In re Equal. Appeal of Johnson Cnty. Appraiser/Privitera Realty Holdings for the Tax Year 2008

Decision Date27 July 2012
Docket NumberNo. 105,769.,105,769.
Citation47 Kan.App.2d 1074,283 P.3d 823
PartiesIn the Matter of the Equalization Appeal of JOHNSON COUNTY APPRAISER/PRIVITERA REALTY HOLDINGS for the tax year 2008.
CourtKansas Court of Appeals


Syllabus by the Court

1. The clear and unambiguous language of K.S.A.2011 Supp. 79–1609 indicates that if the property at issue in a tax dispute is leased commercial property and the owner failed to furnish to the county or district appraiser a complete income and expense statement for the property for the 3 years next preceding the year of appeal, then the owner bears the burden of proof before the Court of Tax Appeals (COTA) to show that the tax assessment for the property was inaccurate.

2. Judicial review of orders of COTA is governed by K.S.A.2011 Supp. 77–621. Relevant to the facts presented here, application of this statute requires the appellate court to grant relief if: (1) COTA has erroneously interpreted or applied the law, K.S.A.2011 Supp. 77–621(c)(4); (2) COTA has engaged in an unlawful procedure or has failed to follow prescribed procedure, K.S.A.2011 Supp. 77–621(c)(5); (3) COTA's decision was based on a determination of fact, made or implied, that is not supported to the appropriate standard of proof by evidence that is substantial when viewed in light of the record as a whole, K.S.A.2011 Supp. 77–621(c)(7), (d); or (4) COTA's decision is otherwise unreasonable, arbitrary, or capricious, K.S.A.2011 Supp. 77–621(c)(8).

3. Substantial evidence is that which possesses both relevance and substance and which furnishes a substantial basis of fact from which the issues can reasonably be resolved. When determining whether a factual finding is supported by substantial evidence when viewed in the light of the record as a whole under K.S.A.2011 Supp. 77–621(c)(7) and (d), the adequacy of the evidence in the record before the court to support a particular finding of fact shall be judged in light of all the relevant evidence in the record cited by any party that detracts from such finding as well as all of the relevant evidence in the record cited by any party that supports such finding, including determinations of veracity by the presiding officer. An appellate court, however, does not reweigh the evidence or engage in de novo review. If COTA's decision is not supported by substantial evidence, it may be viewed as arbitrary or capricious.

4. Kansas appellate courts no longer give deference to an agency's interpretation of a statute and, therefore, exercise unlimited review over issues of statutory interpretation.

5. K.S.A. 79–501 requires that each parcel of real property be appraised for taxation purposes to determine its fair market value.

6. K.S.A.2011 Supp. 79–503a defines “fair market value” as “the amount in terms of money that a well informed buyer is justified in paying and a well informed seller is justified in accepting for property in an open and competitive market, assuming that the parties are acting without undue compulsion.”

7. K.S.A. 79–505(a)(2) states that appraisals performed in connection with ad valorem taxation in this state must be in writing. K.S.A. 79–504(b) establishes that appraisals produced by a computer assisted mass appraisal (CAMA) system prescribed or approved by the director of the Property Valuation Division (PVD) of the Kansas Department of Revenue shall be deemed to be written appraisals that fulfill the statutory requirements.

8. The factors listed in K.S.A.2011 Supp. 79–503a set forth the three approaches to establishing value: the sales approach, the cost approach, and the income approach. Under a directive issued by the PVD, all appraisers must consider and apply the three approaches to value in order to determine the fair market value of property when data to perform each approach is readily available.

9. K.S.A. 79–505 and K.S.A. 79–506 require that appraisal practice be governed by the Uniform Standards of Professional Appraisal Practice (USPAP) (1992). The USPAP standards are embodied in the statutory scheme of valuation, and a failure by COTA to adhere to them may constitute a deviation from a prescribed procedure or an error of law.

10. The PVD issued Directive No. 92–006 in November 1992, which requires county appraisers to perform all appraisal functions in conformity with Standards 2 and 6 of the USPAP. Standard 2 governs the form and content of an appraisal report that communicates the result of a single real-property appraisal performed under Standard 1. Standard 1 governs the substantive aspects of developing a competent, single real-property appraisal. In comparison, Standard 6 establishes the guidelines which should be observed when performing and reporting a mass appraisal ( i.e., the process of valuing a universe of properties as of a given date utilizing standard methodology, employing common data, and allowing for statistical testing).

