Joseph W. and Anna P. Hadley v. Board of Assessors of the City of Beverly (November 24, 2009)

COMMONWEALTH OF MASSACHUSETTS

APPELLATE TAX BOARD




JOSEPH W. and ANNA P. HALEY	v.	THE BOARD OF ASSESSORS 
							OF THE CITY OF BEVERLY

Docket No. F297869 (FY 2008)		Promulgated:
		 					November 24, 2009


	This is an appeal under the formal procedure, pursuant to G.L. c. 59, §§ 64 and 65, from the refusal of the appellee to abate a tax on certain real estate in the City of Beverly owned by and assessed to the appellants under G.L. c. 59, §§ 11 and 38, for fiscal year 2008.  
	Commissioner Rose heard this appeal. Chairman Hammond and Commissioners Scharaffa, Egan, and Mulhern joined him in the decision for the appellee.  
	These findings of fact and report are made pursuant to requests by both parties under G.L. c. 58A, § 13 and 831 CMR 1.32.  

	Joseph W. Haley, pro se, for the appellants.
	Francis J. Golden, Chief Assessor, for the appellee.


FINDINGS OF FACT AND REPORT
On January 1, 2007, Joseph W. Haley and Anna P. Haley were the assessed owners of a parcel of real estate located at 65 Paine Avenue in the Prides Crossing neighborhood in the City of Beverly ("subject property").  The irregularly shaped parcel contains approximately 4.91 acres of land with approximately 470 feet of sandy frontage on the Atlantic Ocean, and it is improved with two bath houses.  The appellants also own an approximately 1.154-acre contiguous parcel, which contains their home.  The two parcels were conveyed to the appellants on the same deed on August 25, 1972.  The multi-level, wood-shingled 4,861-square-foot contemporary home was built about 1957 and contains eight rooms, including three bedrooms, as well as one one-half and two full bathrooms.  Amenities include a two-car attached garage, three fireplaces, a deck off the master bedroom, and a covered entry porch. The appellants did not appeal the assessed value assigned to this property.  
The Board of Assessors of Beverly ("assessors") valued the subject property at $2,904,000 for fiscal year 2008 and assessed taxes thereon, at the rate of $10.40 per thousand, in the amount of $30,201.60.  The assessors valued the appellants' contiguous improved parcel at $549,700, and they identified the subject property as Lot 16A and the appellants' contiguous improved parcel as Lot 16 on assessors' Map 26.  
	On or about December 31, 2007, Beverly's Collector of Taxes sent out the city's actual real estate tax notices for fiscal year 2008.  In accordance with G.L. c. 59, § 57C, the appellants paid the taxes without incurring interest.  On January 28, 2008, in accordance with G.L. c. 59, § 59, the appellants timely filed their abatement application, which the assessors denied on April 24, 2008.  In accordance with G.L. c. 59, §§ 64 and 65, the appellants seasonably filed their appeal with the Appellate Tax Board ("Board") on July 14, 2008.  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-in-chief primarily through the testimony and photograph submissions of      Mr. Haley and the testimony and "Restricted Use Appraisal Report" of their real estate valuation expert, Stephen B. Gasperoni.  Relying on a sales-comparison approach and a highest and best use determination that valued the subject property as an unbuildable vacant parcel rather than one valued in conjunction with the appellants' contiguous improved parcel, Mr. Gasperoni estimated the fair cash value of the subject property as of January 1, 2007 at $550,000.  
