Dept. of Rev. v. City of Gainesville

• Decision Date: 26 November 2003
• Docket Number: No. 1D02-1582.,1D02-1582.
• Citation: 859 So.2d 595
• Parties: DEPARTMENT OF REVENUE, Appellant, v. The CITY OF GAINESVILLE, Appellee.
• Court: Florida District Court of Appeals

859 So.2d 595

DEPARTMENT OF REVENUE, Appellant, v. The CITY OF GAINESVILLE, Appellee.

No. 1D02-1582.

District Court of Appeal of Florida, First District.

November 26, 2003.

Charlie Crist, Attorney General; Nicholas Bykowsky and Mark T. Aliff, Assistant Attorneys General, Tallahassee, for Appellant.

Kenneth R. Hart and Sean E. Fennelly of Ausley & McMullen, Tallahassee, for the Florida Telecommunications Industry Association as Amicus Curiae.

Michele Santi and John C. Dent, Jr., of Dent & Cook, Sarasota, for Edward Crapo, Alachua County Property Appraiser, as Amicus Curiae.

Robert W. Pass and E. Kelly Bittick, Jr., of Carlton Fields, P.A., Tallahassee, for Appellee.

James Baller and Sean A. Stokes of The Baller Herbst Law Group, P.C., Washington, D.C., and William J. Peebles, Tallahassee, for the Florida Municipal Electric Association as Amicus Curiae.

WOLF, C.J.

The Department of Revenue (Department) appeals from a final summary judgment entered in a declaratory judgment suit filed by the City of Gainesville (City). The trial court declared facially unconstitutional section 2 of chapter 97-197, Laws of Florida, creating section 166.047, Telecommunications services, Florida Statutes, which imposes ad valorem taxes on property owned and used by a municipality to provide telecommunications services, because the statute contravened Article VII, Section 3(a) of the Florida Constitution. For the same reason, the trial court also declared facially invalid a portion of section 3 of chapter 97-197, Laws of Florida, which amended section 196.012, Definitions, Florida Statutes, to provide that a municipality's provision of two-way telecommunications services to the public does not constitute an exempt use for ad valorem tax purposes unless the services complied with certain conditions therein specified. We affirm because we believe that the property in question is being used by the City for a municipal purpose and the legislature's attempt to condition the provision of these municipal services on the payment of an amount equal to any ad valorem tax liability is in direct conflict with Article VII, Section 3(a) of the Florida Constitution.¹

The City, doing business under the fictitious name, Gainesville Regional Utilities (GRU), sells telecommunications infrastructure and integrated telecommunications services to its citizens, charging its customers contractually agreed-upon rates for the services provided. Pursuant to the terms of the challenged statute, property owned by the City and used for providing these telecommunication services is subject to ad valorem taxation.

Section 2 of chapter 97-197, Laws of Florida, created section 166.047, which provides in pertinent part,

Telecommunications services.—A telecommunications company that is a municipality or other entity of local government may obtain or hold a certificate required by chapter 364, and the obtaining or holding of said certificate serves a municipal or public purpose under the provision of s. 2(b), Art. VIII of the State Constitution, only if the municipality or other entity of local government:

. . .

(3) Notwithstanding any other provision of law, pays, on its telecommunications facilities used to provide two-way telecommunications services to the public for hire and for which a certificate is required pursuant to chapter 364, ad valorem taxes, or fees in amounts equal thereto, to any taxing jurisdiction in which the municipality or other entity of local government operates. Any entity of local government may pay and impose such ad valorem taxes or fees.

. . .

(emphasis supplied).

In section 3 of chapter 97-197, the legislature amended section 196.012(6), which sets out definitions for governmental, municipal, or public purposes or functions, by adding the following language:

Providing two-way telecommunications services to the public for hire by the use of a telecommunications facility, as defined in s. 364.02(13), and for which a certificate is required under chapter 364 does not constitute an exempt use for purposes of s. 196.199, unless the telecommunications services are provided by the operator of a public-use airport, as defined by s. 332.004, for the operator's provision of telecommunications services for the airport or its tenants, concessionaires, or licensees, or unless the telecommunications services are provided by a public hospital. However, property that is being used to provide such telecommunications services on or before October 1, 1997, shall remain exempt, but such exemption expires October 1, 2004.

