Richmond, F. & P.R. Co. v. Com.

• Decision Date: 05 March 1962
• Docket Number: No. 5382,5382
• Citation: 124 S.E.2d 206,203 Va. 294
• Parties: RICHMOND, FREDERICKSBURG AND POTOMAC RAILROAD COMPANY v. COMMONWEALTH OF VIRGINIA, EX REL., ETC., ET AL. Record
• Court: Virginia Supreme Court

Page 206

124 S.E.2d 206

203 Va. 294

RICHMOND, FREDERICKSBURG AND POTOMAC RAILROAD COMPANY v. COMMONWEALTH OF VIRGINIA, EX REL., ETC., ET AL.

Record No. 5382.

Supreme Court of Appeals of Virginia

March 5, 1962.

R. Colston Christian, for the appellant.

A. Carter Whitehead and Eldridge K. Hayes, Assistant City Attorney for the City of Alexandria, for the Commonwealth, Et Al.

JUDGE: WHITTLE

WHITTLE, J., delivered the opinion of the court.

This is an appeal of right by the Richmond, Fredericksburg and Potomac Railroad Company from an order entered by the State Corporation Commission denying its application for the correction of the Commission's assessment of the value of certain real estate belonging to the railroad, located in the City of Alexandria.

The real estate involved consists of 313 acres of land known as Potomac Yard, located in the heart of the city, fronting 7200 feet on U.S. Highway No. 1; 296 acres of the land is used for a freight and interchange yard where all freight handled by the Pennsylvania Railroad Company and the Baltimore and Ohio Railroad Company to and from the north, and all freight handled by the Chesapeake and Ohio Railway Company, the Southern Railway Company and the appellant to and from the south, is classified and interchanged. The remaining 17 acres are used for tracks over which the Chesapeake and Ohio Railway Company, the Southern Railway Company and the appellant, operate passenger trains to and from the District of Columbia.

The real estate was assessed in 1960 by the Commission's Division of Public Utility Taxation on a square foot basis in four zones as follows:

Zone 118 76.55 acres $ 995,150

Zone 119 161.86 acres 2,104,180

Zone 120 71.73 acres 136,287

Zone 121 2.86 acres 37,180

------ ----------

313.00 acres $3,272,797

The 1959 assessment was also on a square foot basis and was the same as the 1960 assessment.

In 1958 and for several years prior thereto the real estate was assessed on a front foot basis as follows:

                Zone 118   76.55  acres  $ 207,451
                Zone 119  161.86  acres    335,050
                Zone 120   71.73  acres     15,422
                Zone 121    2.86  acres      1,373
                          ------         ---------
                          313.00  acres  $ 559,296
                

There was no complaint as to the method of assessment until the value of $559,296 for 1958 had been raised to $3,272,797 for the years 1959 and 1960.

The assessment was made by Charles W. Dickinson, the Commission's Chief Public Utility Appraiser. The assessment was arrived at by first determining the square foot value of various adjacent parcels of locally assessed industrial land; then reducing this square foot value in order to compensate for the difference in topography and size of the railroad's real estate; and then applying the reduced square foot value to the property.

By this method the value of 75cents per square foot was placed on 241.27 acres in Zones 118, 119 and 121, while a value of $4,750 per acre was placed on the 71.73 acres in Zone 120.

In 1958 and prior years the Commission's assessor had valued the real estate by using a front foot value for the frontage on U.S. Highway No. 1, and applying depth tables. According to the assessor's testimony this method gave too little value to the land in the interior of Potomac Yard. Therefore, the method of valuing the property on the basis of depth tables was changed to valuation on the square foot basis in 1959 after the assessor discovered that locally assessed property was being so valued. The assessment was made on the theory that the 313-acre tract could be used for industrial sites.

