N C , ,
s u c c e s s o r t o Great Northern Railway
Company, a c o r p o r a t i o n ,

                             P l a i n t i f f and A p p e l l a n t ,



ETATHEAD COUNTY, a p o l i t i c a l s u b d i v i s i o n
o f t h e S t a t e of Montana e t a l . ,

                             Defendants and Respondents.



Appeal from:        D i s t r i c t Court of t h e Eleventh J u d i c i a l D i s t r i c t ,
                    Honorable Robert Sykes, Judge p r e s i d i n g .

Counsel o f Record:

     For Appellant :

            Gough, Booth, Shanahan and Johnson, Helena, Montana.
            Ward Shanahan argued, Helena, Montana                         .
     For Respondents :

            Baldwin and J e l l i s o n , K a l i s p e l l , Montana.
            M. Dean J e l l i s o n argued, K a l i s p e l l , Montana.



                                                        Submitted:         A p r i l 24, 1973

                                                           Decided :

Filed   :JfR 1 3 1973                                                    3 v IJI ri5
                                                                              ~

                         4
Mr. Justice John Conway Harrison delivered the Opinion of the
Court.

     This is an appeal from a summary judgment entered in the
district court of the eleventh judicial district, Flathead County,
in an action challenging a 1968 county airport levy. The trial
court held for the county and plaintiff railroad company appeals.
     The Board of County Commissioners of Flathead County in
its 1968-69 budget adopted the following budget for the county
airport fund:
                                         "Taxable Valuation $41,987,688 '
     "#215 Airport Fund
     tt
          Total Expenditures last year     $29,833
          Last Yeark budget                $67,942
          Receipts Last Year from Taxes
          Estimated Expenditures this year
                               $41,035
              Capital Outlay   $29,000
              Less 119.13 OW
                                    Total $70,035
          Cash in Fund         $42,226.03
          Estimated Receipts   $ 6,701
                                   Total $48,808
          Tax Levy -51
          Mills required to raise balance $21,227",
     At the time the budget was considered there was an estimated
expenditure of $41,035 and a capital outlay expenditure of $29,000.
When the budget was adopted and the levy fixed, there was cash on
hand in the amount of $42,226.03 less an outstanding warrant of
$119.13, and estimated receipts of $6,701.        The tax requirements
for the following year were set at a levy of .51 mills (2 mills
being the maximum) which raised the necessary $21,227 for the
budget.     The proposed capital outlay expenditure of some $21,227
was to be used in that fiscal year to remodel an already existing
airport building which,appellane argues, created a debt or liability
exceeding the sum of $10,000 in violation of Art. XXZI, Sec. 5,
Montana Constitution, and sections 16-807 and 16-1904, R.C,M.
1947. Appellant paid its taxes under protest.
         Respondent county argues i t makes no d i f f e r e n c e whether t h e
c a p i t a l o u t l a y expenditure r e l a t e s t o an e x i s t i n g f a c i l i t y (as t h e
t r i a l c o u r t found) o r a new f a c i l i t y .        F u r t h e r , i t makes no d i f -
ference whether a p a r t of t h e money proposed t o be expended i n
t h e 1968-69 budget was money l e f t over from t h e previous year o r
money t o be r a i s e d by t a x e s during t h e c u r r e n t year, i f t h e t o t a l
amount proposed t o be spent was less than t h e amount t h a t would
be r a i s e d by t h e permissible m i l l levy during t h e c u r r e n t year.
