observing that section 12(b) “is unambiguous in its condemnation of any attempt to bind a municipality in the absence of an appropriation”
How later courts described this case
- observing that section 12(b) “is unambiguous in its condemnation of any attempt to bind a municipality in the absence of an appropriation”
Written by the judges who cited it.
The opinion
FILED
Aug 28 2019, 8:42 am
CLERK
Indiana Supreme Court
Court of Appeals
and Tax Court
ATTORNEYS FOR APPELLANTS ATTORNEYS FOR APPELLEES
Alice M. Morical Paul L. Jefferson
Michael R. Limrick McNeely Stephenson
Evan D. Carr Indianapolis, Indiana
Hoover Hull Turner LLP Grant M. Reeves
Indianapolis, Indiana Barada Law Offices LLC
Rushville, Indiana
IN THE
COURT OF APPEALS OF INDIANA
The City of Lawrenceburg, August 28, 2019
Indiana, the Mayor of the City of Court of Appeals Case No.
Lawrenceburg in his official 19A-PL-263
capacity, and The Common Appeal from the Decatur Superior
Council of the City of Court
Lawrenceburg in their official The Honorable Matthew D.
capacities, Bailey, Judge
Appellants-Defendants, Trial Court Cause No.
16D01-1702-PL-89
v.
Franklin County, Indiana, and
The Franklin County Board of
Commissioners in their official
capacities,
Appellees-Plaintiffs
Baker, Judge.
Court of Appeals of Indiana | Opinion 19A-PL-263 | August 28, 2019 Page 1 of 22
[1] The City of Lawrenceburg (Lawrenceburg) entered into an agreement with
Franklin County (Franklin), pursuant to which Lawrenceburg would share its
gaming tax revenue with Franklin by making annual payments of $500,000. In
2014, Lawrenceburg stopped making those payments. Franklin sued for breach
of contract and the trial court entered summary judgment in its favor.
Lawrenceburg appeals, raising the following arguments: (1) the trial court
erroneously determined that it had waived its defenses; (2) the agreement is
void by statute; and (3) there are genuine issues of material fact regarding
consideration, Franklin’s performance of its obligations, and the duration of the
agreement. We hold that Lawrenceburg did not waive its defenses and that the
agreement is void by statute. Consequently, we reverse and remand with
instructions to enter judgment in favor of Lawrenceburg.
Facts 1
[2] As the home dock of a riverboat casino, Lawrenceburg receives a percentage of
Gaming Tax Revenue2 collected by the State each year. In 2005, Lawrenceburg
created a revenue sharing program, pursuant to which it shared some of its
Gaming Tax Revenue with surrounding counties, including Franklin.
1
We held oral argument in Indianapolis on July 22, 2019. We thank counsel for both parties for their
superior written and oral presentations.
2
Gaming Tax Revenue, as defined by the agreement between the parties, “is the total amount received by []
Lawrenceburg from the combined incomes of both the wagering taxes and admissions taxes” under Indiana
Code sections 4-33-13-1 to -6 (“Wagering Tax Revenue”) and Indiana Code sections 4-33-12-1 to -6
(“Admissions Tax Revenue”), respectively. Appellants’ App. Vol. II p. 100.
Court of Appeals of Indiana | Opinion 19A-PL-263 | August 28, 2019 Page 2 of 22
[3] On January 17, 2006, Lawrenceburg and Franklin entered into a “Special
Revenue Sharing Agreement” (the Agreement). Appellants’ App. Vol. II p.
100. The recitals of the Agreement indicate that it was made “in consideration
of the mutual covenants and promises contained herein[.]” Id. The Agreement
required Lawrenceburg to make annual $500,000 payments to Franklin; those
payments were to be made “from the net amount of Gaming Tax Revenues
Lawrenceburg receives on an annual basis.” Id. at 101. The Agreement “is
contingent upon Lawrenceburg’s continued receipt of Wagering Tax
Revenue . . . .” Id. Both entities agreed that they had “the necessary power and
authority to enter into this Agreement” and that they would “cooperate with
each other in a marketing plan to promote tourism and development in each
area.” Id.
