Title: Hertelendy v. Board of Edu

State: maryland

Issuer: Maryland Supreme Court

Document:

Emory Hertelendy, et al. v. 
Board of Education of Talbot County, et al.
No. 16, September Term, 1995
[Concerns The Validity Of The Property Tax Limitation Provision In
The Talbot County Charter]
IN THE COURT OF APPEALS OF MARYLAND
No. 16
September Term, 1995
________________________________________
EMORY HERTELENDY et al.
v.
BOARD OF EDUCATION
OF TALBOT COUNTY et al.
_______________________________________
    *Murphy, C.J.,
Eldridge
Rodowsky
Chasanow
Karwacki
Bell
Raker, JJ.
________________________________________
PER CURIAM
________________________________________
        Filed:  March 4, 1997
*Murphy, C.J., now retired, participated
in the hearing and conference of this
case while an active member of this
Court; after being recalled pursuant to
the Constitution, Article IV, Section
3A, he also participated in the decision
and the adoption of this opinion.
The controversy in this case concerned the validity of the
property tax limitation provision in Article VI, § 614, of the
Talbot County Charter.  The Circuit Court for Talbot County on
March 22, 1995, filed a declaratory judgment, declaring that
Article VI, § 614, "abrogate[d] the power of the Talbot County
Council to set the property tax rate in that jurisdiction . . . and
is therefore unconstitutional and invalid."  On May 9, 1995, after
briefing and oral argument, this Court issued an order affirming
the judgment of the Circuit Court for Talbot County.  This opinion
sets forth the reasons for that affirmance. 
At the general election in November 1978, Talbot County
residents voted to amend Article VI, § 614, of the Talbot County
Charter, entitled "Tax Levy and Balanced Budget."  Prior to this
amendment, Article VI, § 614, read as follows: 
"When the County budget is finally estab-
lished by the Annual Budget and Appropriation
Ordinance, the Council thereupon shall levy
and cause to be raised the amount of taxes
required by the current expense budget and the
current portion of the capital budget in the
manner provided by law so that the budget is
balanced as to proposed income and expendi-
tures."
- 2 -
       One of the changes to the initial paragraph of § 614 is
1
that "County" now reads "county."  The other change is the
inverted word order of "thereupon shall," which now reads "shall
thereupon."
       Article VI, § 614, of the Talbot County Charter refers to
2
the constant yield procedures in Maryland Code (1957, 1980 Repl.
Vol.), Art. 81, § 232C.  This provision was subsequently
recodified as Code (1986, 1994 Repl. Vol., 1996 Cum. Supp.), §§
2-205 and 6-308 of the Tax-Property Article. 
The amended version of Article VI, § 614, went into effect
in December 1978.  The amended charter section included the above
paragraph with two minor changes.   In addition, the following two
1
paragraphs were added to § 614 by the 1978 amendment:
"Notwithstanding any other provisions of
this Article, the Council may not establish
property tax rates which would provide more
property tax revenues than were raised during
the 1978-79 tax year, unless such additional
revenues are the result of assessments on
newly constructed property or other property
not previously assessed.  The constant yield
tax rate shall be as currently specified by
Article 81 of the Annotated Code of Maryland.2
Should the foregoing method of calculating the
constant yield tax rate expire, the rate will
be calculated at the county level using the
same procedures now provided by said Article
81.  However, should Article 81 of the An-
notated Code of Maryland be amended, reenacted
or otherwise changed to provide a different
method for calculation of the constant yield
tax rate, this new method shall be followed. 
"The provisions of Article 81 of the An-
notated Code of Maryland which permit local
taxing authorities to increase property tax
rates above the constant yield tax rate shall
not be employed by the Talbot County Council."
Thus, § 614, as amended, effectively limited the amount of
- 3 -
       These organizations and individuals were the Talbot
3
County Board of Education, the Talbot County Council of PTAs, the
Talbot County Chamber of Commerce, Inc., the League of Women
Voters of Talbot County, Inc., the Talbot County Branch of the
National Association for the Advancement of Colored People, Peggy
M. Rider, Harold Baines, Marla Baines, Lorraine B. Claggett,
Royce L. Sampson, Leonard Lash, William F. Best, Richard W.
