Board of Education of Ridgeland School District No. 122 v. Property Tax Appeal Board

ILLINOIS OFFICIAL REPORTS
Appellate Court

Board of Education of Ridgeland School District No. 122 v. Property Tax Appeal Board,
2012 IL App (1st) 110461

Appellate Court THE BOARD OF EDUCATION OF RIDGELAND SCHOOL
Caption DISTRICT NO. 122, Cook County, Illinois, Petitioner, v. THE
PROPERTY TAX APPEAL BOARD, THE COOK COUNTY BOARD
OF REVIEW, SOUTH COOK COUNTY MOSQUITO ABATEMENT
DISTRICT, and SEARS, ROEBUCK AND COMPANY, Respondents.

District & No. First District, Third Division
Docket No. 1-11-0461

Rule 23 Order filed June 13, 2012
Rule 23 Order
withdrawn June 28, 2012
Opinion filed July 11, 2012

Held The Property Tax Appeal Board’s finding as to the market value of
(Note: This syllabus respondent’s anchor store in a regional shopping mall for the tax years
constitutes no part of at issue was not against the manifest weight of the evidence in the record.
the opinion of the court
but has been prepared
by the Reporter of
Decisions for the
convenience of the
reader.)

Decision Under Petition for review of order of Illinois Property Tax Appeal Board, Nos.
Review 05-23585.01-C-3, 06-29317.001-C-3.
Judgment Affirmed.

Counsel on Ares G. Dalianis, Michael J. Hernandez, and Scott R. Metcalf, all of
Appeal Franczek Radelet P.C., of Chicago, for petitioner.

Lisa Madigan, Attorney General, of Chicago (Michael A. Scodro,
Solicitor General, and Timothy K. McPike, Assistant Attorney General,
of counsel), for respondent Illinois Property Tax Appeal Board.

Gregory J. Lafakis and Ellen G. Berkshire, both of Verros, Lafakis &
Berkshire, P.C., of Chicago, for respondent Sears, Roebuck & Company.

Panel JUSTICE MURPHY delivered the judgment of the court, with opinion.
Presiding Justice Steele and Justice Neville concurred in the judgment
and opinion.

OPINION

¶1 This appeal arises from an administrative review proceeding before the Illinois Property
Tax Appeal Board (PTAB). The PTAB considered a consolidated appeal of the valuation for
the tax years 2005 and 2006 by the Cook County Board of Review (BOR) of respondent
Sears, Roebuck & Company’s (Sears) property at Chicago Ridge Shopping Center in
Chicago Ridge, Illinois. The BOR certified an assessed value of $6,085,755 for the property,
representing a market value of $16,015,144 and Sears sought review. Petitioner, Ridgeland
School District No. 122 (school district), intervened in the matter as a matter of right to
protect the interests of the taxing district.
¶2 The school district, Sears and the BOR each submitted appraisals to the PTAB and
presented testimony of their own experts. A final administrative decision was entered on
January 21, 2011, finding the market value of the property to be $10,400,000 for the
assessment dates at issue and reducing the certified assessed value of the property to
$3,952,000. The school district filed a petition for review with this court. For the following
reasons, we affirm the decision of the PTAB.

¶3 I. BACKGROUND
¶4 The property at issue is located in Chicago Ridge, Illinois, and contains a land area of
666,632 square feet, improved with a two-story, 211,311-square-foot masonry building
constructed in 1981. The property is zoned C-3, regional shopping district, and is part of the
Chicago Ridge Shopping Center. Sears operates an anchor department store on the property,
including a 22,424-square-foot auto center within the building.

