F298316; F304236

Texto completo

COMMONWEALTH OF MASSACHUSETTS

APPELLATE TAX BOARD

CHELMSFORD MOBILE HOME PARK v. BOARD OF ASSESSORS OF
PROPERTIES, LLC, Successor THE TOWN OF CHELMSFORD
to CJD REAL ESTATE, LP

Docket Nos. F298316 Promulgated:
F304236 June 24, 2011

These are appeals under the formal procedure, pursuant to G.L. c. 58A, § 7 and G.L. c. 59, §§ 64 and 65, from the refusal of the appellee to abate taxes on certain real estate in the Town of Chelmsford assessed under G.L. c. 59, §§ 11 and 38 for fiscal years 2008 and 2009.
Commissioner Mulhern heard these appeals. Chairman Hammond and Commissioners Scharaffa, Egan, and Rose joined him in the decisions for the appellant.
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.

Gregg S. Haladyna, Esq. for the appellant Chelmsford Mobile Home Park Properties, Inc.

Robert Kraus, Esq. for intervener Massachusetts Manufactured Housing Association, Inc.

Richard P. Bowen, Esq. and Jeffrey Honig, Esq. for the appellee.

FINDINGS OF FACT AND REPORT
On January 1, 2007 and January 1, 2008, the appellant, Chelmsford Mobile Home Park Properties, LLC successor to CJD Real Estate Limited Partnership (the "appellant"), was the assessed owner of a number of contiguous parcels of real estate located at 270-288 Littleton Road in the Town of Chelmsford (the "subject property"). At all relevant times, the appellant operated the subject property as a manufactured home park, named Chelmsford Mobile Home Park (the "Park"). The subject property consists of approximately 37.75 acres, improved with roads, 254 site pads, and other infrastructure necessary for the operation of a manufactured home park. There are also four residential cabins and a commercial building, the second floor of which is used as an office and the first floor as a Laundromat.
For fiscal years 2008 and 2009, the Board of Assessors of Chelmsford (the "assessors") valued the subject property at $11,530,500 and $11,635,300, respectively. The assessors assessed taxes on the subject property at the rates of $13.50 per $1,000 for fiscal year 2008 and $14.07 per $1,000 for fiscal year 2009, resulting in tax assessments of $155,661.75, plus a Community Preservation Act ("CPA") surcharge in the amount of $2,314.68, for fiscal year 2008 and $163,708.67, plus a CPA surcharge in the amount of $2,434.53, for fiscal year 2009. On December 26, 2007 and December 29, 2008, the Tax Collector for Chelmsford caused the town's actual tax bills to be mailed for fiscal years 2008 and 2009, respectively. In accordance with G.L. c. 59, § 57C, the appellant timely paid each fiscal year's taxes without incurring interest.
On January 30, 2008 and January 30, 2009, in accordance with G.L. c. 59, § 59, the appellant timely filed Applications for Abatement with the assessors for fiscal years 2008 and 2009, respectively. The assessors denied the appellant's abatement application for fiscal year 2008 on April 30, 2008; the appellant's abatement application for fiscal year 2009 was deemed denied on April 30, 2009. In accordance with G.L. c. 59, §§ 64 and 65, the appellant seasonably appealed these denials by filing Petitions Under Formal Procedure with the Appellate Tax Board (the "Board") on July 28, 2008 for fiscal year 2008 and July 24, 2009 for fiscal year 2009. On the basis of these facts, the Board found and ruled that it had jurisdiction over these appeals.
The appellant couched the issue in these appeals as one of exemption. It claimed that the assessors valued the subject property at $3,873,600 in fiscal year 2007, but then raised the assessment to $11,530,500 in fiscal year 2008 and to $11,635,300 in fiscal year 2009, by improperly including in the assessments the value of some 255 exempt manufactured homes located in the Park. According to the appellant, these manufactured homes qualified for the statutory exemption for manufactured homes under G.L. c. 59, § 5, cl. 36 ("Clause 36") and, therefore, should not have been included in the appellant's real estate tax assessment or assessed a personal property tax. The appellant further contended that the hearing of these appeals should therefore be limited to evidence necessary for a determination of whether the $7,650,000 portion of the assessment, which the appellant claimed the assessors attributed to the manufactured homes located at the Park, should be abated in full because of the exemption.
The assessors asserted that the appellant's view of the scope of the hearing was unduly restricted. The assessors claimed that the Board should admit evidence relevant and material to the more general issue of whether the assessors had overvalued the subject property for the fiscal years at issue. They further argued that, even if the appellant's burden of proof required it to prove here that the manufactured homes were exempt, the appellant still had to show that the subject property's fair cash value for each of the fiscal years at issue was less than its assessed value.
As a threshold matter, and as more fully explained in its Opinion below, the Board agreed with the assessors regarding the scope of the hearing. The issues here were not limited to a mere determination of exemption, but necessarily included a finding on overvaluation. Even if the Board found that the manufactured homes were exempt, it could not abate the $7,650,000 portion of the assessment purportedly allocated to the manufactured homes unless the assessment that the assessors had placed on the subject property as a whole for fiscal years 2008 and 2009 actually included values for the manufactured homes and exceeded the subject property's fair cash value, excluding the value of the exempt manufactured homes for those fiscal years. It is undisputed that, at all relevant times, the assessors never sent real estate or personal property tax bills to the individual owners of the manufactured homes or personal property tax bills for the manufactured homes to the appellant. Accordingly, the only assessments at issue in these two appeals are the two on the subject property - the Park - for the two fiscal years at issue. To the extent that the value of the manufactured homes might have been included in the subject property's assessments, it would have had to have been as a component of those two assessments.
