LACY DIV. IND. v. DEPT. OF LOCAL GOV. FIN., 49T10-0103-TA-29.

• Decision Date: 05 December 2003
• Docket Number: No. 49T10-0103-TA-29.,49T10-0103-TA-29.
• Citation: 799 N.E.2d 1215
• Parties: LACY DIVERSIFIED INDUSTRIES, LTD., Petitioner, v. DEPARTMENT OF LOCAL GOVERNMENT FINANCE, Respondent.
• Court: Indiana Tax Court

799 N.E.2d 1215

LACY DIVERSIFIED INDUSTRIES, LTD., Petitioner, v. DEPARTMENT OF LOCAL GOVERNMENT FINANCE,¹ Respondent.

No. 49T10-0103-TA-29.

Tax Court of Indiana.

December 5, 2003.

Larry J. Stroble, Jennifer A. Dunfee, Barnes & Thornburg, Indianapolis, IN, Attorneys for Petitioner.

Steve Carter, Attorney General of Indiana, Linda I. Villegas, Deputy Attorney General, Indianapolis, IN, Attorneys for Respondent.

FISHER, J.

Lacy Diversified Industries, Ltd. (LDI) appeals from the two final determinations of the State Board of Tax Commissioners (State Board) valuing its real property as of the March 1, 1995 and 1996 assessment dates. LDI raises three issues for the Court to consider:

I. Whether the State Board erred in assigning a "B" grade to LDI's improvement;

II. Whether the State Board erred in determining that the portion of LDI's improvement used as a parking garage is in "average" condition; and

III. Whether the State Board erred in determining that LDI's improvement was only entitled to a 15% obsolescence adjustment.

FACTS AND PROCEDURAL HISTORY

LDI owns a nine-story office building located at 54 Monument Circle, Indianapolis, Indiana. Constructed in 1924, the building consists of both a parking garage and office space on floors one through six, and office space only on floors seven through nine. For the 1995 and 1996 assessments, the Center Township Assessor (Assessor) assessed LDI's property at $628,900. In arriving at that value, the Assessor assigned LDI's improvement a "B" grade, determined that it was in "good" condition, and awarded it a 15% obsolescence adjustment.

Believing the assessments to be too high, LDI appealed them to the Marion County Board of Review (BOR). In its appeal, LDI argued that the assigned grade factor of "B" was excessive, that the building's condition rating was too high, and that it was entitled to an additional obsolescence adjustment. After conducting hearings on each of the appeals, the BOR denied all requested relief.

LDI then appealed to the State Board via two Form 131 Petitions for Review of Assessment. After conducting a hearing on the appeals, the State Board issued two final determinations in which it lowered LDI's condition rating on the improvement from "good" to "average."² All other relief was denied.

On March 21, 2001, LDI initiated an original tax appeal. In lieu of a trial, the parties agreed to argue the case based on the administrative record compiled before the State Board and their briefs. This Court heard the parties' oral arguments on October 19, 2002. Additional facts will be supplied as needed.

ANALYSIS AND OPINION

Standard of Review

The Court gives great deference to the State Board's final determinations when it acts within the scope of its authority. Clark v. State Bd. of Tax Comm'rs, 742 N.E.2d 46, 48 (Ind. Tax Ct.2001),review denied. Accordingly, this Court reverses final determinations of the State Board only when those decisions are unsupported by substantial evidence, are arbitrary or capricious, constitute an abuse of discretion, or exceed statutory authority. Id. The taxpayer bears the burden of demonstrating the invalidity of the State Board's final determination. Id. To do so, the taxpayer must present a prima facie case, i.e., a case in which the evidence is "sufficient to establish a given fact and which if not contradicted will remain sufficient." GTE North Inc. v. State Bd. of Tax Comm'rs, 634 N.E.2d 882, 887 (Ind. Tax Ct.1994) (citations and internal quotation marks omitted).

Discussion

I. GRADE

LDI contends that the State Board erroneously graded its property. More specifically, LDI argues that the current grade of "B" is excessive and that the grade should be reduced to "C + 1." In response, the State Board argues that LDI did not present a prima facie case that the "B" grade was improper.

Under Indiana's true tax value system, improvements are assigned various grades based on their design, workmanship, and quality of materials used in their construction; the grades represent multipliers that are applied to the base reproduction cost of an improvement. IND. ADMIN. CODE tit. 50, r. 2.2-10-3 (1996); Whitley Prods., Inc. v. State Bd. of Tax Comm'rs, 704 N.E.2d 1113, 1116 (Ind. Tax Ct.1998), review denied. The selection of which grade should be applied to an improvement calls for a subjective judgment and is committed to the discretion of the assessor. Mahan v. State Bd. of Tax Comm'rs, 622 N.E.2d 1058, 1064 (Ind. Tax Ct.1993). Thus, in determining grade, the assessor must "distinguish significant variations [in an improvement's] quality and design." IND. ADMIN. CODE tit. 50, r. 2.2-10-3(a) (1996).

