Court Decisions

Plaintiff H.O.R.S.E., an organization devoted to rehabilitating and placing for adoption of ill or injured horses, claimed exemption from property tax as a charitable organization. The taxing authority denied the claim, but the trial court and the court of appeals said the organization had proved it was entitled to the exemption without the necessity for a trial.

In this opinion, the Connecticut Supreme Court says that because there is conflicting evidence as to whether the property is used exclusively for charitable purposes or is used for charitable and for profit purposes, a trial is needed to adjudicate the organization’s claim. Because it sent the case back for trial, the Supreme Court did not address a second question—whether an organization devoted to the welfare of horses, rather than of humans, can be a charitable organization under the applicable law.

Text of Opinion

The plaintiff, H.O.R.S.E. [FN1] of Connecticut, Inc., appealed to the trial court from the decision of the board of assessment appeals of the defendant town of Washington, claiming that it is a charitable organization, the real property of which is entitled to a tax exemption pursuant to General Statutes (Rev. to 1995) § 12-81(7) . The trial court granted the plaintiff's motion for summary judgment and rendered judgment thereon, from which the defendant appealed to the Appellate Court. The Appellate Court affirmed the trial court's judgment. H.O.R.S.E. of Connecticut, Inc. v. Washington, 57 Conn.App. 41, 51, 746 A.2d 820 (2000). We granted the defendant's petition for certification to appeal limited to the following two issues: "Did the Appellate Court properly conclude that: (1) there were no material facts in dispute regarding whether the plaintiff's property is used exclusively for charitable purposes under ... § 12-81(7); and (2) even if there were no such facts in dispute, as a matter of law the plaintiff is a charitable organization under § 12-81(7), and uses its property exclusively for charitable purposes?" H.O.R.S.E. of Connecticut, Inc. v. Washington, 253 Conn. 911, 754 A.2d 161 (2000). We disagree with the Appellate Court's conclusion that the trial court properly determined that there are no material facts in dispute as to whether the plaintiff uses its property exclusively for charitable purposes and, consequently, we reverse the judgment of the Appellate Court.

The following undisputed facts are set forth in the opinion of the Appellate Court. "The [defendant's] board of assessment appeals denied the plaintiff's claim for an exemption from local taxation as to a forty-six acre parcel of land that the plaintiff owns and operates as a farm for injured, distressed and mistreated horses. The plaintiff appealed to the Superior Court, claiming that [its property is exempt from taxation] under § 12-81(7) because it is a corporation organized exclusively for charitable purposes, and it uses the property exclusively to carry out such purposes. The court noted that the plaintiff's corporate charter reveals that its objectives are to unite into one organization the care of all abused, neglected, unwanted and lost domestic hoofed animals; to provide education and training pertinent to the care of hoofed animals for employees, members and officers, and the community as a whole; and to safeguard, advance and promote the safety and well-being of domestic hoofed animals by political, educational and other community activity. The plaintiff's president, Patricia Wahlers, resides on the property ... and cares for the horses." [FN5] (Internal quotation marks omitted.) H.O.R.S.E. of Connecticut, Inc. v. Washington, supra, 57 Conn.App. 42-43. Additional facts will be set forth as necessary.

The trial court granted the plaintiff's motion for summary judgment, concluding that there was no genuine issue of material fact and, on the basis of the undisputed facts, the plaintiff's property was tax exempt under § 12-81(7) because the plaintiff is a charitable organization that uses its property exclusively for charitable purposes. On appeal to the Appellate Court, the defendant claimed that the trial court improperly had determined that there were no material facts in dispute. Id., 44. The defendant further claimed that, even if, as the trial court had concluded, there were no material facts in dispute, the plaintiff is not entitled to a property tax exemption under § 12-81(7). Id., 46. The defendant advanced two arguments in support of this claim: first, the plaintiff does not qualify as a charitable organization for purposes of § 12-81(7) because its purpose is to serve the well-being of horses, not that of social man; id., 47; and second, even if it is assumed that the plaintiff is a charitable organization within the meaning of § 12-81(7), it nevertheless is not entitled to a property tax exemption because it does not use its property exclusively for charitable purposes. See id., 48. The Appellate Court rejected the defendant's arguments and affirmed the trial court's judgment. Id., 51. Because we conclude that a genuine issue of material fact exists as to whether the plaintiff uses its property exclusively for charitable purposes, we conclude that summary judgment was inappropriate and, therefore, reverse the judgment of the Appellate Court. [FN6]

Before addressing the merits of the defendant's claim, we set forth the applicable standard of review. "The standards governing our review of a trial court's decision to grant a motion for summary judgment are well established. Practice Book [§ 17-49] provides that summary judgment shall be rendered forthwith if the pleadings, affidavits and any other proof submitted show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law.... In deciding a motion for summary judgment, the trial court must view the evidence in the light most favorable to the nonmoving party.... The party seeking summary judgment has the burden of showing the absence of any genuine issue [of] material facts which, under applicable principles of substantive law, entitle him to a judgment as a matter of law ... and the party opposing such a motion must provide an evidentiary foundation to demonstrate the existence of a genuine issue of material fact. Practice Book [§ 17-46]." (Citations omitted; internal quotation marks omitted.) Appleton v.. Board of Education, 254 Conn. 205, 209, 757 A.2d 1059 (2000). "A material fact ... [is] a fact which will make a difference in the result of the case." (Internal quotation marks omitted.) Hammer v. Lumberman's Mutual Casualty Co., 214 Conn. 573, 578, 573 A.2d 699 (1990). Finally, the scope of our review of the trial court's decision to grant the plaintiff's motion for summary judgment is plenary. See, e.g., Doucette v. Pomes, 247 Conn. 442, 453, 724 A.2d 481 (1999).

Our review of the defendant's claim also is informed by the "settled rule of law that statutes which exempt from taxation are to be strictly construed against the party claiming an exemption.... Exemptions, no matter how meritorious, are of grace, and must be strictly construed. They embrace only what is strictly within their terms." (Citations omitted; internal quotation marks omitted.) United Church of Christ v. West Hartford, 206 Conn. 711, 718, 539 A.2d 573 (1988). "It is also well settled that the burden of proving entitlement to a claimed tax exemption rests upon the party claiming the exemption." (Internal quotation marks omitted.) Id., 719, 539 A.2d 573.

With these principles in mind, we turn to the defendant's claim that the Appellate Court improperly upheld the trial court's decision to grant the plaintiff's motion for summary judgment. Certain additional facts, however, are necessary to our resolution of that claim.

In support of its opposition to the plaintiff's motion for summary judgment, the defendant relied on the following testimony of Wahlers, which was taken at a deposition on January 23, 1997:

In support of its motion for summary judgment, the plaintiff submitted the affidavit of Danielle K. Cole, dated June 27, 1997. Cole stated in her affidavit, which purports to be based upon her personal knowledge, that: (1) she had been the plaintiff's accountant since 1990; (2) the plaintiff "rescues or otherwise receives abused, neglected or abandoned horses" and "attempts to rehabilitate [them] by providing nutritional care, [medicine], exercise, and grooming in addition to professional veterinary and farrier attention"; (3) "[w]hen a horse has made suitable progress [the plaintiff] makes the animal available for adoption"; (4) "[w]hen horses are adopted their expenses are underwritten ... by freeing money for the care of animals that are not ready for adoption or that are unadoptable"; (5) "[e]ight ... of the animals [then] on [the plaintiff's] property [were] formerly abused, neglected or abandoned horses that [were] being rehabilitated and [were] not [yet] adopted"; (6) "[t]welve ... of the animals [then] on [the plaintiff's] property [were] formerly abused, neglected or abandoned horses [and] adopted by new owners ... that [were] continuing rehabilitation that originally [had begun with the plaintiff]"; and (7) "[t]wo ... of the animals [then] on [the plaintiff's] property belong to ... [Wahlers'] sister ... [Susan Wahlers], who reimburses [the plaintiff] for the cost of their necessities." (Internal quotation marks omitted.)

The determination of whether property is entitled to a tax exemption necessarily is a fact-intensive inquiry. As the Appellate Court noted, we previously have stated that "[t]he existence of a purpose that can be characterized as charitable ... does not in itself render a corporation charitable and tax-exempt. An institution must be exclusively charitable, not only in the purposes for which it is formed and to which its property is dedicated, but also in the manner and means it adopts for the accomplishment of those purposes." (Internal quotation marks omitted.) H.O.R.S.E. of Connecticut, Inc. v. Washington, supra, 57 Conn.App. 49, quoting Waterbury First Church Housing, Inc. v. Brown, 170 Conn. 556, 562, 367 A.2d 1386 (1976). Thus, "[w]hether the property for which exemption is claimed is actually and exclusively used for ... [charitable] purposes must be determined from the facts of the case." (Internal quotation marks omitted.) Waterbury First Church Housing, Inc. v. Brown, supra, at 561, 367 A.2d 1386, quoting Camp Isabella Freedman of Connecticut, Inc. v. Canaan, 147 Conn. 510, 514, 162 A.2d 700 (1960). The extent to which an organization uses its property for purposes not directly related to its charitable purpose, therefore, is relevant to the determination of whether the organization's property is entitled to tax-exempt status under § 12-81(7).

