                                        No. 116,607

             IN THE COURT OF APPEALS OF THE STATE OF KANSAS

                        In the Matter of the Equalization Appeal of
                                 TARGET CORPORATION,
                                   for the Year 2015 in
                                Sedgwick County, Kansas.


                              SYLLABUS BY THE COURT


1.
       The Kansas Judicial Review Act, K.S.A. 77-601 et seq., governs appellate review
of Kansas Board of Tax Appeals rulings.


2.
       As a general rule in construing tax statutes, provisions which impose a tax are to
be construed strictly in favor of the taxpayer.


3.
       Each parcel of real property shall be appraised at its fair market value in money,
the value thereof to be determined by the appraiser from actual view and inspection of the
property.


4.
       "Fair market value" means the amount in terms of money that a well informed
buyer is justified in paying and a well informed seller is justified in accepting for
property in an open and competitive market, assuming that the parties are acting without
undue compulsion.




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5.
       Appraisals for ad valorem taxation purposes must be performed in accordance
with the Uniform Standards of Professional Appraisal Practice.


6.
       For appraisal purposes, counties can no longer use carryover values to determine a
current year's valuation.


7.
       When valuing property, an appraiser may determine the difference between the
value of the property under a hypothetical vacant condition and its value as occupied in
order to isolate the value of the taxable real estate separate and apart from the business
being conducted on it.


       Appeal from the Board of Tax Appeals. Opinion filed December 29, 2017. Affirmed.


       Patricia J. Parker, assistant county counselor, for appellant Sedgwick County.


       Linda Terrill, of Property Tax Law Group, LLC, of Overland Park, for appellee Target
Corporation.


       Roger M. Theis and Thomas R. Powell, of Unified School District No. 259, of Wichita, for
amicus curiae U.S.D. No. 259.


       R. Scott Beeler and Jennifer M. Hannah, of Lathrop Gage LLP, of Overland Park, for amicus
curiae The Kansas Chamber of Commerce and Industry, Inc.


Before BRUNS, P.J., SCHROEDER, J., and HEBERT, S.J.

       SCHROEDER, J.: Sedgwick County (the County) appeals the Board of Tax
Appeals' (BOTA) valuation for ad valorem tax purposes of four Target Corporation

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(Target) retail store locations. The County argues BOTA erred in determining a proper
value for the property; this argument is unpersuasive. The record reflects BOTA accepted
and relied upon substantial competent evidence to determine each property's value in
compliance with Uniform Standards of Professional Appraisal Practice (USPAP). We
affirm.


                                             FACTS


          The properties subject to this appeal consist of four retail store locations owned
and occupied by Target in Sedgwick County. Target filed protest applications and sought
equalization appeals based on the County's real property tax valuations for the 2015 tax
year for all four locations. The four equalization appeals were consolidated for hearing
before BOTA.


          The County valued the subject properties at $7,475,000; $10,152,000;
$10,028,000; and $7,407,000. Target valued them at $6,550,000; $8,910,000;
$8,800,000; and $6,280,000. Trecia McDowell, a certified appraiser, testified as an expert
witness on behalf of the County. However, McDowell was not admitted as an expert
appraisal witness because she did not appraise the subject property; rather, she was
admitted as a mass appraisal expert. McDowell could not explain how the County's 2015
valuations were calculated, only that they were based on settlement values for 2013 and
carried over to 2014 and 2015. McDowell testified as to how the County would have
valued the properties had it appraised them on January 1, 2015. She testified as to her
computer assisted mass appraisal (CAMA) calculations using income and cost approach
values for 2015; however, these valuations were not used. Instead, the County relied on
the 2013 settlement values. McDowell could not testify as to how those values were
determined. McDowell further acknowledged her CAMA valuations for 2015 were based
on data lacking in both quantity and quality.


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       Gerald Maier, MAI, testified as an expert appraiser on behalf of Target. Maier
inspected the interior and exterior of the subject properties; inspected documents and
maps; reviewed county data relating to the properties; researched comparable land and
improved sales; conducted buyer and seller interviews; conducted peer appraiser
interviews; reviewed multiple property listing services; investigated internet sources;
completed cost, sales, and income approach valuations of the properties; and considered
market data for the City of Wichita.


