Opinion ID: 1828536
Heading Depth: 1
Heading Rank: 1

Heading: Diversion of special and dedicated taxes

Text: The City argues, and the district court found, that La.Rev.Stat. 11:1481(1)(a)(i), as most recently amended by 2004 La. Acts, No. 860, violates La. Const. Art. VI, §§ 26(B) and 32, because it results in an improper diversion to LARF of dedicated and special taxes from the purposes for which they were adopted and dedicated. The pertinent constitutional provisions state as follows: La. Const. art. VI, §§ 26(B). Parish Ad Valorem Tax (B) Millage Increase Not for General Purposes. When the millage increase is for other than general purposes, the proposition shall state the specific purpose or purposes for which the tax is to be levied and the length of time the tax is to remain in effect. All proceeds of the tax shall be used solely for the purpose or purpose set forth in the proposition. La. Const. Art. VI, § 32. Special Taxes, Authorization. For the purpose of acquiring, constructing, improving, maintaining or operating any work of public improvement, a political subdivision may levy special taxes when authorized by a majority of the electors in the political subdivision who vote thereon in an election held for the purpose. (Bold emphasis in original; italicized emphasis added.) The above constitutional provisions clearly prohibit the use of dedicated and special taxes for purposes other than those for which they were dedicated or levied. See Orleans Parish School Board v. City of New Orleans, 238 La. 738, 116 So.2d 505 (1959); see also Denham Springs Economic Development District v. All Taxpayers, Property Owners, 04-1674, p. 35 (La.2/4/05), 894 So.2d 325, 836. The City's argument relative to diversion of dedicated and special taxes addresses itself to a fundamental problem with La.Rev.Stat. 11:1481(1)(a)(i), which provides, in pertinent part, as follows: Each sheriff and ex officio tax collector of the state of Louisiana, or other official responsible for such tax collection, is hereby authorized and required to deduct one-fourth of one percent of taxes shown to be collectible by the tax rolls, including that shown on the tax rolls to be exempted by virtue of the homestead exemptions of each respective parish, and the city tax collector for the city of New Orleans, or other official responsible for such tax collection, is hereby authorized and required to deduct one-fourth of one percent of taxes shown to be collectible by the tax rolls, including that shown on the tax roll to be exempted by virtue of homestead exemptions, for the city of New Orleans and the parish of Orleans which money each respective sheriff, tax collector, or any other person performing said duties shall remit to the Assessors' Retirement Fund in a lump sum from first tax collections each year or periodically at the same time said sheriff and tax collector shall disburse funds to the tax recipient bodies of his respective parish. The amount remitted to the Assessors' Retirement Fund shall be based on the total amount of taxes shown to be collectible on the roll, including that shown on the tax roll to be exempted by virtue of homestead exemption, on the date the tax roll is filed for collection. The majority opinion correctly sets forth a number of the well-established rules of statutory construction. See City of New Orleans v. LARF, 05-2548, at pp. 20, 22, 23, 986 So.2d at 17, 18, 19. Among those rules are the following: (1) the language of a statute is the starting point for ascertaining the legislature's intent in adopting that statute; (2) words and phrases are to be given their generally-prevailing meaning; (3) courts are bound to give effect to all parts of a statute and to construe no sentence, clause, or word as meaningless and surplusage if a construction giving force to, and preserving, all words can legitimately be found; (4) the meaning and intent of a law must be determined by consideration of the law in its entirety; (5) of two possible ways to interpret a statute courts must choose the interpretation that upholds its constitutionality. La.Rev.Stat. 11:1481(1)(a)(i) sets forth the first part of the legislature's scheme for financing LARF. Application of the well-recognized principles for construing constitutional provisions listed above reveals that the first sentence of La.Rev. Stat. 11:1481(1)(a)(i) [hereinafter referred to as the deduct and remit requirement] places an affirmative duty on officials responsible for tax collection in Louisiana parishes (and in the City of New Orleans) to deduct 0.25 percent of collectible ad valorem taxes and remit that 0.25 percent to LARF before dispersing