Appeal of City of Berlin

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THE SUPREME COURT OF NEW HAMPSHIRE
___________________________
Board of Tax and Land Appeals
No. 2020-0474
APPEAL OF CITY OF BERLIN
(New Hampshire Board of Tax and Land Appeals)
Argued: June 22, 2021
Opinion Issued: January 12, 2022
Donahue, Tucker & Ciandella, PLLC, of Meredith (Christopher L. Boldt,
Eric A. Maher, and Brendan A. O’Donnell on the brief, and Christopher L. Boldt
orally), for the petitioner.
Sulloway & Hollis, P.L.L.C., of Concord (Margaret H. Nelson, Derek D.
Lick, and Trevor J. Brown on the brief, and Derek D. Lick orally), for the
respondent.
BASSETT, J. The petitioner, City of Berlin (City), appeals an order of the
New Hampshire Board of Tax and Land Appeals (BTLA) determining that the
City over-assessed the respondent, Public Service Company of New Hampshire
d/b/a Eversource Energy (PSNH), for tax year 2017. The City challenges the
BTLA’s decision to apply the New Hampshire Department of Revenue
Administration (DRA) 2017 median equalization ratio to determine the
proportionality of the City’s assessment of PSNH’s J. Brodie Smith
hydroelectric facility (Smith Hydro). It argues that the 2016 median
equalization ratio — the most recent DRA ratio available at the time the City
prepared the 2017 tax assessment — should apply. Because we agree, we
reverse and remand.
The following facts are supported by the record or are otherwise
undisputed. In February 2018, PSNH applied for an abatement from the City
for property taxes assessed as of April 1, 2017 on 15 properties it owned in
Berlin, including Smith Hydro. The City had appraised PSNH’s property in the
aggregate sum of $99,763,300 and assessed a tax of $3,659,317. PSNH
asserted, among other things, that the City’s assessment “substantially
exceed[ed]” the properties’ fair market value and was “disproportional.” See
RSA 76:16 (Supp. 2021). The City’s Board of Assessors denied the request for
an abatement, and PSNH appealed to the BTLA. See RSA 76:16-a, I (Supp.
2021).
PSNH’s appeal to the BTLA included the same 15 properties it had
identified in its abatement application. Its stated reasons for the appeal
included that the City’s assessment “fail[ed] to reflect changes in the energy
market and their impact on the market value of Smith Station.” In addition,
PSNH stated that applying the DRA 2017 median equalization ratio to the
City’s assessment of $99,763,300 indicated a fair market value for its property
of approximately $103,704,054. That amount, PSNH asserted, was
substantially greater than the “full and true value” of its property, thereby
resulting in an “excessive” assessment and a “disproportionate burden.”
PSNH’s appeal was subsequently consolidated with 137 other tax
abatement appeals filed by PSNH challenging the proportionality of
assessments on property it owned in 47 municipalities during tax years 2014-
2017. By the time the BTLA held a hearing on the consolidated appeals, the
only PSNH property at issue in Berlin was Smith Hydro, which also was the
only hydroelectric generating facility involved in the appeals. The parties
agreed that Smith Hydro’s highest and best use was as a merchant generating
plant operating in the deregulated marketplace, but disagreed as to the market
value of the property, and as to the equalization ratio that should be applied in
the proportionality analysis.
As to the valuation issue, PSNH’s expert testified that the fair market
value of Smith Hydro was $34 million, while the City’s experts testified that its
valuation was $49 million. The BTLA found that the City’s valuation was “more
credible and better supported by the record as a whole and [PSNH] did not
meet its burden of proving otherwise.” PSNH does not appeal that finding.
As to the issue on appeal, the parties disagreed as to the proper DRA
median equalization ratio to be applied in determining the general level of
assessment for tax year 2017 in Berlin. Prior to the hearing on the merits,
PSNH filed a motion requesting that the BTLA adopt the DRA 2017 ratio “as
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evidence of the proportional level of assessment.” The City objected, arguing
that it “did not use the DRA’s 2017 median equalization ratios when setting its
2017 assessments and tax rate.” It asserted that “[t]he general level of
assessment in a municipality is a triable issue of fact, which [PSNH] bears the
burden of proving at trial,” and, therefore, the BTLA should reject PSNH’s “pre-
trial request to adopt a certain assessment level.” The BTLA did not rule on the
motion at that time.
