BEFORE THE STATE BOARD OF EQUALIZATION

 

FOR THE STATE OF WYOMING



 

IN THE MATTER OF THE APPEAL OF               )

SHELLEY DEROMEDI, HOT SPRINGS           )

COUNTY ASSESSOR, FROM A DECISION      )

OF THE HOT SPRINGS COUNTY BOARD         )                                Docket No. 2000-145

OF EQUALIZATION - 2000 PROPERTY              )

VALUATION (TOWN OF THERMOPOLIS,     )

PARCEL 2486 - OLD WEST WAX MUSEUM) )

___________________________________________________________________________________________________________________________

 

FINDINGS OF FACT

CONCLUSIONS OF LAW

DECISION AND ORDER

____________________________________________________________________________________________________________________________



 

APPEARANCES

Shelley Deromedi, Assessor (Assessor), Hot Springs County, Wyoming, by and through Daniel L. Forgey, Hot Springs County Attorney, Petitioner.

Town of Thermopolis, by and through Michael S. Messenger of Messenger and Jurovich, Attorneys at Law, Respondent.


DIGEST

This matter was considered by the State Board of Equalization (SBOE) consisting of Edmund J. Schmidt, Chairman, Roberta A. Coates, Vice-Chairman, and Sylvia Lee Hackl, Member, on written information pursuant to a Briefing Order (Locally Assessed Property) dated October 30, 2000. Oral argument was held on February 6, 2001, with Daniel L. Forgey presenting argument on behalf of Petitioner and Michael S. Messenger presenting argument on behalf of Respondent. This appeal arises from a decision of the Hot Springs County Board of Equalization (CBOE) concerning the Assessor's 2000 valuation of Respondent's property located in Hot Springs County, Wyoming. The issue is:

 

Was the CBOE decision reviewing the County Assessor's 2000 assessment of Respondent's property supported by substantial evidence, in accordance with procedures required by law, and neither arbitrary, capricious, nor inconsistent with law?


 

JURISDICTION

The SBOE is mandated to "hear appeals from county boards of equalization. . . upon application of any interested person adversely affected" and hold hearings after due notice pursuant to the Wyoming Administrative Procedure Act and prescribed rules and regulations. Wyo. Stat. 39-11-102.1(c) and (c)(viii). An appeal from a CBOE decision must be filed with the SBOE within thirty (30) days from entry of the CBOE decision. Rules, Wyoming State Board of Equalization, Chapter 3, 2. Wyoming statutes grant county assessors an express right of appeal from CBOE actions. Wyo. Stat. 39-11-102.1(c).

The SBOE is required to "(d)ecide all questions that may arise with reference to the construction of any statute affecting the assessment, levy, and collection of taxes, in accordance with the rules, regulations, orders, and instructions prescribed by the department." Wyo. Stat. 39-11-102.1(c)(iv).



DISCUSSION

Respondent filed an appeal with the Hot Springs County CBOE challenging the Assessor's 2000 valuation of its property located in Hot Springs County, Wyoming. The property is owned by the Town of Thermopolis and consists of land and improvements. The property was acquired by the Town of Thermopolis to house wax figurines and to serve as a wax museum. The fair cash market value of the real property and improvements assigned by the Assessor was $579,916 and the assessed value was $55,092. Respondent argued the Assessor's valuation was erroneous because the property was tax exempt pursuant to Article 15, Section 12 of the Wyoming Constitution, and section 39-11-105 (a)(v) of the Wyoming Statute, since it was used primarily for governmental purposes. Respondent also contended that the Assessor's methodology and assessed valuation of the parcel were invalid and unsupported by substantial evidence.

After a hearing, the CBOE upheld the Assessor's valuation as correct. The CBOE also ruled, however, that the Assessor erred in deciding that the property was not tax exempt. The CBOE reversed the Assessor's determination and ordered that no taxes were due from the Town of Thermopolis concerning the property. Assessor filed an appeal with the SBOE challenging only the CBOE's ruling as to the tax exempt nature of the property. Assessor contends that the property is being used for a commercial venture and thus does not qualify for an exemption as property being used primarily for a governmental purpose.

