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decided: February 7, 1969.


Appeals from decree of Court of Common Pleas of Philadelphia County, Dec. T., 1968, No. 1538, in case of Adriano Mastrangelo et al. v. Romanus J. Buckley et al.


Edward G. Bauer, Jr., City Solicitor, with him Matthew W. Bullock, Jr., Second Deputy City Solicitor, and Frank J. Pfizenmayer, Assistant Deputy City Solicitor, for City, defendant.

Edward R. Becker, for plaintiffs.

John R. McConnell, with him Thomas M. Kittredge, and Morgan, Lewis & Bockius, for School District, defendant.

Arthur E. Newbold, IV, and Robert M. Landis, for Greater Philadelphia Movement, intervenor.

Gregory M. Harvey and Thomas V. Lefevre, for Greater Philadelphia Chamber of Commerce, amicus curiae.

Arlin M. Adams, with him Ira P. Tiger, and Schnader, Harrison, Segal & Lewis, for interested parties.

Bell, C. J., Jones, Cohen, Eagen, O'Brien, Roberts and Pomeroy, JJ. Opinion by Mr. Justice Jones. Bills Nos. 822 and 823: Mr. Chief Justice Bell files a dissenting opinion. Bills Nos. 824-827: Mr. Chief Justice Bell files a concurring opinion. Mr. Justice Cohen and Mr. Justice Eagen file separate dissenting opinions. Bills No. 826: Mr. Justice Roberts files a dissenting opinion. Bills Nos. 828 and 829: Mr. Chief Justice Bell files a concurring opinion. Mr. Justice Cohen, Mr. Justice Eagen and Mr. Justice Roberts file separate dissenting opinions. Bills Nos. 854-865 and 867: Mr. Justice Cohen and Mr. Justice Eagen file separate dissenting opinions.

Author: Jones

[ 433 Pa. Page 357]

These are appeals from a decree of a three-judge panel of the Philadelphia Court of Common Pleas*fn1 enjoining the City of Philadelphia from enforcing certain revenue measures adopted by the City Council and approved by the Mayor on December 26, 1968, enjoining the enactment of certain appropriation transfer ordinances introduced in City Council on the same day and dissolving an injunction as to two revenue measures for the School District of Philadelphia.

The genesis of this litigation goes back to December, 1967, when the City Council and Mayor approved an eighteen-month operating budget commencing on January 1, 1968, and terminating on June 30, 1969.*fn2 The purpose of the eighteen-month budget was to convert the City from a calendar fiscal year commencing on January 1 to a fiscal year commencing on July 1. The total appropriations under this budget were estimated at $585,202,000, and anticipated revenues were estimated at $609,681,000. The difference between these two figures, $24,479,000, was allocated as "working capital surplus."

Meanwhile, the School Board of Philadelphia, which was already operating on a fiscal year beginning on July 1, submitted to the Mayor and City Council on April 3, 1968, its anticipated budget for the fiscal year

[ 433 Pa. Page 358]

    beginning on July 1, 1968. Since its proposed expenditures exceeded its anticipated revenues by $33,945,926, the Board asked the Council for authority to levy taxes to collect this amount.*fn3

On December 5, 1968, eight interim tax measures were introduced in City Council to raise money for both the City and the School District.*fn4 The money for the School District was required to eliminate the deficit which had already been anticipated in the budget for the fiscal year commencing on July 1, 1968. The interim taxes for the benefit of the City, anticipated to yield $13,750,000, were, allegedly, necessitated by two unexpected expenses: first, the City had signed a new contract with the City policemen, firemen and non-uniformed

[ 433 Pa. Page 359]

    employees which, it was estimated, would require the expenditure of an additional $12,809,400; second, the remaining amount was to be used to defray the increased cost of running the judicial system in the City resulting from the consolidation of the various courts brought about by the amendments to the State Constitution effective January 1, 1969.

