Hope M. Vermette & Another Springfield Post Road Corp. v. Board of Assessors of the City of Springfield (March 28, 2001)

COMMONWEALTH OF MASSACHUSETTS

APPELLATE TAX BOARD




HOPE M. VERMETTE & Another	v.	BOARD OF ASSESSORS OF
SPRINGFIELD POST ROAD CORP.    	THE CITY OF SPRINGFIELD

Docket Nos.:	F203217/18 (FY 92)
			F238550/51 (FY 96)
			F245221/22 (FY 97)	Promulgated:
							March 28, 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 in the City of Springfield owned by and assessed to the appellants under G.L. c. 59, § 38, for fiscal years 1992, 1996, and 1997.  
	Former-Chairman Gurge heard these appeals.  Chairman Burns, Commissioners Scharaffa and Gorton, and Former-Commissioner Lomans joined him in the decisions for the appellants in Docket Nos. F203217, F203218, and F238550, and the decisions for the appellee in Docket Nos. F238551, F245221, and F245222.   
	These findings of fact and report are made pursuant to a request by the appellants under G.L. c. 58A, § 13 and 831 CMR 1.32.

	James F. Martin, Esq. for the appellants.
	Wayman Lee, Esq. for the appellee.

FINDINGS OF FACT AND REPORT
	On January 1, 1991, January 1, 1995, and January 1, 1996, either Springfield Post Road Corp. or Hope M. Vermette and Thomas L. Sophinos were the assessed owner(s) of a parcel of real estate in the City  of  Springfield located at 1380-1400-1402-1404 Boston Road ("1380-1404 Boston Road").  On those same dates, Springfield Post Road Corp. was the assessed owner of a parcel of real estate in Springfield located at 1420 Boston Road.  
	1380-1404 Boston Road consists of approximately 4.3 acres of land improved with a lighted asphalt parking area and three commercial buildings.  The parking area serves all three buildings at 1380-1404 Boston Road as well as another building at 1420 Boston Road.  The largest building at 1380-1404 Boston Road contains a Marshall's store that leases approximately 24,000 square feet of space.  This building is an older single-story concrete-block structure.  The second building at 1380-1404 Boston Road was built in 1994 and 1995 to replace a now demolished structure.  All 8,582 square feet of this newer building is leased to an Olive Garden restaurant.  The structure that existed on January 1, 1991, prior to its demolition for $15,000 and the erection of the Olive Garden restaurant building for $545,000, also contained a restaurant, Beef Steak Charlie's, that leased approximately 6,604 square feet of space.  The smallest of the three buildings houses Liberty Travel.  It contains approximately 3,845 square feet of rentable space.  On January 1, 1991, the buildings at 1380-1404 Boston Road contained a total of approximately 34,449 square feet of rentable space.  On January 1, 1995 and 1996, they contained approximately 36,427 square feet.           
The parcel located at 1420 Boston Road consists of approximately 26,998 square feet of land improved with a small commercial building.  On January 1, 1991, the building was leased to a branch bank.  Several years later, the bank sub-leased the property to an enterprise named Tax Land.  This parcel is adjacent to 1380-1404 Boston Road and is sited between part of that parcel's frontage along Boston Road and the parking area.         
Both of these parcels are level with adequate ingress and egress and are serviced by all utilities.  Combined they have over seventy-five feet of frontage along Boston Road and Parker Street.  Boston Road and Parker Street are part of a major commercial strip in Springfield.  This section of Boston Road is also Route 20, and Parker Street is also Route 21.  The Massachusetts Turnpike, I-90, and I-291, which connects with I-91, are readily accessible from this area.
In fiscal years 1992, 1996, and 1997, the Board of Assessors of Springfield ("Assessors") valued the subject properties and assessed taxes at the rates and amounts summarized in the following table.
Fiscal Year	Docket Number	Property Address	Assess-ment	Tax Rate
Per $1,000	Tax
Assessed	
1992	F203217	1380-1404	$1,946,800	$25.15	$48,903.62	
1992	F203218	1420	$  469,700	$25.15	$11,798.86	
1996	F238550	1380-1404	$1,633,200	$38.11	$62,241.25	
1996	F238551	1420	$  230,000	$38.11	$ 8,765.30	
1997	F245222	1380-1404	$1,633,200	$37.65	$61,489.98	
1997	F245221	1420	$  295,000	$37.65	$11,106.75	

