BEFORE THE STATE BOARD OF EQUALIZATION
FOR THE STATE OF WYOMING
IN THE MATTER OF THE APPEAL OF )
NATRONA COUNTY ASSESSOR FROM )
A DECISION OF THE NATRONA COUNTY ) Docket No. 2003-132
BOARD OF EQUALIZATION - 2003 )
PROPERTY VALUATION )
(Casper Hospitality Group, d/b/a Wonder Bar) )
FINDINGS OF FACT,
CONCLUSION OF LAW,
DECISION AND ORDER
William W. Harden, Deputy County Attorney for Natrona County, Wyoming, for Susan Dewitt, Natrona County Assessor (Assessor).
The property owner and taxpayer (Taxpayer), Casper Hospitality Group, LLC, failed to appear or file a brief with the State Board of Equalization (State Board). Pat Sweeney appearing before the Natrona County Board of Equalization (County Board).
This matter was considered by the State Board, consisting of Roberta A. Coates, Chairman, Alan B. Minier, Vice-Chairman, and Thomas R. Satterfield, Board Member, on written information, pursuant to a Briefing Order dated January 23, 2004. This matter arises from a decision of the County Board, concerning the 2003 valuation of property owned by Casper Hospitality Group, LLC, at a location known as the “Wonder Bar.” The issue is:
Was the County Board’s decision on the valuation of the Taxpayer’s property supported by substantial evidence, according to procedures required by law, and neither arbitrary, capricious, nor inconsistent with law?
For the reasons set forth below, the State Board finds there is substantial evidence in the record to support the decision of the County Board, the decision is consistent with law, and affirms the decision of the County Board.
PROCEEDINGS BEFORE THE COUNTY BOARD
The County Board conducted a hearing on September 26, 2003, with Hearing Officer Eric Easton, Natrona County Attorney, presiding.
Mr. Patrick Sweeney of Casper Hospitality, LLC, Taxpayer, testified and introduced an appraisal of the property prepared by William L. Elliot effective December 5, 2002 and the Settlement Statement of Sale. Ms. Kay Music of the Assessor’s office testified and introduced the assessment schedule and a “Commercial/Industrial Review Document.”
The State Board is required to “hear appeals from county boards of equalization.” Wyo. Stat. Ann. §39-11-102.1(c). The County Board entered its Order on October 22, 2003, and the Assessor filed a timely Notice of Appeal on November 19, 2003. Rules, Wyoming State Board of Equalization, Chapter 3, §2.
The Assessor appeals from an order of the County Board reversing the value set by the Assessor and setting the value using the appraisal introduced by the Taxpayer. The County Board set the value for the real property at $280,000. The Assessor originally valued the property at $765,900.00 and reduced the value to $476,300.00 after the Taxpayer met with the Assessor.
In the Notice of Appeal, the Assessor raised one issue: whether the valuation of the real property should include the value of the liquor license associated with the business of the property?
The central issue is whether the County Board’s decision on the valuation of property was supported by substantial evidence, according to procedures required by law, and was not arbitrary, capricious, or inconsistent with law. We find the main guidance for the Assessor’s question in Wyo. Stat. Ann. §39-11-105(a)(xxix) which exempts intangible property from taxation.
We conclude that there is substantial evidence in the record to support the result reached by the County Board.
STANDARD OF REVIEW
When the State Board hears appeals from a county board, it acts as an intermediate level of appellate review. Laramie County Board of Equalization v. Wyoming State Board of Equalization, 915 P.2d 1184, 1188 (Wyo. 1996); Union Pacific Railroad Company v. Wyoming State Board of Equalization, 802 P.2d 856, 859 (Wyo. 1990). In its appellate capacity, the State Board treats a county board as the finder of fact. Id. In contrast, the State Board acts as the finder of fact when it hears contested cases on appeal from final decisions of the Wyoming Department of Revenue. Wyo. Stat. Ann. §39-11-102.1(c). This sharp distinction in roles is reflected in the State Board Rules governing the two different types of proceedings. Compare Rules, Wyoming State Board of Equalization, Chapter 2 and Rules, Wyoming State Board of Equalization, Chapter 3. Statutory language first adopted in 1995, when the State Board of Equalization and the Department of Revenue were reorganized into separate entities, does not express the distinction between the State Board’s appellate and de novo capacities with the same clarity as our long-standing Rules. 1995 Wyo. Sess. Laws, Chapter 209, Section 1, §39-1-304(a).
