You can
search the entire site.
or go to the recent opinions, or the chronological or subject indices.
Stanek v. Kenai Peninsula Borough (12/05/2003) sp-5758
Stanek v. Kenai Peninsula Borough (12/05/2003) sp-5758
Notice: This opinion is subject to correction before
publication in the Pacific Reporter. Readers are
requested to bring errors to the attention of the Clerk
of the Appellate Courts, 303 K Street, Anchorage,
Alaska 99501, phone (907) 264-0608, fax (907) 264-0878,
e-mail corrections@appellate.courts.state.ak.us.
THE SUPREME COURT OF THE STATE OF ALASKA
RONALD F. STANEK, )
) Supreme Court No. S-10566
Appellant, )
) Superior Court No.
v. ) 3KN-00-690 CI
)
KENAI PENINSULA BOROUGH, ) O P I N I O N
)
Appellee. ) [No. 5758 - December 5, 2003]
)
Appeal from the Superior Court of the State
of Alaska, Third Judicial District, Kenai,
Jonathan H. Link, Judge.
Appearances: Robert D. Stone, Anchorage, for
Appellant. Collette Thompson, Borough
Attorney, Soldotna, for Appellee.
Before: Fabe, Chief Justice, Matthews,
Eastaugh, Bryner, and Carpeneti, Justices.
MATTHEWS, Justice.
I. INTRODUCTION
An ordinance of the Kenai Peninsula Borough excludes
from taxation $10,000 of the value of residential property used
as the owner's permanent residence. An Anchorage resident who
owns a second home in the Borough challenges the ordinance,
contending mainly that it illegally discriminates against Borough
nonresidents. We uphold the ordinance because it discriminates
on the basis of property use, treating resident and nonresident
owners of second homes alike, and because this discrimination is
legitimate.
II. FACTS AND PROCEEDINGS
Ronald Stanek owns a second home that he uses for
recreational purposes in the Kenai Peninsula Borough. He is an
Anchorage resident. Kenai Borough Ordinance (KPB) 5.12.115
exempts from taxation the first $10,000 of residential property
used as the owner's permanent place of residence.1 Implementing
regulations define "permanent place of residence" as "that place
where a person has his true, fixed and permanent home and to
which, after any temporary absence, the person has the intention
to, and will return." Stanek is not eligible for this exemption
because his Kenai house is not his permanent place of residence.
Stanek sued the Borough, challenging the ordinance on
constitutional and statutory grounds. Specifically, he claimed
that the ordinance violated constitutional guarantees of equal
protection; the right to travel; AS 29.45.050, which permits
municipalities to exempt $10,000 of residential property; and AS
29.45.110, which requires property to be assessed at its full and
true value. Both parties moved for summary judgment. The
superior court granted the Borough's motion and Stanek appeals.
III. DISCUSSION
A. Standard of Review
Only issues of law are involved in this case. We
review issues of law exercising our independent judgment.2
B. The Exemption Does Not Violate Equal Protection.
Stanek argues that the tax exemption discriminates
between otherwise similarly situated taxpayers on account of
their borough residency. He argues that this discrimination
violates the Equal Rights Clause of the Alaska Constitution and
the Equal Protection Clause of the Fourteenth Amendment to the
United States Constitution.
We address at the outset Stanek's state constitutional
challenge. The Alaska Constitution provides that all persons are
"entitled to equal rights, opportunities, and protection under
the law."3 In Gonzales v. Safeway Stores, Inc.,4 we summarized
our general approach to claims that the equal rights clause has
been violated:
The constitutional right to equal
protection is a command to state and local
governments to treat those who are similarly
situated alike. The common question in equal
protection cases is whether two groups of
people who are treated differently are
similarly situated and thus entitled to equal
treatment. Equal protection jurisprudence
concerns itself largely with the reasons for
treating one group differently from another.
In reviewing equal protection claims we view
the enactment in question as creating, by its
differential treatment, separate
groups. . . . This separation by different
legal treatment is referred to as a
"classification." We ordinarily review a
classification under Alaska's equal rights
clause by asking whether a legitimate reason
for disparate treatment exists, and, given a
legitimate reason, whether the enactment
creating the classification bears a fair and
substantial relationship to that reason.7
7 However, when a classification
is based on a suspect factor such
as race, the question is much more
demanding: is there a "compelling"
reason for the classification, and
if so, is the enactment narrowly
designed to bring about its goal?
This is commonly referred to as
strict scrutiny. Additionally,
under federal equal protection
analysis, there are quasi_suspect
factors such as gender and
illegitimacy where the inquiry is
whether the purpose of the
enactment is "important" and
whether the enactment bears a
substantial relationship to the
accomplishment of its purpose.
