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Appeals Court Upholds Moore in Property Tax Rulings

June 28, 2004 – The V.I. government's second appeal of District Court orders relating to the territory's property assessment for tax purposes has been shot down in its entirety by a 3rd Circuit Court of Appeals panel.
In its opinion filed on Monday, the three-judge panel rejected the Turnbull administration's appeal of District Judge Thomas K. Moore's orders:
– Enforcing a 2000 settlement agreement between the V.I. government and three plaintiffs who challenged the tax assessor's practice of assessing commercial property for tax purposes on the basis of replacement value, rather than market value.
– Enjoining the Tax Assessor's Office from calculating property taxes on the basis of replacement value.
– Enjoining the government from issuing property tax bills based on such appraisals.
"We affirm the District Court's order enforcing the settlement agreement and grant of the permanent injunction as later modified," the circuit judges' opinion states.
The appeal was the government's second to the 3rd Circuit Court in the case, which has its origins in a lawsuit filed in July 2000 by Gary Berne and others alleging that the property appraisal system did not assess their properties at actual value as required by applicable federal law dating from 1936.
In the settlement of that suit approved by Judge Moore in December 2000, the V.I. government agreed to reform its commercial property valuation system within two years, subject to review and certification by an independent special master. (See "Berne Tax Assessment Case Settled".) The agreement provided, among other things, for the tax assessor to begin appraising commercial properties pursuant to the Uniform Standards of Professional Appraisal Practice.
One of the other property owners who subsequently filed their own suits was Equivest St. Thomas, the owner of Bluebeard's Castle. Moore granted Equivest's motion for a preliminary injunction to prevent the government from collecting property taxes until the Tax Assessor's Office proved in court that the tax assessment system represented the properties' actual value.
The V.I. government appealed that ruling, arguing that the District Court lacked jurisdiction; in February 2003 a Circuit Court appellate panel sided with the lower court.
Moore than consolidated the cases of Berne, Equivest and others "for the purpose of trying the common issue – whether the V.I. tax assessment system was in violation of federal law," the appellate court opinion filed Monday stated.
In May 2003 Moore held that it was in violation and ordered the 2000 settlement enforced, entered a permanent injunction against the V.I. government and extended it to all similarly situation taxpayers, effectively imposing a moratorium on property tax billings and collections.
Three months later, after legislation was enacted providing a mechanism for adjustment of any taxes later found to have been over- or underpaid, Moore allowed tax billings – based on 1998 assessments – and collections to resume. (See "Judge: Property Tax Collections Can Resume".)
Government Arguments Raised and Rejected
In the Circuit Court case just decided, the appellate panel declined to consider the V.I. government's challenge of the District Court's jurisdiction, noting that the issue had been decided in the court's favor last year in the earlier appeal. But it further noted "an alternative ground" for federal jurisdiction: "The record shows that the plaintiffs pleaded in their complaint that their rights under the Due Process and Equal Protection Clauses of the United States Constitution were violated."
The District Court "did not address these constitutional claims because it was unnecessary to do so after it determined that the plaintiffs prevailed on their statutory claims," the circuit panel noted. It then proceeded to hold that "this alone conferred subject matter jurisdiction on the District Court."
The V.I. government also argued that the District Court issued "an advisory opinion" in striking down the local law on property valuation. Again, the circuit judges disagreed, saying that Moore's opinion "decided the actual controversy between the parties: whether the V.I. government failed to appraise residential properties at their actual value as required by federal law."
The V.I. government further claimed that the plaintiffs lacked standing to sue on behalf of non-plaintiff property taxpayers. The appellate judges said the point became moot when Moore lifted his embargo to allow tax billings and collections to resume.
The government contended that the plaintiffs lacked standing to sue on behalf of themselves. This, the circuit panel said, amounted to challenging the District Court decision in the original 2000 case. "As the V.I. government relinquished its right to appeal that case by entering into the settlement agreement, it cannot now appeal," the circuit judges held.
The V.I. government contended that the District Court could have enforced the settlement agreement or have entered the permanent injunction, but not both. The circuit panel's opinion: "Since the injunction has the same consequences for the plaintiffs as the enforcement of the settlement agreement, we conclude that the two remedies are not mutually exclusive."
Finally, the V.I. government argued that the District Court violated the separation of powers principle when it ordered the government to set up a fund to finance implementation of the settlement agreement.
The appeals ruling notes that "the binding nature" of the agreement and the V.I. government's breach of its terms "are undisputed" and that the agreement provided for the District Court to supervise and enforce its provisions. The lower court "did not exceed its judicial power when it enforced the settlement agreement and ordered the V.I. government to provide adequate funding for the purpose of its implementation," the opinion states.
The case was argued on May 5. The V.I. government was represented by Winston & Strawn, the administration's Washington, D.C., law firm, and the V.I. Justice Department.
The appellees in the case were the three original plaintiffs — Berne Corp., B&B Corp. and Twenty-One Queen Quarter – plus Equivest and the other plaintiffs whose cases Moore consolidated. They are: Miller Properties, Robert Schmidt, Kim Holdsworth, Robert Schmidt Development Corp., Dori P. Derr, Cyril V. Francois Associates, Shell Seekers Inc., Charles W. Consolvo, Linda B. Consolvo, Snegle Gade Associates, Yvette Lederberg, Arthur B. Choate, Stewart Loveland, Stacy Loveland, Elisabeth Sharp, Lindon Corp., Gordon L. Coffelt, Soraya D. Coffelt and One Stop Inc.
For this appeal, they were collectively represented by attorneys David A. Bornn, Soraya D. Coffelt, James M. Derr and David E. Nichols, except that Equivest was represented by Dudley Topper & Feuerzeig.
Where Things Stand
On June 7, Lt. Gov. Vargrave Richards announced that property tax bills for 2003 should be mailed out "within a few weeks." The bills are based on 1998 assessment levels in accordance with the legislation enacted a year ago to comply with requirements set by Moore for lifting the moratorium on property tax billings and collections.
In the governor's proposed fiscal year 2005 budget, the section for the Office of the Lieutenant Governor, under which the Tax Assessor's Office falls, states that FY 2003 accomplishments included having "trained all property tax appraisers in the procedures for all property assessments."
The FY 2005 strategic objective for the Real Property Tax Division, the budget states, is to "complete the re-evaluation of 1,920 comme
rcial properties as mandated by the District Court." Among the performance goals for the Lieutenant Governor's Office are "to begin the District Court-mandated revaluation project concentrating first on the commercial properties and then the non-commercial properties."

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