On the first day of the hearing, PSNH offered an exhibit showing the DRA
2017 median equalization ratio for Berlin. PSNH asserted that the BTLA
should take administrative notice of the DRA 2017 ratio and use that ratio for
resolving its appeal involving Smith Hydro. Although acknowledging that it
bore the burden of proving the general level of assessment for property in
Berlin for tax year 2017, PSNH argued that the exhibit established that it had
“made a good prima facie showing that the ratio should be the median
equalization ratio set by the [DRA],” and, therefore, the burden shifted to the
City to present evidence “that would warrant use of another ratio.” The City
objected, explaining that because the 2017 median equalization ratio was not
established by the DRA until 2018, the City calculated the tax rate for the 2017
tax year utilizing the 2016 median equalization ratio. Therefore, the City
asserted, the proper equalization ratio was “the median equalization ratio
certified by DRA for 2016,” which was “the equalization ratio that every other
taxpayer in [Berlin] was subject to” for the 2017 tax year. After the BTLA
acknowledged that the exhibit simply reflected what the DRA 2017 median
equalization ratio was — but did not establish whether that ratio should be
used for the purpose of resolving PSNH’s appeal — the City agreed to its
admission.
On the seventh day of the hearing, before the City began to present its
case, the BTLA announced that it was granting PSNH’s pre-trial motion to
adopt the DRA 2017 median equalization ratio, concluding that it was “proper
to apply the DRA’s median ratio for the intended tax year 2017 instead of the
prior tax year, 2016.” The City again objected, asserting that the taxes
assessed for the 2017 tax year “were paid based on [the DRA 2016 equalization
ratio], not on the after-the-fact determination,” and that the BTLA’s decision
was, therefore, “as a matter of equity, not correct.”
During the BTLA proceedings, the City explained the process that it uses
to determine property values and ensure that assessments are reasonably
proportional and satisfy the requirements of state law. As the City noted, every
municipality in the State is required to perform a revaluation of all property “at
least as often as every fifth year.” See RSA 75:8-a (2012); N.H. CONST. pt. II,
art. 6. The City represented that property values are generally carried forward
from year to year until the next revaluation; however, each year the City is
required to adjust assessments for any properties that have had a material
physical change or undergone other changes affecting value. See RSA 75:8
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(2012). As the City’s expert explained, because there are often year-to-year
changes to utility property that affect its value, the City generally revalues
utility property annually. To ensure that the assessment for such property is
proportional to the valuations for other property in Berlin, the City equalizes
the fair market value using the most recent DRA equalization ratio, and
assesses the property at that equalized value.
Prior to September 1 of each year, the City must determine and submit
the assessed value of all property in Berlin to the DRA. See RSA 21-J:34, I
(2020). In so doing, the City’s assessors apply the most recent equalization
ratio, which is the equalization ratio published by the DRA earlier in the same
year. See RSA 21-J:3, XIII (Supp. 2021). For the 2017 tax year, as of
September 1, the current median equalization ratio was the 2016 median
equalization ratio published by the DRA in early 2017.
Accordingly, prior to September 1, when setting the assessed value of
Smith Hydro for the 2017 tax year, the City applied the then-current DRA 2016
equalization ratio of 110.7% to the adjusted fair market value of the facility.
The City likewise applied the DRA 2016 equalization ratio of 110.7% in setting
the assessed value of any other property that was subject to revaluation for the
2017 tax year. It was not until the spring of 2018 that the DRA announced
that the 2017 median equalization ratio for Berlin was 96.2%.
In a written decision issued following the hearing, the BTLA reiterated its
position that, under “established law,” proportionality required application of
the current tax year’s median equalization ratio, not the prior tax year’s ratio.
The BTLA reasoned that “[i]t is one thing to question what statistic best
measures the level of assessment (median ratio or weighted mean, for
example), but quite another to require a party to prove what should be obvious
(i.e., that a current year statistic is more valid than a prior year statistic).” The
BTLA found the decisions of Appeal of City of Nashua, 138 N.H. 261 (1994),
Appeal of Andrews, 136 N.H. 61 (1992), and one of its own administrative
decisions issued in 2007, “dispositive” on this issue, and concluded that
Berlin’s arguments to the contrary were “without merit.” Accordingly, the BTLA
applied the DRA 2017 median equalization ratio of 96.2% to the City’s $49
million market value estimate of Smith Hydro, resulting in “an abated
assessment of $47.138 million.” The City moved for rehearing, which the BTLA
denied. This appeal followed.
