COLONIAL SQUARE COOPERATIVE V CITY OF ANN ARBOR
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STATE OF MICHIGAN
COURT OF APPEALS
COLONIAL SQUARE COOPERATIVE,
GEDDES LAKE COOPERATIVE HOMES, INC.,
and UNIVERSITY TOWNHOUSES
COOPERATIVE,
FOR PUBLICATION
August 5, 2004
9:00 a.m.
Plaintiffs-Appellees,
v
No. 247226
Washtenaw Circuit Court
LC No. 00-001408-CZ
CITY OF ANN ARBOR,
Defendant-Appellant.
Official Reported Version
Before: Hoekstra, P.J., and O'Connell and Donofrio, JJ.
O'CONNELL, J.
Defendant city appeals of right from the trial court's order granting summary disposition
to plaintiffs and declaring MCL 211.27a(6)(j) void as unconstitutional. We affirm in part and
reverse in part.
I. Issue
The central issue in this case is whether the city may annually increase the taxable value
of an entire parcel of property when individual units in that parcel are transferred.
II. Facts
Our state constitution prohibits cities and other governmental entities from increasing a
single parcel's taxable value by more than a certain percentage each year if the property does not
change hands. Const 1963, art 9, § 3. Plaintiffs are housing cooperatives that ostensibly own
only one parcel of property shared by many members, yet experience a turnover of members
involving several units a year. The Legislature defined these exchanges as transfers that allow
reevaluation at the time of the exchange. The city adopted this definition as a means to
reevaluate annually the cooperatives' entire parcel proportionate to the amount of turnover.
Plaintiffs challenge the validity of the definition as contrary to the Michigan Constitution.
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III. Application
We first address whether Const 1963, art 9, § 3 forever preserves the pre-Proposal A
meaning of a property transfer for tax assessment purposes or if it permits the Legislature to
define which "transfers" of property will lead to reassessment based on the property's actual
value. We will then evaluate the separate issue whether the city may constitutionally accomplish
the reassessments and taxation in the manner it employed against plaintiffs.
The adoption of Proposal A on March 15, 1994, amended Const 1963, art 9, § 3. The
amended section caps the annual increase in a property's taxable value, except that, "[w]hen
ownership of the property is transferred as defined by law, the parcel shall be assessed at the
applicable proportion of current true cash value." The trial court held that the phrase, "[w]hen
ownership of the property is transferred" refers to transfers defined by property law as it stood
when the amendment was incorporated into our Constitution. It therefore concluded that the
Legislature overstepped its constitutional bounds when lawmakers newly decreed that "property
is transferred" for reassessment purposes when an owner of a unit in a cooperative housing
corporation transfers the unit. MCL 211.27a(6)(j). The trial court held that the new law
unconstitutionally altered the intended, immortalized definition of "transfer." We disagree.
According to MCL 211.27a(6)(j), a transfer of ownership includes, "[a] conveyance of an
ownership interest in a cooperative housing corporation, except that portion of the property not
subject to the ownership interest conveyed." Plaintiffs claim that this break from a traditional
understanding of "transfer of ownership" violates the constitutional section that prohibits
reevaluation until "ownership of the property is transferred as defined by law." Const 1963, art
9, § 3. However, in WPW Acquisition Co v City of Troy, 466 Mich 117, 126; 643 NW2d 564
(2002), our Supreme Court pointed to the section's phrase, "transferred as defined by law," as an
illustration that "the drafters of the proposal knew how to commit the definition of certain terms
to the Legislature, in this instance, what constitutes a transfer." Because the phrase "defined by
law" committed the definition of a qualifying transfer to the Legislature, the Legislature did not
violate Const 1963, art 9, § 3 when it expanded the definition to include the conveyance of a
cooperative housing unit. MCL 211.27a(6)(j).
However, a finding that the definition does not run contrary to the Constitution does not
end our inquiry. In this case, the city failed to track the individual units transferred, but rather
uncapped the value of the whole parcel in proportion to the percentage of units transferred. This
the city cannot do. Only by happenstance would the city arrive at an evaluation that did not
affect "that portion of the property not subject to the ownership interest conveyed." MCL
211.27a(6)(j). Moreover, annual reevaluations of an entire parcel of property run contrary to the
Constitution's plain meaning because they impose increasing obligations on the units in a
cooperative that have not been transferred. Const 1963, art 9, § 3. The city's current estimation
approach veils which units, if any, the city actually reassessed. The Constitution does not allow
the city to reassess the entire parcel's value on the basis of a phantom reevaluation of the
percentage of units transferred. Because of these shortfalls in the city's procedure, its application
of the valid statute violated our Constitution.
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Affirmed in part and reversed in part.
Donofrio, J., concurred.
/s/ Peter D. O'Connell
/s/ Pat M. Donofrio
Hoekstra, P.J., I concur in the result only.
/s/ Joel P. Hoekstra
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