For a complete updated story, see this week’s Leader, now in stores.
Citizens facing big tax boost to pay for mistakes a dozen years ago
Rogers County District Attorney Janice Steidley on Wednesday issued an explanation of how Rogers County taxpayers have become liable for a judgment of more than $22 million that is not covered by insurance.
Currently, it is expected to be paid by raising property taxes for three years to cover the entire judgment–which will undoubtedly increase before collections begin. Assessor Scott Marsh said the judgment will have no effect on 2012 property taxes.
The Oklahoma Supreme Court has unanimously declined to hear the last possible appeal in the inverse condemnation case, Material Service v. Rogers County and the judgment—which continues to grow due to interest which continues to accrue.
In a statement Thursday, Material Services said the judgment as of Wednesday was valued at $22.1 million and was growing by 5.25% a year or $3,180 per day to cover post-judgment interest.
Also, in rejecting the county’s appeal, the Oklahoma Court of Civil Appeals determined that the attorneys for Material Service had not been awarded adequate attorney fees under their contract with the company and ordered a hearing before the trial court to determine the proper level of fees–which could add millions more to the judgment. No hearing date has been set.
The company said, “The County could save taxpayers significant money by privately bonding the judgment.”
The company would benefit by getting its money immediately, and the county would save future interest on the judgment and spread the payments from taxpayers over a much longer period of time, lessening the impact on taxpayers.
But officials are not certain if such an arrangement is legal and, even if it is, are not certain the county has sufficient collateral to support such bonds.
The county already is stretched financially by construction of the new courthouse and E911 center, which also are funded by bonds, and the largest unencumbered asset–the courthouse–will be torn down when the new courthouse opens
“Material Service Corporation never turned a shovel of dirt. The jury made their decision and we will have to live with it,” said Commissioner Kirt Thacker. “Unfortunately, this was a mistake from many years ago that we are paying for today. We are a progressive county and are working to ensure that we minimize and manage risk in the future.”
Steidley, whose district includes Rogers, Mayes and Craig counties said, “Like all Rogers County citizens, as a wife, mother and property owner I was outraged when I first learned of this case and how it was handled by the former District Attorney’s Office.
“One of the reasons I ran for District Attorney was to try to do anything possible to fix the damage and also to make certain that something like this can never happen again. I am outraged for the citizens of Rogers County who have to pay this judgment.
“The taxpayers were let down by their public servants in former District Attorney Gene Haynes’ office. They deserved better.”
The case involves inverse condemnation, action by a county which does not take property but diminishes its value. In this case, Material Service had leased 320 acres in 1998 to mine limestone. Before it began any operations, the county in 2000 took that land into the jurisdiction of the Planning and Zoning Commission as part of a 99,200 acre annexation. The zoning would not allow mining without a rezoning. Because the legal notices announcing the public hearing on annexation were incomplete, Material Services filed suit challenging the validity of the annexation and zoning requirements. It lost at the trial court level but won at the Court of Civil Appeals in 2003. It filed suit against the County in April 2004.
“This case was a train wreck from the word go. This should have been outsourced from the beginning. I believe this case could have been settled or won if it had been handled by a specialist. But the former DA’s office apparently never took it as seriously as it should have and never brought in an outside specialist even as defeats piled up,” Steidley said.
The county lost another crucial pre-trial appeals court ruling in 2006 and still the former DA’s office did not bring in outside counsel specializing in inverse condemnation, a very complicated and sophisticated area of the law. The case went to trial in Mayes County in 2009 and the jury awarded $12.5 million in damages to Material Service. With attorney fees, interest, costs and other fees, the figure has grown to over $22
million and continues to increase daily.
million and continues to increase daily.
Even after that, the DA’s office tried to downplay the danger the case posed. According to one newspaper report shortly after the verdict, “Assistant District Attorney Barry Farbro insists that a final judgment anywhere close to that amount is unlikely.” He made similar comments downplaying the risk to taxpayers in other interviews.
In appealing cases of this kind, arguments are limited to issues and evidence raised during the trial. In rejecting the county’s initial appeal—which the former DA’s office still did not seek help in preparing—the Court of Civil Appeals made it clear that the County had failed to put key evidence, objections, motions and issues before the trial court.
For example, the County tried to raise an issue involving the statute of limitations, but the court noted, “an objection to the statute of limitations” was not made in a timely fashion. Material Service presented two expert witnesses on the issue of valuation, or what the lease would have been worth without inverse condemnation. The appeals court noted, “County did not object to that testimony…County did not present evidence of the value of the taking.”
The former DA’s office was so confident that the jury would not find a “taking” that it totally ignored trying to mitigate the value Material Services said the land was worth through their expert witnesses.
“As soon as we took office, we made this case a top priority,” said Steidley. “The Board of County Commissioners, at our recommendation, hired top outside counsel who are specialists in this area of the law, but it was too late to save the case. I want to stress that this is not the fault of the County Commissioners.
“None of the Commissioners were in office when this case began, and they have worked tirelessly with our Civil Assistant District Attorney and our outside expert counsel. They are victims, just like every other property owner in Rogers County.
“And the officeholders at the time of the events leading to this tragedy should not be blamed either—they merely were listening to the legal advice and strategies of their attorneys at the time.
“Sadly, those responsible for the damage facing taxpayers are out of office. They will face few or no consequences. My goal now is to make certain we have the proper policies and procedures in place so this can never happen again.”
However, Material Service laid the blame squarely at the feet of the county commissioners at the time the dispute began at the turn of the century.
It said when it signed a lease to mine limestone, there were highway projects in Rogers and nearby counties that made the product of the mine extremely valuable. By the time it got a court ruling allowing it to mine, the projects were done and the opportunity for profits had greatly slowed.
“The Rogers County Commissioners ignored plain open meetings law to successfully insulate the then-booming limestone market from another competitive entrant. Long after the obvious mistake was brought to their attention the Commissioners stubbornly refused to relax the mining restriction. Meanwhile, an American citizen that invested over $750,000, untold time and profound risk could do nothing with his lease,” the Material Service statement said.
Here is a link to a news analysis about the lawsuit that the Leader wrote in 2009: oll-2009-11-12-0-001
Here is a link to the second page of that story: oll-2009-11-12-0-003