Opinion
HHBCV156029790S
06-09-2017
Anthony J. Spadaccini et al. v. City of Norwalk et al
UNPUBLISHED OPINION
MEMORANDUM OF DECISION
Sheila A. Huddleston, Judge.
This is a real estate tax appeal by the plaintiffs, Anthony J. Spadaccini and Sole, LLC (Sole), challenging the valuation placed upon property at 86 New Canaan Avenue, Norwalk, by the defendants city of Norwalk (city), its board of assessment appeals, and its tax assessor, Michael J. Stewart. The subject property is located at the corner of New Canaan Avenue and Silvermine Avenue. (Ex. 7, p. 12.) A gasoline station and a convenience store are located on the property. Spadaccini owns the land on which the gas station and convenience store are located. (Ex. 2, p. 1.) Sole has leased the property since 2003 and operates the gas station and convenience store. (Ex. 2, pp. 1, 7.) Under the terms of the lease, Sole owns all improvements on the property, including the building, the underground storage tanks, the canopy, and all other manmade improvements under, on or above the property. (Ex. 2, p. 1.) Sole is responsible for paying all real estate taxes and assessments on the property, and such taxes and assessments are deemed additional rent. (Ex. 2, p. 14.)
In a city-wide mass appraisal revaluation effective as of October 1, 2013, the assessor determined the fair market value of the property to be $1,125,700, and assessed it at $787,990, which is seventy percent of that fair market value. (Ex. 4.) The plaintiffs did not appeal from the October 1, 2013 assessment, but did appeal to the board of assessment appeals for the assessment that was continued through to the grand list of October 1, 2014, claiming that a recent appraisal had found the fair market value of the property to be $820,000. (Ex. 5.) The board declined to adjust the assessment. (Ex. 6.) The plaintiffs then appealed to the Superior Court pursuant to General Statutes § 12-117a, challenging the fair market value determination for each grand list from October 1, 2014, to the next city-wide revaluation.
For the reasons stated below, the court finds that the plaintiffs have not established that they were aggrieved by the city's assessment. The court is not persuaded that the city used an illegal or arbitrary method of assessment, nor is it persuaded that the assessment overvalued the plaintiffs' property. The appeal is therefore dismissed.
I
THE SITE
The subject property is located on .292 acres, or 12, 720 square feet, of land in Norwalk. (Ex. 4.) A one-story masonry convenience store, built in 1988, is located on the northeast side of the property. (Ex. G, pp. 28, 30.) The store contains 1, 871 square feet in gross area. (Ex. 4; Ex. G, p. 30.) The interior of the building accommodates a retail area, a cashier counter, a small office, storage areas, and one restroom. (Ex. 7, p. 12; Ex. G, p. 30.) The exterior of the property is improved by a large steel canopy over three gasoline pump stations, each with two gasoline dispensers, and by a paved area of approximately 10, 000 square feet. (Ex. 7, p. 12; Ex. G, p. 31.) There are three driveway cuts for access and egress, two from New Canaan Avenue and one from Silvermine Avenue. (Ex. 7, p. 12.)
A multi-family residential development is adjacent to the property on the north. (Ex. 7, p. 12.) Along New Canaan Avenue to the south, there are fast food outlets and other restaurants, retail shops, offices, and gasoline stations. New Canaan Avenue is a heavily traveled commercial strip with a daily traffic count of approximately 15, 000 vehicles. (Ex. G, p. 25, and Tr. 10/20/2016 [1T], pp. 11-12, 30-31, 121-22.)
The subject property is located in a Neighborhood Business zone. (Ex. 7, p. 13.) A special permit is required to operate a gasoline station in the zone. (Ex. 7, p. 13; Ex. C; Ex. D.) The special permit is transferable with the land. (Tr. 10/25/2016 [2T], p. 61.) Under Norwalk zoning regulations, no new gasoline stations can be built within two thousand feet of existing stations or within two hundred feet of a school, a public library, or certain hospitals, churches and theaters. (Ex. D.)
II
APPLICABLE LEGAL STANDARDS
Before addressing the merits of the parties' claims, the court sets out the well settled legal principles that govern an appeal under General Statutes § 12-117a. " Section 12-117a . . . provide[s] a method by which an owner of property may directly call in question the valuation placed by assessors on his property . . . In a § 12-117a appeal, the trial court performs a two step function. The burden, in the first instance, is upon the plaintiff to show that he has, in fact, been aggrieved by the action of the board in that his property has been overassessed . . . In this regard, [m]ere overvaluation is sufficient to justify redress under [§ 12-117a], and the court is not limited to a review of whether an assessment has been unreasonable or discriminatory or has resulted in substantial overvaluation . . . Whether a property has been overvalued for tax assessment purposes is a question of fact for the trier . . . The trier arrives at his own conclusions as to the value of land by weighing the opinions of the appraisers, the claims of the parties in light of all the circumstances in evidence bearing on value, and his own general knowledge of the elements going to establish value including his own view of the property." (Internal quotation marks omitted.) Redding Life Care, LLC v. Redding, 308 Conn. 87, 99-100, 61 A.3d 461 (2013). " Thus, the trial court first must determine whether the plaintiff has offered sufficient, credible evidence that the property has been overvalued. If the trial court concludes that the plaintiff has not met its burden, the trial proceeds no further, and the town's assessment stands." Id. " If the trial court finds that the taxpayer has failed to meet his burden because, for example, the court finds unpersuasive the method of valuation espoused by the taxpayer's appraiser, the trial court may render judgment for the town on that basis alone." Ireland v. Wethersfield, 242 Conn. 550, 557-58, 698 A.2d 888 (1997). " A taxpayer . . . who fails to carry [the] burden [of establishing overvaluation] has no right to complain if the court accords controlling weight to the assessor's valuation of his property." Id., 559.
It is well established that in a trial to the court, " the trial judge is the sole arbiter of the credibility of the witnesses and the weight to be given specific testimony . . . The credibility and weight of expert testimony is judged by the same standard, and the trial court is privileged to adopt whatever testimony [it] reasonably believes to be credible." (Citation omitted; internal quotation marks omitted.) Torres v. Waterbury, 249 Conn. 110, 123, 733 A.2d 817 (1999).
There are three generally recognized approaches to the valuation of real estate: the market sales approach, the cost approach, and the income capitalization approach. See, e.g., United Technologies Corp. v. East Windsor, 262 Conn. 11, 18-20, 807 A.2d 955 (2002) (describing three approaches); Abington, LLC v. Avon, 101 Conn.App. 709, 711 n.4, 922 A.2d 1148 (2007).
" The market sales approach is also known as the 'sales comparison approach' or the 'market data approach.'" United Technologies Corp. v. East Windsor, supra, 262 Conn., 17 n.10. " Under the market sales approach, the subject property's appraised value is derived from a comparison to recently sold similar properties in the vicinity, with appropriate value adjustments based on the elements of comparison." (Internal quotation marks omitted.) Id.
