County of Maricopa v. North Central Development Co.

ON REHEARING

WREN, Judge.

Upon Motion for Rehearing, this Court feels compelled to issue this supplemental opinion. We reaffirm our prior opinion in this matter in its entirety except for that portion which states that the finding of discrimination rendered moot all other issues raised by appellants. The one issue that did not become moot is the question of classification of the property pursuant to A.R.S. § 42-136. Although our holding of discriminatory assessment resulted in non-taxability of the partially completed structures for the 1971 tax year, there was no question but that the underlying real property was nevertheless subject to taxation and the amount of that tax depends upon the classification of the property. See, A.R.S. § 42-227 B.

The classification dispute is whether the property is Class three or Class four property. The trial court ruled that Class four was the proper classification. A.R.S. § 42-136 defines the various classes and provides, inter alia:

“3. Class three:
All real and personal property devoted to any commercial or industrial use other than property included in classes one, two or four, including but not limited to land, the improvements thereto or any part of such land or improvements leased or rented for residential use.
“4. Class four:
(a) All real property and the improvements thereto, if any, used for agricultural purposes, and all other real property and the improvements thereto, if any, not included in classes one, two, three or five.”

Appellants contend that even in a state of partial completion, appellees’ property was “devoted to” commercial use and therefore was Class three property in the 1971 tax year. Appellees assert that property is not “devoted to” commercial use until it is capable of producing income.1 We agree with appellants that the partially completed property was “devoted to” commercial use *545and should have been classified as Class three property.

In Apache County v. Atchison, Topeka & Santa Fe Ry. Co., 106 Ariz. 356, 476 P.2d 657 (1970), our Supreme Court discussed classification and noted that the only restraint on the power of the legislature is that once property has been classified, the rate of tax must be uniform upon all property of the same class. Clearly the authority to classify appellees’ properties as commercial even while partially complete was within the legislature’s power. In this same decision, the Supreme Court discussed the purpose underlying classification statutes. That purpose is to shift the burden of taxes so that everyone contributes according to his ability to pay. Classification schemes should take into account the property’s use, productivity, utility and general setting in the economy. Apache County v. Atchison, Topeka & Santa Fe Ry. Co., supra.

We are of the opinion that under the plain wording of the statute, appellees’ properties were devoted to commercial use at the time of their classification for the 1971 tax year. The developers of the properties had already invested millions of dollars in the planning and construction of these commercial buildings. Under the criteria for classification set forth above, only productivity is lacking. In terms of the properties’ use, utility and setting in the economic structure, they were justifiably asked to bear a higher tax burden than Class four property. We believe the trial judge erred in finding they were not yet devoted to commercial use.

Judgment affirmed in part, reversed in part. Remanded for further proceedings not inconsistent with this opinion.

SCHROEDER, P. J., and EUBANK, J., concur.

. We note that the legislature has now resolved this question by amending A.R.S. § 42-136 to provide:

“B. For the purposes of classification of property under this section, partially completed or vacant improvements shall be classified according to their intended use.”