The opinion
ATTORNEYS FOR PETITIONER: ATTORNEYS FOR RESPONDENT:
PETER J. AGOSTINO GREGORY F. ZOELLER
M. CATHERINE FANELLO ATTORNEY GENERAL OF INDIANA
ANDERSON AGOSTINO & KELLER, P.C. EVAN W. BARTEL
South Bend, IN DEPUTY ATTORNEY GENERAL
Indianapolis, IN
______________________________________________________________________
IN THE
INDIANA TAX COURT
______________________________________________________________________
Nov 12 2015, 3:00 pm
UNION TOWNSHIP, )
ST. JOSEPH COUNTY, )
)
Petitioner, )
)
v. ) Cause No. 71T10-1301-TA-00002
)
STATE OF INDIANA, )
DEPARTMENT OF LOCAL )
GOVERNMENT FINANCE, )
)
Respondent. )
______________________________________________________________________
ON APPEAL FROM TWO FINAL DETERMINATIONS OF
THE DEPARTMENT OF LOCAL GOVERNMENT FINANCE
FOR PUBLICATION
November 12, 2015
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
1
Presumably, Union Township submitted its second excess levy appeal because it had not yet
received a final determination with respect to the first. (See, e.g., Cert. Admin. R. at 17.) In early
November of 2012, the DLGF indicated to Union Township that it had never received the first
excess levy appeal; Union Township resubmitted the first excess levy appeal to DLGF via email
on November 20, 2012. (See Cert. Admin. R. at 87-97.)
2
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
2
At the same time, the Court also conducted a hearing on the DLGF’s Motion to Dismiss Union
Township’s original tax appeal. In an opinion issued concurrently with this one, the Court has
denied the DLGF’s Motion. See Union Twp., St. Joseph Cnty. v. State of Indiana, Dep’t of Local
Gov’t Fin., Cause No. 71T10-1301-TA-00002, slip op. at 6 (Ind. Tax Ct. Nov. 12, 2015).
3 The Court wishes to thank the staff and students at the University of Notre Dame Law School
for hosting the oral argument.
4
Property taxes in Indiana are budget-driven; the term “levy,” therefore, describes the aggregate
dollar amount of revenue needed – and subsequently imposed through property taxes – in order
to fund a given operation of local government. See, e.g., U.S. Steel Corp. v. Lake Cnty. Prop.
Tax Assessment Bd. of Appeals, 785 N.E.2d 1209, 1212 (Ind. Tax Ct. 2003), rev’d in part on other
grounds, 820 N.E.2d 1237 (Ind. 2005).
5
In a budget-driven property tax system, tax rates are mathematical results. Id. In other words,
once a budget is agreed upon, the amount of the budget is divided by the taxing unit’s assessed
value; the resulting quotient is the tax rate. Id.
3
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)
4
(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 IC 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
5
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
6
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 that
number;
3) the county’s 2010 pay 2011 tax bills were subsequently issued
using a lower net assessed valuation of $119,968,732;
4) this error resulted in a $51,992 property tax revenue shortfall in
2011;
5) the Union-Lakeville Fire Protection Territory’s financial reserves
were completely depleted in 2011;
6) since 2011, Union Township has been utilizing its own financial
reserves to cover the Union-Lakeville Fire Protection Territory’s
operational expenses;
7
7) with the $51,992 shortfall, Union Township’s ability to fund its
operating budget, let alone that of the Union-Lakeville Fire
Protection Territory, was negatively impacted.
(See Cert. Admin. R. at 1-2, 7, 9, 14-16.) Because this information satisfied Union
Township’s requirements under Indiana Code § 6-1.1-18.5-12(a), the DLGF erred in
denying the first excess levy appeal on this basis. See, e.g., Board of Comm’rs v. Vincent,
988 N.E.2d 1280, 1281 (Ind. Tax Ct. 2013) (explaining that a DLGF final determination is
arbitrary and capricious if it is “patently unreasonable and is made without consideration
of the facts and in total disregard of the circumstances and lacks any basis which might
lead a reasonable person to the same conclusion” (internal quotations omitted)).
B.
