El Paso Natural Gas Co. v. Arizona Dept. of Revenue
| Decision Date | 16 July 1992 |
| Docket Number | No. 1,CA-TX,1 |
| Citation | 174 Ariz. 470,851 P.2d 95 |
| Parties | EL PASO NATURAL GAS COMPANY, a Delaware corporation; The Atchison, Topeka and Santa Fe Railway Company, a Delaware corporation; Black Mesa Pipeline, Inc., a Delaware corporation; Mountain States Telephone and Telegraph Company, a Colorado corporation, doing business as U.S. West Communications, Plaintiffs-Appellants, v. ARIZONA DEPARTMENT OF REVENUE; Coconino County; Williams Hospital District, a special taxing district, Defendants-Appellees. 91-003. |
| Court | Arizona Court of Appeals |
Appellants El Paso Natural Gas Co., The Atchison, Topeka and Santa Fe Railway Co., Black Mesa Pipeline, Inc., Mountain States Telephone and Telegraph Co., and U.S. West Communications have appealed from a summary judgment entered by the tax court in favor of appellee Williams Hospital District ("the District"). The tax court ruled that the District had legal authority to impose a secondary property tax for the operation and maintenance of its hospital for the tax years 1988 and 1989. The appeal presents the following issues:
(1) whether the District was authorized, under section 48-1907(A)(6) of the Arizona Revised Statutes Annotated ("A.R.S."), to impose a secondary property tax for the 1988 tax year on the theory that the District "operated" its own hospital during that year pursuant to a retroactive agreement between the District and Samaritan Health Services;
(2) whether the 1988 Arizona Session Laws, chapter 141, section 2, which authorized any hospital district that levied a secondary property tax for funding the operation and maintenance of a hospital for fiscal year 1987-88 to levy a similar tax for fiscal year 1988-89, was a special law in violation of the Arizona Constitution, article IV, part 2, section 19;
(3) whether the 1989 Arizona Session Laws, chapter 254, section 2, which authorized a hospital district that "owned OR operated" a hospital to levy a secondary property tax, applied to the 1989 tax year;
(4) whether the District was disqualified from imposing a secondary property tax for the 1989 tax year because it did not lease its hospital under the terms of A.R.S. section 48-1911; and
(5) whether the District's attempt to lease its hospital by auction excused its failure to lease the hospital under the terms of A.R.S. section 48-1911(A).
We reverse the tax court's judgment and remand for further proceedings. We hold: (1) that the District was not entitled to levy a secondary property tax for 1988 under A.R.S. section 48-1907(6) because the only evidence produced indicated that Samaritan, and not the District, continued to operate the hospital until December of 1989; (2) that the 1988 Arizona Session Laws, chapter 141, is an unconstitutional special law and therefore did not authorize the District's 1988 secondary property tax levy; and (3) that the 1989 Arizona Session Laws, chapter 254, section 2, which removed the requirement of A.R.S. section 48-1907(6) that a hospital district "operate" its hospital in order to levy a secondary property tax, was not effective until September 15, 1989, and therefore did not authorize the District's 1989 secondary property tax levy on August 21, 1989. We need not address issues 4 or 5.
A detailed history of the Williams Hospital District and the prior litigation over its legal authority to levy secondary property taxes is contained in this court's opinion in Atchison, Topeka & Santa Fe Railway Co. v. Arizona Department of Revenue, 162 Ariz. 127, 781 P.2d 605 (App.1989). We borrow from that opinion in order to establish the background for the current appeal.
The District was formed in early 1974. At that time it incurred a bonded indebtedness of $500,000 in order to purchase and remodel the existing Williams Hospital Facility. The bonds, which are still outstanding and unpaid, require annual principal and interest payments of $49,000 through June of 1994.
From April of 1974 through August of 1986, the District leased the hospital to various organizations, but no lessee was able to operate it at a profit. On July 1, 1986, the District entered into a one-year management agreement with Samaritan Health Services, Inc. ("Samaritan"), which is not a party to this litigation. On July 3, 1986, the District proposed to levy a secondary property tax pursuant to A.R.S. section 48-1907(6) 1 in order to subsidize the hospital's operating expenses. The District's voters approved the levy on August 5, 1986. In fiscal year 1986-87, revenues collected from the tax provided about forty percent of the District's $150,000 budget.