In defense of the assessment, Francis J. Golden, the Chief Assessor for Beverly, and Steven Ozahowski, a real estate valuation expert, testified for the assessors.  The assessors also offered into evidence Mr. Golden's appraisal papers and Mr. Ozahowski's "Summary Appraisal Report."  Both Mr. Golden and Mr. Ozahowski valued the subject property in conjunction with the appellants' contiguous improved parcel.  Mr. Golden and Mr. Ozahowski considered the subject property's highest and best use to be as part of the appellants' contiguous two-parcel holding.  After valuing the two parcels as one larger ocean-front improved residential property, Mr. Golden assigned values to each of the two parcels using the standard assessing tables and guidelines adopted in Beverly.  His total value for the two parcels was their combined assessment of $3,453,700.  Relying on a sales-comparison approach, Mr. Ozahowski valued the two parcels as one property and estimated the one larger ocean-front improved residential property's fair cash value at $4,000,000, as of January 1, 2007.            
	In valuing the subject property, Mr. Gasperoni considered its highest and best use as though vacant to be "its acquisition by an abutter for possible development of accessory structures such as garage, pool sheds, and recreational uses."  He also determined that the subject property's highest and best use as improved was its continued use as a site for two bath houses.  He did not consider the subject property's highest and best use to be as part of a larger ocean-front improved residential property valued in conjunction with the appellants' contiguous improved parcel.  
To estimate the value of the subject property, Mr. Gasperoni relied on the sales-comparison approach while excluding both the cost and the income-capitalization approaches.  He rejected the cost approach because its use is most appropriate for special purpose properties or new construction, which is not the case here, and also because of a lack of meaningful land sales as well as the difficulty in estimating accrued depreciation.  Mr. Gasperoni eliminated the income approach because "[v]acant land like the subject seldom rents, if ever, or sells for their [sic] income producing capabilities." 
	To establish a value for the subject property, Mr. Gasperoni relied on three sales of buildable ocean-front land in the area, which he adjusted.  Two of the properties are located in the Magnolia neighborhood of Gloucester and one in Manchester-by-the-Sea.  The 122 Hesperous Avenue property in Magnolia sold for $1,425,000 in July, 2004.  It has 3.93 acres of land with 125 feet of rocky frontage on the Atlantic Ocean.  The 27 Wingaersheek Road property in Magnolia sold for $1,510,000 in August, 2005.  It has 1.16 acres of land with 125 feet of frontage on the Atlantic Ocean.  The 4 Norton's Point property in Manchester-by-the-Sea sold for $3,600,000 in August, 2006.  It has 2.135 acres with frontage on Manchester Harbor.  The following table summarizes the relevant data pertaining to these three sales as well as Mr. Gasperoni's adjustments and ultimate adjusted sale prices of $512,000, $455,000, and $650,000, respectively, which form the basis of his $550,000 estimate of the subject property's fair cash value for fiscal year 2008.
Mr. Gasperoni's Sales Adjustment Grid
	Sale # 1
122 Hesperus Ave.
Gloucester
	Sale # 2
27 Wingaersheek
Gloucester	Sale # 3
4 Norton's Pt.
Manchester	
Sale Price	$ 1,425,000	$ 1,510,000	$ 3,600,000	
Sale Date	07/12/2004	08/05/2005	08/09/2006	
Land Area (Acres)	3.93	1.16	2.135	
Sales Price/Lot 	$1,425,000	$ 1,510,000	$ 3,600,000	
Property Rights
	Fee Simple	Fee Simple	Fee Simple	
Adjusted Price
	$ 1,425,000	$ 1,510,000	$ 3,600,000	
Financing Terms	Market	Market	Market	
Mr. Gasperoni's Sales Adjustment Grid
continued
	Sale # 1
122 Hesperus Ave.
Gloucester
	Sale # 2
27 Wingaersheek
Gloucester	Sale # 3
4 Norton's Pt.
Manchester	
Conditions of Sale
	Market	Market	Market	
Adjusted Price 
	$ 1,425,000	$ 1,510,000	$ 3,600,000	
Time Adjustment
	None	None	None	
Adjusted Price 
	$ 1,425,000	$ 1,510,000	$ 3,600,000	
Actual Adjustments:				
 Location	None	None	None	
 Physical Character				
   Size	($   100,000)	($   200,000)	($   150,000)	
   Topography	($   712,500)	($   755,000)	($ 2,700,000)	
   Access	($   100,000)	($   100,000)	($   100,000)	
 Eco. Character	None	None	None	
 Use	None	None	None	
 Non-realty Compon.	None	None	None	
Total Net Adjs.	($   912,500)	($ 1,055,000)	($ 2,950,000)	
				
