Clark County Assessor v. Meijer Stores LP

ATTORNEYS FOR PETITIONER: ATTORNEYS FOR RESPONDENT:
BRIAN CUSIMANO BRENT A. AUBERRY
ATTORNEY AT LAW BENJAMIN A. BLAIR
Indianapolis, IN DAVID A. SUESS
FAEGRE BAKER DANIELS LLP
Indianapolis, IN
MARILYN S. MEIGHEN MICHAEL B. SHAPIRO
ATTORNEY AT LAW HONIGMAN MILLER SCHWARTZ
Carmel, IN AND COHN LLP
Detroit, MI
___________________________________________________________________
IN THE
FILED
INDIANA TAX COURT Feb 08 2019, 3:28 pm
___________________________________________________________________
CLERK
Indiana Supreme Court
Court of Appeals
) and Tax Court
CLARK COUNTY ASSESSOR, )
)
Petitioner, )
)
v. ) Cause No. 18T-TA-00003
)
MEIJER STORES LP, )
)
Respondent. )
___________________________________________________________________
ON APPEAL FROM A FINAL DETERMINATION OF
THE INDIANA BOARD OF TAX REVIEW
FOR PUBLICATION
February 8, 2019
WENTWORTH, J.
The Clark County Assessor has challenged the Indiana Board of Tax
Review’s final determination that lowered the assessed value of the Meijer store in
Jeffersonville, Indiana for each of the 2008 through 2016 assessment years. Upon
review, the Court affirms the Indiana Board’s final determination.
FACTS AND PROCEDURAL HISTORY
Meijer Stores LP owns and operates a 180,000 square foot retail store and a
2,432 square foot gas station/convenience store, both situated on one 32.42 acre
parcel of land in Jeffersonville, Indiana (the subject property). Meijer constructed the
stores in 1998/1999.
During the years at issue, the Assessor assigned the following assessed
values to the subject property:
2008: $12,160,100
2009: $12,167,000
2010: $11,732,600
2011: $11,732,600
2012: $10,017,000
2013: $ 9,904,400
2014: $10,021,000
2015: $ 9,966,000
2016: $ 9,969,100
(See Cert. Admin. R. at 1-2, 13-14, 26-27, 40-41, 52-53, 72-73, 86-87, 105-06, 142-
43.) Believing those values to be too high, Meijer filed appeals first with the Clark
County Property Tax Assessment Board of Appeals and then with the Indiana
Board.
In November of 2017, the Indiana Board conducted one administrative
hearing on all of Meijer’s appeals. For purposes of the hearing, however, Meijer and
the Assessor agreed to litigate only the subject property’s 2012 assessment,
2
stipulating that the other years’ assessments could be determined by applying an
agreed-upon trending formula to the finally-determined 2012 assessed value. (See
Cert. Admin. R. at 128-29.)
The Indiana Board Hearing: Meijer’s Evidence
During the Indiana Board hearing, Meijer presented, among other things, an
Appraisal Report, completed in conformance with the Uniform Standards of
Professional Appraisal Practice (USPAP), that valued the subject property as of
March 1, 2012. Meijer also presented the testimony of Laurence Allen, a member of
the Appraisal Institute (MAI), who prepared the Appraisal Report (“Meijer Appraisal”).
To value the subject property, Allen first employed the sales comparison
approach.1 Under this approach, he examined data relating to the fee simple sales
of numerous other big-box stores that had occurred throughout the Midwest between
2006 and 2013. (See, e.g., Cert. Admin. R. at 389, 431-40, 1633-44.) After
adjusting the sales prices of those properties to account for differences in the age
and condition of their improvements, their location, as well as the condition of the
market at the time of sale, Allen used the data to determine a probable sales price
for the subject property of $7,570,000. (See Cert. Admin. R. at 450-98, 1645-54,
1658.)
1
The sales comparison approach, one of the three generally accepted appraisal techniques
for valuing real property, “estimates the total value of the property directly by comparing it to
similar, or comparable, properties that have sold in the market.” 2002 REAL PROPERTY
ASSESSMENT MANUAL (2004 Reprint) (“Manual”) (incorporated by reference at 50 IND. ADMIN.
