South Carolina              
Administrative Law Court
Edgar A. Brown building 1205 Pendleton St., Suite 224 Columbia, SC 29201 Voice: (803) 734-0550

SC Administrative Law Court Decisions

CAPTION:
Mt. Vintage Plantation Golf Club, LLC vs. Edgefield County Assessor

AGENCY:
Edgefield County Assessor

PARTIES:
Petitioners:
Mt. Vintage Plantation Golf Club, LLC

Respondents:
Edgefield County Assessor
 
DOCKET NUMBER:
07-ALJ-17-0569-CC

APPEARANCES:
For the Petitioner:
Greg W. Anderson, Esquire

For the Respondent:
John F. Byrd, Jr., Esquire
 

ORDERS:

FINAL ORDER AND DECISION

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. 2007). Petitioner Mt. Vintage Plantation Golf Club, LLC, (“Mt. Vintage”) challenges the Respondent Edgefield County Assessor’s (“Assessor’s”) valuation of its golf course located at 375 Mount Vintage Plantation Drive, North Augusta, South Carolina, 29860, Tax Map Sheet Number (“TMS #”) 122-00-00-006-000 and 122-00-00-016-000[1], for the 2006 tax year. Mt. Vintage asserts that its golf course was significantly overvalued for the 2006 tax year, and is not equitably valued in relation to other golf courses in the surrounding area. Accordingly, Mt. Vintage seeks a reduction of the Edgefield County Board of Assessment Appeals’ valuation of $5,629,043 to $3,114,000. The Assessor argues that Mt. Vintage’s golf course is equitably valued and that no reduction from its assessment of $8,896,899 is warranted.

After notice to the parties, the court held a hearing on April 15, 2008. 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 2006 tax year should be valued at $3,114,000.

ISSUES

1.                  Did the Assessor properly equitably appraise Mt. Vintage’s golf course for the 2006 tax year?

2.                  If not, what is the value of Mt. Vintage’s property for the 2006 tax year?

FINDINGS OF FACT

General Information

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.

Mt. Vintage owns real property located at 375 Mount Vintage Plantation Drive, North Augusta, South Carolina, 29860, identified as TMS #122-00-00-006-000 and #122-00-00-016-000. The property includes an eighteen-hole golf course,[2] a clubhouse, parking spaces, a maintenance shed, and a cart shed. The golf course opened in the spring of 2000 and contains 265.29 acres of land. The golf course was built to increase the property value of the surrounding residential development. The area where Mt. Vintage is located has experienced significantly appreciating property values in recent years. The golf course is the primary amenity of the local residences that make up Mt. Vintage Plantation; however, the golf club does not have a high marketability on its own, as do some courses found along the South Carolina coast. For this reason, Mt. Vintage charges significantly lower greens fees than do coastal golf clubs. In addition, Mt. Vintage has lost money every year since it opened.

The Assessor initially determined that Mt. Vintage’s property was worth $8,896,899[3] for the 2006 tax year. Mt. Vintage claims that the Assessor used an inappropriate valuation method for the property. Furthermore, Mt. Vintage contends that, even if the valuation method used by the Assessor were appropriate, the Assessor failed to account for economic obsolescence[4] in its calculation. Mt. Vintage contends that because the golf course operates at a loss, and because it does not have more than 21,000 rounds of golf per year on average, economic obsolescence should have been a consideration in the Assessor’s appraisal.

Mt. Vintage appealed the Assessor’s $8,896,899 appraisal to the Edgefield County Board of Assessment Appeals (“Board”) on the ground that the property’s value was significantly over-valued and was not equitably appraised when compared to similar, nearby properties. After a hearing on October 30, 2007, the Board reduced the Assessor’s valuation of $8,896,899 to $5,629,043[5] for the 2006 tax year. Mt. Vintage appealed this decision to the ALC, contending that the assessed value of its property should be further reduced.

