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Mc Holdings, L.L.C., A Limited Liability Company v. Board of Review of Davis County

February 13, 2013

MC HOLDINGS, L.L.C., A LIMITED LIABILITY COMPANY, PLAINTIFF-APPELLANT,
v.
BOARD OF REVIEW OF DAVIS COUNTY, IOWA, DEFENDANT-APPELLEE.



Appeal from the Iowa District Court for Davis County, Annette J. Scieszinski, Judge.

The opinion of the court was delivered by: Danilson, J.

MC Holdings, L.L.C., appeals the $513,310 valuation of its property for the 2007 property tax assessment. AFFIRMED.

Heard by Eisenhauer, C.J., and Danilson and Bower, JJ.

The taxpayer contests the district court's initial valuation of its property, which included a new office building, at $513,310. The taxpayer claims the 2007 assessed value should be no greater than $270,000 based on the viewpoint of its appraisers. The district court upheld the Board's assessment. Based upon our de novo review of the evidence, we concur and adopt the district court's findings regarding the weaknesses of the taxpayer's appraisals. Accordingly, we agree with the district court that the assessment of the subject property was not excessive. We therefore affirm.

I. Background Facts and Proceedings.

MC Holdings is the owner of 402 Karr Street, in Bloomfield, Davis County, Iowa. MC Holdings purchased the lot on which the property was built in the spring of 2006 for $42,000, and spent $541,053 to construct the 12,000 square-foot facility. The design was largely dictated by the contracted tenant for the main floor-the United States Department of Agriculture (USDA), which now operates its Farm Service Agency (FSA) and Natural Resources Conservation Service (NRCS) offices from the site. The building also features drive-up access to its lower level, planned for MC Holdings' commercial rental to separate tenants.

On April 13, 2007, the Davis County Assessor, Lois Heckethorn, valued the parcel (including the land and buildings) for tax assessment purposes at $513,310.00. MC Holdings appealed the assessment to the Board of Review of Davis County. The board took final action on May 31, 2007, assessing the parcel at $513,310.

MC Holdings sought review in the district court. MC Holdings submitted the appraisal of Richard DeHeer, who concluded the parcel had a fair market value of $270,000. Gregory Morehead reviewed and analyzed DeHeer's appraisal report, and agreed with DeHeer's $270,000 valuation.

Heckethorn testified as to the process she employed in reaching the $513,310 valuation, which included reference to a state-approved appraisal manual, a widely-used computer program, and relevant local cost and sales data.

The assessor presented the testimony of Patrick Schulte, a certified appraiser knowledgeable about commercial properties in the area, who conducted a retrospective appraisal of the MC Holdings property. Schulte employed three approaches in his valuation of the property: a sales approach indicated a value of $550,000; a cost approach, $580,000; and an income approach, $486,000. He determined that the January 1, 2007 market value for the subject property was $486,000, noting that just one lower-level suite was finished at that time. Schulte's composite conclusion factored a reasonable examination of the property, the local market, and an assumption that the facility was used in its highest and best role as an office building.

The assessor also called Robert Ehler, president of Vanguard Appraisals and an appraiser of commercial properties. Ehler physically inspected the property the day before his testimony. However, he conducted a review of pertinent records, suitable comparison sales, and other data commonly included in a valuation analysis. Ehler, like Schulte, employed sales, cost, and income approaches and determined that the January 1, 2007 market value of 402 Karr Street was $530,000.

The district court found "DeHeer's appraisal analysis does not earn sufficient weight to justify" the $270,000 valuation. The court found his assumptions inaccurate in several respects,*fn1 which skewed the valuation by a significant amount. The court also noted that Morehead did not independently appraise the subject property but conducted a "review appraisal."*fn2

The court found "Schulte's analysis, despite challenge by MC Holdings in various respects, is sound, utilized accurate inputs of data, and involved reasonable exercises of appraiser discretion in making valid assumptions and adjustments." The court found Ehler's "results are supported by a reasonable examination of the property, evaluation of the local market, and the predicate that the highest and best use for the real estate is as an office building."

The court concluded MC Holdings had offered competent evidence by two disinterested witnesses that the market value of the property is less than determined by the assessor, which shifted the burden of persuasion to the assessor to uphold the assessment. See Iowa Code ยง 441.21(3) (2007). The court nonetheless found the assessor had met her burden and that the actual value of the subject property was $513,310, and that value was ...


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