ATTORNEYS FOR PETITIONER:    ATTORNEYS FOR RESPONDENT:
CURTIS J. DICKINSON    KAREN M. FREEMAN-WILSON
DICKINSON & ABEL    ATTORNEY GENERAL OF INDIANA
Indianapolis, IN    Indianapolis, IN
    
DAVID L. PIPPEN    TED J. HOLADAY
Attorney at Law    DEPUTY ATTORNEY GENERAL
Indianapolis, IN    Indianapolis, IN

_____________________________________________________________________

    IN THE INDIANA TAX COURT _____________________________________________________________________

STERLING MANAGEMENT-ORCHARD                                                           )
RIDGE APARTMENTS,                                                                          )
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    Petitioner,                                                                            )
                                                                                           )
    v.                                                                                     )   Cause No. 49T10-9701-TA-41
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STATE BOARD OF TAX                                                                         )
COMMISSIONERS,                                                                             )
                                                                                           )
    Respondent.                                                                            )    

    II.    Whether the State Board erroneously valued iron fencing on the subject property, where the State Board’s regulations do not assign values to such fencing; and

    III.    Whether the State Board incorrectly assigned a grade of C plus one to Sterling’s apartment complex. See footnote     
    FACTS AND PROCEDURAL HISTORY
    Sterling is a corporation with its principal place of business in Kosciusko County, Indiana. Sterling owns parcel number 003-15001-93, upon which is located an apartment complex known as the Orchard Ridge Apartments. Local assessing officials valued the subject property’s land and improvements at a total value of $897,670 for the March 1, 1993 assessment date. Sterling filed a Form 130 petition for review with the Kosciusko County Board of Review (BOR) on September 8, 1993, claiming that an incorrect grade of C plus one was assigned to the subject improvement. On June 17, 1994, the BOR affirmed the subject improvement’s assigned grade.
    Thereafter, on July 28, 1994, Sterling filed a Form 131 petition for review with the State Board. In the petition, Sterling stated that the subject improvement’s grade was “excessive based on materials used for construction [and] should be C–2 [instead of] C+1.” (Def’s Ex. A at 3.) The State Board held a hearing on the petition on November 28, 1995. In its final determination, dated November 22, 1996, the State Board lowered the subject property’s total assessed value to $885,870. It did not alter the subject improvement’s grade. Instead, the lowered assessment resulted from a change in the subject property’s land classification and from a downward adjustment of iron fencing on the property.
    Sterling filed an original tax appeal with this Court on January 3, 1996. Sterling filed a motion for summary judgment on January 30, 1998; the motion was denied on May 11, 1998. The Court conducted a trial in this matter on September 30, 1998.
    Additional facts will be supplied as necessary.
    ANALYSIS AND OPINION
    Standard of Review
    This 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 Comm’rs, 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. See id. The taxpayer bears the burden of demonstrating the invalidity of the State Board’s final determination. See Clark v. State Bd. of Tax Comm’rs, 694 N.E.2d 1230, 1233 (Ind. Tax Ct. 1998).

(Trial Tr. at 13-14.)
        The evidence presented does not prove that no retaining wall existed. Utt admitted that, at the time, he did not disagree with the value assigned to the retaining wall on the property record card. Moreover, he could not recall whether a retaining wall was present. These statements fall short of demonstrating that no retaining wall existed.
        Furthermore, assuming the retaining wall was present, the testimony does not constitute probative evidence as to what value, if any, should have been assigned to it. The final statement by Utt is speculative at best. It is a conclusory observation that does not represent proof that the retaining wall had no value. Likewise, Miller’s contention that the retaining wall adds no value to the subject improvement is conclusory. See footnote Miller’s assertion lacks any factual basis whatsoever.
        The statements offered by Sterling do not constitute probative evidence regarding either the existence or value of the retaining wall. Therefore, the State Board’s duty to support its final determination with substantial evidence was never triggered. Moreover, Sterling’s argument does not demonstrate that the State Board’s final determination was arbitrary and capricious. The State Board’s final determination as regards assessment of the retaining wall is AFFIRMED.

