ATTORNEYS FOR PETITIONER:    ATTORNEYS FOR RESPONDENT:
FRED M CUPPY    STEVE CARTER
KEVIN E. STEELE    ATTORNEY GENERAL OF INDIANA
BURKE COSTANZA & CUPPY, LLP    Indianapolis, IN
Merrillville, IN    
     JOEL SCHIFF
    DEPUTY ATTORNEY GENERAL
    Indianapolis, IN
    
_____________________________________________________________________

    IN THE INDIANA TAX COURT _____________________________________________________________________ 

PETER ZAKUTANSKY,                                                         )
                                                                               )
    Petitioner,                                                                )
                                                                               )
    v.                                                                         )   Cause No. 45T10-9812-TA-175
                                                                               )
DEPARTMENT OF LOCAL                                                            )
GOVERNMENT FINANCE, See footnote         )
            )
    Respondent.                )
                )    
______________________________________________________________________________

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

______________________________________________________________________________

NOT FOR PUBLICATION
June 6, 2003

FISHER, J.

    Peter Zakutansky appeals the final determination of the State Board of Tax Commissioners (State Board) establishing the assessed value of his real property as of March 1, 1989. The Court restates the issues as:
Whether the State Board erred in grading Zakutansky’s retaining wall and two pole buildings; and

Whether the State Board erred in valuing Zakutansky’s land. See footnote

    For the reasons stated below, the Court REMANDS Issue I to the Indiana Board See footnote and AFFIRMS the State Board’s final determination on Issue II.

FACTS AND PROCEDURAL HISTORY

    Zakutansky owns a marina located in Porter County, Indiana. The marina sits on a waterway known as Burns Ditch Waterway. The marina consists of several buildings, a boat storage area, and a series of docks. Adjacent to the docks is a sloped, concrete retaining wall with stairs built into it.
    For the 1989 assessment, the County assessed Zakutansky’s retaining wall on a square foot basis and assigned it a grade of A. Furthermore, the County assessed Zakutansky’s buildings using the General Commercial Mercantile (GCM) cost schedule as well as assessed Zakutansky’s land at $15,000 per acre pursuant to the Porter County land order. Zakutansky appealed to the State Board via a Form 131 Petition for Review, challenging, among other things, the assessment of his retaining wall, pole buildings, and land value. The State Board issued its final determination, denying relief on these three issues.
    On September 20, 1996, Zakutansky appealed to this Court. On July 7, 1998, this Court remanded the case to the State Board. Zakutansky v. State Bd. of Tax Comm’rs, 696 N.E.2d 494, 498 (Ind. Tax Ct. 1998). Specifically, this Court found that Zakutansky had “demonstrated that the quality of the wall [was] not as high as the State Board’s A grade would indicate” and that the State Board failed to support its assignment of an A grade with substantial evidence. See footnote Id. at 496. The Court also held that the State Board improperly used the GCM cost schedule to assess Zakutansky’s buildings and that the agricultural cost schedule for pricing pole buildings should have been used. Id. at 497. Finally, this Court remanded the land valuation issue in light of Talesnick v. State Bd. of Tax Comm’rs, 693 N.E.2d 657 (Ind. Tax Ct. 1998) so that the State Board could determine if it had accurately valued Zakutansky’s property when compared to surrounding properties. Zakutansky, 696 N.E.2d at 498.
    The State Board conducted a remand hearing and issued its final determination on October 13, 1998. The State Board again graded Zakutansky’s retaining wall with an A grade. Per this Court’s order, the State Board reassessed Zakutansky’s buildings as pole buildings under the agricultural cost schedule, and it raised the grade of the shop building to C+2 and the storage building to B. Finally, the State Board did not reduce the $15,000 per acre land value or grant Zakutansky a negative influence factor adjustment.
    On November 23, 1998, Zakutansky filed an original tax appeal. On September 27, 1999, this Court conducted a trial. The Court heard oral arguments on July 28, 2000. Additional facts will be supplied as needed.
ANALYSIS AND OPINION
Standard of Review

