On June 4, 2012, the United States Supreme Court decided Armour v. City of Indianapolis, No. 11-161, affirming the Indiana Supreme Court's decision and holding that when a municipality switches from one method of infrastructure financing to another, the municipality's decision to forgive certain financial obligations arising under the prior financing method may be justified for equal protection purposes by administrative concerns even when the forgiveness creates disparate consequences.
Since 1889, Indianapolis financed sewer improvements using Indiana's "Barrett Law," which equally divided costs among all affected homeowners and allowed the homeowners to pay either in lump sum or in installments over a period of years, with the installments collected as taxes. In 2005, Indianapolis implemented a new method for sewer financing in which each homeowner was charged a flat fee and the remainder of costs was financed by bonds paid by all taxpayers. In connection with this change, the city chose to forgive all outstanding Barrett Law installment payments. Certain homeowners who had paid their Barrett Law assessments in a lump sum sought refunds of a portion of their lump sum payments, contending that the city's decision to keep their full payments while forgiving outstanding installment payments violated the Equal Protection Clause.
The Indiana trial court granted summary judgment in favor of the plaintiff homeowners, finding an equal protection violation, and the state intermediate appellate court affirmed. The Indiana Supreme Court reversed, ruling in the city's favor and holding that the disparate treatment did not violate the Constitution because it was rationally related to legitimate governmental purposes.
The U.S. Supreme Court affirmed, finding a rational basis for the city's decision and stating "[o]rdinarily, administrative considerations can justify a tax-related distinction." The Court noted that the city's decision had to be supported only by a rational basis because it involved no fundamental right or suspect classification. It then concluded that the administrative burdens that would have been placed on the city justified the disparate treatment that arose from forgiving outstanding Barrett Law assessments. Those administrative burdens included the need to maintain parallel administrative systems (including expensive computer systems) to monitor both the new and old financing systems, billing and collecting outstanding Barrett Law payments, and calculating and administering refunds to lump-sum payers (which would require appropriating funds for the payments). The Court declined to address other reasons the Indiana Supreme Court found in support of the City's decision, ruling that administrative convenience was a sufficient rational basis. It also did not entertain the lump-sum payers' arguments about alternative forgiveness systems, ruling that the City's system needed only to be rational, not ideal. The Court's opinion also addressed Allegheny Pittsburgh Coal Co. v. Commission of Webster County, 488 U.S. 336 (1989), which rejected a property tax assessment system that produced grossly disparate assessments of similar properties, ruling that Allegheny Pittsburgh was distinguishable in light of the clearly stated statutory goal of assessment equality and lack of any other rational basis for the assessment disparities in that case.
Faegre Baker Daniels LLP filed an amicus brief supporting affirmance on behalf of the International City/County Management Association, National Association of Counties, National Conference of State Legislatures, National League of Cities, and United States Conference of Mayors.
Justice Breyer delivered the opinion of the Court, in which Justices Kennedy, Thomas, Ginsburg, Sotomayor, and Kagan joined. Chief Justice Roberts filed a dissent, which was joined by Justices Scalia and Alito.