BEFORE THE STATE BOARD OF EQUALIZATION

FOR THE STATE OF WYOMING

IN THE MATTER OF THE APPEAL OF )

FREMONT COUNTY ASSESSOR FROM )

A DECISION OF THE FREMONT COUNTY ) Docket No. 2005-85

BOARD OF EQUALIZATION - 2005 )

PROPERTY VALUATION )

(Wendt Property) )

DECISION AND ORDER

APPEARANCES

James Whiting, Deputy Fremont County and Prosecuting Attorney, on behalf of Eileen Oakley, Fremont County Assessor (Petitioner or Assessor).

Rick L. Sollars, Western Law Associates, P.C., for Patrick J. and Karen H. Wendt (Respondents or Taxpayers).

DIGEST

This is an appeal by the Fremont County Assessor from a decision of the Fremont County Board of Equalization (County Board). The State Board of Equalization (State Board), comprised of Alan B. Minier, Chairman, Thomas R. Satterfield, Vice-Chairman, and Thomas D. Roberts, Board Member, considered the hearing record and decision of the County Board. Petitioner’s Notice of Appeal was filed with the State Board effective August 18, 2005. Petitioner and Respondents filed briefs as allowed by the State Board’s November 28, 2005, Briefing Order. Neither party requested oral argument.

The Assessor appeals a County Board decision directing her to re-assess the Taxpayers’ property using an agricultural classification.

We will evaluate the Assessor’s claims against our standard of review, which is whether the ruling of the County Board was arbitrary, capricious, unsupported by substantial evidence, and/or contrary to law. Rules, Wyoming State Board of Equalization, Chapter 3, § 9.

PROCEEDINGS BEFORE THE COUNTY BOARD

The County Board conducted a hearing on June 27, 2005. The County Board on July 19, 2005, entered a Decision ordering the Assessor to re-assess the Taxpayers’ land using an agricultural classification.

JURISDICTION

The State Board is required to “hear appeals from county boards of equalization.” Wyo. Stat. Ann. § 39-11-102.1(c). A timely appeal from the County Board decision was filed with the State Board. Rules, Wyoming State Board of Equalization, Chapter 3, § 2.

STANDARD OF REVIEW

When the State Board hears appeals from a County Board, the State Board acts as an intermediate level of appellate review. Laramie County Board of Equalization v. Wyoming State Board of Equalization, 915 P.2d 1184, 1188 (Wyo. 1996); Union Pacific Railroad Company v. Wyoming State Board of Equalization, 802 P.2d 856, 859 (Wyo. 1990). In its appellate capacity, the State Board treats the County Board as the finder of fact. Id. In contrast, the State Board acts as the finder of fact when it hears contested cases on appeal from final decisions of the Wyoming Department of Revenue (Department). Wyo. Stat. Ann. § 39-11-102.1(c). This sharp distinction in roles is reflected in the State Board Rules governing the two different types of proceedings. Compare Rules, Wyoming State Board of Equalization, Chapter 2 and Rules, Wyoming State Board of Equalization, Chapter 3. Statutory language first adopted in 1995, when the State Board and the Department were reorganized into separate entities, does not express the distinction between the State Board’s appellate and de novo capacities with the same clarity as our long-standing Rules. 1995 Wyo. Sess. Laws, Chapter 209, § 1; § 39-1-304(a), (currently Wyo. Stat. Ann. § 39-11-102.1(c)).

By Rule, the State Board’s standards for review of a County Board’s decision are nearly identical to the Wyoming Administrative Procedure Act standards which a district court must apply to hold unlawful and set aside agency action, findings of fact, and conclusions of law. Wyo. Stat. Ann. § 16-3-114(c)(ii). However, unlike a district court, the State Board will not rule on claims that a County Board has acted “[c]ontrary to constitutional right, power, privilege or immunity.” Wyo. Stat. Ann. § 16-3-114(c)(ii)(B). The State Board’s review is limited to a determination of whether the County Board action is:

(a) Arbitrary, capricious, an abuse of discretion or otherwise not in accordance with law;

(b) In excess of statutory jurisdiction, authority or limitations or lacking statutory right;

(d) Unsupported by substantial evidence.

Rules, Wyoming State Board of Equalization, Chapter 3, § 9.

Since the State Board Rules are patterned on the judicial review provision of the Wyoming Administrative Procedure Act, we look to precedent under Wyo. Stat. Ann. § 16-3-114(c) for guidance. For example, we must apply this substantial evidence standard:

Our task is to examine the entire record to determine if substantial evidence exists to support the [County Board’s] findings. We will not substitute our judgment for that of the [County Board] if [its] decision is supported by substantial evidence. Substantial evidence is relevant evidence which a reasonable mind might accept in support of the agency’s conclusions.

Romero v. Davy McKee Corp., 854 P.2d 59, 61 (Wyo. 1993).

We review the findings of ultimate fact of a county board of equalization de novo:

“When an agency’s determinations contain elements of law and fact, we do not treat them with the deference we reserve for findings of basic fact. When reviewing an ‘ultimate fact,” we separate the factual and legal aspects of the finding to determine whether the correct rule of law has been properly applied to the facts. We do not defer to the agency’s ultimate factual finding if there is an error in either stating or applying the law.” Basin Elec. Power Co-op., Inc. v. Dep’t of Revenue, State of Wyo., 970 P.2d 841, 850-51 (Wyo. 1998).

Britt v. Fremont County Assessor, 2006 WY 10, ¶ 17, 126 P.3d 117, 123 (Wyo. 2006).

