May Dept. Stores Co. v. Maricopa County, TX 2001-000630.

• Decision Date: 24 June 2003
• Docket Number: No. TX 2001-000630.,TX 2001-000630.
• Citation: 72 P.3d 842,205 Ariz. 442
• Parties: The MAY DEPARTMENT STORES CO, et al., v. MARICOPA COUNTY, et al.
• Court: Arizona Tax Court

72 P.3d 842

205 Ariz. 442

The MAY DEPARTMENT STORES CO, et al., v. MARICOPA COUNTY, et al.

No. TX 2001-000630.

Tax Court of Arizona.

June 24, 2003.

MINUTE ENTRY

Hon. PAUL A KATZ.

Nature of the Case

The Court having taken the parties' cross-motions for summary judgment under advisement; having reviewed the memoranda of the parties and legal authorities cited therein; and good cause appearing,

The Plaintiffs (the "Taxpayers") are the owners of nineteen anchor department stores located in several malls throughout the Phoenix metropolitan area. The parties have identified five of those stores, located in the Superstition Springs, Arrowhead, Scottsdale Fashion Square, Metro Center and Desert Sky malls, that they have agreed will be representative properties. Four of the subject properties are operated pursuant to a Construction, Operation and Reciprocal Easement Agreement ("COREA"). The COREA provides for the common management of the stores as part of the malls in which they do business. The fifth subject property is operated pursuant to a lease that addresses the common facilities management terms that govern the Taxpayer's conduct. The Taxpayers contend that the Assessor's and/or Board of Equalization's determinations of the full cash values of the subject properties for tax year 2002 are excessive. The Taxpayers further contend the subject properties are entitled to be valued pursuant to A.R.S. § 42-13201 et seq. (the "Shopping Center" statute) and, therefore, the values of the subject properties should be determined pursuant to the "straight line building residual" ("SLBR") method in A.R.S. § 42-13203(D).

Legal Discussion

Under A.R.S. § 42-13201 a shopping center is an area that: 1) is comprised of three or more commercial establishments, 2) the purpose of which is primarily retail sales, 3) that has a gross leasable area of at least twenty-seven thousand square feet, 4) that is owned or managed as a unit, and 5) with at least one of the establishments having a gross leasable area of at least ten-thousand square feet, and that is either owner-occupied or subject to a lease that has a term of at least fifteen years. The Arizona Department of Revenue ("ADOR") has further dealt with how to determine if a property qualifies as a shopping center. ADOR has determined that the collective holdings of several owners can qualify as a shopping center if the holdings are managed and operated as a unit. ADOR Assessment Procedures Manual, pg. 2.2.B.7. ADOR further states that if the holdings are to be managed as a unit, "management must be evidence by a contractual agreement that addresses some, if not all, of the following: common advertising, operating hours, building maintenance, parking lot maintenance, common insurance, and central facilities management." Id. That contractual agreement must uphold the management of the entire property as a single economic unit. ADOR Assessment Procedures Manual, pg. 2.2.B.8.

The malls, of which the subject properties are a part, each comprise three or more commercial establishments, the purpose of which is primarily retail sales, are owned or managed as a unit, have a gross leasable area in excess of twenty-seven thousand square feet, and each has at least one anchor department store which has more than ten-thousand square feet that is owner-occupied or leased for a term of at least fifteen years. As the...