In deciding whether to abate an assessment, the Board must consider the value of the property as a whole and not just the property's component parts. Only if it is proven that the fair cash value of the property as a whole is less than the assessment will the Board order abatement, even if the methodology that the assessors used for establishing the assessment is flawed or improper. If the evidence shows that the assessment is less than or equal to the subject property's fair cash value, the assessment stands.
The appellant called two witnesses to testify in its case-in-chief. The first witness was Francis Reen, the Chief Assessor for Chelmsford. Mr. Reen readily conceded that, at all relevant times, the Park was a manufactured housing community licensed by the Chelmsford Board of Health under G.L. c. 140, § 32B and that the operator of the Park paid the requisite monthly licensing fee pursuant to G.L. c. 140, § 32G. Accordingly, the assessors considered the manufactured homes located in the Park to be exempt under Clause 36, and did not assess a personal property tax on the manufactured homes located at the Park.
Mr. Reen also testified about the various valuation components on the subject property's fiscal year 2008 property record card. According to Mr. Reen, the assessors assessed the subject property's land at $3,655,100, four residential cabins at $159,200, a commercial office and laundry building located at the Park for $66,200, and the site pads for the manufactured homes at $7,650,000, for a total valuation of $11,530,500. For fiscal year 2009, the assessors set those values at $4,142,400, $159,200, $66,200, and $7,267,500, respectively, for a total valuation of $11,635,300. Mr. Reen insisted that the assessors did not value the manufactured homes themselves for real estate tax purposes but rather were valuing the site pads for the manufactured homes, which the assessors had neglected to assess before fiscal year 2008. Certain other evidence suggested that the assessors may have misconstrued or misspoken about the taxability of the manufactured homes as real estate when preparing the Park's fiscal year 2008 assessments before clarifying their rationale. There is no dispute that the assessors did not maintain property record cards for the manufactured homes.
Mr. Reen further testified that the assessors used an income approach to value the Park. Because the appellant failed to provide the assessors with income and expense information, the assessors relied on "secondary sources," such as the monthly license fee statements and expenses and income from other rental properties, for that data. The assessors' income approach, which is based on the average monthly site-pad rental that the appellant charged the owners of the manufactured homes, is summarized in the following table.
Summary of the Assessors' Income Approach
Gross Income ($500/month x 255 units x 12 months) $ 1,530,000
Vacancy @ 4% (61,200)
Expense Allowance @ 20% (293,760)
Net Income $ 1,175,040
Capitalization Rate (including tax factor) 9.50%
Value $12,368,842

The appellant's second witness was David G. Piper, Jr. At the time of his appearance, Mr. Piper was operating two manufactured housing communities and was the President of the Massachusetts Manufactured Housing Association. He had recently completed a four-year term on the Commonwealth's Manufactured Housing Commission. Before testifying, he had inspected the exterior of the manufactured homes in the Park and, relying on his familiarity with manufactured homes and related state laws and regulations, confirmed that the Park's manufactured homes complied with the definition of "manufactured homes" under G.L. c. 140, § 32Q. In his capacity as an experienced operator of parks for manufactured homes, Mr. Piper also testified that expenses associated with the operation of manufactured housing parks are ordinarily one-third of the park's gross income, while occupancy rates now approach one-hundred percent because of the scarcity of parks, particularly in the eastern part of the state, and the downturn in the economy. The leases at the parks which he operated included in their rent clauses provisions requiring the lessees to pay base rent, real estate taxes, licensing fees, and water and sewer charges. He related that increases in his parks' taxes, fees, and charges were usually passed on to the tenants in the form of increased rent. On cross-examination, he acknowledged that he never reviewed the subject Park's financials and was not familiar with the specific details relating to the Park's categories of income and expenses. The appellant did not present any testimony or other evidence from a real estate valuation expert.
The assessors called William A. LaChance to testify as their real estate valuation expert. Based on his education, appraisal designations, experience, and background appraising and researching manufactured housing communities, the Board qualified Mr. LaChance to testify in these appeals as a real estate valuation expert. Using income-capitalization and sales-comparison approaches, Mr. LaChance valued the Park, as of January 1, 2007, at $10,000,000 and $9,950,000, respectively. Ultimately he relied predominantly on his income-capitalization approach in reconciling these estimates at $10,000,000. Mr. LaChance also indicated that the market was stable between January 1, 2007 and January 1, 2008.
In his sales-comparison approach, Mr. LaChance examined five manufactured-housing-park sales in Massachusetts and New Hampshire, which occurred from January, 2002 to April, 2007. The sale prices ranged from $3,000,000 for a 117-pad site to $15,485,700 for a 392-pad site. A summary of the manufactured housing communities' sales data appears in the following table.
Summary of the Assessors' Real Estate Valuation Expert's Sales-Comparison Approach

