ORDERS:
FINAL ORDER AND DECISION
Statement of
the Case
Petitioner
Northbridge Associates, LLC contests Respondent Charleston County Assessor’s
valuation of its Hampton Inn and Suites for tax year 2005. Pursuant to a 2005
countywide reassessment, the Assessor valued this Hampton Inn and Suites,
located on the Isle of Palms Connector in Mount Pleasant, Charleston County, South Carolina, designated as Tax Map Number 558-00-00-388, at $9,300,000.
Petitioner
objected to that valuation, and timely appealed to the Charleston County Board
of Assessment Appeals [“Board”]. The Board held a hearing on October 11, 2006;
it affirmed the Assessor’s valuation of $9,300,000 on October 19, 2006. On
October 30, 2006, the Board issued a revised Decision, again affirming the
Assessor’s valuation of $9,300,000.
Northbridge
Associates, LLC timely filed with the Administrative Law Court a Request for a
Contested Case pursuant to S. C. Code Ann. §12-60-2540 (2000). The Administrative Law Court heard this case on March 3 and 4, 2008. At the Hearing, Petitioner
argued that the Assessor should have reduced the assessed value of the real property
based on its superior management and intangible business value. Based upon all
the testimony and exhibits introduced at the Hearing, I find that Petitioner
has not met its burden of disproving the validity of the Assessor’s valuation
of the subject property. Thus, for tax year 2005, I find that the Assessor’s
value of $9,300,000 is correct.
Issue
What is the
value for the Tax Year 2005 of the real property at Hampton Inn and Suites, Tax
Map No. 558-00-00-388, located on the Isle of Palms Connector, Mount Pleasant, in Charleston County, South Carolina?
Findings of
Fact
Having
carefully considered the entire record, including all testimony, evidence,
exhibits, and arguments, and taking into account the credibility of each
witness, I make the following findings of fact:
1. The Administrative Law Court has personal and subject matter
jurisdiction of this matter.
2. Timely notice of the date, time, place, and nature of the hearing was given
to all parties.
3. Petitioner owns the subject property, located on the Isle of Palms
Connector in Mount Pleasant, Charleston County, South Carolina, designated as
Tax Map Number 558-00-00-388.
4. In 1998, Petitioner constructed a Hampton Inn & Suites on the
property. Petitioner owns and manages the hotel on the property in conjunction
with Hilton Corporation and Bennett Hospitality.
5. The Hampton Inn & Suites has 121 rooms, three meeting rooms, 1,500
square feet of meeting space, a fitness room, a breakfast area where it
provides a complimentary Continental breakfast to guests, and an outdoor pool.
The Hampton Inn & Suites is classified as a mid-scale, limited service
hotel without food and beverage. The hotel is situated on 2.1 acres located in
the Sweetgrass Shopping Center, adjacent to the Marriot Residence Inn. It is
one mile from the Isle of Palms, across US Highway 17 from Snee Farms Golf
Course and Boone Hall Plantation.
6. Charleston County conducted a countywide reassessment in 2005. The
subject property was initially appraised at $10,057,000, for the reassessment. After
an application for review was filed by the Petitioner, the value was reduced
by the appraiser to $9,299,000,
7. Petitioner timely requested a contested case hearing before the
Administrative Law Court (ALC).
8. Petitioner timely appealed the Board’s decision to the ALC. This case
arises from the Assessor’s assessment of the property for Tax Year 2005 at
$9,300,000, valued as of December 31, 2003.
9. At the ALC hearing, both the Assessor and the Assessor’s expert
testified regarding the value of the property. Assessor’s expert Andrew Hinds
(Hinds) is a Certified Real Estate Appraiser in six states. He is a member of
the Appraisal institute (MAI), a licensed Realtor, who has earned the Certified
Commercial Investment Member (CCIM) designation, and is a member of the
International Society of Hospitality Consultation (ISHC). He has appraised
more than 800 hotels, fifty which are located in South Carolina. He has also
sold numerous hotels. He was qualified as an Expert in the Field of Hotel
Appraisal without objection.
