Dunn, Auditor v. City of Indianapolis

This action was filed by the city of Indianapolis, as plaintiff below, to enjoin the auditor and treasurer of Marion county, in making up the tax duplicates and collecting taxes upon property within the city, from reducing by two cents the ordinance tax of the city as it had been ordered reduced by the state board of tax commissioners upon an appeal to said commissioners pursuant to the provisions of section 200 of chapter 95 of the Acts of 1927, being section 64-1331, Burns 1933. By petition, the state board of tax commissioners, Zoercher, Showalter, and Wolfard, were made parties defendant to said action.

The complaint is in two paragraphs, the allegations of which recite the necessary statutory steps required to be taken by the officials of the city of Indianapolis in the preparation and determination of the tax levy for the year 1932. It is alleged that ten or more taxpayers of said city filed with the auditor of said county their objection to the city tax levy upon the ground that it provided for the collection of more taxes than the government thereof economically administered would warrant, and asked that the question be certified to the state board of tax commissioners as provided by said act; that pursuant thereto the same was so certified and passed upon by said board of tax commissioners, which board reduced the tax levy one cent on one hundred dollars in each of two funds, viz.: the general fund and the park department fund, which reduction had the effect to and did reduce the total tax levy of the city from $1.08 to $1.06 on each $100 of the taxable property of said city.

It is alleged that the order of the state board of tax commissioners in making said reduction is illegal and void and that section 200 of said act (Acts 1927, pp. 248-251) is unconstitutional, both as to giving the state board of tax commissioners authority (1) over municipal activities in regard to those matters affecting the inhabitants of that community, and (2) authorizing such state board to exercise both legislative and judicial power in matters of taxation. It is specifically alleged that the action of the state board of tax commissioners is unconstitutional and void as being in conflict with the following provisions of the Constitution of the State of Indiana: section 1 of article I of the bill of rights; and section 1 of article III, section 1 of article IV, section 1 of article VII, and section 1 of article X of the Constitution.

Issues were closed and the cause was tried by the court and judgment rendered enjoining the appellees from extending upon the tax duplicates the reduced tax levies, as fixed and determined by the state board of tax commissioners.

For the purpose of this decision it will be assumed that all facts are alleged in the complaint necessary to present the question; likewise facts were introduced in evidence relative to all the taxable property of the city and the amount necessary to be raised for the use of the various departments and funds; that the budget provided for by statute was in due form and complete; that all jurisdictional notices were given and a compliance shown with all laws pertaining to the assessment and levy of taxes upon the property of the taxing unit.

Section 200 of chapter 95 of the Acts of 1927, the constitutionality of which is questioned by the complaint herein, provides that the several tax levies and rates shall be established by the proper legal officers of any municipal corporation after the formulation and publication by them of a budget on forms prescribed by the state board of accounts; that notice be given to the taxpayers; that a public hearing will be had at which any taxpayer may appear and be heard upon the question of any levy or expenditure or other matter pertaining to the several tax levies and rates; that when the tax levies and rates are finally established by the proper legal officers of any municipal corporation, the same shall be reported to the county auditor and by him to the state board of tax commissioners as provided in sections 197 and 199 of said act and that the same shall stand as the tax levies and rates of such municipal corporation for the next year succeeding, subject to the right of ten or more taxpayers of "any such municipal corporation," other than those who pay poll tax only, to file a petition with the county auditor in which "such municipal corporation" is located, setting forth their objections to the levy made or to any item or to any rate thereof. Upon the filing of such petition the county auditor is required to certify a copy thereof with such other information as will be necessary to present the questions involved to the state board of tax commissioners, "who shall have the power to affirm or decrease said total tax levy or any item thereof of any such municipal corporation after a hearing." It is provided that the hearing must be had in the county in which "such municipal corporation" is located, upon notices thereof to taxpayers; that the finding of the state board of tax commissioners shall be certified to the auditor of the county, who shall thereupon certify such action to the taxing unit interested, and that the action of the state board of tax commissioners shall be final and conclusive. There is a provision in said section 200 that if due to an emergency it should be necessary to spend more money than is provided for in the published budget or in the budget as modified by the state board of tax commissioners, such municipal officers are empowered to adopt a resolution and to give notice of intention to make additional appropriations and proceed in a manner similar to that prescribed in the first instant; that ten or more taxpayers may petition to have the question of such extra or additional appropriation or tax levy certified to the state board of tax commissioners.

