Vanderheiden v. Cedar Cty. Bd. of Equal.

M elvin vanderheiden et al ., appellants , v .
C edar C ounty B oard of equalization , appellee .
746 N.W.2d 717
Filed March 18, 2008. 	Nos. A-07-373 through A-07-376,
A-07-383 through A-07-392.
1. Appeal and Error. Errors assigned but not argued will not be addressed
on appeal.
2. Taxation: Judgments: Appeal and Error. Decisions rendered by the Tax
Equalization and Review Commission shall be reviewed by the court for errors
appearing on the record of the commission.
3. Judgments: Appeal and Error. When reviewing a judgment for errors appearing
on the record, an appellate court’s inquiry is whether the decision conforms to
the law, is supported by competent evidence, and is neither arbitrary, capricious,
nor unreasonable.
4. Taxation: Appeal and Error. Questions of law arising during appellate review
of Tax Equalization and Review Commission decisions are reviewed de novo on
the record.
5. Taxation: Presumptions: Evidence. The statutes governing the Tax Equalization
and Review Commission create a presumption that a board of equalization
has faithfully performed its official duties and has acted upon sufficient com-
petent evidence to justify its actions. This presumption remains until there is
competent evidence to the contrary presented. Once the presumption has been
rebutted, the burden shifts to the party requesting the exemption to prove its
entitlement thereto.
Appeals from the Tax Equalization and Review Commission.
Affirmed.
Boyd W. Strope, of Strope & Gotschall, P.C., for appellants.
Dennis D. King, of Smith & King, P.C., for appellee.
sievers , C arlson, and M oore, Judges.
M oore, Judge.
INTRODUCTION
Fourteen owners of real property situated in Cedar County
filed property valuation protests with the Cedar County Board
of Equalization (County Board) challenging the 2005 assessed
valuation of their property. Upon denial of the protests, the
taxpayers appealed to the Nebraska Tax Equalization Review
Commission (TERC), which consolidated their appeals for
purposes of a hearing. Following presentation of evidence by
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the taxpayers and the county, the TERC determined that the
taxpayers had not overcome the presumption that the challenged
valuations were correct and therefore affirmed the decisions of
the County Board. The taxpayers perfected this timely appeal.
Because the TERC’s decision conforms to the law, is supported
by competent evidence, and is neither arbitrary, capricious, nor
unreasonable, we affirm.
BACKGROUND
The present appeals involve the valuation of agricultural
land in Cedar County, Nebraska, for the tax year 2005 with an
assessment date of January 1, 2005. For the tax year 2005, the
county assessor divided the county into two market areas for
the assessment of agricultural and horticultural land, described
as “Market Area 1” and “Market Area 2.” All but one of the 48
pieces of real property involved in these appeals are located in
Market Area 2. Market Area 2 is located in the southeast portion
of the county, consists of six townships, is rectangular in shape,
and is 18 miles long by 13 miles wide. Township lines were
used as the boundaries for Market Area 2 on the north and west
sides. The east and south boundary lines of Market Area 2 are
the county’s boundaries with adjacent counties. Market Area 1
encompasses the balance of the county beyond the boundaries of
Market Area 2. The assessment in question resulted in different
valuations’ being placed on land of the same soil type depending
on the market area in which the land was located.
A hearing was held before the TERC in this case on November
15, 2006. The following issues for the hearing were agreed
upon by the parties: (1) whether the market area analysis is
a professionally accepted mass appraisal method, (2) whether
the market areas as drawn by the county assessor comply with
professionally accepted methodology for establishing value,
(3) whether the use of market areas to determine the value of
agricultural and horticultural land is prohibited by Nebraska’s
Constitution or by law, (4) whether the taxpayers’ property
had been assessed uniformly and proportionately by valuing
such property at the same percentage of actual value as other
similarly situated property in the county, and (5) whether the
taxpayers’ property had been valued uniformly when the same
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or similar soil types within the same county have different
values assigned thereto. At the hearing before the TERC, the
taxpayers’ position was that the County Board did not uni-
formly or proportionately order the correct taxable value for
the taxpayers’ agricultural property for the tax year 2005. The
taxpayers presented an equalization argument only. The tax-
payers alleged before the TERC that the market areas should
not have been used and further alleged that the market areas
in question were not properly created through professionally
accepted methodology.
