Present: All the Justices 

SHOOSMITH BROS., INC. 

v. Record No. 032572 OPINION BY JUSTICE ELIZABETH B. LACY 

 September 17, 2004 

COUNTY OF CHESTERFIELD 

FROM THE CIRCUIT COURT OF CHESTERFIELD COUNTY 

Michael C. Allen, Judge 

 In this appeal, we consider whether the trial court erred 

in sustaining the County's assessment of real property 

operated as a landfill. 

I. 

Shoosmith Brothers, Inc. (Shoosmith) owns a 1,163 acre 

parcel of land in Chesterfield County. Although the parcel is 

designated as a single tax parcel for real estate taxation 

purposes, the parcel is divided into separate tracts based on 

the use of those tracts to determine its fair market value.

For the past 27 years Shoosmith has used 200 acres of the 

parcel as a sanitary landfill under a conditional use permit 

Shoosmith obtained from the County and a Solid Waste Facility 

Permit it obtained from the Virginia Department of 

Environmental Quality. In 1993, the County applied the income 

capitalization method (income method) of assessment to the 

landfill property and assessed the 200 acres at a fair market 

value of $12,987,600. The 1993 valuation has remained 
2

constant and was the assessed value of the landfill for the 

2001 tax year. 

In March 2001, Shoosmith filed an Application for Review 

of the Assessment of the landfill property asserting that the 

property was not assessed at its fair market value because 

"business income [was] used rather than the real estate's 

rental income to estimate real estate value." Following a 

hearing, the Board of Equalization upheld the County's use of 

the income method and the 2001 assessment of $19,859,935 for 

the entire 1,163-acre parcel. Shoosmith appealed that 

decision to the circuit court, claiming the County improperly 

assessed the 200-acre landfill property.

At trial, Shoosmith's expert witness, Ivo H. Romenesko, 

testified that, in his opinion, the County's assessment 

included the value of the property and of Shoosmith's ongoing 

landfill business, which meant the County was assessing the 

value of the permits. According to Romenesko, the fair market 

value of the landfill property should be based on the value of 

the land without the permits. To determine the proper value 

of the 200 acres, Romenesko examined the sale of four 

properties zoned agricultural or residential which Romenesko 

considered comparable and concluded that the value of the 
3

landfill property was approximately $5,000 per acre or 

$1,000,000.1

 

The County's Commercial and Industrial Appraisal 

Supervisor, Jeffrey Overbey, testified that he applied the 

income method of assessment, although it was "not the only 

approach," because it was "the preferred approach and the most 

accurate approach." He testified that he did not consider the 

income method as an appraisal of a "going concern," and that, 

while the state and county permits affected the value of the 

property, the permits were not separately valued for real 

estate purposes. Overbey testified that income-producing 

property such as a landfill is "bought and sold based on the 

income stream that it generates" and that the income method of 

assessment rather than the cost method is preferable. He also 

stated that the sales of undeveloped agricultural or 

residential land that Shoosmith's expert advanced were not 

comparable sales because their values were not indicative of 

the market value of income-producing property. 

Overbey explained that, after determining that the 

highest and best use of the property was that of a landfill, 

he conducted the assessment following the methodology 

 1

 The properties were (1) 256.82 acres at $3,349 per acre 

zoned residential (formerly agricultural) but not yet serviced 

by sewer and water; (2) 96.68 acres at $4,655 per acre zoned 
4

prescribed in an article styled "Appraisal of Sanitary 

Landfills," by Robert L. Foreman, MAI, SRPA, a professional 

real estate appraiser, which appears as Chapter 50 of the 

third edition of the Encyclopedia of Real Estate Appraising at 

pages 1077-1092 (Edith J. Friedman, ed., 1978) (Foreman 

article). The Foreman article stated that "[t]he only 

appropriate method of appraising a sanitary landfill is to 

arrive at the present worth of the income stream . . . [plus] 

the present worth of the reversion after the site has been 

filled" and that "[s]ophisticated assessing agencies" appraise 

a landfill on this basis. Id. at 1083, 1085. 

