ATTORNEYS FOR PETITIONER: ATTORNEYS FOR RESPONDENT:
STEPHEN E. DEVOE JEFFREY A. MODISETT
B. KEITH SHAKE ATTORNEY GENERAL OF INDIANA
MICHAEL R. HARPING
HENDERSON, DAILEY, WITHROW
TED J. HOLADAY
& DEVOE DEPUTY ATTORNEY GENERAL
Indianapolis, Indiana Indianapolis, Indiana
INDIANA TAX COURT
INDIANAPOLIS RACQUET CLUB, INC.,
) Cause Nos. 49T10-9607-TA-00088
STATE BOARD OF TAX COMMISSIONERS, )
RACQUET SQUARE ASSOCIATES, LTD, )
ON APPEAL FROM FINAL DETERMINATIONS OF THE STATE BOARD
v. ) Cause No. 49T10-9609-TA-00126
STATE BOARD OF TAX COMMISSIONERS, )
OF TAX COMMISSIONERS
January 31, 2000
Petitioners Indianapolis Racquet Club, Inc. (IRC) and Racquet Square Associates, LTD. (RSA) (collectively
Racquet Club) appeal three final determinations of the State Board of Tax Commissioners
(State Board) denying Racquet Clubs appeals challenging the validity of the 1989 assessments
of IRCs indoor and outdoor tennis facilities and RSAs office building complex.
In these original tax appeals, Racquet Club presents the following two issues
I. Whether the subject properties were improperly classified in the Marion County
Land Valuation Order, in violation of
Ind. Code Ann. § 6-1.1-31-6 (West 1989)
and the Indiana Assessment Manual, see Ind. Admin. Code tit. 50, r. 2.1-1-1
to 6-1 (1992) (codified in present form at Ind. Admin. Code tit. 50,
r. 2.2-1-1 to -16-6 (1996)); and
II. Whether the base rate for IRCs indoor tennis facility was incorrectly
determined using the GCM health club model,
see Ind. Admin. Code tit. 50,
r. 2.1-4-7 (1992) (codified in present form at Ind. Admin. Code tit. 50,
r. 2.2-11-1 (1996)), instead of the GCI light warehouse model, see id. (codified
in present form at Ind. Admin. Code tit. 50, r. 2.2-11-2 (1996)).
FACTS AND PROCEDURAL HISTORY
IRC is an Indiana corporation formed in 1965 that owns indoor and outdoor
tennis facilities located at 8249 Dean Road in Indianapolis (Dean Road Property).
The Dean Road Property consists of sixteen indoor and eight outdoor tennis courts
and associated facilities. RSA is an Indiana limited partnership that owns an office
building complex located at 4141 East 82d Street in Indianapolis. The complex,
which lies adjacent to the Dean Road Property, consists of three one-story office
The issues presented arise from the 1989 assessment of three individual parcels.
Racquet Club separately appealed the assessment of each parcel. The procedural history
of these appeals is as follows. Parcel number 8051129 (Parcel A) is
part of the Dean Road Property. It contains eight outdoor tennis courts.
The Washington Township Assessor issued a Notice of Assessment to IRC regarding
Parcel A on November 22, 1989. IRC filed a Form 130 petition
for review with the Marion County Board of Review (BOR) on December 22,
1989. The BOR conducted a hearing on the petition on April 24,
1990. On November 30, 1990, the BOR issued a ruling adverse to
IRC. Thereafter, on December 28, 1990, IRC filed a Form 131 petition
for review with the State Board, which conducted a hearing on September 27,
1995. The State Board issued its final assessment determination on June 14,
1996. Thereafter, IRC filed an original tax appeal regarding Parcel A with
this Court on July 29, 1996.
Parcel number 8048124 (Parcel B) is also part of the Dean Road Property.
It contains sixteen indoor tennis courts and associated facilities. The Washington
Township Assessor issued a Notice of Assessment regarding Parcel B on November 22,
1989. IRC filed a Form 130 petition for review with the BOR
on December 22, 1989. The BOR conducted a hearing on the petition
on December 19, 1990. Subsequently, on February 8, 1991, the BOR issued
a ruling adverse to IRC. IRC filed a Form 131 petition for
review with the State Board on March 11, 1991. The State Board
conducted a hearing on the petition on September 27, 1995 and issued its
final determination on August 7, 1996. IRC filed an original tax appeal
regarding Parcel B with this Court on September 23, 1996.
Parcel number 8048125 (Parcel C) is adjacent to and directly east of Parcel
A. The Washington Township Assessor issued a Notice of Assessment regarding Parcel
C on November 22, 1989. RSA filed a Form 130 petition for
review with the BOR on December 22, 1989. The BOR conducted a
hearing on the petition on August 9, 1990. On August 31, 1990,
the BOR issued a ruling sustaining the township assessors valuations. RSA filed
a Form 131 petition for review with the State Board on October 1,
1990. The State Board conducted a hearing on the petition on September
27, 1995. Thereafter, on August 16, 1996, the State Board issued its
final determination. RSA filed an original tax appeal on September 30, 1996.
The Court conducted a trial involving all three parcels on May 2, 1997.See footnote
On October 22, 1997, the Court heard oral argument on these cases.
Additional facts will be supplied where necessary.
ANALYSIS AND OPINION
Standard of Review
The Court gives the final determinations of the State Board great deference when
the State Board acts within the scope of its authority. See Wetzel
Enters., Inc. v. State Bd. of Tax Commrs, 694 N.E.2d 1259, 1261 (Ind.
Tax Ct. 1998). Accordingly, the Court reverses final determinations of the State
Board only when those decisions are unsupported by substantial evidence, are arbitrary or
capricious, constitute an abuse of discretion, or exceed statutory authority. See id.
Racquet Club bears the burden of demonstrating that the State Boards final
determinations are invalid. See Clark v. State Bd. of Tax Commrs, 694
N.E.2d 1230, 1233 (Ind. Tax Ct. 1998).
