                                    NO. COA14-223

                      NORTH CAROLINA COURT OF APPEALS

                            Filed: 16 September 2014


IN THE MATTER OF:
THE APPEAL OF:
Interstate Outdoor Incorporated                     North Carolina
from the decision of the Johnston                   Property Tax Commission
County Board of Equalization and                    PTC Nos. 11 PTC 1062
Review regarding the valuation of                             12 PTC 1683
certain business personal property
for tax year 2012.



      Appeal    by    Interstate      Outdoor      Incorporated    from    Final

Decisions entered on or about 19 September 2013 by the North

Carolina Property Tax Commission.            Heard in the Court of Appeals

12 August 2014.


      Spence & Spence, P.A., by Robert A. Spence, for appellant
      Interstate Outdoor Incorporated.

      David F. Mills, P.A.,           by   David    F.   Mills,   for   appellee
      County of Johnston.


      STROUD, Judge.


      Interstate Outdoor, Inc. (“Interstate”) appeals from two

final decisions of the Property Tax Commission. It argues that

the Commission erroneously affirmed ad valorem tax assessments

for   2011     and   2012    made    by    Johnston      County   regarding   69

billboards it owns. We affirm the Commission’s decisions because
                                                  -2-
Interstate       failed         to    produce         substantial       evidence     that     the

valuation     method        used          by    Johnston       County    was     arbitrary    or

illegal.

                                          I.     Background

       Interstate          is    a    corporation             that   owns     and   rents    out

billboards       in        40    counties          in     North        Carolina,     including

approximately         80    billboards           in     Johnston       County.      Interstate

appealed Johnston County Tax Administration’s valuation of 60

billboards it owned in Johnston County for tax years 2011 and

2012, as well as nine new billboards it bought in 2012.                                   For tax

year     2011,      the         county          valued        Interstate’s       property      at

$2,547,577. Interstate asserts its property was actually worth

$1,923,746. For tax year 2012, the county valued Interstate’s

property at $2,786,200. Interstate asserted that its property

was actually worth $1,790,691. To value the billboards, Johnston

County     relied      on       the       Billboard       Structures          Valuation     Guide

published by the North Carolina Department of Revenue, which is

updated annually.

       On appeal to the Property Tax Commission, Interstate argued

that the county had significantly overestimated the value of its

property and introduced what it considered the proper estimate

for    each   billboard.             To    do    so,     it    asked    one    of   its    normal
                                      -3-
billboard    contractors     for    ten     quotes    on    different     types    of

billboards. It then used one of the ten quotes for each of the

billboards     of     contested     value.          Additionally,       Interstate

highlighted that the 2011 and 2012 tax values were approximately

eighteen percent higher than those for 2010. In 2010, Interstate

had   appealed      the   valuation   of     its     billboards.    The    parties

reached a negotiated settlement, which valued its property at

$1,923,746.      Interstate argued that the value should remain the

same for the 2011 and 2012 tax years.

      The Property Tax Commission found that Interstate failed to

show that the quotes it used “included all the costs that make

the property ready for its intended uses,” or a substantial

connection     between      the    quotes     and     the    actual     costs      of

constructing the billboards at issue.                  It therefore affirmed

Johnston     County’s     valuation    for    both     tax    years,    with      one

dissent. Interstate timely appealed to this Court.

                           II.    Standard of Review

      In reviewing the decision of the Property Tax Commission,

            the   court   shall  decide   all   relevant
            questions of law, interpret constitutional
            and statutory provisions, and determine the
            meaning and applicability of the terms of
            any Commission action. The court may affirm
            or reverse the decision of the Commission,
            declare the same null and void, or remand
            the case for further proceedings; or it may
                              -4-
         reverse or modify the decision if the
         substantial rights of the appellants have
         been prejudiced because the Commission’s
         findings,    inferences, conclusions   or
         decisions are:

         (1)    In   violation    of    constitutional
         provisions; or
         (2) In excess of statutory authority or
         jurisdiction of the Commission; or
         (3) Made upon unlawful proceedings; or
         (4) Affected by other errors of law; or
         (5) Unsupported by competent, material and
         substantial evidence in view of the entire
         record as submitted; or
         (6) Arbitrary or capricious.

N.C. Gen. Stat. § 105–345.2(b) (2011). “In making the foregoing

determinations, the court shall review the whole record or such

portions thereof as may be cited by any party and due account

shall be taken of the rule of prejudicial error.” N.C. Gen.

Stat. § 105–345.2(c).

         The court may not consider the evidence
         which in and of itself justifies the
         Commission’s decision without also taking
         into account the contradictory evidence or
         other   evidence    from    which   conflicting
         inferences could be drawn. . . . Therefore,
         under   N.C.   Gen.   Stat.    §  105–345.2(b),
         questions of law receive de novo review,
         while issues such as sufficiency of the
         evidence    to   support     the   Commission’s
         decision are reviewed under the whole-record
         test.