the remainder of the ad valorem taxes to the tax-recipient bodies in their parishes. La.Rev.Stat. 11:1481(1)(a)(i). The second sentence of La.Rev.Stat. 11:1481(1)(a)(i) [hereinafter referred to as the amount remitted provision] reiterates that the amount remitted... shall be based on the total amount of taxes shown to be collectible on the roll, including that shown on the tax roll to be exempted by virtue on the homestead exemption. Id. Significantly, nothing in the amount remitted provision modifies the fact that the deduct and remit requirement imposes on officials responsible for collecting taxes in Louisiana a duty to deduct the amount remitted to LARF from ad valorem taxes before dispersing the remainder of the taxes to the appropriate tax-recipient bodies; the amount remitted provision directs itself solely to determination of that amount. The clarifying statement in the amount remitted provision is to be based on collectible ad valorem taxes, rather than ad valorem taxes actually collected, is significant, but not for the reason set forth in the majority opinion, the fallacy of which is fully discussed below. The reason the legislature required that the amount remitted to LARF be based on collectible taxes was to insure that LARF would receive a predictable amount of ad valorem taxes each year. Had the legislature based the remittance amount solely on actual collections, the amount would vary from year to year because the amount of ad valorem taxes actually collected depends on a number of factors, including such things as the percentage of taxpayers who actually pay their taxes and whether payments are made in a timely fashion. Of course, the legislature also specifically required that the amount remitted include 0.25 percent of taxes that would have been collected were they not exempted from collection by the homestead exemption. When all of the pertinent rules of statutory construction are applied to La.Rev. Stat. 11:1481(1)(a)(i), the nature of the affirmative duty imposed on Louisiana officials who collect taxes emerges. That duty might be summarized as follows. First, officials collecting taxes must determine the total amount of collectible taxes-i.e., the amount of ad valorem taxes that would have been collected if there were no homestead exemption and no delinquencies. The total amount of collectible taxes must then be multiplied by 0.25 percent. The resulting amount must then be deducted from the taxes actually collected, and remitted to LARF in a lump sum. Only then can the remainder of the ad valorem taxes collected be distributed to the tax-recipient bodies. Significantly, if a given tax-recipient body receives only dedicated and/or special taxes, La.Rev.Stat. 11:1481 requires that a portion of those dedicated and/or special taxes be deducted and remitted to LARF before the remainder of the dedicated and special taxes may be distributed to the tax-recipient body. Because it requires that LARF be financed through the deduction and remission of a portion of all collectible taxes, including taxes dedicated to various other purposes, La.Rev.Stat. 11:1481(1)(a)(i) results in the diversion of dedicated and special taxes to purposes for which they were not dedicated or levied, for the benefit and to the advantage of LARF. This is the only reasonable interpretation of La.Rev.Stat. 11:1481(1)(a)(i) possible. The majority decision in this case chooses to ignore this interpretation, the only reasonable interpretation of La.Rev. Stat. 11:1481(1)(a)(i) that complies with all the pertinent rules of statutory construction. The majority justifies its conclusion that La.Rev.Stat. 11:1481(1)(a)(i) can be interpreted as constitutional by focusing almost exclusively on the well-recognized rule that requires courts to choose the interpretation that upholds the constitutionality of a statute, when two possible interpretations exist. Ultimately, in its zeal to find that La.Rev.Stat. 11:1481(1)(a)(i) is constitutional, the majority simply ignores arguably the most important words in the provision-that is, the verbs deliberately chosen by the legislature in both the introductory phrase and in the deduct and remit requirement. The introductory phrase specifically provides that LARF shall be financed as described in the provision. Then, the deduct and remit requirement specifically directs Louisiana officials responsible for tax collection to deduct and remit 0.25 percent of all ad valorem taxes to LARF. In fact, the majority describes the first sentence of the provision as follows: As enacted, the first sentence of this provision authorizes and requires the official responsible for tax collection