101 N.E.3d 895 (Ind.Tax 2018), 49T10-1705-TA-00009, Switzerland County Assessor v. Belterra Resort Indiana, LLC

Docket Nº:Cause 49T10-1705-TA-00009
Citation:101 N.E.3d 895
Opinion Judge:WENTWORTH, J.
Party Name:SWITZERLAND COUNTY ASSESSOR, Petitioner, v. BELTERRA RESORT INDIANA, LLC, Respondent.
Attorney:ATTORNEYS FOR PETITIONER: JEFFREY T. BENNETT, BRADLEY D. HASLER, BINGHAM GREENEBAUM DOLL LLP, Indianapolis, IN ATTORNEYS FOR RESPONDENT: DAVID A. SUESS, STEPHEN H. PAUL, BENJAMIN A. BLAIR, FAEGRE BAKER & DANIELS LLP, Indianapolis, IN
Case Date:May 24, 2018
Court:Tax Court of Indiana
 
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Page 895

101 N.E.3d 895 (Ind.Tax 2018)

SWITZERLAND COUNTY ASSESSOR, Petitioner,

v.

BELTERRA RESORT INDIANA, LLC, Respondent.

Cause No. 49T10-1705-TA-00009

Tax Court of Indiana

May 24, 2018

Page 896

ON APPEAL FROM A FINAL DETERMINATION OF THE INDIANA BOARD OF TAX REVIEW

ATTORNEYS FOR PETITIONER: JEFFREY T. BENNETT, BRADLEY D. HASLER, BINGHAM GREENEBAUM DOLL LLP, Indianapolis, IN

ATTORNEYS FOR RESPONDENT: DAVID A. SUESS, STEPHEN H. PAUL, BENJAMIN A. BLAIR, FAEGRE BAKER & DANIELS LLP, Indianapolis, IN

OPINION

WENTWORTH, J.

Page 897

During the course of an administrative appeal, both Belterra Resort Indiana, LLC and the Switzerland County Assessor presented appraisals valuing Belterra’s casino property for purposes of the 2009 through 2014 assessment years. On March 30, 2017, the Indiana Board of Tax Review issued a final determination that reviewed those appraisals and, ultimately, formulated its own value conclusion. Belterra and the Assessor have each separately appealed the Indiana Board’s final determination, which the Court now affirms in part and reverses in part.

RELEVANT FACTS AND PROCEDURAL HISTORY1

Belterra owns and operates the Belterra Casino Resort in Florence, Indiana. For purposes of this appeal, the Resort consists of a Riverboat,2 a Hotel,3 a Golf Course,4 and a total of 250.22 acres of land. (See

generally Cert. Admin. R. at 1811-23.) The vast majority of the Resort’s total gross revenue is generated by gaming. (See generally Cert. Admin. R. at 1950-53.)

During the years at issue, the Assessor’s original assessment valued the Resort as follows:

