                         IN THE NEBRASKA COURT OF APPEALS

               MEMORANDUM OPINION AND JUDGMENT ON APPEAL
                        (Memorandum Web Opinion)

                      MILLARD LUMBER V. DOUGLAS CTY. BD. OF EQUAL.


  NOTICE: THIS OPINION IS NOT DESIGNATED FOR PERMANENT PUBLICATION
 AND MAY NOT BE CITED EXCEPT AS PROVIDED BY NEB. CT. R. APP. P. § 2-102(E).


                              MILLARD LUMBER, INC., APPELLANT,
                                               V.

                    DOUGLAS COUNTY BOARD OF EQUALIZATION, APPELLEE.


                            Filed August 27, 2019.   No. A-18-1091.


       Appeal from the Tax Equalization and Review Commission. Affirmed.
       Jordan W. Adam, Fraser Stryker, P.C., L.L.O., for appellant.
       Jennifer C. Clark, Deputy Douglas County Attorney, for appellee.


       RIEDMANN, BISHOP, and ARTERBURN, Judges.
       RIEDMANN, Judge.
                                       INTRODUCTION
        Millard Lumber, Inc., appeals from an order of the Tax Equalization and Review
Commission (TERC) which affirmed a decision of the Douglas County Board of Equalization
(Board) denying Millard Lumber’s protest of the 2017 valuation of its property. We conclude that
the TERC decision is supported by competent evidence and is neither arbitrary nor capricious. We
therefore affirm.
                                        BACKGROUND
        Millard Lumber owns a 609,633-square-foot distribution warehouse located on 1,440,093
square feet of land in Douglas County, Nebraska (the Subject Property). The structure was built in
1958 and Millard Lumber purchased the Subject Property in 2006. The Douglas County assessor
determined that the value of the Subject Property was $13,496,200 for the 2017 tax year. This
value consisted of a land valuation of $4,320,300 and an improvement value of $9,175,900.



                                              -1-
        Millard Lumber protested the assessment to the Board and requested a valuation of
$9,410,735. Millard Lumber’s requested valuation consisted of a land valuation of $4,320,300,
and an improvement value of $5,090,435. The Board affirmed the original assessment of the
Subject Property, and determined that its taxable value was $13,496,200. Millard Lumber appealed
the Board’s decision to TERC.
        A hearing was held before TERC in February 2018. At the hearing, Millard Lumber argued
that the 2017 tax assessment was not equalized with the property adjacent to it (the Comparable
Property). The only evidence presented at the hearing consisted of testimony from Brent Reeder
on behalf of Millard Lumber. Reeder testified that he was a general contractor and had done
renovation work for Millard Lumber on the Subject Property. Reeder testified that the
improvement value on the Subject Property was nearly double that of the Comparable Property,
when broken down by square foot, with the value of the improvements on the Subject Property
being calculated at $15.05 per square foot, and the value of the improvements on the Comparable
Property being calculated at $8.50 per square foot.
        Reeder asserted to TERC that the Subject Property and the Comparable Property were very
similar. The properties were originally built in the 1950’s and were part of the same campus.
Although the Comparable Property is larger than the Subject Property, both buildings were used
in the same manner. Reeder also informed TERC that both buildings were constructed similarly,
they had similar clear heights for docking, heavy industrial floor slabs, similar lighting, similar
roofing structure and membrane, gas-fired heat systems and were fire-sprinkler protected. Reeder
did acknowledge that the Comparable Property used a gas-fired heat system which used forced air,
which was less efficient than the heating system used by the Subject Property.
        Additionally, in Reeder’s opinion, the condition of the buildings was essentially the same.
Further, both properties leased out office space to tenants. Reeder emphasized that the two
buildings were “as comparable as you can get” for properties in Omaha. On cross-examination,
Reeder admitted that he was not an appraiser and did not have certificates or licenses for
assessment or appraisal. But, on redirect, Reeder stated that he performed contracting work on
both the Subject Property and the Comparable Property, and was therefore familiar with both
properties. The Board did not present any evidence.
        Following the hearing, TERC issued an order affirming the decision of the Board, and
assessing Millard Lumber a tax valuation of $13,496,200 on the Subject Property. TERC
specifically found that Millard Lumber did not present clear and convincing evidence
demonstrating that the Subject Property was similar to the Comparable Property for purposes of
an equalization analysis. Millard Lumber appealed TERC’s order to this court.
                                  ASSIGNMENTS OF ERROR
       Millard Lumber assigns, restated, that TERC erred in affirming the Board’s decision
denying Millard Lumber’s 2017 property tax valuation protest.
                                   STANDARD OF REVIEW
        Decisions rendered by TERC shall be reviewed by an appellate court for errors appearing
on the record of the commission. Brenner v. Banner Cty. Bd. of Equal., 276 Neb. 275, 753 N.W.2d




