BEFORE THE STATE BOARD OF EQUALIZATION

FOR THE STATE OF WYOMING

IN THE MATTER OF THE APPEAL OF )

FREMONT COUNTY ASSESSOR FROM )

A DECISION OF THE FREMONT COUNTY )             Docket No. 2000-171

BOARD OF EQUALIZATION - 2000 )

PROPERTY VALUATION )

(Parkhurst Property) )

___________________________________________________________________________________________________________________________

FINDINGS OF FACT,

CONCLUSION OF LAW,

DECISION AND ORDER

____________________________________________________________________________________________________________________________

APPEARANCES

Fremont County Assessor (Assessor), by Terrance R. Martin, Deputy Fremont County Attorney.

Wesley Roberts, Roberts & Watkins, P.C., for Dale and Marcia R. Parkhurst (Taxpayers).

DIGEST

This matter was considered by the State Board of Equalization, (State Board), Edmund J. Schmidt, Chairman, Roberta A. Coates, Vice-Chairman, and Sylvia Lee Hackl, Member, on written information and oral argument, pursuant to a Briefing Order dated January 11, 2001. This matter arises from a decision of the Fremont County Board of Equalization (County Board), concerning the 2000 valuation of property owned by Dale and Marcia Parkhurst (Taxpayers). The issue is:

Was the County Board's decision on the value of Taxpayers' property supported by substantial evidence, according to procedures required by law, and neither arbitrary, capricious, nor inconsistent with law?

In reviewing this matter, the State Board sua sponte raised a procedural question as to whether the order issued by the County Board was sufficient to meet the demands of Wyoming Statute Section 16-3-110, requiring the County Board to issue "findings of fact and conclusions of law separately stated." In a decision dated April 25, 2001, the State Board concluded that the County Board's failure to issue any basic findings of fact was fatal to appellate review of the case. Because the State Board was unable to determine if there was substantial evidence to support the County Board's findings, it remanded the case for entry of a written decision that set forth with specificity the findings of fact upon which the County Board relied. On October 16, 2001, the County Board entered specific findings in this matter and resubmitted them to the State Board. Additional briefs were filed by both parties, and the State Board heard oral arguments for a second time on February 11, 2002.

JURISDICTION

The State Board is mandated to "hear appeals from county boards of equalization. . . upon application of any interested person adversely affected" and to hold hearings after due notice pursuant to the Wyoming Administrative Procedure Act and prescribed rules and regulations. Wyo. Stat. 39-11-1-2.1(c). An appeal from a county board of equalization decision must be filed with State Board within thirty (30) days from entry of the county board decision. Rules, State Board of Equalization, Chapter 3, Section 2(a). The Assessor timely filed this appeal.

DISCUSSION

The Assessor appeals from a County Board order rejecting the assessed value of Taxpayers' property as determined by the Assessor for 2000. The original assessment notice established a market value for the property at $281,000.00. Taxpayers filed an appeal. The Assessor issued an amended assessment notice revising the value to $268,500.00. At the County Board hearing, Taxpayers presented a fee appraisal setting the market value at $230,000.00. The County Board rejected the value determined by the Assessor, and set the value of the property at $230,000.00.

FINDINGS OF FACT

1. Taxpayers, Dale and Marcia R. Parkhurst, own property located at 410 Big Bend Avenue, Riverton, Fremont County, Wyoming. The property consists of 0.6 acres, with a one-story brick house with attached three-car garage built in 1992, and a detached two-car brick garage built in 1996. The house consists of 2704 square feet on the main floor, and has a full basement, of which 2163 square feet is finished. [County Board Record, pp. 43, 69-70, 84-85].

2. On May 5, 2000, the Fremont County Assessor issued an assessment notice to Taxpayers, valuing their property at $281,700.00. The estimated taxes were $2,165.87. The 2000 assessment represented a $25,300.00 increase in the valuation of the property, and a $194.55 increase in the amount of estimated taxes. [County Board Record p. 26].

3. On June 2, 2000, Taxpayers filed a Statement to Contest Property Tax Assessment. Taxpayers presented the Assessor with a fee appraisal completed on May 28, 2000, valuing the property at $230,000.00. The Assessor then revised the valuation by lowering the condition of the house from good to average, and the type of construction from B to B-. These changes resulted in an amended assessment of $268,500.00. [County Board Record pp. 16, 44, 84-85; Transcript pp. 3, 16].

