RENDERED: MAY 1, 2015; 10:00 A.M. NOT TO BE PUBLISHED Commonwealth of Kentucky Court of Appeals NO. 2013-CA-001745-MR JEAN ACTON APPELLANT APPEAL FROM JEFFERSON CIRCUIT COURT v. HONORABLE SUSAN SCHULTZ GIBSON, JUDGE ACTION NO. 10-CI-006630 JEFFERSON COUNTY PROPERTY VALUATION ADMINISTRATOR; ENVIRONMENTAL AND PUBLIC PROTECTION CABINET, DEPARTMENT OF PUBLIC PROTECTION; AND KENTUCKY BOARD OF TAX APPEALS APPELLEES OPINION AFFIRMING ** ** ** ** ** BEFORE: CLAYTON, DIXON, AND JONES, JUDGES. JONES, JUDGE: This appeal concerns a tax assessment increase on residential property located in Jefferson County, Kentucky. Appellant, Jean Acton, contends
that the 28.3 % tax assessment increase imposed on her residence by the Jefferson County Public Valuation Administrator was arbitrary and should be set aside. Before coming to our Court, Acton appealed the assessment to the Jefferson County Board of Assessment Appeals, the Kentucky Board of Tax Appeals, and the Jefferson Circuit Court. 1 All upheld the assessment. For the reasons more fully explained below, we agree with the Jefferson Circuit Court that Acton did not meet her burden of demonstrating that the assessment was arbitrary. Accordingly, we AFFIRM. I. FACTUAL AND PROCEDURAL BACKGROUND Acton is the owner of real property located in Jefferson County at 1701 Girard Drive, Louisville, Kentucky 40222. Acton purchased the property in 1963. A residence is located on the property, which was constructed somewhere around 1962 or 1963. The residence, a brick one-story, is about 1,358 square feet in size. It has two bathrooms, an unfinished basement, and an attached two-car garage. The property was previously assessed at $121,280. As of January 1, 2009, the Jefferson County Property Valuation Administrator ("PVA") increased the assessment to $155,280. Upon being notified of the increase, Acton filed an appeal with the Jefferson County Board of Assessment Appeals pursuant to KRS 2 133.120(2)(a). 1 Acton is an attorney licensed to practice law in the Commonwealth of Kentucky. She represented herself at all stages of the proceedings below. She continues to do so. 2 Kentucky Revised Statutes. -2-
3 Acton objected at the hearing to any opinion by Makin-Britton regarding property values. Acton maintained that Makin-Britton was not a licensed appraiser, and therefore, unqualified to offer an opinion. Upon review of the record, we believe that the hearing officer properly determined that Makin-Britton was qualified to testify regarding her opinion of the property values given the nature of her work. The fact that Makin-Britton is not a licensed appraiser is an issue going to the weight of her testimony not its admissibility. As part of her appeal, Acton contended that her property should have been valued at no more than $125,000. The Assessment Appeals Board upheld the PVA's assessed value of $155,280. Acton then appealed to the Kentucky Board of Tax Appeals ("KBTA") pursuant to KRS 131.340(3). A hearing officer was designated pursuant to KRS 131.355, and a hearing was scheduled for April 19, 2010. Prior to the hearing, the KBTA issued a Prehearing Order, which directed the parties to submit a summary of "any issues of fact which are in dispute" as well as a "copy of all exhibits which each party intends to introduce at the hearing." The Prehearing Order warned the parties that failure to do so could "result in the [KBTA] denying admission of an exhibit, testimony of a witness or legal authority relied upon by a party." As scheduled, the KBTA hearing officer conducted the hearing on April 19, 2010. The only witnesses at the hearing were Acton and Sally Makin- Britton, a deputy clerk at the Jefferson County PVA. 3 Makin-Britton testified that she prepared an assessment of Acton's property. In doing so, she testified that she relied on three comparables from Acton's neighborhood: (1) 6806 Greenlawn Road, which sold for $160,000, on October 6, 2008; (2) 7103 Woolrich Road, which sold for $162,000, on February -3-
29, 2008; and (3) 1408 Calamar Lane, which sold for $158,900 on September 21, 2007. Makin-Britton testified that 6806 Greenlawn, a home similar in square footage and age to Acton's home, is almost directly across the street from Acton's property. Makin-Britton testified that she adjusted Acton's property downwards from this property to account for Acton's lack of a finished basement and updates. However, she noted that she then adjusted upwards because the Greenlawn property did not have a garage. The total net adjustment was a downward adjustment of $5,000. Makin-Britton testified that 7103 Woolrich Road is similar in square footage to Acton's property, but lacks a basement and garage. She also testified that it is in a "nosier" location than Acton's property because it backs up to a church parking lot. Makin-Britton testified that 1408 Calamar Lane is also similar in square footage to Acton's property, but only has a one-car garage. She testified that it is also in a less desirable location because it backs up to the Westport Road interchange. Acton testified both as the property owner and as a licensed attorney practicing in the real estate field. Acton testified that her home was far less modernized than the comparables relied upon by the PVA. 4 She explained that her 4 Acton testified that she had direct knowledge that the three comparable residences relied on by the PVA were more updated than her residence. She explained that her knowledge came from direct observations gained from either being in the residences and/or observing their exterior updates. -4-