This is the second appeal before the SBOE concerning the tax exempt status of this property. In 1999, Respondent challenged the Assessor's valuation of the same property, arguing that the property was tax exempt. The CBOE agreed with the Respondent, and the Assessor appealed that decision to the SBOE, which in turn reversed the CBOE's decision. See In the Matter of the Appeal of Shelley Deromedi, Hot Springs County Assessor, From A Decision of the Hot Springs County Board of Equalization - 1999 Property Valuation (Town of Thermopolis, Parcel 2486 - Old West Wax Museum), SBOE Docket No. 99-97 (February 8, 2000).

The Respondent then appealed the SBOE decision to the District Court for the Fifth Judicial District. On December 8, 2000, the Honorable Gary Hartman, District Court Judge, signed an order reversing the decision of the SBOE and reinstating the decision of the CBOE. In the Matter of the Appeal of the Town of Thermopolis From A Decision of the State Board of Equalization - 1999 Property Valuation (Town of Thermopolis, Parcel 2486 - Old West Wax Museum), Hot Springs Civil No. 00-18. The Assessor subsequently filed an appeal in the Wyoming Supreme Court, which is pending as of the date of this decision. Deromedi v. Thermopolis, Wyo. Sup. Ct. Docket No. 01-5.

As an initial matter, then, the question arises as to effect of the District Court's ruling upon the SBOE's decision in this case. The answer requires an analysis of the concepts applicable to the determination of whether a prior decision in a particular case is binding in a subsequent matter: law of the case, res judicata, collateral estoppel and stare decisis.

"Under the 'law of the case' doctrine, a court's decision on an issue of law made at one stage of a case becomes a binding precedent to be followed in successive stages of the same litigation." Triton Coal Co. v. Husman, Inc., 846 P.2d 664, 667 (Wyo. 1993); see also 1B Moore's Federal Practice 0.404[1] (2d ed. 1991); Lyden v. Winer, 913 P.2d 451, 454 (Wyo. 1996). Since the valuation and assessment of property for tax purposes must be done on an annual basis, each challenge by a taxpayer to the new year's valuation constitutes a new case: it is not just a continuation of a prior year's contest, nor a "successive stage of the same litigation." Thus, the "law of the case" doctrine does not dictate the same outcome in this case as in the 1999 appeal.

Res judicata applies to subsequent actions by a party after a final judgment on the merits. It acts as an absolute bar to a subsequent action involving the same claim, demand or cause of action. Bard Ranch Co. v. Weber, 557 P.2d 722, 727 (Wyo. 1976). Closely related to res judicata is the doctrine of collateral estoppel, which deals with issues rather than causes of action. Slavens v. Board of County Com'rs for Uinta County, 854 P.2d 683, 685 (Wyo.1993). The Wyoming Supreme Court has held "that the related doctrines of res judicata and collateral estoppel apply to final determinations by administrative agencies." University of Wyoming v. Gressley, 978 P.2d 1146, 1153, (Wyo. 1999), citing Slavens, supra. The Court noted that the doctrine of collateral estoppel, sometimes described as issue preclusion, is most appropriate to review the final decision of a board of county commissioners "because such agencies deal primarily with issues rather than with claims that can be pleaded in an action in court. The doctrine of issue preclusion prevents the relitigation of issues actually and necessarily decided previously in an action between the same parties." University of Wyoming v. Gressley, supra.

For collateral estoppel to apply, four conditions must be met: identical issue, prior substantive decision on the issue, participation by the party (or one in privity) in the prior litigation, and a full and fair opportunity to litigate the issue in the prior proceeding. In the Matter of the Appeal of Donald Bender from a Decision of the Uinta County Board of Equalization (1995 and 1996 Real Property Valuation) SBOE Docket No 99-103 (November 30, 1999), affirmed Bender v. Uinta County Assessor, 14 P.3d 906 (Wyo.2000); University of Wyoming v. Gressley, supra; Kahrs v. Board of Trustees for Platte County School Dist. No. 1, 901 P.2d 404, 406 (Wyo. 1995).

The valuation and assessment of property for tax purposes is a process undertaken annually. Wyo. Stat. 39-13-103(b)(i)(A), 39-13-103(b)(ii) and 39-13-103(b)(iv). As we recently stated:
 

             [T]he County Assessor is required by statute to annually assess each property within her jurisdiction. Each tax year and the conditions and use of the                  property during that year shall govern the value of the property. Wyo. Stat. 39-13-103.

In the Matter of the Appeal of Lane R. and Dianna K. Ross, SBOE Docket Nos. 2000-157, 2000-158 (March 14, 2001)(emphasis added).

