Northport Creek Golf Course LLC v. Township of Leelanau ( 2019 )

If this opinion indicates that it is “FOR PUBLICATION,” it is subject to
revision until final publication in the Michigan Appeals Reports.
STATE OF MICHIGAN
COURT OF APPEALS
NORTHPORT CREEK GOLF COURSE LLC, UNPUBLISHED
May 30, 2019
Petitioner-Appellant,
v No. 337374
Tax Tribunal
TOWNSHIP OF LEELANAU, LC No. 15-002908-TT
Respondent-Appellee.
ON REMAND
Before: SWARTZLE, P.J., and SAWYER and MARKEY, JJ.
PER CURIAM.
This matter is again before us following a remand to the Tax Tribunal. We now affirm.
In our original opinion, we reversed the determination of the Tax Tribunal that petitioner
was responsible for the payment of tax under the lessee-user statute, MCL 211.181. Northport
Creek Golf Course LLC v Leelanau, unpublished opinion of the Court of Appeals (No. 337374,
issued 11/28/2017). Specifically, we concluded as follows:
In sum, we conclude that a governmental entity may contract with a
private, for-profit business to manage property owned by the governmental entity
without the private business necessarily becoming a “user” under MCL 211.181.
Because neither respondent nor the tax tribunal has presented any analysis that
petitioner is a “user” under MCL 211.181 beyond petitioner’s being a for-profit
business, the tax tribunal erred in denying summary disposition to petitioner.
Petitioner was entitled to summary disposition and an order from the tax tribunal
directing respondent to recognize that exemption under MCL 211.7m and
recognizing that petitioner is not subject to tax under MCL 211.181. [Slip op at
4.]
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Thereafter, the Supreme Court reversed, concluding that we should have remanded the matter to
the Tax Tribunal to determine whether petitioner did use the golf course in connection with a for-
profit business, directing us to remand the matter to the Tax Tribunal for that determination.
Northport Creek Golf Course LLC v Leelanau, 503 Mich. 881; 918 NW2d 809 (2018). We now
review the matter following that remand.
Our review of the Tax Tribunal’s decision was summarized by Skybolt Partnership v City
of Flint, 205 Mich. App. 597, 600; 517 NW2d 838 (1994) as follows:
In the absence of fraud, this Court’s review of Tax Tribunal decisions is
limited to whether the Tax Tribunal made an error of law or adopted an improper
legal principle. Gillette Co v Dep’t of Treasury, 198 Mich. App. 303, 306; 497
NW2d 595 (1993); Dow Chemical Co v Dep’t of Treasury, 185 Mich. App. 458,
462–463; 462 NW2d 765 (1990). Additionally, this Court “accept[s] the factual
findings of the tribunal as final, provided they are supported by competent,
material, and substantial evidence.” Id.
Skybolt, 205 Mich App at 601, also observed that the “lessee-user tax is intended to ensure that
lessees of tax-exempt property will not receive an unfair advantage over lessees of privately
owned property.”
After reviewing the dictionary definitions of “use” and “user”, the Tax Tribunal
concluded that petitioner falls within those definitions. We are concerned that the Tax Tribunal
may have taken a somewhat broad view of “use” of the property. That view might, in other
circumstances, ensnare property management companies in the manner that we warned against in
our original opinion. Nevertheless, we find the following conclusion by the Tax Tribunal to be
persuasive:
The Tribunal finds that these definitions of users or use are consistent with
NCGC’s operations at the subject property. Mr. Collins, the sole Member of
Northport Creek, LLC, the owner of the subject golf course before its donation to
the Village of Northport, purchased the land, constructed and ran the for-profit
course, and paid property taxes to Leelanau Township and the Village of
Northport. On the same day of its donation, Mr. Collins, sole Member of NCGC,
signed a Management Agreement with the Village. NCGC was not paid a fee for
its management services but was given 95% of the gross revenue from the course.
