The City of Madison last week received a petition with 525 signatures to refer a new property tax road fee to a public vote. Citizens seeking a vote need 281 valid Madison voter signatures. Last night the Madison City Commission acknowledged receipt of those petitions but issued no certification that they are valid. Instead, Mayor Roy Lindsay says Madison residents may not be entitled to vote on this tax increase:
Lindsay said the commissioners had requested that the South Dakota Attorney General's Office provide guidance on whether passage of the special maintenance fee was a legislative or administrative action. If the commission's passage of the fee resolution was a legislative action, then the decision is referable to voters. If the attorney general determines that the resolution was an administrative action, then questions arise concerning a public vote.
"At this point, we're waiting for further information," Lindsay said. "We're waiting to find out if we're making the correct decision" [Chuck Clement, "City Acknowledges Referendum Petitions, Officials Wait for AG's Opinion," Madison Daily Leader, 2013.06.17].
Legislative vs. administrative—Mayor Lindsay is looking to South Dakota Codified Law 9-20-19 to keep Madisonians from voting on the city's tax increase. That law reads as follows:
Any legislative decision of a governing body is subject to the referendum process. A legislative decision is one that enacts a permanent law or lays down a rule of conduct or course of policy for the guidance of citizens or their officers. Any matter of a permanent or general character is a legislative decision.
No administrative decision of a governing body is subject to the referendum process, unless specifically authorized by this code. An administrative decision is one that merely puts into execution a plan already adopted by the governing body itself or by the Legislature. Supervision of a program is an administrative decision. Hiring, disciplining, and setting the salaries of employees are administrative decisions.
[I'd link to the statute, but the whole dang state server seems to have gone haywire this morning.]
The City of Madison apparently contends that imposing an additional tax levy on property owners is not a decision of permanent or general character but is simply putting into execution some already adopted plan. That's the distinction that the South Dakota Supreme Court made in 2011 in turning back a referendum push by Grant County residents opposed to county zoning changes.
But does that distinction apply to tax increases? South Dakotans can refer property tax increases in the form of opt-outs, though that referendum power is specifically authorized by SDCL 10-13-36. This tax increase isn't an opt-out, although it seems to work that way, since it is an amount the city can take from each property holder without counting toward the property tax levy limit. And unlike the basic property tax levy, which I can see argued to be an administrative decision carrying out the general policy of obtaining funds for city operations through property tax, the road fee is a new component of the tax, distinct from the normal levy. That sounds like a general, legislative decision to me.
The Fort Pierre City Council is mirroring Madison's argument in rejecting referral of a "deferred development fee" for the Riverwalk development. Petitioners there are taking the city to court. The Madison City Commission is seeking cover from the Attorney General before issuing its rejection.
Mayor Lindsay suggests that the city is in dire straits and has to get new money for road repairs somewhere. But trying to dodge a public vote on getting that money seems nboth legally tenuous and politically unwise. Madison has had enough of shutting out the voice of the people. Let this vote happen, and have a discussion with the voters about the wealth, budget, and practical needs of the city, not the finer points of referendum law.
Good write up Cory! I don't believe any of the property owners against this fee is in disagreement with the city roads. They just want to see everyone pay their share, not just property owners.
So we are essentially paying for Randy Schaefer's TIF right now. Rod Goeman told the city commission at the time our budget was maxed out but they approved it anyway.
What TIF are you speaking of? You got me curious and I'd like to know the reasoning behind it.
The city gave (I think it was 330k) of tax deferred credits for road improvements for the land behind Randy Schaefer's insurance office.
To develop more residential housing.
Time for recall petitions?
The part I find hilarious, and also sad, is the part that the city cannot raise funds from an extra sales tax. Because simply it'll be to easy to transfer and use them funds for other projects and needs other than the intent of the added tax was for. Think about that..
Going after one demographic instead of everyone is better in a politicians eyes.
Cory, thanks for your reporting on this. I'll be really interested to see both of these cases develop. The South Dakota Law Review published the article I wrote on special assessments after the courts found a special assessment by the City of Pierre to be an unconstitutional taking. In that article, I briefly explored the new-ish legislative change allowing cities to levy "special maintenance fees" similar to the one at issue in Madison. One can find pretty good authority to suggest that these "fees" are often levied unconstitutionally, but the SD courts have not had an opportunity to address the issue. Whether the referendum happens or doesn't, one might expect a court challenge on those ground to follow. Exciting times for special-assessment junkies...
