Opinion
C.A. No. 99A-09-008 CG.
Date Submitted: January 11, 2000.
Date Decided: February 29, 2000.
On Appeal from the New Castle County Board of Assessment Review. REVERSED IN PART, AFFIRMED IN PART.
William J. Martin, Prickett, Jones Elliott, Attorney for Appellant.
John E. Tracey, Assistant County Attorney, Attorney for Appellees.
MEMORANDUM OPINION
This is an appeal by the property owner from a decision of the New Castle County Board of Assessment Review increasing the assessed value of the property from $1,855,600 to $3,411,700.
Appellant, Lisa D. Moseley, owns tax parcel 07-017.00-006, at issue in this appeal (hereinafter referred to as "the Property.") The Property consists of approximately 180 acres located in Greenville, Delaware. For many years prior to 1998, the Property was assessed and taxed pursuant to the provisions of the State Farmland Assessment Act, 9 Del. C. § 8328-8337. On January 15, 1997, Moseley entered into a 99-year land lease with BMR Partners, L.L.C. Pursuant to the terms of the lease, BMR is developing the Fieldstone Golf Course on the leased Property.
On June 11, 1998, New Castle County approved a site plan for Fieldstone Golf Course. As a result, New Castle County removed the Property from the Farmland Assessment Program. The County has also increased the assessed value of the Property from $1,855,600 to $3,411,700; specifically, the County increased the assessed value of the buildings and improvements from $5,000 to $680,000 and the assessed value of the land from $1,850,600 to $2,731,700. On March 15, 1999, Moseley appealed the increase in the assessed value of the Property to the Board of Assessment Review. On August 12, 1999, the Board held a hearing to consider Moseley's appeal and issued its decision. The Board voted to deny Moseley's appeal and to sustain the assessment of record. Moseley subsequently appealed the Board's decision to this Court pursuant to 9 Del. C. § 8312 (c). Moseley asks that the Court reverse the Board's decision to sustain the increased assessment and reduce the assessed value of the Property to $1,855,600.
Moseley also appealed the removal of the Property from the Farmland Assessment Program and imposition of rollback tax to the Board in a separate appeal. Moseley's appeal of that decision is considered in a separate opinion by the Court. See Moseley v. Board of Assessment Review, Del. Super., C. A. No. 99A-09-007, Goldstein, J., (February 29, 2000), Mem. Op.
Dr. Barry Roseman, one of the general partners responsible for the development of the golf course on the Property, testified at the Board hearing on behalf of Moseley. Roseman testified that there is no other possible use for the Property under the terms of the lease agreement than that of a golf course. Roseman stated that the golf course is not being used "for general purposes." Roseman testified that the total cost of the golf course construction was $3.6 million.
Steven J. Hopkins, an assessor, testified on behalf of New Castle County. Hopkins testified that his duties include identifying and valuing real property as of July 1, 1983. Hopkins testified that the current assessment for the Property is $3,411,700 and that he believed that the assessment is an accurate reflection of the Property's value as of July 1, 1983. Hopkins explained that he utilized the cost approach to valuation to come up with the assessed value of the Property "because it's a special-use property and because it's new construction and because of the lack of comparable sales in the area of other golf courses in that time frame. . . .
Hopkins testified that he then added the land value to arrive at the total increased assessment. Hopkins explained, "In my research, I found that the land rates were too low in that area." Hopkins included three land sales in the 1983 time frame in the area ranging from $15,855 to $44,528 per acre. Hopkins testified that he used a value of $15,110 per acre for the Property. Therefore, Hopkins testified, the increased assessment for the land is correct, as well. Hopkins stressed that the land value he came up with did not reflect the development of the golf course, but the corrected value of the land itself.
