Can an Independence County, Arkansas fire department use voter-approved sales tax revenues to buy land for a new station and to sell extra acreage to fund an ISO-rating improvement?

Plain-English summary

Representative Dwight Tosh asked Attorney General Leslie Rutledge two questions about Independence County Ordinance 2012-39, which levied a sales and use tax for fire-related purposes. A local fire department wanted to use the revenue to (1) buy a 5-acre parcel for a new fire station, and (2) buy a separate 32-acre parcel and sell it, depositing the proceeds into an account for improving the department's ISO rating (the insurance industry's rating of fire-protection effectiveness, which directly affects property-insurance premiums for residents).

The AG declined to answer either question. The reason was structural rather than substantive: a yes-or-no answer required reading the levying ordinance and the ballot title that the voters approved, then determining whether the proposed uses fell within that authorized purpose. That is a fact-finding exercise on local documents that the AG had previously declined to perform, citing prior opinions (e.g., Op. Att'y Gen. 2018-013).

Instead, the AG outlined the controlling legal framework so local officials and counsel could apply it themselves.

The constitutional rule is Article 16, section 11: "No moneys arising from a tax levied for one purpose shall be used for any other purpose." The Arkansas Supreme Court has consistently interpreted that to mean the purpose of a local sales tax is whatever the voters approved, as expressed in the ballot title and the levying ordinance. Daniel v. Jones, 332 Ark. 489 (1998), held that the ballot title is "the final word of information and warning to which the electors had the right to look as to just what authority they were asked to confer," with the "implication and ordinary meaning" of the ballot title generally controlling. Maas v. City of Mountain Home, 338 Ark. 202 (1999), then refined the rule: the ballot title is "the final word" only as the last source of voter information, and it "must be read in conjunction with the levying ordinance."

If the ballot title and ordinance language are ambiguous, courts will consider extrinsic evidence: historical context, contemporaneous conditions at enactment, and consequences of interpretation. Arkansas State Highway Commission v. Mabry, 229 Ark. 261 (1958), and Mears v. Arkansas State Hospital, 265 Ark. 844 (1979), supplied that fallback rule.

A separate strand of authority gave significant deference to the local governing body's reading. Under McAdams v. Henley, 169 Ark. 97 (1925), once the local governing body has determined whether a particular expenditure falls within the ballot-designated purpose, a court will not disturb that determination unless it is "demonstrably arbitrary and unwarranted."

So the practical answer for Independence County: the questions had to be resolved by reading Ordinance 2012-39 and its ballot title against the proposed uses, with the local quorum court making the call in the first instance. The AG could not perform that review because she does not act as a fact-finder in opinion-issuing. Local counsel was the right starting point.

Currency note

This opinion was issued in 2018. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

Background and statutory framework

Article 16, section 11 of the Arkansas Constitution provides: "No moneys arising from a tax levied for one purpose shall be used for any other purpose." The provision operates as a limit on how local sales and use tax revenues can be spent.

The "purpose" of a tax is determined primarily from two documents: the levying ordinance enacted by the local governing body (county quorum court or city council), and the ballot title that voters saw and approved. The ballot title is the more important of the two for voter-intent purposes, but the ordinance establishes the legal authority for the levy and is read together with the ballot title.

When a question arises about whether a particular expenditure falls within the authorized purpose, the analysis proceeds in stages:

1. Plain-language reading of the ballot title. What did the voters approve? The "implication and ordinary meaning" of the ballot title language is normally controlling.
2. Cross-reading with the ordinance. The ballot title must be read together with the levying ordinance.
3. Extrinsic evidence if ambiguous. If the ballot title and ordinance leave the question unclear, courts may look at historical context, contemporaneous conditions, and the consequences of competing interpretations.
4. Deference to the local governing body. Once the local body has made a finding that an expenditure falls within the authorized purpose, courts review only for arbitrariness.

The AG's declination here is consistent with a long line of opinions where she declined to act as a fact-finder on local-document interpretation: Op. Att'y Gen. 2018-013, 2017-105, 2017-086, 2016-134, all cited.

Why the AG declined to give a substantive answer

The Arkansas AG's opinion authority under Ark. Code Ann. § 25-16-706 covers questions of state law for legislators and certain state officials. It does not extend to fact-bound determinations about whether a specific local expenditure falls within a specific local ballot title. Resolving Tosh's questions would have required the AG to:

• Read Ordinance 2012-39's text in detail.
• Read the ballot title that voters approved in 2012.
• Compare the proposed uses (5-acre purchase + 32-acre purchase and resale for ISO funding) against that text.
• Apply the Daniel and Maas rules to determine if the proposed uses fall within the authorized purpose.

Each of those steps is a fact and document review that AG opinions do not undertake. The AG noted she "do[es] not act as a factfinder in issuing official opinions," consistent with her prior practice.

What "ISO rating" means in this context

The opinion did not explain ISO ratings, but for context: the Insurance Services Office (ISO) rates fire departments on a scale (commonly 1 through 10) based on water supply, equipment, communications, and personnel. A better ISO rating typically reduces residents' homeowner-insurance premiums. So the fire department's plan to fund ISO-rating improvements with the resale proceeds was aimed at a tangible community benefit, not a niche bureaucratic goal. Whether that ISO-improvement use falls within the original ballot purpose was the legal question Tosh wanted the AG to address.

Common questions

Could the fire department just ask local counsel to apply the framework?

Yes. The AG's framework was meant to be a roadmap for local lawyers and the quorum court. The questions were ones the local governing body should answer first, with deference from courts under McAdams v. Henley, 169 Ark. 97.

Does this mean fire-tax revenue can never be used to buy land?

