WEBVTT
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SJC-13489.
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Outfront Media LLC,
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the Board of Assessors of Boston.
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(speaker humming)
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(device ringing)
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Okay, Attorney Fray?
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Thank you Madam Chief Justice and Your Honors.
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May it please the court.
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My name is Kelly Fray.
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I represent appellate Outfront Media,
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and joined by my colleague, Ed Daily.
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Your honors, this case turns on the answer to two questions.
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The first question is whether or not the service's contract
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between Out Front Media and the NBTA
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constitutes a lease use for occupancy of NBTA real property.
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If it does not, then the court should reverse
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the decision of the appellate tax board below,
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because the NBTA is enabling statue
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requires the existence of a lease/user occupancy
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as a condition precedent
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before any tax can be imposed against NBTA property.
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If and only if that condition precedent is satisfied,
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then there's a second question for the court to determine.
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And that is whether or not the taxes imposed
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against the assigned,
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has more than a negotiable impact
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on the NBTA's ability to generate commercial
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advertising revenue.
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If it does, then the courts traverse for that reason.
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Because this court found an NBTA verses Sommerville,
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that the NBTA's ability to generate commercial
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advertising revenue, has statutorily integrated
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with the NBTA's essential function.
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Isn't this clearly a use of a property?
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That's precisely the problem, Your Honor.
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Is that under the board's definition,
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anything, any activity at all
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that touches upon a NBTA property would be considered use.
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The board defined a use to mean any activity
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that puts the property into service
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to avail oneself of, to employ,
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to have the privilege, or benefit of using something,
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or to have the legal enjoyment,
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of property that consists of its employment,
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occupation, exercise, or practice.
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That is duly broad construction of the word.
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But turning to you,
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I have the exclusive rights to advertise,
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install, operate and maintain the equipment, correct?
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That's correct.
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How is that not a use of the equipment?
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It's not a use, Your Honor, for several reasons.
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And you get the profits, too, rightfully.
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I guess that's the big one.
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A portion of the profits, Your Honor.
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The NBTA gets a portion of the profits, as well.
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And that is what,
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and those profits, not only do they get them,
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those profits are statutorily integrated
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within the NBTA's essential function.
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And the reason why is because-
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We all know the NBTA is desperate for money.
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So, there's no doubt about that.
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And but, just back to Justice Gaziano's question,
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I don't know,
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you're using the signs and getting a percentage
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of the profits.
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It just seems like,
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that meets that statutory definition.
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Respectfully, Your Honor, it doesn't.
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How, and better help us.
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Sure, absolutely Your Honor.
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For...
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There are several reasons.
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First the word used,
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look at where the word used appears in the statute.
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And it appears,
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and so let me take a step back.
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It'll take me a while to get there,
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but Your Honor, you'll understand
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why I'm taking a step back.
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And talking about the burden,
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and responding to your question.
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The appellate tax board got it wrong on the burden.
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It applied the incorrect burden.
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Well, you're seeking an exemption.
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You know, you can argue that, take up your time,
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whatever, in however way you want.
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But I don't know of any case where we have
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put the burden on the board to show,
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and anyone other than the taxpayer,
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to show an exemption applies.
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Your Honor, we are not seeking an exemption.
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Well, you are because if this was owned by you,
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you would definitely need to pay taxes.
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You're saying "We don't fall under the exception
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"to the exemption, and so we're due the NBTA's exemption."
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Your Honor, the parties have stipulated-
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That this is real estate-
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The signs themselves are covered by the exemption.
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The parties have stipulated the signs-
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So, if owned by the NBTA, and not used by your client,
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they would be covered by the exemption.
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If...no.
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They are covered by the exemption
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regardless of whether where,
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whether they are conducted with a business for profit.
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The question is,
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whether they are leased, used and occupied
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in connection with (crosstalk drains out dialogue).
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And therefore are not covered by the exemption.
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And so, it's the assessor's burden,
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and to establish that condition precedence satisfy.
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Because that's the only condition.
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They can't, they don't have authority of the tax
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unless that condition is satisfied.
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And is this the only tax provision
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where there is an exemption in the exceptions?
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It's not.
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But this is the only case where this SU has been presented
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other than Ogden.
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What the assessors describe as the acceptance-
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So in, is it Ogden, then?
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I mean-
Ogden.
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What, who had the burden of proof
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when there's an exemption, and exception to the exemption?
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We don't know, because the appellate tax board
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did not set a-
This is a new issue for us.
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It is, Your Honor.
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Okay, great.
It is, Your Honor.
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Every single other, and I wanna be clear about this,
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every single other case
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that's cited in the appellate passport, decision,
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and in the assessor's brief,
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the existence of a lease user occupant was presumed,
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it was not at issue.
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Here, the question that the party,
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the primary question that the parties are briefed,
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but to the appellate tax board below, and to the court here
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is whether or not a lease user occupancy exists.
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On that question, it is the assessor's burden-
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I think you need to,
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I know you want to jump to the burden issue.
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But, can you, the language is so direct.
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If used in connection with a business conducted for profit,
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your clients are engaged in a business conducted for profit.
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You're using the NBTA's signs
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for a business conducted for profit.
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I just, you better help me get out of that.
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And because use is big, it doesn't get me there.
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Well, the thing about the effect of what that,
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and simple, admittedly simply and appealing determination
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of what the word used would mean.
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It would mean that a construction worker,
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a janitor, a janitor that comes on and cleans the bathroom-
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No, it doesn't say that.
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They would, (indistinct) that is a use.
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A janitor employees NBTA property.
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A property is used.
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If the property is used in connection
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with a business conducted for profit,
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that's different from if you have a janitor there, right?