CODE 2.3-1-2 (2002 Supp.) (repealed 2010)) at 3; 2011 REAL PROPERTY ASSESSMENT
MANUAL (“2011 Manual”) (incorporated by reference at 50 IND. ADMIN. CODE 2.4-1-2 (2011))
at 2.
3
Allen also employed the income approach to value the subject property.2
Under this approach, Allen first estimated the subject property’s net operating
income using market-based rental rates, occupancy rates, and operating expense
levels. (See, e.g., Cert. Admin. R at 1659-66.) Allen explained that he used the
market-based rental rates from existing big-box stores rather than rates from big-box
properties with “built-to-suit” leases in place, because the former were more
representative of both occupant expectations and improvement age. (See, e.g.,
Cert. Admin. R. at 564-69.) Allen then considered investor surveys and comparable
property sales and performed a band-of-investment analysis to determine the
capitalization rate to apply against his net operating income estimate. (See, e.g.,
Cert. Admin. R. at 580-84, 1666-68.) Under his income approach, Allen estimated
the 2012 value of the subject property to be $7,610,000. (See Cert. Admin. R. at
1668-69.)
Ultimately, Allen reconciled his sales comparison and income approach
values into a final value conclusion for 2012 of $7,600,000. (See Cert. Admin. R. at
1676-77.) In concluding this final value, Allen explained that he did not consider the
third generally accepted appraisal technique, the cost approach,3 to be a reliable
method of valuing the subject property for two reasons. First, he stated that buyers
and sellers of big-box stores typically do not rely on the cost approach to determine
2
The income approach, another generally accepted appraisal technique for valuing real
property, applies to “income producing properties that are typically rented[ and] converts an
estimate of income, or rent, [a] property is expected to produce into value through a
mathematical process known as capitalization.” Manual at 3; 2011 Manual at 2.
3
The cost approach “estimates the value of [any] land as if vacant and then adds the
depreciated cost new of the improvements to arrive at a total estimate of value.” Manual at
3; 2011 Manual at 2.
4
value. (See, e.g., Cert. Admin. R. at 430-31, 1631.) Second, he stated that the use
of the cost approach to value the subject property is redundant because like most
big-box retail properties, it suffered from significant obsolescence that “is difficult, if
not impossible, to estimate without extracting from the other approaches to value.”
(See Cert. Admin. R. at 590-601, 1631.) (See also Cert. Admin. R. at 415-17, 421-
24, 430-31, 592-94, 597-98 (where Allen explains that big-box properties suffer from
obsolescence immediately upon construction because they are built for their users’
exact specifications; subsequent users will never pay “cost” for these properties
because they must incur extensive expenditures to adapt the properties to their own
use).)
The Indiana Board Hearing: The Assessor’s Evidence
During the Indiana Board hearing, the Assessor offered her own USPAP-
certified appraisal that valued Meijer’s property for the 2012 tax year (“Assessor’s
Appraisal”) at $11,200,000. (See, e.g., Cert. Admin. R. at 1728-32.) In addition, she
presented the testimony of David Hall, MAI, the primary author of the Assessor’s
Appraisal.
In his testimony, Hall first stated that he disagreed with Allen regarding the
propriety of using the cost approach. Indeed, Hall reasoned that the cost approach
was the best approach to value the subject property because it was depreciating at a
rate consistent with its age and suffered from no obsolescence whatsoever. (See,
e.g., Cert. Admin. R. at 892-94, 919-20, 1849 (stating there could be no functional
obsolescence because “the subject has been continuously occupied since
completion of construction, and [] the buildings are consistent with market norms in
5
construction quality, size, utility, and design”), 1850 (stating there could be no
economic obsolescence because local and national economic trends “were
positively impacting [the] demand” for properties like Meijer’s).) Under his cost
approach, Hall estimated that the subject property’s 2012 market value-in-use was
$11,300,000. (See Cert. Admin. R. at 1845-51.)