The assessor is required to evaluate the facts annually to determine taxable status and valuation. Where the relevant factors change or new information becomes available, the grant or denial of a tax exemption must be reevaluated. Only when the issue remains the same does collateral estoppel apply. See In the Matter of the Appeal of Donald E. Bender from a Decision of the Uinta County Board of Equalization - 1997, 1998 and 1999 Property Valuation, SBOE Docket No. 99-128 (December 29, 2000) (construction classification litigated fully in prior proceeding.); Tenorio v. State ex rel. Wyo. Workers Compensation Division, 931 P.2d 234, 238 (Wyo.1997) (collateral estoppel bars the relitigation of previously litigated issues).

In this case, a review of the CBOE's findings in the 2000 appeal indicates that the facts supporting its decision, and the basis for its 2000 decision, are different than in 1999. Therefore, collateral estoppel does not apply under the facts of this case.

The fourth legal concept is stare decisis, or precedent. Stare decisis reflects the judicial policy of standing by a legal determination in subsequent cases where the facts are substantially the same. State ex rel. Wyo. Workers Compensation Division v. Barker, 978 P.2d 1156, 1161 (Wyo.1999).

As an intermediate appellate body, the SBOE must give precedential weight to the District Court's decision letter in the 1999 appeal. 20 Am.Jur.2d Courts 165; see also Laramie County Board of Equalization v. Wyo. State Board of Equalization, 915 P.2d 1184, 1188 (Wyo.1996); Antelope Valley Improvement and Service District of Gillette v. State Board of Equalization, 4 P.3d 876, 877 (Wyo. 2000); Exxon Corp. v. Board of County Com'rs, Sublette County, 987 P.2d 158, 162 (Wyo.1999). However, the decision of the District Court on the wax museum's 1999 exempt status does not require the automatic affirmance of the CBOE's 2000 decision for two reasons.

First, the precedential value of the District Court's decision is limited to the matters specifically addressed by it. In concluding that the charging of an admission fee is not controlling, but failing to set out a standard for determining when a municipal activity is entitled to tax exempt status, the District Court has left open the opportunity for the SBOE to independently review the CBOE's 2000 decision which relied on factors not discussed by the District Court. The SBOE has independent authority to "[d]ecide all questions that may arise with reference to the construction of any statute affecting the assessment, levy and collection of taxes . . .." Wyo. Stat. 39-11-102.1(c)(iv).

Second, the precedential value of the District Court's decision is limited because of the subsequent appeal to the Wyoming Supreme Court. The Wyoming Supreme Court gives no deference to the decision of a district court in reviewing conclusions of law on appeal. Bender v. Decaria, 998 P.2d 953, 955 (Wyo.2000); Squillace v. Wyoming State Employees' and Officials' Insurance Board of Admin., 933 P.2d 488, 490 (Wyo.1997).

For these reasons, then, the District Court's ruling with respect to the 1999 decision of the CBOE does not require the SBOE to automatically affirm the CBOE's 2000 decision. The SBOE will analyze the CBOE's 2000 decision pursuant to the enumerated standard of review, mindful of the District Court's ruling, the basis of the ruling, and its scope.

The SBOE will also review this matter, mindful of our constitutional duty to equalize the valuation of all property in the State. Wyo. Const. Art. 15, 10; see also Wyo. Stat. 39-11-102.1(c). The question of the taxability of municipal property is one of statewide import, and we will in this opinion strive to provide standards pursuant to which county assessors may value and assess property in their county.


FINDINGS OF FACT

History of the Thermopolis Wax Museum

1. On February 24, 1997, Tim Smith, executor of the Raymond E. and Helen L. Smith Trust, wrote to the Chamber of Commerce in Thermopolis, Wyoming, articulating an interest in donating to the town, or other governmental entity, the contents of the "Wax Museum of Old Wyoming." The Wax Museum had been located in Jackson for almost 30 years, and had been visited by over three million people during that time. Mr. Smith indicated that the museum's collection of wax figures, props and other materials was worth    2 to 3 million dollars. [CBOE Record, Vol. 1, p. 104]⁽¹⁾ While in Jackson, the Wax Museum had been valued at over $750,000, and assessed accordingly. [CBOE Record, Vol. 1, pp. 139-140]

