The parties agree these 2006
assessments increased more than 5% from the 2005 assessor’s assessments.
Therefore, the Respondent has the burden of proving these 2006 assessments are
correct.
…
The purchase price of a
property can be the best evidence of a property‘s value. See Hubler Realty
Co. v. Hendricks County Assessor, 938 N.E.2d 311, 315 (Ind. Tax Ct. 2010).
The subject property (both parcels) sold for $400,000 in 2011. But nothing in
the record relates that value to the relevant 2005 valuation date. Accordingly,
this evidence is of no probative value. Long, 821 N.E.2d at 471.
Several years before the 2011
sale, the Petitioner listed the subject property with a realtor and was asking
$399,000. This listing lasted from 2000 through most of 2006. According to Mr.
Kelly, this asking price shows what the Petitioner thought the property was
worth even though there was no sale. An asking price, however, is a poor
indication of market value because it does not represent a completed sale. MANUAL at 10
(“Implicit in this definition [of market value] is the consummation of a sale
as of a specified date and the passing of title from seller to buyer…”). Under
limited circumstances, an asking price can have minimal evidentiary value. When
reasonable marketing efforts are made to sell a property at a given price for a
long period of time and those efforts are unsuccessful, it can be inferred that the market value-in-use
is something less than the asking price. But proof that the market value-in-use
of the subject property is something less than $399,000 does not prove the
assessed value of $371,400 is correct.
The Respondent
presented an income capitalization analysis that concluded the value of the
subject property is $408,160. But this evidence is not credible for a number of
reasons. Although several references to “we” may be an indication that Nexus
Group is responsible, the one-page analysis contains no indication of who
actually prepared it. Furthermore, there is no indication it was prepared in
conformity with generally accepted appraisal principles. The calculation is
based on income of $30,000. This figure was taken from the real estate listing,
which in one place shows potential gross income of $30,000 and in another place
states, “Income from parking is approximately $30,000 annually.” The income
capitalization calculation apparently assumed this figure was net income and
applied the capitalization rate to it. But the record does not support this
assumption. Nothing in the record substantially supports the fundamental
assumption that $30,000 is the appropriate income figure to capitalize. In
addition to the income amount, the capitalization rate is problematic. Three
sources were considered:
The Korpaz
[sic.] Survey for the 1st
Quarter of 2006 provides
a dividend indicator of 7.57%. The RealtyRates.com Investor Survey for the 3rd Quarter of 2012 shows an average cap rate of 7.18% for all
types of properties. In the Babson Capital Research Note June 2009, a
historical review of cap rates shows rates between 5% - 7% during the period of
2006. *** For the purposes of this demonstration, we selected a rate of 6.0%
given that the investment risk is far less for land investments than it is for
retail investments.
Resp’t Ex.
F. The net property
tax rate for Nashville, 1.3465% also was loaded to get a capitalization rate of
7.35%. After reviewing all the evidence, the Respondent failed to prove that a
national capitalization rate is relevant to this market area. The use of the
7.35% capitalization rate is a conclusion without adequate support in the
record. For all these reasons, the Board ultimately gives no weight to this
income capitalization analysis.
The Respondent
claims that sales in the same area support the assessed land value at $22.00
per square foot. The Respondent presented evidence of three sales during
2004/2005 in the downtown Nashville area. Resp’t Ex. C, D. All three
were sales of improved properties, not just bare land. The Respondent used the
abstraction (extraction) method to determine the value of land from the sales.
According to
Mr. Kelly, these three sales indicate land values ranging from $18.49 to $24.97
per square foot. He acknowledged, however, that the highest per square foot
value was for a much smaller parcel. He also acknowledged that per square foot
prices for smaller parcels tend to be more than for larger parcels. The lot
sizes, extracted land selling prices, and land selling prices per square foot
for these three comparables are as follows.
square feet extracted land price price/square foot
3,328 $83,100 $24.97
21,780 $426,900 $19.60 10,620 $196,400 $18.49
The subject
property consists of two contiguous parcels, each containing 8,092 square feet.
Thus, the total area for the subject property is 16,184 square feet. If this
part of the Respondent’s case is to be believed, it seems to indicate the
assessed land value for the subject property should be in the range of $18.49
to $19.60 and not $22.00 per square foot.
Closer
examination of this sales comparison approach reveals another fault. Land
values were extracted from the total selling prices by merely subtracting the
assessed value of improvements. The Respondent offered no evidence that those
assessed values actually are the depreciated values of those improvements. To
repeat, this is a case where the Respondent has the burden to prove the
disputed assessments are correct. Ind. Code § 6-1.1-15-17.2. To the extent
there might be any inconsistency between the burden shifting provisions in Ind.
Code § 6-1.1-15-17.2 and the presumption that a value determined from the
Guidelines is presumed to be accurate, the statute controls. See MANUAL at 5. Consequently, the Board will not presume the
improvements’ assessed values are correct. This point eviscerates the
Respondent’s attempt to prove the value of the subject property through
comparable sales.
In addition,
the sales comparison approach offered by the Respondent goes entirely to the
land value and ignores the value of the improvements on the subject property,
even though that assessed value is small.
Finally, the
Respondent attempted to make a case by proving purportedly comparable
assessments. This sort of proof is specifically authorized by statute: “To
accurately determine market-value-in-use, a taxpayer or an assessing official
may … introduce evidence of the assessments of any relevant, comparable
property. **** The determination of whether properties are comparable shall be
made using generally accepted appraisal and assessment practices.” Ind. Code §
6-1.1-15-18(c).
The Respondent
presented property record cards of two other parcels to demonstrate that land
was assessed at $22.00 per square foot for 2006, the same as the subject
parcels. All these properties are located in the same taxing district in
Nashville. The subject property is located on Van Buren Street and the
comparables are located a few blocks away on Old School Way. The relative
locations are shown on the map identified as Respondent Exhibit G. All of the
parcels have 8092 square feet of land. All of the parcels are paved and used
for parking. None of these points of comparison was challenged by the
Petitioner. Thus, the Respondent established that the land of the subject
property and these two other parcels is comparable. See Long, 821 N.E.2d
at 471. It appears that $22.00 per square foot was used for the land assessment
of the subject property and these comparables. While Ind. Code § 6-1.1-15-18(c)
provides authority for the admissibility of comparable assessments, the point
does not establish that $22.00 per square foot corresponds to the land’s actual
market value-in-use. See O’Donnell, 854 N.E.2d at 94-95; Eckerling v.
Wayne Twp. Assessor, 841 N.E.2d 674, 678 (Ind. Tax Ct. 2006).
Furthermore,
the Petitioner’s claim does not indicate his dispute is limited to the assessed
value of the land. Although the Respondent’s case focused entirely on the land
and the improvement assessed value was rather small, in order to make a prima
facie case the Respondent had the burden to prove the assessment is
correct—including the value of the improvements. The subject property and the
assessment comparables are parking lots. But the improvement assessed value for
the subject property was $15,600 and the improvements assessed value for each
of the comparables was only $3,000. The Respondent entirely ignored this
difference and offered no probative evidence that the subject property’s
improvements assessed value is correct.
There is no
substantial, probative evidence that the assessed value of the improvements is
correct. Therefore, the Respondent failed to make a prima facie case.
