City of Erie, & Erie City S.D. v. Erie County Bd. of Assess. Appeals & Erie County Convention Ctr. Auth. ( 2021 )

IN THE COMMONWEALTH COURT OF PENNSYLVANIA
City of Erie, and Erie City :
School District, :
:
Appellants :
:
v. : No. 1587 C.D. 2019
: No. 1588 C.D. 2019
Erie County Board of Assessment : Argued: October 14, 2020
Appeals and Erie County Convention :
Center Authority :
BEFORE: HONORABLE MARY HANNAH LEAVITT, President Judge1
HONORABLE RENÉE COHN JUBELIRER, Judge
HONORABLE PATRICIA A. McCULLOUGH, Judge
HONORABLE ANNE E. COVEY, Judge
HONORABLE MICHAEL H. WOJCIK, Judge
HONORABLE CHRISTINE FIZZANO CANNON, Judge
HONORABLE ELLEN CEISLER, Judge
OPINION NOT REPORTED
MEMORANDUM OPINION
BY JUDGE WOJCIK FILED: July 14, 2021
City of Erie and Erie City School District (collectively, Taxing
Authorities) appeal the order of the Erie County Court of Common Pleas (trial
court) granting the summary judgment motion of the Erie County Board of
Assessment Appeals (Board) and Erie County Convention Center Authority
(Convention Authority) and finding that the Sheraton (Sheraton) and Courtyard by
Marriott (Courtyard) hotels (collectively, Hotels) and appurtenant parking garages
1
This case was assigned to the opinion writer before January 4, 2021, when Judge
Leavitt served as President Judge.
owned by the Convention Authority are not subject to real estate taxation by the
Taxing Authorities. We affirm.
Pursuant to Section 2399.4 of the Third Class County Convention
Center Authority Act (Act),2 the Convention Authority was created by County
Ordinance No. 46-2000, enacted on April 25, 2000, and City Ordinance No. 22-
2000, enacted on May 17, 2000. Section 2399.2 of the Act states that the
Convention Authority “shall exist and operate as [a] public instrumentalit[y] of the
Commonwealth for the public purpose of promoting, attracting, stimulating,
developing and expanding business, industry, commerce and tourism[.]” 16 P.S.
§2399.2.
Pursuant to Section 2399.52(d)(1) of the Third Class County
Convention Center Authority Act (Alternative Provision) (Alternative Act),3 the
2
Act of August 9, 1955, P.L. 323, as amended, added by the Act of November 3, 1999,
P.L. 461, 16 P.S. §2399.4. Section 2399.4 states, in relevant part:
The governing bodies of a third class county and the
political subdivision constituting the county seat . . . may create a
body corporate and politic to be named the ……… County
Convention Center Authority to be created as a public authority
and government instrumentality. . . . The exercise by the authority
of the powers conferred by this subdivision is hereby declared to
be and shall for all purposes be deemed and held to be the
performance of an essential public function.
3
Added by the Act of October 18, 2000, P.L. 541, 16 P.S. §2399.52(d)(1). Section
2399.52(d)(1) of the Act states, in pertinent part:
A county which has created (either individually or jointly
with its county seat) a third class county convention center
authority . . . after January 1, 2000, may opt to have such authority
treated as having been organized under the provisions of this
subdivision.
2
County opted to have the Convention Authority treated as if organized under that
statute. Section 2399.55(a) of the Alternative Act states, in relevant part:
(a) An authority created under this subdivision shall
be a public body, corporate and politic, exercising public
powers of the Commonwealth as an agency and
instrumentality and shall be for the purpose, without
limitation, by itself . . . of acquiring, holding, developing,
designing, constructing, improving, maintaining,
managing, operating, financing, furnishing, fixturing,
equipping, repairing, . . . and owning convention center
facilities, or parts thereof. Such convention center
facilities need not comprise a single, integrated complex
but may be located at one or more locations within the
county and may function independently of one another.
