Anne Arundel County v. Ebersberger

WILNER, Judge. This case arises from a dispute among the residents of the Indian Hills community in Anne Arundel County. It concerns their community swimming pool. A majority of the . homeowners persuaded the county government to enact an ordinance that could, if implemented, require all the property owners in the community to pay for the reconstruction and maintenance of the pool through annual special benefit taxes levied against their property.

That did not sit well with at least four of the homeowners; in a bill for declaratory judgment filed in the Circuit Court for Anne Arundel County, they challenged the ordinance as being both ultra vires and unconstitutional. After a hearing, the court found it unnecessary to address the constitutional issues; it agreed with the plaintiffs that the ordinance was ultra vires and, for that reason, declared it invalid. From that judgment, the county has appealed. The underlying facts are not in dispute.

The pool in question is owned by the Indian Hills Community Association, Inc., a private membership corporation consisting of the property owners in the Indian Hills community. The pool, along with the land on which it sits, was deeded to the Association in 1973 by the developer of the community; it was opened in 1974. In accordance with an express provision in the deed, use of the pool was restricted to the members of the Association and their guests. It is a community, not a public, pool.

For a time, the pool was supported by voluntary contributions and the-purchase of “pool bonds” by various members of the Association. Apparently, those contributions and purchases proved insufficient to maintain the pool in proper ³⁶³ condition, for in 1982 the pool was closed for health reasons. Because the pool does not comply with certain county health regulations, it cannot be reopened without substantial reconstruction and repairs, estimated to cost between $80,000 and $100,000. At some point, the Association succeeded in obtaining a commitment for a $100,000 loan, to be repaid over a period of fifteen years with interest at 13% per annum.

The commitment letter itself is not in the record; whether it is still in force is not clear. Md.Code Ann. art. 25A, § 5(0) authorizes chartered counties, of which Anne Arundel is one, “to establish, modify, amend and abolish special taxing areas for any of the purposes enumerated in this article.... ” Acting pursuant to that authority, Anne Arundel County has established a statutory scheme for the creation, amendment, operation, and abolition of special taxing areas. Section 17-700(a)(l) of the County Code authorizes the county council, by ordinance, to establish “special community benefit districts,” to “furnish and provide special privileges or benefits to persons or property in such districts,” and to “levy special taxes or assessments upon property in such districts receiving special benefit to pay the costs of furnishing, providing and maintaining such special privileges or benefits.” In order to carry out the functions delegated to such a district, the “board of directors of the civic or community association representing a majority of the property owners in the district” must, each year, prepare a proposed budget conforming to the requirements of the county budget office. The proposed budget must be submitted to all property owners in the district for comment and then to the county budget office.

The proposed budget must provide, among other things, the “rate of special community benefit tax” which, together with any unencumbered surplus in the district’s special community benefit fund, will support the proposed expenditures. County Code, § 9-200. If the proposed budget is approved, the special community benefit tax provided for therein is assessed against the property in the district on an ad valorem basis. It is collected by the ³⁶⁴ county along with the county and State real property taxes and is thereafter disbursed in monthly installments to the fiscal officer of the district.

The proceeds of the special community benefit tax may be used only in accordance with the approved budget and for no other purpose. County Code, § 9-400(c). In 1976, upon petition of a majority of the property owners and pursuant to these statutes and ordinances, the county council added a new § 17-703(o) to the County Code and thereby created the Indian Hills Special Community Benefit District. The district includes within it all of the property in the Indian Hills community and is therefore coextensive, geographically, with the Indian Hills Community Association.

Although not specified in § 17-703(o), pursuant to § 9-200, the Board of Directors of the Association acts as the governing body of the district. The “special privileges or benefits” accorded to the district in the 1976 ordinance were described in a “purpose” clause. The ordinance stated that the district was created “for the purpose of the construction, operation, maintenance and repair of certain community owned property and improvements within the boundaries of the district, including the resurfacing and sealing of the existing tennis courts, the installation of drainage pipe and drainage systems, the installation of a basketball court, the renovation of the log cabin by removing partitions, paneling walls, installing new windows, repairing ceilings, repairing and carpeting floor, correcting water problem in the basement, installing a new septic system, and installing, replacing and repairing recreation equipment as necessary.” Consistent with the general requirement of § 9-400(c), the ordinance specified that, “All special community benefit taxes collected for the district shall be used to defray the costs of construction, including the repayment of loans and interest therefor, and the maintenance of facilities in accordance with a ³⁶⁵ budget of the Indian Hills Community Association, Inc., or any other body administering the affairs of the district. Such tax funds may be expended for no purpose other than those specified above.” Seeing this format as the means of enabling the Community Association to borrow the money and renovate the pool, but apparently believing that the existing ordinance did not provide the requisite authority, a majority of the property owners in the district petitioned the county council to amend § 17-703(o) to add that, expressly, as a purpose and power of the district.

