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03/24/2017 09:09 AM CDT




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                                  Nebraska Supreme Court A dvance Sheets
                                          296 Nebraska R eports
                              COUNTY OF FRANKLIN v. TAX EQUAL. & REV. COMM.
                                            Cite as 296 Neb. 193




                                        County of Franklin, appellant, v.
                                          Tax Equalization and R eview
                                              Commission, appellee.
                                                    ___ N.W.2d ___

                                          Filed March 24, 2017.    No. S-16-554.

                1.	 Constitutional Law: Administrative Law: Taxation. Neb. Const. art.
                    IV, § 28, provides that the Tax Equalization and Review Commission is
                    empowered to review and equalize assessments of property for taxation
                    within the state.
                2.	 Taxation: Property: Valuation. Neb. Rev. Stat. § 77-5022 (Cum. Supp.
                    2016) provides that the Tax Equalization and Review Commission shall
                    annually equalize the assessed value or special value of all real property
                    as submitted by the county assessors on the abstracts of assessments and
                    equalize the values of real property that is valued by the state.
                3.	 ____: ____: ____. The Tax Equalization and Review Commission is
                    required to increase or decrease the value of a class or subclass of real
                    property in any county or taxing authority or of real property valued by
                    the state so that all classes or subclasses of real property in all counties
                    fall within an acceptable range.
                4.	 Taxation: Judgments: Appeal and Error. Appellate courts review
                    decisions rendered by the Tax Equalization and Review Commission for
                    errors appearing on the record.
                5.	 Judgments: Appeal and Error. When reviewing a judgment for errors
                    appearing on the record, an appellate court’s inquiry is whether the deci-
                    sion conforms to the law, is supported by competent evidence, and is
                    neither arbitrary, capricious, nor unreasonable.

                 Appeal from the Tax Equalization and Review Commission.
               Affirmed.

                    Henry C. Schenker, Franklin County Attorney, for appellant.
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                Nebraska Supreme Court A dvance Sheets
                        296 Nebraska R eports
             COUNTY OF FRANKLIN v. TAX EQUAL. & REV. COMM.
                           Cite as 296 Neb. 193

   Douglas J. Peterson, Attorney General, and L. Jay Bartel
for appellee.

   Heavican, C.J., Wright, Miller-Lerman, Cassel, Stacy,
K elch, and Funke, JJ.

      Heavican, C.J.
                    I. INTRODUCTION
   The Tax Equalization and Review Commission (TERC)
adjusted upward by 8 percent the value of the “Land Use
Grass” subclass of the agricultural and horticultural land
class in Franklin County, Nebraska. Franklin County appeals.
We affirm.

                      II. BACKGROUND
                       1. A pplicable Law
   [1,2] Some background law is helpful to understand the
facts presented by this appeal. Neb. Const. art. IV, § 28,
provides that TERC is empowered “to review and equalize
assessments of property for taxation within the state.” Neb.
Rev. Stat. § 77-5022 (Cum. Supp. 2016) provides that TERC
“shall annually equalize the assessed value or special value of
all real property as submitted by the county assessors on the
abstracts of assessments and equalize the values of real prop-
erty that is valued by the state.”
   [3] In doing so, TERC is required “to increase or decrease
the value of a class or subclass of real property in any county
or taxing authority or of real property valued by the state so
that all classes or subclasses of real property in all counties
fall within an acceptable range.”1 The acceptable range for
“agricultural land and horticultural land [is] sixty-nine to
seventy-five percent of actual value.”2 The median has been

 1	
      Neb. Rev. Stat. § 77-5023(1) (Reissue 2009).
 2	
      § 77-5023(2)(a).
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                Nebraska Supreme Court A dvance Sheets
                        296 Nebraska R eports
             COUNTY OF FRANKLIN v. TAX EQUAL. & REV. COMM.
                           Cite as 296 Neb. 193

