INDIANAPOLIS — The city of Hammond is not entitled to an exemption from Indiana's $5 cap on annual rental property registration fees, and neither are West Lafayette and Bloomington, the Indiana Supreme Court ruled Friday.
In a 4-0 decision, the state's high court determined the fee exemption was unconstitutional special legislation that failed to address a situation of sufficient uniqueness to justify West Lafayette and Bloomington being permitted to continue imposing higher rates.
As a result, the court said all Indiana municipalities now are restricted to charging landlords each year no more than the statutory maximum rental registration fee of $5 per unit.
The case stemmed from the Republican-controlled General Assembly cracking down on rental registration fees after several localities, including Hammond, Crown Point and Valparaiso, imposed new fees or jacked up their existing rate to raise revenue following state-imposed property tax caps taking effect in 2010.
After several false starts, a 2014 law capped the annual fee at $5 per unit, while simultaneously creating a fee exemption that state lawmakers believed only applied to West Lafayette and Bloomington.
Hammond claimed the fee exemption also should apply to Lake County's most populous city because the legislative language used to carve out West Lafayette and Bloomington from the fee restriction could be read to include Hammond.
State Rep. Ed Soliday, R-Valparaiso, then led legislators in rewriting the statute in 2015 to specifically exclude Hammond, while continuing the fee exemption for West Lafayette and Bloomington.
That prompted Hammond to challenge House Enrolled Act 1165 as unconstitutional special legislation.
Last year, the Indiana Court of Appeals ruled 3-0 in favor of Hammond. It said both the $5 fee restriction and the fee exemption for West Lafayette and Bloomington were unconstitutional and could not be enforced.
The Supreme Court, however, saw things somewhat differently.
While it agreed the fee exemption was unconstitutional, the high court determined that the fee restriction is valid because the Indiana Code requires constitutionally permissible provisions of a law to remain in force, even if an unconstitutional portion is struck down.
Hammond argued that the fee restriction would not have won legislative approval absent the support of lawmakers from West Lafayette and Bloomington, who only voted in favor of the measure because it exempted their student-dominated rental markets.
In her 30-page ruling, Chief Justice Loretta Rush, who lived in Munster as a child, said that while Hammond's argument is "defensible," the city was unable to show that the Legislature intended to eliminate the fee restriction if the fee exemption was deemed invalid.
Hammond Mayor Thomas McDermott Jr. did not respond to a request for comment about the decision.
Prior to the fee restriction, Hammond charged an $80 per unit annual registration fee that partially covered its costs of conducting regular safety inspections of rental properties.
Court records show the city lost about $700,000 in annual revenue after the statute mandated that Hammond could charge only a fee of $5 per unit per year.