Opinion ID: 2377818
Heading Depth: 3
Heading Rank: 1

Heading: Appraisal Methodology And Interpretation Of AS 29.45.110

Text: Pacific Park appeals on the ground that the Board erred when it failed to adopt [Pacific Park's] appraiser's valuation using the `income' approach because that approach is the preferred method for valuing LIHTC projects. The Apartments are properly valued under AS 29.45.110 subsection (a)'s general full and true value provision rather than subsection (d)(1)'s mandatory income approach without adjustment for tax credits because they did not qualify for the LIHTC program prior to January 1, 2001, they are located in a municipality where post-2000 LIHTC projects are exempt from mandatory use of the statutory income approach, [47] and Pacific Park's application for an Assembly resolution directing the Assessor to use the statutory income approach failed. A taxing authority is allowed to choose a reasonable method for determining the full and true value of a property so long as there was no fraud or clear adoption of a fundamentally wrong principle of valuation. [48] Provided that a method is not fundamentally wrong, it does not even need to be recognized by the appraisal community. [49] Here, Pacific Park's witness Bethard testified that the cost approach is a fundamentally correct approach to use, it's normal appraisal methodology, and we have long recognized the cost approach as a usual appraisal method for improved property. [50] Accordingly, the Board could reasonably conclude the cost approach is an acceptable method of valuation. We therefore affirm the superior court's decision upholding the Board's use of the cost approach to value the Apartments.
The Assessor appeals on the ground that the Board impermissibly focused on the restricted rental income of the property. The Assessor argues that (1) after AS 29.45.110(d) became effective, rental restrictions could not be considered in calculating full and true value under AS 29.45.110(a), and (2) the failure of Pacific Park's Assembly resolution precludes consideration of the rental restrictions. We disagree. Just because a taxing authority is not required under state or local law to use the statutory income approach does not necessarily mean that it is prohibited from considering restricted rental rates in another valuation method, if reasonable to do so. The Board could reasonably conclude that it was appropriate to consider the rental restrictions when valuing the Apartments under the cost approach, and we affirm the superior court's decision upholding the Board on this issue. The Assessor also appeals on the ground that the Board's valuation failed to account for the federal tax credits provided to the Property. The Assessor argues there is a requirement that the taxing authority consider federal income tax credits if it considers rental restrictions in assessing the full and true value of a LIHTC property. As noted above, courts from other jurisdictions differ on whether federal income tax credits must be considered when rental restrictions are considered in valuing a LIHTC property. Some conclude that tax credits should be ignored because they are intangible property [51] or because they are subject to recapture if the rental restrictions are violated. [52] Others conclude that tax credits should be considered because they relate directly to the real property. [53] Here the Board did not expressly address the tax credits associated with the Apartments, and we cannot discern whether or why the Board took the tax credits into account or ignored them in its adjustment of the Assessor's valuation. The superior court noted that the Board's decision did not address these questions, but nonetheless held that the Board acted within its expertise to decide that tax credits are largely intangible and not appropriate for tax assessment. We are unable to affirm the superior court's decision on this record. As discussed below, we are remanding to the Board for clarification of its use of the rental restrictions to adjust the Assessor's valuation, and the Board should clarify its treatment of the tax credits in its subsequent decision as well.