SERVICE SYSTEM ASSOC INC V CITY OF HUNTINGTON WOODS
Annotate this Case
Download PDF
STATE OF MICHIGAN
COURT OF APPEALS
SERVICE SYSTEM ASSOCIATES, INC,
UNPUBLISHED
December 6, 2005
Petitioner-Appellee,
v
No. 256632
Tax Tribunal
LC No. 00-292153
CITY OF ROYAL OAK,
Respondent-Appellant.
SERVICE SYSTEM ASSOCIATES, INC,
Petitioner-Appellee,
v
No. 256649
Tax Tribunal
LC No. 00-292152
CITY OF HUNTINGTON WOODS,
Respondent-Appellant.
Before: Gage, P.J., and Hoekstra and Murray, JJ.
PER CURIAM.
In these consolidated appeals regarding property tax disputes, respondents appeal as of
right from orders of the Michigan Tax Tribunal denying respondents’ motions for summary
disposition and granting summary disposition in favor of petitioner. We affirm.
I.
Background
Petitioner is a for-profit corporation providing food and catering services to the general
public for the City of Detroit at the Detroit Zoological Park (Detroit Zoo) pursuant to a formal
agreement. The Detroit Zoo is located in the cities of Royal Oak and Huntington Woods.
Accordingly, respondents sought to tax petitioner for its property, including equipment, buildings
and building improvements, located at the Detroit Zoo. Petitioner filed separate petitions against
respondents, alleging that it did not owe personal property taxes to respondents for the subject
property because it did not own the property at the Detroit Zoo, rather the property belonged to
the City of Detroit and the Detroit Zoo. Petitioner claimed that the concession exemption in
MCL 211.181(2)(b) applied.
-1-
Respondents moved for summary disposition, denying petitioner’s assertion that the
property was entirely owned by the City of Detroit and arguing that the agreement created a
landlord-tenant relationship and that petitioner’s claim that the concession exemption applied
was incorrect because that statute applied to real property, and the subject property constituted
personal property for taxation purposes. Petitioner filed separate motions for summary
disposition against respondents, contending that it was exempt from taxation pursuant to MCL
211.181(2)(b) since it provided a concession at the Detroit Zoo that was open to the public.
Petitioner further contended that it did not own or lease any of the buildings or building
improvements at the Detroit Zoo and that the Detroit Zoo did not relinquish any control or
possession of the property to it.
After review of the parties’ motions and the agreement in dispute, the Tax Tribunal
granted summary disposition in favor of petitioner pursuant to MCR 2.116(C)(10). The Tax
Tribunal found that petitioner and the City of Detroit formed a concession agreement and that the
City of Detroit, through its counterpart the Detroit Zoo, “heavily regulated” the petitioner’s
operation at the Detroit Zoo. The Tax Tribunal also found that petitioner’s operation was held
open and usable to the general public. Subsequently, the Tax Tribunal denied respondents’
motions for reconsideration after concluding that respondents merely reasserted arguments
addressed in its previous orders and that their objections lacked merit.
II.
A.
Analysis
Designation as a Concession Agreement
Respondents assert that the Tax Tribunal erred in determining that the agreement between
petitioner and the City of Detroit for food and catering services at the Detroit Zoo was a
concession, and therefore, exempt from taxation pursuant to MCL 211.181(2)(b). We disagree.
We review de novo a decision to grant or deny a motion for summary disposition.
Dressel v Ameribank, 468 Mich 557, 561; 664 NW2d 151 (2003). A motion for summary
disposition under MCR 2.116(C)(10) tests the factual support for a claim. Corley v Detroit Bd of
Ed, 470 Mich 274, 278; 681 NW2d 342 (2004). In evaluating such a motion, a reviewing court
must consider the whole record in the light most favorable to the nonmoving party, including
affidavits, pleadings, depositions, admissions, and other evidence offered by the parties. Id.
When the evidence demonstrates that no genuine issue of material fact exists, the movant is
entitled to judgment as a matter of law. Id. Moreover, our review of a ruling of the Tax Tribunal
is limited to determining whether the tribunal made an error of law or adopted an incorrect legal
principle. Meijer, Inc v Midland, 240 Mich App 1, 5; 610 NW2d 242 (2000).
