California's constitutional prohibition on excessive municipal debt doesn't apply in situations where cities must pay involuntary judgments such as inverse condemnation awards, the Fifth District Court of Appeal has ruled. Furthermore, the court suggested that a city may be legally obligated to increase taxes without a vote, as otherwise required under Proposition 13, in order to pay the judgment. The ruling came in a case by several farming companies against the City of Lindsay, in Tulare County. Lindsay acknowledged that it owed the farmers some $5 million to satisfy a judgment against them in an inverse condemnation case, but argued that it was effectively prohibited from paying the debt because of state constitutional limitations — specifically, by Article XVI, section 18, which requires a two-thirds vote in order to incur debt in excess of a municipality's annual revenue, as well as Proposition 13. However, the Fifth District ruled that under a different constitutional provision — Article I, Section 19 — inverse condemnation awards are not subject to these limitations. The case began when saline industrial waste at the city's landfill, accepted by the city from local olive growers, began to leak into the local groundwater supply, thus damaging crops and permanently reducing the value of nearby farmland. Farmers sued, and in an unpublished 1991 decision the Fifth District affirmed the inverse condemnation theory with respect to the case. Subsequently a Tulare County Superior Court judge awarded the farmers approximately $2.5 million in damages and about $500,000 in costs and fees. The total, with interest, now approaches $5 million. Lindsay officials acknowledged that the city owed the money but claimed it was unable to pay because of the lack of funds, the "fragile" economy, and the constitutional restrictions on incurring debt. But the Fifth District did not accept the city's argument. "In making its argument, the city gives far too little consideration to the constitutional requirement for compensation that is the basis of the underlying judgments against it. In fact, the city ignores this facet of the case altogether: article I, section 19, is not cited, much less discussed, in either of the city's briefs in this court." Noting that both the compensation requirement and the restrictions on municipal debt have a long history, the court ruled in favor of the farmers. "The city fails to offer any reasoned argument or analysis concerning the applicability of the initiative limitations in the context of constitutional based inverse condemnation awards," the court wrote. The court noted that it could waive the entire issue but engaged in an extensive discussion "in deference to the taxpayers of the City of Lindsay". Among other things, the court noted that the inverse condemnation case was based not only on the state constitution, but also the Fifth Amendment of the federal constitution, which must take precedence. Regarding the city's argument on the municipal debt restriction — which it argued was tied to the populist intent of Proposition 13 — the court wrote: "We cannot rationally conclude that the voters, in enacting the initiative limitations on ‘big government,' intended to empower these same governments to damage private property with impunity and without effective means of compelling the payment of just compensation to injured citizens." Indeed, the court seemed to suggest that under Proposition 13 it might be possible to impose an additional tax to pay for the inverse condemnation ruling without a vote. Proposition 13 requires a two-thirds vote for tax increases devoted to "specific purposes". But the court said that "we think a construction of the term ‘specific purpose' to include the payment of any debt of the local government, no matter what the source or nature of the debt, would give to the phase ‘specific purpose' a unique meaning the voters could not possibly have intended'. Thus, the court concluded that the assessment of a tax levy "is not rendered impossible" as the city asserted. The Case: F&L Farm Co. v. City Council, F029033, 98 Daily Journal D.A.R. 8501 (issued August 4, 1998) The Lawyers: For F&L Farm: S.L. Kabot, McCormick Kabot Foley Jenner & Watson, (xxx) xxx-xxxx. For City of Lindsay: Steve R. Williams, Williams Jordan & Brodersen, (xxx) xxx-xxxx.