### IN THE SUPREME COURT OF IOWA
No. 20

– 1290 Submitted September 15, 2022

— Filed December 16 , 202 2

NATIONWIDE MUTUAL INSURANCE CO. , Appell ant ,
vs. POLK COUNTY BOARD OF REVIEW , Appell ee . On review from the Iowa Court of Appeals

. Appeal from the I owa District Court for Polk County, Paul D. Scott , Judge. Property owner Nationwide Mutual Insurance Co. appeals its property tax assessment by the Polk County Board of Review. DECISION OF THE COURT
OF APPEALS VACAT ED ; DISTRICT COURT JUDGMENT AFFIRMED.
McDermott , J., delivered the opinion of the court , in which all participating justices joined. May, J., took no part in the consideration or decision of the case.
Sean P. Moore (argued) of Brown, Winick, Graves, Gross and Baskerville,
P

. L.C., Des Moines , for appellant. John P. Sarcone, Polk County Attorney, and Mark Taylor (argued) and Jason Wittgraf, Assistant Polk County Attorneys , for appellee.2

McDERMOTT , Justice. This case presents a challenge to a county a ssessor’s valuation for tax
purposes of two large corporate office buildings in downtown Des Moines

. The assessor set the value of the two buildings at $ 87,050,000 and $44,910,000 , which t he properties’ owner, Nationwide Mutual Insurance Co. (Nationwide),
pr ot ested to t he Polk County Board of Review (Board)

. T he Board upheld the county assessor’s valuation , and Nationwide appeal ed to the district court

. Nationwide and the Board each called two appraisers as expert witnesses . T he district court found the Board’s expert s more reliable than Nationwide’s and affirmed the assessment

. Nationwide then appealed to this court, and we transferred the case to the court of appeals. The court of appeals reversed the district court’s determinat ion about the relative reliability of the expert testimony and reduced the assessment s . We granted the Board’s application seeking further review. When valuing real property for tax assessments, the law strives for fairness and uniformity, operating on the notion that similar properties within a given tax classification should be taxed similarly. Because courts reviewing challenges to valuations usually lack technical expertise in appraising commercial real estate, these types of cases often hinge on a fact finder’s judgment about conflicting expert witness testimony. And so it goes in this case.
T he question before us centers on whether the Board’s expert appraisers grounded their opinions in a flawed appraisal method that didn’t rely enough on3

sales of simi lar properties and , thus, whether the district court erred by relying on the se experts when it affirm ed the assessor’s valuation.
I. The two office buildings at issue

— neighboring each other at 1100 Locust Street and 1200 Locust Street

— have slightly different histories

. The building at 1100 Locust was, in 2002, among the first constructed in what’s known as downtown Des Moines ’s Western Gateway area. In 200 6 , Nationwide and the City of Des Moines (City) agreed to an expansion project as part of an “ urban renewal ” development agreement. Under this agreement, Nationwide would expand its building at 1100 Locust and construct another smaller office building at 1200 Locust. In exchange, the City would provide Nationwide about $28
million in economi c incentives to help finance the project. Nationwide further agreed that the minimum property values for tax assessment purposes over the next ten years

— starting from when the construction projects concluded in
2008

— would not fall below $78.5 million for 1 100 Locust and $36 million for
1200 Locust

. The protested assessments at issue are for tax years 2017 and 2018, and thus within the agreement’s ten

- year period. The properties are described with a seri e s of compound adjectives: single

tenant, built

- to

- suit, owner

- occupied , corporate headquarters. The building at 1100 Locust rises seven stories with a gross building area of almost 800,000 square feet, while 1200 Locust stand s f ive stories with a gross building area of almost 372,000 square feet. Nationwide has continued to invest in these properties, partially remodel ing b oth buildings between 2011 and 2016

.4

The county assessor is generally tasked with valuing the real property in a county for tax assessment purposes. For tax years 2017 and 2018 , the Polk County Assessor increased the valuations of both properties, from $80.23 million to $87.05 million for 1100 Locust, and from $41.39 million to $44.91 million for
1200 Locust. An employee from the Polk County Assessor’s Office testified that

an i nitial assessment is typically determined using a mass appraisal technique , such as a large study of the sales of commercial

