Zakutansky v. State Bd. of Tax Com'rs, 45T10-9609-TA-00123

• Decision Date: 07 July 1998
• Docket Number: No. 45T10-9609-TA-00123,45T10-9609-TA-00123
• Citation: 696 N.E.2d 494
• Parties: Peter ZAKUTANSKY, Petitioner, v. STATE BOARD OF TAX COMMISSIONERS, Respondent.
• Court: Indiana Tax Court

Page 494

696 N.E.2d 494

Peter ZAKUTANSKY, Petitioner, v. STATE BOARD OF TAX COMMISSIONERS, Respondent.

No. 45T10-9609-TA-00123.

Tax Court of Indiana.

July 7, 1998.

Fred M. Cuppy, Kevin E. Steele, Burke, Murphy, Costanza & Cuppy, Merrillville, for Petitioner.

Jeffrey A. Modisett, Attorney General, Joel Schiff, Deputy Attorney General, Indianapolis, for Respondent.

FISHER, Judge.

Peter Zakutansky (Zakutansky) appeals a final determination of the State Board of Tax Commissioners (State Board) assessing his boat storage and marina facility as of March 1, 1989.

FACTS AND PROCEDURAL HISTORY

Zakutansky owns a marina located in Portage, Porter County, Indiana. The marina sits on a waterway known as Burns ditch. The marina consists of several buildings, a boat storage area, and a series of docks made partially of concrete and partially of wood. The buildings are simple metal pole buildings with few distinguishing features.

Located adjacent to the docks is a retaining wall. The base of the retaining wall meets the sidewalk of the dock area. The wall is not vertical but rather slopes away from the edge of the water and has concrete The marina was assessed as of March 1, 1989. Believing the assessment to be too high, on February 8, 1990, Zakutansky filed six Form 130 Petitions for Review of Assessment with the Porter County Board of Review raising numerous issues. Unsatisfied with the results obtained on these petitions, on August 21, 1990, Zakutansky filed six Form 131 Petitions for Review of Assessment with the State Board. These petitions raised twenty-five issues for the State Board's resolution. The State Board issued its final determination on August 9, 1996. On September 20, 1996, Zakutansky filed this original tax appeal. A trial was held on September 26, 1997. Additional facts will be supplied as necessary.

stairs built into it. The concrete wall does not contain any footings nor are any metal supports or rods buried in the concrete for strength or stability.

ANALYSIS AND OPINION

Standard of Review

This Court gives the final determinations of the State Board great deference when it acts within the scope of authority. Indiana Sugars, Inc. v. State Bd. of Tax Comm'rs, 683 N.E.2d 1383, 1385 (Ind.Tax Ct.1997). 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.

Discussion

Of the twenty-five issues originally raised by Zakutansky in his six Form 131 petitions, only three remain for this Court to review. Zakutansky's first contention is that the masonry retaining wall was incorrectly valued on a per square foot basis instead of a per linear foot basis and that an improper grade was applied to the wall. ¹

The regulations provide that masonry walls are to be measured on a per linear foot basis. See IND.ADMIN.CODE tit. 50, r. 2.1-4-5 (1992) (codified in present form at id. r. 2.2-12-5 (1996)). The State Board concedes that the wall was incorrectly assessed and agrees to reassess the wall on a per linear foot basis. (Resp't Br. at 8). However, the State Board contends that the A grade applied to the wall is correct.

The State Board attempts to support its position ² by pointing out that the hearing officer, Mr. Kurt Ott (Ott), "considered the additional costs it took to prepare the site for a slanted wall and the additional costs necessarily involved in placing ... concrete stairs into a slanted walkway when he recommended a grade A." (Resp't Br. at 8). Zakutansky counters by arguing that an A grade masonry wall would not have deteriorated as rapidly as this masonry wall has. Moreover, the wall contains no footings or reinforcing materials to make it particularly strong or durable.

In further support of his position, Zakutansky presented empirical evidence regarding the appropriate grade. Zakutansky offered an estimate prepared by an expert witness, Mr. Logan Sammons. Sammons estimated that a masonry wall like Zakutansky's could be built for approximately $7,313. ³ Zakutansky Although such quantitative evidence might be convincing under a fair market value system, Indiana does not value property based on its fair market value. See IND.CODE ANN. § 6-1.1-31-6. However, such evidence is probative of the quality of materials, construction, and design used in making the wall, which in turn affect the grade to be applied. See IND.ADMIN.CODE tit. 50, r. 2.1-4-3. With this in mind, this Court must determine whether the State Board's final determination is supported by substantial evidence. The Court finds that it is not.