The defendant contends that the trial court improperly granted the plaintiff's motion for summary judgment in light of Wahlers' deposition testimony. In particular, the defendant relies on Wahlers' testimony that, at the time of her deposition, twelve of the twenty horses [FN9] on the plaintiff's property were commercial "boarders." According to the defendant, Wahlers' testimony reasonably may be interpreted to mean that those twelve horses were healthy and were not, and never have been, in need of the special care, treatment or rehabilitation that the plaintiff affords abused, neglected or abandoned horses in accordance with its charitable purpose.

We agree with the defendant that Wahlers' deposition testimony is fairly susceptible of such an interpretation. Wahlers described those twelve horses as "boarders," as distinguished from the eight "rehabilitation projects," after explaining that the plaintiff boards healthy horses for a fee. At no time did Wahlers indicate that the "boarders" to which she was referring were, or ever had been, in need of rehabilitation. Construing Wahlers' testimony in the light most favorable to the defendant, as the nonmoving party; e .g., Miller v. United Technologies Corp., 233 Conn. 732, 745, 660 A.2d 810 (1995); it reasonably may be understood to suggest that, at the time of Wahlers' testimony, over one half of the horses on the plaintiff's property were perfectly healthy, commercial boarders. As so interpreted, Wahlers' testimony gives rise to a genuine issue of material fact, namely, whether the plaintiff uses its property exclusively for charitable purposes within the meaning of § 12-81(7) in light of the number of healthy, commercially-boarded horses that are maintained on the plaintiff's property in relation to the number of horses that are boarded there because of their need for special care or rehabilitation.

The plaintiff asserts that any ambiguity in Wahlers' deposition testimony regarding the number of completely healthy, commercially-boarded horses is clarified by a statement in Cole's affidavit that each of the twelve boarders was, at one time, sick, abused or neglected, and, although those horses had been adopted, they continued to need rehabilitative care. Although the explanation posited by the plaintiff is plausible, it does not represent the only reasonable inference that may be drawn from the two sets of sworn statements. As we have indicated, those statements also may be viewed as inconsistent. Because we must view the statements in the manner most favorable to the position advanced by the defendant as the nonmoving party; e.g., id.; we are not at liberty to resolve that latent factual discrepancy in the plaintiff's favor. Moreover, we cannot say that the potential conflict between Wahlers' deposition testimony and Cole's affidavit regarding the status of the horses being cared for by the plaintiff is immaterial to the issue of whether the plaintiff uses its property exclusively for charitable purposes as required under § 12-81(7). We, therefore, conclude that summary judgment was inappropriate and that, consequently, the Appellate Court improperly affirmed the judgment of the trial court.

The judgment of the Appellate Court is reversed and the case is remanded to that court with direction to remand the case to the trial court for further proceedings according to law.

The Connecticut Supreme Court has just ruled against the City of Bridgeport in Davis v. FOIC, holding that tax assessors must disclose all information on motor vehicle grand lists to the public.

It affirmed that the trial court's conclusion that neither the State Drivers' Privacy Act nor the Federal Driver's Privacy Protection Act prohibits disclosure by municipal officials of personal information on motor vehicle grand lists. Thus, there is no exemption from disclosure under Connecticut's Freedom of Information Act (FOIA).

The City of Bridgeport WILL NOT ask the U.S. Supreme Court to hear an appeal of the decision, so the decision of the Connecticut Supreme Court will stand.

This document was scanned in and edited by Thomas DeNoto. Contact Tom at (860) 647-3112 regarding any questions. Copies of the original can be obtained from Tom or the Court.

Quincy Amusements, Inc. ("Quincy") filed this real estate tax appeal challenging the assessor's determination of the value of its property located on Red Stone Road in Manchester on the grand lists of October 1, 1998 and October 1, 1999.

The subject property consists of three contiguous parcels of land totaling 14.45 acres: 51 Red Stone Road ("lot 51 "), which contains 6.05 acres of land; 61 Red Stone Road ("lot 6 1"), which contains 0.77 acres of land; and 99 Red Stone Road ("lot 99"), which contains 7.63 acres of land. Lot 99 is improved with a building containing a sixteen screen, 3597 seat megaplex movie theater. All three sites contain paved parking for patrons of the theater.

The function of the court in this appeal is to determine the fair market value of the three parcels as of the last town-wide revaluation date of October 1, 1990. On October 1, 1990, the subject property was located in a B-III zone located on the north side of Red Stone Road, east of Buckland Street and south of a right of way backing up to the eastbound travel lanes of Interstate1-84. A B-111 zone permits movie theaters, retail stores and shopping centers, personal service facilities, financial institutions, office, business or professional use and hotels and motels.

On October 1, 1990, the subject property was unimproved land owned by Brentwood Manchester. In 1991-92, a Builder's Square home improvement warehouse outlet was constructed on lot 99. The building contained approximately 90,000 square feet of gross building area. An outdoor garden center was located off the east wall of the building. The Builder's Square outlet was closed for business in 1995.

On November 26, 1997, Community Centers Three LLC conveyed lots 51 and 61 and two other lots to Quincy for a price of $3,000,000. On the same date, Quincy conveyed the two other lots for $ 1 00,000, leaving Quincy with lots 51 and 61. On the same day, Kmart Corporation conveyed lot 99 to Quincy for $6,850,000. The total amount paid by Quincy for lots 51, 61 and 99 was $9,750,000.

After Quincy acquired the subject parcels, it renovated the former Builder's Square building to adapt it as a megaplex theater. The interior of the former Builder's Square building was completely changed to accommodate a sixteen screen theater containing a total of 3597 stadium style seats. By industry definition, any theater with more than thirteen screens is known as a "megaplex theater." In addition to doing a complete renovation of the interior for theater use, the roof of the building was raised in the center to create a more spacious lobby and front facade. An extensive mezzanine area of 21,690 square feet was constructed to house the projection equipment for all of the auditoriums in the building. Portions of the site not already paved were paved and re-striped or reconfigured. The total cost of the conversion of the Builder's Square building to a sixteen screen megaplex theater was $5,300,000. The total acquisition cost for Quincy, consisting of the purchase price of the three parcels and the renovations, was $15,050,000. The certificate of occupancy for the theater was issued on June 16, 1998. As the plaintiff s appraiser, Robert H Silverstein, stated in his appraisal report, "[the appraised facility is a new, state of the art cinema; well located except that the site lacks visibility and signage on the main roads." (Plaintiff’s exhibit A, p. 94.) Beginning on the October 1, 1998 grand list, the assessor valued the land and buildings on the three lots at $13,207,299.

Conceptually, it is a difficult task to determine the fair market value of the subject property as of October 1, 1990, because the megaplex theater was not in existence in 1990. The original construction of the subject building as a Builders Square warehouse store was started in 1991, completed in 1992, then further substantially improved with new construction as a megaplex theater in 1997. Historically, we have unimproved land located in a business zone at the time of the 1990 revaluation as the first stage. Second, we have a 90,000 square foot building placed on the tax rolls on the list of 1992 trended back to October 1, 1990 and third, there were the improvements made in 1998 as new construction added to the tax rolls as of October 1, 1998 but trended back to October 1, 1990. Neither Silverstein nor the town's appraiser, Sean T. Hagearty, considered these three segments in their process to arrive at the fair market value of the subject as of October 1, 1990. Silverstein and Hagearty valued the subject property as a new megaplex theater on October 1, 1998 and trended the 1998 value back to October 1, 1990.

The three parcels of land, for all practical purposes, should be valued as a single entity. The assessor valued each parcel separately. The plaintiff s appraiser, Silverstein, was of the opinion that lots 51 and 99 should be treated as one entity and that lot 61 (0.77 acres) could be developed as a separate parcel for a commercial use. The town's appraiser, Hagearty, considered all three parcels to be collectively utilized for a sixteen screen megaplex theater. We agree with Hagearty that all three parcels should be considered as one entity. Silverstein noted that the three parcels are improved with paved parking for use by theater-goers and that the total number of parking spaces on all three parcels is not enough to meet current zoning regulations. Under these circumstances, we fail to see the merit of Silverstein's position that lot 61 could be developed separately. Taking away the parking spaces on lot 61 from use in connection with the theater would increase the noncompliance with the zoning regulations and require a variance to convert the noncompliance into a legal use.

