Linstrom v. Lincoln County Assessor

• Court: Oregon Tax Court
• Decided: April 10, 2023
• Docket: TC-MD 220086R
• Status: Unpublished

Opinion

IN THE OREGON TAX COURT MAGISTRATE DIVISION Property Tax

JERRY LINSTROM, ) ) Plaintiff, ) TC-MD 220086R ) v. ) ) LINCOLN COUNTY ASSESSOR, ) ) Defendant. ) DECISION

Plaintiff appealed Defendant’s Board of Property Tax Appeals (BOPTA) Real Property

Order, dated February 17, 2022, for the 2021-22 tax year. A remote trial was held on September

22 and September 23, 2022, via WebEx. Tom Linstrom appeared as Plaintiff’s representative

and testified on behalf of Plaintiff. Jerry Linstrom testified his own behalf. Ric Becker

(Becker), certified residential licensed appraiser, testified on behalf of Plaintiff. Peter Burch

(Burch) appeared and testified on behalf of Defendant. Plaintiff’s Exhibits 1 to 5, 7, 11, 18, 19,

and 35 (pages 2 to 21) and Defendant’s Exhibits A to Z were admitted into evidence.1

I. STATEMENT OF FACTS

The subject property, identified as Account R61258, is a narrow 5,028 square foot

riverfront parcel along the Siletz River near Highway 101, Lincoln City, and Gleneden Beach.2

Plaintiff purchased the subject property for $65,000. See Linstrom I, 2018 WL 6077843 at *5.

Plaintiff challenges Defendant’s BOPTA Order, which found the real market value of the subject

1 Some of Plaintiff’s exhibits were renumbered during trial due to labeling errors. An updated version of Exhibit 7 was admitted only to the extent it supplemented improperly redacted pages on the original version, but not for pages that were updated for purposes unrelated to the redactions because the new version of the exhibit was not timely exchanged. 2 “The subject property was originally two separate lots, tax lot 301 and tax lot 501, which were combined into a single tax lot, 301, as of the 2016-17 tax year.” Linstrom v. Lincoln Cty. Assessor, TC-MD 180084N, WL 6077843 at *1 (Or Tax M Div Nov 16, 2018) (Linstrom I).

DECISION TC-MD 220086R 1 property at $72,130. Specifically, Plaintiff challenges the buildability of the lot, its potential for

a septic system, the square footage and value of a boat ramp and dock, the value of a shed, and

Defendant’s classification of the property as residential. Although Plaintiff has not applied for

permits, the court is persuaded by the evidence that the lot is not buildable and would not qualify

for a septic permit.3

A. Plaintiff’s Evidence

Becker testified he has been a certified licensed appraiser for 34 years. He prepared an

appraisal of the subject property, as of June 6, 2022, that concluded the market value was

$49,000. He did not make adjustments for the appraisal date being 17 months after the January

1, 2021, assessment date because his assignment did not include performing a retrospective

appraisal. He opined that the market for a riverfront property in Lincoln County that is

unbuildable and without the ability to get septic, has remained flat over several years. However,

Becker did apply an adjustment for time of sale on the comparable properties in the amount of

eight percent per year, to the date of June 6, 2022, based on “a matched pairing of Sales #1 and

#2[.]” (Ex 7 at 8). Becker testified that he also prepared an appraisal of the subject property in

2019, which had a concluded value almost identical to his June 2022 appraisal.4

Becker relied on the sales comparison approach to value after concluding that the income

and cost approach were inappropriate for the type of property under consideration. Becker

3 This finding is in accordance with prior cases regarding the subject property: Linstrom I, 2018 WL 6077843; Linstrom v. Dept. of Rev., 24 OTR 223 (2020) (Linstrom II); Linstrom v. Lincoln Cty. Assessor, TC-MD 200147G, WL 871211 (Or Tax M Div Mar 9, 2021) (Linstrom III). 4 Plaintiff did not submit the appraisal Becker prepared in 2019 as evidence in this case and Becker was unable to recall specifics of his analysis. However, in Linstrom II, this court considered two appraisals of the subject property completed by Becker: one for the 2017-18 tax year valuing the subject property at $32,000, as of February 4, 2018, and one for the 2018-19 tax year valuing the subject property at $43,000, as of February 4, 2019. Linstrom II, 24 OTR at 232-33.

DECISION TC-MD 220086R 2 selected nine comparable properties. However, he deemed the first three as most relevant and

the remaining comparable properties as successively less persuasive. (See Ex 7 at 4-7.)