This is usually referred to as
intermediate scrutiny. Under this
court's equal protection analysis
we use a "sliding scale" between
strict scrutiny and the most
tolerant "legitimate reason" test.
"As the right asserted becomes
`more fundamental' or the
classification scheme employed
becomes `more constitutionally
suspect,' the challenged law `is
subjected to more rigorous scrutiny
at a more elevated position on our
sliding scale.' " We have,
however, in the sixteen years since
the sliding scale approach was
first formulated . . . only
identified three stops on the
sliding scale - at the relaxed,
intermediate, and strict levels of
scrutiny.[5]
The classification in this case pertains to economic
interests and does not involve suspect or quasi-suspect
classifications. We thus apply the most tolerant "legitimate
reason" test. "[F]reedom from disparate taxation[] lies at the
low end of the continuum of interests protected by the equal
protection clause."6
Stanek argues that the classification created by the
ordinance is between nonresidents of the borough who own
residences in the borough, and residents of the borough who own
residences in the borough. The Borough takes issue with this.
It contends that borough residents who own both first and second
homes in the borough are treated as Stanek is treated because
their second homes do not receive the $10,000 exemption. The
distinction, the Borough argues, is based on the use of property
as a primary home, not the residency of the owner.
We conclude that the Borough is correct. The actual
classification that is created by the ordinance is between owners
of owner-occupied primary residences in the borough and owners of
second homes or other types of real property in the borough.
As to this classification, we must ask whether there is
a legitimate reason for the disparate treatment. We conclude
that the answer is affirmative. The exemption is evidently
designed to protect and promote home ownership. Home ownership
is widely thought to be beneficial to a community because it
promotes stability, a sense of commitment to the community, civic
responsibility, and a measure of financial independence.7 These
are unquestionably legitimate goals. They can reasonably be
perceived to be more strongly inherent in owner-occupied home
ownership than in ownership of second homes or other real estate.8
Further, the tax exemption makes home ownership less expensive
than it otherwise would be and thus bears a fair and substantial
relationship to promoting home ownership. We therefore conclude
that the ordinance does not violate the equal rights clause of
the Alaska Constitution.
Other courts considering like programs have reached the
same conclusions. In Reinish v. Clark, a Florida intermediate
appellate court upheld a state statute that exempted the first
$25,000 of property used as a permanent residence. The exemption
was reviewed using minimum scrutiny:
The underlying classification in the
exemption provisions is based primarily on
the use of the property rather than the
user. . . . [T]he Florida exemption treats
the [plaintiffs] no differently from either
Florida residents who rent, rather than own,
. . . or Florida residents who use Florida
real property as a secondary, seasonal, or
vacation residence.[9]
Mindful of the historic, civic, and economic
significance of the need to foster and
protect the primary residence of Florida
homeowners, without an attendant need to give
the same high level of protection to other
types of residential properties, we conclude
. . . that the Florida homestead tax
exemption's classification has some
reasonable basis and does not offend equal
protection concerns. The law-makers
reasonably could have concluded that the
challenged classification would promote a
legitimate State purpose.[10]
Similarly, a New York intermediate appellate court in
Markham v. Comstock upheld a state tax exemption on primary
residences, noting that it did "not favor New York residents over
nonresidents. Rather, it distinguishes between property that
serves as an owner's primary residence and property that does not
and is unavailable with respect to property that is not the
owner's primary residence whether the owner is a New York
resident or not."11 Further, the court found that the exemption
"is rationally related to the State's legitimate interest in
protecting and promoting the ownership of property that serves as
primary residences, and furthers that interest by relieving the
real estate tax burden on such ownership."12
To the same effect is Citizens for Uniform Taxation v.
Northport Public School District, where a Michigan appellate
court stated:
the statute does not distinguish between
residents and nonresidents. Instead, the
statute distinguishes between property that
qualifies as homestead property and property
that does not. Section 1211 treats
nonresidents who own property that does not
qualify as homestead property exactly the
same as Michigan residents who own property
that does not qualify as homestead property,
neither are eligible for the homestead
exemption.[13]
As a subset of his equal protection argument, Stanek
argues that we should presume that the ordinance in question was
created with a discriminatory intent. The ordinance was passed
by initiative in 1978. The Borough apparently no longer
possesses the initiative petition or other documents that might
show the motives of the initiative sponsors. Under this
circumstance Stanek contends that we should apply a spoliation
remedy. In tort law when a party has destroyed records, it is
sometimes appropriate to employ a rebuttable presumption that the
records would have established facts unfavorable to the party who
destroyed the documents.14
We regard the argument as without merit. We are
unaware of any case that has applied a spoliation remedy in a
public law context. Moreover, Stanek has not shown that other
sources, such as newspaper archives, do not show the impetus for
this initiative. Most importantly, while it is easy to imagine
that the initiative might have been promoted to lessen the tax
burden on local home owners, as distinct from nonresidents who
own second homes, this would be merely a popular way of stating
that it is designed to promote owner-occupied home ownership.
