Pleasant Street Realty Trust, Christopher D'Antonio & Paul Wiley, Trustees v. Board of Assessors of the Town of Natick (September 24, 2013)

COMMONWEALTH OF MASSACHUSETTS
APPELLATE TAX BOARD

PLEASANT STREET REALTY TRUST,   v.	       BOARD OF ASSESSORS OF	
CHRISTOPHER D'ANTONIO &                   THE TOWN OF NATICK
PAUL WILEY, TRUSTEES

Docket No. F311635 		     	       Promulgated:
							       September 24, 2013

 
	This is an appeal filed under the formal procedure pursuant to G.L. c. 58A, § 7 and G.L. c. 59, §§ 64 and 65 from the refusal of the appellee, Board of Assessors of the Town of Natick ("assessors" or "appellee"), to abate a tax on certain real estate located in the Town of Natick owned by and assessed to Christopher D'Antonio and Paul Wiley as Trustees of the Pleasant Street Realty Trust ("appellant") under G.L. c. 59, §§ 11 and 38 for fiscal year 2011 ("fiscal year at issue").
	Commissioner Rose heard the appeal.  He was joined by Chairman Hammond and by Commissioners Scharaffa, Chmielinski and Mulhern in a decision for the appellee.
 These findings of fact and report are made pursuant to a request by the appellant under G.L. c. 58A, § 13 and 831 CMR 1.32.

David J. Freniere, Esq. for the appellant.
Kenneth W. Gurge, Esq. for the appellee.
FINDINGS OF FACT AND REPORT
On the basis of testimony and exhibits offered into evidence at the hearing of this appeal, the Appellate Tax Board ("Board") made the following findings of fact. 
On January 1, 2010, the appellant was the assessed owner of a parcel of land identified on the assessors' Map 70 as Lot 0 and with an address of 0 Pleasant Street in Natick ("subject property").  The subject property is a 9.232-acre parcel of unimproved land.  The property record card maintained by the appellee for the fiscal year at issue classified the subject property as class 131 "potentially developable land."  For the fiscal year at issue, the assessors valued the subject property at $711,900 and assessed a tax thereon, at the rate of $12.60 per thousand, in the total amount of $8,969.94.  The appellant timely paid the tax due without incurring any interest.  On January 31, 2011, the appellant timely filed an Application for Abatement with the assessors for the fiscal year at issue.  On March 15, 2011, the assessors granted a partial abatement, reducing the subject property's assessed value to $530,000.  On May 18, 2011, the appellant seasonably filed an appeal with the Board.  On the basis of these facts, the Board found and ruled that it had jurisdiction to hear and decide the appeal for the fiscal year at issue. 
The appellant presented its case through the testimony of its witness, Christopher D'Antonio, one of the two trustees for the subject property, and the submission of exhibits.  Mr. D'Antonio testified that the subject property was comprised mostly of wetlands and ledge.  The appellant thus contended that the costs required to build on the subject property in its current state impacted its fair market value.  The appellant's opinion of the fair cash value of the subject property was $334,000. 
The appellant submitted into evidence a copy of a communication that Mr. D'Antonio had sent to the appellee in which he predicted the respective "hard" and "soft" costs associated with the development of the subject parcel.  The appellant's outline included as "soft costs" the following:  filing and permit fees; wetlands delineation; topography; water, sewer, gas design and layout; wetlands crossing (design of bridge/culvert); road design; on-site drainage design; landscape design; and legal fees.  The appellant provided that these costs would amount to $75,000, but he did not provide any documentary detail for how he determined this amount.  The appellant also listed as a cost the "delineation of wetlands crossing and drainage design at front of parcel," which he determined would amount to $25,664.  For this soft cost, the appellant submitted a transaction detail from the engineering firm Chadwick Properties, Inc. for engineering costs charged at the subject property between June 1, 2009 and February 21, 2011.  For his "hard costs," Mr. D'Antonio listed:  construction of road; construction of wetlands crossing (bridge/culvert); construction of water, sewer, gas, electric, cable; construction of on-site drainage; construction, removal of ledge.  Mr. D'Antonio estimated these costs to be in the range of $200,000 to $300,000; he provided no documentation to support this wide range of costs.
