Board of County Commissioners v. Bolden

Rodowsky, J., delivered the opinion of the Court. When the Board of County Commissioners of Garrett County, Maryland (the "Board”) undertook to fix a property tax rate of $2.61 for the taxable year July 1, 1979 — June 30, 1980 which exceeded the "constant yield tax rate” of $2.37, their action was immediately challenged by this taxpayer’s suit. The Circuit Court for Garrett County concluded that the Board had failed to comply with applicable statutory procedures and enjoined the Board from enforcing a tax rate in excess of the constant yield tax rate. The Writ of Certiorari was issued prior to decision by the ⁴⁴² Court of Special Appeals on the appeal by the Board.

We shall here affirm the decree of the circuit court. The concept of a constant yield tax rate was introduced into the property tax system by Maryland Laws (1977), Ch. 964, now Md. Code (1957, 1975 Repl. Vol., 1979 Cum. Supp.), Art. 81, § 232C.

It is that rate which, when applied to the estimated full assessable base as of the date of finality (here January 1, 1979) of the next taxable year (here 1979/1980), will provide the same property tax revenue for the taxing authority as was levied during the current taxable year (here 1978/1979). 1 During May through July, 1979, the period involved in this case, the relevant statutory scheme and provisions are as hereinafter described. 2 Under § 232C (b) the State Department of Assessments and Taxation, prior to January 15 of each year, 3 "shall notify” each taxing authority, county and municipal, of an estimate of the total assessed value of all real and personal property within its jurisdiction for the next taxable year. The estimated assessable base, after certain exclusions, is to be advertised by the Department in a newspaper of general circulation in each county. The Department is also to notify, presumably after computation, each taxing authority of the constant yield tax rate applicable to.it. Section 232C then sets forth the provisions applicable here.

They are: (c) A taxing authority may not increase the tax rate above the constant yield tax rate ... unless it advertises its intention to impose an increased tax rate. (d) A tax rate in excess of the constant yield tax ⁴⁴³ rate may not be levied until the taxing authority implements the following procedure: (1) The taxing authority shall advertise its intent to exceed the constant yield tax rate in a newspaper of general circulation within its jurisdiction sufficient to give notice as determined by the Department. The taxing authority will meet on a day, at a time and place fixed in the advertisement, which shall be approximately 7 days after the day that the advertisement is published, for the purpose of hearing comments regarding any tax rate increase and to explain the reasons for any proposed increase. The advertisement may not be less than 1/4 page in size and the smallest type used shall be 18 point.

The advertisement may not be placed in that portion of the newspaper where legal notices and classified advertisements appear.... The meeting on the proposed tax rate may coincide with the meeting on the proposed budget of the taxing authority. The hearing shall be held not less than 14 days prior to the date by which property tax rates shall be levied pursuant to the provision contained in a charter, general or local law, or local ordinance. (3) The taxing authority, after the public hearing has been held in accordance with the above procedures, may adopt a resolution or ordinance levying a property tax rate in excess of the constant yield tax rate.

If the resolution or ordinance adopting this tax rate is not approved on the day of the public hearing, the day, time and place at which the resolution or ordinance will be scheduled for consideration and approval by the taxing authority shall be announced at the public hearing. [Emphasis added] ⁴⁴⁴ Subsection (h) provides for sending with tax bills the comparison between the tax rate actually adopted and the constant yield tax rate, and sets forth a form for presenting the information. A Garrett County property tax rate for the fiscal year beginning July 1, 1979 which would exceed the constant yield tax rate was contemplated by the Board. A notice of public hearing was published in the week preceding May 31, 1979 in The Republican, a newspaper printed in Oakland. This notice included the following text, in large type: Last year’s property tax rate was $2.45, and the certified value of all assessable property was $206,937,558.

The rate multiplied by the value produced revenues (less discounts) of $4,708,564. To produce the same revenues as last year (including certain State Aid adjustments), the tax rate would be $2.37. This rate is called the constant yield rate. For this taxable year, the actual property tax rate is $2.66.

