Fla. Dept. of Rev. V. City of Gainesville
| Decision Date | 08 December 2005 |
| Docket Number | No. SC03-2273.,SC03-2273. |
| Citation | 918 So.2d 250 |
| Parties | FLORIDA DEPARTMENT OF REVENUE, Appellant, v. The CITY OF GAINESVILLE, Appellee. |
| Court | Florida Supreme Court |
Charles J. Crist, Jr., Attorney General, Chirstopher M. Kise, Solicitor General, Louis Hubener, III, Nicholas Bykowsky and Mark T. Aliff, Assistant Attorneys General, Tallahassee, FL, for Appellant.
Robert Pass and E. Kelly Bittick, Jr. of Carlton Fields, P.A., Tallahassee, FL, for Appellee.
Sherri L. Johnson and John C. Dent, Jr. of Dent and Associates, P.A., Sarasota, Fl, on behalf of Ed Crapo.
Larry E. Levy and Loren E. Levy of the Levy Firm, Tallahassee, FL, on behalf of Property Appraisers' Association of Florida, Inc.
John R. Beranek, Kenneth R. Hart, and Jason B. Gonzalez of Ausley and McMullen, Tallahassee, FL, on behalf of Florida Telecommunications Industry Association, for Amici in support of Appellant.
James Baller and Sean A. Stokes of The Baller Herbst Law Group, P.C., Washington, D.C. and William J. Peebles, Tallahassee, FL, on behalf of Florida Municipal Electric Association, for Amicus in support of Appellee.
In this case, we review a decision holding unconstitutional a law that requires payment by a municipality of ad valorem taxes on property owned and used exclusively by the municipality to provide telecommunications services to the public. See Dep't of Revenue v. City of Gainesville, 859 So.2d 595 (Fla. 1st DCA 2003). The applicable provision in our state constitution provides that "[a]ll property owned by a municipality and used exclusively by it for municipal or public purposes shall be exempt from taxation." Art. VII, § 3(a), Fla. Const. We have mandatory jurisdiction. See art. V, § 3(b)(1), Fla. Const. Because we conclude that providing telecommunications services does not as a matter of law always serve municipal or public purposes, ad valorem taxation of a municipality's telecommunications facilities is not facially unconstitutional. In reaching this conclusion, we do not dispute that telecommunications services are essential services. Rather, we make the narrower determination that in providing these services, regardless of circumstances such as the availability of the same services through other providers, a municipality does not as a matter of law engage in an activity essential to the welfare of the community. We therefore reverse the decision of the First District Court of Appeal holding the statutory provisions imposing ad valorem taxation on these telecommunications facilities facially unconstitutional.
As part of the nationwide transition from single-provider telecommunications services to a competitive marketplace, the Florida Legislature enacted legislation in 1995 authorizing governmental entities including municipalities to sell two-way telecommunications services to the public. See § 364.02(12), Fla. Stat. (1995) (). However, in 1997 the Legislature made that authority conditional upon payment of ad valorem taxes or equivalent fees on facilities used to provide the telecommunications services. See ch. 97-197, § 2, at 3738-42, Laws of Fla.1 Section 2 of the 1997 enactment created section 166.047, Florida Statutes (1997), which provides in pertinent part:
166.047 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 other words, the Legislature conditioned the grant of the power to obtain or hold a certificate from the Public Service Commission (PSC) for operation of a telecommunications facility on the municipality's payment of ad valorem taxes, and specified that payment of the taxes is necessary for the facility to serve a public purpose under the municipal powers clause of the Constitution.2
In the same act, the Legislature amended section 196.012(6), Florida Statutes (1995), to exclude the telecommunications services authorized in section 166.047 from the statutory ad valorem tax exemption for municipally owned property "used for governmental, municipal or public purposes" contained in section 196.199(1)(c), Florida Statutes (1995). See ch. 97-197, § 3, Laws of Fla.3 The pertinent portion of section 196.012(6), as amended, specifies that "[p]roviding 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," with exceptions inapplicable here. § 196.012(6), Fla. Stat. (1997).
The amended provisions operate in tandem. Section 166.047(3) invokes the municipal powers provision of the state constitution to mandate ad valorem taxation, and the amendment to section 196.012(6) disqualifies municipally owned and operated telecommunications facilities from a statutory ad valorem tax exemption for municipal property. The purpose and effect of this legislation is to make property owned and used by a municipality for a telecommunications business subject to ad valorem property taxation. See Fla. H.R. Comm. on Util. & Comm., CS for CS for HB 313 (1997) Staff Analysis 1 (July 1, 1997) (on file with Comm.) ( that chapter 97-197 "removes the exemptions that municipalities, counties, or other entities of local government have on ad valorem taxes on property used for the purpose of providing telecommunications services to the public").
The City of Gainesville (the City), operating under the fictitious name Gainesville Regional Utilities, acquired certificates from the PSC to operate as a public telecommunications provider. The City then began selling communications infrastructure and integrated telecommunications services to the public, charging contractually agreed-upon rates. Under the service agreements with the City, customers do not have any leasehold interest in the City's telecommunications property.4 The City uses a fiber-optic network to provide private line service and special access service for the transmission of voice, data, and video.
In its 1995 base planning study, the City stated that "[n]o substantial communication services competition appears to be emerging in Gainesville," and asserted that "[i]f the citizens of Gainesville are to be provided with all of the benefits which will be possible through the National Information Superhighway at a reasonable price, a major independent investor will need to assume a role in shaping the communications environment." The City anticipated that its telecommunications business would make it both a provider of services and a promoter for the entry of new service providers. The City stated in its 1995 start-up business plan that its "overall business activities" would benefit the local economy by creating competition in what it termed a "monopoly market," producing additional revenues for the City, and keeping profits within the community. In its pleadings in this case, the City specified that by 2000, it had invested approximately $10 million in infrastructure and equipment.
In 2000, the City filed suit seeking a declaration that the portions of chapter 97-197 imposing the tax obligation on its telecommunications facilities are unconstitutional under article VII, section 3(a). The trial court granted summary judgment in favor of the City and declared sections 2 and 3 of chapter 97-197 facially unconstitutional. The First District affirmed, holding 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." Dep't of Revenue, 859 So.2d at 597. Judge Ervin dissented, concluding that the amendments "are a proper exercise of the legislature's discretion to classify real property for ad valorem taxation." Id. at 601 (Ervin, J., dissenting).
Article VII, section 4 of the Florida Constitution requires a "just valuation of all property for ad valorem taxation," with exceptions that do not apply here.5 However, governmentally owned property is generally excluded from taxation, through either immunity or exemption. An exemption presupposes an ability to tax, whereas an immunity implies the absence of that ability. See Greater Orlando Aviation Auth. v. Crotty, 775 So.2d 978, 980 (Fla. 5th DCA 2000). The state and counties are immune from taxation. See Canaveral Port Auth. v. Dep't of Revenue, 690 So.2d 1226, 1228 (Fla.1996); Park-N-Shop, Inc. v. Sparkman, 99 So.2d 571, 573 (Fla.1957). Unlike counties, municipalities are not subdivisions of the state and are therefore subject to taxation absent an exemption. See Greater Orlando Aviation Auth., 775 So.2d at 980.
Article VII, section 3(a) of the Florida Constitution confers on property owned by municipalities an exemption from ad valorem taxation under...
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