4. The County Board held a hearing on August 1, 2000, to hear Taxpayers' protest. [County Board Record pp. 12-13].

5. Taxpayers challenged the Assessor's valuation by introducing two fee appraisals of their property, both of which were conducted by Michael T. McDonald. One appraisal was dated June 19, 1997, and set the market value of Taxpayers' property at $240,000.00. The second appraisal was dated May 28, 2000, and estimated the market value of the property to be $230,000.00. [County Board Record, pp. 69-70, 84-85].⁽¹⁾

The 2000 appraisal compared Taxpayers' property to five other properties in the same neighborhood. Three of the sales were remote in time from the assessment date, having occurred in 1998. Furthermore, both the lot size and the square footage of the houses on the other properties were much smaller than Taxpayers' property.

[County Board Record, pp. 71, 75-77, 84-85; Transcript, pp. 7-8].

The appraisal also contained unusually large adjustments from the comparable sales to reach the value for Taxpayers' property. In addition, the appraiser assigned a value of only $20,000.00 to the detached garage, despite Taxpayers' acknowledgment that it cost $30,270.00 to build. Finally, the appraisal listed an incorrect sale amount for the first comparable property. [County Board Record, pp. 45, 71, 75-77, 80, 84-85; Transcript, pp. 7-8, 10-11].

6. Mr. McDonald testified the value he assigned to the property in 1997 was higher than the 2000 valuation due to neighborhood decline, and because the improvements were "overbuilt" for the neighborhood. He concluded the neighborhood was declining because the comparable properties sold for less than the original asking price. [Transcript, pp. 7-8].

7. Taxpayers also introduced prior assessment schedules indicating that the value for the property as determined by the Assessor had varied during the previous six years:

MARKET VALUE

[County Board record, pp. 18-27].

8. Taxpayers testified the former Assessor had accepted the 1997 appraisal, and had revised the value of their property accordingly. They argued that the current Assessor should have accepted the 2000 appraisal, and should have set the value of their property at $230,000.00. [Transcript, pp. 3, 6].

9. The Assessor testified she used the Computer Assisted Mass Appraisal (CAMA) system to value Taxpayers' property in 2000. She explained that in 1997 and 1998, the previous assessor had overridden the CAMA system to set the value of the property at the amount reflected in the 1997 appraisal. The override was removed when the property was valued in 1999. Taxpayers did not appeal the 1999 valuation. The Assessor did revise the original 2000 valuation of $281,700.00 after Taxpayers presented her with the May 28, 2000, appraisal. She revised the valuation by lowering the condition of the house from good to average, and the type of construction from B to B-, which resulted in an amended assessment of $268,500.00. [County Board Record pp. 16, 44, 84-85; Transcript pp. 3, 16].

10. The Assessor also introduced evidence of comparable sales upon which she relied in valuing Taxpayers' property.

[County Board Record, pp. 43, 2^nd page 85; Transcript pp 10-16]

11. The County Board entered its order on September 25, 2000. The order contained only three findings of fact:

1. The value of the property as established by the County Assessor is presumed valid, accurate and correct.

2. The Petitioner has presented sufficient credible evidence to refute the presumption of validity.

3. The value of the property as determined by the County Assessor is not considered a valid, accurate and correct estimate of the current actual fair market value of the property.

The County Board then ordered that the value of Taxpayers' property be set at $230,000.00 [County Board Record, p. 7]. ⁽²⁾

12. On April 25, 2001, the State Board remanded the case to the County Board for "entry of a written decision that sets forth with specificity the findings of fact" relied upon by the County Board. On October 16, 2001, the County Board issued the following findings:

1. County Assessor did not consider the 1997 Certified Appraisal on subject property even though it had been delivered and accepted by Assessor and used for adjustment purposes in 1997.

2. Inconsistencies in land valuation methods were found with the Assessor's Office:

3. The 2000 Appraisal was performed by a Wyoming Certified Appraiser using the cost approach method. Only a five percent depreciation factor was used. No economic obsolescence was factored into said appraisal even though this home was overbuilt for the neighborhood in which it is located. Had the Appraiser given more depreciation and/or attributed economic obsolescence, it would have resulted in a lower market value.

4. Comprehensive sales analysis shows a trend of declining values in this neighborhood. Sales used in the appraisal are within three to four blocks of subject property. The Assessor; [sic] however, used comparable sales outside of the subject property neighborhood and does not reflect the correct market value.

