Saturday, June 9, 2012

U.S. Supreme Court Rules Against Northern Estate Residents; Will Indianapolis City-County Council Step in and Right the City's Wrong?

I finally had a chance to read Armour v. City of Indianapolis handed down by the United States Supreme Court on Monday.   It is a local case borne out of horrific municipal unfairness.  Now that the matter is no longer being litigated, I believe the Indianapolis City-County Council should consider righting the wrong left untouched by the courts..

Let me summarize the facts.  Several years ago, the City was set to install sewers in Northern Estates, a upper middle class, quiet neighborhood on the northwest side.  To fund the sewers, the City used Indiana's Barrett Law, a statute that permits Hoosier cities to apportion a public improvement project's costs equally among all homeowners benefiting from the improvement.  The City made an assessment and gave homeowners the choice of paying the bill in a lump sum upfront, or paying it in installments .  Of the 180 residents, 38 chose to pay the entire $9,278 assessment up front.  The rest chose to pay the $9,278 bill in installments over 5, 10 or 15 years.
United States Supreme Court

Shortly after the sewers were hooked up and residents started paying the installments, the City abandoned Barrett Law financing and instead adopted the Septic Tank Elimination Program (STEP),which charged each homeowner $2,500 with the rest of the project financed through bonds paid by all homeowners in the City. In implementing STEP, the City’s Board of Public Works enacted a resolution forgiving all assessment amounts still owed for residents paying in installments.  The 38 Northern Estate residents who paid the entire amount upfront, however, were refused refunds.

Thirty-one of the 38 homeowners brought suit in Indiana state court.  The Northern Estate residents made state law claims and a federal equal protection claim. Probably better state law claims were dismissed for failure to serve a Notice of Tort Claim within 180 days. The federal equal protection claim, with which the residents were left, is a tough row to hoe. Because the case does not involve a fundamental right or a suspect classification, the City of Indianapolis need only show it had a rational basis for the disparate treatment of the residents.

The Marion County Superior Court granted summary judgment to the homeowners, and the Indiana Court of Appeals affirmed. The Indiana Supreme Court, however, 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.

As a side note, I am surprised the Supremes took the case. The United States Supreme Court only hears about 1 1/2 percent of the cases appealed to it via a writ of certiori.  Generally the Court looks for cases that are of major public importance or where there is a split among the districts or states in how an issue should be decided. This case doesn't appear to fit any of that criteria. Further, the Supreme Court upheld the Indiana Supreme Court by a 6-3 decision. I can only suppose that one of the justices in the majority originally voted to hear the case, then changed his or her mind. (Four of the nine justices must vote to hear a case before cert will be granted.)

In an opinion written by Justice Breyer, which was joined by Justices Kennedy, Thomas, Ginsburg, Sotomayor, and Kagan, found that the City's "administrative concerns" in providing refunds provide the rational basis needed to treat the residents unequally and survive the Equal Protection Challenge.
The dissenting opinion, written by Chief Justice Roberts and joined in by Justices Scalia and Alito, I believe makes a much better argument and provides . 

