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HomeMy WebLinkAboutM053002 1820 Jefferson Street P.O. Box 1220 Port Townsend, WA 98368 James A. DeLeo William S. Marlow Richard A. Broders MINUTES MAY 30, 2002 Richard A. Broders William S. Marlow James A. DeLeo Chairman Vice-Chairman Member Chairman Richard A. Broders called the meeting to order at 9:30 a.m. in the presence of Vice-Chairman William S. Marlow and Member James A. DeLeo. APPROVAL OF MINUTES Vice-Chairman Marlow moved to approve the minutes of January 17, 2002 as presented. Member DeLeo seconded the motion which carried by a unanimous vote. DETERMINATIONS Tim & Maureen Snider 1777 Holcomb Port Townsend, W A 98368 BOE: 01-54-R PN: 001294025 Mr. and Mrs. Snider submitted a request to reconvene the 2001 Board of Equalization which was granted by the Board on its own authority, based on the appellants meeting the requirements of WAC 458-14-127 RECONVENED BOARDS-AUTHORITY (l)(c) which states that Boards of Equalization may reconvene on their own authority to hear requests or appeals concerning the current assessment year when the request or appeal is filed with the Board by April 30 of the tax year immediately following the Board's regularly convened session and when a bona fide purchaser or contract buyer of record has acquired an interest in real property subsequent to the first day of July and on or before December 31 of the assessment year and the sale price was less than ninety percent of the assessed value. The appellants purchased the property in September 2001 for $60,000. Prior to the Board hearing the appeal, the appellants and the Assessor agreed to a lower valuation and submitted it to the Board for review. The Board concurred that a hearing is not necessary, based on the fact that the two parties are in agreement on a corrected value. Member DeLeo moved to overrule the Assessor and reduce the valuation from $82,805 ($28,500 for the land and $54,305 for the improvements) to $59,960 ($24,000 for the land and $35,960 for the improvements) as agreed upon by both parties. Vice-Chairman Marlow seconded the motion which carried by a unanimous vote. Phone (360)385-9100 / 1-800-831-2678 Fax (360)385-9382 jeffbocc@co.jefferson.wa.us Board of Equalization . May 30, 2002 Page 2 Eric & Jenny Thorson P.O. Box 1871 Port Townsend, W A 98368 BOE: 01-57-LO PN: 001 295 009 Mr. and Mrs. Thorson submitted a request to reconvene the 2001 Board of Equalization which was granted by the Board on its own authority, based on the appellants meeting the requirements of WAC 458-14-127 RECONVENED BOARDS-AUTHORITY (1)( c) which states that Boards of Equalization may reconvene on their own authority to hear requests or appeals concerning the current assessment year when the request or appeal is filed with the Board by April 30 of the tax year immediately following the Board's regularly convened session and when a bona fide purchaser or contract buyer of record has acquired an interest in real property subsequent to the first day of July and on or before December 31 of the assessment year and the sale price was less than ninety percent of the assessed value. The appellants purchased the property in September 2001 for $5,000. Prior to the Board hearing the appeal, the appellants and the Assessor agreed to a lower valuation and submitted it to the Board for review. The Board concurred that a hearing is not necessary, based on the fact that the two parties are in agreement on a corrected value. Member DeLeo moved to overrule the Assessor and reduce the valuation of this bare land parcel from $15,180 to $4,860 as agreed upon by both parties. Vice-Chairman Marlow seconded the motion which carried by a unanimous vote. HEARINGS Safeway, Inc. c/o Perkins Coie, LLP Robert L. Mahon 1201 Third Avenue, Suite 4800 Seattle, WA 98101-3099 BOE: 0l-42-P PN: 10-11696 No representative was present on behalf of Safeway, Inc. Assessor Jack Westerman and Lead Technician Kathleen Guzman represented the Assessor's office and were sworn in by Chairman Broders. Under appeal is personal property owned by Safeway, Inc. The reason for appealing the valuation was listed on the petition form as "The assessed value exceeds its true and fair value; the depreciation rates used in calculating the assessed value are inconsistent with the actual depreciation and obsolescence of the property the assessment may include a duplication or over reporting of property; the taxpayer reserves the right to identify additional reasons in support of this petition including errors in using or failing to use market data, income capitalization and cost approaches consistent with sound appraisal practices." The property is currently valued at $1,817,250. The appellant estimates the value of the property to be $1,090,300. Mr. Westerman explained that two years ago the appellants filed appeals with 15 different counties in the State including Jefferson County for the 2000 season and requested each local Board of Equalization grant them the authority to appeal directly to the State Board of Tax Appeals (BTA) in order to consolidate all the cases for