Present: All the Justices
BOARD OF SUPERVISORS OF
FAIRFAX COUNTY
v. Record No. 992459 OPINION BY JUSTICE BARBARA MILANO KEENAN
September 15, 2000
HCA HEALTH SERVICES OF
VIRGINIA, INC., ET AL.
FROM THE CIRCUIT COURT OF FAIRFAX COUNTY
Jane M. Roush, Judge
In this appeal, we consider whether the trial court erred:
(1) in holding that the Board of Supervisors of Fairfax County
(the Board) committed manifest error in making certain real
estate tax assessments of a hospital property; and (2) in
correcting the assessments under the evidence presented.
HCA Health Services of Virginia, Inc. (HCA) filed a
petition in the trial court under Code § 58.1-3984 alleging that
the Board erroneously assessed its property, known as Reston
Hospital (the hospital), in 1991, and in 1993 through 1996. 1 The
Board assessed the value of the hospital property in those years
in a range between about $22,340,000 and $26,770,000. HCA
alleged, among other things, that the assessments exceeded the
property's fair market value, which HCA contended was
1
HCA Health Services of Virginia, Inc. was the owner of
Reston Hospital from January 1, 1991 through October 31, 1996,
when Columbia Arlington Health Care System, L.L.C., acquired the
hospital as part of a joint venture. We will refer to these two
property owners collectively as HCA in this opinion.
$12,500,000 in each of the five years at issue. HCA and the
Board agreed at trial on the value of the land on which the
hospital was constructed but disagreed on the value of the
improvements to the land.
The hospital is a 127-bed facility situated on 14.3 acres
in Fairfax County (the County) and contains 126,400 square feet
of floor space. The hospital was built in 1986 at a cost of
$13,841,049, or $115.82 per square foot. The hospital building
was expanded in 1989 and 1991. Between 1990 and 1996, the
hospital's net revenues increased each year, from about $43.5
million in 1990 to about $72 million in 1996. The hospital is
the only general hospital operating in the County that is not
tax-exempt.
In response to HCA's petition, the Board filed a plea in
bar, asserting that HCA's cause of action on the 1991 assessment
was barred by the limitation period of Code § 58.1-3984. In an
amendment to the statute effective July 1, 1991, the limitation
period for challenging real estate tax assessments was reduced
from five years to three years. 2 HCA filed the subject petition
challenging the 1991 assessment in the trial court in December
1996. 3 The Board argued that the three-year limitation period
2
See 1991 Va. Acts, ch. 8.
3
The limitation period provided in Code § 58.1-3984 runs
from the last day of the tax year for which an assessment is
made.
2
applied because HCA's cause of action on the 1991 assessment
arose in July 1991 when the taxes were due and paid.
HCA asserted that the July 1991 amendment to Code § 58.1-
3984 did not apply to its claim regarding the 1991 assessment,
because the five-year limitation period was in effect on the
date of the assessment, January 1, 1991. The trial court agreed
with HCA, ruling that the "injury occurs at the time of the
assessment" and, thus, that the five-year statute of limitation
applied.
At a bench trial, the evidence showed that for the years at
issue, the County's real estate appraisers used the depreciated
reproduction cost approach to valuation to determine the fair
market value of the hospital property. They did not use either
of two other common methods of valuing real estate, the sales
comparison approach and the income capitalization approach.
In applying the depreciated reproduction cost method of
valuation, the County's appraisers used guidelines contained in
a manual developed by the Marshall Valuation Service (the
Marshall manual). These guidelines incorporate cost data
routinely used by real estate appraisers. See Appraisal
Institute, The Appraisal of Real Estate 350-51 (11th ed. 1996).
The Marshall manual uses five general building classifications,
which are termed Classes A, B, C, D, and S, based on a
building's structural composition. Within each general building
3
classification, the Marshall manual provides for the further
classification of buildings as "excellent," "good," "average,"
and "low cost," based on the quality of construction, and
assigns a base cost per square foot for each of these
classifications.
