Indianapolis, IN    Indianapolis, IN
    Indianapolis, IN

    IN THE INDIANA TAX COURT _____________________________________________________________________

FRED EARL & JOHNETTE L. LAWSON,                                                   )             
    Petitioners,                                                                           )
    v.                                                                                     )   Cause No. 49T10-9907-TA-169
BOARD OF TAX COMMISSIONERS,                                                                )
    Respondent.                                                                            )    


December 7, 2000


    Petitioners Fred Earl and Johnette L. Lawson (the Lawsons) appeal the final determination of the State Board of Tax Commissioners (State Board). In this original tax appeal, the Lawsons raise various issues challenging the assessment of their property as of March 1, 1995. The Court restates these issues as:
I.     Whether the State Board improperly valued the Lawsons’ land;

II.     Whether the State Board erroneously refused to grant the Lawsons a negative influence factor;

III.     Whether the State Board incorrectly applied a C-1 grade to the Lawsons’ residence; and

IV.    Whether the State Board erroneously applied a neighborhood rating of Good, instead of Average, to the Lawsons’ Planned Unit Development.


    The Lawsons own a residence and real property within Eagle Valley Farms Project 1 (Eagle Valley), which is located in Wayne Township, Marion County, Indiana. Eagle Valley is a Planned Unit Development (PUD). See footnote The Wayne Township Assessor initially valued their land at $3500 and their improvements at $22,170, for a total assessed value of $25,670. (Stipulation 24, Property Record Card.) The Lawsons appealed this assessment to the Marion County Board of Review, which sustained the local assessor’s valuations. (State Bd. Tr. at 7.) Thereafter, on August 27, 1996, the Lawsons filed a Form 131 petition for review of assessment with the State Board. The State Board conducted a hearing on August 11, 1998. On May 27, 1999, the State Board issued its final determination, affirming the land’s value but decreasing the improvements’ value to $18,000. (Final Determination at 1.) The total assessed value for the Lawsons’ property was reduced to $21,500. (Stipulation 24.) The Lawsons filed an original tax appeal with this Court on July 12, 1999. The Court conducted a trial on July 31, 2000.See footnote Additional facts will be supplied as needed.
Standard of Review

This Court gives the final determinations of the State Board great deference when the State Board acts within the scope of its authority. Wetzel Enters., Inc. v. State Bd. of Tax Comm’rs, 694 N.E.2d 1259, 1261 (Ind. Tax Ct. 1998). Accordingly, this Court reverses final determinations of the State Board only when those decisions are unsupported by substantial evidence, are arbitrary or capricious, constitute an abuse of discretion, or exceed statutory authority. Id. The taxpayer bears the burden of demonstrating the invalidity of the State Board’s final determination. Clark v. State Bd. of Tax Comm’rs, 694 N.E.2d 1230, 1233 (Ind. Tax Ct. 1998). To do so, the taxpayer must submit probative evidence sufficient to establish a prima facie case demonstrating its position. See Western Select Properties v. State Bd. of Tax Comm’rs, 639 N.E.2d 1068, 1075 (Ind. Tax Ct. 1994); King Indus. Corp. v. State Bd. of Tax Comm’rs, 699 N.E.2d 338, 343 (Ind. Tax Ct. 1999). When a taxpayer offers probative evidence, the State Board must deal with the evidence in some meaningful manner. Clark, 694 N.E.2d at 1235. Once the taxpayer has submitted probative evidence establishing a prima facie case, the burden of production shifts to the State Board; the State Board must then rebut the taxpayer’s evidence and support its final determination with substantial evidence. Id. at 1239.
I. Land Value

