Attorney for plaintiff: Not revealed.
Attorney for defendant: Not revealed.
Before: Judge Brian Shortell.
Decision on Appeal
The appellant (“Eklutna”) appeals an administrative hearing officer’s final administrative decision regarding a tax assessment against property owned by Eklutna. The hearing officer determined that the subject property was not entitled to a tax exemption under federal law. The property is a large lot located in downtown Anchorage. Eklutna received the property in a 1988 land exchange with the state, and Eklutna then sold the property to Knakanen (a wholly owned subsidiary of Eklutna’s). In 1994, Knakanen subdivided the property from one lot (Lot 1A, Block 112A) into two lots, 2A and 2B. Eklutna (which now owns the property after dissolution of Knakanen) leases Lot 2A, but claimed that Lot 2B is exempt from taxes because it is owned by a native corporation and it is not developed as per 43 U.S.C. 1620(d), or because it is a “remainder” parcel under 43 U.S.C. 1636(d).
Points on Appeal
Eklutna raises a number of issues. Each states that the hearing officer erred in his conclusions of law. See Statement of Points on Appeal. Eklutna argues that the hearing officer erred as to the following points: (1) Eklutna is not entitled to an exemption from taxes; (2) Lot 2B (except for the portion used for parking) is “developed” under 43 U.S.C. 1620(d), 43 U.S.C. 1636(d), and AS 29.45.030; (3) Lot 2B is not a remainder parcel under 43 U.S.C. 1636(d); (4) there is a potential use and potential users for the parcel; and (5) the property is in a state of present gainful and productive use.
The appellant does not specifically challenge any of the hearing officer’s findings of fact. Eklutna does, however, present issues which are mixed questions of law and fact because it appeals conclusions of law which are based on facts determined at the hearing. The standard of review for conclusions of law is the substitution of judgment test. Handley v. State Dept. of Revenue, 838 P.2d 1231, 1233 (Alaska 1992). In reviewing factual conclusions, the reviewing court uses the substantial evidence test. Substantial evidence exists when, considering the record as a whole, there is sufficient relevant evidence that a reasonable mind might accept as adequate to support the conclusion. Miller v. ITT Arctic Services, 577 P.2d 1044, 1046 (Alaska 1978). The court does not independently weigh evidence, but determines only whether substantial evidence exists. Bouse v. Fireman’s Fund Ins. Co., 932 P.2d 222, 231 (Alaska 1997).
Hearing Officer’s Factual Findings
Because the legal conclusions challenged in the appeal present mixed questions of law and fact, the factual basis on which the hearing officer’s legal conclusions are based should be summarized:
- Lot 2B is level, cleared, and near-grade. It is zoned B-2B (allowing office buildings, retail, hotel, and high density residential uses);
- Lot 2B has a variety of improvements, including surrounding paved city streets, and it has electric, natural gas, storm drain, sewer, telephone, cable and water service. There are public utility and right of access easements in place;
- Downtown lots vary from about 7,000 square feet to a city block and larger. There are numerous developments in the downtown area one city block in size or larger;
- The real estate market is depressed, and growth is especially slow in the area where Lot 2B is located; and
- Typically, an owner does not subdivide property unless the owner has a particular project in mind.
Again, Eklutna does not challenge any of these findings, only the legal conclusions based on them.
Although the appellant lists five points on appeal, its arguments actually involve only two questions: first, is Lot 2B “developed” as defined in federal and state statutes, and second, is Lot 2B a “remainder” parcel?
If a property is “developed”, it no longer qualifies as tax exempt. “Developed” is defined as:
a purposeful modification of land or an interest in land, from its original state that effectuates a condition of gainful and productive present use without further substantial modification. Surveying, construction of roads, providing utilities, or other similar actions, which are normally considered to be component parts of the development process but do not create the condition described in the preceding sentence, shall not constitute a developed state within the meaning of this clause
The hearing officer reasoned that there are current, potential uses for the property, and thus it is in a condition of “gainful and productive present use without further substantial modification.” Decision at 10-12. I agree. The evidence supports the conclusion that it is presently suitable for sale — other large lots have been sold and developed in the downtown area, the lot has sewer, electricity, developed roads, etc., and Knakanen marketed the property in its current configuration for development. The appellant argues that there is currently no buyer for such a large lot of land, and thus the property is not presently productive. The record, however, reflects that Lot 2B is “practically and legally suitable for sale to the ultimate user.” See Kenai Peninsula Borough, 807 P.2d at 498.
The remaining question is whether Lot 2B is a “remainder” parcel:
[L]and subdivided by a State or local platting authority on the basis of a subdivision plat submitted by the holder of the land or its agent, shall be considered developed by such a holder or agency unless the subdivided property is a remainder parcel.
43 U.S.C. 1636 (d)(2)(B)(iii). The hearing officer stated that “Under that provision [43 U.S.C. 1636(d)(2)(B)(iii)], even raw land is transformed into ‘developed’ land merely by the filing of the plat. The ‘remainder parcel’ clause mitigates the effect of the provision, by carving out an exception for what is left after the subdivision is accomplished.” Decision at 12-13.
The hearing officer concluded that “developed” land cannot be rendered a tax-exempt remainder parcel by further subdivision under Section 1636(d)(B)(iii)[sic]. Decision at 13. I agree with this statement; Lot 2B was developed prior to subdivision, and thus the remainder parcel exception does not apply.
The hearing officer stated that “[E]ven raw land is transformed into “developed” land merely by the filing of the plat.” In Kenai Peninsula Bor. v. Cook Inlet Reg., 807 P.2d 487 (Alaska 1991), the court analyzed whether certain property which was subdivided was tax exempt. After noting that the plat creating 142 lots had been approved and recorded, that utilities were available, and that the lots had not been cleared or leveled, the court held that “[a]s the subdivision has made these lots suitable for sale, they are developed within the meaning of section 21(d) of ANCSA.” Id. at 498-99. Mere filing of a plat, then, did not automatically render the land taxable; the court also analyzed the current state of the property to determine taxability.
The effect of subdivision should be analyzed where land is undeveloped prior to filing of a plat in order to determine whether land is tax exempt. However, subdivision does not automatically render land taxable. Practically speaking, of course, subdivision into small lots normally creates suitability for sale and thus subdivision may often destroy any tax exemption. But in this case, Lot 2B is “developed” because it is practically and legally suitable for sale, and because it is not a “remainder” parcel.
Estoppel and Destruction of Exemption
The Appellant also raises the issue of estoppel (arguing that the Municipality of anchorage had not taxed the property for years and had taken contrary positions over the years regarding taxability). As pointed out by the appellee, this argument was not raised below. In Gates v. City of Tenakee Springs, 822 P.2d 455, 460-61 (Alaska 1991), the court concluded that “new issues or new theories presented on appeal” will not be considered. Accordingly, the appellant’s argument regarding estoppel will not be considered. The appellee also discusses whether the transfer of the property from Eklutna to Knakanen destroyed any exemption enjoyed by Eklutna. While the appellee did raise this argument below (see Decision at 9), the hearing officer did not analyze the issue because he determined the property was already developed prior to transfer. I agree with the hearing officer, and thus I will not analyze the effect of the transfer on a tax exemption.
For the reasons stated above, the decision of the hearing officer is AFFIRMED.
DONE this 30th day of December 1997, at Anchorage, Alaska.
Brian Shortell, Superior Court Judge