In October of 1987, the same taxpayers who have brought the instant appeal filed an action in Coconino County Superior Court to challenge the District's authority to levy secondary property taxes for 1986 and 1987. The superior court sustained the levies, but this court reversed on appeal. We held: (1) that A.R.S. section 48-1910 2 did not require a hospital district with bonded indebtedness to lease its hospital on the conditions specified in A.R.S. section 48-1911 3 in lieu of imposing a secondary property tax pursuant to A.R.S. section 48-1907(6) and operating the hospital itself; (2) that under A.R.S. section 48-1907(6), the District had authority to impose a secondary property tax to fund the operation and maintenance of its hospital only if it actually "operated" the Williams Hospital facility; and (3) that the District lacked authority to levy the 1986 or 1987 secondary property taxes because, pursuant to the management agreement in effect between Samaritan and the District, it was Samaritan that actually "operated" the facility.
On January 21, 1988, while the taxpayers' challenge to the District's 1986 and 1987 levies was still pending before the superior court, Senate Bill 1150 was introduced in the Arizona Senate. Section 1 of the bill would have amended A.R.S. section 48-1907(6) to allow a hospital district to
[i]mpose a secondary property tax on all taxable property within the district for the purpose of funding the operation OR maintenance of a hospital or combined hospital and ambulance service that is owned and operated by the district or to pay costs of an ambulance service contract entered into pursuant to this section.
(Capitalization indicates added language; strikeouts indicate deletions.) Section 2 of the bill would have added a new subsection (A)(5) to A.R.S. section 48-1911:
A. A lease of the hospital and its equipment, executed by the board of directors of the district, shall:
. . . . .
(5) CONTAIN TERMS AND PROVISIONS TO ALLOW THE BOARD, IF NECESSARY, TO FUND OPERATION OR MAINTENANCE COSTS PURSUANT TO SECTION 48-1907.
Senate Bill 1150 was passed with certain amendments by the Senate Committee on Government on February 24, 1988. See Minutes of the Committee on Government, February 24, 1988. On May 11, 1988, however, the Ways and Means Committee of the Arizona House of Representatives adopted a "strike-everything" amendment of Senate Bill 1150. This amendment was later adopted by both the House and the Senate and became effective as an emergency provision on June 1, 1988. 4 1988 Ariz.Sess.Laws ch. 141 ("the 1988 act").
In 1989, the legislature enacted Senate Bill 1316. 1989 Ariz.Sess.Laws ch. 254 ("the 1989 act"). The 1989 act amended A.R.S. section 48-1907 to provide:
A. A hospital district may:
. . . . .
(6) Impose a secondary property tax on all taxable property within the district for the purpose of funding the operation and maintenance of a hospital or combined hospital and ambulance district that is owned OR operated by the district....
The 1989 act also amended A.R.S. section 48-1911(A) to provide: "A lease of the hospital and its equipment, AS REQUIRED UNDER SECTION 48-1910 FOR DISTRICTS WITH BONDED INDEBTEDNESS, executed by the board of directors of the district shall...." The 1989 act did not include an emergency clause. The Thirty-Ninth Legislature adjourned sine die on June 16, 1989. The 1989 act therefore became effective on September 15, 1989. See Ariz.Const. art. IV, pt. 1, § 1(3) ().
The taxpayers filed the present actions in October of 1989, challenging the District's 1988 and 1989 secondary property tax levies. In both actions, the District moved to dismiss or in the alternative for summary judgment. The actions were consolidated by stipulation, and the District's motions were briefed and argued. By minute entry of November 7, 1990, the tax court granted partial summary judgment to the District on the taxpayers' challenges to the validity of the 1988 and 1989 secondary property tax levies.
The tax court rejected the taxpayers' arguments that the 1988 act was unconstitutional special legislation, that the 1989 act was inapplicable to the 1989 tax year because it was...
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