The dissent begins by pointing out that Indiana Barrett law statute (IC 36-9-39-15(b)(3) which requires that the cost of the improvement "be primarily apportioned equally among all abutting lands or lots."   The dissent then proceeds to dismiss the City's claim it was just too much bother to offer a refund and offers a workable suggest, a gradual repayment of the homeowners' lump sum payment:
The City refused, however, to refund any portion of the payments made by their identically situated neighbors who had already paid the full amount due. The result was that while petitioners each paid the City $9,278 for their hook-ups, more than half their neighbors paid less than $500 for the same improvement—some as little as $309.27. Another quarter paid less than $1,000.  Petitioners thus paid between 10 and 30 times as much for their sewer hook-ups as their neighbors.
In seeking to justify this gross disparity, the City explained that it was presented with three choices: First, it could have continued to collect the installment plan payments of those who had not yet settled their debts under the old system. Second, it could have forgiven all those debts and given equivalent refunds to those who had made lump sum payments up front. Or third, it could have forgiven the future payments and not refunded payments that had already been made. The first two choices had the benefit of complying with state law, treating all of Indianapolis’s citizens equally, and comporting with the Constitution. The City chose the third option.
And what did the City believe was sufficient to justify a system that would effectively charge petitioners 30 times more than their neighbors for the same service—when state law promised equal treatment? Two things: the desire to avoid administrative hassle and the "fiscal[] challeng[e]" of giving back money it wanted to keep. Brief for Respondents 35–36. I cannot agree that those reasons pass constitutional muster, even under rational basis review.
Even if the Court were inclined to decide that administrative burdens alone may sometimes justify grossly disparate treatment of members of the same class, this would hardly be the case to do that. The City claims it cannot issue refunds because the process would be too difficult, requiring that it pore over records of old projects to determine which homeowners had overpaid and by how much.... But holding that the City must refund petitioners’ overpayments would not mean that it has to refund overpayments in every Barrett Law project. The Equal Protection Clause is concerned with "gross" disparity in taxing. Because the Brisbane/Manning project was initiated shortly before the Barrett Law transition, the disparity between what petitioners paid in comparison to their installment plan neighbors was dramatic.Not so with respect to, for example, a project initiated 10 years earlier, because for those projects even installment plan payers will have largely satisfied their debts, resulting in far less significant disparities.

To the extent a ruling for petitioners would require issuing refunds to others who overpaid under the Barrett Law, I think the city workers are up to the task. The City has in fact already produced records showing exactly how much each lump-sum payer overpaid in every active Barrett Law Project—to the penny. ... What the city employees would need to do, therefore, is cut the checks and mail them out.  Certainly the job need

not involve the complicated procedure the Court describes in an attempt to bolster its administrative convenience argument. Under the Court’s view the City would apparently continue to accept monthly payments from installment plan homeowners in order to gradually repay the money it owes to those who paid in a lump sum. ... But this approach was never dreamt of by the City itself. See Brief for Respondents (setting out City’s "three basic [transition] options," none of which involved the Court’s gradual refund scheme).
Council President Maggie Lewis
I think the dissent is correct in its Equal Protection analysis and for noting the interplay of the Barrett statute which requires equal treatment of homeowners when it comes to billing for the improvement.  The Dissent mocks the City's claim of the "administrative burden" involved in offering refunds and offers a solution that would have a negligible impact on the City's finances - a gradual return refund of the homeowners lump sum payment.

To me, what is appalling is how the political branches - the executive and the legislative - have failed these homeowners.  Although the refusal to refund Northern Estates homeowners' money was initiated under Democratic Mayor Bart Peterson's administration, Republican Mayor Greg Ballard could have at any time reversed the Peterson position and offered refunds.  Instead Ballard fought the homeowners all the way to the United States Supreme Court, undoubtedly costing them over a hundred thousand dollars in legal fees simply because they wanted to be treated fairly.

But fortunately we have another branch of government.  The Indianapolis City-County Council can still take up this matter and right the wrong done to these homeowners.  All it takes is an ordinance passed by the Council to provide a gradual refund to these residents.  I can't imagine that Mayor Ballard would be so foolish as to veto it.

I further would point out also that that Northern Estates is now represented the President of the Council, Maggie Lewis.   It would be a very popular cause for her to take on along with her Democratic caucus.  I would hope though that my Republican councilors wouldn't fall on the knife for Ballard's legal position.  After all, the dissenters who supported the position of the Northern Estate residents are all appointees of Republican Presidents and are three of the most conservative justices on the United States Supreme Court. 


Society of Socrates said...

Yes: Those indivduals that pay in installment should not get the benefit at the expense of those property owners who pay in full their sewer bill.

andieclark said...

I think they should step in and stand up for what they think is right. Once we had an estate litigation in Toronto and we're really firm with our stand. It eventually resulted in the way we wanted.