ATTORNEY FOR PETITIONERS:    ATTORNEYS FOR RESPONDENT:
TIMOTHY J. VRANA    STEVE CARTER
SHARPNACK BIGLEY     ATTORNEY GENERAL OF INDIANA
DAVID & RUMPLE    Indianapolis, IN
Columbus, IN     
     JOEL SCHIFF
    DEPUTY ATTORNEY GENERAL
    Indianapolis, IN
    
_____________________________________________________________________
    IN THE INDIANA TAX COURT _____________________________________________________________________

DON R. AND DALE R. LOWE,                                                  )

                                                 


                                                   Petitioners,                                                               )

                                               


                                                                                                                                )
    v.                                                                         )   Cause No. 49T10-9902-TA-7
                                                                               )
DEPARTMENT OF LOCAL                                                            )
GOVERNMENT FINANCE, See footnote             )
    Respondent.            )    
_____________________________________________________________________

ON APPEAL FROM A FINAL DETERMINATION
OF THE STATE BOARD OF TAX COMMISSIONERS


NOT FOR PUBLICATION
February 13, 2004

FISHER, J.

    The Petitioners, Don R. and Dale R. Lowe (the Lowes), appeal the final determination of the State Board of Tax Commissioners (State Board) valuing their real property for the 1995 tax year. The Lowes present multiple issues on appeal:
Whether the State Board erred in grading one of the Lowes’ improvements;

Whether the State Board erred in assessing two of the Lowes’ improvements under the General Commercial Industrial (GCI) Schedule;

Whether the State Board erred in denying a functional obsolescence adjustment to Lowes’ facility.

    For the reasons explained below, the Court AFFIRMS the State Board’s final determination on all issues.

FACTS AND PROCEDURAL HISTORY

In 1992, the Lowes purchased a grain elevator in Rush County. At the time of assessment in 1995, the facility was used for grain storage only.
For the 1995 assessment, the Lowes’ property was assessed at $272,940.00. In arriving at this value, the local assessing officials assigned one improvement a “D” grade, assessed two improvements using the GCI schedule, and did not apply obsolescence to any part of the facility.
Believing the assessment to be too high, the Lowes petitioned the Rush County Board of Review (BOR) for relief. The BOR, however, denied all requested relief. On appeal, the State Board affirmed the BOR’s determination.
The Lowes filed this original tax appeal on February 1, 1999. This Court held a trial on January 21, 2001. Additional facts will be supplied as necessary.

ANALYSIS AND OPINION
Standard of Review

    This Court gives great deference to the final determinations of the State Board when it acts within the scope of its authority. Wetzel Enters., Inc. v. State Bd. of Tax Comm’rs, 694 N.E.2d 1259, 1261 (Ind. Tax Ct. 1998). This Court will reverse a final determination by the State Board only when its findings are unsupported by substantial evidence, are arbitrary or capricious, constitute an abuse of discretion, or exceed statutory authority. Id.
Discussion
I. Grade

     The Lowes claim that the State Board erroneously graded one of their improvements a “D.” The Lowes contend the grade should be lowered to “D-2.” (See Cert. Admin. R. at 3.) However, the Lowes failed to provide evidence supporting their claim.
The grading of improvements is an important aspect of the True Tax Value system. Whitley Prods., Inc. v. State Bd. of Tax Comm’rs, 704 N.E.2d 1113, 1116 (Ind. Tax Ct. 1998), review denied. Grades, ranging from “A” to “E”, are assigned to improvements based on the quality of the materials used, the design, and workmanship. Ind. Admin. Code tit. 50, r. 2.2-10-3(1996). For instance, a “D” grade building is constructed with “economy materials and fair workmanship. These buildings are devoid of architectural treatment and have a substandard quality interior finish with minimal built-in features, substandard quality electrical and plumbing fixtures, and a substandard quality heating system.” Ind. Admin. Code tit. 50, r. 2.2-10-3(a)(4)(1996). Furthermore, because structures sometimes fall between major grade classifications, a method of interpolation is built into the system. Ind. Admin. Code tit. 50, r. 2.2-10-3(c)(1996). Specifically, intermediate grade levels can be assigned by either a plus or minus 2 indicating that a structure falls halfway between two grade classes, or a plus or minus 1 indicating that structure falls 25% above or below an assigned grade. Ind. Admin. Code tit. 50, r. 2.2-10-3(c)(1),(2)(1996).
    Because the Lowes are challenging the propriety of the State Board’s final determination, they must provide evidence sufficient to establish a prima facie case that the State Board either improperly gave their property a “D” grade or improperly denied it a “D-2” grade. See Sollers Pointe Co. v. Dep’t of Local Gov’t Fin., 790 N.E.2d 185, 191 (Ind. Tax Ct. 2003). At the administrative hearing, the Lowes presented the testimony of their property tax consultant, Mr. Milo Smith:
We’re talking . . . grade, from the manual. [The BOR] already adjusted it a grade down to a “D.” [The assessment regulation] calls for forced hot and cold chilled water zoned for the type of heating and cooling, and this one doesn’t have any cooling, of course, and it was taken off. I’ve got a copy of a “C” grade building out of the manual, and I know this is at “D” now, but this isn’t anything close to a “C.” I can’t find a “D” grade picture of an office in the manual. If there is one, I’ve overlooked it. Uh, its just an old building with, I feel, no architectural design, and therefore, the grade should be lowered to “D-2.”

