Boulder County Bd. of Equalization v. M.D.C. Const. Co., 91SC293

• Citation: 830 P.2d 975
• Decision Date: 26 May 1992
• Docket Number: No. 91SC293,91SC293
• Parties: BOULDER COUNTY BOARD OF EQUALIZATION, and the Colorado Board of Assessment Appeals, Petitioners, v. M.D.C. CONSTRUCTION COMPANY, Respondent.
• Court: Supreme Court of Colorado

Page 975

830 P.2d 975

BOULDER COUNTY BOARD OF EQUALIZATION, and the Colorado Board of Assessment Appeals, Petitioners, v. M.D.C. CONSTRUCTION COMPANY, Respondent.

No. 91SC293.

Supreme Court of Colorado En Banc.

May 26, 1992.

H. Lawrence Hoyt, Ruth E. Cornfeld, Boulder, for Boulder County Bd. of Equalization.

Gale A. Norton, Atty. Gen., Raymond T. Slaughter, Chief Deputy Atty. Gen., Timothy M. Tymkovich, Sol. Gen., Thomas D. Fears, Asst. Atty. Gen., Denver, for Colorado Bd. of Assessment Appeals.

McGeady, Weston, & Sisneros, P.C., David H. Wollins, Michael A. Zahorik, Denver, for M.D.C. Const. Co.

Justice QUINN delivered the Opinion of the Court.

We granted certiorari to review the unpublished opinion of the court of appeals in MDC Constr. Co. v. Board of Assessment Appeals (Colo.App. No. 90CA0063, March 21, 1991), which reversed the Board of Assessment Appeals' determination that MDC, a landowner, was not entitled to have its land assessed for property tax purposes for the 1988 tax year as "agricultural land" under the then-existing version of section 39-1-102(1.6) and (13.5), 16B C.R.S. (1987 Supp.). The Board of Assessment Appeals ruled that various activities of MDC with respect to the land, including its practice of leasing the land for grazing and ranch operations at a price that would not result in a monetary profit to MDC, were inconsistent with MDC's intent as landowner to engage in farming or ranching operations for the primary purpose of obtaining a profit. In reversing that decision, the court of appeals concluded that the critical factor qualifying MDC's land as "agricultural land" was the lessees' surface use of the land to graze animals for the purpose of making a profit. The Boulder County Board of Equalization and the Colorado Board of Assessment Appeals filed a petition for certiorari, which we granted, ¹ and we now affirm the judgment of the court of appeals.

I.

The land in question consists of approximately 1200 acres, divided into a number of parcels, and is located within the incorporated boundaries of the Town of Superior in Boulder County. Most of the parcels are vacant land, with only five containing residential improvements. The land has been used for farming and ranching purposes since approximately 1942, and on January 6, 1987, it was annexed by the Town of Superior and zoned as a planned unit development for a variety of nonagricultural uses. Agricultural uses, however, were not prohibited by the Town of Superior.

At the time of the annexation the land was owned by Rock Creek Partnership, which agreed to provide a municipal water system to the Town of Superior and pledged its water rights to the town. In June 1987 MDC Construction (MDC), a landholding and development company, purchased the land from Rock Creek Partnership for $12,735,000, or approximately $10,500 per acre. MDC planned to develop the land at some future time, but in the interim intended to lease the land for farming and ranching operations. After purchasing the land from Rock Creek Partnership, MDC leased approximately 800 acres to Joseph Scriffiny and the remainder of the land to Regina Hobika. Both Scriffiny and Hobika were legitimate and bona fide rancher-farmers.

The Scriffiny lease provided for a $400 monthly payment, but Scriffiny was permitted to perform maintenance work on the land in lieu of payment. Scriffiny used approximately 240 acres as farm land on which he grew hay for winter feed, and he used the remaining 600 acres to graze his cattle, which numbered from 70 to 90. The primary purpose of Scriffiny's use of the land was to obtain a monetary profit, and Scriffiny in fact did make a profit from his agricultural operations for the years 1986, 1987, and 1988. Although the lease did not include MDC's water rights on the property, MDC permitted Scriffiny to use as much water as he needed for his operations.

Hobika had been leasing her parcel of land since 1985 for the purpose of boarding and breeding horses. Hobika's lease provided for a $300 monthly payment for the use of a residence on the property and an additional $300 monthly payment for the use of the property itself and four outbuildings, which consisted of two barns, a tack room, and a three-sided shed. Hobika testified that her operations were unprofitable in 1986, 1987, and 1988, but that she expected to make a profit by the year 1990. Although Hobika's lease did not include the use of MDC's water rights, Hobika was permitted to use water as needed for her operations.

