NOTICE: This opinion is subject to
formal revision before publication in the preliminary print of the
United States Reports. Readers are requested to notify the Reporter
of Decisions, Supreme Court of the United States, Washington,
D. C. 20543, of any typographical or other formal errors, in
order that corrections may be made before the preliminary print
goes to press.
SUPREME COURT OF THE UNITED STATES
_________________
No. 11–161
_________________
CHRISTINE ARMOUR, et al., PETITIONERS
v. CITY OF INDIANAPOLIS, INDIANA, et al.
on writ of certiorari to the supreme court of
indiana
[June 4, 2012]
Justice Breyer delivered the opinion of the
Court.
For many years, an Indiana statute, the “Barrett
Law,” authorized Indiana’s cities to impose upon benefited lot
owners the cost of sewer improvement projects. The Law also
permitted those lot owners to pay either immediately in the form of
a lump sum or over time in installments. In 2005, the city of
Indianapolis (City) adopted a new as- sessment and payment method,
the “STEP” plan, and it forgave any Barrett Law installments that
lot owners had not yet paid.
A group of lot owners who had already paid their
entire Barrett Law assessment in a lump sum believe that the City
should have provided them with equivalent refunds. And we must
decide whether the City’s refusal to do so un- constitutionally
discriminates against them in violation of the Equal Protection
Clause, Amdt. 14, §1. We hold that the City had a rational basis
for distinguishing between those lot owners who had already paid
their share of project costs and those who had not. And we conclude
that there is no equal protection violation.
I
A
Beginning in 1889 Indiana’s Barrett Law
permitted cities to pay for public improvements, such as sewage
proj- ects, by “apportion[ing]” the costs of a project “equally
among all abutting lands or lots.” Ind. Code §36–9–39–15(b)(3)
(2011); see
Town Council of New Harmony v.
Parker,
726 N.E.2d 1217, 1227, n. 13 (Ind. 2000) (project’s
beneficiaries pay its costs). When a city built a Barrett Law
project, the city’s public works board would create an initial
lot-owner assessment by “dividing the estimated total cost of the
sewage works by the total number of lots.” §36–9–39–16(a). It might
then adjust an individual assessment downward if the lot would
benefit less than would others. §36–9–39–17(b). Upon completion of
the project, the board would issue a final lot-by-lot
assessment.
The Law permitted lot owners to pay the
assessment either in a single lump sum or over time in installment
payments (with interest). The City would collect installment
payments “in the same manner as other taxes.” §36–9–37–6. The Law
authorized 10-, 20-, or 30-year installment plans. §36–9–37–8.5(a).
Until fully paid, an assessment would constitute a lien against the
property, permitting the city to initiate foreclosure proceedings
in case of a default. §§36–9–37–9(b), –22.
For several decades, Indianapolis used the
Barrett Law system to fund sewer projects. See,
e.g.,
Conley v.
Brummit, 92 Ind. App. 620, 621, 176 N.E.
880, 881 (1931) (in banc). But in 2005, the City adopted a new
system, called the Septic Tank Elimination Program (STEP), which
fi- nanced projects in part through bonds, thereby lowering in-
dividual lot owners’ sewer-connection costs. By that time, the City
had constructed more than 40 Barrett Law projects. App. to Pet. for
Cert. 5a. We are told that installment-paying lot owners still owed
money in respect to 24 of those projects. See Reply Brief for
Petitioners 16–17, n. 3 (citing City’s Response to Plaintiff’s
Brief on Damages, Record in
Cox v.
Indianapolis, No.
1:09–cv–0435 (SD Ind., Doc. 98–1 (Exh. A)). In respect to 21 of the
24, some installment payments had not yet fallen due; in respect to
the other 3, those who owed money were in default. Reply Brief for
Petitioners 17, n. 3.
B
This case concerns one of the 24 still-open
Barrett Law projects, namely the Brisbane/Manning Sanitary Sewers
Project. The Brisbane/Manning Project began in 2001. It connected
about 180 homes to the City’s sewage system. Construction was
completed in 2003. The Indianapolis Board of Public Works held an
assessment hearing in June 2004. And in July 2004 the Board sent
the 180 affected homeowners a formal notice of their payment
obligations.
The notice made clear that each homeowner could
pay the entire assessment—$9,278 per property—in a lump sum or in
installments, which would include interest at a 3.5% annual rate.
