                                  [J-102-2014]
                   IN THE SUPREME COURT OF PENNSYLVANIA
                               MIDDLE DISTRICT

          CASTILLE, C.J., SAYLOR, EAKIN, BAER, TODD, STEVENS, JJ.


HARLEY-DAVIDSON MOTOR          :             No. 82 MAP 2014
COMPANY                        :
                               :             Appeal from the order of the
                               :             Commonwealth Court dated October 30,
          v.                   :             2013 at No. 159 CD 2013 which
                               :             Affirmed/Vacated/Remanded the order of
                               :             the Court of Common Pleas of York
SPRINGETTSBURY TOWNSHIP,       :             County, Civil Division, dated January 8,
CENTRAL YORK SCHOOL DISTRICT   :             2013 at No. 2004-SU-1832-Y08
AND YORK COUNTY BOARD OF TAX   :
ASSESSMENT APPEALS             :
                               :             ARGUED: November 18, 2014
                               :
APPEAL OF: CENTRAL YORK SCHOOL :
DISTRICT                       :


                                        OPINION


MADAME JUSTICE TODD                                    DECIDED: September 29, 2015
      This appeal by allowance involves the proper determination of the fair market

value of a commercial/industrial property for purposes of property tax assessment,

including consideration of environmental contamination, remediation, and stigma, as

well as the potential for future subdivision of the property. For the reasons that follow,

we affirm in part, and reverse in part, the order of the Commonwealth Court and remand

the matter to that court, for remand to the Court of Common Pleas of York County, for

further proceedings consistent with this Opinion.

      The factual and procedural background of this appeal is as follows. This matter

concerns a 229.24 acre parcel of commercial/industrial property situated at 1425 Eden

Road, Springettsbury Township, York, Pennsylvania, which is currently owned by
Appellee Harley-Davidson Motor Company (“Harley-Davidson”).          Approximately 110

acres of the parcel contain buildings and other improvements, and the remaining 119

acres are considered “excess” land. Previously, the United States Navy, from 1941 until

1964, and, later, a private firm, American Machinery and Foundry Company (“AMF”),

with whom Harley-Davidson merged in 1969, used the parcel to operate a weapons

manufacturing plant and, in the course of their business, buried numerous contaminants

– as well as unexploded military ordnance – in the subsurface strata. Not surprisingly,

this use occasioned significant environmental damage to the property.            Military

contracting was phased out in the 1980s.      In 1993, Harley-Davidson repurposed a

portion of the site to operate a motorcycle manufacturing plant, which continues in

operation today.

      Subsequently, in 1995, in the course of extant environmental litigation, the United

States, the United States Department of Defense, and the United States Department of

the Navy (collectively, the “United States government”) and Harley-Davidson executed a

settlement agreement.1 As discussed more fully below, pursuant to the 1995 settlement

agreement, the parties agreed, inter alia, to share 100% of the costs of the parcel’s

remediation.2   At present, remediation has not yet been completed, and Harley-

Davidson is participating in the “One Cleanup” program of the United States


1
  Pursuant to the settlement agreement, the parties resolved ongoing litigation pending
in federal court regarding responsibility for remediation, and ongoing investigation and
monitoring, of the property. Harley-Davidson pledged to remediate the property and the
United States government agreed to pay $2.3 million to Harley-Davidson for past
response costs. Further, the parties agreed to set up a “York Facility Remediation Trust
Fund,” and to split future remediation expenses, with the United States government
paying 53% and Harley Davidson paying 47%.
2
   The parties dispute the effect of the 1995 settlement agreement, and related
environmental remediation costs and obligations, with respect to the proper assessment
of the fair market value of the property.



                                    [J-102-2014] - 2
Environmental Protection Agency (“EPA”), which permits owners of contaminated land

to avoid federal environmental liability by complying with state remediation law.

Therefore, federal standards are satisfied if the requirements under the state program

are met.      As a result, and collaterally as a matter of state law, Harley-Davidson’s

conduct relative to the parcel is governed by the Pennsylvania Land Recycling and

Environmental Remediation Standards Act, 35 P.S. §§ 6026.101 et seq. (“Act 2”), which

enables land owners to avoid state environmental liability by satisfying certain

conditions,    including,   inter   alia,   using   or    selling   the   property   only   for

commercial/industrial purposes, and maintaining certain engineering controls until Act 2

remediation is complete.

       In 2003, the Assessment Office of York County (“Assessment Office”) notified

Harley-Davidson that it intended to increase the parcel’s property tax assessment.

Harley-Davidson filed an appeal with the York County Board of Assessment Appeals

(“Board”), which affirmed. Harley-Davidson then filed a de novo appeal in the trial court.

Appellant Central York School District (“School District”) intervened, and the parties

proceeded to a three-day bench trial to determine the parcel’s assessments for tax

years 2004 through 2010, pursuant to the Second Class A and Third Class County

Assessment Law.3

       The case proceeded to a bench trial before Judge Stephen P. Linebaugh. At

trial, both parties offered experts in support of their positions regarding valuation of the

property.     The experts considered the three traditional approaches to valuation,

discussed below in greater detail: the cost approach, the comparable sales approach,

and the income approach. As the trial court concluded, and the parties agreed, the cost

3
 The Second Class A and Third Class County Assessment Law, 72 P.S. §§ 5342-
5350k, was subsequently repealed and reenacted within the Consolidated County
Assessment Law, 53 Pa.C.S. § 8801-8868, effective January 1, 2011.



                                       [J-102-2014] - 3
approach, which considered reproduction or replacement costs of the property, less

depreciation and obsolescence, was not applicable to the property.         The testimony

before the trial court focused on the comparison approach, which compares sales of

property of similar size, type, and location of the property, and the income capitalization

valuation approach, which considers fair market value by dividing the subject property’s

annual net rental income by an investment rate of return. Jackson v. Bd. of Assessment

Appeals of Cumberland Co., 950 A.2d 1081, 1084 n.1 (Pa. Cmwlth. 2008).

      The School District relied largely upon the testimony of Stephen Fulton, an expert

in environmental contamination, and, particularly relevant for this matter, Bernard

Camins, an expert witness in real estate appraisal.         Camins testified that, upon

examination of the property, its “highest and best use”4 would be for “warehousing,

office use with any excess land suitable for development.” N.T., 1/24/2011, at 346.

