Present: All the Justices
McKEE FOODS CORPORATION
OPINION BY
v. Record No. 180521 CHIEF JUSTICE DONALD W. LEMONS
JULY 18, 2019
COUNTY OF AUGUSTA
FROM THE CIRCUIT COURT OF AUGUSTA COUNTY
James V. Lane, Judge
In this appeal, we consider whether the Circuit Court of August County (“circuit court”)
erred when it upheld the County’s tax assessments against McKee Foods Corporation (“McKee”)
for the years 2011 through 2014.
I. Facts and Proceedings
McKee owns real property located at 272 Patton Farm Road, in Augusta County (the
“Property”). The Property consists of an 828,619 square foot industrial building on 171.54 acres
and is where McKee manufactures, among other things, “Little Debbie” snacks. The County
assessed McKee’s property at $28,525,300 for the 2011, 2012, and 2013 tax years, and at
$31,745,800 for the 2104 tax year. McKee filed an Application for Relief from Erroneous
Assessments for Real Property Taxes in the circuit court, alleging that these assessments were
above the Property’s fair market value, were not uniform in application, and were otherwise
invalid or illegal. McKee asserted that it was entitled to a refund of excess taxes paid on the
assessments, as well as interest on the excess amounts paid to the County.
The County filed an answer and denied that the assessments were above fair market
value, manifestly erroneous, not uniform in application, or otherwise invalid or illegal. A four-
day bench trial was held in December 2017.
The evidence presented at trial demonstrated that the County hired Blue Ridge Mass
Appraisal Company, LLC (“Blue Ridge”) to appraise real property for the County for its five-
year reassessment cycle of 2009-2013. David Hickey (“Hickey”) was the Blue Ridge employee
who conducted the assessment of McKee’s property for that time frame. Hickey classified the
Property as industrial use property with an appraised value of $31,741,200. McKee appealed
that assessment to the County’s Board of Assessors, which reduced the assessment to
$28,525,300. McKee then appealed to the County’s Board of Equalization, which affirmed the
reduced assessment. The County assessed taxes for 2011-2013 based upon that reduced figure.
The County hired a different company, Wingate Appraisal Service (“Wingate”), to
appraise real property for the five-year reassessment cycle beginning in 2014. Donald Thomas
(“Thomas”) was the Wingate employee who conducted the assessment of the Property. Thomas
classified the Property as a special use property, with an assessed value of $31,745,800. The
County did not use a Board of Assessors for the 2014 general reassessment, so McKee appealed
that assessment directly to the County’s Board of Equalization. The Board of Equalization
affirmed the assessment without modification. The County then assessed taxes for 2014 based
upon the assessed value of $31,745,800.
McKee’s Evidence
Micheline Parkey, the corporate risk manager for McKee, testified that the company
carried insurance on the property for the years in question. The insurance covered the real
property and personal property, and was a policy for replacement cost, not the amount that
McKee thought it could sell the property. The amount of coverage ranged from $136,944,380 to
$139,944,380, depending upon the year.
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At trial, McKee introduced David Hickey’s deposition transcript, because Hickey was ill
and unable to testify in person. In describing how he determined the assessment amount for the
Property, Hickey testified that he used a cost method 1 to appraise the property, and then he
referred to a list of 52 industrial sales he had previously accumulated to see if he was in the
correct range of price per square foot. The properties on this list ranged in size from 28,360
square feet to 714,278 square feet, and all but two of the buildings were less than half the square
footage of the Property. Hickey explained that he would calculate a certain price per square foot,
and then compare it to the list of industrial properties to see if it was in the range of sales on the
list. He would then make adjustments so that “the bottom line conforms with what those market
sales indicated.”
