IN THE MATTER OF: APPEAL OF: Pace/Dowd Properties Ltd. from the decisions of the Union County Board of Equalization and Review regarding the valuations of certain property for tax year 2010
Heard in the Court of Appeals November 20, 2013.
Counsel Amended, March 18, 2014.
North Carolina Property Tax Commission. No. 10 PTC 638.
K& L Gates LLP, by Samuel T. Reaves, for Pace/Dowd Properties, Ltd.
Hamilton Stephens Steele & Martin, PLLC, by Rebecca K. Cheney, for Union County.
K& L Gates LLP, by Mr. Samuel T. Reaves, Attorney at Law, for Pace/Dowd Properties, Ltd.
Hamilton Stephens Steele & Martin, PLLC, by Ms. Rebecca K. Cheney, Attorney at Law, for Union County.
McCULLOUGH, Judge. Judges ELMORE and DAVIS concur.
Appeal by Union County from final decision entered
24 January 2013 by the North Carolina Property Tax Commission.
Union County appeals from a decision by the North Carolina Tax Commission, holding that Union County used an arbitrary method of valuation in assessing two parcels of land owned by Pace/Dowd Properties, Ltd. Based on the following reasons, we affirm the decision of the North Carolina Tax Commission.
Union County appeals from a 24 January 2013 " Final Decision" of the North Carolina Property Tax Commission (" Commission" ) concerning the tax value of two parcels of land located within Union County. The two parcels of land at issue, purchased by appellee Pace/Dowd Properties Ltd. (" Pace/Dowd" ), consist of Union County Tax Parcel Number 06-135-003 (" Parcel 3" ) and Parcel Number 06-135-003A (" Parcel 3A" ). Parcel 3 is comprised of 216 acres of land. Pace/Dowd purchased it in 2005 for $11,212,500, with the intent to develop Parcel 3 as the second and third phases of a residential development called " Lawson" with 245 lots. Parcel 3A is comprised of 173.85 acres of land. It was purchased in 2003 for $7,375,298, with the intent to develop Parcel 3A as the fourth phase of the Lawson development with 404 lots.
During Union County's 2008 countywide general reappraisal, Parcel 3 was valued by Union County at a property tax value of $10,201,240 and Parcel 3A was valued at $1,135,420. In 2009, Pace/Dowd did not appeal the tax valuations. However, in 2010,
Pace/Dowd contested the value of both parcels by filing an appeal with the Union County Board of Equalization and Review (" County Board" ).
Union County became aware it had wrongly classified Parcel 3A as a subdivision common area and notified Pace/Dowd that it was increasing the tax value of Parcel 3A to $9,166,280 effective 1 January 2008 for tax years 2008, 2009, and 2010. The County Board heard Pace/Dowd's challenges to Union County's assessments on 22 June 2010 and declined to consider Pace/Dowd's appeal on Parcel 3 for tax years 2008 and 2009. Furthermore, the County Board reduced the value of Parcel 3 from $10,201,240 to $7,975,200 effective 1 January 2010 and affirmed the valuation of Parcel 3A at $9,166,280.
Subsequently, Pace/Dowd appealed to the Commission, presenting several issues. First, Pace/Dowd argued that the subject parcels were appraised in excess of the true value of the subject property as of 1 January 2008. Pace/Dowd asserted that the assigned values exceeded fair market value (" FMV" ) as defined in N.C. Gen. Stat. § 105-283 and that the FMV of Parcel 3 should be $2,400,000 and the FMV of Parcel 3A should be $1,837,500. Next, Pace/Dowd argued that Union County applied an arbitrary method of appraisal in reaching the following values: Parcel 3 valued at $10,201,240 and later reduced to $7,975,220; Parcel 3A valued at $1,135,420 and later increased to $9,166,280. Lastly, Pace argued that Union County improperly " discovered" Parcel 3A for tax years 2008, 2009, and 2010.
