Judges: MIKE BEEBE, Attorney General
Filed Date: 6/29/2004
Status: Precedential
Modified Date: 7/5/2016
The Honorable Marilyn Edwards State Representative 2330 North Juneway Terrace Fayetteville, AR 72703-2915
Dear Representative Edwards:
I am writing in response to your request for my opinion on the following questions:
1. What are the possible effects that Amend. 59 and 74 have on the receiving district in school annexation? As you know, the Greenland school district is in the process of consolidation and needs to urgently know how to handle different millage and indebtedness issues.
2. During the next countywide appraisal, should the property assessment of the annexed school district cause an increase of greater than 10% in total property assessment, will the receiving school district be required to roll back millage?
3. Using
Act 1467 of 2003 , can the Arkansas Department of Education rely solely on supplementary comments from a legislative audit to place an Arkansas Public School District into fiscal distress?
My inquiries reveal that the proposed merger is in fact an annexation of the Winslow School District by the Greenland School District.
RESPONSE
Your first question is difficult to address because I am unacquainted with the particular circumstances that prompted it. However, I am enclosing Ark. Op. Att'y Gen. No.
Your second question appears to be premised on an assumption that the respective changes in the valuation of property in the receiving district and the affected annexed district will be of some independent significance in determining whether a rollback is warranted in the new district. The only significant question for purposes of determining whether Amendment 59 will apply is whether the valuation of all taxable property in the new district — i.e., the combined value of taxable property contained in the two or more former districts — has increased by more than 10%. Amendment 59 mandates what the courts refer to as a "uniform" district-wide rollback of taxes when the assessed value of property increases by more than 10% following a reappraisal.1 With respect to the question of what is "uniform," it is unclear whether reducing each millage by an equal number of mills in a district having more than one millage would meet this requirement given that it would necessarily disproportionately affect one portion of a district. If such a reduction in a district having different millages would not qualify as "uniform," it is difficult to determine how to proceed because the law provides no formula to ensure that the rollback will be uniform. Although I can and will propose a mathematical formula that I believe would result in a "uniform" rollback in a multi-millage district, only the legislature or the Assessment Coordination Department can determine the method of calculating rollbacks in such a district.
Your third question appears to be moot since the Greenland School District has reportedly determined not to challenge its fiscal distress designation. Even if it were not moot, I would decline to address this question because this office lacks the authority to determine whether a school district is in fiscal distress. By law, there is a process of administrative appeal to challenge such a determination.
Question 1: What are the possible effects that Amendments 59 and 74 haveon the receiving district in school annexation? As you know, theGreenland School District is in the process of consolidation and needs tourgently know how to handle different millages and indebtedness issues.
It would be impossible for me to opine on all of the "possible effects that Amendments 59 and 74" might have on a school district without knowing the complete factual situation that exists in the district(s). I am neither equipped nor authorized to engage in such a fact-finding endeavor. Unfortunately, your question is not one I am prepared to address in the abstract, given that attempting to do so would entail entertaining a series of assumptions I am unable even to formulate.
With respect to the second part of your question, I have already opined in the attached Ark. Op. Att'y. Gen. No.
Question 2: During the next countywide appraisal should the propertyassessment of the annexed school district cause an increase of greaterthan 10% in total property assessment, will the receiving district berequired to roll back millage?
As noted above, this question is confusing in that it appears to be premised on a mistaken assumption that the "receiving district" and the "affected district" are to be treated independently for purposes of determining whether Amendment 59 dictates a rollback of taxes.2 The school districts at issue both lie in Washington County, which my inquiries reveal assesses all property within the county, including all property contained within the two former districts, on an annual basis. For purposes of determining whether property contained within the new district has appreciated more than 10% in value, thus triggering the rollback provisions of Amendment 59,3 the district will compare the taxable value of property throughout the new district — i.e., throughout the area that formerly comprised the two combining districts — before and after the reappraisal. Once a consolidation or annexation is complete, the resultant school district is treated as a single school district for all purposes — including Amendment 59 — albeit one with two different millage rates for at least the first six months of its existence.4
The qualifying phrase at the end of my last sentence bears some further discussion because it complicates the issue of how a taxing authority might calculate a rollback. As I discussed in Opinion No.
At issue in your request is how to apply a rollback in a district having differing millage rates in order to meet Amendment 59's requirement that a district realize no more than 10% additional revenues in the year following a reappraisal.5 The court touched upon this issue indirectly in Frank v. Barker,
Based on the plain meaning of the language in Amendment 59, we conclude that the Fountain Lake School District includes all taxpayers in the district, whether they reside in Saline County or Garland County. We note that in order to determine whether a rollback is required in the "taxing unit" it is necessary to include "all others interested, to protect the inhabitants thereof against the enforcement of any illegal exactions whatever." The phrase "all others interested" certainly includes all taxpayers within the school district which is the "taxing unit."
Additionally, we note that the plain language of the amendment, when referring to the rollback, which the taxpayers in the taxing unit may be entitled to, refers to "the rate" of school district taxes levied against the taxable real and personal property in the school district being adjusted or rolled back. This language from the amendment does not grant any authority for a single taxing unit to impose various taxing rates.6 Instead it allows for a rollback when the whole taxing unit has been subjected to a ten percent increase in taxable real and personal property in a single year. Furthermore, the rollback of "the rate" is done by the "governing body of the taxing unit;" that is, by the board of the school district. We also note that any rollback of the rate of taxation must be uniform. The Arkansas Constitution in article
16 , §5 provides in part:all real and tangible personal property subject to taxation shall be taxed according to its value, that value to be ascertained in such manner as the General Assembly shall direct, making the same equal and uniform throughout the State. No one species of property for which a tax may be collected shall be taxed higher than another species of property of equal value. . . .