Ultimately, petitioner presents little argument that it is not a “user” under the statute beyond the
fact that the golf course has consistently operated at a loss. But we already rejected that
argument in our previous opinion. Slip op at 3. Moreover, as the Tax Tribunal found, “Mr.
Collins reported all profit and losses from NCGC and several other LLCs on his personal income
tax return, and in 2014 and 2015, offset profits with losses, and personally made money.” This
reinforces the Tribunal’s conclusion that petitioner operated the golf course as a business, rather
than operating a property management business that provided such services to the village in
operating the village’s golf course.
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Accordingly, we are not persuaded that the Tax Tribunal erred in determining that, under
the structure established by the agreement in this case, this is not a case of petitioner operating a
management company managing a golf course, but using the Village’s property to operate a golf
course company.
This conclusion necessitates that we address a question that we found unnecessary to
address in our original opinion, whether the “concession exemption” to the lessee-user tax
applies. Skybolt, 205 Mich. App. at 602, set forth the standard in analyzing the applicability of a
tax exemption:
Tax exemptions are strictly construed against the taxpayer and in favor of
the taxing authority. Ladies Literary Club v Grand Rapids, 409 Mich. 748, 753;
298 NW2d 422 (1980). Because taxation is the rule and exemption the exception,
the intention to make an exemption must be expressed in clear and unambiguous
terms. Nomads, Inc v Romulus, 154 Mich. App. 46, 55; 397 NW2d 210 (1986).
The Legislature is presumed to have intended the meaning it plainly expressed.
Guardian Industries Corp v Dep’t of Treasury, 198 Mich. App. 363, 381; 499
NW2d 349 (1993). If the meaning of the statutory language is clear, judicial
construction is normally neither necessary nor permitted. Id. Every phrase,
clause, and word in a statute must be given effect, if possible. Jenkins v Great
Lakes Steel Corp, 200 Mich. App. 202, 209; 503 NW2d 668 (1993).
Applying these principles to the plain language of the concession
exemption provided in MCL § 211.181(2)(b); MSA § 7.7(5)(2)(b) as presently
written, it is apparent that in order for the exemption to apply, two requirements
must be satisfied: (1) the property must be used as a concession, and (2) it must be
available for use by the general public. The Legislature’s use of the conjunctive
“and” in subsection 2(b) must be given effect and indicates that both of these
conditions must be satisfied before the exemption will apply. Further, requiring
the two conditions to be satisfied is consistent both with the purpose of the user-
lessee statute and with tax exemption statutes in that it favors the taxing authority
and discourages unfair advantage over lessees of private property. Nat’l
Exposition, supra; Nomads, Inc, supra.
In arguing that the concession exemption applies, petitioner relies solely on our decision
in Kalamazoo v Richland Twp, 221 Mich. App. 531; 562 NW2d 237 (1997). In that case, the City
of Kalamazoo owned land in Richland Township upon which a golf course was operated by the
Kalamazoo Municipal Golf Association (KMGA) under a management agreement with the city.
This Court, in addition to concluding that the lesser-user statute did not apply, also concluded
that, even if the statute did apply, so did the concession exemption:
Here, it is not disputed that the management agreements required the KMGA to
provide open golf to the general public.
In addition, Eastern Hills was used as a concession. The Michigan
Supreme Court has defined a “concession” as a “ ‘privilege or space granted or
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leased for a particular use within specified premises.’ ” Kent Co v Grand Rapids,
381 Mich. 640, 651; 167 NW2d 287 (1969), quoting Detroit v Tygard, 381 Mich.
271, 275; 161 NW2d 1 (1968). Incident to a concession is the concept of specific
obligations on the part of the privileged party to maintain particular services at
specified times. Tygard, supra, p 275. These obligations of the concessionaire
must “bear a reasonable relationship to the purposes of” the granting entity. Id., p
276; Seymour v Dalton Twp, 177 Mich. App. 403, 410; 442 NW2d 655 (1989).
Here, there is no question that the KMGA was granted particular privileges within
specified premises.
