2013 VT 48


Lesage, McNeil and Mostrom v.
Colchester, Marchelewicz v. Colchester, in re Colchester Leased Lands
(2012-196, 2012-300 and 2012-392)
 
2013 VT 48
 
[Filed 05-Jul-2013]
 
NOTICE:  This opinion is
subject to motions for reargument under V.R.A.P. 40 as well as formal revision
before publication in the Vermont Reports.  Readers are requested to
notify the Reporter of Decisions by email at: JUD.Reporter@state.vt.us or by
mail at: Vermont Supreme Court, 109 State Street, Montpelier, Vermont
05609-0801, of any errors in order that corrections may be made before this
opinion goes to press.
 
 

2013 VT 48

 

Nos. 2012-196,
  2012-300 & 2012-392


 


 
Stephanie Lesage, Mary E. McNeil and Richard Mostrom, Colin
  McNeil, Daniel and Claudia McNeil


 
Supreme Court


 


 


     v.


On Appeal from


 
Town of Colchester


Property Valuation &
  Review Division


 
Mary Jane Marchelewicz


 


 


 


     v.


 


 


Town of Colchester




                                                            


In re Colchester Leased
  Lands                                              
  Superior Court, Chittenden Unit,


                                                                                               
  Civil Division


 
                                                                                               
  February Term, 2013
 


Merle R. Van Gieson, State Appraiser
  (2012-196 & 2012-300)
Geoffrey W. Crawford, J.
  (2012-392)
 

Ian M. DeGalan and Brian P. Monaghan of Monaghan Safar
Dwight PLLC, Burlington, for
  Appellant Town of Colchester. (2012-196)
 
Peter and Stephanie Lesage, Pro Se, Colchester, Appellees.
 
Joseph E. McNeil, Colin K. McNeil and Kevin J. Coyle of
McNeil, Leddy & Sheahan,
  Burlington, for Appellees McNeil/Mostrom, Colin
McNeil, Daniel and Claudia McNeil.
 
James W. Barlow, Vermont League of Cities and Towns,
Montpelier, for Amicus Curiae 
  Vermont League of Cities and Towns. 
 
Mark L. Sperry of Michele B. Patton of Langrock Sperry &
Wool, LLP, Burlington, for 
  Amicus Curiae Coates Island, LLC.
 
Brian P. Monaghan and Nicholas T. Stanton of Monaghan Safar
Dwight PLLC, Burlington, for
  Appellant Town of Colchester. (2012-300 &
2012-392)

 
Liam L Murphy and Damien J. Leonard of Murphy Sullivan
Kronk, Burlington, for Appellees
  Colchester Leased Lands.
 
William H. Sorrell, Attorney General, and Mary L. Bachman,
Assistant Attorney General, 
  Montpelier, for Amicus Curiae Department of Taxes.
 
 
PRESENT:   Reiber, C.J., Skoglund and Burgess,
JJ., and Bent and Gerety, Supr. JJ., 
          