The appellant further offered a comparable-sales analysis featuring four purportedly comparable properties located in Natick:  0 Waterview Lane Lot 3A; 0 - 4 Waterview Lane; 22 Indian Rock Road; and 50 Farwell Street.  The appellant submitted Multiple Listing Service ("MLS") listings of these properties which detailed their lot size, sale date and sale price, together with geographic information system ("GIS") maps showing the location of each purportedly comparable property.  The purportedly comparable properties ranged from 0.91 acres to 1.34 acres, and their sale dates ranged from February 11, 2010 to December 31, 2010, with sale prices that ranged from $150,000 to $335,000.  The appellant did not provide any adjustments to the sale prices of his comparable properties to account for any differences with the subject property.  The appellant chose these properties for his comparison because, he claimed, they were approved for development.  He contended that the subject property's assessment should be adjusted to account for the costs of developing the subject property, including costs for obtaining permits for engineering and wetlands delineation, and the costs of infrastructure, like water, sewer, gas, electric, roadway and wetlands crossing.  
Finally, the appellant contended that the subject property's valuation was not in keeping with the economic downturn and the corresponding decrease in fair cash valuations of property in Natick.  He submitted a chart depicting the assessment valuations of the subject property from fiscal year 2001 to the fiscal year at issue.  He contended that the 28.2% increase in assessed valuation since fiscal year 2007 was not consistent with the land market in Natick over that same time period.  The appellant's opinion of value for the subject property was $334,000, which represented an 11% decrease in the property's assessed value since fiscal year 2007.  To support his contention, the appellant submitted a copy of a portion of a newspaper article from the Boston Sunday Globe dated November 20, 2011, opining that Massachusetts home values "remain 15% below their peak."  To further his point, the appellant also submitted an MLS listing for a luxury home in South Natick to demonstrate that the home sold for $1,500,000, an 11.5% decrease from its original list price of $1,695,000.
The appellee presented its case-in-chief through the testimony of its witness, Janice D'Angelo, the director of assessing for the appellee, and the submission of documents.  Ms. D'Angelo testified that some of the appellant's comparable properties were not legally buildable lots, and therefore not comparable to the subject property.  She also submitted a copy of the appellee's Map 70, which showed that the subject property abutted the exclusive communities of Dover and South Natick, which she claimed further supported the subject property's assessment.
On the basis of the evidence presented, and as will be explained in the following Opinion, the Board found and ruled that the appellant's cost evidence was entitled to no weight because it was not supported by documented cost estimates or the testimony of a competent witness. Further, the Board found that appellant's valuation evidence was entitled to little weight because: (1) some of his purportedly comparable properties were not buildable lots; (2) the appellant offered no adjustments for any of his comparable properties; and (3) his testimony and the newspaper article that he offered concerning market trends were not persuasive evidence concerning the fair cash value of the subject property.  The Board therefore ruled that the appellant failed to meet its burden of proving a fair cash value that was less than the assessed value for the subject property.  Accordingly, the Board issued a decision for the appellee for the fiscal year at issue. 

