Tax Court affirms courthouse sale-leaseback to build new Allen County Jail
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The Indiana Tax Court has affirmed the final determination of the Department of Local Government Finance to approve the sale-leaseback of the Allen County Courthouse as one of the financing methods for a new county jail, finding no merit in objectors’ challenge to the lease.
According to court records, in 2022, the case Morris v. Sheriff of Allen Cnty. found that conditions in the existing Allen County Jail violated inmates’ constitutional rights.
In turn, the U.S. Court for the Northern District of Indiana mandated corrective measures for the jail, ordering the Allen County Board of Commissioners to find a long-term solution.
After proposing several different ideas on how to resolve the issue, commissioners determined that building a new jail was the best route to take.
The facility was projected to cost around $320 million and take at least three years to build.
To help finance the project, commissioners established the Allen County, Indiana Building Corp., allowing the county to acquire, own, construct, renovate, and lease existing and new county buildings.
They planned to convey the historic Allen County Courthouse to the corporation, which would then lease the property to the county while the jail was being built. This sale-leaseback plan sought to reduce overall costs for the jail by $28 million.
More than 90 Allen County taxpayers filed a petition with the Allen County Auditor objecting to the lease created by commissioners and the corporation. In its final determination, the Department of Local Government Finance rejected taxpayers’ objections and denied their petition.
According to the tax court’s standard of review, objectors to the jail bear the burden of demonstrating that the department’s final determination is invalid.
The court determined objectors failed to do so, rejecting objectors’ argument that the sale-leaseback violates Indiana Code Section 36-1-10-7(c) (“Section 7”).
The tax court stated, “Section 7 explicitly addresses leases of governmental structures and does not restrict the financing methods used; thus, it encompasses, rather than excludes, the sale-leaseback model employed here.”
Further, the court said objectors failed to show the sale-leaseback wasn’t needed to fund the jail project.
“In Section 1, the County Council expressly finds and determines that there is a need for the Project, which necessarily includes the leaseback of the Courthouse given its inclusion as part of the defined Project,” the court stated.
The Allen County Board of Commissioners did not return a request for comment before IL’s deadline Tuesday.