    The first issue raised by the Lawsons concerns the base rate for their land. Their basic argument is that the Marion County Land Order (Land Order) is invalid as applied to Eagle Valley. The Lawsons claim that PUDs in general and Eagle Valley in particular are discriminated against in relation to condominiums and other commercial properties in Marion County. These properties, the Lawsons contend, have land values much lower than those in Eagle Valley. See footnote
    The State Board affirmed the County Board of Review’s base rate values of $6.30 per square foot for primary land and $1.26 per square foot for excess (undeveloped) land. (Final Determination at 11, ¶ 28, 29.) The State Board’s final determination responded to the Lawsons’ challenge by claiming that the Wayne Township Assessor applied the values found in the Land Order for Very Good/Good locations. See footnote (Final Determination at 11, ¶ 28.) The State Board explained that the township assessor was obligated to use these values pursuant to Ind. Admin. Code tit. 50, r. 2.2-4-3 (1996). See footnote (Final Determination at 11, ¶ 28.) In addition, the State Board concluded that the Lawsons’ comparison of their PUD’s primary land to that of commercial properties was not valid, because the definitions of primary land for PUDs and for commercial properties are different. (Final Determination at 11, ¶ 29.) Specifically, the State Board stated that “[w]hile primary land for a PUD is defined as only titled/deeded land under the unit, commercial primary land can also include regularly used parking areas, roadways, regularly used yard storage, and necessary support land.” (Final Determination at 11, ¶ 29.)
    Land orders are administrative rules. Precedent v. State Bd. of Tax Comm’rs, 659 N.E.2d 701, 704 (Ind. Tax Ct. 1995). The party claiming that the land order is invalid bears the burden of showing that the order is not in accordance with the law. Poracky v. State Bd. of Tax Comm’rs, 635 N.E.2d 235, 237 (Ind. Tax Ct. 1994). The Lawsons complain that the Land Order, as applied to land within Eagle Valley, violates Ind. Code Ann. § 6-1.1-2-2 (West 2000), which provides that “[a]ll tangible property which is subject to assessment shall be assessed on a just valuation basis and in a uniform and equal manner.” (Stipulation 15 at 1.) Also, the Lawsons maintain that the Land Order violates Ind. Code Ann. § 6-1.1-31-6(a)(1) (West 2000), which calls on the State Board to provide for the classification of land on the basis of nine factors, including a property’s location and use. (Stipulation 15 at 1.)
    In order to make a prima facie case that the Land Order was invalid as applied to Eagle Valley, the Lawsons in the present case were required to submit probative evidence showing that comparable properties were assessed differently under the order. They have not done so. The Lawsons offer evidence that some condominiums and commercial properties within Marion County have lower base rates for primary land. First, the Lawsons point out that, at a rate of $6.30 per square foot for primary land, property in Eagle Valley is valued at approximately $274,000 per acre. See footnote In contrast, at trial Fred Lawson indicated that values for three different areas in Marion County with condominiums ranged from $25,000 per acre to $27,500 per acre. See footnote (Trial Tr. at 10-11.) Further, the Lawsons pointed to two commercial properties with lower per square foot values for their primary land than the $6.30 assigned to Eagle Valley: Stitzer Buick in Pike Township ($3.00 per square foot) and Honda West in Wayne Township ($5.00 per square foot). See footnote (Stipulations 1, 2 and 15); (Trial Tr. at 17.)
    The Lawsons have not demonstrated that the referenced properties, i.e., condominiums and commercial properties, are comparable to the residential properties located within Eagle Valley. While no statute or regulation defines a PUD precisely, the Land Order does recognize that PUD owners have fee simple title to the property underneath their units (primary land) See footnote in addition to any excess property authorized by their title. See footnote (Land Order at 2.) See also supra n.1. With condominiums, the “undivided interests in the common areas and facilities are vested in the condominium unit owners.” Ind. Code Ann. § 32-1-6-2(a) (West 1979). “Common areas” for condominiums include, among several other items, the “land on which the building is located.” See footnote Id., § 32-1-6-2(h)(1). “Primary commercial land,” in contrast, “refers to the primary building or plant site,” with examples being land located under buildings, regularly used parking areas and roadways. Ind. Admin. Code tit. 50, r. 2.2-4-1(18) (1996). See also Ind. Admin. Code tit. 50, r. 2.2-4-17(b) (1996) (“The amount of acreage necessary to support the existing facility and its purposes is classified as primary.”). The basic characteristics of these three types of properties are different. At first blush, it seems odd that primary land for a PUD is valued at approximately $274,000 per acre in this case. The Court notes, though, that the primary land in question—the 1644 square feet of property upon which the Lawsons’ home sits—is far from an acre in size. (Stipulation 24.) Moreover, the excess land rate applies only to 142 square feet. (Stipulation 24.) Higher rates for PUDS may simply have been applied to account for the small percentage of land that is actually considered primary and excess property in PUDs. See footnote The State Board, through its review and approval of the Land Order, was permitted to value these types of properties differently, as long as there existed a reasonable basis for doing so. See Herb v. State Bd. of Tax Comm’rs, 656 N.E.2d 890, 894 (Ind. Tax Ct. 1995) (noting that a classification for taxation purposes is “not invalid when it rests on a reasonable basis of actual difference between those included and those excluded”); see also Ind. Code Ann. § 6-1.1-4-13.6 (West 1989) (amended 1993, 1997) (permitting State Board to modify a county land commission’s values for commercial, industrial and residential properties). The Lawsons have not provided evidence showing that the Land Order unreasonably classifies and establishes base rates for PUDs. Without further evidence that the properties in question were sufficiently similar to justify a comparison, the Lawsons could not use them to prove that the Land Order discriminated against PUDs generally or Eagle Valley specifically. See footnote The State Board’s valuation of base rates for land within Eagle Valley is AFFIRMED.
II. Negative Influence Factor

    The Lawsons contend that the State Board erroneously refused to apply a negative influence factor to their property. See footnote According to the Lawsons, the proximity of their home to high power electric transmission lines and to State Highway 136, in addition to the presence of easements on their property, warrants application of a twenty to twenty-five percent negative influence factor. (Original Tax Appeal Pet. at 3); (Trial Tr. at 34-35.) Specifically, the Lawsons maintain that “many statistics” reflect the public’s concern regarding the effects of power lines transmissions on human beings, especially children, and that “a future buyer might consider this factor to negatively influence the purchase” of their property. (Original Tax Appeal Pet. at 3.) The Lawsons indicate that lower level power lines are located within ten feet of their property line, with higher power lines next to the lower power ones. (Original Tax Appeal Pet. at 3); (Trial Tr. at 33.) In addition, the Lawsons explain that that the power company owns an easement “directly off [their] patio.” (Original Tax Appeal Pet. at 3.) Further, Mr. Lawson states that there are “both easements on the back of [their] property and along the side of [their] house. The easements are for utility easements and also for right-of-way.” (Trial Tr. at 34.) Consequently, Mr. Lawson maintains that these easements create an “obstacle for anybody trying to do any kind of remodeling to the home.” (Trial Tr. at 34.) The Lawsons also point out that Highway 136 is sixty-seven feet from their property. (Original Tax Appeal Pet. at 3); (Trial Tr. at 33-34.) They assert that traffic on Highway 136 has “continued to increase,” creating traffic problems, and sirens from fire trucks and ambulances of a nearby fire station generate unpleasant noise “at all times of day or night”—both factors that “would definitely negatively affect the location” of their property. (Original Tax Appeal Pet at 3); (Trial Tr. at 35.)
    In its final determination, the State Board declined to apply a negative influence factor to the subject property. (Final Determination at 12, ¶ 31.) To support its decision, the State Board explained as follows:
While Highway 136 runs behind this property and creates some traffic noise, many would consider the direct access to this road as desirable. The power lines and poles discussed by [the Lawsons] are not on or directly above the subject property. They are located in a commons area approximately 20-30 feet behind the subject property. While some may view this as somewhat undesirable, [the Lawsons] failed to show, through evidence, that this has a negative impact on [their] property value. [The Lawsons] purchased this property in 1991, but failed to show the location of Highway 136 or the power lines negatively impacted the property value at the time [they] purchased the property.

