Brenner v. Banner County Bd. of Equal.

• Decision Date: 01 August 2008
• Docket Number: No. S-07-810.,S-07-810.
• Parties: Robert M. BRENNER and Lisa D. Brenner, Appellants, v. BANNER COUNTY BOARD OF EQUALIZATION, Appellee.
• Court: Nebraska Supreme Court

753 N.W.2d 802

276 Neb. 275

Robert M. BRENNER and Lisa D. Brenner, Appellants, v. BANNER COUNTY BOARD OF EQUALIZATION, Appellee.

No. S-07-810.

Supreme Court of Nebraska.

August 1, 2008.

Robert M. Brenner, of Robert M. Brenner Law Office, Gering, for appellants.

James L. Zimmerman, Banner County Attorney, for appellee.

HEAVICAN, C.J., WRIGHT, CONNOLLY, GERRARD, STEPHAN, McCORMACK, and MILLER-LERMAN, JJ.

STEPHAN, J.

Robert M. Brenner and Lisa D. Brenner appeal from an order of the Tax Equalization and Review Commission (TERC) which affirmed a decision of the Banner County Board of Equalization (Board) denying the Brenners' protest of the 2004 valuation of their residence. We conclude that the TERC decision and order is supported by competent evidence, and is neither arbitrary, capricious, nor unreasonable. We therefore affirm.

BACKGROUND

BRENNER PROPERTY

The Brenners are the owners of the property in question, which is a single-family residence located in rural Banner County, Nebraska. Construction of the home was completed in late 1998, and the Brenners occupied the home at that time. The cost of construction was between $200,000 and $204,000. The one-story, wood frame home has a brick veneer exterior and a wood shake roof. The main floor area is 2,544 square feet, which includes two bedrooms, 1½ bathrooms, and other living space. There is an attached garage with an area of 1,020 square feet and a slab porch. There is 2,023 square feet of finished space in the basement, including two bedrooms and a bathroom. The county assessor determined the 2004 actual value of the structure alone, based upon replacement cost less depreciation, to be $220,374.

BOARD OF EQUALIZATION PROCEEDINGS

The Brenners filed a protest of the 2004 valuation with the Board. After hearing the testimony of the Brenners, the Board accepted the assessor's 2004 valuation of the Brenner home.

TERC PROCEEDINGS

The Brenners filed an appeal to TERC, challenging the valuation of their property for specific reasons. The Board filed an answer in which it alleged that the valuation was in accordance with applicable Nebraska law and TERC regulations, and was neither arbitrary, capricious, nor unreasonable. Robert, an attorney, represented himself and Lisa in the TERC proceedings.

At the commencement of the appeal hearing on June 13, 2007, the TERC chairman advised counsel that TERC would consider certain materials not included in the record, as permitted by law.¹ Those materials considered and utilized by TERC in this case are reflected in a supplement to the official record. This supplement was filed in this appeal by TERC at the Brenners' request.

TERC received certain exhibits offered by the parties and rejected others. In particular, TERC sustained objections to two documents offered by the Brenners. The TERC chair determined that a report of an audit of the Banner County assessor's office conducted by the Department of Property Assessment and Taxation, covering the period October 2001 through January 2002, was irrelevant. TERC also excluded an exhibit as hearsay, which exhibit was the affidavit of Betty Holliday and an attached report, dated January 1, 2003, of a countywide property reappraisal for Banner conducted by Holliday on behalf of High Plains Appraisal Service (High Plains).

Five witnesses testified at the hearing, including Sharon Sandberg, the Banner County clerk and ex officio assessor. She testified that she requested the audit conducted by the Department of Property Assessment and Taxation in 2001-02 and that the audit disclosed certain deficiencies in her office, which she corrected. At least partially as a result of the audit, Banner County retained High Plains to conduct a countywide reappraisal for 2003. In determining property valuations for 2004, the assessor utilized data collected by High Plains for the 2003 reappraisal, including data for the Brenner property.

In June 2003, the Nebraska Real Property Appraiser Board (NRPAB) commenced an investigation which concluded that High Plains and appraiser Holliday had committed various errors during the countywide reappraisal for Banner County. NRPAB filed a complaint against Holliday. The complaint does not make specific reference to the Brenner property. NRPAB and Holliday reached a settlement in May 2006, in which settlement Holliday recognized that the allegations in the complaint were valid and that the allegations would be violations of Nebraska statutes and the NRPAB rules and regulations.² Holliday agreed in the 2006 settlement that she would no longer perform mass appraisals for any board of equalization in Nebraska.