The assessor determined the value of the subject property as of October 1, 1998, trended back to October 1, 1990 to be as follows:

The plaintiff's appraiser, Silverstein, using the cost approach, arrived at a total value as of

Using the cost approach, the town's appraiser, Hagearty, arrived at a total value for the three parcels combined, as of October 1, 1990, as follows:

Although Hagearty found that the cost approach was the best approach to use in determining the fair market value of the subject property, he also utilized the income approach, arriving at a value under that approach of $10,865,000. Hagearty's final opinion of the fair market value of the site plus all improvements was $12,750,000, based upon a compromise between $14,002,872 under the cost approach and $10,865,000 under the income approach.

Silverstein and Hagearty both concluded that the highest and best use of the subject property as improved was for its existing use as a theater. Silverstein and Hagearty further concluded that although each looked at the income approach and the sales approach to value, the cost approach was the best approach to determine the fair market value of the subject property. Although we agree that the cost approach is the best approach to use in determining the fair market value of the subject property, we recognize that this case is unique because it deals with an interim valuation based upon new construction. However, both appraisers valued the subject property as if it all came into existence in 1998.

In utilizing the cost approach, each appraiser first determined the value of the land. Where- as Silverstein followed the analysis of the assessor and valued each of the three lots separately, Hagearty combined all three lots together as if they constituted one parcel. Considering the land as vacant, as it was in 1990, Hagearty determined that the highest and best use of the property would be for "a destination-driven retail use" (Defendant's exhibit 1, p. 28), and Silverstein determined that the highest and best use would be for "a secondary commercial use rather than a prime retail - commercial use." (Plaintiff’s exhibit A, p. 38). On October 1, 1998, the subject land was being used to support a megaplex theater and both appraisers considered the highest and best use of the land as improved to be for its present use as a theater.

As of October 1, 1990, the three lots were contiguous parcels of land located within the same zoning district. The subject property was in a B-III zone, and approved as a shopping center which requires a significant number of parking spaces to support the use for this purpose. As Hagearty notes, the Pavilions at Buckland Hills Mall was completed in 1990 and transformed the area into a dominant regional retail trade area. (Defendant's exhibit 1, p. 27.) Although the assessor and Silverstein valued the subject lots separately, we find it more credible to treat the three contiguous lots as a single entity. With this in mind, we look at the land comparables selected by both appraisers. Silverstein selected twelve site comparables, all in Manchester. We disregard eight of Silverstein's comparables because these sales were not really comparable to the subject. These eight parcels were either in an industrial zone or were too small in size to make a fair comparison. Similarly, we disregard two of Hagearty's five comparables, because one was a 1.29 acre parcel, which was one of the small parcels also selected by Silverstein, and the other was a 7.65 acre parcel located within the Manchester Parkade shopping center. We find neither of these two parcels to be comparable to the subject. We were impressed with the selection by Hagearty of a sale at Frontage Road and Webster Square Road in Berlin. This comparable, sale 5 on Hagearty's list, was a 13.78 acre parcel sold on March 1, 1990 for $4,070,000, or $6.78 per acre. Hagearty adjusted the value of this site plus 25% to arrive at an adjusted value of $8.47 per square foot. At the time of the sale, this site was approved for construction of a twelve screen multiplex theater. The facility built upon the site contained a 3 1 01 seat multiplex theater. Although Hagearty made specific adjustments of his comparables, Silverstein did not. Silverstein indicated the adjustments for each of his comparables, but did not translate these adjustments into values other than to indicate a plus or minus adjustment.

We find it difficult to compare Hagearty's specific adjusted comparables with Silverstein's adjusted comparables in plus or minus. We find it appropriate to analyze the unadjusted comparable sales selected by both Silverstein and Hagearty, which we deem credible, to arrive at a square foot value for the land. We find it appropriate to combine Silverstein's sales 6, 7, 9 and 10 with Hagearty's sales of 1, 2 and 5, recognizing that sales 1 and 2 of Hagearty's appraisal and sales 6 and 7 of Silverstein's appraisal are the same properties. Taking an average of these five sales, we arrive at a price of $7.85 per square feet. We are reluctant to disregard using adjusted sales prices because of lack of identifiable adjustments by Silverstein. However, we find that given the variety of sales used by both appraisers, and recognizing that Silverstein has selected lower priced comparables and Hagearty has selected higher priced comparables, we have a balanced spectrum of sales to consider. We note that Hagearty's finding of $8.50 per square foot using comparables that have been adjusted is higher than our use of comparables from both appraisers without adjustments. This gives us some comfort in using unadjusted comparables to find value. Finding that the site contains a total of 629,441 square feet, as determined by the assessor, using a price of $7.85 per square foot of land, we find the site value as of October 1, 1990 was $4,941,111.

Silverstein and Hagearty both undertook to value the subject property as a megaplex theater rather than valuing the property based upon the addition of the Builder's Square building value plus the added value of the new construction. In determining the value of the subject building, Silverstein and Hagearty used the Marshall Valuation Service, a nationally recognized cost estimating guide. Silverstein arrived at a cost new estimate of the replacement building to be $6,541,516 as of October 1, 1990. (Plaintiff’s exhibit A, p. 65.) Hagearty, on the other hand, arrived at a cost estimate of the replacement building to be $10,081,962 as of October 1, 1990. (Defendant's exhibit 1, p. 64.) Silverstein selected the category of "Average Quality Class C Cinema" in the Marshall Valuation Service. Hagearty selected the category of "Good Quality Class C Cinema."

We find that it is more credible to use Hagearty's selection of "Good Quality Class C Cinema" in Marshall Valuation Service in developing the cost estimates to replace the subject building rather than use Silverstein's selection of "Average Quality Class C Cinema." As we have previously noted, Silverstein recognized that the subject building was a "new, state of the art cinema." (Plaintiff’s exhibit A, p. 94.) The Builders Square building was converted to a megaplex theater with the expenditure of $5,300,000 in addition to the cost to originally construct the Builders Square building in 1992. The subject building was not a typical average quality theater as determined by Silverstein with a replacement value of $6,541,516. In our view it is more credible to select "Good" rather than "Average" in defining the category used in Marshall Valuation Service to value the subject building.

This difference in selecting the type of classification amounts to $25.30 per square foot of building. (See defendant's exhibit 1, p. 57.) The cost for Good Quality Class C Cinema per square foot is $85.62; the cost for Average Quality Class C Cinema per square foot is $60.32.

$25.30 per square foot multiplied by the 90,000 square foot building gives us the sum of $2,277,000 as the difference between "Average" versus "Good" quality using the Marshall Valuation Service.

Based on the use of "Good" rather than "Average" in the Marshall Valuation Service, we find it more credible to use Hagearty's cost estimate of the replacement building. One part of Hagearty's replacement cost that we cannot accept is his valuation of adjusted site improvements at $587,302. We find more credible Silverstein's adjusted site improvements value of $367,071 because a number of site improvements listed by Hagearty are accounted for in the building value. This leaves us with Hagearty's adjusted total replacement cost new as of October 1, 1990 of $10,081,962 for the building, plus Silverstein's adjusted total depreciated cost of the site improvements of $367,071. To reach the depreciated value of the building, we deduct 20% of $10,081,962 for functional obsolescence to arrive at a final depreciated value of the building of $8,065,570. We then add Silverstein's depreciated cost of the site improvements of $367,071 to Hagearty's depreciated cost of the building to arrive at a total depreciated value of the building and improvements of $8,432,641 as of October 1, 1990. (See Defendant's exhibit 1, p. 64.)

Another measure of the difference between Silverstein and Hagearty is the calculation of the cost of the building in relation to the cost per screen and cost per seat using the Marshall Valuation Service. Silverstein concluded that the cost per screen was $408,845. Multiplying this figure by the sixteen screens in the theater results in a total value based upon a cost per screen analysis of $6,541,520. Silverstein's valuation on a per seat basis was arrived at by multiplying a cost per seat of $1819 by 3597 seats to arrive at a total cost of $6,542,943. Hagearty, on the other hand, selected a per screen value of $666,829. Multiplying this figure by the sixteen screens results in a total value based upon a cost per screen analysis of $10,669,264.

Hagearty's valuation on a per seat basis was arrived at by multiplying a cost per seat of $2966 by 3597 seats to arrive at a total cost of $10,668,702. Each appraiser seemed to select a price per screen and a price per seat that closely supported their own finding of value based on a price per square foot of building space. However, the Marshall Valuation Service is not a credible guide to use in determining the fair market value of a theater based on the cost per screen or the cost per seat. Marshall Valuation Service recites, under the section Churches, Theaters and Auditoriums, relating to costs per screen and cost per seat, "[the following rules of thumb should not be used for actual appraisals, but should be considered rough budgeting guides and checks only." (Plaintiff’s exhibit A, p.2 of Addendum on Marshall Valuation Service.)