13. Any Discussion above or Conclusion of Law below which includes a finding of fact may also be considered a Finding of Fact and, therefore, is incorporated herein by this reference.

CONCLUSIONS OF LAW

14. The notice of appeal was timely filed and the State Board has jurisdiction to determine this matter.

15. The County Board is an agency subject to the provisions of the Wyoming Administrative Procedure Act. Section 16-3-110 requires an agency to issue a written decision following a contested hearing, which decision "shall include findings of fact and conclusions of law separately stated." The findings of fact must enable a reviewing tribunal to trace the agency's reasoning from the evidence in the record to its eventual findings of ultimate fact, and legal conclusions. Holly Sugar Corporation v. State Board of Equalization, 839 P.2d 959, 963 (Wyo. 1992).

16. The decision in this case is based upon the findings of fact issued by the County Board on October 16, 2001, after remand of the original County Board order.

17. The Board's inquiry is limited to whether the County Board's decision reversing the Assessor's amended 2001 valuation of Taxpayers' property, and establishing a value of $230,000.00, is: (a) arbitrary, capricious and abuse of discretion or otherwise not in accordance with law; (b) in excess of statutory jurisdiction or authority; (c) without observance of procedures required by law; or (d) unsupported by substantial evidence. Rules, Wyoming State Board of Equalization, Chapter 3, 9.

18. The Assessor argues that the County Board's decision was "an arbitrary, capricious abuse of their discretion and not in accordance with law and not supported by substantial evidence." [Second Opening Brief of Petitioner, pp. 1, 10]. Before addressing the Assessor's specific contentions, we will set forth a brief review of the basic principles and procedures of taxation relevant to this matter.

19. All taxable property must be valued annually at fair market value. Wyo. Stat. 39-13-103(b)(ii). Fair market value is defined as:

[T]he amount in cash, or terms reasonably equivalent to cash, a well informed buyer is justified in paying for a property and a well informed seller is justified in accepting, assuming neither party to the transaction is acting under undue compulsion, and assuming the property has been offered in the open market for a reasonable time . . ..

Wyo. Stat. 39-11-101(a)(vi).

20. Article 15, Section 11 of the Wyoming Constitution requires that all property "be uniformly assessed for taxation, and the legislature shall prescribe such regulations as shall secure a just valuation for taxation of all property, real and personal." The legislature, in turn, has required the Department of Revenue (Department) to "prescribe by rule and regulation the appraisal methods and systems for determining fair market value using generally accepted appraisal standards." Wyo. Stat. 39-13-103(b)(ii).

21. The Department has promulgated rules prescribing the methods for valuing property. The acceptable methods include a sales comparison approach, a cost approach, an income or capitalized earnings approach, and the Computer Assisted Mass Appraisal (CAMA) system. Rules, Department of Revenue, Ch. 9, 6 (a), (b), (c), (d). The Wyoming Supreme Court has recognized the validity of valuations derived from the CAMA system. Gray v. Wyoming State Board of Equalization, 896 P.2d 1347 (Wyo. 1995). In fact, the Court rejected the use of actual sales price for properties in favor of the value established by the CAMA system because of the equality and uniformity derived through its use. Id. at 1351.

22. An assessor's valuation is presumed valid, accurate, and correct. This presumption survives until overturned by credible evidence. Teton Valley Ranch v. State Board of Equalization, 735 P.2d 107,113 (Wyo. 1987). The presumption is especially valid where the Assessor has valued the property in accordance with the Department's Rules and Regulations. Rules, Department of Revenue, Chapter 9, 6(b), (d).

23. Because the presumption in favor of an assessor's valuation is rebuttable, a taxpayer may introduce sufficient evidence to overcome it. Basin Electric Power Coop. v. Department of Revenue, 970 P.2d 841, 851 (Wyo. 1998). If the taxpayer does so, the burden shifts to the assessor to indicate how the property was valued. The county board must then evaluate all of the evidence, bearing in mind that its conclusions must be supported by substantial evidence.

