                   IN THE COURT OF APPEALS OF IOWA

                                   No. 15-2148
                             Filed October 12, 2016


VILLAGE GREEN CO-OP, INC.,
     Plaintiff-Appellant,

vs.

IOWA PROPERTY ASSESSMENT APPEAL BOARD,
     Defendant-Appellee.
________________________________________________________________


      Appeal from the Iowa District Court for Polk County, Robert A. Hutchison,

Judge.



      Village Green appeals the district court’s judicial-review order affirming the

agency’s valuation of its apartment complex. AFFIRMED.



      James E. Nervig of Brick Gentry, P.C., West Des Moines, for appellant.

      Jessica Braunschweig-Norris, General Counsel, and Brad O. Hopkins,

Assistant General Counsel, Des Moines, for appellee.



      Considered by Danilson, C.J., and Vaitheswaran and Tabor, JJ.
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TABOR, Judge.

       Village Green appeals the district court’s affirmance on judicial review of

the valuation of its apartment complex as determined by the Property

Assessment Appeal Board (PAAB). Because the PAAB’s determination of value

was supported by substantial evidence and was not, as alleged by Village Green,

based on erroneous findings of material fact, we affirm.

       I. Facts and Prior Proceedings

       Village Green purchased an apartment complex on the east side of Des

Moines for $1,815,000.        It protested the property’s 2011, 2012, and 2013

valuations to the Polk County Board of Review,1 which affirmed the county

assessor’s $1,986,000 valuation. Village Green appealed to the PAAB, which

“determine[s] anew” the questions presented to the board of review. 2 Iowa Code

§ 441.37A(3)(a) (stating “there shall be no presumption as to the correctness” of

the board of review’s determination).

       To provide context, we turn to the applicable statutory framework. The

“actual value of all property subject to assessment and taxation” is the property’s

“fair and reasonable market value.” Id. § 441.21(b)(1). “Market value” means


1
  County assessors determine real property’s tax assessment. Iowa Code § 441.17
(2015). Any property owner or taxpayer who is dissatisfied with a property assessment
can file a protest with the board of review. Id. § 441.37(1)(a). The board of review can
“equalize assessments by raising or lowering the individual assessments of real property
. . . made by the assessor.” Id. § 441.35(1)(a). Before the board of review, the
protesting taxpayer bears the burden of proof. Id. § 441.21(3).
2
  Starting in assessment year 2007, a party “may” appeal the board of review’s decision
to the PAAB or “may bypass” the PAAB and appeal to the district court. Iowa Code
§ 441.37A(1)(a). The PAAB, established within the Iowa Department of Revenue, is a
statewide board “created for the purpose of establishing a consistent, fair, and equitable
assessment appeal process.” Id. § 421.1A(1). The PAAB is an agency. See id.
§ 17A.2(1). The PAAB’s decision “shall be considered final agency action for purposes
of further appeal.” Id. § 441.37A(3)(b).
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“the fair and reasonable exchange” of “a willing buyer and a willing seller, neither

being under any compulsion to buy or sell and each being familiar with all the

facts relating to the particular property.” Id. In determining market value, “[s]ales

prices of the property or [of] comparable property in normal transactions

reflecting market value, and the probable availability or unavailability of persons

interested in purchasing the property, shall be taken into consideration in arriving

at its market value.” Id. (emphasis added). Our supreme court interprets “this

section to state a preference for establishing value using evidence of the sales

price of the property being assessed or using evidence of comparable sales.”

Boekeloo v. Bd. of Review, 529 N.W.2d 275, 277 (Iowa 1995).

       “Recognizing that it may not always be easy to ascertain what a willing

buyer would pay and a willing seller would accept under a comparable-sales

approach, the statute provides for alternate means of determining market value.”

Id.; see also Wellmark, Inc. v. Polk Cty. Bd. of Review, 875 N.W.2d 667, 679

(Iowa 2016).      Specifically, if the property’s market value “cannot be readily

established” through comparable sales, then the assessor may determine the

property’s value by “using the other uniform and recognized appraisal methods.”

