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Minding the Gap How to Recapture Revenue Lost to the Property Tax Cap Indiana Association of Counties 2008 Annual Conference Jonathan Bryant, Esquire.

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Presentation on theme: "Minding the Gap How to Recapture Revenue Lost to the Property Tax Cap Indiana Association of Counties 2008 Annual Conference Jonathan Bryant, Esquire."— Presentation transcript:

1 Minding the Gap How to Recapture Revenue Lost to the Property Tax Cap Indiana Association of Counties 2008 Annual Conference Jonathan Bryant, Esquire

2 898501_12 A Disclaimer This won’t: –Make up for all of your losses. –Make everyone happy. –Balance your budget. This can: –Capture the cost of special programs and services. –Apply that cost to the users. –Allow the program and services to be revenue neutral, instead of draining your general revenue.

3 898501_13 Your Authority The Indiana Home Rule Act –“A unit has: (1) all powers granted it by statute; and (2) all other powers necessary or desirable in the conduct of its affairs, even though not granted by statute.” IC (b). –A “unit” is a county, municipality, or township. IC

4 898501_14 Your Authority, Limited “... [A] unit does not have the following: [... ] (5) The power to impose a license fee greater than that reasonably related to the administrative cost of exercising a regulatory power. (6) The power to impose a service charge or user fee greater than that reasonably related to reasonable and just rates and charges for services. IC (a)

5 898501_15 The Process An exercise in fact-finding and persuasion: 1. Know your costs. 2. Know your neighbors. 3. Know your community. 4. Know your decision-maker.

6 898501_16 The Process, Continued Know your costs. –Fact-finding Thanks, Jeff!

7 898501_17 The Process, Continued Know your neighbors. –Do neighboring counties offer similar services? –Do they charge a user fee? –Is it higher than what you currently charge? –Is it higher than your proposed charge? –If it is lower, has your neighbor found an efficiency you can use?

8 898501_18 The Process, Continued Getting to know your neighbors Mixed exercise of fact-finding and persuasion. –Fact-finding Discover your competitive advantages and disadvantages. You probably don’t want to get too much more expensive than your neighbors. If your neighbor found an efficiency, adopt it instead of charging more. –Persuasion Putting your circumstances in perspective will take some of the pressure off of your council.

9 898501_19 The Process, Continued Know your community. –If the users are represented by a trade group, meet with the trade group. Explain how the program impacts you. Ask how the fee increase will impact its members. Explain the benefits of a successful program to its members. –If there isn’t a trade group, consider engaging the users by holding an unofficial meeting.

10 898501_110 The Process, Continued Getting to know your community Mixed exercise of fact-finding and persuasion. –Fact-finding Understand how users use your services. Make sure your fee increase won’t have a chilling effect. –Persuasion You should have a pretty good idea leaving this meeting whether your users will attend the council meeting to oppose the increase (hint: it is better to know this in advance than to be surprised at the council meeting). You may even get the users’ support.

11 898501_111 The Process, Continued Know your decision-maker. –You’re asking the decision-maker to do something that is not particularly popular. –Showing you’ve done your homework will help the decision- maker approve your request. –Comparing costs with other counties will let the decision-maker know it’s not alone. –Knowing where stakeholders stand will make the decision-maker more comfortable. This is pure persuasion.

12 898501_112 The Process, Continued Your end product. –An ordinance Adopted by the council, if you’re Lake, Marion, St. Joseph, or any other county that has adopted the provisions of IC Adopted by the commissioners, if you’re any other county. –IC

13 898501_113 Bonus: Know your courts. Leading Cases: –City of Portage v. Harrington, 598 N.E.2d 634 (Ind. Ct. App. 1992). –Common Council of the City of Crown Point, et al. v. High Meadows, Inc., 362 N.E.2d 1166 (Ind. Ct. App. 1977). One very recent case: –Allen v. City of Hammond, 879 N.E.2d 644 (Ind. Ct. App. 2008).

14 898501_114 City of Portage v. Harrington A “haven for marinas and water pleasure craft.” –The City of Portage borders Lake Michigan. –The Little Calumet River and Burn’s Ditch both flow through the City’s territory before emptying into Lake Michigan. –Boaters can enjoy a day on the lake before heading back up river to their marina.

