IN THE OREGON TAX COURT MAGISTRATE DIVISION Property Tax
FRERES LUMBER CO. INC., ) ) Plaintiff, ) TC-MD 200399R, 200400R, 210408G, ) 210409G, and 210410G v. ) ) LINN COUNTY ASSESSOR ) and DEPARTMENT OF REVENUE, ) State of Oregon, ) ) Defendants. ) DECISION
This appeal concerns the real market value (RMV) of a veneer plant, a plywood plant,
and those plants’ related machinery and equipment (M&E) for the 2020-21 tax year. This appeal
also concerns the value of those properties and a mass ply panel (MPP)1 plant (collectively, the
subject properties) for the 2021-22 tax year. 2 A consolidated six-day trial of the five related
cases was held in the courtroom of the Oregon Tax Court beginning on November 8, 2022.
Cynthia Fraser and Paul Trinchero, attorneys with Foster Garvey, represented Plaintiff. Robert
Freres Jr., Theodore “Tyler” Freres, Theodore “Kyle” Freres, Timothy La ndolt (Landolt), and
Donald Palmer testified as witnesses on behalf of Plaintiff. Marilyn Harbur and Sam Zeigler,
Assistant Attorneys General, represented Defendant Department of Revenue. Eugene Karandy
II, Linn County Attorney, represented defendant Linn County. Nicholas Bassis (Bassis), Kara
Driskell (Driskell), and Darlene Johnson appeared as witnesses on behalf of Defendant
Department of Revenue.3
1 Defendant alternately describes this as the “Mass Plywood Product (MPP) Plant.” (Def’s Ex A at 5.) 2 The subject properties correspond to the following accounts on the tax rolls. Veneer plant: 4610, 940705, and 4966; plywood plant: 851309 and 940711; MPP plant: 944356 and 6987. 3 This decision hereinafter refers to Defendant because the Department of Revenue is the lead defendant.
DECISION TC-MD 200399R, 200400R, 210408G, 210409G, and 210410G 1 Plaintiff’s Exhibits 1, 2, 9 to 14, 16, 19, 20, 25 to 31 , 41, and 44 were received into
evidence. Defendant’s Exhibits A to J were received into evidence.
I. STATEMENT OF FACTS
Plaintiff, a century-old lumber company, operates a vertically integrated manufacturing
system comprising five mills and plants spread across three sites located in the sparsely
populated areas of Lyons and Mill City, Oregon. (Ptf’s Ex 19; Ptf’s Ex 1 at 33.) These facilities
convert raw timber into green veneer, dry veneer, plywood, and engineered wood products. The
subject properties include a veneer plant, a plywood plant, and an MPP plant. Each facility plays
a distinct role within the production chain, and together they function as an interrelated economic
unit.
The veneer plant is located just east of Lyons and consists of two tax lots: a 109.42-acre
parcel and a 0.45-acre parcel. (Def’s Ex A at 28.) It is improved with 150,184 square feet of
production space, 60,020 square feet of enclosed storage space, 31,806 square feet of covered
area, and 11,124 square feet of office space. (Id.) Structures include small and large log veneer
lines, a stud mill, veneer drying facilities, and truck yard and maintenance buildings. (Id.) The
site also contains a cogeneration facility that was excluded from the appraisal because it belongs
to another entity. (Id.) Veneer produced at this facility is transported by truck five miles to the
plywood plant in Mill City for further processing into plywood. (Ptf’s Ex 1 at 33.)
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DECISION TC-MD 200399R, 200400R, 210408G, 210409G, and 210410G 2 The plywood plant lies approximately 5.2 miles east of the veneer plant and spans two
tax lots: a 38.66-acre parcel, and a 3.18-acre parcel. (Def’s Ex A at 43.) Improvements total
233,325 square feet, consisting of 203,510 square feet of production space, 5,992 square feet of
enclosed storage space, 16,767 square feet of covered area, and 7,056 square feet of office space.
(Id.) This plant is primarily used to produce plywood and panels used in Plaintiff’s MPP plant.
(Def’s Pre-Tr Mem at 3.)
The MPP plant, constructed in 2017, is located midway between the veneer and plywood
plants. (Def’s Ex A at 57, 63.) The site spans 58.27 acres, though only 18 acres are actively
used in operations; the remainder is designated forest or excess land. (Id. at 57.) The MPP plant
manufactures an emerging engineered wood product that competes with products such as cross-
laminated timber. (Ptf’s Ex 1 at 75.)
Valuation of the subject properties presented several challenges. The veneer and
plywood plants were assembled over more than half a century, with piecemeal equipment
upgrades and consistent maintenance that extended the lifespan of machinery well beyond
typical depreciation schedules. Complicating matters, Plaintiff made a statutory election under
ORS 308.411(2)(a) on June 26, 2019, opting to exclude the income approach from valuation and
declining to provide income or expense itemizations. (Ptf’s Ex 2 at 49.) Incorporating language
from ORS 308.411(2)(a), the election form states,
“The owner elects to have the property appraised and valued for ad valorem tax purposes excluding the income approach to valuation. I understand that the owner may not be required to provide any itemization of income or expense of the property for use in making an appraisal of the property. As a consequence of this election, there may be obsolescence that is not measurable.”
(Id.)
DECISION TC-MD 200399R, 200400R, 210408G, 210409G, and 210410G 3 The parties took different approaches to value based on their interpretation of the
consequences of the election above. Plaintiff applied work -around strategies to account for
obsolescence while Defendant asserted that the lack of income and expense data rendered
obsolescence unmeasurable.