Racquet Club challenges the validity of the 1989 Marion County Land Valuation Order
(Order) as applied to Parcels A, B, and C. Specifically, Racquet Club
contends that Parcels A, B and C were improperly included with surrounding commercial
properties in the Order, in violation of Ind. Code Ann. § 6-1.1-31-6 (West
1989) and the Indiana Assessment Manual. As regards the appeal of Parcel
B, Racquet Club asserts that taxing authorities applied the wrong model to 90%
of the indoor tennis courts facility. The Court will separately consider each
I. Marion County Land Valuation Order
Racquet Club asserts that Parcels A, B and C were improperly classified within
the Order, to the extent they were included as part of the area
designated as page 22 in Section IV of the Order. This area,
which the Court shall refer to as the 82nd Street Corridor,
in the Order as Allisonville Road W. to Keystone on 86th St. fr
Dean Rd. Keystone No. to I-465 Interch fr 86th St.
See footnote (Respt Ex.
G.) Primary land for this commercial property ranged from three to four
dollars per square foot; usable undeveloped land ranged from ninety cents to one
dollar twenty cents per square foot. (Respt Ex. G.) Racquet Club
argues that Parcels A, B and C should have been included within the
area designated as page 24A in Section IV of the Order, which area
is described as Township other. See footnote
(Respt Ex. G.) Values
for Primary land in this latter category ranged from one dollar and fifty
cents to three dollars per square foot; values for usable undeveloped land ranged
from forty-five to ninety cents per square foot. (Respt Ex. G.)
Before addressing Racquet Clubs argument, the Court first reviews some basic principles of
Indianas property tax assessment laws, policies and procedures. The Indiana Constitution provides,
The General Assembly shall provide, by law, for a uniform and equal rate
of property assessment and taxation and shall prescribe regulations to secure a just
valuation for taxation of all property, both real and personal. Ind. Const.
art. X, § 1. See also Ind. Code Ann. § 6-1.1-2-2 (West
1989) (All tangible property which is subject to assessment shall be assessed on
a just valuation basis and in a uniform and equal manner.). As
this Court noted in Indianapolis Historic Partners v. State Board of Tax Commissioners:
This provision has long been held to require: (1) uniformity and equality
in assessment, (2) uniformity and equality as to rate of taxation, and (3)
a just valuation for taxation of all property. The purpose of these
constitutional requirements is to distribute the burden of taxation upon principles of uniformity,
equality, and justice.
694 N.E.2d 1224, 1228 (Ind. Tax. Ct. 1998) (citations omitted). The General
Assembly has charged the State Board with interpreting the states property tax laws
and seeing that all property assessments are made in the manner prescribed by
law. See Ind. Code Ann. § 6-1.1-35-1 (West 1989) (amended 1997).
Indiana Code Ann. § 6-1.1-31-6 (West 1989) in part provides the following mandatory
guidelines for the State Board to follow in establishing rules governing the assessment
of real property:
(a) With respect to the assessment of real property, the rules of the
state board of tax commissioners shall provide for:
(1) the classification of land on the basis of:
(vi) productivity or earning capacity;
(vii) applicable zoning provisions;
(viii) accessibility to highways, sewers, and other public services or facilities; and
(ix) any other factor that the board determines by rule is just and
In fulfilling its duties, the State Board is afforded a great deal of
discretion. See Poracky v. State Bd. of Tax Commrs, 635 N.E.2d 235,
236 (Ind. Tax Ct. 1994) (quotation omitted). The State Board exercises its
discretion in part by promulgating land valuation orders. See id.
Land valuation orders are administrative rules. See Precedent v. State Bd. of Tax
Commrs, 659 N.E.2d 701, 704 (Ind. Tax Ct. 1995). The party claiming
that the land valuation order is invalid bears the burden to show the
order is not in accordance with law. See Poracky, 635 N.E.2d at
Application of Proper Model
The procedure for promulgating land valuation orders is governed by statute. See
Ind. Code Ann. § 6-1.1-4-13.6 (West 1989) (amended 1993 & 1997). Section 6-1.1-4-13.6
establishes in each county a nine-member land valuation commission which was required to
determine the values of all classes of commercial, industrial, and residential land .
. . in the county using guidelines determined by the [State Board].
The State Board reviews and has authority to modify the land values submitted
by the commissions. See id. Thus, the State Board ultimately must
approve or disapprove of the land values. Township assessors are obligated to
use the values as determined by the commission and modified by the state
board in making assessments. Id. The purpose of this section is
to ensure that land values throughout Indiana are set in conformity with the
constitutional and statutory commands of uniformity and equality in assessment and tax rate.
See Poracky, 635 N.E.2d at 237.
Racquet Club must show that the land valuation commissions classification of Parcels A,
B and C was improper. To support its claim, Racquet Club cites
State Board of Tax Commissioners v. Valparaiso Golf Club, Inc., 164 Ind.
App. 687, 330 N.E.2d 394 (Ind. Ct. App. 1975), which considered an issue
similar to that in the present case. In Valparaiso Golf Club, the
Indiana Court of Appeals examined whether the State Board acted arbitrarily in fixing
the valuation of a golf course solely on the basis of the lands
use, as testified to by the State Boards own witness. The Court
of Appeals first quoted Ind. Code Ann. 6-1-33-2 (West 1971) (codified in present
form at Ind. Code Ann. § 6-1.1-31-5 (West 1989)(amended 1997)). This section
provided that the legislatures intention was for all assessments to take into consideration
all of the elements referred to in this article. Valparaiso Golf Club,
330 N.E.2d at 395. The Court of Appeals then quoted the relevant
parts of Ind. Code Ann. § 6-1-33-3 (West 1971)the predecessor to section 6-1.1-31-6,
which included a virtually identical list (acreage, lots, etc.) of factors for the
State Board to consider in classifying land for assessment. See id. at
In affirming the trial court, with a minor correction, the Court of Appeals
held that the trial court was justified in determining that the State Board
had violated section 6-1-33-2 by only considering use and not taking into consideration
all the elements enumerated in section 6-1-33-3. See id. at 396.
