Town of Sudbury v. Commissioner of Corporations and Taxation

• Decision Date: 24 December 1974
• Citation: 321 N.E.2d 641,366 Mass. 558
• Parties: TOWN OF SUDBURY et al. 1 v. COMMISSIONER OF CORPORATIONS AND TAXATION et al. 2
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

Page 641

321 N.E.2d 641

366 Mass. 558

TOWN OF SUDBURY et al. ¹ v. COMMISSIONER OF CORPORATIONS AND TAXATION et al.²

Supreme Judicial Court of Massachusetts, Suffolk.

Argued Nov. 7, 1974.

Decided Dec. 24, 1974.

David Lee Turner and Stuart DeBard, Boston, for Town of Sudbury and others.

Lawrence T. Bench, Asst. Atty. Gen., for State Tax Commission.

Augustus F. Wagner, Jr., Town Counsel, Town of Bourne, Alan A. Green, Hyannis, Town Counsel, Town of Sandwich and Robert W. Harrington, Boston, for the Towns of Bourne and Sandwich, amici curiae, joined in a brief. Michael B. Elefante, Belmont, for City Solicitors and Town Counsel Assn., amicus curiae, submitted a brief.

Present TAURO, C.J., and REARDON, QUIRICO, BRAUCHER, HENNESSEY, KAPLAN and WILKINS, JJ.

BRAUCHER, Justice.

We are asked to define the proper role of the Commissioner of Corporations and Taxation (commissioner) and the State Tax Commission (commission) in enforcing the constitutional and statutory duty of assessors to tax property at its full and fair cash value. See Assessors of Lynn v. Shop-Lease Co., Inc., --- Mass. ---, ---, ^a 307 N.E.2d 310 (1974), and cases cited. The commissioner and the commission contend that their functions are advisory and educational only, and not directive. See Rep. A.G., Pub.Doc.No.12 (1964) 208, 210. We hold that declaratory relief is appropriate, and that the commissioner and the commission have underestimated their power and authority. We leave it to them to execute the laws, but retain jurisdiction in the county court so that they may make a report of progress in six months.

The plaintiffs are the town of Sudbury and some of its officials. They filed in the county court a bill in equity for declaratory and injunctive relief against the commissioner and the commission. The defendants filed a demurrer and an answer. A single justice of this court referred the case to a master, and later confirmed the master's report and reported the case to the full court without decision on the pleadings and the master's report. Fourteen cities and towns joined in the plaintiffs' reply brief as friends of the court and three additional towns filed two separate briefs. The City Solicitors and Town Counsel Association also filed a brief as friend of the court, concerned only with the implementation of any relief awarded.

1. Master's Findings. We summarize the master's findings. Partly as a result of a severe shrinkage in real estate values during the depression years of the 1930's the practice of fractional valuation of real estate for tax purposes became widespread, and until the decision in Bettigole v. Assessors of Springfield, 343 Mass. 223, 178 N.E.2d 10 (1961), most real estate in the Commonwealth was assessed at figures well below fair cash values as market values steadily increased. Since 1966 more than half of the 351 cities and towns in the Commonwealth have gone through a revaluation process, but others continue to assess at ratios well below full and fair cash value and to assess different classifications of real estate at different percentages of that value. Revaluation, often with the aid of an outside appraisal firm, is a one-shot performance, and in an inflationary economy is soon out-of-date, sometimes even within a year. The use of fractional assessments in some towns and full assessments in others discriminates against the elderly and others in the latter towns who are entitled to dollar amount exemptions on assessed value. G.L. c. 59, § 5.

As of January 1 of even-numbered years the commission establishes equalized valuations of taxable property for each city and town. For 1972 the assessment ratios (ratio of local assessed value to estimated full market value) ranged from 19% to 100%. The 1972 equalized valuations were in many instances well below full and fair market value, but they tended to approximate full and fair cash value in cities and towns which had caused revaluations to be made. Thus in each of nine towns which revalued in 1973, the 1972 equalized valuation was substantially exceeded by the 1973 assessed valuation; the total increase was more than 60%. Sudbury was one of the towns that assess property at or near its full and fair cash value.

