Opinion ID: 1561673
Heading Depth: 1
Heading Rank: 4

Heading: Validity of the Appraisal Method

Text: There are two arguments that the rolling reappraisal method is invalid: (1) it is inconsistent with the statutory obligations imposed on towns as to the listing of real property; and (2) it is inconsistent with the proportional contribution clause of the Vermont Constitution. Although the Board relied upon the Vermont Constitution, we begin by looking at the statutes and then analyze the actions of the Town. We find that under either the statutes or the constitution the assessment method used by the Town was valid. Our law on listing property for property tax purposes is clear. Under 32 V.S.A. § 3482, it is the duty of the town listers to set property in the grand list at 1% of listed value as of April 1 of the year involved. The listed value of property is equal to 100% of appraised value which, in turn, is equal to fair market value. 32 V.S.A. § 3481(1), (2). Thus, the obligation of the listers is to list all property in the town at fair market value as of April 1. Once all the property is listed, taxes are uniformly assessed on the list unless otherwise provided by law. See 32 V.S.A. § 4601. There is, however, a gap between the theory of the listers' responsibility and the implementation. As our decisions reflect, listing at updated fair market value each year, even if a theoretical possibility, has proved to be unachievable. Thus, the duty imposed upon the Board is to equalize, that is to set listed values at an amount that will correspond to the listed value of comparable properties within the town. 32 V.S.A. § 4467; Town of Barnet v. Palazzi Corp., 135 Vt. 298, 302, 376 A.2d 24, 27 (1977); International Paper Co. v. Town of Winhall, 133 Vt. 385, 387-88, 340 A.2d 42, 44-45 (1975). This is a two-step process that requires first a determination of fair market value and, second, the determination of listed value from an equalization ratio, calculated as the sum of the listed values of the comparables divided by the sum of the fair market values of these properties. See Kachadorian v. Town of Woodstock, 144 Vt. at 350-51, 477 A.2d at 967. The listed value of the property before the Board is the fair market value times the equalization ratio. The equalization ratio is an artificial device, theoretically unnecessary where all listing is at fair market value (the ratio then is 1 to 1), created to ensure uniformity of taxation among comparable properties, even as we recognize that uniformity does not actually exist among noncomparable properties. The Legislature has in other ways recognized that the theoretical command of the listing statutes is not implemented fully. For example, 16 V.S.A. § 3475(a) establishes a state-aid-to-education penalty for towns that fail to keep appraisals current with fair market value. However, the statute allows aggregate listed values for a town to fall to 80% of aggregate fair market values for the town before any penalty is imposed. See 16 V.S.A. § 3475(a)(1). Even with the allowed 20% deviation, the penalty can be waived if the town moves towards reappraisal. See 16 V.S.A. § 3475(c). Neither the Board nor the taxpayers have pointed us to anything in the statutory scheme that makes the Town's action unlawful beyond the obvious point that the Town has not annually appraised all property at fair market valuea characteristic it apparently shares with virtually all other towns in Vermont, at least those which have not reappraised in the last year. As this Court pointed out in In re Town of Essex, 125 Vt. at 172, 212 A.2d at 626, [t]here is no statute which requires that property within a municipality shall be appraised uniformly for tax purposes. The only requirement ... is that the listers shall appraise ... property at its fair market value. Where the Legislature has tacitly accepted that listing below 100% of fair market value will go on, the obligation to appraise at fair market value does not equal an obligation to appraise uniformly. We think the statutes clearly intended the Board to equalize inequality in appraisals among comparables and not across different classes of property. Town of Walden v. Bucknam, 135 Vt. 326, 327-28, 376 A.2d 761, 763 (1977). We find no statutory violation that warrants relief for the taxpayers in this case. The taxpayers' main argument, which the Board accepted, was that the Town's action here violated chapter I, article 9 of the Vermont Constitution, the proportional contribution clause. This provision requires each member of society to contribute his proportion towards the expence [sic] of government. In a taxation context, the proportional contribution clause puts no greater restrictions on governmental action than the equal protection clause of the Fourteenth Amendment to the United States Constitution: The constitutional requirement of proportional contributions for the support of the government was not intended to restrict the State to methods of taxation that operate equally upon all its inhabitants. The limitation imposed by our Constitution does not forbid any classification of property for the purpose of taxation, or the adoption of any scheme of taxation, provided that they do not offend the federal Constitution, the equality clause in the one and the uniform clause in the other being in effect the same for such purposes. Clark v. City of Burlington, 101 Vt. 391, 405, 143 A. 677, 682-83 (1928) (citations omitted). Thus, the test of validity of governmental action under the proportional contribution clause must be the rational basis test used for federal equal protection analysis. See Stoneman v. Vergennes Union High School Dist. # 5, 139 Vt. 50, 56, 421 A.2d 1307, 1310 (1980). We recently described this test as follows: Under this test, distinctions will be found unconstitutional only if similar persons are treated differently on wholly arbitrary and capricious grounds. If there is a rational basis for the distinctions, serving a legitimate policy objective, there is no equal protection violation. In applying this standard, we must look at any of the purposes that are conceivably behind the statute. Smith v. Town of St. Johnsbury, 150 Vt. 351, 357, 554 A.2d 233, 238 (1988) (citations omitted). The Town argues that its actions have a rational basiskeeping appraisals as current as possible within the resources available by attacking the worst underassessment problem areas. We agree that this is a rational basis that serves