General Elec. Co. v. Board of Assessors of Lynn

Decision Date31 December 1984
Citation393 Mass. 591,472 N.E.2d 1329
PartiesGENERAL ELECTRIC COMPANY v. BOARD OF ASSESSORS OF LYNN.
CourtUnited States State Supreme Judicial Court of Massachusetts Supreme Court

Laurence S. Fordham, Boston (Stephen B. Deutsch, Boston, and Barry A. Guryan, Lynn, with him), for plaintiff.

John M. Lynch, Brookline, for defendant.

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

LYNCH, Justice.

The General Electric Company (taxpayer) and the Board of Assessors of Lynn (assessors) bring cross-appeals from a decision by the Appellate Tax Board (board) granting abatements to the taxpayer for fiscal years 1981 and 1982. The board found that the assessors had overvalued the taxpayer's property, and granted abatements in the amounts of $45,922 for fiscal year 1981 and $106,292.34 for fiscal year 1982.

The taxpayer contends on appeal that it is entitled to a greater tax abatement than that awarded by the board. It argues that the board erred in failing to take property taxes into account in valuing the property under the capitalization of income approach. On cross-appeal, the assessors raise several arguments in support of their original valuation and, alternatively, of the board's decision. They argue on three grounds that the board erred in granting the abatements. First, they contend that the taxpayer failed to present sufficient evidence to meet its burden of proof. Second, they argue that the board erred in failing to consider the assessors' evidence of valuation under the depreciated replacement cost method. Third, they contend that the board's finding of overvaluation was arbitrary because the overvaluation was minimal and did not warrant granting the abatements. The assessors argue, alternatively, that the board did not err in its calculation of the value of the property under the capitalization of income approach, so that the amounts of the resulting abatements are appropriate. The assessors raise two grounds in support of this argument. First, they contend that the taxpayer failed during the hearing before the board to introduce sufficient evidence of the effect of taxes on valuation and cannot now raise the issue for the first time on appeal. Second, they argue that the board did not err in its calculation, based on the evidence presented, of the effect of taxes on the value of the property.

We conclude that the taxpayer met the burden of proving its entitlement to an abatement. Furthermore, we conclude that the board's valuation of the property was supported by substantial evidence. We affirm the board's decision granting abatements for fiscal years 1981 and 1982.

In fiscal years 1981 and 1982, the tax years at issue, the taxpayer was the owner of two parcels of real estate in Lynn, known collectively as the River Works. For valuation purposes, the parcels were broken down into the River Works North (north parcel) at 1100 Western Avenue, Lynn, and the River Works South (south parcel) at 701 Lynnway, Lynn. In fiscal year 1981, the south parcel was valued at $1,326,800, and assessed a tax at the rate of $191 per $1,000 for a total of $253,418.80; the north parcel was valued at $15,604,310 and assessed a tax at the rate of $191 per $1,000 for a total of $2,980,423.21. In fiscal year 1982, the south parcel was valued at $1,326,400 and assessed a $216,203.20 tax at the rate of $163 per $1,000; the north parcel was valued at $15,614,780 and assessed a $2,545,209.14 tax at the rate of $163 per $1,000.

The River Works is a major industrial property. The north and south parcels are adjacent to each other and separated by the Boston and Maine Railroad tracks. The entire complex consists of a total of 8,866,435 square feet or 203.55 acres, of which the north parcel contains 129.43 acres and the south parcel contains 74.12 acres. The property is in a good location, relatively close to Boston and well serviced by public transportation. Both parcels have good frontage on major traffic arteries, and the complex abuts the Saugus River. All utilities are available, including water, sewer, gas, and electricity. There are several easements held by the various utility companies, the city of Lynn, and the MBTA for the railroad.

The property has large paved areas used for parking and an extensive system of interior roadways. It is also improved with a large number of buildings of various sizes and designs containing in excess of 3.8 million square feet of area, of which approximately 3.3 million square feet is contained in the north parcel. Construction of the various buildings began prior to the turn of the century and has continued up to the recent past. The taxpayer has made various alterations and additions as its developing needs have dictated, so that the complex grew and expanded over the years up to the assessment dates.

