Kathleen Dickinson, Trustee of the R.T.A Trust v. Board of Assessors of the Town of Stoughton (November 6, 2000)

COMMONWEALTH OF MASSACHUSETTS

APPELLATE TAX BOARD




KATHLEEN DICKINSON, TRUSTEE	v.      BOARD OF ASSESSORS OF        OF THE R.T.A. TRUST			        THE TOWN OF STOUGHTON

Docket Nos.: F239835 (FY 1997)
             F245874 (FY 1998)	Promulgated:
                                   November 6, 2000
			


	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 in the Town of Stoughton owned by and assessed to the appellant under G.L. c. 59, § 38, for fiscal years 1997 and 1998.
	Commissioner Scharaffa heard these appeals and issued single-member decisions for the appellant in accordance with G.L. c. 58A, § 1, and 831 CMR 1.20.
	These findings of fact and report are made pursuant to a request by the appellee under G.L. c. 58A, § 13, and   831 CMR 1.32.

	David S. Tobin, Esq. for the appellant. 
	Patrick J. Costello, Esq. for the appellee.



FINDINGS OF FACT AND REPORT
	On January 1, 1996 and January 1, 1997, the appellant (trustee of the R.T.A. Trust) was the assessed owner of an 11,500 square-foot parcel of real estate, improved with a two-story part-commercial and part-residential structure, located at 506-510 Page Street in the Town of Stoughton ("Stoughton").  For both of the fiscal years at issue in these appeals, the Board of Assessors of Stoughton ("Assessors") valued the subject property at $171,000: $108,800 for the commercial portion (class three) of the property and $62,200 for the residential portion (class one).  For fiscal year 1997, the Assessors assessed a tax, at the rate of $25.07 per $1,000 for the commercial portion of the property and $16.88 per $1,000 for the residential portion, in the total amount of $3,777.56.  For fiscal year 1998, the Assessors assessed a tax, at the rate of $25.59 per $1,000 for the commercial portion of the property and $17.38 per $1,000 for the residential portion, in the total amount of $3,865.22.  The appellant timely paid both fiscal years' real estate taxes.
	On October 16, 1996, and October 22, 1997, the appellant timely filed applications for abatement contesting the fiscal year 1997 assessment on the earlier date and the fiscal year 1998 assessment on the later.  The Assessors denied the fiscal year 1997 application on November 19, 1996, and denied the fiscal year 1998 application on December 9, 1997.  On February 7, 1997 and January 21, 1998, the appellant seasonably appealed to the Appellate Tax Board ("Board") from the Assessors' denials of the appellant's respective fiscal years 1997 and 1998 abatement requests.  On this basis, the hearing officer found that the Board had jurisdiction to hear and decide these appeals.  
	At the hearing of these appeals, five witnesses testified, and numerous exhibits were admitted into evidence.  Based on this evidence, the hearing officer made the following findings of fact.  The subject property consists of an 11,500 square-foot parcel of land, improved with a two-story wood-fame part-commercial and part-residential building that was constructed in 1930.  The property is located at the intersection of Turnpike (also known as Route 139) and Page Streets about one-quarter of a mile from Route 24, but several miles from the downtown.  There is very little pedestrian traffic in the area.  It is primarily a commercial district.  The subject has about seventy-five feet of street frontage.  
According to the Assessors' property record cards, the 1,550-square-foot first floor of the structure is used for commercial purposes, while the 1,550-square-foot second floor contains a three-bedroom and two-bath residence in average condition.  The 1,160 square-foot basement is unfinished.  There is also a fifty-two-square-foot loading dock at the rear of the first floor to which the Assessors did not attribute any additional value.  The rear of the property also contains a dilapidated garage that the Assessors valued at $5,200.
	A convenience store with a wine and beer license has been in operation from the first floor of the subject property since the 1960s.  The store sells wine, beer, lottery tickets, dry goods, some dairy and delicatessen products, and cigarettes.  It has been owned and operated by the same family, first the parents and now the children, since its inception.  For many years the family lived above the business.  Prior to the relevant assessment dates, customers would drive their automobiles directly from the street onto the property in front of the store to park and then shop.  Delivery trucks also had ready access to the front and the loading dock in the rear.  There was no curbing separating the street from the asphalt-covered front section of the property where the first floor entrances to the convenience store were located.
	In November of 1995, Stoughton entered into an agreement with federal and state highway authorities to reconstruct the intersection where the subject property is located.  As a result, six-inch granite curbing was placed all along the subject property's frontage with Page Street. In some places, a sidewalk separated the curbing from the subject property.  The construction of the granite curbing was begun in December 1995, and completed by January 12, 1996.  The appellant's requests for a curb cut to allow continued vehicular ingress and egress to the property were denied.  In addition, local authorities posted "no parking" signs along the roadway in front of the subject property.  Vehicular access to, and parking near, the front and sides of the property were essentially eliminated.  Delivery trucks had to drive illegally over the curbing and sidewalk to unload at the front of the store or at the loading dock. At the time of the hearing of these appeals, the appellant had filed a related eminent-domain case in Superior Court.

