Ruling pending in tax revenue dispute

SANDPOINT — A ruling is still pending on the Independent Highway District’s effort to upend a lawsuit filed by the city over tax revenue.

Judge John T. Mitchell took the highway district’s motion to dismiss under advisement following oral arguments at the Kootenai County Courthouse on Nov. 13.

The city sued the highway district in August after the district refused to turn over revenue it collected from Sandpoint taxpayers.

The city argued the district was breach of a contract to split the revenue evenly.

The district halted the funding after a legal review of a 2003 joint powers agreement to share the revenue. Counsel for the district concluded the agreement was contrary to the Idaho Constitution.

The new legal position adopted by the district ended a decade of relative harmony between the two entities. Legal sparring between the district and the city has already gone to the Idaho Supreme Court three times.

Susan Weeks argued on behalf of the district during this month’s hearing, according an audio recording of the proceedings obtained by The Daily Bee. City Attorney Scot Campbell and C. Matthew Andersen drew up the city’s pleadings, with Andersen arguing for the city during the hearing.

Weeks maintained that the agreement was unenforceable because it violated a  provision of the Idaho Constitution that forbids a political subdivision from incurring indebtedness beyond a single fiscal year.

“They made an unconstitutional agreement,” said Weeks, who portrayed the city as a creditor for the services of the highway district.

Andersen disputed the district’s characterizations that a debt or liability was being created by the agreement. He argued the agreement was to divide tax revenue and acknowledge that the district was obligated to help fund street maintenance in the city.

“We’re at the point of no dispute. The district breached the agreement. They haven’t made the payments they were supposed to make,” said Andersen.

Andersen added that the agreement did not involve the purchase of a tangible item and disputed that the accord was subject to a constitutional analysis.

“There is no constitutional issue. It’s one that’s invented by (district) counsel,” he said.

Weeks countered that the agreement created a liability upon the district because it required it to turn over general-revenue funds over to the city.

“They had a mutual mistake of law and neither side is more culpable for that than the other side,” Weeks said.