(continued...)
property tax that could be collected to the amount that had been
collected in the fiscal year 1978-1979, not including newly
constructed property or other property not previously assessed.
Therefore, any increase in property tax revenue above the amount
collected in the 1978-1979 tax year must be derived from newly
constructed property or other property not previously assessed.  
According to a stipulation by the parties to this case, the
practical effect of this property tax limitation was that, "[a]s
the assessed value of property in Talbot County has increased since
1978, the property tax rate necessarily has decreased, in order to
comply with the requirement of [Article VI, § 614 of the Talbot
County Charter]."  The parties further stipulated that, at $.65,
Talbot County has the lowest property tax rate in Maryland, the
next lowest property tax rate in Maryland being Worcester County's
at $1.68, and the highest being Baltimore City's at $5.85.
In an attempt to remedy the effects of the property tax
limitation, on January 31, 1995, more than sixteen years after the
amended § 614 went into effect, several organizations and individu-
als filed in the Circuit Court for Talbot County a complaint for
declaratory and injunctive relief against Talbot County.   The
3
- 4 -
     (...continued)
3
Barber, and Sharon L. Barber.
       The intervenors included Michael J. Feehley, James B.
4
Walker, Gail C. Walker, Harold M. Jump, Carter N. Jump, Jr.,
T. Coleman, Susan H. Dupont and Emory Hertelendy.
plaintiffs sought a declaration that Article VI, § 614, of the
Talbot County Charter was invalid and should be given no effect
because it "so restricts the constitutionally mandated discretion
of the [Talbot County] Council that it violates the Constitution
and Public General Laws of Maryland."  More specifically, the
plaintiffs asserted that § 614 prevented the governing body of
Talbot County from setting the property tax rate as required by law
and thus conflicted with Article XI-A, § 3, of the Maryland
Constitution, and Maryland Code (1986, 1994 Repl. Vol.), §§ 6-
302(a) and 6-308 of the Tax-Property Article.  
Several individual Talbot County residents moved to
intervene as additional defendants.   The Circuit Court for Talbot
4
County granted the motion to intervene, and the intervenors filed
an answer to the complaint.  Thereafter, both sides filed motions
for summary judgment along with a joint stipulation of facts.  
In a thorough and well-reasoned opinion filed on March 22,
1995, the Circuit Court for Talbot County (Sause, J.) concluded
that Article VI, § 614, of the Talbot County Charter, as amended in
1978, abrogated the authority of the Talbot County Council to set
the property tax rate in that jurisdiction, was "irreconcilably
inconsistent with the Public General Laws of Maryland and is
- 5 -
therefore unconstitutional and invalid."   The net effect of this
charter provision, wrote the circuit court, was that "[a]s of the
moment when the amendment was adopted, the rate became fixed at the
statutory level for the fullness of time, or at least until the
voters agree to relinquish all or part of it."  Because the circuit
court determined that the County Council lacked all discretion in
the matter of setting the property tax rates for Talbot County, the
circuit court granted the plaintiffs' motions for summary judgment
and issued a declaratory judgment that § 614 was invalid.  
The individual defendants appealed to the Court of Special
Appeals.  Before any proceedings in that court, however, the
defendants filed in this Court a petition for a writ of certiorari
which we granted.  Before this Court, the plaintiffs maintained
that, in light of the principles set forth in Board v. Smallwood,
327 Md. 220, 608 A.2d 1222 (1992), the property tax limitation
contained within § 614 of the Talbot County Charter so divested the
County Council of its statutory discretion to set the property tax
rate that it violated Code (1986, 1994 Repl. Vol.), § 6-302 of the
Tax-Property Article, as well as Article XI-A of the Maryland
Constitution.  The defendants argued that § 614 constituted valid
charter material because the electorate possesses coordinate
legislative power.  They further asserted that, because the County
Council could set the property tax at a rate lower than the
"reasonable" and "non-detailed" constant yield tax rate, § 614 left
- 6 -
some discretion with the County Council and was, therefore, valid
under the principles discussed in Board v. Smallwood, supra.  
