Union Twp., St. Joseph Cnty. v. State, Dep't of Local Gov't Fin.

45 N.E.3d 523

UNION TOWNSHIP, ST. JOSEPH COUNTY, Petitioner

v.STATE of Indiana, DEPARTMENT OF LOCAL GOVERNMENT FINANCE, Respondent.

No. 71T10–1301–TA–00002.

Tax Court of Indiana.

Nov. 12, 2015.

Peter J. Agostino, M. Catherine Fanello, Anderson Agostino & Keller, P.C., South Bend, IN, Attorneys for Petitioner.

Gregory F. Zoeller, Attorney General of Indiana, Evan W. Bartel, Deputy Attorney General, Indianapolis, IN, Attorneys for Respondent.

Opinion

WENTWORTH, J.

Union Township challenges the two final determinations of the Department of Local Government Finance (DLGF) that denied the two excess property tax levy appeals it made in 2012. Upon review, the Court reverses those final determinations.

FACTS AND PROCEDURAL HISTORY

Union Township is a civil taxing unit located in St. Joseph County, Indiana. In July of 2012, Union Township, together with the Union–Lakeville Fire Protection Territory, requested the DLGF's permission to impose an excess property tax levy. (See Cert. Admin. R. at 14 –17.) Their appeal documentation asserted that due to a $40 million “error” in calculating Union Township's 2010 net assessed valuation, they each suffered a property tax revenue shortfall in 2011. (See Cert. Admin. R. at 15.) More specifically, they explained that the error was the result of the DLGF certifying Union Township's 2011 budget based on a net assessed valuation of $159,424,430, but St. Joseph County subsequently issuing the tax bills using a lower net assessed valuation of $119,968,732. (See Cert. Admin. R. at 1, 14.) Union Township and the Union–Lakeville Fire Protection Territory therefore requested the DLGF to “increas[e] the current [net assessed valuation] by at least $40,000,000 and [ ] allow[ ] a levy for 2012 payable 2013 sufficient to make up for the cumulative effect of th[at] error[ ].” (Cert. Admin. R. at 16.)

On October 16, 2012, Union Township submitted a second request for the DLGF's permission to impose an excess levy. (See Cert. Admin. R. at 20.) This second appeal again identified the $40 million error as the cause of a property tax revenue shortfall in 2011; it specifically sought a levy increase in the amount of $51,929.¹ (See Cert. Admin. R. at 24, 26–27.)

On December 7, 2012, the DLGF issued two final determinations that denied both excess levy appeals. (Cert. Admin. R. at 71–74.) On January 8, 2013, Union Township initiated an original tax appeal. The Court heard oral argument on September 11, 2013 at the University of Notre Dame Law School.^{2 , 3} Additional facts will be supplied as necessary.

STANDARD OF REVIEW

The party seeking to overturn a DLGF final determination bears the burden of demonstrating its invalidity. See Brown v. Dep't of Local Gov't Fin., 989 N.E.2d 386, 388 (Ind. Tax Ct.2013). This Court will reverse a DLGF final determination if it is arbitrary, capricious, an abuse of discretion, unsupported by substantial evidence, or contrary to law. See id.

LAW

Local government units pay their operating costs and expenditures, in part, through the collection of property taxes. Consequently, each unit is required, annually, to formulate an estimated budget, proposed tax levy,⁴ and proposed tax rates⁵ for the ensuing year. See generally Ind.Code §§ 6–1.1–17–3, –5 (2010) (amended 2012).

In order to make these formulations, each unit relies on information it receives from its county auditor regarding the assessed valuation of property within its taxing district and the resulting estimated tax collection. See generally Ind.Code § 6–1.1–17–1(a), (c) (2010) (amended 2012). More specifically, the units rely on a certified statement, prepared and distributed by the county auditor no later than August 1 of each year, containing:

(1) information concerning the assessed valuation in the political subdivision for the next calendar year;

(2) an estimate of the taxes to be distributed to the political subdivision during the last six (6) months of the current calendar year;

(3) the current assessed valuation as shown on the abstract of charges;

(4) the average growth in assessed valuation in the political subdivision over the preceding three (3) budget years, adjusted according to procedures established by the [DLGF] to account for reassessment under IC 6–1.1–4–4 or IC 6–1.1–4–4.2 ;

(5) the amount of the political subdivision's net assessed valuation reduction determined under section 0.5(d) of this chapter;

(6) for counties with taxing units that cross into or intersect with other counties, the assessed valuation as shown on the most current abstract of property; and

(7) any other information at the disposal of the county auditor that might affect the assessed value used in the budget adoption process.

I.C. § 6–1.1–17–1(a). The county auditor must also provide a copy of this statement to the DLGF. I.C. § 6–1.1–17–1(a).