- clas s p ropertie s , and then applying a uniform percentage change for properties within that class. An
i ndividualized property valuation is prepared only if a property owner files a protest. And that’s what happened here. To arrive at the 2017 valuation, the Polk County Assessor took the 2015 property tax valuations for all commercial

- class properties in Des Moines’s cent ral business district ( such as 1100 Locust and
1200 Locust ) and added 8.5 % . When Nationwide filed its protest, the a ssessor performed an individualized “ cost ” analysis on both properties using a state manual that estimates construction costs if the building were to be constructed

anew . After deducting estimated physical depreciation based on the buildings ’
age s , the assessor arrived at a depreciated value. Because the depreciated value exceeded the a ssessor’s earlier valuation , t h e B oard

— t he body that adjudicat es property owner protest s ( and now the defendant in this case)

— determined that no adjustment to the original tax assessment was warranted and thus denied Nationwide’s protest.5

Nationwide filed a petition for judicial review with the district court. In the district court, Nationwide and the Board each presented testimony from two expert witnesses who had conducted valuations of the properties : for the Board, appraisers Mark Kenney and Russ Manternach; for Nationwide, appraisers Don Vaske and Tom Scaletty. Each expert analyzed the properties using the three valuation methods commonly used to value real property: the “ cost ” approach , which considers the cost of reproducing the property anew mi nus depreciation ; the “ income ” approach, which considers the income

- producing capacity of the property; and the “ comparable

- sales ” (or simply “sales”) approach , which compares the property to other properties with similar characteristics that have recently sold

. But each expert emphasized different approaches

— and as to the sales approach in particular, different properties for comparison

— in arriving at a

“ reconciled ” value for each property

. To give a flavor of the different points of emphasis, Kenney (retained by the Board) provided a single combined appraisal that Nationwide’s lawyer worked to unpack into its component parts on cross

examination. Kenney gave less weight to the comparable

- sales approach because he f ound suitable comparison properties lacking in Des Moines or sufficiently similar markets

. Kenn e y also found the income approach ill

- fitting. Manternach ( the Board’s other expert) gave the least weight to the cost approach because, in his view , the amount of accrued depreciation skewed the valuation too much

. In his comparable

- sales analysis, Manternach used local properties, but couldn’t find suitable single

- tenant properties

. Manternach6

testified that adjust ing a sale o f an owner

- occupied single

- tenant bu ilding in a larger met ropolitan area wouldn’t provide a sufficiently objective comparison

. Vaske (retained by Nationwide) testified that in his view the comparable

sales approach offered the most reliable method . He analyzed two properties in Des Moines, one in suburban Kansas City, and one in St. Paul. But Vaske had
to ma k e considerable adjustments in analyzing his proposed comparable properties for building age (they weren’t as new as Nationwide ’s ) and

— most particul arly

— size, since two of his comparable properties had square footages of only 225,654 and 102,242 , while the Nationwide properties are 798,696 and 371,920. Scaletty (Nationwide’s other expert) analyzed but assigned no weight to the cost approach , instead assign ing a 60 / 40 split to the sales and income approaches in his analysis . The local properties that he viewed as comparable sales were not owner

- occupied , single

- tenant buildings. Scaletty ’s calculations also made the largest adjustment to the gross square footage available for actual business use, reducing 1100 Locust ’s 798,696 gross square footage by 15% , down to 669,565 sq uare f ee t. As the table below shows, the experts’ valuations, including their reconciled final valuations, varied widely:7

The district court acknowledged that Iowa law requires that county assessors first seek to use a comparable

- sales approach in setting a valuation, and that other approaches should be used only when market value cannot be readily determined using the comparable

- sales approach. Iowa Code § 441.21(1)( b )(1) (2018) . The district court noted that all four expert appraisers incorporated the three traditional approaches in arriving at their reconciled valuation numbers. Although the district court found Nationwide’s experts credible, it found the Board’s experts more reliable. The district court thus gave greater weight to the Board’s expert valuations, which more closely tracked the county assessor’s valuation

