Airport Properties v. Maricopa County
Decision Date | 19 January 1999 |
Docket Number | No. 1-CA-CV-97-0597.,1-CA-CV-97-0597. |
Citation | 195 Ariz. 89,985 P.2d 574 |
Parties | AIRPORT PROPERTIES, aka Airport Properties Phase I, an Arizona limited partnership; and Air Commerce Center, L.L.C., an Arizona Limited Liability Company, Plaintiffs-Appellees, v. MARICOPA COUNTY, Arizona, Defendant-Appellant. |
Court | Arizona Court of Appeals |
Helm & Kyle, Ltd by John D. Helm, Roberta S. Livesay, Michelle M. Tran, Tempe, Attorneys for Appellant Maricopa County.
Robert R. Bauer, Phoenix, Attorney for Appellees Airport Properties and Air Commerce Center.
Grant Woods, Attorney General by Linda D. Bach, Assistant Attorney General, Phoenix, Attorneys for Appellee Arizona Department of Revenue.
¶ 1 Maricopa County appeals from summary judgment entered for Airport Properties ("AP") and Air Commerce Center, L.L.C. ("ACC") in consolidated actions challenging the County's right (1) to tax AP's and ACC's interests in Scottsdale Municipal Airport real property as class three (commercial) property for tax years 1993 and 1994, and (2) to assess any ad valorem property taxes at all against those interests after the 1995 repeal of Arizona's possessory interest taxing scheme, former ARIZ.REV.STAT. ANN. ("A.R.S.") sections 42-681 through 42-687. Listed in their logical order, the appeal presents these issues:
¶ 2 In Cutter Aviation, Inc. v. Arizona Department of Revenue, 191 Ariz. 485, 958 P.2d 1 (App.1997), review denied June 25, 1998, we recounted in detail the legislative and decisional history of a controversy with facts similar to those of these taxpayers' in many respects. For this case, we present a summary of that history with only the detail necessary to facilitate understanding the issues before us.
¶ 3 In 1985, the legislature enacted provisions subjecting "possessory interests," defined as rights to possess and actual possession of land or improvements under nonfreehold rights, to ad valorem taxation. A.R.S. §§ 42-681 through 42-686 (1991)(repealed effective retroactively to January 1, 1995). These statutes applied to private possessory rights in government real property. Certain specifically-described possessory interests were either exempted from the tax outright or benefitted from valuation reduction formulae. The possessory interests subjected to taxation were assessed at 1% of full cash value.
¶ 4 In 1994, the legislature enacted amendments and revisions yielding the possessory interest and IPR taxing schemes with which this appeal is concerned. ARIZ. SESS. LAWS Ch. 293, § 8, retroactively effective to January 1, 1993. The law now provides:
¶ 5 The 1994 legislation retained A.R.S. section 42-162(A)(12)(c) in its pre-1994 form. That section included within class twelve:
(c) Interests in property located on state, city, town or county airports and public airports operating pursuant to sections 2-311, 2-312 and 2-313, if the property is used for or in connection with aviation, including hangars, tie-downs, aircraft maintenance, sales of aviation[-]related items, charter and rental activities, parking facilities and restaurants, stores and other services located in a terminal.
Possessory interests were assessed at 1% of full cash value. Former A.R.S. § 42-227(A)(12).
¶ 6 The 1994 legislation also added a new class thirteen, retroactively effective to January 1, 1993. This class included:
Like possessory interests, IPRs classified under A.R.S. section 42-162(A)(13) are assessed at 1% of full cash value. Former A.R.S. § 42-227(A)(13); see A.R.S. § 42-162(A)(11) (Supp.1997); § 42-227(A)(11) (Supp.1997).
¶ 7 In section 8 of 1995 ARIZ. SESS. LAWS ch. 294, the legislature repealed A.R.S. sections 42-681 through 42-687, effective retroactively to January 1, 1995. The repeal did not affect the taxation of IPRs.
¶ 8 The pertinent facts are undisputed. Under lease agreements with the City of Scottsdale, AP built air services related improvements on city land at Scottsdale Municipal Airport. ACC succeeded to AP's interest in one such lease in July 1993. Both taxpayers operated air services businesses using those improvements and portions of airport land throughout tax years 1993, 1994 and 1995.
¶ 9 During the decade preceding tax year 1993, the County viewed AP as holding leasehold interests in improvements owned by the City of Scottsdale. It treated AP's interests in the improvements as exempt from ad valorem taxation. For tax year 1993, however, the County took the position that AP and ACC themselves owned the improvements. For tax year 1993, the County classified the improvements occupied by AP as class three (commercial) property and assessed them at 25% of full cash value. A.R.S. § 42-162(A)(3); § 42-227(A)(3). For the second half of 1993, it accorded the same treatment to the improvements ACC had occupied since July of that year. For tax years 1994 and 1995, the County continued to treat the improvements as owned by the taxpayers, but it assessed them as IPRs at 1% of full cash value pursuant to former A.R.S. sections 42-162(A)(13) and 42-227(A)(13).
¶ 10 The taxpayers challenged their assessments for 1993, 1994 and 1995. After resorting to and exhausting applicable administrative remedies, they brought two property tax appeals in the superior court, later consolidated. In a series of motions and cross-motions for summary judgment, the court ruled: (1) a 1979 judgment precluded the County from taking the position that AP and not the City of Scottsdale owned the airport improvements that it occupied; (2) under the lease assigned by AP to ACC in July 1993, the City of Scottsdale retained ownership of the improvements that ACC occupies under that lease; (3) the repeal of the possessory interest taxing scheme effective beginning with the 1995 tax year did not violate the No-Exemption Clause of the Arizona Constitution; and (4) the 1% assessment ratio provided for possessory interests during 1993 and 1994 and for IPRs during 1994 and 1995 did not violate the Uniformity Clause.
¶ 11 The substance and practical effects of the superior court's rulings were as follows:
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