Brook Road Corporation v. Board of Assessors of the Town of Needham (August 30,2001)

COMMONWEALTH OF MASSACHUSETTS

APPELLATE TAX BOARD



BROOK ROAD CORPORATION     v.   	BOARD OF ASSESSORS OF
				THE TOWN OF NEEDHAM

Docket No. F240871				Promulgated:
		               		August 30, 2001


	This is an appeal filed under the formal procedure pursuant to G.L. c. 59, §§ 64 and 65, from the refusal of the appellee to abate taxes assessed on real estate located in the Town of Needham owned by and assessed to the appellant under G.L. c. 59, § 38, for fiscal year 1997.    
	Commissioner Gorton heard the appeal and was joined by Chairman Burns, former Chairman Gurge and Commissioner Scharaffa in a decision for the appellee.	 
These findings of fact and report are promulgated at the request of the appellant, pursuant to G.L. c. 58A, § 13 and 831 CMR 1.32. 
 
William Connaughton, pro se, for the appellant.

Hoyt Davis, Assessor, for the appellee.


FINDINGS OF FACT AND REPORT
This appeal raises the issues of whether the Board of Assessors of the Town of Needham ("Assessors") properly valued the subject property and whether the Assessors disproportionately assessed commercial property in Needham.  Based on testimony and exhibits offered at the hearing of this appeal, the Appellate Tax Board ("Board") made the following findings of fact.
	On January 1, 1996, Brook Road Corporation ("Brook Road") was the assessed owner of an 8,175-square-foot parcel of real estate located at 19 Brook Road, Needham, Massachusetts.  At all relevant times, the parcel was improved with a two-story brick structure containing approximately 8,400 square feet of gross commercial space.  Adjacent to the building, there was adequate parking for the building's current use.  
On January 1, 1996, the Assessors valued the subject property at $462,800 and assessed a tax thereon at a rate of $21.43 per thousand, in the amount of $9,917.80.  Brook Road timely paid the tax and applied for an abatement within thirty days of the mailing of the actual tax bill.  The Assessors denied the abatement application, and within three months of their denial, Brook Road filed its fiscal year 1997 appeal with the Board.  On this basis, the Board found that it had jurisdiction to hear this appeal.
	To prove its case, Brook Road relied on the testimony and self-prepared documentary analysis of William Connaughton, President of Brook Road.  Based on this evidence, the appellant valued the subject property at approximately $317,000 for fiscal year 1997.  Brook Road also submitted a Board decision for fiscal year 1995 that granted an abatement and found the subject property's fair cash value to be $260,400.
	Because the present appeal involves "a hearing of an appeal relative to the assessed fair cash valuation of property brought within three years after a determination by the appellate tax board of the valuation thereof" and because the assessed value of the subject property for fiscal year 1997 was greater than the value found by the Board for fiscal year 1995, the Assessors had the burden of proving that the increased valuation was warranted.  See G.L. c. 58A, § 12A.  
	Mr. Hoyt Davis, a member of the Board of Assessors, testified and presented documentary evidence on behalf of the Assessors.  Mr. Davis noted that improvements had been completed after 1995, the fiscal year at issue in the prior Board decision, and that the building was no longer under construction, as it had been in fiscal year 1995.  Further, all units in the building appeared to be available for rent as of the assessment date, January 1, 1996.  Based on the documentary evidence and Mr. Davis' testimony, the Board found that the Assessors presented persuasive evidence showing that an increased valuation for fiscal year 1997 was warranted.  
	Regardless of whether the Assessors met their burden of production, the taxpayer retains the burden of persuasion on the issue of fair cash value of the subject property.  In support of the appellant's claim of overvaluation, Mr. Connaughton testified and presented a document entitled "Summary of Facts."  Based on an "income approach" analysis, he testified that his opinion of the value of the property, as of January 1, 1996, was $318,000.  To support this opinion, he presented an income and expense statement  in   which   he  incorrectly  deducted   several 
expenses, such as real estate taxes, the cost of the Massachusetts Certificate of Condition, and the Massachusetts Minimum Excise Tax.  He also deducted, without substantiation, an unusually high percentage (sixteen percent) of gross rents for professional fees.  Further, Mr. Connaughton chose a capitalization rate of ten percent but did not support or explain his choice with any underlying data.  Accordingly, the Board found that Mr.  Connaughton's income-capitalization analysis was unreliable and further found that Brook Road did not meet its burden of proving that the property was overvalued.
Mr. Connaughton also presented some documentary evidence to support his opinion of value under what the Board assumed was a sales-comparison approach.  While six sales were presented, Mr. Connaughton failed to provide evidence of deeds, verification of sale dates, explanation of the properties' characteristics beyond a cursory label of "office" or "showroom", or any other reliable analysis.  Further, under his own analysis, all of the allegedly comparable properties required an adjustment for "condition and use" in the thirty-five to forty percent range.  Accordingly, the Board found that appellant's purportedly comparable properties were not comparable to the subject property at all.  The Board also found that his sales-comparison analysis was unreliable because the methodology was flawed and lacked substantiation.  Accordingly, the Board found that appellant did not meet its burden of proving that the property was overvalued under the sales-comparison approach.  
Finally, Brook Road claimed that its property was disproportionately assessed.  In support of this theory, Mr. Connaughton offered a general narrative alleging that Needham's residential and commercial assessment practices did not reflect market value, but instead were arbitrarily derived using an apportionment formula.  Mr. Connaughton further alleged that the commercial-industrial property class bore a disproportionate tax burden exacerbated by tax overrides.  Mr. Connaughton, however, provided no data to support his assertions aside from a self-prepared chart that purported to show total commercial-industrial valuation in Needham from fiscal year 1992 through fiscal year 1997 along with the percentage of change in valuation using fiscal year 1992 as a base year.  The Board found that the taxpayer's claim in this regard was totally unsubstantiated and devoid of any meaningful analysis.  Further, the Board found that the taxpayer did not demonstrate a widespread or intentional scheme of disproportionate assessment.  Therefore, the Board found that the taxpayer failed to meet its burden of proof on the issue of disproportionate assessment.  
Based on the evidence, the Board found that the Assessors met their burden of justifying the increase in the value of the subject property for fiscal year 1997 over the value found by the Board for fiscal year 1995.  The Board further found that Brook Road failed to offer any persuasive and credible evidence that the Assessors overvalued the subject property for fiscal year 1997.  Accordingly, the Board issued a decision for the appellee.
  
