ATTORNEYS FOR PETITIONER: ATTORNEYS FOR RESPONDENT:
DAVID L. PIPPEN STEVE CARTER
Attorney at Law ATTORNEY GENERAL OF INDIANA
Indianapolis, IN Indianapolis, IN
VINCENT S. MIRKOV
DEPUTY ATTORNEY GENERAL
INDIANA TAX COURT
CANAL REALTY-INDY CASTOR, )
v. ) Cause No. 49T10-9803-TA-23
STATE BOARD OF TAX COMMISSIONERS, )
ON APPEAL FROM A FINAL DETERMINATION OF THE
STATE BOARD OF TAX COMMISSIONERS
February 5, 2001
Petitioner Canal Realty-Indy Castor (Canal) appeals the final determination of the State
Board of Tax Commissioners (State Board) establishing the assessed value of Canals property
as of March 1, 1992. Canal presents various issues for the Courts
consideration, which the Court restates as:
I. Whether the State Board erroneously denied Canal an additional obsolescence adjustment
for the subject improvements;
II. Whether the State Board violated Canals due process rights when it
sua sponte assessed paving on the subject property after its hearing officer inspected
the property, where the State Board only permitted Canal an opportunity to respond
via written communication with the hearing officer; and
III. Whether the State Board incorrectly valued the paving on the subject
See footnote FACTS AND PROCEDURAL HISTORY
Canal owns the subject property located in Marion County, Indiana. The township
assessor initially valued the subject land at $10,830 and the subject improvements at
$86,900, and the Marion County Board of Review sustained these values. On
February 9, 1994, Canal filed a Form 131 petition for review challenging these
assessed values. Specifically, Canal asserted the following: Excessive amount of land
classified as primary. Additional obsolescence depreciation should be applied. (State Bd.
Tr., Ex. A.) On November 17, 1995, the State Board conducted an
administrative hearing on the petition.
At some point, Hearing Officer Norman Binford sent Canals taxpayer representative, Mr. M.
Drew Miller, a letter stating in part that No assessment has been made
in regards to the paving of this parcel. It is determined that
57,050 square feet of paving exists.
(Joint Ex. 1.) Furthermore, Binford
indicated the condition and age of the paving and posited that it should
be priced at ninety cents per square foot.
Id. In the
letter, Binford valued the paving at $8400. Id. The letter gave
Miller ten days to present any additional evidence that will have a bearing
on these issues. Id.
Miller responded in a letter dated January 15, 1997, in which he opined
that the paving is in such poor condition that it does not add
value to the property and should not be assessed. (State Bd. Tr.,
Ex. C.) In addition, Miller requested that Binford forward to him all
evidence that was gathered outside the administrative hearing and further requested an opportunity
to respond to the evidence. Id. He also wanted [e]vidence gathered
in determining that additional obsolescence depreciation should or should not be applied.
In a letter dated April 23, 1997, Binford explained that the pavings age
was an estimate and that he would consider any evidence showing the paving
to be older. (State Bd. Tr., Ex. D.) He asked that
Miller forward any information that tends to prove [the pavings] actual age within
ten (10) days. Id. Also, Binford stated that the pavings condition
was determined by physical examination of the property in November of 1996 and
that its square footage was determined from a photograph made in the spring
of 1985 with a scale of enlargement of 1 [inch] to 100 [feet].
Id. As regards obsolescence, he wrote Obsolescence applied by the [County
Board of Review] is determined to be without error. No evidence is
presented that additional obsolescence is warranted. Id.
Miller replied via letter dated April 30, 1997:
Again with regard to the paving, we need to know what evidence you
gathered outside the hearing held 11/17/95 that the paving was in fact in
existence on 03/01/92 or whether it was refurbished after 03/01/92 but before your
inspection date. Also, how was it determined that all of the paving
sits on this parcel[?] Finally what evidence did you gather to show
that the paving actually adds value to the property[?]