In addition to the privileges that it received under the management
agreements, the KMGA also undertook specific obligations. As the MTT
correctly noted, the agreements required the KMGA to provide to the general
public open golf, league, and tournaments at reasonable times, to operate food and
golf-equipment concessions, and to maintain the golf course to a specified
standard. In addition, as stated earlier during our discussion of the standing issue,
the agreements provided Kalamazoo with extensive oversight of the KMGA’s
operation of Eastern Hills. The specificity of the management agreements
satisfied the requirement of specific obligations to maintain particular services at
specified times. See Kent Co, supra, pp 646–648, 652–653; compare Tygard,
supra, pp 275–276; Golf Concepts [v City of Rochester Hills, 217 Mich. App. 21,
29; 550 NW2d 802 (1996)]; Seymour, supra, pp 408–409.
Finally, the obligations of the KMGA were reasonably related to public
purposes. The broader purpose of the lessee-user tax is to eliminate the unfair
advantage that private-sector users of tax-exempt property would otherwise wield
over their competitors leasing privately owned property. Seymour, supra, pp 410.
Merely privatizing the operation of a golf course is contrary to this purpose. Golf
Concepts, supra, pp 29; Seymour, supra, pp 410. Here, in contrast to those cases,
Kalamazoo did not simply privatize the operation of Eastern Hills. Rather, it
entered into a contract with the KMGA that granted Kalamazoo extensive
oversight in order to protect the public purpose of providing the general public a
recreational opportunity to play golf. Accordingly, the MTT’s finding that the
KMGA used Eastern Hills as a concession for purposes of the lessee-user statute
was supported by competent, material, and substantial evidence. MCL
211.181(2)(b); MSA 7.7(5)(2)(b); Kent Co, supra, pp 652–653. [Kalamazoo, 221
Mich. App. at 538-539.]
The Tax Tribunal distinguished this case from Kalamazoo, relying principally on the
decision in Seymour and Golf Concepts:
Petitioner alternatively contends that even if it is determined that the
golf course is operated “for profit” it is used as a concession available for use
by the general public. It does not appear to be disputed that the Management
Agreement requires the property to be open to the public. Rather, the dispute
is regarding whether the property is a “concession” as required by the statute.
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The Tribunal has further reviewed the Management agreement and finds,
unlike the agreement in the Kalamazoo case, Petitioner, rather than the
Village has “extensive oversight” with regard to the operation of the subject
property. The Tribunal finds that Petitioner’s Management Agreement is
more akin to the operation agreements in Seymour v Dalton Twp, and Golf
Concepts v City of Rochester Hills. The rulings in Seymour and Golf
Concepts held that the agreements did not impose appropriate obligations and
restrictions upon the lessee. [Footnotes omitted.]
The Court in Seymour rejected the conclusion that a concession existed where the entire
operation of a golf course was privatized:
The legal criteria supplied by reported decisions supplies minimal
guidance. Unlike this case, reported decisions arise only in the context of
concessions granted by airports. However, we conclude, based on the foregoing,
that the agreement in this case does not amount to a concession. The agreement
does little to impose obligations and restrictions upon Seymour stated with the
requisite degree of specificity. Terms of an agreement characteristic of a
concession, e.g., minimum hours, standards of service, or oversight of operations
by the city, are conspicuously absent. Oversight of fees charged to the public is
not strenuous; all that is required is that the fees will not exceed the upper end of
that range of fees charged by competitors. The maintenance requirement is
consistent with the city’s interest in protecting its reversion after the termination
of the agreement and does not appear to be directed toward exacting some
specific term or service for the public benefit. Seymour had an unacceptable
degree of discretion to run the golf course and related facilities as he saw fit,
without the imposition of obligations directed toward the fulfillment of a public
purpose.