Under the cost approach to valuation, the appraiser estimates the current cost of replacing or reproducing the existing structures, including an entrepreneurial profit, with adjustments for depreciation, and adds the value of the land. See id., 17 n.8; see also Appraisal Institute, The Dictionary of Real Estate Appraisal (6th Ed. 2015), p. 54.
" The income capitalization approach is a procedure that appraisers use to develop an indication of market value by applying a rate or factor to the anticipated net income from a property." (Internal quotation marks omitted.) United Technologies Corp. v. East Windsor, supra, 262 Conn., 17 n.9. " Appraisers arrive at the anticipated net income by considering the property's actual rental income, as well as the rental income for comparable properties in the vicinity, property expenses, and allowances for vacancy and collection losses . . . In other words, the income capitalization approach values property on the basis of the property's income producing potential." (Emphasis in original; citations omitted; internal quotation marks omitted.) Redding Life Care, LLC v. Redding, supra, 308 Conn., 95 n.9.
Various methodologies, however, can be used to develop value based on the income capitalization approach. One of these is the " going concern" method. " According to the Appraisal Institute, the value of a going concern is comprised of (1) real property, (2) tangible personal property (furniture, fixtures, equipment and inventory), and (3) intangible personal property, which includes residual intangibles." Id. " Included in the residual intangible category is capitalized economic profit, or business enterprise value, which is defined as the present worth of an entrepreneur's economic (pure) profit expectation." (Internal quotation marks omitted.) Id. The going concern method requires an allocation among the component parts of real property and tangible and intangible personal property. See id. " [W]hen a going concern is valued under the income approach, that value pertains to the market value of the total assets of the business, of which real property is but one component. In order to determine the value of the real estate associated with that going concern, the values of the other components of the total assets of the business must be subtracted from the overall value . . . There may be cases in which it is proper to value real estate by first valuing the going concern associated with the property, based on an income capitalization approach, and other cases in which it is not." (Citations omitted.) Id. It is improper to reject the going concern method as a matter of law on the ground that it is not an appropriate appraisal method for tax assessment purposes. See Wheelabrator Bridgeport, L.P. v. Bridgeport, 320 Conn. 332, 360, 133 A.3d 402 (2016). Where a given method is recognized by experts in the field as one that is generally used by market participants to determine the price that they would pay for the property, the court should consider it. See id. If the court believes that another approach is preferable, it should explain why. Id., 361 n.27.
The goal of all the appraisal approaches is to develop an indication of the fair market value of the subject property. United Technologies Corp. v. East Windsor, supra, 262 Conn., 25. " Fair market value" has been defined as " the price that a willing buyer would pay a willing seller based on the highest and best possible use of the land assuming, of course, that a market exists for such optimum use." (Internal quotation marks omitted.) Id. A property's highest and best use is often defined as " the use that will most likely produce the highest market value, greatest financial return, or the most profit from the use of a particular piece of real estate." (Internal quotation marks omitted.) Metropolitan District v. Burlington, 241 Conn. 382, 390, 696 A.2d 969 (1997). " A property's highest and best use is commonly accepted by real estate appraisers as the starting point for the analysis of its true and actual value." United Technologies Corp. v. East Windsor, supra, 262 Conn., 25.
In this case, the parties agree that the highest and best use of the subject property, as improved, is its continued use as a gas station and convenience store. (Ex. 7, p. 13; Ex. G, p. 35.) The plaintiffs' appraiser admitted that the current use at the subject property is more valuable than the land for alternate commercial use. (Ex. 7, p. 13.)
III
THE PLAINTIFFS' CLAIMS
The essence of the plaintiffs' evidence and argument throughout the trial was that the assessor arbitrarily and inequitably increased the market value of the land by fifty percent. The plaintiffs argued that the value of the land underlying the gas station is comparable to, not greater than, the commercial properties proximate to it. They attempted to establish this premise (1) by calling the assessor to explain certain information on the field card for the property and (2) by presenting an appraisal, based on the cost approach, which developed a value for the land by comparing it to commercial properties that did not have gas stations or the special permits required to operate gas stations. Using the cost approach, the plaintiffs' appraiser determined the fair market value of the property as improved to be $740,000. The court is not persuaded that the plaintiffs' basic premise is true. Nor is the court persuaded that the plaintiffs' appraiser properly analyzed the land value or properly accounted for replacement costs.
A
The Assessor's Testimony
To build their case that the assessor arbitrarily increased the value of land by fifty percent, the plaintiffs called as their first witness the city's assessor, Michael Stewart. Stewart testified that the city's 2013 revaluation was conducted by Vision Government Solutions, under his supervision, as a computer-assisted mass appraisal. He explained that, for commercial properties, the city generally used a market-adjusted cost approach, which it reconciled with an income approach, and, if sufficient information was available, a sales approach. (1T, pp. 9-10.)
The plaintiffs' counsel questioned Stewart about the land line valuation section on the field card (Ex. 4), which showed a " special calc" labeled " Gas2" followed by the number 1.5. The plaintiffs' counsel assumed that the base value of the land was calculated by multiplying the property's square footage (12, 720) by the price per square foot ($9.06), which he assumed equaled $420,640. (1T, pp. 10-11.) This assumption was clearly incorrect. When 12, 720 is multiplied by $9.06, the result is $115,243.20, not $420,640. The plaintiff's counsel then further assumed that the base value, which he erroneously assumed to equal $420,640, was arbitrarily multiplied by the " Gas2" factor of 1.5 to reach the final land value of $630,960.
Stewart explained that there are a number of different adjustments in the land line valuation process after the square footage is multiplied by the unit price. (1T, p. 11; see also Ex. 4.) These may include, among others, a size adjustment, a neighborhood adjustment, and special pricing adjustments. In the case of the subject property, the particular adjustments affecting the land value included an adjustment for the neighborhood, which was a factor of 3.65, and the adjustment for " Gas2, " which was a factor of 1.5. (1T, pp. 11, 13.)
Stewart explained the 1.5 multiplier as follows: " Gas 2 carries with it a factor of 1.5. It's part of a range associated with [gas marts] where we rate them from Gas 1 to Gas 4, and this is the second quartile in that group of ratings . . . Gas 1 . . . has a multiplier . . . of 1.25. Gas 2 has a multiplier of 1.5. Gas 3 has a multiplier of 1.75 and Gas 4 has a multiplier of 2 . . . [U]nderstand that this is part of . . . a regression model . . . What you see on the field card is essentially a summary of how the different items come about . . . It's a table-driven model system; and when the [computer] sees certain elements of property characteristics, it goes to these tables, pulls the information, and sometimes it pulls it directly--sometimes it's required to make interpolations within a range and so this is what it does . . . So, as part of the categorization that we do in our data collection, we rank various attributes of the property in terms of quality, strength, and what we feel are an impact; and . . . so that's why there's all these different ranges, and it's throughout the model, not just for land." (1T, pp. 13-14.) Stewart stated that if the property had not been a gas station, the 1.5 multiplier would not have been used. (1T, p. 16.) He further testified that the highest and best use of a property affects its value. (1T, p. 19.)
