Board of County Com'rs of Wyandotte County v. Kansas Ave. Properties

• Decision Date: 14 February 1990
• Docket Number: No. 63,471,63,471
• Citation: 786 P.2d 1141,246 Kan. 161
• Parties: BOARD OF COUNTY COMMISSIONERS OF WYANDOTTE COUNTY, Kansas, Appellant, v. KANSAS AVENUE PROPERTIES, Appellee.
• Court: Kansas Supreme Court

Page 1141

786 P.2d 1141

246 Kan. 161

BOARD OF COUNTY COMMISSIONERS OF WYANDOTTE COUNTY, Kansas, Appellant, v. KANSAS AVENUE PROPERTIES, Appellee.

No. 63,471.

Supreme Court of Kansas.

Feb. 14, 1990.

Syllabus by the Court

1. Rules to be considered in cases involving questions of claimed exemption from ad valorem taxation are stated and applied.

2. In ascertaining the meaning of a constitutional provision, the primary duty of the courts is to look to the intention of the makers and adopters of that provision.

3. In interpreting and construing a constitutional amendment, the court must

examine the language used and consider it in connection with the general surrounding facts and circumstances that cause the amendment to be submitted.

4. The phrase "used exclusively" in the constitution and statutes relating to exemption from taxation means that the use made of the property sought to be exempted from taxation must be only, solely, and purely for the purposes stated, and without participation in any other use.

5. Article 11, § 13 of the Kansas Constitution does not grant ad valorem tax exemption to property rented or leased for profit even though the property is being used by the renter or lessee solely for one or more of the economic development purposes contained in § 13.

John M. Duma, Asst. County Counselor, argued the cause and was on the brief, for appellant.

William M. Modrcin, of Morris & Larson, P.C., Overland Park, argued the cause, and Thomas E. Carew, Kansas City, Mo., was with him on the brief, for appellee.

Thomas R. Powell, City Atty., and Joe Allen Lang, Sr. Asst. City Atty., Wichita, were on the amicus curiae brief for City of Wichita.

Henry E. Couchman, Jr., Asst. City Atty., Kansas City, was on the amicus curiae brief, for City of Kansas City.

Joseph W. Jeter and Charlene Brubaker, of Jeter and Moran, Hays, were on the amicus curiae brief for Ellis County Economic Development Corp.

HOLMES, Justice:

The Board of County Commissioners of Wyandotte County appeals from a decision of the Shawnee County District Court which reversed the Kansas Board of Tax Appeals (BOTA) denial of an ad valorem tax exemption sought under Art. 11, § 13 of the Kansas Constitution. Amicus curiae briefs supporting the position of the landowner have been filed by the City of Kansas City, the City of Wichita, and the Ellis County Economic Development Corporation. We reverse.

The facts of this case are not disputed. Kansas Avenue Properties (KAP), a Kansas limited partnership, owns approximately 4.3 acres of land in Kansas City, Wyandotte County, Kansas. In 1987, KAP constructed a 56,000 square foot "multi-tenant" building on this land. Stephen Dunn, the developer and a general partner of KAP, testified before the BOTA that KAP intended to lease space in the building only to tenants who qualified for ad valorem tax exemption under Art. 11, § 13 of the Kansas Constitution.

Before constructing the building, KAP applied for ad valorem tax-exempt status from the City Council of the City of Kansas City. The City Council found that KAP's proposed business project met the economic development purposes of Art. 11, § 13 and granted KAP a 10-year exemption "for all buildings, land, and tangible personal property." KAP then filed its application for tax exemption with the BOTA pursuant to K.S.A. 79-213.

In an order issued April 29, 1987, the BOTA denied the application for tax exemption. Following a rehearing, the BOTA on June 1, 1988, again denied the application of KAP for ad valorem tax exemption. In doing so, the BOTA relied upon In re Board of Johnson County Comm'rs, 225 Kan. 517, 592 P.2d 875 (1979), and held:

"The Board cannot find that the lessor's use of the property is one which qualifies for exemption under Article 11, Section 13 of the Kansas Constitution. The use made by the owner of the property, i.e., the leasing of the property in question, is not manufacturing, conducting research and development, or storing goods or commodities."