Using the approach taken by both appraisers, which was to value the whole property as of October 1, 1998 but trended back to October 1, 1990, we find, as we have previously deter- mined, that the land value of all three lots is $4,941,111. Using the land value of $4,941,111, we add the depreciated value of the building and site improvements of $8,432,641 to arrive at a value of $13,373,752. The reason that we use the depreciated value of all improvements at $8,432,641 is because we find Hagearty's method of valuing the construction costs of the building less functional obsolescence more credible than Silverstein's method.

The assessor's finding of fair market value of the land and building on the grand list of October 1, 1998 trended back to October 1, 1990 was $13,207,229. This amount compares favorably with our finding that the fair market value of the subject property was $13,373,752 as of October 1, 1990. Under these circumstances we cannot find that the plaintiff is aggrieved by the action of the assessor.

Accordingly, judgment may enter in favor of the defendant dismissing this appeal without

CV 000502561

PAMELA DAVIS : SUPERIOR COURT

v. : JUDICIAL DISTRICT OF NEW BRITAIN

FREEDOM OF INFORMATION : APRIL 30, 2001

COMMISSION, ET AL

MEMORANDUM OF DECISION

This is an administrative appeal from a final decision of the defendant, freedom of information commission (FOIC), brought pursuant to General Statutes §§ 1-206(d) and 4-183(b), by Pamela Davis, tax assessor of the city of Bridgeport, (tax assessor) ordering her to provide the complainant below, Barbara Brennan, with access to the motor vehicle grand lists for 1997 and 1998 and to strictly comply with the provisions of General Statutes § 1-210(a).

The appeal of the FOIC order was timely filed and, after briefs were submitted, the court heard oral argument on January 3, 2001.

FACTS AND PROCEDURAL HISTORY

On March 2, 1999, Barbara Brennan, an insurance investigator, went to the city of Bridgeport tax assessor's office and asked to inspect the motor vehicle grand list books for 1997 and 1998. The tax assessor's office denied Brennan's request on the grounds that the tax assessor is prohibited from disclosing motor vehicle information contained in such lists pursuant to the Federal Drivers Privacy Protection Act, 18 U.S.C.§§ 2721, et seq., (FDPPA) and number 97-266 of the 1997 Public Acts, amending General Statutes § 14-10. By letter dated March 2, 1999, Brennan filed a complaint with the FOIC alleging, inter alia [1] , that the Bridgeport tax assessor had denied her access to inspect the motor vehicle grand lists for 1997 and 1998.

A contested administrative hearing was held on May 20, 1999, before hearing officer Colleen M. Murphy. On July 14, 1999, the FOIC held a hearing on Murphy's amended proposed final decision. The FOIC affirmed Murphy's proposed final decision and, on July 22, 1999, it issued a notice of final decision finding the tax assessor violated General Statutes §1-210 (a) in denying Brennan access to the 1997 and 1998 motor vehicle grand list books and ordered the tax assessor to provide Brennan access to inspect the books and to "[h]enceforth strictly comply with the provisions of General Statutes §1-210(a)."

The facts underlying this case are essentially undisputed. The tax assessor challenges the final decision of the FOIC on the legal ground that they improperly concluded that neither the FDPPA nor General Statutes §§14-10 and 14-50a(d) prohibit the assessor from disclosing information contained in the records received from the department of motor vehicles or the motor vehicle grand lists compiled from such records.

JURISDICTION

The tax assessor is adversely affected by the decision of the FOIC in that she is faced with either complying with the FDPPA and §§ 14-10 and 14-50a, thereby violating the FOIC's orders, or complying with the FOIC's orders and arguably or possibly violating the FDPPA and §§ 14-10 and 14-50a. An agency that has been ordered by the FOIC to disclose information is aggrieved for purposes of an appeal from that order because failure to comply with the order could result in criminal and civil sanctions. See State Librarv v. Freedom of Information Commission, 240 Conn. 824, 834, 694 A.2d 1235 (1997). Likewise, the tax assessor faces possible federal criminal and civil sanctions for violating the FDPPA pursuant to 18 U.S.C. §§ 2723 and 2724. "Aggrievement [necessary for standing for an administrative appeal] is established if there is a possibility, as distinguished from a certainty, that some legally protected interest . . . has been adversely affected." New England Cable Television Assn., Inc. v. Department of Public Utility Control, 247 Conn. 95, 103, 717 A.2d 1276 (1998).

The tax assessor is aggrieved and has standing to appeal.

STANDARD OF REVIEW

The FOIC is an administrative agency; see General Statutes § 1-205; and is, thus, governed by the Uniform Administrative Procedures Act, General Statutes § 4-166 et seq. General Statutes § 4-183 (j), which describes the Superior Court's standard of review of an agency decision, provides in pertinent part: "The court shall not substitute its judgrnent for that of the agency as to the weight of the evidence on questions of fact. The court shall affirm the decision of the agency unless the court finds that substantial rights of the person appealing have been prejudiced because the administrative findings, inferences, conclusions, or decisions are: (1) In violation of constitutional or statutory provisions; (2) in excess of the statutory authority of the agency; (3) rnade upon unlawful procedure; (4) affected by other error of law; (5) clearly erroneous in view of the reliable, probative, and substantial evidence on the whole record; or (6) arbitrary or capricious or characterized by abuse of discretion or clearly unwarranted exercise of discretion...." The ultimate determination is whether, in view of all of the evidence, the agency, in issuing its orders, acted unreasonably, arbitrarily, illegally or in abuse of its discretion. See Domestic Violence Services of Greater New Haven. Inc. v. Freedom of Information Commission, 47 Conn. App. 466, 469-70, 704 A.2d 827 (1998). "Conclusions of law reached by the administrative agency must stand if the court determines that they resulted from a correet application of the law to the facts found and could reasonably and logically follow from such facts." New Haven v. Freedom of Information Commission, 205 Conn. 767, 774, 535 A.2d 1297 (1998). Ordinarily, great deference is given to the construction given a statute by the agency charged with its enforcement. Connecticut Assn. of Not‑For‑Profit‑Providers for the Aging v. Dept of Social Services, 244 Conn 378, 389, 709 A.2d 1116 (1998). "[A]n agency's factual and discretionary determinations are to be accorded considerable weight by the courts.... Cases that present pure questions of law, however, invoke a broader standard of review than is ordinarily involved in deciding whether, in light of the evidence, the agency has acted unreasonably, arbitrarily, illegally or in abuse of its discretion.... Furthermore, when a state agency's determination of a question of law has not previously been subject to judicial scrutiny . . . the agency is not entitled to a special deference.... [I]t is for the courts, and not administrative agencies, to expound and apply governing principles of law." (Citations omitted, internal quotations marks omitted.) Connecticut Light and Power Company v. Texas‑Ohio Power, Inc, 243 Conn. 635, 642-43, 708 A. 2d 202 (1998).

DISCUSSION

In its final decision, the FOIC concluded that neither the FDPPA nor §§ 14-10 and 14-50a (d) prohibits the tax assessor from disclosing the personal information contained in motor vehicle grand lists. The FOIC concluded that the express statutory restrictions against disclosure by the department of motor vehicles and by "a person, firm or corporation" to whom motor vehicle records have been disclosed did not apply to the tax assessor. Additionally, the FOIC concluded that General Statutes §12-55 (a) requires motor vehicle grand lists be available for public inspection. The FOIC declined to find that Public Act 97-266, which amended § 14-10 to prohibit disclosure of personal information contained in motor vehicle records, implicitly repealed § 12-55 (a) in the absence of clear legislative intent to do so.

The essence of this appeal is a challenge to the FOIC's conclusions of law concerning application to the tax assessor of the FDPPA and § 14‑10, as amended by Public Act 97-266, and 14-50a (d) and the interplay between those statutes and § 12-55 (a). This appears to be a matter of first impression. As such, the standard of review is broadened and the special deference ordinarily given to administrative agencies gives way to an analysis of the governing principles of law.

The FDPPA "regulates the disclosure of personal information contained in the records of state motor vehicle departments." Reno v Condon, 528 U.S.141, 143, 120 S. Ct. 666, 145 L. Ed. 2d 587 (2000). Likewise, §14-10 as amended by Public Act 97-266, regulates the disclosure of personal information contained in the records of the department of motor vehicles. "Personal information" in both the federal and state statutes is defined as any information "that identifies an individual, including an individual's ... name [and] address ...." General Statutes § 14-10 (a) (3).

Section 2721(a) of the FDPPA provides in relevant part: [e]xcept as provided in subsection (b), a State department of motor vehicles, and any officer, employee, or contractor, thereof, shall not knowingly disclose or otherwise make available to any person or entity personal inforrnation about any individual obtained by the department in connection with a motor vehicle record. (Emphasis added.)

Sections 14-10 (c) and (d) similarly limit and regulate disclosure of personal information in records of the department of motor vehicles. Section 14-10 (c) (2), as amended by Public Act 97-266, provides in pertinent part: "Before disclosing personal information . . . from motor vehicle records or allowing inspection of any such record containing personal information . . . the commissioner [of motor vehicles] shall ascertain whether the individual who is the subject of the request has elected to allow disclosure .... The commissioner may disclose such personal information or permit inspection of such record containing such information only if the individual who is the subject of the request has elected to allow disclosure."

