COA to determine jurisdiction of fire departments’ annexation, taxation dispute

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The jurisdictional fate of an annexation and taxation dispute involving the Allen County auditor and two Fort Wayne-area fire departments now rests with the Indiana Court of Appeals, which must decide whether the facts of the dispute lend the case to review by the trial court or Tax Court.

Judges Edward Najam, Patricia Riley and Cale Bradford hear arguments Wednesday in City of Fort Wayne v. Southwest Allen County Fire Protection District, et al., 02A05-1612-PL-02883. The case can trace as far back as 1987, when the city of Fort Wayne began annexing properties formerly within the jurisdiction of the Southwest Allen County Fire Protection District.

After the series of annexations, James Fenton, counsel for the city, told the judges the city’s fire department began providing fire protection services to the annexed areas, though cooperation between the two departments has led SWFD to continue providing aid in those areas. Despite the annexation, the Allen County auditor’s office continued to allocate tax revenues from the annexed areas to SWFD, the fact that prompted the instant suit.

The judges are not being asked to determine how the tax revenues should be allocated, but instead posed the question of whether the Allen Superior Court had jurisdiction to hear the city’s complaint. According to Allen Superior Judge Craig J. Bobay, the central issues in the city’s case are grounded in tax law, divesting him of jurisdiction to hear the case.

Bobay held the city must first take its complaint to the Department of Local Government Finance, then appeal its case before the Indiana Tax Court if it is not satisfied with the DLGF’s decision. Thomas Bedsole, counsel for SWFD who argued on behalf of his client and the auditor, urged the Indiana Court of Appeals to adopt a similar holding, telling the judges the city must follow the prescribed administrative procedure to resolve the dispute over the allocation of the tax revenues.

Fenton, however, said the instant case is not a dispute over the allocation of tax revenues, but rather is grounded in annexation law. The question in the case, he said, is which properties are in the jurisdiction of which fire department.

Fenton pointed specifically to Indiana Code 36-8-11-22, which holds that, “Any area that is part of a fire protection district and is annexed by a municipality that is not a part of the district ceases to be a part of the fire protection district when the municipality begins to provide fire protection services to the area.” That statute does not deal with any substantial tax law, the attorney said, but rather presents a question of the boundaries of annexation, which is within the jurisdiction of the trial court.

But pointing to the case of State ex. rel. Zoeller v. Aisin USA Manufacturing, Inc., 946 N.E.2d 1148 (Ind. 2011), Bedsole said the city’s complaint does invoke tax law because it involves a predicate issue to the determination of taxes.  The Aisin USA decision held that challenges to “earlier steps in taxation or assessment process arise under the tax laws,” which means that the city’s challenge as to the determination of who receives the tax revenue in question arises under tax law, Bedsole said.

Fenton, however, said the city’s complaint is not a challenge to any preliminary step in the taxation process, but rather is a question of who has fire protection jurisdiction over the annexed areas.

Najam, who said the case seemed to present a question of the proper sequencing of actions, asked Bedsole why the Allen Superior Court couldn’t answer the city’s annexation question, then refer the case to the DLGF to determine the tax consequences of the trial court’s annexation decision.

Bedsole again pointed to existing administrative remedies available through a DLGF appeal, saying the proper course of action would be for the city to directly appeal the allocation of the tax revenues in the annexed areas to the DLGF. Fenton, however, said in his rebuttal that the decision in Austin Lakes Joint Venture v. Avon Utilities, Inc., 648 N.E.2d 641 (Ind. 1995) – which held that if one issue in a case falls within a trial court’s jurisdiction, the court can hear the entire case – allows for the sequencing Najam proposed.

Full oral arguments in the case can be watched here.

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