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The valuation of leased property in an Indianapolis parking garage will stand after the Indiana Tax Court upheld the Indiana Board of Tax Review’s challenged valuation.
The case — Marion County Assessor v. Square 74 Associates, LLC, 22T-TA-9 — involves the World of Wonders Garage located in the Circle Centre Mall in downtown Indianapolis. During the 2010-2018 tax years, the garage was owned by the Indianapolis Department of Metropolitan Development and Indianapolis Downtown Inc.
Square 74 Associates LLC leased space from the city on the ground floor of the garage and, in turn, subleased it to several entities for use as five separate restaurants. Each of the five restaurant spaces was treated as a discrete parcel and assessed to Square 74 for property tax purposes.
Square 74 appealed the assessments for all five parcels for 2010-2018 tax years, first to the Marion County Property Tax Assessment Board of Appeals and then to the Indiana Board of Tax Review. The combined assessed value for the five parcels for the nine tax years ranged from $4,734,400 to $5,281,900.
The Indiana board held a consolidated hearing on each of Square 74’s appeals at the joint request of the parties. At that hearing, Square 74 presented an appraisal report that valued its leasehold interest for each of the nine years at issue as well as the testimony of the appraiser who prepared the report.
The appraiser prepared separate cost and income approach estimates to value the subject property, reconciling the results into a final combined valuation estimate for each year that ranged from $3,350,000 in 2010 to $3,650,000 in 2018. In arriving at the final values, the appraiser maintained that the land had no value to Square 74 because it reverted to the city at the end of the lease.
The appraiser did, however, prepare a separate valuation of the land using the sales comparison approach to use in calculating his income approach estimate. The appraiser used the sales of four comparable properties to estimate the market value of the land during the nine tax years, resulting in a value range of $720,195 to $1,063,824.
The Indiana board evaluated each of the assessor’s criticisms of Square 74’s appraisal and largely rejected them as unfounded. It did not find Square 74’s assertion that the land held no value to be probative, but it did find Square 74’s valuation of the improvements under the cost approach and its valuation of the land under the sales comparison approach to be probative.
Further, the board found that the appraiser’s land value estimate of $720,195 and his cost estimate of the improvements of $3,228,702, when combined, properly established the subject property’s market value-in-use for the first year at issue, 2010, at $3,949,000. The board also determined that the assessments for all the remaining years under appeal should be reverted to the 2010 value it had determined.
The board’s decision was predicated on its application of the burden-shifting statute, Indiana Code § 6-1.1-15-17.2. It determined that neither party could meet their burden under the statute, and that the statute required reversion to the prior year’s assessment.
The Indiana board further determined that the assessor could not meet his burden because he did not offer any valuation evidence to support his assessments. Additionally, it ruled that Square 74 could not meet its burden because it attributed no value to the land in claiming the property’s ultimate valuation was $3,450,000 for 2011.
The assessor then appealed, first arguing that it was an abuse of discretion for the board to use elements from two different aspects of Square 74’s appraisal to determine the value of the subject property. But the Tax Court did not find that argument persuasive.
“Here, the Indiana Board’s decision was reasonable, consistent with accepted practice, and within its discretion as the trier of fact. Consequently, the Indiana Board did not abuse its discretion,” Judge Justin McAdam wrote.
The assessor also argued that the board erred when it ordered Square 74’s 2011 through 2018 assessments to revert to the $3,949,000 value that was determined for 2010.
Rejecting that argument, McAdam wrote, “The Assessor took a substantial risk by electing not to present any evidence of value as part of his case, particularly given the fact that the taxpayer presented an expert appraisal covering all nine years at issue. Regardless of which party had the burden in the first instance, the Assessor was on notice that the Indiana Board might be persuaded by the taxpayer’s valuation evidence. The strategy may have ultimately proved unsuccessful, but it is not a basis for overturning the Indiana Board’s decision.”
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