The county assessor was aware of the complaint against Holliday and the settlement, but testified that she had no basis for concluding that there was any flaw in the actual data collected by High Plains in the countywide reappraisal for the 2003 tax year.

In determining the 2004 valuations, the assessor also utilized depreciation schedules previously developed by High Plains. She acknowledged that these differed from those provided in the Residential Cost Handbook, published by Marshall & Swift, LP, a reference manual commonly used in the valuation of real property. However, the assessor conducted a "depreciation study" and concluded that the depreciation tables developed by High Plains were appropriate.

The assessor testified that she used a computer program called TerraScan to determine property valuations for the 2004 tax season. She testified that an unspecified number of other Nebraska counties also utilized the TerraScan program. Data from the 2003 mass reappraisal was used by the TerraScan program in determining property valuations for 2004. The record card produced by the TerraScan program showing the 2004 valuation for the Brenner property states, "DATA USED FOR COST CALCULATIONS SUPPLIED BY MARSHALL & SWIFT." The heading above the final calculation of assessment value is titled "Cost Approach From Marshall & Swift." The assessor testified that TerraScan "provided [her] with the costing tables and they called their date as of June of 2001." An entry on the 2004 Brenner record card states "Replacement cost new less depreciation was used in improvement valuation. Marshall Swift tables dated June 2001 were used for costing. Depreciation information is on file." The assessor admitted that she had never compared the base cost found in the Marshall & Swift handbook to the TerraScan results for any property in Banner County. She also testified that TerraScan was used to determine all property values in Banner County in the same manner.

The assessor acknowledged that she did not personally inspect the Brenner property prior to the 2004 valuation, asserting that she was denied access by the Brenners. When she personally inspected the property in December 2006, she confirmed that the data previously entered in the TerraScan program was generally correct. The inspection revealed nothing which caused the assessor to change her determination of value.

The assessor testified that in arriving at the 2004 valuation of the Brenner residence, she considered its condition to be "average" and its quality to be "average plus." She explained that the home had certain features which would not be expected in a home of "average" quality, so she rated the quality "between average and good." The TerraScan program uses a value of 30 for average quality and 40 for good quality. To indicate the "average plus" quality of the Brenner property, the assessor entered a value of 35.

Three members of the Brenner family testified at the hearing. Co-owner Lisa has a bachelor's degree in accounting and has experience in both private and public accounting. She holds an assessor's certificate and has attended "over 60 hours of appraisal education." She testified regarding various aspects of the construction and features of the home, which in her opinion is "average" in both quality and condition. Utilizing the Marshall & Swift Residential Cost Handbook, she concluded that the value of the home in 2004 was approximately $186,000. The only comparable property she could identify was a 3,175-square foot, one-story home which was built in 1976 and valued at $126,072 in 2004. Robert also testified about the quality and condition of the home and agreed with Lisa's opinion that its actual value in 2004 was $186,000. Maddie Lapaseotes, Lisa's daughter and Robert's stepdaughter, testified that the assessor and the county sheriff came to the home unexpectedly in July 2004, when the Brenners were away, and she did not allow them to enter.

Sheila Newell testified as a witness for the Brenners. Newell is licensed in Nebraska as a real estate broker and is also a certified general real property appraiser. At the time of the TERC hearing, she served as chair of the NRPAB. She personally inspected the Brenner home on several occasions between 1999 and 2006. Using the criteria of the Marshall & Swift Residential Cost Handbook, Newell testified that in her opinion, the quality of the home in 2004 was "average." In making this assessment, she considered the various characteristics of construction, including material, workmanship, design, and utility. Newell also testified that in her opinion, the condition of the home was "average" in 2004, based upon her observations. In response to questions from members of the TERC panel, Newell acknowledged that the determination of quality and condition of real estate was subjective, at least to some degree, and that qualified appraisers could reach slightly differing conclusions. Newell also acknowledged that the home had certain features indicative of better than average quality which would support the assessor's determination of "average plus" quality. Newell did not express an opinion as to the actual value of the Brenner home in 2004.

In its written decision and order, TERC found that the Board's valuation of the residence as of the assessment...