A. Plaintiff’s Evidence of Value
Plaintiff’s valuation evidence was presented through Landolt, a qualified appraiser with
the American Society of Appraisers (ASA). Landolt has over 22 years of experience appraising
forest product properties in the Pacific Northwest. He holds an undergraduate degree in
mechanical engineering and an MBA. (Ptf’s Ex 2 at 1484.) He prepared retrospective appraisal
reports for the subject properties as of January 1, 2020, and January 1, 2021, using the cost and
sales comparison approaches to valuation. (Ptf’s Ex 1.) No income approach to value was
developed, consistent with Plaintiff’s election. Landolt determined that the highest and best use
of the subject properties was their current industrial use. (Ptf’s Ex 1 at 55.) He valued Plaintiff’s
veneer and plywood plants together, as if they were a single unit. (See id. at 64-83, 89
(comparing subject veneer and plywood plants with two facilities that process veneer and
plywood under one roof).) Landolt apportioned approximately 55 percent of his original value
conclusions to the veneer plant, and 45 percent to the plywood plant. (See, e.g., id. at 3
(allocating $7.6 million to the veneer plant and $6.2 million to the plywood plant of the total
$13.8 million for both for the 2020-21 tax year).) Landolt valued the MPP plant separately. (Id.
at 94.)
DECISION TC-MD 200399R, 200400R, 210408G, 210409G, and 210410G 4 1. Plaintiff’s cost approach
Landolt’s cost approach was based on the following formula: replacement cost new, less
physical deterioration, less functional obsolescence, less external obsolescence, plus land value ,
plus construction in progress, equals the RMV. (Ptf’s Ex 1 at 89.)
Landolt opted to start with replacement cost new rather than reproduction cost new
because it is less complex and focuses on an equivalent utility or output. (Id. at 57.) He relied
on two recently completed plywood and veneer processing facilities, a new lathe line installation,
and other construction projects and cost quotes, all of which were built under one roof . (Id.)
The first comparable was the Swanson Group’s plywood and veneer facility in Springfield,
which was destroyed by fire. (Id. at 63-64.) Based on the items and production capacity of the
facility, Landolt calculated the replacement cost new at $105 million 4 as of January 1, 2020, and
$110 million as of January 1, 2021. (Id. at 69.) The second comparable was the Winston
Plywood and Veneer plant, in Louisville, Mississippi, reconstructed in 2014 after tornado
damage, with an estimated replacement cost new at $80 million as of January 1, 2020, and $84
million as of January 1, 2021. (Id. at 75.)
Using those two comparables, Landolt estimated the replacement cost for the land,
buildings, and machinery of Plaintiff’s plywood and veneer facilities to be $90.4 million and
$94.3 million for the 2020 and 2021 valuation dates, respectively. (Id.) The MPP plant’s value
was based on trending the recently constructed comparables, with minor adjustments due to the
plant’s uniqueness, estimated at $45.8 million. (Id. at 75-76.)
4 The court uses rounded sale figures except in tables reproducing the parties’ evidence.
DECISION TC-MD 200399R, 200400R, 210408G, 210409G, and 210410G 5 a. Physical deterioration
Having determined each plant’s starting point (i.e., replacement cost new) for the
formula, Landolt proceeded to the next item: a subtraction for physical deterioration. Landolt
estimated physical deterioration based on the expected service lives of the subject properties’
various assets, rather than their actual ages, as much of the property was “in service for far
longer than their placed in-service date would support.” (Ptf’s Ex 1 at 76.) Using Marshall
Valuation Service and other factors, he estimated physical deterioration percentages for the
plants as follows:5
Plywood & Veneer Plywood & Veneer MPP Jan 1, 2020 Jan 1, 2021 Jan 1, 2021 Phys. Det. Phys. Det. Phys. Det. Buildings & Structures 37% 41% 4% Site Improvements 79% 80% 38% Machinery & Equipment 82% 83% 20% Overall Phys. Det. 74.6% 76.0% 15%
(Id. at 77.)
b. Functional obsolescence
The next step in Landolt’s formula was to subtract estimated functional obsolescence.
Landolt defined functional obsolescence as “the loss in value or usefulness of a property due to
inefficiencies or inadequacies of the property itself, when compared to a more efficient or less
costly replacement property that new technology has developed.” (Ptf’s Ex 1 at 77.) The
deduction reflects that new machinery used to estimate value would typically be cheaper per unit
of production due to requiring less labor and redundancy. (Id. at 78.) He adjusted for excess
5 The data in this table is from Landolt’s original report. (Ptf’s Ex 1 at 77.) The court notes that the percentages associated with the plywood and veneer plants’ machinery and equipment were revised during trial. (Ptf’s Post-Tr Br at 16.) The court accounts for those revisions at the conclusion of this section.
DECISION TC-MD 200399R, 200400R, 210408G, 210409G, and 210410G 6 operating costs, including transportation costs and labor costs for additional employees required
to run multiple plants across separate sites as opposed to a single consolidated facility. (Id. at 78,
81.) Relying on 2019 Bureau of Labor statistics, Landolt estimated excess operating costs
totaling approximately $10.8 million for 2020 and $10.1 million for 2021. (Id. at 81.)
c. Economic obsolescence
Next, Landolt explained that economic obsolescence arises from external factors such as
increased lumber costs, reduced product demand, increased competition, and environmental or
regulatory issues. (Ptf’s Ex 1 at 84.) While he acknowledged that this calculation is usually
performed using the income approach, he quoted an ASA publication stating it can also be
applied within the cost approach. Ultimately, due to “extremely volatile” market conditions in
2020 that “were expected to vary significantly in 2021 and 2022 before returning to historic
trends,” Landolt made no specific adjustments for the plywood and veneer plants for economic
obsolescence. (Id.)
However, Landolt did make an adjustment for the MPP plant due to several external
factors. (Id. at 84-85.) For one, the process for obtaining structural certification of a relatively
new product like MPP is subject to significant delays. MPP also faces competition with
alternative markets. Furthermore, the COVID-19 pandemic slowed construction, which in turn
slowed the design, use, and general acceptance of MPP. Finally, the failure of a building at
Oregon State University constructed with a similar (but different) material further slowed market
acceptance of MPP. (Id. at 85.)