OPINION
The Assessors are required to assess all property at its fair cash value.  G.L. c. 59, § 38; Coomey v. Assessors of Sandwich, 367 Mass. 836, 837 (1975).  Fair cash value is customarily defined as the price on which a willing seller and a willing buyer in a free and open market 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); Reservoir Place Realty v. Bd. Of Assessors of Waltham, 17 Mass. App. Tax Bd. Rep. 129, 140 (Docket Nos. 170317, 172764, February 17, 1995).
Generally, the taxpayer has the burden of proving that the property has a lower value than that assessed.  "[T]he Board is entitled to 'presume that the valuation made by the Assessors [is] valid unless the taxpayers . . . prov[e] the contrary.'"  General Electric Co. v. Assessors of Lynn, 393 Mass. 591, 598 (1984) quoting Schlaiker v. Assessors of Great Barrington, 365 Mass. 243, 245 (1974).  "'The burden of proof is upon the petitioner to make out his right as [a] matter of law to [an] abatement of the tax.'"  Schlaiker, 365 Mass. at 245, quoting Judson Freight Forwarding Co. v. Commonwealth, 242 Mass. 47, 55 (1922).  However, 
if, at a hearing of an appeal relative to the assessed fair cash valuation of property brought within three years after a determination by the appellate tax board of the valuation thereof, it appears that the assessed fair cash valuation is greater than the valuation as so determined, the burden shall be on the appellee to satisfy the board that the increased valuation was warranted . . .  


