Decision for Defendants rendered February 14, 2012.
This matter is before the court on cross-motions for partial summary judgment. Throughout this order, real market value is referred to as "RMV," maximum assessed value is referred to as "MAV," and assessed value is referred to as "AV." References to "CPR" are references to the so-called "changed property ratio" — the ratio described in, for example, ORS 308.153(1)(b). Any reference to "the Mill"
Plaintiff (taxpayer) seeks a ruling that "the aggregate RMV of all of the property included in the property tax account for the Mill constitutes a ceiling for purposes of determining the amount of additional tax that may be imposed as a result of disqualification." Taxpayer's papers and argument at the hearing on this matter show that the method proposed by taxpayer for the determination of the RMV of the property allegedly disqualified from Enterprise Zone exemption (PM6) would be as follows:
Defendants (collectively referred to as the department) move to have dismissed any claim of taxpayer "that the real market value of the aggregate property (i.e., the previously 100% Enterprise Zone exempt qualified property plus the nonexempt property) within the same property tax account is less than the real market value on the roll for the aggregate property."
Viewed as a narrative statement, the position of the department appears to be very similar to that of taxpayer — RMV should be determined on an aggregate basis. All
The premise of taxpayer's position is that in determining the RMV of property for purposes of Measure 50 and the statutes implementing that constitutional provision, in a case where there is more than one item of property in a property tax account, the constitutional mandate that the AV of property cannot exceed the RMV of the property can only be achieved through the use of its suggested method. That method the court views as, and will refer to as, a "residual method." That is, the RMV of any item in the tax account is to be determined by first determining the RMV of all the property in the account, by reference to a hypothetical sale of the entire package of assets, and then subtracting the RMV for all other property in the account so as to determine the RMV of the item in question. The residual value remaining after determination of the RMV of the whole account and subtraction of the RMV of other items would, using the method proposed by taxpayer, be the RMV of PM6.
The method suggested by the department is viewed by the court, and will be referred to, as the "additive method." For Measure 50 purposes, if it is relevant to determine the RMV of all items in a tax account, that amount is the sum of the separately determined RMV amounts for each item. By
In the opinion of the court, the additive method proposed by the department is the proper method to be used. In reaching this conclusion the court notes that the department does not in any way disagree with taxpayer as to the general proposition that AV is not to be greater than RMV. Nor does the department disagree with the proposition that the aggregate MAV of property in a tax account is to be compared with the aggregate RMV of the property in the tax account in the process of determining compliance with the constitutional limits. The issue that separates the parties is how to go about determining the RMV for assets that together constitute the group of properties contained in the same tax account.
Most importantly, the approach of taxpayer starts with the assumption that the RMV of a group of assets in one tax account must be determined by reference to a hypothetical sale of all of those assets in one transaction and to one purchaser. Nothing in Measure 50 or the implementing statutes supports that methodology. It may be that determination of the RMV of one item is difficult if one has to assume that it is to be separately determined from the value of other items in the account — especially as here where the operations of the one item are apparently integrated with or interrelated to the operation of the other assets in the account. However, that difficulty existed before the adoption of Measure 50 in respect of the valuation of properties that were, to some extent, integrated or interrelated in operation. No party has pointed to, and the court is not aware of, any indication that the voters of Oregon sought, in the adoption of Measure 50, to address that difficulty, much less to express constitutional limitations as to the methodology for the determination of any given asset in a property tax account.
The decision of the Oregon Supreme Court in Flavorland Foods v. Washington County Assessor, 334 Or. 562, 54 P.3d 582 (2002) (Flavorland) did address the problem of application of Measure 50 in the case of separate items of
Logically, it would be necessary to make determinations of MAV in a multiple asset account on an asset-by-asset basis. This is so because the assets comprising the account, whether including formerly exempt property or property that was always taxable, could well have been added to the account in different years. That being a possibility, the calculation would need to accommodate the possibility that the MAV for different assets would be determined using different CPRs, depending on the year acquired. MAV for any given asset would be determined individually and not by application of a residual methodology because there would, in such instances, be no way to state a total MAV for the account except by the additive method. That being the case, the court is of the opinion that the RMV for the assets in the account should be determined in the same way, by summation of the individually determined asset RMVs — the additive method — and not by a residual method.
The residual method suggested by taxpayer for the determination of RMV for an account is both potentially unrealistic and cumbersome. The method is potentially unrealistic as its most important assumption is that valuation should be done on the basis of a hypothetical sale of all assets in the account. While such a sale might occur, it is also possible that assets from an account could, hypothetically or actually, be sold individually or in groups including
The cumbersome aspect of the residual method suggested by taxpayer appears in considering that it would need to apply not only in cases where, as here, there had been an earlier determination of RMV for one asset group out of two, but also in cases where no such earlier determination had occurred or where more than two assets or groups of assets were found in an account. In the case of a group of assets, none of which had been subject to an earlier RMV determination, the residual method cannot be applied until there is a determination of the total RMV in the hypothetical package sale and a separate RMV for a number of assets equal to
Accordingly the number of RMV determinations in all events would be 1, for the package + (N-1), for the individual assets or groups. Without that determination having been made, it is impossible to know what amount is to be subtracted from the total RMV in order to derive a residual RMV for any asset subject to examination.
Consider: if there are assets A, B and C in an account and the appraised value of a package RMV for the total is 100, the RMV for asset A can be determined by the residual method only if one computes not only the package RMV and the RMV for two of the assets. If one is interested in the RMV of asset A, one would need to compute, in addition to the package RMV, the RMV for assets B and C.
Even in the case of only two assets or asset groups in an account, the number of RMV determinations could be two: one for the package RMV and a second (the N-1) for the asset or group other than the asset or group for which one is seeking an RMV.
Further, the residual method would cause significant differences to occur where the very same assets are present but are combined in different ways in tax accounts. Consider that the method for which taxpayer contends in this case — where PM6 is in the same tax account as the historically nonexempt property — would not be the method applied if the assessor had included PM6 in one tax account and the historically exempt property in a different tax account.
Finally, the court adheres to the logic and conclusions in the order previously entered in this case and withdrawn pending a more comprehensive and intelligible debate between the parties, a goal achieved in the briefs and oral argument on the pending motions. The court adopts the
As discussed at the hearing on this matter, the parties are to consult as to the appropriate form of order carrying out this opinion. The case will be continued for trial. Now, therefore,
IT IS ORDERED that Plaintiff's Amended Motion for Partial Summary Judgment is denied; and
IT IS FURTHER ORDERED that Defendant's cross-motion for partial summary judgment is granted.