2. In June of 1997, Mr. Smith sent a "non-binding letter of intent" to the Mayor of Thermopolis, indicating the Trust's intent to gift the Wax Museum of Old Wyoming collection to the Town. [CBOE Record, Vol. 1, p. 102] The following spring, the Smith Family Trust and the Jackson Wax Museum gifted to the Town of Thermopolis a collection of historical wax statutes, and "the scenes, attendant mounted animals, artifacts and all other things necessary to complete the collection for display as a wax museum." [CBOE Record, Vol. 2, pp. 22-24; CBOE Order, Finding of Fact #15, Vol. 4, p. 520] The gift document provided that "[i]n the event that the Town of Thermopolis ceases operation and maintenance of the Museum, ownership of the collection shall revert to Jackson Wax Museum, Inc., or in the case of the dissolution of that corporation, as the dissolution provides." [CBOE Record, Vol. 2, p. 22]
 

3. Pursuant to a Resolution, dated July 24, 1997, the Town of Thermopolis applied for a Community Development Block Grant in the amount of $150,000.00 to acquire property in order to establish a museum for the purpose of enhancing tourism, and promoting growth and economic development. [CBOE Record, Vol. 1, pp. 76-78; CBOE Order, Finding of Fact #13, Vol. 4, p. 520]

4. The property in question - a building on land located in downtown Thermopolis - was acquired by the Town of Thermopolis on June 11, 1998, through a warranty deed from Charles N. and Sonya C. Stump. [CBOE Record, Vol. 1, p. 22; Vol. 2, p. 149; CBOE Order, Finding of Fact #14, Vol 4, p. 520]

5. On October 10, 1998, the Town entered into an Operating Agreement with Big Horn Prospecting, Inc. (BHP) to operate the Wax Museum. BHP is a for-profit corporation which also operates the Wyoming Dinosaur Center in Thermopolis. Key points of the Operating Agreement provide:

     a. BHP is to provide "management and business expertise" in operating the museum, including "marketing, advertising, staff and employees."

     b. The Town has made the facility and wax figure collection available to BHP; BHP is to pay the Town $1,000/year.

     c. All revenues go to BHP.

     d. BHP is to be "in exclusive control and possession of the facility," and has the authority to lease it without the Town's permission.

     e. BHP may terminate the agreement upon 12-months' notice, if "the financial operation of the facility is not economically viable."
 

     f. During the first twelve months, the Town was to be responsible for "all real property tax, if assessed, and ad valorem taxes on the collection. After the first        twelve (12) months, BHP shall pay any such taxes but not to exceed a sum equal to seventy-five percent (75%) of its positive cash flow, if any, as determined         under Section Twenty Two hereof for the previous fiscal year. Any such taxes over this amount shall be paid by Town."

[CBOE Record, Vol. 1, pp. 24-40; CBOE Order, Findings of Fact ## 11, 19, 21-22, Vol 4, pp. 520-521]

6. The upstairs portion of the Museum, housing the wax figurines, opened in July or August of 1999. The Teddy Bear Museum on the downstairs level opened in September 1999. In January 2000, a textile studio and gallery were opened. [Transcript, p. 113; CBOE Order, Finding of Fact #17, Vol. 4, p. 520] Admission fees are usually charged, although some portions of the building are available without charge. [Transcript, pp. 113-114; CBOE Order, Finding of Fact #18, Vol. 4, p. 521]

Assessment of the Wax Museum

7. On April 27, 1999, the Assessor issued an assessment notice to the Town of Thermopolis, valuing the real property and improvements which comprise the Wax Museum at $210,484, with an assessed valuation of $19,996. [CBOE Record, Vol. 1, p. 18] The Town challenged the Assessor's valuation of the same property, arguing that the property was tax exempt. The CBOE agreed with the Town, and the Assessor appealed that decision to the SBOE, which in turn reversed the CBOE's decision. See In the Matter of the Appeal of Shelley Deromedi, Hot Springs County Assessor, From A Decision of the Hot Springs County Board of Equalization - 1999 Property Valuation (Town of Thermopolis, Parcel 2486 - Old West Wax Museum), SBOE Docket No. 99-97 (February 8, 2000).

The Town then appealed the SBOE decision to the District Court for the Fifth Judicial District. The District Court reversed the decision of the SBOE and reinstated the decision of the CBOE. In the Matter of the Appeal of the Town of Thermopolis From A Decision of the State Board of Equalization - 1999 Property Valuation (Town of Thermopolis, Parcel 2486 - Old West Wax Museum), Hot Springs Civil No. 00-18. The Assessor subsequently filed an appeal in the Wyoming Supreme Court. Deromedi v. Thermopolis, Wyo. Sup. Ct. Docket No. 01-5.

