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City of Sandpoint v. Independent Highway District

Supreme Court of Idaho

November 1, 2016

CITY OF SANDPOINT, Plaintiff-Respondent,
v.
INDEPENDENT HIGHWAY DISTRICT, Defendant-Appellant.

         2016 Opinion No. 107

         Appeal from the District Court of the First Judicial District of the State of Idaho, Bonner County. Hon. John T. Mitchell, District Judge.

         The judgment of the district court is reversed and the case is remanded.

          Sherer & Wynkoop, LP, Meridian and James, Vernon & Weeks, PA, Coeur d'Alene, for appellant. Susan P. Weeks and David E. Wynkoop argued.

          Scot R. Campbell, Sandpoint City Attorney, Sandpoint, and Winston & Cashatt, Lawyers, Spokane, for respondent. C. Matthew Andersen argued.

          J. JONES, Chief Justice.

         This appeal concerns the legality of a Joint Powers Agreement ("JPA") entered into in 2003 between the Independent Highway District ("IHD") and the City of Sandpoint ("City") in settlement of litigation. The JPA provides for the City to assume control of all streets in the City and for IHD to pay over to the City all highway ad valorem taxes collected on property in the city limits. After the parties had operated under the JPA for ten years, IHD notified the City that, upon reflection, it had determined the JPA was legally void and that it would no longer pay its share of the property taxes to the City. The City filed suit against IHD for breach of contract and sought both a declaratory ruling that the JPA was valid and an order enjoining IHD from interfering with the City's control of the streets within city limits. The district court ruled in favor of the City on summary judgment and granted attorney fees. IHD filed a timely appeal to this Court.

         I. Factual and Procedural Background

         IHD is a political subdivision located in Bonner County. By statutory directive, it has the duty to maintain and improve the highways within its jurisdiction, which includes the City, and to levy and collect ad valorem property taxes for highway construction and maintenance. I.C. §§ 40-201, 40-801. The City is a municipal corporation and it, too, has the statutory duty to improve and maintain highways within city limits. I.C. § 40-201. To carry out that duty, the City is entitled to half of the tax revenues collected by IHD on real property located within the City. I.C. § 40-801(1)(a).

         In early 2003, the City and IHD were engaged in litigation wherein the City sought to dissolve IHD and assume its responsibilities within the city limits.[1] In order to avoid dissolution, IHD entered into a Stipulation for Settlement ("Stipulation"), which required the two parties to enter into a joint powers agreement to resolve the issues in dispute. The JPA, which was signed July 8, 2003, provides, in pertinent part:

PURPOSE: The purpose of this agreement is to divide the jurisdiction, maintenance and control of streets and public rights of way within the boundaries of the district between the District and the City and provide for sharing of ad valorem tax revenue.
JURISDICTION, MAINTENANCE AND CONTROL: The City shall exercise exclusive general supervisory authority over all streets and public rights of way within the city limits of the City of Sandpoint including any property subsequently annexed.'
The District shall exercise exclusive general supervisory authority over all streets and public rights of way within the boundaries of the District lying outside of the city limits of the City of Sandpoint.
* * *
REVENUE DISTRIBUTION: The District at the present time and in the future will levy and apply for ad valorem property taxes under the authority granted in Chapter 13, Title 40, Idaho Code. The Districtwill pay over to the city all property tax funds from such District levies on all property located within the city limits.

         For ten years following entry into the JPA, IHD transferred to the City all tax payments it received on property within the city limits. However, by early 2013, the IHD Board of Commissioners no longer contained any of the board members who had signed the JPA. The new IHD board felt that there was little benefit in continuing with the JPA. Accordingly, on July 25, 2013, IHD unilaterally "elected" to terminate the JPA. From that point forward, IHD refused to transfer its statutory share of property tax revenues to the City.

         The City filed a complaint against IHD in August 2013, claiming breach of contract and seeking: (1) a declaration upholding the Stipulation for Settlement; (2) a declaratory judgment that the JPA is a legal and valid exercise of government authority; (3) an order enjoining IHD from interfering with the City's operation and maintenance of its streets; (4) an order requiring IHD to immediately transfer all ad valorem taxes collected and currently being withheld; (5) a restraining order requiring IHD to comply with the JPA while the matter was under consideration; and (6) costs and attorney's fees.

         IHD responded to the complaint, alleging: (1) the JPA was violative of article VIII, section 3 of the Idaho Constitution because IHD's commitment to turn over its half of the property taxes collected within the city limits constituted a long-term indebtedness or liability exceeding yearly revenues that had to be, but was not, approved by the vote of two-thirds of the qualified electors; (2) the JPA did not include provisions mandatory for a joint powers agreement under Idaho Code section 67-2328; (3) the JPA was violative of Idaho Code section 40-801, which requires an equal division of ad valorem property ...


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