                                           No.    83-324

                 I N THE SUPREME COURT O THE STATE O MONTANA
                                        F           F

                                                  1983




CITY O SHELBY, a m u n i c i p a l
      F
corporation,

                 P l a i n t i f f and Respondent,



GLORIA SANDHOLM, e t a l . ,

                 Defendants and A p p e l l a n t s .




APPEAL FROM:     D i s t r i c t Court of t h e Ninth J u d i c i a l D i s t r i c t ,
                 I n a n d f o r t h e County o f T o o l e ,
                 The H o n o r a b l e R. D . J \ l c P h i l l i p s , J u d g e p r e s i d i n g .


COUNSEL O RECORD:
         F


         For Appellants:

                 J. V.     B a r r o n , G r e a t F a l l s , Montana


         For Respondent:

                 Aronow, A n d e r s o n , B e a t t y & Lee, S h e l b y , Flontana




                                           S u b m i t t e d on B r i e f s :     S e p t e m b e r 1 5 , 1983

                                                                Decided:          J a n u a r y 26,     1984



Filed:              In-f




                                           Clerk
Mr. Justice Daniel J.              Shea delivered the Opinion of the
Court.

      Gloria Sandholm, et all protesting the creation of a
special improvement district, appeal from an order of the
Toole County District Court declaring invalid their petition
to place on the election ballot for all the registered voters
of Shelby, the question of whether a special improvement
district created by the city cou.nci1, should be approved by
all the registered voters in Shelby.            We affirm.
      Although the issues are presented in different ways, the
dispositive issue, and one not raised in the trial court, is
whether    a   city         council   resolution     creating         a     special
improvement district consisting of less than the entire city
is subject to repeal by referendum procedure.                    We hold that
it is not and therefore affirm the District Court.
      Authority        for   cities   to    create   special       improvement
districts is provided by sections 7-12-4101. et seq., MCA.
Three resolutions are involved.             On June 7, 1982, the City of
Shelby    validly       passed     Resolution   907,       a    resolution      of
intention to create Special Improvement District No. 53 to
construct and install a storm sewer system that involved most
of the property within the boundaries of the city.                         Protest
of such a resolution is permitted by section 7-12-4110, MCA,
and   although     a    protest was        lodged within        the       statutory
fifteen    days,       it    was   insufficient. protest          to      bar   the
proceedings under section 7-12-4113, MCA.                       The City then
passed Resolution 908 which created the special improvement
district    and     which      also    contained     the       procedures       for
assessment of       costs against          the property        owners       in the
improvement district.          Finally, on October 18, 1982, the City
passed the third resolution, Resolution 916, which permitted
the sale of serial bonds to the highest bidder for cash, the
bonds to be paid from the funds of the special improvement
district.
       The protestors challenged the resolution creating the
special improvement district (Resolution 908) by placing a
petition      before   the   Toole   County   election   administrator
seeking a referendum on the action taken by the City.                At
this point, the Shelby city attorney requested an opinj-on
from the      attorney general as to whether a city council
resolution creating a         special improvement district under
section 7-12-4102, MCA, is subject to repeal by referendum.
When    the    attorney   general    issued   his   opinion   that   the
resolution was not subject to repeal by referendum, the Toole
County election administrator rejected protestors' petition.
The protestors then filed action in District Court asking for
a   temporary     restraining order,     injunction, and      writ    of
mandamus to compel the election administrator to rescind her
decision      rejecting the ballot      referendum petition.         The
protestors al-ternatively asked that the City file a petition
for declaratory judgment to determine the validity of the
protestors' petition.         The City compl-ied with this request
and filed a petition for declaratory judgment in the Toole
County District Court.        The trial court held that the City's
action in creating a special improvement district was not a
legislative act subject to referendum.         This appeal followed.
       We agree, under the facts of this case, that the City's
action creating a special- improvement district, was not a
legislative act subject to referendum.         However, we hold also
that referendum is not a permissible procedure to challenge
the creation of a special improvement district where the
district encompasses less than the entire area within the
city limits.
     The      special     improvement    district        involved    here
encompasses approximately two-thirds of the real property
within the City.        If referendum were a permissible procedure
in this situation, there would be qualified voters within the
city limits who would be qualified to vote on the proposed
referendum but who did not own property within the boundaries
of the special improvement district.               Referendum procedures
were not intended to cover this situation.
     The Montana Constitution places limits on the use of
referendum.     Art. 111, 5 5, provides in part that "[tlhe
people may     approve or reject any act of the Legislature
except an appropriation of money         . . ."       And Art. XI,   §    8,

