ATTORNEYS FOR PETITIONER: ATTORNEYS FOR RESPONDENT:
FRED M. CUPPY JEFFREY A. MODISETT
KEVIN E. STEELE ATTORNEY GENERAL OF INDIANA
BURKE, MURPHY, COSTANZA & CUPPY
Merrillville, IN ANGELA L. MANSFIELD
DEPUTY ATTORNEY GENERAL
PETER ZAKUTANSKY, ) ) Petitioner, ) ) v. )Cause No. 45T10-9609-TA-00123 ) STATE BOARD OF TAX COMMISSIONERS, ) ) Respondent. ) _____________________________________________________________________July 7, 1998 FOR PUBLICATION
ON APPEAL FROM THE STATE BOARD OF TAX COMMISSIONERS _____________________________________________________________________
The State Board attempts to support its positionSee footnote
by pointing out that the hearing
officer, Mr. Kurt Ott (Ott), "considered the additional costs it took to prepare the site for
a slanted wall and the additional costs necessarily involved in placing . . . concrete
stairs into a slanted walkway when he recommended a grade A." (Resp't Br. at 8).
Zakutansky counters by arguing that an A grade masonry wall would not have
deteriorated as rapidly as this masonry wall has. Moreover, the wall contains no
footings or reinforcing materials to make it particularly strong or durable.
In further support of his position, Zakutansky presented empirical evidence regarding the appropriate grade. Zakutansky offered an estimate prepared by an expert witness, Mr. Logan Sammons. Sammons estimated that a masonry wall like Zakutansky's could be built for approximately $7,313.See footnote 3 Zakutansky then compared this estimate with the reproduction cost of the wall as determined under the State Board's regulations. After the application of the A grade factor, the State Board's regulations
resulted in the reproduction cost of the wall being $18,656.64.See footnote
(Pet'r Br. at 5).
Zakutansky then applied a grade factor of D-1 to arrive at an adjusted reproduction cost
of $8,162.28. (Pet'r Br. at 5). This figure is close to Mr. Sammons' estimate of the
actual reproduction cost of the wall. Therefore, Zakutansky argues that the wall should
be assigned a grade of D-1.
Although such quantitative evidence might be convincing under a fair market value system, Indiana does not value property based on its fair market value. See Ind. Code Ann. § 6-1.1-31-6. However, such evidence is probative of the quality of materials, construction, and design used in making the wall, which in turn affect the grade to be applied. See Ind. Admin. Code tit. 50, r. 2.1-4-3 . With this in mind, this Court must determine whether the State Board's final determination is supported by substantial evidence. The Court finds that it is not.
The State Board determined that an A grade applied to the masonry wall because it was sloped and contained steps. However, the State Board made no effort to disclose why a sloped wall or concrete steps warrant an A grade as opposed to a B grade. Although the court acknowledges that such items might add to the reproduction cost of the wall, there is no evidence of how much cost these items would add. Cf. Clark v. State Bd. of Tax Comm'rs, No. 49T10-9607-TA-00083, slip op. at 10-11 (Ind. Tax Ct. Apr. 24, 1998). Therefore, there is no evidence supporting the 160% multiplier
that accompanies an A grade.See footnote
The State Board failed to disclose how the concrete
steps and a sloped wall increased the reproduction cost by 160%. The State Board's
argument that Mr. Ott considered the items is an insufficient basis to support a final
determination. The State Board cannot support its findings with the unsupported
subjective opinions of its hearing officers. See Canal Square, 694 N.E.2d at 808; see
also Corey v. State Bd. of Tax Comm'rs, 674 N.E.2d 1062, 1066 (Ind. Tax Ct. 1997).
Moreover, Zakutansky has demonstrated that the quality of the wall is not as high as the State Board's A grade would indicate. Zakutansky provided evidence that the wall is not reinforced with footings or metal rods, and that the quality of materials and workmanship is not of the highest quality. The State Board has not provided a reason for discounting Zakutansky's evidence. The State Board is obligated to consider evidence presented by the taxpayer and deal with that evidence in a meaningful manner. See Canal Square, 694 N.E.2d at 805. Zakutansky has demonstrated that the A grade is unsupported by substantial evidence, and he has shown the State Board has arbitrarily and capriciously failed to consider the evidence presented. See Clark, No. 49T10-9607-TA-00083, slip op. at 6 (requirement that State Board consider taxpayer's evidence stems from the requirement that the State Board
not act arbitrarily and capriciously). Therefore, the State Board's final determination of
an A grade is unsupported by substantial evidence and is arbitrary and capricious.