one hearing. Direct appeals to the BTA were granted and a hearing was held on June 26, 2001. The decision of the BTA was not rendered prior to the July 1" deadline for filing appeals to local Boards of Equalization for the 2001 season, so the appellant filed appeals for 2001 in the same 15 counties in order to preserve their right to a hearing on the 2001 valuation with the local Boards of Equalization, in the event the BTA's decision on the 2000 valuation did not result in their favor. If the BTA decision was in their favor, they could simply withdraw the appeals as there would be no need for a hearing before the local Boards of Equalization. Board of Equalization - May 30, 2002 Page 3 On May 3, 2002 a decision was finally rendered by the BT A. Mr. Westerman read the issues as outlined in the decision: ISSUES "This appeal concerns the January 1, 2000, assessed value of grocery store personal property owned by Safeway, Inc., a grocery store chain with stores throughout the State of Washington. The personal property includes refrigerated and non-refrigerated cases, shelving, checkout equipment, shopping carts, signs and office equipment and furniture. The Assessors employed a cost approach, depreciating Safeway's reported acquisition costs according to age/life tables developed by the Department of Revenue. Safeway claims application of the Department's tables do not reflect actual market values in the used equipment market. We uphold application of the Department's tables to the amended property listings filed by Safeway with one exception: the use of a 20% depreciation floor. We find there is no basis in fact for the Department's 20% depreciation floor, and direct the Assessors to re-value property which has reached the 20% floor according to the market-based depreciation tables prepared by Safeway's expert appraiser." Mr. Westerman then reviewed a portion of the analysis included in the decision which discussed the 20% depreciation floor and he read the conclusion and decision in their entirety: CONCLUSION "In sum, we conclude: 1. Safeway's amended property listings are reliable. The Assessors should use these listings to determine the existence and age of the Safeway's personal property for the 2000 assessment year. 2. The Assessors may value Safeway's property for the 2000 assessment year using the Department's depreciation tables, except for property which has reached a depreciation floor of 20%. Property at the 20% floor should be depreciated further according to the tables prepared by Mr. Lowry (Exhibits 8-9). The parties are requested to confer and present an agreed order establishing the values for each county after application of the tables to this class of property. If the parties cannot agree, the Board will re-open the hearing and take additional testimony in order to determine the final values for the 2000 assessment year." DECISION "The original values determined by the Assessors (in the case of direct appeals) and the determinations of the County Boards of Equalization are set aside. The parties are directed to confer and present an agreed order establishing the value for each county consistent with the foregoing opinion." Mr. Westerman stated that currently the Washington State Department of Revenue is preparing Mr. Lowry's tables to be used by Assessors in reviewing the property at the 20% depreciation floor and calculating new values for the 2000 assessment year. It is anticipated that the Department of Revenue will also change the tables for this years calculations as well. Since Safeway is required to pay its taxes based on the current assessment, they will be given a refund when the tables are completed and applied to the value of the property. After reviewing all the information submitted and hearing the testimony of the Assessor and the Lead Technician, Chairman Broders closed the hearing. The Board will make a determination at a later date. Board of Equalization - May 30, 2002 Page 4 AileD & Delee PaDasuk 30 Raeburn Court Port Ludlow, WA 98365 BOE: 01-S5-LO 01-56-R PN: 995700008 995 700 009 Mr. Panasuk submitted a request to reconvene the 2001 Board of Equalization which was granted by the Board on its own authority, based on the appellants meeting the requirements of WAC 458-14-127 RECONVENED BOARDS- AUTHORITY (1)( c) which states that Boards of Equalization may reconvene on their own authority to hear requests or appeals concerning the current assessment year when the request or appeal is filed with the Board by April 30 of the tax year immediately following the Board's regularly convened session and when a bona fide purchaser or contract buyer of record has acquired an interest in real property subsequent to the first day of July and on or before December 31 of the assessment year and the sale price was less than ninety percent of the assessed value. Mr. and Mrs. Panasuk were not present. Assessor Jack Westerman represented his office and was previously sworn in by Chairman Broders. The reason the appellants are appealing their property value are listed on the petition as: "1 purchased this property on November 