Id. Also, the State Board estimated that Highway 136 is within 100 to 150 feet of the subject property. (Final Determination at 4, ¶ 12.) At trial, the State Board summed up its position by stating that the Lawsons’ contentions are merely “speculation” and that they had failed to present evidence “of any substantial reason that is a recognized reason for putting a negative influence factor on this land.” (Trial Tr. at 53, 54 & 56.)
    An influence factor “refers to a condition peculiar to the lot that dictates an adjustment to the extended value to account for variations from the norm.” Ind. Admin. Code tit. 50, r. 2.2-4-10(a)(9) (1996). See also id., r. 2.2-4-12 (“An influence factor represents the composite effect that influences the value of certain lots within the boundaries of an entire geographic area.”); id., r. 2.2-4-16 (discussing influence factors for residential acreage). The regulations list six specific conditions and one general condition that may be the basis for an adjustment. See footnote Ind. Admin. Code tit. 50, r. 2.2-4-10(a)(9) (1996). The adjustment is expressed in terms of a percentage increase or decrease in the subject land’s assessed value. Ind. Admin. Code tit. 50, r. 2.2-4-10(a)(9) (1996). “The decision whether to apply an influence factor calls for subjective judgment.” Wirth v. State Bd. of Tax Comm’rs, 613 N.E.2d 874, 878 (Ind. Tax Ct. 1993). In applying an influence factor, an assessing official must first identify the deviations from the norm and then quantify the variations as a percentage. White Swan Realty v. State Bd. of Tax Comm’rs, 712 N.E.2d 555, 562 (Ind. Tax Ct. 1999), review denied.     
    In the present case, the issue before the Court is whether the State Board abused its discretion by refusing to grant the Lawsons’ property a negative influence factor. See footnote The Lawsons were obligated to establish, through probative evidence, a prima facie case that the proximities of power lines and/or Highway 136 near their home or the presence of easements on their property justified application of a negative influence factor to the subject property. See Talesnick v. State Bd. of Tax Commissioners, 693 N.E.2d 657, 659 (Ind. Tax Ct. 1998). Two cases are instructive as to whether the Lawsons met this burden of production.
    In Talesnick v. State Board of Tax Commissioners, the taxpayers owned land and improvements on the banks of Eagle Creek Reservoir in the Eagle Ridge subdivision in Indianapolis. The taxpayers argued that their property was entitled to a negative influence factor because of a lack of infrastructure and because of the presence of a water flowage easement. The Court noted that influence factors are appropriate for making adjustments to the value of land encumbered by an easement. Id. at 660 (citing Poracky, 635 N.E.2d at 238). The taxpayers in Talesnick had submitted evidence showing that the water flowage easement encumbered and encroached upon their property to a greater extent than it did other land surrounding the reservoir. The evidence consisted of a taxpayer’s testimony, which he supported with “maps of the subdivision showing the line of the water flowage easement, the topography of the subdivision, and photographs of his home and others around the reservoir.” Id. at 661. Moreover, the taxpayers had demonstrated that their subdivision lacked the same infrastructure, i.e., city sewers, city water and city-maintained streets with access to the property, as other nearby subdivisions, even though the taxpayer’s property was valued identically to similarly situated properties in these other subdivisions. The Court concluded that the taxpayers had made a prima facie case that their property was valued incorrectly and that the State Board had failed to rebut the taxpayer’s case. Id. at 660 & 661.
    In Wirth v. State Board of Tax Commissioners, the taxpayer owned a commercially zoned platted lot located near a large water tower. The taxpayer used the building on the property as the office for his construction business and for his wife’s retail diet business. To prosecute his appeal before the State Board, Wirth engaged a contingently paid expert witness who was a property tax consultant. Before this Court, the taxpayer claimed that the State Board abused its discretion by denying the taxpayer an influence factor to account for the property’s proximity to the water tower. However, the taxpayer’s only evidence was the expert’s opinion that the water tower detracted from the property’s value. The Court denied the taxpayer’s claim, reasoning that the witness “presented no other evidence that shows the water tower was a detriment, and [that] the expert’s opinion is simply insufficient to overcome the wide latitude given the State Board and the presumption the State Board acted properly.” Wirth, 613 N.E.2d at 878.
    The Lawsons have not established a prima facie case that their property’s proximity to either power lines or Highway 136 warrants application of a negative influence factor. They have submitted no probative evidence to support this position. In their petition to this Court, the Lawsons claim that “many statistics” reveal the public’s concern regarding power lines transmissions and their effects on human beings, especially children. (Original Tax Appeal Pet. at 3.) However, the Lawsons have cited no specific studies or other authority supporting this claim. Their claim is speculative. A conclusory statement is not probative evidence. See footnote See Wirth, 613 N.E.2d at 878; CDI, Inc. v. State Bd. of Tax Comm’rs, 725 N.E.2d 1015, 1019 (Ind. Tax Ct. 2000).
    In addition, the Lawsons submitted copies of photographs of the subject property. See footnote (Stipulation 7.) According to Mr. Lawson, one picture shows that both large and small power lines are “directly behind” his residence; he further testified that there is one foot of space between the back of his home and the power lines. (Trial Tr. at 33.) In their petition, the Lawsons stated that the power company’s “low level lines [are] within 10 feet of [their] property line and the high powered ones next to them.” (Original Tax Appeal Pet. at 3.) Unfortunately, the photocopied picture submitted is dark and unclear. One cannot reasonably ascertain the distances of the power lines to the Lawsons’ home using this copy. Mr. Lawson admits this, observing at trial that the copy does not “give [the Court] much of a chance to view [the property] . . . . [The copy] does not give [a] good enough picture[] to show that it’s directly behind.” (Trial Tr. at 33-34.) Even assuming arguendo that the picture shows that the power lines are approximately one foot from the Lawsons’ home, the Court concludes that the Lawsons have shown neither that the power lines constitute a condition “peculiar” to their lot nor that the presence of the power lines is in anyway a “variation[] from the norm.” Ind. Admin. Code tit. 50, r. 2.2-4-10(a)(9) (1996). Unlike Talesnick, 693 N.E.2d at 660-61, where a taxpayer’s testimony combined with photographs and other documentary evidence established a prima facie case that the property was incorrectly valued, the Lawsons here have submitted no evidence showing the effects of power lines on the value of their residential property. See footnote
    In like manner, the Lawsons have not shown how the easements on their property negatively impact the value of their property. In Talesnick, 693 N.E.2d at 661, the Court found that the taxpayers had presented evidence showing that the easement encroached upon their land to a greater extent than it did upon the other land surrounding the reservoir. In the present case, the Lawsons do not show the extent of the easements on their property or how these easements compare with those affecting other properties in Eagle Valley. The easements may very well be an “obstacle” to remodeling or otherwise improving the Lawsons’ home and property. (Trial Tr. at 34.) However, the Lawsons cannot merely posit this without explanation or supporting evidence. Conclusory statements of this nature are not probative evidence. See CDI, 725 N.E.2d at 1020-21.
    The Lawsons also offered no evidence demonstrating how the proximity of Highway 136 negatively impacts the value of their property. They argue that there is increased traffic accompanied by noise pollution, including the noise from a nearby fire station. (Original Tax Appeal Pet. at 3.) The increased traffic, the Lawsons opine, also means that homeowners must be “very cautious” that children do not “end up” on the highway. (Trial Tr. at 35.) Again, the Lawsons have provided the Court with no evidence of probative value. Without further explanation, the Court will not assume that the presence of a highway, regardless of increased traffic flow and its accompanying noise, qualifies as a condition peculiar to the lot that affects the property’s value in a manner requiring a negative adjustment to account for variations from the norm. Similar to Wirth, 613 N.E.2d at 878, where the expert’s opinion standing alone was insufficient to support application of a negative influence factor, in the present case the testimony of Mr. Lawson (a non-expert) is “insufficient to overcome the wide latitude given the State Board and the presumption the State Board acted properly.”
    The Court holds that the State Board did not abuse its discretion in declining to apply a negative influence factor to the Lawsons’ land. Therefore, the State Board’s final determination on this issue is AFFIRMED.