At the Board hearing, Moseley did not present valuation evidence to rebut the County's increased assessment. Rather, Moseley focused on the applicable statutory provisions to argue that the increases in assessed value were erroneous. Moseley argued that, because the golf construction was limited primarily to a particular trade or business, the improvements were excluded from taxation pursuant to 9 Del. C. § 8101 (d). In addition, Moseley argued that the County should not have been allowed to reappraise the land portion of the Property based upon the fact that a golf course has been constructed on the Property. Moseley also argued that to allow the County to increase the Property's value because it was mistakenly under-appraised is unfair to the property owner.
In response, the County argued that it is acceptable for the County, if it should determine that a parcel has been undervalued, to go back and make changes to reflect the correct value. In addition, the County argued that it was entitled to increase the valuation of the improvements to the Property because the improvements constitute "special betterments" under 9 Del. C. § 8101 (e). The County pointed out that Hopkins testified that he took into account the irrigation system on the golf course, which the County argues is included in the list of special betterments subject to taxation. According to the County, this accounted for the increase in assessed value from $5,000 to $680,000. Furthermore, the County argued, Moseley failed to provide any comparable sales to support its contention that the valuation should be lowered.
At the conclusion of the hearing, the Board voted to uphold the increased assessment of the Property and to deny Moseley's appeal. The Board found that the County was justifiably correcting an erroneously low land assessment" and that the building and improvements assessment consisted of special betterments subject to taxation.
On appeal, Moseley argues that the Board erred in determining that the improvements to the Property constitute special betterments under 9 Del. C. § 8101 (e) and that the Board incorrectly determined that the County is permitted to revalue property at any time to correct errors pursuant to 9 Del. C. § 8302 (b).
A property owner who seeks reduction of an assessment faces a "substantial evidential burden" both before the Board and on appeal. Seaford Assoc. v. Bd. of Assessment Review, Del. Supr., 539 A.2d 1045, 1047 (1988). Before the Board, the property owner confronts a presumption that the existing assessment is accurate and may overcome that presumption only by presenting evidence of substantial overvaluation. Id; Fitzsimmons v. McCorkle, Del. Supr., 214 A.2d 334, 337 (1965). If the property owner presents such evidence, the presumption in favor of the accuracy of the assessment ceases to exist. Fitzsimmons, 214 A.2d at 337; JMB Income Properties Ltd. Partnership-XI v. New Castle County Bd. of Assessment Review, Del. Super., C.A. No. 92A-07-004, Alford, J. (Feb. 3, 1994)( JMB II), Mem. Op. at 6; aff'd, Del. Supr., 648 A.2d 425 (1994). The Board then may hear evidence to support the assessment. The Board may not rely solely upon the assessment, or personal knowledge of its members unsupported by evidence, in the presence of countervailing competent and substantial evidence. Id.
In considering an appeal from the Board, the Court must accept the Board's decision as prima facie correct. It is the appellant's burden to show that the Board acted contrary to law, fraudulently, arbitrarily, or capriciously. 9 Del. C. § 8312 (c); Tatten Partners, L.P. v. Board of Assessment Review, Del. Super., 642 A.2d 1251, 1261 (1993), aff'd, Del.Supr., 647 A.2d 382 (1994). The Court may affirm, reverse or modify the decision of the Board. Id.
The County has the authority to tax real property pursuant to 9 Del. C. § 8101 (a), unless otherwise provided by statute. Real property consists of land, buildings, improvements, and special betterments. 9 Del. C. § 8101 (b). "Improvements" is defined as "annexations to land other than buildings which increase the market value of the land when used for general purposes permitted by law." 9 Del. C. § 8101 (c). Nine Del. C. . § 8101(d) provides for an exception to the taxation and assessment of lands, buildings, and improvements. Specifically, the assessment must exclude "the value of any annexation and other addition to lands other than buildings and the value of any annexation and other addition to buildings or improvements, to the extent its use is limited primarily to a particular trade, business, occupation, profession, industry or similarly restricted activity."