Landolt concluded that those challenges were “likely to result in a decrease in market
value that a knowledgeable market participant would be willing to pay.” (Id.) To quantify this
external economic obsolescence, Landolt used an “inutility analysis” comparing maximum
DECISION TC-MD 200399R, 200400R, 210408G, 210409G, and 210410G 7 capacity to actual production. As a new product facing limited demand, only a fraction of the
plant’s total capacity was being used. (Id. at 86-87.) Landolt used a formula that reflects that
costs rise as production increases, but not in direct proportion, and calculated an inutility rate of
77.4 percent for the MPP plant. (Id. at 87.) Landolt also provided a “second market-based
measure” to support his findings, referencing a bankruptcy sale of a cross-laminated timber plant
that sold for 66 percent of its cost just two years after construction. (Id.) Landolt ultimately
deducted $27.2 million for external economic obsolescence. (Id. at 89.) This deduction is 70
percent of the MPP plant’s “replacement cost new less physical deterioration”—roughly midway
between Landolt’s calculated inutility rate of 77.4 percent and the supporting market-based
measure of 66 percent.
d. Land value
The next element in Landolt’s cost approach formula is to add land value. Plaintiff
accepted—and Landolt used—the actual tax roll land values for each tax account as follows:
Plant Account Number Land Value Year Veneer 4610 $931,690 2020 Veneer 4610 $968,960 2021 Veneer 4966 $50,010 2020 Veneer 4966 $53,030 2021 Plywood 851309 $250,820 2020 Plywood 851309 $260,860 2021 MPP 6987 $518,470 2021
(Ptf’s Ex 1 at 62; Ptf’s Ex 2 at 7-8, 12, 29-30, 43.) Summing the values for the veneer plant’s
two accounts results in a land value of $981,700 for 2020 and $1,021,990 for 2021.
e. Plaintiff’s cost approach value conclusions
Under the replacement-cost-new approach, Landolt concluded the RMV, including “land,
buildings, structures, site improvements, machinery & equipment, and construction -in-process”
DECISION TC-MD 200399R, 200400R, 210408G, 210409G, and 210410G 8 had RMV of approximately $16.1 million for the veneer and plywood plants in 2020, $15.4
million in 2021, and $12.2 million for the MPP plant in 2021 . (Ptf’s Post-Tr Br at 20.) The
values for each step of the calculation appearing in Landolt’s report, organized by plant and
assessment date, and reflecting revisions made at trial are:
Plywood & Plywood & MPP Veneer Veneer Jan 1, 2020 Jan 1, 2021 Jan 1, 2021 Replacement Cost New $90,366,000 $94,265,000 $45,790,431 Less Physical Deterioration - $64,704,000 - $70,217,000 - $6,891,684 Less Functional Obsolescence - $10,830,000 - $10,088,000 - Less External Economic Obsolescence - - - $27,229,000 Plus Land + $1,232,520 + $1,282,850 + $518,470 Plus Construction in Process - + $113,130 - Equals RMV $16,064,520 $15,355,980 $12,188,217
(Id. at 16, 21.)
2. Sales comparison approach
Landolt conducted a sales comparison analysis for the veneer and plywood plants using
seven lumber mill transactions, adjusting for production capacity. (Ptf’s Ex 1 at 90.) Landolt
used those seven sales as comparables for valuation purposes. (Id. at 91.) Those sales are
summarized as follows:
Adjusted Sales Adj Sales Price Sale Date Location Price6 Per Unit Prod Sale 1 Feb 2004 Yakima, WA $1.0 million $4.03 Sale 2 Apr 2004 Creswell, OR $2.9 million $11.60 Sale 3 Dec 2005 Eugene, OR $3.7 million $16.44 Sale 4 Jul 2007 Elma, WA $5.6 million $18.75 Sale 5 Aug 2007 Springfield, OR $2.2 million $9.43
6 To enable an “apples to apples” comparison with Pla intiff’s cost per unit production, Landolt adjusted the comparables’ total sales prices by deducting estimated values for land, personal property, and other assets. (See Ptf’s Ex 1 at 91.)
DECISION TC-MD 200399R, 200400R, 210408G, 210409G, and 210410G 9 Sale 6 Oct 2007 Springfield, OR $3.1 million $12.45 Sale 7 Nov 2017 Sweet Home, OR $4.7 million $15.67
Landolt used the adjusted comparables to estimate a value for the subject properties’
price per unit of production in 2020 and 2021. He grouped Plaintiff’s production types
according to similar production costs: small log and ply at $18 per unit of production, and large
log veneer at $15 per unit of production. Applying those per-unit values to Plaintiff’s
production, Landolt computed values of $4.5 million and $4.7 million respectively for those
production types. Adding these to the values of Plaintiff’s land and personal property, Landolt
computed the plywood and veneer plants’ total value for 2020 as a rounded $14.4 million, and
$15.0 million for 2021. (Id. at 91; Ptf’s Post-Tr Br at 21.)
Landolt did not use a sales comparison approach for the MPP plant because it was the
only facility of its kind. (Ptf’s Ex 1 at 92.)
3. Plaintiff’s value reconciliation
Acknowledging limitations in both the cost and sales comparison approache s, Landolt
reconciled the two by averaging their conclusions, resulting in values of $15.4 million (2020-21)
and $15.2 million (2021-22) for the veneer and plywood plants. He relied exclusively on the
cost approach for the MPP plant, concluding a value of $12.2 million for 2021-22. These values
account for adjustments made during trial. (Ptf’s Post-Tr Br at 59.)
B. Defendant’s Evidence of Value
Defendant called three witnesses in support of its valuation of the subject properties.
Like Plaintiff, Defendant considered the cost and sales comparison approaches but separately
valued the land, improvements, and machinery, for the veneer, plywood, and MPP plants, and
added the values together. Defendant placed much significance on Plaintiff’s election under
DECISION TC-MD 200399R, 200400R, 210408G, 210409G, and 210410G 10 ORS 308.411(2)(a) and determined that obsolescence was not measurable without Plaintiff’s
income and expense data, referencing OAR 150-308-0280.
Bassis has been working as an appraiser for Defendant since 2016. (Def’s Ex A at 138.)