(State Bd. Tr., Ex. E.) ANALYSIS AND OPINION
The State Board issued its final determination on January 28, 1998. With
respect to obsolescence, the State Board concluded: Obsolescence depreciation can not be
granted without either supportable evidence submitted by the petitioner or without verification from
inspection of the structures. After inspecting the structures it is determined that
there are no symptoms to support the application of additional obsolescence depreciation.
It is determined there is no additional obsolescence granted.
(State Bd. Tr.,
Ex. F.) Also, the State Board stated that, after inspection of the
site, it is determined there is 57,050 square feet of paving that was
omitted from the assessment. A change is made as a result of
this finding. Id.
Canal filed this original tax appeal on March 13, 1998. The Court
conducted a trial on November 9, 1998. Additional facts will be supplied
Standard of Review
The Court gives great deference to the State Boards final determinations when the
State Board acts within the scope of its authority. Wetzel Enters., Inc.
v. State Bd. of Tax Commrs, 694 N.E.2d 1259, 1261 (Ind. Tax Ct.
1998). Accordingly, this 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. Id. The taxpayer
bears the burden of demonstrating the invalidity of the State Boards final determination.
Clark v. State Bd. of Tax Commrs, 694 N.E.2d 1230, 1233 (Ind.
Tax Ct. 1998).
Canal contends that the State Board failed to meaningfully consider its evidence of
obsolescence and provided no evidence or explanation for its determination that an additional
obsolescence adjustment was not warranted under the circumstances. According to Canal, it
presented the State Board with an accepted appraisal method and data necessary to
properly calculate obsolescence depreciation. (Petr Br. at 5.) The State Board
maintains that Canal failed to show why the assigned obsolescence adjustment was incorrect.
The State Board argues that Canal offers no probative evidence as to
obsolescence, so that the State Boards duty to support its final determination with
substantial evidence on this issue was never triggered. (Respt Br. at 6-8)
(citing Whitley Prods., Inc. v. State Bd. of Tax Commrs, 704 N.E.2d 1113
(Ind. Tax Ct. 1998), review denied).
Obsolescence Depreciation is composed of functional and economic loss of value. Functional
Obsolescence . . . is evidenced by conditions within the property. Economic obsolescence
is caused by factors external to the property. Ind. Admin. Code tit.
50, r. 2.1-5-1 (1992) (codified in present form at id., 2.2-10-7(e) (1996)).
Obsolescence is expressed as a percentage reduction in the remaining value of the
subject improvement. Id. (codified in present form at id., r. 2.2-10-7(f) (1996)).
Determination of obsolescence involves (1) identification of causes of obsolescence and (2)
quantification of the amount of obsolescence to be applied. Clark, 694 N.E.2d
at 1238. The regulations list various causes of functional and economic obsolescence.
Ind. Admin. Code tit. 50, r. 2.1-5-1 (1992). The list is illustrative,
not exhaustive. Lake County Trust v. State Bd. of Tax Commrs, 694
N.E.2d 1253, 1257 (Ind. Tax Ct. 1998), review denied. To quantify obsolescence,
parties may use generally recognized appraisal methods. Clark, 694 N.E.2d at 1242
The parties agree that obsolescence is present in the subject improvements. Therefore,
quantification of obsolescence, not the identification of causes thereof, is the issue here.
Phelps Dodge v. State Bd. of Tax Commrs, 705 N.E.2d 1099, 1102
(Ind. Tax Ct. 1999) (stating that fact that parties agree on causes of
obsolescence obviates [taxpayers] burden of offering probative evidence showing that the subject improvements
experience obsolescence), review denied. Canal submitted an Assessment Review and Analysis (Review)
to support its argument for an increased obsolescence adjustment.
See footnote (Joint Ex. 2.)
The Review states that 60% overall obsolescence should be applied
to the subject property. (Joint Ex. 2.) Included in the Review
are four pages from a manual on property assessment. Canal does not
identify the title of the manual. At trial, a witness for Canal,
Mr. Lance Rickard, identified the information as a section from the Property Assessment
Valuation Manual and stated that it is a publication by the International Association
of Assessing Officers (IAAO). (Trial Tr. at 12.) The section copied
is titled Methods of Measuring Depreciation and states There are six methods used
to measure accrued depreciation, including the Comparative Sales Data Method. (Joint Ex.
