SC Administrative Law Court Decisions

I. Statement of the Case

This is a contested case brought by Robert Bruce as the petitioner ("taxpayer") against the Greenville County Assessor ("assessor") concerning property valuations for property tax years 2001 and 2002. The taxpayer exhausted the prehearing remedies with the assessor and the Greenville County Board of Assessment Appeals and is now seeking a contested case hearing before the Administrative Law Court. Jurisdiction is granted by § 12-60-2540 (Supp. 2003).

II. Issue

For tax purposes, is the taxpayer’s property valued consistent with the demands of fair market value and is the property equitably assessed?

III. Analysis

A. Findings of Fact

Based on the preponderance of the evidence, the following findings of fact are entered:

In the late 1920's (but prior to the beginning of the Great Depression in 1929), a residential subdivision began in Greenville County encompassing Lake Lanier and the immediately adjoining areas. The subdivision contains well over 2,000 lots with a typical lot having a width of approximately 50 feet.

The subdivision has been exceedingly slow in its development. For example, many of the original planned roads have never been cut and many of the roads that have been cut have not been paved. In addition, basic utilities are lacking throughout the subdivision. In fact, while the original plans called for waste disposal via septic tank, such is incapable of implementation due to inadequate soil properties. Thus, a significant portion of the lots are not suitable for residential living.

The taxpayer owns several lots in the subdivision. The ones in controversy here are identified as map reference 624.2-7-54 (two lots combined into one) and map reference 624.3-1-28 (a single lot). Neither the combined two lots nor the single lot are capable of having a residence built upon them. Further, the lots have the typical 50 foot width and neither property is lake front property.

In valuing property in Lake Lanier, the assessor employs a front-footage basis for property that is water-front property. Property that consists of a significant area or that is the result of a numerous series of accumulated properties is valued as acreage. Properties which consist of a single or a double lot are valued as lots.

Despite the difficulties present in the subdivision, sales have occurred. In this case, both the taxpayer and the assessor rely upon sales in the subdivision, but utilize different sales.

Taxpayer’s Sales

Assessor’s Sales of Double Lots

Assessor’s Sales of Single Lots

B. Conclusions of Law

Based on the foregoing Findings of Fact, I conclude the following as a matter of law:

This controversy presents two issues. First, is the assessor’s valuation consistent with fair market value and, second, is the value used by the assessor equitable in relation to similar property?

1. Fair Market Value

"The proper valuation of realty for taxation is a question of fact to be ascertained in each individual case in the manner prescribed by statute." 84 C.J.S. Taxation § 411 at 793 (1954). For South Carolina, the manner prescribed by statute for answering the valuation "question of fact" is that of determining the property's "true value in money." S.C. Code Ann. § 12-37-930 (Supp. 2003). The "true value in money" is the property's fair market value (see Lindsey vs. S.C. Tax Comm'n, 302 S.C. 504, 397 S.E.2d 95 (1990)) and is statutorily defined as being “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.” S.C. Code Ann. § 12-37-930 (Supp. 2003).

Here, while the parties agree that the sales comparison approach is the best measure of fair market value, the parties do not agree on what properties are the best comparables.

In searching for fair market value, one must acknowledge that the Lake Lanier subdivision has failed to reach the degree of success intended by the original developers. Indeed, numerous deficiencies exist that will continue to limit values in the area. However, the properties here under review are lots in a subdivision which, over time, have produced sales.

For such properties, the sales comparison approach with its reliance upon “recent sales of comparable properties in the market” is a highly reliable indicator of fair market value. Appraisal Institute, The Appraisal of Real Estate at 71 (10th Ed. 1992). In fact, our courts and those of other states have relied on the Appraisal Institute's standards for valuation as published and updated in several editions of The Appraisal of Real Estate. See, e.g., South Carolina Tax Commission v. South Carolina Tax Board of Review, 287 S.C. 415, 339 S.E.2d 131 (Ct. App. 1985); Badische Corporation (BASF) v. Town of Kearny, 288 N.J.Super. 171, 672 A.2d 186, 189 (1996). Accordingly, based on a sales comparison approach to fair market value, the issue in the instant case becomes deciding which sales present the most persuasive evidence of fair market value. Under the evidence presented here, the assessor’s sales data is more compelling.

