While the parties agreed that the assessments of both parcels
increased more than 5% between 2006 and 2007, the evidence shows that the
Petitioners erected a 7,200 square foot commercial building on Parcel No. 3 in
2006.
…
Here, the Petitioners seek to use the purchase of their land
and the construction costs of the building to show that the assessed values of
the properties were incorrect in 2007. In support of this contention, the
Petitioners submitted the purchase agreements for Parcel No. 3 and Parcel No. 4
and an itemized cost schedule and two cost estimates for the storage building
on the lots. See Petitioner Exhibit 1.
The presentation of cost data is a valid method of challenging
an assessment. According to the Guidelines, however, construction costs must
include all direct labor and materials plus the indirect expenses of
constructing the building. “Examples of direct costs include labor, material,
supervision, utilities used during construction, and equipment rental. Indirect
cost examples are building permits, fees, insurance, taxes, construction
interest, overhead, profit and professional fees….it is critical that the
actual construction costs represent all costs (direct and indirect) regardless
of whether or not they were realized, as in the case of do-it-yourself
construction.” GUIDELINES, Intro. at 1.
Here, the Petitioners’ evidence shows that they purchased
Parcel No. 3 and Parcel No. 4 in May of 2006 for $17,500 each, with the
provision that the seller would pay for the sewer and water lines to be brought
to the property at no cost to the Petitioners. However, Mr. Schafer testified,
utilities were never extended to the Petitioners’ lots. He estimated the cost
to extend the water and sewer lines to the lots would be approximately $16,800.
While Mr. Schafer’s testimony is not supported by any estimate or contract, Mr.
Schafer testified that he is a licensed contractor in the state of California,
Illinois and Indiana who has does this kind of work for “many, many years.” Schafer
testimony. In fact, Mr. Schafer testified that it is not uncommon for
appraisers to call his office for cost information when Marshall & Swift
was not specific enough for a particular assignment. Given the testimony
regarding Mr. Schafer’s experience in construction, contracting and costing
projects, the Board finds that the Petitioners presented some evidence that the
value of the two parcels at issue in this appeal was $18,200 for 2007 based on
the properties’ $35,000 purchase price less the $16,800 he estimated it would
cost to bring the utilities to the land that the Petitioners’ contracted for as
part of their purchase price.
The Petitioners also submitted a list showing the expenses
associated with the construction of the building, which totaled approximately
$55,025. Mr. Schafer testified that the exhibit “shows all expenses associated
with the improvement of that building.” Schafer testimony. According to
Mr. Schafer, “It starts, as you can see, with Homeland Security, which is
building permits, the Town of Hebron permits, the poles, the hardware, Menards
– which supplied some of the materials, the necessary labor to put the
structure up, the concrete labor, the concrete, the trusses, the concrete floor
… and the stone for the parking lot out in front.” Id. Mr. Schafer
testified that it only took “three men, four days to erect that structure” and
that his cost information included labor, materials and also “a $3,000
profit..., which represents a 12% or 13% profit, which is typical and customary
in a building like this.” Id.
To support the Petitioners’ cost figures, Mr. Schafer offered
two additional estimates showing that the building materials could be purchased
for $24,123.69 in 2009 and $26,453 in 2011. Petitioner Exhibit 1. Mr.
Schafer argues that he “could put the building up today for less money” because
“material costs and labor costs have actually went down due to the depressed
construction market.” Schafer testimony. The Petitioners further
supported the construction cost with a letter from their insurance company
showing the building was insured for $60,000.
Again, because of Mr. Schafer’s experience in construction,
contracting and costing projects, the Board finds that the Petitioners raised a
prima facie case the value of the building on the lots was $55,025.
Once a petitioner establishes a prima facie case, the burden
shifts to the assessing official to rebut the taxpayer’s evidence. See
American United Life Insurance Co. v. Maley, 803 N.E.2d 276 (Ind. Tax Ct.
2004). To rebut or impeach the Petitioners’ case, the Respondent has the same
burden to present probative evidence that the Petitioners faced to raise their
prima facie case. Fidelity Federal Savings & Loan v. Jennings County
Assessor, 836 N.E.2d 1075, 1082 (Ind. Tax Court 2005).
Here, the Respondent does not dispute the costs associated
with building the storage barn, providing utilities to the lots, or Mr.
Schafer’s experience or expertise as a contractor. Instead, the Respondent
argues that the Petitioners’ properties’ assessments were correct for 2007
based on the properties’ market value-in-use. In support of this contention,
the Respondent presented a valuation opinion prepared by Mr. Jorczak, the
county’s director of commercial operations. In his valuation opinion, Mr.
Jorczak testified that he used four commercial properties and adjusted those
sales for the differences in building type based on costs from published data.
While Mr. Jorczak’s assertions may not differ significantly
from those made by a certified appraiser in an appraisal report, the
appraiser’s assertions are backed by his education, training, and experience.
The appraiser also typically certifies that he complied with the Uniform
Standards of Professional Appraisal Practice (USPAP). Thus, the Board, as the
trier-of-fact, can infer that the appraiser used objective data, where
available, to quantify his adjustments. And where objective data was not
available, the Board can infer that the appraiser relied on his education,
training and experience to estimate a reliable quantification. Here, however,
there is no evidence that Mr. Jorczak is a certified appraiser; he did not
establish that he has any particular expertise in applying generally accepted
appraisal principles; and he did not certify that he complied with USPAP in
performing his valuation analysis. Consequently, Mr. Jorczak’s sales comparison
approach lacks probative value in this case.5 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).
