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Home My WebLink About08-22-2001 Sebring Airport Authority v. McIntyr, 783 So. 2d 238 (Fla. 2001) [Sebring III] City of Winter SpringsBROWN, WARD, SALZMAN & WEISS, P.A. ATTORNEYS AT LAW Usher L. Brown • John'H. Ward • Gary S. Salzman° Jeffrey S. Weiss Suzanne D'Agresta Anthony A. Garganese' Scott D. Danahy Alfred Truesdell Arthur R. "Randy" Brown, Jr.' Brett A. Marlowe Jeffrey P. Buak Kristine R. Kutz Joseph G. Colombo Debra S. Babb • Board Certified Civil Trial Lawyer ° Board Certified Business Litigation Lawyer ° Board Certified City, County & Local Government Law Board Certified Labor & Employment Law August 22, 2001 Mr. Ronald McLemore, City Manager City of Winter Springs 1126 East S. R. 434 Winter Springs, FL 32708 Two Landmark Center 225 East Robinson Street, Suite 660 Post Office Box 2873 Orlando, FL 32802-2873 (407)425-9566 (407) 425-9596 FAX Email: firm@orlandolaw.net Website: www.orlandolaw.net Re: Sebring Airport Authority v. McIntyre, 783 So.2d 238 (Fla. 2001) [Sebring III] City of Winter Springs - General Our File 1193 Dear Ric: This correspondence is to provide you with an analysis of the current state of the law following the recent Florida Supreme Court decision in Sebring Airport Authority v. McIntyre and what effect it may have upon the City of Winter Springs. The Sebring Airport case, referenced above, was decided by the Florida Supreme Court on April 5, 2001, and is the latest in a line of cases regarding the tax exemption status of the Sebring Raceway, which is located upon the property ofthe Sebring Airport. For the purposes of this analysis it will be referred to as Sebring III. The Sebring International Raceway, Inc. leases real property from the Sebring Airport Authority, upon which it operates a racetrack for profit and attendant functions, such as food stands, drink stands, and souvenirs. Mr. Ronald McLemore, City Manager August 22, 2001 Page 2 In the first/second Sebring case [Sebring Airport Authority v. Mclntrye, 623 Sold 541 (Fla.2d DCA 1993); review before the Florida Supreme Court 642 So.2d 1072 (Fla. 1994)] the Raceway argued that a governmental lease to a non -governmental lessee was exempt from ad valorem taxation if the lessee serves a public purpose, regardless of the for -profit motive. The Raceway cited to s. 196.199(2)(a), Florida Statutes (1991), which provided in pertinent part: "[p]roperty owned by the following governmental units but used by non -governmental lessees shall only be exempt from taxation... when the lessee serves or performs a governmental, municipal, or public purpose or function, as defined in s. 196.012(6)" which in turn provided, in pertinent part: "[g]overnmental, municipal, or public purpose or function shall be deemed to be served or performed when the lessee under any leasehold interest created in property of the United States... municipality, agency, authority, or other public body corporate of the state is demonstrated to perform a function or serve a governmental purpose which could properly be performed or served by an appropriate governmental unit or which is demonstrated to perform a function or serve a purpose which would otherwise be a valid subject for the allocation of public funds." The Court found a governmental -proprietary function occurs when anon -governmental lessee utilizes governmental property for -proprietary and for -profit aims. While the Court did not dispute that the Raceway serves the public, it found such service did not fit within the definition of a public purpose as defined by s. 196.012(6), FS. Perhaps in response to the Court's decision, the Legislature amended s. 196.012(6), FS in 1994, which provided in pertinent part: "[t]he use by a lessee, licensee, or management company or real property or a portion thereof as a convention center, visitor center, sports facility with permanent seating, concert hall, arena, stadium, park, or beach is deemed a use that serves a governmental, municipal, or public purpose or function when access to the property is open to the general public with or without a charge for admission." The Raceway again sought an ad valorem tax exemption citing the 1994 amendment. This amendment is the subject of the decision of the Florida Supreme Court in April of this year. The Florida Supreme Court upheld the decision of the 2' District Court of Appeals in finding the 1994 amendment to s. 196.012(6), FS unconstitutional. The Court held, relying upon the principles established in Williams v. Jones, 326 So.2d 425 (Fla. 1975) and Volusia County v. Daytona Beach Racing & Recreational Facilities Dist., 341 So.2d 498 (Fla. 1976), that all privately used property must bear the proper tax burden. The Legislatures attempt to