Taylor v. Multnomah County Assessor

• Court: Oregon Tax Court
• Decided: April 2, 2019
• Docket: TC-MD 180110G
• Status: Unpublished

Opinion

IN THE OREGON TAX COURT MAGISTRATE DIVISION Property Tax

IAN A. TAYLOR and MARY L. TAYLOR, ) ) Plaintiffs, ) TC-MD 180110G ) v. ) ) MULTNOMAH COUNTY ASSESSOR, ) ) Defendant. ) FINAL DECISION1

This residential property valuation case is ready for decision after trial. Plaintiffs

appealed from the order of the Multnomah County Board of Property Tax Appeals (BOPTA)

sustaining the 2017–18 tax roll real market value of the subject property, identified as account

R192211. Plaintiff Ian Taylor appeared and testified on Plaintiffs’ behalf, and Plaintiff Mary

Taylor also testified for Plaintiffs. John James appeared on behalf of Defendant, and Jeff

Sanders, Oregon Registered Appraiser, testified on behalf of Defendant. Plaintiffs’ exhibits 1 to

11 and Defendant’s exhibit A were admitted without objection.

I. STATEMENT OF FACTS

The subject property consisted of a single-family residence on a 16,524 square foot (0.38

acre) flag lot in southwest Portland. (Exs 1 at 1; A at 12.) The nature of the lot was well

described by Plaintiffs:

“The lot on which the house stands slopes steeply in two directions, with the lowest part of the lot designated an environmental zone (wet land); it is close to Wood’s Creek. Only a small amount of the lot is useable and the house occupies most of the useable area. The lot is located below other lots, resulting in continual run off, drainage, and pooling problems during wet weather. The bottom area has experienced flooding these past few years, due to Wood’s Creek

1 This Final Decision incorporates without change the court’s Decision, entered March 14, 2019. The court did not receive a statement of costs and disbursements within 14 days after its Decision was entered. See Tax Court Rule–Magistrate Division (TCR–MD) 16 C(1).

FINAL DECISION TC-MD 180110G 1 bursting its banks.”

(Ex 1 at 1.) Mr. Taylor testified that, in addition to flooding every two to three years, the creek

was occasionally polluted by sewage spills. Fill had been used in the site preparation, which,

while providing a stable base for the house, had caused drainage problems and disappointing

results to Plaintiffs’ landscaping efforts.

Plaintiffs stated their concern regarding Defendant’s “continual and marked increases in

the assessments of the market value for the land,” noting that for 2017–18 the subject’s land had

been valued much higher relative to improvements than it had been in 1984. (Ex 1 at 1.)

Plaintiffs provided a chart of the subject’s tax roll real market values since 1984, showing that its

land value had increased more rapidly than its improvements value in recent years. (Ex 4.)

Plaintiffs opined that Defendant’s trending data for land was skewed by “sales of older homes on

large lots to investors, who have demolished the homes, split the lots, and built multiple houses

on the land.” (Ex 1 at 3.) Plaintiffs stated that the subject’s lot could not be similarly divided

because of the steep slopes and flooding. (Id.)

The house was built in 1984, when Plaintiffs purchased it. (Exs 1 at 1; A at 12.) Its gross

living area was 1,825 square feet, with three bedrooms and two bathrooms. (Ex A at 12.) In the

years before 2017, Plaintiffs had replaced the roof and the windows. Plaintiffs stated that

refurbishment and repair was needed for a bathroom and the kitchen, as well as the carpets and

flooring. (Ex 1 at 2–3.) Contractor bids for the bathroom work ranged from $27,405 to

“$40,000 to $80,000,” and a bid for the kitchen remodel was for $97,500. (Exs 5–6.) Plaintiffs

estimated that completion of all needed work would cost “well in excess of $100,000.” (Ex 1 at

3.) Mr. Taylor testified that while the kitchen was useable on the assessment date it suffered

from a loose sink, plumbing issues, stove ventilation issues, and worn surfaces and trim. In

FINAL DECISION TC-MD 180110G 2 addition, the subject shared a driveway with neighboring residences that was in need of

maintenance.