Sale 2 Sale 1 Sale 3 Sale 4 Sale 5
Lindenshire MH Park
Exeter, NH SUBJECT
Chelmsford, MA Oakhill Home-town America
Attleboro, MA Rocky Knoll West
Taunton, MA Forest Park Estates
Jaffrey, NH Pine Ridge Estates
Loudon, NH
Sale Date* April
2007 January
2007 January
2006 January 2005 April
2005 January
2002 Sale Price* $15,485,700 $11,530,500 $6,990,000 $3,450,000 $3,000,000 $4,500,000 Area in Acres 89 37.75 49 68.6 50.16 148 # of Site Pads 392 254 175 125 117 148 Site Pads/Acre** 4.4 3.6 1.8 2.3 1.0 Occupancy 98% 98% 100% 98% 100% 99% Net Oper. Inc.** $1,238,850 $510,000 $280,000 $219,384 $418,523 Cap. Rate** 6.5% 7.3% 8.0% 7.3% 9.3% Sale Price/Pad** $39,504 $39,943 $27,600 $25,641 $30,405 *For the subject property, the sale date and price are the assessment date and amount for fiscal year 2008.
**The rows left blank correspond to Mr. LaChance's pro forma.

Mr. LaChance concluded that his comparable sales' characteristics and the Park's were sufficiently similar to warrant adjustments only for location and physical attributes. The pertinent differences in physical characteristics that he deemed important were the availability of public sewer, the density of the pads, and the condition of the infrastructure. He found that Sale 1 in Attleboro, Massachusetts and Sale 2 in Exeter, New Hampshire shared comparable locations with the Park. Recognizing the age of Sale 5, he only included it to illustrate "the existence of a multi-million dollar market for such properties as well as showing that capitalization rates had declined from 2002 to 2007."
Instead of making explicit adjustments to his comparables, Mr. LaChance instead placed them in an array from best (Sale No. 2) to worst (Sale No. 5) and then inserted the Park in "its perceived position" within the array. He used this qualitative analysis because in his view these types of properties do not lend themselves to a quantitative analysis. Given its placement in the array, Mr. LaChance concluded that the Park's value was about $39,000 per site pad or a total of $9,906,000. Instead of then adding the values for the other improvements in the Park, he instead theorized that the cabins would be converted into site pads at a cost of $3,200 to $8,000 per site pad, which would add an estimated $50,000 in value to the Park, after accounting for expenses. Accordingly, using a sales-comparison approach, he valued the Park at $9,956,000 which he rounded to $9,950,000.
Mr. LaChance also performed an income-capitalization approach in which he first developed an estimate of market rents for the Park's site pad and one of the cabins using actual rents and rents from what he considered comparable properties. This exercise allowed him to develop a gross potential income for the Park which he then compared to the Park's effective gross rental incomes reported for calendar years 2005, 2006, and 2007 of $1,510,691, $1,540,308, and $1,546,776, respectively. Ultimately, in his methodology, Mr. LaChance relied on the Park's actual effective gross income, which included an implied vacancy/credit loss rate of less than 5%.
For operating expense, Mr. LaChance analyzed three years of actual expenses and adjusted and categorized them in accordance with the Industry Standard Chart of Accounts for Manufactured Homes. For 2005, 2006, and 2007, this exercise resulted in respective expense ratios of 36.9%, 30.4%, and 34.4% of effective gross income, which Mr. LaFrance then compared to industry operating expense ratios reported in the 2006 Allen Report. He concluded that the Park's range of expense ratios compared favorably to industry standards, as well as to another nearby park's expense ratio with which Mr. LaChance was familiar. Based on these investigations and conversations with other manufactured housing park operators, Mr. LaChance selected an operating expense ratio of 35% to use in his income-capitalization approach.
To derive an appropriate capitalization rate to use in his methodology, Mr. LaChance spoke with industry investors and operators and reviewed the capitalization rates associated with the sales that he had incorporated into his sales-comparison approach. This investigation resulted in his approximation of a capitalization-rate range of 7.5% to 8.5%. Recognizing that the Park's rents were already on the high side with little room for immediate growth, Mr. LaChance selected a capitalization rate on the higher end of the range, 8.5%, to which he added a tax factor of 1.35% to reflect the fiscal-year-2008 tax rate of $13.50 per $1,000. After capitalizing the net-operating income, Mr. LaFrance deducted what he estimated to be the value of several non-realty items that had contributed to the Park's net-operating income but should not be part of the real estate valuation ("FF&E"). A summary of Mr. LaChance's income-capitalization approach is contained in the following table.
Summary of the Assessors' Real Estate Valuation Expert's Income-Capitalization Approach