2.) According to the IAAOs Manual, this method estimates accrued depreciation by
using the replacement cost new of the subject building and incorporating sales data
from Buildings of similar age, condition, and desirability that have been sold recently.
Id. The Review also contains data from two sales of allegedly
comparable properties. Id.
Assuming, without holding, that the comparative sales data method advocated by Canal is
a generally recognized appraisal method,
See footnote the Court observes that Canal has failed to
present a prima facie case as to quantification of obsolescence. First, that
a sixty percent obsolescence adjustment should be applied is a conclusory observation that
does not constitute probative evidence.See footnote
Cf. CDI, Inc. v. State Bd. of
Tax Commrs, 725 N.E.2d 1015, 1019 (Ind. Tax Ct. 2000) (addressing grade).
Second, the Review does not explain how the listed sales information, when using
the comparative sales data method, supports application of a 60% obsolescence adjustment.
In fact, Canal has made absolutely no effort to quantify obsolescence in this
case. At trial, Rickard testified that the Review does not show the
exact calculation, but from looking at the data thats presented here it would
be very easy to calculate that overall depreciation factor based on the two
comparable sales that are in here and then quantifying that . . .
obsolescence based on whatever physical deterioration is on the property record card.
(Trial Tr. at 13-14.) The Court can only speculate as
to why, if the calculation would be very easy as Rickard opines, Canal
failed to make the calculations. Rather, Canal expects the Court to make
the obsolescence calculations using the information provided by the Review. The Court
refuses to perform Canals work for it. CDI, 725 N.E.2d at 1020.
Canals efforts with respect to quantification in this case are, at best,
Id. In this case, calculation of obsolescence is a
key part of Canals argument. A party who stands to be adversely
affected by a petition for review has an obvious responsibility to present evidence
and argument in support of its position. North Park Cinemas v. State Bd.
of Tax Commrs, 689 N.E.2d 765, 769 (Ind. Tax Ct. 1997) (emphasis added).
Although Canal presented no prima facie case as to the quantification of obsolescence,
it did not have to do so in this case in order to
trigger the State Boards duty to support its quantification with substantial evidence.
Fortunately for Canal, the administrative hearing in this matter took place in 1995.
In Clark v. State Board of Tax Commissioners, 694 N.E.2d 1230, 1241
(Ind. Tax Ct. 1998), this Court held that it would not consider taxpayer
complaints concerning obsolescence in cases where the State Board holds administrative hearings after
April 24, 1998 (the date of the Clark opinion), unless the taxpayer has
identified the causes of the alleged obsolescence and presented probative evidence that would
support a quantification of obsolescence at the administrative level. Thus, in this
pre-Clark case, the State Board was obligated to support its quantification with substantial
evidence regardless of Canals woefully inadequate quantification efforts.
The State Boards final determination does not alter the Board of Reviews quantification
of obsolescence. (State Bd. Tr., Ex. F.) It states first that,
following inspection of the subject property, no causes of obsolescence were discovered to
support the application of an additional obsolescence adjustment. Id. The final
determination then states that It is determined there is no additional obsolescence granted.
Id. See also (State Bd. Tr., Ex. D) (letter from hearing
officer stating that Obsolescence applied by the [Board of Review] is determined to
be without error). Thus, the State Board affirmatively determined that the Board
of Reviews quantification of obsolescence was correct.
In Loveless Construction Co. v. State Board of Tax Commissioners, 695 N.E.2d
1045, 1048 (Ind. Tax Ct. 1998), the State Boards final determination used similar
language to deny the taxpayers request for an additional obsolescence adjustment beyond the
five percent reduction awarded by the Board of Review. The State Board
in Loveless argued that it was merely preserving the status quo, in the
absence of probative evidence by the taxpayer with respect to quantification of obsolescence.
Id. The Court, however, held that the taxpayer was permitted to
show that the State Boards final determination was not supported by substantial evidence.