Neither the FDPPA nor § 14-10 (d), as amended by Public Act 97-266 apply by their express terms to the office of the tax assessor or to the motor vehicle grand list books. They apply only to the commissioner of motor vehicles and motor vehicle records. See Kirschner v Freedom of Information Commission, Superior Court, judicial district of Hartford-New Britain at Hartford, Docket No. 567162 (January 15, 1998, McWeeny, J.), in which the court held that General Statutes (Rev. to 1996) § 14-10 did not apply to records in the custody of the department of public safety.

Moreover, § 2721 (b) (1) of the FDPPA permits disclosure of personal infonnation by a state department of motor vehicles and any officer, employee, or contractor, thereof “for use by any government agency in carrying out its functions.” (Emphasis added.) Section 14-10 (f) similarly permits the commissioner of motor vehicles or any person contracting with the department to disclose personal information from a motor vehicle record to "any federal, state or local government agency in carrying out its functions or to any individual or entity acting on behalf of any such agency." (Emphasis added.)

Section 14-10 (g) of the General Statutes provides: "Any person receiving personal information from a motor vehicle record pursuant to subsection (f) of this section shall be entitled to use such information for any of the purposes set forth in said subsection." Thus, a person in a government agency, or an individual or person in an entity acting on behalf of any such agency, may use motor vehicle personal information in carrying out its functions, in this case, in carrying out the functions of the Office of the Tax Assessor.

Section 14-50a (d), which enumerates fees that the commissioner of motor vehicles shall charge for requests for information under § 14-10, provides: "No person, firm or corporation furnished information by the commissioner as provided in this section shall distribute such information for any other purpose than that for which it was furnished." Assuming arguendo that this section applies to a government agency or a person in a government agency, there is no prohibition upon the distribution of inforrnation in furnished records in carrying out the functions of the agency as that is the very purpose for which the information was furnished.

Section 14-163 provides in pertinent part: "[T]he commissioner on or before the first day of December, annually shall furnish to the tax assessors in each town a list containing the names and addresses of the owners of motor vehicles and snowmobiles residing in their respective towns as they appear be the record of the Department of Motor Vehicles with a description of such vehicles." Municipal tax assessors, in carrying out the function of their agency, are required to use the lists furnished to them by the commissioner of motor vehicles to create grand lists of property, including motor vehicles, for public inspection.

General Statutes §12-55 (a) provides: "When the lists of any town have been so received or made by the assessor or board of assessors, they shall equalize the same, if necessary, and make any assessment omitted by mistake or required by law .... When such lists have been so completed, the assessor or board of assessors shall arrange such lists in alphabetical order and lodge the same, except as otherwise specially provided by law, in the town clerk's or assessor's office, on or before the thirty-first day of January, for public inspection. Such assessor or board of assessors shall make an abstract of such lists, . . . and, except as otherwise specially provided by law, shall lodge such abstract in the town clerk's office, on or before the thirty first day of January next after the date prescribed for the filing of such lists, for public inspection. (Emphasis added). The purpose of § 12-55 (a) "is for the general benefit of each inhabitant of the town, that he may by inspection ascertain whether, in his opinion, injustice has been done him, and if so, appeal to the board of relief for its correction, and that failure to return such an abstract as and when required invalidated the assessment." Rocky Hill Incorporated District v Hartford Racon Corp., 122 Conn 392, 403, 190 A. 264 (1937).

The tax assessor contended to the FOIC that she is the custodian of the records provided to her by the commissioner of motor vehicles and, as custodian, is prohibited from disclosing them. That contention is not supported by the facts or the law. As the hearing officer rightfully found, the assessor is not the legal custodian of the department of motor vehicle records, but rather is given such records annually to compile a motor vehicle grand list each year pursuant to § 12-55 (a).

The tax assessor also contends that the phrases "except as otherwise specially provided by law" in §12-55 (a) and "except as otherwise provided by any federal law or state statute" in §1-210 refer to the prohibitions against disclosure under the FDPPA and §14-10 as amended. Since, as discussed above, neither the FDPPA nor §14-10 expressly prohibits disclosure by the tax assessor, her contention must fail. To conclude otherwise would require finding an implicit repeal of §12-55 (a) and Connecticut's historical system of making grand lists, including personal property grand lists, available to the public for correction and disputation. The hearing officer rightly rejected such an option and found that if the legislature had intended to restrict access to the name, address and ownership information provided to tax assessors by the department of motor vehicles pursuant to General Statutes §14-163, it would have done so explicitly and specifically.

CONCLUSION

The FOIC has correctly concluded that neither the FDPPA nor §§ 14-10 and 14-50a (d) prohibits the tax assessor from disclosing information contained in records received from the department of motor vehicles or the motor vehicle grand lists compiled from such records. The FOIC correctly concluded that the tax assessor violated the provisions of §1-210 (a) by failing to provide Brennan with access to the requested 1997 and 1998 motor vehicle grand list books.

Accordingly, the appeal of tax assessor is dismissed.

Lois Tanzer, Judge

[1] Brennan also complained that she had been denied access to real estate grand lists and field cards. The FOIC found that Brennan was not denied access to such information. That ruling is not at issue in this appeal.

The plaintiff, United Technologies Corporation, Hamilton Standard Division (UTC), appeals from the decision of the East Windsor Board of Assessment Appeals upholding the assessor’s determination of the fair market value of UTC’s After Market Support Facility (AMSF) located at 97 Newberry Road, East Windsor. On the revaluation date of October 1, 1995, the assessor determined that the fair market value of UTC’s AMSF on Newberry Road was $22,236,770. UTC claims that the fair market value of the subject property as of October 1, 1995, was $13,825,000.

The subject property is located on the north side of Newberry Road, east of Route 5, in the northwest section of East Windsor. The subject property is accessible to Interstate 91 to the west and to Bradley International Airport located about 5 miles away in Windsor Locks. Route 5 is the primary commercial highway through East Windsor and provides access to Interstate 91 to the west and to Interstate 84 to the south. The subject property is located in an area which is primarily industrial. Seven major corporations have facilities in the neighborhood. The subject property is located in an M-1 zone which has a minimum lot size of 60,000 square feet. A wide range of light industrial uses is permitted in this zone. The property contains 39.41 acres of land with access to Newberry Road through a strip of land with frontage of 200 feet. The property consists of a one story industrial building containing 278,025 square feet of gross building area. 217,455 square feet (78.2%) of the building contains the manufacturing area, and 60,570 square feet (21.8%) of the building is devoted to an office area. The building also contains an interior 8000 square foot mezzanine in the manufacturing area. A 6480 square foot wastewater treatment plant is located to the rear of the building. The Town has exempted this treatment plant for tax purposes. The manufacturing portion of the building has many special features, such as a chemical dispensing room, which is explosion proof, separation walls, a three hour fire rated wall, an electrical system of two 4000 amp facilities plus back-up generators, a conduit line system, power plant, water storage tank, electronic service center, a floor drainage system to contain hazardous waste, a 25,000 gallon double lined oil tank with leak detection devices, and an underground coolant storage tank. Other special features of the building include wall heights of 14 feet in the office area, and wall heights of over 26 feet with a 20 foot clear span in the manufacturing area. The manufacturing area is divided into smaller areas for engine component repair, jet fuel controls, propeller assembly, plating, blade machining, and a machine shop. There are areas in the manufacturing area with special interior finishes, including environmental control systems for a clean room with special interior finishes, including environmental control systems for a clean room with separate heating, ventilation and air conditioning system and electronic service center. Other special features include special drainage features for environmental control systems, a reinforced concrete floor with a heavy floor load, special explosion areas, and a paved parking lot of 250,000 square feet to accommodate 700 cars.

The building and improvements were constructed as an AMSF, where UTC tests, repairs, and reconditions fuel injectors of jet aircraft engines and propellers for aircraft piston engines, manufactures testing equipment, and carries out ancillary administrative services related to these activities. The quality of the construction and the maintenance of this facility were exceptional, and the products used in the construction were of the highest quality. This manufacturing facility was constructed with such high quality that maintenance costs are at a minimum. This manufacturing plant was not the normal run-of-the-mill plant.

