Saturday, October 12, 2013

One Appraisal over the Line

Vanderminden, A Family LTD Partnership v. Town of Wells, 2013 VT 49

What is a municipality to do? 

By law, municipalities are obligated to regularly assess the value of all property located within their geographic limits.  This includes property that lies across town lines.  The law also says a municipality must appraise all contiguous property held by a single owner as a single parcel—unless that property lies across town lines.  For those parcels, there is no rule.  So for generations town listers have looked at the portion in their town, assigned a value based on a variety of internal principals, and moved onto the next parcel. 

In today’s case, the listers looked at the .09 acres of land that Plaintiff owned.  This sliver was actually a small tip of a larger parcel located in the next town.  Useless by itself, the listers looked at what value it gave the parcel in the next town (it was the larger parcel’s lake frontage), and based on the town’s guidelines for such frontage, the listers eventually determined this sliver to be worth $122,000.

What is a taxpayer to do?

If you own a parcel that lies in two towns, you will receive tax bills from both of the municipalities.  That’s all well and good as long as the separate tax bills match the value of the separate portions.  But there is trouble down at the docks if a town appraises the value of one part of the property based on the value added to the portion sitting in the next town.  This is even more troubling if the value of the two appraisals exceeds the value of the lot as a whole.

Of course, that is what happened here.  Taxpayer appealed the Town’s assessment to the State Appraiser.  The State Appraiser, guided by statute, agreed with the Town.  So Taxpayer appealed to the SCOV. 

What is a court to do?

The problem with today’s case is that there is not a lot of statutory guidance for the SCOV.  Towns are largely left to their own devices when it comes to working out the value of cross-town parcels.  Neither town has sovereignty over the other.  So there is no requirement for the two to talk. 

Moreover, in this case, the Landowner’s argument that the sliver should be viewed alone is untenable.  Alone, the .09 acres are useless.  It would not support development (the land is not large enough to support septic).  But this ignores the fact that this sliver is perhaps the main reason that the parcel has as much value as it does.  Imagine if the real estate agent that Landowner might hire to market the property made the same arguments that Landowner made to the SCOV, namely that the 125 feet of lake-frontage was useless, except perhaps for a parking lot. 

Sign me up as one who would be willing to buy that parking lot.

At the same time, the Town’s view of the case is equally untenable.  The primary function of assessments is to determine the property’s fair market value.  If the end result of a two-town appraisal adds up to more than fair market, then the owner is left bearing more than her fair share of the common obligations and the joint assessment are in violation of the statute.

Problems like this are where the SCOV earns the big bucks. 

Finding no guidance from either statute or the State’s Property Valuation Department, the SCOV charts a new course.  It holds that when there is evidence that a town’s valuation coupled with the other town’s valuation causes a property to exceed its fair market value, then the first town’s appraisal must be lowered to fit within the overall fair market value.

The SCOV is not particularly happy with this rule as it would seem to invite litigation, could yield unfair results, and does nothing to require towns to cooperate (a reasonable goal in this situation), but it is the best the SCOV can fashion and impose given the limited resources of a judicial determination. 

More importantly, the SCOV shouts loud and clear that anyone unhappy with this new rule needs to take it up with their local legislator or friendly neighborhood property valuation department.  Only through legislation or rulemaking can the relevant parties develop a reasonable solution that is more likely to balance the various policy factors at play.

Until then, this case is headed back down to the State Property Valuation Hearing Officer who will likely have to apply a substantial discount to this valuable lake-front property—unless of course, they actually pave paradise and put up a parking lot.

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