Roeder v. Dept. of Rev. ( 2013 )

178 April 25, 2013 No. 24
IN THE OREGON TAX COURT
REGULAR DIVISION
John ROEDER,
Plaintiff,
v.
DEPARTMENT OF REVENUE,
Defendant,
and
DESCHUTES COUNTY ASSESSOR,
Defendant-Intervenor.
(TC 5017)
Plaintiff (taxpayer) appealed from a Magistrate Division decision as to the
real market value (RMV) of real property in Deschutes County. Taxpayer argued
that his purchase of lots should be valued as a bulk purchase. Pursuant to statute
and case law, the court ruled that the proper issue before the court was the RMV
of each of the residential lots and not a wholesale valuation. Following trial the
court found that taxpayer had not carried his burden of proof due to the fact that
taxpayer’s appraisal evidence included a relatively small number of comparable
sales, and that the county’s valuation of the lots was correct.
Trial was held February 10 and 14, 2012, in the court-
room of the Oregon Tax Court, Salem.
Mark G. Reinecke, Bryant Lovlien & Jarvis PC, Bend,
argued the cause for Plaintiff (taxpayer).
James C. Wallace, Senior Assistant Attorney General,
Department of Justice, Salem, argued the cause for Defen-
dant Department of Revenue (the department).
Laurie E. Craghead, Deschutes County Counsel, Bend,
argued the cause for Defendant-Intervenor Deschutes County
Assessor (the county).
Decision for Defendants rendered April 25, 2013.
HENRY C. BREITHAUPT, Judge.
I. INTRODUCTION
This matter is before the court following trial. The
issue is the real market value of lots in a subdivision in Bend,
Oregon. The tax year is 2009-10 and the assessment date is
Cite as 21 OTR 178 (2013) 179
January 1, 2009. The trial in this matter was held in con-
junction with Roeder Holdings LLC v. Dept. of Rev., 21 OTR
183 (2013) (Roeder II) and the parties agreed that evidence
in either case could be considered in the other case.
II. FACTS
The subject property is each of 45 residential sub-
division lots in the Reed Pointe subdivision on the east side
of Bend, Oregon. The parties do not dispute that the highest
and best use of the subject property is for single family res-
idential development in compliance with the existing zon-
ing. The subdivision has been built out to include roadways,
curbs and utility connections.
The Reed Pointe subdivision is on the east side of
Bend. The subdivision is connected to the west side of the
city by way of Reed Market Drive. The lots in the subdivi-
sion range in size from approximately 4,000 square feet (.09
acre) to 8,000 square feet (.19 acre).
Plaintiff (taxpayer) purchased the subject lots and
two lots that are not the subject of this appeal on July 17,
2009, for a price of $1,551,000 or approximately $33,000 per
lot.
III. ISSUE
The issue in this case is the real market value
(RMV) of each of the lots in the Reed Pointe subdivision that
are the subject of this case.
IV. ANALYSIS
Taxpayer first contends that this court should
adopt the discounted or bulk wholesale market value of the
47 lots purchased in one transaction by taxpayer. Although
taxpayer argues that the approach taken by its appraisal
expert differs from that rejected in First Interstate Bank v.
Dept. of Rev., 306 Or 450, 760 P2d 809 (1988), this court
cannot conclude that there is any material difference in the
factual or legal context as between the two cases. This court
must adhere to the teaching of First Interstate and reject
taxpayer’s assertion that his bulk purchase is to be valued
as such. The issue in this case is the value of each of the
180 Roeder v. Dept. of Rev.
residential lots as of the assessment date and not some val-
uation of a package of lots.
Taxpayer bears the burden of proof in this proceed-
ing. ORS 305.427.1 Having spent most of his time and effort
developing the wholesale approach to valuation, taxpayer’s
appraisal expert spent little time and effort establishing
an RMV for each lot. Although he did perform something
of a comparative sales analysis, that analysis relied on only
three actual sales.
