League adds its voice in taxes case

Ruling against airport poses big consequences, it argues

The Arkansas Municipal League has joined Bill and Hillary Clinton National Airport/Adams Field in the airport's bid to overturn a circuit court ruling that says it owes $450,000 in property taxes, a decision the league said would have consequences and repercussions "both vast and significantly damaging" to city and county governments if it stands.

The high court granted a motion requesting that the league be allowed to submit the brief last week.

The 15-page brief argues that the ruling "is of concern to municipalities, as it introduces a vague and unworkable framework that will greatly increase the difficulty and complexity faced by municipalities and lower courts attempting to determine which publicly owned properties are subject to taxation."

Clinton National and the city of Little Rock are appealing a ruling by Pulaski County Circuit Judge Alice Gray, who upheld a 2016 decision by the office of Pulaski County Assessor Janet Troutman Ward, which billed Clinton National for the property taxes on what at the time was three vacant buildings.

The airport's attorneys had argued that the buildings, which include a parcel that once housed a Hawker Beechcraft facility that customized its line of business jets, were public property used exclusively for public purposes. Under Article 16, Section 5(b) of the Arkansas Constitution, such property is exempt from taxation.

Gray agreed that the buildings were public property but also agreed with attorneys for the assessor who argued that the buildings were not being used exclusively for public purposes.

Even though the buildings were vacant, Gray said, the properties were being marketed to private companies.

"While it is possible that the three properties at issue in this case also served some other public purpose, they are still taxable because they must have an exclusively public purpose to be exempt from taxation," the judge said in her December 2019 ruling.

Typically, airport property is subject to property taxes only when the building is being used by a private entity, such as Hawker Beechcraft. That company vacated the complex in 2013 after it filed for bankruptcy protection. The airport since has leased out portions of the complex.

The airport's requests for property-tax exemptions on two other properties, the former Southwest Airlines reservation center and the former Carrier building, also were denied.

Previous court cases show that property is exempt when governmental entities hold them in a capacity as a caretaker rather than a proprietor, according to the municipal league brief, which was submitted by league attorney Linda Burgess.

In particular, she cited a 1994 Arkansas Supreme Court case, also from Pulaski County, which held that property acquired and held by the Carriage Creek Property Owners Improvement District as the result of foreclosure for failure to pay improvement district assessments wasn't subject to taxation.

"The Carriage Creek lots were up for sale, and in the present case the three Airport facilities were for lease; however, the common thread is clear, that the lots were not used in such a way as to generate a profit and that the role was that of a governmental caretaker rather than a proprietor," Burgess wrote. "Any profit to be made would only be generated upon either sale or lease, not by the mere holding of the property during which time no profit would be realized."

A 1917 case found the court making a similar ruling.

"In Robinson v. Indiana & Arkansas Lumber & MFG. CO., the Court held that the property was exempt from taxation and noted, 'The levee district only held the lands that it acquired at levee tax sale until it was practical to dispose of them again. They were not held for any purpose of gain or as an income producing property,'" according to the league brief.

"Robinson and the present case again share a common thread which is that the properties were not held for gain, and with the Airport acting as a governmental caretaker rather than a proprietor," Burgess wrote.

But attorneys for Pulaski County disagreed with the interpretation of those cases.

"As reiterated in Robinson and Carriage Creek public property must be directly and immediately used exclusively for public purposes to qualify for an exemption," said Meagen E. Davis, a staff attorney for the county. "In each case, the improvement district held the property acquired at foreclosure sales, only to recover delinquent taxes and penalties.

"During the interim, when the property was held for sale, it was not being leased or used in any proprietary manner. Because the sale proceeds were used to make the improvement district whole, the court considered the holding of foreclosed property to be immediate and direct use."

But Burgess said the facts represent such a clear-cut case for tax-exempt property under the state constitution, which is why the league finds the ruling so troubling.

"That is, property used to store equipment to maintain a public runway and the surrounding property which is vitally necessary to ensure the safe arrival and departures of airliners," she wrote. "To allow the disregard of such clear public purposes as in Airport, where there is seemingly no ambiguity, would pave the course for the disregard of a wide swath of public purposes and denial of valid tax exemptions."

Elsewhere in the brief she noted that attorneys for the airport said its properties historically have been exempt from tax unless subject to a private leases, underscoring the randomness of the assessor's office decision.

"As such, the decision to begin taxing the properties is arbitrary at best, based on whim rather than a set formula or set of criteria," Burgess wrote.

Information for this article was contributed by John Lynch of the Arkansas Democrat-Gazette.

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