County of Wayne v. Michigan State Tax Commission, No. 240911 (Mich. App. 3/11/2004)
| Decision Date | 11 March 2004 |
| Docket Number | No. 240911.,240911. |
| Parties | COUNTY OF WAYNE, CITY OF DETROIT, COUNTY OF OAKLAND, COUNTY OF MACOMB, CITY OF DEARBORN, CITY OF LIVONIA, CITY OF TAYLOR, and CHARTER TOWNSHIP OF VAN BUREN, Petitioners-Appellants, v. MICHIGAN STATE TAX COMMISSION, Respondent-Appellee, and CONSUMERS ENERGY COMPANY, DETROIT EDISON COMPANY, and MICHIGAN CONSOLIDATED GAS COMPANY, Intervening Respondents-Appellees. |
| Court | Court of Appeal of Michigan — District of US |
Appeal from Michigan Tax Tribunal, LC No. 273674.
Before: Smolenski, P.J., and Murphy and Wilder, JJ.
Petitioners (hereinafter "municipalities") appeal as of right from a judgment entered by the Michigan Tax Tribunal (hereinafter "MTT" or "tribunal"), which ruled that multiplier tables developed and adopted by respondent Michigan State Tax Commission (STC) for purposes of assessing utility personal property were legally sound. On appeal, the municipalities argue that the MTT committed a multitude of errors that require reversal. We disagree and affirm, holding that, pursuant to the Michigan Constitution of 1963, art 6, § 28, the MTT did not commit errors of law nor adopt wrong principles, except with respect to the tribunal's conclusion that its review of the STC's multiplier tables was governed by Const 1963, art 6, § 28, and that the tables were to be afforded a presumption of correctness. This error, however, does not compel reversal as no prejudice was suffered by the municipalities in light of the substance of the MTT's ultimate ruling in the action and the appellate issues raised. Additionally, in entering a judgment in favor of the STC and intervening respondents (hereinafter "utilities"), the tribunal's factual findings were supported by competent, material, and substantial evidence. The municipalities failed to show that the multiplier tables violate Michigan law.
The municipalities assert that personal property multiplier tables H & I, developed, constructed, and adopted by the STC after extensive studies, are invalid and unlawful under Michigan law. The municipalities challenge the methodologies used by the STC in developing the tables, which are utilized to approximate the true cash value with respect to taxable personal property. The multiplier tables are mass appraisal tools used as guides by local assessors to value public-utility electric transmission and distribution property and gas distribution property (T&D property)1 for purposes of ad valorem property taxation. The multiplier tables are utilized by taking the original or historical installed cost of particular T&D property by year of acquisition and applying a multiplier formulated by the STC to convert the original cost to a current value. The multiplier varies depending on the age of the property, and the product of the equation supposedly reflects an approximation of the subject property's true cash value.
The multiplier tables are contained in the STC's Assessor's Manual. Pursuant to MCL 211.10e, assessing officials are required to use the manual prepared by the STC "as a guide in preparing assessments." The tables are used to value T&D assets owned by the utilities such as poles, pipes, wires, transformers, et cetera. The municipalities vigorously challenge the tables on the basis that the value of the utility property is under-assessed when the tables are utilized, thereby not reflecting the true cash value of the property as required by law. The municipalities maintain that the methodologies used by the STC to develop the tables are unlawful and contrary to proper assessment principles as recognized in case law.2
The Michigan Constitution requires that property taxation be predicated on the true cash value of the property.
The legislature shall provide for the uniform general ad valorem taxation of real and tangible personal property not exempt by law except for taxes levied for school operating purposes. The legislature shall provide for the determination of true cash value of such property; the proportion of true cash value at which such property shall be uniformly assessed, which shall not, after January 1, 1966, exceed 50 percent; and for a system of equalization of assessments. . . . [Const 1963, art 9, § 3.]
MCL 211.27 provides, in pertinent part, that "`true cash value' means the usual selling price at the place where the property to which the term is applied is at the time of assessment, being the price that could be obtained for the property at private sale, and not at auction sale except as otherwise provided in this section, or at forced sale."
