Wisconson County Assessor A - WAAO

Wisconson County Assessor A - WAAO

WAAO Quarterly Meeting 2016 Dark Stores: The Indiana Experience Judy Sharp Stacey ODay Presenters Judy Sharp Monroe County Assessor, Bloomington IN Population 87,000 + 43,000 IU Students Parcel Count 60,000

ICAA President 2009- present Stacey ODay Allen County Assessor, Fort Wayne IN Serving 3rd Term, 25 years experience Population 260,000 - Parcel Count 156,000 ICAA Vice President, Legislative Chair The Indiana Experience

Indiana 92 County Assessors 13 Township Assessors Elected Position, 4 year Term Must be a Level III Certified Assessor Appraiser IAAO (101,102,300,400, USPAP) The Indiana Experience IN -Property rights that are assessable

IN -History of Dark Store philosophy IN - Reaction to the Dark Store from legislators and assessors IN Public Sentiment on Dark Store IN Tangible effects of the decisions

IN - Current legislative proposals, ongoing cases & fixes IN Helpful ideas Indiana - property rights that are assessed Pre-Town of St. Johns True Tax Value 1. Improvements = Cost/Book Value (Marshall Swift)

2. Land = Market Value Resulted in values less than market value Paid taxes on 1/3 of True Tax Value Indiana - property rights that are assessed May 31, 1996 (St. Johns I) Tax Court finds assessments based on fair market values are required

December 10, 1996 (St. Johns II) Study predicts that market values in exchange would cause unfavorable tax shifts: large increases for homeowners large decreases for commercial & industrial December 23, 1996 (St. Johns II) Supreme Court reverses Tax Court finding regarding market value Indiana - property rights that are assessable http://www.in.gov/judiciary/opinions/previous/archive/120401.bed.html

Indiana - property rights that are assessable December 4, 1998 (St. Johns V) Indiana Supreme Court upheld Tax Courts finding that Indianas then tax assessment system was unconstitutional and that the State Board must recognize all competent evidence of property wealth. As the Tax Court noted, the constitution does not require an assessment to be based upon the highest and best use of the property. Id. at 379. Indiana Supreme Court, Page 19 Focusing upon the taxpayers actual use of land and improvements, rather

than the possible uses which potential purchasers may choose, is an altogether appropriate way to evaluate property wealth for the purpose of assessment and taxation under the Property Effectively changed Indianas property tax assessment system and created a new valuation standard. VALUE-IN-USE Indiana - property rights that are assessable Post-Town of St. Johns Market Value-in-Use 3 Approaches to Value Cost, Sales & Income

Does not equal Value-in-Exchange or Highest and Best Use Indiana - property rights that are assessable Real Property Assessment Manual IC 6-1.1-31-6(c) provides that [w]ith respect to the assessment of real property, true tax value does not mean fair market value. Subject to this article, true tax value is the value determined under the rules of the department of local government finance. In the case of agricultural land, true tax value shall be the value determined in accordance with the Guidelines adopted by the Department of Local Government Finance and IC 6-1.1-4-13. In the case of all other real property, true tax value shall mean market value-in-use, which is defined as follows: The market value-in-use of a property for its current use, as reflected by the utility received by the owner or by a similar user, from the property.

True tax value may be considered as the price that would induce the owner to sell the real property, and the price at which the buyer would purchase the real property for a continuation of use of the property for its current use. In markets in which sales are not representative of the utility to the owner, either because the utility derived is higher than indicated sales prices, or in markets where owners are motivated by non-market factors such as the maintenance of a farming lifestyle even in the face of a higher use value for some other purpose, true tax value will not equal value-in-exchange. The market value-in-use standard includes a market value-in-exchange component in markets where there are regular exchanges for the current use. Indiana - property rights that are assessable 2002 -

Cost, Sales & Income Ag / Farm land is one set price throughout the state $2,050 per acre set by the State Residential Properties Mass appraisal Depreciated Cost

