Taxes_property valuation challenge_not a general appraisal year_incomplete record
A taxpayer challenging the valuation of an abandoned furniture factory (in a year
without a general reappraisal) did not meet its burden under N.C.G.S. § 105-287.
Isaacson Isaacson & Sheridan, LLP, by Desmond G. Sheridan and
Jennifer N. Fountain, for taxpayer Schwartz & Schwartz, Inc.
Wilson, Lackey & Rohr, P.C., by David S. Lackey, for Caldwell
County.
MARTIN, Chief Judge.
Schwartz & Schwartz, Inc. (“taxpayer”) appeals from a decision
of the North Carolina Property Tax Commission (“Commission”)
confirming the Caldwell County Board of Equalization and Review's
valuation of taxpayer's property at $5,735,300.
The property subject to this appeal is an abandoned furniture
plant located in the city of Lenoir, Caldwell County, North
Carolina. The property contains 1,141,491 square feet of building
area on approximately 43.5 acres. Caldwell County conducted a
general reappraisal of all property within its jurisdiction
effective 1 January 2001, and it valued the subject property at
$7,871,700. Taxpayer purchased the property on 19 July 2001 for
$1,100,000. Taxpayer appealed the 2001 assessment to the 2002
Caldwell County Board of Equalization and Review (“Board”). After
a hearing, the Board decreased the assessment to $5,735,300,
effective 1 January 2002. Taxpayer appealed the Board's decision
to the North Carolina Property Tax Commission, arguing, inter alia,
that the Caldwell County tax administrator used an incorrect
valuation method in reaching the 2001 figure.
At the Commission hearing, the Caldwell County tax
administrator testified that he used the cost valuation method to
appraise the property. The cost method values property at its
replacement cost less depreciation. He did not use the income
method, which values property by its ability to generate income,
because the property had been vacant for seven years and had little
income history to consider. He did not use the comparable sales
method, which looks at recent sales of similar properties, because
he could not find sales that were sufficiently similar to this
particular property.
Taxpayer put on evidence of similar sales the county could
have considered and argued that the comparable sales approach would
have provided a more accurate picture of the property's fair market
value. Because much of the factory was functionally obsolete and
would not be rebuilt, taxpayer claimed, replacement cost greatly
overvalued its true worth. Therefore, use of the cost method
constituted “an appraisal error resulting from a misapplication of
the schedules, standards, and rules used in the county's mostrecent general reappraisal,” violating G.S. § 105-287. N.C. Gen.
Stat. § 105-287(a)(2).
The Property Tax Commission found, inter alia, that Caldwell
County properly applied its schedule of values, standards, and
rules to Taxpayer's property consistent with the County's appraisal
of similar properties. Based on its findings, the Commission
concluded that Taxpayer failed to show by competent, material, and
substantial evidence that it was entitled to a change in the
appraised value of the subject property under the conditions of
G.S. § 105-287(a).
(3)Recognize an increase or decrease in
the value of the property resulting from
a factor other than one listed in
subsection (b).
(b) In a year in which a general reappraisal
or horizontal adjustment of real property in
the county is not made, the assessor may not
increase or decrease the appraised value of
real property, as determined under G.S. 105-
286, to recognize a change in value caused by:
(1) Normal, physical depreciation of
improvements;
(2) Inflation, deflation, or other
economic changes affecting the county in
general; or
(3) Betterments to the property . . . .
N.C. Gen. Stat. § 105-287.
Taxpayer presented little evidence as to Caldwell County's
“schedules, standards, and rules.” Id. They were not included in
the record on appeal, and the testimonial evidence regarding these
schedules and standards was sparse. Our review is limited to “the
record on appeal and the verbatim transcript of the proceedings.”
N.C. R. App. P. 9(a). Without these schedules, standards, and
rules in the record before us, we cannot determine whether using
the cost method of valuation instead of the comparable sales method
violated the county's approved 2001 appraisal methods. Taxpayer did present expert testimony to the Commission on the
property's value using the comparable sales approach. However, our
Supreme Court has held that, “the Commission's reliance upon an
independent appraiser's collateral determination of the
petitioners' property value, without challenge or correlation to
the County's schedules of value or the application of those
schedules to the property, was in violation of the statutory
requirement of section 105-287.” In re Allred, 351 N.C. at 10,
519 S.E.2d at 57.
For this Court to reverse the Commission's decision, appellant
must show that the Commission's findings were:
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(1) In violation of constitutional provisions;
or
(2) In excess of statutory authority or
jurisdiction of the Commission; or
(3) Made upon unlawful proceedings; or
(4) Affected by other errors of law; or
(5) Unsupported by competent, material and
substantial evidence in view of the entire
record as submitted; or
(6) Arbitrary or capricious.
N.C. Gen. Stat. § 105-345.2(b). Without record evidence as to the
county's 2001 appraisal schedules, we are unable to determine that
appellant taxpayer has met its statutory burden.
Taxpayer has also argued that a decrease in the value of
similar properties combined with a purchase price at 80% less than
the appraised value constituted a non-prohibited change in value
under section 105-287(a)(3). We disagree. Declining property
values have been found to be “economic changes affecting the county
in general,” which is a prohibited reason for revaluing property
in a non-general reappraisal year under section 105-287(b)(2).
N.C. Gen. Stat. § 105-287(b)(2); In re Hotel L'Europe, 116 N.C.App. 651, 654, 448 S.E.2d 865, 866 (1994), cert. denied, 339 N.C.
612, 454 S.E.2d 252 (1995). A purchase price of the subject
property at less than the appraised value alone is not “'a factor'
from which an increase or decrease in value results within the
meaning of section 105-287(a)(3).” In re Allred, 351 N.C. 1, 13,
519 S.E.2d 52, 59 (1999) (quoting N.C. Gen. Stat. § 105-287(a)(3)).
Because we find that taxpayer has not met its burden under
G.S. § 105-287, we do not address taxpayer's further arguments.
For the reasons stated, the order of the Property Tax
Commission confirming the decision of the 2002 Caldwell County
Board of Equalization and Review is affirmed.
Affirmed.
Judges TIMMONS-GOODSON and HUDSON concur.