Griffin v. Anne Arundel County

Moore, J., delivered the opinion of the Court. John H. Griffin and six other residents and property owners of historic Annapolis brought a class action in equity in the Circuit Court for Anne Arundel County seeking injunctive and declaratory relief against Anne Arundel County and the State of Maryland. The gravamen of the complaint was that the County Council for Anne Arundel County imposes an ad valorem property tax on all property owners of the County, including property owners within the ¹¹⁷ City of Annapolis, for services such as fire and police protection, public works, recreation and parks, planning and zoning, mosquito control and Board of Liquor Control — services actually being supplied exclusively through their own city government and with respect to which there is also a city ad valorem property tax; and that an ad valorem property tax rate differential allowed by the County for municipal residents is arbitrary, represents only one-third of the amount to which they are lawfully entitled and bears a disproportionate relationship to benefits actually received. The specific relief requested was the entry of a declaratory decree that (a) the imposition by the County of ad valorem property taxes upon the owners of real property in the City of Annapolis “is, and if continued will be, illegal and void in violation of Articles 15 and 23 of the Maryland Declaration of Rights and the Fourteenth Amendment to the Constitution of the United States” ; and (b) that tax levies imposed upon the appellants since 1966 be declared void and illegal and that damages be awarded to petitioners and the class they represent for the difference between the tax differential allowed and the greater amount to which they were legally entitled. 1 The injunctive relief prayed was also twofold.

Appellants sought injunctions (a) forbidding the collection of any real property tax against the petitioners and all property owners similarly situated for the fiscal year 1973-74 “based on the illegal differential taxation imposed” ; and (b) forbidding any tax sales for delinquent taxes against the petitioners or the members of the class. The chancellor (Childs, J.) sustained, without leave to amend, the demurrer interposed by the State of Maryland and no error is assigned with respect to that ruling. In a memorandum opinion and order the chancellor, in reliance upon Hunt. v. Montgomery County, 248 Md. 403 , 237 A. 2d 35 (1968) and Maryland Rule 610, rendered a summary declaratory judgment in favor of Anne Arundel County, ¹¹⁸ finding no basis for an adjudication of violations of the state or federal constitutions and that the questions presented were of legislative rather than judicial cognizance. I FA CTUAL BA CKGRO UND The City of Annapolis is a municipal corporation governed by the provisions of Article 23A of the Maryland Code which implements Article XI-E of the Maryland Constitution, ratified November 2,1954.

Anne Arundel County adhered to the county commissioner form of government until 1964 when it became a charter county pursuant to Article XI-A of the Maryland Constitution, ratified November 2, 1915, and Article 25A of the Code. Since the fiscal year 1966, except for the fiscal years 1970 and ’71, the County Council has granted to property owners within the City of Annapolis a tax differential as shown by the following table adapted from paragraph 24 of the bill of complaint: Fiscal Year Rate Charged City Non-City 1966 2.60 2.83 1967 2.63 2.86 1968 2.69 2.89 1969 2.69 2.89 1970 3.00 3.00 1971 3.00 3.00 1972 2.95 3.25 1973 2.82 3.12 1974 2.29 2.59 The tax differential granted, as distinguished from the differential to which appellants claim to be entitled, is alleged in the bill of complaint to be as follows: ¹¹⁹ Fiscal Year Tax Differential Granted Claimed 1966 .23 .56 1967 .23 .61 1968 .20 .74 1969 .20 .91 1970 .00 .81 1971 .00 .80 1972 .30 .75 1973 .30 .97 1974 .30 .85 The case was disposed of without the taking of testimony, as indicated above, and the record before us does not disclose, for any of the fiscal years in question, the constituent elements of the tax rate differential nor the legal or legislative means utilized to effect the differential, nor, indeed, the basis for appellants’ calculations of the differential claimed. 2 Appellants concede that the tax money paid by them to the County is spent for public purposes but they contend that the taxes are levied, not for the benefit of the “public of the City of Annapolis, but exclusively for the public of Anne Arundel County, specifically excluding those taxpayers of said County within the said City.” The failure of the County government to provide what is termed a lawful tax differential for real property owners within the City is alleged to constitute illegal “double taxation” prohibited by Article 15 and Article 23 of the Maryland Declaration of Rights and violative of Section One of the Fourteenth Amendment to the Federal Constitution, in that appellants ¹²⁰ are denied equal protection of the laws and are deprived of their property without due process. As the chancellor observed in his written opinion, the issues surrounding County-City relationships presented in the instant case are not new and are not confined to Anne Arundel County alone. They have long engaged the attention of the General Assembly of Maryland and Commissions appointed pursuant to legislative action.

