Title: IN THE MATTER OF THE APPEAL OF DEROMEDI, HOT SPRINGS COUNTY ASSESSOR

State: wyoming

Issuer: Wyoming Supreme Court

Document:

IN THE MATTER OF THE APPEAL OF DEROMEDI, HOT SPRINGS COUNTY ASSESSOR2002 WY 6945 P.3d 1150Case Number: 01-5Decided: 05/07/2002

APRIL TERM, A.D. 2002

                                                                                                            

IN THE 
MATTER OF THE APPEAL OF

SHELLEY 
DEROMEDI, HOT SPRINGS

COUNTY 
ASSESSOR:

SHELLEY 
DEROMEDI, HOT SPRINGS

COUNTY 
ASSESSOR, 

Appellant(Petitioner),

v.

                                                                                                

TOWN OF 
THERMOPOLIS, 

Appellee(Respondent).

Appeal 
from the District Court of Hot Springs County

The 
Honorable Gary P. Hartman, Judge 

Representing 
Appellant:

Dan O. 
Caldwell III, Hot Springs County and Prosecuting Attorney, and Daniel L. Forgey, 
Special Deputy Hot Springs County and Prosecuting Attorney, Thermopolis, 
Wyoming.  Argument by Mr. 
Caldwell.

Representing 
Appellee:

Michael 
S. Messenger of Messenger & Jurovich, Thermopolis, 
Wyoming.

  

Before 
LEHMAN, C.J., and GOLDEN, HILL, KITE, JJ., and SPANGLER, D.J., 
Retired

  

GOLDEN, 
Justice. 

[¶1]           
Appellee Town of 
Thermopolis (Town) established a public museum to house donated western wax 
figures and provide other scientific, educational, and cultural activities and 
displays.  The Town entered into an 
agreement with a for-profit corporation to operate the museum and charge an 
admission fee to patrons.  The 
Appellant Hot Springs County Assessor (Assessor) denied the Town a property tax 
exemption, the Hot Springs County Board of Equalization (CBOE) reversed that 
decision, and was in turn reversed by Wyoming's State Board of Equalization 
(SBOE).  On appeal, the district 
court reversed the SBOE and reinstated the CBOE's order granting an 
exemption.

[¶2]           
We affirm the 
district court's decision to reverse the SBOE's decision to deny the 
exemption.  The CBOE decision to 
grant the exemption is reinstated.

ISSUES

[¶3]           
The 
parties agree that the following statement of the issues is presented for our 
review:

1.  Was the Hot Springs County Board of 
Equalization's July 20, 1999, Findings of Fact, Conclusions of Law and Order 
arbitrary, capricious, an abuse of discretion or otherwise not in accordance 
with law, or unsupported by substantial evidence?

2.  In the context of the first issue, is 
the Town of Thermopolis' wax museum used primarily for a governmental purpose or 
as a commercial, proprietary venture?

FACTS

[¶4]           
In 1997, 
the executor of the Smith Family Trust of Jackson, Wyoming, offered to donate 
the contents of the former "Wax Museum of Old Wyoming" to a community that could 
provide a suitable location.  
Responding to public interest in the opportunity, the Town of Thermopolis 
(Town) purchased a vacant building in Thermopolis to house the museum.  The Town applied for a Community 
Development Block Grant offered by the Wyoming Department of Commerce, Division 
of Economic and Community Development, and was awarded $120,000.  The application process required the 
Town to evaluate and project economic benefits to the community.  With the grant in hand, the Town used 
the funds to establish a museum that not only housed the donated wax figures but 
included other scientific, cultural, and educational displays and activities. 

[¶5]           
The Town 
contracted with a for-profit firm to operate the museum in exchange for $1,000 
per year.  The for-profit firm 
planned to charge admission to the museum.  
Before operations began, the museum appeared on the county assessor's 
rolls, and the Town applied for a tax exemption, which was denied by the Hot 
Springs County Assessor in March of 1999.   The Town objected, claiming that 
its museum property was exempt under the state constitution and state statute, 
and requested a hearing before the County Board of Equalization (CBOE). 