adopted by TERC as the preferred established indicator of cen-
tral tendency.3 Median is defined by regulation as “the value
of the middle item in an uneven number of items arranged or
arrayed according to size; the arithmetic average of the two
central items in an even number of items similarly arranged;
[or] a positional average that is not affected by the size of
extreme values.”4 Thus, TERC prefers that valuation data
“cluster” around the median value.5
   If TERC finds that
      the level of value of a class or subclass of real prop-
      erty fails to satisfy the requirements of section 77-5023,
      [TERC] shall issue a notice to the counties which it
      deems either undervalued or overvalued and shall set a
      date for hearing at least five days following the mailing
      of the notice unless notice is waived.6
Subsequent to such a hearing, TERC shall raise or lower the
valuation of any class or subclass or real property in a county
when it is necessary to achieve equalization.7 TERC’s order
following such a hearing should be entered based on infor-
mation provided to it at the hearing and should specify the
percentage of increase or decrease and the class or subclass of
real property affected.8
   Each county’s assessor and the state’s Property Tax
Administrator (PTA) also have certain duties relating to the
valuation process. Neb. Rev. Stat. § 77-1514 (Cum. Supp.
2016) provides that the county assessor must prepare abstracts
of the property assessment rolls of locally assessed property,

 3	
      442 Neb. Admin. Code, ch. 9, § 004 (2011).
 4	
      Id., § 002.13.
 5	
      Id., § 002.10.
 6	
      Neb. Rev. Stat. § 77-5026 (Reissue 2009).
 7	
      Neb. Rev. Stat. § 77-5027(1) (Cum. Supp. 2016).
 8	
      Neb. Rev. Stat. § 77-5028 (Reissue 2009).
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                Nebraska Supreme Court A dvance Sheets
                        296 Nebraska R eports
             COUNTY OF FRANKLIN v. TAX EQUAL. & REV. COMM.
                           Cite as 296 Neb. 193

which should show the taxable value of property in the county
as determined by the county assessor. These abstracts must be
filed with the PTA.
   As for the PTA, § 77-5027(2) provides that on or before
19 days after each county assessor files its abstracts under
§ 77-1514, the PTA must prepare and deliver to TERC and
to each county assessor its own annual reports and opinions.
Those reports and opinions
      shall contain statistical and narrative reports informing
      [TERC] of the level of value and the quality of assess-
      ment of the classes and subclasses of real property
      within the county and a certification of the opinion of
      the [PTA] regarding the level of value and quality of
      assessment of the classes and subclasses of real property
      in the county.9
In addition, the PTA may make nonbinding recommendations
for consideration by TERC.10 In compiling this information
and formulating its opinion, the PTA may employ various
methods as provided by law and may use sales of comparable
real property in market areas similar to the county or area in
question or from another county as indicators of the level of
value and the quality of the assessment in a county.11

                    2. Valuation Actions
   Franklin County assessor Linda Dallman timely filed her
abstract of assessment. After receiving that abstract, the
PTA filed certain reports with TERC regarding Franklin
County’s assessment. In those reports, the PTA made a non-
binding recommendation that Franklin County’s assessment
as to agricultural land for both farmland and pastureland
be increased by 8 percent. In response to this nonbinding

 9	
      § 77-5027(3).
10	
      § 77-5027(4).
11	
      § 77-5027(5).
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           Nebraska Supreme Court A dvance Sheets
                   296 Nebraska R eports
        COUNTY OF FRANKLIN v. TAX EQUAL. & REV. COMM.
                      Cite as 296 Neb. 193

recommendation, TERC called for a hearing on Franklin
County’s valuation.

                       3. TERC Hearing
   The primary issue raised in the hearing was Franklin
County’s valuation for grassland. Because Franklin County
had relatively few sales of grassland, the use of comparable
sales from other counties was necessary to determine the valu-
ation of that subclass. Dallman and the PTA differed on what
comparable sales should be used, which in turn affected the
valuation of grassland.
   In its valuation, the PTA used 19 sales—9 sales from
within Franklin County and another 10 in comparable sales
from other counties. This resulted in an overall median of
67 percent, outside the range of 69 to 75 percent set forth by
§ 77-5023(2)(a). In Dallman’s valuation, she used 14 sales—
the same 9 sales from within Franklin County and 5 compa-
rable sales. Three of the comparable sales were used by the
PTA; two were not. Dallman testified that she rejected many
of the sales used by the PTA because they were more than
12 miles from Franklin County’s borders and she felt that,
as such, the sales were not comparable. Dallman’s valuation
resulted in an overall grassland median of 74.91 percent, just
inside the range set forth by § 77-5023(2)(a).
   Ruth Sorensen, the PTA for the State of Nebraska, testified
that Dallman’s decision to not use sales beyond 12 miles of
Franklin County was inconsistent with the PTA’s current pol-
icy, which allows the use of any comparable sale from another
county so long as “the proximity to the county and the com-
parability to the county” is examined. Sorensen acknowledged
that this policy, while adopted in January 2016, was not pub-
lished until April 11, 2016. According to the record, the prior
policy generally provided that sales up to 6 miles away could
be utilized. But even that prior policy noted that in an instance
where there were still not enough comparable sales, “[t]he
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           Nebraska Supreme Court A dvance Sheets
                   296 Nebraska R eports
        COUNTY OF FRANKLIN v. TAX EQUAL. & REV. COMM.
                      Cite as 296 Neb. 193

