Case Name: DEPARTMENT OF REVENUE, Appellant, v. The CITY OF GAINESVILLE, Appellee
Court: Florida District Court of Appeal
Jurisdiction: Florida
Decision Date: 2003-11-26
Citations: 859 So. 2d 595
Docket Number: No. 1D02-1582
Parties: DEPARTMENT OF REVENUE, Appellant, v. The CITY OF GAINESVILLE, Appellee.
Judges: BENTON, J., Concurs; ERVIN, J., Dissents with opinion.
Reporter: Southern Reporter, Second Series
Volume: 859
Pages: 595–608

Head Matter:
DEPARTMENT OF REVENUE, Appellant, v. The CITY OF GAINESVILLE, Appellee.
No. 1D02-1582.
District Court of Appeal of Florida, First District.
Nov. 26, 2003.
Charlie Crist, Attorney General; Nicholas Bykowsky and Mark T. Aliff, Assistant Attorneys General, Tallahassee, for Appellant.
Kenneth R. Hart and Sean E. Fennelly of Ausley & McMullen, Tallahassee, for the Florida Telecommunications Industry Association as Amicus Curiae.
Michele Santi and John C. Dent, Jr., of Dent & Cook, Sarasota, for Edward Cra-po, Alachua County Property Appraiser, as Amicus Curiae.
Robert W. Pass and E. Kelly Bittick, Jr., of Carlton Fields, P.A., Tallahassee, for Appellee.
James Bailer and Sean A. Stokes of The Bailer Herbst Law Group, P.C., Washington, D.C., and William J. Peebles, Tallahassee, for the Florida Municipal Electric Association as Amicus Curiae.

Opinion:
WOLF, C.J.
The Department of Revenue (Department) appeals from a final summary judgment entered in a declaratory judgment suit filed by the City of Gainesville (City). The trial court declared facially unconstitutional section 2 of chapter 97-197, Laws of Florida, creating section 166.047, Telecommunications services, Florida Statutes, which imposes ad valorem taxes on property owned and used by a municipality to provide telecommunications services, because the statute contravened Article VII, Section 3(a) of the Florida Constitution. For the same reason, the trial court also declared facially invalid a portion of section 3 of chapter 97-197, Laws of Florida, which amended section 196.012, Definitions, Florida Statutes, to provide that a municipality's provision of two-way telecommunications services to the public does not constitute an exempt use for ad valorem tax purposes unless the services complied with certain conditions therein specified. We affirm because we believe that the property in question is being used by the City for a municipal purpose and the legislature's attempt to condition the provision of these municipal services on the payment of an amount equal to any ad valorem tax liability is in direct conflict with Article VII, Section 3(a) of the Florida Constitution.
The City, doing business under the fictitious name, Gainesville Regional Utilities (GRU), sells telecommunications infrastructure and integrated telecommunications services to its citizens, charging its customers contractually agreed-upon rates for the services provided. Pursuant to the terms of the challenged statute, property owned by the City and used for providing these telecommunication services is subject to ad valorem taxation.
Section 2 of chapter 97-197, Laws of Florida, created section 166.047, which provides in pertinent part,
Telecommunications services. — A telecommunications company that is a municipality or other entity of local government may obtain or hold a certificate required by chapter 364, and the obtaining or holding of said certificate serves a municipal or public purpose under the provision of s. 2(b), Art. VIII of the State Constitution, only if the municipality or other entity of local government:
(3) Notwithstanding any other provision of law, pays, on its telecommunications facilities used to provide two-way telecommunications services to the public for hire and for which a certificate is required pursuant to chapter 364, ad valorem taxes, or fees in amounts equal thereto, to any taxing jurisdiction in which the municipality or other entity of local government operates. Any entity of local government may pay and impose such ad valorem taxes or fees.
(emphasis supplied).
In section 3 of chapter 97-197, the legislature amended section 196.012(6), which sets out definitions for governmental, municipal, or public purposes or functions, by adding the following language:
Providing two-way telecommunications services to the public for hire by the use of a telecommunications facility, as defined in s. 364.02(13), and for which a certificate is required under chapter 364 does not constitute an exempt use for purposes of s. 196.199, unless the telecommunications services are provided by the operator of a public-use airport, as defined by s. 332.004, for the operator's provision of telecommunications services for the airport or its tenants, concessionaires, or licensees, or unless the telecommunications services are provided by a public hospital. However, property that is being used to provide such telecommunications services on or before October 1, 1997, shall remain exempt, but such exemption expires October 1, 2004.