The taxpayers offered certain exhibits into evidence and
the testimony of the Cedar County assessor, Don hoesing.
The County Board also provided certain exhibits, which were
received into evidence, and the testimony of hoesing; Catherine
lang, Nebraska’s Property Tax Administrator; Jerry Knoche, an
appraiser; and Barb Oswald, a liaison for lang.
The taxpayers elicited testimony from hoesing that there was
irrigated ground in Market Area 1 being valued for less than dry-
land ground in Market Area 2. hoesing affirmed that irrigated
ground is generally valued higher than dryland ground.
The taxpayers did not produce any evidence of the actual
value or characteristics of the subject properties other than
the information listed on valuation documents offered by the
County Board.
lang reviewed the various sales statistics and gave her opin-
ion that the levels of value in each market area were within
the acceptable range. lang noted that the average assessed
sale price and average assessed value for the two market areas
were significantly different from each other, indicating that the
average selling price per sale was different between the two
market areas and that the average assessed value was differ-
ent. lang testified that the only statistic that was outside the
acceptable range was the price-related differential for Market
Area 2, but she testified that the price-related differential is not
as directly applicable in the agricultural statistics as it would
be for residential real property. lang testified further concern-
ing the price-related differential figure in this case, stating that
statistically it would be deemed to be high and that what that
indicates in improved properties is that the market value for
580 	16 NEBRASKA APPEllATE REPORTS

lower-priced properties is assessed at a higher level than that
for higher-priced properties. lang testified that in agricultural
land, that is not as direct a comparison because the higher price
paid may be for more acres of land.
hoesing was recalled to testify by the County Board. hoesing
had been the county assessor for approximately 10 years, dur-
ing which time he had noticed that land was selling for more
in certain parts of the county. hoesing testified that using a
combination of several factors, only one of which was the sales
ratio of sales in the county, he developed boundaries for market
areas. In 2003, three market areas were established. In 2005,
the north-south line separating the second and third market
areas was removed and the new market area was designated
Market Area 2.
hoesing used several factors to establish the boundary lines
for Market Area 2, including an examination of the land for soil
types, productivity, availability of water, relation to market dis-
tribution points, land use, geography, and sales history. Based
on this analysis, the boundary lines were established using
township lines on the north and west sides of Market Area 2
and the county’s boundary lines on the east and south sides.
hoesing described differences in topography throughout the
county. hoesing stated that in the northeast part of the county
along the Missouri River, a certain amount of recreational prop-
erty exists which is used for, among other things, water-related
activities. In that part of the county, there are more trees and
brush, with grass area continuing to the south. In the northwest
part of the county, there is less tree cover with more farming
and pasture ground. Farms in the northern portion of the county
raise “small grain hay crops,” corn, and soybeans and have a
fair amount of center-pivot irrigation. hoesing also described
the topography moving into the south part of the county, where
the topography becomes more gently rolling with larger farms
and fields, minimal grass, and less livestock production.
hoesing testified that prior to his use of market areas, he
had problems with some valuation results’ not being within
the acceptable range for the statistical analysis required by
Nebraska statutes. hoesing created certain documentary exhibits
to demonstrate that substituting the values from one market
VANDERhEIDEN v. CEDAR CTy. BD. OF EQUAl. 	581
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area in the other market area resulted in unacceptable statisti-
cal results. The evidence demonstrated that the use of market
areas in valuing agricultural and horticultural land in the county
gave a more accurate picture of the market for agricultural
land in the county than would have resulted from not using
market areas. hoesing testified that he began to use market
areas because when he analyzed sales throughout the county,
in the southern part of the county the level of assessment was
historically and consistently lower than the level of assessment
through the rest of the county.
Knoche testified that he had become familiar with the mar-
ket characteristics of the two market areas. Knoche testified
that in the northern portion of the county, “you get into what
I call patch farming, because you don’t have full quarters.”