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And that's where we get to Ogden,
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which, Ogden is your best bet.
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It is.
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Because you're really,
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the statutory so obviously fits you.
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But Ogden, the tax board went a different way.
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There I see you may have some traction.
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Right, right. And importantly Your Honor,
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that happened just a few years before the legislature
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added the word used to this statute in 2013.
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And it's presumed to be aware
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of how the appellate tax board decided Ogden.
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And Ogden, the appellate tax board found that
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a for-profit service provider,
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who managed an events facility for taxes
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in public university,
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was not using the facilities properly
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in connection with a business-for-profit.
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I mean, what they were doing there,
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they were hosting WWF wrestling matches,
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they were coordinating David Copperfield magic shows.
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They got a service fee for that, right?
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It was, it's different from this.
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You guys are just getting,
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you're running a profit, generating profits off of this,
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as opposed to just getting paid for operating,
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getting a service fee, a little different, right?
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No, no, Your Honor.
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In Ogden there were two different elements to the contract.
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One was the for-profit company would host uni...
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It would help the university
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host university-sponsored events in the facility.
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And that's what they got the management fee for.
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And then, the separate part of the contract
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was that they would host these for-profit events,
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like Aerosmith rock and roll show,
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is another one mentioned in the decision.
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And for those, the for-profit company,
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and the university would split the revenues.
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And that's the element-
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But importantly, the for-profit entities upside
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on those non-university events, was capped.
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Was it not in Ogden?
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It was capped.
It was capped.
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So here, though,
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your client's upside is not capped, right?
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It has to pay a percentage of gross revenues to the NBTA,
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but beyond that, whatever profits you reap,
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are yours to keep, with no cap.
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No, whatever profits we make are,
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flow both to the NBTA and to us.
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So there's a minimum guarantee.
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So we have to, the revenues have to reach
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a certain threshold under the contract.
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But once they've reached that threshold, the revenues split.
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It goes for infinitely.
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We made, the revenues split between the NBTA,
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and the for-profit Out Front.
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It goes as high, there is no cap.
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Right yeah.
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So unlike Ogden, there's no cap to your profit.
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And no cap to the NBTA's profit.
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Regardless. But, none to you.
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Right, right, yes.
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And so, maybe that's the difference
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between the type of use that is not use in Ogden,
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and the type of use, which is a use to you.
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And, I'd like to give you the opportunity
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to respond to that.
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You have no upside cap
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to your provision of these services for advertising
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on the NBTA signs.
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In Ogden, there was a cap to the provider
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of the management services.
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Right, and the contract should be structured that way,
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so that Out Front has an incentive to get
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every dollar of advertising revenue that it possibly can
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to split with the NBTA.
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That serves the NBTA's essential function.
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It serves writers.
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It serve, it increases non-fair revenue.
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And maybe a consequence of that is that you pay tax.
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It should-
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That might be an advantageous business relationship.
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I'm not suggesting there's anything nonparous about that.
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But under the provisions that we're looking at,
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it looks more like a use.
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Respectfully Your Honor,
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I think the more critical distinction
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that the assessors are trying to draw between Ogden,
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is that Ogden paid a management fee,
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and for the private university's use of the facility.
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Here the NBTA, let's not forget the fact that
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the NBTA has the right to use these signs 25% of the time.
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That is a paying match, they received a management fee.
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Ogden received a management fee, right?
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They didn't pay a management fee.
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I'm sorry, received a management fee
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for the portions of the time the facility was being used
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for university events. Here-
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And that's all they got.
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And, they got a revenue share, as well.
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Just like Out Front does.
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Out Front just go the same revenue share.
267
00:12:06.690 --> 00:12:08.847
The only difference is it's not capped.
268
00:12:08.847 --> 00:12:10.650
So I come at a different way?
269
00:12:10.650 --> 00:12:11.577
So we know what a lease is,
270
00:12:11.577 --> 00:12:13.710
and we know what occupied is, right?
271
00:12:13.710 --> 00:12:15.510
So now, we're dealing with use.
272
00:12:15.510 --> 00:12:18.090
And you say that the ATB got it wrong,
273
00:12:18.090 --> 00:12:21.060
they had this broad dictionary definition of use.
274
00:12:21.060 --> 00:12:22.563
How do you define use?
275
00:12:23.442 --> 00:12:26.130
Well, I define it by how the court has defined it
276
00:12:26.130 --> 00:12:28.140
for over a hundred years of property law.
277
00:12:28.140 --> 00:12:30.990
The word use is used in the statute
278
00:12:30.990 --> 00:12:32.670
to define a property right.
279
00:12:32.670 --> 00:12:36.060
And so, why not let the property law to define what a use-
280
00:12:36.060 --> 00:12:38.310
I read a bunch of those cases you cite.
281
00:12:38.310 --> 00:12:41.403
They distinguish between a lease and a permit.
282
00:12:42.466 --> 00:12:46.500
They don't define use in this context.
283
00:12:46.500 --> 00:12:48.000
They just say it's not a lease,
284
00:12:48.000 --> 00:12:49.950
it's a permit or a license, right?
285
00:12:49.950 --> 00:12:53.073
All those cases you're citing aren't really,
286
00:12:54.533 --> 00:12:55.583
a very little import.
287
00:12:56.460 --> 00:12:57.630
Protectively they are, Your Honor.
288
00:12:57.630 --> 00:13:00.210
Because they are the cases addressing what,
289
00:13:00.210 --> 00:13:04.380
they are the cases addressing how to classify
290
00:13:04.380 --> 00:13:06.240
the right to go onto an owner's property.
291
00:13:06.240 --> 00:13:08.703
But they define it, it's not a lease.
292
00:13:09.631 --> 00:13:11.250
It's a permit, or it's a license.
