BEFORE THE STATE BOARD OF EQUALIZATION
FOR THE STATE OF WYOMING
IN THE MATTER OF THE APPEAL OF )
MARK WHITLOCK FROM )
A DECISION OF THE WASHAKIE COUNTY ) Docket No. 2008-102
BOARD OF EQUALIZATION - 2008 )
PROPERTY VALUATION )
IN THE MATTER OF THE APPEAL OF )
MARK & APRIL WHITLOCK FROM A )
DECISION OF THE WASHAKIE COUNTY ) Docket No. 2009-70
BOARD OF EQUALIZATION - 2008 )
PROPERTY VALUATION )
DECISION AND ORDER
Mark Whitlock and April Whitlock appeared pro se. (Taxpayers).
Kathryn J. Treanor, Washakie County Assessor, appeared pro se. (Respondent or Assessor).
These consolidated appeals arose from decisions of the Washakie County Board of Equalization (County Board) affirming the Assessor’s 2008 valuation of Taxpayers’ property. Taxpayers’ original Notice of Appeal was filed with the State Board of Equalization (State Board) effective August 30, 2008. The County Board, by request filed with the State Board on October 28, 2008, sought remand of Taxpayers’ appeal to the County Board for an additional hearing as its initial decision had been based, at least partially, on evidence reviewed by the County Board members which had not been presented at the County Board hearing. The State Board, in response to the County Board request, to which Taxpayers did not object, remanded Taxpayers’ appeal to the County Board by Order dated November 19, 2008. Taxpayers subsequently filed, effective April 15, 2009, a second Notice of Appeal with the State Board from a County Board decision dated March 17, 2009.
The Assessor and Taxpayers filed briefs as allowed by the State Board Briefing Order dated July 13, 2009. Taxpayers requested oral argument by letter dated July 23, 2009.
The 2008 and 2009 State Board dockets were consolidated by Order dated September 16, 2009.
The State Board, comprised of Thomas D. Roberts, Chairman, Steven D. Olmstead, Vice-Chairman, and Deborah J. Smith, Board Member, considered the parties’ filings, the hearing records, and the March 17, 2009, decision of the County Board. The State Board heard oral argument on October 8, 2009.
We evaluate Taxpayers’ appeal of the County Board decision against our standard of review, which is whether the decision was arbitrary, capricious, unsupported by substantial evidence, and/or contrary to law. Rules, Wyoming State Board of Equalization, Chapter 3 § 9.
We will affirm the March 17, 2009, decision of the County Board.
The State Board is required to “hear appeals from county boards of equalization.” Wyo. Stat. Ann. § 39-11-102.1(c). Taxpayers filed timely appeals of the County Board decisions with the State Board effective August 30, 2008, and April 15, 2009. Rules, Wyoming State Board of Equalization, Chapter 3 § 2.
Taxpayers’ Opening Brief sets out four main points:
1. The total valuation amounts shown on our Notice of Assessments are figured on the “Cost” approach (RCN), not the Market approach.
2. The RCN building base values (from Marshall & Swift/Boeckh, LLC) are twice as high as our local costs.
3. If the currently used RCN values cannot be adjusted in the program, then the “multiplier” for steel-framed structures in Washakie County needs to be a 50% not at 96%.
4. The Local Board of Equalization needs to be made up of individuals other than the County Commissioners so there will not be a conflict of interest.
[Taxpayers’ Opening Brief]. (Emphasis in original).
The Assessor’s Response Brief simply asserts Taxpayers’ property was properly listed and valued within the CAMA system; no arbitrary adjustments were made to the property; and given the limited sales information available to the Assessor for 2007, the resultant market value was fair. Without adequate sales, the cost approach is the next best approach to value commercial properties where income information is not available. [Washakie County Assessor’s Response Brief].
PROCEEDINGS BEFORE THE COUNTY BOARD
The County Board conducted hearings on July 8, 2008, and March 4, 2009. The County Board entered Decisions on August 5, 2008, and March 17, 2009, affirming the Assessor’s 2008 fair market value for Taxpayers’ property. [County Board Record 2008-102, pp. 9-10, 163-165; County Board Record 2009-70, pp. 9-10, 97-100].
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 the 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 Department of Revenue (Department). 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 with Rules, Wyoming State Board of Equalization, Chapter 3. Statutory language first adopted in 1995, when the State Board and the Department 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, § 1; Wyo. Stat. Ann. § 39-1-304(a), (currently Wyo. Stat. Ann. § 39-11-102.1(c)).
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 which a district court must apply to hold unlawful and set aside agency action, findings of fact, and conclusions of law. 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 the 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.
Since the State Board Rules are patterned on the judicial review provision of the Wyoming Administrative Procedure Act, we look to precedent under Wyo. Stat. Ann. § 16-3-114(c) for guidance. For example, we must apply this substantial evidence standard:
When [a person] challenges a [county board]'s findings of fact and both parties submitted evidence at the contested case hearing, we examine the entire record to determine if the [county board]'s findings are supported by substantial evidence. Colorado Interstate Gas Co. v. Wyoming Department of Revenue, 2001 WY 34, ¶ 8, 20 P.3d 528, 530 (Wyo.2001); RT Commc'ns, Inc. v. State Bd. of Equalization, 11 P.3d 915, 920 (Wyo.2000). If the [county board]'s findings of fact are supported by substantial evidence, we will not substitute our judgment for that of the [county board] and will uphold the factual findings on appeal. “Substantial evidence is more than a scintilla of evidence; it is evidence that a reasonable mind might accept in support of the conclusions of the agency.” Id.
