limits. The form of constitutional inhibition is usually such as to prevent either the legislature or the municipality from passing the constitutional limit; in which case all indebtedness, howsoever incurred, beyond this limitation is void. Limitation may also be fixed in the charter, or by general statute, which cannot be transgressed by the municipality; but such boundary when fixed by the legislature may likewise be transgressed by the same body, and indebtedness beyond the statutory limit may be imposed upon the municipality by the legislature. The recognized classes of municipal indebtedness are two, (1) bonded and (2) current. The weight of authority favors such strict construction of these statutory and constitutional prohibitions as will include both classes of debts, and thereby protect the citizens from overburdensome taxation.78 106. Municipal bonds.-Municipal bonds are now generally understood to mean negotiable bonds issued by a municipality as security for its indebtedness. Municipal bonds are not necessarily negotiable. But the term "municipal bonds" in modern parlance imports negotiability. They are generally issued as security for a loan of money to the municipality. But sometimes they are used to subsidize some undertaking of advantage to the municipality, such as a railroad, gas, water, or electric company. Express power to incur indebtedness by borrowing money on the municipal credit may be conferred upon a municipal corporation either by charter or by gen 78 Laporte v. Gamewell Fire Alarm Tel. Co., 146 Ind. 466, 35 L. R. A. 686, 58 Am. St. Rep. 359. eral law. Like power may also be implied as appropriate and necessary for the proper and efficient exercise of the municipal powers expressly conferred upon the corporation. Lacking express or implied power for such purposes, a municipality does not possess inherent power to incur municipal indebtedness by borrowing money on municipal credit. Until the era of municipal extravagance had come to America, municipal corporations had been wont to borrow money, and give their notes or bonds therefor, without serious doubt or question as to the existence or source of such power. But upon recent challenge it has been declared in the Supreme Court of the United States that the power to borrow money is not an incidental and necessary power of a municipal corporation; and that to create a valid indebtedness for money borrowed by a municipality there must exist either express authority, or the same must be clearly implied from granted powers." To this view has been added the great weight of the opinion of Judge Dillon,80 and the concurrence of some of the state supreme courts, and the preponderance of judicial opinion is now against the inherent power of a municipality to borrow money. 107. Power to issue bonds.-Authority to issue municipal bonds, though not inherent in a municipality, may be expressly conferred by the legislature, or may be implied as necessary to the exercise of the express powers. This power to issue negotiable paper will be implied from the express power to bor 79 Mayor of Nashville v. Ray, 19 Wall. 468 (U. S.), 22 L. Ed. 164. so 1 Dill. Mun. Corp., § 125. row money; but the courts have been generally averse to any such implication where the bonds are to be used as municipal aid to the construction of a railroad, either by subscription to stock or purchase of bonds. Usually the statute authorizing the issuance of such bonds provides for a submission of the question to popular vote, and authorizes their issuance only when favored by a majority of the electors or taxpayers of the municipality. Municipal bonds, being generally issued for the purpose of obtaining a loan of money on favorable terms, are made payable to bearer and pass by delivery. They are therefore held free from all equities which might exist in favor of the corporation, and the only defense open to the municipality is want of authority for their issuance. Unauthorized bonds are void, and cannot be validated. Estoppel cannot save them even in the hands of a bona fide holder for value without notice of the want of power. When the want of authority is due to the illegal exercise of possible authority (as issuing bonds without an indispensable popular vote favoring it), false recitals in the face of the bond that the conditions have been complied with estop the municipality to deny compliance when sued by a bona fide holder. Such irregularities may be cured by express ratification or long continued acquiescence and recognition. 108. Municipal warrants.-The current indebtedness of the municipality is usually evidenced by the warrants or orders, which the municipality has the inherent power to issue through its officers. Mu nicipal orders or warrants are informal checks by one municipal officer upon another for the payment of a certain sum of money. These warrants are usually not negotiable, and do not bear interest. They are not intended to be used as currency, though they are assignable; but in the hands of any person the city is entitled to all equities against the original payee. 109. Funds Creditors.-Municipal revenues are usually divided into funds which represent the various sums of money appropriated by the council for the payment of specified kinds of indebtedness; e. g., a school fund, interest fund, street fund, sinking fund, and the like. The warrants of the municipality are usually drawn upon some special fund, and are to be paid out of that fund in the order in which they are presented and accepted by the disbursing officer. If the fund be exhausted, such warrant is not then payable out of other money in the municipal treasury, but may be payable out of the same fund the following year. Creditors may by contract obtain a vested interest in municipal funds so that the same cannot be taken from them either by municipal or legislative action. It often happens in the administration of municipal affairs that contractors doing work of improvement for the municipality have been promised compensation out of certain municipal funds; or that a loan of money has been obtained upon the credit of some specific municipal fund; or that creditors of the municipality have been induced to refund their existing obligations at a lower rate of interest, or even to reduce the principal of the debt, upon guaranty of payment out of some specific source of municipal revenue. In all such cases, unless the fund pledged is strictly governmental in its nature, so as to be incapable of being pledged, the creditor obtains a vested interest in the fund, which is protected by the contract clause of the Federal Constitution; and his right cannot be impaired by subsequent legislation, either by the state or the municipality. Sinking funds have been held to be peculiarly within the protection of this constitutional provision, and any legislation void which tends to impair the creditor's contractual security. 81 110. Expenses.-Municipal expenses include all such items as are incidental to the proper exercise of corporate functions in administering the government of the municipality, and, if within the scope of the municipal powers, are within the discretion of the governing body. For example, a stenographer's fees for reporting, under the direction of the city attorney, the trial of a case against a police officer, is a proper item of municipal expense, though the city was not a party to the suit, since such matters must be left to the discretion of the city attorney, and he was acting within the apparent scope of his authority.82 But the discretion vested in the council will not validate a claim for items of expenditure obviously not municipal, such as giving banquets, providing entertainment for guests, buying 83 81 Kelly v. Minneapolis, 63 Minn. 125, 65 N. W. 115, 30 L. R. A. 281. 82 City of Chicago v. Williams, 80 Ill. App. 33. 83 Black v. Detroit, 119 Mich. 571. |