HORTON, Justice.
This appeal from Custer County relates to proposed repairs and improvements to the City of Challis' (the City) water distribution system. In 2013, the City initiated a judicial confirmation proceeding seeking approval to incur $3.2 million in debt without a public vote. The Consent of the Governed Caucus (the Caucus) challenged the constitutionality of the City's request based upon Article VIII, section 3 of the Idaho Constitution. The district court granted the City's request and the Caucus appealed. We reverse.
The City maintains a drinking water distribution system. In December of 2011, the City commissioned the services of Riedesel Engineering to determine the present and future adequacy of the system with respect to laws and standards of the local fire authority, the Idaho Department of Environmental Quality (DEQ), and the United States Environmental Protection Agency. Riedesel Engineering issued its Challis Water System Facility Plan (the Riedesel Report) in February of 2012, outlining aspects of the water system that needed repair and improvement.
The City initiated this action on August 29, 2013, under Idaho's Judicial Confirmation Law, Idaho Code sections 7-1301, et seq. The City sought approval to incur $3.2 million in public indebtedness without a public vote for work on the City's water distribution system. On October 1, 2013, the Caucus appeared and challenged whether the indebtedness was "necessary" under the Idaho Constitution. An evidentiary hearing was held on January 17, 2014. At the hearing, the City presented testimony from its Mayor, Superintendent of Public Works, and Engineer. The Caucus presented testimony from an engineer it had retained.
Three components comprised the proposed work on the City's water system: (1) replacement
The metering and telemetry work calls for aging meters to be replaced with automatic meters and the system supervisory control and data acquisition (SCADA) system to be upgraded. Although the current metering and telemetry system is operational, the Riedesel Report identifies several advantages to the proposal. Replacement of the metering system will allow for accurate, year-round determination of water use, permit identification of service leaks, enable recovery of "lost water revenues," and encourage conservation. Installation of a new telemetry system will reduce staff time and improve monitoring capabilities, resulting in enhanced responsiveness to alarms and increased system security.
The airport component of the work calls for extending new six and eight inch mains, along with fire hydrants, to the airport. The airport is not currently tied into the City's water system, relying instead on an independent system supplied with well water. The Riedesel Report reflects that the primary deficiency of the current airport water system is inadequate water flow to meet design fire requirements. This has resulted in increased fire insurance premiums and concern about the potential negative impact on the City's economic attractiveness to businesses which may be considering locating operations within the City.
The Old Town work includes replacing old four inch pipes with larger water mains, installing new fire hydrants, looping dead end pipes, installing pressure reduction stations, and making roadway improvements. Although Old Town's water system is currently operational, the outdated system is subject to water main breakage and increased capacity is needed for fire protection purposes. Portions of the Old Town system do not meet current standards imposed by DEQ regulations. However, these regulations also provide that the City is not required to comply with these standards until new construction on the system takes place. In other words, the Old Town system is "grandfathered."
On February 5, 2014, the district court issued its Findings of Fact and Conclusions of Law, holding that the City could incur debt to finance the project without a confirmatory vote of the electorate. The district court entered judgment on March 19, 2014, and the Caucus timely appealed.
"This Court defers to the factual findings of the district court unless those findings are clearly erroneous. This Court exercises free review of the district court's application of the relevant law to the facts. Constitutional issues are questions of law over which we also exercise free review." City of Idaho Falls v. Fuhriman, 149 Idaho 574, 576, 237 P.3d 1200, 1202 (2010) (quoting City of Boise v. Frazier, 143 Idaho 1, 2, 137 P.3d 388, 389 (2006)).
The Caucus' appeal asserts that Article VIII, section 3 of the Idaho Constitution forbids the City from incurring this debt without a confirmatory vote and that the district court's findings were clearly erroneous. We begin by considering the current status of our jurisprudence relating to this provision of the Idaho Constitution.