We must also apply this “arbitrary and capricious” standard:

Even if sufficient evidence is found to support the agency’s decision under the substantial evidence test this [Board] is also required to apply the arbitrary-and-capricious standard as a “safety net” to catch other agency action which might have violated the Wyoming Administrative Procedures Act. Decker v. Wyoming Medical Comm’n, 2005 WY 160, ¶ 24, 124 P.3d 686, 694 (Wyo. 2005). “Under the umbrella of arbitrary and capricious actions would fall potential mistakes such as inconsistent or incomplete findings of fact or any violation of due process.” Id. (quoting Padilla v. State ex rel. Wyoming Workers’ Safety and Comp. Div., 2004 WY 10, ¶ 6, 84 P.3d 960, 962 (Wyo. 2004).

State ex rel. Wyoming Workers’ Safety and Comp. Div. v. Madeley, 2006 WY 63, ¶ 8, 134 P.3d 281, 284 (Wyo. 2006). Where there is insufficient information to review the decision of the County Board on its merits or the findings of fact or conclusions of law are inadequate to permit effective review, the matter must be remanded. Id. at ¶ 14.

ISSUES

Under our standards of review, the Assessor must argue that the County Board decision is unsupported by substantial evidence, and/or the County Board acted arbitrarily and capriciously when it determined the property should be classified as agricultural for 2005 tax purposes.

We are unable to discern from the County Board’s decision whether the four separate statutory requirements for agricultural classification were considered by the County Board or the factual basis, if any, for the County Board’s ultimate decision granting the Taxpayers’ request for an agricultural classification. We will, therefore, remand this case to the County Board for further proceedings consistent with this decision.

FACTS PRESENTED TO THE COUNTY BOARD:

1. Patrick and Karen Wendt own and reside on 19.7 acres at 30 O’Brien Road north of Lander, Wyoming. The land was formerly known as Lot 8 of the O’Brien Subdivision in Fremont County, Wyoming. [County Board Record, Exhibit 4, p. 14].

2. Eileen Oakley is the Fremont County Assessor. [County Board Record, Hearing Tape].

3. On or about April 25, 2005, the Assessor sent the Taxpayers an Assessment Schedule listing the total market value of their property as $392,600 for 2005, of this total, $136,200 was for the Taxpayers’ land which is the amount at issue in this proceeding. [County Board Record, Exhibit A, p. 12].

4. The Taxpayers applied for agricultural classification for their property on May 3, 2005. [County Board Record, pp. 131-132].

5. On May 6, 2005, the Assessor denied the application for agricultural classification stating the property had characteristics of a subdivision or is in transition for further development. [County Board Record, Exhibit 16, p. 105].

6. On May 17, 2005, the Taxpayers sent a letter to the Assessor with seven attachments protesting the denial of agricultural classification. [County Board Record, pp. 107-139].

7. On May 18, 2005, the Assessor sent a letter denying the Taxpayers’ May 17, 2005, request for agricultural classification stating the following reasons:

Property has characteristics of a subdivision or is in transition for further development.

Primary purpose or use of the land is other than producing a marketable agricultural product, i.e. home site, cabin site, or dude ranch facilities.

Activities on the land, which appear agricultural in nature, do not by themselves qualify the land for agricultural assessment.

The land is not being used or employed, consistent with the land’s size, location and capability to produce.

The owner/lessee does not report or pay taxes on farm machinery or other equipment.

[County Board Record, Exhibit P, p. 69].

8. The Assessor’s letter also stated the Taxpayer could furnish additional information that may affect the classification made by the assessor’s office. The letter advised the Taxpayers that if they disagreed with the Assessor’s decision they could file a protest with the County Board within 30 days of the assessment notice. [County Board Record, Exhibit P, p. 69].

9. The Taxpayers filed a Statement To Contest 2005 Property Tax Assessment with twenty attachments on May 17, 2005. [County Board Record, pp. 107-108].

10. On June 1, 2005 the clerk for the County Board set a hearing date for the Taxpayers’ protest of June 27, 2005. [County Board Record, p. 142].

11. At the hearing, Karen Wendt testified they were seeking an agricultural classification of their land under Wyo. Stat Ann. § 39-13-103 because their land is being used for an agricultural purpose. [County Board Record, Hearing Tape].

12. The Taxpayers complained that other landowners in the same geographic area with similar acreage were valued as agricultural. Examples included Richard Bird’s property which is smaller than their property, the Ken Mead property which is larger, and the Spriggs property which is similar in size to their property. All three of these have agricultural status. [County Board Record, Hearing Tape].

13. The Taxpayers testified the O’Brien Subdivision was vacated in 2004 and the parcels, including their parcel, can not be subdivided because of restrictions contained in the covenants. [County Board Record, Hearing Tape]. A quitclaim deed and legal survey of the Taxpayers’ parcel are part of the Taxpayers’ exhibits. [County Board Record, pp. 124-125].

14. The Taxpayers disagreed with the Assessor’s position that their land is in active transition and that the covenants contradict their use as agricultural. The Taxpayers told the County Board the land is not in active transition because they have no intention of subdividing the land, and it does not have the characteristics of a subdivision. [County Board Record, Hearing Tape].

15. The Taxpayers told the County Board they never intended to use the property for anything other than the present use, and chose to vacate the subdivision so the true use of the land would be apparent. In cooperation with the local Soil Conservation District, they had gone to the expense of installing above and below ground irrigation pipe for efficient use of water. This improvement prevents erosion and allows more growth of hay which they sell. The water rights are legally attached to the property with an 1887 water right. [County Board Record, Hearing Tape].

16. The Taxpayers provided the Assessor with receipts from the sale of hay and their 2004 income tax form 1040 Schedule F showing a gross income of $1,363. The Taxpayer asserts the receipts meet the letter of the law for having gross annual revenues of not less than $500. [County Board Record, p. 112; pp.126-139; Hearing Tape].

17. After the Taxpayer received the Assessor’s second denial letter, they created another document as an addendum to the first letter stating the following points:

The primary purpose of the property is to grow hay and pasture after the hay is cut. It can not be used as a home site, cabin site and certainly not as a dude ranch. The covenants prevent this. [County Board Record, Hearing Tape].