Hickey testified that his approach to valuation established “the range of the unit price per
square foot [he] should be working towards.” Hickey then used that average when he entered
information about the Property into the Computer Assisted Mass Reappraisal system
(“CAMRA”), a database management system utilized by Blue Ridge to process the valuation
data for real estate. When asked “[w]hat appraisal methodologies does the CAMRA system
include,” Hickey responded that the CAMRA valuation model is very similar to a model that
goes “back in the ‘70s.” Although he had initially described his appraisal method as a cost
approach, he later testified that the CAMRA is:
not really a cost approach. We come up with -- how do I want to
say it? We analyze the sales to come up with rates – unit rates that
are applicable to the different types of properties because what
we're -- what we're trying to do is come up with a set of rates so
that, when we apply those rates against the information related to
the known sales, that the value that comes out related to that --
1
The witnesses refer to both the cost “method” and cost “approach” for valuation. Our
prior cases also refer interchangeably to valuation “methods” and “approaches.” Therefore, the
words “method” and “approach” are also used interchangeably throughout this opinion.
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those – that inventory of -- pieces of those particular properties,
that the value comes out close to what a property actually sold for.
According to Hickey, the CAMRA system’s analysis needed to be “massaged” to reduce the
valuation of the Property to “roughly” the raw average he derived from his list of sales. Hickey
then admitted that the default physical depreciation for the Property, based on its age and
condition, would have been only 9%. However, in order to achieve the result he thought was
reasonable, Hickey adjusted the physical depreciation value to 45%.
Hickey testified that he made no adjustments to the sale prices of the properties on the list
to account for the size of the properties, the location of the properties, or when in the ten-year
period the sales occurred. Hickey further stated that he made no attempt to ascertain the nature
of the sales (i.e., whether they were arm’s length transactions) when he compiled his list. Hickey
admitted that he assessed the Property using an average of the sale price divided by the square
footage for each of the 52 properties on the list.
McKee then presented testimony from Thomas, who performed the 2014 assessment for
the County while he was employed by Wingate. Through Thomas, McKee introduced Wingate’s
proposal to the County for the 2014 reassessment cycle. The proposal indicated that Miles
Willett, a certified general real estate appraiser, would be conducting the appraisals. Instead of
Willett, however, Thomas was the Wingate employee who assessed the Property. When Thomas
assessed the Property, he was only a licensed residential real estate appraiser. Thomas did not
obtain his certified general real estate appraiser license until 2015. Willett did not provide
Thomas with any supervision or guidance for the McKee appraisal.
Thomas testified that he classified the Property as a special use property solely because it
was originally designed and constructed to be used for food processing. He admitted, however,
that the main building on the property was a rectangular-shaped industrial building and that it
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could have been converted to a different use. Thomas testified that his appraisal of the Property
was the price he thought it could sell for if McKee sold the Property to a buyer who also
intended to use the Property as a food processing plant. Thomas used the cost approach to
determine the value of the property. He testified that he was unable to use the comparable sales
approach due to the lack of comparable sales for special purpose food processing plants, and he
rejected the income approach due to a lack of rental market data because the Property was
owner-occupied. Although Thomas testified that the market for the McKee Property was
national in scope, he admitted that he did not search for rental data outside of Augusta County,
and he did not search for comparable sales outside of the eastern region of the United States.
In his assessment report to the County, Thomas stated that “the assessment is compliant
with USPAP Standard 6 (Mass Appraisal, Development and Reporting), including development
of scope of work and highest and best use analysis.” However, at trial Thomas admitted that he
did not comply with Standard 6-8. Thomas claimed he was exempt from Standard 6-8 because
he performed his appraisal for the County, and there is an exemption from certain USPAP
standards for federal, state or local employees performing their official capacity. However, he
admitted that he was not an employee of the County when he performed the assessment, so that
exemption would not apply to his assessment.
