BD. OF COUNTY COM'RS v. Vail Associates
| Decision Date | 26 February 2001 |
| Docket Number | No. 99SC126., No. 98SC869 |
| Citation | 19 P.3d 1263 |
| Parties | BOARD OF COUNTY COMMISSIONERS, County of Eagle, State of Colorado, acting as the Eagle County Board of Equalization, Petitioner, v. VAIL ASSOCIATES, INC.; and the Board of Assessment Appeals, Respondents. Allen S. Black, in his capacity as Eagle County Assessor; the Board of County Commissioners of Eagle County, Colorado; Nancy D. Anders, in her capacity as Grand County Assessor; the Board of County Commissioners of Grand County, Colorado; Judy Pettit, in her capacity as Jefferson County Assessor; Robert N. Cruzan, in his capacity as Montezuma County Assessor; the Board of County Commissioners of Montezuma County, Colorado; Tom Issac, in his capacity as Pitkin County Assessor; the Board of County Commissioners of Pitkin County, Colorado; Amy J. Williams, in her capacity as Routt County Assessor; the Board of County Commissioners of Routt County, Colorado; Denise Steiskal, in her capacity as Summit County Assessor, and the Board of County Commissioners of Summit County, Colorado, Petitioners, v. Colorado State Board of Equalization, Respondent. |
| Court | Colorado Supreme Court |
James R. Fritze, Eagle County Attorney, Bob D. Slough, Cortez, CO, Attorneys for Petitioner in No. 98SC869.
Holme, Roberts & Owen LLP, James D. Butler, Stephanie M. Tuthill, Denver, CO, Attorneys for Respondent Vail Associates, Inc. in No. 98SC869, and Amicus Curiae Possessory Interest Working Group in No. 99SC126.
Ken Salazar, Attorney General, Barbara McDonnell, Chief Deputy Attorney General, Alan J. Gilbert, Solicitor General, Paul Farley, Deputy Attorney, David M. Kave, First Assistant Attorney General, Mark W. Gerganoff, Assistant Attorney General, State Services Section, Denver, CO, Attorneys for Respondent Board of Assessment Appeals in No. 98SC869.
Hall & Evans, L.L.C., Thomas J. Lyons, Andrew D. Ringel, Denver, CO, Attorneys for Amicus Curiae Colorado Counties, Inc.
H. Lawrence Hoyt, Boulder County Attorney, Robert R. Gunning, Assistant County Attorney, Boulder, CO, Attorneys for Amicus Curiae Board of County Commissioners of the County of Boulder.
Bob D. Slough, Montezuma County Attorney, Cortez, CO, Attorney for Petitioners in No. 99SC126.
Ken Salazar, Attorney General, Barbara McDonnell, Chief Deputy Attorney General, Michael E. McLachlan, Solicitor General, Christine M. Arguello, Deputy Attorney General, Maurice G. Knaizer, Deputy Attorney General, State Services Section, Denver, CO, Attorneys for Respondent in No. 99SC126.
In this appeal, we review recent legislation which creates a tax exemption for ski areas and other parties with long-term leases, permits, or contracts to use federal property. We hold that this legislation violates Colorado's constitution, which prohibits statutory exemptions to property taxation unless the exemptions are authorized in the constitution itself. Unless constitutionally authorized, the legislature may not exempt some interests in federal property from taxation while taxing others.
In 1996, the General Assembly enacted legislation directing that some possessory interests in tax-exempt property not be subject to taxation unless the legislature expressly directs such taxation by statute. See §§ 39-3-136 & 39-1-106, 11 C.R.S. (2000). The court of appeals held that this legislation was a constitutionally permissible exercise of legislative authority. See Vail Assocs., Inc. v. Eagle County Bd. of County Comm'rs, 983 P.2d 49 (Colo.App.1998)
; Black v. Colorado State Bd. of Equalization, No. 97CA1642 (Colo.App. Dec. 24, 1998) (). We granted certiorari and consolidated these two cases to determine the constitutionality of these provisions.1 We reverse the court of appeals.
We hold that section 39-3-136 unconstitutionally exempts some private possessory interests in tax-exempt property from taxation, contrary to Article X of the Colorado Constitution and our controlling decision in Mesa Verde Co. v. Montezuma County Board of Equalization, 898 P.2d 1 (Colo.1995) (Mesa Verde III). This legislation exempts certain forms of property from taxation without constitutional authorization, and also treats interests within the same class of property differently for taxation purposes. Neither is constitutionally permissible. Accordingly, we sever the offending provisions and leave in place section 39-1-103(17), 11 C.R.S. (2000), which the General Assembly enacted for the valuation of private possessory interests in tax-exempt property should we determine that section 39-3-136 was unconstitutional.
