Millard Lumber, Inc. v. Douglas Cnty. Bd. of Equal.

MILLARD LUMBER, INC., APPELLANT, v. DOUGLAS COUNTY BOARD OF EQUALIZATION, APPELLEE.

No. A-18-1091.

NEBRASKA COURT OF APPEALS

August 27, 2019

MEMORANDUM OPINION AND JUDGMENT ON APPEAL

(Memorandum Web Opinion)

NOTICE: THIS OPINION IS NOT DESIGNATED FOR PERMANENT PUBLICATION AND MAY NOT BE CITED EXCEPT AS PROVIDED BY NEB. CT. R. APP. P. § 2-102(E).

Appeal from the Tax Equalization and Review Commission. Affirmed.

Jordan W. Adam, Fraser Stryker, P.C., L.L.O., for appellant.

Jennifer C. Clark, Deputy Douglas County Attorney, for appellee.

RIEDMANN, BISHOP, and ARTERBURN, Judges.

RIEDMANN, Judge.

INTRODUCTION

Millard Lumber, Inc., appeals from an order of the Tax Equalization and Review Commission (TERC) which affirmed a decision of the Douglas County Board of Equalization (Board) denying Millard Lumber's protest of the 2017 valuation of its property. We conclude that the TERC decision is supported by competent evidence and is neither arbitrary nor capricious. We therefore affirm.

BACKGROUND

Millard Lumber owns a 609,633-square-foot distribution warehouse located on 1,440,093 square feet of land in Douglas County, Nebraska (the Subject Property). The structure was built in 1958 and Millard Lumber purchased the Subject Property in 2006. The Douglas County assessor determined that the value of the Subject Property was $13,496,200 for the 2017 tax year. This value consisted of a land valuation of $4,320,300 and an improvement value of $9,175,900.

Millard Lumber protested the assessment to the Board and requested a valuation of $9,410,735. Millard Lumber's requested valuation consisted of a land valuation of $4,320,300, and an improvement value of $5,090,435. The Board affirmed the original assessment of the Subject Property, and determined that its taxable value was $13,496,200. Millard Lumber appealed the Board's decision to TERC.

A hearing was held before TERC in February 2018. At the hearing, Millard Lumber argued that the 2017 tax assessment was not equalized with the property adjacent to it (the Comparable Property). The only evidence presented at the hearing consisted of testimony from Brent Reeder on behalf of Millard Lumber. Reeder testified that he was a general contractor and had done renovation work for Millard Lumber on the Subject Property. Reeder testified that the improvement value on the Subject Property was nearly double that of the Comparable Property, when broken down by square foot, with the value of the improvements on the Subject Property being calculated at $15.05 per square foot, and the value of the improvements on the Comparable Property being calculated at $8.50 per square foot.

Reeder asserted to TERC that the Subject Property and the Comparable Property were very similar. The properties were originally built in the 1950's and were part of the same campus. Although the Comparable Property is larger than the Subject Property, both buildings were used in the same manner. Reeder also informed TERC that both buildings were constructed similarly, they had similar clear heights for docking, heavy industrial floor slabs, similar lighting, similar roofing structure and membrane, gas-fired heat systems and were fire-sprinkler protected. Reeder did acknowledge that the Comparable Property used a gas-fired heat system which used forced air, which was less efficient than the heating system used by the Subject Property.

Additionally, in Reeder's opinion, the condition of the buildings was essentially the same. Further, both properties leased out office space to tenants. Reeder emphasized that the two buildings were "as comparable as you can get" for properties in Omaha. On cross-examination, Reeder admitted that he was not an appraiser and did not have certificates or licenses for assessment or appraisal. But, on redirect, Reeder stated that he performed contracting work on both the Subject Property and the Comparable Property, and was therefore familiar with both properties. The Board did not present any evidence.

Following the hearing, TERC issued an order affirming the decision of the Board, and assessing Millard Lumber a tax valuation of $13,496,200 on the Subject Property. TERC specifically found that Millard Lumber did not present clear and convincing evidence demonstrating that the Subject Property was similar to the Comparable Property for purposes of an equalization analysis. Millard Lumber appealed TERC's order to this court.

ASSIGNMENTS OF ERROR

Millard Lumber assigns, restated, that TERC erred in affirming the Board's decision denying Millard Lumber's 2017 property tax valuation protest.

STANDARD OF REVIEW

Decisions rendered by TERC shall be reviewed by an appellate court for errors appearing on the record of the commission. Brenner v. Banner Cty. Bd. of Equal., 276 Neb. 275, 753 N.W.2d802 (2008). When reviewing a judgment for errors appearing on the record, an appellate court's inquiry is whether the decision conforms to the law, is supported by competent evidence, and is neither arbitrary, capricious, nor unreasonable. Id. Questions of law arising during appellate review of TERC decisions are reviewed de novo on the record. Id.

ANALYSIS

We note at the outset of our analysis that Millard Lumber does not argue that the valuation of the Subject Property was incorrect, i.e., that it could not be sold at the valuation set by the assessor. Rather, it argues only that it received a grossly excessive tax assessment when compared to the Comparable Property, which it argued was similar to the Subject Property. Because Millard Lumber does not challenge the actual valuation of the Subject Property, we focus our analysis on the dispositive issue of the similarity between the two properties for equalization purposes.

The Nebraska Constitution requires that real property be taxed "by valuation uniformly and proportionately." Brenner v. Banner Cty. Bd. of Equal., 276 Neb. at 294, 753 N.W.2d at 818. Equalization is the process of ensuring that all taxable property is placed on the assessment rolls at a uniform percentage of its actual value. Brenner v. Banner Cty. Bd. of Equal., supra. The purpose of the equalization of assessments is to bring the assessment of different parts of a taxing district to the same relative standard, so that no one of the parts may be compelled to pay a disproportionate part of the tax. Id.

The burden of proof is on the taxpayer to establish the taxpayer's contention that the value of the taxable property has been arbitrarily or unlawfully fixed by the county board of equalization at an amount greater than its actual value, or that its value has not been fairly and properly equalized when considered in connection with the assessment of other property and that such disparity and lack of uniformity result in a discriminatory, unjust, and unfair assessment. Omaha Country Club v. Douglas Cty. Bd. of Equal., 11 Neb. App. 171, 645 N.W.2d 821 (2002). Such a burden is not met by showing a mere difference of opinion unless it is established by clear and convincing evidence that the valuation placed upon the taxpayer's property, when compared with valuations placed on other similar properties, is grossly excessive and is the result of a systematic exercise of intentional will or failure of plain legal duty, and not mere errors of judgment. Id.

When examining comparable property for sales comparisons, the Nebraska Supreme Court stated that a comparable real property is one that is similar to the property being assessed in significant physical, functional, and location characteristics and in its contribution to value. County of Webster v. Nebraska Tax Equal. & Rev. Comm., 296 Neb. 751, 896 N.W.2d 887 (2017). Appellate courts have affirmed a TERC finding that properties were not similar when the...