Leon County Educational Facilities Authority v. Hartsfield

• Decision Date: 12 June 1997
• Docket Number: No. 87769,87769
• Citation: 698 So.2d 526
• Parties: 22 Fla. L. Weekly S341 LEON COUNTY EDUCATIONAL FACILITIES AUTHORITY, et al., Petitioners, v. Bert HARTSFIELD, etc., Respondent.
• Court: Florida Supreme Court

Page 526

698 So.2d 526

22 Fla. L. Weekly S341

LEON COUNTY EDUCATIONAL FACILITIES AUTHORITY, et al., Petitioners, v. Bert HARTSFIELD, etc., Respondent.

No. 87769.

Supreme Court of Florida.

June 12, 1997.

Rehearing Denied Aug. 18, 1997.

Kenza van Assenderp and Andrew I. Solis of Young, van Assenderp & Varnadoe, Tallahassee, and Richard E. Benton, Tallahassee, for Petitioners.

Ricky L. Polston of Radey, McArthur, Polston & Frehn, Tallahassee, for Respondent.

Larry E. Levy and Loren E. Levy of the Levy Law Firm, Tallahassee, for Honorable David H. Goolsby, Jr., Hamilton County Property Appraiser and as President of the Property Appraisers' Association of Florida, Amicus Curiae.

Robert L. Nabors, Sarah M. Bleakley and Kimberly L. Franklin of Nabors, Giblin & Nickerson, P.A., Tallahassee, and James G. Yaeger, Lee County, County Attorney, Fort Myers, for Lee County, Amicus Curiae.

Elliott Messer, Albert T. Gimbel and Kimberly L. King of Messer, Caparello, Madsen Goldman & Metz, P.A., Tallahassee, for Chris Jones, Escamiba County Property Appraiser, Amicus Curiae.

C. Allen Watts of Cobb, Cole & Bell, Daytona Beach, for the School Board of Volusia County, Amicus Curiae.

William J. Roberts, General Counsel, Florida Association of Counties, Inc., Tallahassee, and Jorge Fernandez, President, Florida Association of County Attorneys, Inc., Sarasota, for the Florida Association of Counties, Inc. and the Florida Association of County Attorneys, Inc., Amici Curiae.

GRIMES, Justice.

We review Leon County Educational Facilities Authority v. Hartsfield, 669 So.2d 1105 (Fla. 1st DCA 1996), in which the court certified conflict with First Union National Bank v. Ford, 636 So.2d 523 (Fla. 5th DCA 1993). We have jurisdiction under article V, section 3(b)(4) of the Florida Constitution.

Leon County Educational Facilities Authority (Authority) is a public corporate body established by the Board of County Commissioners of Leon County pursuant to chapter 243, part II, Florida Statutes (1989). The Authority is empowered to own, lease, and finance higher educational facilities. The Authority determined to operate a dormitory and food service project (project) for the purpose of serving the students at Florida State University, Florida A & M University, and Tallahassee Community College. SRH, Inc. (SRH), a nonprofit Florida corporation, was established solely for the purpose of facilitating the financing, acquisition, construction, and equipping of the project. The Authority entered into a lease with option to purchase agreement with SRH under which SRH as the lessor would acquire, construct, and equip the project and lease it to the Authority in exchange for periodic rental payments. Financing was obtained through the issuance of certificates of participation (COPS) to investors who would obtain a fractional interest in the rentals payable under the lease after the payment of certain expenses. The interest received by the COPS holders is excludable from the gross income for federal income tax purposes. Any net proceeds in excess of the amounts owed the COPS holders would be paid to the Authority. The lease specifies that the Authority shall be responsible for maintenance and insurance on the project and shall pay any taxes which may be assessed against the project. The lease further provides that upon payment in full to the COPS holders, the Authority could purchase the project for one dollar.

The project received a tax exemption in 1992. However, in 1993, the Leon County property appraiser denied the application for a tax exemption. The Authority and SRH sued the property appraiser for declaratory relief. The parties entered into a stipulation of facts and filed cross-motions for summary judgment. The trial judge entered summary judgment in favor of the property appraiser and dismissed the complaint with prejudice.