                                               -2-
802 (2008). When reviewing a judgment for errors appearing on the record, an appellate court’s
inquiry is whether the decision conforms to the law, is supported by competent evidence, and is
neither arbitrary, capricious, nor unreasonable. Id. Questions of law arising during appellate review
of TERC decisions are reviewed de novo on the record. Id.
                                            ANALYSIS
         We note at the outset of our analysis that Millard Lumber does not argue that the valuation
of the Subject Property was incorrect, i.e., that it could not be sold at the valuation set by the
assessor. Rather, it argues only that it received a grossly excessive tax assessment when compared
to the Comparable Property, which it argued was similar to the Subject Property. Because Millard
Lumber does not challenge the actual valuation of the Subject Property, we focus our analysis on
the dispositive issue of the similarity between the two properties for equalization purposes.
         The Nebraska Constitution requires that real property be taxed “by valuation uniformly
and proportionately.” Brenner v. Banner Cty. Bd. of Equal., 276 Neb. at 294, 753 N.W.2d at 818.
Equalization is the process of ensuring that all taxable property is placed on the assessment rolls
at a uniform percentage of its actual value. Brenner v. Banner Cty. Bd. of Equal., supra. The
purpose of the equalization of assessments is to bring the assessment of different parts of a taxing
district to the same relative standard, so that no one of the parts may be compelled to pay a
disproportionate part of the tax. Id.
         The burden of proof is on the taxpayer to establish the taxpayer’s contention that the value
of the taxable property has been arbitrarily or unlawfully fixed by the county board of equalization
at an amount greater than its actual value, or that its value has not been fairly and properly
equalized when considered in connection with the assessment of other property and that such
disparity and lack of uniformity result in a discriminatory, unjust, and unfair assessment. Omaha
Country Club v. Douglas Cty. Bd. of Equal., 11 Neb. App. 171, 645 N.W.2d 821 (2002). Such a
burden 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 taxpayer’s property, when compared with
valuations placed on other similar properties, is grossly excessive and is the result of a systematic
exercise of intentional will or failure of plain legal duty, and not mere errors of judgment. Id.
         When examining comparable property for sales comparisons, the Nebraska Supreme Court
stated that a comparable real property is one that is similar to the property being assessed in
significant physical, functional, and location characteristics and in its contribution to value. County
of Webster v. Nebraska Tax Equal. & Rev. Comm., 296 Neb. 751, 896 N.W.2d 887 (2017).
Appellate courts have affirmed a TERC finding that properties were not similar when the record
supports such a determination. See Bottorf v. Clay Cty. Bd. of Equal., 7 Neb. App. 162, 580 N.W.2d
561 (1998) (TERC’s determination that properties were not similar due to style, quality, and size
of properties was not arbitrary and capricious). See, also, 72nd Property, L.L.C. v. Douglas Cty.
Bd. of Equal., 10 Neb. App. 826, 638 N.W.2d 872 (2002) (TERC’s determination that properties
were not similar in light of location, improvements, age, and size of properties was supported by
competent evidence). To set the valuation of similarly situated property, i.e., comparables, at
materially different levels, i.e., value per square foot, is by definition unreasonable and arbitrary.
Zabawa v. Douglas Cty. Bd. of Equal., 17 Neb. App. 221, 757 N.W.2d 522 (2008).