Accordingly, Camins compared, inter alia, the prices of sales of similarly situated land to

developers for similar purposes — here, a Caterpillar plant in Springettsbury Township,

York County — and found that, given a developer’s likely costs and profits, the main

portion of the parcel (for warehousing/office use) would sell for approximately $50,000

per acre and the excess land (for development) would sell for approximately $75,000

per acre, concluding that the parcel had the following aggregate market values:

                               Tax Year      Market Value
                                2004-07      $24,500,000
                                2008         $26,500,000
                                2009         $24,500,000
                                2010         $18,000,000


4
  The “highest and best use” is a tool in assessing the value of property that
contemplates the reasonable and probable use of property that supports the highest
present value on the date of the appraisal. See Krohn v. Snyder Co., 62 A.3d 476, 477
(Pa. Cmwlth. 2013).



                                     [J-102-2014] - 4
See Letter from Camins Associates to Philip H. Spare, Esq., 1/14/2011, at 4 (R.R. at

562a). In providing his valuation, Camins repeated numerous times that he had made

his conclusions based on an evaluation of the property in its current state, and not as if

it were already subdivided or developed.

      Camins further testified that he considered the parcel’s environmental

contamination in arriving at his valuation. Specifically, Camins indicated that, since the

1995 agreement made the United States government and Harley-Davidson jointly

responsible for remediation, and since the environmental degradation of the property

itself would not preclude the type of development he contemplated, his appraisal was

not changed as a result of the contamination. However, Camins noted that, regardless

of whether environmental damage to the property would give rise to expense, the

associated stigma reduced its market price, and, thus, he applied an across-the-board

5% reduction to his appraisal. Consequently, Camins’ final determinations of market

value were as follows:

                               Tax Year     Market Value
                                2004-07     $23,000,000
                                2008        $25,000,000
                                2009        $23,000,000
                                2010        $17,000,000
See id.; N.T., 1/24/2011, at 329.

      Harley-Davidson offered the expert testimony of Elliott Weinstein.       Weinstein

concluded that owner-occupied industrial uses were the highest and best use of the

property, employed a “cost-to-cure” approach to environmental remediation, discussed

below, which was not based upon the 1995 settlement agreement, and ultimately

opined that the market value of the property was as follows:




                                    [J-102-2014] - 5
                               Tax Year      Market Value
                                2003          $7,800,000
                                2004          $7,800,000
                                2005          $7,500,000
                                2006          $7,300,000
                                2007         $7,800,000
                                2008          $8,800,000
                                2009          $9,100,000
                                2010          $6,600,000

See N.T., 1/24/2011 at 110, 149, 152-53.
       The trial court rejected Weinstein’s expert testimony as not credible. Specifically,

the court found, inter alia, that his estimates of a lower fair market value of the property

were without support; his comparisons to similar properties were not based on owner-

occupied industrial users; he changed his opinion of the highest and best use of the

property throughout his report; and his treatment of the environmental conditions on the

property and valuation approaches were inconsistent.

       Ultimately, the trial court found for the Board and the School District, crediting

Camins’ testimony, and specifically finding the highest and best use of the property was

for warehouse and office use with excess land being suitable for development, and,

importantly for purposes of this matter, that the fair market value conclusions of Camins

were based on the present condition of the property, and not as if the property had been

subdivided. However, without explanation, the trial court then adopted Camins’ pre-

reduction market values as the parcel’s assessed values:

                             Tax Year       Assessed Value
                               2004-07        $24,500,000
                               2008           $26,500,000
                               2009           $24,500,000
                               2010           $18,000,000
Trial Court Opinion, Findings of Fact and Conclusions of Law, 1/8/2013 at 12.




                                     [J-102-2014] - 6
       Harley-Davidson timely appealed to the Commonwealth Court, claiming, inter

alia, that: (1) the trial court erred in relying on Camins’ report because, contrary to the

Commonwealth Court’s decisions in Air Products and Chemicals, Inc. v. Board of

Assessment Appeals of Lehigh County, 720 A.2d 790 (Pa. Cmwlth. 1998), and

Craftmaster Mfg., Inc. v. Bradford County Board of Assessment Appeals, 903 A.2d 620

(Pa. Cmwlth. 2006), Camins had valued the property not in its current condition,

accounting for prospects of subdivision and development, but, rather, as if it were

already subdivided and developed; and (2) the trial court erred in relying on Camins’

report because Camins did not properly account for the effect of the parcel’s

environmental contamination upon market price and, also, applied an arbitrary stigma

reduction.

       In a published opinion, a divided Commonwealth Court affirmed in part, and

vacated and remanded in part. In re: Appeal of Harley-Davidson Motor, 80 A.3d 506

(Pa. Cmwlth. 2013). Regarding Harley-Davidson’s initial claim, the Court observed that,

pursuant to, inter alia, Air Products and Craftmaster, an appraisal must be based on the

property in its current state, considering its potential for development, but that valuation

of the property may not be made as if it were already subdivided and developed. The

court noted that, in Craftmaster, it reviewed a trial court’s acceptance of an expert’s

appraisal of market value wherein the expert had “viewed the Property as three

separate tax parcels and assigned separate values” to each parcel, and rejected that

appraisal because, inter alia, it found that the method evaluated the property as if it had

already been subdivided and developed.         In re: Harley-Davidson, 80 A.3d at 520

(quoting Craftmaster, 903 A.2d at 624). Noting that, in the instant case, Camins had

likewise considered the property in piecemeal fashion, the court found the trial court’s

reliance on Camins’ appraisal was not supported by substantial evidence.