"Cities in Idaho are generally barred from incurring debts or liabilities, in excess of the income and revenue provided for debts and liabilities in such year, unless they first conduct an election and secure voter approval of the proposed expenditure, as provided in Article VIII, § 3 of the Idaho Constitution." Fuhriman, 149 Idaho at 576-77, 237 P.3d at 1202-03. This constitutional provision contains an exception, known as the proviso clause, that no voter approval is required
In Frazier, this Court summarized the circumstances surrounding adoption of Article VIII, section 3 of Idaho's Constitution:
Frazier, 143 Idaho at 3-4, 137 P.3d at 390-91.
Frazier, 143 Idaho at 4, 137 P.3d at 391 (citation omitted).
The district court did not discuss our decisions in Frazier and Fuhriman as to what constitutes a necessary expense.
This statement is inconsistent with the legal principles articulated in Fuhriman and Frazier. In both cases, we repeatedly referred to the "urgency" of a necessary expense for which indebtedness may be incurred without an approving vote of the electorate. Fuhriman, 149 Idaho at 578-79, 237 P.3d at 1204-05; Frazier, 143 Idaho at 6, 137 P.3d at 393.
The Caucus argues the district court erred by failing to apply the principles articulated in these decisions, contending that there must be a necessity for making the expenditure during the year at issue. The City responds that the Caucus' "absolutist interpretation" ignores (1) the repair and maintenance and (2) public safety exceptions to Article VIII, section 3 of the Idaho Constitution, which apply without temporal limitation.
This Court has previously addressed the first exception claimed by the City. In Fuhriman, we expressly rejected the municipality's contention that expenses arising "in the ordinary administration of local government affairs, such as repairs [and] maintenance" are exempt from the "necessity-requires-urgency analysis." Fuhriman, 149 Idaho at 578-79, 237 P.3d at 1204-05. There, Idaho Falls sought to incur a long-term liability under a power sales agreement for the benefit of its municipal electric utility. Id. at 575-76, 237 P.3d at 1201-02. We held that the "necessity-requires-urgency" analysis applied and the "exception" advocated by Idaho Falls did not apply, stating:
Id. at 579, 237 P.3d at 1205. The Court reasoned that Idaho Falls could continue to provide power through short-term, albeit more expensive, agreements while it came up with a more lasting solution subject to a confirmatory vote. Id.
This Court has not explicitly addressed the question whether the "necessity-requires-urgency" analysis applies in instances where public safety is implicated. The City correctly observes that our past decisions have taken an expansive view of public safety considerations when evaluating whether expenditures were ordinary and necessary. See City of Pocatello v. Peterson, 93 Idaho 774, 778, 473 P.2d 644, 648 (1970) (replacement of an "inadequate" and "unsound" airport terminal held to be a "necessary" expense); Bd. of Cnty. Comm'rs of Twin Falls Cnty. v. Idaho Health Facilities Auth., 96 Idaho 498, 510, 531 P.2d 588, 600 (1974) (holding that improvements to hospital structure in order to comply with state safety standards was an
We take this opportunity to reiterate our holding in Frazier and Fuhriman. The "necessity-requires-urgency" analysis governs all expenditures, regardless of the underlying purpose. In Fuhriman, when discussing this analysis, we quoted from Frazier, observing that "[t]he required urgency can result from a number of possible causes, such as threats to public safety, the need for repairs, maintenance, or preservation of existing property, or a legal obligation to make the expenditure without delay." Fuhriman, 149 Idaho at 578, 237 P.3d at 1204 (quoting Frazier, 143 Idaho at 6-7, 137 P.3d at 393-94). For these reasons, we conclude that the district court erred by failing to apply the legal analysis articulated in Fuhriman and Frazier when considering whether the City's proposal constituted a "necessary" expense under the Idaho Constitution.
The parties concur on one point of law: a court is without power to partially grant judicial confirmation of a bond, obligation or agreement. We agree that courts lack the authority to approve some aspects of a proposal while rejecting others. Idaho Code section 7-1308(2) charges the district court with the responsibility of determining "if the political subdivision is entitled to the relief sought." Nothing within the Judicial Confirmation Law may be interpreted as granting the district court authority analogous to a line-item veto. Here, the City's petition asked the district court to confirm "whether or not the proposed promissory note or other obligation evidencing" $3.2 million in debt "constitutes an `ordinary and necessary expense.'"
