BEFORE THE STATE BOARD OF EQUALIZATION
FOR THE STATE OF WYOMING
IN THE MATTER OF THE APPEAL )
BENTLEY-MILLER WYOMING, INC. FROM )
A DECISION OF THE PLATTE ) Docket No. 2002-74
COUNTY BOARD OF EQUALIZATION )
CONCERNING 2002 PERSONAL PROPERTY )
VALUATION )
FINDINGS OF FACT
CONCLUSIONS OF LAW
DECISION AND ORDER
APPEARANCES
Bentley-Miller Wyoming, Inc., appearing by and through Layne E. Mann, Attorney at Law but not licensed to practice law in Wyoming. [County Board Record, Transcript, p. 9].
Platte County Assessor, Lynda Chaffin, appearing pro-se at the hearing and Eric M. Alden, Platte County Attorney, having filed a letter of response.
DIGEST
This matter was considered by the State Board of Equalization (State Board) consisting of Edmund J. Schmidt, Chairman and Roberta A. Coates, Vice-Chairman, on written information and oral argument pursuant to a Oral Argument Order dated September 6, 2002. The appeal arises from a decision of the Platte County Board of Equalization (County Board) affirming the 2002 valuation by the Platte County Assessor (Assessor) of property owned by Bentley-Miller Wyoming, Inc. (Petitioner) located in Platte County, Wyoming. The Petitioner questions whether the County Board was incorrect in not considering Petitioner’s purchase price as fair market value.
Stated another way, was the County Board decision affirming the Assessor’s value of Petitioner’s property supported by substantial evidence, according to procedures required by law, and neither arbitrary, capricious, nor inconsistent with law?
JURISDICTION
The State Board is mandated to "hear appeals from county boards of equalization . . . upon application of any interested person adversely affected" and hold hearings after due notice pursuant to the Wyoming Administrative Procedure Act and prescribed rules and regulations. Wyo. Stat. § 39-11-102.1(c). An appeal from a county board of equalization decision must be filed with the State Board within thirty (30) days from entry of the County Board decision. Rules, Wyoming State Board of Equalization, Chapter 3, § 2.
DISCUSSION
Petitioner appealed the 2002 assessment of restaurant equipment, personal property, located in Platte County, Wyoming. Assessor testified at the County Board hearing that she valued Petitioner’s property using depreciation schedules and trending tables prepared by and mandated by the Department of Revenue for the State of Wyoming (Department) for use in the Department’s computer assisted mass appraisal system (CAMA).
Petitioner questioned the value assigned to the property because it had been recently purchased by Petitioner and, using an allocation formula, Petitioner estimated a purchase price lower than the Assessor’s value.
The County Board affirmed the Assessor’s valuation of Petitioner’s property. The County Board issued its decision on July 2, 2002. Petitioner filed its Notice of Appeal on July 22, 2002. Petitioner originally asked for a de novo hearing but the request was denied based on Rules, Wyoming State Board of Equalization, Chapter 3, §9.
FINDINGS OF FACT
1. Petitioner’s Notice of Appeal was filed on July 22, 2002 from a County Board order dated July 2, 2002.
2. An audiotape and exhibits of the County Board hearing were filed with and reviewed by the State Board.
3. The Assessor valued Petitioner’s restaurant personal property at $48,360.00 in 2002. In 2001, the Assessor had valued the equipment at $44,780.00 [County Board Record, p. 00011 and Assessor’s Exhibits 2 and 6, p.6].
4. Petitioner wants the restaurant equipment valued for the purchase price they say was paid. In the Statement to Contest Property Tax Assessment Mr. Mann wrote:
The subject personal property was purchased used during 2001 from the previous owner for $11,694. Bentley-Miller feels their purchase price represents the fair market value for this used personal property. Restaurant equipment depreciates very rapidly. There is almost a non-existent market for used restaurant equipment in Wheatland. Thus, its fair market value is considerably less than what it would cost to replace it with new equipment. For assessment purposes it is our understanding that the relevant issue is “what is the fair merket (sic) value of the personal property?” and not “what would it cost to replace it with brand new equipment?”
[County Board Record, p. 0002].
Petitioner clarified this position in the testimony and estimated $9,500.00 as the value of the equipment at the time of purchase as some additional equipment was added after the purchase and, therefore, Petitioner testified the value was approximately $16,000. Petitioner derived the value of the original purchase by taking the $28,500 paid for equipment and dividing it by three for the three restaurants purchased. Petitioner describes this value as arbitrary and we agree. [County Board Record, audiotape].