10. Petitioner’s witness, Chris Donato, also testified at the hearing. He is
a Certified Real Estate Appraiser and holds the MAI and CCIM designations. He
has appraised ten to fifteen hotels in South Carolina. However, those
appraisals were for Mortgage underwriting purposes only. He also appraised one
hotel for a condemnation proceeding. He was qualified as an expert in Hotel
Valuation. Petitioner also had Tom Dolan testify on its behalf. Dolan is not
licensed as an appraiser in any state. He also does not have any MAI and CCIM
designations and does not have a Real Estate license. He lectures on the
“Rushmore Approach”, discussed infra, at various trade associations and state
assessor’s organizations. He was qualified as an expert.
11. Petitioner, the Assessor, and all witnesses agree that the highest and
best use of the property is as a Hotel.
12. In determining the value of hotels, the parties must (1) Identify a
Competitive Set and conduct a Competitive Set Analysis; (2) Determine the
Occupancy Rate of the Competitive Set; (3) Determine the Average Daily Rates of
the Competitive Set; and (4) employ a Valuation Method for the Subject Hotel based
on the information gleaned from the Competitive Set.
Competitive Set Analysis:
13. To determine what figure should be used as a market average daily rate
and what the market occupancy level for the subject hotel should be, the
analysis of the competition in the market must be completed, along with the
analysis of the operating history of the subject hotel. Therefore, the Assessor
and the parties’ experts each delineated Competitive Sets of hotels with which
to compare the subject property.
14. The Assessor and the Assessor’s expert Hinds agreed on the same hotels
for their competitive sets. Their competitive set consists of (1) the subject
property, (2) the Homewood Suites, (3) the Hampton Inn Patriots Point, (4) the
Residence Inn, (5) The Hampton Inn Daniel Island, and (6) the Comfort Suites.
15. Three of these hotels are in the immediate neighborhood of the subject
property: the Comfort Suites, Residence Inn, and Homewood Suites. The remaining
two are Hampton Inns, one located in Mount Pleasant and the other located on Daniel Island, on the main corridor approaching Mount Pleasant.
16. Petitioner’s two expert witnesses do not agree on their competitive
sets. Petitioner’s two experts defined their competitive sets thusly:
Dolan |
Donato |
Hampton Inn & Suites-Subject |
Hampton Inn & Suites-Subject |
Homewood Suites |
Homewood Suites |
Hampton
Inn Patriots Point |
Hampton
Inn Patriots Point |
Hampton Inn Daniel Island |
Residence
Inn |
Comfort
Suites |
Holiday
Inn |
Holiday
Inn |
|
Comfort
East |
|
Mainstay
Suites |
|
17. Dolan’s competitive set includes five of the six properties in
Respondent’s set, but adds three additional properties for a total of eight
competing properties. However, Dolan excludes the Residence Inn, which is
adjacent to the subject hotel and is owned by the same company as the subject.
The remaining three additional properties are not comparable to the subject.
Two are full service Holiday Inns; one is an older exterior corridor property
called the Comfort Inn East.
18. Donato’s competitive set includes four of the six properties that the
Assessor and Hinds use, but includes an additional hotel – The Holiday Inn –
that is included in the set defined by Dolan.
19. The subject hotel has 121 rooms. Forty-one of the rooms are one-bedroom
suites and 80 are regular rooms or non-suite rooms. Because the subject hotel
offers both suites and regular rooms, it competes directly with the Homewood
Suites, which has 107 rooms. 104 are one-bedroom suites and four are two-bedroom
suites. The subject also competes directly with the Residence Inn, which has
90 rooms (60 one-bedroom suites and 30 two-bedroom suites). The subject also
competes with other hotels that have regular rooms of the same quality that are
not considered ‘suites.’