In each year at issue, the County appraisers classified the
hospital using the Marshall manual's classification system. The
appraisers adjusted the base cost per square foot stated in the
Marshall manual to reflect such factors as the number of floors
in the building, recent changes in construction costs, and
variations in construction costs based on location. The
appraisers multiplied the adjusted cost per square foot, or
reproduction cost, by the number of square feet in the hospital
to determine the "base building cost."
After consulting the depreciation table in the Marshall
manual, the County appraisers deducted a percentage from the
"base building cost" for depreciation, based on the age of the
building and the appraisers' estimation of its expected life.
The building depreciation percentages listed in the Marshall
manual reflect typical physical depreciation as well as
functional obsolescence, which represents any loss in value
arising from a building's lack of utility or desirability. The
appraisers limited their deduction for functional obsolescence
to the percentages listed in the Marshall manual and they did
4
not make any deductions for external obsolescence, which
represents any loss in value resulting from causes unrelated to
the subject property. The appraisers applied depreciation
deductions ranging from 1% to 5% in the years at issue to arrive
at the depreciated reproduction cost of the building.
For 1991, the County's appraiser, Walter Girod, rated the
hospital building as "Class B - Excellent," and multiplied the
building's square footage by a reproduction cost of $175 per
square foot. Girod then applied a 1% depreciation reduction and
concluded that the value of the improvements to the land was
$19,089,015. 4 When the land value was included, the total
assessed value of the property in 1991 was $23,657,420.
Girod testified that there are several sources of
information for determining the actual construction costs of a
hospital. He stated that these costs are an important
consideration in assessing the value of a property, but
acknowledged that he could not remember whether he considered
actual construction costs when performing the 1991 appraisal.
Girod also testified that he did not consider any trends or
changing conditions affecting the health care industry in making
his appraisal.
4
In each year at issue, the County's appraisals of the total
value of the hospital's improvements included the value of the
building, as calculated using the Marshall manual, plus $250,000
to reflect the value of certain paved areas of the property.
5
David Williams performed the 1993 and 1994 appraisals for
the County. In 1993, Williams assigned a "Class A - Good"
rating to the hospital building. His use of this rating
resulted in a reproduction cost calculation of $166 per square
foot, to which he applied a 2% depreciation deduction. Williams
testified that since the hospital was continuing to expand, he
made no additional allowance for obsolescence. In 1993, he
concluded that the value of the improvements to the land was
$18,756,475, and that the total value of the property was
$23,432,985.
Williams testified that at the time he made the 1993
assessment, he "was not aware of" the hospital's actual
construction costs. He did not attempt to obtain this
information from HCA and did not investigate whether there was
external obsolescence or any other market factor affecting the
value of the hospital.
In 1994, Williams changed the classification of the
building from "Class A - Good" to "Class B - Excellent" because
he concluded that the hospital building had some characteristics
of both classes A and B. Williams' use of the "Class B -
Excellent" rating resulted in a reproduction cost calculation of
$200 per square foot. After applying a 4% depreciation
deduction, Williams concluded that the value of the improvements
6
to the property was $22,091,920. The total assessed value of
the property in 1994 was $26,768,430.
Williams testified that when making the 1994 appraisal, he
did not consider the hospital's actual construction costs and
did not request that information from HCA. He stated that in
determining depreciated reproduction costs, he consulted only
the Marshall manual and did not investigate any effect that
market factors may have had on the hospital's value.
David S. Amey performed the County's 1995 appraisal on the
property. He assigned a "Class A - Excellent" rating to the
building, which resulted in a reproduction cost calculation of
$197.61 per square foot, and he applied a 5% depreciation
deduction to this amount. Amey testified that he inspected the
hospital building and did not observe any signs of abnormal
physical depreciation or functional obsolescence. After
reviewing the hospital's gross receipts and noting that its
income was increasing steadily, Amey concluded that an
additional depreciation deduction was not warranted. He
determined that the value of the improvements was $21,606,110,
and that the total value of the property was $26,282,620.