By Rule, the State Board’s standards for review of a county board’s decision are nearly identical to the Wyoming Administrative Procedure Act standards for judicial review of administrative action. Wyo. Stat. Ann. §16-3-114(c)(ii). However, unlike a district court, the State Board will not rule on claims that a county board has acted “[c]ontrary to constitutional right, power, privilege or immunity.” Wyo. Stat. Ann. §16-1-114(c)(ii)(B). The State Board’s review is limited to a determination of whether a county board action is:
(a) Arbitrary, capricious, an abuse of discretion or otherwise not in accordance with law;
(b) In excess of statutory jurisdiction, authority or limitations or lacking statutory right;
(c) Without observance of procedure required by law; or
(d) Unsupported by substantial evidence.
Rules, Wyoming State Board of Equalization, Chapter 3, §9.
The State Board Rules are patterned on the judicial review provision of the Wyoming Administrative Procedure Act. The State Board looks to precedent under Wyo. Stat. Ann. §16-3-114(c) for guidance. For example, we must apply this substantial evidence standard:
Our task is to examine the entire record to determine if substantial evidence exists to support the [county board’s] findings. We will not substitute our judgment for that of the [county board] if [its] decision is supported by substantial evidence. Substantial evidence is relevant evidence which a reasonable mind might accept in support of the agency’s conclusions.
Clark v. State ex rel. Wyoming Workers’ Safety and Compensation Division, 934 P.2d 1269, 1272 (Wyo. 1997).
THE DECISION OF THE COUNTY BOARD
1. The County Assessor originally determined the value of the property at $765,900 for 2003. After the Taxpayer questioned the value, the Assessor reviewed the property and adjusted the value to $476,300. [Record, pp. 001-003, 067, 076-077, 082].
2. The property is located at 256 South Center Street, Casper, Block 2, Lots 21-22, Casper, Natrona County, Wyoming. This property is commonly and historically referred to as the Wonder Bar. There is a main level with a bar and restaurant area, a second story with a bar and large dance floor and both are 7,000 square feet. There is also a basement that is 6300 square feet. [Record, pp. 001, 003].
3. The County Board held a hearing and received evidence and testimony on September 26, 2003. [Record, pp. 070, 075].
4. The Taxpayer argued the value should be $280,000 because of an independent appraisal performed for the purchase of the property in December 2002. The County Board accepted the Taxpayer’s argument and set the value for the real property at $280,000. [Record, pp. 70-72].
Evidence Supporting the County Board Decision
5. Casper Hospitality Group, LLC, who is doing business as the Wonder Bar, purchased all the property on December 9, 2002. The purchase price was $475,234.35. The price included the purchase of the real property, the furniture, fixtures and equipment (called FF&E) and a liquor license. As part of the purchase process the financing business, First Interstate Bank, had an appraisal performed by William L. Elliot. [Record, pp. 004-006, 008-011, 038-040, 77].
6. Mr. Elliot holds the designation of SRA from the Appraisal Institute and is a Wyoming Certified General Real Estate Appraiser. The effective date of the Elliot appraisal was December 5, 2002. The date of assessment is January 1 of each year per Wyo. Stat. Ann. §39-13-103(b)(i)(A). There was no showing the property had changed from December 5, 2002 to January 1, 2003. [Record, pp. 009, 011].
7. The appraisal indicated a value for the vacant land at $70,000, a value for all of the real estate at $280,000, a value for the liquor license at $200,000, and the value of the FF&E at $68,000. [Record, pp. 011, 037]. There was no criticism of the appraisal.
