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                                                        - 638 -
                               Nebraska Supreme Court Advance Sheets
                                        304 Nebraska Reports
                             WHEATLAND INDUS. v. PERKINS CTY. BD. OF EQUAL.
                                          Cite as 304 Neb. 638




                         Wheatland Industries, LLC/Mid America Agri
                            Products, appellee, v. Perkins County
                             Board of Equalization, appellant.
                                                   ___ N.W.2d ___

                                        Filed December 6, 2019.   No. S-19-305.

                 1. Taxation: Judgments: Appeal and Error. Appellate courts review
                    decisions rendered by the Tax Equalization and Review Commission for
                    errors appearing on the record.
                 2. 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.
                 3. Administrative Law: Judgments: Words and Phrases. Agency action
                    is arbitrary, capricious, and unreasonable if it is taken in disregard of the
                    facts or circumstances of the case, without some basis which would lead
                    a reasonable and honest person to the same conclusion.
                 4. Taxation: Valuation: Presumptions: Evidence. A presumption exists
                    that a board of equalization has faithfully performed its official duties
                    in making an assessment and has acted upon sufficient competent
                    evidence to justify its action. That presumption remains until there is
                    competent evidence to the contrary presented, and the presumption
                    disappears when there is competent evidence adduced on appeal to
                    the contrary.
                 5. ____: ____: ____: ____. Once the challenging party overcomes the pre-
                    sumption of validity by competent evidence, the reasonableness of the
                    valuation fixed by the board of equalization becomes one of fact based
                    upon all of the evidence presented.
                 6. Taxation: Valuation: Proof: Appeal and Error. The burden of show-
                    ing a valuation to be unreasonable rests upon the taxpayer on appeal
                    from the action of the board of equalization.
                 7. Taxation: Valuation: Proof. The burden of persuasion imposed on
                    a complaining taxpayer is not met by showing a mere difference of
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          Nebraska Supreme Court Advance Sheets
                   304 Nebraska Reports
        WHEATLAND INDUS. v. PERKINS CTY. BD. OF EQUAL.
                     Cite as 304 Neb. 638

   opinion unless it is established by clear and convincing evidence that
   the valuation placed upon the property when compared with valuations
   placed on other similar property is grossly excessive and is the result of
   a systematic exercise of intentional will or failure of plain duty, and not
   mere errors of judgment.

  Appeal from the Tax Equalization and Review Commission.
Affirmed.
  Richard H. Roberts, Perkins County Attorney, and Gary F.
Burke for appellant.
  Frederick D. Stehlik and Zachary W. Lutz-Priefert, of Gross
& Welch, P.C., L.L.O., for appellee.
  Heavican, C.J., Miller-Lerman, Cassel, Stacy, Funke,
Papik, and Freudenberg, JJ.
  Cassel, J.
                      INTRODUCTION
   This review proceeding addresses the taxable valuation of
commercial real estate used as an ethanol plant. The tax-
payer unsuccessfully protested the county’s $16.3 million valu-
ation—a valuation based upon mass appraisal techniques—and
then appealed to the Tax Equalization and Review Commission
(TERC), which reduced the value to $7.3 million based upon
the taxpayer’s appraisal. Here, because the county’s valua-
tion relied upon admittedly incorrect information and lacked
evidentiary support regarding applicable depreciation, the evi-
dence showed more than a mere difference of opinion. Finding
no error appearing on the record, we affirm TERC’s ruling.
But our decision should not be read to categorically reject
mass appraisal as a proper valuation methodology for an etha-
nol plant.
                     BACKGROUND
   Wheatland Industries, LLC/Mid America Agri Products
(Wheatland) owned an ethanol plant on commercial real estate
in Madrid, Perkins County, Nebraska (Madrid property). The
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         Nebraska Supreme Court Advance Sheets
                  304 Nebraska Reports
        WHEATLAND INDUS. v. PERKINS CTY. BD. OF EQUAL.
                     Cite as 304 Neb. 638

Perkins County assessor, Peggy Burton, assessed the value of
the Madrid property at $16,364,768 for the 2017 tax year.
   Wheatland protested the assessment to the Perkins
County Board of Equalization (Board). At the protest hear-
ing, Wheatland did not present evidence. The Board affirmed
Burton’s valuation of the Madrid property.
   Wheatland appealed to TERC. A hearing was held and both
parties presented evidence. We first summarize the evidence
regarding the county’s assessment, then the evidence of the
taxpayer’s appraisal, and finally TERC’s decision.

