Opinion ID: 4503337
Heading Depth: 1
Heading Rank: 4

Heading: analysis

Text: [4] We begin by noting that the presumption of validity does not apply at this stage. A presumption exists that a board of equalization has faithfully performed its official duties in making an assessment and has acted upon sufficient competent evidence to justify its action. That presumption remains until there is competent evidence to the contrary presented, and the presumption disappears when there is competent evidence adduced on appeal to the contrary.6 Neither party disputes that Wheatland presented competent evidence through Calvanico’s appraisal and thereby overcame the presumption of validity of the Board’s valuation. 3 Betty L. Green Living Trust v. Morrill Cty. Bd. of Equal., 299 Neb. 933, 911 N.W.2d 551 (2018). 4 Id. 5 Id. 6 Id. - 645 - Nebraska Supreme Court Advance Sheets 304 Nebraska Reports WHEATLAND INDUS. v. PERKINS CTY. BD. OF EQUAL. Cite as 304 Neb. 638 [5-7] This leads to the principles governing TERC’s decision. Once the challenging party overcomes the presumption of validity by competent evidence, the reasonableness of the valuation fixed by the board of equalization becomes one of fact based upon all of the evidence presented.7 That applies here. The burden of showing a valuation to be unreasonable rests upon the taxpayer on appeal from the action of the board of equalization.8 The burden of persuasion imposed on a complaining taxpayer is not met by showing a mere difference of opinion unless it is established by clear and convincing evidence that the valuation placed upon the property when compared with valuations placed on other similar property is grossly excessive and is the result of a systematic exercise of intentional will or failure of plain duty, and not mere errors of judgment.9 The Board makes three arguments that there was insufficient evidence to support TERC’s determination. First, it argues that once the presumption of the Board was rebutted, there was sufficient evidence to support that the Board’s valuation of the Madrid property, when compared to a similar property, was not grossly excessive. Second, it argues that there was insufficient evidence to support the 40-percent economic depreciation, because the Madrid property had been profitable and the ethanol plant numbers Calvanico relied upon were proposed plants not completed plants. Third, it argues that if we determine the economic depreciation percentage was incorrect, then we should value the Madrid property without economic depreciation or remand the matter to TERC with instruction to determine the correct amount of economic depreciation, if any. Wheatland presented evidence of the Furnas County plant as a comparable property. Calvanico stated that he had appraised 7 See id. 8 Id. 9 Id. - 646 - Nebraska Supreme Court Advance Sheets 304 Nebraska Reports WHEATLAND INDUS. v. PERKINS CTY. BD. OF EQUAL. Cite as 304 Neb. 638 the Furnas County plant twice and that it was nearly identical to the Madrid property in blueprint, technology, and capacity. He referred to the Furnas County plant as a “sister” plant. Wheatland owned the Furnas County plant, and its chief executive officer affirmed that they were identical. Stanard explained that Burton’s spreadsheet contained incorrect information about the Furnas County plant. The Furnas County plant was not a 22-million-gallon plant, but, rather, it was a 44-million-gallon plant. This affirmed Wheatland’s evidence that the plants were identical in capacity. Stanard’s statement—that the nameplate capacity of a plant was critical to determining its value—emphasized the importance of the relationship in value between the Furnas County plant and the Madrid property. Although Burton did not state how her opinion of the Madrid property value would change from the incorrect spreadsheet, she did not dispute the $8.9 million value of the Furnas County plant. Stanard did state that if the Furnas County plant was a “sister” plant, he would have no disagreement with Calvanico’s appraisal of the Madrid property. Clearly, the evidence presented showed that the Furnas County plant was a “sister” plant. Calvanico’s opinion purported to show that the Board had overvalued the Madrid property by well over $6 million—hardly a mere difference of opinion. Stanard’s acceptance of Calvanico’s appraisal undermines the Board’s argument attempting to characterize it as such. As part of Wheatland’s evidence intended to show a grossly excessive value, it focused on the failure to apply depreciation. Burton, Stanard, and Calvanico all agreed that physical depreciation should be applied to the Madrid property. Burton and Stanard were unaware if physical depreciation was applied, and there was no evidence that it was. Additionally, Stanard agreed with Calvanico that “some” economic depreciation should be applied to the Madrid property but the Board did not present evidence as to an appropriate amount. This evidence showed that the Board’s valuation was unreliable, because it failed to - 647 - Nebraska Supreme Court Advance Sheets 304 Nebraska Reports WHEATLAND INDUS. v. PERKINS CTY. BD. OF EQUAL. Cite as 304 Neb. 638 take into account any depreciation, which in turn resulted in an excessively high valuation. Because the evidence showed that the Furnas County plant was comparable and that the Board’s valuation was unreliable, there was competent evidence to show that the Board’s valuation was grossly excessive. Accordingly, TERC’s determination that it was arbitrary and unreasonable to rely on the Board’s determination of value was supported by competent evidence and was not arbitrary, capricious, or unreasonable. The Board argues that there was insufficient evidence to support economic depreciation of 40 percent. “Based upon the applicable law, the Board need not put on any evidence to support its valuation of the property at issue unless the taxpayer establishes the Board’s valuation was unreasonable or arbitrary.”10 Because Wheatland established that the Board’s valuation was unreasonable and arbitrary, TERC did not err in relying upon Calvanico’s appraisal. “Economic depreciation results from external economic forces which depress the value of the property.”11 Calvanico observed the state of the ethanol industry, the decrease in the price per gallon of ethanol, and the reduction of the rate of ethanol plant construction. He emphasized that Nebraska had 39 ethanol plants in 2010 and 26 ethanol plants in 2017. From his observations, he opined that economic depreciation of 40 percent was appropriate. We cannot say that TERC’s reliance on Calvanico’s opinion was arbitrary, capricious, or unreasonable. Stanard asserted that the numbers that Calvanico relied upon were not all constructed and operational ethanol plants—that is, some were proposed plants that never came to fruition. But he did not expound why proposed plants versus operational plants makes a difference 10 Bottorf v. Clay Cty. Bd. of Equal., 7 Neb. App. 162, 168, 580 N.W.2d 561, 566 (1998). 11 First Nat. Bank v. Otoe Cty., 233 Neb. 412, 414, 445 N.W.2d 880, 882 (1989). - 648 - Nebraska Supreme Court Advance Sheets 304 Nebraska Reports WHEATLAND INDUS. v. PERKINS CTY. BD. OF EQUAL. Cite as 304 Neb. 638 to the state of the Nebraska ethanol industry or how it would affect economic depreciation. Moreover, Stanard admitted that “some” economic depreciation was appropriate, but failed to quantify his opinion. TERC was left with the choice between “some” and 40 percent. Further, the Board failed to present evidence as to how the profitability of the ethanol plant would affect economic depreciation of the property and quantify that amount. Accordingly, TERC’s determination of economic depreciation was based on competent evidence and was not arbitrary, capricious, or unreasonable.