A judge has again found that Cookeville Boat Dock must pay delinquent DeKalb County property taxes, but in a new ruling Judge Amy Hollars has granted a motion by the marina’s attorney to bar the county from collecting more than 10 years in back taxes with 10 years being a statue of limitations. That ruling saves the boat dock nearly $60,000. However, the judge ruled against the boat dock when it came to the amount of interest the county could charge on the back taxes.
Judge Hollars announced her decision via a telephone conference call Tuesday morning with Vester Parsley, Jr., the county’s tax attorney, and Jon Jones of Cookeville, the lawyer representing Cookeville Boat Dock. Clerk and Master Deborah Malone and County Mayor Tim Stribling were also present.
The boat dock owners have refused to pay their taxes since 1998. As of Tuesday, the total amount owed comes to $204,504 including taxes, interest, penalty, court costs, and attorneys fees. As a result of the judge’s decision, the boat dock will NOW owe the county only $136,051 for the delinquency from 2004-2013
Jones initially argued for the marina that Tennessee law violated the Supremacy Clause of the U.S. Constitution by discriminating against a lessee of the United States in favor of lessees of the State of Tennessee. It was argued since the boat dock pays fees to the U.S. Army Corps of Engineers which are used, in part, to pay DeKalb County a sum of “in lieu of taxes,”that having to pay property tax to the county was, in effect, double taxation.
In April Judge Hollers ruled that the boat dock’s challenge to the tax was invalid in part because the Supremacy Clause “does not prevent a state or local government from imposing a tax on an individual or a corporation ‘using government property in connection with a business conducted for its own private gain.”
The attorney for the marina later filed a motion asking the judge to reconsider her ruling. Jones argued that the county cannot collect taxes beyond 10 years; that the judge’s ruling on the “Supremacy Clause” of the U.S. Constitution was incorrect; and that the amount of interest the county wants to charge is above what is allowed by law.
In the motion for “additional consideration of issues,” attorney Jones pointed to a Tennessee law that states, “All taxes assessed against real property and personal property in this state shall be barred, discharged and uncollectible after the lapse of 10 years from April 1 of the year following the year in which such taxes become delinquent, whether suit be brought within that time or not to collect the taxes.”
Judge Hollars sustained Jones’ motion on the 10 year bar based on TCA 67-5-1806. ” Here it’s not an action for recovery. There has been no payment under protest or otherwise. We do not have an action that is or has been before an administrative appeal before the state board of equalization so I think I have to rule that the 10 year bar does apply here so Cookeville Boat Dock will be relieved of several years of their taxes,” said Judge Hollars.
As for the interest issue, the defendants argued “prejudgment interest may be awarded by courts or juries in accordance with the principles of equity at any rate not in excess of a maximum effective rate of 10 percent per annum.”
The motion stated that the county “had not provided a breakdown regarding its proposed computation of prejudgment interest. However, defendant (boat dock) expected the county would claim prejudgment interest at a rate of 18 percent per annum. This exceeded the maximum rate of prejudgment interest this court is allowed to award.”
The defendant went on to suggest the interest rate “should correspond with the interest rate DeKalb County has paid during the relevant time.”
Showing documentation the county borrowed money or issued bonds in recent years at rates varying from one to 5.5 percent, the defendant claimed “these rates should provide the upper limit on an award of prejudgment interest that the court may make in this case.”
While Judge Hollars granted the motion to bar the county from collecting delinquent taxes beyond 10 years, she denied the request to prohibit the county from assessing the current rate of interest and penalty. “Because this is a case involving the taxes, I think the more specific statute TCA 67-5-2010 controls as to the amount of interest that is applicable. That calls for interest of one percent which shall be added on March 1 following the tax due date. That defines the specific rule with regard to the amount of interest applicable to these taxes. There is an additional one half of one percent that goes into that figuring and there is an additional penalty when suit is filed to enforce a tax lien that is set forth in TCA 67-5-2410,” Judge Hollars said.
She also affirmed her earlier ruling on the constitutionality of the tax. “I’m not going to disturb my previous ruling with regard to Article II Section 28 and the asserted constitutionality of it,” Judge Hollars concluded.
Mary Ellen Knack of Nashville has been representing the state on behalf of the Tennessee Attorney General’s Office in this case as to the
constitutionality of issues being challenged by the marina. Knack was not present for the telephone conference.
Both sides have thirty days to file an appeal from the date the court’s order is entered.
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