Opinion
No. 37485
Decided December 28, 1962.
Taxation — Undivided local government fund — Allocation by county budget commission — Appeal to Board of Tax Appeals — Items considered in determining budget needs — "Current operating expenses" construed — Section 5705.01 (F), Revised Code — Accumulated balances arising from special tax levies not considered — Anticipated transfers from general fund to road and bridge funds.
APPEAL from the Board of Tax Appeals.
The present controversy involves the allocation for the calendar year 1962 of the undivided local government fund of Fairfield County, in the estimated total amount of $265,919.08, among the county of Fairfield, 13 townships of that county and 14 municipalities in the county, including the city of Lancaster.
From an order of the Fairfield County Budget Commission allocating such funds according to needs, an appeal was taken to the Board of Tax Appeals by the city of Lancaster on the ground that the amount allotted to it was too small. The board, acting under Section 5705.37, Revised Code, substituted its finding for that of the county budget commission and ordered other and different allocations to the political subdivisions affected, increasing the allocation to the city of Lancaster from $66,293.62, as fixed by the county budget commission, to $99,134.63. Nine of the townships, being dissatisfied with the decision of the board, perfected an appeal to this court, as authorized by Section 5717.04, Revised Code, and the matter is now here for disposition.
Mr. John T. Huddle, city solicitor, for appellee city of Lancaster.
Mr. E. Raymond Morehart, prosecuting attorney, for appellees Fairfield County Budget Commission and Fairfield County.
Mr. G. Gene Jackson, for appellants and appellees Amanda Township, Madison Township and Hocking Township.
Appellants contend that the decision of the board is unreasonable and unlawful in several respects. It appears from the record that the budget of the city of Lancaster arbitrarily included about $60,000 more for fire and police protection than it did in the preceding year; and that such city has no tax levies outside the ten-mill limitation and no income tax to support its fire and police activities. Moreover, it is disclosed that the city's anticipated expenditures for 1962 are in excess of $112,000 more than they had been in any previous year of record.
On the other hand, it appears that the several complaining townships and the village of Baltimore have voted levies outside the ten-mill limitation to provide for fire protection; that the funds derived from such levies have been kept in separate accounts; that by reason of such outside levies small balances have accumulated in the general funds and in fire levy funds; and that without such levies deficits would have occurred with respect to the maintenance and operation of fire departments as well as in current operating costs. Appellants point out that in determining their needs the board considered only current operating needs as shown in the general fund portion of their budgets and ignored those needs as shown in the fire operating funds, and that by such erroneous procedure the appellants were discriminated against, with the result that they were allotted only the minimum 10% permitted by law, whereas Fairfield County was awarded the 50% maximum amount permitted by law, and the city of Lancaster the balance of 40%.
It seems to us that the board in exercising the authority accorded it by Section 5705.37, Revised Code, failed to recognize and include certain items which were correctly taken into account by the county budget commission in making its computations under the provisions of Section 5739.23, Revised Code; that under such section the term, "current operating expenses," as defined in Section 5705.01 (F), Revised Code, embraces more than those expenses shown in the general fund portion of a political subdivision's annual tax budget. The fact that a political subdivision has a balance at the close of a fiscal year in the fund which may lawfully be used for current operating expenses or in a special levy fund out of which disbursements are made and which disbursements are properly payable from the general fund does not affect the amount needed for current operating expenses. It is not fair or right in determining the current operating needs of such subdivision to reduce those needs to the extent of such balances, without deducting from such balances whatever amounts are contained therein and attributable to "those revenues which a subdivision receives for an additional tax or service charge voted by its electorate."
The effect of the decision of the Board of Tax Appeals is to give to the city of Lancaster the advantage of the greater tax levies imposed upon the inhabitants of the various townships and municipalities in the county. There is no proportionate increase in the tax load of the inhabitants of the city of Lancaster. In other words, by practicing economies and increasing their own tax burdens, the small political subdivisions make it possible for the inhabitants of the city of Lancaster to enjoy lower taxes. This is neither the intent nor the purpose of the law. The funds are to be distributed on the basis of need for a given period of time without reference to the special tax revenues and without deduction for balances acquired by the economical operation of these small governmental units. The fund is to be apportioned on the actual cost of the operating needs during the period without consideration of present accumulated balances or funds arising from special tax levies.
A political subdivision which votes and collects a levy outside the ten-mill limitation to provide for governmental operations is entitled to credit therefor in the allocation of an undivided local government fund of a county and should not be penalized for assuming an added tax burden to provide for a governmental activity, which would normally be paid out of current operating funds.
We are in agreement with appellees' assignment of error which challenges the board's action in considering anticipated transfers from the general fund to road and bridge funds as proper expenditures upon which to predicate allocation of the local government fund. Section 5705.05, Revised Code, outlines the purpose of the general levy for current expenses and states the objectives for which such general levy may be made. However, the statute excludes from the general levy those sums of money needed for the construction, reconstruction, resurfacing or repair of roads and bridges in both counties and townships. By such exclusion and from the fact that local fund money must be placed in the general fund and used for general fund purposes, the board in appraising need was mistaken in its determination that no amount should be removed from the proposed expenditure portion of appellants' budgets, when they showed anticipated transfers of money from the general fund to the special road and bridge fund.
The decision of the board is unreasonable and unlawful and is reversed in the respects indicated herein, and the cause is remanded to the board for redeterminations and allocations not inconsistent with this opinion.
Decision reversed in part.
WEYGANDT, C.J., ZIMMERMAN, TAFT, MATTHIAS, RADCLIFF, O'NEILL and GRIFFITH, JJ., concur.
RADCLIFF, J., of the Fourth Appellate District, sitting by designation in the place and stead of HERBERT, J.