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Franks v. Town of Essex

Supreme Court of Vermont

September 27, 2013

Gillian Franks
v.
Town of Essex; Rockingham Area Community Land Trust
v.
Town of Rockingham

Page 419

On Appeal from Property Valuation and Review Division. Merle R. Van Gieson, State Appraiser (2011-359). Norman E. Wright, State Appraiser (2012-258).

The state appraiser's decision in Franks is affirmed; the state appraiser's determination in Rockingham is reversed and remanded for further consideration in light of this holding.

Merle R. Van Gieson, State Appraiser (2011-359).

Norman E. Wright, State Appraiser (2012-258).

Rebecca E. Boucher, Brian S. Dunkiel, and Geoffrey H. Hand of Dunkiel Saunders Elliott Raubvogel & Hand PLLC, Burlington, for Plaintiff-Appellant. (2011-359).

William F. Ellis of McNeil, Leddy & Sheahan, P.C., Burlington, for Defendant-Appellee. (2011-359).

Robert A. Gensburg of Gensburg, Atwell and Greaves, PLLC, St. Johnsbury, for Plaintiff-Appellee. (2012-258).

William F. Ellis and Kevin J. Coyle of McNeil, Leddy & Sheahan, P.C., Burlington, for Defendant-Appellant. (2012-258).

James W. Barlow, Vermont League of Cities and Towns, Montpelier, for Amici Curiae Vermont League of Cities and Towns and Vermont Assessors and Listers Association. (2011-359 & 2012-258).

Present: Reiber, C.J., Skoglund, Burgess and Robinson, JJ., and Zonay, Supr. J., Specially Assigned. ROBINSON, J., dissenting.

OPINION

Reiber, C.J.

[¶ 1] These cases raise the question of how nonrental residential properties subject to housing-subsidy covenants should be valued for property-tax purposes. Taxpayers in both cases contend that the governing statute mandates an automatic reduction in valuation for properties subject to these covenants or, what is effectively equivalent, a mandatory tax exemption on a portion of the property's value. The towns in which these properties are located contend instead that the statute, 32 V.S.A. § 3481, requires that municipal listers give individualized consideration to the effect, if any, these covenants may have on the fair market value of a given property when they determine the appropriate assessed value for the allocation of property taxes. The Vermont League of Cities and Towns and the Vermont Assessors and Listers Association join the towns as amici curiae. We agree with the towns that the existence of a housing-subsidy covenant is but one of myriad factors listers and assessors must take under advisement in ascertaining a property's fair market value.

[¶ 2] In the first of these two cases, Franks v. Town of Essex, taxpayer Gillian Franks (Franks) owns an affordable-housing unit in the Town of Essex that is subject to a housing-subsidy covenant. After taxpayer appealed the assessed value of the unit, the state appraiser concluded that the mere existence of a housing-subsidy covenant does not automatically lower a property's fair market value,[1] and found that in this specific case, the covenant did not, in fact, negatively affect the property's value. Taxpayer appealed the state appraiser's decision to this Court.

[¶ 3] In the second case, Rockingham Area Community Land Trust v. Town of Rockingham, taxpayer Kathleen Margaret (Margaret) owns a house subject to a housing-subsidy covenant granting the land trust a ninety-day purchase option and ostensibly capping the amount she will receive upon the sale of her home to her original contribution, plus twenty-five percent of its appreciation and capital improvements. The house sits on land owned by the trust, which leases the land to Margaret. Under the terms of the ninety-nine-year lease, Margaret agreed to pay all property taxes assessed on the land and house. After the trust grieved the assessed value of the house and land on Margaret's behalf, the state appraiser in this second case eventually concluded that, by law, housing-subsidy covenants automatically decrease a property's value. The state appraiser then reduced the assessed value to a figure that appears to correspond to the property's prior-year assessment, although the appraiser did not explain the calculation's basis. The Town appealed the state appraiser's determination to this Court.

[¶ 4] We hold that the statute does not compel a so-called automatic reduction in property tax valuation for all parcels subject to a housing-subsidy covenant, but instead demands an individualized consideration of the effect a particular covenant has on a property's fair market value. For the reasons that follow, we affirm the state appraiser's determination in Franks but reverse the appraiser's decision in Rockingham, remanding the latter case for consideration of the property's value in light of our holding.

I.

[¶ 5] Central to both these appeals is the meaning of our property-valuation statute. Taxpayers in both cases contend that the unambiguous statutory language of 32 V.S.A. § 3481 requires a decrease in the fair market value of a taxpayer's property if it is subject to a housing-subsidy covenant. Vermont employs an ad valorem system for the taxation of property. That is to say, property is taxed in accordance with its actual value. " The property taxation statute requires the listed value of real property to be equal to its appraisal value, which in turn must reflect its estimated fair market value." Barrett v. Town of Warren, 2005 VT 107, ¶ 6, 179 Vt. 134, 892 A.2d 152 (citing 32 V.S.A. § 3481(1)-(2)). In Vermont, then, property is taxed in accordance with its fair market value and not based upon an owner's equity. A property's estimated fair market value is defined by statute as " the price which the property will bring in the market when offered for sale and purchased by another, taking into consideration all the elements of the availability of the property, its use both potential and prospective, any functional deficiencies, and all other elements such as age and condition which combine to give property a market value." 32 V.S.A. § 3481(1).

