The city of Fort Wayne is entitled to tax revenues for providing fire protection services to annexed land in Allen County, but past revenues will stay with the original fire protection district that served the area before the annexation, the Indiana Court of Appeals ruled Friday. A dissenting judge, however, questioned whether the case should have proceeded in the Indiana Tax Court instead.
Friday’s decision in Southwest Allen County Fire Protection District and Tera K. Klutz, in her official capacity as Auditor of Allen County, Indiana v. City of Fort Wayne, 19A-PL-510, came after the case returned to the COA for the second time in December. Previously, the appellate court issued an opinion determining the litigation was within the purview of the Allen Superior Court and did not have to go through the Indiana Tax Court. At issue are portions of land within the Southwest Allen County Fire Protection District that were annexed by the city of Fort Wayne beginning in 1987. Both the city and the fire protection district have provided fire services to the annexed areas since, but all the property tax revenues have been allocated to the district.
After the Indiana Supreme Court denied transfer, the case was remanded to Allen Superior Court, which entered partial summary judgment for the city in its argument seeking all future tax revenues from the annexed areas, as well as revenues dating back to the case’s inception in 2016.
The case turns on Public Law 341, enacted in 1987 to address “aspects of fire districts in the context of annexation.” Specifically, Judge Patricia Riley wrote, Indiana Code 36-8-11-22 “allows property in a fire district to be transferred to a municipality upon annexation, and the municipality then provides the services and receives the tax revenues.”
I.C. 36-4-3-7, Riley continued, “requires that the annexing municipality takes on all the financial obligations of that fire district relating to the assessed valuation of the property being removed from the fire protection district.” But, she noted, that statute only applies to fire protection districts established after July 1, 1987.
“We are not persuaded by the District’s argument that the temporal framework in I.C. § 36-4-3-7 should be read into other statutes of the Act,” Riley wrote in partially ruling for the city.
“… As our legislature restricted the application to two specific subsections within a broader statute, there is no reason to infer, absent any explicit indication, that it intended to have us apply the same restrictive provision in a different statute,” Riley wrote. “… Accordingly, giving effect to the plain, ordinary, and usual meaning of the words of the statute, we conclude that upon annexation and provision of the fire protection services to the Annexed Territories, the City was entitled to receive the assessed tax revenue associated with the Annexed Territories.”
But, Riley continued, the city conceded that it failed to exhaust its administrative remedies prior to the filing of the litigation by never challenging the auditor’s allocation to the Department of Local Government Finance. Thus, the city is foreclosed from pursuing tax revenues from before May 2016, Riley said, noting those revenues have already been spent.
“In line with our decision in the first issue, we agree with the trial court’s conclusion that the City is entitled to receive all future property taxes attributable to fire protection services in the Annexed Territories,” the judge continued. “If the Auditor fails to allocate future levies to the City, and the DLGF certifies this allocation, then the City should follow the administrative procedure outlined in I.C. § 6-1.1-17, as recently amended by our Legislature in 2019.”
The case was remanded for a trial court determination on whether the city properly availed itself of administrative remedies between May 2016, when the case was filed, and February 2019, when summary judgment was entered.
Chief Judge Cale Bradford joined Riley’s opinion, but Judge Nancy Vaidik partially dissented.
In a separate opinion, Vaidik said the COA’s initial determination finding the trial court had jurisdiction was incorrect. That determination was made by Bradford, Riley and Judge Edward Najam.
“As the District explains, with no dispute from the City, the Legislature has set forth what should happen if a political subdivision disagrees with an allocation of funds in a budget notice from the DLGF,” Vaidik wrote. “… Because the Legislature has established a procedure that leads to the tax court, I believe we erred in determining that the trial court had subject-matter jurisdiction in this matter.
“That being said, we must resolve this appeal in accordance with our first opinion,” Vaidik continued. “In that regard, I agree with the majority that the trial court properly interpreted Indiana Code section 36-8-11-22 and properly determined that the City is entitled to the property-tax revenues from February 2019 onward. Where I depart from the majority is on the issue of the 2016-2019 property-tax revenues.”
Vaidik would hold that the city is not entitled to seek revenues from the dispute 2016-2019 timeframe because it made a “strategic choice” to seek declaratory judgment rather than pursuing an administrative action in the DLGF.
“I am troubled by the majority’s analysis requiring the City to exhaust its administrative remedies while the declaratory-judgment action was pending in the trial court for two reasons,” she wrote. “First, that reasoning is inconsistent with what we said in the first opinion — that the trial court had jurisdiction over this dispute without the City having to exhaust its administrative remedies.
“Second, the majority’s reasoning — requiring the City to exhaust its administrative remedies at the same time the trial court had jurisdiction — means that the City would have been required to file parallel proceedings in two separate courts — one in the trial court and one with the DLGF (followed by judicial review in the tax court),” she continued. “Parallel proceedings waste judicial resources, generate questions of which judgment controls, and may produce contradictory judgments.”