While the parties agreed that the assessments of both parcelsincreased more than 5% between 2006 and 2007, the evidence shows that thePetitioners erected a 7,200 square foot commercial building on Parcel No. 3 in2006.…
Here, the Petitioners seek to use the purchase of their landand the construction costs of the building to show that the assessed values ofthe properties were incorrect in 2007. In support of this contention, thePetitioners submitted the purchase agreements for Parcel No. 3 and Parcel No. 4and an itemized cost schedule and two cost estimates for the storage buildingon the lots. See Petitioner Exhibit 1.
The presentation of cost data is a valid method of challengingan assessment. According to the Guidelines, however, construction costs mustinclude all direct labor and materials plus the indirect expenses ofconstructing the building. “Examples of direct costs include labor, material,supervision, utilities used during construction, and equipment rental. Indirectcost examples are building permits, fees, insurance, taxes, constructioninterest, overhead, profit and professional fees….it is critical that theactual construction costs represent all costs (direct and indirect) regardlessof whether or not they were realized, as in the case of do-it-yourselfconstruction.” GUIDELINES, Intro. at 1.
Here, the Petitioners’ evidence shows that they purchasedParcel No. 3 and Parcel No. 4 in May of 2006 for $17,500 each, with theprovision that the seller would pay for the sewer and water lines to be broughtto the property at no cost to the Petitioners. However, Mr. Schafer testified,utilities were never extended to the Petitioners’ lots. He estimated the costto extend the water and sewer lines to the lots would be approximately $16,800.While Mr. Schafer’s testimony is not supported by any estimate or contract, Mr.Schafer testified that he is a licensed contractor in the state of California,Illinois and Indiana who has does this kind of work for “many, many years.” Schafertestimony. In fact, Mr. Schafer testified that it is not uncommon forappraisers to call his office for cost information when Marshall & Swiftwas not specific enough for a particular assignment. Given the testimonyregarding Mr. Schafer’s experience in construction, contracting and costingprojects, the Board finds that the Petitioners presented some evidence that thevalue of the two parcels at issue in this appeal was $18,200 for 2007 based onthe properties’ $35,000 purchase price less the $16,800 he estimated it wouldcost to bring the utilities to the land that the Petitioners’ contracted for aspart of their purchase price.
The Petitioners also submitted a list showing the expensesassociated with the construction of the building, which totaled approximately$55,025. Mr. Schafer testified that the exhibit “shows all expenses associatedwith the improvement of that building.” Schafer testimony. According toMr. Schafer, “It starts, as you can see, with Homeland Security, which isbuilding permits, the Town of Hebron permits, the poles, the hardware, Menards– which supplied some of the materials, the necessary labor to put thestructure up, the concrete labor, the concrete, the trusses, the concrete floor… and the stone for the parking lot out in front.” Id. Mr. Schafertestified that it only took “three men, four days to erect that structure” andthat his cost information included labor, materials and also “a $3,000profit..., which represents a 12% or 13% profit, which is typical and customaryin a building like this.” Id.
To support the Petitioners’ cost figures, Mr. Schafer offeredtwo additional estimates showing that the building materials could be purchasedfor $24,123.69 in 2009 and $26,453 in 2011. Petitioner Exhibit 1. Mr.Schafer argues that he “could put the building up today for less money” because“material costs and labor costs have actually went down due to the depressedconstruction market.” Schafer testimony. The Petitioners furthersupported the construction cost with a letter from their insurance companyshowing the building was insured for $60,000.
Again, because of Mr. Schafer’s experience in construction,contracting and costing projects, the Board finds that the Petitioners raised aprima facie case the value of the building on the lots was $55,025.
Once a petitioner establishes a prima facie case, the burdenshifts to the assessing official to rebut the taxpayer’s evidence. SeeAmerican United Life Insurance Co. v. Maley, 803 N.E.2d 276 (Ind. Tax Ct.2004). To rebut or impeach the Petitioners’ case, the Respondent has the sameburden to present probative evidence that the Petitioners faced to raise theirprima facie case. Fidelity Federal Savings & Loan v. Jennings CountyAssessor, 836 N.E.2d 1075, 1082 (Ind. Tax Court 2005).
Here, the Respondent does not dispute the costs associatedwith building the storage barn, providing utilities to the lots, or Mr.Schafer’s experience or expertise as a contractor. Instead, the Respondentargues that the Petitioners’ properties’ assessments were correct for 2007based on the properties’ market value-in-use. In support of this contention,the Respondent presented a valuation opinion prepared by Mr. Jorczak, thecounty’s director of commercial operations. In his valuation opinion, Mr.Jorczak testified that he used four commercial properties and adjusted thosesales for the differences in building type based on costs from published data.
While Mr. Jorczak’s assertions may not differ significantlyfrom those made by a certified appraiser in an appraisal report, theappraiser’s assertions are backed by his education, training, and experience.The appraiser also typically certifies that he complied with the UniformStandards of Professional Appraisal Practice (USPAP). Thus, the Board, as thetrier-of-fact, can infer that the appraiser used objective data, whereavailable, to quantify his adjustments. And where objective data was notavailable, the Board can infer that the appraiser relied on his education,training and experience to estimate a reliable quantification. Here, however,there is no evidence that Mr. Jorczak is a certified appraiser; he did notestablish that he has any particular expertise in applying generally acceptedappraisal principles; and he did not certify that he complied with USPAP inperforming his valuation analysis. Consequently, Mr. Jorczak’s sales comparisonapproach lacks probative value in this case.5 See Inland Steel Co. v. StateBoard of Tax Commissioners, 739 N.E.2d 201, 220 (Ind. Tax Ct. 2000)(holding that an appraiser’s opinion lacked probative value where the appraiserfailed to explain what a producer price index was, how it was calculated orthat its use as a deflator was a generally accepted appraisal technique).
http://www.in.gov/ibtr/files/Schafer_64-002-07-1-3-00001_et_al.pdf
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