December 21, 2016
KOHL'S DEPARTMENT STORES, INC., Plaintiff-Appellant,
BOARD OF REVIEW OF DALLAS COUNTY, Defendant-Appellee.
from the Iowa District Court for Dallas County, Richard B.
Department Stores, Inc. challenges the Dallas County Board of
Review's 2013 assessment of its West Des Moines property.
A. Dublinske of Fredrikson & Byron, P.A., Des Moines, and
Judy S. Engel and Phillip S. Bubb of Fredrikson & Byron,
P.A., Minneapolis, Minnesota, for appellant.
Brett Ryan of Watson & Ryan, P.L.C., Council Bluffs, for
by Vaitheswaran, P.J., and Potterfield and Bower, JJ.
VAITHESWARAN, Presiding Judge.
Department Stores, Inc. challenges the Dallas County Board of
Review's 2013 assessment of its West Des Moines property
at $8, 357, 450. The district court affirmed the valuation.
On appeal, Kohl's contends the court (1) failed "to
exercise its own independent judgment" in reviewing the
property tax assessment, (2) should not have found its
witnesses incompetent, and (3) should not have found the
Board's witnesses more credible.
Exercise of Judgment
outset, Kohl's argues the district court "adopted
nearly verbatim large portions of the [Board's] post
trial brief . . . resulting in a decision that is not
supported by the evidence in the record or consistent with
Iowa law." But Kohl's concedes "[t]he nearly
verbatim adoption of one party's [p]ost [t]rial [b]rief
does not dictate that a different or separate standard of
review should apply."
standard of review is de novo. See Compiano v. Bd. of
Review, 771 N.W.2d 392, 395 (Iowa 2009). While the
court's adoption of a party's brief would normally
require us to "scrutinize the record more closely and
carefully when performing our appellate review, " our de
novo standard essentially incorporates this level of scrutiny
and no additional scrutiny is required. See Soults Farms,
Inc. v. Schafer, 797 N.W.2d 92, 97 (Iowa 2011) (citation
Competency of Kohl's Witnesses
burden is on the taxpayer to prove one of the statutory
grounds for protest by a preponderance of the evidence.
See Iowa Code § 441.21(3)(b) (2013);
Compiano, 771 N.W.2d at 396. If the taxpayer
"offers competent evidence by at least two disinterested
witnesses that the market value of the property is less than
the market value determined by the assessor, the burden of
proof thereafter shall be upon the officials or person
seeking to uphold such valuation to be assessed." Iowa
Code § 441.21(3)(b). "Evidence is competent under
the statute when it complies 'with the statutory scheme
for property valuation for tax assessment
purposes.'" Compiano, 771 N.W.2d at 398
offered the testimony and reports of two valuation witnesses,
Dane Anderson and Kyran Cook. Kohl's also called
Kohl's employee Scott Schnuckel as a witness. The
district court found all three witnesses incompetent. On our
de novo review, we disagree with this finding.
The district court found Anderson made "only 'mental
adjustments' to account for differences in size and
location between his comparable sales and the subject
property" and "did not translate these adjustments
into specific dollar amounts so the Court could make the
necessary adjustments without further evidence." The
court concluded his appraisal failed "to comply with
fact, Anderson used the comparable sales approach to
valuation of the property, as required by our legislature. In
other words, he followed the statutory scheme. See Hy-Vee
Food Stores, Inc. v. Carroll Cty. Bd. of Review, No.
12-1526, 2013 WL 5498137, at *1 (Iowa Ct. App. Oct. 2, 2013)
(noting board did "not seriously dispute that the
experts followed the statutory scheme for valuing property
for tax assessment purposes"); cf. Compiano,
771 N.W.2d at 399 ("[T]he opinions on market value
expressed by [the complainant's two experts] did not
comply with the statutory scheme for valuing property for the
purposes of tax assessment."); Dowden v. Dickinson
Cty. Bd. of Review, 338 N.W.2d 719, 723 (Iowa Ct. App.
1983) (questioning competency of the complainant's
witnesses because they "relied solely on the
income method in reaching their final valuations on all three
statutory dictates, Anderson valued the property at $6, 000,
000. In arriving at his valuation, he engaged in a detailed
"adjustment discussion and analysis." He
specifically considered "selected demographic and
traffic count data when evaluating each comparable sale"
and made "[u]pward qualitative adjustments]" based
on this data. Although the Board faulted him for failing to
quantify his adjustments, Anderson testified "mark[ing]
them qualitatively" was "an accepted methodology,
peer tested and reviewed through the Appraisal Institute and
in the 14th Edition, which is the authoritative source for
conclude Anderson's methodology was consistent with
generally accepted appraisal methodology and was not grounds
to find his testimony and report incompetent.
Like the other appraisers, Cook used the comparable sales
approach and other approaches to value the Kohl's store.
The district court took issue with the adjustments he made in
connection with his comparable sales analysis. However, the
appropriateness of his adjustments goes to the persuasiveness
of the ultimate valuation figures rather than witness
competency. See Soifer v. Floyd Cty. Bd. of Review,
759 N.W.2d 775, 784 (Iowa 2009) ("[I]n determining
whether the Soifers offered competent testimony from two
disinterested witnesses, we examine whether this evidence was
admissible on the question of value, not whether we find it
persuasive."). For example, one of the sales Cook used
was concededly between related parties. The district court
reasonably found his testimony less credible on this basis.
