John & Vesha Czuber v. Board of Assessors of the City of Springfield (October 23, 2012)

COMMONWEALTH OF MASSACHUSETTS

APPELLATE TAX BOARD



JOHN & VESHA CZUBER	            v.    BOARD OF ASSESSORS OF 								   THE CITY OF SPRINGFIELD

Docket No. F309993				   Promulgated:
		 					   October 23, 2012
  

	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 Board of Assessors of the City of Springfield ("assessors" or "appellee"), to abate a tax on certain real estate located in the City of Springfield owned by and assessed to John and Vesha Czuber ("appellants") under G.L. c. 59, §§ 11 and 38, for fiscal year 2010 ("fiscal year at issue").
	Commissioner Mulhern heard this appeal.  Chairman Hammond and Commissioners Scharaffa, Rose and Egan joined him in a decision for the appellants.
	These findings of fact and report are made pursuant to a request by the appellants under G.L. c. 58A, § 13 and 831 CMR 1.32.  
	
	Randy J. Milou, Esq. and Eric D. Applebaum, Esq. for the appellants.

	Richard J. Allen, assessor for the appellee.

FINDINGS OF FACT AND REPORT	
	On the basis of the testimony and exhibits entered into evidence at the hearing of this appeal, the Appellate Tax Board ("Board") made the following findings of fact.	
On January 1, 2009, the relevant date of assessment for the fiscal year at issue, the appellants were the assessed owners of two contiguous parcels of real estate located at 80 Congress Street and Congress Street Rear (collectively, "subject property" or "subject parcels").  80 Congress Street is a 47,654 square-foot parcel improved with a one-story, multi-tenanted, medical/office building with a net rentable area of 11,680 square feet ("subject building").  Congress Street Rear is a 2,927-square-foot, land-locked parcel of unimproved real estate situated to the rear of 80 Congress Street, which is used as additional parking for the subject building and also to act as a buffer from the nearby highway.  Sited on Congress Street Rear is a dumpster that is used by the tenants of the subject building.  Although the appellants purchased the subject parcels as part of a single transaction, for assessment purposes they are identified and assessed separately as 03115-0022 and 03115-0023, respectively.  The subject property is located in the Metro Center neighborhood at the intersection of Dwight Street and Congress Street, less than one mile from the Mercy Medical Center.  The subject property is proximate to State Route 20 and also Interstates 91 and 291.  
The subject building was built circa 1976.  It is circular in shape with the center of the building acting as the lobby.  The interior is finished with drywall, suspended ceilings and a mix of flooring, including carpet, vinyl tile and exposed concrete.  There are two bathrooms located at the main entrance and also five bathrooms located throughout the building in the various office suites.  The building has a gas-fired HVAC system with individual units located throughout the building.  The windows are fixed glass, and the building has a flat membrane roof.  There are front and back entrances and also two side entrances.  Overall, the building is in average condition.  Access to the property is by Congress Street.  
For the fiscal year at issue, the assessors valued 80 Congress Street at $909,700 and valued Congress Street Rear at $50,500, and assessed taxes thereon, at the rate of $39.25 per thousand, in the total amounts of $35,705.73 and $1,982.13, respectively.  The Springfield Collector of Taxes mailed the fiscal year 2010 tax bills on January 27, 2010.  In accordance with G.L. c. 59, § 57C, the appellants paid the taxes due without incurring interest.  On February 26, 2010, in accordance with G.L. c. 59, § 59, the appellants timely filed two separate Applications for Abatement with the assessors seeking a reduction in the subject parcels' assessed values.  The appellants' abatement applications were denied on May 25, 2010.  On June 25, 2010, in accordance with G.L. c. 59, §§ 64 and 65, the appellants seasonably filed a single appeal with the Board which joined the two contiguous parcels.  On the basis of these facts, the Board found and ruled that it had jurisdiction to hear and decide this appeal.
The appellants presented their case through the testimony of John Czuber.  Appellants also offered an appraisal report that was prepared by a professional appraiser, Dario M. Mercadante, who was not present and therefore did not testify at the hearing of this appeal.  In addition, appellants offered a listing of the fiscal year 2004 through fiscal year 2011 assessed values of the subject property and 1985 Main Street.  Mr. Czuber testified that he purchased the subject parcels in a single transaction by deed dated August 19, 2004 and contended that Congress Street Rear operates in connection with 80 Congress Street, providing additional parking for the subject building and acting as a buffer between the highway and the subject building, and therefore has no independent value.  