Knoche testified that while some of the same soil types exist in
both market areas, their distribution in the northern part of the
county is “not in the generous portions that it is in the southern
part of the county.” Knoche described the occurrence of larger,
consolidated farms with big fields in the southern portion of the
county. Knoche was asked about a cluster of a particular soil
type included in Market Area 1 and whether it would have been
appropriate to include that cluster in Market Area 2. Knoche’s
recollection was that either there were no sales occurring in
that area or there were several sales occurring in that area that
matched more closely with the values in the northern portion of
the county. Knoche opined that the agricultural land in Cedar
County was assessed uniformly and proportionately within
each market area.
Oswald testified in her role as liaison between the “Department
of Property Tax Administration” and Cedar County. As liaison,
her duties include consulting with the county assessor’s office
and analyzing the measurements of taxable value for agricul-
tural and horticultural lands. Oswald had been the liaison for
the past 9 years and had worked for the past 27 years in the
business of assessing real property. Oswald holds both an asses-
sor’s certificate and a registered appraiser’s license. As liaison,
Oswald has 10 counties under her responsibility, all located in
the northeast portion of Nebraska. Prior to testifying, Oswald
reviewed the statistics for Cedar County and prepared various
582 	16 NEBRASKA APPEllATE REPORTS

exhibits validating the use of market areas in Cedar County and
the uniformity and proportionality of the assessed taxable value
of agricultural and horticultural land in Cedar County. Oswald
testified that the property in Cedar County has been assessed
uniformly and proportionately by valuing the property at the
same percentage of actual value as other similarly situated
property in the county.
The TERC issued a decision and order dated March 14,
2007, affirming the decisions of the County Board. In its written
decision, the TERC provided some background information on
market areas. The TERC then set forth the process an appraiser
goes through to identify a market area’s boundaries. The TERC
stated that an appraiser’s investigation begins with an examina-
tion of the subject property and its surroundings, proceeding
outward, identifying all relevant and potential locational influ-
ences on the property’s value. The appraiser extends the search
outward to encompass all of the market influences affecting
the property’s value, and when no more factors are found, the
boundaries for analysis are set. The TERC stated that county
assessors in Nebraska have been guided by Neb. Rev. Stat.
§ 77-103.01 (Reissue 2003) as to which characteristics are to be
considered in the creation and use of market areas; those char-
acteristics include parcel use, parcel type, location, geographic
characteristics, zoning, city size, parcel size, and market charac-
teristics appropriate for the valuation of such land.
The TERC noted that the location of a particular soil type
within the boundaries of a county has a bearing on the valua-
tion for soil type. The TERC stated that location can be a posi-
tive or negative factor and that a location can be hampered by
woodlands, rivers, or manmade structures or can be enhanced
by its proximity to nearby elevators, more plentiful rainfall, or
many items that only a buyer can define. The TERC further
noted that the market defines the value placed on property and
that a certain market will pay more for property within certain
locations. The TERC stated that the duty of an assessor is to
be able to read that market and then assess the property in a
uniform and proportionate manner.
The TERC reviewed the statistical exhibits prepared by
Oswald and found the statistics were all within acceptable
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Cite as 16 Neb. App. 578

levels. The TERC noted that the exhibits prepared by Oswald
showed that the statistics do not fall within the acceptable range
when the values for agricultural and horticultural land in either
market area are substituted for the values in the other area. The
TERC concluded that the respective market area values work to
create acceptable valuations which are uniform and proportion-
ate for each market area and the county overall.
The TERC found from its review of the evidence that the tax-
payers had not met their burden to show that the County Board
was incorrect in its decision. The TERC further found that the
taxpayers had not shown by clear and convincing evidence that
the decision of the County Board was arbitrary or unreason-
able. The TERC found that the taxpayers had failed to provide
proof that their property was not valued uniformly and propor-
tionately with respect to other property of similar type within
the same market area and had failed to provide any evidence
of actual value of the subject properties or any other evidence
concerning the characteristics of the subject properties or the
comparable properties, other than soil type.
