An Allen County judge has dismissed the city of Fort Wayne’s complaint against the county auditor’s allocations of taxes, writing that the case should be heard in the Indiana Tax Court, not a trial court.
In an order granting Allen County auditor Tera Klutz’s motions to dismiss, Allen Superior Judge Craig J. Bobay wrote that the central issues in City of Fort Wayne v. Southwest Allen County Fire Protection District and Tera K. Klutz, 02D02-1605-PL-231, focused on taxes, not annexation laws as the city contended.
The issues in the case began as far back as 1987, when the city of Fort Wayne began annexing properties located in the Southwest Fire District. When the annexations occurred, the Fort Wayne Fire Department began providing fire protection to service areas previously under the jurisdiction of the Southwest Fire District. However, property tax revenues derived from the annex areas were and still are distributed to the Southwest Fire District, not the city.
Fort Wayne first broached the issue in 2014 when it told Klutz and Southwest that it believed it was entitled to the tax revenues from the annexed areas, then filed a complaint for declaratory and other relief against Southwest and Klutz in August 2016. Klutz filed a motion to dismiss the city’s request for an award of damages in July 2016, then filed a second motion to dismiss the request for declaratory relief in August.
Both of Klutz’s motions centered on the same argument: the Allen Superior Court did not have jurisdiction to hear the case because it was a tax issue that must be sent to the Indiana Tax Court. Specifically, Klutz pointed to Indiana Code 33-26-3-1 and 33-26-3-2(1), which provide that the Tax Court has jurisdiction over any case that “arises under” Indiana tax laws.
Bobay pointed out that the Indiana Court of Appeals had previously defined “arises under” to mean situations where “the case principally involves collection of a tax or defense to that collection.”
Further, in State ex rel. Zoeller v. Aisin USA Manufacturing, Inc., 946 N.E.2d 1148, 1152-1153 (Ind. 2011), the Indiana Supreme Court wrote that “challenging the collection of a tax or assessment arises under tax laws” and that “the challenge need not be to the collection directly – challenges to earlier steps in the taxation or assessment process arise under the tax laws.”
Further, Klutz argued that the city must further seek administrative remedies through the Department of Local Government Finance before taking its case to court.
But the city of Fort Wayne argued that its case was based on a question of annexation law, not tax law, and thus was subject to trial court jurisdiction. It pointed to Indiana Code 36-8-11-16, which holds that, “All the real property within a fire protection district constitutes a taxing district for the purpose of levying taxes … .” That statute, and similar ones, falls under a section of state code dealing with local governments, not taxation, thus putting it under the jurisdiction of the trial court.
But Bobay said the city’s argument had not convinced him that the case was an issue of annexation, not taxes.
“The City’s Complaint expresses dissatisfaction with the Auditor’s allocation of tax revenues and, in turn, seeks property tax revenues derived from areas the City has annexed,” Bobay wrote. “The City’s Complaint is concentrated on a dispute over tax revenue, which clearly implicates tax law.”
Further, Bobay wrote that he agreed that Fort Wayne must first take its complaint to the DLGF and bring it back to the courts only if it believes the department’s decision is in error. Thus, he granted both of Klutz’s motions to dismiss the case.
John Perlich, spokesman for the city of Fort Wayne, told Indiana Lawyer in an email that the city acknowledged the case was difficult but said the opinion did not shed light of the issue of where the tax dollars should be allocated.
“The court’s decision doesn’t address the essential question of whether the city of Fort Wayne is entitled to property tax revenues from those areas formerly within the Southwest Allen County Fire Protection district(s) that are now within the city and primarily served by the Fort Wayne Fire Department,” Perlich said. “The decision only says that the Department of Local Government Finance and, ultimately, the Indiana Tax Court are the ones to decide the question.”
Perlich went on to say that the city is currently reviewing options for its next steps, including filing an appeal of the jurisdictional review with the Indiana Court of Appeals or filing for administrative review with the DLGF, as Bobay suggested in his opinion.