Adjusted Price 	$   512,500	$   455,000	$   650,000	
      
	 The assessors' first witness in their case-in-chief was Mr. Golden.  He testified that, during the fiscal year 2008 revaluation, the assessors reviewed their treatment of the subject property and the appellants' contiguous parcel, which contained their home.  The assessors decided that the two parcels should be valued collectively as ocean-front property with a primary site coupled with excess acreage.  Mr. Golden testified that the assessors could jointly value the two contiguous properties because they had been conveyed together to the appellants on the same deed.  In accordance with the residual technique that they applied to all properties in the city and consistent with the values ascribed to other properties in the subject property's neighborhood, the assessors valued the first 90,000 square foot primary site at $2,272,500 with the excess land being valued at $200,000 per acre.  Accordingly, for fiscal year 2008, the subject property and the appellant's contiguous property were valued collectively at $3,453,700.
	Mr. Ozahowski also testified for the assessors.  He determined that the subject properties' highest and best use was its use as part of a larger ocean-front improved residential property valued in combination with the appellants' contiguous parcel that contained the appellants' home.  Mr. Ozahowski testified that the subject property most likely would be marketed with the appellants' contiguous property and would in this way preserve the unobstructed ocean-front views and access and achieve the highest price for both the subject parcel and the appellants' contiguous one.  With this highest and best use, he estimated the fair cash value of the appellants' contiguous properties at $4,000,000 using a comparable-sales analysis, which included five Beverly properties and one from Manchester-by-the-Sea.  
Three of the Beverly properties, 76 Paine Avenue,     8 Curtis Point, and 171 West Street sold in 2005 and 2006 for $4,000,000, $2,912,500, and $2,275,000, respectively.  A fourth Beverly property, 28 Paine Avenue, was placed under agreement in December 2006 for $4,125,000, while the fifth Beverly property, 30 Paine Avenue, was listed for sale in June 2007 for $3,300,000.  The Manchester-by-the-Sea property, located at 27 Old Neck Road, sold in 2006 for $3,500,000.  After adjustments for factors such as date of sale, location, size of parcel, type and quality of construction, age, condition, and size of improvement, as well as amenities, Mr. Ozahowski valued the three Beverly properties, which sold in 2005 and 2006 at $4,343,600, $4,383,725, and $3,620,250, respectively; the fourth Beverly property, which was placed under agreement in December 2006, at $3,993,300; the fifth Beverly property, which was listed for sale in June 2007, at $4,110,500; and the Manchester-by-the-Sea property at $4,401,700.  One of the Beverly properties, 76 Paine Avenue, abutted the subject property and necessitated the smallest gross adjustment at 22%.  
On the basis of all of the evidence, the Board found that the appellants failed to meet their burden of proving that the subject property was overvalued.  More specifically, the Board found that the subject property's highest and best use was its use as part of a larger ocean-front improved residential property valued in combination with the appellants' adjoining parcel that contained the appellants' home.  The Board found that the subject property likely would be marketed with the appellants' contiguous property and would in this way preserve the unobstructed water-front views and access and achieve the highest price for both the subject parcel and the appellants' contiguous one.  The Board found that this highest and best use was legally permissible, physically possible, financially feasible, and maximally productive.  
In making this determination, the Board credited both Mr. Golden's and Mr. Ozahowski's testimony and opinion in this regard, as well as its own evaluation of the evidence, including photographs of the subject property and the appellants' adjoining parcel and improvements, maps depicting both of the appellants' properties and the neighborhood, descriptions of the appellants' properties contained in Mr. Golden's papers and Mr. Ozahowski's and Mr. Gasperoni's appraisal reports, and the description of the abutting 36 Paine Avenue comparable property contained in Mr. Ozahowski's Summary Appraisal Report.  The Board also relied on the deed transferring the two contiguous properties to the appellants, which enabled them to convey the two properties in conformity with the Board's highest and best use determination -- as a larger ocean-front improved residential property.                
In addition, the Board found that the 36 Paine Avenue comparable sale property upon which Mr. Ozahowski relied in his comparable-sales analysis supported, after adjustment, the combined assessments placed on the appellants' two contiguous properties, including the subject property.  This comparable sale abutted the appellants' properties and provided a reasonable check on the combined value assigned to the appellants' two contiguous properties by the assessors.  The Board found that this comparable property's adjusted value exceeded the combined assessments of the appellants' two properties by almost $1,000,000.  
In its analysis of the evidence, the Board did not credit the adjusted values assigned to the two properties in Mr. Ozahowski's Summary Appraisal Report that were merely "under agreement" or "listed" at a certain price because they were not reliable indicators of actual sale prices at a specific time.  The Board also did not accept the adjusted values that Mr. Gasperoni calculated for the comparable properties contained in his Restricted Use Report because his highest and best use determination did not comport with the Board's.  Consequently, the validity and probative worth of his adjusted values for ascertaining the fair cash value of the subject property for fiscal year 2008 were compromised.
On these bases, the Board found that the appellants failed to meet their burden of proving that the subject property was overvalued for the fiscal year 2008.  The Board, therefore, decided this appeal for the appellee.  

