Black Cat Cranberry Corporation v. Board of Assessors of the Town of Carver; Black Cat Cranberry Corporation v. Board of Assessors of the Town of Kingston (August 2, 2001)

COMMONWEALTH OF MASSACHUSETTS

APPELLATE TAX BOARD

BLACK CAT CRANBERRY 		v.	BOARD OF ASSESSORS OF 
CORPORATION					THE TOWN OF KINGSTON

Docket No. F256007				 
and

BLACK CAT CRANBERRY 		v.	BOARD OF ASSESSORS OF 
CORPORATION					THE TOWN OF CARVER								
Docket No. F256008				Promulgated: 
							August 2, 2001


	These are appeals under the formal procedure, pursuant to G.L. c. 59, §§ 64 and 65, from the refusal of the appellees to abate taxes on certain real estate located in the Towns of Kingston and Carver, owned by and assessed to the appellant under G.L. c. 59, § 38 for fiscal year 2000. 
	Commissioner Egan heard the Kingston appeal and was joined in the decision for the appellee Board of Assessors of the Town of Kingston by Chairman Burns and Commissioners Scharaffa, Gorton and Rose.  Commissioner Rose heard the Carver appeal and was joined in the decision for the appellee Board of Assessors of the Town of Carver by Chairman Burns and Commissioners Scharaffa, Gorton and Egan.
	These findings of fact and report are promulgated at the request of the appellant, pursuant to G.L. c. 58A, § 13 and 831 CMR 1.32.
	Richard H. Sgarzi, pro se for the appellant.

James Judge, Assessor, for the appellee Board of Assessors of the Town of Kingston.



FINDINGS OF FACT AND REPORT

	On January 1, 1999, the Black Cat Cranberry Corporation ("Black Cat Cranberry") was the assessed owner of a parcel of real estate located in the Town of Kingston ("Kingston parcel").  On January 1, 1999, Black Cat Cranberry was also the assessed owner of a parcel of real estate located in the Town of Carver ("Carver parcel"). Black Cat Cranberry operates approximately 100 acres of cranberry bogs in Carver, Plymouth, Kingston and Duxbury.
The Kingston parcel, consisting of 8.95 acres and including a 6.2 acre cranberry bog ("North Plymouth Bog"), is located off Anderson Road, Kingston. This parcel is identified by the Board of Assessors of the Town of Kingston ("Kingston Assessors") as map 84, lot 31. 
The Carver parcel, consisting of 41.17 acres and including a 17.25 acre cranberry bog ("North Carver Bog"), is located on Plymouth Street, Carver.  This parcel is identified by the Board of Assessors of the Town of Carver ("Carver Assessors") as map 48, block 2, lot 0.  
For the tax year at issue, as well as in previous years, both parcels at issue were valued, assessed,      and taxed as agricultural land under the provisions of  G.L. c. 61A. 
  	For fiscal year 2000, the Kingston Assessors valued the Kingston parcel at $131,300.  Their valuation was based upon the range of values promulgated by the Massachusetts Farmland Valuation Advisory Commission ("FVAC") for fiscal year 2000.  Taxes were assessed thereon at the rate of $16.39 per thousand, in the amount of $2,152.01.
The appellant timely paid the Kingston taxes for fiscal year 2000, without incurring interest.  On January 18, 2000, the appellant filed an application for abatement for fiscal year 2000, before the last day for payment of the first installment of the actual tax bill.  By notice dated January 26, 2000, the Kingston Assessors denied the abatement application.  The appellant seasonably filed its fiscal year 2000 appeal with the Appellate Tax Board ("Board") on April 25, 2000.  On this basis, the Board found that it had jurisdiction over the Kingston appeal.
For fiscal year 2000, the Carver Assessors valued the Carver parcel at $332,916.  Their valuation was also based upon the range of values promulgated by FVAC for fiscal year 2000.  Taxes assessed thereon were at the rate of $25.79 per thousand, in the amount of $8,585.90. 
The appellant timely paid the Carver taxes for   fiscal year 2000, without incurring interest.  On    January 11, 2000, the appellant filed an application for abatement, before the last day for payment of the first installment of the actual tax bill.  By notice dated February 16, 2000, the Carver Assessors denied the abatement application.  The appellant seasonably filed its fiscal year 2000 appeal with this Board on April 25, 2000.  On this basis, the Board found that it had jurisdiction over the Carver appeal. 
Each parcel at issue is comprised of cranberry bog, surrounded by wetlands, waterholes and roadways, with no potential for residential development. For the ten-year period prior to the fiscal year at issue, Black Cat Cranberry's overall cranberry production was ten percent above the Massachusetts average.  The most recent five-year average production for its Kingston cranberry bog     (North Plymouth bog), from 1995 through 1999, was 214 barrels per acre. In 2000, the North Plymouth bog produced 165.57 barrels per acre.  The most recent five-year average production for its Carver cranberry bog (North Carver bog), from 1995 through 1999, was 138 barrels per acre.  In 2000, the North Carver bog produced 163.70 barrels per acre. 
The FVAC's range of values for agricultural land used for cranberry production, utilized by both the Kingston and Carver Assessors to value the parcels at issue, is based on a five-year average value of cranberry bogs in the Commonwealth.  The per acre range of values established for fiscal year 2000 is as follows: 
Production level (barrels/acre)	Above average		Average	Below Average
Cranberries				> 162			110-162	< 110

