BEFORE THE STATE BOARD OF EQUALIZATION


FOR THE STATE OF WYOMING


IN THE MATTER OF THE APPEAL OF          ) 

LARAMIE COUNTY ASSESSOR FROM      )

A DECISION OF THE LARAMIE COUNTY   )         Docket No. 2008-94

BOARD OF EQUALIZATION - 2008              )

PROPERTY VALUATION                                )

(Johnson Property)                                             )




DECISION AND ORDER






APPEARANCES


Mark T. Voss, Laramie County Attorney, appeared on behalf of Brenda Arnold, Laramie County Assessor (Assessor).


Patricia Johnson (Taxpayer) appeared pro se.



DIGEST


This is an appeal from a decision of the Laramie County Board of Equalization (County Board). The Decision and Order had the effect of reducing the Assessor’s valuation of Taxpayer’s residential structures for 2008 tax purposes. The Assessor’s Notice of Appeal was filed with the State Board effective August 25, 2008. Taxpayer and the Assessor filed briefs as allowed by the State Board Briefing Order issued September 25, 2008. Neither party requested oral argument.


The State Board of Equalization (State Board), comprised of Thomas R. Satterfield, Chairman, and Thomas D. Roberts, Vice-Chairman, considered the parties’ briefs, the hearing record, and the decision of the County Board. We evaluate the Assessor’s 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 reverse the decision of the County Board.



PROCEEDINGS BEFORE THE COUNTY BOARD


The County Board conducted a hearing on June 11, 2008, at which the Taxpayer and Assessor each testified and presented exhibits. The County Board entered its Decision and Order on July 31, 2008, which had the effect of reducing the Assessor’s 2008 fair market value for Taxpayer’s residential structures. The decision was mailed to Taxpayer and the Assessor on August 4, 2008. [County Board Record, pp. 72-73].



JURISDICTION


The State Board is required to “hear appeals from county boards of equalization.” Wyo. Stat. Ann. § 39-11-102.1(c). The Assessor filed a timely appeal of the County Board decision with the State Board effective August 25, 2008. Rules, Wyoming State Board of Equalization, Chapter 3 § 2.



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).



ISSUES


The Assessor urges the County Board decision is not supported by credible or substantial evidence; the County Board legally erred by failing to give the Assessor’s value the required presumption of validity; and the County Board abused its discretion by arbitrarily directing the Assessor to modify the condition of the residential structures on Taxpayer’s property from “average” to “fair.” The Assessor, in order to prevail, must establish the County Board decision is not supported by substantial evidence, and/or the County Board acted arbitrarily and capriciously by in effect reducing the Assessor’s value for 2008 tax purposes.


We conclude the County Board record lacks the substantial evidence necessary to support the County Board decision.



FACTS PRESENTED TO THE COUNTY BOARD

1.        Taxpayer owns residential property at 1820 Seymour Avenue, Cheyenne, Laramie County, Wyoming. [County Board Record, p. 41]. Taxpayer’s property consists of a 1239 square foot, single story, brick veneer ranch-style residence with an attached garage, and a second, separate 360 square foot, single story, brick veneer garage converted to an apartment. [County Board Record, pp. 17, 19, 44-51].


2.        The Assessor sent Taxpayer a Notice of Assessment for the 2008 tax year on March 17, 2008, indicating a fair market value of $161,872 for Taxpayer’s property. [County Board Record, pp. 14, 41].


3.        Taxpayer filed a request for review with the Assessor on March 31, 2008. Based on this review, the Assessor removed the market adjustment on the converted garage, and issued an amended assessment schedule on April 1, 2008, reducing the fair market value of Taxpayer’s property to $143,032. [County Board Record, pp. 14-15].


4.        On April 18, 2008, Taxpayer filed an Official Appeal of Assessment with the County Board. [County Board Record, p. 39]. The County Board held a hearing on Taxpayer’s appeal on June 11, 2008. [County Board Record, p. 1].


5.        Taxpayer testified at the County Board hearing with regard to the condition of her house:

I want to present my house has no insulation, no good windows and the wind comes through. The bathroom is so small, you bump the door and wall to go in. The tiles are loose, wallpaper is torn. Nothing is done for more than 45 years. Kitchen floor needs to be taken up. Level the floor and then replace it with tile or carpet, whatever, and other things in the kitchen to be done.

 

The back door and frame are worn out. They need either replaced or a lot of work. The furnace needs to be replaced. Also, the wood stove, the pipe going to the roof needs replaced. A lot of plumbing and electricity system needs replaced. The house needs to have scratches and holes patched and painted. The cement foundation has cracks, sidewalks need replaced.


[County Board Record, p. 7].


6.        Taxpayer also stated she had checked each of the houses the Assessor had indicated were comparable to her house. She asserted they were not comparable, partly because they were not within a four block perimeter of her house. [County Board Record, p. 8].


7.        When asked what she thought her house was worth, Taxpayer responded: “Not any more than it was last year, if that. Less, but not more.” [County Board Record, p. 10].


8.        The Assessor testified she has been a certified Wyoming tax appraiser since 1989, and is accredited by the International Association of Assessing Officers. [County Board Record, pp. 11-12].