We must now determine whether the proposed project is "necessary." As previously noted, the proposed project has three components, (1) the meter and telemetry upgrades, (2) the airport expansion, and (3) the Old Town water line replacement.
The district court determined the metering upgrades were necessary for accurate billing and water conservation. It also determined the telemetry upgrades were "necessary" "to provide security to the system." The Caucus argues installing "new high-tech metering and telemetry" is not truly urgent because the City discussed the project for four years and there is already a workable metering system. The City responds that telemetry upgrades are necessary to prevent unauthorized entry to facilities and potential threats to the water distribution system. It further argues meter replacement is necessary for water conservation and equitably charging users for the amount of water they actually consume.
In Fuhriman, we discussed our earlier decision in Bannock Cnty. v. C. Bunting & Co., 4 Idaho 156, 37 P. 277 (1894) overruled on other grounds by Veatch v. City of Moscow, 18 Idaho 313, 109 P. 722 (1910), stating:
149 Idaho at 579, 237 P.3d at 1205. Additionally, we quoted Frazier's discussion of the thrifty inclinations of the framers of the Idaho Constitution:
Id. at 579-80, 237 P.3d at 1205-06 (quoting Frazier, 143 Idaho at 5, 137 P.3d at 392).
Here, the Riedesel Report indicates the proposed metering and telemetry projects are largely motivated by economic interests. It stated: "Even though metering is not a health and safety priority, our analysis indicates the construction cost may be significantly (if not completely) offset by the labor saving to read the meters and process water bills." Regarding telemetry it stated:
The testimony of Donald Acheson, the City Engineer, also supports these conclusions. He testified that meter replacement was necessary for water conservation and for "equitably distributing" the cost of water use. He also testified that the meters in the City were from the 1980s, were beyond a meter's typical life-span, and were inefficient. Regarding telemetry, Acheson testified the telemetry improvements would promote public safety.
Applying the relevant law to these facts, we cannot say that the proposed metering and telemetry upgrades are necessary. As with the proposed long-term power agreement in Fuhriman, metering and telemetry upgrades are undoubtedly desirable from an economic perspective. However, the need for these upgrades cannot be characterized as urgent. As with the temporary jail in Bannock County the City must get by with what it has until it obtains approval for these expenditures from the electorate.
The City also argues that "[t]here is no Idaho precedent wherein this Court parceled out individual aspects of a project" and compares this Court's concerns about the expense of metering and telemetry to questioning whether an "additional bathroom facility should or should not be included." We do not agree. The estimated construction costs of aspects of the project as follows:
Estimated Construction Cost
1. Old Town Improvements $920,853
2. Airport Extension $563,178
3. Metering & Telemetry $645,036
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Estimated Construction Total $2,129,066
4. Contingencies $236,827
5. Design Engineering, Bidding & Award $348,715
6. Construction Observation, Testing & Administration $207,352
7. Other (Legal, Interest & Grant Administration) $115,000
___________
TOTAL ESTIMATED PROJECT $3,036,960
At $645,036 the metering and telemetry upgrades constitute over 30% of the total estimated construction costs. We are unable to conclude that metering and telemetry is just a small portion of the project that we may overlook.