III. Grade

    The Lawsons request that the grade of their home be lowered to a “D at best.” (Original Tax Appeal Pet. at 3.) According to the Lawsons, “Many of the [home’s] interior features were built with low cost materials.” (Original Tax Appeal Pet. at 3.) At trial, Mr. Lawson submitted a copy of the State Board’s grade specification table, see Ind. Admin. Code tit. 50, r. 2.2-7-6 (1996). (Stipulation 16.) He compared his home with the specifications in the table. (Trial Tr. at 35-41.) Mr. Lawson drew the following similarities between his residence and the D grade description: (1) no drain tile; (2) 2” x 8” wood joists; (3) metal gutters; (4) 3/8” to 1/2” drywall finish; (5) low cost cabinets; (6) low cost plumbing fixtures; and (7) tract type structural design that is simple and conventional and that has normal roof overhangs. See footnote (Trial Tr. at 36-40.)
    In its final determination, the State Board lowered the assigned grade of the Lawsons’ home from a C+2 to a C-1. (Final Determination at 13-14, ¶ 35.) The State Board reasoned as follows:
After inspection of the dwelling and in consideration of 50 IAC 2.2-7-6(d) and (g), it is determined [that] many of the property features are consistent with that of a C grade, or of average quality. There are a few features, such as the cathedral ceilings, and oak staircase . . . [that] are above what would normally be found in a C grade dwelling. However, there are more features that stand out as being below the features of a C grade. Examples of these features are the 2” x 4” rafters; small, inexpensive windows; floor joists that are 24” on center; slightly below average woodwork; and apparent lack of drain tile . . . . In addition, the quality of workmanship appears to be below average. For the above reasons the grade is best described as C-1.

(Final Determination at 13-14, ¶ 35.) At trial the State Board essentially argued that grade assignment involves the weighing of numerous factors, many of which are subjective in nature, and that in the present case the State Board did consider all of the relevant features of the Lawsons’ home in arriving at a grade of C-1. (Trial Tr. at 57-58.) The State Board asserted that the Lawsons had failed to prove specific facts demonstrating that a C-1 grade is “clearly wrong.” (Trial Tr. at 58.)
    “Grade” means the “classification of an improvement based on certain construction specifications and quality of materials and workmanship.” Ind. Admin. Code tit. 50, r. 2.2-1-30 (1996). C grade dwellings are described in part as being “moderately attractive and constructed with average quality materials and workmanship. They have minimal to moderate architectural treatment. The design has universal appeal and optimal utility.” Id., r. 2.2-7-6(d)(3). D grade dwellings are described in part as being “constructed with economy materials and fair workmanship. They are void of any architectural detail.” Id., r. 2.2-7-6(d)(4).
    Each grade has a corresponding multiplier that applies to the base value of a residence. Id., r. 2.2-7-8.1(g). See footnote A C grade dwelling has a corresponding multiplier of one hundred percent. Id., r. 2.2-7-6(e)(3). A D grade dwelling has a corresponding multiplier of eighty percent. Id., r. 2.2-7-6(e)(4). An intermediate grade of C-1 indicates that the grade is slightly below the C grade classification. Id., r. 2.2-7-6(g)(2). A C-1 grade has a multiplier of ninety-five percent. Id., r. 2.2-7-11 (Schedule F).
    “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.” Garcia v. State Bd. of Tax Comm’rs, 694 N.E.2d 794, 796 (Ind. Tax Ct. 1998). Accord King Indus., 699 N.E.2d at 341 n.7. See also Ind. Admin. Code tit. 50, r. 2.2-7-6(c) (1996) (“The selection of the proper grade relies on the judgment of the assessor.”) “This Court affords subjective determinations made by the State Board a great deal of deference, and this Court will not substitute its judgment for that of the State Board.” Clark, 694 N.E.2d at 1236. To assign the correct grade, the regulations provide that the “assessor must weigh the components of each represented major grade classification and determine an overall composite grade. This is accomplished by first determining the major grade classification that best represents the structure [and second] . . . weigh[ing] the various components against the determined classification.” Ind. Admin. Code tit. 50, r. 2.2-7-6(f) (1996). According to the regulations, the “quality of materials and design are the most significant factors” to consider in establishing a dwelling’s grade. Id., r. 2.2-7-6(c). The grade specification table “offers some guidance for assessors in selecting the basic grade classification.” Garcia, 694 N.E.2d at 797. But cf. Kemp v. State Bd. of Tax Comm’rs, 726 N.E.2d 395, 401 (Ind. Tax Ct. 2000) (concluding that marking a copy of the grade specification table, without further explanation, is conclusory and thus not probative as to grade). It “provides the assessor with an indicator for establishing the differences between the subject dwelling and the model.” See footnote Ind. Admin. Code tit. 50, r. 2.2-7-6(b) (1996). Assessors “must carefully review the grade specification table for the changes in material used to construct the different grade dwellings.” Id., r. 2.2-7-6(b).
    To prove that the State Board abused its discretion in assigning a C-1 grade, the Lawsons, who argue that a D grade should be applied, were obligated to submit probative evidence sufficient to establish a prima facie case that a D grade was the proper grade. See Whitley Prods., Inc. v. State Bd. of Tax Comm’rs, 704 N.E.2d 1113, 1119 (Ind. Tax Ct. 1998); Clark, 694 N.E.2d at 1236 (finding that taxpayer had presented prima facie case that State Board erred as to grade). The Lawsons have shown that a D grade would be appropriate. They list several items from the D grade column of the grade selection table that match the design and construction of their home. See footnote
    However, this does not mean that the State Board has abused its discretion. The State Board’s final determination noted that the hearing officer who inspected the Lawsons’ home observed fourteen different characteristics of the home that were relevant to the building’s grade determination.See footnote (Final Determination at 5, ¶ 15.) Some of these characteristics are found in the C grade description, including average quality doors, plumbing fixtures, and kitchen cabinets, and the 1/2” plywood on 2” x 8” joists for the floor and normal roof overhangs.See footnote See Ind. Admin. Code tit. 50, r. 2.2-7-6(d)(3) (1996). Two of these characteristics, the 2” x 8” wood joists and the normal roof overhangs (cited by Mr. Lawson as well), are also found in the D grade description, per Ind. Admin. Code tit. 50, r. 2.2-7-6(b) (1996). See footnote
    The Court finds that the State Board has rebutted the Lawsons’ prima facie case with substantial evidence. The Lawsons’ home had some C grade features. Thus, the home’s “major grade classification” appropriately could be deemed as best represented by C, see Ind. Admin. Code tit. 50, r. 2.2-7-6(f) (1996). Having determined that many of the home’s features are “consistent with that of a C grade,” the State Board then weighed the building’s features against the C grade classification. (Final Determination at 13-14, ¶ 35.) Compare with (Stipulation 15 at 5) (listing as either C or D grade quality the home’s roof, interior finish and electric and listing its heating as C grade.) Upon doing so, the State Board determined that the home had both features typical of higher and lower quality homes. (Final Determination at 13-14, ¶ 35.) It found that the building’s overall quality was slightly below a C grade. (Final Determination at 13-14, ¶ 35.) Having examined the evidence, the Court cannot state that the State Board abused its discretion in assigning a grade of C-1. Therefore, the State Board’s final determination on this issue is AFFIRMED.

