Bha Group Holding, Inc. v. Pendergast

• Decision Date: 11 October 2005
• Docket Number: No. WD 64454.,WD 64454.
• Citation: 173 S.W.3d 373
• Parties: BHA GROUP HOLDING, INC., Respondent, v. Michael PENDERGAST, et al., Appellant.
• Court: Missouri Supreme Court

173 S.W.3d 373

BHA GROUP HOLDING, INC., Respondent, v. Michael PENDERGAST, et al., Appellant.

No. WD 64454.

Missouri Court of Appeals, Western District.

October 11, 2005.

COPYRIGHT MATERIAL OMITTED

Arthur Aaron Hogg, Kansas City, for Appellant.

Aaron Gold March, Kansas City, for Respondent.

RONALD R. HOLLIGER, Presiding Judge.

This is a case of first impression. Jackson County, Jackson County Collector Michael Pendergast, and the Jackson County Deputy Director of Assessment (collectively the "County") appeal the trial court's decision that the property tax abatement under Mo.Rev.Stat. Section 353.110.1¹ begins in the year a Chapter 353 redevelopment corporation acquires the property rather than the calendar year after the date of acquisition. The County argues that the abatement begins in the calendar year following the year in which the redeveloper acquires the property. BHA claims that the abatement applies to the tax on improvements for the entire year of acquisition, even though the redevelopment corporation did not acquire the property until December 18.

Because the terms in the statute do not require a delay in initiating the partial statutory abatement, we affirm.

Facts

The parties stipulated to the operative facts and tried the case to the court. BHA Group Holdings, Inc. ("BHA") owns property in Raytown, Jackson County, Missouri, and has owned that property at all relevant times except briefly on December 18, 2001. BHA sought to redevelop the property and formed a separate Chapter 353 redevelopment corporation ("RDC") for that purpose. On May 1, 2001, the city of Raytown approved BHA's redevelopment plan and contract, which provided that the property would not be subject to assessment or payment of general ad valorem taxes on improvements to the property for a period of ten years after the date the RDC should acquire the property, congruent with the terms of Section 353.110.1. The agreement also provided that the tax benefit would inure to a transferee of the property as long as the transferee complied with the provisions of the agreement. On December 18, 2001, the RDC acquired the property from BHA, triggering the acquisition date provision of the redevelopment plan, then promptly transferred it back to BHA.

At the time the redevelopment corporation acquired the property in December 2001, the County had already assessed the property, including its existing improvements, and billed BHA for 2001 taxes. BHA paid the taxes under protest and subsequently sued to recover for the amount of tax applicable to the improvements on the property. The trial court found for BHA, concluding that Section 353.110.1 prohibits the County from requiring payment of taxes on improvements to the land in the year of acquisition by the RDC, even though the taxes had already been assessed for the year. The County appeals.

Standard of Review

In a court-tried case, the trial court's judgment will be affirmed on appeal unless there is no substantial evidence to support it, it is against the weight of the evidence, or it erroneously declares or applies the law. Murphy v. Carron, 536 S.W.2d 30, 32 (Mo. banc 1976).

Jurisdiction

Preliminarily, we address our jurisdiction sua sponte. Riverside-Quindaro Bend Levee Dist. v. Intercontinental Eng'g Mfg. Corp., 121 S.W.3d 531, 533 (Mo. banc 2003). The Missouri Supreme Court has exclusive appellate jurisdiction over cases involving the construction of revenue laws of this state. MO. CONST. art. V, Section 3; Alumax Foils, Inc. v. City of St. Louis, 939 S.W.2d 907, 910 (Mo. banc 1997); Two Pershing Square, L.P. v. Boley, 981 S.W.2d 635, 637 (Mo.App.1998). A revenue law "of this state" means one "the proceeds of which are deposited in the state treasury." Alumax Foils, 939 S.W.2d at 910; Two Pershing Square, 981 S.W.2d at 638. Because this case involves property taxes paid to the Jackson County treasury, not the state treasury, it does not involve the construction of a revenue law "of this state," and appellate jurisdiction is proper in this court. Two Pershing Square, 981 S.W.2d at 638.