[4] After the Agreement was executed, the Lawrenceburg Common Council
appropriated $500,000 in 2006 for Lawrenceburg’s first payment to Franklin.
Lawrenceburg continued to make annual $500,000 payments through 2013.3
According to Lawrenceburg, in 2013, it decided to stop making payments
because of increased competition from nearby Ohio casinos and because of a
projected 30% loss in its Gaming Tax Revenue for the following year. 4
3
It is unclear from the record whether, in the years following 2006 in which Lawrenceburg made payments
to Franklin, Lawrenceburg appropriated funds for the payments.
4
Lawrenceburg actually realized a 49.1% loss in Gaming Tax and “true up” tax revenues in 2014.
Appellants’ App. Vol. II p. 107.
Court of Appeals of Indiana | Opinion 19A-PL-263 | August 28, 2019 Page 3 of 22
[5] According to Lawrenceburg, Franklin did nothing to earn the annual payments.
It did not provide any services or goods, nor did it incur any non-trivial
expenses in connection with the Agreement.
[6] Franklin explains the reason for the Agreement, as well as its own obligation, as
follows:
In 2006, the issue of the distribution of local riverboat gaming
monies was receiving special scrutiny by the Indiana Gaming
Commission and the Indiana General Assembly. . . .
Lawrenceburg was rightfully concerned with the possibility of
seeing its wagering and admissions taxes lessening or ending
completely, as almost all of its revenue for development
remained at the local level, which conflicted with the policies of
riverboat gaming. In an effort to keep as much money as
possible, to comply with its statutory requirements, and to avoid
potential difficulty with state lawmakers and governmental
regulators, Lawrenceburg approached Franklin County so it
could accurately represent that its economic development
activities were, in fact, regional in scope.
. . . Lawrenceburg identified an opportunity to further the
footprint of its economic development by utilizing adjacent
counties, including Franklin County, and in turn persuade the
legislature to keep the wagering and admissions revenue flowing.
In that effort to ensure that monies kept flowing to
Lawrenceburg, the City of Lawrenceburg and Franklin County
entered into [the Agreement], and a separate grant program, at
Lawrenceburg’s invitation. This regional partnership was shown
to and apparently had the intended effect of appeasing regulators
and legislators looking at the issue. In exchange for the
Agreement, Franklin County publicly supported Lawrenceburg’s
riverboat revenue program. That support was effective, as
Lawrenceburg kept its revenue.
Court of Appeals of Indiana | Opinion 19A-PL-263 | August 28, 2019 Page 4 of 22
Appellees’ Br. p. 11-12 (internal citations omitted). In fashioning this
explanation, Franklin does not cite to any specific documents or evidence
related to this case or the Agreement; instead, it cites statutes and an unrelated
case. It does direct our attention to two letters drafted by Franklin County:
• On January 23, 2006, the Franklin County Board of Commissioners sent
a letter thanking Lawrenceburg for its “contribution” of $500,000 and
stating that Franklin supported Lawrenceburg in its “endeavors with
your riverboat revenue.” Appellants’ App. Vol. II p. 142.
• On January 28, 2006, the president of the Franklin County Council sent
a letter thanking Lawrenceburg for including Franklin in its Revenue
Sharing Program. The letter acknowledges that the Agreement will
remain in effect only so long as Lawrenceburg “continues to enjoy
financial stability and a steady flow of revenue. We also understand that
this revenue flow would be subject to the decisions made by the Indiana
State Legislature. We, the members of the County Council pledge to
support your endeavor by contacting the necessary members of the State
Legislature and extend to them how important this Revenue Sharing
program is to all of the 9 surrounding counties included in the
agreement.” The letter notes that the “sharing of this revenue with us
and the other counties is truly a wonderful example of a neighbor helping
others.” Id. at 145.