Chevron U.S.A., Inc. v. Department of Revenue, 2007 WY 79, ¶ 9, 158 P.3d 131, 134 (Wyo. 2007).
We review the findings of ultimate fact of a county board of equalization de novo:
“When an agency’s determinations contain elements of law and fact, we do not treat them with the deference we reserve for findings of basic fact. When reviewing an ‘ultimate fact,’ we separate the factual and legal aspects of the finding to determine whether the correct rule of law has been properly applied to the facts. We do not defer to the agency’s ultimate factual finding if there is an error in either stating or applying the law.” Basin Elec. Power Co-op., Inc. v. Dep’t of Revenue, State of Wyo., 970 P.2d 841, 850-51 (Wyo. 1998)(citations omitted).
Britt v. Fremont County Assessor, 2006 WY 10, ¶ 17, 126 P.3d 117, 123 (Wyo. 2006).
We must also apply this “arbitrary and capricious” standard:
Even if sufficient evidence is found to support the agency’s decision under the substantial evidence test, this [Board] is also required to apply the arbitrary-and-capricious standard as a “safety net” to catch other agency action which might have violated the Wyoming Administrative Procedures Act. Decker v. Wyoming Medical Comm’n, 2005 WY 160, ¶ 24, 124 P.3d 686, 694 (Wyo. 2005). “Under the umbrella of arbitrary and capricious actions would fall potential mistakes such as inconsistent or incomplete findings of fact or any violation of due process.” Id. (quoting Padilla v. State ex rel. Wyoming Workers’ Safety and Comp. Div., 2004 WY 10, ¶ 6, 84 P.3d 960, 962 (Wyo. 2004)).
State ex rel. Wyoming Workers’ Safety and Comp. Div. v. Madeley, 2006 WY 63, ¶ 8, 134 P.3d 281, 284 (Wyo. 2006).
FACTS PRESENTED TO THE COUNTY BOARD
1. Taxpayers own a residential property at 292 West River Road, and a commercial property at 413 Lawson Ave., both in Worland, Washakie County, Wyoming. [County Board Record 2008-102 pp. 56-57].
2. Taxpayers filed a Statement to Contest 2008 Property Tax Assessment on May 9, 2008, for both their residence and commercial property. [County Board Record 2008-102 p. 1]. Taxpayers subsequently withdrew the protest of the 2008 value of their residence. [County Board Record 2009-70 p. 97; Audio Recording - March 4, 2009, Hearing, 4:10-4:15].
3. The County Board conducted hearings on Taxpayers’ 2008 valuation appeal on July 8, 2008, and March 4, 2009. [County Board Record 2008-102 pp. 9-10; County Board Record 2009-70 pp. 9-10].
4. The County Board entered Decisions on August 5, 2008, and March 17, 2009, affirming the Assessor’s 2008 fair market value for Taxpayers’ commercial property. [County Board Record 2008-102 pp.163-165; County Board Record 2009-70 pp. 97-100].
5. Kathy Treanor has been the Washakie County Assessor since January 1, 2003. She was previously a deputy assessor beginning August, 1989. She was certified by the Wyoming Department of Revenue as a Property Tax Appraiser for 2008. [Audio Recording - March 4, 2009, Hearing, 33:00-34:00, 43:00-44:29; County Board Record 2009-70 p. 16].
6. Taxpayers moved their taxidermy business to the commercial property at issue in 2005. They initially rented the property until purchasing it in March, 2005, for $145,000. The seller was the owner from whom Taxpayers were renting. Taxpayers did not utilize a realtor for the purchase. Mr. Whitlock stated his recollection the fair market value as determined by the Assessor for 2005 was approximately $165,000. The building on the property was built in 1996. [Audio Recording - July 8, 2008, Hearing, 4:00-4:16; County Board Record 2008-102 pp. 32-37, 98; Audio Recording - March 4, 2009, Hearing, 4:23-5:13, 27:18-27:33, 27:00-27:30].
7. Taxpayers stated their building was not currently for sale. [Audio Recording - March 4, 2009, Hearing, 28:00-28:24].
8. The fair market value of Taxpayers’ commercial real property and improvements in 2005 was $167,778 (real property, $21,969; improvements, $145,809); in 2006, $174,031 (real property, $21,969; improvements, $152,062); in 2007, $189,237(real property, $21,969; improvements, $167,268); and in 2008, $336,718 (real property, $69,695; improvements, $267,023). [County Board Record 2008-102 pp. 19, 23, 26, 30].
9. The fair market value of Taxpayers’ commercial improvements increased 4.25% from 2005 to 2006; 10% from 2006-2007; and 59.5% from 2007 to 2008. [Audio Recording - July 8, 2008, Hearing, 4:24-4:55; County Board Record 2008-102 p. 47].
10. The value per square foot for Taxpayers’ land in 2005, 2006, and 2007 was $.79 [$21,969/27,878]. The value per square foot in 2008 increased 318% to $2.50 [$69,695/27,878]. [Audio Recording - July 8, 2008, Hearing, 5:09-5:28, 9:06-10:08; County Board Record 2008-102 pp. 19, 23, 26, 30, 47].
