Case Title: Pacificorp Power Marketing v. Dept. of Rev.

Citation: 

Docket Number: S51403

State: oregon

Court: Oregon Supreme Court

Date: 2006-03-16T00:00:00Z

Document:
FILED: March 16, 2006
IN THE SUPREME COURT OF THE STATE OF OREGON
PACIFICORP POWER MARKETING, INC.,
Appellant,
v.
DEPARTMENT OF REVENUE,
Respondent.
(OTC 4592; SC S51403)
On review from the Oregon Tax Court.*
Henry C. Breithaupt, Judge.
Argued and submitted May 4, 2005.
James N. Westwood, of Stoel Rives LLP, Portland, argued the
cause for appellant.  With him on the briefs was David L. Canary,
of Garvey Schubert Barer, Portland.
Marilyn J. Harbur, Assistant Attorney General, Salem, argued
the cause for respondent.  With her on the briefs were Hardy
Myers, Attorney General, and Melisse S. Cunningham, Assistant
Attorney General.
Before Carson,** Chief Justice, and Gillette, Durham, Riggs,
De Muniz,*** Balmer, and Kistler, Justices.
CARSON, J.
The decision of the Tax Court is affirmed.
*17 OTR 334 (2004).
**Chief Justice when case was argued.
***Chief Justice when decision was rendered.
CARSON, J.
In this property tax case, we are called upon to decide 
whether appellant, PacifiCorp Power Marketing, Inc. (PPM), (1)
is subject to ad valorem taxation by the Department of Revenue
(department) based upon its contract rights relating to a
municipally owned electricity cogeneration facility (facility). 
The department assessed the facility and taxed PPM for the 2002-03 tax year, pursuant to ORS 308.505 to 308.665 (2001) (central
assessment statutes), after determining that PPM had "used" the
facility, for purposes of those statutes, through its various
contracts with the City of Klamath Falls (the city). (2)  PPM
challenged the assessment in the Oregon Tax Court, where both
parties moved for summary judgment.  The Tax Court granted the
department's motion and denied PPM's motion, concluding that the
applicable central assessment statutes, set out below, allowed
the department to assess PPM's contract rights in the facility as
intangible property.  Pacificorp Power Marketing v. Dept. of
Rev., 17 OTR 334 (2004).  Taxpayer appealed to this court
pursuant to ORS 305.445.  For the reasons set forth below, we
affirm the Tax Court's decision, but upon grounds different from
those relied on by the Tax Court.
We take the following undisputed facts from the record. 
In 1985, the city, a tax-exempt municipal corporation, first
issued revenue bonds for the purpose of building a hydroelectric
facility.  In the mid-1990s, after an unsuccessful attempt to
form a partnership with another energy company, the city
endeavored to construct a gas-fired electricity cogeneration
facility.  Toward that end, the city entered into two contracts
with Pacific Klamath Energy, Inc. (PKE), an affiliate of
PPM. (3)  Pursuant to the first contract, PKE oversaw the
construction of the facility.  The second contract provided that
PKE would operate and maintain the facility following its
construction.  Construction of the facility began in 1999, after
the city issued lien bonds to fund it.  The city also signed two
contracts with PacifiCorp Group Holdings Company (PacifiCorp
Group), PPM's then-parent:  a guarantee agreement for the lien
bonds and a credit facility agreement. (4) 
At around the same time, the city also entered into
four separate contracts with PPM:  (1) a management contract; (2)
a power-purchase contract; (3) a power-brokerage contract; and
(4) a fuel supply and services contract.  Under the management
contract, PPM managed the facility as an independent contractor
for a renewable term of 20 years.  PPM also performed
administrative work for the city, including preparation of the
facility's annual budget.  PPM received a management fee from the
city, and the city received the profits earned by the facility,
if any.  PPM also received a "Management Performance Incentive"
for "achieving certain performance levels."  
