State v. Lake Superior Court

• Decision Date: 13 January 2005
• Docket Number: No. 45S00-0405-OR-204, No. 45S00-0405-CV-224.
• Citation: 820 N.E.2d 1240
• Parties: STATE of Indiana ex rel. The ATTORNEY GENERAL of the State of Indiana, Relator, v. The LAKE SUPERIOR COURT and The Honorable Robert Pete, As Judge Thereof, Respondents. Governor of the State of Indiana, et al., Appellants (Defendants below), v. Miller Citizens Corporation, et al., Appellees (Plaintiffs below).
• Court: Indiana Supreme Court

820 N.E.2d 1240

STATE of Indiana ex rel. The ATTORNEY GENERAL of the State of Indiana, Relator, v. The LAKE SUPERIOR COURT and The Honorable Robert Pete, As Judge Thereof, Respondents. Governor of the State of Indiana, et al., Appellants (Defendants below), v. Miller Citizens Corporation, et al., Appellees (Plaintiffs below).

Nos. 45S00-0405-OR-204, 45S00-0405-CV-224.

Supreme Court of Indiana.

January 13, 2005.

Stephen A. Carter, Attorney General of Indiana, Gary Damon Secrest, Joby Jerrells, Deputy Attorneys General, Indianapolis, IN, Attorneys for Relator in No. 45S00-0405-OR-204.

John S. Dull, Merrillville, IN, George Patrick, Crown Point, IN, Attorneys for Respondent and Appellee The Treasurer of Lake County.

Kenneth D. Reed, Harold Abrahamson, John P. Reed, Hammond, IN, Gregory S. Reising, Douglas M. Grimes, Gary, IN, Attorneys for Respondent and Appellee Miller Citizens Corporation.

Robert G. Berger, Highland, IN, Attorney for Respondent and Appellee Common Council of the City of Hammond.

Joseph Allegretti, Indianapolis, IN, Attorney for Respondent and Appellee Common Council of the City of East Chicago.

Stephen A. Carter, Attorney General of Indiana, Gary Secrest, Joby Jerrells, Ted Holaday, Douglas Webber, Deputy Attorneys General, Indianapolis, IN, Attorneys for Appellants Governor of Indiana, Attorney General of Indiana, Department of Local Government Finance in No. 45S00-0405-CV-224.

Thomas Atherton, Ronald M. Soskin, David Suess, Indianapolis, IN, Attorneys for Appellant United States Steel Corporation.

Larry J. Stroble, Michael V. Knight, Indianapolis, IN, Attorneys for Appellant International Steel Group, Inc.

Jeffrey T. Bennett, Indianapolis, IN, Attorney for Appellant BP Products N. America, Inc.

Francina A. Dlouhy, James H. Ham, III, Christopher A. Ruhl, Indianapolis, IN, Attorneys for Appellant Ispat Inland, Inc.

William Clyde Jones, Gary, IN, Attorney for Appellee Common Council of the City of Gary.

ON PETITION FOR WRIT OF MANDAMUS AND PROHIBITION.

BOEHM, Justice.

In 2001, the General Assembly passed two statutes that applied only in Lake County and provided for countywide reassessment of property for tax purposes to be conducted by the Department of Local Government Finance and by private contractors selected by the DLGF. The plaintiffs are a group of taxpayers who brought an action in April 2004 in Lake Superior Court seeking a declaratory judgment that these statutes are unconstitutional. The bills for taxes due in 2003 had not yet been mailed due to delays in the reassessment process and the plaintiffs asked that the taxing authorities in that county be enjoined from mailing bills for the property taxes due in 2003.

The trial court found the statutes to violate five separate provisions of the Indiana Constitution and granted the requested preliminary injunction. The Attorney General contended that exclusive jurisdiction over this case lies in the Tax Court and on that ground asked this Court for a writ of mandamus and prohibition. While that writ proceeding was pending, an appeal of the preliminary injunction was also initiated. This Court stayed the trial court's preliminary injunction. As a result the taxing authorities were free to mail the bills for taxes due in 2003. We then ordered the writ proceeding and the appeal to be argued concurrently. This opinion addresses both.

We hold that the Lake Superior Court had no jurisdiction to entertain these claims. We recognize that ordinarily lack of jurisdiction of the trial court would preclude deciding any other issues. However, this case presents a challenge to the entire assessment process in Indiana's second most populous county. For the reasons explained below, we think it is clear that the plaintiffs will ultimately fail in their effort to enjoin the tax bills produced by the 2002 countywide reassessment. It is not in anyone's interest to preserve false hopes by resolving this appeal on jurisdictional grounds alone. In short, there is broad public interest in a prompt resolution of this case, and the parties ask us to address the merits of the plaintiffs' claims without regard to jurisdiction. For these reasons we do so without delaying a final resolution of this matter.