Effective Gross Income*
$ 1,543,730
Less Operating Expenses (35%)
$ 540,306
Net-Operating Income
$ 1,003,424
Capitalization Rate (8.5% + 1.35% = 9.85%)
$10,187,051
Less Value of FF&E $ 187,051

Indicated Market Value $10,000,000
*Accounts for vacancy and credit loss.

Based on all of the evidence, the Board found that the income-capitalization method that Mr. LaChance employed to estimate the value of the Park for fiscal year 2008 produced the best evidence of the Park's value for that fiscal year. The Board found that each step in his methodology was adequately supported by relevant market information and actual data that reflected the market or the Park's place in the market. Mr. LaChance's expense ratio and treatment for vacancy and credit loss were also supported by the testimony of the appellant's witness, Mr. Piper. While the Board had reservations about Mr. LaChance's handling of the Park's FF&E in his income-capitalization methodology to account for the effect of the Park's personal property on income and value, his approach had some logical appeal. In addition, it was not without precedent, was not specifically challenged by the appellant, and may have been his only option given the unavailability of actual data for creating reserves for the items. Under the circumstances and lacking any better evidence, the Board adopted it.
The Board further found that, given the stability in the market reported by Mr. LaChance, Mr. LaChance's methodology also produced the best evidence of the Park's value for fiscal year 2009 once the tax factor used in the capitalization rate was adjusted to reflect the tax rate for fiscal year 2009. The Board's adjustment to Mr. LaChance's methodology is reflected in the following table.

Summary of the Board's Income-Capitalization Approach
For Fiscal Year 2009

Effective Gross Income
$ 1,543,730
Less Operating Expenses (35%)
$ 540,306
Net-Operating Income
$ 1,003,424
Capitalization Rate (8.5% + 1.41% = 9.91%)
$10,125,368
Less Value of FF&E $ 187,051

Indicated Market Value $ 9,938,317

Rounded $ 9,938,300

In addition, the Board found, as the parties had, that the manufactured homes in the Park were exempt under Clause 36 from personal property and real estate taxes because they were "[m]anufactured homes located in [a] manufactured housing community subject to the monthly license fee provided for under section thirty-two G of chapter one hundred and forty." The Board also found that for fiscal years 2008 and 2009, the assessors had not assessed personal property or real estate taxes on the manufactured homes located at the Park. Rather, the Board found that the increase in the subject property's assessment from fiscal year 2007 to fiscal year 2008, and continuing into fiscal year 2009, resulted from the inclusion of values for the 254 site pads starting in fiscal year 2008, which the assessors had previously and erroneously excluded. The Board therefore found that the assessors had not improperly assessed taxes on the exempt manufactured homes but merely included the value produced by the site pads for manufactured homes in the valuation and assessment of the Park. The Board also found that the assessors were not bound to continue their failure to assess the value of site pads into perpetuity just because they had erroneously neglected to do so in earlier fiscal years.
In making these findings, the Board additionally found that it was appropriate for the assessors to include in their overall assessment for the Park values for the various components of the Park, including values for its land, cabins, office/laundry, and site pads; moreover, if the values allocated to one or more of the components were excessive, the subject property was still not overvalued unless the subject property's overall assessment exceeded its fair cash value. The Board further found that an income-capitalization approach was the best technique to use to value the Park because, at all relevant times, the Park was an income-producing property where the rental of its site pads produced the Park's income, not manufactured homes owned by third parties. Because of the limited number of timely and meaningfully comparable sales of manufactured housing communities during the relevant time period, the Board found that values derived from a comparable-sales approach were useful only as checks. The Board further found that the qualitative analysis which Mr. LaChance adopted in his sales-comparison approach lacked precision because he only used a limited number of comparables, he rated only one property out of five superior to the subject, and he made no quantitative adjustments before undertaking his qualitative analysis. The assessors' reliance on an income-capitalization methodology in setting their assessment on the subject property and Mr. LaChance's almost total reliance on the income-capitalization technique in his reconciliation both provided additional support for the Board's finding in this regard.
Because the assessments for fiscal years 2008 and 2009 were $11,530,500 and $11,635,300, respectively, and the values developed using Mr. LaChance's methodology were $10,000,000 and $9,938,300 respectively, the Board found that the Park was overvalued for both fiscal years and therefore decided these appeals for the appellant and granted tax abatements in the amount of $20,971.68 for fiscal year 2008 and $24,234.95 for fiscal year 2009.

