Brookfield Trade Center v. Ramsey County

• Decision Date: 20 April 2000
• Docket Number: No. C4-99-1164.,C4-99-1164.
• Citation: 609 N.W.2d 868
• Parties: BROOKFIELD TRADE CENTER, INC., et al., Respondents, v. COUNTY OF RAMSEY, Relator.
• Court: Minnesota Supreme Court

609 N.W.2d 868

BROOKFIELD TRADE CENTER, INC., et al., Respondents, v. COUNTY OF RAMSEY, Relator.

No. C4-99-1164.

Supreme Court of Minnesota.

April 20, 2000.

Rehearing Denied May 23, 2000.

Susan Gaertner, Ramsey County Attorney, David F. MacMillan, Assistant County Attorney, St. Paul, for relator.

Thomas R. Wilhelmy, Fredrikson & Byron, P.A., Minneapolis, for respondents.

Clayton Robinson, City Attorney, Peter J. McCall, Assistant City Attorney, St. Paul, amici curiae.

David F. Herr, Laura E. Walvoord, Wayne Stuart Moskowitz, Mason Edelman Borman & Brand, LLP, Minneapolis, amici curiae. Heard, considered, and decided by the court en banc.

OPINION

BLATZ, Chief Justice.

Relator Ramsey County appeals from a decision of the Minnesota Tax Court granting partial summary judgment to respondents Brookfield Trade Center, Inc., and Petula Associates, Inc. (collectively "Brookfield"), and denying summary judgment to Ramsey County. On remand from this court, the issue before the tax court was whether an assessment agreement establishing the minimum market value for a development property for tax assessment purposes was invalid because the assessor did not comply with the statutory certification requirements set forth in Minn. Stat. § 273.76, subd. 8 (1984).¹ The tax court determined the statute required the assessor to conduct an independent valuation analysis and found that because there was no evidence to show the assessor conducted such an analysis the agreement was invalid. We reverse, concluding that the certification statute requires only an estimate of value based on the assessor's judgment, and that Brookfield failed to rebut the presumption that the assessor complied with the statutory certification requirements.

In July 1985, the City of St. Paul (City), the St. Paul Housing and Redevelopment Authority (HRA), and Oxford Development, Inc. (Oxford)² entered into a development agreement for construction of the World Trade Center in downtown St. Paul. The agreement provided that the City would issue tax increment financing (TIF) bonds in the amount of $10 million to help finance the development and that the parties would enter into an assessment agreement. The purpose of an assessment agreement is to establish minimum market values for property tax purposes as provided under Minn.Stat. § 273.76, subd. 8 (1984), for a property under development. Pursuant to Minn.Stat. § 273.76, subd. 8, the property is then valued for property tax purposes each year at the higher of its actual market value or the minimum market value established by the agreement. This ensures tax revenues will be available to repay the TIF bond debt issued for the property regardless of future adverse market conditions.³

The following minimum market values were agreed to by Oxford, the City, and the HRA for the World Trade Center: $1,800,000 on January 2, 1986; $10,827,401 on January 2, 1987; and $43,309,606 on January 2, 1988 and thereafter.⁴ Under Minn.Stat. § 273.76, subd. 8, the local assessor, in this case the county assessor, was required to certify these values. According to that subdivision, the certification process required that the assessor receive the assessment agreement,

review the plans and specifications for the improvements to be constructed, review the market value previously assigned to the land upon which the improvements are to be constructed and, so long as the minimum market value contained in the assessment agreement appears, in the judgment of the assessor, to be a reasonable estimate, shall execute the following certification upon such agreement:

The undersigned assessor, being legally responsible for the assessment of the above described property upon completion of the improvements to be constructed thereon, hereby certifies that the market value assigned to such land and improvements upon completion shall not be less than $........

Id.

In the instant case, the assessment agreement between Oxford, the City, and the HRA included two certifications signed by Walter O'Malley, the Ramsey County Assessor in 1985. The first certification incorporated the statutory certification language, stating:

The undersigned, having reviewed the plans and specifications for the improvements to be constructed and the market value previously assigned to the land upon which the improvements are to be constructed, and being of the opinion that the minimum market value contained in the foregoing Agreement appears reasonable, hereby certifies as follows: The undersigned Assessor, being legally responsible for the assessment of the above described property upon completion of the improvements to be constructed thereon, hereby certifies that the market value assigned to such land and improvements upon completion shall not be less than forty-three million three hundred nine thousand Dollars ($43,309,000) until termination of this Agreement.