In re Blue Ridge Housing of Bakersville LLC, ___ N.C. App. ___,

___, 738 S.E.2d 802, 807 (citations, quotation marks, ellipses,
                                    -5-
and brackets omitted), app. dismissed and rev. allowed, ___ N.C.

___, 747 S.E.2d 526 (2013), disc. rev. improvidently allowed,

___   N.C.   ___,   753   S.E.2d   152    (2014).   “If   the   court   finds

substantial evidence to support the Commission’s decision, the

Commission’s decision may not be overturned.” Matter of Moses H.

Cone Memorial Hosp., 113 N.C. App. 562, 571, 439 S.E.2d 778, 783

(1994), aff’d in part, 340 N.C. 93, 455 S.E.2d 431 (1995).

                               III. Analysis

      Although Interstate frames its arguments on appeal as four

distinct issues, in reality, it raises but one. In essence, it

argues that the County used an illegal and arbitrary method of

valuation     because     it   followed    the   Department     of   Revenue

schedules for the valuation of billboards without taking into

account local conditions in Johnston County.

             A county’s ad valorem tax assessment is
             presumptively correct. However, the taxpayer
             may rebut this presumption by presenting
             competent,    material,     and     substantial
             evidence that tends to show that (1) either
             the county tax supervisor used an arbitrary
             method of valuation; or (2) the county tax
             supervisor   used   an   illegal    method   of
             valuation;    and    (3)     the     assessment
             substantially exceeded the true value in
             money of the property. Simply stated, it is
             not enough for the taxpayer to show that the
             means adopted by the tax supervisor were
             wrong, he must also show that the result
             arrived at is substantially greater than the
             true   value   in  money   of    the   property
                                      -6-
             assessed, i.e., that           the   valuation   was
             unreasonably high.

             Once   the    taxpayer   rebuts    the   initial
             presumption, the burden shifts back to the
             County which must then demonstrate that its
             methods produce true values. The critical
             inquiry in such instances is whether the
             County’s appraisal methodology is the proper
             means     or      methodology      given     the
             characteristics     of   the    property   under
             appraisal to produce a true value or fair
             market value. To determine the appropriate
             appraisal    methodology     under   the   given
             circumstances, the Commission must hear the
             evidence of both sides, to determine its
             weight and sufficiency and the credibility
             of witnesses, to draw inferences, and to
             appraise   conflicting     and    circumstantial
             evidence, all in order to determine whether
             the Department met its burden.

In re Parkdale Mills, ___ N.C. App. ___, ___, 741 S.E.2d 416,

419-20 (2013).

    Thus, we must first consider whether there is substantial

evidence in the record, considering it as a whole, to support

the Commission’s conclusion that Interstate failed to carry its

burden of showing that Johnston County used an arbitrary or

illegal method of valuation.

    N.C.      Gen.   Stat.    §     105-291(g)    (2011)   authorizes    the

Department of Revenue to “develop and recommend standards and

rules   to   be   used   by   tax   supervisors    and   other   responsible

officials in the appraisal of specific kinds and categories of
                                          -7-
property for taxation.” The Local Government Division of the

Department of Revenue created a Billboard Structures Valuation

Guide (“Billboard Guide”) for tax years 2011 and 2012.                         Johnston

County used the guide to appraise Interstate’s billboards for

the relevant tax years.

      The Billboard Guide recommended applying a replacement cost

approach to valuation because of the difficulty of acquiring the

information     necessary      to    accurately       value    billboards         using

either the income or sales comparison approaches.1                       The schedule

was created based on data “extracted from material costs, labor,

and   other    integral       components        of   billboard       construction.”

George   Hermane,     the     personal     property     manager         for    Johnston

County Tax Administration, testified that use of a sales or

income   approach     would    not   be    possible     because         the   necessary

information     is   not    normally      available.          As    a    result,    the

Billboard Guide suggests that “[t]he valuation of each sign . .

. be determined by calculating the replacement cost new (RCN)

and   then    deducting     depreciation        based   on    an     effective      age

depreciation schedule.”

      The Billboard Guide divides billboards into four general

categories:          (1)    wood     structures,        (2)        steel      “A-Frame”

1
  Replacement cost is a valid method of appraising personal
property under N.C. Gen. Stat. § 105-317.1(a)(1) (2011).
                                    -8-
structures,     (3)   multi-mast     structures,    and     (4)    monopole

structures.     It then further divides the various classes of

billboards into subclasses based on the size, height, and number

of   panels   and   design.   The   Billboard   Guide    also    established

special guidelines for electronic displays, tri-fold, and tri-

vision billboards.       Each one of these categories is assigned an

RCN value. There is also a schedule of depreciation which takes

into account the age of the billboard.

