Houser v. County of Hennepin

Decision Date30 December 2004
Docket Number29232
PartiesPeter R. HOUSER, Petitioner, v. COUNTY OF HENNEPIN, Respondent.
CourtTax Court of Minnesota

Heard Aug. 24, 2004

Submitted on Briefs Oct. 1, 2004

The Honorable George W. Perez, Chief Judge of the Minnesota Tax Court, heard this matter, on September 9, 2004, at the Minnesota Judicial Center, 25 Rev. Dr. Martin Luther King Jr., Boulevard, St. Paul, Minnesota.

Attorneys and Law Firms

Joseph G. Springer, Attorney at Law, Fredrickson & Byron, P.A. appeared for the Petitioner.

Robert A. Burck, Assistant Hennepin County Attorney, appeared for the Respondent.

FINDINGS OF FACT, CONCLUSIONS OF LAW AND ORDER FOR JUDGMENT

GEORGE W. PEREZ, Chief Judge.

The Court, having heard and considered the evidence adduced at the hearing, and upon all of the files, records and proceedings herein, now makes the following:

FINDINGS OF FACT

1. Peter R. Houser (Petitioner) has sufficient interest in the property to maintain this petition; all statutory and jurisdictional requirements have been complied with, and the Court has jurisdiction over the Subject Property and the parties.

2. The Subject Property is located at 1206 Brookdale Mall in Brooklyn Center, Minnesota (“Subject Property”).

3. The Subject Property consists of a one level automotive service center with a gross business area (“GBA”) of 8 285 square feet (“sf”) on 1.21 acres (52, 857 sf) of improved land. The GBA consists of 4, 813 sf of automotive service, 2, 472 sf of storage, and 1, 000 sf of office area.

4. Since 1974, Petitioner has operated the Subject Property as a Midas Muffler Shop and then a Midas Auto System Expert. In 1999, Petitioner began leasing 1, 000 sf of the building to Hi-Tech Tune Up, Inc.

5. The assessor placed a January 2, 2001, estimated market value of $537, 700 on the Subject Property Property.

6. The Petitioner's expert, Dennis W. Jabs, Jr., MAI, testified that the Subject Property had a January 2, 2001, value of $410, 000.

7. The Respondent's expert, Daniel F. Salzwedel, SAMA, testified that the Subject Property had a January 2, 2001, value of $535, 000.

8. We find the Subject Property's January 2, 2001, fair market value to be $475, 000.

CONCLUSIONS OF LAW

1. The assessor's estimated market value for the Subject Property as of January 2, 2001, shall be reduced on the books and records of Hennepin County from $537, 700 to $475, 000.

2. Real estate taxes due and payable in 2002 shall be recomputed accordingly and refunds, if any, shall be paid to Petitioner as required by such computations, together with interest from the original date of payment.

LET JUDGMENT BE ENTERED ACCORDINGLY. THIS IS A FINAL ORDER. A STAY OF 15 DAYS IS HEREBY ORDERED.

MEMORANDUM
Background

Petitioner challenges the January 2, 2001, estimated market value of the Subject Property. The Subject Property is a 35 year old automotive service center with 11 repair bays. Three repair bays are leased to Hi-Tech Tune Up, Inc. The Subject Property is near the intersection of Bass Lake Road (County Road 10) and Xerxes Avenue North, in Brooklyn Center, but it does not have curb access to either street. The Subject Property can only be accessed via service roads surrounding Brookdale Mall. Visibility is blocked by an earth berm and an existing service station located adjacent to the Subject Property.

Petitioner's expert, Dennis W. Jabs, performed a limited appraisal and considered the cost approach and the market approach. Respondent's expert, Daniel F. Salzwedel, considered the income approach and the market approach. Both experts gave greater weight to the market approach.

Highest and Best use

We find that the Subject Property's highest and best use, as if vacant, would be for retail commercial use or service use and, as improved, is for the continued use as an automotive service facility.

Traditional Approaches

This Court considers the three traditional approaches (cost, income and sales) to determine market value as outlined in Equitable Life Assurance Soc'y v. Ramsey County, 530 N.W.2d 544, 552 (Minn.1995)

Cost Approach

Only Mr. Jabs analyzed the value of the Subject Property under the cost approach. Using this approach, Mr. Jabs arrived at a value of $410, 000. Mr. Jabs gave moderate weight to the value reached under the cost approach due to the difficulty in accurately estimating depreciation. Mr. Salzwedel determined that the cost approach was not applicable due to the age of the Subject Property, which was built in 1966. We agree. Due to the age of the Subject Property and the difficulty in measuring depreciation, we place minimal weight on the cost approach.

Income Approach

Only Mr. Salzwedel analyzed the value of the Subject Property under the income approach. Using this approach, Mr. Salzwedel arrived at a value of $547, 000. In Mr. Salzwedel's analysis, the lease to Hi-Tech Tune Up, Inc. is not weighted heavily because it is an above market rate lease. Comparables Nos. 3 and 4 lack sufficient similarity with the Subject Property to be considered reliable. The net adjustment percentages for these comparables were -42% and -50% respectively. Mr. Salzwedel testified that it was difficult to find comparables to complete an income approach analysis. Mr. Salzwedel concluded that the income approach is not the best indicator of value for the Subject Property. Thus, he relied on the income approach as support to the market approach.

Mr. Jabs did not employ the income approach because, as he testified, most automotive centers are owner occupied and not purchased as an investment for their income potential. Mr. Salzwedel's difficulty in finding leases for comparables confirms Mr. Jabs' view. We agree with Mr. Jabs and place minimal weight on the income approach.

Market Approach

Both experts placed significant weight on the market approach. Mr. Jabs performed a sales comparison approach analysis based on sales of seven comparable properties chosen by similarity to the Subject Property in use and utility, date of sale, transactional characteristics, age of the improvements, and size. Mr. Jabs arrived at a value of $410, 000. For his sales comparison analysis, Mr. Salzwedel chose four comparables based on their similarity to the Subject Property in utility, size, and type. Mr. Salzwedel arrived at a value of $532, 000.

After reviewing the appraisals, the comparable sales, and the testimony of the experts and Petitioner, we place the most weight on the market approach. We find Mr. Jabs' market approach reliable because of the similarity between the comparables and the Subject...

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