The power-purchase contract required PPM to take or pay
for 237.7 megawatts (MW), which was approximately 47 percent of
the facility's output of electric power and energy.  The term of
the power-purchase agreement was 30 years.  In exchange for the
percentage of purchased power, PPM agreed to pay certain fees to
the city, including a "monthly demand charge," which was PPM's
allocation of the capital and interest due on the revenue bonds
used to construct the facility.
Under the power-brokerage contract, PPM brokered the
sale of the remaining 53 percent of the facility's power.  PPM
could not purchase any of the brokered power.  The city paid PPM
a fixed monthly brokering fee, plus an incentive bonus.  PPM
distributed all revenues from PPM-brokered sales to the city.
Finally, under the fuel supply and services contract,
PPM provided the fuel to be burned in the facility's turbines. 
The city paid PPM a "fuel management fee" and monthly charges for
the fuel supply.  If PPM failed to supply the amount of fuel
required, the city could obtain it elsewhere.  
Based upon the above-described contracts between the
city and PPM, PKE, and PacifiCorp Group, the department imposed a
property tax on PPM for the 2002-03 tax year.  The department
asserted its authority under the central assessment statutes, ORS
308.505 to 308.665 (2001), and taxed PPM based upon its "use" of
the facility.  The department determined PPM's assessable
interest to be 47 percent of the cost of the construction of the
facility.  That percentage corresponds to the allocation to PPM
of the cost of the facility and to the percentage of the
facility’s power purchased by PPM, as set out in PPM's power-purchase contract with the city. (5)
PPM appealed the department's assessment to the Tax
Court, challenging the department's conclusion that it had any
taxable interest in the facility.  PPM argued that its contracts
with the city did not bestow any ownership, use, or possessory
interests in the facility.  PPM also challenged the department's
attempt to include PKE's and PacifiCorp Group's separate
contracts with the city as PPM's property.  Additionally, PPM
claimed that the department's assessment violated the
constitutional requirements of uniformity and equalization in
taxation under Article I, section 1, and Article IX, section 1,
of the Oregon Constitution, because the department had taxed none
of the three other purchasers of the facility's
electricity. (6)  PPM did not challenge either the amount of
the assessment or the department's method of valuation.  
The parties filed cross-motions for summary judgment. 
The Tax Court granted the department's motion and denied PPM's
motion.  Pacificorp Power Marketing, 17 OTR at 347.  The Tax
Court defined the central legal question as follows:  Does PPM
"own, hold, or otherwise use some property, whether real or
personal, tangible or intangible, so as to be assessable under
the central assessment statutes," or does PPM hold the facility
under a lease or other interest less than a fee simple, so as to
be assessable under ORS 307.110? (7)  Id. at 337 (footnote
omitted).
Although the department had imposed an ad valorem tax
on PPM based upon PPM's alleged use of the facility, the Tax
Court concluded that PPM's rights in the "constellation of
contracts" themselves, apart from PPM's alleged use of the
facility, were intangible property rights that were taxable under
the central assessment statutes.  Id. at 340-41.  The Tax Court
reasoned as follows:  (1) under the central assessment statutes,
intangible property can be assessed and taxed to the "user" of
that intangible property in and of itself, apart from any
tangible personal or real property; (2) the use of the contract
rights as intangible property is the "use" that is to be assessed
and taxed, not the use of the facility itself; (3) intangible
contract rights themselves are taxable when used in a centrally
assessed business, regardless of whether those contract rights
create any possessory interest in the facility; and (4) the
intangible property need not be connected to any "unit" of
tangible personal or real property.  Id. at 339-45.  Because the
Tax Court concluded that the central assessment statutes allowed
the department to tax PPM as a user of its intangible contract
rights, the Tax Court did not address whether PPM could be taxed
as a user of the facility under the central assessment statutes. 
Neither did the Tax Court address whether PPM held a taxable
interest in the facility under ORS 307.110 (2001).  Id. at 340-41.  The Tax Court also rejected PPM's claim that the department
had violated the constitutional requirements of uniformity and
equalization by taxing PPM's contract rights but not taxing other
purchasers of power from the facility.  Id. at 345-47.  PPM now
appeals from the Tax Court's decision.
