ORDERS:
FINAL ORDER AND DECISION
STATEMENT OF THE
CASE
This property tax
valuation matter came before me pursuant to S.C. Code Ann. § 12-60-2540 as a
contested case hearing. Both parties appealed the decision by the Aiken County
Board of Assessment Appeals (Board) dated May 4, 2005. With the consent of the
Aiken Regional Medical Center (Hospital or Petitioner) and the Aiken County
Assessor (County or Respondent), I consolidated the two matters for hearing and
a decision.
Pursuant to notice to
the parties, a hearing was held before me on December 13, 1005 at the offices
of the Administrative Law Court (ALC or Court). Twenty days prior to the
hearing, the parties exchanged evidence in accordance with my pretrial order. A
portion of that exchanged evidence was entered into the record at the hearing. In
addition, both parties presented testimony.
The question before the
Court is the value of the Hospital for the 2004 property tax year. The Board found
the value of the Hospital to be $20,500,000. Petitioner alleges that its value is
$15,500,000 and Respondent alleges that its value is $25,259,000. For the
reasons stated below, I find and conclude that the value of the Hospital as of
December 31, 2003 for the 2004 property tax year is $18,700,000 (inclusive of
both land and buildings).
FINDINGS OF FACT
Having
observed the witnesses and exhibits presented at the hearing and closely passed
upon their credibility, taking into consideration the respective burden of
persuasion by the parties, I make the following Findings of Fact by a
preponderance of evidence:
1. The property in question is the Aiken County Regional Medical Center (Hospital).
2. The property tax year at issue is 2004
and the valuation date is December 31, 2003.
3. The cost approach,
which was used by both parties, is the most accurate method to determine the
fair market value of the hospital.
4. The
Hospital was initially built in 1974. Since that time there have been a number
of additions, the last occurring in 1992. Those additions and the square footage
of them are as follows:
Building Section |
Year of Completion |
Square Footage |
Original Building 1st Floor |
1974 |
81,950 |
Original Building 2nd Floor |
1974 |
20,546 |
Original Building 3rd Floor |
1974 |
20,546 |
Original Building 4th Floor |
1974 |
19,017 |
Building Addition 1st Floor |
1992 |
20,576 |
Building Addition 2nd Floor |
1992 |
16,433 |
Building Addition 3rd Floor |
1992 |
26,590 |
Building Addition 5th Floor |
1992 |
11,915 |
Building Addition 6th Floor |
1992 |
20,576 |
Building Addition Penthouse |
1992 |
5,900 |
Total |
|
244,079 |
5. The
total square footage of the Hospital is 244,079.
6. The
hospital is a Class A, average quality structure.
7. The appropriate
base cost of the hospital is $195.47.
8. The
proper local cost multiplier for the Augusta, Georgia area is 0.880.
9. The
proper height multiplier is 1.015.
10. The
proper current multiplier is 1.00.
11. Using the
multiplier and the square footage, the resulting replacement cost new is $175.00
per square foot for a total replacement cost new of $42,713,825.
12. The major difference in the parties’ written
appraisals and their explanatory testimony was the depreciation allocable to
the hospital building when using the cost approach. The County derived a depreciation rate of fourteen (14%) percent
using the Marshall Swift Depreciation tables based on an economic life of forty-five
(45) years and an effective age of fifteen (15) years. Petitioner's witness
presented a depreciation rate of fifty (50%) percent using the age/life method
of calculating depreciation based on an economic life of forty (40) years and
an effective age of twenty (20) years.
13. I find that an economic life of forty five (45)
years is appropriate.
14. I find that the effective age of the Hospital
building on the valuation date was twenty (20) years.
15. I find that the Marshall Swift tables for
depreciation do not accurately reflect the
depreciated state of the Hospital building
on December 31, 2003. Instead, I find that the age/life method is the proper
technique to estimate depreciation. The age/life method calculates
depreciation based on the ratio of the effective age of the property to its
total economic life.
16. Using the age/life method with a total economic
life of forty-five (45) years and an effective age of twenty (20) years, I find
that the building was forty-four (44%) depreciated on December 31, 2003.
