…
Mr. Kropp provided no evidence
to demonstrate that the Petitioner’s property’s income and expenses were
typical for comparable properties in the market. Thus, any low income or high
expense levels may be attributed to the Petitioner’s management of the property
as opposed to the property’s market value. See Lake County Trust Co. No.
1163 v. State Board of Tax Commissioners, 694 N.E.2d 1253, 1257-58 (Ind.
Tax Ct. 1998) (economic obsolescence was not warranted where taxpayer executed
unfavorable leases resulting in a failure to realize as much net income from
the subject property). In fact, Mr. Kropp testified that the Petitioner hired a
new management company in 2008, which did a better job of marketing the
property, resulting in a higher net operating income. Kropp testimony;
Petitioner Exhibit 2. The difference in net operating income between the
prior management company, where the facility lost $61,023, and the net
operating income under the new management company, where the facility earned a
profit of $406,992 the following year, starkly proves the point made by the Tax
Court in the Lake County Trust and Thornton Telephone Company cases.4 Thus, without
showing what comparable properties are earning, the Petitioner’s
representative’s income analysis has little probative value.
Moreover, Mr. Kropp did not
adequately support his capitalization rate. A capitalization rate “reflects the
annual rate of return necessary to attract investment capital and is influenced
by such factors as apparent risk, market attitudes toward future inflation, the
prospective rates of return for alternative investments, the rates of return
earned by comparable properties in the past, the supply of and demand for
mortgage funds, and the availability of tax shelters.” See Hometowne
Associates, L.P. v. Maley, 839 N.E.2d 269, 275 (Ind. Tax Ct. 2005). Here
Mr. Kropp did not present any evidence to support his capitalization rate of
9.5%. While the rules of evidence generally do not apply in the Board’s
hearings, the Board requires some proof of the accuracy and credibility of the
evidence. Statements that are unsupported by probative evidence are conclusory
and of no value to the Board in making its determination. Whitley Products,
Inc. v. State Board of Tax Commissioners, 704 N.E.2d 1113, 1118 (Ind. Tax
Ct. 1998); and Herb v. State Board of Tax Commissioners, 656 N.E.2d 890,
893 (Ind. Tax Ct. 1995).
Ultimately, Mr. Kropp failed to
show that his income approach methodology conformed to the Uniform Standards of
Professional Appraisal Practice (USPAP) or any other generally accepted
standards. Consequently, Mr. Kropp’s income approach calculation lacks
probative value in this case. See Inland Steel Co. v. State Board of Tax
Commissioners, 739 N.E.2d 201, 220 (Ind. Tax Ct. 2000) (holding that an
appraiser’s opinion lacked probative value where the appraiser failed to
explain what a producer price index was, how it was calculated or that its use
as a deflator was a generally accepted appraisal technique).
