United States District Court, E.D. Arkansas, Eastern Division
THELMA FORTE, individually and as Superintendent of the Mineral Springs School District; MINERAL SPRINGS SCHOOL DISTRICT BOARD OF EDUCATION, a public body corporate; WILLIAM DIXON, MIKE ERWIN, JAMIE JACKSON, ZEMERA NEWTON, RAY HAWKINS, SHEILA JACKSON, and DOROTHY VAUGHN, all individually and in their official capacities as members of the Mineral Springs School District Board of Education; and MINERAL SPRINGS SCHOOL DISTRICT PLAINTIFFS
JOHNNY KEY, individually and as Commissioner of the Arkansas Department of Education, a state agency; ARKANSAS DEPARTMENT OF EDUCATION, a state agency; BOARD OF EDUCATION OF THE ARKANSAS DEPARTMENT OF EDUCATION, a state agency; JAY BARTH, JOE BLACK, CHARISSE DEAN, MIREYA REITH, R. BRETT WILLIAMSON, DIANE ZOOK, SUSAN CHAMBERS, OUIDA NEWTON, and O. FITZGERALD HILL, all individually and in their official capacities; and HEMPSTEAD COUNTY, ARKANSAS DEFENDANTS
MARSHALL JR. UNITED STATES DISTRICT JUDGE
case was really two cases. The first was the Mineral Springs
School District plaintiffs' challenge to the evolving
Arkansas School Choice Act. The Court addressed that
challenge, and concluded that all other issues had been
resolved between the parties. No. 34. The Court was
mistaken. As was made clear in the briefing to dismiss
Mineral Springs' appeal, the District's claims about
how Hempstead County was handling utility-related taxes
remained alive. The Court of Appeals dismissed for lack of a
final order; this Court vacated its Judgment as premature;
and Mineral Springs made clear that it was pursuing four
claims only against Hempstead County, not any of the State
defendants. No. 39, 53 & 54. Discovery was done.
Hempstead County asks for summary judgment, while Mineral
Springs says a bench trial is needed.
remaining claims are about taxes flowing from the coal-fired
James W. Turk power plant. Construction of this facility was
controversial. E.g., Sierra Club v. U.S. Army Corps of
Engineers, 645 F.3d 978 (8th Cir. 2011); Hempstead
County Hunting Club, Inc. v. Southwestern Electric Power
Co., 2011 Ark. 234, 385 S.W.3d 123; Hempstead County
Hunting Club, Inc. v. Arkansas Public Service
Commission, 2010 Ark. 221, 384 S.W.3d 477. But the Turk
plant was eventually built. The whole thing is in Hempstead
County, though most of the real property is in the Hope
School District, while the plant itself is in the Mineral
Springs District. The complaint mentions others, but the
briefing makes clear that the core dispute is how the County
handled the division of plant-related taxes between these two
School Districts. There are four claims: actual fraud in the
valuation of utilities tax assessments and division of the
resulting revenue; constructive fraud by nondisclosure of
correct numbers to Mineral Springs and the Arkansas
Department of Education; a "hometown" equal
protection violation, by treating the Hope School District
(which is in Hempstead County) better than the Mineral
Springs District (which is based in neighboring Howard
County), U.S. Const, amend XIV, § 1; and a violation of
Hempstead County's obligation under the Arkansas
Constitution to direct tax revenue only for the levied
purpose. ARK. CONST, art. 16, §11.
There's a faulty legal premise behind Mineral
Springs' claims. Hempstead County isn't responsible
for assessing the real and personal property of utilities
such as the Turk plant. "The Arkansas Public Service
Commission shall have the full power and authority in the
administration of the tax laws of this state to have the
exclusive power of original assessment of both real and
personal property used in the operating of . . . electric
power ... or other similar companies, associations, or
corporations, commonly known as utilities, doing business or
owning property in this state." ARK. Code. Ann. §
26-24-103; see also § 26-24-102. The Commission
has a tax division that handles these matters. Ark. Code Ann.
§ 26-24-101. The Arkansas Supreme Court described the
operation of this part of the Commission in Arkansas
County v. Desha County, 342 Ark. 135, 136-37, 27 S.W.3d
379, 380-81 (2000). Hempstead County is bound by law to adopt
the valuations certified by the Commission each year. ARK.
