Burritt Mut. Sav. Bank of New Britain v. City of New Britain

• Decision Date: 13 January 1958
• Docket Number: No. 67217,67217
• Citation: 140 A.2d 324,20 Conn.Supp. 476
• Court: Connecticut Court of Common Pleas
• Parties: BURRITT MUTUAL SAVINGS BANK OF NEW BRITAIN v. CITY OF NEW BRITAIN.

Page 324

140 A.2d 324

20 Conn.Supp. 476

BURRITT MUTUAL SAVINGS BANK OF NEW BRITAIN v. CITY OF NEW BRITAIN.

No. 67217.

Court of Common Pleas of Connecticut, Hartford County.

Jan. 13, 1958.

Harold J. Eisenberg, New Britain, for plaintiff.

George Coyle, Corporation Counsel, and Paul G. Cavaliere, Asst. Corporation Counsel, New Britain, for the defendant.

KLAU, Judge.

This is an appeal from the refusal of the board of tax review of the defendant city to reduce the tax assessment on the list of September 1, 1956, on the plaintiff's land and building located at 267-271 Main Street in the city of New Britain.

The building in which the plaintiff conducts its savings bank business is a modern one, having been erected in 1949. The land in question has a frontage of approximately 43.5 feet on Main Street and is approximately 90 feet in depth. In addition, there are easement or passway rights on land of others over which entrance may be gained to the rear of the plaintiff's building.

The assessors of the city found the fair market value of the land on September 1, 1956, to be $182,866, of which $4137 was the value of the easement and $178,729 the value of the parcel itself. The front foot value of the subject property, based on a depth table standard of a lot 100 feet in depth, was established by the assessors at a market value unit price of $4137.24 per base front foot. This sum of $4137.24 was a slight adjustment of approximately $2.70 per foot from the fair market value of $4200 per front foot for a parcel having a standard depth of 100 feet which the assessors had established as the fair market value of land immediately adjacent and to the south. This market value of $4200 per front foot was established and accepted by the assessors on September 1, 1956, upon the recommendation of J. M. Cleminshaw Company, which had been engaged by the city in 1955 to make a revaluation of the entire real and personal property of the city for the grand list of September 1, 1956. This revaluation was conducted for the city by Richard Nesser, an employee of the J. M. Cleminshaw Company, whose findings and opinions were accepted in this case in toto by the board of assessors. Nesser's experience had been derived entirely from his employment of fourteen years with the Cleminshaw Company, and by research and a study of appraisal methods. He had never been in the real estate business or participated in real estate investments and mortgage financing.

In this case we are concerned with the question whether the $4200 per front foot valuation, adjusted to the subject premises by the slight variance downward, previously described, to $4137.24 by reason of its location a short distance northerly from the corner of Church and Main Streets and the northerly wall of the New Britain Trust Company building, is in fact representative of the fair market value of the subject premises.

The basic valuation of $4200 per front foot is the highest land valuation in the city of New Britain. It was the front foot rate established on September 1, 1956, in the so-called 100 per cent business district, which runs southerly from the corner of Main and Church Streets on the east side of Main Street to the Fair Department Store, and runs northerly from said corner to and including Grant's Department Store. Southerly from the corner of Main and Church Streets, the valuation, including the New Britain Trust Company building, which is located on that corner, was uniformly $4200 per front foot and was adjusted to a greater amount as the depth increased beyond 100 feet, in accordance with a depth table submitted in evidence. Northerly there was an adjustment downward for a distance of 141 feet along the east side of Main Street from the northerly wall of the New Britain Trust Company, which also constitutes the southerly wall of the subject property, to the end of Grant's Department Store. At the latter point the front foot price had decreased to $3800. The adjustment downward was due to a feeling that there was a slight decrease in the 100 per cent valuation. Plaintiff's property is located between the New Britain Trust Company building on the south and the so-called Lerner building on the north, with common party walls.