Vail Associates, Inc. (Vail) operates the Vail ski resort in Eagle County under a special use permit from the U.S. Forest Service (Forest Service). This permit entitles Vail to the occupancy, use, and enjoyment of 12,590 acres of federal land in the White River National Forest for operation of its ski area through October 31, 2031.2 The permit reserves the right of the Forest Service to allow uses by others that do not materially interfere with Vail's rights and privileges under the permit.
In May 1996, the Eagle County Assessor sent a notice of assessment to Vail for the ski area. The assessor utilized a published formula designed for valuation of ski areas on federal lands. See 3 Division of Property Taxation, Colorado Department of Local Affairs, Assessors Reference Library: Land Valuation Manual Addendum VII-A, at 1 (1989, rev.vol.1996) [hereinafter Land Valuation Manual]. Under this formula, the assessor multiplied the fees paid by Vail to the Forest Service the previous year by an adjustment factor for the current year, and then multiplied the adjusted figure by a capitalization rate tied to the appraisal date, to yield actual value. See id. The assessor figured the capitalization rate by adding the state discount rate,3 the state pass-through rate,4 and the effective tax rate.5 See id. The assessor multiplied the actual value of the possessory interest by the assessment rate to determine the property tax. See id.
The Eagle County Assessor valued Vail's possessory interests at $14,040,330 for the 1996-1997 tax year. Vail appealed the assessment to the Eagle County Board of Equalization, on the basis that taxation of possessory interests in tax-exempt property violates section 39-3-136. The Board of Equalization denied Vail's appeal. Vail then appealed to the State Board of Assessment Appeals (BAA). BAA ruled that taxation of Vail's possessory interests in government-owned land contravened section 39-3-136; it ordered Eagle County to remove them from the tax rolls. BAA determined that it lacked jurisdiction to consider Eagle County's constitutional challenge to section 39-3-136.
Eagle County appealed BAA's ruling to the court of appeals, arguing that section 39-3-136 creates an exemption from taxation contrary to Article X of the Colorado Constitution. The court of appeals affirmed the Board of Assessment Appeals. Vail Assocs., 983 P.2d at 50. The majority determined that the General Assembly has plenary power over taxation and the constitution does not preclude it from defining what interests in property shall be taxed. Id. at 56-57. The majority construed the General Assembly's 1996 enactment as a redefinition of the operable taxable property definitions and ruled that the BAA had legally ordered removal of private possessory interests in public lands from the tax rolls. Id. at 57. The dissent concluded that our decision in Mesa Verde III governed and that section 39-3-136 constituted a tax exemption contrary to Article X. Vail Assocs., 983 P.2d at 60-62 (Roy, J., concurring in part and dissenting in part).
Implementing section 39-3-136, the Colorado State Board of Equalization (SBOE) issued an order in October 1996 to each of fourteen Colorado counties, requiring the removal of all possessory interests in government-owned land from the county's property tax rolls.6 The county assessor and/or Board of County Commissioners of seven of the counties refused to comply with the order and commenced an action in Denver District Court. The 1996 assessed valuation of the possessory interests in the seven counties contesting the order was:
Number of Assessed County Accounts Value Eagle 18 $4,511,100 Grand 1 8,660 Jefferson 14 1,752,060 Montezuma 4 356,530 Pitkin 7 2,313,850 Routt 1 899,660 Summit 6 4,329,040
Four of the seven counties (Eagle, Pitkin, Routt, and Summit) listed on their tax rolls at least one ski resort located on federal lands.
The seven counties argued that: (1) SBOE's order constituted a violation of sections 3, 6, 9 and 10 of Article X of the Colorado Constitution; and (2) possessory interests in government-owned property are taxable under our decision in Mesa Verde III. The district court disagreed, affirming SBOE's order. The court of appeals, in affirming the district court, based its ruling on the reasoning stated in Vail Associates. Black, No. 97CA1642, slip op. at 4. Judge Roy dissented, for the reasons he set forth in his Vail Associates dissent. Id. at 6.
Section 39-3-136 was not enacted in a vacuum, but rather was a direct legislative response to the third in a series of cases involving the taxation of private possessory interests in tax-exempt federal property in Mesa Verde National Park. In 1972, we were called upon to address Montezuma County's taxation of improvements used by the Mesa Verde Company in operating its concession in the national park.7 See Mesa Verde Co. v. Board of County Comm'rs, 178 Colo. 49, 51, 495 P.2d 229, 230 (1972) (Mesa Verde I)
. Although the United States held title to the improvements on federal lands, the Mesa Verde Company had a contractual right to control them and a right to the occupation, use, enjoyment, and profits of the property. We thus determined that...
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