Tax exemptions are disfavored, and the burden of proving an entitlement to an exemption
rests on the party asserting a right to the exemption. Guardian Industries Corp v Dep’t of
Treasury, 243 Mich App 244, 249; 621 NW2d 450 (2000). “However, this rule does not permit
a strained construction adverse to the Legislature’s intent.” Holland Home v Grand Rapids, 219
Mich App 384, 396; 557 NW2d 118 (1996). The General Property Tax Act (GPTA), MCL
211.1 et seq., provides that all real and personal property within the jurisdiction of this state and
not expressly exempted is subject to taxation. The Lessee-User Tax Act (LUTA), MCL 211.181
et seq., provides for taxation of leased property. However, MCL 211.181(2)(b) exempts from
taxation property “that is used as a concession at a public airport, park, market, or similar
-2-
property and that is available for use by the general public.” The LUTA seeks to eliminate the
unfair advantage that private-sector users of tax-exempt property would otherwise exert over
their competitors who lease privately owned property. Seymour v Dalton Twp, 177 Mich App
403, 410; 442 NW2d 655 (1989).
A concession has been defined as “‘a privilege or space granted or leased for a particular
use within specified premises.’” American Golf of Detroit v Huntington Woods, 225 Mich App
226, 230; 570 NW2d 469 (1997), quoting Detroit v Tygard, 381 Mich 271, 275; 161 NW2d 1
(1968). Incident to a concession is the concept of a concession holder’s responsibility to uphold
specific obligations and to maintain particular services at specified times and under specified
terms of the concession agreement. Id. at 275-276; American Golf, supra at 230. These
obligations of the concession holder must “bear a reasonable relationship to the purposes” of the
facility being operated. Tygard, supra at 276; American Golf, supra at 230. To be a concession,
the operation should be a “subsidiary business incidentally related to a public-oriented operation,
rather than a privatized, self-contained operation.” Id. at 231.
The question of what constitutes a concession for taxation purposes has been addressed in
several cases. In Seymour, supra at 408-410, which involved a public golf course owned by the
City of Muskegon and operated by a private manager, this Court ruled that the Tax Tribunal
properly determined that Muskegon did not grant the petitioner a concession. The Seymour
Court reasoned that the agreement did “little to impose obligations and restrictions” on the
petitioner that were “stated with the requisite degree of specificity.” Id. at 409. This Court
further reasoned that “conspicuously absent” from the agreement were provisions characteristic
of a concession, such as minimum hours, standards of service or oversight of operations by the
city. Id. This Court stated that the petitioner “had an unacceptable degree of discretion to run
the golf course and related facilities as he saw fit, without the imposition of obligations directed
toward the fulfillment of a public purpose.” Id.
Similarly, in Golf Concepts v Rochester Hills, 217 Mich App 21, 23; 550 NW2d 803
(1996), this Court reviewed the terms in a lease agreement between the City of Rochester Hills
that owned a public golf course and the petitioner that leased the course. The Golf Concepts
Court concluded that Rochester Hills “merely privatized the operation of the golf course,” and
thus, it did not confer a concession under the LUTA. Id. at 29. This Court stated:
The provisions in the lease contract between the parties do not rise to the
level of specific obligations on the part of petitioner, the privileged party, to
maintain particular services at specified times. The provisions do not include
requirements for minimum hours of operation, for petitioner’s standards of
service, or for respondent’s oversight of the golf course operations. While the
lease provisions demonstrate that respondent had some control over the
operations, the provisions address broader management issues rather than specific
obligations. [Id.]
However, in Kalamazoo v Richland Twp, 221 Mich App 531, 532-533; 562 NW2d 237
(1997), this Court looked to the provisions of agreements between Kalamazoo, the owner of a
public golf course, and the petitioner, the manager of the course. The Kalamazoo Court held that
the agreements created a concession for purposes of the LUTA. Id. at 539-540. This Court
noted that the agreements required the petitioner to “provide to the general public open golf,
-3-
league, and tournaments at reasonable times, to operate food and golf-equipment concessions,
and to maintain the golf course to a specified standard.” Id. at 539. This Court determined that
“[t]he specificity of the management agreements satisfied the requirement of specific obligations
to maintain particular services at specified times.” Id. This Court noted that merely privatizing
the operation of the golf course would be contrary to the purpose of the LUTA, but held that, in
contrast to Golf Concepts and Seymour, the City of Kalamazoo did not merely privatize the
operation of the course, but instead, entered into management agreements with the petitioner that
allowed Kalamazoo to retain “extensive oversight in order to protect the public purpose of
providing the general public a recreational opportunity to play golf.” Id. Given the abovementioned cases, the relevant inquiry into what constitutes a concession for taxation purposes is
whether the city specifically retained a sufficient degree of control over the lessee’s operation of
the facility to constitute a concession as in Kalamazoo, or instead, relinquished meaningful
control and in so doing privatized the operation of the facility as in Seymour, and Golf Concepts.