IV. Neighborhood Rating

    The Lawsons argue that Eagle Valley should have been rated as “Good,” not “Average.” In their petition, the Lawsons maintain that
[t]he lack of street lighting, lack of sidewalks, [and] poor maintenance of the roads has a very negative impact [on] our community in light of recent developments around [Eagle Valley]. The fact that Highway 136 is close to schools, shopping and major roads may be desirable to some[;] however the heavy flow of traffic and newer competitive construction have had a negative impact on the community and a change from good to average would be more consistent with this neighborhood.

(Original Tax Appeal Pet. at 3.) At trial Mr. Lawson repeated these contentions, adding that the wooded areas and trees in the neighborhood have become a problem for septic systems. (Trial Tr. at 42-43.) Many of the septic systems, he indicated, need to be removed. (Trial Tr. at 43.) According to Mr. Lawson, the only sidewalks in the neighborhood are on one-half of the main thoroughfare; none are located on side streets. (Trial Tr. at 44-45.) He admitted that the both a country club and racing facility were located somewhat near Eagle Valley. (Trial Tr. at 45-46.) Moreover, he reported that the landscape in Eagle Valley is “maintained.” (Stipulation 23, Tape of Administrative Hearing.) Accord (Stipulation 15 at 2.)
    The State Board’s final determination upheld the application of a Good rating to Eagle Valley. (Final Determination at 15, ¶ 40.) The State Board concluded that “[w]hile the lack of many street lights and sidewalks detract slightly from this neighborhood, it has many characteristics of a desirable neighborhood. It is close to shopping and major roads, and an acceptable distance to schools. It is in close proximity to a country club and a major motor speedway.” (Final Determination at 15, ¶ 40.) Moreover, the State Board stated that new construction in the area was evidence that the neighborhood was above average. See footnote (Final Determination at 15, ¶ 40.)
    A dwelling’s neighborhood desirability rating is important for purposes of calculating its physical depreciation. Ind. Admin. Code tit. 50, r. 2.2-7-9(c) (1996). “The neighborhood desirability rating is a judgment of overall desirability, which includes the consideration of all neighborhood characteristics that are benefits or liabilities to the dwelling.” Id., r. 2.2-7-7.1(g)(20). The rating is a “composite judgment of the overall desirability based on the condition of agreeable living and the extent of residential benefits arising from the location of the dwelling.” Id., r. 2.2-7-7.1(f)(7). The regulations list seven categories, including “G[ood]” and “Av[erage].” Id., r. 2.2-7-7.1(f)(7)(C) & (D); see also infra n.28. These categories have limited definitions in the regulations. Good “indicate[s an] attractive and desirable area”; Average “indicate[s] an average area.” Id. However, the Marion County Land Order further fleshes out the meaning of these two terms with respect to Apartment Land and PUDs in the following manner:
GOOD: Attractive and desirable with good landscaping, level to rolling partially wooded terrain and could possibly include a man-made lake. Has many of the same features as the very good classification. Features include: 2 parking spaces per unit, some carport areas, asphalt or concrete roads, sidewalks to units, lighted streets, clubhouse and office. Recreational areas may include a swimming pool and tennis courts.

AVERAGE: A typical area with level terrain, adequate drainage, and landscaping. May have a man-made lake, near commercial and residential areas with acceptable distances to roads, schools and shopping areas and is neither particularly attractive nor unattractive having characteristics of both good and fair areas. Features include: one and one-half parking spaces per unit, may have carports available, sidewalks, hard surface roads, small clubhouse and office.

