Allcott v. Lane County Assessor ( 2012 )

IN THE OREGON TAX COURT
MAGISTRATE DIVISION
Property Tax
ELIZABETH ALLCOTT, )
)
Plaintiff, ) TC-MD 120125
)
v. )
)
LANE COUNTY ASSESSOR, )
)
Defendant. ) DECISION
Plaintiff appeals the real market exception value of residential property identified as
Account 0621753 (subject property) for the 2011-12 tax year. A telephone trial was held on
Wednesday, August 8, 2012. David E. Carmichael, Attorney at Law, appeared on behalf of
Plaintiff. James St. Clair (St. Clair), real estate broker, testified on behalf of Plaintiff. Bryce
Krehbiel, Property Appraiser III, Lane County Assessment and Taxation, appeared on behalf of
Defendant.
Plaintiff‟s Exhibit 1, Plaintiff‟s Rebuttal Exhibit 1, Defendant‟s Exhibits A through J, and
Defendant‟s Rebuttal Exhibits A and B were received without objection.
I. STATEMENT OF FACTS
The subject property is a single-story, 976 square foot home located on a 5,6631 square
foot lot in Eugene, Lane County, Oregon. (Ptf‟s Ex 1 at 2; Def‟s Ex C.) The subject property‟s
improvement is a single family house originally built in 1940; however, the effective year built is
1992. (Ptf‟s Ex 1 at 2; Def‟s Ex C.) The house has two bedrooms, one bathroom, and a
detached single-car garage. (Ptf‟s Ex 1 at 2; Def‟s Ex C.)
1
Defendant‟s Exhibit A lists the area of the subject property as 0.1531 acres (6,669 square feet). The area
of the subject lot is not relevant to the outcome of this case.
DECISION TC-MD 120125 1
Plaintiff purchased the subject property for $99,700 on August 12, 2009 in “as is”
condition. (Ptf‟s Ex 1 at 6.) At the time of purchase, the property was in “decrepit condition”
and was “non-financeable.” (Def‟s Ex G.) Plaintiff financed the rehabilitation of the subject
property with a “203K Rehabilitation Loan” from Bank of America (Bank). (Ptf‟s Ex 1 at 1.)
Pursuant to that loan, the Bank “disbursed funds to contractors on a monthly basis.” (Ptf‟s Ltr
at 1, July 26, 2012.) From November 20, 2009 to July 15, 2010, Plaintiff spent a total of
$100,257 improving the subject property. (Ptf‟s Ex 1 at 1.)
St. Clair testified that $55,517 of the total $100,257 Plaintiff spent improving the subject
property was attributable to general ongoing maintenance and repair. (Ptf‟s Ltr at 1, July 26,
2012.) Plaintiff alleges that $27,909 of that total was attributable to general ongoing
maintenance and repairs during calendar year 2011. (Ptf‟s Rebut Ex 1.) St. Clair testified that
the amount spent on ongoing maintenance and repair included the costs of masonry, siding
materials, roofing materials, paint, caulking, grading work, plaster, wood floors, finished floors,
appliances, termite damage repair, clean-up, and miscellaneous items. (Ptf‟s Ex 1 at 1; Ptf‟s
Rebut Ex 1 at 1.) Plaintiff alleges that the remaining $44,740 of the total $100,257 spent
constitutes new construction. (Ptf‟s Ltr at 1, July 26, 2012.) Plaintiff alleges that the total
amounts spent on ongoing construction and repairs and on new construction span the 2010-11
tax year and 2011-12 tax year. (Id.)
On February 2, 2010, the Board of Property Tax Appeals (BOPTA) reduced the real
market value of the improvements to the subject property from $95,440 to $5,000 for the
2009-10 tax year. (Def‟s Ex F.) Plaintiff alleges that the county assessor added $41,720 in
exception value to the subject property‟s 2010-11 tax roll, which Plaintiff did not timely appeal
DECISION TC-MD 120125 2
to BOPTA. (Ptf‟s Ltr at 1, July 26, 2012.) Plaintiff alleges that the county assessor added an
additional $68,419 in exception value to the subject property‟s 2011-12 tax roll. (Id.)
Plaintiff filed a petition to appeal the subject property‟s real market exception value of
$68,419 to BOPTA. (Ptf‟s Compl at 2.) Id.) On February 15, 2012, BOPTA sustained the
$68,419 real market exception value. (Id.)
