Property of One Church Street City of Burlington, In re

• Citation: 152 Vt. 260,565 A.2d 1349
• Decision Date: 04 August 1989
• Docket Number: No. 87-480,87-480
• Parties: In re PROPERTY OF ONE CHURCH STREET CITY OF BURLINGTON.
• Court: Vermont Supreme Court

Page 1349

565 A.2d 1349

152 Vt. 260

In re PROPERTY OF ONE CHURCH STREET CITY OF BURLINGTON.

No. 87-480.

Supreme Court of Vermont.

Aug. 4, 1989.

Paul, Frank & Collins, Inc., Burlington, for plaintiff-appellant.

John L. Franco, Jr., Asst. City Atty., Burlington, for defendant-appellee.

Jeffrey L. Amestoy, Atty. Gen., and Mary L. Bachman, Asst. Atty. Gen., Montpelier, for intervenor-appellee.

Before ALLEN, C.J., PECK, J., COSTELLO, District Judge (Ret.), and SPRINGER, District Judge (Ret.), Specially Assigned.

ALLEN, Chief Justice.

Taxpayer appeals the entry of its nonresidential property in the grand list at 120 percent of fair market value, pursuant to statutory authorization. Taxpayer is a partnership which owns a six-story brick building located at 1-7 Church Street in Burlington. The building formerly housed the Masonic Temple and was renovated for commercial uses in 1985. In 1986 the Legislature amended the Burlington City Charter to state as follows, in relevant part:

Except for the property of utilities subject to the provisions of 30 V.S.A. Chapter 3, all personal and real property set out in the grand list which is not used as residential property, farmland, and vacant land zoned 'recreation, conservation and open space (RCO)' shall be classified as nonresidential property and shall be assessed at 120% of fair market value;....

1985, No. M-21 (Adj.Sess.), § 1(3). Burlington implemented the new authority for the tax year which began July 1, 1986, and taxpayer's property was appraised at $2,510,900 and listed at $3,013,100. Taxpayer did not contest the fairness of the initial appraisal of taxpayer's property, but contended that the assessment at 120% of fair market value was invalid under the Common Benefit (ch. 1, art. 7) and Proportional Contribution (ch. 1, art. 9) Clauses of the Vermont Constitution. Taxpayer appealed the listing to the superior court and there moved for summary judgment on the constitutional grounds asserted. The trial court denied the motion and then reported the following two questions to this Court pursuant to V.R.A.P. 5(a):

1. Does the listing of nonresidential property in the City of Burlington at 120% of fair market value pursuant to amended Section 81 of the Charter of the City of Burlington violate the Common Benefit Clause contained in Article 7 of Chapter I of the Vermont Constitution?

2. Does the listing of nonresidential property in the City of Burlington at 120% of fair market value pursuant to amended Section 81 of the Charter of the City of Burlington violate the Proportional Contribution Clause contained in Article 9 of Chapter I of the Vermont Constitution?

I.

Taxpayer relies first on the Common Benefit Clause of the Vermont Constitution, ch. I, art. 7. ¹ But this Court has long held that the Common Benefit Clause does not prohibit taxes that distinguish among classes of taxpayers. State v. Harrington, 68 Vt. 622, 629, 35 A. 515, 517 (1896) (Legislature may impose a license tax upon one occupation and not another, so long as there is no discrimination among those engaged in the occupation taxed). Taxpayer does not dispute that the Common Benefit Clause, like the Proportional Contribution Clause, prohibits only arbitrary and irrational classifications. See State v. Auclair, 110 Vt. 147, 161, 4 A.2d 107, 113 (1939). But taxpayer asserts that since State v. Ludlow Supermarkets, Inc., 141 Vt. 261, 448 A.2d 791 (1982), this Court has imposed a much stricter standard for state action: that a "preferential standard" will be invalidated unless a "compelling public need is demonstrated."