8. Mr. Elliot first valued the liquor license portion of the sale of property. He evaluated three transfers involving only the transfer of liquor licenses and one transfer that was pending. Two transfers were for $200,000, one was for $300,000 and one was for $150,000. From these transfers, Mr. Elliot valued the liquor license transfer at $200,000. [Record, pp. 026-027].
9. Using the sales comparison approach, Mr. Elliot estimated the value of the FF&E to be $68,000. [Record, p. 27]. Mr. Elliot arrived at this value by evaluating two sales of restaurants in the area and determining the sales price per square foot with the FF&E and the sales price per square foot without the FF&E and determined the value of the subject FF&E. [Record, pp. 33, 35]. There may be some concerns about this formula but none were called to the attention of the County Board.
10. The site is 7,000 square feet and using one sale of vacant land in the area Mr. Elliot determined the value per square foot to be $10.00 for a total value of the land to be $70,000. [Record, pp. 032, 033]. There may be some concerns about this approach as well, but none were called to the attention of the County Board.
11. Mr. Elliot compared the sales of two other restaurants in the immediate vicinity and considered three other related sales and calculated a value of the property per square foot. The estimated value of the real estate using the sales comparison approach was $277,000. [Record, pp. 33-35]. We notice some concerns about this approach but none were called to the attention of the County Board.
12. The appraiser then evaluated three lease agreements to calculate a value using the income capitalization approach and estimated a value of $283,000. [Record, pp. 036-037]. This formula considered a limited number of leases and included leases for retail space rather than a restaurant. Again, any concerns with these methods were not called to the County Board’s attention.
13. The assessor valued the land for $24,000 and the building for $452,300 for a total value for 2003 at $476,300. [Record, p. 064].
14. The property was assessed for 2003 at a value of $765,900 and after the Assessor visited the property on June 12, 2003, and observed some economic problems such as parking, she adjusted the value to $465,300. [Record, pp. 003, 063, 067, 076].
15. The Assessor adjusted the base value as calculated on the computer sheets by 57% “good.” [Record, p. 064]. There was no explanation of the work papers the Assessor introduced. There was no explanation of why a 57% “good” multiplier was used.
16. In 2002, the property was valued originally at $765,900 and the assessor reduced the value to $617,500. [Record, pp. 076-077, 083]. No explanation for this action was given to the County Board.
17. The Assessor testified that she valued the property as commercial property and used the Wyoming Cost and Depreciation Tables. [Record, p. 081]. The tables are updated annually by the Wyoming Department of Revenue. The Assessor did not explain how the tables were used to calculate value, only that they were used.
18. The value as calculated might reflect a reasonable estimation of the fair market value of the real property but without an explanation the County Board was not bound to understand the value or accept it.
19. The value as established by the Assessor may indeed be established closer to fair market value than the appraisal if the Assessor had supported her calculations with an explanation and expressed concerns about the appraisal. Instead the Assessor focused on the value of the liquor license and presented the County Board with the question of how to tax the value of the liquor license. [Record, pp. 082, 086]. As explained below, the County Board was correct in rejecting the taxation of the value of the liquor license.
The Value of a Liquor License Is Exempt from Taxation
20. The Assessor gave some confusing testimony to the County Board regarding taxation of the liquor license:
Our problem with extracting the liquor license is that that almost falls under Blue Sky. I mean, when you pay for a liquor license from the City, you pay $1,500 a year. And obviously they can sell it for whatever they can get for it. And that does encompass some of the business aspects. I mean, when they sell that liquor license, if it’s a going business, they get more for it.
And we’re at a – our hands are basically tied as to how to place a value. Our choices are, it has to be either personal property or real property. So you’re falling into the Blue Sky element there that makes it difficult for us to attribute what portion of value or what value can be allotted to that.
[Record, p. 082].