         Specially Assigned
 
 
¶ 1.            
SKOGLUND, J.   The common legal issue in these consolidated
cases is whether Vermont law allows the Town of Colchester to consider
location-related “intangible” factors in assessing seasonal lakefront camps
situated on leased land.  We conclude that the Town is not precluded from
considering such factors in assessing the subject properties. 
Accordingly, we reverse the decisions of the superior court and state appraiser
reaching the opposite conclusion, and we remand the cases for further
consideration consistent with our opinion set forth below.
¶ 2.            
There are two decisions for our review, one by the superior court and
one by a state appraiser from the Vermont Division of Property Valuation and
Review.  As noted, both decisions addressed the Town’s authority to factor
in intangible factors related to location in assessing lakefront camps situated
on leased land.  In each of the cases before us, taxpayers own camp
buildings on land owned by others who are not parties to these proceedings.
¶ 3.            
The seed for the instant dispute was planted in 2008 when the Division
informed the Town that both its common level of appraisal, which measures
assessment equity across towns, and its coefficient of dispersion, which
measures assessment equity within a town, were outside acceptable state parameters,
thereby requiring a town-wide reappraisal.  The Town completed its
reappraisal in 2011.  Among the town properties subject to reappraisal
were hundreds of seasonal lakefront camps, many of which were located on leased
lands.
¶ 4.            
Upon discovering during the reappraisal process that the camps on leased
land were listed on the average at about half their median sale price, the Town
determined to reappraise the properties based on the actual sales of comparable
properties.  The Town’s appraisal software broke down the appraised value
of the camps into two categories, which the Town labeled “building” value and
“land/amenity” value.  The Town derived the “building” value by estimating
the replacement cost of a new building and then deducting depreciation. 
The Town calculated the “land/amenity” value by using market data to establish
a fixed base value and then adjusting that value depending on a variety of
factors related to location, such as proximity to shoreline, views, and quality
of beachfront.
¶ 5.            
Following challenges before the town listers and the Town of Colchester
Board of Civil Authority, forty-four camp owners appealed their reappraisal
assessments to the superior court.  See 32 V.S.A. § 4461(a)
(providing that taxpayer aggrieved by decision of town board of civil authority
may appeal to either superior court or state appraiser).  In an April 2012
summary judgment ruling on those consolidated cases, the court concluded that
Vermont law does not give municipalities authority to assess owners of
“buildings” on leased land for location-related value attributable to the
leasehold rather than the building itself.  After denying the Town’s
motion for reconsideration, the court entered its final judgment in September
2012 ordering the Town to remove the “land/amenity” value from the appraised
value for each of the forty-four camps.
¶ 6.            
Meanwhile, other camp owners appealed to a state appraiser after
challenging the Town’s assessment first before the town listers and the Board
of Civil Authority.  Despite finding that the Town had “presented reliable
evidence that camps on leased land are selling in the free and open market for
a greater amount than the FMV estimate of the camp/buildings themselves,” and
further that the Town was assessing taxpayers “for the location of a
camp/building, not the Leasehold Interest,” the state appraiser concluded,
similarly to the superior court in the other consolidated cases, that Vermont
law does not authorize the Town to assess camps on leased land for value
attributable to location-related factors associated with the land rather than
structures on the land.
¶ 7.            
The Town appeals to this Court.  The essence of the Town’s argument
on appeal is that the decisions of the superior court and state appraiser
thwart the letter and purpose of Vermont law to assess all real property
uniformly according to its fair market value.  The Vermont Department of
Taxation and the Vermont League of Cities and Towns have filed briefs as amici
curiae in support of the Town’s appeal.  In addition to echoing the Town’s
