ORDERS:
FINAL ORDER AND DECISION
STATEMENT OF THE CASE
This matter is a contested case brought by South Carolina National Bank (Wachovia Bank
of South Carolina) hereafter called Taxpayer or Bank, against Mike Freeman, Anderson County
Assessor, hereafter called Assessor, concerning the assessed value of $2,198,491.00 accorded
taxpayer's real property located at 1101 North Main Street, Anderson County, South Carolina by the
Assessor, as subsequently reduced by the Anderson County Board of Assessment Appeals (Board)
for the tax year 1992. The Taxpayer is now seeking a contested case hearing before the
Administrative Law Judge Division (Division) for an Order determining that the assessed value of the
property for the tax year in question is less than that determined by both the Assessor and the Board.
Jurisdiction is granted to the Division by S.C. Code Ann. § 12-60-2540(A) (Supp. 1995).
The matter was heard at the Anderson County Courthouse, Anderson, South Carolina on
January 22, 1996. All parties were represented by counsel.
After considering all the evidence and testimony, I conclude that taxpayer's property must be
valued at $1,565,000.00 for the tax year 1992.
ISSUES
1. What is the value of taxpayer's property for the tax year 1992?
POSITIONS OF THE PARTIES
The Assessor argues that the highest and best use of the entire subject property is as a bank.
In support thereof, he identifies its special features such as a vault, security system, large drive-through with a window, teller cages and counter space, each of which is unique to a bank. His
assessed value of the property is $2,198,491.00.
The Bank, in its Appraisal Report(1) and through testimony of an expert witness, opined that
the assessed value is $1,450,000.00, relying upon the cost method, income capitalization method and
comparable sales method approaches.
FINDINGS OF FACT
After consideration and review of all the evidence and testimony, by a preponderance of the
evidence, I make the following findings:
A. General
1. This Division has personal and subject matter jurisdiction.
2. Notice of the date, time, place and nature of the hearing was timely given to all parties.
3. The Bank is the owner of a parcel of real property containing 2.18 acres, more or less,
with a building thereon. The property is used as a bank.
4. The property is located in Anderson County, South Carolina, is identified on the
Anderson County Tax Map as TM # 123-25-11-001, and carries a property address of 1101 North
Main Street, Anderson, South Carolina. The property is bounded on the North by West Roberts
Street, on the Northeast by North Main Street, on the Southeast by Crayton Street and on the
Southwest by North Murray Avenue.(2)
5. The building located on the property is a two-story, masonry office/bank building, with
an attached drive-through canopy. The building has a total finished area of 17,146 square feet. The
floor plan includes administrative offices, a lobby/teller area, breakroom, training room, mail room,
conference room, board room, four fixture restrooms and storage rooms.(3)
6. The property is not located in a floodway or a flood plain area.
7. The property location is zoned 3-C limited commercial district.
8. The Bank purchased the land from the City of Anderson Municipal Corporation on
October 11, 1990, for the sum of $285,000.00. The subject property was previously used for tennis
courts by the Anderson Recreation Department.
9. Both the Assessor, Board and Taxpayer valued the land at $285,000.00.
B. Cost Method
10. Using the cost method, the Assessor valued the improvements (building) at
$1,913,501.00. The cost data was derived from Marshall and Swift Valuation Service (Valuation
Service), factoring in the entire building as a bank. No depreciation deduction was included in the
valuation. Using this method, a value of $122.29 per square foot was applied to the building. This
valuation method consisted only of a replacement cost, not a full cost approach.
11. The valuation by the Assessor was based upon a mass appraisal, not an individual
property appraisal.
12. The Assessor did not consider the comparable market sales method or income
capitalization method in valuing the property.
13. The Board, at the appeal level, reduced the value of the improvements. However, no
Order or Determination of the Board was ever filed with or reviewed by the Division.
14. The Taxpayer, in its appraisal, considered three commonly accepted methods for
valuation, which are cost-less-depreciation, income capitalization and direct market sales comparison.
15. In arriving at a value using the cost-less-depreciation method, five comparables were
utilized.
16. Each of the comparables are located on North Main Street or in the immediate
geographic area. The sales occurred during the period 1989 to May 10, 1991. All are vacant site
sales. Each are sufficiently similar to Taxpayer's property to be used as reliable evidence of the value
of Taxpayer's property.
17. Taxpayer, after analyzing these land sales, arrived at its land value of $285,000.00 or
$3.00 per square foot, which is the fair market value of the land.
18. The cost estimate of the improvements on the property was determined by the
Taxpayer through usage of the Valuation Service. Taxpayer used manual calculations and figures
treating the improvement as "a good quality, office/bank building, Class C, masonry." Separate cost
figures were applied to those parts of the building allocable to bank occupancy versus office
occupancy.
