Blakeley v. Board of Assessors of Boston

• Decision Date: 15 March 1984
• Citation: Blakeley v. Board of Assessors of Boston, 462 N.E.2d 278, 391 Mass. 473 (Mass. 1984)
• Parties: Gerald W. BLAKELEY, Jr. et al., trustees, v. BOARD OF ASSESSORS OF BOSTON.
• Court: Supreme Judicial Court of Massachusetts

Page 278

462 N.E.2d 278

391 Mass. 473

Gerald W. BLAKELEY, Jr. et al., trustees, v.BOARD OF ASSESSORS OF BOSTON.

Supreme Judicial Court of Massachusetts Suffolk.

Argued Dec. 5, 1983.

Decided March 15, 1984.

Evan Y. Semerjian, Boston, for plaintiffs.

Walter H. McLaughlin, Jr., and Michael Eby, Boston (Stephen H. Clark, Sp. Asst. Corp.Counsel, Boston, with them), for defendant.

Before HENNESSEY, C.J., and WILKINS, LIACOS, NOLAN and O'CONNOR, JJ.

WILKINS, Justice.

We uphold the decision of the Appellate Tax Board(board) denying an abatement of local real estate taxes assessed on land and a building under construction at 60State Street in Boston on the first of January in the years 1976, 1977, and 1978.The appellanttrustees, whom we shall refer to as the trust, argue that the board (1) improperly rejected its evidence of fair market or fair cash value based on capitalization of net income imputed to the building and (2) improperly relied on the cost of construction of the building in arriving at a fair market value of the property, which we shall refer to as 60 State Street.

As completed, the building is a thirty-nine story modern office tower with a triple basement for parking and storage.The parties agreed on the following percentages of completion of the building on the relevant assessment dates:

January 1, 1976--21.18%
                January 1, 1977--53.28%
                January 1, 1978--77.62%
                

The parties have accepted disproportionate assessment ratios applicable in the city of Boston on these assessment dates, as follows (seeTregor v. Assessors of Boston, 377 Mass. 602, 387 N.E.2d 538cert. denied, 444 U.S. 841, 100 S.Ct. 81, 62 L.Ed.2d 53[1979] ):

January 1, 1976--26.8%
                January 1, 1977--22.4%
                January 1, 1978--22.4%
                

The assessors assessed 60 State Street at the following values on the relevant assessment dates:

January 1, 1976--$4,330,000
                January 1, 1977--$7,970,000
                January 2, 1978--$7,970,000
                

The board determined that the fair market value of the land was $3,379,860 on each relevant date, and neither party challenges that determination.Applying the appropriate disproportionate assessment ratios to the value attributed to the land on each date, the portion of the assessment of 60 State Street attributable to the land on each date was:

January 1, 1976--$905,802
                January 1, 1977--$757,089
                January 1, 1978--$757,089
                

Consequently, the portion of the assessed valuation attributable to the building on the relevant dates was:

January 1, 1976--$3,424,198
                January 1, 1977--$7,212,911
                January 1, 1978--$7,212,911
                

The parties both approached the valuation of the building by proposing a value for the building when completed and then adjusting that value to the various assessment dates by applying both the agreed percentage of completion and the agreed disproportionate assessment ratio to the proposed fair market value of the completed building.By the same process in reverse, one can determine what the fair market value of the building, when completed, had to equal or exceed in order to support the assessed valuations of the building on the relevant assessment dates.For each assessment date, the fair market value of the building, as completed, had to equal or exceed the following amounts (rounded) in order to support the assessment attributable to the building:

January 1, 1976 ($3,424,198 divided by .268 and
                again by .2118)--                     $60,325,110
                January 1, 1977 ($7,212,911 divided by .224 and
                again by.5328)--                      $60,436,360
                January 1, 1977 ($7,212,911 divided by .224 and
                again by .7762)--                     $41,484,790
                

The board concluded that using the total cost of construction of the building was the "proper approach to value" and further concluded that the cost of the building showed that a fair cash value of 60 State Street was at least $76,500,000 (thus attributing approximately $73,000,000 to the cost of the building).As can be seen, the fair market or fair cash value the board attributed to the building was, for each year, more than $12,500,000 in excess of the fair cash value of the building necessary to support the assessments.Thus (1) if the board was warranted in disregarding the fair cash value of 60 State Street advanced by the trust (on the basis of capitalization of hypothetical net income of the property), (2) if the board was warranted in relying on the cost of construction of the building in determining the fair market value of the property, and (3) if those costs which may properly be considered exceeded in total approximately $60,440,000, the decision of the board must be affirmed as to each year.We consider each of these points in turn.