The land is used consistent with the size of the land, the location of the land and its capability. In 2004 this land produced 26 tons of good quality hay. The Assessor claims it should produce more. However, the Taxpayers chose not to fertilize the land because of the high water table. They have a good well, which is highly unusual for this area. It is a potable well and has been legally recorded. [County Board Record, Hearing Tape].

The Taxpayers contract the haying on ten acres and included the receipt. [County Board Record, Exhibit 17, p. 106]. Before his death, Bill Bates contracted the haying operation. The entire 19 acres less ditch lines and tree area produced hay. The Taxpayers worked for Bill Bates in return for the haying. Since the hay operation is contracted, there is no need for equipment so they do not pay taxes on haying equipment. [County Board Record, Hearing Tape].

18. The second letter of denial stated that activities on the land which appear to be agricultural in nature by themselves do not qualify the land for agricultural assessment. The Taxpayers found no meaning in this statement in relationship to their property.

19. Karen Wendt testified they applied for agricultural exemption, proven they use the land as agricultural and provided documentation as such. They are not protesting the taxation of the house or the outbuildings, only the fact the County Assessor refused to grant them agricultural classification. [County Board Record, Hearing Tape].

20. Eileen Oakley testified she was the Fremont County Assessor, and was certified as a property tax appraiser by the Department. [County Board Record, Hearing Tape].

21. The Assessor presented a complete description of the Taxpayers’ property. The market value of the property improvements was not being disputed, only the classification. [County Board Record, Exhibit R, p. 84].

22. The Assessor testified to qualify for agricultural assessment a property must meet the conditions of the statutes and rules that govern agriculture valuation. The statutes outline those conditions and Chapter 10 of the Department’s Rules further define the conditions. [County Board Record, Assessor’s Exhibit I, pp. 37-40].

23. The Assessor told the County Board to meet agricultural classification there were four qualifications, all of which must be met. The initial qualification is that the land be used to produce forage. There were, however, other qualifiers. The Assessor must consider that certain activities which appear to be agricultural in nature do not by themselves qualify land for the agricultural classification. The Assessor must consider all requirements, not just the appearance of the land. [County Board Record, Hearing Tape].

24. The Assessor testified she must also consider whether or not the land is part of a platted subdivision. The Assessor conceded the commissioners had vacated the O’Brien Subdivision but believed the vacation contravened the intent of the statutes on subdivisions. [County Board Record, Hearing Tape].

25. The Assessor testified the land under appeal had been divided into parcels for sale and development. [County Board Record, Hearing Tape; Exhibit K, p. 85]. The Taxpayers stated the owners of the lots waited until the subdivision was fully developed to begin the process of vacation. The only reason for the vacation was to receive an agricultural classification to lower their taxes. [County Board Record, Hearing Tape].

26. The Assessor told the County Board she must also consider whether the owner of the land has derived annual gross revenue of not less than $500. [County Board Record, Hearing Tape]. The Taxpayers’ IRS form 1040, Schedule F Profit or Loss From Farming shows a gross income of $1,363. [County Board Record, Taxpayer’s Statement to Contest 2005 Property Tax Assessment, p. 112].

27. The fourth qualification for agricultural status was quoted by the Assessor from the statute. “The land has been used or employed, consistent with the land’s size, location and capability to produce as defined by the department rules and the mapping and agricultural manual published by the department, primarily in the agricultural operation...,” where primarily means chiefly or of the first importance. The Assessor pointed out the Taxpayers’ own covenants established that the land was residential with animals and agricultural use being limited. Therefore, the Assessor concluded the land’s primary use was residential. The parcel had significant residential improvements as described in the CAMA printouts. [County Board Record, Hearing Tape; Exhibit B, p. 33].

28. The Assessor told the County Board she applied the Department’s Rules equally and uniformly. Regardless of the fact that people feel they have used property as best they can and produced as much as they can, the land had to meet the standards of a true agricultural operation to assess everyone equally. [County Board Record, Hearing Tape].

29. The Assessor prepared a quantitative analysis to determine whether the Taxpayers had used their land consistent with the land’s capability to produce. [County Board Record, Exhibit R, p. 88]. She first subtracted two acres from the Taxpayers’ total acreage of 19.7 acres to account for a residential farmstead as required by the Department’s rules. Rules, Wyoming Department of Revenue, Chapter 10, § 3(c)(iv). She then determined a productive capacity for the remaining 17.7 acres using elements of the methods prescribed by the Department for valuation of all agricultural lands. [County Board Record, Exhibit R, p. 88].

30. The Assessor used the Lander Area Soil Survey to determine the land soil type of the Taxpayers’ property. [County Board Record, Exhibit R, p. 88; Exhibit J, p. 41]. She did this by overlaying the ownership information on the soils map. [County Board Record, Exhibit K, p. 42].

31. The Assessor determined the productive value of the Taxpayers’ soil type using the 2005 Ag Land Valuation Study authorized by the Department. [County Board Record, Exhibit M, pp. 44-57]. To do this, the Assessor determined: (1) the pertinent Land Resource Area, and (2) the productive class of the land. [County Board Record, Exhibit R, p. 88; Exhibit M]. These numbers were then translated into a standard productive range for irrigated crop land, expressed in tons of hay per acre. [County Board Record, Exhibit R, p. 88; Exhibit M, p. 51]. The resulting range of production was from three to four tons per acre. [County Board Record, Exhibit R, p. 88; Exhibit M, p. 51]. On the referenced chart, those values appear for Land Resource Area 4-5, Class III. [County Board Record, Exhibit M, p. 51].