. In its a nalysis, the district court discounted the testimony of Nationwide’s associate vice president of corporate real estate, who contended that 1100 Locust should not be considered a “ corporate headquarters ” building. While perhaps technically accurate given that Nationwide’s national 1 1 00 Locust (assessed at $ 87 , 050 ,000)

Board of Review Nationwide Manternach Kenney Vaske Scaletty Cost approach $ 86 , 1 00,000 $ 99 ,000,000 $ 54 , 385 ,000 $ 39 ,4 70 ,000 Sales approach $ 81 , 3 00,000 $ 107 ,000,000 $ 48 , 237 ,000 $ 39 , 390 ,000 Income approach $ 8 2, 1 00,000 $ 80 ,000,000 $ 48 ,1 17 ,000 $ 39 , 550 ,000 Reconciled valuation $ 82 , 1 00,000 $ 9 4,000,000 $ 49 ,000,000 $3 9 , 450 ,000

1 2 00 Locust (assessed at $ 44 , 910 ,000)

Board of Review Nationwide Manternach Kenney Vaske Scaletty Cost approach $ 44 , 0 00,000 $ 41 ,000,000 $ 26 , 650 ,000 $ 23 ,4 4 0,000 Sales approach $ 42 , 800 ,000 $ 63 ,000,000 $ 26 , 034 ,000 $ 22 , 64 0,000 Income approach $ 4 2, 9 00,000 $ 55 ,000,000 $ 25 , 134 ,000 $ 24 , 240 ,000 Reconciled valuation $ 43 , 0 00,000 $ 47 ,000,000 $ 26 ,000,000 $ 2 3 ,28 0,0008

headquarters are in Columbus, Ohio, the district court found the testimony unconvincing considering that all four expert witness es — even Nationwide’s

— described the properties as single

- tenant corporate h eadquarters , and Nationwide’s own agreement with the City called for an “expansion of the regional headquarters for Nationwide.” The district court also noted that, despite’s Nationwide’s push to set the valuation at the minimum assessment from the parties ’ agreement, Nationwide never appealed the property tax assessment s for 2015 , which also landed above the minimum. The district court further found persuasive Nationwide’s own property insurance coverage that set the replacement cost for 1100 Locust at $148,061,365 and 1200 Locust at $67,804,793

— both well above the county assessor’s valuations for each property

. The district court thus affirmed the Polk County Assessor ’s original tax valuation of 1100 Locust at $87,050,000 and 1200 Locust at $44,910,000

. Nationwide appealed, arguing that the Board’s evidence failed to meet the requirement s s et out in Wellmark , Inc. v. Polk County Board of Review , 875 N.W.2d 667 (Iowa 2016), and , relatedly, that the district court erred in finding the Board’s experts more reliable than Nationwide’s experts. After we transferred the case, t he court of appeals determined that the Board’s experts failed to rely on the comparable

- sales approach to value the propert ies as required by statute

. T he Board thus failed , in the court’s view, to support the county assessor’s valuation with “ competent evidence

. ” Because the court of appeals found that Nationwide’s experts , conversely, had properly arrived at their valuations using9

the comparable

- sales approach , the cour t r eversed t he decision of the district court. Rather than remand, the court set the valuations at the agreed minimum s (from the 2008 agreement) of $78.5 million for 1100 Locust and $36 million for
1200 Locust.
II. Iowa law requires that a ssessors tax property at its “ actual value ,” which refers to its “ fair and reasonable market value. ” Iowa Code § 441.21(1)( a )

– ( b )(1). Market value, in turn, refers to “the fair and reasonable exchange . . . between a willing buyer and a willing seller, neither being under any compulsion to buy o r sell and each being familiar with all the fact s relating to the particular property.” Id. at § 441.21(1)( b )(1). The Code establishes the sales approach as the preferred method of determining valuation, requiring that “ [s] ale prices of the property or comparable property in normal transactions reflecting market value, and the probable availability or unavailability of persons interested in purchasing the property, shall be taken into consideration in arriving at its mark et value.” Id

