2000 Synopsis -- Industrial Chapter

Section 16-190 of the Property Tax Code

(35 ILCS 200/16-190, Illinois Compiled Statutes)

Official Rules - Section 1910.76

Printed by Authority of the State of Illinois

The subject property consists of a 12.32-acre parcel improved with 9 industrial buildings, 11 storage tanks and various yard improvements.  The buildings are of metal and steel construction ranging in size from 121 to 7,872 square feet of building area resulting in a total building area of 21,960 square feet.  The clear ceiling heights of the buildings range from 8 to 28 feet.  Office area comprises 6,240 square feet of the total building area.  The 11 storage tanks have a capacity of 1,750,800 gallons.  The yard improvements include 75,000 square feet of asphalt paving; 15,000 square feet of concrete paving; 350,000 square feet of gravel paving; 3,200 lineal feet of chain link fencing; 3 truck scales; a 200 square foot fuel island metal canopy and a storm detention pond.  The plant was constructed in 1996 and 1997.  The property is used as an atmospheric air separation plant and is located in Hartford, Madison County, Illinois.

The appellant argued the market value of the subject property was not accurately reflected in the subject’s assessed valuation.  The first witness called on behalf of the appellant was a real estate appraiser that prepare a narrative appraisal estimating the fair market value of the land, buildings, tank improvements and site improvements of the BOC Group, Inc. (hereinafter BOC) property.  The effective date of the appraisal was January 1, 1997.

The witness defined fair market value as the most probable price which a property would bring in a competitive open market with both buyer and seller being knowledgeable; neither the buyer nor seller are under any duress; the buyer and seller having typical motivations; and terms are in payment of cash.  The appraiser was of the opinion this definition was synonymous with the provision within the Property Tax Code which defines “fair cash value” as the amount for which a property can be sold in the due course of business and trade, not under duress, between a willing buyer and a willing seller.  (35 ILCS 200/1-50).  The appellant’s appraiser also explained that market value and value-in-exchange are synonymous terms.  In contrast, the appraiser explained the term value-in-use is the value of a specific property for a specific use.

In describing the subject improvements the appraiser explained that although the subject has nine buildings, three of the buildings comprise 87 percent of the total building area of the complex.  The buildings are typical metal clad structures.  The buildings were primarily constructed in 1996 with two of the buildings being completed in early 1997.

The site was described as containing 536,659 square feet or 12.32 acres.  The site is composed of two parcels.  Parcel one is a small parcel that provides access to parcel two, the larger parcel that contains the improvements.  The two parcels are separated by a railroad right-of-way easement to the Norfolk and Western Railroad.  Parcel one is zoned I-1, light industrial, and parcel two is zoned I-2, heavy industrial.  The I-2 zoning provides for a wide range of industrial and commercial uses as long as it is not detrimental to the public health.  The appraiser was of the opinion the subject parcel could be adapted to any of the permitted uses in the zoning ordinance.

The appellant's appraiser determined the subject’s highest and best use as vacant would be for some type of industrial use.  The appraiser also was of the opinion the subject buildings could be used for a variety of industrial uses and they would not be limited to the use as an air separation plant.

In evaluating the subject property the appellant’s appraiser was of the opinion the subject had excess land.  The subject had an unadjusted land to building ratio of 24.44:1.  He was of the opinion the subject could be operated with a land to building ratio of 10.00:1, which results in surplus land in the amount of 317,059 square feet.  The adjusted land to building ratio was based on a primary site size of 219,600 square feet.

The appellant's appraiser estimated the buildings and yard improvements had a total economic life of 40 years; an effective age of 1 year; and a remaining economic life of 39 years.  He estimated the tanks had a total economic life of 30 years; all but one tank had an effective age of 1 year; and a remaining economic life of 29 years.  One tank was estimated to have an effective age of 2 years and a remaining economic life of 28 years.

In estimating the market value of the subject property the appellant’s appraiser developed the three traditional approaches to value.  The first approach developed was the cost approach to value.  The initial step under the cost approach was to estimate the value of the subject’s land as vacant.  To estimate the subject’s land value the appraiser used four comparable land sales.  The comparables were located in Madison County and ranged in size from 869,022 to 2,049,839 square feet.  The sales occurred from January 1991 to July 1997 for prices ranging from $91,770 to $548,435.  The appraiser adjusted the price of the first comparable by adding $330,000 to reflect the extension of a water main and sanitary sewer to the site.  This adjustment expanded the price range of the comparables from $91,770 to $878,435 or from $.11 to $.43 per square foot of land area.  The appraiser was of the opinion the land sales were inferior to the subject property.  The appraiser testified that he confirmed the sales were arm’s length transactions and he personally viewed the sites.  Based on these sales the appraiser estimated the primary site, which contained 219,600 square feet, had a value of $.50 per square foot or $109,800.  He also estimated the surplus land had a unit value of $.50 per square foot or $158,529.  Adding the components together resulted in an estimated site value of $270,000, rounded.

The appellant's witness also investigated the sale of the subject parcel that occurred in March 1995 for a price of $616,000 reflecting unit values of $50,000 per acre or $1.15 per square foot.  He was of the opinion that BOC paid a premium for the site because of business considerations.  The appellant's appraiser testified that BOC operated an air separation plant in East Alton and provided neighboring industries with the various gases it produced such as nitrogen, oxygen and argon.  He testified that BOC had received some additional contracts, which resulted in BOC having to expand its current facility; therefore, it wanted to locate a site that was adjoining the existing pipeline that serviced its customers.  BOC’s pipeline to these various industries adjoins the subject parcel.  BOC approached the owners of the site who were steadfast in their demand of $50,000 per acre for the site.  BOC agreed to the price rather than delay construction of the new plant.  Following the purchase BOC expended $728,000 to provide the utilities to the site and when combined with the purchase price resulted in a unit price of $2.50 per square foot of land area.  In addition BOC discovered the site did not have adequate bearing capacity to hold the weight of two tanks.  As a result BOC spent an additional $670,000 to install sheet pilings under the tanks’ locations.  BOC also spent $824,000 to remove four feet of topsoil and replace it with crushed stone because of concerns of herbicides being present on the site.

The appellant's witness was of the opinion that the costs associated with purchasing the land and bringing utilities to the site is reflective of value-in-use rather than value-in-exchange.  He noted that the purchaser of the land wanted to retain its location along the pipeline in order to continue business operations.  He also was of the opinion the subsequent discovery that the soil did not have adequate bearing capacity creating the need to install pilings at an additional cost indicates the initial acquisition cost was in excess of market value.  In his research he found no vacant land sales that approached $50,000 per acre or $1.15 per square foot within and around Madison County.  Based on these factors the appellant’s appraiser was of the opinion the purchase price of the subject parcel was not reflective of its market value.

The next step under the cost approach was to estimate the value of the subject improvements.  In estimating the replacement cost new of the improvements the appraiser examined the historical costs that BOC expended because the improvements were only one year old.  The historical costs were compared to a database maintained by the appraiser.  The owner reported a total cost new of the buildings of $879,123 or $40.03 per square foot of building area.  The appraiser attempted to value each of the buildings using an internal database, which included the Means Square Foot Cost Manual and the Marshall & Swift Cost Manual and estimated a replacement cost new of $854,000.  In reconciling the historical costs and the replacement costs generated from the cost manuals, the appraiser determined the replacement cost new of the buildings as reported by the owner was reasonable and estimated the replacement cost new to be $880,000.

The appraiser next estimated the value of the yard improvements.  He compared the historical costs as provided to him by BOC and typical replacements costs.  The total reported historical costs were $2,331,250.  The estimated replacement cost of the yard improvements was $1,260,000.  The total difference between the historical costs and the cost new was $1,074,000 with two items accounting for most of the difference.  The historical cost for the excavation and gravel fill was $824,000 whereas the appellant's appraiser estimated the typical cost for this would be $200,000.  As stated previously, BOC removed four feet of topsoil and replaced it with crushed stone because of concerns of herbicides being present on the site.  The second element of primary difference in yard improvement costs was the cost of $500,000 for the steel pilings to support the tanks.  The appraiser indicated the $.50 per square foot site value estimate was assuming utilities present on the site and with normal bearing capacity.  Since the soil capacity was not adequate to hold the tanks he felt this additional cost was excessive and would not have been expended if the site had adequate bearing capacity.  Therefore, this $500,000 was not included in the replacement cost new.  In conclusion, the appraiser estimated the replacement cost new of the yard improvements was $1,260,000.

The next step under the cost approach was to estimate the replacement cost new of the tanks.  The tanks ranged in size from 1,500 to 889,465 gallons.  The replacement cost new of the tanks was estimated to be $4,200,000, which was slightly greater than the historical costs of $4,072,255.

In summary, the replacement cost new of the buildings and yard improvements was estimated to be $2,140,000 and the replacement cost new of the tanks was estimated to be $4,200,000 for a total cost new of $6,340,000.  The actual cost of construction of the buildings, yard improvements and the tanks was $7,282,628.

The next step in this analysis was to estimate the amount of depreciation to be deducted from the cost new of the improvements.  To estimate the depreciation of the building and yard improvements the appraiser used the sales contained in the sales comparison approach to value contained within the appraisal and abstracted depreciation.  Abstracting depreciation from the market takes into account the three forms of depreciation; physical, functional and economic.  In abstracting the depreciation the appraiser deducted from the sale price of each comparable the estimated land value to arrive at a residual building value.  He next estimated the replacement cost new of each of the buildings.  From this amount he subtracted the residual building value to arrive at the accrued depreciation for each building.  He then divided the accrued depreciation by the cost new to arrive at the percent of total depreciation for each building.  The total depreciation for the comparables ranged from 45.3% to 70.2%.  The next step was to divide the total depreciation by the age of each building to arrive at an annual rate of depreciation.  The annual rates of depreciation ranged from 2.5% to 8.5%.  The appraiser estimated the physical depreciation of the comparables ranged from 13.3% to 57.5% using the age-life method.  Deducting the physical depreciation from the total depreciation for each comparable resulted in functional and economic obsolescence ranging from 12.7% to 54.3%.  The appraiser was of the opinion the total depreciation for the subject was not due to physical depreciation but to functional and economic obsolescence.  He estimated the subject’s buildings and yard improvements suffered from total accrued depreciation of 35%.  The depreciated value of the building and yard improvements was estimated to be $1,400,000.

The appraiser estimated the depreciated value of the tanks using the economic age-life method.  He estimated all but one of the tanks suffered from 3% depreciation with the remaining tank experiencing 7% depreciation.  The depreciated value of the storage tanks was estimated to be $4,070,400.

Adding the depreciated value of the building and yard improvements of $1,400,000; the depreciated value of the tanks of $4,070,400, and the land value of $270,000, resulted in an indicated value under the cost approach of $5,740,000.

The next approach to value developed by the appraiser was the income approach to value.  The initial step under the income approach was to estimate the market rent for the subject property using comparable rentals.  The appraiser identified three comparable rentals that ranged in size from 8,200 to 19,200 square feet of building area.  The comparables were one story single building structures ranging in age from new to 17 years old.  The comparables had clear ceiling heights ranging from 15 to 18 feet with land to building ratios ranging from 1.82:1 to 13.75:1.  The first comparable was built-to-suit for Federal Express and was constructed according to Federal Express specifications and is used for warehouse purposes.  This comparable had a 10 year lease entered in May 1994 with a net rental for the first five years of $5.50 per square foot and for the final five years of $6.36 per square foot.  Comparable number two was a 17 year old, multi-tenant single story industrial building being used for industrial purposes.  This building was leased in May 1997 for a one-year term with a one-year option with a net rental of $2.92 per square foot of gross building area.  The third comparable was a 15 year old, single tenant industrial building that was leased in January 1997 for a net rental of $2.65 per square foot.  Based on these comparables the appraiser estimated the subject would have a net rental of $5.00 per square foot resulting in a total rent of $109,800.  From this amount the appraiser deducted 7.0% or $7,686 as an allowance for management fee, vacancy and collection loss.  The resulting effective net income was $102,114.

The next step under the income approach was to estimate the capitalization rate to be used to capitalize the net income into an estimate of value.  The appraiser estimated an overall rate by abstracting a rate using the comparable sales in the sales comparison approach to value.  The appraiser first estimated the market rent of the comparables and then made an allowance for management fee, vacancy and collection loss for each sale to arrive at a net income.  He then divided the net income by the sales price of each comparable to arrive at an overall rate.  The appraiser estimated the comparables had net rentals ranging from $2.03 to $2.93 per square foot resulting in net rents ranging from $24,000 to $405,000.  The overall rates ranged from 10.4% to 13.7%.  The appraiser estimated the subject would have an overall rate of 10.0%.  Capitalizing the net income of $102,114 by 10% resulted in an estimated value of $1,021,140.  To this amount the appraiser added the value of the excess land of $158,529 and the storage tanks of $4,070,400 to arrive at an indicated value under the income approach of $5,250,000.

The final approach to value developed by the appraiser was the sales comparison approach.  The appraiser selected four comparable sales in developing the sales comparison approach to value.  Comparable number one was a three building complex used as an aviation facility.  The comparable has a total building area of 136,000 square feet with buildings constructed from 1988 to 1991.  One of the buildings contains a 36,000 square foot one story hangar building with 4,500 square feet of office space.  This building has a clear ceiling height of 35 feet.  The second building contains 75,000 square feet used as a hangar and has a clear ceiling height of 59 feet.  The final building is a one-story office building.  This comparable sold in May 1998 for a price of $3,900,000 or $28.68 per square foot.  Comparable number two was an 11 year old, single story, single tenant industrial building that contained 20,000 square feet of building area.  This building had a clear ceiling height of 24 feet.  The property sold in December 1996 for a price of $350,000 or $17.50 per square foot.  Comparable number three was a one story, multi-tenant industrial building with 25,000 square feet of building area.  The comparable was 18 years old and had a clear ceiling height of 18 feet.  The comparable sold in May 1997 for a price of $470,000 or $18.80 per square foot.  Comparable number four was a 23 year old single story industrial building that contained 11,800 square feet of building area.  The building had a clear ceiling height of 16 feet.  This comparable sold in February 1998 for a price of $175,000 or $14.83 per square foot of building area.  The comparables had unit prices ranging from $14.83 to $28.68 per square foot of building area.

Sales numbered 1 and 3 were located in Bethalto, Madison County, Illinois; sale number 2 was located in Belleville, St. Clair County, Illinois; and sale number four was located in Fairmont City, St. Clair County, Illinois.  After analyzing the comparables and making qualitative adjustments, the appraiser estimated the subject land, buildings and building improvements would have a value of $55.00 per square foot resulting in an indicated value for the buildings and yard improvements of $1,207,800.  To this amount the appraiser added $158,529 for the value of the surplus land and $4,070,400 for the depreciated value of the tanks to arrive at an indicated value under the sales comparison approach of $5,440,000.

In reconciling the three approaches to value, the appraiser gave moderate weight to the cost approach, substantial consideration to the sales comparison approach and minimum consideration to the income approach.  In conclusion the appraiser estimated the subject property had a market value of $5,500,000 as of January 1, 1997.

Under cross-examination the appellant’s appraiser was questioned about the qualitative adjustment process used in the appraisal.  He explained there were no quantified adjustments on either a dollar or percentage basis because of a lack of homogeneity among properties that would allow computation of specific adjustments.  The adjustments were done mentally based upon his experience in valuing this property and other properties that were incorporated in the report.

The appellant's appraiser was also questioned about the modifications of the subject’s land to support the subject tanks.  He indicated there may have been some modifications required on all property that would be acquired to accommodate the tanks.  The witness further testified that he did not value the machinery and processing equipment located on the site.