Plaintiff alleges that the real market exception value for the 2011-12 tax year should be
no more than $20,000. (Ptf‟s Compl at 1.) Defendant requests the court sustain the BOPTA
ordered real market exception value of $68,419 for the 2011-12 tax year. Defendant alleges that
the total real market exception value is rehabilitation and renovation costs that were properly
added as exception value to the 2011-12 tax roll. (Def‟s Ans at 1.)
II. ANALYSIS
The issue before the court is the subject property‟s real market exception value as of the
assessment date January 1, 2011. The Tax Court has previously explained:
“The term „exception value‟ is a creature of Measure 50 (Article XI, section 11 of
the Oregon Constitution). It is not found in either the Constitution or statutes, but
is a shorthand expression for the occasions triggering a calculation of the
[maximum assessed value] for an account under an exception to the calculation
rule of ORS 308.146(1).”
Douglas County Assessor v. Ralph L. Crawford, TC No 5076, WL 3204674 at *1(Aug 7, 2012).
Under ORS 308.146(1)2, a property‟s maximum assessed value is calculated as “103
percent of the property‟s assessed value from the prior year or 100 percent of the property‟s
maximum assessed value from the prior year, whichever is greater.” The property‟s assessed
value equals the lesser of the property‟s maximum assessed value or its real market value for the
applicable tax year. ORS 308.146(1),(2).
2
All references to the Oregon Revised Statutes (ORS) and Oregon Administrative Rules (OAR) are to
2011 unless otherwise noted.
DECISION TC-MD 120125 3
ORS 308.153 provides the method for calculating the maximum assessed value of
property that includes new property or improvements. ORS 308.153(1) states in pertinent part:
“(1) If new property is added to the assessment roll or improvements are
made to property as of January 1 of the assessment year, the maximum assessed
value of the property shall be the sum of:
“(a) The maximum assessed value determined under ORS 308.146
(Determination of maximum assessed value and assessed value); and
“(b) The product of the value of the new property or new improvements
determined under subsection (2)(a) of this section multiplied by the ratio,
not greater than 1.00, of the average maximum assessed value over the
average real market value for the assessment year.”
ORS 348.149(5)(a) defines “[n]ew property or new improvements” as changes in value
of property as the result of new construction, reconstruction, major additions, remodeling,
renovation, or rehabilitation. “New property or new improvements” does not include changes in
the value of the property from general ongoing maintenance and repair. ORS 348.149(5)(b).
The Department of Revenue promulgated OAR 150-308.149-(A) to further clarify
what constitutes “new property or new improvements” and “general ongoing
maintenance and repair.” OAR 150-308.149-(A) states in pertinent part:
“(1) For purposes of ORS 308.149:
“(a) „New construction‟ means any new structure, building,
addition or improvement to the land, including site development.
“* * * * *.
“(e) „Renovation‟ means the process by which older structures or
historic buildings are modernized, remodeled or restored.
“(f) „Rehabilitation‟ means to restore to a former condition without
changing the basic plan, form or style of the structure.
“(2)(a) For purposes of ORS 308.149 „general ongoing maintenance and
repair‟ means activity that:
DECISION TC-MD 120125 4
“(A) Preserves the condition of existing improvements without
significantly changing design or materials and achieves an average
useful life that is typical of the type and quality so the property
continues to perform and function efficiently;
“(B) Does not create new structures, additions to existing real
property improvements or replacement of real or personal property
machinery and equipment;
“(C) Does not affect a sufficient portion of the improvements to
qualify as new construction, reconstruction, major additions,
remodeling, renovation or rehabilitation; and
“* * * * *.
“(b) Regardless of cost, the value of general ongoing maintenance and
repairs may not be included as additions for the calculation of maximum
assessed value.”
The first task is to determine whether the improvements Plaintiff made to the subject
property during the 2011-12 tax year were “general ongoing maintenance and repairs” or
“renovations.” Plaintiff alleges that $55,517 of the total $100,257 spent on improving the house
during 2010-11 and 2011-12 was for ongoing maintenance and repairs. (Ptf‟s Ex 1 at 1.)
Plaintiff categorized the alleged maintenance and repair expenses as follows: $14,000 on
masonry, $2,700 on siding materials, $4,590 on roofing materials, $3,528 on paint, $300 on
caulking, $450 on grading work, $3,900 on plaster, $1,260 on wood floors, $4,151 on finished
floors, $4,373 on appliances, $7,908 termite damage repair, $2,000 on clean-up, and $6,357 on
miscellaneous items. (Ptf‟s Ex 1 at 1; Ptf‟s Rebut Ex 1 at 1.)