OPINION
The assessors have a statutory and constitutional obligation to assess all real property at its full and fair cash value. Part II, c. 1, § 1, art. 4, of the Constitution of the Commonwealth; art. 10 of the Declaration of Rights; G.L. c. 59, §§ 38, 52. See Coomey v. Assessors of Sandwich, 367 Mass. 836, 837 (1975) (citations omitted). "Real property" is statutorily defined to include "all land within the commonwealth and all buildings . . . unless otherwise exempted from taxation under other provisions of law." G.L. c. 59, § 2A (a). Fair cash value means fair market value, which 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 appellant has the burden of proving that the property has a lower value than that assessed. "'The burden of proof is upon the petitioner to make out its right as [a] matter of law to [an] abatement of the tax.'" Schlaiker v. Assessors of Great Barrington, 365 Mass. 243, 245 (1974)(quoting Judson Freight Forwarding Co. v. Commonwealth, 242 Mass. 47, 55 (1922)). "[T]he board is entitled to 'presume that the valuation made by the assessors [is] valid unless the taxpayer[] . . . prov[es] the contrary.'" General Electric Co. v. Assessors of Lynn, 393 Mass. 591, 598 (1984)(quoting 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, 393 Mass. at 600 (quoting Donlon v. Assessors of Holliston, 389 Mass. 848, 855 (1983)).
With respect to "exposing flaws or errors in assessors' method of valuation," taxpayers do not conclusively establish a right to abatement merely by showing that their land, or a portion of it, is overvalued. "The tax on a parcel of land and the building thereon is one tax . . . although for statistical purposes they may be valued separately." Assessors of Brookline v. Prudential Insurance Co., 310 Mass. 300, 316-17 (1941). In abatement proceedings, "the question is whether the assessment for the parcel of real estate, including both the land and the structures thereon, is excessive. The component parts, on which that single assessment is laid, are each open to inquiry and revision by the appellate tribunal in reaching the conclusion whether that single assessment is excessive." Massachusetts General Hospital v. Belmont, 238 Mass. 396, 403 (1921). See also Buckley v. Assessors of Duxbury, Mass. ATB Findings of Fact and Reports 1990-110, 119; Jernegan v. Assessors of Duxbury, Mass. ATB Findings of Fact and Reports 1990-39, 48-49; Everhart v. Assessors of Dalton, Mass. ATB Findings of Fact and Reports 1985-49, 54.
In the present appeals, the appellant asserted that the assessors had included the value of exempt manufactured homes in their assessment of the subject property for fiscal years 2008 and 2009 and that this addition explained the dramatic $7,650,000 increase in the subject property's assessment from fiscal year 2007 to fiscal year 2008. To prove this point, the appellant attempted to use Mr. Reen's conduct prior to the hearing as evidence against the assessors at the hearing. "Evidentiary admissions are the 'conduct of a party while not on the stand used as evidence against him at trial. The conduct may be in the form of an act, a statement, or a failure to act or make a statement.'" General Electric Co., 393 Mass. at 603 (quoting P.J. Liacos, Massachusetts Evidence 275-276 (5th ed. 1981)). While the Bourd found that this evidence of Mr. Reen's prior conduct was probative, the Board also found that it did not carry the day. Based on Mr. Reen's testimony, the subject property's property record cards, and Mr. Reen's income-capitalization methodology, as well as other evidence and inferences, the Board found that the weight of the evidence established that in valuing the subject property for fiscal years 2008 and 2009, the assessors had valued the site pads for the manufactured homes, which they had erroneously omitted in prior fiscal years, not the manufactured homes; the manufactured homes were neither taxed as personal property or real estate to either their actual owners or the appellant.
The fair cash value of property may often best be determined by recent sales of comparable properties in the market. See Correia, 375 Mass. 360, 362 (1978); McCabe v. Chelsea, 265 Mass. 494, 496 (1929). 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. Assessors of Foxborough, 385 Mass. 679, 682 (1982); 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). Sales of comparable realty in the same geographic area and within a reasonable time of the assessment date contain credible data and information for determining the value of the property at issue. See McCabe, 265 Mass. at 496. "In the sales comparison approach, an opinion of market value is developed by comparing properties similar to the subject property that have recently sold." Appraisal Institute, The Appraisal of Real estate 297 (13th ed., 2008). "A major premise of the sales comparison approach is that an opinion of the market value of a property can be supported by studying the market's reaction to comparable and competitive properties." Id. 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. Assessors of Pembroke, Mass. ATB Findings of Fact and Reports 1998-1072, 1082. "After researching and verifying the transactional data and selecting the appropriate unit of comparison, the appraiser adjusts for any differences." The Appraisal of real estate at 307.