He has worked on several industrial appeals. He previously was a residential appraiser in
Hawaii. Bassis limited his appraisal of the land and improvements to the real property. (Id. at
3.) He concluded that the five-mile separation between the facilities is “consistent with current
competitive business practices and there is no factual basis to conclude that it is a detriment.”
(Id. at 4.) Further, Bassis emphasized that Plaintiff’s election precluded a reliable measurement
of functional or economic obsolescence, and instead relied on comparable sales to extract
depreciation. Bassis’s cost approach applied land sales data, Marshall & Swift cost estimations,
and a depreciation adjustment based on market-derived rates. (Id. at 4, 75.) Bassis divided the
subject property into three sites and valued each one separately. (Id. at 4.)
1. Defendant’s cost approach – real property
Bassis first analyzed the subject properties’ land values. (Id. at 72.) He selected six
comparable land sales from 2018 through 2021, ranging in size from 5.1 to 94.1 acres. Bassis
created a graph with a best fit line, showing that price per acre decreased as parcel size increased.
Based on those sales, he determined the veneer plant’s 109.87 acres at $7,081 per acre, for a total
of $777,976. He determined the plywood plant’s 41.84 acres to be worth $11,029 per acre, for a
total of $461,458. Finally, he valued the MPP Plant’s 58.27 acres at $9,474 per acre, yielding a
value of $552,022. Bassis considered the information available and concluded that no
adjustments were necessary to account for the time between the 2020 and 2021 assessment dates.
(Def’s Ex A at 74.) These totals compare to the tax roll land values accepted by Plaintiff as
follows:
DECISION TC-MD 200399R, 200400R, 210408G, 210409G, and 210410G 11 Plant Year Tax Roll Land Values Bassis’s Land Analysis Veneer 2020 $981,700 $777,976 Veneer 2021 $1,021,990 $777,976 Plywood 2020 $250,820 $461,458 Plywood 2021 $260,860 $461,458 MPP 2021 $518,470 $552,022
The next step in Bassis’s cost analysis was estimating the replacement cost new of the
buildings and site improvements using the Marshall & Swift Valuation Service program. For the
veneer plant, Bassis calculated yard improvements, including 700,000 square feet of four-inch
asphalt with a three-inch rock base capable of supporting heavy trucks and equipment, to have a
value of $6,682,640. (Def’s Ex A at 81.) He performed similar calculations for the plywood and
MPP plants, estimating the costs of yard improvements at $1,798,498 and $1,453,075
respectively. (Id. at 82.)
Bassis examined the fire protection coverage required for the properties, estimating that
yard improvements accounted for 45 percent of the total replacement cost for the veneer plant,
compared to 19 percent and 12 percent for the plywood and MPP plants, respectively. (Id. at
83.)
Bassis next considered depreciation in the forms of physical deterioration, functional
obsolescence, and external obsolescence. For physical deterioration, he analyzed five industrial
property sales, calculated the cost new for the buildings, subtracted the land value, and computed
an average projected depreciation. (Def’s Ex A at 84.) He determined the physical deterioration
rates for the veneer plant’s building and yard improvements to be 50 percent for 2020-21 and
51.3 percent for 2021-22 tax years. (Id. at 88.) The plywood plant’s rates were 60 percent and
61.3 percent, respectively. Bassis estimated that the MPP plant’s main production warehouse
and associated yard improvements had a depreciation rate of 4 percent for 2021-22. Remaining
DECISION TC-MD 200399R, 200400R, 210408G, 210409G, and 210410G 12 structures at that property, which were older than the main production warehouse, were assigned
a 41.3 percent deterioration rate. (Id.)
Bassis addressed functional obsolescence by comparing the subject property’s operations
to the most cost-effective business practices and found they did not constitute a detriment.
(Def’s Ex A at 93.) However, he testified it was not possible to calculate functional
obsolescence without Plaintiff’s income and expense data, citing OAR 150-308-0280.
Regarding economic obsolescence, Bassis again noted that such calculations required
income and expense data, which were unavailable due to Plaintiff’s election. (Def’s Ex A at 95.)
He opined that the sales comparison approach already accounted for all forms of depreciation
and used those comparables to extract depreciation rates. Thus, further calculations for
obsolescence were unnecessary. (Id.)
In summary, under the cost approach, Bassis concluded the veneer plant’s land and
improvement values to be $8.2 million for 2020, and $8.1 million for 2021. (Def’s Ex A at
revised 98.) The plywood plant’s values were $4.37 million for 2020, and $4.33 million for
2021. (Id. at revised 101.) The MPP Plant’s value was $12.3 million for 2021. (Id. at revised
103.)
2. Defendant’s sales comparison approach – real property
Bassis selected seven sales of industrial property for comparison. Comparable 1 was a
400,000-square-foot wood products manufacturing facility with rail access located in Prineville
that was partially damaged, leaving 10,000 square feet occupiable. This property sold in January
2020, with an adjusted price, excluding land, of $1.8 million. (Def’s Ex A at revised 105,
original 106.) Comparable 2 was a 300,000-square-foot multi-tenant, general use industrial
warehouse located in Springfield, which sold in June 2018 for an adjusted sales price of $4.7
DECISION TC-MD 200399R, 200400R, 210408G, 210409G, and 210410G 13 million, excluding land. (Id. at 107.) Comparable 3 was a 120,000-square-foot former veneer
processing plant located in Glendale, which sold in September 2019 for $2.4 million. (Id. at
revised 105, original 108.) This property had a deed restriction preventing its use in the wood
products industry. (Id. at 108.) Comparable 4 was a 140,000-square-foot former wood products
manufacturing facility in Cottage Grove that sold in March 2019 for $4 million. (Id. at 109.)