Not  surprisingly,  the  convenience  store's businesssuffered rather dramatically beginning in December of 1995, first, from the inconveniences associated with the construction project itself and then, after the project's completion, from the lack of curb cuts and reasonable vehicular access to, and parking near, the property.  The convenience store's federal income tax returns indicate nearly a fifty-percent reduction in the store's gross sales from 1994 to 1996 and net losses in 1996 and 1997.  At all relevant times, the residential apartment remained vacant.  
The hearing officer qualified Kenneth Croft, III as the appellant's expert real estate appraiser.  After describing the subject property, Mr. Croft testified that the subject's highest and best use was for sale to an abutter for parking or some other ancillary commercial use.  He reasoned that because "there was no legal [vehicular] access or practical access to the property," its "only legal use would be to sell to one abutter or the next for expansion of [their] parking."  The neighborhood was best suited for commercial, not residential uses.  Mr. Croft testified that because of the nature of the subject property, it was "largely immune from the overall market conditions" that existed at that time and was part of a very limited market, namely the two abutters.  The hearing officer found that, even if the curbing and construction project did not limit completely vehicular access to the subject property until several weeks after January 1, 1996, the expectation of this imminent restriction was present on the relevant assessment date, and a reasonably informed buyer would have been cognizant of it.  Accordingly, the value of the property was affected by this limitation on January 1, 1996, and thereafter.  The hearing officer also agreed with Mr. Croft's evaluation of the neighborhood as being suited for commercial, as opposed to residential, uses and with his opinion of the highest and best use for the subject property.        
In estimating the value of the subject property on January 1, 1996 and January 1, 1997, Mr. Croft relied on recent sales of nearby comparable properties that were of similar limited utility or were back-land.  He did not use the income approach because the convenience store located on the subject property operated at a loss during the relevant time period and there were no other variety stores located on comparable properties from which market-rental data could be obtained.  On this basis, Mr. Croft concluded that "land [in Stoughton] without [vehicular] access was worth $3.00 per square foot."  Accordingly, in estimating the value of the subject property at $34,500 for both of the fiscal years at issue in these appeals, he simply multiplied the property's 11,500 square feet by $3.00.  
Brenda Cameron, the Director of Assessing for Stoughton, testified for the Assessors.  Ms. Cameron explained how the Assessors used an income approach to value the subject property during the fiscal year 1996 revaluation (the fiscal year immediately preceding the years at issue in these appeals).  They attributed a rent of $525 per month to the residential portion of the subject property, and a rent of $15.00 per-square foot to the commercial part.  Ms. Cameron calculated the potential gross income at $29,550, and, after deducting ten percent for vacancy, she calculated the effective gross income at $26,595.  She then determined the property's net income of $21,276 by subtracting another twenty percent for expenses.  She estimated the value of the subject property at $177,300 by applying a capitalization rate of 12% to the net income amount.  She did not explain how she derived her market rents, her vacancy and expense percentages, or her capitalization rate.  Her 12% capitalization rate purportedly included a tax factor.  
The property-record cards for fiscal years 1996, 1997, and 1998 indicated a total value of $171,000 for the subject property based on a cost approach.  Relying primarily on the cost approach and using the income approach mainly as a check, the Assessors valued the subject property for the two fiscal years at issue at $171,000.  They assigned values, for the residential portion, of $33,200 for the land component, $26,700 for the building component, and $2,300 for the garage component.  They assigned values, for the commercial portion, of $59,500 for the land component, $46,400 for the building component, and $2,900 for the garage.  The total of these residential and commercial components constituted the $171,000 assessment.  
Ms. Cameron further testified that, in their fiscal year 1997 assessment of the subject property, the Assessors did not take into account the construction project at the intersection, the installation of the curbing in front of the property, or the lack of access.  Ms. Cameron also testified that the Assessors did not take these factors into account in their fiscal year 1998 assessment, either, because they assumed that their previous assessment was correct, and they were unaware of any evidence to the contrary.  The hearing officer found that the Assessors' failure to account for the subject property's limited utility during the relevant time period was error and rendered their estimate of value excessive.  
The hearing officer also found that, under the circumstances present in these appeals, the most appropriate method to use to estimate the value of the subject property was the appellant's expert real estate appraiser's sales-comparison approach.  The Assessors' income-capitalization approach was not supported by any underlying market data and was discredited by the property's own relevant history.  The cost approach is disfavored when, as here, viable market data is available to support a sales-comparison approach.  The appellant's expert real estate appraiser's sales-comparison data appeared to properly reflect the market, and his adjustments were appropriate and credible.  Therefore, the hearing officer found that the sales-comparison approach used by the appellant's expert real estate appraiser was the most suitable methodology for estimating the value of the subject property as of January 1, 1996 and January 1, 1997.   
On this basis, the hearing officer agreed with the appellant's expert real estate appraiser's opinion that the subject property had limited utility and its market was limited to abutters or neighbors.  Accordingly, the hearing officer found that the subject's highest and best use on January 1, 1996, and January 1, 1997, was as extended parking from abutters' or neighbors' properties or as ancillary commercial property.  Under the circumstances present in these appeals, the hearing officer further found that the appellant's expert's sales-comparison approach was reasonable and produced a viable estimate of the subject property's value during the fiscal years at issue.  The hearing officer also found that the property should be classified as commercial only, and not residential or some combination thereof.   Accordingly, the hearing officer adopted the appellant's expert's $34,500 estimate of value for both of the fiscal years at issue in these appeals, and decided these appeals for the appellant.  The hearing officer granted abatements in the amounts of $2,912.64 and $2,982.39 for fiscal years 1997 and 1998, respectively.  The bases of the hearing officer's computation of the abatements are contained in the following table.

