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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.)