Jet Black v. Routt County Bd.

• Decision Date: 05 October 2006
• Docket Number: No. 05CA0511.,05CA0511.
• Citation: 165 P.3d 744
• Parties: JET BLACK, LLC, Virginia E. Srednicki, Richard J. Srednicki, Storm Mountain Ranch, LLC, Mary K. Allen, David Rayner, Cheryl Rayner, Jim Carol, Cynthia Carol, Barry Gafner, Annette Gafner, Jeff Temple, Floren Enterprise Limited Partnership, Tom Kartsotis, Lynne Kartsotis, Link Family Trust, Michael H. Salsbury, Donna H. Triptow, Ogilvie Family Trust, Randall Reed, and Sherry D. Reed, Petitioners-Appellants, v. ROUTT COUNTY BOARD OF COUNTY COMMISSIONERS, Respondent-Appellee, and Colorado State Board of Assessment Appeals, Appellee.
• Court: Colorado Court of Appeals

165 P.3d 744

JET BLACK, LLC, Virginia E. Srednicki, Richard J. Srednicki, Storm Mountain Ranch, LLC, Mary K. Allen, David Rayner, Cheryl Rayner, Jim Carol, Cynthia Carol, Barry Gafner, Annette Gafner, Jeff Temple, Floren Enterprise Limited Partnership, Tom Kartsotis, Lynne Kartsotis, Link Family Trust, Michael H. Salsbury, Donna H. Triptow, Ogilvie Family Trust, Randall Reed, and Sherry D. Reed, Petitioners-Appellants, v. ROUTT COUNTY BOARD OF COUNTY COMMISSIONERS, Respondent-Appellee, and Colorado State Board of Assessment Appeals, Appellee.

No. 05CA0511.

Colorado Court of Appeals, Div. II.

October 5, 2006.

Rehearing Denied December 28, 2006.

Certiorari Denied August 27, 2007.

Sherman & Howard, L.L.C., Joseph J. Bronesky, Denver, Colorado, for Petitioners-Appellants.

John D. Merrill, County Attorney, Joanne Eldridge, Assistant County Attorney, Steamboat Springs, Colorado, for Respondent-Appellee.

John W. Suthers, Attorney General, John D. Baird, Assistant Attorney General, Denver, Colorado, for Appellee.

Opinion by Judge ROY.

Appellants Jet Black, LLC, Virginia E. and Richard J. Srednicki, Storm Mountain Ranch LLC, Mary K. Allen, David and Cheryl Rayner, Jim and Cynthia Carol, Barry and Annette Gafner, Jeff Temple, Floren Enterprise Limited Partnership, Tom and Lynne Kartsotis, Link Family Trust, Michael H. Salsbury and Donna H. Triptow, Ogilvie Family Trust, and Randall and Sherry D. Reed (collectively, the owners) appeal two orders from the Colorado State Board of Assessment Appeals (BAA) affirming the assessment of the Routt County Board of Commissioners (the board) of the common area parcels of their planned development to the individual lot owners and the method of valuation for the ownership parcels. We affirm.

This case presents the issue of the proper valuation for ad valorem property tax purposes of vacant agricultural residential lots in a fourteen lot common interest ownership community with extensive common area improvements. The lots in question sell for $2.5 to 3.0 million dollars as vacant land, share common interest improvements through a homeowner's association costing approximately $4.8 million to construct and $500,000 a year to maintain, are valued at $600 to $1,200 as vacant agricultural land, and the actual value for tax purposes should include the contribution of the common interest property.

Storm Mountain Ranch (the ranch) is a planned real estate development located in unincorporated Routt County approximately five miles south of Steamboat Springs at the base of Rabbit Ears Pass. The ranch abuts, and is connected to, Routt National Forest. It consists of approximately 1,063 acres and is classified as agricultural land for tax purposes. The ranch includes a fishery, a creek, wetlands, ponds, a trail system, a variety of wildlife, and land devoted to irrigation and dry land farming. A conservation easement held by the Yampa Valley Land Trust covers 793 acres of the ranch, including the five common area parcels and portions of some of the ownership parcels.

The ranch was developed as a planned community pursuant to the Colorado Common Interest Ownership Act (CCIOA), § 38-33.3-101, et seq., C.R.S.2006. The land was subdivided into fourteen ownership parcels and five common area parcels. Of the fourteen ownership parcels, two were approximately 35 acres in size and the remaining twelve were 70 acres in size with designated residential building sites. The five common area parcels, designated Parcels A — E, are owned by the Storm Mountain Ranch Homeowners Association (the HOA). The residential building sites are in relatively close proximity to each other and the ownership parcels are quite elongated. As a typical example, Owner Parcel 8 has a building site at its north end, is approximately 717 feet wide on the north boundary, is 408 feet wide on the south boundary, is approximately 7,875 feet long, and is approximately 35 feet wide at its narrowest point. Therefore, the vast majority of the land is quite remote from the residential building sites and is used for agricultural purposes.

