Alabama Advisory Opinions July 23, 1997: AGO 1997-232 (July 23, 1997)

AGO 1997-232.

Dear Mr. Jenkins:

This opinion of the Attorney General is issued in response to your request.

May Baldwin County retain and use for its general purposes those excess proceeds of the temporary ad valorem tax described in subsection (l) of Section 217 of the Constitution of Alabama of 1901 as amended by Amendment No. 373 thereto, levied at the rate of 2 mills by the county in 1989 without agreement of the other taxing authorities in the county, that are now remaining after reimbursement therefrom of the county's costs of reappraisal and the costs of reappraisal incurred by other local taxing authorities within the county?

Your question arises because the Examiners of Public Accounts say that any excess revenue recouped from the so-called "two mill reappraisal fund" must be prorated to the entities that participated in the cost of the original reappraisal program. They base this upon State Department of Revenue's Ad Valorem Tax Division Directive #6.

The funds in question, amounting to $469,129.81, represent the remaining portion of the proceeds of a temporary ad valorem tax levied in l989 for one tax year by the county at the rate of 2 mills. This tax was levied under the authority of subsection (l) of Section 217 of the Constitution of Alabama of 1901, as amended by Amendment No. 373 thereto. Subsection (l) authorizes the one- time temporary levy, without voter approval, of additional local ad valorem taxes not exceeding two mills in the aggregate to allow local taxing authorities, such as the county, to reimburse themselves for costs incurred by them in connection with the statewide reappraisal of real property for ad valorem tax purposes that was conducted approximately contemporaneously with the adoption of Amendment No. 373.

The expenses of such reappraisal of county property incurred through 1979 have been borne both by the county and by the other twelve then-existing local taxing authorities in the county, and therefore each was eligible to levy a portion of the total two mills of tax authorized under subsection (l). No portion of said tax was levied in the county by any taxing authority until 1989.

The next to last sentence of subsection (l) reads:

If more than one such taxing authority in a county has paid or owes all or a portion of its reappraisal costs, such 2 mills shall be prorated among such taxing authorities in the county as they may agree, or if they cannot agree, in the percentage which each such taxing authority's costs of reappraisal bear to the total costs of reappraisal of all taxing authorities in the county .

There was no agreement among the county and the other taxing authorities in the county respecting proration of the levy or the division of excess proceeds of said tax in the event more money was collected as a result of the levy thereof than proved necessary for payment of reappraisal expenses. Since subsection (l) specifically provides that the "taxes authorized . . . shall not exceed in the aggregate . . . a total of two mills for all such taxes levied by all taxing authorities in a county and not two mills for each taxing authority in a county," the levy by the county of the temporary tax at the rate of 2 mills effectively exhausted the available additional taxing power authorized under subsection (l).

We note that the levy of the temporary tax by the county at the rate of two mills appears to have been ratified and validated by Amendment No. 559 to the Constitution of Alabama of 1901, submitted to the qualified electors of the State at the November 8, 1994, general election and proclaimed ratified on January 6, 1995.

Reappraisal costs incurred and paid by the county and the other local taxing authorities amounted to $668,817.70.

A total of $1,137,947.51 was collected by the county from the levy of the 2 mill temporary tax. The county recovered its reappraisal costs of $155,994.96 and reimbursed the other taxing authorities their reappraisal costs in the aggregate amount of $512,822.74, leaving $469,129.81 in excess funds derived from the tax. The excess funds have not been disbursed by the county but have been covered into its general operating fund.

The State Examiners of Public Accounts have questioned the county's retention of all the funds in question on the authority of an opinion of the Attorney General to the Honorable D. Shelby Counce, dated January 23, 1980, A.G. No. 80-00170, which addressed a situation generally similar to that under discussion. In that opinion this Office indicated that, after full reimbursement of reappraisal costs, excess funds derived from the levy pursuant to subsection (l) of the temporary tax in Madison County should be distributed pro rata among the various local taxing entities in Madison County that had incurred reappraisal costs. The situation there under consideration differed from the one here under consideration in that there was an agreement between the various entities. Therefore, the opinion included a statement to the effect that this was required "where there is an agreement between the various entities that the county governing body or other taxing entity will levy the entire 2 mills for pro rata distribution among the various entities."

While a previous Attorney General's opinion referred to an agreement between county taxing authorities, it was not meant to suggest that one taxing authority may claim the entire overage from the tax by not entering into an agreement with other taxing authorities. The excess proceeds should be distributed to the several taxing authorities pro rata, just as the expenses were distributed.

This conclusion is further supported by the fact that the Department of Revenue, pursuant to ALA. CODE § 40-7-64 (1975), has promulgated a Budget and Accounting Directive, now identified as "Division Directive #1," formerly Directive #6. This Directive sets forth the procedures and responsibilities for budgeting and accounting relative to the ongoing appraisal and mapping program supervised by the Department. In Section 1(h) the Directive addresses the problem of excess funds at the end of a fiscal year which may result in consequence of a mismatch between the funds withheld in a given year pursuant to § 40-7-68 and the actual costs in that year. Section 1(h) of Division Directive #1 provides:

All monies remaining at the end of fiscal year will be handled in one of the two following procedures at the discretion of the county commission.

(1) The money will revert to the tax collector/revenue commissioner who will remit said money to each ad valorem tax fund from which withheld.

(2) The amount of money to be withheld from each fund for the new fiscal year will be reduced by the amount of money remaining in the appraisal update budget from the prior year.

The percentage furnished by the Department of Revenue will be used to calculate the new withholdings from each fund or agency. The county commission must zero out all the unexpended money according to one of the above procedures within 90 days of the close of the fiscal year.

These provisions are in conformity with this opinion, and the previous opinion of this Office to D. Shelby Counce, cited above.

Because a pro rata allocation of "excess" tax proceeds is required under subsection (l), the county is entitled to its pro rata share with the other taxing authorities in the county.

The answer to your question is negative. The county may not retain all of the excess. When the 2 mill tax authorized by Amendment No. 373 to the Constitution of Alabama of 1901 is levied by one taxing authority in a county, whether or not with the agreement of the other taxing authorities in the county, and there is an excess over that required to reimburse the several taxing authorities for their reappraisal expenses, the excess should be distributed, pro rata, to the several taxing authorities that had borne the cost of reappraisal.

I hope this opinion answers your question. If this Office can be of further assistance, please contact Philip C. Davis of my staff.

Sincerely,

BILL PRYOR

Attorney General

By: JAMES R. SOLOMON, JR.

Chief, Opinions Division

BP/PCD/ag

J7.97/OP