16 P.S. §2399.55(a).
In turn, Section 2399.53 of the Alternative Act defines “‘convention
center’ or ‘convention center facilities,’” in pertinent part, as:
[A]ny land, improvement, structure, building, or part
thereof, or property interest therein, . . . owned by . . . an
authority, appropriate for any of the following: large
public assemblies, the holding of conventions,
conferences, trade exhibitions and other business, social,
cultural, scientific, sports, recreational, artistic and public
interest events, performances and exhibitions, and all
facilities, furniture, fixtures and equipment necessary and
incident thereto, including hotels, meeting rooms, dining
rooms, kitchens, ballrooms, reception areas,
registration and prefunction areas . . . and areas
appurtenant to any of the preceding, and also including
any other land, buildings, structures or facilities for use
or planned for use in conjunction with the forgoing,
including, but not limited to, . . . off-street parking . . . .
16 P.S. §2399.53 (emphasis added).
Additionally, Section 2399.69 of the Alternative Act states, in relevant
part:
3
The effectuation of the authorized purposes of
authorities created under this subdivision shall and will
be in all respects for the benefit of the people of this
Commonwealth, for the increase of their commerce and
prosperity and for the improvement of their health and
living conditions; and since authorities, as public
instrumentalities of the Commonwealth, will be
performing essential governmental functions in
effectuating these purposes, the authorities shall not be
required to pay any taxes or assessments upon a
convention center facility, or parts thereof, or property
acquired or used or permitted to be used by them for
these purposes[.]
16 P.S. §2399.69.
Pursuant to the foregoing, the Convention Authority built the Bayfront
Convention Center (BCC) located on the shoreline of Presque Isle Bay, which
opened on August 2, 2007. At the same time, the Convention Authority
constructed the 200-room Sheraton, which opened in 2008. The Convention
Authority also constructed the 192-room Courtyard, which opened in 2015.
From its inception, the plan for the BCC included an adjoining host
hotel of at least 200 rooms as an essential component to the ultimate success of the
convention center. For the 2016-2018 period, the Sheraton had an overall average
occupancy rate of approximately 72.2%, and the Courtyard had an overall average
occupancy rate of 64.2%. For that same period, the Sheraton had a Convention
Authority venue-related occupancy rate of 49.2%, and the Courtyard has had a
related occupancy rate of 36.4%. The estimated range of room occupancy for the
Sheraton by guests who are affiliated with a Convention Authority event is
between 34.19% to 49.2%, and for the Courtyard between 33.2% to 36.4%. The
Convention Authority has stipulated that, to the extent that hotel rooms are not
needed for people attending events at any of its properties, they are open to and are
4
rented by members of the general public. The trial court assumed that at least 63%
of hotel occupancy is attributable to the general public.
On September 28, 2016, the Board sent a “Notice of Change of
Assessment” to the Convention Authority regarding the tax-exempt status of the
hotel properties. On November 3, 2016, the Convention Authority appealed the
change of assessment challenging the hotel properties’ taxable status, but not
contesting the fair market values or assessments themselves. On December 12,
2016, the Board held a consolidated hearing on the appeals. On December 13,
2016, the Board issued a “Hearing Decision Notification” in which it did not
change the amount of assessments, but granted each hotel property tax-exempt
status.
On January 11, 2017, the Taxing Authorities appealed the Board’s
decision with respect to each of the hotel properties to the trial court. In the
appeal, the Taxing Authorities argued that to the extent the Hotels rent rooms to
the general public, and not to guests associated with the BCC venue, they are
subject to taxation because the renting of rooms to the general public is not the
purpose of the Convention Authority. The Convention Authority argued that its
hotel properties are immune from taxation as a Commonwealth agency under
Section 2399.55(a) of the Alternative Act, and exempt from taxation under Section
2399.69 of the Alternative Act.
The trial court granted the Convention Authority’s motion for
summary judgment. The trial court held:
As in Delaware [County Solid Waste Authority v. Berks
County Board of Assessment Appeals, 626 A.2d 528 (Pa.
1993) (Delaware County),] and Reading [Housing
Authority v. Board of Assessment Appeals of Berks
County, 103 A.3d 869 (Pa. 2014) (Reading)], the Hotels’
5
rooms rented to the general public cannot be viewed as a
separate component of the Hotels’ operations. They are a
part of an integrated facility [the] functioning [of which]
is consistent with the legislatively prescribed overall
public purpose of a convention center authority. . . .