       BOTA found Target's evidence more compelling than the County's. It found
Maier's sales and income approaches were competent approaches for valuing the
properties' fee simple interest and were the best indicators of value in the record. Based
on the evidence presented, BOTA valued the properties at $5,700,000; $8,910,000;
$8,800,000; and $6,280,000. The County timely filed a motion for reconsideration. The
Board denied the County's motion, and the County timely petitioned this court for review.
Additional facts are set forth as necessary herein.


                                         ANALYSIS


       The County argues BOTA's decision was based on errors of fact and law and was
otherwise arbitrary, capricious, or unreasonable. The Kansas Judicial Review Act
(KJRA), K.S.A. 77-601 et seq., governs appellate review of BOTA rulings. K.S.A. 2016
Supp. 74-2426(a), (c); K.S.A. 2016 Supp. 77-603(a). The KJRA delineates specific
circumstances under which this court may properly grant relief:


             The agency action, or the statute or rule and regulation on which the agency
              action is based, is unconstitutional on its face or as applied;
             The agency has erroneously interpreted or applied the law;
             The agency action is based on a determination of fact, made or implied by
              the agency, that is not supported to the appropriate standard of proof by
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              evidence that is substantial when viewed in light of the record as a whole,
              which includes the agency record for judicial review, supplemented by any
              additional evidence received by the court; or
             The agency action is otherwise unreasonable, arbitrary, or capricious.
              K.S.A. 2016 Supp. 77-621(c)(1), (4), (7), (8).


Because the County is challenging the validity of BOTA's action, it bears the burden of
proving the invalidity of the action. K.S.A. 2016 Supp. 77-621(a)(1).


       To the extent this issue involves interpretation of a statute, this court's review is
unlimited. Neighbor v. Westar Energy, Inc., 301 Kan. 916, 918, 349 P.3d 469 (2015). As
a general rule in construing tax statutes, provisions which impose a tax are to be
construed strictly in favor of the taxpayer. In re Tax Exemption Application of Central
Illinois Public Services Co., 276 Kan. 612, 616, 78 P.3d 419 (2003).


The County did not meet its burden below.


       The County raises several arguments in its brief. However, as Target points out,
the County has not addressed whether it met its burden of production and persuasion
before BOTA. The subject property is real property primarily used for commercial
purposes; thus, the County had the burden of production and persuasion before BOTA.
See K.S.A. 2016 Supp. 79-1609. The County was required to properly appraise the
subject property and submit a valuation to BOTA.


       "Each parcel of real property shall be appraised at its fair market value in money,
the value thereof to be determined by the appraiser from actual view and inspection of the
property." K.S.A. 79-501. In pertinent part, K.S.A. 2016 Supp. 79-503a states: "'Fair
market value' means the amount in terms of money that a well informed buyer is justified
in paying and a well informed seller is justified in accepting for property in an open and

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competitive market, assuming that the parties are acting without undue compulsion."
Appraisals for ad valorem taxation purposes must be performed in accordance with the
USPAP. K.S.A. 2016 Supp. 79-505; K.S.A. 79-506(a).


       Here, the County did not base its valuations for the 2015 tax year from an actual
view and inspection of the property by the appraiser; rather, its valuations were based on
the 2013 tax year agreed-upon settlement values for each of the properties. K.S.A. 2014
Supp. 79-1460 provided for a two-year carryover of any valuation reduced because of an
appeal. As of the date of the County's valuation—January 1, 2015—K.S.A. 2014 Supp.
79-1460 was still good law. However, the carryover provision was held unconstitutional
by our Supreme Court in Board of Johnson County Comm'rs v. Jordan, 303 Kan. 844,
869, 370 P.3d 1170 (2016). The hearing before BOTA took place after Jordan was
decided; therefore, the use of carryover values by the County was impermissible as a
matter of law.


       The County's evidence was limited to McDowell testifying as to how the County
would have valued the properties had it appraised them on January 1, 2015. McDowell
testified as to her CAMA calculations using income and cost approach values for 2015;
however, these valuations were not used. Instead, the County specifically relied on the
2013 settlement values. McDowell could not testify as to how those values were
determined. McDowell also testified her CAMA valuations for 2015 were based on
insufficient data lacking in both quantity and quality.


