Tuesday, April 23, 2013

Board Finds Greenhouses Not Personal Property But Not Sufficient Part of Property's use to Warrant Agricultural Assessment; and Assessor's Appraisals Most Credible Evidence of Property's Value

Excerpts of the Board's Determination follow:


Before turning to the fundamental issue, which is the accurate valuation of the subject property, we must address the Petitioner’s claim that the greenhouses should have been assessed as personal property and not as real property. Both parties relied on the Real and Personal Property Guidelines, Table 1-1, listing that identifies a greenhouse building as real property and also identifies a greenhouse building with plastic cover as personal property. The weight of the evidence establishes that these particular greenhouses are more substantial and permanent than ones that would properly be classified as personal property. An even more important factor in this case, however, is the Petitioner’s admission that the greenhouses were not reported as personal property. Under these circumstances, the Board will not change the classification from real to personal.

Another preliminary issue is the claim that the subject property should have been assessed as agricultural land. The Indiana General Assembly has directed the DLGF to establish rules for determining the true tax value of each parcel of agricultural land. Ind. Code § 6-1.1-4-13(c). The Guidelines also require assessors to further classify agricultural land into various types, some of which call for applying negative influence factors in predetermined amounts. Guidelines, ch. 2 at 102-05. Only land actually "devoted to agricultural use," however, may be assessed as agricultural land. Ind. Code § 6-1.1-4-13(b). The word ―devote‖ means "to give or apply (one’s time, attention, or self) completely." WEBSTER’S II NEW RIVERSIDE DICTIONARY 192 (revised edition). Thus, a taxpayer seeking to have its land assessed as agricultural cannot prevail merely by showing that agriculture is one of several activities for which it uses the land. Here, substantial evidence shows that the property is zoned for general business and the biggest part of it is the home, garage, retail building and a large parking lot. The entire parcel is slightly less than 2 acres—and the evidence about agricultural use goes to only a small portion of that total. Although the Petitioner presented evidence of some agricultural activity, the agricultural use proved for a small part of the land is not enough to demonstrate this parcel is devoted to agricultural use.

Real property is assessed based on its "true tax value," which means "the market value-in-use of a property for its current use, as reflected by the utility received by the owner or a similar user, from the property." Ind. Code § 6-1.1-31-6(c); 2002 REAL PROPERTY ASSESSMENT MANUAL at 2 (incorporated by reference at 50 IAC 2.3-1-2). There are three generally accepted techniques to calculate market value-in-use: the cost approach, the sales comparison approach, and the income approach. Indiana assessing officials primarily use the cost approach. Id. at 3. Indiana promulgated Guidelines that explain the application of the cost approach. REAL PROPERTY ASSESSMENT GUIDELINES FOR 2002 – VERSION A (incorporated by reference at 50 IAC 2.3-1-2. The value established by use of the Guidelines is presumed to be accurate, but it is merely a starting point. Other evidence relevant to market value-in-use can rebut that presumption. That evidence may include actual construction costs, sales information regarding the subject or comparable properties, appraisals, and any other information compiled in accordance with generally accepted appraisal principles. MANUAL at 5.

The most effective method to establish value can be through the presentation of a market value-in-use appraisal, completed in conformance with the Uniform Standards of Professional Appraisal Practice. Kooshtard Property VI, LLC v. White River Twp. Assessor, 836 N.E.2d 501, 506 n. 6 (Ind. Tax Ct. 2005).

Regardless of the valuation method used, a party must explain how its evidence relates to market value-in-use as of the relevant valuation date. See O’Donnell v. Dep’t of Local Gov’t Finance, 854 N.E.2d 90, 95 (Ind. Tax Ct. 2006); Long v. Wayne Township Assessor, 821 N.E.2d 466, 471 (Ind. Tax Ct. 2005). The valuation date for a 2010 assessment was March 1, 2010. For a 2011 assessment, the valuation date was March 1, 2011. IC 6-1.1-4-4.5(f). Any evidence of value relating to a different date must also have an explanation about how it demonstrates, or is relevant to, that required valuation date. Long, 821 N.E.2d at 471.

Although its conclusion about value exceeds the 2010 assessment of $288,100, the 2010 appraisal is substantial evidence and is sufficient to satisfy the Respondent’s initial burden to support that assessment. (Significantly, the Respondent did not ask for any increase in the assessment to match the appraised value.) The other appraisal is substantial evidence that the value of the subject property was only $311,000 as of March 1, 2011. This value is less than the current assessment of $339,300 for 2011. Accordingly, based on the statute defining the Respondent’s initial burden, the final determination for the 2011 assessed value can be no more than $311,000. Beyond this initial analysis and conclusion, however, the final outcome and our final determination depend on determining credibility.

The Petitioner attempted to prove a more credible value that would be much lower than the appraisals in several ways. But ultimately, none of those other attempts are as credible as the two Sceifers appraisals.