The First District Court of Appeal affirmed the summary judgment based upon its interpretation of sections 196.192 and 196.199, Florida Statutes (1991). These statutes read in pertinent part as follows:

196.192 Exemptions from ad valorem taxation.--

Subject to the provisions of this chapter:

(1) All property owned by an exempt entity and used exclusively for exempt purposes shall be totally exempt from ad valorem taxation.

....

For purposes of this section, each use to which the property is being put must be considered in granting an exemption from ad valorem taxation, including any economic use in addition to any physical use. This section shall not apply in determining the exemption for property owned by governmental units pursuant to s. 196.199.

....

196.199 Government property exemption.--

(1) Property owned and used by the following governmental units shall be exempt from taxation under the following conditions:

....

(b) All property of this state which is used for governmental purposes shall be exempt from ad valorem taxation except as otherwise provided by law.

(c) All property of the several political subdivisions and municipalities of this state or of entities created by general or special law and composed entirely of governmental agencies, or property conveyed to a nonprofit corporation which would revert to the governmental agency, which is used for governmental, municipal, or public purposes shall be exempt from ad valorem taxation, except as otherwise provided by law.

(Emphasis added.)

The court reasoned that under these statutes the Authority was not entitled to the exemption because legal title to the project was vested in SRH. The court buttressed its conclusion by noting that prior to 1988, section 196.192(1) read: "All property used exclusively for exempt purposes shall be totally exempt from ad valorem taxation." In 1988, the legislature amended subsection (1) to read: "All property owned by an exempt entity and used exclusively for exempt purposes shall be totally exempt from ad valorem taxation."

Because the Authority is using the project for the purposes authorized by chapter 243, part II, it argues that the project is entitled to a tax exemption under section 243.33, which reads as follows:

243.33 Tax exemption.--The exercise of the powers granted by this part will be in all respects for the benefit of the people of this state, for the increase of their commerce, welfare and prosperity, and for the improvement of their health and living conditions, and as the operation and maintenance of a project by the authority or its agent will constitute the performance of an essential public function, neither the authority nor its agent shall be required to pay any taxes or assessments upon or in respect of a project or any property acquired or used by the authority or its agents under the provisions of this part or upon the income therefrom, and any bonds issued under the provisions of this part, their transfer, and the income therefrom, including any profit made on the sale thereof, shall at all times be free from taxation of every kind by the state, the county and by the municipalities and other political subdivisions in the state. The exemption granted by this section shall not be applicable to any tax imposed by chapter 220 on interest, income or profits on debt obligations owned by corporations.

The court below did not address this statute in its opinion.

The Authority also relies upon the opinion in Ford in which the Fifth District Court of Appeal concluded under circumstances much like the instant case that the property at issue could not be taxed. In Ford, a bank held legal title to the property but leased it to the county for use as its primary governmental and administrative offices. Like the instant case, the buildings were financed through the issuance of COPS. The rental payments made by the county were used to pay the COPS holders. The bank was paid a one-time fee of $50,000 for acting as the trustee in this arrangement. All sums received by the bank in excess of those necessary to retire the COPS were returned to the county. At the conclusion of the lease, the bank was required to convey legal title of the property to the county. The court rejected the property appraiser's argument that the property could be taxed because the county did not hold legal title. The court reasoned that because all of the burdens and obligations of ownership were vested in the county, the county was the beneficial owner of the property and thereby entitled to tax relief.

The concept of equitable ownership in ad valorem taxation has long been a part of Florida law. In Bancroft Investment Corp. v. City of Jacksonville, 157 Fla. 546, 27 So.2d 162 (1946), this Court held that property titled in the name of the United States government was nevertheless subject to ad valorem taxation because the property was being used by a private entity for nonexempt purposes under a contract for sale. In responding to the argument that the applicable statute specified that all property of the United States should be exempt from taxation, the Court said:

Appellant rests its thesis on a literal interpretation of the quoted statute defining exemptions, but this court is not limited...