HAMMOND’S VICTORY NO LONGER

“Hammond’s Victory for Now” was the title of the CLB’s Featured Article posted February 22, 2018 and analyzing the February 20, 2018 COA Opinion in City of Hammond v. Herman & Kittle Properties, Inc. The CLB predicted a grant of Transfer and correction of the COA’s error in awarding a rental fee windfall to the City of Hammond. The SCOTSI delivered March 15, 2019 with a 4-0¹ holding against the City of Hammond, though on slightly different reasoning than that predicted by the CLB.

The nature of the case was Hammond’s challenge to a State law limiting what Hammond could charge annually for residential rental registration fees. A problem with the statute, IC-36-1-20-5, is that it is “special” legislation², applying a $5.00 per year per unit rental registration fee cap on all of the State, except for exemptions in favor of University towns Bloomington and West Lafayette.

Because the General Assembly wraps its special legislation in opaque language it is not possible to determine from the text of IC 36-1-20-5 which communities are exempt. The General Assembly confused itself when in 2011 it adopted a version of the statute that (inadvertently) included Hammond within the fee exemption class intended only for Bloomington and West Lafayette.

Hammond’s spendthrift government had to have been elated with the windfall of its unintended exemption from the rental registration fee cap. Hammond exploited its good luck by charging a rental registration fee of $80.00 per unit annually, or 16 times the limit applicable to all but two other communities in the State. See the $80.00 fee at the Hammond Municipal Code § 96.152(c).

Then the General Assembly realized its gaff and enacted a legislative remedy in the form of tweaking the definition of “rental registration or inspection program” as that term is used in IC 36-1-20-5 to describe what communities are exempt from the registration fee cap. The result was Hammond’s elimination from that short list of Hoosier municipalities exempt from the general cap on rental registration fees. See IC 36-1-20-1.2.

The City of Hammond was greedy in charging $80.00 per residential rental unit per year. While the City of Hammond remained in the exclusive “exempt” class of municipalities that could charge $80.00 (or more) annually for each rental unit it had no quarrel with IC 36-1-20-5. Then Hammond was kicked out of that exclusive club of exempt municipalities and became hypocritical in challenging that same statute as unconstitutional “special” legislation per Article 4 Sec. 23 of the Indiana Constitution³.

The (Marion County) trial court held that the registration fee cap “exemption” in IC 36-1-20-5 was “special” but still constitutional by reason of the unique characteristics of the two exempt college towns. The COA reversed with three notable holdings:

1. The fee cap exemption was per se unconstitutional under the “salaries and fees” clause of Article 4 Sec. 22 banning special legislation in certain categories;
2. Under Article 4 Sec. 23 the fee cap exemption was also unconstitutional (on the facts) in that the unique circumstances of Bloomington and West Lafayette were insufficient to justify disparate treatment; and
3. The invalid fee cap exemption was not severable from the remainder of IC 36-1-20-5, such that there would be no statutory fee cap for any locality in the state.

In the previous Featured Article the CLB took issue with all three COA holdings. As for holding no. 1, the CLB position was that there is no modern applicability to the “salaries and fees” clause of Sec. 22. The SCOTSI Opinion of March 15, 2019 deferred consideration of this issue in light of its holding with respect to Sec. 23. As for holding no. 2 the CLB position was that the two college towns exempted from the (otherwise) state-wide rental registration fee cap had sufficiently unique circumstances to warrant disparate treatment. The SCOTSI disagreed. As for holding no. 3, the CLB position was that nonseverability of the fee cap exemption to the effect of voiding all of IC 36-1-20-5 would amount to “the tail wagging the dog,” contrary to conventional severability analysis. The SCOTSI agreed and added a helpful citation to IC 1-1-1-8(b) to the effect that there is a presumption of the severability of an unconstitutional clause within a larger statute that has no nonseverability provision.

Hammond was greedy and hypocritical. It scored a temporary victory in the COA and lost it in the SCOTSI ruling of March 15, 2019. Hammond most likely collected tens of thousands of dollars in overcharges that it should now refund with a smile and an apology. It is doubtful that Hammond will do so.

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¹ Justice Slaughter did not participate.

² For purposes of this case and this Article, “special” legislation is that which could be given state-wide applicability, but is not.

³ Under Sec. 23 “special” legislation may be unconstitutional unless grounded in unique traits of the class receiving disparate treatment.