City of Magnolia v. Milligan

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          APPEAL FROM THE PULASKI COUNTY CIRCUIT COURT, THIRTEENTH DIVISION [NO. 60CV-15-3961], HONORABLE W. MICHAEL REIF, JUDGE

         Bell & Boyd, PLLC, by: Michael W. Boyd Pine Bluff, and Karen Talbot Gean, Magnolia, for appellant.

         Leslie Rutledge, Att’y Gen., by: Patricia Ann Ausdell, Ass’t Att’y Gen., for appellee Dennis Milligan.

         Rose Law Firm, by: James M. Fowler, Jr., Little Rock, and Stephen N. Joiner, for appellees Larry Atkinson and Selena Blair.

         OPINION

         WAYMOND M. BROWN, Judge

          In 1992, the City of Magnolia ("Magnolia" or "the City") had to close its landfill after the Environmental Protection Agency found chemicals and other contaminants in the groundwater of the surrounding land. The Magnolia landfill was Columbia County’s largest in the area, receiving most of the trash collected from the other cities in Columbia County as well as from the county itself. With the landfill closing, Magnolia, the county, and the other municipalities urgently needed to find a new way to dispose of their trash.

          To solve the problem, the General Assembly amended the tax code to allow local governments to levy sales and use taxes to finance the operation, maintenance, or rental expense of a solid waste management system.^[1] The county followed with an ordinance that levied a one percent sales tax throughout the county and called a special election for approval of the tax. Additionally, the county and the cities entered into a cooperative agreement to establish a county-wide solid waste management system that would be administered by the county quorum court and financed through the 1 percent tax.

          The voters of Columbia County approved the tax on April 21, 1992. Appellee Dennis Milligan ("Milligan" or "the Treasurer") thereafter remitted the proceeds of the tax directly to the county.

         The unified solid waste management system worked well until 2015, when Magnolia filed a petition for a declaratory judgment against Milligan, county judge Larry Atkinson, and county treasurer Selena

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Blair.^[2] Magnolia argued that it was entitled to its per capita share of the revenue from the sales and use tax. According to the City, the cooperative agreement, in which the county and each of the cities pledged their share of the tax revenue to the solid waste management system, was repealed by an ordinance that the county quorum court enacted in 1998. Magnolia argued that in the absence of a cooperative agreement or other voter-approved means of directing all the tax proceeds to the county, Arkansas law required the Treasurer to remit Magnolia’s per capita share of the proceeds from the sales and use tax directly to the City. The circuit court disagreed and granted summary judgment in favor of Milligan and the County Appellees. We affirm.

          I. Facts and Procedural History

         On March 16, 1992, shortly after the General Assembly amended section 26-73-113 to allow the proceeds of local sales and use taxes to be used to finance the operation, maintenance or rental expense of a solid waste management system,^[3] the Columbia County Quorum Court passed Ordinance 92-2 to levy a sales and use tax for that purpose. The ordinance explained the need for the tax, stating that "the Magnolia Municipal Landfill into which Columbia County deposits solid waste from the residents of Columbia County is currently at capacity and will, in the immediate future, be closed down by governmental entities[.]" Consequently, "Columbia County and the municipalities will need a means of collecting, disposing of, and hauling solid waste from Columbia County to other locations[.]" The ordinance also provided that the county would be responsible for the new solid waste collection system, declaring that "it [was] the desire of Columbia County to provide weekly door to door pickup for all residents of Columbia County and for residents of each municipality in the County and to provide for the disposal of such solid waste in an environmentally safe and acceptable manner[.]"

          Noting also that Columbia County "wish[ed] to finance ... a solid waste management system to deal with all aspects of solid waste within the county and municipalities[,]" the ordinance levied "a sales and use tax ... at a rate of one percent (1%)" on goods sold within the county. The ordinance further provided that the county "wish[ed] to dedicate all proceeds of the sales and use tax" and "use such proceeds for the purpose of developing within Columbia County a Solid Waste Management System." Among other duties, the new solid waste management system would "administer[ ] the proceeds from the sales and use tax[.]" The ordinance also made it clear that the proceeds of the tax would be used only for solid waste management, providing "[t]hat all revenues derived by the County or the municipalities from the proceeds of such tax are designated for use in solid waste management and for no other reason or purpose."

          Ordinance 92-2 also called a special election to approve the tax and provided that the official ballot would read as follows:

FOR ADOPTION OF A ONE PERCENT (1%) SALES AND USE TAX WITHIN COLUMBIA COUNTY, ARKANSAS, TO BE USED SOLELY FOR SOLID WASTE MANAGEMENT.

AGAINST ADOPTION OF A ONE PERCENT (1%) SALES AND USE TAX WITHIN COLUMBIA COUNTY, ARKANSAS, TO BE USED SOLELY FOR SOLID WASTE MANAGEMENT.

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          Finally, Ordinance 92-2 declared that cities and counties would enter into a cooperative agreement, called an interlocal agreement, regarding the solid waste management system. In particular, section 5 of the ordinance provided as follows:

Each governmental unit within the County which is entitled to receive a proportionate share of the revenues derived from the sales and use tax shall authorize, by appropriate action of its governing body, the approval of and the entering into of an interlocal agreement with and among the other units for the purpose of assigning all revenues from the sales and use tax, to which each governmental unit may be entitled, to the authority for the use by the authority of solid waste collection, disposal, recycling, and compost facilities. Provided, further, that all such governmental units shall execute and deliver such interlocal agreements prior to the date of the special election[.]

          The county judge and the mayors of each city— including Magnolia— signed the interlocal agreement on March 23, 1992. The agreement declared that all the parties determined that the sales and use tax, which was "pledged for solid waste management purposes and no other," was "the best means of financing a solid waste management system for all persons residing within Columbia County[.]" It further declared that the parties

determined that all proceeds of the sales and use tax, which may otherwise be receivable by them for revenue purposes, should be pledged to the County for use by the County in the development of a solid waste management system[.]

          The agreement also made it clear that the parties intended that the county would be responsible for administering the solid waste management program and tax proceeds, stating as follows:

[T]he County Court of Columbia County has undertaken responsibility to form and administer a solid waste management system on behalf of all of the citizens of Columbia County and to disburse funds derived from the sales ...