Street fighting re-ignites between Sandpoint, IHD

SANDPOINT — The city and the Independent Highway District are at odds again.

The two entities have been operating in relative harmony for the past decade, after entering into a joint powers agreement that was meant to resolve legal conflicts over tax dollars, jurisdiction and street maintenance.

But the highway district now contends that the 2003 joint powers agreement, in which all of the tax revenue collected by the district goes to the city, is unconstitutional and contrary to state law.

The district’s legal counsel in the matter put the city on notice in July that the joint powers agreement was unlawful and therefore would not turn over additional revenue to the city.

The city responded by filing suit against the highway district in 1st District Court on Friday. The suit alleges the district is in breach of the joint powers agreement and seeks judicial declaration that the pact is in fact valid.

“The City and the District have a long history of disagreement, including three trips to the Idaho Supreme Court,” city attorney Scot Campbell observes in the suit’s preamble.

The city sued the district in 1994 and the high court held that the district had control of the streets in the absence of a functioning city street department. Citizens petitioned the county in 2000 to dissolve the highway district but the supreme court ruled that the county — not the city — would be the recipient of the district’s revenue due to state law.

While the dissolution petition was pending, the city expanded the powers of its Public Works Department to include street maintenance. However, the supreme court said the district still retained jurisdiction over the streets despite the enactment of a street department.

Nevertheless, the city maintained the streets for about three years, while the highway district worked out arrangements with the cities of Ponderay and Dover for street maintenance.

The city and the highway district, formerly known as the Sandpoint Independent Highway District, reached an accord in 2003 which sought to resolve all the outstanding legal issues.

Under the agreement, the district retained jurisdiction over the streets and agreed to turn over 100 percent of the tax revenue to the city, which would continue maintaining the routes. In return, the city would no longer seek dissolution or oppose the district’s annexation efforts.

But on the 10th anniversary of the agreement, the district asked Meridian attorney David Wynkoop to review the legality of it.

“Our office has opined to IHD that the agreement violates Idaho law,” Wynkoop said in a July 11 letter to the city.

Wynkoop contends the agreement violates an Idaho constitutional provision which prohibits governments from incurring indebtedness beyond a single fiscal year. The agreement is also contrary to state law, which requires 50-50 split of tax revenue between cities and highway districts with common boundaries, Wynkoop advised the city.

Campbell counters in the suit that the tax revenue is not indebtedness or a liability of the district. If it is deemed as such, however, it is exempt from the constitutional prohibition because it is an ordinary and necessary expense, Campbell said in the suit.

The city contends the district is intentionally trying to harm it by withholding $140,000 in tax revenue, which is jeopardizing projects and forcing it to devote additional financial resources toward litigation.

“The City of Sandpoint would prefer to see those dollars be spent on streets rather than attorneys,” the city said in a statement that coincided with the suit’s filing.

The city further contends the district gave no advance warning of its intentions and sought no meeting with city officials in an attempt to resolve things.

Wynkoop, however, maintains that it was up-front with the city and said his July 11 letter and follow-up correspondence on July 25 yielded no responses.

“The city decided to resolve this with litigation rather than cooperation,” Wynkoop said on Monday.

The district is offering to convey title to Sandpoint’s streets to the city if it adheres to the 50-50 revenue split outlined in Idaho Code. The district also said it would not attempt to recover “several million dollars” in tax revenue it alleges was illegally paid to the city over the years, according to court documents.