ATTORNEY FOR PETITIONER:    ATTORNEYS FOR RESPONDENT:
JOSEPH D. GEESLIN, JR.    STEVE CARTER    
ATTORNEY AT LAW     ATTORNEY GENERAL OF INDIANA
Indianapolis, IN    Indianapolis, IN

     LINDA I. VILLEGAS
    DEPUTY ATTORNEY GENERAL
    Indianapolis, IN

_____________________________________________________________________

    IN THE INDIANA TAX COURT _____________________________________________________________________ 

PHOENIX MUTUAL,                                                    )
                                                                               )
    Petitioner,                                                                )
                                                                               )
    v.                                                                         )   Cause No. 49T10-9806-TA-67
                                                                               )                  
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NOT FOR PUBLICATION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 19, 2002

FISHER, J.     

    Phoenix Mutual (“Petitioner”) appeals from a final determination of the State Board of Tax Commissioners (“State Board”), valuing its commercial real property for the 1995 assessment.
ISSUES

Whether the State Board erred in assessing the Petitioner’s land; and

Whether the State Board erred in assigning a grade of B+2 to the Petitioner’s improvement.

FACTS AND PROCEDURAL HISTORY

    The Petitioner owns an office complex in Clay Township, Hamilton County, Indiana. The property consists of a four-story metal and glass office building situated on 7.7 acres of land. For the 1995 assessment, the Clay Township Assessor (Assessor) assessed the property at $2,276,860 ($1,722,930 for land and $553,930 for improvements). In arriving at that value, the Assessor designated 4.191 acres as primary land (valued at $250,000 an acre) and 3.509 acres as secondary land (valued at $175,000 an acre). See footnote In addition, the Assessor assigned the office building a grade of B+2.
    Believing the assessment to be too high, the Petitioner filed a Form 130 Petition for Review of Assessment. The Hamilton County Board of Review (“BOR”) reduced the overall assessment to $2,252,700 to account for lack of partitioning on the fourth floor of the building.
    Still believing the assessment to be too high, the Petitioner filed a Form 131 Petition for Review of Assessment with the State Board on March 20, 1997. The Petitioner stated its grounds for appeal as:
1. Primary acreage should be valued at $200,000 per acre with residual land area valued at useable undeveloped.

2. Grade factor of improvements should be B grade not B+2.

(Stip. Ex. 2.) The State Board held a hearing on December 9, 1997. In its final determination of May 6, 1998, the State Board made no change to the Petitioner’s assessment.
    The Petitioner filed an original tax appeal with this Court on June 19, 1998. See footnote The Court conducted trial on November 4, 1999. The Court heard oral argument on November 6, 2000. Additional facts will be supplied as necessary.

STANDARD OF REVIEW

    This Court accords great deference to the State Board when it acted within the scope of its authority. Thousand Trails, Inc. v. State Bd. of Tax Comm’rs, 757 N.E.2d 1072, 1075 (Ind. Tax Ct. 2001). Accordingly, the Court will reverse a final determination by the State Board only if it is unsupported by substantial evidence, constitutes an abuse of discretion, exceeds statutory authority, or is arbitrary and capricious. Id. The party challenging the propriety of a State Board final determination bears the burden of demonstrating its invalidity by presenting a prima facie case. See Clark v. State Bd. of Tax Comm’rs, 694 N.E.2d 1230, 1233 (Ind. Tax Ct. 1998).
DISCUSSION AND ANALYSIS
Land Assessment

    At trial, the Petitioner waived its land valuation issue. (Trial Tr. at 47, 52-53.) Consequently, the State Board’s determination that Petitioner’s primary acreage be valued at $250,000 an acre is affirmed.
    Nevertheless, the Petitioner claimed during trial that the State Board erred in not reevaluating the land’s classification. (Trial Tr. at 3.) More specifically, the Petitioner claims that only 2.361 acres should be classified as primary land and only 1.618 acres should be classified as secondary land. The Petitioner asserts that the remainder of the land should be classified as: 0.194 acres unusable undeveloped, 2.764 acres usuable undeveloped, and 0.763 acres retention ponds. (See Stip. Ex. 16.) The State Board maintains, however, that because the issue of land classification “was not raised in the 131 petition nor in the [administrative] hearing,” it cannot now be raised for the first time at trial. (Resp’t Br. at 2.) The State Board is mistaken.
    As stated earlier, all of Petitioner’s land was originally classified as either primary or secondary. When it challenged its assessment to the State Board in its 131 petition, the Petitioner framed its issue as:
1. Primary acreage should be valued at $200,000 per acre with residual land area valued at useable undeveloped.