Mt. Vintage’s Witnesses

At the hearing, Bettis Rainsford (“Rainsford”) testified on behalf of Mt. Vintage. Rainsford is one of the developers of a residential real estate development project known as Mt. Vintage Plantation. The Mt. Vintage Plantation development began in the late 1980s, and by the late 1990s, the developers decided to construct a golf course to assist in marketing the surrounding residential lots. Rainsford testified during the hearing that the golf course has lost money every year, but it is the principal amenity of the development and has greatly increased the value of the residential lots around it. Rainsford testified that the golf course’s value should not be compared to courses in the state’s coastal region because those courses benefit from tourism, which is not the case in Edgefield County. Rainsford testified that Mt. Vintage Golf Club struggles to achieve 20,000 rounds of golf per year, which is rather low. Rainsford further testified about golf courses closer to Mt. Vintage that have all sold for less than $3 million. After receiving the Assessor’s value of $8,896,899, Mt. Vintage hired E. W. Reece, II and Ashby R. Krouse, III to conduct an independent appraisal of the golf club.

E. W. Reece, II (“Reece”) testified on behalf of Mt. Vintage. Reece is a Member of the Appraisal Institute (“MAI”) and a licensed appraiser in both South Carolina and Georgia. Reece has worked as an appraiser since 1971, and he served as the Chief Appraiser for the City of Augusta, Georgia, for five years. The court qualified him as an expert in real estate appraisals and found him to be knowledgeable and credible.

Reece conducted an independent appraisal of Mt. Vintage’s golf course with Ashby R. Krouse, III (“Krouse”),[6] who has vast experience in appraising golf courses. Reece testified that he and Krouse used three different approaches to determine the value of Mt. Vintage’s golf course: the cost approach, the sales comparison approach, and the income approach.

Under the cost approach, a valuation “is derived by estimating the depreciated reproduction or replacement cost of the improvements to which is added land value as estimated from comparable market sales.” (Petr.’s Ex. 1 at 17). According to Reece and Krouse, the cost approach usually provides a higher value because it is based on the use of new materials and the best use of the land; thus, it does not always reflect market value. For that reason, it is important to also consider functional obsolescence and current economic conditions. (Id.). For an estimate of land value, sales of similar nearby properties were analyzed, which showed that sales prices ranged from $2,204 to $7,796 per acre. (Id. at 18). To arrive at an appropriate land value for Mt. Vintage, Reece and Krouse considered its specific land characteristics—such as its size and its location—in relation to the comparable properties, as well as the dates of sale for the nearby properties. Based on this information, they determined Mt. Vintage’s land value to be $3,200 per acre. With 265.29 acres, the total land value was $848,928. (Id. at 26). Next, they valued the buildings on Mt. Vintage’s property at $1,967,300 based on actual construction cost minus depreciation. The golf course was valued at $4,032,000 based on actual construction cost minus depreciation. Together, the total value was $6,847,3000. (Id. at 28). Reece and Krouse then reduced that value by a factor of fifty percent for economic obsolescence, resulting in an overall value under the cost approach of $3,423,500.

The sales comparison approach “involves market investigation and analysis of recent sales of similar improved properties to the subject being appraised.” (Id. at 29). Reece and Krouse reviewed twenty golf course sales and gave six nearby golf courses primary importance. The sales of these courses ranged from $66,667 to $263,611 per hole. Jones Creek Golf Course in Columbia County, Georgia sold in foreclosure for $161,111 per hole in 2003; Cedar Creek Golf Club in Aiken County, South Carolina sold for $127,778 per hole in 2002; Pine Ridge Club in Edgefield County, South Carolina sold for $66,667 per hole in 2006; North Augusta Country Club in Edgefield County, South Carolina sold for $154,278 per hole in 2007; River Golf Club in Aiken County, South Carolina sold for $263,611 per hole in 2002; Houndslake Country Club in Aiken County, South Carolina sold for $189,815 per hole in 2000. (Petr.’s Ex. 1 at 30-33). Based on the two most comparable nearby courses—Jones Creek and Houndslake—Reece and Krouse valued Mt. Vintage at $173,000 per hole. (Id. at 34-35). Multiplying this figure by its total number of holes in 2006 gives a total value under the sales comparison approach of $3,114,000.