Initially, the municipalities filed a complaint in the Wayne Circuit Court challenging the STC's tables, alleging that the tables were illegal, invalid, and unconstitutional. The municipalities sought a declaratory judgment to that effect (count I), along with a preliminary and permanent injunction (count II). The municipalities also sought a writ of mandamus (count III) and superintending control (count IV), arguing that the tables were not promulgated pursuant to the Administrative Procedures Act (APA), MCL 24.201 et seq., despite the fact that use of the tables, through placement in the Assessor's Manual, was mandated. The circuit court found that it did not have subject-matter jurisdiction over counts I and II, and it transferred those counts to the MTT pursuant to MCR 2.227. With regard to counts III and IV, the circuit court granted summary disposition in favor of the STC, opining that the manual and the tables contained therein did not constitute "rules" under the APA; therefore, the requisite procedures for rule promulgation need not have been followed. This Court upheld the trial court's ruling, stating:
MCL 211.10e states that "[a]ll assessing officials . . . shall use only the official assessor's manual or any manual approved by the state tax commission . . . as a guide in preparing assessments" (emphasis added). If evidence of a different true cash value is apparent, a party may obtain a deviation from the manual. See, e.g., Jones & Laughlin Steel Corp v City of Warren, 193 Mich App 348, 353, 356; 483 NW2d 416 (1992). Ultimately, the true cash value of the property controls. See generally Washtenaw County v State Tax Commission, 422 Mich 346, 364-365; 373 NW2d 697 (1985). Accordingly, the Assessor's Manual does not constitute a binding rule of law that definitively establishes the true cash value of taxable property.
* * *
[T]he multiplier tables in the Assessor's Manual represent [the STC's] interpretation of true cash value, but this interpretation is not ultimately controlling. Jones, supra at 353-356. Indeed, MCL 211.10e itself mandates that the manual be used as a "guide" in preparing assessments. Accordingly, we agree with the trial court that the Assessor's Manual does not have the force and effect of law and does not affect the public's right to have property assessed at "true cash value." The exceptions to the definition of "rule" contained in MCL 24.207(g) and (h) apply here, and therefore no APA violation occurred. [Co of Wayne, et al v Michigan State Tax Comm, unpublished opinion per curiam of the Court of Appeals, issued April 2, 2002 (Docket No. 227236).]
The case proceeded to the MTT, which received witnesses and exhibits pertaining to the assessment of utility property, valuation methodologies, and the tables adopted by the STC. The tribunal concluded, in an eighty-page opinion:
The record demonstrates that the STC, in adopting personal property multiplier Tables H and I, acted lawfully in accordance with its responsibilities and authority under the general property tax act. Its judgment in this matter was informed by surveys of other states' methodologies, BDO Seidman recommendations, Staff valuation and multiplier studies, written and oral submissions by interested parties and its own investigations. It obtained, weighed, and diligently considered substantial and relevant data in exercising its judgment in adopting utility personal property multiplier Tables H and I.
The factual background concerning development of the tables and the basic nature of the methodologies used by the STC are not in dispute. In 1998, the STC contracted with the accounting firm of BDO Seidman to study the effectiveness of the personal property multiplier tables3 contained in the Assessor's Manual to determine whether they were accurate, and if not, to develop and recommend new multipliers that would result in accurate valuations. The study was initiated because the majority of the personal property multiplier tables in the Assessor's Manual had indeterminate origins and were developed prior to 1966. The STC was concerned that the current tables no longer provided reasonable approximations of the true cash value of personal property. BDO did not develop tables for utility property valuation, stating that attempts to value utility T&D property would be subjective at best, but rather recommended that the use of "rate base" calculated for the Michigan Public Service Commission (MPSC) for rate making purposes was an appropriate proxy for market value and should be used to determine valuations for utility T&D personal property.
Personal property in Michigan has been valued through multiplier tables since the early 1960s. In general, taxpayers report the original (historical) installed cost of their property by year of acquisition to which the STC applies a multiplier that converts the original cost to a current true cash value for the property. Until recently, the multipliers were less than one (1) and decreased as property aged. The new multipliers for T&D property are lower than the prior multipliers, and this allegedly has a billion dollar impact on total value of T&D property, along with a concomitant impact on tax revenues.
Upon receipt of BDO's report, the STC assigned to the Utility Valuation Section (UVS) of...
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