US Supreme Court finds rational basis for Indianapolis special assessment action

by Gary Taylor

Armour, et al. v. City of Indianapolis
(US Supreme Court, June 4, 2012)

For decades, Indianapolis (City) funded sewer projects using Indiana’s Barrett Law, which permitted cities to apportion a public improvement project’s costs equally among all abutting lots. Under that system, a city would create an initial assessment, dividing the total estimated cost by the number of lots and making any necessary adjustments. Upon a project’s completion, the city would issue a final lot-by-lot assessment. Lot owners could elect to pay the assessment in a lump sum or over time in installments. After the City completed a particular sewer project, it sent affected homeowners formal notice of their payment obligations. Of the 180 affected homeowners, 38 elected to pay the lump sum. The following year, the City switched from the Barrett Law method of financing and adopted the Septic Tank Elimination Program (STEP),which financed projects in part through bonds, thereby lowering individual owner’s sewer-connection costs. In implementing STEP, the City’s Board of Public Works enacted a resolution forgiving all assessment amounts still owed pursuant to Barrett Law financing. The 38 homeowners who elected to pay their assessments in a lump sum on the prior year’s project received no refund, while homeowners who had elected to pay in installments were under no obligation to make further payments. The 38 homeowners who paid the lump sum asked the City for a refund, but the City denied the request. Thirty-one of these homeowners brought suit in Indiana state court claiming that the City’s refusal violated the Equal Protection Clause of the US Constitution. The trial court granted summary judgment in favor of the homeowners, and the State Court of Appeals affirmed. The Indiana Supreme Court reversed, holding that the City’s distinction between those who had already paid and those who had not was rationally related to its legitimate interests in reducing administrative costs, providing financial hardship relief to homeowners, transitioning from the Barrett Law system to STEP, and preserving its limited resources.  The homeowners appealed to the US Supreme Court.

The Supreme Court held that the City had a rational basis for its distinction and thus did not violate the Equal Protection Clause. The City’s distinction does not violate the Equal Protection Clause as long as “there is any reasonably conceivable state of facts that could provide a rational basis for the classification,” and the “burden is on the one attacking [the classification] to negative every conceivable basis which might support it.” The distinction between the homeowners who already paid their assessments and those who did not does not involve a fundamental right or suspect classification. Its subject matter is local, economic, social, and commercial. It is a tax classification, and there was no claim that the City has discriminated against out-of-state commerce or new residents.

Administrative concerns can ordinarily justify a tax-related distinction, and the City’s decision to stop collecting outstanding Barrett Law debts finds rational support in the City’s administrative concerns. After the City switched to the STEP system, any decision to continue Barrett Law debt collection could have proved complex and expensive. It would have meant maintaining an administrative system for years to come to collect debts arising out of 20-plus different construction projects built over the course of a decade, involving monthly payments as low as $25 per household, with the possible need to maintain credibility by tracking down defaulting debtors and bringing legal action. The rationality of the City’s distinction draws further support from the nature of the line-drawing choices that confronted it. To have added refunds to forgiveness would have meant adding further administrative costs, namely the cost of processing refunds. And limiting refunds only to the homeowners in the subject project would have led to complaints of unfairness, while expanding refunds to the apparently thousands of other Barrett Law project homeowners would have involved an even greater administrative burden. Finally, the rationality of the distinction draws support from the fact that the line that the City drew—distinguishing past payments from future obligations—is well known to the law.

The homeowners further argued that administrative considerations alone should not justify a tax distinction lest a city justify an unfair system through insubstantial administrative considerations. Here it was rational for the City to draw a line that avoided the administrative burden of both collecting and paying out small sums for years to come. Petitioners have not shown that the administrative concerns are too insubstantial to justify the classification.

US Supreme Court to hear land use conflict of interest case

The U.S. Supreme Court is scheduled to hear oral arguments on April 27 on a conflict of interest case originating in Sparks, Nevada, where a city councilman voted on a proposed casino that his campaign manager helped develop.  The Nevada Ethics Commission said the councilman had a clear conflict of interest, and should have recused himself, even though the Sparks city attorney told him that casting his vote would be acceptable as long as he publicly disclosed his relationship with the developer.  The case focuses on the councilman’s free speech rights.

The question as presented on the U.S. Supreme Court docket is here.  A USA Today article on the case can be found here.  A recent editorial from the Sparks Tribune is here.

