water, or electricity, stands on the same footing as individuals or private corporations so engaged, finds support, also, in such cases as Brumm v. Pottsville Water Co. (1888) 9 Sadler (Pa.) 483, 12 Atl. 855 (where the statement is arguendo merely, the case being one of a private corporation); and Linne v. Bredes (1906) 43 Wash. 540, 6 L.R.A. (N.S.) 707, 117 Am. St. Rep. 1068, 86 Pac. 858, 11 Ann. Cas. 238 (involving the power of a municipality by ordinance to make delinquent water rentals a lien on property as against a subsequent owner or occupant).

III. Inducement to industries or institutions to locate in city.

See Bellaire Goblet Co. v. Findlay (Ohio) under II., supra, where the special rate was made as an inducement to rebuild a factory.

The rule above indicated (see II., supra), forbidding unreasonable discrimination by a municipality in operating a public utility, would seem clearly to prohibit the granting of special rates or service to an industry to induce it to locate in the city. And the authorities support this view. Whether the municipality might be expressly authorized to make discriminations of this kind is, of course, a different question, the decisions being merely to the effect that municipalities ordinarily have no such power.

In the reported case (AMERICAN ANILINE PRODUCTS V. LOCK HAVEN, ante, 121) it is held that a municipality, having statutory authority to erect waterworks, determine rates, and supply water at such prices as may be agreed upon, has no authority to fix rates or agree on prices which would allow it to give water free of charge, such an agreement constituting a discrimination against other users of water, and void as against public policy, even though the agreement to supply water free for a certain period was made as an inducement to the consumer to locate in the municipality.

And in Eastern Illinois State Normal School v. Charleston (1916) 271 Ill. 602, L.R.A.1916D, 991, 111 N. E.

573, where a municipality, in order to induce the location therein of a state normal school, agreed to supply, for a nominal consideration, all of the water which the school would need for a period of fifty years, and the school was located within the municipality, which performed the agreement for a number of years, but afterwards repudiated it and proposed to install meters and make a regular charge for water consumed by the school, it was held that the municipality had no power to enter into such a contract by virtue of statutory authority conferred upon it to supply water to its inhabitants at such rates as the common council should deem expedient; also, that the municipality had no implied authority to make such an agreement; and that the establishment of the school in the municipality, at large expense, on the faith of its offer to furnish water at a nominal rate, did not estop the municipality from questioning the validity of the contract. The court said: "In supplying water for the use of the inhabitants for domestic and commercial purposes, a municipality is not in the exercise of a governmental power, but acts in the same capacity as a private corporation, although the business is carried on for the public advantage, and, being public in its nature, is impressed with a public use. There are material distinctions between the exercise of governmental powers and those which are in their nature private, in the fact that in the exercise of governmental powers a municipality is not liable to a private action, while it is liable for injuries resulting from improper exercise of a power in its private capacity. Any distinction, however, based on the nature of the power exercised is of very little importance in determining whether the city of Charleston is bound by its contract, which rests on the question whether the city had power to enter into it in any capacity. The argument for the sufficiency of the bill is that, because the city was authorized to construct and maintain waterworks and supply water to the inhabitants of the city, and the exercise of that power was in its private

capacity, therefore the city could enter into any contract it saw fit for a term of fifty years, and would be bound by it. The conclusion does not follow either from the fact that the city had authority to supply water, nor that the exercise of the power was in a private capacity; but the question is whether the city had power to make the contract it did make to furnish water to the complainant or to any person or corporation for fifty years for $5. The rule is that the powers of municipalities are only those expressly granted or necessarily implied to make the grant of specific powers effective. . The only statutory

