H & R PARTNER. v. Davis County Bd. of Rev.
| Decision Date | 18 December 2002 |
| Docket Number | No. 00-0275.,00-0275. |
| Citation | 654 N.W.2d 521 |
| Parties | H & R PARTNERSHIP, Timothy S. Kniffen, Pride, L.L.P., Scott Schager, and Southland Pork, L.C., Appellants, v. DAVIS COUNTY BOARD OF REVIEW, David William Hardy, Chairman, Appellee. |
| Court | Iowa Supreme Court |
Robert P. Malloy of Malloy Law Firm, Goldfield, and Deborah M. Tharnish of Davis, Brown, Koehn, Shors & Roberts, P.C., Des Moines, for appellants.
Frank W. Pechacek, Jr. and Michael J. Davenport of Willson & Pechacek, P.L.C., Council Bluffs, and Rick L. Lynch, County Attorney, Bloomfield, for appellee.
Thomas J. Miller, Attorney General, and Harry M. Griger, Special Assistant Attorney General, and James D. Miller, Assistant Attorney General, for amicus curiae, Iowa Department of Revenue.
H & R Partnership, Timothy S. Kniffen, Pride, L.L.P., Scott Schager, and Southland Pork, L.C., who are Davis County property owners on whose land swine confinement facilities have been constructed, appeal from the district court's judgment upholding the property tax assessment on their respective parcels. On May 8, 2002, we filed an opinion in this case disposing of the issues raised on appeal. The appellants then filed a petition for rehearing, which was granted. The prior opinion, which was not published, has been withdrawn. After again reviewing the record and considering the arguments presented, including the arguments on rehearing, we modify the district court's decree and remand for further proceedings.
The assessments in question were made in January of 1998 and January of 1999. Swine confinement facilities had recently been constructed on the parcels in question. The individual assessments that are involved are as follows:
H & R Partnership (1998) Land Buildings Total Parcel 1 $5923 $ 453,086 $ 459,009 Parcel 2 $3851 $ 461,025 $ 464,876 Parcel 3 $2625 $ 245,456 $ 248,081 H & R Partnership (1999) Parcel 1 $5645 $ 304,779 $ 310,424 Parcel 2 $7186 $ 312,731 $ 319,917 Parcel 3 $5205 $ 392,969 $ 398,174 Timothy S. Kniffen (1998) Parcel 1 $3142 $ 453,086 $ 456,228 Timothy S. Kniffen (1999) Parcel 1 $3812 $ 312,409 $ 316,221 Pride L.L.P. (1998) Parcel 1 $4946 $ 453,086 $ 458,032 Parcel 2 $6309 $ 453,086 $ 459,395 Pride L.L.P. (1999) Parcel 1 $7654 $ 307,182 $ 314,836 Parcel 2 $4639 $ 310,271 $ 314,910 Scott Schager (1998) Parcel 1 $2649 $ 453,086 $ 455,735 Scott Schager (1999) Parcel 1 $3213 $ 310,271 $ 313,484 Southland Pork, L.C. (1998) Parcel 1 $5439 $ 527,092 $ 532,531 Parcel 2 $3563 $ 229,343 $ 232,906 Southland Pork, L.C. (1999) Parcel 1 $4323 $ 160,275 $ 164,598 Parcel 2 $6992 $1,276,127 $1,283,119
In their respective protests to the board of review, the property owners only objected to that portion of the assessments allocated to the buildings. The basis for each of the protests was that the amount of the assessment allocated to the buildings exceeded that authorized by law. An alternative amount deemed by the property owners to be a fair assessment was proposed in the protest. The board of review denied the protests and confirmed the assessor's valuations. In their appeal to the district court pursuant to Iowa Code section 441.38 (1997), the property owners continued to challenge only the valuation placed on the buildings. After a trial in equity, the district court upheld the determinations of the assessor and board of review.
The trial of assessment appeals in the district court is by equitable proceedings. Iowa Code § 441.39. Consequently, our review is de novo. Iowa R.App. P. 6.4. No presumption exists that the assessor's valuation is correct. Eagle Food Ctrs., Inc. v. Bd. of Review of City of Davenport, 497 N.W.2d 860, 863 (Iowa 1993); Iowa Code § 441.39.
