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circumstances which surrounded its adoption and in which it is to be applied.

The ordinance was approved by the Mayor May 25, 1932, and was to become effective July 1 of that year. It provides in § 2 that the word “person " in the several sections shall be taken to include a corporation unless the context plainly shows otherwise; in subdivision (c) of § 5 that the tax shall be applied to " every person engaged in or carrying on" the business of selling or furnishing electric light and power within the city; and in § 6 that subdivision (c) of § 5 “shall, as far as permitted by law, be applicable to the City of Seattle, except that said City shall not, as a taxpayer, be required to conform to the other provisions of this ordinance "_the “other provisions” obviously being those which require sworn returns, application for license, etc.

The electric light and power business of the appellant and the like business of the city have been and are highly competitive, and are the only ones in the field. Both had their inception in ordinances adopted in 1902—the one under which the city entered the field being a little older than the one granting the franchise under which the plaintiff has proceeded. Both businesses have been greatly extended and enlarged in relative keeping with the growth of the city.

The city's business is conducted, as is required by statutory and charter provisions, as an independent unit distinct from all other activities of the city, whether governmental or proprietary; and the accounts, revenues, expenses and funds pertaining to the business are kept, handled and adjusted, as is similarly required, separately from other accounts, revenues, expenses and funds of the city. This independence and separation is not merely formal, but real and persistent. The city in its governmental capacity is a customer of its proprietary light

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and power business and obtains therefrom electric current needed for street lighting and other municipal purposes. For this current the city in its governmental capacity pays each year a sum which is determined after a public hearing in which all who are interested are given an opportunity to participate. The payment is effected by transferring money from the city's tax-supported general fund, which is devoted to governmental uses, to the separate fund into which the revenues of the proprietary light and power business are required to be paid. The amount to be paid for such current in 1932 was given in the city's budget as $438,750.

The decisions of the Supreme Court of the State leave no doubt that the situation is as just stated. In Uhler v. Olympia, 87 Wash. 1; 151 Pac. 117, 152 id. 998, which relates to a proposed city-owned water system designed to supply for hire both private and municipal needs, that court says (p. 4): “ The revenues to be received under the plan proposed ... do not partake of the character of general funds, nor can the general fund be invaded if they are not sufficient”; and again (p. 14): “The city, in meeting functions that are called governmental, is taking [water] from the city . . . in its proprietary capacity; therefore the general fund of the city may be charged and the special fund credited with a reasonable charge for the water used [by the city] where it is so provided in the ordinance. The city, as a governmental entity, stands in the same relation to the system as a private citizen who is patronizing it.” And that court further holds that, while it is admissible under the laws of the state for a city to make“ temporary loans ” from the taxsupported general fund to a special utility fund or vice versa, or from one special utility fund to another, if the borrowing fund is solvent and has an assured income from which repayment may be made, it is not admissible to

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make loans from one of these funds to another which is insolvent, or to make contributions or permanent diversions from one to another; and that attempted infractions of these restrictions may be prevented by injunction. Asia v. Seattle, 119 Wash. 674, 679–680; 206 Pac. 366; Griffin v. Tacoma, 49 Wash. 524, 529; 95 Pac. 1107; Uhler v. Olympia, 87 Wash. 1, 7; 151 Pac. 117, 152 id. 998; Von Herberg v. Seattle, 157 Wash. 141, 147, 150–151; 288 Pac. 646.

Since 1916 the city has financed the extension and development of its electric light and power business by issuing and selling revenue bonds, without submitting the matter to the electorate or creating an indebtedness on the part of the city. The total of such bonds outstanding at the end of 1931 was approximately $32,000,000. By law and by their own terms these bonds are payable only from a bond fund specially created from revenues derived by the city from its electric light and power business.

The appellant in its complaint alleges that the gross revenues of the business are by law, underlying ordinances, and the terms of the bonds, pledged to the payment of the bonds, principal and interest; and that “such pledge constitutes a charge upon such gross revenues prior and superior to all other charges whatsoever, including charges for maintenance and operation.” Counsel for the city, while not questioning the allegation in other respects, insist that under the applicable law the pledge is not of the gross revenues, but at most is only of what remains after paying costs of maintenance and operation, and that the tax in question if laid on the city's business pursuant to the ordinance may be paid from the gross revenues like other costs of maintenance and operation.

Section 9491 of Remington's Revised Statutes of Washington, under which appellant alleges the bonds were issued, makes provision for setting aside and paying into a

VAN DEVANTER, J., concurring.

291 U.S.

any fixed

special bond fund“ any fixed proportion" or amount” of the “ gross revenues” from the business in aid of which bonds are issued, and for making the bonds payable "only out of such special fund.” These provisions are followed by another in the same section declaring:

“In creating any such special fund or funds the common council or other corporate authorities of such city or town shall have due regard to the cost of operation and maintenance of the plant or system as constructed or added to, and to any proportion or part of the revenue previously pledged as a fund for the payment of bonds, warrants or other indebtedness, and shall not set aside into such special fund a greater amount or proportion of the revenue and proceeds than in their judgment will be available over and above such cost of maintenance and operation and the amount or proportion, if any, of the revenue so previously pledged.”

The charter of the city also contains a provision, § 18 (Fifteenth), enabling the city to establish, operate and maintain a plant or system for furnishing electric power and light for industrial, individual and municipal uses, " and to provide and secure payment therefor in whole or in part by net earnings therefrom."

Section 9491, under which the appellant alleges the revenue bonds were issued, is not confined to enabling cities to supply an electric light and power service, but is also directed to enabling them through the issue of like bonds to supply a street railroad service or a water service. In 1919 the appellant, which then owned a street railroad system in Seattle as well as an electric light and power system, sold and transferred its street railroad system to the city and received in payment fifteen million dollars of revenue bonds with a supporting pledge like that which the appellant sets forth in its complaint in

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the present case. Controversy soon arose as to whether that pledge includes the entire gross revenue of the street railroad system or only what remains after paying the cost of maintenance and operation; and much litigation ensued in which the appellant persistently sought to establish the broader construction of the pledge. The litigation resulted in decisions recognizing and sustaining the pledge in several respects, but leaving undetermined the question whether it includes all of the gross revenue or only what is left after the cost of maintenance and operation is paid. The case of Von Herberg v. Seattle, 157 Wash. 141, decided in 1930, appears to have been the last of the series. The appellant was a party and set up its contention as in the other cases. In concluding the decision the court said: “We accordingly express no opinion upon the question of whether or not wages and operating expenses of the street railway must be paid before the application of any money in the street railway fund to the payment of the bonds evidencing the purchase price of the system.”

In view of that acute and undetermined controversy and its obvious bearing on the pledge given in support of the revenue bonds pertaining to the city's electric light and power business, it is easy to perceive why the city in adopting the ordinance of 1932 and providing in § 6 that the tax should be applicable to the city's business, inserted the words “ as far as permitted by law.” Evi

Twichell v. Seattle, 106 Wash. 32; 179 Pac. 127; Old Colony Trust Co. v. Seattle, 271 U.S. 426.

· Puget Sound Power & Light Co. v. Seattle, 284 Fed. 659; Von Herberg v. Seattle, 27 F. (20) 457; Puget Sound Power & Light Co. v. Von Herberg, 278 U.S. 644; Puget Sound Power & Light Co. v. Seattle, 29 F. (20) 254;

* Twichell v. Seattle, 106 Wash. 32; 179 Pac. 127; Asia v. Seattle, 119 Wash. 674; 206 Pac. 366; Von Herberg v. Seattle, 157 Wash. 141; 179 Pac. 127.

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