G.L. c. 58A, § 12A.  In the present appeal, the assessment at issue falls within the three-year statutory period of § 12A applicable to the fiscal year at issue.  Therefore, the burden of showing that the increased value is warranted is on the appellee.  See generally, Beal v. Assessors of Boston, 389 Mass. 648 (1983); Cressey Dockham & Co., Inc. v. Assessors of Andover, 11 Mass. App. Tax Bd. Rep. 41, 50 (1989); Ellis v. Assessors of Northborough, 3 Mass. App. Tax Bd. Rep. 152, 154-155 (1983).  
"Once a prior determination of the Board of the fair cash value of the same property has been placed in evidence [] the statute requires the appellee to produce evidence to 'satisfy the Board that the increased valuation was warranted.'"  Cressey Dockham, 11 Mass. App. Tax Bd. Rep. at 50.  
In the present appeal, the Assessors offered evidence that improvements had been completed and that the building was no longer under construction, as it had been in fiscal year 1995.  Further, it appeared that all units in the building were available for rent by January 1, 1996.  Based on this evidence, the Board found that the Assessors were justified in increasing the valuation of the subject property in fiscal year 1997 over the value that the Board found for fiscal year 1995.  
To support the claim of overvaluation, the taxpayer "may present persuasive evidence of overvaluation either by exposing flaws or errors in the assesssors' 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 (1984), quoting Conlon v. Assessors of Holliston, 389 Mass. 854, 855 (1983).  In support of its claim of overvaluation, the taxpayer offered testimony and documentary evidence under the income-capitalization and sales-comparison approaches.  The taxpayer's income-capitalization approach included expenses that are not customarily included in the analysis, and the expense for professional fees was unusually high and unsubstantiated.  In addition, items that are customarily included in an income-capitalization analysis, such as rent per square foot, vacancy rate, cost of tenant improvements, and reserves were not included in the taxpayer's calculations.  Furthermore, the taxpayer offered no justification for the selection of a capitalization rate of ten percent.  Consequently, the Board found and ruled that the taxpayer's income-capitalization analysis was severely flawed and, as a result, unreliable.
Similarly, the taxpayer's apparent sales-comparison approach was flawed.  No reliable documentary proof was offered to support the taxpayer's sales-comparison analysis aside from a self-prepared recitation of purported sales of commercial property in Needham.  The taxpayer did not present any deeds or any other documentation to substantiate its witness' suppositions.  Further, the Board found and ruled that none of the supposedly comparable properties was, even under the taxpayer's own analysis, sufficiently comparable to provide support for the taxpayer's opinion of value.  Accordingly, the Board found and ruled that the sales-comparison and income-capitalization analyses were flawed and unreliable.  On this basis, the Board further found and ruled that the taxpayer failed to demonstrate that the subject property was overvalued.  
The appellant also raised a claim of disproportionate assessment.  "If the taxpayer can demonstrate in an appeal to the Board that he has been the victim of a scheme of discriminatory, disproportionate assessment, he 'may be granted an abatement.'"  Gargano v. Assessors of Barnstable, 1999 ATB Adv. Sh. 237, 249 quoting Coomey v. Assessors of Sandwich, 367 Mass. 836 (1975) [citation omitted].  The burden of proof as to the existence of a "scheme of discriminatory, disproportionate assessment" is on the taxpayer.  Gargano at 249, quoting First National Stores, Inc. v. Assessors of Somerville, 358 Mass. 554, 559 (1971).  "In order to obtain relief on the basis of disproportionate assessment, a taxpayer must show that there is an 'intentional policy or scheme of valuing properties or classes of properties at a lower percentage' of fair cash value than the taxpayer's property."  Brown v. Assessors of Brookline, 43 Mass. App. Ct. 327, 332 (1997), quoting Shopper's World, Inc. v. Assessors of Framingham, 358 Mass. 554, 562 (1971).
In support of its claim, the taxpayer alleged that Needham's residential and commercial assessment practices did not reflect market value, but instead were arbitrarily derived using an apportionment formula and that the commercial-industrial property class, therefore, bore a disproportionate tax burden.  The listing of sales offered by the taxpayer was devoid of any substantiating documentation.  Further, the listing showed adjustments for size, time of sale, location and condition, but did not provide any analysis or proof to support a conclusion that a widespread and intentional scheme of disproportionate assessment existed during the relevant time period in Needham.  Accordingly, the Board found and ruled that the taxpayer failed to demonstrate an "intentional widespread scheme of discrimination."  Stillson v. Assessors of Gloucester, 385 Mass. 724, 727-28 (1982).  Consequently, the Board found that the taxpayer failed to meet its burden of proof on the issue of disproportionate assessment.


  
Based on the evidence presented, the Board found that the taxpayer failed to meet its burden of proof that the subject property was overvalued for fiscal year 1997.  Accordingly, the Board issued a decision for the appellee.

					      APPELLATE TAX BOARD

					By:						
					   Abigail A. Burns, Chairman



A true copy,


Attest:________________________
         Clerk of the Board 

Decision dated January 3, 1997, Docket Number F226518.   
St. 1998, c. 485, § 2, effective as of January 1, 1999, changed the three-year time period under G.L. c 58A, § 12A to two years. 
    
 Mr. Connaughton valued the property at $318,000 under the "income approach," at $316,848 under the "market approach," and calculated a "fair market valuation" of $317,000 for the property for fiscal year 1997.
  See supra at footnote 2. 

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ATB 2001 - 660