Court Opinion

ID: 8039696
Source: CourtListenerOpinion
Date Created: 2022-09-09 03:27:03.875233+00
Date Added: 2024-06-11T16:37:16.897791
License: Public Domain

McCown, J.,
dissenting.
We respectfully dissent. A thorough examination of the record produced from scores of official witnesses reveals such confusion in the interpretation of the constitutional and statutory terms of “valuation” and “actual value” as applied to a tax on real property, that we deem it essential to review some fundamental principles involved.
The constitutional provision, insofar as applicable, is: “Taxes shall be levied by valuation uniformly and proportionately upon all tangible property.” Art. VIII, § 1, Constitution of Nebraska.
The basic rule of property taxation is that the value of the property is the basis of taxation, and the fundamental rule or standard of value is actual, market, full, true, or fair cash value. Ordinarily these are all defined as being one and the same and are encompassed in the term “fair market value.” See, 51 Am. Jur., Taxation, § 696, p. 648, § 701, p. 652; 84 C. J. S., Taxation, § 410, p. 780, § 411, p, 791; Richards v. Board of Equalization, ante p. 537, 134 N. W. 2d 56.
Our former statutes defined “actual value” as “value in the market in the ordinary course of trade.” § 77-201, Comp. St. 1929; § 77-112, R. S. 1943.
“Fair market value” is a well-defined legal term even though it “is an intangible concept, is largely a matter of opinion, and there are no yardsticks with which it can be determined with accuracy” as stated in the majority opinion. “Fair market value” means the price property will bring when offered for sale by one who desires, but is not obliged to sell, and purchased by one who is under no necessity of buying, both having reasonable knowledge of the facts.
*631The principles governing the ascertainment of value for the purpose of taxation are the same as those that control in condemnation cases, confiscation cases, and generally in controversies involving the establishment of just compensation. 51 Am. Jur., Taxation, § 701, p. 653.
Many elements enter into the determination of actual value. No one element of value is controlling and all elements entering into a determination of actual value must be taken into consideration where applicable. Richards v. Board of Equalization, supra.
Section 77-112, R. R. S. 1943, as amended in 1957, states: “Actual value of property for taxation shall mean and include the value of property for taxation that is ascertained by using the following formula where applicable: (1) Earning capacity of the property; (2) relative location; (3) desirability and functional use; (4) reproduction cost less depreciation; (5) comparison with other properties of known or recognized value; and (6) market value in the ordinary course of trade.” The first five elements of the formula are clearly proper elements of “actual value.” The sixth is actually not an element but essentially the same as the “actual value” which is to be determined. Obviously, number (6) has been treated or interpreted by many officials as meaning “market price” rather than “market value” as it is stated. “Market price” is only an element in determining “actual value” or “market value,” but “market price” and “market value” are not the same. “Market price” is generally accepted as one of the best tests of the “market value” of land, but is only one element. Nowhere in the statute as now constituted does the word “price” appear. This, of course, does not mean that “market price,” either of the particular land or of similar property, cannot be taken into account; because clearly it must be. It does, however, demonstrate the basic confusion which has arisen in the interpretation of constitutional and statutory language as to value for purposes of taxation.
*632No specific percentage can be assigned to any one element of value, nor are they necessarily equal. In our opinion, the Legislature cannot set an arbitrary formula or standard which does not reasonably reflect “actual value” or “fair market value.”
We turn now to a consideration of the particular case before us. We agree with the majority opinion that the record established that the sales assessment ratio, as it was prepared, compiled, and used here, was not proper. In our opinion, this does not mean, however, that a sales price assessment ratio study, properly and uniformly compiled, and properly and expertly weighed, analyzed, tested, compared, and sampled, could not be an effective instrument of equalization.
The majority opinion proceeds on the assumption that since the sales assessment ratio as presented was ineffective, the State Board of Equalization and Assessment, hereinafter called the Board, was entitled to act upon the presumption that the abstracts of assessment returned by the various counties have conformed to law, and that the object of the law of uniformity is accomplished if all of the property within the taxing district is assessed at a uniform standard of value; impliedly, even if less than 35 percent of the actual value which the statute requires. In this respect, the majority opinion relies upon the case of Sioux City Bridge Co. v. Dakota County, 260 U. S. 441, 43 S. Ct. 190, 67 L. Ed. 340, 28 A. L. R. 979. That case involved an individual taxpayer whose property was taxed at 100 percent of its true value while all other property in the county was taxed at 55 percent of that value. That case, however, is specifically based on the principle that where it is impossible to equalize both the standard of true value and the uniformity and equality required by law, the latter requirement is to be preferred. The United States Supreme Court pointed out that to require all other taxpayers to be increased, “is to deny the injured taxpayer any remedy at all because it is utterly im*633possible for him by any judicial proceeding to secure an increase in the assessment of the great mass of under-assessed property in the taxing district.” The majority opinion here applies the principle of that case to this one. But here the action involves the Board, required by law to equalize all county assessments at 35 percent of actual value, and authorized to increase or decrease any or all. In fact, the transcript specifically shows that the Attorney General had advised the Board before the hearings that it probably could not legally set the valuations in the various counties, at an average figure which would be below 35 percent of actual value. The result of the majority opinion here, on the basis of an incorrect application of the principles of a case involving the assessment of an individual taxpayer, is. that the Board may disregard the specific requirement of the statute. It also determines, in effect, that it is impossible for the Board to assess at 35 percent of value, and at the same time accomplish equalization and uniformity. We do not know how it is possible to have uniformity at some percentage of actual value less than 35 percent, but impossible to have uniformity at 35 percent of actual value. The Board itself has the power to> increase or decrease the valuations of each county, and we cannot agree that a simple mathematical computation can make the possible impossible when dealing with the same actual value. We believe that the effect of this portion of the majority opinion is in direct conflict with section 77-201, R. S. Supp., 1963, and with the holding in Laflin v. State Board of Equalization & Assessment, 156 Neb. 427, 56 N. W. 2d 469.