Because of the limited number of timely and meaningfully comparable sales of manufactured housing communities during the relevant time period, the Board found that values derived from a comparable-sales approach were useful only as checks. The Board further found that the qualitative analysis which Mr. LaChance adopted in his sales-comparison approach lacked precision because he only used a limited number of comparables, he rated only one property out of five superior to the subject, and he made no quantitative adjustments before undertaking his qualitative analysis. Consequently, the Board found and ruled that this method was not the best available methodology to use to determine the value of the subject property.
"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), but the income-capitalization method "is frequently applied with respect to income-producing property." Taunton Redev. Assocs. v. Assessors of Taunton, 393 Mass. 293, 295 (1984). Use of the income-capitalization method is appropriate when reliable market-sales data are not available. Assessors of Weymouth v. Tammy Brook Co., 368 Mass. 810, 811 (1975); Assessors of Lynnfield v. New England Oyster House, 363 Mass. 696, 701-702 (1972); Assessors of Quincy v. Boston Consol. Gas Co., 309 Mass. 60, 67 (1942). Under the income-capitalization approach, valuation is determined by dividing net-operating income by a capitalization rate. See Assessors of Brookline v. Buehler, 396 Mass. 520, 522-23 (1986). Net-operating income is obtained by subtracting market expenses from a market-derived gross income. Id. at 523. The capitalization rate should reflect the return on investment necessary to attract capital. Taunton Redev. Assoc., 393 Mass. at 295. Generally, it is appropriate to add a tax factor to the capitalization rate in most multiple tenant scenarios because the landlord is assumed to be responsible for paying the real estate taxes, and the tenant's contribution toward the real estate tax is included in the landlord's gross income. Id. at 295-96.
In the present appeals, the Board ruled that the capitalization of net income was the best method for determining the fair cash value of the Park. There were too few comparable sales within the relevant time period to use that technique for anything more than a check on values derived from an income-capitalization approach. The Board found that Mr. LaChance's income-capitalization methodology was suitably supported by relevant market information and actual data and, accordingly, with one alteration regarding the tax factor for fiscal year 2009, adopted it. The Board, however, only reluctantly approved Mr. LaChance's approach for accounting for the effect of FF&E on the Park's value. Instead of deducting the income attributable to the FF&E from the Park's net income by multiplying either the current value or the replacement cost of the FF&E by factors that represent returns on and of the personal property, see, e.g. Cambridge Hyatt Joint Venture v. Assessors of Cambridge, Mass. ATB Findings of Fact and Reports 1990-182, 218-20, Mr. LaChance deducted his estimate of the current value of the FF&E from his preliminary determination of the Park's value. While not ordinarily preferred, that approach is not without precedent. See, e.g. District of Columbia v. Washington Sheraton Corp., 499 A.2d 109, 114 (D.C. App. 1985) (reporting that the assessors' witness deducted the value of personal property after applying the capitalization rate to the total stabilized net income of the enterprise) and Analogic Corp. v. Assessors of Peabody, Mass. ATB Findings of Fact and Reports 1999-267, 296 (adopting an enterprise valuation approach in which the hotel enterprise was first valued as a whole using an income-capitalization approach and then values for non-realty items, including personal property, were deducted to obtain a value for the real estate alone). The Board found that Mr. LaChance's approach had some logical appeal, was not without precedent, was not specifically challenged by the appellant, and may have been his only option given the unavailability of actual data for expensing or creating reserves for the items. Therefore, under the circumstances and lacking any better evidence, the Board adopted it.
"'The board [i]s not required to accept the opinion expressed, or the valuation principles used by [an expert witness.]'" Foxboro Associates, 385 Mass. at 683 (citation omitted.) Rather, "[t]he essential requirement is that the Board exercise judgment." New Boston Garden Corp., 383 Mass. at 473. The Board may rely upon any method of valuation that is reasonable and supported by the record." Analogic Corp. v. Assessors of Peabody, 45 Mass. App. Ct. 605, 609 (1998) (quoting Blakely v. Assessors of Boston, 391 Mass. 473, 477 (1984)). The Board found and ruled here that Mr. LaChance's income-capitalization approach was reasonable and sufficiently supported.
The Board further found and ruled that the appellant's attempt to limit the scope of the hearing for these appeals to the exempt status of the manufactured homes located in the Park and an abatement commensurate with any value allocated or assigned to them was misplaced. First, G.L. c. 59, § 59, provides, in pertinent part, that:

