Tulsa County Budget Board v. Tulsa County Excise Board

Citations: 2003 OK 103; 81 P.3d 662; 74 O.B.A.J. 3318; 2003 Okla. LEXIS 118; 2003 WL 22846745Docket: 98,780

Court: Supreme Court of Oklahoma; December 2, 2003; Oklahoma; State Supreme Court

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The case involves a dispute between the Tulsa County Budget Board and the Tulsa County Excise Board regarding the authority of the Excise Board to review and adjust the budget submitted by the Tulsa County Assessor. The key issues are whether the Excise Board has the authority to review the Assessor's visual inspection budget and whether it acted arbitrarily or abused its discretion in modifying that budget. 

The Supreme Court of Oklahoma determined that the Excise Board does have the authority to resolve funding disputes related to the visual inspection budget. It found no abuse of discretion in the Excise Board's decision to reallocate personnel costs from the visual inspection budget to the regular budget. However, the Court ruled that the Excise Board acted arbitrarily by eliminating all valuation costs from the visual inspection budget.

Under the County Budget Act, the Tulsa County Budget Board is responsible for preparing budgets for all county funds, which must then be submitted to the Excise Board for approval. Assessors must conduct visual inspections of all taxable property every four years, with separate budgets for these inspections. For fiscal year 2002-2003, the Budget Board approved a general budget of $2,605,330 and a visual inspection budget of $3,169,835, both deemed reasonable and necessary. However, school districts protested the proposed budgets as excessive, leading the Excise Board to table the motion for approval.

Byron Burke, Chairman of the Excise Board, raised concerns about the visual inspection budget following a June meeting, highlighting discrepancies in spending between Oklahoma County and Tulsa County. Over four years, Tulsa County spent $4.6 million more than Oklahoma County while inspecting 42,500 fewer parcels; Oklahoma County allocated $7.11 million for 276,000 properties, resulting in a cost of $25.75 per parcel, compared to Tulsa County's $11.47 million for 233,500 parcels and a cost of $49.14 per parcel. An examination of Tulsa County's budget revealed that higher-paid employees were primarily assigned to the visual inspection program, while lower-paid employees were categorized under the general budget. Although salaries can be prorated between budgets, some appraisers engaged in both visual inspections and general duties were fully funded by the visual inspection budget.

The Assessor indicated that statutory law lacked clarity on budget charge separation, prompting inquiries to the Oklahoma Tax Commission. The Commission reviews the visual inspection plan for compliance with minimum requirements but is not focused on whether the budget is sufficient. The Tax Commission suggested a minimum of twenty-two employees for Tulsa County's program, while the Assessor's records showed fifty-five budgeted employees.

On July 9, 2002, the Excise Board revised the Assessor's budget, cutting nearly $1.9 million from the visual inspection budget and recommending that the cut be compensated by increasing the general budget. The Board included salaries for thirty-two employees, exceeding the Tax Commission's recommendation, and removed traditional valuation expenses from the budget.

On September 24, 2002, the Budget Board, County Commissioners, and Assessor filed a petition for a writ of mandamus and declaratory judgment, which was later joined by Tulsa County school districts. The case was tried on December 6, 2002, with the trial court denying the petition on December 26, 2002. The court ruled that the Excise Board had the final authority over the Assessor's budget and acted within its discretion without being arbitrary or capricious.

The order is stayed without a supersedeas bond under 12 O.S.2001. 990.5. The Budget Board, County Commissioners, and Assessor appealed on January 24, 2003, with the cause retained on March 14, 2003, and the court-ordered briefing cycle completed by May 22, 2003. The County Excise Board is authorized to resolve funding disputes related to the visual inspection program. Tulsa County's proposed visual inspection plan for 2003-2006 was submitted on September 26, 2002, and approved on November 14, 2002. The Assessor and County Commissioners argue the Excise Board's discretion is limited to upholding this approved plan, while the Excise Board and School Districts contest this interpretation. The court agrees with the latter, affirming that the Excise Board holds supervisory powers under 19 O.S.2001. 1414, allowing it to adjust unlawful budget amounts. Title 68, Section 2820(C) mandates county assessors submit four-year visual inspection plans for Tax Commission approval, which can be modified if inadequate. Disputes regarding funding for the visual inspection program are addressed in 68 O.S.2001. 2822(C), specifying the Excise Board's authority to resolve such disputes, ensuring funds are exclusively used for the program without detracting from the assessor's general funds. The legislation uses clear language to assert that the Excise Board resolves funding disputes, with the Tax Commission's role being limited to ensuring proper allocation after the Excise Board's determinations. The case of Clay v. Independent School Dist. No. 1 of Tulsa County is referenced, involving the visual inspection program and clarifying that school districts cannot use sinking funds for related costs. The court recognized the Excise Board's discretion in determining the Assessor's budget and ruled against the school districts due to a lack of evidence showing abuse of discretion.

