Sierra Tucson, Inc. v. Pima County, 1

CourtCourt of Appeals of Arizona
Citation178 Ariz. 215,871 P.2d 762
Docket NumberNo. 1,CA-TX,1
PartiesSIERRA TUCSON, INC., an Arizona corporation, Sierra Tucson/Arizona Holdings, Inc., an Arizona corporation, Sierra Tucson Companies, Inc., a Delaware corporation, and Sierra Tucson Educational Materials, Inc., an Arizona corporation, Plaintiffs-Appellants, v. PIMA COUNTY, a body politic; the Arizona Department of Revenue, a department of the State of Arizona, Pima County Assessor; Pima County Board of Supervisors, Defendants-Appellees. 92-0014.
Decision Date31 March 1994


Taxpayers Sierra Tucson, Inc., and related corporations (Sierra Tucson) appeal from a tax court judgment determining that four parcels of real property were classified as class three commercial property for ad valorem tax purposes.


Sierra Tucson presents the following issues on appeal:

(1) whether the tax court erred in holding that Sierra Tucson's property was not "structured to the care or housing of handicapped persons ..." within the meaning of Arizona Revised Statutes Annotated (A.R.S.) section 42-162(A)(5)(c); and

(2) whether the tax court erred in holding that the portion of Sierra Tucson's facility licensed as a "special hospital" could not, in any event, qualify as class five, rather than class three, property under A.R.S. section 42-162(A)(5)(c). 1

We have jurisdiction pursuant to A.R.S. section 12-2101(B). The appeal is assigned to Department T of this court pursuant to A.R.S. sections 12-120.04(G) and 12-170(C).


Sierra Tucson owns four contiguous parcels of real property in northern Pima County. At all material times, Sierra Tucson operated a for-profit health care facility on its property. The facility consists of a 70-bed residential unit for the treatment of eating disorders, a 400-seat auditorium, a 23-bed medical building for detoxification and assessment, five separate 32-bed residential treatment communities, and a program center that provides food preparation services, dining areas, and recreational facilities. The facility houses a total of 253 beds. Ninety-six beds are licensed as a "behavioral health residential facility" by the Arizona Department of Health Services (DHS). The remaining 157 beds are licensed as a "special hospital" by DHS.

Sierra Tucson provides treatment to persons who suffer from chemical dependencies and mental, psychological, emotional, behavioral, and eating disorders. It provides medical, nursing, and other health-related services through its staff of physicians, psychologists, psychiatrists, and other medical professionals. Sierra Tucson's treatment approach combines principles and practices from the medical, psychiatric, psychological, family systems, and self-help communities.

About one-third of the patients who come to Sierra Tucson are primarily diagnosed as chemically dependent. Many also have other addictions or mental illnesses. Persons admitted to Sierra Tucson may suffer dysfunction in many areas of their lives--socially, in relationships, physical health, jobs, finances, and significant ongoing emotional discomfort. The typical length of stay for a chemically-dependent patient at Sierra Tucson is thirty days, thirty-three or thirty-four days for a person with emotional problems, and forty-two days for a person with an eating disorder.

Upon arrival at Sierra Tucson, the patient typically spends three days in the detoxification, orientation, and evaluation unit. There, the patient undergoes a battery of tests to determine the appropriate unit for placement. The patient is then assigned to a residential community to participate in daily group therapy in both small and large groups and to attend lectures. During the third week, the patient's family members are invited to participate in the treatment process. In the final week, the patient starts to work with continuing care counselors to determine appropriate aftercare. Sierra Tucson helps refer patients to counselors and sponsors in their home environment or at extended care facilities. The goal of the treatment at Sierra Tucson is to give patients "structured tools to improve their life functions when they return to their environment."

Since its inception, Sierra Tucson has viewed alcoholism and other addictions "as a disease and a disability." According to Dr. James F. Graham, medical director at Sierra Tucson, dependency or addiction is defined in terms of loss of control and compulsive, continued use despite adverse consequences. Dr. Graham testified:

[T]he reason you treat any illness is to return people to function.... [T]hat's why we exist. We exist to treat an illness that we think is a treatable illness.