Hall also performed an income approach to value the subject property. In
calculating net operating income, Hall, unlike Allen, used rental, occupancy, and
expense rates derived from built-to-suit leases (i.e., leases to first-generation users).
(See Cert. Admin. R. at 971-74, 1877-80, 1882-85.) Like Allen, however, Hall
considered investor surveys and comparable property sales and performed a band-
of-investment analysis to determine the capitalization rate to apply against his net
operating income estimate. (See, e.g., Cert. Admin. R. at 1888-91.) Ultimately,
under his income approach, Hall estimated the 2012 value of the subject property
was $11,200,000. (Cert. Admin. R. at 1891.)
Finally, Hall valued the subject property using two separate sales comparison
approaches. In his first sales comparison valuation, Hall used the leased-fee sales
of occupied big-box properties as his comparables. (See Cert. Admin. R. at 1751-
52, 1853 (asserting that the leased-fee properties best reflected Meijer’s utility
because they were 100% occupied as retail space at the time of their sale).) Hall
maintained that The Appraisal of Real Estate, 14th edition, instructed that because
the leased-fee properties were all leased at market rates, no adjustments were
necessary to account for the difference in the type of property rights conveyed.
(See, e.g., Cert. Admin. R. at 922-24, 928-37, 1746, 1853-55, 1857, 1876.) Based
6
on this analysis, Hall determined a probable sales price for the subject property of
$11,200,000. (Cert. Admin. R. at 946, 1863.)
For his second sales comparison valuation, Hall relied on fee simple sales of
vacant big-box properties as his comparables. (Cert. Admin. R. at 1751-52, 1853
(explaining that these comparables transferred fee simple property rights and were
not new construction, just like the subject property).) Hall adjusted the sales prices
of these comparables by 45% to account for the fact that they, unlike the subject
property, were vacant. (See, e.g., Cert. Admin. R. at 787-91, 927, 958-69, 1748-51
(explaining that “[v]acancy adversely impacts a property’s utility” because it might
indicate atypical motivations to sell, such as excess supply or duress, that adversely
influence sale price).) From this analysis, Hall determined a probable sales price for
the subject property was $10,900,000. (See Cert. Admin. R. at 2251-52.)
Hall reconciled all four values into one final value conclusion of $11,200,000.
(Cert. Admin. R. at 1898.) His reconciliation gave his second sales comparison
approach value the least amount of weight. (See Cert. Admin. R. at 1899.)
The Indiana Board’s Final Determination
The Indiana Board issued its final determination on December 1, 2017. In it,
the Indiana Board explained that because both Meijer and the Assessor presented
USPAP-compliant appraisals from qualified experts, it needed to weigh the
competing appraisals and determine which one was more persuasive. (See Cert.
Admin. R. at 2423 ¶ 78.) Ultimately, the Indiana Board determined that Meijer’s
Appraisal was more persuasive than the Assessor’s Appraisal.
7
With respect to the parties’ income approaches, the Indiana Board’s analysis
was rather brief, stating that while each party’s income approach suffered from some
infirmities that detracted from its overall reliability, each one was still somewhat
probative. (See Cert. Admin. R. at 2427-29 ¶¶ 92-97, 2431 ¶¶ 102-04.) In reviewing
the parties’ sales comparison approaches, the Indiana Board stated that the Meijer
Appraisal presented a sufficient quantity and quality of data to arrive at the subject
property’s March 1, 2012, value of its fee simple interest. (See, e.g., Cert. Admin. R.
at 2398 ¶ 1, 2403 ¶ 19, 2425 ¶ 85, 2426 ¶ 87, 2427 ¶ 91.) In contrast, the Indiana
Board found neither of the Assessor’s sales comparison approaches probative at all:
In [its first] sales analysis, we find that [the Assessor’s Appraisal]
actually measured the leased[-]fee value of the subject property.
In [its second] sales analysis, we find [the] vacancy adjustment
entirely unsupported. These two errors render [the Assessor’s]
sales-comparison approaches entirely unreliable[.]
