M.T. Associates v. Town of Randolph

M.T. Associates v. Town of Randolph (2004-259); 179 Vt. 81; 889 A.2d 740

2005 VT 112

[Filed 07-Oct-2005]


       NOTICE:  This opinion is subject to motions for reargument under
  V.R.A.P. 40 as well as formal revision before publication in the Vermont
  Reports.  Readers are requested to notify the Reporter of Decisions,
  Vermont Supreme Court, 109 State Street, Montpelier, Vermont 05609-0801 of
  any errors in order that corrections may be made before this opinion goes
  to press.


                                 2005 VT 112

                                No. 2004-259


  M.T. Associates	                         Supreme Court

                                                 On Appeal from
       v.	                                 Orange Superior Court


  Town of Randolph	                         April Term, 2005	


  John P. Meaker, J.

  Allan R. Keyes of Ryan, Smith & Carbine, Ltd., Rutland, for
    Plaintiff-Appellee.

  Richard I. Burstein of Law Offices of Richard I. Burstein, Randolph, for
    Defendant-Appellant.


  PRESENT:  Reiber, C.J., Dooley, Johnson and Skoglund, JJ., and 
            Allen, C.J. (Ret.),  Specially Assigned 

       ¶  1.  DOOLEY, J.  The Town of Randolph appeals from a superior
  court decision which found it had violated the state and federal
  constitution by selectively reassessing taxpayer M.T. Associates' property. 
  The superior court concluded that the Town completed an unconstitutional
  partial reappraisal and, consequently, reset the value of taxpayer's
  property at its assessed value for the previous year.  We conclude that no
  unconstitutional reappraisal occurred, and that the Town's decision to
  correct an error by reappraising only mini-marts was within its power. 
  Therefore, we reverse the superior court and affirm the assessed value of
  $496,000 as set by the listers.
   
       ¶  2.  In 1998, taxpayer purchased property in Randolph and, in
  2000, tore down the existing building and constructed a new convenience
  store with gasoline pumps, commonly called a mini-mart.  The listers
  reassessed the property at $411,300 in light of the new construction. 
  Taxpayer grieved the 2000 assessment on the grounds that the value was
  higher than that of other mini-marts in town.  The Town reviewed the values
  of other mini-marts, observed that it appeared that all mini-marts were
  assessed below fair market value, and concluded that taxpayer's property
  was set disproportionately higher than comparable mini-marts. 
  Consequently, for 2000 the Town temporarily lowered the assessed value of
  taxpayer's property to $336,300.  In a note attached to the grievance
  decision, the lister stated: "[T]his is a one-year adjustment.  We will be
  looking at all minimart/gas station type properties in Randolph again next
  year."  

       ¶  3.  In 2001, the listers reviewed the assessments of all five
  mini-marts in the Town and found that they were assessed at between
  fifty-three percent and seventy percent of fair market value.  To correct
  what they observed as an underassessment of all these properties, the
  listers raised all the values.  Taxpayer's assessed value increased to
  $560,000.  Taxpayer and three other mini-mart owners either grieved their
  assessments or presented additional information.  Listers then lowered all
  four values, which reduced the assessed value of taxpayer's property to
  $496,000.
   
       ¶  4.  Of the five reappraised mini-marts, only taxpayer appealed
  the reassessed value to the Board of Civil Authority.  When that proved
  unsuccessful, taxpayer filed an appeal in superior court.  Taxpayer did not
  contest the Town's determination of the fair market value of its property,
  nor did it claim that the Town's actions violated state law other than the
  state constitution.  At trial, the parties agreed on a statement of facts,
  and each submitted testimony from an assessor.  The parties agreed that
  Randolph last reappraised its property in 1994, and in 2001, at the time of
  the appeal, overall property values in the Town were at 104.36% of fair
  market value and commercial properties were at 106.12%.  The Town concedes
  that it is not conducting a "rolling reappraisal"-that is, it is not
  intentionally reappraising a class of property each year to move closer to
  uniform assessment at fair market value.  It has not looked comprehensively
  at the values of the 156 commercial properties in the Town.  It has not
  reassessed any group of properties other than mini-marts.  No townwide
  reappraisal is scheduled.  Generally, the listers reassess a property at
  fair market value if "there was a new construction or a fire or a building
  addition to any real property of any category." 

       ¶  5.  The trial court issued an oral order, concluding that the
  Town's reappraisal of only mini-marts was unconstitutional and consequently
  that the listed value of taxpayer's property should be reset to the
  previous year's value.  In its written reconsideration decision, the court
  explained that where the Town reappraised only 3.2% of the commercial
  properties within the Town, was not selectively reappraising in the context
  of a "rolling reappraisal," and did not intend to reappraise other
  commercial properties, the reappraisal scheme violated both Chapter I,
  Article 9 of the Vermont Constitution and the Equal Protection Clause of
  the Fourteenth Amendment to the United States Constitution "in bearing
  unequally on properties within the same class." 