As previously indicated, on May 9, 1995, this Court issued
an order affirming the circuit court's judgment which had declared
invalid the property tax limitation provision in Article VI, § 614,
of the Talbot County Charter.
In Board v. Smallwood, supra, 327 Md. 220, 608 A.2d 1222, we
considered the validity of proposed charter amendments that
attempted to limit property taxes in Anne Arundel and Baltimore
Counties.  The charter amendments in Smallwood proposed to limit
property taxes using both "percentage tax cap" and "roll back"
provisions.  The percentage tax cap provisions authorized the
county councils to increase property tax revenues for the next tax
year by no more than 2% in Baltimore County and by no more than
4.5% in Anne Arundel County.  The charter amendments also contained
roll back provisions, which attempted to limit the amount of
property tax revenues for the 1991-1992 tax year to no more than
the amount collected in the base tax year of 1989-1990 for
Baltimore County, and no more than the amount collected in the base
tax year of 1988-1989 for Anne Arundel County.
In Smallwood, the Court took the position that, under
Article XI-A of the Constitution, property tax limitations could be
proper charter material in home rule counties such as Anne Arundel
and Baltimore Counties.  We held, inter alia, that "a limitation on
- 7 -
the power of a legislative body to raise revenue is at the heart of
the form and structure of our government and thus is proper charter
material."  Board v. Smallwood, supra, 327 Md. at 238, 608 A.2d at
1231.
We also held in Smallwood that the proposed Anne Arundel
County and Baltimore County charter provisions did not conflict
with the requirement in § 6-302(a) of the Tax-Property Article that
the county governing bodies annually set the property tax rate
because the county councils in each county could still exercise
reasonable legislative discretion.  The Court thus stated (327 Md.
at 242-243, 608 A.2d at 1233):
"The proposed [percentage tax caps] would not
have had the [prohibited] effect of allowing
the 
electorate 
of 
the 
two 
counties 
to
[legislatively] set the tax rates.  As
required by § 6-302(a), the legislative body
in each county would continue to set the tax
rate on property.  There is no language in the
statute indicating that reasonable limits
cannot be placed on the legislative power to
set the tax rate."
The proposed tax limitations in Smallwood would also have
limited somewhat the power of the county councils to raise the tax
rate above the constant yield.  It was argued that this type of
limitation conflicted with § 6-308 of the Tax-Property Article
which requires that certain procedures be followed if "a taxing
authority intends to set a county . . . property tax rate that
exceeds the constant yield tax rate . . . ."  We rejected this
- 8 -
argument, explaining that there was no conflict between the
proposed charter amendments and § 6-308 because § 6-308 is a
"procedural provision limiting a county's authority, rather than an
affirmative grant of power."  Board v. Smallwood, supra, 327 Md. at
243, 608 A.2d at 1233.
In Smallwood this Court did, however, invalidate the "roll
back" provisions in the Baltimore County and Anne Arundel County
proposed charter amendments.  These roll back provisions attempted
to limit the amount of property tax revenues for the 1991-1992 tax
year to no more than the amount collected in the base tax year of
1989-1990 for Baltimore County, and no more than the amount
collected in the base tax year of 1988-1989 for Anne Arundel
County.  We noted that, unlike the percentage tax cap provisions,
which simply placed a percentage limit on the authority of the
county councils to increase property taxes, the roll back
provisions would have "transferred the county councils' § 6-302(a)
powers to the voters" and allowed the "voters of [the two counties]
to set the property tax rates for the tax year 1991-1992."
Smallwood, 327 Md. at 244, 608 A.2d at 1234.  
The teaching of Smallwood is that, although property tax
limitations may be valid charter material when they "would have
simply placed a limit on the taxing power of [a] county council,"
§ 6-302(a) of the Tax-Property Article prohibits charter provisions
that "would have transferred the county councils' § 6-302(a) powers
- 9 -
to the voters" and "would have allowed the voters . . . to set the
property tax rates for the tax year . . . ."  Smallwood, 327 Md. at
244, 608 A.2d at 1234.  In light of Smallwood, the circuit court
was clearly correct in declaring invalid the 1978 amendment to
Article VI, § 614, of the Talbot County Charter.  