Here[,] having hotel rooms available for the general
public serves the same purposes as having hotel rooms
available to be rented by guests attending specific
[Convention] Authority events. It’s the availability of the
rooms and related hotel facilities that further the
[Convention] Authority’s purpose of the promotion,
attraction, stimulation, development and expansion of
business, industry, commerce and tourism. In the end,
there is nothing in the [Alternative] Act, its legislative
history or in the case law that supports the notion that the
[Convention] Authority’s tax immunity is limited to the
value of its Hotels as defined by usage from particular
patrons. By renting its excess room capacity to the
general public, the [Convention] Authority is engaging in
activity that anyone operating a hotel would normally be
expected to do. It is well within the authorized use of its
property and consistent with its scope of operation.
Trial Court 10/11/19 Opinion at 17. The trial court distinguished Southeastern
Pennsylvania Transportation Authority (SEPTA) v. Board of Revision of Taxes,
833 A.2d 710 (Pa. 2003) (SEPTA), explaining: “Here, as opposed to the facts in
SEPTA, the [Convention] Authority through its ownership and operation of the
Hotels is pursuing the very essence of its mission.” Trial Court 10/11/19 Opinion
at 14.
As a result, the trial court “conclude[d] that owning and operating the
Hotels are directly related to the authorized public purposes of the [Convention]
Authority and convention center facilities and therefore within the scope of the
[Convention] Authority’s immunity from taxation.” Trial Court 10/11/19 Opinion
at 18. Additionally, the trial court held that
6
owning and operating a hotel [are] a part of the
[Convention] Authority’s specified public purpose of
owning and operating convention center facilities and the
practice of renting its excess capacity to the general
public does not diminish that purpose and therefore the
[Convention] Authority is meeting the requirements of its
statutory tax exemption.
Id. The Taxing Authorities then appealed the trial court’s order to this Court, and
we consolidated the appeals for disposition.4
On appeal, the Taxing Authorities assert that the trial court erred in
granting summary judgment because both the concepts of tax immunity and tax
exemption must consider the actual use of the property. In this case, the hotel
properties should be partially taxed to the extent that their guests are not attending
BCC-related events. The evidence showed that the Hotels are occupied by non-
BCC patrons 63% of the time, so that 37% of the Hotels’ usage is limited to
Convention Authority events. The trial court interpreted the Convention
Authority’s enabling legislation too broadly because a hotel use is not within its
operations as evidenced by the fact that it transferred all hotel management
activities over to a third party. The trial court also violated the rules of statutory
construction5 in that it failed to distinguish between “convention centers” and
4
“Our scope of review of a trial court’s order granting or denying summary judgment is
plenary, and our standard of review is clear: the trial court’s order will be reversed only where it
is established that the court committed an error of law or abused its discretion.” Bay Harbor
Marina Limited Partnership v. Erie County Board of Assessment Appeals, 177 A.3d 406, 414
n.10 (Pa. Cmwlth. 2018) (citation omitted). “Summary judgment is proper only where there is
no genuine issue as to any material fact and it is clear that the moving party is entitled to a
judgment as a matter of law.” Id.5
See Section 1921(a) and (b) of the Statutory Construction Act of 1972, 1 Pa. C.S.
§1921(a), (b) (“The object of all interpretation and construction of statutes is to ascertain and
effectuate the intention of the General Assembly. Every statute shall be construed, if possible, to
(Footnote continued on next page…)
7
“convention center facilities” as defined in the Alternative Act, and these terms are
not interchangeable. In sum, the Taxing Authorities argue that operating hotels is
not a statutory purpose of the Convention Authority, and the trial court’s
interpretation of the provisions of the Alternative Act has led to an absurd result.6
We do not agree.
As the Supreme Court has explained:
The elementary premise underlying taxation is that
the power to tax is exclusively vested within the
legislature. “Property is immune from taxation if the
taxing body has not been granted the authority to levy a
tax.” As a general matter, property owned by the
Commonwealth and its agencies is immune from taxation
by a local subdivision in the absence of express statutory
authority. It cannot be presumed that general statutory
provisions giving local subdivisions the power to tax
local real estate, were meant to include property owned
by the Commonwealth, since to allow such taxation
would upset the orderly processes of government. Thus,
in order to tax property owned by the Commonwealth, a
local subdivision must establish that it has the authority
to tax such property.
SEPTA, 833 A.2d at 713 (citations omitted).
Moreover, as this Court has observed:
(continued…)
give effect to all its provisions,” and “[w]hen the words of a statute are clear and free from all
ambiguity, the letter of it is not to be disregarded under the pretext of pursuing its spirit.”).
