Are you benefited? Indiana's drainage tax system.
by Marty Lucas - 7.21.2001
Northwestern Indiana is a land of countless ditches. These ditches transformed the landscape from one of the most extensive wetland regions in the upper Midwest, into a predominantly agricultural landscape. Today I'm not going to get into whether the creation of this network of canals was a good idea - today's subject is who pays for it?
What's a drainage board?
Most of these ditches are created and maintained under the authority of local and regional drainage boards. The drainage boards owe their existence to the Indiana Drainage Code, (IC 36-9-27).
Where a ditch is entirely within a single county, it's under the control of the county drainage board. Often, a ditch, or watershed, extends into multiple counties and in that case a regional board composed of representatives from each of the counties sits on the administrative board. These boards take three basic kinds of actions relative to a particular ditch. Construction is the building of a new ditch or channelization of a natural stream for the first time. Reconstruction is an extensive new project on an existing ditch; one that can include changing the original specifications of the ditch. Maintenance is routine work that helps keep the ditch operating at specification.
They drain wallets too
Whether it's a county drainage board or a regional board, funding for all of these projects comes from a property tax sometimes euphemistically called an "assessment". The drainage code authorizes the controlling drainage board to tax real estate located in that ditch's watershed, based on the "benefit" accruing to the property. So, let's say you own land in the watershed where the drainage board has decided to do some dredging, or bulldoze some trees? Are you benefited?
Flat wrong
A recent dispute between Starke and Marshall counties highlights this issue. Both counties are members of a four county drainage board for the Robbins Ditch, a tributary of the upper Kankakee River. Newspaper accounts indicate that this four-county drainage board set a uniform ditch tax of $10 per acre for the entire watershed of the Robbins Ditch. However, some Starke County property owners were actually billed at $5 per acre. Published reports consistently refer to this as an "inequity".
Quite frankly, equity has little to do with tax law. A better question would be, "is it legal?" The Marshall County officials argue zealously for the enforcement of a flat rate tax throughout the thousands of acres of the Robbins Ditch watershed. Examination of Indiana law shows that, in general, a flat rate ditch tax is illegal.
In the case of Whitley, Noble and Allen Joint Drainage Bd. v. Tschantz, (Ind. App. 1984) 461 N.E.2d 1146, the Indiana Court of Appeals considered the reconstruction of the Eel River. The three-county board adopted a flat rate ditch tax of $3 per acre on the "theory that because every acre of land which drains into the river contributes to the drainage problem, all must equally pay for the maintenance of the river". The court rejected this plan as arbitrary, because Indiana law requires the assessment to be based on the relative benefit accruing to the parcels of real estate in the watershed. The court held that in determining rates "proper considerations include: indirect benefits received by all owners of land within the watershed; increased value of land affected; the right of owners of high ground to natural drainage; and, the burden caused by artificial drainage of high ground."
The law
The legislature made a list of some of the relevant factors for setting a ditch tax rate in Indiana Code 36-9-27-112, which says in relevant part:
(a) In determining benefits to land under sections 39, 50, and 62 [IC 36-9-27-39, IC 36-9-27-50, and IC 36-9-27-62] of this chapter, the board may consider:
(1) The watershed affected by the drain to be constructed, reconstructed, or maintained;
(2) The number of acres in each tract;
(3) The total volume of water draining into or through the drain to be constructed, reconstructed, or maintained, and the amount of water contributed by each land owner;
(4) The land use;
(5) The increased value accruing to each tract of land from the construction, reconstruction, or maintenance;
(6) Whether the various tracts are adjacent, upland, upstream, or downstream in relation to the main trunk of the drain;
(7) Elimination or reduction of damage from floods;
(8) The soil type; and
(9) Any other factors affecting the construction, reconstruction, or maintenance.
While the statute uses the word may, the decision in Whitley, Noble and Allen Joint Drainage Bd. v. Tschantz clearly holds that this means only that this list is not intended to be exclusive. A flat rate might not always be arbitrary; a very small project might only affect one hundred acres or less, and such a small tract might be so uniform in character that adjustments would not be needed. That would be the exception, not the rule.
Unfortunately, it seems that local drainage boards in the Kankakee basin at least, are not comfortable with this law and would prefer to tax at a flat rate. Taxing at a flat rate is easier, of course. But it's wrong. Taxing at a flat rate shifts the cost of drainage projects away from the people that want them: people interested in farming or building in wetland areas. At the same time the flat rate tends to shift the tax burden to landowners who don't want the projects: people who own forestry lands, wildlife areas, and home owners with the good sense to build in well drained upland areas where no artificial drainage is needed or desired.
Are you benefited?
If the law were followed correctly, more of the cost of the drainage projects would be borne by the proponents of these projects, most notably farmers who want to bring wet areas into production. That is as is should be. Wetland farmers will not share the income they generate with their neighbors, so why should their neighbors share their costs? Some will surely protest that if things were done this way (as legally, they must), these projects won't get done. Wouldn't that be sad?