The income approach “is based upon the gross income potential generated by the property and the quantity, quality, and durability of that gross income stream.” (Id. at 36). This approach looks at the total revenue generated by the property—gross income minus expenses—and then capitalizes the net income stream to determine current value. Expenses include allowances for vacancy and rent loss,[7] day-to-day expenses that are inherent in operation of the property, and replacement of short-lived building components. (Id.). The Mt. Vintage Golf Course has averaged between 18,000 to 22,000 rounds of golf per year since 2003. Other nearby golf courses averaged 20,000 to 40,000 rounds per year. Based on this information and Mt. Vintage’s Multi-Year Income Statement for 2004-2006, Reece and Krouse determined that Mt. Vintage’s net operating income for 2006 was $466,000. That net operating income was then converted into a present value estimate by looking at the relationship between net income and the value of receiving that income during a specific period of time. (Id. at 41). Reece and Krouse calculated the present value estimate by considering interest rates in the area, the average amortization period, and other local golf courses, determining that 13.20% was an appropriate capitalization rate. Dividing the net operating income of $466,000 by the 13.20% capitalization rate produced a value under the income approach of $3,530,000.

After determining a value under each approach, Reece and Krouse selected the sales comparison approach based on its strength over the other two approaches. Reece and Krouse determined that the cost approach did not “accurately reflect the normal investment thought process a prudent purchaser would follow in determining market value for investment purposes.” (Id. at 43). Reece and Krouse similarly rejected the income approach because the golf course currently does not have positive net income. (Id. at 45). Although the sales comparison approach was possibly weakened by “the judgement required in adjusting the sales comparables to the subject to reflect the variances which affect value,” (id. at 44), Reece and Krouse determined that it was the superior methodology for valuing Mt. Vintage and therefore gave the sales comparison approach the most weight. Using the sales comparison approach, Reece and Krouse gave a final value to Mt. Vintage’s golf course of $3,114,000.

Assessor’s Witnesses

Lakeisha Bryant (“Bryant”), the Edgefield County Tax Assessor, testified regarding the value of Mt. Vintage’s golf course. Bryant has served as the Edgefield County Assessor for the past three years, and has worked for the Edgefield County Tax Assessor’s Office for the past fourteen years. She is a certified residential mass appraiser. The Assessor appraises approximately 20,000 properties every five years. In appraising Mt. Vintage’s property, Bryant used the cost approach; Bryant testified that using the cost approach is consistent with the method used by other county assessors in South Carolina to assess golf course properties. Bryant stated that the reason her cost approach value was different from Reece and Krouse’s is because she did not consider economic obsolescence in her assessment.

In further support of its assessment, the Assessor presented Michael Reed (“Reed”), the building and planning director for Edgefield County. Reed is a certified appraiser, and formerly served as the tax assessor for Aiken County. Reed testified that the Assessor valued Mt. Vintage’s property more generally than a fee appraiser (such as Reece or Krouse) would because the Assessor conducts mass appraisals.[8] Reed acknowledged that golf courses are complex properties to appraise and that he himself has no experience appraising golf courses. However, with help from the assessor in Horry County (where golf course properties are plentiful), Reed roughly appraised Mt. Vintage under an approach similar to the income approach, and arrived at a figure between three and four million dollars.

Based on the evidence presented, the court finds that, for Mt. Vintage, the best valuation approach is the sales comparison approach. Using this method, the court finds that the value of the subject property was $3,114,000 for the 2006 tax year.


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) (2000), S.C. Code Ann. § 1-23-600(B) (Supp. 2007), and S.C. Code Ann. §§ 1-23-310 et seq. (2005 & Supp. 2007). 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).

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). 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., 327 S.C. at 534, 489 S.E.2d at 677. “The taxpayer may . . . 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).

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. 2007). 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)).