Following hearings held on 15 February 2012 and 18 April 2012, the Commission entered the " Final Decision" on 24 January 2013. The Commission made the following findings of fact, in pertinent part:
4. Under orders of the State of North Carolina (the " State" ), Union County imposed a moratorium on new sewer taps in February 2007. Thereafter, the State denied Union County's request to expand its largest sewer treatment plant, and the moratorium continued.
5. On September 17, 2007, Union County adopted the " Policy for Allocating Wastewater Treatment Capacity (" SAP" ), after which the State allowed Union County to lift the moratorium.
6. Pursuant to the SAP, 50 lots within Parcel  and 100 lots within Parcel [3A] were included within the first priority of properties to receive sewer and permits and 449 lots from Parcel  and [3A] were placed in the last priority of properties to receive sewer permits. Notwithstanding that [Pace/Dowd] purchased the subject parcels at purchase prices which included water and sewer capacity for residential development, the parcels were never developed.
7. As of the January 1, 2008 countywide general reappraisal of all real property in Union County, Parcel  was assessed at a value of $10,210,240, and, based upon [Pace/Dowd's] 2010 appeal, the County Board reduced the assessment to a value of $7,975,220; and, based upon [Pace/Dowd's] 2010 appeal, Union County increased the assessed value of parcel [3A] from $1,135,420 to $9,166,280 and assigned the increased value of $9,116,280 for tax years 2008, 2009 and 2010. Further, Union County has collected taxes from [Pace/Dowd] based on the increased value of Parcel [3A] ($9,166,280) for tax years 2008, 2009 and 2010.
8. Union County is required to value all property for ad valorem tax purposes at its true value in money, which is " market value." N.C. Gen. Stat. § 105-283. . . .
9. An important factor in determining the property's market value is its highest and best use. The highest and best use of the subject property, as improved, would be residential development. . . .
10. However, under orders of [the State], Union County imposed a moratorium on new sewer taps in February 2007, which caused declines in the market
values of the subject parcels. Accordingly, Union County shall, whenever any real property is appraised, consider the factors set forth in N.C. Gen. Stat. § 105-317. In particular, Union County shall consider how the county's sewer allocation policy affects the market value of the subject parcels, and the availability of water and sewer to Parcels [3 and 3A].
11. Consequently, [Pace/Dowd] did rebut the initial presumption of correctness as to Union County's assessments of the subject parcels by offering evidence tending to show that Union County used an arbitrary method of assessment and that Union County's assessments of the subject parcels substantially exceeded the market values of the parcels when the county assessed Parcel  at a value of $7,975,220; and by increasing the valuation of Parcel [3A] from $1,135,420 to $9,166,280, and when Union County did not consider the factors set forth in N.C. Gen. Stat. § 105-317 (i.e. the availability of water and sewer to Parcels [3 and 3A]).
12. Accordingly, the burden then shifts to Union County to go forward with the evidence and to demonstrate that its methods would in fact produce true value[.]
13. [T]he Commission . . . determines that Union County did not meet its burden regarding the valuations of the subject parcels when Union County did not consider certain relevant factors, as required by N.C. Gen. Stat. § 105-317[.]
14. Accordingly, the Commission, when considering the expert testimony of Mr. Willcox [sic], finds that the true value in money, which is " market value," as that term is defined in N.C. Gen. Stat. § 105-283, for Parcel  was $3,987,600, and the true value in money of Parcel [3A] was $4,583,140.
The Commission concluded that Pace/Dowd rebutted the presumption that Union County's ad valorem tax assessment was correct by showing that the county tax supervisor used an arbitrary method of valuation and that the assessments substantially exceeded the true value in money of the parcels. Furthermore, the Commission determined that the true value in money of Parcel 3 was $3,987,600 and the true value in money of Parcel 3A was $4,583,140 as of the 1 January 2008 appraisal.
Union County appeals.
II. Standard of Review
In reviewing a decision from the North Carolina Property Tax Commission:
[this] court shall decide all relevant questions of law, interpret constitutional and statutory provisions, and determine the meaning and applicability of the terms of any Commission action. The court may affirm or reverse the decision of the Commission, declare the same null and void, or remand the case for further proceedings; or it may reverse or modify the decision if the substantial rights of the ...