The declarations provide that common expenses are to be shared equally by the owners. The only apparent advantage of owning one of the 70-acre ownership parcels, which are divided into subparcels (A and B) for tax purposes, is the right to construct more than one full residence.

The common area parcels comprise 184.86 acres, are relatively compact, and are scattered throughout the development. Parcel A is a 35-acre parcel with one cabin on it; parcel B is a 44-acre vacant parcel; parcel C is a 35-acre vacant parcel; parcel D is a 35-acre parcel that includes a stable and a pole barn/hay shed; and parcel E is a 35-acre parcel with a lodge, four surrounding cabins, and a horse barn. The predominant use of the common area parcels is as irrigated hay and meadow hay land. Part of Parcel E is used for dry land farming.

The common area parcels are specifically designated in the declarations as common interest property subject to development, partition, and resale restrictions. They are available for use solely by the owners for recreational purposes; they are not open to the public and cannot be rented out to non-owners. The lodge is a gathering place for friends and family and is used for community fundraisers, but is not available for lodging or commercial uses. The cabins are available for use by an owner who has not yet built a residence; or, once a residence is built, by an owner's family and social guests for one month at any one time without charge. Moreover, these common area parcels are limited to agricultural and recreational uses by virtue of the conservation easement.

Tax year 2002 was an intervening tax year for the owners. Accordingly, the owners saw no change to their Notice of Valuation for their ownership parcels which were valued at, with limited exceptions, $600 for a 35-acre ownership parcel and $1,200 for a 70-acre ownership parcel without improvements. This valuation did not include any contribution to value from the common area parcels, even as agricultural land.

In May 2002, the HOA received a Notice of Valuation for common area Parcel E improvements in the amount of $1,071,130. The Routt County Assessor's Office (the assessor) then issued a Notice of Determination, which recognized that the HOA could not be separately assessed and taxed for the common areas, but stated that the common area parcels would be taxed to the owners of the ownership parcels.

Then, in August 2002, the assessor issued a Special Notice of Valuation (SNOV) to each owner, adding to the actual value of the ownership parcel as agricultural land the actual value of the proportionate interest in the common area parcels and improvements, and thereby increasing the actual value of the ownership parcels by $149,780 for a 35-acre ownership parcel and $299,560 for a 70-acre ownership parcel. The assessor used the mass appraisal market value method of valuation.

The owners paid the tax and filed an abatement petition which was denied. They petitioned the BAA, which, after hearings, issued an order finding that the SNOVs had been properly issued. The BAA then scheduled a separate hearing on the issue of valuation. Ten days prior to the valuation hearing, the assessor issued a reappraisal using an extraction method that was designed to determine the contribution to the actual value of the ownership parcels made by the common area parcels and improvements. This contribution was determined to total just under $17.5 million. The BAA affirmed the methodology but further concluded that the ownership parcels were probably undervalued. This appeal followed.

I.

The owners first contend that the BAA erred in concluding that the SNOVs issued August 7, 2002, were properly issued. More specifically, the owners argue that the assessor improperly attributed the value of the common areas to the owner lots under § 38-33.3-105, C.R.S.2006. We conclude that the assessment was proper.

The owners agree, or do not dispute, that the actual value of the ownership parcels does not reflect the value of the common area parcels and improvements but that value is reflected in the sales prices of the unimproved ownership parcels. They assert that the market approach to valuation of common areas as set forth in the Assessors Reference Library is premised upon valuing residential improvements on residential land, and not residential improvements on agricultural land. In the former instance, the value of the common area would be reflected in the market value of the residential unit. Therefore, it would appear that if the ranch were classified as residential land rather than agricultural land, the value of the land only component for tax purposes would have been significantly higher than $600 to $1,200 for each ownership parcel, likely approaching the $2 million to $3 million price the owners paid. They view this dichotomy as permanent or lasting as to each ownership parcel, until residential improvements are constructed on it.

In interpreting a comprehensive legislative scheme such as the tax statutes, courts must give meaning to all the statutory provisions to further and give effect to the legislative intent. Huddleston v. Grand County Bd. of Equalization, 913 P.2d 15 (Colo.1996); Xerox Corp. v. Bd. of County Comm'rs, 87 P.3d 189 (Colo.App.2003). And, while we give deference to an administrative agency's interpretation of a statute, we are not bound by a decision that misapplies or misconstrues the law. Welby Gardens v. Adams County Bd. of Equalization, 71 P.3d 992 (Colo.2003). However, a BAA decision may not be set aside if it is supported by competent evidence and that correctly applies the law. Bd. of Assessment Appeals v. Colorado Arlberg Club, 762 P.2d 146 (Colo. 1988); Burns v. Bd. of Assessment Appeals, 820 P.2d 1175 (Colo.App.1991).

Fundamental principles contained in the Colorado Constitution, statutes, and case law...