These sections directly conflict with Article VII, Section 3(a), Florida Constitution, providing an exemption from ad valorem taxation for municipal property used by the municipality for a municipal purpose. Article VII, Section 3(a) states,

All property owned by a municipality and used exclusively by it for municipal or public purposes shall be exempt from taxation. A municipality, owning property outside the municipality, may be required by general law to make payment to the taxing unit in which the property is located. Such portions of property as are used predominantly for educational, literary, scientific, religious or charitable purposes may be exempted by general law from taxation.

In City of Sarasota v. Mikos, 374 So.2d 458 (Fla.1979), the supreme court declared that this provision of the constitution is self executing:

A reading of section 3(a) of article VII clearly establishes that it is a self-executing provision and therefore does not require statutory implementation. The change in the language of chapter 196 is irrelevant because although a statute may grant additional exemptions, it may not repeal the exemptions granted municipalities by the constitution.

Id. at 460. Thus, if municipality-owned property is being used by the municipality for a public purpose, the legislature may not remove the exemption. Yet, that is precisely the purpose of section 166.047. The legislative staff analysis of chapter 97-197 states the purpose of the act: to "remove the exemption that municipalities, counties, or other entities of local government have for ad valorem taxes on real property used for the purpose of providing telecommunication services to the public." Fla. H.R. Comm. on Utils. and Communications, HB 313 (March 5, 1997) Staff Analysis (on file with Comm.). The only issue before us is whether this property which is owned by the City is being used for a municipal purpose.²

The provision of utility type services has always been considered to be a tax exempt municipal purpose. Ford v. Orlando Utils. Comm'n, 629 So.2d 845 (Fla.1994). Relying on language contained in Sebring Airport Auth. v. McIntyre, 783 So.2d 238 (Fla.2001), appellant and the dissent argue, however, that we should define municipal purpose narrowly. Appellant has not cited any case which supports the proposition that when property is owned and used by a municipality the term "municipal purpose" as used in Article VII, Section 3(a), Florida Constitution, should be narrowly construed.³McIntyre and other cases cited for adopting a narrow interpretation involve situations where municipal property is being leased or utilized by a private entity. In Williams v. Jones, 326 So.2d 425, 432 (Fla.1975), a case where a municipality leased municipal property, the court stated that one person operating a commercial establishment for profit should not have an advantage over another commercial establishment also operating for purely proprietary purposes just because one is located on governmental property.⁴ The same policy considerations do not apply where the property is being owned and operated by the municipality itself, in which case the focus of the municipality is the provision of service to its citizens. See, e.g. City of Boca Raton v. Gidman, 440 So.2d 1277 (Fla.1983)

. In fact, we are unaware of any public policy reason when property is owned and operated by a municipality that the term "municipal purpose" should not be given its generally accepted meaning in accordance with Article VIII, Section 2(b), Florida Constitution. The Fifth District's opinion in Crotty, 775 So.2d at 978, and the opinion of this court in Page v. Fernandina Beach, 714 So.2d 1070 (Fla. 1st DCA 1998), support such a uniform construction. The Crotty court noted,

[T]he constitution exempts from taxation property owned by a municipality and used exclusively by it for municipal or public purposes. The term "municipal purpose" has been defined as encompassing all activities essential to the health, morals, protection and welfare of the municipality. State v. City of Jacksonville, 50 So.2d 532, 535 (Fla.1951). "Municipal functions" are those created or granted for the special benefit and advantage of the urban community embraced within the corporate boundaries. Chardkoff Junk Company v. City of Tampa, 102 Fla. 501, 135 So. 457 (1931). See also State ex rel. Harper v. McDavid, 145 Fla. 605, 200 So. 100 (1941); City of Winter Park, 448 So.2d at 1244. Our courts have ruled that municipal functions include functions which specifically and peculiarly promote the comfort, convenience, safety and happiness of the citizens of the municipality rather than the welfare of the general public.

Crotty, 775 So.2d at 980-981 (emphasis in original).

In Page v. Fernandina Beach, we specifically noted that city owned and operated (as opposed to leased out) property was exempt from taxation under a broad construction of "municipal purpose:"

Municipal operation of a marina is a legitimate municipal corporate undertaking for the comfort, convenience, safety, and happiness of the municipality's citizens. Indeed, the uncontradicted expert testimony was that operation of this marina constituted a proper municipal or public function. When a city operates a marina it owns, marina property it has not leased to a nongovernmental entity is exempt from ad valorem taxation.... But operating a marina partakes of no

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