         The only i s s u e on appeal i s whether o r n o t t h e t r i a l c o u r t
e r r e d i n determining t h a t a c a p i t a l o u t l a y expenditure f o r an
e x i s t i n g f a c i l i t y could be discharged by t h e county by applying
"cash on hand" f i r s t t o t h e expenditure, and then by using t h e
a v a i l a b l e m i l l levy t o r a i s e t h e balance needed f o r t h e Flathead
County a i r p o r t operation f o r t h e f i s c a l year ending June 30, 1969,
         W f i n d t h e t r i a l c o u r t e r r e d i n reaching i t s conclusion t h a t
          e
t h e financing procedure followed by respondent county was proper.
         Clearly t h i s type of budget procedure v i o l a t e s s e c t i o n s 16-
1901 through 16-1911, R.C.M,                  1947, (County Budget System) enacted
t o give t h e taxpayer n o t i c e a s t o how h i s taxes w e r e t o be spent
and p r o t e c t i o n from t h e improper use of t a x monies.                        Section 16-
1904(2) c l e a r l y provides t h a t t h e cash balance i n any fund must
be applied f i r s t a g a i n s t ordinary expenses i n t h e budget.                        "Funds
on hand" a t t h e end of a f i s c a l year a r e t o be used t o reduce t h e
t a x requirements of t h e next f i s c a l year.                  C a p i t a l o u t l a y items
must be s i n g l e d out f o r taxpayers' consideration.                        Section 16-1902,
R,C.M.        1947, r e q u i r e s :
         "* * * Expenditures f o r            c a p i t a l o u t l a y s h a l l set
         f o r t h and d e s c r i b e each   o b j e c t of expenditure
         s e p a r a t e l y . * * *"
The procedure a l s o v i o l a t e s A r t . XIIL, Sec. 5 , Montana C o n s t i t u t i o n ,
which provides i n p e r t i n e n t          part:
         I1
           N county s h a l l i n c u r any indebtedness o r l i a -
            o
         b i l i t y f o r any s i n g l e purpose t o an amount ex-
         ceeding t e n thousand d o l l a r s ($10,000) without
         t h e approval of a m a j o r i t y of t h e e l e c t o r s t h e r e o f ,
         v o t i n g a t an e l e c t i o n t o be provided by law",
This constitutional provision has been executed by section
16-807, R.C.M.    1947, which provides:
     "Limit of Indebtedness. No county must become in-
     debted in any manner for any purpose to an amount,
     including existing indebtedness, in the aggregate
     exceed-ing five per centum of the val.ue of the taxable
     property therein, to be ascertained by the last assess-
     ment for state and county taxes previous to the in-
     curring of such indebtedness, and all bonds or obliga-
     tions in excess of such amount given by or on behalf
     of such county are void. No county must incur any
     indebtedness or liability for any single purpose to
     an amount exceeding ten thousand dollars without the
     approval of a majority of the electors thereof voting
     at an election to be provided by law."
     Here, there can be no question but that the action taken
by the Board of County Commissioners in contracting to remodel
the airport building created an "indebtedness or liability" within
the meaning of both the constitutional and statutory provisions,
and was for a "single purpose".    State ex rel, Diederichs v.
Board of Trustees, 91 Mont. 300, 7 P.2d 543; State ex rel. Ward
v. Anderson, 158 Mont. 279, 491 P.2d 868.
     In effect, what was done here by respondent county was to
over levy for the airport fund in 1967 and create a fund to which
it made the necessary levy the following year and thereby accomp-
lished the remodeling of the airport building without allowing
the electors to vote on it. At that time Montana law did not