[7] On November 18, 2015, Franklin sued Lawrenceburg for breach of contract. In
Lawrenceburg’s answer, it did not raise any affirmative defenses. Franklin
moved for summary judgment, arguing that the Agreement was a valid and
enforceable contract that could be terminated only if there was a complete
failure of Lawrenceburg’s Gaming Tax Revenue stream. Lawrenceburg filed a
cross-motion for summary judgment, arguing that the Agreement was void
pursuant to Indiana Code section 36-4-8-12(b) because it purported to obligate
the city to pay money that had not been appropriated. It also argued that the
Court of Appeals of Indiana | Opinion 19A-PL-263 | August 28, 2019 Page 5 of 22
Agreement was unenforceable because it was not supported by consideration
and did not have a finite durational term. Following briefing and a hearing, the
trial court entered summary judgment in favor of Franklin on August 10, 2018.
In pertinent part, it found and held as follows:
4. The Agreement acknowledges adequate consideration.
***
9. The Wagering Tax revenue that is shared pursuant to the
Agreement is appropriated to Lawrenceburg by the State
of Indiana. These funds are State money collected
pursuant to a State tax.
***
12. Annually, Lawrenceburg has continued to receive
wagering tax revenue in amounts exceeding $500,000.
13. Franklin County has fully performed under the
Agreement.
14. There are no genuine issues of material fact.
15. The Agreement has a sufficient term of duration. The
duration of the Agreement is the period of time that
Lawrenceburg continues to receive Wagering Tax revenue
in an amount sufficient to make the agreed payment to
Franklin County.
16. The Agreement is a valid and enforceable contract.
Court of Appeals of Indiana | Opinion 19A-PL-263 | August 28, 2019 Page 6 of 22
17. Lawrenceburg has breached the Agreement, and Franklin
County has suffered damages.
18. Pursuant to Indiana Trial Rule 8(A), Lawrenceburg’s
failure to plead illegality and lack of consideration results
in waiver of those issues.
19. The Wagering Tax revenue funds shared under the
Agreement are appropriated by the State of Indiana and
paid to Lawrenceburg pursuant to IC 4-33-13-6.
20. IC 4-33-13-6(b) specifically allows units of local
government to enter into agreements to share Wagering
Tax revenue with other units of local government.
21. Lawrenceburg’s argument that the contract is void because
it requires the payment of public funds beyond the amount
appropriated at the time of the execution of the Agreement
is without merit.
Appealed Order p. 1-3. Following a hearing, on January 23, 2019, the trial
court ordered Lawrenceburg to pay Franklin damages in the amount of $2.5
million plus prejudgment interest, for a total award of approximately $3.1
million. Lawrenceburg now appeals.
Discussion and Decision
[8] Lawrenceburg argues that the trial court should not have granted summary
judgment in favor of Franklin. Instead, Lawrenceburg claims that summary
judgment should have been granted in its own favor or, alternatively, that there
are genuine issues of fact rendering summary judgment improper.
Court of Appeals of Indiana | Opinion 19A-PL-263 | August 28, 2019 Page 7 of 22
[9] Our standard of review on summary judgment is well established:
We review summary judgment de novo, applying the same
standard as the trial court: “Drawing all reasonable inferences in
favor of . . . the non-moving parties, summary judgment is
appropriate ‘if the designated evidentiary matter shows that there
is no genuine issue as to any material fact and that the moving
party is entitled to judgment as a matter of law.’” Williams v.
Tharp, 914 N.E.2d 756, 761 (Ind. 2009) (quoting T.R. 56(C)). “A
fact is ‘material’ if its resolution would affect the outcome of the
case, and an issue is ‘genuine’ if a trier of fact is required to
resolve the parties’ differing accounts of the truth, or if the
undisputed material facts support conflicting reasonable
inferences.” Id. (internal citations omitted).
Hughley v. State, 15 N.E.3d 1000, 1003 (Ind. 2014).
[10] The interpretation of a statute is a question of law to which we apply a de novo
standard of review. Kaser v. Barker, 811 N.E.2d 930, 932 (Ind. Ct. App. 2004).
I. Waiver
[11] The trial court found, and Franklin continues to argue on appeal, that
Lawrenceburg has waived its argument that the Agreement is void by statute.
According to Franklin, this argument amounts to an affirmative defense that
should have been, but was not, pleaded in Lawrenceburg’s answer.