McKee then called John Lifflander, an industrial and commercial appraiser, to testify as
an expert witness regarding complex industrial appraisals. Among other qualifications,
Lifflander authored the text book, “Fundamentals of Industrial Valuation,” which was published
by the International Association of Assessing Officers and serves as the authoritative text for that
organization. Lifflander testified that he agreed to take on this case because, when he reviewed
the numbers, he immediately knew the Property had been “overassessed.” He explained that it
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was a “jumbo building,” and because it was over 800,000 square feet, it would be difficult to sell
or lease. Also, he was already familiar with the price per square foot nationally for these types of
properties and knew that the average price per square foot was half of the amount for which the
Property had been assessed.
Lifflander described numerous problems with Thomas’ assessment. First, Lifflander
testified that the McKee property was a rectangular building, “and a rectangular building can be
used for a lot of different manufacturing uses.” Therefore, according to Lifflander, “if somebody
says the highest and best use is food manufacturing, that shows they do not understand industrial
buildings.” Lifflander testified that another problem with Thomas’ assessment was that he used
the cost approach instead of the sales approach, and when he determined the depreciation he did
not have any local market research to support that amount. Lifflander explained, “[t]here’s no
way they could know the value from the cost approach. There’s no way you can depend on that
value because it has to be corroborated with market evidence because depreciation is market
driven.” Lifflander also testified that Thomas’ assessment did not comply with USPAP Standard
6 and pointed out several ways in which the assessment failed to comply with this Standard,
including “the failure to apply an estimate of functional and/or economic obsolescence,” the fact
that “the sales comparison approach was also left out,” and that “much of the information
required by USPAP Standard 6 was missing from the information that Wingate provided from its
work file.”
Lifflander further testified that USPAP Standard 6 was not just generally accepted
practice, “[i]t’s required. It’s the law for appraisers. It’s not something – you can lose your
license if you don’t follow it. You can be banned from appraising if you don’t follow it.”
Lifflander described the errors as “egregious, and actually, a bit perplexing.” Lifflander stated
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the likely reason for these errors was because Thomas was only certified as a residential
appraiser at the time he conducted the McKee appraisal.
With respect to the appraisal conducted by Harvey for the 2009 reassessment cycle,
Lifflander testified that it “was probably the worst work I’ve seen in my life.” He explained that
Hickey took all sales, ranging from $5 a foot to $170 a foot, averaged them out, and came out
with a value for the subject, without making any adjustments. Lifflander stated:
That would be very much like me going and valuing your house in
this city, for instance, and taking every house in the city, mansions,
fixers, everything, and getting an average, and once I got that
average I’d say, ‘That’s your value for your house.’ It doesn’t
make a bit of sense.
....
In fact, if it could be done that way, we wouldn’t need appraisers.
A clerk could do it, just go ahead and average everything. An
appraisal is not about averaging. You use averages of similar
properties, but it’s about finding properties that are similar and
then making adjustments.
The second problem with Hickey’s approach that Lifflander identified was how he
determined depreciation. Hickey used depreciation to get a number he already had in mind,
which is “the opposite of how you appraise. You look at the evidence, and that drives your
number. You don’t seek to get to a number that you’ve already preconceived should be the
value.” Another problem was that Hickey, like Thomas, failed to consider other listings.
Lifflander explained that was also a violation of USPAP standards, because it is important to
understand the current state of the market before valuing a property.
McKee then called Stuart Holtzman to testify as an expert in appraisal of real estate.
Holtzman is a commercial real estate appraiser in Virginia and has appraised numerous industrial
properties along the I-81 corridor. Holtzman was hired by McKee to conduct an independent
appraisal of the property for the various tax years at issue. Holtzman testified that he believed
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the Property had been assessed far above its market value. Holtzman stated the highest and best
use of the Property was as a general manufacturing building. Holtzman explained that he was
not able to develop the income approach because there was no definable rental market for similar
properties in the region. Holtzman considered the cost approach, but it required making too
many assumptions regarding depreciation and functional problems, so he did not give that
approach much weight. Holtzman testified that he primarily relied on the sales comparison
approach. He considered sales of other manufacturing or food processing plants along the I-81,
I-64, and I -95 corridors. Holtzman concluded that the fair market value of the Property for
2011-2013 was $16,400,000, and for 2014 it was $17,200,000.
