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,
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, 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 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 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 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”), 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, 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.
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
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