Id. See also FreudenbergNOK General Partnership v. State Bd. of Tax
Commrs, 715 N.E.2d 1026, 1029-30 (Ind. Tax Ct. 1999) (holding that State Board
was obligated to support its decision affirming Board of Reviews application of a
twenty percent obsolescence adjustment with substantial evidence, where State Board simply stated that
[taxpayer] did not present evidence supporting the need for additional obsolescence), review denied.
As in Loveless, the State Board in the present case was obligated to
support its approval of the Board of Reviews quantification of obsolescence with substantial
evidence. A review of the record reveals no evidentiary basis for the
State Boards decision. Therefore, its final determination approving the Board of Reviews
quantification of obsolescence is REVERSED and REMANDED.
Upon remand, Canal must submit probative evidence sufficient to establish a prima facie
case as to the quantification of obsolescence. Clark, 694 N.E.2d at 1241.
The State Board, in turn, must deal with the taxpayers probative evidence
in a meaningful manner. Loveless, 695 N.E.2d at 1049. If the
taxpayer establishes a prima facie case on this issue, the State Board must
rebut Canals evidence and support its final determination with substantial evidence. Id.
To carry its burden of production, the State Board must do more
than merely assert that it assessed the property correctly. Instead, the State
Board must offer an authoritative explanation of its decision to discount the taxpayers
prima facie case. Id. (citations omitted).
If the State Board deems Canals evidence non-probative or concludes that Canal has
not presented a prima facie case as to quantification
See footnote of obsolescence, it should
indicate this in its final determination. Then, the State Board may merely
state in its final determination that Canal takes nothing by its petition.
In this way, the State Board neither passes judgment on nor endorses the
accuracy of the Board of Reviews decision. In that event, the Board
of Reviews quantification of obsolescence stands automatically.
Cf. Clark v. State Bd.
of Tax Commrs, No. 49T10-9701-TA-53, 2001 WL 16015, at *3 n.5 (Ind. Tax
Ct. Jan. 8, 2001) (applying similar analysis in taxpayers challenge as to grade).
If Canal does not establish a prima facie case of quantification and
the State Board chooses to change the assigned obsolescence adjustment, then it must
support its quantification of obsolescence with substantial evidence if Canal is prejudiced by
the State Boards action. Cf. id.
II. Due Process
Canal claims that the State Board violated Canals right to due process when
the State Board assigned value to previously non-assessed paving on the subject property
sua sponte without giving Canal an opportunity to address issues raised by the
assessment. Canal questions whether the paving adds value to the subject property,
a prerequisite for its assessment pursuant to Ind. Admin. Code tit. 50, r.
2.1-4-3(g)(2) (1992), which provides Only those yard improvements that add value to the
property and that are not included in land improvements are included in the
replacement cost estimate. According to Canal, the assessments are in error due
to the failure of the State Board to provide the taxpayer with an
opportunity to meet the issue of the value of the paving. (Petr
Br. at 5.)
The State Board, upon hearing an appeal initiated by a taxpayer pursuant to
Ind. Code § 6-1.1-15-3 (the Form 131 review process), may assess the property
in question, correcting any errors which may have been made. Ind. Code Ann.
§ 6-1.1-15-4(a) (West 1989) (amended 1993, 1995 & 1997). Thus, the State
Board may address and correct errors not raised in a taxpayers petition for
review. Castello v. State Bd. of Tax Commrs, 638 N.E.2d 1362, 1364
(Ind. Tax Ct. 1994) (quoting Wirth v. State Bd. of Tax Commrs, 613
N.E.2d 874, 879 (Ind. Tax Ct. 1993)). However, if the State Board
does choose to address issues not raised by the taxpayer, the taxpayer is
constitutionally empowered to respond to the State Boards disposition of those issues.