Special betterments, whether or not they may also be considered improvements, are limited to the categories specifically delineated in 9 Del. C. § 8101 (e). Special betterments, among other things, include "mains, pipes and tanks, used for conducting steam, heat, water, oil or gas, not used in manufacturing, assembling, processing or refining operation" and "poles, wires, cables and conduit for distribution of telephone communication services either above or below ground." 9 Del. C. § 8101 (e)(2) and (8). Therefore, if a "special betterment" is not specifically listed within the statute, it cannot be taxed. Rollins Cablevue, Inc. v. McMahon, Del. Supr., 361 A.2d 243, 246 (1976).
Moseley's first argument on appeal is that 9 Del. C. § 8101 (d) prohibits the County from increasing the assessed value of the Property and that the Board incorrectly determined that the improvements to the Property constitute special betterments under 9 Del. C. § 8181 [ 9 Del. C. § 8101](e). Moseley points out that Dr. Roseman testified that a golf course is a restricted use activity and that the lease to BMR prohibits BMR from using the Property for any other use. Also, the County's witness, Steven Hopkins, testified that a golf course is a " limited-purpose activity" and that the improvements to the Property could not be used for a purpose other than a golf course. Therefore, Moseley argues that, pursuant to 9 Del. C. § 8101 (d), the improvements to the golf course are "limited primarily to a particular trade, business, occupation, profession, industry or similarly restricted activity" and therefore, exempt from assessment and taxation.
Moseley also argues that the improvements do not constitute special betterments as listed in 9 Del. C. § 8101 (e). Moseley argues, as before the Board, that the golf course's irrigation system does not fall under 9 Del. C. § 8101(e)(2), which lists "mains, pipes and tanks, used for conducting steam, heat, water, oil or gas, not used in manufacturing, assembling, processing or refining operation" as special betterments subject to assessment and taxation. Moseley argued before the Board that the golf course's irrigation system is a specialized system that carries fertilizers and other chemicals, as well as water, and therefore cannot be considered as a special betterment. Moseley argues that the County presented no "evidence" to counter this claim.
In response, the County states that it does not dispute that the improvements to the property are "limited primarily to a particular trade, business occupation, profession, industry or similarly restricted activity" within the meaning of 9 Del. C. § 8101 (d). Rather, it was the County's position that the improvements to the Property were taxable as special betterments under 9 Del. C. § 8101(e)(4). Thus, the County contends, Moseley must prevail in her assertion that the irrigation system "and other utilities" annexed to the Property are not special betterments within the meaning of the statute. The County also contends that Moseley's argument that the irrigation system does not fall within the list of special betterments set forth in 9 Del. C. § 8101 (e) is flawed.
Finally, the County argues that Moseley has failed to rebut the presumption in favor of the County's assessment because she presented no competing valuation figures to rebut the County's assessment. The County argues that it presented the methodology at which it arrived at the assessment for the Property's improvements, "including the key component of the site, the irrigation system." Therefore, the County concludes that the County's $680,000 assessed value for the improvements must be upheld.
The Court finds that the Board acted contrary to law in upholding the $680,000 assessment for the improvements to the Property. Initially, the Court notes that Moseley's argument that the irrigation system cannot be taxed as a special betterment under 9 Del. C. § 8101 (e)(2) lacks merit. Clearly, the system constitutes. . . . pipes . . . used for conducting . . . water . . . not used in a manufacturing assembling, processing or refining operation." However, the Court finds that the lack of merit of Moseley's argument does not affect the Court's decision that the Board erred.
At the conclusion of the Board hearing, the attorney for the County argued that its assessor had taken into account the irrigation system when he arrived at the assessed value of the improvements. However, when questioned by a Board member as to whether the irrigation system itself would have cost $600,000, the County attorney stated, "Well, that was part of the calculation of $680,000." The County attorney also stated that the figure "doesn't include just the irrigation system, but includes utilities as well that have been added."
However, when reviewing the record below and the transcript of the Board hearing, the Court finds that the County presented no evidence at all as to the valuation of the irrigation system or utilities. Rather, Hopkins testified that he arrived at the $680,000 figure by allowing $50,000 per golf course hole less 25 percent depreciation (totaling $675,000) and adding $5,000 for the existing maintenance building now housing the temporary clubhouse.
