RH Acquisitions, Corp. v. Board of Assessors of the Town of Orange (November 5, 2001)

COMMONWEALTH OF MASSACHUSETTS
APPELLATE TAX BOARD

RH ACQUISITIONS, CORP.		v.	BOARD OF ASSESSORS OF 
THE TOWN OF ORANGE


Docket Nos.: F255128 (FY 1999)	Promulgated:
		   F255488 (FY 2000)	November 5, 2001
	
	These are appeals under the formal procedure, pursuant to G.L. c. 59, §§ 64 and 65, from the refusal of the appellee to abate taxes on certain real estate located in the Town of Orange owned by and assessed to the appellant under G.L. c. 59, § 38, for fiscal years 1999 and 2000.
	Commissioner Egan heard these appeals and was joined in the decisions for the appellee by Chairman Burns and Commissioners Scharaffa, Gorton and Rose.
	These findings of fact and report are made pursuant to a request by the appellant under G.L. c. 58A, § 13 and 831 CMR 1.32.

	David J. Martel, Esq., for the appellant.
	Shari Littlewood, Assessor, for the appellee.



FINDINGS OF FACT AND REPORT
	On January 1, 1998 and January 1, 1999, RH Acquisitions Corp. ("the appellant") was the assessed owner of a parcel of real estate located at 46 Mill Street in the Town of Orange.  According to the Town of Orange zoning map, the subject property is situated in the Residential Village/Commercial zoned district.  The subject property actually consists of a cluster of abutting parcels with a total land area of 45.98 acres.  Allowable uses within the area include single- and two-family dwellings, schools, churches, retail and service stores, hotels and motels, small offices, professional buildings and light manufacturing.  Other uses are permitted with Town approval.  
	The majority of the subject property is situated between the northern bank of the Millers River and the southern side of the Boston & Maine Railroad tracks, which extend through the neighborhood.  Approximately four acres of the subject property are situated on the northern side of the railroad tracks, between Water and Mill Streets.  The property is irregularly shaped and slopes slightly south towards the river bank.  It has limited frontage along Water Street and also along the portions of Mill Street that are located on the northern side of the railroad tracks.
	The Cemetery Brook flows in a north/south direction along the western side of the property and empties into  the Millers River.  Due to the existence of the Cemetery Brook and the Millers River, any added development on the property is subject to the provisions of The Rivers Act.  According to Mr. Crowley, the appellant's real estate appraiser, significant portions of the subject property are located in Flood Zone B, defined as the area between the one-hundred-year and five-hundred-year flood plain or in a one-hundred-year flood plain with less than one foot of flooding.  Also, portions of the site are located in Flood Zone A5, an area within the one-hundred-year flood plain, and Flood Zone C, an area outside the five-hundred-year flood plain that experiences minimal flooding.
Located on the property is the appellant's manufacturing complex comprised of twenty-five partially interconnected buildings.  The buildings were built at various times from the 1880s to the 1980s and range in size from 1,400 square feet to 31,120 square feet, with a total area of 239,048 square feet.
An area of approximately 26,146 square feet, contained in five buildings, is devoted to office space.  Three of the buildings are interconnected via a pass-through on both floors.  The office areas are designed with open office space in the middle and private offices on the perimeters.  These spaces are improved with a modern office fit-out including drop-tile ceilings, recessed fluorescent lighting and carpeting.  
An area of approximately 186,227 square feet is devoted to the appellant's manufacturing activities.  The construction of these manufacturing buildings is essentially the same, steel frame with metal-panel and concrete-block walls.  The buildings are heated by low-pressure steam and wall-mounted heaters.  High-pressure sodium vapor fixtures provide the lighting.  There are eleven large mechanically operated steel roll-up doors and four overhead dock doors within these three buildings.  The manufacturing areas in other buildings are heated by a variety of methods including suspended propane-fired blowers, gas-fired space heaters and low pressure steam-space heaters.  Most of the lighting fixtures are halogen units.  Several of the buildings house large cranes, which are used in the appellant's manufacturing process.  
The remaining space, approximately 26,675 square feet, is devoted to storage.  These areas are typically not heated and only small portions have lighting.  Storage spaces are located throughout the complex.
All but two of the buildings in the complex are connected to a Honeywell fire alarm and security system.  A majority of the buildings are fitted with a wet sprinkler system while the unheated buildings have a dry system.  Recently, all twenty-five buildings were wired to a central computer system.      
The property is also improved with paving that allows for on-site truck maneuvering and vehicle and material storage.  There is off-street parking for two hundred cars at three paved lots conveniently located near the buildings and available vacant land for the creation of additional parking if needed.  Other improvements include guardrails and pole lighting in the parking lots, and  six-foot-high chain-link fencing that extends along the perimeter of the entire property.  
For fiscal year 1999, the Board of Assessors of Orange ("Assessors") valued the property at $2,704,300 and assessed a tax at the rate of $20.45 per $1,000, in the amount of $55,302.94.  The appellant paid the tax due without incurring interest.  On May 3, 1999, the appellant timely filed an application for abatement, which the Assessors denied on July 19, 1999.  On August 25, 1999, the appellant seasonably filed its appeal with the Board.  For fiscal year 2000, the Assessors valued the property at $2,563,900 and assessed a tax at the rate of $20.18, in the amount of $51,739.50.  The appellant paid the tax without incurring interest.  On November 12, 1999, the appellant timely filed an application for abatement, which the Assessors denied on December 20, 1999.  The appellant seasonably filed its appeal with the Board on February 2, 2000.  On the basis of the foregoing, the Board ruled that it had jurisdiction over these appeals.    
In support of its requests for abatement, the appellant relied on the testimony and appraisal report of Michael Crowley, a certified real estate appraiser.  Mr. Crowley estimated the value of the property at $1,430,000 for both fiscal year 1999 and 2000.  He valued the property using the sales comparison method.  Mr. Crowley noted that due to the size and configuration of the subject property he was unable to locate any sales of industrial properties in the subject's immediate market area that were even remotely similar to the subject.  Consequently, Mr. Crowley expanded his search throughout Western and Central Massachusetts.  Also, due to the size of the property, Mr. Crowley expanded the time frame of his search to five years prior to the effective date of his analyses.  For fiscal year 1999, Mr. Crowley based his opinion of value on the following five sales:
Location	Date of Sale	Sale 
Price	Land Area (acres)	Building Area (sf)	Sale Price (psf)	
Spingfield	10/01/96	$4,000,000	18.9 	392,746	$10.18	
W.Springfield	05/16/96	$2,000,000	12.35	184,226	$10.86	
Springfield	01/11/96	$2,400,000	 9.26	175,000	$13.71	
Westfield	01/04/94	$1,000,000	37.82	211,325	$ 4.73	
Hatfield	06/23/93	$2,800,000	38.83	359,182	$ 7.80	