The methodology set out in the Foreman article requires 

determining the annual gross income of the landfill property, 

deducting the costs expended to produce the income to 

determine the "net income" generated by the real estate, 

projecting the net income for the useful life of the landfill 

property, and discounting the projected income stream to the 

present value of the real estate by using a discount rate. 

Id. at 1083. Applying this formula, Overbey estimated the 

annual gross income of the landfill property at $13,125,000 

and applied an estimated costs expended factor of 75.2%, which 

 

agricultural; (3) 27.60 acres at $5,616 zoned agricultural; 

and (4) 42.90 acres at $5,828 per acre zoned agricultural. 
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resulted in an estimated net income of $3,250,000.2 Overbey 

then projected the net income over the remaining life of the 

landfill, approximately 25 years, and applied a 25% discount 

rate. Overbey assessed the value of the 200 acres at 

$12,987,600.

J. Brian Bergan, a property tax consultant for the 

Commonwealth who consulted with Chesterfield County on the 

Shoosmith landfill assessment, testified that the cost and 

comparable sales methods of assessment were not appropriate 

for assessing Shoosmith's landfill because there was "no 

substantiation" for the cost methodology and a lack of 

comparable sales that could be considered. 

Following the hearing, the circuit court concluded that 

the County had used an appropriate assessment methodology and 

that the assessment was a "reasonable assessment of the fair 

market value" of the landfill property. Shoosmith filed an 

appeal raising a number of assignments of error. We granted 

the appeal, limited to whether the trial court erred in (1) 

holding that the County's method of assessment was appropriate 

and that the County Assessor's assessment of the property was 

proper; (2) upholding the County's 2001 assessment of the 200-

acre landfill property; or (3) refusing to accept Shoosmith's 

 2

 Overbey used estimates of the revenue and expenses 

because Shoosmith declined to provide actual figures in 
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expert testimony of the fair market value of the landfill 

property. 

II. 

The parties do not dispute the principles which we apply 

when reviewing a challenge to a tax assessment. We presume 

that a county's tax assessment is correct, and the burden is 

on the taxpayer to rebut the presumption by showing by a clear 

preponderance of the evidence that its property is assessed at 

more than fair market value. Shoosmith agrees that it must 

show that the County committed manifest error or totally 

disregarded controlling evidence in its determination of fair 

market value. Tidewater Psychiatric Institute, Inc. v. City 

of Virginia Beach, 256 Va. 136, 140-41, 501 S.E.2d 761, 763-64 

(1998). 

Shoosmith asserts that the County committed manifest 

error by using the income method of assessment in assessing 

the landfill property. Shoosmith's rationale for its position 

can be summarized as follows. Under Article X, § 2 of the 

Constitution of Virginia, real estate and tangible personal 

property shall be assessed and taxed at their fair market 

value. Intangible assets such as non-transferable use permits 

are not subject to assessment and taxation under this 

provision. Shoosmith maintains that if the use of real 

 

response to the County's request. 
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property requires a permit which does not run with the land, 

any assessment of that property that is based on the permitted 

use is manifestly erroneous because such an assessment 

includes an assessment of an intangible asset the permit 

represents. In this case, state and local law required 

Shoosmith to secure permits to conduct a landfill operation on 

its land. Those permits did not run with the land and were 

not transferable. Because the method of assessment the County 

used factored in the income generated by a use of the land 

that Shoosmith enjoyed only by virtue of the non-transferable 

permit, the County's assessment, according to Shoosmith, 

included an assessment of an intangible asset and, therefore, 

was manifestly erroneous. 

We reject Shoosmith's premise that consideration of the 

use of property when permits are required for that use is 

improper because it constitutes assessment of the permits 

themselves. We begin with the basic principle that real 

property is to be assessed at its fair market value and with 

the "fundamental rule that in assessing all tangible 

properties for tax purposes such properties should be assessed 

at their highest and best use." Norfolk & Western Railway Co. 

v. Commonwealth, 211 Va. 692, 699, 179 S.E.2d 623, 628 (1971). 

