In re City of Berlin
| Decision Date | 12 January 2022 |
| Docket Number | 2020-0474 |
| Citation | 174 N.H. 733,274 A.3d 546 |
| Parties | APPEAL OF CITY OF BERLIN (New Hampshire Board of Tax and Land Appeals) |
| Court | New Hampshire Supreme Court |
Donahue, Tucker & Ciandella, PLLC, of Meredith (Christopher L. Boldt, Eric A. Maher, and Brendan A. O'Donnell on the brief, and Christopher L. Boldt orally), for the petitioner.
Sulloway & Hollis, P.L.L.C., of Concord (Margaret H. Nelson, Derek D. Lick, and Trevor J. Brown on the brief, and Derek D. Lick orally), for the respondent.
The petitioner, City of Berlin (City), appeals an order of the New Hampshire Board of Tax and Land Appeals (BTLA) determining that the City over-assessed the respondent, Public Service Company of New Hampshire d/b/a Eversource Energy (PSNH), for tax year 2017. The City challenges the BTLA's decision to apply the New Hampshire Department of Revenue Administration (DRA) 2017 median equalization ratio to determine the proportionality of the City's assessment of PSNH's J. Brodie Smith hydroelectric facility (Smith Hydro ). It argues that the 2016 median equalization ratio — the most recent DRA ratio available at the time the City prepared the 2017 tax assessment — should apply. Because we agree, we reverse and remand.
The following facts are supported by the record or are otherwise undisputed. In February 2018, PSNH applied for an abatement from the City for property taxes assessed as of April 1, 2017 on 15 properties it owned in Berlin, including Smith Hydro. The City had appraised PSNH's property in the aggregate sum of $99,763,300 and assessed a tax of $3,659,317. PSNH asserted, among other things, that the City's assessment "substantially exceed[ed]" the properties’ fair market value and was "disproportional." See RSA 76:16 (Supp. 2021). The City's Board of Assessors denied the request for an abatement, and PSNH appealed to the BTLA. See RSA 76:16-a, I (Supp. 2021).
PSNH's appeal to the BTLA included the same 15 properties it had identified in its abatement application. Its stated reasons for the appeal included that the City's assessment "fail[ed] to reflect changes in the energy market and their impact on the market value of Smith Station." In addition, PSNH stated that applying the DRA 2017 median equalization ratio to the City's assessment of $99,763,300 indicated a fair market value for its property of approximately $103,704,054. That amount, PSNH asserted, was substantially greater than the "full and true value" of its property, thereby resulting in an "excessive" assessment and a "disproportionate burden."
PSNH's appeal was subsequently consolidated with 137 other tax abatement appeals filed by PSNH challenging the proportionality of assessments on property it owned in 47 municipalities during tax years 2014-2017. By the time the BTLA held a hearing on the consolidated appeals, the only PSNH property at issue in Berlin was Smith Hydro, which also was the only hydroelectric generating facility involved in the appeals. The parties agreed that Smith Hydro's highest and best use was as a merchant generating plant operating in the deregulated marketplace, but disagreed as to the market value of the property, and as to the equalization ratio that should be applied in the proportionality analysis.
As to the valuation issue, PSNH's expert testified that the fair market value of Smith Hydro was $34 million, while the City's experts testified that its valuation was $49 million. The BTLA found that the City's valuation was "more credible and better supported by the record as a whole and [PSNH] did not meet its burden of proving otherwise." PSNH does not appeal that finding.
As to the issue on appeal, the parties disagreed as to the proper DRA median equalization ratio to be applied in determining the general level of assessment for tax year 2017 in Berlin. Prior to the hearing on the merits, PSNH filed a motion requesting that the BTLA adopt the DRA 2017 ratio "as evidence of the proportional level of assessment." The City objected, arguing that it "did not use the DRA's 2017 median equalization ratios when setting its 2017 assessments and tax rate." It asserted that "[t]he general level of assessment in a municipality is a triable issue of fact, which [PSNH] bears the burden of proving at trial," and, therefore, the BTLA should reject PSNH's "pre-trial request to adopt a certain assessment level." The BTLA did not rule on the motion at that time.