Id. (citing Wirth, 613 N.E.2d at 879). When the State Board considers
ex parte evidence, the State Board is required to provide taxpayers an opportunity
to review and rebut that ex parte evidence. Castello, 638 N.E.2d at
1365. See also State Bd. of Tax Commrs v. Oliverius, 156 Ind.
App. 46, 294 N.E.2d 646, 651 (1973) (noting that, in Indiana, administrative decisions
deny due process when an agency considers ex parte evidence and a party
is not afforded an opportunity to rebut the evidence).
The issue is whether Binfords correspondence with Miller constituted a sufficient opportunity to
review and rebut the State Boards ex parte evidence under the circumstances.
Whether it did is fact specific. See City of Mitchell v. Graves, 612
N.E.2d 149, 152 (Ind. Ct. App. 1993) (In determining whether constitutional requirements of
due process have been met, courts should take cognizance of the practicalities and
peculiarities of each particular case.) Without so stating in its briefs, Canal
seems to argue that the State Board was obligated to conduct another administrative
hearing to consider evidence of the pavings value. However, the law does
not require another hearing in this case. Due process requires an opportunity
to review and rebut the State Boards evidence but does not require an
administrative hearing to do so under these circumstances.
See footnote In
Castello v. State
Board of Tax Commissioners, 638 N.E.2d 1362, 1364-65 (Ind. Tax Ct. 1994), the
State Board reassessed the taxpayers land, buildings and asphalt after inspection, and the
taxpayers were never given an initial opportunity to rebut the reassessment. Therefore,
the Court remanded the issue to the State Board for additional administrative review,
deeming the State Board the appropriate arena to address the reassessment of the
Id. at 1365.
In the present case, Canal was given an opportunity to review and rebut
the ex parte evidence. Canal, via Miller, was given ten days from
the date of Binfords initial letter to present evidence responding to the proposed
assessment. (Joint Ex. 1.) Instead of providing additional evidence, Miller sent
Binford a letter requesting all evidence gathered by the State Board and requesting
a hearing. (State Bd. Tr., Ex. C.) Binford responded by letter
that he had estimated the pavings age, that the pavings condition was determined
by physical examination of the property in Novmber 1996 and that the pavings
square footage was determined by reference to a photograph furnished by the State
Land Office. (State Bd. Tr., Ex. D.) The photograph was produced
at trial. (Joint Ex. 4.) Binford gave Miller an additional ten
days to respond. (State Bd. Tr., Ex. D.) Miller again responded
via letter, requesting more information but supplying no evidence regarding the pavings construction.
(State Bd. Tr., Ex. E.) Although Miller had no opportunity to cross-examine
Binford, he did have an opportunity to review the evidence considered by Binford
and to rebut the State Boards evidence in writing. Moreover, there is
no indication that Miller lacked access to his clients property. That he
chose not to review and rebut the State Boards evidence does not mean
that he had no reasonable opportunity to do so. Therefore, the Court
holds that the State Board did not deny Canals due process rights in
declining to conduct a second hearing on the issue of the pavings value.
III. Value of Paving
In Castello, the Court observed In the typical case, when the State Board
has given the taxpayer an opportunity to rebut, the taxpayer retains the burden
in this Court to show evidence [that] the State Boards decision was unsupported
by substantial evidence, constitutes an abuse of discretion, exceeds statutory authority, or is
arbitrary and capricious. 638 N.E.2d at 1365 n.3. Having been
given an opportunity to rebut the State Boards evidence at the administrative level,
Canal now bears the burden of demonstrating that the State Boards assessment was
invalid. Clark, 694 N.E.2d at 1233. In other words, Canal must
provide the Court with probative evidence as to the pavings value or lack
thereof. See Sterling Mgmt.-Orchard Ridge Apartments, 730 N.E.2d 828, 834 (Ind. Tax
Ct. 2000). This includes probative evidence as to the pavings condition, for
purposes of challenging the physical depreciation assigned to the paving. See CDI, 725
N.E.2d at 1022 (addressing need for probative evidence on issue of proper economic
life table); Ind. Admin. Code tit. 50, r. 2.1-5-1 (1992) (codified in present
form at id., r. 2.2-12-4 and 6.1 (1996)). However, Canal has provided
no probative evidence as to the pavings value. The State Boards photograph
of the subject property, set to scale, shows the pavings size, and the
ninety-cent per square foot base rate applied to it is taken directly from
Schedule G in the regulations, see Ind. Admin. Code tit. 50, r. 2.1-4-5
(1992) (codified in present form at id, r. 2.2-12-5 (1996)). While there
is no substantial evidence presented as to the pavings condition, the State Boards
duty to support its assessment with substantial evidence on this issue was never
triggered, because Canal failed to establish a prima facie case on this issue
and was not prejudiced by the State Boards decision.