    The Court gives great deference to the State Board’s final determinations when it acts within the scope of its authority. Miller Structures, Inc. v. State Bd. of Tax Comm’rs, 748 N.E.2d 943, 947 (Ind. Tax Ct. 2001). 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 Board’s final determination. Id. The taxpayer must present a prima facie case, i.e., a case in which the evidence is “sufficient to establish a given fact and which if not contradicted will remain sufficient.” Id. (citation and internal quotation marks omitted). To establish a prima facie case, the taxpayer must offer probative evidence concerning the alleged error. Id. “Once the taxpayer carries the burden of establishing a prima facie case, the burden shifts to the State Board to rebut the taxpayer’s evidence and justify its decision with substantial evidence.” Id. (quoting Clark v. State Bd. of Tax Comm’rs, 694 N.E.2d 1230, 1233 (Ind. Tax Ct. 1998)). To carry its burden, the State Board must do more than merely assert that it assessed the property correctly. Miller Structures, 748 N.E.2d at 948. Instead, the State Board must offer an authoritative explanation of its decision to rebut the taxpayer’s prima facie showing. Id.
Discussion
I. Grade

    The first issue is whether the State Board properly graded Zakutansky’s retaining wall and two pole buildings. Under Indiana’s property assessment system, assessors use improvement models and cost schedules to determine the base reproduction cost of a particular improvement. See Whitley Prods., Inc. v. State Bd. of Tax Comm’rs, 704 N.E.2d 1113, 1116 (Ind. Tax Ct. 1998), review denied. Improvements are then assigned various grades based on their materials, design, and workmanship. Id. See also Ind. Admin. Code tit. 50, r. 2.1-4-3(f) (1988). The grades, which range from A to E, represent multipliers that are applied to the subject improvement’s base reproduction cost. Whitley Prods., 704 N.E.2d at 1116.
    “When an improvement deviates from the model and associated cost schedule used to assess the improvement, the deviation often has an effect on the reproduction cost of the improvement.” Id. at 1117. Therefore, when an improvement deviates from the model, an assessor may account for that deviation by adjusting the grade of the improvement. See footnote See id. The burden was on Zakutansky to submit probative evidence showing that the State Board either improperly graded his retaining wall and buildings or improperly denied the grade which he sought. See footnote See Deer Creek Developers, Ltd. v. Dep’t of Local Gov’t Fin., 769 N.E.2d 259, 265-66 (Ind. Tax Ct. 2002).
A. Retaining Wall

    Zakutansky argues that the State Board improperly assessed his retaining wall with an A grade. In examining the evidence presented, the Court determines that Zakutansky has met his burden of presenting a prima facie case on grade by showing an error in the A grade assigned by the State Board to the retaining wall.
    Zakutansky presented an estimate from a construction company that estimated the retaining wall could be built for $7,313. While the actual cost of reproducing the wall is not determinative of its value under a true tax value system, it is probative of the quality of materials, construction, and design used to make the wall. See Zakutansky, 696 N.E.2d at 496. Zakutansky also presented photographs of the wall accompanied by testimony to show that the wall had no foundation, was not reinforced with footings or posts, and had to be constantly maintained.
    As this Court explained in its prior opinion, Zakutansky’s evidence demonstrates that the quality of the wall’s materials and workmanship are not as high as the State Board’s A grade would indicate. Id. Thus, Zakutansky has made a prima facie case that the State Board improperly assessed his retaining wall with an A grade. Consequently, the burden then shifted to the State Board to rebut Zakutansky’s evidence and to explain why the A grade was appropriate. Clark, 694 N.E.2d at 1233.
    The State Board argues that its A grade is justified by values from the Marshall Valuation Service, which the State Board used to determine that the reproduction cost should be increased to at least 160%. (Joint Ex. 17 at 17-19.) However, the Marshall Valuation Service is based on fair market value, and Indiana does not value property based on a fair market value system. Ind. Code § 6-1.1-31-6(c). Instead, it values property according to the true tax value, which is defined as the values contained in the State Board’s regulations and cost schedules. Because the State Board has pointed to nothing in its regulations to support its A grade, it has not met its burden of rebutting Zakutansky’s prima facie case by showing why the A grade was appropriate. Accordingly, this Court REVERSES the State Board’s final determination grading the retaining wall and REMANDS it to the Indiana Board.
B. Pole Buildings