Upon further cross-examination the appellant's appraiser testified that to the best of his knowledge the subject site was not listed on the open market by the previous owner prior to the time it was purchased.  He also agreed that approximately 4/5ths of his estimate of value for the subject property was attributed to the tanks, which were valued using the cost approach.  He further indicated the value derived using the value-in-exchange concept could be equivalent to the value using the value-in-use concept.  He indicated that using the age-life method the subject buildings would have physical depreciation of 2 1/2%.  Of the 35% depreciation assigned to the buildings, the primary cause was attributable to functional and economic obsolescence.  He also conceded; however, that use of replacement cost new is supposed to eliminate functional obsolescence.  The appraiser deducted no economic obsolescence from the value of the tanks derived under the cost approach.  The witness also agreed that when you extract depreciation from the market, the resulting number is only as valid as the comparables are similar to the subject property.  He also indicated that in developing the capitalization rate from the comparable sales, he used estimated rents for the comparables since they were not being rented.

The next witness called on behalf of the appellant was the director of real estate for BOC.  The director was involved in BOC’s purchase of the subject’s site.  He was the main lead on a team to select the site and negotiate to purchase the site and close the transaction.

The witness, in explaining why BOC purchased the subject site, stated BOC recently signed a supply agreement with Shell Oil, which required the generation and transportation of new products to Shell Oil.  BOC had an existing, antiquated, inefficient plant in East Alton that was not large enough to produce the products.  BOC decided it wanted to build a new plant to take advantage of modern technology and a lower cost structure to produce products for Shell Oil and other merchants in the area.

The director testified that many sites were investigated during a nine-month review process.  The site selection group determined that BOC needed to be adjacent to a Union Electric power station because of the high power requirement of the plant and they wanted to be near BOC’s existing oxygen and nitrogen pipelines.  This limited the selection committee to two available sites.  He explained that because of the 12-month time lag that would be needed to obtain approval from the state to place power lines across a third party property necessitated finding a site adjacent to the source of power of the plant.  The 12-month period was a problem because construction of the plant was a “fast track project”.

He also explained that BOC’s two pipelines, one for oxygen and the other for nitrogen, were adjacent to the subject site.  These pipelines could only be used by BOC to deliver its products to customers.  No other competitor is allowed to use the pipelines.

Of the two sites remaining, BOC determined that the one located north of the electric substation was too small to allow for expansion and was located too near recreational ball fields to be used.  The subject site was not on the market for sale at the time BOC identified it.  On November 28, 1994, BOC offered the property owner $25,000 per acre for 15 acres to purchase the subject site.  The witness was of the opinion this was an above market price based on a review of other parcels in the area that were on the market for prices ranging from $10,000 to $20,000 per acre.  The director indicated the other parcel that was considered by BOC located north of the substation could have been purchased for $20,000 per acre.  There was no response to the offer to purchase the subject parcel and he followed up several times with the owners and was informed they were not interested in selling the property although they did not want to stand in the way of the project coming to Hartford.  The witness then asked what the owners would be willing to sell the property for and was informed $50,000 per acre.  Because the price was considerably above rates for land, he talked to his management and it was decided that the increase in land cost was not as detrimental as any delays or not proceeding with the project.  The land was then acquired in March 1995 for $50,000 per acre.

On cross-examination the director was of the opinion his company paid above what it felt the land value was.  He was of the opinion the appellant's appraiser's valuation of the subject site at $.50 per square foot was high.

The intervenor then presented its case-in-chief.  The only witness called on behalf of the intervenor was a real estate appraiser who prepared a narrative appraisal of the subject property.

The intervenor's appraiser described the subject property as a highly specialized industrial facility that is an atmospheric air separation plant.  He indicated the subject property consists of 12.32 acres improved with 9 buildings, 11 storage tanks and site improvements.  He described the buildings as prefabricated metal buildings.

After inspecting the subject property the intervenor’s appraiser and associates in his office reviewed their files to determine if they had any sales of similar types of properties.  The appraiser also contacted other appraisers in the St. Louis area and inquired if they knew of any similar sales.  He stated he did not locate any sales even remotely similar to this type of property.  The witness stated that without market evidence he could not prepare a market value appraisal.  He then prepared a “use value” appraisal, which is done based on the cost approach and the value of that property to that particular user.  He did state the cost approach is one segment of a market value appraisal.

The intervenor's appraiser did review the sales contained in the appellant’s appraisal and did not find them to be comparable to the subject property.  He stated none of the appellant’s comparables had a cooling tower or tanks that make the subject property special.

The intervenor's appraiser estimated the value of the subject property to be $8,100,000.  In estimating the subject’s value he excluded the machinery and equipment located on the site.  The appraiser estimated the value of the land to be $616,000, based on the sale of the subject parcel.  In valuing the subject improvements he examined the historical construction costs.  The historical costs were derived from the appellant’s appraisal since he was not able to obtain the cost information from the property owner.  The total cost new of the buildings was $879,123.  The cost new of the site improvements was $2,346,250.  The cost new of the tanks was $4,072,255.  Adding the components together resulted in a cost new of $7,297,628.  He then applied a factor of 1.026 for time to arrive at a replacement cost new of $7,487,366.  The adjustment factor was from the Marshall Valuation Service Cost Manual.  To this amount he added $616,000 for the land value to arrive at an indicated value of $8,100,000, rounded.

He testified value-in-use and value-in-exchange are ordinarily not the same.  He stated value-in-exchange is in effect market value while value-in-use is the value to a particular user for a specific use.

Under cross-examination the intervenor's appraiser testified he did not estimate the fair market value of the subject property.  The appraiser estimated the value of the subject property to BOC in conducting its air separation business.  In developing his estimate of value he did not determine the subject’s highest and best use.  In estimating the land value the witness did not consider other vacant land sales because they did not have the strategic location of being next to the electric substation and pipeline.  With respect to the purchase of the subject site, the witness did not speak to any parties to the transaction.  The appraiser also acknowledged he did not deduct any depreciation from the buildings even though they were one year old.  He was of the opinion the buildings were somewhat unique because they have heavy construction and highly specialized with the technology that goes into them.  The appraiser did not think that there was anything particularly unique about the site excavation and gravel fill.  The appraiser did not develop a sales comparison approach because he found no sales.  He further testified he did not develop an income approach because properties like the subject do not lease.

The intervenor's appraiser did not believe the buildings suffered from any depreciation and had an effective age of zero.  He did not include an estimate of total economic life with the report because he did not believe they suffered from any depreciation.  He did agree the cost approach to value is more relevant the newer the buildings because the estimate of depreciation is not as subjective.

The board of review submitted its “Board of Review Notes on Appeal” wherein its final assessment of the subject totaling $4,629,200 was disclosed.  The subject’s assessment reflects a market value of $13,892,490 using the Madison County three-year median level of assessments for 1997 of 33.30%.  In support of the subject’s assessment the board of review submitted a copy of the subject’s property record card, which itemized the values placed on the nine buildings which totaled $222,710 and a component for the tanks in the amount of $12,000,000.  The board of review submitted an addendum to the “Notes on Appeal” and argued that since processing units at the Shell and Clark Oil Refineries located in Madison County are included in the overall value of the real estate, the processing units at the subject property should also be classified and valued as part of the real estate.  In questioning the board of review’s representative she agreed that the subject’s property record card did not itemize any machinery and equipment in the computation of the subject’s assessment nor did the card contain an independent value for the machinery and equipment.  The board’s representative also agreed the subject property is not an oil refinery.  As a final point she testified that it was the policy of Madison County to assess machinery and equipment as real estate in specialized properties and not do so in non-specialized properties.

After hearing the testimony and reviewing the record, the Property Tax Appeal Board finds that it has jurisdiction over the parties and the subject matter of the appeal.  The Board further finds that a reduction in the subject’s assessment is supported by the evidence contained in the record.  The assessment of the subject property totaling $4,629,200 reflects a market value of $13,892,490 using the Madison County three-year median level of assessments for 1997 of 33.30%.  The appellant submitted a narrative appraisal estimating the subject property had a market value of $5,500,000 as of January 1, 1997.  The board of review submitted copies of the subject’s property record card in support of the assessment.  The intervenor submitted an appraisal estimating the subject property had a market value of $8,100,000 as of January 1, 1997.

Initially the Board finds the appraisal submitted on behalf of the intervenor is to be given little weight.  The intervenor's appraiser testified and the appraisal clearly indicates he estimated the subject’s worth under the concept of value-in-use.  The witness testified he did not estimate the subject’s market value.  Use-value is the value a specific property has for a specific use.  Use-value focus is on the contributory value of the real estate to the enterprise of which it is a part without regard to highest and best use or what might be realized upon the property’s sale.  A property may have one use-value and a different value-in-exchange.  The Property Tax Code provides that property is to be valued at 33 1/3% of its fair cash value.  (35 ILCS 200/9-145).  Fair cash value is defined in the Code as “[t]he amount for which a property can be sold in the due course of business and trade, not under duress, between a willing buyer and a willing seller.”  (35 ILCS 200/1-50).  The Property Tax Code requires properties to be valued and assessed based on the concept of value-in-exchange and not based on its value to a particular user or use-value.  Since the intervenor's appraiser did not estimate the subject’s fair cash value as required by the Code, but estimated its use value, the Property Tax Appeal Board gives the appraisal little weight.

Second, the Board gives little weight to the data submitted by the board of review in establishing the subject’s market value and correct assessment.  The board of review did submit the subject’s property record card itemizing, in summary fashion, the value placed on the buildings and the tanks.  However, the property record card was void of any calculations or data to support the valuations placed on the buildings or the tanks located on the subject property.

Additionally, the board of review contends the value of the processing equipment should be included in the value of the subject’s real estate in part because processing equipment at two oil refineries are classified and valued as real estate for ad valorem taxation purposes.  The Property Tax Appeal Board finds this argument is not supported and is without merit.  First, the subject’s property record card does not indicate that any items of processing machinery and equipment were valued as part of the subject’s real property.  The subject’s property record does not contain an itemization or calculation with respect to assessing the processing machinery and equipment.  Second, the board of review submitted no evidence and made no showing that processing equipment was in fact valued at these oil refineries.  Third, the subject property is not an oil refinery and there was no showing that the equipment was in any way similar to that at the oil refineries that was arguably assessed as part of the real estate.  Furthermore, there was no showing pursuant to section 24-5 of the Property Tax Code (35 ILCS 200/24-5) that any similar or “like kind” items of machinery and equipment were classified and assessed as real property prior to January 1, 1979, thus requiring classification as real property in the assessment year in question.  For these reasons the Property Tax Appeal Board finds this aspect of the board of review’s argument has no merit.

The only evidence remaining in the record is the narrative appraisal prepared on behalf of the appellant.  In estimating the market value of the subject property appellant's appraiser developed the three traditional approaches to value.  The Board finds it necessary to evaluate each of the approaches to value in determining the subject’s market value and the resulting correct assessment.

The first method developed by the appellant's appraiser was the cost approach to value.  The initial step under the cost approach to value was to estimate the value of the subject’s land.  In estimating the subject’s land value the appraiser used four comparable land sales.  The comparables were located in Madison County and ranged in size from 869,022 to 2,049,839 square feet.  The sales occurred from January 1991 to July 1997 for prices ranging from $91,770 to $548,435.  The appraiser adjusted the price of the first comparable by adding $330,000 to reflect the extension of a water main and sanitary sewer to the site.  This adjustment expanded the price range of the comparables from $91,770 to $878,435 or from $.11 to $.43 per square foot of land area.  The witness was of the opinion the land sales were inferior to the subject property.  The appraiser testified that he confirmed the sales were arm’s length transactions and he personally viewed the sites.  Based on these sales the appraiser estimated the primary site, which contained 219,600 square feet, had a value of $.50 per square foot or $109,800.  He also estimated the surplus land had a unit value of $.50 per square foot or $158,529.  Adding the components together resulted in an estimated site value of $270,000, rounded.

Although the subject parcel sold in March 1995 for a price of $616,000, the appellant's appraiser was of the opinion that BOC paid a premium for the site because of business considerations.  Therefore, he was of the opinion the price paid was not reflective of its market value.  This testimony and opinion is supported by the director of real estate for BOC.  The director discussed the details surrounding BOC’s purchase of the subject site.  His testimony disclosed the site was not actually listed on the market at the time of purchase.  His testimony further revealed there were business reasons for the price of $50,000 per acre or $1.15 per square foot paid for the subject site such as proximity to a power source, proximity of the site to BOC’s existing customer pipeline, time constraints to complete the project and the reluctance to sell the land on the part of the original owners.  Other corroborative testimony provided by the director was his assertion that during his investigation other industrial parcels could be purchased for prices ranging from $10,000 to $20,000 per acre.  For these reasons the Property Tax Appeal Board finds the purchase of the subject site for a price of $616,000 was not reflective of the market.  Therefore, the Board finds the subject had a land value of $270,000.

The next step under the cost approach was to estimate the replacement cost new of the improvements. In estimating the replacement cost new of the improvements the appraiser examined the historical costs that BOC expended because the improvements were only one year old and compared those to a database he maintained.  The owner reported a total cost new of the buildings of $879,123 or $40.03 per square foot of building area.  The appellant's appraiser also estimated the replacement cost new for the buildings using an internal database which included the Means Square Foot Cost Manual and the Marshall & Swift Cost Manual and estimated a replacement cost new of $854,000.  In reconciling the historical costs and the replacement costs generated from the cost manuals, the appraiser determined the replacement cost new of the buildings as reported by the owner was reasonable and estimated the replacement cost new to be $880,000.  The Board finds this conclusion of value is well supported.

The appraiser next estimated the value of the yard improvements.  He again compared the historical costs as provided to him by BOC and the typical replacements costs.  The total reported historical costs were $2,331,250.  The appraiser's estimated replacement cost of the yard improvements was $1,260,000.  The total difference between the historical costs and the cost new was $1,074,000 with two items accounting for most of the difference.  The historical cost for the excavation and gravel fill was $824,000 whereas the appraiser estimated the typical cost for this would be $200,000.  The evidence revealed BOC removed four feet of topsoil and replaced it with crushed stone because of concerns of herbicides being present on the site.  The Board finds the appellant's appraiser's conclusion that the actual cost of site preparation of $824,000 should not be used in estimating the replacement cost new is proper.  The intervenor’s appraiser seemed to concur with the appellant's appraiser by indicating the removal of four feet of topsoil is not typical but it does happen.

A second element at issue in estimating the cost new of the yard improvement costs is the cost of $500,000 for the steel pilings to support the tanks.  The appraisesr indicated that the $.50 per square foot site value estimate was assuming utilities present on the site and normal bearing capacity.  Since the soil capacity was not adequate to hold the tanks he was of the opinion this additional cost was excessive and would not have been expended if the site had adequate bearing capacity.  As a result the $500,000 was not included in his estimate of the replacement cost new.  However, under cross-examination the witness seemed to equivocate by testifying there may have been some modifications required on all property that was acquired to accommodate the tanks on the subject property.  Therefore, the Board finds that in estimating the replacement cost new of the subject property the $500,000 expended for the pilings should be included in estimating the value of the subject under the cost approach.

The appraiser’s next step under the cost approach was to estimate the replacement cost new of the tanks.  The tanks ranged in size from 1,500 to 889,465 gallons.  The replacement cost new of the tanks was estimated to be $4,200,000, which was slightly greater than the historical costs of $4,072,255.  The Board finds this estimate was proper.

