The Arkansas Supreme Court delivered its long awaited and potentially groundbreaking opinion, Thursday morning, for two separate appeals in the Mississippi County Courthouse lawsuits between the City of Osceola and the county.
The Court affirmed the decision by retired Circuit Judge David N. Laser to stop the special elections that were set to allow Mississippi County voters to decide whether they desire the county to extend the current "hospital tax" and issue bonds for the purpose of building a $22.5 million new courthouse in Blytheville...at least not in the way that the latest ordinances and resolution proposed.
The ramifications of these opinions have to potential to be quite significant, not only in Mississippi County but all across the state of Arkansas. It is certainly precedent setting for "dual county seat counties" in Arkansas, especially since nine of the 10 counties that have multiple judicial districts within their borders were created using essentially the same language as Mississippi County.
The ramifications potentially call into question where all county wide sales tax revenue can be spent. Other examples of countywide tax revenue go toward the hospitals, economic development, roads, the jail, and etcetera. Additionally, it has, at least in some areas, reduced the "tax authority" downward to the judicial district as opposed to remaining at the county level. The problem is, there is not a current mechanism in place to separate all sales tax revenue streams by judicial district (as was testified to by a witness from the Arkansas Department of Finance and Administration during testimony in circuit court). Therefore, large questions at both the county and state level remain regarding how tax revenues will be tracked and allocated in the future.
Currently, there is even an effort in Little Rock, in its very beginning stages, to bring a legislative solution to the confusion.
Associate Justice Robin F. Wynne, of Fordyce, authored the Court's opinion and Associate Justice Josephine Linker Hart, of Batesville, was the sole dissenting vote in the case. In the second appeal between the same two parties, Chief Justice John Dan Kemp wrote the opinion. The Court ruled it was "moot" due to the fact that the first special election date that was scheduled had already passed and also because of the ruling in the other opinion that will be discussed below.
Bart Calhoun, lead attorney for the City of Osceola and partner in the Little Rock law form of McDaniel, Richardson & Calhoun told the CN, "The City of Osceola and Plaintiffs were excited today to hear the Arkansas Supreme Court ruled in their favor. The Court ruled that Judge Laser did not abuse his discretion in finding that Act 81, which separated the County into two judicial districts, prevented the County from imposing a sales and use tax on the entire County to fund the construction of the proposed new courthouse in Blytheville. As the Plaintiffs emphasized in their appellate briefs and at the trial court, the entire County should not have to pay for a courthouse, that by Act 81, can only really be used by the citizens of the Chickasawba Judicial District. Plaintiffs hope that today's ruling will bring finality to this matter."
Nate Steel, lead attorney for the county from the Little Rock law firm Steel, Wright, Gray and Hutchinson said, "I'm disappointed by the majority opinion of the court and concerned about its far-reaching implications. We will have to sit down with county officials and others to determine how to comply with the mandate, but it appears that the county as a whole will be harmed by the ruling. All existing sales and use taxes are now in question, and appropriating those revenues based on judicial district could have a devastating impact on the county's operations including the hospital system, economic development and others."
Judge Randy Carney said, "I am a little disappointed in the ruling today. I was hoping the citizens could vote on the issue, but we certainly respect the Supreme Court's decisions. I guess it will have to be fixed legislatively at some point...The Supreme Court put a lot of emphasis on Section 20 of Act 81 of 1901 and....I've been pretty neutral on this. All I ever wanted was for the people to get to vote on it. I say that because I have heard people in Blytheville that do not want the new courthouse to be built and I have heard people in Osceola that do...I was just hoping that the people could get to vote on it."
Justice Michael White said: "At this time, I do not believe that Mississippi County has any intentions of any further legal actions. This Supreme Court ruling opens a whole new set of circumstances that can only be addressed by the State Legislature, if it chooses. It affects not only Mississippi County, but all 10 "Dual Judicial District" counties in the State. It is my personal hope that Mississippi County can come together as one common group of citizens, working side by side, to make Mississippi County a better place to live, to worship, and to work, and to raise a family."
Justice Ken Kennemore said: "The people down here didn't want it and I'm glad that the court ruled the way they did."
Osceola Mayor Dickie Kennemore added, "We're very pleased and not surprised....I wish we could all work together....we in the south [portion of the county] were all left out of all the planning at the beginning...we need to just plan for the future...I'd like to work together. We're not competing with each other, we are competing with the world...I'd like us to get together as a family and work together."
Justice Wynne, in his opinion, wrote that the County argued that the circuit court had erred by stopping the special election on the grounds that Act 81 of 1901 prohibits a countywide sales-and-use tax for the purpose of financing a new courthouse in Blytheville, to benefit the Chickasawba District alone. He said the county argued that Act 81 was "ambiguous and should be read in harmony with Arkansas Code Annotated sections 26-74-201 et seq." He said the county also argued that Act 81 has been superseded by section 26-74-201, that the "plain language" of the "Amended Sales and Use Tax" does not violate Act 81, and that Resolution No. R-2016-6, which set up the special election, is not prohibited by Act 81. He also said the county argued that Act 81 "has nothing to do with" the county's ability to issue bonds.