The appraisal report indicated that Mr. Mercadante valued the two parcels as a single unit.  In his appraisal report he included both an income-capitalization analysis and a comparable-sales analysis.  For the income-capitalization analysis, he purportedly completed a study of medical/office lease space in the Springfield area and found that market rents ranged from $10.00 to $24.00 per square foot, dependent upon size, style, location and condition.  He determined that for the subject property an economic rent at $19.00 per square foot on a gross lease basis was appropriate.  Based on his assumption of a fair economic rent and also the subject building's existing leases as of December 31, 2008, Mr. Mercadante calculated an annual fair market rent of $189,183.  He assumed a vacancy credit loss rate of 20% to calculate an effective gross income of $151,346.  He then deducted $80,780 for operating expenses, including a management fee and also a reserve for replacement, each calculated at 7.5% of effective gross income.  After applying an overall capitalization rate of 9.16%, Mr. Mercadante calculated the rounded value of the subject property at $770,000.    
For his comparable-sales analysis, Mr. Mercadante cited sales of four medical office/office properties that sold between June 9, 2005 and July 17, 2008.  Mr. Mercadante's purportedly comparable properties were located between 1.09 miles and 5.89 miles away from the subject property.  After making adjustments for differences between his purportedly comparable properties and the subject property, Mr. Mercadante arrived at a final estimate of value for the subject property of $770,000 as of December 31, 2008.  From these two analyses, Mr. Mercadante concluded a final estimate of value for the subject property of $770,000.
The appellants also presented a listing of the fiscal years 2004 through 2011 assessments for the subject property and 1985 Main Street, which included the annual percentage changes and the annual assessed value per square foot for both properties.  
	The assessors did not present any witnesses or expert reports at the hearing of this appeal. Instead, the assessors questioned the analyses contained in Mr. Mercadante's appraisal report.   With respect to the comparable-sales analysis, the assessors maintained that, contrary to Mr. Mercadante's findings, only comparable sale number two had a similar location and the rest of the purportedly comparable properties had inferior locations.  
	The assessors also raised questions about Mr. Mercadante's income-capitalization analysis.  First, the assessors noted that the rental comparables offered as evidence of fair market rent were triple net terms.  In his analysis, however, Mr. Mercadante used a gross lease with the landlord paying all expenses and made no adjustments to account for the differences in leasing terms.  The assessors also questioned Mr. Mercadante's choice of a market rent of $19.00 per square foot, noting that the comparable leases ranged from $10.00 per square foot to $24 per square foot and Mr. Mercadante's report did not provide an explanation as to how he arrived at this figure.  Because Mr. Mercadante was not present at the hearing, the assessors were unable to cross-examine him on these issues.           
	The assessors also introduced the relevant jurisdictional documentation and the subject parcels' property record cards, which indicated that 80 Congress Street was valued using the income-capitalization approach.  However, no detailed analysis was included.
	Based on the evidence presented and reasonable inferences drawn therefrom, the Board found that the subject property was overvalued for fiscal year 2010.  Because the appellants' real estate appraiser was not present at the hearing and was, therefore, unavailable for cross-examination by the assessors or questioning by the hearing officer, the Board gave no weight to Mr. Mercadante's opinion of value.  The Board found, however, that the assessed value of 80 Congress Street was based on an income approach which captured value attributable in part to Congress Street Rear.  The rent paid by tenants of 80 Congress Street included parking and the use of a dumpster on Congress Street Rear.  By attributing all the rental income to the value of 80 Congress Street, and not considering the tenants' use of Congress Street Rear in conjunction with the lease of office space, the assessors overvalued 80 Congress Street.  
	Since the appellants failed to provide any independent value of Congress Street Rear, the Board found that the appellants failed to prove that this parcel was overvalued.  The Board further found, however, that since the assessed value of 80 Congress Street included the value attributable to Congress Street Rear, 80 Congress Street was overvalued.  Accordingly, the Board found that the subject property was overvalued by $50,500, the assessed value of Congress Street Rear, and granted an abatement in the amount of $1,982.13.  

