Madison Paper Industries v. Town of Madison
| Decision Date | 13 August 2020 |
| Docket Number | Civil Action AP-19-05 |
| Parties | MADISON PAPER INDUSTRIES, Petitioner v. TOWN OF MADISON, Respondent |
| Court | Maine Superior Court |
Petitioner: MADISON PAPER INDUSTRIES ATTY: JONATHAN BLOCK ESQ.
Respondent: TOWN OF MADISON ATTY: DAVID SILK, ESQ.
This case is before this Court on Petitioner Madison Paper Industries' (hereinafter "MPI") "Petition For Review" pursuant to Rule 80C, Maine Rules of Civil Procedure, 36 M.R.S. § 271, and 5 M.R.S. §§ 11001-11008. Specifically, the Petitioner is appealing the decision dated July 29, 2019 of the State Board of Property Tax Review (hereinafter "The Board") to deny MPI's appeal from the Madison Board of Assessors decision to deny certain abatement applications filed by MPI for the April 1, 2016 property tax year.
1. MPI was the owner of the Madison Paper Mill (hereinafter "Mill"), that included two hydro-electric plants, both situated in Madison and partially in Anson, Maine.
2. For the tax year April 1, 2016, the total assessed value of the subject property, excluding BETE[1] exempt property, and including the two hydro-electric plants, was $72, 362, 681. The Town Of Madison (hereinafter "Town") assessed the Mill property, excluding BETE exempt property, at $38, 070, 181, and the two hydro-electric plants (the parts in Madison), again excluding BETE, at $34, 292, 500.
3. These valuations are the subject of the current appeal. MPI asserts a value of $2, 675, 000 for the mill assets and $31, 787, 000 for the hydro-electric plants (also the parts located in Madison). This valuation is based on an appraisal by Duff & Phelps, authored by Robert Herman, in May of 2017 and included that as of April 1, 2016, "the premise of value considered in this appraisal assumes that the paper mill assets subject to the appraisal will be liquidated and repurposed for a different use - not for paper making."
4. MPI was a partnership between the New York Times Company (hereinafter "NYT") and UPM-Kymmene Corporation (hereinafter "UPM"). MPI purchased the Mill in order to supply NYT, and presumably others as well, with super-calendared paper (hereinafter "SC") for advertising and other newspaper inserts.
5. The two hydro-electric plants provided 40% of the energy the Mill required, with MPI purchasing the remaining 60% on the market. Although the partnership's EBITA[2] had decreased notably in recent years, and the S.C. industry as a whole continued to decline because of the increasing move away from paper newspapers to online news, the mill nonetheless continued to maintain a positive cash flow, and it still operated in the black at the time of the appraisal. In addition, the mill, despite being over 30 years old, was well maintained, and was considered a "state of the art" facility.
6. UPM also produced S.C. paper at other locations in addition to Madison, and MPI did not deny that closing down the Mill - and preventing it from ever producing S.C. paper - would potentially benefit UPM.
7. On March 14, 2016, NYT/UPM announced the dissolution of their partnership, MPI, in the USA, the closure of the Mill, and the sale of the hydro power assets. The announcement did not state that the Mill would be sold. The offer to sell the Mill and the hydro power assets as a whole was not made. Unlike for the hydro property, for the Mill no broker was hired, no formal prospectus was issued, and no advertising was issued. On April 1, 2016, the Mill was operational, and neither NYT nor UPM were in financial difficulty.
8. Because the hydro property would be sold separately, most bids to purchase the Mill sought only the equipment, with no plans to operate the mill; indeed, everyone who submitted a formal bid for the mill assets was a liquidator.
9. Additionally, as UPM did with other closures worldwide, they placed restrictions on six pieces of MPI mill equipment critical to the production process. This restriction prohibited the equipment from being used on or off the premises or sold to anyone for use in the production of S.C. paper or to any mill that makes a paper product in competition with UPM. Moreover, the restriction specifically stated that the parties "agree that this restriction is reasonable in scope and duration [10 years] in order to protect the legitimate competitive interests of Seller and its Affiliates...."
10. Despite the rather significant restriction, Duff & Phelps seemingly did not take it into consideration in their appraisal, which the Board decision pointed out on numerous occasions - indeed, it seems that this was one of the primary reasons that the Board ruled against MPI. Ultimately, the mill property was sold in December 2016 to Somerset Acquisitions LLC, for $2, 000, 000 as scrap - Duff & Phelps cited the sale price as support for its conclusion of value of $2, 675, 000 exclusive of excess land. Pursuant to an asset agreement between the two companies, Somerset Acquisitions was forbidden from using certain equipment for the production of S.C. paper.