Comparable 5 was a 100,400-square-foot industrial distribution warehouse in Sherwood, which
sold in September 2018 for $10.6 million. (Id. at 110.) Comparable 6 was a 202,743-square-
foot former industrial warehouse originally built by Xerox in Wilsonville, which sold in October
2018 for $13.9 million. (Id. at 111.) Comparable 7 was a 239,072-square-foot multi-tenant
general use industrial distribution warehouse built in 2017 in Donald , which sold in October
2018 for $22.4 million. (Id. at 112.) Bassis testified that he selected properties, mostly
consisting of large industrial warehouses, in various locations because he was unable to locate
contemporaneous sales of similar properties in the geographical area of the subject property.
Bassis adjusted for sales dates based on a paired sales analysis of six properties in the
Portland, Beaverton, and Hillsboro metropolitan areas (market trends). (Def’s Ex A at 114.)
Based on the paired sales and data from CoStar regarding Linn County, he applied a five percent
yearly appreciation rate. Bassis acknowledged that the land values reflected in his pa ired
analysis were high and adjusted each comparable sale by subtracting estimated land values.
In addition to adjusting for market trends and subtracting land values, Bassis also
adjusted for miscellaneous repairs and M&E. (Id. at revised 123, original 124.) Based on those
adjustments, Bassis found that the seven comparable sales had the following adjusted values per
square foot:
DECISION TC-MD 200399R, 200400R, 210408G, 210409G, and 210410G 14 Comparable Sale Date Location Adj Value (Bldgs Only) Per Sq Ft 1 Jan 2020 Prineville, OR $7.59 2 Jun 2018 Springfield, OR $15.68 3 Sep 2019 Glendale, OR $20.29 4 Mar 2019 Cottage Grove, OR $28.90 5 Sep 2018 Sherwood, OR $105.54 6 Oct 2018 Wilsonville, OR $68.47 7 Oct 2018 Donald, OR $93.64
(Id. at revised 105, 119-20, original 121.)
For the veneer plant, Bassis reconciled the value by bracketing comparable sales 1
through 4. Those sales had a low adjusted value of $7.59 per square foot, a high of $28.90, and a
median of $17.99. Bassis concluded that $26 per square foot was the most indicative value. (Id.
at revised 125.) Using that value per unit and adding the land value of $777,976, Bassis
calculated a total value for the veneer plant of $7.35 million for the 2020 assessment date and
$7.69 million for the 2021 assessment date.
For the plywood plant, Bassis used the same method as for the veneer plant. He
identified a low comparable of $4.78 per square foot, a high of $25.65 per square foot, and a
median price of $13.38 per square foot. 7 His outcome was a reconciled value of $23.50 per
square foot. Adding the land value of $461,458, Bassis concluded a total value of for the
plywood plant of $5.9 million for the 2020 assessment date and $6.2 million for the 2021
assessment date. (Id. at revised 126.)
For the MPP plant, Bassis bracketed comparable sales 5 through 7 and identified a low
comparable value of $68.47 per square foot, a high of $105.54 per square foot, and a median
price of $93.64 per square foot. His outcome was a reconciled value of $80 per square foot.
7 Bassis’s report does not explain where the low of $4.78 and high of $25.65 came from, as neither of those figures appear in the discussion or analysis grid of comparable sales. (Def’s Ex A at revised 123, 126.)
DECISION TC-MD 200399R, 200400R, 210408G, 210409G, and 210410G 15 Adding the land value of $552,022, he calculated a total value of $15.6 million for the MPP plant
in 2021. (Id. at revised 127.)
3. Defendant’s reconciliation of approaches to real property value
Bassis gave the cost approach less weight for the veneer plant and plywood plant because
of their age and the uncertainty in estimating depreciation. He found the sales comparison
approach a better indicator of value for those plants. As to the MPP plant, Bassis gave the cost
and sales comparison approaches equal weight because the data used in the cost approach did not
include potential adverse factors related to the rural location of the plant.
Bassis’s final conclusions of value for land and improvements are as follows:
Facility 2020-21 Land & Improvements 2021-22 Land & Improvements Veneer plant $7,350,000 $7,688,535 Plywood plant $5,900,000 $6,218,752 MPP plant Not appealed $14,000,000
(Def’s Ex A at revised 130, 132, original 133.)
4. Defendant’s M&E values
In determining the subject properties’ total RMV, Defendant relied on a second appraisal
of Plaintiff’s M&E by Driskell, separate from Bassis’s valuation of land and improvements.
Driskell began her appraisal career in Marion County in 2004 primarily performing residential,
farm, forest and small commercial appraisals. She joined Defendant as an appraiser in 2016 and
is currently a Principal Appraiser Analyst (IV). (Def’s Ex C at 96.) Her assignment was to
develop a RMV for the M&E contained in the subject properties.
DECISION TC-MD 200399R, 200400R, 210408G, 210409G, and 210410G 16 Driskell prepared a M&E appraisal report for the 2020-21 and 2021-22 tax years. She
determined that the highest and best use of the facilities to be as a going concern . (Id. at 16.)
However, she valued the machinery at each plant separately. (Id. at 3.) She concluded that
functional and economic obsolescence could not be measured without Plaintiff’s income and
expense data. (Id. at 27-28.)
Driskell used the cost approach exclusively to estimate the value of the M&E due to a
lack of available data for used equipment. (Def’s Post-Tr Br at 14 n 7.) She employed two
methods. Driskell used the Trended Investment Cost Method (TICM), which begins with the
original cost of the equipment and applies adjustments based on economic data. She also used a
cost estimate from a supplier to reproduce Plaintiff’s processes, adjusted back to the assessment
date. This second “turn-key” estimate doubled the cost of the machinery to account for delivery
and installation. (Def’s Ex C at 39.) Driskell accounted for physical deterioration through
“observation and age/life analysis.” (Def’s Ex C at 26; see also, e.g., id. at 36-37.)
After compiling, evaluating, and reconciling data for all three plants, Driskell
summarized the M&E values as follows:
Plant Year M&E RMV Veneer 2020 $30,986,386 Veneer 2021 $29,387,955 Plywood 2020 $23,283,856 Plywood 2021 $22,624,959 MPP 2021 $26,070,279
(Id. at 78.)