In terms of looking at an addiction disease as a chronic progressive illness, we think that it's a life-threatening disease if it's not treated, and that it is a treatable disease. It's not a curable disease because it's a chronic progressive illness. We treat this disease to return people to society and to family and to function.

Dr. Graham also testified:

Q. We talked a little bit about dysfunctions that limited major life activity. If a handicap is defined as an impairment that substantially limits a major life activity such as caring for one's self or learning or working, would you consider the majority of patients that arrive at Sierra Tucson to be handicapped?

A. I think that I would. In terms of how a person is handicapped, he can't perform function in his life in a vital area of his life, he can't provide for himself, he can't provide for his children. He is impaired, and he's handicapped. He's dysfunctional.


In the concept of how we understand health care in this country, a person who has a heart attack who is in ICU is out on the floor for a while, and then he is home. He is dealing with a chronic illness. Then he may go to a lesser level of care, rehabilitation. Then he may go to a cardiologist every 60 days or 90 days. That's a life long process. He has chronic, progressive heart disease.

It's the same thing with addiction disease and mental illness. We see that as a life long process, the treatment of the disease. It's a treatable disease, admittedly. And that is why I do this is because I think people can get weller than well with this disease. But for a period of time, they are extremely dysfunctional and they need levels of care designed to carry them through the dysfunction and restore them to society.

Dr. Graham testified that most people who successfully complete the Sierra Tucson program can take care of personal hygiene, get dressed, perform manual tasks, walk, see, hear, breathe, learn, and work. People who complete the Sierra Tucson program have an eighty percent to ninety percent chance of sustained recovery.

Sierra Tucson's facility was operated as a guest ranch under a previous owner in the early eighties. At that time the property held a class six (residential rental) classification pursuant to A.R.S. section 42-162(A)(6). Under A.R.S. section 42-227(A)(6) in 1991, class six property was assessed at 13 percent of full cash value. Sierra Tucson bought the property in January 1984 and has operated it as a medical facility since that time. The property retained its class six classification. In 1987, Sierra Tucson sought and obtained a class five classification under a former Pima County Assessor.

In 1991, a field inspector for the Pima County Assessor's Office observed a new structure on Sierra Tucson's property. The assessor's office added the new improvement to the tax roll and at the same time changed the entire property's classification to class three (commercial) pursuant to A.R.S. section 42-162(A)(3). For tax year 1991, A.R.S. section 42-162(A)(3)(a) provided:

There are established the following classes of property for taxation: ... (3) class three: (a) through tax year 1991, all real and personal property devoted to any commercial or industrial use other than property included in class one, two, four, five(b), five(c), six or seven.

At a hearing held pursuant to A.R.S. section 42-405, the Pima County Board of Equalization agreed that the property should be classified as class three property. Sierra Tucson appealed that determination to the State Board of Tax Appeals, which affirmed it.

Sierra Tucson brought this action in the Arizona Tax Court in August 1991. Its complaint sought reclassification under class five pursuant to A.R.S. section 42-162(A)(5)(c), which provides:

Through tax year 1991, all real property and improvements to such property and personal property used for the operation of licensed residential care institutions or licensed nursing care institutions which provide medical services, nursing services or health related services and are structured to the care or housing of handicapped persons or persons sixty-two years of age or older. (Emphasis added).

The parties filed cross-motions for summary judgment, focusing primarily on whether Sierra Tucson's facility was "structured to the care or housing of handicapped persons...." The tax court ruled:

There is no definition of handicapped person readily at hand for the guidance of the Court. Dictionary definitions suggest that a handicapped person is one with a disability that makes achievement unusually difficult. Such a definition would include persons who were temporarily ill. The Court holds that the legislature intended that the definition [of] "handicapped persons" be distinguishable from the definition of "sick persons." The Court, therefore, holds that in order for such a facility to be entitled to class 5 classification, it must be one in which its patients are suffering from a disability, mental, physical, or emotional, which is permanent in nature, or so nearly so that the...

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