The County’s Evidence
The County called William C. Harvey, II, a real estate appraiser in Virginia, as its expert
witness. Harvey testified that he performed an appraisal of the Property for the County, and he
determined that in 2011 the Property’s fair market value was $33,000,000, in 2012 it was
$32,790,000, in 2013 it was $32,900,000, and in 2014 it was $32,880,000. Harvey testified that
he toured the Property before preparing his report. He considered the size and age of the
Property, as well as its location along the I-81 corridor. Harvey testified that he used all three
appraisal methods – cost, income, and sales comparison, in arriving at his conclusions, but he
gave more weight to the sales comparison approach.
Harvey was also questioned about Holtzman’s appraisal report. Harvey testified that
Holtzman complied with the requirements for an appraisal, but he found Holtzman’s
methodology to be inappropriate as to various elements of the work. One reason was because
Holtzman did not develop the income approach. Another problem was that for the sales
comparison approach, Holtzman mainly considered vacant properties. Harvey also criticized
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Holzman’s statistical analysis of certain data that he used in his cost and sales approaches.
Harvey did not express any opinion on Lifflander’s report.
McKee’s Rebuttal Evidence
McKee recalled Lifflander as a rebuttal witness. Lifflander testified that he had reviewed
Harvey’s report and his review of Harvey’s report was admitted into evidence. Lifflander
testified that Harvey’s appraisal was “completely a sham because it’s using information that
should not be used,” and that it was a “dishonest appraisal.” Instead of using sales of
manufacturing or industrial properties, Harvey relied on sales of distribution warehouses and on
sales of leased fee properties. Lifflander explained that “[l]eased fee is a different ownership, as
we’ve discussed a number of times, different bundle of rights, but these types of properties are
investment-grade properties that corporate owners all over the country want to invest in.”
Lifflander stated that was the only way that Harvey could come up with an appraisal as high as
he did. Lifflander testified that leased fee properties were a completely different type of property
right, and that an investor would “pay a lot more for that than an industrial building which, by
the way, you couldn’t very easily lease out.”
Lifflander also testified that Harvey violated USPAP standards because he did not
disclose the comparable fee simple sales, and because Harvey did not explain why he did not use
them in his appraisal. Lifflander stated that Harvey’s cost approach was erroneous because
Harvey did not allow for functional obsolescence in the Property, even though he considered the
functional obsolescence in his sales approach. Lifflander testified that when he reworked
Harvey’s appraisal and corrected the mistakes that he found, he determined that the fair market
value of the Property was $16,000,000 in 2011, $16,660,000 in 2012, $17,000,000 in 2013, and
$17,660,000 in 2014.
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McKee then recalled Holtzman as a rebuttal witness. Holtzman reviewed Harvey’s
report, and testified regarding certain problems with Harvey’s report. First, Holtzman stated that
if he had used the comparable sales that Harvey used, he “would be breaking every rule that
[he’d] ever learned about appraising.” Holtzman, like Lifflander, testified that Harvey
improperly used warehouses and triple net leased investments as comparable sales instead of
other manufacturing facilities.
The Circuit Court’s Ruling
McKee and the County gave their closing arguments, and the matter was submitted to the
circuit court for decision. The court issued its ruling from the bench, and the judge stated as
follows:
If all other things are equal, there’s a presumption that the
appraisal was done in a correct manner. And after having heard all
the evidence, I do find that the appraisal was conducted in the
appropriate manner, and I find in favor of McKee – not of McKee
– of the [C]ounty on their appraisal.
It’s very difficult when you’re trying to look through 10 or 12
inches of paper, and I read them all, and I’ve listened to your
argument, but the statutory scheme seems to be to have this
presumption, and when you have an equality, everything is equal,
that’s what I’m left with. And I’m going to have to comply, and
my ruling is that they are in compliance, and I’m ruling in favor of
McKee.