position that fair market value is the touchstone of property tax assessment in
Vermont, they warn of far-reaching and potentially unintended consequences
should this Court uphold the decisions below.
¶ 8.            
For their part, taxpayers also warn of negative consequences if the
decisions are overturned.  They take the position that the Vermont statute
allowing towns to assess “buildings” on leased land does not authorize towns to
assess those buildings based in part on location-related factors attributable
to the land.
¶ 9.            
The decisions below resolved a pure legal question, which we generally
review on a “nondeferential and plenary” basis.  Barnett v. Town of
Wolcott, 2009 VT 32, ¶ 5, 185 Vt. 627, 970 A.2d 1281.  Although we
will uphold “interpretations of statutory provisions by the agency responsible
for their administration” absent “compelling indication of error,” we must
thoroughly review decisions by state appraisers “to ensure that they are
supported by findings rationally drawn from the evidence and based on a correct
interpretation of the law.”  Barrett v. Town of Warren, 2005 VT
107, ¶ 5, 179 Vt. 134, 892 A.2d 152.
¶ 10.        
At the heart of the instant controversy is a simple statute, 32 V.S.A. §
3608, that has been part of Vermont law since the end of the nineteenth
century.  Section 3608 states as follows: “Buildings on leased land or on
land not owned by the owner of the buildings shall be set in the list as real
estate.”  Taxpayers insist that this statute means that buildings on
leased land must be assessed based only on the value of the structures
themselves and not on factors, such as location, typically associated with the
land.  The superior court and the state appraiser relied on § 3608 to
arrive at the same conclusion.  We conclude that the court, the state
appraiser, and taxpayers read too much into the statute and in particular the
word “buildings” contained within the statute.
¶ 11.        
“The goal of property-tax appraisal is to ensure that no property owner
pays more than his or her fair share of the tax burden; this is accomplished by
listing all properties at fair market value.”  Barnett, 2009 VT 32,
¶ 4.  Fair market value is “the price which the property will bring in the
market when offered for sale and purchased by another.”  32 V.S.A. §
3481(1); see Sondergeld v. Town of Hubbardton, 150 Vt. 565, 567, 556
A.2d 64, 66 (1988) (stating that “touchstone” of property tax valuation is fair
market value as mandated by § 3481).[1] 
The “most persuasive method” of establishing the fair market value of
residential property is “through bona fide sale transactions.”  Sondergeld,
150 Vt. at 567, 556 A.2d at 66.
¶ 12.        
The Town contends that because its assessments of the subject properties
are ultimately based on recent bona fide sale transactions involving comparable
properties, the superior court and the state appraiser erred by rejecting those
assessments.  As noted, the court and state appraiser reduced the Town’s
assessments of the subject properties by the values representing the intangible
location factors attributed to the properties by the Town.  While
acknowledging that its appraisal software program indicated subcategories of
“building” value and “land/amenity” value, the Town argues those program labels
do not alter the fact that the subject properties were appraised at fair market
value, as required by Vermont law.
¶ 13.        
Taxpayers acknowledge that if they owned both the buildings and the land
upon which the buildings sit, factoring in location as a component of the
buildings’ fair market value would be entirely appropriate.  Indeed, in Wennar
v. Town of Georgia, 161 Vt. 632, 633, 641 A.2d 101, 101-02 (1994) (mem.),
we rejected the taxpayer’s argument that the Town erred by basing the fair
market value of his lakefront house on the original construction cost plus a
time-location factor rather than on the house’s replacement value.  More
specifically, we rejected “taxpayer’s assertion that a house must be valued the
same wherever it is located.”  Id. at 633, 641 A.2d at 101. 
In so ruling, we cautioned that valuation methodologies were only devices for
arriving at fair market value, the ultimate goal of property tax
valuation.  Id. at 633, 641 A.2d at 102.  In that case, we
upheld the town’s location adjustment factor because “there was evidence that
structures on lakefront lots were valued higher than structures elsewhere.” 
Id.
¶ 14.        
Taxpayers argue that Wenner does not govern here because, unlike