In all of these appeals, the appellants timely paid the real estate taxes without incurring interest.  They also seasonably filed their applications for abatement and subsequent petitions to the Appellate Tax Board ("Board") appealing the Assessors' denials of their abatement requests.  The relevant jurisdictional information for each of the appeals is summarized in the following table.
Fiscal Year	Docket Number	Property Address	Tax Bill Mailed	AA
Filed	AA5 Denied or Deemed Denied	Petition Filed at Board	
1992	F203217	1380-1404	04/01/92	04/13/92	06/11/92	08/06/92	
1992	F203218	1420	04/01/92	04/13/92	06/11/92	08/06/92	
1996	F238550	1380-1404	01/01/96	01/30/96	04/30/96	07/29/96	
1996	F238551	1420	01/01/96	01/30/96	04/30/96	07/29/96	
1997	F245222	1380-1404	12/31/96	01/29/97	04/29/97	07/29/97	
1997	F245221	1420	12/31/96	01/29/97	04/29/97	07/29/97	

	On this basis, the Board found that it had jurisdiction over these appeals.  With respect to the fiscal year 1996 appeals, the Board found that the applications for abatement were filed within thirty days of the January 1, 1996 sending of the related tax bills.
	Two witnesses testified at the hearing of these appeals, including Melvin Getlan, the President of Springfield Post Road Corporation, who testified for the appellants, and Richard Allen, the Chairman of the Springfield Assessors, who testified for the Assessors.  The Board also admitted numerous exhibits into evidence.  On the basis of this evidence and reasonable inferences drawn therefrom, the Board made the following additional findings of fact.
1380-1404 Boston Road
	The Board found that the 1380-1404 Boston Road property's actual income and expense figures for calendar years 1990 and 1995 were representative of the market for this type of property in fiscal years 1992 and 1997.  The calendar year 1995 income figures were also representative of the market for this type of property in fiscal year 1996 if, as the appellant's testimony indicated, an additional twenty-percent vacancy rate was taken into account to reflect the demolition and rebuilding of the restaurant building.   Similarly, the calendar year 1995 expense figures were representative of the market for this type of property in fiscal year 1996 if, as the appellant's testimony indicated, they were slightly decreased to reflect lower expenses associated with less rentable space.  Accordingly, the Board used actual income figures of $355,399 for fiscal year 1992, $323,200 for fiscal year 1996, and $404,000 for fiscal year 1997 as the effective gross incomes in the income-capitalization methodology that the Board utilized to estimate the values of the subject property as of January 1, 1991, 1995, and 1996.  The Board also used actual expenses of $99,691 for fiscal year 1992, $126,750 for fiscal year 1996, and $127,500 for fiscal year 1997 in calculating its fiscal year 1992 net-income figure at $255,708, its fiscal year 1996 net-income figure at $196,450, and its fiscal year 1997 net-income figures at $276,500.  Using a base capitalization rate of twelve-percent plus a tax factor in fiscal year 1992, as suggested by the appellants, to account for the greater risk for investors that year, and ten-percent plus a tax factor in fiscal years 1996 and 1997, as suggested by the Assessors, to reflect the improved economy and lesser risk for this type of investment in those years, the Board determined that the fair cash values of this property on the January 1, 1991, 1995, and 1996 assessment dates were $1,760,000, $1,420,000, and $2,010,000, respectively.  The Board's income-capitalization methodology is summarized in the following table.
	Docket No. F203217
Fiscal Year 1992 	Docket No. F238550
Fiscal Year 1996	Docket No. F245222
Fiscal Year 1997	
				
Total Income	$  355,399	$  323,200	$  404,000	
Less Expenses	$   99,691	$  126,750	$  127,500	
Net Operating Income	$  255,708	$  196,450	$  276,500	
				
Base Capitalization Rate	0.12000	0.10000	0.10000	
Tax Factor	0.02512	0.03811	0.03765	
Total Cap. Rate	0.14512	0.13811	0.13765	
				