On December 26, 1968, all eight revenue measures were approved by the Council and signed into law by the Mayor. On the same day, fourteen appropriation transfer bills were introduced into Council. Thirteen of these transfer bills were designed to transfer most of the budgeted surplus of approximately $24 million from the "working capital surplus" to various City departments. The City Finance Director subsequently testified that, during the course of 1968, various City department heads requested permission to exceed their budgets because of unforeseen expenses and, when the Finance Director was satisfied that these expenses were necessitated, he authorized the department heads to exceed their budgets with the promise that he would ask City Council to reimburse them from the budgeted surplus. It was also decided that the Council would not make the transfers to the departments piecemeal but would wait until the end of 1968 to make all the transfers at one time. The result was the thirteen appropriation bills introduced on December 26. The fourteenth and final transfer bill appropriated $12,809,400 of the anticipated $13,750,000 to be raised by the new tax measures to the Finance Director to cover the new salary increases and the balance to the Finance Director for working capital.*fn5

Meanwhile, on December 19, 1968, appellees, in the capacity of taxpayers of the City of Philadelphia, filed

[ 433 Pa. Page 360]

    suit against the City to enjoin collection of the new taxes. On December 31, a three-judge panel convened to hear the case enjoined the City from collecting the taxes and fines imposed by the revenue bills and from enacting the appropriation transfer bills. The court ruled, in effect, that the City had not established that the revenues to be raised by the new taxes were to meet "unanticipated emergencies" as required by § 2-301(a) of the Philadelphia Home Rule Charter. Two days later the Council held a hearing after which it passed a resolution finding specifically that the needs of the School District and of the City for the wage increases and for the court consolidation costs were "unanticipated emergencies" and that the appropriation transfer bills "provide for the payment of expenses which were unanticipated and could not reasonably be anticipated, and in very large measure were of an emergency nature, and are properly within the budget provisions of the Home Rule Charter authorizing transfers in appropriations." The City went back to the Common Pleas Court to ask that the injunctions be dissolved.

The lower court handed down its opinion and order on January 9, 1969. The three judges unanimously held that the injunction pertaining to the two tax measures for the benefit of the School District should be dissolved. As to the tax measures for the City, the court was divided. Judge Smith, writing for the majority, held that the City lacked the power to pass interim tax measures and that the transfer bills -- with the exception of the bill transferring the money for the salary increases -- were also invalid because dissolution of the budgeted surplus would create a deficit. Judge Barbieri, in a concurring opinion, argued that the funds to be transferred under the appropriation bills were not for "unanticipated emergencies," that

[ 433 Pa. Page 361]

    the pay increases and increased costs of administering the courts should be paid for out of the operating surplus and that, therefore, there was no deficit and no "unanticipated emergency" requiring additional revenues. Judge Spaeth dissented to this part of the majority's opinion, contending that the City had the right to pass interim tax measures, that the expenses of the pay raises and of the court system were "unanticipated emergencies" and that at least some of the budgeted surplus was not available for this emergency since the money had already been committed to various City departments. Judge Spaeth would have remanded the matter to Council for a determination as to which of the monies proposed to be transferred had, in fact, already been committed to the various departments. Finally, Judge Spaeth criticized the majority's order upholding Bill No. 829 authorizing the School District to raise its real estate tax from $.42 1/2 to $1.10 on each $100 of assessed value and at the same time striking down Bill No. 826 decreasing the rate of real estate tax for use by the City from $2.375 to $1.825, pointing out that the result of the majority's decision was to increase the real estate tax by $.67 1/2 on each $100 of assessed valuation, whereas the City Council had only intended to raise the rate by $.12 1/2.

The City has appealed to this Court. The Greater Philadelphia Movement and the Philadelphia Chamber of Commerce have intervened in support of the City's position. Fogel's Garage, Inc., and Donna M. Yokum, owners of public garages in Philadelphia, have also intervened. In so intervening, they maintain that, in the event that we uphold the Council's right to pass the tax measures, we, nevertheless, must strike down Bill No. 825 increasing the tax on outdoor parking lots from 10% to 20%. Fogel and Yokum have also filed

[ 433 Pa. Page 362]

    a separate action attacking the validity of Bill No. 825.

The Authority of the City To Enact Interim Taxes

In our approach to the resolution of the instant controversy, we bear in mind the salutary rule that the judiciary should not intrude into the legislative area of government unless it be demonstrated that the legislative body -- in the present case the City Council -- has acted in a manner violative of our Constitution, Acts of the General Assembly or the organic law of the City (the Home Rule Charter) or in a manner wherein the Council lacks the power or authority to act. The wisdom of the councilmanic action is not within our judgment; we only review the legal validity of such action. We do not and should not act as a "super councilmanic" body; we simply inquire whether the action of Council finds warrant in the law, bearing in mind that Council can act if it is empowered to do so by the Constitution, the General Assembly of the Commonwealth or the City Charter.