The TERC found that the County Board had shown by
reasonable evidence that the taxable valuation of agricultural
and horticultural lands for 2005 in Cedar County was uniform
and proportionate within each market area. The TERC found
that market area analysis was a professionally accepted mass
appraisal method, but it cautioned that the creation of mar-
ket areas must be accomplished using professionally accepted
methodology. The TERC found that Cedar County did estab-
lish market areas using professionally accepted methodology
and noted that lang, Knoche, and Oswald, witnesses called by
the County Board, testified that the use of market areas was
a professionally accepted methodology for mass appraisal of
agricultural and horticultural property. The TERC noted that
witnesses hoesing, Knoche, and Oswald testified that market
areas were drawn in Cedar County with professionally accepted
methodology. The TERC concluded that the market areas, as
drawn by the county assessor, do comply with professionally
accepted methodology for establishing value.
The TERC found that the taxpayers’ properties had been
assessed uniformly and proportionately at the same percentage
584 	16 NEBRASKA APPEllATE REPORTS

of actual value as other similarly situated property in the
county. The TERC found that the taxpayers’ properties had
been valued uniformly despite the fact that the same or similar
soil types in the same county have different values assigned to
them. The TERC found that the taxpayers had failed to meet
their burden of showing that the County Board was incorrect
or acted in an arbitrary or unreasonable manner. The TERC
accordingly affirmed the decisions of the County Board deter-
mining taxable value of the subject properties as of the assess-
ment date of January 1, 2005.
ASSIGNMENTS OF ERROR
[1] The taxpayers assert, consolidated and restated, that the
TERC erred in finding that the market areas as drawn by the
county assessor complied with professionally accepted meth-
odology. The taxpayers also assert, but do not argue, that the
TERC erred in concluding that evidence used to establish the
market area boundary lines in 2003 was inadmissible because
it was not relevant. Errors assigned but not argued will not be
addressed on appeal. Peterson v. Ohio Casualty Group, 272
Neb. 700, 724 N.W.2d 765 (2006).
STANDARD OF REVIEW
[2-4] Decisions rendered by the TERC shall be reviewed by
the court for errors appearing on the record of the TERC. City
of York v. York Cty. Bd. of Equal., 266 Neb. 297, 664 N.W.2d
445 (2003). When reviewing a judgment for errors appearing on
the record, an appellate court’s inquiry is whether the decision
conforms to the law, is supported by competent evidence, and
is neither arbitrary, capricious, nor unreasonable. Id. Questions
of law arising during appellate review of TERC decisions are
reviewed de novo on the record. Id.
ANAlySIS
The taxpayers assert that the TERC erred in finding that the
market areas as drawn by the county assessor complied with
professionally accepted methodology.
The Nebraska Supreme Court addressed the use of market
areas in Bartlett v. Dawes Cty. Bd. of Equal., 259 Neb. 954,
613 N.W.2d 810 (2000), a case originating procedurally from
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an action by the TERC to adjust assessments within a county in
order to achieve equalization within the state under Neb. Rev.
Stat. § 77-5026 (Cum. Supp. 1998). The Bartlett court reviewed
the statutory scheme for valuation of agricultural land:
Agricultural land constitutes a separate and distinct
class of property for purposes of property taxation. Neb.
Rev. Stat. § 77-1361(1) (Cum. Supp. 1998). Neb. Const.
art. VIII requires uniform and proportionate assessment
within the class of agricultural land. Agricultural land is
then divided into “categories” such as irrigated cropland,
dry cropland, and grassland. Neb. Rev. Stat. § 77-1363
(Cum. Supp. 1998). These categories are further divided
into subclasses based on soil classification.
259 Neb. at 962, 613 N.W.2d at 817.
In Bartlett, the Dawes County assessor had divided the
county into four agricultural “market areas” for property tax
purposes. The boundaries for each market area were based
upon where assessment-to-sales ratios for various land sales
fell on the county map, were drawn along township or half-
township lines, and were not consistent with the soil classifica-
tions depicted on the soil map of Dawes County, a fact admit-
ted by the assessor. The Dawes County Board of Equalization
argued that the TERC correctly found that the establishment
of market areas is a professionally recognized method of mass
appraisal under Neb. Rev. Stat. § 77-112 (Cum. Supp. 1998).
The Bartlett court assumed without deciding that market area
analysis is a professionally accepted mass appraisal method for
establishing actual value, but it rejected the use of the market
areas employed in that case as violative of the statutory scheme
set out by the legislature, stating:
The evidence in this case indicates that the market areas
established by the assessor were not, in fact, based on soil
classification, but, instead, were based on assessment-to-
sales ratios. Subclasses of agricultural land must be based
on soil classification, not upon where the land is located.