17. The
parties presented different values for functional depreciation and for deferred
maintenance. The assessor presented a value for functional depreciation of
$10,865,028. The Hospital's appraiser presented a value for deferred
maintenance of $6,355,922. I understand these terms to have similar meaning
for appraisal purposes. I find that the figure of $6,355,922 for functional
depreciation or deferred maintenance is appropriate.
18. The value of
the building, using the specific dictates of the cost method and giving appropriate
weight to the testimony and evidence presented at the hearing, is $17,563,820.
19. The value of
the land is $1,143,450.
20. The combined
value of the land and building is $18,707,290 and is rounded
to $18,700,000.
CONCLUSIONS OF
LAW
Based on the foregoing, I
conclude as a matter of law:
1. The
Administrative Law Court has jurisdiction of this matter pursuant to S.C. Code
Ann. § 12-60-2540.
2. The
standard of proof in proceedings before the ALC is a preponderance of the
evidence. Anonymous v. State Bd. Of Medical Examiners, 329 S.C. 371,
496 S.E.2d 17 (1998).
3. 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).
4. Where an expert's testimony is based upon facts
sufficient to form the basis for an opinion, the trier of fact determines its
probative weight. See Berkeley Elec. Coop. v. South Carolina Pub. Serv. Comm'n., 304 S.C. 15, 402 S.E.2d 674 (1991); Smoak v.
Liebherr-Am. Inc., 281 S.C. 420, 422, 314 S.E.2d 116, 118 (1984). A trier
of fact is not compelled to accept an expert's testimony, but may give it the
weight and credibility he determines it deserves. Florence Cty.
Dep't. of Social Serv. v. Ward, 310 S.C. 69, 425 S.E.2d 61 (1992); Greyhound
Lines v. South Carolina Pub. Serv. Comm’n., 274 S.C. 161, 262 S.E.2d 18
(1980).
5. The Constitutional and statutory authority which
is applicable to this case is Article X, Section 1, of the Constitution of the
State of South Carolina, which provides that "fair market value" is
the standard for property taxation in this State. Section 12-37-930 (Supp
2004) of the Code provides that all property is to be valued "at its true
value in money which is the price which the property would bring following
reasonable exposure to the market where both seller and buyer are willing." See Lindsey v. South Carolina Tax Commission, 302 S.C. 504, 397
S.E.2d 95 (1990).
6. The date for valuation for property tax purposes
is "the thirty-first day of December next preceding" the tax year
under consideration. S.C. Code Ann. § 12-37-900 (Supp. 2004). See also F. Abbott Brown vs. Charleston County Assessor 02-ALJ-17-0549-CC
(Administrative Law Judge Division, August 14, 2003). In the case at hand, the
tax year is 2004; therefore, the valuation date is December 31, 2003.
7. Both parties to this litigation relied upon the
cost approach for determining the value of the property in question. The cost approach
is an acceptable appraisal method. See The Appraisal of Real Estate,
12th ed. (Chicago: Appraisal Institute, 2001).
8. Based on the evidence presented before me, I find
and conclude that the market value of the hospital as of December 31, 2003 is
$18,700,000.
ORDER
Based upon the foregoing Findings of Fact and Conclusions of
Law,
IT IS HEREBY ORDERED that the value of the Hospital for
the 2004 tax year is $18,700,000; and
IT IS FURTHER ORDERED that the County Assessor shall
forthwith certify this value to the proper county officials to ensure that Petitioner's
property tax liability for the 2004 tax year is redetermined using this value;
and
IT IS FURTHER ORDERED that if the amount previously
paid to Aiken County by Petitioner for the 2004 tax year for this property exceeds
this recomputed tax liability, the excess amount paid, together with statutory
interest, shall be refunded to Petitioner; and
IT IS FURTHER ORDERED that if the amount of the
recomputed tax liability exceeds the tax previously paid by Petitioner to Aiken County, Petitioner shall pay the additional tax owed together with statutory
interest.
AND IT IS SO
ORDERED.
Marvin
F. Kittrell
Chief
Administrative Law Judge
January 17, 2006
Columbia South Carolina
Petitioner
called two witnesses: Mr. Howard Bazzarre, the Chief Financial Officer of the
Hospital, and Mr. Max Row, an appraiser with a MAI designation who is employed
by Complex Property Advisors Corporation. Respondent called Mr. Mike Reed, the
County Assessor, and Mr. Rick Jantzen, a county appraiser.
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