As the party seeking affirmative relief, Plaintiff bears the burden of proving that the
subject property‟s real market value is incorrect on the tax roll. ORS 305.427. Plaintiff must
establish her claim “by a preponderance of the evidence, or the more convincing or greater
weight of evidence.” Schaefer v. Dept. of Rev., TC No 4530 at 4 (July 12, 2001) (citing Feves v.
Dept. of Revenue, 4 OTR 302 (1971)).
DECISION TC-MD 120125 5
Plaintiff did not substantiate her alleged maintenance and repair expenses with receipts.
Plaintiff submitted various invoices, dated 2009 and 2010. (Ptf‟s Ex 1 at 9-20.) Those invoices
were not referenced to the “Accounting 203K Rehabilitation Funds” worksheet. (Ptf‟s Ex 1
at 1.) It is apparent that the few invoices submitted as evidence do not substantiate all the costs
listed on the worksheet.
Plaintiff asks the court to accept her allocation of expenditures between years with no
supporting documentation. In addition, Plaintiff asks the court to accept her characterization of
the expenditures as maintenance and repair or renovation/rehabilitation. Plaintiff did not testify.
Given the subject property‟s condition (“decrepit” and “non-financeable”) as of the Plaintiff‟s
purchase date, it is unclear to the court whether the activities, such as painting, grading, roofing,
and adding hardwood floors, which Plaintiff alleges were ongoing maintenance and repairs,
affected “a sufficient portion of the improvements to qualify as new construction, * * *
renovation, or rehabilitation, * * * .” OAR 150-308.149(A)(2)(a)(C). There is insufficient
evidence for the court to accept Plaintiff‟s allocation.
Even if the court were to accept Plaintiff‟s allocation and characterization of the
expenditure between tax years, the next “critical task for the court is to determine how much the
RMV [real market value] increased as a result of the improvements.” Hoxie v. Dept. of Rev., 15
OTR 322, 326 (2001). Plaintiff alleges that the increase in real market value is no more than the
expenditure. “Obviously a myriad of factors can affect the RMV of property * * * The exception
value is limited to the RMV attributable to the new improvements.” Id. Plaintiff offered no
evidence of real market value. She asked the court to agree with her conclusion that cost equals
real market value, but offered no evidence in support of her conclusion that cost equals real
market value.
DECISION TC-MD 120125 6
Plaintiff‟s evidence in support of her requested real market exception value reduction is
inconclusive. When the “evidence is inconclusive or unpersuasive, the taxpayer will have failed
to meet his burden of proof * * *.” Reed v. Dept. of Rev., 310 Or 260, 265, 798 P2d 235 (1990).
Plaintiff has failed to carry her burden of proof.
Even though the burden has not shifted under ORS 305.427, the court has jurisdiction to
determine the “real market value or correct valuation on the basis of the evidence before the
court, without regard to the values pleaded by the parties.” ORS 305.412. After reviewing the
evidence and testimony provided, the court concludes that the court lacks sufficient evidence to
determine the real market value attributable to the 2011-12 improvements and to make a
determination as to the portion of the expenditures that were for renovation/rehabilitation or
general ongoing maintenance and repairs.
Because Plaintiff failed to meet her burden of proof, and the court lacks sufficient
evidence to make its own determination of real market value, the court accepts the Board of
Property Tax Appeals Order stating that the subject property‟s real market exception value is
$68,419 for the 2011-12 tax year.
III. CONCLUSION
After careful consideration of the testimony and evidence, the court concludes that
Plaintiff failed to carry her burden of proof. Now, therefore,
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DECISION TC-MD 120125 7
IT IS THE DECISION OF THIS COURT that Plaintiff‟s appeal is denied.
Dated this day of October 2012.
JILL A. TANNER
PRESIDING MAGISTRATE
If you want to appeal this Decision, file a Complaint in the Regular Division of
the Oregon Tax Court, by mailing to: 1163 State Street, Salem, OR 97301-2563;
or by hand delivery to: Fourth Floor, 1241 State Street, Salem, OR.
Your Complaint must be submitted within 60 days after the date of the Decision
or this Decision becomes final and cannot be changed.
This document was signed by Presiding Magistrate Jill A. Tanner on October 15,
2012. The Court filed and entered this document on October 15, 2012.
DECISION TC-MD 120125 8