       Kansas law requires all appraisals to be prepared in accordance with USPAP
standards. Without having personally appraised the property, McDowell cannot offer a
valid opinion of value. See K.S.A. 2016 Supp. 79-501; K.S.A. 2016 Supp. 79-505. The
County was required to appraise the property as of January 1, 2015, in accordance with
K.S.A. 2016 Supp. 79-503a unless otherwise specified by law. K.S.A. 79-1455; see In re
Equalization Proceeding of Amoco Production Co., 33 Kan. App. 2d 329, 347, 102 P.3d

                                              6
1176 (2004). The use of the 2013 settlement values was impermissible as of the date of
the BOTA hearing; therefore, the County was required to reappraise the properties in
accordance with the USPAP standards for the 2015 tax year. The County failed to meet
its burden of production and persuasion before BOTA and did not address this issue on
appeal. Its failure to do so renders its arguments suspect.


Maier's appraisal was appropriate.


       The County makes several arguments regarding Maier's appraisal of the property,
primarily regarding adjustments allegedly not made in the valuation. The County argues
against Maier's sales comparison approach but failed to perform a sales comparison
approach of its own. This argument is highly suspect given the County had the burden of
production and persuasion before BOTA. The County asserts Maier's valuation was
inconsistent with In re Equalization Appeal of Prieb Properties, 47 Kan. App. 2d 122,
275 P.3d 56 (2012), but fails to cite to any specific language in Prieb in support of its
argument.


       Finally, the County argues it was not necessary for Maier to apply a hypothetical
condition in determining the leased fee value. It asserts Maier's hypothetical leased fee
value was actually a fee simple value. This argument was explicitly rejected by BOTA
when it found "the County's attempts to re-define Maier's valuation conclusions to be at
odds with Maier's stated appraisal objectives and hearing testimony, as well as contrary
to Kansas ad valorem tax law." The County has not acknowledged, addressed, or rebutted
this finding. As the party asserting error, the County has the burden to prove BOTA
erred. K.S.A. 2016 Supp. 77-621(a)(1). It has not done so.


       In any event, Maier's appraisal was appropriate and complied with Kansas law. He
used cost, sales, and income approaches. For his cost approach, Maier developed his land
value by reviewing the sale of seven vacant lots, adjusting for conditions of sale,

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time/market conditions, size, physical condition, zoning, and location. He developed his
improvement value for the cost approach calculating replacement cost, estimating
entrepreneurial profit, and calculated depreciation utilizing functional and external
obsolescence.


       Maier's sales comparison approach discussed three categories of sales: build-to-
suit sale/leaseback sales; second-generation leased fee sales; and fee simple sales. Maier
selected nine recent comparable sales of single-retailer commercial locations. He
examined each sale and adjusted for time and market conditions, age and condition of the
property, location, improvement size, quality and utility of the property, and investment
quality. He determined the leased fee, build-to-suit sale/leaseback, and second-generation
leased fee sales had a higher value than adjusted fee simple sales; therefore, he concluded
the value of the investment was greater than the underlying real property. He then
determined the values for fee simple and non-fee simple sales of the subject property and
concluded the fee simple sale values were lower.


       Maier also used an income approach analyzing market rents for the subject
property. He compared first-generation leases and sales leaseback agreements and
determined they were not appropriate valuation methods for market rent. He stated first-
generation leases are not to be used in an income approach because "[t]he tenant pays an
above market rate for a turn-key lease that provides a prototype building allowing for
economies of scale in the overall company. These tenants would not be willing to pay the
same rate for space designed for another retailer's use." He further noted sales leaseback
agreements are increasingly used to finance nonrealty costs and are not indicative of
market rent.


       Maier further analyzed second-generation leases with owner-financed renovations
and second-generation leases taken on an as-is basis. He noted the cost of owner-financed
renovations are amortized over the term of the lease; thus, second-generation as-is leases

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are most indicative of market rent. He analyzed nine leases, adjusting for the same
conditions as his sales comparison analysis. He analyzed and accounted for expense
reimbursements, vacancy, and credit loss to determine effective gross income. He
forecasted expenses to arrive at net operating income. Finally, Maier developed a
capitalization rate based on a review of sales of comparable big-box retail properties.


       Maier's approach is consistent with the factors set forth in K.S.A. 2016 Supp. 79-
503a(b), (c), (d), (e), (g), (i), and (k). His appraisal and BOTA's reliance on it were
justified.