5. Defendant’s total value conclusions
Combining the results of Bassis’s and Driskell’s reports, Defendant’s total RMV
conclusions for the veneer and plywood plants for the 2020-21 tax year were as follows:
DECISION TC-MD 200399R, 200400R, 210408G, 210409G, and 210410G 17 Plant Component Account 2020-21 RMV Land, Buildings, Structures 4610 $7,087,458 Veneer Land, Buildings, Structures 4966 $262,542 Machinery & Equipment 940705 $30,986,386 Veneer Plant Total: $38,336,386
Plant Component Account 2020-21 RMV Land, Buildings, Structures 851309 $5,433,900 Plywood Land, Buildings, Structures 7829 $466,100 Machinery & Equipment 940711 $23,283,856 Plywood Plant Total: $29,183,856
(Def’s Post-Tr Br at 27-28.) Defendant’s total RMV conclusions for all three plants for the
2021-22 tax year were as follows:
Plant Component Account 2021-22 RMV Land, Buildings, Structures 4610 $7,413,901 Veneer Land, Buildings, Structures 4966 $274,634 Machinery & Equipment 940705 $29,387,955 Veneer Plant Total: $37,076,490
Plant Component Account 2021-22 RMV Land, Buildings, Structures 851309 $5,727,470 Plywood Land, Buildings, Structures 7829 $491,281 Machinery & Equipment 940711 $22,624,959 Plywood Plant Total: $28,843,710
Plant Component Account 2021-22 RMV Land, Buildings, Structures 6987 $14,000,000 MPP Machinery & Equipment 944356 $26,070,279 MPP Plant Total: $40,070,297 (Id.)
DECISION TC-MD 200399R, 200400R, 210408G, 210409G, and 210410G 18 II. ANALYSIS
The issue before the court is the RMV of Plaintiff’s veneer and plywood plants, including
M&E, for the 2020-21 tax year. The appeal also includes those plants plus Plaintiff’s MPP plant
for the 2021-22 tax year. RMV is defined in ORS 308.205(1), 8 which states:
“Real market value of all property, real and personal, means the amount in cash that could reasonably be expected to be paid by an informed buyer to an informed seller, each acting without compulsion in an arm’s-length transaction occurring as of the assessment date for the tax year.”
The assessment dates for the 2020-21 and 2021-22 tax years are January 1, 2020, and
January 1, 2021, respectively. ORS 308.007(1)(a); ORS 308.210(1). The RMV of property
“shall be determined by methods and procedures in accordance with rules adopted by the
Department of Revenue.” ORS 308.205(2). The three approaches to value that must be
considered are: (1) the cost approach, (2) the sales comparison approach, and (3) the income
approach. ORS 308.411(1); OAR 150-308-0260(3)(a).9 Although all three approaches must be
considered, all three approaches may not be applicable for all cases. OAR 150-308-0260(3)(a).10
The court has jurisdiction to determine the RMV or correct valuation on the basis of the evidence
before the court, without regard to the values pleaded by the parties. ORS 305.412 .
Nevertheless, Plaintiff bears the burden of proof and must establish its case by a preponderance
of the evidence. ORS 305.427.
8 The court’s references to the Oregon Revised Statutes (ORS) are to the 2019 edition. 9 Oregon Administrative Rules (OAR). See Seneca Sustainable Energy, LLC v. Dept. of Rev., 363 Or 782, 799, 429 P3d 360, 370 (2018) (“Under 10
OAR 150-308-0260(3)(a), appraisers must use all three approaches when determining RMV of industrial property. However, that rule recognizes that some approaches cannot be applied to a particular property.”)
DECISION TC-MD 200399R, 200400R, 210408G, 210409G, and 210410G 19 A. Impact of Plaintiff’s Election Under ORS 308.411(2)(a)
Recognizing that some owners of industrial facilities wish to forgo opening the
operation’s income and expense records to an appraiser for property tax valuation purposes, ORS
308.411(2) allows an election. The owner may elect to exclude use of the income approach to
valuation. The statute provides the following options for the election:
“The owner of a plant may elect to have the plant appraised and valued for ad valorem property tax purposes excluding the income approach to valuation. An owner making an election under this subsection must further determine which of the following paragraphs is applicable to the election:
(a) If this paragraph applies to the election, the owner may not be required to provide any itemization of income or expense of the industrial plant for use in making an appraisal of the plant for ad valorem property tax purposes; or
(b) If this paragraph applies to the election, the owner may not be required to provide any itemization of income of the industrial plant for use in making an appraisal of the plant for ad valorem property tax purposes, but may be required to provide an itemization of operating expenses of the industrial plant for use in measuring functional obsolescence in a market data approach or cost approach to valuation.”
Id.
Based on Plaintiff’s election under ORS 308.411(2)(a), Plaintiff did not provide income
and operating expenses to Defendant. Plaintiff’s election under ORS 308.411(2)(a) precludes
introduction of evidence relating to the income approach, which in turn precludes any and all
consideration of that approach. ORS 308.411(5). Defendant argued that the election also means
that “neither party could reliably measure any functional obsolescence that might affect the
Subject Plants.” (Def’s Post-Tr Br at 9.)
DECISION TC-MD 200399R, 200400R, 210408G, 210409G, and 210410G 20 Plaintiff disagreed and argued that,
“an appraiser should consider the same factors that a buyer or seller of an industrial property would * * *. And buyers and sellers are familiar with the cost of new construction, the physical attributes and condition of the plan t being reviewed, the operating characteristics of the subject in comparison with a modern plant, and the economics.”
(Ptf’s Post-Tr Br at 4 n 5 (internal quotation omitted).)
Indeed, Plaintiff’s position is supported by changes to the statute by the legislature in
1995, which removed statutory language that excluded consideration of functional and economic
obsolescence. Or Laws 1995, ch 724, §1. The court agrees with Plaintiff’s interpretation,
finding no legal prohibition against considering obsolescence. This court has previously noted
the effects of the change to the 1995 law. Dept. of Rev. v. Grant Western Lumber Co., 15 OTR
258, 260 n 2 (2000). Thus, despite making the election under ORS 308.411(2)(a) to preclude
consideration of the income approach, evidence regarding obsolescence may be considered.