Under an installment plan, payments would amount to $77.27 per
month for 10 years; $38.66 per month for 20 years; or $25.77 per
month for 30 years. In the event, 38 homeowners chose to pay up
front; 47 chose the 10-year plan; 27 chose the 20-year plan; and 68
chose the 30-year plan. And in the first year each homeowner paid
the amount due ($9,278 upfront; $927.80 under the 10-year plan;
$463.90 under the 20-year plan, or $309.27 under the 30-year plan).
App. to Pet. for Cert. 48a.
The next year, however, the City decided to
abandon the Barrett Law method of financing. It thought that the
Barrett Law’s lot-by-lot payments had become too burdensome for
many homeowners to pay, discouraging changes from less healthy
septic tanks to healthier sewer systems. See
id., at 4a–5a.
(For example, homes helped by the Brisbane/Manning Project, at a
cost of more than $9,000 each, were then valued at $120,000 to
$270,000. App. 67.) The City’s new STEP method of financing would
charge each connecting lot owner a flat $2,500 fee and make up the
difference by floating bonds eventually paid for by all lot owners
citywide. See App. to Pet. for Cert. 5a, n. 5.
On October 31, 2005, the City enacted an
ordinance implementing its decision. In December, the City’s Board
of Public Works enacted a further resolution, Resolution 101,
which, as part of the transition, would “forgive
all assessment
amounts . . . established pursuant to the Barrett Law
Funding for Municipal Sewer programs
due and owing from the
date of November 1, 2005 forward.” App. 72 (emphasis added). In its
preamble, the Resolution said that the Barrett Law “may present
financial hardships on many middle to lower income participants who
most need sanitary sewer service in lieu of failing septic
systems”; it pointed out that the City was transitioning to the new
STEP method of financing; and it said that the STEP method was
based upon a financial model that had “considered the current
assessments being made by participants in active Barrett Law
projects” as well as future projects.
Id., at 71–72. The
upshot was that those who still owed Barrett Law assessments would
not have to make further payments but those who had already paid
their assessments would not receive refunds. This meant that
homeowners who had paid the full $9,278 Brisbane/ Manning Project
assessment in a lump sum the preced- ing year would receive no
refund, while homeowners who had elected to pay the assessment in
installments, and had paid a total of $309.27, $463.90, or $927.80,
would be under no obligation to make further payments.
In February 2006, the 38 homeowners who had paid
the full Brisbane/Manning Project assessment asked the City for a
partial refund (in an amount equal to the smallest forgiven
Brisbane/Manning installment debt, apparently $8,062). The City
denied the request in part because “[r]efunding payments made in
your project area, or any portion of the payments, would establish
a precedent of unfair and inequitable treatment to all other
property owners who have also paid Barrett Law assessments
. . . and while [the November 1, 2005, cutoff date] might
seem arbitrary to you, it is essential for the City to establish
this date and move forward with the new funding approach.”
Id., at 50–51.
C
Thirty-one of the thirty-eight
Brisbane/Manning Project lump-sum homeowners brought this lawsuit
in Indiana state court seeking a refund of about $8,000 each. They
claimed in relevant part that the City’s refusal to provide them
with refunds at the same time that the City forgave the outstanding
Project debts of other Brisbane/Manning homeowners violated the
Federal Constitution’s Equal Pro- tection Clause, Amdt. 14, §1; see
also Rev. Stat. §1979, 42 U. S. C. §1983. The trial court
granted summary judgment in their favor. The State Court of Appeals
affirmed that judgment. 918 N.E.2d 401 (2009). But the Indiana
Supreme Court reversed. 946 N.E.2d 553 (2011). In its view, the
City’s distinction between those who had already paid their Barrett
Law assessments and those who had not was “rationally related to
its legitimate interests in reducing its administrative costs,
providing relief for property owners experiencing financial
hardship, establishing a clear transition from [the] Barrett Law to
STEP, and preserving its limited resources.” App. to Pet. for Cert.
19a. We granted certiorari to consider the equal protection
question. And we now affirm the Indiana Supreme Court.
II
A
As long as the City’s distinction has a
rational basis, that distinction does not violate the Equal
Protection Clause. This Court has long held that “a classification
neither involving fundamental rights nor proceeding along suspect
lines . . . cannot run afoul of the Equal Protection
Clause if there is a rational relationship between the dis- parity
of treatment and some legitimate governmental purpose.”
Heller v.
Doe,
509 U.S.
312, 319–320 (1993); cf.
Gulf, C. & S. F. R. Co. v.
Ellis,
165 U.S.
150, 155, 165–166 (1897). We have made clear in analogous
contexts that, where “ordinary commercial transactions” are at
issue, ra- tional basis review requires deference to reasonable
under- lying legislative judgments.
United States v.