Estimate of Value	$1,762,045	$1,422,416	$2,008,717	
				
Rounded Estimate of Value	$1,760,000	$1,420,000	$2,010,000	

	On this basis, the Board issued decisions for the appellants in the fiscal year 1992 and 1996 appeals and granted abatements in the amounts of $4,692.42 and $8,125.05, respectively.  The Board issued a decision for the appellee in the fiscal year 1997 appeal. 
1420 Boston Road
	As with the 1380-1404 Boston Road property, the Board found that the 1420 Boston Road property's actual income and expense figures in calendar years 1990 and 1995 were representative of the market for this type of property in fiscal years 1992 and 1997.  The Board further found that the calendar year 1995 income figures were also representative of the market for this type of property in fiscal year 1996 if, as the appellant's testimony indicated, a higher vacancy rate was taken into account.  Accordingly, the Board used actual income figures of $64,246 for fiscal year 1992, $48,442 for fiscal year 1996, and $60,552 for fiscal year 1997 as the effective gross incomes in the income-capitalization methodology that the Board utilized to estimate the values of the subject property as of January 1, 1991, 1995, and 1996. 
Based on the testimony of both parties, the Board found that ten-percent of effective gross income was an appropriate amount to subtract from effective gross income to account for the expenses related to this property.  Accordingly, the Board used $6,425, $4,844, and $6,055 for its expense figures in fiscal years 1992, 1996, and 1997, respectively, and subtracted these amounts from the associated effective gross incomes in calculating its fiscal year 1992 net-income figure at $57,821, its fiscal year 1996 net-income figure at $43,598, and its fiscal year 1997 net-income figure at $54,497.  Using a base capitalization rate of twelve-percent plus a tax factor in fiscal year 1992 and ten-percent plus a tax factor in fiscal years 1996 and 1997, for the reasons previously discussed, the Board determined that the value of the property was $398,000 in fiscal year 1992, $315,675 in fiscal year 1996, and $396,000 in fiscal year 1997. The Board's income-capitalization methodology is summarized in the following table.

	Docket No. F203218
Fiscal Year 1992 	Docket No. F238551
Fiscal Year 1996	Docket No. F245221
Fiscal Year 1997	
				
Total Income	$   64,246	$   48,442	$   60,552  	
Less Expenses	$    6,425	$    4,844	$    6,055	
Net Operating Income	$   57,821	$   43,598	$   54,497	
				
Base Capitalization Rate	0.12000	0.10000	0.10000	
Tax Factor	0.02512	0.03811	0.03765	
Total Cap. Rate	0.14512	0.13811	0.13765	
				
Estimate of Value	$  398,436	$  315,676	$  395,910  	
				
Rounded Estimate of Value	$  398,000	$  315,675	$  396,000	

	On this basis, the Board issued a decision in the fiscal year 1992 appeal for the appellants and granted an abatement in the amount of $1,801.10.  However, because the Board's estimates of the fair cash value of 1420 Boston Road were greater than the assessments in the other two fiscal years at issue, the Board issued decisions in the fiscal year 1996 and 1997 appeals for the appellee. 

