Property tax assessment law ruled unconstitutional by Oklahoma

Journal Record, The (Oklahoma City),  Jan 30, 2008  by Janice Francis-Smith

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The Oklahoma Supreme Court on Tuesday called a law governing how assessors tax developer-owned property "unconstitutional."

Howard Liddell, a former developer, called the law "organized crime."

The state Supreme Court struck down a law allowing county assessors to base their property tax assessments on the total purchase price for the land divided by the number of lots platted. The law, found at Title 68 Section 2817(I) of the Oklahoma statutes, allows the assessment to remain fixed until the buildings constructed on the land are sold or leased.

The Supreme Court agreed with Liddell, finding the law conflicts with Article X section 8(A)(2) of the Oklahoma Constitution, which requires property tax assessments to be based on the "fair cash value for the highest and best use for which such property was actually used, or was previously classified for use."

Liddell has been entangled in litigation with the Cleveland County Assessor's Office since the early 1990s.

Liddell claimed the law was used by developers to favor certain developers and punish others.

Liddell, age 83, said the assessor's office used the law to run him out of business, to run low-income residents out of town, and to short-change local schools. Many of his properties had been developed as low-income housing, but court records show several instances in which the assessor's office assessed Liddell's properties at a much higher rate than comparable properties.

For instance, The Trails Golf Club in Norman was developed in 1981 on land purchased for $300 an acre. In 1990, when the club was owned by Liddell, the property tax on the club for the year was $31,832. At the time, other golf clubs in the area, including Broadmore Golf Club and Brookside Golf Club, were taxed less than $4,500 each. Liddell said he could not afford the property taxes and sold The Trails in the late 1990s.

In 2006, under new ownership, The Trails Golf Club was assessed $31,528.97 by the Cleveland County Assessor, based on a value of $262,741. In a 1994 case, the District Court of Cleveland County made a preliminary finding that The Trails Golf Club assessments "evidence discriminatory assessment," but found at that time Liddell had not exhausted the administrative remedies available to him before bringing the matter before the court.

Cleveland County Assessor Denise Heavner said when interviewed in 2006 there had been some unintended discrepancies in assessments of similar properties, but the assessor's office had followed the law while trying to balance the interest of developers with that of the community as a whole. The law had been tweaked several times over the years to address inconsistencies, but the 1997 revision allowing assessors to divide the purchase price of the land by the number of lots being developed simplified a difficult a complicated process.

The law allows for some land to be undervalued, the court found. Land zoned for agricultural use may be sold cheaply. The assessor may fix the assessed value of that land based on an artificially low purchase price even as the property adapted for a high-end development. Provided the developer does not sell or lease the property, the assessed value can remain stagnant for years, as the law did not include a time limit on how long an assessment can be frozen.

The state Supreme Court reversed the rulings of the Cleveland County District Court and the state Court of Civil Appeals, which had upheld the law. The Supreme Court, in a ruling penned by Justice Marian Opala, found the Legislature overstepped its authority in allowing the assessment to remain frozen for an indeterminate length of time.

"What it (the Legislature) may not constitutionally do and what it has done... is to potentially divorce the valuation of platted lots from the fair market value of the underlying tract of land as of the relevant assessment date," the ruling reads. "It arrested the process of annual reassessment required by law... The acquisition cost of the tract as a whole may be a factor in arriving at the value of platted lots, but fixing it rigidly as the sole and conclusive factor violates the fair cash value standard of Article X."

In a dissenting opinion, justices Yvonne Kauger and John Reif argued that assessments may be based on the previous year's use of the land, even if developed for a different use in the future.

Though laws ruled unconstitutional are often applied retroactively, the Supreme Court saw fit to limit the application of its ruling to future cases only so as not to impose hardship or liability on public officials and taxpayers who applied the law in good faith.

Liddell said those who applied the law should be punished.

"It's the biggest crime ever committed in Oklahoma, stealing from the most vulnerable among us," said Liddell. "I caught them stealing. Can you imagine how much money has been stolen from our local schools?"

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