15 898501_115 City of Portage v. Harrington, Cont’d The Common Council established the Port Authority of Portage, Indiana, in –The Port Authority has authority to control, regulate, straighten, deepen, and improve the waterway. –The Port Authority also has authority to regulate and license any recreational or business use of the waterway. –Prior to 1990, the Port Authority collected an annual license fee of $1.00 per foot of boat length from each boat permanently docked along the waterway. –For fifteen years, this fee covered the Port Authority’s administrative costs.

16 898501_116 City of Portage v. Harrington, Cont’d All that boat traffic caused silt build up. –Waterway developed shallow spots, sandbars, and a low water level. –Complaints from boaters indicated the need to dredge the Waterway. –Port Authority received a conditional permit for preliminary studies and dredging.

17 898501_117 City of Portage v. Harrington, Cont’d But the existing license fee wasn’t sufficient to fund the preliminary study. So the Port Authority raised the license fee to $75 per dock slip.

18 898501_118 City of Portage v. Harrington, Cont’d Boaters’ complaint: “I have a problem. You fix it. But don’t make me pay for it.”

19 898501_119 City of Portage v. Harrington, Cont’d Court concludes that the Port Authority may charge a license fee, but the new fee is not reasonably related to the administrative cost of exercising a regulatory power. “A license fee, authorizes solely to carry out a regulatory purpose, must be limited to the probable expense of issuing the license, inspecting and regulating the activity.” Inquiry into whether a license fee is “reasonably related” involves the amount and the purpose of the fee.

20 898501_120 City of Portage v. Harrington, Cont’d Amount –Courts defer to the legislative branch. –Courts will not generally compute the difference between administrative costs and the amounts collected. –If a license fee is clearly shown to be obviously and largely beyond what is needed for the regulatory services rendered, the fee will be declared a revenue tax and will be prohibited. Court did not quarrel with the amount.

21 898501_121 City of Portage v. Harrington, Cont’d Purpose –The purpose of the increased fee was not to cover the administrative costs of regulating boat traffic. –Recall the limit of the City’s authority: a license fee must be reasonably related to the administrative cost of exercising a regulatory power. –But the extra funds were specifically earmarked for a dredging project unrelated to the administrative costs of regulating of boat traffic. Court held the increased charges exceed the statutory authorization and are contrary to law.

22 898501_122 City of Portage v. Harrington, Cont’d What’s in a name? –If the Port Authority had opted to fund the dredging project with a user fee instead of a license fee, it probably would have avoided this result. –Port Authority may not impose a user fee or service charge greater than that reasonably related to reasonable and just rates and charges for services. –If the service is maintaining the Waterway, reasonable and just rates likely would have included the costs of dredging the Waterway.

23 898501_123 Allen v. City of Hammond City requires most businesses within its boundaries to apply for a business license. The City raised its license fee from $25 to $100. Allen, an attorney who maintained a law business in the City, sued the City. In finding the license fee was appropriate, the Court applied the same amount and purpose analysis.

24 898501_124 Allen v. City of Hammond, Cont’d Amount –Allen sought access to public records that would have justified the City’s license fee, but the City did not have any responsive records. –The City presented evidence about the budget for the police, fire, and code enforcement departments, the revenues generated from the license fee, and the administrative costs associated with the issuance of business licenses.

25 898501_125 Allen v. City of Hammond, Cont’d Amount, cont’d –Court stated: “We will not compute the difference between administrative costs and the amounts collected to determine the reasonableness of the $100 business license fee. Based on the designated evidence, Allen has not established that the amount of the business license fee is largely beyond what is needed for the regulatory services rendered by the City.”

26 898501_126 Allen v. City of Hammond, Cont’d Purpose –Allen made no showing that the fee was imposed with any other purpose than to defray the administrative costs of regulating business. Note the deference shown to the City by the Court.

27 Questions? Thank you!

28 898501_128 How to contact me: Jon Bryant Taft Stettinius & Hollister LLP One Indiana Square Suite 3500 Indianapolis, Indiana (317)

29 898501_129


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