Iowa Code § 441.21(2). “These alternate means of valuation may be used only

when market value cannot be readily established using a comparable-sales

approach.” Boekeloo, 529 N.W.2d at 277; see also Bartlett & Co. Grain v. Bd. of

Review, 253 N.W.2d 86, 88 (Iowa 1977) (stating “the sales-prices approach is

initially to be used”).

       At the February 2015 contested case hearing, the PAAB heard evidence

from two expert appraisers—Ted Frandson for Village Green and Gene Nelsen
                                        4


for Polk County. According to the experts, valuation of real estate consisting of

land and buildings occurs through three primary methods—the cost approach,

the sales-comparison approach, and the income approach. Neither expert used

the cost approach. Frandson used only the income approach and valued the

property at $1,194,000. Nelsen completed both the “preferred” sales-comparison

approach and the income approach, and he reconciled those results. See Iowa

Code § 441.21.

      The PAAB’s ruling provided a detailed summary of this evidence.           It

determined Nelsen’s appraisal was the best evidence of the property’s fair

market value and reduced Nelsen’s valuation by $26,684 to account for personal

property, resulting in a final valuation of $1,813,000.    The PAAB concluded

Nelsen’s appraisal showed the county had over-assessed the property, and the

PAAB reduced the assessment.

      Village Green sought judicial review in the district court, where “the

burden” is on it as “the party asserting the invalidity of the agency action.” See

Wendling Quarries, Inc. v. Prop. Assessment Appeal Bd., 865 N.W.2d 635, 638

(Iowa Ct. App. 2015). The district court affirmed the PAAB, and Village Green

now appeals.

      II. Scope and Standard of Review

      We review the PAAB’s ruling for correction of errors at law. Iowa Code

§ 441.39.   In reviewing the district court’s decision affirming the agency, “we

apply the standards of chapter 17A to determine if we reach the same conclusion

as the district court.” Wendling Quarries, 865 N.W.2d at 638. We are bound by

the PAAB’s findings of fact if such findings are supported by substantial
                                        5

evidence. Id. Substantial evidence supports an agency’s decision even if the

interpretation of the evidence may be open to a fair difference of opinion. Arndt

v. City of Le Claire, 728 N.W.2d 389, 393 (Iowa 2007).

      III. Analysis

      Village Green claims Nelsen’s appraisal was “based on erroneous findings

of material fact” and his resulting analysis was “materially flawed.” From this

premise, Village Green contends the PAAB’s ruling relying on Nelsen’s appraisal

was not supported by substantial evidence. Village Green asks us to reverse

and remand to the PAAB “for reconsideration after correction of the material

errors in evidence.”

      Village Green asserts three errors: (1) Nelsen rated the property as

average; (2) Nelsen’s inadequate inspection undermines his eight-percent

capitalization rate; and (3) after Nelsen inappropriately compared the subject

apartments to apartments in better condition, he failed to “downwardly adjust the

sales prices of the other superior apartment buildings to reflect the lesser

condition of the subject apartments.”

      A.    “Average” Apartment Complex.        Village Green asserts Nelsen’s

“most critical finding of fact” was that the apartment complex was in “average”

condition, causing him to overestimate its value. In response, the PAAB points to

Nelsen’s grid of comparable sales listing the property’s condition as below

average and to Nelsen’s testimony: “[R]ecognizing again the below-average

condition of the subject properties.” The record does not support Village Green’s

assertion that Nelsen offered erroneous information about the condition of the

property.
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       B. Nelsen’s Inspection. Village Green next finds fault with Nelsen’s

inspection of the property, arguing Nelsen “would have understood the poor

condition of the premises” if he had “investigated the interior of the subject

buildings.” It then asserts Nelsen’s faulty inspection led him to use an eight-

percent capitalization rate.3     Village Green’s expert adopted a ten-percent

capitalization rate. But citing to Nelsen’s testimony, Village Green also states,

even based on his inadequate investigation, Nelsen “acknowledged the premises

were in substandard condition and below-average investment grade.”4 Village

Green seeks a remand to the PAAB “for further proceedings allowing for the

correction of the erroneous [eight-percent] capitalization rate.”