HCA appealed from the 1995 assessment to the County's Board
of Equalization (BOE), asserting that the fair market value of
the property was $11 million. In support of its appeal, HCA
provided the County with a list of sales of hospitals in
7
Virginia and other states. Amey testified that in response to
HCA's appeal, he requested additional information about the
listed hospitals from HCA so that he could perform a sales
comparison analysis. He explained that in order to perform even
a "minimal [sales] comparison," he needed to know the gross
income of each hospital so that a "gross income multiplier"
could be calculated. Amey testified that when HCA did not
provide the requested information, he concluded that the
depreciated reproduction cost analysis method was "the most
valid approach" for valuing the property because there was
insufficient market data available to perform either a sales
comparison or a capitalization of income analysis.
Amey testified that the actual construction cost of a
building is relevant to the determination of a property's fair
market value and should be considered when assessing a property
such as the hospital building that was built "fairly recently."
Amey explained that actual construction costs may be used to
determine present reproduction costs by multiplying the actual
costs by certain cost indexes. However, he testified that he
was not certain whether he had done these calculations when
performing the 1995 appraisal. Amey stated that during HCA's
appeal to the BOE in 1995, he considered the building costs of
construction projects at two "non-profit" hospitals in Fairfax
County, which confirmed his judgment that the cost per square
8
foot calculation that he had applied to the hospital building
was reasonable. 5
Lisa Altoft performed the County's 1996 appraisal of the
hospital property. Using a "Class A - Good" designation for the
building, she calculated that the base reproduction cost per
square foot was $162.12. She applied a 5% depreciation rate to
that amount and concluded that the value of the property
improvements was $17,750,630. The total assessed value of the
property in 1996 was $22,447,140.
Richard Carroll Green, Jr., assistant director of the
County's Department of Taxation, testified that the County's
appraisers did not have access to a central research file on
hospital valuations. He stated that he was unaware of any
efforts by the County appraisers to track trends in the health
care industry, and that he had no personal knowledge of any
emerging problems facing that industry. Larry L. Lewis, the
County's supervising appraiser for the Taxation Department's
commercial property division, testified that the County's
appraisers routinely consider national sales data when
appraising other types of commercial property, such as regional
shopping malls.
5
As a result of the 1995 appeal, the BOE reduced the total
assessment of the property to $22,339,319, by re-classifying the
building as "Class A - Good."
9
HCA presented the testimony of James Kenneth Upchurch, who
qualified as an expert witness on the subject of hospital design
and planning. Upchurch testified that the Reston Hospital had
experienced some obsolescence over recent years. He explained
that since the hospital was first planned in 1983, public and
private insurers had made "major changes" in the methods they
used to reimburse hospital insurance claims. Upchurch stated
that as a result of these reimbursement changes, the demand for
hospital inpatient services had decreased while the demand for
outpatient services had greatly increased. To illustrate this
fact, he testified that about 80% of the surgical procedures
performed at the hospital are done on an outpatient basis. He
stated that if the hospital had been constructed in any of the
tax years at issue, it would have been designed differently to
accommodate such demands for outpatient services.
Upchurch testified that the hospital design was based on an
"old model" of health care that does not adequately meet the
needs of the current large volume of outpatients. He explained
that unlike the design of the Reston hospital, modern design
practices provide for outpatient services on the ground floor of
a hospital building, with large common areas, convenient patient
access, and separation of these facilities from the inpatient
areas. Upchurch stated that the Reston Hospital design was
deficient in several areas, including the main lobby, the
10
waiting rooms for surgery and radiology, the cafeteria, and the
facilities for support services. He also explained that the
hospital had an insufficient number of private rooms and
critical care rooms, and that it was not in compliance with
requirements for accessibility by disabled persons.
HCA also presented the testimony of William H. Beazley,
III, who qualified as an expert witness on the valuation of
hospitals. Beazley had prepared an appraisal report in which he
concluded that the total fair market value of the hospital
property for each of the five years at issue was $12,500,000.
In reaching this conclusion, Beazley valued the hospital using a
depreciated reproduction cost approach, an income capitalization
approach, and a sales comparison approach.
Beazley explained that the goal of an appraisal is to
determine a property valuation that reflects all factors
influencing the market value of the property. According to
Beazley, if an appraiser does not have a solid understanding of
the hospital industry and the market in which hospitals operate,
the use of a depreciated reproduction cost approach has a "great
potential for error" since reproduction costs are not
necessarily equal to a hospital building's value. He explained
that the use of a cost approach to appraise hospital buildings
is "typically deficient" because of "weak treatment" of all
potential factors influencing obsolescence.