This rate is $.29 more than the constant yield tax rate and will produce in revenue $619,556 more than produced by the constant yield tax rate. 4 The notice advised that the public hearing would be held on June 5, 1979 at 1:30 P.M. in the Grand Jury Room, Garrett ⁴⁴⁵ County Courthouse "to present and take testimony on the proposed County Budget ....” 5 The succeeding events were the subject of the following findings of fact by the Chancellor which are not challenged in any material respect: [T]he hearing was convened as advertised on June 5, 1979, in the Grand Jury Room, but shortly thereafter was recessed by the Commissioners because of an unexpected large audience. It was announced to those assembled that the hearing would resume on June 11, 1979, at 7:30 P.M. at Garrett Community College. The hearing was continued at the College at the date and time announced. [T]he Commissioners did not adopt or approve a resolution or ordinance adopting the proposed tax rate at the hearing, or that day .... There was no announcement of the day, time and place at which such resolution or ordinance would be scheduled for consideration and approval....

It was further established that no notice of the day, time and place at which the resolution or ordinance was scheduled for consideration or approval was ever given. On June 19,1979, at a regular meeting of the Board, a tax rate of $2.61 was in form established. 6 The present action was filed on June 29,1979 by Appellee, DeCorsey E. Bolden. 7 In addition to suing the Board, as a municipal corporation, the complaint joined as defendants Truman E. Paugh, H. Lester Hunter and Ernest J. Gregg, Jr., who are the members of the Board, and the county ⁴⁴⁶ treasurer. 8 Undoubtedly spurred by the suit, the Board undertook to fortify its position and caused to be published in The Republican in the week before July 5, 1979 a notice that it would conduct a public hearing on July 10, 1979 "for the purpose of ratifying the tax rate, which had been established at a regular meeting of the County Commissioners on June 19, 1979 ... at a level of $2.61 ... with an additional $ .05 per $100.00 for Fire Departments.” The Board, by its majority, on July 10, 1979 again set a tax rate of $2.61. Appellees challenged below, and challenge here, every step of the process followed in fixing the tax rate. 9 The trial court held that the June 19,1979 adoption of a tax rate was invalid because of a failure to state at the conclusion of the public hearing on June 11,1979, the day, time and place at which the tax rate resolution would be scheduled for consideration and approval, and that the July 10 attempted ratification was ineffective under Article 81, § 32, because the tax rate was not fixed before July 1,1979. We agree with the Chancellor that it is unnecessary to review each of the Appellees’ points of challenge, and shall address ourselves to the issues which were the ground of decision below.

The power of a board of county commissioners to fix the property tax rate is derived from the General Assembly. See, e.g., Schneider v. Landsdale, 191 Md. 317 , 61 A.2d 671 (1948); Md. Code (1957, 1973 Repl. Vol.), Art. 25, § 20. Section 232C of Art. 81 has clearly limited the exercise of that power, since a "tax rate in excess of the constant yield ⁴⁴⁷ tax rate may not be levied until the taxing authority implements” the procedure set forth in subsection (d).

The Garrett County Board did not announce at the public hearing of June 11 "the day, time and place at which the resolution or ordinance [would] be scheduled for consideration and approval” by it. § 232C(d)(3). It is contended by the Board, however, that this provision is merely directory, or, alternatively, that there has been substantial compliance. Here, the obvious purpose of § 232C is to focus public attention from one year to the next on the interrelationship between the rate of property tax and the assessable basis in a period of rising property values. In the constant yield tax rate presentation the property tax revenue element of the equation is held constant so that the factor of a rising assessable basis is reflected in the reduced, or constant yield, rate.

Thus, if the proposed rate for the forthcoming taxable year is the same dollars per hundred as the current year’s rate, the comparison to the constant yield rate enables taxpayers more readily to determine that the tax rate has effectively increased and that increased property taxes are not exclusively due to increases in assessed valuations. In order for a taxing authority to exceed the constant yield rate, there must be newspaper notice of this intent in advance of a public hearing. Certainly one purpose of this notice and of the public hearing is to afford taxpayers the opportunity to be heard with respect to proposed appropriations and revenue estimates which, in combination, will cause the constant yield property tax rate to be exceeded. If the tax rate is not approved on the day of the public hearing, § 232C (d) (3) states that the day, time and place at which the rate will be scheduled for consideration and approval "shall be announced at the meeting.” We assume solely for purposes of addressing the Board’s argument that the manner of giving notice, i.e., by announcement, and that the time of giving notice, i.e., at the public hearing, are directory only.