293
00:13:11.250 --> 00:13:13.320
That's all those cases do, right?
294
00:13:13.320 --> 00:13:16.950
Is there any case that, I looked at them.
295
00:13:16.950 --> 00:13:18.960
I read all those old cases you're citing.
296
00:13:18.960 --> 00:13:19.980
They don't define,
297
00:13:19.980 --> 00:13:24.960
they define how the right to go onto another property
298
00:13:24.960 --> 00:13:26.307
and maintain a sign should be classified.
299
00:13:26.307 --> 00:13:28.350
They say it's not a lease, it's a permit.
300
00:13:28.350 --> 00:13:30.480
It's not a lease, it's a license.
301
00:13:30.480 --> 00:13:32.730
That's what those cases say, right?
302
00:13:32.730 --> 00:13:34.800
Right, and in everyone of those cases,
303
00:13:34.800 --> 00:13:36.161
it was either-
They don't say
304
00:13:36.161 --> 00:13:38.670
it fit the definition of use.
305
00:13:38.670 --> 00:13:39.960
They don't fit the definition of-
306
00:13:39.960 --> 00:13:40.890
Oh, oh, oh, oh.
307
00:13:40.890 --> 00:13:41.760
I understand your question.
308
00:13:41.760 --> 00:13:43.110
Yes, you're precisely right.
309
00:13:43.110 --> 00:13:45.660
No, no, there's not one directly on point.
310
00:13:45.660 --> 00:13:47.040
But what they do do,
311
00:13:47.040 --> 00:13:50.880
is they define the property right as a license,
312
00:13:50.880 --> 00:13:53.520
or in the baseball publishing case, an easement.
313
00:13:53.520 --> 00:13:56.610
All of these categories of property interest
314
00:13:56.610 --> 00:14:00.750
that the legislature did not add to the statute.
315
00:14:00.750 --> 00:14:03.420
If the legislature wanted an easement right to be taxed,
316
00:14:03.420 --> 00:14:05.280
they would of said easement rights should be taxed.
317
00:14:05.280 --> 00:14:07.350
If they wanted a license right to be taxed,
318
00:14:07.350 --> 00:14:09.450
they should of said, a license right to be taxed.
319
00:14:09.450 --> 00:14:12.870
So where this is only a license right that Out Front holds,
320
00:14:12.870 --> 00:14:15.390
it shouldn't fall within this,
321
00:14:15.390 --> 00:14:17.986
gets shoehorned into a-
322
00:14:17.986 --> 00:14:20.700
Did you ever say what the definition is? No-
323
00:14:20.700 --> 00:14:23.430
Yes, it's used to refer to a possessor interest in land,
324
00:14:23.430 --> 00:14:26.613
is the proper, what Massachusetts state law has set,
325
00:14:27.720 --> 00:14:30.270
referred to as the use and occupation of land
326
00:14:30.270 --> 00:14:32.850
for over a century, possessory interest in land.
327
00:14:32.850 --> 00:14:37.850
So you're asking us to construe use,
328
00:14:38.070 --> 00:14:41.310
consistent with the way of use and occupancy
329
00:14:41.310 --> 00:14:43.950
has been defined in real estate law.
330
00:14:43.950 --> 00:14:44.850
Precisely Your Honor,
331
00:14:44.850 --> 00:14:47.550
and as it appears in the statute,
332
00:14:47.550 --> 00:14:50.680
it's being implemented to describe a property right.
333
00:14:50.680 --> 00:14:52.680
Isn't it odd, though, that the statute
334
00:14:52.680 --> 00:14:54.870
doesn't say "Use in occupancy?"
335
00:14:54.870 --> 00:14:58.890
And instead says "Use comma occupation," or whatever it is.
336
00:14:58.890 --> 00:15:01.417
No Your Honor, because it says "Lease, use, or occupant.
337
00:15:01.417 --> 00:15:02.640
"Lease, use, or occupied."
338
00:15:02.640 --> 00:15:03.473
So there are three.
339
00:15:03.473 --> 00:15:05.280
So, it's disjunctive.
340
00:15:05.280 --> 00:15:08.091
Right, there are three, lease, use, or occupancy.
341
00:15:08.091 --> 00:15:09.030
So it-
342
00:15:09.030 --> 00:15:11.820
So why it's given, it's framed disjunctively
343
00:15:11.820 --> 00:15:14.730
would we think that the legislature
344
00:15:14.730 --> 00:15:17.880
sought to adopt the use and occupancy language
345
00:15:17.880 --> 00:15:19.380
of real estate law?
346
00:15:19.380 --> 00:15:21.990
Precisely because it's intended for the words
347
00:15:21.990 --> 00:15:24.900
used to be applied to any right in property,
348
00:15:24.900 --> 00:15:27.510
such as an easement, or a license.
349
00:15:27.510 --> 00:15:29.280
They would of said that in the statute.
350
00:15:29.280 --> 00:15:33.390
They would not, as I think one of, Emma Che, put it.
351
00:15:33.390 --> 00:15:36.300
The legislature doesn't hide elephant in mouse holes.
352
00:15:36.300 --> 00:15:38.100
So, it didn't intend for the word use
353
00:15:38.100 --> 00:15:40.331
to have this broad meaning
354
00:15:40.331 --> 00:15:44.220
outside of what the word use typically means
355
00:15:44.220 --> 00:15:47.700
when arises in between the words lease and occupy.
356
00:15:47.700 --> 00:15:49.260
Leased, used and occupied.
357
00:15:49.260 --> 00:15:50.940
So, that's why you should.
358
00:15:50.940 --> 00:15:53.160
The court shouldn't focus on the word Or,
359
00:15:53.160 --> 00:15:55.890
it should focus on the words Lease, Use, Occupy.