11
Beazley explained that market analysis data concerning the
hospital industry provide an appraiser vital information for use
in all three approaches to valuation. In a depreciated
reproduction cost analysis, market data provide information
about current building costs as well as market conditions that
are relevant to determining functional and external
obsolescence. Beazley noted that the Marshall manual directs
appraisers to include a market study when conducting a
depreciated reproduction cost analysis.
Beazley testified that the amount of market data available
concerning health care facilities exceeds the amount of data
available for any other type of property he has appraised. He
explained that because of government regulation of the health
care industry, hospital income and expense information is
available from various government agencies. Beazley also stated
that there are more national sales of hospitals than sales of
regional shopping malls, and that a "considerable amount" of
information concerning hospital sales is readily available. He
identified numerous publications and resources available on the
"Internet" that provide financial data, utilization statistics,
and discharge and occupancy figures for a few thousand
hospitals, including Reston Hospital.
In his use of the depreciated reproduction cost method of
valuation, Beazley used a "Class A - Average" rating for the
12
hospital building. He calculated that the hospital was entitled
to depreciation deductions ranging between 40.08% and 48.63% for
the five years at issue. These depreciation deductions included
physical depreciation percentages ranging between 12.5% and 25%,
and external obsolescence percentages ranging between 23.63% and
27.58%. These calculations reflected Beazley's determination
that the hospital had 44 excess beds and 39,885 square feet of
excess or obsolete floor space.
As part of his depreciated reproduction cost approach,
Beazley testified that he analyzed the actual construction costs
of the hospital in 1986, as well as the actual costs of the 1988
and 1991 additions. He explained that he applied a "trending
factor" to these costs to determine a present cost value for the
hospital, which he compared to the valuations he reached using
other methods of cost analysis.
Beazley also estimated the hospital's value using an income
capitalization analysis. Under this approach, Beazley
determined the net revenues attributable to the hospital's real
property, as distinct from its personal property, and multiplied
that net income by a capitalization rate to arrive at a current
or "actual" value of the hospital. Beazley testified that he
treated the hospital's outpatient revenue as "business revenue."
Therefore, rather than including the actual outpatient revenue
in his calculation of the hospital's net income, Beazley imputed
13
rent to the hospital from the outpatient service area occupying
12,660 square feet of the building. He also calculated a ratio
that he used to allocate all the hospital's expenses between
outpatient and inpatient services.
Beazley conducted a separate, sales comparison analysis to
test the reasonableness of the valuations he reached using the
depreciated reproduction cost and income capitalization
approaches. He considered eight "arms-length" sales of
hospitals that occurred between 1991 and 1996, including sales
of two hospitals in Virginia that are not tax-exempt. After
analyzing each sale, he arrived at a valuation of about $100 per
square foot for the Reston Hospital.
The Board presented the testimony of Courtney B. Lees, who
qualified as an expert witness in the valuation of health care
facilities, concerning her review of Beazley's deposition
testimony and appraisal report. She stated that the methods
Beazley used to determine depreciation and obsolescence were
flawed, and that Beazley improperly based his calculation of
physical deterioration on a 40-year life expectancy for the
hospital, when a 45-to-50-year life expectancy was more
accurate.
Lees also disagreed with Beazley's deductions for external
obsolescence. She testified that such deductions` should be
taken only if there has been a dramatic decline in hospital
14
occupancy combined with a loss of profitability. She stated
that neither of these factors affected the hospital's business
at the time of the challenged assessments.
Lees noted that in 1986, when the hospital was constructed
after a state regulatory agency determined a need for 127 beds,
the statewide hospital occupancy rate was 60%. In 1991, the
Reston Hospital's occupancy rate had declined to 53%. Lees
stated that this 7% decline was not "dramatic" and would not
result in the 35% decrease in required beds on which Beazley had
based his obsolescence analysis. She noted that from 1990 to
1997, the hospital had experienced increased total revenues and
an increase in its profit margin. Lees also testified that
Beazley's imputation of rent for outpatient services and his
allocation of expenses between inpatient and outpatient services
were based on unexplained and unsupported formulas that were
inconsistent with other calculations presented in his report.