The County then asked the judge to clarify if he was finding in favor of the County or McKee, to
which he responded, “I’m sorry. Augusta County.”
McKee then asked the court, for purposes of appeal, to explain what the court found
about McKee’s case that was not sufficient to reach a conclusion that it had overcome the
presumption of correctness. The circuit court then stated:
There is a presumption – basically, you’re saying you want to
know why…. And “why” is because I think they were both in
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equipoise. In other words, each case had opposing evidence, but I
don’t find the case you have presented to be sufficient to override
that presumption. It’s – when you’re dealing with valuations, you
can probably have ten appraisers and they’ll have ten different
opinions on values, and at this point you’re the one with the burden
of proof. The legislature clearly has given the presumption of
correctness, and I don’t feel the evidence you presented has
overridden that.
I haven’t seen anything that’s been inherently an error or
improperly done. The qualifications of all the witnesses is [sic] not
being challenged. And we end up with a stalemate, and the
legislature has decided to break the stalemate with their
presumption.
The circuit court subsequently entered an order that upheld the County’s tax assessments, and
McKee appealed to this Court. We granted McKee’s appeal on the following assignments of
error:
1. The trial court erred by failing to order that the 2011-2014 assessments be corrected to
the fair market values that McKee proved at trial because McKee’s evidence is sufficient
to rebut the presumption that the assessments were correct.
2. The trial court erred by its ruling that McKee’s unrefuted evidence of the 55% difference
[between] the 2011 assessment and the fair market value of the McKee property is not
sufficient to rebut the presumption of correctness of the 2011 assessment.
3. The trial court erred by its ruling that McKee’s unrefuted evidence of manifest error in
Hickey’s valuation methodology is not sufficient to rebut the presumption of correctness
of the 2011 assessment.
4. The trial court erred by its ruling that McKee’s unrefuted evidence that the 2012-2013
assessments were not arrived at in accordance with GAAP and Virginia law relating to
valuation of property is not sufficient to rebut the presumption of correctness of the 2012-
2013 assessments.
5. The trial court erred by its ruling that McKee’s evidence that the 2014 assessment was
not arrived at in accordance with GAAP and Virginia law relating to valuation of
property is not sufficient to rebut the presumption of correctness of the 2014 assessment.
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II. Analysis
A. Standard of Review
On appeal, we view the evidence and all reasonable inferences arising therefrom in the
light most favorable to the prevailing party at trial. Western Refining Yorktown, Inc., v. County
of York, 292 Va. 804, 808 (2016). The Constitution of Virginia requires that real estate be
assessed at its fair market value. See Va. Const. art. X, § 2. In proceedings to seek relief from
real property taxes, there is a presumption that the valuation determined by the assessor or as
adjusted by the board of equalization is correct. See Code § 58.1-3984(B). This appeal requires
us to construe relevant provisions of Code § 58.1-3984. Issues of statutory construction are
questions of law which we review de novo. Commonwealth v. Amos, 287 Va. 301, 306 (2014).
B. Tax Assessment for 2011
Code § 58.1-3984 was amended in 2011. Our review of the tax assessment for 2011 is
governed by the prior version of the statute, and our prior opinions that interpreted that statute.
The version of Code § 58.1-3984 in effect in 2011, stated that in proceedings to challenge
erroneous assessments:
[T]he burden of proof shall be upon the tax payer to show that the
property in question is valued at more than its fair market value or
that the assessment is not uniform in its application, or that the
assessment is otherwise invalid or illegal, but it shall not be
necessary for the taxpayer to show that intentional, systematic and
willful discrimination has been made.
See former Code § 58.1-3984 (emphases added). Assessments by taxing authorities are afforded
a presumption of correctness, and the burden is on the taxpayer to rebut the presumption.
Tidewater Psychiatric Institute, Inc. v. City of Virginia Beach, 256 Va. 136, 140 (1998).