(Land Order at 1-2.)
    Before considering whether the Lawsons’ home was assigned a proper neighborhood rating pursuant to the above descriptions, the Court first observes that the State Board applied the incorrect description in the first place. This fact is reflected in both the State Board’s final determination and by its arguments at trial. The final determination states that the neighborhood classification was left unchanged as Good “[a]fter inspection of the property and in consideration of 50 IAC 2.2-4-13.” (Final Determination at 15, ¶ 40.) The final determination quotes the relevant language from Ind. Admin. Code tit. 50, r. 2.2-4-13(c) (1996), which lists seven categories, See footnote including those for Good and Average. (Final Determination at 15, ¶ 39.) However, under the regulation, these categories are to be applied to “agricultural homesites and rural residential parcels.” Id. The regulation specifically requires local land valuation commissions to establish value ranges for each of the seven categories. Id. Under this regulation, Good indicates that the location is “pleasant,” is an “improving area with good access to shopping, schools, and major roads,” and “may be in close proximity to recreational facilities.” Id., r. 2.2-4-13(c)(3). Average, in comparison, indicates that the “location is typical,” is generally in a “static area with little or no evidence of new development,” has acceptable distances to shopping, school and major roads, and is “neither particularly attractive nor unattractive.” Id., r. 2.2-4-13(c)(4). The Land Order adopts this language verbatim, stating that the “category definitions apply to Rural Residential and Agricultural Homesites [Rural Sites].” At trial, the State Board’s counsel admitted that the final determination quoted the wrong description. (Trial Tr. at 60 & 61.)
    Although the wrong description was used as the standard, the State Board insists that its analysis is consistent with the Good standard applicable to a PUD. (Trial Tr. at 61.) In other words, the State Board argues that paragraph forty of its final determination “makes it clear that [the State Board is] analyzing [the Lawsons’ property] under the correct criteria for . . . good PUD neighborhood land.” (Trial Tr. at 61.) If this is the case, the State Board’s rating is proper.
    Unfortunately, a comparison of the State Board’s findings and conclusions with the proper standard indicates that the State Board may have improperly considered and applied some factors while neglecting to consider and apply others. First, the State Board pointed out that there was new construction in the area, i.e., it was not a “static neighborhood.” See footnote The proper standard for a PUD does not include such a consideration, while the presence of new development plays a prominent role in the description for Rural Sites. Second, the State Board noted that the neighborhood lacks “many street lights and sidewalks.” (Final Determination at 15, ¶ 40.) An Average PUD typically features sidewalks. An Average PUD may have characteristics of both Good and Fair areas, and Fair areas feature sidewalks and “scant lighting throughout the area.” (Land Order at 2.) In sharp contrast, a Good PUD features “sidewalks to units” and “lighted streets.” (Land Order at 1.) The Good and Average descriptions for Rural Sites mention neither sidewalks nor street lighting. (Land Order at 1.) Third, The only overlapping category that plays into the State Board’s final determination is the neighborhood’s access to shopping, schools and major roads. In the Rural Sites category, Good involves “good access” to these places, including the possibility that it “may be in close proximity to recreational facilities.” (Land Order at 1.) Similarly, Good PUDs have many features of the Very Good Classification, which includes “easy access to major roads, schools and shopping areas.” (Land Order at 1.) Average Rural Sites properties merely have “acceptable” distances to shopping, schools and major roads. (Land Order at 1.) In like manner, Average PUDs have “acceptable” distances to roads, schools, and shopping areas. (Land Order at 2.) The State Board’s final determination states that the Lawsons’ neighborhood is in “close” proximity to shopping and major roads and is an “acceptable” distance to schools. Thus, the area apparently shares features of both Good and Average PUDs, with respect to access to shopping, major roads and schools. The Court notes, though, that the State Board also considered the area’s proximity to a country club and a racing facility; these are important with respect to the Good category for Rural Sites, but recreational facilities are not part of the PUD category descriptions. The State Board thus appears to have improperly weighed this factor.
    The Court disagrees with the State Board’s contention that it analyzed the Lawsons’ neighborhood using the factors associated with the Good and Average PUD categories. It is obvious that that the State Board applied the incorrect descriptions. However, it is not so obvious as to whether, in considering and applying the incorrect descriptions, the State Board also applied the incorrect neighborhood rating. The Lawsons, while providing some probative evidence concerning certain pertinent features in the neighborhood, have not established a prima facie case as to the appropriate neighborhood rating. In this case, where the State Board mistakenly applied the incorrect standard, the Court finds that the State Board should consider this issue under the correct standard for the first time on remand. Under these circumstances, the Court finds that the State Board abused its discretion when it applied the Good neighborhood rating pursuant to the incorrect rating descriptions. Therefore, the Court REVERSES the State Board’s final determination on this issue and REMANDS this issue to the State Board for further consideration in a manner consistent with this opinion.


    For the aforementioned reasons, the Court AFFIRMS the State Board’s final determination with respect to Issues I, II and III. The Court REVERSES the State Board’s final determination with respect to Issue IV and ORDERS this case REMANDED to the State Board for a determination of the correct neighborhood desirability rating using the correct category descriptions for PUDs.

Footnote: PUD is not defined by statute or regulation. Black’s Law Dictionary 1171 (7th ed. 1999) defines it as a “land area zoned for a single-community subdivision with flexible restrictions on residential, commercial, and public uses.” Additionally, the Marion County Land Order includes the following description with respect to PUDs: “Fee Simple Title – titled by either lot number, unit number, deed descriptions etc. Includes the area under the individual unit plus any excess included or excluded by the title.” (Land Order at 2.)

Footnote: The Court did not order the parties to submit briefs in this matter. (Trial Tr. at 51.)

Footnote: The Lawsons offer a second argument; they contend that the ratio of their home’s true tax value to its sales or market value is much higher in comparison with other properties in Marion County. In their Form 131 Petition for Review, the Lawsons assert that a “ratio study shows other residential property in [Marion] County at 45-60% of [market] value.” (State Bd. Tr. at 4.) At trial, Mr. Lawson stated that he purchased his home for $80,000. (Trial Tr. at 64.) The home was purchased in 1991. (Stipulation 6.) Prior to the State Board’s adjustments in this case, his property’s true tax value was determined to be $77,000. (Trial Tr. at 64); (Stipulation 24.) Mr. Lawson indicated that his property was assessed at ninety-eight percent of its market value. (Trial Tr. at 64.) The ratio actually approximates ninety-six percent. At the administrative hearing, Mr. Lawson “testified that ratio studies have shown that the ratio of true tax value to fair market value is much higher with PUD owners than any other type of property.” (Final Determination at 4, ¶ 8.) He submitted as proof “studies” showing the disparities in sales to market value ratios between his property and other properties in Marion County. (Stipulation 9); (Final Determination at 6, ¶ 19.) The Lawsons’ challenge is really a constitutional challenge to the Land Order; they basically assert that the Land Order, as applied to their property, violates Article X, § 1 of the Indiana Constitution. The Court permits such “as applied” challenges. Dana Corp. v. State Bd. of Tax Comm’rs, 694 N.E.2d 1244, 1247 (Ind. Tax Ct. 1998). To be successful, a taxpayer must present specific evidence that an assessment is unconstitutional as applied to him. Id. The Court recently discussed whether use of a sales ratio study as evidence met this standard. In Kemp v. State Board of Tax Commissioners, 726 N.E.2d 395, 403 (Ind. Tax Ct. 2000), the Court observed that the taxpayers “were obligated to show how use of this market data helps demonstrate that the State Board’s regulations, as applied, violated their right to an equal and uniform assessment under the Indiana Constitution.” Accord Bernacchi v. State Bd. of Tax Comm’rs, 727 N.E.2d 1133, 1138 (Ind. Tax Ct. 2000) (noting that counsel must provide evidentiary basis for his argument). As with the taxpayers in Kemp, the Lawsons in the present case “do not sufficiently explain how the [sales ratio study] demonstrates uniformity of assessments calculated using the true tax value system.” 726 N.E.2d at 404.

