Clark v. Union Pacific Railroad

John I. Purtle, Justice. This is a case concerning Amendment 59 to the Arkansas Constitution. This amendment was referred to the people by the legislature to counter the effect of our decision in Arkansas Public Service Commission v. Pulaski County Board of Equalization, 266 Ark. 64, 582 S.W.2d 942 (1979). The question in this case is whether a new millage passed after Amendment 59 was implemented can be collected against personal property. The answer is no. Wynne School District #9 voted an increase of three mills in 1985. The collector of Cross County, upon the advice of the attorney general, applied the increase equally to both real and personal property. (The attorney general had changed his opinion which first said the new millage could not be collected against personal property.) The appellees filed suit to prevent collection of the millage against personal property. The chancellor held the new millage could not be collected against personal property until the rates equalize. The chancellor was correct. Amendment 59 provides that the amount of revenue derived from personal property cannot be increased until the rates for real and personal property equalize. It is undisputed that application of the new millage to personal property would increase the revenue collected. The decision in Public Service Commission v. Pulaski County Board of Equalization was based on the Arkansas Constitution, Art. 16, § 5 as it read before the adoption of Amendment 59. The former § 5 read in pertinent part: § 5 All property subject to taxation shall be taxed according to its value, that value to be ascertained in such manner as the General Assembly shall direct, making the same equal and uniform throughout the State. No one species of property from which a tax may be collected shall be taxed higher than another species of property of equal value Amendment 59 substituted a new section 5 and added sections 14, 15 and 16 to Const., Art. 16. The amendment provides in part: § 5(a) All real and tangible personal property subject to taxation shall be taxed according to its value, that value to be ascertained in such manner as the General Assembly shall direct, making the same equal and uniform throughout the State. No one species of property for which a tax may be collected shall be taxed higher than another species of property of equal value, except as provided and authorized in Section 15 of this Article, and except as authorized in Section 14 of this Article. § 14(a) Whenever a county wide reappraisal or reassessment of property subject to ad valorem taxes made in accordance with procedures established by the General Assembly shall result in an increase in the aggregate value of taxable real and personal property in any taxing unit in this state of ten percent (10%) or more over the previous year the rate of city or town, county, school district, and community college district taxes levied against the taxable real and personal property of such taxing unit shall, upon completion of such reappraisal or reassessment, be adjusted or rolled back, by the governing body of the taxing unit, for the year for which levied as provided below. . . . The adjustment or rollback of tax rates or millage for the “base year” as hereinafter defined shall be designed to assure that each taxing unit will receive an amount of tax revenue from each tax source no greater than ten percent (10%) above the revenues received during the previous year from each such tax source, adjusted for any lawful tax or millage rate increase or reduction imposed in the manner provided by law . . . and after making the following additional adjustments: (i) By excluding from such calculation the assessed value of, and taxes derived from, tangible personal property assessed in the taxing unit, . . . (ii) By computing the adjusted or roll-back millage rates on the basis of the reassessed taxable real property for the base year that will produce an amount of revenue no greater than ten percent (10%) above the revenues produced from the assessed value of real property . . . from millage rates in effect in the taxing unit during the base year in which the millage adjustment or rollback is to be calculated. Provided, however, that the amount of revenues to be derived from taxable personal property assessed in the taxing unit for the base year. . . shall be computed at the millage necessary to produce the same dollar amount of revenues derived during the current year in which the base year adjustment or rollback of millage is computed, and the millage necessary to produce the amount of revenues received from personal property taxes received by the taxing unit. . . shall be reduced annually as the assessed value of taxable personal property increases until the amount of revenues from personal property taxes. . . will produce an amount of revenues from taxable personal property equal to or greater than received during the base year, and thereafter the millage rate for computing personal property taxes shall be the millage rates levied for the current year. [Emphasis added.] The amendment provides that the General Assembly shall establish by law the manner in which the equalization of assessment and millage is to be accomplished. In an attempt to clarify the matter, the General Assembly enacted Act 848 of 1981 (Ark. Code Ann. §§ 26-26-401 et seq. (1987)) which provides at § 405: (a) Revenues derived from personal property by each taxing unit in the county are to be frozen at the base-year levels. The millage applied to personal property only is then adjusted downwards in the same proportion that the assessment base increases. The current millage is defined as the millage that was used in each taxing unit to derive the base year revenues for personal property. This procedure shall be followed each year until the personal property millage rate is equal to, or lesser than, the millage rate applied to real estate, at which time the interim adjustment is complete, and both personal property and real estate shall thereafter be taxed at the same millage rate. From the words used in Act 848 it is clear that the millage applied only to personal property will be adjusted downwards in the same proportion that the assessment base for all property increases. The concluding sentence clearly requires that this procedure be repeated annually until the interim adjustment is complete, at which time “both personal property and real estate shall thereafter be taxed at the same millage rate.” We glean from the language of Amendment 5 9 that the revenues produced from real estate taxes cannot be increased more than ten percent (10%) in the “base year” (the year following completion of reappraisal or reassessment). However, the adjustment or rollback in the “base year” is to be “adjusted for any lawful tax or millage rate increase or reduction imposed in the manner provided by law. . ..” Therefore, in the absence of a lawful increase in the millage rate (which would apply only to real estate until the rates are equalized), the personal property rate reduction will depend upon the increase in revenues from real property, after making the specified adjustments. Although Amendment 59 is obtuse, it can be seen that the overall intent was to equalize the assessments and millage rates with respect to personal and real property taxes after completion of reappraisal. In order to equalize the rate of taxation, it obviously is necessary to (1) lower the assessed valuation of personal property, (2) increase the assessed valuation of the real estate, or (3) hold the personal property rates at the present level, with adjustments, until the real estate tax rates reach the same level. Adding new millage at the same rate to personal property and real property would never equalize the two, and the goal of Amendment 59 could never be reached. Act 848 and Amendment 59 require the eventual equalization of personal and real estate property tax rates. Therefore, the only practical way of obtaining equality between the two is to apply new millage rates only to realty until such time as the rates between the two classifications are equalized. The only issue presented to this court is whether Amendment 59 requires that personal property be exempted from new levies until such time as the rates are equalized. We hold that personal property is exempt from the new millage under these circumstances. We do not decide the wisdom nor the constitutionality of Amendment 59. Our duty is to interpret the amendment and law as best we can and to enforce it. Therefore we affirm the decision of the chancellor. Affirmed. Glaze, J., concurs. Hickman, J., dissents.