The general tax law of 1919, Acts 1919, ch. 59, p. 198, section 200 of which was amended by the Acts of 1927, chapter 25, defines the term "municipal corporation" in section 202 thereof as follows:

"The phrase ``municipal corporation' as used in the five preceding sections, shall be deemed to include a county, township, city, incorporated town, school corporations, or any person, persons or organized body authorized by law to establish tax levies for any purpose."

Both appellants and the appellee agree that the power of taxation is inherent in the state, and is a legislative power limited only by the provisions of the Constitution. Section 1, article X, Constitution; State ex rel. Goodman v. Halter (1898), 149 Ind. 292, p. 297, 47 N.E. 665, 49 N.E. 7; Beard v.Peoples Savings Bank (1913), 53 Ind. App. 185, 101 N.E. 325.

The appellee contends that when a city government is created by an act of the General Assembly, in which a common council is provided for and certain duties delegated to it, in their nature legislative, among which is to make and designate the tax levy of such municipality, such act of the common council is final, and arises to the dignity of a legislative act by the General Assembly; that, therefore, its power and authority cannot be curtailed or modified as provided in section 200, supra, wherein the General Assembly has delegated to the state board of tax commissioners supervisory authority over the acts of the common council in that respect; nor does such board of tax commissioners possess the power and right under the Constitution to reduce a tax levy established by the common council.

The first two objections made by appellee: That the act in question violates (1) section 1, article I, and (2) section 1, article III, of the Constitution, are answered inZoercher v. Agler (1930), 202 Ind. 214, 172 N.E. 186, 172 N.E. 907, contrary to appellee's contention. That case also holds that the statute in question does not violate section 19, article IV, and section 6, article VI, of the Constitution, and that the statute is not violative of the principle of local self-government reserved to the inhabitants of the municipality.

Appellee further contends that said statute is in violation of section 1, article IV, of the Constitution, which provides that the legislative authority of the state shall be vested in 1-3. the General Assembly, and that it violates section 1, article VII, of the Constitution, which pertains to the judicial powers of the state. These two sections may be considered together.

Under our form of government the three divisions: judicial, legislative, and administrative, are separate and distinct, each possessed of certain governmental powers. Numerous decisions of the Supreme Court hold that neither judicial nor legislative functions can be delegated to administrative or other departments of government. Equally as many Supreme Court decisions hold that boards such as the state board of tax commissioners possess only administrative and ministerial powers delegated by acts of the General Assembly.

In Zoercher v. Agler, supra, it was held that section 200 of the tax law here in question, providing for an appeal by ten or more taxpayers, did not confer upon the state board of tax commissioners either judicial or legislative power, but it was held that the power and authority delegated constituted a delegation of ministerial power only, the power to approve or reduce tax rates within the respective municipalities and subdivisions of the state, and that the act of the state board of tax commissioners in thus reviewing the proceedings of a local municipal corporation "is not the exercise of a legislative power." Such has been the holding of this court concerning powers and duties delegated by the General Assembly to the numerous boards and commissions created by law.

In School City of Marion v. Forrest (1907), 168 Ind. 94, 78 N.E. 187, a controversy arose between the city and the library board as to which possessed the power to levy a certain tax for library purposes. It was there held that the power of taxation is possessed solely by the legislature. The court stated that it recognized the validity of the proposition that the power to tax follows by implication, within the grant of legislative authority, and that in the main there can be no delegation of that authority except to the extent that our form of government, in which local powers have been decentralized, makes it necessary that taxes should be levied under legislative authority, by the various municipal bodies in the state, for the purpose of carrying out the objects of the legislation upon the question of taxation. This case holds that while the power to tax is vested in the legislature yet there is left to the legislature much discretion in the selection of the means for the efficient performance of that duty; that the board of school trustees and the library board as well as the city council itself possess the power under the statute to fix the levy necessary to produce funds for their maintenance.

