Could the City of Cascade upgrade its water system without holding a special election, even though the project cost more than the city's annual budget?

Plain-English summary

Idaho Const. art. 8, § 3 prohibits a city, county, or other political subdivision from incurring debt that exceeds its yearly income unless two-thirds of qualified electors approve at a special election. There are two carve-outs: "ordinary and necessary expenses authorized by the general laws of the state" require no election at all, and certain specific projects (water systems, sewage systems, treatment plants, electrical generating facilities) can be funded by revenue bonds with simple-majority voter approval.

The Director of the Department of Water Resources asked whether the City of Cascade needed voter approval to finance about $466,000 in water-system improvements: $56,400 to upgrade the upper-zone distribution system, $180,845 to improve the existing water treatment plant, and $228,338 to add a new backup well. The improvements addressed serious problems: the water could not consistently meet state turbidity standards, contamination by Giardia lamblia from an adjacent water system was a possibility, fire-flow protection was inadequate, and Cascade depended on a single water source with no redundancy.

The AG concluded the improvements qualified as "ordinary and necessary" expenses and required no voter approval, despite costs exceeding Cascade's annual budget.

The analytical framework had three steps. First, did the city have legal authority to incur the debt? Yes, Idaho Code § 50-323 authorizes cities to maintain a domestic water system. Second, did the debt exceed yearly income? Yes, Cascade had no reserve capital improvement funds in its current budget. Third, were the expenses "ordinary and necessary"? Yes, even applying the more demanding case-law tests of Asson v. City of Burley (1983) and City of Pocatello v. Peterson (1970).

The Idaho Supreme Court's modern test does not draw a bright line between repairs and new construction. Rather, the court considers whether the entity has a long-standing involvement in the enterprise, whether existing facilities are obsolete or unsafe, whether failure to upgrade would jeopardize public safety, whether failure to upgrade would create legal liability, and the size of the expenditure relative to the budget.

The repairs to the upper-zone distribution system and the treatment plant were "clearly repairs and maintenance to an existing system" under the older case law. The harder question was the new well. But applying City of Pocatello and Asson, the AG concluded the well was also ordinary and necessary: $228,000 was significantly less than the $1.44 million ordinary-and-necessary airport expense in City of Pocatello; the total $466,000 was less than the yearly payments any city in Asson faced; the water system was an on-going municipal obligation; and the municipal liability for an inadequate or contaminated water system was at least as significant as for an obsolete airport.

Currency note

This opinion was issued in 1988. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

Background and statutory framework

Idaho Const. art. 8, § 3 was the product of Idaho's response to nineteenth-century municipal-debt abuses. Many western municipalities had backed private enterprises and were left holding the bills when those enterprises failed in the recessions of the late nineteenth century. Moore, Constitutional Debt Limitations on Local Government in Idaho, Article 8, Section 3, 17 Idaho L. Rev. 55, 57-58 (1980). The original draft of art. 8, § 3 was meant to prohibit any indebtedness without two-thirds voter approval. The "ordinary and necessary" exception was added at the convention to ensure that counties and cities would not be paralyzed by routine expenses.

The legacy Feil v. City of Coeur d'Alene (1912) decision rejected the "special fund" doctrine, refusing to treat revenue bonds (payable only from the project's revenues) as outside art. 8, § 3. The 1949 amendment to art. 8, § 3 finally authorized revenue bonds for water and sewer systems and other enumerated projects, but the "ordinary and necessary" clause was not changed and continued to apply to projects financed by general obligation debt as well as the enumerated revenue-bond projects.

The Idaho Supreme Court's modern interpretation came together in City of Pocatello v. Peterson (1970) and was crystallized in Asson v. City of Burley (1983). The earlier line of cases had drawn a bright line between new construction (requiring voter approval) and repair or partial replacement (ordinary and necessary). City of Pocatello and Asson moved away from that bright line. Asson described the test as a balancing of factors: long-standing municipal involvement; obsolescence and unsafe condition of existing facilities; potential legal liability; and the size of the expenditure as a ratio to the annual budget. Asson itself struck down WPPS nuclear power plant contracts as not "ordinary," partly because of the unprecedented size and open-ended risk of the obligation.

The Cascade situation fit the case-law factors: long-standing city involvement in water, plainly inadequate existing facilities (turbidity violations, contamination risk, no redundancy), public-safety implications (drinking water, fire flow), legal-liability potential (municipal exposure for an inadequate water supply), and a moderate expenditure relative to the precedents.

Common questions

When does a city need voter approval to take on debt?