In the trial transcript, " gas marts" is transcribed as " Gas Smarts." (1T, p. 13, line 6.) The court has listened to the trial recording of the assessor's testimony and finds that he said " gas marts, " apparently referring to properties that, like the subject property, include both retail gas sales and a convenience store.
In the trial transcript, " computer" is transcribed as " competitor." (1T, p. 14, line 3.) The court has listened to the trial recording of the assessor's testimony and finds that he said " computer."
The plaintiffs offered Stewart's testimony to prove aggrievement, arguing in essence that the city had arbitrarily increased the land value by fifty percent simply because it was occupied by a gas station. (1T, p. 15.) They did not ask Stewart to explain the various factors on which the ratings of gas marts were based. They appear simply to have assumed that the 1.5 multiplier was in essence attributable to the existence of the special use permit to operate a gas station. The court is not persuaded that the 1.5 multiplier is based on the special use permit. Stewart's testimony, although limited, established that a number of factors were considered in arriving at the multiplier.
The court recognizes that a tax appeal is not an administrative appeal in which the court is required to defer to the judgments of the assessor. See Stamford Apartments Co. v. Stamford, 203 Conn. 586, 589, 525 A.2d 1327 (1987). There is no presumption that an assessor's judgment is correct. See id. Nevertheless, as the trier of fact in a de novo proceeding, the court is entitled to consider the assessor's testimony and give it such weight as the court deems appropriate.
Stewart testified credibly that the adjustments for gas marts included consideration of a range of variables, including but not limited to the strength and quality of the property as compared to other gas marts. He also testified that the highest and best use of the property is a consideration in determining value. Based on Stewart's credible testimony, the court concludes that the multipliers for gas marts were not arbitrary and illegal, but simply a statistical method of quantifying differences among gas station properties, similar to other adjustments made in the land valuation, such as the neighborhood adjustment.
The plaintiffs rely on Davis v. Westport, 61 Conn.App. 834, 767 A.2d 1237 (2001), to argue that aggrievement may be shown based on " inequitability" of assessment. In Davis, the plaintiff had merged two adjacent waterfront lots at the direction of the town's planning and zoning commission so that she could build a large single-family residence straddling the boundary line of the two lots. Despite the merger of the two lots, the town's assessor appraised the property by simply adding the value previously assigned to the two separate lots. The referee who tried the tax appeal found that the plaintiff had established aggrievement by showing that the assessor deviated from the method he had used in all other assessments of waterfront properties. Id., 843. The Appellate Court agreed and held that the plaintiff was aggrieved. Id.
The assessment in Davis was improper because the assessor treated the plaintiff's property differently from all other waterfront properties that were similarly situated. In this case, Stewart's testimony indicated that all gas marts were analyzed and rated based on observed characteristics specific to that type of property. This case is therefore distinguishable from Davis because there is no evidence in this case that the assessor treated the subject property differently from any other gas marts. The plaintiffs did not explore the factors that contribute to the gas mart analysis and consequently did not show that such factors were improperly considered. The plaintiff failed to show an " inequitability" in the assessment of the subject property.
B
The Plaintiffs' Appraisal
The court next considers the testimony and expert report of the plaintiffs' appraiser, Michael Gold. Gold is a member of the Appraisal Institute and an appraiser with some forty years' experience. (1T, p. 20.) Nevertheless, as he admitted throughout the trial, he is not an expert on the gasoline station industry (1T, pp. 27, 65) and does not claim to have a " perfect understanding" of the " gasoline service station industry." (1T, p. 53.) Although he has occasionally appraised gas stations, it had been some years since he had appraised a gas station previous to this one. (1T, p. 23.)
Gold determined that the highest and best use of the subject property as improved was its continued use as a gas station and convenience store. (Ex. 7, p. 13.) He observed that " [t]he current use at subject property requires a Special Permit, and is, in my opinion, more valuable than the land for alternate commercial use." Id. He admitted that the process of obtaining a special permit is lengthy and requires a prospective operator to " jump through some hoops." (1T, pp. 57-58.) He testified, confusingly, that " the pertinence of the special permit was that . . . it is a special permit use that leads to a value that is higher than the underlying land so that the highest and best use is the current use. I don't see the special permit is not synonymous with premium value." (1T, p. 57.)
Gold testified that a prospective purchaser of a gas station would probably rely on the going concern method for appraising the value of the property. (1T, pp. 93-94.) He acknowledged that the going concern method is an income approach. (1T, p. 94.) He admitted that recent literature on appraising gas stations has focused on the going concern method. (1T, p. 54.) He testified that the going concern method requires a " very good, precise knowledge of the gasoline industry." (1T, p. 55.)
Although Gold recognized that a prospective purchaser of a gas station would likely rely on a going concern method, he did not think it was an appropriate method to use for tax appraisal purposes. He likened it to an outmoded method of using gallonage as a basis for estimating the value of gas stations. (1T, pp. 35-36; Ex. 7, p. 14.) He testified that a going concern valuation involves multiple judgments to get to the residual value of the real estate, and that any error in any of the judgments could distort the real estate value, which he believed could be achieved through a more direct approach. (1T, pp. 34-35.)
In his discussion of the use of gallonage in appraising gas stations, Gold relied on an article published in the Appraisal Journal in 1975. (Ex. 7, p. 14, and 1T, p. 36.) He admitted that gallonage had not been generally relied upon by appraisers for more than thirty years. (1T, p. 36.)
Gold rejected the use of an income approach for two reasons. First, he thought that an income approach " is more appropriate for valuing a going concern." (1T, p. 34.) Second, he believed that the actual rent being paid for the subject property " takes into account business factors." (1T, p. 34.)
Gold also rejected the use of a sales approach. (1T, p. 34.) He believed that the sale price for the transfer of gasoline stations often reflected " business elements" and that a cost approach more properly reflected the value of a special use property where the primary element of value is in the land. (1T, p. 34.)
Having rejected the income and sales approaches, Gold was left only with the cost approach to use, with no other method to use as a check against its result. Under the cost approach, Gold first developed an opinion as to the value of the land and then added the value of the improvements.
Gold opined that the value of the land on which a gas station is located should be appraised consistently with the commercial land around it. The standard text on real estate appraisal, however, unequivocally states that " [i]n the cost approach . . . [t]he value of the land depends on its highest and best use." Appraisal Institute, The Appraisal of Real Estate (14th Ed. 2013), p. 569.