the taxpayer in that case, they do not own the land upon which their buildings
are situated.  Taxpayers reason as follows.  Municipalities may tax
only what the Legislature allows them to tax.  Meriwether v. Garrett,
102 U.S. 472, 501 (1880).   Section 3608 allows towns to tax—as real
estate—“buildings” on leased land, but the fair market value of buildings
separately taxed from the land cannot include valuation related to location,
which is most aptly attributable to the land underlying the buildings rather
than buildings themselves.  We find this reasoning unavailing in that it
reads more into § 3608 than its plain meaning and limited purpose.
¶ 15.        
 Section 3651 of Title 32, which has been in place in one form or
another since the eighteenth century, sets forth the general rule as to whom
towns may impose property tax.  That provision states that “[t]axable real
estate shall be set in the list to the last owner or possessor thereof on April
1 in each year in the town . . . where it is situated.”  32 V.S.A. §
3651.  “By enacting § 3608, the Legislature specifically included
buildings on leased land in the definition of taxable real estate, and recognized
that a building can be taxed separately from the land upon which it
sits.”  Gordon v. Town of Morristown, 2006 VT 94, ¶ 8, 180 Vt. 299,
910 A.2d 836.
¶ 16.        
Thus, the provision does not purport to mandate a particular methodology
for valuing buildings on leased land, but rather is intended only to authorize
towns to assess that type of property as real estate.  By requiring that
buildings on leased land be set forth in a town’s grand list as real estate, §
3608 is aimed at precluding any argument that a building in different ownership
from the underlying land must be considered personal property rather than real
estate.  The Legislature has enacted similar provisions concerning other
types of property.  See, e.g., 32 V.S.A. § 3602 (“Engines and boilers, electric
motors, air compressors, traveling cranes and machinery, so fitted and attached
as to be a part of a manufacturing or other plant and kept and used as such,
shall be set in the grand list as real estate.”); id. § 3602a (“All
structures, machinery, poles, wires and fixtures of all kinds and descriptions
used in the generation, transmission or distribution of electric power that are
so fitted and attached as to be part of the works or facilities used to
generate, transmit or distribute electric power shall be set in the grand list
as real estate.”); id. § 3604 (“The interest of a grantee in severance
from surface ownership in mines, quarries, or the right of mining and
quarrying, shall be set in the grand list as real
estate . . . .”); id. § 3605 (establishing water
rights as real estate to be set in grand list).
¶ 17.        
When the Legislature has intended to create an exception to assessment
at fair market value, it has done so expressly.  See, e.g., id. §
3607a (providing that barns, silos, and sugarhouses shall be entered into grand
list at fair market value unless town elects to exempt, or appraise at less
than fair market value, such properties).  See generally id. §§
3751-3763 (authorizing use-value appraisal of agricultural and forest
lands).  If the Legislature had intended a divergence from the general
fair-market-value standard for assessing buildings on leased land, it would
have explicitly said so.  See State v. Smith, 2011 VT 83, ¶ 8, 190
Vt. 222, 27 A.3d 362 (“The underlying principle is that if the Legislature made
specific exceptions to the applicability of the provision and also wished to
include another exception, it would have explicitly stated the additional
exception.”).  Nothing in § 3608 creates an exception to the town listers’
duty under § 3481 to list the real estate identified therein—buildings on
leased land—at fair market value, which is most persuasively established
through comparable sale transactions. 
¶ 18.        
Fair market value “takes into account all the elements of the property’s
availability, ‘its use, potential or prospective, and all other elements . . .
which combine to give property a market value.’ ”  Barrett, 2005 VT
107, ¶ 6 (quoting Town of Barnet v. New England Power Co., 130 Vt. 407,
411, 296 A.2d 228, 231 (1972)).  As this Court declared in Barrett,
“[a]ll of the elements, tangible and intangible, that combine to give real
property fair market value are subject to property tax” as long as “those
intangible factors are so ‘intimately intertwined’ with the real property that
