Opinion ID: 1913947
Heading Depth: 1
Heading Rank: 6

Heading: Inequity.

Text: From our de novo review of the record, it is abundantly clear Spring Village was not treated the same as other like properties. We find, as did the district court, many inconsistencies in the assessment of Spring Village compared with the assessment of other like shopping centers in the area. The city assessor adopted an income approach to determine the market value of four shopping centers. The assessor developed an analyzation of income and expense statements form to be used in determining the value of the property. Using the form, actual gross income is calculated by starting with potential gross income and then adjusting for vacancy delinquencies and other income. Net income is then established by deducting operating expenses from the actual gross income. A capitalization rate is established for both the land and improvements. The land tax rate is determined by adding an interest percentage and a taxes percentage. The interest rate is to reflect a reasonable return on the investment. The taxes rate takes out of the computation the anticipated amount to be paid by the property owner for real estate taxes. The capitalization rate on improvements is determined by adding an interest percentage, taxes percentage, and a recapture percentage. The recapture percentage reflects a depreciation reserve. The value of the property being assessed is then the capitalization of the net income; dividing the net income by the capitalization rate. Obviously, as the income increases, so does the value. However, as the capitalization rate increases, the value decreases. When we compare the assessor's analyzation of income and expense statements we find only one constant figure: a 3.5% rate for taxes. The interest percentage for Spring Village was 6%, while Village Shopping Center was 7%, Old Town was 7.5%, and Walnut Center was 10%. The allowance for recapture was 2.5% for all shopping centers except Old Town; which was 3.5%. As a result, Spring Village was allowed a 9.5% capitalization rate on land value and 12% on improvements; in contrast to Village Shopping Center, 10.5% and 13%; Old Town, 11% and 14.5%; and Walnut Center, 13.5% and 16%. Likewise, it is inequitable to allow some property owners to take deductions not permitted other owners or to add as income certain items that are not added to others. The assessor arbitrarily afforded Old Town, Walnut Center, and Village Shopping Center a ten percent vacancy rate without any basis for the allowance, while giving Spring Village a three percent vacancy rate when its actual rate was much higher. In determining the net income of Spring Village, the assessor added $140,091 as other income because of real estate taxes paid by the tenants. None of the other shopping centers had real estate taxes paid by the tenant added to the gross income. The appraiser used a publication, Dollars and Cents, which established certain methods to arrive at operating receipts and operating expenses for shopping centers in the Midwest. This publication allocated both receipts and expenses based on either dollar-per-square-foot or percentage of total receipts. The assessor applied the median decile figures to two of the shopping centers and the upper decile figures to the other two without good explanation for the difference. Obviously, the assessment of Spring Village is not equitable when the income approach is not uniformly applied to comparable properties. It was also inequitable for the assessor to increase the land value of Spring Village 54% in 1990 while not making any adjustment as to land value of other shopping centers in the same area.