2009: $109, 276, 900
2010: $108, 775, 300
2011: $108, 226, 700
2012: $ 92, 505, 200
2013: $ 95, 843, 400
2014: $ 93, 170, 100
(See Cert. Admin. R. at 12 ¶ 10, 1827, Page 898 4186-87, 4194-95, 4199-4200, 4205-06, 4211-12, 4217-18.) Believing those values to be too high, Belterra initiated appeals with the Switzerland County Property Tax Assessment Board of Appeals (PTABOA). (See Cert. Admin. R. at 4189, 4197, 4202, 4208, 4214, 4220.) On June 24, 2015, Belterra transitioned its appeals to the Indiana Board.5 (See, e.g., Cert. Admin. R. at 4183.) In May of 2016, the Indiana Board conducted a consolidated hearing on all of Belterra’s appeals. For purposes of the hearing, Belterra and the Assessor agreed to litigate only the Resort’s 2009 and 2014 assessments, stipulating that the 2010 through 2013 assessments could then be determined with a trending formula based on the finally-determined 2009 and 2014 assessed values. (See Cert. Admin. R. at 4231-32.) Consequently, both Belterra and the Assessor’s evidentiary presentations consisted of appraisals valuing the Resort for the 2009 and 2014 tax years alone. (See, e.g., Cert. Admin. R. at 10-12.) The Indiana Board Hearing: Belterra’s Evidentiary Presentation Belterra presented appraisals by Robert Herman and David Lennhoff. Herman, a member of the Appraisal Institute (MAI), valued the Riverboat and Golf Course while Lennhoff, also an MAI, valued the Hotel. (See Cert. Admin. R. at 520, 979, 1659, 2337-39, 2783-84.) Both Herman and Lennhoff certified that their appraisals conformed to the Uniform Standards of Professional Appraisal Practice (USPAP). (Cert. Admin. R. at 525-26, 984-85, 1660.) The appraisals indicated a total Resort value of $44,402,000 for 2009 and $48,675,000 for 2014. (See Cert. Admin. R. at 28 ¶ 69 n. 20, 357 ¶ 12, 525-26, 984-85, 1660, 2636-41.) 1. Herman’s Riverboat Valuations There are three generally accepted appraisal techniques for valuing real property.6 In valuing the Riverboat, Herman’s appraisals employed two of them: the sales comparison approach and the cost approach. (See, e.g., Cert. Admin. R. at 527, 986.) Under the sales comparison approach, Herman estimated the Riverboat’s market value-in-use to be $4,500,000 in 2009 and $3,500,000 in 2014 based on the price it would have garnered on the open market. (See Cert. Admin. R. at 574-602, 1033-86.) Under the cost approach, Herman estimated the Riverboat’s market value-in-use as $8,600,000 for 2009 and $3,700,000 for 2014. (See Cert. Admin. R. at 604-16, 1088-1100.) Herman testified that he considered the third technique, the Page 899 income approach, to be inappropriate to value the Riverboat because the Riverboat had no "discrete rental [income] stream" and it did not constitute a substantial portion of the Resort’s total going concern value. (See, e.g., Cert. Admin. R. at 527, 986, 2370-74.) Herman reconciled his two values for each year into one final value conclusion: $4,327,000 for 2009 and $3,500,000 for 2014. (See, e.g., Cert. Admin. R. at 617-18, 1100-02.) More specifically, he chose the lowest value of the two approaches indicated for each year (i.e., the $4,500,000 for 2009 and the $3,500,000 for 2014), and then trended the 2009 value back to its valuation date of January 1, 2008. (See Cert. Admin. R. at 618, 1102.) See also generally IND. CODE § 6-1.1-4-39.5(b) (2009); IND. CODE § 4-33-2-17 (2009) (together explaining that the assessed value of a riverboat was the lowest valuation determined under the cost, sales comparison, and income approaches); 50 IND. ADMIN. CODE 21-3-3(b) (2006) (indicating that prior to 2010, a property’s March 1 assessment was to reflect a property’s market value-in-use on January 1 of the preceding year) (repealed 2010). 2. Herman’s Golf Course Valuations To value the Golf Course for 2009, Herman’s appraisal used the cost approach and arrived at a value of $2,500,000. (See, e.g., Cert. Admin. R. at 533, 535, 2519-30.) For 2014, however, Herman’s appraisal used the income approach and arrived at a value of $3,000,000. (See, e.g., Cert. Admin. R. at 985, 992, 1604-07, 2530-45, 2636-41.) Herman testified during the Indiana Board hearing that Indiana’s Assessment Manual and Guidelines required him to value the Golf Course in 2009 using the cost schedules it provided, but for 2014, he used the income approach to value the Golf Course as mandated by the newly enacted Indiana Code § 6-1.1-4-42. (See, e.g., Cert. Admin. R. at 2518-19, 2531-33.) 3. Lennhoff’s Hotel Valuation Lennhoff’s appraisal used the income approach to value the Hotel. (See, e.g., Cert. Admin. R. at 1733-34 (explaining why he believed the sales comparison and cost approaches were not applicable to valuing the Hotel).) Under this approach, Lennhoff valued the Hotel at $37,575,000 for 2009 and $42,175,000 for 2014.7 (See Cert. Admin. R. at 1731, 1769.) Lennhoff explained that in completing his income approach, he treated the Hotel as if it were a "stand-alone," full-service hotel owned and operated independently of the casino operation. (See Cert. Admin. R. at 1720-21 (stating that this premise was necessary to extract any value that solely benefitted the casino operation because Belterra operated the Hotel as a marketing tool for the casino and, thus, as a "loss-leader").) Moreover, he relied on market income and expense data published in national investor surveys for full-service hotels as opposed to the Hotels actual operating data, given the Hotels prevalent practice of "comping" rooms in order to generate gaming business. (See, e.g., Cert. Admin. R. at 1739-49 (indicating that paying guests represented only a small percentage of the Hotels total annual occupancy), 2885-86 (implying that had he used the Hotels actual operating data, he would have produced a negative value), 2910 (stating that he put very little weight on the Hotels actual income and expense figures).) Lennhoff noted that several other hotels that operated near casinos, but were owned independently from the casinos, Page 900 generally performed about the same as full-service hotels. (See, e.g., Cert. Admin. R. at 2860-61, 2895-97, 2908-25.) Lennhoff acknowledged, however, that as a "stand-alone" hotel, the Hotel was "super-adequate" (i.e., over-improved) in relation to other full-service hotels. (Cert. Admin. R. at 1708, 1720-21.) The Indiana Board Hearing: The Assessors Evidentiary Presentation The Assessor offered...

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