The Petitioner focused part of its case on the amount it paid for the subject property in July 2009.

The sale of a property can be the best evidence of its market value or value-in-use, but sometimes it does not. The distinction can depend on the conditions surrounding the sale and is reflected in the definition of "market value," which means:

The most probable price (in terms of money) which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller each acting prudently and knowledgably, and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby:

The buyer and seller are typically motivated;
Both parties are well informed and advised and act in what they consider their best interests;
A reasonable time is allowed for exposure in the open market;
Payment is made in terms of cash or in terms of financial arrangements comparable thereto;
The price is unaffected by special financing or concessions.

MANUAL at 10. This definition recognizes that sometimes the circumstances of a transaction make it less likely that a particular sale price accurately reflects market value. One frequent issue is whether "the buyer and seller are typically motivated." For example, when one family member sells a property to another family member the price is not reliable evidence of market value. Other sales fall into the unreliable category because a seller’s motivation is not typical for other reasons. They include ones where circumstances force a sale, such as tax sales, sheriff sales, and bankruptcy liquidations. Where a property sells under such circumstances, the price is likely to be less than it would have been if all the requirements in the "market value" definition were present. Consequently, sales with such problematic circumstances normally are not used by appraisers in forming an opinion about value. Alternatively, if they are considered, an adjustment for the special circumstances is normally required.

The evidence indicates the auction of the subject property was a "COURT ORDERED ABSOLUTE SHERIFF’S FORECLOSURE AUCTION." Pet’r Ex. A-2. It was incumbent on the Petitioner to offer specific evidence to allay the concerns discussed above. The Petitioner merely relied on the fact that 140 bidders were present and claimed that the auction was well advertised. To convincingly overcome concerns about the auction, however, requires much more than the Petitioner offered in this case. Under these circumstances the Board gives very little, if any, weight to the Petitioner’s purchase price—far less weight than the Sceifers appraisals.

The Petitioner also focused on several purportedly comparable sales, Petitioner Exhibits B1 through B9 and C1 through C11. But in order to use the sales comparison approach as evidence in a property assessment appeal, the proponent must establish the comparability of the properties being examined. Conclusory statements that a property is "similar" or "comparable" to another property do not constitute probative evidence of the comparability of the two properties. Long, 821 N.E.2d at 470. Instead, the proponent must identify the characteristics of the subject property and explain how those characteristics compare to the characteristics of the purportedly comparable properties. Id. at 471. The proponent also must deal with how any differences between the properties affect their relative values. Id. When seeking to establish comparability of land, the relevant characteristics to compare include things such as location, accessibility, and topography. See Blackbird Farms Apts., LP v. Dep’t of Local Gov’t Fin., 765 N.E.2d 711, 715 (Ind. Tax Ct. 2002) (holding that taxpayer failed to establish comparability of parcels of land where, among other things, taxpayer did not compare the topography and accessibility of parcels). The proponent also must explain how any differences between the properties affect their relative market values-in-use. Long at 471. The Petitioner failed to offer any such meaningful analysis in this appeal. The Petitioner’s conclusory evidence is insufficient to establish the comparability of these parcels and has no probative value. Id.

The Petitioner also attempted to use cost evidence to reconstruct the greenhouses and the retail structure, which the Petitioner attempted to characterize as a barn. Most of these estimates are dated January 2012, well after the respective valuation dates for 2010 and 2011. No evidence trended these proposed values to either of the assessment dates. Long, 821 N.E.2d at 471. More importantly, the Petitioner failed to establish that these proposed costs include all required cost elements and that they would be sufficient to satisfy generally accepted appraisal principles for use of the cost method of valuation. At most, these estimates offer minor support to the contention that individual features of the property may be incorrectly assessed. But they do not demonstrate the total assessment is in error. Eckerling v. Wayne Twp. Assessor, 841 N.E.2d 674, 677 (Ind. Tax Ct. 2006).

Finally, even if the property record card has errors concerning a finished attic or the lack of a negative influence factor, the Petitioner failed to make a case by simply contesting the methodology used to compute the assessment. Eckerling, 841 N.E.2d at 677. To successfully make a case the Petitioner needed to show the assessment does not accurately reflect the subject property’s market value-in-use. Id.; see also P/A Builders & Developers, LLC v. Jennings County Assessor, 842 N.E.2d 899, 900 (Ind. Tax Ct. 2006) (explaining that proper focus is not on methodology, but rather, on what the correct value actually is). It failed to do so.

The appraisals are the most credible, convincing evidence of the value of the subject property. The Petitioner failed to rebut the value proved by the appraisals and did not present substantial, probative evidence to support reducing the assessment to $115,833 or $126,419.

http://www.in.gov/ibtr/files/Cave_River_Valley_88-021-10-1-5-00003_etc.pdf