                                                 -3-
        Here, TERC found that the Subject Property was not similar to the Comparable Property,
and thus, denied Millard Lumber’s appeal. In its order, TERC stated that the improvements were
not similar because the Comparable Property was larger than the Subject Property, and that the
Subject Property had a better condition rating, more area protected by fire sprinklers, more area of
heavy duty concrete paving, and a more efficient heating system than the Comparable Property.
        Based on our review of the record, we find that TERC’s determination that the two
properties were not similar, and therefore, should not have been equalized, is supported by
competent evidence and was not arbitrary or capricious. First, the Douglas County assessor rated
the Subject Property in average condition and average quality, whereas the Comparable Property
was rated in fair condition and average quality. Additionally, the record indicates that the Subject
Property has 80,000 square feet of heavy duty concrete paving and 35 foot ceilings, whereas the
Comparable Property has only 50,000 square feet of heavy duty concrete paving and 30 foot
ceilings.
        Additionally, the Subject Property has 602,753 square feet of sprinkler coverage, which is
more than the Comparable Property’s sprinkler coverage of 569,000 square feet, despite being
over 350,000 square feet larger. The evidence also demonstrates that the Subject Property has a
more efficient heating system than the Comparable Property does. Finally, the classification of the
two properties is different. The Subject Property is classified as a distribution warehouse, while
the Comparable Property is classified as a storage warehouse.
        Thus, in sum, the smaller Subject Property has more improvements to the property, such
as more fire sprinkler coverage, heavy duty concrete paving, and higher ceilings, than does the
larger Comparable Property. Therefore, as was the case in both Bottorf v. Clay Cty. Bd. of Equal.,
supra, and 72nd Property, L.L.C. v. Douglas Cty. Bd. of Equal., supra, the quality, improvements,
and size difference between the two properties render the Subject Property different from the
Comparable Property.
        Millard Lumber asserts that the two properties are similar because: they were constructed
in the same year, they were part of the same industrial complex, they are comprised of the same
building materials, are adjacent to each other, are of average quality, and are utilized for the same
purposes. However, Millard Lumber bases its assertion on the testimony of Reeder, who was not
an appraiser, but rather, was familiar with both properties due to his work as a contractor.
Therefore, Reeder was offering only his opinion that the buildings were similar. A mere difference
of opinion that the buildings were similar is not sufficient to establish that TERC erred in finding
the properties were not similar. Omaha Country Club v. Douglas Cty. Bd. of Equal., supra. The
Board was able to identify numerous differences between the properties with Reeder on
cross-examination. These differences led TERC to determine that the two properties were not
similar and Millard Lumber failed to carry its burden to clearly and convincingly demonstrate that
the properties were similar.
        Further, Millard Lumber alleges that TERC applied the wrong standard by stating that the
improvements to the properties were not “substantially similar.” Brief for appellant at 10. Millard
Lumber correctly states that the standard for equalization is that properties must be similar.
However, TERC appropriately laid out the rule for equalization in its order referencing “similar
property” and “similarly situated property.” It recognized the similarities and the differences



                                                -4-
between the two properties in its analysis of the evidence. In light of the differences between the
two properties that TERC identified in its order, its statement that there was “not clear and
convincing evidence that these improvements are substantially similar for purposes of an
equalization analysis” does not require reversal. Contrary to Millard Lumber’s assertion, the term
“substantially” does not necessarily imply a heightened standard. Rather, it is defined to mean
either “to a large degree” or “generally.” See Cambridge Advanced Learner’s Dictionary and
Thesaurus (2019). Millard Lumber does not direct us to any evidence to support a finding that
TERC required the properties to be anything other than similar, and we likewise find none.
Therefore, we find that TERC applied the proper standard for equalization between two properties.
        Upon our review of the record, we find that TERC’s determination that the Subject
Property was not similar to the Comparable Property for equalization was supported by competent
evidence and was not arbitrary and capricious. Accordingly, we find no error in TERC’s order
affirming the Board’s decision to deny Millard Lumber’s protest of its 2017 tax assessment.
Further, because we affirm TERC’s determination that the Subject Property is not similar to the
Comparable Property, we do not address Millard Lumber’s argument that its tax valuation was
grossly excessive compared to the Comparable Property.
                                         CONCLUSION
       We conclude that Millard Lumber failed to prove by clear and convincing evidence that
the Subject Property was similar to the Comparable Property for equalization. We affirm TERC’s
decision.
                                                                                       AFFIRMED.




                                               -5-