This would not detract from the legitimacy of that objective.
Since analysis of equal protection claims under the
federal constitution is, if anything, more forgiving than the
approach we use under the Equal Rights Clause of the Alaska
Constitution, it follows from our conclusion that the state Equal
Rights Clause is not violated, that the federal Equal Protection
Clause is also not violated.15
C. The Right To Travel
The second paragraph of KPB 5.12.115(A) provides that
if the owner of record occupied the residence for less than 183
days during the previous year the borough assessor may presume
that the property has not been occupied as the owner's primary
place of residence. Stanek challenges this provision as an
unjustified durational residency requirement that violates the
right to travel as recognized by the federal and state
constitutions.
We have recognized that there is a right to inter-state
or intra-state travel that may be impinged "when a governmental
entity creates distinctions between residents based upon the
duration of their residency."16 Not all durational residency
requirements trigger heightened scrutiny.17 In order to determine
what level of scrutiny should be applied, a test is used that
"balances the nature and extent of the infringement on this right
caused by the classification against the state's purpose in
enacting the statute and the fairness and substantiality of the
relationship between that purpose and the classification."18
But in this case we need not decide what level of
scrutiny the ordinance's 183-day presumptive period should
receive, or whether the ordinance violates the right to travel.
Stanek lacks standing to bring a right to travel challenge
because his house in the borough is not by any measure his
permanent place of residence. Since Stanek does not use his
borough home as his primary residence, the 183-day presumptive
period is irrelevant to him. Only if he were to move into the
house with an intention to make it his permanent place of abode
would the 183-day clock begin to tick. Stanek has no personal
stake in the constitutionality of the 183-day presumptive period.
Thus he lacks standing to challenge it.19
D. Statutory Arguments
Alaska Statute 29.45.050 authorizes municipalities to
exempt residential property from taxation in an amount not to
exceed the assessed value of $10,000. Alaska Statute
29.45.050(a) provides:
A municipality may exclude or exempt or
partially exempt residential property from
taxation by ordinance ratified by the voters
at an election. An exclusion or exemption
authorized by this section may not exceed the
assessed value of the $10,000 for any one
residence.
Alaska Statue 29.45.110(a) requires that "[t]he assessor shall
assess property at its full and true value as of January 1 of the
assessment year . . . ."
Stanek argues that the ordinance violates AS 29.45.050
because the statutory exemptions are exclusive and the Borough
has "exceeded the limitations set forth in AS 29.45.050 by
providing property tax exemptions to Kenai Peninsula Borough
residents outside of the exceptions set forth in AS 29.45.050."
The premise of Stanek's argument that the statutory
exemptions mentioned in AS 29.45.050(a)-(r) are exclusive appears
to be sound and is not challenged by the Borough. But the
Borough argues that the ordinance merely defines "residential
property" as used in AS 29.45.050(a) and that it has the implied
power to give a narrow but reasonable meaning to the statutory
term. We agree with the Borough's argument.
The term "residential property" as used in the statute
requires definition. The definition imposed by the ordinance -
basically that residential property means the owner's primary
residence - is a narrow but reasonable interpretation of the
statute. Article X, section 1 of the Alaska Constitution
mandates that a liberal construction be given to the powers of
local government20 and this applies to the taxing authority of
local governments.21 The themes of liberal construction and broad
local powers are also expressed statutorily in AS 29.35.400 and
.410.22 Unless otherwise limited by law, a municipality has and
may exercise all powers and functions necessarily or fairly
implied in or incident to the purpose of all powers and functions
conferred in this title. We have also observed that tax
exemptions should be narrowly construed to the end that
"disturb[ances] to . . . that equality in the distribution of
this common burden upon all property which is the object and aim
of every just system of taxation" be minimized.23
Considering all these factors we conclude that the
Borough had the power to define the statutory term "residential
property" as it did. We thus conclude that the Borough ordinance
is authorized by AS 29.45.050(a) and does not violate that
subsection.
Stanek also argues that the ordinance violates AS
29.45.110 which commands that property be assessed at its full
and true value. This argument also lacks merit. The ordinance
does not conflict with the statute. It does not require that
residential property be assessed for less than full and true
value. By requiring the equal assessment of property AS
29.45.110 implies an equal taxation goal. Accepting that equal
taxation is a goal of section .110, this goal is necessarily
subject to tax exemptions that are authorized by statute.24 As we
have seen, the exemption in this case is authorized by statute.
