APPEAL from the Circuit Court of Boone County; the Hon. JOHN
S. GHENT, JR., Judge, presiding.
MR. PRESIDING JUSTICE GUILD DELIVERED THE OPINION OF THE COURT:
Plaintiff taxpayer Chrysler Corporation (hereinafter Chrysler) brought an action under the Administrative Review Act (Ill. Rev. Stat. 1977, ch. 110, par. 264 et seq.), for a review of a decision of the Illinois Property Tax Appeals Board concerning real property tax valuations made by Boone County. The trial court affirmed the decision of the Board and Chrysler has appealed.
This case, concerning the 1972 tax assessment of the Chrysler assembly plant in Belvidere, has a long and complex history. Because of the large number of different appraisal and assessment figures involved, it seems advisable to begin with brief definitions of certain terms. In this opinion, total value, appraised value, full value and cash value are all used to refer to the actual value of the plant.
Although changes in total value will result in changes in assessed value, this case involves a dispute over the total value of the plant and not one concerning how the assessed value was calculated from that total value. With this in mind, we have intentionally omitted any direct reference to specific figures for assessed value; all of the dollar amounts in the following opinion refer to total value.
In 1969 Boone County entered into a contract with Cole-Layer-Trumble Company (hereinafter CLT) to reappraise all of the real property in Boone County on the basis of its value on January 1, 1970, for use in making the 1971 assessment. Pursuant to this contract, CLT assigned Basil Byer to supervise the reappraisal of approximately 12,000 parcels of land in the county. A separate appraisal report was prepared on the Chrysler assembly plant, showing a total building cash value of $16,461,922 and a full land value of $1,275,600, making a total value of $17,737,522. Dissatisfied with this appraisal, the Boone County Board of Review asked CLT to review its work and also asked the Illinois Department of Local Government Affairs to make an independent appraisal. Subsequently, Nick Ferguson, the senior industrial appraiser for CLT, concluded that the plant had a total building value of $19,682,110, a full land value of $1,364,500, and a total value of $21,046,610, and William Townsley, an industrial appraiser for the Department of Local Government Affairs, concluded that the buildings had a total value of $27,387,800, the land a value of $1,364,500, and the combination a total value of $28,752,300.
The Boone County Board of Review made an assessment for 1971 reflecting the $28,752,300 figure fixed by Mr. Townsley. Subsequently the Board decided to increase the assessment of the plant for 1972, on the basis that the full value of the property as of January 1, 1972, was $36,363,600. This conclusion was not the result of any new appraisals or on any significant improvements to the property in question but was based on testimony as to the initial cost of the plant and on a calculation of value on a square-foot basis from a manual provided by the Department of Local Government Affairs.
Chrysler contended that this increase was unwarranted and appealed to the State Property Tax Appeal Board, asking for a reduction of the assessed valuation to reflect a total valuation of $21,046,618. Defendant, Community School Unit District #100 also appealed to the State Property Tax Appeal Board, contending that the assessment should be raised to reflect a value of $72,000,000. The Board held a hearing on December 12 and 13, 1973. Depositions from Mr. Byer and Mr. Ferguson were admitted into evidence. Mr. Townsley appeared and testified. John Rodge of the Chrysler tax department also submitted his own appraisal, which concluded that the total value of the property in question was $23,349,757 as of January 1, 1972. Fred Shappert also testified before the Board, estimating that it had cost at least $54,000,000 to build the plant in 1964 and that the value of the plant in 1972 was considerably higher. However, Mr. Shappert admitted that he was not a professional appraiser and was not familiar with the various methods used by professional appraisers.
On April 2, 1975, the State Property Tax Appeal Board rejected the appraisals by CLT, Townsley, Shappert and the tax department of Chrysler "due to lack of documentation and an absence of presentation and analysis of factual and relevent data," and upheld the County Board of Review's decision.