24. "'Substantial evidence' is a term of art, best described as relevant evidence that a reasonable mind can accept as adequate to support an agency's conclusion." Sidwell v. State Worker's Compensation Div., 977 P.2d 60, 63 (Wyo. 1999). While substantial evidence may be less than the weight of the evidence, it cannot be clearly contrary to the overwhelming weight of the evidence. The Wyoming Supreme Court has held that "an agency's action is arbitrary and capricious and must be reversed if any essential finding is not supported by substantial evidence." Amax Coal West, Inc. v. State. Board of Equalization, 896 P.2d 1329, 1335 (Wyo. 1995), citing Majority of Working Interest Owners in Buck Draw Field Area v. Wyoming Oil and Gas Conservation Commission, 721 P.2d 1070, 1079 (Wyo. 1986) and Amax Coal v. State Board of Equalization, 819 P.2d 825, 831 (Wyo. 1991).

25. In this case, the Assessor utilized the CAMA system to value Taxpayers' property. Thus, her valuation was presumed valid, accurate and correct. Although Taxpayers' disagreed with the valuation, and with the Assessor's refusal to override the CAMA system to enter the value they preferred, they nevertheless demonstrated no error or inaccuracy in the Assessor's use of the CAMA system. They simply articulated a difference of opinion as to the value of their property, which they supported through the introduction of a recent fee appraisal. A mere difference of opinion as to value is not sufficient to overcome the presumption in favor of an assessor's valuation. Basin Electric Power Coop. v. Department of Revenue, 970 P.2d 841, 851 (Wyo. 1998); J. Ray McDermott & Company v. Hudson, 370 P.2d 364, 370 (Wyo. 1962).

26. We turn now to the specific findings entered by the County Board, to see whether they are supported by substantial evidence. The first finding was, "County Assessor did not consider the 1997 Certified Appraisal on subject property even though it had been delivered and accepted by Assessor and used for adjustment purposes in 1997." Although this is an accurate statement, it does not constitute substantial evidence in support of the County Board's ultimate conclusion and order.

The Assessor acted in accordance with generally accepted appraisal practices in not considering the 1997 appraisal. The 1997 appraisal relied upon the sales comparison approach to determine a value for Taxpayers' property. One of the fundamental principles of the sales comparison approach is that it must be reflective of the actions of buyers and sellers in the marketplace. The further removed in time the sale of a comparable property is from the date of the appraisal, the less value it has as an indicator of current market value. International Association of Assessing Officers, Property Assessment Valuation, Chap. 6, pp. 97-113 (2d ed., 1996).

The most recent sale in the 1997 appraisal was May of 1997 - three years prior to the assessment date. The Assessor acted correctly in not adjusting her valuation on the basis of this out-of-date appraisal. Whether or not the previous assessor properly overrode the CAMA system to accept the value set forth in the 1997 appraisal, it is clear that the 1997 appraisal should have had no weight in determining the value of the Taxpayers' property in 2000.

27. The second finding entered by the County Board was that "[i]nconsistencies in land valuation methods were found with the Assessor's Office." The following information was then set forth:

Again, this is an accurate statement, but it does not constitute substantial evidence in support of the County Board's ultimate order. To begin with, the evidence clearly demonstrated that the valuations from 1994 through 1997 were made by previous assessors. [County Board Record, p. 44]. The former assessor had to override the CAMA system valuation in 1997 and 1998 to accommodate Taxpayers' insistence that the value of their property be the same as that determined by the 1997 fee appraisal. The current Assessor removed the override in 1999, resulting in an increased valuation, which Taxpayers did not protest. See Paragraph 9, supra.

The removal of the CAMA system override resulted in a significant change to the property's valuation. See Paragraph 10, supra. During the hearing, the Deputy County Assessor attempted to explain the fluctuations in land values, but was prevented from doing so by the hearing officer, who cut off her response. [Transcript, p. 16]. Thus, the evidence is incomplete as to the reasons for the fluctuations, but it is clear that three factors were involved: (a) Taxpayers' efforts to reduce their property valuation; (b) the previous assessor's override of the CAMA system; and (c) fluctuating land values.

To the extent that the fluctuations reflect the actions of previous and current assessors to work with Taxpayers to establish a fair market value for their property, such practices should be encouraged. The information should not be considered as "evidence" of inconsistent assessment practices, nor does such information, by itself, constitute "substantial evidence" upon which a county board may base a reversal of an assessor's valuation.

28. The third and fourth findings shall be considered together. The County Board found:

3. The 2000 Appraisal was performed by a Wyoming Certified Appraiser using the cost approach method. Only a five percent depreciation factor was used. No economic obsolescence was factored into said appraisal even though this home was overbuilt for the neighborhood in which it is located. Had the Appraiser given more depreciation and/or attributed economic obsolescence, it would have resulted in a lower market value.