Carolene Products Co.,
304 U.S.
144, 152 (1938) (due process); see also
New Orleans v.
Dukes,
427 U.S.
297, 303 (1976)
(per curiam) (equal protection). And we
have repeatedly pointed out that “[l]egislatures have especially
broad latitude in creating classifications and distinctions in tax
statutes.”
Regan v.
Taxation With Representation of
Wash.,
461 U.S.
540, 547 (1983); see also
Fitzgerald v.
Racing Assn.
of Central Iowa,
539 U.S.
103, 107–108 (2003);
Nordlinger v.
Hahn,
505 U.S.
1, 11 (1992);
Lehnhausen v.
Lake Shore Auto Parts
Co.,
410 U.S.
356, 359 (1973);
Madden v.
Kentucky,
309 U.S.
83, 87–88 (1940);
Citizens’ Telephone Co. of Grand
Rapids v.
Fuller,
229 U.S.
322, 329 (1913).
Indianapolis’ classification involves neither a
“fundamental right” nor a “suspect” classification. Its subject
matter is local, economic, social, and commercial. It is a tax
classification. And no one here claims that Indianapolis has
discriminated against out-of-state commerce or new residents. Cf.
Hooper v.
Bernalillo County Assessor,
472 U.S.
612 (1985);
Williams v.
Vermont,
472 U.S.
14 (1985);
Metropolitan Life Ins. Co. v.
Ward,
470 U.S.
869 (1985);
Zobel v.
Williams,
457 U.S.
55 (1982). Hence, this case falls directly within the scope of
our precedents holding such a law constitutionally valid if “there
is a plausible policy reason for the classification, the
legislative facts on which the classification is apparently based
rationally may have been considered to be true by the governmental
decisionmaker, and the relationship of the classification to its
goal is not so attenuated as to render the distinction arbitrary or
irrational.”
Nordlinger,
supra, at 11 (citations
omitted). And it falls within the scope of our precedents holding
that there is such a plausible reason if “there is any reasonably
conceivable state of facts that could provide a rational basis for
the classification.”
FCC v.
Beach Communications,
Inc.,
508 U.S.
307, 313 (1993); see also
Lindsley v.
Natural
Carbonic Gas Co.,
220 U.S.
61, 78 (1911).
Moreover, analogous precedent warns us that we
are not to “pronounc[e]” this classification “unconstitutional
unless in the light of the facts made known or generally assumed it
is of such a character as to preclude the assumption that it rests
upon some rational basis within the knowledge and experience of the
legislators.”
Carolene Products Co.,
supra, at 152
(due process claim). Further, because the classification is
presumed constitutional, the “ ‘ burden is on the one
attacking the legislative arrangement to negative every conceivable
basis which might support it.’ ”
Heller,
supra,
at 320 (quoting
Lehnhausen,
supra, at 364).
B
In our view, Indianapolis’ classification has
a rational basis. Ordinarily, administrative considerations can
jus- tify a tax-related distinction. See,
e.g.,
Carmichael v.
Southern Coal & Coke Co.,
301 U.S.
495, 511–512 (1937) (tax exemption for businesses with fewer
than eight employees rational in light of the “[a]dministrative
convenience and expense” involved); see also
Lehnhausen,
supra, at 365 (comparing administrative cost of taxing
corporations versus individuals);
Madden,
supra, at
90 (comparing administrative cost of taxing deposits in local banks
versus those elsewhere). And the City’s decision to stop collecting
outstanding Barrett Law debts finds rational support in related
administrative concerns.
The City had decided to switch to the STEP
system. After that change, to continue Barrett Law unpaid-debt
collection could have proved complex and expensive. It would have
meant maintaining an administrative system that for years to come
would have had to collect debts arising out of 20-plus different
construction projects built over the course of a decade, involving
monthly payments as low as $25 per household, with the possible
need to maintain credibility by tracking down defaulting debtors
and bringing legal action. The City, for example, would have had to
maintain its Barrett Law operation within the City Controller’s
Office, keep files on old, small, installment-plan debts, and (a
City official says) possibly spend hundreds of thousands of dollars
keeping computerized debt-tracking systems current. See Brief for
International City/County Management Association et al. as
Amici Curiae 13, n. 12 (citing Affidavit of Charles
White ¶13, Record in
Cox, Doc. No. 57–3). Unlike the
collection system prior to abandonment, the City would not have
added any new Barrett Law installment-plan debtors. And that fact
means that it would have had to spread the fixed administrative
costs of collection over an ever-declining number of debtors,
thereby continuously increasing the per-debtor cost of
collection.