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).  Generally, real estate valuation experts, the Massachusetts courts, and this Board rely upon three approaches to determine the fair cash value of property: income capitalization, sales comparison, and cost.  Correia v. New Bedford Redevelopment Authority, 375 Mass. 360, 362 (1978).  
"The board is not required to adopt any particular method of valuation."  Pepsi-Cola Bottling Co. v. Assessors of Boston, 397 Mass. 447, 449 (1986).  In these appeals, the parties agreed, and the Board ruled that neither the sales-comparison nor the cost approaches were appropriate under the circumstances.  The Board, like the parties, found that there were not enough market sales of reasonably comparable properties to meaningfully estimate the value of the subject properties using a sales-comparison technique.  Furthermore, the Board ruled that "[t]he introduction of evidence concerning the value based on [cost] computations has been limited to special situations in which data cannot be reliably computed under the other two methods."  Correia v. New Bedford Redevelopment Authority, 375 Mass. at 362.  The Board found here that no such "special situations" existed, and, even if they did, there was scant evidence on which to base a value using a cost approach.  Accordingly, the Board ruled that this method of valuation was not an appropriate technique to use for valuing the subject properties during the fiscal years at issue in these appeals.  
The use of the income-capitalization approach is appropriate when reliable market data are not available.  Assessors of Weymouth v. Tammy Brook Co., 368 Mass. 810, 811 (1975); Assessors of Lynnfield v. New England Oyster House, 362 Mass. 696, 701-702 (1972); Assessors of Quincy v. Boston Consolidated Gas Co., 309 Mass. 60, 67 (1941).  It is also an appropriate technique to use for valuing income-producing property.  Id. at 64-65.  In these appeals, the Board relied exclusively on the value determined from the income-capitalization approach because the other methods were not appropriate, and the approach that the Board used was equivalent to what buyers and sellers in the marketplace would have used under the circumstances.   See Foxboro Associates v. Board of Assessors of Foxborough, 385 Mass. 679, 682-683 (1982); New Boston Garden Corp. v. Assessors of Boston, 383 Mass. 456, 469 (1981).
In determining fair market value, all uses to which the properties were or could reasonably be adapted on the relevant assessment dates should be considered.  Irving Saunders Trust v. Assessors of Boston, 26 Mass. App. Ct. 838, 843 (1989).  The idea is to ascertain the maximum value of the properties for any legitimate and reasonable use.  Id.  If the properties are particularly well suited for a certain use or uses that are not prohibited, then that or those uses may be reflected in an estimate of the properties' fair market value.  Colonial Acres, Inc. v. North Reading, 3 Mass. App. Ct. 384, 386 (1975).  On this basis, the Board agreed with the parties and ruled that the highest and best use of the subject properties during the fiscal years at issue in these appeals was their existing commercial use with some shared resources. 
The income stream used in the income-capitalization method must reflect the properties' earning capacity or economic rental value.  Pepsi-Cola Bottling Co. v. Assessors of Boston, 397 Mass. at 451.  Imputing rental income to the subject properties based on fair market rentals from comparable properties is evidence of value if, once adjusted, they are indicative of the subject properties' earning capacity.  See Correia v. New Bedford Redevelopment Auth., 5 Mass. App. Ct. 289, 293-94 (1977), rev'd on other grounds, 375 Mass. 360 (1978); Library Services, Inc. v. Malden Redevelopment Auth., 9 Mass. App. Ct. 877, 878 (1980)(rescript); AVCO Manufacturing Corp. v. Assessors of Wilmington, 12 Mass. App. Tax Bd. Rep. 132, 143 (1990).  Actual rents from the subject properties are also probative in this regard if they reflect the subjects' true earning capacity.  Pepsi Cola Bottling Co. v. Assessors of Boston, at 451-52; Irving Saunders Trust v. Assessors of Boston, 26 Mass. App. Ct. at 842.  After accounting for vacancy and rent losses, the net-operating income is obtained by deducting the landlord's appropriate expenses.  General Electric Co. v. Assessors of Lynn, 393 Mass. 591, 610 (1984).  The expenses should also reflect the market.  Id.
The Board's selections of its effective gross-income figures were consistent with those suggested by the appellants and were supported by the evidence.  The Board's vacancy rates were either subsumed in the actual gross incomes that the appellants derived from the properties or were based on actual rates from the testimony.  The Board's expense deductions were also based on the appellants' testimony and information contained in the appellants' income and expense statements.  The Board found and ruled that, under the circumstances, these income and expense figures were reasonable and reflected the market for these types of properties during the relevant fiscal years.
The capitalization rate selected should consider the return necessary to attract investment capital.  Taunton Redevelopment Assoc. v. Assessors of Taunton, 393 Mass. 293, 295 (1984).  The "tax factor" is a percentage added to the capitalization rate "to reflect the tax which will be payable on the assessed valuation produced by the [capitalization] formula."  Assessors of Lynn v. Shop-Lease Co., 364 Mass. 569, 573 (1974).  It is appropriate to add a tax factor to the capitalization rate in most multiple tenancy scenarios because the landlord is assumed to be responsible for paying the real estate taxes.  Taunton Redevelopment Assoc. v. Assessors of Taunton, 393 Mass. at 295-96.  Relying on these principles, the Board selected capitalization rates of twelve-percent plus a tax factor in fiscal year 1992 and ten-percent plus a tax factor in fiscal years 1996 and 1997.  The Assessors suggested the rates for fiscal years 1996 and 1997, while the rate for fiscal year 1992 was adopted from the appellants' testimony.  The Board's selection of these rates also reflected the testimony regarding the sluggish economy in fiscal year 1992 and the beginning of its turn around by fiscal year 1996.  
In reaching its opinion of fair cash value in these appeals, the Board was not required to believe the testimony of any particular witness or to adopt any particular method of valuation that an expert witness suggested.  Rather, the Board could accept those portions of the evidence that the Board determined had more convincing weight.  Foxboro Associates v. Board of Assessors of Foxborough, 385 Mass. at 683; New Boston Garden Corp. v. Assessors of Boston, 383 Mass. at 473; Assessors of Lynnfield v. New England Oyster House, Inc., 362 Mass. at 702.  In evaluating the evidence before it, the Board selected among the various elements of value and formed its own independent judgment of fair cash value.  General Electric v. Assessors of Lynn, 393 Mass. at 605; North American Philips Lighting Corp. v. Assessors of Lynn, 392 Mass 296, 300 (1984).
The Board need not specify the exact manner in which it arrived at its valuation.  Jordan Marsh v. Assessors of Malden, 359 Mass. 106, 110 (1971).  The fair cash value of property cannot be proven with "mathematical certainty and must ultimately rest in the realm of opinion, estimate and judgment."  Assessors of Quincy v. Boston Consol. Gas Co., 309 Mass. at 72.  "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).  
 "'The burden of proof is upon the [appellants] to make out [their] right as a matter of law to abatement of the tax.'"  Schlaiker v. Board of Assessors of Great Barrington, 365 Mass. 243, 245 (1974), quoting Judson Freight Forwarding Co. v. Commonwealth, 242 Mass. 47, 55 (1922).  The appellants must show that they have complied with the statutory prerequisites to their appeal, Cohen v. Assessors of Boston, 344 Mass. 268, 271 (1962), and that the assessed valuation of their property was improper.  See Foxboro Associates v. Board of Assessors of Foxborough, 385 Mass. at 691.  The assessment is presumed valid until the taxpayers sustain their burden of proving otherwise.  Schlaiker v. Board of Assessors of Great Barrington, 365 Mass. at 245.  The Board ruled here that the appellants met their burden of proving that both of the subject properties were overvalued in fiscal year 1992.  The Board further ruled that 1380-1404 Boston Road was over-valued in fiscal year 1996.  The Board ruled that the appellants did not meet their burden with respect to the fiscal year 1997 appeals.  
The Board applied these principles in reaching its opinions of the fair cash values of the subject properties during the fiscal years at issue in these appeals.  On this basis, the Board decided that 1380-1404 Boston Road was overvalued in the amounts of $186,800 and $213,200 for fiscal years 1992 and 1996, respectively.  The Board also ruled that the property was not overvalued for fiscal year 1997.  Accordingly, the Board granted the appellants abatements for fiscal years 1992 and 1996 in the amounts of $4,692.42 and $8,125.05, respectively.
In addition, the Board decided that 1420 Boston Road was overvalued in the amount of $71,700 for fiscal year 1992.  The Board also ruled that this property was not overvalued for fiscal years 1996 and 1997.  Accordingly, the Board granted the appellants an abatement for fiscal year 1992, only, in the amount of $1,801.10.