American Golf, supra at 233.
Here, it is undisputed that the subject property is at a public park and is available for use
by the general public. The issue then becomes whether the property satisfies the definition of a
concession pursuant to MCL 211.181(2)(b). To determine this issue, the Tax Tribunal was
required to interpret this exemption statute. Statutory interpretation is a question of law properly
interpreted by the agency that administers the statute. Golf Concepts, supra at 26. Moreover, the
Tax Tribunal was required to interpret the provisions of the agreement between the petitioner and
the City of Detroit. The interpretation of a contract is also a question of law. Burkhardt v
Bailey, 260 Mich App 636, 646; 680 NW2d 453 (2004).
In this case, the Tax Tribunal looked to the terms of the agreement between the City of
Detroit and petitioner to determine whether the City and its counterpart, the Detroit Zoo,
maintained the level of control necessary for the grant of a concession within the meaning of the
LUTA. The Tax Tribunal found that the concession agreement “heavily regulates [p]etitioner’s
abilities to conduct business freely without limitations on everyday services” and “rise[s] to the
level of imposing specific obligations on the part of [p]etitioner.” Specifically, the Tax Tribunal
found that the agreement “impose[s] standards of service, minimum hours of operation, and
oversight of [p]etitioner’s concession stand at the Detroit Zoological Institute” and “infringes on
the control of [p]etitioner’s rights, the hours that can be worked, the foods that can be sold, and
provides for unilateral termination by the Detroit Zoo.” The Tax Tribunal concluded that
“[p]etitioner is a concession that is heavily regulated by the Detroit Zoo.”
The agreement contained numerous provisions to support this determination. As in
Kalamazoo, the City of Detroit maintained substantial controls and restrictions over petitioner’s
operation. Under the agreement, the City of Detroit, through the Detroit Zoo, had daily oversight
of petitioner’s operations, including the brands of items to be sold, pricing of items for sale,
locations where items were to be sold, manner in which items were to be sold, hours of operation
and cash control procedures. As the Tax Tribunal determined, the clear language of the
agreement satisfied the statutory requirement of specific obligations to maintain particular
services at specified times. See Tygard, supra at 275-276; American Golf, supra at 230.
-4-
Therefore, we conclude that the Tax Tribunal did not err as a matter of law in ruling that,
according to the provisions of the agreement, the City of Detroit used the property as a
concession for purposes of the LUTA.1
Furthermore, we decline to address respondents’ related assertion that a finding that an
agreement is a concession is inconsistent with a finding that a party held independent contractor
status. Respondents failed to cite legal authority to support this position. This Court will not
search for authority to sustain a party’s position. Lionel Trains, Inc v Chesterfield Twp, 224
Mich App 350, 354; 568 NW2d 685 (1997). Nevertheless, we note that there is legal authority
contrary to respondents’ position. In Kalamazoo, supra at 533, this Court found that the
management agreements between Kalamazoo that owned the golf course and the petitioner that
managed the course specified that the petitioner and its employees were independent contractors.
Yet, this Court concluded that the same agreements created a concession for purposes of the
LUTA. Id. at 539-540. Accordingly, it is not inconsistent for a party to a concession agreement
to hold independent contractor status.
B.
Categorization of Property for Taxation Purposes
Respondents contend that the Tax Tribunal erred in determining that the concession
exemption applied to the subject property because the exemption only applies to real property.
Respondents argue that the equipment, buildings and building improvements that petitioner used
were personal property based on MCL 211.8(d) and (h) and MCL 211.14(5) and because the
City of Detroit did not exert meaningful control over petitioner’s operation as required for
ownership. We disagree.
First, we address respondents’ argument that the buildings and improvements are taxable
as personal property under MCL 211.8(d) and (h). Personal property owned by a lessee is not
tax exempt:
For the purposes of taxation, personal property includes all of the
following:
1
We reject respondents’ argument that summary disposition was improper. Although a
reviewing court is prohibited from making factual findings or weighing credibility in deciding a
motion for summary disposition, Burkhardt, supra at 646-647, both statutory and contract
interpretation are questions of law. Id. at 646; Golf Concepts, supra at 26. The determination of
whether contract language is clear and unambiguous is also a question of law. Mahnick v Bell
Co, 256 Mich App 154, 157, 159; 662 NW2d 830 (2003). At issue in the instant cases was
whether the concession exemption applied to petitioner to exempt it from taxation for the subject
property. The resolution of this issue involved the interpretation of the pertinent tax statutes,
namely, MCL 211.181, 211.8, and 211.14, as well as the terms of the agreement. The Tax
Tribunal reviewed all the terms of the agreement and concluded that the clear contract terms
provided for a concession. Because we conclude that there was no legal error in the Tax
Tribunal’s determinations as to the meaning of the contract, summary disposition in favor of
petitioner was proper.
