Maryland-National Capital Park and Planning Com'n v. State Dept. of Assessments and Taxation

• Decision Date: 01 September 1995
• Docket Number: No. 1611,MARYLAND-NATIONAL,1611
• Citation: 678 A.2d 602,110 Md.App. 677
• Parties: TheCAPITAL PARK AND PLANNING COMMISSION v. STATE DEPARTMENT OF ASSESSMENTS AND TAXATION. ,
• Court: Court of Special Appeals of Maryland

Page 677

110 Md.App. 677

678 A.2d 602

The MARYLAND-NATIONAL CAPITAL PARK AND PLANNING COMMISSION v. STATE DEPARTMENT OF ASSESSMENTS AND TAXATION.

No. 1611, Sept. Term, 1995.

Court of Special Appeals of Maryland.

July 1, 1996.

Isaac H. Marks (Debra Yerg Daniel, on the brief), Upper Marlboro, for appellant.

Jeffrey G. Comen, Asst. Atty. Gen. (J. Joseph Curran, Jr., Atty. Gen. and David M. Lyon, Asst. Atty. Gen., on the brief), Baltimore, for appellee.

Argued before MOYLAN, HOLLANDER and EYLER, JJ.

EYLER, Justice.

The 94th Aero Squadron restaurant ("Restaurant"), a privately run concern located on tax exempt property belonging to the Maryland-National Park and Planning Commission ("Commission") in College Park, Maryland, was designed to resemble a fortified French chalet from the World War I era that had been damaged by bombing. In this appeal, the disputants call upon us to decide whether the Restaurant can withstand an "attack" by the State Department of Assessments and Taxation ("Department"), seeking to impose a tax assessment.

After wending their way through four other adjudicative levels, the parties to this appeal, Commission, appellant, and Department, appellee, ask us to answer four questions.

I. Did the circuit court err in ruling that the operation of the 94th Aero Squadron restaurant does not constitute a 'concession' as required by Tax-Property Article, § 7-211?

II. Did the circuit court err in ruling that the 94th Aero Squadron restaurant is not 'available for use by the general public' as required by Tax-Property Article, § 7-211?

III. Did the circuit court err in granting the State Department of Assessments and Taxation's motion to strike?

IV. Did the tax court lose jurisdiction to hear the appeal from the decision of the Property Tax Assessment Appeals Board for failure to hear and decide the appeal on or before 60 days from the date that said appeal was entered, as required by the Tax-Property Article, § 14-512(f)(5)?

I.

In 1973, the Commission, a State-created agency, ¹ purchased the historic College Park Airport. The Airport, located in the Calvert Road Park, Prince George's County, is the world's oldest continuously operated airport, and counts, among its other distinctions, the training by the Wright brothers of Army Signal Corps pilots on its premises. In October, 1980, the Commission circulated a prospectus that outlined the Commission's interest in soliciting bids from the private sector to construct, operate, and maintain a restaurant "concession." 94th of College Park, Inc. ("94th") and its holding company, Specialty Restaurants Corporation ("Specialty"), the only bidders on the project (hereinafter, "lessee"), entered into a lease with the Commission on May 1, 1981. ² The lease did not include all of the items detailed in the prospectus, including several that would have imposed specific operational controls. For example, the following section relating to charges to the public was not included.

The Director of Parks and Recreation shall exercise the authority over rates charged with a reasonable opportunity for the concessionaire to realize a profit on these facilities and services as a whole, commensurate with the investment and obligation assumed. The concessionaire will prepare and submit to the Director of Parks and Recreation for approval a schedule of fees and prices to be charged for all goods or services offered for sale or hire on the premises. No charge will be made for any such goods, or services, except in strict compliance with the approved schedule and any violation of this provision shall constitute grounds for the termination of the license and/or privilege herein granted. In approving rates, primary consideration will be given to the prices charged for similar facilities and services furnished or sold outside the areas administered by the Maryland-National Capital Park and Planning Commission under similar conditions with due regard being given to such other factors as may be deemed significant. The principal objective of such controls is to assure the public satisfactory service and quality merchandise at reasonable rates. The concessionaire will pay all expenses of promoting or operating the concession, including the payment of salaries of such personnel to provide for efficient operation together with expenses for supplies and all public utility expenses.

