City Must Use Dedicated Sales Tax Revenues For Firefighter Salaries

The voters of the City of Crowley, Louisiana approved a sales tax proposition authorizing the City to levy and collect a sales tax of one-half of one percent whose proceeds are to be used for the purpose of City employees’ salary increase, with one-third of the levy proceeds paid to all fire personnel. Under Louisiana law, once an election is held wherein citizens approve a tax dedicated to one purpose, the tax proceeds cannot be used for any other purpose.

Though the sales tax votes directed the proceeds to be spent on “salary,” the City used the proceeds to fund increases above the base pay for fire personnel, including an across-the-board raise, promotional increases, longevity increases, and costs related to the increases, including the City’s contributions to the Firefighters’ Retirement System, the City’s FICA taxes, workers’ compensation insurance premiums, and payment of unemployment compensation taxes. Additionally, the City funds overtime and holiday pay from the sales tax proceeds.

Local 1442 of the International Association of Fire Fighters, which represents the City’s firefighters, sued the City, claiming that the tax proceeds had to be used solely for the purpose of salary increases. The Louisiana Supreme Court largely agreed with the firefighters.

The Court started with Local 1442’s contention that the City’s use of the sales tax proceeds to fund promotional increases for each individual firefighter who is promoted, rather than an increase for the entire class of fire personnel at each rank, was impermissible. The Court agreed with the contention, observing that “the funding of statutorily-required promotional increases with the sales tax proceeds does not comport with the intent of the voters who dedicated those proceeds to salary increases to fire personnel. When a firefighter is promoted to a higher rank or position, he is entitled to the minimum salary required to be paid for that rank or position. The new salary is payment for the performance of a different job, not a salary increase for the former rank or position held by the firefighter. Although the individual firefighter does receive additional take-home pay, he is entitled to the additional compensation because he was promoted and is performing a new job; he has not merely received a salary increase. In our view, payment of statutorily-mandated promotional increases for each individual at the time he is promoted is not a salary increase for fire personnel as intended by the voters when they approved the tax at issue.”

The Court then turned to the City’s use of the funds for overtime and other personnel costs. “Similarly, the City’s practice of funding the overtime and holiday pay of firefighters from the sales tax revenues is impermissible when the intent of the voters in passing the tax is considered. While overtime pay is part of a firefighter’s compensation, it is not part of his salary. Holiday pay may be paid with time off rather than money. We do not believe the voters intended for holiday pay to be funded from the sales tax proceeds dedicated to salary increases.

“In addition to funding promotional increases, overtime pay and holiday pay from the sales tax proceeds, the City also pays costs related to increases in firefighters’ compensation, such as the City’s contribution to the retirement system, FICA taxes, and the City’s cost of insurance for workers’ compensation and unemployment compensation, from the sales tax revenues. These costs are not part of a firefighter’s salary, but are obligations of the City. As such, they cannot be said to be what the voters had in mind when they agreed to tax themselves to give a salary increase to fire personnel. Payment of these costs, while necessary, do not increase the salary of a firefighter.”

The one area where the Court sided with the City was with respect to Local 1442’s argument that the City was impermissibly retaining a portion of the sales tax proceeds by maintaining a surplus of funds in their account. The Court reasoned that “the City has maintained a balance of varying amounts since the tax was enacted. For practical reasons, we see no problems with the City maintaining a reasonable surplus or balance in the account representing the firefighters’ share of the sales tax proceeds. While the proceeds are dedicated to salary increases for fire personnel and must be used for this purpose, it would be unworkable to prohibit the carrying of a reasonable balance in the account at issue.”

The Court ordered the City to change its practices to limit the use of the sales tax proceeds only for salary increases for fire personnel.

Local Number 1442, Professional Firefighter’s Ass’n v. Crowley, 9 So.3d 792 (La. 2009).

This article appears in the September 2009 issue