In conclusion, the Board finds the subject buildings, yard improvements and tanks had a replacement cost new of $6,840,000.

The next step under the cost approach is to estimate the depreciation to be deducted from estimated cost new of the subject improvements.  The appellant's appraiser estimated the subject building and yard improvements suffered from 35% depreciation.  He explained that the primary source of depreciation was functional and external obsolescence.  Using the age-life method the subject’s buildings and yard improvements suffered from 2 1/2% physical depreciation with the remainder attributable to the other forms of obsolescence.  To estimate the amount of depreciation he used the market data contained in the sales comparison approach to value.  The witness agreed that the validity of abstracting depreciation from the market was only as valid as the comparables are similar to the subject property.  The more dissimilar the comparables are from the subject the less valid is the estimate of depreciation.  The Board finds that the comparables used by the appraiser to abstract depreciation from the market are significantly dissimilar from the subject property in terms of age, location, number of buildings and size.  Additionally, as the witness agreed, the use of replacement cost new eliminates functional obsolescence and should not have been considered by the appellant’s appraiser as a form of depreciation.  As a result the Board finds the appellant’s appraiser's deduction of 32.5% depreciation to the building and yard improvements attributable to functional and external obsolescence to be highly speculative and unreliable.  The Board also finds that the appraiser’s determination that the subject building and yard improvements suffered from functional and external obsolescence but that the numerous tanks located on the site suffered no such depreciation to be inconsistent.  Since the buildings and yard improvements located on the subject are relatively new, the Board finds the only depreciation deduction supported in the record is for physical depreciation using the age-life method.  Therefore, the Board finds that there should be a 2.5% deduction from the replacement cost new of the building and yard improvements to account for physical depreciation.  This results in a depreciated building and yard improvement value of $2,574,000.

With respect to the tanks, the appraiser estimated their depreciated value using the economic age-life method.  He estimated all but one of the tanks suffered from 3% depreciation with the remaining tank experiencing 7% depreciation.  The depreciated value of the storage tanks was estimated to be $4,070,400.  The Board finds this method to be supported.

Adding the depreciated value of the building and yard improvements of $2,574,000, the depreciated value of the tanks of $4,070,400 and the estimated land value of $270,000, the subject property has an indicated value under the cost approach of $6,914,000, rounded.

The next approach to value developed by the appellant's appraiser was the sales comparison approach to value.  The appraiser used this approach to develop an estimate of value for the subject’s primary site and building and yard improvements.  To this amount he added $4,070,400 for the value of the tanks as determined under the cost approach and $158,529 for the value of the excess land.  In this approach the appraiser used four comparable sales that ranged in size from 11,800 to 136,000 square feet of building area.  The comparables ranged in age from 8 to 23 years.  One of the comparables was improved with three buildings while the remaining three comparables were improved with single buildings.  The comparables had average clear ceiling heights ranging from 16 to 52 feet.  The comparables sold from December 1996 to May 1998 for prices ranging from $175,000 to $3,900,000 of from $14.83 to $28.68 per square foot of building area.  Based on these comparables the appraiser estimated the subject had a unit value of $55.00 per square foot or $1,207,800.  The Board gives this conclusion little weight.  As previously stated, the Board finds the comparables to be dissimilar to the subject in terms of age, location, number of buildings and size.  The Board finds that the appraiser's estimated unit value of $55.00 per square foot is from 92% to 271% greater than the unit sales price of the comparables.  The Board finds this level of adjustment demonstrates the comparables were not very similar to the subject property.  As a result the Board gives the conclusion of value under the sales comparison approach little weight.

The final approach to value developed by the appellant's appraiser was the income approach to value.  To estimate the market rent the appraiser used three rental comparables that ranged in size from 8,200 to 19,200 square feet of building area.  The comparables ranged in age from new to 17 years with rentals ranging from $2.65 to $5.50 per square foot of building area.  Based on these comparables the appraiser estimated the subject had a market rent of $5.00 per square foot for a gross income of $109,800.  From this amount the appraiser deducted $7,686 for expenses to arrive at a net income of $102,114.  In developing the capitalization rate the appraiser estimated a market rent for the comparable sales to arrive at a net income for each of the properties.  The market rents for the comparable sales were estimated to range from $2.03 to $2.93 per square foot of building area.  The appraiser then divided the estimated net income of the comparables by the sales prices, which resulted in overall rates ranging from 10.4% to 13.7%.  Based on this analysis the appraiser estimated the subject had an overall capitalization rate of 10.0%.  Capitalizing the estimated net income resulted in an estimated value of $1,021,140.  To this amount he added a $4,070,400 for the value of the tanks as determined under the cost approach and $158,529 for the value of the excess land to arrive at a conclusion of value under the income approach of $5,250,000. 

The Board, as did the appellant's appraiser, gives little weight to the estimated value derived under the income approach.  Initially the Board finds that in comparing the subject’s estimated market rent of $5.00 per square foot with that attributable to the comparable sales again indicates these properties were not very similar to the subject.  Second, the capitalization rate may not be accurate because it was not based on actual rents but on estimated rents and was developed through the use of comparable sales that the Board has determined are not similar to the subject.  For these reasons the Board gives little weight to the conclusion of value developed by the income approach.

In conclusion, the Board finds the best evidence of market value for the subject property was that developed through the use of the cost approach using the appellant's appraiser’s figures as modified above.  The appellant's appraiser testified he gave the cost approach moderate consideration and the intervenor's appraiser testified the cost approach provides a good estimate of value for relatively new structures.  Additionally, appraisal theory provides that the cost approach works best for newer improvements, because construction costs are easier to estimate and there is less depreciation.  Furthermore, this approach is especially useful for appraisal of properties for which sales and income data are scarce.  (International Association of Assessing Officers, Property Assessment Valuation, 127 (2nd ed. 1996)).  Therefore the Property Tax Appeal Board finds the subject property had a market value of $6,914,000 as of January 1, 1997.  Since market value has been determined the 1997 three year median level of assessments for Madison County of 33.30% shall apply.

The subject property consists of a 40.14 acre parcel improved with an industrial complex containing approximately 260,000 square feet of building area.  The improvements were built in stages from 1962 to 1997 with approximately 75,000 square feet being built in 1997.

The property was the subject of appeals before the Property Tax Appeal Board for the years 1993 through 1996 under docket numbers 93-2672-I-3, 94-564-I-3, 95-1252-I-3 and 96-442-I-3.  In those appeals, the Board gave most weight to the appellant's appraisal and reduced the subject property's assessment to reflect a market value of $2,850,000.  The Kankakee County Board of Review sought direct review of the Board's decision in the Appellate Court, Third District.  On March 1, 2000, the court affirmed the Property Tax Appeal Board's decision.

The Board consolidated the 1997 and 1998 appeals for hearing purposes and incorporated the evidence and hearing transcript for the 1993 through 1996 appeals.

The appellant appeared before the Property Tax Appeal Board for the 1997 and 1998 appeals again arguing that the fair market value of the subject was not accurately reflected in its assessed value.  The appellant's evidence from the 1993 through 1996 appeals contained for the most part an appraisal and update letters prepared by the appraiser.  The appraiser's testimony and appraisal from the 1993 through 1996 appeals were incorporated into the 1997 and 1998 appeals.  The appraiser was present and testified at the 1997 and 1998 hearing.

The appellant's appraiser testified he prepared an update letter for his appraisal for the 1997 appeal.  He indicated a new addition consisting of a warehouse; packing area, offices and a lab area were added to the subject property in April of 1997.  At the hearing the parties stipulated to this date of construction.  The assessor's estimated value for this new addition as reflected in the assessment was $1,326,588.  The appraiser testified he agreed with this value estimate.  Adding his appraised value of the remainder of the subject property to the $1,326,588 estimate of value for the new construction resulted in a total finished value for the subject of $4,175,000.

The witness stated this total estimate of value should be reduced for the 1997 assessment year by $330,000 because the new addition was not completed until April of 1997.  He stated the board of review did not make any proration for the 1997 assessment year.  The full value of the subject property should be reflected in the 1998 assessment.

The Board of review presented "Board of Review Notes on Appeal" wherein the subject's final assessment of $1,861,061 was disclosed for both years.  The assessment reflects an estimated value for the subject for 1997 of $5,679,160 using the three-year median level of assessments for 1997 for Kankakee County of 32.77% and $5,583,741 for 1998 using the county's median level of 33.33%.

The board of review called its appraiser as a witness.  The appraiser testified in the 1993 through 1996 appeals of the subject property and his testimony and report from those appeals are incorporated into the 1997 and 1998 appeals.  The witness discussed special use properties.  He stated special use properties are generally found in the industrial and commercial classes of property, such as fast food restaurants and fast food restaurants within commercial buildings.  He stated the very nature of the industrial class makes it special use.  He indicated they are special use because they make up such a small percentage of all the different property types.

The witness testified the subject property is a special use property because it is the only edible oil manufacturing plant in Kankakee County.  He testified an appliance manufacturing facility, which can no longer compete, that has been put to an alternative use and a closed brewery are special use properties.  However, the witness testified there is a market for the resale of special use properties.  He testified a warehouse of less than 300,000 square feet located in an industrial park would be a general industrial property as opposed to other special use industrial properties.

The board of review's appraiser did not understand why he testified in the prior hearings that it would take only ninety days to market the subject property.  He stated in the instant hearing that if the subject property were to be vacated it would probably be bulldozed down. 

On cross-examination, the appraiser was asked why he included eight sales comparables in his report if the subject was a special use property.  He testified the sales were included to show there are no good sales comparables.  He also stated industrial properties that could possibly be sold are general use properties built for speculation.  He indicated once a large industrial manufacturing facility is no longer used for its original intended purpose, it is no longer saleable.

The witness was asked to define special use.  However, he stated it was a building built for a particular use.  He also stated it would be easy for another oil company to use the subject property.  He also stated parts of the buildings could be used for warehousing.  Creative developers could come up with any number of uses for the property.

The board of review's appraiser also testified the cost approach was the best method to value the subject property.  He stated the sales and income approaches should be given little, if any, consideration in valuing the subject property.  He testified he has not inspected the subject since 1995 and could not offer an opinion of value for these 1997 and 1998 appeals.  However, on re-direct examination, the witness stated he would not change his original opinion of value for the subject property due to the new addition.

The board of review next called the Bourbonnais Township Assessor as a witness.  The witness testified he was not the assessor in 1997 or 1998 but that he did not change the assessments placed on the subject from the amount placed on the property by the previous assessor.  During cross-examination, the witness stated he knew nothing about the new addition to the subject property.

The board of review's last witness was the Kankakee County Building Inspector.  He testified to the various building permits and was asked to identify when the new addition to the subject was completed.  The inspector indicated the permits were closed in early 2000.  However, the parties stipulated the building was completed as of April 1997.

The board of review also submitted a document entitled Report of Market Value, prepared by the Burbonnais Township Assessor in the years 1997 and 1998.  The assessor was not present to testify to his analysis or to be cross-examined by the appellant, nor did he sign the report.  The board of review did not discuss the report at the hearing.  The valuation date of the report was January 1, 1998, however, the new addition was not a part of the report and no value was given to this very large portion of the subject property.  He mentioned the addition in the report but did not use it or value it as part of the property.

The report mirrored an appraisal in most respects.  The assessor's cost approach utilized seven suggested land sales ranging in size from 1.72 acres to 50 acres and ranged in sale price from $8,000 to $86,280 per acre.  He found comparables 2,3,6 and 7 to be exceptional comparables while comparables 1,5 and 7 needed extensive adjustments to compare to the subject.  The Board notes comparable 7 was listed as both a good and bad comparable while comparable 4 was not listed at all. From the enclosed graph, it appears sale 7 was considered a good sale.  It was not discernable what the assessor would have considered sale 4.  He indicated one property was not sold in an arm's length transaction.  He also considered the adjacent land owned by the appellant to be a benefit to the subject property and indicated he placed significance on this fact in arriving at a value for the subject land of $33,000 per acre or $1,3324,620.

For his replacement cost new, the assessor used the Marshall Valuation Service.  The costs new minus depreciation for the older improvements were $3,128,854.  Adding the estimated land value resulted in a total value under this approach of $4,453,474.  The costs of the addition were prepared separately and totaled $1,293,129.

The assessor's report indicated there was not enough income data available to prepare a reasonable and appropriate estimate of income or a proper capitalization rate to arrive at an estimate of value.  He included three leases that were indicated to be for reference only.  However, he used these leases to estimate potential gross income, expenses, vacancy and a capitalization rate to arrive at an estimate of value under this approach of $3,524,100.  Although he gave it little weight, the assessor included the estimate of value under this approach in his final reconciliation.

The assessor utilized six sales, five of which had land sizes ranging from 2.6 to 13 acres.  One property contained 26 acres.  The improvements were smaller than the subject ranging in size from 49,000 to 201,380 square feet of building area.  Five properties ranged in age from 15 to 47 years old while the ages of two properties were not reported.  Five properties sold from 1993 to 1996 for prices ranging from $9.36 to $18.88 per square foot while one property sold for $30.29 per square foot.  One property was listed as damaged at the time of sale with the sale price reflecting rehabilitation costs.  One property was listed as considerably inferior to the subject while another property was listed as "inferior to the subject in every way."  Another property was listed as not being sold in an arm's length transaction.

The assessor also included two pages which contained eleven additional sales.  All but two properties were considerably larger than the subject with sizes ranging from 424,751 to 1,086,737 square feet.  Four properties ranged in size from 251,262 to 330,734 square feet.  The ages of three of these properties was new, four, and five years old.  The age of one property was not listed.  These four properties sold from 1992 to 1995 for prices ranging from $30.38 to $42.15 per square foot.

The assessor's report only indicated the original six properties were adjusted to the subject, however, no adjustment information was presented.  He also indicated the extra eleven sales must also be considered.  He estimated a value for the subject under the sales comparison approach of $20.50 per square foot or $4,249,650.

In reconciling his three approaches to value and relying most heavily on the sales comparison approach, the assessor estimated a value for the subject property of $4,300,000.  He indicated this value does not include any value for the new addition.

The appellant argued the assessor relied most heavily on commercial properties in his sales comparison approach.  This is inconsistent with his highest and best use as industrial property.  The assessor also considered acreage owned by the appellant that is not part of the subject property in estimating a land value.  The appellant also argued the assessor made no deduction for economic obsolescence and did not adjust the Marshall Swift national figures to comply with local market figures.  The assessor's income approach was not prepared in accordance with standard appraisal practice.

The board of review also submitted most of an appraisal prepared by Real Estate Analysis Corporation on a Kmart property located in Manteno, Illinois, dated January 1, 1996.  The board of review did not state the reason for submitting this property.  The Board notes Mr. Lipowsky used it in his appraisal.

In rebuttal, the appellant submitted information, which called into question the assessor's report regarding the comparable he indicated was in need of extensive repair, and was inferior to the subject in every way.

After hearing the testimony and reviewing the record, the Property Tax Appeal Board finds that it has jurisdiction over the parties and the subject matter of this appeal.  The Board further finds the record supports a reduction in the assessment of the subject property.

The Board first finds it decided the fair market value of the subject property to be $2,850,000 for the years 1993 through 1996 based mainly on the appellant's appraisal.  The Board further finds the Appellate Court, Third District, affirmed the Board's decision in these appeals.  The Board next finds the evidence in these 1997 and 1998 appeals, with the exception of the assessor's market report, is essentially the same as that found in the previous appeals.