Beckenstein Enterprises (Beckenstein) purchased the subject land on November 2, 1987, for $1,400,000, or $35,523 per acre. Beckenstein entered into a fifteen-year lease with UTC on June 18, 1987. The lease provided that Beckenstein would construct a facility of approximately 275,000 square feet in accordance with the plans and specifications of UTC. Beckenstein entered into an arrangement with UTC to construct the AMSF on a "fast track" basis to meet UTC’s specifications. Beckenstein constructed the AMSF using UTC’s plans and specifications and completed the construction in 1988. Beckenstein constructed the facility with funds provided by Prudential Insurance Company of America (Prudential). The subject premises, owned by Beckenstein, is subject to a mortgage in favor of Prudential in the principal sum of $26,000,000. This mortgage, executed on September 1, 1994, was a consolidation of various promissory notes. Since the mortgage securing the $26,000,000 was a non-recourse note, the only security for the loan was the subject real estate.

UTC took occupancy under the lease with Beckenstein in 1989. The lease is a modified triple net lease requiring UTC to be responsible for all operating expenses, including taxes. However, Beckenstein is responsible for insurance and structural repairs. The initial rent was based on the cost of construction, including change orders for the first five years. The lease also provided for an adjustment of the rent during the balance of the fifteen-year lease based upon the mortgage to Prudential. In 1994, Beckenstein and UTC negotiated a fifth amendment to the lease. This fifth amendment provided for an annual rent of $4,251,687 for the then remaining 10 years of the lease. The fifth amendment of the lease gave UTC an option to purchase the property for $25,344,000 or on a mutually agreed upon price at the termination of the lease, or a right of first refusal. The lease provided for two ten-year renewal options. On the revaluation date of October 1, 1995, the lease was in full force and effect with an annual rent of $4,251,687 for the remainder of the nine years on the lease plus the options to renew the lease. On this date to the present time, UTC has been in possession under the terms of the lease.

The issues to be determined in this appeal are whether the value placed on the property by the assessor was excessive, and if so, what is the fair market value of the subject property on October 1, 1995.

The highest and best use of the subject property on the date of revaluation is the starting point in the determination of fair market value. The plaintiff’s appraisers, Arnold J. Grant and Dr. William N. Kinnard, were of the opinion that the highest and best use of the subject property as vacant land on October 1, 1995, "would be development for light industrial use by a single user-occupant." (Plaintiff’s Exhibit A, p. 18.) Grant and Kinnard were of the opinion that the highest and best use of the subject property as improved on October 1, 1995 "was its continued use as an industrial manufacturing-repair-office facility with a single user-occupant." (Plaintiff’s Exhibit A, p. 20.)

The defendant’s appraisers, Christopher K. Kerin and Ronald B. Glendinning, were of the opinion that the highest and best use of the subject property as vacant "would be to develop the site with a single-tenant industrial facility for use by an owner/user, or pre-leased to a single tenant." (Defendant’s Exhibit 10, p. 16.) Kerin and Glendinning were of the opinion that the highest and best use of the subject property as improved on October 1, 1995, "would be for its continued present use as an industrial facility by United Technologies Corporation or some comparable entity taking advantage of the special-purpose improvements in place." (Defendant’s Exhibit 10, p. 17.) Kerin and Glendinning commented that the "[c]ontinued present use of the subject property represents the most profitable use of the subject property as improved. This highest and best use conclusion properly reflects the market value contribution of the special-purpose features in the subject property. There is no alternate use to which the subject property could be put which would yield a higher present value indication." (Defendant’s Exhibit 10, p. 17.) We agree with this conclusion.

We agree with the appraisers for both sides that the highest and best use of the subject premises as vacant would be to develop the site with a single tenant or owner occupied industrial facility. We also agree that the highest and best use of the subject premises as improved would be for its continued use as an industrial facility as presently used by UTC.

The plaintiff’s appraisers, Grant and Kinnard, arrived at their opinion of value by using the market sales approach, the capitalization of income approach and the cost approach. Their final conclusion of the value of the subject property of $13,825,000 was developed from the application of all three approaches to value. Their opinion of value using the market sales or comparable sales approach was $13,825,000. Their opinion of value was $13,800,000 using the income capitalization approach, and $14,100,000 using the cost approach.

Grant and Kinnard selected nine sales that they considered to be comparable to the subject property for the purpose of developing market value. We were not impressed with any of the sales selected by Grant and Kinnard upon which they based their opinion of the value of the subject property.

The subject property was a class A, top of the line building, constructed for light industrial use. The sales selected by the plaintiff’s appraisers were not even close to being comparable to the subject. Sale one was a 40,000 square foot building with fourteen-foot ceilings and no air conditioning sold by the Federal Deposit Insurance Corporation to investors on September 28, 1995 for $1,200,000. Sale two was a 100,000 square foot building located in Windsor, Connecticut, near Blue Hills extension. Forty-eight percent of this building was devoted to office space. Sale three was an old mushroom factory located across the street from the subject property in East Windsor. This building of 277,382 square feet has been vacant for several years prior to sale. Sales four and seven were sales of the same warehouse property in Manchester, in 1995 and 1992. Sale five was a warehouse located in Meriden, and sale eight was a warehouse in Manchester. Sale six was a pre-engineered building constructed in 1978 in Enfield. Grand admitted on cross-examination that he would not use the subject property as a storage warehouse. Kinnard was of the opinion that the subject was a limited market property with a few potential buyers because of the size and character of the building. The town’s appraiser, Glendinning, also agreed that the subject was a limited market property because only a limited number of users would be able to fully exploit the features of the building.

We find that the use of market sales approach used by Grant and Kinnard to arrive at the fair market value of the subject premises as of October 1, 1995, was not credible. On the contrary, we do find credible opinions of Kerin and Glendinning that the subject is a limited-market property and that they could find no sales of property at or near the revaluation date that could be considered comparable to the subject. "Buyers of special-purchase properties such as the subject property do not typically rely on the sales comparison approach since no two properties tend to have sufficient comparability not to require excessive adjustment." (Defendant’s Exhibit 10, p. 49.) For these reasons, we conclude that the market sales approach to finding value of this special use property was not a viable approach to use in this case.

Turning to the income approach, General Statutes 12-63b mandates that when comparable sales do not exist in an assessor’s town, the assessor must consider each of the following methods of appraisal in determining the fair market value of commercial income producing property: "(1) Replacement cost less depreciation, plus the market value of the land, (2) the gross income multiplier method as used for similar property and (3) capitalization of net income based on market rent for similar property." General Statutes 12-63b(a). Section 12-63c permits the assessor to request verification of actual rental and rental-related income or operating expenses related to the current use of such property when the valuation of the property is based on the capitalization of net income. Section 12-63b does not change the basic concept of valuation. The three acceptable methods of property valuation are the cost approach, the capitalization of income approach, and the market sales approach. Four D’s Inc. v. Mattera, 25 Conn. App. 308, 315, 594 A.2d 484 (1991). If there are market sales available to develop the market approach, the assessor can justifiably use this approach to value when considering income-producing property. However, if there are no comparable sales available in the town where the property is located, as we have in this case, 12-63b requires the assessor to consider the cost approach and the capitalization of net income approach. In considering the capitalization of net income approach, the assessor must base his or her decision on the development of market rentals. The development of market rentals means that the assessor or the appraiser must develop rents that result from leases of properties that are similar or comparable to the subject property. In considering the development of market rents, 12-63b(b) requires that the assessor or appraiser look at and take into consideration what the actual rent is for the subject property. In other words, the assessor and appraiser must consider whether the contract rent of the subject represents market rent, below market rent, or above market rent.

In considering the income approach to value, Grant and Kinnard disregarded the existing contract between Beckenstein and UTC, which produced a yearly rental income stream of $4,251,687. Grant and Kinnard considered the contract rent to be above market rent because, in their opinion, the rent is reflective of the historical cost of constructing the building. In their opinion, the contact rent was two times higher than the market rent and therefore played no role in determining the fair market value of the subject. Grant and Kinnard instead considered eleven market rents that they considered to be comparable to the subject. Grant and Kinnard placed particular emphasis on rentals one, three and four in their report to arrive at their conclusion that the best indicator of market rent for the subject as of October 1, 1995 was $5.50 per square foot of main building area. Rental one, located in East Windsor, was a 48,000 square foot building with a five year lease with a five year option with rent from $4.00 to $5.08 per square foot during the terms of the lease. Rental three, also located in East Windsor, was a 30,000 square foot building with Sunbeam Bread as a tenant with a lease for five years and a rental income of $4.00 per square foot. Rental four was a 73,458 building in Hartford used as a printing plant, in which 58,766 square feet was used as office space. Rental four was a five-year lease at $5.50 per square foot. None of the eleven rentals selected by Grant and Kinnard were, in our finding, comparable in size and use to the subject property. Since the basic premise to finding value using the income approach to value is the determination of comparable market rents for similar property, the conclusion of value by Grant and Kinnard cannot be supported by the rentals they have chosen to represent market rent. Market rent means "the rental income that such property would most probably command on the open market as indicated by present rentals being paid for comparable space." (Emphasis omitted.) Heather Lyn Limited Partnership v Griswold, 38 Conn. App. 158, 163, 659 A.2d 740 (1995), quoting First Bethel Associates v. Bethel, 231 Conn. 731, 739-40, 651 A.2d 279 (199%). In our view, the rentals used by Grant and Kinnard involved properties with dissimilar sizes and uses to the subject property. The rent from the subject property and the rent from Allied Signal more closely represent the market rent for the subject in both size and use.