20. The subject hotel is a limited service, interior corridor hotel that
offers a free continental breakfast, outdoor pool, guest laundry, fitness room
and open lobby area with a large fireplace and gathering area. I find that the
hotels in the competitive set which are most similar to the subject are the
Residence Inn, Homewood Suites, Comfort Suites, and the two Hampton Inns, which
were used by the Assessor and Hinds in delineating their competitive sets.
21. There are several hotels in Petitioner’s competitive sets that are not
truly comparable to the subject property. The Comfort Inn East, which Dolan
used in his Competitive Set, is an exterior corridor motel where guests drive
up to each door to access their room. There is no central lobby. The Holiday
Inn, which both Donato and Dolan used, is a full service hotel with a
restaurant and lounge that caters to a different clientele than that of the
subject hotel.
22. The subject hotel is rated as a midscale chain without food and beverage
by Smith Travel Research. However, Smith Travel Research also classifies the
subject hotel as an upscale price category in the Mount Pleasant/Isle of Palms
area. The other three properties in this upscale price category list include
the Residence Inn, Homewood Suites, and the Seaside Inn. The subject’s suite
rooms compete in price with the Homewood Suites and the Residence Inn. The
subject’s non-suite rooms compete with the other hotels on each of Petitioner’s
competitive sets to some degree, except the Comfort Inn East.
23. The subject hotel’s image is similar to that of the Homewood Suites and
Residence Inn due to the physical characteristics, condition and location. Its
brand name, Hampton Inn & Suites, is well known and considered a quality
accommodation in the travel community. Based on photographic evidence, the
subject hotel is most similar to the Residence Inn and Homewood Suites and
superior to all the other hotels in the various competitive sets.
24. For the reasons set forth above, the competitive set utilized by
Respondent and Respondent’s expert are valid comparisons for determining the
valuation of the subject hotel.
Occupancy Rate
Analysis:
25. The next component of hotel valuation is an analysis of the occupancy
rates for the competitive set. Occupancy rate is calculated by multiplying the
total number of rooms in a hotel by the number of days in a year. Then, the
actual number of rooms occupied in a particular year is divided by the total
number available.
26. Hinds interviewed a management representative from each hotel in his
competitive set, excluding the subject hotel and the Residence Inn. During his
investigation, Hinds determined that the Hampton Inn Patriots Point was under
renovation for most of 2004, and therefore, there were 4,867 room nights that
were not available for use due to renovations (rooms out of service). He
adjusted for this, arriving at the actual occupancy for that hotel of 72.6%.
He also learned that The Homewood Suites occupancy for 2004 was 61.6%, but the
hotel had not reached stabilized occupancy, and that The Hampton Inn Daniel
Island had not reached stabilized occupancy until 2005.
27. Donato did not interview the management representatives of any of the
properties in his competitive set. Dolan interviewed the management
representatives of only the subject hotel.
28. Based on the analysis of the subject hotel’s occupancy history and the
occupancy of Respondent’s competitive set, Hinds determined that the occupancy
rate for 2004 was 72.6%. The Assessor estimated a rate of 70.0%.The subject
hotel’s actual occupancy rate for 2004 was 73.51% and 71.78% for 2003. I find
that the Assessor’s and Hinds’ estimates for their competitive sets are
consistent with the actual occupancy rates of the subject hotel. Both are
below the subject’s actual occupancy rate of 73.5% for 2004. Additionally, Hinds’ estimates are below the Residence Inn’s occupancy rate of
75.5% and his estimates match that of the Hampton Inn Patriots Point of 72.6%,
adjusted to reflect room nights out of inventory due to renovation.
29. Petitioner’s estimate of 65% is 11.6% lower than the subject’s actual
occupancy rate, and Petitioner’s experts failed to demonstrate that their
estimate of occupancy rate was reasonable for the subject hotel.
30. It appeared Donato and Dolan did not fully analyze the information
available. Both extracted raw data from the surveys and reports provided to
them and testified that the subject hotel was outperforming the market. Without
conducting research or providing substantive evidence, Petitioner’s witnesses
testified that the subject hotel’s superior management was the sole reason for
their rates. Thus, I find their analysis of occupancy rates and conclusion
less credible than Hinds.
