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

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