(Joint Ex. 1). Along with his testimony, Smith submitted a photocopy of a page from the State Board’s assessment regulations with photographs of various commercial industrial offices that received grades ranging between “C+2” to “C.”
    Testimony, even from a recognized appraisal expert, is conclusory, and therefore not probative, when it does not link the evidence submitted to the requested relief. See Inland Steel Co. v. State Bd. of Tax Comm’rs, 739 N.E.2d 201, 220 (Ind. Tax Ct. 2000), review denied. In other words, in order to establish a prima facie case on grade, a taxpayer can provide “specific evidence tied to the descriptions of the various grade classifications.” Sollers Pointe, 790 N.E.2d at 191 (footnote omitted). Consequently, the statement that “its just an old building with, I feel, no architectural design,” is not probative evidence on the issue of grade. See Freudenberg-Nok Gen. P’ship v. State Bd. of Tax Comm’rs, 715 N.E.2d 1026, 1030 (Ind. Tax Ct. 1999), review denied; Whitley Prods., 704 N.E.2d at 1119. Rather, the Lowes should have provided specific reasons as to why their building is “devoid of architectural treatment.” See Lacy Diversified, Indus., Ltd. v. Dep’t of Local Gov’t Fin., 799 N.E.2d 1215, 1221 n. 5 (Ind. Tax Ct. 2003). See also 50 IAC 2.2-10-3(a)(4). Moreover, the Lowes should have provided evidence showing how their improvement was constructed with less than economy materials or less than substandard built-in features, interior finish, or electrical/plumbing fixtures. See id. Therefore, this Court cannot say that the application of a “D” grade to the Lowes’ improvement was an abuse of discretion.

II. GCI Schedule

    The Lowes contend that the State Board incorrectly valued two of their improvements under the GCI schedule. The Lowes argue that one improvement should have been valued under a combination of the GCI schedule and General Commercial Mercantile (GCM) schedule, and another improvement should have been valued under the General Commercial Kit (GCK) Schedule. The State Board counters that the Lowes failed to present a prima facie case supporting their claims. The State Board is correct.
    Under Indiana’s property tax assessment system, cost schedules are used to determine the base reproduction cost of a particular improvement. Whitley Prods., 704 N.E.2d at 1116. See also Ind. Admin. Code tit. 50, r. 2.2-11-6(1996). To help identify and define various classes of buildings, the assessment regulations have categorized improvements into numerous models based upon their physical characteristics. Assessing officials apply a cost schedule associated with the model that most closely resembles the subject improvement physically. See Herb v. State Bd. of Tax Comm’rs, 656 N.E.2d 890, 893 (Ind. Tax Ct. 1995)(stating that “while the model names are reflective of use, the model specifications actually reflect the physical features that are incorporated into the structure.”)    
Improvement # 1

    The Lowes have a building that they use as office space and where they sell livestock feed. While the State Board assessed the improvement using the GCI industrial office model, the Lowes contend that a portion of the building should be assessed using the GCM general retail model.
    The GCI industrial office model presumes construction with concrete block walls, 10-foot high ceilings, carpeted or terrazzo floors, framed interior partitions, average cost lighting fixtures typical of divided office areas, zoned air conditioning, and gas-fired, forced air heating. Ind. Admin. Code tit. 50, r. 2.2-11-2 (12)(1996). The GCM general retail model, which the Lowes contend should be used to assess part of their building, also presumes concrete block walls, tiled or carpeted floors, drywalled interior finish, 12-foot suspended ceilings, lighting typical of finished open areas, evaporative cooling, and gas-fired forced air heating. Ind. Admin. Code tit. 50, r. 2.2-11-1 (34)(1996).
    The Lowes must present evidence demonstrating that the GCM general retail model is more representative of a portion of their improvement than the GCI model. See CGC Enters. v. State Bd. of Tax Comm’rs, 714 N.E.2d 801, 804 (Ind. Tax Ct. 1999)(citing Whitley Prods., 704 N.E.2d at 1119). At trial, the Lowes’ expert, Mr. Smith testified:
It’s a concrete block building with a metal roof . . .. When you walk into the building, it’s very apparent they have kind of some wood up over the ceiling for ceiling finish . . . and you can see that there’s bat insulation in the attic, but the interior walls are concrete block with no finish . . . there [are] two space heaters and two window air conditioners, which have been deducted . . . because it lacked central heat and central cooling.