To avoid the necessity of comparing the subject property with other properties having the same highest and best use, Gold first analyzed the " equitability" of the assessment by comparing assessments of the land value of gas stations with assessments of the land value of general commercial properties in Norwalk and selected other municipalities in lower Fairfield County. (Ex. 7, pp. 7-10.) He concluded that Norwalk's assessor, unlike other assessors, applied a fifty percent premium to the land value of gas station properties. (1T, p. 32; Ex. 7, pp. 7-10.) He testified that he had examined field cards in other towns and did not see any that applied a land factor for gas stations. (1T, p. 93.) He also spoke with the Greenwich assessor and confirmed that she valued gas station land at the same rate as general commercial land. (1T, p. 33.)
As Gold's testimony confirmed, the analysis at pages 7 through 10 of his report considered only the portion of municipal property assessments attributed to the value of the land . The court questions the validity of evaluating only the land assessment rather than looking at the overall assessment of the entire property, including improvements. See National Amusements, Inc. v. East Windsor, 84 Conn.App. 473, 481, 854 A.2d 58 (2004) (indicating that the overall tax assessment of a property is at issue in a tax appeal, not the specific allocation to land or improvements). Without a comparison of the total assessments of gas stations in Norwalk and in other municipalities, it is impossible to tell whether the municipalities use the same assumptions in allocating value to the land, the improvements, and the personal property. This is particularly important with gas stations, where some items, such a fuel pumps, could be considered as either improvements to the real property or as trade fixtures and thus personal property.
Gold proceeded from his comparison of land assessments to a comparison of gas station sales as either divestment sales or non-divestment sales. He testified that in recent years major gasoline producers, such as Shell and ExxonMobil, have divested their holdings of gasoline station assets, selling off large numbers of properties in bulk sales, usually to entities that then lease the stations to operators with agreements for the continued supply of gasoline. (1T, pp. 27-28; Ex. 7, p. 11; see also Ex. 7 appendix, GASDA, Inc., " Big Oil Selling Off Retail-Better or Worse?, " March 8, 2011.) Because the divestment sales involved significant business elements related to the supply of products, Gold believed that the divestment sales reflected premium values as compared to sales of gas stations that were not part of divestment programs. (1T, p. 28.) The subject property was not part of a divestment sale by a major oil company. (1T, p. 28.)
Gold identified seventeen gas station sales that took place in Norwalk, Stamford, Westport, and Wilton between 2007 and 2013. (Ex. 7, pp. 15-16.) Four of these sales were part of a divestment sale by ExxonMobil, in 2011, three were part of divestment sales by Motiva Enterprises, LLC (Motiva), a joint venture of Shell Oil Company and other oil companies, in 2007, and five were part of a Motiva divestment sale in 2008. (Id. ) Five were not divestment sales. (Id. ) Gold presented data about the sale prices, sale dates, tax assessments, and assessment dates of these seventeen properties to show that assessors disregarded the premium prices paid as part of an oil company's divestment of retail properties and assessed properties that had been divested on the same basis as proximate commercial land. Gold's analysis, however, has several flaws.
Gold testified that he had analyzed " about 20 sales" (1T, pp. 91-92), but the table in his appraisal report identifies only seventeen properties. See Ex. 7, pp. 15-16.
First, Gold did not credibly explain how he chose the properties that he used for the analysis. The twelve divestment sales are certainly a small fraction of divestment sales during the time period he chose, from 2007 to 2013. For instance, an article attached to Gold's expert report, " Landmark Shell Deal, " dated June 9, 2008, mentions that in April, Motiva sold twenty-two Shell stations in Fairfield, Connecticut, in a transaction involving 372 Wilton Associates. (The court infers the article was referring to sales in Fairfield County, rather than the town of Fairfield, as it is unlikely that the town of Fairfield, with a population of approximately 59, 000, had twenty-two Shell stations.) Gold included in his table only five sales by Motiva to 372 Wilton Associates, all of which occurred on April 8, 2008, in the towns of Wilton, Norwalk, and Stamford. He did not adequately explain why he did not consider the other seventeen Motiva sales that occurred in Fairfield County at the same time.
Nor did Gold adequately explain how or why he chose the five non-divestment sales that he used. He admitted that he did not know whether there were other non-divestment sales in the time frame he had chosen, testifying that: " I don't know whether there were others, but these were selected for this statistical analysis." (1T, p. 85.) He personally visited only three of the non-divestment properties. (1T, p. 86.) He could not remember whether the gas station at 537 Main Avenue in Norwalk was vacant. (1T, p. 86.) He believed that his sample size was sufficiently large for a " statistical" analysis, so that he did not need to consider individual characteristics of the properties. (1T, pp. 91-93.) He admitted, however, that at least one of the five non-divestment sales was a sale by an executor of an estate. (1T, pp. 80-81.) He acknowledged that the property in the estate sale did sell at a discount. (1T, p. 83.) Although Gold claimed the five non-divestment sales on pages 15 and 16 of his report were a " representative sample" of non-divestment sales in Norwalk and Fairfield County, he did not articulate any principled basis on which they were determined to be representative. (1T, pp. 85-86.) The court was left with considerable doubt as to whether the selected properties were representative or cherry-picked.
Second, Gold's analysis was internally contradictory. He claimed that the assessment data he provided shows that assessors disregarded the premium paid for business value in the divestment sales and instead " reverted to normal, standard commercial land values in the proximity of these sales." (1T, p. 71.) However, seven of the twelve divestment sales in his table were in Norwalk and were assessed as of October 1, 2013, the same date as the subject property. Gold's claim that the assessor " reverted to normal, standard commercial land values" for these Norwalk divestment sales is inconsistent with his claim that Norwalk's assessor generally added an arbitrary fifty percent premium value for gas station land.
Third, the sales Gold chose spanned a seven-year period in which major changes in the commercial real estate market occurred, but Gold did not make any adjustments for market conditions or time of sale when he compiled his table. (See. Ex. 7, pp. 15-16.) Eight of the twelve divestment sales he chose occurred in 2007 and or early in 2008, before the crash of the commercial real estate market later in 2008. Yet the assessment dates Gold considered for those properties were generally several years after the decline in the market. For instance, the properties at 912 Danbury Road, Wilton, and 1033 Hope Street, Stamford, were both part of the Motiva bulk sale on April 2, 2008. (Ex. 7, pp. 15-16.) Gold compared these sales prices from April 2, 2008, with assessments that were effective as of October 1, 2012. Similarly, the properties at 640 Main Avenue and 216 East Avenue in Norwalk were identified as divestment sales in September 2007, and October 2007, respectively. Gold compared these sale prices from 2007 with assessments that were effective as of October 1, 2013, some six years later. (Ex. 7, p. 17.) Gold acknowledged that the real estate market declined after the " financial meltdown" in 2008, but he did not think it was necessary to take into account the changes in the real estate market between the date of the sales included in his analysis and the date of the revaluations upon which the analysis was based. (1T, pp. 78-79.)