According to the Court of Appeals, the statute did not require the State
Board to use every element listed as an element; rather, it required the
State Board to consider each element, to determine whether the enumerated elements are
applicable to the [assessment] situation at hand and then to consider those elements
that are applicable. Id. Therefore, the Court of Appeals concluded that
it was an arbitrary action by the [State] Board to refuse to consider
any of the other factors enumerated in IC 1971, 6-1-33-3. Id.
Racquet Club contends that, pursuant to the Court of Appeals decision in Valparaiso
Golf Club, the State Board may not base its assessment on only one
or two of the factors listed in section 6-1.1-31-6. Racquet Clubs reliance
on Valparaiso Golf Club is misplaced. The Court of Appeals in that
case relied upon the language in section 6-1-33-2, which required the State Board
to take into consideration all of the elements referred to in [section 6-1-33-3],
in deciding that the State Board erred in basing its assessment solely upon
the use element. Id. at 395. Section 6-1-33-2 has been replaced
by section 6-1.1-31-5, which has no language requiring the State Board to consider
all of the elements listed in section 6-1.1-31-6.
See footnote Thus, Racquet Club incorrectly states
Valparaiso Golf Club established a rule that the State Board must consider
every element of section 6-1.1-31-6 in assessing real property and improvements.
The Courts inquiry does not stop here. The Court must now consider
whether the language of section 6-1.1-31-6 dictates a result similar to that reached
by the Court of Appeals in Valparaiso Golf Club. The Court may
only construe a statute if it is ambiguous. See Indianapolis Historic Partners, 694
N.E.2d at 1227. In construing a statute, this Court strives to determine
and give effect to the General Assemblys intent. See id. Words
and phrases in a statute are to be given their plain, ordinary, and
usual meaning. Riley at Jackson Remonstrance Group v. Indiana State Bd. of
Tax Commrs, 642 N.E.2d 562, 566 (Ind. Tax Ct. 1994).
Section 6-1.1-31-6(a)(1) states that the State Board shall provide for . . .
the classification of land on the basis of [factors one through nine].
The plain language of the section does not concretely require the State Board
to consider each of the nine factors in classifying land, although it could
be reasonably interpreted to have such meaning. It is thus ambiguous.
The statutory language must be considered in light of the General Assemblys purpose
of fulfilling the constitutional requirement of uniformity and equality in assessment and rate
of taxation, as well as the requirement that all property receive a just
valuation. See Indianapolis Historic Partners, 694 N.E.2d at 1228.
The Court concludes that the most logical interpretation of section 6-1.1-31-6 is that
the General Assembly intended for the State Board to consider all the factors
listed in the section when promulgating a rule, including land orders. Thus,
at a minimum, in placing a particular parcel within a specific category of
a land valuation order, the State Board, in either approving or modifying the
land order or in reviewing an assessment on appeal, must consider these statutory
factors: acreage, lots, size, location, use, productivity or earning capacity, applicable zoning
provisions, and accessibility to highways, sewers, and other public services or facilities.
Of course, the ninth factor listed leaves room for the State Board to
consider any other factor that the [State Board] determines by rule is just
and proper. Ind. Code Ann. § 6-1.1-31-6(a)(1)(ix) (West 1989). Similar to
the Court of Appeals conclusion in Valparaiso Golf Club, the Court herein observes
that section 6-1.1-31-6 does not require the State Board to apply each factor;
if the State Board considers a factor and determines that the factor is
not applicable to the parcel being reviewed, then it cannot be expected to
base its classification of the parcel on a non-applicable factor.
Racquet Club asserts that Parcels A, B and C were not classified based
upon the factors listed in section 6-1.1-31-6(a)(1). Kevin Fasick, the chief values
deputy for the Washington Township Assessors office at the time of the 1989
assessment, testified at trial.
See footnote According to Fasick, in grouping commercial properties within
Washington Township, the land valuation commission looked at distinct neighborhoods or areas where
the[re] were similar characteristics, or at least boundary lines that could be identified
clearly on a map, such as a major crossroad or a major commercial
area. (Trial Tr. at 68.) Fasick stated that the commission, in
including the parcels within the 82nd Street Corridor, did not consider the earning
capacity of the Indianapolis Racquet Club. (Trial Tr. at 72.) Further,
the commission did not consider that Parcel B did not abut 82nd
Street. (Trial Tr. at 72.) Also, the commission failed to take
into account that Parcels A and B did not have automobile access onto
82nd Street; rather, they could only be accessed via Dean Road. (Trial
Tr. at 73.) The commission also did not consider zoning of the
parcels, [e]xcept to say it was commercial. (Trial Tr. at 73.)
Terry Warrum, the hearing officer assigned by the State Board to conduct the
hearings of Racquet Clubs appeals, testified that he considered the potential and not
the actual earning capacity of the parcels; he did so by assuming the
earnings capacity was factored into the parcel of land . . . through
the valuation order, in that . . . the valuation order was arrived
at through the sale of comparable properties . . . . (Trial
Tr. at 99, 100.) Warrum accepted the classifications and property groupings of
the Order as correct. (Trial Tr. at 108-09.) Both the commission
and Warrum considered the use of the parcels, as far as whether the
property was used in a commercial, industrial or residential manner. (Trial Tr.
at 71-72, 118-19.) However, Warrum acknowledged that the type of commercial use
between Parcels A, B and C and the other commercial properties with which
it was grouped was a big difference in use. See footnote (Trial Tr. at
The trial testimony demonstrates that neither the commission nor the State Board considered
all of the statutory factors in classifying Parcels A, B and C as
part of the 82nd Street Corridor. The commission properly considered location as
a general principal in classifying commercial properties within the township. However, in
classifying the three parcels in question, the commission and the State Board overlooked
or intentionally ignored certain factors required to be considered under section 6-1.1-31-6, such
as: earning capacity of the parcels; accessibility to 82nd Street; the specific
zoning of the parcels; and the location of Parcels A and B in
relation to 82nd Street, as compared to other properties contained within the 82nd
Street Corridor description. The Court concludes that it was error not to
consider these factors in approving the Order or in reviewing the validity of
the classification of Parcels A, B and C pursuant to the Order.