(Trial Tr. at 12-13.) Although the State Board’s valuation lowered the assessed value for the fencing, the State Board provided no explanation for the change. In its final determination, the State Board simply states that, “It is determined that the fence price should be changed to $32 per linear foot.” (Def.’s Ex. A at 15.)
    Noting that Indiana does not value property based on its market value and that the State Board is generally not obligated to consider a taxpayer’s cost data when reviewing an assessment, See footnote the Court on Feb. 21, 2000 invited the State Board to submit a supplemental brief identifying what regulations or other authority governs the valuation of iron fencing and explaining precisely how the iron fencing’s value was calculated in the present case.
    On March 16, 2000, the State Board submitted its supplemental authority. It relied upon the Affidavit of Gordon E. McIntyre, the State Board Commissioner who reviewed and approved Sterling’s final assessment determination. McIntyre’s affidavit, in turn, cited and attached copies of: (1) a “question and answer” memorandum (Memo); (2) one page of Marshall and Swift Company’s Residential Cost Handbook (1983) (Handbook); and (3) one side of Sterling’s property record card. The State Board offered the following narrative in support of its position that the fencing should be valued at thirty-two dollars per linear foot:
It is acknowledged that the applicable regulations of the State Board for assessment of real property from 1989 through 1993 contained no specific values for iron fences. In order to meet its obligation to assess all property that should be assessed, the State Board relied upon a “question and answer” memorandum it had sent out to all local assessors. The memorandum states that four foot high iron fence should be valued at $32 per linear foot. This value is consistent with the lowest value stated by Marshall & Swift Valuation Service, which is $8 per square foot. The State Board simply multiplied the $32 times 226 feet and rounded the result to $7200 to calculate the true tax value of this fence. Sterling presented no evidence upon which to base a value. Because the State Board’s calculation is favorable to Sterling and based upon the lowest value figure, it should be sustained by the Tax Court.

(Resp’t Supp. Authority at 2.)
    The Memo is the basis for the State Board’s valuation of the iron fencing. The Memo, dated April 10, 1989, was sent from the State Board to all local assessors. Its introductory paragraph reads, “At the conference held in late January, 1989, question and answer sessions were held. This memorandum catalogues the questions and answers. Unless otherwise indicated, the answers are responsive to specific circumstances and should not be applied beyond those circumstances.” Question and answer number forty-three states as follows:
Q:    How are the following valued: (a) commercial wrought iron fencing[?]
A:    (a) Iron fencing – 4’ high $32 P.L.F.; 6’ high $48 P.L.F.; 8’ high $64 P.L.F.; 10’ high $80 P.L.F.; 12’ high $96 P.L.F.