See J. Levitin and S. Wachter, " The Commercial Real Estate Bubble, " 3 Harvard Bus. L.Rev. 83 (2013) (discussing causes of decline in commercial real estate value in 2008).
After conducting this flawed comparison of selected divestment and non-divestment sales, Gold then compared the five non-divestment gas station sales he had identified to sales of general commercial properties that were not gas stations. (Ex. 7, p. 17.) In the table on page 17 of his report, he grouped each non-divestment gas station sale with two sales of commercial properties in the same municipality to compare their sale prices per square foot, including the buildings on them, purportedly to show that " the market" does not recognize a premium in the sale prices of gas station properties. Yet there is no rhyme or reason in the selection of each grouping. For instance, in the first grouping of three Stamford properties, he compared the sale price of an 11, 326-square-foot gas station property, which was improved by a 1, 144-square-foot building, with the sale prices of a 26, 136-square-foot commercial property, improved by a 3, 000-square-foot building, and of a 7, 841-square-foot property with no improvements. Similarly, he compared the sale price of a Norwalk gas station property that was 17, 860 square feet, with a 2, 028-square-foot building, with the sale prices of two Norwalk commercial properties, one an unimproved parcel of 22, 041 square feet, and one a 15, 682-square-foot property improved by a 264-square-foot structure that was demolished after purchase. (Ex. 7, p. 17.) The gas station property used in this grouping, moreover, was the one that sold at a discount in an estate sale. (1T, pp. 80-81, 83.)
In comparing sale prices for general commercial properties and gas station properties, Gold was trying to show that sales of general commercial properties could properly be used to develop the value of the land in his appraisal of the subject property. To be clear, Gold did not use the sales in the tables on pages 15, 16, or 17 of his report as comparable sales for developing the land value of the subject property. Rather, he attempted to derive from those sales a general premise that gas station land has the same value as land used for general commercial purposes, even if the commercial land does not have the same highest and best use, does not have a special permit that would allow gas station use, does not have fuel service equipment, and might not ever be able to be used as a gas station because of Norwalk zoning restrictions. The court is simply not persuaded that Gold's underlying premise is true. His data comparisons fail to take into account the variables that reasonably must be thought to influence sale prices--such as market conditions at the time of sale, whether a property is improved or not, and whether a property can be used for the buyer's intended purpose.
Relying on the premise that the land value of gas station properties is comparable to that of general commercial properties, Gold then chose four Norwalk commercial properties--none of which were in use as gas stations and convenience stores--to develop the land value of the subject property for his cost approach appraisal. See Ex. 7, pp. 19-24.
Gold's first sale, at 198-200 East Avenue, involved a property that was nearly twice the size of the subject property (.49 acres as compared to .292 acres for the subject property). Unlike the subject property, the property in Gold's first sale was not a corner lot. It was improved by two residential dwellings that were approximately a hundred years old. It was bought by a " special interest buyer, " a neighborhood owner of a Dunkin Donuts/Carvel outlet, for redevelopment. It sold for $1,225,000 on March 26, 2009. Gold reported its unadjusted value as $57.39 per square foot. (Ex. 7, p. 19.)
Gold's second sale, at 552 Connecticut Avenue, was half the size of the subject property (.14 acres). It was not a corner lot. It was vacant land, adjacent to a retail strip. It sold for $300,000 on June 24, 2011. Gold reported its unadjusted value as $49.19 per square foot. (Ex. 7, p. 20.)
Gold's third sale, at 270-282 Main Avenue, was 5.06 acres of vacant land. This property was more than seventeen times larger than the subject property. It was not a corner lot and was unimproved. The site had previously been contaminated. It was remediated before sale but required post-sale monitoring. It sold for $5,550,000 on May 5, 2012. Gold reported its unadjusted value as $25.18 per square foot. (Ex. 7, p. 21.)
Gold's fourth sale, at 151 Main Street, was .272 acres, improved only by a 240-square-foot building. It was a corner site that was previously used for used-car sales. It sold for $548,696 on November 4, 2014, more than a year after the revaluation date of October 1, 2013. Gold reported its unadjusted value as $46.31 per square foot. (Ex. 7, p. 22.)
Gold then made adjustments to his " comparable" sales. He adjusted the first sale downward by 35 percent, the second sale downward by 25 percent, the third sale upward by 15 percent, and the fourth sale downward by 30 percent. (Ex. 7, p. 25.) Giving approximately equal weight to each sale, he derived an adjusted average sale price of $32 per square foot, which he then used as his value for the land of the subject property. Based on this analysis, he derived an overall value of $410,000 for the subject property's land. Id.
The plaintiffs criticize the defendants' use of a comparable sale to which a 30 percent adjustment was made, arguing that " [a] 30% adjustment was made, which is quite excessive under these circumstances. The use of this significant adjustment shows lack of comparability." See Pl. Post-Trial Mem., p. 30. Yet the plaintiffs' expert made similarly large adjustments to his comparables. Gold's first and fourth comparables required downward adjustments of thirty-five and thirty percent, respectively, for site-specific characteristics. His first comparable was also subject to a downward adjustment of 17 percent for market conditions. (Ex. 7, p. 25.)
The court is not persuaded that the properties Gold selected for comparison were in any way comparable to the subject property. None had special permits for the operation of a gas station. Three were not corner properties. One was twice the size of the subject property, one was half its size, and one was more than seventeen times larger than the subject property. One was known to have had environmental contamination. Two were purchased by special interest buyers. Two of the four were unimproved; the other two had improvements that were likely to be demolished for future redevelopment. One was sold more than three years before the revaluation date and one was sold more than a year after it. In sum, the properties were not comparable in size, location, use, or other variables important to the value of real property.
Having used a flawed method to determine the value of the land, Gold then considered the value of the improvements. He estimated that the cost of replacing the building and other improvements, including the paving and " canopy/miscellaneous, " minus depreciation, was $330,000. (Ex. 7, p. 26.) He testified that he used a standard source, Marshall Valuation Service, for replacement cost and depreciation. (1T, p. 41; see also Ex. 7, p. 26.) He used the cost of an " automotive showroom" as an equivalent specification for developing his cost analysis. (Ex. 7, p. 26.)
Gold did not provide sufficient detail to persuade the court that he had accurately appraised the value of the improvements. The value of improvements is addressed in a single page in his report. (Ex. 7, p. 26.) His direct testimony on this issue covers slightly less than a page of transcript. (1T, p. 41, line 22-p. 42, line 16.) The court is left with more questions than answers about the value of the improvements. For instance, an appraiser using the cost approach typically estimates the direct and indirect costs of the improvements as of the effective date of the appraisal and adds an estimate of an appropriate entrepreneurial incentive to arrive at the total cost of the improvements. See Appraisal Institute, The Appraisal of Real Estate (14th Ed. 2013), pp. 568-69. Gold's report did not discuss whether the Marshall Valuation Service data that he used included estimates of indirect costs and entrepreneurial incentives. Nor did he discuss these issues in his testimony.
