SC Administrative Law Court Decisions

STATEMENT OF THE CASE

This matter is before the Administrative Law Court (“ALC”) for a final order and decision following a contested case hearing pursuant to S.C. Code Ann. § 12-60-2540 (2000) and S.C. Code Ann. § 1-23-600(B) (Supp. 2006). Petitioner Michael J. Welsh (“Welsh”) challenges the Respondent Charleston County Assessor’s (“Assessor”) valuation of his property located at 3327 Olympic Lane, Mount Pleasant, South Carolina 29466, Tax Map Sheet Number (TMS #) 599-06-00-163, for the 2005 tax year. Welsh asserts that his property is not equitably valued in relation to other properties in the surrounding area. Accordingly, Welsh seeks a reduction of the Assessor’s valuation of $350,000 to $338,000.[1] The Assessor argues that all properties in Charleston County have been equitably valued and that no reduction is warranted.

After notice to the parties, the court held a hearing on March 21, 2007. Both parties appeared at the hearing. Evidence was introduced and testimony presented. After carefully weighing all of the evidence, the court finds that the Petitioner’s property for the 2005 tax year should be valued at $350,000.

ISSUE

1.                  Did the Assessor properly equitably appraise Welsh’s property for the 2005 tax year?

2.                  If not, what is the value of Welsh’s property for the 2005 tax year?

FINDINGS OF FACT

Having observed the witnesses and exhibits presented at the hearing and closely passed upon their credibility, and taking into consideration the burden of persuasion by the parties, the court makes the following Findings of Fact by a preponderance of the evidence.

Welsh owns real property located at 3327 Olympic Lane in Mount Pleasant, Charleston County, South Carolina, identified as TMS # 599-06-00-163. The property is an owner-occupied, two-story, single-family residence built in 2000 on a .25-acre, interior lot in a desirable neighborhood known as The Estates at Charleston National. The Mount Pleasant area where Welsh’s property is located has experienced substantial growth and significantly appreciating property values in recent years.

When the Assessor entered Welsh’s property into the Charleston County tax rolls, the Assessor determined through a field review that the total square footage of Welsh’s residence was 2,915 square feet. The residence has three bedrooms and three and a half baths. Its features include a stoop, a screened porch, two decks, and a two-car garage. The Assessor initially determined that Welsh’s property was worth $384,000 for the 2005 tax year.

Welsh appealed this determination to the Charleston County Board of Assessment Appeals (“Board”) on the ground that the property’s value is not equitably appraised when compared to like surrounding properties. Welsh contended that his property should be assessed at $300,000. Prior to the hearing before the Board, the Assessor completed a Uniform Residential Appraisal Report (“URAR”) of Welsh’s property and reduced the value to $350,000 based on the lot size of Welsh’s property and the quality of construction of the home. After a hearing on October 25, 2006, the Board affirmed the Assessor’s valuation of $350,000 for the 2005 tax year. Welsh appealed this decision to the ALC, contending that the assessed value of his property should be further reduced.

Angela Sawadske (“Sawadske”) testified on behalf of the Assessor regarding the value of Welsh’s property. Sawadske is a certified residential real estate appraiser with 6 years’ experience in appraising real estate. Since January 2005, she has held a certified residential license, which allows Sawadske to legally appraise all the residential properties within the responsibility of the Assessor. The court qualified her as an expert in residential real estate appraisals and found her to be knowledgeable and credible.

After Welsh appealed the value of his property, the Assessor directed Sawadske to examine Welsh’s property and create a URAR. In appraising Welsh’s property, Sawadske relied upon the sales comparison approach.[2] Welsh purchased his property in 2000 for $295,280. In conducting the URAR, Sawadske compared four properties located near Welsh’s property which were sold within ten months of December 31, 2003 (“Comparables”). Based on her comparisons, she valued Welsh’s property at $350,000.

In further support of its assessment, the Assessor presented John Blanton, an appraisal supervisor for the Assessor. Blanton testified that he reviewed Sawadske’s appraisal and, based upon his expertise, believes the sales comparison approach supports a valuation of $350,000 for the 2005 tax year.

The only evidence Welsh presented at the hearing was his own opinion as the landowner as to the value of his property. In his testimony, Welsh criticized the Assessor’s appraisal, essentially challenging (1) the square footage measurement used by the Assessor, and (2) the value Sawadske attributed to the views for neighboring properties as compared to Welsh’s.

