Toll Northville Ltd. v. Mtp. of Northville

• Decision Date: 05 February 2008
• Docket Number: Calendar No. 9.,Docket No. 132466.
• Citation: 480 Mich. 6,743 N.W.2d 902
• Parties: TOLL NORTHVILLE LTD and Biltmore Wineman LLC, Plaintiffs-Appellees v. TOWNSHIP OF NORTHVILLE, Defendant-Appellant.
• Court: Michigan Supreme Court

743 N.W.2d 902

480 Mich. 6

TOLL NORTHVILLE LTD and Biltmore Wineman LLC, Plaintiffs-Appellees v. TOWNSHIP OF NORTHVILLE, Defendant-Appellant.

Docket No. 132466.

Calendar No. 9.

Supreme Court of Michigan.

Argued October 4, 2007.

Decided February 5, 2008.

Hoffert & Associates, P.C. (by Myles B. Hoffert and David B. Marmon), Farmington Hills, for the plaintiff.

Bauckham, Sparks, Rolfe, Lohrstorfer & Thall, P.C. (by Robert E. Thall), Kalamazoo, for the defendant.

Michael A. Cox, Attorney General, Thomas L. Casey, Solicitor General, and Ross H. Bishop, Assistant Attorney General, for the State Tax Commission.

James W. Porter, P.C. (by James W. Porter), Kalamazoo, for the Michigan Townships Association, the Michigan Municipal League, the Michigan Assessors Association, and the Michigan Association of School Boards.

McClelland & Anderson, L.L.P. (by Gregory L. McClelland and Melissa A. Hagen), Lansing, for the Michigan Association of Home Builders and the Michigan Association of Realtors.

OPINION

PER CURIAM.

At issue are: (1) whether MCL 211.34d(1)(b)(viii) is constitutional and (2) whether public-service improvements, such as water service, sewer service, or utility service, constitute "additions" to property within the meaning of Const. 1963, art. 9, § 3, as amended by Proposal A. We affirm in part the judgment of the Court of Appeals that held that MCL 211.34d(1)(b)(viii) is unconstitutional because it is inconsistent with the meaning of "additions" as used in Const. 1963, art. 9, § 3 and that public-service improvements consisting of public infrastructure located on utility easements or land that ultimately becomes public do not constitute "additions" to property within the meaning of that constitutional provision. However, we vacate in part the judgment of the Court of Appeals that incorrectly defined the term "ambiguous" and mistakenly concluded that taxing property on the basis of value added from available public services and also taxing utility lines as personal property of the utility companies results in "double taxation."

I. FACTS AND PROCEDURAL HISTORY

Plaintiffs Toll Northville and Biltmore Wineman LLC are engaged in developing real property. During the tax years 2001 and 2002, plaintiffs invested millions of dollars to install infrastructure consisting of physical improvements, such as a primary access road, streetlights, sewer service, water service, electrical service, natural gas service, telephone service, and sidewalks for condominium and single-family residential lots located in Northville Township. This infrastructure development is required before a final plat for a subdivision can be approved. Relying on MCL 211.34d(1)(b)(viii), defendant Northville Township increased plaintiffs' property-tax assessments for the tax years 2001 and 2002 on the basis of the enhanced value resulting from the public-service improvements that were made to the land.

Plaintiffs challenged their assessments before the Michigan Tax Tribunal, claiming that the assessment increases violated Const. 1963, art. 9, § 3. The Michigan Tax Tribunal stayed its proceedings so that this declaratory action regarding the constitutionality of the statute could proceed in circuit court. The circuit, court held that MCL 211.34d(1)(b)(viii) is unconstitutional because it taxes improvements of real property beyond the meaning of "additions" when Proposal A was passed. The circuit court determined that plaintiffs could not be taxed on the basis of the public-service improvements because the improvements were not attached to the separate lots and were either dedicated to the municipality or given to public utilities.

The Court of Appeals affirmed the trial court's judgment, concluding that the term "additions" as used in Const. 1963, art, 9, § 3 refers to improvements that become part of the real property as structures or fixtures, but not to public-service improvements. Toll Northville, Ltd. v. Northville Twp., 272 Mich.App. 352, 726 N.W.2d 57 (2006). The Court of Appeals concluded that, although at the time of the installation of the public-service improvements, plaintiffs, as developers, owned the parcel of land "on which the public service improvements are installed," plaintiffs did not owe property tax on the improvements because title to these improvements would ultimately vest in the municipality or a utility company. Id. at 375, 726 N.W.2d 57. We granted defendant's application for leave to appeal. 478 Mich. 863, 731 N.W.2d 427 (2007).¹