The authors of The Appraisal of Real Estate observe as follows: " Published cost manuals usually include benchmarks for direct unit costs but rarely include benchmarks for indirect costs--such as escrow fees, legal fees, interest on construction loans, financing fees, carrying charges, and property taxes--because these are site specific. For example, Marshall Valuation Service costs do not include construction loan points and permanent loan fees, so appraisers often research ranges of rates through discussion with lenders of the respective types of loans. Appraisers should recognize when published costs estimates do not include indirect costs." Appraisal Institute, The Appraisal of Real Estate (14th Ed. 2013), pp. 582-83.
A significant flaw in Gold's overall appraisal is his failure to address the cost of the underground storage tanks and the fuel pumps on the subject property. He was aware that underground storage tanks can cost " several hundred thousand dollars" (1T, p. 61), yet he did not consider the underground tanks or the fuel pumps either in developing the value of the land or in estimating the cost of the improvements. Gold valued the subject property at $740,000; the town's revaluation placed the value at $1,125,700. The difference between Gold's value and the town's value is $385,700--a difference that may well be explained by Gold's failure to consider the cost of the storage tanks and fuel pumps or the value that they contribute to the property.
Gold attempted to justify his failure to consider the presence of the storage tanks and fuel pumps by stating that the city's assessment " has no direct reference to the underground tanks or . . . the pumps." (1T, p. 60.) The court disagrees. Although the field card does not assign a specific dollar value to the fuel pumps and underground storage tanks, the field card does note that the property is a " standard fuel gas station" with three double-sided pumps and " 3 tanks 10K gallons = est." and " I/G." (Ex. 4.) It is reasonable to read these last notations as describing three in-ground tanks with an estimated storage capacity of ten thousand gallons. The city's assessor was therefore clearly aware of the presence of gasoline storage tanks and fuel pumps. When the assessor testified, he was not asked whether or how value was attributed to the tanks and to the pumps. He did testify, however, that the city's valuation of the subject property was based on comparisons with other gas marts. (1T, pp. 13-14.) This indicates that in developing the value of the property, the appraisal company and the assessor compared the subject property with other gas stations, not with other commercial properties that do not have gasoline storage tanks and pumps.
Gold also attempted to justify his failure to consider the cost of the storage tanks by arguing that storage tanks may be a liability because of the possibility of environmental contamination. This argument is a red herring. Underground storage tanks containing gasoline are strictly regulated to prevent environmental contamination and to detect promptly any leaks that might occur. See, e.g., Regs., Conn. State Agencies § 22a-449(d)-101 through § 22a-449(d)-113. Operators of gas stations, such as the plaintiffs, are required to monitor the performance of their underground storage tanks and pumps on a regular basis. See Regs., Conn. State Agencies § 22a-449(d)-104. The plaintiffs presented no evidence that the subject property has ever been contaminated. Although there is always a risk that an underground storage tank may leak, the mere possibility of contamination from a leak, unsupported by any evidence that such contamination has occurred on the subject property, does not provide a basis for failing to account for the storage tanks and pumps.
More fundamentally, storage tanks and pumps are essential to the operation of a gas station. A prospective buyer would not buy a parcel of unimproved commercial land for use as a gas station without considering the costs of installing storage tanks and gas pumps. In his cost approach, Gold developed a land value for the subject property based on commercial properties that did not have storage tanks or gas pumps, but he did not include the cost of installing tanks and pumps in his valuation of the improvements. To ignore the cost of the tanks and pumps where the land value was based on land that did not already have tanks and pumps is simply to ignore the most basic requirement for a gas station--the ability to sell gas.
The cost of installing gas tanks and pumps would include not only the direct costs of labor and materials for the tanks and pumps, but also indirect costs such as engineering fees, environmental studies, legal fees, and the costs of carrying the investment in land during construction. See Appraisal Institute, The Appraisal of Real Estate (14th Ed. 2013), p. 572.
IV
THE DEFENDANTS' CLAIMS
The defendants engaged David Herbst to appraise the subject property. (Ex. G.) Herbst, like Gold, is a member of the Appraisal Institute and an experienced appraiser whose qualifications the plaintiffs acknowledged. (1T, p. 110.) Unlike Gold, who admitted that he had not appraised any gas stations in recent years except for the subject property, Herbst testified that he has appraised approximately fifteen gas stations in the past few years, using the same income approach in each of those appraisals that he used here. (2T, p. 38.)
In this case, Herbst appraised the fee simple interest in the subject property primarily by using the income capitalization approach, supported by a sales comparison approach. In developing the income capitalization approach, he first projected the net operating income of the going concern, which includes the contribution of real property, personal property (furniture, fixtures, and equipment), and business value (intangibles). He allocated a portion of the net operating income to the personal property and to the business components of the going concern. The residual net operating income was attributed to the real estate. That residual net operating income was then capitalized into a value indication for the fee simple interest in the real estate. (Ex. G, p. 38.) Using this method, Herbst estimated the market value of the subject property to be $1,280,000. (Ex. G, p. 45.)
In developing the value of the property under the going concern method, Herbst analyzed the trade area for the subject property and determined that there are five gas stations with convenience stores within a three-minute drive time of the subject property. (Ex. G, p. 23.) He determined that the average daily traffic count is 15, 000. Based on an analysis of sales data from comparable properties, three-year historic fuel sales volumes for the subject property, and traffic count, he developed a projection of annual fuel volume of 1, 150, 000, which was somewhat lower than the average of the subject property's three-year historic sales volume. (Ex. G, pp. 25-26.) Using comparative market data, he conservatively projected a fuel sales margin of $0.12, and projected a fuel sales gross profit margin of $138,000. (Ex. G, p. 40.) Based on comparable market data, he also developed an indication of projected store sales based on factors such as the size of the store, its location quotient, and the traffic count. (Ex. G, p. 26.) Again using comparative market data, Herbst projected in-store sales of $1,122,600, which he rounded down to $1,120,000, a profit margin of 27.0 percent, and a gross profit of $302,400. (Ex. G, pp. 26, 40.)
The subject property's fuel sales volume was 1, 494, 858 in 2012, 1, 311, 368 in 2013, and 1, 181, 275 in 2014, for a three-year average of 1, 329, 167. Based on comparative data and traffic count considerations, Herbst projected a fuel sale volume for the subject property at 1, 150, 000. (Ex. G, pp. 25-26.)