                                     [J-102-2014] - 7
       With respect to Harley-Davidson’s second claim, the Commonwealth Court

observed that, notwithstanding the 1995 settlement agreement, Harley-Davidson’s

participation in federal and state remediation programs required, inter alia, that it not sell

the parcel for any non-commercial, non-industrial purposes, and that it require any

purchaser to continue maintenance of engineering controls to monitor environmental

conditions at the site.    Reasoning that these restrictions would certainly affect the

parcel’s market value, the Commonwealth Court rejected Camins’ and the trial court’s

conclusions to the contrary as unsupported by substantial evidence. Moreover, the

Commonwealth Court agreed that Camins’ and the trial court’s application of a 5%

stigma reduction was essentially arbitrary, in that there was no evidence of record

detailing how Camins’ arrived at that number, and, thus, found the same was likewise

unsupported by substantial evidence. Accordingly, the court vacated the trial court’s

order and remanded to the trial court with instructions to properly calculate the

assessed value, with due consideration of Harley-Davidson’s environmental obligations,

using a discernable evaluation of environmental stigma, and without impermissibly

evaluating the property as subdivided.

       Then-Judge, now-President Judge, Pellegrini filed a concurring and dissenting

opinion. President Judge Pellegrini opined that the majority had usurped the factfinder’s

function in rejecting Camins’ professional judgment with respect to the stigma’s effect

on market price, which he reasoned was itself substantial evidence, as an expert

“guess.”   In re: Harley-Davidson, 80 A.3d at 523 (Pellegrini, P.J., concurring and

dissenting). The dissent noted that there was no allegation that Camins’ opinion in this

regard was based upon facts outside of the record, on assumptions contrary to

established fact, or on other impermissible factors. Thus, according to the dissent, the

matter of environmental stigma went to the weight and credibility of Camins’ testimony,




                                      [J-102-2014] - 8
which was not subject to appellate review. The dissent also found that the majority

erred in disregarding Camins’ testimony at trial that he evaluated the parcel as it stood,

with potential for subdivision, rather than as if it were already subdivided.

       The School District filed a petition for allowance of appeal with this Court, which

we granted as to the following two issues:

              (1) Whether the trial court properly considered reasonably
              foreseeable hypothetical ways in which the property could be
              used by potential buyers to determine what a willing buyer
              would pay for the property consistent with the holdings in
              Craftmaster Mfg., Inc. v. Bradford County Board of
              Assessment Appeals, 903 A.2d 620 (Pa. Cmwlth. 2006) and
              Air Products and Chemicals, Inc. v. Board of Assessment
              Appeals of Lehigh County, 720 A.2d 790 (Pa. Cmwlth.
              1998)?

              (2) Whether the trial court followed Commonwealth Court
              precedent and properly considered the impact of
              environmental conditions by reviewing the settlement
              agreement, interpreting Pennsylvania’s Land Recycling and
              Remediation Standards Act (Act 2), accepting the opinion of
              an expert appraiser, and applying a five percent reduction in
              value for stigma?


Harley-Davidson Motor Co. v. Springettsbury Twp., 97 A.3d 729 (Pa. 2014) (order). In

reviewing a tax appeal, the appellate court must determine whether the trial court

abused its discretion, committed an error of law, or rendered a decision unsupported by

the evidence. Safe Harbor Water Power Corp. v. Fajt, 876 A.2d 954, 966 n.12 (Pa.

2005); Appeal of Marple Springfield Ctr., Inc., 607 A.2d 708, 709-10 (Pa. 1992).

       In its first issue raised on appeal, the School District initially offers that the

starting point for an appraisal is to determine the “highest and best use” of the property.

The School District points out that the lower tribunals determined, consistent with

Camins’ testimony, that the highest and best use of the property is not as a single user



                                      [J-102-2014] - 9
manufacturing facility, but as a warehouse and office space with excess land suitable

for development.    Moreover, the School District argues that the methodology that

Camins used to determine fair market value of the property is consistent with a long line

of Pennsylvania decisions.        Specifically, the School District submits that the

Commonwealth Court in Air Products and Craftmaster explained that hypothetical ways

in which property could be used by potential buyers, including subdivision of the

property, should be considered in determining what a willing buyer will pay for the

property in its current condition, but that the property should not be valued as though it

were already in that hypothetical condition. Thus, consistent with Air Products and

Craftmaster, the School District maintains Camins did just that: determined the parcel’s

value by considering what a developer would pay for it, which necessarily entailed a

calculation of what a developer would spend and earn in developing the property, and

the Commonwealth Court erred in concluding that Camins had, contrary to his

testimony, determined the parcel’s value as if it were already subdivided. Further, the

School District contends, consistent with President Judge Pellegrini’s dissent, that,

since Camins repeatedly testified that he had evaluated the property in this regard, and

not as if it were already subdivided, the Commonwealth Court usurped the trial court’s

role and erred in impeaching Camins’ testimony with the substance of his report. The

School District asserts that Harley-Davidson’s position — that the reasonably

foreseeable prospect of the property’s excess land being developed in the future is not

a permissible factor in valuation — is erroneous, and contradicts Air Products and

Craftmaster, as well as well-established practice among appraisers. The School District

stresses that the trial court found that there was excess land on the property, and that it

was reasonably foreseeable that the excess land could be developed.




                                    [J-102-2014] - 10
       Further, the School District maintains that the substantial evidence supports the

conclusion that the property was not valued as if already subdivided. Specifically, the

School District offers Camins’ negative response to the question of whether he

assumed the property was already subdivided, his statement that he looked at the

property in its entirety, and his statement that that subdivision was not assumed for the

highest and best use, as the property did not have to necessarily be subdivided.

Finally, the School District points out that Camins provided one final value conclusion

for each year in question, and did not assign separate taxable values based upon

separate properties.   The School District emphasizes Camins’ testimony regarding

hypothetical uses, i.e., how the property could be subdivided, how the building could be

sold, and how the excess land has potential for subdivision.         Camins’ testimony,

according to the School District, is consistent with Air Products and Craftmaster’s

holdings that hypothetical ways in which the property could be used for potential buyers

should be considered in determining what a willing buyer would pay for the property.

Related thereto, the School District submits that the substantial evidence of record also

supports that Camins did not value the property as if it were already adapted for its

highest and best use as a warehouse and office space, as deductions for demolition

and renovations to the property, and other costs, including leasing of buildings and the

developers’ profit, which would be required to realize the property’s highest and best

use were taken into account. Thus, rather than valuing the property already in the

hypothetical condition, the School District contends that Camins valued the property

considering the costs a typical developer would incur to realize the highest and best use

of the property.