The trial court issued an opinion letter in which it
concluded that the Board had committed manifest error in its
assessments of the hospital property in the five years at issue.
The trial court ruled that the County's appraisers committed
three errors in applying the depreciated reproduction cost
method of valuation. First, they failed to consider the actual
cost of constructing the hospital in 1986, which was $115 per
square foot. Second, the County's appraisers failed to consider
15
market factors impacting functional and external obsolescence.
Third, they misinterpreted the building classification
guidelines in the Marshall manual and failed to classify the
hospital building as a "Class A - Average" structure.
The trial court also concluded that the County's appraisers
erred by making "no effort or inquiry" to obtain sufficient data
to consider any method of valuation other than the depreciated
reproduction cost approach. The court noted that HCA showed
that there is a "wealth of information" publicly available
concerning hospitals, including Reston Hospital, "if even a
cursory examination or inquiry is attempted."
The trial court held that the Board's assessments
substantially exceeded the fair market value of the property,
and that its actual fair market value was $12,500,000 for each
of the years at issue. The trial court entered final judgment
correcting the assessments and ordering the Board to refund to
HCA about $687,000.
On appeal, the Board first argues that the trial court
erred in holding that a five-year limitation period governed
HCA's challenge to the 1991 assessment because the cause of
action accrued when the taxes were due or paid, rather than on
the date of the assessment. The Board next contends that the
trial court erred in concluding that the Board committed
manifest error in determining the assessments at issue. The
16
Board asserts that the County appraisers' use of the depreciated
replacement cost method as the sole method of valuation was
proper, and that the County appraisers did not have available
for their use sufficient reliable data to permit the application
of other valuation methods. The Board also asserts that the
evidence did not show that the assessments of the hospital were
inconsistent with proper and accepted appraisal practices. We
disagree with the Board's arguments.
Initially, we conclude that the trial court did not err in
holding that the five-year limitation period of former Code
§ 58.1-3984 applied to HCA's challenge to the 1991 assessment.
Under Code § 58.1-3281, real estate is assessed as of January 1
of each year. HCA's cause of action to correct the 1991
assessment arose on the effective date of that assessment,
January 1, 1991, when the five-year statute of limitations of
former Code § 58.1-3984 still applied. Since HCA filed its
petition challenging the 1991 assessment within five years of
the end of the tax year in which the challenged assessment was
made, its petition contesting the 1991 assessment was not time
barred. See Code § 58.1-3984.
We next consider general principles that govern the review
of a petition for correction of erroneous assessment of real
estate taxes. Under Art. X, § 2 of the Constitution of
Virginia, a taxing authority is required to assess real estate
17
at its fair market value. Generally, when a taxpayer challenges
a real estate tax assessment by filing a petition in a circuit
court to correct the assessment, the court is required to afford
a presumption of correctness to the taxing authority's
assessment of the real estate's fair market value. Tidewater
Psychiatric Inst., Inc. v. City of Virginia Beach, 256 Va. 136,
140-41, 501 S.E.2d 761, 763 (1998); County of Mecklenburg v.
Carter, 248 Va. 522, 526, 449 S.E.2d 810, 812 (1994); Board of
Supervisors v. Telecommunications Indus., Inc., 246 Va. 472,
475, 436 S.E.2d 442, 444 (1993); Arlington County Bd. v.
Ginsberg, 228 Va. 633, 640, 325 S.E.2d 348, 352 (1985). The
burden is on the taxpayer to rebut this presumption by showing
that the taxing authority committed manifest error or totally
disregarded controlling evidence. Code § 58.1-3984; Carter, 248
Va. at 526, 449 S.E.2d at 812; Telecommunications Indus., 246
Va. at 475, 436 S.E.2d at 444; City of Richmond v. Gordon, 224
Va. 103, 110, 294 S.E.2d 846, 850 (1982).
Once a trial court finds that a taxing authority committed
manifest error in determining an assessment, the court is
authorized to correct the assessment based on the evidence.
