ATTORNEYS FOR PETITIONER: ATTORNEYS FOR RESPONDENT:
INDIANA TAX COURT
JAMES W. BEATTY STEVE CARTER
STEPHEN M. TERRELL ATTORNEY GENERAL OF INDIANA
LANDMAN & BEATTY Indianapolis, IN
ROBERT B. WENTE
DEPUTY ATTORNEY GENERAL
REGENCY CANTERBURY, LP, )
v. ) Cause No. 49T10-0111-TA-97
DEPARTMENT OF LOCAL )
See footnote )
ON APPEAL FROM A FINAL DETERMINATION OF
THE STATE BOARD OF TAX COMMISSIONERS
December 5, 2003
Regency Canterbury, LP (Canterbury) appeals the State Board of Tax Commissioners (State Board)
final determination valuing its real property for the 2000 tax year. The
issue for the Court to decide is whether the State Board erred when
it refused to reduce the grade factor on Canterburys 12 apartment buildings (buildings).
For the following reasons, the Court REVERSES the State Boards final determination.
FACTS AND PROCEDURAL HISTORY
Canterbury owns the Canterbury Apartment Complex located in Fort Wayne, Indiana. Canterburys
complex consists of 12 two and threestory apartment buildings with wood joist construction.
For the 2000 assessment year, the local assessing officials valued the buildings
from the General Commercial Residential (GCR) Schedule apartment model and graded them
a C+1. Canterbury appealed its assessments with the Allen County Property Tax
Assessment Board of Appeals (PTABOA); the PTABOA denied Canterburys appeal.
Canterbury then appealed its assessments to the State Board, alleging that the base
value of its buildings should have been reduced to reflect a variation from
the GCR model and that its buildings should have been graded a C.
On October 12, 2001, following an administrative hearing, the State Board issued
a final determination adjusting Canterburys assessments to reflect the buildings deviation from the
GCR model. The State Board, however, denied Canterburys requested grade reduction.
On November 21, 2001, Canterbury initiated an original tax appeal. On September
9, 2002, this Court heard the parties oral arguments. Additional facts will
be supplied as necessary.
ANALYSIS AND OPINION
Standard of Review
This Court gives great deference to the final determinations of the State Board
when it acts within the scope of its authority. Hamstra Builders, Inc.
v. Dept of Local Govt Fin., 783 N.E.2d 387, 390 (Ind. Tax Ct.
2003). Thus, this Court will reverse a final determination of the State
Board only when its findings are unsupported by substantial evidence, arbitrary, capricious, constitute
an abuse of discretion, or exceed statutory authority. Id. When appealing
to this Court from a State Board final determination, the taxpayer bears the
burden of showing that the final determination is invalid. Id.
Canterbury asserts that, while the State Board properly adjusted the base rate of
its buildings to reflect their deviation from the GCR model, it erred when
it failed to reduce the grade. Canterbury is correct.
Under Indianas property assessment system, assessors use improvement models and cost schedules to
determine the base reproduction cost of a particular improvement. See Whitley Prods.,
Inc. v. State Bd. of Tax Commrs, 704 N.E.2d 1113, 1116 (Ind. Tax
Ct. 1998), review denied. These models and schedules reflect the reproduction costs
of improvements using typical construction materials. Ind. Admin. Code tit. 50, r.
2.2-10-6.1(a)(1) (1996). Improvements are then assigned various grades based on the quality
of design, workmanship, and materials used in their construction. Whitley Prods., 704
N.E.2d at 1116. For instance, C grade buildings are moderately attractive and
constructed with average quality materials and workmanship. These buildings have minimal to
moderate architectural treatment . . . an average quality interior finish with adequate
built-ins, standard quality fixtures, and mechanical features. Ind. Admin. Code tit. 50,
r. 2.2-10-3(a)(3) (1996).
See footnote The grades represent multipliers that are applied to the
subject improvements base reproduction cost, accounting for variations in standards of quality and
Whitley Prods., 704 N.E.2d at 1116. See also Ind.
Admin. Code tit. 50, r. 2.2-10-6.1(f) (1996).
There are times, however, when an improvement deviates from the applicable improvement model
or cost schedule; in turn, the deviation impacts the improvements base reproduction cost.