residence has not been updated or modernized since she purchased it in 1963. She testified that her residence has its original plumbing, electrical system, kitchen cabinets, windows, and bathrooms. She further testified that her driveway is in need of replacement, her roof has hail damage, 5 and there are damaged trees in both the front and back of the property. She introduced pictures of the exterior of her residence home, including the alleged roof damage, but did not produce any photographs of its interior. Acton sought to introduce evidence of a comparable sale not used by the PVA, 807 Girard Drive, which she claimed sold for $130,000, on December 23, 2008. Acton admitted that she did not have any documentation to support this comparable. The hearing officer also noted that Acton had failed to provide the PVA with her intent to rely on this comparable in violation of the Prehearing Order. As a result, the hearing officer ruled that Acton was prohibited from relying on evidence related to 807 Girard Drive. On July 1, 2010, the KBTA hearing officer issued Findings of Fact, Conclusions of Law, and Recommended Order. After summarizing the evidence, the KBTA hearing officer concluded that Acton "did not sustain her burden of proof regarding her challenge to the final order of the Jefferson Board of Assessment Appeals and a comparable value of $155, 280 will be recommended as the fair cash value of the property." 5 Acton testified that it would cost $9,626 to repair the roof, but she did not offer any documentation to support her testimony in this regard. -5-
Acton filed exceptions to the hearing officer's recommendations. In a final order rendered on August 26, 2010, the KBTA upheld the final decision of the Jefferson County Board of Assessment Appeals and ordered that the property be assessed at a fair cash value of $155,280. Acton appealed to the Jefferson Circuit Court. By order entered September 12, 2013, the Jefferson Circuit Court affirmed the KBTA. This appeal followed. II. STANDARD OF REVIEW One aggrieved by a tax assessment may appeal to the KBTA. See KRS 131.340(1) ("The Kentucky Board of Tax Appeals is hereby vested with exclusive jurisdiction to hear and determine appeals from final rulings, orders, and determinations of any agency of state or county government affecting revenue and taxation."). The KBTA's "function is not simply to review the action but to try anew the issues as presented." Jefferson Cnty. Prop. Val. Adm'r v. Oxford Prop., Inc., 726 S.W.2d 317, 319 (Ky. App. 1987) (citing KRS 131.340(1)). Judicial review of the KBTA's decision is governed by KRS Chapter 13B. Louisville Edible Oil Products, Inc. v. Revenue Cabinet Com. of Kentucky, 957 S.W.2d 272, 273 (Ky. App. 1997). The standard of review appears in KRS 13B.150(2) as follows: The court shall not substitute its judgment for that of the agency as to the weight of the evidence on questions of fact. The court may affirm the final order or it may reverse the final order, in whole or in part, and remand -6-
the case for further proceedings if it finds the agency's final order is: (a) In violation of constitutional or statutory provisions; (b) In excess of the statutory authority of the agency; (c) Without support of substantial evidence on the whole record; (d) Arbitrary, capricious, or characterized by abuse of discretion; (e) Based on an ex parte communication which substantially prejudiced the rights of any party and likely affected the outcome of the hearing; (f) Prejudiced by a failure of the person conducting a proceeding to be disqualified pursuant to KRS 13B.040(2); or (g) Deficient as otherwise provided by law. Id. KRS 13B.150(2) makes clear that in reviewing the decision of an administrative agency, a reviewing court does not perform a de novo review. With respect to factual disputes, the reviewing court must uphold the agency's decision if there was substantial evidence of probative value upon which the agency could base its decision and the agency applied the correct rule of law to the facts before it. Kentucky Unemployment Ins. Comm'n v. Murphy, 539 S.W.2d 293, 294 (Ky.1976). If the agency relied on substantial evidence in making its -7-