11. As mentioned above, the hydro-property was given more standard treatment, as UPM advertised its sale, issued a prospectus, and even hired Kleinschmidt as a sort of consultant for the sale of the hydro properties. The hydro property eventually sold to Eagle Creek after negotiations commenced in December 2016.
12. The sale formally closed in July 2017 a few days after Duff & Phelps issued its appraisal report. Duff & Phelps did not mention the sale price of the hydro property, as it did for the mill assets, claiming promise of confidentiality based on other work performed for Eagle Creek under a different assignment.
13. The Board convened on October 25, 26, and 29, 2018, to conduct a hearing on the substance of the appeal. The Board conducted deliberations on April 25, 2019, and concluded that MPI did not meet its burden to prove that the property was substantially overvalued, and denied the appeal.
14. The Court reviews the Board's decision for abuse of discretion or findings not supported by substantial evidence in the record. York v. Town of Ogunquit, 2001 ME 53, ¶ 6, 769 A.2d 172. Substantial evidence is evidence that is sufficient for the Board to have reasonably found the facts as it did. Ryan v. Town of Camden, 582 A.2d 973, 975 (Me. 1990).
15. A Board's "decision is not wrong because the record is inconsistent or a different conclusion could be drawn from it." Twigg v. Town of Kennebunk, 662 A.2d 914, 916 (Me. 1996).
16. In appeals of denial of an abatement, the assessor's valuation is presumed to be valid. Yusem v. Town of Raymond, 2001 ME 61, ¶ 8, 769 A.2d 865, overruled in part by Mainetoday Media, Inc. v. State, 2013 ME 100, ¶ 10 n.8, 82 A.3d 104; Petrin v. Town of Scarborough, 2016 ME 136, ¶ 14, 147 A.3d 842. To rebut that presumption, a taxpayer has the affirmative burden to prove that the assessed value of the property "is 'manifestly wrong' by demonstrating that (1) the property was substantially overvalued and an injustice resulted from the overvaluation; (2) that there was unjust discrimination in the valuation of the property; or (3) that the assessment was fraudulent, dishonest, or illegal." Ne. Empire Ltd. P'ship No. 2 v. Town of Ashland, 2003 ME 28, ¶ 7, 818 A.2d 1021, 1024. See also City of Waterville v. Waterville Homes, Inc., 655 A.2d 365, 367 (Me. 1995) (citations omitted) ("The taxpayer seeking abatement carries that burden by proving that the assessed valuation in relation to the just value is 'manifestly wrong'").
17. In order to meet this burden, impeaching the assessor is not, by itself, enough to prove the taxpayer's case. Waterville, 655 A.2d at 367. Sears, Roebuck &Co. v. City of Presque Isle, 150 Me. 181, 186, 107 A.2d 475, 477 (Me. 1954), superseded by statute, 36 M.R.S. § 844, as recognized in Town of Vienna v. Kokernak, 612 A.2d 870, 873 (Me. 1992). "We will vacate the [Board's] decision that a taxpayer failed to meet his burden to show one of these three circumstances 'only if the record compels a contrary conclusion to the exclusion of any other inference." Town of Bristol Taxpayers' Ass'n v. Bd. of Selectmen/Assessors for the Town of Bristol, 2008 ME 159, ¶ 9, 957 A.2d 977; Terfloth v. Town of Scarborough 2014 ME 57, ¶ 13, 90 A.3d 1121.
18. The Maine Constitution provides that "[a]ll taxes upon real and personal estate, assessed by authority of this State, shall be apportioned and assessed equally according to the just value thereof." Me. Const, art. IX § 8; Weekley v. Town of Scarborough, 676 A.2d 932, 934 Me. 1996) ("Just value" means "market value.")
19. Thus, an assessment must be supported by two factual findings. Chase v. Town of Machiasport, 1998 ME 260 ¶ 11, 721 A.2d 636, overruled in part by Maine to day Media, 2013 ME 100, ¶ 10 n.8. "[F]irst, the property must be assessed at its fair market value." Id. (citing Quoddy Realty Corp. v. City of Eastport, 1998 ME 14, ¶ 9, 704 A.2d 407). "[S]econd, the assessed value must be equitable, that is, the property must be assessed at a relatively uniform rate with comparable property in the district." Chase, 1998 ME 260, ¶ 11.
20. The undersigned acknowledges that "[t]he sale price of property is probative of its market value." McCullough v. Town of Sanford, 687 A.2d 629, 631 (Me. 1996) (quoting Weekley, 676 A.2d at 934); see also Arnold v. Me. State Highway Comm'n, 283 A.2d 655 (Me. 1971) (). Thus, the discrepancy between the town's assessed...
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