Effective tax rate: 
  Low (single rate)			$21,085		$17,570	$14,055
  High	(split rate)			$19,200		$16,000	$12,800
												
Non-productive land			$55			$45		$35



The Board found and ruled that both the Kingston and Carver Assessors properly relied upon current FVAC guidelines in valuing the parcels at issue, in compliance with G. L. 61A, § 10.  Both parcels at issue had "above average" per acre cranberry yields for fiscal year 2000, and both Assessors, accordingly, valued their respective parcels pursuant to the specified per acre value within that category.   
The appellant, however, argued that the parcels at issue should have been valued outside the guidelines promulgated by the FVAC for fiscal year 2000.  In support of its position, the appellant asserted that the late 1990's industry-wide overproduction of cranberries, coupled with declining demand, resulted in a sharp decline in the market price of cranberries.  Without identifying any specific factors to support a determination of value outside the FVAC's guidelines, the appellant further asserted that valuation utilizing income capitalization methodology would more accurately reflect the true value of the subject parcels.   
Utilizing income capitalization methodology, the appellant estimated that the overall fair market value of the Carver parcel for fiscal year 2000 was less than $10,000 per acre.  Similarly, the appellant estimated that the overall fair market value for the Kingston parcel for fiscal year 2000 was less than $5,000 per acre. In calculating these values on a per acre basis, the appellant used actual income generated by the parcels at issue, along with actual expenses incurred in operating the bogs.  Both parcels at issue generated net losses for fiscal year 2000.  The capitalization rate utilized was based on a seven-year term mortgage, with an interest rate of 9.5 percent for the North Carver bog and 10 percent for the North Plymouth bog.  The appellant, however, supported neither income, expenses nor capitalization rates with market data.
The Board found that the appellant failed to clearly identify specific factors to support a determination of value outside the range of values promulgated by the FVAC for fiscal year 2000.  Consequently, the Board found that there was insufficient support to warrant valuation of either parcel outside the range of values set forth by the FVAC's guidelines.  
Further, even if the appellant had clearly identified specific factors to support a determination of value outside the FVAC's guidelines for either parcel, the Board found that the income capitalization methodology utilized by the appellant was flawed because the value estimates used lacked proper foundation.  While the appellant used actual income, actual expenses and actual debt service in determining value, no evidence was introduced to demonstrate that these figures were indicative of the relevant market.  On this basis, the Board found that the income, expenses and capitalization rate used by the appellant lacked credible market support.  Accordingly, the Board found that the estimates of value for the subject parcels, obtained by the appellant's methodology, were not adequately supported.  Consequently, the values derived therefrom were without merit.  
For the reasons stated above, the Board found that the appellant failed to meet its burden of proving that the subject parcels were overvalued for fiscal year 2000.  Accordingly, the Board issued a decision for the appellees in these appeals.