With regard to the assessor's report submitted by the board of review, the Board first finds the assessor was not present to testify to his methodology or any of his adjustments that were not included in the report.  The report was prepared in almost the exact format as an appraisal, however, the Board finds it is not an actual appraisal and the assessor did not hold himself out to be an appraiser.  Also, the report does not include any value for the large, new addition even though the valuation date was January 1, 1998, well after its completion.  The report also includes three leases in an income section.  The assessor states he was unable to complete an income approach and the leases were included only as reference.  However, in his reconciliation and final conclusion of value he includes an estimate of value from this incomplete income approach.  Even though he gave little weight to this approach, it should have been disregarded and not included in the final conclusion of value.

The cost approach included land sales significantly smaller than the subject.  The assessor indicated he gave consideration to adjacent land owned by the appellant.  He also included a sale that was not arm's length in nature.  He estimated a cost for the addition, however his total replacement costs did not include the addition.

The assessor gave most weight to his sales comparison approach.  He included seventeen sales, however, eleven of these sales were just added to the report on two pages and adjustments to these properties were not made.  Even so, the assessor considered these eleven sales in his estimate under this approach.  Of the six sales he indicated he did adjust to the subject, no adjustments were included.  All of the properties were smaller than the subject and many were newer than the subject and located on much smaller parcels.  Several properties were listed as either significantly inferior or completely inferior to the subject.  One property was damaged at the time of sale with concessions made in the sale price.  Based on this analysis of the assessor's report, the inability to question him, and the exclusion of the new additions in the analysis, the Board accords no weight to the report.

The board of review's appraiser testified at the hearing.  The Board finds his testimony adds nothing to his prior testimony that was incorporated into the 1997 and 1998 appeals.  The Board finds his explanation of special use property to be suspect at the beginning because he indicated there are other uses for special use properties, including the subject.  His definition and explanation of special use properties would indicate any industrial property with the exception of a warehouse located in an industrial park would have no use to which it could be put after the initial owner vacated the building.  He then went on to contradict this testimony by stating there are other uses for these types of properties.

The appellant's appraiser prepared an update to his appraisal that was included in the previous years' appeals and incorporated into the 1997 and 1998 appeals.  The appellant's appraiser was present and testified at the hearing.  He indicated his previous estimate of value for the subject property, prior to the 1997 addition, was $2,850,000.  He agreed with the estimated value the assessor placed on the new addition of $1,326,588, however, he indicated this amount should be prorated to reflect the fact the addition was not complete on the January 1, 1997 assessment date.  Adding his previous value of $2,850,000 to the estimated value of the new addition of $1,326,588 resulted in a total completed value for the subject of $4,176,588.  The appraiser then deducted three-twelfths of this amount to account for January, February and March when the new addition was not completed.  This resulted in an estimate of value for the subject for 1997 of $3,845,000 rounded.  The appellant and the appraiser agreed the full value of the completed subject of $4,175,000 would be the estimated value for the subject property for 1998.

Section 9-180 of the Property Tax Code states in pertinent part as follows:

The owner of property as of January 1 also shall be liable, on a proportionate basis, for the increased taxes occasioned by the construction of new or added buildings, structures or other improvements on the property from the date when the occupancy permit was issued or from the date the new or added improvement was inhabitable and fit for occupancy or for intended or customary use to December 31 of that year. (35 ILCS 200/9-180).

The Property Tax Appeal Board finds the appellant's appraisal and the appraiser's update letter estimating a value of $2,850,000 is the best evidence of value in the record for the subject property, not including the new addition.  The Board also finds the parties agree to the value of the new addition, as determined by the assessor of $1,326,588.  Adding this value to the $2,850,000 value of the existing improvements reflects the best evidence of the full value of the subject property of $4,175,000 rounded.

The Board also finds the appellant's appraiser correctly reduced the value of the new addition by $330,000 to reflect the three months in 1997 the addition was not occupied or fit for its intended use.  Therefore, the Board finds the assessment of the subject property for 1997 should reflect a value of $3,845,000.  The Board also finds the assessment for 1998 should reflect the subject's completed value of $4,175,000.  Based on this analysis of the record, the Property Tax Appeal Board finds the appellant has supported by a preponderance of the evidence that the subject property was overvalued for the 1997 and 1998 assessment years.  The Board therefore finds a reduction in the assessment of the subject property for both 1997 and 1998 are warranted.  Since fair market value had been established, the three-year weighted average median level of assessments for Kankakee County of 32.77% for 1997 and 33.33% for 1998 shall apply.

The subject property consists of 6.37 acres zoned for industrial use located on the south side of Rockford, Winnebago County, Illinois.  The property is improved with a one story 124,404 square foot manufacturing and warehouse building.  The building is 100% steam heated and 100% sprinkled and includes 16.8% office area.  The steel and masonry building, constructed in 1948, has had four additions from 1950 to 1953.

The appellant appeared at the hearing by counsel and claimed unequal treatment in the assessment process as the basis for both the 1997 and 1998 appeals of the subject property.  The appellant called its appraiser as a witness.  The board of review and the intervenor both stipulated to the appraiser's qualifications to give testimony in these appeals.

The witness testified the scope of his assignment was to look at properties of like-kind "that were being assessed lower or differently than the subject".  The appraiser made both interior and exterior inspections of the subject property on October 8, 1997.  He prepared a report for the 1997 tax year entitled, Demonstration of Unequal Treatment in the Assessment Process and Equitable Solution of Camcar Textron, Inc.  The report was timely submitted into the evidence by the appellant.

The appraiser testified his equity report is very different from an appraisal because it does not render an opinion of value but rather looks at like-kind properties to arrive at what the subject’s assessment should be based on the analysis.  He testified properties within the industrial class with similar desirability, utility and remaining economic life would be considered like-kind to the subject.

Two smaller buildings were reported on the subject’s property record card in addition to the main building.  The witness testified the smaller buildings are not located on the subject property.  An aerial map was presented indicating the location of the subject building and the two smaller structures.

The appraiser testified he first reviewed the subject’s land assessment separate from the building because it would be the most accurate method to use.  At the hearing, the parties agreed to stipulate to a land assessment of $52,000 for 1997.  The parties also agreed to a 1998 land assessment for the subject of $53,000.

The witness found five suggested equity comparables that had improvement assessments lower than the subject property.  No grid analysis showing the subject characteristics as compared to the comparables’ characteristics was included.  The buildings were located on the south side of Rockford with one building being across the street from the subject and one building was within the same block as the subject.  One property contained two buildings and one property had a two story office.  These properties were constructed from 1918 to 1954 and had varying additions or remodeling dates.  They ranged in building size from 72,645 to 185,094 square feet and had clear ceiling heights ranging from 12 to 15 feet to 16 to 32 feet.  Office areas ranged from 2% to 25% of the total building area.

The appraiser then used three methods to analyze the assessments of the suggested comparables to the subject property.  The first method compared the assessments on a per square foot basis.  The properties had improvement assessments ranging from $.60 to $2.16 per square foot of building area.  The mean and median were $1.28 and $1.22 per square foot respectively.  He then placed the suggested comparables on a graph isolating each property by size.  He then inserted the subject property on the graph to show that the subject is the third largest and has an improvement assessment of $3.03 per square foot.  Using this first method of analysis, the witness estimated an improvement assessment for the subject property of $155,505 or $1.25 per square foot.

The appraiser testified he compared the different characteristics of the suggested comparables to the subject and did not just choose an assessment without making adjustments.  He stated these types of adjustments are not typically detailed in a voluminous report.  The appraisal report, without addenda, was only 16 pages in length with several pages containing only one paragraph.

The witness next looked at the assessments and the cost new ratios of the properties.  For this method, the witness calculated the replacement costs new of the suggested comparables using the Marshall Swift Cost Manual and then compared the costs to the building assessments to derive a ratio.  The assessments reflected ratios from 1.8% to 5.4% of the replacement costs new.  The subject property’s assessment reflected an assessment to cost new ratio of 8.4%.  The mean and median ratios were 3.5% and 3.3% respectively. Based on this analysis, the appraiser estimated an assessment to cost new ratio for the subject of 3.5% reflecting an improvement assessment of $156,356.  He testified that in other words, an equitable improvement assessment for the subject can be determined by multiplying its replacement cost new by 3.5% which is based on the replacement costs of other like-kind properties.

The appraiser's third method of analysis was called the assessment equity or trend line analysis.  This analysis singled out the building size of the comparables and their assessments.  The subject was then placed with the comparables according to size.  The best fit assessment for the subject can then be plotted by drawing a trend line.  A 1990 article referring to the regression analysis and trend lines was included as an addendum to the report.  Based on this third method, the appraiser estimated an improvement assessment for the subject of $156,500.

The witness next reconciled the three estimated assessments found in his unit comparison, ratio and trend line equity methods.  The three estimated improvement assessments for the subject were $155,505, $156,356 and $156,500.  The final estimated improvement assessment for the subject property was $156,000.

The appraiser testified he prepared a similar equity report for the subject property for 1998.  He testified the analysis methods used were the same as those he testified to for 1997.  The same suggested equity comparables were also used in the 1998 report.  Using the 1998 improvement assessments for the subject property and the same five suggested comparables, the unit comparison method indicated a range of assessments from $.61 to $2.20 per square foot of building area.  The mean and median were $1.23 and $.90 per square foot of building area respectively.  The improvement assessment concluded for the subject property was $149,285 or $1.20 per square foot.

The assessment to cost new ratio method produced ratios of 1.8% to 5.4%.  The subject’s assessment to cost new ratio was 8.2%.  The mean and median ratios were 3.3% and 3.1% respectively.  Based on this method, the appraiser estimated an improvement assessment to cost ratio for the subject of 3.2% or $149,723.  The trend line analysis produced a best fit improvement assessment for the subject property of $149,200.  After reconciliation, the estimated final improvement assessment for the subject property for 1998 of $149,500.

During cross-examination the appellant's appraiser testified he reviewed assessments of 10 or 11 properties located in south end of Rockford from which he selected his five suggested improvement comparables.  He also stated other than the subject’s area there are several major industrial parks in the Rockford area, however, these properties are primarily newer than those located in the southern part of Rockford.  Looking at the large aerial map submitted by the appellant, the witness testified there were 10 to 12 large structures near the subject, however, he only chose two as comparables.  He indicated two nearby properties were not chosen because one was primarily office space and one was newer and in better condition than the subject.

The witness also testified the subject’s clear ceiling heights of 10 to 15 feet would be a detriment in an industrial building because of craneways, heavy equipment and presses.  However, he testified the subject has presses and no structural adjustment was made for them.  He also stated there were approximately 20 to 50 manufacturing properties on the south side of Rockford that are between 30 and 60 years old.  He agreed after reviewing 10 or 11, there were still 8 to 38 he did not review.  He stated he did not know if those properties all had higher assessments than the subject because he did not review their assessments.  He also stated he could not recall if the five or six properties he reviewed but did not select had higher or lower improvement assessments than the subject property.

The witness testified that of his five suggested improvement comparables, he did interior inspections of only two of them.  He stated a cost new analysis can easily be performed without inspecting the property if the basic characteristics can be gleaned through other sources.  He indicated he usually looks at property record cards for the information.

The witness also testified the scope of his assignment was to find similar properties with lower assessments than the subject.  Therefore, he agreed he only looked at properties with lower assessments and then included only those similar to the subject.  He agreed this method of analysis excludes any properties with assessments higher than the subject that may be similar to the subject.

The board of review submitted "Board of Review Notes on Appeal" wherein the subject's final assessments for 1997 of $428,562 and $436,741 for 1998 were disclosed.  These assessments reflect estimated values for the subject property using the three year median level of assessments for Winnebago County of 33.42% for 1997 and 33.33% for 1998 of $1,282,352 and $1,310,354 respectively.  The board of review submitted separate evidence for the 1997 and 1998 appeals.  The board also agreed at the hearing that the two smaller buildings assessed to the subject property are in fact located on an adjacent property.  The board of review indicated it would not object to the removal of the assessed valuations from the subject’s assessment.

The board of review called the Rockford Township Deputy Assessor as a witness.  The assessor testified there are approximately 50 buildings that are like-kind to the subject on the south side of Rockford having the same general size as the subject.  He prepared evidence for the 1998 appeal and testified he first reviewed properties located within one or two miles of the subject and then broadened his search to all of Rockford Township.  Every industrial property of similar construction within a size range of 50,000 to 300,000 square feet and over 30 years old was reviewed.  The assessor testified he did not use larger properties, properties with three stories or warehouse properties because they would not be similar to the subject.  He compared the assessments of the most similar properties to the subject’s assessment and found the subject to be reasonably and equitably assessed.

The assessor next testified to his grid analysis.  He testified assessments higher or lower than the subject property’s assessment was not a criterion for selecting his comparables.  He stated his first group is of properties located within approximately one mile of the subject.  The suggested comparables on the grid were constructed from 1930 to 1968, were one or one and two stories, had wall heights of 16 feet with one at 27 feet, and all had sprinkler safety systems.  These properties ranged in building size from 98,795 to 208,456 square feet.  Four of the buildings had improvement assessments reflecting values ranging from $5.45 to $8.46 per square foot.  The oldest property, which is in inferior condition, had an improvement assessment reflecting a value of $1.84 per square foot while the newest property in the best condition had an improvement assessment reflecting a value of $13.51 per square foot.  He indicated the differences in assessments are due largely to condition, age and number of stories.  Functional obsolescence and poor condition also attribute to the lower assessments.  The subject’s improvement assessment was $8.47 per square foot.

The second group on the grid analysis are properties more similar in size to the subject located within the same township as the subject.  Some locations were similar, others were considered superior or inferior.  These properties were built from 1935 to 1968, were one or one and two stories, had 14 to 28 foot wall heights and were sprinkled to partially sprinkled.  These properties ranged in size from 94,360 to 194,004 square feet of building area.  Improvement assessments reflected values ranging from $1.45 to $11.83 per square foot.

The assessor also prepared a critique of the appellant’s suggested comparables.  He argued three of the properties used by the appellant’s expert have lower assessments because they are at the lower end of the value range and are inferior to the subject due to condition.  He also argued the appellant’s expert could not prepare a proper estimate of depreciation if he did not inspect the interiors of his suggested comparables to know the true condition of these properties.

At the hearing it was learned that the assessor relied on the evidence prepared by the Rockford Township Assessor for the 1997 appeal.  The Rockford Township Assessor was then called as a witness for the board of review to testify to the evidence he prepared.  He stated the appellant’s appraiser’s three methods of analyzing the equity of assessments singles out one factor among many and then claims that one factor proves inequity.  The assessor argued the appraiser’s unit of comparison method only looks at building size and shape and disregards age, depreciation, condition and utility to conclude the subject is inequitably assessed.  The second method, the assessment to cost new comparison, does not consider depreciation and calculates two story buildings the same as one story buildings.  The witness also argued the trend line method used by the appellant’s expert is again based on the premise that the properties compared to the subject are truly similar and he argues they are not.

The witness stated he reviewed the suggested comparables submitted by the appellant’s expert along with other properties and found no assessment inequity.  He stated the subject’s assessment was reduced in 1994 based on a 1994 appraisal.  This assessment has been carried forward each year, subject only to township equalization factors applied to all parcels within the township.  The 1994 assessment and a portion of the 1994 appraisal were submitted.

The witness also prepared an analysis using five suggested comparable properties.  All but one property was located in the subject’s market neighborhood.  The properties ranged in date of construction from 1936 to 1968 and all are manufacturing properties.  One property was a two story structure with four properties being one story buildings.  Wall heights ranged from 15 to 27 feet and three of the five properties had sprinkler safety systems.  The properties ranged in building size from 57,192 to 208,456 and had improvement assessments reflecting values of $8.30 to $13.25 per square foot of building area.  The subject’s assessment reflected a value of $8.30 per square foot of building area.

