Wednesday, February 13, 2013

Board Finds Respondent Failed to Support Property's Assessed Value with Cost and Sales Comparison Information and Taxpayer Failed to Support a Lower Value by Comparing Other Assessments

Excerpts of the Board's Determination follow:

The PTABOA determined the property’s March 1, 2011 assessment at $824,500, which represents an increase of more than 5% over the property’s March 1, 2010 assessment of $745,000. The Assessor therefore had the burden of proving that the subject property’s March 1, 2011, assessment was correct. To the extent that Bushmann seeks an assessment below the previous year’s level, however, Bushmann had the burden of proving that value.

The Assessor pointed to three things in an attempt to show that the subject property was actually assessed for less than its market value-in-use: (1) Mr. Williamson’s testimony that the subject parcel is actually significantly larger than its assessment reflects; (2) Mr. Williamson’s analysis of building permits for the subject store and other convenience store/gas stations; and (3) Mr. Williamson’s sales-comparison analysis. As explained below, none of these things suffices to prove the subject property’s market value-in-use.

As to the first item, Mr. Williamson did little to explain how he re-measured the subject property other than to say that he used basic “aerial tools.” Williamson testimony. Even if one assumes that the subject parcel was assessed using the wrong measurements, simply showing the parcel’s correct dimensions does not translate to any particular value. Mr. Williamson presumably multiplied the additional area by the same base rate used to assess the parcel in the first place. But he did nothing to show how that base rate was determined or otherwise explain how the base rate correlated to the property’s actual market value-in-use.

Mr. Williamson did explain where he got the data for his survey of building costs, albeit in a highly summary fashion. But the Board fails to see how average or median building costs show the market value-in-use for the subject store and canopy. Instead, Mr. Williamson’s data merely shows that building costs varied widely.

Mr. Williamson’s survey, however, included actual construction costs for the subject store and canopy. And the actual construction costs for a property under appeal are relevant to its market value-in-use. But as already explained, Mr. Williamson referenced those costs in a highly summary fashion, and he did not include the permits from which he drew his information. Also, the subject store was built in 2005, and Mr. Williamson did not explain how those 2005 costs related to building costs for March 1, 2011—the valuation date at issue this appeal. While Mr. Williamson did offer some evidence to trend market levels from 2005 to 2011 in the form of a paired sales analysis, that analysis showed widely varying rates of appreciation and depreciation. Without more support, Mr. Williamson’s trending information does little to relate the subject improvements’ construction costs to a value as of March 1, 2011.

That leaves Mr. Williamson’s sales-comparison analysis. For sales data to be probative, the sold properties must be sufficiently comparable to the property under appeal. Conclusory statements that a property is “similar” or “comparable” to another property do not show comparability. See Long, 821 N.E.2d at 470. Instead, one must identify the characteristics of the property under appeal and explain how those characteristics compare to the characteristics of the sold properties. Id. at 471. Similarly, one must explain how any differences between the sold properties and the property under appeal affect the properties’ relative market values-in-use. Id.

Although Mr. Williamson did not extensively compare the other properties in his analysis to the subject property, he did compare at least some relevant characteristics. For example, he explained that all the properties were used as convenience stores that sold gas. And he both identified the age and condition of all the stores and adjusted each store’s sale price where those characteristics differed from the subject store. Mr. Williamson also adjusted those sale prices to make them reflect March 1, 2011 values, although, as explained above, his adjustments in that regard have little or no probative weight.

Significantly, Mr. Williamson did not compare the stores in terms of their relative locations other than to say that all of the sales were from Allen County. Mr. Williamson justified his decision by explaining that he deducted each store’s land value from its sale price. Although Mr. Williamson did not say so, the Board infers that he believed any location-related market influences would be reflected solely in the value of each property’s land. Similarly, while Mr. Williamson did not explain the process by which he allocated the properties' sale prices between land and improvements, it appears that he simply deducted each property’s land assessment from its total sale price.

Of course, that assumes that each property’s land assessment accurately reflected its market value-in-use, a proposition that Mr. Williamson offered nothing to support. Mr. Williamson’s failure to offer that support is especially problematic given that each sale price differed dramatically from the property’s assessment. Thus, absent further explanation, there is little reason to believe that any component of the comparable properties’ assessments was accurate. Under those circumstances, Mr. Williamson’s claim that he did not need to account for differences in location—a key influence on the market value-in-use of a convenience store/gas station—is not persuasive. At a minimum, Mr. Williamson needed to provide some assurances that his methodology complied with generally accepted appraisal principles. And he did not give any such assurances.

Because the Assessor did not offer probative evidence to show the subject property’s market value-in-use, she failed to make a prima facie case that the property’s March 1, 2011 assessment was correct. Bushmann is therefore entitled to have the property’s assessment returned to its March 1, 2010 level of $745,000.

Bushmann, however, sought an assessment below that amount. And as explained above, Bushmann had the burden of proving that lower amount. It is to that issue that the Board now turns.

To support Bushmann’s claim for a lower assessment, Mr. Smith analyzed the assessments of several other convenience store/gas stations. To support his methodology, Mr. Smith pointed to Ind. Code § 6-1.1-15-18, which allows parties to offer evidence of comparable properties’ assessments to prove the value of a property under appeal:

(a) This section applies to an appeal to which this chapter applies, including any review by the board of tax review or the tax court.
(b) This section applies to any proceeding pending or commenced after June 30, 2012. (c) To accurately determine market-value-in-use, a taxpayer or an assessing official may:
(1) in a proceeding concerning residential property, introduce evidence of the assessments of comparable properties located in the same taxing district or within two (2) miles of a boundary of the taxing district; and
(2) in a proceeding concerning property that is not residential property, introduce evidence of the assessments of any relevant, comparable property.
However, in a proceeding described in subdivision (2), preference shall be given to comparable properties that are located in the same taxing district or within two (2) miles of a boundary of the taxing district. The determination of whether properties are comparable shall be made using generally accepted appraisal and assessment practices.

I.C. § 6-1.1-15-18 (emphasis added).

As Mr. Smith correctly pointed out, this appeal was pending before the Board on July 1, 2012. Indiana Code § 6-1.1-15-18 therefore applies. But that statute does not automatically make evidence of other properties’ assessments probative. As with a sales-comparison analysis, the party offering the evidence must show that the properties in question are comparable to the property under appeal and how relevant differences affect their relative values. Mr. Smith’s attempt to compare the properties was highly superficial; indeed, he did not even offer the property record cards for any of his purportedly comparable properties. Instead, Mr. Smith simply summarized a few of the myriad factors that go into assessing improvements. He similarly failed to explain how relevant differences, such as significant disparity between the quality grades assigned to the purportedly comparable stores and the “B+2” grade assigned to the subject store, affected the properties’ relative values. Mr. Smith’s comparison data therefore lacks probative value.

http://www.in.gov/ibtr/files/Bushmann_LLC_02-074-11-1-4-00129.pdf