Appeal of Boeing Co.

Decision Date24 January 1997
Docket NumberNo. 75702,75702
Citation261 Kan. 508,930 P.2d 1366
PartiesIn the Matter of the Appeal of the BOEING COMPANY from Orders of the Kansas State Board of Tax Appeals Regarding the Protests of Taxes Paid for 1991, 1992 and 1993 in Sedgwick County, Kansas.
CourtKansas Supreme Court

Syllabus by the Court

1. Interpretation of a statute is a question of law, and our review is unlimited.

2. Board of Tax Appeals (BOTA) orders are subject to judicial review under the Act for Judicial Review and Civil Enforcement of Agency Actions, K.S.A. 77-601 et seq., and we apply the same standards that district courts apply in reviewing agency actions.

3. BOTA is a specialized agency that exists to decide taxation issues. BOTA's decisions should be given great credence and deference when it is acting in its area of expertise. However, if we find that BOTA's interpretation is erroneous as a matter of law, we should take corrective steps.

4. The party challenging the validity of BOTA's order bears the burden of proving the order's invalidity. K.S.A. 77-621(a)(1).

5. The term "benefit," as used in K.S.A. 19-2765(a)(9), includes either direct or indirect benefits.

6. Neither the wisdom of the legislature's enactment of K.S.A. 19-2753 et seq., the Improvement District Act, nor the wisdom of the improvement district board's lawful utilization thereof are legitimate subjects for judicial review.

7. With statutory construction, the fundamental rule is that the intent of the legislature governs. We must first look to the words used. When a statute is plain and unambiguous, we must give effect to the expressed statutory language, rather than determine what the law should or should not be. Words in common usage should be given their natural and ordinary meaning. We view the entire act and have a duty, as far as practicable, to reconcile the different provisions to make them consistent, harmonious, and sensible.

8. In an action for judicial review of BOTA's denial of the taxpayer's protest of ad valorem taxes assessed against its personal property to pay bonds issued under K.S.A. 19-2765(a)(9) to finance a sewer lateral reconstruction project in a residential area within the improvement district, it is held that the taxpayer's property received indirect benefits from the project and the improvement district's assessment is lawful.

Thomas R. Powell, of Hinkle, Eberhart & Elkouri, L.L.C., Wichita, argued the cause, and Roger M. Theis, of the same firm, was with him on the briefs, for intervenor/appellant Oaklawn Improvement District.

Eric F. Melgren, of Foulston & Siefkin, Wichita, argued the cause, and Darrell L. Warta, of the same firm, was with him on the brief, for appellee The Boeing Company.

Patricia J. Parker, Assistant County Counselor, argued the cause, and Stephen B. Plummer, County Counselor, was with her on the brief, for appellant Board of Sedgwick County Commissioners.

SIX, Justice:

This case requires our interpretation of the Improvement District Act, K.S.A. 19-2753 et seq. (Act). The issue arises from the language of the Act (providing for "general taxation" to pay bonds for public works projects commenced under K.S.A. 19-2765[a] ). Does the Act authorize levying general taxes assessed on an ad valorem basis against the personal property of The Boeing Company (Boeing) to pay bonds issued for a sewer lateral reconstruction project?

Boeing paid the 1990 ad valorem taxes assessed by the Oaklawn Improvement District (Oaklawn) against Boeing's personal property in Oaklawn. Taxes for 1991 and 1992 were paid under protest. Boeing sought an injunction against Oaklawn's levy under K.S.A. 60-907. The district court granted the injunction, holding the Act unconstitutional. Oaklawn appealed. We reversed, upholding the constitutionality of the Act, and remanded with directions for dismissal, deciding that Boeing had not exhausted its remedies before the Board ofTax Appeals (BOTA). Boeing Co. v. Oaklawn Improvement Dist., 255 Kan. 848, 859, 877 P.2d 967 (1994) (Boeing I). We said:

"The question is whether the Act's language requiring 'benefit' to property in the district and permitting 'general taxation' for a project commenced under K.S.A. 19-2765(a)(9) is authority for either general ad valorem property taxes or special assessments. We hold that such a determination is administrative in character and properly entrusted initially to BOTA." 255 Kan. at 858, 877 P.2d 967.