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¶5 For the tax years 2005 and 2006, the BOR certified an assessed value of $6,085,755 for
the property, representing a market value of $16,015,144. Sears appealed this assessment,
claiming that the assessment should be $3,268,000, or a market value of $8,600,000. The
parties failed to reach a settlement and the PTAB held a hearing.
¶6 Sears presented an appraisal of the property prepared by Joseph M. Ryan, MAI, of
LaSalle Appraisal Group, Inc. Ryan testified to his appraisal experience, in particular his
experience with anchor department stores, and was accepted as an expert. He testified that
he did a complete interior and exterior inspection of the property. Ryan termed the Chicago
Ridge mall a super-regional mall, though he noted the mall was close to the 800,000-square-
foot minimum for that designation. He found the mall, which has two anchor stores and
inline stores in between, to be inefficiently designed.
¶7 As addressed in his appraisal report, Ryan did not consider the cost approach to
valuation. Ryan explained the market development and forces in retail indicated that mall
properties were losing market share to stand-alone, lifestyle center and big box retail stores
and the design was obsolete by industry standards. He was unable to find any sales of anchor
department store sites. He also noted that these types of stores have very close relationships
with developers that are unique to the owner-user. Further, he noted that no shopping center
developers he has interviewed utilized the cost approach in their investment decisions.
Accordingly, he found the sales-comparison and income approaches were most applicable
to valuing the property. He stated that this did not affect the final opinion of value for the
subject property in any way because the present use was the best use of the property.
¶8 Ryan explained that the income approach began with estimating the potential gross
income for the property. The second step is to estimate the vacancy and collection loss for
the property. Third, the effective gross income is factored from the first two steps and
operating expenses are factored in to determine a net operating income, which is capitalized
into a value estimate. Because the property is owner-occupied, there is no income or expense
derived from operation of the property; therefore, Ryan’s income-approach calculations were
market-based.
¶9 Ryan obtained median rental rates for several similar department stores in the Midwest,
avoiding use of any big box retail stores. He explained that anchor department stores
frequently set rent at a per-square-foot rate based on a percentage of sales. Based on the rents
at the comparable sites and adjusting for lease date, size, location, condition of the property
and the auto center, Ryan concluded the property would have a rental rate of $5 per square
foot. He determined credit losses and a vacancy allowance and a capitalization rate of
10.58% to conclude that the property had a market value of $8,700,000 million for 2005 and
2006.
¶ 10 Under the comparable-sales approach, Ryan identified several similar properties in
Illinois, Ohio, Michigan and Indiana because local comparable properties were sale of
leasebacks, financing mechanisms, or big box stores that could not be used. He indicated that
he verified all terms and conditions of the sales and adjusted for location by demographics,
competitive market conditions, population density and median household income. Ryan
noted some out-of-market sales in Colorado and Texas to show that there is a defined market

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 for department stores. Ryan settled on a market value of the property for $40 per square foot,
or $8,450,000.
¶ 11 Ryan took the two values and, giving more weight to the comparable-sales approach
because the property is owner-occupied and not leased, concluded the property had a final
market value estimated at $8,600,000. Ryan stated that his opinions were formed in
conformance with the standards and ethics of his profession. Ryan also admitted that he did
not form an opinion of the value for the land.
¶ 12 The BOR entered into evidence a copy of its notes on appeal, which included an appraisal
for the property prepared by Jeff Hortsch for the Cook County assessor’s office. The Hortsch
appraisal provides the effective date of valuation of January 1, 2004. The BOR did not
present Hortsch as a witness.
¶ 13 As with Ryan, Hortsch also did not utilize the cost approach. In preparing his report, he
reviewed Ryan’s report and conducted a site investigation. Hortsch determined that the
property had an estimated value of $11,810,000 under the income capital approach and
$11,835,000 under the sales comparison approach. Hortsch concluded that the property had
a value of $11,835,000 as of that effective date.
¶ 14 The school district presented the report and testimony of its appraiser, James A. Gibbons,
MAI, of Gibbons & Gibbons, Limited, who concluded that the property had an estimated
market value of $14 million. Gibbons concurred with the other appraisers that the highest
and best use of the property was the continuation of the existing commercial improvements.
Unlike the other two appraisers, Gibbons utilized all three approaches to value.
¶ 15 Under the cost approach, he estimated market value to be $19,690,000. Under the
income-capitalization approach, Gibbons found the property to have an estimated market
value of $13,860,000. Finally, he found that the property had an estimated market value of
$13,740,000 under the sales-comparison approach.
¶ 16 Gibbons utilized four land sales within three miles of the property under the reproduction
cost approach. Gibbons used four land sales from the Oak Lawn area at rates from $17.40
to $40.21 per square foot. Gibbons concluded that the land component of the property had
a market value of $15 per square foot or $10 million. In estimating the replacement cost of
the improvements on the property, Gibbons used the Marshall Valuation Service cost manual
and after deducting depreciation, arrived at an improvement value of $9,687,989 for the cost-
approach total of $19,690,000.
¶ 17 Under the income-capitalization approach, Gibbons utilized five comparable properties
from Chicago, Orland Park and Schaumburg, Illinois. One rental was an anchor department
store, one rental was a mall out lot and the others were attached mall rentals. Gibbons noted
the Carson Pirie Scott department store at the Chicago Ridge mall had a rental rate of $5.03
per square foot, but opined that location was inferior to the subject property and estimated
a rental rate of $5.50 for the property. After determining a capitalization rate of 7.5% for the
property, he concluded that the property has an estimated market value of $13,860,000 under
the income-capitalization approach.
¶ 18 For the sales-comparison approach, Gibbons utilized three comparable sales from
Broadview, Bloomingdale and Orland Park, Illinois. One of the comparables was an anchor