The present controversy must be placed in its proper posture. The right of the Council in general to enact tax measures is not at issue. The issue is whether the Council has the right to enact new or so-called interim tax measures and to appropriate the proceeds therefrom after having adopted its operating budget for the fiscal year and after having enacted tax measures to meet the appropriations contained in the operating budget.

We initiate our inquiry with a restatement of a concept basic and inherent in our form of government, a concept established beyond question in the law of this Commonwealth. The power of taxation, in all forms and of whatever nature, lies solely in the General

[ 433 Pa. Page 363]

Assembly of the Commonwealth acting under the aegis of our Constitution.*fn6 Absent a grant or a delegation of the power to tax from the General Assembly, no municipality, including Philadelphia, a city of the first class, has any power or authority to levy, assess or collect taxes. To determine whether a municipality possesses the power to tax and, if so, the extent of such power, recourse must be had to the acts of the General Assembly.

In Fischer v. Pittsburgh, 178 Pa. Superior Ct. 16, 112 A.2d 814 (1955), aff'd., 383 Pa. 138, 118 A.2d 157 (1955), Judge Woodside, speaking for the Superior Court, stated: "Municipal corporations can levy no taxes upon inhabitants or their property unless the power to do so is plainly and unmistakably conferred by the legislature" (178 Pa. Superior Ct. at p. 20). (Emphasis added) Chief Justice Stern, speaking for the Supreme Court in Fischer, stated: ". . . municipal corporations can levy no taxes unless the power be plainly and unmistakably conferred by the sovereign state, and the grant of such right must be strictly construed and not extended by implication [citing authorities]." (383 Pa. at p. 141) (Emphasis added)

Moreover, the determination of whether the General Assembly has granted to a municipality the power of taxation in a particular area is subject to a strict construction and the grant of such power may not be found by implication. See: Fischer v. Pittsburgh, supra; Murray v. Philadelphia, 364 Pa. 157, 163, 164, 71 A.2d 280 (1950); Breitinger v. Philadelphia, 363 Pa. 512, 514, 515, 70 A.2d 640 (1950); Marson v. Philadelphia,

[ 433 Pa. Page 364342]

Pa. 369, 373-375, 21 A.2d 228 (1941); Wilson v. Philadelphia School District, 328 Pa. 225, 229, 230, 195 A. 90 (1937).

As a necessary corollary to the exclusive competency of the General Assembly to authorize the imposition of taxes by a municipality, the General Assembly possesses the sole competency to determine not only the areas of permissible taxation but also when and in what manner such taxes shall be imposed. If, for instance, the General Assembly alone has the power to authorize the taxation of real estate by municipalities, it stands to reason that the General Assembly alone has the power to determine the frequency with which the power of taxation may be exercised. Were it otherwise, taxation by municipalities could well result in an intolerable situation.

Now that we have outlined the general principles which must guide our decision, we turn to the specific issue involved in this case. The City contends that, by reason of certain "unanticipated emergencies" which have occurred during its current eighteen-month fiscal year but subsequent to the passage of its budget for the fiscal year and which emergencies have forced it to exceed its present budgetary appropriation, it has the right, in order to bring its budget into balance, to enact new tax measures during the fiscal year. On the other hand, the taxpayer-appellees maintain that the City lacks the power and authority to enact new tax legislation and to appropriate the proceeds therefrom after its operating budget has been adopted.

We begin by looking at the case law on this question. The City cites two cases wherein this Court has upheld the adoption of interim taxing measures.*fn7 Both cases are inapposite. In both Treaster and Dunkard,

[ 433 Pa. Page 365]

    the statutes in question specifically granted the taxing authority the right to interim taxation during the fiscal year.

