Scopelite v. Ind. Dep't of Local Gov't Finance

• Decision Date: 22 November 2010
• Docket Number: No. 49T10–0812–TA–71.,49T10–0812–TA–71.
• Parties: Dale J. SCOPELITE and James T. Sheehan, Petitioners,v.INDIANA DEPARTMENT OF LOCAL GOVERNMENT FINANCE, Respondent.
• Court: Indiana Tax Court

939 N.E.2d 1138

Dale J. SCOPELITE and James T. Sheehan, Petitioners,

v.INDIANA DEPARTMENT OF LOCAL GOVERNMENT FINANCE, Respondent.

No. 49T10–0812–TA–71.

Tax Court of Indiana.

Oct. 28, 2010.Publication Ordered Nov. 22, 2010.

Dale J. Scopelite, James T. Sheehan, Hammond, IN, Pro Se, Petitioners.Gregory F. Zoeller, Attorney General of Indiana, John D. Snethen, Nancy M. Hauptman, Deputy Attorneys General, Indianapolis, IN, Attorneys for Respondent.FISHER, J.

On November 7, 2008, the Department of Local Government Finance (DLGF) issued a final determination approving the City of Hammond's (City) budget and tax levy for the 2008 tax year. Dale J. Scopelite and James T. Sheehan (hereinafter, the Petitioners) challenge that final determination. While the Petitioners present ten issues for the Court's review ( see Petrs' Br. at 1–2), the Court consolidates and restates those issues as:

I. Did the DLGF deny the Petitioners due process when it conducted its hearing on the taxpayers' objection statement on October 30, 2008?

II. Did the DLGF fail to follow the law when it did not provide written determinations and statements on each of the taxpayers' fifty-nine objections?

III. Did the DLGF err in concluding that the City had not exceeded its debt limit?

IV. Did the DLGF err in approving the City's budget?

RELEVANT FACTS AND PROCEDURAL HISTORY

In September of 2007, the City, through its authorized officers and after several public hearings, adopted its budget and correlating property tax levy for 2008. ( See Petrs' V. Pet. for Judicial Review (hereinafter, “Pet.”) Ex. 1 at 4 ¶ 1; Ex. 2 at 35.) On May 3, 2008, the Auditor of Lake County, Indiana (Auditor) posted notice advising City taxpayers of the rates to be charged in order to generate the approved property tax levy. ( See Pet. Ex. 4.)

On May 9, 2008, a group of taxpayers (which included the Petitioners) initiated an appeal by filing an objection statement with the Auditor. In their statement, the taxpayers explained that over the course of several years, the City had “recklessly” spent money it did not have, forcing taxpayers to make up the shortfall through higher property taxes. ( See Pet. Ex. 2 at 2–3.) Consequently, in an effort to compel more responsible fiscal management from City officers, the taxpayers' statement contained a list of fifty-nine objections to the City's budget, tax levy, and related tax rates. ¹ (Pet. Ex. 2 at 5–16 (footnote added).) The Auditor forwarded the matter to the DLGF.

On October 30, 2008, the DLGF conducted a hearing on the taxpayers' objections. On November 7, 2008, the DLGF issued a final determination in the matter in which it denied the taxpayers' petition and approved the City's 2008 budget. In so doing, the DLGF did not address each of the taxpayers' objections individually; rather, it construed them collectively as representing four objections to the City's budget, tax levy, and tax rates: (1) the City's expenditures were “reckless”; (2) the City's budget estimates were inaccurate; (3) the City exceeded its 2% constitutional debt limit; and (4) the City was inefficiently administered. ( Cf. Pet. Ex. 1 at 1, 4 ¶ 3 with Ct. Ex. A.)

On December 18, 2008, the Petitioners initiated an original tax appeal. The Court conducted oral argument on September 4, 2009. Additional facts will be supplied as necessary.

ANALYSIS AND OPINION

I.

Did the DLGF deny the Petitioners due process when it conducted its hearing on the taxpayers' objection statement on October 30, 2008?

Each year, 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,² and proposed tax rates ³ for the ensuing year. See generally Ind.Code Ann. §§ 6–1.1–17–3, –5 (West 2007) (amended 2008) (footnotes added). In order to make these formulations, each unit relies on information it receives from its county auditor regarding the assessed valuation within the district and the estimated tax collection thereon. See generally Ind.Code Ann. § 6–1.1–17–1(a) (West 2007) (amended 2008).

Once the unit has completed its formulations, it is required to provide taxpayers within the taxing district notice of, and an opportunity to be heard on, “(1) the estimated budget; (2) the estimated maximum permissible levy; (3) the current and proposed tax levies of each fund; and (4) the amounts of excessive levy appeals to be requested.” A.I.C. § 6–1.1–17–3(a). After the public hearing but before November 2, the unit is to “fix” (adopt) its budget, tax levy, and tax rates.⁴ See generally A.I.C. § 6–1.1–17–5(a)(2) (footnote added).