preferred method of correcting the deficiency is to supplement
the sample with comparable sales from surrounding counties,”
without a limitation on distance.
   Sorensen also testified that she felt the sales outside of 12
miles from Franklin County were comparable to the grass-
land in Franklin County. Sorensen noted that the assessors
of Webster and Harlan Counties, Nebraska, agreed, as both
used those sales in grassland valuations for their respec-
tive counties.

                       4. TERC’s Order
   Following the show cause hearing, TERC entered its writ-
ten findings and order adjusting value. As to all areas except
one, TERC found that statistical studies of the level of value
and the quality of assessment were reliable and representa-
tive of the level of value and quality of assessment for the
category in question. But as to the “land use grass” sub-
class of the agricultural and horticultural land class of real
property not receiving special valuation, excluding timber
subclass and improvements, TERC found that an adjustment
was necessary.
   For this subclass, TERC’s order noted that the level of value
was 66.61 percent of actual or fair market value, as shown by
the reports and opinions of the PTA. The order stated that this
level was not within the acceptable range of 69 to 75 percent,
and must be adjusted upward by 8 percent to a 75-percent
level of value. Franklin County appeals.

              III. ASSIGNMENTS OF ERROR
   Franklin County assigns, renumbered, that TERC (1) erred
by relying on statistics prepared by the PTA, including sales
that should not have been considered comparable sales; (2)
violated Neb. Const. art. VIII by failing to uniformly and pro-
portionally equalize Franklin County valuations; (3) erred by
adjusting the grassland value of property in Franklin County
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                Nebraska Supreme Court A dvance Sheets
                        296 Nebraska R eports
             COUNTY OF FRANKLIN v. TAX EQUAL. & REV. COMM.
                           Cite as 296 Neb. 193

upward by 8 percent; and (4) erred by denying its motion
to reconsider.

                IV. STANDARD OF REVIEW
   [4,5] Appellate courts review decisions rendered by TERC
for errors appearing on the record.12 When reviewing a judg-
ment for errors appearing on the record, an appellate court’s
inquiry is whether the decision conforms to the law, is sup-
ported by competent evidence, and is neither arbitrary, capri-
cious, nor unreasonable.13

                          V. ANALYSIS
                     1. Use of PTA Statistics
   Franklin County first assigns as error TERC’s reliance on
the statistics prepared by the PTA.

              (a) Reliance on PTA Values Rather
                      Than County Values
   Franklin County first argues that TERC relied solely on
the values provided by the PTA and not the values certified
by Franklin County and that the Franklin County values and
underlying sales files were not made available to TERC.
   Franklin County is misconstruing the applicable statutes.
As Franklin County argues, TERC is required by § 77-5022
to “annually equalize the assessed value or special value of
all real property as submitted by the county assessors on the
abstracts of assessments.” But contrary to Franklin County’s
contention, TERC is not required to use only the abstract pro-
vided by the county to equalize that value.
   The PTA is statutorily required, under § 77-5027, to pro-
vide to TERC the very information it provided to TERC in

12	
      Neb. Rev. Stat. § 77-5019(5) (Cum. Supp. 2016). See JQH La Vista Conf.
      Ctr. v. Sarpy Cty. Bd. of Equal., 285 Neb. 120, 825 N.W.2d 447 (2013).
13	
      JQH La Vista Conf. Ctr. v. Sarpy Cty. Bd. of Equal., supra note 12.
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           Nebraska Supreme Court A dvance Sheets
                   296 Nebraska R eports
         COUNTY OF FRANKLIN v. TAX EQUAL. & REV. COMM.
                       Cite as 296 Neb. 193

this case. That section also authorizes the PTA to make non-
binding recommendations regarding valuation to TERC. And
TERC is to use all information provided at its hearing to make
its determination.
   Information was provided to TERC by both the PTA and
Franklin County. The record shows that TERC considered all
the information and concluded that an upward increase of 8
percent on grassland was warranted. TERC did not err in con-
sidering the PTA’s figures.