11. The Washakie County Assessor Property Profile for the property at issue for 2008 indicates a “Value Per Unit” of $3.00 under the Land Valuation Summary. A manual calculation dividing the Actual Value of $69,695 by 27,878 square feet yields a Value Per Unit of $2.50, the same as the 2008 assessment schedule. The same discrepancy also appears on the Washakie County Assessor Property Profile in the records on appeal for the Mark and Mike Decker property. It thus appears the $3.00 Value Per Unit may be a typographical error, or possibly a rounding issue with the Property Profile. [County Board Record 2008-102 pp. 30, 137; County Board Record 2009-70 pp. 20, 62; Audio Recording - March 4, 2009, Hearing, 1:01-1:02].
12. The fair market value of Taxpayers’ land and improvements increased $147,481, or 78% between 2007 and 2008. [Audio Recording - July 8, 2008, Hearing, 5:30-5:58; County Board Record 2008-102 p. 47].
13. Taxpayers stated the Assessor had, at their request, remeasured their property, and lowered the height of the building which may result in a reduction in the assessed value in 2009. [Audio Recording - March 4, 2009 Hearing, 21:45-25:00, 41:09-43:12].
14. Taxpayers presented a market analysis by Landis Benson, Broker, Hake Realty, which indicated his opinion commercial property in the Worland area had increased an average of 7.5% from March 1, 2005, through June 18, 2008. Mr. Benson estimated a market value on Taxpayers’ commercial property of $199,999 as of June 19, 2008. [Audio Recording - July 8, 2008, Hearing, 6:22-7:17; County Board Record 2008-102 pp. 45-46; Audio Recording - March 4, 2009, Hearing, 13.20-17.53].
15. Taxpayers testified the only improvement to their commercial property between 2007 and 2008 was the installation of approximately 20 sheets of sheet rock to enclose a storage area. Their property is located in an industrial area without paved roads, curbs or gutters. [Audio Recording - July 8, 2008, Hearing, 7:17-7:49; County Board Record 2008-102 p. 47].
16. Mr. Whitlock testified a vacant property [Process Power and Control] across the street from their property sold on June 11, 2008, for $1.396 per square foot. A vacant property [Bill Smith] one or two blocks from their property sold for $.80 per square foot in 2007. Both sales were private sales, not listed with a realtor. [Audio Recording - July 8, 2008, Hearing, 8:00-9:00; County Board Record 2008-102 pp. 48, 50, 51; Audio Recording - March 4, 2009 Hearing, 10:55-13:39].
17. Ms. Treanor testified the Process Power & Control land sale with a purchase date of June 11, 2008, would not be relevant for 2008 valuation purposes as 2008 values are determined as of January 1, 2008. The Process Power sale would be considered in determining values for 2009. [Audio Recording - July 8, 2008, Hearing, 32:15-34.48; County Board Record 2008-102 p. 48].
18. Ms. Treanor indicated the Bill Smith sale in 2007 was not, in her opinion, an open-market sale as it was offered to Mr. Smith before it was put on the market. She would therefore not use that sale in her analysis. [Audio Recording - July 8, 2008, Hearing, 34:48-34:58; County Board Record 2008-102 p. 48].
19. Taxpayers asserted their structure had historically been valued at a higher level than comparable facilities. A comparable 6250 square foot structure owned by Joe and Vicky Nehl was valued in 2008 at $15.10 per square foot. A comparable 2000 square foot structure owned by Mark and Mike Decker was valued in 2008 at $14.18 per square foot. A comparable 7500 square foot structure owned by Haumont Investments was valued in 2008 at $15.06 per square foot. Taxpayers’ 7000 square foot structure had been valued at $20.82 per square foot in 2005; $21.72 per square foot in 2006; $23.89 per square foot in 2007; and $38.15 per square foot in 2008. The fair market value of Taxpayers’ structure increased 50.50% from 2007 to 2008. [Audio Recording - July 8, 2008, Hearing, 12.10-14:00; County Board Record 2008-102 pp. 19, 23, 26, 30, 47, 132-143].
20. Ms. Treanor asserted the difference in the valuation per square foot between Taxpayers’ property, and the Nehl, Decker, and Haumont buildings was basically a function of the amount of depreciation allowed since all four buildings were valued as a service garage. The property at issue is a newer building and therefore did not receive as much depreciation as the Nehl, Decker, and Haumont buildings. [Audio Recording - July 8, 2008, Hearing, 34:58-38.25; County Board Record 2008-102 pp. 132-136, 137-139, 140-143].
21. Taxpayers asserted the fair market value for their commercial land and structure for 2008 should be approximately $199,599, the value estimated by Mr. Benson in his market analysis. [Audio Recording - July 8, 2008, Hearing, 14:45-15:20; County Board Record 2008-102 pp. 45-46, 47].
22. Ms. Treanor testified that in 2008 she did not value any commercial property in Washakie County, except four-plexes, using only the sales comparison approach. Sales comparison is one of the three approaches to valuation [cost, sales comparison, and income] authorized for use by an assessor under the Department Rules. She testified there were only three sales of property in 2007 similar to Taxpayers’ which she, as the assessor, concluded was not numerically sufficient to justify a market adjustment. [Audio Recording - July 8, 2008, Hearing, 19:16-21:23, 22:19-22:27; County Board Record 2008-102 p. 157; Audio Recording - March 4, 2009, Hearing, 1:15:40-1:18.05; County Board Record 2009-70 pp. 53-56, 79].
