Clark-Pleasant School v. Dept. of Local

899 N.E.2d 762

CLARK-PLEASANT COMMUNITY SCHOOL CORPORATION, Petitioner, v. DEPARTMENT OF LOCAL GOVERNMENT FINANCE, Respondent.

No. 49T10-0805-TA-37.

Tax Court of Indiana.

December 2, 2008.

Publication Ordered January 15, 2009.

George E. Purdy, Kelly M. Scanlan, Bose McKinney & Evans LLP, Indianapolis, In, Attorneys for Petitioner.

Steve Carter, Attorney General of Indiana, Andrew W. Swain, Chief Counsel, Tax Section, John D. Snethen, Deputy Attorney General, Indianapolis, IN, Attorneys for Respondent.

Gretchen K. Gutman, Geoffrey G. Slaughter, Taft Stettinius & Hollister LLP, Indianapolis, IN, David R. Day, Séamus P. Boyce, Alexander P. Pinegar,

Church Church Hittle & Antrim, Fishers, IN, Amici Curiae for Petitioner.

John R. Price, Price Owen Law, Indianapolis, IN, Amicus Curiae for Respondent.

FISHER, J.

On April 8, 2008, the Department of Local Government Finance (DLGF) rejected a lease rental agreement between the Clark-Pleasant Community School Corporation (the School Corporation) and the Clark-Pleasant Middle School Building Corporation (the Building Corporation) providing for the construction of a new middle school and renovations to the existing middle school and high school. The School Corporation now appeals.

FACTS AND PROCEDURAL HISTORY

The School Corporation, located 20 minutes south of Indianapolis in Johnson County, Indiana, serves a geographic district of approximately 56 square miles. The district is comprised primarily of a residential, as opposed to a commercial, tax base. The School Corporation currently operates one high school (grades 9 through 12), one middle school (grades 7 and 8), one intermediate school (grades 5 and 6), four elementary schools (kindergarten through grade 4), and the Clark Pleasant Academy.¹ The School Corporation is also in the process of constructing a fifth elementary school.

In 2005, the School Corporation was faced with the challenge of physically accommodating its rapidly growing student body: the high school was over-capacity and the School Corporation was using portable classrooms to facilitate student instruction; the intermediate school and all four of the elementary schools were at capacity. With enrollment projected to increase by another 350 to 400 new students per year for the next ten years, the School Corporation commissioned a task force, comprised of both members of its staff and the community at large, to assist it in developing a construction plan to accommodate that enrollment growth. The task force met 22 times to review and suggest options on how to best accommodate the enrollment growth. The School Corporation also conducted six public forums to gather community input. The School Corporation ultimately decided that it would best serve both the immediate and projected needs of the district if it converted the current middle school into a high school annex to house all ninth-graders, constructed a new middle school, and made certain minor renovations to the existing high school (the proposed project). The total cost of the proposed project was $60,000,000.

On February 22, 2007, the School Corporation conducted a public hearing on the proposed project, giving taxpayers the opportunity to ask questions or voice concerns. Two people spoke out against the project. At the conclusion of the hearing, the School Corporation voted unanimously to proceed with the proposal.² The School Corporation published notice of its decision on February 23, 2007.

In March of 2007, opponents of the proposed project initiated a remonstrance process as provided by statute. The remonstrance process failed, however, as only 1,513 petitions against the project were filed, opposed to the 2,740 petitions favoring the project. The Johnson County Auditor certified these results on July 5, 2007.

The School Corporation subsequently moved forward with its plans and approved a proposed lease rental agreement. On October 12, 2007, the School Corporation petitioned the DLGF to approve the execution of the lease, which provided that the School Corporation would make annual rental payments of $4,905,000 to the Building Corporation over the course of 27 years for the proposed project. The DLGF referred the petition to the School Property Tax Control Board (Control Board) for its recommendation.

On November 15, 2007, the Control Board conducted a hearing on the matter. Comments from both proponents and opponents of the proposed project were heard.³ After a vote, the Control Board recommended that the DLGF approve the lease rental agreement.

On February 6, 2008, the Commissioner of the DLGF, Cheryl Musgrave (Musgrave), sent letters to each member of the School Corporation's school board. Musgrave's letters urged the School Corporation to meet with the remonstrators again "to bridg[e] the gap that currently exists." (See Cert. Admin. R. at 362-69.) The School Corporation subsequently declined Musgrave's request, explaining that it had met with project remonstrators numerous times throughout the entire process and believed it had done all that it was statutorily required to do. (See Cert. Admin. R. at 431-32.) On April 8, 2008, the DLGF rejected the lease rental agreement.

