ORDERS:
FINAL ORDER AND DECISION
STATEMENT OF THE CASE
This contested case is brought by RDCC, LLC (“Taxpayer”) against the Greenwood County
Assessor (“Assessor”) concerning property valuation for the 2003 tax year. The Taxpayer exhausted
all pre-hearing remedies with the Assessor and the Greenwood County Board of Assessment Appeal
(“Board”). Jurisdiction is granted to the Administrative Law Court (“ALC”) by S.C. Code Ann. §12-60-2540(A) (2000) and S.C. Code Ann. §1-23-600 (Supp. 2003). After notice to all parties, a
hearing was conducted on March 26, 2004 at the ALC in Columbia, South Carolina. Based on the
evidence, I find that the proper valuation of the property located at 607 Cambridge Avenue West,
Greenwood, South Carolina is $3,600,000 for the 2003 tax year.
FINDINGS OF FACT
Having carefully considered the testimony and the arguments of both sides, and taking into
account the credibility of the evidence and witnesses, I find the following 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.The Taxpayer, RDCC, LLC, is a South Carolina limited liability company consisting
of seven (7) members, all of whom are both shareholders of Greenwood Mills, Inc. and members of
the Self family. The Taxpayer is the owner of real property comprising the Greenwood Country
Club located at 607 Cambridge Avenue West, Greenwood, South Carolina, which is the subject of
this contested case hearing.
3.The subject property is identified as Tax Map Numbers 6845-446-950, 6846-206-247,
6846-245-078, 6846-335-322, 6846-390-082, and 6846-468-123 for tax purposes.
4.At one time the subject property was operated as a dairy farm by a member of the Self
family. According to family lore, the idea of having a country club on the subject property sprung
from a conversation in the 1950's between two members of the Self family who decided that a golf
course would lose a lot less money than a dairy farm.
5.The Greenwood Country Club was never intended to be an income-producing vehicle.
Rather, it was a place where the majority of the members of the Self family grew up. It also served
as a place where Greenwood Mills, Inc., which owned the subject property prior to the sale to the
Taxpayer, could host clients and provide a place for recreation for mill employees over the years.
6.In 1988 Greenwood Mills, Inc. entered into a lease with the Greenwood Country
Club. The lease was executed by W. M. Self, Sr. on behalf of Greenwood Mills, Inc. W. M. Self,
Sr. is also one of the members of RDCC, LLC, the Taxpayer in this case. This lease was for a term
of thirty years, commencing on June 1, 1988 and terminating on May 31, 2018. It provided for the
operation of a private club offering golf, tennis, swimming, and dining room facilities for its
members. Under the terms of the lease, the Greenwood Country Club basically was required to pay
an amount of rent equal to the amount of property taxes and insurance owed on the property and to
perform all maintenance on the property. The lease also provided that Greenwood Mills, Inc. had
to approve the rules and regulations of the club. Business guests of Greenwood Mills, Inc. were
entitled to use the club facilities without having to pay guest fees, and Greenwood Mills, Inc. was
entitled to use the dining room facilities for business functions without paying any rental fees.
7.The lease also contains a specific provision whereby the owner of the subject property
reserves the right to subdivide and sell any portion of the property that is not otherwise utilized by
the Greenwood Country Club. Approximately 20 acres of the subject property are capable of being
subdivided and sold as residential lots without disturbing the operation of the Greenwood Country
Club. Residential lots located on the Greenwood Country Club golf course have recently sold for
between $70,000 and $110,000 per lot. Moreover, at the expiration of the lease, the value of all
buildings and other improvements made to the subject property for the benefit of the Greenwood
Country Club revert back to the owner of the subject property.
8.Greenwood Mills, Inc. sold the subject property to the Taxpayer in July 2002. The
sale was the result of an effort by Greenwood Mills, Inc. to liquidate its assets due to a downturn in
the economy. W.M. Self, Sr., a shareholder in Greenwood Mills, Inc. and a member of the taxpaying
entity RDCC, LLC, facilitated the sale of the subject property to the Taxpayer by first approaching
his son, William M. (“Bubba”) Self, Jr., with the idea. Bubba Self, Jr. then sought out other
members of the Self family who would be interested in purchasing the property. The primary goal
in facilitating the purchase by the Taxpayer was to keep the property in the family.
9.The Taxpayer, through Bubba Self, Jr., had Hotel and Club Associates, Inc. (“Hotel
and Club Associates”) of Greensboro, North Carolina perform an appraisal of the subject property
on November 6, 2001. Hotel and Club Associates, which utilized both the income capitalization
approach and the sales comparison approach, determined that the value of the subject property, in
fee simple, was $3,600,000 as of November 6, 2001, and projected a value of $4,000,000 as of
November 2003. Hotel and Club Associates estimated the value of the leased fee interest for the
subject property at $960,000. The Taxpayer ultimately purchased the property from Greenwood
Mills, Inc. for $925,000.