We review decisions of the Tax Court for "errors or
questions of law or lack of substantial evidence in the record." 
ORS 305.445 (2001).  PPM raises two main issues on appeal.  The
first issue relates to whether the department may tax PPM's
interest in the facility pursuant to the central assessment
statutes, ORS 308.505 to 308.665 (2001), or pursuant to the
municipal property statute, ORS 307.110 (2001).  PPM argues that
only ORS 307.110 (2001) applies and that the department cannot
tax PPM under that statute because PPM does not "hold" the
facility "under a lease or other interest or estate less than a
fee simple[.]"  ORS 307.110(1) (2001).  Alternatively, PPM
asserts that it does not "use" the facility, within the meaning
of the central assessment statutes.  PPM also argues that its
contract rights are not assessable under the central assessment
statutes because those rights are unrelated to any tangible or
real property that is owned, held, or used by PPM.  PPM also
contends that it is, and has been, a separate entity from PKE and
PacifiCorp Group and, therefore, it cannot be assessed and taxed
based upon their separate contracts with the city.  The second
issue that PPM raises is that the department violated the
constitutional guarantee of uniformity in taxation by not taxing
the facility's three other purchasers of power. 
For the following reasons, we conclude that the Tax
Court erred by affirming the department's assessment of PPM
based, in part, on contracts with PPM's affiliates.  Despite that
error, we affirm the Tax Court's decision, because PPM's own
contracts with the city demonstrate that PPM "used" the facility
under the central assessment statutes. 
To address the first issue that PPM raises -– that is,
whether it is subject to assessment under the central assessment
statutes or the municipal property statute -– we must define the
property subject to taxation.  The Tax Court found that the
"constellation of contracts" itself was the property "used" by
PPM and assessed by the department.  On review, however, both
parties agree that the department actually assessed PPM's
interest in the facility, including any of the facility's real or
personal property that PPM uses, but did not assess the contracts
in and of themselves.  After reviewing the record, we accept the
parties' representation that the department assessed PPM's
interest in the facility.  We now address whether the department
did so consistently with applicable statutes.  
The parties agree that the city is the owner of the
facility and that the city is a municipal corporation.  Pursuant
to ORS 307.090(1) (2001), therefore, the facility is exempt from
taxation as public property, "[e]xcept as provided by law" 
(emphasis added). (8)  As noted, the parties dispute what
statute provides the exception applicable to this case.  The
department contends that the central assessment statutes, ORS
308.505 to 308.665 (2001), provided an exception to the general
exemption, while PPM contends that the municipal property
statute, ORS 307.110 (2001), provided the only applicable
exception.  The central assessment statutes require the
department to assess and tax any entity that "use[s]" certain
utility property, ORS 308.515(1) (2001) and ORS 308.510(1).  In
contrast, ORS 307.110 requires the taxation of publicly owned
property that is "held under a lease or other interest or estate
less than a fee simple" by any person whose real property is
taxable.  Taxation under ORS 307.110 (2001) required a
"possessory interest" in the publicly owned property.  Sproul v.
Gilbert, 226 Or 392, 404-406, 359 P2d 543 (1961).  For the
reasons that follow, we agree with the department and conclude
that ORS 308.515(1) (2001), which was part of the central
assessment statutes, provides for the taxation of property
otherwise exempt from taxation under ORS 307.090(1) (2001). (9)
This court addressed a similar issue in Western
Generation Agency v. Dept. of Rev., 327 Or 327, 959 P2d 80
(1998).  In that case, the court concluded that ORS 261.050
provided an exception to ORS 307.090(1) and allowed the
department to assess an electricity generation facility and to
tax an intergovernmental entity composed of a people's utility
district and a municipal utility.  Id. at 333.  ORS 261.050
provides that "[a]ll property * * * owned, used, operated or
controlled by any people's utility district in [the business of
electricity] shall be assessed and taxed * * * as * * * provided
by law[.]"  (Emphasis added.)  The court held that the facility
at issue was "controlled" by a people's utility district and was
therefore taxable under ORS 261.050.  Western Generation, 327 Or
at 333.  The court rejected the taxpayer's argument that such a
result would violate due process by improperly imposing a tax on
the people's utility district and explained that the property,
not the people's utility district, was subject to taxation.  Id.
at 333 n 6. 