The lease began with several recitals, including:

WHEREAS, the Lessor has the power to lease the same to any responsible individual, partnership, or corporation, on such terms and conditions as the Lessor in the exercise of its discretion may deem advantageous to the development of the Park System under its jurisdiction; and

WHEREAS, the Lessor has determined that the Lessee is responsible and that the purposes set forth herein are consistent with the use of the Land for park and recreation purposes; and

WHEREAS, the Lessee desires to take the Land and to construct thereon a Restaurant as defined herein, the (improvements to be constructed on the Land by the Lessee in accordance with this Agreement, being sometimes hereinafter called the 'Improvements'), for the benefit of all of the citizens of the State of Maryland, and, in particular, the citizens of Prince George's and Montgomery Counties.

The Commission granted concession rights to the lessee and indemnified the lessee from the payment of any tax that might be assessed against the fee title or leasehold as follows:

The Lessor hereby grants to Lessee for the period of said Lease (including any extension periods), the right to construct, operate, and maintain upon said Land the Improvements as herein defined in accordance with this Lease, provided the Lessee shall faithfully perform the terms and conditions of this Lease and Agreement. Lessor agrees not to grant the rights as herein granted to any other persons, nor will it construct and operate any financially competitive facility on the premises owned by it adjacent to the Leased Premises during the term of this Lease and Agreement, including any renewal period.

...

It is acknowledged by the parties hereto that, because the fee title to the Leased Premises is owned by the Lessor, a public entity, the Leased Premises are not subject to either ad valorem taxation or possessory interest taxation against the leasehold. Accordingly, the aforesaid percentage rent schedule is structured in consideration of the tax-free status of the Leased Premises and that the Lessor and its assigns hereby indemnifies the Lessee and holds it harmless from any tax which may be assessed against either the fee title or the leasehold of the Lessee.

Paragraph Nine of the lease provided:

USE OF LEASED PREMISES

The Lessee covenants and agrees to operate, manage, and maintain throughout the term hereof, in a good, courteous, and efficient manner a Restaurant (and the other improvements to be constructed by it in accordance with this Lease) and further covenants that it will operate, manage, and maintain the premises in a manner consistent with the purposes of this Lease and the public interest generally.

The lessee was required to provide a capital investment of $900,000 to construct the restaurant facility and to provide $100,000 in working capital. The design of the facility was subject to approval by the Commission. The payment structure of the lease required the lessee to pay to the Commission a flat monthly fee plus a percentage of the lessee's gross receipts.

The Commission and the lessee learned, somehow, that the leasehold was not automatically tax-exempt, as each had assumed, and that application had to be made. Accordingly, they filed a request for an exemption to the Department; the Department denied the request. The matter was next heard by the Property Tax Assessment Appeals Board ("Board") which, in a decision dated July 12, 1993, reversed the Department's denial of the exemption. Unsatisfied with that result, the Department filed an appeal with the Maryland Tax Court on June 30, 1994. More than one year later, on August 25, 1994, the Tax Court conducted a hearing, during which Robert Young, Associate Director of the Department, ³ Richard Stevenson, Associate Director of the Commission, and Louis Viggiano, Divisional Manager of Specialty and General Manager of the Restaurant testified, respectively. The Tax Court accepted the parties' stipulation that the Restaurant was, in fact, a "restaurant," and that it was located in a public park that contained an airport. ⁴ After hearing testimony and considering the parties' arguments, the Tax Court reversed the Board's decision and reinstated the assessment.

The Tax Court characterized the question before it as one of law and, specifically, one of statutory interpretation. The Tax Court construed "concession" in § 7-211(b) as requiring specific, detailed, operational controls by the granting authority over the concessionaire and requiring that the service be primarily for the people using the airport, park, market or fairground. There was some evidence that the Commission occasionally checked on the quality of the Restaurant's operation but the Tax Court found there were no specific controls of the type required to be a "concession." The Tax Court further found from the evidence that the Restaurant was primarily used by persons who were not users of the other facilities in the park and airport. In fact, the Tax Court stated that the Restaurant would not be able to survive if it depended upon only those persons using the park and airport. Of note, the Tax Court did not cite any cases to support the construction of the statute. Three days after the Tax Court's decision, the Commission filed a petition requesting the Circuit Court for Prince George's County to review the decision.

In the proceedings before the Circuit Court, the Department filed a motion to strike those portions of the Commission's pleadings that quoted excerpts of Viggiano's...