10.In its appraisal, Hotel and Club Associates looked for recent sales of eight (8) similar
golf courses and country clubs in North Carolina, South Carolina, Georgia, and Virginia and made
comparisons. However, only one of the comparables used, Hunter’s Creek Golf and Country Club,
is located in Greenwood County. Hunters Creek is not located on Cambridge Avenue West. It
consists of 242 acres. The subject property consists of 278.45 acres. On January 1, 2000, Hunters
Creek sold for $3,850,000, or $15,909 per acre.
11.The Assessor originally valued the property at $3,872,000. The Assessor adjusted
that value to $3,600,000 after the Taxpayer requested a review of the assessment. The Taxpayer
appealed this assessment to the Greenwood County Board of Assessment Appeals. The Board
determined that the value of the subject property was $3,600,000 and upheld the value submitted by
the Assessor.
12.The Taxpayer contends that the value of the subject property should be reduced to
$960,000 as a result of the long-term non-revenue lease of the subject property to the Greenwood
Country Club through 2018. The Taxpayer further contends that the lease impairs the fair market
value of the subject property. The Taxpayer argues that the leased fee value of the subject property,
as opposed to the fee simple value, is the measure of the subject’s property true value.
13.The Assessor appraised the subject property using the cost approach.
14.Under the cost approach, the Assessor utilized Marshall & Swift and determined the
value of the subject property to be $3,872,000. The Assessor reduced this amount to $3,600,000
after the Taxpayer requested a review of the assessment based on Hotel & Club Associates’ appraisal
in 2001.
15.Because the January 1, 2000 sale of Hunter’s Creek was the only sale of a golf course
and country club in Greenwood County in recent years, the Assessor determined that the cost
approach was the best method for estimating the value of the subject property. Therefore, the
Assessor contends that the 2003 estimate of fair market value of $3,600,000 ($12,928.71 per acre)
is well supported by the cost approach as well as the income capitalization approach and the sales
comparison approach used by Hotel and Club Associates to arrive at the same value in fee simple.
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 (Supp. 2003).
2.S.C. Code Ann. § 12-37-210 (2000) defines property subject to taxation in South
Carolina as “all real and personal property in this State.” All such property must be assessed uniformly
and equitably throughout the State pursuant to regulations promulgated by the S.C. Department of
Revenue. S.C. Code Ann. § 12-43-210(A) (Supp. 2003). “All taxes upon property, real and personal,
shall be laid upon the actual value of the property taxed.” S.C. Const. Art. III § 29.
3.“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. v. Smith, 327 S.C. 528, 537, 489 S.E.2d 674, 679 (Ct. App. 1997) (quoting Wasson
v. Mayes, 252 S.C. 497, 502, 167 S.E.2d 304, 306-07 (1969)).
4.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).
5.A taxpayer may appeal a property tax assessment made by a county board of assessment
by requesting a contested case hearing before the ALC. S.C. Code Ann. § 12-60-2540(A) (2000). On
appeal, the Taxpayer has the burden of proving the actual value of the property at issue. Reliance, 327
S.C. at 534-35, 489 S.E.2d at 677. Because this proceeding is in the nature of a de novo hearing, the
Administrative Law Judge is not sitting in an appellate capacity and therefore is not restricted to a
review of the decision below. Id. at 534, 489 S.E.2d at 677. Findings of fact shall be based
exclusively on the evidence and on matters officially noticed. S.C. Code Ann. § 1-23-320(i) (Supp.
2003).
6.In S.C. Code Ann. § 12-37-930 (Supp. 2003) the legislature set forth how property must
be valued as follows:
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 as to the uses and purposes for which it
is adapted and for which it is capable of being used.
Therefore, fair market value, or the property’s “true value in money,” 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).
7.The qualification of a witness as an expert in a particular field is within the sound
discretion of the trial judge.” Smoak v. Liebherr-Am., Inc., 281 S.C. 420, 422, 315 S.E.2d 116, 118
(1984). When the expert’s testimony is based upon facts sufficient to form a basis for an opinion,
the trier of fact determines its probative weight. Berkeley Elec. Co-op. v. S.C. Pub. Servs. Comm’n,
304 S.C. 15, 402 S.E.2d 674 (1991); see also Smoak, 281 S.C. at 422, 315 S.E.2d at 118. Further,
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 Co. Dep’t of Soc. Serv. v. Ward, 310 S.C. 69, 425
S.E.2d 61 (1992). He also may accept the testimony of one expert over another. S.C. Cable
Television Ass’n v. So. Bell Tel. & Tel. Co., 308 S.C. 216, 417 S.E.2d 586 (1992).
