Deadwood Stage Run, LLC v. S.D. Dep't of Revenue

• Decision Date: 17 December 2014
• Docket Number: No. 27069.,27069.
• Citation: 857 N.W.2d 606
• Parties: DEADWOOD STAGE RUN, LLC, Plaintiff and Appellant, v. SOUTH DAKOTA DEPARTMENT OF REVENUE and Andy Gerlach, in his individual capacity and in his official capacity as Secretary of Revenue, Defendants and Appellees.
• Court: South Dakota Supreme Court

857 N.W.2d 606

DEADWOOD STAGE RUN, LLC, Plaintiff and Appellant

v.SOUTH DAKOTA DEPARTMENT OF REVENUE and Andy Gerlach, in his individual capacity and in his official capacity as Secretary of Revenue, Defendants and Appellees.

No. 27069.

Supreme Court of South Dakota.

Considered on Briefs Nov. 17, 2014.

Decided Dec. 17, 2014.

Michael F. Marlow, Beth A. Roesler of Johnson, Miner, Marlow, Woodward & Huff, Prof., LLP, Yankton, South Dakota, Attorneys for plaintiff and appellant.

Marty J. Jackley, Attorney General, Matthew Naasz, Assistant Attorney General, Pierre, South Dakota, Andrew L. Fergel, Stacy R. Hegge of South Dakota Department of Revenue, Pierre, South Dakota, Attorneys for defendants and appellees.

Opinion

GILBERTSON, Chief Justice.

[¶ 1.] Appellant, Deadwood Stage Run, LLC (the Developer), appeals the Sixth Judicial Circuit Court's denial of its motion for summary judgment and that court's granting of the same to Appellee, the South Dakota Department of Revenue (the Department). The Developer argues the Department incorrectly calculated the tax incremental base for Tax Incremental District Number Eight (the District) in the City of Deadwood (the City) by using Lawrence County's (the County) November 1, 2006 annual assessment, rather than the Department's August 25, 2006 annual Certificate of Assessment, Equalization, and Levy. The Developer asks this Court to reverse the circuit court's summary judgment in favor of the Department and to direct the court to enter summary judgment in favor of the Developer. We affirm.

Facts and Procedural History

[¶ 2.] The facts of this case are not in dispute.¹ On February 15, 2006, Steve Slowey, Wayne Ibarolle, William Pearson, and Clayton Johnson purchased real property located in Lawrence County, South Dakota,² from John Nick Heinen, Jackie Heinen, Douglass M. Mergen, and Tammy Hollenbeck for the amount of $1,000,000. At some point during the subsequent two-week period, but prior to March 1, 2006, the purchasers received an assessment notice from the County. The assessment classified the property as agricultural, valued the land at $13,070, and valued improvements on the land at $9,560. The total assessed value of $22,630 represented the value of the property as of November 1, 2005, as required by SDCL 10–6–2.³ Shortly thereafter, in April 2006, Slowey, Ibarolle, Pearson, and Johnson transferred the property to the Developer—a limited liability company owned by Slowey, Ibarolle, Pearson, and Johnson, with a principal place of business in Deadwood, South Dakota—by a quit claim deed.

[¶ 3.] On August 25, 2006, the Department issued a Certificate of Assessment, Equalization and Levy for 2007 showing the equalized valuation of all property located in Lawrence County assessed by the secretary of revenue, as required by SDCL 10–11–51. Per SDCL 10–6–2, the County again assessed the property at issue according to its value as of November 1, 2006. Because the purchase price of $1,000,000 was more than 150% of $22,630—the assessed value of the property at the time of sale—the County assessed the property's value at $934,520.⁴ The assessed value of the land increased from $13,070 to $924,960, but the assessed value of the improvements to the land remained $9,560.

[¶ 4.] On December 18, 2006, the City passed Resolution No. 2006–44, creating the District out of the property at issue here. On January 29, 2007, the City and the Developer entered into a “Contract for Private Development” of the District. Sometime thereafter, but prior to March 1, 2007, the County sent its 2007 assessment of the property to the developer reflecting the November 1, 2006 assessed value of $934,520. The City and the Developer amended the project plan on July 23, 2007. However, in the amended contract, the City and the Developer continued to agree that the assessed value of the property in the District was $15,800,⁵ rather than the County's most recent assessment of $934,520. On August 27, 2007, the Department sent a new Certificate of Assessment, Equalization and Levy for 2007 to the County.

[¶ 5.] On October 16, 2007, the City's finance officer sent a written request to the Department to certify the tax incremental base valuation of the District. The City stated that the County's assessed valuation of the property in the District was $15,370 on the date the District was created and asked the Department to verify that amount as the District's tax incremental base. The Department responded to the City's request on November 16, 2007, certifying the aggregate assessed value of the District to be $924,960 for the land and $9,560 for improvements to the land—the values determined from the County's 2007 assessed valuation of the property.

