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PEARL RIVER VALLEY WATER SUPPLY DISTRICT, ET AL. v. HINDS COUNTY

JANUARY 25, 1984

PEARL RIVER VALLEY WATER SUPPLY DISTRICT, ET AL.
v.
HINDS COUNTY, ET AL.



EN BANC.

WALKER, PRESIDING JUSTICE, FOR THE COURT:

Hinds County, Leake County and Roger Stewart, appellees and cross-appellants, hereinafter referred to as Hinds County, et al., initiated this action by bill of complaint, as amended, seeking an injunction, accounting and return of funds against the Pearl River Valley Water Supply District, et al.

BACKGROUND

 On August 20, 1982, the Chancery Court of the First Judicial District of Hinds County entered its final judgment, permanently enjoining the Pearl River Valley Water Supply District from using any State ad valorem tax proceeds diverted to the District by Mississippi Code Annotated section 51-9-131 (1972) for any purpose other than paying, prepaying, redeeming or retiring bonds. The court also permanently enjoined the District from making a special levy under Mississippi Code Annotated section 51-9-139 (1972) in any year that the State ad valorem taxes paid to the District exceed the amount of the District's debt service.

 The Pearl River Valley Water Supply District was created in 1958 with the Legislature's passage of the Pearl River Valley Water Supply District Law *fn1 Mississippi Code

 Annotated section 51-9-101, et seq. The District was formally established through petition to the Chancery Court of Hinds County. The voters of five counties - Hinds, Leake, Rankin, Madison and Scott - elected to make their counties members of the District.

 The District is an agency of the State. Miss. Code Ann. 51-9-105 (1972). Its powers are prescribed by statute, Mississippi Code Annotated section 51-9-121 (1972), and exercised by a board of directors, Mississippi Code Annotated section 51-9-107 (Supp. 1982). Although it is an agency of the State, the District does not receive an appropriation of money by the Legislature from the general fund of the State.

 Mississippi Code Annotated section 51-9-133 (1972) authorized and empowered the District to issue bonds of the District for the purpose of paying the costs of acquiring, owning, constructing, operating, repairing, and maintaining the project.

 Since construction of the reservoir was completed, the expenses of the District, including debt service on the bonds, i.e., interest and principal, have been defrayed by the following revenues, according to the District records:

 (1) The avails of two mills of the State ad valorem tax collected in each of the five-member counties (State levy);

 (2) The avails of a special tax levy by the District board on property in the five-member counties in an amount not to exceed two mills (the special levy);

 (3) Real estate development and lease payments;

 (4) Camping, garbage, water and sewer, and miscellaneous fees;

 (5) Interest on investments; and

 (6) Contractual payments by the City of Jackson.

 In its brief, the District acknowledges that the proceeds of the special tax, i.e., the special tax levy cannot be used to pay operation and maintenance expenses of the District. The District also acknowledges that in the past, the proceeds from the State levy and the other revenues mentioned above have been used first to pay operation and maintenance expenses with the balance being applied toward payment of debt service on the bonds. Hinds County, et al object to this method and contend that the State levy tax proceeds can only be used for retirement of the District's bonded indebtedness.

 As late as 1968, the District's budgeted revenue from the full State levy and full special levy exceeded the District's bond cost, i.e., principal and interest payments, by only about $5,800.00. However, the revenues to the District from the State's two-mill levy have been increasing steadily and in 1982 were projected to yield $1,470,000.00. By the year 1981, the revenues from the State's two-mill levy alone were sufficient to service the District's annual bond cost which is a relatively constant amount. For fiscal year 1983, the District anticipated that the revenues from the State two-mill levy alone, would exceed annual bond charges by $187,500.00.

 The residential lessee population of the District by 1981 was approximately 5,000, and the District's "operation and maintenance" expenditures increased dramatically from $622,455.03 in 1972 to an estimate of $2,687,500.00 in 1982. A large portion of the District's budget during this period was spent furnishing services for the residential population, including utility service, police protection, fire protection, and street maintenance. Of these services furnished by the District to the lessees, there was no charge for the police protection, the fire protection, or the road and street maintenance. For many years the District provided free garbage pickup. The District has not charged the lessees for the police protection or for the road and street maintenance even though those lessees agreed, in their leases, to pay their pro-rata share of the cost of such services. The law provides for such charges; and it is patently unfair for the District's five-member counties to bear this burden. Miss. Code Ann. 51-9-121 (t).

 The amount by which the District's "operation and maintenance" expenditures have exceeded receipts from the residential and commercial "lease rental" payments has grown from $417,464.16 in 1972 to $747,435.00 in 1976, to $1,651,482.00 in 1980, to a projected $2,558,000.00 in 1983.

 Studies commissioned by the District revealed that with the escalating "operation and maintenance" *fn2 cost of the District and the leases executed by the District, that even when the District is fully developed, its revenues from the annual "lease rental" payments will pay only about one-half of the "operation and maintenance" expense of the District. It is evident that the District will never be self-sustaining if expenditures are not brought under control.

 BILL OF COMPLAINT

 Hinds County, et al's bill of complaint, as amended, had five separate counts, only two of which are pertinent to this opinion.

 In Count I, Hinds County, et al charged that under the Pearl River Valley Water Supply District Law, Mississippi Code Annotated sections 51-9-101 et seq, the proceeds of the State two-mill levy (section 51-9-131) are required to be used solely for the purpose of paying bonds or the costs of bonds issued pursuant to the District Law. They further contended that the amount received annually by the defendant-appellant Pearl River Valley Water Supply District under such State levy exceeded the District's annual bond costs, that no special levy under section 51-9-139 could be properly imposed, and that the District may apply the excess State levy revenues only to prepay bonds.

 In Count II, Hinds County, et al contended that in making the determination of whether a special levy under section 51-9-139 was "necessary," and could thus be imposed, the District had not been giving Hinds County, or the other taxpayers of member counties, credit for substantial revenues,

 projected revenues and funds which were coming to the District or were available to the District, all in violation of the District Law and particularly of section 51-9-139.

 CHANCERY COURT'S DECREE

 After hearing the matter on the merits, the chancellor entered the court's final decree, which provided ...


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