       ¶  6.  We will reverse a trial court's factual findings only if they
  are clearly erroneous.  Williams v. Town of Lyndon, 2005 VT 27, ¶ 10, 16
  Vt. L. W. 89, 872 A.2d 341 (mem.).  Our review of legal issues is
  nondeferential and plenary.  Searles v. Agency of Transp., 171 Vt. 562,
  562, 762 A.2d 812, 813 (2000) (mem.).
   
       ¶  7.  On appeal, the Town argues that its reappraisal of mini-marts
  was appropriate to keep assessed values near fair market value between
  reappraisals of all property within the Town.  Taxpayer, in response, urges
  us to adopt the rationale of the superior court.  It asserts that the Town
  violated the Proportional Contribution Clause of the Vermont Constitution
  by selectively reappraising only mini-marts and not all commercial
  properties.  That clause states that every member of society "is bound to
  contribute the member's proportion towards the expence [sic] of [society's]
  protection." Vt. Const. ch. I, art. 9. 

       ¶  8.  We begin with a discussion of the statutory appraisal scheme
  because under the constitutional arguments lies a dispute about how a Town
  should approach its listing responsibilities.  Under our statutory scheme,
  listers are required to appraise property at fair market value.  See 32
  V.S.A. §§ 3431, 3481(1)-(2).  As we have observed in other decisions,
  however, universal appraisal at fair market value is not achievable in most
  years.  Thus, the Legislature has provided that towns must conduct a
  complete reappraisal if the percentage of deviation between the aggregate
  price of all properties sold in a year and their aggregate listed value
  falls below eighty percent or if the coefficient of dispersion of this
  deviation is above twenty.  Id. §§ 4041a(b), 5401(3).  The deviation
  percentage measures the ratio of listed values to actual sale prices and
  indicates whether properties have appreciated or depreciated.  The
  coefficient of dispersion "measures the degree to which the ratio of listed
  to fair market value of individual properties deviates from the median
  ratio for the area."  Williams, 2005 VT 27, ¶ 3; see also 32 V.S.A. §
  5401(1).  Beyond these specific mandates, towns may reappraise as long as
  the result is fair and equitable, with the overall goal to value properties
  at 100% of market value.
   
       ¶  9.  The stipulated facts indicate that the listers generally use
  a recent activity approach, reassessing properties only when an event
  occurs-like construction of a new building-that has a substantial impact on
  fair market value.  Under this approach, the appraisals of other properties
  remain in place until a new general reappraisal.  Taxpayer's expert
  witness, the assessor for the City of Rutland, testified that a different
  approach was proper.  The witness testified that the Town should assess
  property at its value as of the last general reappraisal.  Thus, he
  testified that the listers should have assessed taxpayer's property at the
  value it would have had in 1994 if the new construction had occurred in
  that year.  He further testified that the listers did exactly that in 2000,
  after taxpayer's grievance, when the listers lowered the initial assessment
  of taxpayer's mini-mart to a value comparable to other mini-marts.

       ¶  10.  Although the validity of the approach urged by Taxpayer was
  not directly before us, we criticized it extensively in Knollwood Bldg.
  Condominiums. v. Town of Rutland, 166 Vt. 529, 532, 540, 543-45, 699 A.2d 31, 34, 39, 41-42 (1997).  We find it difficult to square this approach
  with the statutory command that listers appraise at current fair market
  value.  Here, taxpayer's approach would be used to create an artificial
  value for a building that did not exist on the date for which it would be
  appraised.  Overall, taxpayer's approach produces different property tax
  rates for different classes of property without statutory authority for
  such a system.  See id. at 543-44, 699 A.2d  at 41.

       ¶  11.  Thus, we do not believe that the Town was in any sense
  required in 2000 to lower the appraisal of taxpayer's mini-mart to make it
  comparable to that of other mini-marts.  Indeed, that action was not
  consistent with its general approach to assessing new construction.  Thus,
  we see no reason why, under Vermont statutory law, the listers could not
  correct their deviation from their listing practices by raising taxpayer's
  assessment to fair market value.  
   