Footnote: The Land Order provides ten different categories of PUDs, ranging from the top category of “Excellent/Very Good” to “Poor.” However, no values are assigned to these extreme categories. The categories with assigned values provide low and high values for “Title/Deeded Land Under the Unit,” as well as low and high values for “Excess Land.” Eagle Valley has been deemed “Very Good/Good.” This category has a low value of $5.50 and a high value of $6.30 for titled/deeded land under the unit and a low value of $1.10 and high value of $1.26 for excess land. Thus, Eagle Valley has been assessed at the high values for both categories.

Footnote: This provision has been repealed. The regulation in part provided that “[i]n making land assessments, the township assessor shall use the values as finally determined by the state board.” Ind. Admin. Code tit. 50, r. 2.2-4-3(d) (1996).

Footnote: This is based on Mr. Lawson’s calculation of the base rate times a total of 43,500 square feet per acre. (Stipulation 15 at 1); (Trial Tr. at 11.) An acre actually equals 43,560 square feet. 1 The New Encylcopaedia Britannica 68 (15th ed. 1992). However, this discrepancy does not affect the outcome of the Court’s decision. For the sake of convenience, the Court will use the per acre value applied by Mr. Lawson.

Footnote: Stipulation 17 is an addendum with exhibits prepared by the Lawsons for the State Board hearing officer. It shows average land per square foot costs for these same three areas as ranging from $1.89 to $2.37. Applying the Lawsons’ formula to one of these figures, the Court observes that multiplying $2.37 by 43,500 square feet results in a value of $103,095. The Lawsons point out that the figures for condominiums “do not reflect that regular condominiums include the cost of common land in the land figures[,] whereas, PUD[s] have a separate cost passed on to each homeowner to cover these land costs.” (Stipulation 17 at 1.) Accordingly, the Lawsons posit that removing the common land values from these base values would effectively lower them “by at least fifty cents.” (Stipulation 17 at 1.) Applying the $2.37 example again, less fifty cents (for a value of $1.87), the value for one total acre would equal $81,345. Either set of figures, i.e., the per acre values recited at trial or the per square foot values in Stipulation 17, is less than the $274,000 per acre value attributed to Eagle Valley by the Lawsons. The Court cannot ascertain from the evidence how Mr. Lawson came up with the two significantly different sets of values for the referenced condominiums.

Footnote: The Lawsons also assert that the primary base rates for their property exceed even those for a shopping mall in Marion County. (Stipulation 15 at 1.) However, they have provided no property cards or other evidence supporting this assertion.

Property underneath the individual units in a PUD was also referred to as a “footprint.” (Trial Tr. at 62.) Compare with Black’s Law Dictionary 656 (7th ed. 1999) (defining “footprint,” for real estate purposes, as the “shape of a building’s base”).

Mr. Lawson described the excess land as that land owned by the taxpayer (not the homeowners association) that was “platted but not improved upon.” (Trial Tr. at 28.)

Footnote: PUDs also have common ground. According to Mr. Lawson, homeowners in a PUD receive two property tax bills; one is “a bill directly to the homeowner and that homeowner is responsible for the homesite as platted” and the other is a bill for the PUD’s common ground. (Trial Tr. at 31.) Mr. Lawson further explained that each homeowner in a PUD is responsible for a portion of the common ground’s assessment based upon the “square footage of [the homeowner’s] house.” (Trial Tr. at 31.) Common ground in Eagle Valley (and other PUDs in Marion County) was valued at $18,000 per acre or its rough equivalent of forty-one cents an acre. (Stipulation 4.) At trial, Mr. Lawson claimed that this rate violated the Land Order—a fact proving that the township assessor neither had to nor actually did follow the Land Order. (Trial Tr. at 12.) This is important because the final determination explains that the State Board’s regulations require township assessors to “use values in the land order.” (Final Determination at 11, ¶ 28) (citing Ind. Admin. Code tit. 50, r. 2.2-4-3 (1996).) However, the Lawsons are appealing only the assessment for their primary and excess land, not the assessment for their proportionate liability of the common ground. (Tr. of Proceedings at 3 & 5-6, Form 131 Petition & Property Record Card); (Final Determination at 4, ¶ 8.) The State Board was not obligated to and did not address the propriety of the assessment of common land within Eagle Valley. Whitley Prods., Inc. v. State Bd. of Tax Comm’rs, 704 N.E.2d 1113, 1119 (Ind. Tax Ct. 1998) (noting that State Board may limit its inquiry to only those errors raised by the taxpayer), review denied. Therefore, the Court does not and, indeed, likely does not have the authority to consider the merits of this argument. See id. (noting that Court’s scope of review precludes it from considering evidence and issues not presented to the State Board).

Footnote: At the administrative hearing, the Wayne Township Assessor was represented by Mr. John Kendall. (Final Determination at 3, ¶ 3.) Mr. Kendall estimated that the land in Eagle Valley averaged approximately $170,000 per acre. (Stipulation 23, Tape of Administrative Hearing); (Trial Tr. at 16.) The Court assumes that this figure represents totals for all primary, excess and common lands included within an average acre in Eagle Valley. Again, the Lawsons offer no probative evidence showing or explaining why this average, if accurate, is inappropriate for a PUD, in comparison with lower-valued areas with condominiums and commercial properties.

Footnote: What constitutes a comparable property depends on the characteristics of the subject property. Cf. Zakutansky v. State Bd. of Tax Comm’rs, 691 N.E.2d 1365, 1370 (Ind. Tax Ct. 1998) (concluding that evidence of comparable properties submitted by taxpayer established that assessed value of his property was not equal and uniform with similarly situated properties); Vonnegut v. State Bd. of Tax Comm’rs, 672 N.E.2d 87, 90 (Ind. Tax Ct. 1996) (holding that State Board failed to assess taxpayer’s land consistently with similar properties located in his neighborhood).

