Sunflower Racing, Inc. v. Board of County Com'rs of Wyandotte County

• Decision Date: 09 December 1994
• Docket Number: No. 70316,70316
• Citation: 256 Kan. 426,885 P.2d 1233
• Parties: SUNFLOWER RACING, INC., Appellant, v. BOARD OF COUNTY COMMISSIONERS OF WYANDOTTE COUNTY, et al., Appellees.
• Court: Kansas Supreme Court

Page 1233

885 P.2d 1233

256 Kan. 426

SUNFLOWER RACING, INC., Appellant, v. BOARD OF COUNTY COMMISSIONERS OF WYANDOTTE COUNTY, et al., Appellees.

No. 70316.

Supreme Court of Kansas.

Dec. 9, 1994.

Syllabus by the Court

1. The scope of judicial review of agency actions is set out in K.S.A. 77-601 et seq. The burden of proving the invalidity of an agency action is on the party asserting invalidity. The district court is to make a separate and distinct ruling on each material issue on which the court's decision is based and grant relief only if it determines any one or more of the factors set out in the statutes exist.

2. Under the Act for Judicial Review and Civil Enforcement of Agency Actions, the district court is restricted to considering the grounds for relief set forth in K.S.A. 77-621(c); it must presume the agency's findings valid, and it may not set aside an agency order merely because the court would have reached a different conclusion if it had been the trier of fact. However, it may set aside the agency's finding when the finding is not supported by substantial competent evidence. In making its determinations, the district court shall take due account of the rule of harmless error, and an agency's action may be set aside by the court if it is otherwise unreasonable, arbitrary, or capricious.

3. An agency's action is arbitrary and capricious if it is unreasonable or without foundation in fact.

4. An objection based on the absence of subject matter jurisdiction must be considered and may be effectively raised at any time. Such an objection may be raised for the first time in the district court or an appellate court, or on the appellate court's own motion.

5. In determining whether provisions of a statute are mandatory or directory, it is a general rule that where strict compliance with a provision is essential to the preservation of the rights of parties affected and to the validity of the proceeding, the provision is mandatory, but where the provision fixes a mode of proceeding and a time within which an official act is to be done, and is intended to secure order, system, and dispatch of the public business, the provision is directory.

6. No law shall be revived or amended unless the new act contains the entire act revived or the section or sections amended, and the section or sections so amended shall be repealed. Kan. Const. art. 2, § 16. The repeal of a statute does not revive a statute previously repealed, nor does the repeal affect any right which accrued, any duty imposed, any penalty incurred, or any proceeding commenced under or by virtue of the statute repealed. The provisions of any statute, so far as they are the same as those of any prior statute, shall be construed as a continuation of the prior provision and not as a new enactment.

7. Once K.S.A. 74-2436, which provided for a two-member quorum of the Board of Tax Appeals, was repealed by implication upon the enactment of K.S.A. 74-2433 with its three-member quorum provision, the two-member quorum statute was not revived by the passage of S.B. 462.

R. Scott Beeler, of Gage & Tucker, Overland Park, argued the cause, and Charles J. Williams, of the same firm, was with him on the briefs, for appellant.

Linda A. Terrill, of Neill & Terrill, Overland Park, argued the cause and was on the brief, for appellees.

LOCKETT, Justice:

Sunflower Racing, Inc., (Sunflower) the owner and operator of the Woodlands horse and dog racing facility, appeals the district court's judgment affirming the State Board of Tax Appeals' (BOTA) denial of its tax protest and request for equalization of the appraised value of the property for ad valorem tax purposes for the years 1990 and 1991. This court transferred the case from the Court of Appeals to its docket pursuant to K.S.A. 20-3018(c). Sunflower claims that (1) BOTA was improperly constituted when it ruled on this case; (2) BOTA's decision was not supported by substantial competent evidence; (3) BOTA's order was arbitrary, capricious, and unreasonable, and the district court applied an inappropriate standard of review; and (4) the district court erred by failing to remand the case to BOTA for it to make a factual determination of comparable properties within the state. Although they did not file a cross-appeal, the appellees Board of Wyandotte County Commissioners, county treasurer, county appraiser, and county clerk (the county) assert that the district judge erred in finding that Sunflower's appeal to the district court was timely filed.

In 1989, all county appraisers in this state were charged with the task of conducting a mass reappraisal of all real estate in Kansas. The Wyandotte County Appraiser reappraised the 396-acre Woodlands racetrack for the years 1990 and 1991 using the computerized mass appraisal method. Sunflower appealed the county's assessment of ad valorem taxes to BOTA.