. W e have interpreted this to mean “ a party cannot move to other

- factors valuation unless a showing is made that the market value of the property cannot be readily established through market transactions.” Wellmark , 875 N.W.2d at 68 2

. Our

cases have repeatedly recited the sales approach ’s fav ored status

. See, e.g. , Heritage Cablevision v. Bd. of Rev

. , 457 N.W.2d 594, 597 (Iowa 1990); Bartlett & Co. Grain v. Bd

. of Rev

. , 253 N.W.2d 86, 87

– 88 (Iowa 1977) (en banc)

.10

Despite the Code ’s preference for the sales a pproach, valuations using comparable sales alone are not always appropriate. W hen market value can’t be

“ readily established ” using a sales approach , “ the assessor may determine the value of the property using the other uniform and recognized appraisal methods.” Iowa Code § 441.21( 2). These “other” methods include “ its productive and earning capacity, if any ” (in other words, the income approach) and “ its cost, physical and functional depreciation and obsolescence and replacement cost ” (in other words, the cost approach), along with “ all other factors which would assist in determining the fair and reasonable market value of the property .” Id. The taxpayer bears the initial burden of proving that an assessment is incorrect

. Id. § 441.21(3)( b )(1). But if the taxpayer presents “ competent evidence ” from two or more disinterested witnesses that the property’s market value is less than the assessed value, then the burden of proof swings to the assessor . Id. In this case, it ’ s undisputed that Nationwide presented competent evidence t hrough its experts to rebut the presumption of validity , thus shifting the burden to the Board to uphold the assessment

. See id. ; Equitable Life Ins

. v . Bd

. of Rev

. , 281 N.W.2d 821, 824 (Iowa 1979). Although acknowledging the burden had shifted to the Board, the court of appeals found that the district court failed in the initial step of the analysi s w hen it determined that the properties’ values could not be readily established using the sales approa ch

. The assumption that the Board’s experts did not present competent evidence because neither relied on the sales approach misconstrues11

the question of competent evidence. T he real question involves a judgment about the persuasive force of the properties tendered by an expert as “ comparable

. ” In some cases, the lines of force between the assessed and comparable properties will be too remote to exert any real pull. When that happens

— as the
statute conte mplates, and as we held in Wellmark

— using other valuation methods in the analysis is appropriate

. “The statutory preference for e valuations based on comparable sales,” after all, “applies only to those situations where the value may be readily established by that method alone.” Heritage Cablevision , 457 N.W.2d at 597. We review tax protest cases de novo. Soifer v. Floyd C n ty

. Bd. of Rev

. , 759 N.W.2d 775, 782 (Iowa 2009). Although we give weight to the district court’s factual findings, we’re not bound by them. Boekeloo v. Bd. of Rev

. , 529 N.W.2d 275, 276 (Iowa 1995). But we are “especially deferential to the court’s assessment of the cred ibility of witnesses.” Wellmark , 875 N.W.2d at 672. The district court found that the comparable

- sales approach could n o t readily establish the properties’ value s, and it thus looked to the other approaches that the experts presented

. In finding the Board’ s experts’ opinions more reliable, the district court necessarily adopted the Board’s experts’ views that the sales approach alone was inadequate to readily establish the market valu e of the two properties. The district court did so with the benefit of hav ing heard directly the experts’ testimony to assess the persuasive force of their valuation opinions

. That all the experts used all three approaches in arriving at a valuation could reasonably imply that a property’s market value “could not12

readily be esta blished through the ‘sales prices’ approach alone but had to be determined by use of the ‘other factors’ approach.” Equitable Life Ins

. , 281 N.W.2d at 825 (emphasis added)

. Yet t he court of appeals determined that the Board’s experts “did not present competent evidence of the value of [ the propert ies] ” because they relied too heavily on factors other than comparable sales in their analysis.
T h e court of appeals, in our view, graft ed too rigid a standard onto s ection
441.21