Land orders are administrative rules, and section 6-1.1-3-1-6 mandates that the State Board
in approving a land order consider the listed factors.
Because the listed factors were not considered, the issue of whether Parcels A,
B and C were properly classified within the Order is remanded to the
State Board. On remand, the State Board shall assess whether, upon considering
all factors required by section 6-1.1-31-6, the parcels may be properly classified as
part of the 82nd Street Corridor or whether another classification is more appropriate.
Moreover, the State Board shall determine the appropriate base rate within the
IRC challenges the assessment of its indoor tennis courts facility on Parcel B.
IRC contends that the State Board improperly determined its base rate for
90% of the facility by applying the rates for the General Commercial Mercantile
(GCM) health club model. See Ind. Admin. Code tit. 50, r. 2.1-4-5
(1992) (general commercial and industrial cost schedules) (codified in present form at Ind.
Admin. Code tit. 50, r. 2.2-11-6 (1996)). It is IRCs position that
the State Board should have applied the base rate figures for the General
Commercial Industrial (GCI) light warehouse model to this area. See id.
According to IRC, only 10% of the facility consists of construction that is
consistent with the GCM health club model and therefore should have been assessed
by application of that model. (Petr Br. at 18.) The facility
in this 10% section is made up of a lobby, locker room, office
and retail sales areas. In contrast, IRC argues that the construction of
the remaining 90%, which is occupied by sixteen indoor tennis courts, more closely
resembles the vertical and horizontal cost elements of the GCI light warehouse model.
(Petr Br. at 18.) Consistent with that claim, IRC contends that
the tennis facility should be classified as Unfinished. (Petr Br. at 18.)
Under Indianas system for property tax assessment, assessors use cost schedules to determine
the base reproduction cost of a particular improvement. Whitley Prods., Inc. v.
State Bd. of Tax Commrs, 704 N.E.2d 1113, 1116 (Ind. Tax Ct. 1998)
(citations omitted). The cost schedules promulgated by the State Board consist of
base square foot unit rates by floor for various use and finish types
for two types of exterior walls. Ind. Admin. Code tit. 50, r.
2.1-4-3 (1992) (codified in present form at Ind. Admin. Code tit. 50, r.
2.2-10-6.1 (1996)). The State Board has categorized improvements into several models.
See id. tit. 50, r. 2.1-4-7 (codified in present form at Ind. Admin.
Code tit. 50, r. 2.2-11-1 to -3 (1996)).
See footnote These models help identify
and define various classes of buildings.
Herb v. State Bd. of Tax
Commrs, 656 N.E.2d 890, 893 (Ind. Tax Ct. 1995). The State
Board has further divided the models, as regards commercial improvements, into one of
three use-association groupings: (1) General Commercial Mercantile; (2) General Commercial Industrial; and
(3) General Commercial Residential.
See Ind. Admin. Code tit. 50, r.
2.1-4-3 (1992). In addition, the models are subdivided into one of four
descriptive classifications denoting the extent to which interior finish is included in the
base cost. Id. These classifications include: (1) Unfinished (UF); (2)
Semi-Finished (SF); (3) Finished Open (FO); and (4) Finished Divided (FD). See
The State Boards regulations do not contain a model for indoor tennis facilities.
However, Ind. Admin. Code tit. 50, r. 2.1-4-4 (1992) (codified in present
form at Ind. Admin. Code tit. 50, r. 2.2-11-5.1 (1996)) lists the proper
schedule to be used in computing the replacement cost of various commercial and
industrial improvements that do not have their own GCM or GCI model.
For tennis barns, this regulation indicates that the GCM health club model should
See id. The GCM health club model has the
MODEL: GCMHEALTH CLUBFirst
Foundation 12 Reinforced concrete perimeter grade walls to 26 high on 12 x 18
strip footings including Trench Excavation and Back-fill
Walls: See footnote
Type 1: Reinforced Concrete Block with 2 coats of masonry paint for 12 wall
Type 2: Face Brick with Block back-up for 12 wall height
Openings 1%1 ¾ Hollow Metal Door
Mechanical and Interior Components
Type: Finished Open, 10 Ceiling Height
Walls Taped and Painted Drywall on Metal Furring for a 10 Ceiling Height
Floors 40% Carpet, 50% Unfinished, and 10% Ceramic Tile
Ceiling Suspended Acoustical Tile made of mineral fiber over 50% of the floor area
Partitions Gypsum Board on Metal Studs with 10% Hollow Metal Doors with 4% density.
6 Concrete Block with Ceramic Tile 2 sides with a 2% density
Lighting Average cost typical of Finished Open uses such as a Health Club Facility
HVAC Package Air Conditioning
HTG. Only Gas Fired Forced Air
Ind. Admin. Code tit. 50, r. 2.1-4-7 (1992) (codified in present form at
Ind. Admin. Code tit. 50, r. 2.2-11-1 (1996)).
IRC contends that the GCI light warehouse model should be applied to determine
the base rate for 90% of the tennis facility. Indiana Admin. Code
tit. 50, r. 2.1-4-7 (1992) (codified in present form at Ind. Admin. Code
tit. 50, r. 2.2-11-2 (1996)) lists the characteristics of the GCI light warehouse
model. These characteristics include:
MODEL: GCILIGHT WAREHOUSEFirst
Foundation: 12 reinforced concrete perimeter grade walls to 26 high on 12 x 18
strip footings including trench excavation and back-fill
Type 1: Reinforced concrete block with two coats masonry paint for a wall height
Type 2: Common brick on concrete block backup for a wall height of 18
Openings 1% 1 ¾ hollow metal service doors
4% overhead doors
Mechanical and Interior Components
Type: Unfinished, 18 floor height
Partitions 8 hollow concrete block painted one side with a density of 100 S.F.
floor/L.F. partition to a floor hight of 18
Lighting 200 Ampere service with panel board and feeders. Fixtures are fluorescent and
include switches and receptacles.