6
In this regard, the Taxing Authorities’ reliance on Pennsylvania State System of Higher
Education v. Indiana Area School District (Pa. Cmwlth., No. 184 M.D. 2011, filed April 5,
2012), aff’d per curiam, 69 A.3d 236 (Pa. 2013), is misplaced because our opinion in that matter
was later overruled in Indiana University of Pennsylvania v. Jefferson County Board of
Assessment Appeals, 243 A.3d 745, 754 n.12 (Pa. Cmwlth. 2020).
8
In determining whether a municipal authority has
forfeited its tax immunity status, a court must employ
what has become known as the “public-use” test. It
provides that, “a court must first look at the broader
question of whether the agency’s action is within its
‘authorized purposes and powers.’” [SEPTA, 833 A.2d at
716]. In addition, the court must also consider the scope
of the immunity, i.e., whether the property was acquired
or used for a purpose that is within the operation of the
agency. In making this determination, the court must
keep in mind that immunity is not limited to the absolute
minimum of property necessary for operations
Reading, 103 A.3d at 872-73.
As outlined above, pursuant to the provisions of Section 2399.53 of
the Alternative Act, the operation of the hotels falls within the broad definition of
“‘convention center’ or ‘convention center facilities,’” such that rental of rooms to
the general public does not fall outside of the core functions of this
“Commonwealth agency and instrumentality” as provided in the Act and the
Alternative Act. As noted by the trial court, and contrary to the Taxing
Authorities’ assertion, there is no distinction made within the statutory definition
of “‘convention center’ or ‘convention center facilities,’” and we will not insert
language into the Alternative Act to create one. See, e.g., Commonwealth ex rel.
Fox v. Swing, 186 A.2d 24, 27 (Pa. 1962) (“It is not for us to legislate or by
interpretation to add to legislation matters which the legislature saw fit not to
include.”).
In SEPTA, the Supreme Court quoted this Court in explaining that
the [statutory] purpose of SEPTA is to operate a
transportation system in Southeastern Pennsylvania.
While SEPTA is free to lease its real estate to tenants and
is under the direction to raise revenue, clearly the leasing
of real estate, solely to raise revenue, is not an activity
connected to SEPTA’s purpose. Therefore, SEPTA
9
property leased to commercial tenants is not immune
from taxation.
SEPTA, 833 A.2d at 717 (citation omitted). That is why the Supreme Court
determined:
There is no question that [Section 1741(a)(12) and
(24) of the of the Public Transportation Law,] 74 Pa. C.S.
§1741(a)(12) and (24)[,] encourages and authorizes
SEPTA to raise revenues and thereby decrease expenses,
which has the benefit of assisting the public at large in
keeping public funding down. In fact, that is just what
happened here, since SEPTA was able to raise additional
revenue through rental income by entering into
commercial leases with commercial entities. However,
[Section] 1741 does not provide a basis for concluding
that in becoming a commercial landlord, SEPTA is
absolved or exempted from its responsibility for paying
real estate tax on the portion of the property that is
utilized for such a commercial venture. In that respect,
SEPTA is like any other commercial landlord with which
it competes as a landlord.
Id.
By contrast, in Delaware County, the entire tract of land acquired by a
municipal solid waste authority from a private entity (R.R.M.) to operate a landfill,
including land used as a buffer, was within the municipal solid waste authority’s
enumerated purposes and powers set forth in the former Section 306(a)(7) of the
Municipal Authorities Act of 1945.7 The Supreme Court found that “the fact that
the landfill was operated through the R.R.M. corporate vehicle did not alter the fact
that the [a]uthority controlled R.R.M., owned the land, and operated the site. As
such, we find that there is no basis to deny the [a]uthority immunity from local
taxes for the property in this case.” Delaware County, 626 A.2d at 533.
7
Act of May 2, 1945, P.L. 382, as amended, formerly 53 P.S. §306(a)(7), repealed by the
Act of June 19, 2001, P.L. 237.
10
Accordingly, “[i]n Delaware County, [the Supreme Court] concluded that the
excess property was immune from taxation since ‘there was no evidence that [the
excess property] was acquired or used for some purpose other than as part of the
[statutorily-authorized l]andfill operation.’ [Id.] at 532.” SEPTA, 833 A.2d at 717.
