Williams Natural Gas Co. v. State Bd. of Equalization

Decision Date20 December 1994
Docket NumberNo. 84097,84097
Citation1994 OK 150,891 P.2d 1219
PartiesWILLIAMS NATURAL GAS COMPANY, Williams Pipe Line Company and Williams Telecom Group, Petitioners, v. The STATE BOARD OF EQUALIZATION and the Oklahoma Tax Commission, Respondents.
CourtOklahoma Supreme Court

Hall, Estill, Hardwick, Gable, Golden & Nelson by Graydon Dean Luthey, Jr. and Kenneth L. Hunt, and William G. von Glahn, Associate Gen. Counsel, The Williams Companies, Tulsa, for petitioners.

Susan Brimer Loving, Atty. Gen. and Douglas F. Price, Asst. Atty. Gen., Oklahoma

City, for respondent State Bd. of Equalization.

David Allen Miley, Asst. Gen. Counsel, Oklahoma Tax Com'n, Oklahoma City, for respondent Oklahoma Tax Com'n.

Stipe Law Firm by Gene Stipe, and J. Rick Faling, and Stuart Strasner, Oklahoma City, for intervenors Oklahoma State School Bd. Ass'n and Ass'n of County Com'rs of Oklahoma.

McKenzie, Moffett, Elias & Books by William K. Elias, Oklahoma City, for intervenors ANR Pipeline Co., Colorado Interstate Gas Co., El Paso Natural Gas Co., Transwestern Pipeline Co., Enron Oil & Gas Marketing, Black Marlin Pipeline Co., Explorer Pipeline Co., Aquila Gas Systems, Inc., Sun Pipeline Co., Mid-Continent Pipe Line Co., Northern Natural Gas Co., Natural Gas Pipeline Co. of North America, Western Gas Resources, Inc.

Gable & Gotwals by Oliver S. Howard, and Teresa D. Adwan, Tulsa, Additional Counsel for intervenors ANR Pipeline Co. and Colorado Interstate Gas Co.

Cleeta John Rogers, Gen. Counsel, and Jon D. Sellers, Oklahoma City Public Schools, Oklahoma City, for intervenors Independent School Dist. No. 89 of Oklahoma County, Okl.

Doerner, Stuart, Saunders, Daniel, Anderson & Biolchini by John B. Turner, and Rebecca M. Fowler, Tulsa, for intervenor Public Service Co. of Oklahoma.

HODGES, Chief Justice.

Three public service corporations, Williams Natural Gas Company, Williams Pipe Line Company, and Williams Telecom Group (Williams Companies) ask this Court to assume original jurisdiction. They request a writ prohibiting the State Board of Equalization (Board) from assessing their public service property at a greater ratio than that applied to public service property owned by railroads and airlines. Original jurisdiction is assumed and the petition for a writ of prohibition is denied.

The Williams Companies assert that the assessment of their property at a ratio higher than that used to assess railroad and airline property is unlawfully discriminatory. They have challenged the Board's assessment in the Court of Tax Review. There are seventy to ninety other challenges pending in that court. All were brought by public service corporations seeking to have their assessment ratio lowered to the ratio applied to railroad and airline companies.

The Board has responded through the Attorney General to the Williams Companies' application to this Court to assume original jurisdiction. The Oklahoma Tax Commission has adopted that response. Motions to intervene have been granted to the State School Board Association, the Association of County Commissioners, several pipeline companies with cases pending before the Court of Tax Review, the Oklahoma City Public Schools, and Public Service Company of Oklahoma. Oral arguments were heard on this matter on October 19, 1994.

ORIGINAL JURISDICTION

The Williams Companies, the Board, the School Board Association, and the Oklahoma City Schools ask this Court to assume original jurisdiction on the basis of publici juris. They point to the many other challenges pending in the Court of Tax Review which raise the issues presented by this original action. They urge resolution of the "pure questions of law" raised in this action which must ultimately be determined by this Court. Further, they point out that if the matter is not resolved before April 1, 1995, when the ad valorem taxes are due, the taxes will be paid under protest. Those funds will then be placed in an escrow account and will be unavailable to schools and county governments.

Every recipient of ad valorem tax revenue is potentially impacted by this action. These include common schools (K-12), vocational technical education, county government, county health departments, emergency medical service districts, solid waste management districts, county and city/county libraries, and cities (sinking funds only). The projected revenue shortfall for these institutions is $63.8 million. This represents 6.8% of total property tax revenue.