15, 2001 for a total of $325,000. This property was on the market for over one year. Therefore, the value is what it sold for, which is a total of $325,000." The Assessor's combined assessment of the two parcels currently is $370,475 (parcel no. 995 700 008 - $35,000 and parcel number 995 700 009 - $77,500 for the land and $257,975 for the improvements). Mr. Westerman reviewed a map of the area where these parcels are located so the Board could see how they are configured. Parcel number 995 700 008 (lot 8) does not have a view. The assessment date of the property was January 1, 1999. When he valued the property he thought that lot 8 was a buildable lot. Parcel number 995700 009 (lot 9) has a view and is equitably assessed and should not be reduced without considering the value of other parcels in the area. Any adjustment which is necessary for this parcel should be made to the improvement value. He noted that the house is 20 years old house and he only gave it 9% depreciation. Since, he does not believe the market has dropped in the area, it may be the improvements are in poor condition resulting in the house selling for less than the assessed value. Mr. Westerman then reviewed comparable property sales in the area. After reviewing all the information submitted and hearing the testimony of the Assessor, Chairman Broders closed the hearing. The Board will conduct a physical inspection of the property and make a determination at a later date. Port Ludlow Associates Thomas A. Griffin 70 Breaker Lane Port Ludlow, WA 98365 BOE: 01-58-C 01-59-C 01-60-C 01-61-C 01-62-C 01-63-C 01-64-C 01-6S-C (Club House) 01-66-C 01-67-C 01-68-C PN: 968600001 821163 006 821163 007 821 201 002 821 201 003 821 201 004 821204002 821 212 002 821 212 003 821213002 821 291 003 Thomas Griffin and Greg McCarry represented Port Ludlow Associates. Assessor Jack Westerman and Appraiser Robert Shold represented the Assessor's office. After explaining the hearing process Chairman Broders swore them in. He noted that some of the information included in the appeal is confidential and proprietary, however, since nobody else is present other than the parties involved, discussion of the information will not be an issue. Board of Equalization - May 30, 2002 Page 5 The Clerk of the Board explained that the discussion of any confidential or proprietary information must be done in closed session and recorded on a separate tape. She requested that the parties forewom the Board when such information will be discussed so the appropriate measures can be taken. The property under appeal includes many parcels which make up the following businesses owned by Port Ludlow Associates: Heron Beach Inn, Golf Course, Harbor Master, R.V. Park and the Commercial Center. Mr. McCarry explained that this Port Ludlow property was owned by Pope & Talbot prior to 1985 and from 1985 until this sale took place it was owned by Pope Resources. There were a number of instances over the years where either Pope & Talbot or Pope Resources had attempted to sell the property, none of which were successful. In 1985 the property was listed for $18 million. At that time interest rates were at approximately 18%, so not many people were buying property. Ten years later in 1995, there was a proposed sale for a portion of the Port Ludlow properties to a company that was involved in building the Heron Beach Inn. There was an earnest money agreement signed near a sale price of $11 million. That sale fell through. In this most recent sale, they took the approach to identify the types of buyers which might be interested in a mix of properties like Port Ludlow. They felt that Port Ludlow's assets are unique and fairly integrated with each other so they did not want to sell the properties separately. Both he and Tom Griffin were working for Pope Resources at the time they began this sale process and were offered to continue working for the new owner. The sale process included identifying three (3) potential purchasers which was done intemally. Companies were identified in Washington and Califomia. Shortly after introducing the property for sale they received an offer from a company called Lowe Enterprises. While their headquarters is in California, they have a local northwest region office in Seattle. The sale which was entered into was in the range of $18 Million for all the same assets which were included in the final sale. After preparing a purchase and sale agreement began a due diligence process which lasted approximately eight (8) months. About six (6) months into that process the company came to the conclusion that $18 million for the property was too high and went to Pope Resources requesting a reduction in the sale price. The Board of Directors for Pope Resources decided not to accept a reduced sale price and put the property back on the market. Two months later HCV Pacific Partners, the parent company of Port Ludlow Associates, LLC, submitted a letter of intent which ultimately resulted in the final purchase and sale agreement. The purchase price was in the same vicinity as the offer made by Lowe Enterprises, approximately $18.5 million. This company also conducted a due diligence process to review all the assets and scrutinize the operating income, maintenance issues, etc. Upon completion of this process in April 2001, Port Ludlow Associates also requested a reduction in the sale price based on their findings. The second time around the Board of Directors for Pope Resources did agree to accept a reduced sale price. Mr. McCarry stated that this entire sale process from beginning to end was about a two year period. The property was exposed to a number of different buyers. There were actually two (2) transactions written, one failing and one successful. But, all in the same general price range of value. Mr. Griffin explained the reason they say $18 million, but the purchase and sale agreement shows $16.7 million, is because the value of the homes, lots and development are frozen at a certain price when the purchase and sale agreement was prepared and then those values are adjusted at the time the sale closes. He noted the values at Board of Equalization - May 30, 2002 Page 6 closing were substantially less than when the agreement was originally signed. Approximately $1.5 million less. The commercial price was fixed, but the residential price was flexible. The final sale price was $16,720,000. Mr. Griffin stated that they met with Assessor Jack Westerman at the time of the sale and asked about appealing the property values since the sale amount was significantly lower than the combined assessed values of each parcel. At that meeting Mr. Westerman reminded them that the sale amount does not necessarily reflect the independent valuation of the assets as the seller may be trying to value one higher or lower to affect the assessed value. Mr. Westerman also added that it's always nice to have an appraisal of the property conducted by a third party. Mr. Griffin stated that an independent appraisal of the property was conducted and a copy is included with the appeal, but as the Board can see, the value of all the commercial properties were consolidated in the appraisal as it was done for a bank in order to obtain a commercial loan. For the purposes of this appeal they asked the independent appraiser to take the appraisal and break down the values of each of the operating assets in order to obtain a separate appraised value for each operating asset. After that was done they had to determine an individual value for each parcel, so they prorated the values based on the assessed value and the appraised value. Whether one parcel is higher or lower is not their argument. Their argument is the total value of each commercial asset and they are unable to determine exactly how the value is distributed among the individual parcels which make up each commercial asset. In addition, the appraisal included $800,000 of personal property. In order to back out the personal property value from the appraisal they used the book value as of the date of the sale and used the same percentage to reach an $800,000 reduction. This gave them the adjusted appraised value. Mr. Westerman stated that during the meeting with the representatives from Port Ludlow Associates, he informed them that he would not be valuing the property based on the sale price because Jefferson County is on a four-year revaluation cycle, and given just one large sale, there is no breakdown of value for the individual parcels. At that time Port Ludlow Associates were contemplating appealing the assessed value of their property and he told them that an appraisal of the individual value for each parcel would assist the Board of Equalization and possibly the Board of Tax Appeals in making their determination on whether or not to sustain or reduce the assessed value of the individual parcels. Today, the appellants have provided a history and told the Board that this appears by all accounts to be an "armslength" transaction between a willing buyer and a willing seller for an overall amount which is substantially less than the assessed value as of January 1, 1999. He is not going to tell the Board that this sale price should not be considered in their decision, however, he reminded the Board that these properties were assessed as of January 1, 1999 and must be valued based on the market at that time in order to maintain the integrity of the four-year revaluation cycle as well as the uniformity of the assessments. Especially the land values of all the appellant's properties to insure equity among other land values in the entire revaluation area. Vice-Chairman Marlow asked Mr. McCarry when Lowes Enterprises first contacted Pope Resources regarding purchasing the property? Mr. McCarry replied in June 1999. Vice-Chairman Marlow asked how long they were interested in the property? Mr. McCarry replied approximately six (6) months. Vice-Chairman Marlow asked when they were contacted by HCV Pacific Partners? Mr. McCarry replied that their letter of intent was received in December 1999 and it took nine (9) months from that time to close the transaction. Board of Equalization . May 30, 2002 Page 7 Heron Beach Inn BOE: 01-5S-C