May 12, 2011
Full Disclosure --
our firm represents the appellees in the case discussed below.
Personal issues have prevented me from informing you about the most recent lesson in how hard it is to fight the government when it only needs to meet the rational basis standard. On May 10, 2011, the Indiana Supreme Court held in a 3-2 decision that the government's interest in saving money justified treating members of a similar class unequally in
City of Indianapolis v. Armour, ___ N.E.2d ___ (Ind. 2011), Cause No. 49S02-1007-CV-402.
less..
In 2001, Indianapolis levied a special assessment against certain properties to fund a sanitary sewer project. Property owners were given the option to pay the assessment up front in its entirety or in monthly installments over a 10-, 20-, or 30-year period. In 2005, Indianapolis adopted a new method to fund the sanitary sewer project and forgave all of the outstanding assessment balances. However, Indianapolis would not refund any money to the people who had paid their assessment in full in 2001. The plaintiffs brought an action seeking a refund, claiming that not doing so violated their federal constitutional rights under the Equal Protection Clause of the Fourteenth Amendment. The trial court granted the plaintiffs' motion for summary judgment and the Court of Appeals affirmed. The Indiana Supreme Court then granted transfer.
On appeal, the Court described the rational basis standard and held that the City's refusal to refund any money to the people who had paid their assessment in full in 2001 was justifiable under that standard.
[I]t was reasonable for the City to believe that property owners who had already paid their assessments were in better financial positions than those who chose installment plans. To be sure, there might be some property owners who could have paid up front but elected to pay in installments, despite being required to pay more because of interest. And it is possible that there are some who paid up front that are currently experiencing financial hardship. But, like in
Clover Leaf Creamery, it does not matter under rational basis review what the actual facts would show, as determined in court, so long as the issue was at least debatable when the governmental decision maker acted.
...
Furthermore, the decision not to issue refunds to those who had already paid implicates another legitimate interest – preservation of limited resources. The City clearly has a legitimate interest in not emptying its coffers to provide refunds to those who had already paid their assessments. The funds from the particular assessments at issue here were used to fund the Brisbane/Manning Project and had already been spent in constructing those sewers. The plaintiffs each paid for a sewer and received a sewer, along with all the attendant public health benefits associated with sanitary sewers. This was not a case in which the plaintiffs were assessed for a local benefit and did not receive that local benefit. It is true that those whose assessments were discharged also received a sewer and did so at a lower price. But the Equal Protection Clause does not require substantive equality among taxpayers if there is a rational basis for differing treatment, and the Court of Appeals erred in concluding otherwise.
The City's decision to forgive outstanding assessments was rationally related to its legitimate interests in reducing its administrative costs, providing relief for property owners experiencing financial hardship, establishing a clear transition from Barrett Law to STEP, and preserving its limited resources.
The Court then went on to reject other arguments the plaintiffs advanced to apply some test other than the rational basis test.
As stated above, this case demonstrates why it is exceedingly difficult to win a case against the government when the rational basis standard is the proper legal standard to apply. If the government can treat similar people differently simply because doing so will save the government money, then there are few true limits on the application of that legal standard.
Lessons:
- Government's interest in saving money is sufficient justification for treating similarly situated people differently.
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