BOTA's decision is properly supported by the record.


       The County argues BOTA's decision is not supported by substantial competent
evidence in the record. Our standard of review under the KJRA is limited. Pursuant to
K.S.A. 2016 Supp. 77-621(d), we must consider the record as a whole, including the
relevant evidence which detracts from BOTA's findings. This court may not reweigh the
evidence or engage in de novo review of an agency's factual findings. See Herrera-
Gallegos v. H & H Delivery Service, Inc., 42 Kan. App. 2d 360, 363, 212 P.3d 239
(2009).


       The County's arguments are inconsistent with the relief it seeks on appeal. It
argues Maier's appraisal did not adjust for lease-up costs or rent loss to arrive at an as-
vacant value. As Target points out, lease-up costs are adjustments an appraiser would
make to adjust a leased fee value to get to a fee simple value. Adjusting for lease-up
expenses would result in a downward adjustment. Similarly, adjustments for rent loss
would be a downward adjustment. See In re Tax Appeal of Brocato, 46 Kan. App. 2d
722, 731, 277 P.3d 1135 (2011). The County argues BOTA's valuations were too low but
asserts it erred by not considering factors that would have further reduced the value of the
property.

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       The County also argues no adjustments were made for after-sale capital
expenditures. As Target points out, such an adjustment is necessarily speculative and is
based on the needs of the individual buyer, not the needs or value of the market as a
whole. Simply put, remodeling or improvements benefitting one buyer may not be of
value to another. Maier testified it was not appropriate to consider these costs when
adjusting for a sales comparison approach. The County did not do a sales comparison
approach in its valuation. Accordingly, there is nothing in the record that detracts from
BOTA's findings with respect to this issue.


       The County also argues BOTA's valuation is not reflective of the highest and best
use of the property. It acknowledges both Maier and McDowell testified the highest and
best use of the property was continued use as a single-tenant retail store. Without any
citation to the record, the County assumes BOTA found the highest and best use of the
property was as vacant. Its argument lacks support in the record. BOTA noted Maier's
use of a sales comparison approach and adjustments to determine a fee simple interest. It
did not find the highest and best use of the property was as vacant.


       Next, the County vaguely asserts Maier's sales comparison approach failed to
account for properties that were older, distressed, deed-restricted, or in inferior locations.
It only points to one such location and does not explain how this alleged error
undermines BOTA's decision when viewed in light of the record as a whole. At best, the
point is incidentally raised but not fully argued. A point raised incidentally in a brief and
not argued therein is deemed abandoned. Friedman v. Kansas State Bd. of Healing Arts,
296 Kan. 636, 645, 294 P.3d 287 (2013). In any event, the County is incorrect as Maier's
appraisal accounted for these factors.


       Finally, the County makes an argument regarding whether the as-vacant value
should be listed as a hypothetical condition. Its argument is difficult to follow and not
supported by pertinent authority or proper citation to the record. The County fails to

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explain how not listing the as-vacant value of the property as a hypothetical undermines
BOTA's decision. Further, the County erroneously assumes BOTA valued the properties
as vacant. BOTA's valuation was based on a sales comparison and income approach that
accounted for the value of the property in its current use. The Board did not value the
property as though it was presently vacant. There is a difference between a vacant
property and the as-vacant value of the property. A vacant property is one that is
unoccupied and/or unused. The as-vacant value of the property refers to the separation of
the value of the property itself from the value of the business being conducted on it—in
other words, the value of the property itself if Target vacated it so another tenant could
move in.


         The County separately argues BOTA's decision was arbitrary, capricious, or
unreasonable. Its argument centers largely on the same factual contentions regarding the
hypothetical leased fee value and as-vacant value as discussed above. Its arguments are
conclusory in nature and are not supported by the record. For the reasons previously
discussed herein, the County has failed to demonstrate error in BOTA's order determining
the value for the four properties.


BOTA's valuations complied with USPAP Standards.


         Here, the County argues BOTA's valuations did not comply with USPAP
standards, specifically USPAP Standard 6 regarding mass appraisals. BOTA's valuation
was heavily premised on Maier's appraisal. Again, the County erroneously assumes
Maier valued the properties as vacant. He did not. As previously discussed, Maier did an
extensive cost, sales, and income analysis of the subject properties in compliance with
K.S.A. 2016 Supp. 79-503a. His determination of market rent was based on the property
being leased to a second-generation tenant as-is. In other words, his determination was
consistent with the property being currently occupied. The County has failed to show
error.

