May 14, 2003 – Attorney General Iver Stridiron said on Wednesday that his reason for appealing to the U.S. Supreme Court to overturn a District Court order halting the collection or property taxes is the need for recognition that "the local government has some degree of autonomy."
District Judge Thomas K. Moore issued the order on Monday, agreeing with a consolidated group of 11 plaintiffs that property should be assessed for tax purposes on the basis of market value, and not on replacement value. He barred the government from issuing tax bills or collecting outstanding bills since 1999 until the government revamps its tax assessment system, in compliance with the settlement in 2000 of the first case challenging the assessment basis.
On Tuesday, Stridiron filed an appeal with the Supreme Court seeking to reverse a 3rd Circuit Court of Appeals ruling in March rejecting the V.I. government's challenge of Moore's jurisdiction to hear the tax cases.
Stridiron said on Wednesday that the appeal is being filed with the blessing of Gov. Charles W. Turnbull. The attorney general said the governor acknowledged the high cost of pursuing such an action but felt it was necessary to get a definitive ruling on the autonomy of the V.I. government.
"There has got to be a recognition by everybody in this territory that the local government has some degree of autonomy. We cannot subordinate ourselves to the federal government because states don't do that," Stridiron said on Wednesday. "The federal government has historically deferred to the local government on purely local matters, which is the way it's supposed to be."
Bond limits tied to property values
A key, and perhaps crucial, issue arising from the inflated tax assessments is how they affect the V.I. government's borrowing power.
The federally adopted Revised Organic Act of 1954 which serves as the territory's constitution states that the government may not float bonds that exceed 10 percent of the assessed value of all taxable property in the territory.
David Bornn, attorney for Berne Corp., which brought the original suit that ended in the 2000 settlement, said, "Not only does this have the potential to diminish the government's ability to issue new bonds; it potentially means they may have exceeded the bond ceiling already."
The law reads that "indebtedness of the V.I. government shall not be incurred in excess of 10 percent of the aggregated assessed valuation of the taxable real property in the V.I." Since property valuations in the territory appear to have be exaggerated, when the more realistic assessments are made based on actual cash value of the property, Bornn said, "there are going to be some dramatic effects."
For the moment, the most immediate effect of Moore's ruling is to prevent the government from billing and collecting hundreds of millions of critical dollars at a time when it is facing a shortfall of some $115 million this fiscal year. According to Stridiron, the halt to property tax collections now could add $40 million to that projected deficit.
Senator: Fix the problem; don't appeal the ruling
On Wednesday, one lawmaker said the territory's top priority should be to take the steps necessary to get on with the property tax assessing, billing and collecting.
Sen. Louis Patrick Hill in a release from his office called on the administration and the Legislature to "fix the problem so we can send out the tax bills and focus on our larger fiscal and management failures."
Hill called on the Turnbull administration to formulate the legislation that Moore called for in his memorandum, instead of seeking to have the Supreme Court reverse the Circuit Court on Moore's jurisdiction to hear the tax assessment cases.
Fixing the problem, according to Moore's decree, amounts to the Senate amending the V.I. Code to "provide for retroactive adjustment on the [tax] bills on all classes of property for 1999, 2000, 2001, 2003, and 2004 and for a reasonable time thereafter until a fair and equitable system capable of reliably and credibly assessing all real property at actual value is in place," after which bills can be sent and taxes can be collected.
It appears from Moore's opinion that his concern is that property owners have recourse to recoup taxes paid during the years in questions that were based on assessments "in violation of federal law."
Attorney general: Issue is federal invasion in local matters
Stridiron said on Wednesday that he is asking the Supreme Court to intervene because the circuit court ruling could adversely affect the V.I. government and its people. He's hoping a high court panel will deem the case worthy of review by the justices, at which point they will either decide to hear the case or order the 3rd Circuit Court to conduct its own review.
After the Circuit Court affirmed Moore's jurisdiction, Stridiron asked the appellate court for a review its ruling; that request was turned down.
"What we're saying in this case, as well as the wastewater case and the binding arbitration case is that those — in our judgment — are purely local matters that the federal government has invaded," Stridiron said.
His reference to "the wastewater case" is to a ruling Moore issued on March 10 ordering the government not to reinstitute a $3.6 million contract awarded to a start-up St. Croix company for sewer system repairs and maintenance. The attorney general announced the next day that he would appeal it to the Circuit Court.
The reference to "the binding arbitration case" is to the government's appeal of a ruling by District Judge Raymond Finch last June that a Hovensa subcontractor's requirement of an arbitration agreement as a condition of employment is valid and enforceable.
Stridiron also said on Wednesday that Moore based his findings on territorial statutes from the 1930s that were replaced in the Revised Organic Act.
Judge: Legislation a result of misrepresentation
The landmark case that has spawned a series of subsequent lawsuits was brought by Berne Corp. and B&B Corp. over the valuation of their properties for 1999 tax assessment purposes. The settlement of that case in December 2000 provided for the designation by Moore of a "special master" from the mainland to review the procedures and process of commercial property assessment in the territory.
The Berne suit alleged that the government was assessing commercial properties based on replacement value rather than market value, and that the method resulted in inflated assessments.
Moore wrote in his opinion issued Monday: "In the face of this court's valid and still binding [ruling] in Berne that the 1999 commercial property tax bills are based on an assessment process that violates federal law, the attorney general misled Gov. Turnbull into making certain representations."
Those representations, made to Senate President David Jones, led to the enactment of a law passed by the Legislature on Feb. 12 and signed by the governor on Feb. 28 providing for use of the illegal assessment basis for taxation in the years 2001, 2002, 2003 and 2004.
Moore's opinion says the net effect of the legislation is that the attorney general, the governor and legislators would require V.I. commercial property owners to continue to pay property taxes without credits being available to them once their property is reassessed at actual value by "a fair and equitable system" that would in most instances lead to taxes being lowered.
In other words, Moore wrote, the Turnbull administration and the Legislature would have V.I. commercial property owners "pay four more years of property taxes that have been assessed in violation of federal law," and without recourse for reimbursement.
Shaun A. Pennington contributed to this report.
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