Discussion

The History and Purpose of Chapter 353 Redevelopment

Urban redevelopment under Chapter 353 has its roots in the new Constitution of 1945, which specifically allowed enactment of state and local laws to redevelop blighted property and authorized the use of eminent domain for that purpose. Mo. Const. art. VI, Section 21. The new constitution also specifically provided for partial relief from taxation to encourage redevelopment. MO. CONST. art. X, Section 7. From this constitutional authorization came first the statute authorizing the creation of Land Clearance for Redevelopment Authorities (LCRA's), Section 99.300 et seq., and the far more uncommon Urban Redevelopment Corporations Law contained in Chapter 353.² Atypically for its time,³ Chapter 353 looked not to public entities but to the private sector, induced by tax relief, as redeveloper of blighted areas. Redevelopment thus might not require direct public funds or even public bonds, and the public authority was permitted to lend its eminent domain power to private developers.

Despite its long history in Missouri law there has been little specific litigation and appellate analysis of the specifics of how tax abatement works under Chapter 353. We are advised by counsel, but without reference either to facts in the record or to legal authority, that the interpretation of when the abatement begins has been exactly opposite in Kansas City and St. Louis, with Kansas City delaying abatement until the year after the RDC's acquisition, and St. Louis beginning abatement in the year of acquisition.⁴ Under Chapter 353, a blighted property which has been approved for private redevelopment by a private corporation receives a tax abatement for a specified number of years on the value of the improvements to the land. The property remains taxed, however, based upon the value of the land, exclusive of improvements such as buildings. In many cases, the year in which abatement begins may make little practical difference because there may be no existing improvements on the land, or any improvements that do exist may be so blighted as to have minimal assessed value. In this case, however, BHA had an existing office building of considerable value on the property, incurring about $80,000 per year in real estate taxes. Thus, whether the abatement begins in 2001 or 2002 is obviously of importance to the RDC, which seeks to use the 2001 tax savings immediately in the redevelopment, and to the County, which stands to lose substantial tax revenue.

We look to the legislature's choice of language in the statute for the answer to the question whether abatement begins in the year of—or the year after—acquisition. The relevant portion of Section 353.110.1 reads as follows:

Once the requirements of this section have been complied with, the real property of urban redevelopment corporations acquired pursuant to this chapter shall not be subject to assessment or payment of general ad valorem taxes ... for a period not in excess of ten years after the date upon which such corporations become owners of such real property, except to such extent and in such amount as may be imposed upon such real property during such period measured solely by the amount of the assessed valuation of the land, exclusive of improvements....

I. Construction of Section 353.110.1

a. The "plain" language

In its first point on appeal, the County argues that the plain language of Section 353.110.1 requires delaying initial abatement until the next calendar year. In construing the statute, we seek to effectuate the legislature's intent by applying the plain and ordinary meaning of statutory terms. Maudlin v. Lang, 867 S.W.2d 514, 516 (Mo. banc 1993). Furthermore, "significance and effect should, if possible, be attributed to every word, every phrase, sentence and part [of the statute], and words or phrases may be stricken out only in extreme cases." State ex rel. Smith v. Atterbury, 364 MO. 963, 270 S.W.2d 399, 404 (1954).

The County's position, though we decline to adopt it, is better understood in light of the taxation process for real property in Missouri. The Missouri Supreme Court summarized that process in an opinion that merits extensive quotation:

The determination of the amount of tax liability that attaches to a particular parcel of real property consists of two processes: the assessment of the property and the levying of the tax.

Assessment is a process by which the assessor identifies property by parcel and owner, values it, classifies it[,] and lists it so that taxing authorities can apply their tax levies. [See Section 137.115.] Under [section 137.080], assessment is a continuing process "which commences on the first day of January." The assessor has until May 31 of the tax year to submit the "assessor's book" to the county governing body. [Section 137.245.] ...

The second part of the taxing process, the levy, is the method by which the specific amount of tax due becomes known. After the assessor submits the assessor's book to the governing body of the county, the governing body of the county sets the annual tax levy rate.... [Section 137.055] requires the governing body to "fix the rate of taxes" after a public hearing "but not later than September twentieth of each year."

Beatty v. State Tax Comm'n, 912 S.W.2d 492, 496-97 (Mo. banc 1995). The final step is payment, which is due on December 31 each year. Section 140.010. The County emphasizes the legal consequences to landowners of the first two parts of the process, as expressed in Beatty:

For purposes of ad valorem real property taxation, ownership of real property is determined on the first day of January.

"Every person owning or holding real property ... on the first day of January, including all such property purchased on that day, shall be liable for taxes thereon during the same calendar year."

[Section...