31. I am not persuaded by Petitioner’s view and find the preponderance of
the evidence supports the Assessor’s experts’ occupancy rates. The manager of
the subject hotel did not testify at trial. Nor is there any documentation in
the record of what constitutes the alleged “superior management” at the subject
hotel.
Average Daily
Rate Analysis:
32. The third step in determining the valuation of the subject property is
to ascertain the average daily rates of hotels in the competitive set. The
average daily rates (ADR) in the competitive sets ranged from $77.59 per night
for the Hampton Inn Patriots Point to $108.27 per night for the Residence Inn.
The average daily rate was $106.07 per night for the Homewood Suites. The
actual average daily rate for the subject hotel was $92.97 for 2003 and $95.99 for
2004. The average daily rate for all Hampton Inn & Suites properties
corporate wide was $92.83 for 2003 and $94.64 for 2004. The Residence Inn and
Homewood Suites set the upper end of the range; the next highest is the subject
hotel. From this data and based on other projections of the subject hotel’s
occupancy rate, Hinds estimated that the average daily rate would increase to
$98 per day for tax year 2005. The Assessor estimated that the average daily
rate of $96 was stabilized for 2004.
33. Petitioner’s experts ‘average daily rate estimates of $87.30 [Dolan] and
$90 [Donato] are not supported by the market or the actual operating history of
the subject hotel property. Petitioner offered no testimony regarding the
basis for these rates, other than attributing them to superior management. Moreover,
since Petitioner’s witnesses included properties in their competitive sets that
are of lesser quality than the subject property and thus not truly competitive,
their analysis yielded lower average daily rates.
34. Accordingly, I am not persuaded by Petitioner’s view and I agree with
the Assessor’s estimate of the average daily rate and Hinds’ evidence
supporting that ADR. I find the Assessor’s and Hinds’ analysis and reports
regarding average daily rates more credible than those proffered by Petitioner.
Further, I find the appraisals submitted by the Assessor and Hinds most
persuasive in the valuation of the subject hotel.
Valuation
Method:
35. The final step in determining the value of the subject property is to
determine which valuation method should be used. Commercial Real Estate is
generally valued using three commonly accepted methods for ad valorem tax purposes: (1) the Income Capitalization Approach; (2) the Sales Comparison
approach; and (3) the Cost Approach. The Assessor’s expert witness, Andrew A.
Hinds, relied on all three methods in determining the value of the subject
property.
36. In commercial real estate appraisals, the Income Approach
converts net operating income into a
value, estimating a market-derived overall rate of return. Net income is
calculated prior to debt service, and is divided by a capitalization rate to
determine the value of the property. 37. Of the three traditional approaches that the Assessor and Hinds used, I
find that the income capitalization approach should receive primary emphasis.
It reflects the economics of ownership, which is the basis of investment in
this type of property, and is based on a detailed analysis of the subject hotel
operation. However, the sales comparison approach provides good support for a
value estimate. Based on the evidence submitted and analysis of the data
presented by the Assessor and Hinds, the going concern market value of the
subject hotel as of December 31, 2004 is $9,800,000, and as of December 31,
2003 is $9,300,000.
38. Using the three approaches to value, yields the following values for the
subject hotel:
Cost
Approach $ 9,600,000
Income
Capitalization Approach $ 9,800,000
Sales
Comparison Approach $10,100,000
39. These
values are consistent with the Assessor’s original determination that the value
of the subject property is $9,300,000. Therefore, I find that the Petitioner
failed to meet its burden of proof that the Assessor’s valuation of the
property was incorrect.
The Rushmore Approach:
40. Petitioner’s expert witnesses, Chris Donato and Tom Dolan, utilized an
alternative methodology known as the Rushmore Approach. Mr. Donato valued the
property at $6,568,000 as of December 31, 2003 and Mr. Dolan valued the
property at $6,500,000 on December 31, 2003.