US Supreme Court falls short of declaring that “judicial takings” are possible

by Gary Taylor

Stop the Beach Renourishment, Inc. v. Florida Department of Environmental Protection
(United States Supreme Court, June 17, 2010)

In Florida, with respect to littoral (shorefront) property owners, the state owns the land permanently submerged under water as well as the the land between the low-tide line and the mean high-water line.  At common law in Florida, the littoral property owners own up to the mean high-water line.  Also, littoral owners have “special rights” with regard to the water and the land between low- and high-water line, generally likened to easements.  These “special rights” include the right of access and use of the water, the right to use the water for certain purposes, the right to an unobstructed view of the water, and the right to receive “accretions” and “relictions” to the littoral property. “Accretions” are additions of sand, sediment, or other deposits to waterfront land, while “relictions” are lands once covered by water that become dry when the water permanently recedes.  In order for the littoral property owner to receive these accretions and relictions (i.e., to alter their property line) they must occur gradually and imperceptibly over time.  A sudden change (such as through a hurricane or a specific man-made event) is an “avulsion,” and the property boundary remains the mean high-water line as it existed before the avulsive event.

In 1961, Florida enacted the Beach and Shore Preservation Act (BSPA) to restore and maintain critically eroded beaches within the state. The BSPA allows a municipality to apply to the State for funding and permits to restore an eroded beach, generally by dumping sand on the previously eroded portion of the land.  The BSPA provides that once a project is undertaken, an erosion-control line is established, usually at the current mean high-water line, and sand is added is added seaward of the erosion-control line.  As a consequence of the renourishment under the BSPA, the erosion-control line replaces the mean high-water line as the boundary between the littoral property and state-controlled land.  The establishment of the erosion-control line in effect extinguishes the littoral right of property to accretions and relictions.

In 2003, two counties received permits under BSPA from the Florida Department of Environmental Protection for the funding and permits necessary to restore beaches affecting, among others, Stop the Beach Renourishment, Inc. (SBR), a nonprofit corporation whose members are Florida beachfront property owners whose property eroded due to several hurricanes.  SBR challenged the issuance of the permit and the constitutionality of the BSPA.   The Florida Court of Appeals held that the BSPA eliminated two of the Petitioner’s members’ littoral rights, namely the right to receive accretions and relictions and the right to have their property come into contact with the water, and that therefore the BSPA resulted in an unconstitutional taking.  The Florida Supreme Court reversed, finding among other things that right to accretions and relictions is a “future contingent interest” and not a vested property right, and that there is no littoral right to contact with the water, other than the right of access which the BPSA does not affect.  SBR appealed, and the case reached the U.S. Supreme Court.

The questions relevant to planning were (1) whether a judicial opinion can result in an unconstitutional taking (a “judicial taking”), and if so (2) whether the Florida Supreme Court effected a judicial taking by reversing longstanding holdings that littoral rights are property rights under Florida law. 

The U.S. Supreme Court held 8-0 that the Florida Supreme Court did not take property without just compensation in violation of the Fifth and Fourteenth Amendments. The Court held that there could be no taking unless property owners could show that they had rights to future exposed land and to contact with the water superior to Florida’s right to fill in its submerged land. The Court drew from Florida property law principles that (1) the state, as owner of submerged land adjacent to beachfront property, has the right to fill that land and (2) the exposure of land previously submerged belongs to the state even if it interrupts the beachfront property owners’ contact with the water.

However, Justice Scalia, with three other members of the Court including Chief Justice John G. Roberts and Justices Clarence Thomas and Samuel A. Alito, also opined that a court could be determined to have effected a “judicial taking” in violation of the Takings Clause if that court declares that what was once an established right of private property no longer exists. “If a legislature or a court declares that what was once an established right of private property no longer exists, it has taken that property, no less than if the State had physically appropriated it or destroyed its value by regulation.”  Justice Scalia observed that the Takings Clause, unlike other provisions in the U.S. Constitution, is not addressed to the action of a specific branch or branches.  It is concerned simply with the act, and not with the governmental actor (“nor shall private property be taken”). There is no textual justification for saying that the existence or the scope of a State’s power to expropriate private property without just compensation varies according to the branch of government effecting the expropriation.  It would be absurd to allow a State to do by judicial decree what the Takings Clause forbids it to do by legislative fiat.   

 Because only four Justices signed on to this part of the opinion, the concept of a “judicial taking” is not (yet) a principle of Constitutional law.