9.        An on-site inspection of Taxpayer’s property was completed by the Assessor’s office on May 15, 2007, as part of the normal rotation of on-site inspections every four years. [County Board Record, p. 14].


10.      An assessment schedule was sent Taxpayer on March 17, 2008, reflecting a fair market value for her property of $161,872. Taxpayer requested a review of the property characteristics on March 31, 2008. As a result of a review of the converted garage, the Assessor decided to remove the market adjustment from this structure since it could not be sold separately. An amended assessment schedule reflecting a fair market value of $143,032 for Taxpayer’s property was mailed on April 1, 2008. [County Board Record, pp. 14-15, 32].

11.      The Assessor, in determining the 2008 value for Taxpayer’s property, compared the sold prices in 2007 of 55 properties within the same neighborhood as Taxpayer’s property with the computer assisted mass appraisal (CAMA) system replacement costs new less depreciation [RCNLD]. The comparison indicated properties in the same neighborhood as Taxpayer’s property were selling at a median of 32 percent (32%) more than replacement cost new less depreciation. The Assessor thus applied the 32% adjustment to every residential structure within the area, including Taxpayer’s house, to reach a fair market value. [County Board Record, pp. 15-16, 52-54].


12.      The Assessor determined Taxpayer’s house to be in average condition, and allowed 33% depreciation since the property was built in 1920. The Assessor asserted the depreciation allowed, which totaled $41,623, was an allowance to cover the type of repair issues raised by Taxpayer. The Assessor thus valued the house at $111,087. [County Board Record, pp. 16, 50].


13.      The Assessor also determined the converted garage to be in average condition for its age, and allowed 77 percent depreciation. Even the allowance of maximum depreciation would still leave a residual value of at least 20 per cent of RCNLD. [County Board Record, pp. 16-17, 28, 32, 51].


14.      The Assessor also provided an analysis of comparable properties, including properties in the range of the value first asserted by Taxpayer, $120,000. This comparable analysis reinforced her conclusion Taxpayer’s property should be valued as of January 1, 2008, at $143,032. [County Board Record, pp. 17-19, 55-62].


15.      The Assessor complied with Department regulations and state statutes in calculating the fair market value of Taxpayer’s structures and land. [County Board Record, p. 19].


16.      The Assessor stated the definition of average condition as:

 

Some evidence of deferred maintenance and normal obsolescence with age in that a few minor repairs are needed along with some refinishing, but with all major components still functioning and contributing toward an extended life expectancy. Effective age and utility is standard for like properties of its class and usage.


[County Board Record, p. 20].


17.      The Assessor stated the definition of fair condition as:

 

[M]uch repair is needed. Many items need refinishing or overhauling, deferred maintenance obvious, inadequate building utility and services, all shortening the life expectancy and increasing the effective age.


[County Board Record, pp. 20-21].


18.      The Assessor asserted Taxpayer’s property was very representative of property built in 1920. The CAMA appraisal system she used has a section for older residences. She believed the condition of Taxpayer’s structures was typical for older residences. She did not agree the condition should be fair. [County Board Record, pp. 21, 27-28].


19.      The County Board issued its decision on July 31, 2008. The decision reversed the Assessor’s revised 2008 fair market value of Taxpayer’s property with instructions on remand to revise the condition of both structures from “average” to “fair.” [County Board Record, p. 71].



DISCUSSION OF ISSUES AND APPLICABLE LAW

20.      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.”


21.      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).


22.      All property must be valued annually at fair market value. Wyo. Stat. Ann.§ 39-13-103(b)(ii). Further, all taxable property must be valued and assessed for taxation in the name of the owner of the property on January 1. Wyo. Stat. Ann. § 39-13-103(b)(i)(A).


23.       Fair market value is defined as:

 

[T]he amount in cash, or terms reasonable 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); See Rules, Wyoming Department of Revenue, Ch. 9 § 4(f.).


24.      An assessor is required to annually value property within the assessor’s county for tax purposes at its fair market value. In completing this task, an assessor is required to “[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).


25.      The Department is required 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) and (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).


26.      In particular, the Department “shall 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). The Department has promulgated rules prescribing the methods for valuing property. The acceptable methods include a sales comparison approach, a cost approach, and an income or capitalized earning approach. The rules also authorize the use of the CAMA system. Rules, Wyoming Department of Revenue, Chapter 9, § 6(a)–(d).


27.      In valuing real property and improvements for tax purposes, the assessor must take into consideration depreciation. Rules, Wyoming Department of Revenue, Chapter 9 § 6(b.)(iv.). Depreciation is defined as:

 

(d.)"Depreciation" means a loss of utility and hence value from any cause. Depreciation may take the form of physical depreciation, functional obsolescence, or economic obsolescence.

(i.) "Physical Depreciation" means the physical deterioration as evidenced by wear and tear, decay or depletion of the property.

(ii.) "Functional Obsolescence" means 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.

(iii.) "Economic Obsolescence" means 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:

(A.) Capitalization of the income or rent loss attributable to the negative influence;

(B.) Comparison of sales of similar properties which are subject to the negative influence with others which are not.