in each respective jurisdiction to deduct one-fourth of one percent of taxes shown to be collectible by the tax rolls, including that shown on the tax rolls to be exempted by virtue of the homestead exemptions, which money each tax collector is directed to remit to the Fund in a lump sum from first tax collections each year or periodically at the same time said sheriff and tax collector shall disburse funds to the tax recipient bodies of his respective parish. City of New Orleans, 05-2548 at 21, 986 So.2d at 17-18 (emphasis added). Nevertheless, the majority renders this affirmative directive meaningless in favor of its finding that La.Rev.Stat. 11:1481 merely sets forth a method of calculating the amount of ad valorem taxes due LARF. This interpretation is adopted despite the fact that no derivation of the word calculate (and no synonym for that word) appears anywhere in the statute. According to the majority, La.Rev.Stat. 11:1481(1)(a)(i) results in an unconstitutional violation of the prohibitions against diversion of dedicated and special taxes only if the deduct and remit provision is read in isolation. If the sentences of the provision are read together, no diversion of dedicated and special taxes is required, the majority says, because the sentence which immediately follows the first one [the amount remitted provision] elucidates and clarifies the intent of the provision. The amount remitted provision states as follows: The amount remitted to the Assessors' Retirement Fund shall be based on the total amount of taxes shown to be collectible on the roll, including that shown on the tax roll to be exempted by virtue of homestead exemption, on the date the tax roll is filed for collection. According to the majority, the above-quoted sentence makes it clear that La.Rev. Stat. 11:1481(1)(a)(i)does not prescribe the method of financing LARF (which, of course, is the purpose of the statute). Rather, the statute at issue does nothing except establish a calculation method, the majority concludes. Because the amount remitted provision states that the amount is to be based on collectible taxes, the majority says that the deduct and remit requirement of La.Rev.Stat. 11:1481(1)(a)(i) does not really mean what it says! Instead, the majority finds that the statute's reference to collectible taxes makes it clear that no deduction and remission is intended, despite the clear and unambiguous language of the deduct and remit requirement! Noting that some collectible taxes are not actually collected (because they are exempted by the homestead exemption), the majority asserts that deductions cannot be made from amounts that are not actually collected. Thus, despite the affirmative language of the deduct and remit requirement of La.Rev.Stat. 11:1481(1)(a)(i), Louisiana officials responsible for tax collection are not actually required to deduct and remit 0.25 percent of collectible taxes, the majority says. Under the majority's reasoning, the verbs in the introductory phrase and in the deduct and remit requirement are rendered meaningless. According to the majority, my interpretation is possible only if the first sentence of La.Rev.Stat. 11:1481(1)(a)(i) is read in isolation. However, the fact is that the majority's interpretation reads the second sentence in isolation, completely writing out the language of the first sentence, which we must assume was deliberately chosen by the legislature. Further, the majority opinion offers no alternative to my interpretation of the deduct and remit requirement beyond the simple conclusion that it does not and cannot mean what it says! The stated purpose La.Rev.Stat. 11:1481 is to establish the manner by which LARF shall be financed. However, rather than interpreting the statute in a manner that clarifies the appropriate method for financing LARF, the majority finds that La.Rev.Stat. 11:1481(1)(a)(i) does nothing more than set forth a calculation formula. In the process, the majority eviscerates the purpose of the statute and chooses an interpretation riddled with unanswered questions. When it adopted La.Rev.Stat. 11:1481, the legislature chose the following descriptive title for the provision: Financing of fund; deductions, deficiencies and surpluses; remedies. That title demonstrates that the legislature's purpose was to provide a method for financing LARF with deductions from ad valorem taxes. In fact, La.Rev.Stat. 11:1481 is the only Louisiana statute that sets forth a method for financing LARF. If the statute does not mean what it says, and officials responsible for collecting taxes are not supposed to deduct and remit a percentage of all ad valorem taxes to