OPINION
Valuation of land classified under Chapter 61A as agricultural and/or horticultural land must be derived solely from values based upon its agricultural            or horticultural use, rather than from values based      upon the ordinary standard of "fair cash value".        G.L. c. 61A, §§ 4 and 10.  "In the . . . Board's experience, the land values so determined by                    use have always been considerably less than fair cash     values for 'highest and best' uses . . . ."              NMB Wetstone v. Board of Assessors of the Town of Longmeadow, 9 Mass. App. Tax. Bd. Rep. 31, 34 (1987).  Landowners, therefore, "who choose to have their land so qualified [under Chapter 61A] . . . receive a benefit of a lower tax levy for each year that they qualify by continued agricultural or horticultural use."  Id.  
In determining use value for land qualified under Chapter 61A, and while permitted to rely on their own knowledge, judgment and experience concerning local land values, local assessors are required to consider the ranges of land use values promulgated each year by the FVAC     and published by the Commissioner of Revenue.           G.L. c. 61A, § 10.  "[I]t is mandatory that the assessors take into consideration the ranges of value established by the  FVAC . . . ."  Mann v. Board of Assessors of Wareham, 387 Mass 35, 40 (1982) ("Mann I").  (Emphasis added.)    See also Mann v. Board of Assessors of the Town of Wareham, 8 Mass. App. Tax. Bd. Rep. 97 (1987).   ("Mann II.") 
The FVAC is specifically charged with determining annually, prior to January first of each year, a range of values for each classification of land in agricultural or horticultural use in the Commonwealth on a per acre basis. G.L. c. 61A, § 11.  The FVAC is instructed to determine its annual range of values after consideration of "agricultural or horticultural land use capability available from soil surveys and such other evidence and documentation as may, in its judgment, appear pertinent."  G.L. c. 61A, § 11.  The FVAC's members are the Commissioner of Revenue, the Commissioner of Agriculture, the Director of Housing and Community Development, the Dean of the College of Food and Natural Resources of the University of Massachusetts, or their respective designees, and one member of a local board of assessors, appointed by the Governor. G.L. c. 61A, § 11.  As highlighted by this Board, because the FVAC's range of values "are promulgated throughout the Commonwealth, it seems inferable that the Legislature intended some uniformity of treatment of farmland in each category in the absence of relevant differences affecting particular parcels or parcels in particular communities."          Mann II, 8 Mass. App. Tax. Bd. Rep. at 108.  
Further, the Massachusetts Supreme Judicial Court ("SJC") in Mann I found that the 

Act clearly provides that the FVAC guidelines are some evidence of value.  G.L. c. 61A, § 10.  In valuing land classified as agricultural or horticultural, a finding of value within the guidelines established by FVAC would therefore require little additional evidence to meet the substantial evidence test. 
 

Mann v. Board of Assessors of Wareham, 387 Mass. at 42.  Moreover, the SJC found that 

[a] determination of value outside the guidelines would require an appreciably stronger showing and would require, at a minimum, an identification of the factors that led to a determination of value outside the guidelines.