Code § 58.1-3987; Carter, 248 Va. at 526, 449 S.E.2d at 812-13;
Telecommunications Indus., 246 Va. at 476, 436 S.E.2d at 444;
Board of Supervisors v. Donatelli & Klein, Inc., 228 Va. 620,
627, 325 S.E.2d 342, 345 (1985). When the trial court makes a
18
finding of manifest error and corrects an erroneous assessment,
the trial court's judgment comes to us with a presumption that
the court's ruling based on its findings of fact is correct.
Carter, 248 Va. at 526, 449 S.E.2d at 812-13; Donatelli & Klein,
Inc., 228 Va. at 627, 325 S.E.2d at 345. We will set aside the
trial court's judgment only if it is plainly wrong or without
evidence to support it. Carter, 248 Va. at 526, 449 S.E.2d at
813; Telecommunications Indus., 246 Va. at 476, 436 S.E.2d at
444.
When a taxing authority uses a depreciated reproduction
cost approach as the sole method of assessing fair market value,
after the taxing authority has considered but properly rejected
the use of other valuation methods, the assessment is entitled
to a presumption of correctness. Tidewater Psychiatric, 256 Va.
at 142, 501 S.E.2d at 764; Norfolk and W. Ry. v. Commonwealth,
211 Va. 692, 700-01, 179 S.E.2d 623, 629 (1971). Here, the
evidence showed that the County's appraisers concluded that they
lacked reliable data to consider other methods of valuation,
even though they had not made an effort to acquire the data
necessary to perform appraisals based on such other methods.
These unsubstantiated conclusions by the County's appraisers
were insufficient to show that the County considered and
properly rejected other methods of calculating the value of the
hospital property. Thus, under the rule in Tidewater
19
Psychiatric, the Board's assessment of the hospital based solely
on the depreciated reproduction cost method of valuation was not
entitled to a presumption of correctness. 256 Va. at 142, 501
S.E.2d at 765; Norfolk and W. Ry., 211 Va. at 700, 179 S.E.2d at
629.
Since this assessment was not entitled to a presumption of
correctness, HCA was not required to demonstrate that the Board
committed manifest error in making the assessment, but was only
required to meet the lesser burden of proving that the Board's
assessment was erroneous. Nevertheless, the trial court held
that the Board committed manifest error in its assessment based
on the manner in which the County's appraisers conducted their
depreciated reproduction cost analysis. We conclude that the
evidence supports the trial court's determination.
First, the trial court held that the County's appraisers
erred in failing to consider actual construction costs in
performing their depreciated reproduction cost analyses. Two of
the County's appraisers, Walter Girod and David Amey, conceded
that actual construction costs are a relevant factor in making
an assessment under the depreciated reproduction cost method and
should be considered when using this method. The record fails
to show, however, that any of the County's appraisers considered
the actual construction costs of the hospital in performing the
appraisals under the depreciated reproduction cost method.
20
Second, the trial court held that the County's appraisers
erred in failing to consider market factors affecting
obsolescence and depreciation when applying the depreciated
reproduction cost approach. Beazley's testimony was undisputed
that an understanding of market factors causing obsolescence is
essential to performing an accurate cost valuation of a
hospital, and that the Marshall manual directs appraisers to
include a market study in performing a depreciated reproduction
cost analysis. While the County's appraisers and Tax Department
supervisors testified that they were not aware of any such
market factors affecting Reston Hospital or the health care
industry in general, the evidence also demonstrated that these
witnesses had made no inquiries or efforts to learn about such
factors. 6
Third, the trial court held that the County's appraisers
erred in failing to consider and properly reject other methods
of valuation before deciding to use the depreciated reproduction
cost approach as its sole method of valuation. In Tidewater
Psychiatric, we explained that use of the depreciated
reproduction cost approach as the sole method for determining
fair market value is erroneous only when the taxing authority
6
David Amey testified that he considered performing a sales
comparison analysis in response to HCA's appeal of the 1995
assessment to the BOE, not as part of his appraisal of the
property.
21
fails to consider other factors that demonstrate that the use of
this method plainly leads to unfair and improper results. 256
Va. at 142, 501 S.E.2d at 764.