    Zakutansky also argues that the State Board improperly graded his pole buildings, especially because it did not notify him that the grade of the buildings was at issue. See footnote Previously, this Court remanded this case to the State Board to assess Zakutansky’s buildings as pole buildings from the agricultural cost schedules instead of from the GCM cost schedules. Zakutansky, 696 N.E.2d at 497. In doing so, this Court stated that “[t]he taxpayer is entitled to have his property assessed using the correct cost schedule [and o]nly after this is done may adjustments for quality be made.” Id. Thus, upon remand, it was up to the State Board and Zakutansky to discuss the correct cost schedule and any adjustments to the assessment of the buildings.
    Upon remand, the State Board did indeed assess the buildings as pole buildings. However, it also raised the grade of the store building to a C+2 and the storage building to a B to account for a number of features that it believed were atypical of pole buildings and that increased the value of the pole buildings. Zakutansky argues that the State Board’s sua sponte grade assessment was an abuse of discretion because the grade of the pole buildings had not been raised as an issue at the hearing and because he did not have an opportunity to rebut the State Board’s evidence. Zakutansky is correct.
    The State Board may address and correct errors in an assessment, even if those errors were not raised in the taxpayer’s petition for review. Castello v. State Bd. of Tax Comm’rs, 638 N.E.2d 1362, 1364 (Ind. Tax Ct. 1994). However, if the State Board does address issues not raised by a taxpayer, “the taxpayer is constitutionally empowered to respond to the State Board’s disposition of those issues.” Id. (citing Wirth v. State Bd. of Tax Comm’rs, 613 N.E.2d 874, 879 (Ind. Tax Ct. 1993)).
    Here, the hearing officer did not notify Zakutansky during the remand hearing that the grade of the pole buildings was at issue. The hearing officer inspected Zakutansky’s buildings and made recommendations to the State Board for reassessment of the buildings, including the grade issue not raised by Zakutansky in his appeal. Without holding an additional hearing, the State Board adopted the hearing officer’s recommendations and included the increased grade assessment of the pole buildings in its final determination. The State Board did not provide Zakutansky an opportunity to rebut the evidence on the buildings’ grade. “It is well settled that an opportunity to meet and rebut adverse evidence is one of the minimum requirements of due process in an administrative hearing.” Castello, 638 N.E.2d at 1365. “[T]he appropriate arena for [Zakutansky’s] initial rebuttal of the [grade] reassessment of [his buildings] is at the administrative level.” See footnote Id. Thus, this Court REMANDS this issue of the grade of the pole buildings to the Indiana Board. See footnote
II. Land Value

    The last issue is whether the State Board properly determined Zakutansky’s land value. Zakutansky contends that the State Board improperly determined his base rate under the land order, erroneously denied the application of a negative influence factor, and improperly assessed him with excess acreage. The Court does not agree.
A. Base Rate

