It was more than two years in the making, but a Pulaski circuit judge has struck down a 2015 law sponsored by Sen. Bart Hester to give a property tax break to billboards.
Circuit Judge Mary McGowan ruled the law was unconstitutional.
The lawsuit, filed by John Burnett on behalf of Little Rock residents Charles and Kaitlin Lott and County Judge Barry Hyde, argued that the scheme resulted in assessing the billboards at less than fair market value, which is contrary to the state Constitution’s requirement of equal treatment of taxable property. The judge noted that argument, but said, irrespective of that, the legislation was invalid because it didn’t receive a three-fourths vote in either the House or Senate, the requirement for legislation that changes assessment to something other than market value.
At the time the law was passed, Benton County tax records indicated Hester owned property that was leased for billboards. When the suit was filed in 2017, he said he had no land with billboards. At that time, he said he had land with a billboard easement, but no billboard.
The suit was filed against County Assessor Janet Troutman Ward, who agreed the legislation hadn’t received sufficient votes and that it would have the effect of reducing tax revenues that go to schools and other governments. The judge wrote in a declaratory judgment:
The assessment method mandated by Act 573, Section}, for off-premises advertising signs will result and has resulted in these signs being assessed at a value less than fair market value as derived from other regular assessment methods, less than the fair market value derived from the Billboard Evaluation Guide that was promulgated by the Arkansas Assessment Coordination Department in 2015, and less than the value otherwise required by Article 16, Section 5.
That new state assessment guide, and the prospect of tax increases for billboard owners, gave rise to Hester’s effort to engineer the big tax break. The guide, for one thing, took location — a powerful factor in value — into account. The law allows only the cost of a billboard to be counted, with no regard to differing revenue flows. As Rep. John Walker noted at the time it was like saying identical houses in the Country Club neighborhood and central Little Rock should have the same property tax.
The attorney general’s office declined to defend the statute, leaving that to Pulaski County. Attorney General Leslie Rutledge had earlier dodged a question about the deficient vote.
The Arkansas Outdoor Advertising Association, represented by Sylvester Smith, intervened and tried to have the suit dismissed. It argued that one county officer, Hyde, couldn’t sue another county office. It also said the other plaintiffs had no standing because the law had no direct impact on them. But they said the law reduced revenue for the schools their children attend. The judge agreed and in refusing the billboard lobby’s motion to dismiss also said Hyde had an interest because of the impact on the county’s share of property tax collections. She also said Hyde and Ward have distinct duties and neither answers to the other.
For now, the ruling serves as a precedent only in the Sixth Judicial District (Pulaski and Perry counties). But it will provide a powerful example to other assessors in the state.
Should the billboard association appeal (and at a minimum, many high-profile billboards in Pulaski County face tax increases under the decision) it would lead to a definitive statewide decision. Standing and taxation arguments aside, it has been difficult since 2015 to see how the law could survive the failure to achieve the three-fourths vote requirement in the Constitution.
Hester’s bill fell short of that in both chambers — only 18 votes in the Senate and 67 in the House, needing 27 and 75, respectively.