Appeal from Superior Court of Benton County. Docket No: 95-2-00856-6. Date filed: 11/15/95. Judge signing: Hon. Duane E. Taber.
Authored by Charles W. Johnson. Concurring: Barbara Durham, James M. Dolliver, Charles Z. Smith, Richard P. Guy, Philip A. Talmadge. Dissenting: Richard B. Sanders, Gerry L. Alexander, Barbara A. Madsen.
The opinion of the court was delivered by: Johnson
JOHNSON, J. -- This case requires us to apply the tax exemptions contained in article VII, section 1 (amend. LXXXI) of the Washington State Constitution and RCW 84.36.010 to determine whether a multipurpose stadium facility owned jointly by a private corporation and the City of Kennewick (Kennewick) is wholly or partially exempt from property taxes levied by Benton County (County). We find Kennewick's ownership interest in the stadium facility exempt from taxation.
The Tri-Cities Coliseum (Coliseum) is a multi-purpose stadium facility located in Kennewick, Washington, and jointly owned by Kennewick and the Tri-Cities Coliseum Corporation (TCCC). The ownership and operation of the Coliseum is governed by a Joint Venture Partnership Agreement entered into by Kennewick and TCCC in 1994. Under the partnership agreement, Kennewick holds a 49 percent ownership interest in the Coliseum; however, legal title to the Coliseum is in Kennewick's name, held in trust for the benefit of the joint venturers.
After Kennewick and TCCC's purchase of the Coliseum in 1994, the County assessed Kennewick for property taxes on the Coliseum -- $95,768.98 for the second half of 1994 and $96,733.35 for the first half of 1995. Under protest, Kennewick paid both assessments plus interest and penalties. The City claimed the assessments were illegal under article VII, section 1 of the Washington Constitution on the grounds: (1) the property of municipal corporations is exempt from property tax; or (2) if not wholly exempt, Kennewick's 49 percent interest is exempt.
On June 30, 1995, Kennewick filed a complaint in Benton County Superior Court seeking to recover the previously paid taxes. Shortly thereafter, the County filed a motion to dismiss for failure to state a claim. The City responded by filing a motion for summary judgment. Both motions were argued on September 7, 1995. The trial court granted Kennewick's motion for summary judgment, and entered a judgment ordering a refund of 49 percent of the taxes paid by Kennewick. In support of the judgment, the court entered a finding that RCW 84.36.010 is repugnant to article VII, section 1 of the Washington Constitution.
The County appealed directly to this court, seeking to have the trial court's decision reversed and an order directing the trial court to grant its motion to dismiss. The City cross- appealed, asking this court to find the Coliseum completely tax exempt. While we find RCW 84.36.010 is not repugnant to article VII, section 1 of the Washington Constitution, we agree with and affirm the trial court's finding that Kennewick's 49 percent interest is exempt from taxation by the County.
The issue in this case, involving statutory and constitutional construction, is a question of law reviewed de novo by this court. See Rettkowski v. Department of Ecology, 128 Wash. 2d 508, 515, 910 P.2d 462 (1996).
Article VII, section 1 contains an exemption from property taxes for property owned by governmental entities. The relevant portions of article VII, section 1 state: "The word 'property' as used herein shall mean and include everything, whether tangible or intangible, subject to ownership. . . . Property of the United States and of the state, counties, school districts and other municipal corporations . . . shall be exempt from taxation." Wash. Const. art. VII, sec. 1 (amend. LXXXI). This definition of property "is as broad and comprehensive as may well be imagined." American Smelting & Ref. Co. v. Whatcom County, 13 Wash. 2d 295, 302, 124 P.2d 963 (1942). RCW 84.36.010 contains a similar exemption: "All property belonging exclusively to the United States, the state, any county or municipal corporation . . . shall be exempt from taxation."
This court has not previously addressed the application of these exemptions to property jointly owned by public and private entities; however, we have addressed the issue of property held in trust by a municipality for the benefit of a third party, in the context of article VII, section 1. In Spokane County v. City of Spokane, 169 Wash. 355, 13 P.2d 1084 (1932), the city of Spokane held fee simple title to certain real property in trust for the local improvement fund, acquired through foreclosure of local improvement assessments. Spokane County, 169 Wash. at 356- 59. The city's acquisition of the property was made pursuant to specific statutory authority. Spokane County, 169 Wash. at 357- 58. The statute also required the property be held in trust by the city for the benefit of the local improvement fund until the assessments had been discharged. Spokane County, 169 Wash. at 357. After the city's acquisition of the property, Spokane County foreclosed the same properties for delinquent property taxes. Spokane County, 169 Wash. at 356. The city brought an action to quiet title to the properties, claiming article VII, section 1 exempted the property from county taxes. *fn1 This court held the property was not the property of the city within the meaning of article VII, section 1: "the test is whether the trust . . . is for the benefit of the municipal corporation or for the benefit of third persons." Spokane County, 169 Wash. at 361; see also 2 Thomas M. Cooley, Taxation sec. 629 (4th ed. 1924) (property held in trust by a municipality for the benefit of a third party is taxable). The court held the property was not exempt because the city held the property in trust for the benefit of the local improvement fund and not for itself.
Applying this rule here, the fact Kennewick holds full legal (i.e., fee simple) title to the Coliseum does not result in full exemption from taxation because legal title does not determine who benefits from ownership. Rather, Spokane County requires us to determine who benefits from the ownership structure of the property. Under the partnership agreement, Kennewick holds a 49 percent interest in the Coliseum; Kennewick contributed 49 percent of the purchase price and is accountable for 49 percent of the profits and liabilities. In other words, Kennewick is a 49 ...