powers conferred by law upon cities in respect to waterworks and water supply are those which have been stated above. If there is no legitimate corporate purpose from which the power to enter into the contract may be implied, the contract was void, and cannot be enforced." And the court, after referring to other cases in that state in which it has been held that municipalities could not make a binding agreement with regard to the payment by them for water for a number of years, said that whether the exercise of the power was in its nature private or governmental, the municipality in question could not, without legislative authority, agree to furnish water to the school or anyone else for fifty years for the sum of $5; that everyone is presumed to know the extent of the powers of a municipal corporation, and it cannot, therefore, be estopped to allege its incapacity, which would amount to conferring power to do unauthorized acts simply because it had done them and received the stipulated consideration. Decisions of public service commissions are to a similar effect. Thus, it is held in Civic League v. St. Louis Water Dept. (1916; Mo.) P.U.R.1917B, 576, that a municipality operating a water plant cannot give a lower rate for water used for purely manufacturing purposes, to encourage the establishment of manufacturing plants within its limits, since the powers of the municipality must be employed alone for public purposes or objects,

and the aiding of manufacturers is not such a public purpose; that the fact that it is the earnest desire of the municipal authorities, and the business interests of the city, to give the lower rate, is not a sufficient reason to warrant the commission in approving a lower rate for water furnished by municipal plants for purely manufacturing purposes than is charged for water used for general purposes; also, that the fact that lower water rates have been given to manufacturers and to other water users by a city, during a long period of years, does not constitute such a usage or custom as will be recognized by law.

And in Re Hammond Waterworks (1918; Ind.) P.U.R.1919A, 180, it was held that the practice of a municipality which owned and operated a water plant, in providing free water for industries, in order to encourage their location in the city, was unfair and discriminatory and was contrary to the provisions of the utility commission act.

IV. Special or free rates or service to public, charitable, or religious institutions.

At this point attention is called again to the annotations in 10 A.L.R. 504, and 15 A.L.R. 1200, on the question whether franchise provisions for free or reduced rates by public service corporations are within constitutional or statutory provisions prohibiting discrimination. As pointed out in these annotations, the question there considered is one upon which there is a diversity of opinion; the utilities commissions, however, generally holding that franchise provisions for free or reduced rates constitute unlawful discrimination. So, on the present subject, while there are several court decisions which support the right of a municipality, in operating a public utility, to give free or reduced rates to public, charitable, or religious institutions, or for public purposes generally, yet the commission decisions are generally to the contrary, holding that such free or special rates are unjustly discriminatory.

In Oklahoma City v. Oklahoma R. Co. (1907) 20 Okla. 1, 16 L.R.A. (N.S.) 651, 93 Pac. 48 (which is set out in the annotation in 10 A.L.R. on p. 505), the court expressed the opinion that, if the municipality were itself operating the street railway, it would not be precluded from carrying school children at the reduced rate, and policemen, firemen, and mail carriers without charge.

And in Fretz v. Edmond (1916) 66 Okla. 262, L.R.A.1918C, 405, 168 Pac. 800, it was held that the donation of water by a municipality to a state normal school did not constitute an unjust discrimination against a citizen, taxpayer, and water consumer of the city, who was required to pay a fixed rate for water used by him. The suit was for an injunction to restrain the municipality from furnishing the water free of charge, and it was held that a demurrer to the petition had been properly sustained. The court, after pointing out that the petition contained no allegation that the water rate which the plaintiff was compelled to pay, or the taxes on his property, would be increased by reason of the contemplated action, and that additional cost to the city which the plaintiff and other taxpayers and water consumers would be obliged to meet was not necessarily shown therefrom, said: "The question raised by the petition and demurrer, therefore, must be determined not upon the ground of any unlawful disposition of the public moneys or funds which the plaintiff, under proper circumstances and allegations, would be entitled to enjoin, but upon the averment of the plaintiff's petition that the donation of such water constitutes an unjust discrimination against him and his fellow citizens similarly situated. . . . In exercising the authority conferred upon them by statute in relation to the conducting and maintenance of waterworks, it is clear that the officers of the city are not exercising, in any strict sense, the governmental or legislative powers by which the sovereignty of the city is maintained and its people governed, but that they are acting in a quasi