[¶ 6] Since 1997, the municipal listers and assessors who determine property-tax valuations have been specifically required to include in this calculation " a consideration of a decrease in value in nonrental residential property due to a housing subsidy covenant." Id.; 1997, No. 60, § 64. These covenants -- designed to help maintain affordable housing -- may include, among other things, restrictions on use, resale price, tenant income and rents, as well as limitations on the income of a purchaser of a housing unit for his or her own residence. See 27 V.S.A. § 610(b). The covenants are generally executed by lower-income homebuyers as a condition for the receipt of a purchase subsidy from the Vermont Housing and Conservation Board (VHCB) or its nonprofit partners, whose bylaws require that the subject housing be maintained as affordable housing on a perpetual basis. See 10 V.S.A. § § 303(3)-(4), 321(a)(1).

[¶ 7] Taxpayers in both cases maintain that the housing-subsidy-covenant " consideration" language in the property-tax-valuation statute requires listers to presume an automatic decrease in a property's value based on the mere existence of a covenant of this type. Although deference to the state appraisers' legal interpretation of 32 V.S.A. § 3481(1) is generally appropriate, it does not resolve this matter because two appraisers arrived at conflicting interpretations of the statute. Barrett, 179 Vt. 134, 2005 VT 107, ¶ 5, 892 A.2d 152 ( Court will generally uphold state appraiser's legal interpretation of § 3481(1) absent a compelling indication of error).

[¶ 8] We begin by observing that on all issues of statutory interpretation we presume the Legislature intends the plain and ordinary meaning of a statute. Pease v. Windsor Dev. Review Bd ., 2011 VT 103, ¶ 17, 190 Vt. 639, 35 A.3d 1019 (mem.). Here, the statute imposes a duty on municipal listers to include " a consideration of a decrease in value" from a qualifying housing-subsidy covenant. See 32 V.S.A. § 3481(1) (emphasis added). Words that are not defined within a statute are given their plain and ordinary meaning, which may be obtained by resorting to dictionary definitions. Pease, 190 Vt. 639, 2011 VT 103, ¶ 17, 35 A.3d 1019. To " consider" generally means " to think about with care or caution," while " consideration" is " continuous and careful thought" or " a taking into account." Webster's New Collegiate Dictionary 241-42 (1977). Other definitions we have consulted do not deviate from this general understanding. See, e.g., Webster's International Dictionary 569 (2d ed. 1961) (defining the noun " consideration" principally as: " observation; contemplation," " [the] [a]ct or process of considering continuous and careful thought; examination; deliberation; attention," " [t]houghtful or sympathetic regard or notice," and " [t]hat which is, or should be, considered as a ground of opinion or action ... ." ); Black's Law Dictionary 277 (5th ed. 1979) (defining the verb " consider" as " to fix the mind on, with a view to careful examination; to examine; [t]o inspect. [t]o deliberate about and ponder over. [t]o entertain or give heed to." ). Based on these definitions, a lister or assessor must give thought to and take into account a potential decrease in value as a result of a covenant. The very act of taking something under advisement in this manner does not suggest the sort of specific, preordained outcome of an automatic decrease in valuation.

[¶ 9] Nothing in the statutory language suggests its drafters intended an interpretation that contradicts the plain meaning of " consideration" by imposing a rote reduction in assessed value for all properties subject to a housing-subsidy covenant. First, the drafters' use of an indefinite article to describe any decrease in value attributable to a housing-subsidy covenant supports this conclusion. In describing the type of decrease for which listers must include consideration, the statute employs the indefinite article " a" -- as in " a decrease" -- which indicates that there may or may not be a reduction in value, instead of the definite article " the," which would imply that the presence of a covenant necessarily reduces value. Cf. In re Swanton Mkt. Area, 112 Vt. 285, 291-92, 23 A.2d 536, 538 (1942) (distinguishing between " a loss" and " the loss," and concluding latter phrase means " the definite loss which has occurred rather than an indefinite loss which may occur" ). Second, even if the property-taxation statute could be understood to mandate a so-called automatic decrease in assessed value, its interaction with the housing-subsidy-covenant statute would leave unanswered the more vexing question of the amount by which to reduce a nominally restricted property's value. Taxpayers' interpretation would, in effect, mandate an automatic valuation decrease of an indeterminate amount. In cases where market evidence and analyses found absolutely no reduction in value, listers would face the unenviable task of reconciling an " automatic decrease" with the need to assign a value reflecting actual data. This is precisely the sort of absurd result we seek to avoid when interpreting statutes. See Shlansky v. City of Burlington, 2010 VT 90, ¶ 8, 188 Vt. 470, 13 A.3d 1075 ( " In looking to the statutory language as an expression of legislative intent, we presume the Legislature intended an interpretation that furthers fair, rational consequences, and not one that would lead to absurd or irrational consequences." (quotation omitted)).