1.The board was warranted in disregarding the trust's evidence of the fair market value of 60 State Street based on a capitalization of net earnings attributed to the property.The trust's expert gave the following opinions of the fair market value of the building on the relevant dates:

January 1, 1976--$33,220,644
                January 1, 1977--$40,643,990
                January 1, 1978--$40,484,129
                

The board stated that "[i]f the expert had made a check of his fair cash values with the actual costs incurred, he should have discovered that his capitalization of income approach was so inaccurate and speculative that it was entitled to little or no weight by the board."It concluded that the trust had failed to meet its burden of proof and found that "in this instance the capitalization of income approach to value this building was too speculative."

We grant that a more competent opinion would have stated in greater detail why the trust's capitalization of income approach was "inaccurate and speculative" and might have focused on specific deficiencies in the assumptions made by the trust's expert in valuing the building.At the appellate level we may not consider facts and arguments advanced for the first time on behalf of an agency decision, even if the agency record would have supported the agency's reliance on those facts and arguments.¹The board's decision must state adequate reasons in support of its decision so as to permit meaningful appellate review.SeeNew Boston Garden Corp. v. Assessors of Boston, 383 Mass. 456, 467, 420 N.E.2d 298(1981);Assessors of Lynnfield v. New England Oyster House, Inc., 362 Mass. 696, 699-700, 290 N.E.2d 520(1972);Jordan Marsh Co. v. Assessors of Malden, 359 Mass. 106, 109-110, 267 N.E.2d 912(1971).

The board's decision meets this standard.The board concluded that the cost of the building was a better guide to its fair market value than the capitalization of net income approach, at least as presented by the trust's expert.The board also noted the unexplained disparity between the value advanced by the trust and the amounts invested in the building.The board is entitled to select valuation methods, as long as they are reasonable and supported by the record.SeeGeneral Dynamics Corp. v. Assessors of Quincy, 388 Mass. 24, 29, 444 N.E.2d 1266(1983);Boston Edison Co. v. Assessors of Watertown, 387 Mass. 298, 302, 439 N.E.2d 763(1982).Thus, if the cost of the building may reasonably be used as the basis for determining its fair market value and if the total of those costs that may properly be considered exceeds the amount necessary to sustain the assessments, the board's decision must be sustained.We, therefore, turn successively to these two questions.

2.The board was warranted in relying on the cost of construction of the building in deciding the taxpayer's appeal.In Jordan Marsh Co. v. Assessors of Quincy, 368 Mass. 322, 331 N.E.2d 61(1975), we upheld the board's decision valuing a recently constructed regional distribution center on the basis of original cost, including site improvements."Original cost, recently incurred, was a legitimate factor to be considered in determining fair cash value.Essex Co. v. Lawrence, 214 Mass. 79, 89[100 N.E. 1016](1913).Assessors of Quincy v. Boston Consol. Gas Co., 309 Mass. 60, 66-67[34 N.E.2d 623](1941).Boston Gas Co. v. Assessors of Boston, 334 Mass. 549, 566-567[137 N.E.2d 462](1956).Cf.Assessors of Lynnfield v. New England Oyster House, Inc., 362 Mass. 696, 701-702[290 N.E.2d 520](1972)."Id. at 324, 331 N.E.2d 61.The use of the cost of construction of a partially completed building has been held to be within the discretion of the board.SeeAssessors of Woburn v. Ramada Inns, Inc., 371 Mass. 894, 357 N.E.2d 776(1976).

We have generally viewed with disfavor the use of the depreciated reproduction cost approach to valuation except where the special character of the property makes it substantially impossible to arrive at value on the basis of capitalized net earnings or on the basis of comparable sales.SeeCorreia v. New Bedford Redevelopment Auth., 375 Mass. 360, 362-364, 377 N.E.2d 909(1978).In the instance of a building under construction, comparable sales are generally not available (as was the case here) and the structure is by definition not yet income producing (although rents and expenses attributable to such a building ...