A unit is then required to conduct a series of public hearings on its proposed budget, tax levy, and tax rates for the ensuing year. See, e.g., I.C. §§ 6–1.1–17–3, –5, Ind.Code § 6–1.1–17–13 (2010). The unit then forwards its proposed budget package to the DLGF for its review and “certification” (i.e., approval). See Ind.Code § 6–1.1–17–16 (2010) (amended 2012).

ANALYSIS

Union Township contends that the DLGF erred in denying its two excess levy appeals. Specifically, it asserts that both of the DLGF's final determinations must be reversed because they are arbitrary, capricious, an abuse of discretion, and not in accordance with the law. (See generally Pet'r Br. at 6–7.)

I.

As previously indicated, Union Township submitted its first excess levy appeal with the Union–Lakeville Fire Protection Territory. (See Cert. Admin. R. at 14 –17.) Their appeal documentation explained that although they formulated their budgets based on the St. Joseph County Auditor's certified statement that the county's net assessed valuation was $159,424,430, the tax bills were subsequently issued using a net assessed valuation of only $119,968,732. (See Cert. Admin. R. at 1 –2, 14 –16.) This $40 million “error” resulted in a property tax revenue shortfall in 2011. (See Cert. Admin. R. at 1 –2, 15.) Union Township and the Union–Lakeville Fire Protection Territory therefore requested the DLGF to “increas[e] the current [net assessed valuation] by at least $40,000,000 and [ ] allow[ ] a levy for 2012 payable 2013 sufficient to make up for the cumulative effect of th[at] error [ ].” (Cert. Admin. R. at 16.)

In its final determination, the DLGF denied this excess levy appeal for three alternative reasons. First, the DLGF stated that because Union Township failed to present its information using the DLGF's “prescribed appeal template,” it failed to present the information required by the DLGF under Indiana Code 6–1.1–18.5–12. (Cert. Admin. R. at 71.) Second, the DLGF explained that even if Union Township had used the prescribed appeal template, “it failed to substantiate the alleged error.” (Cert. Admin. R. at 71.) Finally, the DLGF reasoned that “even if [Union] Township had supplied the required data and demonstrated that an error occurred, [it] failed to request relief ... with sufficient specificity.” (Cert. Admin. R. at 72.)

A.

Indiana Code § 6–1.1–18.5–12 not only establishes the parameters by which Union Township was to initiate its excess levy appeals, but also sets forth the parameters by which the DLGF was to review those appeals. That statute provides, in relevant part, that:

(a) Any civil taxing unit that determines that it cannot carry out its governmental functions ... under the levy limitations imposed by section 3 of this chapter may ... appeal to the [DLGF] for relief from those levy limitations. In the appeal the civil taxing unit must state that it will be unable to carry out the governmental functions committed to it by law unless it is given the authority that it is petitioning for. The civil taxing unit must support these allegations by reasonably detailed statements of fact.

(b) The [DLGF] shall immediately proceed to the examination and consideration of the merits of the civil taxing unit's appeal.

(c) In considering an appeal, the [DLGF] has the power to conduct hearings, require any officer or member of the appealing civil taxing unit to appear before it, or require any officer or member of the appealing civil taxing unit to provide [it] with any relevant records or books.

Ind.Code § 6–1.1–18.5–12(a) –(c) (2012). Nothing in this statute required Union Township to present its excess levy appeal to the DLGF using a particular form (i.e., “a prescribed appeal template”). But see, e.g., Ind.Code § 6–1.1–17–3 (2010) (mandating that a political subdivision formulate its estimated budget, tax rates, and tax levy “on the form prescribed by the department of local government finance ” (emphasis added)). Consequently, the only question to be answered is whether Union Township's first excess levy appeal provided the DLGF with the information it was required to provide by Indiana Code § 6–1.1–18.5–12. See UACC Midwest, Inc. v. Indiana Dep't of State Revenue, 629 N.E.2d 1295, 1298–99 (Ind. Tax Ct.1994) (explaining that when the use of an administrative agency's “prescribed” form is not mandated by statute, a taxpayer's claim should be considered as long as it timely provides the agency with the information required by the statute).

Indiana Code § 6–1.1–18.5–12 required Union Township to “state that it w [ould] be unable to carry out the governmental functions committed to it by law unless it [was] given the authority [to impose an excess levy]” and “support [its] allegations by reasonably detailed statements of fact.” See I.C. § 6–1.1–18.5–12(a). The certified record in this case demonstrates that when Union Township presented its first excess levy appeal to the DLGF, it provided documentation establishing that:

1) it formulated its 2011 budget package using the St. Joseph County Auditor's certified statement that the county's 2010 net assessed valuation was $159,424,430;

2) the DLGF certified Union Township's 2011 budget using

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