360
00:15:55.890 --> 00:15:56.973
Not the word Or.
361
00:15:57.990 --> 00:15:59.853
That's really stretching.
362
00:16:02.160 --> 00:16:04.350
So, we're not supposed to look at the word Or?
363
00:16:04.350 --> 00:16:05.250
No, no, no, I'm sorry.
364
00:16:05.250 --> 00:16:09.123
Should not give the word Or meaning over,
365
00:16:11.049 --> 00:16:12.180
give that height meaning over the words
366
00:16:12.180 --> 00:16:13.380
lease, use and occupy.
367
00:16:13.380 --> 00:16:17.010
Oh but Or means, one, two, or three.
368
00:16:17.010 --> 00:16:19.440
Any one of those three things.
369
00:16:19.440 --> 00:16:21.240
That's just what Or means.
370
00:16:21.240 --> 00:16:23.070
I don't understand.
371
00:16:23.070 --> 00:16:23.940
Right, Your Honor.
372
00:16:23.940 --> 00:16:27.630
So for instance, if there was a storage facility that,
373
00:16:27.630 --> 00:16:31.473
a for-profit incidy was using, that would be,
374
00:16:33.120 --> 00:16:35.070
that would be possessory interest in land
375
00:16:35.070 --> 00:16:37.530
that's not occupied, it's not leased.
376
00:16:37.530 --> 00:16:38.640
That's why the Or exists,
377
00:16:38.640 --> 00:16:40.140
to cover situations like that.
378
00:16:43.050 --> 00:16:44.490
Okay.
379
00:16:44.490 --> 00:16:47.193
Any other questions? Thank you so much.
380
00:16:52.020 --> 00:16:53.230
Attorney Umbrano.
381
00:16:55.017 --> 00:16:57.180
May it please the court, Anthony Umbrano.
382
00:16:57.180 --> 00:17:00.153
on behalf of the board of assessors of the City of Boston.
383
00:17:01.590 --> 00:17:03.930
The court has questioned my brother extensively
384
00:17:03.930 --> 00:17:05.100
for the respect to use,
385
00:17:05.100 --> 00:17:08.130
and the terms of the contract agreement
386
00:17:08.130 --> 00:17:11.580
between Out Front and the NBTA.
387
00:17:11.580 --> 00:17:13.672
There's one additional point that I would
388
00:17:13.672 --> 00:17:17.853
like to emphasize, is that under that agreement,
389
00:17:21.150 --> 00:17:26.150
the proceeds go to the NBTA after all expenses
390
00:17:26.250 --> 00:17:28.203
are paid by Out Front.
391
00:17:29.160 --> 00:17:31.740
It is a net agreement to the NBTA.
392
00:17:31.740 --> 00:17:32.733
Furthermore,
393
00:17:33.690 --> 00:17:36.040
the agreement specifically says
394
00:17:36.900 --> 00:17:39.483
that in the event that any taxes are levied,
395
00:17:41.190 --> 00:17:44.940
those taxes are the responsibility of Out Front.
396
00:17:44.940 --> 00:17:47.160
Can you finish your thought on that first part?
397
00:17:47.160 --> 00:17:50.190
What do you mean these proceeds are net to the NBTA?
398
00:17:50.190 --> 00:17:51.023
I don't-
399
00:17:52.080 --> 00:17:55.980
Well, to clarify that point.
400
00:17:55.980 --> 00:17:57.532
Thank you.
401
00:17:57.532 --> 00:18:00.630
The NBTA wanted and received a minimum
402
00:18:00.630 --> 00:18:02.883
annual guarantee payment.
403
00:18:04.110 --> 00:18:06.390
That payment is received by the NBTA
404
00:18:06.390 --> 00:18:09.000
regardless of any expenses.
405
00:18:09.000 --> 00:18:12.213
On top of that, the NBTA gets a share of the gross.
406
00:18:13.320 --> 00:18:16.500
It participates in the gross revenues.
407
00:18:16.500 --> 00:18:18.750
Not after the expenses are paid.
408
00:18:18.750 --> 00:18:20.207
Okay.
409
00:18:20.207 --> 00:18:21.600
So what was your first point then? I don't understand.
410
00:18:21.600 --> 00:18:24.330
Well the first point is that, it's net to the NBTA
411
00:18:24.330 --> 00:18:26.670
after the expenses are paid by Out Front.
412
00:18:26.670 --> 00:18:29.020
Perhaps I wasn't clear, but that was the point.
413
00:18:29.910 --> 00:18:33.660
The NBTA participates in the high revenue number.
414
00:18:33.660 --> 00:18:35.880
What difference does that make?
415
00:18:35.880 --> 00:18:37.830
I think the difference that it makes,
416
00:18:38.880 --> 00:18:41.493
is that it was contemplated under this agreement.
417
00:18:42.510 --> 00:18:44.940
Which was then entered into after the amendment
418
00:18:44.940 --> 00:18:46.053
to the statute.
419
00:18:49.020 --> 00:18:52.230
That's just, the lawyers,
420
00:18:52.230 --> 00:18:54.720
we don't really care what the NBTA's lawyers,
421
00:18:54.720 --> 00:18:56.670
and the Ogden lawyers,
422
00:18:56.670 --> 00:18:59.176
that's, I'm not sure how important that is.
423
00:18:59.176 --> 00:19:00.960
Help me out here.
424
00:19:00.960 --> 00:19:03.720
Ogden involved use, too, right?
425
00:19:03.720 --> 00:19:08.720
Ogden, and I am troubled by what are the limitations of use?
