Atchison, Topeka & Santa Fe Ry. Co. v. Arizona Dept. of Revenue
| Decision Date | 05 September 1989 |
| Docket Number | No. 1,CA-CV,1 |
| Citation | 781 P.2d 605,162 Ariz. 127 |
| Court | Arizona Court of Appeals |
| Parties | ATCHISON, TOPEKA & SANTA FE RAILWAY COMPANY, a Delaware corporation, Black Mesa Pipeline, Inc., a Delaware corporation; Mountain States Telephone and Telegraph Company, and El Paso Natural Gas Company, a Delaware corporation, Plaintiffs-Appellants, v. ARIZONA DEPARTMENT OF REVENUE; Coconino County and Williams Hospital District, a special taxing district, Defendants-Appellees. 88-367. |
In this civil appeal, this court considers the validity of a secondary property tax levied by the appellee Williams Hospital District pursuant to A.R.S. § 48-1907(6). We conclude that because the district did not "operate" the hospital facility as required by § 48-1907(6), the tax levied against the appellant real property owners was illegal. We therefore reverse the decision of the trial court upholding the validity of the tax and remand for further proceedings consistent with this opinion.
The pertinent facts are not in dispute. In 1943, the Williams Hospital Board was incorporated to operate a health care facility in the Williams area. Construction of a hospital began in August 1948 and was financed with private funds and a $50,000 bond election. The hospital was dedicated on May 12, 1950.
The hospital had financial problems from the outset. From 1950 through 1970, the hospital provided only acute care services. In 1970, the hospital converted sixteen beds to long-term care to increase occupancy and revenues. In 1972, however, the hospital ceased providing long-term care, and reconverted to acute care beds only. In 1972, the city of Williams, which had operated the hospital since 1950, attempted to lease the hospital to a Flagstaff physician to resolve its financial problems. No agreement was reached, and in April of 1973, the hospital was closed and not reopened until the following October.
In early 1974, the Williams Hospital District (the district) was formed. At that time, the district incurred a bonded indebtedness of $500,000, including $250,000 to purchase the hospital from the city of Williams, and $250,000 to remodel it. In 1974, the total indebtedness was $887,700 including interest. The outstanding bonds require annual principal and interest payments of $49,000 through June of 1994.
From April 15, 1974, through August of 1986, the district leased the hospital to various organizations, but no lessee was able to operate it at a profit. On May 13, 1975, the city of Williams imposed a one percent sales tax to subsidize the hospital's operating costs and allow it to remain open. The city has supplemented its initial subsidy with additional funds at various times as needed. In 1979, the Northern Arizona Health Systems Agency investigated the hospital's financial condition and advised the city that the hospital was losing money despite an annual subsidy which exceeded $150,000. In early 1986, the hospital stopped providing 24-hour service due to financial pressure.
On July 1, 1986, Samaritan Health Services, Inc. (Samaritan), which is not a party to this litigation, entered into a management agreement with the Williams Hospital District. On July 3, 1986, the district proposed the levy of a secondary tax pursuant to A.R.S. § 48-1907(6) in order to subsidize the hospital's operating expenses. The district's voters approved that tax on August 5, 1986. On August 29, 1986, the hospital again commenced to operate on a 24-hour basis. In fiscal year 1986-87, revenues collected from the secondary property tax provided about forty percent of the district's $150,000 budget.
The management agreement between Samaritan and the district provides that the district is to lease the hospital to Samaritan for the one-year period beginning July 1, 1986 for rent of $1 per year. The agreement provides for renewal for two additional one-year periods upon mutual agreement of the parties. It further provides that the district, Samaritan, and the city of Williams agree that their relationship is that of independent contractors rather than employees, principals, agents or joint venturers. The agreement provides in part:
3. MANAGEMENT OF THE WILLIAMS FACILITY. DISTRICT hereby retains SAMARITAN and SAMARITAN agrees to supervise, operate and manage the Williams facility subject to the terms and conditions set forth in this agreement. SAMARITAN shall be responsible for the operation and management of the Williams facility including the establishment and implementation of the facility's policies and standards affecting operation, services, maintenance, and pricing.
3.1 Management Fee. SAMARITAN shall be paid a management fee by DISTRICT for the supervision, operation and management of the Williams facility. This fee shall amount to forty thousand dollars ($40,000) per year. The fee shall be paid at a monthly rate of three thousand thirty-four dollars ($3,334) [sic] per month payable on the first of each month beginning on July 1, 1986. The management fee will be renegotiated on a yearly basis. DISTRICT and SAMARITAN further agree that all net profits will be allocated equally between DISTRICT and SAMARITAN during the calendar months such profit or revenue is obtained.