The equalization process for 1974 was improved in quality, but there is no assurance that the final 1974 equalized valuations approximate full and fair cash values. Equalized valuations are largely based on the ratio of assessments to sales for each of four classifications of real estate--commercial, industrial, residential and vacant land. The determination of such ratios lacked precision in several respects. Sales data failed to supply sufficient information to ensure that only arm's-length sales were used, the frequency of sales varied with the types of property, and sales of commercial and industrial property were inadequate in number. Appraisers were expected to make appraisals of commercial and industrial property in far less time than was needed. With the resources available for the preparation of the 1974 equalized valuations, those valuations are subject to serious reservations.

The equalized valuations established by the commission play an important part in determining substantial amounts to be distributed to each city and town as school aid, highway funds, and lottery funds, and in apportioning the burden of county and other taxes. The effect of a change in equalized valuation is shown in the case of Westborough, where the equalized valuation used for 1974 was almost double that used for 1972, the school aid percentage dropped from 40% to 15% (the minimum), and the dollar entitlement for school aid dropped from $1.1 million to $.4 million. The impact of such a change is also illustrated by the school aid entitlement of Sudbury. In 1974 Sudbury was entitled to $1.1 million on the basis of 1972 equalized valuations. The defendants calculated that, if the improved 1971 equalized valuations had been used, Sudbury would have been entitled to $1.7 million.

The commission has no long-range plan for staffing and electronics data processing. In addition to supplying to local assessors information on property tax laws and forms for reports, it has conducted voluntary training programs for them on valuation procedures and practices. It has not promulgated uniform standards for assessment at fair cash value nor have sanctions been invoked to enforce such assessment. In June, 1973, it warned delinquent assessors that failure to file required information would result in loss of the right to appeal proposed equalized valuations. G.L. c. 58, § 10. No steps have been taken to suspend or remove an assessor for failure to assess property at full and fair cash value. No commissioner has issued a formal report on the performance of assessors to their mayor or selectmen.

Experience in other States demonstrates that under the authority of a court decision or a statute the State department of taxation can enforce acceptable uniformity inlocal assessment practices, can substantially accelerate the trend toward local assessment at full and fair cash value, and can through refinement of the equalization process produce equalized valuations with acceptable uniformity and within acceptable reach of full and fair cash value. The master made detailed findings with respect to Kentucky, New Jersey and Wisconsin.

The commissioner and the commission interpret their role in the administration of the work of local assessors as advisory and educational rather than as directory. If so directed and if given the necessary resources, they would undertake to compel changes in local assessing practices, where necessary, with the intent of achieving full and fair cash valuation, and to refine the equalization process in order to produce equalized valuations with acceptable uniformity, and within acceptable reach of full and fair cash value. Given the authority to compel local assessors to assess property at its full and fair cash value, the commissioner and the commission would need increased funding, more personnel, and resources such as computer assistance to do a satisfactory job.

The time and resources necessary for satisfactory improvement in assessment and equalization are matters of estimate and would vary with the methods adopted. Property-by-property appraisals in communities assessing well below full and faircash value would take several years and would soon become obsolete in a rapidly rising market. A system assuring yearly updating would require careful study and report from qualified experts, expansion of the capabilities of the responsible bureau, and its continuing intensive effort. A reasonable estimate of time for this approach is four years. Percentage adjustments in the various classifications of real estate, based on reasonably current ratios of assessments to sales, could be achieved within a year's time if the necessary resources were made available. The result would be an improvement over existing conditions but not a final solution.

Other findings of the master are referred to hereafter.

2. The duties of assessors. The findings of the master disclose that illegal assessments have long been the rule rather than the exception throughout much of the Commonwealth. The duty of assessors is to assess property at its 'fair cash valuation.' G.L. c. 59, § 38. Bettigole v. Assessors of Springfield, 343 Mass. 223, 230--232, 178 N.E.2d 10 (1961). Leto v. Assessors of Wilmington, 348 Mass. 144, 146--147, 202 N.E.2d 922 (1964). Shoppers' World, Inc. v. Assessors of Framingham, 348 Mass. 366, 371--372, 203 N.E.2d 811 (1965). Assessors of Lynn v. Shop-Lease Co. Inc., --- Mass. ---, --- ^b, 307 N.E.2d 310 (1974). The assessor's oath of office includes an oath that he 'will neither overvalue nor undervalue any property subject to taxation.' G.L. c. 41, § 29. Knowing violation for any fraudulent or corrupt purpose is a crime. G.L. c. 41, § 30. He is to subscribe,...