OPINION
	The assessors are required to assess real estate at its fair cash value.  G.L. c. 59, § 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 appellants have the burden of proving that the 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)). "[T]he board is entitled to 'presume that the valuation made by the assessors [is] valid unless the taxpayers . . . prove 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 this appeal, the appellants attempted to demonstrate overvaluation "'by introducing affirmative evidence of value which undermined the assessors' valuation.'"  Id.  
"Prior to valuing the subject property, its highest and best use must be ascertained, which has been defined as the use for which the property would bring the most."  Tennessee Gas Pipeline Co. v. Assessors of Agawam, Mass. ATB Findings of Fact and Reports 2000-859, 875 (citing Conness v. Commonwealth, 184 Mass. 541, 542-43 (1903)); Irving Saunders Trust v. Assessors of Boston, 26 Mass. App. Ct. 838, 843 (1989)(and the cases cited therein). "[T]he phrase 'highest and best use' implies the selection of a single use . . . and . . . the Board is required to make its best judgment as to what that use is likely to be, considering all the evidence presented."  New England Telephone and Telegraph Co. v. Board of Assessors of the Town of Framingham, Mass. ATB Findings of Fact and Reports 1988-95, 150.  In determining the property's highest and best use, consideration should be given to the purpose for which the property is adapted.  See Leen v. Board of Assessors of Boston, 345 Mass. 494, 504 (1963); Boston Gas Co., 334 Mass. at 566.  A property's highest and best use must be legally permissible, physically possible, financially feasible, and maximally productive. Appraisal Institute, The Appraisal Of Real Estate 277-81 (13th ed., 2008); see also Skyline Homes, Inc. v. Commonwealth, 362 Mass. 684, 687 (1972);  DiBaise v. Town of Rowley, 33 Mass. App. Ct. 928 (1992).  Property cannot be valued on the basis of hypothetical or future uses that are remote or speculative.  See Skyline Homes, 362 Mass. at 687; Tigar v. Mystic River Bridge Authority, 329 Mass. 514, 518 (1952); Salem Country Club, Inc. v. Peabody Redevelopment Authority, 21 Mass. App. Ct. 433, 435 (1986).  
In the present appeal, the appellants' real estate valuation expert stated that the subject property's highest and best use was its current use.  The Chief Assessor and the assessors' real estate valuation expert found that the subject property likely would be marketed and sold with the appellants' contiguous property and would in this way achieve the highest price for both the subject parcel and the appellants' contiguous one.  Accordingly, they posited that the subject property's highest and best use was as part of a larger ocean-front improved residential property valued in combination with the appellants' contiguous improved parcel.  Under the circumstances present in this appeal, the Board agreed with the Chief Assessor's and the assessors' real estate valuation expert's determination and found and ruled that the subject property's combined use with the appellants' contiguous improved parcel as a larger improved residential ocean-front property was its highest and best use for the fiscal year at issue.  The Board agreed that the two properties would likely be marketed and sold together to maximize the selling price for both parcels.  See Schear v. Assessors of Barnstable, Mass. ATB Findings of Fact and Reports 1998-611, 618 & 622 (finding that the highest price for the water-front parcels at issue in that appeal would be obtained by marketing them with adjacent parcels of common ownership); see also The Appraisal Of Real Estate at 213 ("Sometimes highest and best use results from assembling two or more parcels of land under one ownership.  If the combined parcels have a greater unit value than they did separately, plottage value is created.  Plottage is an increment of value that results when two or more sites are combined to produce a larger site with greater utility.").        