32. The Assessor next multiplied the Taxpayers’ total acreage (exclusive of farmstead), 17.7 acres, times the low end of expected production per acre, three tons, to reach an expected total production of 53.1 tons. [County Board Record, Exhibit R, p. 88]. She then multiplied this expected total tonnage by a low revenue estimate of $70 per ton of hay, and rounded down to reach an expected total revenue of $3,500 for the Taxpayers’ property. The land did not meet the requirements of selling agricultural products consistent with it size, location and capability to produce. [County Board Record, Exhibit R, p. 88].

33. The Assessor reviewed the records of other small acreage parcels between 5 and 20 acres. The Assessor told the County Board only five small acreage parcels had an agricultural value. There were 247 other small acreage parcels valued as residential. The Assessor advised the County Board her office is receiving more and more applications for agricultural use. Agricultural status is considered at the time of application. Her office has consistently and uniformly valued these small parcels as residential. [County Board Record, Exhibits N, pp. 60-61; Exhibit O, pp. 62-68].

34. In conclusion the Assessor told the County Board while the Taxpayers’ use of their land may appear to be agricultural, the Taxpayers do not meet all of the requirements for agricultural classification. While the Taxpayers’ land was agricultural prior to its subdivision, the land was divided into tracts or parcels, and sold for primarily residential use. The Taxpayers’ parcel was correctly valued as residential land. [County Board Record, Hearing Tape; Exhibit R, p. 88;].

DISCUSSION OF ISSUES AND APPLICABLE LAW

35. The issue raised by the Taxpayers at the County Board hearing was the Assessor’s decision to classify their land as residential rather than agricultural. On appeal, the Assessor argues the County Board erred in ordering her to revalue the Taxpayers’ land as agricultural.

36. The Wyoming Constitution article 15, § 11(b) provides in pertinent part: “[a]ll taxable property shall be valued at its full value as defined by the legislature except agricultural and grazing lands which shall be valued according to the capability of the land to produce agricultural products under normal conditions.”

37. The classification of land as agricultural requires fulfilment of four statutory requirements:

(x) The following shall apply to agricultural land:

(A) The department shall determine the taxable value of agricultural land and prescribe the form of the sworn statement to be used by the property owner to declare that the property meets the requirements of subparagraph (B) of this paragraph. In determining the taxable value for assessment purposes under this paragraph, the value of agricultural land shall be based on the current use of the land, and the capability of the land to produce agricultural products, including grazing and forage, based on average yields of lands of the same classification under normal conditions;

(B) Contiguous or noncontiguous parcels of land under one (1) operation owned or leased shall qualify for classification as agricultural land if the land meets each of the following qualifications:

(I) The land is presently being used and employed for an agricultural purpose;

(II) The land is not part of a platted subdivision;

(III) If the land is not leased land, the owner of the land has derived annual gross revenues of not less than five hundred dollars ($500.00) from the marketing of agricultural products, or if the land is leased land the lessee has derived annual gross revenues of not less than one thousand dollars ($1,000.00) from the marketing of agricultural products; and

(IV) The land has been used or employed, consistent with the land's size, location and capability to produce as defined by department rules and the mapping and agricultural manual published by the department, primarily in an agricultural operation, or the land does not meet this requirement and the requirement of subdivision (III) of this subparagraph because the producer:

(1) Experiences an intervening cause of production failure beyond its control;

(2) Causes a marketing delay for economic advantage;

(3) Participates in a bona fide conservation program, in which case proof by an affidavit showing qualification in a previous year shall suffice; or

(4) Has planted a crop that will not yield an income in the tax year.

(C)If needed, the county assessor may require the producer to provide a sworn affidavit affirming that the land meets the requirements of this paragraph. When deemed necessary, the county assessor may further require supporting documentation.

Wyo. Stat. Ann. 39-13-103(b)(x) (emphasis added).

38. The Department is required to confer with, advise and give necessary instructions and directions to the county assessors as to their duties, and to promulgate rules and regulations necessary for the enforcement of all tax measures. Wyo. Stat. Ann. § 39-11-102(c)(xvi) and (xix). In particular, except as provided by law for specific property, the Department “shall prescribe by rule and regulation the appraisal methods and systems for determining fair market value using generally accepted appraisal standards.” Wyo. Stat. Ann. § 39-13-103(b)(ii).

39. A county assessor has a corresponding duty to annually value property within the assessor’s county, and in doing so to “[f]aithfully and diligently follow and apply the orders, procedures and formulae of the department of revenue or orders of the state board of equalization for the appraisal and assessment of all taxable property.” Wyo. Stat. Ann. §18-3-204(a)(ix).

40. The Department’s rules contain this definition of “agricultural land:”

(a) "Agricultural land" means contiguous or noncontiguous parcels of land presently being used and employed for the primary purpose of providing gross revenue from agricultural or horticultural use or any combination thereof unless part of a platted subdivision. Agricultural land shall generally include land that is actively farmed, ranched or is used to raise timber for timber products to obtain a fair rate of return.

Rules, Wyoming Department of Revenue, Chapter 10, § 3(a).

41. The Department’s rules also contain a definition of “non-agricultural lands:”

(c) "Non-agricultural lands" shall include but not be limited to lands as described in the State of Wyoming market valuation of Residential, Commercial and Industrial Lands as published by the Department of Revenue, Ad Valorem Tax Division:

(i) Lands classified within neighborhood boundaries as residential, commercial, industrial or rural, whether vacant or improved;

(ii) Lands in active transition from agricultural use to residential, commercial or industrial use, which includes creation or division of a tract, parcel or other unit of land for the purpose of sale or development for such use.

(iii) Residential subdivision lands developed with either predetermined floor plans and elevations or custom buildings;

(iv) Farmsteads with lands occupied by buildings which constitute the homesite including one or more acres of land used in direct connection with the homesite;

* * *

(x) Parcels of land forty (40) acres or less unless the landowner provides proof that such land should otherwise be classified as agricultural land.

