ATTORNEY FOR PETITIONER:    ATTORNEYS FOR RESPONDENT:
CURTIS J. DICKINSON    STEVE CARTER
DICKINSON & ABEL     ATTORNEY GENERAL OF INDIANA
Indianapolis, IN    Indianapolis, IN

DAVID L. PIPPEN     VINCENT S. MIRKOV
ATTORNEY AT LAW    DEPUTY ATTORNEY GENERAL
Indianapolis, IN    Indianapolis, IN
_____________________________________________________________________

    IN THE INDIANA TAX COURT _____________________________________________________________________ 

SUPERIOR WALLBROOK, INC.,                                                 )
                                                                               )
    Petitioner,                                                                )
                                                                               )
    v.                                                                         )   Cause No. 49T10-9701-TA-33
                                                                               )
DEPARTMENT OF LOCAL                                                            )
GOVERNMENT FINANCE, See footnote         )
                )
    Respondent.            )    
_____________________________________________________________________

ON APPEAL FROM A FINAL DETERMINATION
OF THE STATE BOARD OF TAX COMMISSIONERS
_____________________________________________________________________
NOT FOR PUBLICATION
July 3, 2002


FISHER, J.
Superior Wallbrook, Inc. (Superior) appeals the State Board of Tax Commissioners’ (State Board) final determination that assessed its property as of the March 1, 1991, assessment date. Superior presents the following issues for this Court’s review on appeal, which the Court restates as:
whether the State Board improperly applied a C grade to Superior’s improvement; and

whether the State Board improperly denied Superior’s improvement any obsolescence depreciation. See footnote

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

FACTS AND PROCEDURAL HISTORY

In 1991, Superior owned improved property located in Noble County, Indiana.See footnote After receiving its property assessment for 1991, Superior appealed to the Noble County Board of Review (BOR). On November 6, 1991, the Noble County BOR issued a final determination affirming the assessment. Thereafter, Superior appealed via a 131 Petition for Review of Assessment (131 Petition) to the State Board asserting that its improvements’ grade and obsolescence were incorrect and that its assessment was unconstitutional. On November 22, 1996, the State Board issued its final determination denying any change to grade or obsolescence and stating that the property was properly assessed under the True Tax Value system. On January 3, 1997, Superior filed its original tax appeal in this Court. The Court held a trial on September 2, 1998, and oral argument on February 25, 1999. Additional facts will be provided as necessary.
ANALYSIS AND OPINION


Standard of Review


This Court gives final determinations of the State Board great deference when the State Board acts within the scope of its authority. Freudenberg-NOK General Partnership v. State Bd. of Tax Comm’rs, 715 N.E.2d 1026, 1028-29 (Ind. Tax Ct. 1999), review denied. Accordingly, this Court reverses final determinations of the State Board only when they are unsupported by substantial evidence, are arbitrary or capricious, constitute an abuse of discretion, or exceed statutory authority. Id. at 1029.
A taxpayer challenging the validity of the State Board’s final determination bears the burden of demonstrating the invalidity of the final determination. Clark v. State Bd. of Tax Comm’rs, 694 N.E.2d 1230, 1233 (Ind. Tax Ct. 1998). The taxpayer must present a prima facie case, which is a case wherein the evidence is sufficient to establish a given fact that if not contradicted will remain sufficient. Damon Corp. v. Indiana State Bd. of Tax Comm’rs, 738 N.E.2d 1102, 1106 (Ind. Tax Ct. 2000). 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.” Clark, 694 N.E.2d at 1233.
Discussion
I.    Grade


The first issue is whether the State Board improperly applied a C grade to Superior’s improvement. Superior asserts that the State Board did not support its C grade of Superior’s improvement with substantial evidence. The State Board argues that Superior did not present any evidence demonstrating that the grade that it assigned to the improvement was improper. Superior misunderstands the placement of the burden here. As mentioned above, the burden is on Superior to present a prima facie case that the State Board’s grade is improper or that it is entitled to a different grade. See Miller Structures, Inc. v. Indiana State Bd. of Tax Comm’rs, 748 N.E.2d 943, 953 (Ind. Tax Ct. 2001). Only then does the burden shift to the State Board to support its final determination with substantial evidence. See Clark, 694 N.E.2d at 1233.
    Grading of improvements is a key aspect of the True Tax Value system. White Swan Realty v. State Bd. of Tax Comm’rs, 712 N.E.2d 555, 559 (Ind. Tax Ct. 1999), review denied. Assessors use cost schedules to determine the base reproduction cost of a particular improvement. Id. Various grades are then assigned to an improvement based on the quality of the improvement’s materials, design, and workmanship. Id. See also Ind. Admin. Code tit. 50, r. 2.1-4-3(f) (1992). The grades represent multipliers that are applied to the base reproduction cost of an improvement as calculated by using the cost schedules provided in the regulations. White Swan Realty, 712 N.E.2d at 559.
At trial, three joint exhibits were admitted into evidence and two witnesses testified. See footnote The exhibits included an Assessment Review and Analysis (Review), the official transcript of proceedings before the State Board, and a property record card prepared by the State Board. In the Review, Superior argues that its improvement should receive a grade no higher than D-1. In support of this contention the Review simply states the following:
The 51,000 SF subject property varies substantially from the base models in type and quality of materials and workmanship. To adjust for these differences a grade no higher than D-1 or a 70% factor should be applied.