For fiscal year 2000, Mr. Crowley based his opinion of value on the same five sales used for fiscal year 1999, plus the following sixth sale:
Location	Date of Sale	Sale  Price	Land Area (acres)	Building Area (sf)	Sale Price (psf)	
Greenfield	06/02/98	$700,000	17.30	94,080	$7.44	

In estimating the value of the subject property, Mr. Crowley adjusted for such factors as market conditions, date of sale, location, building size, building condition, utility and land area.  However, due to the "[limited] amount of data from which to draw accurate adjustments for all the variables involved," and because "without adequate data, adjustments would be subjective and potentially open for error," Mr. Crowley ultimately based his opinion of value on the "unadjusted sales prices."  
Although Mr. Crowley noted that three of the sales occurred within the twenty-four month period prior to the assessment date of January 1, 1998, he relied more heavily on the two sales which occurred more than forty-eight months prior to the assessment date.  Of his six purported comparables, four were composed of single buildings, one was a complex of seven buildings and another a complex of nine buildings.  Mr. Crowley also acknowledged that all of the so-called comparables were in locations superior to that of the subject property.  Again, relying most heavily on the older sales in Westfield and Hatfield, with per-square-foot selling prices of $4.73 and $7.80, respectively, Mr. Crowley estimated a $6.00 per-square-foot value for the subject property for fiscal year 1999.     
With respect to fiscal year 2000, Mr. Crowley again relied on the same out-dated sales plus one more recent one, which occurred six months prior to the assessment date.  This more recent sale was of a property that had been vacant for some time, and from which the plumbing and electrical systems had been removed.  In addition, the air compressor for the air conditioning system needed to be replaced, and the heating system in the manufacturing/warehouse area did not work.  Mr. Crowley noted that there were monitoring wells located on the site due to ground water contamination by a previous user.  Finally, the sale was financed almost one-hundred percent by the seller.
Despite these issues, Mr. Crowley still considered this property comparable to the subject property and suggested that this additional sale supported the $6.00 per-square-foot value that he estimated for the subject property for fiscal year 2000. 
Based on the evidence presented, the Board found that the sales relied upon by Mr. Crowley lacked sufficient comparability with the subject property to support a meaningful estimate of value.  The sale dates of at least half of the purportedly comparable properties were twenty-four to fifty-four months prior to the assessment dates posing great difficulties in making adjustments.  
Of the six purported comparable properties, four of the properties were composed of single buildings, one was a complex of seven buildings and the last a complex of nine buildings.  The Board found that none of these properties compares favorably to the twenty-five buildings that comprise the subject property.  The land area of the so-called comparables ranged in size from 9.26 acres to 38.83 acres, noticeably smaller than the subject property's 45.98 acres.  In addition, the Board found that of the six comparables used in Mr. Crowley's analyses, four contained between twelve- and forty-percent less building area than the subject property.  The remaining two comparables contained fifty-percent and sixty-four-percent more building area than the subject property.  
The Board found that to the extent that the allegedly comparable properties may have been somewhat comparable, the appellant's expert appraiser offered no bases for effectively adjusting for their dissimilarities with the subject property.  Accordingly, the Board found that Mr. Crowley failed to adequately establish the comparability between the sales he relied upon and the subject property.  As he noted in his report, he held that there was a lack of adequate data which prevented him from making accurate adjustments for the many differences between the comparables and the subject property.  His failure to make any adjustments to account for these differences underscored the lack of reliability in his valuation analysis.  For these reasons, the Board found that the appellant failed to meet its burden of proving that the subject property was over-valued for fiscal years 1999 and 2000.
OPINION