The market areas do not constitute subclasses of agricul-
tural land as defined by our statutes.
259 Neb. at 963, 613 N.W.2d at 817. See, also, Schmidt v. Thayer
Cty. Bd. of Equal., 10 Neb. App. 10, 624 N.W.2d 63 (2001)
586 	16 NEBRASKA APPEllATE REPORTS

(relying on Bartlett in rejecting TERC’s approval of valuation
of property in market area not based on soil classification).
After the Supreme Court’s decision in Bartlett, the legislature
enacted § 77-103.01, which currently states:
Class or subclass of real property means a group of
properties that share one or more characteristics typically
common to all the properties in the class or subclass,
but are not typically found in the properties outside the
class or subclass. Class or subclass includes, but is not
limited to, the classifications of agricultural land or horti-
cultural land listed in section 77-1363, parcel use, parcel
type, location, geographic characteristics, zoning, city
size, parcel size, and market characteristics appropriate
for the valuation of such land. A class or subclass based
on market characteristics shall be based on characteristics
that affect the actual value in a different manner than [they
affect] the actual value of properties not within the market
characteristic class or subclass.
The Committee Statement for the bill that would ultimately
be enacted as, among other things, § 77-103.01 provides:
Section 3 would provide a definition of “class or subclass
of real property” to be applicable throughout the property
tax statutes. According to the definition, a class or sub-
class is a group of properties that share characteristics not
shared by those outside the class or subclass. The clas-
sification may be based on use, size, zoning, city size, or
market characteristics. If based on the market, the class
must be based on characteristics that affect market value.
This change is a response to the Nebraska Supreme Court
decision in Bartlett v[.] Dawes County Bd. of Equalization,
259 Neb[.] 954, [6]13 N.W.2d 810 (2000), which held that
the TERC may not adjust by market area to achieve inter-
county equalization because market areas are not classes
or subclasses of property found in the statutes . . . .
l.B. 170, Revenue Committee, 97th leg., 1st Sess. (Jan. 25,
2001). A review of the floor debate for the bill makes it clear
that this statutory section was enacted in response to the deci-
sion in Bartlett v. Dawes Cty. Bd. of Equal., 259 Neb. 954, 613
N.W.2d 810 (2000).
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For purposes of our review of the present case, the criti-
cal portion of § 77-103.01 is the requirement that “[a] class
or subclass based on market characteristics shall be based on
characteristics that affect the actual value in a different manner
than [they affect] the actual value of properties not within the
market characteristic class or subclass.” The evidence adduced
in this case shows that the market areas in question were drawn
in compliance with this requirement. The evidence shows that
the market areas in this case were established based upon an
examination of the land for soil types, productivity, availability
of water, relation to market distribution points, land use, geog-
raphy, and sales history. Although the market area boundaries
are drawn on township and county lines and do not follow soil
classifications, the record shows that the topography varies
throughout the county, that there are smaller farms in the north
than in the south part of the county, and that the larger proper-
ties tend to sell for a higher value. The record shows that the
use of market areas in valuing agricultural land in the county
gave a more accurate picture of the market than would have
resulted from not using market areas.
[5] The statutes governing the TERC create a presumption
that the County Board has faithfully performed its official duties
and has acted upon sufficient competent evidence to justify its
actions. City of York v. York Cty. Bd. of Equal., 266 Neb. 297,
664 N.W.2d 445 (2003). This presumption remains until there
is competent evidence to the contrary presented. Id. Once the
presumption has been rebutted, the burden shifts to the party
requesting the exemption to prove its entitlement thereto. Id.
The TERC found that the taxpayers had not presented evidence
to overcome this presumption. We have reviewed the TERC’s
decision for errors on the record and find that the TERC’s deci-
sion conforms to the law, is supported by competent evidence,
and is neither arbitrary, capricious, nor unreasonable.
CONClUSION
The TERC did not err in finding that the market areas as
drawn by the county assessor complied with professionally
accepted methodology.
affirMed .
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