23. Ms. Treanor did not make any sales adjustments to any commercial properties in Washakie County in 2008 based on a lack of 2007 comparable sales, and the fact the median sales ratio for all commercial property in 2008 was 1.0103. The accepted range for a sales ratio under the State Board Rules for commercial property was .95 to 1.05. All commercial property improvements in Washakie County in 2008 were valued on a depreciated cost basis. Land values were, however, adjusted based on comparable sales. [Audio Recording - July 8, 2008, Hearing, 21:48-23:17; County Board Record 2008-102 pp. 73, 157, 158].
24. Ms. Treanor used an abstraction process to estimate land values in eleven of the thirteen commercial property sales in 2007 in Washakie County. The abstraction process subtracts from the sales price the fair market value estimated by the assessor for the improvements. The remainder is considered to be the portion of the sales price attributable to the land. The land values determined by Ms. Treanor using this abstraction method ranged from a low of $1.46 per square foot to a high of $9.94 per square foot. Ms. Treanor asserted there had been no sale of residential property in Washakie County with a land value of less than $2.00 per square foot. [Audio Recording - July 8, 2008, Hearing, 23:18-24:31; County Board Record 2008-102 pp. 158, 162; Audio Recording - March 4, 2009, Hearing, 1:01-1:03:30, 1:29:30-1:30:45; County Board Record 2009-70 p. 84].
25. Ms. Treanor testified that prior to 2005, a cost guide published by Boeckh was used in Washakie County to determine the replacement costs new less depreciation [RCNLD] for property improvements. She asserted because the Boeckh cost guide was not updated on a regular basis, the Department decided to have the assessors transition to use of the Marshall & Swift cost guide beginning in 2005. Washakie County began using that cost guide in 2006. [Audio Recording - March 4, 2009, Hearing, 34:20-36:00; 2:42:41-2:42:50].
26. The Marshall & Swift cost tables are updated annually and provided to the assessors by the Department. [Audio Recording - July 8, 2008, Hearing, 29:00-30:15].
27. Ms. Treanor stated the fair market values for all commercial properties in Washakie County were “rolled over” from the old CAMA system to the new CAMA system in March, 2006, and those values stayed in place for 2006 and 2007. The Assessor’s office re-listed all commercial property in the county in 2007 to ensure the property characteristics were accurate. The 2008 fair market values were derived using the commercial property characteristics verified in 2007, and the new 2008 CAMA system Marshall & Swift cost tables. As a result of the new CAMA system cost tables, some commercial properties increased in value and some decreased. Ms. Treanor suggested in her testimony this change in cost table values after two years was the primary reason for the increase in value for the building at issue. [Audio Recording - July 8, 2008, Hearing, 24:31-26:00, 30:15-31.47, 36:00-37:55, 41:09-41:44].
28. Ms. Treanor stated because she lacked an adequate number of sales of commercial property, she valued Taxpayers’ building using depreciated cost for a 7000 square foot building of average quality and condition and steel construction with radiant heat using an occupancy classification for a service garage - a large building with small office area. [Audio Recording - July 8, 2008, Hearing, 26:00-28:15; County Board Record 2008-102 pp. 97-98].
29. The appraisal characteristics for any commercial building are entered into the Assessor’s appraisal software [CAMA] which uses the Marshall & Swift cost table to determine a value for replacing the building new, and then applies depreciation based on the age of the building, quality, and condition. Ms. Treanor stated this was the process used to determine the value of the improvements on the property at issue. The value for those improvements for 2008 was depreciated cost. [Audio Recording - July 8, 2008, Hearing, 28:15-29:00; County Board Record 2008-102 pp. 97-98; Audio Recording - March 4, 2009 Hearing, 2:34:00-2:34:15].
30. Ms. Treanor stated the three factors which require appraisal judgement in listing a commercial building for calculation of RCNLD are quality of construction, condition, and the “built as” category. [Audio Recording - March 4, 2009, Hearing, 39:40-40:05, 1:36:20-1:36:35].
31. Taxpayers’ building was depreciated by the CAMA system based on a year-built of 1996. Ms. Treanor indicated the exact same building built in 2000 would have a higher depreciated value based on the fact the newer building would receive less depreciation. [Audio Recording - March 4, 2009, Hearing, 40:05-41:09].
32. Ms. Treanor stated Exhibit MW-15a was an abbreviated property profile. It indicated the basic characteristics in the CAMA system for Taxpayers’ property. Quality indicated the type of construction. Condition indicated how the building was being maintained. Perimeter is used in the calculation to determine square footage. Percentage Comp. of 100% indicated construction of the building was complete. Nbhd indicated the neighborhood, for valuation purposes, in which the building was located. Nbhd Ext indicated the property was commercial. A Nbhd Adj of one (1) indicated there was no neighborhood adjustment, either by increase or decrease, thus the property was valued at RCNLD. Occupancy was as a service garage. [Audio Recording - March 4, 2009, Hearing, 46:30-54:00, 1:31:50-1:34:00; County Board record 2009-70 pp. 62-63, 89-90].
