Southern Ry. Co. v. State Bd. of Equalization

• Decision Date: 23 November 1988
• Docket Number: No. 1:85-CV-4258-HTW,1:85-CV-4241-HTW.,1:85-CV-4258-HTW
• Citation: 712 F. Supp. 1557
• Parties: SOUTHERN RAILWAY CO., et al., Plaintiffs, v. STATE BOARD OF EQUALIZATION, et al., Defendants. ACF INDUSTRIES, INC., et al., Plaintiffs, v. STATE BOARD OF EQUALIZATION, et al., Defendants.
• Court: U.S. District Court — Northern District of Georgia

712 F. Supp. 1557

SOUTHERN RAILWAY CO., et al., Plaintiffs, v. STATE BOARD OF EQUALIZATION, et al., Defendants.

ACF INDUSTRIES, INC., et al., Plaintiffs, v. STATE BOARD OF EQUALIZATION, et al., Defendants.

Nos. 1:85-CV-4258-HTW, 1:85-CV-4241-HTW.

United States District Court, N.D. Georgia, Atlanta Division.

November 23, 1988.

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Burt DeRieux, Keith J. Reisman, Greene Buckley DeRieux & Jones, Atlanta, Ga., Everett Bell Gibson, Laughlin Halle Gibson & McBride, Washington, D.C., for Southern Ry. Co., Alabama Great Southern Ry. Co., Central of Georgia R. Co., Georgia Northern Ry. Co., Georgia Southern & Florida Ry. Co., Live Oak, Perry, and South Georgia Ry. Co., Tennessee, Alabama and Georgia Ry. Co., plaintiffs.

Lucy T. Sheftall, Office of State Atty. Gen., Atlanta, Ga., Jefferson James Davis, Davis & Davis, Decatur, Ga., for State Bd. of Equalization of State of Ga., Marcus E. Collins, Sr., William M. Nixon and G.W. Hogan, Members of State Bd. of Equalization of Georgia and their successors in office, Marcus E. Collins, Sr., as Com'r of Revenue of State of Ga. and his successor in office, defendants.

Curtis Eugene Anderson, Office of U.S. Atty., Atlanta, Ga., for U.S., intervenor-defendant.

MEMORANDUM OPINION

HORACE T. WARD, District Judge.

Introduction

The above cases are consolidated actions brought for relief under the provisions of 49 U.S.C. § 11503 ("Section 306") by seven interstate carriers by rail which own property in the state of Georgia and by eleven private rail carlines (hereinafter "Railroads" or "plaintiffs"). Defendants are the Georgia State Board of Equalization, its members, and the Georgia Commissioner of Revenue (hereinafter "defendants"). The defendants bear the responsibility under Georgia law for the valuation and assessment of rail transportation property for ad valorem tax purposes.

The Railroads are seeking to permanently enjoin the defendants from assessing Railroads' property for purposes of ad valorem taxation for the 1985 tax year pursuant to Notices of Assessment dated October 7, 1985, to the extent that such assessments are contrary to 49 U.S.C. § 11503. The Railroads also seek a declaration pursuant to 28 U.S.C. § 2201 that the defendants' assessments of the plaintiffs' property for the 1985 tax year, and the certification and distribution of such assessments, violate 49 U.S.C. § 11503.

Jurisdiction is based upon 49 U.S.C. § 11503, 28 U.S.C. § 1337, and 28 U.S.C. § 1331. On application of the Railroads, the court granted preliminary injunctive relief, enjoining the defendants from assessing plaintiffs' property for 1985 at a level higher than 28% of true market value.

Railroads contend that defendants are assessing their transportation property for the 1985 tax year at a higher ratio of assessed value to true market value than the ratio of assessed value to true market value at which commercial and industrial property has been assessed in Georgia for the 1985 tax year. Specifically, they contend that defendants have assessed Railroads' property at no less than 40% of true market value, even though other commercial and industrial property has been assessed for the same tax year at no more than 28% of true market value.

The defendants contend that the Railroads must show that the assessment level of "all other commercial and industrial property" (i.e., non-railroad property) in each Georgia county is more than 5% less than the railroad's 40% assessment level. They assert that Section 306 provides that the Railroads must satisfy the burden of proof provided by state law, and must prove the level of assessment of all other commercial and industrial property in each county of the state of Georgia.

Defendants contend that the assessment jurisdiction should be on a county-by-county basis rather than a statewide basis as asserted by Railroads. The defendants further contend that the evidence they presented shows that the statute has not been violated in most Georgia counties, and that at a minimum the 28% assessment level urged by the plaintiffs is not an accurate measure of any relief to which they might be entitled.