                     County Assessment
   For the county, Darrell Stanard conducted an appraisal of
the Madrid property using the mass appraisal method. He had
appraised five other ethanol plants in different counties using
the mass appraisal approach. He agreed with the $16 million
value of the Madrid property.
   In order to aid the mass appraisal assessment, Burton pre-
pared a spreadsheet of the values of all ethanol plants in
Nebraska. She obtained the values directly from the other
counties’ assessors but she was unaware how those counties
assessed their ethanol plants. She maintained that the $16 mil-
lion value was the proper value for the Madrid property.
   Wheatland elicited evidence about the value shown on
Burton’s spreadsheet for the Furnas County ethanol plant.
Stanard agreed with Wheatland that the Furnas County plant’s
nameplate capacity shown on the spreadsheet was incorrect. Its
nameplate capacity was actually 44 million gallons, not 22 mil-
lion gallons as shown on the spreadsheet. He explained that the
nameplate capacity is critical to determining the value of the
plant. Before this court, the Board in effect concedes the error.
And Burton agreed that if the spreadsheet contained incor-
rect information about the nameplate capacity of the Furnas
County plant, it would change her opinion about the value of
the Madrid property. But she did not quantify how her opinion
would change.
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         Nebraska Supreme Court Advance Sheets
                  304 Nebraska Reports
       WHEATLAND INDUS. v. PERKINS CTY. BD. OF EQUAL.
                    Cite as 304 Neb. 638

   Wheatland’s appraiser, Joseph Calvanico, had valued the
Furnas County plant twice. He stated that the Furnas County
plant was “almost a mirror copy” of the Madrid property—both
were constructed at the same time, used the same technol-
ogy, and are about the same size. When appraising the Furnas
County plant, he used the same methodology as he did for the
Madrid plant. Wheatland’s chief executive officer stated that
he owned the Furnas County plant and that it was identical
to the Madrid property, except there was 200 more acres of
land for the Furnas County plant. The Furnas County plant
was assessed at $8,943,575. Stanard agreed that if Calvanico
was correct that the Furnas County plant was a “sister” plant
to the Madrid property, he would have no disagreement with
Calvanico’s appraisal of the Madrid property.

                    Wheatland Appraisal
   At the time of TERC’s hearing, Calvanico had been a
real property appraiser for 35 years. Wheatland hired him to
appraise the Madrid property. He testified that his appraisal
conformed with the Uniform Standards of Professional
Appraisal Practice.
   Calvanico utilized the cost approach method to appraise
the property. He stated that the income approach would not
be useful, because the income stream associated with the
property came from the separately assessed equipment rather
than from the real estate. He opined that the sales compari-
son approach was useful to underscore the information from
the cost approach. He explained that the sales comparison
approach would not be effective as a stand-alone method of
appraisal for the Madrid property, because most sales of etha-
nol plants were older and not from the area.
   Calvanico explained his application of the cost approach
method. He began by determining the value of the underlying
land. He examined land sales of dry farmland and concluded
that the price per acre was $1,600. He appraised the value
of the underlying land at $277,000. He then appraised the
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         Nebraska Supreme Court Advance Sheets
                  304 Nebraska Reports
        WHEATLAND INDUS. v. PERKINS CTY. BD. OF EQUAL.
                     Cite as 304 Neb. 638

