School district, city tax case argued

A 2010 voter-approved tax to fund construction on Fayetteville High School should not be diverted to other city projects, an attorney for the school district told the Arkansas Supreme Court on Thursday.

Fayetteville attorney Chris Lawson, who represented the school district in oral arguments before the court, said the ballot language for the 2.75-mill increase funding the project provided a clear purpose for the tax revenue.

Lawson said a ruling on a previous lawsuit involvingthe city and the school district should not apply to the current case because of Act 2231, which was passed by the legislature in 2005, and amended the “total ad valorem rate” to exclude future increases in millage rates “if the additional money is pledged forrepayment of a specif ic bond.”

“When the voters of this school district went to the polls in 2010 and voted for a millage increase to be pledged to bonds to finance the second phase of the new high school they were doing exactly what was expressly addressed in Act 2231, so that millage should not be included in the total ad valorem rate for this TIF district,” Lawson said.

In 2005, the city established a tax increment financingtax , or TIF, district approving a bond purchase agreement and the issuance of TIF bonds to finance a redevelopment project at College Avenue and Mountain Street. About 30 days after the project was approved, the legislature passed Act 2231.

The city filed for a declaratory judgment to clarify the definition of “total ad valorem rate” as it should be used for the TIF district and Circuit Judge Kim Smith ruled that Act 2231 should not be applied. The case was appealed to the Supreme Court and resultedin a judgment that explained how the mills collected by the county should be applied.

In May 2011, the county assessor diverted 1.45 mills of the 2.75 mills - about $25,000 a year - from the school construction to pay for TIF district bonds, in accordance with the 2007 judgment.

Fayetteville city attorney Kit Williams argued that the court had already made a determination in the case from the 2005 lawsuit and argued that the city was following the law in applying the judgment to the assessor’s 2011 certification.

“This declaratory judgment actually seems a little like dejavu to me,” Williams said.

Justice Courtney Hudson Goodson asked whether the cases were actually completely different because they addressed county tax assessments from different years.

Williams said the language in the judgment applied to both because the paragraphs “used the future tense and all spoke about how this whole issue about how to divide these millages - the increments of these millages - should be handled forever.”