(xi) Land zoned for purposes, which exclude agricultural uses.

Rules, Wyoming Department of Revenue, Chapter 10, § 3(c).

42. Administrative rules have the force and effect of law. Wyo. Dep’t of Revenue v. Union Pacific Railroad Co., 2003 WY 54, ¶ 18, 67 P.3d 1176, 1184 (Wyo. 2003); Painter v. Abels, 998 P.2d 931, 939 (Wyo. 2000).

43. With regard to appeals of property tax matters, the Wyoming Supreme Court has stated:

The Department’s valuations for state-assessed property are presumed valid, accurate, and correct. This presumption can only be overcome by credible evidence to the contrary. In the absence of evidence to the contrary, we presume that the officials charged with establishing value exercised honest judgement in accordance with the applicable rules, regulations, and other directives that have passed public scrutiny, either through legislative enactment or agency rule-making, or both.

The petitioner has the initial burden to present sufficient credible evidence to overcome the presumption, and a mere difference of opinion as to value is not sufficient. If the petitioner successfully overcomes the presumption, then the Board is required to equally weigh the evidence of all parties and measure it against the appropriate burden of proof. Once the presumption is successfully overcome, the burden of going forward shifts to the DOR to defend its valuation. The petitioner, however, by challenging the valuation, bears the ultimate burden of persuasion to prove by a preponderance of the evidence that the valuation was not derived in accordance with the required constitutional and statutory requirements for valuing state-assessed property….

****

Colorado Interstate Gas Company v. Wyoming Department of Revenue, 2001 WY 34, ¶¶ 9-11, 20 P.3d 528, ¶¶ 9-11 (Wyo. 2001) (citations omitted).

Airtouch Communications, Inc. v. Dep’t of Revenue, 2003 WY 114, ¶ 12, 76 P.3d 342, 348 (Wyo. 2003).

Thunder Basin Coal Co. v. Campbell County, Wyoming Assessor, 2006 WY 44, ¶ 13, 132 P.3d 801, 806 (Wyo. 2006). This presumption applies equally to an assessor’s valuation of locally assessed property. Id. at 806 n.1.

A. Present Use for Agricultural Purpose

44. The first statutory requirement for land to qualify for agricultural valuation is the present use of the land for an agricultural purpose. Wyo. Stat. Ann. § 39-13-103(b)(x)(B)(I). “Agricultural purpose” is defined by statute:

(viii) "Agricultural purpose," as used in W.S. 39-13-103(b)(x), means the following land uses when conducted consistent with the land's capability to produce:

(A) Cultivation of the soil for production of crops; or

(B) Production of timber products or grasses for forage; or

Wyo. Stat. Ann. § 39-13-101(a)(viii).

45. In this case, the Taxpayers offered testimony that they produced 26 tons of hay from the property and grazed cattle on the land in 2004. These uses of the land qualify as agricultural purposes and meet the requirements of Wyo. Stat. Ann. § 39-13-103(b)(x)(B)(I).

B. Not Part of Platted Subdivision

46. The second statutory requirement for agricultural classification is that the land “is not part of a platted subdivision.” Wyo. Stat. Ann. § 39-13-103(b)(x)(B)(II). The Department’s Rules define “platted subdivision” as follows:

Platted subdivision” means for the purpose of Chapter 13 of Title 39, the creation of a lot, parcel, or other unit of land; or division of a lot, parcel, or other unit of land into one or more parts that has received approval from the governing body in whose jurisdiction the property resides at the time of creation and is recorded in the records of the county clerk.

Rules, Wyoming Department of Revenue, Chapter 10, § 3(b). We note that neither the parties nor the County Board addressed this Department Rule.

47. The Taxpayers argued that because their property was not now part of a subdivision, they meet this test. Yet the definition provided in the Department’s Rule is contrary to this interpretation. Instead, the Department’s definition is backward-looking. If we apply the letter of the platted subdivision definition found in the Department’s Rules in the context of this record, it is undisputed that: (1) the Taxpayers’ property is identifiable as a unit of land that was created as a lot among other units of land, and part of a subdivision; (2) the subdivision so created received the approval of the governing body in whose jurisdiction the property resided at the time of creation; and (3) the creation was recorded in the records of the county clerk. The Taxpayers’ property fits within the rule, and cannot qualify as agricultural if the rule is literally construed.

48. Stated another way, any modification to the status of the Taxpayers’ property as Lot 8 of the O’Brien Subdivision occurred after the subdivision was created. The Department’s Rule appears to ignore any such post-creation modification of the platted subdivision status.

49. The Taxpayers’ property was platted as one of eight lots in the O’Brien Subdivision according to the plat filed with the Fremont County Clerk, on February 12, 1991. [County Board Record, Exhibit C, p. 14]. The Taxpayers assert the O’Brien Subdivision was vacated by the county commissioners and therefore, meets the second statutory requirement for agricultural classification. The only evidence in the record supporting the Taxpayers’ assertion is a copy of a quitclaim deed from the Taxpayers to themselves describing the property by metes and bounds. [County Board Record, Exhibit 13, p. 101]. There are no copies of minutes or resolutions of the Board of County Commissioners purporting to vacate the subdivision in the record.

50. The only Wyoming statute which addresses vacating a subdivision plat is Wyo. Stat. Ann. § 34-12-106:

Any such plat may be vacated by the proprietors thereof at any time before the sale of any lots therein, by a written instrument declaring the same to be vacated, duly executed, acknowledged or proved and recorded in the same office with the plat to be vacated, and the execution and recording of such writing shall operate to destroy the force and effect of the recording of the plat so vacated, and to divest all public rights in the streets, alleys, commons and public grounds laid out or described in such plat, and in case where any lots have been sold, the plat may be vacated as herein provided, by all the owners of lots in such plat joining in the execution of the writing aforesaid. No plat or portion thereof within the corporate limits of a city or town shall be vacated as herein provided without the approval of the city or town.

