Opinion ID: 2464048
Heading Depth: 1
Heading Rank: 2

Heading: Residual Fund Disposition

Text: Appellant class-members urged the chancellor to apply the cy pres doctrine, thereby fashioning a fluid recovery remedy using the residual funds to benefit all citizens of Pulaski County. In the alternative, they suggested distribution of the residual funds either to a formal fund to be known as the Pulaski County Foundation or to a number of small charities existing within Pulaski County. They are joined on appeal by the cross-appellant municipalities in urging a vacation of the portion of the chancellor's order that gave the bulk of the residual funds to the construction of a juvenile detention and services center. The municipalities contend that the residual funds should be returned pro rata to the respective governmental entities and used for the purpose for which the tax was collected, which was to provide general municipal services to the citizens. We agree with the approach of the municipalities. We have stated that monies collected for one purpose cannot be spent for another purpose. Bell v. Crawford County, 287 Ark. 251, 697 S.W.2d 910 (1985). Pursuant to Bell , the chancellor must first, by evidentiary hearing, identify all taxpayers from whom monies were illegally exacted who can feasibly be identified, and second, the chancellor must utilize the unclaimed residual funds for the purpose for which they were collected. The chancellor clearly did not follow the dictates of Bell . Instead, she ordered $700,000.00 of taxpayers' funds be given to assorted charities. She made awards to forty-two charities in varying amounts. Nine charities received funding without having submitted applications. On the other hand, at least four charities that submitted applications were not funded. In addition a $5,000.00 award went to establish a fund to host an annual Christmas party for the children of Pulaski County employees. The Arkansas Constitution forbids county or municipal funds to be given to any corporation, association, institution, or individual. Ark. Const. art. 12 § 5; Halbert v. Helena-West Helena Ind. Dev. Corp., 226 Ark. 620, 625, 291 S.W.2d 802, 806 (1956). The record reveals, however, that fifteen or more corporations were awarded $355,000.00 in the distribution order. An estimated 3.3 million dollars has been entrusted by the chancellor's order to the co-trustees to be used in their discretion for the construction of a juvenile justice center. The distribution order states, in part: The Court agrees that to allow a proportionate refund to the Defendant governmental entities in the case would reward those governmental entities for their past misdeeds, ... [Emphasis added.] The awarding of the 3.3 million dollar sum to defendant/appellant Pulaski County contradicts the chancellor's statement. We also think that the chancellor's use of the word misdeeds in her order mistakenly implies flagrant actions by the parties which are not supported by the record. Such use of public funds is arbitrary and capricious, necessarily leads to unpredictable results, and is impermissible. On remand, subject to other instructions included herein, we direct that the residual funds be returned pro rata to the governmental entities to be used for general municipal services.