-5-
(d) For taxes levied before January 1, 2003, buildings and improvements
located upon leased real property, except if the value of the real property is also
assessed to the lessee or owner of those buildings and improvements . . . .
***
(h) During the tenancy of a lessee, leasehold improvements and structures
installed and constructed on real property by the lessee, provided and to the extent
the improvements or structures add to the true cash taxable value of the real
property notwithstanding that the real property is encumbered by a lease
agreement, and the value added by the improvements or structures is not
otherwise included in the assessment of the real property or not otherwise
assessable under subdivision (j). The cost of leasehold improvements and
structures on real property shall not be the sole indicator of value. Leasehold
improvements and structures assessed under this subdivision shall be assessed to
the lessee.
This statute was intended to collect taxes on buildings located on leased property:
The obvious purpose of the Legislature in the enactment of the above
statute was to reach for taxation buildings erected on leased lands, such as
airports, federal and state lands or any other lands where title to the underlying
properties remains in the owners and the use is granted by, usually, long-term
ground leases. The purpose of this statute is not to define what is personal
property. [Dick & Don’s Greenhouses, Inc v Comstock Twp, 112 Mich App 294,
298; 315 NW2d 573 (1982).]
Ownership of the improvements and buildings on a property is related to categorization of the
property for tax purposes. Inquiry into whether property is defined as personal property for tax
purposes requires consideration of MCL 211.8 and the question of the amount of control
relinquished in the contract at issue. Golf Concepts, supra at 33. Both statutory interpretation
and contract interpretation are questions of law properly determined by the Tax Tribunal.
Burkhardt, supra at 646; Golf Concepts, supra at 26.
In Skybolt Partnership v City of Flint, 205 Mich App 597, 599; 517 NW2d 838 (1994),
the City of Flint leased to the petitioner property located at an airport. The lease required the
petitioner to make permanent improvements that would become Flint’s property at the expiration
or termination of the lease. Id. The petitioner constructed three hangars and office space. Id.
The tribunal held that the improvements were the real property of Flint and were exempt from
taxation. Id. This Court affirmed the tribunal’s ruling that the improvements were not owned by
the petitioner, and therefore, were not subject to taxation as the petitioner’s personal property.
Id. at 600. This Court cited Air Flite & Serv-A-Plane v Tittabawassee Twp, 134 Mich App 73;
350 NW2d 837 (1984), which relied on the statutory and common-law rule that “buildings
placed upon real property become a part of the real property” and the “bundle of sticks” theory
of ownership. Skybolt, supra at 600. This Court also reasoned that the improvements were
Flint’s property because Flint “exerted ultimate control over the property,” and because the
petitioner’s “rights as lessee were strictly limited.” Id.
-6-
However, in Golf Concepts, supra at 23, the City of Rochester Hills leased three distinct
parcels of land to the petitioner. The lease provided that the petitioner surrender the property to
Rochester Hills for no consideration except fair market value of the golf course equipment,
maintenance and office equipment, and trade fixtures and furnishings when the lease ended. Id.
The tribunal ruled that the land and improvements on one of the parcels was real property, and
because Rochester Hills owned the land and improvements, the property was tax exempt. Id. at
24. The tribunal further ruled that the other two parcels were likewise tax exempt because they
consisted of a public park, and the petitioner operated the golf course as a concession. Id. This
Court reversed the tribunal’s holding. Id. at 34. This Court cited Kalamazoo, supra at 712 n 2,
as confirming that the improvements to the property constituted personal property under the
GPTA. This Court distinguished Skybolt, reasoning that the respondent “does not exert ultimate
control of the property, and because [the] petitioner’s rights as a lessee are not strictly limited.”
Golf Concepts, supra at 33. This Court also reasoned that the lease “provided petitioner with a
high degree of independence in operating the golf course and managing the property” and that
“neither Skybolt nor Air Flite considered in any detail MCL 211.8, . . . which directly affects the
decision se.” Id.
The tribunal analyzed the issue regarding the ownership of the property for tax purposes.