The BOTA, in its order on rehearing, stated:

"The applicant has presented evidence that there is now a tenant in the facility and other leases are being negotiated with all uses by the various lessees to be qualifying uses as required by Article 11, Section 13. The applicant has also presented a legal argument that the Board has not properly construed In re Board of Johnson County Commissioners, 225 Kan. 517, 592 P.2d 875 (1979), given the intent and purpose of the constitutional amendment exempting property for economic development purposes. The applicant suggests that the standard for exemption under Section 13 of Article 11 differs significantly from the standard set forth in Section 1 of Article 11. The applicant concurs with the Board's rationale that the exclusive use test set out in Section 1 of Article 11 requires that all uses made of the property be for the stated exempt purpose. The applicant, however, contends that Section 13 of Article 11 was adopted by the people of Kansas for the specific purpose of allowing local governments to grant exemptions where the property is used exclusively by a business for one of the stated purposes. The applicant contends that the only use which must be considered under Section 13 of Article 11 is the use by the business, not the owner of the property. In other words, if any business is using the property for one of the stated purposes, it qualifies for exemption regardless of any other business use. The applicant suggests that the 'exclusive use' requirement is that the property be used exclusively 'by a business' for one of the specified purposes.

"The applicant also suggests that the Board examine the intent of the makers and adopters of this constitutional amendment as a means of ascertaining the meaning of the provisions within the constitutional amendment. Taxpayer cited cases for the proposition that a constitutional provision is not to be narrowly or technically construed, but rather its language should be interpreted to mean what the words imply to men of common understanding. The Board wholeheartedly concurs with this suggestion; however, the Kansas Supreme Court has specifically addressed what the term 'used exclusively' shall mean. The Legislature certainly had knowledge of what the Kansas high court has determined exclusive to mean and presumably knew what language was being used in the amendment that was placed before the voters for adoption. If the Legislature and the people did not intend for an exclusive use test to be applied to this type of exemption, the exclusive use language would have been deleted or the amendment would not have been adopted by the people. Taxpayer suggests an elementary rule of constitutional construction is that effect should be given to every part and every word and that no portion of the law should be treated as superfluous unless there is some clear reason to the contrary. The Board has followed this elementary rule of construction in that the Board has given every word, including 'used exclusively' the effect the words 'used exclusively' convey. If, as taxpayer suggests, the legal intendment is that each and every clause has been inserted for some useful purpose, then the Board has given effect to the words 'used exclusively.' The Kansas Supreme Court has consistently held used exclusively means just that, used exclusively. Any use other than that specifically authorized in the exemption language disqualifies the property for exemption.

"The facts in this case, as set out in the Board's original Order demonstrate that there are multiple uses of this property. Some of these uses would fit within the constitutional amendment exempting property for economic development purposes and some do not. Since the constitutional amendment does not exempt property which is being leased, the Board has no recourse but to sustain its original Order denying exemption for failure to establish that the property is used exclusively by a business for the purpose of manufacturing articles of commerce, conducting research and development or storing goods or commodities which are sold or traded in interstate commerce."

KAP appealed the final order of the BOTA to the Shawnee County District Court. The sole issue before the district court was whether rental property qualifies for tax exemption under Art. 11, § 13. It is undisputed that the proposed use of the property by the business tenants would qualify for exemption if the businesses were being conducted by the owner of the property. Stated in another way, the issue is whether rental property used by a business for economic development purposes qualifies for exemption from ad valorem taxation pursuant to Art. 11, § 13.

In a memorandum decision, the Shawnee County District Court reversed the BOTA, adopting as its conclusions of law the arguments in KAP's memorandum which was submitted to the BOTA and to the district court. As would be expected, the memorandum filed by KAP contains arguments, opinions, and legal authorities supporting its position. Numerous arguments are propounded in the KAP memorandum and it would have been helpful if the district court had prepared an opinion which specified the arguments and authorities upon which it based its decision. The district court apparently determined that the leased property qualified for exemption because the language of Art. 11, § 13 modifies the exclusive use test to apply only to the business physically using the property when it is used for one of the three enumerated purposes in the amendment; because the language indicates legislative intent to give cities and counties broad authority to grant or deny exemptions; because the legislative history and the explanatory statement provided to the voters reveal no distinction between rental or owned property; and because the purpose of the amendment is to increase Kansas' ability to compete with other states. The Board of County Commissioners of...