The Rockford Park District intervened in these appeals and was represented by counsel.  The intervenor called an MAI appraiser as a witness.  The appellant and the board of review stipulated to the appraiser's qualifications to give testimony in these appeals.  The witness testified his assignment was to prepare a market value appraisal of the subject property and to review the appellant's appraiser's equity report submitted by the appellant.

The witness testified the suggested comparables used in the appellant's report were only like kind to the subject in that they are all industrial type properties.  The witness testified he drove by the suggested comparables in the equity report and concluded the appellant's report did not consider the modernization occurring on the subject since 1980 in the remodeling of the office, dock area, etc.  It was the witness’s opinion a prospective purchaser of the subject property would not even consider the properties in the appellant's report as viable alternatives.  It was his opinion the suggested comparables would sell for significantly less than the subject property.

The intervenor's appraiser argued the appellant's report should have comparables that are both inferior and superior to the subject so as to bracket a value range for the subject.  The witness stated in the appellant's report, only properties inferior to the subject were reviewed.  The witness found properties similar that were both inferior and superior to the subject.  He testified that based on this review and his appraisal analysis, the subject property was equitably assessed.

During cross-examination on the issue of equity, the intervenor's appraiser testified he is on the Appraisal Institute’s Development Team of Rights, participates on the Appraisal Foundation’s course development, and lectures on ethical appraisal practices.  He stated that for him to be an unbiased, disinterested third party complying with the ethics provisions of the Uniform Standards of Appraisal Practice (USPAP), he would look at sales above, below and the same as the subject property of the report.  Looking at properties only falling below the subject property would imply client accommodation or bias and would be a violation of USPAP ethics provisions.  He stated this would also hold true for an equity report.  The intervenor presented a letter from the witness, dated August 23, 1999, which reiterated his testimony.

The intervenor's appraiser also prepared an appraisal of the subject property, dated January 5, 1999, with an effective date of January 1, 1997.  The witness stated his estimate of value for the subject would be reduced approximately $55,000 if the two small buildings are in fact located on a separate parcel number.

The appraisal first found a value for the subject land using four land comparables.  The subject’s replacement costs new was derived using E. H. Boeckh’s cost service.  Depreciation was estimated at 75% for a total estimated value under the cost approach including land of $1,370,000.

The sales comparison approach in the appraisal compared the subject to three properties that sold from April 1995 to September 1996 for prices ranging from $1,230,000 to $1,735,744.  After adjustments were made to the comparables, the appraiser estimated a value for the subject under the sales comparison approach of $1,370,000.  For his income approach, the appraiser reviewed three leases of industrial properties.  The triple net leases ranged from $1.35 to $1.99 per square foot.  After estimating a rental rate for the subject of $1.44 per square foot and subtracting 10% for vacancy and collection loss, 1% management fee and 3% for reserves, the appraiser estimated a net operating income of $158,293.  Capitalizing the net income by 13.03% through the band of investment technique, the appraiser estimated a value under the income approach of $1,316,000.  Reconciling the three approaches to value with most emphasis placed on the sales comparison approach, the intervenor's appraiser estimated a final value for the subject property as of January 1, 1997, of $1,327,000.

The appellant recalled its appraiser as a rebuttal witness.  He testified he could not comment on the intervenor's appraisal conclusion of value because he did not himself prepare an appraisal of the subject.  The witness did review the equity comparables submitted by the board of review and prepared a letter response to the board’s evidence, dated February 12, 1999.

The appellant's appraiser testified the board of review indicated its first comparable was built in 1968 when only 53% was constructed in that year with the remainder built in 1979.  He stated the second comparable is one of several parcels included in a facility.  The assessment of this property was lowered by the board of review in 1998 to $2.38 per square foot.  The third comparable submitted by the board of review represents the back portion of a facility.  He also agreed two of his own comparables were inferior to the subject; however, he argued one property was superior and two were very similar to the subject.  When asked if he agreed that equity claims on commercial and industrial appeals are less common than market value claims, the appellant's appraiser would not agree or disagree.  However, he testified in the last five years he has prepared approximately 80 to 200 market value appraisals but only 10 equity reports.

After reviewing the record and considering the evidence, the Property Tax Appeal Board finds that it has jurisdiction over the parties and the subject matter of this appeal.  The Board further finds that the appellant has failed to support the contention of unequal treatment in the assessment process.  The Illinois Supreme Court has held that taxpayers who object to an assessment on the basis of lack of uniformity bear the burden of proving the disparity of assessment valuations by clear and convincing evidence.  Kankakee County Board of Review v. Property Tax Appeal Board, 131 Ill.2d 1 (1989).  The evidence must demonstrate a consistent pattern of assessment inequities within the assessment jurisdiction.  After an analysis of the assessment data, the Board finds that the appellant has failed to overcome this burden.

The appellant submitted an equity analysis report prepared by an appraiser.  The appraiser first indicated two smaller buildings located on adjacent parcels were being assessed to the subject property.  The board of review agreed to the removal of the amount added to the subject’s assessment from these buildings.  The Property Tax Appeal Board finds the removal of the value added by these buildings to the subject’s improvement assessment to be proper.  The appellant and the board of review also stipulated to land values for the subject for 1997 of $52,000 and $53,000 for 1998.  Based on the record, the Board finds this land value to be proper.

The appellant's appraiser testified he reviewed 10 or 11 of the approximately 50 industrial properties of similar age to the subject in the southern part of Rockford where the subject is located.  He also testified the scope of his assignment was to find similar properties with lower assessments than the subject property.  He used five suggested comparable properties in his report.  One property contained two buildings.  These properties were constructed from 1918 to 1954 and had varying dates of additions or remodeling.  Building sizes ranged from 72,645 to 185,094 square feet.  Clear ceiling heights ranged from 12 to 32 feet with office areas ranging from 2% to 25% of the total building area.  The appraiser agreed two properties were inferior to the subject.  The subject property was built in 1948, has had four additions, and contains 124,404 square feet of building area.  The office area was 16.8% of the total building area and clear ceiling heights ranged from 10 to 15 feet.

The Board finds this wide disparity of characteristics greatly diminishes the reliability of an equity based analysis.  To find inequity in the assessment process, similar properties with similar characteristics must be used.  If the base information is suspect, the entire report suffers.  Also, no comparison analysis or adjustments were included in any of the appellant's appraiser's analyses.  He stated this detailed analysis was not typically done in a voluminous report, however, his report consisted of a scant 16 pages plus addendum.

The appellant's equity report used three methods of analysis.  The first method was a straight assessment per square foot method.  The suggested comparables had improvement assessments ranging from $.60 to $2.16 per square foot of building area for 1997.  The subject’s improvement assessment for 1997 was $3.03 per square foot.  The assessments for these properties for 1998 ranged from $.61 to $2.20 per square foot.  The subject’s 1998 improvement assessment was $3.09 per square foot.  The Board finds this method, using only the five properties chosen with such significant differences in characteristics to the subject, does not sufficiently support the appellant’s equity claim.

Although three to four comparable properties are typically used to support an inequity claim on a residential property, residential properties all have significant similarities.  Each has a kitchen, bedroom, bathroom and living areas in one building.  Commercial and industrial properties have wide disparities of size and office area, ceiling heights, number of buildings, etc.  Also, not all commercial and industrial buildings have office areas, warehouse areas, docks, etc.  Furthermore, the Board finds equity appeals are not typical for industrial and commercial appeals due to the wide variances in the buildings.  The appellant's appraiser also testified while he has prepared 80 to 200 market value appraisals on commercial and industrial properties in the last five years, he has only prepared 10 industrial and commercial equity reports in five years.

The appellant's appraiser's second analysis compared costs new of the subject and the suggested comparables.  He estimated costs for the comparables and then looked at the ratio of costs to assessments to arrive at a proper ratio for the subject.  He testified he inspected only two of his comparables.  The Board finds this analysis is basically a portion of a cost approach analysis.  This analysis of properties, several of which cannot even be considered comparable to the subject is far too incomplete to derive any support for an assessment reduction.

The final method of analysis compared assessments to building size.  Again, he indicated once a trend line was established, it would be clear what the subject’s improvement assessment should be.  The Board finds this single factor size analysis to find an equitable assessment for a large forty year old industrial building not particularly similar to the suggested comparables is insufficient and totally lacking in detail.  As stated earlier, the base properties used for comparison in this industrial equity analysis are not sufficiently similar to the subject and the data is sparse and unconvincing.

The board of review submitted equity comparables in both the 1997 and 1998 appeals.  The 1997 equity comparables found to be most similar to the subject had improvement assessments reflecting values of $11.60 and $13.25 per square foot.  The subject’s improvement assessment for 1997 was $8.30 per square foot.  The 1998 equity analysis compared properties both within one mile of the subject and then those further away in the same market but with more similar characteristics to the subject.  The groupings pointed out the major factors that contribute to differences in value.  These items included age, condition, design and location.  Comparing all these items together showed the comparables closest to the subject had improvement assessments reflecting values of $1.84 per square foot for the oldest two story property to $13.51 per square foot for the newest property.  The more similar properties had improvement assessments ranging from $1.45 per square foot for the property with the lowest clear ceiling height to $11.83 per square foot for the newest property.  The subject had a building assessment reflecting a value of $8.47 per square foot.

The intervenor provided a market value appraisal of the subject using all three traditional approaches to value.  The appraiser was present at the hearing and testified to his analysis and the methodologies employed.  He estimated a value for the subject property as of January 1, 1997 of $1,327,000.  The subject’s assessments reflect estimated values below this value at $1,282,352 for 1997 and $1,310,354 for 1998.

The constitutional provision for uniformity of taxation and valuation does not require mathematical equality.  The requirement is satisfied if the intent is evident to adjust the burden with a reasonable degree of uniformity and if such is the effect of the statute enacted by the General Assembly establishing the method of assessing real property in its general operation.  A practical uniformity, rather than an absolute one, is the test.  Apex Motor Fuel Co. v. Barrett, 20 Ill.2d 395 (1960).  Although the comparables presented by the appellant disclosed that properties located in the same area are not assessed at identical levels, all that the constitution requires is a practical uniformity which appears to exist on the basis of the evidence.  For the foregoing reasons, the Board finds that the appellant has not proven by clear and convincing evidence that the subject property is inequitably assessed.

However, the Board finds two small buildings located on an adjacent parcel were incorrectly assessed to the subject property.  The board of review indicated it would be appropriate for the Property Tax Appeal Board to deduct the amount of the subject’s assessment attributable to these buildings.  These buildings had estimated market values of $45,122 for 1997 and $46,020 for 1998.  The Board also finds a reduction in the land assessment as agreed to by the parties is warranted.  Therefore, the Property Tax Appeal Board finds that the subject's assessment should be reduced by these amounts.  Therefore, a reduction in the assessment of the subject property is warranted.

The subject property consists of a three acre industrial site improved with a 10,000 square foot one story steel building located in LaSalle, LaSalle County, Illinois.

The appellant claimed the subject building was located within a TIF District Enterprise Zone and therefore is exempt from real property taxation.  The appellant's attorney filed a brief in support of this claim.  The brief indicated prior to the construction of the subject building, the City of LaSalle Mayor, enterprise zone administrator, and the developer told the appellant the subject would automatically be included in the TIF District and receive real estate tax abatements for twelve years.  The brief indicated at a later date the supervisor of assessments sent a letter to the appellant stating the subject improvement would be added to the tax rolls for 1999.

The appellant submitted the letter from the supervisor of assessments.  A letter from the appellant to the City of Peru Attorney and a response letter were also submitted.  The response letter indicated properties in the subject's industrial park are automatically included in the TIF District, however, the right to a tax abatement is not automatic.  The letter indicated a proposal to change this situation was being sent to the mayor.  Based on this evidence, the appellant requested the subject improvement be exempt from real property assessment and taxation.

The LaSalle County Board of Review submitted its "Board of Review Notes on Appeals" wherein the subject property's final assessment was disclosed.  As evidence, the board of review submitted a letter from the LaSalle County Assistant State's Attorney dated July 27, 2000.  The letter stated the appellant relied on representations made by officials that are not assessment officials.  He argued there is no legal authority to support a claim the assessment officials should now be estopped from assessing the improvement.  He indicated Illinois statutes do not allow for an automatic preclusion from assessment for properties within an enterprise zone and that the abatement of taxes within the zone are determined by the governing bodies of each taxing district.  (35 ILCS 200/18-170).

The letter also stated the appellant is claiming an exempt status for the subject improvement and that the Property Tax Appeal Board lacks jurisdiction to adjudicate exemption complaints.  The Assistant State's Attorney also included an abatement statement that showed the subject was receiving tax abatements from six taxing districts while two others gave no abatements.  Based on this evidence, the board of review requested the appeal be denied.

After reviewing the record and considering the evidence, the Property Tax Appeal Board finds it has no jurisdiction over this appeal.  Section 1910.10(f) of the Official Rules of the Property Tax Appeal Board states as follows:

The Property Tax Appeal Board is without jurisdiction to determine the tax rate, the amount of a tax bill, or the exemptions of real property from taxation.  (86 Ill.Admin.Code d1910.10(f)).

Section 16-70 of the Property Tax Code states in pertinent part as follows:

The board of review shall hear and determine the application of any person who is assessed on property claimed to be exempt from taxation.  However, the decision of the board shall not be final, except as to homestead exemptions. . . . The Department [of Revenue] shall determine whether the property is legally liable to taxation.  It shall notify the board of review of its decision, and the board shall correct the assessment if necessary. . . . (35 ILCS 200/16-70)

The appellant clearly requested the Property Tax Appeal Board determine the exempt status of the subject improvement.  The appellant's application and its brief state an exemption is requested.  Both the Property Tax Code and the Official Rules of the Property Tax Appeal Board demonstrate the Property Tax Appeal Board has no authority to rule on the application of any property claimed to be exempt from taxation.  Furthermore, the Board has no authority to determine tax rates or tax bills, including the abatement of taxes that may be allowed due to the property's location in an enterprise zone or a tax increment financing (TIF) district.  The Board therefore finds it is without jurisdiction to decide this appeal and the complaint is dismissed.

The subject property consists of a one-story, masonry, industrial manufacturing building situated on 27,556 square feet of land area.  The improvement is 50 years old and contains 13,229 square feet of area as follows:  12,029 square feet of manufacturing area and 1,200 square feet of office area.  The appellant contends that the fair market value of the subject is not accurately reflected in its assessed value.

In support of the appellant’s market value argument, the appellant’s attorney submitted an appraisal that developed the three traditional approaches to value in estimating the subject’s market value.  The appraisal reflected the following value estimates:  under the cost approach a value of $315,000; under the income approach to value a value of $250,000; and under the sales comparison approach a value of $245,000.  The final conclusion of value placed the maximum weight on the sales comparison approach to value with a final value of $250,000 for the subject property as of January 1, 1997.

The first method developed was the cost approach.  The initial step under the cost approach was to estimate the value of the site using six comparable land sales.  The properties ranged in size from 27,173 to 166,834 square feet.  The properties sold from November, 1993, to March, 1995, for prices that ranged from $32,367 to $500,000, or from $.91 to $5.06 per square foot, unadjusted.  The subject’s final value estimate for the land was estimated using $5.00 per square foot for a value of $137,780 or $140,000, rounded.

The replacement cost new prior to depreciation was estimated as $708,000 or $53.52 per square foot using a cost engineer’s analysis of unit prices.  The subject was accorded an effective age of 50 years with a remaining economic life of 10 years.  The total accrued depreciation attributable to the subject was estimated at 75%.  Under this approach, a value of $317,000 was estimated by adding the depreciated value of the improvements at $177,000, and the land value of $140,000.