the property would not function without them.”  Id. ¶ 11. 
Hence, although intangible elements of real property “ ‘cannot be
separately taxed as property,’ ” such elements “ ‘may be reflected
in the valuation of taxable property.’ ”  Id. ¶ 9 (quoting, with
added emphasis, Roehm v. Orange Cty., 196 P.2d 550, 554 (Cal. 1948)).
¶ 19.        
The critical question, then, is whether the intangible location-related
factors in this case are “intimately intertwined” with the buildings—and not
solely with the underlying leased land—such that the Town may consider those
factors in assessing the buildings.  In Barrett, the issue was
whether the state appraiser erred by reducing the Town’s assessment of a
condominium unit by the value attributable to the unit owner’s ownership share
of the condominium association’s assets.  Noting that the unit owner’s
interest in the association was appurtenant to the real property—unlike the
club memberships and ski passes we had rejected as part of the value of real estate
in other cases, we held that “the value of that interest may be taken into
account when determining the property’s fair market value” because the interest
was an intrinsic feature of the condominium “positively influenc[ing] the price
a buyer is willing to pay for a unit.”  Id. ¶¶ 12-13. 
Accordingly, we concluded that “[t]he Town complied with the plain language of
32 V.S.A. § 3481 by listing the value of taxpayer’s property at its fair market
value,” and that “[t]he statute does not recognize adjusting the fair market
value by the amount of a taxpayer’s interest in a condominium owners
association.”  Id. ¶ 4.
¶ 20.        
We reject in this case taxpayers’ reliance on Barrett for the
proposition that Vermont law does not recognize the Town’s attempt to adjust
the fair market value of their buildings by adding a value “arising from the
favorable location of the underlying land.”  Here, the location-related
factors are plainly “intimately intertwined” with the fair market value of the
buildings, as reflected by comparable sale transactions.  Indeed, it is
hard to imagine any factor more closely tied to the value of a building than
its location.  Similar to Barrett, the land/amenity factor
represents a necessary component of each cottage and “positively influences the
price a buyer is willing to pay for” the property.  Id. ¶ 13.
¶ 21.        
This is true no matter what label is placed on the location-related
factors applied by the Town.  At various times, these factors have been
described either by the Town’s appraisal software, the superior court, or the
parties as “land” value, “land/amenity” value, or the value related to a
leasehold interest.  Specifically, regarding the latter label, the parties
have acknowledged that the value could be described as representing, at least
in part, the buyer’s right to renegotiate the lease on the underlying land or,
perhaps most accurately, the seller’s agreement to relinquish the current
lease.
¶ 22.        
The leases associated with the subject properties are short-term,
generally three to twenty years and not transferable.  Normally, a new
lease is executed after the sale of a camp, often in a separate
transaction.  Taxpayers have not presented any evidence of leaseholds
purchased along with the camps.  The Town’s assessments of the subject
properties are not based on leasehold contracts, which are rarely reported in
the land records.  Rather, the Town’s assessments are based on comparable
sales of camp properties, which may or may not include any specified leasehold
interest.  Based on these facts, the state appraiser acknowledged in the
case before him that the taxpayer “is being assessed for the location of a
camp/building, not the Leasehold Interest.”
¶ 23.        
Call it what you may, it is a factor intimately intertwined with the
building and its purchase price.  As we stated in Royal Parke Corp. v.
Town of Essex, 145 Vt. 376, 378-79, 488 A.2d 766, 768 (1985) (emphasis
added):
When . . . fair
market value can be established by the operation of bona fide sale transactions
themselves, a market value is perforce established for appraisal
purposes.  There is then no need to consider factors useful in trying to
estimate market value.  So long as the sales evidence proves a transaction
between a willing buyer and a willing seller at arms length, entered into in
good faith, and not to “rig” a value, the tax statute is not concerned about
the reasons either buyer or seller attributed the agreed value to the property.