(Cert. Admin. R. at 2431-32 ¶ 105.) In fact, the Indiana Board held that these two
errors were so significant and fundamental that they effectively undermined any
probative value overall that the Assessor’s Appraisal may have had otherwise. (See
Cert. Admin. R. at 2398 ¶ 1, 2435 ¶ 114.)
Finally, in addressing the use of the cost approach to value the subject
property, the Indiana Board explained that it was not necessary to apply the cost
approach because deriving an obsolescence adjustment from the sales comparison
and income approaches alone was appropriate. (Cert. Admin. R. at 2425 ¶ 85, 2430
¶ 100.) Thus, the Indiana Board found that the fact that Allen did not perform a cost
approach to value the subject property was not improper. (See Cert. Admin. R. at
2425 ¶ 85, 2430 ¶ 100.) The Indiana Board reasoned that due to the “large
8
discrepancy” between the Meijer Appraisal’s values computed under its sales
comparison and income approaches and the Assessor Appraisal’s cost approach,
the subject property suffered from obsolescence that the Assessor’s Appraisal failed
to account for. (Cert. Admin. R. at 2435 ¶ 114.) Accordingly, the Indiana Board
deemed the Assessor’s cost approach unreliable. (Cert. Admin. R. at 2435 ¶ 114.)
Finding that the Meijer Appraisal was more persuasive than the Assessor’s
Appraisal, the Indiana Board reduced the subject property’s 2012 assessment
consistent with the Meijer Appraisal’s reconciled value of $7,600,000. (Cert. Admin.
R. at 2435-36 ¶¶ 114-15.) The Assessor subsequently initiated this original tax
appeal on January 12, 2018, and the Court conducted oral argument on the matter
on July 19, 2018. Additional facts will be supplied as necessary.
STANDARD OF REVIEW
The party seeking to overturn an Indiana Board final determination bears the
burden of demonstrating its invalidity. Osolo Twp. Assessor v. Elkhart Maple Lane
Assocs., 789 N.E.2d 109, 111 (Ind. Tax Ct. 2003). Accordingly, the Assessor must
demonstrate to the Court that the Indiana Board’s final determination in this matter is
arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law;
contrary to constitutional right, power, privilege, or immunity; in excess of or short of
statutory jurisdiction, authority, or limitations; without observance of the procedure
required by law; or unsupported by substantial or reliable evidence. See IND. CODE §
33-26-6-6(e)(1)-(5) (2019).
9
ANALYSIS
The Assessor claims the Indiana Board’s final determination must be
reversed because it is contrary to law, not supported by substantial evidence, and
constitutes an abuse of discretion. More specifically, she asserts that the final
determination is contrary to law because in accepting Meijer’s valuation over hers,
the Indiana Board ignored the generally accepted appraisal practices that 1)
required Allen to adjust his sales comparables to account for expenditures incurred
after those properties were purchased, and 2) permitted Hall to use leased-fee sales
as comparable properties. (Pet’r Br. at 7-15; Oral Arg. Tr. at 4-6, 25-27.) The
Assessor also argues that the final determination must be reversed because there is
no evidence to support the Indiana Board’s conclusion that 1) the leased-fee sales
used in her first sales comparison valuation were not credible and reliable, and 2)
Meijer’s property suffered from obsolescence. (Pet’r Br. at 15-20; Oral Arg. Tr. at
29, 35-37.) Finally, the Assessor argues that the Indiana Board’s final determination
constitutes an abuse of discretion because it “failed to apply a consistent burden of
proof[.]” (Pet’r Br. at 20-21; Oral Arg. Tr. at 39-41.)
Contrary to Law
1) Post-Purchase Adjustments to Sales Comparables
On appeal, the Assessor explains that she presented evidence demonstrating
that several properties used as comparables in the Meijer Appraisal’s sales
comparison approach incurred large post-purchase expenditures. (See Pet’r Br. at
4-5 (citing Cert. Admin. R. at 705, 1294, 1301, 1310, 1326); Pet’r Reply Br. at 2.)