426
00:19:09.240 --> 00:19:14.240
Because Ogden, let the private company use its prop,
427
00:19:15.930 --> 00:19:17.700
you know, the University of Massachusetts
428
00:19:17.700 --> 00:19:22.700
let the private company use the facilities, right?
429
00:19:22.980 --> 00:19:25.290
So there's some limitations.
430
00:19:25.290 --> 00:19:27.180
I understand how we distinguish Ogden.
431
00:19:27.180 --> 00:19:29.430
But I'm trying to understand how we distinguish Ogden,
432
00:19:29.430 --> 00:19:31.833
on the meaning of the word use.
433
00:19:33.570 --> 00:19:35.340
I think in two ways.
434
00:19:35.340 --> 00:19:38.520
First, I'm just gonna go backtrack, just a little bit.
435
00:19:38.520 --> 00:19:41.913
And point out that Ogden was under a different statute.
436
00:19:43.440 --> 00:19:44.973
592B.
437
00:19:45.930 --> 00:19:48.303
The crucial difference in that statute,
438
00:19:49.380 --> 00:19:52.620
is that while it does make taxable certain property
439
00:19:52.620 --> 00:19:57.570
of the Commonwealth, and its municipalities,
440
00:19:57.570 --> 00:20:01.500
and its agencies, that is used for profit.
441
00:20:01.500 --> 00:20:04.020
There is an important exception in there.
442
00:20:04.020 --> 00:20:05.730
That has to deal with properties
443
00:20:05.730 --> 00:20:07.533
that are used for public purpose.
444
00:20:09.540 --> 00:20:14.163
So even if a property under 2B might otherwise be taxable,
445
00:20:15.240 --> 00:20:17.883
if the purpose is for public purpose,
446
00:20:19.290 --> 00:20:23.760
that property remains exempt.
447
00:20:23.760 --> 00:20:27.152
That is not the case under the statute
448
00:20:27.152 --> 00:20:29.850
that we're talking about here today, Section 24.
449
00:20:29.850 --> 00:20:32.670
That public purpose language
450
00:20:32.670 --> 00:20:35.493
was not imported into this statute.
451
00:20:37.170 --> 00:20:39.960
I would point out then perhaps more directly
452
00:20:39.960 --> 00:20:42.483
to your question, Justice Kafter,
453
00:20:46.320 --> 00:20:48.903
Ogden was paid by UMass.
454
00:20:50.640 --> 00:20:53.313
They were paid to manage the property.
455
00:20:55.830 --> 00:21:00.453
All profits and losses, in that case, went to UMass.
456
00:21:01.410 --> 00:21:04.293
Specifically in that scenario,
457
00:21:05.400 --> 00:21:07.743
if there was any tax liability,
458
00:21:09.060 --> 00:21:11.543
the tax liability was paid by UMass.
459
00:21:13.020 --> 00:21:14.490
So I agree it's very much,
460
00:21:14.490 --> 00:21:16.230
very much a question of fact,
461
00:21:16.230 --> 00:21:19.800
it's a very fact-intensive determination
462
00:21:19.800 --> 00:21:20.940
that must be made.
463
00:21:20.940 --> 00:21:22.053
And you're saying that UMass
464
00:21:22.053 --> 00:21:24.974
paid the tax liability in Ogden?
465
00:21:24.974 --> 00:21:26.010
So if there was any tax liability
466
00:21:26.010 --> 00:21:28.800
under the agreement between UMass and Ogden,
467
00:21:28.800 --> 00:21:30.123
UMass would pay it.
468
00:21:31.710 --> 00:21:35.650
I thought 592B
469
00:21:36.840 --> 00:21:38.673
taxed the user.
470
00:21:39.540 --> 00:21:42.180
You're saying there was compensation indemnity
471
00:21:42.180 --> 00:21:44.107
under the contract?
Yes, so that,
472
00:21:44.107 --> 00:21:45.100
I think indemnity-
We're interpreting this-
473
00:21:45.100 --> 00:21:45.933
Is a proper word.
We're interpreting
474
00:21:45.933 --> 00:21:48.810
the statute.
Right, however it might fall
475
00:21:48.810 --> 00:21:50.850
however it might fall if there was anything,
476
00:21:50.850 --> 00:21:53.073
it was UMass's burden, not Ogden's.
477
00:21:54.060 --> 00:21:55.268
So I think that's one of the-
478
00:21:55.268 --> 00:21:56.101
(crosstalk drains out dialogue)
479
00:21:56.101 --> 00:21:57.630
The same thing is happening here, though.
480
00:21:57.630 --> 00:22:02.020
If we say that this relatively new provision covers
481
00:22:03.990 --> 00:22:07.623
Out Front, thank you. Out Front,
482
00:22:08.880 --> 00:22:12.393
in some ways it's effecting the NBTA.
483
00:22:13.830 --> 00:22:17.310
In some ways it may, or it may not affect the NBTA.
484
00:22:17.310 --> 00:22:18.870
What we have here-
Well, certainly it would.
485
00:22:18.870 --> 00:22:22.350
Because no rational third party would contract
486
00:22:22.350 --> 00:22:25.793
with the NBTA, if we construe the use,
487
00:22:25.793 --> 00:22:29.730
the way the board is suggesting,
488
00:22:29.730 --> 00:22:33.630
without getting something from the NBTA in return.
489
00:22:33.630 --> 00:22:37.530
Isn't that exactly what your opposing consul's argument is?
490
00:22:37.530 --> 00:22:38.480
Well if they put,
491
00:22:40.133 --> 00:22:41.010
I think what Out Front is getting in return,
492
00:22:41.010 --> 00:22:46.010
is the exclusive right to make profits from the signs.
