City of Louisville v. Fiscal Court of Jefferson County
| Decision Date | 03 November 1981 |
| Docket Number | SC-857-DG |
| Citation | 623 S.W.2d 219 |
| Parties | CITY OF LOUISVILLE, Kentucky, et al., Movants, v. FISCAL COURT OF JEFFERSON COUNTY, Kentucky, et al., Respondents. 80- |
| Court | United States State Supreme Court — District of Kentucky |
J. Bruce Miller, Jefferson County Atty., Stuart L. Adams, Jr., Asst. County Atty., Louisville, for Fiscal Court of Jefferson County.
Henry A. Triplett, Louisville, for Fadel, Dean, Cunningham, Jr. & Oliver.
Joseph B. Helm, Stephen R. Schmidt, Brown, Todd & Heyburn, Louisville, for Highbaugh Enterprises, Inc.
Max Simmons, Director of Law, Donald L. Cox, Louisville, for City of Louisville.
Robert L. Sloss, Sheryl G. Snyder, Marianna Gordon, Wyatt, Tarrant & Combs, Louisville, for Thomas W. Bullitt, et al.
Henry Watson III, Lexington, for amicus curiae (Kentucky Municipal League and Municipal Atty.'s Ass'n of Kentucky).
The issue we deal with on this appeal is the validity of a contract between the City of Louisville and certain property owners which attempts to settle a remonstrance suit.
In November of 1977, the City introduced an ordinance which proposed to annex a large area east of the city. The area included a regional shopping center, a large working farm, a residential subdivision, a smaller shopping center and office complex, several motels and an interstate highway service area. Two remonstrance suits were filed. 1 The suits were consolidated for trial, and the Jefferson County Fiscal Court was made a party. 2 Prior to trial, Oxmoor and the City negotiated a settlement which resulted in the contract in question. Essentially, Oxmoor agreed to be annexed and the City agreed to place the property in a special taxing and service district, with a reduced ad valorem real estate tax rate, for a number of years. 3
Following the execution of the contract, the Board of Aldermen of the City enacted an ordinance ratifying it. The City and Oxmoor tendered an agreed judgment which incorporated the contract, to the trial court. Hurstbourne and the Fiscal Court of Jefferson County objected to the entry of the judgment, claiming that the contract, which was the underpinning of the judgment, was void. The trial court agreed and ruled the contract invalid for two reasons: (1) the city council had no authority to contract for a specified tax rate beyond its term of office, and (2) the City's agreement with Oxmoor to cooperate with respect to future zone changes and its agreement not to take any action which would adversely affect the present agricultural land, were too vague. As a result of the trial court's ruling, the remonstrance action is awaiting trial, pending the outcome of this appeal.
On appeal, the Court of Appeals, with two concurring opinions, affirmed the trial court and declared the contract invalid. The majority opinion held that Section 172A of the Kentucky Constitution, which authorizes variable tax rates, applies only to farm land and is therefore not available to sustain the contract. The concurring opinion disagreed with the majority's restrictive interpretation of Section 172A but limited its application of variable tax rates to those areas in which the taxing district is unable to furnish "important" governmental services which it does furnish to other areas. Because of the obvious importance of the issues in this case, we granted discretionary review.
The main issues which we will discuss are: (1) Do the respondents, Hurstbourne and Jefferson County Fiscal Court, have standing to challenge the validity of the contract? (2) Does Section 172A of the Kentucky Constitution apply only to farm land? (3) May a city, by ordinance, limit the ad valorem tax rate beyond its term of office? (4) May a city annex property with a provision for de-annexation, solely at the discretion of the property owners affected?
Since the focal point of the litigation is the agreement between the City and Oxmoor, it will be helpful to discuss its terms and conditions. The parties to the contract are the City of Louisville and all of the property owners in the area to be annexed. The main provisions of the contract may be summarized as follows:
(1) Oxmoor consented to annexation.
(2) The City agreed to place Oxmoor in a "special taxing and servicing district" wherein the City will furnish substantial "non revenue-producing services," including 24-hour per day fire and police protection, emergency ambulance service and road maintenance.
(3) The City and Oxmoor agree that the Oxmoor area shall not receive designated non revenue-producing services such as sidewalk construction and maintenance, street lights, sanitary and storm sewers, fire hydrants, snow removal and garbage collection.