8. In March of 2000, the Mayor contacted the Assessor, seeking information on applying for a property tax exemption. The Town submitted its tax exemption application on March 31, 2000. On April 17, 2000, the Assessor issued a letter denying the application, for the reasons that the property did not fulfill the statutory requirements for exemption. [CBOE Record, Vol. 1, pp. 8-11] The Assessor later testified that she denied the exemption because after evaluating the applicable mill levy information, the "for profit" nature of the enterprise and the fact that the for-profit entity had complete control of the facility and the enterprise, she concluded that the primary purpose of the Museum was not governmental in nature, but rather for economic development, as set forth in the Operating Agreement. [Transcript, pp. 56, 60, 76]

9. On April 21, 2000, the Assessor issued an assessment notice, valuing the Museum's real property and improvements at $579,916.[ CBOE Record Vol. 1, p. 18] The assessed value was $55,092. [CBOE Record Vol. 1, p. 18]

CBOE Hearing

10. The Town appealed the valuation to the CBOE. [CBOE Record Vol. 1, p. 19] The CBOE held a hearing on July 11, 2000. [CBOE Record, Vol. 4, pp. 516-525; Transcript]

11. The director and curator of the Wax Museum, Sue Blakey, admitted that at the time the Town applied for the Community Development Block Grant, the purpose of the Museum was economic development. She testified that the grant application emphasized economic development because that was necessary to obtain the funding. [Transcript, pp. 106-107, 133]

12. Ms. Blakey testified at length about the cultural and educational activities occurring at the Museum, and said that its primary focus was on "educational and entertainment and that's partly cultural" purposes. [Transcript, pp. 89-107]

13. Patty Stegman, the office manager for Big Horn Prospecting, Inc., testified that the Wax Museum lost $129,992.02 from July 1999 through June 2000. In response to questioning by the Town's counsel, she said, "Our primary goal is to enhance the Town of Thermopolis." She further testified that the Dinosaur Center, also operated by BHP, was not making a profit either: "We're an educational, scientific institution. That's the way we run our museums. I believe that's why the Town asked us to run their Museum." Ms. Stegman admitted that the Wax Museum is marketed in conjunction with the Dinosaur Center. [Transcript, pp. 141-150, 155]

14. The CBOE issued its Findings of Fact, Conclusions of Law, and Order on August 1, 2000. [CBOE Record, Vol. 4, pp. 516-525] The CBOE based its decision in favor of the Town on three conclusions:
 

a. Although the "primary purpose of the Museum is for the educational and recreational benefit of the citizenry, and to economically benefit the local economy in general . . . the primary use is not of a proprietary nature for the Town . . .. [CBOE Order, Conclusion of Law #12, Vol. 4, p. 524]
 

b. Because the Museum is not making a profit, the Town, through BHP, is rendering the service "gratuitously," thus qualifying the Museum for a tax exempt status under Department of Revenue rules. [CBOE Order, Conclusions of Law ## 8-10, 13, Vol. 4, pp. 523-525]
 

c. The Museum contains a gallery, which can be used by a variety of groups. A gallery is similar to an auditorium, which is a permissible recreational facility which a municipality may operate on a tax-exempt basis, so long as the charges for the facility do not exceed the costs of operation. Therefore, since the Museum is operating at a loss, and a portion of the facility sometimes serves as an auditorium/recreational facility, the entire Museum is tax exempt. [CBOE Order, Conclusions of Law ## 14-16, Vol. 4, p. 525]
 

15. The Assessor filed a notice of appeal from the CBOE decision on August 8, 2000. [CBOE Record, Vol. 4, p. 529]
 

16. Any discussion above or Conclusion of Law below which includes a finding of fact may also be considered a Finding of Fact and, therefore, is incorporated herein by this reference.

 

CONCLUSIONS OF LAW

17. The Assessor's letter of appeal was timely filed and the SBOE has jurisdiction to determine this matter.

18. In reviewing the CBOE decision reviewing Assessor's assessment of Respondent's property for 2000, we must determine whether the decision is: (a) arbitrary, capricious, an abuse of discretion or otherwise not in accordance with law; (b) in excess of statutory jurisdiction or authority; (c) without observance of procedures required by law; or (d) unsupported by substantial evidence. Rules, Wyoming State Board of Equalization, Chapter 3, 9.