       ¶  12.  This leads us to the constitutional question.  The superior
  court found the Town's assessment inconsistent with Chapter I, Article 9,
  the Proportional Contribution Clause, of the Vermont Constitution.  In the
  tax context, this provision places no greater restrictions on government
  action than the Equal Protection Clause of the Fourteenth Amendment to the
  United States Constitution.  Alexander v. Town of Barton, 152 Vt. 148, 157,
  565 A.2d 1294, 1299 (1989).  Therefore, we review the Town's action under a
  rational basis test;  "governmental action is unconstitutional only if it
  treats similar persons differently for arbitrary and capricious reasons." 
  Williams, 2005 VT 27, ¶ 7.  We will uphold the classification if we can
  conceive of any reasonable policy or purpose for it.  Hoffer v. Dep't of
  Taxes, 2004 VT 86, ¶ 10, 15 Vt. L. W. 286, 861 A.2d 1085 (mem.). 
  Taxpayer bears the burden of demonstrating that a town's method was
  unconstitutional.  Williams, 2005 VT 27, ¶ 7.

       ¶  13.  To comply with the Proportional Contribution Clause, a town
  must appraise its property at a uniform rate.  Kruse v. Town of Westford,
  145 Vt. 368, 375, 488 A.2d 770, 774-75 (1985).  Consequently, if a taxpayer
  demonstrates that the property at issue is assessed at a higher percentage
  of fair market value than comparable properties, the court must list the
  taxpayer's property at a corresponding value.  Heindel v. Town of Grafton,
  140 Vt. 147, 149, 435 A.2d 695, 696 (1981).  This does not mean that a town
  may not reassess certain properties, but the effect must be uniform.  Id.

       ¶  14.  In this case, taxpayer concedes that $496,000 accurately
  represents the fair market value of its property, but argues that the Town
  unlawfully discriminated by selectively reappraising only 5 of the 156
  properties in the commercial class.  It argues that the Town can change a
  preexisting appraisal only if it reappraises all properties in the Town or
  it conducts a "rolling reappraisal" under which it reappraises all
  properties within a class.  It finds this rule in our decision in
  Alexander, 152 Vt. at 156-57, 565 A.2d  at 1299.  
   
       ¶  15.    In Alexander, the taxpayer argued that the Town's
  reappraisal method was unconstitutional because the Town appraised only
  certain categories of property each year-those with the greatest degree of
  deviation from fair market value.  Id.  Applying a rational basis test, we
  rejected taxpayer's argument, noting that the town did not intentionally
  discriminate and that the town's method was rational and served a
  legitimate purpose-to keep appraisals as current as possible with limited
  resources.  Id. at 157-58, 565 A.2d  at 1299.  

       ¶  16.    The overall message of Alexander is not, as taxpayer
  asserts, that the only constitutionally-acceptable reappraisal methods are
  total reappraisal and rolling reappraisal.  Indeed, we recently rejected
  that interpretation in Williams, 2005 VT 27, ¶ 9.  There, the Town of
  Lyndon chose to reappraise a group of commercial properties located in a
  specific geographic area because sale prices for properties in that area
  were much greater than  listed values.  Some property owners challenged the
  town's method, arguing that such a selective reassessment violated the
  Proportional Contribution Clause.  Relying on Alexander, we applied a
  rational basis test and concluded that the town's decision to reappraise a
  unique geographic area was rational and served the legitimate purpose of
  addressing the most under-assessed areas.  Id.  We specifically held that
  Alexander did not turn on whether the appraisal in issue "was conducted
  pursuant to a 'rolling' or cyclical reassessment scheme."  Id.
   
       ¶  17.  Thus, the determinative issue is whether there is a rational
  basis for the distinctions the Town has drawn in assessing taxpayer's
  property.  We conclude that there are two rational bases for its decision. 
  The first is the basis found for the Town's action in Alexander-"keeping
  appraisals as current as possible within the resources available by
  attacking the worst underassessment problem areas."  152 Vt. at 157-58, 565 A.2d  at 1299.  That was also the rationale for reassessing properties
  within a specific geographic area in Williams, and we upheld the selective
  reassessment in that case.  2005 VT 27, ¶ 9.

       ¶  18.  We find the analysis contained in Regent Care Center, Inc. v.
  Hackensack City, 828 A.2d 332, 340-41 (N.J. Super. Ct. App. Div. 2003)
  particularly persuasive here.  In that case, the assessor had reviewed the
  town's property and determined that 150 of the town's commercial properties
  were grossly underassessed. The nursing home was identified as one such
  property, and the assessor adjusted its value.  The New Jersey Superior
  Court affirmed the assessment, recognizing that although assessors may not
  single out property for increased assessment, the assessors can make
  adjustments for legitimate reasons.  Id. at 340.  The court emphasized that
  assessors may properly change assessment values between full-town
  appraisals if a legitimate nondiscriminatory reason exists and if equitably
  done to all similarly-situated properties.  Id. at 340-41; see Security
  Props. v. Ariz. Dep't of Prop. Valuation, 537 P.2d 924, 927 (Ariz. 1975)
  (affirming increased assessment for high-rise buildings where undertaken to
  correct acknowledged discrepancies in valuation).
   