buildings and improvements on the land. He classified the
buildings and improvements and used the Marshall Valuation
Service to estimate the replacement cost. He estimated the base
actual value of the buildings at $9,387,529 and improvements
at $5,641,172.
   He then discussed depreciation. He concluded that the physi-
cal depreciation of the buildings that were 10 years old would
depreciate 20 to 22 percent, the structures built within the past
few years would depreciate 4 to 6 percent, and the improve-
ments would depreciate 25 percent.
   Burton stated that when performing mass appraisal, she did
not apply depreciation to any property and did not believe
that depreciation was applied to the Madrid property. Stanard
agreed that physical depreciation should be factored into the
value of the Madrid property.
   Calvanico discussed the functional depreciation attributed to
the buildings. He stated that if the fermentation and main proc­
ess buildings were put to an alternative use, those buildings
would be the most difficult to repurpose, because their function
is to house the equipment. He applied a 20-percent functional
depreciation to those buildings. Stanard stated that functional
depreciation should not be applied.
   Calvanico discussed the economic depreciation attributed
to the buildings and improvements. He examined the etha-
nol industry in Nebraska and nationwide. He discussed the
decrease in the price per bushel of corn and the diminished
number of ethanol plants in Nebraska. He emphasized that in
2011, there were 39 ethanol plants in Nebraska, and that at the
time of appraisal, there were 26 ethanol plants. He articulated
that this was a 40-percent decrease in the ethanol industry in
Nebraska and concluded that the economic value of the Madrid
property would depreciate 40 percent. Stanard agreed that
“some” economic depreciation should be applied but did not
quantify how much that should be.
   Ultimately, Calvanico appraised the actual value of the
Madrid property at $6.8 million.
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            Nebraska Supreme Court Advance Sheets
                     304 Nebraska Reports
           WHEATLAND INDUS. v. PERKINS CTY. BD. OF EQUAL.
                        Cite as 304 Neb. 638

                        TERC’s Decision
   TERC found that because Calvanico performed the appraisal
according to professionally approved standards, his appraisal
report was competent evidence sufficient to rebut the presump-
tion in favor of the Board’s determination.
   TERC then found that, for two reasons, it was unreason-
able and arbitrary for the Board to rely upon Burton and
Stanard’s valuation. First, TERC agreed with Burton, Stanard,
and Calvanico that physical depreciation should be applied to
the Madrid property. It characterized Burton’s and Stanard’s
testimony as to whether physical depreciation had been applied
as “inconsistent,” and it determined that they had provided
no evidence of the amount of physical depreciation. Second,
TERC pointed to the incorrect information Burton’s spread-
sheet contained and the absence of a revised opinion based
upon the correct information.
   TERC then discussed Calvanico’s appraisal and focused
on his analysis of depreciation. First, TERC agreed with
Calvanico’s assessment of physical depreciation. Second, it
reasoned that the Madrid property was still operating as an
ethanol plant with the “Delta-T technology” at the time of the
assessment and that therefore, it did not suffer from functional
depreciation. Finally, it agreed that
      due to the state of the ethanol industry, including a reduc-
      tion in the price per gallon paid for ethanol, a reduction
      if not contraction of the rate of ethanol plant construction
      and other factors the depreciation to be applied to the
      [Madrid property] for economic obsolescence should be
      40 [percent].
Except regarding functional depreciation, TERC found
Calvanico’s appraisal persuasive and assessed the value of the
Madrid property for 2017 at $7,336,042.
   The Board timely petitioned for review of TERC’s decision.1
We moved the review proceeding to our docket.2

1
    See Neb. Rev. Stat. § 77-5019(2)(a)(i) (Reissue 2018).
2
    See Neb. Rev. Stat. § 24-1106(3) (Reissue 2016).
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            Nebraska Supreme Court Advance Sheets
                     304 Nebraska Reports
          WHEATLAND INDUS. v. PERKINS CTY. BD. OF EQUAL.
                       Cite as 304 Neb. 638

