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BOARD OF WYANDOTTE COUNTY COMM'RS v. KANSAS AVE. PROP.

February 14, 1990.

BOARD OF COUNTY COMMISSIONERS OF WYANDOTTE COUNTY, KANSAS, Appellant,
v.
KANSAS AVENUE PROPERTIES, Appellee.



The decision of the court was delivered by

The Board of County Commissioners of Wyandotte County appeals from a decision of the Shawnee County District Court which reversed the Kansas Board of Tax Appeals (BOTA) denial of an ad valorem tax exemption sought under Art. 11, § 13 of the Kansas Constitution. Amicus curiae briefs supporting the position of the landowner have been filed by the City of Kansas City, the City of Wichita, and the Ellis County Economic Development Corporation. We reverse.

The facts of this case are not disputed. Kansas Avenue Properties (KAP), a Kansas limited partnership, owns approximately 4.3 acres of land in Kansas City, Wyandotte County, Kansas. In 1987, KAP constructed a 56,000 square foot "multi-tenant" building on this land. Stephen Dunn, the developer and a general partner of KAP, testified before the BOTA that KAP intended to lease space in the building only to tenants who qualified for ad valorem tax exemption under Art. 11, § 13 of the Kansas Constitution.

Before constructing the building, KAP applied for ad valorem tax-exempt status from the City Council of the City of Kansas City. The City Council found that KAP's proposed business project met the economic development purposes of Art. 11, § 13 and granted KAP a 10-year exemption "for all buildings, land, and tangible personal property." KAP then filed its application for tax exemption with the BOTA pursuant to K.S.A. 79-213.

  In an order issued April 29, 1987, the BOTA denied the application for tax exemption. Following a rehearing, the BOTA on June 1, 1988, again denied the application of KAP for ad valorem tax exemption. In doing so, the BOTA relied upon In re Board of Johnson County Comm'rs, 225 Kan. 517, 592 P.2d 875 (1979), and held:

  "The Board cannot find that the lessor's use of the property is one which qualifies for exemption under Article 11, Section 13 of the Kansas Constitution. The use made by the owner of the property, i.e., the leasing of the property in question, is not manufacturing, conducting research and development, or storing goods or commodities."

[246 Kan. 163]

     

 The BOTA, in its order on rehearing, stated:
"The applicant has presented evidence that there is now a tenant in the facility and other leases are being negotiated with all uses by the various lessees to be qualifying uses as required by Article 11, Section 13. The applicant has also presented a legal argument that the Board has not properly construed In Re Board of Johnson County Commissioners, 225 Kan. 517, 592 P.2d 875 (1979), given the intent and purpose of the constitutional amendment exempting property for economic development purposes. The applicant suggests that the standard for exemption under Section 13 of Article 11 differs significantly from the standard set forth in Section 1 of Article 11. The applicant concurs with the Board's rationale that the exclusive use test set out in Section 1 of Article 11 requires that all uses made of the property be for the stated exempt purpose. The applicant, however, contends that Section 13 of Article 11 was adopted by the people of Kansas for the specific purpose of allowing local governments to grant exemptions where the property is used exclusively by a business for one of the stated purposes. The applicant contends that the only use which must be considered under Section 13 of Article 11 is the use by the business, not the owner of the property. In other words, if any business is using the property for one of the stated purposes, it qualifies for exemption regardless of any other business use. The applicant suggests that the `exclusive use' requirement is that the property be used exclusively `by a business' for one of the specified purposes.
  "The applicant also suggests that the Board examine the intent of the makers and adopters of this constitutional amendment as a means of ascertaining the meaning of the provisions within the constitutional amendment. Taxpayer cited cases for the proposition that a constitutional provision is not to be narrowly or technically construed, but rather its language should be interpreted to mean what the words imply to men of common understanding. The Board wholeheartedly concurs with this suggestion; however, the Kansas Supreme Court has specifically addressed what the term `used exclusively' shall mean. The Legislature certainly had knowledge of what the Kansas high court has determined exclusive to mean and presumably knew what language was being used in the amendment that was placed before the voters for adoption. If the Legislature and the people did not intend for an exclusive use test to be applied to this type of exemption, the exclusive use language would have been deleted or the amendment would not have been adopted by the people. Taxpayer suggests an elementary rule of constitutional construction is that effect should be given to every part and every word and that no portion of the law should be treated as superfluous unless there is some clear reason to the contrary. The Board has followed this elementary rule of construction in that the Board has given every word, including `used exclusively' the effect the words `used exclusively' convey. If, as taxpayer suggests, the legal intendment is that each and every clause has been inserted for some useful purpose, then the Board

[246 Kan. 164]

      has given effect to the words `used exclusively.' The Kansas Supreme Court has consistently held used exclusively means just that, used exclusively. Any use other than that specifically authorized in the exemption language disqualifies the property for exemption.

 
"The facts in this case, as set out in the Board's original Order demonstrate that there are multiple uses of this property. Some of these uses would fit within the constitutional amendment exempting property for economic development purposes and some do not. Since the constitutional amendment does not exempt property which is being leased, the Board has no recourse that the property is used exclusively by a business for the purpose of manufacturing articles of commerce, conducting research and development or storing goods or commodities which are sold or traded in interstate commerce."
  KAP appealed the final order of the BOTA to the Shawnee County District Court. The sole issue before the district court was whether rental property qualifies for tax exemption under Art. 11, § 13. It is undisputed that the proposed use of the property by the business tenants would qualify for exemption if the business were being conducted by the owner of the property. Stated in another way, the issue is whether rental property used by a business for economic development purposes qualifies for exemption from ad valorem taxation pursuant to Art. 11, § 13.