Generally, real estate valuation experts, the Massachusetts courts, and this Board rely upon three approaches to determine the fair cash value of property:  income capitalization, sales comparison, and cost reproduction. 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).  In this appeal, the appellants' real estate valuation expert did not use cost-reproduction or income-capitalization techniques.  He determined that they were not appropriate valuation methodologies for valuing the subject property.  Instead, both he and the assessors' real estate valuation witness used sales-comparison methods.  The Board agreed with both real estate valuation experts and found and ruled that an analysis of comparable sales was the best method to use to value the subject property for fiscal year 2008.    
Actual sales generally "furnish strong evidence of market value, provided they are arm's-length transactions and thus fairly represent what a buyer has been willing to pay for the property to a willing seller."  Foxboro Associates v. Assessors of Foxborough, 385 Mass. 679, 682 (1982); New Boston Garden Corp. v. Assessors of Boston, 383  Mass. 456, 469 (1981); First National Stores, Inc. v. Assessors of Somerville, 358 Mass. 554, 560 (1971).  Sales of comparable realty in the same geographic area and within a reasonable time of the assessment date contain credible data and information for determining the value of the property at issue.  See McCabe v. Chelsea, 265 Mass. 494, 496 (1929).  "A major premise of the sales comparison approach is that an opinion of the market value of a property can be supported by studying the market's reaction to comparable and competitive properties."  The Appraisal of Real estate at 297.  
In this appeal, the Board found and ruled that the appellants failed to meet their burden of demonstrating that the subject property was overvalued for fiscal year 2008 because their real estate valuation expert's comparable-sales analysis did not focus on "comparable and competitive properties."  Id.  "In the sales comparison approach, the appraiser develops an opinion of value by analyzing . . . sales of properties that are similar to the subject property," id., by looking for properties with, among other things, "similar . . . property types" and uses.  Id. at 301.  "The analysis of highest and best use helps . . . identify and analyze the competitive . . . factors that influence value in the market."  Id. at 300.  It also "provides the basis for the research and analysis of comparable sales."  Id.  In this appeal, because Mr. Gasperoni misidentified the subject property's highest and best use, the Board found and ruled that his comparable-sales analysis contained dissimilar properties and, consequently, was of little probative worth.           
Furthermore, the Board found that the 36 Paine Avenue comparable sale property upon which the assessors' real estate valuation expert relied in his comparable-sales analysis, supported, after adjustment, the combined assessments placed on the appellants' two properties, including the subject property.  This comparable sale abutted the appellants' properties and, the Board found and ruled, provided a reasonable check on the combined value assigned to the appellants' two contiguous properties by the assessors.  The Board found that this comparable property's adjusted value exceeded the combined assessments of the appellants' two contiguous properties by almost $1,000,000. 
 On these bases, the Board ultimately found and ruled that the appellants failed to meet their burden of proving that their property was overvalued for the fiscal year 2008. 
"The board [is] not required to believe the testimony of any particular witness but [may] accept such portions of the evidence as appear to have the more convincing weight. Assessors of Quincy v. Boston Consol. Gas Co., 309 Mass. 60, 72 (1941).  "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).  
The Board, therefore, decided this fiscal year 2008 appeal for the appellee.

  					   APPELLATE TAX BOARD

				  

			    By:			          	____
				  Thomas W. Hammond, Jr., Chairman A true copy,

Attest:					
    Clerk of the Board

 The assessors mistakenly termed their denial a "deemed denial," which, under the circumstances present in this appeal, constitutes harmless error.  

ATB 2009-1159