Commonwealth v. City of Covington

— 39 — Opinion op the Court by Judge Settle Affirming. This is an appeal from a judgment of the Campbell circuit court sustaining a demurrer to and dismissing’ the appellant’s petition. The action was instituted by the Commonwealth of Kentucky to recover of the appellee, city of Covington, taxes alleged to be due the State, county of Campbell, and Courthouse district of Campbell county. It is alleged in the petition that the city of Covington, which is a city of the sec-, ond class, situated in Kenton county, is the owner of lands, reservoirs, water mains, pumping stations, engines, etc., situated in Campbell county and used as a water plant or system for supplying water to the inhabitants of the city of Covington and certain citizens of Campbell county residing near its reservoir and water mains; that the assessable value of. the property is $785,000; and that at the time of the institution of the action there was due as a tax thereon, for the year 1906, to the Commonwealth, county, and Courthouse district, at the rate of 50 cents to the State, 17 cents to the county, and 6 cents to the Courthouse district on each $100 worth of the property, the aggregate sum, including interest, penalty, and costs, of $6,355.99. The petition sets out the assessment of the property in due form, proper- issual of the tax warrant, the action of the sheriff in demanding the tax, failure of appellee to pay it, the levy upon and sale of the property for same, and its purchase by the sheriff for the State, county, and Courthouse district. By the prayer of the petition possession of the property was asked, and, if not to be had, that the property be placed in the hands of a receiver and by him operated, so that the-rents and income applied to the — 40 — taxes due may be liquidated, or that it be sold to pay them. The question presented by this appeal is not a new one, and no valid reason is furnished by the brief of appellant’s counsel for distinguishing this case from others in which this court has held that such property as is here sought to be taxed cannot be taxed. Its exemption from taxation is specifically provided for by section 1/0 of the present Constitution, which declares : ‘ ‘ There shall be exempt from taxation public property used for public purposes.” The power to provide and maintain a waterworks system is conferred upon the city of Covington by section 3058, subsections 4-25, Ky. St. 1903, applicable to cities of the second class. “A municipality is an arm of the State, an ‘effluence’ from its sovereignty, and is an instrumentality by which the State seeks to give to its citizens the best government possible.” City of Owensboro v. Comth., 105 Ky. 344, 49 S. W. 320, 44 L. R. A. 202, 20 Ky. Law Rep. 1282. The city of Covington is but a political subdivision of the State, intrusted with the power to maintain its waterworks for the comfort, health, and safety of its inhabitants. The fact that water rents are paid by the inhabitants of the city using the water does not affect the question. There is nothing connected with the operation of the water works which is not of a governmental and public nature. We cannot better express our view of the question under consideration than to reiterate what was said by the court in the case of Board of Councilmen of City of Frankfort v. Commonwealth, 94 S. W. 648, 29 Ky. Law Rep. 699, in applying the exemption to electric light bonds owned by the city for public, purposes: “It is insisted that a waterworks plant is not public property in the meaning of the Constitution, — 41 — and that it is private property, and ought not to he exempt from taxation, because it sells water to the inhabitants of the municipality. The city is authorized to acquire and own waterworks plants, because water is needed for the purpose of flushing sewers of the city and carrying off the material which would accumulate in the city that would cause sickness and produce death. If a city can build sewers at public expense, because they are a public necessity, it would seem that the same necessity exists for acquiring waterworks for the purpose of making the sewer useful and accomplishing the purpose for which they are built. Likewise water is needed by the inhabitants of the town to carry away the effete matter from the various residences to the sewers in the street. The public is just as much interested in carrying such matter from the homes of the citizens as it is in carrying it through the sewers of the city after it reaches them. The same necessity rests upon the city to see the inhabitants are supplied with water for that purpose as it is to see that a sewer is constructed for the purpose of carrying the matter away after it has flowed into them. In the first instance it is the duty of the Commonwealth to look after the public health of the citizens. It has made the municipality its agent for that purpose. In some instances the State requires the cities to maintain boards of public health at their own expense. If a smallpox epidemic breaks out in a municipality, the expenses are not paid by the State, but by the municipality, the agency which the State has selected to perform a public duty which it owes- to the citizens. In City of Newport v. Commonwealth, 106 Ky. 434, 21 Ky. Law Rep. 1591, 50 S. W. 433, it seems to have based the decision in part upon the fact that the city, while operating the waterworks' — 42 — for the- convenience of its people, makes charges against them for furnishing them with water, and Bailey v. New York, 3 Hill (N. Y.) 531, 38 Am. Dec. 669, is cited in support of that conclusion. The water is not sold for private purposes, but for public purposes. It is not sold to make a profit for the benefit of the city in its private capacity, but for public purposes as above stated. The New York court subsequently failed to follow Bailey v. New York, and said (Springfield Fire & Marine Ins. Co. v. Keeseville, 148 N. Y. 57, 42 N. E. 408, 30 L. R. A. 660, 51 Am. St. Rep. 667) that: “The imposition of water rents is but a mode of taxation, and a part of the general scheme for the purpose of raising revenue with which to carry on the work of government, and that, if any profits-accrue over the expense of maintaining the system, they go for the benefit of the public. ’ ’ The same exemption has been applied by this court to a public park owned and maintained by a city. Owensboro v. Comth., 105 Ky. 344, 49 S. W. 320, 44 L. R. A. 202, 20 Ky. Law Rep. 1282. The fact that appellee’s reservoir, pumping station, and some of its mains lie outside of the municipality and in another county, or that it may incidentally derive some revenue from the use of the- water by persons living near its mains and outside of the city limits, cannot 'affect the question. Ye-ry few cities have such property situated within their, corporate limits, and in many instances it has been found necessary to locate it miles away. The test is: Is the property used for public purposes; that is, primarily for the health, comfort, and welfare of the inhabitants of the city? If so, it is exempt from taxation. We do not mean that a city may enter upon the business of maintaining a waterworks system for other cities or towns, — 43 — but only that' the fact that it incidentally furnishes water to a considerable number of persons in proximity to the city, without injury to the rights of the inhabitants of the city, does not alter the public character or use of the property, or make it subject to taxation. The judgment of the lower court being in accord with the conclusions herein expressed, it is hereby affirmed. , O’Rear, 0.' J., and Nunn and Carroll, JJ., dissent. Petition for rehearing by appellant overruled'.