a legitimate purpose and that the properties which are compared here are in fact dissimilar. Thus, there is a real, unfeigned difference between persons owning different classes of property, and the decision to attack the class with the greatest degree of underassessment is reasonable. In reaching this conclusion, we do not rule out the possibility that a more detailed showing of impact of the Town's practice over time might make out a constitutional violation. On this record, however, there is no violation of the proportional contribution clause. The justification that the Town advances here is similar to that asserted in Sunday Lake Iron Co. v. Township of Wakefield, 247 U.S. 350, 38 S.Ct. 495, 62 L.Ed. 1154 (1918), a federal equal protection case. There, the town raised the assessment of a particular mine, pursuant to state statute, but ran out of time and did not complete reassessments on other similar properties. The taxpayer argued that lack of time to make assessments could not justify the discrimination. The United States Supreme Court rejected the argument because it found no purpose or design to discriminate. [The town's] action is not incompatible with an honest effort in new and difficult circumstances to adopt valuations not relatively unjust or unequal. Id. at 353, 38 S.Ct. at 495. Numerous decisions from other states have applied Sunday Lake Iron Co. to cyclical reappraisal cases, the situation present here. The most instructive are the decisions of the Supreme Court of Washington in Carkonen v. Williams, 76 Wash.2d 617, 458 P.2d 280 (1969), and Dore v. Kinnear, 79 Wash.2d 755, 489 P.2d 898 (1971). In Carkonen, the Court upheld a cyclical reappraisal policy under which the assessors would reach all of the property in the county every four years. The Court found: The evidence indicates quite clearly that, to the best of their ability, and with their limited staffs, the assessors involved were honestly endeavoring to pursue a systematic nondiscriminatory cyclical approach to revaluation.... The sheer physical problem of annually inspecting the units of property involved, coupled with the staff and budgetary allocations required to accomplish such, lends wisdom to the legislative act authorizing and directing a cyclical approach, and virtually lays to rest any viable claim to intentional discrimination inhering in the system. 76 Wash.2d at 632, 458 P.2d at 289. The Court held that under Sunday Lake Iron Co., as long as a cyclical appraisal system is carried out systematically and without intentional discrimination, there is no constitutional violation. Id. at 633, 458 P.2d at 290. In Dore v. Kinnear , the Court faced a claim of intentional discrimination in the same county as that involved in Carkonen. The four-year cycle had broken down, and the assessor reached only about six percent of the parcels in a year. The Court held that the appraisal system could no longer be upheld because the six percent of the properties were subject to gross discrimination of higher appraisals for a longer period of time during the cycle. 79 Wash.2d at 763, 489 P.2d at 903. Decisions from other states have recognized the distinction between systematic reappraisal and intentional discrimination and almost invariably have upheld the cyclical reappraisal against a challenge under the state or federal constitution. See Hillock v. Bade, 22 Ariz.App. 46, 53, 523 P.2d 97, 104 (1974) (the issue is whether a cyclical plan would constitute intentional and arbitrary discrimination; court must look to a number of factors, including discrimination caused if cyclical plan not initiated), aff'd, 111 Ariz. 585, 535 P.2d 1302 (1975); Probst v. City of New Orleans, 337 So.2d 1081, 1084 (La.1976) (reappraisal conducted over a period of years and targeting certain properties where property values increased greatly is valid), cert. denied, 430 U.S. 916, 97 S.Ct. 1329, 51 L.Ed.2d 594 (1977); May Dep't Stores Co. v. State Tax Comm'n, 308 S.W.2d 748, 760 (Mo.1958) (municipality could single out commercial areas for reappraisal as part of plan to reach uniformity over time where complete revaluation was impossible immediately); Skinner v. New Mexico State Tax Comm'n, 66 N.M. 221, 225, 345 P.2d 750, 753 (1959) (cyclical reappraisal at the rate of 20% of the properties per year valid absent a showing of specific discrimination or fraud). We do not believe our decision is undercut by the United States Supreme Court's opinion in Allegheny Pittsburgh Coal Co. v. County Comm'n, ___ U.S. ___, 109 S.Ct. 633, 102 L.Ed.2d 688 (1989), a case decided after this case was briefed and argued in this Court. In Allegheny Pittsburgh Coal Co., the Court found a violation of equal protection requirements where the taxing authority valued the plaintiff's property on the basis of its purchase price but made only minor modifications in the assessments of lands which had not been recently sold. The system produced gross disparities between the values assigned to lands recently sold and those assigned to otherwise comparable surrounding lands. One plaintiff was taxed at a rate approximately thirty-five times the rate applied to owners of comparables. In that county, it would require over 500 years to equalize assessments. For three reasons, we believe Allegheny Pittsburgh Coal Co. is distinguishable. First, it dealt with discrimination between comparable properties, not discrimination between classes of property. In fact, it recognized the power to divide property into classes and assign to each class a different tax burden as long as the divisions and burdens are reasonable. ___ U.S. at ___, 109 S.Ct. at 638. Second, it dealt with a system that acted to perpetuate discrimination rather than eliminating it. Third, the disparities were far greater in magnitude than those present here and were essentially permanent. We cannot say that there is intentional discrimination in this case. While the plan adopted by the Town may never reappraise all property, it is aimed at the property with the greatest discrepancy between fair market value and listed value. Thus, it is entirely possible, even likely, that the plan adopted by the Town is fairer overall than a cyclical plan that did a certain percentage of the property each year. Of course, a more complete record may show impacts and unfairness not shown on the limited record before us. Reversed and remanded to the State Board of Appraisers to determine the fair market and listed value of taxpayers' property.