We conclude that the statutes providing for private parties or the DLGF to assess certain assets in Lake County violate one of the provisions of the Indiana Constitution on which the plaintiffs rely, but not the other four. Although the 2001 laws violated Article IV, Section 22 of the Indiana Constitution as special legislation providing for the assessment of taxes, in 2004 the General Assembly passed a statute authorizing the assessment conducted pursuant to the 2001 legislation. This "curative" legislation validated the acts taken under the unconstitutional special legislation. Moreover, plaintiffs waited until reassessment was completed to seek injunctive relief. In the meantime, other taxpayers and local government units relied on the ongoing reassessment process provided by statute to supply funding for essential day-to-day functions of government. For that reason as well, plaintiffs' claim for injunction was barred by the delay in seeking equitable relief.

Factual and Procedural Background

In broad brush, the amount of property taxes owed for each individual property is set by allocating the total amount of property taxes to be raised in a taxing district among all pieces of property in proportion to their assessed valuations. If the total to be raised increases, of course the sum of all tax bills in the district goes up by that amount. But, the total amount to be raised is unaffected by a reassessment of property valuations. If all assessed valuations go up or down by the same percentage as the result of a reassessment, even if there is a large change in the dollar amount of the assessed valuation on each property, there is no change in the tax burden of any individual property. In simplified terms, if the assessed valuation of every property doubles, it would have no effect on the tax bills of any of them. If, however, some assessed valuations go up or down more than others, as is always the case in the real world, some taxes go up and some go down, but the gains by those whose assessed valuations go down more than the average are offset by losses among those whose assessed valuations increase more than the average. In other words, reassessment is a zero sum game for all property in the affected area.

As explained in more detail below, Lake County has for several years had a history of uneven assessments and generally lower assessed valuations than those in other parts of the state for similar properties. In response to this situation, the two challenged provisions were enacted by the 2001 session of the General Assembly in the same law, H.B.1902. Both by their terms apply only in counties with populations between 400,000 and 700,000, and Lake County is the single county meeting that criterion. The two statutes now appear as Indiana Code section 6-1.1-4-32 (2004), which authorized the DLGF to employ private firms to assess real property in Lake County, and Indiana Code section 6-1.1-8.5-1 et seq., which provided for the DLGF itself to assess industrial properties in Lake County with an estimated assessed value in excess of $25 million.

Indiana property taxes are due in May and November of each year based on assessed valuations as of March 1 of the preceding year. Both of the challenged statutes provide procedures that formed a part of the process of determining the assessed valuation of property in Lake County as of March 1, 2002. The 2002 reassessment was completed, although later than usual, by a private firm selected by the State Board and by the DLGF. In practical terms, the issue here is that the reassessment resulted in proportionally lower assessed valuations of some large industrial properties in Lake County compared to the changes in assessed valuations of some residential properties, notably those owned by the plaintiffs. As a result, the 2003 taxes increased for the owners of properties whose changes in assessments were proportionally higher. For some properties, these new taxes were dramatically higher than their historic levels. The State points out that if the reassessment is accurate, the increase in taxes compared to prior years merely corrects an underpayment these residential properties have enjoyed in the past. The plaintiffs counter that the effect of increased taxes is to lower the market value of their residential properties because most homes are purchased based on the monthly cash payments required for principal and interest on a mortgage plus taxes and insurance. An increase in taxes means a potential purchaser has less available for monthly mortgage payments and therefore produces a reduced market value of the property.

Article IV, Section 22 of the Indiana Constitution prohibits "local or special laws" dealing with a number of subject matters, one of which is "providing for the assessment and collection of taxes...." Article IV, Section 23 provides that even if a law does not address one of the Section 22 items, it nevertheless must be a general law "where a general law can be made applicable." Finally, Article X, Section 1 directs the General Assembly to "provide, by law, for a uniform and equal rate of property assessment and taxation...." Plaintiffs brought this action in Lake Superior Court, contending that these two statutes violate each of these three provisions, and two others as well. For that reason they claim that the collection of the 2003 property taxes in Lake County must be enjoined. The State responds that the trial court lacks jurisdiction over this case. The State also contends that the statutes are constitutional, and in any event the resulting assessed valuations are correct, so there is no point in redoing the assessment by some other agency that would, after some extended time,...