Filed: July 6, 2001

IN THE SUPREME COURT OF THE STATE OF OREGON

HYUNDAI SEMICONDUCTOR AMERICA,

Respondent,

v.

CITY OF EUGENE,
COUNTY OF LANE,

Appellants.

(OTC 4167; SC S46528)

On appeal from the Oregon Tax Court.*

Carl N. Byers, Judge.

Argued and submitted September 11, 2000.

William F. Gary, of Harrang Long Gary Rudnick P.C., Eugene, argued the cause and filed the briefs for appellants. With him on the briefs were Glenn Klein and Judith Giers, of Harrang Long Gary Rudnick P.C., and Teresa J. Wilson and David B. Williams, of the Lane County Office of Legal Counsel.

Robert T. Manicke, of Stoel Rives LLP, Portland, argued the cause and filed the brief for respondent. With him on the brief were Henry C. Breithaupt and Richard S. Gleason.

Before Carson, Chief Justice, and Gillette, Durham, Leeson, and Riggs, Justices.**

RIGGS, J.

The decision of the Tax Court is vacated. The case is remanded to the Tax Court with instructions to dismiss the complaint.

*14 OTR 557 (1999).

**Van Hoomissen, J., retired December 31, 2000, and did not participate in the decision of this case; Kulongoski, J., resigned June 14, 2001, and did not participate in the decision of this case; De Muniz, J., did not participate in the consideration or decision of this case.

RIGGS, J.

In this tax case, plaintiff challenges a condition imposed by defendants on applicants for a property tax exemption in an enterprise zone. On summary judgment motions, the Oregon Tax Court ruled that the condition violated ORS 285.577(4) (1995) (set out below). (1) Hyundai Semiconductor America v. City of Eugene, 14 OTR 557, 565 (1999). For the reasons that follow, we conclude that plaintiff failed to exhaust its administrative remedies. We therefore vacate the decision of the Tax Court and remand the case to that court with instructions to dismiss the complaint.

The following undisputed facts are taken from the Tax Court's opinion:

"By statutes first enacted in 1985, the state authorizes the establishment of enterprise zones. The basic purpose of an enterprise zone is to attract industries that will create new jobs for the area. The primary incentive for new industries to locate in an enterprise zone is a property tax exemption for three years.

"Defendants co-sponsored the establishment of the West Eugene Enterprise Zone in 1986. In 1995, Plaintiff applied for precertification,[ (2)] proposing to construct a plant to manufacture semiconductors. The application estimated the total cost of the plant at $1,294,500,000, to be constructed in three phases. Defendants approved the application on September 8, 1995, precertifying Plaintiff for Phase I. Plaintiff began construction of Phase I and anticipates construction of Phases II and III in the next ten years.

"At this point, two features of the rather lengthy Enterprise Zone Act become prominent. First, ORS 285.577(4) delegates authority to the sponsor of an enterprise zone to impose additional conditions for precertification. Second, if an enterprise zone terminates, then businesses already in the zone may qualify for additional tax exemptions for new construction within the boundaries of the expired zone. ORS 285.587.

"The West Eugene Enterprise Zone was scheduled to terminate by operation of law at midnight on June 30, 1997. As co-sponsors, Defendants decided not to seek renewal of the zone. In addition, Defendants decided to impose an additional condition hours before the enterprise zone terminated. Each of the Defendants adopted a new resolution [(the June resolutions)] requiring qualified businesses to make a 'public benefit contribution' of up to 15 percent of the tax exemption in order to qualify for the tax exemption."

Hyundai, 14 OTR at 559.

The June resolutions also authorized the formation of a committee that, in any given case, would consider seven factors and recommend to defendants the appropriate amount of a qualifying business's public benefit contribution. (3) Under the June resolutions, however, defendants' governing bodies could select an amount different from the committee's recommendation. If defendants disagree on an amount, then the amount would be the lesser of the committee's recommendation or 10 percent of the tax exemption. The June resolutions provided that 40 percent of the funds raised from public benefit contributions would be allocated to defendant county, 40 percent to defendant city, and the remaining 20 percent would be allocated "among the City, County and local education services, including Section 501(c)(3) tax exempt education foundations."

