BERRYVILLE — Another hearing in the lawsuit filed regarding an $18 fee charged to property owners was held last week, but it will lead to a much more expansive hearing in February.
Carroll County Circuit Judge Scott Jackson denied motions for summary judgement by both the plaintiff and defense, but he also said there were still factual matters to be defined at a full hearing with testimony from witnesses someone early next year.
The lawsuit is one of six filed in the Ozark Mountain Solid Waste District, which consists of Baxter, Boone, Carroll, Marion, Newton and Searcy counties.
The bulk of the lawsuits are the same, but the plaintiffs are individual residents of each county. Fayetteville lawyers Matt Bishop and Wendy Howerton filed all six suits. The plaintiff in Carroll County is Paul Summers.
The solid waste district board of directors voted in 2012 to default on revenue bonds sold to purchase the now defunct NABORS landfill in northern Baxter County due to a lack of revenue. Soon after, the district filed for federal bankruptcy protection, but that was denied. The bankruptcy judge ruled the district wasn’t eligible for bankruptcy because the district could have levied a fee against business and residential property owners for making trash service available, but the board chose not to for political reasons — the board is comprised almost solely of elected officials from each county.
Bank of the Ozarks (now Bank OZK), acting as trustee for the bond holders, filed suit against the district in Pulaski County Circuit Court, where Judge Tim Fox ruled in favor of the trustee and a and a receiver, Little Rock lawyer Geoffrey Treece, was appointed to file a report.
Treece’s report recommended the $18 fee be collected on every residential and business property in the district until bond holders are paid off, which could be almost 20 years. Fox approved the report and ruled that tax collectors across the state collect that fee. That led to court proceedings in the Ozarks.
Each of the suits alleges the court-ordered $18 fee collected on business and residential property taxes is actually a tax, thus an illegal exaction.
In court last week, Bishop pointed out that the law would allow the district to assess a fee for trash service, but in 2014 testimony in depositions revealed no trash services were being offered.
The district receives $2 for each ton of solid waste going to a landfill outside the district and fees it charges trash haulers for licensing, as well as grants for recycling and electronic waste.
Bishop said that since 2014, the district has ended each year with triple-digit budget balances, but it has never tried to repay bond holders with that money.
Courts have ruled that a fee is not a tax if it is related to a service offered, but the $18 fee is used only to retire debt, Bishop said. Thus, it is a tax, not a fee, and a court cannot levy a tax.
A section in the state legislature’s appropriation bill that finances the ADEQ allows the agency to sue taxpayers to recoup money it spends from the Post Closure Trust Fund to permanently close a landfill. That section cites concern for environment protection as well.
Bishop said that section applies only to landfills owned by a solid waste district that cannot meet its financial obligations or has filed for bankruptcy protection. But it does not apply to privately-owned or county-owned facilities, so concern about the environment seems misplaced.
Bishop said the appropriations violate the state constitution, so plaintiffs are asking for protection from the bond holders, ADEQ and the receiver as well.
Mary-Tipton Thalheimer, Little Rock lawyer representing the defendants, said the law allowed for collection of a fee on business and residential customers for make services available, not necessarily services provided. She said one circuit court can’t overrule another circuit court, so the place to have filed the suit would have been in Pulaski County when Judge Fox issued his ruling.
W.H. Taylor, Carroll County lawyer representing Carroll County Collector Kay Phillips, who is also named as a defendant in the suit, also argued in favor of action in Pulaski County.
He said it appeared the receiver might have fraudulently reported to the court that the district offered trash services, which would allow for Judge Fox to reopen the case.
Deputy Attorney General Olan Reeves also appeared at the hearing.
Reeves explained that his only argument concerned the constitutionality of appropriations for the ADEQ.
Reeves told Judge Jackson that he has worked in state government for 41 years and admitted he was concerned when he first started seeing such substantive language in appropriations bills, but it is becoming more common. He said the Supreme Court has ruled that such language is legal if it addresses the same subject and doesn’t include funds for other purposes.
He went on to say his arguments had nothing to do with approval of the ADEQ’s ability to sue taxpayers, but whether it is legal under the constitution. Although the section in the ADEQ appropriations bill does indeed apply only to Ozark Mountain, it could apply to others in the future.
After hearing arguments, Judge Jackson recessed for about 45 minutes to digest the parties’ position.
When he called court back in session, he ruled that venue was proper in Carroll County because it was an illegal exaction lawsuit.
He also ruled in favor of Reeves’ argument that the ADEQ appropriations did not violate the constitution.
However, Jackson said there were still some factual matters to determine, namely whether the district actually offered solid waste disposal services and whether the district board voted to allow its lawyer to enter into an agreement with the receiver in the first place.
He said the parties would hold a conference call to set a date for winter 2020 for a hearing that will include testimony from witnesses.