The Assessor contends that pursuant to The Appraisal of Real Estate, 14th edition,
10
Allen was required to adjust the sales prices of those comparable properties to
account for those expenditures. (Pet’r Br. at 10.) Because he did not, the Assessor
claims that the final determination that ultimately adopted the Meijer Appraisal’s final
value conclusion is contrary to law and must be reversed. (See Pet’r Br. at 7-11;
Oral Arg. Tr. at 4-19.) The Court finds the Assessor’s argument unpersuasive for
the following reasons.
First, the two pages of The Appraisal of Real Estate that the Assessor cites
do not mandate adjustments for post-purchase expenditures. (Compare Pet’r Br. at
10 with APPRAISAL INSTITUTE, THE APPRAISAL OF REAL ESTATE 412-13 (14th ed.
2013).) Rather, they (along with a few other pages) indicate that adjustments for
certain types of post-purchase expenditures may be appropriate but only after the
terms of the sale transaction have been verified through interviews with the
transaction’s participants. See THE APPRAISAL OF REAL ESTATE at 404-05, 412-14.
(See also Oral Arg. Tr. at 18 (where the Assessor concedes that The Appraisal of
Real Estate does not mandate the adjustments but then “clarifies” that an appraiser
should, at a minimum, consider whether a post-purchase expense adjustment is
appropriate).)
Notwithstanding, both the Assessor and Meijer have indicated that
adjustments for post-purchase “re-imaging” costs are not necessary.4 (Compare
Pet’r Reply Br. at 3 with Cert. Admin. R. at 454-77, 592-93 and Resp’t Resp. Br. at
11-12.) The evidence to which the Assessor cites indicates how much the owners of
4
“Re-imaging” refers to the types of renovations a second-generation user would make to a
property to align its layout and appearance with a specific business plan or model. (See,
e.g., Cert. Admin. R. at 415-17, 421-24, 592-94 (describing generally how a Meijer store is
different from a K-Mart, Walmart, or Target store).)
11
the comparable properties incurred in post-purchase expenditures but does not
show what the expenditures were for. (See Pet’r Br. at 4-5; Cert. Admin. R. at 705,
1294, 1301, 1310, 1326.) Nonetheless, Meijer’s appraiser, Allen, testified that the
costs presented by the Assessor were all attributable to re-imaging and that
adjustments were therefore unnecessary.5 (See, e.g., Cert. Admin. R. at 476-77.)
Second, and more importantly, a final determination of the Indiana Board
is contrary to law only if it violates a statute, constitutional provision, legal principle,
or rule of substantive or procedural law. Shelbyville MHPI, LLC v. Thurston, 978
N.E.2d 527, 529 (Ind. Tax Ct. 2012). The Appraisal of Real Estate is not a statute,
constitutional provision, legal principle, or rule of substantive or procedural law; it is a
textbook, used by the appraisal profession, to instruct its members on the “principles
of appraisal and the sound application of recognized valuation methodology.”
THE APPRAISAL OF REAL ESTATE at ix. To the extent an appraiser relies on the
guidance provided in The Appraisal of Real Estate to complete an appraisal
assignment, the result, his appraisal, is still merely his opinion. See Stinson v.
Trimas Fasteners, Inc., 923 N.E.2d 496, 502 (Ind. Tax Ct. 2010) (explaining that the
appraisal of property is not a science). Consequently, the Assessor has not shown
that the Indiana Board’s final determination is contrary to law on this basis.
5
The Assessor argued that her evidence of expenditures shifted the evidentiary burden to
Meijer to demonstrate the purpose of those expenditures was something other than re-
imaging. (See Pet’r Br. at 10-11.) The Assessor, however, bore the burden of
demonstrating that Allen’s testimony was wrong, and her claim that Allen “should have done
more” regarding her evidence (see Pet’r Br. at 10 (arguing that more investigation by Allen
“could have significantly affected his value conclusions”)) does not suffice.