Rules, Wyoming Department of Revenue, Chapter 9 § 4(d.).


28.      An assessor is also required to take into consideration appreciation. Rules, Wyoming Department of Revenue, Chapter 9 § 6(b.)(iii.). 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 § 6(b.)(v.)(A.).


29.      The determination of fair market value 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 (1923). 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).


30.      An assessor’s valuation is presumed valid, accurate, and correct. Teton Valley Ranch v. State Board of Equalization, 735 P.2d 107, 113 (Wyo. 1987). This presumption survives until overturned by credible evidence. Id.; Britt v. Fremont County Assessor, 2006 WY 10, ¶ 34, 126 P.3d 117, 127 (Wyo. 2006). A mere difference of opinion as to value is not sufficient to overcome the presumption. J. Ray Mc Dermott & Co. v. Hudson, 370 P.2d 364, 370 (Wyo. 1962); Britt, supra. 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 § 6(b), (d). “The burden is on the Taxpayer to establish any overvaluation.” Hillard v. Big Horn Coal Co., 549 P.2d 293, 294 (Wyo. 1976).


31.      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, ¶ 39, 126 P.3d 117, 128 (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, 896 P.2d at 1351.


32.      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 decision. In determining whether there is the required substantial evidence, 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).


33.      The Assessor complied with the requirements of state law in determining the value for Taxpayer’s property by using the cost approach adjusted to account for depreciation and appreciation as prescribed in Chapter 9 of the Rules promulgated by the Department. Rules, Wyoming Department of Revenue, Chapter 9 § 6(b). Specifically, the Assessor employed the CAMA system supplied by the Department to determine the value of Taxpayer’s structures. The use of the CAMA system is specifically authorized and entitles the Assessor’s value to be afforded a presumption of correctness. Supra ¶¶ 30, 31.


34.      Taxpayer did not present any evidence challenging the CAMA system, its use by the Assessor, or the information specific to her property entered into the CAMA system.


35.      The Assessor collected 2007 sales information and compared the valid sale prices for properties in the same neighborhood as Taxpayer’s with the value calculated using replacement cost new less depreciation for those recently sold properties. She found the value reflected by sales prices exceeded the replacement cost new less depreciation by 32%. She therefore adjusted the values of all properties in the neighborhood by 32% to reflect the indicated appreciation. Supra ¶ 11.


36.      The only evidence presented by Taxpayer with regard to the condition of her house was her testimony as to what she believed to be needed repairs to her residence. Supra, ¶ 5. She did not present any independent evidence which addressed the condition of her residence within the applicable definitions of average and fair condition as presented by the Assessor. There was no evidence of needed repairs or deferred maintenance which affected the utility of the house, and therefore shorten its life expectancy as required to support a “fair” condition. Supra, ¶ 17. The testimony by Taxpayer, although clearly honest and sincere, is, without independent corroboration, simply her opinion, which is not sufficient by itself to provide the required substantial evidence needed to overcome the presumption of validity in favor of the Assessor’s determination of “average” condition for Taxpayer’s house considering its age. Taxpayer also did not rebut the Assessor’s assertion the depreciation allowance of 33% was intended as a reflection of needed repairs. Supra, ¶¶ 12, 18, 30.


37.      Taxpayer did not provide any evidence with regard to the condition of the converted garage, other than to assert it was not remodeled in 1983. [County Board Record, pp. 21-22]. There is thus a complete lack of substantial evidence to overturn the Assessor’s “average” condition determination for the converted garage.


38.      While we can appreciate Taxpayer’s concern with regard to increases in the valuation of her property, we are constrained to conclude there is not sufficient substantial evidence in the record to support a conclusion the County Board’s decision directing the Assessor to change the condition of Taxpayer’s property, which in effect reduces the valuation of Taxpayer’s structures, establishes an appropriate fair market value. Taxpayer did not challenge the CAMA system or assert the Assessor improperly utilized the system. The CAMA system ensures all residential real estate is valued using the same rational method. By its uniform application, the constitutional requirements of uniformity and essential fairness are met. Supra ¶¶ 20, 21.


39.      The valuation of the Assessor derived using the CAMA system is presumed valid, accurate, and correct. In this case Taxpayer failed to present sufficient substantial evidence to overcome the presumption of validity in favor of the Assessor’s condition determination for either structure. The CAMA system was a rational method, equally applied to all property, and thus achieved essential fairness. The decision of the County Board is not supported by substantial evidence, and therefore must be reversed. Based on this conclusion, we do not need to consider whether the County Board decision was unlawful, arbitrary, or capricious.



ORDER


           IT IS THEREFORE HEREBY ORDERED the Decision and Order of the Laramie County Board of Equalization directing the Assessor to change the condition description of Taxpayer's property from average to fair, is reversed.


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 February, 2009.


                                                                  STATE BOARD OF EQUALIZATION




                                                                  _____________________________________

                                                                  Thomas R. Satterfield, Chairman




                                                                  _____________________________________

                                                                  Thomas D. Roberts, Vice-Chairman


ATTEST:




________________________________

Wendy J. Soto, Executive Secretary