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Div. 230, 40 N. Y. S. 607. See also Admiral Realty Co. v. New York, (1912) 206 N. Y. 110, 99 N. E. 241, Ann. Cas. 1914A 1054, affirming 151 App. Div. 888, 135 N. Y. S. 1097. Apparently, however, an act (ch. 554, Laws of 1885), directing the immediate appropriation of city money for the construction of a railroad to be used for experimental purposes, is violative of this section, where the construction of the railroad is contingent on further action by the legislature and no benefit is insured the city. People v. Loew, (1886) 102 N. Y. 471, 7 N. E. 297, reversing 39 Hun 490. It would seem, too, that the purchase of lands for a railroad right of way, freight house, station, yard, or other terminal facility to be owned by the railroad company would not be a city purpose. People v. Bradley, (1913) 207 N. Y. 592, 101 N. E. 766, affirming 155 App. Div. 882, 139 N. Y. S. 1139; Hanrahan v. Terminal Station Commission, (1912) 152 App. Div. 349, 136 N. Y. S. 1001, reversed on other grounds 206 N. Y. 494.

Monument. The erection within a city of a monument in commemoration of a public hero or heroes or of some great event, is a city purpose. Accordingly, a statute (ch. 552, Laws of 1893) authorizing the city of New York to issue bonds to defray the expense of erecting a monument in memory of the soldiers and sailors of New York who died serving their country during the Civil war, is not unconstitutional hereunder. Parsons v. Van Wyck, (1900) 56 App. Div. 329, 67 N. Y. S. 1054.

IV. TEN PER CENT LIMITATION OF INDEBTEDNESS.

1. Generally.

Purpose of limitation of indebtedness. The general purpose of the provision prohibiting any county or city from incurring indebtedness exceeding in amount ten per cent. of the assessed valuation of its real estate subject to taxation, was to prevent those municipalities from improvidently contracting debts for other than ordinary current expenses. "It was to restrict their borrowing capacity and, thus, to minimize the mischievous consequences to the taxpayers of extravagance in city expenditures." Levy v. McClellan, (1909) 196 N. Y. 178, 89 N. E. 569, affirming 132 App. Div. 913, 116 N. Y. S. 1087. The more specific mischief to be prevented was "the creation of an excessive debt for local improvements, or public works, or the loaning of municipal credit, so payable that the burden should not fall upon those who contracted the obligations, or on their revenues, but on posterity." Levy v. McClellan, (1909) 196 N. Y. 178, 89 N. E. 569, affirming 132 App. Div. 913, 116 N. Y. S. 1087; Bank for Savings v. Grace, (1886) 102 N. Y. 313, 7 N. E. 162.

Possible disregard of limitation as affecting validity of statute.- An act permitting a city to incur indebtedness is not invalid under the provision fixing the limitation of indebtedness, merely because the officers intrusted with its execution may transgress by making contracts violative of that limitation when the act itself contemplates nothing of the kind. Sun Printing, etc., Ass'n v. New York, (1896) 8 App. Div. 230, 40 N. Y. S. 607, affirmed (1897) 152 N. Y. 257, 46 N. E. 499, 37 L. R. A. 788.

Value of real estate. In determining the value of the "real estate" of a city for the purpose of ascertaining the relation of the municipal indebtedness thereto, that term must be deemed to comprehend all properties which the state makes taxable as such. At common law franchises partook of the nature of realty and by the Tax Law special franchises are classified as real estate; hence they are properly included as part of the real estate which valued for assessment purposes. "These franchises could never be classified as personal property and if a new subject of taxation, that fact is of no consequence in determining the correctness of their classification as taxable

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property. In my opinion, the article of the constitution, in the respect under consideration, must be deemed to comprehend within the term real estate all properties which the statute makes taxable as such." Levy v. McClellan, (1909) 196 N. Y. 178, 89 N. E. 569, affirmed 132 App. Div. 913, 116 N. Y. S. 1087; Kronsbein v. Rochester, (1902) 76 App. Div. 494, 78 N. Y. S. 813.