On May 21, 2008, the School Corporation filed this original tax appeal.⁴ The Court conducted a hearing on the matter on October 24, 2008. Additional facts will be supplied when necessary.

ANALYSIS AND OPINION

When the DLGF reviews school construction projects, it does so as a tax specialist. See, e.g., Graber v. State Bd. of Tax Comm'rs, 727 N.E.2d 802, 806 (Ind. Tax.Ct.2000), review denied; Boaz v. Bartholomew Consol. Sch. Corp., 654 N.E.2d 320, 325-26 (Ind. Tax Ct.1995); Bell v. State Bd. of Tax Comm'rs, 651 N.E.2d 816, 819-20 (Ind. Tax Ct.1995). Thus, the DLGF's function is not to pass judgment on how a school corporation chooses to educate its students; rather, its function is to analyze, from a tax standpoint, the school corporation's need for capital construction in light of its chosen educational programs and policies. See Graber, 727 N.E.2d at 808-09; Boaz, 654 N.E.2d at 325-26; Bell, 651 N.E.2d at 819-20. To that end, Indiana Code § 20-46-7-11 requires the DLGF to consider the following factors when determining whether or not to approve a school building construction project:

(1) The current and proposed square footage of school building space per student.

(2) Enrollment patterns within the school corporation.

(3) The age and condition of the current school facilities.

(4) The cost per square foot of the school building construction project.

(5) The effect that completion of the school building construction project would have on the school corporation's tax rate.

(6) Any other pertinent matter.⁵

IND.CODE ANN. § 20-46-7-11 (West 2008) (footnote added).

On appeal, the School Corporation argues that while it presented evidence as to all these statutory factors which weighed in the proposed project's favor, the DLGF still rejected it. The School Corporation claims that the DLGF's final determination is not supported by the evidence and therefore constitutes an abuse of discretion. The DLGF maintains, on the other hand, that it was within its statutory discretion to deny the proposed project and, as a result, its final determination was proper.

Indiana Code § 20-46-7-11 does not require the DLGF to assign greater weight to any one of the statutorily listed factors, nor does the DLGF have to consider any single factor dispositive. See Graber, 727 N.E.2d at 807.⁶ Rather, all that is required by the DLGF is that it consider each of the listed factors, though it does not have to base its ultimate decision on them. See id. Consequently, this Court will give deference to whatever factor or reason the DLGF bases its final determination on as long as the DLGF's reasoning is supported by substantial evidence. See Huffman v. Office of Envtl. Adjudication, 811 N.E.2d 806, 809 (Ind. 2004) (citations omitted); Filter Specialists, Inc. v. Brooks, 879 N.E.2d 558, 571 (Ind.Ct.App.2007) (citation omitted). Substantial evidence means "`such relevant evidence as a reasonable mind might accept as adequate to support a conclusion.'" Amax Inc. v. State Bd. of Tax Comm'rs, 552 N.E.2d 850, 852 (Ind. Tax Ct.1990) (citation omitted).

When the School Corporation presented its proposed project to both the public at large and the Control Board, it presented evidence addressing each of the statutory factors in Indiana Code § 20-46-7-11. First, it presented evidence demonstrating that its current—and projected— enrollment required additional classroom facilities. (Cert. Admin. R. at 2-16, 375-98, 405.) Indeed, the School Corporation explained that between 1997 and 2007, its total student enrollment had nearly doubled from 2,900 to 5,600. As a result of this explosive growth, its high school was currently over-capacity and using portable classrooms to accommodate the student body; furthermore, its intermediate and elementary schools were all at capacity. Based on residential construction trends, the School Corporation estimated that another 350 to 400 new students would be added each year to the student body through 2017.

Second, the School Corporation explained that while nearly every one of its existing facilities had been renovated within the last eight years for the purpose of finding room to accommodate its growing student body (and were therefore in very good to excellent condition), it still did not have enough space for the students. As a result, it examined various renovation/construction project options to deal with the enrollment growth. (Cert. Admin. R. at 4-16, 405.) After receiving community input and examining the viability of all its options, the School Corporation decided that the proposed project would best meet both the immediate and future needs of the district.

Next, the School Corporation presented evidence demonstrating that the costs of the proposed project fell within established DLGF...