Passing the question of whether the Sioux City Bridge Co. case applies to this situation, and even assuming that it does, then, since uniformity is the primary objective, there is still a constitutional and statutory obligation on the Board to decrease as well as increase the valuations of individual counties to secure the uniformity and equality required by law. How can it be said *634that there is equality or uniformity of any sort except in relationship to a uniform standard of value? As it was philosophically expressed by one of the witnesses: “If you start with a wrong number, you are going to come up with 35% of the wrong number.”
Apparently the majority opinion accepts the statements of representatives of the counties that they had placed their values at 35 percent of what they thought actual value was, as being proof of the fact, at least where coupled with the presumption of validity. This ignores the other evidence in the record which we think established the fact that a uniform standard of value was not used by the counties. At this point also, we should state that we disagree with the holding that the Board is not bound by the record, but may act upon the knowledge of its own members as to value and on any other information satisfactory to it. If this be the rule, as applied to this case, it would be virtually impossible to successfully contest any action of the Board. Nevertheless, the record itself establishes the failure to use or apply a uniform standard of value among the various counties and a consequent lack of equality and uniformity of assessment.
The record shows that over 40 counties apparently had had professional appraisals of actual value in the period from 1950 through 1962. Professional scientific appraisals are, we think, a proper method of determining actual value. The Legislature, by enactment of sections 77-1301 to 77-1301.08, R. S. Supp., 1963, has now specified that all counties must have professional scientific appraisals within the next few years. The record is replete with expressions of official opinion that such scientific professional appraisals or reappraisals will provide a much improved standard of uniformity. This can only be true, however, if these professional scientific reappraisals are required to be applied uniformly. The record indicates that for the year involved here, at least 18 counties which had had professional appraisals between 1950 and 1962, applied them 100 percent and took *63535 percent of those appraisals as the assessment. At least two other counties had done likewise with respect to urban or rural property, one or the other. Twenty-two counties, however, had reduced their appraisals by various arbitrary percentages. The percentages of the appraisals which were used ranged from approximately 60 percent to 95% percent, and in two instances, the exact amount of the reduction is not shown by the record. There were many other counties which had had professional appraisals as to which the record does not show what percentages of them were used. There is nothing in the record as to eight counties because the recording equipment broke down.
Of the counties which had appraisals in 1961 and 1962, three were using 100 percent of the appraisal figures; three arbitrarily reduced the appraisal figures to 75 percent, 76 percent, and 80 percent respectively; and one county was using 100 percent on its urban property and 80 percent on its rural property. Of counties completing appraisals in 1959 and I960, two were using 100 percent and three used percentages of 82 percent, 90 percent, and 94 percent respectively. Of counties completing appraisals in 1957 and 1958, three used them 100 percent and five reduced them to percentages varying from 80 percent to 93 percent. One county used an interesting and revealing method of arbitrary reduction. It first reduced the professional appraisal values by 29.575 percent and then took 28.57 percent of that. The reason for this involved computation was to reach the same total valuation as the county had reported in prior years. This resulted in an apparent actual value of approximately 60 percent of the appraisal. For counties completing appraisals in the years 1955 and 1956, five counties were using 100 percent of their appraisal figures and five reduced them, one to 67 percent, one to 70 percent, one to 75 percent, one to 80 percent, and one to 95.5 percent. However, the county which reduced to 70 percent, used 37 percent of that rather than 35 per*636cent. Of counties completing professional appraisals in 1953 and 1954, three of them were using 100 percent, one used 85 percent, and one 92.5 percent. It seems clear to us from the record that at least some counties arbitrarily reduced their actual values, and that a lack of uniformity and equality is clearly apparent. Of what use to the state are appraisals, past or future, if some counties are permitted to arbitrarily reduce their values for state assessment purposes?
We agree with the majority opinion that in dealing with the intangible concepts of valuation and uniformity, a mathematically precise result can never be reached, nor perfect equalization ever accomplished. However, we cannot agree that equality and constitutional uniformity are even reasonably approximated where one county may be assessed for state tax purposes on a basis 50 percent higher than some other county, or where one county may be assessed at two-thirds of the basis applied to another county. Such disparities, in our opinion, exceed the bounds of approximation or reasonableness.
We entirely agree with the opinion of the majority that this court cannot act as a super board of equalization, nor substitute its judgment for that of the Board. We are convinced, however, that on the record here, regardless of the enormity of the task, the failure of the Board to do anything was illegal, contrary to law, and arbitrary. Anyone reading the record in this case will be overwhelmed by the problems and conflicts discussed. They run the gamut of the problems involved in Nebraska in the field of property taxation. We recognize the extreme difficulty, as well as the complexity, of the decisions facing the Board, as well as the fact that it has been given few tools with which to work. Nevertheless, we cannot escape the conclusion that the constitutional and statutory requirements were not met.
I am authorized to state that Justice Carter and Justice Brower concur in this dissent.