These sections directly conflict with Article VII, Section 3(a), Florida Constitution, providing an exemption from ad valorem taxation for municipal property used by the municipality for a municipal purpose. Article VII, Section 3(a) states,
All property owned by a municipality and used exclusively by it for municipal or public purposes shall be exempt from taxation. A municipality, owning property outside the municipality, may be required by general law to make payment to the taxing unit in which the property is located. Such portions of property as are used predominantly for educational, literary, scientific, religious or charitable purposes may be exempted by general law from taxation.
In City of Sarasota v. Mikos, 374 So.2d 458 (Fla.1979), the supreme court declared that this provision of the constitution is self executing:
A reading of section 3(a) of article VII clearly establishes that it is a self-executing provision and therefore does not require statutory implementation. The change in the language of chapter 196 is irrelevant because although a statute may grant additional exemptions, it may not repeal the exemptions granted municipalities by the constitution.
Id. at 460. Thus, if municipality-owned property is being used by the municipality for a public purpose, the legislature may not remove the exemption. Yet, that is precisely the purpose of section 166.047. The legislative staff analysis of chapter 97-197 states the purpose of the act: to "remove the exemption that municipalities, counties, or other entities of local government have for ad valorem taxes on real property used for the purpose of providing telecommunication services to the public." Fla. H.R. Comm. on Utils, and Communications, HB 313 (March 5, 1997) Staff Analysis (on file with Comm.). The only issue before us is whether this property which is owned by the City is being used for a municipal purpose.
The provision of utility type services has always been considered to be a tax exempt municipal purpose. Ford v. Orlando Utils. Comm'n, 629 So.2d 845 (Fla.1994). Relying on language contained in Sebring Airport Auth. v. McIntyre, 783 So.2d 238 (Fla.2001), appellant and the dissent argue, however, that we should define municipal purpose narrowly. Appellant has not cited any case which supports the proposition that when property is owned and used by a municipality the term "municipal purpose" as used in Article VII, Section 3(a), Florida Constitution, should be narrowly construed. McIntyre and other cases cited for adopting a narrow interpretation involve situations where municipal property is being leased or utilized by a private entity. In Williams v. Jones, 326 So.2d 425, 432 (Fla.1975), a case where a municipality leased municipal property, the court stated that one person operating a commercial establishment for profit should not have an advantage over another commercial establishment also operating for purely proprietary purposes just because one is located on governmental property. The same policy considerations do not apply where the property is being owned and operated by the municipality itself, in which case the focus of the municipality is the provision of service to its citizens. See, e.g. City of Boca Raton v. Gidman, 440 So.2d 1277 (Fla.1983). In-fact, we are unaware of any public policy reason when property is owned and operated by a municipality that the term "municipal purpose" should not be given its generally accepted meaning in accordance with Article VIII, Section 2(b), Florida Constitution. The Fifth District's opinion in Crotty, 775 So.2d at 978, and the opinion of this court in Page v. Fernandina Beach, 714 So.2d 1070 (Fla. 1st DCA 1998), support such a uniform construction. The Crotty court noted,
[T]he constitution exempts from taxation property owned by a municipality and used exclusively by it for municipal or public purposes. The term "municipal purpose" has been defined as encompassing all activities essential to the health, morals, protection and welfare of the municipality. State v. City of Jacksonville, 50 So.2d 532, 535 (Fla.1951). "Municipal functions" are those created or granted for the special benefit and advantage of the urban community embraced within the corporate boundaries. Chardkoff Junk Company v. City of Tampa, 102 Fla. 501, 135 So. 457 (1931). See also State ex rel. Harper v. McDavid, 145 Fla. 605, 200 So. 100 (1941); City of Winter Park, 448 So.2d at 1244. Our courts have ruled that municipal functions include functions which specifically and peculiarly promote the comfort, convenience, safety and happiness of the citizens of the municipality rather than the welfare of the general public.