LARF, then how is the amount that results from the calculation formula to be remitted to LARF? The majority does not even attempt to answer that question. Thus, the majority leaves LARF with a calculation formula, but without any method for collecting the amounts resulting from that calculation. Ultimately, Louisiana officials responsible for tax collection are left with no direction concerning the performance of their duties. Further, the majority's interpretation renders the entire statute meaningless because it can no longer be read to set forth a method of financing LARF. The majority states that dedicated and special taxes cannot be used to fund LARF, but nevertheless finds that La.Rev. Stat. 11:1481 can be interpreted in such a manner as to render it consistent, and not in conflict with the constitutional prohibitions against the diversion of dedicated or special taxes. City of New Orleans, 05-2548 at 25, 986 So.2d at 19. Although I am not sure exactly what that means, I assume it means that the calculation method that the majority finds is set forth in La.Rev.Stat. 11:1481(1)(a)(i) is constitutional, but that the amount must be paid only from taxes that are not dedicated to other purposes. Thus, I assume that the majority means to require that the amount derived from the calculation be paid out of some type of non-dedicated ad valorem taxes. Of course, as I have already mentioned, La. Const. art. X, § 29(E)(3) lists only three possible sources of funding for retirement systems, and those sources are employer contributions, employee contributions, and dedicated taxes. Despite the fact that the constitutional provision does not mention non-dedicated taxes as a source of funding for retirement systems, the majority finds that non-dedicated ad valorem taxes are the only type of taxes that can be used to fund LARF. This fact I believe underscores an important problem with the majority's interpretation. If the statutory language simply sets forth a calculation method for determining the amount of taxes due, how do Louisiana officials responsible for tax collection know what they should do? Since the majority finds that the words finance, deduct, and remit, are essentially meaningless, the statute provides no direction concerning the question of who is to pay and in what percentages. If the statute does not require that some amount be deducted and remitted from every tax recipient body, then who pays? The fact is that all of the taxes received by some tax-recipient bodies are special and/or dedicated taxes. Does La.Rev.Stat. 11:1481 require that those tax-recipient bodies that happen to receive non-dedicated taxes be burdened with the responsibility of paying the entire amount derived from the calculation formula, despite the fact they receive only a portion of the underlying taxes? La.Rev. Stat. 11:1481 was carefully designed by the legislature to spread the liability for funding LARF among all of the ad valorem tax-recipient bodies in the State of Louisiana. The majority's interpretation places that burden on only a few of those tax-recipient bodiesi.e., those that receive non-dedicated ad valorem taxes. Finally, I must note that the record in this case contains the Legislative Auditor's report showing the calculation of the City's alleged liability to LARF for the 2005 tax year. That report conclusively demonstrates that the calculation includes 0.25 percent of all the ad valorem taxes collectible by the City, including dedicated and special taxes. The report further demonstrates that my understanding of La.Rev. Stat. 11:1481 is shared by the Legislative Auditor. His report indicates that the 0.25 percent due LARF is to be deducted from the funds that would otherwise be received from each and every tax-recipient body in Orleans Parish, then remitted to LARF. Under the majority's interpretation, neither the Legislative Auditor nor Louisiana officials responsible for tax collection will have any idea what to do once they have determined the amount of taxes due by using the calculation formula. Diversion of dedicated and special taxes is prohibited by La. Const. art. VI, §§ 26(B) and 32. La.Rev.Stat. 11:1481 violates that constitutional provision because it requires that 0.25 percent of the taxes shown to be collectible on the tax rolls be deducted by sheriff's and tax collectors and remitted to LARF. The requirement that the specified percentage be deducted is not limited to the taxes that are not dedicated to other purposes, rather it includes all taxes shown to be collectible on the tax rolls. Accordingly, the district court properly held that La.Rev.Stat. 11:1481 is unconstitutional.