Comparable 1 is located 8.9 miles from the subject property, sits on the Salmon River, and sold

for $55,000 on April 15, 2022. Becker adjusted the value down by $12,500 for the site area, up

by $6,500 for lack of a shed and dock, and made no adjustments for the time of sale. He

concluded an indicated value for Comparable 1 was $49,500. Comparable 2 is located 9.2 miles

from the subject property, sits on the Salmon River, and sold for $43,500 on June 10, 2019.

Becker adjusted the value up by $10,500 for time of sale, $6,500 for no shed or dock, and down

by $16,000 based on the site size, for an indicated value of $45,000. Comparable 3 is 41.54

miles from the subject property, sits on the Wilson River, and sold for $50,000 on July 30, 2020.

Becker adjusted the value up by $8,000 for time of sale, $6,500 for no shed or dock, $7,500 for

“electrical available” but no water, and down by $24,500 for site size. The total indicated value

was adjusted to $47,500.

On the assessment date, the subject property was improved with a floating dock and ramp

totaling 1,321 square feet and a multi-purpose shed with a covered porch totaling 152 square

feet. (Ex B at 3.) Plaintiff disputes these measurements because some of the dock boards were

removed, and the railings moved inward for handicapped accessibility. Tom Linstrom testified

that he measured the ramp and dock intentionally disregarding the extra space beyond the

railings and eliminating square footage where boards had been removed. On inspection, Becker

measured the dock at 21 by 26 feet, resulting in 546 square feet of usable area. Although Becker

did measure the dock, he testified that the actual square footage was not significant because the

age and poor condition of the dock made its value negligible. Becker contacted individuals from

Marshall & Swift and worked through an estimate cost of the dock, ramp, and shed as new, and

DECISION TC-MD 220086R 3 depreciated those costs for age and condition. Becker opined the combined value of the items

was $6,500.

Using the Marshall & Swift valuation program to estimate the value of the dock alone,

Becker multiplied the total square footage of the dock by $57 per square foot, and reduced the

value by 83.6 percent for depreciation, resulting in a value of $4,978. However, he found that

the dock was built before the current records were first maintained, so he “conservatively”

reduced the value down from $4,978 to $3,000, and then increased it by $1,500 for the wood

ramp, for a total dock value of $4,500. He added $2,000 to that value for the shed and the

property fence. (Ex 7 at 10.)

B. Defendant’s Evidence

Burch testified he is Property Appraiser II and has worked for Defendant for three years.

He previously worked in residential construction for about 18 years. He prepared a retrospective

opinion of value of the subject property as of January 1, 2021. (See Exs C-I.) Burch selected

five comparable sales to value the subject property. (See Ex G.)

Comparable 1 is located 3.1 miles from the subject property, sits on the Siletz River, and

sold for $125,000 on September 19, 2019. The property has an illegal septic system and is likely

unbuildable. Burch adjusted for site size (-$8,493), shed size (-$2,152), a porch ($1,932), a fence

($4,799), and because the time of sale was the three and a half months before the assessment date

($28,406). Comparable 2 is located 11.06 miles from the subject property, sits on the Siletz

River, and sold for $55,000 on October 6, 2018. Burch adjusted for site size (-$2,279), a dock

($26,151), shed ($2,800), porch ($1,932), fence ($4,799), and for the sale date ($22,498).

Comparable 3 is located 43.9 miles from the subject property, sits on the Alsea River, and sold

for $99,900 on December 17, 2020. Burch adjusted for site size (-$51,493), time of sale

DECISION TC-MD 220086R 4 ($1,513), electricity available at the street ($4,000), no water ($10,900), and dock, shed, porch,

and fence in the same amounts as Comparable 2. Comparable 4 is located 7.9 miles from the

subject property, sits on the Siletz River, and sold for $264,900 on March 18, 2021. Burch

adjusted for site size (-$205,356), time of sale (-$12,040), and no dock, shed, porch, or fence in

the same amounts as Comparable 2. He also adjusted for electricity available at the street and no

suitable well site in the same amounts as Comparable 3. Comparable 5 is located 8.4 miles from

the subject property, sits on the Siletz River, and sold for $125,000 on June 4, 2021. Burch

adjusted for site size (-$15,615), time of sale (-$9,469), and dock, shed, porch, fence, concrete,

and deck in the amounts of $18,306, $187, -$2,362, $4,799, -$166, and -$1,683, respectively. He

also made a negative adjustment of $11,000 for a septic system.

