Filed: December 9, 2010

IN THE SUPREME COURT OF THE STATE OF OREGON

CLACKAMAS COUNTY ASSESSOR,

Appellant,

v.

VILLAGE AT MAIN STREET PHASE II, LLC,

Respondent.

(TC 4877; SC S057858)

En Banc

On appeal from the Oregon Tax Court.*

Henry C. Breithaupt, Judge.

Argued and submitted September 15, 2010.

Kathleen J. Rastetter, Assistant County Counsel, Oregon City, argued the cause and filed the brief for appellant. With her on the brief was Clackamas County Counsel.

Donald H. Grim, Greene & Markley, P.C., Portland, argued the cause and filed the brief for respondent. With him on the brief was David P. Weiner.

KISTLER, J.

The judgment of the Tax Court is affirmed.

*___ OTR ___ (Sept 1, 2009).

KISTLER, J.

Once a tax assessor has determined the value of property and listed it on the assessment roll, the assessor may not correct the value listed on the assessment roll merely because he or she "would [now] arrive at a different opinion of value." ORS 311.205(1)(b).(1) An assessor, however, may add property to the assessment roll that "has from any cause been omitted, in whole or in part," from the assessment roll. ORS 311.216. The question that this case poses is whether the Clackamas County tax assessor (the assessor) may add, as omitted property, the value of site developments to land already listed on the assessment roll. The Tax Court held that, because the site developments were an integral part of the land listed on the assessment roll, the assessor was not adding omitted property to the roll; he was merely correcting an undervaluation. Clackamas County Assessor v. Village at Main Street Phase II, LLC, __ OTR __, __ (Sept 1, 2009) (slip op at 9). On the assessor's appeal, we affirm the Tax Court's judgment.

Because this case arises on the taxpayer's motion for summary judgment, we state the facts in the light most favorable to the assessor. Bergmann v. Hutton, 337 Or 596, 599, 101 P3d 353 (2004). The taxpayer owns two adjacent parcels of real property in Clackamas County. As of January 1, 2004, the two parcels were bare, undeveloped land, and the assessment roll reflected the value of that undeveloped land.(2) After that time, the taxpayer began developing an apartment complex on the two parcels. In connection with that development, the taxpayer made improvements to the land; it graded the land, added roads, sidewalks, street lights, water and sewer lines, storm drains, electrical services and other utilities, and laid foundations for parking lots. The parties refer to those improvements as the site developments. The taxpayer also began constructing the apartment buildings.

Each year, every county tax assessor must assess and list on the assessment roll the real market value of land within the county separately from the real market value of "all buildings, structures and improvements thereon." ORS 308.215. By statute, "land includes any site development made to the land," such as "fill, grading, leveling, underground utilities, underground utility connections, and any other elements identified by rule of the Department of Revenue." ORS 307.010(1)(a).(3) Because the legislature has specified that "land" includes "any site development," the value for any land listed on an assessment roll should include the value of both the land and the site developments.

In 2005, the assessor physically inspected the taxpayer's property to establish the value of that property for the 2005-06 tax year. At that point, the site developments were substantially complete, and the apartment buildings were approximately 25 percent complete. Although the assessor was aware of the site developments when he inspected the property in 2005, he assigned no value to them. Instead, the assessor established the value of the land for the 2005-06 tax year by a process known as "trending." Specifically, the assessor took the value assigned to the land for the 2004-05 tax year, which reflected only the value of the undeveloped land, and adjusted that value to account for the general trend in real estate prices.(4) The assessor then listed the trended valuation for the land on the assessment roll. The assessor took a different approach for the partially constructed apartment buildings. He specifically appraised the value of those partially constructed buildings and listed that value separately on the assessment roll, as ORS 308.215 requires.

In 2006, the assessor again physically inspected the taxpayer's property to establish the value of the land for the 2006-07 tax year. At that point, the apartment buildings were 40 percent complete. The land (and site developments) remained unchanged since the last physical inspection. The assessor appraised and added the increased value of the apartment buildings to the assessment roll but assigned no value to the site developments. Instead, the assessor again adjusted the previously established value of the land to reflect property value trends for that year.

