FFW Enterprises v. Fairfax County

• Decision Date: 04 November 2010
• Docket Number: Record Nos. 091883, 091930.
• Court: Virginia Supreme Court
• Parties: FFW ENTERPRISES v. FAIRFAX COUNTY, et al. FFW Enterprises v. Fairfax County Economic Development Authority, et al.

701 S.E.2d 795

280 Va. 583

FFW ENTERPRISES

v.FAIRFAX COUNTY, et al.

FFW Enterprises

v.Fairfax County Economic Development Authority, et al.

Record Nos. 091883, 091930.

Supreme Court of Virginia.

Nov. 4, 2010.

James N. Markels (Jackson & Campbell, on briefs), for appellant.

James V. McGettrick, Assistant County Attorney (Thomas O. Lawson; Peter L. Canzano; A. Francis Robinson; David P. Bobzien, County Attorney; Michael H. Long, Deputy County Attorney; Lawson and Silek; Sidley Austin, on brief), for appellees.

Amicus Curiae: The Tax Foundation (Patrick M. McSweeney; McSweeney, Crump, Childress & Temple, Richmond, on brief), in support of appellees.

Amicus Curiae: Commonwealth of Virginia (Kenneth T. Cuccinelli II, Attorney General; Charles E. James, Jr., Chief Deputy Attorney General; E. Duncan Getchell, Jr., State Solicitor General; Wesley G. Russell, Jr., Deputy Attorney General; Stephen R. McCullough, Senior Appellate Counsel, on brief), in support of appellees.

Amicus Curiae: Local Government Attorneys of Virginia, Inc.; Virginia Association of Counties; Northern Virginia Transportation Authority; Prince William County; Arlington County (Angela Lemmon Horan, County Attorney; Bernadette Peele, Senior Assistant County Attorney; Curt G. Spear, Jr., Assistant County Attorney; Stephen A. MacIsaac, County Attorney; Phyllis A. Errico, Richmond, on brief), in support of appellees.

Amicus Curiae: Loudoun County (John R. Roberts, County Attorney, on brief), in support of appellees.

Present: HASSELL, C.J., KOONTZ, KINSER, LEMONS, GOODWYN, and MILLETTE, JJ., and LACY, S.J.

OPINION BY Justice S. BERNARD GOODWYN.

In these appeals,¹ we consider whether Code §§ 58.1-3221. 3 and 33.1-435 violate the Constitution of Virginia (the Constitution). FFW Enterprises (FFW) owns commercially-zoned real property located in Fairfax County. The property has been assessed taxes as authorized by Code § 58.1-3221.3 and Code § 33.1-435, and FFW is challenging the constitutionality of those tax statutes.

I. Procedural History

In 2008, FFW brought an action against Fairfax County (the County) and the Board of Supervisors of Fairfax County (the Board) in the Circuit Court of Fairfax County for refunds of taxes paid pursuant to Code § 33.1-435 and Code § 58.1-3221.3. FFW contended that these two tax statutes were facially unconstitutional in violation of the uniformity requirement of Article X, Section 1 of the Constitution because the statutes impose certain taxes on commercial and industrial real properties within the County, while excluding other real property.

[701 S.E.2d 798, 280 Va. 587]

The parties submitted a joint stipulation of facts and proceeded on cross motions for summary judgment. The circuit court denied FFW's motion for summary judgment, but granted the County's motion for summary judgment, holding that FFW failed to prove that the statutes were unconstitutional. In its letter opinion, the circuit court stated:

For this court to invalidate the legislative classification of property for taxation purposes, there must be no rational basis for the classification. The County has posited several conceivable rational bases for the classifications in this case:

For example, the General Assembly may have believed that commercial and industrial property would benefit disproportionately from the transportation improvements to be made using tax revenues (as the landowners requesting creation of the Phase I District asserted in their Petition), perhaps because such improvement might enable more intense commercial and industrial uses than otherwise would be possible and thus potentially could result in more significantly increased commercial and industrial property values. The General Assembly may have believed that residents would share indirectly in the costs of transportation improvements by a tax levied only on commercial and industrial property, in that they would pay higher prices for goods and services because the owners of such properties likely would attempt to recover the cost of the additional tax burden from customers and tenants, and thus to impose the tax on residential properties would result in a form of undesirable double taxation of residents. The General Assembly may have believed that because of the potential opportunity for owners of commercial and industrial properties to pass at least some of the cost of the additional tax burden on to others, such properties could more easily, fairly, and equitably bear that burden.