493
00:22:46.350 --> 00:22:47.610
That's what they're getting, and-
494
00:22:47.610 --> 00:22:51.840
But the NBTA is also making profits from the signs.
495
00:22:51.840 --> 00:22:52.740
That is correct.
496
00:22:54.157 --> 00:22:55.320
And the terms of this agreement-
497
00:22:55.320 --> 00:22:57.390
So, it's not exclusive.
498
00:22:57.390 --> 00:22:59.880
It's what's good for us, is good for the NBTA.
499
00:22:59.880 --> 00:23:03.090
It's exclusive in the sense that only Out Front
500
00:23:03.090 --> 00:23:05.883
has the right to place advertising on those signs.
501
00:23:06.900 --> 00:23:08.490
That's what I meant be exclusive.
502
00:23:08.490 --> 00:23:09.480
And how is that different
503
00:23:09.480 --> 00:23:12.570
from the management services being provided in Ogden?
504
00:23:12.570 --> 00:23:14.610
Only that entity could provide
505
00:23:14.610 --> 00:23:16.160
the management services, right?
506
00:23:17.640 --> 00:23:19.890
Yes, that is correct, and the management service-
507
00:23:19.890 --> 00:23:21.960
Yes, exclusivity doesn't really make the difference.
508
00:23:21.960 --> 00:23:23.460
What does?
509
00:23:23.460 --> 00:23:24.600
Well I think for one thing,
510
00:23:24.600 --> 00:23:29.600
it's very important that Ogden was paid by UMass.
511
00:23:31.050 --> 00:23:33.363
They were paid to render a service.
512
00:23:34.770 --> 00:23:37.590
And that service was taking care of, managing it,
513
00:23:37.590 --> 00:23:40.980
taking care of it on behalf of UMass.
514
00:23:40.980 --> 00:23:44.523
Which ultimately UMass was the-
515
00:23:47.579 --> 00:23:48.584
Is that really?
516
00:23:48.584 --> 00:23:49.727
If for lack of a better legal term,
517
00:23:49.727 --> 00:23:51.248
I mean-
That we're in charge.
518
00:23:51.248 --> 00:23:52.827
Sorry to interrupt you.
519
00:23:52.827 --> 00:23:57.827
Isn't in some ways, Out Front being paid by the NBTA
520
00:24:00.630 --> 00:24:01.743
in the form of,
521
00:24:03.930 --> 00:24:05.910
if the NBTA ran these signs,
522
00:24:05.910 --> 00:24:08.070
it would take all the money for themselves.
523
00:24:08.070 --> 00:24:12.960
But instead, it's hired Ogden, sorry, Out Front to do it.
524
00:24:12.960 --> 00:24:16.360
And so, Out Front's payment for doing that
525
00:24:17.618 --> 00:24:19.263
is the profits that it reaps.
526
00:24:20.250 --> 00:24:22.620
I think that is all correct.
527
00:24:22.620 --> 00:24:24.210
And part of that agreement-
528
00:24:24.210 --> 00:24:26.700
So the difference between Ogden and Out Front
529
00:24:26.700 --> 00:24:31.050
can't be payment to the service provider.
530
00:24:31.050 --> 00:24:32.550
Well, I think it-
531
00:24:32.550 --> 00:24:33.450
Is the difference.
532
00:24:33.450 --> 00:24:35.355
Well, for one thing-
533
00:24:35.355 --> 00:24:37.705
Isn't the difference the effect of the taxes?
534
00:24:38.969 --> 00:24:40.442
I think that's a large-
535
00:24:40.442 --> 00:24:41.498
Because in Ogden-
536
00:24:41.498 --> 00:24:42.510
Well, isn't that what we're here to determine?
537
00:24:42.510 --> 00:24:44.280
Right, well in Ogden,
538
00:24:44.280 --> 00:24:47.400
the agreement expressly said, UMass,
539
00:24:47.400 --> 00:24:50.640
if they're taxes, UMass has to pay them, right?
540
00:24:50.640 --> 00:24:55.640
Here, if there are taxes, both side lose out on revenues.
541
00:24:56.550 --> 00:24:58.110
Is that right? Or, am I misstating the facts?
542
00:24:58.110 --> 00:25:01.113
Well that's both sides, not the city. But-
543
00:25:03.090 --> 00:25:05.433
Well, both sides.
544
00:25:06.750 --> 00:25:11.750
The NBTA and Out Front, if there are taxes,
545
00:25:13.500 --> 00:25:18.270
both will suffer negative consequences of that, right?
546
00:25:18.270 --> 00:25:20.760
No, the NBTA will not suffer because
547
00:25:20.760 --> 00:25:22.761
the taxes are so-
Get less revenue.
548
00:25:22.761 --> 00:25:23.790
I'm sorry?
549
00:25:23.790 --> 00:25:26.760
They're gonna get less of a cut of revenue, right?
550
00:25:26.760 --> 00:25:28.560
Well, I think we would have to-
551
00:25:28.560 --> 00:25:32.190
You're basically transferring some money to the city
552
00:25:32.190 --> 00:25:34.353
that would otherwise go to the state.
553
00:25:36.030 --> 00:25:38.673
Or, otherwise go to Out Front.
554
00:25:39.510 --> 00:25:40.470
That's really the question.
555
00:25:40.470 --> 00:25:45.470
The legislature has the-
The NBTA's profit
556
00:25:46.080 --> 00:25:48.870
from this agreement is a fixed fee.
557
00:25:48.870 --> 00:25:51.660
Plus, a percentage of gross revenue
558
00:25:51.660 --> 00:25:53.940
from which the taxes would not be deducted.
559
00:25:53.940 --> 00:25:55.414
Correct.