The State Board's regulations define the different characteristics that help assessors differentiate between grades. For instance, "`B' grade buildings are architecturally attractive and constructed with good quality materials and workmanship. These buildings have a high quality interior finish with abundant built-in features, very good lighting and plumbing fixtures, and a custom heating and air conditioning system." IND. ADMIN. CODE tit. 50, r. 2.2-10-3(a)(2) (1996). On the other hand, "`C' grade buildings are moderately attractive and constructed with average quality materials and workmanship. These buildings have minimal to moderate architectural treatment ... an average quality interior finish with adequate built-ins, standard quality fixtures, and mechanical features." IND. ADMIN. CODE tit. 50, r. 2.2-10-3(a)(3) (1996).³

When contesting a grade assigned to an improvement, a taxpayer must offer probative evidence concerning the alleged assessment error. Whitley Prods.,704 N.E.2d at 1119. A taxpayer's conclusory statements concerning the grading of a subject improvement, however, do not constitute probative evidence. Id. Likewise, mere references to photographs or State Board regulations, without explanation, do not qualify as probative evidence for purposes of grading issues. Heart City Chrysler v. State Board of Tax Comm'rs, 714 N.E.2d 329, 333 (Ind. Tax Ct.1999). If a taxpayer fails to provide the State Board with probative evidence supporting its position on a grade issue, the State Board's duty to support its final determination with substantial evidence is not triggered. Whitley Prods.,704 N.E.2d at 1119-20.

In examining the evidence presented to the State Board at the administrative hearing, the Court determines that LDI has not met its burden of proof. Indeed, at the administrative hearing, LDI submitted documentation on six allegedly comparable properties in Indianapolis.⁴ Specifically, LDI submitted photocopies of those properties' record cards, as well as photocopies of photographs of their buildings' exteriors. (Cert. Admin. R. at 139-177.) LDI also submitted the property record card and photographs of the subject improvement. (Cert. Admin. R. at 194-97; 215-23.) Nevertheless, LDI made little written explanation of the record cards, photographs, or comparisons of the allegedly comparable buildings to its improvement. In fact, the only written explanation provided by LDI at the administrative hearing was its "Memorandum In Support of Assessment Reduction." It merely states:

[T]he construction design and materials [of the subject improvement] are in the "C" range, as shown by Exhibits A through F, which are property record cards showing comparable buildings very nearly the same age as the Building. The architectural appearance and type of materials used in the construction of these buildings is similar in character, design, and architecture to the Building.

(Cert. Admin. R. at 115.)

In addition to the submitted documentation, LDI also called Mr. Scott Hokanson, Director of Operations for the building's management company, to testify at the administrative hearing. Mr. Hokanson testified:

Q: How do the [allegedly comparable] buildings ... compare with the Property?

A: [Their] character, design, and architecture are similar to the Property.

Q: Given these similarities, do you think that the Property should be graded for property tax purposes in a [similar] manner ... ?

A: Yes.

(Cert. Admin. R. at 126.) Later, in the administrative hearing:

Q: [How is t]he [building at] 146 East Market ... [comparable?]

A: The building has been vacant, and up until a couple of years ago has been reoccupied by some city agencies. They're reopening the old Pierpont Restaurant. I have not been in the building recently, but it's still comparable. It has, if I recollect, marble floors, lobbies, and they've renovated some of the upper floors for tenant occupancy.

* * * * *

Q: [Th]e Fletcher Trust Building [located at 108 N. Pennsylvania], which is now the Ramada Inn. It was built in 1915.... Do you have anything to add?

A: I can't really comment on this building, other than it is a grand old building. I used to spend a lot of time in the Fletcher Trust Building, occupying my office. I have not toured the upper floors since the renovation of the building into a hotel. I've been in the lobbies and the first floor, though, and it's been changed into a hotel and offices.

(Cert. Admin. R. at 331-32.) And finally:

Q: [W]ould you feel that the quality of the materials of the [subject] Building is average, or would you consider the quality of the materials to be good?

A: I think it's a combination of average to good.

* * * * *

Q: May I ask you about the design; the architectural design. How would you classify the architectural design: moderately attractive, or would you call it above average or attractive architectural character?

A: I have always been told beauty was in the eyes of the beholder. That's a tough one! To some, it's a beautiful type of building, and to others its not. And I'm going to say it[`]s average to good. And, again, it's still dependent on the individual. I tend to like historical older buildings, some don't.

* * * * *

Q: Let's move on to workmanship. Would you classify the workmanship as good

...