19. In considering the issue of substantial evidence, the question is whether there is credible evidence in the record which could be reasonably relied upon in coming to the conclusion reached by the CBOE. As a reviewing body, we will not substitute our judgment for findings reasonably supported by evidence in the CBOE record. Sage Club, Inc. v. Employment Security Commission, 601 P.2d 1306, 1310 (Wyo. 1979). While substantial evidence may be less than the weight of the evidence, it "cannot be clearly contrary to the overwhelming weight of the evidence. It is more than a mere scintilla of evidence or suspicion of a fact to be established." Mountain Fuel Supply Company v. Public Service Commission of Wyoming, 662 P.2d 878, 882 (Wyo. 1983). See also: Squillace v. Wyoming State Employees' and Officials' Group Insurance Board of Admin., 933 P.2d 488, 490-491 (Wyo. 1997).

20. However, the Wyoming Supreme Court also has held that "an agency's action is arbitrary and capricious and must be reversed if any essential finding is not supported by substantial evidence." Amax Coal West, Inc. v. Wyo. State Board of Equalization, 896 P.2d 1329, 1335 (Wyo.1995), citing Majority of Working Interest Owners in Buck Draw Field Area v. Wyoming Oil and Gas Conservation Commission, 721 P.2d 1070, 1079 (Wyo. 1986).

21. Generally, taxation is the rule and exemption is the exception. However, where the property is publicly owned this rule is not applicable. When the property is publicly owned, the burden is on the taxing authority to establish taxability. City of Cheyenne v. Board of County Com'rs, 484 P.2d 706, 709 (Wyo. 1971).

22. The exemption of municipal property is solely dependent upon its use and is thus a question of fact. City of Cheyenne v. Sims, 521 P.2d 1347, 1349 (Wyo. 1974).

23. When a municipality uses property primarily for a governmental purpose, the property is exempt from ad valorem taxes. Wyo. Const. Art. 15 12; Wyo. Stat. 39-1-201(a)(v)(C); State Board of Equalization v. City of Lander, 882 P.2d 844, 850 (Wyo. 1994). However, the mere ownership of the property by a governmental entity does not per se exempt the property. City of Cheyenne v. Sims, 521 P.2d 1347, 1348 (Wyo. 1974).

24. When a municipality uses property in a proprietary manner, the property is not exempt from taxation. Town of Pine Bluffs v. State Board of Equalization, 79 Wyo. 262, 333 P.2d 700, 710 (1958).

25. This decision hinges on a determination of what is a "governmental purpose" and whether the CBOE properly applied the law. The Wyoming Supreme Court recognized the difficulty of defining "governmental purpose" and in City of Cheyenne v. Board of County Com'rs, 484 P.2d 706, 708 (Wyo. 1971) stated, "(T)he term "governmental purpose" is not readily amenable to precise definition and such determination is largely dependent upon the circumstances presented in each case." Most of the Court's decisions have defined "governmental purpose" by example: Maintaining a fire department is a governmental function. White v. City of Casper, 35 Wyo. 371, 249 P. 562, 563 (Wyo. 1926). Removal of rubbish or garbage and street cleaning are governmental functions. Villalpando v. City of Cheyenne, 51 Wyo. 300, 65 P.2d 1109, 1111-1112 (Wyo. 1937). On the other hand, the sale of electricity is not a governmental function. Town of Pine Bluffs v. State Board of Equalization, 79 Wyo. 262, 333 P. 2d 700, 710 (Wyo. 1958).

The Court has stated, "The test, as we view it, is whether or not those buildings were primarily used [for a governmental purpose] and being so used as reasonably necessary or essential facilities to the efficient operation and maintenance of the [activity]." City of Cheyenne v. Board of County Com'rs, 484 P.2d 706, 709 (Wyo. 1971). "'Primarily' means 'of first importance' or 'principally.'" State Board of Equalization v. City of Lander, 882 P.2d 844, 849 (Wyo. 1994).