560
00:25:55.414 --> 00:25:57.453
The problem with the argument that you have
561
00:25:57.453 --> 00:26:00.900
is the next contract that the NBTA enters into.
562
00:26:00.900 --> 00:26:05.900
Which is in the next contractor for services will say
563
00:26:07.537 --> 00:26:09.153
"Hey, look at Out Front.
564
00:26:11.143 --> 00:26:13.278
"We were supposed to not get taxes on our use
565
00:26:13.278 --> 00:26:14.677
"of the real estate.
566
00:26:14.677 --> 00:26:17.100
"And somehow we're being taxed."
567
00:26:17.100 --> 00:26:20.847
The next vendor will say "NBTA, you're in it with us then."
568
00:26:21.720 --> 00:26:24.720
I don't know why either the NBTA, or Out Front,
569
00:26:24.720 --> 00:26:27.360
would had gotten into this contract.
570
00:26:27.360 --> 00:26:28.680
And word it the way they did,
571
00:26:28.680 --> 00:26:31.392
in particular with respect to taxes.
572
00:26:31.392 --> 00:26:32.870
Because they did not expect to be taxed.
573
00:26:32.870 --> 00:26:35.430
Is that relevant to our construction of that statute,
574
00:26:35.430 --> 00:26:38.340
the expectation of the parties going into the contract?
575
00:26:38.340 --> 00:26:39.786
No.
576
00:26:39.786 --> 00:26:40.619
So what is relevant?
577
00:26:40.619 --> 00:26:42.750
Tell me what is it that makes Ogden different
578
00:26:42.750 --> 00:26:43.743
from this case?
579
00:26:44.670 --> 00:26:47.370
I think it's the factual determination by the NB,
580
00:26:47.370 --> 00:26:49.110
by the appellate tax board,
581
00:26:49.110 --> 00:26:51.870
which obviously decided the Ogden case, as well.
582
00:26:51.870 --> 00:26:55.053
Can I ask you two examples, perhaps?
583
00:26:57.505 --> 00:27:00.360
If I'm operating a Dunkin' Donuts in South Station, right?
584
00:27:00.360 --> 00:27:04.053
Under your view, that clearly comes under the exempt.
585
00:27:05.584 --> 00:27:06.600
It's exempt from the exemption, right.
586
00:27:06.600 --> 00:27:08.310
It's exempt for the exemption, right?
587
00:27:08.310 --> 00:27:11.250
That they're taxed, that the Dunkin' Donuts is taxed.
588
00:27:11.250 --> 00:27:13.260
If I'm South Station, the NBTA,
589
00:27:13.260 --> 00:27:17.190
and I hire custodial service to clean the bathrooms
590
00:27:17.190 --> 00:27:20.430
in South Station, are they taxed as well?
591
00:27:20.430 --> 00:27:21.720
The custodial service?
592
00:27:21.720 --> 00:27:24.570
I think that would be a very far-
593
00:27:24.570 --> 00:27:26.430
Is that a use of the real estate?
594
00:27:26.430 --> 00:27:27.930
I think it would be a very far stretch.
595
00:27:27.930 --> 00:27:29.463
And I think one point of the statute
596
00:27:29.463 --> 00:27:31.050
that you haven't mentioned yet.
597
00:27:31.050 --> 00:27:32.910
What's the difference between the custodial service
598
00:27:32.910 --> 00:27:34.380
and the Dunkin' Donuts?
599
00:27:34.380 --> 00:27:36.240
For one thing the taxes assessed,
600
00:27:36.240 --> 00:27:37.800
and this has not been addressed so far,
601
00:27:37.800 --> 00:27:42.800
as of January 1st, to the user, lessee,
602
00:27:43.350 --> 00:27:46.500
or occupant as of that date.
603
00:27:46.500 --> 00:27:47.970
That suggests to me,
604
00:27:47.970 --> 00:27:51.450
and the contract here with Out Front
605
00:27:51.450 --> 00:27:53.943
goes until, I think, 2034, 2036.
606
00:27:57.150 --> 00:28:02.150
That, I would consider a transient type of a use.
607
00:28:02.700 --> 00:28:07.440
But isn't Justice Gaziano's hypothetical useful in saying
608
00:28:07.440 --> 00:28:11.250
Ogden is more like the cleaners.
609
00:28:11.250 --> 00:28:14.020
They're getting a flat fee to provide a service
610
00:28:15.935 --> 00:28:19.743
to clean the facility.
611
00:28:22.597 --> 00:28:23.790
And they're not getting a percentage of the profits
612
00:28:23.790 --> 00:28:25.177
of the facility.
613
00:28:25.177 --> 00:28:28.590
They're like UMass's running the con...
614
00:28:28.590 --> 00:28:32.070
Because they're not getting any money except for a fee.
615
00:28:32.070 --> 00:28:34.320
But here, Out Front is,
616
00:28:34.320 --> 00:28:37.680
they're engaging in a profit-making enterprise.
617
00:28:37.680 --> 00:28:41.790
Where they can make as much money as they possibly can
618
00:28:41.790 --> 00:28:43.233
from those signs.
619
00:28:44.608 --> 00:28:45.441
And it's not a set fee,
620
00:28:45.441 --> 00:28:47.073
they're different from the janitor.
621
00:28:50.215 --> 00:28:51.210
So the thing is informative.
622
00:28:51.210 --> 00:28:56.160
One's more like a janitor, not quite like it, but similar.
623
00:28:56.160 --> 00:28:59.043
I think that is all true.
624
00:28:59.909 --> 00:29:02.059
And again, I focus on the exclusive rights.
625
00:29:03.053 --> 00:29:03.900
But, I'm looking at your definition of use.
626
00:29:03.900 --> 00:29:08.850
And the fellow tax board decision is very broad.