The document addresses the authority of the Excise Board in resolving funding disputes related to the visual inspection budget, emphasizing that the Excise Board has the discretion to manage the Assessor's budget, as supported by statutory mandates and prior case law. It evaluates whether the Excise Board acted arbitrarily in reallocating personnel costs from the visual inspection budget to the general budget. The board's decision to reduce the number of employees funded under the visual inspection budget was based on recommendations from the Oklahoma Tax Commission, which suggested ten field and twelve office personnel. However, the Excise Board opted to double the field personnel to accommodate the number of parcels needing inspection, resulting in field employees facing a heavier inspection workload than initially projected.

The Assessor acknowledged potential errors in budget allocations, admitting that some salaries were incorrectly charged to the visual inspection budget. The burden of proof was on the Budget Board, County Commissioners, and Assessor to demonstrate an abuse of discretion, which they failed to do, leading to the affirmation of the trial court's decision regarding the personnel cost shift.

Conversely, the Excise Board's decision to exclude all valuation costs from the visual inspection budget was found to be an abuse of discretion. The argument presented by the Excise Board, which cited statutory provisions restricting budget items to those directly related to the visual inspection program, was countered by the Budget Board and others, who argued that both statutory language and Tax Commission rules clearly indicate that valuation expenses should be included in the visual inspection budget.

The Excise Board argues that the Assessor's duty to assess real property annually means valuation expenses should not be charged to mill fund recipients under 68 O.S. Supp. 2002. 2823(B). Although Assessors are required to prepare assessment rolls and value properties, the Board suggests that these expenses are separate from the visual inspection program's budget. However, the statute allows for proration of expenses that relate to both the visual inspection program and other sources, contradicting the Board's position. Section 2823(B) specifies that the visual inspection budget should only include expenses that would not exist without the program, yet it also permits proration for expenses that apply to both the Assessor's regular budget and the visual inspection budget. The Legislature defines the visual inspection program as essential for gathering data to establish fair cash values, indicating that valuation is a necessary component of the program. Moreover, Assessors must create a detailed plan for inspections and valuation methodologies and report these to the Oklahoma Tax Commission. The legislative framework clearly integrates valuation as a fundamental aspect of the visual inspection program.

Expenses related to the Assessor's visual inspection duties can be charged to both the regular and visual inspection budgets, as outlined in 68 O.S.2001. 2823(B). Excise boards must authorize funding sufficient for the countywide visual inspection program approved by the Oklahoma Tax Commission, which has the authority to create administrative rules that carry the force of law. These rules mandate that property valuation is a key aspect of the visual inspection program, requiring assessors to submit a detailed plan that includes valuation methodology and a representative sample from each property use category. Specific rules exist for valuing agricultural, multi-family, and commercial/industrial properties. Although the statute does not explicitly outline budgetary items for the visual inspection budget, it reflects legislative intent to prorate costs between budgets. The Excise Board's decision to exclude all valuation costs from the Assessor's visual inspection budget is deemed an abuse of discretion, affirming that valuation costs should be included. While acknowledging the impact of budgetary constraints on school districts, the ruling emphasizes that all government levels, including counties, are facing similar financial challenges.