In this case, ORS 308.515 (2001) contained a directive
similar to that set out in ORS 261.050 (2001).  ORS 308.515(1)(a)
(2001) provided that the department "shall make an annual
assessment" of certain "property having a situs" in the State of
Oregon (emphasis added), including 
"any property used or held for its own future use by
any company in performing or maintaining any of the
following businesses or services or in selling any of
the following commodities, whether in domestic or
interstate commerce or both, and whether mutually, or
for hire, sale or consumption by other persons:  * * *
electricity[.]" 
(Emphasis added.)  ORS 308.510(1) (2001) defined "property," for
purposes of the central assessment statutes, as 
"all property, real and personal, tangible and
intangible, used or held by a company as owner,
occupant, lessee, or otherwise, for or in use in the
performance or maintenance of a business or service or
in a sale of any commodity, as set forth in ORS 308.515
* * * but does not include items of intangible property
that represent claims on other property including money
at interest, bonds, notes, claims, demands and all
other evidences of indebtedness, secured or unsecured,
including notes, bonds or certificates secured by
mortgages, and all shares of stock in corporations,
joint stock companies or associations."  
(Emphasis added.)  Further, ORS 308.505(3) (2001) defined
"property having situs in this state" as "all property, real and
personal, of a company, owned, leased, used, operated or occupied
by it and situated wholly within the state[.]"  (Emphasis added.)
Those provisions establish that any property (including most
types of intangible property) that a company uses in the
performance or maintenance of an electricity business or in the
sale of electricity is assessable.  As in Western Generation, it
is the property that is assessed and taxed to the company under
ORS 308.515 (2001). (10)  Therefore, as with ORS 261.050
(2001), ORS 308.515 (2001) provided an exception to the general
exemption from taxation for municipal property set out in ORS
307.090 (2001).
We now turn to the question whether PPM "used" the
facility, including its real and personal property, and tangible
and intangible property.  The department assessed the facility
and taxed PPM, based upon several agreements between PPM, PKE,
PacifiCorp Group, and the city.  The department argues that all
those contracts should be considered because, under ORS 308.517
(2001), the property could be assessed to any of the affiliated
entities as "users" of the facility.  The department admits,
however, that it mistakenly understood, at the time of its 2002-03 tax year assessment, that PKE was a subsidiary of PPM.  The
department chose to tax PPM, because PPM appeared to be the
"chief operating company," as distinguished from PacifiCorp
Group, which the department understood to be a holding company of
PPM and PKE. (11)
We must determine whether the department properly
assessed and taxed PPM on the property of its affiliate, PKE, and
its former parent, PacifiCorp Group.  In Southern Pacific, 295 Or
47, this court addressed whether the property of one centrally
assessed utility included the property of an out-of-state
affiliate.  In that case, Cottonbelt, a midwestern railroad, was
affiliated with and nearly wholly owned by Southern Pacific, a
centrally assessed railroad operating in Oregon.  Id. at 49.  The
department included Cottonbelt in assessing Southern Pacific's
property, and Southern Pacific challenged the assessment.  Id. at
50.  The court noted that that case "turn[ed] on whether the
Cottonbelt railroad operations are Southern Pacific's 'property,'
as that term is defined in ORS 308.510(1) and used in the rest of
the statutory scheme."  Id. at 59.  The court then wrote:
"The proper test of what this statutory scheme
includes depends on concepts of property, 'real and
personal, tangible and intangible, used or held * * *
as owner, occupant, lessee, or otherwise.'  ORS
308.510(1).  The term 'otherwise' broadens the
definition of property but, construed by the ejusdem
generis rule, stays within this familiar arena.  These
concepts of property are more definite than the
wavering tests of operational and economic integration. 