       ¶  19.  Such guidelines were followed by the Town here.  In general,
  the Town's assessments of commercial properties are at or above fair market
  value, so there is no impetus for a general reappraisal or a reappraisal of
  commercial properties.  At the same time, taxpayer's grievance of its 2000
  assessment demonstrated the underassessment of all mini-marts.  In
  response, the Town conducted a study, found that mini-marts were
  underassessed, and reappraised them to fulfill the statutory goal of
  listing property at fair market value.  This action reduced inequity in
  assessments in the Town.  As explained above, both Alexander and Williams
  support a town's ability to reappraise underassessed property without
  completing a town-wide reassessment.  The Town had a rational basis for
  targeting mini-marts because it knew that the listed values of mini-marts
  were much lower than fair market value, and it had a legitimate purpose in
  reappraising them-to bring the values closer to fair market value.

       ¶  20.  Although the trial court acknowledged that the Town acted in
  good faith to correct the values of the mini-marts, the court's main
  criticism of the Town's reappraisal was that it did not examine all other
  types of commercial property for similarly unexpected gains in value.  The
  trial court made a factual finding that mini-marts were not a discrete
  class, and therefore concluded that the Town's decision to target only
  mini-marts was discriminatory.  In essence, the court held that the Town
  must reappraise all commercial properties or none at all.  

       ¶  21.  However desirable the superior court's approach may be, we
  cannot conclude that it is commanded by the constitution.  To succeed on
  appeal, the Town need demonstrate only that there was a reasonable basis
  for the disparate treatment-reassessing only mini-marts and not other
  commercial properties.  Williams, 2005 VT 27, ¶ 7; see Nordlinger  v. Hahn,
  505 U.S. 1, 11 (1992) (under the Equal Protection Clause, the issue is
  whether distinctions rationally further a legitimate state interest; the
  requirements of the clause are met if there is "a plausible policy reason
  for the classification").  Here, the aggregate data shows that there is no
  significant problem in the valuation of commercial properties as a whole. 
  The Town, like the Legislature, "may address a perceived evil one step at a
  time and is not required to take an all or nothing approach."  Schievella
  v. Dep't of Taxes, 171 Vt. 591, 593, 765 A.2d 479, 482 (2000) (mem.).  The
  Town has demonstrated a rational basis for reassessing mini-marts without
  reassessing other properties.
   
       ¶  22.  There is a second basis for the Town's action specifically
  applicable to taxpayer's property.  In 2000, the Town made only a temporary
  decision concerning the value of taxpayer's property, returning in 2001 to
  its policy of appraising new construction at fair market value when it
  could equitably apply that policy to all mini-marts.  Even if the Town's
  actions were invalid with respect to other mini-marts, it was simply
  correcting its inaccurate action with respect to taxpayer.  We conclude
  that correcting a mistake is a rational basis for its decision to appraise
  taxpayer's property at fair market value in 2001.

       ¶  23.  For related reasons, we upheld a legislative freeze on the
  assessed value of certain hydroelectric plants in USGen New England, Inc.
  v. Town of Rockingham, 2003 VT 102, 176 Vt. 104, 833 A.2d 927.  We found a
  rational basis in "ensuring temporary stability of tax revenues in a number
  of small Vermont towns, in the face of difficulties in determining the fair
  market value of hydroelectric facilities brought about by the 'changing and
  deregulated utility market.' "  Id. ¶ 20 (citation omitted).  Here, the
  Town's action was induced, in part, by uncertainties about the appropriate
  fair market value of mini-marts, and it took a year to study the valuation
  issues and determine a fair value for all mini-marts.  Without running
  afoul of the constitution, the Town can make the necessary adjustments to
  correct its initial valuation. 

       ¶  24.    We do not read taxpayer's challenge as broadly attacking the
  Town's use of a trigger, here new construction, to commence appraisal at
  fair market value.  Certainly, the ability of a taxpayer to make such a
  challenge is undercut by the United States Supreme Court decision in
  Nordlinger v. Hahn, 505 U.S. 1, 11 (1992), as well as by the requirement
  that listed values be equalized in relation to comparable properties, 32
  V.S.A. § 4467.  See generally M. Morrow, Comment, Twenty-Five Years of
  Debate: Is Acquisition-Value Property Taxation Constitutional?  Is It Fair? 
  Is it Good Policy?, 53 Emory L.J. 587 (2004).  In any event, we do not
  consider this potential issue.
   
       ¶  25.  Having concluded that the Town's reappraisal of mini-marts was
  constitutional, we  need not address the Town's contention that the trial
  court's order setting taxpayer's listed value at $336,300 was erroneous. 

       Reversed.


                                       FOR THE COURT:



                                       _______________________________________
                                       Associate Justice