 
¶ 24.        
Taxpayers argue, however, that the Town’s comparables include more than
the value of the buildings and thus are not reliable indicia of the actual fair
market value of the subject properties.  According to taxpayers, the
Town’s comparables include the value of other interests in addition to the
value of the buildings, including personal property or short-term leasehold
interests in the underlying land.
¶ 25.        
This is an issue for the superior court and state appraiser on
remand.  Both the court and the state appraiser based their decisions on
their legal conclusion that Vermont law does not permit the Town of Colchester
to consider location-related factors in assessing buildings on leased
land.  We reject that legal conclusion, and remand the matter for the
court and state appraiser to reconsider the Town’s assessment of the subject
cases consistent with our holding in this case that the court may consider
location-related factors in arriving at the fair market value of the subject
properties.  We recognize that the state appraiser has already found “that
the Town has presented reliable evidence that camps on leased land are selling
in the free and open market for a greater amount than the FMV estimate
[referring to the Town’s replacement cost component] themselves.”
 Nonetheless, on remand, taxpayers may dispute the Town’s comparables, in
light of our holding.[2]
¶ 26.        
Taxpayers suggest that the lack of long-term leases associated with the
subject properties reinforces the notion that location-related factors may not
add to the value of the camp buildings, as opposed to the underlying leased
land.  We disagree.  The most persuasive evidence of fair market
value is what the cottages are selling for, as is, without long-term
leases.  Even though the landowner could negate the value of a
leaseholder’s interest by not renewing the lease, the leaseholder must still
“pay tax on the full value of the buildings because they have full use of them”
in the interim, Cove Sportsman’s Club v. Dep’t of Rev., 11 Or. Tax.
42-43 (Or. T.C. 1988)—and the market dictates that value.  As we stated in
Gordon in rejecting the argument of the owner of a hangar on leased land
that he should not be subject to property taxes because the State could
terminate its lease at any time: “While the possibility does exist that at
termination of the lease the State could take title to the hangar, that does
not alter the undisputed fact that at the present time, and until the State
executes its option to claim title, [the hangar’s owner] is the title holder
for the hanger.”  2006 VT 94, ¶ 12.
¶ 27.        
Nor does 32 V.S.A. § 3610 support the notion, as suggested by the
superior court and taxpayers, that owners of buildings with short-term leases
on the underlying land should not be assessed for fair market value based in
part on location-related factors.  This provision requires towns to list
perpetual leases as real estate to be taxed to the lessee, with certain
exemptions and conditions.  See 32 V.S.A. § 3610(a)-(i).  The statute
is aimed at making owners of perpetual leases of land the effective owners of
the property for purposes of taxation—nothing more.  It has no bearing on
this case, which does not involve perpetual leases.  Taxpayers are not the
effective owners of the underlying land in these cases, and no one has
suggested otherwise.  The issue, rather, is whether the Town is authorized
to consider location-related factors in arriving at the fair market value of
the buildings by using comparable sale transactions.  The fact that
perpetual leaseholders are also recognized as owners of the underlying land for
tax purposes is not relevant in resolving this question.
¶ 28.        
Taxpayers have also taken up the superior court’s position that the
leaseholders and owners of the underlying land will work out allocation of the
value of location through their negotiated leases.  We agree with the Town
that this is an example of “the tail wagging the dog.”  The Town is
authorized—indeed compelled—to tax property based on fair market value unless
the Legislature has indicated otherwise—which it has not with respect to
buildings on leased land.  It is the market that determines fair market
value.  The Town claims that bona fide sale transactions demonstrate that
the market has, in effect, allocated location-related value, for the most part,
to the camp owners.  This is certainly plausible, given that the camp
owners are the ones who most directly benefit from that value.  In any
event, if comparable sale transactions support the Town’s determination of the
subject property’s fair market value, neither the superior court nor the state
appraiser may disturb that determination under the assumption that lease
negotiations will sort out fair market value.
¶ 29.        
By the same token, the Sherburne cases relied upon by taxpayers
do not govern our resolution of these appeals.  In Sherburne Corp. v.
Town of Sherburne, 124 Vt. 481, 486, 207 A.2d 125, 128 (1965), this Court
rejected the Town of Sherburne’s attempt to tax ski lifts on land leased to the
ski operator by the state under long-term—but not perpetual—leases, holding
that the improvements on the leased premises were real property rather than
personal property and thus the property of the State for tax purposes. 
Later the Town of Sherburne attempted to tax 400 of the 2115 acres covered by
the lease agreements based on its contention that the ski operator’s use and
control of those 400 acres was so extensive as to effectively divest the state
of its ownership for taxation purposes.  The town’s position was rejected
by this Court.  Noting that our taxation system did not support the town’s
position because the leases were not perpetual, we acknowledged the potential
hardship for the town, but stated that “the remedy lies with the Legislature
and not this Court.”  Sherburne Corp. v. Town of Sherburne, 145 Vt.
581, 585, 496 A.2d 175, 178 (1985).  Neither of these cases apply here,
where the parties agree that § 3608 authorizes the Town to tax taxpayers’
buildings, and the only issue is whether the Town may consider location-related
factors in doing so.   
¶ 30.        
Taxpayers also rely upon several out-of-state cases in defense of the