The second issue raised by Zakutansky is the assessment of the buildings located on the marina land. Zakutansky argues that the buildings were assessed using the incorrect cost schedules. See Ind. Admin. Code tit. 50, r. 2.1-4-5 (1989) (presently codified at id. r. 2.2-11-6 (1996)). Specifically, Zakutansky argues that the State Board incorrectly used the General Commercial-Mercantile cost schedule (GCM schedule) based on his use of the property. Id. Zakutansky argues that the property should be assessed using the residential or agricultural cost schedules because the buildings are properly categorized as pole barns. See id. r. 2.1-3-5 (1992) (presently codified at id. r. 2.2-9-6 (1996)); see also id. r. 2.1-3-6 (1992) (presently codified at id. r. 2.2-9-5 (1996)) (regulation containing models of pole barns).
The State Board counters with three arguments. First, the State Board argues that the assessor is given discretion to select the appropriate model and cost schedule based on "class and usage." (Resp't Br. at 6). Therefore, the selection of the GCM schedule by the State Board was proper. Second, the State Board argues that the physical features of the building were considered in determining the appropriate cost schedule to use and "adjustments were made to reflect the quality of the construction." (Resp't Br. at 6-7). Finally, the State Board argues that "with appropriate adjustments . . . the pricing would be very similar for a pole barn and a commercial building." (Resp't Br. at 7).
The buildings on Zakutansky's property are basic metal pole buildings.See footnote
that those buildings are used as storage for boats, or are located at a facility called a
marina, is not determinative of which cost schedule to use. See Herb v. State Bd. of
Tax Comm'rs, 656 N.E.2d 890, 893 (Ind. Tax Ct. 1995). "[T]he actual use of the
property is not a determinative factor in selecting the appropriate model, but merely a
starting point. As a result, the model that most closely resembles the subject
improvement with respect to physical features is to be used, regardless of the model's
name." Id. (emphasis added). Thus, the cost schedule for pricing pole barns is the
correct cost schedule to use in this instance.
Additionally, the Court notes that the State Board's consideration of the quality of the building and an adjustment based on that quality are of no avail. Nor is the fact that the adjusted pricing using a commercial cost schedule would be very close to that of a pole barn. The taxpayer is entitled to have his property assessed using the correct cost schedule. Only after this is done may adjustments for quality be made. Moreover, the fact that the State Board's assessment was close to the assessment it would have arrived at using the appropriate schedule does nothing to aid its position. Simply put, Zakutansky's pole buildings should have been valued using the cost schedule for pole
Therefore, this issue is REMANDED to the State Board for further
Zakutansky's third argument is that the land, on which the marina is located, is assessed too high. Specifically, Zakutansky claims that the presence of an underground pipeline and an easement restrict the use of the land because their presence prevents construction on certain portions of the property. Additionally, Zakutansky claims that the property is not served by any utilities except electricity. All this, according to Zakutansky, renders the $15,000 per acre assessment of the property too high. Zakutansky argues that the Porter County Land OrderSee footnote 8 should be amended to reduce the per acre value of his land, or in the alternative a negative influence factor should be applied. The Court has recently examined a similar factual situation.
In Talesnick v. State Bd. of Tax Comm'rs, 693 N.E.2d 657 (Ind. Tax Ct. 1998), the Court was called on to determine whether a taxpayer's property was incorrectly valued. The taxpayer owned property adjacent to a reservoir. The property was subject to a water flowage easement that placed some restrictions on the use of the
land along the banks of the reservoir. Id. at 658. In addition to this, the taxpayer's
property did not have access to city water, sewers, fire hydrants, or even city
maintained streets. Id. The taxpayer's property was valued at the maximum value
allowed under the county land order. Id.; see also Ind. Code Ann. § 6-1.1-4-13.6 (West
1989) (amended 1993 & 1997). This value was identical to other properties
surrounding the reservoir that were less encumbered by the water flowage easement
and had access to the "infrastructure" that the taxpayer's property lacked. Id. at 660-
The Court held that the State Board was required to compare the taxpayer's property to those around it. Id. at 660. This would allow the State Board to more accurately determine the appropriate land value. Also, the Court noted that the application of a negative influence factor may be appropriate. Id. This was due to the lack of access to an "infrastructure" and the loss in value of land due to the presence of an easement. Id. (citing Poracky v. State Bd. of Tax Comm'rs, 635 N.E.2d 235, 238 (Ind. Tax Ct. 1994)).
Like Talesnick, the present case presents a question of whether the State Board accurately valued property when compared to others around it. Zakutansky presented evidence that similar properties nearby, with greater access to utility service, were assessed at a lower rate than his property. Also, Zakutansky demonstrated that his property was encumbered by an easement restricting the use of his property. The Court notes that its decision in Talesnick was not available to the parties until after they had submitted briefs and this case was taken under advisement by the Court.
Therefore, this Court REMANDS this issue to the State Board for further consideration
in light of Talesnick.
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