HTG Only Gas fired, hot water boiler with unit heaters
AC Add Single zone electric cooling
The Court first notes that IRC was entitled to have its property assessed
using the correct cost schedule. See Zakutansky v. State Bd. of Tax
Commrs, 696 N.E.2d 494, 497 (Ind. Tax Ct. 1998). However, a classification
for taxation purposes is not invalid when it rests on a reasonable basis
of actual difference between those included and those excluded. Herb, 656 N.E.2d
at 894. Moreover, because a building may not conform perfectly with model
specifications, a hearing officer must use subjective judgment to decide which model the
building most closely resembles. Id. Thus, the hearing officer has some
discretion in selecting which model to use.
In Zakutansky v. State Board of Tax Commissioners, the taxpayer owned a marina
consisting of, among other things, several buildings described as simple metal pole buildings
with few distinguishing features. Zakutansky, 696 N.E.2d at 494. The taxpayer
argued that these buildings had been assessed by application of the wrong cost
schedules. Specifically, the taxpayer claimed that, because the buildings were pole barns, the
State Board should have used the Residential and Farm cost schedules, see Ind.
Admin. Code tit. 50, 2.1-3-5 (1992) (codified in present form at Ind. Admin.
Code tit. 50, r. 2.2-7-11 and -9-6 (1996)), rather than the GCM cost
schedule. See Zakutansky, 696 N.E.2d at 497.
The State Board in Zakutansky asserted three arguments in support of its assessment:
(1) the assessor is given discretion to select the appropriate model and
cost schedule based on class and usage; (2) the buildings physical features were
considered in determining the appropriate cost schedules and adjustments had been made to
reflect the quality of the construction; and (3) with appropriate adjustments, the pricing
for the buildings would be very similar for a pole barn and a
commercial building. See id. The Court disagreed with each of the
State Boards arguments, observing that the taxpayer had presented evidence showing the buildings
to be basic metal pole buildings. See id. at 497 n.6.
As to the State Boards first argument, the Court observed that the taxpayers
use of the buildings was not determinative of which cost schedule to apply.
See id. at 497. Quoting Herb v. State Board of Tax Commissioners,
656 N.E.2d 890, 893 (Ind. Tax Ct. 1995), the Court stated: The
actual use of the property is not a determinative factor in selecting the
appropriate model, but merely a starting point. As a result, the model
that most closely resembles the subject improvement with respect to physical features is
to be used, regardless of the models name.
Id. Thus, the
Court concluded that the correct cost schedule to apply was that for pricing
pole barns. See id. The Court further noted:
[T]he State Boards consideration of the quality of the building and an adjustment
based on that quality are of no avail. Nor is the fact
that the adjusted pricing using a commercial cost schedule would be very close
to that of a pole barn. The taxpayer is entitled to have
his property assessed using the correct cost schedule. Only after this is
done may adjustments for quality be made. Moreover, the fact that the
State Boards assessment was close to the assessment it would have arrived at
using the appropriate schedule does nothing to aid its position.
At trial, Stephen E. DeVoe (DeVoe), former IRC President, testified that he had
been involved with the design and construction of the tennis facility. (Trial
Tr. at 35.) He generally described the construction of the indoor tennis
courts area. DeVoe explained that steel girders on approximately twenty-four foot centers
ran all the way down the two sets of eight courts on the
north and south sides of the facility. (Trial Tr. at 35-36.)
These provided the structural support for the building. (Trial Tr. at 35.)
Each girder sits on a concrete pad. (Trial Tr. at 36.)
There is no foundation. (Trial Tr. at 36.) A layer
of brick block, approximately two blocks wide and three blocks deep, comes to
the grounds surface, providing a stable surface to attach the buildings metal sides.
(Trial Tr. at 36.) Sheet metal beams are run between the
girders; these beams support the sheet metal siding that is bolted to the
building. (Trial Tr. at 36.) No ceiling, interior walls or partitions
are present. (Trial Tr. at 37, 38.) Pad-type insulation is attached
to the sheet metal. (Trial Tr. at 37.) The facility has
no floors; only the ground lies beneath each tennis court surface. (Trial
Tr. at 37.) Unlike a standard pre-engineered kit-type warehouse, the tennis facility
has no concrete floor, no loading docks and no overhead doors. (Trial
Tr. at 37.)
In his trial testimony, DeVoe described how the tennis facility was dissimilar to
the GCM health club model. He stated that the 90% of tennis
facility in question lacked these features found in the health club model:
(1) foundation with reinforced concrete perimeter grade walls; (2) interior walls; (3) 10
ceiling height; (4) carpet or ceramic tile; (5) suspended acoustical tile; (6) partitions;
(7) gas fired forced air heating; or (8) air conditioning. (Trial Tr.
at 40.) In addition, DeVoe indicated that the tennis facility had no
second story, so no comparison to the upper story characteristics for the GCM
health club model was necessary. (Trial Tr. at 40.)
DeVoe also compared the tennis facility to the GCI light warehouse model.
He indicated that the tennis facility possessed certain features contained in that model,
including: (1) 18 floor heights; (2) some 8 hollow concrete block; and
(3) 200 plus ampere service. (Trial Tr. at 41.)
He stated too that, consistent with this model, the tennis facility could be
classified as Unfinished. (Trial Tr. at 41.) Further, DeVoe testified that
the tennis facility, as regards the 90% under review, used tennis court lighting
and gas space heaters. (Trial Tr. at 40.) This contrasts with
the fluorescent light fixtures and gas fired heating provided for in the light
warehouse model. See Ind. Admin. Code tit. 50, r. 2.1-4-7. Also,
unlike the light warehouse model, the tennis facilitys indoor courts area had no
hot water boiler. (Trial Tr. at 41.) DeVoe acknowledged that the
tennis facility did not possess all the features of the light warehouse model.