       The School District also points to eminent domain cases as an analogy to the

proper approach in determining fair market value, as such cases involve highest and




                                   [J-102-2014] - 11
best use determinations, as well as the use of hypothetical subdivision to show the best

value of property.    Stressing the appropriate standard of review, the School District

urges that the trial court did not abuse its discretion, committed no error of law, and

based its decision on the substantial evidence of record, and, thus, that the

Commonwealth Court’s order vacating the trial court’s determination should be

reversed.

       Harley-Davidson responds that the School District’s appraiser, Camins, identified

portions of the property as excess land suitable for development and improperly

considered a subdivision of the excess property in arriving at his assessment. Harley-

Davidson argues that the Commonwealth Court’s decisions in Craftmaster and Air

Products were properly relied upon by the court below as prohibiting a subdivision

approach to valuation. Specifically, Harley-Davison avers that the circumstances in this

appeal are similar to that in Craftmaster, which relied in part upon its prior decision in Air

Products.   Harley-Davidson offers that, in Craftmaster, the court found an expert’s

valuation based upon a hypothetical subdivided property — including valuation of

residential structures in the area, valuation of former residential structures that were

being used by Craftmaster in its business operations, and identifying excess land which

was valued separately on the assumption it could be sold to smaller businesses — did

not represent a reasonably foreseeable “prospect” for the property which existed at the

time of the assessment. Harley-Davidson claims that, like Camins, the appraiser in

Craftmaster engaged in the legally inappropriate hypothetical subdivision of the property

in arriving at his opinion as to a highest and best use of the property. Moreover, Harley-

Davidson submits that the Commonwealth Court’s prior decision in Air Products is

entirely consistent with its decision in the matter sub judice, as, while the rationale for

the Air Products decision involved employment of a value-in-use analysis, not whether




                                     [J-102-2014] - 12
an improper subdivision was conducted, the court was faced with a similar assessment

situation in which the court noted a distinction between reasonably foreseeable

prospects for the property which exist at the time of the assessment — that is, probable

use, which may be considered in determining property fair market value — and

impermissible valuation as though the property were already in that hypothetical

condition.

       Harley-Davidson rejects the School District’s claim that Camins did not value the

property as if it were already subdivided, but that he only addressed the highest and

best use of the property, by offering that: (1) Camins designated three areas within the

property and valued each part of the property separately suggesting an actual

subdivision; (2) Camins used comparable land sales in York County which lacked

excess land or surplus land of a manufacturing facility which were sold off in bulk; and

(3) Camins made various references in his testimony suggesting or noting the potential

for the subdivision of the property. This valuation, as determined by the Commonwealth

Court, and as Harley-Davidson presses here, constituted a subdivision valuation

prohibited by Craftmaster.

       Finally, Harley-Davidson dismisses the School District’s analogy to eminent

domain valuation, noting that fair market value is more broadly defined under the

Eminent Domain Code as the price agreed to by a willing and informed seller and buyer,

and contemplates factors such as the present use of the property and its value for that

use, the highest and best reasonably available use of the property and its value for that

use, the machinery, equipment, and fixtures forming part of the real estate, as well as

other factors.

       The General Assembly and this Court have set forth the foundational principles

for the determination of the fair market value of property for tax assessment purposes.




                                   [J-102-2014] - 13
A property is to be assessed at its actual value. 53 Pa.C.S. § 8842 (previously 72 P.S.

§ 5020-402(a)).5 Actual value means a parcel’s fair market value, which is “the price

which a purchaser, willing but not obliged to buy, would pay an owner, willing but not

obliged to sell, taking into consideration all uses to which the property is adapted and

might in reason be applied.”     F & M Shaeffer Brewing Co. v. Lehigh Cty. Bd. of

Assessment Appeals, 610 A.2d 1, 3 (Pa. 1992) (plurality) (quoting Buhl Foundation v.

Bd. of Property Assessment, 180 A.2d 900, 902 (Pa. 1962)). The “actual or fair market

value, while not easily ascertained, is fixed by the opinions of competent witnesses as

to what the property is worth on the market at a fair sale.” Id. In this regard, a parcel’s

market value is distinct from its value as it is currently being used; and while this Court

has not definitively so held, the Commonwealth Court has reasoned that a property’s

use and its resulting value-in-use (value unique to a particular owner) is not to be

considered in assessing the fair market value of property for tax assessment purposes.6

5
  See supra note 2.
6
  In our nonprecedential plurality decision in F & M Shaeffer Brewing Co., we noted that
a property’s current use value should not be considered for assessment purposes. Id.
Subsequent Commonwealth Court decisions, have consistently embraced the position
that “value-in-use” is not to be considered in assessing the fair market value of property
for tax assessment purposes. See, e.g., BET Lehigh Real Estate, LLC v. Schuylkill Co.
Bd. of Assessment Appeals, 67 A.3d 845, 860 (Pa. Cmwlth. 2013); 1198 Butler Street
Assoc. v. Bd. of Assessment Appeals, 946 A.2d 1131, 1138 (Pa. Cmwlth. 2008).
However, other states and scholarship have suggested that, if no market value exists,
viewing contaminated properties as special purpose properties and considering value-
in-use or value-in-exchange when assessing the value of a property may be proper.
See Bonnie H. Keen, Tax Assessment of Contaminated Property: Tax Breaks for
Polluters?, 19 B. C. Envtl. Aff. L. Rev. 885, 906 (Summer 1992). Similarly, certain
Commonwealth Court decisions have eschewed a value-in-use approach, but have
employed the phrase “continued use” — as distinguished from value-in-use — to mean
the value of a property to an arms-length buyer where such a purchaser would likely
continue the parcel’s current use. See, e.g., Craftmaster Mfg., 903 A.2d at 633-35;
McGraw-Edison Co. v. Wash. Cnty. Bd. of Assessment Appeals, 573 A.2d 248, 251
(Pa. Cmwlth. 1990). In the instant case, however, the parties do not present advocacy
(continuedR)


                                    [J-102-2014] - 14
In assessing actual value, the legislature has required three approaches (1) cost

reproduction, or replacement, as applicable, less depreciation and all forms of

obsolescence; (2) comparable sales; and (3) income approach, and all three

approaches to valuation must be considered in conjunction with one another. Id; 53

Pa.C.S. § 8842(b).