J. Edward Rountrey, a former real estate assessor for the City of Richmond, testified for the railroad. He stated that in his opinion the fair market value of the real estate as of January 1, 1960, was $2,574,425, and that after applying the 40% assessment ratio the real estate should have been assessed at $1,029,770; that he, in conjunction with Edward Holland, of Holland Engineering Company, had devised a plan for developing the property as an industrial park, with some commercial use, which he believed would produce the maximum revenue to an owner who was desirous of disposing of his property to the best advantage; that if the property were developed according to his plan the real estate could be disposed of for a gross sum of $9,946,267; that the cost of developing the real estate would amount to $7,371,842, with the result that the owner would net the sum of $2,574,425, which he considered the fair market value of the land.

Ebner R. Duncan, testifying for the railroad, corroborated the testimony of Rountrey and stated that in his opinion the value placed on the property by Rountrey was correct.

The City of Alexandria called four witnesses, the first being Wilbur S. Ratcliffe, Jr., Deputy Real Estate Assessor for the City, who agreed with the railroad company that the highest and best use to which the real estate could be put would be to develop it as an industrial park. He stated that in his opinion the fair market value as of January 1, 1960, was $8,900,000. He arrived at the valuation on the industrial park plan, after conferring with the Planning Director of the City and valuing the lots in the proposed subdivision by comparison with fifty-two sales of industrial or commercial property in the vicinity. He was of the opinion that the retail value of the lots in the proposed industrial park was $20,350,000, from which should be deducted costs and expenses of $11,450,000, leaving a net amount of $8,900,000 which represented the fair market value, subject to the 40% assessment ratio.

Arthur M. Fisher, a qualified appraiser, testifying for the City said the fair market value of the real estate as of January 1, 1960, was $8,275,000. He was of the opinion that the industrial park plan would put the real estate to its highest and best use; that the lots in the proposed industrial park would have a retail value of $20,990,784, from which he deducted $12,715,784 to cover development costs, thereby reducing the net amount to $8,275,000, subject to the 40% ratio.

Robert L. Kane, a qualified real estate appraiser, testifying for the City stated that in his opinion the real estate was worth 70cents per square foot as raw land, which would produce a value of $9,544,000.

Philip B. Hall, Director of Public Works for the City, testified that he had calculated the costs used by witnesses Ratcliffe and Fisher and that in his opinion the costs for developing the property were approximately correct.

The questions involved on appeal, says the railroad, are:

1. Should the real estate involved have been valued as if it were real estate owned by someone other than a public service corporation or should the value used in assessing this real estate have been reduced in view of the facts (a) that the real estate is railroad property devoted to a special use; (b) that the railroad receives a limited return from the real estate from long-term contracts; and (c) that the value of a railroad's franchise must be eliminated in valuing its real estate?

2. Did the real estate involved in this proceeding have a fair market value as of January 1, 1960, of $8,181,992?

The Commission, in its unanimous opinion, had this to say:

'In valuing land the Division proceeds as follows: It aims to value the land of utilities on the same basis that other similar land is valued by the assessing officers of the locality in which the land is. The first step is to pick out numerous pieces of similar land. In making that selection an element of judgment is necessarily involved. The Division notes the appraised value of the locally assessed similar land. If the appraised value appears to be within 15 or 20% of the actual fair market value, the Division treats the appraised value as being full market value. It appraises the utility land in the same manner and assesses it at 40% of the appraised value.

'Market value is the price at which property can be sold. The amount received by the seller will, of course, be diminished by the costs of making the sale. Mr. Dickinson testified that local appraisals in Alexandria were 80 or 85% of selling prices. * * * The value to be taxed is the value of the property in the hands of the taxpayer. He found that industrial land in Alexandria was locally appraised at around $1.25 a aquare foot. * * * The information available in the present situation was that good industrial sites in Alexandria were worth around $1.25 a square foot, some more and some less; and that it would cost a lot of money to clean up the 313 acres and prepare them for the market. Exercising his judgment, Mr. Dickinson reduced the $1.25 average figure to an average figure of 60 cents.

'* * * He proceeded in the same manner in which he had proceeded in countless other cases. He followed the procedure that he followed in appraising the Acca Yards and numerous other railroad marshalling yards as well as a great variety of public utility properties. * * * The prior...