[12] Indiana Trial Rule 8(C) provides that a responsive pleading “shall set forth
affirmatively and carry the burden of proving” affirmative defenses, including
“illegality.” Here, Lawrenceburg’s answer did not assert any affirmative
defenses, nor did it ever seek to amend its answer to add any. Instead, it argued
Court of Appeals of Indiana | Opinion 19A-PL-263 | August 28, 2019 Page 8 of 22
that the Agreement was void by statute for the first time in the summary
judgment proceedings. The parties disagree as to whether Lawrenceburg’s
argument that the Agreement is void by statute qualifies as the affirmative
defense of illegality. As explained below, we need not resolve that issue to find
that no waiver occurred here.
[13] Generally, courts of this State have a strong preference for deciding matters on
the merits as opposed to legal technicalities. E.g., Mizen v. State ex rel. Zoeller, 72
N.E.3d 458, 466-67 (Ind. Ct. App. 2017), trans. denied. Therefore, even if we
assume solely for argument’s sake that Lawrenceburg’s argument that the
Agreement is void by statute amounts to the affirmative defense of illegality as
set forth in Indiana Trial Rule 8(C), we will consider whether Franklin was
prejudiced by the sequence of events in this case.
[14] In Mizen, this Court considered a defendant who asserted a statute of limitations
defense—also an affirmative defense explicitly included in Trial Rule 8(C)—for
the first time at summary judgment. The trial court found that the defense was
waived for failure to plead it, but we reversed:
[T]here is a presumption that issues can be raised as they, in good
faith, are developed. In order to rebut this presumption, the
party against whom the new issue is raised may make an
affirmative showing of prejudice. In order to demonstrate
prejudice, the party must show that it will be deprived of, or
otherwise seriously hindered in the pursuit of some legal right if
injection of the new issue is permitted.
Id. at 467 (internal quote marks and citations omitted).
Court of Appeals of Indiana | Opinion 19A-PL-263 | August 28, 2019 Page 9 of 22
[15] Here, as in Mizen, Franklin had ample time to, and did, respond to
Lawrenceburg’s arguments made at summary judgment. Franklin designated
no evidence showing prejudice from the timing of Lawrenceburg’s arguments,
nor could it, given that the argument that the Agreement was void by statute is
a purely legal argument that did not necessitate a fully developed factual record
to address. Franklin’s argument that the only way to raise an affirmative
defense is through an answer or motion to amend an answer is overly technical
and fails to account for our predilection to resolve issues on their merits when
possible.5
[16] Here, where the expenditure of municipal funds is at the heart of the matter,
Franklin cannot claim to have been unfairly surprised by Lawrenceburg’s
argument that Indiana Code section 36-4-8-12(b) applies, nor should this Court
be deprived of addressing that issue. Given that Franklin cannot show that it
was deprived of, or otherwise seriously hindered in the pursuit of, some legal
right, we find that the timing of Lawrenceburg’s void by statute argument did
not bar its introduction into the proceedings. In other words, Lawrenceburg did
not waive the argument, and the trial court erred by concluding otherwise.
5
Franklin maintains that we routinely consider waiver under Trial Rule 8(C) without any discussion of
prejudice. But in the cases cited by Franklin for this proposition, prejudice was not discussed because it
either was not argued, was not raised until after judgment was entered, or was not necessary to find that the
amendment should have been allowed. See Appellees’ Br. p. 16-17. In any event, given that Franklin does
not argue (nor could it) that we are prohibited from considering prejudice with respect to a waiver argument,
it is our prerogative to do so and here, we so choose.
Court of Appeals of Indiana | Opinion 19A-PL-263 | August 28, 2019 Page 10 of 22
II. Void By Statute
[17] Indiana Code section 36-4-8-12(b) (section 12(b)) provides that “a city
department, officer, or employee may not obligate the city to any extent beyond
the amount of money appropriated for that department, officer, or employee.
An obligation made in violation of this section is void.” See Bd. of Pub. Works v.
L. Cosby Bernard & Co., 435 N.E.2d 575, 577 (Ind. Ct. App. 1982) (observing
that section 12(b) “is unambiguous in its condemnation of any attempt to bind a
municipality in the absence of an appropriation”).