The front foot valuation of the plaintiff's land, having been first adjusted downward from $4200 to $4137.24, was further adjusted to $3971.75 in accordance with a depth table. The 90-foot depth was computed as having a 96 per cent comparative value to that of a standard lot 100 feet in depth. The amount of $3971.75, therefore, represents 96 per cent of $4137.24. The total land value was thereafter computed on a 45-foot frontage as having a fair market value of $178,729 plus $4137 for easement rights. The fair market value of the building on September 1, 1956, was found by the assessors to be $235,497.

In the course of the trial, the plaintiff withdrew its objections to the failure of the board of tax review to reduce the valuation placed upon the building and confined its appeal solely to the issue of fair market value of the land and the tax assessment based thereon.

It was stipulated between the parties that the uniform percentage for tax assessment purposes prevailing and used by the assessors on the list of September 1, 1956, was 60 per cent of the fair market value. Such practice of assessing at a uniform rate less than 10 per cent of the fair market value of real property has been validated by the General Assembly in its 1957 general session; Public Acts 1957, No. 673, § 1; though declared illegal prior to such enactment by the Supreme Court of Errors. E. Ingraham Company v. Town and City of Bristol, 144 Conn. 374, 132 A.2d 563.

Though the land in the instant case is occupied by the bank building, the parties are in agreement that the highest and best use which could be made of the parcel is for retail business purposes. Hence, the issue in this case is the fair market value of the land if it were devoted and utilized for its highest use and to its best purpose. Based upon such use, the plaintiff's expert claimed that the land had a fair market value on September 1, 1956, of $108,000. The contention of the city, based on the findings of Nesser, as has already been stated, was that its fair market value on that date was $178,729, plus $4137 for the passway rights, or a total of $182,866. Both of these opinions were based almost entirely on the method of determining market value known as capitalization of stabilized net income. Sibley v. Town of Middlefield, 143 Conn. 100, 107, 120 A.2d 77; Lomas & Nettleton Co. v. City of Waterbury, 122 Conn. 228, 232, 233, 188 A. 433. This is a method of determining value by capitalizing the future net incomes to be expected from a building devoted to the highest and best use of the land at a capitalization rate which provides for both a return on the investment and a recapture or amortization of the investment, also termed depreciation, over the period of the economic life of the building.

There are three residual methods of capitalizing income into value. The first, known as the land residual process, capitalizes the amount remaining from the gross income, in order to determine the land value, after proper allowance has been made for vacancies, the earnings to be derived from the ownership of the building, the amortization of the investment therein, and the payment of all expenses in connection with its operation including taxes on the building itself. In the land residual method of capitalizing income the return on the capitalization rate as well as the amount of amortization are charged against gross income as expenses of the building. The rate plus an anticipated tax rate is then used to capitalize the remaining income, which is regarded as attributable to the land.

The use of the land residual method is proper when the building is new and its cost is known and its value determined, and was the process employed by Nesser in finding a base rate land value of $4200 per front foot in the so-called 100 per cent business area. This base rate was also used as a base for establishing lesser values of land in other parts of the business district, such lesser values being based upon a site relationship percentage valuation to the 100 per cent business district. The land value for the plaintiff's property, Nesser stated, 'was determined through co-relation and comparison of two land sales, residual land value capitalization of all property in the central business district where rent or lease information was known, of consideration of the advice and recommendation of a citizens land value committee composed of local realtors, appraisers, bankers and owners.'

The so-called 'citizens land value committee' never recommended or approved the basic $4200 front foot valuation. Nesser never explained to them the manner or the calculations by which he had arrived at the $4200 per front foot valuation for the 100 per cent zone. Certainly they were unaware of his capitalization rate upon which this land valuation was computed. Its recommendation, if it has any value at all, merely related to the approval of a land map shown them by Nesser and and confined only to the site relationship of various parts of the business district to the 100 per cent district, rather than an approval of the 100 per cent valuation in and of itself.

The two land sales, one at 96 West Main Street in 1950 to the New Britain Federal Savings and Loan Association, and the other in 1953 at the corner of Main and Court Streets to the Savings Bank of New Britain, shed little, if any, light on the value of the subject property or the value of land in the 100 per cent zone. These purchases were made for the establishment or enlargement of banking facilities and are not market sales which are significant or comparable.

The defendant agrees that there are no sales of comparable property to that of the plaintiff's in the city. For...