Whitley Prods., 704 N.E.2d at 1117. As this Court has previously
explained, there are two methods by which to account for an improvements deviation
from the applicable model or cost schedule:
The preferred method . . . is to use separate schedules that show
the costs of certain components and features present in the model. This
method allows an assessing official to make an objective adjustment to the improvements
base rate. Another method to account for an improvements deviation is application
of a grade adjustment. Where possible, this type of an adjustment should
be avoided because it requires an assessing officials subjective judgment. However, because
the component (base rate adjustment) schedules are not comprehensive, this type of adjustment
may be necessary.
Clark v. State Bd. of Tax Commrs, 742 N.E.2d 46, 49 (Ind. Tax
Ct. 2001) (internal quotations and citations omitted).
In its final determination, the State Board concluded that it did not need
to reduce Canterburys grade because [ ] Clark  mandated [the] use of
the unit-in-place tables for a base cost adjustment instead of a grade adjustment.
(Cert. Admin. R. at 1096.) The State Boards interpretation of Clark,
however, is erroneous.
Nowhere in the Clark opinion does this Court state that grade adjustments in
general are precluded when a base rate adjustment has been made. Specifically,
the Court held that, where an improvement deviates from the model, if the
unit-in-place tables are used [which is the preferred method], the missing items cannot
[also] be the basis for the lowering of the subject units grade[.]
Clark, 742 N.E.2d at 49. Thus, when an improvement deviates from the
model, grade adjustments are inappropriate when base rate adjustments can be made.
In this case, however, Canterbury sought two distinct adjustments to its property tax
assessment: 1) a base rate adjustment to account for the lack of concrete
back-up walls; and 2) a grade reduction based on the overall quality of
design and materials
used to construct its buildings.
See footnote Accordingly, with regard to Canterburys first issue,
the State Board did not err when it adjusted the base rate -
Clark - by using the unit-in-place tables to subtract the value of
concrete back-up walls presumed in the model. (See Cert. Admin. R. 1096.)
However, the State Board did err in failing to consider Canterburys evidence
with regard to the separate issue of grade. Consequently, the State Boards
final determination cannot stand.
For the reasons stated above, the Court REVERSES the final determination of the
State Board and REMANDS it to the Indiana Board of Tax Review (Indiana
See footnote to instruct the local assessing officials to consider Canterburys request for a
grade reduction, consistent with this opinion.
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. 2001 Ind. Acts 198 § 119(b)(2). Effective January
1, 2002, the legislature created the Department of Local Government Finance (DLGF),
Indiana Code § 6-1.1-30-1.1 (West Supp. 2003)(eff. 1-1-02); 2001 Ind. Acts 198 §
66, and the Indiana Board of Tax Review (Indiana Board). Ind. Code
§ 6-1.5-1-3 (West Supp. 2003)(eff. 1-1-02); 2001 Ind. Acts 198 § 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. 2003)(eff. 1-1-02);
2001 Ind. Acts 198 § 95. Nevertheless, the law in effect prior
to January 1, 2002 applies to these appeals. I.C. 6-1.5-5-8. See
also 2001 Ind. Acts 198 § 117. Although the DLGF has been
substituted as the Respondent, this Court will still reference the State Board throughout
Because 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) (1996). 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.
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.
In its appeal before the State Board, Canterbury alleged that 1) [g]rade
and design factor should be reduced from C+1  to C . .
. based upon Grade and Design factor[s] utilized in assessing comparable properties in
Allen County and 2) [t]he base price should be adjusted due to the
lack of concrete block back-up for exterior walls. (Cert. Admin. R. at
7, 103, 178, 223, 268, 314, 371, 410, 455, 490, 528, 561.)
See also Cert. Admin. R. at 1284.) The State Board, in its
final determination, however, stated the issues as [t]he petition for review sought a
grade reduction from C+1 to C due to the lack of a concrete
block back-up wall. (Cert. Admin. R. at 1079.)
All cases that would have been remanded to the State Board are
now remanded to the Indiana Board of Tax Review (Indiana Board).
Code § 6-1.1-15-8 (West Supp. 2003). Final determinations made by the Indiana
Board are subject to review by this Court pursuant to Ind. Code §
6-1.1-15. Ind. Code §§ 6-1.5-5-7 (West Supp. 2003); 3-33-5-2.