Crotty, 775 So.2d at 980-981 (emphasis in original).
In Page v. Fernandina Beach, we specifically noted that city owned and operated (as opposed to leased out) property was exempt from taxation under a broad construction of "municipal purpose:"
Municipal operation of a marina is a legitimate municipal corporate undertaking for the comfort, convenience, safety, and happiness of the municipality's citizens. Indeed, the uncontradicted expert testimony was that operation of this marina constituted a proper municipal or public function. When a city operates a marina it owns, marina property it has not leased to a nongovernmental entity is exempt from ad valorem taxation.... But operating a marina partakes of no aspect of sovereignty and does not warrant an exemption for a marina leased to a nongovernmental operator seeking profits.
Page, 714 So.2d at 1076-1077.
Indeed, the provision of telecommunication services for the benefit of city residents constitutes a valid municipal purpose pursuant to any reasonable interpretation of the term "municipal purpose." The best evidence in this regard is the statute itself which recognizes that political subdivisions within the state may be issued certificates by the Public Service Commission to act as a telecommunications provider. See § 364.02(13), Fla. Stat.
In addition, as recognized by the trial court, there is a long history in Florida and elsewhere in this country of local governments providing utility services. In discussing the provision of telecommunications services, the trial court stated,
While the provision of telecommunications services may also partake of "no aspect of sovereignty," it is no less "a legitimate municipal corporate undertaking for the comfort, convenience, safety, and happiness of the municipality's citizens" than a marina. Indeed, if anything, it is more analogous to such services as electricity and water, long recognized as serving valid municipal and public purposes. See Ford v. Orlando Utilities Comm'n, 629 So.2d 845 (Fla.1994) (property used in furnishing electricity is used for valid municipal purpose and exempt from tax under the Florida Constitution); Schultz v. Crystal River Three Participants, 686 So.2d 1391 (Fla. 5th DCA 1997) (interest of municipalities in private power plant was tax exempt); Orlando Utilities Comm'n v. Milligan, 229 So.2d 262 (Fla. 4th DCA 1969) (furnishing of electricity, power, and water was municipal purpose under Florida's 1885 Constitution.)
(footnote omitted).
Indeed, the provisions of telecommunication services are still regulated by the Public Service Commission just like water, sewer, and electricity. See Chs. 362, 366, and 367, Fla. Stat. Telecommunication providers like utilities provide essential public services.
Telegraph and telephone companies as ordinarily operated are categorized as "public service corporations," and in legal phraseology as "quasi-public corporations" or "corporations affected with a public interest." They are important agencies and instrumentalities of commerce, in constant use in conducting both governmental and private affairs of the country, so that the public clearly has an interest in such business. The property employed, as well as the proceeds of the business, belongs to the company, but such property is used and the business conducted for the accommodation and convenience of the public.
74 Am.Jur.2d Telecommunications § 2 (2003) (footnotes omitted).
In City of Gainesville v. State Dep't of Transp., 778 So.2d 519, 523 (Fla. 1st DCA 2001), this court recognized the power of the city to provide the utility services enumerated in chapter 90-394, section 1, Laws of Florida, and the implicit power to operate and maintain the necessary facilities to provide such services. Included among such utilities are the telecommunication services of telephone and telegraph. Ch. 90-394, § 1, at 23, Laws of Fla. (amending the charter of the City of Gainesville). The dissent argues that because competition exists in the telecommunications market somehow the provision of these services no longer constitutes a municipal purpose. In analyzing whether a provision of services constitutes a municipal purpose pursuant to Article VII, Section 3(a), the focus is whether the function promotes comfort, convenience, safety, and happiness of the citizens of the municipality. See Crotty 775 So.2d at 980; Page 714 So.2d at 1076. Utilities such as telecommunication providers are treated differently in part because of the essential nature of the service they provide. The services they provide become no less important to the citizens regardless of whether they may be provided in a competitive market.
We also find that the argument that the provisions of the act merely outline a condition for the provision of telecommunication services is unpersuasive. By requiring the payment of ad valorem taxes on property that would otherwise be exempt, as a condition of obtaining and holding a certificate under chapter 364, the legislature has attempted to indirectly achieve its desire purpose — taxation of municipal telecommunications property — when it could not do so directly.