The taxpayers rely, to some extent, on Rose Twp. v. Hollobaugh, 179 Pa. Superior Ct. 284, 116 A.2d 323 (1955). In Rose Twp., Judge Woodside, speaking for the majority, pointed out that the Second Class Township Code involved in Rose Twp. provided for an annual budget which would show the estimated revenues and expenditures in the forthcoming fiscal year, all for the purpose of determining how much tax to levy. He then stated: "The budget required is more than a mere estimate of probable revenues and expenditures. It is a method whereby expenditures are controlled and limited during the fiscal period by designating the amount of money legally at the disposal of the supervisors and the purpose for which it may be expended. Kistler v. Carbon County, 154 Pa. Superior Ct. 299, 301, 302, 35 A.2d 733 (1943). These budget provisions are not directory but 'in the highest degree mandatory.' Leary v. Philadelphia, 314 Pa. 458, 472, 172 A. 459 (1934).

"The Supreme Court has required such strict compliance with the provisions of this section that township supervisors have been removed from office for failure to comply with them, even when the supervisors were depending upon their solicitor to file the required reports. Crane's Appeal, 344 Pa. 624, 26 A.2d 457 (1942), and others have been surcharged for making disbursements without previous appropriations according to the provisions of the section even though the township received a reasonable quid pro quo for the unauthorized outlays and no fraud or dishonesty on the part of the supervisors was shown. Lower Nazareth Township Supervisors' Appeal, 341 Pa. 171, 19 A.2d 92 (1941).

[ 433 Pa. Page 366]

"In Dunkard Township School Tax Case, 359 Pa. 605, 60 A.2d 39 (1948) the court permitted a school district to impose a tax under Act 481 after the budget had been approved but the court placed its decision on the ground that the Act of July 5, 1947, P. L. 1266 specifically authorized a revision of the school budget for that year.

"Justice, now Chief Justice Stern, indicated that the right not only to revise the budget but also to provide for additional revenue was limited to the one fiscal year.

"Provisions concerning budgets have been in the second class township law for many years, but the budgetary requirements imposed upon the supervisors have become more strict and detailed with the passing years.

"It is vital for the good administration of municipal affairs for its officials to budget expenditures for the necessary functions and thereby determine the amount of tax necessary for the operation of the municipality for the ensuing year. It was for the purpose of protecting the public against extravagance and waste in local government that the budget provisions were made more stringent over the years both by statutes and court decisions." (pp. 291-293)

"If we were to decide that a municipality could enact new tax legislation and appropriate the proceeds therefrom after the budget was adopted, we would, to a great extent, destroy the value of the provisions relating to budgets. We think that was not the intent of the legislature in passing Act 481 and its amendments." (p. 294) The Court held in Rose Twp. that the municipality lacked authority to levy an interim tax measure. While we recognize that Rose Twp. can be distinguished from the instant case, because, admittedly, in Rose Twp. the tax was not levied for emergency

[ 433 Pa. Page 367]

    purposes and because the second class township therein involved did not operate under a "home rule charter," nevertheless the rationale of Rose Twp. is clearly applicable to the instant situation.

Since the case law is so meager on this question and because the exact issue before us is one of first impression, we must go back to the acts of the General Assembly which confer taxing powers upon the City. The specific question we must answer in this case is whether the General Assembly has conferred the power of interim taxation upon the City. The General Assembly could confer such power in either of two ways. First, in granting to the City the power of home rule, it could confer the power of interim taxation as one of the sovereign powers of a home rule government. Second, in granting to the City the power to levy a particular type of tax, it could grant to the City the additional power to levy that tax during the fiscal year.

We start with the first method by which the General Assembly might confer the power of interim taxation upon the City. By an amendment to our Constitution (adopted November 7, 1922) titled Article XV, § 1, cities, after appropriate action by the General Assembly and upon approval of the electorate of such cities, were granted "the right and power to frame and adopt their own charters and to exercise the powers and authority of local self-government, subject, however, to such restrictions, limitations, and regulations, as may be imposed by the Legislature." Acting within such constitutional fiat and an act of the General Assembly (Act of April 21, 1949, P. L. 665, 53 P.S. § 13101),*fn8 a "Philadelphia Home Rule Charter" was prepared by a distinguished Commission, submitted to

[ 433 Pa. Page 368]

    and approved by the electorate and became the organic law of the City subject, of course, to any legislatively imposed restrictions as contemplated by Article XV, § 1, of our Constitution.

