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-69
                                                                               )                  
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NOT FOR PUBLICATION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+1 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 three-story metal and glass office building situated on approximately five acres of land. For the 1995 assessment, the Clay Township Assessor (Assessor) assessed the property at $1,250,860 ($344,430 for land and $906,430 for improvements). In arriving at that value, the Assessor designated 2.93 acres as primary land (valued at $250,000 an acre) and 1.719 acres as secondary land (valued at $175,000 an acre). See footnote In addition, the Assessor assigned the office building a grade of B+1.
    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”), however, declined to reduce the assessment.
    Consequently, 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 base rate should be $200,000 not $250,000 with secondary land valued at $140,000 per acre not $175,000 per acre.

2. Grade factor should be B-2 not B+1.

(Stip. Ex. 1 at 5.) The State Board held a hearing on December 9, 1997. In its final determination of May 6, 1998, the State Board declined to adjust the Petitioner’s assessment. See footnote
    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 and that the secondary land is valued at $175,000 an acre is affirmed.
    Nevertheless, the Petitioner claimed during trial that the State Board erred in not reevaluating the land’s classification. More specifically, the Petitioner argues that 1.445 acres should be classified as primary land, 0.666 acres as secondary land, 0.410 acres as unusable undeveloped, 2.128 acres as usuable undeveloped, and 0.249 acres as public road. (See Stip. Ex. 15 at 5.) 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.)
    In the companion case issued simultaneously today, all of Petitioner’s land was classified as either primary or secondary. When the Petitioner challenged its assessment to the State Board, it framed its issue on the 131 petition 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). This Court held that the issue sufficiently evidenced Petitioner’s belief that a portion of its land should be classified as something other than primary or secondary. Phoenix Mutual v. Dep’t of Local Gov’t Fin., Cause No. 49T10-9806-TA-67, slip op. at 5 (Ind. Tax Ct. July 19, 2002). Thus, the issue was deemed raised in the Petitioner’s Form 131, and it was erroneous for the State Board to not consider the issue. Id.
    Here, however, there is no evidence that the Petitioner sought to have its land classification reevaluated. The Petitioner merely stated:
Primary base rate should be $200,000 not $250,000 with secondary
land valued at $140,000 per acre not $175,000 per acre.

(Stip. Ex. 1 at 5.) There is no mention of residual land or implication that the land should be reclassified. Furthermore, as the administrative record indicates, the issue of land classification was never discussed at the hearing, nor did the State Board hearing officer request “[a] site plan showing land classification breakdown and how it [should be] calculated or determined” as it did in the companion case. (Cf. Stip. Ex. 13 and Stip. Ex. 14.) Consequently, the Court determines that the issue of land classification was not raised prior to trial, and therefore the State Board acted properly when it did not reevaluate the land’s classification. As a result, the Court AFFIRMS the State Board’s final determination on this issue.

Grade

    The Petitioner also challenges the B+1 grade assigned to its building. More specifically, the Petitioner argues:

A grade of B[+1] means that the building grade falls [somewhere] between a B grade and an A grade or [has some] A grade characteristics as [well as] B grade characteristics. . . . The [State Board] hearing officer made no findings that there were any A grade characteristics in the building.

(See Pet’r Proposed Findings of Fact and Conclusions of Law at 3 (internal citations omitted).) Again, the Court finds that the Petitioner did not make a prima facie case that the assigned grade was improper. See Phoenix Mutual v. Dep’t of Local Gov’t Fin., Cause No. 49T10-9806-TA-67, slip op. at 6 (Ind. Tax Ct. July 19, 2002).
    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 “all distinguish 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 initial burden of proof. For instance, at the administrative hearing, the Petitioner submitted no evidence whatsoever on comparable properties and their assigned grades for 1995. Instead, the Petitioner submitted a State Board final determination on the same property indicating that, for the 1990 assessment, the improvement had been assigned a grade of B. (Stip. Ex. 5.) All this establishes is Petitioner’s conclusion that because the improvement was graded a B in 1990, it should now be graded a B-2. No explanation was given as to how this determination relates to the 1995 assessment. (See Stip. Ex. 21.) Consequently, this evidence does not establish a prima facie case that the improvement should be assigned a grade of B-2 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 (who presented Petitioner’s grade argument 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-2. For instance:
Q: Did you determine what value the [] building should be?

A: Yes.

Q: And what is that[?]

A: I would consider that building a B minus 2.

Q: And how did you determine it was B minus 2?

A: By the construction quality and design of the building itself.

* * * * *


Q: Is – are there any A grade features or characteristics in the [] building?

A: Not a one.

Q: Are there C grade features in the [] building?

A: Yes.

Q: Are there more C than B in your opinion . . . ?

A: I would say it’s equal.

(Trial Tr. at 77-78.) 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: [Y]ou don’t recall him saying to the [] building, in your opinion, is the B minus 2 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 therefore not triggered. See id. The State Board’s determination of a B+1 grade is AFFIRMED.

CONCLUSION

Because the Petitioner did not raise the issue of land reclassification prior to trial, the State Board was precluded from deciding the issue. Consequently, the State Board’s final determination on the issue is AFFIRMED. Furthermore, 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.


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: The State Board did, however, adjust the assessment to account for improper pricing of a section of the improvement. That adjustment is not at issue in this case.

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: 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 1990 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. 15 at 9.) This does not rise to the level of establishing a prima facie case that an assigned grade is improper.