Docket Number	Fiscal
Year	
Location	Assessed
Value	Tax
Assessed	Fair Cash
Value	Over-
Valuation	
F239835	1997	506-510 Page St.	$171,000	$3,777.56	$34,500 (Class 3)	$136,500 (Class 1&3)	
F245874	1998	Same	$171,000	$3,865.22	$34,500 (Class 3)	$136,500 (Class 1&3)	

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 assessment is presumed valid until the taxpayer sustains her burden of proving otherwise.  Schlaiker v. Board of Assessors of Great Barrington, 365 Mass. 243, 245 (1974).
	Accordingly, the burden of proof is upon the appellant to make out her right as a matter of law to an abatement of the tax.  Id.   The appellant must show that she has complied with the statutory prerequisites to her appeal, Cohen v. Assessors of Boston, 344 Mass. 268, 271 (1962), and that the assessed valuation of her property was improper.  See Foxboro Associates v. Board of Assessors of Foxborough, 385 Mass. 679, 691 (1982).  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. 591, 600 (1984), quoting Donlon v. Assessors of Holliston, 389 Mass. 848, 855 (1983).
	In these appeals, the hearing officer found and ruled that, under the circumstances, the highest and best use of the subject property was as extended parking from abutters' or neighbors' properties or as ancillary commercial property.  The hearing officer also ruled that the appellant adequately showed that the subject property possessed limited utility in fiscal years 1997 and 1998.  Furthermore, the hearing officer ruled that, as of January 1, 1996 and thereafter, a reasonably informed potential buyer of the subject property would be aware of its lack of vehicular access. The hearing officer ruled that this awareness would adversely impact the value of the subject property.  See Skyline Homes, Inc. v. Commonwealth, 362 Mass. 684, 687-88 (1972).    
	Generally, real estate valuation experts, the Board and the Massachusetts courts rely upon three approaches to determine the fair cash value of property: income capitalization, sales comparison, and cost analysis.  Correia v. New Bedford Redevelopment Authority, 375 Mass. 360, 362 (1978).  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 v. Board of Assessors of Foxborough, 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).  The appellant's expert real estate appraiser relied on a sales-comparison approach to estimate the fair cash value of the subject property.  The hearing officer found that the appellant's expert's selection of and adjustments to the comparable properties that he used in his sales-comparison approach were appropriate under the circumstances present in these appeals.  The hearing officer also found that his methodology produced a reasonable estimate of the value of the subject property for the fiscal years at issue.  In addition, the hearing officer found that, under the circumstances, the property should be classified as commercial only and not residential or some combination thereof.  Accordingly, he ruled that the estimate of value that was derived from this approach was the most appropriate value for the subject property on January 1, 1996 and January 1, 1997.