This Court has assumed original jurisdiction pursuant to the doctrine of publici juris to address ad valorem tax issues emanating from the Board. See State ex rel. Poulos v. State Bd. of Equalization, 646 P.2d 1269 (1982); State ex rel. Poulos v. State Bd. of Equalization, 552 P.2d 1134 (1975). The public importance of the issues presented by this action are heightened by the adverse impact on school districts and county government if the controversy is not rapidly resolved. In addition, judicial economy will be served by today's resolution of the central issues in numerous ad valorem tax protests. Original jurisdiction is therefore assumed to address the issues raised by the Williams Companies.

BACKGROUND

In Oklahoma's Ad Valorem Tax Code, the Legislature has listed three classes of property: 1) real property; 2) personal property; and 3) public service corporation property. Okla.Stat. tit. 68, § 2803(A) (1991). Real and personal property are assessed locally by county officials. The Board, however, is "responsible for valuation of railroad, airline and public service corporation property and the adjustment and equalization of all property values both centrally and locally assessed." Id. at § 2802(26). The Board assesses ad valorem taxes on public service corporations by 1) establishing a fair cash value for property and 2) fixing an assessment percentage for property. The second step is challenged in this action.

During the 1960s and 1970s, Congress became concerned about the number of failing railroads. See Chrysler Rail Transp. Corp. v. Holt, 845 F.Supp. 463, 465 (W.D.Mich.1994). Congress found that the states had been forcing railroads to carry more than their share of the tax burden. To prevent discriminatory taxation of railroad property by the states, Congress enacted the Railroad Revitalization and Regulatory Reform Act of 1976 (4-R Act), 49 U.S.C. § 11503 (1988). The Act provides in part:

The following acts unreasonably burden and discriminate against interstate commerce, and a State, subdivision of a State, or authority acting for a State or subdivision may not do any of them:

(1) assess rail transportation property at a value that has a higher ratio to the true market value of the rail transportation property than the ratio that the assessed value other commercial and industrial property has to the true market value of the other commercial and industrial property.

(2) levy or collect a tax on an assessment that may not be made under clause (1) of this subsection.

(3) levy or collect an ad valorem property tax on rail transportation property at a tax rate that exceeds the tax rate applicable to commercial and industrial property in the same assessment jurisdiction.

Id. at § 11503(b) (emphasis added).

Tax discrimination against airline property which burdens interstate commerce was similarly remedied under provisions of the Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA), 49 U.S.C.App. § 1513 (1988). That Act provides in part:

(1) The following acts unreasonably burden and discriminate against interstate commerce and a State ... may not do any of them:

....

(C) levy or collect an ad valorem property tax on air carrier transportation property at a tax rate that exceeds the tax rate applicable to commercial and industrial property in the same assessment jurisdiction.

Id. at § 1513(d)(1)(C).

In response to these federal acts, the Oklahoma Legislature enacted section 2864(C) of title 68. That section provides that "[i]n determining the assessment ratio for all air carrier property and all railroad property, the State Board shall only consider the ratio of the aggregate assessed value of the fair cash value of the locally assessed commercial/industrial real property of the state."

In June of this year, the Board adopted an assessment ratio of 12.08% for airline and railroad property. In July, the Board adopted a ratio of 22.85% for the Williams Companies and other public service corporations.

The Williams Companies claim the assessments 1) violate the Equal Protection Clause of the Fourteenth Amendment to the United States Constitution, 2) violate article X, section 5 of the Oklahoma Constitution which requires uniform taxation within a tax class, and 3) violate sections 2803(C) and 2847 of the Ad Valorem Tax Code, Okla.Stat. tit. 68, §§ 2801-2899 (1991), which require uniform treatment in ad valorem taxation.

EQUAL PROTECTION

The Williams Companies assert that the Board's assessments violate the Equal Protection Clause of the Fourteenth Amendment to the United States Constitution because their property subjects them to a higher assessment percentage than the assessment percentage applied to the property of airlines and railroads. Thus, they argue, their property has been subjected to discriminatory treatment. The Board responds that the Legislature has created a subclass of property for ad valorem taxation purposes of public service corporations, the railroad and airline companies, in response to the federal legislation.

The Equal Protection Clause of the Fourteenth Amendment requires that no state "deny to any person within its jurisdiction...

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