26. The CBOE concluded that the primary purpose of the Museum was governmental, and not proprietary, because the Museum was "for the educational and recreational benefit of the citizenry, and to economically benefit the local economy in general." [CBOE Order, Conclusions of Law ## 11 - 12, Vol. 4, p. 524] This conclusion ignores the clear weight of the evidence that the purpose of the Museum, from its very inception, was economic development, an intent clearly articulated in the application for the Community Development Block Grant, [CBOE Record, Vol. 1, pp. 76-79, 88-90, 96-99, 113, 116-124], in the Operating Agreement governing the management of the Museum for a ten-year period, [CBOE Record, Vol. 1, p. 25], and even in the minds of those responsible for the daily management of the Museum. [Transcript, pp. 133, 149-150] While economic development may be a worthwhile activity for a municipality to promote, it does not rise to the level of a "governmental function." Conclusions that are clearly contrary to the overwhelming weight of the evidence must be reversed. State Board of Equalization v. City of Lander, 882 P.2d 844, 850 (Wyo. 1994).

27. The CBOE also erred in concluding that because the Museum is not making a profit, its functions and services are being provided gratuitously, thus making it tax-exempt pursuant to Department of Revenue Rules. [CBOE Order, Conclusion of Law # 10] The record is clear that the Museum was intended to be a profit-making venture for BHP, and to have the added benefit of enhancing the Town's economy. For example, the grant application discussed the Museum's funding and operation as follows:

          [The Museum] will be operated by a private business, Big Horn Prospecting, which also operates The Wyoming Dinosaur Museum (WDC). The WDC              includes a museum, gift shop, concession stand and digsite tours. The operations proposed at [the Museum] are similar to current WDC operations. Their              current success should translate into success with [the Museum].

 

          Entrance fees have been tentatively set at $3 - $3.50, with variations for age. The soda fountain and gift shop will generate additional dollars. Participants in             classes at the Folk Art Center will pay an additional fee. Although a profit cannot be expected the first year or two, profits might be reasonably expected by             year 3-4. Increased generation in traffic should affect business in the entire downtown area.

[CBOE Record, Vol. 1, p. 94; see also Vol. 1, p. 89 (reference to establishing the Folk Art Center as a not-for-profit operation if funding sources look promising) and Vol. 1, p. 30 (section of Operating Agreement providing for the payment of taxes)]
 

While the Museum has not, in fact, made a profit since it began operation, that economic reality does not itself metamorphosize the function into a "gratuitous" provision of services, and thereby into a tax exempt governmental function.

"Gratuitous" is defined as "without valuable or legal consideration." Black's Law Dictionary, 5^th Ed. Thus, to provide something "gratuitously" means to do so without an expectation of recompense or profit. Simply failing to make a profit does not change the provision of services into a governmental function which is being rendered "gratuitously."

In Town of Pine Bluffs v. State Bd. of Equalization, 79 Wyo. 262, 333 P.2d 700, 712 (1958), the Wyoming Supreme Court reviewed the case of Hayes v. Town of Cedar Grove, 126 W.Va. 828, 30 S.E.2d 726, 730 (1944), in which the West Virginia court said, "[W]here no profit to the municipality is involved, its acts are governmental." (Emphasis in original) The Wyoming Supreme Court noted, "Instead of the phrase 'where no profit to the municipality is involved, its acts are governmental,' we should substitute the phrase that where a service is rendered by a municipality gratuitously and for the public welfare generally, such service should be considered governmental." (Emphasis added) In this case, the operation of the Museum is being rendered by BHP without profit, not gratuitously by the Town of Thermopolis.

28. CBOE also erred in concluding that because the fees charged did not exceed expenses, the Museum was a recreational facility, and thus tax exempt. [CBOE Order, Conclusion of Law # 13, Vol. 4, p. 525] It is true that state law exempts from taxation certain municipal property used primarily for a governmental purpose, including "[p]arks, airports, auditoriums, cemeteries, golf courses, playgrounds and recreational facilities. Any charges for use of the facilities shall not exceed the cost of operation and maintenance to qualify for the exemption." Wyo. Stat. 39-11-105(a)(v)(D). The CBOE's conclusion was once again "reverse-engineered," however, for the controlling factor is not whether the fees exceed the costs of operation. The threshold test is whether the property is "used primarily for a governmental purpose." Only if it is does the question then proceed to the nature of the property (park, recreational facility, etc.) and the issue of whether fees exceed expenses. Furthermore, as noted above, the evidence in this case clearly shows that the Museum was intended as a profit-making operation. That it has not yet done so does not alter the purpose of the enterprise nor make it a governmental function, exempt from taxation.

