SC Administrative Law Court Decisions

STATEMENT OF THE CASE

This real property tax valuation matter is before the Administrative Law Court (“ALC” or “Court”), upon the request of First Palmer Trust, c/o Hugh A. Palmer, Trustee (“Petitioner”) for a final order and decision following a contested case hearing pursuant to S.C. Code Ann. § 12-60-2540 and S.C. Code Ann. § 1-23-600. The Petitioner challenges the Respondent Richland County Assessor’s (“Respondent” or “Assessor”) valuation of its property located at 7358 Two Notch Road, Columbia, South Carolina 29223, Tax Map Sheet Number (TMS #) 17005-03-10, and property located at 7390 Two Notch Road, Columbia, South Carolina 29223, Tax Map Sheet Number (TMS #) 17005-03-06, for the 2005 tax year.

Petitioner asserts that the properties are not equitably valued in relation to other properties in the surrounding area. Accordingly, Petitioner seeks a reduction of the Assessor’s valuation of $1,564,700 to $1,235,200 for the property at TMS #17005-03-10, and seeks a reduction of the Assessor’s valuation of $1,425,000 to $1,109,562 for the property at TMS #17005-03-06. The Assessor argues that the decision of the Richland County Board of Assessment Appeals should be affirmed and that the fair market value of Petitioner’s properties should not be reduced on appeal as the value derived by the Assessor and Board is fair and equitable. After notice to the parties, the Court held a hearing on January 16, 2008.

ISSUE PRESENTED FOR DETERMINATION

What is the appropriate value for tax years 2004 and 2005 for two parcels of real property located in Richland County, South Carolina, known as Tax Map Number R17005-03-06 or 7390 Two Notch Road, and Tax Map Number R17005-03-10 or 7538 Two Notch Road?

FINDINGS OF FACT

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

1. Notice of the time, date, place and subject matter of the hearing was given to all parties in a timely manner.

2. Petitioner owns two retail strip shopping centers located at 7390 Two Notch Road (TMS# R17005-03-06) and 7358 Two Notch Road (TMS# R17005-03-10), consisting of approximately 29,110 and 32,736 square feet, respectively. The first parcel is located on a 1.51 acre tract and the second parcel is located on a 1.69 acre tract.

3. The shopping centers were built in the early 1980’s. There are no national anchor tenants in either center.

4. The Richland County Assessor valued the parcels at $1,425,000 and $1,564,700, respectively, for tax years 2004 and 2005. From that assessment, Petitioner submitted its first informal appeal on April 30, 2004, in which it estimated the value of the properties to be $1,109,562 and $1,235,200, respectively. The Assessor then conducted an office review of the properties and notified Petitioner on June 2, 2006, that no change of value would be made.

5. Petitioner appealed to the Richland County Board of Assessment Appeals. On December 4, 2006, the Assessor completed a physical appraisal of the properties. Both parties presented evidence to the Board and on February 20, 2007, the Board issued its findings. As to TMS# R17005-03-06 “the Board affirmed the value of $1,425,000 as established by the Assessor,” and as to TMS# R17005-03-10 “the Board affirmed the value of $1,564,000 as established by the Assessor.” It is from those decisions that the Petitioner appeals to this Court.

6. Petitioner argues that the assessments of both the Assessor and the Board are incorrect. The Petitioner contends, among other things, that it is inappropriate and inequitable for the Assessor to increase the estimate of fair market value by 15.86% over the 2003 tax year for 7358 Two Notch Road, and by 13.34% over the 2003 tax year for 7390 Two Notch Road, in light of the unfavorable location and general economic decline of the Dentsville area of Columbia, where the subject properties are located near the intersections of Decker Boulevard and Two Notch Road.

7. Petitioner offered the testimony of Frank W. Cason, a realtor with Colliers Keenan, as an expert in commercial property and comparison. Mr. Cason stated his opinion that the Assessor inequitably increased the value of the subject properties more than for surrounding properties of a similar and comparable nature. Mr. Cason prepared an analysis of comparable properties in the Parklane Road, Decker Boulevard and Two Notch Road areas, and determined that fair market values as of 2004 and 2005 had increased no more than 5% to 8.5% at most above the 2003 tax year valuation. Mr. Cason further testified that the subject properties would be considered as low “Class B” or high “Class C” properties; that the subject retail strip centers had no “anchor” tenants, and that the subject properties were located in an economically declining area of Columbia.

8. Photographs of approximately twenty commercial properties were introduced, in the immediate proximity of the subject properties, which had been vacant for an extended period of time. Additionally, Petitioner introduced newspaper reports of several high profile murders and other violent crimes in the area of the subject properties.

9. Petitioner offered another newspaper article, relating that numerous major Decker Boulevard retailers left the area of the subject properties between 2000 and 2005. Each moved several miles toward the Northeast area of Columbia.

10. Petitioner argues that the fair market value of the subject properties should be based on comparable sales. Petitioner offered comparable sales at 224 O’Neil Court, 255 O’Neil Court, 7375 Two Notch Road, 7201 Parklane Road, 7101 Parklane Road, 215 O’Neil Court, 2400 Decker Boulevard, and 2300 Decker Boulevard in the 2002 through 2006 period. Petitioner used these comparables to establish a value of $6.00 per square foot for land value and a value of $25.94 per square foot for building value, for a total of $1,109,562 for 7390 Two Notch Road and $1,235,200 for 7358 Two Notch Road.