PN: 968 600 001 Mr. Griffin stated that the sale price and the appraisal value were both based on cash flows using the income approach. He believes the income approach is the best way to value this property. It should not be valued using the market or cost approach. Based on the current economy the appraisal value is probably too high. Buyers for this type of property are going to look at cash flows and how much income the property produces. Mr. Westerman stated that most appraisers typically value income producing property based on the income approach. He agreed that investors which are buying income producing property usually do not care about building costs, they want to know the amount of income that is produced and how they can increase that income amount. He also agrees that with the Heron Beach Inn there may be a connection with the golf course, Harbor Master restaurant and the conference center as a "going concern". If you increase the usage of the golf course, it is likely that the usage of the Heron Beach Inn and the Harbor Master restaurant will be increased as well. While this connection should be considered by the Board, he reminded them that the value was set as of January 1,1999. The economy was better at that time and the Heron Beach Inn was 2 Yo years newer. He noted that the Assessor's valuation was not completely based on the cost approach as they were informed in 1995 that it cost $3.9 million to construct the building. The building is only assessed at $3.2 million. The land is valued at $670,130 which he believes is easily substantiated. He requested the Board consider not changing the land value as it is equitably assessed with other properties in the area. If the Board feels that they have no alternative other than to make an adjustment to the value of this property, he strongly suggests that the land value be sustained unless the appellants provide a preponderance of sales evidence indicating the land value is substantially below the assessed value. Mr. Griffin stated that if the land value must not change, than they believe the improvement value should be less. In their appeal they just prorated the land and improvement values. The property has a certain value based on the income it produces. They don't have a preference how it is distributed between the land and improvements. Mr. McCarry added that the Assessor made a good point. The land would be worth more if the Heron Beach Inn building were not on it. In his opinion, there is a better economic use for the land. Discussion ensued regarding the changes in economic condition since January 1, 1999. Mr. McCarry noted that the Assessor did not have the income information at the time the property was assessed which may have impacted the current valuation. Mr. Westerman agreed that when he valued the property he did not have the appraisal and sales information that they now have. Typically the cost approach does indicate a higher value versus the income or market approaches. He agrees that this property is unique, but, he believes the value he set as of January 1999 is reasonable. At that time the owner did not appeal the assessed value, however, he understands that they may not have wanted to because they were attempting to sell the property. The current assessed value of the Heron Beach Inn is $3,872,130. The appellants estimate the value to be $2,607,709. Board of Equalization - May 30, 2002 Golf Course Page 8 BOE: 01-59-C 01-60.C 01-61-C 01-62-C 01-63-C 01-64-C 01-65-C 01-66-C 01-67-C 0l-68.C PN: 821163006 821163 007 821 201 002 821 201 003 821 201 004 821 204 002 821 212 002 821212 003 (Club House) 821 213 002 821 291 003 Mr. Griffin stated that here again the sale price and the appraisal were based on the income approach using cash flow generated by the golf course. The golf course is made up of several separate parcels which must be valued together. A sixteen-hole golf course would not work, so, the parcels cannot be separated and their individual value is determined by the combined value as a whole operation. These parcels are also different in the fact that the land value is based on the income it produces as a golf course. It does not have a "true" land value as with other properties. He stated that whether some of the parcels are allocated more value because they have more holes makes no difference to them as long as the value of the golf course as a whole is based on the income approach. Vice-Chairman Marlow asked why the golf course wasn't put under one parcel? Mr. Griffin stated that it would be much easier if it was under one parcel. He doesn't know why it's not. Mr. Westerman stated the Assessor's office had to map out the golf course on each parcel. They valued the property by giving it a raw land value of $4,000 per acre with a 70% reduction for being in the Open Space program. He noted that the $4,000 per acre is the same figure used for all parcels which were 80 acres or greater, in the entire revaluation area. These parcels also have a value for the golf holes which was included like site improvements. If the Board determines an adjustment