The agreement further provides:
3.4 Employees. Effective July 1, 1986, DISTRICT shall cease any further relationship it has directly or indirectly with each non-physician employee of the Williams facility. SAMARITAN shall staff the Williams facility with qualified personnel of SAMARITAN'S sole choosing, at such level of compensation and benefits as may be negotiated between the parties. It is anticipated that SAMARITAN will rehire those past employees of the Williams facility at salaries and wage levels currently experienced. All employees hired by SAMARITAN will receive SAMARITAN benefit packages, modified as necessary to be consistent with the employees' past benefits. Every effort will be made to hire existing Williams facility personnel, although SAMARITAN reserves the right of final selection of personnel.
3.5 Medical Staff. Effective July 1, 1986, DISTRICT shall cease any further relationship it has directly or indirectly with each physician providing coverage for the Williams facility. SAMARITAN shall forthwith enter into such arrangements as it deems advisable with physicians to provide coverage for the Williams facility. SAMARITAN'S board of directors, in all instances, may, for good cause, limit or deny any physician, surgeon or dentist the privilege to practice in the Williams facility.
The management agreement also requires Samaritan to indemnify the district for any claims or liabilities arising out of or connected with the use or operation of the hospital or the services provided by the employees of the hospital.
Appellants commenced two separate actions in October of 1987 to challenge the legality of the district's 1986 and 1987 secondary property taxes levied pursuant to A.R.S. § 48-1907(6). Appellants also requested awards of attorney's fees against the appellee Arizona Department of Revenue under A.R.S. § 12-348. The two actions were consolidated by stipulation of the parties. Appellants filed separate motions for summary judgment. The district opposed those motions and filed its own cross-motion for summary judgment. Coconino County joined in the district's response to appellants' motions for summary judgment, but not in the district's cross-motion for summary judgment.
The trial court denied appellants' motions for summary judgment, but granted the district's motion, although it failed to state its reasons for doing so. The trial court accordingly did not reach the question of whether appellants could recover their attorney's fees from the Department of Revenue under A.R.S. § 12-348. This timely appeal followed entry of formal judgment in accordance with the trial court's ruling.
The provisions of A.R.S. §§ 48-1907, 48-1910, and 48-1911 are at the heart of this appeal. Section 48-1907 provides in pertinent part:
A hospital district may:
....
5. Provide for the operation and maintenance of a hospital or combined hospital and ambulance service owned by the district. If the hospital district provides for the operation of an ambulance service, ambulance services shall be provided to all areas within the district.
6. Impose a secondary property tax on all taxable property within the district for the purpose of funding the operation and maintenance of a hospital or combined hospital and ambulance service that is owned and operated by the district or to pay costs of an ambulance service contract entered into pursuant to this section. The amount of the levy necessary for the operation and maintenance of the ambulance service shall be separately stated in the levy. Prior to the initial imposition of such a tax a majority of the qualified electors voting in a regular or special election must approve such initial imposition. The continued imposition of such a tax must be approved by a majority of the qualified electors voting in a regular or special election at least every five years from the date of the initial imposition.
Section 48-1910 provides:
The board of directors may purchase surgical...
To continue reading
Request your trial
-
Hibbs ex rel. Arizona Dept. of Revenue v. Chandler Ginning Co.
...the Legislature. Collins v. Stockwell, 137 Ariz. 416, 419, 671 P.2d 394, 397 (1983). Accord Atchison, Topeka & Santa Fe Railway Co. v. Department of Revenue, 162 Ariz. 127, 781 P.2d 605 (App.1989). When statutes relate to the same subject matter, and the later enactment does not contain an ......
-
Bromley Group, Ltd. v. Arizona Dept. of Revenue
...nominal party status within A.R.S. § 12-348(G)(4) appears foreclosed by our decision in Atchison, Topeka & Santa Fe Railway Co. v. Arizona Department of Revenue, 162 Ariz. 127, 781 P.2d 605 (App.1989). In that case, the Williams Hospital District levied a secondary property tax pursuant to ......
-
State v. Cereceres
...to ascertain and give effect to the legislative intent behind the statute. E.g., Atchison, Topeka & Santa Fe Railway Company v. Arizona Department of Revenue, 162 Ariz. 127, 132, 781 P.2d 605, 610 (App.1989); Martin v. Martin, 156 Ariz. 452, 457, 752 P.2d 1038, 1043 (1988); Calvert v. Farme......
-
El Paso Natural Gas Co. v. Arizona Dept. of Revenue
...legal authority to levy secondary property taxes is contained in this court's opinion in Atchison, Topeka & Santa Fe Railway Co. v. Arizona Department of Revenue, 162 Ariz. 127, 781 P.2d 605 (App.1989). We borrow from that opinion in order to establish the background for the current The Dis......