Opinion ID: 1760281
Heading Depth: 1
Heading Rank: 2

Heading: Millage for Debt Service

Text: For its first point on appeal, the City contends that the circuit court erred in holding that the Washington County Assessor was correct to allocate more mills to the School District for purposes of the TIF formula than were passed by the voters. The City claims that Assessor Kizzar's calculations for the certification made on January 29, 2005, included 4.5 mills more in school taxes than the voters of the school district had approved on September 19, 2000. The City explains that the assignment of 23.7 mills for school debt service would mean that 48.7 mills (23.7 mills for debt service plus the uniform rate of 25 mills) would be directed to the School District rather than the 44 mills approved by the voters for school taxes prior to January 1, 2001, or the 44.2 mills approved by the voters at the subsequent election. The result, according to the City, is an illegal exaction due to diversion of 4.5 mills to the schools without voter approval. The City adds that the Assessor's certification for debt service is unconstitutional despite the Assessor's good faith reliance on the voters' approval of 23.7 mills for debt service on September 19, 2000, and the definition of the debt service ad valorem rate found in Arkansas Code Annotated § 14-168-301(5) (Supp.2003), which points to the debt service in effect as of January 1, 2001. The City explains, in addition, that 44 mills less 23.7 mills leaves only 20.3 mills for maintenance and operation and not the constitutionally mandated uniform rate of 25 mills. Because of this, the City concludes that the assignment of 23.7 mills for debt service was unconstitutionally high by 4.5 mills. The School District's retort is that Amendment 78 specifically excludes from funds available to the TIF district any ad valorem taxes for debt service approved by the voters prior to the effective date of Amendment 78. That effective date was January 1, 2001. The School District also argues that the original Redevelopment Act (Act 1197 of 2001) specifically referred to the debt service rate as of January 1, 2001. See Ark.Code Ann. § 14-168-303(5) (2001). The School District emphasizes that the debt service rate passed by the voters prior to January 1, 2001, was 23.7 mills. Our analysis begins with the certification by Assessor Lee Ann Kizzar. She certified that the total millage for all county, city, and public school property taxes included in Quorum Court Ordinance 2004-68 for 2004 was 26.86 mills. She further certified the debt service ad valorem rate for the public schools as of January 1, 2001, was 23.7 mills. That rate is defined by the Redevelopment Act as that portion of the total ad valorem rate that has been, at January 1, 2001, pledged to the payment of debt service on bonds issued by any taxing unit in which all or any part of the redevelopment district is located[.] Ark.Code Ann. § 14-168-301(5) (Supp.2003). [5] Assessor Kizzar testified at the bench trial that she looked to the September 19, 2000 School Tax ballot, which stated that 23.7 mills would be used for debt service for the school district, to reach the conclusion that the debt service ad valorem rate as of January 1, 2001, was 23.7 mills. There is one insurmountable problem with simply affirming the assignment of 23.7 mills as the debt service ad valorem rate. It is obvious from the ballot that the 23.7 mills assigned to debt service on the September 19, 2000 ballot actually included a portion of the 25 mills that was to be set aside for general maintenance and operation of the schools under Amendment 74. In fact, the September 19, 2000 ballot said that only 19.3 mills, and not the uniform rate of 25 mills under Amendment 74, would be used for school maintenance and operation. Because the total millage passed by the voters for schools on September 19, 2000, was 44 mills, the assignment of 23.7 mills for debt service violated Amendment 74's mandate that 25 mills be used solely for general maintenance and operation of the schools. See Lake View, supra . The reason is simple: 23.7 mills plus 25 mills exceeds the voters' approval of 44 mills. In fact, as previously noted, following this court's decision in Lake View, the School District was forced to refinance part of its debt in 2003 to comply with this court's Lake View ruling and Amendment 74 for purposes of its bond issue. In short, the assignment of 23.7 mills for debt service of the 44 mills passed in the September 2000 election by voters in the Fayetteville School District was unconstitutional in light of Amendment 74 and Lake View . Thus, the use of 23.7 mills as the figure for debt service in the TIF formula cannot stand. The result of this problem is that the 23.7 mills dedicated to debt service in Assessor Kizzar's certification includes 4.5 mills beyond the 44.2 mills the voters approved for public-school taxes at the time of the Assessor's certification. [6] Using the Assessor's certification of 23.7 mills for debt service in the January 29, 2005 certification would mean that an additional 4.5 mills would be directed to the School District. [7] Clearly, that would violate the Arkansas Constitution and the jurisprudence of this court. See Ark. Const. art. 16 § 11; Maas v. City of Mountain Home, 338 Ark. 202, 992 S.W.2d 105 (1999). While we recognize that Amendment 78 refers to an exclusion of taxes for debt service as of January 1, 2001, that presupposes that the debt service tax is constitutional. Here, it is clear that the 23.7 debt service tax is unconstitutional and invalid. We hold, accordingly, that the debt service rate for purposes of the Assessor's certification on January 29, 2005, must be limited to 19.2 mills, and we modify the Assessor's certification to refer to the correct millage rate of 19.2 mills.