is necessary, he suggests that they do not change the raw acreage value in order to maintain equity, but, instead make any changes to the value of the golf holes. The Assessor established the value at $160,000 per hole using Marshall & Swift's appraisal standards. This is the value the Board would need to adjust. Not the raw acreage value. It is very important to maintain equity for all parcels. He noted that he called Kitsap County to inquire about the value of a similar championship golf course in that county called McCormick Woods. McCormick Woods is valued at $106,000 per hole. Kitsap County also has a greater population base on which to draw income, however, the golf course is valued using the cost approach and not the income approach and they are not in the Open Space program. In comparing golf course values in Jefferson County, Chevy Chase golf course is valued substantially less than $160,000 per hole. It can also be argued that this golf course is somewhat unique. There is no other 27 hole championship golf course in Jefferson County or a golf course that even comes close. Kitsap County does have a better population base to make a viable income from a golf course operation than Jefferson County where golfers have to come typically from a small population base and from outside the area crossing a bridge which at different times mayor may not be open. From the income standpoint there may be some economic obsolescence to this course itself. In reading through the appraisal the club house currently in place for this 27 hole championship golf course may be an economic obsolescence detractor from the golf course value. One way to build up the usage of the golf course would be to construct a club house that is commensurate with the course itself. He believes that based on all these factors a legitimate argument could be made to support a 50% reduction in value from $160,000 to $80,000 per hole. If directed to do so by the Board, his office could calculate the adjusted amounts and provide the figures for the Board to review and determine if a further adjustment is necessary. Board of Equalization - May 30, 2002 Page 9 Mr. Griffin stated that they do not dispute the value of the raw acreage. It's the site improvement value or the value of $160,000 per hole that they believe is overvalued. Mr. Westerman stated the problem is that the site improvements are included in the land value so a calculation should be done. He suggests that what ever the Board decides on a per hole basis, that the Board allow the Assessor's office to apply the adjustment in the same manner that Kitsap County applies the values, in order to maintain some statewide integrity on how golf courses are valued. He added that Chevy Chase golf course is also valued on the same per hole basis so they are maintaining that equity and integrity as well. Mr. McCarry stated that this is the same situation as with the Heron Beach Inn. It is the income approach they are primarily looking at. In support of the Assessor's comments, the value of $160,000 per hole would reflect an assessment for a brand new golf course and other improvements such as an irrigation system. The systems in Port Ludlow are 27 years old. The $160,000 figure does not reflect accumulated depreciation of the system or those kinds of assets. Some of the issues that the owner faced in 1999 was the fact that not only does the club house have to be torn down and replaced, but the parking lot has to be reconstructed and many of the systems that go with the golf course such as the sand traps need to be renovated. These were all issues in existence in 1999 that might of been considered at that time. He agrees with the Assessor that a much lower figure would be appropriate, recognizing the fact that they do not have a new golf course, nor did they in 1999. Mr. Griffin stated that a new irrigation system for the older 18 holes would cost over $1 million. A new system for the newer 9 holes would not be necessary. To reconstruct all 27 bunkers would cost $350,000. Mr. McCarry supports the Assessor's suggestion for the Board to decide on an equitable figure and allow the Assessor to reallocate it to the individual parcels. To solve the problem with the individual parcels they could apply for a boundary line adjustment in order to consolidate all the golf course parcels, however, it is a complicated process to do that in this county. Mr. Griffin agreed that the methodology is correct. The question is what is the appropriate figure? The combined value of the parcels which make up the golf course is currently assessed at $4,846,185. The appellants estimate the value to be $1,735,708. Harbor Master BOE: 01-69-C 01-70-C 01-71-C PN: 968 600 006 968 600 007 968 600 008 Mr. Westerman stated that he believes the land value for this property should also be sustained to maintain equity. Parcel #968 600 006 contains the Harbor Master restaurant. The land value of this parcel should be sustained based on uniformity of the assessment as of January 1, 1999 and because the value is reasonable and fair given its size. The improvement