Lathrop et al. v. Town
of Monkton, 2014 VT
9.
There are two certainties in life: death and taxes. For the second, every town in Vermont has, to
the chagrin of landowners, a posse of listers ready to mount up
and find ways to increase property assessment values, but for those who think
they can out run such Ox-Bow incidents, there lies another certainty to contend
with: the tax appeal.
One of the creative ways that the Town of Monkton has to extract
value out of properties is to tax land for the potential that it has for
“subdivision and further development.”
In 2011, when the underlying appeals in today’s case were taken, a
landowner in Monkton could subdivide his property if it: 1) was naturally
divided by a road; 2) contained multiple contiguous lots created by deed before
zoning was introduced in 1978; or 3) had a subdivision permit from the
Development Review Board. Categories one
and two are taxed as having one house site.
Category three is taxed as having the potential for two or more house
sites.
As you might imagine, the appellant taxpayers in this case
all had subdivision permits and were handed an uncomfortable tax bill for
multiple house sites even though their parcel only had one actual house
site.
The Monkton Board of Civil Authority denied taxpayers’
appeals of their 2011 assessments. Taxpayers
appealed to the state appraiser. During
the proceedings, one taxpayer refused to produce documents the Town requested,
claiming they were in the public record and did not need to be submitted in
advance of the hearing. Even though he
could have, the appraiser did not dismiss Norris’ appeal. Instead he gave the Town opportunity to
respond and submit comments after it reviewed Norris’ documents at the hearing.
After the hearing, the state appraiser reversed the
assessments in favor of taxpayers. He
found the Town’s distinction between the subdivision permit parcels and the
road or contiguous lot parcels to be arbitrary, and determined that the Town
was not treating all properties in the Town fairly or equitably. The Town appealed to the SCOV.
On appeal, the Town asks the SCOV to determine two things:
whether the appraiser’s decision to not sanction taxpayer Norris should be
reversed, and whether the appraiser erred in determining that taxpayers were
treated unequally.
On the first issue, the SCOV makes a quick conclusion: yes,
the appraiser could have and probably should have sanctioned Norris and
dismissed his appeal, but it won’t reverse the appraiser. It doesn’t matter whether documents are
public records, a taxpayer has to disclose all relevant documents in an
appeal. But it was not an abuse of the
appraiser’s discretion to let the Town comment on Norris’ documents after the
hearing rather than dismiss the appeal.
On the second issue, the SCOV has to dig into some
constitutional law. Property taxes must
be “uniformly assessed”—no taxpayer should be required to pay more than his
share of the tax burden. Case law
dictates that this is accomplished by listing properties at fair market value,
which is based on the “highest and best use” of the property. Whether or not a property has potential to be
developed into more than one lot is something listers can consider when
assigning a property value.
The problem is that the first two categories of subdividable
land in Monkton—naturally divided by a road, or contiguous parcels conveyed
before 1978—are not taxed for multiple lot value, whereas the third
category—parcels that have a subdivision permit—is taxed for multiple lot
value. According to taxpayers this
resulted in unequal treatment of properties that were otherwise
similarly-situated, in violation of the Equal Protection Clause of the federal
Constitution, and the Proportional Contribution Clause of the Vermont
Constitution.
The standard the SCOV applies to this question is a modified
form of the familiar rational basis standard: a classification of taxpayers
will be upheld if it is reasonably related to the purpose for which it was
established, it is fairly and equally applied among similarly-situated classes
of taxpayers, and the town had “any reasonable policy or purpose” for making
the classification.
The SCOV concludes that the Town had a rational basis for
making the distinction at issue here.
True, all three types of parcels could potentially be sold as subdivided
lots. But parcels that already have
subdivision permits can be safely assumed to be ready for subdivision. The permittee has already gone through the
process of determining exactly how many home sites can be carved out of the
parcel, demonstrating that subdivision is the “highest and best use” of the
property. A permittee can also
demonstrate that, despite the permit, the property lacks development value, so
it is possible to challenge the assumption.
By contrast, road-divided or contiguous parcels, while
potentially subdividable, have not been demonstrated to be so, and may in fact
not be. The SCOV gives an example of a
lot that is in part unbuildable, too small, or landlocked. It is not necessarily true with these parcels
that subdivision is the “highest and best use” of the property. The Town had a rational basis for making this
distinction, the SCOV concludes, and it is reasonably related to its purpose,
even if it appears to unfairly target subdivision permittees.
This is technically referred to as the SCOV cutting the
municipality some slack, but it is fully consistent with the SCOV’s recent case
law in this area that has affirmed the right of listers to mount up and use some
creativity and statutorily sustained cunning to bring in the tax dollars
equivalent to the highest and best use. Hi
ho, and away!
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