What shows a property connection between corporations
is the right to control the operations of the other
company.  While overlap of officers is neither
necessary nor sufficient to show that one company is
the property of another, it is evidence of at least
possessory control."
Id. at 62 (emphasis in original).  The court concluded that
Cottonbelt's property could be assessed to Southern Pacific,
explaining that Southern Pacific owned 99.7 percent of Cottonbelt
and exerted executive control over Cottonbelt's marketing,
financing, management, operations, and labor.  Id.   
Here, the Tax Court did not address whether PPM had the
right to control either PKE or PacifiCorp Group, because it
erroneously described PKE as a "wholly owned subsidiary" of PPM. 
Pacificorp Power Marketing, 17 OTR at 338.  Based upon that
error, the Tax Court concluded that the "constellation" of
contracts involving both PPM and PPM's affiliates were taxable
intangible property.  Id. at 340.  The Tax Court erred by not
analyzing whether PPM could be taxed for PKE's and PacifiCorp
Group's property, consistently with Southern Pacific. (12) 
However, we may affirm the Tax Court's decision, despite that
error, if, considering only the four contracts between PPM and
the city, PPM "used" the facility, pursuant to the central
assessment statutes, during the tax year in question.
We turn now to the proper interpretation of the central
assessment statutes.  As with any other statute, this court
"shall pursue the intention of the legislature."  ORS 174.020. 
We first look to the text and context of the provision.  PGE v.
Bureau of Labor and Industries, 317 Or 606, 610-11, 859 P2d 1143 (1993).  In construing the text and context, we first look to the
"plain, natural and ordinary meaning" of words.  Id. at 611.  If
the legislative intent is clear after reviewing the ordinary
meaning of the text and context, then no further inquiry is
necessary.  Id.
The word "used" appears in several different provisions
of the relevant central assessment statutes.  See ORS 308.515(1)
(2001) (directing department to make an assessment of "any
property used or held for its own future use") (emphasis added);
see also ORS 308.505(3) (2001) ("property having situs in this
state" includes "all property * * * of a company, owned, leased,
used, operated or occupied by it") (emphasis added); ORS
308.510(1) (2001) ("property" includes "all property * * * used
or held by a company") (emphasis added); ORS 308.517 (the
department "shall assess to the property user all property owned,
leased, rented, chartered or otherwise held for or used by it")
(emphasis added).  The statutes, however, do not provide a
definition of the word "used."  In ordinary usage, the verb "to
use" means "to put into action or service[;] have recourse to or
enjoyment of[;] employ."  Webster's Third New Int'l Dictionary
2523-24 (unabridged ed 2002).  Synonyms for that verb include to
"employ, utilize, apply, avail."  Id. at 2524.  "Use * * *
indicates any putting to service of a thing, usu[ally] for an
intended or fit purpose or person[.]"  Id.  Those definitions of
"use" make clear that some degree of control is necessary.  
This court's prior decisions support that
interpretation of "use."  As noted earlier, this court's decision
in Southern Pacific, 295 Or at 62, applied the concept of control
to the central assessment statutes, though not to the definition
of "use" specifically.  Additionally, in P.G.E. Company v. Tax
Com., 249 Or 239, 437 P2d 827 (1968), this court reviewed the
assessment, under the central assessment statutes, of lands on
the Warm Springs Reservation that PGE had flooded pursuant to
certain flowage easements.  The court noted that the flowage
easements "would seem to be non-possessory."  Id. at 249.  The
court concluded, however, that it did not need to determine the
precise nature of PGE's rights to the property because the
agreement between PGE and the Confederated Tribes of the Warm
Springs granted PGE rights to use the property.  Id.  In
determining the appropriate valuation under the central
assessment statutes, the court concluded that "the rules for the
valuation of possessory interests in real property [were] fully
applicable."  Id. at 251.  The court found "no distinction of
substance between PGE's right to use the tribal lands and the
rights usually enjoyed by a lessee of property from a tax-exempt
owner."  Id. 
