Only a few months after his November 2011 election, Ledyard Mayor John Rodolico faced a difficult decision. Should he urge the Town Council to press forward with a high-risk, high-reward lawsuit launched by his predecessors to capture disputed property tax revenues from the Foxwoods Resort Casino? Or should he cut the town's losses and move on?
Mayor Rodolico and the council chose to press on and this week enjoyed a sweet victory that over the long run should broaden the town's tax base and help pay for necessary services.
At issue was the ability of the town to assess and tax non-tribal personal property on the reservation. In particular, the federal case focused on hundreds of slot machines leased by the Mashantucket Pequot Tribe for use in its casino. The legal point had broader implications, however, potentially having an impact on the town's ability to assess and tax other personal property in restaurants and retail outlets operating on the reservation.
The Mashantucket tribe made the argument that its sovereign status insulated the leased property from taxation by an outside government. Town lawyers argued that only property owned by the tribe was exempt from local taxation. Indicating the importance of the issues at stake, the tribe had national support from Indian Country, while Attorney General George Jepsen backed Ledyard's position.
In March 2012, soon after Mayor Rodolico took office, Senior U.S District Judge Warren W. Eginton, sitting in Bridgeport, ruled in favor of the tribal nation. Judge Warren issued a summary judgment, concluding the tribe had prevailed on the legal and constitutional questions. Up to that point the town had invested about $900,000 in a legal fight then several years old.
The town's choice to appeal proved the right one. In a unanimous decision this week, a three-member panel of the 2nd Circuit Court of Appeals overturned Judge Warren. The appellate court found no constitutional or federal law barring a state or town from assessing a tax on leased, non-tribal property.
"In our view, neither the Indian Trader Statutes nor IGRA (Indian Gaming Regulatory Act) indicates congressional intent to bar the tax … the tax is a valid exercise of state authority," reads the Circuit Court ruling. "The ability of a state to apply generally-applicable taxes to non-Indians performing otherwise-taxable functions on an Indian reservation is well established."
In Connecticut all taxing authority, including property taxation by towns, flows from the state.
The appellate court ruling appears well founded, built solidly on precedent rather than breaking any new legal ground. Given that fact and the unanimous nature of the ruling, there is a good chance the U.S. Supreme Court would not take the appeal even if the tribe sought one. An appeal by the tribe would also risk setting a high-court precedent that Indian Country may just as soon avoid. The Mashantucket tribe has yet to indicate whether it will seek a Supreme Court review.
As for Ledyard, Mayor Rodolico said the town will seek to recoup about $500,000 in back taxes and penalties. Going forward, the decision should secure for the town $300,000 a year in tax revenues from nontribal casino properties, a number that could grow with planned retail expansion at Foxwoods.
Montville, home to the Mohegan Sun casino, will assess the impact of the decision as well, said that town's mayor, Ronald McDaniel. The consequences are expected to be far less, however, because taxes are largely being paid now on vendor holdings there.
The cost of additional taxation on vendors is likely to pass through to tribal casino operations, which have seen declines in gaming revenues in recent years. Yet the decision is a fair one. As the circuit court decision notes, "services provided by (Ledyard) include … police and emergency-services functions, road maintenance, education, and trash collection. The town maintains roads to and throughout the Indian reservation, provides emergency services … buses children living on-reservation to schools, and pays for the education of tribal children."
Ledyard residents should applaud this ruling and the decision of town leaders to pursue the appeal. The tribe should accept the court's finding.