[18] Franklin argued, and the trial court appeared to agree, that because the State
appropriated money for the Gaming Tax Revenue to be provided to
Lawrenceburg, it was not then required for Lawrenceburg to also appropriate—or
encumber—the money to be paid to Franklin. But we agree with
Lawrenceburg that this conclusion is based on a fundamental misunderstanding
of the process:
The State appropriates and provides Gaming Tax Revenue to
Lawrenceburg’s fiscal officer—at which point the money may be
deposited into either the city’s general fund, a riverboat fund
established by statute, or both. Wherever it is deposited, the
money then “may be used for any legal or corporate purpose of
the” city. . . . Thus, once received from the State, Gaming Tax
Revenue is Lawrenceburg’s to spend—subject to the statutorily-
required appropriations process.
Appellants’ Br. p. 18-19 (internal footnote and citations omitted). In other
words, “[t]he State’s appropriation transfers funds into only Lawrenceburg’s
Court of Appeals of Indiana | Opinion 19A-PL-263 | August 28, 2019 Page 11 of 22
accounts. For those funds to leave Lawrenceburg’s hands requires further
action by the city council: an appropriation.” Reply Br. p. 7.
[19] The trial court found it significant that the legislature has explicitly allowed
agreements between municipalities to share gaming revenues. Appealed Order
p. 3 (citing Ind. Code § 4-33-13-6 (the revenue sharing statute)). Initially, we
note that, in relevant part, the revenue sharing statute merely declines to
prohibit the recipient of gaming funds from sharing the revenue with other units
of government. Id. at -6(b). We interpret this to mean that Lawrenceburg may
share its gambling revenue with Franklin without Franklin having to provide
actual consideration in the form of goods or services.
[20] Moreover, we agree with Lawrenceburg that the statutes are easily harmonized:
the revenue sharing statute grants Lawrenceburg the authority to enter into
revenue sharing agreements, and section 12(b) prescribes the method for doing
so. “If that method—appropriation of payments—is not followed, then the
revenue sharing agreements (like any other municipal contract) are void.”
Appellants’ Br. p. 19. If Lawrenceburg paid “$500,000 per year of its Gaming
Tax Revenue . . . , perpetually into the future and without the oversight and
appropriation of its legislative body,” the city would be in violation of multiple
Indiana statutes governing municipal contracts and spending. Id. at 20.
[21] Franklin argues, essentially, that the revenue sharing statute operates as an
exception to section 12(b). According to Franklin, funds that are incorporated
into a revenue sharing agreement need not be appropriated by the
Court of Appeals of Indiana | Opinion 19A-PL-263 | August 28, 2019 Page 12 of 22
municipalities. We do not find this argument compelling. Had the General
Assembly intended the revenue sharing statute to be an exception to the
appropriation requirement of section 12(b), it could have—and would have—
explicitly said so. Cf. White River Conservancy Dist. v. Commw. Eng’rs, Inc., 575
N.E.2d 1011, 1015 (Ind. Ct. App. 1991) (observing that the public contract at
issues would otherwise be “void and contrary to law” because the municipality
did not appropriate funds to cover its costs but finding that a statutory exception
under I.C. § 36-1-12-3.5 allowed contracts to be entered into without an
appropriation of funds for the services at issue, so the contract was valid).
Because the legislature did not indicate that the revenue sharing statute operates
as an exception to section 12(b), we must harmonize the statutes as described
above.
[22] There are good public policy reasons for requiring municipalities to appropriate
all necessary funds before entering into contracts. First, this process enables
public comment and involvement, shedding needed sunlight onto
municipalities as they decide how to spend their funds. Specifically, the State
disburses gambling revenue one year at a time. When the funds arrive, they
belong to the municipality—here, Lawrenceburg—and how those funds shall be
spent is subject to an annual budget process requiring public notice and a public
decision by the City Council to appropriate the funds. See I.C. § 36-4-8-12(b)
(stating that an “obligation made in violation of this section is void”).
