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AGO 1995 No. 6 - April 27, 1995
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Christine Gregoire | 1993-2004 | Attorney General of Washington

TAXATION - PROPERTY - EXEMPTIONS - PROPERTY JOINTLY OWNED BY A CITY AND A PRIVATE CORPORATION

A coliseum owned jointly by a private corporation and a city is neither wholly nor partially exempted from state and local property taxes under article 7, section 1 of the state constitution or RCW 84.36.010.

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                                                                   April 27, 1995

The HonorableAndrew K. Miller
Benton County Prosecuting Attorney
7320 W Quinault
Kennewick, WA   99336-7693

                                                                                                Cite as:AGO 1995 No. 6

Dear Mr. Miller:

            By letter previously acknowledged, you have asked for our opinion on a question that we paraphrase as follows:

            Is the Tri-Cities Coliseum exempt from property taxation in whole or in part under article 7, section 1 of the state constitution and RCW 84.36.010, which exempt property of certain public entities from taxation?

                                                               BRIEF ANSWER

            For the reasons explained below, we conclude that the answer to your question is "no".  The Tri-Cities Coliseum is neither wholly nor partially exempt from property tax under these provisions.

                                                                    ANALYSIS

A.        FACTUAL BACKGROUND[1]

              The Tri-Cities Coliseum (Coliseum) is a multi-use facility jointly owned and operated under a Joint Venture Partnership Agreement by the City of Kennewick (City) and the Tri-Cities Coliseum Corporation (TCCC), a private company.  The Agreement sets forth the relationship between the City and TCCC in this venture and their respective ownership interests in the Coliseum.  As to ownership of the Coliseum, the Agreement provides:

            Title to the coliseum shall be taken in the name of the City of Kennewick, in trust for the benefit of the Joint Venturers, TCCC and the City, as their interests may appear herein.

Agreement, ¶ II at 3.

            As we understand it, TCCC owns an undivided 51% interest in the Coliseum and the City owns an undivided 49% interest in the facility.  These ownership interests reflect the parties' relative contributions toward purchasing the Coliseum.[2]  Consistent with the above-quoted provision of the Agreement, legal title to the Coliseum is in the name of the City, in trust, for the benefit of the joint venturers.

            Under the Agreement, TCCC supervises the management and operation of the Coliseum.  Agreement, ¶ IV at 4.  Gross receipts from the Coliseum are earmarked first for debt service, then for operating expenses, and then, for expenditure as a majority in ownership of the Coliseum directs.  Profits, if any, are distributed according to each party's ownership interest.  Agreement, ¶ V at 5.  Sale of either party's interest is subject to a right of first refusal in the other.  Agreement, ¶ XXI at 11.  In all matters affecting the joint venture that are subject to vote, each party's vote is weighted according to its ownership interest.  Agreement, ¶ III at 4.

            By virtue of these provisions, then, the City holds a minority interest in the Coliseum as part of a joint venture, the terms of which substantially limit its authority to manage, control, and use the Coliseum.

B.        CONSTITUTIONAL AND STATUTORY PROVISIONS

            Under the state constitution and by statute, property of a municipal corporation, such as a city, is exempt from property tax.  Article 7, section 1 provides:

            Property of the United States and of the state, counties, school districts and other municipal corporations . . . shall be exempt from taxation.

This exemption also is reflected in RCW 84.36.010 which provides:

                        All property belonging exclusively to the United States, the state, any county or municipal corporation . . . shall be exempt from taxation[.][[3]]

C.        DISCUSSION

            Essentially, your inquiry is whether this exemption from property tax is available where ownership is joint in a municipal corporation and a private entity, as it is in the Coliseum.