The buildings can be grouped into five classes according to their use. The first class consists of multi-storied buildings located throughout the north parcel and used mainly for offices and administration. The second class, the aircraft engine business group, consists of one-story and multi-storied buildings used for light manufacturing, aircraft engine assembly, and office support. The third class, the gear works and industrial marine turbine division, consists of a series of large, integrated buildings used for heavy industrial purposes. The fourth class consists of the test cells used for testing manufactured products. The fifth class comprises the buildings used for personnel or employee relations. The over-all condition of the buildings is good because the taxpayer has a continuing program of maintenance and capital improvements.

The board held thirty-four days of hearings between February 14, 1983, and April 26, 1983, to consider the taxpayer's petitions for abatements. On December 22, 1983, the board promulgated its decision and issued its findings of fact and report pursuant to G.L. c. 58A, § 13. The board found the fair cash value of the River Works to be $44,400,000 for each of fiscal years 1981 and 1982. After application of the effective tax rates of $71.80 and $59.80 for those years, respectively, the board granted total abatements for the River Works of $45,922 for fiscal year 1981, and $106,292.34 for fiscal year 1982. As apportioned between the two parcels, the abatements for fiscal year 1981 were $41,161.01 for the north parcel, and $4,761.04 for the south parcel. The abatements for fiscal year 1982 were $97,188.54 for the north parcel, and $9,103.84 for the south parcel.

During the course of hearings before the board, both parties presented evidence of the fair cash value of the property. The taxpayer introduced two expert real estate appraisers, Paul W. Shoup and David L. Cary, who testified to valuations based on the market and capitalization of income methods of valuation. The taxpayer's experts dismissed the reproduction and replacement cost approaches as being too speculative due to the age of most of the buildings and the difficulty in establishing a valid estimate of depreciation.

The taxpayer also introduced the assessors' answers to interrogatories filed in an unrelated proceeding before the board. In those answers, the assessors had stated that they valued all industrial property in the city at $45,694,000, and that, based on these answers, all property owned by the taxpayer, including parcels not involved in this proceeding, had a value of $20,334,928.

The assessors introduced expert testimony regarding three valuation approaches, the replacement cost, market, and capitalization of income methods, but relied only on the replacement cost and capitalization of income methods to generate a value for the two River Works parcels.

The board found that one of the taxpayer's expert witnesses, Shoup, relied more on the market approach to valuation than on the capitalization of income approach. The board accorded little or no weight to the value testified to by Shoup, which was based on comparison of the River Works to the sales prices of allegedly comparable properties. During the course of Shoup's testimony, evidence of the sales prices of some allegedly comparable properties was struck because of his lack of personal knowledge of the properties, or because they were found not to be sufficiently comparable, or because they included the sales of unallocated personal property. The board found that the market approach was inadequate to supply a basis for finding fair cash value. It concluded that this method requires too many adjustments for variables such as location, time, and amenities, reasoning that "[t]hese types of large, heavy industrial properties are not customarily bought and sold on a regular basis to allow the formation of a valid opinion of fair cash value."

The board then considered the testimony of the taxpayer's second expert witness, Cary, as to valuation under the capitalization of income approach. Cary computed fair cash value under two alternative assumptions: single tenancy and multiple tenancy. The board concluded that, under both of these assumptions, a reliable fair cash value figure could be estimated. After considering the market for comparable rentals and expenses, Cary found values of $15,900,000 for single tenancy, and $15,200,000 for multiple tenancy. The board found that he applied an appropriate capitalization rate and used a tax factor when necessary under the multiple tenancy approach. Cary did not use a tax factor in calculating fair cash value under the single tenancy approach.

Relying on Cary's testimony, on the assessors' answers to interrogatories in an unrelated case, and on the testimony of Richard J. Dennis, the assessors' expert witness, the board found that the taxpayer had successfully sustained the burden of proving that it was entitled to an abatement.

The board then considered the evidence presented by the assessors as to the value of the property. The assessors first...

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