Opinion ID: 1761250
Heading Depth: 1
Heading Rank: 2

Heading: the assessment of the real property.

Text: The first State tax commission hearing on the real property assessment was held on September 28, 1964. It was conducted by Robert L. Purnell, the commission chairman. The city of Grand Rapids was represented by Clarence Thielman, city assessor. The taxpayer was represented by Jason L. Honigman. This is the hearing at which no formal record was made and as to which the taxpayer subsequently furnished an affidavit undertaking to record the substance of the proceedings. According to the Honigman affidavit, the Pantlind Hotel is a 10-story structure in downtown Grand Rapids covering an entire city block. On May 27, 1963, the property was sold by National Building Corporation to taxpayer, Pantlind Hotel Company, a Michigan corporation. The purchase price consisted of $50,000 paid for the owner's equity, the building at the time being subject to a mortgage having an unpaid balance of approximately $590,000. The total purchase price of $640,000 covered land, building, furniture and equipment. The taxpayer recorded the purchase price by allocating $532,438.87 to the land and buildings, and $94,000 to personal property. The Pantlind Hotel property had been offered over a period of time prior to its purchase, but no buyer had appeared. Ben Silberstein was one of the stockholders of National Building Corporation and an owner and operator of outstanding hotels in this country. A $50,000 offer to sell Silberstein the owner's equity was rejected. Immediately following purchase of the Pantlind Hotel properties, the sole stockholder of taxpayer sold a 32% interest to three Roberts brothers who had been former employees of the hotel. The stock was sold to them at stockholder's cost basis. After acquisition of the hotel properties, taxpayer acquired property adjacent to and structurally a part of the Pantlind Hotel, owned by the Old Kent Bank, for $137,500. Taxpayer attempted to relate the price for this property to its assessed value of $341,300, claiming that it showed an overassessment at a ratio of 250% of actual market value as established by the sale price. Taxpayer claimed as to the remaining hotel property, acquired from National Building Corporation, that the overassessment by the Grand Rapids board of review was at the ratio of 160% to the actual purchase price. Clarence Thielman, the city assessor, had assessed taxpayer's property on a basis of unit cost of reproduction which was comparable to that used for other buildings in the downtown area of Grand Rapids. Mr. Thielman made the statement that real property in the city of Grand Rapids was assessed at a level of one third of actual market value. The Honigman affidavit ends with taxpayer's contention that its property should have been assessed at approximately one third of the purchase price which would give an assessed valuation of $175,000. The commission's staff report, dated November 13, 1964, disclosed that the land portion of the Pantlind Hotel property was appraised at a current value of $432,000, and that the building was appraised by the use of Boeckh's Manual [] as having a current value of $1,340,000. The building appraisal was determined on the cubic foot content at a unit cost per cubic foot of $1.33. This produced the rounded-off sum of $4,972,131 and was designated on the schedule as being the base value. The reproduction cost or base value was reduced by 55% for depreciation and by 40% of that resultant amount for economic obsolescence. The appraiser's true cash value for the property was determined to be $1,342,475. The land value appraisal of $432,000 and the building value appraisal of $1,342,475 produced $1,774,475 which was without explanation reduced to $1,772,060. The staff report also undertook to make an appraisal based upon income from the property, using the hotel's operations for 1961, 1962 and 1963, years prior to purchase by the taxpayer. The calculation of true cash value by use of the capitalization of income method was $1,603,296. A stenographic transcript was made at the supplemental hearing on May 16, 1966. Eugene Hall, a member of the commission's staff and the field examiner who prepared the staff report, was called and cross-examined by taxpayer's counsel. The questions asked were not for the purpose of challenging the appraisal figures per se which had appeared in the staff report. The questioning was an effort to discredit Hall and to show his incompetency as an appraiser. Hall was interrogated about the relevancy of the reproduction cost method and whether it had any bearing at all on the price people would pay for a commercial property of the type of the Pantlind Hotel. An attempt was made to demonstrate that Hall could not qualify as an expert. Next, Hall was examined as to his use of the capitalization of income method. Finally, he was asked what consideration he gave to the actual sale of the property to the taxpayer. He stated it did not have any bearing on the amount of his valuation because it was not thought to represent market value. Harold Berry testified that he was the operating vice-president of International Hotels, Inc. He stated that he had made an examination of the Pantlind Hotel property and of the operating records for the years 1961, 1962 and 1963. He gave his opinion that the economic value or the value people would pay for the business, including good will and personal property, was about $625,000. He attributed about 25% of the estimated value to personal property. Jason L. Honigman testified. He gave an account of the difficulty the taxpayer had in obtaining a mortgage on the property. The Old Kent Bank refused a loan, as did the City National Bank in Detroit and a number of mortgage brokers in Detroit. Finally a loan was obtained from the Manufacturers National Bank of Detroit in the amount of $550,000 with Honigman giving a personal mortgage for anything above $375,000. Honigman further testified that the present owners acquired the 59-foot corner property owned by the Old Kent Bank. Part of the Pantlind Hotel was constructed over the top of the bank corner. The purchase price for the bank corner paid by the taxpayer was $137,500. Based upon the assessed values of the two properties and applying the price paid for the bank corner in that proportion would result in a selling price for the Pantlind Hotel of $445,000. Honigman offered the affidavits of Allen B. Kramer, a hotel operator, and Herbert Daverman, an architect, in which they stated they had investigated purchase of the Pantlind Hotel for $800,000 and determined the property was not worth more than $600,000. This concluded the record made by the taxpayer at the second hearing. Clarence Thielman, city assessor for the city of Grand Rapids, was called as a witness and examined by Mr. Roesch, an assistant attorney general. Thielman said that he would roughly estimate the value of the Pantlind Hotel at around $2,000,000, or so, in 1963. He placed an assessed value on it of $1,019,000. He arrived at the amount of his assessment largely through replacement cost less depreciation, less obsolescence. He tried to use the other recognized approaches but there was only one other sale of a hotel property in Grand Rapids and that was back about five years. It would be very difficult to use the capitalization method because there was very little income at the time from the Pantlind Hotel. This concluded the testimony on the second hearing.