[¶6]           
The CBOE 
held a contested case hearing and issued Findings of Fact, Conclusions of Law 
and Order on July 20, 1999.  It 
granted the exemption, and the assessor appealed to the State Board of 
Equalization (SBOE), which reversed the CBOE.  The Town then appealed to the district 
court, which reversed the SBOE.  
This appeal followed.

DISCUSSION

Statutory 
Framework

[¶7]           
By 
statute, a town may establish, maintain and, in a manner the governing body 
determines, provide for a public museum.  
Wyo. Stat. Ann. § 15-1-103(a)(xxxii) (LexisNexis 2001).  By constitutional1 and statutory provision,2 property owned by a town and used 
primarily for a governmental purpose is exempt from property taxes.  Agency regulations have developed a list 
of considerations to assist with defining the term "used primarily for a 
governmental purpose," and approving exemptions.3  The precise issue before the CBOE and 
the SBOE was whether this museum is used primarily for a governmental 
purpose.  Each agency interpreted 
and applied these regulations, and each reached a different conclusion.  

Standard of Review

[¶8]           
Our 
standard of review for cases arising from a county board contested case 
proceeding, appealed to a state agency, and finally arriving in this Court on 
appeal is as follows:  

Since in 
this case the county board was the finder of the fact and the state board heard 
no additional testimony, we will treat the state board as an intermediate level 
of review and accord deference only to the county board's findings of fact.  Thus, the primary focus of our review 
will be whether the county board's decision was lawful and supported by 
substantial evidence.

Laramie 
County Bd. of Equalization v. Wyo. State Bd. of Equalization, 915 P.2d 1184, 1188 (Wyo. 1996) (quoting Union Pacific Railroad Co. v. Wyo. State 
Bd. of Equalization, 802 P.2d 856, 859 (Wyo. 1990)).  

The 
party challenging the sufficiency of the evidence has the burden of 
demonstrating the agency's decision is not supported by substantial 
evidence.  If the agency action is 
supported by substantial evidence, its decision should be reversed only for 
errors of law.  If the agency did 
not apply the correct rule of law, or applied it incorrectly, this Court does 
not defer to the agency's conclusion.  
The agency's errors of law are corrected by this 
Court.

Id. 
(quoting Butts v. Wyo. State Bd. of Architects, 911 P.2d 1062, 1065 (Wyo. 
1996)).

[¶9]           
The 
scope of appellate review of agency decisions is provided by 
statute:

(c) To 
the extent necessary to make a decision and when presented, the reviewing court 
shall decide all relevant questions of law, interpret constitutional and 
statutory provisions, and determine the meaning or applicability of the terms of 
an agency action.  In making the 
following determinations, the court shall review the whole record or those parts 
of it cited by a party and due account shall be taken of the rule of prejudicial 
error.  The reviewing court 
shall:

(i) 
Compel agency action unlawfully withheld or unreasonably delayed; 
and

(ii) 
Hold unlawful and set aside agency action, findings and conclusions found to 
be:

(A) 
Arbitrary, capricious, an abuse of discretion or otherwise not in accordance 
with law;

(B) 
Contrary to constitutional right, power, privilege or 
immunity;

(C) In 
excess of statutory jurisdiction, authority or limitations or lacking statutory 
right;

(D) 
Without observance of procedure required by law; or

(E) 
Unsupported by substantial evidence in a case reviewed on the record of an 
agency hearing provided by statute.

Wyo. 
Stat. Ann. § 16-3-114(c) (LexisNexis 2001).

            
We examine the entire record to determine if there is substantial 
evidence to support an agency's findings.  
If the agency's decision is supported by substantial evidence, we cannot 
properly substitute our judgment for that of the agency, and must uphold the 
findings on appeal.  Substantial 
evidence is relevant evidence which a reasonable mind might accept in support of 
the conclusions of the agency.  It 
is more than a scintilla of evidence.

Laramie 
Cty. Bd. of Equalization, 915 P.2d  at 1189.