33. Ms. Treanor also explained Exhibit MW-15a, on page 63, indicated the characteristics of Taxpayers’ building as constructed. It was a metal building with radiant heat built in 1996 with an effective age as of January 1, 2008, of eleven (11) years. The building was one story enclosing 7000 square feet. It had a small loft, as well as a concrete slab driveway apron and a built-in SubZero refrigerator. Fencing was also valued and assessed on commercial properties. [Audio Recording - March 4, 2009, Hearing, 54:00-1:00:20; County Board Record 2009-70 pp. 62-63].
34. Ms. Treanor testified the Improvements Subtotal - Actual Value of $267,023 under the building Valuation Summary on Exhibit MW-15a was the RCNLD as determined by the CAMA system based on the characteristics of Taxpayers’ property. [Audio Recording - March 4, 2009, Hearing, 1:04:06-1:06:00].
35. Ms. Treanor stated all commercial property in Washakie County had been valued at RCNLD since conversion to the new CAMA system in 2007. She stated the RCNLD value for commercial property would be adjusted if there were sufficient sales to justify an adjustment. [Audio Recording - March 9, 2009, Hearing 2:25:00-2:28:40]
36. Ms. Treanor testified she has never used the income approach to value any property in Washakie County. She used the cost approach to value Taxpayers’ improvements for 2008. [Audio Recording - March 4, 2009 Hearing, 1:18:05-1:18:31; County Board Record 2009-70 p. 64].
37. Ms. Treanor asserted the CAMA system was simply a tool to help an assessor develop a market value for all property in a county. [Audio Recording - March 4, 2009 Hearing, 1:18.05-1:19:18].
38. The Marshall & Swift cost guide is supplied annually by the Department to all county assessors for use in establishing fair market values for all property improvements as of the statutory assessment date of January 1st. The guide sets out replacement costs as of June of the prior year. Ms. Treanor explained that based on the Department’s choice to use the prior June cost guide, the fair market value established by the assessor in any given year as of January 1st reflects replacement costs as of the prior June. The Marshall & Swift cost guide does contain a location multiplier to adjust national costs to reflect costs in Wyoming. [Audio Recording - March 4, 2009, Hearing, 1:20-1:22, 2:00:00-2:01:11; County Board Record 2009-70 pp. 65].
39. Ms. Treanor testified the hand-written percentage in the lower left hand corner of the pages of Exhibits MW 26a-26f indicate the percentage increase in fair market value from 2007 to 2008 for six properties similar to Taxpayers’ in the same area as Taxpayers’ property. Taxpayers’ property increased 73%. All of the properties, including Taxpayers’, were valued using the cost approach. [Audio Recording - March 4, 2009 Hearing, 1:34-1:36; County Board Record 2009-70 pp. 91-96].
40. Ms. Treanor indicated in her testimony that Taxpayers’ property was valued in the same manner as all other commercial property in Washakie County. [Audio Recording - March 4, 2009, Hearing, 1:36:00-1:36:40].
DISCUSSION OF ISSUES AND APPLICABLE LAW
41. The State Board is authorized to “hear appeals from county boards of equalization.” Wyo. Stat. Ann. § 39-11-102.1(c). Taxpayers filed timely appeals of the County Board decisions with the State Board effective August 30, 2008, and April 15, 2009. Rules, Wyoming State Board of Equalization, Chapter 3 § 2.
42. The Wyoming Constitution, article 15, § 11(b), provides in pertinent part: “[a]ll taxable property shall be valued at its full value as defined by the legislature except agricultural and grazing lands which shall be valued according to the capability of the land to produce agricultural products under normal conditions.”
43. The Wyoming Constitution, article 15 § 11(d), requires “[a]ll taxation shall be equal and uniform within each class of property. The legislature shall prescribe such regulations as shall secure a just valuation for taxation of all property, real and personal.”
44. Broken into its component parts, the constitutional standard requires: (1) a rational method; (2) equally applied to all property; and (3) essential fairness. It is the burden of one challenging an assessment to prove by a preponderance of the evidence that at least one of these elements has not been fulfilled. Basin Electric Power Coop. v. Dept. of Revenue, 970 P.2d 841, 852 (Wyo.1998).
45. The Legislature has required all property in Wyoming to be valued annually at fair market value. Wyo. Stat. Ann.§ 39-13-103(b)(ii). The statutory valuation date is January 1 of each year; all taxable property must be valued and assessed for taxation in the name of the owner of the property on that date. Wyo. Stat. Ann. § 39-13-103(b)(i).
46. 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. Ann. § 39-11-101(a)(vi).
47. Each county assessor annually determines the fair market value of residential real property within their county. Wyo. Stat. Ann. 18-3-204(a)(i), (ii), (vi); Wyo. Stat. Ann. 39-13-103(b)(i). In so doing, the assessor must “[f]aithfully and diligently follow and apply the orders, procedures and formulae of the department of revenue or orders of the state board of equalization for the appraisal and assessment of all taxable property.” Wyo. Stat. Ann. § 18-3-204(a)(ix).
48. The Department has a corresponding statutory obligation to confer with, advise and give necessary instructions and directions to the county assessors as to their duties, and to promulgate rules and regulations necessary for the enforcement of all tax measures. Wyo. Stat. Ann. § 39-11-102(c)(xvi), (xix). The Department is required to “[p]rescribe the system of establishing the fair market value of all property valued for property taxation to ensure that all property within a class is uniformly valued.” Wyo. Stat. Ann. § 39-11-102(c)(xv). In particular, the Department must “prescribe by rule and regulation the appraisal methods and systems for determining fair market value using generally accepted appraisal standards.” Wyo. Stat. Ann. § 39-13-103(b)(ii).