value is at question here again. This case has a different argument than the Heron Beach Inn. He noted that this property was also valued using the cost approach, however, with the income approach, it could be argued that there is some real functional obsolescence with how the building was constructed. When he valued the property in January 1999, he used improvements they had made in 1995 and he did not feel the valuation was unreasonable. The owner at the time must have felt the same as he did not appeal the value when he received the change of value notice, however, they were trying to sell the property. He strongly suggested the Board sustain the land value, but, he feels there is a functional and economic obsolescence built into this case that the income approach proves. Board of Equalization . May 30, 2002 Page 10 Mr. McCarry agreed with the Assessor's argument about the land value. The methodology they used in their appeal was simply to ratio the land and improvement values. However, he feels it is more than just the functional obsolescence of the building. This building does not come close to meeting the codes for a commercial building such as disability requirements and seismic structural standards. It is very likely that this building will be tom down and replaced. It is the best example in the area of a building that has outlived its useful life. The reduction should be applied to the improvement value and the reduction should be significant based on the information they provided. Mr. Westerman stated that parcels #968 600 007 and #968 600 008 only have land values which he suggested should also be sustained. Mr. Griffin stated they have no argument with Mr. Westerman's suggestion. The current total assessed value of the Harbor Master is $1,083,575. The appellants estimate the total value to be $655,137. R.V. Park BOE: Ol-72-C PN: 821172 002 Mr. Westerman suggested that the land value for this parcel also be sustained for equity purposes. The land is currently valued at $90,330 and was given a 25% reduction for size because it is such a large parcel. R.V. parks are not unique and there are other RV. parks in the revaluation area. If the appraisal and the sale of the subject property which occurred after the assessment date of January 1, 1999 are going to be considered, than the Board needs to also consider the sales of other R.V. parks which occurred after the assessment date. A 40 unit R.V. park located on Marrowstone Island sold on March 27, 2002 for $300,000 and it is currently assessed at $173,220. The appellant's R.V. park also has 40 units and he believes if the Board compares it to the one on Marrowstone Island, they will find that the one in Port Ludlow is superior. Based on the sale of the other RY. park the land value of $90,330 and the improvement value of $102,000 should be sustained for equity and uniformity. Mr. Griffin stated that without looking at the income that the other R.V. park generates and where it's located, he is unable to say if it is a true comparison. It may be argued that the Port Ludlow R.V. park is in better condition, newer and nicer than the other one, but if people don't go to it and income is not generated, than it is not worth much. The R.V. park barely generates any cash flow which is why the appraiser valued it at such a low amount. The appellants would love to see several RV.'s come in to Port Ludlow. They go to the Olympic Mountains or they go to Fort Flagler, they just don't come to Port Ludlow. Mr. McCarry said this RV. park has existed for a long time. The quality of construction was very good, but it's just not on the right path. If they could find a buyer who would purchase it for the assessed value, they would accept it cash on the spot. Nobody will pay that value for property which is not producing any income. He feels this is the best case they have for the income approach to be applied to the value of the property. Member DeLeo asked if the visitors to the park have any privileges such as beach access? Mr. McCarry replied that the visitors have access to the open space, trails and a public easement on a 1.5 mile beach. Mr. Griffin added that they also get a discount at the golf course. Mr. McCarry stated that even with advertising and promotions this has not been a successful venture. It does not produce any income that makes it worth anything near the assessed value. There is a higher and better use for that property and it will most likely be converted into something else. Board of Equalization . May 30, 2002 Page 11 Mr. Westerman stated that he understands the appellant's argument. He suggested that if the Board determines that a change in valuation is necessary because of economic or functional obsolescence due to the location of the R.v. park, that they only adjust the improvement value and sustain the land value to maintain equity among the surrounding properties. The current assessed value of the R.V. park is $192,330. The appellants estimate the value to be $74,191. Commercial Center BOE: 01-73-C PN: 821171 001 As with the other appeals, Mr. Westerman prefaced with the