It is not the County's burden, however, to prove that there is a rational basis for the classification. The burden rests upon the challenger of a tax classification to prove that no reasonable basis for that classification can be conceived. FFW has failed to meet that burden.

FFW appeals (Record No. 091883).

In 2009, after the above-mentioned case concluded, the Fairfax County Economic Development Authority (EDA) brought a complaint in the Circuit Court of Fairfax County under Code § 15.2-2650, et seq. , concerning validation of Transportation District Improvement Revenue Bonds (the Bonds). The Bonds were to be repaid by the proceeds of the tax levied pursuant to Code § 33.1-435. Under the provisions of Code § 15.2-2651, such a proceeding may validate, inter alia, "the tax or other means provided for payment of the bonds," so EDA sought a ruling that a tax per Code § 33.1-435 is constitutional. FFW, as a property owner in the County, intervened in the bond validation proceeding as a statutory defendant under Code § 15.2-2650, et seq. , and opposed the EDA's complaint. FFW appeared at that proceeding to reserve its rights as to the constitutional arguments made in the prior case. The circuit court held that the imposition of the tax pursuant to Code § 33.1-435 complied with the Constitution and entered an order validating the bonds. FFW appeals (Record No. 091930).

Upon joint motion of the parties, this Court has consolidated the two appeals (Record Nos. 091883 and 091930). Both appeals concern the constitutionality of the relevant tax statutes.

II. Factual Background

Code § 33.1-431 was enacted by the General Assembly in 2001. See 2001 Acts ch. 611. It permits a county with a population of more than 500,000 ² to create a transportation district and impose a special improvements tax on real property zoned for commercial or industrial use (or used for such purposes), as well as on taxable leasehold interests located within that transportationdistrict. Code §§ 33.1-430, -431 and -435. One of the requirements for creating such a transportation district is that the owners of at least fifty-one percent of either the land area or of the assessed value of real property within the proposed transportation district, whose property would be subject to the tax, must petition the county and ask that the district be created and that property in the district be taxed. Code § 33.1-431(A). Revenues raised by this tax are either to be dedicated to transportation improvements within the district, or to be paid to the Commonwealth Transportation Board. Code §§ 33.1-431, -435 and -436.

In 2003, pursuant to Code § 33.1-431, the owners of at least fifty-one percent of the assessed value of real property zoned for commercial or industrial use, or used for such purposes, located within the boundaries of the proposed district, petitioned the Board to create the Phase I Dulles Rail Transportation Improvement District (the District). The owners submitting the petition contended that the District should be subject to taxation in accordance with Code § 33.1-435, in order to fund a portion of the cost of extending the "Metrorail" service toward Dulles Airport, specifically, the extension of the Orange Line of Metrorail from Falls Church to Reston. The petition contended that the owners of taxable real estate zoned for commercial or industrial use, and subject to taxation under Code § 33.1-435, would " benefit specially" from the proposed transportation improvements.

The Board adopted resolutions in 2004 to create the proposed District. ³ Beginning in 2006, the tax authorized by Code § 33.1-435 began to be levied on the real property located in the District that was zoned for commercial or industrial use or used for such purposes, including property owned by FFW. FFW paid the taxes assessed under Code § 33.1-435 for tax years 2006, 2007 and 2008. Residential real property located within the District is not subject to the tax.

Code § 58.1-3221.3 was adopted by the General Assembly in 2007. See 2007 Acts ch. 896. In summary, that statute permits all counties and cities embraced by the Northern Virginia Transportation Authority to assess a tax on real property zoned or used for commercial and industrial uses. The proceeds of such tax are dedicated to local transportation improvements. Residential real property is not subject to the tax.

In 2008, the Board began to levy and collect a tax authorized by Code § 58.1-3221.3 on all commercial and industrial property located within Fairfax County as an additional part of the funding strategy for transportation improvements in the County. For tax year 2008, FFW paid $546.96, as assessed under Code § 58.1-3221.3.

III. Analysis

FFW claims that the taxes imposed pursuant to Code §§ 58.1-3221.3 and 33.1-435 violate the uniformity requirement of Article X, Section 1 of the Constitution. FFW argues that the statutes areunconstitutional because, applying the principle of expressio unius est exclusio alterius⁴ in interpreting the Constitution, Article X, Section 1 requires the General Assembly to treat all real property within a given jurisdiction as a single indivisible class for purposes of taxation. FFW further asserts that even if the General Assembly does have the constitutional authority to classify real property within a jurisdiction, the classifications used in Code §§ 58.1-3221.3 and 33.1-435 are unconstitutional because they lack any reasonable basis.

There is a strong presumption in favor of the...