Id. Pursuant to this constitutional language, it is clear that one uniform rate of taxation must be applied to property of equal value throughout the school district, which is the taxing unit. Additionally, we note that all members of the class share a common interest in the fair and uniform distribution of any rollback by a uniform reduction in the rate of taxation throughout the taxing unit. The dissent urges that the constitutional requirement of a uniform rate of taxation within a taxing unit has been overturned by the legislative enactment of
Act 848 of 1981 partially codified at Ark. Code Ann. §26-26-408 (Repl. 1997). However, we find no authority to support the proposition that a statutory provision overrides a constitutional principle.7
In my opinion, the paramount principle to be drawn from this passage is that any rollback of taxes within a district must apply uniformly to all areas of the district. Determining what this means in a district that has divergent millages following a consolidation or annexation may be difficult. Nothing in the constitution, the Code or the case law directly addresses this issue. However, Barker clearly suggests, first, that the determination of whether a rollback is warranted must be based on a consideration of circumstances throughout the district and, secondly, that the rollback must apply uniformly throughout the district. If, based upon that determination, a district with different rates is obliged to roll back taxes, the only remaining question will be how to effect the rollback "uniformly."
The law provides no clear guidance regarding this question. A uniform rollback in a district having varying millage rates might entail simply deducting an equal number of mills from the areas of the district having different rates. On the other hand, because doing so would disproportionately benefit the section of the district having the lower millage, it is possible that an across-the-board reduction in millage throughout the district would not qualify as "uniform." In the latter event, the Assessment Coordination Department, in consultation with this office, see A.C.A §
I also note, first, that a rollback could never result in a tax rate below the 25-mill uniform rate of tax Amendment 74 mandates for maintenance and operation of the schools and, secondly, that Amendment 59 expressly prohibits any rollback that would undermine the requirements of the bond indenture. Finally, I note that your question poses a hypothetical situation which may or may not occur and which has not been addressed by any judicial, legislative or regulatory body. Amendment 59 makes no mention of what happens in the case of school district restructuring. This is an area in which either legislative clarification or regulatory clarification by the Assessment Coordination Department is sorely needed. See Ark. Op. Att'y Gen. No.
Question 3: Using
This question may be moot. According to recent news accounts, the board of the Greenland School District has voted not to appeal its fiscal distress designation.9 However, I do not know whether the board has reversed its position on this score. My inquiries reveal that the superintendent of the Greenland School District received a certified letter, return receipt requested, as provided under A.C.A §
Assistant Attorney General Jack Druff prepared the foregoing opinion, which I hereby approve.
Sincerely,
MIKE BEEBE Attorney General
MB:JD/cyh
(1) "Affected district" means a school district that loses territory or students as a result of annexation or consolidation;
* * *
(4) "Receiving district" means a school district or districts that receive territory or students, or both, from an affected district as a result of annexation[.]
These definitions are misleading within the context of title 6, chapter 13, subchapter 14 of the Code because that subchapter envisions not merely an indeterminate loss of students or territory by an affected district as a result of annexation, which the definition appears to envision, but rather the complete merger of the affected district into the receiving district.
Definitions:
• Subscript "s" = Each Area Subject to a Particular Millage Rate From 1 to
N
• = Sum of
• X = Base Year Millage (i.e., the millage in the year before the reappraisal takes effect)
• X1 = Zero-Growth Millage (i.e., the millage that if applied post-reappraisal would yield the same revenue as realized from real property taxed in the base year, excluding from the calculation newly discovered property, new construction and property owned by public utilities and regulated carriers)
• X2 = Readjusted Millage or Final Millage
• BYR = Revenues Collected on Taxable Real Property in the Base Year
• PRA = Post-Reappraisal Assessments Minus Tangible Personal Property, Newly Discovered Real Property, New Construction and Property Owned by Public Utilities and Regulated Carriers
• APRA = All Post-Reappraisal Assessments Minus Tangible Personal Property and Property Owned by Public Utilities or Regulated Carriers
• ND = Assessments on Newly Discovered Property, New Construction and Improvements
• NDR = Tax Revenue Realized from ND
Solve for X2
IF Xs (APRAs) 1.10(BYRs) THEN X2s = Xs ELSE
X1s = BYRs PRAs
NDRs = X1s (NDs)
IF NDRs .10 (BYRs) THEN X2s = X1s ELSE
X2s = 1.10 (BYRs)
APRAs
In accordance with my statutory obligations, this office will provide a detailed explanation of these equations to officials of the Assessment Coordination Department. For purposes of the present discussion, I will merely note that under the express terms of Amendment 59, the figures used in these computations must reflect only variations in "local tax revenues." (Emphasis added.) Amendment 59 is explicit in declaring that the rollback shall apply only to "the rate of city or town, county, school district, and community college district taxes levied. . . ." In my opinion, this directive precludes including within tax revenues for purposes of this computation all revenues realized from the 25-mill uniform rate of tax mandated by Amendment 74. As I noted in Ark. Ops. Att'y Gen. Nos.