Thus, a Joint Resolution of the 1959 Maryland General Assembly (Joint Resolution #26) resulted in the appointment by the Governor of a 13-member commission “to study problems of City-County fiscal relationships” and its report 3 to the Governor almost four years later contained the following observations: “The problem of tax differentials is one which has long been of concern to state and local government officials, not only in Maryland but in other states as well. A number of attempts have been made to cope with it, in order to eliminate some of the inequities which have existed in the tax structures of neighboring jurisdictions within states and counties, but to date none have been wholly successful. “The problem arises primarily as a result of the fact that in many counties the county government established a single tax rate on all taxable property, whereas it may appear to provide some of its services only in the unincorporated areas of the county and leave the furnishing of these services within the cities and towns to the municipal governments. The results are that owners of property within the incorporated areas pay both the county and municipal governments for these services, such as street maintenance or police service, but they may receive the services only from ¹²¹ the city or town governments. The resident of the municipality thus pays the same amount in taxes to the county government as does the resident of the unincorporated area, but receives none of these services from the County in return for his tax dollars. “The problem of tax differentials is noted most often in Maryland in connection with such activities as street construction and maintenance, police and fire services, in which municipal governments frequently engage.

It is encountered least often in connection with education, judicial administration and welfare matters, since the county governments are normally charged with these responsibilities and the city and town governments neither provide services nor levy taxes to underwrite them. These activities would be the responsibility of the county governments whether or not the municipalities existed.” p. 10 (Emphasis added.) It was the conclusion of the Commission that the problem was not amenable to any “single solution and that any possible solutions would have to be developed on a County-by-County basis.” Toward this end, the Commission recommended that county and municipal governments be encouraged to create Commissions to identify governmental activities within the County with respect to which financial inequities exist as between taxpayers within incorporated areas and those in unincorporated areas; and to devise solutions to alleviate the problem. The chancellor in his written opinion in this case specifically noted that the entire matter was also the subject of an extensive Report by the Committee on Taxation and Fiscal Affairs of the Legislative Council of Maryland in 1970. 4 ¹²² With reference to then existing county-municipal fiscal relationships, that Report pointed out that a number of different practices were concurrently in effect in the counties. These included: 1.

County Property Tax Rate Differential Harford County, for example, allowed a .20 cent differential, under a specifically enacted Ordinance, reflecting expenditures for County roads and street lighting; Cecil County in 1969 and Allegany in 1970 enacted Local Laws that authorized the Counties to impose a differential property tax rate for municipal residents. 2. Reimbursement of Portion of County Taxes Collected in Municipal Corporations Caroline, Carroll and Queen Anne Counties provided reimbursement to the municipal corporations for a portion of the County taxes collected on the municipal assessed valuation. 3. Fixed County Grant Fixed grants were made in Allegany, Dorchester and Somerset Counties mandated by local law and to be utilized for street maintenance; the City of Takoma Park received a grant from Montgomery County in lieu of County expenditures for police services and public libraries within the City limits. 4. Proceeds of County Revenue Operations The Counties of Harford, Kent, Somerset and Worcester paid a portion of the proceeds from ¹²³ the profits of County Liquor Dispensaries to the municipal corporations. 5.

Provision of Services Certain services would be provided by the County to the municipality without charge. Illustrative of these services was staff ' assistance for planning and zoning and Code enforcement programs. 6. State Mandated Grants Two State mandated grants to counties were noted (a) .37% of the taxable income of the residents of the municipality; and (b) a sum equivalent to the amount of the tax on bank stock that the municipality received in the 1968 fiscal year. In the Report’s discussion of the subject of property tax rate differential, it was stated that a lower county property tax for residents of municipal corporations would prevent “any ‘double taxation.’ ” The differential was deemed to be more “visible” to the taxpayer.