                ASSIGNMENTS OF ERROR
   The Board assigns that (1) there was insufficient evidence
for TERC to find that the Board’s determination was unrea-
sonable and arbitrary, (2) TERC erred when it allowed a
40-­percent economic depreciation, and (3) it erred when it
found the value of the Madrid property to be $7,336,042.
                  STANDARD OF REVIEW
   [1-3] Appellate courts review decisions rendered by TERC
for errors appearing on the record.3 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.4 Agency action is arbitrary, capri-
cious, and unreasonable if it is taken in disregard of the
facts or circumstances of the case, without some basis which
would lead a reasonable and honest person to the same
conclusion.5
                          ANALYSIS
   [4] We begin by noting that the presumption of validity
does not apply at this stage. A presumption exists that a board
of equalization has faithfully performed its official duties in
making an assessment and has acted upon sufficient competent
evidence to justify its action. That presumption remains until
there is competent evidence to the contrary presented, and
the presumption disappears when there is competent evidence
adduced on appeal to the contrary.6 Neither party disputes that
Wheatland presented competent evidence through Calvanico’s
appraisal and thereby overcame the presumption of validity of
the Board’s valuation.

3
    Betty L. Green Living Trust v. Morrill Cty. Bd. of Equal., 299 Neb. 933,
    911 N.W.2d 551 (2018).
4
    Id.
5
    Id.
6
    Id.
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               Nebraska Supreme Court Advance Sheets
                        304 Nebraska Reports
              WHEATLAND INDUS. v. PERKINS CTY. BD. OF EQUAL.
                           Cite as 304 Neb. 638

   [5-7] This leads to the principles governing TERC’s deci-
sion. Once the challenging party overcomes the presumption
of validity by competent evidence, the reasonableness of the
valuation fixed by the board of equalization becomes one of
fact based upon all of the evidence presented.7 That applies
here. The burden of showing a valuation to be unreasonable
rests upon the taxpayer on appeal from the action of the board
of equalization.8 The burden of persuasion imposed on a com-
plaining taxpayer is not met by showing a mere difference
of opinion unless it is established by clear and convincing
evidence that the valuation placed upon the property when
compared with valuations placed on other similar property is
grossly excessive and is the result of a systematic exercise of
intentional will or failure of plain duty, and not mere errors
of judgment.9
   The Board makes three arguments that there was insufficient
evidence to support TERC’s determination. First, it argues
that once the presumption of the Board was rebutted, there
was sufficient evidence to support that the Board’s valuation
of the Madrid property, when compared to a similar prop-
erty, was not grossly excessive. Second, it argues that there
was insufficient evidence to support the 40-percent economic
depreciation, because the Madrid property had been profit-
able and the ethanol plant numbers Calvanico relied upon
were proposed plants not completed plants. Third, it argues
that if we determine the economic depreciation percentage
was incorrect, then we should value the Madrid property
without economic depreciation or remand the matter to TERC
with instruction to determine the correct amount of economic
depreciation, if any.
   Wheatland presented evidence of the Furnas County plant as
a comparable property. Calvanico stated that he had appraised

7
    See id.
8
    Id.
9
    Id.
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         Nebraska Supreme Court Advance Sheets
                  304 Nebraska Reports
        WHEATLAND INDUS. v. PERKINS CTY. BD. OF EQUAL.
                     Cite as 304 Neb. 638

the Furnas County plant twice and that it was nearly identical
to the Madrid property in blueprint, technology, and capac-
ity. He referred to the Furnas County plant as a “sister” plant.
Wheatland owned the Furnas County plant, and its chief execu-
tive officer affirmed that they were identical.
   Stanard explained that Burton’s spreadsheet contained incor-
rect information about the Furnas County plant. The Furnas
County plant was not a 22-million-gallon plant, but, rather,
it was a 44-million-gallon plant. This affirmed Wheatland’s
evidence that the plants were identical in capacity. Stanard’s
statement—that the nameplate capacity of a plant was criti-
cal to determining its value—emphasized the importance of
the relationship in value between the Furnas County plant
and the Madrid property. Although Burton did not state how
her opinion of the Madrid property value would change from
the incorrect spreadsheet, she did not dispute the $8.9 million
value of the Furnas County plant. Stanard did state that if
the Furnas County plant was a “sister” plant, he would have
no disagreement with Calvanico’s appraisal of the Madrid
property. Clearly, the evidence presented showed that the
Furnas County plant was a “sister” plant. Calvanico’s opinion
purported to show that the Board had overvalued the Madrid
property by well over $6 million—hardly a mere difference of
opinion. Stanard’s acceptance of Calvanico’s appraisal under-
mines the Board’s argument attempting to characterize it
as such.
   As part of Wheatland’s evidence intended to show a grossly
excessive value, it focused on the failure to apply depreciation.
Burton, Stanard, and Calvanico all agreed that physical depre-
ciation should be applied to the Madrid property. Burton and
Stanard were unaware if physical depreciation was applied, and
there was no evidence that it was. Additionally, Stanard agreed
with Calvanico that “some” economic depreciation should be
applied to the Madrid property but the Board did not present
evidence as to an appropriate amount. This evidence showed
that the Board’s valuation was unreliable, because it failed to
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             Nebraska Supreme Court Advance Sheets
                      304 Nebraska Reports
            WHEATLAND INDUS. v. PERKINS CTY. BD. OF EQUAL.
                         Cite as 304 Neb. 638