For the sales he chose to analyze, taxpayer’s expert
made only qualitative adjustments and provided no docu-
mentary support for those adjustments. Importantly, the
appraiser made no adjustment for the date of the sale of his
comparables, even though the expert acknowledged that the
Bend residential lot and general real estate market was in
a very dynamic state throughout the years 2008 and 2009.
When asked why no such adjustment was even attempted,
taxpayer’s appraiser stated that such an adjustment would
just introduce another level of uncertainty into the appraisal
process.
The appraisal witness for taxpayer, using a com-
parable sales method, concluded an average lot value of
$50,000 for the subject lots.
The appraisal witness for Defendant-Intervenor
Deschutes County Assessor (the county) used the compara-
ble sales method and looked at 17 sales of residential lots
in Bend, bracketing in time the assessment date. The sales
were from various locations in the Bend area, with most
located on the west side of the city. Some of the sales con-
sidered comparable by the witness for the county were up to
50 percent larger in size than the average lot size in the Reed
Pointe subdivision. The witness performed a paired-sales
analysis to develop a time adjustment factor and applied
that to adjust sales occurring before or after the assessment
date.
Taxpayer’s appraisal expert criticized the conclusion
of the county appraiser on the basis that she had made no
1
All references to the Oregon Revised Statutes (ORS) are to the 2011 edition.
Cite as 21 OTR 178 (2013) 181
adjustment for differences in lot size. Taxpayer’s appraiser
based that criticism on his view that lot size was an import-
ant factor. The appraiser for the county agreed that lot size
could be a factor but only when the differences in size were
greater than those found as between her comparable sales
and the subject lots. Neither witness presented paired-sales
or other objective market based analyses to support his or
her view. However, the record includes a study of land val-
ues on the east side of Bend that supports the conclusions
reached by the witness for the county.
Taxpayer’s appraisal expert also criticized the con-
clusion of the county appraiser that sales from the west side
of Bend could be used without adjustment to account for
what the appraiser considered to be a generally more attrac-
tive set of amenities on the west side of Bend. The witness
prepared for rebuttal a brief paired-sales analysis to support
his view, admitting on cross-examination, however, that
his approach was not free from criticism. The court notes
that in the appraisal report presented by the witness for
taxpayer, he observes with respect to his comparable sales
analysis: “It should be noted that the comparable sales are
dispersed in varying neighborhoods in Bend. We are of the
opinion that, oftentimes, projects such as the subject com-
pete for potential purchasers within subdivisions from vary-
ing Bend neighborhoods; therefore, the use of developments
throughout the Bend area is considered to be appropriate.”
The conclusions of the appraiser for the county are
not free from concern as to size and location characteristics
of the sales used in her comparable sales approach. However,
taxpayer bears the burden of proof on both matters. As to
size, the lack of any objective support for the conclusions of
taxpayer’s witness is a decisive concern for the court. On
the issue of location, the testimony of taxpayer’s witness is
inconsistent with the observation of that same witness in
his report.
Most importantly, the relatively small number of
arguably comparable sales in the analysis of the witness
of taxpayer is of significant concern to the court. That sig-
nificant concern also exists with the views of the witness
as to the need for adjustment to sales that occur in a very
182 Roeder v. Dept. of Rev.
dynamic market. The witness explained his lack of adjust-
ment as based on a desire to not introduce another level of
uncertainty into the appraisal process. In times of dynamic
market change, uncertainty exists in the market and the
court expects expert witnesses to address the uncertainty
by analysis of market evidence. Failure to do so simply com-
pounds the level of uncertainty.
V. CONCLUSION
For the foregoing reasons the court concludes that
taxpayer has not carried its burden of proof that the RMV
conclusions of the county are incorrect. The court finds the
RMV for each of the subject lots to be as asserted by the
county. Now, therefore,
IT IS THE DECISION OF THIS COURT that the
RMV for each of the subject lots at issue in this case are
as asserted by Defendant-Intervenor Deschutes County
Assessor.