The Arkansas Supreme Court on Thursday upheld a lower court’s ruling that the Washington County tax collector improperly used part of a Fayetteville School District millage increase toretire redevelopment-district bonds.
In City of Fayetteville v. Fayetteville School District No. 1, the court unanimously found that the 2.75 ad valorem school-millage increase was approved by voters for a specific use - school improvements - and was not meant to be diverted for other purposes.
Associate Justice Jo Hart wrote in the opinion that the ballot “specifically indicated that the 2.75 newdebt-service mills wouldbe a continuing debt-service tax for the principal amount of $51,000,000 in bonds.” Voters were told the money would be used to erect and equip new school facilities and renovate existing facilities.
In 2005, the city established a tax increment financing, or TIF, district and issued TIF bonds for a redevelopment project at College Avenue and Mountain Street.
About 30 days later, the Legislature passed Act 2231, which amended the “total ad valorem rate” to exclude future increases in millage rates “if the additional money is pledged for repayment of a specific bond.”
The city filed for declaratory judgment to clarify which definition of “total ad valorem rate” should be used for the TIF district and a circuit judge ruled that the actshould not be applied.
The case went to the Supreme Court, which remanded the case back to the circuit court for a judgment that explained how the mills collected by the county should be applied.
In that case, the city was able to keep some of the millage money because the city entered the bond purchase agreement before Act 2231 was enacted.
Voters approved the tax increase in 2010 to fund construction on Fayetteville High School and in May 2011, the county assessor diverted 1.45 mills of the 2.75 mills - about $25,000 a year - from the school construction fund to pay for TIF district bonds.
Fayetteville School District No. 1 filed for declaratory and injunctive relief in November 2011.
During oral arguments, Fayetteville City Attorney Kit Williams argued that the language in the judgment of the previous case applied to both cases 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 handledforever.”
In the opinion released on Thursday, Hart disagreed and said the cases were “distinctly different.”
“Moreover, the judgment entered by the circuit court did not contain any language addressing whether future millages should be excluded, or included, in the total ad valorem rate,” Hart wrote.
Northwest Arkansas, Pages 9 on 02/22/2013