On appeal, under the Administrative Review Act, the circuit court reversed and remanded to the State Board with instructions to consider the evidence presented, together with any additional evidence the parties might wish to present. (Chrysler Corp. v. State Property Tax Appeal Board, 17th Jud. cir., No. 74-Tx-2.) The Board held a new hearing on April 22, 1975, at which time Chrysler presented the testimony of Guy Romito of Mid-America Appraisal and Research Corp. Mr. Romito testified that he had used two different methods of valuation of this property; the comparison sales approach and the reproduction cost approach. In using the reproduction cost approach Mr. Romito estimated the reproduction cost of the plant to be $66,671,619, less physical depreciation of $7,800,579, and economic obsolescence of $34,145,482 for a total cash value of $24,641,000. Combined with a land value of $1,032,000, this cost approach resulted in a total property value of $25,673,000. Using the comparison approach, Mr. Romito investigated sales of other properties comparable to the property in question. He found a number of sales of large plants in other areas and chose four which he felt were particularly comparable. This comparison led to an estimation of a total value of $22,000,000. Mr. Romito concluded that the comparison approach should be given more weight and made a final estimate of a total value of $23,000,000.
The Property Tax Appeal Board held a third hearing on January 15, 1976, at which time defendant school board presented the testimony of Joseph Kuehnle. Mr. Kuehnle basically agreed with Mr. Romito's estimation of the reproduction cost of the plant but only allowed $4,519,000 for physical depreciation and nothing at all for functional or economic obsolescence, resulting in a finding of a total reproduction cost of $61,051,000. Mr. Kuehnle testified that he did not consider comparable sales to be a valid approach to valuation in this situation because, in his opinion, the Chrysler assembly plant was a single purpose or special purpose property having value only as an automobile assembly plant, and there were no comparable sales of automobile assembly plants to be examined. Mr. Kuehnle made no independent examination of the other properties discussed by Mr. Romito but concluded on the basis of the latter's report that they were not comparable to the Chrysler plant. He indicated that while the plant could be sold as a general industrial building, it would be at a "sacrifice price" and that he "didn't consider that to be a fair criteria of value." The Property Tax Board decision was based primarily upon Mr. Kuehnle's testimony, with some adjustments for increased depreciation. The Board found the total cash value of the property in question to be $56,000,000.
Chrysler's argument on appeal focuses on Mr. Kuehnle's reason for his exclusive reliance on the reproduction cost minus depreciation method: namely, his characterization of the plant as special purpose property. Chrysler contends that this characterization caused Mr. Kuehnle to both erroneously emphasize the reproduction cost method and to misuse the method by not allowing a sufficient figure for functional obsolescence.
The primary issue before us is whether Mr. Kuehnle's method of valuation, particularly his classification of the property as special purpose property, was incorrect as a matter of law. If it were incorrect, the Board's decision reflecting Mr. Kuehnle's method was also incorrect and must be reversed.
• 1 We recognize that the findings of an administrative agency are prima facie correct in a case such as this (Kellogg Switchboard & Supply Corp. v. Department of Revenue (1958), 14 Ill.2d 434, 153 N.E.2d 45), and that a court should not intervene in a case where property has been assessed higher or lower than it should have been through a mere error of judgment on the part of the administrative agency. (People ex rel. Frantz v. M.D.B.K.W., Inc. (1966), 36 Ill.2d 209, 221 N.E.2d 650.) In the instant case we are faced with potential use of an improper method of valuation rather than with a mere difference of opinion as to the market value of a particular piece of property. Our courts have actively intervened when the issue is one of improper method. (See Consolidation Coal Co. v. Property Tax Appeal Board (1975), 29 Ill. App.3d 465, 331 N.E.2d 122.) A court may also act in a situation where an assessment is so grossly excessive as to be tantamount to constructive fraud. (See People ex rel. Rosewell v. Dee El Garage, Inc. (1977), 51 Ill. App.3d 382, 366 N.E.2d 585; People ex rel. Frantz v. M.D.B.K.W., Inc.) Whether there is a fraud on account of excessive valuation of property for taxation will depend largely on the circumstances of each particular case. (People ex rel. Schmulbach v. City of St. Louis (951), 408 Ill. 491, 97 N.E.2d 252.) The value of approximately $56,000,000 set on the plant by the Property Tax Appeal Board and the over $60,000,000 set on the plant by Mr. Kuehnle are both more than twice that of any of the other qualified appraisers. Thus, if an improper method was used, this is clearly a case where we should step in.
The parties agree that there are three basic methods of evaluating real property: the comparison approach, the income approach and the reproduction cost approach. The comparison approach, as has been noted, focuses on sales of comparable property. The income approach, used when the property is most valuable as a rental property, is not applicable to the instant case as no evidence relevant to this approach was presented. The reproduction cost approach focuses on what it would cost to recreate real property with the same value. In theory, use of either of the two relevant approaches should lead to the same total value. As this may not be the case in practice, one ...