No. Whether a particular use is permissible depends entirely on the ballot title and ordinance. If the levying ordinance authorized expenditures for "fire protection" broadly, land for a new station might fall within that purpose. If the ballot title specified more narrowly (e.g., "operating expenses only"), land acquisition might not.

What if the quorum court approved the use, but a taxpayer disagreed?

Under Article 16, section 11 and McAdams v. Henley, a taxpayer could sue to enjoin an expenditure they believed exceeded the authorized purpose. The court would review the quorum court's determination for arbitrariness, with the ballot title and ordinance as the touchstone.

Could the levying ordinance be amended later to permit the new use?

That is more complex. An ordinance amendment by the quorum court might or might not be sufficient under Article 16, section 11, depending on whether the change altered the purpose voters approved. A material change to the authorized purpose might require a new vote.

Citations

Ark. Const. art. 16, § 11; Hartwick v. Thorne, 300 Ark. 502, 708 S.W.2d 531 (1989); Daniel v. Jones, 332 Ark. 489, 966 S.W.2d 226 (1998); Arkansas-Missouri Power Corp. v. City of Rector, 214 Ark. 649, 217 S.W.2d 335 (1949); Maas v. City of Mountain Home, 338 Ark. 202, 992 S.W.2d 105 (1999); Arkansas State Highway Commission v. Mabry, 229 Ark. 261, 315 S.W.2d 900 (1958); Mears v. Arkansas State Hospital, 265 Ark. 844, 581 S.W.2d 339 (1979); McAdams v. Henley, 169 Ark. 97, 273 S.W. 355 (1925); Ops. Att'y Gen. 2018-013, 2017-105, 2017-086, 2016-134, 97-260.

Source

• Landing page: https://arkansasag.gov/divisions/opinions-foia/attorney-general-opinions-search/

Original opinion text

Opinion No. 2018-040
July 24, 2018
The Honorable Dwight Tosh
State Representative
4513 Butler Road
Jonesboro, AR 72404-8829
Dear Representative Tosh:
STATE OF ARKANSAS
ATTORNEY GENERAL
LESLIE RUTLEDGE
This is in response to your request for an opinion concerning the permissible use of county sales and use tax revenues. You forwarded a copy of the text of the ordinance and provided the following additional background information:
A fire department in Independence County would like to use funds derived from Ordinance 2012-39 to purchase thirty-seven (37) acres of land. Once the land is purchased, the fire department would set aside five (5) acres to build a new fire department building and sell the remaining land. The fire department intends to deposit the proceeds received from the sale of the remaining thirty-two (32) acres into an account to improve the fire department's ISO rating.

You have asked the following questions against this background:
1) Is it permissible for a fire department in Independence County to use the revenues derived from the taxes designated for the purposes according to the approved ballot measure for Ordinance 2012-39 to purchase five (5) acres of land to build a new fire department building?
2) Is it permissible for a fire department in Independence County to use the revenues derived from the taxes designated for the purposes according to the approved ballot measure for Ordinance 2012-39 to purchase thirty-two (32) acres of land, sell the thirty-two (32) acres of land and deposit the proceeds of the sale in an account to improve the fire department's ISO rating?

RESPONSE
The answers to these questions will depend upon the language of the ordinance by which the sales and use tax was levied and the ballot title by which it was presented to the electorate. I lack the resources and the authority to undertake the necessary review in this regard. These matters are local in nature and must be resolved on the local level. I will, however, briefly outline the analytical framework for addressing your questions.

DISCUSSION
Your questions most directly implicate Article 16, Section 11 of the Arkansas Constitution, which provides in pertinent part that "no moneys arising from a tax levied for one purpose shall be used for any other purpose." In determining the purpose of a tax, the Arkansas Supreme Court has stated that "it is to the title of the ordinance and the ballot title 'that the electors had the right to look to ascertain what they were asked to approve[.]'"

Thus, the purpose of the sales and use tax, as stated in the levying ordinance and the ballot title, will be determinative of the manner in which the proceeds may be used. The Court in Daniel went on to state that "[t]he ballot title is the final word of information and warning to which the electors had the right to look as to just what authority they were asked to confer[.]" The "implication and ordinary meaning" of the ballot title will, generally, be controlling. The Court has further noted that "[t]he ballot is the 'final word' to the voters only in the sense that it is the last source of information, not in the sense that it is conclusive of the measure's effects. It must be read in conjunction with the levying ordinance."

If the ordinance's language is ambiguous, a court might resort to extrinsic evidence to determine whether a particular use of tax revenues is authorized. A court might look at such factors as evidence of the historical context of the measure, contemporaneous conditions at the time of its enactment, consequences of interpretation, and other matters of common knowledge within the limits of its jurisdiction in order to determine whether the voters intended to approve use of the sales tax revenues for the particular projects in question.

Additionally, generally speaking, it is the responsibility of the local governing body to determine legislatively whether a particular expenditure is within the ballot-designated purpose(s) of a local sales tax, and a court will not disturb its finding unless it is "demonstrably arbitrary and unwarranted."

It becomes apparent that only a finder of fact could determine whether using the particular sales and use tax revenues at issue here is consistent with the uses authorized by the voters. And I do not act as a factfinder in issuing official opinions. The language of the ordinance and the ballot title must be reviewed to determine whether the purpose of the tax is stated so as to encompass the proposed uses. Consideration of extrinsic factors may also be necessary in the case of ambiguity. The questions are local in nature and must be answered on the local level, ideally with the assistance of local counsel.

For these reasons, I must decline to opine on your questions. I hope, however, that the foregoing will be of assistance in addressing the underlying issues.

Sincerely,

LESLIE RUTLEDGE
Attorney General