Idaho Const. art. 8, § 3 generally requires two-thirds voter approval for debt exceeding yearly income. There are two carve-outs: "ordinary and necessary" expenses authorized by general laws (no election needed), and revenue-bond projects for water, sewer, treatment plants, and electrical generating facilities (majority voter approval).

What counts as "ordinary and necessary"?

Under Asson v. City of Burley (1983) and City of Pocatello v. Peterson (1970), the courts balance several factors: long-standing municipal involvement in the enterprise; obsolescence or unsafe condition of existing facilities; potential public-safety jeopardy or legal liability; and the size of the expenditure relative to budget. New construction is not automatically excluded; the courts examine whether the new structure replaces an inadequate existing one.

Did Cascade need voter approval for the $466,000 in water improvements?

The AG concluded no. The distribution and treatment-plant work was repair and maintenance of an existing system, clearly ordinary and necessary even under older case law. The new backup well was a closer question, but applying City of Pocatello and Asson's balancing test, the AG concluded it was also ordinary and necessary.

What about Asson's concern about expenditure size?

Asson struck down the WPPS nuclear power plant contracts because they were a "colossal undertaking, fraught with financial risk" and "open-ended" in a way that ordinary expenses could not be. The Cascade $466,000 was modest relative to the $1.44 million airport in City of Pocatello and to the figures in Asson. The size factor cut for Cascade's project, not against it.

What was the historical "new construction vs. repair" line?

The older Idaho cases drew a bright line: new construction required voter approval (e.g., Woodward v. City of Grangeville (1907) on a new water system; McNutt v. Lemhi Co. (1906) on construction of a wagon road), while repairs to existing structures were ordinary and necessary (e.g., Hickey v. City of Nampa (1912) on water-system repairs; Thomas v. Glindeman (1921) on street maintenance). City of Pocatello and Asson moved away from that bright-line test.

Citations

Constitutions: Idaho Const. art. 8, § 3.

Idaho statutes: Idaho Code § 50-323.

Idaho cases: Asson v. City of Burley, 105 Idaho 432, 670 P.2d 839 (1983), cert. denied, 469 U.S. 870 (1984); Board of County Commissioners v. Idaho Health Facilities Authority, 96 Idaho 498, 531 P.2d 588 (1975); City of Pocatello v. Peterson, 93 Idaho 774, 473 P.2d 644 (1970); Feil v. City of Coeur d'Alene, 23 Idaho 32, 129 P. 643 (1912); General Hospital, Inc. v. City of Grangeville, 69 Idaho 6, 201 P.2d 750 (1949); Hickey v. City of Nampa, 22 Idaho 41, 124 Pac. 280 (1912); McNutt v. Lemhi Co., 12 Idaho 63, 84 P. 1054 (1906); Straughan v. City of Coeur d'Alene, 53 Idaho 494, 24 P.2d 321 (1932); Thomas v. Glindeman, 33 Idaho 394, 195 P. 92 (1921); Woodward v. City of Grangeville, 13 Idaho 652, 92 Pac. 840 (1907).

Other authority: H.J.R. No. 9, S.L. 1949, p. 598 (1949 amendment); S.B. No. 7, S.L. 1951 (Revenue Bond Act); I Debates on the Idaho Constitutional Convention, at 584-94; Moore, Constitutional Debt Limitations on Local Government in Idaho, Article 8, Section 3, 17 Idaho L. Rev. 55 (1980); Feasibility Study of Water Supply and System Improvements for the City of Cascade.

Source

• Landing page: https://www.ag.idaho.gov/office-resources/opinions/
• Original PDF: https://ag.idaho.gov/content/uploads/2018/04/OP88-03.pdf

Original opinion text

Full opinion text is preserved in the linked PDF. The opinion analyzed whether Cascade's proposed $466,000 water-system improvements (distribution upgrades, treatment plant repairs, new backup well) qualified as "ordinary and necessary" expenses under Idaho Const. art. 8, § 3. The AG worked through the convention history of art. 8, § 3, the early bright-line repair/construction cases, the 1949 amendment authorizing revenue bonds for water systems, and the modern balancing test crystallized in City of Pocatello v. Peterson (1970) and Asson v. City of Burley (1983). Applying the modern factors (long-standing municipal involvement, obsolete or unsafe facilities, public-safety implications, legal-liability potential, and expenditure size relative to budget), the AG concluded all three elements of the Cascade project were ordinary and necessary, requiring no voter approval despite the project cost exceeding the city's annual budget.

DATED this 19th day of May, 1988.

JIM JONES
Attorney General
State of Idaho