  In a memorandum decision, the Shawnee County District Court reversed the BOTA, adopting as its conclusions of law the arguments in KAP's memorandum which was submitted to the BOTA and to the district court. As would be expected, the memorandum filed by KAP contains arguments, opinions, and legal authorities supporting its position. Numerous arguments are propounded in the KAP memorandum and it would have been helpful if the district court had prepared an opinion which specified the arguments and authorities upon which it based its decision. The district court apparently determined that the leased property qualified for exemption because the language of Art. 11, § 13 modifies the exclusive use test to apply only to the business physically using the property when it is used for one of the three enumerated purposes in the amendment; because the language indicates legislative intent to give cities and counties broad authority to grant or deny exemptions; because the legislative history and the explanatory statement provided to the voters reveal no distinction between rental or owned property; and because the

[246 Kan. 165]

      purpose of the amendment is to increase Kansas' ability to compete with other states. The Board of County Commissioners of Wyandotte County has appealed the district court decision granting the exemption.

  In 1986, the Kansas Legislature adopted House Concurrent Resolution No. 5047 (HCR 5047) to submit to the voters a proposal to amend the Kansas Constitution. The proposed amendment was adopted by voters on August 5, 1986. The amendment, designated as Art. 11 § 13 of the Kansas Constitution, reads:
"§ 13. Exemption of property for economic development purposes; procedure; limitations. (a) The board of county commissioners of any county or the governing body of any city may, by resolution or ordinance, ad the case requires, exempt from all ad valorem taxation all or any portion of the appraised valuation of: (1) All buildings, together with the land upon which such buildings are located, and all tangible personal property associated therewith used exclusively by a business for the purpose of: (A) Manufacturing articles of commerce; (B) conducting research and development; or (C) storing goods or commodities which are sold or traded in interstate commerce, which commences operations after the date on which this amendment is approved by the electors of this state or (2) all buildings, or added improvements to buildings constructed after the date on which this amendment is approved by the electors of this state, together with the land upon which such buildings or added improvements are located, and all tangible personal property purchased after such date and associated therewith, used exclusively for the purpose of: (A) Manufacturing articles of commerce; (B) conducting research and development; or (C) storing goods or commodities which are sold or traded in interstate commerce, which is necessary to facilitate the expansion of any such existing business if, as a result of such expansion, new employment is created.
(b) Any ad valorem tax exemption granted pursuant to subsection (a) shall be in effect for not more than 10 calendar years after the calendar year in which the business commences its operations or the calendar year in which expansion of an existing business is completed, as the case requires.
(c) The legislature may limit or prohibit the application of this section by enactment uniformly applicable to all cities or counties.
  (d) The provisions of this section shall not be construed to affect exemptions of property from ad valorem taxation granted by this constitution or by enactment of the legislature, or to affect the authority of the legislature to enact additional exemptions of property from ad valorem taxation found to have a public purpose and promote the general welfare." (Emphasis added.)

[246 Kan. 166]

     

  In construing an exemption to taxation, certain well-reorganized rules of construction apply. Those rules were summarized in T-Bone Feeders, Inc. v. Martin, 236 Kan. 641, 693 P.2d 1187 (1985):
"In cases involving questions of claimed exemption from ad valorem taxation, the following rules and legal principles have been established as guidelines to be followed by the courts>:
(1) Taxation is the rule; exemption is the exception. All doubts are to be resolved against exemption and in favor of taxation. Manhattan Masonic Temple Ass'n v. Rhodes, 132 Kan. 646 649, 296 P. 734 (1931);
(2) Constitutional and statutory provisions exempting property from taxation are to be strictly construed. Lutheran Home, Inc., v. Board of County Commissioners, 211 Kan. 270, 275, 505 P.2d 1118 (1973); In re Board of Johnson County Commissioners, 225 Kan. 517, 519, 592 P.2d 875 (1979);
(3) The burden of establishing exemption from taxation is on the one claiming it. Seventh Day Adventist v. Board of County Commissioners, 211 Kan. 683, 690, 508 P.2d 911 (1973);
(4) The question is not whether or not the property is used partly or even largely for the purpose stated in the exemption provisions, but whether it is used exclusively for those purposes. Clements v. Ljungdahl, 161 Kan. 274, 167 P.2d 603 (1946); In re Board of Johnson County Comm'rs, 225 Kan. at 519;
(5) The phrase `used exclusively' in the constitution and statutes means that the use made of the property sought to be exempted from taxation must be only, solely, and purely for the purposes stated, and without participation in any other use. Seventh Day Adventist v. Board of County Commissioners, 211 Kan. 683." 236 Kan. at 645-46.
  However, these rules of construction must also be considered in light of equally well-established principles relating to constitutional construction. In Behrmann v. Public Employees Relation Board, 225 Kan. 435, 591 P.2d 173 (1979), the court held:
 
"In ascertaining the meaning of a constitutional provisions, the primary duty of the courts> is to look to the intention of the makers and adopters of that provision." Syl. ¶ 3.
"In interpreting and construing a construing a constitutional amendment the court must examine the language used and consider it in connection with the general surrounding facts and circumstances that caused the amendment to be submitted. Syl. ¶ 4.
In State, ex rel., v. Hines, 163 Kan. 300, 304, 182 P.2d 865 ...

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