Both parties request attorney fees. Since the City is not the prevailing party, it is not entitled to an award of attorney fees. The Caucus requests attorney fees on appeal and for the proceedings before the district court under Idaho Code section 7-1313. This statute provides:
In Frazier, 143 Idaho at 7, 137 P.3d at 394, we awarded attorney fees and remanded "to the district court pursuant to I.C. § 7-1313 and I.R.C.P. 54 for a determination of costs and a reasonable sum of attorney fees below and on appeal" after a party challenging Boise's plan to build an airport parking garage prevailed on appeal. As the statute is mandatory, the Caucus is entitled to an award of attorney fees incurred in the prior proceedings and in this appeal. However, we erred in one procedural aspect in Frazier. It is not the district court's responsibility to determine an appropriate award of fees and costs incurred on appeal; rather, that is our duty. Accordingly, this matter will be remanded to the district court with directions to ascertain and award the Caucus reasonable attorney fees and costs incurred in the prior proceedings in the district court. In the event that the Caucus timely submits a memorandum of costs and fees, see Rules 40(c) and 41(d), I.A.R., this Court will evaluate that memorandum, and any objections thereto, to determine an appropriate award of attorney fees and costs.
We reverse the district court's judgment granting judicial confirmation of the City's proposed $3.2 million indebtedness for expenses related to repair and improvement of its water distribution system. This case is remanded to the district court with directions to ascertain and award the Caucus reasonable attorney fees and costs incurred in the proceedings below. We award attorney fees and costs on appeal to the Caucus.
Justices EISMANN and W. JONES concur.
J. JONES, Chief Justice, dissenting.
I dissent because I am unable to agree with the Court's conclusion that Article VIII, section 3 of the Idaho Constitution requires a vote of the people for the maintenance or modernization of an existing city water system. The framers of the Idaho Constitution were thrifty people, concerned about the possibility of county and city governments incurring unnecessary debt, but they were also practical people who looked to the future. They hoped and expected that cities in Idaho would grow, that municipal services for those cities would necessarily expand, and that such services would require periodic updating. And, they did not want to place unnecessary fiscal restraints upon county and municipal governments. This is reflected in the proceedings of the constitutional convention relating to Article VIII.
As originally proposed, section 3 would have required a two-thirds vote of qualified electors for any indebtedness exceeding the income and revenue of the governmental entity for the current year. The convention president, Judge William Claggett from Shoshone County, proposed the proviso clause out of concern that, without it, Article VIII, section 3, "would prohibit the issuance of county scrip to pay the ordinary indebtedness absolutely imposed upon the county as provided by law, in case there should be any
1 Proceedings at 58889.
W.B. Heyburn from Shoshone County argued in favor of the proviso clause, pointing out that it was expensive and impractical to require an election every time a county incurred indebtedness in excess of current year revenues. He said, "[W]e don't want to leave any part of the ordinary legitimate expenses of running county government in doubt, and we don't want to call a county election for the purpose of making up a deficit of four or five hundred dollars at the end of the year, because the costs of the election are very considerable in a county such as ours." 1 Proceedings at 591.
H.S. Hampton from Cassia County offered a substitute for the proviso clause, limiting it to "necessary court expenses." 1 Proceedings at 59192. P.J. Pefley from Ada County opposed the substitute, arguing:
1 Proceedings at 592. The substitute amendment was rejected and the proviso clause was adopted by the convention.
The convention then turned to consideration of a proposed section 4 to Article VIII, which apparently limited the indebtedness authorized to be incurred by governmental subdivisions to five percent on the assessed value of their property. 1 Proceedings at 598. Substantial objections were made to the proposed limitation. The debate on section 4 is relevant here, as it sheds light on the intent of the delegates as to the proviso clause upon which they had just acted.
1 Proceedings at 599600. J.W. Poe from Nez Perce County agreed, arguing:
1 Proceedings at 60001.
Edgar Wilson from Ada County argued, "[I]f the section does prevail it paralyzes different improvements in this city and will ruin municipal improvements in half a dozen towns in Idaho Territory." 1 Proceedings at 601. W.C.B. Allen from Logan County said, "I think it is limiting the powers of the state in such respects as would prevent its prosperity and progress and prevent it from issuing bonds for carrying on public work." 1 Proceedings at 602. Section 4 was stricken by the convention.