Through identical resolutions passed in July and December 1997, defendants each adopted a point system for the seven factors. That point system, which accords different weight to the various factors, exempts a business from the public benefit contribution if it scores 80 points or higher. For example, a business receives 25 points if its average wage for all new jobs is between 100 percent to 110 percent of the average county wage; 35 points if its average is between 110 percent to 115 percent; and 40 points if its average is greater than 115 percent. By contrast, the most a business can receive under the factor regarding assessed value is one point. The July and December resolutions also clarified several of the seven factors (e.g., explaining that a "small business" means 50 or fewer people).

On August 1, 1997, plaintiff filed its complaint in the Tax Court. In its first claim, plaintiff sought a declaration that the public benefit contribution requirement in the June resolutions violated ORS 285.577(4). (4) In its second claim, plaintiff sought a determination that the public benefit contribution was a tax within the meaning of Article XI, section 11b(2)(b), of the Oregon Constitution, and thus, was subject to the limits of Article XI, sections 11 and 11b, of the Oregon Constitution (Measure 5 claim). (5) Third, plaintiff sought a declaration that, if the public benefit contribution is valid under ORS 285.577(4), then that statute violates Article I, section 32, and Article IX, section 1, of the Oregon Constitution (the Uniformity Clauses); Article I, section 20, of the Oregon Constitution (the Equal Privileges and Immunities Clause); and the Equal Protection Clause of the Fourteenth Amendment to the United States Constitution. (6)

Defendants moved to dismiss, arguing, inter alia, that plaintiff's claims are not ripe and that plaintiff had failed to exhaust its administrative remedies. Plaintiff responded by moving to stay proceedings in the Tax Court so that plaintiff could bring its first and third claims before the Department of Revenue (department). The Tax Court ruled that plaintiff's claims were ripe. The court denied plaintiff's motion for a stay, reasoning that, under ORS 305.580, (7) plaintiff's Measure 5 claim was entitled to immediate review and, although plaintiff normally should have exhausted its administrative remedies as to its first and third claims, the court would consider all the claims together to foster judicial economy. In a separate order entered that same day, the court dismissed plaintiff's Measure 5 claim.

On the parties' subsequent motions for summary judgment, the Tax Court held that the public benefit contribution requirement was invalid under ORS 285.577(4) because the June resolutions had failed to establish standards for the imposition of the contribution and because the contribution is not reasonably related to providing job opportunities. Accordingly, the court declared all defendants' resolutions pertaining to the public benefit contribution void and further declared that plaintiff is not required to pay any public benefit contribution. Defendants appealed. At issue in this court is whether the Tax Court erred in ruling that the public benefit contribution requirement violated ORS 285.577(4). Neither plaintiff's Measure 5 claim nor its claim that ORS 285.577(4) is unconstitutional is before us on appeal.

The parties first dispute whether plaintiff's claim is ripe for judicial determination. We have reviewed the record and the arguments of counsel, and we conclude that the case is ripe. Plaintiff is a business in the West Eugene Enterprise Zone and is qualified to apply for an additional enterprise zone tax exemption in connection with new construction. Defendants assert the right to impose the public benefit contribution on businesses in the position of plaintiff. Plaintiff's interest in obtaining a favorable declaration is manifested not only by the threat of being required in the future to make a public benefit contribution, but also by a present incentive to minimize any payment by adjusting its conduct before applying for precertification. This case is ripe.

We turn to defendants' argument that plaintiff has failed to exhaust its administrative remedies. ORS 305.275(4) (1995) precludes a party from appealing to the Tax Court unless it has exhausted its administrative remedies:

"Except as provided in ORS * * * 305.580 to 305.591 [relating to Measure 5 claims], no person shall appeal to the Oregon Tax Court or other court on any matter arising under the revenue and tax laws administered by the department unless the person first exhausts the administrative remedies provided before the department and the director." (8)

There is no dispute that plaintiff did not present its claims to the department before filing in the Tax Court.

Plaintiff argues that it had no adequate administrative remedy to exhaust and, alternatively, that judicial economy would not be served by requiring exhaustion here. Defendants disagree, relying on this court's decision in Nutbrown v. Munn, 311 Or 328, 811 P2d 131 (1991). Plaintiff responds that Nutbrown is distinguishable. Because Nutbrown is pivotal to our disposition of this case, we discuss it in detail below.

In Nutbrown, the plaintiffs had filed a complaint in the Tax Court alleging claims for refund, claims in quasi-contract, claims in constructive trust, claims for an order setting aside certain tax payments already made, and claims for violation of their civil rights under 42 USC