A proposal to disburse a $3 million pool of illegally collected property taxes to qualifying Pulaski County property owners, minus legal expenses and administration costs, has been tentatively approved by Pulaski County Circuit Judge Tim Fox.
The agreement between the plaintiffs -- four local property owners -- and the defendants -- the city of Little Rock, Pulaski County and the Central Arkansas Library System -- will divvy up the $3 million fund, plus six years of interest, to end almost seven years of litigation over a citywide property tax imposed in 2008 to fund library renovations.
The arrangement calls for the plaintiffs' lawyers, Gene Sayre and Chris Brockett, to receive 15 percent of the fund, plus their expenses in bringing the class-action lawsuit. Another $35,000 has been set aside for the county to administer the refund process. Brockett, who signed the agreement, could not be reached for comment Tuesday.
Little Rock voters, with 65 percent of the vote in 2007, approved a 1.5-mill tax increase to repay improvement loans and fund some operating expenses for the library. The increase added $1.50 in taxes for each $1,000 of taxable property valuation, about $45 annually to the taxes on a $150,000 home.
Eligible refund recipients are taxpayers who owned property in the city and paid the library tax between May 15, 2008, the date the suit was filed, and Dec. 31 of that year, unless they received a homestead tax credit. It's not clear how many taxpayers would be eligible.
The refund will consist of the amount of the property owner's 2007 1.5-mill tax payment with interest, minus the administration and legal costs. Recipients owed less than those costs won't get a refund. Unclaimed monies will go to the library. The refund pool was established in 2008 when the lawsuit was filed.
The plaintiffs -- John Robinson, Kathy Robinson, Edward Bozovsky and Richard Kelley -- sued on behalf of property owners, inspired by Arkansas Democrat-Gazette reporting that raised questions about the timing of the implementation of the tax collection.
The judge deemed the collection legal, but the Arkansas Supreme Court in an appeal of his 2009 ruling overturned his decision, ruling that Pulaski County authorities, responsible for tax collection, had imposed the tax too soon.
The high court's decision made the first year of the collection illegal and ordered it refunded to taxpayers, initially estimated to number about 170,000 who would be owed a total of $4.5 million.
The Supreme Court ruling, reached in 2009, also returned the case to Fox for the parties to try to work out how to refund the wrongfully collected money.
After about 15 months, the sides reached a tentative agreement on how the refund would be administered and how eligible property owners would be notified.
But they could not agree over the qualifications for property owners to be eligible for a refund and the amount of compensation for the plaintiffs' lawyers. Siding with the defendants, Fox ruled in June 2011 that property owners who paid the tax before the lawsuit was filed were ineligible.
He made that decision relying on the voluntary-payment rule. The concept that payments of illegal taxes are voluntary and cannot be recovered, except when paid under coercion, dates back almost 200 years in American courts, with the Arkansas Supreme Court first endorsing that position in 1913.
The plaintiffs appealed that ruling to the state Supreme Court, arguing that it was unfair to property owners whose mortgage companies automatically paid the property tax. But the challenge was dismissed on a technicality in June 2012, and the plaintiffs initially chose not to pursue it further.
The case then lagged with no action for almost two years until May, when the judge approved a defense-recommended plan to dispense the funds based on an 2011 agreement between the parties.
The plan's approval led to a June appeal to the Supreme Court by the plaintiffs, who described the plan as "burdensome and tedious."
But last month, the plaintiffs agreed to withdraw that third appeal and submit a plan agreed to by the defendants to begin the refund process. The judge signed off on it Friday.
The notification plan calls for a postcard explaining how to claim a refund to be sent to all eligible recipients. Eight advertisements will run in the Democrat-Gazette to inform taxpayers, and a website will be set up to dispense refund information.
Under the plan approved Friday by the judge, notice to potential claimants should begin within the next two months. They'll have two months after the publication of the first notice to either submit a claim, decline a refund or object to the arrangements, with refunds scheduled to be sent out within three months of the closing of the claims period April 17.
Metro on 01/14/2015