public and quasi private capacity, exercising as the agent of the people mere business powers of the conduct of an enterprise for the benefit of the inhabitants of the municipality. Acting, therefore, in such capacity, the rights of the city are to be determined largely upon the same principles which govern the acts of individuals or corporations in transacting the same quasi public services. . . . As to each, the rule is not that there must not be any discrimination of any kind, but that there must be no unjust discrimination. . . . In exercising the discretion vested in them to fix rates to the various consumers, the city council are not bound, therefore, to give absolute equality of service and to fix an absolute equality of rate, but only to act so that there may be no arbitrary exercise of power or substantial injustice done. . . . It has often been held that a municipality may exact of a private corporation, as a condition of a franchise, free service to itself, or even to charitable or religious institutions within its borders. . . . If a city, having the power to engage in the same business, may lawfully exact of a private corporation certain conditions in conducting that business, certainly it must be true that the city itself may perform the same condition.

The contention that the city has the power in proper case to give from the resources of its public service plants to public institutions or public uses without unjustly discriminating against the rights of its inhabitants seems to be supported by reason, logic, and abstract justice. A fire originates within the borders of a city upon the property owned by some person who has never been a user of the city water. The fire is extinguished by water furnished by the city plant. Can it be said that the city is required to install a meter at some place upon the hose line, in order to determine the number of thousand gallons for which the owner of the property must pay, or that, by failing so to do and giving the water, not only for the benefit of the private individuals, but for the benefit of the public, it un

justly discriminated against some person who has paid for all the water that he used? The statement of the proposition, of course, reveals its absurdity, and shows that the conduct of the city must be based not upon absolute equality of service, but upon discrimination which is not essentially unjust. The public lavatories, rest rooms, public fountains, and public parks maintained by cities, are all places where water is donated for the public good. So, it must seem that water might be given for use in the city hall, or the city's public buildings. Does the rule extend to those institutions which are owned and controlled not by the city, but by the state? We can see no good reason for the distinction between them, where the state institution of learning is located within the city, and redounds, as it must, both to the benefit of the business activities of the city and to the intellectual and moral life of its inhabitants. The support of the institution must be for the public good."

In other words, in Fretz v. Edmond (Okla.) supra, the court takes the view that discriminations in favor of the public at large, or institutions which must vastly benefit the intellectual and business life of the public, are not opposed to public policy, and cannot be held to be illegal, in the absence of legislation on the subject, the reason being that there is a benefit to the people generally by relieving them in this method of part of their burdens.

It was held, also, in Consolidated Ice Co. v. Pittsburgh (1922) 274 Pa. 558, 118 Atl. 544, that the fact that a municipality operating a water plant supplied itself with free water for fire protection, etc., and also supplied water free to certain public charities, was not an abuse of discretion, and afforded its pay customers no just grounds for complaint.

And in Preston v. Water Comrs. (1898) 117 Mich. 589, 76 N. W. 92, where consumers' of water sought to restrain collection of water rates by water commissioners of a municipality, on the ground that the assessment was inequitable and discriminatory,

and that the board had no right to furnish water free to the board of education, or to charitable institutions, or to the public, the court said that it appeared that the free use of water was given only to institutions in which the city and all of its citizens were interested, and that, where a partial rate was charged, the recipient was a charitable or educational institution in the maintenance of which the public was more or less interested; that it was shown that the water used by the fire department, the park commission, and all other purposes which might be called "free water," for which property should pay, constituted but 4 per cent of the entire amount, while from 18 to 25 per cent of the receipts of the water board had been derived from the city through a tax levied upon all the property of the municipality; that the board was properly given wide discretion in the management of the water plant, and there was nothing to show that it had abused its discretion in fixing the rates. It will be observed that the decision of the lower court, which was reversed, takes the position that the water commissioners had no authority to discriminate, but should charge the public institutions for water furnished, and that the cost should be assessed as a general tax, so that the burden for such public benefits would be borne by all the taxpayers. Whether this view is one in which the supreme court might, under other circumstances, have concurred, is not clear, since, as indicated above, it appeared that for years an assessment of a large sum annually had been made upon the property of the city to apply upon the expenses of the water plant; it was held that the rates fixed were reasonable and equitable, and that the plaintiffs had no ground for complaint.

