The assessment determination on review before the Board is the PTABOA’s determination assessing the property at $165,300 for March 1, 2010. To decide whether Ind. Code § 6-1.1-15-17.2 shifts the burden of proof to the Assessor, the Board must compare that assessment to the amount that the Assessor determined for the previous year. The Assessor originally valued the property at $178,200 for March 1, 2009, which is actually more than the assessment currently under review. Granted, the subject property’s March 1, 2009 assessment was later reduced to $146,500. But that reduction was part of an agreement to settle Ms. Menefee’s appeal for the 2009 assessment year. And strong policy reasons dictate against using that compromised amount as the baseline for determining whether Ind. Code § 6-1.1-15-17.2 applies.
Indiana law strongly favors settlements. They allow courts to operate more efficiently and allow parties to resolve their disputes through mutual agreement. Thus, as the Indiana Supreme Court has explained, the law encourages parties to engage in settlement negotiations by, among other things, “prohibit[ing] the use of settlement terms or even settlement negotiations to prove liability for or invalidity of a claim or its amount. Dep’t of Local Gov’t Fin. v. Commonwealth Edison Co., 820 N.E.2d 1222, 1227 (Ind. 2005). That strong policy justifies denying settlements precedential effect in property tax cases; to do otherwise would have a chilling effect on the incentive of assessors to resolve cases. Id. at 1228. There are many reasons for parties enter into settlement agreements, and the Board will not speculate as to what those reasons were in any particular case. The Board therefore will not apply a settlement agreement to set a baseline for comparison to future assessments, especially where, as here, the agreement does not contain any language clearly indicating that the parties intended such a result.
Even if the Board was to use the $146,500 reflected in the settlement agreement as the baseline for comparing the subject property’s 2009 and 2010 assessments for purposes of Ind. Code § 6-1.1-15-17.2, the Board would still find that Ms. Menefee has the burden of proof. Indiana Code § 6-1.1-15-17.2 only shifts the burden of proof to an assessor where an assessment for the “same property” increases more than 5% between assessment years. On its face, the settlement agreement is premised on Ms. Menefee’s house being assessed as only 62% complete in 2009. And it is undisputed that the house was assessed as 100% complete in 2010. Thus, the 2010 assessment was not for the “same property” that was assessed under the settlement agreement. Instead, the increase came from new physical structures, or at least new portions of previously existing structures, being assessed for the first time.
Ms. Menefee did not prove that the subject property’s assessment should be reduced.
Ms. Menefee largely relies on the fact that the subject property has a significant problem with flooding. That problem likely detracts from the property’s value. But merely showing that a problem exists is not enough to rebut the presumption that a property was accurately assessed. Instead, Ms. Menefee needed to offer the types of evidence contemplated by the Manual. And she offered little in that regard.
It appears that Ms. Menefee bought the subject property for $122,500 in May 2007. Often, a property’s sale price can be probative of its market value-in-use. But that is not the case here for two reasons. First, Ms. Menefee tore down the original house and replaced it. Thus, the property that Ms. Menefee bought, in the form she bought it, no longer existed on March 1, 2010. Second, even if the property had remained unchanged, Ms. Menefee did nothing to relate her 2007 purchase price to the relevant March 1, 2010 valuation date other than making the conclusory assertion that property values had declined since 2007. For those reasons, the price that Ms. Menefee paid to buy the subject property in 2007 is not probative of the property’s true tax value for the March 1, 2010 assessment.
Ms. Menefee’s testimony that family and friends built the replacement home with materials and supplies that she bought for $27,000 fares no better. True, the Manual recognizes actual construction costs as probative evidence of a property’s market value-in-use. But that is premised on the cost approach to value, which assumes that “potential buyers will pay no more for the subject property, hence they set the subject property’s value, than it would cost them to purchase an equally desirable substitute parcel of vacant land and construct an equally desirable substitute improvement.” MANUAL at 13. It takes more than just materials to build a substitute improvement. One therefore must include all direct and indirect costs required to build the improvement. GUIDELINES, intro. at 1. Labor is an example of a direct cost. Thus, when comparing the Guidelines’ cost tables to actual construction costs, “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.” Id. (emphasis added). Without knowing the labor costs attributable to Ms. Menafee’s house, her cost information does little to show the subject property’s true tax value.
Ms. Menefee also attempted to compare her property to a neighboring property and argued that her assessment is higher even though her neighbor has a bigger property with an extra garage. But Ms. Menefee offered almost no information from which the Board could meaningfully determine whether the two properties are comparable to each other, and nothing to show how any relevant differences affect their relative market values-in-use. Her testimony therefore lacks probative value. See Long, 821 N.E.2d at 471 (finding that taxpayers’ evidence lacked probative value where they failed to explain how their property’s characteristics compared to purportedly comparable properties and how differences affected the properties’ market values-in-use).
Ms. Menefee similarly failed to explain how the property record cards and listing information that she introduced at the PTABOA hearing relate to her claim. In fact, she did not even introduce that evidence at the Board’s hearing—the Assessor did. In any case, the Board has not been presented with any meaningful analysis to compare the properties referenced on those documents to the subject property or to explain how any differences affect the properties’ relative market values-in-use. Thus, like Ms. Menefee’s testimony about her neighbor’s property, the property record cards and listing information lack probative value.
