In re Target Corp.

• Decision Date: 29 December 2017
• Docket Number: No. 116,607,116,607
• Citation: 410 P.3d 939,55 Kan.App.2d 234
• Parties: In the MATTER OF the Equalization Appeal of TARGET CORPORATION, for the Year 2015 in Sedgwick County, Kansas.
• Court: Kansas Court of Appeals

55 Kan.App.2d 234

410 P.3d 939

In the MATTER OF the Equalization Appeal of TARGET CORPORATION, for the Year 2015 in Sedgwick County, Kansas.

No. 116,607

Court of Appeals of Kansas.

Opinion filed December 29, 2017

Patricia J. Parker, assistant county counselor, for appellant Sedgwick County.

Linda Terrill, of Property Tax Law Group, LLC, of Overland Park, for appellee Target Corporation.

Roger M. Theis and Thomas R. Powell, of Unified School District No. 259, of Wichita, for amicus curiae U.S.D. No. 259.

R. Scott Beeler and Jennifer M. Hannah, of Lathrop Gage LLP, of Overland Park, for amicus curiae The Kansas Chamber of Commerce and Industry, Inc.

Before Bruns, P.J., Schroeder, J., and Hebert, S.J.

Schroeder, J.:

Sedgwick County (the County) appeals the Board of Tax Appeals' (BOTA) valuation for ad valorem tax purposes of four Target Corporation (Target) retail store locations. The County argues BOTA erred in determining a proper value for the property; this argument is unpersuasive. The record reflects BOTA accepted and relied upon substantial competent evidence to determine each property's value in compliance with Uniform Standards of Professional Appraisal Practice (USPAP). We affirm.

FACTS

The properties subject to this appeal consist of four retail store locations owned and occupied by Target in Sedgwick County. Target filed protest applications and sought equalization appeals based on the County's real property tax valuations for the 2015 tax year for all four locations. The four equalization appeals were consolidated for hearing before BOTA.

The County valued the subject properties at $7,475,000; $10,152,000; $10,028,000; and $7,407,000. Target valued them at $6,550,000; $8,910,000; $8,800,000; and $6,280,000. Trecia McDowell, a certified appraiser, testified as an expert witness on behalf of the County. However, McDowell was not admitted as an expert appraisal witness because she did not appraise the subject property; rather, she was admitted as a mass appraisal expert. McDowell could not explain how the County's 2015 valuations were calculated, only that they were based on settlement values for 2013 and carried over to 2014 and 2015. McDowell testified as to how the County would have valued the properties had it appraised them on January 1, 2015. She testified as to her computer assisted mass appraisal (CAMA) calculations using income and cost approach values for 2015; however, these valuations were not used. Instead, the County relied on the 2013 settlement values. McDowell could not testify as to how those values were determined. McDowell further acknowledged her CAMA valuations for 2015 were based on data lacking in both quantity and quality.

Gerald Maier, MAI, testified as an expert appraiser on behalf of Target. Maier inspected the interior and exterior of the subject properties; inspected documents and maps; reviewed county data relating to the properties; researched comparable land and improved sales; conducted buyer and seller interviews; conducted peer appraiser interviews; reviewed multiple property listing services; investigated internet sources; completed cost, sales, and income approach valuations of the properties; and considered market data for the City of Wichita.

BOTA found Target's evidence more compelling than the County's. It found Maier's sales and income approaches were competent approaches for valuing the properties' fee simple interest and were the best indicators of value in the record. Based on the evidence presented, BOTA valued the properties at $5,700,000; $8,910,000; $8,800,000; and $6,280,000. The County timely filed a motion for reconsideration. The Board denied the County's motion, and the County timely petitioned this court for review. Additional facts are set forth as necessary herein.

ANALYSIS

The County argues BOTA's decision was based on errors of fact and law and was otherwise arbitrary, capricious, or unreasonable. The Kansas Judicial Review Act (KJRA), K.S.A. 77-601 et seq., governs appellate review of BOTA rulings. K.S.A. 2016 Supp. 74-2426(a), (c) ; K.S.A. 2016 Supp. 77-603(a). The KJRA delineates specific circumstances under which this court may properly grant relief:

• The agency action, or the statute or rule and regulation on which the agency action is based, is unconstitutional on its face or as applied;

• The agency has erroneously interpreted or applied the law;

• The agency action is based on a determination of fact, made or implied by the agency, 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, which includes the agency record for judicial review, supplemented by any additional evidence received by the court; or

• The agency action is otherwise unreasonable, arbitrary, or capricious. K.S.A. 2016 Supp. 77-621(c)(1), (4), (7), (8).