	The assessors are required to assess real estate at its fair cash value.  G.L. c. 59, § 38.  Fair cash value is defined as the price on which a willing seller and a willing buyer will agree if both of them are fully informed and under no compulsion.  Boston Gas Co. v. Assessors of Boston, 334 Mass. 549, 566 (1956).  The burden of proof is upon the taxpayer to make out his or her right as a matter of law to an abatement of the tax.  Schlaiker v. Board of Assessors of Great Barrington, 365 Mass. 243, 245 (1974).  The taxpayer must demonstrate that the assessed valuation of his or her property was improper.  See Foxboro Associates v. Board of Assessors of Foxborough, 385 Mass. 679, 691 (1982).  Accordingly, the Board is entitled to presume that the assessment is valid until the taxpayer sustains its burden or proving otherwise.  Schlaiker, 365 Mass. at 245.
In appeals before this Board, a taxpayer "may present persuasive evidence of overvaluation either by exposing flaws or errors in the assessors' method of valuation, or by introducing affirmative evidence of value which undermines the assessors' valuation."  General Electric Co. v. Assessors of Lynn, 393 Mass. at 600, quoting Donlon v. Assessors of Holliston, 389 Mass. 848, 855 (1983).  Generally, real estate valuation experts, the Massachusetts courts, and this Board rely upon three approaches to ascertain the fair cash value of property: income capitalization, sales comparison, and cost reproduction.  Correia v. New Bedford Redevelopment Authority, 375 Mass. 360, 362 (1978).  
The fair cash value of property may be determined by recent sales of comparable properties in the market.   Actual sales generally "furnish strong evidence of market value, provided they are arm's-length transactions and thus fairly represent what a buyer has been willing to pay for the property to a willing seller."  Foxboro Associates, 385 Mass. at 682; New Boston Garden Corp. v. Assessors of Boston,  383 Mass. 456, 469 (1981); First National Stores, Inc. v. Assessors of Somerville, 358 Mass. 554, 560 (1971).  When comparable sales are used, however, allowance must be made for various factors which would otherwise cause disparities in the comparable prices.  See Pembroke Industrial Park Co., Inc. v. Board of Assessors of the Town of Pembroke, 25 Mass. App. Tax Bd. Rep. 312, 315 (1998).  "Adjustments for differences are made to the price of each comparable property to make the comparable equal to the subject on the effective date of the value estimate."  Appraisal Institute, The Appraisal of Real Estate 403 (12th ed. 2001).    
In the present appeals, the Board found that the appellant's expert failed to sufficiently establish the comparability between the subject property and the sales on which he relied in estimating a fair market value for the subject property.  The Board found that not only was there a considerable time difference between the dates of sales and the assessment dates, but also that the properties themselves had little in common with the subject property.  
The Board found and ruled that of the purported comparables, four were composed of single buildings, one was a complex of seven buildings and the last a complex of nine buildings.  Accordingly, none of these properties compared favorably to the twenty-five buildings that comprise the subject property.  The Board further found and ruled that the land areas associated with the so-called comparables were significantly smaller than the subject property, ranging in size from 9.26 acres to 38.83 acres compared to the subject property's 45.98 acres.  In addition, the Board found and ruled that of the six comparables used in Mr. Crowley's estimates of value for both fiscal years, four contained considerably less building area than the subject property.  In particular, the additional comparable used for fiscal year 2000 represented only about forty-percent of the building area of the subject property.  The Board further found and ruled that to the extent that the allegedly comparable properties may have been somewhat comparable, the appellant's expert appraiser offered no bases for effectively adjusting for their dissimilarities with the subject property and, in fact, made no such adjustments.
Accordingly, the Board found and ruled that the appellant failed to prove that its property was overvalued in fiscal years 1999 and 2000 and issued, therefore, a decision for the appellee.

						APPELLATE TAX BOARD

					 By: __________________________
						Abigail A. Burns, Chairman


A true copy,



Attest: ______________________
		Clerk of the Board
                          

 The Rivers Act, passed on August 7, 1996, requires a two-hundred foot riverfront area on both sides of the river.  Development within that riverfront area is prohibited without prior approval from the local conservation commission.
 Based on the Federal Emergency Management Agency ("FEMA") map dated July 5, 1987, Community Panel #250125 0022B.
 "Sf" denotes "square feet."
 "Psf" denotes "per square foot." 

ATB 2001-845