                 (b) Presumption of Correctness
   Franklin County also argues that its figures were entitled
to a presumption of correctness under 350 Neb. Admin. Code,
ch. 12, § 003.04 (2009). Franklin County is correct insofar as
this regulation requires that its figures, as entered into the state
sales record by an assessor, are presumed to be correct.
   But it is not the figures entered by Franklin County that
were challenged. Those figures were used by both Franklin
County and the PTA in determining the appropriate valuation.
It is the comparable sales outside of Franklin County that are
at issue. That regulation is simply not relevant in this case.

                (c) Comparable Sales Standard
   Finally, Franklin County argues that TERC should not have
accepted the PTA’s comparable sales from counties further than
12 miles from Franklin County because of the recent change in
policy. This contention is also without merit.
   The PTA acknowledges that a different policy generally
providing for use of comparable sales no more than 6 miles
from a county’s border was previously in place. The PTA fur-
ther acknowledges that a new policy—that the PTA could use
any comparable sale so long as “the proximity to the county
and the comparability to the county”—was effective begin-
ning in January 2016, but was not published on its website
until April 11, 2016, just prior to the show cause hearing in
this case.
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                Nebraska Supreme Court A dvance Sheets
                        296 Nebraska R eports
             COUNTY OF FRANKLIN v. TAX EQUAL. & REV. COMM.
                           Cite as 296 Neb. 193

   But this standard is not a rule or statute, and is not explicitly
applicable to county assessors. Rather, it is a policy directed at
the PTA. This is consistent with the statutory obligation on the
part of the PTA to determine the level of value and quality of
assessment in all counties.14
   Moreover, Franklin County suggests that the prior policy
was a fixed 6-mile rule. In fact, the prior standard was flex-
ible in allowing the use of sales outside of 6 miles. This is
evidenced by Dallman’s testimony that she utilized sales up to
12 miles from Franklin County’s border. This argument, and
in turn Franklin County’s first assignment of error, is with-
out merit.

                    2. Lack of Proportionality
   In its second assignment of error, Franklin County contends
that TERC violated Neb. Const. art. VIII by failing to uni-
formly and proportionally value grasslands in the state. This
assertion is not supported by evidence in the record. Franklin
County refers us to several figures suggesting a difference in
grassland valuation between the counties, but offers no expla-
nation beyond a list of those numbers. As TERC notes, there
are any number of reasons explaining why a particular valua-
tion is what it is, and without context to a value, a list of num-
bers indicates nothing.
   There is no merit to Franklin County’s second assignment
of error.

             3. R emaining Assignments of Error
   Franklin County also assigns that TERC erred in the upward
adjustment of its level of value. We review decisions ren-
dered by TERC for errors appearing on the record,15 and con-
sider whether the decision conforms to the law, is supported

14	
      See § 77-5027.
15	
      § 77-5019(5). See JQH La Vista Conf. Ctr. v. Sarpy Cty. Bd. of Equal.,
      supra note 12.
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                Nebraska Supreme Court A dvance Sheets
                        296 Nebraska R eports
             COUNTY OF FRANKLIN v. TAX EQUAL. & REV. COMM.
                           Cite as 296 Neb. 193

by competent evidence, and is neither arbitrary, capricious,
nor unreasonable.16
   We have concluded that TERC did not err in utilizing the
PTA’s statistics. TERC’s decision conformed to the law. There
was evidence in the record supporting TERC’s adjustment,
and its decision was not arbitrary, capricious, or unreason-
able. As such, we cannot find error in TERC’s upward adjust-
ment. Nor did TERC err in denying Franklin County’s motion
to reconsider.
                    VI. CONCLUSION
  TERC’s order adjusting the Franklin County grassland value
upward by 8 percent is affirmed.
                                                 A ffirmed.

16	
      See JQH La Vista Conf. Ctr. v. Sarpy Cty. Bd. of Equal., supra note 12.