On the first day of the hearing, PSNH offered an exhibit showing the DRA 2017 median equalization ratio for Berlin. PSNH asserted that the BTLA should take administrative notice of the DRA 2017 ratio and use that ratio for resolving its appeal involving Smith Hydro. Although acknowledging that it bore the burden of proving the general level of assessment for property in Berlin for tax year 2017, PSNH argued that the exhibit established that it had "made a good prima facie showing that the ratio should be the median equalization ratio set by the [DRA]," and, therefore, the burden shifted to the City to present evidence "that would warrant use of another ratio." The City objected, explaining that because the 2017 median equalization ratio was not established by the DRA until 2018, the City calculated the tax rate for the 2017 tax year utilizing the 2016 median equalization ratio. Therefore, the City asserted, the proper equalization ratio was "the median equalization ratio certified by DRA for 2016," which was "the equalization ratio that every other taxpayer in [Berlin] was subject to" for the 2017 tax year. After the BTLA acknowledged that the exhibit simply reflected what the DRA 2017 median equalization ratio was — but did not establish whether that ratio should be used for the purpose of resolving PSNH's appeal — the City agreed to its admission.
On the seventh day of the hearing, before the City began to present its case, the BTLA announced that it was granting PSNH's pre-trial motion to adopt the DRA 2017 median equalization ratio, concluding that it was "proper to apply the DRA's median ratio for the intended tax year 2017 instead of the prior tax year, 2016." The City again objected, asserting that the taxes assessed for the 2017 tax year "were paid based on [the DRA 2016 equalization ratio], not on the after-the-fact determination," and that the BTLA's decision was, therefore, "as a matter of equity, not correct."
During the BTLA proceedings, the City explained the process that it uses to determine property values and ensure that assessments are reasonably proportional and satisfy the requirements of state law. As the City noted, every municipality in the State is required to perform a revaluation of all property "at least as often as every fifth year." See RSA 75:8-a (2012); N.H. CONST. pt. II, art. 6. The City represented that property values are generally carried forward from year to year until the next revaluation; however, each year the City is required to adjust assessments for any properties that have had a material physical change or undergone other changes affecting value. See RSA 75:8 (2012). As the City's expert explained, because there are often year-to-year changes to utility property that affect its value, the City generally revalues utility property annually. To ensure that the assessment for such property is proportional to the valuations for other property in Berlin, the City equalizes the fair market value using the most recent DRA equalization ratio, and assesses the property at that equalized value.
Prior to September 1 of each year, the City must determine and submit the assessed value of all property in Berlin to the DRA. See RSA 21-J:34, I (2020). In so doing, the City's assessors apply the most recent equalization ratio, which is the equalization ratio published by the DRA earlier in the same year. See RSA 21-J:3, XIII (Supp. 2021). For the 2017 tax year, as of September 1, the current median equalization ratio was the 2016 median equalization ratio published by the DRA in early 2017.
Accordingly, prior to September 1, when setting the assessed value of Smith Hydro for the 2017 tax year, the City applied the then-current DRA 2016 equalization ratio of 110.7% to the adjusted fair market value of the facility. The City likewise applied the DRA 2016 equalization ratio of 110.7% in setting the assessed value of any other property that was subject to revaluation for the 2017 tax year. It was not until the spring of 2018 that the DRA announced that the 2017 median equalization ratio for Berlin was 96.2%.
In a written decision issued following the hearing, the BTLA reiterated its position that, under "established law," proportionality required application of the current tax year's median equalization ratio, not the prior tax year's ratio. The BTLA reasoned that "[i]t is one thing to question what statistic best measures the level of assessment (median ratio or weighted mean, for example), but quite another to require a party to prove what should be obvious (i.e., that a current year statistic is more valid than a prior year statistic)." The BTLA found the decisions of Appeal of City of Nashua, 138 N.H. 261, 638 A.2d 779 (1994), Appeal of Andrews, 136 N.H. 61, 611 A.2d 632 (1992), and one of its own administrative decisions issued in 2007, "dispositive" on this issue, and concluded that Berlin's arguments to the contrary were "without merit." Accordingly, the BTLA applied the DRA 2017 median equalization ratio of 96.2% to the City's $49 million market value estimate of Smith Hydro, resulting in "an abated assessment of $47.138 million." The City moved for rehearing, which the BTLA denied. This appeal followed.
On appeal, the City argues that the BTLA's decision to apply the DRA "after the fact" 2017 equalization ratio to determine the proportionality of the City's assessment of Smith Hydro was unlawful or unreasonable. The City asserts that a taxpayer "cannot carry its burden of proving the general level of assessment by...
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