Tax Court reverses reduction in school corp.'s exempt debt service fund levy

September 2, 2014

The Indiana Tax Court on Friday overturned the decision by the Department of Local Government Finance to reduce the Gary Community School Corp.’s exempt debt service fund levy for the 2011 budget year. Judge Martha Wentworth found the state agency had no authority to reduce the levy.

The DLGF approved the school corporation’s lease rental agreement with the Gary Community School Building Corp. in 2003, which provided that the school corporation would lease two new elementary schools from the building corporation for a 25-year period. The school corporation used surplus money from its general fund to pay its rental obligations, but due to dwindling funds, decided to include an exempt debt service fund levy in its 2011 budget to pay for the rent.

The DLGF reduced the school corporation’s levy by removing all the amounts related to the payment of the rental obligations because it said there was no indication the school corporation had used an exempt debt service fund level to pay its rental obligations in the past. The DLGF also claimed the school corporation was using the process to circumvent taxpayer remonstrance opportunities.

Wentworth reversed in Gary Community School Corporation v. Indiana Department of Local Government Finance, 45T10-1104-TA-30, in which she found the state agency exceeded its authority because the statutory framework for reviewing such levies did not authorize it to consider other sources of funding. There is no specific language preventing the DLGF from considering amounts that may be available to the school corporation from its other funds; however, the absence of this prohibition, does not imply that the DLGF has the authority to do so, she wrote.

Wentworth also held that the 2003 order does not authorize the DLGF to consider other funding sources in reviewing the school corporation's’s exempt debt service levy. She also noted that Indiana’s property tax statutes provide taxpayers with chances other than remonstrance to object to a school corporation’s request to establish an exempt debt service fund levy.

The judge remanded for action consistent with the opinion.

Wentworth also released an order Friday related to this case granting the DLGF’s motion to strike three exhibits contained in the school corporation’s appendix and denying its motion to strike a letter from the school corporation.


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