Trended by data collected by Sales Disclosures (2006) Market factors are applied to cost to keep in line with market values. Commercial / Industrial Properties Mass appraisal Depreciated Cost (Craftsman cost schedule) Income data is collected and used to value leased based properties Indiana Dark Store Philosophy Indiana Dark Store Philosophy August 16, 2006

Meijer #1 https://secure.in.gov/ibtr/files/89-030-02-1-4-00417.pdf Wayne Twp. Assessor, 821 N.E.2d 466, 469 (Ind. Tax Ct. 2005). The appraiser chose the sale of vacant and abandoned Walmart and Lowes stores to such secondary users as Big Lots as comparable properties. The appraiser admitted, however, that the subject property was built for Meijers own use. It was not built as an investment. Nor was it built to sell. Mr. Mitchell testified that comparable users of big box retail stores were retail stores like Lowes, Home Depot and Walmart. He testified, however, that those retailers would not buy an existing big box store, but instead the retailers would build

their own store using their own marketing scheme and layout. 8 Despite his testimony that a competitor would not buy a Meijer store but would build its own, the appraiser deemed this not to be a special use because there were approximately 46 sales of closed or bankrupt big box stores to secondary users of abandoned big box facilities such as Burlington Coat Factory or Hobby Lobby. We are not persuaded by the Petitioners argument.9 Meijer #1

Footnote:10 Similar to a build to suit property, the Meijer store cannot be compared to an open market transaction because it was not built to be sold in any open market transaction, but rather for the profits generated by the stores operation. As the Petitioner itself observed, the store would not have been constructed at all if it had been required to have a return on cost. Mitchell testimony. Thus, it is clear that the value of the property to Meijer to use as a Meijer store is the cost of the development and construction of the property and not what price in the market that the properties may raise if the properties are later sold for a different retail purpose than the one for which they were developed. Footnote:11 We note that despite the fact that the store opened in 2000, the Petitioner presented no evidence of its actual construction costs or the purchase price of the property on which the store was built. Because there is no evidence of the actual construction costs, we base our conclusions on the assumption that the actual costs are not exceeded by the appraised costs of the subject property.

Footnote: 12 The definition of true tax value is the market value-in-use of a property for its current use, as reflected by the utility received by the owner or similar user, from the property. MANUAL at 2. The Petitioner argues that we should consider the value to a similar user and focus on the market rather than the value of the properties to Meijer. We decline to read the definition so narrowly as to disregard the value of a property to its owner. Because the Meijer store at issue here is a store developed and constructed for Meijers own use and purposes it is well within the Manuals contemplation that the value of that use to Meijer be considered. Indiana Dark Store Philosophy Life is good! Our assessment system is working!

What Dark Store?? Indiana Dark Store Philosophy March 26, 2010 Indiana Tax Court overturned Meijer #1 2002, 2003 & 2005 Meijer Presented an appraisal The Assessor did not present evidence. Tax Court ruled that the Assessor had not presented evidence or argument to refute this claim.

Indiana Dark Store Philosophy March 26, 2010 Sue Ann Stinson, Washington Township v. Trimas Fasteners, Inc. Judge Fisher says Generally speaking, market value-in-use, as determined by objectively verifiable market data, is the value of a property for its use, not the value of its use. 10 See Manual at 2-3 (footnote added). What the *&%$# (heck) does this mean?? Footnote:10 Thus, in markets where property types are frequently exchanged and used by both buyer and seller for the same general purpose, a sale will be representative of utility and market value-in-use will equal value-inexchange. Manual at 2-3. Having said that, the Court notes that Indiana's Assessment Manual provides an exception to this rule with respect to special-purpose properties. A special-purpose property is [a] limitedmarket property with unique physical design, special construction materials, or a layout that restricts its utility to the use for which it was built. Guidelines, Bk. 2, App. F at 17. Generally, a sale will not be representative of utility with respect to a special-purpose property. See id. Both Mitchell and Helmer agreed, however, that Trimass property was

not a special-purpose property. (See Cert. Admin. R. at 818-19, 823, 896.) Indiana Dark Store Philosophy IBTR (Indiana Board of Tax review) Takes note of Judge Fishers broad generalization of sales that can be usedthe swung far to the left except for Special Use Properties pendulum has Indiana Dark Store Philosophy Assessors take note!