Under the income approach, five rental comparables were used that ranged in size from 10,000 to 40,000 square feet with a rental rate per square foot from $1.60 to $3.15.  The rental rate for the subject of $2.75 per square foot triple net was estimated indicating a potential gross income of $36,380.  Then the vacancy and collection loss of 10% was deducted to estimate an effective net income of $32,742.  An overall capitalization rate of 13% was used whereby the net income was capitalized resulting in an estimate of market value for the subject of $251,862, or $250,000, rounded, under the income approach.

The final method developed was the sales comparison approach.  Under this approach, five suggested sales comparables were utilized that were either one-story or part one-story and part two-story buildings.  These properties sold from March, 1996, to March, 1997, for prices that ranged from $137,700 to $525,000, or from $9.41 to $23.17 per square foot.  The properties contained improvements that ranged in age from 19 to 81 years and in size from 12,300 to 31,000 square feet.  The properties contained office area that ranged from five to 12% with land-to-building ratios that ranged from 0.99:1 to 3.36:1.  Based upon this data, the subject’s market value was estimated at $18.50 per square foot or $244,737.

In reconciling the three approaches to value, the appraisal accords maximum consideration to the sales comparison approach with moderate consideration to the income approach.  The market value for the subject was estimated at $250,000 as of January 1, 1997.

The board of review presented "Board of Review Notes on Appeal" wherein the subject's final assessment of $102,934 was disclosed. 

In addition, the board submitted the Cook County Real Property Assessment Classification Ordinance, which provides for an assessment level of 36% for Class 5B property such as the subject.  The board also submitted case law, In re Application of Rosewell v. U.S. Steel Corp., 106 Ill. 2d 311, 478 N.E.2d 343 (1985) and In re Application of County Treasurer v. Twin Manors West of Morton Grove Condominium Association, 175 Ill. App. 3d 564, 529 N.E.2d 1104 (1st Dist. 1988).  No brief with an explanation as to each case’s relevance in the present appeal was submitted.  Finally, the board submitted a report entitled The Illinois Ratio Study for Commercial and Industrial Properties:  Review and Recommendations, by Robert J. Gloudemans and Alan S. Dornfest [hereinafter, the "Dornfest report"].  The "Dornfest report" reviewed and evaluated the procedures and methodology used by the Illinois Department of Revenue in its annual sales ratio studies.

Furthermore, a narrative analysis was offered.  The board’s analysis asserted two points.  First, the board of review asserts that the current valuation of the subject is within a reasonable range; therefore, the taxpayer’s position would represent a de minimus reduction.  The second point in the board’s analysis stated that the current assessment was supported by the recent sale of the subject in January of 1996 for $278,200.  The board of review also submitted limited data on 20 sales properties.  Based on this analysis, the board of review requested a confirmation of the subject’s fair market value as of the 1997 assessment date.

In rebuttal, the appellant’s attorney submitted an affidavit from the president of Cragin Metals indicating that he had purchased the assets of Cragin Metal Products Corporation, which had been owned by his three nieces.  The affidavit states that the sale included all fixtures and equipment, inventory, and real estate.  Moreover, the affidavit indicated that financing for the transaction was provided by the seller.  Therefore, the appellant’s attorney asserted that the recent sale was not an arm’s length transaction.

After reviewing the record and considering the evidence, the Property Tax Appeal Board finds that it has jurisdiction over the parties and the subject matter of this appeal.

When overvaluation is claimed the appellant has the burden of proving the value of the property by a preponderance of the evidence.  Property Tax Appeal Board Rule 1910.63(e).  Proof of market value may consist of an appraisal, a recent arm’s length sale of the subject property, recent sales of comparable properties, or recent construction costs of the subject property. Property Tax Appeal Board Rule 1910.65(c).

Having considered the evidence presented, the Board concludes that the appellant has satisfied this burden and that a reduction is warranted.

As to the appellant’s market value argument, the Board finds the best evidence of market value was submitted by the appellant.  The appellant submitted an appraisal that developed the three traditional approaches to value.  The final conclusion of value placed the maximum weight on the sales comparison approach to value with a final value of $250,000 for the subject property as of January 1, 1997.

The sales comparison approach utilized five sales comparables that were either one-story or part one-story and part two-story buildings.  These comparables sold from March, 1996, to March, 1997, for prices that ranged from $137,700 to $525,000, or from $9.41 to $23.17 per square foot.  The comparables contained improvements that ranged in age from 19 to 81 years and in size from 12,300 to 31,000 square feet.  They contained office area that ranged from five to 12% with land-to-building ratios that ranged from 0.99:1 to 3.36:1.

In comparison, the subject property contains a one-story, masonry, industrial manufacturing building situated on 27,556 square feet of land.  The improvement is 50 years old and contains 13,229 square feet of area with 1,200 square feet of office area included therein.

The Board further finds that the appellant has rebutted the board of review's assertion that the recent sale price of the subject is controlling.  The appellant’s affidavit rebuts the arm’s length nature of the transaction for:  the transfer was between related parties, the seller provided financing, and the sale price included inventory and personal property.

The Board must next determine the subject’s "correct assessment" based on "equity and the weight of the evidence."  35 ILCS 200/16-180 and 16-185.  The Illinois Constitution provides, in part, that "taxes upon real property shall be levied uniformly by valuation" and that, in counties, which classify property, "assessments shall be uniform within each class."  Ill.Const. 1970, art.IX, sec. 4.  Assessments must be uniform at the county level and within the same class.  In re: Application of County Treasurer v. Twin Manors West of Morton Grove Condominium Association, 175 Ill. App. 3d 564, 529 N.E.2d 1104 (1st Dist. 1988).  Thus, the subject, a Class 5B property, must be assessed uniformly with other Class 5B property at the county level.

To uniformly assess the subject, the Board must determine the proper assessment level for Class 5B property.  In doing so, "the Board may consider competent evidence . . . under the Illinois Constitution, the Illinois Property Tax Code, and the Cook County Real Property Assessment Classification Ordinance." Property Tax Appeal Board Rule 1910.50(c)(3).  The Code directs the Department of Revenue to design and prepare sales ratio studies.  35 ILCS 200/17-10.  The studies’ results, which have been repeatedly validated by the courts, are used to adjust each county’s aggregate reviewed assessment in the state equalization process.  35 ILCS 200/17-5.  These equalization provisions apply in Cook County.  In re: Application of County Collector v. Johnson, 133 Ill. App. 3d 208, 478 N.E.2d 1119 (1st Dist. 1985).

The Board hereby takes official notice of the results of the Department’s 1997 sales ratio studies for Cook County as matters within the Board’s "specialized knowledge and expertise." Property Tax Appeal Board Rule 1910.90(i).  The courts have held that the Board is to use the Department’s sales ratio study for the three most recent years preceding the tax assessment year at issue.  Commonwealth Edison Co. v. Property Tax Appeal Board, 102 Ill. 2d 443, 468 N.E.2d 953 (1984); Board of Review of Grundy County v. Property Tax Appeal Board, 201 Ill. App. 3d 999, 559 N.E.2d 504 (3d Dist. 1990).  According to the Department, the 1997 Cook County three year average median level of assessment for Class 5B property was 34.47 percent.

The results of the Department’s sales ratio studies are prima facie evidence of the levels of assessment.  Will County Board of Review v. Illinois Property Tax Appeal Board, 100 Ill. App. 3d 506, 508, 426 N.E.2d 1238 (3d Dist. 1981).  The Board systematically uses the results to determine the proper assessment levels for properties located outside of Cook County.  Similarly, the Board has used the studies to determine the assessment level for Class 2 residential properties located in Cook County.  Property Tax Appeal Board Rule 1910.50(c)(1) and (2). (See Cook County Board of Appeals v. Property Tax Appeal Board and Lefkowitz, Gen No. 98 COTAB 0001, wherein the Circuit Court found that the Property Tax Appeal Board’s decision, in which the Board utilized the Department of Revenue’s three year median level of assessments for Class 2 property to determine the correct assessment, was not against the manifest weight of the evidence.)

The Board finds unpersuasive the "Dornfest report" submitted by the board evaluating the Department’s studies.  The report fails to present any "competent evidence" indicating the proper assessment level as required under the Board’s rules. Property Tax Appeal Board Rule 1910.50(c)(3).  The report also fails to present any empirical evidence indicating that the Department’s studies produced inaccurate assessment levels.  The report is merely an analytical review of the Department’s procedures and methodology.  Significantly, the report fails to present any evidence indicating that the Department’s studies would result in different outcomes if the report’s recommendations were implemented.  The Illinois Supreme Court has found such omissions fatal in proving the Department’s studies are flawed.  Further, the Court has found that most of the Department’s procedures criticized in the "Dornfest report" are in accord with the authority granted by the legislature.  Airey v. Department of Revenue, 116 Ill. 2d 528, 508 N.E.2d 1058 (1987); Advanced Systems, Inc. v. Johnson, 126 Ill. 2d 484, 535 N.E.2d 797 (1989).  Thus, the Board finds that the report fails to impeach the reliability of the Department’s studies.

The Board also finds unpersuasive the case law submitted by the board.  (Since no brief was submitted describing the relevancy of these cases, the Board will assume the cases were submitted to address the proper assessment level.)  The first case, In re: Application of Rosewell v. U.S. Steel Corp., 106 Ill. 2d 311, 478 N.E.2d 343 (1985), is factually distinguishable from the present matter.  In U.S. Steel, the only evidence presented concerning the Department’s studies indicated the studies were not reliable.  However, the Court specifically stated that it did not "mean to imply that assessment/sales ratio studies may not be used as evidence of valuation in Cook County under any circumstances."  Id. at 323, 348.  A subsequent Illinois Supreme Court case distinguished U.S. Steel and made use of the Department’s studies in Cook County.  In Airey, supra., the Court allowed the use of the Department’s studies where the evidence supported the studies and the objecting party failed to show that the studies should not be used.  As already stated herein, the "Dornfest report" is insufficient to impeach the reliability of the Department’s studies.  An administrative agency may rely on its own "experience, technical competence, and specialized knowledge."  5 ILCS 100/10-40; See Ekco Glaco Corp. v. Illinois Environmental Protection Agency, 186 Ill. App. 3d 141, 542 N.E.2d 147 (1st Dist. 1989).  In such circumstances, the Illinois Supreme Court has found the Department’s studies reliable in numerous cases.  People ex rel. Hillison v. Chicago Burlington and Quincy R.R. Co., 22 Ill. 2d 88, 174 N.E.2d 175, (1961); People ex rel. Wenzel v. Chicago and North Western Railway Co., 28 Ill. 2d 205, 190 N.E.2d 780 (1963); People ex rel. Musso v. Chicago Burlington and Quincy R.R. Co., 33 Ill. 2d 88, 210 N.E.2d 196 (1965); Airey, supra; Advanced Systems, supra.  Based on the Board’s "experience, technical competence, and specialized knowledge," the Board finds the Department’s studies reliable.

The Board’s decision herein is consistent with the second case submitted by the board, Twin Manors, supra.  In Twin Manors, the court held "that the proper geographic area [in Cook County for purposes of uniformity] is the county [level]."  Id. 529 N.E.2d at 1105.  In the present matter, the Board has taken official notice of the countywide assessment level as the court in Twin Manors held was proper.

Finally, the board submitted the Cook County Real Property Assessment Classification Ordinance, which provides for an assessment level of 36% for Class 5B property for consideration.  As noted herein, however, the Department’s studies indicate an assessment level of 34.47%.  As the Illinois Supreme Court stated in Airey, "this is an imperfect world; hence, assessment levels vary."  Airey, 508 N.E.2d at 1059.  In light of this, Illinois courts have recognized that, despite a statutory defined assessment level, "if property within the taxing district is assessed on a debased proportion of the fair market value, all property shall be assessed on the same basis."  People ex rel. Wangelin v. Gillespie, 358 Ill. 40, 192 N.E. 664 (1934); M.F.M. Corp. v. Cullerton, 16 Ill. App. 3d 681, 686, 306 N.E.2d 505, 508 (1st Dist. 1973) citing People ex rel. Rhodes v. Turk, 391 Ill. 424, 63 N.E.2d 513 (1945).  Thus, in order to determine the subject’s "correct assessment" in the present matter, the Board must debase the subject’s market value in the same proportion as property within its class.  No further evidence concerning the proper assessment level was presented in the record by the board in this matter.  As such, the Board finds that the proper assessment level in this matter are the results of the Department’s sales ratio studies.

Utilizing the Department’s 1997 three year median level of assessments for Cook County Class 5B property of 34.47%, the subject’s market value found herein should reflect a total assessment of $86,175.  Since the current total assessment of $102,934 is greater than the assessment warranted by the subject’s market value, a reduction is appropriate.

Considering all of the evidence, the Board finds that the subject had a market value of $250,000 as of the assessment date.  Since the market value of the subject has been established, the Department of Revenue’s 1997 three year median level of assessments for Cook County Class 5B property of 34.47% will apply.

The subject property is improved with a multi-tenant, single-story, masonry and metal panel constructed industrial building that contains 15,854 square feet of building area.  The building contains three units ranging in size from 602 to 9,419 square feet.  The building has clear ceiling heights ranging from 17 to 19 feet.  The building was constructed in 1989.  Also located on the site is a cellular tower/transmission station.  The improvements are located on a 1.65-acre site resulting in a land to building ratio of 4.53:1.  The subject property is located in St. Charles, Kane County, Illinois.

The appellant argued the market value of the subject property was not accurately reflected in the subject’s market value.  In support of that argument the appellant submitted a narrative appraisal and called as the appraiser as the first witness.

The appellant's appraiser testified that he prepared a summary appraisal report that contained only the income and sales comparison approaches to value.  He described the subject as containing 15,700 square feet of building area and the site as containing 71,874 square feet.  He noted the subject property suffered because there was no frontage on the site and no direct access to Tyler Road, the main street that passed in front of the subject.  Access to the site was through the use of an easement over an adjacent parcel, which had frontage on Tyler Road.  The subject also suffered from limited visibility from Tyler Road.

In developing the sales comparison approach, the appellant's appraiser used five comparable sales.  The comparables were located in St. Charles, Batavia and Carol Stream, Illinois.  The comparables were single story industrial buildings that ranged in size from 11,900 to 42,500 square feet of building area.  The comparables were constructed from 1987 to 1998 and had land to building ratios ranging from 3.07:1 to 4.35:l.  Two of the comparables were single tenant buildings while the three remaining comparables were multi-tenant structures.  The sales occurred from November 1996 to April 1998 for prices ranging from $628,000 to $2,310,000 or from $35.09 to $56.32 per square foot of building area.  Based on these sales the appraiser estimated the subject had an indicated value of $40.00 per square foot for a total value of $626,000.