A person upon whom a tax has been assessed . . . if aggrieved by such tax, may . . . apply in writing to the assessors . . . for an abatement thereof, and if they find him taxed at more than his just proportion or upon an improper classification, or upon an assessment of any of his property in excess of its fair cash value, they shall make a reasonable abatement.

Accordingly, an appellant has three grounds for appeal under c. 59: (1) disproportionate assessment, (2) misclassification, or (3) overvaluation. The appellant, here, has not brought its appeals under either of the first two grounds. It has brought its appeal under the third ground, overvaluation, by alleging that part of the assessed property was exempt. In overvaluation appeals, the Board will allow competent and relevant evidence of value and examine the entire record before rendering findings or rulings on valuation. See General Electric Co., 393 Mass. at 600 ("[T]he board's decision [on whether] the taxpayer ha[s] met its burden of persuasion, [is] made upon all of the evidence.")(emphasis in original).
Second, the assessors did not contest that the manufactured homes were exempt under Clause 36. Consistent with that determination, the assessors did not assess personal property taxes or real estate taxes on the manufactured homes or send tax bills to the owners of them, nor did the assessors prepare and maintain property record cards for the manufactured homes. Notwithstanding the appellant's assertions to the contrary, the Board found that the dramatic increase in the Park's assessment from fiscal year 2007 to fiscal year 2008, and continuing into fiscal year 2009, was for the value added by the site-pad components which the assessors had neglected to value and assess in the earlier fiscal years. The Board further found that, at all relevant times, the assessors were not assessing the manufactured homes located at the Park; they were simply including in the Park's overall assessment an appropriate value for the 254 site pads. Accordingly, the appellant's complaint amounted to a challenge to the methodology that the assessors used to value the Park. The Board found, however, that an income-capitalization approach was the appropriate methodology to use to capture the value that the site pads added to the Park and to ascertain an overall value for the Park for fiscal years 2008 and 2009. By using this methodology, the Board found values, based on the analysis provided by the assessors' real estate valuation expert, that resulted in abatements for each of the fiscal years at issue. To the extent that the assessors may have overvalued one component of the Park, the Board found and ruled that it could not make a finding of overvaluation unless the Park as a whole had been overvalued.
In reaching its opinion of fair cash value, 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, 385 Mass. at 682; New Boston Garden Corp., 383 Mass. at 469. "The credibility of witnesses, the weight of evidence, the 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).
Lastly, the appellant's suggestions that the assessors cannot from fiscal year to fiscal year change their assessment strategy, correct a previous assessment error, or even retreat from a prior public pronouncement by an official with apparent or perhaps even actual authority are without merit. The invocation of principles of equitable estoppel against the government has long been disfavored in Massachusetts. See Municipal Light Co. of Ashburnham v. Commonwealth, 34 Mass. App. Ct. 162, 167, cert denied, 510 U.S. 866 (1993) ("Generally, the principles of estoppel are not applicable against the government in connection with its exercise of public duties."). Moreover, the courts are very "‛reluctant to apply principles of equitable estoppel to public entities where to do so would negate requirements of law intended to protect the public interest.'" Holahan v. Medford, 394 Mass. 186, 191 (1985)(quoting Phipps Prods. Corp. v. Massachusetts Bay Transp. Auth., 387 Mass. 687, 693 (1982). "If [a taxing authority] has made a mistake in determining [a] classification . . . , unless specifically prohibited by statute or constitutional principles, [the taxing authority] should not be estopped from correcting that mistake and from assessing a tax that is otherwise lawfully due." John S. Lane v. Commissioner of Revenue, 396 Mass. 137, 140 (1985). "Statutory authority (like an easement in land) is not subject to atrophy or abandonment merely from nonuse." Polaroid Corp. v. Commissioner of Revenue, 393 Mass. 490, 496 (1984). Furthermore, equitable estoppel is not a bar to correction by a taxing authority of a mistake of law. Automobile Club v. Commissioner, 353 U.S. 180, 183-84 & n.7 (1957).
Here, the assessors are merely performing their statutory duty by attempting to value the Park at its fair cash value and ensure that the appellant is assessed its proportional and just amount of real estate tax. It is in the best interests of all taxpayers that the assessors be allowed to timely correct errors or misconceptions particularly where those most affected are only being asked to pay what is constitutionally, statutorily, and otherwise legally required. See, e.g., Bell Atlantic Mobile of Massachusetts Corporation, LTD. d/b/a Verizon Wireless v. Assessors of Boston, Newton, Springfield and Westborough, Mass. ATB Findings of Fact and Reports 2010-897 (ruling that, contrary to long-standing erroneous practice, corporate cell-phone providers were not entitled to corporate utility exemption). Moreover, a taxpayer is entitled to abatement under G.L. c. 59, §§ 59 and 64 and 65, only if they are aggrieved as a result of disproportionate assessment, misclassification, or overvaluation. Based on the Board's findings and rulings, supra, the appellant here was aggrieved only by overvaluation, for which the Board granted abatements. "Equitable considerations, not prescribed by statute, are not major players in tax matters (and, indeed, often do not even enter the game)." Commissioner of Revenue v. Marr Scaffolding, 414 Mass. 489, 495 (1993).
On this basis, the Board decided these appeals for the appellant and granted tax abatements in the amounts of $20,971.68, including the CPA surcharge, for fiscal year 2008 and $24,234.95, including the CPA surcharge, for fiscal year 2009. The Board's bases of computation of abatement for fiscal years 2008 and 2009 are summarized in the following two tables, respectively.
Docket
No.
Fiscal Year Assessed Value ($) Tax
Assessed ($) Fair Cash
Value ($) Over-
Valuation ($)
F298316 2008 11,530,500 157,976.43* 10,000,000 1,530,500