Plaintiffs estimated the subject’s 2017–18 real market value at $350,000, consisting of a

land value of $150,000 and an improvements value of $200,000. (Ex 1 at 1.) Mr. Taylor

testified that he arrived at that estimate by generating trend lines from the subject’s historical tax

roll values and following them out. The total-value trend line on Plaintiffs’ exhibit indicates a

value somewhere between $400,000 and $420,000 at the point two-fifths of the distance between

the years 2015 and 2020. (Ex 4.)

Plaintiffs provided five comparable sales: three “comparables” and two “superior

comparables.” (Exs 7–10.) The comparable sale prices ranged from $370,000 to $457,000;

dates of sale ranged from December 2016 to December 2017. (Exs 8, 10.) Dates of construction

ranged from 1968 to 1991. (Id.) Lot sizes ranged from 7,098 square feet to 12,196 square feet;

gross living areas were not provided. (Id.) Each of the comparables was located one mile away

from the subject. (Id.) Of the two comparables with sale prices below $400,000, one had been

rehabilitated after a garage fire and the other had an unfinished basement. (Ex 7 at 4, 6.) Mr.

Taylor testified that he did not verify any of the sales by calling the listing agents and that he did

not make any adjustments.

Defendant’s appraiser concluded in his report that the subject’s current use as a single-

family residence was its highest and best use as of January 1, 2017. (Ex A at 6–7.) He

considered the three approaches to value and determined the sales comparison approach was

most applicable, given the subject’s age and highest and best use. (Id. at 10.) He provided three

comparable sales. (Id. at 12.) The unadjusted sale prices ranged from $450,000 to $475,000;

dates of sale ranged from June 2016 to April 2017. (Id.) Dates of construction ranged from

FINAL DECISION TC-MD 180110G 3 1979 to 1983. (Id.) Lot sizes ranged from 0.16 acre to 0.26 acre; gross living areas ranged from

1,806 square feet to 1,929 square feet. (Id.) Two comparables were located 0.04 mile away

from the subject; one comparable was located 1.75 miles from the subject. (Id.) Defendant’s

appraiser made adjustments for differences in dates of sale, lot size, view, condition, room count,

and gross living area totaling up to 5.1 percent of the unadjusted sales prices. (Id.) The adjusted

comparable sale prices ranged from $451,000 to $468,000. (Id.) Defendant’s appraiser

concluded to a real market value of $461,000 as of January 1, 2017. (Id. at 10.)

Additional factual details are included in the analysis where pertinent.

The 2017–18 tax roll real market value sustained by BOPTA was $454,360, with

$225,000 allocated to land and $229,360 allocated to improvements. (Compl at 3.) Plaintiffs

request that the real market value be reduced to $350,000, with $150,000 allocated to land and

$200,000 to improvements. (Id. at 1.) Defendant requests that the tax roll value be sustained.

(Answer at 1.)

II. ANALYSIS

At issue is the real market value of the subject property as of January 1, 2017. Because

Plaintiffs seek a reduction in the subject’s tax roll real market value, they must bear the burden of

proof by a preponderance of the evidence. See ORS 305.427.2

Valuation of property for ad valorem taxation is a fact-intensive process subject to legal

constraints. Hewlett-Packard Co. v. Benton County Assessor, 357 Or 598, 609, 356 P3d 70

(2015). Real property appraisal is a discipline with established methodologies that assessors are

required to consider—the sales comparison, cost, and income approaches to value. ORS

308.205(2); OAR 150-308-0240(2)(a). The goal of all three approaches is finding “the amount

2 The court’s references to the Oregon Revised Statutes (ORS) are to 2015.

FINAL DECISION TC-MD 180110G 4 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.” ORS 308.205(1).

A. Plaintiffs’ Valuation

Mr. Taylor did not use a standard appraisal methodology, but relied on what he termed an

“informed buyer’s approach.” His approach separately considered the value of the subject’s land

and its improvements.

1. Land value

With respect to the land, Mr. Taylor produced a chart of past assessed values showing

that the subject’s tax roll land value had increased significantly faster since 2015 than in previous

years. Mr. Taylor attributed the increased land value to Defendant’s valuing the subject as if it

were suitable for subdivision and further development. Mr. Taylor argued that the challenges

inherent in the lot—an environmental zone rendering portions of it unbuildable, seasonal

flooding and drainage problems, erosion along the slopes, and occasional sewage contamination

in the creek—rendered it undevelopable and distinguished it from other lots of comparable size.

Mr. Taylor testified that his requested land value of $150,000 was derived from applying a trend

line to the subject’s historical assessed land values.