(Joint Ex. 1 at 2.) At the trial before this Court, Mark Drew Miller, the author of the Review, testified that the assessment was excessive because “things” that were not present in the subject building were included in the model’s price. (Trial Tr. at 21.) More specifically, he stated that “[t]he subject is a preengineered steel building. The model that was being priced from is for concrete block/mortar type building.” (Trial Tr. at 21.) Miller also testified that at the State Board hearing he went “into the interior components that were not present in the subject property, but were assumed present in the model, [and] the type of exterior walls that were used to construct the subject.” (Trial Tr. at 21-22.) Additionally, he mentioned that “[w]e discussed the interior, heat, lack of partitioning and the metal walls versus concrete block walls.” (Trial Tr. at 25.)
Superior’s assertions in its exhibits and through Miller’s testimony are conclusory because they do not specifically describe why the improvement was improperly assigned a C grade or why it better resembles the description of a D-1 grade improvement as set forth in the State Board Regulations. See Ind. Admin. Code tit. 50, r. 2.1.4-3(f)(1992). “A taxpayer’s conclusory statements do not constitute probative evidence concerning the grading of the subject improvement.” Sterling Management-Orchard Ridge Apartments v. State Bd. of Tax Comm’rs, 730 N.E.2d 828, 838 (Ind. Tax Ct. 2000). See also Herb v. State Bd. of Tax Comm’rs, 656 N.E.2d 890, 893 (Ind. Tax Ct. 1995) (stating that allegations, unsupported by factual evidence, remain mere allegations). Because Superior has not submitted probative evidence of grade, it has not made a prima facie case that the grade of the improvement should be lowered to a D-1. Thus, the State Board’s duty to support its final determination with substantial evidence is not triggered. See Miller Structures, Inc., 748 N.E.2d at 953. Consequently, the Court AFFIRMS the State Board’s final determination that the improvement in question is entitled to a C grade.

II.    Obsolescence

The second issue is whether the State Board improperly denied Superior’s improvement any obsolescence depreciation. Superior argues that the State Board did not support its denial of obsolescence with substantial evidence. The State Board contends that Superior did not present evidence to show that the improvement was entitled to obsolescence depreciation. As mentioned with regard to grade, the burden is on Superior to present a prima facie case as to obsolescence. See Miller Structures, 748 N.E.2d 943 at 954.
“The True Tax Value of a commercial improvement is determined by calculating the reproduction cost of the improvement (as determined by an application of the State Board regulations) and subtracting any physical and obsolescence depreciation.” Loveless Const. Co. v. State Bd. of Tax Comm’rs, 695 N.E.2d 1045, 1047 (Ind. Tax Ct. 1998), review denied. The regulations define obsolescence as a functional or economic loss of value. Ind. Admin. Code tit. 50, r. 2.1-5-1 (1992). Functional obsolescence is caused by factors internal to the property and is “evidenced by conditions within the property.” Id. Economic obsolescence is caused by factors that are external to the property. Id.
In Clark v. State Board of Tax Commissioners, this Court concluded that as a prerequisite for this Court to review a taxpayer’s case, the taxpayer must follow a two step process during its hearing before the State Board. Clark, 694 N.E.2d at 1241. First, a taxpayer must identify causes of obsolescence and then must quantify the amount of obsolescence to be applied. Id. However, because this case arose before Clark, Superior was not required to quantify its evidence but simply to identify it. See id. Superior is required to present probative evidence to establish a prima facie case regarding its asserted causes of obsolescence. White Swan Realty, 712 N.E.2d at 560.
Here, however, Superior has not even identified what type of obsolescence that it claims affects its improvement. The Review states that “[t]he subject property suffers from the following highlighted causes of obsolescence depreciation. To account for this loss in value, 25% obsolescence depreciation should be applied.” (Joint Ex. 1 at 2.) Within the Review, definitions and information on both functional and economic obsolescence are highlighted with a yellow marker. The origin of this information is not identified in the Review other than the statements “RULE 6: DEPRECIATION” and “RULE 6: APPENDIX” at the bottom of the pages. (Joint Ex. 1 at 3, 4.) The Review also contains a State Board final determination regarding an alleged comparable improvement. Highlighted in the final determination is one sentence: “Obsolescence depreciation of 20% is applied.” (Joint Ex. 1 at 13.) Superior does not provide any explanation to show how its property is comparable to the one discussed in the exhibit.
Superior has not shown how the information that it submitted to the State Board demonstrates a cause of obsolescence nor has it even identified what kind of obsolescence it seeks to have applied to its improvement. Its statements are conclusory and do not constitute probative evidence of obsolescence. See Miller Structures, 748 N.E.2d at 954. In addition, Superior has not presented any authority to support its claim of obsolescence. This Court will not make Superior’s case for it. See id. Because Superior has not presented a prima facie case showing that its property suffers from obsolescence, this Court AFFIRMS the State Board’s final determination as it relates to obsolescence. See footnote
CONCLUSION