Dont go to the IBTR without an USPAP appraisal 2005 Kooshtard v. White River Township .the most effective method to rebut the presumption that an assessment is correct is through the presentation of a market value-in-use appraisal, completed in conformance with the Uniform Standards of Professional Appraisal Practice (USPAP) . A sales comparable need only be for general use the value of a property for its use, not the value of its use. (Whatever that means??) Be prepared to spend some $$ to defend a fair assessment Indiana - Reaction to the Dark Store Decisions

December 12, 2014 Meijer Stores LP v. Marion County Assessor http://www.in.gov/ibtr/files/Meijer_Stores_LP_49-440-02-1-4-00573_etc.pdf Board found that using build-to-suit leases and sale-leaseback transactions to determine market rent detracted from the persuasiveness of the Marion Assessors appraisal as they did not account for various market factors that affect typical investors . 65% reduction in Assessed Value

December 31, 2014 Kohls Indiana LP v. Howard County Assessor http://www.in.gov/ibtr/files/Kohls_Indiana_LP_34-002-10-1-4-00350_etc.pdf Board held that the Howard County appraisal interpreted market value-in-use too narrowly by focusing on Kohls as a special use property that was unaffected by obsolescence. 40% reduction in Assessed Value Both taxpayers won using Dark Stores Both sides had Appraisals Indiana - Reaction to the Dark Store Decisions

2015 legislative session was about to begin AIC -Association of Indiana Counties ICAA-Indiana County Assessors Association 1. Contact our Legislators 2. Gathered data of the assessed value loss Indiana Reaction to Dark Store Decisions Monroe County Indiana Reaction to the Dark Store Decisions Allen County

Indiana Reaction to the Dark Store Decisions Statewide conference calls Indiana - Reaction to the Dark Store Decisions Indiana - Reaction to the Dark Store Decisions Indiana - Reaction to the Dark Store Decisions Indiana- Reaction to the Dark Store Decisions 3.5 Billion loss in AV annually

$120 Million in revenue annually $50 Million shift to other classes $43 Million increase to circuit breaker loss $25 Million loss to TIF 7 property classes

17,067 parcels 310: Industrial Food & Drink 320: Industrial Foundries & Heavy Manufacturing 330: Industrial Medium Manufacturing and Assembly 421: Commercial Supermarkets 422: Commercial Discount & Junior Department Stores

424: Commercial Full Line Department Stores 429: Commercial Other Retail Structures Indiana Reaction to Dark Store Decisions Indiana Reaction to Dark Store Decisions Senate Enrolled Act 436 (2015) 05/06/2015 Signed by the Governor 1. Cost must be provided on buildings 10 years or newer during the appeals process 2. Land must be assessed separately from buildings

Following comps cannot be used: 1. Vacant for more than one year 2. Significant deed restrictions 3. Comp that sold, no longer used for same purpose Indiana Reaction to Dark Store Decisions While this was an attempt to address Tax Court rulings, it was not a cure-all. It is estimated that another 4000 pending appeals are at the

IBTR. 600 possible appeals using the dark store method. Indiana Reaction to Dark Store Decisions August 19, 2016 CVS v. Monroe County Assessor Indiana - Reaction to the Dark Store Decisions

Appeals are still being filed Indiana - Reaction to the Dark Store Decisions Indiana Reaction to Dark Store Decisions Indiana Reaction to Dark Store Decisions Public/Business Sentiment Monroe County

Marion County St. Joseph County Newspaper

TV Media Coverage Local Chamber Positive

IMA - Indiana Manufacturing Association Indiana State Chamber Indiana Retailers Association Negative Current Legislative Proposals

Market Segmentation Real estate markets are divided into categories based on property types and their appeal to different market participants. The markets for various categories ... are further divided into submarkets, which correspond to the preference of buyers and users. Appraisal of Real Estate 163. The economic concept of highest and best use is the logical end of a spectrum of market analysis procedures, running from the macroeconomic overview of a general market study, through more detailed marketability studies ... to the formal analysis of highest and best use. Id. at 331.