5. The Assessor used the Department’s CAMA system to establish value. This system uses Standard Industrial Trending Tables. This system is uniformly used throughout the State of Wyoming. [County Board Record, audiotape and P. 00010].
6. The Department conducts a study annually using available information about personal property. The Department interprets the data and makes recommendations which contain updated cost tables for equipment, trend-factor tables, and depreciation tables. All of the tables in the CAMA system use the cost approach to value. [County Board Record, audiotape].
7. The Assessor introduced schedules containing the equipment detail including a description of the equipment, the date the equipment was acquired, what was reported by the owner for the original cost of the equipment, and the Replacement Cost New Less Depreciation (RCNLD) value. [County Board Record Assessor’s Exhibit 4, p. F].
8. A majority of the equipment in this matter was purchased in 1988. The Assessor testified the useful life for depreciation was ten years. Therefore, a majority of the equipment was fully depreciated and was valued at a residual value. [County Board Record Assessor’s Exhibit 4, p. F and audiotape].
9. Department rules allow a residual value, value for equipment in use, of 25% of the original cost, unless the property tax appraiser has collected sufficient market information to indicate a different residual value. Rules, Wyoming Department of Revenue, Chapter 9, § 6(b)(iv)(D). This residual value is applied if the years of use of the equipment exceeds the estimated years of depreciation.
10. The cost of the equipment was established by the owner when it was acquired and Petitioner did not question the original cost information. [County Board Record, audiotape].
11. Petitioner verified the Assessor’s list of equipment on April 19, 2002, and admitted that the Assessor had not included two new pieces of equipment. The Assessor also found and assessed sixty seats and decor that had not been previously valued. [County Board Record, audiotape].
12. Petitioner introduced two letters that surmised depreciation in excess of the depreciation as set by the Department and surmised a residual value less than allowed by the Department rules. The Assessor contacted one of the writers who explained as a reseller he would buy the equipment less than he would sell it for use in a restaurant. [County Board Record pp. 00020, 00021, Petitioner’s Exhibits 4 and 5]. The writers of both letters were not available to defend their theories, and there was no evidence the writers had viewed the property in question.
13. The consideration between Petitioner, the buyer, and the seller included a real estate lease, a percent of sales and an agreement to operate the business. As the Asset Purchase Agreement recites in Section 1.01; “As part of the consideration for the transaction contemplated herein, Buyer will lease the Real Estate and will use its business skills to operate the Restaurants to maintain and increase sales volumes.” [County Board Record p. 00022, Petitioner’s Exhibit 6]. The purchase agreement recites that all the equipment in the three locations is being purchased for $28,500 but the other terms of the agreement demonstrate the equipment purchase was only a portion of the agreement and the other terms reflect there were other considerations exchanged. For instances, Section 3.03 provides for consideration of paying one-half the cost of acquiring the franchise, Section 6.01 provides for 7.25% payment of the net sales and Section 6.02 provides for an option to purchase real estate. [County Board Record p. 00022, Petitioner’s Exhibit 6]. All the terms are additional consideration for the entire transaction and it is doubtful the personal property would have been sold but for all of the terms.
14. Petitioner introduced a letter from Stewart W. Rusch, a partner in Rusch & Rusch Investments, which was a partner of the selling entity of the property. Mr. Rusch wrote the purchase price was fair market value. This letter did not describe the conditions of the sale such as if the property was offered in the open market, if the buyer was well-informed, etc. [County Board Record, p. 00019, Petitioner’s Exhibit 3].
15. The sale included Arby’s restaurants in Wheatland, Riverton, and Douglas, communities in three different counties in Wyoming. [County Board Record p. 00022, Petitioner’s Exhibit 6].
16. Petitioner appealed the value of the restaurant equipment in all three counties. [State Board of Equalization Dockets 2002-74, 2002-82, and 2002-83].
17. The equipment is being used in the restaurant. [County Board Record, audiotape].
18. Petitioner stated there is no market for restaurant equipment in Wheatland but offers no proof. [County Board Record, audiotape].
19. The Assessor introduced an exhibit demonstrating that if the value of the equipment and the square footage of various fast food restaurants in the Wheatland community were compared the value of Petitioner’s property is average. The Assessor also introduced a comparison of the value per square foot of equipment for Arby’s restaurants in the state of Wyoming which shows the equipment value in Wheatland is comparable if not low. [County Board Record, p. 00022, Assessor’s Exhibit 5, pp. A and B].
20. Any Discussion above or Conclusion of Law below which includes a finding of fact may also be considered a Findings of Fact and, therefore, is incorporated herein by this reference.