[¶10]       
Although 
under Title 39, taxation of property is generally the rule, the exemptions 
provided for by § 39-11-105(a)(v) require that we apply the rule that where the 
established policy of the state is to exempt publicly owned property, the burden 
is placed on the taxing authority to establish taxability.  City of Cheyenne v. Bd. of County 
Comm'rs of the County of Laramie, 484 P.2d 706, 708-09 (Wyo. 1971).  The mere ownership of property by a town 
does not exempt the property; it must also be used primarily for governmental 
purposes.  Id. at 
709.  When a town uses the 
property in a proprietary manner, the property is not exempt from taxation.  Town of Pine Bluffs v. State Board of 
Equalization, 79 Wyo. 262, 288, 333 P.2d 700, 710 (Wyo. 1958).  The taxable status of property owned by 
a governmental entity must be determined as a question of fact by the use made 
of the property.  City of 
Cheyenne v. Sims, 521 P.2d 1347, 1349 (Wyo. 1974).   

[¶11]       
We have 
recognized that the term "used primarily for a governmental purpose" is 
difficult to define but have found that it applied to buildings leased to 
profit-making corporations although located upon a municipally owned and 
operated airport.  City of 
Cheyenne v. Bd. of Cty. Comm'rs of Laramie Cty., 484 P.2d  at 709.  There, we said that the mere fact that 
the city accomplishes such use through a lessee or receives rent in return for 
such use is not controlling.  
Id.  We later decided 
that "[w]here the primary and principal use to which property is put is public, 
the mere fact that income is incidentally derived from it does not affect its 
character as property devoted to a public use, so as to prevent its being exempt 
from taxation."  State Bd. of 
Equalization v. City of Lander, 882 P.2d 844, 850 (Wyo. 1994).  

[¶12]       
The CBOE 
found that the museum would be used by the Town in many ways.  Primarily, the museum would house the 
donated western wax figures, but the museum was expanded to include a Folk 
Center, textile studio, a conference room, and historical and educational 
displays.  The CBOE found that the 
more scientific aspect of the facility would be run by Big Horn Prospecting, 
Inc. (BHP) and the other aspects would be operated by the Big Horn Basin 
Foundation.  The CBOE also found 
that no firm agreement existed as to how any income generated would be spent, 
and "[t]aking into consideration the annual lease payment and the allocation 
between BHP and the Town as to the payment of certain costs of operating and 
maintaining the facility, in connection with the numerous scientific, 
educational and cultural activities intended to occur at the facility, it cannot 
be said that the primary purpose of the Museum is to directly enhance the Town 
of Thermopolis' income.  The primary 
purpose of the facility is to encourage economic development and diversity and 
to better the quality of life for the local citizenry."  The CBOE concluded that the primary 
purpose of the museum was not commercial or of a proprietary nature but served a 
governmental purpose for the educational and recreational benefit of the 
citizenry and to economically benefit the local economy in general.  The tax exemption was granted.  

[¶13]       
The 
statutory exemptions provided for in § 39-11-105(a)(v)4 are not limited to those explicitly 
stated.  By the statutory use of the 
term "including" the legislature intends to include other purposes even though 
not specifically enumerated.  See 
City of Cheyenne v. Bd. of Cty. Comm'rs of Laramie Cty., 484 P.2d  at 708. 
A museum is defined as "an institution devoted to the procurement, care, 
study, and display of objects of lasting interest or value."  Merriam Webster's Collegiate Dictionary 
765 (10th ed. 2000).  The Town points to many state statutes 
providing for the establishment and maintenance of public museums, and we agree 
that the legislature has recognized that museums serve a governmental 
purpose.  The CBOE found that this 
particular museum would provide numerous scientific, educational, and cultural 
activities that would better the quality of life for the local citizenry.  In this capacity, a public museum serves 
a governmental purpose similar to that served by a library, park, golf course, 
art gallery or other public recreational facility, and we hold that the CBOE's 
finding that the museum had a governmental purpose is supported by substantial 
evidence.

[¶14]       
According to the 
Assessor, the Town articulated its nongovernmental, proprietary purposes of 
enhancing tourism and promoting growth and economic development in its grant 
application.  The Assessor contends 
that the SBOE's determination that the economic development purpose served by 
this museum precludes an exemption is the correct conclusion.  Specifically, the SBOE stated that 
"[w]hile economic development may be a worthwhile objective, we do not believe 
that it rises to a governmental function." The Assessor further contends that 
the SBOE properly applied a tort liability test and concluded that the purpose 
is proprietary because the town is charging a fee to view the museum figures. 