These rules require consideration of a property's use when 

assessing the property. They make no exception for uses that 
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depend on securing a permit from a governmental agency, and 

they do not differentiate between a use conducted pursuant to 

a transferable or non-transferable permit. Our previous cases 

are consistent with this principle. 

In Board of Supervisors of Fairfax County v. HCA Health 

Services of Virginia, Inc., 260 Va. 317, 535 S.E.2d 163 

(2000), we considered the proper tax assessment of a hospital. 

The trial court first concluded that the county's assessment 

using the depreciated cost method was not entitled to a 

presumption of correctness because the county did not consider 

other methods of assessment. 260 Va. at 328, 535 S.E.2d at 

168. The other available assessment methods the hospital 

presented to the trial court included an income analysis and a 

comparable sales analysis. The former was based on net 

revenues from the hospital's real property, consisting of 

revenue from inpatient services and imputed rental income to 

the hospital from its outpatient service area. The latter 

included a number of "arms-length" sales of hospitals. Id. at 

327, 535 S.E.2d at 168. We approved the trial court's holding 

that the county's assessment based on the depreciated cost 

method was erroneous because the county did not consider, 

among other things, market forces in the health care industry 

affecting obsolescence and depreciation, and we approved the 
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assessment made by the trial court based on health care 

industry market forces. Id. at 331, 535 S.E.2d at 170. 

Under Shoosmith's theory, consideration of comparable 

sales of other hospitals, revenue streams from the operation 

of the hospital, and issues related to the use of the property 

as a hospital such as market forces in the health care 

industry relating to obsolescence would have been improper 

because the operation of a hospital requires a nontransferable certificate of public necessity issued by the 

state. Code §§ 32.1-102.3, -102.5. In affirming the judgment 

of the trial court in Health Services, we implicitly rejected 

such a theory. 

Accordingly, we hold that consideration of the use of the 

land in assessing fair market value, even if such use requires 

non-transferable government permits, is not the assessment of 

an intangible asset. Therefore, the County did not commit 

manifest error in assessing Shoosmith's 200-acre landfill as a 

landfill using the income method of assessment. 

Shoosmith also asserts that the County's application of 

the income method was flawed because proper use of that method 

requires determining the rental value of the land and "[o]nly 

the income attributable to the land – rent – should be 

included." Shoosmith bases this argument on our statements in 

prior cases that economic rent was the measure to be used in 
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capitalizing income for fair market value determinations. See

e.g. Tysons International LP v. Board of Supervisors, 241 Va. 

5, 11, 400 S.E.2d 151, 154 (1991), Board of Supervisors v. 

Nassif, 223 Va. 400, 404-05, 290 S.E.2d 822, 825 (1982). 

Again, we disagree with Shoosmith. 

The cases Shoosmith cites involved properties that were 

subject to lease and the issue in each case was whether the 

economic or contract rent should be used when applying the 

income capitalization assessment method. The use of economic 

rent is appropriate when land is under lease, but in this 

case, the landfill property is owner-operated and is not under 

lease, and there are no comparable leases of such land in 

evidence. 

The methodology the County used in applying the income 

assessment was consistent with the formula the Foreman article 

prescribed for assessing landfills. As that article 

recognizes, if the landfill is leased and the lease data is 

available, the assessment would include that income in the net 

income attributable to the real estate. "However, such leases 

are almost unheard of . . . , and the only way the appraiser 

can estimate a net income stream attributable to the real 

estate is to make a careful analysis of the expenses." This 

is precisely the situation here. The property is not under 

lease and the County applied a 75% expense factor to account 
11

for the expenses and an "unusually high" 25% discount factor. 

See also Waste Management of Wisconsin v. Kenosha County Board 

of Review, 516 N.W.2d 695, 704-05 (Wis. 1994).

Based on this record, we hold that the trial court did 

not err in concluding that Shoosmith failed to show either 

that the County committed manifest error in assessing the 

landfill property based on the income method or that the 

County ignored controlling evidence in determining the fair 

market value of the property at issue. Accordingly, we will 

affirm the judgment of the trial court. 

Affirmed.