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Nature of indebtedness contemplated. In ascertaining the limit of a city's capacity to become further indebted, the constitutional provisions of this section relating to that subject may properly be read as contemplating what may be termed a permanent, or funded, debt, for permanent improvements, to be paid by future taxation, and a temporary indebtedness, created to pay the current expenses of administration and to be liquidated from the taxes levied for the year." Levy v. McClellan, (1909) 196 N. Y. 178, 89 N. E. 569, affirming 132 App. Div. 913, 116 N. Y. S. 1087. Addition of city to county debt and vice versa.- "When a county desires to create an additional debt, the ten per cent. limitation is not reached until the county debt equals ten per centum of the valuation of all the real estate in the county, including, of course, the real estate in the city which forms a part of the county; but in ascertaining when the limitation is reached in such a case, the debt of the city cannot be charged against the county any more than its proportionate share of the state debt or the debt of the several towns within its limits. The power of the county or the city, as the case may be, is restricted only by the amount of its own debt, and for the purpose of creating a disability against the one or the other, the debts of both cannot be aggregated." The foregoing holding was made with respect to a former provision of the constitution, prohibiting a county containing a city of over 100,000 inhabitants, or any such city, from becoming indebted to an amount exceeding ten per cent. of the assessed valuation of its real estate. It would seem, however, to be equally applicable to the present provisions. Adams v. East River Sav. Inst., (1892) 136 N. Y. 52, 32 N. E. 622, affirming 65 Hun 145, 20 N. Y. S. 12.

2. Items Included in Computation of Indebtedness.

Assessment bonds.— Assessment bonds issued by a city to pay the cost of local improvements are issued upon the faith and credit of the city alone and, when due, are its absolute and unqualified obligations. Such bonds must, therefore, be included in an estimate of the indebtedness of the city, although the cost of the improvements will be recouped, more or less, from the property benefited. The lien of the city on the property can be regarded only as a general asset. Levy v. McClellan, (1909) 196 N. Y. 178, 89 N. E. 569, affirming 132 App. Div. 913, 116 N. Y. S. 1087. Amount due on property appropriated to public use.- -The amount owing by a city to the owners of private property taken for public use, must be included in determining the total of the city's debt. Levy v. McClellan, (1909) 196 N. Y. 178, 89 N. E. 569, affirming 132 App. Div. 913, 116 N. Y. S. 1087.

Water supply bonds.- While bonds issued by the city of New York after Jan. 1, 1904, to provide for the water supply, are, by the terms of this section, to be excluded from an estimate of the total indebtedness of that city for the purpose of determining its power to contract debts, this exclusion does not include such bonds as were issued after that date to pay debts incurred prior thereto. Levy v. McClellan, (1909) 196 N. Y. 178, 89 N. E. 569, affirming 132 App. Div. 913, 116 N. Y. S. 1087.

Dock or rapid transit indebtedness.- Under the provision that " any indebtedness heretofore incurred by the city of New York for any rapid transit or dock investment may be so excluded proportionately to the extent to which

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6

the current net revenue received by said city therefrom shall meet the interest and amortization instalments thereof," only such bonds or obligations are to be excluded as can be paid, both principal and interest, with the current net revenue received by the city from the improvements for which they were issued. Matter of New York, (1910) 139 App. Div. 40, 123 N. Y. S. 860. Outstanding contract liabilities to be met by bond issue.—“In ascertaining the margin of the city's constitutional debt limit, existing indebtedness' must be regarded as including the city's liability upon contracts for public improvements, which is intended to be met from an issue of bonds." Thus, it has been held that outstanding contracts made by New York city for public improvements and involving $54,000,000, should be included as a portion of that city's indebtedness. Levy v. McClellan, (1909) 196 N. Y. 178, 89 N. E. 569, affirming 132 App. Div. 913, 116 N. Y. S. 1087. Delivering, in that case, the opinion of the majority of the court, Gray, J., said: "Why should these contracts not be regarded as constituting an indebtedness of the city? The law presumes that the parties to a contract will perform their agreements. If the incurring of contractual obligations to pay for public improvements does not represent an indebtedness, which is to be taken into account in ascertaining the margin of the debt limit, the force of the constitutional prohibition becomes doubtful. If the provision applies, not to the time of the execution of the contract, but, only, to the time when payments become due, very remark able results may follow. To illustrate: if, prior to the time of the completion of a contract for an extensive public improvement, made when the margin of the city's debt limit, as measured by an indebtedness consisting in direct, or absolute obligations, seemed to warrant it, the debt limit is reached, through the issuance of bonds to meet payments upon other contracts subsequently made, but completed at an earlier date, is the obligation of payment upon the first contract avoided? The constitutional provision is that 'all indebtedness in excess of such limitation, . . . shall be absolutely void;' with an exception which does not apply to the case supposed. Can that provision be invoked by a taxpayer to defeat an obligation of the city, valid and binding when incurred? I do not think we should agree to that. Then, may the validity of a contract obligation depend upon conditions, as determined by subsequent facts? If contracts are binding when made, are they to be invalidated by after-occurring events in the city's financial career? If the answer is obvious, it is, at once, suggested to the mind that the constitutional debt limitation does include within its provision the actual, or estimated, indebtedness upon such contracts."