       Addressing Village Green’s inspection challenge, the PAAB ruled:

              Village Green is critical of [Nelsen not completing] an interior
       inspection of the property and, as a result, his opinions do not
       adequately account for the subject’s condition. We recognize that
       Nelsen considered the subject to be in below average condition,
       which appears to be consistent with the actual condition of the
       property. In addition, we note that Frandson’s inspection was also
       limited due to a bed bug infestation at the property. As a result, it
       appears that neither appraiser had the benefit of a full inspection
       nor can we say either has a materially better understanding of the
       [subject] property’s overall condition.

       On judicial review, the district court rejected Village Green’s claim, stating

the PAAB acknowledged Village Green’s concern as to Nelsen’s inspection “but

3
  “In using the income approach, the capitalization rate represents an expert’s judgment
of the market interest rate reasonably to be expected by an investor in the property at
the time involved.” Eagle Food Ctrs., Inc. v. Bd. of Review, 497 N.W.2d 860, 863 (Iowa
1993).
4
  Village Green points to Nelsen’s testimony:
                Q. If you do a strict comparison though between the subject
        property and the five other properties, would it be accurate to say that
        since the subject is characterized as below average that you would
        consider it in a lesser condition than the . . . other five comparable
        [properties]? A. Yes, I made adjustments to each and every one.
                                          7


concluded Nelsen did account for the property’s poor condition despite not

performing an interior inspection of the subject property.” Aptly following case

law, the district court refrained from reweighing the evidence and concluded

substantial evidence supported the PAAB.           See id. at 394 (“Making a

determination as to whether evidence ‘trumps’ other evidence or whether one

piece of evidence is ‘qualitatively weaker’ than another piece of evidence is not

an assessment for the district court or the court of appeals to make when it

conducts a substantial evidence review of an agency decision.” (citation

omitted)); McHose v. Prop. Assessment Appeal Bd., No. 14-1584, 2015 WL

4488252, at *3 (Iowa Ct. App. July 22, 2015) (discussing judicial review of the

PAAB).

      We agree with the district court.

      C. Nelsen’s Comparable-Sales Analysis. In its final challenge, Village

Green alleges Nelsen erred in his comparable-sales analysis by referring to other

apartments in better condition and by failing to “downwardly adjust the sales

prices of the other superior apartment buildings to reflect the lesser condition of

the subject apartments.” It seeks a remand so an “appropriate adjustment” can

be made to the “sales of other properties.”

      In response, the PAAB points out Frandson, Village Green’s expert, did

not provide any comparable-sales analysis, even though that is the preferred

approach in Iowa. See Iowa Code § 441.21(1).

      The district court provided a detailed description of Nelsen’s logical and

accurate use of comparable sales and adjustments, which we need not restate

here. See Tim O’Neill Chevrolet, Inc. v. Forristall, 551 N.W.2d 611, 614 (Iowa
                                         8


1996) (stating the trier of fact [here, the PAAB] “has the prerogative to determine

which evidence is entitled to belief” and a reviewing court only determines

whether substantial evidence supports a finding “according to those witnesses

whom the [trier of fact] believed” (emphasis added)).      The district court then

concluded substantial evidence supports the PAAB’s ruling that Nelsen’s

appraisal is the best evidence of the fair market value of the apartment complex.

See id.; Bartlett, 253 N.W.2d at 93 (“An assessor is in an even better position

than a [fact finder] to weigh ‘points of difference’ and make adjustments

accordingly.” (citation omitted)).   We agree with the district court and reject

Village Green’s final challenge.

       IV. Conclusion

       Because the PAAB’s decision was supported by substantial evidence and

not based on “erroneous findings of material facts,” we affirm the district court’s

judicial review.

       AFFIRMED.
