INDIANAPOLIS — The Indiana Supreme Court will hear oral arguments Thursday over whether a 2015 state law targeting Hammond's rental registration revenue is unconstitutional.

At stake is approximately $800,000 in annual fees charged to rental unit landlords, and often passed on to tenants — at $80 per unit — that Hammond uses to partially defray its costs of conducting regular inspections to ensure rental properties are safe for habitation.

Between 2011 and 2015, the Republican-controlled General Assembly approved several statutes aimed at prohibiting or limiting rental registration fees in most communities, ultimately capping them in 2014 at $5 per unit per year.

While that law was intended to exclude West Lafayette and Bloomington from the $5 fee restriction, allegedly because of the unique rental market in those college towns, the exemption was written in a way that also allowed Hammond to maintain its $80 registration fee.

State lawmakers in 2015 then approved a fee restriction rewrite in House Enrolled Act 1165 that preserved the West Lafayette and Bloomington exemptions, but specifically excluded Hammond — causing a deficit in Hammond's rental registration and inspection program of more than $700,000, according to the city controller.

Hammond initially was unsuccessful in challenging the law in Marion Superior Court. But the Indiana Court of Appeals in February agreed with the city that the 2015 statute was unconstitutional special legislation and struck it down.

In its 3-0 decision, the appeals court determined the General Assembly and then-Gov. Mike Pence violated the Indiana Constitution's ban on "local or special laws ... relating to fees or salaries" by allowing West Lafayette and Bloomington, and only those communities, to charge a rental registration fee distinct from the fee that applies across the rest of the state.

Moreover, the court concluded that the characteristics of West Lafayette and Bloomington are not sufficiently unique to justify special legislation, as occasionally has been permitted by the Supreme Court, such as the state-mandated consolidation of Lake County numerous "small" election precincts.

The state's high court has not yet agreed to transfer the case from the appellate court. As a result, the February ruling currently remains the final word on the impermissible targeting of Hammond's rental registration fee.

Differing views

During oral arguments Thursday, attorneys for Herman and Kittle Properties Inc., which manages two Hammond apartment communities, as well as Indiana Solicitor General Thomas Fisher, who is defending the constitutionality of the statute, plan to contend that Hammond lacks standing to contest the law.

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They claim in court filings that a 1975 Indiana Supreme Court decision essentially prohibits local governments from challenging special legislation enacted by the state because localities are subdivisions of the state and must unquestioningly follow legislative directives.

According to court records, Hammond will rebut that argument by relying on the Court of Appeals' conclusion that the city has standing to sue because it will suffer direct, significant financial injury if it only is permitted to charge a $5 annual rental registration fee, instead of $80.

Documents show the landlord and the state also will try to convince the five Supreme Court justices that the fee exemptions for West Lafayette and Bloomington are permissible, even as special legislation, while Hammond should be subject to the fee restriction.

"In order to prove that a special law is unjustified, the challenging party must negate every conceivable basis which might have supported the classification," Fisher writes in his defense of the law.

"Hammond has not negated the 'large university town' rationale as a conceivable basis for treating Bloomington and West Lafayette differently from other cities."

Hammond's attorney notes in court documents that the Constitution directs "where a general law can be made applicable, all laws shall be general, and of uniform operation throughout the state."

As such, if Hammond must abide by the fee restriction, so should West Lafayette and Bloomington, or alternatively, all cities once again be empowered to set rental registration fees without legislative interference.

"Indiana logically requires a factual basis to justify special legislative treatment. It is a relatively low bar to factually justify to a court why a special law is needed," writes Hammond attorney Bryan Babb.

"There is no such factual basis here because the special legislative treatment is obvious logrolling meant to burden Hammond and impact this litigation, which could not pass without exempting two influential municipal heavyweights."

Oral arguments at the Supreme Court are set for 8 a.m. Region time Thursday. They can be viewed online at courts.in.gov.

There is no mandatory timeline for the justices to decide whether to grant transfer in the case or issue a ruling.

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