Burch analyzed the boat dock, ramp, shed, and fence using the Marshall & Swift

valuation program. He found the price of the dock and ramp, deducted for the missing boards by

assuming the dock was 75 percent complete, and depreciated for age by 35 percent.

Burch testified that he based his adjustments for time of sale on Defendant’s self-titled

Double Sales Time Trend Study. (See Ex N.) Properties in the time study were all in the same

classification as the subject property and had been sold twice in a short period of time. He

testified that he could not determine whether some of the properties in the time study had

improvements and/or a septic system. Based on the data in the time study, Burch found that

prices for properties in the same classification as the subject property appreciated by 0.973

percent per month during 2019, 1.899 percent per month during 2020, and 1.515 percent per

month during 2021. (Id.)

Burch concluded that the value of the subject property as of January 1, 2021, using the

sales comparison approach was $102,500. (Ex G at 8.) He found the value of the subject

DECISION TC-MD 220086R 5 property using the cost approach was $103,160 and reconciled the values to arrive at his

conclusion of value at $102,830.

II. ANALYSIS

The issue before the court is the real market value of the subject property for the 2021-22

tax year. As the party seeking affirmative relief, Plaintiff bears the burden of proof and must

establish his case by a preponderance of the evidence. See ORS 305.427. A “[p]reponderance of

the evidence means the greater weight of evidence, the more convincing evidence.” Feves v.

Dept. of Rev., 4 OTR 302, 312 (1971).

“Real market value is the standard used throughout the ad valorem statutes except for

special assessments.” Richardson v. Clackamas Cty. Assessor, TC-MD 020869D, WL 21263620

at *2 (Or Tax M Div Mar 26, 2003) (citations omitted). Real market value is defined by ORS

308.205(1),5 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 date for the 2021-22 tax year is January 1, 2021. See ORS 308.007; see also

ORS 308.210. The real market value 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. OAR 150-308-0240(2)(a).

Although all three approaches must be considered, all three approaches may not be applicable in

///

5 The court’s references to the Oregon Revised Statutes are to 2019.

DECISION TC-MD 220086R 6 a given case. Id. Here, both parties primarily relied on the sales comparison approach, although

they also considered the cost approach with respect to the boat ramp, dock, and shed.

For the sales comparison approach, the “court looks for arm’s length sale transactions of

property similar in size, quality, age and location” to the subject property. Richardson, 2003 WL

21263620 at *3. “Competent evidence includes appraisal reports and sales adjusted for time,

location, size, quality, and other distinguishing differences, and competent testimony from

licensed professionals such as appraisers, real estate agents and licensed brokers.” Yarbrough v.

Dept. of Rev., 21 OTR 40, 44 (2012).

Plaintiff relies on Becker’s appraisal that valued the subject property at $49,000 as of

June 6, 2022. This is an obvious error because the assessment date is January 1, 2021—17

months before the effective date of Becker’s appraisal. The appraisal report does not account for

the time difference correctly. Instead, Becker used a time trend factor of eight percent based on

a sample size of only two properties, Comparable properties 1 and 2, and then applied them to

the date of June 6, 2022, rather than the assessment date. Plaintiff and Becker should have

anticipated this problem because a recent decision by this court, entered on September 24, 2020,

specifically mentioned Becker’s lack of adjustments for time of sale as a problem for Plaintiff.

See Linstrom II, 24 OTR at 228.

Upon realization of this critical error at trial, Plaintiff attempted to rehabilitate it by

asking Becker whether he remembered preparing the 2019 appraisal he prepared in connection

with Linstrom II. Becker could not recall the specifics of the appraisal but did remember his

conclusion that it was about the same as his current appraisal. Plaintiff did not offer the 2019

appraisal into evidence. However, as noted in footnote four, the court in Linstrom II identified

two appraisal reports submitted by Becker that show a dramatic increase in value from 2018 to

DECISION TC-MD 220086R 7 2019, which undercuts his testimony that the market has remined “flat.” Plaintiff did not present

persuasive evidence that market remained flat prior to, or after, the assessment date.

In Yarbrough, a taxpayer presented an appraisal for a property with an effective date of

June 30, 2011. Yarbrough, 21 OTR at 41. However, the assessment date was January 1, 2010.