      “The use of schedules of values and rules of application

not only makes the valuation of a substantial number of [pieces]

of property feasible, but also ensures objective and consistent

countywide property valuations and corollary equity in property

tax liability.” In re Allred, 351 N.C. 1, 10, 519 S.E.2d 52, 58

(1999). Nevertheless, use of a schedule alone “does not prove

that the valuation and assessment of the subject property was

itself not arbitrary.” In re Lane Company-Hickory Chair Div.,

153 N.C. App. 119, 125, 571 S.E.2d 224, 228 (2002).

      Here, Interstate argues the use of the Billboard Guide in

Johnston County is arbitrary and illegal because it fails to

take into account the wind load and soil conditions in the area,

which   could   affect    construction    costs.   But    “the    fact   that

independent valuations of each [piece of personalty] might be
                                      -9-
more accurate than a mass appraisal does not make the county’s

method arbitrary. Considerations of practicality must enter into

the choice of method.” Appeal of Wagstaff, 42 N.C. App. 47, 49,

255 S.E.2d 754, 756 (1979). As our Supreme Court noted in McLean

Trucking, “[t]he task of examining and appraising each of the

thousands of [pieces of personalty in a given class] would be

almost impossible.” In re McLean Trucking Co., 281 N.C. 375,

387-88, 189 S.E.2d 194, 202 (1972) (citation, quotation marks,

and brackets omitted), app. dismissed and cert. denied, 409 U.S.

1099, 34 L.Ed. 2d 681 (1973).

      “To   avoid   this,   the   County     is   justified   in    using   some

recognized dependable and uniform method of valuing them.” Id.;

see also Appeal of Bosley, 29 N.C. App. 468, 471-72, 224 S.E.2d

686, 688 (noting that “[t]he difficulty of estimating the value

of household property makes it impossible to appraise each item

of such property precisely at actual market value”), disc. rev.

denied, 290 N.C. 551, 226 S.E.2d 509 (1976). “A uniform and

dependable method of property appraisal which gives effect to

the various factors that influence the market value of property

and results in equitable taxation does not violate the appraisal

provisions of the Machinery Act.” Bosley, 29 N.C. App. at 472,

224   S.E.2d   at   688.    Indeed,   N.C.    Gen.   Stat.    §    105-317.1(a)
                                            -10-
specifically        permits      an   appraiser          of     personal   property         to

appraise      either     “each    item”       or     a    “lot    of    similar       items.”

Interstate     is    not    the   only       owner       of   billboards     in      Johnston

County and it alone owns more than 80 billboards in various

locations     across     the     county.      The    impracticality        of     assessing

each and every billboard based on the precise soil conditions at

its base and wind load is a valid consideration for the county.

See Wagstaff, 42 N.C. App. at 49, 255 S.E.2d at 756.

      Interstate         presented       various          invoices       for      what     it

considered     “similar”       signs     in    an    attempt       to   demonstrate        the

application of the Billboard Guide did not result in the true

value    of   the   billboards.        But    these       quotes    were   not       for   the

particular signs at issue. Interstate requested 10 estimates to

use for all of the signs.              It then used the estimates to argue

that what it considered similar signs should be valued at the

amount quoted.

      The estimates produced by Interstate often used dimensions

that did not match the actual billboards. Interstate used quotes

for     smaller     billboards         to     provide         estimates        for     larger

billboards,       some     significantly           so.    For    instance,      Interstate

estimated the replacement costs for one 12’x 40’ sign that is
                                  -11-
65’ tall using a quote for a billboard 10’6” by 40’ and 40’

tall.

    Moreover, we note that Interstate’s prices are based on

estimates provided by one of its regular suppliers. Mr. Hermane

explained that in “outdoor advertising . . . the structures are

sold in bulk transfers and often through other agreements that

would throw off the valuation.”

           The appraisal of property for taxation
           cannot be made to depend upon the number of
           units of similar properties owned by the
           taxpayer or upon the varying abilities of
           the several taxpayers to negotiate for
           favorable terms in buying or selling such
           units. To hold otherwise would depart from
           the principle of equality of appraisal which
           is fundamental in the Machinery Act.

In re McLean Trucking Co., 281 N.C. at 387, 189 S.E.2d at 202.

Thus, there was substantial reason to doubt that the quotes

reflected the true value of the billboards.

    Additionally, Interstate argues that it should have been

evident to the Commission that the 2011 and 2012 appraisals were

arbitrary and illegal because they were so much higher than the

2010 appraisal. But the 2010 appraisal was a compromise reached

between the parties for that tax year. Interstate cites no case

holding   that   a   settlement   concerning   a   prior   tax   year   is
                                      -12-
substantial evidence that the appraisal should remain the same

into the future.

    Given these facts, it was not illegal or arbitrary for

Johnston County to appraise Interstate’s billboards in bulk. The

method     followed   by   Johnston     County     took   into   account    the

relevant    properties     of   the   billboards,    such   as   their     size,

design, and age. Interstate has failed to show that the method

prescribed by the Billboard Guide produces a value significantly

higher than the true value.           Therefore, we affirm the Property

Tax Commission’s Final Decisions as to both the 2011 and 2012

tax years.

                                IV.   Conclusion

    We affirm the Commission’s final decisions regarding both

the 2011 and 2012 tax years because Interstate failed to present

substantial evidence that the valuation method used by Johnston

County was arbitrary or illegal.

    AFFIRMED.

    Chief Judge MCGEE and Judge BRYANT concur.