Sterling Mgmt., 730
N.E.2d at 835; CDI, 725 N.E.2d at 1022. Cf. Clark, 2001 WL
16015 at *3 n.5. Therefore, the State Boards determination as to the
value of the paving is AFFIRMED.
For the aforementioned reasons, the State Boards final determination as to the quantification
of obsolescence is REVERSED and REMANDED. The Court further concludes that Canals
due process rights were not violated. Finally, the Court holds that the
State Boards valuation of the previously non-assessed paving is AFFIRMED.
Canal raises an additional issue: whether the State Boards assessment regulations
violate both the United States Constitution and the Indiana Constitution. However, the
fact that the subject property was assessed under an unconstitutional regulation does not
mean the assessment will be invalidated on that basis.
Whitley Prods., Inc.
v. State Bd. of Tax Commrs, 704 N.E.2d 1113, 1121 (Ind. Tax Ct.
1998) (citations omitted), review denied. Real property must still be assessed, and,
until the new regulations are in place, must be assessed under the present
system. Id. See also Town of St. John v. State Bd.
of Tax Commrs, 729 N.E.2d 242, 246 & 251 (Ind. Tax Ct. 2000)
(ordering that all real property in Indiana shall be reassessed under new, constitutional
rules as of March 1, 2002, and stating that, until then, real property
tax assessments shall be made in accordance with the current system). Therefore,
the Court will not address the constitutionality issue.
The letter as typewritten is undated; however, handwritten notations on the letter
indicate that it was mailed on January 13, 1997.
Footnote: According to this letter, Condition is determined to be 28,525 fair, 17,150
poor and 11,375 in very poor condition. Age is determined to be
1975. (Joint Ex. 1.)
Footnote: This photograph was submitted as Joint Exhibit 4. It was furnished
by the State Land Office Division of the Administrative Office. (State Bd.
Tr., Ex. D); (Joint Ex. 4.)
Most areas of the subject improvements received a forty percent obsolescence adjustment;
one area received a twenty percent adjustment. (Joint Ex. 6.)
Footnote: Although identification of causes of obsolescence is not at issue, the Court
notes that the Review contains ten color photographs of the interior and exterior
of the subject property. The photographs captions identify only the general location
of the areas shown (e.g., East Side of Building and Production Area).
In addition, the Review contains a copy of page three from Rule 5
of the State Boards assessment manual. This page three lists various causes
of functional and economic obsolescence.
See also Ind. Admin. Code tit. 50,
r. 2.1-5-1 (1992). The Review highlights in yellow marker four causes of
functional obsolescence and three causes of economic obsolescence. Presumably, the highlighted causes are
those from which Canal asserts its improvements suffer. In its List
of Contentions, the Review provides that the building suffers from nearly every item
of obsolescence listed in Regulation 17. (Joint Ex. 2.) First, photographs, without
further explanation, are not probative evidence as to causes of obsolescence. Cf.
Heart City Chrysler v. State Bd. of Tax Commrs, 714 N.E. 329, 333
(Ind. Tax Ct. 1999) (addressing grade). The captions in the Review do
not constitute explanations with respect to obsolescence. Second, the highlighted marks on
page three, without further explanation, are conclusory and thus not probative as to
causes of obsolescence in this case. Cf. Kemp v. State Bd. of
Tax Commrs, 726 N.E.2d 395, 401 (Ind. Tax Ct. 2000) (holding that checkmarks
on grade specification table were not probative as to improvements grade). Accord
Bernacchi v. State Bd. of Tax Commrs, 727 N.E.2d 1133, 1136-37 (Ind. Tax
Ct. 2000). Third, the Reviews statement that the improvements suffer nearly every
item of obsolescence is likewise conclusory and non-probative. See CDI, Inc. v.