The hearing officer further ruled that the appellant not only "'present[ed] persuasive evidence of overvaluation,'" but also "'expose[d] flaws or errors in the assessors' method of valuation.'"  General Electric Co. v. Assessors of Lynn, 393 Mass. at 600, quoting Donlon v. Assessors of Holliston, 389 Mass. at 855.  He found that, in their valuation methodology, the Assessors failed to account for both the probable and actual limited utility of the subject property, caused by its lack of vehicular access.  They also failed to appreciate that the subject's highest and best use in fiscal years 1997 and 1998 was as a mere ancillary commercial lot for an abutter or neighbor.  Moreover, the methodology that the Assessors used to estimate the value of the subject property was flawed under the circumstances present in these appeals.  There was no underlying data to support their income-capitalization approach, and their cost approach was disfavored where reasonably comparable market sales were available to support a sales-comparison approach.  Consequently, the hearing officer ruled that the Assessors' estimate of value was erroneous and clearly excessive.  See The Appraisal Institute, THE APPRAISAL OF REAL ESTATE (11th Ed., 1996) at 227 ("Public land use and government programs in an area can also affect land uses and values. . . . Probable changes in government regulations must also be considered.").
In contrast, the hearing officer ruled that the appellant's expert real estate appraiser determined, under the circumstances, the most appropriate highest and best use for the subject property on the relevant assessment dates.  He properly considered the subject's limited utility resulting from its limited access and used reasonably comparable properties, to which he applied appropriate adjustments, in his sales-comparison approach.
"The board is not required to adopt any particular method of valuation."  Pepsi-Cola Bottling Co. v. Board of Assessors of Boston, 397 Mass. 447, 449 (1986).  Nor is "the board . . . required to believe the testimony of any particular witness but it [can] accept such portions of the evidence as appear[s] to have the more convincing weight.  The market value of the property [can] not be proved with mathematical certainty and must ultimately rest in the realm of opinion, estimate, and judgment. . . . The board [can] select various elements of value as shown by the record and from them form . . . its own independent judgment."  Assessors of Quincy v. Boston Consolidated Gas Co., 309 Mass. 60, 72 (1941).  See also North American Phillips Lighting Corp. v. Board of Assessors of Lynn, 392 Mass. 296, 300 (1984); New Boston Garden Corp., 383 Mass. at 473; Jordan Marsh Co. v. Board of Assessors of Malden, 359 Mass. 106, 110 (1971).  "The credibility of witnesses, the weight of the evidence, and inferences to be drawn from the evidence are matters for the board."  Cummington School of the Arts, Inc. v. Assessors of Cummington, 373 Mass. 597, 605 (1977).          

  On this basis, the hearing officer ruled that the appellant met her burden of proving that her property was overvalued in fiscal years 1997 and 1998.  Accordingly, the hearing officer decided these appeals for the appellant and granted appropriate abatements.

						THE APPELLATE TAX BOARD


				     By: ______________________________
						Frank Scharaffa, Member


A true copy,



Attest: _________________________
		 Clerk of the Board

 Pursuant to Stoughton Traffic Rules and Orders, Article VIII, Section 14, driving over curbing onto sidewalks is prohibited.
 Pursuant to G.L. c. 79, § 8A, Stoughton's Board of Selectman authorized an $85,000 pro tanto payment to compensate the appellant for the "taking," that is, the property's diminution in value caused by the installation of the granite curbing without any curb cuts.

ATB 2000 - 911