3. Items Excluded in Computation of Indebtedness.

Bonds in anticipation of taxes.- This section provides that revenue bonds issued in anticipation of the collection of taxes, shall not be included in a computation of the indebtedness of a city unless they have been outstanding for more than five years since their issue. It is not essential to their exception, under the constitutional provision, that these revenue bonds should have been issued during the year, when the taxes became payable against which they are issued; provided that, when issued, they represented those taxes, within the amount unpaid of the levy, and were payable from the proceeds of their collection." Thus, revenue bonds issued by the city of New York by virtue of section 187 of its charter, should be excepted, when they have not been outstanding five years from issue, although they are redeemable out of the tax levy for the year next succeeding the year of their issue. Levy v. McClellan, (1909) 196 N. Y. 178, 89 N. E. 569, affirming 132 App. Div. 913, 116 N. Y. S. 1087. Similarly, revenue bonds in anticipation of taxes, when not of five years' standing, should be excluded, though issued for purposes other than to meet expenditures under the appropriations for each

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current year. They do not differ, in their temporary character, from other revenue bonds. They are issued in emergencies and provisionally. Instead of being in anticipation of the revenue for the year, in which issued, they are redeemable in the ensuing year under a special appropriation to be made. They should not be included in the computation." Levy v. McClellan, supra. Dock or rapid transit indebtedness.- Under the provision that “ any indebtedness heretofore incurred by the city of New York for any rapid transit or dock investment may be so excluded proportionately to the extent to which the current net revenue received by said city therefrom shall meet the interest and amortization instalments thereof," only such bonds or obligations are to be excluded as can be paid, both principal and interest, with the current net revenue received by the city from the improvements for which they were issued. Matter of New York, (1910) 139 App. Div. 40, 123 N. Y. S. 860. Unliquidated and disputed claims.- Unliquidated and disputed claims pending against a city should not be included as a part of the city's indebtedness. "Liability upon them is denied; they have not been adjudicated and, so far as they may be ultimately reduced to judgment, they will be payable from the proceeds of special revenue bonds; which, as it has previously been shown, do not enter into the constitutional purview of an existing indebtedness.” Levy v. McClellan, (1909) 196 N. Y. 178, 89 N. E. 569, affirming 132 App. Div. 913, 116 N. Y. S. 1087.

Cost of local improvement undertaken by property owners.- Sums to be paid for the construction of local improvements within a city should not be regarded as part of the indebtedness of the city where the entire cost of the improvements is to be borne by the owners of the property benefited and where the city, though party to the contracts of construction, is specifically exonerated from all liability thereon, engaging only to collect the assessments to be levied against the property owners interested. No claim enforceable against the city could arise out of such a contract as the contractor, by the terms of his agreement, looks to the property owners. The function of the city is merely to exercise control over the improvement and to act as an intermediary between the contractor and the property owners in the collection and the payment of the costs. Kronsbein v. Rochester, (1902) 76 App. Div. 494, 78 N. Y. S. 813.

4. Deductions.

Bonds payable year of determination.— Bonds payable the year of an inquiry as to the city's power to contract debts should be deducted from the city's total indebtedness where provision has been made for their payment in the budget of that year. Levy v. McClellan, (1909) 196 N. Y. 178, 89 N. E. 569, affirming 132 App. Div. 913, 116 N. Y. S. 1087.