41. The “Rushmore Approach” created by Stephen Rushmore and HVS is an income
approach developed specifically for hotel valuations that allows adjustments to
reflect more accurately the impact of the business on the value of the real
property and to determine the value of solely the real property for ad valorem
tax purposes.
42. The Rushmore Approach, adopted in other jurisdictions, modifies the income approach and adjusts components of the net income
calculations to extract the hotel’s “business value” from the net income
figure.
43. In order to deduct the income attributable to management, as opposed to
the real estate, the Rushmore Approach analyzes the hotel’s competition by
identifying the hotel’s competition known as the “competitive set,” and
adjusting the hotel’s average Average Daily Rate (“ADR”),
Occupancy Rate, and Revenue per Available Room (“RevPAR”)
to reflect the quality of management and extract the intangible business value
from the Property in order to calculate the true value of the real estate
properly for ad valorem tax purposes.
44. By comparing the subject hotel’s ADR, Occupancy Rate, and RevPAR to
those values achieved by other hotels in the competitive set, the Rushmore
Approach analyzes the strength of the subject hotel’s management. For example,
if the hotel is performing poorly compared to its competition, the Rushmore
Approach adjusts the subject hotel’s ADR, Occupancy Rate and RevPAR upwards.
If the subject hotel is performing well, the Rushmore Approach adjusts the
subject property’s ADR, Occupancy Rate and RevPAR downward to reflect figures
more consistent with those in the competitive set.
45. The Assessor contends that the hotel property is appraised at market
value, which is supported by the fee simple market appraisals performed by her
staff and Hinds. The Assessor does not disagree with the Rushmore Approach in
principle, but contends the competitive set chosen by Petitioner does not
reflect accurate hotel market conditions, revenues, expenses, and values in
Charleston County because it includes hotels that are not truly
comparable, such as the Holiday Inn Hotel, which is a full service hotel, and
The Comfort Inn East, which is an older exterior corridor motel.
46. Petitioner contends that the subject property is overvalued because it
is outperforming the market. Petitioner’s experts value the real property at
$6,800,000, contending that the average daily rate and occupancy levels should
be adjusted downward based on superior management. However, the Rushmore
Approach requires that the appraiser perform research if there is such a
discrepancy, and such a wide discrepancy in both occupancy rates and average
daily rates of the hotels in Petitioner’s competitive sets would not be
considered comparable to the subject hotel.
47. While the Rushmore approach is one approach that can be used in valuing
the subject property, I find that the three commonly accepted method for ad valorem tax purposes: (1) the Income Capitalization Approach; (2) the
Sales Comparison approach; and (3) the Cost Approach should be used. The
County’s expert provided values of the subject property through the three
traditional approaches to value, which I find are the acceptable methodologies
to value the subject hotel.
Business
Value:
48. In
his valuation, the Assessor’s Expert Hinds employed the Rushmore Approach in
part by deducting the “business value” of the hotel from the value he
calculated using the Income Capitalization Approach. The “Rushmore Approach”
calculates the “business value” by making a deduction for a management fee and
a franchise fee, after adjusting for occupancy and average daily rate to
account for superior management, if it exists.
49. Testimony
revealed that most hotels today are operated under a management contract and
franchise to run the day-to-day operations of the hotel. They pay a fee for
this service, typically a percentage of total income. If the hotel is
affiliated with a chain or brand, the affiliation charges a fee for this
service, which is a percentage of the room revenues. The subject hotel is
operated under the management contract with brand affiliation.
50. In
determining the Business Value of the property, both Petitioner and the
Respondent allowed as an expense a management fee of 3% of total income. All
parties agreed that the market fee is 3%, even though the subject hotel’s
actual agreement with the management company contains a management fee of 2.5%
of total income. Both Petitioner and the Respondent allowed as an expense 4%
of room revenue for franchise fees. This is the actual percentage paid by the
subject hotel. Therefore, all parties allowed identical percentage amounts for
those components of business value, accounted for them in the same manner, and
used similar procedures as an expense to the hotel operations. However,
Petitioner contends that Hinds did not make a large enough deduction for
occupancy and average daily rate to allow for the superior management of the
subject hotel. The subject hotel has a management fee of approximately 3% of
its gross revenues. The gross income attributable to business is calculated as
follows: gross revenues of $3,198,363 times the management fee of 3% equals
business income of $95,951.