On December 13, 2016, the Mississippi County Quorum Court enacted the two ordinances and one resolution. Ordinance No. O-2016-16 levied a 0.5-percent countywide sales-and-use tax to be used for the county hospital system and to redesignate the use of the net collections of the Tax as follows: (i) 50-percent for County Hospital Purposes and (ii) 50-percent for one or more of the following: (A) to acquire construct, repair, improve, renovate, equip, furnish, operate and maintain new or existing County courthouses and court facilities; (B) for county hospital purposes; (C) to construct, reconstruct, restore, improve, maintain, alter and repair County roads, bridges, culverts and related structures[;] and (D) to pay and secure the repayment of bonds approved by the voters and issued by the County from time to time to finance capital improvements[.]"
One ordinance would have extended the tax from March 31, 2020 until March 31, 2047. The resolution called for a special election to be held on March 14, 2017 and Ordinance No. O-2016-17 called for voters to also vote on whether or not to allow the issuing of bonds to finance all or a portion of the costs of a new $22.5 million courthouse in Blytheville, to be secured by a pledge as collateral of 50-percent of the net collections from the tax.
The City of Osceola's argument was that the ordinances constituted an illegal exaction of Osceola District taxpayers, that the county had violated the Arkansas Code and Arkansas Freedom of Information Act, that Blytheville is not a county seat of Mississippi County and thus the construction of a courthouse in Blytheville to be funded by taxation of residents of the Osceola District was unlawful. They also argued that even if the court allowed the tax, the proposed bonds were not sufficient to secure the funds to be collected.
The Court defined "illegal exaction" in its opinion as "a tax that is either not authorized by law or is contrary to law." The opinion also said that Judge Laser had "held that the amended sales-and-use-tax ordinance, the resolution, and the bond ordinance were invalidated by Act 81 and enjoined the special election" because Laser "found that the tax at issue was contrary to law". The Court recognized the trial court's right to grant the injunction, therefore the review by the Supreme Court hinged upon a review of "abuse of [that] discretion."
The county insisted that they had both statutory and constitutional authority to levy the tax, change what the revenues are used for, change the end date of existing taxes, to issue bonds for capital improvements of a public nature and to refer ordinances to voters.
With Laser's basis for stopping the election being based upon Act 81 of 1901, the Court pointed out that the act established two judicial district in the county, delineated the boundary of the Chickasawba and Osceola Districts and "provides that 'the circuit courts and the chancery courts hereby established in the respective districts of Mississippi County shall be as distinct from each other, and have the same relation to each other, as if they were circuit and chancery courts of different counties."
Wynne continued by writing that Act 81 also regulated the operation of the two judicial districts. "For example, judgments and decrees rendered in the circuit courts of the respective districts shall be liens upon real estate only in the district where rendered...and the citizens of Mississippi County shall only be liable to serve on juries in the district in which they reside."
Particularly pivotal was the portion found in section 20 that states, "That all revenue accruing to the county from the sale of forfeited state and county lands, liquor and ferry license, and from all other sources whatever, shall be used for the exclusive benefit of the district in which such revenue shall arise."
Addressing the claim by the county that the statute is ambiguous, the court defined that "a statute is ambiguous where it is open to two or more constructions, or where it is of such obscure or doubtful meaning that reasonable minds might disagree or be uncertain as to its meaning."
The opinion stated, "In the present case, the plain language of section 20 is clear and unambiguous: all revenue accruing to the county from the enumerated sources and from all other sources whatever is to be used for the exclusive benefit of the judicial district from which it arises."
The county argued that Act 81 had been superseded by Arkansas Code Annotated section 26-74-201 et seq., "which authorizes county wide sales-and-use taxes to secure the payment of bonds, for any purpose for which the general fund of a county may be used, or for any combination thereof." The county also pointed out that the first sales-and-use tax in Arkansas wasn't even enacted until 1935, many years after the passage of Act 81 of 1901. Therefore the new statue superseded the former and Act 81 did not forbid something that wasn't even in existence at the time.
The Court ruled "there is no reference to Act 81 in Arkansas Code Annotated sections 26-74-201 et seq., "Sales and Use Tax for Capital Improvements" and that the "stated legislative intent" of the new law is to "supplement all constitutional provisions and other acts adopted" for making capital improvements and the issuance of bonds. The court also said there is "no conflict between the power of a county to levy a countywide sales-and-use tax and the requirement that revenue arising in one judicial district be used for the benefit of that district." Therefore, the Court ruled that Act 81 had not been superseded by later law.
