By GARRY RAYNO, InDepthNH.org
CONCORD — A superior court judge has denied a request to stop the state from setting tax rates for the statewide education property tax because the plaintiffs claim it does not meet constitutional requirements.
In an order issued Monday, Rockingham Superior Court Judge David Ruoff denied both a request for an injunction, and another for a temporary injunction and granted the Coalition Communities’ request to intervene in the issue of the tax’s constitutionality, but not in the question of the adequacy of the state’s per-pupil education funding.
The plaintiffs, a number of residential and commercial property taxpayers, who claim the way the state administers the SWEPT results in higher taxes for them and lower taxes for about 25 communities that are either property wealthy and raise more money than they need under the SWEPT to provide a state set adequate education or extremely small with no or little education costs.
The two provisions amount to between $10 million to $11 million of tax revenue.
In denying the plaintiffs’ request to stop the Department of Revenue Administration from setting tax rates in the communities at issue, Ruoff said he is taking no action on the merits of the case which will go to trial in September 2023.
He did dismiss the state’s claim the plaintiffs had no standing to bring the case and said his concern was granting an injunction would be financially disruptive to the affected communities, many members of the Coalition Communities.
Two affidavits submitted to the court by officials from Waterville Valley and Newington indicate the communities would need to make significant and costly adjustments including sending property taxpayers a second bill.
“At this preliminary stage, the Court is disinclined to impose substantial, concrete harm on the Coalition members to avoid such speculative harm to the plaintiffs,” Ruoff wrote, and notes the state Supreme Court in its Claremont education ruling, allowed the current system to remain in place for a time in order to have an orderly transition to a new system.
“In sum, the issue of whether the current application of the SWEPT results in a constitutional violation is a complicated issue best decided with the benefit of a fully developed record and additional time for the parties to brief (and the Court to consider) the relevant legal issues,” Ruoff wrote. “Under the circumstances presented here, the Court cannot conclude that in the interim, equity favors disrupting the Coalition members’ fiscal operations in such a substantial way to avoid the plaintiffs’ claimed (but as yet unproven) constitutional injuries, especially given that the injunction the plaintiffs now seek would not impact the SWEPT rate they will pay for this tax year.”
The plaintiffs sought the injunction when they filed the original complaint in June, and modified their request later.
The plaintiffs sought the temporary restraining order to block the property tax rate setting, which is nearly complete now, after the original judge hearing the case, Justice Lawrence MacLeod, rescued himself in early November after a hearing on the group’s motion for the injunction.
In his recusal order, MacLeod said until that hearing he did not know Lebanon was a member of the Coalition Communities and he had substantial property holdings in the community.
The case was transferred to Ruoff, who was the judge for the ConVal case challenging the state’s per-pupil costs of an adequate education, $3,561.
He ruled in the school district’s favor and the state appealed to the Supreme Court, which largely agreed with Ruoff, but sent the case back before the judge to determine what the actual district costs are to provide an adequate education for their students.
The plaintiffs in the latest challenge to the education system contend the SWEPT is unconstitutional because it is not assessed in a uniform and reasonable manner as required by the state constitution. They say it is unconstitutional because some communities pay no money for the SWEPT essentially giving them a $0 per $1,000 rate, while others are allowed to retain the excess money the levy raises to cover the state’s obligation to fund an adequate education effectively reducing their tax rate.
The statewide tax raises $363 million annually, and provides about 30 percent of the state’s obligation for funding public education, while the majority of the money for public education is supported by local property taxes with widely varying rates.
This fiscal year, the state used $100 million in surplus funds to reduce the revenue required to be raised by the SWEPT to $263 million, but also included an additional $15 million to reimburse the towns that generated surplus funds, but would not raise that money with the lesser obligation this fiscal year.
During the hearing before Justice Ruoff last month, the plaintiffs argued the original SWEPT had the state collect the excess revenue from the property wealthy communities and redistribute it to property poor communities, but since 2011, the legislature has allowed the communities to retain their excess revenue.
State Solicitor General Anthony Galdieri argued the plaintiffs had other remedies to recover their taxes through the abatement process and did not need an injunction blocking rate setting.
He argued if a temporary injunction were granted the affected communities could experience significant budget shortfalls if they could not use the excess revenue to offset costs. He said a ruling now would come at a time that would most impact the affected communities.
And Galdieri argued the statute is silent in how the excess money would be used and that would have to be determined by the Legislature and not necessarily distributed to other communities to help support their schools.
Ruoff asked the plaintiffs how they would remedy an unforeseen revenue shortfall if they were to prevail on their request.
“It would be a tough time any time, there is no good time to roll out this (issue),” he said. “But they raise legitimate concern for me.”
The plaintiffs’ attorney Michael Jaoude said remedies could be crafted to have minimum impact on the communities and noted they would face the same situation whenever a decision is reached either for an injunction or after a trial.
The Coalition’s attorney John-Mark Turner, said the court had to balance the harms, a few thousand dollars for most communities, versus $10 million to $20 million for the other towns. “It is a textbook case of harm,” he said.
The judge set the trial for the case the week of Sept. 25 to Oct. 2, 2023.
It was originally scheduled for August when it was before Grafton County Superior Court Justice MacLeod before he recused himself.
Garry Rayno may be reached at garry.rayno@yahoo.com.