Bd. of Cnty. Comm'rs of Johnson Cnty. v. Jordan

303 Kan. 844

370 P.3d 1170

BOARD OF COUNTY COMMISSIONERS OF JOHNSON COUNTY, Kansas, et al., Petitioners,

v. Nick JORDAN, in His Official Capacity as Secretary of the Kansas Department of RevenueandDavid N. Harper, in His Official Capacity as Director of Property Valuation, Kansas Department of Revenue, Respondents.

No. 114,827.

Supreme Court of Kansas.

Feb. 24, 2016.

Kathryn D. Myers, assistant county counselor, argued the cause and was on the briefs for petitioners.

Amelia S. Kovar–Donohue, special assistant attorney general, and M.J. Willoughby, assistant attorney general, argued the cause and were on the brief for respondents.

The opinion of the court was delivered by BILES, J.:

This is an original action in mandamus challenging a unique aspect of the State's statutory methodology for valuing real property for ad valorem taxation purposes. It is brought by 21 boards of county commissioners against Nick Jordan, Secretary of the Kansas Department of Revenue, and David N. Harper, Director of Property Valuation.

The dispute concerns Harper's statewide directive to county appraisers requiring compliance with K.S.A. 2014 Supp. 79–1460, which prohibits increasing the valuation of real property for 2 tax years after a successful valuation appeal without documented substantial and compelling reasons to do so. Generally speaking, all other taxable real property is reappraised annually at fair market value. The Counties argue this dichotomy between property that was subject to a successful valuation appeal and all other property violates our state's constitutional mandate to the legislature to provide a "uniform and equal basis of valuation and rate of taxation of all property subject to taxation." Kan. Const. art. 11, § 1 (a) (2014 Supp.). We agree with the Counties.

The legislature has statutorily provided that all taxable property must be listed and valued every January 1. See K.S.A. 79–309. Real property, other than property devoted to agricultural use, is appraised at fair market value on that date. See K.S.A. 79–501 ; see also Kan. Const. art. 11, § 12 (providing land devoted to agricultural use may be valued on basis of agricultural income or productivity). But the challenged statute changes this for a discrete group of taxpayers by insulating them from the annual valuation process. Such preference is constitutionally forbidden. See State ex rel. Stephan v. Martin, 227 Kan. 456, 468, 608 P.2d 880 (1980) (Martin I ) (Kan. Const. art. 11, § 1 [a] "prohibits favoritism, and requires uniformity in valuing property for assessment purposes so that the burden of taxation will be equal.").

We hold K.S.A. 2014 Supp. 79–1460 is unconstitutional to the extent it prevents appraisers from valuing taxable real property at its fair market value in any tax year. We further hold that subsections (a)(2) and (c) of K.S.A. 2014 Supp. 79–1460, which are the constitutionally offending provisions, are severable from the remainder of the statute. The writ of mandamus is issued and relief ordered to preclude respondents from further efforts to implement the stricken statutory provisions.

FACTUAL AND PROCEDURAL BACKGROUND

The facts are straightforward and undisputed. The legislature enacted K.S.A. 2014 Supp. 79–1460, effective July 1, 2014. Under the statute, when a property owner successfully appeals a property valuation, subsection (a)(2) prevents the valuation from being increased during the next 2 tax years unless certain conditions are met. Subsection (a) states:

"The county appraiser shall notify each taxpayer in the county annually on or before March 1 for real property and May 1 for personal property, by mail directed to the taxpayer's last known address, of the classification and appraised valuation of the taxpayer's property, except that, the valuation for all real property shall not be increased unless: (1) The record of the latest physical inspection was reviewed by the county or district appraiser, and documentation exists to support such increase in valuation in compliance with the directives and specifications of the director of property valuation, and such record and documentation is available to the affected taxpayer; and (2) for the next two taxable years following the taxable year that the valuation for real property has been reduced due to a final determination made pursuant to the valuation appeals process, documented substantial and compelling reasons exist therefor and are provided by the county appraiser. " (Emphasis added.)

The statute goes on to limit the "documented substantial and compelling reasons" for a county appraiser to increase the qualified property's valuation during the 2–year grace period by specifying:

"(c) For purposes of this section:

(1) The term ‘substantial and compelling reasons' means a change in the character of the use of the property or a substantial addition or improvement to the property;

(2) the term ‘substantial addition or improvement to the property’ means the construction of any new structures or improvements on the property or the renovation of any existing structures or improvements on the property. The term ‘substantial addition or improvement to the property’ shall not include:

(A) Any maintenance or repair of any existing structures, equipment or improvements on the property; or(B) reconstruction or replacement of any existing equipment or components of any existing structures or improvements on the property."