Holdings of sinking funds.- Cash or bonds held in any sinking fund not created by law for the particular purpose of discharging indebtedness which is not to be reckoned under this section in ascertaining a city's debt, should be deducted from a city's entire debt for the purpose of determining its margin of indebtedness. Levy v. McClellan, (1909) 196 N. Y. 178, 89 N. E. 569, affirming 132 App. Div. 913, 116 N. Y. S. 1087. See also Bank for Savings v. Grace, (1886) 102 N. Y. 313, 7 N. E. 162; Kronsbein v. Rochester, (1902) 76 App. Div. 494, 78 N. Y. S. 813. Thus, holdings of water supply bonds issued by the city of New York after Jan. 1, 1904, should be deducted from the total indebtedness of the city, even though such bonds are excluded from the computation thereof, where they are held by sinking funds not by laws especially created to discharge indebtedness which is not to be reckoned in ascertaining the city's debt. Levy v. McClellan, supra. Voicing, in that case, the view of the majority of the court, Chief Judge Cullen said: availability as an offset to the general indebtedness of the city of water bonds issued by the city since the new constitution and held in the sinking

"The

Art. VIII, § 11

Visitation of Certain Institutions

funds, I think depends entirely upon the particular sinking fund in which such bonds are held and not on the character of the bond. If they or other bonds are held in the special sinking fund created by section 208 of the charter, or in any sinking fund which is by law especially created to discharge indebtedness which, under the constitution, is not to be reckoned in ascertaining the city's debt, then they cannot be treated as an offset against the general city debt; otherwise, they should be so considered."

Current instalment of sinking fund.— In determining the debt of a city for the purpose of this section, deduction should be made from its total indebtedness of the annual instalment provided for the sinking fund by the budget of the year in which the debt is determined. Levy v. McClellan, (1909) 196 N. Y. 178, 89 N. E. 569, affirming 132 App. Div. 913, 116 N. Y. S. 1087.

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Available cash. In ascertaining a city's debt for the purpose of this section, there should be deducted from its total indebtedness the following: Cash in the treasury from unallotted proceeds of bonds issued to pay debts included in the computation of the city's indebtedness, and cash on hand applicable to the discharge of contract liabilities. Levy v. McClellan, (1909) 196 N. Y. 178, 89 N. E. 569, affirming 132 App. Div. 913, 116 N. Y. S. 1087. Funds which may be used to defray any legitimate city expense should not, however, be deducted, inasmuch as they may or may not be used to reduce the indebtedness of the city. Kronsbein v. Rochester, (1902) 76 App. Div. 494, 78 N. Y. S. 813.

§ 11. State board of charities.

State commission in lunacy.

State commission of prisons.

The Legislature shall provide for a state board of charities, which shall visit and inspect all institutions, whether state, county, municipal, incorporated or not incorporated, which are of a charitable, eleemosynary, correctional or reformatory character, excepting only such institutions as are hereby made subject to the visitation and inspection of either of the commissions, hereinafter mentioned, but including all reformatories except those in which adult males convicted of felony shall be confined; a state commission in lunacy which shall visit and inspect all institutions, either public or private, used for the care and treatment of the insane (not including institutions for epileptics or idiots); a state commission of prisons which shall visit and inspect all institutions used for the detention of sane adults charged with or convicted of crime, or detained as witnesses or debtors.

Const. 1894, Art. VIII, § 11. See also Const. 1846, Art. V, § 4. Object in creating board of charities. The board of charities was created to regulate the expenditure of public money for charity, and to guard against the misapplication of funds appropriated to that purpose. People v. New York Society, etc., (1900) 162 N. Y. 429, 56 N. E. 1004; People v. New York Society, etc., (1900) 161 N. Y. 233, 55 N. E. 1063, reversing 42 App. Div. 83, 58 N. Y. S. 953; People v. Fitch, (1897) 154 N. Y. 14, 47 N. E. 983, 38 L. R. A. 591, reversing 12 App. Div. 581, 39 N. Y. S. 926, 42 N. Y. S. 1131.