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Many of the most valuable possessory interests in California can be characterized as unusual monopoly rights in real estate and how to get real estate license -- for instance, the concessionaire permitted the exclusive right to operate a restaurant in the midst of a large government park. The tiny parcel of land required for this purpose would have little value were it possible for competition to restrict its earning power; but, when the governmental authority artificially restricts this competition, the monopolistic rights of this parcel may enhance its value. These are rights imputable to the real estate and are properly included in the appraised value of the possessory interest.
If this rationale were accepted, the street vendor could indeed be taxed upon the full value of the permit, as could a vendor in a public stadium who had no fixed concession stand. A tax upon tangible property requires a valuation of rights in that property, rather than a valuation of business or franchise rights in connection with which such property is used. The right to make use of a patent held by a state university cannot be included in the right to undertake research in a campus building, even if the two are granted in tandem. Only data on the rental value of comparable physical space provides a basis for restricting the possessory interest tax to rights in real property.
A focus upon rental values can help distinguish a contractor's right to use a government shipyard, as in Kaiser, from a maintenance worker's right to enter an office building. If the federal government had not furnished use of a shipyard, Kaiser would have built or leased one, with that cost added to the contract. The shipyard thus had an imputed rental value to Kaiser, and a similar potential rental value to other shipbuilders, independent of the government contract. There is no sense, however, in which a maintenance worker avoids a rental charge by use of a government office building, or has a right to use the government property that could command an independent price from a hypothetical purchaser or renter. Kaiser's use of the federal shipyard was sufficiently independent that its business activity could have been carried on at a privately rented location. By contrast, the maintenance worker cannot separate the right to enter an office building from the business activity of cleaning it. There is no rental value that could be assigned to the right to enter the office building for cleaning purposes, since the business could not be conducted at a separate private location.
Rights of employees and others in property owned by colleges, universities, hospitals, and other nonprofit institutions were themselves exempt because their use was "incidental to or reasonably necessary for" the exempt owner's purpose. Because in each case the use of property by the interest holder was itself exempt, the courts did not consider at what point the interest of a private contractor or employee becomes independently possessory.
The appropriate question is whether the taxpayer's right to make use of exempt property rises to the status of an interest in it, as in the case of a mineral lease or grazing permit, or does not rise to that status, as in the case of a postal patron's right to enter a government building. This inquiry may be compared to determinations as to whether a given covenant "touches and concerns" the land. In both cases individual applications of a general formulation call for a practical approach that takes into account the characteristics of specific tangible property and arrangements concerning its use.
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