Hopkins also explained that he included more than the irrigation system and utilities to arrive at the value of the improvements:
On a golf course, one of the main features is an irrigation system. You have [to] water the holes, the greens. You're making improvements such as bunkers, sand gets imported and put into sand traps. You do have some extensive landscaping in the area, and that is incorporated into the building value, and that includes . . . engineering and surveying, design fees, golf course architects, architect expenses, irrigation design fees, construction management, general administrative fees, utilities (which includes utility installation, water courses, pumping stations, irrigation systems, irrigation repairs, finish grading trash removal, lake construction, lake transfer lines), sand bunks, parking lots, drainage, seed fertilizer trees, plants, greens material, labor, wages, equipment rental, equipment repairs, [and] golf course accessories (such as poles, cups, etc.).
The Court finds that Moseley's failure to present an assessment of her own in this case was not fatal to her appeal. Moseley's argument was not simply that the County's assessed valuation was too high so that she was required to present competent substantial evidence of a lower valuation, but that the County acted in contravention of the controlling statutes in coming up with its valuation of the Property.
Moseley demonstrated that the County's assessor did not follow the requirements of 8101 when arriving at his assessment. Although the County argued after the fact that the irrigation system and utilities made up "a portion" of the taxable special betterments, it acknowledged that those improvements did not make up the entire $680,000 valuation. Hopkins' testimony established that he considered the construction of the golf course in its entirety and that he took other factors into consideration to arrive at a figure of $50,000 per golf course hole, rather than determining which improvements constituted special betterments and then establishing their value.
Also, the Court finds that the reasons set forth by the Board during the hearing for upholding the $680,000 assessed value for the improvements were arbitrary. One Board member stated:
All right. You have a golf course, 18 holes at $50,000 per hole. Now, the good doctor testified that the cost of constructing the golf course was somewhere in the excess of $3 million. So it sounds as though the $50,000 a hole or $900,000 cost is fairly reasonable, less than a . . . more than a third, less than a quarter anyway. And whatever this temporary clubhouse thing, a couple of thousand or something. And then, adjusting the land value . . . it sounds as though the total value of $3,411,700 is not terribly low . . . or not terribly high, rather. And I think we'll have to go with that.
Therefore, it is clear that neither the assessor, in calculating the assessed value of the improvements to the land, nor the Board in upholding that assessment, followed the guidelines set forth in § 8101 to determine which improvements were taxable as special betterments and which were not. The Court finds, therefore, that the Board acted contrary to law, arbitrarily, and capriciously in upholding the increased assessment for the improvements to the Property.
Moseley's second argument on appeal is that the Board erred in determining that the County is permitted to revalue property at any time to correct errors pursuant to 9 Del. C. § 8302 (b). As outlined above, Hopkins testified that the increase in the valuation of the land portion of the Property was not a result of the construction of the golf course but to correct an undervaluation in the original 1983 assessment. The Board determined that the County was authorized to correct such a "mistake" pursuant to 9 Del. C. § 8302 (b), which provides that each board of assessment "may correct errors in assessment lists at any time."
Moseley argued before the Board that the provision cited by the Board applies to the correction of clerical or ministerial errors and does not permit the County to revalue property simply because it finds the initial valuation was too low. On appeal, Moseley argues that the Board's interpretation of 8302(b) is clearly contrary to law. Moseley also argues that the County is not permitted to "revalue property at any time and on an ad hoc basis." Moseley asserts that, if the County believes a property's 1983 assessment is no longer valid, its proper course of action would be to undertake a County-wide reassessment program.
Appellees respond that the County did not rely on § 8302 in making its determination that the Property was overvalued. Rather, the County relied on 9 Del. C. § 8338, which permits the County to prepare quarterly assessment rolls in order to increase the assessed value of a property. Appellees state that the face of the notice received by Moseley of the increased assessed value indicates this. Because it is "abundantly clear" that the new assessment is the result of the supplemental assessment procedure outlined in § 8338, the County argues that Moseley should have addressed the provisions of that statute.