Kerin and Glendinning took a different approach to finding the value using the income approach. Kerin and Glendinning found it difficult, as in their market sales analysis, to find credible comparable rentals. Kerin and Glendinning found only one rental in Connecticut that they could rely on as truly comparable to the subject. This comparable lease was for a 160,000 square foot industrial building located in the Cheshire Industrial Park in Cheshire. The building was leased by Allied Signal, which spent $10,000,000 to improve the property with special purpose features suiting its specific needs. Kerin and Glendinning found the effective net rental rate for the Allied Signal property to be $14.06 per square foot. Allied Signal’s lease, like UTC’s lease with Beckenstein, provided for an option to purchase by the tenant. When comparing the Allied Signal rental of $14.06 with the contract rent of the subject of $13.70 per square foot, Kerin and Glendinning concluded that the contract rent of the subject was also the market rent for such a property. We agree with Kerin and Glendinning that the Allied Signal lease is the most comparable lease, and we agree with their conclusion that the contract rent for the subject property was also the market rent for the property.

Kerin and Glendinning used the discounted cash flow method of analysis to estimate the value of the subject property. As Kerin and Glendinning noted: "Discounted cash flow analysis is considered to be a very appropriate technique for estimating the market value of the subject property because it is based on the projected cash flow of the property over the holding period. The approach is most reflective of the valuation process a typical buyer utilizes when contemplating the purchase of an income-generating investment property." (Defendant’s Exhibit 10, p. 39.) We are impressed with this analysis since we find that the lease between Beckenstein and UTC was made at "arm’s length" between two knowledgeable and experienced parties, and a nationally recognized tenant would be responsible for the payment of the rent over the life of the lease.

Using the discounted cash flow analysis, Kerin and Glendinning found the fair market value via the income approach as follows:

(See Defendant’s Exhibit 10, p. 48.) We find this analysis by Kerin and Glendinning to be credible.

In considering the cost approach to value, the appraisers for the parties took divergent approaches. Grant and Kinnard considered only the use of Marshall Valuation Service, whereas Kerin and Glendinning used the historical cost and the Marshall Valuation Service to analyze the cost of constructing the subject building.

Grant and Kinnard used a two-step analysis. First, Grant and Kinnard determined the value of the land. To do this, they examined twelve land sales to arrive at their conclusion that the market rate was $25,000 per acre. Multiplying the $25,000 by the subject land’s 39.41 acres resulted in a total land value of $985,250 as of October 1, 1995. Kerin and Glendinning arrived at the land value of the subject by analyzing two land sales, 100 Helmsford Way, Windsor and 135 Great Pond Drive, Windsor, which were two of the twelve land sales used by Grant and Kinnard. Kerin and Glendinning arrived at a value of $34,506 per acre for the subject land. Grant and Kinnard were of the opinion that if the subject land had a larger street frontage than its 200-foot frontage on Newberry Road, the subject land could have been priced at $32,000 per acre. We do not consider the 200-foot frontage to be a detriment. The 200-foot frontage provides for a road access from Newberry Road to the interior of the large parcel. It is not the road frontage that is important to the subject as it would be if it were a strip mall; it is the overall use of the land made by UTC that is important. While Grant and Kinnard concluded that Beckenstein overpaid for the subject property because it was entering into a lease with UTC, we find this hard to believe. Beckenstein purchased the 39.41 acres for $1,400,000 or approximately $35,000 per acre, from Henry L. Shensky on November 2, 1987. Our view of the evidence is that the sale from Shensky to Beckenstein was an arm’s length transaction. There is no evidence to conclude that UTC would condone Beckenstein paying more than the market price for the land so that the lease from Beckenstein to UTC could be inflated with this additional cost.

Considering the input from all of the appraisers, and placing more weight on the analysis by Kerin and Glendinning, and more importance on the sale from Shensky to Beckenstein than do the appraisers, even with the passage of time from 1987 to 1995, we conclude that the fair market value of the subject land for the purpose of developing the cost approach, as of October 1, 1995, was $1,400,000.

In the second step under their analysis of the value of the subject property using the cost approach, Grant and Kinnard calculated the replacement cost new of the building and then trended this cost back to October 1, 1995 to arrive at the 1995 value, less physical depreciation. Grant and Kinnard did not find that the building suffered from functional obsolescence. Grand and Kinnard arrived at a total cost new of $16,104,062 through the use of calculated costs based on the Marshall Swift Valuation Service. Grant and Kinnard used the Marshall Valuation Service costs rather than the historical costs of constructing the subject because they felt that the calculated cost service was more representative of construction costs. In addition, Grant and Kinnard did not have sufficient knowledge of the historical costs to be of any benefit to them. Grant and Kinnard concluded that the subject building was in a mixed class of "C" and "S" with quality determined as "good." Using the June 1999 edition of Marshall Valuation Service, Grant and Kinnard concluded that the building cost of the main building and classroom area of the subject as of June 1999 was $51.70 per square foot. Grant and Kinnard estimated the cost of constructing the pump house to be $25.23 per square foot, and the office mezzanine to be $26.16 per square foot, added 5% for coordination of the development project, and concluded that the total replacement cost new of the primary buildings was $15,172,966. (Plaintiff’s Exhibit A, p. 46.) Grant and Kinnard added $836,000 for paving, $30,000 for landscaping, $67,500 for fencing and $4000 for light standards to arrive at a total replacement cost new of $16,111,266. Grant and Kinnard then trended back the June 1999 figure to October 1, 1995 using the adjustment factor in Marshall Valuation Service to arrive at a replacement cost new as of October 1, 1995 of $15,118,812. Grant and Kinnard next considered the effect of accrued depreciation on the subject. Grant and Kinnard estimated the effective age of the subject to be 5 years as of October 1, 1995. Grant and Kinnard found no functional or external obsolescence, but did estimate physical depreciation by applying 2.5% per year on a declining, negative compound interest basis to arrive at $1,994,228 for depreciation of the buildings. Grant and Kinnard also applied a 35% depreciation factor to paving, fencing and light standards to arrive at a total depreciation for site improvements of $299,864. The total accrued depreciation, therefore, amounted to $1,994,223. By subtracting the accrued depreciation of $1,994,223 from the replacement cost new of $15,1178,812, Grant and Kinnard arrived at a fair market value of the building of $13,124,589. To this figure, Grant and Kinnard added the fair market value of the land of $985,250 to reach their conclusion that the fair market value of the subject property using the cost approach was $14,109,839, rounded to $14,100,000 as of October 1, 1995. (See Plaintiff’s Exhibit A, pp. 48-50.)

Kerin and Glendinning developed final cost estimates using two processes, the historical cost analysis, and the replacement cost estimates provided by Marshall Valuation Services. Using the historical cost method, Kerin and Glendinning looked at the actual historic costs to construct the subject building in 1988. These costs were obtained from UTC and amounted to $18,775,296. Kerin and Glendinning used the Comparative Cost Multipliers provided in the Marshall Valuation Service to trend the construction costs to October 1, 1995. Kerin and Glendinning multiplied the 1988 construction costs by 10.7%, the cost trend factor developed from Marshall Valuation Service to arrive at construction costs as of October 1, 1995, of $20,784,253. Kerin and Glendinning also used the Marshall Valuation Service figures in determining value under the cost approach. Using the Marshall Valuation Service, Kerin and Glendinning arrived at a replacement cost new of $20,605,564. As Kerin and Glendinning noted, the cost estimation provided by the Marshall Valuation Service is a more generalized approach to value than using the actual costs of construction under the historical cost approach. The credibility of developing value using the Marshall Valuation Service in this case is put in question when we have four appraisers with impeccable credentials who use the same valuation service to arrive at values that are $6,000,000 apart. We find that the historical cost approach used by Kerin and Glendinning is the more reliable way to arrive at value, since the actual construction costs of the subject property were available. "This method of estimating cost is deemed very reliable as it is based on the actual costs to construct the subject improvements through a breakdown of all the major building components, which results in an accurate cost estimate." (Defendant’s Exhibit 10, p. 28.) We note in this case that Kerin and Glendinning added an entrepreneurial profit of 15% of $20,780,000 to the direct construction costs. We disagree with this addition because the lease arrangement between Beckenstein and UTC appears to incorporate any entrepreneurial profit in the rent. We find the historical cost approach as utilized by Kerin and Glendinning, is the more credible cost approach, except for their addition of the entrepreneurial profit and our finding, as stated above, that the land value was $1,400,000. Accordingly, we adopt the historical cost approach of Kerin and Glendinning as follows:

Our finding of fair market value of $22,636,600 using the historical cost approach is compatible with the finding of fair market value of John J. Valente, who appraised the property for East Windsor for its revaluation of October 1, 1995. Valente arrived at a value of $22,236,770, which was adopted by the East Windsor assessor as the value of the subject property for tax purposes on the list of October 1, 1995.