19. The value of the improvements was determined to be $1,251,783.00; this value, added
to the land value, provided a value of $1,536,784.00 or $89.63 per square foot.
C. Income Capitalization Method
20. Taxpayer's appraiser considered rentals of fourteen properties similar to the subject
property in both Anderson and Greenville Counties. The discounted cash flow analysis method,
utilizing a projected income stream of the subject property, was used by the Taxpayer.
21. The appraiser considered annual gross income allocable as follows: office portion
(11,516 square feet) @ $10.00 per square foot = $115,100.00 and bank portion (5,360 square feet)
@ $25.00 per square foot = $140,750.00 for a total of $255,910.00. Various allowances were
allowed. A capitalization rate of 12% was used which produced a value of $1,457,469.00.
D. Direct Sales Comparison Method
22. Taxpayer, in applying this method, examined two sets of sales, one representing good
quality office buildings and one representing sales of branch bank properties. Six sales of comparable
quality office properties and four sales of branch bank properties were utilized.
23. The adjusted values per square foot for the office properties range from $79.12 to
$81.37; the bank sales had an adjusted range of $90.52 to $126.54. Minimum adjustments were
made to arrive at $105.00 per square foot allocation for the bank portion and $81.25 per square foot
for the office portion. These provided a total valuation of $1,526,825.00.
24. The subject property, if sold at its location, would most probably not be purchased
for single tenant occupancy because of its size. Lease and generation of an income stream would be
the primary motivation. The income capitalization method represents the most reliable indicator of
the value of this property. However, a yield rate of 10% would be applicable in this case, providing
a valuation of $1,632,430.00 utilizing this method.
25. Based upon Taxpayer's appraisal value of $1,526,825.00 under the market sales
comparison approach, $1,536,784.00 under the cost approach and $1,632,430.00 under the adjusted
income capitalization approach, Taxpayer's property is valued at $1,565,000.00 for the tax year 1992.
CONCLUSIONS OF LAW
Based upon the foregoing Findings of Fact, applicable law, and Summary of the Evidence,
I conclude, as a matter of law, the following:
1. S.C. Code Ann. § 12-60-2540 (Supp. 1995) authorizes the South Carolina
Administrative Law Judge Division to hear this contested case pursuant to Chapter 23 of Title I of
the 1976 Code, as amended.
2. S.C. Code Ann. § 12-37-90 (Supp. 1995) grants authority to the South Carolina Tax
Commission to alter values set by the assessor on real property.
3. S.C. Code Ann. § 12-4-30(D) (Supp. 1995) provides that an administrative law judge,
after February 1, 1995, shall hear all contested cases as defined by S.C. Code Ann. § 1-23-310 (Supp.
1995) previously heard by the South Carolina Tax Commission.
4. S.C. Code Ann. § 12-37-90 (Supp. 1995) states that all counties shall have a full-time
assessor, whose responsibility is appraising and listing property. Further, the assessor shall:
a) Maintain a continuous record of recorded deed sales transactions, building
permits, tax maps and other records necessary for a continuing reassessment
program;
b) Diligently search for and discover all real property not previously returned by
the owners or agents thereof or not listed for taxation by the county auditor
and list such property for taxation, in the name of the owner or person to whom it is taxable;
c) When values change, reappraise and reassess any or all real property so as to
reflect its proper valuation in light of changed conditions, except for exempt
property and real property required by law to be appraised and assessed by the
commission, and furnish a list of these assessments to the county auditor;
d) Determine assessments and reassessments of real property in such a manner
that the ratio of assessed value to fair market value shall be uniform
throughout the county.. . .
5. S.C. Code Ann. §§ 12-43-300 and 12-60-2510 through 12-60-2530 (Supp. 1995)
provide the procedure whereby a taxpayer, upon receipt of a notice from the Assessor of the
valuation and assessment placed on his property, may file written notice of objection to the valuation
and assessment within certain time frames. Failure to serve the written notice of objection within the
statutory time limitations is a waiver of the owner's right to appeal. If the objection is timely filed,
the owner may have a conference with the assessor and, if still aggrieved, may appeal that decision
to the Board of Assessment Appeals.
6. An assessor's valuation is presumed correct and that it was made in conformity with
the law. The burden is on the property owner to disprove the assessor's determination. 84 C.J.S.
Taxation § 410 (1954).
7. Taxpayer has met this burden if he proves the actual value of the property is a value
other than that determined by the taxing authority. Newberry Mills v. Dawkins, 259 S.C. 7, 190
S.E.2d 503 (1972).