11. When a CAMA system is used to assess the value of real property, Kansas law dictates that Standard 6 of the USPAP applies to the resulting appraisal report, not Standards 1 and 2.

Linda Terrill, of Neill, Terrill & Embree, P.A., of Leawood, for appellant, Privitera Realty Holdings.

Kathryn D. Myers, assistant county counselor, for appellee, Board of Johnson County Commissioners.



Privitera Realty Holdings (Privitera) appeals the Kansas Court of Tax Appeals' (COTA) decision reinstating the original value that the Johnson County Appraiser (County) assigned to property that Privitera owns in Overland Park, Kansas, for the tax year 2008. For the reasons stated below, we find substantial evidence supports COTA's decision.


The property at issue is a fast-food restaurant built in 1989 and located in front of a community shopping center at the intersection of 119th Street and Metcalf Avenue in Overland Park, a heavy retail intersection. Notably, the restaurant houses three fast-food chains under one roof—Kentucky Fried Chicken, Taco Bell, and Pizza Hut. This “KenTacoHut” is the only one of its kind in Johnson County.

For 2008, the County assigned a value of $1,774,450 to the KenTacoHut for ad valorem tax purposes. Privitera appealed the tax assessment to the small claims and expedited hearings division of COTA. The hearing officer presiding over the matter concluded that Privitera's recommended value of $1,393,200 better reflected the fair market value of the KenTacoHut compared to the value assessed by the County. Accordingly, the hearing officer reduced the assessment to $1,393,200.

The County appealed the decision of the hearing officer to the regular division of COTA. At the evidentiary hearing before COTA, the County presented the testimony of Linda Clark, a commercial valuation specialist with the County Appraiser's office. Clark testified that she had taken numerous courses over the years from the International Association of Assessing Officers, the Appraisal Institute, and the Property Valuation Division (PVD) of the Kansas Department of Revenue. She also stated that she currently held a certified assessment evaluator designation from the International Association of Assessing Officers, a general certified appraisal certificate from the Kansas Real Estate Appraisal Board, that she was a registered mass appraiser with the PVD, and that she was current in her continuing education classes. Based on this education and training, COTA determined Clark was qualified to give an opinion as to the value of the KenTacoHut.

Clark noted that when a taxpayer appeals the assessment of his or her property, she will review the previous work done in making the initial assessment, request further information, and then make a value determination. Clark testified that the County's original assessment of $1,774,450 was calculated using a cost approach to value within a computer assisted mass appraisal (CAMA) system approved by the PVD director of the Kansas Department of Revenue. The specific cost approach system used in the County's CAMA system was the Marshall & Swift cost valuation system, a nationally known cost system and one of the most widely used by appraisers. Clark said that the cost parameters used in the Marshall & Swift system to value the KenTacoHut were specific for 2008.

Clark reported that she personally inspected the KenTacoHut on February 11, 2010. She noted the KenTacoHut was located on a “pad site” and that the building, considering its age (built in 1989), was in good condition and well maintained. When she inspected the property, she determined the County incorrectly had listed the total building area of the KenTacoHut as 6,124 square feet. Instead, the square footage of the restaurant was 6,222. Because the cost approach was used in 2008 to value the KenTacoHut, the increase in square footage resulted in an increase to the estimated value of the restaurant from $1,774,450 to $1,778,660. Clark specifically stated that the increase in the estimated value was solely the result of the discovery of the additional 98 square feet in 2010. She denied doing an entirely new cost approach to estimate the value of the KenTacoHut.

For purposes of the hearing, Clark prepared a 75–page document (introduced into evidence and designated as Exhibit 1), which included the report from the CAMA system assigning a $1,778,600 value to the KenTacoHut for the 2008 tax year. Specifically, the report indicated that it would cost $1,136,250 to replace the KenTacoHut building. A 10 percent “entrepreneurial profit” was added to this cost, resulting in a total replacement cost of $1,249,880. Clark stated that, based on her training and experience, adding a 10 percent entrepreneurial profit to the replacement cost was appropriate.

Once the replacement cost is calculated, Clark said that the age, physical condition, and functional utility of a building are considered to determine the applicable percentage of depreciation for the building. Here, the...

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