None of the delegates indicated that there must be a great sense of urgency in the present year for a governmental subdivision to incur indebtedness exceeding revenues or income in order to repair or improve existing infrastructure. Mr. Pefley clearly indicated that he understood the proviso clause to allow debt to be incurred in order to make improvements to a city's existing ditch system before damage was incurred. He did not indicate that the potential damage had to be of an immediate nature. Again, these people were practical and knew that once you established a ditch system, a fire department, a municipal water distribution system, or some other public facility authorized by law, maintenance and modernization were necessary to keep the facility in good operating condition. They intended Idaho cities to expand and did not express any notion that each time an improvement was necessary, an election would be required.
The urgency expressed in Dunbar v. Bd. of Comm'rs of Canyon Cnty., 5 Idaho 407, 412, 49 P. 409, 411 (1897), where the Court said, "there must exist a necessity for making the expenditure at or during such year," is unsupported by any argument made by the delegates at the convention. Indeed, the comment was unnecessary to the Court's decision because Dunbar was decided on the ordinary prong of the proviso clause, rather than the necessary prong. The Court's holding said:
Id. The holding did not address the necessity issue. The holding was, however, contrary to Judge Claggett's admonishment that the proviso was not intended to prohibit "extraordinary expenses in the ordinary administration of affairs." 1 Proceedings at 588. He specifically stated that what the proviso clause did not countenance was "special indebtedness." Further, the two expenditures at issue in the Dunbar case were for new items—a new bridge and a new scalp bounty—rather than for continuation of existing programs or expenditures.
Of interest is the fact that the Court did not even acknowledge the Dunbar holding in a case decided just 15 years later, pertaining to the repair and improvement of a city water system. In Hickey v. City of Nampa, 22 Idaho 41, 124 P. 280 (1912), the Court was considering whether planned expenditures to repair and improve the water system of the City of Nampa required the vote of the city's qualified electors under Art. VIII, section 3. The system had sustained fire damage. The Court held that a vote was unnecessary, saying:
22 Idaho at 44-45, 124 P. at 281. (underlined emphasis added). The Court made no mention of the Dunbar dicta that "there must exist a necessity for making the expenditure at or during such year."
Notwithstanding that the urgency language in Dunbar appears to have been unnecessary to the decision in that case and unsupported by any debate at the constitution convention, it was cited to and given legs in City of Boise v. Frazier, 143 Idaho 1, 4, 137 P.3d 388, 391 (2006). It then was given additional credibility in City of Idaho Falls v. Fuhriman, 149 Idaho 574, 578, 237 P.3d 1200, 1204 (2010). With this shaky foundation, it also makes its way into the Court's present opinion. It is inconsistent with the constitutional convention debate and should be disregarded.
The main focus of the inquiry should be directed to the issue of whether the governmental entity proposes a new program or facility or whether the proposed expenditure is for an existing program or repair or modernization of an existing facility. That was, in fact, the issue decided by the Court in both Dunbar and Frazier. In Dunbar, the question was whether a new bridge could be built without a vote of the electors where the cost would exceed the current year's income. In Frazier, the question was whether "[c]onverting a flat parking lot into a five floor parking garage," an expansion "so profound as to constitute an entirely new construction" was "necessary" within the meaning of the proviso clause. Id. at 6, 137 P.3d at 393.
It is true that the Court has zigged and zagged over the years as to the scope of the proviso clause, sometimes giving it a broader reading and at other times a narrower reading. This is reflected in the Court's discussion of previous decisions in Asson v. City of Burley, 105 Idaho 432, 441-42, 670 P.2d 839, 848-49 (1983), and of cases discussed in the various opinions in Frazier and Fuhriman. Nevertheless, what has been fairly consistent is the recognition of a dichotomy between new programs or construction, which require a vote of the electors, and support or expansion of existing governmental facilities or functions, which do not.
Earlier cases dealing with water systems are instructive. In Woodward v. City of Grangeville, 13 Idaho 652, 660, 92 P. 840, 842 (1907), the Court held that the City of Grangeville was not authorized, without a vote of the electors, to purchase an existing water system from the estate of a deceased city resident. However, in the Hickey case, we held that the City of Nampa was authorized, without voter approval, to repair and improve an existing water system. Likewise, a decision by the City of Moscow to drill a new well to support a voter-approved plan to improve an existing water system and build a water storage tank to provide a "more adequate water supply" did not necessitate a vote of the people. The well was not approved by the voters but the Court deemed it necessary to the project nevertheless. Durand v. Cline, 63 Idaho 304, 312-13, 119 P.2d 891, 894-95 (1941).