This, the county council did by enacting Bill No. 97-83 on October 19, 1983. The bill added to § 17-703(o), as an additional purpose of the district, “the renovation and reconstruction of the community pool and its related facilities, including all related equipment, and the payment of the pool’s yearly operational and maintenance expenses.” The district’s operations under the 1976 ordinance were rather modest. The total budget for FY 1984, for example, amounted to $3,350 and required a special community benefit tax of only 3.7 <t/$100 of assessable property. Upon adoption of the 1983 amendment, however, the Board of Directors of the Association, in January, 1984, proposed a budget for FY 1985 of $20,950, most of which was attributable to an appropriation of $16,400 for “Anticipated Pool Debt Service.” To support that budget, a special community benefit tax of 38.3 <u/$100 was required and proposed.

Article X of the Community Association by-laws requires an affirmative vote of two-thirds of the members to adopt a proposed budget. The budget submitted by the Board of Directors failed to get that support; more than one-third of the members rejected it. The Board thereupon prepared, submitted, and obtained approval of an amended FY 1985 budget containing no appropriation for pool debt service. That amended budget is the one that was submitted to the county and actually took effect. ³⁶⁶ The amended budget included, in place of the debt service item, a $9,300 appropriation for some emergency repairs, on account of which the special benefit tax was 7.8<t/$100.

The parties agreed, however, that the actual impact of the debt service item was 30 <p/$100, i.e., if the Association were to exercise its authority under Bill No. 97-83 and borrow the money in accordance with the commitment, and if the debt service on that loan were to be paid from special benefit taxes, an additional 30 e/$100 of tax would be required. That rate, it was also agreed, would increase once the pool reopened and maintenance and operational costs were incurred. As twice amended, the bill of complaint presented three issues: (1) whether Bill No. 97-83 contravenes the Fifth and Fourteenth Amendments to the U.S. Constitution, articles 15 and 24 of the Maryland Declaration of Rights, and art. Ill, § 40 of the Maryland Constitution by permitting taxes to be used for a private purpose; (2) whether the ordinance violates those same constitutional provisions by imposing a tax that would exceed the benefit conferred on the properties subject to it; and (3) whether the ordinance represented a valid exercise of the county’s authority under Md.Code Ann. art. 25A, § 5. 1 The court, as we have noted, decided the case on the third ground.

No doubt for plausible tactical reasons, both sides have asked us to consider and rule upon both the constitutional and ultra vires issues. They would like to have the validity of Bill No. 97-83 presently and finally determined. Unfortunately, we are unable to oblige them. Under the circumstances evident in the record before us, we do not believe that there exists an actual, justiciable controversy.

We therefore think that the bill of complaint, as amended, should not have been ruled upon at all, but dismissed. ³⁶⁷ Despite its long existence and frequent use, the Declaratory Judgment Act (Md.Code Ann.Cts. & Jud.Proc. art., §§ 3-401 — 3-415) does not spell out as clearly as it could some very basic limitations on its application. Section 3-403(a) authorizes a circuit court “within its jurisdiction [to] declare rights, status, and other legal relations whether or not further relief is or could be claimed.” Sections 3-406— 3-408.1 set forth some of the circumstances under which that power may be exercised, the heart of it being § 3-406, which authorizes the court to determine a question of construction or validity or to declare rights, status, or other legal relations under an instrument, statute, ordinance, regulation, patent, contract, or franchise upon complaint of a person interested therein or affected thereby. Those are not the exclusive circumstances, however. Section 3 — 403(b) states that the “enumeration in §§ 3-406, 3-407, 3-408, and 3-408.1 does not limit or restrict the exercise of the general powers conferred in [§ 3-403(a) ] in any proceeding where declaratory