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 department store while the other two were department or big box stores. Comparing sales
rates for the property to the comparables, Gibbons found that the property had an estimated
market value of $13,740,000 under the sales-comparison approach. In conclusion, Gibbons
considered the three values and gave primary consideration to the income and sales-
comparison approaches to reach his estimated market value of $14 million as of January 1,
2005.
¶ 19 The school district also submitted an appraisal review of Ryan’s appraisal by Eric W.
Dost, MAI, of the Dost Valuation Group, Ltd. Dost opined that a determination of land value
is necessary for a proper determination of highest and best use of a property and an important
component of total value. Dost took issue with several of the comparables utilized by Ryan
based on their locations out of state and out of the area and the inferior demographics of
those sites. In addition, Dost noted that there were contingencies surrounding these other
sales, such as bankruptcies or sale-leaseback transactions, that made the properties improper
to use as comparables. Further, Dost opined that Ryan incorrectly used the Dollars and Cents
of Shopping Centers publication in estimating retail sales and utilized an unsupported
vacancy rate. As a result, Dost found Ryan’s approach unreliable.
¶ 20 The PTAB considered the evidence and testimony and determined that a reduction in the
assessment of the property was warranted. No weight was afforded the Hortsch appraisal
because the estimate was for January 1, 2004, the appraiser was not presented as a witness
to testify to his qualifications and the contents and conclusions of his report. The PTAB
detailed the strengths and weaknesses of the remaining two appraisals.
¶ 21 The PTAB noted that both appraisers, as well as Dost, agreed that the highest and best
use of the property was as improved and that the subject was in good condition with an
effective age of 20 to 25 years and economic life of 40 to 45 years. It noted that only Gibbons
developed the cost approach and that his estimate under this approach was over 40% greater
than the other two approaches he followed. Based on this vast disparity in values, the fact
that neither Ryan nor Dost was of the opinion that the cost approach had any relevance, and
Gibbons’ own discounting of the approach in his final market value estimate, the PTAB
found that the cost approach did not provide a true reflection of the property value.
¶ 22 The PTAB found that the determinations of market rent and estimated expenses were
similar, but that Ryan’s determination of $5 per square foot and Gibbons’ expense estimate
based on 2005 numbers were better supported by the record. It found that Ryan’s estimated
vacancy rate was better supported, but that Gibbons’ estimated capitalization rate was
supported by the data from comparable sales.
¶ 23 With respect to the sales-comparison approach, the PTAB found that only one of the
three sales utilized by Gibbons was similar to the subject property. One of Gibbons’ three
comparable sales and five of Ryan’s eight comparable sales were similar to the subject
property. Accordingly, the PTAB utilized these six sales to conclude that the property had
a value of $49 per square foot of building area, or $10,354,000, rounded. Utilizing this
number and the value from the income approach, the PTAB concluded that the property had
an estimated market value of $10,400,000 and certified an assessed value of $3,952,000. This
appeal followed.

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¶ 24 II. ANALYSIS
¶ 25 The school district argues that the PTAB failed to utilize the appropriate valuation
methodology in determining the estimated market value and assessed value by failing to
consider the evidence of the land value, failing to properly account for differences in location
for properties used in comparable sales and rentals, and for giving inconsistent weight to
similar evidence in other PTAB decisions. We review PTAB decisions under the
Administrative Review Law (735 ILCS 5/3-101 (West 2008)) and factual determinations by
an administrative agency are held to be prima facie true and correct and will stand unless
contrary to the manifest weight of the evidence. 735 ILCS 5/3-110 (West 2010);
Bloomington Public Schools, District No. 87 v. Illinois Property Tax Appeal Board, 379 Ill.
App. 3d 387, 390 (2008). However, questions of law, such as whether the PTAB considered
the proper methodologies for valuation, are subject to de novo review. Cook County Board
of Review v. Property Tax Appeal Board (Omni), 384 Ill. App. 3d 472, 479 (2008).
¶ 26 The school district argues that, pursuant to the Property Tax Code, every property in
Illinois must be given an assessment that includes an assessed value for the land and an
assessed value for the improvements that are then added together to obtain a total assessed
valuation for the property. 35 ILCS 200/9-155 (West 2010). The school district argues that
the Second District of this court has held that “it [is] necessary to calculate the entire
assessment by valuing the improvements as well as the land.” Showplace Theatre Co. v.
Property Tax Appeal Board, 145 Ill. App. 3d 774, 777 (1986). The school district cites to
Connecticut state court cases, including one unreported case, that have followed this
“precedent” to conclude that it was fatal error to not determine a specific land value. See
National Amusements, Inc. v. Town of East Windsor, 854 A.2d 58, 84 (Conn. App. Ct. 2004).
¶ 27 We agree with appellees that this is a misconstruction of Showplace Theatre and Illinois
case law does not have such an absolute requirement. In Showplace Theatre, the taxpayer
objected to the assessed value of the land but not of the improvements. Showplace Theatre,
145 Ill. App. 3d at 776. The court rejected the taxpayer’s attempt to limit review of the tax
assessment; instead, it noted that the statutes under which the appeal was made were clear
that an appeal required consideration of all calculations necessary to a final determination.
Id. at 777. The court continued to hold that the PTAB, having statutory authority to
recompute the value of improvements, made its determination based on competent evidence
and affirmed the PTAB’s findings. Id. at 777-78.
¶ 28 Accordingly, Showplace Theatre holds that review of an assessed value of real property
requires consideration of all the factors. In Illinois, this requires valuation at fair cash value
at a fair, voluntary sale, and where there is no contemporaneous arms length sale, there are
three valuation methods to use: the sales-comparison approach, the income approach, and
the reproduction cost approach. Omni, 384 Ill. App. 3d 472. As addressed by the Omni court,
the sales-comparison approach is the preferred method, but each of the approaches should
be utilized where reliable information is available to serve as a check on the value. Id. at 480-
81.
¶ 29 That is not to say that the sales-comparison approach absolutely must be used. Nor is a