extends the power        of referendum to the voters of              local
government by providing that " [tlhe legislature shall extend
the initiative and referendum powers reserved to the people
by the constitution of the qualified voters of each local
government unit."        The intent of this provision is to give
al.1 interested and qualified voters of a municipal-ity a right
to vote on a referendum.          But here the special improvement
district encompasses less than all of the real property in
the City, and there are qualified voters in the City who
could vote on the referendum but who are not physically or
financially affected by          the special improvement district.
Clearly, the property owners who will be benefited by the
improvement, as well        as    assessed    for    the costs of        the
project,    should     control whether   the project        succeeds or
fails.       Section     7-12-4110,   MCA,     provides    the   protest
procedure    for those affected by           the    special improvement
district, but the protest here was insufficient because it
did not represent 50 percent or more of the property within
the district, and the trial court so found.                    The protestors
have not appealed from that finding.                    This being so, the
protestors         cannot    now     avail    themselves     of    a    city-wide
referendum as a means of challenging the creation of a
special improvement district affecting less than all of the
area in the City, and less than all of the property owners in
the City.
        The   California       case    of    Chase v.   Kalber         (1915), 28
Cal.App. 561, 153 P. 397, illustrates the application of a
referendum procedure to the creation of special improvem.ent
districts.           California's       Constitution        reserved      to    the
electors      of    the     cities    and    counties the     initiative and
referendum powers, just as does our Montana Constitution.
The City wanted to improve streets in certain areas of the
City and therefore passed a resolution to create a special
improvement        district.          But,    the   protestors     wanted       the
resolution placed on the ballot in a city-wide election and
they brought an action in mandamus to compel the city clerk
to accept their petition to have the City's resolution passed
on by the voters of the City.                 The Supreme Court, however,
held that initiative and referendum procedures do not apply
to resolutions or ordinances establ-ishing street improvements
because such ordinances or resolutions affect only the people
within the improvement district rather than the people of the
municipality as a whole.             We think the same rationale applies
here.     Referendum is not the proper tool for repeal of an
ordinance      creating       a    special     improvement     district        that
encompasses less than the entire city limits.
     Although the constitutional issue, not raised in the
trial    court, and          raised    by    this   Court    sua   sponte,      is
dispositive, we also agree that the trial court was correct
in   holding    that    the     challenged     resolution     was    not     a
legislative act subject to referendum.                Rather, it was part
of an administrative procedure not subject to initiative or
referendum procedure.         The trial court's holding is in accord
with our decisions in City of Billings v. Nore (1966), 148
Mont. 96, 41-7 P.2d 458; Dieruf v. City of Bozeman (1977), 173
Mont. 447, 568 P.2d 127; and Allen v. City of Butte (1918),
55 Font. 205, 175 P. 595, where we also held that only state
or local government acts which are legislative, as opposed to
administrative in nature, are subject to repeal by referendum
or initiative.
     The protestors' reliance on City of Billings v. Nore,
supra, is misplaced.        There the voters of Billings passed an
ordinance providing       for    the   sale of municipal bonds              to
finance a city-wide storm sewer system.                   The city council
then passed an ordinance that created the special improvement
district out of the entire city limits, and provided, among
other things, for a sliding scale for rate assessment, a
method for assessments, a method for collection, and a method
to periodically review the assessment rates.                  The Billings
voters petitioned to place the second ordinance on the ballot
for a cj-ty-wide vote.         The issue was whether the ordinance
creating the special improvement district was subject to
repeal by      referendum.       The   Court       held   that the   second
ordinance was     not    subject to referendum because               it was
"simply executing" the municipal bond ordinance which the
voters   had      already       passed,      and     therefore      it     was
administrative in nature.          It should be emphasized that the
burdens imposed there were city-wide, and all property owners
in the Billings city limits were to be assessed the cost.
Here, however, the improvement district is not city-wide and
it affects less than all of the qualified voters in the City
of Shelby.
     In Dieruf v. City of Bozeman, supra, we repeated the
policy    that     a   city     must    be    free   to   perform    val-id
administra.tive acts without having to refer them to the
voters.   Otherwise, small groups of dissatisfied voters would
have it in their power to constantly frustrate the efforts of
local government.         In Dieruf, the city passed an ordinance
setting a       formula   for     assessing property      for a parking
facility and then adopted a resolution creating the special
improvement district for the parking facility.                We upheld the
trial court's ruling that the protestors were not entitled to
a writ of mandamus to refer the ordinance and the resolution
to the voters.
     We   further note that the attorney general issued an
opinion on this precise question based on a request by the
City of Shelby.        The attorney general's opinion stated that
"[a] resolution creating a special improvement district under
section   7-12-4102,       MCA,    is   not    subject    to    repeal   by
referendum. "     38 Att'y. Gen. Op. No. 73 (1982)        .    The opinion
correctly stated the law.
     For these reasons, the order of the District Court
declaring the protestors' petition invalid is affirmed.
W e concur:



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