CONCLUSIONS OF LAW
21. The Notice of Appeal was timely filed, within thirty (30) days of the County Board order, and the State Board has jurisdiction to hear this matter.
22. 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).
23. The Wyoming Constitution, Article 15, Section 11, provides "[a]ll property…shall 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."
24. The County Board is required to hear and determine the complaint of any person relative to any property assessed or valued. Wyo. Stat. § 39-13-102(c)(iv).
25. Our inquiry is limited to whether the 2002 value established by the County Board is: (a) arbitrary, capricious, an 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.
26. All taxable property is to be valued at its fair market value. “[T]he department shall prescribe by rule and regulation the appraisal methods and systems for determining fair market value using generally accepted appraisal standards.” (emphasis added) Wyo. Stat. § 39-13-103(b)(ii).
27. The Assessor followed the rules of the Department and applied the trending factor the reported cost of equipment and applied the Department’s depreciation rate to derive a value using the cost method.
28. The rules of the Department require the value of personal property to reflect the trade value and include factors such as value in place and usefulness to owner and actual income produced. Rules, Wyoming Department of Revenue, §6.
29. The cost approach is a method of estimating value. The approach may also be used to establish value for personal property through the process of cost estimation. The cost approach relies on the principle of substitution in which an informed buyer will not pay more for a property than its comparable replacement. Rules, Wyoming Department of Revenue, §6(b)
30. To calculate the cost value, the Department’s one requires:
(ii) Accurate, pertinent physical data regarding the property to which cost data may be applied;
(iii) Current cost data which considers appreciation in the case of real and personal property;
(B) Typical reproduction and replacement costs may be estimated by the quantity survey method, the unit-in-place method, the comparative unit method, or the trended original cost method
(iv) Depreciation in the case of real and personal property. For personal property:
(A) The Ad Valorem Tax Division shall provide depreciation factors for use by property tax appraisers. ....
Rules, Wyoming Department of Revenue, §6(b)
31. The economic lives for equipment are developed by the Department from IRS Publication 534 and 946, Marshall Swift Valuation Service, Assessor’s Committee Recommendations and other valuations systems and information. Rules, Wyoming Department of Revenue, §6(b)(iv)(B).
32. According to the Department of Revenue’s rule 6(b)(v):
(H) “Trended original cost method” means the procedure... For personal property, acquisition or original costs shall be trended to reflect current replacement costs by application of a cost trend factor developed annually by the Ad Valorem tax Division. The result is replacement cost new, or rcn. Trending of acquisition or original costs shall cease when the residual value has been reached except when refurbishing or maintenance changes the effective age.
33. All property in Wyoming must be uniformly assessed and the selling price may not be the best evidence to establish fair market value. Gray v. Wyoming State Board of Equalization, 896 P.2d 1347, 1351 (Wyo. 1995). The court found that using the sales price of a particular piece of property to value that piece of property violates the constitutional test of equality. Gray v. Wyoming State Board of Equalization, supra, at 1352. As the court observed:
Reliance upon actual sales prices, in lieu of the methods adopted by the State Board may well lead to discrimination and lack of equality and uniformity. While one method of arriving at assessed valuation, the sales comparison approach, may rely upon actual sales, it is not limited to the sale price for the particular property involved. We hold the Assessor followed a valuation method properly adopted by the State Board in this case. It was applied uniformly to all properties and, like the district court, we do not perceive any arbitrary, capricious, or unlawful action by the Assessor, nor is there any abuse of discretion.
Gray v. Wyoming State Board of Equalization, supra, at 1351:
34. An Assessor’s valuation is presumed valid, accurate, and correct, a presumption which survives until overturned by credible evidence. Teton Valley Ranch v. State Board of Equalization, 735 P. 2d 107,113 (Wyo. 1987). A mere difference of opinion as to value is not sufficient to overturn this presumption. J. Ray McDermott & Company v. Hudson, 370 P. 2d 364, 370 (Wyo. 1962).
35. One question before the State Board is whether there is substantial evidence in the record that reasonably supports the conclusions reached by the County Board. As a reviewing body, we will not substitute our judgment for findings reasonably supported by evidence in the County Board record. Laramie County Board of Equalization v. State Board, 915 P.2d 1184, 1188-1189 (Wyo.1996); Amax Coal v. State Bd. Of Equalization, 819 P.2d 825 (Wyo. 1991); Sage Club, Inc. v. Employment Sec. Comm'n., 601 P.2d 1306, 1310 (Wyo. 1979). While substantial evidence may be less than the weight of the evidence, it cannot be clearly contrary to the overwhelming weight of the evidence. As the Wyoming Supreme Court has stated, substantial evidence ". . . is more than a mere scintilla of evidence or suspicion of a fact to be established." Mountain Fuel Supply Company v. Public Service Commission of Wyoming, 662 P.2d 878, 882 (Wyo. 1983). “Substantial evidence is relevant evidence which a reasonable mind might accept in support of the conclusions of the agency.” Amax Coal v. State Board Of Equalization, 819 P.2d 825 at 828 (Wyo. 1991).