49. The Department has promulgated rules which establish appraisal techniques which may be used by an assessor. Rules, Wyoming Department of Revenue, Chapter 9, § 5 . These techniques include the Sales Comparison Approach, the Cost Approach, and the Income or Capitalized Earnings Approach. Rules, Wyoming Department of Revenue, Chapter 9, § 5(a.)(i.)(ii.)(iii.). Administrative rules have the force and effect of law. Wyo. Dep’t of Revenue v Union Pacific Railroad Co., 2003 WY 54,¶ 18, 67 P.3d 1176, 1184 (Wyo. 2003); Painter v. Abels, 998 P.2d 931, 939 (Wyo. 2000).
50. The Department’s Rules provide for use of a CAMA system. Rules, Wyoming Department of Revenue, Chapter 9, § 7. CAMA “automates the comparable sales and replacement cost methods.” Britt v. Fremont County Assessor, 2006 WY 10, ¶ 39, 126 P.3d 117, 128 (Wyo. 2006).
51. The Department also prescribes how the various valuation methods are to be evaluated and utilized by an assessor:
Section 5. Appraisal Methods.
(a.) The appraisal techniques which may be used by the County Assessor include the approaches described in this section. Each approach used shall be an appropriate method or the type of property being valued; that is, the property shall fit the assumptions inherent in the appraisal method in order to calculate or estimate the fair market value of the property. Each approach used shall also consider the nature of the property and the regulatory and economic environment within which the property operates. All methods used by the Assessor shall be consistent with the applicable IAAO and USPAP standards including, but not limited to, the following (except where standards conflict with Wyoming Statute or Rule): IAAO Standard on Mass Appraisal (2008), IAAO Standard on Automated Valuation Models (AVMs) (2003), IAAO Standard on Ratio Studies (part A) (2007), Uniform Standards of Professional Appraisal Practice (USPAP) Standard 6 (2008-2009), IAAO Standard on Property Tax Policy and IAAO Standard on Valuation of Personal Property (2004).
Rules, Wyoming Department of Revenue, Chapter 9, § 5(a.).
Section 9. Reconciliation.
(a.) The appraiser shall weigh the relative significance, applicability and appropriateness of the indications of value derived from the approaches to value or methods outlined above, and will place the most weight and reliance on the value indicator which, in his professional judgment, best approximates the value of the subject property. The appraiser shall evaluate all alternative conclusions and reconcile the value indicators to arrive at a final estimate of value. For market value, the final estimate is that value which most nearly represents what the typical, informed, rational purchaser would pay for the subject property and a rational seller would accept if it were available for sale on the open market as of the date of the appraisal, given all the data utilized by appraisers in their analyses.
Rules, Wyoming Department of Revenue, Chapter 9, § 9.
52. In valuing real property and improvements for tax purposes, the assessor must take into consideration depreciation. Rules, Wyoming Department of Revenue, Chapter 9 § 5(a.)(ii.). Depreciation is defined as:
(xii.) "Depreciation":A loss of utility and hence value from any cause. Depreciation may take the form of physical depreciation, functional obsolescence, or economic obsolescence.
(A.) "Physical Depreciation":The physical deterioration as evidenced by wear and tear, decay or depletion of the property.
(B.) "Functional Obsolescence":The impairment of functional capacity or efficiency, which reflects a loss in value brought about by such factors as defects, deficiencies, or super adequacies, which affect the property item itself
or its relation with other items comprising a larger property.
(C.) "Economic Obsolescence (External Obsolescence)":Impairment of desirability or useful life arising from factors external to the property, such as
economic forces or environmental changes which affect supply-demand relationships in the market. The methods to measure economic obsolescence
may include, but are not limited to:
(1.) Capitalization of the income or rent loss attributable to the negative
(2.) Comparison of sales of similar properties which are subject to the negative influence with others which are not.
(3.) Identification of factors specifically analogous to the property, i.e.
Investments, capacities, and/or industry relationships.
Rules, Wyoming Department of Revenue, Chapter 9 § 4(a.)(xii.).
53. An assessor is also required to take into consideration appreciation. Rules, Wyoming Department of Revenue, Chapter 9 § 5(a.)(ii.)(C.). Appreciation is defined as “an increase in value due to an increase in cost to reproduce, value over the cost, or value at some specified earlier point in time, brought about by greater demand, improved economic conditions, increasing price levels, reversal of depreciating environmental trends, or other factors as defined in the market.” Rules, Wyoming Department of Revenue, Chapter 9 § 4(a.)(ii.).
The Presumption in Favor of an Assessor’s Value
54. The determination of fair market value inevitably involves a degree of discretion:
Early on, Justice Blume recognized a truth inherent in the area of property valuation: “There is no such thing as absolute value. A stone cannot be other than a stone, but one man may give a different valuation to a piece of land than another.” Bunten v. Rock Springs Grazing Ass’n, 29 Wyo. 461, 475, 215 P. 244, 248 (l923). Accordingly, this court has consistently interpreted Wyo. Const. art. 15, § 11 to require “only a rational method [of appraisal], equally applied to all property which results in essential fairness.”