In summary, we have a top of the line, class A building constructed in 1988 for the needs of a specific tenant, who entered into a long term lease with the owner to pay $4,251,687 per year on a qualified triple net lease covering the remaining nine years of the lease with options to extend for two additional ten year periods. "[T]he taxpayer bears the burden of establishing that the assessor has overassessed its property….The trier of fact must arrive at his own conclusions as to the value of [the taxpayer’s property] by weighing the opinion of the appraisers, the claims of the parties in light of all the circumstances in evidence bearing on value, and his own general knowledge of the elements going to establish value. (Citations omitted; internal quotation marks omitted.)" Ireland v Town of Wethersfield, 242 Conn. 550, 556-57, 698 A.2d 888 (1997), quoting Xerox Corp. v. Board of Tax Review, 240 Conn. 192, 204, 690 A.2d 389 (1997). We find, based upon all the factors discussed in this opinion, as well as our analysis of the appraisers’ efforts in determining valuation and our own knowledge regarding values, that the subject property was not overassessed by the assessor on the October 1, 1995 grand list. Accordingly, we find that UTC has not met its burden of showing that the property was overvalued.

Accordingly, judgment is entered in favor of the defendant. UTC’s appeal is dismissed, without costs to either party.

In this real estate tax appeal, the plaintiff, Aetna Life Insurance Company (Aetna), claims that the assessor for the City of Middletown (City) overvalued for tax purposes Aetna’s property located at 1000 Middle Street on the October 1, 1995, 1996 and 1997 grand lists.

In 1980, Aetna announced plans to develop a headquarters facility for its Employee Benefits Division and a computer center in Middletown. Aetna purchased 269.7 acres of undeveloped land at 1000 Middle Street for $5,448,000, or $20,000 per acre. Aetna conveyed approximately 6.7 acres on the east side of the property to the City in 1982 for the construction of Industrial Park Road, leaving a balance of 263 acres of land. The subject land occupies a hillside location overlooking Interstate 91 and other public roads in Middletown.

With the expectation of adding valuable real estate to its tax rolls and bringing in thousands of employees, the City entered into an incentive development agreement with Aetna in 1981 to encourage it to build its headquarters in Middletown. The incentive agreement between Aetna and the City provided for an original assessed value of the land of $2,000,000. The assessed value would increase on October 1, 1987 to $4,700,000 based upon an agreed upon fair market value of $6,714,285, or approximately $25,000 per acre. Aetna and the City also agreed that as of October 1, 1987, the fair market value of the improvements would be $243,950,800, for a total valuation of Aetna’s fee simple interest in the subject property as improved of $250,665,085. The incentive agreement provided that the assessed value of the improvements would be set at 40% of the agreed upon value of the improvements by Aetna and the City to run for seven years from the date of the grand list following the issuance of the certificate of occupancy. The final certificate of occupancy for the subject was issued on August 28, 1984. The tax assessment for the subject began on the grand list of October 1, 1984. The City completed a statutorily mandated revaluation of all property in Middletown for the grand list of October 1, 1987. As a result of this revaluation and the impact it would have on property owners, the City approved a phase-in of the assessment of all property in the City for ad valorem tax purposes. For the grand list of October 1, 1987, the subject property was taxed on 30% of the property’s value. The phase-in increased each year by 10% until 1991, at which time all property in Middletown was assessed at 70% of value. The total tax savings to Aetna for the period from 1982 to 1990 was $20,712,536. (Defendant’s exhibit X.) Aetna paid the full property tax on the subject property for the grand lists of 1991, 1992, 1993 and 1994. This appeal was subsequently filed contesting the valuation of the property on the grand lists of October 1, 1995, 1996 and 1997 as of the last revaluation date of October 1, 1987. The total fair market value of the subject property, during this period of time, as set by the assessor, was $250,665,000.

Prior to the construction of the headquarters building, Aetna retained Hellmuth, Obata and Kassabaum (HOK), a nationally recognized architectural firm with specific expertise in the design of large corporate headquarters buildings. In 1981, Aetna contemplated constructing a 1,300,000 square foot corporate headquarters in the form of a mall for its Employee Benefits Division and a computer center. Aetna required HOK to design the corporate headquarters building so that it could later be expanded to 2,500,000 square feet. The design of the corporate headquarters building consisted of a distinctive, six story complex with a ground level and levels 1-6 with three core sections or pods consisting of interconnected octagons surrounding a central atrium extending up through each of the six levels. The purpose of the design was to segment the massive headquarters building into sections and to provide light to interior areas of the building. The headquarters building was constructed between March 1981 and April 1984. The construction was completed on a "fast track" basis, which resulted in many change orders and cost increases.

The headquarters building consists of approximately 1,490,000 square feet of gross building area and is used primarily as office space. Although Aetna originally intended to locate more than 7000 employees on this campus, the planned expansion never materialized, resulting in about 5000 employees working there. The headquarters building contains many special features for employees such as a health and fitness center, auditorium with a seating capacity for 700 people, a lecture hall with a seating capacity for 115 persons, eighteen conference rooms, a convenience store, a hair salon, executive and employee dining areas, a cafeteria with seating for 2100 persons, as well as a sky-lit central court containing a large granite water fountain.

The computer data center, separate from the headquarters building, was constructed in 1982 with three levels containing approximately 120,000 square feet of gross building area and is connected to the main headquarters building by a tunnel.

The maintenance building contains approximately 7570 square feet of gross building area and is used for storage and related uses. Parking structures containing approximately 215,000 square feet of gross building area accommodate parking for 538 vehicles. The balance of the improvements to the subject property consists of a covered walkway, roads, paving and landscaping, an outdoor recreation area with two softball fields and a jogging/hiking trail, and a helipad off the north branch of Aetna Drive.

The total historical cost of the headquarters building was $146,883,300, which included the cost of site development and parking garage, but excluded the cost of the land, the maintenance garage and the computer center. (Defendant’s Exhibit A, p. 58; see Plaintiff’s exhibit 10, p. 72.) According to Arnold Grant, the plaintiff’s appraiser, the total historical project costs were $167,846,318, consisting of $161,846,318 for the improvements and $5,415,000 for the land. (Plaintiff’s exhibit 10, p. 72.)

On June 28, 1985, Aetna entered into three separate agreements with Colonial Bank and Michael J. D’Angelico as trustees of Middletown Trust (Trust). The first agreement Aetna entered into was a ground lease with the Trust as lessee covering 54.49 acres of the total tract of 263 acres. All of Aetna’s improvements, including the headquarters building, computer center, maintenance garage and parking garage were located on the 54.49 acres. This ground lease was for 25 years with an option by the Trust, as lessee, to extend the lease for ten consecutive terms of five years each. At the same time, Aetna sold the improvements on the 54.49 acres to the Trust for $225,000,000 and took back a sublease of the 54.49 acres from the Trust together with the improvements. The lease of the 54.49 acres with the improvements was for a term of 25 years with five additional five year consecutive terms. The result of this transaction, known as a sale leaseback, was that the Trust owned the improvements with a stepped-up basis from the historical building costs $161,846,318 to $225,000,000, together with a lease of the 54.49 acres. Aetna ended up owning the balance of the 263 acres of land with a reported gain of $61,500,000 on the sale of the improvements to the Trust. (Plaintiff’s exhibit 10, p. 143.)

The lease between Aetna and the Trust covering the 54.49 acres with the improvements provided for no rent the first year and thereafter rent at $24,937,127 yearly for the next seven years. (Plaintiff’s exhibit 10, p.144.) As a condition of the sale leaseback, the Trust was required to obtain, at its cost, an independent MAI appraisal of the property reflecting that the property had a minimum value of $225,000,000. (Plaintiff’s exhibit 10, p. 145.) Aetna was required to execute a fee mortgage and collateral assignments of leases and rents to the Trust to secure Aetna’s performance under the lease. (Plaintiff’s exhibit 10,

H.O.R.S.E. of Connecticut v. Town of Washington

Connecticut Supreme Court
258 Conn. 553, 783 A.2d 993
November 20, 2001

For the opinion in this case from the Court of Appeals, go to H.O.R.S.E. v. Town of Washington.

Summary of Opinion

Text of Opinion

H.O.R.S.E. of Connecticut v. Town of Washington

Connecticut Supreme Court 258 Conn. 553, 783 A.2d 993 November 20, 2001

For the opinion in this case from the Court of Appeals, go to H.O.R.S.E. v. Town of Washington.

Summary of Opinion

Text of Opinion

Connecticut Supreme Court
258 Conn. 553, 783 A.2d 993
November 20, 2001