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No error of law.


       The County argues BOTA's decision was based on an error of law and should be
reversed pursuant to K.S.A. 2016 Supp. 77-621(c)(4). Specifically, the County argues
BOTA misapplied four decisions from other panels of this court: Prieb, 47 Kan. App. 2d
122; In re Tax Appeal of Yellow Freight System, Inc., 36 Kan. App. 2d 210, 137 P.3d
1051 (2006); In re Equalization Appeal of Mumbo Jumbo, No. 110,793, 2014 WL
4435905 (Kan. App. 2014) (unpublished opinion); and In re Equalization Appeal of
Yellow Equipment & Terminals, Inc., No. 107,653, 2012 WL 6634418 (Kan. App. 2012)
(unpublished opinion).


       The County asserts BOTA erred in applying Prieb when it determined the
properties' values as vacant and available to lease were the best indicator of the fee
simple values of the property. The County cites to the following language from Prieb
which BOTA cited in its order:


       "'The appraiser theoretically should approach the valuation as if the property were vacant
       and available to be leased at market rent, recognizing the necessary adjustment for lease-
       up to stabilized occupancy. Although the definitions are not all consistent with this
       approach, in most assignments that involve a fee simple estimate for a leased property,
       the appraiser is seeking a value that assumes fully leased (or at a normalized occupancy
       level) at market rent.' (Emphasis added.) Lennhoff, Fee Simple? Hardly, The Appraisal
       Journal 400, 402 (Oct. 1997)." Prieb, 47 Kan. App. 2d at 132.


       In its order, BOTA emphasized the words "were vacant and available to be leased
at market rent." The County argues emphasis should be placed on the words "leased at
market rent, recognizing the necessary adjustment for lease-up to stabilized occupancy."
The County's argument becomes unclear, however, as it "requests the Court clarify its
finding to avoid further confusion." The County argues Prieb should have considered
additional statements from the Lenhoff article it cited. In essence, the County is either

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arguing Prieb was wrongly decided or asking this court to modify, clarify, or extend its
holding. The County is not truly arguing BOTA misapplied Prieb.


       The County further argues BOTA failed to follow Prieb's admonition against
using commercial build-to-suit leases without a disentanglement by adjustments. The
County asserts Maier's appraisal was inconsistent with Prieb but fails to cite to any
specific language in Prieb in support of its proposition or fully explain the point. Further,
the County's allegations about Maier's valuation methods are not supported with citation
to the record. At best, the point is incidentally raised but not fully argued and not
supported by appropriate citation to authority. A point raised incidentally in a brief and
not argued therein is deemed abandoned. Friedman, 296 Kan. at 645. Failure to support a
point with pertinent authority or show why it is sound despite a lack of supporting
authority or in the face of contrary authority is akin to failing to brief the issue. University
of Kan. Hosp. Auth. v. Board of Comm'rs of Unified Gov't, 301 Kan. 993, 1001, 348 P.3d
602 (2015).


       The County's arguments with respect to Mumbo Jumbo, Yellow Equipment, and
Yellow Freight System are likewise improperly briefed. It does not explain how Mumbo
Jumbo or Yellow Equipment apply and provides no citation to Yellow Freight System for
the proposition asserted. Nevertheless, the distinction the County tries to draw between
the phrases "vacant" and "vacant and available to be leased at market rent" is an argument
that was rejected by another panel of this court in In re Equalization Appeal of ARC
Sweet Life Rosehill, No. 113,692, 2016 WL 3856666, at *1, 15 (Kan. App. 2016)
(unpublished opinion). The ARC panel found it was permissible to "determine the
difference between the value of the property under a hypothetical vacant condition and its
value as occupied in order to isolate the value of the taxable real estate separate and apart
from the business being conducted on it." 2016 WL 3856666, at *15. Through its analysis
and use of Maier's appraisal, BOTA's valuation process was reasonable, and BOTA did
not commit an error of law.

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      BOTA's valuation of the four properties was in compliance with USPAP standards
and was supported by substantial competent evidence.


      Affirmed.




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