We find ourselves in agreement with the conclusion of the hearing officer
incorporated by the Tax Tribunal:
“[T]he notion of a ‘concession’ ... is ... that of a subsidiary business
related to a public-oriented operation.... [A holding to the contrary that] would
allow for a self-contained public entity ... leased to the private sector to qualify as
a concession ... would give carte blanche to a governmental unit to lease out, for
profit, one of any number of governmental enterprises and, with minimal
restrictions on its operation, gain for it a favored tax status by simply
denominating it a ‘concession.’ ”
Although the cases discussed earlier did not need to reach the question of
whether a concession need be incidental to and subsumed by the larger public
purpose of the granting governmental entity, our conclusion in the affirmative is
supported by a close reading of Tygard, supra. A concession is there defined as a
“privilege or space granted or leased for a particular purpose within specific
premises.” Id., 381 Mich at 275 (emphasis added). The concessionaire must be
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obligated to offer services that “bear a reasonable relationship to the purposes” of
the granting entity. Id. at 276. If that entity simply privatizes its entire operation,
as the city did here, exemption from taxation would be at odds with the broader
purpose of the lessee-user tax, which is to eliminate the unfair advantage that
private-sector users of tax-exempt property would otherwise wield over their
competitors leasing privately owned property. [Seymour, 177 Mich. App. at 408-
410.]
Similarly, in Golf Concepts, 217 Mich. App. at 29, this Court rejected that the golf course
operations in that case constituted a concession:
The provisions in the lease contract between the parties do not rise to the level of
specific obligations on the part of petitioner, the privileged party, to maintain
particular services at specified times. The provisions do not include requirements
for minimum hours of operation, for petitioner’s standards of service, or for
respondent’s oversight of the golf course operations. While the lease provisions
demonstrate that respondent had some control over the operations, the provisions
address broader management issues rather than specific obligations. For example,
the lease in this case provides that respondent has the right to change the prices
charged by petitioner. The Seymour Court observed, however, that the
“[o]versight of fees charged to the public is not strenuous.” Id. at 409. Likewise,
in this case respondent had the right to inspect and regulate the maintenance of the
property. The Seymour Court stated that the maintenance was consistent with the
city’s goal in protecting the property and that it did not exact a specific term or
service for the public benefit. Id.
After reviewing these decisions, the Tax Tribunal rejected the petitioner’s argument that
the concession exemption applies in this case:
Here, the Management Agreement sets forth the following operation
requirements:
A. NCGC shall operate the Golf Course on a play for pay basis in a manner
that is available to all members of the general public without
discrimination and regardless of residency.
B. Hours of operation for the Golf Course and related facilities shall be set at
the reasonable discretion of NCGC, provided, however they are
reasonably consistent with other golf courses in the northern lower
peninsula of Michigan that provide open golf, outings, and league play.
C. The Village shall not be responsible for any memberships or gift
certificates issued.
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D. NCGC shall encourage youth golf, including cooperation and
encouragement through promotional programs of instruction, tournaments
and other activities that focus on youth participation.
E. For safety and maintenance reasons, the Golf Course shall not be used for
non-golf activities during the term of this Agreement without the prior
written consent of NCGC and the Village.
Like the agreements in Seymour and Golf Concepts, this does not set forth
minimum hours of operation and leaves the hours within Petitioner’s
discretion, there is no oversight of the overall operations by the Village, and
there are no true standards of service other than to require the encouragement
of youth golf. The Tribunal finds that, based upon the Management
Agreement, it is unable to conclude that Petitioner has demonstrated that the
subject property qualifies as a concession under MCL 21l.181(2)(b).
Given that tax exemptions are narrowly construed against the taxpayer and the deference
that we must give to the decisions of the Tax Tribunal, we are not persuaded that the Tax
Tribunal erred in determining that the concession exemption does not apply in this case. We
agree with the Tax Tribunal that the agreement in this case left too much operational control in
the hands of petitioner in privatizing the entire golf course operation. That is, similar to our
analysis of the lessee-user question, under this agreement, petitioner operated a golf course on
the village’s property rather than operating a concession at the village’s golf course.
Affirmed. Respondent may tax costs.
/s/ Brock A. Swartzle
/s/ David H. Sawyer
/s/ Jane E. Markey
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