8. Even if the taxpayer fails to prove the actual value of the property, the taxpayer still
meets its burden of proof when the taxpayer "show(s) by other evidence that the assessing authority's
valuation is incorrect." Cloyd v. Mabry, 295 S.C. 86, 367 S.E.2d 171 (S.C. App. 1988).
9. The Legislature, in S.C. Code Ann. § 12-37-930 (Supp. 1995), has decided how real
property must be valued:
"All real property shall be valued for taxation at its true value in money which
in all cases shall be held to be 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
as to the uses and purposes of which it is adapted and for which it is capable
of being used..."
10. Fair market value is the measure of true value for taxation purposes. Lindsey v. S.C.
Tax Comm'n, 302 S.C. 274, 395 S.E.2d 184 (1990).
11. The taxable status of real property for a given year is to be determined as of December
31st of the preceding tax year. S.C. Code Ann. § 12-37-900 (1976). Atkinson Dredging Co. v.
Thomas, 266 S.C. 361, 232 S.E.2d 592 (1976).
12. While not conclusive, market sales of comparable properties present probative
evidence of the fair market value of similar property. 84 C.J.S. Taxation § 411 (1954); see Cloyd v.
Mabry, 295 S.C. 86, 367 S.E.2d 171 (Ct. App. 1988).
13. Fair market value can be determined by adding to the land value the replacement cost
of the improvements, reduced for depreciation. 84 C.J.S. Taxation § 411 (1954). This method is
acceptable in South Carolina for valuing property. Belk Department Stores v. Taylor, 259 S.C. 174,
191 S.E.2d 144 (1972).
14. Complete equity and uniformity are not practically attainable when valuing property.
Wasson v. Mayes, 252 S.C. 497, 167 S.E.2d 304 (1967).
15. The income capitalization method is recognized as a somewhat favored means for
valuing rental property. Bornstein v. State Tax Commission, 176 A.2d 859 (Md. 1962). This method
converts net income imputable to the real property into an indication of property value by the use of
a capitalization rate or factor. All estimated expenses attributable to the real property are deducted
from an effective gross income estimate to arrive at forecasts or applicable net income streams. The
net value income streams are then capitalized or discounted into value by market abstracted rates
(i.e... those that would attract a prudent investor to invest in a similar situation with comparable
degrees of risk, liquidity and management burdens.)
16. Banks and office buildings are defined as follows:
Banks include savings and loan and credit union occupancies where the design is of
a bank type. Where such uses are made of ordinary store or office buildings, the store
or office costs should be used, adding for any extra features. While a branch bank
tends to be a single-purpose, low-rise neighborhood facility, the main or central bank
facility may be more office building in character, where administrative office floors
should be priced as such. Costs include vaults, but do not include banking fixtures or
equipment, vault doors, or safe deposit boxes. Drive-up windows, night depositories,
and surveillance systems commensurate with the quality, are included.
Office Buildings are buildings designed for general commercial occupancy, including
administrative government and corporate uses, and are normally subdivided into
relatively small units. If part of an office building has some other occupancy, such as
a bank or store on the first floor, that portion should be priced using its appropriate
base cost.
Marshall and Swift Valuation Service, § 15 (1995).
17. In this case, the Assessor appraised the subject property based upon a mass appraisal
method utilizing the Valuation Service. However, he did not factor in depreciation nor segregate the
bank portion from the office portion for valuation purposes. Taxpayer appropriately applied a lesser
valuation rate per square foot to the office portion versus the bank portion as authorized by the
Valuation Service. Also, the Taxpayer applied a depreciation deduction to the replacement cost
value.
Taxpayer's opinion of value based on the cost-less-depreciation approach is buttressed by the
valuations derived from the income and comparables sales computations. Each is a more reliable
indicator of the value of the subject property than the Assessor's mass appraisal computation.
Accordingly, having reviewed all the evidence, I conclude Taxpayer's property known as 1101
North Main Street, Anderson, South Carolina, is valued at $1,565,000.00 for the tax year 1992.
ORDER
Based upon the above Findings of Fact, Conclusions of Law and a viewing of the property,
it is hereby
ORDERED that the Assessor value taxpayer's property identified as TM# 123-25-11-001 at
$1,565,000.00 for the tax year 1992.
AND IT IS SO ORDERED.
______________________________________
Marvin F. Kittrell
Chief Judge
Columbia, South Carolina
February 13, 1996
1. Petitioner's Exhibit #1.
2. A plat of the subject property is found on page 18 of the Appraisal Report submitted as
Taxpayer's Exhibit #1. A location map is found on page 20.
3. See Petitioner's Exhibits #2 and 3. |