    Zakutansky argues that his base rate of $15,000 under the Porter County land order should be reduced to $5,000. Specifically, he contends that his base rate should be changed because: (1) his land was assessed under the wrong section of the land order and should be assessed with a similar base rate as the recreational parks and campgrounds section of the land order; and (2) land adjacent to his was assessed at $5,000 per acre.
Under Indiana’s true tax value system, commercial, residential, and industrial land values are compiled into a “land order.” See Ind. Code § 6-1.1-4-13.6 (West 1989). The land values are typically expressed in ranges of “base rates” that assessing officials apply to various geographic areas, subdivisions, or neighborhoods based on their distinguishing characteristics or boundaries. Ind. Admin. Code tit. 50, r. 2.1-2-1(a) (1988).
To challenge the base rate applied to its land, a taxpayer must present probative evidence showing that either: (1) comparable properties were assessed and taxed differently than his own under the land order or (2) his land was improperly assessed under the wrong section of the land order. See Park Steckley I v. Dep’t of Local Gov’t Fin., 779 N.E.2d 1270, 1273 (Ind. Tax Ct. 2002); Blackbird Farms Apartments v. Dep’t of Local Gov’t Fin., 765 N.E.2d 711, 714 (Ind. Tax Ct. 2002). Accordingly, when a taxpayer challenges its assessment under a land order, it is essential for the Court to have an opportunity to read and analyze the relevant portion of the applicable land order. In particular, the Court must be able to evaluate the application of the land order to the taxpayer’s property or comparable properties—or both—so that it may determine if a remedy is warranted and, if so, its nature and extent. See Goodhost v. Dep’t of Local Gov’t Fin., 786 N.E.2d 813, 815 (Ind. Tax Ct. 2003); Blackbird Farms, 765 N.E.2d at 711 n.4. See also Eastgate P’ship v. Dep’t of Local Gov’t Fin., 780 N.E.2d 435, 438–39 (Ind. Tax Ct. 2002) (evaluating different portions of a disputed land order); Park Steckley, 779 N.E.2d at 1273 (same).
Zakutansky, having the burden of proof in this case, has not provided the Court with a copy of the land order that is the subject of his appeal. See footnote This Court does not have its own copies of land orders, nor is it able to infer what may or may not be in the land order. See Goodhost, 786 N.E.2d at 815; Davidson Indus. v. State Bd. of Tax Comm’rs, 744 N.E.2d 1067, 1071 (Ind. Tax Ct. 2001) (stating that the Court will not make a party’s case for it). Consequently, without the opportunity to read and evaluate the land order, this Court is unable to reach the merits of Zakutansky’s base rate claim. Thus, Zakutansky has not made a prima facie case. See footnote
B. Negative Influence Factor

Zakutansky also argues that the State Board erroneously declined to apply a negative influence factor to his property to account for the pipeline easement on his land. The State Board does not dispute the presence of the easement, but it argues that Zakutansky failed to make a prima facie showing that the value of his land was more adversely affected than any of the other properties around Burns Ditch Waterway that had the easement.
An influence factor refers to a condition peculiar to the land that dictates an adjustment, either positive or negative, to the extended value to account for variations from the norm. Ind. Admin. Code tit. 50, r. 2.1-2-1(g) (1988). The State Board may use influence factors to adjust values in a land order for properties that possess unique characteristics. Phelps Dodge v. State Bd. of Tax Comm’rs, 705 N.E.2d 1099, 1105 (Ind. Tax Ct. 1999), review denied. In applying an influence factor, an assessing official must first identify the deviations from the norm and then quantify the variations as a percentage. Fleet Supply, Inc. v. State Bd. of Tax Comm’rs, 747 N.E.2d 645, 652 (Ind. Tax Ct. 2001), review denied. An influence factor is expressed as a percentage increase or decrease in the subject land’s assessed value, with the percentage representing the composite effect of the factors that influence the value. White Swan Realty v. State Bd. of Tax Comm’rs, 712 N.E.2d 555, 562 (Ind. Tax Ct. 1999), review denied. A taxpayer seeking the application of a negative influence factor has the burden to produce “probative evidence that would support an application of a negative influence factor and a quantification of that influence factor[.]” Phelps Dodge, 705 N.E.2d at 1106.
Zakutansky contends that he should receive a negative influence factor adjustment because the presence of the easement restricts the use of his property. At the administrative hearing, however, Zakutansky testified that all the properties around Burns Ditch Waterway were subject to the same restrictions and easement. He did not present any evidence that the easement encumbered his property to a greater extent than the other waterway properties. Because Zakutansky did not submit evidence to show how his property deviates from the norm or how the easement caused any decrease in the value of his property, he failed to make a prima facie case that he was entitled to a negative influence factor. See Talesnick v. State Bd. of Tax Comm’rs, 756 N.E.2d 1104, 1108 (Ind. Tax Ct. 2001) (finding prima facie case on negative influence factor met where taxpayer presented evidence that his water flowage easement encumbered more of his property than it does his neighbors and that the easement encroached his land to a greater extent than it does the other land surrounding the reservoir); Fleet Supply, 747 N.E.2d at 652.
C. Acreage