Nine Del. C. § 9338 provides:
In addition to the annual assessment provided for in §§ 1308 and 8301 of this title, each Board of Assessment of Kent and Sussex County and the Department of Land Use of New Castle County may, at its option, prepare quarterly supplemental assessment rolls for the purpose of: (1) Adding property not included on the last assessment; or (2) Increasing the assessed value of property which was included on the last assessment. The supplemental assessment roll may be used to correct errors on the prior assessment rolls and to remove or modify any exemption from taxation applicable to property in the county.
The Court finds that the Board erred in its reliance on 9 Del. C. . § 8302(b) to determine that the County had the authority to correct errors in assessment lists at any time. However, the Court finds that this mistake does not render invalid the Board's decision to uphold the increased land assessment for the Property.
After reviewing § 8302 in its entirety, the Court finds that the statute, as Moseley contends, was meant to apply to clerical or ministerial errors on the assessment rolls and not as authority for the County to increase or decrease the assessed valuation of properties. The authority for such changes in assessment is contained, as Appellees argue, in § 8338.
The Court finds that there is evidence contained in the record indicating that the County re-assessed the Property's land pursuant to § 8338, rather than on an "ad hoc" or random basis, as Moseley contends. The transcript of Hopkins' testimony indicates that Hopkins performed the assessment of the Property pursuant to a quarterly supplemental assessment, as Appellees now contend. Hopkins testified, when queried as to how he came to evaluate the Property:
Well, initially, there was an office request issued. There was a land swap in the area. I did not even know there was a golf course under construction when I went out the property. My initial visit showed a couple of holes were completed and more were on the way. . . . So therefore I did proceed to put the golf course on the tax roll. In the event that there was no building permit, I did not want to miss that opportunity.
In addition, Moseley received an Assessment Change Notice, which provided that the value of the assessment for the Property had changed, "Due to completion of an improvement, withdrawal of an exemption, creation of a new lot or parcel, correction of an error or revaluation." Although it is true, as Moseley argues, that the notice does not specifically refer to 9 Del. C. § 8338, Moseley concedes that the back of the notice "does in fact indicate that the assessment increase is a supplemental assessment."
Therefore, the Court finds that the Board's reliance on the wrong statutory provision to uphold the change in the assessed value of the Property did not deprive Moseley of the opportunity to challenge the assessment. Moseley admits that the notice stated that the increase was due to a supplemental assessment. Therefore, Moseley had the opportunity to contest the increase in valuation before the Board, despite its erroneous reliance on 9 Del. C. § 8302 (b). Nor did it deprive Moseley of the opportunity of its argument on appeal to this Court. As noted above, Moseley argued before the Board and before the Court that the County had no authority, aside from a county-wide reassessment, to alter the assessed value of a property. Clearly, the Board's decision that the County does indeed have that power was correct, despite its reliance on the wrong statutory provision.
As a result, the Court must affirm the decision of the Board to uphold the increase in the assessed value of the land portion of the Property. As noted by the County, Moseley presented no valuation evidence to challenge the assessment by the County, as described by Hopkins at the Board hearing.
Therefore, for the foregoing reasons, the Court hereby REVERSES the decision of the Board of Assessment Review upholding the increase in the assessment of buildings and improvements to the Property from $5,000 to $680,000 and finds that the assessed value of the buildings and improvements must be reduced to the prior assessed value of $5,000. The Court hereby AFFIRMS the Board's decision to uphold the assessed value of the land portion of the Property in the amount of $2,731,700. Therefore, the Court hereby orders the Board to alter the assessed value of the Property to $5,000 for buildings and improvements and $2,731,700 for land, for a total assessed value of $2,736,700.
IT IS SO ORDERED.
Carl Goldstein, Judge