On appeal, the City argues that the BTLA’s decision to apply the DRA
“after the fact” 2017 equalization ratio to determine the proportionality of the
City’s assessment of Smith Hydro was unlawful or unreasonable. The City
asserts that a taxpayer “cannot carry its burden of proving the general level of
assessment by solely relying upon one of the DRA equalization studies unless
the municipality actually used that ratio or stipulated to the validity of that
ratio.” In addition, the City argues, PSNH submitted no evidence regarding
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“whether or how it was proper to use” the DRA 2017 equalization ratio arrived
at in May 2018 to prove the general level of assessment for tax year 2017, i.e.,
valuations as of April 1, 2017.
PSNH counters that the City’s argument that PSNH failed to introduce
any evidence to support the use of the DRA 2017 median equalization ratio
“lacks merit both as a matter of fact and as a matter of law.” PSNH asserts
that it submitted sufficient evidence as to the proper equalization ratio to be
used when it requested, prior to the hearing, that the BTLA take administrative
notice of the DRA 2017 median equalization ratio and submitted an exhibit
showing what that ratio was for Berlin. According to PSNH, under “the
controlling legal standard,” no more was required to meet its burden of
establishing the proportional level of assessment than: (1) introducing evidence
of the DRA 2017 median equalization ratio; (2) the City introducing evidence of
the DRA 2016 median equalization ratio; and (3) the BTLA, “in its role as the
finder of fact,” concluding that the 2017 ratio should be applied. We disagree
with PSNH that simply introducing a DRA equalization ratio that the City did
not use was sufficient to carry its burden of proving the general level of
assessment in Berlin for the 2017 tax year.
Our standard for reviewing BTLA decisions is established by statute.
Appeal of Town of Chester, 174 N.H. ___, ___ (decided September 16, 2021) (slip
opinion at 3); see RSA 71-B:12 (2012); RSA 541:13 (2021). We will not set
aside or vacate a BTLA decision except for errors of law, unless we are satisfied
by a preponderance of the evidence that such order is unjust or unreasonable.
Appeal of Town of Chester, 174 N.H. at ___ (slip opinion at 3); see RSA 541:13.
The appealing party has the burden of demonstrating that the BTLA’s decision
was clearly unreasonable or unlawful. Appeal of Town of Chester, 174 N.H. at
___ (slip opinion at 3); see RSA 541:13. The BTLA’s findings of fact are deemed
prima facie lawful and reasonable. See RSA 541:13.
In a tax abatement appeal, the taxpayer bears the burden of proving by a
preponderance of the evidence that it is paying more than its proportional
share of taxes. Appeal of Pub. Serv. Co. of N.H., 170 N.H. 87, 93-94 (2017). To
satisfy this burden, the taxpayer must show that its property is assessed at a
higher percentage of fair market value than the percentage at which property is
generally assessed in the municipality. Id. at 94; see also Appeal of Andrews,
136 N.H. at 64-65. When resolving tax abatement appeals, the BTLA must
make specific factual findings regarding the fair market value of the taxpayer’s
property and the general level of assessment for the municipality. See Appeal
of City of Nashua, 138 N.H. at 263. We will uphold the BTLA’s factual findings
unless the evidence does not support them or they are erroneous as a matter of
law. See Appeal of Pub. Serv. Co. of N.H., 170 N.H. at 94; see RSA 76:16-a, V
(Supp. 2021) (providing that, on appeal from a BTLA tax abatement order, the
BTLA’s findings of fact “shall be final” and any appeal from the BTLA’s decision
“shall be limited to questions of law”).
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The general level of assessment for a given tax year represents the
proportion of fair market value at which property in the municipality is
generally assessed for tax purposes. Appeal of Town of Sunapee, 126 N.H. 214,
217 (1985). The taxpayer’s burden of proving the general level of assessment
in the municipality “can be difficult to carry.” Id. at 218. In certain
circumstances, the DRA equalization ratio may be used to meet the taxpayer’s
burden — such as when there is uncontroverted evidence that the municipality
used the DRA ratio in the assessment process for the tax year in question. See
id. However, if a municipality does not stipulate to the validity of the DRA’s
equalization ratio, or actually use that ratio, the taxpayer must introduce
further proof of the general level of assessment. See Milford Props., Inc. v.