But it was also pointed out that: “[i]f the premise of the property tax differential [for municipal residents] is accepted as public policy” the implementation thereof raises a number of questions with respect to the calculation of the costs of services not provided to municipal residents and how to determine what revenues are involved. 5 The ultimate findings of the Report of the Taxation and Fiscal Affairs Committee with respect to property tax rate differentials for municipal residents were as follows: “The Committee on Taxation and Fiscal Matters finds that there are instances in Maryland where the residents of municipal corporations are paying county taxes for services that are not provided to them by the county and for which they also must ¹²⁴ pay municipal taxes for the same service. The most easily identified service is highway maintenance. Other services that can be subject to double taxation are police protection, parks, recreation, refuse disposal, planning and zoning, and mosquito control. “The Committee further finds that the existing allocation of State-shared taxes among counties and municipal corporations and the existing requirements for the counties to make certain revenues available to municipal corporations have created instances where municipal corporations are receiving a disproportionate share of revenues for the type of services provided. Consequently, while some municipal residents are being subject to double taxation, some municipal residents are receiving double benefit from the allocation of non-property tax revenues.

In such instances the residents outside of municipal corporations are paying a higher property tax rate than they should be paying. “The Committee does not believe that a state mandated property tax rate differential for municipal residents is warranted at this time. It believes that while State action could correct some inequities it might also tend to promote the uneconomical or ineffective providing of services by small units of government and limit the flexibility of transferring or merging governmental services at the local level. The Committee also believes because of the variation in the types of governmental services provided by the local governments that determination of the countywide nature of a service can only be made at the county level and not at the state level.” (Emphasis added.) Special note was taken by the Committee with respect to Anne Arundel County as shown by the following excerpt from the Report’s Conclusions and Recommendations: ¹²⁵ “The Committee notes in Anne Arundel County where the question oí a property tax rate differential has been the subject of considerable discussion by both public officials and private citizens that the County Council of Anne Arundel County and the Mayor and Aldermen of the City of Annapolis have enacted similar resolutions calling for a study of county-city fiscal relationships by a management and fiscal consultant. The Committee hopes that both units of government take prompt action to initiate this study.” A consulting firm was indeed engaged to make a study and report of the fiscal relationships between the City of Annapolis and the County but the results of its Report 6 do not appear in the record.

It is disclosed, however, that there was subsequently established a Committee known as the “Annapolis Fair Tax Committee”, of which the appellant, John H. Griffin, was chairman. A communication from Mr. Griffin to the County Council dated May 14, 1973, annexed to the bill of complaint, made it plain that the Committee did not object to the County’s not expending in Annapolis tax monies for fire and police protection, public works, recreation and parks and similar services; but that it was considered unlawful and improper for the County to tax city residents for these and similar services which were being furnished only to that part of the County outside the city limits of Annapolis. During the fiscal year 1972-73, appellant stated, the excess levy for these services on ¹²⁶ Annapolis residents had been calculated by a joint City-County Tax Differential Committee to be more than $700,000. Attached to the communication was an Ordinance adopted by the County Council of Prince George’s County in its 1972 Legislative Session providing for “a reduced tax to citizens in a municipality for services rendered by a municipality which relieve the County from increased expenditures to supply these services.” 7 Notwithstanding the broad language of the prayers for relief contained in the petition below, it appears clear that appellants do not contend that they are not subject to the imposition of any ad valorem property tax by the County.

Rather, their contention is that they are being illegally taxed by the County for a substantial portion of the County tax levy. 8 II CONSTITUTIONAL ISSUES Since the power to tax is an inherent attribute of sovereignty and since a County is only an agency or subdivision of the State, it is fundamental that the power of a County (or County Board of Commissioners) to tax is not inherent but is a delegated power and exists only when and to the extent granted by the State. The authority of a municipality to tax is similarly a delegated power. The County’s authority to tax is derived from Article XI-A of the Constitution and Code, Article 25A, Section 5 (O); a municipality’s authority derives from Article XI-E of the Constitution and Code, Article 23A, Section 2. With respect to all taxes in Maryland — State, County and Municipal — Article 15 of the Declaration of Rights provides ¹²⁷ that they . . . “shall be uniform within each class or sub-class of land, improvements on land and personal property which the respective taxing powers may have directed to be subjected to the tax levy; yet fines, duties or taxes may properly and justly be imposed, or laid with a political view for the good government and benefit of the community.” (Emphasis added.) Another applicable State constitutional provision is Article 23 of the Declaration of Rights, the due process clause: “That no man ought to be taken or imprisoned or disseized of his freehold, liberties or privileges, or outlawed, or exiled, or, in any manner, destroyed, or deprived of his life, liberty or property, but by the judgment of his peers, or by the Law of the land.” Also generally applicable, of course, are the provisions of Section One of the Fourteenth Amendment to the Constitution of the United States: “. . . nor shall any State deprive any person of life, liberty, or property, without due process of law; nor deny to any person within its jurisdiction the equal protection of the laws.” Both in the bill of complaint and in argument below, considerable emphasis has been laid by appellants upon the claim of “double taxation.” As Mr. Justice Holmes stated in now familiar language in the case of Fort Smith Lumber Company v. Arkansas, 251 U. S. 532 (1920): “The objection to the taxation as double may be laid on one side.