[23] Second, this process prevents one administration from binding the next
administration in perpetuity. Were we to accept Franklin’s interpretation of the
Court of Appeals of Indiana | Opinion 19A-PL-263 | August 28, 2019 Page 13 of 22
revenue sharing agreement, the 2006 Lawrenceburg government could require
the 2056 Lawrenceburg government to spend $500,000 annually on this
agreement—even if the priorities of the citizens and government had changed,
even if the City’s budget had been dramatically altered, even if life as we know
it were fundamentally different. We simply cannot countenance such a result.
[24] Third, if Franklin’s interpretation were correct, municipalities would be free to
contract away funds that they have not yet received—and do not know
(1) whether they will continue to receive them from year to year, or (2) if they
do receive the funds, how much they will receive. In the very different context
of dissolution of marriages, we have held that a retirement plan held by one
spouse cannot be divided as a marital asset unless the spouse has a present
vested interest in the plan. E.g., Bingley v. Bingley, 935 N.E.2d 152, 155-56 (Ind.
2010). Here, likewise, Lawrenceburg may not expend funds that it has not
appropriated or contract to appropriate, encumber, or expend anticipated
revenue in which it does not have a present vested interest.
[25] The 2006 Lawrenceburg government was free to enter into a revenue sharing
agreement with Franklin. It was even free to make that agreement last for a
lengthy number of years. It was simply required, pursuant to section 12(b), to
appropriate all the funds required to fulfill the agreement at the time it was
executed. Thus, had Lawrenceburg intended to pay Franklin $500,000
annually for ten years, it would have had to have encumbered $5 million at the
time the agreement was executed. In that way, while the city would have had
to honor the agreement for its duration, all the necessary funds would have
Court of Appeals of Indiana | Opinion 19A-PL-263 | August 28, 2019 Page 14 of 22
been accounted for at the outset, meaning that future administrations would not
be on the financial hook.
[26] Unfortunately, that is not what occurred in this case. It is undisputed that at
the time the Agreement was executed, no money had been appropriated by
Lawrenceburg to fulfill it. Shortly thereafter, Lawrenceburg appropriated
$500,000 for the first year’s payment, but that action cannot save a contract that
was void ab initio.6 Because the Agreement was void from the outset, any
payments made by Lawrenceburg to Franklin thereafter were gratuitous, and
Franklin has no legal right to demand their continuation or to receive damages
for their cessation.7 Therefore, the trial court should have entered summary
judgment in favor of Lawrenceburg.8
6
It is well settled that an otherwise invalid public contract cannot be rescued and ratified by the subsequent
conduct of the parties. See Miller v. City of Evansville, 244 Ind. 1, 5, 189 N.E.2d 823, 825 (1963).
7
If Franklin had rendered services to Lawrenceburg over the years for which it was not compensated, it
would, in theory, be entitled to quantum meruit compensation. But it has never made that argument, nor
does the record suggest that it rendered any services beyond writing letters in 2006 and providing generic
public support.
8
Franklin asks that, rather than direct that judgment be entered in favor of Lawrenceburg, we remand so that
it can be determined whether the Gaming Commission relied on the Agreement in allowing Lawrenceburg to
keep its license. If the Agreement is a term and condition of a gaming license, Lawrenceburg did not have
the authority to unilaterally terminate or alter it. City of E. Chi. v. E. Chi. Second Century, Inc., 908 N.E.2d 611,
623-24 (Ind. 2009). But this argument misses the point—the Agreement was void ab initio. Whether this
result affects Lawrenceburg’s gaming license is a matter for the Gaming Commission to consider. The
resolution of that issue does not change our conclusion here that the Agreement was void and, as a result,
Franklin does not have the right to enforce it.
Court of Appeals of Indiana | Opinion 19A-PL-263 | August 28, 2019 Page 15 of 22
[27] The judgment of the trial court is reversed and remanded with instructions to
enter final judgment in favor of Lawrenceburg.
Najam, J., concurs.
Robb, J., concurs in part and dissents in part with a separate opinion.
Court of Appeals of Indiana | Opinion 19A-PL-263 | August 28, 2019 Page 16 of 22
IN THE
COURT OF APPEALS OF INDIANA
The City of Lawrenceburg, Court of Appeals Case No.