Zakutansky also argues that the State Board assessed his property with an excessive amount of acreage because his total assessed acreage includes property that runs to the middle of Burns Ditch Waterway and to the middle of Maine Avenue. See footnote He argues that, under Indiana Code § 6-1.1-4-14, this property should not be assessed to him because it is used as a public drainage ditch and a public highway, respectively. To support his claim that this property was included in his total assessed acreage, Zakutansky points to his property record card. The card, however, does not indicate that he has been assessed for the land under the ditch or road. (See Joint Ex. 17 at 23-27.) Thus, Zakutansky has failed to make a prima facie case that his acreage was erroneously assessed.
In summary, because Zakutansky has not met his burden of presenting a prima facie case on the base rate, negative influence factor, and acreage, this Court AFFIRMS the State Board’s final determination on the land value issue.
CONCLUSION

    For the aforementioned reasons, the Court REVERSES the State Board’s final determination on Issue I and REMANDS it to the Indiana Board for further proceedings consistent with this opinion See footnote and AFFIRMS the State Board’s final determination on Issue II.

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. 2001); 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. 2001) (eff. 2002); 2001 Ind. Acts 198 § 95. Moreover, 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: In his original tax petition, Zakutansky also claimed that his due process rights under the United States and Indiana Constitutions were violated because the hearing officer, who was required to testify in the previous trial before this Court ( see Zakutansky v. State Bd. of Tax Comm’rs, 696 N.E.2d 494 (Ind. Tax Ct. 1998)), served as his hearing officer at his remand hearing. Zakutansky, however, did not include this issue in his briefs nor did he argue the issue during the trial or oral argument. As a result, Zakutansky has provided the Court with no clear statement of the issue, no analysis or cogent reasoning, and specifies no particular relief. This Court will not make a taxpayer’s case for him. See Davidson Indus. v. State Bd. of Tax Comm’rs, 744 N.E.2d 1067, 1071 (Ind. Tax Ct. 2001). Accordingly, the Court will not review this claim.

Footnote: All cases that would have previously been remanded to the State Board are now remanded to the Indiana Board of Tax Review (Indiana Board). Ind. Code § 6-1.1-15-8. Final determinations made by the Indiana Board are subject to review by this Court pursuant to Indiana Code § 6-1.1-15. Ind. Code §§ 6-1.5-5-7; 33-3-5-2.
Footnote: The State Board conceded that the retaining wall should have been assessed on a linear foot basis and agreed to reassess the wall on that basis.
Footnote: However, the preferred method of accounting for an improvement’s deviation from the model is to use the separate schedules that show the costs of certain components and features present in the model. Whitley Prods., Inc. v. State Bd. of Tax Comm’rs, 704 N.E.2d 1113, 1117 (Ind. Tax Ct. 1998). Because the use of a grade adjustment requires an assessor’s subjective judgment, the Court generally discourages a grade adjustment to account for deviations from the model. See id. Nonetheless, a grade adjustment is sometimes necessary.

Footnote: Note, however, that a taxpayer who presents a grade issue to the Indiana Board after December 17, 2002, will be required to submit probative evidence of “ what his grade should have been” in order to meet his burden. See Clark v. Dep’t of Local Gov’t Fin., 779 N.E.2d 1277, 1282 (Ind. Tax Ct. 2002) (emphasis in original).