But see In Re: James S., 286 Md. 702 , 410 A.2d 586 (1980); State v. Hicks, 285 Md. 310 , 403 A.2d 356 (1979); and Johnson v. State, 282 Md. 314 , ⁴⁴⁸ 384 A.2d 709 (1978). We shall further assume, as the Board argues, that no right is conferred, by § 232C, on taxpayers to be heard again at the subsequent meeting. However, in the face of the rather detailed procedures for adopting a tax rate in excess of the constant yield rate which permeate § 232C, we cannot read out of the statute the requirement that some notice be given of the subsequent meeting. It is of the essence of the last sentence of § 2320(d)(3) that taxpayers be advised of the target date, time and place for rate adoption so that those who support or oppose the proposed increase may further marshal public opinion and bring it to bear on the taxing authorities.

Here, the Board failed to give any notice prior to fixing the tax rate on June 19, 1979. We conclude that, at a minimum, the taxing authority must give some reasonable notice of its meeting at which the rate is scheduled for consideration and approval. 10 The effect of the failure by the Board to comply with the procedural requirements of § 232C was that a property tax rate in Garrett County of $2.37 per hundred was in effect no later than midnight of June 30, 1979 for the 1979/1980 taxable year. This result obtained under one or the other of two theories. A choice need not be made between them for the present decision.

Section 232C imposes limitations on the exercise of taxing power by taxing authorities, but the result of the violation of its requirements presented here need not be that the action of the Board on June 19, 1979 was a complete nullity. The action of the Board in attempting to establish a rate of $2.61 can be viewed as effective up to the ⁴⁴⁹ legislatively imposed ceiling of the constant yield tax rate. On this analysis the legal consequence of the Board’s action on June 19 was to adopt a rate of $2.37. The analysis of the Chancellor was that the action of June 19, 1979 was a total nullity and thus there was no tax rate established by the Board prior to July 1, 1979.

The trial court then turned to Art. 81, § 32 which states: As soon as may be practicable after the date of finality in each year and in any event before the first day of July next following the county council or county commissioners of each county ... shall fix the rate of county ... taxation for such ensuing year on all assessments, persons or property subject to taxation under this article in such county ... and for which the rate is not fixed by this article ... provided that where any fixed or limited rate of county ... taxes is prescribed by this article, such county ... taxes are hereby levied at such respective rates upon all assessments, persons and property liable thereto under the provisions of this article, and it shall not be necessary for the county commissioners of any county... to pass a resolution or ordinance levying the same. Since the trial court considered the constant yield tax rate as a "limited rate,” prescribed by Art. 81, it concluded that the rate of $2.37 was in effect by operation of § 32. The Board next argues that any procedural defect was cured by the notice published in the week prior to July 5, 1979 and by the resolution adopted on July 10, 1979. Appellees argue, and the trial court held, that effect to the Board’s July 10 action is precluded by the provision of Art. 81, § 32 under which county commissioners shall fix the rate of county taxation "in any event before the first day of July next following” the date of finality.

The Board rejoins by contending that the quoted provision is directory. In addressing this contention we shall continue to assume that the requirements for notice of a subsequent meeting in § 232C (d) (3) are satisfied by substantial compliance and we ⁴⁵⁰ shall assume that the newspaper notice of the July 10 meeting was substantial compliance. On the issue of the interpretation of § 32 the Board emphasizes, by reference to 1A Sutherland, Statutory Construction, § 25.03 at 299-300 (4th ed. C. Sands 1972) that "the essence of the thing to be done,” the levy, was done on July 10 and that the non-compliance relates only to the July 1 time limit which