Basin Electric Power Coop. v. Dept. of Revenue, 970 P.2d 841, 857 (Wyo.1998) quoting Holly Sugar Corp. v. State Board of Equalization, 839 P.2d 959, 964 (Wyo.1992). The Wyoming Supreme Court has recently reiterated the “rational method” standard. Britt v. Fremont County Assessor, 2006 WY 10, ¶ 18, 126 P.3d 117, 123 (Wyo. 2006).
55. An assessor’s valuation is presumed valid, accurate, and correct. This presumption survives until overturned by credible evidence. Britt v. Fremont County Assessor, 2006 WY 10, ¶ 23, 126 P.3d 117, 125 (Wyo. 2006); Thunder Basin Coal Company v. Campbell County, Wyoming Assessor, 2006 WY 44, ¶ 13, 132 P.3d 801, 806 (Wyo. 2006); 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 overcome the presumption. J Ray McDermott & Co. v. Hudson, 370 P.2d 364, 370 (Wyo. 1962); Thunder Basin Coal Company v. Campbell County, Wyoming Assessor, 2006 WY 44, ¶¶ 13, 48, 132 P.3d 801, 806, 816 (Wyo. 2006). The presumption is especially valid where the Assessor valued the property according to the Department’s Rules and Regulations which provide for the use of the CAMA system in the assessment of real property. Rules, Wyoming Department of Revenue, Chapter 9 § 7. “The burden is on the taxpayer to establish any overevaluation.” Hillard v. Big Horn Coal Co., 549 P.2d 293, 294 (Wyo. 1976).
56. The Wyoming Supreme Court has described the burden of proof for a taxpayer challenging a county assessor’s valuation:
A strong presumption favors the Assessor’s valuation. “In the absence of evidence to the contrary, we presume that the officials charged with establishing value exercised honest judgment in accordance with the applicable rules, regulations, and other directives that have passed public scrutiny, either through legislative enactment or agency rule-making, or both.” Amoco Production Co. v. Dept. of Revenue, 2004 WY 89, ¶ 7, 94 P.3d 430, 435 (Wyo. 2004). The Britts [i.e., the protesting taxpayers] had the initial burden of presenting evidence sufficient to overcome the presumption. Id., ¶ 8. If the Britts successfully overcame the presumption, then the county board was “required to equally weigh the evidence of all parties and measure it against the appropriate burden of proof.” CIG v. Wyoming Dept. of Revenue, 2001 WY 34, ¶ 10, 20 P.3d 528, 531 (Wyo. 2001). The burden of going forward would then have shifted to the Assessor to defend her valuation. Id. Above all, the Britts bore “the ultimate burden of persuasion to prove by a preponderance of the evidence that the valuation was not derived in accordance with the required constitutional and statutory requirements for valuing . . . property.” Id.
Britt, supra, 2006 WY 10, ¶ 23, 126 P.3d at 125.
57. 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), Britt v. Fremont County Assessor, 2006 WY 10, ¶ 17, 126 P.3d 117, 123 (Wyo. 2006). In fact, the Wyoming Supreme 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 which result from its use. Gray, supra, at 1351.
58. Our evaluation of this appeal turns, at least in part, on the question of whether there is substantial evidence in the record which reasonably supports the County Board’s decisions. In determining whether the required substantial evidence is present, the State Board will not substitute its judgement for findings reasonably supported by evidence in the County Board record. Laramie County Board of Equalization v. State Board of Equalization, 915 P.2d 1184, 1188-1189 (Wyo. 1996); Holly Sugar Corp. v. Wyoming State Board of Equalization, 839 P.2d 959 (Wyo. 1992); 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. The Wyoming Supreme Court has stated “[s]ubstantial evidence is a term of art best described as relevant evidence that a reasonable mind can accept as adequate support for an agency’s conclusion.” Sidwell v. State Workers’ Compensation Div., 977 P.2d 60, 63 (Wyo. 1999).
59. The County Board, on March 9, 2009, held what it described, with consent of the parties, as a hearing de novo after remand by the State Board to the County Board by order dated November 19, 2008. [Audio Recording - March 9, 2009, Hearing 00:35-00:48; County Board Record 2009-70 pp. 24-25]. Neither party, however, has requested the State Board limit its review of the March 17, 2009, decision by the County Board affirming the Assessor’s 2008 fair market value for the commercial property at issue to the testimony and exhibits presented at only the March 9, 2009, County Board hearing. There was, in addition, some indication in the March 9, 2009, hearing of references to the prior July 8, 2008, hearing exhibits. We believe the parties, as well as the County Board, are entitled to as thorough a review by the State Board of the County Board decision as is possible. We have thus considered, in reaching a decision in these combined matters, the testimony and exhibits presented at both County Board hearings by both Taxpayers and the Assessor as transmitted to the State Board as county board of equalization records on appeal.
60. This Board, as an intermediate level of appellate review, is charged with the responsibility of reviewing county board decisions within defined parameters. Rules, Wyoming State Board of Equalization, Chapter 3, § 9,supra, pp. 3-4. It is those parameters which must be the overall focus of this Board’s review of a county board decision.