OPINION
	Fair cash value is the standard for assessing real property for tax purposes in Massachusetts. See G.L. c. 59, § 38.  Fair cash value is defined as the price on which a willing seller and a willing buyer will agree if both are fully informed and under no compulsion.  Boston Gas Co. v. Assessors of Boston, 334 Mass. 549, 566 (1956)), aff'd, 63 Mass. App. Ct. 1116 (2005).  
The appellant has the burden of proving that the property has a lower value than that assessed. "'The burden of proof is upon the [appellant] to make out its right as a matter of law to abatement of the tax.'"  Schlaiker v. Board of Assessors of Great Barrington, 365 Mass. 243, 245 (1974) (quoting Judson Freight Forwarding Co. v. Commonwealth, 242 Mass. 47, 55 (1922)).  "[T]he board is entitled to 'presume that the valuation made by the assessors [is] valid unless the taxpayer[]  . . . prove[s] the contrary.'"  General Electric Co. v. Assessors of Lynn, 393 Mass. 591, 598 (1984) (quoting Schlaiker, 365 Mass. at 245). 
In appeals before this 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., 393 Mass. at 600 (quoting Donlon v. Assessors of Holliston, 389 Mass. 848, 855 (1983)).  
In reaching its opinion of fair cash value in this appeal, the Board was not required to believe the testimony of any particular witness or to adopt any particular method of valuation.  Rather, the Board could accept those portions of the evidence that the Board determined had more convincing weight.  Foxboro Associates v. Board of Assessors of Foxborough, 385 Mass. 679, 683 (1982); New Boston Garden Corp. v. Assessors of Boston, 383 Mass. 456, 473 (1981); Assessors of Lynnfield v. New England Oyster House, Inc., 362 Mass. 696, 702 (1972).  "The credibility of witnesses, the weight of evidence, and inferences to be drawn from the evidence are matters for the board."   Cummington School of the Arts, Inc. v. Assessors of Cummington, 373 Mass. 597, 605 (1977).  In evaluating the evidence before it, the Board selected among the various elements of value and formed its own independent judgment of fair cash value.  General Electric Co., 393 Mass. at 605; North American Philips Lighting Corp. v. Assessors of Lynn, 392 Mass. 296, 300 (1984). 
In the present appeal, the Board found that the comparable-sales and income-capitalization analyses presented in Mr. Mercadante's appraisal report did not provide reliable or credible evidence of overvaluation. Because he was not present at the hearing and was not subject to cross-examination or questioning by the hearing officer, the Board gave no weight to his opinion of value.  See, e.g. Papernik v. Assessors of Sharon, Mass. ATB Findings of Fact and Reports 2011-600, 615 (ruling that hearsay opinion evidence, which, although not objected to by the assessors, was entitled to no weight because it was offered without proper foundation, qualification, or underlying factual support and without providing the assessors with an opportunity for cross-examination.)  The Board found, however, that the assessed value of 80 Congress Street was based on an income approach which captured value attributable in part to Congress Street Rear. 	
In reaching its decision, the Board was not limited to the appellant's evidence of overvaluation.  Instead, the Board's determination "must be made 'upon consideration of the entire record.'"  New Boston Garden Corp., 383 Mass. at 466 (quoting Cohen v. Board of Registration in Pharmacy, 350 Mass. 246, 253 (1966)).  The Board was therefore entitled to rely on all of the evidence of record, including evidence offered by the assessors, to determine whether there was overvaluation. Haynes v. Assessors of Middleton, Mass. ATB Findings of Fact and Reports 2011-143, 183 (citing General Electric Co., 393 Mass. at 600); see also Boston Edison Co. v. Assessors of Watertown, 387 Mass. 298, 302 (1982) ("The board's decision must be supported by substantial evidence considering the entire record before the board.").  
Because the appellants failed to provide any independent value of Congress Street Rear, the Board found that the appellants failed to prove that this parcel was overvalued.  The Board further found, however, that because the assessed value of 80 Congress Street included value attributable to Congress Street Rear, 80 Congress Street was overvalued.  	  





	Accordingly, the Board found and ruled that the subject property was overvalued by $50,500 and granted an abatement in the amount of $1,982.13.  

         APPELLATE TAX BOARD

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

A true copy,

Attest: ________________________
        Clerk of the Board

 Pursuant to G. L. c. 58A, § 7, and 831 CMR 1.03, the Board allowed the taxpayer to join the parcels on a single petition. 

ATB 2012-1086