Legal Issues and City Government and Local Government and Courts and Government & Economic Development and Government and Law

Indy’s sewer-fee forgiveness ruled constitutional by high court

June 4, 2012

The Supreme Court has turned down homeowners in Indianapolis who sought tax refunds when the city changed its plan for paying for a new sewer line.

In a 6-3 ruling Monday, the court upheld the city's decision to refuse to refund taxes that some homeowners paid up front while it forgave the remaining taxes for people who paid on an installment plan.

Those who paid in full complained that the disparate treatment violated the Constitution's Equal Protection Clause.

But Justice Stephen Breyer said in his majority opinion that Indianapolis acted properly in changing the payment system because it wanted to reduce the administrative headaches of debt collection. "In our view, Indianapolis' classification has a rational basis," Breyer said.

In dissent, Chief Justice John Roberts said the court was wrong to endorse such a gross disparity in tax treatment.

Roberts said the court should not let stand a decision that ended up charging some homeowners 30 times more than others.

"The equal protection violation is plain," he said, in an opinion joined by Justices Samuel Alito and Antonin Scalia.

The case, Christine Armour v. City of Indianapolis, led to a divided Indiana Supreme Court decision in May.

The case involves 45 homeowners in an Indianapolis subdivision who sued the city when they didn’t receive refunds of sewer assessments they paid. The case was named for Armour, one of the homeowners, because her name is listed first in the lawsuit.

In 2004, the city assessed each property $9,278 for a sanitary sewer project in the Northern Estates subdivision on the northwest side.  Homeowners were given the option to pay the fee in full or installments.

The next year, the Indianapolis Board of Public Works changed the way it financed sewer projects and adopted a policy that forgave 90 percent or more of the sewer assessments to Northern Estates residents who had elected to pay in installments.

The homeowners who paid the assessments in one lump sum prior to Nov. 1, 2005, were denied a refund by the city.

In 2009, the Indiana Court of Appeals concluded that the differing treatment of identically situated homeowners violated the Equal Protection Clause of the Constitution. The city was ordered to pay back $8,968 to the homeowners, plus interest and attorney fees.

However, in a 3-2 decision, the Indiana Supreme Court reversed the appeals court judgment and found no constitutional violation under the 14th Amendment had occurred.

Justice Frank Sullivan wrote the majority opinion and was joined by former Chief Justice Randall T. Shepard and Justice Steven David, while Justices Robert Rucker and Brent Dickson dissented.

The majority found that the city’s rationale was that low- and middle-class families were more likely to have been paying gradually and those who paid in full up front were more capable of affording the assessment.

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