      In Air Products, supra, the Commonwealth Court applied the foregoing principles

to conclude that, although a property’s market value must incorporate its potential for

subdivision and development, an appraiser must value the property as it stands, and not

assume that potential has already been realized:

             In other words, hypothetical ways in which the property could
             be used by potential buyers should be considered in
             determining what a willing buyer would pay for the property.
             That is not to say, however, that the property should be
             valued as though it were already in that hypothetical
             condition. For instance, a large farm may have greater
             potential value if the land were subdivided into one acre lots
             for single family homes, but while that potential must be
             considered, the property may not be taxed as though it were
             currently subdivided and developed.


Air Products, 720 A.2d at 793-94. Therein, the court referenced F & M Schaeffer’s fair

market value analysis, and its distinction between “value-in-exchange” versus “value-in-

use,” and explained that reasonably foreseeable prospects for a property which exist at

the time of valuation may be considered in analyzing a property’s fair market value

(value-in-exchange). The Commonwealth Court found that a parcel’s fair market value


(Rcontinued)
regarding whether and how the present use of a property should be considered in a
highest and best use assessment, and, thus, we leave any definitive statement by our
Court regarding consideration of the value of the property in its present state for future
controversies in which the issue is raised.



                                    [J-102-2014] - 15
incorporates its potential for sale for future uses, but this potential is distinct from the

property’s actual value to a specific user (value-in-use), which, as noted above, the

court considered not a reflection of fair market value and not relevant in tax assessment

determinations.

       Eighteen years later, in Craftmaster, the Commonwealth Court similarly rejected

an analysis that embraced a comparable sale analysis and assigned a separate value

to various structures, hypothetically, as though they were already in the subdivided

condition.   Craftmaster, 903 A.2d at 631-32.         In so doing, the court opined that

hypothetical, but reasonably foreseeable, uses of the property for valuation are

permissible in the valuation calculus, but subject to limitations:

              This Court does not agree that [the appraiser’s] opinion
              represented a reasonably foreseeable prospect for the
              Property which existed at the time of his assessment.
              Although he couched his opinion in terms of the probable
              market value, there was no evidence that Craftmaster had
              any present (or future) intention of selling those structures as
              residences. In fact, the evidence indicated that the reason
              that the owners sold their homes in the first place was
              because of their undesirable location next to the plant. There
              was also no indication that the Property, which was located
              in an industrial zoning district, would or could be subdivided
              and rezoned residential. [The appraiser’s] opinion was purely
              speculative and the precise type of valuation testimony
              proscribed by [inter alia, Air Products]. [The appraiser]
              should have based his value on the Property as is, rather
              than its value when configured into its hypothetical highest
              and best use.


Id. at 632 (internal citations and quotations omitted; footnote omitted).              The

Commonwealth Court’s approach in Air Products and Craftmaster is in accord with this

Court’s teachings in F & M Schaeffer: that ways in which a property hypothetically

could be used by potential buyers are properly considered by an expert in evaluating



                                     [J-102-2014] - 16
what a willing buyer would pay for a property; however, the subject property should not

be valued as though it were already in that hypothetical condition. The parties have

offered no reason, and we discern none, to depart from this standard.

      As noted supra, the Commonwealth Court determined that Camins valued the

subject property as if it had already been subdivided, and developed, in contravention of

Air Products and Craftmaster, the view proffered by Harley-Davidson. Review of the

entire record, however, including Camins’ credited testimony and the trial court’s

opinion, demonstrates that this was not the case. As emphasized by President Judge

Pellegrini in his concurring and dissenting opinion, the record establishes that Camins’

purpose in referring to a hypothetical subdivision was merely to show the use to which

the land was best adapted and the property’s highest and best use. Specifically, as

noted by the School District, Camins determined the highest and best use of the

property was as a warehouse and office space, with excess land suitable for

development, and, in doing so, made clear that he did not assume the property was

currently subdivided. See, e.g., N.T. 1/25/2011, at 347-48. Indeed, Camins testified

that he considered what amount a developer would pay — in the current market and in

the property’s current condition — to obtain and develop the parcel, which included a

potential developer’s risks, and demolition and renovation costs. Additionally, Camins’

final opinion contains one value determination for each year, and not the assignment of

separate taxable values for hypothetical parcels.

      Pursuant to F & M Schaeffer, Air Products, and Craftmaster, such an approach

was not only appropriate, but necessary: a parcel’s fair market value is the amount

buyers will pay for it, which depends, at least in the realm of commercial/industrial

property, on the amount buyers must put into improving the parcel, and what they can

expect to receive from such purchase. Indeed, akin to the farm analogy used by the




                                   [J-102-2014] - 17
Commonwealth Court in Air Products, Camins considered the property’s potential for

future subdivision, but did not value the property as if already subdivided and

developed.

      Further, while both parties cite Camins' testimony regarding the hypothetical

ways in which the property could be used by potential buyers, “Complete Appraisal Self-

Contained Report” (“Appraisal”), 7/26/2006, at 49, 50, 53, and Exhibit A-4, we are

persuaded, as was the trial court, that Camins’ consideration of the hypothetical ways in

which the property could be used to determine the highest and best use was

appropriate. Specifically, Camins testified in this regard: “[t]he large size of the site

suggests subdivision of the land could occur;” “[t]he buildings could be sold in bulk or

subdivided and sold to various users;” due to a “significant amount of excess land, east

and south of the main buildings that have the potential for subdivision;” and area “north

and east of [the plant] could be subdivided into smaller parcels, which would be suitable

for warehouse, and distribution type uses.” Id. at 49-50 (emphasis added). These

statements demonstrate that Camins determined the highest and best use of the

property by considering hypothetical ways in which the property could be used by

potential buyers, and not by valuing the property as if it were already subdivided.

