Opinion ID: 1761035
Heading Depth: 2
Heading Rank: 1

Heading: I would say almost entirely.

Text: It is the taxpayer's contention that, because Case stated he was not an expert on the capitalization of income method, the entire probative value of the appraisal by the staff of the commission was destroyed. The appraisal itself is a part of the record. Case, though unwilling to denominate himself as an expert in a particular phase of appraisal work, exhibited a familiarity with appraisal procedures and the use of appraisal manuals. Consequently, we do not conclude that the staff's report to the commission is without any evidentiary value whatsoever. John W. Libcke, a member of the board of assessors of the city of Detroit, testified as to the procedures followed by that board. There are 420,000 parcels of real estate in Detroit to be assessed and more than 65,000 individual personal property assessments to be made. Real property appraisals are made by a staff of 60 appraisers and presented to the board of assessors, pursuant to policy determinations and procedures outlined by the board. The board of assessors established building cost schedules which they considered to reflect the true cash value of property when applied with other factors involved in the assessment process. Building cost schedules are tested by sales to determine the validity of the schedules. Libcke stated it would be proper to utilize the income approach in determining the true cash value of property but, basically, the city uses the reproduction cost method. He testified that the known cost of a particular building would have no relevancy under the reproduction cost method of assessment used by the city but that such a building would be assessed on the basis of average costs for a building of the type involved, such average costs being determined from the building cost schedules. George Turner, an employee attached to the land division of the board of assessors, testified with regard to the city's procedures for the valuation of real estate. He stated that in assessing the value of land he was concerned with more than the value of the one piece of property involved. He said assessors must always keep in mind how their valuation of a parcel relates to the next block and the next block thereafter, and so to the whole city. This is the assessor's primary function. When asked for his opinion as to the average level of property assessments, real and personal, to cash value in 1963, 1964 or 1965, he replied: I would say in the downtown area the newer buildings would be assessed at close to 50%, the older buildings  there is so much obsolescence and if you went by the sales of these properties our assessments could be 100% of the sale price in many cases more. Henry K. Thomas, head appraiser of the major building division for the Detroit board of assessors, testified with regard to the assessment of the Fisher-New Center properties. The normal procedure used by that board for appraising property would be to take the comparative replacement rate and depreciate for the age of the structure in conformity with its rules and procedures. A comparative replacement rate is used instead of a reproduction rate to remove excess cost for over-decoration and overdesign. The next operation is an analysis for obsolescence. The basic approach utilized in determining the building assessment is on the comparative replacement cost, less allowances for depreciation, less obsolescence. The city also makes a study of comparative sales to determine obsolescence considerations. Thomas stated that the city does not base any assessments solely on an income approach or on a sales approach but, rather, does them on an appraisal of cost less depreciation. Upon cross-examination, he was asked: Q. Are you now satisfied to state that in your opinion you are not competent to make a capitalization of income approach of this property? A. Yes.    Q. You have testified that you did not seek to arrive at true cash value of this property, the Fisher-New Center Complex, isn't that right? You have already testified to that? A. Yes. It is clear from the testimony of the city's witnesses and exhibits that the policies, procedures, and method of assessment established by the Detroit board of assessors sought as its primary objective to attain uniformity within and between properties rather than true cash values. At the conclusion of the hearing, Commissioner Barr raised the question as to what would constitute the file in this case. He said: The complaint of the taxpayer must remain there, all our work sheets and our appraisal data and reports of our staff must be considered a part of the file. In an exchange with the attorney for the city, Commissioner Barr said: If you are saying that we are not going to be permitted to use this material in determining these assessments, to make use of the material that we have accumulated through our staff, then we will have to meet again and lay it out for you because I am not going to agree on this record that we are going to be so restricted that we can't make use of the knowledge that we have accumulated in our work. Finally, Commissioner Barr stated: Well, at any rate we have the new record, but it is not limited. The decision and order of the State tax commission filed December 2, 1965, reads in part as follows: In this, and as in every other assessment appeal, the State tax commission is faced with (a) determining the true cash value of property and (b) the proportion of true cash value at which its assessment should be placed. The taxpayer contends in essence that its recent purchase of the properties for $10,000,000 establishes its true cash value; and that it should consequently be assessed at approximately $4,270,000 since the work data of county and State equalization indicates an assessment level of 42.7% of true cash value for the city of Detroit.    The city of Detroit has not chosen to justify the assessment of $13,241,460 [4] but has instead urged the figure of $12,548,010 as being the proper assessment figure for the properties which consist of 29 descriptions comprising the Fisher Building, the New Center Building, and surrounding parking locations. The city maintains that it has consistently assessed properties by consideration of its cost less depreciation and obsolescence, that it assesses all properties in such manner and that therefore the Fisher-New Center properties must necessarily be assessed their proper tax burden. The commission rejects such contention based upon its long experience as well as the constant judicial pronouncements of the Michigan Supreme Court. Such experience and judicial decisions establish that uniform approach to valuation does not always result in uniform assessment. Although the commission is aware of the purchase price of the properties in the amount of $10,000,000 it cannot conclude therefrom that the purchase price is representative of the properties true cash value. An isolated sale of property is not evidence of its true cash value especially where the property is singular in character and quality.    The commission is not impressed with the appraisal presented by the taxpayer to support a market value of $10,000,000. The actual income and expense figures for the years 1961 and 1962 were submitted to the commission and thoroughly analyzed by its staff. A reasonable capitalization factor applied thereto assigns an aggregate value of $19,558,348 to the 29 items of property. Such valuation by an income approach is substantiated by a reproduction cost approach to the property. The taxpayer's contention that 42.7% of true cash value constitutes the assessment level of all properties in the city of Detroit is based exclusively upon the work of Wayne county equalization upon which is superimposed State equalization. Acceptance of such percentage would presuppose perfect intracounty equalization which in fact is unattainable. State tax commission studies of real property indicate that real property in the city of Detroit was assessed in a significant range of 38-52% of its true cash value as of the tax days in question. Studies of personal property assessment levels indicate that personalty was assessed at approximately 56% of its true cash value. The assessment level of all property, real and personal, in the city of Detroit for the tax years in question has been determined to approximate one-half or 50% of its true cash value. Thus, the tax commission has determined all assessment appeals during the years in question by application of 50% to the true cash value of the property. It should be stressed that the taxpayer's sole reliance upon a so-called `equalization factor' of 42.7% is misplaced. It presumes perfect intracounty equalization. This is not the fact in any county within the State.    The State tax commission finds that the 29 items of property contained in the appeal of Fisher-New Center Company had a true cash value as of December 31, 1962 of $19,558,348; that the proportion of true cash value at which all property, real and personal in the city of Detroit is assessed, is one-half or 50% of true cash value; and that therefore the proper assessment to be imposed upon the property amounts to $9,779,170.