Opinion ID: 2377818
Heading Depth: 4
Heading Rank: 1

Heading: Overvalued finding

Text: The Board found the failure to factor in rental restrictions and economic obsolescence made the Assessor's valuation excessive. The Assessor argues that his failure to incorporate rental restrictions in the form of economic obsolescence did not render the valuation excessive because economic obsolescence cannot measure internal conditions such as rental rates. But although the deed restriction limiting a LIHTC property's rental rates is part of the property itself, the marketplace's reaction to the deed restriction is external. [56] In this way, economic obsolescence can measure the external reaction to the deed restriction on the Apartments. [57] The Board could reasonably determine the Assessor's valuation was excessive because it failed to account for economic obsolescence, and to this extent we affirm the superior court's decision upholding the Board on this issue. Pacific Park argues the Board should have recognized complete economic obsolescence instead of a 40% factor. In applying the 40% factor, the Board acknowledged it heard testimony that up to a 50% reduction would be reasonable as an economic obsolescence factor. Pacific Park accurately clarifies that Bethard's testimony suggested a 50% factor at the hearing to account for the depressed nature of the general housing market in Seward, and implies that its 30-year rental restrictions would make the Apartments even less desirable to a potential buyer. Pacific Park never quantified the additional economic obsolescence due to rental restrictions except to assert that an appropriate economic obsolescence factor would render a cost-approach valuation similar to an income-approach valuation. The Board's oral findings do not specify whether its 40% economic obsolescence factor accounts for the general housing market in Seward, the rental restrictions, or both, stating simply the cost approach should include a factor for economic obsolescence. The Board's written findings state the Apartments were overvalued because [t]he assessment did not include a factor for economic obsolescence, even though the property is burdened by rent restrictions that run with the land, indicating the 40% factor relates at least in part to the rental restrictions. At oral argument before us, counsel for Pacific Park stated that the 40% factor chosen by the Board lacked an evidentiary basis. The Assessor stated at oral argument that he understood the restricted rental income was the sole reason for the Board's 40% obsolescence factor and the general Seward market was not taken into account by the Board. It is not clear to us why the Board applied a 40% economic obsolescence factor when the only quantified factor presented to the Board was the 50% obsolescence factor accounting for the depressed Seward rental market in general. We therefore remand to the Board for clarification and explanation of its decision on this issue and for further factual findings as it deems necessary. [58]