The Excise Board has the authority to adjust budget items but cannot eliminate those mandated by statute or valid administrative rules, specifically regarding the visual inspection program. Key findings include: 1) The Excise Board has discretion to resolve funding disputes related to the visual inspection budget, supported by the explicit language of 68 O.S.2001. 2822(C) and the ruling in Clay v. Independent School Dist. No. 1 of Tulsa County, which confirms its authority in such matters. 2) No evidence of abuse of discretion was found regarding the transfer of personnel costs from the visual inspection budget to the regular budget. 3) The Excise Board did abuse its discretion by removing all valuation costs from the visual inspection budget, as both statutory provisions and administrative rules stipulate that these costs must be included. The decision is affirmed in part, reversed in part, and remanded for further action. Notably, counties are subject to the County Budget Act only if they elect to comply with its requirements.

Title 68 O.S.2001, § 2820 mandates county assessors to implement a comprehensive program for the visual inspection of all taxable property within their counties, ensuring each property is inspected at least once every four years. Prior to each inspection cycle, assessors must create a detailed plan outlining the number of properties to inspect annually, categorized by use and geographic area, along with the necessary resources and budget to complete these inspections. This plan must ensure that the inspections provide a representative sample for accurate property valuation according to accepted mass appraisal standards and be submitted to the Oklahoma Tax Commission by the first working day of October before the cycle begins.

The Tax Commission will either approve the plan if it meets the requirements or modify it to ensure compliance, with an approved plan required for each county at the cycle's start. Annual progress reports detailing inspected properties, budget expenditures, and valuation methods must be submitted to the Tax Commission, which may adjust the inspection plan mid-cycle if reports indicate potential non-compliance with legal requirements. 

Title 68 O.S.2001, § 2822 specifies that county assessors must budget adequately for these inspections, and jurisdictions receiving ad valorem revenue must be provided with the inspection program budget. They are also entitled to be notified and participate in discussions regarding the budget before its approval by the county excise board or budget board.

County excise and budget boards are tasked with approving and levying sufficient funds to support the countywide visual inspection program, as sanctioned by the Oklahoma Tax Commission. These funds are designated exclusively for the program and are separate from the county assessor's other allocations, ensuring that the overall budget for the assessor's office remains unaffected. Any disputes regarding the authorized amount for the visual inspection program will be settled by the county excise board, with the Oklahoma Tax Commission overseeing compliance to ensure funds are exclusively for the program and do not reduce other allocations to the assessor's office.

For each fiscal year, the costs associated with the comprehensive visual and physical inspection programs will be financed through warrants from entities benefiting from mill rate revenues. School districts can also use building fund revenues for these costs. The county assessor must prepare and submit a budget for these inspections to the county excise or budget board. The cost will be distributed among various revenue recipients based on their previous year's tax collections, excluding general office expenses of the county assessor that would occur regardless of the inspection programs. Shared expenses between the programs may be prorated, but the salary of the county assessor is excluded from these costs. The billing statements received by revenue recipients will inform the mill rates established for the current year, constituting an appropriation for the county assessor to manage the visual inspection program.

A written notification from a recipient's governing body to the board, indicating a lack of appropriated funds to cover a sinking fund's billing statement, serves as conclusive evidence of the recipient's financial obligation regarding that sinking fund. The board is then authorized to pursue legal judgment for the owed amount and associated court costs in the district court of the respective county. Additionally, the county assessor is required to provide a detailed statement to all jurisdictions within the county that receive revenue from an ad valorem mill rate. This statement must include: the current fiscal year reflecting the charge in the budget; each jurisdiction's previous year's mill rate and its proportion to the total mill rates; the charges for each entity based on these proportions; the total budget for the county assessor's office and the percentage of visual inspection program expenses; and a copy of the County Budget Visual Inspection Account along with a description of the visually inspected areas for the current year, aligned with the plan filed with the Oklahoma Tax Commission. 

The document also references testimony regarding salary prorating and function adherence, emphasizing the court's limited review to issues presented to the trial court. It notes the approval of visual inspection plans by the Tax Commission, highlighting discrepancies in budget allocations between counties for similar inspection duties.

