Opinion ID: 2449412
Heading Depth: 1
Heading Rank: 2

Heading: does section 172a of the kentucky constitution apply solely to farm land?

Text: The majority of the Court of Appeals ruled the agreement between the City of Louisville and Oxmoor invalid because it applied differing tax rates to the urban area of the City and to the urban area in Oxmoor. They reasoned that Section 172A of the Kentucky Constitution, on which the agreement was based, applies only to farm land. We do not agree, and conclude that § 172A applies to urban land as well as agricultural land. § 172A is as follows: § 172A. ASSESSMENT OF FARM LAND ACCORDING TO VALUE FOR FARM PURPOSES. Notwithstanding contrary provisions of Sections 171, 172, or 174 of this Constitution  The General Assembly shall provide by general law for the assessment for ad valorem tax purposes of agricultural and horticultural land according to the land's value for agricultural or horticultural use. The General Assembly may provide that any change in land use from agricultural or horticultural to another use shall require the levy of an additional tax not to exceed the additional amount that would have been owing had the land been assessed under Section 172 of this Constitution for the current year and the two next preceding years. The General Assembly may provide for reasonable differences in the rate of ad valorem taxation within different areas of the same taxing districts on that class of property which includes the surface of the land. Those differences shall relate directly to differences between non-revenue-producing governmental services and benefits giving land urban character which are furnished in one or several areas in contrast to other areas of the taxing district. (Proposed by Acts 1968, ch. 103, ratified November, 1969). The clear purpose of § 172A is to permit a lack of uniformity in taxation, both as to rate and valuation, for the land affected. This is, of course, totally opposite to the historical and constitutional principles built into our system. The second paragraph specifically permits reasonable differences in the tax rate within different areas of the same taxing districts. The amendment then provides a guideline and a limitation to the authorized differences. They shall relate directly to the differences in so-called non-revenue-producing governmental services and benefits furnished by the taxing authority in different areas of the taxing district. There are no words or phrases here which restrict this section of the amendment to farm land. Different rates are specifically contemplated when the land affected is given an urban character by the different governmental services which are furnished. We have so held in the past. In Holsclaw v. Stephens, Ky., 507 S.W.2d 462 (1974), there was a challenge to the proposed charter of the urban county government in Lexington and Fayette County. One of the provisions attacked was that which authorized a differential in tax rate for a corresponding difference in non-revenue producing governmental services provided by the government. We specifically held that § 172A authorized such a difference: We hold that Section 172A of the Constitution expressly authorizes the General Assembly to provide for reasonable differences in the rate of ad valorem taxation within different areas of the same taxing district . . . . Id., at 476. Because KRS 82.085 specifically allowed second class cities (and urban-county governments) to establish different tax rates for different services provided, we upheld the provision of the charter. There is nothing in that opinion that restricts the application of 172A to farm land. The questioned provision of the urban county charter applied to the entire geographical area of Fayette County which, of course, consists not only of agricultural land but also of a great deal of urban development. It is clear that the differential in tax rates applied to all land in that county. In Jacobs v. Lexington-Fayette Urban County Government, Ky., 560 S.W.2d 10 (1978), although we disallowed a difference in the tax rate as far as it applied to personal property and mineral rights, we reiterated our view that Section 172A and KRS 82.085 authorize the levy of ad valorem taxes at different rates, id., p. 14. We drew no distinction between farm land and urban land. We permitted such differing rates in all situations except in cases of personal property and mineral rights. We therefore conclude that the Court of Appeals was in error when it interpreted Section 172A (and all enabling legislation passed by the General Assembly) to apply only to farm land. One further point remains. In the concurring opinion of the Court of Appeals it was opined that although Section 172A and KRS 82.085 permitted variable tax rates, there is an inherent danger in unrestricted differences in such rates. We concur in the reasoning of Judge Vance and adopt it as part of our opinion: (Section 172A does not permit) a taxing authority to cease providing or to agree not to provide governmental services in selective areas where it has customarily provided and is capable of providing them and by reason thereof create a different tax rate. Such a scheme would open the doorway to individuals or groups to barter with the taxing authority for a favorable tax rate for their particular property and it would not be unusual if the more prominent and influential citizens fared better than others. Although section 172A imposes the safeguard that any difference in tax rate must relate directly to the difference in service, it is conceded that the exact cost of a governmental service is difficult to compute and equally difficult to challenge. I especially do not believe that section 172A permits residents of an area sought to be annexed by a city to barter with the city for a more favorable tax rate than is accorded to other citizens in exchange for their agreement not to protest the annexation. This, no doubt, would lead residents of every area sought to be annexed to remonstrate in the hope that they might be able to negotiate for themselves a favorable tax rate and many cities, like the city of Louisville in this case, might prefer to accede to some tax concession rather than to proceed with litigation on the merits of the annexation. Although many reasons were given in the briefs as to why Oxmoor and the City entered into the Agreement, the record is silent as to the availability of services provided to the annexed area by the City. There is no basis set out in the contract for the difference in services authorized or not authorized. Moreover, there is no factual basis set out in the contract for the tax rates agreed upon. We believe that under the policy set out in Section 172A the difference in tax rates must be reasonable. The present contract falls short of that requirement in that no factual basis for the rates agreed on is set out. We believe that the danger pointed out by Judge Vance is exemplified by this agreement.