51. The
net business income is calculated as follows: gross revenue of $95,951 times
the ratio of net income of 35.0% equals net income estimate of $33,583.
52. The
business value estimate is calculated as follows: income attributable to
business of $33,583 divided by the capitalization rate of 25% equals business
value of $134,331, rounded to $130,000. The allocation of value is calculated
as follows: total value estimate of $9,800,000 less furniture, fixtures and
equipment of $210,000 less business allocation of $130,000 equals allocation to
real estate of $9,460,000.
53. In
the case before me, expert witness Donato testified that the subject hotel had
superior management. In view of that testimony, one can conclude that the
subject hotel is managed in an efficient manner so as to produce optimal net
income. It is the job of a competent hotel management company to maximize
revenue and limit expenses to fully realize net operating income for a hotel.
54. The
evidence presented by the Petitioner does not support its contention that the
Property was not equitably valued and appraised at its fair market value. The
Appraisal Report submitted by the Assessor is the most credible reflection of
the value of the Property. Therefore, Respondent did not meet its burden of
showing that the Property was overvalued.
55. Further,
the evidence does not reflect an intentional and systematic under-valuation of
hotel properties in Charleston County. The values assigned by the Assessor to
the Property were well within the equitable values of other properties in its
general area.
56. The
Assessor’s valuation of the Hampton Inn at $9,300,000, based on the three
commonly accepted methods of valuation, is reasonable and is supported by the
evidence and market data in the record.
Conclusions of Law
Based
upon the findings of fact, I conclude the following as a matter of law:
1. S.C. Code Ann. § 12-60-2540 authorizes the South Carolina Administrative
Law Court to hear this contested case arising from a controversy involving the
valuation of real property pursuant to Chapter 23 of Title 1 of the 1976 Code,
as amended. 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. Atkinson Dredging Company v. Thomas, 266 S.C. 361, 22 S.E. 2d
592 (1976).
2. The Legislature set forth in S.C. Code § 12-37-930 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 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.
Therefore,
market value is the measure of true value for taxation purposes. Lindsey v.
S.C. Tax Comm’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 S.C. Code Ann. § 12-37-930. S.C. Tax Comm’n v. S.C.
Tax Board of Review, 287 S.C. 415, 399 S.E.2d 131 (Ct.App. 1985).
3. An Assessor’s valuation is presumed correct and the property owner bears
the burden of proving the Assessor’s determination is not correct. 84 C.J.S.
Taxation § 410 (1954). 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. See In re Mayfair Mills, Inc. v. Spartanburg
County, 295 B.R. 827 (S.C. 2002); See also; Cloyd v. Mabry,
295 S.C. 86, 367 S.E.2d 171 (Ct.App. 1988); Belk Dept. Stores v. Taylor,
259 S.C. 174, 191 W.E.2d 144, 146 (1972) (nothing that the taxpayer contesting
an assessment has the burden to prove that the assessed valuation was
incorrect); and Newberry Mills, Inc. v. Dawkins, 259 S.C. 7, 190 S.e.2d
503,507 (1972) (noting that it was incumbent upon the taxpayer to prove that the
taxing authority’s valuation of its property was incorrect).
4. The income approach seeks to determine the present value of future
benefits of property ownership based upon the net income an informed buyer
believes the property will produce during its remaining useful life. See The Appraisal of Real Estate (American Institute of Real Estate
Appraisers 10th ed.).
5. The income capitalization approach is an accepted means of valuing
commercial property. When applying the income approach, a reliable method is that
of the direct capitalization technique. That technique primarily relies upon
factors of net operating income and overall capitalization rate. The
capitalization rate is the desired yield a purchaser would seek on the capital
investment. The estimated value of the property is derived by dividing the net
operating income by the applicable capitalization rate. S.C. Tax Comm’n v.