In the alternative, the DLGF stated that it was denying the excess levy appeal
because Union Township “failed to substantiate the alleged error.” (Cert. Admin. R. at
71.) The DLGF then stated:
The [DLGF] notes that during the 2010 Pay 2011 cycle, Marshall
County certified its net assessed values before St. Joseph County did,
resulting in the [DLGF] having to use St. Joseph County’s previous
year’s abstract assessed value to issue the [Union] Township’s budget
in a timely manner. This action was based on . . . IC 6-1.1-17-1[(a)(6)]
requiring the certified statement from each county auditor . . . to
contain “for counties with taxing units that cross into or intersect with
other counties, the assessed valuation as shown on the most current
abstract of the property.” This [provision i]s intended to address
situations where a county has submitted its assessed values to the
[DLGF] but a neighboring county sharing a cross-county taxing unit
has failed to submit [its] assessed values[.]
(Cert. Admin. R. at 72 (footnote added).) The DLGF’s purported “rationale,” however,
fails on at least two grounds.
First, Indiana Code § 6-1.1-17-1(a)(6) has nothing to do with the DLGF’s authority
to “issue” (i.e., certify) budgets. Indeed, Indiana Code § 6-1.1-17-1(a)(6) merely required
8
the St. Joseph County Auditor to include in its August 1 certified statement to Union
Township the assessed valuation of all property located in intersecting Marshall County
taxing units “as shown on the most current abstract of property[.]” See I.C. § 6-1.1-17-
1(a)(6). The inclusion of this data in the certified statement enabled Union Township’s
fiscal officers to base their budget, tax rate, and tax levy formulations using the assessed
valuation of all property that was subject to taxation: property located in both Union
Township, St. Joseph County and Marshall County. See, e.g., IND. CODE § 6-1.1-17-7
(2010) (providing that when “[t]he boundaries of a political subdivision cross one (1) or
more county lines, the budget, tax levy, and tax rate fixed by the political subdivision shall
be filed with the county auditor of each affected county” and that “the county which
contains the largest portion of the value of property taxable by the political subdivision,
as determined from the abstracts of taxable values last filed with the auditor of state, has
jurisdiction over the budget, tax rate and tax levy to the same extent as if the property
taxable by the political subdivision were wholly within the county”).
Second, the DLGF has not answered “the $40 million question:” whether or not
an “error” existed. Indeed, even assuming that 1) the St. Joseph County Auditor failed to
timely certify Union Township’s 2010 pay 2011 net assessed valuation and 2) the DLGF
was therefore authorized to certify Union Township’s 2011 budget using its 2009 pay
2010 net assessed valuation does not explain why the St. Joseph County Auditor
subsequently issued the 2010 pay 2011 tax bills using a number that was $40 million
lower.6
6
The administrative record reveals that Union Township’s 2010 budget was certified by the DLGF
using a 2009 pay 2010 net assessed valuation of $159,323,137 – a number presumably culled
from the appropriate abstracts and certified by the St. Joseph County Auditor. (See Cert. Admin.
R. at 6.) See also IND. CODE §§ 6-1.1-17-1(a), 6-1.1-17-16 (2010) (amended 2012).
9
It is plausible that the St. Joseph County Auditor amended its certified statement
and reduced Union Township’s 2010 pay 2011 net assessed valuation sometime after
August 1 of 2010. See IND. CODE § 6-1.1-17-0.5 (2010) (amended 2012); I.C. § 6-1.1-17-
1(d)-(f) (describing generally the reasons and procedure by which an auditor may amend
her certified statement). Nonetheless, the St. Joseph County Auditor would have had to
provide notice of the reduction to Union Township, the DLGF, and the general public. I.C.
§ 6-1.1-17-0.5; I.C. § 6-1.1-17-1(d)-(f). Union Township has indicated that it received no
such notice. (See, e.g., Cert. Admin. R. at 1, 15 ¶ 6; Pet’r Br. at 3, 14-15.) Moreover, the
DLGF has failed to direct the Court to any evidence in the administrative record that would
support a finding that the St. Joseph County Auditor made such a reduction. 7
The DLGF’s second reason for denying Union Township’s first excess levy appeal
– that Union Township failed to demonstrate that the $40 million discrepancy was the
result of an error – is neither on point nor supported by any evidence. Accordingly, the
DLGF erred in denying Union Township’s first excess levy appeal on this basis as well.
See, e.g., Perry v. Indiana Dep’t of Local Gov’t Fin., 892 N.E.2d 1281, 1282-83 (Ind. Tax
Ct. 2008) (explaining that any factual findings made by the DLGF must be supported by
substantial evidence).
