Both sides offered evidence and arguments that are relevant and probative, but what they offered leads to different conclusions about the value of the subject property. Therefore, the credibility and reliability of the cost approach offered by the Petitioner must be weighed against the credibility and reliability of the appraisals offered by the Respondent. This process involves a great number of considerations. There are no general rules that one type of evidence is always more credible than another. The Board has established no general rules of priority in past cases, nor will it do so. Specifically, the language the Petitioner focused on in Roop v. Monroe County Assessor does not mean actual construction costs for the subject property necessarily outweigh the credibility and reliability of other types of evidence.
The Petitioner obtained a favorable result in a prior appeal that reduced the 2008 assessment for the subject property based on construction cost evidence that is similar to the evidence the Petitioner submitted for 2009 and 2010. The 2008 determination, however, merely established that the cost evidence was enough to make a prima facie case.2 In the 2008 case the Respondent did nothing to rebut or impeach the Petitioner’s cost evidence. The prior determination has very little (if any) impact here because each tax year stands alone. See Thousand Trails Inc. v. State Bd. of Tax Comm’rs, 747 N.E.2d 1072, 1077 (Ind. Tax Ct. 2001). And the Respondent presented a very different case for 2009 and 2010. For example, the Respondent offered evidence that the Petitioner’s purported actual costs are much lower than typical building costs, the Respondent pointed out that for 2008 Mr. Kropp failed to include a 17,943 square foot addition to the nursing home, and the Respondent introduced appraisals for the subject property together with testimony from Appraiser Johns. Obviously, weighing the evidence where there is substantial evidence on both sides is much different from a case where only one side submitted such evidence.
In spite of the Respondent’s failure to walk the Board through the analysis, several factors weigh against the credibility of the cost valuation presented by the Petitioner.
Mr. Kropp is a certified tax representative. The record does not disclose how he is being compensated. In the absence of such disclosure, it is presumed that a contingent fee arrangement exists between the taxpayer and Mr. Kropp. 52 IAC 1-2-4(c). Therefore, he has a financial stake in the outcome.
Nothing in the record indicates that Mr. Kropp had direct, firsthand knowledge about the Petitioner’s land acquisitions, the construction of the subject property or the associated costs.
It is not clear who prepared the Petitioner’s cost figures or how they were obtained, but it is clear that Mr. Kropp simply presented cost figures that somebody else provided to him. (Mr. Kropp explained that the cost figures he originally was given omitted part of the building. He acknowledged the error and provided figures that purportedly have been corrected.)3
Nothing in the record indicates that Mr. Kropp is a certified appraiser.
Nothing in the record indicates the Petitioner’s cost approach methodology was prepared according to generally accepted appraisal principles or satisfies USPAP requirements.
Mr. Johns’ testimony and his appraisals are more credible for several reasons.
Mr. Johns is an Indiana Certified General Appraiser.
Although he was paid for doing these appraisals, it was not on a contingent fee basis.
His analyses, opinions, and conclusions were developed, and his reports were prepared, in conformity with the Uniform Standards of Professional Appraisal Practice (USPAP).
His value opinion was developed through the cost approach and the comparable sales approach. He explained why he did not develop the income approach, even though for this type of property it is typically the most meaningful.
A market value-in-use appraisal prepared according to USPAP is often the best indication of a property’s true tax value. See Kooshtard Property VI, LLC v. White River Twp. Assessor, 836 N.E.2d 501, 506 n.1 (Ind. Tax Ct. 2005). We reach that same conclusion here, but not without some concerns.
Mr. Johns disclosed the fact that he did not inspect the interior of the subject property beyond the lobby. That situation, of course, creates the possibility that some of his assumptions concerning interior features might be incorrect. Nevertheless, the Petitioner did not explore that possibility on cross-examination and did not offer any probative evidence to the contrary. Therefore, in this case the lack of interior inspection, while troubling, was not shown to be a major weakness or flaw in Mr. Johns’ opinion about the value of the subject property.
Appraisers commonly use three valuation approaches: cost, comparable sales, and income capitalization. In this particular instance, Mr. Johns only developed values based on the cost approach and the comparable sales approach. Although Mr. Johns admitted that the income approach is typically the most meaningful approach for income producing properties such as skilled nursing facilities, he disclosed that he did not develop a value based on that approach in this instance. He explained that doing so was not possible “due to lack of available income/expense data for the subject property.” The lack of income and expense data apparently stems from the fact that Mr. Johns was engaged by the Respondent, who did not have that kind of data for the subject property. Significantly, there is no indication in the record that the Respondent engaged in any kind of discovery to obtain that kind of information from the Petitioner.5 The circumstances surrounding the lack of income and expense data, however, are not the main point. Rather, the main point is that the appraisals did not develop a value based on the approach that is typically the most meaningful for this kind of property. This void diminishes the credibility and reliability of the appraisals, but it does not entirely destroy their probative value. Even without the income approach, the appraisals have some weight and credibility derived from the cost approach and the sales comparison approach.
The Petitioner also attacked some of the comparable sales used by Mr. Johns. According to Mr. Kropp, the transaction identified as comparable sale 2 was not an arm’s-length transaction. Relying on an article from Wikipedia, Mr. Kropp testified that the buyer, HCR ManorCare Properties LLC, and the seller, ManorCare Health Services, Inc., are related. Mr Kropp also testified that this transaction involved numerous nursing homes and the purported purchase price was an allocation of the total price. If there was any basis for his testimony beyond the Wikipedia article, Mr. Kropp did not explain it. Nevertheless, there was no hearsay objection to this evidence and the Respondent did nothing to rebut or impeach it. Therefore, it cannot be entirely disregarded, but the Petitioner failed to establish that the point has anything more than a minimal impact on the credibility of the appraisals. Similarly, Mr. Kropp testified that comparable sale 3 was not really a sale, but just involved a name change due to a financing arrangement. This testimony was entirely conclusory and has no probative value. It did not make the appraisals’ conclusions about the value of the subject property any less credible.
Evidence frequently is not perfect. Even considering these shortcomings, the appraisals and Mr. Johns’ value opinions are ultimately the most reliable and credible evidence presented for the 2009 and 2010 assessments.
Finally, the appraised values are related to the required valuation dates. The 2009 appraised value was related back to January 2008 and the appraised value as of March 1, 2010, which coincides with the required valuation date for that year.
