Knollwood Bldg. Condominiums v. Town of Rutland

• Decision Date: 16 May 1997
• Docket Number: 94-540,Nos. 94-443,s. 94-443
• Citation: 699 A.2d 31,166 Vt. 529
• Parties: KNOLLWOOD BUILDING CONDOMINIUMS, et al., v. TOWN OF RUTLAND. to 94-542, 94-544 and 94-545.
• Court: Vermont Supreme Court

Page 31

699 A.2d 31

166 Vt. 529

KNOLLWOOD BUILDING CONDOMINIUMS, et al., v. TOWN OF RUTLAND.

Nos. 94-443, 94-540 to 94-542, 94-544 and 94-545.

Supreme Court of Vermont.

May 16, 1997.

Motion for Reargument Denied

July 7, 1997.

Thomas M. Dowling and Kimberly K. Hayden of Ryan Smith & Carbine, Ltd., Rutland, for plaintiffs-appellees

Mark L. Sperry and F. Rendol Barlow of Langrock Sperry & Wool, Middlebury, for defendant-appellant

Before ALLEN, C.J., and GIBSON, DOOLEY and MORSE, JJ., and MARTIN, Superior Judge, Specially Assigned.

DOOLEY, Justice.

The Town of Rutland appeals from decisions of the State Board of Appraisers in six cases reversing the decisions of the Town Board of Civil Authority (BCA) for the 1993 grand list. Because the analysis in the six cases is identical, we refer to these decisions generally as Knollwood Building Condominiums v. Town of Rutland. ¹ On appeal, the Town contests the Board's decision that equal protection principles barred the Town from applying separate equalization ratios to separate classes of property, where the Town had not conducted a town-wide reappraisal since 1968; the Town also contests the Board's jurisdiction to render such a decision. The taxpayers cross-appeal the Board's adoption of a 27.63% equalization rate, arguing that using an overall ratio that included both real and personal property was erroneous and that the proper uniform rate should have been 20%. We affirm the decision in part and reverse it in part.

I. Facts

Appellees are commercial and industrial taxpayers. ² Each grieved its 1993 assessment with the town listers, who applied an appraisal methodology that has been in continuous use since 1968, when town properties were last reappraised. Under this methodology, all real property is valued in accordance with a 1967 cost manual on which the 1968 reappraisal was based. Thus, irrespective of when any buildings were built, all real property is appraised to produce its fair market value as if the year of appraisal were 1968, using cost and value data from 1967.

The method for appraisal of personal property is starkly different. The Town set personal property in the 1993 grand list at 100% of fair market value, based on figures reported by business taxpayers on their inventory forms, and transferred them to the grand list without adjustment, other than to correct simple mathematical errors. As would be expected, the methodology results in higher assessments for personal property in relation to current fair market value than for real property.

The system also produces unequal assessments among types of real property. Both the taxpayers and the Town offered evidence of median equalization ratios for the different classes of real property. By "equalization ratio," we mean the ratio between listed value and fair market value as of 1993, the year of property tax assessment. The following are the ratios advanced by the Town for real and personal property:

                      Classification                       Equalization Ratio
                      Residential                           20.88%
                      Commercial                            27.85%
                      Industrial                            44.90%
                      Overall real property                 22.84%
                      Personal property                    100.00%
                      Overall, real/personal                31.51%
                

The appeals involved both real and personal property. The fair market and initial listed values of the properties for each of these taxpayers are shown in the following table.

                                                                         Real &amp
                Taxpayer                          Real      Personal    Personal
                American Resources             1,918,650      215,580
                CVPS                                                    6,843,000
                Hogge Penny Owners Ass'n          20,000       38,000
                                               (per unit)  (all units)
                Hogge Penny Unit Owners           25,300
                Knollwood Office Condominiums
                Roger A. Olson # 1                10,800
                Marble Bank # 2                    9,600
                Marble Bank # 3                   30,270
                Eugene Karol # 4                   9,750
                Thomas J. LaPlaca # 5             21,900
                William A. Matthews # 6            4,650
                Robert C. Bienieki # 7             4,350
                Ray Ault # 8                      21,263
                Marble Bank # 9                   13,100
                Marble Bank # 10                   6,420
                Marble Bank # 11                   6,675
                Sto                              480,050    1,782,177
                VELCO                                                   2,620,604
                