Once the budget has been adopted, the county auditor is to prepare and post notice to taxpayers of the tax rates to be charged on each $100 of assessed valuation in order to generate the unit's levy. See generally Ind.Code Ann. § 6–1.1–17–12 (West 2007) (amended 2008). Within ten days of the auditor's posting, taxpayers “may initiate an appeal ... by filing a statement of their objections with the county auditor.” See generally Ind.Code Ann. § 6–1.1–17–13(a) (West 2007) (amended 2009). “The statement shall specifically identify the provisions of the budget, tax rate, or tax levy to which the taxpayers object.” Id. The DLGF is to conduct a hearing on the taxpayers' objections and, after considering their testimony and evidence, issue a “written determination [ ] and ... statement of findings[.]” Id. at (b)(3). In conjunction with the hearing on the taxpayers' objection statement, the DLGF may also hold the hearing required under Indiana Code § 6–1.1–17–16. See id. at (b). See also Ind.Code Ann. § 6–1.1–17–16(c) (West 2007) (explaining that before the DLGF may review, revise, reduce, or increase a budget by fund, tax rate, or tax levy, it must hold a public hearing). The DLGF “is expressly directed to complete the[se] duties ... not later than February 15th of each year for taxes to be collected during that year.” Id. at (h).

On appeal, the Petitioners explain that the DLGF did not conduct its hearing on the taxpayers' objection petition until October 30, 2008, well after the mandatory February 15 deadline. (Petrs' Br. at 17.) As a result, the Petitioners claim that the DLGF denied them due process ⁵ “[because it] allowed the [C]ity ... to implement the [ ] budget prior to the objection hearing[.]” (Oral Argument Tr. at 16 (footnote added).) The Court, however, must disagree for two reasons.

First, the February 15 deadline set forth in Indiana Code § 6–1.1–17–16(h) is not a mandatory one. Admittedly, to say that the DLGF “is expressly directed” to do something connotes a mandatory import. See, e.g., Huntington County Cmty. Sch. Corp. v. Indiana State Bd. of Tax Comm'rs, 757 N.E.2d 235, 240 (Ind. Tax Ct.2001) (explaining, for example, that the terms “must” and “shall” connote mandatory import). Nevertheless, phrases and terms that appear mandatory may, at times, be construed as directory in order “ ‘to prevent the defeat of the legislative intent.’ ” In re Middlefork Watershed Conservancy Dist., 508 N.E.2d 574, 578 (Ind.Ct.App.1987) (citation omitted). More specifically, such phrases and terms will be construed as directory when the statute in which they are contained fails to specify adverse consequences, the provision does not go to the essence of the statutory purpose, and a mandatory construction would thwart the legislative purpose. Id. (citation omitted).

Here, Indiana Code § 6–1.1–17–16 does not specify any adverse consequences in the event the DLGF fails to complete its duties by February 15. Such silence leads the Court to conclude that the legislature's purpose behind the specified date is simply to keep the budget process “moving along” and, ultimately, to ensure that the DLGF has final review on both budgets and taxpayer objections thereto. See, e.g., Whetzel v. Dep't of Local Gov't Fin., 761 N.E.2d 904, 908 (Ind. Tax Ct.2002) (explaining that when construing statutes, it is equally as important to recognize what they do not say as it is to recognize what they do say) (citation omitted). This legislative purpose would be thwarted if the February 15 date was construed as a mandatory deadline: when the DLGF received the taxpayers' objection statement in May of 2008, it would have been precluded from reviewing it, along with the City's budget. Cf. with Bd. of Comm'rs of Marion County v. W. Elec. Co., 198 Ind. 417, 153 N.E. 177, 178 (1926) (explaining that when statutory provisions are for the benefit and protection of taxpayers, they are construed as mandatory; when statutory provisions are designed to merely secure order, system, and dispatch in proceedings, they are construed as directory) (citation omitted).

Second, with respect to the Petitioners' allegation that the City implemented its budget prior to the DLGF's hearing on October 30, 2008, there is no evidence in the record to substantiate that allegation. In fact, both parties acknowledge that tax anticipation warrants were issued in order to fund the City's operation while the budget approval process was being completed. ( See Oral Argument Tr. at 16, 29.) See also Black's Law Dictionary 1724 (9th ed.2009) (defining tax anticipation warrants as short-term loans made to local governmental units that are to be payable out of tax receipts when collected).

The Petitioners have not shown that they were denied due process when the DLGF conducted its hearing on the taxpayers' objection statement on October 30, 2008. Accordingly, the Petitioners' claim as to this issue is denied.⁶

II.

Did the DLGF fail to follow the law when it did not issue written determinations and statements on each of the taxpayers' fifty-nine objections?

Next, the Petitioners take issue with the manner by which the DLGF, in its final determination, addressed the taxpayers' objections. Specifically, the Petitioners argue that pursuant to Indiana Code § 6–1.1–17–13...