The Act of 1949 does not grant any specific taxing powers to the City. Section 17 of the Act grants to the City "all powers and authority of local self-government" including "complete powers of legislation and administration in relation to its municipal functions. . . ."*fn9 Although § 17 appears to convey broad legislative powers to the City, it does not attempt to establish the City's general taxing powers and structure. Section 11 of the Act of 1949 states in pertinent part: "Any new charter or amendments to the charter of a city thus proposed, which are approved by a majority of the qualified electors voting thereon, shall become the organic law of the city. . . . All existing acts or parts of acts and ordinances affecting the organization, government and powers of the city, not inconsistent or in conflict with the organic law so adopted, shall remain in full force. . . ." (Emphasis added) (Act of April 21, 1949, P. L. 665, § 11, 53 P.S. § 13111) We must look to see, therefore, whether there are any other acts of the General Assembly which deal with the question of taxation directly. If there are any such acts, they are controlling on the City by virtue of the section quoted above unless they are inconsistent with the Philadelphia Home Rule Charter.

Article 17 of the First Class Cities Act, or the Act of 1919, deals specifically with the question of municipal finance. If this Act is applicable to this case -- a matter upon which the court below divided -- that Act provides that on or before December 15,*fn10 the City Council

[ 433 Pa. Page 369]

    shall, in one ordinance, adopt a "financial program for the ensuing year" (53 P.S. § 12552), and, on or before December 15, the Council "shall levy and fix a tax rate for the ensuing year" and, upon Council's failure to do so, the " rate for the current year shall be the rate for the ensuing year." (53 P.S. § 12553)*fn11

The Act of 1949, supra, authorizing the Charter of Philadelphia, provides, inter alia, that: "Notwithstanding the grant of powers contained in this act, no city shall exercise powers contrary to, or in limitation or enlargement of, powers granted by acts of the General Assembly which are -- (a) Applicable to a class or classes of cities on the following subjects: . . . (8) Limiting rates and fixing subjects of taxation; (9) Providing for the assessment of real or personal property and persons for taxation purposes. . . ."*fn12 Neither in the title nor in any of the provisions of the Act of

[ 433 Pa. Page 3701949]

, supra, is there any change pertaining to the time set by the Act of 1919, supra, when the tax levy shall be made and the tax rate fixed. The 1949 Act does not specifically repeal the Act of 1919, and we find nothing in the 1949 Act inconsistent with the provisions of the 1919 Act as to the time for the levying of taxes and fixing the tax rate which would, by implication, suspend the time provisions of the 1919 Act. In summary, therefore, we believe that the Act of 1919 is presently applicable, that under its provisions the tax rate for the current eighteen-month fiscal year had to be fixed by December 15, 1967,*fn13 and no interim adjustment of the tax rate was provided therein. Since we are forbidden to imply the grant of the power of interim taxation and since we cannot find any express provision therefor, we are of the opinion that the statutes which enable Philadelphia to levy, assess and collect taxes intend the levy and fixing of the tax rate by one and only one legislative act which must occur prior to the fiscal year.

We have examined the various statutes granting to the City its home rule powers and dictating the requirements as to the City's fiscal budget and have found no indication that the General Assembly intended to confer interim taxing power upon the City.

Even if we were to assume that the 1949 statute did grant to the City the right to choose, through the medium of its Charter, the manner in which it would exercise its General Assembly-granted power to tax, this assumption does not aid the City because not only does the Charter fail to provide for interim taxation but its scheme contraindicates such taxation.

[ 433 Pa. Page 371]

In examining the Charter provisions, we must be guided by the well-settled principle that tax statutes must be strictly construed against the taxing authority and that all reasonable doubts must be resolved in favor of the taxpayer. See: Commonwealth v. Willson Products Co., Inc., 412 Pa. 78, 194 A.2d 162 (1963); Commonwealth v. Allied Bldg. Credits, Inc., 385 Pa. 370, 123 A.2d 686 (1956).

The City, under the Charter, has "the power to enact ordinances and to make rules and regulations necessary and proper to carry into execution its powers; . . . " (§ 1-100), and the "legislative power of the City . . . [is] exclusively vested in and exercised by ...

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