Welsh claims that Sawadske’s appraisal is flawed because she did not personally measure the square footage of his residence, but rather relied upon the square footage listed in the Assessor’s records.[3] Welsh stated that the square footage the Assessor used in determining the value of his property was incorrect based upon his own measurement of his residence. Welsh testified that he personally measured along the exterior walls of his home and that, based on his measurement, the square footage of his residence should be 2,802 square feet, not 2,915 square feet.[4]

To determine the square footage of a residence, Sawadske testified that industry standards require the determination to be based on exterior wall measurements. The total square footage is based on the finished livable areas of the house, including its walls and air ducts, but not unfinished areas such as garages, attics, and decks. Most two-story houses are not exact boxes. Therefore, in determining the second floor square footage the roof lines are taken into account, and rooms that extend into the second floor such as an open two-story foyer are deducted from the second floor square footage.

According to Sawadske and Blanton, the square footage of every newly constructed home in Charleston County is measured by either an appraiser or a data collector. Sawadske further testified that with respect to Welsh’s neighborhood, an appraiser rather than a data collector would have measured the square footage of those residences. Sawadske further testified that as an expert in residential appraisals she commonly relies upon the measurements found in the tax rolls and has confidence in their accuracy. The court finds, based upon her testimony, that the appraiser’s measurement of Welsh’s home utilizing industry standards is more reliable than the measurement made by Welsh, a layman who does not have the experience and training that an appraiser does.

Welsh further challenged the premiums Sawadske ascribed to the vistas enjoyed by the Comparables as contrasted with Welsh’s home. Welsh claims that the adjustments Sawadske applied to several Comparables for their views were incorrect. For example, he asserted that a larger adjustment should have been made for a Comparable that had a view of the golf course and a pond. Sawadske testified, however, that she took into consideration the variance in the view of the two properties as a whole, including both the golf course and the pond, in making her adjustment for that Comparable. While Welsh assigned his own values to the adjustments for view, he provided no real support for his numbers other than his belief that the adjustment should have been larger because the view from his property is less desirable. The court finds these values to be less reliable than the values assigned by Sawadske.

In summary, Welsh arrived at his valuation by utilizing his own square footage measurement rather than that of the Assessor’s appraiser, making larger adjustments for the differences in view, and disregarding one of the Comparables because he believed its square footage was incorrect.[5] Based upon his calculations and measurements, he determined his property should be valued at $338,000.

LAW

Based upon the foregoing Findings of Fact, the court concludes the following as a matter of law.

1. Jurisdiction and Review

Jurisdiction over this case is vested with the South Carolina Administrative Law Court pursuant to S.C. Code Ann. § 12-60-2540(A) (Supp. 2006), S.C. Code Ann. § 1-23-600(B) (Supp. 2006), and S.C. Code Ann. §§ 1-23-310 et seq. (2005). The weight and credibility assigned to evidence presented at the hearing of a matter is within the province of the trier of fact. See S.C. Cable Television Ass’n v. S. Bell Tel. & Tel. Co., 308 S.C. 216, 222, 417 S.E.2d 586, 589 (1992). Furthermore, a trial judge who observes a witness is in the best position to judge the witness’s demeanor and veracity and to evaluate the credibility of his testimony. See, e.g., Woodall v. Woodall, 322 S.C. 7, 10, 471 S.E.2d 154, 157 (1996); Wallace v. Milliken & Co., 300 S.C. 553, 556, 389 S.E.2d 448, 450 (Ct. App. 1990). In presiding over this contested case, the court serves as the finder of fact and makes a de novo determination regarding the matters at issue. Reliance Ins. Co. v. Smith, 327 S.C. 528, 534, 489 S.E.2d 674, 677 (Ct. App. 1997); see S.C. Code Ann. § 1-23-600(B) (Supp. 2006).

2. Property Tax Assessments

A taxpayer may appeal a property tax assessment of a county board of assessment by requesting a contested case hearing before the ALC. S.C. Code Ann. § 12-60-2540(A) (Supp. 2006). A presumption exists that an assessor’s valuation is correct. See S.C. Tax Comm’n v. S.C. Tax Bd. of Review, 278 S.C. 556, 562, 299 S.E.2d 489, 492-93 (1983). As the party contesting the assessing authority's valuation, the Petitioner has the burden of proving the actual value of the property at issue. See Reliance Ins. Co. v. Smith, 327 S.C. 528, 534, 489 S.E.2d 674, 677 (Ct. App. 1997).