61. The Department has approved, by Rule, three appraisal techniques - sales comparison, cost, and income - which an assessor may use to achieve the required fair market value for all property in a county. Supra, ¶¶ 47, 48, 49. The Department Rules in addition provide for use of a CAMA system. Supra, ¶ 50.
62. It is clear from the testimony and exhibits included in both County Board hearing records, the Assessor determined the 2008 value for Taxpayers’ commercial property using the cost approach to value the improvements, and the sales comparison approach to value the land. Specifically, the Assessor, in utilizing a cost valuation technique, employed the CAMA system to develop a depreciated cost value for Taxpayers’ building. To value Taxpayers’ real property, she used the sales comparison approach in conjunction with an abstraction process. The use of the CAMA system [to develop a cost valuation] in conjunction with the sales comparison approach [to value the land] is specifically authorized by Department Rule, and therefore entitles the Assessor’s value be afforded a presumption of correctness. Supra ¶¶ 22, 23, 24, 27, 28, 29, 31, 34, 47, 48, 49, 50.
63. Taxpayers did not present any evidence directly challenging the applicability of the CAMA system, or its use by the Assessor to value their building. They did offer testimony as to the 2008 value calculated by the Assessor for other allegedly similar metal buildings as a challenge to the value calculated for their building. As the Assessor pointed out in response, however, the difference in value between Taxpayers’ building and the buildings Mr. Whitlock discussed was very likely attributable to a difference in the amount of depreciation allowed by the CAMA system cost tables based on the various buildings being built at different times and thus having different effective ages. A newer building, such as Taxpayers’, would not receive as large a reduction in value based on depreciation as would a similar older building. Supra ¶¶ 19, 20, 31.
64. The testimony and exhibits in both County Board records reflect without question the fair market value of Taxpayers’ building increased significantly form 2007 to 2008. The Assessor testified to the change in the cost tables used in a cost approach calculation in the CAMA system from Boeckh to Marshall & Swift, and the reasons for such change. The Assessor’s testimony, which was not contradicted or challenged by Taxpayers, provided an adequate evidentiary explanation for the large increase in value. There is also the possibility such a large increase may have been attributable to Taxpayers’ building being undervalued in prior years in light of the Assessor’s testimony the Boeckh cost tables were not regularly updated. Supra ¶¶ 8, 9, 10, 12, 19, 25, 26, 27, 29, 38.
65. Taxpayers, in challenging the 2008 land value for their property calculated by the Assessor, offered testimony regarding two vacant land sales which they asserted were of property comparable to their property. They asserted these two sales, Process Power and Control, and Bill Smith, indicated the value calculated by the Assessor for their property was overstated. Supra ¶¶ 10, 11, 16.
66. The Assessor’s testimony in response to Taxpayers’ assertions provided more than an adequate explanation as to why neither vacant land sale referenced by Taxpayers was relevant to the value of their property.
67. The Process Power and Control sale was completed on June 11, 2008. The statutory assessment date for 2008 valuations was January 1, 2008. A June, 2008, sale, having occurred six months after the statutory assessment date, while possibly relevant for 2009 valuation purposes, was not reflective of fair market value for purposes of 2008 land valuation. Supra ¶¶ 17, 45, 46, 47.
68. The property sold to Bill Smith, as testified by the Assessor, was not placed on the open market, but rather simply offered to Mr. Smith for purchase. Supra ¶ 18. Any sale of property, in order to be reflective of fair market value as statutorily defined, must be “offered in the open market for a reasonable time.” Supra ¶ 46. The Smith property not having been placed on the market but rather only offered and sold to Mr. Smith, its selling price would not necessarily be reflective of fair market value as defined by statute, and thus is not sufficient to overcome the presumption in favor of the Assessor’s land value. Supra ¶¶ 18, 46, 54, 55, 56.
69. Taxpayers, in support of their challenge to the Assessor’s value determination, offered a commercial property market analysis for their property undertaken by a local real estate agent. The analysis, however, estimates a market value as of June 19, 2008, a date over six months after the statutory lien date of January 1st, and is therefore not an appropriate indication of fair market value as of that date. The analysis, in addition, could arguably be classified as simply one person’s opinion of value which is not sufficient to overcome the presumption in favor of the value calculated by the Assessor for Taxpayers’ property. Supra ¶¶ 14, 45, 46, 54, 55, 56.
70. The 2008 value for Taxpayers’ property derived by the Assessor using the CAMA system to determine a depreciated cost value for the building, and the sales comparison approach to determine a land value, is presumed valid, accurate, and correct. Taxpayers, notwithstanding detailed and well presented evidence and argument, have nonetheless failed to present sufficient evidence to prove by a preponderance of the evidence the valuation approaches used by the Assessor were not a rational method, were not equally applied to all property, or did not achieve essential fairness. The March 17, 2009, decision of the County Board affirming the Assessor’s valuation is supported by substantial evidence. We further conclude, based on our review of the County Board record, the County Board decision is neither unlawful, arbitrary, nor capricious.
IT IS THEREFORE HEREBY ORDERED the Washakie County Board of Equalization Order dated March 17, 2009, affirming the Assessor’s 2008 valuation of Taxpayer's property is 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 day of January, 2010.
STATE BOARD OF EQUALIZATION
Thomas D. Roberts, Chairman
Steven D. Olmstead, Vice-Chairman
Deborah J. Smith, Board Member
Wendy J. Soto, Executive Secretary