Footnote: At trial, Mr. Lawson made his argument on this issue in terms of an adjustment for economic obsolescence. (Trial Tr. at 32-33) (citing Ind. Admin. Code tit. 50, r. 2.2-1-40 (1996).) However, his argument is properly viewed as one requesting application of a negative influence factor. See Ind. Admin. Code tit. 50, r. 2.2-7-9(d) (1996) (stating that obsolescence depreciation is “seldom applied to residential dwellings”).

Footnote: The six specific factors are: (1) adverse topography; (2) absence of water or sewage disposal system; (3) excess frontage; (4) irregular shape or inadequate size; (5) “misimprovement” (non-conforming land use); and (6) restrictions such as encumbrances, restrictive covenants or the presence of obstructions. Ind. Admin. Code tit. 50, r. 2.2-4-10(a)(9)(A)-(F) (1996). These six factors result in a decrease in the subject land’s value. Id. The sole general condition is labeled the “other” category and indicates an “influence other than those listed.” Id. Although not citing any specific factor, the Lawsons rely upon sub-sections (a)(9)(F) & (G), i.e., the “encumbrances” and “other” factors, as the basis for their arguments.

Footnote: Quantification of the influence factor is not an issue. However, the Court notes that in Phelps Dodge v. State Board of Tax Commissioners, 705 N.E.2d 1099, 1106 (Ind. Tax Ct. 1999), review denied, it held that “in any hearing regarding influence factors, market data may be used to quantify influence factors.”

Footnote: The Lawsons may be asking this Court to take judicial notice of the fact that power lines are potentially dangerous to those who live near them. However, the Lawsons have not demonstrated this alleged fact to be either “generally known” within Indiana or “capable of accurate and ready determination by resort to sources whose accuracy cannot reasonably be questioned.” Ind. Evidence R. 201(a).

Fred Lawson testified that the originals had been given to the State Board at the administrative hearing. (Trial Tr. at 33.)

Footnote: Stipulation 7 does show the presence of a tall power lines tower near the Lawsons’ property. The State Board admitted that the tower, not the lines, may be “less desirable to some people.” (Trial Tr. at 54.) This observation, while perhaps true, is based on speculation and is not probative evidence justifying application of a negative influence factor. See CDI, 725 N.E.2d at 1020-21.

Footnote: The Lawsons also submitted photocopied pictures of their home as evidence of the home’s quality. (Stipulation 11-13.) However, these photocopies are of extremely poor quality. In fact, Mr. Lawson described the photocopies as being of “poor quality.” (Trial Tr. at 36.) They do not assist the Court in reaching a decision on this issue.

Footnote: The base rates listed for dwellings, see Ind. Admin. Code tit. 50, r. 2.2-7-11 (1996), reflect C grade standards of quality and design. Ind. Admin. Code tit. 50, r. 2.2-7-6(e) (1996).

Footnote: A model is a “conceptual tool used to replicate reproduction cost of a given structure using typical construction materials.” Ind. Admin. Code tit. 50, r. 2.2-7-6(a) (1996).

Footnote: However, the statements by Mr. Lawson that the cabinets and plumbing fixtures in the home are “low cost” are concustory and thus do not constitute probative evidence. (Trial Tr. at 39 & 40.) See CDI, 725 N.E.2d at 1019. Likewise, a statement that the carpeting in the home was “average” is conclusory and not probative evidence. (Stipulation 15 at 5.) See CDI, 725 N.E.2d at 1019.

Footnote: These fourteen items were: (1) minimal roof lines, 2” x 4” rafters; (2) small aluminum windows; (3) Masolite siding and garage door; (4) average quality bathroom fixtures; (5) “Floor – 1/2 [inch] plywood on 2 [inch] x 8 [inch] joists, 24[inch] on center. Floor squeaks”; (6) average quality six-panel doors; (7) cathedral ceiling with a skylight in the living room and a cathedral ceiling in the den; (8) linoleum kitchen floor and average kitchen cabinets; (9) average to slightly below average woodwork; (10) oak staircase; (11) mirrored closet doors in the bedrooms; (12) textured ceilings throughout home; (13) normal roof overhangs; and (14) no drain tile. (Final Determination at 5, ¶ 15.)

Footnote: Mr. Lawson described the Masolite as “composition board,” which is an item listed as part of the C grade description (and not the D grade description) with regard to the design and construction of exterior walls. (Trial Tr. at 38); Ind. Admin. Code tit. 50, r. 2.2-7-6(b) (1996).

Footnote: At trial, Mr. Lawson stated that the home had a “gambrel” roof. (Trial Tr. at 39.) This is a characteristic included in the C description and excluded from the D description. Ind. Admin. Code tit. 50, r. 2.2-7-6(b) (1996). In Stipulation 15 at 4, he labeled it a “gable” roof (a D characteristic). The Court is unable to ascertain which is correct from the evidence. In addition, the home’s heating system matches the C grade description, as Mr. Lawson indicated that the home has “central forced air and heat” and is “automatically fired” and “thermostatically controlled.” (Stipulation 15 at 4); (Trial Tr. at 40); Ind. Admin. Code tit. 50, r. 2.2-7-6(b) (1996). As with Mr. Lawson’s conclusory statements with respect to cabinets, plumbing and carpet, see supra n.23, the Court finds that the State Board’s statements as to the “average” quality doors, plumbing fixtures and kitchen cabinets are conclusory and not probative as to grade. See CDI, 725 N.E.2d at 1019.

Footnote: The hearing officer, upon viewing the property, noted: (1) some new construction in the area; (2) shopping and restaurants within one mile; (3) access to Highway 136, Crawfordsville Road and Interstate 74; (4) one block from Indianapolis Country Club; (5) two to three miles from schools; (6) three to four miles from the Indianapolis Speedway; and (7) few street lights or sidewalks in the immediate area. (Final Determination at 6, ¶ 23.)

Footnote: As with Ind. Admin. Code tit. 50, r. 2.2-7-7.1 (1996), this regulation provides the following categories: (1) Excellent; (2) Very Good; (3) Good; (4) Average; (5) Fair; (6) Poor; and (7) Very Poor.

Footnote: A “static” neighborhood means that the neighborhood is in a “condition of equilibrium evidenced by little change.” Ind. Admin. Code tit. 50, r. 2.2-6-1(e)(4)(B) (1996).