(Stip. Ex. 2 at 5)(emphasis added). While not phrased as succinctly as it could have been, the issue nonetheless evidences Petitioner’s belief that a portion of its land should be classified as something other than primary or secondary. Thus, the issue was raised in the Petitioner’s 131 petition. Furthermore, the record indicates that after the State Board hearing, the State Board’s hearing officer requested that Petitioner “provide [a] site plan showing land classification breakdown and how it [should be] calculated or determined.” (Stip. Ex. 14.) As a result, the Petitioner submitted a detailed calculation of what it believed the proper land classifications to be, as well as how it derived those calculations. (Stip. Ex. 20 at 3.)
    Having reviewed the record, the Court determines that it was in error for the State Board to refuse to consider the Petitioner’s land classification issue on the grounds that it was never raised prior to trial. Accordingly, the issue is REMANDED to the Indiana Board See footnote for consideration.

Grade

    The Petitioner also challenges the B+2 grade assigned to its building. More specifically, the Petitioner argues:
A grade of B+2 means that the building grade falls halfway between a B grade and an A grade or as many A grade characteristics as B grade characteristics. . . . The [State Board] hearing officer made no findings that there were any A grade characteristics in the building. . . . Petitioner testified that the [] building should be graded a B. [The Petitioner] testified that the floor covering should be graded C, the wall covering and ceiling should be graded C. . . . There are no A grade characteristics in the building.

(Pet’r Proposed Findings of Fact and Conclusions of Law at 2-3 (internal citations omitted).) The Court finds, however, that the Petitioner did not make a prima facie case that the assigned grade of B+2 was improper.
    Under Indiana’s true tax value system, improvements are assigned various grades based on their materials, design, and workmanship; the grades represent multipliers that are applied to the base reproduction cost of an improvement. Ind. Admin. Code tit. 50, r. 2.2-10-3; Whitley Prods., Inc. v. State Bd. of Tax Comm’rs, 704 N.E.2d 1113, 1116 (Ind. Tax Ct. 1998), review denied. The selection of which grade should be applied to an improvement calls for a subjective judgment and is committed to the discretion of the assessor. Mahan v. State Bd. of Tax Comm’rs, 622 N.E.2d 1058, 1064 (Ind. Tax Ct. 1993). Thus, in determining grade, the assessor is to “distinguish all significant variations in [an improvement’s] quality and design.” Ind. Admin. Code tit. 50, r. 2.2-10-3(a). The State Board’s regulations define the different characteristics that help assessors differentiate between grades. For instance, “‘B’ grade buildings are architecturally attractive and constructed with good quality materials and workmanship. These buildings have a high quality interior finish with abundant built-in features, very good lighting and plumbing fixtures, and a custom heating and air conditioning system.” Ind. Admin. Code tit. 50, r. 2.2-10-3(a)(2). On the other hand, “‘A’ grade buildings have an outstanding architectural style and design and are constructed with the finest quality materials and workmanship. These buildings have a superior quality interior finish with extensive built-in features, high grade lighting and plumbing fixtures, and a deluxe heating system and air conditioning system.” Ind. Admin. Code tit. 50, r. 2.2-10-3(a)(1). See footnote
    When contesting a grade assigned to an improvement, a taxpayer must offer probative evidence concerning the alleged assessment error. Whitley Prods., 704 N.E.2d at 1119. A taxpayer’s conclusory statements concerning the grading of a subject improvement, however, do not constitute probative evidence. Id. Likewise, mere references to photographs or State Board regulations, without explanation, do not qualify as probative evidence for purposes of grading issues. Heart City Chrysler v. State Board of Tax Comm’rs, 714 N.E.2d 329, 333 (Ind. Tax Ct. 1999). In the event that a taxpayer fails to provide the State Board with probative evidence supporting its position on a grade issue, the State Board’s duty to support its final determination with substantial evidence is not triggered. Whitley Prods., 704 N.E.2d at 1119.
    In examining the evidence presented to the State Board at the Petitioner’s administrative hearing, the Court determines that the Petitioner has not met its burden of proof. For instance, at the administrative hearing, the Petitioner submitted a State Board final determination on the same property indicating that, for the 1991 assessment, the improvement had been assigned a grade of B+1. (Stip. Ex. 6.) No explanation was given as to how this determination relates to the 1995 assessment. (See Stip. Ex. 22.) Consequently, this evidence does not establish a prima facie case that the improvement should be assigned a grade of B for the 1995 assessment. See footnote
    In addition, the Petitioner submitted a copy of 50 I.A.C. 2.2-10-3 (the State Board regulation defining grades and their application). No supporting explanation, however, was provided. See footnote As stated earlier, mere references to State Board regulations, without explanation, do not qualify as probative evidence for purposes of grading issues. Heart City Chrysler v. State Board of Tax Comm’rs, 714 N.E.2d 329, 333 (Ind. Tax Ct. 1999).
    Finally, Mr. George Spenos, the tax consultant who represented the Petitioner at the administrative hearing, was called to testify at trial. However, his testimony was nothing more than broad, conclusory statements that the improvement’s grade should be a B:
Q: What in your opinion should be the grade for [this] building?