allow any accumulation of a "reserve fund".    Section 1-804, R.C.M.
1947, provided:
     "1-804. Tax levy for establishment and operation of
     airports. For the purpose of establishing, constructing,
     equipping, maintaining and operating airports and landing
     fields under the rovisions of this act the county com-
                        'i
     missioners of [or the city or town council may each
     year assess and levy in addition to the annual levy for
     general administrative purposes, a tax of not to exceed
     two (2) mills on the dollar of taxable value of the
      roperty of said county, city or town, In the event of
       jointly established airport or landing field, the county
     commissioners and the council. or councils involved shall
     determine in advance the levy necessary for such purposes
     and the proportion each political subdivision joining in
     the venture shall pay, based upon the benefits it is de-
     termined each shall derive from the project. Provided
     that if it be found that the levy hereby authorized will
     be insufficient for the purposes herein enumerated, the
     commissioners and councils acting are hereby authorized
     and empowered to contract an indebtedness on behalf of
         such county, c i t y o r town, a s t h e c a s e may be,
         upon t h e c r e d i t thereof by borrowing money o r
         i s s u i n g bonds f o r such purposes, provided t h a t
         no money may be borrowed and no bonds may be
         i s s u e d f o r such purpose u n t i l t h e proposition
         has been submitted t o t h e taxpayers a f f e c t e d
         thereby, and a majority v o t e t o be cast t h e r e f o r , "
         (Emphasis added).
         I n 1969, s e c t i o n 1-804, R,C.M,        1947, was amended t o allow t h e
c r e a t i o n of a "reserve fund" but only f o r t h e use by t h e county
t o "resurface, overlay, o r improve e x i s t i n g runways, taxiways and
rampsft.      Even under t h i s amendment, t h e county could n o t have f i -
nanced t h e remodeling of t h e a d m i n i s t r a t i o n b u i l d i n g i n t h e manner
which i t did.
         There was, a s shown previously, some $42,000 l e f t over from
t h e previous year, t h e t o t a l expenditure t h e previous year was
$29,833 out of a budget of $67,942.                    Very, very c l e a r l y , t h e
county had c r e a t e d a "reserve fund" by t h e simple device of
over-levying a tax.            The county extended a levy a g a i n s t t h e tax-
payers f o r a c a p i t a l o u t l a y expenditure and spread i t over two
y e a r s ; and thus, by t h e i r b o o t s t r a p s picked themselves up and
jumped over t h e c o n s t i t u t i o n a l l i m i t a t i o n bf A r t . X I I I , Sec, 5 ,
and t h e s t a t u t o r y provisions of s e c t i o n s 16-807 and 16-1904,
R.C.M.     1947.
         This "bootstrap" operation then allowed t h e county, under
t h e r a t i o n a l e of S t a t e ex rel. Diederichs v. Board of T r u s t e e s ,
9 1 Mont. 300, 7 P.2d 543, t o claim t h a t no "indebtedness o r
l i a b i l i t y t t was c r e a t e d because t h e money was already on hand.
I n Diederichs, t h e money on hand came from insurance proceeds a s
a r e s u l t of a f i r e which destroyed t h e school b u i l d i n g f o r which
v o t e r s had already approved bond financing.                    I n the i n s t a n t case
t h e funds on hand came about by v i o l a t i n g t h e county budget laws.
         This decision i s c o n s i s t e n t with t h e r a t i o n a l e of Cause No.
12390, Burlington Northern Inc. v, Richland County, decided t h i s
same date.
         The judgment of the district court is reversed and it is
    directed to enter judgment for appellant.