Docket
No.
Fiscal Year Assessed Value ($) Tax
Assessed ($) Fair Cash
Value ($) Over-
Valuation ($)
F304236 2009 11,635,300 166,143.20* 9,938,300 1,697,000
*Includes the CPA Surcharge

THE APPELLATE TAX BOARD

By: _________________________________
Thomas W. Hammond, Jr., Chairman

A true copy,

Attest: ____________________________
Clerk of the Board

On September 23, 2009, Chairman Hammond granted Massachusetts Manufactured Housing Association, Inc.'s Motion to Intervene.
The evidence indicates that, at all relevant times, there were not more than 254 manufactured homes in the Park.
General Laws, c. 59, § 5, cl. 36 provide an exemption for "Manufactured homes located in manufactured housing communities subject to the monthly license fee provided for under section thirty-two G of chapter one hundred and forty . . . ."
The appellant submitted a Motion in Limine to preclude the assessors from offering evidence of valuation. The appellant argued that the pleadings did not raise the issue of valuation, only exemption. Accordingly, any evidence pertaining to valuation should be excluded from the hearing of these appeals. At the hearing, the Board took the motion under advisement and allowed the introduction of valuation evidence de bene. See Commonwealth v. Curry, 341 Mass. 50, 54 (1960)("evidence may be admitted de bene and the determination of its admissibility or effect postponed until the parties have rested."). After the close of the hearing, the Board denied the motion and allowed the evidence without qualification.
This evidence includes Mr. Reen providing to the appellant's counsel as justification for dramatically raising the assessed value of the appellant's real estate from fiscal year 2007 to fiscal year 2008 a copy of the case Ellis v. Assessors of Acushnet, 358 Mass. 473 (1970)(holding that under certain circumstances manufactured homes may be taxed as real estate) and certain public pronouncements by Mr. Reen, which he attempted to explain away when testifying. After the close of the hearing and after the Board took these appeals under advisement, the appellant attempted to submit additional evidence into the record by attaching minutes of a Chelmsford Finance Committee meeting to its post-trial brief. The assessors promptly filed a motion to strike the minutes. Primarily for the reasons set forth in the assessors' motion, the Board allowed it and struck the minutes.
The assessors submitted a Motion in Limine to exclude Mr. Piper from testifying at the hearing, which the Board denied.
In 2002, Mr. LaChance studied and included the subject Park as a comparable rental property for an appraisal that he was hired to perform on another manufactured housing park.
The other three cabins were not rentable because of their dilapidated condition.
Mr. LaChance identified those items as a nearly new truck/snow plow, a bucket loader, office and laundry equipment, and miscellaneous other things.
The tax abatements include appropriate abatements for the CPA surcharge.


ATB 2011-679

Chelmsford Mobile Home Park Properties LLC, Successor to CJD Real Estate, LP v. Board of Assessors of the Town of Chelmsford (June 24, 2011)

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