. The determination that the Board’s experts failed to present competent evidence ( because neither relied on the sales approach ) misconstrues what the statute refers to as “competent evidence.” See Iowa Code § 441.21(3)( b )(1). In Compiano v. B oar

d of Rev iew , we stated that “the production of competent evidence by two disinterested witnesses in tax assessment cases only pertains to shifting the burden of proof.” 771 N.W.2d 392, 397 (Iowa 2009)

. There’s no dispute that Nationwide’s t wo expert witnesses fit the bill and that the burden shifted to the Board to uphold the assessments. But t he quantum of an expert’s reliance on the sales approach as opposed to other factors does not, on its own, determine whether a party has produced comp etent evidence in a case. See Wellmark , 875 N.W.2d at 682. What’s more, s imply because an apprais er calculates a valuation using a comparable

- sales approach does n o t mean that this approach in fact readily establish es a property’s value

. We need look no further than our most recent appraisal case for proof. I n Wellmark , experts for both sides offered valuations using a comparable

- sales approach to assess Wellmark’s headquarters

. Id. at13

6 8 1

– 8 2. The experts disagreed , of course, about wh at p roperties were truly comparable

— the taxpayer’s experts used sales from geographic markets similar to Des Moines, but multi

- tenant office buildings ; the b oard’s expert s used sales of single

- occupant office buildings , but in large metropolitan areas . Id. Yet w e found both side’s comparable

- sales

- based valuation s un convincing

. Id. We reiterated that comparable sales are not strictly limited by geographic area, nor do they need to be identical to the subject property (only similar). Id

. (“ [W] hether properties were sufficiently similar to be comparable was generally left to the sound discretion of the district court

. ”). Because “[t] he value of the building simply could not be readily established by a comparable

- sales analysis , ” w e considered other factors to establish the property’s value

. Id. In our view, the same consideration of “other factors” is necessary in this

case. The expert witnesses presented a number of recentl y s old properties as

“ comparable sales

. ” But the properties cited in Des Moines , for instance, were multi

- tenant office building s with (as one might expect) varying uses by those multiple tenants , or were not build

- to

- suit corporate head quarters . T he proposed properties that didn’t suffer these incongruent characteristics were in substantially dissimilar markets than Des Moines ( for instance, suburban Chicago , Kansas City , or St. Paul ) , thus leaving plenty of doubt about how much weight to afford the other

- market sales prices

. Ideally , appraisers would find a recent sal e i n the same geographic region as their subject propert y o f similar size, age, condition, and current use. But this is simply not always possible, particularly with a built

- to

- suit corporate headquarters. No expert provided14

evidence of any sales in the Des Moines area of a large office building to an

owner
- occupant for that occupant’s sole use as a corporate headquarters. It bears repeating that each expert used all three approaches

— income, cost, and comparable

- sales

— in forming a proposed reconciled valuation. “Implicit in this evidence ”

— referring to expert opinion s using all three methods of valuation

— “ is an assumption by the parties that market value for the property could not readily be established through the ‘ sales prices ’ approach alone but had to be determined by use of the ‘ other factors ’ approach. ” Equitable Life In s . , 281 N.W.2d at 825 ; see also Wellmark , 875 N.W.2d at 683 (reciting , with approval , cases using the cost approach to value a single

- tenant corporate headquarter s w hen comparable sales were inadequate). None of the experts in this case proposed that the court use only a comparable

- sale s approach to valuing Nationwide’s properties. And because comparable sales alone were inadequate, the district court correctly considered “ other factors

. ” Iowa Code § 441.21( 2 ) (requiring that “the actual value shall not be determined by use of only one such factor”).
We find no basis to reject the district court’s determination about the relative reliability of the expert witness testimony or the court’s reliance on the reconciled values incorporating other factors in the analysis, and thus hold that the Board met its burden to prove the valuation was not excessive

. W e affirm the
assessment s of 1100 Locust at $87,050,000 and 1200 Locust at $44,910,000

. DECISION OF THE COURT OF APPEALS VACAT ED ; DISTRICT COURT JUDGMENT AFFIRMED.15

All justices concur exce pt May, J., who takes no part.