" Location quotient" is a " ratio of the percentage of local employment in a given industry to the percentage of the region, state, or national employment in the same industry." Appraisal Institute, The Dictionary of Real Estate Appraisal (6th Ed. 2015), p. 134.
Herbst then used data from comparable properties to project operating expenses, which he concluded to be 56 percent of gross profit, to arrive at a net operating income of $189,726 for the going concern. (Ex. G, pp. 41-42.) He then allocated the projected income based on profit allowances described in an Appraisal Institute publication, Convenience Stores and Retail Fuel Properties . Using the subject property's declared personal property value of $27,246, he allocated 2.9 percent of the net operating income to the personal property, 35 percent to the business value (intangibles), and the residual 62.1 percent to the real estate. (Ex. G, p. 42.) From this allocation, he derived a projected monthly rent of $8,006 for an implied annual rent of $96,075. (Ex. G, p. 42, 44.)
To test the validity of his projected monthly rent, Herbst developed a market rent based on four gas station leases, including the actual contract rent for the subject property that was effective as of September 2013. (Ex. G, p. 43.) From this comparable data, he determined that the implied rent he had developed was at market. (Ex. G, p. 44.)
A lease on the subject property executed in September 2005 set an eight-year rent, on a triple net basis, at $672,000, resulting in a monthly rent of $7,000. (Ex. 2, p. 2.) In March 2014, the plaintiffs executed a renewal of the lease, retroactive to September 1, 2013, with a rent of $8,500 per month from September 1, 2013, through August 31, 2020, and a rent of $9,500 per month from September 1, 2020, through August 31, 2023. (Ex. 3, p. 1.) The plaintiffs' counsel acknowledged that the renewed lease is relevant to the case because it retroactively relates back to September 2013. (1T, p. 108.)
Finally, Herbst developed a capitalization rate based on survey data from three market surveys for net leased gas station and convenience store properties. The surveyed capitalization rates ranged from 5.9 percent to 8.38 percent, with an average of 6.88 percent. (Ex. G, p, 44.) Herbst concluded that a capitalization rate of 7.5 percent was appropriate. (Ex. G, p. 45.) He added the effective tax rate of 1.7 percent to reach a tax-loaded capitalization rate of 9.2 percent. When applied to the net operating income attributable to the real estate, this produced a residual real estate value of $1,280,813, which Herbst rounded downward to $1,280,000. (Ex. G, pp. 44-45.)
Herbst also developed a conclusion of the value of the subject property by using a sales comparison approach, in which he considered the sales of three gas station properties in Norwalk, Greenwich, and Westport and a portfolio of nineteen Fairfield County gas station properties sold by ExxonMobil to Alliance Energy, a regional fuel distributor, in or around 2011. He concluded that the value he had developed through his analysis of comparable sales was within the range of the sale prices in the ExxonMobil/Alliance portfolio. (Ex. G, pp. 46-53.) Using the sales comparison approach, Herbst concluded that a value of $1,120,000 was indicated. (Ex. G, p. 54.)
Herbst then reconciled the values he had reached through the going concern method of the income capitalization approach and the sales comparison approach to reach his final opinion of value. He concluded that the value of the subject property as of October 1, 2013, was $1,220,000. (Ex. G, p. 54.) Herbst's conclusion of value was higher than the value determined by the assessor.
The plaintiffs are sharply critical of Herbst's approach. They characterize it as a going concern method and rely on Redding Life Care, LLC v. Redding, supra, to argue that the going concern method has not been recognized as an appropriate method for developing the value of real property for the purposes of a tax appeal under § 12-117a.
In his testimony, Herbst resisted using the term " going concern" to describe his method (1T, pp. 112-13), but his report discussed the valuation of the " going concern" as the first step in his income capitalization approach. (Ex. G, p. 38.) The court agrees with the plaintiffs that the income approach Herbst employed fits the description of the going concern approach as discussed in Redding Life Care, LLC v. Redding, supra, 308 Conn., 95 n.9. The court disagrees, however, that it is never proper to use an income approach that first values a going concern in a tax appeal. As the Supreme Court stated in Redding Life Care, " [t]here may be cases in which it is proper to value real estate by first valuing the going concern associated with the property, based on an income capitalization approach, and other cases in which it is not." Id. More recently, the Supreme Court has held that a trial court hearing a § 12-117a appeal should consider the appraisal method upon which market participants rely. Wheelabrator Bridgeport, L.P. v. Bridgeport, supra, 320 Conn., 354-62 and 361, n.27. If the court determines that some other method is to be preferred, it should explain why. Id., 361 n.27.
The authors of the leading treatise on real estate appraisal agree that the method used by market participants is a principal consideration in deciding what method of valuation is appropriate for an income-producing property. " If the goal of the valuation is to predict what would have been paid for the property if it had been exposed on the open market, it is preferable to perform calculations in the way typical buyers and sellers do." Appraisal Institute, The Appraisal of Real Estate (14th Ed. 2013), p. 709.
In this case, Gold admitted that a prospective purchaser of a gas station would " probably be more focused on the going-concern value, which would include the intangible assets, " and he thought that was the methodology they would use. (1T, pp. 93-94.) Herbst testified that the method he used is the method generally used by market participants. (1T, p. 125.) As Herbst explained, the subject property was constructed as a gas station and convenience store, could not readily be converted to any other use, and its highest and best use is to continue its current use. (1T, pp. 124-25.) Herbst testified that the value of a gas station and convenience store property is " directly tied to the amount of income it can produce for that particular use, and this is the way buyers and sellers look at these types of properties." (2T, p. 37.) In developing the going concern value for use in the income capitalization approach, he relied upon the " standard methodology, as recognized by market participants" and as described in the Appraisal Institute's publication, Convenience Stores and Retail Fuel Properties . (2T, pp. 36-37; Ex. G, p. 42.)
The plaintiffs criticize the going concern method as a " circuitous" method of developing value. (Pl. Post-Trial Mem., p. 22.) Gold's principal criticism of the going concern method was that it is vulnerable to errors because of the number of projections and judgments required to execute it. He testified: " I have no argument with going through the methodology of valuing a going concern like a gas station, but the problem is it's a multiple, multiple-tiered process." (1T, p. 64.) He later explained that the going concern method required an estimation of the revenue from the gasoline sales and the convenience store sales as a first step, and " if you're wrong on either one of those elements, you're starting to go wrong on the overall valuation. Then you have to analyze expenses associated with these revenues. You have to get into profit margins and various other things." (1T, p. 101.) He further testified that to use the going concern method, " [y]ou'd have be an expert in the gasoline industry to understand all of the permutations and combinations." (1T, p. 101.) Gold candidly admitted that he was no expert in the gasoline industry. (1T, pp. 27, 65.)
