Deja vu as Bloomington battles a state law preventing annexation

After its second attempt to annex several neighboring areas was blocked by the Legislature, the city of Bloomington is challenging a change to another state law that prevents the municipality from the incorporating areas which are already connected to its sewer service.

The city has filed a lawsuit, City of Bloomington v. Catherine Smith, in her official capacity as Monroe County Auditor, 53C06-2203-PL-000608, claiming House Enrolled Act 1427, which was passed by the Indiana General Assembly in 2019, violates the provisions in the U.S. and Indiana constitutions that protect against impairing the obligation of contracts. Bloomington is asking the Monroe Circuit Court to find Indiana Code §§ 36-4-3-11.7(b) and (c) and 13-18-15-2(e) and (f) are unconstitutional and to direct the city auditor to disregard all defective remonstrance petitions.

This is the second time the Legislature has amended the state statute specifically to foil Bloomington’s attempt to annex multiple areas surrounding the city limits.

In 2017 while the city was preparing for a series of public hearings over its proposed annexation, an amendment was passed in the final hours of the legislative session to the state’s biennial budget bill. The new provision, Indiana Code § 36-4-3-11.8, applied only to Bloomington and terminated any annexation ordinance that had been introduced between Dec. 31, 2016 and July 1, 2017.

The city filed a lawsuit and in December 2020, a split Indiana Supreme Court struck down the statute in Holcomb v. City of Bloomington, 19S-PL-304.

However as the 2017 law was being litigated, the General Assembly approved HEA 1427 , authored by Rep. Daniel Leonard. The 299-page bill included language that retroactively voided annexation remonstrance waivers if the contract was more than 15 years old.

Since the mid-1950s, Bloomington has been extending and connecting non-municipal residents to the city sewer service. In exchange for the service, the non-residents would sign a contract agreeing not to remonstrate against a future annexation.

The “voluntary extension” of the sewer service, according to the lawsuit challenging HEA 1427, enabled many unincorporated contiguous areas to develop. Also, the non-residents were benefiting from other city services but were not paying any property taxes to support these services.

HEA 1427 retroactively voided provision in at least 966 of Bloomington’s sewer extension contracts. According to the complaint, the city had negotiated about 1,206 sewer extension contracts and more than 80% were blocked by the Legislature.

“… The General Assembly retroactively nullified a crucial contractual provision, inserting itself between the parties to a voluntary agreement,” Bloomington asserts in its complaint. “In doing so, the legislature relieved the owner of their contractual obligation, even though Bloomington had already extended its sewer service and had upheld its part of the bargain.”

After the Indiana Supreme Court agreed the provision tucked into the budget bill was unconstitutional, Bloomington resumed the annexation process for the neighboring areas. The city council held public hearings and notices were published and mailed to the property owners in the designated areas.

State law mandates that if more than 65% of the property owners remonstrate, the annexation is void. If at least 51% but fewer than 65% remonstrate, then the annexation may be subjected to judicial review but if fewer than 51% remonstrate, the annexation is approved.

The Monroe County Auditor prepared two sets of numbers. The certified numbers tallied the remonstrance totals if the sewer extension contracts more than 15 years old were void while the uncertified numbers were calculated as if all the contract waivers were valid.

Under the 2019 law, the annexation of five areas would fail and the remaining two areas would be eligible to be appealed to a judge. However, if HEA 1427 is found to be unconstitutional, then five areas – representing 96% of the total acreage and 90% of the population – would automatically become part of Bloomington while two other areas could be sent for judicial review.

“… But for the state’s earlier illegal effort to thwart Bloomington’s annexation, the annexation would have been long over before the state passed the 2019 law,” the city states in its complaint. “Equity demands that the state not be allowed to benefit from its earlier unconstitutional delay of Bloomington’s annexation and, through Auditor (Catherine) Smith’s application of the 2019 law to that same annexation, achieve its original goal.”