Clark County Assessor v. Meijer Stores LP, 020819 INTAX, 18T-TA-00003

Docket Nº:18T-TA-00003
Opinion Judge:WENTWORTH, J.
Party Name:CLARK COUNTY ASSESSOR, Petitioner, v. MEIJER STORES LP, Respondent.
Attorney:ATTORNEYS FOR PETITIONER: BRIAN CUSIMANO ATTORNEY AT LAW Indianapolis, IN MARILYN S. MEIGHEN ATTORNEY AT LAW Carmel, IN ATTORNEYS FOR RESPONDENT: BRENT A. AUBERRY BENJAMIN A. BLAIR DAVID A. SUESS FAEGRE BAKER DANIELS LLP Indianapolis, IN MICHAEL B. SHAPIRO HONIGMAN MILLER SCHWARTZ AND COHN LLP De...
Case Date:February 08, 2019
Court:Tax Court of Indiana
 
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CLARK COUNTY ASSESSOR, Petitioner,

v.

MEIJER STORES LP, Respondent.

No. 18T-TA-00003

Tax Court of Indiana

February 8, 2019

ON APPEAL FROM A FINAL DETERMINATION OF THE INDIANA BOARD OF TAX REVIEW

ATTORNEYS FOR PETITIONER: BRIAN CUSIMANO ATTORNEY AT LAW Indianapolis, IN MARILYN S. MEIGHEN ATTORNEY AT LAW Carmel, IN

ATTORNEYS FOR RESPONDENT: BRENT A. AUBERRY BENJAMIN A. BLAIR DAVID A. SUESS FAEGRE BAKER DANIELS LLP Indianapolis, IN MICHAEL B. SHAPIRO HONIGMAN MILLER SCHWARTZ AND COHN LLP Detroit, MI

WENTWORTH, J.

The Clark County Assessor has challenged the Indiana Board of Tax Review's final determination that lowered the assessed value of the Meijer store in Jeffersonville, Indiana for each of the 2008 through 2016 assessment years. Upon review, the Court affirms the Indiana Board's final determination.

FACTS AND PROCEDURAL HISTORY

Meijer Stores LP owns and operates a 180, 000 square foot retail store and a 2, 432 square foot gas station/convenience store, both situated on one 32.42 acre parcel of land in Jeffersonville, Indiana (the subject property). Meijer constructed the stores in 1998/1999.

During the years at issue, the Assessor assigned the following assessed values to the subject property:

2008: $12, 160, 100
2009: $12, 167, 000
2010: $11, 732, 600
2011: $11, 732, 600
2012: $10, 017, 000
2013: $ 9, 904, 400
2014: $10, 021, 000
2015: $ 9, 966, 000
2016: $ 9, 969, 100
(See Cert. Admin. R. at 1-2, 13-14, 26-27, 40-41, 52-53, 72-73, 86-87, 105-06, 142-43.) Believing those values to be too high, Meijer filed appeals first with the Clark County Property Tax Assessment Board of Appeals and then with the Indiana Board. In November of 2017, the Indiana Board conducted one administrative hearing on all of Meijer's appeals. For purposes of the hearing, however, Meijer and the Assessor agreed to litigate only the subject property's 2012 assessment, stipulating that the other years' assessments could be determined by applying an agreed-upon trending formula to the finally-determined 2012 assessed value. (See Cert. Admin. R. at 128-29.) The Indiana Board Hearing: Meijer's Evidence During the Indiana Board hearing, Meijer presented, among other things, an Appraisal Report, completed in conformance with the Uniform Standards of Professional Appraisal Practice (USPAP), that valued the subject property as of March 1, 2012. Meijer also presented the testimony of Laurence Allen, a member of the Appraisal Institute (MAI), who prepared the Appraisal Report ("Meijer Appraisal"). To value the subject property, Allen first employed the sales comparison approach.1 Under this approach, he examined data relating to the fee simple sales of numerous other big-box stores that had occurred throughout the Midwest between 2006 and 2013. (See, e.g., Cert. Admin. R. at 389, 431-40, 1633-44.) After adjusting the sales prices of those properties to account for differences in the age and condition of their improvements, their location, as well as the condition of the market at the time of sale, Allen used the data to determine a probable sales price for the subject property of $7, 570, 000. (See Cert. Admin. R. at 450-98, 1645-54, 1658.) Allen also employed the income approach to value the subject property.2Under this approach, Allen first estimated the subject property's net operating income using market-based rental rates, occupancy rates, and operating expense levels. (See, e.g., Cert. Admin. R at 1659-66.) Allen explained that he used the market-based rental rates from existing big-box stores rather than rates from big-box properties with "built-to-suit" leases in place, because the former were more representative of both occupant expectations and improvement age. (See, e.g., Cert. Admin. R. at 564-69.) Allen then considered investor surveys and comparable property sales and performed a band-of-investment analysis to determine the capitalization rate to apply against his net operating income estimate. (See, e.g., Cert. Admin. R. at 580-84, 1666-68.) Under his income approach, Allen estimated the 2012 value of the subject property to be $7, 610, 000. (See Cert. Admin. R. at 1668-69.) Ultimately, Allen reconciled his sales comparison and income approach values into a final value conclusion for 2012 of $7, 600, 000. (See Cert. Admin. R. at 1676-77.) In concluding this final value, Allen explained that he did not consider the third generally accepted appraisal technique, the cost approach, 3 to be a reliable method of valuing the subject property for two reasons. First, he stated that buyers and sellers of big-box stores typically do not rely on the cost approach to determine value. (See, e.g., Cert. Admin. R. at 430-31, 1631.) Second, he stated that the use of the cost approach to value the subject property is redundant because like most big-box retail properties, it suffered from significant obsolescence that "is difficult, if not impossible, to estimate without extracting from the other approaches to value." (See Cert. Admin. R. at 590-601, 1631.) (See also Cert. Admin. R. at 415-17, 421-24, 430-31, 592-94, 597-98 (where Allen explains that big-box properties suffer from obsolescence immediately upon construction because they are built for their users' exact specifications; subsequent users will never pay "cost" for these properties because they must incur extensive expenditures to adapt the properties to their own use).) The Indiana Board Hearing: The Assessor's Evidence During the Indiana Board hearing, the Assessor offered her own USPAP-certified appraisal that valued Meijer's property for the 2012 tax year ("Assessor's Appraisal") at $11, 200, 000. (See, e.g., Cert. Admin. R. at 1728-32.) In addition, she presented the testimony of David Hall, MAI, the primary author of the Assessor's Appraisal. In his testimony, Hall first stated that he disagreed with Allen regarding the propriety of using the cost approach. Indeed, Hall reasoned that the cost approach was the best approach to value the subject property because it was depreciating at a rate consistent with its age and suffered from no obsolescence whatsoever. (See, e.g., Cert. Admin. R. at 892-94, 919-20, 1849 (stating there could be no functional obsolescence because "the subject has been continuously occupied since completion of construction, and [] the buildings are consistent with market norms in construction quality, size, utility, and design"), 1850 (stating there could be no economic obsolescence because local and national economic trends "were positively impacting [the] demand" for properties like Meijer's).) Under his cost approach, Hall estimated that the subject property's 2012 market value-in-use was $11, 300, 000. (See Cert. Admin. R. at...

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