Mount Auburn Hosp. v. Assessors of Watertown

• Citation: 773 N.E.2d 452,55 Mass. App. Ct. 611
• Decision Date: 19 August 2002
• Docket Number: No. 00-P-1419.,00-P-1419.
• Parties: MOUNT AUBURN HOSPITAL v. BOARD OF ASSESSORS OF WATERTOWN.
• Court: Appeals Court of Massachusetts

773 N.E.2d 452

55 Mass. App. Ct. 611

MOUNT AUBURN HOSPITAL v. BOARD OF ASSESSORS OF WATERTOWN.

No. 00-P-1419.

Appeals Court of Massachusetts, Suffolk.

Argued April 18, 2002.

Decided August 19, 2002.

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Daryl J. Lapp, for the taxpayer.

Ellen M. Hutchinson, North Andover, for Board of Assessors of Watertown.

Present: PORADA, SMITH, & KAFKER, JJ.

KAFKER, J.

The taxpayer, Mount Auburn Hospital (the hospital), which is based in Cambridge, purchased over eleven acres of land and a 440,000 square foot building at 705 Mount Auburn Street in Watertown (the property) in September, 1991. The hospital, which only occupied part of the building, appealed the real estate taxes assessed against the property by the board of assessors of Watertown (assessors) for fiscal years 1993 and 1994. After hearing the evidence, the Appellate Tax Board (board) granted abatements to the hospital for both years. Both the hospital and the assessors argue on appeal that the board erred in determining the amount of the abatements.

1. Board decision. A. Hearings and report. At two separate hearings in September, 1995, and January, 1996, board chairman Timothy O'Brien heard testimony from eight witnesses. The witnesses included the hospital's president, vice-president and chief financial officer, two current and two former assessors for the town of Watertown, and a real estate consultant employed by the hospital. In addition, deposition testimony from two other witnesses and extensive documentary evidence were admitted. The board's single-page decision, dated August 25, 1997, ordered abatements for the hospital for both years. It was signed by five board members, including the new chairman, Kenneth Gurge, but the decision was not signed by O'Brien.¹ The board report, issued in June, 2000,² was authored by then chairman Abigail Burns, who was joined in the decision by two former and two current board members, who were the same individuals who signed the August, 1997, decision.

B. Fact-finding. The board found the following facts. The hospital's property consisted of approximately 11.297 acres of land occupied by a 440,000 square foot building surrounded bLIL3495 paved parking spaces. Prior to the purchase of the property, the hospital had formed a facilities task force which concluded that the hospital needed additional facilities at a different site to alleviate "pressing space constraints at its existing facility." The task force also determined that the hospital should relocate its outpatient services to a new site.

Over a three-year period, the hospital spent over $550,000 on planning studies and considered several divergent scenarios for its use of the property. Minutes of the weekly meetings of the hospital's project coordinating committee, which was formed after the purchase and which met at the property, reflect that the hospital considered either using all the space, or using about one-half of the building space and leasing, "mothballing," or demolishing the remainder. By late 1992 through the spring of 1993, the hospital "focused on a development option that proposed using part of the building for tax exempt hospital purposes, part for non-exempt medical offices, and mothballing the remaining portion." The board found that, as of the date of purchase, as well as of July 1, 1993, the hospital intended to use approximately fifty percent of the new site for its charitable purposes.

The hospital never reached a final decision regarding its use of the property for the tax years of 1993 and 1994, due to "rapid changes that were occurring in the health care industry at the time." The board found that at all relevant times, the hospital used "about eighteen percent of the building for medical record storage,[³] another one percent for weekly meetings, and about seventy-five percent of the available parking spaces, that is, 375 out of 495 spaces, for hospital personnel."⁴ The combined total of all the hospital's use "comprise[d] well less than fifty percent of the subject property's space," the board noted.

C. Fiscal year 1993: assessors' valuation, revised bill, and board ruling. In fiscal year 1993, the assessors valued the property at $10,290,600, but determined initially that 84.62. percent of the property was tax exempt, leaving only 15.38 percent of the property taxable. The taxable portion of the property was that space occupied by an office of the United States Postal Service, under a commercial lease agreement with the hospital. At a rate of $21.50 per $1,000 of assessed valuation, the hospital's total tax liability on the property for the fiscal year was $34,023.94. In June, 1993, the assessors issued a revised fiscal year 1993 tax bill on the property, imposing a tax on fifty percent of assessed value of the property, with a new amount due of $110,623.95. The revised bill was issued following a change in membership of the board of assessors, when the terms of two of the three members expired, and two new members assumed their duties. The new members determined that only fifty percent, not 84.62 percent, of the property should be exempt from taxation in fiscal year 1993.