The similarities noted in P.G.E. Co. between possessory
interests and rights to use property extend beyond the valuation
context.  For example, lessees of property generally exercise
some degree of control over the leased property.  Whether a
taxpayer exercises control over property is also a component of
the "possessory interest" test under the municipal property
statute, ORS 307.110, advocated by PPM.  As this court has
explained,
"although a 'possessory' interest always is marked by
some degree of control and some degree of exclusivity,
neither absolute control nor absolute exclusivity is
required[.]"
Power Resources Cooperative v. Dept. of Rev., 330 Or 24, 31, 996
P2d 969 (2000) (citing Sproul, 226 Or at 405-06).   
We import similar principles of control to the test for
determining whether a utility "uses" property under the central
assessment statutes.  By analogizing the concept of control as
utilized in the "possessory interests" test, however, we do not
equate "use" under the central assessment statutes with
"possession" under the municipal property statute, which is
shorthand for property "held under a lease or other interest or
estate less than a fee simple," under ORS 307.110 (2001).  The
central assessment statutes clearly differentiate between
property that is "used" and property that is "held by a company
as owner, occupant, lessee, or otherwise," ORS 308.510(1) (2001). 
See also ORS 308.505(3) (2001) ("owned, leased, used, operated or
occupied"), ORS 308.515(1)(a) (2001) ("property used or held for
its own future use").  Therefore, if "absolute control" is not
necessary to show a possessory interest under the municipal
property statute, absolute control is certainly not required to
demonstrate mere "use" of a property under the central assessment
statutes.  "Use" does entail some degree of control over the
property at issue, however.  The property here is an electricity
cogeneration facility; to have "used" that facility, therefore,
PPM must have exercised some control over the facility's
business.  As explained below, based upon the aggregate of PPM's
four contracts with the city, we conclude that PPM "used" the
facility during the tax year in question.  
PPM's power-purchase contract with the city entitled
PPM to a specific amount of the facility's output:  237.7 MW
(approximately 47 percent) of the facility's base output. 
Additionally, PPM's payments to the city for that output were
tied to its share of the cost of the facility, and the length of
the agreement was tied to the useful life of the facility.  The
power brokerage agreement allowed PPM to broker, for a fee, the
sale of the remaining 53 percent of facility output, as the
city's exclusive selling agent.  PPM also received an annual
incentive bonus for its brokerage efforts. 
PPM's management contract with the city also allowed
PPM to exercise control over the facility.  Under the management
agreement, PPM "perform[ed] all administrative work of the
facility," including administering the power-purchase agreement
on a day-to-day basis and developing an annual budget.  The city
paid PPM a management fee as well as a performance incentive
bonus.  Further, that contract was a 20-year renewable contract
with the city to manage the facility.  That contract granted PPM
"the nonexclusive right * * * to enter on the premises on which
the Facility is located and to occupy and have free access to use
the same for solely the purposes set forth in this Agreement."
PPM points out that those agreements imposed limits on
PPM's control.  As we concluded earlier, however, absolute
control is not necessary for PPM to have "used" the facility.  We
conclude that the provisions described above demonstrate that
PPM's contracts with the city entitle PPM to "use" the
facility. (13)  We therefore hold that the department properly
assessed PPM under the central assessment statutes.  Accordingly,
we affirm the Tax Court's grant of summary judgment to the
department on PPM's claim that it had no taxable interest in the
facility.
In its second assignment of error, PPM contends that the Tax Court erred in granting summary judgment to the
department on its claim that the department violated the
constitutional requirements of uniformity and equalization in
assessment and taxation.  
PPM bases its constitutional claim on two provisions of
the Oregon Constitution.  The first provision, found in the Bill
of Rights, provides:
"No tax or duty shall be imposed without the
consent of the people or their representatives in the
Legislative Assembly; and all taxation shall be uniform
on the same class of subjects within the territorial
limits of the authority levying the tax."