Thanks, John! DB, here's my September 2011 post on the Silver Creek TIF district. That post includes links to more background:
https://madvilletimes.com/2011/09/schaefer-shifts-tif-story/
Very interesting, Counsel! Where can cheapskate bloggers and blog readers find a copy of the law review to study your article? And do you have any perspective on whether those special maintenance fees are considered legislative or administrative actions?
Joseph, city officials are some of the few elected officials in South Dakota who can be subjected to recall... and Mayor Lindsay can't submit those petitions to AG review.
How the city went about only mentioning this fee in the cities online agenda and not even hit the front page of the MDL... Almost seems like they planned minimal press to get the dirty deed done.
Correct me if I am wrong but how many 100k's of dollars did they spend on road improvements when they handed out their corporate welfare when the new John Deere Store was built? I though something like 150k was spent on building the turning lane plus other road improvements for them. When technically I thought it was not in the city limits and they would collect little or no sales tax from them.
Don't forget that the people pushing for a new building for a Madison thrift store last year wanted $150,000 from the city to subsidize said store. It was a bad idea and I hope is now only a bad memory, but I don't remember hearing an argument that the city didn't have the money to spend on that.
I would hate to see a precedent set that any city can enact any new tax for any reason that would affect only certain parts of the population, and not necessarily those who benefit from said tax, without the people affected having a chance to vote on it. I guess that is a mouthful, but I think you can get the gist of what I'm saying. A tax is a tax is a tax, regardless of semantics.
"Correct me if I am wrong but how many 100k's of dollars did they spend on road improvements when they handed out their corporate welfare when the new John Deere Store was built?"
IMO, that was a good investment. Could have easily been the deciding factor for Global Polymer.
I'd personally like to have more information about the claim John Hess made about 330k tax break for Randy Schaefer. Never heard about that one.
City can always find money for the people and business that need it.
Any landlord in town is still probably upset when tr city went with the college to build those apartments by the playhouse. Than promised if they were not rented they would cover the expenses. Creating direct competition with landlord in town.
Where is our handout?
DB, the question isn't whether it was a good investment. Folks petitioning the road repair tax generally agree that fixing roads is a good investment. The question is whether the city needs a new tax to come up with the money to pay for that investment, and whether such a new tax is imposed fairly.
Cory, I'm just commenting on that scenario. This scenario is a little different, and I agree with a vote, even though I fully support paying this tax. The main users of my street are neighbors, guests, and those servicing our properties(garbage, utilities, etc). When it comes to main thoroughfares, I believe all property owners should support improvements. I always get a kick out of "everyone paying their fair share" and when that applies.
The TIF is fact. Cory gave a link above. Drive behind Randy Schaefer's insurance office. The dirt work and street improvements were completed by what I would call a tax loan. The improvements were done by the city without cost to Schaefer, with future tax payments going toward that cost that normally the developer would have to pay himself up front. All that land needed lots of fill etc. Now the city says they need 380k for necessary improvements. A TIF can be a very valuable tool, but in my opinion, and the opinion of many others who saw the project develop, it was just wasted resources.
John, sorry about that! Missed the link.
The city sure isn't make it easier for people who own rental property in this town lately with utility rates increasing, property fee, school district getting their gym, shall I go on? And at the same time rent costs in this town has hardly raised to equal the cost of owning the properties.
Yes, let's add sidewalks. Since I'm a landlord with small houses on corner lots, obviously I have my own perspective on this special fee, and since I did not view the TIF favorably it's a sore spot. That said, rents have actually been going up quite a bit in the last year and a half. We've been in a situation for the last few months where rental houses are hardly available. BUT, because of our relatively low wages and still relatively low rents, it doesn't pencil out to build new units, unless you control it from start to finish (like Amerts have been doing with their new duplexes) or are willing to accept a low rate of return.
Update: Referendum is on, says the same 2012 law authorizing the special maintenance fee: https://madvilletimes.com/2013/06/new-law-says-madison-residents-can-refer-maintenance-fee-to-public-vote/
I want to clarify as I asked the finance officer today how the TIF affected our budget for this street maintenance. She said the TIF did not create the monetary need for these additional funds, but it and any future TIF lowers our ability to borrow. Maxing out the ability to borrow is a concern. There is talk of more TIFs.