As a threshold matter, the board considered whether the hospital's payment of the revised fiscal year 1993 bill was received before any interest was incurred, i.e., no later than July 19, 1993, a prerequisite to board jurisdiction to hear a taxpayer's appeal. G.L. c. 59, § 64. The evidence on the timing of the hospital's payment was circumstantial. The hospital's check was dated July 16, 1993. As to the payment date, the assessors offered the deposition testimony of the town's assistant treasurer. She stated that the town's records showed a payment date of July 20, 1993, but acknowledged that checks received after 12:00 P.M. but before 5:00 P.M. were deposited into the bank on the day following receipt. The check was deposited by the town on July 20, 1993. The hospital's chief financial officer, Dana Diggins, testified generally to the procedures by which the hospital's tax bills were paid. He stated that after purchasing the property, the hospital hand-delivered every tax payment to the town, to insure they were paid on time. He acknowledged, however, that he was unable to determine which of his staff members delivered the particular check in question, and was unable to find a receipt showing when the bill was paid. Harmonizing the two versions of the parties' practices, the board determined that the hospital's payment was made "after noontime but before 5:00 P.M. on July 19, 1993."⁵ The board therefore retained jurisdiction of the matter.

The board went on to rule that the assessors had exceeded their authority when they imposed a revised tax on the property for fiscal year 1993, and that the hospital therefore owed only the tax originally assessed, which reflected an exemption on 84.62 percent of the property's value. The assessors' revised 1993 tax bill, according to the board, was not aimed at correcting a clerical, data processing, or other ministerial error as authorized by G.L. c. 59, § 76, but reflected the considered decision of the new members of the board of assessors to change the level of taxation on the property in the middle of a fiscal year. They did so, the board found, after conducting a new and "substantial investigation," including interviews of hospital personnel and site visits. The board therefore ordered abatement of the $76,600.01 assessed by the revised tax bill.

D. Fiscal year 1994: assessors' valuation and board ruling. The assessors determined that in fiscal year 1994, none of the property, which was then valued at $9,448,500, was exempt from taxation. The tax was assessed at a rate of $22.08 per $1,000 of valuation in the amount of $208,622.88. The board ruled that the hospital's intended use of fifty percent of the property for the removal of some of its existing charitable services fit within the exemption provided by G.L. c. 59, § 5, Third, and "coupled with the proportionate exemption rule, was enough to qualify the property for a partial exemption." The abatement for fiscal year 1994 was $104,311.44.

2. Discussion. A. Review standards. "Normally all property of a taxable nature should contribute its proportionate share to the support of the State." Boston Chamber of Commerce v. Assessors of Boston, 315 Mass. 712, 716, 54 N.E.2d 199 (1944). A taxpayer has the burden of establishing its right to an exemption, Assessors of Boston v. Garland Sch. of Home Making, 296 Mass. 378, 384, 6 N.E.2d 374 (1937), and to do so must show that it "comes within either the express words or the necessary implication of some statute conferring this privilege." Animal Rescue League of Boston v. Assessors of Bourne, 310 Mass. 330, 332, 37 N.E.2d 1019 (1941). Any doubt in the application of an exemption statute operates against the party claiming tax exemption. Boston Symphony Orchestra, Inc. v. Assessors of Boston, 294 Mass. 248, 257, 1 N.E.2d 6 (1936).

A decision of the board is upheld as long as "it is based on a correct application of the law and if it is based on substantial evidence." Kennametal, Inc. v. Commissioner of Rev., 426 Mass. 39, 43, 686 N.E.2d 436 (1997), cert. denied, 523 U.S. 1059, 118 S.Ct. 1386, 140 L.Ed.2d 646 (1998). "Resolution of conflicts in evidence and the credibility of the witnesses is in the province of the board." Bayer Corp. v. Commissioner of Rev., 436 Mass. 302, 307, 763 N.E.2d 1100 (2002). "To the extent that the question [before it] is one of fact, the board's findings are entitled to deference, so long as there is substantial evidence in the record to support [them]." Tambrands, Inc. v. Commissioner of Rev., 46 Mass.App.Ct. 522, 526, 707 N.E.2d 400 (1999). On the other hand, "evidence of a party having the burden of proof [in this case, the hospital] may not be disbelieved without an explicit and objectively adequate reason." Tennessee Gas...