BOTA denied Boeing's protest of the 1991, 1992, and 1993 taxes. Boeing petitioned for judicial review in the district court. The district court held the taxes were unlawful, reversed BOTA, and ordered the Sedgwick County Treasurer to refund the protested taxes. Oaklawn, the Board of Sedgwick County Commissioners, and the Sedgwick County Treasurer (Sedgwick County) appealed. Our jurisdiction is under K.S.A. 20-3017 (motion of a party to transfer). We reverse the district court.


The parties filed a written stipulation of facts with BOTA, and presented witnesses and additional evidence at the hearing. The facts as of our remand are described in Boeing I, 255 Kan. at 849-52, 877 P.2d 967. Briefly summarized, in 1989 and 1990, Oaklawn voters approved bond issues financed by ad valorem taxes on all taxable property in the district for the reconstruction of sewer laterals in a poor residential area within the district. With the approval of Oaklawn officials, Boeing built its own sewer trunk line in 1985 to service its anticipated needs for a planned development of its Oaklawn property. Although Boeing's real property was exempt, the cost of the project, through taxes assessed on its personal property, fell primarily on Boeing. Additional facts not contained in Boeing I and brought out at the BOTA hearing are provided below.

According to Robert Friesen, a civil engineer working for Boeing in 1983, at the time Boeing presented its planned development and its anticipated sewer requirements, Oaklawn representatives suggested that the Oaklawn system did not have the capacity to provide the service needed by Boeing. Friesen also testified that Oaklawn expressed no interest in becoming involved in building or owning the additional sewers needed by Boeing. Dan Nordmark, another Boeing engineer, recalled that Oaklawn representatives said that Oaklawn did not have the maintenance capabilities for larger pipes needed by Boeing and expressed no interest in handling Boeing's sewage problems. Both Friesen and Nordmark said that Al Reiss, a consulting engineer for Oaklawn, was involved in the discussions of Boeing's anticipated sewer needs. Boeing believed it had no alternative but to build its own sewer system.

Reiss, however, did not recall that Boeing ever brought up either hooking into the Oaklawn system permanently or Oaklawn building and operating the line for Boeing.

Robert Lakin, a former Wichita-Sedgwick County Metropolitan Area Planning Director and a Boeing witness, testified that traditionally, sewer laterals are always financed by the property they serve, or can serve (if the property is a vacant lot). A sewer lateral is an underground pipe picking up sewage from individual homes on both sides of the pipe. A sewer main picks up sewage from the laterals and conveys it toward a treatment facility or to a larger pipe, an interceptor. An interceptor, sometimes called a trunk line, carries the sewage to the treatment facility. Laterals carry sewage from the local neighborhood. Mains and interceptors benefit more than just adjacent properties and are traditionally financed over a larger area. Benefit areas for trunk lines are established by engineering studies and normally consist of a drainage basin or sub-basin. Property not served by a sewer can still benefit, because of the opportunity to hook into it. However, a lateral could benefit only the adjacent property. Lakin compared the benefit analysis for financing sewers to that used for water lines or streets. Lakin agreed that Oaklawn's sewer system would have been inadequate to serve Boeing's anticipated needs and expressed concerns about Oaklawn's ability to manage such a project.

Lakin had never seen an instance in which a lateral sewer project was financed with a levy on personal property. However, Lakin believed improvement districts have authority to issue general obligation bonds payable by ad valorem taxes. Lakin had seen instances when improvement districts issued general obligation bonds financed with ad valorem taxes for such projects as water towers or swimming pools. Lakin acknowledged that repairs to laterals were paid for out of a sewer utility fund from sewer service charges levied on all users. In Lakin's experience, projects for extension of laterals in the City of Wichita were always specially assessed, unless the developer had already installed them. However, Lakin could not recall an instance when reconstruction of a sewer was financed by a special assessment. He acknowledged that the City of Wichita uses revenue bonds funded by sewer service charges to pay for the reconstruction of laterals.

Al Reiss, the Oaklawn engineer, described the poor condition of the original clay pipe laterals. The pipe joints leaked. The bedding for the pipes was sand, below the water table in certain places. Groundwater could seep into the pipe through a joint, causing a cavity around the pipe. The laterals were laid in the streets, instead of in alleys. When cavities developed around pipe joints, streets above could collapse and pipes could break, resulting in frequent expensive repairs. When a line broke, sand sucked into the open pipe could block the line and cause sewage backup into homes. Leaking pipes below the water table could become surcharged with underground water, resulting in sewage escaping from manholes. Also, sewage leaking from pipes could pollute the surrounding water table. Storm water could get into the system, causing surface sewage.

The lateral reconstruction project did not...

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