determination, the reviewing court must uphold it. Brown Hotel Co. v. Edwards, 365 S.W.2d 299, 302 (Ky. 1963). [S]ubstantial evidence means evidence of substance and relevant consequence having the fitness to induce conviction in the minds of reasonable men. Owens Corning Fiberglas Corp. v. Golightly, 976 S.W.2d 409, 414 (Ky.1998). III. ANALYSIS Section 172 of the Kentucky Constitution states that "all property, not exempted from taxation by this Constitution, shall be assessed for taxation at its fair cash value, estimated at the price it would bring at a fair voluntary sale..." "The determination of fair market value is a difficult task, and, except in rare circumstances, the final decision is at best an educated estimate. Comparable sales and the sale of the identical property are at best factors which enable the determining body to make an enlightened estimate." Harlan County Bd. of Sup'rs v. Black Star Land Co., 392 S.W.2d 40, 42 (Ky. 1965). "Regardless of the manner or method used by the Property Valuation Administrator or the decision of the Kentucky Board of Tax Appeals, the finding of valuation must be its fair cash value, estimated at the price it would bring at a fair voluntary sale." Helman v. Kentucky Bd. of Tax Appeals, 554 S.W.2d 889, 891 (Ky. App. 1977). The law of Kentucky grants the estimated property tax assessment a presumption of validity and places the burden of establishing that the assessment is incorrect on the taxpayer. Revenue Cabinet, Com. of Ky. v. Gillig, 957 S.W.2d 206, 210 (Ky. 1997). To prevail, the taxpayer must "establish that the assessment -8-
was wrong, and if there is testimony of competent valuation witness/es in support of the assessment, even though conflicting, a finding adverse to the taxpayer cannot be set aside as clearly erroneous." Jefferson County Property Valuation Adm'r v. Ben Schore Co., 736 S.W.2d 29, 30 (Ky. App. 1987). The PVA produced evidence at the hearing that it based its assessment on the recent sale of three comparable properties. It further demonstrated that it took into account some differences between these properties and Acton's property and made appropriate adjustments. Instead of introducing evidence of different comparables, Acton attempted to discredit the PVA assessor by asserting that the PVA should have considered all of the individual characteristics of Acton's property such as its roof damage, lack of interior updates, and the like. Acton's argument ignores that a tax assessor is not held to the same standard as a private appraiser conducting a fee-type single property appraisal. As explained by the Kentucky Supreme Court, The level of accuracy which may be achieved by a private appraiser in a fee-type appraisal or a single property appraisal of a parcel of real property simply cannot be attained by the tax assessor nor has it ever been required in the valuation of any property in Kentucky for taxation purposes. Accordingly, for taxation purposes, a tax assessor is allowed to use mass appraisal techniques. Under the mass appraisal approach, while individual characteristics of each property are considered, not all of a particular property's characteristics are considered just those factors which allow the assessor to make a logical estimate of the property's value. For example, in valuing a residential property, if it has been determined that the number of bedrooms, -9-
bathrooms, size, and location of the home are factors which provide a logical indication of a property's fair cash value, under a mass appraisal approach, the assessor would obtain information about these characteristics for each property and value similar properties accordingly. On the other hand, in a fee-type appraisal, or a single property appraisal, the private appraiser would not only consider these characteristics, but would also consider, for example, the condition of the heating and cooling systems, the condition of the interior, any added extras in the home and all other characteristics of the home which would affect its value in any way. Kentucky courts have recognized in several cases that the level of accuracy achieved by a private fee appraiser in valuing a property cannot practically be achieved by the state tax assessor nor is such accuracy even required by Section 172 of the Kentucky Constitution, which specifically provides that fair cash value will be estimated. Kentucky courts have previously recognized that some amount of inequality in property taxation is inevitable. Gillig, 957 S.W.2d at 208-09. The PVA established that it based its valuation of Acton's property on similarly situated comparables. Acton did not produce any evidence from which the KBTA could have concluded that the PVA's assessment was arbitrary. At most, she introduced evidence relating to factors that our Kentucky Supreme Court has specifically held that the PVA is not required to consider such as the condition of the interior of her residence. Acton's evidence was insufficient to meet her burden of proof and substantial evidence of record supports the assessment. IV. CONCLUSION -10-
Circuit Court. Accordingly, for the reasons set forth above, we affirm the Jefferson ALL CONCUR. BRIEF FOR APPELLANT: Jean Acton Louisville, Kentucky BRIEF FOR APPELLEES: Michael J. O Connell Lawrence E. Osterhage Louisville, Kentucky -11-