In 2007, the assessor sought to add the value of the site developments to the assessment roll as "omitted property" under ORS 311.216. Doing so increased the value of the taxpayer's land listed on the assessment roll by approximately one million dollars and increased the tax liability by approximately $18,000. The taxpayer challenged the assessor's action, claiming that the site developments did not constitute omitted property. On cross-motions for summary judgment, the Tax Court ruled in the taxpayer's favor. Relying on its decision in West Foods v. Dept. of Rev., 10 OTR 7 (1985), and a Department of Revenue rule reflecting that decision,(5) the Tax Court reasoned that, if an assessor failed to include the value of property that was "in existence at the time of an appraisal and [was] an 'integral part' of property that was physically appraised," then the assessor had undervalued the appraised property; he had not omitted property from the tax roll. Clackamas County Assessor, __ OTR at ___ (slip op at 9).(6)

On appeal, the assessor argues that the Tax Court's decision in this case and the Department of Revenue rule are inconsistent with the omitted property statute. The assessor notes that ORS 311.216 provides that, "[w]henever the assessor discovers or receives credible information * * * that any real or personal property * * * has from any cause been omitted, in whole or in part, from assessment and taxation on the current assessment and tax rolls," then the assessor shall initiate a process to add the omitted property to the assessment or the tax rolls.(7) (Emphasis added.) The assessor reasons that there is no dispute that, in trending the value of the bare, undeveloped land, he did not assign any value to the site developments. It follows, the assessor concludes, that he omitted part of the land -- the site developments -- from the assessment roll and that, under the plain terms of ORS 311.216, he may add that property to the assessment roll.

Put more generally, relying on the statutory phrase "in part," the assessor contends that the legislature intended to permit an assessor to divide a unit of property into its component parts and, if the assessor can show that the value of any part of the property (even an integral part) is not reflected in the value of the property listed on the assessment roll, then the property has been omitted "in part" from the assessment roll and the value of the component part may be added to the roll.

The taxpayer, for its part, contends that, under ORS 307.010(1)(a), site developments are an integral part of the land. The taxpayer argues that, when, as in this case, the assessor has valued the land and listed the land on the assessment roll, he may not correct the value of the land listed on the roll merely because he failed to attribute any value to an integral part of the land. In so doing, the taxpayer argues, the assessor is not adding omitted property to the assessment roll; he is revaluing the property already listed on the assessment roll. The taxpayer acknowledges that there is some tension between the statutory prohibition on correcting an error in valuation judgment and the statutory authorization to add omitted property to the assessment roll. It reasons, however, that the line that the Tax Court's decision in West Foods and the Department of Revenue's rule draw between those two statutes is a permissible one that gives effect to both statutes.

As we understand the parties' arguments, they turn on an issue of statutory interpretation -- does the statutory authorization to add property to the assessment roll that has been omitted "in part" apply to an integral part of property that is listed on the assessment roll.(8) In answering that question, we begin with the text of ORS 311.216. See State v. Gaines, 346 Or 160, 171-72, 206 P3d 1042 (2009) (setting forth methodology). That statute authorizes an assessor to initiate a process for adding "omitted property" to the assessment roll when the assessor discovers that "any real or personal property * * * has from any cause been omitted, in whole or in part, from assessment and taxation on the current assessment and tax rolls."

The text of ORS 311.216 permits both parties' interpretations. It is possible to read the phrase "in part" narrowly, as the taxpayer does, to refer only to distinct units of property. If, for example, a taxpayer owns two adjacent lots but the assessor lists only one of them on the assessment roll, then the taxpayer's real property has been omitted, in part, from the assessment roll, and ORS 311.216 authorizes the assessor to add the second lot to the roll. It is also possible to read the phrase "in part" broadly, as the assessor does, to permit the assessor to treat an integral part of a single unit of property as property that has been omitted "in part." The text, standing alone, does not resolve the parties' dispute.

The context provides greater insight. Before 1907, the Oregon legislature authorized the Board of Equalization or the tax collector to add omitted property to the assessment and tax rolls without specific notice to the taxpayer. See Oregon & California R.R. v. Lane County, 23 Or 386, 393-97, 31 P 964 (1893) (opportunity to appear at the Board of Equalization sufficient; no additional notice required before the tax collector subsequently added omitted property); Oregon & Washington Mortgage Sav. Bk. v. Jordan, 16 Or 113, 116, 17 P 621 (1888) (so holding regarding the board). In 1907, the legislature enacted the provision that, with some amendments, is now codified as ORS 311.216. Or Laws 1907, ch 267,