create a tax exemption not i Mr. Ronald McLemore, City Manager August 22, 2001 Page 3 allowed by the Constitution is impermissible, thus the 1994 amendment is unconstitutional. (See Sebring III, @ 243). So where does that leave the City of Winter Springs? The Florida law provides, unless expressly exempted from taxation, all real and personal property in this state and leasehold interests in property of the United States, of the State of Florida, or any political subdivision, municipality shall be subject to ad valorem taxes. (See s. 196.001, FS 2000) Property owned and used by the several political subdivisions and municipalities which is used for governmental, municipal, or public purposes shall be exempt from ad valorem taxation. (See s. 196.199(1)(c), FS 2000) Property owned by a municipality but used by a non -governmental lessee shall only be exempt from taxation if the lessee serves or performs a governmental, municipal, or public purpose or function. (See s. 196.199(2)(a), FS 2000) Additionally, any property owned by a municipality which is leased to an organization which uses the property exclusively for literary, scientific, religious, or charitable purposes shall be exempt from taxation. (See s. 196.199(2)(c), FS 2000) The Florida Supreme Court, in Sebring III, states the test to determine whether the lessee serves a governmental, municipal, or public purpose is the governmental -governmental standard, which was originally established in the Williams case and reaffirmed later in the Volusia County case. In Williams, twenty-five (25) separate suits were brought against the County Property Appraiser, challenging assessments to their leaseholds for ad valorem property tax. These leases were with the County for property located on Santa Rosa Island and were of a commercial and residential nature. The typical establishments were barber shops, plumbing businesses, beauty shops, laundries, rental cottages or rental units, etc... The Court stated "[t]he operation of the commercial establishments represented by appellants' cases is purely proprietary and for profit. They are not governmental functions. Therefore the leases failed the governmental -governmental standard. Further, "[a]ll property used by private persons and commercial enterprises is subjected to taxation either directly or indirectly through taxation on the leasehold. Thus all privately used property bears a tax burden in some manner and this is what the Constitution mandates." In summary, where property of the City of Winter Springs is leased to a non -governmental party, and the utilization of that property is for a private for -profit endeavor, the property will not be entitled to an ad valorem real property exemption. The only exceptions to this rule would be where the lessee performs a governmental -governmental function or if the lessee uses the property exclusively for literary, scientific, religious, or charitable purpose. For example: City owned marina, leased to private lessee to lease dock space to general public was not a governmental, municipal or public purpose. Mikos v. City of Sarasota, 636 So.2d 83 (Fla. 2nd DCA 1994). Mr. Ronald McLemore, City Manager August 22, 2001 Page 4 City owned golf course, leased to private lessee to operate for general public was not a governmental, municipal or public purpose, and not exempt from ad valorem taxation. Capital City Country Club v. Tucker, 613 So.2d 448 (Fla. 1993). Property owned by city and agency of city and leased to tenants, who used property for private and commercial purposes and not for municipal or public purposes, was subject to county ad valorem tax. City of Orlando v. Hausman, 534 So.2d 1183 (Fla 5'' DCA 1988) Lessee, a private partnership for profit which leased land in city from city port authority, and, after improving the leasehold property, subleased same for specific periodic rent to a private corporation for profit which used the property to service and store imported cars pending shipment, this use did not serve a governmental purpose and the leasehold was not exempt from ad valorem taxation. St. John's Associates v. Mallard, 366 So.2d 34 (Fla. I" DCA 1978). Finally, subject to the provisions of Chapter 196, FS, all property owned by an exempt entity and used predominantly for exempt purposes shall be exempted from ad valorem taxation to the extent of the ratio that such predominant use bears to the nonexempt use. (See s. 196.192(2), FS 2000) If you have any questions regarding the foregoing please do not hesitate to call our offices. Very truly yours, oe i� J P. Buak A �istant City Attorney W- cc: Anthony A. Garganese, City Attorney F OOCS\City ofWinter Springs\General\CorrespondenceWcLemore, Ronald\Sebring Airport Analysis Ur 8-22-01 jpb . jd