8.In the instant case, the Taxpayer argues that the value of their land should be reduced
because the subject property is subject to a long-term lease which impairs its value. The Taxpayer
contends that they will not be able to sell the subject property at the assessed value because of the
lease. Furthermore, the Taxpayer argues that, based upon the leased fee interest value as determined
by Hotel and Club Associates, the value of the subject property should be reduced to the leased fee
value of $960,000.
9.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 § 510 (2001).
“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.
10.The purchase price of property, while not conclusive, is some evidence of its value.
Belk Dep’t Stores v. Taylor, 259 S.C. 174, 179, 191 S.E.2d 144, 146 (1972).
11.While not conclusive, market sales of comparable properties present persuasive
evidence of fair market value of similar property. 84 C.J.S. Taxation § 512 (2001).
12.“In determining the market value of income producing commercial real estate, . . . the
contract rent of long-term leases entered into at arms length and at a fair rental at the time is one of
the determinative factors of the market value of property.” S.C. Tax Comm’n v. S.C. Tax Bd. of
Review, 287 S.C. 415, 339 S.E.2d 131 (Ct. App. 1985). In this case, however, it is not clear that the
Greenwood Country Club lease was entered into either at arms length or for a fair consideration.
Even the Taxpayer’s appraiser agreed that the fair rental value of the subject property is greater than
that realized by the Taxpayer under the terms of the lease. Moreover, the Court in South Carolina
Tax Commission. v. South Carolina Board of Tax Review properly gave consideration to an existing
lease for the purpose of ascertaining the fee simple interest as opposed to the leased fee interest. I
find no authority for the proposition offered by the Taxpayer that the leased fee interest, as opposed
to the fee simple interest, is the appropriate measure of the subject property’s true value.
13.Even if the long-term lease on the subject property negatively affects the marketability
of the property and the Taxpayer’s ability to sell the property, the property still has value for taxation
purposes. Lindsey v. S.C. Tax Comm’n, 302 S.C. 504, 397 S.E.2d 95 (1990). Use and not title is
the determining factor. Id.
14.In general, a lessor is responsible for the taxes on the full value of property. 84 C.J.S.
Taxation § 137 (2001). “Absent an agreement between the lessor and lessee to the contrary, a lessor
as owner of the fee interest in property pays real estate taxes on the full value of land as if the
leasehold interest did not exist, even though the lessor’s interest is nonpossessory and represents only
a fraction of the total value of the property.” Id. A landlord and tenant may enter into a private
agreement as to which party shall pay a tax; this has no bearing one way or another on the practice
of taxing the whole of a property. Trimble v. City of Seattle, 231 U.S. 683 (1914). “[O]rdinarily,
leaseholds are taxed even if they are lumped and included in the value of the fee.” Id.
17.Other jurisdictions have followed suit in taxing the lessor for the value of the fee
simple interest, rather than the leased fee interest. In Schultz v. Florida-Ohio Realty, LTD., 577
So.2d 573 (Fla. 1991), the Florida Supreme Court, in considering property encumbered by a 22-year
lease, held that “the assessed value of the land must represent all the interests in the land. This
means that despite the mortgage, lease, or sublease of the property, the landowner will still be taxed
as though he possessed the property in fee simple.” Thus, the Florida court held that the true
valuation of property was the fair market value of the fee simple interest; that is, the unencumbered
fee. In Caldwell v. Dept. of Revenue, 122 Ariz. 519, 596 P.2d 45 (Ariz. App. 1979), the Court stated
“[t]he fact that an unfavorable lease may make the property less desirable to prospective buyers does
not affect its full cash value for tax valuation.” That Court stated that it is “[t]he combined value of
both the lessor’s and lessee’s interests under a long-term lease” that is subject to taxation. I find that
the reasoning in these cases is persuasive and, while not binding, supports my conclusion that the
value of the fee simple interest of the subject property is the appropriate measure of its true value.
18.Therefore, I find that $3,600,000 is a reasonable valuation for this property.
ORDER
Based upon the foregoing Findings of Fact and Conclusion of Law,
IT IS HEREBY ORDERED that the Taxpayer’s property, located at 607 Cambridge
Avenue West, Greenwood, South Carolina, be valued at $3,600,000 for the 2003 tax year;
AND IT IS SO ORDERED.
_____________________________
C. Dukes Scott
Administrative Law Judge
Columbia, South Carolina
April 30, 2004 |