Generally, a taxing authority’s assessment of a property’s fair market value is presumed valid
and a circuit court will reject and correct a tax authority’s assessment only if the taxpayer
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demonstrates that the taxing authority committed manifest error or disregarded controlling
evidence in making the assessment. Keswick Club, L.P. v. County of Albemarle, 273 Va. 128,
136-37 (2007).
Taxing authorities commonly use one or more of three valuation approaches: the cost
approach, income approach, and sales approach. Id. at 137. The cost approach estimates the
value of property based on the current cost of the asset, minus depreciation or reduced value
“from physical deterioration, functional obsolescence, and economic obsolescence.” Western
Refining, 292 Va. at 813. The income approach “measures market value as the present worth of
monetary benefits anticipated to be derived in the future from ownership of the asset.” Id. The
sales approach “calls for an analysis and comparison of recent sales of comparable property.” Id.
“Ideally, an appraisal should, if possible, derive its final determination of a property’s value
using all three approaches in order to maximize the likelihood that the valuation accurately
reflects the property’s fair market value.” Keswick, 273 Va. at 137. In cases where a taxing
authority bases an assessment of fair market value solely on one approach, the resulting
assessment is still entitled to the presumption of validity so long as the taxing authority
considered and properly rejected the other valuation methods. Id. See also Tidewater
Psychiatric, 256 Va. at 142.
In Keswick, we considered whether the assessor had rejected the sales and income
approaches, and only relied on the cost approach. Id. at 138. However, the evidence at trial
demonstrated that the county assessor applied the cost approach “in an automatic fashion without
sufficiently attempting to gather the data necessary to utilize the income approach or sales
approach.” Id. at 139. We held that because the assessment was based on a single approach, and
because the taxing authority had failed to consider and properly reject the other approaches, it
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was not entitled a presumption of validity. Id. at 140. Therefore, the taxpayer was only required
to show that the county’s assessment was erroneous, not that the county committed manifest
error or disregarding controlling evidence in making its decision. Id. at 141. Accordingly, we
remanded the matter back to the circuit court for consideration under the proper and less
stringent standard. Id.
Similarly, in Board of Supervisors v. HCA Health Services, 260 Va. 317 (2000), the
taxing authority had only used the cost approach to reach its assessment. We determined that the
taxing authority failed to consider and properly reject the other two methods of calculating the
value of the taxpayer’s property. Id. at 330. Accordingly, we held that the taxing authority’s
assessment “was not entitled to a presumption of correctness.” Id. Because the assessment was
not entitled to the presumption of correctness, the taxpayer “was not required to demonstrate that
the [taxing authority] committed manifest error in making assessment, but was only required to
meet the lesser burden of proving that the [taxing authority’s] assessment was erroneous.” Id.
The record in this case, including Hickey’s own testimony, demonstrates that Hickey did
not properly use any of the three generally accepted approaches to valuation. First, Hickey did
not perform an income approach valuation at all. Second, to the extent he considered
comparable sales, Hickey’s methodology was so improper it did not meet the definition of the
sales approach. Hickey identified 52 properties and simply used the average price per square
foot of those properties as the price per square foot for the McKee property, without any
adjustments for the size or location of the other properties. As Lifflander explained, although the
sales approach involves the averages of properties, first an assessor must find similar properties
and make necessary adjustments, which Hickey completely failed to do. Hickey also failed to
properly utilize the cost approach. Although Hickey originally claimed that he used the cost
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approach, he later testified that the CAMRA system that he used “is not really a cost approach.”
Instead of estimating depreciation based upon the Property’s actual characteristics, Hickey used
the average price per square foot to guide his depreciation.
