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SOUTHEAST DELCO SCHOOL DISTRICT v. MILTON SHAPP (10/08/76)

SUPREME COURT OF PENNSYLVANIA


decided: October 8, 1976.

SOUTHEAST DELCO SCHOOL DISTRICT, APPELLANT,
v.
MILTON SHAPP, GOVERNOR OF THE COMMONWEALTH OF PENNSYLVANIA, ET AL.

COUNSEL

Peter J. Nolan, Chester, for appellant.

Melvin R. Shuster, Deputy Atty. Gen., Harrisburg, for appellees.

Jones, C. J., and Eagen, O'Brien, Roberts, Pomeroy, Nix and Manderino, JJ.

Author: Pomeroy

[ 468 Pa. Page 476]

OPINION OF THE COURT

This suit in equity was brought in the Commonwealth Court*fn1 by the appellant, the Southeast Delco School District, on behalf of itself and all other similarly situated local taxing authorities, to compel distribution by the Commonwealth to them of up to eighty million dollars collected in the years 1970 to 1974, inclusively, pursuant to the Public Utility Realty Tax Act, Act of March 10, 1970, P.L. 168, as amended, 72 P.S. § 3271 et seq. [hereinafter "PURTA"]. The defendants, various Commonwealth officials, filed preliminary objections in the nature of a demurrer and asserting that the Commonwealth Court lacked jurisdiction and that appellant's claim was barred by laches. The Commonwealth Court sustained the demurrer and dismissed appellant's complaint. 18 Pa. Commw. 389, 336 A.2d 656 (1975). This appeal followed.*fn2 We shall affirm.

The public utility realty tax -- a tax of thirty mills upon each dollar of the state taxable value*fn3 of public

[ 468 Pa. Page 477]

    utility real estate -- was imposed by the General Assembly pursuant to Article VIII, Section 4, of the Constitution of Pennsylvania*fn4 as a special tax in place of local taxation of public utility real estate.*fn5 Appellant's complaint alleges that during the years 1970 through 1974

[ 468 Pa. Page 478]

    the Commonwealth collected from public utilities approximately $163,000,000 as a result of imposition of the public utility realty tax, and that, of this amount, approximately $82,300,000 has been distributed to local taxing authorities. The remaining approximately $80,000,000 alleges appellant, has been retained by the Commonwealth and commingled with other funds in the General Fund of the state treasury. The complaint avers that the amounts of money distributed to appellant and to numerous other local taxing authorities for the years in question fall short of the amounts the local bodies could have raised by directly taxing the public utility realty within their boundaries -- amounts to which, appellant contends, it and other local taxing authorities are entitled under Article VIII, Section 4, supra. Thus, the complaint seeks, inter alia, distribution to appellant and all other allegedly aggrieved local taxing authorities of the portions of the public utility realty tax proceeds to which they claim to be entitled but which they have not yet received.

The cause of action which appellant purports to state is based upon the theory that Article VIII, Section 4, requires the Commonwealth to distribute to each local taxing authority "an amount of money, equal to the money that each local taxing authority would have obtained had it taxed the public utility realty directly." (Paragraph 12 of appellant's complaint, R. 7a). We agree with the Commonwealth Court that this theory is erroneous.

The purpose of Article VIII, Section 4, was to provide local taxing authorities with an additional source of revenue. See American Telephone and Telegraph Company v. Board of Property Assessment Appeals and Review of Allegheny County, 461 Pa. 716, 720-23, 337 A.2d 844, 846-47. To this end, the first sentence of the section eliminates the exemption from local real estate taxation which public utilities had theretofore enjoyed. Article VIII, Section 4 goes on, however, to provide for a means

[ 468 Pa. Page 479]

    by which all local taxing authorities -- rather than only those in which public utility realty is located -- may share in the benefits to be derived from this new revenue source. Id. It does so by providing for the replacement of local taxation of public utility realty by a gross receipts or other special tax imposed and collected by the Commonwealth and distributed among all local taxing authorities "in the proportion which the total tax receipts of each local taxing authority bear to the total tax receipts of all local taxing authorities, or in such other equitable proportions as may be provided by law." To insure that any special tax imposed pursuant to Article VIII, Section 4, will be a source of revenue for all local taxing authorities,*fn6 the constitutional provision requires that the total amount of money collected by the Commonwealth from public utilities and distributed to all local taxing authorities as a group "shall not be less than the gross amount of real estate taxes which the local taxing authorities could have imposed upon such real property but for the exemption herein provided."*fn7 While there is thus a minimum amount which the Commonwealth must collect and distribute among local taxing authorities, there is nothing in Article VIII, Section 4, which prohibits the Commonwealth from raising more than this minimum amount and, if it does so, from retaining the excess. See Heller v. Depuy, 2 Pa. Commw. 196, 217-18, 277 A.2d 849, 862 (1971). And, by suggesting a distribution of tax proceeds based upon the respective total tax receipts of the various local taxing authorities and by permitting any

[ 468 Pa. Page 480]

"equitable" manner of distribution, Article VIII, Section 4, clearly authorizes a method of distribution under which the amount of money distributed to each local taxing authority bears no direct relationship to the amount which it could have raised through real estate taxation of its own utility realty.

In enacting PURTA, the legislature followed the suggestion of Article VIII, Section 4 by adopting a distribution scheme in which each local taxing authority's share of public utility realty tax proceeds is dependent upon the ratio of its total tax receipts to the aggregate tax receipts of all local taxing authorities. See § 7 of PURTA, 72 P.S. § 3277 (Supp.1976).*fn8 Thus, the amount distributed to each local taxing authority will in virtually every case be either greater or less than the amount of money such local unit could have raised by direct taxation of public utility realty within its boundaries; indeed, it would be a pure coincidence were the two amounts found to be the same in any given year.

In summary, even if, as appellant complains, the Commonwealth as a result of imposition of the public utility realty tax has collected more money than it has distributed, that fact alone does not mean that the Commonwealth has not met the Article VIII, Section 4, requirements as to the distribution of public utility realty tax proceeds. In view of the facts that the PURTA manner of distributing the proceeds of the public utility realty

[ 468 Pa. Page 481]

    tax to local taxing authorities is authorized by Article VIII, Section 4, and that this distribution scheme does not contemplate that each local taxing authority must receive an amount of money equal to that which it could have raised by direct local taxation of public utility real estate within its jurisdiction, the School District's complaint states no prima facie entitlement to relief merely by alleging that appellant did not receive this amount.*fn9 Accordingly, the Commonwealth Court was correct in holding that the school district had not stated a cause of action and in dismissing its complaint.

Decree affirmed. Costs on appellant.


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