Current Legislative Proposals Senate Bill 308 Construction costs must be supplied Market Segmentation 7 (d) With respect to the assessment of an improved property, a 8 valuation does not reflect the true tax value of the improved 9 property if the purportedly comparable sale properties supporting 10 the valuation have a different market or submarket than the 11 current use of the improved property, based on a market 12 segmentation analysis. Any market segmentation analysis must be 13 conducted in conformity with generally accepted appraisal 14 principles and is not limited to the categories of markets and

15 submarkets enumerated in the rules or guidance materials adopted 16 by the department of local government finance. 17 (e) True tax value does not mean the value of the property to the 18 user. 19 (f) Subject to this article, true tax value shall be determined 20 under the rules of the department of local government finance. The 21 department's rules may include examples to illustrate true tax 22 value. Current Legislative Proposals Senate Bill 308 Gives County Fiscal Body ability to adopt local ordinance to

reimburse County Assessors Office for certain appeal costs. 1 CODE AS A NEW SECTION TO READ AS FOLLOWS 2 [EFFECTIVE JULY 1, 2016]: Sec. 10.7. (a) The county fiscal body 3 may adopt an ordinance to provide that the county assessor be 4 reimbursed for certain costs incurred by the county assessor in 5 defending an appeal under this chapter that is uncommon and 6 infrequent in the normal course of defending appeals under this 7 chapter. Costs include appraisal and expert witness fees incurred 8 in defending an appeal. 9 (b) The ordinance must specify: 10 (1) the appeal or appeals and why they are uncommon and 11 infrequent; 12 (2) a detailed list of expenses incurred by fund and by parcel 13 number; and

14 (3) that the county auditor will deduct the expenses listed in 15 the ordinance from property tax receipts collected in the 16 taxing district in which the parcel is located before 17 apportioning receipts to taxing units for the next semiannual 18 settlement under IC 6-1.1-27. 19 (c) Property tax receipts that are collected under this section 20 must be deposited in the county fund that incurred the initial 21 expense. 22 (d) Expenses for an appeal that are deducted from a civil taxing 23 unit's property tax revenue under this section are not considered 24 to be part of a payment of a refund resulting from an appeal for 25 purposes of a maximum permissible property tax levy appeal 26 under IC 6-1.1-18.5-16.

Meijer to invest $400M in new, remodeled stores this year Midwest retailer Meijer Inc. plans to invest more than $400 million in new and remodeled stores this year. Grand Rapids-based Meijer announced Wednesday that the investment includes construction of nine new Meijer supercenters and 32 remodeling projects. New supercenters are scheduled to open this year in Indiana, Michigan, Illinois, Kentucky and Wisconsin. Indiana's newest Meijer store will be in Indianapolis at Keystone Avenue and 56th Street. The previously announced 192,000square-foot store is expected to open in June. It will give Meijer a total of a dozen stores in the area. Three of those stores are undergoing remodeling projects this year, including one at 5349 Pike Plaza Road and another at Southport Crossing Shopping Center. Meijer's store in Carmel received a multi-million-dollar renovation in 2015.

CEO Hank Meijer said in a written statement that the company is "pleased to continue to grow and invest in the Midwest communities that have supported us for so long." Since 2010, Meijer has opened 36 new stores and remodeled dozens of others. The company said each new store creates as many as 300 jobs. Meijer operates 224 supercenters and grocery stores in Michigan, Ohio, Indiana, Illinois, Kentucky and Wisconsin. The company also has plans to build a store in Westfield and in McCordsville in future years. Indiana Dark Store Philosophy Indiana Experience Helpful Hints!

Questions? Contact Info: [email protected] 812-349-2703 [email protected] 260-449-7237

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