Footnote: Zakutansky also contends that State Board improperly assessed one of his pole buildings with a mezzanine. Specifically, he argues that because this Court’s remand order instructed the State Board to assess his building as a pole building, the mezzanine should be assessed as a loft. He bases his argument on the fact that the agricultural cost schedule does not include pricing information for the assessment of a mezzanine but does have pricing for a loft, and he contends that a building can be assessed with a mezzanine only if the GCM cost schedule is used to assess the building.
The regulations show that mezzanines and lofts are structurally different. Indeed, a mezzanine is “a low story formed by placing a floor between what would ordinarily be the floor and ceiling of a high story[,]” while a loft is “an unpartitioned or relatively unpartitioned upper story of a building[.]” Ind. Admin. Code tit. 50, r. 2.1-6-1 (1988). Furthermore, there are times when the State Board may refer to a different cost schedule to price features not found in the model’s schedule. See Wirth v. State Board of Tax Comm’rs, 613 N.E.2d 874, 879 (Ind. Tax Ct. 1993) (affirming the State Board’s use of the residential cost schedules to assess a stoop on a commercial improvement). Zakutansky, however, did not provide any evidence to show that the mezzanine was indeed a loft. Thus, Zakutansky has failed to meet his burden of showing that the State Board improperly assessed the mezzanine.

Footnote: The State Board is the “appropriate arena” is most cases, but it is not the only one. See Canal Realty-Indy Castor v. State Bd. of Tax Comm’rs, 744 N.E.2d 597, 605 n.12 (Ind. Tax Ct. 2001). There would not be a denial of due process if the taxpayer would be given an opportunity to challenge a sua sponte assessment before this Court. Id.

Footnote: Giving Zakutansky the opportunity to rebut, however, does not imply the State Board’s assessment was in error, and the Court expresses no opinion on the propriety of the grade assessment. Today’s ruling simply returns the parties to their respective positions prior to the State Board’s entry of final determination, and the burden lies with Zakutansky to avail himself of the opportunity to challenge the State Board’s grade assessment. See Castello v. State Bd. of Tax Comm’rs, 638 N.E.2d 1362, 1365 (Ind. Tax Ct. 1994).
Footnote: During oral argument, Zakutansky’s counsel referred to the Porter County land order and stated that it was “before the Court,” ( see Oral Argument Tr. at 13) but Zakutansky failed to include it in any exhibits to the State Board or to this Court. (See Joint Exs. 1-19.)

Footnote: Zakutansky submitted evidence of nearby properties that he claims are: (1) comparable to his own and (2) have a base rate of $5,000 under the land order. Assuming arguendo that the properties are comparable to Zakutansky’s, this Court cannot determine whether the same portion of the land order that applies to Zakutansky’s land also applies to these properties without reading the land order. See Blackbird Farms Apartments, LP v. Dep’t of Local Gov’t Fin., 765 N.E.2d 711, 711 n.4 (Ind. Tax Ct. 2002). The fact that Zakutansky’s putative comparables are only a short distance from his own land is of no moment. Indeed, properties that are literally across the street from each other can receive different assessments under a land order. See, e.g., Park Steckley I v. Dep’t of Local Gov’t Fin., 779 N.E.2d 1270, 1274 (Ind. Tax Ct. 2002). Thus, mere proximity does not give rise to a reasonable inference that different properties were assessed under the same portion of a land order.
Footnote: While this issue was not part of this Court’s remand order to the State Board, see Zakutansky, 696 N.E.2d at 497-98, the Court will decide it because Zakutansky argued the acreage issue at the remand hearing without objection by the State Board. See Two Market Square Associates Ltd. P’ship v. State Bd. of Tax Comm’rs, 656 N.E.2d 308, 309 n.1 (Ind. Tax Ct. 1995), rev’d on other grounds by 679 N.E.2d 882 (Ind. 1997) (citing Yunker v. Porter County Sheriff’s Merit Bd., 382 N.E.2d 977, 981 (Ind. Ct. App. 1978)) (finding that when an issue not raised in the administrative pleading is actually litigated at the hearing, the failure to object at the hearing to the introduction of that issue has the same effect as amending the pleading to include that issue).

Footnote: Zakutansky is reminded that when he argues the grade issue of the retaining wall and pole buildings to the Indiana Board on remand, he has the burden to submit probative evidence of “ what his grade should have been.” See Clark, 779 N.E.2d at 1282 (emphasis in original).