See Wellmark, Inc. v. Polk Cty. Bd. of Review, 875
N.W.2d 667, 682 (Iowa 2016) ("The mere fact that sales
might be considered comparable, however, did not necessarily
mean that valuation based on them was credible."). But
wholesale rejection of his opinion was inappropriate because
the properties he used for comparison purposes were
"sufficiently similar to support admission" of his
testimony. See Soifer, 759 N.W.2d at 785.
The district court found Kohl's employee Scott
Schnuckel's testimony incompetent on the ground that it
"was not based upon a comparable sales analysis, "
but a comparison of "per square foot information"
with other Kohl's retail stores, which the court found to
be "neither a recognized appraisal practice nor a method
of valuation recognized by Iowa law." Kohl's takes
issue with this finding, noting that Schnuckel was presented
as a fact witness rather than a valuation expert. We agree
with Kohl's on this point. Just as the Board called the
deputy county assessor to testify to foundational facts
concerning the development of the Jordan Creek area,
Kohl's called Schnuckel to testify to foundational facts
concerning retail sales at various Kohl's stores. See
id. at 782 ("[T]he property owner is 'required
to offer a sufficient factual basis for the [witnesses']
opinions to take them out of the realm of mere speculation
and conjecture.'" (citation omitted)). Because
Schnuckel was not called as a valuation expert, the statutory
"competency" requirement did not apply to his
testimony. As for the relevancy of sales-per-square-foot
data, one of the Board's experts conceded the Kohl's
appraisers did not appear to have used a methodology
predicated on pure sales per square foot.
conclude Kohl's presented two competent valuation experts
to challenge the Dallas County assessor's valuation.
Accordingly, the burden shifted to the Board to uphold the
Credibility of Board's Valuation Experts
Board presented two valuation experts, appraisers Ranney
Ramsey and Mark Nelson.
Ramsey valued the Kohl's store at $8, 400, 000 under a
comparable sales approach. Kohl's takes issue with
Ramsey's valuation opinion on the ground that he was not
"a certified Iowa appraiser, " he admitted to
"serious double counting under his income approach
analysis, " and he made unjustified adjustments to his
cites no authority for the proposition that the Board's
experts must be certified appraisers. Ramsey testified he was
an associate appraiser with more than twenty years of
experience, had completed "all the coursework"
required to become certified, and had "completed and
passed the test." All that was required for him to
become certified was a review of his experience. On our de
novo review, we conclude Ramsey was qualified to provide a
valuation of the property.
to Ramsey's analysis under the income approach. Ramsey
appeared to admit to duplication of operating cost
reimbursement revenues but, on redirect examination,
explained precisely how he obtained the per-square-foot rent
used in determining gross potential income. In any event, any
admissions he made in connection with his calculations under
the income approach did nothing to impugn his analysis under
the sales comparison approach.
respect to that approach, Ramsey compared seven properties
and prepared a "quantitative adjustment grid" that
included location adjustments ranging from fifteen to
twenty-five percent. Ramsey also compared the age and
condition of the properties and made adjustments for market
conditions. Although Ramsey admitted to using his
"professional judgment" to make some of the
adjustments, we are not persuaded this concession renders his
testimony unreliable. See Sears, Roebuck & Co. v.
Sieren, 484 N.W.2d 616, 617 (Iowa Ct. App. 1992)
("The heart of most assessment cases is the evidence of
experts applying, at best, their professional judgments
within a context of variables which can in no definite way be
end, Ramsey valued the properties "from $62.48 to
$118.27 per square foot" and assigned Kohl's a value
of $95 per square foot. Ramsey's report and testimony
support the Dallas County assessment.
Nelson valued the Kohl's store at $8, 185, 000 under a
sales comparison approach. He added the value of land and
improvements to arrive at a final valuation figure of $8,
250, 000. Kohl's contends his valuation was flawed
because he "conducted no analysis of effective age,
" made an error in his calculation of the location
adjustment, and "focused only on the demand side of the
compared ten sales of "large-scale retail
properties" and made adjustments based on
"location, type of use, age and condition, size of the
building and land to building ratio." He testified he
made age and condition adjustments for the comparable
properties. While he did not determine whether the effective
age of the properties was reduced by replacement of certain
building components, he testified "[t]hat would be well
outside the norm."
his location adjustment, Nelson disagreed with Kohl's
attorney that he should have used actual retail sales as a
benchmark. He testified, "That is a comparison of the
business performance of specific stores that is not ideally
or even reasonably relevant to the value of the underlying
real estate." Instead, Nelson looked "at the retail
sales potential within . . . the demographic studies."
This was an entirely appropriate consideration. See
Hy-Vee, 2013 WL 5498137, at *2 (noting that an expert
examined annual sales in certain areas to determine whether
the recession affected the value of commercial properties in
Kohl's concern that Nelson focused only on the demand
side of the equation is unpersuasive. Nelson emphasized,
"I'm not valuing the Kohl's business here.
I'm valuing the underlying real estate."
adjustments, Nelson obtained prices for the comparable
properties ranging from $69.50 per square foot to $136.30 per
square foot, with the average price being $96.28 per square
foot. He valued the Kohl's property at $92.50 per square
foot. We conclude Nelson's valuation supports the Dallas
County assessment. See Wellmark, Inc., 875 N.W.2d at
681 (noting "whether properties were sufficiently
similar to be comparable was generally left to the sound
discretion of the district court").
affirm the Board's assessment of $8, 357, 450.