4. Comprehensive sales analysis shows a trend of declining values in this neighborhood. Sales used in the appraisal are within three to four blocks of subject property. The Assessor; [sic] however, used comparable sales outside of the subject property neighborhood and does not reflect the correct market value.

The record does not support these findings. First, the 2000 appraisal, while detailed, was based on sales which were from seven months to two years prior to the assessment date. [County Board Record, pp. 71-77, 84-85]. Second, the properties selected were not similar in size or construction to Taxpayers' property, requiring the appraiser to make unusually large adjustments, ranging from $77,870.00 to $110,570.00 (53% to 98%). [County Board Record, pp. 71, 85.]

Finally, the record does not support the County Board's finding that "[c]omprehensive sales analysis shows a trend of declining values in this neighborhood." The only evidence of "declining values" was the fee appraiser's testimony that the sales price for two of the five comparable properties was less than the original listing price, and his opinion that this demonstrated "the neighborhood where this house is located is going down in price." [Transcript, p. 8]. This does not constitute substantial evidence; the appraiser offered his opinion relating to only two sales, both of which were remote in time from the assessment date. Furthermore, a difference between a listing price and a sales price may demonstrate only that the original price was too high, not that an entire neighborhood is declining in value.

While the 2000 appraisal may have been adequate to rebut the presumption of validity afforded the Assessor's valuation, the County Board was incorrect in discounting the Assessor's comparable sales, which she offered in support of her valuation. The sales relied upon by the Assessor were of properties far more comparable in size and construction to Taxpayers' property than were those selected by the fee appraiser. All of the Assessor's comparable properties were within 1 mile of Taxpayers' property. [County Board Record, Map introduced by Assessor (2^nd page 85)]. To the extent that some of the comparable properties were perceived as being located in a more desirable part of the community, this was taken into account through the CDU ("condition, desirability and utility") factors. [Transcript, p. 15]. Most importantly, the comparable sales relied upon by the Assessor were closer in time to the assessment date than most of those selected by the appraiser, ranging in time from five to thirteen months prior to the assessment date. The Assessor met her burden of explaining the value determined for Taxpayers' property.

29. The County Board's findings are not supported by substantial evidence. As such, the County Board's order was arbitrary and capricious and must be reversed. See Amax Coal West, Inc. v. State. Board of Equalization, 896 P.2d 1329, 1335 (Wyo. 1995), citing Majority of Working Interest Owners in Buck Draw Field Area v. Wyoming Oil and Gas Conservation Commission, 721 P.2d 1070, 1079 (Wyo. 1986) and Amax Coal v. State Board of Equalization, 819 P.2d 825, 831 (Wyo. 1991).

ORDER

IT IS THEREFORE HEREBY ORDERED:

The decision of the County Board overturning the Assessor's revised valuation of Taxpayers' property, and setting a value of $230,000.00, shall be and the same is, hereby reversed, and the Assessor's revised valuation of $268,500.00 shall be reinstated.

Pursuant to Wyo. Stat. 16-3-114 and Rule 12, Wyoming Rules of Appellate Procedure, any person aggrieved or adversely affected in fact by this decision may seek judicial review in the appropriate district court by filing a petition for review within 30 days of the date of this decision.

DATED this 23^rd day of May, 2002.

STATE BOARD OF EQUALIZATION

Edmund J. Schmidt, Chairman

Roberta A. Coates, Vice-Chairman

Sylvia Lee Hackl, Member

ATTEST:

Wendy Soto, Executive Secretary

1. Due to the organization of the record on appeal, documents in the two appraisals have been mixed together. The 1997 appraisal is found on pages 69 and 70. The descriptions of the comparable sales which follow on pages 71-77 clearly belong with the 2000 appraisal, which is found on pages 84 and 85.

2. We note again the statutory requirement, reiterated in the County Board's own rules, that the written decision must be issued no later than the first Monday in August. Wyo. Stat. 39-13-102(c)(v); Rules and Regulations of the Fremont County Board of Equalization, Section 11 (eff. 5/1/90). This deadline is directly related to the County Board's duty to set the mill levies by the first Tuesday in August, Wyo. Stat. 39-13-102(g), which cannot be accomplished properly unless all tax protests have been decided. While the State Board will not reverse the County Board on this basis, we again strongly caution the County Board to complete its hearings in accordance with the statutory requirements.