   						  THE APPELLATE TAX BOARD


   By: __________________________
	  Abigail A. Burns, Chairman


A true copy,



Attest: ________________________
Clerk of the Board

 Hope M. Vermette and Thomas L. Sophinos are the named appellants in Docket Nos. F203217 & F238550.  Springfield Post Road Corp. is the named appellant in the other four appeals.  
 These are the numbered addresses on Boston Road in Springfield where the parcels are located.  
 The Board noted that a letter from the Deputy City Collector certified that the fiscal year 1996 actual tax bills were mailed on December 29, 1995.  However, the tax bills themselves display the date of issue as January 1, 1996, and the due date for applications for abatement as January 31, 1996.  G.L. c. 59, § 59, as in effect at the time of these appeals, provides, in pertinent part, that "[a] person upon whom a tax has been assessed . . . if aggrieved by such tax, may . . . on or before the thirtieth day after the date on which the bill or notice was so sent, apply in writing to the assessors . . . for an abatement thereof."  Accordingly, for the fiscal year 1996 appeals, if the tax bills were sent on December 29, 1995, then the appellants' applications for abatement, which were filed on January 30, 1996, were late.  However, the Board was unwilling to attribute to Springfield's Collector and Assessors a motive of misleading the appellants of the all-important start of the appellants' appeal period for filing applications for abatement.  Rather, the Board construed the Collector and Assessors' actions as admissions that the tax bills were actually mailed on or about January 1, 1996.  See General Dynamics v. Assessors of Quincy, 338 Mass. 24, 41 (1983); Lehane v. Assessors of Saugus, 2000 Mass. A.T.B. Adv. Sh. 415, 416-417, footnote 1 (Docket No. F247964, June 29, 2000); Newgate Corporation v. Assessors of Springfield, 1998 Mass. A.T.B. Adv. Sh. 1103, 1117-18 (Docket Nos. 223558, etc., November 3, 1998).  
 See footnote 2.  
 "AA" is an abbreviation for application for abatement.  
 Appropriate vacancy rates were otherwise subsumed in the actual income amounts, rendering these figures the equivalent of effective gross income. 
 The Board included expenditures related to property management, utilities, materials and supplies, snow removal, insurance, professional services, licenses, ground rent, security, postage, and miscellaneous costs in its expenses, but it did not include mortgage interest, depreciation, amortization, or real estate taxes in its expenses.  
 See footnote 6.  

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