The final approach developed by the appellant's witness was the income approach to value.  He noted that the property is a three tenant industrial building that has two leases in place.  One lease is to the owner of the property for $4.00 per square foot.  The appraiser was of the opinion this was not an arm’s length lease.  A second tenant had a lease commencing in February 1997 and expiring in January 2000.  The monthly gross rentals ranged from $3,727 to $4,025 or from $7.80 to $8.40 per square foot.  The appraiser also utilized two comparable rentals located in West Chicago, Illinois.  Comparable rental number one contained 7,020 square feet in a multi-tenant building constructed in the early 1990’s.  The property was leased in October 1998 for a gross rental of $6.75 per square foot with ownership responsible for insurance, taxes and common area maintenance.  Comparable rental number two contained 7,800 square feet in a multi-tenant building that was constructed in the 1980’s.  This property was leased in January 1998 for a gross rental of $6.25 per square foot.  Based on this data the appraiser estimated the subject would have a net rental of $4.80 per square foot resulting in a potential gross income of $75,120.  From this amount the appraiser deducted 5% or $3,756 for vacancy and credit loss to arrive at an effective net income of $71,364.  From this amount the appraiser deducted 5% of effective gross income or $3,568 for management fees.  He also deducted $860 for real estate taxes that the owner would be responsible for during times of vacancy.  He also deducted $3,000 for maintenance expenses and $2,000 for insurance and miscellaneous expenses.  The resulting net income was estimated to be $61,936.  The appraiser next estimated the capitalization rate to be 9.6% using the mortgage equity band of investment method.  The appraiser also examined his comparable sale number two to extract a capitalization rate of 9.0% from the market.  Dividing the net income of $61,936 by the capitalization rate of 9.6% resulted in an estimated value under the income approach of $645,000.

In reconciling the two approaches to value the appraiser put most reliance on the income approach and estimated the subject property had a market value of $645,000 as of January 1, 1998.

Under cross-examination the appellant's appraiser indicated that the size of the building used to calculate the values was estimated to be 15,700 square feet of building area.  However, a review of the report indicated the appraiser used an estimated building size of 15,650 square feet in estimating the subject’s value.  The report also indicated the building had an actual age of seven years and an effective age of 5 years.  However, the building was constructed in 1989 and had an actual age of 9 years as of the assessment date at issue.  The report also contained discrepancies or errors in the income approach calculations of the potential gross income and deduction for vacancy losses.  The appraiser also indicated he did not measure the comparable sales and only had interior inspections of comparable sales number one and three.  The appellant's appraiser made drive-by inspections of the remaining comparable sales.  As a final point on page 16 of the report the appraiser indicated within the report that a slight positive adjustment was made to the comparable sales to account for the presence of the cellular tower on the subject property.  However, on page 19 of the report the appraiser indicated that the cellular tower was personal property and he did not attribute value for the tower in the valuation of the subject property.  The appellant’s appraiser testified he did not investigate the Kane County assessment practices as they relate to the classification and assessments of cellular towers.

The board of review submitted its “Board of Review Notes on Appeal” wherein its final assessment of the subject property totaling $304,752 was disclosed.  The subject’s assessment reflects a market value of $916,547 using the 1998 three year median level of assessments for Kane County of 33.25%.  The board of review submitted a narrative appraisal in support of its contention of the proper value for the subject property.  The board's appraiser estimated the subject property had a market value of $761,000 as of January 1, 1998.  The appraiser was called as the board of review’s first witness.

The board's appraiser testified he determined the subject property had 15,854 square feet of building area based on field measurements.  He described the subject property as being in good condition with no deferred maintenance.  He also agreed the subject property suffered from a lack of visibility from the main road.  He also pointed out the diagram of the subject property contained in the appellant’s appraisal was in error and not reflective of the subject’s dimensions.

In estimating the market value of the subject property the board of review’s appraiser used the three traditional approaches to value.  The first step under the cost approach was to estimate the value of the subject’s land using four comparable land sales.  The land comparables were located in Batavia, Geneva, and St. Charles, Illinois.  The comparables ranged in size from 56,250 to 152,416 square feet.  The comparables sold from May 1995 to October 1998 for prices ranging from $150,000 to $457,259 or from $2.67 to $3.45 per square foot of land area.  Based on these comparables the appraiser estimated the subject parcel had a unit value of $2.85 per square foot for a total value of $205,000, rounded.

To estimate the replacement cost new of the improvements the appraiser made use of the Marshall & Swift cost service.  The appraiser classified a majority of the building as a Class “S” building, with the smaller one story office portion as a Class “C” building.  The appraiser estimated the subject had an estimated cost new of $37.96 per square foot or $600,000.  From this amount the appraiser deducted depreciation in the amount of 18% or $110,000, utilizing the economic age/life method to estimate physical depreciation of 13% and an additional 5% deduction for the obsolescence associated with the subject’s limited street visibility.  The depreciated value of the main building was estimated to be $490,000.  To this amount the appraiser added $40,000 for the depreciated value of the site improvements to arrive at a total improvement value of $530,000.  To this amount the appraiser added the estimated land value to estimate the subject had an indicated value under the cost approach of $735,000.

The next approach developed by the board of review’s appraiser was the sales comparison approach to value.  In developing the sales comparison approach to value the appraiser used seven comparable sales that were located in Batavia, St. Charles, North Aurora and Carol Stream, Illinois.  The comparables were single story industrial buildings ranging in size from 6,080 to 31,342 square feet of building area.  The comparables ranged in age from new to 22 years old.  The buildings had clear ceiling heights ranging from 13 to 19 feet and land to building ratios ranging from 2.42:1 to 4.30:1.  Three of the comparables were single user buildings while four were multi-tenant structures.  These properties sold from January 1997 to July 1998 for prices ranging from $275,000 to $1,125,000 or from $35.10 to $58.14 per square foot of building area.  The appraiser testified he personally measured each of the comparable sales and verified the sales through county records and a principal to the transaction such as the buyer, seller or broker.  Based on these sales the appraiser estimated the subject property had an indicated value under the sales comparison approach of $47.00 per square foot or $745,000, rounded.

The final approach to value developed by the board of review’s appraiser was the income approach to value.  In estimating the subject’s market rent the board of review’s appraiser analyzed the subject’s current leases and rental data on five comparable properties.  The comparables ranged in size from 2,000 to 23,000 square feet and in age from 3 to 20 years old.  The net rentals ranged from $5.21 to $8.00 per square foot.  Based on this data the appraiser estimated the subject’s small office area would have a net market rent of $8.00 per square foot while the remaining building area would have a net market rent of $5.25 per square foot.  The resulting potential gross income was estimated to be $84,889.  From this amount the appraiser deducted 6% or $6,184 for vacancy and collection loss to arrive at an effective gross income of $78,705.  The appraiser also deducted $7,113 for expenses to arrive at a net income of $71,592.  A capitalization rate of 9.7% was extracted from the market using the sales data contained in the sales comparison approach to value.  Capitalizing the net income resulted in an estimated value under the income approach of $740,000.

Reconciling the three approaches to value the board’s appraiser estimated the subject property, excluding the cellular tower, had an indicated value of $740,000.  The board’s appraiser also estimated the contributory value of the cellular tower located on the subject property to be $21,000.  Adding the components together the appraiser estimated the subject property had a market value of $761,000.

The next witness called on behalf of the board of review was the St. Charles Township Assessor.  The township assessor testified that cellular towers are classified and assessed as real estate.  A copy of the subject’s property record card disclosed the cellular tower had been valued.  The witness explained that towers are valued at $90,000, which was determined through the evaluation of leases.

The board of review also submitted a list of twelve sales of commercial properties that was compiled by the township assessor.  The list contained the address, date of sale, sale price, year built, and size of the comparables.  The comparables were constructed from 1969 to 1997 and ranged in size from 11,850 to 131,801 square feet.  The sales occurred from February 1995 to December 1997 for prices ranging from $620,000 to $5,647,000 or from $31.51 to $72.52 per square foot of building area.

Based on this evidence the board of review’s representative requested the Property Tax Appeal Board find the subject building and land to have a market value of $740,000 to which $90,000 should be added for the value of the cellular tower for a total market value of $830,000.

After hearing the testimony and considering the evidence the Property Tax Appeal Board finds that it has jurisdiction over the parties and the subject matter of the appeal.  The Board further finds that a reduction in the subject’s assessment is supported by the evidence contained in the record.  The appellant argued the market value of the subject property was not accurately reflected in its assessed valuation.  The subject’s total assessment of $304,752 reflects a market value of $916,547 using the 1998 three year median level of assessments for Kane County of 33.25%.  The appellant submitted a summary appraisal in which the appraiser estimated the subject property had a market value of $645,000.  The board of review submitted an appraisal in which the subject property was estimated to have a market value of $761,000.  Both appraisers arrived at an estimated market value less than the value reflected by the subject’s assessment.

After reviewing the appraisals and considering the testimony, the Property Tax Appeal Board finds the best evidence of value in the record is the appraisal submitted by the board of review estimating the subject property had a market value of $761,000 as of the assessment date at issue.  The board of review’s appraiser developed the three approaches to value in estimating the subject’s market value.  With respect to the cost approach the board of review’s appraiser estimated the subject had a market value of $735,000.  The appellant’s appraiser did not develop the cost approach in his appraisal.

Both appraisers developed the sales comparison approach to value.  The Board finds the board of review’s appraiser’s sales analysis under the sales comparison approach is superior to that developed by the appellant’s appraiser.  First, the testimony revealed that the board's appraiser actually physically inspected and measured each of the comparable sales.  The appellant’s appraiser did drive-by inspections of most of the comparable sales he used.  Second, the Board finds the board of review’s appraiser’s testimony regarding the manner in which he verified the sales more credible than that testified to by the appellant's appraiser.  In all the appraisers submitted information on 12 comparable sales, two of which were duplicates.  One sale both appraisers used was significantly larger than the subject property and sold for $1,100,000 or $35.09 per square foot of building area.  Because of the size difference this sale is given little weight.  The appellant’s comparable sale number two was also significantly larger than the subject with 42,500 square feet; therefore, this sale is given less weight.  The board of review’s comparable sale number two was significantly smaller than the subject with 6,080 square feet; therefore, this sale is given less weight.  The remaining sales used by the appraisers ranged in size from 10,750 to 21,929 square feet.  The remaining comparables sold from November 1996 to July 1998 for prices ranging from $625,000 to $1,125,000 or from $47.30 to $58.14 per square foot of building area.  One of these comparables used by both appraisers contained 12,045 square feet and sold in March 1997 at a price of $52.14 per square foot of building area.  After analyzing these sales the Board finds the board's appraiser's conclusion that the subject property had an indicated value of $47.00 per square foot or $745,000 is better supported than the appellant's appraiser's estimate the subject had a unit value of $40.00 per square foot.

The final approach developed by the appraisers was the income approach to value.  The board finds the board's appraiser's estimate of the subject’s market rent is better supported than that developed by the appellant's witness.  The board's appraiser did a more thorough analysis of the subject’s actual income and used more rental comparables than did the appellant's appraiser.  Furthermore, the appellant's appraiser had mistakes or discrepancies in his income approach with respect to the potential gross income and the deduction for vacancy and collection loss.  The Board also finds the board of review's appraiser's estimate of the expenses to be deducted from the effective gross income was more credible.  The Board finds that both appraisers were in near agreement with respect to the capitalization rate to be applied to the net income.  In conclusion the Board finds that the board of review's income approach analysis was superior to that developed by the appellant.

The Board also finds that the appellant did not consider the contributory value of the cellular tower located on the subject property in estimating the subject’s market value.  The board of review's appraiser; however, did estimate the contributory value of the cellular tower to be $21,000.

The Property Tax Appeal Board accords little weight to the raw sales data submitted by the board of review since there was a lack of descriptive data about the individual sales to do a meaningful analysis.  Additionally, the Board finds the township assessor’s testimony that cellular towers were valued at $90,000 was not supported by any market data to justify that estimated value.

In conclusion, the Property Tax Appeal Board finds the best evidence of value in the record is the appraisal submitted by the board of review.  As a result the Property Tax Appeal Board finds the subject property had a market value of $761,000 as of January 1, 1998.  Since market value has been determined the 1998 three year median level of assessments for Kane County of 33.25% shall apply. 

The subject property consists of a 105,600 square foot parcel of land improved with an office/industrial facility of steel, concrete and masonry construction containing 131,457 square feet of total building area.  The site also includes a two-story masonry building containing 3,286 square feet (Lincoln Depot) originally constructed in 1914.  The plant section was constructed in 1973 and contains a total of 48,286 square feet including unfinished basement area.  The office section, constructed in 1981, consists of a three-story structure containing a total of 83,171 square feet including unfinished basement area.  Site improvements include landscaping, sidewalks, parking area and exterior lighting.  The subject property consists of a printing press/distribution center with 53.7% of office area; 30.2% unfinished basement area and 16% of plant area with 14 to 15 feet ceiling heights.

The appellant appeared before the Property Tax Appeal Board by its attorney claiming the market value of the subject property was not accurately reflected in its assessed valuation.  In support of this contention, a summary appraisal report of the subject property was presented.  The preparer of the appraisal report was present at the proceeding and was called as the appellant’s expert witness.  The appraiser stated his education and experience in the appraisal field and noted he is a certified general appraiser licensed by the State of Illinois.

The appraiser stated that he performed a detailed inspection of the subject facility on September 10, 1998 and December 29, 1998.  In his opinion the highest and best use of the subject site as vacant, would be as a commercial or office development.  The maximally productive use of the subject parcel as improved is a continuation of its current use.

To estimate the market value of the subject facility, the appraiser performed and analyzed the three traditional approaches to value to arrive at a final estimate of value of $4,400,000 as of January 1, 1998.

The first valuation method developed was the cost approach.  The initial step under the cost approach is to estimate the value of the land as if vacant.  Six suggested comparable vacant land sales and one offering were analyzed.  Due to a limited amount of transactions of large, vacant commercial parcels, sales of smaller parcels in the area were used for comparison.  The parcels have varying degrees of comparability to the subject site and range in size between 5,440 square feet and 25,120 square feet.  They sold between December 1995 and March 1998 for unit prices ranging between $6.45 per square foot and $22.76 per square foot.  The offering contains 28,400 square feet and was available at $12.32 per square foot in September of 1998.  Based upon the analysis of the sale properties regarding location, size, utility, and market conditions on the sale date and accessibility to major traffic arterials, the appraiser estimated the market value of the subject parcel to be $13.00 per square foot or $1,375,000 (rounded).

In the cost approach, the appraiser must estimate the cost new on the date of the appraisal for “replacing” or “reproducing” the physical components of the improvements.  In this appraisal, the reproduction cost new was employed. The appraiser consulted Boeckh’s Automated Cost Estimator, Marshall Valuation Service and performed a survey of local cost indexes to estimate the reproduction cost new of the facility’s improvements.  This analysis developed a total reproduction cost of the improvements of $6,899,014.  Based upon depreciation derived from the market sales contained within the report, an average rate of depreciation of 2.5% per year was determined for the subject facility.  The appraiser concluded the subject facility has a weighted average age of 22 years (as of January 1, 1998), which results in a total amount of depreciation from all causes of 55%.  After deducting the depreciation from the estimated reproduction cost new of the improvements, the appraiser estimated the depreciated value of the subject’s improvements to be $3,104,961.  The subject property’s estimated land value of $1,375,000 was added to the depreciated cost new of the improvements to arrive at a final conclusion of value by the cost approach of $4,480,000.

The next approach to value analyzed was the income approach.  Under this method the appraiser estimated the subject property’s potential gross income based on an analysis of the market rent of seven properties that were leased.  The appraiser stated that due to the nature of the subject facility, minimal comparable rental data exists.  A variety of rental properties were included because of the subject’s different sections (office, plant and basement).  These properties rented for prices ranging between $2.63 per square foot and $12.90 per square foot of area.  Upon considering adjustments for utility, condition, location, age and market conditions, the appraiser concluded the subject property would have a market rent of $10.00 per square foot or a potential gross income or $1,347,430.  Vacancy and credit losses were estimated to be 10% or $134,743 and were deducted to arrive at an effective net income of $1,212,687 for the subject property.  Operating expense for the subject property was estimated to be $4.50 per square foot annually.  This amount was deducted from the effective net income to arrive at a net operating income of $606,343 (excluding real estate taxes).  A weighted capitalization rate of 11% was developed using the comparative market method and the band of investment technique.  An effective tax rate of 2.6% was added to the weighted capitalization rate of 11% to develop a total capitalization rate of 13.6%.  After capitalization of the estimated net operating income of $606,343, a value of $4,460,000 (rounded) was developed for the subject property by the income approach.