The second certification explained the certification process that O'Malley subscribed to:

The undersigned, being the duly qualified and acting County Assessor of Ramsey County, Minnesota, hereby certifies that:

1. he is the assessor responsible for the assessment of the property described in the foregoing Exhibit A;

2. he has read the foregoing Agreement;

3. he has received and read a duplicate original of the Development Agreement;

4. he has received and reviewed the architectural and engineering plans and specifications for the Facilities agreed to be constructed on the property described in Exhibit A by the Developer under the Development Agreement;

5. he has received and reviewed an estimate of the cost of the property described in Exhibit A and the Facilities to be constructed thereon, prepared by the Developer; and

6. the Market Value assigned to property and the Facilities described in the foregoing Exhibits A and B upon completion shall not be less than $43,309,000.00.

Both certifications noted the $43 million minimum market value established by the assessment agreement for 1988 and thereafter when construction on the property was expected to be completed, even though minimum market values of $1.8 million and $10.8 million were also established for 1986 and 1987, respectively.

Following the signing of the development and assessment agreements, construction on the World Trade Center began in 1985 and the 37-story office tower and adjacent commercial retail area opened in September 1987. In 1987 and 1988, the property had actual market values of $48,744,200 and $59,167,600, respectively. Pursuant to the assessment agreement and Minn.Stat. § 273.76, subd. 8, Ramsey County assessed the taxes for the World Trade Center based on these actual market values rather than the lower minimum market values. In contrast, from 1989 until the termination of the assessment agreement in 1993, the market value of the World Trade Center was less than or equal to the minimum market value of $43 million set by the assessment agreement. Accordingly, property taxes were assessed on the basis of the $43 million minimum market value.

On January 2, 1993, Ramsey County assessed the 1993 taxes on the property (payable 1994) based on the minimum market value of $43 million. Subsequently, on February 1, 1993, the $10 million bond debt issued by St. Paul for the development of the World Trade Center was retired and the assessment agreement terminated. On May 16, 1994, Brookfield filed a property tax petition in the Minnesota Tax Court seeking a reduction in the 1993 assessed value to reflect the actual market value of the World Trade Center.

During discovery, Brookfield deposed the current Ramsey County Assessor, Brian Ducklow, and served him with a subpoena duces tecum requesting all the information contained in the assessor's files relating to the 1985 assessment agreement and the minimum market value for the World Trade Center. Ducklow found only one responsive document. It was a letter dated April 10, 1984, from Gerald Augst, Supervisor of the Commercial-Industrial Section of the Ramsey County Assessor's Office, to Robert Simon, an employee in the Department of Planning and Economic Development for the City of St. Paul. In this 1984 letter, Augst estimated what the property taxes on the World Trade Center might be for the tax years 1985 through 1989. Attached to the letter were three pages of handwritten notes which appeared to be cost, income, and market analysis calculations of estimated market values for those years. The calculations arrived at various market values for the property. Although the last page identified the final estimates as $21.5 million and $30.2 million for 1987 and 1989, respectively, the handwritten calculations also reflected several other market values, including the values of $42.4 million, $32 million, and $35 million.⁵

In response to Brookfield's discovery requests, a second document related to the minimum market value was produced from the files of the City of St. Paul. It was a memorandum dated May 17, 1985, from Greg Blees of the Office of the Mayor to members of his staff (Blees Memo). This memo referred to an attached worksheet that calculated what the minimum market value for the World Trade Center property needed to be to support the issuance of TIF bonds. The memo explained that "[t]his worksheet should be the basis for determining the Minimum Assessor's Estimated Market Value for determining Oxford's minimum property tax after the World Trade Center is constructed, regardless of occupancy." The memo suggested that the minimum market value must be $43,307,645 to support the bond debt, and arrived at that value by back-calculating from the proposed bond amount. It concluded by stating that "[t]his calculation results in a minimum value equal to an assessed value under the income approach if the building was 58% occupied." Although the Blees Memo was produced by the City, the parties agreed that there was no evidence that former Ramsey County Assessor O'Malley saw it....