Harold Chevrolet, Inc. v. County of Hennepin, C3-94-102
| Decision Date | 13 January 1995 |
| Docket Number | No. C3-94-102,C3-94-102 |
| Citation | 526 N.W.2d 54 |
| Parties | HAROLD CHEVROLET, INC., Relator, v. COUNTY OF HENNEPIN, Respondent. |
| Court | Minnesota Supreme Court |
Syllabus by the Court
The tax court's decision to lower the estimated market value of the subject property was supported by the evidence as a whole and was not clearly erroneous.
Christopher J. Dietzen, Gary A. Van Cleve, Larry D. Martin, Larkin, Hoffman, Daly & Lindgren, Ltd., Bloomington, for relator.
Michael O. Freeman, Hennepin County Atty., Robert T. Rudy, Asst. County Atty., Minneapolis, for respondent.
Considered and decided by the court en banc without oral argument.
This case comes to us on certiorari to the Minnesota Tax Court. Relator, Harold Chevrolet, Inc., challenged the 1990 assessed value of three tracts of property it was leasing and using as a car dealership (subject property). The Hennepin County assessor estimated that the fair market value of the subject property was $3,738,600. The tax court lowered the market value to $3,680,000. Harold moved for amended findings or a new trial. The court denied Harold's motions. On appeal, Harold argues: (1) the court erroneously double-counted the value of two of the subject property's four parcels, and (2) the court relied too heavily on the cost approach to market value. We affirm.
On the date of assessment, Harold operated a car dealership on the subject property at the intersection of Highways 494 and 35W in Bloomington, Minnesota. Harold was leasing the subject property, which consisted of four separate parcels of land contained in three noncontiguous tracts. The tracts included: the main Harold Chevrolet dealership site, which consisted of two contiguous parcels of land (main tract); a used car lot (used car lot); and an employee parking lot (employee parking lot). The Hennepin County assessor determined that the market value of the subject property was $3,738,600 as of January 2, 1990, for taxes payable January 2, 1991.
The land area of the subject property was 326,639 square feet. The combined gross building area of the subject property was 61,040 square feet. The land area of the main tract was approximately 270,300 square feet and the tract was improved with a main office, a showroom service building, and a small used car office. The gross building area of the main tract improvements was 59,720 square feet. The used car lot, located across the street from the main tract, had a land area of 35,410 square feet and the tract was improved with a single story concrete building of approximately 1,320 square feet. Finally, the land area of the employee parking lot, which was located two blocks away from the main tract and across the street from the used car lot, was approximately 21,929 square feet. The employee parking lot contained no improvements.
The three traditional approaches for determining market value are: market data or sales comparison, replacement cost, and capitalization of income. Lewis & Harris v. County of Hennepin, 516 N.W.2d 177, 178 (Minn.1994); Fed. Reserve Bank of Minneapolis v. County of Hennepin, 372 N.W.2d 699, 700 (Minn.1985); Northerly Centre Corp. v. County of Ramsey, 311 Minn. 335, 337, 248 N.W.2d 923, 925 (1976). Under the market approach, an appraiser surveys the market and compares the subject property with other comparable properties, adjusting for differences such as time of sale, location, size, and topography. Northerly Centre Corp., 311 Minn. at 337 n. 2, 248 N.W.2d at 925 n. 2. Under the cost approach, the appraiser determines the current cost of constructing the existing improvements on the property, subtracts depreciation to determine the current value of the improvements, and then adds the value of the land. Id. Finally, under the income approach, the appraiser determines the rental income the property should be generating, subtracts expenses, and then capitalizes the net income at a rate of capitalization that investors would expect to obtain. Id.
In the present case, each party presented the testimony of an expert appraiser who analyzed the market value of the subject property using the three traditional approaches to market value. Harold's appraisal expert, Jeffrey Johnson, a licensed real estate appraiser, opined that the market value of the subject property was $2,800,000. Under his market approach, Johnson opined that the value for all three tracts was $2,990,000. Under his cost approach, Johnson separately calculated the land values of each of the three tracts and concluded the total land value for the subject property was $2,340,000. Based on a depreciation rate of 81.6%, he opined that the value of the depreciated improvements was $667,920. Johnson's total value for all three tracts under the cost approach was $3,010,000. Under his income approach, Johnson opined that the value for all three tracts was $2,560,000.
In establishing a market value of $2,800,000 for the subject property, Johnson testified that he relied most heavily on the market and income approaches, with minor consideration for the cost approach. He concluded the cost approach was unreliable given the significant amount of depreciation the improvements had experienced.
The county's appraisal expert was John G. Pasternacki, a certified assessor for the City of Bloomington. Pasternacki, unlike Harold's expert, did not value the three tracts as a single unit. For his market approach, Pasternacki calculated only the value of the main tract and opined that its value was $3,437,000. For his cost approach, Pasternacki separately calculated the value of each of the three tracts, using an improvement depreciation rate of 85%. His land and depreciated improvement value totals were: $3,561,200 for the main tract; $417,200 for the used car lot; and $230,000 for the employee parking lot. For his income approach, Pasternacki again analyzed only the main tract and opined that its value was $3,470,200.
In establishing a final market value for the subject property, Pasternacki provided three separate market value figures. He opined that the market value of the main tract was $3,450,000; the market value of the used car lot was $417,200; and the market value of the employee parking lot was $230,300. His total market value for the subject property was $4,097,500. Pasternacki testified that he relied most heavily on the market and income approaches for the main tract because he concluded these methods offered the most reliable information. Pasternacki relied exclusively on the cost approach for the used car lot and the employee parking lot.
After a two-day trial, a viewing of the subject property, and the submission of post-trial briefs, the tax court lowered the market value on the subject property from $3,738,000 to $3,680,000. The court analyzed the subject property under the three traditional approaches to value. For its cost approach, the court adopted Harold's estimated depreciated improvement value of $667,920. The court used land values of $2,662,455 for the main tract; $300,985 for the used car lot; and $186,397 for the employee parking lot. The court's total value for all three tracts under the cost approach was $3,817,757.
For its income approach, the tax court discussed the figures submitted by the parties' experts and, without further explanation, held that the main tract alone had a value in the range of $2,800,000 to $3,000,000. The court did not explicitly state a market approach value for the subject property. It did, however, discuss the comparable properties used by the two expert appraisers and the adjustments made by each of them. It concluded the adjustments made by the county's appraisal expert were more reasonable, and the court placed more weight on his market approach value. For its final conclusion as to market value, the court placed equal weight on the cost and income approaches, and less weight on the market approach.
This court will not disturb the tax court's valuation of property for tax purposes unless the tax court's...
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