[¶ 10] From a public-policy standpoint, an individualized consideration is particularly important given the fact that not all housing-subsidy covenants are built alike. Great variation in their terms is permissible, and this variety could easily yield divergent market effects. See 27 V.S.A. § 610(b) (containing nonexhaustive list of restrictions and noting that covenants may be perpetual or time limited). Although the covenants " run with the land," id. § 610(e), they " may be amended or terminated by written agreement of the owner of the land and all persons or entities holding the right to enforce the covenant." Id. § 610(d). Either the subsidy's provider or a state-designated affordable-housing organ or nonprofit corporation to whom the right of enforcement has been assigned may enforce the covenants. Id. § 610(e). As illustrated by the record in both of these cases, the housing-subsidy covenants are frequently terminated by consent. The language in the Rockingham property covenant imposes no limitation on the ability of the parties -- the taxpayer and the land trust -- to terminate the restriction. The land trust involved in the Rockingham property can, in fact, extinguish the covenant through purchase, foreclosure or by agreement. Without individualized analysis of a covenant's specific terms and the market context -- an inquiry that may well discern no difference in estimated fair market value between the nominally restricted subject property and other unencumbered properties -- the concept of a so-called automatic decrease would be meaningless.

[¶ 11] Taxpayers cite Prowitz v. Ridgefield Park Village, 237 N.J. Super. 435, 568 A.2d 114 (N.J. Super. Ct. App.Div. 1989), for the proposition that automatic decrease in assessed value is required. We find their argument unpersuasive. To begin with, the Appellate Division of the New Jersey Superior Court remanded that case for a consideration of the extent to which restrictive covenants affected the subject property's tax valuation. Id. at 119 (remanding for effect of restriction to be taken " into account" ). The court did not specify an automatic decrease, but instead mandated precisely the type of consideration we have said our statute commands. Furthermore, several salient distinctions convince us that Prowitz differs materially from the present case. First, the Prowitz court noted that municipal appraisers should assess neither the value transferred through an easement appurtenant to a dominant parcel, which enjoys a corresponding increase in value, nor the value transferred to the public more generally through an easement in gross. Id. at 117. The court also observed that " the whole gamut of governmental regulation imposing like restraints" exerts a " depreciating effect on value." Id. at 118. Here, no such shift of value occurred, nor does governmental regulation for the public good categorically and perpetually reduce the properties' fair market values. Although the Prowitz court spoke in glowing terms of the indisputable social good and public benefit of maintaining affordable housing, the court's reasoning, in fact, relied heavily on the existence of a statewide statutory obligation to provide a certain quantity of affordable housing within each jurisdiction. See id. (" [T]he provision of a fair share of affordable housing is, by reason of the Fair Housing Act, a municipal obligation imposed by statute." ). These restrictions helped the municipality in achieving its legally mandated lower-income-housing requirements, in effect offering a quid pro quo for the corresponding decrease in the municipal tax base.

[¶ 12] It does not appear from the statutory language that the Legislature intended to impose such a laudable-but-sweeping requirement on Vermont municipalities.[2] Rather, the State created a program to facilitate lower-income home ownership by making provision for grants to eligible buyers to help defray the purchase cost. The regime seeks to restrain the future price of the same properties by requiring owners in most cases to forego a portion of a home's regular market appreciation pursuant to a housing-subsidy covenant. In enacting amendments to the property-tax statute, the Legislature required listers to be mindful of the potential market impact of the housing-subsidy covenants that often accompany these grants. In doing so, however, the Legislature did not impose an affirmative duty on all town residents to personally subsidize these properties at the local level by forcing neighbors to shoulder a disproportionate share of the cost of education and municipal services. Yet this is precisely the interpretation urged by taxpayers in both cases. We therefore hold that the statute as written does not require the imposition of an automatic reduction in a property's valuation.

II.

[¶ 13] There remains the more fact-intensive question of whether the assessors and listers in these cases properly considered the effect, if any, of these covenants.

A. Franks

[¶ 14] Franks contends that, even if the property-taxation statute does not mandate an automatic decrease in valuation, the state appraiser abused his discretion in failing to defer to the methodology contained in a memorandum authored by the Director of the Division of Property Valuation and Review (PVR). Franks urges this Court to defer to the memorandum's methodology rather than the state appraiser. Franks maintains that the evidence does not support the state appraiser's finding that the housing-subsidy covenant resulted in no decrease in fair market value.[3] We conclude that the ...


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