Taxpayer is correct in identifying the "preferential standard" as the evil which the Common Benefit Clause addresses. While the focus of the federal Equal Protection Clause and Vermont's Proportional Contribution Clause is the individual and the social calculus of what is required to treat each individual in the society equally, ² the emphasis in the Common Benefit Clause is the obverse--what is required to protect the polity from the granting of privilege to the few. Though it may be an oversimplification, the goal of the Proportional Contribution Clause is protection of the individual from unfair government action, while the aim of the Common Benefit Clause is to protect the state from favoritism to individuals and to remind citizens of the sense of compact that lies at the heart of constitutional government. Ludlow Supermarkets Inc. states that where preferential legislation is at issue, "[t]he purpose of the preferential legislation must be to further a goal independent of the preference awarded, sufficient to withstand constitutional scrutiny." 141 Vt. at 269, 448 A.2d at 795. The express purpose of the so-called Sunday closing law in that case was "to promote the economic health of small business enterprises." 13 V.S.A. § 3352 (repealed 1983, No. 80 (effective Apr. 29, 1983)); Ludlow Supermarkets, Inc., 141 Vt. at 267, 448 A.2d at 794. The Legislature expressly targeted a class of beneficiaries of the legislation--small businesses--rather than crafting legislation "instituted for the common benefit, protection, and security of the people, nation or community." There could be no claim in support of the Sunday closing law that the large businesses compelled to close on Sundays were included in the general class of its beneficiaries or that the detriment they incurred was only incidental. As the Court stated, the whole recent history of legislation in this area is a demonstration that the core purpose of these laws, confirmed by legislative language, is the special protection of the economic health of small, locally owned, retail stores. 141 Vt. at 270, 448 A.2d at 796.

The amended Burlington Charter stands on a different footing. Though it creates classifications of taxpayers, its goal is to raise total city revenues and benefit the city's inhabitants as a whole. As this Court said in Ludlow Supermarkets, Inc.:

Almost all regulatory legislation, particularly when the concern is economic, tends to be uneven in its impact. Such inequalities are not fatal with respect to constitutional standards if the underlying policy supporting the regulation is a compelling one, and the unbalanced impact is, as a practical matter, a necessary consequence of the most reasonable way of implementing that policy.

141 Vt. at 265, 448 A.2d at 793 (citing Auclair, 110 Vt. at 160, 4 A.2d at 113). The underlying purposes for the classification challenged in this case are clear on the face of the Act and were presented to the Legislature during its consideration. About the impact of the proposed amendment on City revenues, the City Attorney testified before the Senate Finance Committee as follows:

It is not a revenue neutral provision. It is a revenue raising issue. It was developed upon recommendation of a business person's task force within the city and was developed with the notion to [sic] softening the blow of the loss of federal revenue sharing that the city could expect.

Testimony of Joseph E. McNeil, April 24, 1986, transcript at 4. Taxpayer points to no legislative history indicating that the bill's purpose was to grant a preferential benefit to any class of persons in Burlington, and points to no evidence that the charter amendment does so in fact. It surely will benefit some taxpayers more than others, but "[s]o long as the public purpose is paramount and the enactment reasonably related to that purpose, the statute is not made invalid thereby." Vermont Woolen Corp. v. Wackerman, 122 Vt. 219, 226, 167 A.2d 533, 538 (1961).

II.

Taxpayer argues next that Burlington's tax scheme violates the Proportional Contribution Clause of the Vermont Constitution, ch. I, art. 9, ³ because that Clause requires that all property be assessed at a uniform rate, without the creation of classes of property within which the mandate of equality would be enforced. ⁴ But this Court has never construed the Clause to forbid reasonable classifications of property for tax purposes. "The constitutional requirement of proportional contributions for the support of the government was not intended to restrict the State to methods of taxation that operate equally upon all its inhabitants." Clark v. City of Burlington, 101 Vt. 391, 405, 143 A. 677, 682-83 (1928). "And, as far as classifications are concerned, our proportional contribution clause is the practical equivalent of the equal protection clause of the Fourteenth Amendment to the United States Constitution." In re Estate of Eddy, 135 Vt. 468, 472, 380 A.2d 530, 534 (1977). See also State v. Auclair, 110 Vt. at 161, 4 A.2d at 114.

Taxpayer contends that recent decisions of this Court have "revised the theory" of the Proportional Contribution Clause of the Vermont Constitution, citing Bookstaver v. Town of Westminster, 131 Vt. 133, 142-43, 300 A.2d 891, 897 (1973):

The law requires that the methods of taxation must operate equally upon all of the inhabitants. See Chapter I, Article 9, Vermont Constitution; Fourteenth Amendment to the United States Constitution; Clark v. Burlington, 101 Vt. 391, 143 A. 677 (1928); In re Hickok's Est., 78 Vt. 259, 62 [A.] 724 (1906). This law applies equally to the evaluation of property for tax purposes.

But neither Bookstaver nor four subsequent cases relied on by taxpayer ⁵ alter the theory of the Proportional Contribution Clause. Our precedents establish two fundamental requirements for the valid imposition of taxes in Vermont: first, that any legislative classification of taxpayers bear a reasonable relation to the purpose for which it is established; and second, that the classification scheme be fairly and equitably applied among like classes of taxpayers.

The meaning of the first requirement is spelled out in Andrews v. Lathrop, 132 Vt. 256, 259, 315 A.2d 860, 862 (1974), where we stated:

What is required is that the discriminatory classification not be capricious or arbitrary, but rest on some reasonable...