Likewise, in Reading, with respect to the tax immunity of the 80% of
market-rate housing units that were interspersed with the 20% of low-income
subsidized units in the property owned by the Reading Housing Authority (RHA),
this Court observed:
[T]he market-rate units cannot be viewed in isolation.
Both the market-rate and public units form an integrated
whole and, pursuant to the findings of fact, the former are
critical to the success of the latter. Specifically, the fact-
findings indicate that the market-rate units were essential
to obtaining the financing needed for the property to be
constructed, including the public units, and the RHA
issued bonds guaranteed by [the United States
Department of Housing and Urban Development]. In
addition, the role of the market-rate units in the
comprehensive housing scheme is consistent with and
tied to the purposes of the RHA. As we noted above, one
of the RHA’s authorized purposes under Section 2 of the
Housing Authorities Law[8] is “the providing of safe and
sanitary dwelling accommodations for persons of low
income through new construction . . . so as to prevent
recurrence of the economically and socially disastrous
conditions hereinbefore described. . . .” Here, the
commingling of tenants of varying incomes, made
possible by the inclusion of market-rate units, is an
essential component of the permissible mixed-use
project.
Reading, 103 A.3d at 875.
8
Act of May 28, 1937, P.L. 955, as amended, 35 P.S. §1542.
11
Thus, as in Reading and Delaware County, the commingling of the
general public’s use of the Sheraton and Courtyard hotel rooms with those used for
BCC-related functions in no way affects the immunity of the Convention
Authority’s hotel properties herein. All such uses are a necessary and essential
component of, and directly tied to, the Convention Authority’s statutory purpose as
set forth in the Act and the Alternative Act “for the public purpose of promoting,
attracting, stimulating, developing and expanding business, industry, commerce
and tourism[,]” and “of acquiring, holding, developing, designing, constructing,
improving, maintaining, managing, operating, financing, furnishing, fixturing,
equipping, repairing, . . . and owning convention center facilities, or parts thereof,”
because the statutory definition of “convention center facilities” specifically
includes “any land, improvement, structure, building, or part thereof, or property
interest therein, . . . owned by . . . an authority, . . . and all facilities, furniture,
fixtures and equipment necessary and incident thereto, including hotels . . . .” 16
P.S. §§2399.2, 2399.53, 2399.55(a) (emphasis added). In sum, the trial court did
not commit an error of law or an abuse of discretion in granting summary
judgment in this matter.9
9
Moreover, in the alternative, with respect to the exemption for the Convention
Authority’s hotel properties from taxation, Article 8, Section 2(a)(iii) of the Pennsylvania
Constitution states: “The General Assembly may by law exempt from taxation . . . [t]hat portion
of public property which is actually and regularly used for public purposes.” Pa. Const. art. VIII,
§2(a)(iii). See also Pa. Const. art. VIII, §5 (“All laws exempting property from taxation, other
than the property above enumerated, shall be void.”). The Convention Authority must first
demonstrate that the hotel properties meet the constitutional definition before we may examine
whether the statutory exemption in the Alternative Act applies. Community Options, Inc. v.
Board of Property Assessment, 813 A.2d 680, 683 (Pa. 2002). This “is a mixed question of law
and fact on which the trial court’s decision is binding absent an abuse of discretion or lack of
supporting evidence.” Id. (citation omitted). Thus, to the extent that the hotel properties are not
immune from taxation, they are clearly exempt from taxation under Section 2399.69 of the
(Footnote continued on next page…)
12
Accordingly, the trial court’s order is affirmed.
MICHAEL H. WOJCIK, Judge
(continued…)
Alternative Act, as all of the property in question “is actually and regularly used for the public
purposes” of the Convention Authority outlined in the foregoing provisions of the Act and the
Alternative Act.
13
IN THE COMMONWEALTH COURT OF PENNSYLVANIA
City of Erie, and Erie City :
School District, :
:
Appellants :
:
v. : No. 1587 C.D. 2019
: No. 1588 C.D. 2019
Erie County Board of Assessment :
Appeals and Erie County Convention :
Center Authority :
ORDER
AND NOW, this 14th day of July, 2021, the order of the Erie County
Court of Common Pleas dated October 11, 2019, is AFFIRMED.
__________________________________
MICHAEL H. WOJCIK, Judge