Appealed from: Board of Contract Appeals. General Services Administration
Before Michel and Plager, Circuit Judges, and Meskill, Senior Circuit Judge.*fn*
Appellants, W. David and Janet N. Kimbrell, appeal the decision of the General services Administration Board of Contract Appeals (GSBCA), Kimbrell v. General Servs. Admin., GSBCA No. 11325, 93-2 BCA P 25,665 (Dec. 2, 1992), denying their claim for an equitable adjustment premised upon selecting 1988 as the base year for application of the tax escalation clause in their lease agreement with the government. At issue on appeal is whether the GSBCA correctly determined that the base year was 1989, which would require appellants to reduce the rent for 1990, rather than 1988, which would entitle appellants to an equitable adjustment. Because we conclude as a matter of law that the GSBCA properly construed and applied the tax clause definition of "base year," and correctly interpreted "full tax assessment" to mean assessment on property only after completion of all improvements required by the lease, we affirm the GSBCA's decision.
On June 15, 1988, the Kimbrells leased property in Lawrence, Kansas, to the government. Initially, the property was undeveloped. Under the lease, however, the Kimbrells had to provide for the improvement of the property with an office building. The lease also contained a clause, called hereinafter "the tax escalation clause," which transferred to the government the risk of increases in real estate taxes assessed during the term of the lease. In relevant part, the tax escalation clause stated:
(A) The government shall pay additional rent for its share of increases in real estate taxes over taxes paid for the calendar year in which its lease commences (base year). . . . If no full tax assessment is made during the calendar year in which the government lease commences, the base year will be the first year of a full assessment.
(D) In the event of any decreases in real estate taxes occurring during the term of occupancy under the lease, the rental amount will be reduced accordingly. The amount of any such reduction will be determined in the same manner as increases in rent provided under this clause.
Appellants' Appendix at 46-47.
The Kimbrells paid $5,829.00 in real estate taxes for 1988. Their 1988 tax assessment did not reflect the newly constructed building because the property was not improved until after January 1, 1988, the valuation date for the 1988 tax appraisal. For 1989, the Kimbrells paid $52,747.38 in real estate taxes. The increase was due not only to the addition of the building, but also to a major increase in real estate tax rates. pursuant to the tax escalation clause, the Kimbrells sought reimbursement for 1989 tax payments that exceeded the $14,931.00 estimated tax bill for 1989 reflected in the Lessor's Annual Cost Statement, which accompanied the Kimbrells' bid for the lease. The contracting officer denied the Kimbrells' request, on the grounds that:
(1) The lease commencement date is established as December 1, 1988.
(2) No full tax assessment was made during the calendar year (1988) in which the lease commenced. The first full tax assessment was made in the 1989 tax year. Thus, 1989 ...