(4) The real estate ad valorem tax rate on the Oxmoor area shall not exceed ten cents per $100 assessed valuation for the first post-annexation five-year period, twelve cents per $100 for the second five years, fifteen cents per $100 for the third five-year period, and eighteen cents per $100 valuation for a fourth five-year period (as opposed to the tax rate paid presently by Louisville property owners of approximately fifty-six cents per $100 assessed value).
(5) The City further agrees to "assist and cooperate fully" with the Oxmoor parties, "in all of the Owners' applications for zoning changes, building and other permits, changes in street entrances to and exits from the area, street layouts, stream usage and flood control ...."
(6) The City agrees not to take any action of any nature that would adversely affect "the agricultural or forestry use" in the area or "the lawful rights and privileges presently enjoyed" by the Oxmoor shopping center parties.
(7) The term of the agreement is for a period of five years, and shall be automatically renewed for three successive terms of five years each; provided, however, that there will be no such renewal if two of the named Oxmoor parties notify the City that they will not consent to the renewal. If such consent is withheld, de-annexation occurs.
The remonstrance actions of Hurstbourne and Oxmoor were filed in March of 1979. In each case the Jefferson County Fiscal Court was joined as a party defendant. Oxmoor and the City of Louisville tendered an agreed judgment based on the contract in question here. The Fiscal Court and Highbaugh Enterprises challenged the entry of the judgment because of the alleged illegality of the contract.
It is argued that neither the Fiscal Court nor Highbaugh has standing in these remonstrance actions. We do not agree.
The Fiscal Court was joined as a party because of the mandate of KRS 81.290(2) which provided, "Whenever the proposed annexation ... shall be protested ... the Fiscal Court of such county shall be made a party to such a protest suit." (emphasis added). It is true that this statute was repealed, effective July 15, 1980. However, the appearance of the Fiscal Court as a party was mandated as of the time the actions were filed in 1979 and the concomitant rights of the Fiscal Court to appear and raise any and all questions concerning the annexation were vested then. The subsequent repeal of the statute did not change these rights. We believe the statute is dispositive of the question of standing of the Fiscal Court.
Highbaugh Enterprises is not only a remonstrant in the Hurstbourne suit, but also a taxpayer in the present City of Louisville. We believe Highbaugh has an absolute right, as a taxpayer of the City, to question the legality of a contract which would allegedly require city officials to administer the tax laws in an unconstitutional manner. Kelley v. City of Ashland, Ky., 562 S.W.2d 312 (1978); Russman v. Luckett, Ky., 391 S.W.2d 694 (1965).
The majority of the Court of Appeals ruled the agreement between the City of Louisville and Oxmoor invalid because it applied differing tax rates to the urban area of the City and to the urban area in Oxmoor. They reasoned that Section 172A of the Kentucky Constitution, on which the agreement was based, applies only to farm land. We do not agree, and conclude that § 172A applies to urban land as well as agricultural land.
§ 172A is as follows:
§ 172A. ASSESSMENT OF FARM LAND ACCORDING TO VALUE FOR FARM PURPOSES.
Notwithstanding contrary provisions of Sections 171, 172, or 174 of this Constitution-
The General Assembly shall provide by general law for the assessment for ad valorem tax purposes of agricultural and horticultural land according to the land's value for agricultural or horticultural use. The General Assembly may provide that any change in land use from agricultural or horticultural to another use shall require the levy of an additional tax not to exceed the additional amount that would have been owing had the land been assessed under Section 172 of this Constitution for the current year and the two next preceding years.
The General Assembly may provide for reasonable differences in the rate of ad valorem taxation within different areas of the same taxing districts on that class of property which includes the surface of the land. Those differences shall relate directly to differences between non-revenue-producing governmental services and benefits giving land urban character which are furnished in one or several areas in contrast to other areas of the taxing district. (Proposed by Acts 1968, ch. 103, ratified November, 1969).
The clear purpose of § 172A is to permit a lack of uniformity in taxation, both as to rate and valuation, for the land affected. This is, of course, totally opposite to the historical and constitutional principles built into our system. The second paragraph specifically permits "reasonable" differences in the tax rate "within different areas of the same taxing districts". The amendment then provides a...
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