(Trial Tr. at 41.)
At trial, Hearing Officer Warrum testified that he used the health club model
as his starting point for assessing the tennis facility because the Indiana Assessment
Manual instructed that the health club model was the proper schedule to use
in calculating the replacement cost for a tennis barn. (Trial Tr. at
101-02.) See also Ind. Admin. Code tit. 50, r. 2.1-4-4. According
to Warrum, had another model better matched the tennis facilitys structure, he would
have applied that alternative model. (Trial Tr. at 102.) However, Warrum
indicated that he had found no other model more closely resembling the tennis
facilitys structure. (Trial Tr. at 102.) Warrum explained that he had
compared the tennis facilitys features with those listed in both the health club
and light warehouse models. (Trial Tr. at 102.) He saw that
both models deviated from the tennis facilitys actual features and concluded that application
of either model was a middle-of-the-road decision. (Trial Tr. at 102.)
Warrum qualified that statement by observing that the tennis facility more closely .
. . resembled [the] health club [model], in that it had a health
club reference in the [Indiana Assessment Manual], so I leaned that way when
making the decision and adjusted from that basis. (Trial Tr. at 102.)
IRC had an affirmative duty to present evidence showing that the State Board
abused its discretion in selecting the health club model. See Herb, 656
N.E.2d at 894. As described supra, the 90% of the tennis facility
in dispute lacked a substantial number of features described in the health club
model, such as interior walls, carpet and tile floor, 10 ceiling heights with
suspended acoustical tile, and air conditioning and gas fired forced air. In
contrast, this part of the building did have eighteen feet wall heights and
some eight-inch hollow concrete blocksfeatures found in the health club model. Further,
the interior of the tennis facility better matches the description Unfinished: walls
are made of sheet metal with insulation attached; no ceilings are present; and
there are no floors, merely tennis court surfaces. The health club model
includes the Finished Open type, which describes features directly opposite those of the
tennis facility, i.e., finished walls, ceiling, and flooring. Ind. Code Ann. tit.
50, r. 2.1-4-3 (1992). Warrum primarily supports his selection of the health
club model by referencing the Indiana Assessment Manuels instructions to apply that model
to tennis barns. See Ind. Admin Code tit. 50, r. 2.1-4-4.
Substantial evidence does not support the State Boards application of the health club
model to the 90% of the tennis facility under consideration. Considered in
its entirety, the evidence shows that the tennis facilitys features clearly better match
those of the light warehouse model than those of the health club model.
Therefore, the Court concludes that IRC has carried its burden to show
that the State Board abused its discretion by applying the wrong model in
assessing the tennis facility.
The State Board defends its assessment by explaining that Warrum adjusted the assessment
for the features this building lacked, such as interior finish, division walls, heating
and air conditioning. Furthermore, he adjusted the overall grade for the building
down to D-1 to further account for more general differences from the selected
(Respt Br. at 13.) It is true that Warrum adjusted the
tennis facilitys base rate downward because the building lacked the mentioned features; he
also included a positive adjustment for additional lighting. (Trial Tr. at 104.)
In all, these adjustments lowered the buildings base rate from $28.65 to
$19.61 per square foot. (Trial Tr. at 105; Respt Ex. D.)
It is equally true that Warrum assigned the building a grade of D
See footnote (Trial Tr. at 106; Respt Ex. D.) Warrum selected
this grade after pricing the building using the light warehouse model, comparing that
price to his calculation using the health club model and then deriving a
percentage from the ratio of those two calculations. (Trial Tr. at 106.)
He derived the D minus one grade from that percentage. (Trial
Tr. at 106.) Based upon Warrums testimony as to his methodology regarding
the base rate adjustments and grading, the State Board asserts that his calculations
were not arbitrary or capricious decisions. (Respt Br. at 13.)
This Court considered and rejected similar reasoning by the State Board in
where the State Board defended its use of the wrong cost schedule by
arguing that adjustments to the subject improvements base rate calculation had been made
to reflect the quality of the improvements construction. See Zakutansky, 696 N.E.2d
at 497. The Court in Zakutansky concluded that the taxpayer was entitled
to have his property assessed using the correct cost schedule. See id.
Only after this is done may adjustments for quality be made.
Id. Applying this same rationale to the facts at hand, the Court
concludes that, regardless of the appropriateness of either Warrums adjustments or his grading,
these corrections could only have been properly made after a base rate had
been calculated under the correct cost schedule. Warrum applied the wrong cost
schedule. Therefore, IRC is entitled to have the tennis facility valued pursuant
to the correct cost schedule.
The Court concludes that the State Board abused its discretion by applying the
health club model in determining the tennis facilitys reproduction cost. Upon remand,
the State Board must apply the model that most closely resembles the physical
structure of the tennis facility area being considered and recalculate the facilitys reproduction
costs based upon that model.
For the foregoing reasons, the Court hereby REVERSES the State Boards final assessment
determinations and REMANDS these causes to the State Board for further proceedings consistent
with this opinion.
See footnote Racquet Club is reminded that, on remand, it bears
the burden of going forward with probative evidence concerning the proper classification of
Parcels A, B and C within the Order and the appropriate base rate
to be assigned the parcels.
See Whitley Prods., 704 N.E.2d at 1121.
In like manner, IRC must come forward with probative evidence concerning the
appropriate model to use in calculating the base rate for the 90% of
its indoor tennis facility at issue, including but not limited to evidence regarding
the proper grade to be assigned the subject improvement.
Cause Number 49T10-9607-TA-00088 was assigned to the appeal of the assessment for
Cause number 49T10-9609-TA-00119 was assigned to the appeal of the assessment
for Parcel B.
Cause Number 49T10-9609-TA-00126 was assigned to the appeal of the assessment
for Parcel C.
IRC requested in its petition for original tax appeal for Parcel B
that the appeals for Parcels A and B be consolidated with the appeal
in cause number 49T10-9609-TA-00120 of another parcel owned by IRC, parcel number 4017437
(Parcel D), which parcel is located at 4901 North Shadeland Avenue in Indianapolis.
