The City of Lebanon was sued by a company leasing land at the Lebanon Municipal Airport for breach of contract. However, the dispute centered on issues of taxation, and the Court in this case had to disentangle the tax abatement issues from the breach of contract issues. It is an interesting case for any municipality that leases space or land to a private organization.
The Company had a lease with the City to use certain land at the Airport. In the lease, the City agreed, among other things, that it would not allow any other provider of commercial aeronautical services to operate at the airport “under rates, terms [or] conditions” that were more favorable than those in the lease with the Company. Ten years into the lease, the City increased the assessed value of the leased land, which led to an increased property tax bill. The Company argued that this assessment was not proportional to the assessment of other land leased out at the airport. The Company sought an abatement in 2006 and 2007, but the City denied the requests, the Company was unsuccessful at the Board of Tax and Land Appeals (BTLA), and the matter was not appealed. It did not seek abatements for 2008 or 2009.
In 2010, the Company filed for an abatement and, at the same time, sued the city claiming that the increased taxation violated the lease by “providing more favorable and disproportionate tax assessments and taxation schemes” to “other entities at the airport.” They also alleged that it was required to pay taxes on a larger portion of the airport than similarly situated competitors. The Superior Court dismissed the case on the grounds that it was truly a tax abatement case “styled as a breach of contract.” This appeal to the Supreme Court followed.
The Court’s task here was to determine whether the claims were about tax abatements or the lease between the City and the Company. This distinction was critical because, to the extent the claim was really an abatement case, an ordinary lawsuit would not be appropriate. It found that the claims contained some of each.
As the Court has stated before, the New Hampshire tax abatement statutes provide the exclusive remedy available to a taxpayer dissatisfied with an assessment made against his property. Under this statutory scheme, the governing body has the authority to abate taxes for good cause shown. If the governing body refuses to do so, the taxpayer may appeal either to the BTLA or the superior court. RSA 76:16-a; RSA 76:17. “The issue in an abatement proceeding…is whether the government has taxed the plaintiff out of proportion to other property owners in the taxing district.” Porter v. Sandwich, 153 N.H. 175 (2006). In this case, the Company had appealed the 2006 and 2007 taxes to the BTLA and lost, but not appealed to the Supreme Court. No abatement request was filed for 2008 or 2009, and the 2010 abatement request had not yet been acted on by the City so it was not ready for review. And, critically, much of the Company’s argument was based on claims of “disproportionate taxation.” Therefore, the Court concluded, to the extent the suit was based on issues that belong in abatement proceedings, the suit was invalid and should be dismissed.
However, that was not the end of the story. The Company’s suit also alleged “unequal treatment” in a way that violated the lease, specifically with respect to the amount of taxable land the City attributed to the Company and to other competitors. This claim did not involve disproportionate assessment and tax abatement, but rather an allocation of which land the Company was going to be taxed on, which was a matter involving the lease rather than tax abatements. The Court found that claim could proceed, and that portion was remanded back to the Superior Court for trial.