                                   f    A
                                            ?
                                            ociate Justice




/     /Chief Justice




    .................................
      Associate Justices.
M r , J u s t i c e Gene B. Daly and Mr, J u s t i c e Frank I. Haswell
dissenting:
        W r e s p e c t f u l l y d i s s e n t t o t h e view o f t h e m a j o r i t y ,
         e
The t e x t of t h e m a j o r i t y opinion concludes w i t h t h e s t a t e m e n t :
"This d e c i s i o n i s c o n s i s t e n t w i t h t h e r a t i o n a l e of Cause No.
12390, E u r l i n g t o n Northern Inc. v. Richland County, decided
t h i s same d a t e . "       W agree with the r a t i o n a l e applied i n t h e
                                e
Richland County c a s e and t h a t t h e r a t i o n a l e a p p l i e d i n t h e
p r e s e n t c a s e i s c o n s i s t e n t w i t h t h a t of t h e Richland County c a s e ,
however, t h e f a c t s o f t h e p r e s e n t c a s e a r e i n no way c o n s i s t e n t
w i t h t h o s e of t h e Richland County c a s e .
         I n t h e Richland County c a s e an "indebtedness o r l i a b i l i t y "
of $200,000 from t h e S t a t e Aeronautics Board was undertaken by
t h e Sidney-Richland County A i r p o r t Commissi.on f o r t h e " s i n g l e
purpose1f of a i r p o r t runway c o n s t r u c t i o n .             Repayment of p r i n c i p a l
and i n t e r e s t was t o be made by t h e county from t h e proceeds of a
one and one-half m i l l levy t o be r e a p p l i e d u n t i l repayment was
complete,
        I n t h e p r e s e n t c a s e t h e Flathead County Board o f Commis-
s i o n e r s approved e x p e n d i t u r e of about $70,000 f o r remodeling work
on t h e a i r p o r t a d m i n i s t r a t i o n b u i l d i n g .   Funds remaining from
previous y e a r s ' budgets i n t h e amount of about $42,000 and a
one-half m i l l l e v y e f f e c t e d t o provide about $29,000 made up
t h e t o t a l expenditure,              The county i s p e r m i t t e d under s e c t i o n
1-804, R.C.E.I.         1947, t o impose a "permissive" two m i l l l e v y " f o r
t h e purpose of e s t a b l i s h i n g , c o n s t r u c t i n g , equipping, m a i n t a i n i n g
and o p e r a t i n g a i r p o r t s   *      *I1.      (Emphasis s u p p l i e d ) .   The r e c o r d
i n d i c a t e s t h a t had t h e maximum permissive two m i l l a i r p o r t l e v y
been e f f e c t e d , over $80,000 would have been r a i s e d thereby.                           The
permissive one-half m i l l a i r p o r t levy which was e f f e c t e d , t o g e t h e r
w i t h remaining funds, provided t h e t o t a l amount of a u t h o r i z e d
expenditure.            Consequently, t h e r e was never any "indebtedness o r
l i a b i l i t y " i n c u r r e d by Flathead County w i t h i n t h e meaning of
A r t . X I I I , Sec. 5 , of t h e Montana C o n s t i t u t i o n .
       The a p p l i c a t i o n of t h e c o n s t i t u t i o n a l p r o v i s i o n contained
i n A r t . X I I I , Sec. 5 , by t h e m a j o r i t y i n t h e p r e s e n t c a s e , i n
our view, i s i n c o r r e c t , a s pointed out i n S t a t e ex r e l . Diederichs
v , Board of T r u s t e e s , 91 Mont, 300, 305, 7 P.2d 543, w h i l e
q u o t i n g w i t h approval language from S t a t e ex r e l . Rankin v . Board
of Examiners, 59 Mont. 557, 197 P. 988, 992:
       11 II n c o n s t r u i n g our c o n s t i t u t i o n a l p r o v i s i o n
       a p p l i c a b l e , we have under c o n s i d e r a t i o n t h e
       meaning of t h e words "debt o r l i a b i l i t y , " and
       i n our view t h e p r o h i b i t i o n intended by t h e s e
       words i s t h e c r e a t i o n of a d e b t o r o b l i g a t i o n
       of t h e s t a t e i n excess of cash on hand and
       revenue provided f o r t ;k + %.        :    ***            No p r o v i s i o n
       of law h a s been made f o r s u b m i t t i n a t o t h e
       e l e c t o r s t h e q u e s t i o n of t h e expen&ture of c a s h
       on hand r a i s e d f o r a d e f i n i t e purpose, i n excess
       ~-00;                 and by t h e lawmakers t h i s c o n s t i t u t i o n a l
       r e s t r i c t i o n h a s been i n t e r p r e t e d a s a r e s t r i c t i o n
       upon t h e borrowing o f money, a s by s t a t u t e a method
       i s provided f o r t h e manner of s u b m i t t i n e t o t h e
                                                                    U

       people t h e q u e s t i o n of borrowing money i n excess of
       $10,000." (Emphasis s u p p l i e d ) .
       W would a f f i r m t h e summary judgment e n t e r e d by t h e d i s t r i c t
        e
court.




                                                      Associate J u s t i c e s .