On appeal the property owners contend that the assessed value allocated to the buildings is, in each instance, not correct. The arguments made for relief from this court are that (1) the assessor failed to take into account the productivity and net-earning capacity criteria for valuing agricultural real estate pursuant to Iowa Code section 441.21(1)(e); (2) the assessments improperly included the value of removable personal property; (3) the formula applied in valuing the buildings relied on inaccurate data concerning comparable sales; (4) the amount of the assessments are excessive when compared to the valuations of similar facilities by assessors in other counties; (5) the Iowa Department of Revenue and Finance failed to adopt a rule embracing the formula used to allocate value to the buildings; and (6) in using cost of construction as a measure of value, the board of review and district court relied on average costs and ignored evidence of actual costs. We separately consider these contentions.
Iowa Code § 441.21(1)(e).
The assessment of the property owners' lands and buildings in the present case involved the application of a process established in Iowa Administrative Code rule 701-71.12(1) (1997), promulgated by the Iowa Department of Revenue and Finance. The first step in that process is to calculate the total crop-producing value for the county. The assessor begins this process by examining the county's per-acre crop-producing value as computed by the Iowa Department of Revenue and Finance. That agency reviews each county's crop yields and gross crop-production income over a five-year period. The county's total gross income is then reduced by the aggregate production costs. The agency then adjusts this net figure to account for real estate taxes and, then, to comport with Iowa Code section 441.21(1)(e), capitalizes the resulting value at the rate of seven percent.
The assessor arrives at the county's total crop-producing value by multiplying the per-acre crop-producing value derived by the Iowa Department of Revenue and Finance by the total number of crop-producing acres in the county. This figure represents the total productivity value of both land and improvements within the county. In order to obtain a valuation for the improvements (buildings) on the land, the assessor values the improvements on each separate parcel other than dwelling houses in the county at market value (derived on the basis of replacement cost). This valuation is then adjusted to conform to the ratio between the fair market value of all agricultural real estate in the county and the productivity valuation of such real estate that has been computed pursuant to rule 701-71.12(1). Dwelling houses are valued as ordinary real property. This adjusted value constitutes the assessed valuation of the agricultural buildings on each individual tract. The total valuation of all buildings within the county, so derived, is then subtracted from the total crop-production value of all land and buildings as computed under rule 701-71.12(1) to establish the aggregate value of the bare land.
This aggregate value is spread to each parcel to be assessed in proportion to the ratio of the corn-suitability rating of the particular tract to the sum of all corn-suitability ratings within the county.1 That computation establishes the valuation of the land on each parcel and is stated separately from the valuation of the buildings on that parcel. The separate assessment of land and buildings is dictated by Iowa Code section 441.21(7) ().
The property owners urged that this method of appraisal does not comport with the criteria established in section 441.21(1)(e). They contend that the assessment should be based on the productivity value of their property as a swine-producing operation. We disagree. As the board of review urges, consideration of the productivity value of livestock operations on these parcels is an unsatisfactory criteria for assessing agricultural land because it involves the profits derived from a business being carried on upon the land rather than the productivity value of the land itself.
Section 441.21(1)(e) expressly authorizes the Iowa Department of Revenue and Finance to fashion a formula in accordance with that statute for the valuation of agricultural property. We are satisfied that the formula set forth in rule 701-71.12(1) provides a reasonable application of the productivity, net-earning capacity, and seven percent capitalization criteria established by section 441.21(1)(e). We also conclude that the procedure applied for allocating the aggregate productivity valuation of land and buildings within the county between land and buildings resulted in a reasonable assessment of the buildings if the market value of the buildings (based on replacement cost) was accurately determined by the assessor. That issue will be discussed later in this opinion.
B. Inclusion of personal property. The property owners urge that the challenged assessments improperly included the value of removable personal property. Based on the evidence, the district court concluded that the "attached property is integral to the use of these specialized buildings and is properly assessed for real estate taxation purposes." Evidence was offered suggesting that the items that the taxpayers claim to be removable personal property had a relatively short useful life and that the cost of moving them would discourage that effort. We agree with the district court's conclusion that, to the extent this property was considered in determining the market value of these buildings prior to the...
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