Talbot County is a charter county subject to Article XI-A of
the Maryland Constitution.  The legislative body for Talbot County
is the Talbot County Council.  As such, the Talbot County Council
has the power to "impose property tax on the assessment of property
that is subject to [Talbot County's] property tax."  § 6-202 of the
Tax-Property Article.  The County Council is also authorized to
assess, levy, and collect taxes "as may be necessary for the
support and maintenance of the county government."  Code (1957,
1994 Repl. Vol.), Art. 25A, § 5(O).  Moreover, the County Council,
along with the County Executive, must "annually . . . set the tax
rate for the next taxable year on all assessments of property
subject to [Talbot County's] property tax."  § 6-302(a) of the Tax-
Property Article (emphasis added). 
As mentioned previously, the effect of Article VI, § 614, of
the Talbot County Charter was that, except for newly constructed
and newly assessed property, for several years, the Talbot County
Council has been prohibited from raising more property tax revenues
than were raised in 1978-1979.  Furthermore, § 614 freezes the tax
rate at the constant yield tax rate as provided for in § 2-205 of
- 10 -
the Tax-Property Article.  As Judge Sause pointed out in the court
below, "the County Council was locked into the rate set by the
voters, i.e. the . . . rate for the tax year 1978-1979."  Judge
Sause's opinion continued as follows:
"Indeed, the Talbot County property tax
limitation is unlike those as originally
proposed or amended in Smallwood in that it
contains 
no 
provision 
for 
any 
change
whatsoever.  Thus, the voters do not usurp the
power to fix the rate for a mere one year or
in one referendum.  As of the moment when the
amendment was adopted, the rate became fixed
at the statutory level for the fullness of
time, or at least until the voters agree to
relinquish all or part of it.
"Also clear from a reading of Smallwood is
the fact that the Court viewed a `tax cap' as
involving not merely a limitation, but a
limitation in which some portion of the
council's power was retained.  That is to say,
the provisions of the Anne Arundel and
Baltimore County proposals which permitted a
limited increase in the rate provided in the
`base year' as part and parcel of a `tax cap.'
In describing those proposals, Judge Eldridge,
for the Court, expressly stated that `The
proposed Property Tax Limitation charter
amendments . . . would have placed a
percentage cap on the amount of local property
tax revenues to be raised each year [emphasis
supplied]' (327 Md. at 236).
"Elsewhere, because of that small window of
discretion (4.5% in Anne Arundel County, and
2% in Baltimore County), the Court found that
`These proposed tax limitation amendments were
not back-door attempts by the voters . . . to
enact detailed legislation.  Nor did they
divest the county councils of the ability to
set the property tax rates' (327 Md. at 240).
Here, the tax cap was `detailed' to the point
of excluding all other possibility; and the
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Council's ability was completely divested.
"Beyond any doubt, the Court of Appeals
viewed the tax caps which it considered as
being limitations upon the authority of Anne
Arundel and Baltimore Counties to a prescribed
range. 
 
By 
definition, 
the 
ability 
to
establish the property tax rate within a
prescribed range is an ability to set the
property tax rate, albeit a limited ability.
By definition, the absence of any choice is
the ability to do nothing.  As the Board of
Education succinctly notes, `in the one case,
the voters do not . . . set tax rates, but
only . . . limit them, while in the other
case, the voters in effect set the tax rate
legislatively, by decreeing for the indefinite
future that revenues shall not exceed levels
in an arbitrary base year.'
"Under Smallwood, a `tax cap' is valid only
so long as it confers some authority upon a
county council to carry out its mandated duty
under § 6-302(a) of the Tax-Property Article
to `annually . . . set the tax rate for the
next taxable year on all assessments of
property subject to that county's property
tax.'  Under Article VI, § 614, of the Talbot
County Charter, the County Council has no such
authority."
Judge Sause correctly applied the principles of Smallwood to
the circumstances of this case.  For this reason, we affirmed the
judgment of the circuit court.