Indiana, the Mayor of the City of 19A-PL-263
Lawrenceburg in his official
capacity, and The Common
Council of the City of
Lawrenceburg in their official
capacities,
Appellants-Defendants,
v.
Franklin County, Indiana, and
The Franklin County Board of
Commissioners in their official
capacities,
Appellees-Plaintiffs,
Robb, Judge, concurring in part and dissenting in part.
[28] I agree with Part I of the majority opinion holding that Lawrenceburg has not
waived its argument that the Agreement was void by statute. And I agree with
much of what the majority says regarding appropriations in Part II. However, I
disagree that this agreement in this context is void ab initio and therefore dissent
from the majority’s resolution.
Court of Appeals of Indiana | Opinion 19A-PL-263 | August 28, 2019 Page 17 of 22
[29] The legislative intent behind allowing riverboat gambling is “to benefit the
people of Indiana by promoting tourism and assisting economic development.”
Ind. Code § 4-33-1-2. To that end, and in the interest of assisting economic
development in the state as a whole and not just in the specific locations
allowed to engage in riverboat gambling, Indiana Code section 4-33-13-6(b)
provides that local governments receiving wagering tax revenue are not
prohibited from entering into agreements with other units of local government
to share the revenue they have received. And this is exactly what
Lawrenceburg has done. The designated evidence shows Lawrenceburg
approached Franklin County in December 2005 with the following offer:
The City of Lawrenceburg, with the assistance of Senator Nugent
and Representative Bischoff, is preparing a Revenue Sharing
program for year 2006 that involves [Franklin County]. First, we
are proposing a $10,000,000 economic development grant
program that will serve nine (9) surrounding counties including
Franklin. In addition, we would like to develop a direct revenue
sharing arrangement with Franklin County. We are proposing a
$500,000 contribution for 2006 and each year thereafter for
[Franklin] County to use for general purposes.
The inauguration of these programs this year, and their
continuation into the future, will depend upon Lawrenceburg
continuing to enjoy financial stability. . . .
***
We look forward to working with your County Council to
develop a long term relationship that improves the quality of life
in Franklin County and beyond.
Court of Appeals of Indiana | Opinion 19A-PL-263 | August 28, 2019 Page 18 of 22
Appellant’s App., Vol. II at 141. Franklin County graciously accepted
Lawrenceburg’s offer of a “$500,000 contribution for 2006 and thereafter[,]” id.
at 142, and acknowledged both that the “sharing of this revenue with us and the
other counties is truly a wonderful example of a neighbor helping others” and
that the “agreement can only remain in place if the City of Lawrenceburg
continues to enjoy financial stability and a steady flow of revenue[,]” id. at 145.
For eight years, Lawrenceburg paid Franklin County $500,000 each year –
$4,000,000 total – until suddenly it decided the Agreement was void ab initio
because it did not comply with Indiana Code section 36-4-8-12(b).
[30] I have several problems with this position. First, this cannot be the result the
legislature intended. In allowing revenue sharing and encouraging economic
development across a broad base, the legislature had to anticipate agreements
such as the one at hand. If revenue sharing agreements are subject to Indiana
Code section 36-4-8-12(b), then the terms of such agreements would have to
include a fixed dollar amount for a fixed number of years and the total amount
would have to be appropriated and set aside in a separate fund at the outset. 9 If
a local government had that kind of money, it would not need the economic
boost provided by gaming revenue. Under Lawrenceburg’s position, the ability
9
At oral argument, the parties were asked whether it would have been better had the Agreement provided for
Franklin County to have received a percentage of the wagering tax revenues. This would in fact be a worse
situation because even if the Agreement included a fixed term of years, it would be impossible to know the
amount to be paid under the Agreement in advance.
Court of Appeals of Indiana | Opinion 19A-PL-263 | August 28, 2019 Page 19 of 22
to craft an agreement that is in harmony with both the appropriations statute
and the purpose behind the revenue sharing statute is so unlikely as to be a
virtual impossibility – and clearly the legislature intended for it to be possible.