            Several legal principles are helpful in resolving your inquiry.  First, as you note in your letter, tax exemptions are strictly construed.  An intention to create an exemption from taxation must be expressed in clear and unambiguous terms.  Columbia Irrigation Dist. v. Benton Cy., 149 Wash. 234, 270 P. 813 (1928).  This principle of strict construction applies to municipal corporations seeking exemption from taxation, as well as private parties.  Spokane Cy. v. Spokane, 169 Wash. 355, 13 P.2d 1084 (1932) (applying the rule of strict construction to a municipal corporation seeking a property tax exemption under a prior version of the constitutional provision about which you inquire).

            Second, in determining whether property is exempt from tax under article 7, section 1, the courts look to beneficial ownership in the property, not legal title.  Holding legal title, for trust or security purposes, does not qualify for the exemption.  Id., at 360;Washington Iron Works Co. v. King Cy., 20 Wash. 150, 54 P. 1004 (1898).

            When these principles are considered in the context of your inquiry, a couple of points become evident.  First, neither article 7, section 1 nor RCW 84.36.010 create an express exemption from taxation for property jointly owned by a private and a public entity.  And under the rule of strict construction discussed above, no such exemption would be implied.  Moreover, RCW 84.36.010 makes clear that the exemption applies only to property "belonging exclusively" to a designated public entity.

            As noted above, the Coliseum is not owned exclusively by the City.  TCCC, a private corporation, holds a majority ownership interest in the Coliseum.  The fact that legal title is in the name of the City, in trust for the joint venturers, does not change this result or qualify the property for the exemption.  Spokane Cy., at 360.  For these reasons, the Coliseum is not exempt from property tax based on article 7, section 1 and RCW 84.36.010.[4]

            Nor have we found any other constitutional provision or statute that would authorize a partial or pro rata tax exemption under these circumstances.  Absent a constitutional or statutory provision creating an exemption, none exists.  Washington Iron Works; Thurston Cy. v. Sisters of Charity of House of Providence, 14 Wash. 264, 44 P. 252 (1896).  For these reasons, we conclude that the Coliseum is neither wholly nor partially exempt from property taxation.

            We trust that this opinion will be of assistance to you.

                                                                        Sincerely,

                                                                        MAUREEN HART
                                                                        Sr. Assistant Attorney General
                                                                        (360) 753-2536


    [1]This background is drawn from your letter and enclosures, including a copy of a Joint Venture Partnership Agreement for the Joint Operation, Ownership, and Management of the Tri-Cities Coliseum dated April 29, 1994, and a copy of correspondence from the Kennewick City Attorney to a financial institution dated March 25, 1994.

    [2]The City's percentage ownership interest may increase only to the extent that TCCC is unable to cover costs in excess of the City's annual obligation under the Agreement and the City chooses to cover those costs.  Agreement, ¶ XXIII at 12.

    [3]Since its ratification in 1889, the state constitution has included an exemption virtually identical to the above-quoted language of article 7, section 1. (As originally enacted, article 7, section 2 provided: "[T]he property of the United States and of the state, counties, school districts and other municipal corporations . . . shall be exempt from taxation".)  Similarly, since 1890, the Legislature has interpreted this constitutional exemption for "property of" certain public entities as "property belonging exclusively" to the designated public entities.  Laws of 1890, ch. 18, § 5; Laws of 1895, ch. 176, § 2.  An early legislative construction of a constitutional provision that extends over a long period is entitled to great weight.  State ex rel. Todd v. Yelle, 7 Wn.2d 443, 110 P.2d 162 (1994); State v. Reece, 110 Wn.2d 766, 757 P.2d 947 (1988).  Such an interpretation also is consistent with the constitution's reference to "property of" designated public entities.  Such language denotes property belonging to such entities.  See Webster's II New Riverside University Dictionary 815 (1984) (defining the term "of"). 

    [4]For a case denying a property tax exemption under very similar constitutional and statutory language because the public entity "acquired substantially less than exclusive ownership of the property in question", seeSatterlee v. Gulf Coast Waste Disposal Auth., 576 S.W.2d 733, 777 (Tex. 1978).

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