In a pair of decisions issued on September 30 and December 3, 2015, the Indiana Tax Court upheld the 2006 to 2010 assessment reductions for an Indianapolis shopping center.  In Marion County Assessor v. Gateway Arthur, Inc., Taxpayer owned six parcels consisting of three buildings with 270,000 square feet of leasable space, a retention pond, two access roads and a pylon sign.  For the 2006 to 2010 tax years, the Assessor assigned values to the property ranging from about $17 to $18.1 Million.  The Indiana Board of Tax Review granted reductions to the property’s assessments, lowering the values to approximately $10.5 to $14.8 Million.  On appeal, the Assessor raised several arguments in challenging the Indiana Board’s final determinations.

For 2006, the Assessor failed to meet his burden of proof. Because the property’s assessment increased by more than 5% from the 2005 to 2006 assessment dates, the Assessor bore the burden of proof on appeal.  At the administrative hearing, the Assessor submitted an income analysis and a computer printout showing that the property had been purchased for $21 Million in 2007.  Before the Tax Court, the Assessor claimed that Taxpayer, in fact, had the burden of proof.  The certified record showed the assessment increase year-over-year, and the Court observed that application of Indiana’s burden-shifting provision “has always been triggered by the filing of an appeal in which there was an annual increase in the assessed value of property in excess of 5%.” (citation omitted).

The Tax Court further noted that conflicting evidence in the record showed that the Assessor’s income analysis failed to account for the impact of property taxes on the shopping center’s value.  The Court, therefore, deferred to the Indiana Board’s conclusion that the analysis lacked probative value.

Regarding the property’s purchase price, the Court explained that the Assessor’s computer printout “failed to indicate who entered the data, failed to include all six parcels, and contained the wrong sale and deed dates.” (internal quotes, citations omitted).  The Assessor could not produce a sales disclosure form.  Moreover, the shopping center was part of a thirty-six property portfolio sale, so it was important to determine whether its allocated sales price included more than the “sticks and the bricks.” Because the Assessor had the burden of proof, Taxpayer was not required to submit independent valuation evidence.  The Indiana Board properly reinstated the property’s 2005 assessed value for 2006.

For 2007 to 2010, Taxpayer’s appraisal supported reductions.  The Indiana Board had adopted values for the shopping center reflecting the property’s appraised values as “augmented” by $1 Million to account for certain property tax reimbursements.  The Assessor asked the Tax Court to reverse, wrongly claiming that Indiana’s assessment guidelines prohibited use of loaded capitalization rates to value property.  The Assessor also argued that the appraisal underestimated the shopping center’s value by failing to attribute income to the retention pond, pylon sign and access road parcels. However, the record lacked evidence showing that Taxpayer collected rent from retailers based on their use of these parcels.  The Assessor failed to undermine the appraisal’s probative value.

The Assessor further failed to show that his evidence supported a reduction.  The Assessor did not explain why his reliance on capitalization rates for national power centers was proper or why Taxpayer’s appraisal, which treated the shopping center as a “hybrid” center, was improper.  The Court also noted the same flaws with the Assessor’s income analysis and purchase price information as discussed above.

Finally, the Court found that the Indiana Board did not err in adopting the “augmented” values, because the adjustments were based on evidence in the record.

The Tax Court’s decision can be viewed here (Sept. 30, 2015) and here (Dec. 3, 2015).