OPINION
"All property, real and personal, situated within the commonwealth . . . shall be subject to taxation."  G.L. c. 59, § 2.  The assessors are required to assess real estate at its fair cash value determined as of the first day of January preceding the fiscal year at issue.  G.L. c. 59, §§ 2A and 38.  Fair cash value is defined as the price on which a willing seller and a willing buyer in a free and open market will agree if both of them are fully informed and under no compulsion.  Boston Gas Co. v. Assessors of Boston, 334 Mass. 549, 566 (1956).  
The appellant has the burden of proving that the subject property has a lower value than that assessed. "'The burden of proof is upon the petitioner to make out its right as [a] matter of law to [an] abatement of the tax.'" Schlaiker v. Assessors of Great Barrington, 365 Mass. 243, 245 (1974) (quoting Judson Freight Forwarding Co. v. Commonwealth, 242 Mass. 47, 55 (1922)).  In appeals before the Board, a taxpayer "may present persuasive evidence of overvaluation either by exposing flaws or errors in the assessors' method of valuation, or by introducing affirmative evidence of value which undermines the assessors' valuation."  General Electric Co. v. Assessors of Lynn, 393 Mass. 591, 600 (1984) (quoting Donlon v. Assessors of Holliston, 389 Mass. 848, 855 (1983)).  However, "the board is entitled to 'presume that the valuation made by the assessors [is] valid unless the taxpayer[] sustain[s] the burden of proving the contrary.'"  General Electric Co., 393 Mass. at 598 (quoting Schlaiker, 365 Mass. at 245).  
Real estate valuation experts, the courts, and this Board generally utilize three principal methods to arrive at fair cash value: the cost approach, income capitalization, and comparable-sales analysis. See Correia v. New Bedford Redevelopment Authority, 375 Mass. 360, 362 (1978).  "The Board is not required to adopt any particular method of valuation."  Pepsi-Cola Bottling Co. v. Assessors of Boston, 397 Mass. 447, 449 (1986).  Regardless of which method is employed to determine fair cash value, the Board "must determine 'the highest price which a hypothetical willing buyer would pay to a hypothetical willing seller in an assumed free and open market.'"  Irving Saunders Trust v. Assessors of Boston, 26 Mass. App. Ct. 838, 843 (1989) (citation omitted).  "The validity of a final estimate of market value depends to a great extent on how well it can be supported by market data."  Chatham Investment Trust of Newton v. Assessors of Newton, Mass. ATB Findings of Fact and Reports 2007-298, 308 (citing Appraisal Institute, The Appraisal of Real Estate 134 (12th ed. 2001)).
The ascertainment of a property's highest and best use is a prerequisite to valuation analysis.  See Peterson v. Assessors of Boston, 62 Mass. App. Ct. 428, 429 (2004); Irving Saunders Trust, 26 Mass. App. Ct. at 843. "A property's highest and best use must be legally permissible, physically possible, financially feasible, and maximally productive." Northshore Mall Limited Partnership v. Assessors of Peabody, Mass. ATB Findings of Fact and Reports 2004-195, 246, aff'd 63 Mass. App. Ct. 1116 (2005).
In the present appeal, the assessors characterized the subject property as "potentially developable."  However, the appellant's witness, Mr. D'Antonio cited purported impediments to developing the subject property, particularly the presence of wetlands.  Mr. D'Antonio estimated costs associated with developing the subject property with these impediments and stated that, in his opinion, those costs should be considered in valuing the subject property.  However, "[t]he Courts and this Board have found and ruled consistently that only qualified engineers, architects, or contractors should present cost estimates in most circumstances."  Cnossen v. Assessors of Uxbridge, Mass. ATB Findings of Fact and Reports 2002-675, 690 (citing Tiger v. Mystic River Bridge Authority, 329 Mass. 514, 519 (1952) and Maryland Cup Corp. v. Assessors of Wilmington, Mass. ATB Findings of Fact and Reports 1988-169).  Mr. D'Antonio was not a licensed engineer, architect, or contractor.  The Board thus found and ruled that Mr. D'Antonio did not have the requisite expertise and therefore was not competent to offer costs or applicable discounts to the subject property's fair market value for impediments to development caused by the presence of wetlands or other construction or engineering issues.  See Cnossen, Mass. ATB Findings of Fact and Reports at 2002-690 (finding that the witnesses' lack of qualifications substantially diminished the probative value of their testimony relating to the reproduction-cost approach); see also Andreozzi v. Assessors of Seekonk, Mass. ATB Findings of Fact and Reports 2010-800, 808-10; Mason v. Assessors of Winchester, Mass. ATB Findings of Fact and Reports 2004-110, 143.  
The transaction detail from the engineering firm that he did submit was not a complete list of all costs involved in developing the subject property.  Moreover, because no engineer from the firm was presented as a witness, the Board rejected the transaction detail because it lacked adequate foundation, was unsubstantiated hearsay, and no engineers were present at the hearing and available for cross-examination by the assessors or for questioning by the Board.  See, e.g., Papernik v. Assessors of Sharon, Mass. ATB Findings of Fact and Reports 2011-600, 615 ("hearsay information was opinion evidence, which, although not objected to by the assessors, was offered without proper foundation, qualification, or underlying factual support and without providing the assessors with an opportunity for cross-examination.  Accordingly, the Presiding Commissioner gave it no weight."). 
Furthermore, the Board was not persuaded by Mr. D'Antonio's comparable-sales analysis, which was merely a generic summary of sale prices from sales of vacant lots in Natick, one sale of a luxury single-family residence in South Natick, and a partial newspaper article describing in general terms a downturn in the Massachusetts housing market resulting in prices "below their peak," without any specifications or adjustments for features which would affect a property's fair market price, including size, location and condition.  The Board found and ruled that, without evidence of the comparability of the comparable-sale properties with the subject property and appropriate adjustments for the properties' differences, the comparable-sales analysis lacked persuasive value.  See Lupacchino v. Assessors of Southborough, Mass. ATB Findings of Fact and Reports 2008-1253, 1269 ("[W]ithout appropriate adjustments, . . . the assessed values of [comparable] properties [do] not provide reliable indicator[s] of the subject's fair cash value."); see also Graham v. Assessors of West Tisbury, Mass. ATB Findings of Fact and Reports 2007-321, 402, aff'd, 73 Mass. App. Ct. 1107 (2008).

Conclusion
On the basis of the evidence of record, the Board found and ruled that the appellant failed to meet its burden of proving that the subject assessment exceeded the fair cash value of the subject property.  Accordingly, the Board issued a decision for the appellee.

   						THE APPELLATE TAX BOARD


By: _________________________________
    Thomas W. Hammond, Jr., Chairman




A true copy,

Attest: _________________________
     Clerk of the Board

 "Soft costs," also known as indirect costs, are expenditures for items other than labor and materials that are typically part of the construction contract.  Appraisal Institute, The Appraisal of Real Estate 387 (13th ed. 2008).

  "Hard costs," also known as direct costs, are expenditures for labor and materials used in construction.  Appraisal Institute, The Appraisal of Real Estate 387 (13th ed. 2008).

ATB 2013-961