B. Highest and Best Use
Because this is an industrial property appeal, and the evidence shows the highest and best
use of each property is as an operating plant, the court must value each of the facilities as a
“going concern.” OAR 150-308-0260(2) states,
“If the highest and best use of the unit of property is an operating plant or an operating integrated complex, the real market value will be considered to be a ‘going concern.’ The going concern concept recognizes that the value of an assembled and operational group of assets usually exceeds the value of an identical group of assets that are separate or not operational.”
While this rule “acknowledges that assembled value usually is greater, * * * it is possible that it
may be less than the total of its parts.” Grant Western Lumber, 15 OTR at 263. Further, “[t]he
market value of a unit of property must not be determined from the market price of its
component parts, such as wood, glass, concrete, furnaces, elevators, machines, conveyors, etc.,
DECISION TC-MD 200399R, 200400R, 210408G, 210409G, and 210410G 21 each priced separately as an item of property, without regard to its being integrated into the total
unit.” OAR 150-308-0260(3)(b) (emphasis added).
The parties do not explicitly dispute the veneer and plywood properties’ highest and best
use as a single, vertically integrated unit. However, Defendant’s approach effectively evaluates
individual components of each of the subject properties and then recombines them. Under OAR
150-308-0260(3)(b), this piecemeal approach is not allowable unless regard is given for the
property’s value as assembled. No such regard is offered here for two reasons. First, Defendant
simply adds the values from Bassis’s report to the values from Driskell’s report without any
discussion of whether or how this increases or decreases each plant’s value. Second,
Defendant’s valuation includes no estimate for functional or economic obsolescence. In omitting
estimates for these deductions, Defendant disregards key aspects of each plant’s assembled
value.
Landolt valued the veneer and plywood plants as a single going concern in part because
the veneer operation feeds the plywood operation, so the two largely operate as an integrated
enterprise. This is in line with modern plywood facilities, which typically process veneer and
plywood at a single site. While Landolt lacked access to Plaintiff’s financial statements and
operating costs, he made reasonable estimates for functional and economic obsolescence for the
veneer and plywood plants resulting from, among other things, operating at two sites rather than
one. As discussed above, Defendant instead valued land, site improvements, buildings,
machinery, and equipment separately. Plaintiff’s evidence was more in line with the
department’s rule for valuing the market value of the subject property as a “total unit.” OAR
150-308-0260(3)(b).
DECISION TC-MD 200399R, 200400R, 210408G, 210409G, and 210410G 22 In Grant Western Lumber, this court emphasized that industrial facilities should be
valued based on their utility as a whole, rather than as the sum of their parts. 15 OTR at 263.
Defendant’s segmented approach ignores the operational interdependence of the facilities.
Plaintiff’s methodology better captures the integrated nature of the subject properties.
C. The Cost Approach
Given the limitations imposed by Plaintiff’s election and the lack of reliable comparable
sales, the court finds the cost approach to be the most appropriate valuation method. As noted in
Boise Cascade Corporation v. Department of Revenue, 12 OTR 263, 266 (1991), appraising
industrial properties is as much an art as a science, requiring the court to evaluate the credibility
and reliability of expert testimony.11 In that regard, the court finds the picture painted by
Plaintiff generally more persuasive.
As discussed above, Defendant’s approach did not adjust for obsolescence, citing
Plaintiff’s election. Defendant attempted to use a TICM approach, but it ignored the difference
in efficiency of new machines over older machines. This approach did not accurately reflect the
qualities noted in the subject properties. Plaintiff also started with replacement cost new but
made adjustments focused on output capacity. That approach is generally more persuasive as
described below.
1. Functional obsolescence
Landolt considered several factors for functional obsolescence such as the dual existence
of a small log and large log mills, physical separation of the veneer production, veneer drying,
11 “If appraising, as an art, can be likened to painting, market value is a medium of watercolors, not painting by numbers. In applying the concept of market value, the appraiser must intentionally blur some lines and soften the edges of others. The appraiser seeks a visual representation of an ideal, not some specific reality. This point is essential in property taxation.” Boise Cascade Corp., 12 OTR at 266.
DECISION TC-MD 200399R, 200400R, 210408G, 210409G, and 210410G 23 and plywood production requiring trucking, and older machinery requiring excess personnel.
Bassis testified that other mills had physical separation of facilities and, as such, the court need
not consider Plaintiff’s facilities’ separation as obsolescence. OAR 150-308-0280(3)(c) states in
part:
“Functional Obsolescence is a loss in market value of a subject property when there is a reasonable feasibility of a typical prospective purchaser acquiring, without undue delay, a replacement property possessing an equivalent utility but is more cost-effective in terms of design, materials, or equipment.”
Defendant’s argument that physical separation between facilities is common in other mills does
not negate the obsolescence caused by inefficiencies specific to the subject properties. Plaintiff’s
analysis was more persuasive on this issue.
2. Economic obsolescence of the MPP plant
Landolt employed an “inutility” analysis, comparing actual production to capacity to
estimate economic obsolescence for the MPP plant. That analysis was based on a formula
involving the actual production of the facility versus its maximum capacity and recognizing that
costs do not go up in proportion to production. That calculation resulted in a reduction in value
of over 77 percent. The extent of the reduction based on a minute data set brings the accuracy of
the method into question. As a secondary check, Plaintiff presented evidence of a recent
bankruptcy sale of a facility only two years old and producing a related product for only 66
percent of its cost.
Landolt’s testimony on this economic obsolescence was not persuasive because
examining the capacity of a new business does not necessarily reveal only the effect of external
economic obsolescence. New business models often take time to build up market attention and
production levels. The MPP plant’s actual production in 2020 does not necessarily justify such a
significant reduction in value to an informed buyer. Further, the bankruptcy value presented was
DECISION TC-MD 200399R, 200400R, 210408G, 210409G, and 210410G 24 not persuasive, as that sale was merely one part of a larger restructuring plan and therefore not
representative of typical market conditions. Plaintiff has not presented persuasive evidence on
an economic obsolescence deduction for the MPP plant.