21. The Assessor failed to recognize that a liquor license falls within the statutory exemption for intangibles.
22. Wyoming Statute Annotated Section 39-11-105(a)(xxix) provides an exemption for intangible personal property. According to Wyo. Stat. §39-11-101(a)(vii):
“Intangible personal property” includes:
(A) Money and cash on hand including currency, gold, silver and other coin, bank drafts, certified checks and cashier’s checks;
(B) Money on deposit;
(C) Accounts receivable and other credits;
(D) Bonds, promissory notes, debentures and other evidences of debt;
(E) Shares of stock or other written evidence of ownership;
(F) Judgments for the payment of money;
(G) Annuities and annuity contracts.
This statute does not define what intangible property is. However, the Board and the Wyoming Supreme Court have determined the list is not exclusive. Airtouch Communications, Inc. v. Department of Revenue, 2003 WY 114, 76 P. 3d 342 (Wyo. 2003); RT Communications, Inc., 11 P.3d 915; Union Telephone Company, et. al., 1999 WL 370035 (Wyo. St. Bd. Eq. 95-69); Tri-County Telephone Association, et. al., 1999 WL 1268428 (Wyo. St. Bd. Eq. 95-70).
23. The Wyoming Supreme Court has held that an intangible asset must be both identifiable and separable. Airtouch Communications, Inc. v. Department of Revenue, 2003 WY 114, 76 P. 3d 342 (Wyo. 2003); RT Communications, Inc. v. State Board of Equalization, 11 P.3d 915, 928 (Wyo. 2000). A liquor license is separable and identifiable.
24. In RT Communications, Inc. the Wyoming Supreme Court provided guidance as to what is intangible property:
The one common characteristic of each of the items listed within §39-1-101(a)(vii) was that they had no inherent value in and of themselves but instead represented value. In the ordinary sense of usage, this is what “intangible property” means: “As used chiefly in the law of taxation, this term means such property as has no intrinsic and marketable value, but is merely the representative or evidence of value, such as certificates of stock, bonds, promissory notes, copyrights, and franchises.” Blacks Law Dictionary 809 (6th ed. 1990). This definition is clearly what was intended by the legislature as evidenced by the fact that §39-1-101(a)(vii) specifically listed some of the examples cited therein such as stocks, bonds, and promissory notes.
11 P.3d at 922-923.
25. A liquor license is identifiable and has no value in and of itself. It represents the ability to sell liquor under certain State of Wyoming guidelines. Wyo. Stat. Ann. §12-4-101, et.seq. A liquor license can be sold and transferred to another party separate from the sale of real or personal property. Wyo. Stat. Ann. §12-4-601. Therefore, a liquor license is both separable and identifiable and is exempt from taxation. Airtouch Communications, Inc. v. Department of Revenue, 2003 WY 114, 76 P. 3d 342(Wyo. 2003); RT Communications, Inc. v. State Board of Equalization, 11 P.3d 915, 928 (Wyo. 2000).
26. By this ruling we are not discounting that there may be an enhancement to value of taxable property by an intangible and that such enhancement may be taxable. RT Communications, Inc.,11 P.3d at 928. However, the only evidence before the County Board was that the liquor license had a value of $200,000. The value of the license should not be taxed as real or personal property.
27. To sum up, there is substantial evidence to support the County Board’s decision that the value of the property is $280,000 in the form of an appraisal that was not challenged by the assessor. The decision of the County Board should be affirmed. The value of a liquor license should not be included in the value of real or personal property because it is intangible property and therefore exempt from taxation.
THIS SPACE INTENTIONALLY LEFT BLANK
IT IS THEREFORE HEREBY ORDERED:
The decision of the County Board setting the valuation of Petitioner’s property shall be and the same is, hereby affirmed.
Pursuant to Wyo. Stat. Ann. §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 2nd day of June, 2004.
STATE BOARD OF EQUALIZATION
Roberta A. Coates, Chairman
_____________________________________ Alan B. Minier, Vice-Chairman
Thomas R. Satterfield, Member
Wendy Soto, Executive Secretary