11. The Assessor offered the appraisals of Mr. Terrence Fancey, Deputy Assessor of Appraisals for Richland County. The Assessor contends that the value of $1,425,000 for 7390 Two Notch Road and $1,564,700 for 7358 Two Notch Road. The comparables used by the Assessor for this purpose were as follows:

Sale 1 – “The Crossing” shopping center located on the north side of Clemson Road, consisting of 44,231 square feet of net rentable area, with Food Lion as its anchor tenant.

Sale 2 – “Northpointe” shopping center located at 10122 Two Notch Road, with 64,258 square feet of net rentable area, with Publix as its anchor tenant.

Sale 3 – “Friarsgate Plaza” shopping center located at 7949 Broad River Road in the northwest area of Columbia, with 68,236 square feet of net rentable area, with BiLo as its anchor tenant. This comparable was located approximately eighteen miles away from the subject property.

12. The Court finds that the Assessor’s comparables for the income approach to valuation are not located in a comparable area of Columbia but rather in more favorable areas; and are of larger size than the subject properties. Moreover, each comparable has an anchor tenant in the form of an established national grocery chain, unlike the two subject properties. Moreover, the comparables used by the Assessor are located in areas with substantially different demographics.

CONCLUSIONS OF LAW

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

1. The ALC has subject matter jurisdiction over this action pursuant to S.C. Code Ann. §12-60-2540(A) (2000) and S.C. Code Ann. §1-23-600.

2. The standard of proof in weighing the evidence and making a decision on the merits of a contested case hearing is by a preponderance of the evidence. Anonymous v. State Board of medical Examiners, 329 S.C. 371, 496 S.E.2d 17 (1998).

3. The Administrative Law Court is not bound by the findings of the County Board of Assessment Appeals but rather is required to conduct a de novo hearing. Smith v. Newberry County Assessor, 350 S.C. 572, 567 S.E.2d 501 (Ct. App. 2002). The County tax assessor's valuation is only a piece of the evidence to be considered in setting an accurate value for the property, and the court is free to determine the proper amount of weight to give such valuation. Id. Both the Assessor and Mr. Cason used comparables to arrive at their values. However, based on the evidence present by Mr. Cason, the Assessor’s comparable are not comparable to the subject property.

4. The trier of fact must weigh and pass upon the credibility of the evidence presented. See South Carolina Cable Television Ass‘n. v. Southern Bell Tel. and Tel. Co., 308 S.C. 216, 417 S.E.2d 586 (1992). The trial judge who observes a witness is in the best position to judge the witness' demeanor and veracity and evaluate his testimony. See e.g., McAlister v. Patterson, 278 S.C. 481, 299 S.E.2d 322 (1982).

5. S. C. Code Ann. §12-37-930 provides:

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.

6. Fair market value is the measure of true value for taxation purposes under S. C. Code Ann. §12-37-930. Lindsey v. South Carolina Tax Com’n, 302 S. C. 504, 397 S.E.2d 95 (1990). There is no valid distinction between market value for sales purposes and market value for taxation purposes under Section 12-37-930. S. C. Tax Comm’n v. S.C. Tax Board of Review, 287 S.C. 415, 339 S.E. 2d 131 (Ct. App. 1985).

7. Unlike commodities, land does not have a fixed market price at a given period, and its value is determined by the estimate of the person who values it. 84 C.J.S. Taxation §411 at 793 (1954). “Generally, 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.” Id.

8. The Petitioner has the burden of showing that the Assessor’s valuation is incorrect. Ordinarily, this is done by proving the actual value of the property. 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 removed and the taxpayer is entitled to appropriate relief. Cloyd v. Mabry, 295 S.C. 86, 367 S.E.2d 171 (Ct. App. 1988). Petitioner has met its burden of proof by showing by a preponderance of the evidence that the comparables relied upon by the Assessor were not comparable to the subject property due to the fact that they were located miles away from the subject property in more favorable areas of the city.

9. While not conclusive, market sales of comparable properties present probative evidence of fair market value of similar property. 84 C.J.S. Taxation §411 (1954). Furthermore, in estimating the value of property, all of the factors which affect market value or would influence the mind of a purchaser should be considered, such as location, quality, condition and use. See 84 C.J.S. Taxation §410 at 784; §411 at 794 (1954). Mr. Cason’s appraisal takes into consideration the proximity of the subject properties to vacant buildings and the gentleman’s club, as well as the condition of the properties. The Assessor’s appraisal uses comparables with anchor tenants in the form of an established national grocery chain, unlike the two subject properties. As such, I find Mr. Cason’s comparables to be more accurate in assessing the value of the subject properties.

ORDER

Based upon the foregoing Findings of Fact and Conclusions of Law,

IT IS THEREFORE ORDERED that the Petitioner’s property, located at 7390 Two Notch Road, Columbia, South Carolina, be valued at $1,109,562 for the 2004 and 2005 tax years; and that the Petitioner’s property located at 7358 Two Notch Road, Columbia, South Carolina, be valued at $1,235,200 for the 2004 and 2005 tax years.

AND IT IS SO ORDERED.

Carolyn C. Matthews

Administrative Law Judge

August 28, 2008

Columbia, South Carolina