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Kelley v. Municipality of Anchorage

Supreme Court of Alaska

May 31, 2019

LEONARD T. KELLEY, Appellant,
v.
MUNICIPALITY OF ANCHORAGE, BOARD OF EQUALIZATION, Appellee.

          Appeal from the Superior Court No. 3AN-17-07122 CI of the State of Alaska, Third Judicial District, Anchorage, Yvonne Lamoureux, Judge.

          Leonard T. Kelley, Kelley & Canterbury, Anchorage, for Appellant.

          Quincy H. Arms, Assistant Municipal Attorney, and Rebecca A. Windt Pearson, Municipal Attorney, Anchorage, for Appellee.

          Before: Bolger, Chief Justice, Winfree, Stowers, Maassen, and Carney, Justices.

          OPINION

          MAASSEN, JUSTICE

         I. INTRODUCTION

         The superior court affirmed a municipality's tax valuation of a landowner's property. The landowner argues on appeal that the municipality's valuation review board abused its discretion by excluding certain evidence of value on timeliness grounds; we find no abuse of discretion. The landowner also argues that the board applied fundamentally wrong principles of valuation by failing to consider, as definitive evidence of value, either his purchase price for the property or the price for which he sold a neighboring lot. But the assessor explained at the hearing why he considered certain evidence of value more persuasive and more consistent with the municipality's usual methods of appraisal, and it was well within the board's broad discretion to accept the assessor's explanation.

         We therefore affirm the superior court's decision upholding the board's valuation of the property.

         II. FACTS AND PROCEEDINGS

         A. Facts

         In September 2016 Leonard Kelley bought Thunderbird Falls Lot 5 from the Mancel O. Pederson Estate for $160, 000. Located in a subdivision within the Municipality of Anchorage, Lot 5 is 93, 006 square feet and has a residence on it. The Municipality's assessor valued Lot 5 at $318, 900 using a market adjusted cost approach, which he described as "includ[ing] land value as if vacant plus depreciated replacement cost of the improvements . . . calibrated to specific market segments based on a large sampling of sales data."

         In February 2017 Kelley appealed the valuation to the Municipality of Anchorage Board of Equalization, asking for time to gather additional evidence. With his appeal he submitted the settlement statement from his purchase of Lot 5, along with a letter describing various "building deficiencies" in the residence: problems with the septic system, rot in the garage and deck, a leaky roof, and windows that needed replacing, as well as a general need for improvements and repairs. In response, the Municipality's assessor asked Kelley to submit "[c]ontractors['] itemized estimates of the cost to repair damage, as indicated in your [letter]," by April 1, but Kelley did not do so.

         The assessor nonetheless made a number of adjustments to his valuation of the property following a March site inspection, including correcting the square footage, removing the garage and carport from the assessed property, and changing the condition "from average to poor plus for deferred maintenance." Kelley then submitted additional evidence: a Multiple Listing Service (MLS) listing for Lot 5 showing an asking price of $298, 000; his purchase agreement; photos of the property; and a 2016 article describing economic trends in Alaska. Kelley later submitted the name of the seller's agent for his purchase, along with information about his August 2016 sale of a neighboring lot to a developer, Troy Davis Homes, for $77, 000[1]

         The assessor emailed the seller's agent seeking an explanation for Lot 5's purchase price; he noted that the property had been listed for months, had a sale pending at $225, 000, then, when that sale "fell through," was sold to Kelley for "his cash offer of $ 160, 000" just a few weeks later. The seller's agent later responded to Kelley, who forwarded her response to the assessor. She explained that the property "was marketed heavily" but failed to sell because of "the age and deferred maintenance of the property," making financing "a challenge," and ultimately "the owner decided to accept an offer lower than list price, taking into consideration the cost of repairs the buyer would need to address." In the meantime, on March 29, the Municipality sent Kelley a new valuation of $259, 800, based on the assessor's revised recommendation following his site inspection. Kelley did not accept this valuation either, however, and his appeal was forwarded to the Board.

         B. Proceedings

         The Board held an appeal hearing on April 20 and upheld the assessor's recommended value of $259, 800. Kelley asked for reconsideration, alleging two procedural errors: (1) the Board's refusal to admit "documentary evidence" of the value of two other properties in the subdivision and (2) the Board's refusal to allow Kelley to directly question the assessor. The Board granted reconsideration and scheduled another hearing for May 10.

         At the start of the second hearing, the Board chair announced that new procedures would allow "both parties [to] have an opportunity to ask each other questions before we close the testimony." The chair also ruled that absent the Municipality's agreement, the Board would not accept Kelley's offered documentary evidence related to other properties because he had failed to comply with the deadline for submitting that information to the assessor.[2] The assessor, while maintaining the Municipality's objection to that evidence, agreed that Kelley could "speak to it"; the chair allowed this, reasoning that if the evidence was really from municipal records, as Kelley claimed, "it should be very easy for anyone to find."

         Kelley testified that Lot 5 had been "fairly marketed, openly marketed" by a realtor and listed on MLS for over 15 months and that the seller "was under no duress" when he bought it. He testified that neighborhood lot values ranged from $77, 000 to $90, 000, referring to the documentary evidence to which the Municipality had objected. He argued that the comparable sales figures used by the assessor were higher because they were "pre-recessionary." He said that his own valuation of $ 160, 000 - the price he paid for Lot 5 - was based on the poor condition of the building, necessitating over $45, 000 in repair costs.

         The assessor then testified about his use of the "market adjusted cost approach" in valuing Kelley's property. He explained that "[p]art of the definition of market value is [whether the property was] exposed to an open market, was [the sale] between knowledgeable buyers, between reasonably informed buyers or reasonably informed sellers." He testified that the open market was usually accessed through the MLS, and that if owners sold their property without an MLS listing, the Municipality's "operating procedure" required that he "not consider that [as] exposure to the open market." He believed Kelley's purchase of Lot 5 to be a "discounted cash sale" which did not represent fair market value; factors he considered were that previous pending sales had fallen through, Kelley offered cash ("an atypical financing transaction type"), and Kelley accepted the property "as is" without an inspection. He pointed to Lot 5's listing history, in which the price dropped from $225, 000 to $160, 000 in ten days, as evidence of some sort of duress on the seller. He also testified that purchases from estates "generally are not considered at-market sales, especially when they have condition issues," because the heirs "may have just [given] up on it and wanted to unload the property . . . ." He ...


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