12
2) Use of Leased-Fee Sales in Sales Comparison Approach
As previously indicated, the Indiana Board rejected the Assessor’s sales
comparison approach analysis that used leased-fee sales of occupied big-box
properties as comparables because it failed to measure the fee simple value. The
Assessor contends, however, that the Indiana Board’s rejection of that analysis was
contrary to law because it ignored the generally accepted appraisal practice noted in
The Appraisal of Real Estate that permits the use of leased-fee sales as comparable
properties in the sales comparison approach. (See Pet’r Br. at 11-15; Oral Arg. Tr.
at 20-27.) The Assessor’s claim fails because, as the Court just explained, The
Appraisal of Real Estate is not law.
Furthermore, the Court notes that the Indiana Board rejected the Assessor’s
first sales comparison approach as unreliable because it was not supported by the
evidence. (See Cert. Admin. R. at 2433 ¶ 108.) Indeed, the final determination
acknowledged that the leased-fee sales may be used as comparables, but only if
they are properly adjusted to put them on “a level playing field” with the subject
property.6 (See Cert. Admin. R. at 2426 ¶ 87.) Hall did not make any adjustments,
however, to account for the differences in the type of property rights conveyed
between the subject property and the leased-fee sales comparables; instead, he
asserted that his leased-fee sales comparables did not require adjustment because
they were all leased at market rates. (See Cert. Admin. R. at 922-24, 928-37, 1746,
1853-57, 1876.) The Indiana Board found that even if his assertion that market rate
leases relieved the requirement to adjust were correct, Hall failed to prove that the
6
The Indiana Board stated that when a sufficient number of fee simple sales exists for use
as comparisons, however, “it is not necessary to resort to leased fee sales.” (Cert. Admin.
R. at 2426 ¶ 87.)
13
leased-fee properties were in fact leased at market rates. (See Cert. Admin. R. at
2432-33 ¶ 107 (stating that Hall’s claim that the comparables were leased at market
rents was based largely on “circular reasoning”).) (See also Cert. Admin. R. at
2415-16 ¶ 56 (where, in relaying Hall’s testimony, the Indiana Board indicates that
Hall’s sole support for asserting his comparables were leased at market rates “was
the data and conclusions from his own income approach,” which itself used the
same leased-fee properties as comparables), 2432 ¶ 107.)
Not Supported by Substantial Evidence
Next, the Assessor argues on appeal that the final determination must be
reversed because it is not supported by substantial evidence. Specifically, she
maintains that there is no evidence to support the Indiana Board’s conclusion that 1)
the leased-fee sales comparables she used in her first sales comparison approach
were not credible and reliable, and 2) Meijer’s property suffered from obsolescence.
(Pet’r Br. at 15-20; Oral Arg. Tr. at 29, 35-37.)
1) The Credibility and Reliability of the Assessor’s Leased-Fee Sales
As previously discussed, the Indiana Board gave no weight to Hall’s first sales
comparison analysis because the Assessor did not prove that his leased-fee sales
comparables were leased at market rents. The Assessor claims on appeal,
however, that “the evidence, facts, and circumstances surrounding th[ose] sales . . .
undoubtedly support the conclusion that the[y] . . . were leased[] at market rent” and
therefore the first sales comparison approach “provided a reliable and credible
opinion of value [that] should have been adopted by the [Indiana] Board.” (Pet’r Br.
at 11-12, 15.)
14
The Assessor’s claim asks the Court to reweigh the evidence that was
presented to the Indiana Board in her favor. The Court cannot reweigh the evidence
absent a showing that the Indiana Board has abused its discretion. See Trimas
Fasteners, 923 N.E.2d at 498-99. See also Hubler Realty Co. v. Hendricks Cty.