State Bd. of Tax Commrs, 725 N.E.2d 1015, 1020-21 (Ind. Tax Ct. 2000).
The State Boards final determination observed that there were no symptoms to
support the application of additional obsolescence depreciation. (State Bd. Tr., Ex. F.)
To the extent that Canal may be challenging the determination that no
additional causes of obsolescence are present in the subject improvements, the Court concludes
that Canal offered no probative evidence on this issue and thus failed to
establish a prima facie case as to additional causes of obsolescence. With
respect to causes of obsolescence, the State Boards final determination stands. White
Swan Realty v. State Bd. of Tax Commrs, 712 N.E.2d 555, 560 (Ind.
Tax Ct. 1999), review denied.
Rickard testified that the comparative sales data method is typically used throughout
the country in mass appraisal techniques and is a generally accepted method of
quantifying depreciation from all causes. (Trial Tr. at 12-13.) However, Rickard
does not explain how this method, which uses market information, supports a claim
See Lake County Trust Co. No. 1163 v. State Bd.
of Tax Commrs, 694 N.E.2d 1253, 1258 (Ind. Tax Ct. 1998), review denied.
The Review calls for 60% overall obsolescence. (Joint Ex. 2.)
However, Canal does not explain whether or to what extent the sixty percent
overall obsolescence adjustment includes an adjustment for physical depreciationan adjustment that is distinct
and separate within the State Boards Remainderment Method for calculating an improvements true
Ind. Admin. Code tit. 50, r. 2.1-5-1 (1992). See
also Western Select Props. v. State Bd. of Tax Commrs, 639 N.E.2d 1068,
1071 n.2 (Ind. Tax Ct. 1994) (noting taxpayers admission that regulations do not
define or provide for overall obsolescence). The Court also observes that the
Review fails to distinguish between functional and economic obsolescence.
Canals review, as regards quantification of obsolescence, suffers several flaws. For
example, the section of the IAAO Manual cited in the Review states that
the comparative sales data method does not produce a breakdown or allocation of
physical deterioration, functional obsolescence, and economic obsolescence. (Joint Ex. 2.) As
supra note 8, the distinction between physical depreciation and obsolescence is important
in calculating an improvements true tax value. Furthermore, the IAAO Manual states
that the comparative sales data method requires ample sales data of truly comparable
properties. (Joint Ex. 2.) Canal does not explain how two sales
qualify as ample. In addition, Canal does not explain how the improvements
that are the subject of the so-called comparable sales are similar in age,
condition and desirability to the subject improvements.
This suggested evaluative process also applies to the State Boards decisions as
to the identification of causes of obsolescence.
Footnote: The Court in
Castello, 638 N.E.2d at 1365, did reject the State
Boards argument that the taxpayers were provided the opportunity to rebut the ex
parte evidence at the subject propertys inspection. The inspection of property, while
part of the State Boards review process, does not itself constitute either a
hearing or the opportunity to rebut. Id.
The State Board in most cases may be the most appropriate arena
for the taxpayers rebuttal, but it is not the only one. This
Herb v. State Board of Tax Commissioners, 656 N.E.2d 890, 894
n.4 (Ind. Tax Ct. 1995) stated: While it might be a better
practice for the State Board to afford a taxpayer an opportunity to challenge
a proposed determination when the hearing officer has inspected the property after a
hearing, failure to so provide is not a denial of due process where
such a challenge may be made to the court. See also Wirth,
613 N.E.2d at 879-80.
Canal was not prejudiced by the State Boards decision as to condition
because, depending upon whether a section of paving was considered fair, poor or
very poor, its cost of reproduction (as determined from Schedule G,
lowered by either forty-five, fifty or fifty-five percent. (Joint Ex. 6.)