fact that the land values should be sustained to maintain equity and uniformity among other land values in the area. He explained that he valued the front part of the commercial property at $1.20 per square foot plus a 25% increase for the corner location. The remaining commercial property was valued at $.50 per square foot. The current assessed land value is $276,745. Like the sale of the appellant's property which occurred after the assessment date of January 1, 1999, there was a bare land sale for $225,000 which occurred in the area on July 30,1999. This property was assessed at $58,930 using the same $1.20 per square foot plus a 10% increase for corner location. This sale indicates that the assessed value was at 1/4 of market value. As these properties are equitably assessed this also indicates that the current assessed land value of the appellant's property is legitimate if not substantially undervalued. In further support of this value, another commercial property in the area which was assessed slightly over $300,000, sold in September 2001 for $500,000. Based on the market, the total value of $1,092,360 is legitimate as well. Given there are other commercial centers such as Kivley Center, QFC, and Port Townsend Plaza the assessment must be maintained to insure equity and uniformity. Mr. McCarry stated that the comparable sales presented by the Assessor did occur after the assessment date, and while they were "armslength" transactions, the fact of the matter is the properties are "single user/third party" transactions where the properties are being used and are producing an income. The issue with the sale of the commercial center is that it is a bulk sale of land in an environment where there is not much demand for commercial property. The comparable property which sold for $225,000 has a unique user which is a bank. The bank purchased a comer piece of property where they could conduct "drive-thru" business. Since there aren't many pieces of property in Port Ludlow where that could be done, he argues that the bank paid a premium price for that corner property. The bank also didn't buy five or seven acres of land. They purchased a little less than an acre and any time property is sold in smaller pieces there is a higher value per square foot. Their property, the Port Ludlow Village Center, is seven acres in size and is zoned commercial. There is a difference between the single user sale and their bulk sale. A buyer must look at how much it is going to cost to purchase the property and how long will it take to put it to economic use. There is more commercial property available in Port Ludlow than there is demand for. Approximately 50% of the usable space in their center is vacant and the tenant turnover is very high. If they were to build out the Village Center to its capacity, they would just be supplying the market with a bunch of empty buildings. The income approach is again the appropriate method of valuing this property. In a certain sense the developable land is a liability in that they have to keep it for a long period of time before it can be used. Also at issue is the value of the improvements which were built many years ago. The entire parking lot needs to be replaced. Of all the properties, this parcel is the least desirable for the company to own. Mr. Westerman stated that he does not question what the appellant has stated, but from a uniformity standpoint this property value must be sustained. Board of Equalization - May 30, 2002 Page 12 Mr. McCarry clarified that they are not using the August 2001 sale of their property to justify or make the case for their argument. What they are trying to present is that the property values should have been appealed in 1999. All the 2001 sale does is validate what existed. Mr. Westerman agreed, however, there are two other sales that totally invalidate that, and while banks do tend to pay more for property, he questions why they paid 5 times more than the assessed value. It can be discounted to a degree, but it cannot be discounted completely. Discussion ensued regarding the age of the building. Mr. Westerman does not feel that there is any economic or functional obsolescence with these improvements. Especially based on the comparable sales. Vice-Chairman Marlow asked if the property can be subdivided? Mr. McCarry replied that he does not believe so, however, the Board should not consider that in their decision making process, because he is unable to answer that question. The current assessed value of the commercial center is $1,092,360. The appellants estimate the value to be $159,111. After reviewing all the information submitted and hearing the testimony of both parties, Chairman Broders closed the hearing. The Board will conduct a physical inspection of the property and make a determination at a later date. Meeting adjourned. Attest: f , LI. ';' / ~/ ct0. ' / ~, I i'd' , '~' l.Af{' ~4/~ . elf\../' 'l/ 'I' E}ifi K. Lundgren, erk of th Board JEFFERSON COUNTY BOARD OF EQUALIZATION ~jJA(;~L Richard A. Broders, Chairman jA William S. Marlow, Vice-Chairman Ct~O,M~ ?es A. DeI:eo, Member