Pursuant to this Courts order dated February 7, 1997, proceedings in the
appeal of Parcel D were stayed pending the Courts decision in the appeal
of Parcel A. Although no order consolidating the appeals of Parcels A,
B and C has been issued, the Court and the parties without dispute
have treated the cases as having been consolidated.
The parties used this designation at trial. (Trial Tr. at
The State Board, on page four of its post trial brief,
The street curves through this area so that at the west end it
is identified as 86th, but at the east end of the described area
the same street is identified as 82nd. The land order clearly intended
to describe this street as it runs between Allisonville Road and Keystone Avenue.
It is also clear that the evidence in this case uses 82nd
and 86th to refer to the same section of the street through this
Thus, the Courts references to the 82nd Street Corridor encompasses any part of
86th Street technically falling within the section designated as page 22 in Section
IV of the Order.
There is some confusion as to whether the Order in fact
classified the parcels within the 82nd Street Corridor area, because Parcel A merely
touches 82nd Street at the tip of the parcels northeast corner and Parcel
B does not touch 82nd Street at all. (Petr Ex. 5.)
There is no question that all parcels are designated part of the 82nd
Street Corridor if one interprets the abbreviation fr preceding Dean Rd. in the
description as meaning fronting. (Trial Tr. at 117.) However, this interpretation
is inconsistent with the second use of the abbreviation in the description, i.e.
fr 86th St. The evidence indicates that the land valuation commission clearly
placed the parcels within the 82nd Street Corridor area. (Trial Tr. at
69.) Moreover, the parties arguments are essentially based upon this understanding.
Therefore, the Court finds that Parcels A, B, and C were included within
the 82nd Street Corridor area.
The current version of section 6-1.1-4-13.6 provides in part that the township
assessor shall determine the values of all classes of commercial, industrial, and residential
land . . . in the township using guidelines determined by the [State
Board]. The assessor then submits the land values to the county property
tax assessment board of appeals. See Ind. Code Ann. § 6-1.1-4-13.6 (West
Supp. 1999). After giving proper notice, the board of appeals must hold
a public hearing on the land values. See id. The board
of appeals may modify the values submitted if it deems such modification necessary
to provide uniformity and equality. Id. Thus, unlike with the
prior version of this section, the State Board currently does not review the
Instead, section 6-1.1-31-5 states, among other things, that the rules promulgated by
the State Board are the basis for determining a propertys true tax value
and that local assessing officials shall comply with the State Boards rules and
use the forms prescribed by the State Board. In addition, section 6-1.1-31-5
allows township assessors to use other factors in addition to those not prescribed
by the State Board, if those factors are indicated in the assessors records
for each individual assessment.
The Court is precluded from considering issues and evidence not presented
to the State Board. See Whitley Prods., Inc. v. State Bd. of
Tax Commrs, 704 N.E.2d 1113, 1119 (Ind. Tax Ct. 1998)(citing Ind. Code Ann.
§ 33-3-5-14 (West 1996)), review denied, 714 N.E.2d 174 (Ind. 1999). Other
than the hearing officer, only those witnesses who testified at the State Boards
hearing may testify before the Tax Court, and they may only testify to
those facts to which they testified before the State Board. See North
Park Cinemas, Inc. v. State Bd. of Tax Commrs, 689 N.E.2d 765, 767
(Ind. Tax Ct. 1997) (quoting State Bd. of Tax Commrs v. Gatling Gun
Club, Inc., 420 N.E.2d 1324, 1328 (Ind. Ct. App. 1981)). The trial
transcript does not reflect and the parties do not indicate whether Fasick testified
at the State Board hearing. On direct examination, the State called Fasick
as its first witness. The Racquet Club did not object. Because
there was no objection to Fasicks testimony at trial, the Court assumes that
the evidence provided by Fasick was presented at the administrative level. See
Barth, Inc. v. State Bd. of Tax Commrs, 699 N.E.2d 800, 803 n.7
(Ind. Tax Ct. 1998)(quoting Indiana Assn of Seventh Day-Adventists v. State Bd. of
Tax Commrs, 512 N.E.2d 936, 940 (Ind. Tax Ct. 1987)), rehg denied.
The Court further notes that it is well settled law in Indiana that
boards and commissions speak or act officially only through the minutes and records
made at duly organized meetings.
Scott v. City of Seymour, 659 N.E.2d
585, 590 (Ind. Ct. App. 1995) (citing Brademas v. St. Joseph County Commrs,
621 N.E.2d 1133, 1137 (Ind. Ct. App. 1993)); see also Carter v. Allen,
631 N.E.2d 503, 509 n.4 (Ind. Ct. App. 1994) (observing that trial court
correctly excluded testimony of two members of the Crawford County Commissioners, which testimony
was inadmissible to prove the legislative intent of the full body). Given
this legal principle, the Court has concerns as to whether Fasick, an employee
of the township assessor, was a competent witness for purposes of showing the
land valuation commissions intent. However, as stated supra, no objection was made to
his testimony. The Court therefore saves for another day questions regarding the
propriety and admissibility of such testimony.
Parcels A and B are zoned SU-3, a special use category
for golf courses for which IRC has a variance to operate its tennis
courts. (Trial Tr. at 27; Petr Ex. 11.) Parcel C is
zoned C-1, a buffer commercial district separating residential properties from more intense commercial
or industrial areas/districts. (Petr Exs. 11, 29.) Racquet Club contends that
Parcels A, B and C are grouped in the Order with other properties
having zonings and usages of a type and density not permitted on the
parcels because of their respective zoning classifications. As the State Board concedes,
Racquet Clubs parcels would have to be rezoned to allow retail development such
as occurred elsewhere along 82nd Street. (Respt Post Trial Br. at 6.)
Thus, it is important in the present case to consider the parcels
specific types of commercial zoning when classifying them pursuant to section 6-1.1-31-6 because
of the varying degrees of economic activity permitted within the different zoning categories.
