CATS gets favorable court ruling on tax challenge

Advocate file photo by ARTHUR D. LAUCK -- Buses wait for riders at the CATS terminal in Baton Rouge in this August 2013 Advocate file photo. Show caption
Advocate file photo by ARTHUR D. LAUCK -- Buses wait for riders at the CATS terminal in Baton Rouge in this August 2013 Advocate file photo.

Suit aimed to void results of property tax election

A state appeals court Friday threw out a lawsuit that sought to void the results of the April 2012 Capital Area Transit System election in which residents in the city limits of Baton Rouge and Baker approved a property tax to improve the bus service.

CATS started collecting the 10.6-mill tax in January, and more than 1,200 residents have been paying the tax under protest.

State District Judge Todd Hernandez refused in late October to dismiss the suit, thereby allowing it to go forward. But a three-judge panel of the 1st Circuit Court of Appeal reversed the judge and said the suit was not filed in a timely manner.

The Louisiana Supreme Court is the expected next stop for the case.

“The funds that are expected in January will be available for CATS to build out the system,” CATS Chief Executive Officer Bob Mirabito said in response to the appellate court decision.

The 1st Circuit panel agreed with attorneys for CATS who argued that, under state law, opponents have only 60 days to challenge an election once the results have been officially declared. The suit, filed by businessman Milton Graugnard and later joined by William L. Smith Jr., was filed 70 days after the tax election results were promulgated.

“It is difficult to envision how the citizens of this state in enacting their constitution or the Louisiana legislature could have more clearly articulated the intent to provide that if the validity of a tax authorized by an election is not challenged within the sixty-day period, it is too late no matter the cause,” Circuit Judge James Kuhn wrote Friday for the panel that also included Circuit Judges John Michael Guidry and William Crain.

Kyle Keegan, an attorney for Graugnard, said he was reserving comment until he had a chance to review the 16-page ruling.

The crux of the suit’s argument was that the tax was levied within the city limits, yet some areas outside the city limits, such as the Mall of Louisiana and Perkins Rowe, will receive service without having to pay a tax.

Attorneys for Graugnard and Smith argued, and Hernandez agreed, that the 60-day provision doesn’t apply to their case because a state law cannot limit the rights that a plaintiff has in a federal claim. The plaintiffs have asserted that the tax election violated their equal protection rights under both state and federal law.

The plaintiffs’ attorneys also alleged the 60-day provision is intended for tax elections that involve issuing bonds for public financing, which CATS will not be doing.

Graugnard lives within the city limits of Baton Rouge, while Smith lives in the unincorporated area of East Baton Rouge Parish but owns taxable property within the city, the 1st Circuit noted.

The CATS tax also was on the April 2012 ballot in Zachary, where it failed.

The cash-strapped CATS was running out of money and faced a possible shutdown in 2012 unless it secured a new source of revenue.

CATS Chief Financial Officer Gary Owens testified in November 2012 that the tax was expected to generate about $15.3 million in 2013.

CATS has been unable to access the full extent of taxes owed to it, because of a state provision that allows property owners to request their taxes be held in escrow until the suit is resolved.

The taxes “paid under protest” are collected by the East Baton Rouge Sheriff’s Office and held in escrow. If the courts determine the election was held properly, then the money will ultimately be returned to CATS. But if the courts rule the election was unconstitutional, then only those people who filed for the payment under protest will have their tax money returned.

This year, more than $470,000 of property tax money owed to CATS is being held in escrow. A total of 1,299 individual properties filed for the CATS protest, according to the Sheriff’s Office.

Property taxes are collected at the beginning of every year, which means those who want to continue paying under protest will have to file with the Sheriff’s Office again.

It also means people who didn’t do it last year will have the opportunity to pay under protest this year.

Those who want the Sheriff’s Office to escrow their taxes should contact the Sheriff’s Office before Dec. 31.

CATS board President Marston Fowler has said the agency has no choice but to continue to operate as if they are going to win the suit.

“To take the opposite position would mean we wouldn’t be providing services, so it’s much better to spend the money and provide the services,” he said recently, adding that they feel their legal position is strong. “But if it were declared unconstitutional, it would be total chaos.”