Town of Milford, 120 N.H. 581, 583 (1980) (explaining that, in the absence of
evidence of the equalization ratio used by the town, the taxpayer bore the
burden of establishing the actual ratio of the assessed value to the fair market
value of other properties in the town for the tax year at issue).
PSNH, like the BTLA, relies primarily upon Appeal of City of Nashua as
controlling the outcome of this appeal. PSNH asserts that, in that decision,
this court “laid out the process which governs in the event a municipality does
not agree to stipulate to the use of a particular ratio.” According to PSNH, we
“recognize[d] that the BTLA has the ability and the authority to determine the
equalization ratio most reasonably representative of the general level of
assessment in a community for a given year.” Therefore, PSNH contends, in
this case, “the BTLA could properly conclude the 2017 median equalization
ratio properly reflected the general level of assessment in Berlin in 2017 as
opposed to the 2016 ratio.” PSNH, however, posits an unduly broad reading of
Appeal of City of Nashua.
In Appeal of City of Nashua, the city appealed the BTLA’s decision
granting property tax abatements for taxes assessed on an office building for
tax years 1988, 1989, and 1990. Appeal of City of Nashua, 138 N.H. at 263.
The city argued that the BTLA had misapplied the burden of proof standard set
forth in Appeal of Town of Sunapee by failing to require the taxpayers to
produce evidence on the validity of the DRA equalization ratios relied upon by
them for the tax years at issue to prove disproportionate taxation. See id. The
city had chosen “not to stipulate to the use of any equalization ratio in its
property assessments,” thereby “unduly magnif[ying]” the taxpayer’s already
difficult burden of proving the general level of assessment. Id. at 265-66.
Given the lack of any evidence of the equalization ratios “actually used” by the
city during the relevant tax years, the taxpayers “were compelled to urge” the
BTLA to adopt the DRA equalization ratios for those years. Id. at 266
(emphasis added).
Because the city neither disclosed to the BTLA what the appropriate
equalization ratios should be, nor disclosed how its ratios differed from the
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DRA ratios, we rejected the city’s position that the taxpayers had to introduce
further proof of the general level of assessment beyond the DRA ratios. Id. at
266-67. Such further evidence, we surmised, would have simply “necessitated
an expensive duplication” of the DRA’s ratio studies. Id. at 266. We noted,
however, that the taxpayer’s burden of proving the general level of assessment
did not relieve the city “of its preexisting obligation to use some method to
equalize tax assessments to insure proportionality.” Id. (quotation omitted).
We explained that “[i]f a municipality does not use a uniform equalization ratio
to ensure proportional assessments, it will have violated its obligation to
appraise property fairly for taxation purposes.” Id.
Thus, we held that a municipality must disclose its preferred
equalization ratio in a tax abatement case before the BTLA and, “[i]f it employs
its own uniform ratio . . . , a municipality must make a good faith offering of
[that] ratio, as well as the methodology by which it computed [that] ratio.” Id.
(emphasis added). In such a circumstance, the taxpayer, then, “may offer proof
that another ratio, perhaps the [DRA] ratio, more closely reflects the general
level of assessment” and, in the event of a disparity, the BTLA, in its role as
fact finder, “shall determine the equalization ratio most reasonably
representative of the general level of assessment.” Id. at 266-67.
Appeal of City of Nashua does not support PSNH’s position in this case
that the taxpayer can meet its burden of proving disproportionality simply by
offering evidence of an alternative DRA ratio that the municipality did not use.
See Appeal of Andrews, 136 N.H. at 64 (“When asked to consider taxpayer
proportionality, we have consistently held that in order to achieve
proportionality all taxpayers must be assessed at the same ratio.”). Rather, in
accordance with Appeal of City of Nashua, the City disclosed that, in setting
assessments for tax year 2017, it applied the DRA 2016 median equalization
ratio of 110.7%. It was undisputed that the City did not use the DRA “after the
fact” 2017 median equalization ratio of 96.2%. Thus, the burden was on PSNH
to prove, by a preponderance of the evidence, that Smith Hydro was assessed
at a different percentage of fair market value than the percentage applied to
other property in Berlin in 2017. See Milford Props., Inc., 120 N.H. at 582-83
(where there was no evidence that the town used an equalization ratio of 72%
in the tax year at issue, it was incumbent upon the taxpayer “to establish the
actual ratio of the assessed value to fair market value of other properties in the
town for that year”); Stevens v. City of Lebanon, 122 N.H. 29, 33 (1982) (if a
municipality does not stipulate to the validity of the DRA ratio “or otherwise
indicate its acceptance of the accuracy by actual use,” the taxpayer must
introduce further proof of disproportionality). To conclude otherwise would
result in determining the merits of PSNH’s abatement request based on an
equalization ratio that was not applied for tax year 2017 to any other taxpayer
in Berlin.