Id. (Emphasis added.) As this Board cautioned, "[t]he language of the [Mann I] Court strongly suggests that the board should be sure of its ground before concluding that the [Farmland Valuation Advisory] Commission lacked        a reasonable basis for its determinations."             Mann II, 8 Mass. App. Tax. Bd. Rep. at 108.  
	In the present appeals, the Board found and ruled that the valuation of the subject parcels, by both the Kingston and Carver Assessors, were based on the guidelines set forth by the FVAC, in compliance with Chapter 61A.  At minimum, therefore, the appellant must identify specific factors that lead to a determination of value outside these guidelines.  Mann I, 387 Mass. at 42.  
 In support of its opinion of value outside the FVAC guidelines, the appellant described, only generally, the overall drop in regional cranberry prices in the late 1990s without identifying specific factors that lead to a determination of value outside the FVAC's guidelines.  In addition, the appellant argued that in order to reflect the true earning capacity of the parcels at issue in a declining market, the subject parcels should be valued by an income capitalization methodology. 
The SJC has recognized that the ordinary fair cash methods for land valuation, such as the income capitalization method, are not "without problems" when applied to use valuation.  Mann I, 387 Mass. at 41.  In use valuation, for example, the SJC noted that "the income approach has . . . been criticized for not distinguishing between efficient and inefficient operations, or for failing to adjust for variable factors, such as weather conditions."  Id. citing King v. Real, 466 S.W.2d 1,       7 (Tex. Civ. App. 1971).  
In addition to concerns with the application of income capitalization methodology to use valuation of farmland, the Board found and ruled that this appellant's application of income capitalization methodology to value the parcels at issue was seriously flawed because the income, expenses and capitalization rates utilized were not adequately supported by market data.  The validity of a final estimate of market value depends to a great extent on how well it can be supported by market data.  The Appraisal Institute, THE APPRAISAL OF REAL ESTATE, (11th Ed., 1996) at 169.  It is the earning capacity of real estate, rather than its actual income, that is probative of market value.  Assessors of Quincy v. Boston Consolidated Gas Co.,      309 Mass. 60, 64 (1941).  
Moreover, while the income capitalization method "is frequently applied with respect to income producing property," Taunton Redevelopment Associates v. Assessors of Taunton, 393 Mass. 293, 295 (1984), "[i]ts proponent    must establish the existence of an income stream            which 'adequately reflect[s] earning capacity."           Analogic Corporation v. Board of Assessors of Peabody,    45 Mass. App. Ct. 605, 610 (1998), quoting            Pepsi-Cola Bottling Company v. Assessors of Boston,      397 Mass. 447, 451 (1986).  Using actual income figures may be acceptable, as long as they reflect the market.       See generally Pepsi-Cola Bottling Company v. Assessors of Boston, 397 Mass. at 449.  See also Carye v. Assessors of Chelmsford, 394 Mass. 1001 (1985) (The SJC affirmed the Board's use of actual rents for valuation because there was substantial evidence in the record to support the Board's conclusion that actual rents were an adequate measure of the earning capacity of the real estate at issue in that case).  The expenses should similarly mirror the market.  General Electric v. Assessors of Lynn, 393 Mass. 591,    610 (1984).  The capitalization rate selected should consider the return necessary to attract investment capital. Taunton Redevelopment Association v. Assessors of Taunton, 393 Mass. at 295.  In these appeals, the appellant did not properly determine or support market income, expenses or reasonable capitalization rates.  Consequently, the Board ruled that the appellant's suggested income approach was not a reliable means for estimating value of the subject parcels for the fiscal year at issue.
An assessment of a parcel of real estate's value is presumed valid until the taxpayer sustains his burden of proving otherwise.  Schlaiker v. Board of Assessors of Great Barrington, 365 Mass. 243, 245 (1974).  Accordingly, the burden of proof is upon the appellant to make out his right as a matter of law to an abatement of the tax.  Id.  The mere going forward with evidence is not enough to meet the taxpayer's burden in this regard; the evidence must be credible and persuasive.  See Foxboro Associates v. Board of Assessors of Foxborough, 385 Mass. 679, 691 (1982).  Furthermore, the Board may disbelieve a witness or reject evidence as long as it has "'explicit and objectively adequate reason.'"  New Boston Garden Corporation v. Board of Assessors of Boston, 383 Mass. 556, 470 (1981).
In reaching its decision in these appeals, the Board was not required to believe the testimony of any particular witness or adopt any particular method of valuation that an expert witness suggested.  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. at 683;            New Boston Garden Corporation v. Assessors of Boston,    383 Mass. at 473; Assessors of Lynnfield v. New England Oyster House, Inc., 362 Mass. 696, 701-702 (1972).      "The credibility of witnesses, the weight of evidence, the 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 these appeals, therefore, the Board found and ruled that the appellant failed to identify any specific factors that would require a determination of the parcels' use value outside the range of values set by the FVAC guidelines.  Moreover, even had the appellant specifically identified such factors, the Board was not convinced that the evidence presented by the appellant substantiated that the parcels at issue were overvalued.  In particular, the Board further found and ruled that the appellant's income capitalization approach to determine value was flawed because it was without market support, and was therefore unreliable. 
	On this basis, the Board found and ruled that the appellant failed to demonstrate that the parcels at issue were overvalued in fiscal year 2000.  The Board, therefore, decided these appeals for the appellees.
						APPELLATE TAX BOARD
					By:  ______________________
						Abigail A. Burns, Chairman
A true copy,
Attest: ___________________
   Clerk of the Board

 No appearance was filed on behalf of the appellee Board of Assessors of the Town of Carver.
  In this matter, the Kingston Assessors did not provide the Board with a breakdown of its overall valuation, between productive and non-productive acreage.  
 As documented by its property record card submitted into evidence by the appellant, the Carver Assessors valued the Carver parcel as follows: 17.25 acres of cranberry bog at $331,200, based on $19,200.00 per acre, derived from FVAC's guidelines for above average cranberry production, "high (split) rate"; 21.42 acres of non-productive land at $1,178, based on $55.00 per acre, derived from FVAC's guidelines for above average cranberry production; 2.5 acres of related land at $538.
 General Laws chapter 61A, § 10, as then in effect and as applicable to both Mann I and Mann II, required only that boards of assessors "be guided by" the values determined under FVAC guidelines. (Emphasis added.)  The statutory language requiring that boards of assessors use the range of values established by FVAC was added in 1983, following the decision of Mann I.  St. 1983, Ch. 709. 

ATB 2001 - 613