State Bd. of Equalization v. City of Lander

Citation882 P.2d 844
Decision Date03 October 1994
Docket NumberNo. 93-211,93-211
PartiesThe STATE BOARD OF EQUALIZATION for the State of Wyoming, Appellant (Respondent), v. The CITY OF LANDER, a Municipal Corporation, Appellee (Petitioner).
CourtUnited States State Supreme Court of Wyoming

Joseph B. Meyer, Atty. Gen., and Michael L. Hubbard, Sr. Asst. Atty. Gen., Cheyenne, representing appellant.

Rick L. Sollars, Lander City Atty., and John T. Pappas, Lander, representing appellee.

Before GOLDEN, C.J., and THOMAS, CARDINE, * MACY, ** and TAYLOR, JJ.

TAYLOR, Justice.

The Constitution and laws of the State of Wyoming exempt from taxation property which is used "primarily" for a "governmental purpose." In this appeal, we are asked to determine if property owned by one governmental entity that is partially leased to another governmental entity is subject to taxation. The State Board of Equalization found that the leased portion of the property was subject to taxation by a third governmental entity. On appeal, the district court disagreed and determined the property was exempt from taxation.

Although our rationale differs, we affirm the district court's ruling.

I. ISSUES

Appellant, the State Board of Equalization for the State of Wyoming, presents a single issue:

Is property owned by the City of Lander and leased to the Wyoming Department of Environmental Quality reasonably necessary or essential to the efficient operation and maintenance of the City of Lander and therefore exempt from Wyoming property taxes?

Appellee, the City of Lander, restates the issue as:

Is the portion of the Lander City Hall, which is owned by the City of Lander and leased to the State of Wyoming for use as offices by the Department of Environmental Quality used primarily for a government purpose and therefore exempt from Wyoming property taxation?

II. FACTS

In 1991, Fremont County, Wyoming (County) issued a property tax assessment to the City of Lander (City). The assessment notice stated market and assessed values for a portion of the Lander City Hall (City Hall). A year earlier, the City leased approximately one-half of the office space in the newly acquired City Hall to the Department of Environmental Quality of the State of Wyoming (DEQ). The assessment notice declared that the leased portion of the City Hall was subject to taxation. The City contested the property tax assessment.

In a contested case hearing before the Fremont County Board of Equalization, the County Assessor maintained the City was required to pay property taxes because a portion of City Hall was being leased to DEQ "for profit" by the City. The City Clerk/Treasurer explained the City was not earning a profit from the lease because all City Hall rents were assigned to the State of Wyoming Farm Loan Board under terms of a loan agreement which was used to finance the purchase of the building. The City insisted that property of cities used primarily for a governmental purpose is exempt from taxation. The Fremont County Board of Equalization denied the tax protest.

The City filed an appeal with the State Board of Equalization (Board). The Board determined that the City Hall office space leased to DEQ was taxable. The Board agreed that property used primarily for a governmental purpose was exempt from taxation. However, the Board found that to be exempt, the property must be used to fulfill a purpose that comes within the duties of the governmental entity seeking the exemption. The Board determined that the portion of the City Hall leased to DEQ was taxable because it was "not reasonably necessary nor an essential facility to the operation" by the City of a City Hall.

After exhausting its administrative remedies, the City filed an appeal in district court. The district court found that the City Hall was being used solely for a governmental purpose, either by the City or by DEQ, and was exempt from taxation. The Board filed this appeal to challenge the district court's decision.

III. DISCUSSION

Administrative decisions of the Board are subject to judicial review. Wyo.Stat. § 39-1-306 (1994). The scope of review is directed by the Wyoming Administrative Procedure Act, which provides, in pertinent part:

(c) To the extent necessary to make a decision and when presented, the reviewing court shall decide all relevant questions of law, interpret constitutional and statutory provisions, and determine the meaning or applicability of the terms of an agency action. In making the following determinations, the court shall review the whole record or those parts of it cited by a party and due account shall be taken of the rule of prejudicial error. The reviewing court shall:

(i) Compel agency action unlawfully withheld or unreasonably delayed; and

(ii) Hold unlawful and set aside agency action, findings and conclusions found to be:

* * * * * *

(B) Contrary to constitutional right, power, privilege or immunity;

* * * * * *

(E) Unsupported by substantial evidence in a case reviewed on the record of an agency hearing provided by statute.

