Therefore, the amounts
suggested by the Petitioners’ “cost approach,” “income approach,” “market
approach,” and “other” calculations do not help to prove anything relevant to
this case.
Often the purchase price for a
property can be some of the best evidence of its market value-in-use. The
Petitioners’ version of the cost approach in this case, however, does not help
to make a case for several reasons. It is not really a cost approach. Mr.
Richards testified that $625,000 of the total purchase price was for 25 acres
of land that is not included in the assessment of the subject property. The
Sales Disclosure Form appears to generally support the fact that the purchase
price was $1,290,000 and it included 24.35 acres of land. The PRC shows that
the assessment of the subject property includes no land. Accordingly, reducing
the total purchase to account for the land conceptually makes sense. But the
amount—$625,000—is problematic because the record contains no substantial
evidence to support Mr. Richards’ conclusory calculation based on $25,000 per
acre. Mr. Richards’ cost calculation also subtracted another $100,000 for the
demolition of five structures on the property, but his statements about that
part of the calculation were entirely unsupported conclusions. He offered no authority
or substantial argument to support how subtracting demolition costs conforms to
generally accepted appraisal principles. Furthermore, his anticipated $100,000
figure is merely a bald conclusion. Ultimately, the unsubstantiated conclusions
at the heart of the Petitioners’ version of the cost approach leave the
calculation with no probative value. See Lacy Diversified Indus. v. Dep’t of
Local Gov’t Fin., 799 N.E.2d 1215, 1221 (Ind. Tax Ct. 2003); Whitley
Products v. State Bd. of Tax Comm’rs, 704 N.E.2d 1113, 1119 (Ind. Tax Ct.
1998).
The Petitioners presented some factual evidence about the 2007 income and expenses related to the subject property. The Respondent did not dispute the accuracy of that information and for purposes of this analysis the Board will regard that income and expense data as accurate. Nevertheless, the Petitioners’ version of the income approach to value has serious problems and no probative value. There was a 79 percent vacancy rate. That number may be high, but from the record it is impossible to draw any legitimate conclusion about what it really means. For 2007 they had $136,013 gross operating income and $173,487 of expenses—a loss of $37,474. The Petitioners made no attempt to relate their own numbers to industry standards or establish what might reasonably be expected over a longer period of time. Most importantly, their income approach includes absolutely nothing about determining an appropriate capitalization rate and applying it to determine a value, which is an integral part of any generally accepted income approach to value. The Petitioners’ version of the income approach is not credible or relevant.
The market approach also
frequently is called the sales comparison approach. It can be accomplished by
comparing a subject property to other properties that have been sold in the
same market. See, e.g., State Bd. of Tax Comm'rs v. Garcia, 766 N.E.2d
341, 343 n.3 (Ind. 2002). Similarities and differences such as date of sale,
location of property, physical characteristics, and conditions of the sale must
be noted in detail. See Long v. Wayne Twp. Assessor, 821 N.E.2d 466,
470-471 (Ind. Tax Ct. 2005) (explaining that in offering comparables one must
establish the characteristics of the subject property, establish how those characteristics
compare to the purportedly comparable properties, and establish how any
differences affect the relative values). In this case the Petitioners offered
no other sales to compare. As a market approach they simply relied on their own
purchase price of $1,290,000 and subtracted the purported $900,000 cost to
remediate asbestos, reaching a value of $390,000. For the reasons explained
earlier, this single reference point does nothing to help prove the actual
market value-in-use of the subject property. Furthermore, the Petitioners’
calculation assumes that the cost of the asbestos remediation relates to
reducing value on a one for one basis, but provides no support for that
assumption. Such a conclusion is not probative evidence. See Lake Co.
Assessor v. U.S. Steel Corp., 901 N.E.2d 85, 94-95 (Ind. Tax Ct. 2009)
(holding that failure to link the cost of remediating environmental
contamination with an actual reduction in property value equivalent to what was
spent on remediation left the remediation cost with no probative value for
purposes of determining assessed valuation). The Petitioners’ purported market
approach does nothing to support their claim.
The approach that the
Petitioners identified as "other" is nothing more than subtracting the purported land
value and environmental clean-up costs from their purchase price. Again, they
failed to establish that this approach is in accordance with generally accepted
appraisal principles. Furthermore, the record contains no substantial basis for
attributing $625,000 to land value and it contains no substantial basis for
attributing $900,000 remediation cost to a $900,000 reduction in the value of
the subject property. The kind of unsupported conclusory statements that the
Petitioners relied on are not probative evidence and do not help to prove that
the existing assessment must be changed. See Lacy Diversified, 799
N.E.2d at 1221; Whitley Products, 704 N.E.2d 1119.
In summation, none of the
Petitioners’ various valuation approaches are probative evidence. They do not
prove the existing assessment is wrong or prove the lower value that was
requested.