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. 2007) 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 (“Taxes on real property must be ascertained by the methods provided by the General Assembly by general law as prescribed in Article X of this Constitution.”); S.C. Const. art. X, § 1 (“[R]eal property . . . shall be taxed on an assessment equal to six percent of the fair market value of such property.”). 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).

3. Conclusions

As the taxpayer contesting the assessment of its property, Mt. Vintage has the burden of proving the correctness of the valuation it is seeking; Mt. Vintage is not required to prove the incorrectness of the Assessor’s decision. See Reliance Ins. Co., 327 S.C. at 534, 489 S.E.2d at 677. Reece is an expert in appraisals and provided persuasive and reasonable evidence to support his and Krouse’s valuation of Mt. Vintage’s property at $3,114,000. Bryant and Reed admitted that the Assessor conducts mass appraisals, which may not always take into consideration the specific features of a particular property. Moreover, Bryant testified that she had used only the cost approach in valuing Mt. Vintage’s property and that she had not taken economic obsolescence into account in rendering her appraisal. Bryant did not provide an explanation for that decision. Cf. In re Appeal of Stroh Brewery Co., 447 S.E.2d 803, 805 (N.C. Ct. App. 1994) (holding that county assessor erred in failing to consider economic obsolescence in rendering its valuation). Reed admitted he had conducted a valuation of Mt. Vintage using a method that was similar to the income approach, and had appraised the property between three and four million dollars. This lends further support to the valuation of Reece and Krouse. Furthermore, the other two golf courses in Edgefield County were each valued at less than three million by the Assessor. Therefore, the court finds that Mt. Vintage has proven by a preponderance of the evidence that its valuation rather than the Assessor’s more accurately reflects the fair market value of Mt. Vintage and should be used for the 2006 tax year.

ORDER

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

ORDERED that Board’s determination that Mt. Vintage’s property should be assessed at $5,629,043 for the 2006 tax year is overturned. It is further

ORDERED that the Assessor shall value Mt. Vintage’s property for the 2006 tax year at $3,114,000.

IT IS SO ORDERED.

______________________________

PAIGE J. GOSSETT

Administrative Law Judge

May 13, 2008

Columbia, South Carolina



[1] Mt. Vintage Golf Course consists of two adjoining parcels. TMS #122-00-00-006-000 is the larger parcel containing most of the course and its buildings; TMS #122-00-00-016-000 is a smaller parcel containing the irrigation pump station and other facilities of the golf course. Mt. Vintage appealed the valuation of both parcels to the Edgefield County Board of Assessment Appeals, and the Board did not specify in its decision whether it was considering only one of the two parcels. Although some of the testimony during the contested case hearing focused on the value of the larger parcel only, the court will consider the joint value of the two parcels in rendering its decision.

[2] Since the 2006 assessment, Mt. Vintage has added nine additional holes to its course, for a total of twenty-seven holes.

[3] This is the total value for the entire property. The large parcel was valued at $8,795,379 and the small parcel at $101,520 by the Assessor.

[4] Economic obsolescence is defined as “[r]eduction in the desirability or economic life of an asset caused by factors such as regulatory changes, technological changes, and excess supply.” BusinessDictionary.com (2008).

[5] As previously mentioned, the Board did not indicate whether it considered the value of both parcels or just the larger parcel. Because Mt. Vintage appealed the value of both, the court considers the Board’s $5,629,043 valuation to include both parcels. It is also important to note that the reasons for the Board’s reduction in value of Mt. Vintage’s property were not provided in the Record.

[6] Although Krouse was present at the hearing, he did not testify.

[7] Rental losses may be caused by location, design, and condition of the property that differentiate it from other nearby golf courses. (Petr.’s Ex. 1 at 36). Rentals include things like cart rentals and greens fees.

[8]A mass appraisal method is one that looks at the sales from a region to determine the value per square foot and applies that value to the square footage of the assessed property.” Smith v. Newberry County Assessor, 350 S.C. 572, 575 n.2 567 S.E.2d 501, 502 n.2 (Ct. App. 2002).


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