Consistent with these facts, the Director of the
City’s Department of Public Works later explained that the City
decided to forgive outstanding debt in part because “[t]he
administrative costs to service and process remaining balances on
Barrett Law accounts long past the transition to the STEP program
would not benefit the taxpayers” and would defeat the purpose of
the transition. App. 76. The four other members of the City’s Board
of Public Works have said the same. See Affidavit of Gregory Taylor
¶6, Record in
Cox, Doc. No. 57–5; Affidavit of Kipper Tew
¶6,
ibid. Doc. No. 57–6; Affidavit of Susan Schalk ¶6,
ibid. Doc. No. 57–7; Affidavit of Roger Brown ¶6,
ibid. Doc. No. 57–8
.
The rationality of the City’s distinction draws
further support from the nature of the line-drawing choices that
confronted it. To have added refunds to forgiveness would have
meant adding yet further administrative costs, namely the cost of
processing refunds. At the same time, to have tried to limit the
City’s costs and lost revenues by limiting forgiveness (or refund)
rules to Brisbane/Manning homeowners alone would have led those
involved in other Barrett Law projects to have justifiably
complained about unfairness. Yet to have granted refunds (as well
as pro- viding forgiveness) to all those involved in all Barrett
Law projects (there were more than 40 projects) or in all open
projects (there were more than 20) would have involved even greater
administrative burden. The City could not just “cut . . .
checks,”
post, at 4 (Roberts, C. J., dissenting),
without taking funding from other programs or finding additional
revenue. If, instead, the City had tried to keep the amount of
revenue it lost constant (a rational goal) but spread it evenly
among the apparently thousands of homeowners involved in any of the
Barrett Laws projects, the result would have been yet smaller
individual payments, even more likely to have been too small to
justify the administrative expense.
Finally, the rationality of the distinction
draws support from the fact that the line that the City
drew—distinguishing past payments from future obligations—is a line
well known to the law. Sometimes such a line takes the form of an
amnesty program, involving, say, mortgage payments, taxes, or
parking tickets.
E.g., 26 U. S. C. §108(a)(1)(E)
(2006 ed., Supp. IV) (federal income tax provision allowing
homeowners to omit from gross income newly forgiven home mortgage
debt);
United States v.
Martin, metricconverter523
F.3d 281, 284 (CA4 2008) (tax amnesty program whereby State newly
forgave penalties and liabilities if taxpayer satisfied debt);
Horn v.
Chicago, metricconverter860 F.2d 700, 704,
n. 9 (CA7 1988) (city parking ticket amnesty program whereby
outstanding tickets could be newly set- tled for a fraction of
amount specified). This kind of line is consistent with the
distinction that the law often makes between actions previously
taken and those yet to come.
C
Petitioners’ contrary arguments are not
sufficient to change our conclusion. Petitioners point out that the
Indiana Supreme Court also listed a different consideration, namely
“financial hardship,” as one of the factors supporting rationality.
App. to Pet. for Cert. 19a. They refer to the City’s resolution
that said that the Barrett Law “may present financial hardships on
many middle to lower income participants who most need sanitary
sewer service in lieu of failing septic systems.” App. 71. And they
argue that the tax distinction before us would not necessarily
favor low-income homeowners.
We need not consider this argument, however, for
the administrative considerations we have mentioned are sufficient
to show a rational basis for the City’s distinction. The Indiana
Supreme Court wrote that the City’s classification was “rationally
related” in part “to its legitimate interests
in reducing its
administrative costs.” App. to Pet. for Cert. 19a (emphasis
added). The record of the City’s proceedings is consistent with
that determination. See App. 72 (when developing transition, the
City “considered the current assessments being made by participants
in active Barrett Law projects”). In any event, a legislature need
not “actually articulate at any time the purpose or rationale
supporting its classification.”
Nordlinger, 505 U. S.,
at 15; see also
Fitzgerald, 539 U. S., at 108
(similar). Rather, the “burden is on the one attacking the
legislative arrangement to negative every conceivable basis which
might support it.”
Madden, 309 U. S., at 88; see
Heller, 509 U. S., at 320 (same);
Lehnhausen,
410 U. S., at 364 (same); see also
Allied Stores of Ohio,
Inc. v.
Bowers,
358 U.S.
522, 530 (1959) (upholding state tax classification resting
“upon a state of facts that reasonably can be conceived” as
creating a rational distinction). Petitioners have not
“negative[d]” the Indiana Supreme Court’s first listed
justification, namely the administrative concerns we have
discussed.