Effective January 1, 1988, the Boulder County Assessor reclassified MDC's property for 1988 tax purposes from "agricultural" to "vacant" land. The reclassification was based on several factors, including the high purchase price paid by MDC for ultimate use of the land for development, the annexation of the land to the Town of Superior, the rezoning of the land to a planned unit development, the pledging of water rights by Rock Creek Partnership to the Town of Superior, and inadequate evidence of any monetary profit to MDC from agricultural operations on the land.

MDC unsuccessfully appealed the reclassification to the Boulder County Board of Equalization and then to the Colorado Board of Assessment Appeals. The Board of Equalization concluded that MDC had not presented sufficient evidence to rebut the presumption in favor of the assessor. The Board of Assessment Appeals concluded that the landowner, rather than the lessee, must utilize the land as "agricultural land" for the primary purpose of obtaining a profit and that the following factors were inconsistent with that purpose:

One, annexing a farm or ranch to a town, receiving PUD zoning, and dedicating the water rights to a municipal water system; two, leasing 200 acres of irrigated land and 600 acres of pasture for $450 per month, or $23.52 per acre per year; and three, stating in a lease that no water rights are included, leasing the land at a dry-land rate, then giving the lessee all the water needed.

The court of appeals reversed the decision of the Board of Assessment Appeals and remanded the case to the Board with directions to enter an order classifying MDC's land as agricultural land for purposes of the tax assessment for the 1988 tax year. Noting that there is no requirement in the statutory scheme that the property owner actually graze livestock on the land for the primary purpose of making a profit or that the owner's leasing activity be conducted for the owner's own profit, the court of appeals concluded that the Board of Assessment Appeals "erred in interpreting the statute to require that the 'primary purpose' be applied to the landowner's intent rather than to the lessees' activities and the actual surface use of the land." MDC Constr. Co., No. 90CA0063, slip op. at 2. We granted certiorari to consider whether the court of appeals properly concluded that MDC's land qualified as "agricultural land" for tax assessment purposes.

II.

As a prelude to our resolution of the question before us, we briefly review the constitutional and statutory standards by which land was classified and valued for tax assessment purposes at the time of the 1988 assessment at issue before us. We cite to those provisions of the General Property Tax Law in effect as of the date of the reclassification and appraisal of MDC's land, which was January 1, 1988. See § 39-1-105, 16B C.R.S. (1987 Supp.) (all taxable property appraised and valued for assessment purposes on January 1 of each year).

The Colorado Constitution states that all taxes upon real property shall be uniform and distinguishes agricultural and residential property from other types of real property for assessment purposes. Colo. Const. art. X, § 3(1)(a), 1A C.R.S. (1991 Supp.). Generally, valuations for assessment must be based on appraisals made by assessing officers for the purpose of determining the actual value of the property in accordance with provisions of law, "which laws shall provide that actual value be determined by appropriate consideration of cost approach, market approach, and income approach to appraisal." Id. Article X, section 3 of the Colorado Constitution, however, gives special tax consideration to agricultural lands by providing that "the actual value of agricultural lands, as defined by law, shall be determined solely by consideration of the earning or productive capacity of such lands capitalized at a rate as prescribed by law." Colo. Const. art. X, § 3(1)(a), 1A C.R.S. (1991 Supp.).

In keeping with these constitutional provisions, the General Property Tax Law, §§ 39-1-101 to -120, 16B C.R.S. (1982 & 1987 Supp.), includes a legislative declaration that its provisions shall be strictly construed for the purpose of securing a just and equalized valuation for assessment of all real and personal property not exempt from taxation. § 39-1-101, 16B C.R.S. (1987 Supp.). The statutory scheme requires the assessor of the county wherein the real property is located to appraise the property and determine its actual value for property tax purposes. § 39-1-103(5)(a), 16B C.R.S. (1987 Supp.). With the exception of agricultural lands exclusive of building improvements, residential property, and producing mines and lands or leaseholds producing oil or gas, the actual value of real property is determined "by appropriate consideration of the cost approach, the market approach, and the income approach to appraisal." Id. In the case of agricultural lands, section 39-1-103(5)(a) states that the actual value, exclusive of building improvements thereon, "shall be determined by consideration of the earning or productive capacity of such lands during a reasonable period of time, capitalized at a rate of thirteen percent." Vacant land, in contrast, is treated as any other type of real property not accorded special tax consideration, and its actual value is determined by considering the cost approach, the market approach, and the income approach to appraisal....