Or Const, Art I, § 32.  The second provision provides:
"The Legislative Assembly shall, and the people
through the initiative may, provide by law uniform
rules of assessment and taxation.  All taxes shall be
levied and collected under general laws operating
uniformly throughout the State." 
Or Const, Art IX, § 1.  PPM contends that the department has
violated those provisions by assessing it, but not also assessing
the three other entities who have power-purchase agreements with
the city.  PPM argues that it is entitled to summary judgment on
its constitutional claim or, alternatively, that a triable issue
of fact exists such that granting summary judgment to the
department on PPM's constitutional claim was inappropriate.  For
the reasons explained below, we affirm the Tax Court's grant of
summary judgment to the department on PPM's constitutional claim.
In Penn Phillips Lands v. Tax Com., 247 Or 380, 385-86,
430 P2d 349 (1967), this court explained that, under Article I,
section 32, and Article IX, section 1, "[t]he taxing authorities
may not single out one taxpayer for discriminatory, or selective,
enforcement of a tax law that should apply equally to all
similarly situated taxpayers."  This court has required that
taxpayers asserting claims under Article I, section 32, and
Article IX, section 1, like PPM, must demonstrate an intentional
and systematic pattern of discrimination.  Freightliner Corp. v.
Dept. of Rev., 275 Or 13, 17, 549 P2d 662 (1976).
PPM argues that it has demonstrated a pattern of
discrimination on the department's part through the following
facts: (1) the department assessed to PPM 47 percent of the cost
of the facility, an amount corresponding to its power-purchase
agreement; and (2) the department has not assessed any of the
other three purchasers of power from the facility.
The department contends that the other three power
purchasers are not similarly situated, so there is no pattern of
discrimination based upon its refusal to assess those other three
purchasers.  The department explains that it did not assess PPM
as merely a purchaser of power from the facility; instead, the
department assessed PPM as a "user" of the facility based upon
all the contracts between the city and PPM and its
affiliates. (14)  The department also points out that the terms
of the city's power-purchase agreements with the other power
purchasers are different from those in PPM's power-purchase
contract.  For example, the non-PPM power-purchase agreements
involve shorter terms and smaller amounts of the facility's
capacity.  The department also points out that, unlike PPM, the
other power purchasers' contracts do not include "monthly demand
charges."
PPM has not satisfied its burden of showing an
intentional pattern of discrimination under this court's decision
in Freightliner, 275 Or at 19-20.  In that case, the taxpayer
challenged the department's omitted-property assessment after the
taxpayer had lost a previously recognized exemption, where the
department did not initiate similar omitted-property assessments
in four instances where other taxpayers had lost a previously
recognized exemption.  Id. at 16.  In that case, this court
assumed that the department had "committed errors in judgment,"
but concluded that such errors were "insufficient to show an
intentional violation of the 'principle of practical
uniformity.'"  Id. at 20 (quoting Sunday Lake Iron Co. v.
Wakefield, 247 US 350, 353, 38 S Ct 495 (1918)).
Here, PPM has not demonstrated that the department's
failure to assess the three other power purchasers constituted an
intentional, systematic, or arbitrary discrimination against PPM,
as required by Freightliner, 275 Or at 19-20.  The department has
offered nondiscriminatory reasons for the differing treatment,
and PPM has not offered evidence to refute those reasons. 
Because PPM had the burden to present evidence sufficient to
create an issue of material fact, TCR 47, and did not satisfy
that burden, we affirm the Tax Court's grant of summary judgment
to the department on PPM's constitutional claim.
In summary, we hold that the central assessment
statutes, ORS 308.505 to 308.665 (2001), provided an exception to
the public property tax exemption outlined in ORS 307.090 (2001),
that otherwise would apply to the facility in this case.  We also
hold that the Tax Court erred by considering contracts held by
entities affiliated with PPM to constitute intangible property
taxable to PPM without first determining that PPM had controlled
those entities.  Despite that error, we affirm the Tax Court's
grant of summary judgment to the department on PPM's statutory
claim, because PPM's four contracts with the city demonstrate
PPM's "use" of the facility under the central assessment
statutes.  Finally, we conclude, like the Tax Court, that PPM
failed to satisfy its burden to show any constitutional violation
and therefore affirm the Tax Court's grant of summary judgment on
PPM's constitutional claim.
