Opinion ID: 1679169
Heading Depth: 1
Heading Rank: 3

Heading: Inequitable Assessments Claim: Is the Ratio of Assessed Values to Market Values Fair and Equitable?

Text: When a property owner claims an assessment is inequitable, the owner must prove (1) the existence of comparable properties in the taxing district, (2) the market value and assessed value of the comparable properties, (3) the market value and assessed value of the property at issue, and (4) that the owner's property is assessed at a higher proportion of its market value than the ratio of the assessed and market values of the comparable properties. Riso, 362 N.W.2d at 517; Maxwell v. Shivers, 257 Iowa 575, 579-80, 133 N.W.2d 709, 711 (1965). The record shows that many of the challenged assessments were a higher percentage of market value than were the assessments on the comparable properties relied upon by the parties. The district court concluded that the subject properties should be assessed at no higher percentage level than the highest percentage assessment of any comparable property not the subject of this appeal. (Emphasis added.) Using this standard, the trial court ordered the assessments be no higher than 83.4% of market value in 1989 and 1990 and no higher than ninety-seven percent in 1991. The property owners argue that full relief from the inequitable assessments can only be attained if the court reduces the assessments on their properties using the average ratio of the comparable properties. The average assessed-to-market-values ratio for the comparable properties in 1989 and 1990 was 71.5. In 1991 it was 77.1. Neither Iowa case law nor the applicable statutes establish an exact method to make an assessment equitable. In a 1916 assessment appeal, the trial court reduced the challenged assessment on a bridge to the average level of the assessments on all real and personal property in the county. Iowa Cent. Ry. v. Board of Review, 176 Iowa 131, 134-37, 157 N.W. 731, 732-33 (1916). Neither party disputed this method of adjustment on appeal so our court did not consider that issue. In the prior appeal of the 1986, 1987, and 1988 assessments of the subject properties, the trial court reduced the inequitable assessments to the level of the most comparable property. Metropolitan Jacobson, 476 N.W.2d at 727. Again, this method of adjustment was not challenged on appeal. Despite the lack of precedent on this point, we are not without guidance in fashioning a remedy for the property owners here. General principles of taxation are helpful. Equality is the paramount object that the law seeks to ensure in distributing the burdens of taxation. Butler v. City of Des Moines, 219 Iowa 956, 961, 258 N.W. 755, 758 (1935); Iowa Cent. Ry., 176 Iowa at 134, 157 N.W. at 732. Like property within a taxing district must be treated similarly. Talbott v. City of Des Moines, 218 Iowa 1397, 1403, 257 N.W. 393, 396 (1934). Therefore, if an assessment is inequitable when compared to similar property in the taxing district, the court must reduce it to an equitable level. Call v. Board of Review, 227 Iowa 1116, 1120, 290 N.W. 109, 110 (1940); see Iowa Code § 441.37(1) (1993). The question we must answer is: what is similar or like property for purposes of ensuring equitable assessments? In this case, is it all commercial property in Des Moines, all warehouses in Des Moines or only warehouses in Des Moines that are comparable to the subject properties? [3] We believe that the equality the law seeks to achieve is broader than simply consistency among properties that are comparable for purposes of valuation. For example, it would not be fair to tax residential properties in one area of Des Moines on eighty percent of their market values and tax higher-priced residential properties on only sixty percent of their market values. Even if comparable residential properties are taxed the same, this system is inequitable because owners of lower-priced homes would bear a disproportionately higher property tax burden. Equality in property taxation requires at a minimum equality within a class of property, not just within a representative group of comparable properties chosen by the parties. Therefore, we reject the property owners' efforts to focus solely on the comparable properties to determine an appropriate ratio for calculating assessed value. Having decided that the term similar or like property refers to a class of property rather than the comparable properties used in a particular case, we must now consider whether like property here is all commercial property or only commercial warehouses. Again, we think that the goal of equality requires that we look beyond the ratio of assessed to market value for commercial warehouses alone. We know of no reason that commercial warehouses should be taxed on a lower or higher percentage of their market value than other commercial property. Consequently, we look to all commercial properties in fixing a fair market-to-assessed-value ratio for the subject properties. The Board introduced evidence of the median [4] ratio of market value to assessed value for all commercial properties in the City of Des Moines for 1989 and 1991. These figures were prepared by the Iowa director of revenue and finance. [5] The director of revenue and finance calculated the ratios for commercial property in Des Moines as 99.1 in 1989 and 90.4 in 1991. We adopt these ratios as fair and equitable percentages to be applied to the market values of the subject properties for purposes of determining their assessed values. See Newbury Commons Ltd. Partnership v. City of Stamford, 226 Conn. 92, 626 A.2d 1292, 1297 (1993) (apparently using ratios prepared by the Connecticut office of policy and management); In re Objection to Real Property Taxes, 353 N.W.2d 525, 532 (Minn.1984) (relying on ratio studies done by the Minnesota department of revenue).