In strictness such power does not arise to the dignity of a legislative enactment by the General Assembly. The power to make a law and the authority to execute it are two separate and distinct matters. The first is in the General Assembly; the latter is in the board or body charged with its execution and is ministerial. Arnett v. State ex rel. (1907), 168 Ind. 180, 184, 80 N.E. 153, quotes from an Ohio case as follows:

"``The true distinction, therefore, is between the delegation of power to make the law, which necessarily involves a discretion as to what it shall be, and conferring authority or discretion as to its execution, to be exercised under and in pursuance of the law. The first cannot be done; to the latter no valid objection can be made.'"

This case further quotes from a Pennsylvania case as follows (p. 184):

"The legislature cannot delegate its power to make a law; but it can make a law to delegate a power to determine some fact or state of things upon which the law makes, or intends to make, its own action depend. To deny this would be to stop the wheels of government. There are many things upon which wise and useful legislation must depend, which cannot be known to the lawmaking power, and must, therefore, be a subject of inquiry and determination outside the halls of legislation."

The Supreme Court of Indiana has held many times that where the legislature has authority over the subject matter, it has the sole charge of the means that are necessary and proper to complete the object it seeks to obtain; that it may delegate discretionary authority under the Constitution to boards, commissions, and other bodies, as may be illustrated by reference to the authority conferred upon the railway commission to make rules and regulations, which was held not a delegation of legislative authority in Vandalia R. Co. v. RailroadCommission of Indiana (1914), 182 Ind. 382, 101 N.E. 85. The public service commission of Indiana, a creature of legislation, possesses administrative and ministerial authority and has broad powers over subjects delegated to it, but it possesses no legislative authority. In re Northwestern Indiana Tel. Co. (1930), 201 Ind. 667, 171 N.E. 65. Section 36-105, Burns 1933, § 8644, Baldwin's 1934, confers upon the state highway commission power to make rules and regulations and perform many other acts which are administrative and ministerial, Hammond,etc., R. Co. v. State Highway Commission (1926), 198 Ind. 456,152 N.E. 806, 154 N.E. 20. The statute which confers power upon the state board of health to adopt rules and regulations does not violate section 1, article IV, of the Constitution and is not a delegation of legislative power. Blue v. Beach (1900),155 Ind. 121, 56 N.E. 89; State ex rel. Horne v. Beil (1901),157 Ind. 25, 60 N.E. 672, and many other authorities could be added and the examples multiplied to illustrate the principle under consideration.

The question of legislation and of the delegation of legislative authority and of regulation and administration has been discussed so many times and has become so well settled that it cannot be regarded as an open question in this state that the power of legislation remains in the General Assembly and cannot be delegated, but the power and authority to administer the legislative enactments may be and necessarily are delegated to various boards, bodies and commissions.

Under our legislative system, the General Assembly is in regular session for a period of only sixty-one days in a term of two years. Upon the question of legislation providing for taxation, as well as many other subjects, it is apparent that legislation cannot be enacted, in detail, so as to apply to all conditions in the various subdivisions and municipalities of the state, and, therefore some discretion must be lodged in some official board or commission to exercise judgment and discretion as to the application of the tax law pursuant to the standard designated by the General Assembly. It sometimes occurs that the discretionary authority so delegated partakes of and is closely allied to both the judicial and legislative departments of government, but so long as such official, board, or commission is not permitted to render final judgments or to make new laws, it has always been held that such acts are administrative and ministerial, and are necessary to the orderly administration of the legislative enactments. The state board of tax commissioners is a creature of the statute and has performed the duties and exercised the functions conferred upon it by statute and has been acquiesced in by the people of the state for such a long period that this court would not be justified in disturbing its functions and acts except where there is the clearest constitutional transgression.

The city of Indianapolis is in error when it takes the position that the act of its city council in making up the tax budget and passing the tax ordinance constitutes a legislative act 4, 5. in the sense that a law enacted by the General Assembly is a legislative act. Such is not the case. There is but one constitutional legislative body and that is the General Assembly. Municipal corporations are creatures of the state. They possess such powers only as are granted by the legislature in express words and those necessarily implied and incidental to those expressly granted, and those indispensable to the declared objects and purposes of the corporation, and to its continued achievements. Central Union Telephone Co. v. IndianapolisTelephone Co. (1920), 189 Ind. 210, 126 N.E. 628; Wallace v.Feehan (1934), 206 Ind. 522, 190 N.E. 438; §§ 10304 and 10306, Burns 1926, §§ 48-1504 and 48-1506, Burns 1933.

