Sevde v. Board of Review of City of Ames, 88-456
| Decision Date | 25 January 1989 |
| Docket Number | No. 88-456,88-456 |
| Citation | 434 N.W.2d 878 |
| Parties | Richard H. SEVDE and Marguerite Sevde, v. BOARD OF REVIEW OF the CITY OF AMES, Iowa, Appellant. |
| Court | Iowa Supreme Court |
John R. Klaus, City Atty., and Beth Ringgenberg, Asst. City Atty., Ames, for appellant.
Dale Sharp, Ames, for appellees.
Considered by McGIVERIN, C.J., and LARSON, SCHULTZ, CARTER, and ANDREASEN, JJ.
The Board of Review of the City of Ames appeals from an adverse decree in an action challenging a real estate tax assessment pursuant to Iowa Code section 441.38 (1987). The primary issue presented to this court is whether the district court incorrectly classified the subject real estate as agricultural rather than commercial. Because we conclude that it did not, we affirm that court's decree subject only to a remand for determination of omitted issues identified later in this opinion.
Plaintiffs, Richard H. and Marguerite Sevde, own a parcel of land located in the City of Ames consisting of approximately twenty-one acres. For assessment years 1985 and many years prior thereto, this property had been classified as "agricultural" for assessment purposes. The assessment of the property on January 1, 1985, pursuant to the agricultural classification, was $1045 per acre.
During the year 1985, plaintiffs constructed three buildings on the property each 160 feet by 30 feet. These buildings are partitioned into 123 separate storage areas offered for rent to the general public. In both 1985 and 1986, plaintiffs leased the remaining 19.6 acres for agricultural purposes, receiving a cash rent of $2100 in each of these years. Gross revenues received by plaintiffs from the storage enterprise in 1985 were $6372. Expenses for the storage business in that year totaled $6372, which included $2302 for depreciation. Gross revenues received by plaintiffs from storage in the calendar year 1986 totaled $33,649. Expenses for the storage business in that year totaled $33,649, which included $10,640 for depreciation.
Acting on the belief that there had been a change in the value of the subject real estate, the assessor, on January 1, 1986, a nonassessment year, reassessed plaintiffs' twenty-one-acre tract by applying a "commercial" classification to the property. 1 The aggregate assessment was increased from $21,945 to $390,700. This aggregate was divided between buildings and land in the ratio of $201,700 (buildings) to $189,000 (land).
The plaintiffs protested the January 1, 1986, assessment to the defendant Board of Review. The Board granted no relief to the plaintiffs from the increase in assessment other than changes mandated by a state equalization order. Plaintiffs appealed the Board's decision to the district court as permitted by Iowa Code section 441.38 (1987).
The district court concluded that, notwithstanding the commercial activities associated with the storage business, the twenty-one-acre tract continued to be primarily used for agricultural purposes. The court's decree determined that the entire tract should be assessed as agricultural property and the valuations determined accordingly. The Board of Review has challenged that determination in the present appeal. Other facts bearing on the decision on appeal will be discussed in connection with our consideration of the legal issues presented.
The issues on appeal illustrate the "single tract" assessment concept which pervades the process of listing real property for assessment in this state. See, e.g., Iowa Code §§ 428.4, 428.7, 441.29 (1987). Prior to 1976, Iowa Code section 428.7 () provided substantially as follows with respect to a maximum assessable land unit:
A description shall not comprise more than one city lot or other smallest subdivision of the land according to the government surveys, except in cases where the boundaries are so irregular that it cannot be described in the usual manner in accordance therewith. However, descriptions may be combined for assessment purposes to allow the assessor to value the property as a unit. This section shall apply to known owners and unknown owners, alike.
(Emphasis added.) In Davison v. Board of Review, 209 Iowa 1332, 1339, 230 N.W. 304, 307 (1930), this court stated:
The manifest purpose of the foregoing statute is to forbid lump valuations of large areas, and to require the valuation to be specific, and to be directed to what may be termed the natural units of the government subdivisions....
The italicized language was added to section 428.7 in 1976. 1976 Iowa Acts ch. 1190, § 14. That amendment grants the assessor some discretion to aggregate separately described tracts for valuation purposes. 2 There is, however, no corresponding authorization granted the assessor to subdivide the historic legal descriptions of properties for purposes of separately assessing individual portions thereof.
The absence of authority to subdivide tracts for assessment purposes does not present a problem if the assessment is to be based on market value of the tract sold as a unit. As observed in 84 C.J.S. Taxation section 407, at 776 (1954), "[w]hile a single tract should be valued as a unit, it is not improper in making a preliminary computation, first to value different parts, where they are not treated or assessed as separate units, and the aggregate result is the assessment of a single unit." (Footnotes omitted.) If, however, the assessment is required to be made under a statutory formula tied to a particular use of the property and some portion of the property is used differently than other portions, problems can arise in applying the formula valuation to the unit as a whole. This is the situation in the present case. Notwithstanding these problems, the parties concede that the property involved in the present case must ultimately be classified as either entirely agricultural or entirely commercial.
Under administrative regulations adopted by the Iowa Department of Revenue and Finance, the determination of whether a particular property is "agricultural" or "commercial" for assessment purposes is to be decided on the basis of its primary use. With respect to agricultural real estate, these regulations provide:
Agricultural real estate...
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