CNL Hotels & Resorts, Inc. v. Maricopa County
226 Ariz. 155
| Ariz. Ct. App. | 2010Background
- Desert Ridge Improvements located on state land held in trust for Arizona schools; Improvements include hotel, convention facilities, and golf courses within the Desert Ridge master plan.
- Taxpayers own the Improvements under two 99-year ground leases with the State; leases expire July 6, 2092.
- County assessed and taxed the property as class one for 2003–2006; classification disputed leading to tax court suit.
- Leases and related covenants limit the Taxpayers’ ability to alter or destroy Improvements; removal requires mortgagee approval and may be constrained by federal/state plans.
- State classification statute ARS 42-12009 provides a preferential class nine for improvements on government land with a reversionary interest; Taxpayers argue a demonstrable reversion exists.
- Taxpayers pursue relief via error-correction statutes arguing misclassification; primary use of the property is asserted as convention/athletic use.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Improvements on state land qualify for class nine under ARS 42-12009. | Taxpayers own the Improvements and there is a demonstrable reversionary interest. | No guaranteed reversion; removal rights undermine reversion and eligibility. | Yes; demonstrable reversion exists and class nine applies. |
| Do lease terms and removal rights defeat the State's reversionary interest for class nine eligibility? | Restrictions and covenants protect reversion; removal rights do not negate eligibility. | Removal/demolition rights negate the necessary reversionary interest. | No; reversion remains despite removal rights. |
| Whether the error-correction statute audibly supports correcting classification to class nine and timeliness. | Classification error falls within error-correction provisions. | (Not stated explicitly in brief) challenge should be barred by timing. | Proper under ARS 42-16251 et seq.; timely and correctable. |
| Whether the tax court’s primary use finding should be stricken or preserved without cross-appeal. | Primary use supported by record. | Lacks cross-appeal to challenge or modify. | County must cross-appeal to upset the primary-use finding; otherwise the ruling stands. |
Key Cases Cited
- Calpine Construction Finance Co. v. Arizona Department of Revenue, 221 Ariz. 244 (Ariz. App. 2009) (ownership/possession on government land; interpret ownership broadly)
- Stewart Title & Trust of Tucson v. Pima County, 156 Ariz. 236 (Ariz. App. 1987) (current usage valuation principle for property tax)
- Cutter Aviation, Inc. v. Ariz. Dep't of Revenue, 191 Ariz. 485 (Ariz. App. 1997) (ownership/construction of tax liability on government land)
- King's Court Racquetball v. Dawkins, 62 S.W.3d 229 (Tex. Ct. App. 2001) (contract interpretation to harmonize waste and alterations restricting reversion)
- Pima County Assessor v. Arizona State Board of Equalization, 195 Ariz. 329 (Ariz. App. 1999) (error-correction remedial doctrine for tax classifications)