Relying on the provisions of the agreement, the tribunal found:
The agreement clearly stipulated that all concessionaire and catering
equipment remained at the Detroit Zoo; Petitioner would lower a percentage of
the profits it receives by agreeing to level the capital investment that would
remain at the Detroit Zoo following the end of the contract. Petitioner’s
depreciation of the equipment does not constitute ownership of the questioned
property. Petitioner’s use of the property concerning hour requirements and
services, specified in the agreement, strictly limited Petitioner’s scope of control.
Therefore, the tribunal determined that the clear terms of the agreement demonstrated that the
City of Detroit owned the property, including the equipment, buildings and building
improvements.
The agreement and an affidavit provided by petitioner supported the Tax Tribunal’s
ruling. The agreement stated that SSA was hired to perform certain food and catering services at
the Detroit Zoo. As in Skybolt, the terms of the agreement demonstrated that the City of Detroit,
through the Detroit Zoo, never relinquished control of its buildings and building improvements
to petitioner. With regard to the equipment, the agreement provided, “Estimated equipment
expenses are based upon the assumption that the successful bidder will inherit all of the existing
equipment.” (Emphasis in original.) However, the agreement also provided that the Detroit Zoo
would “buy-back” any remaining un-amortized value of the investment if the contract ended
after three years, and thereby, retain the investment. In his affidavit, Mark A. Schroeder, the
Chief Financial Officer for petitioner, explained that petitioner was able to reduce “the
percentage of its sales it ha[d] to pay to the Detroit Zoo by agreeing to a level of capital
investments that would remain at the zoo when the agreement concluded.” Schroeder averred
that the agreement provided that “upon its expiration all of the concessionaire and catering
equipment remains at the Detroit Zoo.” Accordingly, the evidence established that petitioner did
not own any personal property at the Detroit Zoo.
-7-
Although the fact that petitioner was required to surrender the property to the City of
Detroit at the termination of the contract alone is not indicative of the City’s ownership, when
combined with the fact that petitioner’s rights were strictly limited under the terms of the
agreement, it supports the Tax Tribunal’s determination that all of the property was under the
ownership of the City. In addition, all of the concession stands were available for use by the
public. See Skybolt, supra at 603. Therefore, we conclude that the Tax Tribunal did not err as a
matter of law in ruling that the City of Detroit owned the subject property and that it was not the
personal property of petitioner for taxation purposes.
Next, we address respondents’ argument that the buildings and improvements are taxable
as personal property under MCL 211.14(5). This statute provides:
Tangible personal property under the control of a trustee or agent, whether
a corporation or a natural person, may be assessed to the trustee or agent in the
local tax collecting unit in which the trustee or agent resides, except as otherwise
provided. Personal property mortgaged or pledged is considered the property of
the person in possession of that personal property and may be assessed to that
person. Personal property not otherwise taxed under this act that is in the
possession of any person, firm, or corporation using that property in connection
with a business conducted for profit is considered the property of that person,
firm, or corporation for taxation and shall be assessed to that person, firm, or
corporation. [MCL 211.14(5).]
“This section presumes that the property at issue is personal property.” Golf Concepts, supra at
33 (emphasis in original). Therefore, this statute does not aid in determining whether the
property at issue is personal or real. Id. at 33-34. Where the property is personal, the petitioner
is responsible for taxes pursuant to MCL 211.8(d) and (h). Id. at 34. However, where the
property is real, the statute is inapplicable. Id. Because the Tax Tribunal did not err as a matter
of law in determining that the property at issue was real property belonging to the City of
Detroit, we conclude that the above section is immaterial to these cases. In sum, we affirm the
Tax Tribunal’s orders granting summary disposition in favor of petitioner because the Tax
Tribunal’s interpretation of the statutes at issue and application of the clear terms of the contract
did not amount to an error of law. Meijer, supra at 5.2
Affirmed.
/s/ Hilda R. Gage
/s/ Joel P. Hoekstra
/s/ Christopher M. Murray
2
At oral argument, respondents asserted that summary disposition was improper because
petitioner failed to provide evidence that the City of Detroit owned the subject property.
Respondents did not raise this argument in their primary briefs, and their subsequent assertion of
the matter in a reply brief was too late to invoke review. See MCR 7.212(G); Maxwell v Dep’t of
Environmental Quality, 264 Mich App 567, 576; 692 NW2d 68 (2004).
-8-
Some case metadata and case summaries were written with the help of AI, which can produce inaccuracies. You should read the full case before relying on it for legal research purposes.
This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.