Assessor, 938 N.E.2d 311, 315 n.5 (Ind. Tax Ct. 2010) (explaining that the Indiana
Board abuses its discretion when it either misinterprets the law or when its final
determination is clearly against the logic and effect of the facts and circumstances
before it). To demonstrate an abuse of discretion, the Assessor first points out that
in her first sales comparison approach, four of Hall’s six comparable properties were
leased at rates between $5.13 and $6.90 per square foot. (See Pet’r Br. at 14 (citing
Cert. Admin. R. at 1862, 2415).) (See also Cert. Admin. R. at 1854-55.) She then
maintains that there was “no logical path” for the Indiana Board to determine those
rental rates were not at market levels because “[t]here’s no evidence that . . .
suggests these properties were leased at above market rents”; moreover, “all [the
rates] fall within the range of [] rents [that were] provided by Allen [in the Meijer
Appraisal.]” (Pet’r Br. at 14-15; Oral Arg. Tr. at 27-28, 31.) The Assessor’s argument
does not, however, rise to the level of demonstrating an abuse of discretion.
First of all, her argument is argumentum ad ignorantiam, meaning that she
claims “a proposition is true simply on the basis that it has not been proved false[.]”
PHILOSOPHY 103: INTRODUCTION TO LOGIC ARGUMENTUM AD IGNORANTIAM,
https://philosophy.lander.edu/logic/ignorance.html (last visited Feb. 6, 2019). This
“logical fallacy” is a type of argument used to shift the burden of proof improperly
from the one who actually bears it. ARGUMENT FROM IGNORANCE,
15
https://en.wikipedia.org/wiki/Argument_from_ignorance.html (last visited Feb. 6,
2019).
Second, the final determination states that the only evidence Hall relied on to
support his conclusion that the rental rates were at market levels was his own
income approach analysis. (See, e.g., Cert. Admin. R. at 2415-16 ¶ 56 (citing Cert.
Admin. R. at 931, 934), 2432 ¶ 107 (noting that Hall’s reasoning was circular
because he used the same comparables in both his income approach and his first
sales comparison approach analysis).) If, however, the Assessor wanted the
Indiana Board to follow a specific path to conclude that the leased-fee rental rates
were at market levels (e.g., comparing her rental rates to with those used by Allen in
the Meijer Appraisal), she needed to walk the Indiana Board down that path during
the administrative process. Because the Assessor failed to do so, she cannot now
rectify her misstep. See, e.g., Blesich v. Lake Cty. Assessor, 46 N.E.3d 14, 17 (Ind.
Tax Ct. 2015); Long v. Wayne Twp. Assessor, 821 N.E.2d 466, 471 (Ind. Tax Ct.
2005), review denied; Davidson Indus. v. Indiana State Bd. of Tax Comm’rs, 744
N.E.2d 1067, 1071 (Ind. Tax Ct. 2001) (all indicating that this Court has repeatedly
reminded litigants that they have a duty to walk the Indiana Board, and ultimately
this Court, through every element of their analyses; they cannot assume that the
evidence speaks for itself).
Based on its review of the evidence in the administrative record, the Court is
not persuaded that the Indiana Board’s determination that the Assessor failed to
demonstrate that the rents used in her first sales comparison approach were at
market levels was against the logic and effect of the facts and circumstances before
16
it. Accordingly, the Court will not reverse the Indiana Board’s final determination on
this basis.
2) Obsolescence
The Assessor also argues that there is no evidence in the administrative
record to support the Indiana Board’s conclusion that the subject property suffers
from obsolescence. (Pet’r Br. at 15-17.) She asserts that simply because sales
prices were much lower per square foot than the per square foot value under the
cost approach does not prove obsolescence has occurred. (See Pet’r Br. at 16;
Pet’r Reply Br. at 8.) As a result, she concludes that Meijer failed to both identify
and quantify the amount of obsolescence it claimed was present in its property.
(See Pet’r Br. at 15-18; Oral Arg. Tr. at 35-36.) See also Hometowne Assocs. v.
Maley, 839 N.E.2d 269, 273-74 (Ind. Tax Ct. 2005) (explaining that a taxpayer must
support its claim that obsolescence has diminished the value of its property with
probative evidence that 1) identifies the causes of the alleged obsolescence and 2)
quantifies the amount of obsolescence to be applied to its improvements).
Under the substantial evidence standard, this Court reviews the
administrative record to determine whether, when viewed as a whole, it provides a
reasonably sound basis of evidentiary support for the Indiana Board’s decision.