But in University of Montana v. Bozeman (1923; Mont.) P.U.R.1924A, 705, it was held that it would be unlawful for a municipal utility to grant a preference to the state through the furnishing of water to a state university at rates based merely on operating costs, exclusive of depreciation, in

terest, etc.,-as service to the school on such a scale would mean merely that the taxpayers of the municipality or the water consumers thereof must make up the deficiency for which the school-service rate did not compen

sate.

It was held, also, in Re Warren (1919; Ind.) P.U.R.1919F, 38, that a charge by a municipal utility to churches and charitable institutions, of a rate for electricity less than that charged other consumers for the same service, was discriminatory, and contrary to the provision of the Public Service Commission Act, prohibiting any public utility from charging a consumer a greater or less compensation for service then it charged any other consumer. To a similar effect is Re Warren (1920; Ind.) P.U.R. 1921A, 107.

And the Missouri Commission in Botts v. Brookfield (1917; Mo.) P.U.R. 1917D, 224, held that the furnishing of water free from a municipal water plant to churches and schools in the city, while other consumers were charged for a like service, constituted unlawful discrimination.

A similar conclusion has been reached by various commissions with regard to the furnishing of light or water for public purposes, as street lighting, fire protection, etc., the position being taken that a charge should be made therefor.

In Cavanaugh v. Whitefish Municipal Water Utility (1922; Mont.) P.U.R.1922E, 198, where it appeared that water was taken by the public from a municipal water plant for fire protection, public buildings, and other public purposes, the commission said that to render the public these services without charge constituted unlawful discrimination in favor of taxpayers and against the water con

sumers.

And on petition for the establishment of rates of a municipal electric utility, the commission in Re Hillis (1926; Ind.) P.U.R.1927A, 443, held that discrimination was shown against private consumers, in that the city paid nothing for street lighting, it being said that the utility should be

paid a fair rate for all service rendered, whether rendered to an individual or to the city. And it was held that the city's rate for service should be the same as the rate for the largest power consumer.

And that a city owning a municipal water plant should make a proper charge for its fire-protection facilities and service and for other city service is the position taken in Re Hammond Waterworks (1918; Ind.) P.U.R.1919A, 180.

A city which operates a municipal lighting plant is not justified in charging itself for street lighting a sum per light which is less than the actual cost of rendering the service, since other consumers of electricity would thus be paying a part of the expense of lighting the streets. Bonser v. Electric Light Commission (1920; Me.) P.U.R.1920F, 183.

That a municipal waterworks should make a charge for fire protection furnished the municipality, especially where the utility is charged with interest on the funded debt, is supported also by Wood v. La Farge (1916; Wis.) P.U.R.1917A, 763, where the complaint was that the rates of the municipal waterworks were unjustly discriminatory.

And in Skogmo v. River Falls (1917; Wis.) P.U.R.1917E, 964, it was held that the fact that a city had built and practically paid for a municipal utility plant did not entitle it to furnish street lighting and fire protection service without charge, since this would be an unlawful discrimination under the Wisconsin statute. The commission said that the fact that the utility was owned by the city did not alter the conditions, because, under the public utilities act, privately owned and municipally owned public utilities were subject to the same treatment at the hands of the commission.

On the question of accounting and discrimination, the Wisconsin commission in Re Light & Water Commission (1915; Wis.) P.U.R.1915E, 539, said that it appeared to be good business policy to treat a municipal water or electric plant as an enterprise