South Carolina law requires that all property within the same class must be assessed uniformly and equally. S.C. Const. art. X, § 1; S.C. Code Ann. § 12-43-210(A) (Supp. 2006). However, neither the South Carolina Constitution nor the United States Constitution requires absolute accuracy in property tax matters. Allied Stores of Ohio v. Bowers, 358 U.S. 522 (1959); Reliance Ins. Co., 327 S.C. at 537, 489 S.E.2d at 679. “While our constitution requires equality and uniformity in tax assessments, ‘[a]bsolute accuracy with respect to valuation and complete equality and uniformity are not practically attainable.’” Reliance Ins. Co., 327 S.C. at 537, 489 S.E.2d at 679 (quoting Wasson v. Mayes, 252 S.C. 497, 502, 167 S.E.2d 304, 306-07 (1969)). Rather, what is proscribed is the intentional and systematic undervaluation of certain properties while other properties in the same class are valued at fair market value. Sunday Lake Iron Co. v. Wakerfield Tp., 247 U.S. 350 (1918). To meet that standard, more than a mere showing that other properties are undervalued must be shown. Owen Steel Co., Inc. v. S.C. Tax Comm’n, 287 S.C. 274, 337 S.E.2d 880 (1985). “[A]s in any median figure, there are some properties taxed at a higher figure than the median and some at a lower.” Id. at 278, 337 S.E.2d at 882. Accordingly, the taxpayer bears the burden of proving that the inequality is not the result of a mere error in judgment but rather that the inequality is the result of an intentional and systematic undervaluation. Sunday Lake Iron Co., 247 U.S. at 352-53.

The taxable status of real property for a given year is to be determined as of December 31 of the preceding tax year. S.C. Code Ann. § 12-37-900 (2000); Atkinson Dredging Co. v. Thomas, 266 S.C. 361, 223 S.E. 2d 592 (1976). In making this determination, the South Carolina Supreme Court has stated that an “[a]ppraisal is, of course, not an exact science and the precise weight to be given to any factor is necessarily a matter of judgment, for the court, in the light of the circumstances reflected by the evidence in the individual case.” Santee Oil Co. v. Cox, 265 S.C. 270, 277, 217 S.E.2d 789, 793 (1975). Nevertheless, S.C. Code Ann. § 12-37-930 (Supp. 2006) sets forth how real property must be valued:

All property must be valued for taxation at its true value in money which in all cases is the price which the property would bring following reasonable exposure to the market, where both the seller and the buyer are willing, are not acting under compulsion, and are reasonably well informed of the uses and purposes for which it is adapted and for which it is capable of being used.

See also S.C. Const. art. III, § 29 (“All taxes upon property, real and personal, shall be laid upon the actual value of the property taxed.”). Therefore, fair market value is the measure of true value for taxation purposes. Lindsay v. S.C. Tax Comm’n, 302 S.C. 504, 397 S.E. 2d 95 (1990). “The taxpayer may, however, show by other evidence that the assessing authority’s valuation is incorrect. If he does so, the presumption of correctness is then removed and the taxpayer is entitled to appropriate relief.” Cloyd v. Mabry, 295 S.C. 86, 89, 367 S.E. 2d 171, 173 (Ct. App. 1988).

3. Conclusions

As the taxpayer contesting the assessment of his property, Welsh has the burden of overcoming the presumed correctness of the Assessor’s valuation by showing that the valuation of the Assessor is incorrect. See Cloyd, 295 S.C. at 89, 367 S.E. 2d at 173. Further, as the petitioner, Welsh has the burden of proving that the actual value of his property is $338,000. See Reliance Ins. Co., 327 S.C. at 534, 489 S.E.2d at 677. Welsh failed meet this burden.

Sawadske is an expert in appraisals and provided persuasive and reasonable evidence to support her valuation of Welsh’s property at $350,000. By contrast, Welsh’s calculations were supported only by his opinion. While a landowner’s opinion regarding the value of his property is admissible, Seaboard Coast Line R.R. v. Harrelson, 262 S.C. 38, 202 S.E.2d 1 (1974), Welsh’s lay opinion, without more, was insufficient to prove by a preponderance of the evidence that his property is worth less than $350,000 when compared with Sawadske’s and Blanton’s persuasive and credible expert testimony. See Reliance Ins. Co., 327 S.C. at 532, 489 S.E.2d at 676 (noting that the taxpayer presented expert testimony criticizing the assessor’s appraisal but did not present an independent appraisal of the property).

The court further finds Sawadske’s testimony to be more persuasive regarding both the appropriate square footage and the adjustments made for view. Therefore, Welsh has failed to prove by a preponderance of the evidence that his valuation rather than the Assessor’s should be used for the 2005 tax year. Moreover, Welsh failed to present any evidence whatsoever of systematic and “intentional violation of the essential principle of practical uniformity,” thus failing to carry his burden of proof to show that his property is inequitably valued. See Sunday Lake Iron Co., 247 U.S. at 352-53; Reliance Ins. Co., 327 S.C. at 537-38, 489 S.E.2d at 679.

ORDER

Based upon the Findings of Fact and Conclusions of Law stated above, it is hereby

ORDERED that Board’s assessment of Welsh’s property at $350,000 for the 2005 tax year is upheld.

IT IS SO ORDERED.

______________________________

PAIGE J. GOSSETT

Administrative Law Judge

May 7, 2007

Columbia, South Carolina