We must presume the legislature intended logical application of the revenue
sharing provision, see Piotrowski v. State, 3 N.E.3d 1051, 1054 (Ind. Ct. App.
2014), but the majority’s adoption of Lawrenceburg’s argument on this issue
makes no logical sense.
[31] Second, not only can this result not be what the legislature intended, but it is
clearly not what Lawrenceburg intended, either. The offer it made to Franklin
County was to include Franklin County in an economic development grant
program with other surrounding counties and also to create an ongoing direct
revenue sharing agreement with Franklin County. See Appellant’s Appl, Vol. II
at 141. Thus, Lawrenceburg’s assertion that every payment after the first year
was in the nature of a grant rather than a payment under the Agreement is
disingenuous, as the Agreement and the grant program are two separate things
and Franklin County was invited to participate in both. Moreover, if
Lawrenceburg is correct that the Agreement was void ab initio, then it was just
gifting $500,000 per year to Franklin County while requiring nothing from
Franklin County. At least under the Agreement, Franklin County was
obligated to cooperate in promoting tourism and development in the area. 10
10
In its brief, Lawrenceburg raised the issue that the Agreement was not supported by consideration.
Although the majority does not address that issue, and I do not believe it is necessary to discuss it at length
Court of Appeals of Indiana | Opinion 19A-PL-263 | August 28, 2019 Page 20 of 22
[32] Finally, it is unclear whether Lawrenceburg actually did go through the
appropriations process each year to account for the $500,000 it paid to Franklin
County from 2006 through 2013. Lawrenceburg stated in its motion to
reconsider the grant of summary judgment to Franklin County that
Lawrenceburg made appropriations through 2013, see Appellant’s App., Vol. II
at 150, but stated at the oral argument that the payments after the first year were
entirely gratuitous. Regardless, under Lawrenceburg’s argument, even the first
year’s payment was gratuitous because although $500,000 was appropriated for
that year, the total sum for the entire length of the Agreement was not
appropriated and Lawrenceburg was never obligated by the Agreement to give
Franklin County money. Lawrenceburg asserts the purpose of section 36-4-8-
2(b) is to further the “vitally important policy” of “protecting the public by
preventing public officials from contractually obligating a city to pay money
without the oversight of its legislative body[.]” Brief of Appellants at 12. If
Lawrenceburg’s position is correct, then it extended an offer and entered into a
contract it should have known was illegal from the start, and yet it paid out
$4,000,000 under that illegal contract, in the process doing a poor job of
protecting its citizens from fiscal overreaching.
[33] Here, the Agreement was for Lawrenceburg to share its wagering tax revenues
with Franklin County in the amount of $500,000 for as long as Lawrenceburg
herein, I do note that under Lawrenceburg’s argument that the Agreement was void ab initio, it conceded it
essentially gave the money to Franklin County for no reason, which would have been an irresponsible use of
Lawrenceburg’s funds.
Court of Appeals of Indiana | Opinion 19A-PL-263 | August 28, 2019 Page 21 of 22
received at least that much in wagering tax revenue.11 The legislature clearly
contemplated such an agreement in enacting Indiana Code section 4-33-13-6(b).
Applying section 36-4-8-12(b) to void the Agreement is illogical and contrary to
legislative intent. I would affirm the trial court’s grant of summary judgment to
Franklin County.12
11
As Franklin County pointed out at the summary judgment hearing, “a contract with [a] municipality is
meaningless if they choose not to appropriate funds.” Transcript, Volume 2 at 18. Lawrenceburg conceded
at the oral argument that failing to appropriate a sufficient amount at the outset of a contract can be a way to
avoid a contract later. In other words, in this case, Lawrenceburg is – many years after the fact – using the
appropriations statute as a way to avoid an agreement it participated in for eight years but no longer wishes
to acknowledge.
12
Because this is specific to statutorily allowed revenue sharing of riverboat wagering taxes between local
governments, I do not believe this result would open the floodgates to agreements circumventing the
appropriations requirement. Once in receipt of the funds, properly appropriating the funds before spending
them is required.
Court of Appeals of Indiana | Opinion 19A-PL-263 | August 28, 2019 Page 22 of 22