Id. at 42. The taxpayer did not make a time adjustment and failed to “provide any meaningful

explanation for the gap in time.” Id. at 45. Thus, the court found the taxpayer’s appraisal in that

case as unreliable. The gap identified in Yarbrough is near the exact same length in time as the

17-month period between the assessment date and effective date of Becker’s appraisal in this

case. The court concludes that Becker’s failure to make appropriate time adjustments renders his

report as unreliable. Consequently, Plaintiff has failed to meet his burden of proof on the value

of the subject property as of the assessment date.

Defendant’s conclusion of value is based on the testimony and valuation report prepared

by Burch, in which he analyzed the subject property using the sales comparison approach

supplemented with the cost approach for the boat ramp, dock, and shed. Burch selected five

comparable sales. However, he treated Comparable 1 as an outlier. Burch’s chosen comparable

properties are primarily located on the same river, unbuildable, and do not have legal septic

systems. Plaintiff’s primary challenges to Burch’s report are twofold: Plaintiff first takes issue

with Burch’s time adjustments based on sale dates, and second, with the square footage and

value of the boat dock and ramp.

With regard to Defendant’s time adjustments, Plaintiff specifically takes issue with

Defendant’s data, as it uses a property classification that may include sites with homes and septic

systems, which may have significantly different rates of appreciation than the subject property—

a recreational lot. This court shares Plaintiff’s concerns and its questioning of Burch at trial

DECISION TC-MD 220086R 8 reflected that point. However, this exact argument was already litigated in Linstrom II. A quote

from that case is instructive:

“As to the time-based adjustments, the court starts with background. Each year, an assessor is required to conduct a ‘ratio study’ based on property sales data the assessor collects during the calendar year. ORS 309.200(2). Among other things, the ratio study estimates the ‘percentage relationship between the total prior year’s real market value of each class of taxable property on the prior assessment roll and the total current real market value of the same properties in each class on the current assessment roll.’ Oregon Administrative Rule (‘OAR’) 150-309-0230(12)(a). This year-to-year comparison is a tool that allows an assessor to annually estimate the value of properties as of the prescribed time of 1:00 a.m. on January 1 based on trends apparent in the study, as opposed to viewing and studying each property individually at that hour. See ORS 308.210(1) (requiring assessor to record value ‘as of’ that date and time). A separate ratio study is required for each property class.

“* * * Because an assessor prepares a separate ratio study for each class of property, it is theoretically possible that [the county’s] selection of an incorrect class for the Property may have led to an incorrect percentage value change for trending purposes and thus to an incorrect value indicator for each comparable property. However, Plaintiff put forward no evidence that any misclassification distorted [the county’s] value indicator for any comparable property.”

Linstrom II, 24 OTR at 227-28.

The argument and the presentation in this case mirror those in Linstrom II. Burch used a

double sale study using a class of property that could potentially skew the results. Yet Plaintiff

chose not to reform his approach and put forward affirmative evidence that “any

misclassification distorted” the values, as the court stated in Linstrom II. Linstrom II, 24 OTR at

228. Concerns and criticisms about Defendant’s evidence are not enough. The court has long

held “it is not enough for a taxpayer to criticize a county’s position. Taxpayers must provide

competent evidence of the [real market value] of their property.” Woods v. Dept. of Rev., 16

OTR 56, 59 (2002).

As to Plaintiff’s challenge to the size of the dock and ramp, the court deems Defendant’s

approach more reasonable. Removing boards from a dock and relocating railings for

DECISION TC-MD 220086R 9 handicapped accessibility does not change the actual measurements of the dock and ramp.

Defendant’s approach of reducing the percentage completion of the dock is more persuasive.

In his final reconciliation, Burch averages the values he found using the cost and sales

comparison approaches. However, the court finds the cost approach is useful only the extent it

assists in making adjustments within the sales comparison approach. Thus, the court rejects

Defendant’s reconciliation and finds the value of the subject property by the sales comparison

approach, which concluded a value of $102,500.

III. CONCLUSION

Plaintiff’s appraisal contained errors, which render it unreliable. Defendant’s appraisal of

the property, while imperfect, is the best evidence of value that was presented to the court. Thus,

the court finds the real market value as of the assessment date was $102,500. Now, therefore,

IT IS THE DECISION OF THIS COURT that Plaintiff’s appeal is denied.

IT IS FURTHER DECIDED that the real market value of the subject property for the

2020-21 tax year is $102,500.

Dated this _____ day of April 2023.

RICHARD 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.

This document was signed by Magistrate Richard Davis and entered on April 10, 2023.

DECISION TC-MD 220086R 10