take into account any depreciation, which in turn resulted in an
excessively high valuation.
   Because the evidence showed that the Furnas County plant
was comparable and that the Board’s valuation was unreliable,
there was competent evidence to show that the Board’s valua-
tion was grossly excessive. Accordingly, TERC’s determination
that it was arbitrary and unreasonable to rely on the Board’s
determination of value was supported by competent evidence
and was not arbitrary, capricious, or unreasonable.
   The Board argues that there was insufficient evidence to
support economic depreciation of 40 percent. “Based upon
the applicable law, the Board need not put on any evidence to
support its valuation of the property at issue unless the tax-
payer establishes the Board’s valuation was unreasonable or
arbitrary.”10 Because Wheatland established that the Board’s
valuation was unreasonable and arbitrary, TERC did not err in
relying upon Calvanico’s appraisal.
   “Economic depreciation results from external economic
forces which depress the value of the property.”11 Calvanico
observed the state of the ethanol industry, the decrease in the
price per gallon of ethanol, and the reduction of the rate of
ethanol plant construction. He emphasized that Nebraska had
39 ethanol plants in 2010 and 26 ethanol plants in 2017. From
his observations, he opined that economic depreciation of 40
percent was appropriate.
   We cannot say that TERC’s reliance on Calvanico’s opinion
was arbitrary, capricious, or unreasonable. Stanard asserted that
the numbers that Calvanico relied upon were not all constructed
and operational ethanol plants—that is, some were proposed
plants that never came to fruition. But he did not expound why
proposed plants versus operational plants makes a difference

10
     Bottorf v. Clay Cty. Bd. of Equal., 7 Neb. App. 162, 168, 580 N.W.2d 561,
     566 (1998).
11
     First Nat. Bank v. Otoe Cty., 233 Neb. 412, 414, 445 N.W.2d 880, 882
     (1989).
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         Nebraska Supreme Court Advance Sheets
                  304 Nebraska Reports
        WHEATLAND INDUS. v. PERKINS CTY. BD. OF EQUAL.
                     Cite as 304 Neb. 638

to the state of the Nebraska ethanol industry or how it would
affect economic depreciation. Moreover, Stanard admitted that
“some” economic depreciation was appropriate, but failed to
quantify his opinion. TERC was left with the choice between
“some” and 40 percent. Further, the Board failed to present
evidence as to how the profitability of the ethanol plant would
affect economic depreciation of the property and quantify
that amount. Accordingly, TERC’s determination of economic
depreciation was based on competent evidence and was not
arbitrary, capricious, or unreasonable.

                        CONCLUSION
   We reiterate that our decision does not mean that mass
appraisal valuation techniques do not apply to ethanol plants.
Here, because evidence was presented to show that a similar
property was valued comparably to Wheatland’s appraisal and
the Board’s valuation was unreliable, we conclude that TERC’s
determination that the Board’s valuation was unreasonable and
arbitrary was supported by competent evidence and was not
arbitrary, capricious, or unreasonable. Additionally, we con-
clude that TERC’s determination of economic depreciation was
supported by competent evidence and was not arbitrary, capri-
cious, or unreasonable. We affirm its decision.
                                                  Affirmed.