decisions below, but those cases are either distinguishable or unpersuasive. 
For example, taxpayers cite In re Reid, 722 A.2d 489 (N.H. 1998) and LSP
Ass’n. v. Town of Gilford, 702 A.2d 795 (N.H. 1997), two 3-2 decisions by
the New Hampshire Supreme Court, to support their argument that the Town may
not tax any value of their buildings associated with their leasehold
interests.  The Gilford case concerned taxation of owners of
cottages and mobile homes within a commercial lakefront park.  In
assessing the unit owners’ properties, the town added a site-amenity value
above and beyond the depreciated value of the physical structures.  The
court held that the town could tax the site-amenity value because agreements
between the unit owners and the park owners’ association, which was the
titleholder to the underlying land, indicated that the unit owners’ interest
was “in the nature of a license and . . . not a taxable interest in
land.”  Gilford, 702 A.2d at 800.
¶ 31.        
One year later, citing Gilford, the court in Reid held
that because the leasehold interests of the owners of cottages on land leased
by a town entity were not sufficient “to justify a taxable interest in the
leaseholds, it follows that a site amenity charge added to the depreciated cost
of their buildings based solely on the value of the underlying land is equally
illegal.”  Reid, 777 A.2d at 495.  In ruling that the
leasehold interests in question were not taxable, however, the Reid
court relied upon New Hampshire statutory law requiring term-year lease
agreements to include a provision for the payment of property taxes, which it
found consistent with the general rule that “leaseholds for a term of years are
taxable if the lessee consents to be taxed.”  Id. at 494.
¶ 32.        
Vermont statutes contain no such provision, and thus the New Hampshire
cases have little persuasive value.  The issue here is whether
§ 3608, which explicitly authorizes towns to tax buildings on leased land,
precludes the towns from considering location-related factors.  Because
the New Hampshire cases are grounded on distinctive statutory law, they do not
inform our decision on this issue.
¶ 33.        
Taxpayers also rely upon two recent cases from intermediate-level Kansas
appellate courts dealing with leasehold interests.  See In re Wine,
260 P.3d 1234 (Kan. Ct. App. 2011); In re Lipson, 238 P.3d 757 (Kan. Ct.
App. 2010).  Those cases are distinguishable because the leaseholders in
both cases owned easily movable mobile homes and because the courts relied upon
Kansas law that does not tax divided interests and particularly leasehold
interests.  See Wine, 260 P.3d at 1239-40 (adopting reasoning in Lipson,
which was based on Kansas law not taxing leasehold interests); Lipson,
238 P.3d at 760-61 (explaining statutory scheme that does not tax divided
interests and particularly leasehold interests).  Similarly, a Connecticut
case cited by taxpayers is distinguishable in that its holding was based upon
both the town’s potential inability to assess the landowner’s property at fair
market value using only rental income and the absence of statutory law giving
towns the authority “to assess a tax against a lessee on the value of the
leasehold in excess of actual rent.”  See Sheridan v. Town of Killingly,
897 A.2d 90, 97 (Conn. 2006).
¶ 34.        
In contrast, our consolidated cases involve buildings explicitly subject
to real estate tax under a statute containing no exception to the general rule
that assessments must be based on fair market value as most persuasively shown
through bona fide comparable sale transactions.  Accordingly, we conclude
that because location-related factors are intimately intertwined with
taxpayers’ camp buildings, the Town may take those factors into consideration
to the extent they reflect the fair market value of the properties.
¶ 35.        
The Town asks this Court to reverse the underlying decisions and set the
values of the subject properties as established by the Town’s Board of Civil
Authority.  Both the superior court and the state appraiser in these
consolidated cases excised the land/amenity value from the Town’s calculation
of fair market value, leaving as the fair market value of the subject
properties the structural component of value indicated by the Town’s appraisal
software.  Given our decision today allowing the Town to take into account
location-related factors in assessing fair market value of the subject
properties, we reverse the underlying decisions and remand the matter for the
superior court and state appraiser to reconsider the cases in light of our
decision.  As noted above, the court and state appraiser may reexamine the
comparables offered by the Town or taxpayers, but there is no need for new
evidence unless the court or state appraiser determines that the passage of
time warrants the submission of new evidence.
Reversed and
remanded for further proceedings consistent with this opinion.
 

 


 


FOR THE COURT:


 


 


 


 


 


 


 


 


 


 


 


Associate
  Justice

 





[1] 
Under Vermont law, real estate must be set in the grand list at one percent of
its “listed value.”  32 V.S.A. § 3482.  “Listed value,” in turn, is
equal to one hundred percent of the “appraisal value,” id. § 3481(2),
which means “estimated fair market value”—“the price which the property will
bring in the market when offered for sale and purchased by another, taking into
consideration all the elements of the availability of the property, its use
both potential and prospective, any functional deficiencies, and all other
elements such as age and condition which combine to give property a market
value.”  Id. § 3481(1).


[2] 
Taxpayers in one of the consolidated cases have filed a motion asking this
Court to strike, as irrelevant, any evidence of comparables submitted in the
record on appeal.  We do not adjudicate the adequacy of the Town’s
comparables in our resolution of the consolidated appeals, but we nonetheless
deny taxpayers’ motion insofar as evidence of the comparables was admitted by
the state appraiser in the proceedings below.  See V.R.A.P. 10(a)
(providing that record on appeal shall consist of, among other documents,
original papers and exihibits filed in lower court proceedings).