627
00:29:08.850 --> 00:29:13.850
Where it does, in fact, apply to a custodial service,
628
00:29:14.640 --> 00:29:16.263
for-profit custodial service.
629
00:29:17.519 --> 00:29:18.810
I don't think it would go that far.
630
00:29:18.810 --> 00:29:19.860
Because of that fact,
631
00:29:21.150 --> 00:29:24.360
the ATB went to great lengths in its factual findings.
632
00:29:24.360 --> 00:29:27.030
They talked about the exclusivity.
633
00:29:27.030 --> 00:29:29.157
Which, I think was a very important point.
634
00:29:29.157 --> 00:29:31.530
So, I run Acme Custodial Services,
635
00:29:31.530 --> 00:29:34.320
and I got the whole South Station.
636
00:29:34.320 --> 00:29:36.810
What's exclusivity have to do with it?
637
00:29:36.810 --> 00:29:39.390
Well, I think it would have to do with the fact that
638
00:29:39.390 --> 00:29:43.560
the exclusive right is to hire other people to do it.
639
00:29:43.560 --> 00:29:46.200
I'm hiring all the, I got a fleet of janitors.
640
00:29:46.200 --> 00:29:47.760
Well that might be the case.
641
00:29:47.760 --> 00:29:49.863
But again, as of January 1st,
642
00:29:50.880 --> 00:29:53.790
what was going on as of January 1st.
643
00:29:53.790 --> 00:29:58.790
And I think that notion very much implicates a time element,
644
00:29:59.430 --> 00:30:01.560
and element of some permeance.
645
00:30:01.560 --> 00:30:05.853
Someone who walks across a couple of times a year,
646
00:30:07.740 --> 00:30:11.130
would not be found to be a user.
647
00:30:11.130 --> 00:30:12.900
But what if I have Acme,
648
00:30:12.900 --> 00:30:16.470
and I have a 10 year contract to clean South Station?
649
00:30:16.470 --> 00:30:18.630
It's permanent?
650
00:30:18.630 --> 00:30:21.330
Well again, I think that would be more akin
651
00:30:21.330 --> 00:30:25.470
to Ogden than it would be to Out Front.
652
00:30:25.470 --> 00:30:26.790
Could you address before you leave
653
00:30:26.790 --> 00:30:28.110
the burden of proof issue?
654
00:30:28.110 --> 00:30:32.190
Yes, very much. Thank you very much for that opportunity.
655
00:30:32.190 --> 00:30:33.990
With respect to the burden of proof,
656
00:30:34.860 --> 00:30:37.890
an answer to Justice Windler's question.
657
00:30:37.890 --> 00:30:39.910
There has been no case ever
658
00:30:41.400 --> 00:30:44.580
where the burden of proving an exemption,
659
00:30:44.580 --> 00:30:47.280
even an exception to an exemption,
660
00:30:47.280 --> 00:30:50.700
has been placed on a municipality.
661
00:30:50.700 --> 00:30:52.800
Are there cases going the other way, though?
662
00:30:52.800 --> 00:30:55.724
Or, are we just writing on a blank slate?
663
00:30:55.724 --> 00:30:57.270
I think no. I think A and B Fund,
664
00:30:57.270 --> 00:31:00.450
addressed to with respect to property at Mass Port,
665
00:31:00.450 --> 00:31:04.443
I think it was also addressed in the South Station case,
666
00:31:05.521 --> 00:31:06.540
with I think ultimately gave.
667
00:31:06.540 --> 00:31:08.007
The burden of proof,
668
00:31:08.007 --> 00:31:09.660
because this is the burden of proof issue
669
00:31:09.660 --> 00:31:11.433
was directly addressed 'cause,
670
00:31:13.303 --> 00:31:17.640
or we get, literally we're gonna get guidance on that.
671
00:31:17.640 --> 00:31:21.180
Yes, in the, it was addressed in the,
672
00:31:21.180 --> 00:31:22.380
what was the A and B Fund case.
673
00:31:22.380 --> 00:31:25.920
And in the South Station case,
674
00:31:25.920 --> 00:31:28.170
which was mentioned in the brief.
675
00:31:28.170 --> 00:31:29.430
At least in my opinion.
676
00:31:29.430 --> 00:31:31.647
The city's opinion gave rise to this,
677
00:31:31.647 --> 00:31:33.510
a limit to that statute.
These are, A and B cases
678
00:31:33.510 --> 00:31:35.850
is an appellate tax board case.
679
00:31:35.850 --> 00:31:39.810
Do we have any appellate cases got, providing guidance?
680
00:31:39.810 --> 00:31:42.390
I think both the appeals court decisions
681
00:31:42.390 --> 00:31:47.010
of both A and B Fund, and Beacon South Station Associates.
682
00:31:47.010 --> 00:31:49.950
So in Beacon, there wasn't an exception to the exemption,
683
00:31:49.950 --> 00:31:52.200
in the other case that you mentioned A and-
684
00:31:52.200 --> 00:31:54.750
Yes A and B Fund, which is a Mass Port case.
685
00:31:54.750 --> 00:31:56.820
And was that, was there an exception
686
00:31:56.820 --> 00:31:58.440
to the exemption in that case?
687
00:31:58.440 --> 00:31:59.833
Yes.
688
00:31:59.833 --> 00:32:01.020
Okay, and we said that the burden,
689
00:32:01.020 --> 00:32:03.780
or the court said the burden is on the taxpayer.
690
00:32:03.780 --> 00:32:07.560
Correct.
Okay.
691
00:32:07.560 --> 00:32:08.490
If there are no further questions,
692
00:32:08.490 --> 00:32:09.740
my time is up. Thank you.