With respect to the valuation of personal property, all of the taxpayers who had such property argued that the different treatment of real and personal property violates 32 V.S.A. § 3481, Chapter I, Article 9 of the Vermont Constitution, and the Equal Protection Clause of the Fourteenth Amendment to the United States Constitution. They made a similar argument with respect to real property asserting that the passage of time without a reappraisal had led to discriminatory assessments. On average the values of industrial and commercial properties had not risen as fast as the values of residential properties so that the 1967 values on which the Town relied were a higher percentage of current fair market value for commercial and industrial properties. Taxpayers argued that the difference in equalization ratios, under the circumstances of the case, violated the applicable Vermont listing statute, 32 V.S.A. § 4601, the Proportional Contribution Clause of Chapter I, Article 9 of the Vermont Constitution, and the Equal Protection Clause of the Fourteenth Amendment to the United States Constitution. They argued for use of the equalization ratio for all real property in the Town, as developed by their expert.

For purposes of this appeal, the parties have agreed to the fair market values for the properties before the Board. The taxpayers relied on a study of 166 property sales that occurred between 1987 and 1994. The Town relied on separate studies for commercial and industrial properties, developing separate equalization ratios for each class based on six properties of each type. The Board rejected the taxpayers' evidence for a variety of reasons discussed below. The Board rejected the Town's evidence because of the small sample used and the fact that some of the comparables used by the Town were under appeal to the Board.

The Board held:

The Board is ... constrained from determining an accurate assessment value of the subject property employing ratios for classes of property in the Town because of a lack of sufficient comparable data or a statistically representative sample of comparable properties in the Town. It thus appears to the Board that the appropriate methodology to arrive at a proper assessment value for the subject property is to employ the average equalization ratio for the entire Town. ³

It decided to use the overall equalization ratio for all property in the Town as determined by the Division of Property Valuation and Review (PV & R) of the Vermont Tax Department. It applied this ratio, 27.63%, to all real and personal property in each case.

The Town appeals from the Board's orders, asserting numerous claims of error, as noted below. The taxpayers cross-appeal, arguing that the Board should have adopted the equalization ratio advocated by their expert witness.

II. Jurisdiction

The Town argues that the Board did not have jurisdiction to reach the decision it did. In making this argument, it relies on the wording of the property tax appeal statute, 32 V.S.A. § 4461(a), as interpreted by this Court in Alexander v. Town of Barton, 152 Vt. 148, 151-55, 565 A.2d 1294, 1296-98 (1989). In that case, the taxpayers, who owned a vacation home, attacked the Town's action of reappraising vacation homes without reappraising other properties. We held that the attack could not be launched before the State Board of Appraisers because the Board's jurisdiction is limited by 32 V.S.A. § 4467 and the statute allows the Board to equalize property values only to "comparable properties within the town." See id. at 153, 565 A.2d at 1297. The taxpayers' challenge sought equalization with properties that were not comparable because they were in a different class, and thus the Board had no jurisdiction to consider the challenge. Id. at 154, 565 A.2d at 1297-98. The Town of Rutland argues that Alexander prevents the Board in this case from comparing assessments of properties in different classes, as it did.

We do not think these cases are governed by the Alexander jurisdictional holding. Taxpayers' attack on the differential listing of real and personal property is based on a statute, 32 V.S.A. § 3481. This challenge asks the court to follow the dictates of § 4467, not to war with them. Alexander does not prevent this challenge.

As to real property, the taxpayers asked the Board to set their property in the list at a value corresponding to the properties they viewed as comparables. It is undisputed that the Town does not list properties based on current fair market value, reduced by an equalization ratio. To the extent its method of listing--by determining a fair market value as of 1967--produces a correct result, it is a matter of sheer coincidence. In essence, this case is no different from any other where equalization is an issue.

The Town argues that there is no jurisdiction because taxpayers sought to compare their properties to properties that are not comparable, as that term is used in § 4467. As we decide in the main body of this opinion, taxpayers' use of the concept of comparable properties is fully consistent with our precedents in the context of the record before the Board. More to the point, we do not believe that every dispute over what is a comparable property must be resolved initially as a dispute over jurisdiction. Taxpayers are entitled to argue for a view of comparability as favorable as they can reasonably achieve without having their appeal summarily dismissed because they...