(Trial Tr. 13-14.) Smith also stated that the building was incorrectly assessed as GCI industrial office because it had a substandard floor finish, lack of interior partitions, and a substandard interior finish. (See Trial Tr. at 14-15.) Smith described the building’s interior as being comparable to a “farm building.” (Trial Tr. at 15.) Smith provided no other evidence beyond his observations.
    To prevail on this issue, the Lowes should have demonstrated the absence of features in their building that are present in the GCI industrial office model, or shown how the presence of features in their building makes it more like the GCM model. See Indianapolis Racquet Club, Inc. v. State Bd. of Tax Comm’rs, 722 N.E.2d 926, 938-40 (Ind. Tax Ct. 2000), rev’d on other grounds by 743 N.E.2d 247 (Ind. 2001) (stating that a taxpayer established a prima facie case that its improvement was assessed with the wrong model by pointing to several identifiable, objective differences between the model and subject improvement). Instead, Smith merely discussed the subject improvement generally without specifically relating what features made the GCI model inappropriate. Accordingly, this Court cannot say that the State Board’s application of the GCI industrial office model was in error.

B. Improvement #2

    The Lowes also argue that the State Board abused its discretion when it applied the GCI pricing schedule, rather than the GCK pricing schedule, to an improvement on their property. The State Board argues that the GCK schedule does not apply because the Lowes’ improvement is not a “dealer distributed brand name building whose major components are fabricated at the manufacturer’s factory and . . . then assembled on the customer’s site.” (See Cert. Admin. R. at 53.) The State Board is correct.
    The GCK pricing schedule See footnote is used for “valuing preengineered and predesigned pole buildings which are used for commercial and industrial purposes.” Ind. Admin. Code tit. 50, r. 2.2-10-6.1(a)(1)(D)(1996). “Generally, [GCK] buildings are . . . fabricated at central manufacturing facilities and shipped to the construction site ready for fast and efficient assembly. [A reduced] base price is offered because of the low cost and economical quality of materials used in [GCK] buildings.” Damon Corp. v. State Bd. of Tax Comm’rs, 738 N.E.2d 1102, 1111 (Ind. Tax Ct. 2000)(internal citation and quotation omitted).
    The Lowes contend that their improvement should have been valued under the GCK schedule. To support their claim, the Lowes provided testimony and photographs indicating that the subject improvement has interior wood frame construction with a metal roof and siding. (Trial Tr. at 17.) (See also Pet’r Exs. 3, 4, 5, 6.) The Lowes also submitted a document from the Indiana Assessor’s Association stating “[a]ll wooden pole frame buildings qualify as GCK.” (Pet’r Ex. 10.) The Assessor countered that the metal roof and walls were added many years after the construction of the building, which originally had wooden siding and an asphalt roof. (Joint Ex. 1.) Consequently, the Assessor argues that this structure was never constructed as a GCK building as it was neither preengineered nor predesigned. (Joint Ex. 1.) Mr. Smith, the Lowes’ expert, even testified that the building “looked like an old farm shed . . . before they put siding on it.” (Joint Ex. 1).
    This Court has previously stated that evidence that a building has metal exterior skin is a factor to consider in applying the GCK assessment model, but alone it does not require application of that schedule. Barker v. State Bd. of Tax Comm’rs, 712 N.E.2d 563, 567 (Ind. Tax Ct. 1999). The Lowes’ evidence shows that their building has a wooden frame with metal skin, but it does not show that it was constructed as a “preengineered” or “predesigned” building. While the documents from the Indiana Assessor’s Association state that “[a]ll wooden pole frame buildings qualify as GCK,” the regulations explain that the structure must be “preengineered” and “predesigned.” (Pet’r Ex. 10); see also Ind. Admin. Code tit. 50 r. 2.2-10-6.1(a)(1)(D). The Lowes’ building is not. Accordingly, this Court cannot say that the State Board is incorrect in applying the GCI pricing schedule over the GCK schedule.
III. Obsolescence