"It is fundamental and elementary that the legislature may not do that by indirect action which it is prohibited by the Constitution to do by direct action." Lewis v. Fla. Bar, 372 So.2d 1121, 1122 (Fla.1979) (finding attempt to impose documentary stamp tax on transaction between Florida Bar and bank, which tax would be passed on to Bar, constituted an attempt to impose an indirect tax on an immune governmental body); Dep't of Revenue v. Fla. Boaters Ass'n, 409 So.2d 17 (Fla.1981) (holding statute attempting to define the term "boat" for purposes of tax exemption was unconstitutional where it failed to provide a reasonable definition of that term, but simply constituted a decree that certain uses of boats would render them subject to ad valorem taxation, contrary to constitutional exemption).
The legislature cannot circumvent the constitutional language contained in Article VII, Section 3(a) of the Florida Constitution, concerning exemptions of municipal property operated by the municipality for a public purpose.
The decision of the trial court is affirmed.
BENTON, J., Concurs; ERVIN, J., Dissents with opinion.
. The Department also complains that the trial court erred in declaring the statutes facially unconstitutional because, in so doing, it incorrectly applied the legal standard for an "as applied" challenge. Among other things, it argues that the correct standard to be used in determining whether a statute is facially constitutional is if it could be constitutionally applied to any hypothetical set of factual circumstances. See State v. Bales, 343 So.2d 9 (Fla.1977). The Department posits that there are a number of circumstances under which the act could be constitutionally applied, such as when a city owns and operates telecommunications property outside the county in competition with private companies, or when such property is leased for a proprietary purpose, rather than owned.
In our judgment, the statutes do not on their face reasonably imply any permissible circumstances that would allow them to survive a facial constitutional challenge. Section 166.047(3) mandates that each municipality shall pay "on its telecommunications facilities . ad valorem taxes . to any taxing jurisdiction in which the municipality . operates." In comparing this broad, all-inclusive language with that in article VII, section 3(a), requiring that all property owned by a municipality and used by it exclusively for a public purpose be exempt from taxes, the argued hypothetical scenarios that would facially validate the enactments are simply not apparent. It is true that the second sentence of article VII, section 3(a) authorizes the legislature to carve out one specific class of municipal property that can be taxed, i.e., "property outside the municipality"; nevertheless, the constitutional language does not contemplate that the legislature may lump together that which it forbids and that which it permits. It is rather the legislature's obligation to draft a law that generally tracks the constitutionally drawn line between property inside a municipality's boundaries and property outside them.
. Inquiry into whether property is being used for a municipal purpose is necessary because municipal property is only exempt from taxation, whereas county and state properties enjoy immunity from taxation. See Canaveral Port Auth. v. Dep't of Revenue, 690 So.2d 1226 (Fla.1996).
. Appellant relies heavily on the case of Greater Orlando Aviation Auth. v. Crotty, 775 So.2d 978 (Fla. 5th DCA 2000), in which the court found that the operation of a hotel on airport property owned by the city and which was not subject to a lease was subject to ad valorem taxes. Crotty is factually distinguishable from the instant case for a number of reasons. Most importantly, the municipal property was a hotel being operated by a private entity, the Hyatt Corporation, pursuant to an agreement specifically requiring Hyatt to maximize profits. Id. at 980. In the instant case the telecommunications system is operated and managed by the city. Further, the purpose of the hotel in Crotty was not to serve citizens of Orlando but to "serve persons who reside elsewhere and therefore require public accommodations." Crotty at 981. In the instant case the telecommunications services are provided for the benefit of the citizens of Gainesville. Based on the foregoing, Crotty does not address the situation we have before us where municipally owned property is being used by the municipality for the benefit of its own citizens.
. In fact in cases where a government itself is acting purely for the purpose of making profit there may be no legitimate municipal purpose. See State v. City of Orlando, 576 So.2d 1315 (Fla.1991).
. The condition that the legislature attempts to place on the provision of telecommunication services — the payment of an amount that equates to ad valorem tax liability — does not negate the fact that the provision of such services constitutes a valid municipal purpose under the constitution.
. In addition, telecommunication services were specifically included in the public service tax assessed by municipalities. See Ch. 98-277, Laws of Fla.