      Thus, we are constrained to hold that, under these facts, the Commonwealth

Court misapplied its prior decisions in Air Products and Craftmaster, essentially

forbidding virtually any reference to a parcel’s hypothetical future uses, including its

potential subdivision, even where such reference is necessary to determine market

value.7

7
  With respect to the dissent, in a tax assessment appeal, the findings of the trial court
have “great force and will not be set aside by this Court unless clear error is made to
appear.” Thomas Wynne, Inc. v. Bd. for the Assessment and Revision of Taxes of
Montgomery Co., 253 A.2d 632, 635 (Pa. 1969). Further, a reviewing court is to affirm
(continuedR)


                                    [J-102-2014] - 18
(Rcontinued)
the court of common pleas unless, inter alia, its decision is not supported by the
substantial evidence of record.        Westinghouse Elec. Corp. v. Bd. of Property
Assessment, 758 A.2d 1178, 1187 (Pa. 2000). While the dissent suggests that the
substantial evidence does not support the trial court’s determination that the property
was not viewed as if it had been subdivided, and would remand for additional fact-
finding and consideration, there is ample evidence in the record, both in Camins’
Appraisal and his testimony, to substantially support the trial court’s conclusions.
        Specifically, as noted above, Camins’ Appraisal is replete with explanation as to
valuation based upon permissible hypothetical subdivision. The Appraisal begins with
“Consideration has been given to the uses for which the property could be employed,
location, condition, size, zoning, functional utility, sales of comparable properties,
pertinent data, and applicable valuation analysis.” Introduction to Appraisal, 7/26/2006,
at 2. Camins properly set forth the definition of “market value,” noting it “tak[es] into
consideration all uses to which the property is adapted and might in reason be applied.”
Appraisal, 7/26/2006, at 2. As set forth above, the Appraisal goes on to list numerous
hypothetical possibilities for use, and the “potential for subdivision.” Id. at 49-50.
Importantly, Camins recognized the costs for conversion, demolition and renovation of
the buildings, id. at 51-52, and, specifically, the cost of demolition of certain buildings
and space renovation, employing the services of Claflen and Associates to identify such
components and costs, which were deducted from the assessment calculations. Id. at
95-100. While valuing certain portions of the property separately, hypothetical
improvements were considered in the final value estimate. See, e.g., id. at 101 (“We
have valued the excess land separately by means of the sales comparison approach,
attributing a higher unit rate for the frontage land because its development potential
would include some commercial uses.” (emphasis added)). Camins’ final opinion
contains one value determination for each year, and not the assignment of separate
taxable values for hypothetical parcels.
        Camins’ testimony at trial is entirely consistent with this view. When asked if he
performed his analysis for the property assuming the property was already subdivided,
Camins responded that he did not. See N.T., 7/24/2011, at 347. Camins’ explanation
did not suggest he had already subdivided the property in his assessment, but merely
that the property did not necessarily have to be subdivided, as an investor could buy the
entirety and just utilize and develop portions of the property in the future. Id. at 347-48.
With respect to the excess lands, Camins was likewise clear that he did not consider the
property to already be in a subdivided state, explaining that it could be developed aside
from the main section of property. Id. at 353. When specifically asked if he assumed
the property was already subdivided, Camins again indicated that he did not, and that
he looked at the land in a current as-is situation and as an entirety. Id. at 354. Thus,
employing deferential review, there is a solid basis on which to conclude that the trial
court’s determination was supported by the substantial evidence of record.



                                    [J-102-2014] - 19
      Turning to the second issue on which we granted allocatur — consideration of

the impact of environmental contamination, remediation, and stigma on valuation — the

Commonwealth Court panel concluded that the trial court erred, first, in relying on

Camins’ testimony, as the School District’s expert failed to consider the impact of

environmental damage on the property’s value and alienability; and, second, as

discussed below, in accepting a 5% environmental stigma devaluation. We address

each of these aspects of the issue in turn.

      The School District offers that fair market value determination becomes more

complex when the property presents environmental issues, and asserts that

Pennsylvania law, while requiring that environmental contamination be considered as

part of the determination of fair market value, mandates no specific approach for

valuation of contaminated property. It argues that the trial court’s findings were based

upon the substantial evidence of record, including Camins’ fair market value

determination. According to the School District, the trial court properly considered a

number of factors with respect to environmental degradation, including a settlement

agreement under which 100% of the environmental remediation costs were to be paid

by the United States government or Harley-Davidson; the fact a remediation fund has

been established; and the fact that, under the Pennsylvania Department of

Environmental Protection’s model buyer-seller agreement under Pennsylvania’s Act 2

Program — used to facilitate the purchase of property while remediation of property

contamination is ongoing — a buyer may purchase contaminated property and obtain

protection from potential environmental liability. Thus, the School District maintains that

the Commonwealth Court erred in concluding that the trial court erroneously credited

Camins’ testimony on the ground that his opinion failed to adequately account for




                                    [J-102-2014] - 20
environmental degradation, and embraced a valuation of the associated stigma that was

based on an uninformed guess.

       Related thereto, the School District further rejects Harley Davidson’s suggested

cost-to-cure approach which, the School District avers, is inapt, as, again, any

prospective purchaser would not be responsible for the cost of environmental

remediation. While possibly appropriate where there are no binding and enforceable

agreements for remediation in place, the School District claims that the cost-to-cure

approach is divorced from the unique reality of the property sub judice.

       In response, Harley-Davidson disputes the School District’s claim that the

settlement agreement and the model buyer-seller agreement insulate the buyer from

responsibility for the environmental degradation of the property, and, thus, that only

environmental stigma is at issue. According to Harley-Davidson, the agreement does

not limit existing or future claims of any environmental regulator; the parties reserve the

right to seek redress from those not a party to the agreement; any expenditure is

subject to the availability of appropriated funds; the agreement is binding upon Harley-

Davidson and its successors and assigns; and there is no provision for what would

occur if Harley-Davidson went out of business or filed for bankruptcy, which might lead

to a buyer of the property being responsible for environmental remediation. Similarly,

Harley-Davidson challenges the School District’s reliance on the model buyer-seller

agreement as releasing any prospective purchaser from environmental liability, noting

that such an agreement in some circumstances provides protection to a property buyer,

but that there is no evidence the site will meet all of the program’s criteria. Further,

Harley-Davidson offers that a buyer would be responsible for maintaining engineering

controls on the property and, if there was damage to a contaminated area, the buyer

would be responsible for repair and remediation. For these reasons, Harley-Davidson




                                    [J-102-2014] - 21
favors a cost-to-cure valuation approach, which includes consideration of all costs

directly related to the site cleanup. According to Harley-Davidson, this approach is the

same approach advocated by the School District’s environmental consultant, Stephen

Fulton.