51. The plain language of Wyo. Stat. Ann. § 34-12-106 does not require a county commission take any action if a plat is to be vacated under this statute. However, the statute does require a “written instrument declaring the same to be vacated, duly executed, acknowledged or proved and recorded in the same office with the plat to be vacated.” Id. The County Board Record is devoid of such supporting documentation.

52. Even presuming the County Board Record would contain appropriate evidence and documentation to indicate the O’Brien Subdivision had in fact been vacated, use of such a procedure as part of an attempt to reclassify land from residential to agricultural is problematic at best. Land which was previously platted as a residential subdivision does not take on agricultural characteristics simply by vacating a plat.

53. There is some question the statute which provides a procedure to vacate a plat is in fact applicable to the situation in which an entire subdivision has been sold by the original developer or proprietor. Wyo. Stat. Ann. § 34-12-106. While the statute allows a plat to be vacated after “any lots have been sold,” the vacation action must include both the owners of any lots as well as the original proprietors based upon the language which indicates the owners join “in the execution of the writing aforesaid.” The “writing aforesaid” is obviously a reference to the written statement declaring vacation which the original proprietors are empowered to use to vacate the plat. Wyo. Stat. Ann. § 34-12-106. The statute in effect allows a plat to be vacated as long as the original proprietors still own a portion thereof. Once all lots have been sold, the original proprietors no longer own any interest in the platted property, and the vacation statute is arguably inapplicable. This interpretation is reinforced by the fact the statutory language differentiates between “proprietors” who own all lots before any are sold, and “owners” of sold lots.

54. When the State Board interprets the language of Wyo. Stat. Ann. § 39-13-103(b)(x)(B)(II), it must reach a reasonable interpretation in light of the purpose and policy behind the enactment. Kunkle v. State ex rel. Wyoming Workers’ Safety and Compensation Division, 2005 WY 49, ¶ 11, 109 P.3d 887, 890 (Wyo. 2005). One of the principal purposes of subdivision regulation is to allow local governments to provide for integration of a new development into an existing community:

Subdivision regulation is important for a variety of reasons. First, it enables a community to ensure (insofar as possible) that a new development will “fit in” with the existing community character, that the existing community will be able to provide needed services to the new development both at the present time and in the future, and that the new development will be a safe and healthy place for its citizens to live. Second, in a broader sense, subdivision controls give local governments the opportunity to attempt to ensure the success of a new development. This is important in several respects. For example, subdivision regulations can protect tax revenues and prevent undue disbursements of public funds by limiting the creation of blighted areas. Furthermore, a financially successful development also protects lot purchasers and mortgage lenders by preserving resale value, and helps protect the reputation of the subdivision developer.

Patrick J. Rohan, Zoning and Land Use Controls, § 45.01[3], p. 45-19 (1978-).

55. While the county commissioners approved the Taxpayers’ request to vacate the subdivision, we doubt the purpose of Wyo. Stat. Ann. § 39-13-103(b)(x)(B)(II) was to enable landowners who subdivided for the purposes of securing government resources, particularly the location of public roads and access to public roads, to later secure the substantial property tax benefits of agricultural land status. Even if the O’Brien Subdivision owners were “up front” about vacating the subdivision, the State Board concludes that the Taxpayers must fully and completely demonstrate compliance with Wyo. Stat. Ann. § 34-12-106, yet did not do so.

56. The public purpose of ensuring the success of a new development is also at issue in this record. The vacation of a plat also acts to “divest all public rights in the streets,…laid out or described in such plat.” Wyo. Stat. Ann. § 34-12-106. If there are no “public rights” in the streets laid out on a vacated plat, the county, in this case, Fremont County, is prohibited from performing any maintenance, snow removal or repair thereon. Vacating the plat would also divest the public of any rights in O’Brien Road. The owners of lots 5, 6, 7 and 8 thus would have no legal access to a public road unless they have been granted easements by the owners across the lots which lie between lots 5, 6, 7 and 8 and the apparent public road, North 2^nd Street. The lack of access might well affect the value and even the marketability of Lots 5, 6, 7 and 8. This may be of great concern to these Taxpayers who occupy Lot 8 but there is no indication that the owners of lots 5, 6, 7 and 8 appreciated the full implications of vacating the subdivision.

57. The parties to this proceeding did not request oral argument, and their briefs did not address the issues of concern to the State Board regarding the interpretation and application of Wyo. Stat. Ann. § 39-13-103(b)(x)(B)(II). The County Board’s decision offers no insight into what specific facts it relied upon with respect to this test, nor what conclusions of law it drew. The County Board, the Taxpayers and the Assessor may have an interest in addressing these issues and may raise arguments or policy considerations that the State Board has not examined based on the inadequate record presented to us. For example, the Assessor appears to believe it significant that the parcel in question could not have been created other than by subdivision. The State Board concludes the appropriate action is to remand the case. The County Board, in its discretion, may wish to take further evidence from the Taxpayers regarding whether the subdivision was properly vacated.

C. Minimum Annual Gross Revenues

58. The third statutory requirement to qualify for agricultural valuation is that the owner establish the statutory minimum gross revenues were derived from agricultural use of the property. Wyo. Stat. Ann. § 39-13-103(b)(x)(B)(III). The evidence related to the third requirement consisted of copies of hay sale receipts and the 2004 federal income tax return with Schedule F, Profit or Loss from Farming. The amounts shown by the Taxpayers’ evidence exceeded the minimum income requirements set by the legislature for agricultural valuation, and could have been accepted by the County Board as meeting the minimum gross revenues requirement set by the legislature for agricultural valuation.