A: Well, my opinion it should be a B grade.

Q: And how did you determine that?

A: By visual inspection of the property, and looking at the grade factor classifications in the manual itself.

* * * * *


Q: And in your opinion, what should the floor covering . . . be graded?

A: Outside the atrium area, it’s all C grade.

* * * * *


Q: How about the exterior of the building. What is the exterior of the building?

A: The exterior of the building . . . [i]n my opinion would be a B grade.

(Trial Tr. at 74-75.) Later:
Q: Mr. Spenos, you’ve rendered quite a few opinions here today, haven’t you?

A: I wouldn’t call them opinions, no.

Q: You don’t recall him asking in your opinion that the [] building should be a B grade?

* * * * *


A: Yeah, okay. I understand.

(Trial Tr. at 79.)
    Testimonial statements that something “should be a B grade” or that something “should be a C grade” are nothing more than conclusions. Conclusory statements do not qualify as probative evidence. Whitley Prods., 704 N.E.2d at 1119. Because the Petitioner has failed to provide the State Board with probative evidence to support its position on grade, the State Board’s duty to support its final determination with substantial evidence is not triggered. See id. As a result, the State Board’s determination of a B+2 grade is AFFIRMED.

CONCLUSION

The Petitioner has not made a prima facie case with respect to the issue of grade and the State Board’s final determination with respect to that issue is therefore AFFIRMED. The case is REMANDED, however, to the Indiana Board to consider Petitioner’s issue and evidence regarding land classification.

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”), see Indiana 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 § 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. Nevertheless, the law in effect prior to January 1, 2002 applies to these appeals. Id. See also P.L. 198-2001, § 117. Although the DLGF has been substituted as the Respondent, this Court will still reference the State Board throughout this opinion.


Footnote: Pursuant to the Hamilton County Land Order, primary land in the Petitioner’s area can be assessed with a value between $130,700 and $330,000 an acre; secondary land between $91,500 and $210,000 an acre; usable undeveloped land between $39,200 and $90,000 an acre; and unusable undeveloped land at $1,500 an acre. (Stip. Ex. 23.)
Footnote:
In conjunction with filing this original tax appeal, Petitioner also filed an original tax appeal on another parcel of land it owned in Hamilton County. While the two appeals were consolidated for purposes of proceedings before this Court, the Court is issuing a separate opinion in each case today.

Footnote: All cases that would have previously been remanded to the State Board are now remanded to the 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: In addition, the State Board’s regulations recognize that “[b]ecause structures sometimes fall between major classifications . . . a method of interpolation is built into the system.” Ind. Admin. Code tit. 50, r. 2.2-10-3(c). Therefore:

Plus or minus two (+/- 2) indicates that the grade falls halfway between the assigned grade classification and the grade immediately above or below it. For example, a grade of “C+2” indicates that the quality and design grade classification is estimated to fall halfway between “C” and “B” or average to good construction. . . .

Plus or minus one (+/- 1) indicates that the grade falls slightly above or below the assigned grade classification, or at a point approximately twenty-five percent (25%) of the interval between the assigned grade classification and the grade immediately above or below it. For example, a grade of “C+1” indicates that the quality and design grade classification is estimated to be slightly better than average or approximately halfway between a “C” grade and a “C+2” grade.

Id.

Footnote: At any rate, each tax year stands alone. Glass Wholesalers, Inc. v. State Bd. of Tax Comm’rs, 568 N.E.2d 1116, 1124 (Ind. Tax Ct. 1991). Consequently, property is to be assessed separately and distinctly each year (i.e., a 1991 tax assessment will not be considered as probative evidence of the proper tax assessment for a later year). See id.

Footnote: In fact, in response to the State Board hearing officer’s request for additional information, the Petitioner merely stated, with respect to grading:

As far as the County representative’s submission of photographs showing what is believed to be comparable [buildings and their] grades in comparison to subject, without properly identifying the[ir] actual building components . . . [they] are rendered moot. The evidence which we presented indicating the grade factor established on the prior assessment appeal by the State Board of Tax Commissioners is the proper grade classification.

(Stip. Ex. 16 at 8.) This does not rise to the level of establishing a prima facie case that an assigned grade is improper.