36. 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., 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 Bd. Of Equalization, 819 P.2d 825(Wyo. 1991). “Substantial evidence is that quantum of relevant evidence which would be accepted by a reasonable mind as adequate to support the conclusion.” Gray v. Wyoming State Board Of Equalization, 896 P.2d 1347 (Wyo. 1995).
37. The Assessor used the personal property schedules as developed by the Department to value Petitioner’s property. The schedules were developed with publicly available information and these schedules were uniformly applied in the county and throughout the state of Wyoming. This results in uniformity and equality as demonstrated by the Assessor’s Exhibit 5, pp. A and B.
38. The Assessor complied with the rules of the Department. If rules have been properly promulgated pursuant to statutory authority they have the force and effect of law. Department of Revenue v. Buggy Bath Unlimited, Inc., 2001 WY. 27, 18 P.3rd 1182 (Wyo. 2001). Therefore, the Assessor complied with the law.
39. The price assigned to the property by the Petitioner is flawed for several reasons. The value is arbitrary as observed by the Petitioner’s agent. Arbitrary prices do not reflect fair market value. The terms of the sale, whether this was an open market sale, were not presented so there is no evidence the sale price reflected fair market value. The consideration as recited in the sale agreement is more than the $28,500.00 but includes a lease agreement, a portion of net sales and other terms.
40. Petitioner introduced two letters that were not supported by testimony or other evidence. These letters were hearsay. The letters stated that restaurant equipment depreciates at a faster rate than set by the Department and the residual value is less than allowed by the Department. Further the writers had never viewed the equipment and did not present underlying evidence to support their conclusions. The County Board was not arbitrary and capricious by rejecting such information. As the Wyoming Supreme Court observed in Wyoming Department of Employment, Unemployment Insurance Commission v. SF Phosphates, LTD., 926 P.2d 199, 202 (Wyo. 1999):
With regard to the claimant’s alleged threat against the human resources manager, the commission was justified in accepting the claimant’s first-hand testimony over the second-hand hearsay testimony presented by Lake on behalf of SF Phosphates. See City of Casper, 851 P.2d at 4. The agency is charged with determining the credibility of the witnesses and the ultimate weight to be assigned to the evidence.
Also, hearsay evidence was rejected in J.H. Story, M.D. v. Wyoming State Board of Medical Examiners, 721 P.2d 1013, 1018 (Wyo., 1986):
Where hearsay evidence is by statute admissible in administrative proceedings, it is often held that it must be probative, trustworthy and credible; and, although it may not be the sole basis for establishing an essential fact and is insufficient to support an administrative decision, it may be considered as corroborative of facts otherwise established.
41. The concept of residual value for equipment in use is logical. It is logical that even if the total cost of the equipment has been depreciated the equipment has value, because it is being used. The County Board was not arbitrary in accepting a residual value from duly adopted rules. The letter surmising a smaller residual value was not supported by testimony or first-hand knowledge.
42. The County Board could have chosen to accept the sales price the Petitioner presented. However, they did not. The County Board accepted the appraised value of the Assessor, and the Petitioner failed to meet its burden of showing the Assessor was incorrect.
43. The price paid for a property does not necessarily determine fair market value. Gray v. Wyoming State Board of Equalization, 896 P.2d 1347 (Wyo. 1995). The Petitioner failed to present enough evidence that the sales of the subject property met the conditions of a fair market value sale. Therefore, the County Board and the Assessor was not bound to accept the sales price. Union Pacific Railroad v. Wyoming State Board of Equalization, 802 P.2d 856, 861 (Wyo. 1990).
ORDER
IT IS THEREFORE HEREBY ORDERED:
The decision of the Platte County Board of Equalization affirming the Assessor’s 2002 fair market value of the Petitioner’s property is affirmed.
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 18th day of February, 2003.
STATE BOARD OF EQUALIZATION
______________________________________
Edmund J. Schmidt, Chairman
_____________________________________
Roberta A. Coates, Vice-Chairman
ATTEST:
__________________________________
Wendy J. Soto, Executive Secretary