Therefore Stanek's argument that section .110 bars the exemption
fails.
IV. CONCLUSION
The decision of the superior court is AFFIRMED.
_______________________________
1KPB 5.12.115 states:
A. The first $10,000 of assessed valuation
of a single parcel of residential real
property owned and occupied by the owner of
record as the owner's permanent place of
residence in the borough, shall be exempt
from the borough tax levy on real property
within the Kenai Peninsula Borough.
The assessor may presume that the
property has not been occupied as the owner
of record's primary residence and permanent
place of abode, if the owner of record
occupied it for less than 183 days during the
previous year. If the current owner of
record can provide the assessor with
satisfactory evidence that the lack of
occupancy was for medical reasons, the
exemption may be granted.
The second paragraph was added in 1998.
2Guin v. Ha, 591 P.2d 1281, 1284 n.6 (Alaska 1979).
3Alaska Const. art. I, 1.
4882 P.2d 389, 396 (Alaska 1994).
5Id. at 396 (citations omitted).
6Matanuska-Susitna Borough Sch. Dist. v. State, 931 P.2d 391, 398
(Alaska 1997) (quoting Atl. Richfield Co. v. State, 705 P.2d 418,
437 (Alaska 1985)).
7Federal programs encourage home ownership. See, e.g., 12 U.S.C.
1715l (2003). Tax exemptions for primary residences "promote
the stability and welfare of the state by encouraging property
ownership and independence on the part of the citizen and by
preserving a home where the family may be sheltered and live
beyond the reach of economic misfortune." Reinish v. Clark, 765
So. 2d 197, 206-07 (Fla. App. 2000) (quoting Bigelow v. Dunphe,
197 So. 328, 330 (Fla. 1940)).
8Reinish, 765 So. 2d at 208 ("[S]econdary residences do not
trigger the same public policy concerns and are not entitled to
the same protection as permanent . . . residences.").
9Id. at 205 (emphasis in original).
10Id. at 207.
11272 A.D.2d 971, 973 (N.Y. App. Div. 2000) (citation omitted).
12Id.
13608 N.W.2d 480, 483 (Mich. App. 2000).
14See Sweet v. Sisters of Providence in Washington, 895 P.2d 484,
492 (Alaska 1995).
15"Minimal scrutiny under our state constitution may be more
demanding than under the federal constitution. As under the
federal constitution, the challenged exclusion must be designed
to achieve a `legitimate' governmental objective; however, the
exclusion must bear a `fair and substantial' relationship to the
accomplishment of the legitimate objective" under state law
whereas the relationship under federal law need only be
"rational." State, Dep't of Revenue, Permanent Fund Dividend
Div. v. Cosio, 858 P.2d 621, 629 & n.11 (Alaska 1993).
16Gilman v. Martin, 662 P.2d 120, 125 (Alaska 1983).
17Church v. State, Dep't of Revenue, 973 P.2d 1125, 1131 (Alaska
1999).
18Id. (quoting Alaska Pac. Assurance Co. v. Brown, 687 P.2d 264,
271 n.10 (Alaska 1984)).
19See Hoblit v. Comm'r of Natural Res., 678 P.2d 1337, 1340
(Alaska 1984) (stating that a party has standing to obtain
judicial resolution only when he has "a sufficient `personal
stake' in the outcome of the controversy to ensure the requisite
adversity").
20Art. X, 1 provides:
The purpose of this article is to
provide for maximum local self-government
with a minimum of local government units, and
to prevent duplication of tax-levying
jurisdictions. A liberal construction shall
be given to the powers of local government
units.
21Liberati v. Bristol Bay Borough, 584 P.2d 1115, 1120 (Alaska
1978).
22AS 29.35.400 provides:
A liberal construction shall be given to
all powers and functions of a municipality
conferred in this title.
AS 29.35.410 provides:
23Greater Anchorage Area Borough v. Sisters of Charity of the
House of Providence, 553 P.2d 467, 469 (Alaska 1976) (quoting
Animal Rescue League of Boston v. Bourne's Assessors, 37 N.E.2d
1019, 1021 (Mass. 1941)).
24Article IX, section 4 of the Alaska Constitution provides that
tax exemptions of real property may be granted by law:
The real and personal property of the
State or its political subdivisions shall be
exempt from taxation under conditions and
exceptions which may be provided by law. All,
or any portion of, property used exclusively
for non- profit religious, charitable,
cemetery, or educational purposes, as defined
by law, shall be exempt from taxation. Other
exemptions of like or different kind may be
granted by general law. All valid existing
exemptions shall be retained until otherwise
provided by law.
(Emphasis added.)