Wyo.Stat. § 16-3-114(c) (1990) (emphasis added). Agency conclusions of law are affirmed when the agency acts in accord with the law; if not, the conclusion of law is corrected. Barcon, Inc. v. Wyoming State Bd. of Equalization, 845 P.2d 373, 376 (Wyo.1992) (quoting Employment Sec. Com'n of Wyoming v. Western Gas Processors, Ltd., 786 P.2d 866, 871 (Wyo.1990)). We accord no special deference to the district court's decision; instead, appellate review is conducted as if the matter had come directly to us from the agency. Casper Iron & Metal, Inc. v. Unemployment Ins. Com'n of Dept. of Employment of State of Wyo., 845 P.2d 387, 392 (Wyo.1993).

Generally, all property in Wyoming is subject to taxation based upon a system of uniform valuation:

(a) All property, except as in this constitution otherwise provided, shall be uniformly valued at its full value as defined by the legislature, in three (3) classes as follows:

(i) Gross production of minerals and mine products in lieu of taxes on the land where produced;

(ii) Property used for industrial purposes as defined by the legislature; and

(iii) All other property, real and personal.

Wyo. Const. art. 15, § 11 (emphasis added). The legislature has affirmed its intent to make all property subject to taxation, unless prohibited by law or expressly exempted:

All property within Wyoming is subject to taxation as provided by this act except as prohibited by the United States or Wyoming constitutions or expressly exempted by W.S. 39-1-201.

Wyo.Stat. § 39-1-102 (1994).

The Constitution of the State of Wyoming states a general exemption to taxation when property is owned by a governmental entity and used "primarily" for a "governmental purpose:"

The property of the United States, the state, counties, cities, towns, school districts and municipal corporations, when used primarily for a governmental purpose, and public libraries, lots with the buildings thereon used exclusively for religious worship, church parsonages, church schools and public cemeteries, shall be exempt from taxation, and such other property as the legislature may by general law provide.

Wyo. Const. art. 15, § 12 (emphasis added). The legislature has chosen to expressly exempt from taxation certain property of cities and towns. The exemptions are stated in Wyo.Stat. § 39-1-201(a)(v)(C) (1994), which provides, in pertinent part:

(a) The following property is exempt from property taxation:

* * * * * *

(v) Property of Wyoming cities and towns owned and used primarily for a governmental purpose including:

* * * * * *

(C) City or town halls, police stations and equipment, traffic control equipment, garbage collection and disposal equipment and lands and buildings used to service and repair the halls, stations or equipment[.]

(Emphasis added.)

The Board and the City present differing interpretations of the language of these governing provisions. The Board advocates the view that exemption from taxation depends upon proof that the use by DEQ of the property is reasonably necessary or essential to the efficient operation and maintenance of the City Hall. The City argues that the law permits the consideration of "stacked" governmental purposes. In the City's view, the City Hall is being partially utilized for a municipal governmental purpose and partially utilized for a state governmental purpose. Therefore, the property is exempt from taxation because no nongovernmental activities are taking place on the property owned by the City. The Board and the City both find support for their positions in prior decisions of this court. However, we are unable to agree that mandatory precedent supports either of the interpretations offered by the parties because the parties ignore the importance of using a property "primarily" for a "governmental purpose."

In City of Cheyenne v. Sims, 521 P.2d 1347, 1348-49 (Wyo.1974), we noted that municipal property is not automatically exempt from taxation under our Constitution and laws. The taxable status of property owned by a governmental entity must be determined as a question of fact by the use made of the property. Id. at 1349. The property will be found to be exempt only "when used primarily for a governmental purpose." Id.

In City of Cheyenne v. Board of County Com'rs of Laramie County, 484 P.2d 706, 707 (Wyo.1971), Laramie County sought to collect property taxes for several buildings owned by the City of Cheyenne at its municipal airport and leased to private corporations or individuals. Writing for the court, Justice Gray began by noting that our Constitution had been amended in 1957 to eliminate automatic exemptions from taxation based on ownership of property by a governmental entity. Id. The amendment limited the power of the legislature to exempt municipal property from taxation by inserting the requirement that exempt property must be "used primarily for a governmental purpose." Id. at 708. "The problem then gets down to a determination...

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