29. The CBOE also erred in concluding that because a portion of the building, the gallery, could be used for public or governmental purposes, it was an auditorium, and thus the entire building was tax exempt. [CBOE Order, Conclusions of Law ## 14-16, Vol. 4, p. 525] The CBOE misapplied the law in reaching this conclusion. While it is true that the Wyoming Supreme Court has rejected the concept of spatial apportionment of public buildings for taxation purposes, State Board of Equalization v. City of Lander, 882 P.2d 844, 851 (Wyo. 1994), the Court's ruling does not stand for the proposition that an entity can occasionally utilize a small portion of its facility for a governmental function, and thereby enable the entire facility to be tax exempt. Were this so, any for-profit corporation could loan its board room to the local city council for weekly meetings, and then claim tax exempt status for its entire operation. In State Board of Equalization v. City of Lander, supra at 850-651, the Court reiterated the threshold requirement for property to be tax exempt: it must be used primarily for a governmental purpose. If the primary use is not governmental, then the spatial apportionment analysis is inapplicable.

30. We hold that the management, operation and maintenance of the museum by a for-profit corporation under the circumstances in this case constitutes a proprietary function by the Town of Thermopolis. As stated in the case of City of Phoenix v. State ex rel. Conway, 85 P.2d 56, 58 (Ariz. 1938), "It would seem that when municipalities become competitors with private enterprise they should be treated no better than others operating in the same field. The general rule is that municipalities are subject to the same liabilities as private corporations, or individuals, except when they are exercising purely governmental functions." We believe the Town of Thermopolis, through BHP, is competing with private enterprise.

31. We must also note Chapter 14, Section 4(b)(v), of the Rules and Regulations of the Department of Revenue, which specifically denies an exemption to a municipality which enters into activities which may be and frequently are carried on through private enterprise. The circumstances of this case clearly establish that one other museum in Thermopolis, the Wyoming Dinosaur Center, is privately owned and operated. The activities of the Wyoming Dinosaur Center are managed by a private enterprise, Big Horn Prospecting, Inc., the same entity that the Town has hired to operate the wax museum. If the operator of the Dinosaur Museum were not also the same entity operating the wax museum, that entity might well question why one of its competitors for tourist dollars was entitled to tax exempt status.

32. Much effort was exerted during the CBOE hearing to highlight the similarities between the Hot Springs County Museum (which is tax exempt) and the Wax Museum. [Transcript, pp. 37-47, 67-72, 76-77] However, the record is also replete with evidence of the similarities between the Wyoming Dinosaur Center and the Wax Museum. In fact, the office manager of the Wyoming Dinosaur Center testified that it was not making a profit either, and that it was also "an educational, scientific institution. That's the way we run our museums. I believe that's why the Town asked us to run their Museum." [Transcript, pp. 141-150, 155] Just as the similarities between the Wax Museum and the Wyoming Dinosaur Center are insufficient to justify granting tax exempt status to the Wyoming Dinosaur Center, so also do the similarities support the conclusion that the operation of the Wax Museum is a proprietary function.

32. Finally, mention must be made of a comment made by the CBOE hearing officer during the closing argument of the Town's counsel, which calls into question the procedure used by the CBOE in reaching its decision. The hearing officer asked counsel:

"So how is this Board going to keep from getting reversed again in it's [sic] decision? If it decides in your favor, it says, oh, this is an exemption here, it shouldn't be taxed, how is this Board going to keep from getting reversed again by the State Board?"

[Transcript, p. 179]

This comment seems to indicate that the CBOE had pre-judged the matter, before hearing the evidence or the arguments of counsel. Such pre-judgment is contrary to basic concepts of due process. "[A]ll administrative hearings should be conducted and decided in a fair and impartial manner . . . See also Wyo. Stat. 16-3-112, which provides, in pertinent part, the '[t]he functions of all those presiding in contested cases shall be conducted in an impartial manner.' (Emphasis added.)" ANR Production Co. v. Wyo. Oil and Gas Conversation Com'n, 800 P.2d 492, 499 (Wyo. 1990).





 

The decision of the Hot Springs County Board of Equalization reversing the Assessor's 2000 taxation of Respondent's property shall be, and the same is hereby reversed; and

 

Dated this 15^th day of May, 2001.

 

Edmund J. Schmidt, Chairman

Roberta A. Coates, Vice-Chairman

Sylvia Lee Hackl, Member

ATTEST:

Wendy Soto, Executive Secretary





 

1. In many instances, both parties submitted the same exhibit to the CBOE, thus, duplicate sets of documents appear in the record. To minimize confusion, this opinion will cite to the first exhibit appearing in the record.