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We conclude that PSNH did not offer sufficient evidence to meet its
burden. When agreeing to admit PSNH’s exhibit showing the DRA 2017
median equalization ratio, the BTLA expressly noted that, standing alone, it did
not establish the propriety of a particular ratio for Berlin.1 Indeed, PSNH
acknowledged that it bore the burden of proving the general level of assessment
for property in Berlin for tax year 2017 and expressly “reserve[d] [its] right to
present additional evidence” if the City introduced evidence regarding the
general level of assessment. However, we have reviewed the record and agree
with the City that PSNH failed to introduce any evidence regarding the general
level of assessment in Berlin or supporting its preferred equalization ratio.
PSNH’s expert testified that she had limited knowledge on the general
topic of equalization ratios and, specifically, the process used by the DRA to
determine such ratios. The City’s experts testified concerning the equalization
ratio the City used when setting the 2017 assessment for property in Berlin,
and explained that the DRA 2016 ratio was used because it was the ratio that
was known as of the April 1 assessment date and the September 1 deadline for
submitting the assessed value of property in Berlin to the DRA. Nonetheless,
during the cross-examination of the City’s experts, PSNH did not question
either expert about the general level of assessment in Berlin in 2017, the
propriety of using any particular DRA equalization ratio, or whether the DRA
2016 ratio reflected the general level of assessment less accurately than the
DRA 2017 ratio. Given that PSNH put forth no evidence on the general level of
assessment in Berlin, we reject its assertion that we owe deference to the
BTLA’s determination. Although findings of fact by the BTLA are final, the
issue before us is whether there is sufficient evidence in the record to support
the BTLA’s decision, which presents a question of law. See Appeal of Clark Hill
Forest Prods., Inc., 128 N.H. 352, 356-57 (1986) (determining that the BTLA’s
decision was unsupported by sufficient evidence in the record); see also
Demers Agency v. Widney, 155 N.H. 658, 661 (2007) (sufficiency of the
evidence supporting an agency’s factual findings presents a question of law).
PSNH asserts that the City’s methodology of using the DRA 2016 median
equalization ratio for assessment purposes in 2017 is “untethered from . . .
good assessing practice.” However, “[d]isproportionality, and not methodology,
is the linchpin in establishing entitlement to a petition for abatement.” LLK
Trust v. Town of Wolfeboro, 159 N.H. 734, 739 (2010) (quotation omitted); see
Porter v. Town of Sanbornton, 150 N.H. 363, 369 (2003). To the extent PSNH
argues that the City’s use of the DRA 2016 ratio rendered the City’s 2017 tax
1We note that the DRA’s equalization studies do not precisely coincide with any particular tax
year. A tax year runs from April 1 to March 31. See RSA 76:2 (Supp. 2021). However, the DRA’s
equalization studies run from October 1 to September 30. See RSA 21-J:9-a, I (2020). Therefore,
no DRA equalization ratio is based on every sale occurring during the twelve months immediately
preceding April 1. The purpose of the DRA’s annual equalization studies is to ensure that “any
public taxes that may be apportioned” between municipalities “shall be equal and just.” RSA 21-
J:3, XIII (Supp. 2021).
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year assessments illegal, “a complaint that the assessment [is] illegal as a
whole [is] no ground for granting a petition for abatement.” Bretton Woods Co.
v. Carroll, 84 N.H. 428, 431 (1930) (explaining that abatements are granted
“upon strictly equitable principles only, and equity requires that [a taxpayer]
should not be relieved from [its] proportionate share of the common burden of
taxation at the expense of the other taxpayers” (quotations omitted)).
Accordingly, we hold that the BTLA’s decision to apply the DRA 2017
median equalization ratio to determine whether the tax placed on Smith Hydro
was disproportionately higher in relation to its true value than to other
property in general in Berlin was unjust and unreasonable. We remand for
further proceedings consistent with this opinion.
Reversed and remanded.
MACDONALD, C.J., and HICKS, HANTZ MARCONI, and DONOVAN, JJ.,
concurred.
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