Where a county’s expert testified that two tax assessments were more than the property’s fair market value, the property owner overcame the presumption that a taxing authority’s assessment is presumed to be correct.
Assessments and opinions
In 1988, CSHV leased two office buildings in Arlington County to the Government Services Administration. The GSA used the space for the Drug Enforcement Agency’s headquarters. The GSA renewed the lease for 10 years in 2008. In 2015, GSA announced it was taking competitive bids for DEA office space.
“As part of the bid process, the GSA required at least $55,000,000 in tenant improvement contributions and $16,000,000 in capital improvement contributions from the winning bidder.”
The county assessed the property’s fair market value for the 2017 tax year at $287,715,300. For tax year 2018, the assessed fair market value was $263,874,500.
CSHV challenged both assessments, citing expiring leases and the tenant and capital improvement contributions as reasons for lower assessments. The county did not change the assessments. CSHV sued.
At trial, CSHV called Shields as an expert. Shields testified that the property was “unstable” and that if stabilized, the fair market value would be $217 million. Otherwise, the fair market value would be $150 million for tax year 2017 and $156 million for tax year 2018.
The county called Korpacz as an expert witness. He testified that taking into account the tenant improvement contributions, the 2017 tax year fair market value would be $236.7 million and $243.7 million for tax year 2018.
The circuit court denied CSHV’s relief petition.
“The circuit court explained that CSHV failed to rebut the presumption that the County’s assessment was correct. It specifically took issue with Shields’ testimony, finding that he ‘exaggerated the variable affecting fair market value, made errors in evaluating the market and calculations which undermined his credibility and cast doubt on his opinion.’
“The circuit court further determined that the assessments fell ‘within the range of a reasonable difference of opinion.’
“CSHV moved for reconsideration, pointing out that Korpacz’s valuation was also lower than the County’s assessment. CSHV insisted that the circuit court was bound by that lower valuation and, therefore, it was required to reduce the assessed value of the property.
“The circuit court denied the motion, stating that it was not bound by Korpacz’s testimony because his testimony was ‘just another opinion, among many opinions, of the value of this Property for the two tax years and does not independently meet [CSHV’s] burden of proof.’”
“CSHV argues that the circuit court erred because the evidence presented at trial proved that the Property had been assessed at more than its fair market value. CSHV notes that both experts testified that the fair market value of the property was significantly less than the County’s assessment. At a minimum, CSHV contends that the circuit court was required to adopt Korpacz’s valuation of the property.
“This Court has repeatedly explained that ‘[a] taxing authority’s assessment is presumed to be correct, and a taxpayer has the burden to rebut that presumption by establishing that the real property in question is assessed at more than fair market value or that the assessment is not uniform in its application.’ …
“[W]hen a taxing authority chooses to present evidence of fair market value, it is bound by that evidence, to the extent it is credible, and if that evidence establishes that the fair market value is less than the assessed value, then the presumption that a tax assessment is correct is conclusively rebutted.
“Here, the County’s evidence presented at trial clearly establishes that the assessed value of the Property exceeded its fair market value for both 2017 and 2018.
“Korpacz, the County’s expert, opined that, for 2017, the fair market value of the property was $236,700,000, which is approximately $51,015,300 less than its assessed value of $287,715,300. Similarly, for 2018, Korpacz concluded that the fair market value of the property was $243,700,000, which is approximately $20,174,700 less than the assessed value of $263,874,700.
“Thus, the presumption that the assessment is correct was rebutted and, therefore, the circuit court erred in denying CSHV’s application for relief.”
It is not necessary to remand this case to determine the correct fair market value assessments. “[T]he circuit court specifically found that certain flaws in Shields’s methodology ‘undermined his credibility and cast doubt on his opinion.’ As a result, Korpacz’s testimony was not, as the circuit court stated, ‘just another opinion, among many opinions, of the value of th[e] Property.’ Rather, Korpacz’s testimony was the only opinion of the value of the Property.
“Accordingly, final judgment is entered in favor of CSHV on its petition and the assessed value of the Property for 2017 is reduced to $236,700,000 for the 2017 tax year and $243,700,000 for the 2018 tax year.”
CSHV Lincoln Place v. County Board of Arlington, Record No. 201301 (Unpublished Order) Oct. 28, 2021. Upon an appeal from a judgment rendered by the Circuit Court of Arlington County. VLW 021-6-073, 5 pp.