      As noted above, a property tax assessment must be predicated on fair market

value, and, thus, must include all relevant factors having a bearing on that value. F & M

Schaeffer, supra. Furthermore, and unremarkably, “[e]nvironmental contamination is

relevant to determining the fair market value of real estate for tax purposes.” B.P. Oil

Co., Inc. v. Bd. of Assessment and Appeals of Jefferson Cnty., 633 A.2d 1241, 1243

(Pa. Cmwlth. 1993). The Commonwealth Court, in B.P. Oil, Co., suggested a cost-to-

cure approach to considering the effect of environmental contamination on property

value, explaining: “[u]nder the cost approach, the fair market value of the property is

calculated by subtracting the cost to cure the contamination from the value the property

would have if it were not contaminated.” Id.

      Preliminarily, we note that our Court has not spoken to the question of whether a

cost-to-cure approach to valuation should be embraced in this Commonwealth. We

reserve the answer to that question for another day, however, due to the unique status

of the environmental contamination regarding the subject property and the inapplicability

of a cost-to-cure approach in these circumstances.

      As noted above, the property is subject to an undisputed settlement agreement

between Harley-Davidson and the United States government, pursuant to which all

environmental remediation costs will be fully paid by those two parties. Thus, with

100% of the environmental contamination remediation costs covered, any purchaser of

the property has a certain degree of comfort that it will not be exposed to environmental

remediation costs. Yet, as noted by Harley-Davidson, there is at least the possibility,




                                   [J-102-2014] - 22
however remote, of the imposition of some remediation liability upon a prospective

buyer.8 Similarly, while the model buyer-seller agreement would release a purchaser

from liability, certain restrictions and responsibilities are placed upon a purchaser even

under such agreement, including restricting the use of the property for commercial or

industrial purposes, an ongoing obligation to maintain engineering controls, and a

prohibition against disturbing subsurface areas.

      As all relevant factors having a bearing on the value of a property, including

environmental contamination, must be considered in a fair market value determination,

we hold that the potential impact of a settlement agreement regarding environmental

remediation and ongoing limitations and maintenance as a by-product thereof, through

a buyer-seller agreement, are relevant factors that must be taken into account. Accord

F&M Shaeffer; B.P. Oil Co. Thus, we find that the Commonwealth Court properly

remanded the matter to the trial court to determine the effect of possible remediation

liability and environmental restrictions and maintenance responsibilities upon a potential

purchaser of the property upon its fair market value.

      Finally, with respect to the Commonwealth Court’s rejection of Camins’ across-

the-board 5% environmental stigma devaluation, the School District maintains that the

application of a 5% stigma factor is a sound approach, consistent with the law and

unique circumstances of this property. According to the School District, in Craftmaster,

the Commonwealth Court specifically offered the possibility of “negative stigma”

impacting the valuation of contaminated property, 903 A.2d at 633, and other states


8
  Harley-Davidson raises the specter of the agreement binding Harley-Davidson’s
successors and assigns, the parties to the agreement reserving the right to pursue
anyone not a party to the agreement, and the lack of a provision for what occurs if
Harley-Davidson files for bankruptcy or goes out of business. Harley-Davidson Brief, at
23-24.



                                    [J-102-2014] - 23
have recognized a stigma deduction even though the prospective buyer would not be

responsible for cleanup costs.     The School District proffers that Camins based his

conclusion on his expertise and 40 years of experience in appraisal work, and the

School District asserts the Commonwealth Court usurped the role of the trial court by

ignoring the trial court’s findings of fact and credibility determination on this issue. As

support for its claim, the School District references President Judge Pellegrini’s

conclusion, in his concurring and dissenting opinion, that “Camins was merely using his

best judgment as an expert to quantify the reduction in the [p]roperty’s valuation as a

result of the subjective intangible stigma that is attached to the [p]roperty due to its

contamination.” In re: Harley-Davidson Motor Co., 80 A.3d at 524 (Pellegrini, P.J.,

concurring and dissenting).    According to the School District, and as suggested by

President Judge Pellegrini, Harley-Davidson is in actuality challenging the weight and

credibility of Camins’ testimony, a matter outside of the scope of the Commonwealth

Court’s review on appeal.

       Harley-Davidson counters that the School District’s appraiser “guessed” at the

impact of the environmental contamination on the value of the property. Specifically,

Harley-Davidson notes that our courts have not approved a 5% stigma factor, and that

the trial court improperly accepted such devaluation factor even though the appraiser

admitted there was no support for such estimation of stigma. Harley-Davidson offers

that, when asked how he could place a value on a stigma deduction, the School

District’s expert responded, “You don’t.” N.T. 2/1/2011 at 59. Harley-Davidson further

highlights Camins’ explanation that stigma was really only a rough perception and that

“[a]s a matter of fact, there [is] almost no data available dealing with stigma.” Id. at 60.

Related thereto, Harley-Davidson argues that Camins’ testimony is contrary to




                                     [J-102-2014] - 24
Pennsylvania Rule of Evidence 705, which requires support for the facts or data upon

which an expert opinion or inference is based.

      Harley-Davidson further challenges the School District’s support for a 5%

environmental stigma devaluation, based on Camins’ testimony that his estimate relied

upon the environmental report of the School District’s environmental consultant,

Stephen Fulton.    Harley-Davidson offers that Fulton included in his 2008 report a

statement that, based on standard industry practice, the final property valuation should

be based on the unencumbered value of the property, less the present value of the

estimated environmental liabilities, which, according to Harley-Davidson, does not

include environmental stigma. Indeed, Harley-Davidson, citing New Jersey intermediate

court decisions, suggests that the value of contaminated property should not be

diminished by any stigma value, as quantifying the effects of environmental stigma is a

daunting task, and Harley Davidson submits that, of the three approaches to valuation

of contamination that have emerged, none of them include a stigma component.