As stated above, the evidence showed that the County's
appraisers failed to consider market factors in the health care
industry that bore on the issues of obsolescence and
depreciation. Beazley's testimony, which the trial court
accepted, established that the failure to consider these factors
resulted in a gross underestimation of the depreciation of the
hospital building that led to unfair and improper results in the
Board's assessments.
Lastly, the trial court held that the County's appraisers
improperly failed to classify the hospital building as a "Class
A – Average" structure under the Marshall manual guidelines.
Although the evidence showed that the hospital should not have
been classified as "Class B – Excellent" in 1991 and 1994 since
it was not a concrete structure, the evidence also showed that
the classification of a building under the Marshall manual
guidelines requires an appraiser to exercise professional
judgment. The record does not demonstrate that "Class A –
Average" was the only reasonable classification for the hospital
building that an appraiser could make in the exercise of such
judgment. Thus, we conclude that the evidence does not support
the trial court's conclusion on this one issue. This
22
determination, however, does not require reversal of the trial
court's holding of manifest error since the other evidence
recited above is sufficient to support the trial court's
conclusion.
Since the evidence supports the trial court's conclusion
that there was manifest error in the Board's assessments of the
hospital property, we next consider whether the evidence
supports the trial court's correction of the assessments. See
Code § 58.1-3987; Carter, 248 Va. at 526, 449 S.E.2d at 812-13;
Telecommunications Indus., 246 Va. at 476, 436 S.E.2d at 444.
We disagree with the Board's contention that the trial court
erred in adopting Beazley's valuation methodology and his
testimony concerning the fair market value of the hospital
property because the testimony was based on unsupported,
speculative assumptions. Beazley testified in great detail,
explaining the methodology he used to arrive at his valuations
using cost, comparable sales, and capitalization of income
approaches. Contrary to the Board's assertion, this testimony
included a detailed consideration of the actual construction
costs of the hospital. In response to Beazley's testimony, the
Board presented the testimony of Lees, who rendered an opinion
that there were errors in Beazley's valuation methods and
conclusions. Thus, the issue of the proper valuations of the
hospital property presented a "battle of experts," and we will
23
defer to the trial court's judgment of the weight and
credibility to be given their testimony. See Tidewater
Psychiatric, 256 Va. at 141, 501 S.E.2d at 764; Norfolk and W.
Ry., 211 Va. at 700, 179 S.E.2d at 629.
We also note that the Board relied on the testimony of the
County's appraisers who had performed the appraisals at issue to
refute HCA's evidence of the fair market value of the hospital.
Since the Board's evidence in this regard was based on the
County appraisers' flawed application of the depreciated
reproduction cost approach, we cannot say that the trial court
was plainly wrong in adopting HCA's evidence and correcting the
assessments in accordance with that evidence. See Tysons Int'l
Ltd. Partnership v. Board of Supervisors, 241 Va. 5, 12, 400
S.E.2d 151, 155 (1991); Smith v. Board of Supervisors, 234 Va.
250, 258, 361 S.E.2d 351, 356 (1987).
Finally, we find no merit in the Board's argument that it
is entitled to prevail on appeal because HCA did not present
expert testimony establishing that the County's appraisers
deviated from accepted appraisal standards when performing the
contested appraisals. Beazley testified, without objection,
that when an appraiser fails to consider market forces in the
health care industry when determining the fair market value of a
hospital, the credibility of the appraisal is undermined. As
stated above, Beazley also testified that the Marshall manual
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directs that appraisals based on a depreciated reproduction cost
approach include a market study for depreciation factors such as
obsolescence. The record shows that the County's appraisers did
not consider market forces in the health care industry or
conduct a market study to determine depreciation related to
those market factors. The County's appraisers also did not
consider actual construction costs in performing their
depreciated reproduction cost analyses, even though the County's
own evidence showed that such costs should be considered when
performing appraisals under this approach. The trial court,
sitting as trier of fact, found this evidence persuasive on the
issue of the County's application of the depreciated
reproduction cost approach, and we will not disturb that finding
on appeal.
For these reasons, we will affirm the trial court's
judgment.
Affirmed.
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