Even though Hickey failed to properly utilize any of the three accepted valuation
methods, the circuit court still applied the presumption of validity to his 2011 assessment. The
trial judge referred to the presumption of validity several times in his ruling from the bench,
including where he stated, “If all other things are equal, there’s a presumption that the appraisal
was done in a correct manner.” The trial judge further stated, “To me, it’s about equal on each
side, but the tiebreaker has been put into the legislation that there’s a presumption of correctness,
and I find the evidence has not overcome that presumption.” However, because this assessment
did not properly apply any of the three accepted methods of valuation, it was not entitled to the
presumption of validity. Therefore, the proper standard of review by the circuit court was the
less stringent standard, requiring McKee “only to show that the [C]ounty’s assessment was
erroneous, not that the [C]ounty committed manifest error or disregarded controlling evidence in
making its assessment.” See Keswick, 273 Va. at 141. Accordingly, we will reverse the circuit
court’s judgment with respect to the 2011 assessment and remand the case for the circuit court to
apply the proper and less stringent standard of review under the facts of this particular case.
C. Tax Assessments for 2012-2014
As stated above, the General Assembly amended Code § 58.1-3984 in 2011.
Accordingly, McKee’s challenges to the assessments for the years 2012-2014 are governed by
the revised statute. Code § 58.1-3984(B) states in relevant part that:
In circuit court proceedings to seek relief from real property taxes,
there shall be a presumption that the valuation determined by the
assessor or as adjusted by the board of equalization is correct. The
burden of proof shall be on the taxpayer to rebut such presumption
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and show by a preponderance of the evidence that the property in
question is valued at more than its fair market value or that the
assessment is not uniform in its application, and that it was not
arrived at in accordance with generally accepted professional
appraisal practices, procedures, rules and standards as prescribed
by nationally recognized professional appraisal organizations such
as the International Association of Assessing Officers (IAAO) and
applicable Virginia law relating to valuation of property.
Code § 58-3984(B) (emphases added). Under this revised statute, in order to rebut the
presumption of correctness, a taxpayer must first prove either that (1) the property has been
valued at more than its fair market value, or (2) that that the assessment is not uniform in its
application. If they prove either of those two prongs by a preponderance of evidence, then the
taxpayer moves to the next requirement. In this second step, the taxpayer must also prove by a
preponderance of the evidence that the assessment was not arrived at in accordance with
generally accepted appraisal practices, procedures, rules, and standards as prescribed by
nationally recognized professional appraisal organizations such the International Association of
Assessing Officers and applicable Virginia law relating to the valuation of property.
These statutory revisions all relate to what the taxpayer must prove to rebut the
presumption of correctness and obtain a judgment in their favor. However, the preliminary
question whether a taxing authority is entitled to the presumption of correctness must first be
considered, and the revisions to Code § 58.1-3984 do not impact that inquiry. As our prior
decisions make clear, an assessment that is based on a single approach, where the taxing
authority has failed to consider and properly reject the other approaches, is not entitled to this
presumption of correctness. See Keswick, 273 Va. at 140, and HCA Health Servs., 260 Va. at
330. Consequently, an assessment that is not based on any of the three accepted approaches
would also not be entitled to a presumption of correctness.
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The 2012 and 2013 Assessments
As discussed above, Hickey’s assessment was not based on any of the three accepted
approaches of valuation. Instead, he used the “Hickey Model,” which was essentially based
upon a rate per square foot that Hickey obtained by averaging 52 properties. In addition to using
this model to prepare the 2011 assessment, Hickey also prepared the 2012 and 2013 assessments
for the Property using this model. Therefore, the 2012 and 2013 assessments are based upon the
same improper methodology and are not entitled to the presumption of correctness. Because the
circuit court improperly relied upon the presumption of correctness in reaching its decision, we
will reverse the judgment of the circuit court and remand for the circuit court to apply the proper
and less stringent standard of review to the 2012 and 2013 assessments as well.