[¶15]       
We 
disagree that establishing a public museum that will provide scientific, 
educational and cultural activities to local citizenry precludes an exemption 
because that museum will also enhance tourism and promote growth and economic 
development.  The Assessor and SBOE 
assume that because the museum will generate income, the Town is competing 
against private enterprise and the museum's purpose must be deemed 
proprietary.   However, as the 
Town argues, it is authorized to establish and maintain a public museum by § 
15-1-103(xxxii), and any economic benefits derived from so doing do not change 
its purpose from a governmental purpose to a proprietary undertaking.  As we have already stated, the general 
rule is that where the primary and principal use is public, the property is 
exempt and income received from its use does not preclude the exemption.  City of Lander, 882 P.2d  at 
850.   In City of Cheyenne 
v. Bd. of Cty. Comm'rs of Laramie Cty., we noted that many authorities do 
apply a tort liability test and find a purpose proprietary if income is 
generated; however, we decided that generating income is not controlling, and 
merely renting a building to a lessee engaged in a profit-making venture is not 
a use for a nongovernmental purpose.  
484 P.2d  at 709.  There, we 
decided that because the buildings were necessary or essential facilities to the 
efficient operation and maintenance of the airport, the improvements were not 
subject to taxation.  Id.  Here, the property's use is primarily 
for the governmental purpose of providing scientific, educational, and cultural 
activities in a museum, and any fees charged or profits generated by its lessee 
do not alter its tax exempt status.

[¶16]       
The 
order of the district court reversing the SBOE is affirmed, and the order of the 
CBOE is reinstated.

FOOTNOTES

1"The property of the United States, 
the state, counties, cities, towns, school districts and municipal corporations, 
when used primarily for a governmental purpose, and public libraries, lots with 
the buildings thereon used exclusively for religious worship, church parsonages, 
church schools and public cemeteries, shall be exempt from taxation, and such 
other property as the legislature may by general law provide."  Wyo. Const. Art. 15, § 
12.

2Wyo. Stat. Ann. § 39-11-105 (LexisNexis 
2001) governs exemptions and provides:

            
(a) The following property is exempt from property 
taxation:

                        
* * * *

            
(v) Property of Wyoming cities and towns owned and used primarily for a 
governmental purpose including:

            
(A) Streets and alleys and property used for the construction, 
reconstruction, maintenance and repair of streets and 
alleys;

            
(B) Property used to furnish sewer and water 
services;

            
(C) City or town halls, police stations and equipment, traffic control 
equipment, garbage collection and disposal equipment and lands and buildings 
used to service and repair the halls, stations or 
equipment;

            
(D) Parks, airports, auditoriums, cemeteries, golf courses, playgrounds 
and recreational facilities.  Any 
charges for the use of the facilities shall not exceed the cost of operation and 
maintenance to qualify for the exemption;

            
(E) Personal property used exclusively for the care, preservation and 
administration of city or town property;

            
(F) Parking lots operated on a nonprofit 
basis.

3Section 4.  Publicly owned property - W.S. 
39-11-105(a)(i)-(vi).

(a) Publicly owned property is not, per 
se, exempt from taxation. The property is exempt only "when used primarily for a 
governmental purpose."

(b) The phrase "governmental purpose" 
cannot be precisely defined.  The 
following considerations should be evaluated:

(i) If a service or function is 
obligatory (one the governmental entity must perform as a legal duty imposed by 
statute), the function is governmental and the associated property is 
exempt.

(ii) If a service is rendered 
gratuitously, supported by taxes, and for the public welfare or enjoyment 
generally, the property associated with providing such service is 
exempt.

(iii) W.S. 39-11-105(a)(v) specifically 
identifies certain municipal property which is exempt (used primarily for a 
governmental purpose).

(iv) W.S. 39-11-105(a)(i)(A)-(E) and 
(ii)(A)-(D) identify specific uses of federal and state property which are 
not exempt (not used for governmental 
purposes).

(v) Property owned by a governmental 
entity acting in its proprietary capacity is not exempt, (e.g. where a city 
enters the field of private competitive business for profit or into activities 
which may be and frequently are carried on through private 
enterprises).

Wyoming Department of Revenue, Ad 
Valorem Tax Exemption Standards, Ch. 14, § 4 (filed Feb. 11, 
1999).

4W.S. 1957 § 39-7, subd. 
1(E).