                then compared this estimate with the reproduction cost of the wall as determined under the State Board's regulations.  After the application of the A grade factor, the State Board's regulations resulted in the reproduction cost of the wall being $18,656.64. 4  (Pet'r Br. at 5).  Zakutansky then applied a grade factor of D-1 to arrive at an adjusted reproduction cost of $8,162.28.  (Pet'r Br. at 5).  This figure is close to Mr. Sammons' estimate of the actual reproduction cost of the wall.  Therefore, Zakutansky argues that the wall should be assigned a grade of D-1
                

The State Board determined that an A grade applied to the masonry wall because it was sloped and contained steps. However, the State Board made no effort to disclose why a sloped wall or concrete steps warrant an A grade as opposed to a B grade. Although the court acknowledges that such items might add to the reproduction cost of the wall, there is no evidence of how much cost these items would add. Cf. Clark v. State Bd. of Tax Comm'rs, 694 N.E.2d 1230, 1238 (Ind.Tax Ct.1998). Therefore, there is no evidence supporting the 160% multiplier that accompanies an A grade. ⁵ The State Board failed to disclose how the concrete steps and a sloped wall increased the reproduction cost by 160%. The State Board's argument that Mr. Ott considered the items is an insufficient basis to support a final determination. The State Board cannot support its findings with the unsupported subjective opinions of its hearing officers. See Canal Square, 694 N.E.2d at 808; see also Corey v. State Bd. of Tax Comm'rs, 674 N.E.2d 1062, 1066 (Ind.Tax Ct.1997).

Moreover, Zakutansky has demonstrated that the quality of the wall is not as high as the State Board's A grade would indicate. Zakutansky provided evidence that the wall is not reinforced with footings or metal rods, and that the quality of materials and workmanship is not of the highest quality. The State Board has not provided a reason for discounting Zakutansky's evidence. The State Board is obligated to consider evidence presented by the taxpayer and deal with that evidence in a meaningful manner. See Canal Square, 694 N.E.2d at 805. Zakutansky has demonstrated that the A grade is unsupported by substantial evidence, and he has shown the State Board has arbitrarily and capriciously failed to consider the evidence presented. See Clark, 694 N.E.2d at 1234-35 (requirement that State Board consider taxpayer's evidence stems from the requirement that the State Board not act arbitrarily and capriciously). Therefore, the State Board's final determination of an A grade is unsupported by substantial evidence and is arbitrary and capricious.

The second issue raised by Zakutansky is the assessment of the buildings located on the marina land. Zakutansky argues that the buildings were assessed using the incorrect cost schedules. See IND.ADMIN.CODE tit. 50, r. 2.1-4-5 (1989) (presently codified at id.

r. 2.2-11-6 (1996)). Specifically, Zakutansky argues that the State Board incorrectly used the General Commercial-Mercantile cost schedule (GCM schedule) based on his use of the property. Id. Zakutansky argues that the property should be assessed using the residential or agricultural cost schedules because the buildings are properly categorized as pole barns. See id. r. 2.1-3-5 (1992) (presently codified at id. r. 2.2-9-6 (1996)); see also id. r. 2.1-3-6 (1992) (presently codified at id. r. 2.2-9-5 (1996)) (regulation containing models of pole barns).

The State Board counters with three arguments. First, the State Board argues that the assessor is given discretion to select the appropriate model and cost schedule based on "class and usage." (Resp't Br. at 6). Therefore, the selection of the GCM schedule by the State Board was proper. Second, the State Board argues that the physical features of the building were considered in determining the appropriate cost schedule to use and "adjustments were made to reflect the quality of the construction." (Resp't Br. at 6-7). Finally, the State Board argues that "with appropriate adjustments ... the pricing would be very similar for a pole barn and a commercial building." (Resp't Br. at 7).

The buildings on Zakutansky's property are basic metal pole buildings. ⁶ The fact that those buildings are used as storage for boats, or are located at a facility called a marina, is not determinative of which cost schedule to use. See Herb v. State Bd. of Tax Comm'rs, 656 N.E.2d 890, 893 (Ind.Tax Ct.1995). "[T]he actual use of the property is not a determinative factor in selecting the appropriate model, but merely a starting point. As a result, the model that most closely resembles the subject improvement with respect to physical features is to be used, regardless of the model's name." Id. (emphasis added). Thus, the cost schedule for pricing pole barns is the correct cost schedule to use in this instance.

Additionally, the Court notes that the State Board's consideration of the quality of the building and an adjustment based on that quality are of no avail. Nor is the fact that the adjusted pricing using a commercial cost schedule would be very close to that of a pole barn. The taxpayer is entitled to have his property assessed using the correct cost schedule. Only after this is done may adjustments for quality...