The matter was tried by the court, sitting without a jury, with the court taking the case under advisement pending the filing of post-trial briefs.

FINDINGS OF FACT

All nonexempt real and personal property located in the state of Georgia on January 1 of each year is subject to ad valorem taxation. O.C.G.A. §§ 48-5-3 & 48-5-10 (Michie 1982). All tangible property subject to taxation is required to be assessed for property tax purposes at 40% of its true market value. O.C.G.A. § 48-5-7 (Michie 1982 & Supp.1988).

Public utility property, which by statutory definition includes railroad property, is assessed annually for property tax purposes by the Commissioner of Revenue. O.C.G.A. § 48-5-511 (Michie 1982). The assessment of a railroad's property is apportioned among the counties in which the railroad owns property by the Commissioner under O.C.G.A. § 48-5-521 (Michie 1982 & Supp.1988). All other tangible commercial and industrial property is assessed for taxation by the tax receiver or tax commissioner in the county where the property is located. O.C.G.A. § 48-5-11 (Michie 1982).

Railroad property, in practice, is reappraised annually by the Commissioner and is assessed each year at no less than 40% of true market value. The parties have stipulated that for the 1985 tax year Railroads' property has been assessed at 40% of true market value.

In the case of motor vehicles, the counties are required to determine the taxable value of motor vehicles on a uniform basis in accordance with schedules prepared annually by the Commissioner of Revenue. O.C.G.A. § 48-5-442 (Michie 1982). The tax is collected by the county at the time the motor vehicle owner purchases his or her license plate. O.C.G.A. § 48-5-473 (Michie 1982 & Supp.1988).

The parties called several expert witnesses who testified regarding certain theories and methodologies being advanced by the parties in support of their respective positions. Three of the principal expert witnesses are identified at the outset. The Railroads called Dr. Frederick A. Ekeblad as their statistical witness. Dr. Ekeblad has taught in the fields of economics and applied statistics. His experience included a professorship at Northwestern University and post of Dean of the College of Business Administration at the University of Bridgeport. The Railroads also called Dr. Dick Netzer, an economist and professor at New York University. He was called to testify regarding the level of assessment of commercial and industrial personal property in Georgia, based on a method that he developed. The defendants called Dr. Allison R. Manson, a long-time professor of statistics at North Carolina University, as their statistical witness. He testified about various issues raised in the case. Dr. Manson was initially retained by the defendants to make calculations designed to determine the overall assessment level of commercial and industrial property in all Georgia counties for 1985.

The defendants contend that the evidence shows that the ratio of assessed value to true market value of commercial and industrial personal property (other than railroad transportation property) for 1985 is 40% in Bibb, Chatham, Cobb, DeKalb, Floyd, Hall, Richmond, and Whitfield counties. The evidence relating to those counties showed the methods used in assessing personal property. The individual assessors from these counties testified that in their opinion personal property in the respective counties was assessed at or near 40% in 1985. Their opinions are challenged by other evidence in the record. Some of these assessors also admitted that they failed to comply with certain assessment practices and procedures outlined by Steve Pruitt and Lyman Martin. Some did no trending and others did not conduct site audits. Lyman Martin, Tax Assessor of Hall County, which had one of the best systems, testified that while the ratio in his county might be close to the required level, his county had not achieved a 40% ratio as to personal property. Steve Pruitt, a defense witness, when asked about these eight counties, testified that they have the capabilities of assessing personal property at 40%. As to personal property ratios in the remaining counties in Georgia, defendants urged the court to assume that the personal property ratios were at the same level as real property ratios.

The evidence in the case demonstrates that in a large number of counties in Georgia, assessment of personal property is of a poor quality when compared to the assessment of real property. The Railroads presented evidence regarding personal property assessment practices in 65 counties which supports this finding. Further, the evidence indicates that the assessment level of personal property in many Georgia counties is lower than that of real property. According to Dr. Ekeblad, this historically has been the case throughout the nation as a whole.

Congress designated the sales assessment ratio study as an evidentiary device in section 306 litigation to demonstrate discrimination in taxation. The sales assessment ratio study compares the assessment on each sample of locally assessed real property to the price at which the property sells. The total of assessments of all samples of property is divided by the total of selling prices. The resulting percentage represents the average ratio of assessed value to true market value of commercial and industrial real property in the assessment jurisdiction.

The Georgia Department of Audits conducts a sales assessment ratio study in each county in Georgia each year.¹ Railroads have been provided with the underlying data from the Department of Audits study, which compared sales occurring in calendar year 1984 to assessments on the sold properties as of January 1, 1985. Railroads' statistical witness, Dr. Frederick A. Ekeblad, has...