That is a matter of state law alone. The Fourteenth Amendment no more forbids double taxation than it does doubling the amount of a tax; short of confiscation or proceedings unconstitutional on other grounds.” Double taxation occurs only when “two taxes of the same character are imposed on the same property, for the same purpose, by the same taxing authority within the same jurisdiction during the same taxing period.” Rhyne, Municipal Law (1957), p. 673, cited in Associated Home Builders v. City of Walnut Creek, 484 P. 2d 606 , (Cal. 1971). Where there are different taxing authorities, as here, it is established that there can be levies by the respective taxing entities on the same property for ¹²⁸ similar purposes without resulting in double taxation. Kucharski v. White, 247 N.E.2d 428 (Ill. 1969).

In Kucharski the Supreme Court of Illinois upheld a tax levy by a municipality for, among other things, the support of a library facility notwithstanding the fact that the taxpayer had already been taxed by the “Prospect Heights Library District” for another library. See also Board of Highway Commissioners v. City of Bloomington, 97 N. E. 280 (Ill. 1911); Fox Bakersfield Theatre Corp. v. City of Bakersfield, 222 P. 2d 879 (Cal. 1950). Baker v. Druesedow, 263 U. S. 137 (1923). The tax challenged here is the only ad valorem tax levied on the appellants’ property by Anne Arundel County.

As the chancellor observed: “The city residents are taxed as county residents in the same manner and according to the same rate (before any differential adjustment) as those county residents living outside the city. The county imposes no additional tax on the city dwellers, as such.” (Emphasis added.) If the County were to impose an additional levy of the same kind, double taxation would result. That, however, is not the case. All assessable real property within the City is taxed by the County at the same rate.

Thus, the rule of uniformity — the principal mandate of Article 15 of the Declaration of Rights — is satisfied. As stated in McQuillin’s treatise on Municipal Corporations (3d ed., Vol. 16, § 44.21): “The rule of uniformity is not violated by double taxation resulting from taxes levied by different authorities if each authority adheres to the uniformity rule in its levies.” State v. Leaksville, 165 S.E.2d 201 (N.C. 1969); City of Pelly v. Harris County Water Control & Improvement District, 198 S.W.2d 450 (Tex. 1946). Furthermore, the constitutionality of the imposition of an ad valorem property tax does not require the demonstration of specific benefit to the property owners who are taxed. This principal was stated by the Supreme Court of the United States in the case of St. Louis and S. W. Railway Co. v. Nattin, 277 U. S. 157 (1928) and Memphis and C. Railway ¹²⁹ Co. v. Pace, 282 U. S. 241 (1931).

In the Nattin case the Court observed: “As the assailed tax was general and ad valorem its legality does not depend upon the receipt of any special benefit by the taxpayer.” In Pace, supra, the Court stated: “Where the tax is laid generally on all property or all real property within the taxing unit, it does not become arbitrary or discriminatory merely because it is spread over such property on an ad valorem basis; nor where the tax is thus general and ad valorem does its validity depend upon the receipt of some special benefit as distinguished from the general benefit to the community.” (Emphasis added.) Speaking more generally with respect to the element of benefit, the Supreme Court said in Carmichael v. Southern. Coal & Coke Co., 301 U. S. 495 (1937): “A tax is not an assessment of benefits. It is as we have said, a means of distributing the burden of the cost of government. The only benefit to which the taxpayer is constitutionally entitled is that derived from his enjoyment of the privileges of living in an organized society, established and safeguarded by the devotion of taxes to public purposes.” (Emphasis added.) In a relatively recent State case, People ex rel.

Hanrahan v. Caliendo, 277 N.E.2d 319 (Ill. 1971) the Supreme Court of Illinois rejected a challenge to the constitutionality of the State’s Urban Transportation