The 2014 Assessment
The County hired Wingate and Associates, Ltd. to perform the 2014 general
reassessment. Although Wingate told the County that Miles Willett, a certified general real
estate appraiser, would serve as Project Manager, the McKee assessment was instead performed
by Thomas. Thomas admitted at trial that at the time he assessed the Property, he was only a
licensed residential real estate appraiser, and was not certified as a general real estate appraiser.
Thomas’s work was performed with no guidance or supervision from Willett. In addition to not
being properly licensed, Thomas admitted that his appraisal did not comply with USPAP
standard 6-8. Thomas further admitted that he was not an employee of the County, and therefore
did not qualify for the exemption from USPAP requirements for “local employees performing
their official capacity.”
Thomas’ assessment was based upon a single valuation approach, the cost approach.
Thomas had classified the Property as a special use property for food processing. He testified
17
that he was unable to use the sales approach due to “the lack of comparable sales of comparable
food processing plants in the eastern region of the United States.” Thomas testified that he
rejected the income approach because the Property was owner-occupied and because, in his
opinion, rental data for food processing plants would be unavailable.
Because Thomas’ assessment of fair market value is based solely on the cost approach,
the resulting assessment is only entitled to the presumption of correctness if the taxing authority
considered and properly rejected the other valuation methods. See Keswick, 273 Va. at 137.
Therefore, we must determine whether the evidence in this case reflects that Thomas considered
and properly rejected the income and sales approaches before relying solely on the cost
approach. Id. at 137-38.
Regarding the sales approach, Thomas testified that he was unable to use this approach
because there were no comparable sales for food processing plants in the eastern region of the
United States. However, Thomas admitted that, although the market for the Property was
national in scope, he did not search for comparable sales outside of the eastern region of the
United States. Lifflander also testified that Thomas had erred in classifying the Property as a
special use property, because the Property was a rectangular building that could be used for
many different manufacturing uses. It is therefore also possible that, by only considering special
use food processing plants, Thomas necessarily limited the potential comparable sales that could
be considered.
With respect to the income approach, Thomas rejected it because the Property was
owner-occupied and because, in his opinion, rental data for food processing plants would be
unavailable. However, he also admitted that he did not search for rental data outside of Augusta
County, despite having admitted that the market for this Property was national in scope. Thomas
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provided no explanation for why he did not perform a nationwide search for comparable sales or
rental data. Accordingly, the evidence at trial demonstrates that Thomas applied the cost
approach without sufficiently attempting to gather the data necessary to utilize the income or
sales approach. As discussed above, an assessment based on a single approach to the
determination of market value, where the taxing authority failed to consider and property reject
the other approaches, is not entitled to a presumption of validity. Keswick at 140, and HCA
Health Servs., 260 Va. at 329-30. Therefore, the circuit court erred when it applied the
presumption of correctness to the assessments at issue in this case. On remand, McKee will still
be required to prove the elements of Code § 58.1-3984(B). However, the County will not be
entitled to the presumption of correctness set forth in that statute.
III. Conclusion
For the reasons stated, we will reverse the judgment of the circuit court. However, we
are aware that the trial judge who presided over this matter is retired and unavailable for recall
under Code § 17.1-106. Therefore, it will not be possible to remand this matter for the original
trial judge to reevaluate the evidence heard at trial and consider it under the proper standard or
review, without the presumption of correctness. Given the voluminous record in this case, 2 and
the numerous witnesses who testified at trial, it may not be feasible for a new judge to review the
existing record, to make credibility determinations, and attempt to apply the proper standard of
review to these assessments. Accordingly, due to the unique circumstances of this case and the
trial judge’s unavailability, we will remand this matter for a new trial, consistent with holdings
expressed in this opinion. However, if the parties and the circuit court all agree to forego a new
2
There are seven volumes of the appendix, totaling over 3400 pages, and the circuit court
record contains over 5700 pages.
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trial and have the circuit court review the existing record under the proper standard of review,
our remand authorizes the circuit court to exercise its discretion whether to conduct a new trial or
limit its review to the existing record.
Reversed and remanded.
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