The final approach to value performed by the appraiser was the sales comparison approach.  Under this method, six sales of industrial properties were analyzed and compared to the subject property.  The appraiser stated that an analysis of market data from the subject’s immediate area and the surrounding area indicated a lack of recent sales of comparable properties.  Thus, the comparable sales selected for comparison are from areas that have significantly lower land values than the subject property.  Due to the significant differences in land value, estimated land values were excluded from the sale prices of the comparables to arrive at unit prices per square foot of building area only.  According to the appraiser, the comparables’ land value estimates are based upon the prevailing land values in the locale of the properties.  He further stated that by isolating the contributory value of the building improvements, only the physical characteristics of the comparable properties and the market conditions of the sales needed to be analyzed.

Comparable sale #1 is an eight-year-old one story industrial facility located in Addison, Illinois.  The building contains 99,767 square feet of area with 7.0% of the area devoted to office space.  The plant area has 24.0’ clear ceiling heights.  This property sold in January 1996 for a unit price per square foot including land of $36.30 and a unit price per square foot of building area excluding land of $23.37.  Comparable sale #2 is a 13-year-old one story industrial facility located in Mount Prospect, Illinois.  The building contains 107,944 square feet with 22.0% of office area and 22.0’ clear ceiling heights.  This property sold in March 1998 for $35.39 per square foot including land and a per square foot unit price of building area excluding land of $26.31.  Sale #3 is a 134,796 square foot industrial facility with 8.1% devoted to office space.  It has a weighted age of 27 years and weighted ceiling heights of 24.0’.  This property is located in Champaign, Illinois and sold in June 1998 for $17.99 per square foot including land or $12.95 per square foot of building area excluding land.

Comparable sale #4, located in Lisle, Illinois, is a one-story, steel framed and masonry constructed, manufacturing building that was converted into an office building with 17% warehouse area.  The building contains a total of 360,000 square feet and is situated on three parcels containing a total of 1,180,476 square feet of land.  This property sold in December 1995 for $22.92 per square foot including land and $11.80 per square foot of building area excluding land.  Sale #5 is located in Mt. Vernon, Illinois and consists of a one-story, steel framed manufacturing type building containing 367,200 square feet situated on 5,619,240 square feet of land.  The building was constructed in 1979 and 1985 and had an average age of 12 years.  It has 15,680 square feet (3.8%) of office space; 28.0 to 34.0 foot ceiling heights; 14 dock height doors and an internal rail dock.  This property sold in January 1994 for $9.53 per square foot including land and $9.00 per square foot of building area excluding land.  The final comparable sale analyzed consists of two one and part two story, steel framed and concrete constructed light manufacturing and office buildings containing a total of 495,000 square feet situated on 2,613,600 square feet of land.  The facility is located in Arlington Heights, Illinois and contains 43.3% office space and 56.7% light manufacturing space.  This property sold in November 1996 for $30.30 per square foot with land and $17.17 per square foot without land.

Due to the significant differences in land value between the subject and the sales comparables, the appraiser’s estimated land values were excluded from the sale prices of the comparables to arrive at unit prices per square foot of building area.  The six comparable sales analyzed indicated a range of unit prices of between $9.00 and $26.31 per square foot of building area excluding estimated land values.  After considering any necessary adjustment factors such as time of sale, building area, land to building ratio, age, per cent of office space and the physical condition of each facility, the appraiser estimated the subject buildings had a market value, excluding land, of $22.00 per square foot of building area, or $2,964,346.  After adding in the subject’s estimated land value of $1,375,000, a value of $4,340,000 was indicated for the subject property by the sales comparison approach.

In reconciling the three approaches to value, the appraiser gave primary weight to the sales comparison approach since it reflects the actions of typical buyers and sellers in the market place.  The income approach was also considered to be a reliable indicator of value but was given secondary consideration due to the lack of comparable rental market data.  The least amount of weight was given to the cost approach due to the difficulty in estimating accrued depreciation from all causes.  Based thereon, the appraiser concluded a final market value of the subject property as of January 1, 1998, of $4,400,000.

Under cross-examination the appellant’s appraiser stated that he considered the subject property to be an industrial facility with a greater than average percentage of office space.

The board of review submitted “Board of Review-Notes on Appeals” wherein the subject property’s final 1998 assessment of $2,273,796 was disclosed.  The assessment equates to a market value of $6,859,113 using the 1998 three year median level of assessments for Sangamon County of 33.15%.

In support of the valuation placed on the subject property, the board of review presented evidence prepared by the Capital Township Assessor’s Office.  The Deputy Assessor was present at the proceeding and presented the evidence prepared by the township.  The township assessor was of the opinion that the subject property should be valued primarily as an office building with light industrial area.  Thus the evidence submitted to estimate the market value of the subject facility consisted of comparable sales of office buildings in close proximity to the subject property and sales of warehouse facilities in the local area.  Copies of property record cards for the comparables and the subject property were also submitted detailing each property’s cost analysis.

Six suggested sales of comparable office buildings in the central business district area in close proximity to the subject property were investigated and summarized on a spreadsheet.  The comparables ranged in size between 11,556 square feet and 101,942 square feet including finished basement areas.  They are situated on sites containing between 13,908 square feet and 206,692 square feet.  These properties sold between September 1993 and December 1998 for unadjusted prices ranging between $975,000 and $5,600,000 including land or from $54.93 per square foot to $84.37 per square foot of building area with a median selling price of $74.08 per square foot.  Using the median office selling price per square foot of $74.08 and applying this value to the subject’s office area of 66,953 square feet, the assessor concluded a value of the subject’s primary office building area including land of $4,959,878

With respect to the valuation of the subject’s plant and warehouse area, the township assessor submitted five sales of industrial/warehouse facilities located in the Springfield area.  The assessor testified that the sales are in locations that are inferior to the location of the subject property, which is in Springfield’s central business district.  The comparables ranged in building size between 10,000 square feet and 27,792 square feet and are situated on parcels ranging between 25,120 square feet and 107,158 square feet.  These properties sold between April 1994 and August 1997 for unadjusted prices ranging from $225,000 to $700,000 including land or between $19.84 and $31.50 per square foot of building area with a median selling price of $25.97 per square foot.  Using the median warehouse selling price per square foot of $25.97 and applying the subject’s warehouse area of 54,744 square feet, a value of $1,421,987 including land was indicated for the industrial/warehouse portion of the subject facility.  It was further noted that the subject property’s office building has 34,293 square feet of unfinished basement area that was calculated at an equivalent square footage rate of 75%.  Also, the square footage of the Lincoln Depot building, while being finished area, was included in the warehouse square footage of the subject due to its age and lack of utility.

The assessor explained the sum of the above-calculated office and warehouse values equates to an estimated value for the subject property including land of $6,381,865.  Based on the local sales data, the assessor contends the appraisal submitted by the appellant is outside the range of values established by the office and warehouse market in the Springfield area, particularly in Springfield’s Downtown central business district.  On the basis of forgoing analysis and conclusions, the assessor and board of review request that the subject’s assessment be adjusted to reflect a value no lower than $6,381,865.

In addition to the market analysis, the assessor explained that he performed an analysis of the rent comparable properties submitted by the appellant’s appraiser.  He detailed the significant differences between the subject property and the comparables with respect to location, age, percent of finished office area and quality of construction.  He testified that rent comparable #7 was most similar to the subject with a reported rent of $12.90 per square foot.  However, the appellant’s appraiser used a rent value of $10.00 per square foot to estimate the value of the subject property by the income approach.

Under cross-examination, the assessor explained his experience in the appraisal field and his official duties as Deputy Township Assessor.  He further explained the valuation methodologies utilized by the assessor in the mass appraisal environment.  He stated that there are very few industrial buildings located in the central business district of Springfield.  The witness was also questioned about another set of sales submitted by the board of review that had conflicting amounts of building areas in comparison to the same properties he analyzed.  He explained that he was not responsible for that data.  However, it did include sales of properties he analyzed.  The assessor stated that there was no value adjustment grid performed for differences between the subject properties and the suggested comparable sales.  He explained that a value range was developed from the office sales and the warehouse sales.  The median value per square foot for office sales and the industrial sales was then applied to the subject property.

Under redirect examination, the assessor explained that building square footage is determined by a field inspection and listed on the property record cards.  The property record cards are updated when a building permit is filed and after the assessor’s field staff inspects the construction being performed at the property.

The next witness presented by the board of review was a state certified general real estate appraiser.  The appraiser performed an appraisal review of the appellant’s appraisal report of the subject property.  In an overview, the appraiser pointed out the subject building is classified as an industrial facility with office by the appellant’s appraisers.  However, the primary subject building has a layout that consist of 53.7% finished office/mezzanine area, 16.0% unfinished plant area and 30% unfinished basement area.  In the Description of the Improvements section of the appellant’s appraisal, the appraisers stated, “the subject facility’s composition and design is unlike typical industrial or office properties”.  However, he noted the value indications via the cost, income capitalization and the sales comparison approaches are based on the classification of the subject improvements as primarily an industrial facility with office area.  The review appraiser stated the primary building represents a mix of both industrial and office with the most area devoted to office.  Thus, in his opinion, the classification of the building and the highest and best use analysis of the property as determined by the appellant’s appraisers are incorrect.  The review appraiser was of the opinion that if the building were vacant and available for sale, given its present level of office finish and location, it would be purchased for office use.

The review appraiser next gave a detailed analysis of the data employed by the appellant’s appraisers to arrive at value estimates via each approach to value.  Each valuation approach was discussed in detail addressing the adequacy and relevance of the data and the appropriateness of the employment of this data and the adjustments applied.

In cross-examination, the review appraiser explained statements and conclusions arrived at with respect to data analyzed in the appraisal performed on the subject property.  He further explained where he obtained sales and rental information and how the information was confirmed regarding the data that was provided to the assessor.

After hearing the testimony and reviewing the record, the Property Tax Appeal Board finds it has jurisdiction over the parties and the subject matter of this appeal.  The Board further finds the evidence contained in the record supports a reduction in the assessed valuation of the subject property.

The subject property’s assessment of 2,273,796 reflects a total valuation of $6,859,113 using the 1998 Sangamon County median level of assessments of 33.15%.

In the instant appeal, the taxpayer and the board of review presented valuation evidence to estimate the market value of the subject property as of the assessment date in question.  The taxpayer submitted a summary appraisal report of the subject property that classified the subject’s highest and best use as industrial.  The appraisal relied on sales and rental data of industrial use properties with office areas to estimate the subject’s market value of $4,400,000.  The board of review relied on a mix of sales of comparable office buildings and industrial properties to arrive at an estimate of value of the subject property of $6,381, 865.

In the cost approach, the appellant’s appraisers first analyzed seven suggested comparable vacant land sales.  The parcels had varying degrees of comparability to the subject site.  After considering adjustments for location, size, shape and market conditions, the appraisers estimated a market value for the subject parcel of $1,375,000 (rounded).  The 1998 assessment of the subject parcel of $430,008 equates to a value of $1,297,400 using Sangamon County’s 1998 three-year median level of assessment of 33.15%.

The appellant’s appraisal analyzed a depreciated cost approach to value the subject’s improvements.  However, the conclusion of value arrived at was accorded less weight by the appraisers due to the difficulty in estimating the depreciation to be applied to the improvements.  The Property Tax Appeal Board also places less emphasis on the cost approach to value because of the difficulty and subjective nature in estimating depreciation.  Thus, the Board accords less weight to the conclusion of value under this approach.

Under the income approach, the appellant’s appraisers developed a potential gross income for the subject property based on market rents of industrial properties in the general area.  However, expenses attributed to the subject property were estimated without substantive documentation from the market to support the reliability of the data.  The estimated net income attributed to the subject property was capitalized by an overall rate of 13.6% to arrive at a final estimate of value for the subject property.  The appraisers gave secondary weight to this approach due to the lack of comparable rental properties in the area.  The Board likewise accords less weight to this analysis because it lacks in probative documentation necessary for conclusions arrived at in estimating the income, vacancy, collection losses, and expenses of the subject property.

The Property Tax Appeal Board finds the best evidence in the record to estimate the subject property’s market value are the comparable sales submitted by the parties.  The courts have stated that where there is credible evidence of comparable sales, these sales are to be given significant weight in estimating a market value of a similar property.  Chrysler Corp. v. Illinois Property Tax Appeal Board, 69 Ill.3d 207 (2nd Dist. 1979); Willow Hill Grain, Inc. v. Property Tax Appeal Board, 187 Ill.App. 3rd 9 (5th Dist. 1989).

The appraisal submitted by the appellant classified the subject property as an industrial facility with office area.  The appraisers investigated six sales of industrial use properties with office areas.  These properties were not located in the Springfield area and offered varying degrees of similarity to the subject property.  Because the comparable sales selected for comparison are from areas that were reported to have significantly lower land values, the appraisers extracted the estimated land values from the sale prices of the comparables to arrive at unit prices per square foot of building area.  The resulting unadjusted building values of the comparables ranged between $9.00 and $26.31 per square foot.  After adjustments, the appraisers concluded the subject property had a market value of $22.00 per square foot of total combined building area.

There were a total of eleven sales comparables submitted on behalf of the board of review.  Five of the comparables were office buildings located in the Springfield’s central business district like the subject property and six were industrial use properties located in the area.  Based on this mix of comparable sales, unadjusted median values of $74.08 per square foot for the office area and $25.97 per square foot for the industrial and unfinished basement area including land was indicated for the subject property.

Due to the amount of office area contained in the subject facility and considering its location in the central business district of Springfield, the Board finds the best method to estimate the subject’s market value is developed by a mix of comparable office sales to estimate a separate value of the office area with sales of industrial facilities to value the industrial section of the property.

After reviewing the suggested comparables offered by the parties and considering adjustments for locations, land sizes, age, physical characteristics and other relative differences between the properties and the subject property, the Board finds the adjusted sale data of the most similar properties support a reduction in the valuation of the subject’s building improvements.  Thus, based on its review of the valuation evidence submitted by the parties and upon consideration of adjustments for differences between the suggested comparable properties and the subject property, the Property Tax Appeal Board finds a value of $70.00 per square foot (66,953) including land is supported for the office area and a value of $25.00 per square foot (54,755) including land, is supported for the industrial portion of the facility.  This results in a total market value for the subject property including land, as of the assessment date in question, of $6,056,000 (rounded).  Since market value has been established the 1998 Sangamon County median level of assessments of 33.15% shall apply.

Atmospheric Air Separation Facility
(35 ILCS 200/1-50) ,  (35 ILCS 200/9-145)

Equitable Assessment – Manufacturing & Warehouse Facility

Jurisdictional Issue – TIF District Exemption
(35 ILCS 200/18-170), (35 ILCS 200/16-70)

Market Value – Industrial Complex

Market Value – Multi-Tenant Building

Market Value – Office/Industrial Complex

 Market Value – Industrial Complex, Median Level of Assessments Contention
(Official Rules of the Property Tax Appeal Board 1910.65(c), 1910.63(e), 1910.50(c)(3),1910.90(i)), (35 ILCS 200/16-180 & 185),  (35 ILCS 200/17-10 & 17-5)