County can’t raise tax to fund emergency expenses

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The Indiana Tax Court affirmed the decision by the Department of Local Government Finance to deny the Clark County Board of Commissioners' request to increase the county’s Cumulative Capital Development Fund tax rate for the 2012 budget year. The county sought the additional funds for a rainy day fund and to cover unexpected emergency costs.

The board of commissioners unanimously adopted Ordinance 18-2011 in July 2011, seeking to increase its tax rate under the CCDF from $0.018 per $100 of assessed valuation to $0.0333 per $100 of assessed valuation. The additional $613,800 in property taxes generated from the increase would defray health insurance costs or go into the county’s rainy day fund, which would then be used to pay certain operating expenses such as emergency situations dealing with weather.

Taxpayers opposed the increase at a hearing before the DLGF to approve the tax hike, claiming the board previously improperly used CCDF funds. Because neither I.C. 6-1.1-41 nor I.C. 36-9-14.5-2 authorize an increase to the CCDF tax rate for either purpose Clark County sought, the DLGF denied the authorization to increase the tax rate.

Judge Martha Wentworth affirmed in Board of Commissioners of Clark County v. Indiana Department of Local Government Finance, 49T10-1111-TA-68. She ruled against the board on all of its arguments: that the DLGF considered matters outside its statutory authority under I.C. 6-1.1-41, et seq.; that the DLGF’s finding that the board sought to increase the CCDF tax rate for an impermissible purpose is contrary to law, and arbitrary and capricious; and that the finding is unsupported by substantial evidence.

“Indiana Code § 36-9-14.5-8(c), therefore, permits the Board to spend CCDF money already in the fund to defray emergency expenses, but does not allow an increase in the CCDF’s tax rate for the sole purpose of using the new tax revenues to pay for subsequent emergency expenses. Accordingly, the Board has not shown that the DLGF’s finding is in contravention of Indiana Code § 36-9-14.5-8(c),” Wentworth wrote.

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