(Memo at 7.)
    Along with the Memo, the State Board submitted a copy of page C-1 of the Handbook. This page is in the “Yard Improvements” section of the Handbook and shows the Unit-in-Place Costs for fencing and patio roofs and enclosures. It lists the cost range for “Hand forged wrought iron” metal fences as eight dollars to sixteen dollars twenty-five cents per square foot.
    Sterling submitted its Reply to the State Board’s supplemental authority on April 24, 2000. Sterling reasons that, because the State Board’s regulations determine a property’s “true tax value” yet assign no value to iron fencing, the iron fencing has no “true tax value.” (Pet’r Reply to Supp. Authority at 2.) Sterling points out that the State Board knew of the regulation’s deficiency as regards iron fencing but failed to properly revise its regulations or even to issue an instructional bulletin for taxing officials. The State Board, according to Sterling, violated due process principles by providing no notice to the public of its decision to use market value in assessing iron fencing. Therefore, Sterling maintains that the issue must be remanded with instructions to remove any assigned value to the fencing.
    “Under Indiana’s ascertainable standards rule, all administrative decisions must be in accord with previously stated, ascertainable standards.” Boaz v. Bartholomew Consol. Sch. Corp., 654 N.E.2d 320, 323 (Ind. Tax Ct. 1995). The ascertainable standards requirement ensures that administrative decisions are “fair, orderly and consistent rather than irrational and arbitrary.” Garcia v. State Bd. of Tax Comm’rs, 694 N.E.2d 794, 796 (Ind. Tax Ct. 1998) (quoting Podgor v. Indiana Univ., 178 Ind. App. 245, 258, 381 N.E.2d 1274, 1283 (1978)). To satisfy the ascertainable standards rule, standards must be written with sufficient precision to give fair warning as to what factors an agency will consider in making an administrative decision. See Mechanics Laundry & Supply, Inc. v. Indiana Dep’t of State Revenue, 650 N.E.2d 1223, 1233 (Ind. Tax Ct. 1995) (citing Podgor, 178 Ind. App. at 258, 381 N.E.2d at 1283). Moreover, standards should also be readily available to those who have potential contact with the administrative body. See footnote See id.
    The State Board’s actions violate the ascertainable standards requirement. The State Board’s assessment regulations provide no standards whatsoever with respect to valuing iron fencing. Cf. Garcia, 694 N.E.2d at 797-98 (finding State Board’s assessment arbitrary and capricious, where regulations provided no definitions or guidelines for differentiating between “A” and “A+10” grade dwellings). Thus, there is no previously announced standard for the State Board to apply in assessing the iron fencing. Moreover, Sterling certainly had no fair warning that the State Board would rely upon market information from the Handbook to assess the fencing. As noted supra note four, in Indiana a property’s reproduction cost is determined by referring to the State Board’s regulations, not market information. Sterling could not have reasonably known that the State Board would use market information, i.e., the Handbook, in assessing its iron fencing. In this case, the State Board provided no warning that it would consider market information. No warning falls far short of being fair warning. Finally, the State Board’s standards were not readily available to Sterling. The Memo is neither a regulation See footnote nor an informational bulletin;See footnote by its own terms, the document was responsive (unless otherwise stated) only to “specific circumstances and should not be applied beyond those circumstances.” See footnote (Memo at 1.) The State Board could not have expected Sterling to have access to or possess knowledge of the Memo. Moreover, even if Sterling did know about this Memo from April of 1989, it would not have been expected to know that it applied to the 1993 assessment of the iron fencing. In addition, the State Board contends that the Memo’s value for iron fencing is “consistent” with that found in the Handbook. However, the Memo never references the Handbook. While Marshall and Swift’s Handbook may be a widely accepted and respected valuation source, Sterling should have had the opportunity to challenge the accuracy of the Handbook’s assigned value or to offer its own competing evidence of the fencing’s value. This is especially true considering that the Handbook is copyrighted a full decade before the assessment year in question.
    The State Board’s actions in assessing Sterling’s iron fencing are troubling, if not egregious. Basic principles of due process require the State Board to establish identifiable standards in assessing property and to have those standards published and accessible. In the present case, the State Board failed to promulgate regulations for assessing iron fencing. To correct that error, it may not simply refer to market concepts when it is convenient to do so without giving the taxpayer an opportunity to respond. Therefore, the Court finds that the State Board’s assessment of Sterling’s iron fencing was arbitrary and capricious.
    Sterling would have the Court remand and order the State Board to assign no value to the iron fencing. However, real property must be assessed. See Whitley Prods., 704 N.E.2d at 1121. The State Board asserts that the iron fencing’s assessment should be affirmed because its valuation is “favorable” to Sterling and because Sterling offered no evidence regarding the value of the iron fencing. The Court refuses to rubber-stamp the State Board’s improper assessment. Sterling must be given the opportunity to respond with evidence as to the fencing’s value. Cf. Wirth v. State Bd. of Tax Comm’rs, 613 N.E.2d 874, 879 (Ind. Tax Ct. 1993) (“The State Board simply has no power to take action affecting a taxpayer’s property without giving the taxpayer notice and an opportunity to be heard . . . .”) Therefore, on the issue of the iron fencing’s valuation, the State Board’s final determination is REVERSED and this cause REMANDED to the State Board. The State Board is instructed to conduct a hearing on this issue, during which it shall accept and consider any objectively verifiable evidence submitted by Sterling as to the iron fencing’s value. See footnote