Broadly stated, BOTA's statutory authority includes the power to hear appeals from the Director of Property Valuation and the Director of Taxation (K.S.A. 74-2437); to act as the State Board of Equalization (K.S.A. 74-2439); to conduct hearings and decide applications for refund of protested taxes (K.S.A. 74-2439); and to review taxpayers' applications for property exemption from taxation (K.S.A.1993 Supp. 79-213). See Salina Airport Authority v. Board of Tax Appeals, 13 Kan.App.2d 80, 87, 761 P.2d 1261, rev. denied 244 Kan. 738 (1988). BOTA is composed of five members. The votes of three members are required for any action to be taken by the board. K.S.A. 74-2433. BOTA has authority to adopt rules and regulations relating to the performance of its duties and particularly with reference to its procedure for hearings and appeals. K.S.A. 74-2437(c).

Construction of the Woodlands racing facility began in 1988. On May 29 and 30, 1991, BOTA set the value of the Woodlands property at $42,019,760 for 1990, noting it was "partially completed," and $60,336,520 for 1991. BOTA noted that Sunflower's racing facility, a combined horse- and dog-racing track, is unique because there is no other similar facility in the United States. In analyzing the valuation, BOTA acknowledged that the three generally accepted approaches to appraising property are the cost, market data, and income methods of valuation. See The Appraisal of Real Estate, p. 51 (6th ed. 1973). The county appraiser used the cost method based on actual construction costs, after investigating other appraisal methods.

Sunflower's own appraiser utilized all three methods of appraising property in determining the Woodlands' valuation. In arriving at his valuation under each of the methods, Sunflower's appraiser reviewed the sale of other facilities located in other states, including the Birmingham (Alabama), Canterbury Downs (Minnesota), and Prairie Meadows (Iowa) parimutuel racing facilities. The Birmingham track was built for $86 million. After operating for one year, it was placed under supervision of a bankruptcy court, and there was allegedly a pending sale for $19.5 million. Canterbury Downs was built for $70 million in 1986, never made a profit, and was sold for $23 million. BOTA observed that "[v]irtually all of Sunflower's witnesses testified as to the declining health of the horse racing industry" and that alternative forms of gambling reduced the amount of money bet at the facility.

In its determination of the proper valuation of the Woodlands racing facility, BOTA found that although the county's appraisal and Sunflower's appraisal of the property seemed diametrically opposed, they were in fact not so far apart. It observed that the fundamental difference between the valuations of the racing facility was the appraisers' focus on the presence or absence of economic obsolescence. BOTA determined that the racetrack was a special purpose facility and that no comparable dual purpose racing facility existed. After reviewing the evidence, BOTA concluded that facilities used for racing purposes are not sold unless they are in financial difficulty. It observed that the two sales used by Sunflower's appraiser as indicators of market value were distressed sales and that prior to their sale both of the facilities had a history of idleness or bankruptcy. BOTA pointed out that Sunflower's appraiser reached the same value when using the cost, market, or income methods of appraising the property. BOTA concluded that Sunflower's valuation was not a credible indicator of economic obsolescence, rejected Sunflower's method of determining economic obsolescence, and approved the county's cost approach valuation for the appraisal.

Sunflower filed a petition for rehearing and reconsideration, raising several issues. K.S.A. 74-2426(b). In its petition Sunflower pointed out that the hearing panel was composed of only three members and that the final BOTA order was signed by some members of BOTA who were not present at the hearing and had been appointed subsequent to the hearing. Sunflower argued that it was not preferable for panel members who were not assigned or could not participate in the hearing to read a transcript of the evidence presented at the hearing as opposed to actually hearing the evidence and questioning the witnesses. Sunflower argued that this procedure was fundamentally unfair and required a rehearing by all members of the present board.

In deciding whether to grant Sunflower's request for a rehearing, BOTA noted it was standard practice for a majority of panel members not to participate in the evidentiary hearing. BOTA noted that K.S.A. 74-2433 requires the vote of only three members for any action taken by the board. BOTA determined there was no "inherent defect" in the process used, reviewed the record, and affirmed its prior order.

Sunflower appealed BOTA's 1990 and 1991 valuations of its racing facility, and its appeals were consolidated in the district court. When the orders of BOTA are appealed, they are reviewed in the district court in...