D. Use Consistent with Size, Location and Capability to Produce Primarily in an Agricultural Operation

59. The Wyoming Constitution grants favorable treatment to agricultural and grazing lands by providing that they “shall be valued according to the capability of the land to produce agricultural products under normal conditions.” Wyo. Const. art. 15 § 11(b). The statutory definition of agricultural purpose echoes this language, limiting those purposes to being “consistent with the land’s capability to produce.” Wyo. Stat. Ann. § 39-13-101(a)(viii). Land can only qualify for agricultural classification if it meets a fourth and related statutory test of being “used or employed, consistent with the land’s size, location and capability to produce as defined by department rules and the mapping and agricultural manual published by the department, primarily in an agricultural operation….” Wyo. Stat. Ann. § 39-13-103(b)(x)(B)(IV). The qualifying phrase, “consistent with the land’s capability to produce,” appears repeatedly in the Department’s Rules. E.g., Rules, Wyoming Department of Revenue, Chapter 10, §§ 3(a)(i), 3(a)(ii), 3(a)(ii)(B), 3(a)(ii)(B)(II), 3(a)(ii)(B)(III), 3(a)(ii)(B)(IV).

60. The pertinent definition of “consistent” is “in agreement or harmony; in accord; compatible.” Webster’s New World College Dictionary, 4^th Edition (2001), p. 311. The fourth statutory test for agricultural classification requires use of the land in an actual agricultural operation, measured generally by the same constitutional standard providing favorable property tax treatment – the land’s capability to produce. The State Board concludes the intent of the legislature was to deny agricultural classification to lands principally employed in other uses, such as residential or being held for future residential development, yet generating enough agricultural revenue to meet the minimum gross revenues standard of Wyo. Stat. Ann. § 39-13-103(b)(x)(B)(III).

61. The statute expressly addresses the problem that “normal conditions” may not prevail in any given assessment year. Unusual conditions may interfere with a taxpayer’s ability to use the land consistent with its capability to produce. An agricultural producer may accordingly be excused from compliance with the fourth requirement for agricultural classification, and the minimum gross revenues requirement of Wyo. Stat. Ann. § 39-13-103(b)(x)(B)(III), if it:

(1) Experiences an intervening cause of production failure beyond its control;

(2) Causes a marketing delay for economic advantage;

(3) Participates in a bona fide conservation program, in which case proof by affidavit showing qualification in a previous year shall suffice; or

(4) Has planted a crop that will not yield an income in the tax year.

Wyo. Stat. Ann. § 39-13-103(b)(x)(B)(IV); see Rules, Wyoming Department of Revenue, Chapter 10, § 3(a)(ii)(A). The Taxpayers in this case offered no evidence to support any such excuse from compliance with Wyo. Stat. Ann. § 39-13-103(b)(x)(B)(IV).

62. The Assessor prepared a calculation to quantify her view that the Taxpayer did not meet this requirement. She first excluded two acres from the Taxpayers’ parcel to account for their residence, as required by the Department’s Rules and consistent with her practice for other agricultural land in Fremont County. Rules, Wyoming Department of Revenue, Chapter 10, § 3(c)(iv). She then calculated a minimum production value for the remaining acres, which she rounded down to $3,500. Supra, ¶ 32. This calculation is consistent with statutory requirements of the Department’s mapping and agricultural manual, which we have described in detail in other cases arising from Fremont County. E.g., Fremont County Assessor (Dechert Property), Docket No. 2004-125, February 4, 2005, 2005 WL 301141 (Wyo. St. Bd. Eq.). Finally, she compared this minimum value against the income actually reported by the Taxpayers, of $1,363. Supra, ¶ 16. Based on this comparison, she concluded the Taxpayers had not employed their land consistent with its capability to produce. Supra, ¶ 32.

63. The Assessor’s calculation may not be the only approach to determining whether the use of a particular property is consistent with its capability to produce, but her approach has obvious virtues. It relies on measurable criteria. The criteria tie to the Assessor’s uniformly enforced policy concerning the size of the residential portion of agricultural lands in her county. The criteria also tie to the same measures of productivity that the Department uses to determine taxable value. They also tie to revenues that a taxpayer can readily document. These objectively verifiable measures should enable a county assessor and a taxpayer to readily reach a common understanding about whether the taxpayer’s lands qualify for agricultural classification.

64. By taking the Assessor’s calculation one step further, one can also estimate the values at stake in this case. From the Taxpayers’ property record, we see that four acres of the Taxpayers’ land are valued at $48,000; four acres are valued at $34,400; and 11.7 acres are valued at $53,820, for a total land value of $136,200. [County Board Record, Exhibit B, p. 13]. If the Taxpayers were to prevail, their land values would be divided between a two acre homestead and the remaining 17.7 acres. If we assume that a two acre homestead would continue to be valued as the highest acreage, half of that value would be $24,000 (in practice it might be greater, as smaller parcels commonly have a higher value per acre than larger parcels). The remaining 17.7 acres would be valued as Irrigated Land Resource Area 4, class III. The Assessor’s value per acre for that LRA and class was $801 per acre in 2005. [County Board Record, Exhibit M, p. 59]. The value of the agricultural acreage would accordingly be $14,178, and the total land value would be $38,178. On these assumptions, the resulting difference in valuation would be a reduction of $98,022. (By calculation).

65. The related reduction in taxes would be approximately $692.95. The difference in valuation is multiplied by the tax rate of 9.5%, then by the estimated levy of 74.414 mills. [See County Board Record, Exhibit A, p. 12]. Similar savings would be realized in future years as long as the lands remained eligible for agricultural classification.