[¶ 6.] The Developer sought a declaratory judgment prospectively establishing the 2006 assessed valuation of the District as the appropriate tax incremental base rather than the 2007 assessed valuation. The Developer and the Department filed cross motions for summary judgment. The circuit court denied the Developer's motion and granted the Department's. The Developer raises one issue in this appeal:

1. Whether, in calculating the tax incremental base for a tax incremental district, SDCL chapter 11–9 requires the Department to use the last aggregate assessed valuation certified by the Department prior to the date of creation of the tax incremental district.

Standard of Review

[¶ 7.] When we review a circuit court's grant or denial of summary judgment, “we determine whether the moving party has demonstrated the absence of any genuine issue of material fact and showed entitlement to judgment on the merits as a matter of law.” Dykstra v. Page Holding Co., 2009 S.D. 38, ¶ 23, 766 N.W.2d 491, 496 (quoting Cowan Bros., LLC v. Am. State Bank, 2007 S.D. 131, ¶ 12, 743 N.W.2d 411, 416 ). However, because “[t]he parties stipulated to the facts[,] ... our review [in this case] is limited to determining whether the trial court correctly applied the law.” Econ. Aero Club, Inc. v. Avemco Ins. Co., 540 N.W.2d 644, 645 (S.D.1995). “Questions of statutory interpretation and application are reviewed under the de novo standard of review with no deference to the circuit court's decision.” Argus Leader v. Hagen, 2007 S.D. 96, ¶ 7, 739 N.W.2d 475, 478.

Analysis and Decision

[¶ 8.] The South Dakota Legislature authorized the creation of tax incremental districts in 1978. 1978 S.D. Sess. Laws ch. 91. “The basic purpose of statutes authorizing the creation of tax incremental districts is to enable the increased tax revenues generated by community redevelopment projects to be placed in a special fund for the purpose of repaying the public costs of the projects.”Meierhenry v. City of Huron, 354 N.W.2d 171, 175 (S.D.1984). The mechanism for achieving this purpose is relatively simple. First, after a tax incremental district is created by a municipality, the Department determines the tax incremental base for that district. SDCL 11–9–12. The tax incremental base is the aggregate assessed valuation of all property in the district at the time of its creation. SDCL 11–9–19. Next, while property taxes are assessed yearly on property located within the district, any political subdivision of the State possessing the power to levy taxes on the district is permitted to retain tax revenue based solely on the value of the tax incremental base, rather than the full amount of the year-to-year assessments. SDCL 11–9–27. Finally, as development in the tax incremental district progresses, and the assessed valuation of the district increases over time, any positive difference between the assessed valuation in any given year and the tax incremental base of the district is called a positive tax increment and is allocated to the municipality that created the district to pay for public project costs. SDCL 11–9–25.

[¶ 9.] The issue before us today is one of timing and focuses on the proper determination of the tax incremental base of the District. The Developer argues that the plain language of SDCL 11–9–19 and SDCL 11–9–20 requires the Department to calculate the tax incremental base using valuations assessed prior to the creation of the District. The Developer further argues that, in certifying the tax incremental base at $934,520, the Department “frustrate[d] the clear intent of the legislature[ ]” and “deprived Developer of the benefit intended and expressed by the legislature.” For its part, the Department asserts that it does not typically certify valuations of specific parcels; therefore, the requirement in SDCL 11–9–20 to use the valuations “as last previously certified by the department” is “unworkable.” Consequently, the Department urges us to examine the legislative intent and conclude that the Department properly used the County's 2007 assessed valuation of the property in the District in determining the District's tax incremental base. We disagree with the Department that SDCL 11–9–20 is unworkable. However, we conclude that the plain meaning of SDCL chapter 11–9 indicates that the circuit court's granting of summary judgment in favor of the Department was proper.

[¶ 10.] In arguing that the Department must use the last certified valuation assessed prior to the creation of the district, the Developer relies on two specific phrases. According to SDCL 11–9–19, “A ‘tax incremental base’ is the aggregate assessed value of all taxable property located within a tax incremental district on the date the district is created, as determined by § 11–9–20.” (Emphasis added.) SDCL 11–9–20, in turn, states:

Upon application in writing by the municipal finance officer, on a form prescribed by the Department of Revenue, the department shall determine the aggregate assessed value of the taxable property in the district, which aggregate assessed valuation, upon certification to the finance officer shall constitute the tax incremental base of the district. Except as provided for in § 11–9–20.1, the department shall use the valuations as last

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