Specifically, Harley-Davidson offers that, at one extreme, local taxing authorities have

argued that they should be able to ignore the effect of contamination on property value,

and, on the other extreme, taxpayers who own contaminated property have argued that

tax assessors should deduct cleanup costs from the market value of the property. In

what it refers to as the “Oregon Rule,” based upon an approach employed by the

Oregon Department of Revenue, Harley-Davidson submits that the better approach is to

recognize some effect that environmental contamination has on property values — in

essence, a cost-to-cure approach — as a bright-line rule that includes all costs related

to the site cleanup, and a discounted present value of those costs. Harley-Davidson’s

Brief at 19-20 (citing 19 B.C. Envtl. Aff. L. Rev. 885, 901-02, 919-20 (Summer 1992)).




                                   [J-102-2014] - 25
       Consistent with the broad scope of factors that may be considered in assessing a

property’s value, including environmental contamination, we find that environmental

stigma, although an inherently imprecise concept, may be relevant to determining fair

market value of real estate for tax purposes.        See Craftmaster, 903 A.2d at 633

(referring to possibility of “negative stigma” impacting valuation of contaminated

property); see also Dealers Mfg., Co. v. Cnty. of Anoka, 615 N.W.2d 76, 79 (Minn.

2000) (finding an environmental stigma is a “factor [which] may be associated with a

property, whether contaminants are present, are threatened, or are totally absent.”).

That said, “[a]n expert cannot base his [or her] opinion upon facts which are not

warranted by the record. No matter how skilled or experienced the witness may be, he

will not be permitted to guess or to state a judgment based on mere conjecture.” Collins

v. Hand, 246 A.2d 398, 404 (Pa. 1968). Thus, while consideration of an environmental

stigma may be examined when determining fair market value, expert testimony of such

stigma may not be offered without any foundation.

       While a close call, we conclude that, considering the inherently imprecise nature

of environmental stigma, Camins’ 5% devaluation in the instant case was not based

upon pure conjecture. Rather, Camins’ testimony suggests that it is standard practice in

the appraisal community to apply a 5% reduction in the context of commercial/industrial

property (and a higher reduction for residential property):

              What stigma is really -- is really kind of a very rough
              perception that some people have. Say, well if I buy a site
              that didn’t have any problems in the past, even if it’s not
              going to cost me any money compared to a site that has had
              them, even though -- or a site that hasn’t had them, I’ll try to
              negotiate and pay less and that 5 percent adjustment was an
              adjustment made to reflect that intangible perception from a
              market perspective.




                                    [J-102-2014] - 26
N.T., 2/1/2011 at 59-60.     Camins’ testimony reflected his appraisal experience and

professional judgment, which a court is entitled to accept. See McMahon v. Young, 276

A.2d 534, 535 (Pa. 1971) (opining, that if credited, fact-finder may find, as fact, what the

expert gave as an opinion). While an expert’s opinion may not be based upon pure

conjecture, we conclude that an appraisal expert’s best efforts to quantify a reduction in

property valuation as a result of a subjective and intangible stigma is permissible. As

Camins’ opinion regarding the environmental stigma associated with the property was

not based upon improper factors, erroneous assumptions, or facts outside of the record,

the trial court’s crediting of this testimony was proper, and the Commonwealth Court’s

rejection of this expert testimony as unsupported was in error.

       In conclusion, we reiterate: (1) hypothetical ways in which a property could be

used by potential buyers are properly considered by an expert in evaluating what a

willing buyer would pay for a property; however, the Commonwealth Court erred in

concluding that the School District’s expert valued the subject property as already

subdivided, and, thus, its determination in this regard is reversed; (2) the potential effect

of agreements concerning possible environmental remediation liability and ongoing

environmental restrictions and maintenance is a relevant factor that must be taken into

account when determining the fair market value of property, and, here, the

Commonwealth Court properly concluded that these agreements were not accounted

for by the trial court; thus, we affirm the Commonwealth Court’s remand in this regard;

and (3) environmental stigma may be relevant to determining fair market value of real

estate for tax purposes in appropriate circumstances, and, presently, the trial court

properly relied upon the School District’s expert’s opinion regarding a 5% environmental

stigma devaluation for the property; thus, we reverse the Commonwealth Court’s

rejection of the trial court’s reliance upon such stigma in its valuation of the property.




                                     [J-102-2014] - 27
         Accordingly, the decision of the Commonwealth Court is affirmed in part and

reversed in part, and the matter is remanded to the Commonwealth Court for remand to

the Court of Common Pleas of York County for proceedings consistent with our

Opinion.9

         Jurisdiction relinquished.

         Former Chief Justice Castille did not participate in the decision of this case.

         Messrs. Justice Baer and Stevens join the opinion.

         Mr. Chief Justice Saylor files a concurring opinion in which Mr. Justice Eakin

joins.




9
   Before the Commonwealth Court, Harley-Davidson challenged another aspect of the
trial court’s valuation of the property. The primary issue before the trial court was a
determination of the market value of the property for the relevant years. Once the court
arrived at the market value of the property for these time periods, the court was required
by law to apply a common level ratio (the ratio of assessed value to current market
value) for each year to arrive at the assessed value for the property for each year in
question pursuant to 72 P.S. § 5350 (now 53 Pa.C.S. § 8854). The trial court did not
apply the common level ratio to the fair market value, but rather equated the market
value and the assessed value of the property. The Commonwealth Court explained
that, pursuant to 72 P.S. § 5350, a court determining a parcel’s assessed value must
demonstrate on the record that it has determined the parcel’s market value and, then,
multiply that value by the applicable common level ratio to arrive at its assessed value.
In the instant case, the Commonwealth Court observed that the trial court did not
demonstrate its calculation on the record and, in any event, appeared to simply adopt
Camins’ pre-reduction values as the parcel’s market value; thus, the Commonwealth
Court agreed with Harley-Davidson that the trial court had erred in its calculation.
Before us, the parties discuss and appear to be in agreement, as the Commonwealth
Court found, that the trial court determined fair market value but failed to apply the
appropriate common level ratio for each year of the tax appeal as required. As we did
not grant allocatur with respect to this issue, we leave undisturbed the Commonwealth
Court’s remand to the trial court to properly apply the correct ratio.



                                       [J-102-2014] - 28