For example, the assessor more accurately identifies comparables for map reference 624.2-7-54, the property consisting of two lots combined into one. As to that property, the comparables chosen by the assessor are a better match to the taxpayer’s property since the assessor relies upon comparables that are sales of property consisting of two combined lots. On the contrary, the taxpayer’s sales are less reliable since they show the sales of single lots.

In addition, the assessor’s comparables are more reliable than the taxpayer’s for map reference 624.3-1-28 (the single lot) as well as map reference 624.2-7-54 (the combined lots) since the assessor relies upon property sales that are more current in time. For instance, the assessor’s sales are from 1999 and 2000. The taxpayer’s sales are from 1997. While the taxpayer seeks to compensate for the less than current sales by adding a “time adjustment” of $200, the evidence does not establish the reliability of the $200 adjustment.

Therefore, based on the totality of the evidence presented, the valuation of the taxpayer's property at map reference 624.2-7-54 is $4,500. Further, the value of the taxpayer’s property at map reference 624.3-1-28 is $3,000.

2. Equity Value

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); Owen Steel Co., Inc. v. S.C. Tax Comm'n, 287 S.C. 274, 337 S.E.2d 880 (1985). Indeed, the law recognizes that complete equity and uniformity are not practically attainable when valuing property. Wasson v. Mayes, 252 S.C. 497, 167 S.E.2d 304 (1967). 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. Wakefield Tp, 247 U.S. 350 (1918). The burden of proving an intentional and systematic undervaluation rests with the complaining party. Id.

To meet the taxpayer's burden, more than a mere showing that other properties are undervalued must be shown. Owen Steel Co., Inc., 337 S.E.2d at 882-3. The evidence must establish that the undervaluation is not the result of a mere judgment call but rather that the undervaluation is the result of an intentional and systematic undervaluation. For example, a noteworthy illustration of an "intentional and systematic undervaluation" is found in Allegheny Pittsburgh Coal Co. v. County Comm'n, 488 U.S. 336 (1989).

In Allegheny, the Court found that the property of the petitioners had been assessed at approximately 8 to 35 times more than comparable neighboring property, and that these discrepancies continued for more than 10 years with little change. Id., 109 S.Ct. at 638. Indeed, in finding the presence of a faulty and systematic valuation method which produced a disparity, Allegheny found that the disparity was a gross disparity as opposed to a mere judgment error in valuation by the Assessor.

Moreover, the Assessor in Allegheny increased the valuation on the petitioners' property by reference to the property's very recent sales price while other similar properties were not subject to any significant adjustments since those properties utilized their much older sales prices. Noting that the petitioners had "suffered from such 'intentional systematic undervaluation by state officials' of comparable property" in the County, the Court held that "[t]he relative undervaluation of comparable property in Webster County over time therefore denies petitioners the equal protection of the law." Id., 109 S.Ct. at 639.

In the instant case, no "intentional systematic undervaluation" has occurred. In fact, no showing has been made that any comparable properties have been undervalued relative to the taxpayer’s properties. Here, the evidence establishes that property that is water front is valued consistently on a front-footage basis. Property that consists of a numerous series of accumulated properties is valued as acreage. But properties such as the taxpayer’s properties which consist of a single or double lot are valued as lots. In short, the method employed in this case is rational and has been evenly applied to similar properties in the area. Thus, no equity violation has occurred.

IV. Order

Based upon the Findings of Fact and Conclusions of Law, it is hereby ordered:

For property tax years 2001 and 2002, Robert Bruce’s property identified as map reference 624.2-7-54 (two lots combined into one) and map reference 624.3-1-28 (a single lot) located in Greenville County must be valued at $4,500 and $3,000 respectively

AND IT IS SO ORDERED.

_________________________________

RAY N. STEVENS

Administrative Law Judge

Dated: October 25, 2004

Columbia, South Carolina