Because the County is challenging the validity of BOTA's action, it bears the burden of proving the invalidity of the action. K.S.A. 2016 Supp. 77-621(a)(1).

To the extent this issue involves interpretation of a statute, this court's review is unlimited. Neighbor v. Westar Energy, Inc. , 301 Kan. 916, 918, 349 P.3d 469 (2015). As a general rule in construing tax statutes, provisions which impose a tax are to be construed strictly in favor of the taxpayer. In re Tax Exemption Application of Central Illinois Public Services Co. , 276 Kan. 612, 616, 78 P.3d 419 (2003).

The County did not meet its burden below .

The County raises several arguments in its brief. However, as Target points out, the County has not addressed whether it met its burden of production and persuasion before BOTA. The subject property is real property primarily used for commercial purposes; thus, the County had the burden of production and persuasion before BOTA. See K.S.A. 2016 Supp. 79-1609. The County was required to properly appraise the subject property and submit a valuation to BOTA.

"Each parcel of real property shall be appraised at its fair market value in money, the value thereof to be determined by the appraiser from actual view and inspection of the property." K.S.A. 79-501. In pertinent part, K.S.A. 2016 Supp. 79-503a states: " ‘Fair market value’ means 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." Appraisals for ad valorem taxation purposes must be performed in accordance with the USPAP. K.S.A. 2016 Supp. 79-505 ; K.S.A. 79-506(a).

Here, the County did not base its valuations for the 2015 tax year from an actual view and inspection of the property by the appraiser; rather, its valuations were based on the 2013 tax year agreed-upon settlement values for each of the properties. K.S.A. 2014 Supp. 79-1460 provided for a two-year carryover of any valuation reduced because of an appeal. As of the date of the County's valuation—January 1, 2015— K.S.A. 2014 Supp. 79-1460 was still good law. However, the carryover provision was held unconstitutional by our Supreme Court in Board of Johnson County Comm'rs v. Jordan , 303 Kan. 844, 869, 370 P.3d 1170 (2016). The hearing before BOTA took place after Jordan was decided; therefore, the use of carryover values by the County was impermissible as a matter of law.

The County's evidence was limited to McDowell testifying as to how the County would have valued the properties had it appraised them on January 1, 2015. McDowell testified as to her CAMA calculations using income and cost approach values for 2015; however, these valuations were not used. Instead, the County specifically relied on the 2013 settlement values. McDowell could not testify as to how those values were determined. McDowell also testified her CAMA valuations for 2015 were based on insufficient data lacking in both quantity and quality.

Kansas law requires all appraisals to be prepared in accordance with USPAP standards. Without having personally appraised the property, McDowell cannot offer a valid opinion of value. See K.S.A. 2016 Supp. 79-501 ; K.S.A. 2016 Supp. 79-505. The County was required to appraise the property as of January 1, 2015, in accordance with K.S.A. 2016 Supp. 79-503a unless otherwise specified by law. K.S.A. 79-1455 ; see In re Equalization Proceeding of Amoco Production Co. , 33 Kan.App.2d 329, 347, 102 P.3d 1176 (2004). The use of the 2013 settlement values was impermissible as of the date of the BOTA hearing; therefore, the County was required to reappraise the properties in accordance with the USPAP standards for the 2015 tax year. The County failed to meet its burden of production and persuasion before BOTA and did not address this issue on appeal. Its failure to do so renders its arguments suspect.

Maier's appraisal was appropriate .

The County makes several arguments regarding Maier's appraisal of the property, primarily regarding adjustments allegedly not made in the valuation. The County argues against Maier's sales comparison approach but failed to perform a sales comparison approach of its own. This argument is highly suspect given the County had the burden of production and persuasion before BOTA. The County asserts Maier's valuation was inconsistent with In re Equalization Appeal of Prieb Properties , 47 Kan.App.2d 122, 275 P.3d 56 (2012), but fails to cite to any specific language in Prieb in support of its argument.

Finally, the County argues it was not necessary for Maier to apply a hypothetical condition in determining the leased fee value. It asserts Maier's hypothetical leased fee value was actually a fee simple value. This argument was explicitly rejected by BOTA when it found "the County's attempts to re-define Maier's valuation conclusions to be at odds with Maier's stated appraisal objectives and hearing testimony, as well as contrary to Kansas ad valorem tax law." The County has not acknowledged, addressed, or rebutted this finding. As...