Mr. Taylor’s computation of land value by trending presupposes that tax roll values of the

past are good evidence of a property’s value. However, this court reviews tax roll values “without

any presumption as to the correctness of the assessor’s valuation.” J. R. Widmer, Inc. v. Dept. of

Rev., 261 Or 371, 378, 494 P2d 854 (1972). That is why assessors defend their valuations in court

with appraisals; the tax roll value by itself is not persuasive. Even if drawing a trend line from a

single property’s historical values were a credible method of valuation, such a trend would only be

FINAL DECISION TC-MD 180110G 5 as reliable as the data underlying it.3 Mr. Taylor did not provide evidence supporting the accuracy

of Defendant’s past tax rolls. In fact, Mr. Taylor himself challenges the accuracy of Defendant’s

recent tax roll valuations. The evidentiary value of Mr. Taylor’s land-value trend is slight, if not

nonexistent.

2. Improvements value

Mr. Taylor argued the subject had deferred maintenance that would require Plaintiffs to

make concessions if they were to sell the subject as is. Mr. Taylor readily admitted the house

was habitable, but asserted it was due for an update after having been lived in for over 30 years;

for example, the kitchen sink was loose, there were some plumbing issues, and there were worn

surfaces and trim in the kitchen. Mr. Taylor argued that the five comparables he submitted were

equal or superior to the subject in condition, and that because the three “similar” comparables

sold for less than the subject’s tax roll real market value, that real market value was too high.

While Mr. Taylor described conditions that could lower a house’s market value, the

evidence does not quantify the effect of those conditions. The contractor bids are of no help;

they do not reveal the extent to which they contemplate repair work that would maintain the

subject’s value as opposed to remodeling work that would upgrade it, and they reveal nothing at

all about the condition of the comparable properties. Mr. Taylor was unable to confirm the

extent to which the comparable properties also suffered deferred maintenance and did not adjust

their sale prices for condition. Likewise, he did not adjust for other physical differences between

the subject and the comparables—such as in gross living area and lot size—or for differences in

the respective transactions—such as whether concessions or contingencies were involved in the

3 In fact, trending based on one property’s past value is unreliable evidence of its current market value. External circumstances in the market—such, as for instance, as shortage of available land for building—can affect a property’s current value independent of its past value.

FINAL DECISION TC-MD 180110G 6 sales. The evidence does not even show whether Mr. Taylor’s comparable sales were arm’s-

length transactions. The court can place no reliance on them.

B. Defendant’s Valuation

Defendant’s appraiser effectively controverted Mr. Taylor’s hypothesis that the subject

had been valued as if it were fit for subdivision, agreeing that the surplus land on the subject was

not buildable and that the subject’s highest and best use was its current use. Defendant’s appraisal

used the sales comparison approach. Defendant’s appraiser provided three verified comparable

sales—all single-family residences—and adjusted for date of sale, lot size, condition, gross

living area, view, and room count. Total adjustments were relatively small, equal to or less than

5.1 percent of the unadjusted sale prices. On cross-examination, Defendant’s appraiser defended

his choice of comparables, asserting that the cul-de-sac location of two comparables mimicked

the subject’s flag lot. Defendant’s appraiser further testified that the subject’s larger lot size—

0.38 acre as opposed to the comparables’ 0.16- to 0.26-acre lots—did not present an obstacle to

comparison because the houses on the subject and the comparables alike used most of their lots’

buildable areas. His conclusion that the subject’s excess land was not buildable was further shown

by the relatively small, $2,600- to $4,800-upward adjustments he made for his comparables’

differences from the subject’s lot size.

Defendant’s appraisal provides a credible indicator of value, with verified comparables

requiring relatively small adjustments, including two comparables located less than half a mile

from the subject. Plaintiffs did not provide evidence on which the court could find another

value.

///

FINAL DECISION TC-MD 180110G 7 III. CONCLUSION

Plaintiffs did not carry their burden of proof. Now, therefore,

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

Dated this day of April, 2019.

POUL F. LUNDGREN MAGISTRATE

If you want to appeal this Final 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 the Final Decision or this Final Decision cannot be changed. TCR-MD 19 B.

This document was signed by Magistrate Poul F. Lundgren and entered on April 2, 2019.

FINAL DECISION TC-MD 180110G 8