C.
In its final determination, the DLGF provided yet another alternative reason for
denying Union Township’s first excess levy appeal. Indeed, the DLGF stated that:
even if [Union] Township had supplied the required data and
demonstrated that an error occurred, [it] failed to request relief from
7
Even if the St. Joseph County Auditor made a reduction under the guise of Indiana Code § 6-
1.1-17-0.5 and Indiana Code § 6-1.1-17-1(d)-(f), the validity of such reduction is questionable.
See I.C. § 6-1.1-17-0.5(e) (2010) (amended 2012) (indicating that the amount of the reduction
may not exceed 2% of the net assessed valuation for a particular year).
10
the [DLGF] with sufficient specificity. The Township requested “an
Order from the [DLGF] correcting the error in the [net assessed
valuation] . . . by increasing the current [net assessed valuation] by at
least $40,000,000.00, and by allowing a levy for 2012 payable 2013
sufficient to make up for the cumulative effect of the errors.” The
Department cannot competently grant appropriate relief without
specificity from [Union Township] as to the exact fiscal consequences
of the alleged error.
(Cert. Admin. R. at 72.) The Court does not find this argument persuasive.
Here, it is abundantly clear what relief Union Township seeks: it wants to recoup
the $51,992 in property tax revenue it was unable to collect in 2011 as a result of the $40
million discrepancy. (See Cert. Admin. R. at 1-2, 14-16.) Consequently, the DLGF erred
in denying Union Township’s first excess levy appeal on the basis that its request for relief
lacked specificity. See Amax Inc. v. State Bd. of Tax Comm’rs, 552 N.E.2d 850, 852 (Ind.
Tax Ct.1990) (explaining that an agency’s final determination is not supported by the
evidence if the reviewing court determines that a reasonable mind would not accept the
evidence contained in the administrative record as adequate to support the conclusion at
issue).
II.
The sole reason the DLGF denied Union Township’s second excess levy appeal
was because in presenting its appeal package, Union Township failed to provide it with
the actual County Forms 127CER and 17TC. (See Cert. Admin. R. at 73-74 (explaining
that while Union Township provided it with the information purportedly contained on those
reports, it “relies only on the actual county reports to ensure that [the property tax revenue
shortfall] calculations are based on accurate and official data”), 119.) (But see Pet’r Br.
at 17; Cert. Admin. R. at 99-101, 120-21; Oral Arg. Tr. at 22, 24-25 (all demonstrating that
Union Township maintains that it did provide the DLGF with the actual forms completed
11
by St. Joseph County).) The Court, however, need not determine today whether the
DLGF erred in denying Union Township relief for this stated reason.
The basis for Union Township’s second excess levy appeal was that, again, the
alleged $40 million error caused a property tax revenue shortfall in 2011. (See Cert.
Admin. R. at 24, 26-27.) To the extent that both Union Township’s first and second excess
levy appeals intersect at the question of whether a $40 million error gave rise to a property
tax revenue shortfall, the DLGF – not the Tax Court – is the appropriate finder of fact.
CONCLUSION
For the above-stated reasons, the Court REVERSES the final determinations of
the DLGF. The matter is REMANDED to the DLGF so that it may determine whether an
error caused the $40 million discrepancy between the net assessed valuation used to
certify Union Township’s 2011 budget and the net assessed valuation the St. Joseph
County Auditor used in issuing the property tax bills related to that budget. If an error did
in fact occur, the DLGF shall order “[a] correction . . . to be applied to [Union Township’s]
levy limitations, rate, and levy for the ensuing calendar year to offset the cumulative effect
that the error caused[.]” See IND. CODE § 6-1.1-18.5-14(b) (2015).
As an aside, the Court notes that this case demonstrates yet another instance
where infirmities in the DLGF’s fact-finding process have hindered the Tax Court’s review
of the final determination and certified administrative record. See also, e.g., City of
Greenfield v. Indiana Dep’t of Local Gov’t Fin., 22 N.E.3d 887, 892 (Ind. Tax Ct. 2014);
Gary Cmty. Sch. Corp. v. Indiana Dep’t of Local Gov’t Fin., 15 N.E.3d 1149, 1150 n.3
(Ind. Tax Ct. 2014). The Court strongly encourages the DLGF to correct these infirmities
so that its adjudicatory process can develop all the relevant facts and legal arguments for
12
possible review by the Court.
13