The county also argued that neither the tax, nor the resolution calling for the special election on the tax violated Act 81 since it does not specially reference a courthouse in Blytheville or in the Chickasawba District, but rather states that its use, in part, would be "to acquire, construct, repair, improve, renovate, equip, furnish, operate and maintain new or existing courthouses and court facilities."
The Court disagreed saying that the other ordinance (the one for the issuance of bonds for the specific purpose of a new courthouse in Blytheville), was passed at the same time and hence they should be read as "complementary legislation" and as a result -- "Taken together, these ordinances would have authorized the use of tax revenue from the Osceola District for the exclusive benefit of the Chickasawba District in violation of Act 81. This would constitute an illegal exaction; therefore, the circuit court did not abuse its discretion in enjoining the special election."
The county also argued that the quorum court had the authority under Amendment 62 to the Arkansas Constitution and various statues to enact the ordinances and call for the special election. The county argued, "Act 81 of 1901 has nothing to do with Mississippi County's ability to issue bonds...fund capital improvements of a public nature. Rather, Act 81 of 1901 relates to the use of revenues in a judicial district. Further, any potential prohibitions imposed by Act 81 of 1901 have been expressly superseded... [by statute] in 1985."
The court agreed that Act 81 has nothing to do with the issuance of bonds, but that the circuit court did not abuse its discretion by stopping the special election "for issuing bonds when the collateral funds would be derived from a tax that constituted an illegal exaction." The decision, however, was not unanimous.
Associate Justice Josephine Linker Hart wrote, in her dissenting opinion, "I respectfully dissent from the majority's conclusion that Act 81 of 1901" which limits the revenues for a new courthouse to only those residents of the judicial district in which the court would be built.
She admitted that the majority of justices on the bench concluded, "that the 'plain language' of section 20 requires that the sales-and-use tax collected by Mississippi County be used only in the judicial district in which it was collected." However, she began to point to case law that she believes proved otherwise. She pointed to the case of Hutchinson v. Ozark Land Co of 1893.
She wrote that Clay County was created in 1881, using the same language found in section 20 of Act 81. She went on to say, regarding a case from Clay County, "In Hutchinson, this court stated, 'The expense of maintaining two judicial districts in a county is necessarily a county expense, and the revenue to pay it can be raised only by a county tax.'"
She also pointed to Williams v. Ark. Cty. Courthouse Improvement Dist. of 1922 and said, "'This court has held that a county may be divided into judicial districts, but that the expense of maintaining two judicial districts in a county is necessarily a county expense, and that the revenue to pay it can be raised only by a county tax.' [And that the Court had further stated] 'All the affairs of the two districts are concerns of the county, and the expenses incurred in both, whether in the holding of courts or otherwise, constitute demands against the county; and a creditor of the county is not bound to look for payment alone to the district in which his claim arises.'"
She then argued that "noting that the county is a taxing authority, the Court argued " [I]t is sufficient to say that these provisions cannot be treated as having created separate taxing districts without holding that they impair the unity and power which the constitution secures to Clay County as a political subdivision of the state... [In Woolard v. Thomas of 1964 in Clay County] 'we stated, The levying of a tax for the construction of a courthouse is a tax levy for county purposes. In Williams, et al, v. Arkansas County Courthouse Improvement District... we said, 'If the expense of holding the courts and otherwise maintaining two judicial districts in a county is a county expense, it would seem that it necessarily follows that the erection of a courthouse for the use of such district would also be a county expense.' It must be said that the construction or reconstruction of a district courthouse or jail is a matter of countywide interest and responsibility and any tax levied for such a purpose is a tax levy for a county purpose."
"Thus, it is clear that, as a taxing entity, Mississippi County can levy a tax for the building of a courthouse in either judicial district because it is a county purpose. Again, I note that the Clay County act establishing two judicial districts contained the same language as section 20. In precluding Mississippi County from collecting the tax, the majority usurps its authority to impose a countywide tax to further a countywide purpose and instead accords that authority to a non-taxing authority, a judicial district,"she argued.
She also accused the majority of misconstruing Section 20 by not applying "a common rule of statutory construction that this court has applied many times is that of ejusdem generis, which provides that when general words follow specific words in a statutory enumeration, the general words are construed to embrace only objects similar in nature to those objects enumerated by the preceding specific words."
Therefore, she insists that when Section 20 of Act 81 states, "revenue accruing to the county from the sale of forfeited state and county lands, liquor and ferry license," they are in essence "fees that might be collected by the county clerk at a courthouse in a judicial district" and that "in applying the rule of ejusdem generis, it is fair to argue that the general words that follow the specific words, "from all other sources whatever," might also include fees collected at each courthouse for marriage licenses, filing civil cases, and recording instruments of record. Yet, the majority concludes that a county sales-and-use tax also falls within these general words. I submit that this inclusion stretches far beyond what any reasonable construction of those words might entail.
She ended her dissent by adding, "This case serves as a blow to the Mississippi County Quorum Court and to the residents of that county in their efforts to govern themselves."
thenry@blythevillecourier.com