II. STANDARD OF REVIEW

A trial court's ruling in a declaratory action is reviewed de novo. Theatre Control Corp. v. Detroit, 365 Mich. 432, 436, 113 N.2d 783 (1962). Matters of constitutional and statutory interpretation and questions concerning the constitutionality of a statutory provision are also reviewed de novo. Goldstone v. Bloomfield Twp. Pub. Library, 479 Mich. 554, 558, 737 N.W.2d 476 (2007); Phillips v. Mirac, Inc., 470 Mich. 415, 422, 685 N.W.2d 174 (2004); Halloran v. Bhan, 470 Mich, 572, 576, 683 N.W.2d 129 (2004). When interpreting constitutional provisions, our primary objective "`is to realize the intent of the people by whom and for whom the constitution was ratified.'" Studier v. Michigan Pub. School Employees' Retirement Bd., 472 Mich. 642, 652, 698 N.W.2d 350 (2005), quoting Wayne Co. v. Hathcock, 471 Mich. 445, 468, 684 N.W.2d 765 (2004). In realizing this intent, we apply the plain meaning of terms used in the constitution unless technical legal terms were employed. Phillips, supra at 422, 685 N.W.2d 174.

"[I]f a constitutional phrase is a technical legal term or a phrase of art in the law, the phrase will be given the meaning that those sophisticated in the law understood at the time of enactment unless it is clear from the constitutional language that some other meaning was intended." [WPW Acquisition Co. v. City of Troy, 466 Mich. 117, 123, 643 N.W.2d 564 (2002), quoting Mich. Coalition of State Employee Unions v. Civil Service Comm., 465 Mich. 212, 223, 634 N.W.2d 692 (2001).]

Statutes are presumed constitutional unless the unconstitutionality is clearly apparent. McDougall v. Schanz, 461 Mich. 15, 24, 597 N.W.2d 148 (1999).

III. ANALYSIS

This appeal addresses legislation enacted after Michigan voters adopted Proposal A in 1994, which amended article 9, § 3 of the Michigan Constitution. As amended by Proposal A, Const. 1963, art. 9, § 3 provides, in relevant part:

The legislature shall provide for the uniform general ad valorem taxation of real and tangible personal property not exempt by law except for taxes levied for school operating purposes. The legislature shall provide for the determination of true cash value of such property; the proportion of true cash value at which such property shall be uniformly assessed, which shall not, after January 1, 1966, exceed 50 percent; and for a system of equalization of assessments. For taxes levied in 1995 and each year thereafter, the legislature shall provide that the taxable value of each parcel of property adjusted for additions and losses, shall not increase each year by more than the increase in the immediately preceding year in the general price level, as defined in section 33 of this article, or 5 percent, whichever is less until ownership of the parcel of property is transferred. When ownership of the parcel of property is transferred as defined by law, the parcel shall be assessed at the applicable proportion of current true cash value. [Emphasis added.]

The purpose of Proposal A was

to generally limit increases in property taxes on a parcel of property, as long as it remains owned by the same party, by capping the amount that the "taxable value" of the property may increase each year, even if the "true cash value," that is, the actual market value, of the property rises at a greater rate. However, a qualification is made to allow adjustments for "additions." [WPW Acquisition Co, supra at 121-122, 643 N.W.2d 564.]

Thus, as amended, the constitution caps general property tax increases during the course of a property owner's ownership, but permits additional taxation based on increases in value arising from "additions" in the year they are added to the land.

When Proposal A was adopted . . ., the General Property Tax Act defined "additions" to mean

"all increases in value caused by new construction or a physical addition of equipment or furnishings, and the value of property that was exempt from taxes or not included on the assessment unit's immediately preceding year's assessment role." [Id. at 122, 643 N.W.2d 564, quoting the text of MCL 211.34d(1)(a) in effect at the time of Proposal A's adoption.]

After Proposal A was adopted, the Legislature enacted several amendments of MCL 211.34d. As it now stands, MCL 211.34d provides, in pertinent part:

(1) As used in this section or section 27a, or section 3 or 31 of article IX of the state constitution of 1963:

(a) For taxes levied before 1995, "additions" means all increases in value caused by new construction or a physical addition of equipment or furnishings, and the value of property that was exempt from taxes or not included on the assessment unit's immediately preceding year's assessment roll.

(b) For taxes levied after 1994, "additions" means, except as provided in subdivision (c), all of the following:

* * * (viii) Public services. As used in this subparagraph, "public services" means water service, sewer service, a primary access road, natural gas service, electrical service, telephone service, sidewalks, or street lighting. For purposes of determining the taxable value of real property under section 27a, the value of public services is the amount of increase in true cash value of the property attributable to the available public services multiplied by 0.50 and shall be added in the calendar year following the calendar year when those public services are initially available.

The issue is the constitutionality of MCL 211.34d(1)(b)(viii...