CODE ANN. §§ 26-24-104 & 105. From these
assessments come the bills, and from them comes the revenue,
which is disbursed in due course. As to utility property like
the Turk plant and related real estate, Hempstead
County's role is ministerial. To the extent the
assessment is an essential element of any of Mineral Springs7
claims, and it is the root of several if not all, the claim
fails. St. Jude Medical, Inc. v. Lifecare International,
Inc., 250 F.3d 587, 595 (8th Cir. 2001).
the facts in the light most favorable to Mineral Springs
where some genuine dispute exists, Torgerson v. City of
Rochester, 643 F.3d 1031, 1042 (8th Cir. 2011) (en
banc), a jury could not reasonably conclude that
Hempstead County shorted Mineral Springs. The County provided
its records to the District. A former County Clerk, who had
been much involved in this work, was deposed and questioned
in detail. The County intended to provide the assessment
records to the Court on a flash drive, No 69 at 7,
but they were not received. Mineral Springs, though, has not
offered any part of the documents in support of the alleged
misevaluation and improper disbursements. And the former
Clerk's testimony is unequivocal: she double checked all
the relevant records; she found no error; and the State's
annual audits of the County have found no error.
was a disbursement problem in 2013, which was discovered by
the vigilant then-superintendent at Mineral Springs, and
which was fixed that year. He questioned the County Clerk
about how much Turk-plant-related tax revenue Mineral Springs
was getting. The Clerk investigated. The Turk plant had been
completed and gone online in 2012, resulting in a huge
increase in tax collections starting in 2013. And the
increased revenue was attributable to the now-operating
plant, which is in the Mineral Springs District. By long
practice, however, Hempstead County was distributing revenue
based on the prior year's collections, and with a 10%
hold back, which was used to tie things up at the end of each
year. The 2013 spike in collections, coupled with
distributions based on 2012 numbers, created a growing gap,
which favored the Hope School District and disfavored the
Mineral Springs District. The Hempstead County Clerk closed
this gap by increasing distributions to Mineral Springs and
decreasing distributions to Hope. By the end of 2013, the gap
was eliminated. The Clerk also abandoned the use of last
year's numbers, and a hold back, for distributions:
starting in 2014, distributions were based on actual
collections, month by month.
Springs had had financial difficulties for several years, and
the delay in payment of utility-related tax revenues during
2013 didn't help. But the District weathered those
difficulties. The collection-generated stream of tax revenue
necessarily ebbs and flows during a given year. In sum, the
District has not come forward with sufficient proof of any
harm from the 2013 disbursement problem to meet the
County's undisputed proof of prompt cure. Bedford v.
Doe, 880 F.3d 993, 997 (8th Cir. 2018).
Springs resists this record with two points. A retired state
auditor was under contract to help Hempstead County manage
the settlement and distribution of tax revenue to school
districts. Mineral Springs first objects to the former County
Clerk testifying about what the retired auditor said. The
Court sustains that hearsay objection. But this retired state
auditor worked under the County Clerk's close direction,
and she can testify about how all this work was done, what
she directed, and the changes she made.
Springs next relies on the affidavit of its former
superintendent, saying it creates factual issues for trial.
The Court disagrees. The affidavit is almost three years old.
It was first filed with Mineral Springs' original
complaint in February 2016. The former superintendent's
testimony about what happened in the summer and fall of 2013
tracks with the former County Clerk's testimony. He also
believed Hempstead County had shorted Mineral Springs in
prior years on so-called PILOT money-"payments in lieu
of taxes." That issue, though, has faded with Hempstead
County's production of records going back to 2005 and the
former County Clerk's deposition. Neither side has
provided the Court with the Turk plant PILOT agreement.
According to the Clerk, the one attached to the complaint,
and cited by the former superintendent, was actually for
another facility. Perhaps all this creates some metaphysical
doubt about past years' payments, but that sort of vague
uncertainty is not enough to prevent summary judgment.
Bedford, 880 F.3d at 997. In any event, it is now
undisputed that PILOT revenue and disbursements were based on
the assessed value of real property. And, circling back to
the starting point, that assessment for the Turk plant's
realty was made by the Arkansas Public Service Commission,
not Hempstead County. ARK. Code Ann. § 26-24-103.
about Mineral Springs' claim that Hempstead County
didn't accurately report tax-related information to the
District or the Arkansas Department of Education? The former
County Clerk testified that she did, and she pointed to the
forms she completed each year. Here again, Mineral Springs
hasn't met this proof with any countervailing proof.
Bedford, 880 F.3d at 997. Plus the district's
former superintendent candidly noted that County officials
across several offices had cooperated with his inquiry about
the 2013 disbursements.
reasonable jury could find fraud, actual or constructive, on
this record. There was no unequal treatment. Tax revenue
didn't flow to the wrong district for the wrong purpose.
Neither the federal nor state Constitution was violated.
Mineral Springs has gotten all the tax revenue to which it
was entitled from the Turk Plant, albeit with the stumble for
several months in 2013, which Mineral Springs commendably
caught and ...