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October 12, 1990.


The Board of Park Commissioners of the applicant City of Wichita (City) appeals from a decision of the district court affirming the decision of the Board of Tax Appeals (BOTA), which denied ad valorem tax exemptions to the City concerning certain park property.

Essentially we have three issues to consider: (1) Whether BOTA had jurisdiction to revoke the City's exemption as to certain park property; (2) whether BOTA's corrected order on rehearing was supported by substantial evidence and not arbitrary; and (3) whether certain ex parte communications between the Sedgwick

[14 Kan. App. 2d 778]

      County appraiser and BOTA prejudiced the City. We affirm in part, reverse in part, and remand with directions.


This appeal concerns two parcels of land: horse stables and a residence. The facts are not generally in dispute.

  The first parcel of real property, referred to as "the stables," is real property approximately a quarter-section in size. The stables were built between 1977 and 1980 and have since operated under various arrangements. The stables property had previously been exempted from ad valorem taxation under BOTA Order No. 787-1, April 7, 1971. The City leased the stables to Bobbi Reichert on May 12, 1986. In the stables lease, the City named this property the Pawnee Prairie Park Riding Stables, referring to it as the "facility." Pawnee Prairie Park is a large regional park (625 acres) consisting primarily of natural area and is made available to the public through a system of pedestrian and equestrian trails. The Park is immediately adjacent to Wichita Mid-Continent Airport. The stables consist of a barn, pens, arena, farm ground, and hay meadow, along with equestrian trails, wilderness areas, and public picnic areas which make up about one-sixth of the total park area. The real property comprising the stables was described by metes and bounds and was identified as the facility to be leased to Bobbi Reichert in the May 12, 1986, lease.

  There is a dispute between the parties concerning the legal sufficiency of this description. The Board of Sedgwick County Commissioners (County), respondent, argues the property was "fully legally described by metes and bounds . . . such legal description being an attachment and part of the lease agreement." The City contends

"[t]he property subject to the Stables lease is not entirely the same as D-423-UP, the property identified by the BOTA Order. [D-423-UP is a County tax key number identifying a 151-acre tract within Pawnee Prairie Park.] Pawnee Prairie Park is 625 acres, the Stables are 109.5 acres. . . .
. . . .
"[T]he precise parcel of land [the stables] that is the subject of this appeal has never been determined."
  The lease agreement between the City and Bobbi Reichert provided the facility was to be used to provide the public with riding stables that would include services such as the boarding

[14 Kan. App. 2d 779]

      of horses; providing horses for riding lessons; conducting fun shows, horse shows, junior rodeos, riding instruction, trail rides, and cookouts; and rehabilitating individuals with mental and physical disabilities. The facility was to be open to the public from sunrise to sunset seven days a week. Under the terms of the lease, Bobbi Reichert was to pay one dollar per year as rent and pay the operation's expenses out of the revenues from the facility. Reichert had the right to mow and bale any hay growing on the property.

  Reichert boarded her own horses and those of private individuals on the property. There were no city-owned horses involved in the operation. She used her own horses for teaching and rehabilitative purposes, and leased them to customers for trail rides. Reichert boarded privately owned horses, charging between $78 and $140 per month. Reichert was not paid to operate the stable, but was allowed to keep the fees for boarding the horses, with the potential for profit, even though there was no showing of profit from the stables.

  Approximately six weeks after the City and Bobbi Reichert entered into the lease on the stables, they entered into a lease on the residence. The residence lease states that it is necessary that "LESSEE reside near, on, or adjacent to" the stables. The Wichita Airport Authority (WAA) owned the residence and had leased it to the City on June 23, 1986. The City had previously deeded the property to WAA on August 23, 1976.

  On the same date WAA leased the property to the City, the City leased it to Bobbi Reichert. This sublease agreement locates the residence just south of and adjacent to the riding stables facility owned by the City. Under the sublease, Reichert was responsible for paying utilities, repairing any damage above normal wear and tear, paying any taxes which may have become a lien on the property, and carrying and maintaining appropriate insurance as required by the lessor. Reichert waived any and all rights of recovery against the City for or arising out of damages to or destruction of any of her property.

  The stables operation ultimately was unsuccessful for a number of reasons. Both leases were terminated in early 1988, and the residence was returned to WAA. The City resumed direct control of the stables. On September 10, 1986, the City filed an application

[14 Kan. App. 2d 780]

      with BOTA for ad valorem tax exemption on the residence. The stables were not listed on the application for exemption. The residence was described by metes and bounds, situated at 2655 S. Tyler Road in Wichita, Kansas. A hand-written key number of D-425-UP appeared on the face of the application where the form requests specific description of the property to be exempted. After the City submitted its application for exemption, the County Appraiser recommended the exemption be granted. On October 28, 1987, BOTA, in docket No. 4551-86-TX, denied the application, finding the subject matter of the application, the residence, to be nonexempt. BOTA stated it found neither statutory nor case law authority for exempting residences owned by municipalities. BOTA further found that the City had presented no evidence supporting the use of the residence as a recognized governmental or proprietary function.

  The City filed a Motion for Rehearing. BOTA granted the motion and a rehearing was held. Additional evidence was presented and entered into the record. BOTA issued an Order on Rehearing which reaffirmed its original determination and revoked the stables' exemption. A corrected Order on Rehearing was issued to include the County tax key number of the stables, D-423-UP. The City then filed this appeal.


  The City contends BOTA had no jurisdiction to expand its Order on Rehearing beyond the property listed on the application for exemption: the residence. The Order on Rehearing not only denied exemption for the residence, but also revoked the existing exemption for the stables. The City contends further that BOTA's revocation of the stables exemption denied the City notice and an opportunity for hearing as required by the Kansas Administrative Procedure Act.

  The County contends that although there is no specific statutory authority for the review of an exemption from ad valorem taxation except for the property for which the exemption is sought, the City inextricably tied the proposed exemption of the residence to the stables. The County contends BOTA had the authority to revoke the stables' ...

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