The government of the city of Indianapolis, a creature of the legislature, is part of the taxation machinery, acting in an administrative capacity, subject to the 1. restrictions and limitations imposed by the legislature. The local government of the city does not act either in a judicial or a legislative capacity in applying the tax laws to the needs and necessities of that unit. It is one of the municipalities defined by the legislature in section 202,supra. The city's authority, so vested in it by the legislature is restricted and limited by a provision that ten or more taxpayers may have a review of the city's acts by the state board of tax commissioners, which board may approve or reduce the amount to be provided and expended in any given fund. No power of legislation, in approving or lowering the tax rates of the municipality, is conferred upon the board. The only power granted is to approve or reduce the amount fixed by the officers of the municipality, acting administratively. Neither the city officials nor the tax board can levy a tax not provided for by the legislature. No power is delegated to either to legislate upon that subject; nor do they pronounce judgment. They administer the tax laws as required by the legislature, and pursuant to the method, standard, and rules prescribed by the statute, among which are maximum amounts of the several levies to be made by the local municipalities, and the provision that the state board of tax commissioners only can approve or reduce the levies fixed by the local tax officials.

Lastly the appellee asserts that the statute is violative of section 1 of article X of the Constitution. There is no merit in this contention. So much has been written concerning 6, 7. this section of the Constitution that elaboration is unnecessary. It is understood everywhere that the rate of taxation and assessment in each taxing unit shall be uniform in that unit and so long as that uniformity is maintained, the Constitution is not violated. The Constitution does not require that the same rate shall be maintained in the city of Indianapolis as is maintained in the city of Evansville or Fort Wayne or other places. The requirement of section 200, supra, providing for a review by the state board of tax commissioners does assist to some extent in maintaining uniformity throughout the state. That board is in a position to and has before it facts, figures, and assessments of each municipality in the State of Indiana and thereby becomes to a certain degree expert in reviewing and reducing, but not raising, the levies of the several municipalities of the state.

The principles and practices, provided by law, under constitutional sanction, granting appeals to and a hearing and review by the state board of tax commissioners have been recognized and followed by this court in matters so closely analogous to the question here involved that it cannot be doubted that the General Assembly, in enacting tax laws, possesses ample power and authority to reserve a check upon all municipalities, levying taxes and assessments, and to lodge a supervisory control in an administrative board. The state board of tax commissioners is a creature of the people through legislative enactment, and the administrative agent representing the whole people in an effort to provide uniform and equal rates of taxation and assessment. Its jurisdiction and powers conferred by statute are limited. Being the agent of the people, created by the General Assembly, it affords a tribunal to which aggrieved taxpayers may appeal for a review of tax rates and assessments made, or indebtedness to be incurred, by the local municipality and subdivisions of the state. These principles are recognized in many cases among which are: State Board of Tax Commissioners v. McDaniel (1928), 199 Ind. 708, 160 N.E. 347; Zoercher v.Agler, supra; State Board, etc., v. State ex rel. (1926),198 Ind. 343, 153 N.E. 404, 153 N.E. 576; Van Hess v. Board, etc. (1921), 190 Ind. 347, 129 N.E. 305; State ex rel. Freeland v.Evans (1926), 197 Ind. 656, 150 N.E. 788; State ex rel. v.Leonard (1926), 198 Ind. 356, 153 N.E. 777; O'Connor v.Board, etc. (1924), 194 Ind. 386, 142 N.E. 858; Wallace v.Feehan, supra.

From the foregoing the court concludes that the tax law under consideration in this appeal is valid, and that the judgment of the lower court is contrary to law and is not sustained by sufficient evidence. Therefore, the judgment is reversed with instructions to proceed in accordance with this opinion.

Roll, J., concurs with opinion. Fansler, J., dissents with opinion.