The statutory visual inspection program mandates a statewide approach for assessing real property values through physical inspections conducted at least once every four years. Each county assessor is responsible for ensuring these inspections yield sufficient data to accurately determine fair cash values, utilizing appropriate valuation methodologies (cost, income and expense, or sales comparison). At the start of each four-year cycle, assessors must submit a detailed plan to the Tax Commission outlining the number of properties inspected annually, required resources, and valuation methodologies. The visual inspection program's budget is distinct from the assessor's general budget, with funds allocated solely for the program’s execution. Costs associated with the program are shared among revenue recipients from levied mill rates, limited to expenses directly related to the visual inspection process, excluding general assessor office expenses unless they are specifically attributable to the program. Salary costs for the assessor are not to be included in the visual inspection program's budget. The Budget Board, County Commissioners, and Assessor clarify that the approval of the visual inspection plan by the Tax Commission does not prevent the Excise Board from revising the associated budget.

The plaintiffs assert that funding the Tax Commission-approved Visual Inspection Program is the benchmark for evaluating the parties' actions. The legal analysis emphasizes that legislative intent is crucial for statutory interpretation, derived from the entire act and its objectives. Special statutes take precedence over general ones if they specifically address the matter in question. Legislative intent is presumed to be clearly expressed within statutory language, guiding the interpretation towards fulfilling the intended purpose. The county excise board's authority under Title 19 O.S.2001 is highlighted, particularly its power to amend county budgets by striking unlawful items or reducing excess amounts. The term "shall" generally indicates a mandatory directive but can also be interpreted permissively, depending on context. Relevant case law supports these interpretations and principles in statutory construction.

An assessor's hiring of personnel requires approval from the Excise Board during its annual budget review process, rather than the Oklahoma Tax Commission. The budgetary process must be completed by county budget boards at least thirty days before the fiscal year begins on July 1. Following public hearings, a budget must be adopted no less than seven days before the new budget year starts. The visual inspection plan for Tulsa County for 2003-2006 was due to be filed with the Tax Commission on September 30, 2002, which is after the county budget board's deadline, indicating that the Tax Commission does not control the visual inspection budget. The County Commissioners, Budget Board, and Assessor question whether the Excise Board abused its discretion in constructing a budget instead of just removing unlawful amounts. However, the distinction is deemed insignificant. Key issues involve employee shifts between budgets and valuation cost elimination. Some items questioned by the County entities may have already been included in the Excise Board's final budget. They also sought to amend their petition to require school districts to include valuation expenses in their budgets, but the court declined this request, stating that amendments are no longer timely or beneficial at this stage, and the court does not provide advisory opinions.

In Keating v. Johnson, 1996 OK 61, and Application of Fun Country Development Auth., 1977 OK 138, the court emphasizes its reliance on the record available for review, as established in Heirshberg v. Slater, 1992 OK 84, and Snyder v. Smith Welding, Fabrication, 1986 OK 35. The burden of proof rested with the County Commissioners, Budget Board, and Assessor to demonstrate that the trial court had abused its discretion in not granting relief, as noted in Clay v. Independent School District No. 1 of Tulsa County and Beatrice Foods Co. v. City of Okmulgee. The plaintiffs/appellants' claim of seeking an amendment before the response was misleading; the record shows the motion to amend was filed after the answer. The evidentiary burden that existed before the trial court was consistent with prior rulings in Rogers v. Excise Board of Greer County and Summey v. Tisdale. Relevant statutes from Title 68 emphasize the requirement for county assessors to conduct annual visual inspections and statistical evaluations of real property to ensure accurate assessments of fair cash values, including methods like cost, income and expense, or sales comparison approaches. Specific provisions outline the necessity for the physical inspection of real property and the relevance of gathered data to the valuation methodology.

The county assessor is required to create a detailed visual inspection plan before initiating the first and each subsequent visual inspection cycle. This plan must include specific elements outlined in subsections (1) through (9) and propose a valuation methodology for determining the fair cash value of real property and its improvements. The plan must ensure that the data gathered from the visual inspections each year is sufficient to establish a representative sample across all use categories for accurate valuation of taxable properties. Additionally, the visual inspection plan must incorporate information and procedures related to valuation changes, and it must include inspections and appraisals for all agricultural properties, which are to be valued based on the income capitalization approach using cash rent, in accordance with specific statutory guidelines. The plan must also encompass details related to the valuation methodology and processes as mandated by relevant Oklahoma Administrative Codes.