On May 16, 2014, Harper issued Directive # 14–047 pursuant to his statutory responsibilities as property valuation director to enforce ad valorem property tax statutes. See, e.g., K.S.A. 2014 Supp. 79–505(a) (director authorized to adopt appraiser directives prescribing standards for appraisals concerning ad valorem taxation); K.S.A. 79–1404Second (director's duty to confer with, advise, and direct appraisers, boards of commissioners, and others obligated to make levies and assessments as to their duties under Kansas statutes); K.S.A. 2014 Supp. 79–1460(a)(1). Directive # 14–047, in part, instructed all county appraisers to comply with K.S.A. 2014 Supp. 79–1460(a) :

"When the valuation for real property has been reduced due to a final determination made pursuant to the valuation appeals process the county appraiser shall comply with K.S.A. 79–1460. This requirement is a jurisdictional exception when it prevents the value of a parcel from increasing to the value as indicated by the mass appeal appraisal process."

On November 30, 2015, the Counties filed this original action in mandamus to challenge the constitutionality of K.S.A. 2014 Supp. 79–1460 and, consequently, Harper's Directive # 14–047. Petitioners are the boards of county commissioners for Johnson, Barton, Chautauqua, Cowley, Douglas, Elk, Ellis, Finney, Franklin, Geary, Harper, Harvey, Leavenworth, Lyon, McPherson, Miami, Ness, Pottawatomie, Reno, Riley, and Wyandotte Counties.

In their petition, the Counties note their county appraisers are required by law to send a "Notice of Valuation" for each parcel of real property in their jurisdictions no later than March 1, 2016, using the valuation methodologies fixed by law. They claim further that if their appraisers comply with K.S.A. 2014 Supp. 79–1460(a)(2) by maintaining a valuation reduced during the 2015 valuation appeal process, they potentially face litigation from other taxpayers as tax burdens within their counties shift due to the undervaluing of property caused by compliance with K.S.A. 2014 Supp. 79–1460(a)(2). They also note if they refuse to comply with Harper's directive, their county appraisers face possible removal from office or other penalties under the property valuation director's statutory authority. See K.S.A. 79–1404.

On December 7, 2015, this court ordered Jordan and Harper to answer the petition no later than December 18. See Supreme Court Rule 9.01(c)(3) (2015 Kan. Ct. R. Annot. 88). But on that date, respondents instead moved for an extension of time until January 8, 2016, to respond. On December 22, this court denied the extension because of the looming March 1 deadline for valuations and set a schedule for briefing and oral arguments.

In their brief, respondents oppose the requested relief, arguing: (1) this is not an appropriate case to exercise our discretionary original jurisdiction; (2) the Counties lack standing because they fail to allege an actual injury giving rise to suit; and (3) the statute is constitutional because it is rationally related to legitimate government interests. In the alternative, if we hold K.S.A. 2014 Supp. 79–1460(a)(2) and (c) are unconstitutional, respondents argue the challenged provisions are severable from the remainder of K.S.A. 2014 Supp. 79–1460. We consider those arguments in that sequence.

EXERCISING ORIGINAL JURISDICTION IS APPROPRIATE

A mandamus action seeks "to compel some inferior court, tribunal, board, or some corporation or person to perform a specified duty, which duty results from the office, trust, or official station of the party to whom the order is directed, or from operation of law." K.S.A. 60–801. Judgments in mandamus must specify with particularity the acts or act the respondent is compelled to perform or enjoined from performing. K.S.A. 60–802. This court has original jurisdiction in mandamus. Kan. Const. art. 3, § 3 ("The supreme court shall have original jurisdiction in proceedings in quo warranto, mandamus, and habeas corpus; and such appellate jurisdiction as may be provided by law.").

But as the parties correctly observe, under the circumstances of the present controversy, mandamus would also be an appropriate proceeding to initiate with the district court. See K.S.A. 60–801. And when there is concurrent jurisdiction, our procedural rules recognize this court should exercise its original jurisdiction cautiously. See Supreme Court Rule 9.01(b) (2015 Kan. Ct. R. Annot. 88) ("An appellate court ordinarily will not exercise original jurisdiction if adequate relief appears to be available in a...