Switzerland Cty. Assessor v. Belterra Resort Indiana, LLC, 101 N.E.3d 895, 904
(Ind. Tax Ct. 2018), review denied. See also Starke Cty. Assessor v. Porter-Starke
Servs., Inc., 88 N.E.3d 814, 820 (Ind. Tax Ct. 2017) (defining substantial evidence
as “more than a scintilla”; it is such relevant evidence as a reasonable mind might
accept as adequate to support a conclusion). Because the substantial evidence
17
standard is a highly deferential one, the Court will uphold the Indiana Board’s final
determination unless, based upon the evidence presented, the Assessor can show
that a reasonable person would be compelled to reach a different result. See
Belterra Resort, 101 N.E.3d 904.
Allen testified at length about what he believed had a diminishing effect on the
value of Meijer’s property. Indeed, he explained numerous times that big-box
properties generally, and the subject property specifically, suffer from obsolescence
immediately upon construction because they are built for first-generation users to
their exact specifications, and in turn, subsequent users will never pay “cost” for
these properties because they must incur extensive expenditures to adapt the
properties to their own use. (See Cert. Admin. R. at 415-17, 421-24, 430-31, 592-
94, 597-98.) Allen’s testimony adequately identifies the cause of the obsolescence
and is consistent with a paradigm this Court has long accepted as valid. See, e.g.,
Meijer Stores Ltd. P’ship v. Smith, 926 N.E.2d 1134, 1137-39 (Ind. Tax Ct. 2010)
(indicating that a newly constructed Meijer store was adversely impacted by
obsolescence).
Furthermore, Meijer’s Appraisal quantifies the amount of obsolescence Allen
claimed was the result of that cause. As this Court has previously explained, all
three approaches to valuation quantify obsolescence, they just do it differently.
Indeed, while the cost approach to valuation accounts for the obsolescence
explicitly, the sales comparison and income approaches account for it implicitly.
Millennium Real Estate Inv., LLC v. Benton Cty. Assessor, 979 N.E.2d 192, 197-98
(Ind. Tax Ct. 2012), review denied. Allen’s conclusion is buttressed by the fact that,
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as the final determination stated, there was a very large difference between the
values computed under the Meijer Appraisal’s sales comparison and income
approaches and the Assessor Appraisal’s cost approach. (Compare Cert. Admin. R.
at 2435 ¶ 114 with Hometowne Assocs., 839 N.E.2d at 275 (explaining that “the
difference [between a property’s valuations under the income/sales comparison
approaches and the cost approach is] attributable to the obsolescence present in the
property”).)
The Court holds that there is a reasonably sound basis of support in
administrative record for the Indiana Board’s conclusion that the subject property
suffered from obsolescence. Accordingly, the Court will not reverse the Indiana
Board’s determination on this issue either.
Abuse of Discretion
Finally, the Assessor contends that the Indiana Board’s final determination
constitutes an abuse of discretion because it failed to apply a consistent burden of
proof. Specifically, she complains that “[p]articularly as to rebuttal evidence and the
credibility of the data and witnesses, the [Indiana] Board’s expectations and the
burden of proof fluctuated without any apparent authority.” (Pet’r Br. at 20.)
In essence, the Assessor’s complaint is a restatement of the burden-shifting
arguments already peppered throughout her appeal presentation. (See Pet’r Br. at
20-21 (claiming Meijer bore the burden of proof on the issue relating to adjustments
to account for post-purchase expenditures as well as on the issue whether the rental
rates for Hall’s leased fee sales were not at market levels).) The Court has already
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addressed and rejected these claims. See supra note 5, pp. 15-16. As a result, the
Court will not reverse the Indiana Board’s final determination on this basis.
CONCLUSION
The Assessor has not demonstrated to the Court that the Indiana Board’s
final determination is contrary to law, unsupported by substantial evidence, or
constitutes an abuse of discretion. Accordingly, the Indiana Board’s final
determination in this matter is AFFIRMED.
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