    Finally, the Lowes contend their facility is entitled to a 58% functional obsolescence See footnote depreciation adjustment due to excess capacity in their grain storage bins. However, the Lowes’ requested obsolescence adjustment must be denied for failure to identify a cause of obsolescence.
    When a taxpayer seeks an obsolescence deduction adjustment, a two-step inquiry must be satisfied. See Clark v. State Bd. of Tax Comm’rs, 694 N.E.2d 1230, 1238 (Ind. Tax Ct. 1998). First, a cause of obsolescence must be identified. Id. Then, the identified obsolescence must be quantified. Id.
    While the Lowes quantified the amount of obsolescence they sought at 58%, the State Board denied the claim, determining that they failed to first identify a cause of the alleged obsolescence. (Cert. Admin. R. at 47, 54.) Nevertheless, the Lowes propose that they do not need to identify a cause of obsolescence because in an unpublished opinion regarding their 1994 assessment, this Court stated that because the parties agreed that there was obsolescence, the only matter to resolve was that of quantification. See Lowe’s Pellets and Grain, Inc. v. State Bd. of Tax Comm’rs, Case No. 49T10-9702-TA-133 (Ind. Tax Ct. March 23, 2001).
    “[I]n original tax appeals, each assessment and each tax year stands alone.” See Glass Wholesalers, Inc. v. State Bd. of Tax Comm’rs, 568 N.E.2d 1116, 1124 (Ind. Tax Ct. 1991)(quotation in original, citation omitted). Consequently, the Lowes were required to identify a cause of obsolescence for each assessment they challenge. In this case, the State Board found that the Lowes did not identify any causes of obsolescence for the assessment year they challenge. The Lowes chose to waive briefing in this case, and rely upon this Court’s previous decision. Unlike the previous case, there is no agreement here between the parties as to the existence of obsolescence, and like the previous case the Lowes did not present sufficient evidence identifying a cause of obsolescence. Therefore, the State Board’s decision is affirmed on this issue for failure to identify a cause of obsolescence.

C ONCLUSION

    For the foregoing reasons, the State Board’s final determination is AFFIRMED.


Footnote: The State Board of Tax Commissioners (State Board) was originally the Respondent in this appeal. However, the Legislature abolished the State Board as of December 31, 2001. 2001 Ind. Acts 198 § 119(b)(2). Effective January 1, 2002, the Legislature created the Department of Local Government Finance (DLGF), and the Indiana Board of Tax Review (Indiana Board). Ind. Code §§ 6-1.1-30-1.1; 6-1.5-1-3 (West Supp. 2003); 2001 Ind. Acts 198 §§ 66, 95. Pursuant to Indiana Code § 6-1.5-5-8, the DLGF is substituted for the State Board in appeals from final determinations of the State Board that were issued before January 1, 2002. Ind. Code § 6-1.5-5-8 (West Supp. 2003); 2001 Ind. Acts 198 § 95. Nevertheless, the law in effect prior to January 1, 2002 applies to these appeals. I.C. § 6-1.5-5-8. See also 2001 Ind. Acts 198 § 117. Although the DLGF has been substituted as the Respondent, this Court will still reference the State Board throughout this opinion.

Footnote: The GCK cost schedule provides minimal detail in describing the essential characteristics of a building that may be classified under it. See Ind. Admin. Code tit. 50, r. 2.2-11-6 (Schedule A.4) (1996). Before the State Board amended its regulations to include a GCK cost schedule, certain light, pre-engineered buildings were given a 50% reduction from the existing cost schedules to account for their inexpensive construction. See Ind. Admin. Code tit. 50, r. 2.1-4-5 (Schedules A.1 & A.2) (1992). Thereafter, the State Board issued Instructional Bulletins 91-8 and 92-1 to provide guidance to assessors in determining which light, pre-engineered buildings qualified for the reduction. See Componx, Inc. v. State Bd. of Tax Comm’rs, 741 N.E.2d 442, 444-45 (Ind. Tax Ct. 2000). Although these bulletins have been superseded by the GCK cost schedule, they still offer guidance in determining whether a building may be assessed under the GCK schedule.

Footnote: Obsolescence is the functional or economic loss of property value, expressed as a percentage reduction in the remaining value of the subject improvement. Clark v. State Bd. of Tax Comm’rs, 742 N.E.2d 46, 51 (Ind. Tax Ct. 2001), review denied. Functional obsolescence is caused by factors internal to the property, while economic obsolescence is attributable to external factors. See Ind. Admin. Code tit. 50, r. 2.2-10-7(e)(1), (2)(1996).