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Va. Cir.: Country club wins second municipal tax challenge

For tax purposes, the City of Fairfax must assess Army Navy Country Club’s land as residential property and omit “improvements” (e.g. clubhouse, pool, tennis courts) that would be demolished in the event of residential development.


This case challenges tax assessments for the years 2012 to 2016 for a Property owned by Army Navy Country Club located in the City of Fairfax. The Property has functioned as a country club and golf course for decades, but is zoned for by-right residential development. The parties agreed that the Property’s highest and best use is for residential development, despite it being used as a country club.

During the relevant tax years, the City assessed the Property at approximately $53 million. The Country Club contends that the Property’s fair market value for those years should be no greater than $29.88 million.

This case was before the court previously, when the Country Club filed a complaint to correct the City’s tax assessments for the years 2007-2010. In that case, the court found that the City’s use of the “development cost” approach was improper under Fruit Growers Exp. Co. v. City of Alexandria, 216 Va. 602 (1976).

As in the previous case, this court heard testimony from T. Reed, the City’s assessor, in addition to other expert witnesses for both parties.

Assessment methodology

The City’s tax assessments of the Property for the years 2012-2016 were erroneous. Reed’s methodology was incorrect and not in accordance with generally acceptable accounting principles, and the valuation exceeded fair market value.

Specifically, the valuation of improvements to the Property was improper. The highest and best use of the Property is residential, which requires the Property to be evaluated as if it consists of residential lots. In order to properly value the Property, then, one cannot keep the value of the improvements in the calculation.

For the relevant tax years, Reed valued not only the land but also the improvements. Recognizing that the improvements would be demolished if the Property was developed for residential use, he assigned them a reduced value and then depreciated that value. But it was improper to value the land under a residential scheme and also value the improvements, because the improvements would be nonexistent if the Property consisted of residential lots. This approach would allow the City to “have its cake and eat it too.”

Further, Reed’s valuation of improvements was inconsistent with the court’s prior decision, finding this same approach improper. Despite that decision, the City continued to assign an improper value to the improvements.

Reed didn’t value the Property in accordance with generally acceptable accounting principles because the development cost approach was improper for this particular analysis. Reed’s analysis also violated the principle of consistent use, which states that land cannot be valued based on one use while improvements are valued based on another. That is exactly what Reed did here.

Finally, the comparison properties Reed used were not similar enough. The Property at issue consists of over 200 acres, while Reed’s comparison properties were mostly under 60 acres. Two were just over 100 acres, which is still not entirely on par with the size of the Property. One comparison property was about 300 acres, but was not in a similar location, i.e. in or near Fairfax County. Additionally, many of the comparison sales occurred too long ago to be relevant to a current potential sale.

In sum, the City’s methodology was improper in several ways and, thus, not in accordance with generally acceptable accounting principles. As a result, the Property was valued at greater than its fair market value.

Corrected assessment

The City’s assessment was erroneous, and thus the court may correct it. The court finds that the value should be $44,632,900.

In reviewing all of the comparable sales offered by both parties’ appraisers in evaluating the Property, as well as all evidence adduced at trial, the court is most persuaded by the sales that were similar in size and location. However, the court recognizes that Fairfax County has developed significantly over the last several decades, and 230-acre properties do not exist in the current market. Smaller sales in closer proximity reflect the high value of the Country Club’s land, but they don’t take into consideration the discount a seller would provide for such a large parcel. On the other hand, sales from western Loudoun County don’t accurately reflect the Property’s value, given its proximity to Washington D.C., the Metro station, and several interstates.

After surveying all expert testimony and comparable sales, the court finds that the price per acre is $190,000. Applying this price to the 234.91 acres of the Property, the value is $44,632,900. The court assigns this value to all of the disputed tax years in the litigation.

Army Navy Country Club v. City of Fairfax, Va., Case No. CL15-17941, June 5, 2018. Fairfax Cir. Ct. (Ortiz). VLW No. 018-8-051, 9 pp.