Court Orders Mediation for BIA Property Tax Dispute

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Thursday October 09, 2014

Property tax assessments for Burlington International Airport and related properties are at the center of litigation between the City of South Burlington where the airport is located, and the City of Burlington, which owns the airport. Court ordered mediation is scheduled to take place later this fall, in a final attempt to avoid a trial by reaching agreement on the value of the property.

The controversy over the airport’s property tax bill is ongoing. Burlington appealed the 2012, 2013, and 2014 property valuation of approximately $72 million per year. The South Burlington Board of Civil Authority (BCA) re-evaluated, but confirmed that the figures were accurate, and the appeal was denied. The City of Burlington appealed once again and the issue was moved to Vermont Superior Court.

As the two entities are gearing up for mediation, City Attorney Jim Barlow gave an update on the progress of the BIA property tax appeal at the October 6 council meeting and requested the appointment of a City Council member to participate in the mediation.

According to Barlow, the crux of the issue is a dispute between the parties (City of Burlington and the City of South Burlington) regarding the interpretation of a Vermont statute, 32 V.S.A. 3659.

“Essentially, section 3659 sets out a formula for taxation of property owned by one municipality but located in another municipality. On its face, the statute might appear straightforward, but there are several different types of airport property owned by Burlington, such as the residential properties it has acquired through the FAA noise mitigation program, property and improvements used for airport purposes (e.g., the terminal, runways) and property Burlington leases to parties like the Vermont Air National Guard and Heritage Aviation,” Barlow said.

Both sides have retained expert appraisers and those experts differ significantly in their opinions of the value of the airport property. The difference references the application of section 3659 and some important aspects of real estate appraisal theory.

Burlington and South Burlington disagree on how, and even if, section 3659 applies to these different types of property. Additionally, sales of airport land and comparable large properties (the typical basis for real estate appraisals) do not occur very often. An important issue in the case is whether the appraisers should be using smaller, local parcels as the basis to determine the value of the airport land or larger parcels of commercial land located around the county.

On April 25, 2014, city staff met with airport management to see if common ground could be reached, but unfortunately, the meeting was not fruitful. Prior to going to trial, the court requires that the two bodies participate in a mediation session. Barlow requested a councilor be appointed to take an active role in the mediation process and report back to the council. The responsibility would involve a commitment of two full days at the end of October or early November. Barlow said, “This is one of the most significant matters to come before the city.” If no common ground can be reached, the case will move to trial, likely in mid February 2015.

Chris Shaw said, “Pat [Nowak] and myself have been on the Board of Civil Authority (BCA) and might be seen to have good knowledge as would be required for this process.” However, Pat Nowak recused herself from consideration since she is currently the council's representative on the airport commission and viewed it as a conflict of interest. Nowak, did, however ask if de novo or ‘starting anew’ would apply to the property values. Barlow said a new determination of valuation of the property would be made in 2015.

Meaghan Emery said that she had served on the Board of Civil Authority from 2008-2012 and had direct knowledge of the proceedings regarding this particular issue during the terms of two City Managers, Chuck Hafter and Sandy Miller.

Helen Riehle wondered what the odds were of mediation being successful since there had not yet been a “meeting of the minds.” Barlow could not speak to that point in open session, and suggested they enter executive session.

Emery made a motion, required by the open meeting law, stating “we find that premature general public knowledge of the council's perspective would be disadvantageous to the pending litigation.” Riehle seconded the motion and the decision was unanimous. The council entered executive session and when they returned to open session, Riehle made a motion to appoint Emery to be the council representative in court ordered mediation, Chris Shaw seconded and the decision was unanimous.

SOURCE: Corey Burdick, Correspondent