The Appraisal Institute agrees that " appraiser competence" is an important consideration in the valuation of real property with related personal property or intangible property. See Appraisal Institute, The Appraisal of Real Estate (14th Ed. 2013), p. 707 (" Before accepting an appraisal or appraisal review assignment, an appraiser must decide that he or she has or can acquire the expertise to complete the assignment competently . . . Business valuation and personal property valuation are distinct segments of the valuation profession, and those disciplines require substantial specialized education and experience that most real estate appraisers do not have"). See id., chapter 35, " Valuation of Real Property with Related Personal Property or Intangible Property."
The court agrees that the going concern method of income capitalization requires extensive knowledge of the industry to which it is applied, whether it is a gas station, a hotel, a nursing home, or any other special use income-producing property. The summary of Herbst's application of the going concern method illustrates the number of projections required. That does not mean, however, that a court should disregard an appraisal based on a going concern method--the method relied upon by buyers and sellers in the market for such properties--when presented by an appraiser with the expertise to apply it.
The court finds that Herbst is qualified to present an appraisal based on a going concern method as applied to a gas station. He testified credibly that he has done some fifteen gas station appraisals in recent years, using the same method for each of those prior appraisals that he used here. He has sufficient knowledge of the industry and access to databases with market data on comparable businesses to provide benchmarks for the various projections required.
While the court finds that Herbst is qualified to present an appraisal based primarily on the going concern method, the court's confidence in Herbst's appraisal in this case is qualified because Herbst had limited information about the actual operating income and expenses of the subject property. He relied primarily on data from comparable businesses to develop the projections used in his model. (1T, pp. 125-26.) He did obtain three years of historic data regarding the fuel sales, which fell in line with the projections that he had developed by using comparable data. (1T, pp. 125-26.) He did not testify as to whether market participants would rely primarily on market data or would require actual operating revenue and expense data to value a going concern.
Nevertheless, Herbst's projections appear to be reasonable in relation to the comparable data on which he relied. Notably, although the plaintiffs are highly critical of the going concern method, they presented no evidence to show that Herbst had overestimated revenues or underestimated costs for the subject property. Moreover, Herbst tested his implied rent projection against actual market rents and found it within the range for comparable properties and, indeed, lower than the actual rent in the lease renewal for the subject property that was effective as of September 1, 2013.
The plaintiffs criticize Herbst's consideration of the contract rent for the subject property. Gold opined that the contract rent for the subject property " incorporates a business element, relating to the supply of gasoline, " which makes it unsuitable for comparison in his view. (Ex. 7, p. 14.) The lease, however, is in evidence. See Ex. 2 (lease from 2005 through 2013); Ex. 3 (lease from 2013 through 2023). Herbst testified that he did not believe that the lease contains a business element related to the supply of gasoline. (1T, p. 124.) Gold could not identify, nor has the court found, any provision in the lease that incorporates a business element relating to the supply of gasoline. See 1T, pp. 46-47, and see Ex. 2, Ex. 3. According to the representations of the plaintiffs' counsel, who moved to quash a subpoena for Spadaccini's testimony, Spadaccini is a mail carrier who inherited the subject property in 1984. See 1T, p. 3, and see Ex. 1 (certificate of devise). As the plaintiffs' counsel repeatedly represented, Spadaccini has had nothing to do with the business; he never operated a gas station at the subject property or anywhere else. (1T, pp. 3-4, 108.) He is simply the owner and landlord. (1T, p. 3.) No principal of Sole, the tenant that operates the property, testified at trial to describe any business element reflected but not stated in the lease. Based on the two leases (2005-2013 and 2013-2023) that are in evidence, and in the absence of any credible evidence to the contrary, the court concludes that the lease for the subject property is a ground lease that does not include a business element related to the supply of gasoline.
Herbst also conducted an analysis based on comparable sales. As both Herbst and Gold testified, however, the sales comparison approach is difficult to use with gas station properties because of the many variables involved, including the presence of portfolio sales in the market and gasoline supplier relationships that may affect the sale prices for properties.
The only Norwalk sale that Herbst included in his analysis was a sale for $1,300,000 from 2016, more than two years after the revaluation date of October 1, 2013. The property was a gas station/service station with three service bays but only a small convenience retail portion. It had an auto-emissions testing station which would also generate revenue. It also had full seller financing, which may also have affected the price. (Ex. G, p. 48; 1T, p. 147.) The other individual sales analyzed were in Greenwich and Westport, towns where the property values are generally higher. (Ex. G, pp. 49-50.) The portfolio sales from ExxonMobil to Alliance Energy likely involved business elements related to the gasoline supply. (Ex. G, p. 53.) The court is not persuaded that the comparable sales analysis adequately adjusts for all the variables involved and, consequently, gives it no weight.
V
FINDINGS AND CONCLUSIONS
After carefully weighing the opinions of the appraisers, the claims of the parties in light of all the circumstances bearing on value, and the court's own general knowledge of the elements going to establish value, the court finds, as a matter of fact, that the plaintiffs have failed to offer sufficient, credible evidence that the subject property has been overvalued by the city. A cost approach may be a permissible approach for valuing gas stations in some circumstances. Gold's application of the cost approach in this case, however, was built on a sequence of flawed assumptions, questionable data, and an inexplicable refusal to consider one of the most significant costs of building a gas station--the cost of the tanks and pumps that make it possible actually to use a parcel of land as a gas station.
The defendants' evidence, although based more on market data than actual operating data, was nevertheless reasonably credible. Herbst applied an income approach that is used by market participants in valuing gas station properties for purchase or sale. The plaintiffs did not show that the projections Herbst made were based on faulty data or that he failed to perform some necessary step in the analysis. Nothing in the plaintiffs' cross examination of Herbst or in Gold's rebuttal testimony persuaded the court that the subject property has been overvalued.
In a tax appeal under § 12-117a, " [t]he burden, in the first instance, is [on] the plaintiff to show that he has, in fact, been aggrieved by the action of the board in that his property has been overassessed." (Internal quotation marks omitted.) Nutmeg Housing Development Corp. v. Colchester, 324 Conn. 1, 9, 151 A.3d 358 (2016). " Whether a property has been overvalued for tax assessment purposes is a question of fact for the trier." (Internal quotation marks omitted.) Id. If a trial court finds that a taxpayer has failed to meet his burden of proving that a property has been overvalued, the court " may render judgment for the town on that basis alone." Ireland v. Wethersfield, supra, 242 Conn., 557-58. " [A] trial court is afforded wide discretion in making factual findings and may properly render judgment for a town based solely [on] its finding that the method of valuation espoused by a taxpayer's appraiser is unpersuasive." (Internal quotation marks omitted.) Nutmeg Housing Development Corp. v. Colchester, supra, 324 Conn., 10.
Because the plaintiffs failed to present credible evidence that the subject property is overvalued, they have failed to prove aggrievement. The appeal is dismissed for lack of proof of aggrievement. Judgment may enter in favor of the defendants without costs to any party.