    For the foregoing reasons, the Court hereby AFFIRMS the State Board’s final determination that Superior is not entitled to a change in grade or application of obsolescence.

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. P.L. 198-2001, § 119(b)(2). Effective January 1, 2002, the legislature created the Department of Local Government Finance (DLGF), Ind. Code § 6-1.1-30-1.1 (West Supp. 2001)(eff. 1-1-02); P.L. 198-2001, § 66, and the Indiana Board of Tax Review (Indiana Board). Ind. Code § 6-1.5-1-3 (West Supp. 2001)(eff. 1-1-02); P.L. 198-2001, § 95. Pursuant to Indiana Code Section 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. 1-1-02); P.L. 198-2001, § 95. Moreover, the law in effect prior to January 1, 2002 applies to these appeals. Ind. Code § 6-1.5-5-8 (West Supp. 2001)(eff. 1-1-02); P.L. 198-2001, §§ 95, 117. Although the DLGF has been substituted as the Respondent, this Court will still reference the State Board throughout this opinion.
Footnote: Superior also argues that the State Board Regulations in effect at the time of its assessment were unconstitutional because they lacked ascertainable standards. In St. John III this Court concluded that the tax system in place at that time did lack ascertainable standards. Town of St. John v. State Bd. of Tax Comm’rs, 690 N.E.2d 370, 384 (Ind. Tax Ct. 1997) (St. John III), rev’d in part on other grounds by Town of St. John v. State Bd. of Tax Comm’rs, 702 N.E.2d 1034 (Ind. 1998) (St. John V). Notwithstanding the conclusion that this Court made in St. John III, this Court has also recognized that the fact that the subject improvement was assessed under an unconstitutional regulation does not mean that the assessment will be invalidated on that basis. Whitley Prods., Inc. v. State Bd. of Tax Comm’rs, 704 N.E.2d 1113, 1121 (Ind. Tax Ct. 1998), review denied. See also White Swan Realty v. State Bd. of Tax Comm’rs, 712 N.E.2d 555, 559 (Ind. Tax Ct. 1999), review denied; Phelps Dodge v. State Bd. of Tax Comm’rs, 705 N.E.2d 1099, 1104 (Ind. Tax Ct. 1999), review denied. “Real property must still be assessed, and, until the new regulations are in place, must be assessed under the present system.” Whitley Prods., 704 N.E.2d at 1121; See also Town of St. John v. State Bd. of Tax Comm’rs, 729 N.E.2d 242, 250-251 (Ind. Tax Ct. 2000). This means that a taxpayer cannot come into court, point out the inadequacies of the system and obtain a reversal of an assessment. Whitley Prods., 704 N.E.2d at 1121. Instead, the taxpayer must come forward with probative evidence relating to the issue the taxpayer raises. Id. Therefore, Superior’s argument that the final determinations should be reversed because the regulations did not contain ascertainable standards cannot prevail.
Footnote: The property at issue was parcel number 075-080-00004900.
Footnote: The two witnesses were Gary Utt, the hearing officer on the case and Mark Drew Miller from Landmark Appraisals for Superior.
Footnote: Superior also argues that the State Board impermissibly considered its property’s location and use when determining obsolescence because in its final determination the State Board stated: “[t]he structure is used for its designed and intended purpose.” (Joint Ex. 2.) Superior asserts that this is improper because the State Board’s regulations do not contain any information on location and use as required by Indiana Code Section 6-1.1-31-6. The Court acknowledges that the regulations are not as developed as they could be regarding location and use. Nevertheless, location and use are described in Indiana Administrative Code title 50, r. 2.1-2-1 (1992). The regulations also provide for the use of property as residential, agricultural, commercial, and industrial. Ind. Admin Code tit. 50, rr. 2.1-3-1, 2.1-4-1 (1992). Consequently, Superior’s argument regarding location and use cannot prevail.