The judgment of the Tax Court is affirmed.
1. In 2003, PacifiCorp Power Marketing, Inc. changed its
name to PPM Energy, Inc.
2. The central assessment statutes "impose[] standards and
procedures for assessing the ad valorem property tax of
designated public utilities."  Southern Pacific Transp. Co. v.
Dept. of Rev., 295 Or 47, 52, 664 P2d 401 (1983).  The statutes
require those utilities to be "centrally assessed, i.e., assessed
by the Department rather than by the counties."  Id. at 53.
3. During the tax year at issue, PKE and PPM were wholly
owned subsidiaries of PacifiCorp Holdings, Inc.  
4. PacifiCorp Group, at that time, was also a parent of
PKE indirectly.  PacifiCorp Group owned Pacific Generation, the
parent of PKE.  Both PPM and PKE are now subsidiaries of
PacifiCorp Holdings, Inc.
5. In its opinion and order, the department identified PKE
as a wholly owned subsidiary of PPM and, on that basis, included
the contracts signed between the city and PKE in its assessment. 
The record shows, however, and the department does not dispute,
that, although PPM and PKE are affiliates with a common parent,
they do not themselves have a parent-subsidiary relationship with
each other.  
6. During the tax year in question, the city also had
power-purchase agreements with the following entities:  Seattle
City Light, Modesto Irrigation District, and Sacramento Municipal
Utility District.
7. ORS 307.110(1) provides, in part: 
"[A]ll real and personal property of * * * any county
or city, town or other municipal corporation or
political subdivision of this state, held under a lease
or other interest or estate less than a fee simple, by
any person whose real property, if any, is taxable * *
* shall be subject to assessment and taxation for the
assessed or specially assessed value thereof uniformly
with real property of nonexempt ownerships."
8. ORS 307.090(1) (2001) provided: 
"Except as provided by law, all property
of the state and all public or corporate
property used or intended for corporate
purposes of the several counties, cities,
towns, school districts, irrigation
districts, drainage districts, ports, water
districts, housing authorities and all other
public or municipal corporations in this
state, is exempt from taxation."
9. We do recognize, however, that ORS
307.110 is also an exception to ORS 307.090. 
In this case, we conclude only that the
department need not base its taxation of PPM
on whether it holds a "possessory interest"
in the facility, as required by ORS 307.110;
instead, the department may tax PPM if PPM
"uses" the facility, pursuant to the central
assessment statutes.
10. ORS 308.635(4) (2001), in turn, required assessed
property to be taxed:  "Taxes shall be levied and collected on
assessments of properties so made, certified and apportioned in
the same manner as taxes on other properties are levied and
collected and at the same time and by the same officers." 
11. As noted earlier, PacifiCorp Group is no longer the
parent of either PPM or PKE.  The parent of those companies is
PacifiCorp Holdings, Inc.
12. We conclude only that the Tax Court erred in not
undertaking the analysis required by Southern Pacific.  We
express no opinion as to whether the corporate relationships
described above could support the legal conclusion that the Tax
Court reached.
13. Federal courts, deciding issues of intergovernmental
tax immunity, have similarly concluded that certain contracts,
including management contracts, can give rise to taxable "use" of
government property.  See, e.g., United States v. Muskegon, 355
US 484, 486, 78 S Ct 483 (1958) (state is permitted to tax
contractor who "us[es] the [federal] property in connection with
its own commercial activities" where contractor was "free within
broad limits to use the property as it thought advantageous and
convenient in performing its contracts and maximizing its profits
therefrom"); United States v. Nye County, 178 F3d 1080, 1085 (9th
Cir 1999) (concluding that county could tax contractors who "use
government property as they see fit in conducting their
commercial activities").  
14. The department's inclusion of PPM's affiliates, whether
or not correct, does not affect our analysis of PPM's
constitutional claims.