D. The Sales Comparison Approach
Plaintiff presented seven comparable sales but acknowledged that sales of these types of
properties are rare and often involve financial distress. These sales were outdated —all but one
having occurred prior to 2008. In Freedom Federal Savings and Loan Association v.
Department of Revenue, 310 Or 723, 728, 801 P2d 809 (1990), the court rejected comparable
sales that did not reflect the economic realities of the subject property. Plaintiff’s comparables
suffer from similar deficiencies. Accordingly, Plaintiff’s sales comparables are not reliable
indicators of value.
While Defendant’s seven comparable sales were more recent and geographically
proximate, they failed to align with the highest and best use of the subject properties.
Defendant’s extraction method, which subtracted land values from total sales and compared
building values only, results in attenuated comparisons. For this reason, the court does not find
Defendant’s sales comparables persuasive either.
E. M&E Values
The parties presented competing approaches to M&E. Plaintiff’s appraiser did not
separately appraise M&E. Defendant’s appraiser, Driskell, developed her valuations using the
cost approach exclusively, applying both the TICM and a “turn -key” cost estimate of new
equipment adjusted for delivery and installation.
Driskell concluded that, due to Plaintiff’s election under ORS 308.411(2)(a), functional
and economic obsolescence could not be reliably measured. However, this court has already
DECISION TC-MD 200399R, 200400R, 210408G, 210409G, and 210410G 25 determined that Plaintiff’s election does not preclude consideration of obsolescence where it is
supported by the evidence. Driskell accounted for physical deterioration but failed to account for
functional or economic obsolescence, despite relying on replacement cost figures that assume
modern, fully efficient operations. That omission overstates the value of equipment, most of
which has been in use for decades.
Although Driskell’s methodology was methodical and well-documented, the lack of any
adjustment for obsolescence undermines its reliability. Conversely, Plaintiff’s appraiser
incorporated obsolescence into the integrated valuation but did not separate the equipment
component.
Given these limitations, the court finds Defendant’s equipment values overstated. The
court finds the integrated approach presented by Plaintiff for the veneer and plywood plants more
persuasive. As for the MPP plant, Defendant’s separate valuation of M&E is more credible,
given the plant’s recent construction, whereas Plaintiff’s economic obsolescence analysis was
not persuasive.
III. CONCLUSION
After careful consideration of the testimony, exhibits, and arguments presented, the court
concludes that Plaintiff’s integrated valuation approach more accurately reflects the RMV of the
veneer and plywood plants as of the applicable assessment dates. Consistent with Landolt’s
apportionment, the court assigns 55 percent of the total value to the veneer plant and 45 percent
to the plywood plant. Once those values are assigned to each plant, the court further apportions
them to each tax account appealed using the same proportion of the total RMV that each tax
account represented for a given year.12 Plaintiff did not present persuasive evidence to support
12 For example, for the 2020-21 tax year, Plaintiff has appealed two accounts associated with the plywood plant: 851309 for land and structures, and 940711 for machinery and equipment. Plaintiff’s 2020-21 property tax
DECISION TC-MD 200399R, 200400R, 210408G, 210409G, and 210410G 26 its significant deduction for economic obsolescence for the MPP plant, and Defendant’s M&E
valuation for that facility is accepted. Now, therefore,
statements stated RMVs of $1,552,820 and $17,507,040, respectively, for a total RMV of $19,059,860. (Ptf’s Ex 2 at 30, 35.) Account 851309 therefore comprised approximately 8 percent of the total RMV and account 940711 comprised approximately 92 percent. The court uses these percentages to allocate the plywood plant’s value as of January 1, 2020, among those two tax accounts.
DECISION TC-MD 200399R, 200400R, 210408G, 210409G, and 210410G 27 IT IS THE DECISION OF THIS COURT that Plaintiff’s appeal is granted in part and
denied in part. The RMV of the plywood and veneer plants as of January 1, 2020, and January 1,
2021, were $15.4 and $15.2 million respectively. The RMV of the MPP plant as of January 1,
2021, was $40,070,279.13
The breakdowns by plant, tax account, and valuation date are as follows:
Plant Account Valuation Date RMV Veneer 4610 Jan 1, 2020 $1,813,493 Veneer 4966 Jan 1, 2020 $49,551 Veneer 940705 Jan 1, 2020 $6,606,956 Total: $8,470,000 Plywood 851309 Jan 1, 2020 $564,592 Plywood 940711 Jan 1, 2020 $6,365,408 Total: $6,930,000 Veneer 4610 Jan 1, 2021 $1,822,472 Veneer 4966 Jan 1, 2021 $70,163 Veneer 940705 Jan 1, 2021 $6,467,365 Total: $8,360,000 Plywood 851309 Jan 1, 2021 $731,321 Plywood 940711 Jan 1, 2021 $6,108,679 Total: $6,840,000 MPP 6987 Jan 1, 2021 $14,000,000 MPP 944356 Jan 1, 2021 $26,070,279 Total: $40,070,297
RICHARD D. DAVIS MAGISTRATE
If you want to appeal this Decision, file a complaint in the Regular Division of the Oregon Tax Court, by mailing to: 1163 State Street, Salem, OR 97301-2563; or by hand delivery to: Fourth Floor, 1241 State Street, Salem, OR.
Your complaint must be submitted within 60 days after the date of this Decision or this Decision cannot be changed. TCR-MD 19 B.
13 This figure includes machinery and equipment value as determined by Defendant.
DECISION TC-MD 200399R, 200400R, 210408G, 210409G, and 210410G 28 This document was signed by Magistrate Richard D. Davis and entered on July 17, 2025.
DECISION TC-MD 200399R, 200400R, 210408G, 210409G, and 210410G 29