66. The County Board’s Findings of Fact acknowledge the Assessor “argued” the “productivity of the property does not meet the requirements for agricultural classification.” [County Board Record, p. 9, Findings of Fact, ¶ 4]. The County Board likewise acknowledged its own review of the Assessor’s Exhibit R, which included the Assessor’s calculations. [County Board Record, p. 9, Findings of Fact, ¶ 5]. The County Board decision nonetheless failed to address the Assessor’s undisputed and objective measurement of the degree to which the Taxpayers actually used their land for agricultural purposes, and found generally the Taxpayers had met their burdens. [County Board Record, p. 10, Decision and Order, ¶ 3]. We are also uncertain as to whether the County Board understood the statutory requirement, because the words “consistent with the land’s capability to produce” are not expressly referenced in the County Board’s decision.

67. While the County Board’s decision appears to be contrary to the undisputed evidence and the statutory standard, the State Board is unable to discern the County Board’s rationale from either the record or the face of its written decision. Specifically, the State Board is unable to discern how or why the County Board concluded the Taxpayers met the requirements of Wyo. Stat. Ann. § 39-13-103(b)(x)(B)(IV). For this reason alone, we remand the County Board’s decision for further proceedings, and anticipate a decision which: (1) specifically acknowledges the requirements of the statute, and (2) if the County Board concludes the Taxpayers have met the requirements of Wyo. Stat. Ann. § 39-13-103(b)(x)(B)(IV), specifically addresses the evidentiary basis for its conclusions.

68. The County Board’s decision indicates that it considered two other issues related to Wyo. Stat. Ann. § 39-13-103(b)(x)(B)(IV), i.e. the argument that the property was in transition to a residential purpose, [County Board Record, p. 9, Findings of Fact, ¶ 4], and the effect of the restrictive covenants on the Taxpayers’ property, [County Board Record, p. 9, Findings of Fact, ¶ 3]. On remand, the State Board concludes that the County Board is not obliged to revisit the first issue, but may wish to revisit the second.

69. The “lands in transition” issue arises from the Department’s definition of non-agricultural lands. Supra, ¶ 41. The State Board has previously been reluctant to deny agricultural classification based on an assessor’s general assertion that the lands in question are in transition. E.g., Arnola M. Davis, Docket No. 2003-96, February 11, 2004, 2004 WL 364070 (Wyo. St. Bd. Eq.). In this case, the County Board could readily have determined, in its capacity as finder of fact, that any transition with respect to the Taxpayers’ land had already occurred. We accordingly uphold the County Board’s conclusion on this point.

70. The Taxpayers referred to their restrictive covenants as a response to the Assessor’s argument that the Taxpayers’ land was in transition. Specifically, they argued the restrictive covenants now prohibit subdivision of their land. Supra, ¶ 13. While this may be a response to the Assessor’s concern for the lands being in transition, it does not speak at all to the matter of the capability of the Taxpayers’ lands to produce. If the restrictive covenants bear in any way on the fourth statutory test, it can only be as evidence to determine whether their lands are in use “primarily in an agricultural operation.” Wyo. Stat. Ann. § 39-13-103(b)(x)(B)(IV). The State Board doubts that an examination of the restrictive covenants supports the Taxpayers’ claim and the County Board’s decision.

71. In their present form, we would be inclined to characterize the covenants as maintaining a residential character for the Taxpayers and the seven other properties of the O’Brien Subdivision, with minor accommodation for agricultural activity. For example, the covenants empower the Architectural Control Committee to determine the number and type of livestock which may be kept on any given property. [County Board Record, Exhibit F, Covenants, Section V, p. 29]. On its face, this provision promotes residential use, restricts agricultural use, and unavoidably acts as a limit on the land’s capability to produce. We are skeptical that land which is truly devoted primarily to agricultural purposes can be encumbered by restrictive covenants. However, we cannot discern from the County Board’s decision how it chose to address the effect of the covenants. Should the County Board determine on remand that the Taxpayers have otherwise met the requirements of Wyo. Stat. Ann. § 39-13-103(b)(x)(B)(IV), we encourage specific findings and conclusions on this issue.

E. Miscellaneous Issues

72. In their Response Brief, the Taxpayers’ raise an issue regarding the agricultural classification of other lands of “comparable or smaller size.” Supra ¶ 12. [Taxpayers’ Response Brief, p. 14]. As a matter of law, any disparity can be of no concern if the other tracts properly qualify as agricultural. In fact, the Taxpayers are plainly seeking to create a disparity between themselves and other taxpayers who have located in large lot subdivisions in Fremont County. The sole question before the County Board was whether these Taxpayers qualify for favorable treatment.

73. The Taxpayers have also ignored a provision of the Department’s Rules placing an additional burden on landowners who seek agricultural classification for a parcel of forty acres or less. Those landowners must provide proof that a parcel of that size should be classified agricultural. Rules, Wyoming Department of Revenue, Chapter 10, § 3(c)(x). This burden applies whether or not the landowner chooses to appeal an assessor’s determination of agricultural classification. For any such landowner, the threshold question is not whether other landowners have provided such proof to the assessor, but whether the landowner seeking the classification has done so.

74. We conclude the County Board’s Findings of Fact and Conclusions of Law are inadequate to permit review of the merits of the County Board’s determination. We must, therefore, remand this case to the County Board for supplemental findings of fact and conclusions of law or other proceedings consistent with this decision.

ORDER

IT IS THEREFORE HEREBY ORDERED the decision of Fremont County Board of Equalization granting the Taxpayers agricultural classification is remanded to the County Board of Equalization for further proceedings consistent with this decision.

Pursuant to Wyo. Stat. Ann. §16-3-114 and Rule 12, Wyoming Rules of Appellate Procedure, any person aggrieved or adversely affected in fact by this decision may seek judicial review in the appropriate district court by filing a petition for review within 30 days of the date of this decision.

DATED this day of July, 2006.

STATE BOARD OF EQUALIZATION

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Alan B. Minier, Chairman

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Thomas R. Satterfield, Vice-Chairman

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Thomas D. Roberts, Board Member

ATTEST:

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Wendy J. Soto, Executive Secretary