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 single-valuation method inadequate as a matter of law. Rather, where the evidence supports
such a practice and the appraiser supports exclusion of a method of valuation by citation to
this evidence, it is sufficient for the PTAB, and the courts, to follow. Id. at 487-88; see also
Board of Education of Meridian Community Unit School District No. 223 v. Illinois Property
Tax Appeal Board, 2011 IL App (2d) 100068, ¶¶ 46-48.
¶ 30 In the instant matter, Ryan provided explanation of why he did not utilize the cost
approach to valuation that would provide a specific valuation for the land both in his
appraisal and his testimony. Likewise, Dost agreed that this approach was unreliable for the
property. Accordingly, Ryan undertook the other two valuation approaches to come to his
conclusion and provided sufficient detail of record to support his findings. Accordingly, his
failure to follow the cost approach and provide a value for the land was not fatal.
¶ 31 The school district also complains that Ryan improperly focused on several comparable
sales from other states while the PTAB ignored sales prices cited by Gibbons of nearby
properties. The issue of whether comparable properties establish the uniform assessment and
valuation of properties is a question of fact. Du Page County Board of Review v. Property
Tax Appeal Board, 284 Ill. App. 3d 649, 653-54 (1996). In this case, Ryan did consider
properties from out-of-state as comparables including location and demographic data.
However, he adjusted for different variables. The PTAB took this into account, as well as the
types of properties, in accepting five of the properties utilized by Ryan and one of the three
used by Gibbons, rejecting the use of big box stores. The record indicates that the
discrepancies inherent in utilizing properties from different locations were considered, the
PTAB understood and addressed this, and followed the evidence of record to accept the best
comparable properties. Its decision is not against the manifest weight of the evidence.
¶ 32 Finally, the school district argues that the PTAB has ruled inconsistently in this case,
when compared to other PTAB cases, in particular a companion case before this court
involving a Sears store in Schaumburg, Illinois. The school district argues that PTAB
accepted evidence of sales prices of comparable properties in one appeal, but did not in the
other. It maintains that these inconsistent findings raise legitimate questions concerning the
methods used by PTAB in ascertaining value. The school district does not cite to any
authority binding on this court, but cites PTAB decisions where comparable sales from
outside Cook County were disfavored to conclude that PTAB’s methodology requires
reversal.
¶ 33 We again agree with Sears and the PTAB that the previous PTAB decisions are not
grounds for reversal. This court is not bound by decisions of an administrative agency. As
noted above, factual decisions of the PTAB are reviewed under the manifest weight of the
evidence standard. Sears further notes that, under the Illinois Property Tax Code, the PTAB
is charged with making a decision on an appeal that “shall be based upon equity and the
weight of evidence and not upon constructive fraud, and shall be binding upon appellant and
officials of government.” 35 ILCS 200/16-185 (West 2010). Under this standard of review
and authority, Sears argues that each decision by the PTAB is necessarily fact specific and
based upon the particular record of each case. Therefore, we find, as addressed above, based
on the evidence of record, the PTAB’s decision is not against the manifest weight of
evidence of record. Accordingly, the finding of the PTAB is affirmed.

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¶ 34 III. CONCLUSION
¶ 35 For the foregoing reasons, the decision and order of the PTAB is affirmed.

¶ 36 Affirmed.

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