Aside from its errant reliance on Dunbar for the urgency element, the Frazier Court merely followed the long-standing dichotomy between new construction, on the one hand, and maintenance of an existing facility, on the other. The expensive new parking garage in Frazier was clearly not exempt under the proviso clause and, therefore, a vote was required under article VIII, section 3. The
Turning to the case at hand, there is no question but that the Challis water project involved ordinary expenditures. The City of Challis had exercised its power under Idaho Code section 50-323 to construct and operate a domestic water system; had acted pursuant to Idaho Code section 50-309 to maintain a fire department and "to provide water for fire purposes" in the city; and decided to operate and maintain an airport, as authorized by Idaho Code section 50-321. The question is whether the three elements of the water project presented here are within the necessary prong of the proviso clause.
In this regard, the district court made the following pertinent findings of fact:
These findings certainly appear to be supported by the record.
The Caucus does not identify and attack specific factual findings made by the district court but, rather, devotes one and one-third pages of its opening brief to arguing that no evidence supported the Court's "determination that the Project was necessary for fire protection, health or welfare." The Caucus claims that expenses for repair or maintenance of a water system do not qualify as necessary within the meaning of the proviso clause unless "recent casualty or accident. . . impaired the System," citing Hickey. The Caucus contends that since the City "is presently providing its users with clean drinking water," and because what the City "proposes is a permanent solution to a future risk," the proviso clause does not allow the proposed expenditures. The Caucus claims that since there is no evidence that the City is not presently able to fight actual fires, there is no necessity to address the problem with the aging 4-inch pipes, dilapidated componentry, and inadequate existing system at the airport.
Essentially, the Caucus takes the position that since there has not been an actual
It is clear from the convention proceedings that the framers of the Constitution were hopeful about Idaho's future. They wanted and expected towns to grow and prosper. They knew that towns would grow into cities, and that cities would expand to accommodate growing populations and would need to continually modernize their existing facilities. They wanted governing bodies to exercise caution in implementing new programs and constructing new facilities and, therefore, required a vote of electors for those purposes. But, they knew that, once approved, the new infrastructure would need to be maintained, expanded for growing communities, and modernized to keep it up to date. For those purposes they adopted the proviso clause. It was clear from the debate that they did not want to hamstring cities by requiring that they hold a vote every time some existing facility needed to be expanded or modernized. That was just an inherent part of voter approval of a new project or a new facility, just as digging a new well was an inherent part of improving the water system in Durand.
The City determined that expenditures were necessary to improve the water system by replacing old infrastructure within the city proper, to extend the system to the City airport, and to improve the means for conserving and accounting for water with modern telemetry. None of this entailed establishing a new program but, rather, was to maintain and modernize the existing system and make it available to the City's airport.
Even though the City had good drinking water and had not suffered catastrophic failure of the distribution system, it was clearly dilapidated and out of date, had many dysfunctional fire hydrants, and was crying out for replacement. The airport was not connected to the main water system and its own water system was inadequate, particularly with respect to fire protection. The new controls were necessary to conserve water, to improve accountability, and to protect the integrity of the system. Just as it would not be appropriate to require that voters approve the modernization of county or city accounting and recordkeeping from pen and pencil to computers, it shouldn't require a vote to modernize the controls of a city water system from manual to electronic. That is just an inherent part of owning infrastructure. As the Court said in Hickey, "[i]n order for this property to be of any value to the city, it was necessary for it to be kept in repair." 22 Idaho at 44, 124 P. at 281.
The district court did a good job of analyzing the issues presented and its decision was in keeping with the spirit of the Idaho constitutional drafters. I would affirm.
Justice BURDICK concurs.