Ind. Admin. Code tit. 50, r. 2.2-10-6.1 (1996) describes a model as
a conceptual tool used to replicate reproduction cost of a given structure using
typical construction materials. The model assumes that there are certain elements of construction
for a given use type.
The General Commercial Mercantile grouping is used in use-types generally associated with
mercantile districts. Ind. Admin. Code tit. 50, r. 2.1-4-3 (1992). The
General Commercial Industrial grouping includes those use-types generally associated with industrial related operations.
Id. The General Commercial Residential (GCR) grouping includes those use-types generally
associated with commercial operated residential accommodations, which are more typical of residential type
construction . . . . Id. Current regulations add a fourth
grouping, General Commercial Kit (GCK), which does not include use type descriptions.
See Ind. Admin. Code tit. 50, r. 2.2-10-6.1 (1996). The base rate
schedules for each use-association grouping can be found at Ind. Admin. Code tit.
50, r. 2.1-4-5 (1992) (codified in present form at Ind. Admin. Code tit.
50, r. 2.2-11-6 (1996)).
The regulations do not define the term tennis barn. However,
IRC does not question whether the State Board or local assessing officials properly
characterized its indoor tennis facility as a tennis barn. Thus, the Court
will not consider the issue.
Basement, first floor, and upper floor prices are given for the various
use-types. Ind. Admin. Code tit. 50, r. 2.1-4-3 (1992) (codified in present
form at Ind. Admin. Code tit. 50, r. 2.2-10-6.1 (1996)).
Ind. Admin. Code tit. 50, r. 2.1-4-3 (1992) provides that Base rates
for each use-type are given for two exterior wall types with the exception
of parking garages, for which there are three.
The quoted language from Herb reflects testimony by the hearing officer assigned
the case, as well as testimony by a State Board Commissioner. See
Herb, 656 N.E.2d at 893. The Court in Herb further explained:
Thus, while the model names are reflective of use, the model specifications actually
reflect the physical features that are incorporated into the structure. Id.
To adjust for variations between the structure and the model, the
State Boards regulations provide schedules showing the costs of components. For any
item to which value is assigned, but does not exist in the subject
building, the value assigned should be subtracted. Wareco Enters., Inc. v. State
Bd. of Tax Commrs, 689 N.E.2d 1299, 1302 (Ind. Tax Ct. 1997) (citing
Ind. Admin. Code tit. 50, r. 2.1-4-3). Use of these separate schedules
is the preferred method for accounting for a buildings deviations from the appropriate
model and associated cost schedule. See Whitley Prods., Inc. v. State Bd.
of Tax Commrs, 704 N.E.2d 1113, 1117 (Ind. Tax Ct. 1998) (citations omitted).
This allows an assessor to adjust the base reproduction cost of the
improvement objectively. Id. (citations omitted). However, an assessing official may also
account for an improvements deviation from the model via adjustment to the buildings
grade. See id. An improvement is assigned a grade based upon
its material, design and workmanship. See id. at 1116 (citing Ind. Admin.
Code tit. 50, r. 2.1-4-3). The grades represent multipliers that are applied
to the base reproduction cost of an improvement as calculated by using the
cost schedules provided in State Board regulations. Id. (citing Zakutansky, 696 N.E.2d
at 496 n.5). This type of adjustment requires the assessors subjective judgment
and, [w]here possible, . . . should be avoided. Id. at 1117
The Court notes that the tennis facility in question is actually pictured
in the Departments regulations at Ind. Code Ann. tit. 50, r. 2.1-4-6 (1992)
(codified in present form at Ind. Code Ann. tit. 50, r. 2.2-11-4.1 (1996)).
The tennis facility is depicted as an example of a light warehouse
with a grade of C. The picture, of course, serves only as
an indication of grade and not a determination of the actual grade factor
of the structure shown. Id. The Court realizes that the light
warehouse caption likewise does not mean that the State Board has determined that
the light warehouse model applies in assessing the buildings value. The Court
does understand, though, how IRC might reasonably question the merits of the State
Boards decesion when the very regulations it interprets as defeating IRCs claim appear
on their face to directly support IRCs contention that the light warehouse model
most closely resembles the tennis facilitys actual structure.
In its appeal of Parcel A, IRC identifies a mathematical error
on the property record card. The property record card indicates that Parcel
A has eight tennis courts valued at $8300 each, with a total reproduction
cost of $88,300. (Pet. for Original Tax Appeal, ¶ 7 & Ex.
B.) However, eight multiplied by $8300 equals $66,400. Thus, the property record
card overstates the assessed value of the tennis courts by $21,900. In
its Answer to IRCs petition, the State Board admits that the error exists
but denies that the error was raised during the prior administrative proceedings.
(Respt Answer, ¶ 7.) Therefore, the State Board contends that no relief should
be granted as to this miscalculation. (Respt Answer, ¶ 7.) However,
Warrum testified that he prepared property record cards reflecting changes that he made.
(Trial Tr. at 86.) Warrums property record card for Parcel A
was admitted as Respondents Exhibit E. This exhibit contains the calculation error
in question. Because Warrum made the error after hearing IRCs appeal, IRC
did not have the opportunity to challenge his mistake until raising the issue
during the original tax appeal of Parcel A. Therefore, the Court concludes
that, upon remand, the State Board should correct the obvious mathematical error as
requested by IRC.
While IRC has demonstrated that the light warehouse model is better than
the health club model, for purposes of assessing the disputed 90% of the
tennis facility, the State Board on remand may consider whether a different model
even more closely resembles the tennis facilitys physical structure. Also, as IRC
correctly observes, the Departments regulations permit application of a separate base rate for
each distinct area of a building with two or more use types.
See Ind. Admin. Code tit 50, r. 2.1-4-1 (1992) (providing formula for determining
base rate for mixed use building) (codified in present form at Ind. Admin.
Code tit 50, 2.2-10-2 (1996)).