S.C. Tax Board of Review, 287 S.C. 415, 399 S.E.2d 131 (Ct.App. 1985).
6. 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, 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. 84 C.J.S. Taxation §
410.
7. The gross income of a hotel property differs from other commercial
properties because an appraiser must extract the business value of the hotel in
order to determine the real estate’s “true value” as required by South Carolina
law. See S.C. Code Ann. § 12-37-930 (Supp. 2007).
8. In determining net operating income for purposes of deriving real
property value for ad valorem tax purposes under the income approach, the
tangible and intangible personal property, and the income derived therefrom,
must be separated from the real property’s value. See The Ocean Course Golf Club, Ltd. v. Charleston County Assessor, 2005 WL
405408, *6-*7 (S.C.A.L.J. Jan. 18, 2005).
9. Petitioner pays a yearly business license tax based on the gross income
generated by hotel operations. See S.C. Code Ann. § 5-7-30 (2004 &
Supp. 2007).
10. Petitioner pays yearly personal property taxes based on the value of its
furniture, fixtures and equipment located at the Property. See S.C. Code
Ann. §§ 12-37-210, 12-37-220; 12-37-710 (2000 & Supp. 2007)
11. South Carolina courts, as well as other jurisdictions, have relied on
the Appraisal Institute standards for valuation as published and updated in
several editions of The Appraisal of Real Estate. See, e.g., S.C. Tax
Comm’n v. S.C. Tax Board of Review, 287 S.C. 415, 399 S.E.2d 131 (Ct.App.
1985); Badische Corporation (BASF) v. Town of Kearn, 288 N.J. Super,
171, 672 A.2d 186 (1996).
12. Petitioner appealed the Assessor’s valuation for tax year 2001 to this
Court. By Order 03-ALJ-17-0148-CC, J. Kittrell upheld the Assessor’s valuation
of this property of $8,530,000. No evidence was introduced at this hearing to
show that the value of the hotel has decreased since the 2001 valuation.
13. In the instant case, Petitioner has failed to establish that the
Assessor’s valuation is incorrect. Petitioner failed to establish through
reliable, cogent, and competent quantitative evidence, or otherwise, that its
valuation of the subject hotel was credible. However, the Assessor did
demonstrate through reliable, cogent and competent evidence that it correctly
valued the subject hotel. I conclude that the appraisals submitted by the
Assessor and her expert are credible and that the methodology of valuation,
i.e., cost approach, income capitalization approach and sales comparison
approach, established the value of the real property.
Effective
Date of Valuation:
14.
Generally, the date of value for a given tax year is as of the lien date for
taxes. Under S.C. Code Ann. Sections 12-37-900, the date for valuation for
property for tax purposes is “the thirty-first day of December next preceding”
the tax year under consideration. However, SC statutes have some conflicts
regarding date of value. The property value in question is being appealed for
the 2005 tax year. Therefore the date of value would generally be December 31,
2004. However, the SC legislature recently adopted SC Code of Law Section
12-43-215 which states that if Market value is lower as of the lien date than
it is as of the re-assessment date, the Charleston County Assessor’s office
would value the property as of the lien date. Doing so would construe
conflicting statutes in favor of the taxpayer as the courts have frequently
required. The more recent value date will apply if it benefits the taxpayer.
There is no indication in the market that values fell between December of 2003
and December of 2004. Accordingly, the date of value for this Tax Year 2005
appeal is December 31, 2003, which is the date of value for the countywide
reassessment.
ORDER
IT
IS HEREBY ORDERED that the Assessor’s valuation of Petitioner’s property
for tax year 2005 of $9,300,000 is correct and consistent with Section
12-37-930.
AND
IT IS SO ORDERED.
HONORABLE CAROLYN C.
MATTHEWS
Administrative
Law Judge
November 25, 2008
Columbia, South Carolina
|