Petitioners go on to propose various other
forgiveness systems that would have included refunds for at least
some of those who had already paid in full. They argue that those
systems are superior to the system that the City chose. We have
discussed those, and other possible, systems earlier.
Supra,
at 8–9
. Each has advantages and disadvantages. But even if
petitioners have found a superior system, the Constitution does not
require the City to draw the perfect line nor even to draw a line
superior to some other line it might have drawn. It requires only
that the line actually drawn be a rational line. And for the
reasons we have set forth in Part II–B,
supra, we believe
that the line the City drew here is rational.
Petitioners further argue that administrative
considerations alone should not justify a tax distinction, lest a
city arbitrarily allocate taxes among a few citizens while
forgiving many similarly situated citizens on the ground that it is
cheaper and easier to collect taxes from a few people than from
many. Brief for Petitioners 45. Petitioners are right that
administrative considerations could not justify such an unfair
system. But that is not because administrative considerations can
never justify tax differences (any more than they can
always do so). The question is whether reducing those
expenses, in the particular circumstances, provides a rational
basis justifying the tax difference in question.
In this case, “in the light of the facts made
known or generally assumed,”
Carolene Products Co., 304
U. S., at 152, it is reasonable to believe that to graft a
refund system onto the City’s forgiveness decision could have (for
example) imposed an administrative burden of both collecting and
paying out small sums (say, $25 per month) for years. As we have
said,
supra, at 7–9, it is rational for the City to draw a
line that avoids that burden. Petitioners, who are the ones
“attacking the legislative arrangement,” have the burden of showing
that the circumstances are otherwise,
i.e., that the
administrative burden is too insubstantial to justify the
classification. That they have not done.
Finally, petitioners point to precedent that in
their view makes it more difficult than we have said for the City
to show a “rational basis.” With but one exception, however, the
cases to which they refer involve discrimination based on residence
or length of residence.
E.g., Hooper v.
Bernalillo County
Assessor,
472 U.S.
612 (state tax preference distinguishing between long-term and
short-term resident veterans);
Williams v.
Vermont,
472 U.S.
14 (state use tax that burdened out-of-state car buyers who
moved in-state);
Metropolitan Life Ins. Co. v.
Ward,
470 U.S.
869 (state law that taxed out-of-state insurance companies at a
higher rate than in-state companies);
Zobel v.
Williams,
457 U.S.
55 (state dividend distribution system that favored long-term
residents). But those circumstances are not present here.
The exception consists of
Allegheny
Pittsburgh Coal Co. v.
Commission of Webster Cty.,
488 U.S.
336 (1989). The Court there took into account a state
constitution and related laws that required equal valuation of
equally valuable property.
Id., at 345. It considered the
constitutionality of a county tax assessor’s practice (over a
period of many years) of determining property values as of the time
of the property’s last sale; that practice meant highly unequal
valuations for two identical properties that were sold years or
decades apart.
Id., at 341. The Court first found that the
assessor’s practice was not rationally re- lated to the county’s
avowed purpose of assessing properties equally at true current
value because of the intentional systemic discrepancies the
practice created.
Id., at 343–344. The Court then noted
that, in light of the state constitution and related laws requiring
equal valuation, there could be no other rational basis for the
practice.
Id., at 344–345. Therefore, the Court held, the
assessor’s discriminatory policy violated the Federal
Constitution’s insistence upon “equal protection of the law.”
Id., at 346.
Petitioners argue that the City’s refusal to add
refunds to its forgiveness decision is similar, for it constitutes
a refusal to apply “equally” an Indiana state law that says that
the costs of a Barrett Law project shall be equally “apportioned.”
Ind. Code §36–9–39–15(b)(3). In other words, petitioners say that
even if the City’s decision might otherwise be related to a
rational purpose, state law (as in
Allegheny) makes this the
rare case where the facts preclude any rational basis for the
City’s decision other than to comply with the state mandate of
equality.
Allegheny, however, involved a clear
state law requirement clearly and dramatically violated. Indeed, we
have described
Allegheny as “the rare case where the facts
precluded” any alternative reading of state law and thus any
alternative rational basis.
Nordlinger, 505 U. S., at
16. Here, the City followed state law by apportioning the cost of
its Barrett Law projects equally. State law says nothing about
forgiveness, how to design a forgiveness program, or whether or
when rational distinctions in doing so are permitted. To adopt
petitioners’ view would risk transforming ordinary violations of
ordinary state tax law into violations of the Federal
Constitution.
* * *
For these reasons, we conclude that the City
has not violated the Federal Equal Protection Clause. And the
Indiana Supreme Court’s similar determination is
Affirmed.