Appeal from the Appellate Court for the Second District; heard
in that court on appeal from the Circuit Court of Lake County,
the Hon. Harry D. Strouse, Jr., Judge, presiding.
JUSTICE MORAN DELIVERED THE OPINION OF THE COURT:
Rehearing denied September 28, 1984.
This appeal arises out of two complaints filed with the Lake County board of review (the board of review) by Commonwealth Edison Company (Edison) objecting to the 1975 and 1976 real estate assessments of Edison's nuclear generating plant located in Zion Township, Lake County (hereinafter referred to as the plant). The board of review reduced the assessments, and the Zion Park District, Zion Township School District No. 126, the city of Zion, Zion Township, and the Zion-Benton Library District (hereinafter collectively referred to as Zion) appealed. Edison also appealed from the board of review's decision.
The Property Tax Appeal Board (the Board), after consolidating the two appeals, held hearings pursuant to its statutory authority (Ill. Rev. Stat. 1975, ch. 120, par. 592.3). It made the following findings pertinent to the issues raised in this court: (1) that the proper level of assessment for 1975 and 1976 was 27.29% and 28.22%, respectively, as determined by the Department of Local Governmental Affairs' (the Department) one-year assessment-to-sales ratio study; (2) that capitalized operator training costs should be included in the valuation of the plant; (3) that certain pollution-control facilities, which were not assessed by the State, should be included in the county assessment for the 1975 tax year; and (4) that personal property in the amount of $9,372,978 should be deducted from the real property assessment for 1976.
Both Edison and the board of review filed petitions in the circuit court of Lake County for administrative review of the Board's decision. (Ill. Rev. Stat. 1975, ch. 110, par. 268.) The circuit court affirmed in part and reversed in part the decision of the Board. The circuit court agreed that the proper level of assessment for the 1975 and 1976 tax years was 27.29% and 28.22%, respectively. It also approved the Board's inclusion of capitalized operator training costs in the real property valuation of the plant. However, the court held that the Board had erred when it failed to deduct, from the overall assessed valuation, the value of certain pollution-control facilities which were certified, but unassessed, by the State in the 1975 tax year. The court also found that the Board improperly included certain personal property in the 1976 real property assessment.
The decision of the circuit court was, in turn, appealed by the various parties. Edison appealed, contesting the operator-training-cost inclusion for 1975 and 1976. Edison also contended that the proper level of assessment for 1975 and 1976 was 26.21% and 27.02%, respectively. Edison reached these figures by analyzing sales data for the years prior and subsequent to the assessment dates.
In the appellate court, the board of review and Zion argued for a 31.75% level of assessment in 1975 and a 32.33% level of assessment in 1976. (115 Ill. App.3d 371.) These levels were based upon assessment/sale ratio studies for the three years preceding the assessment dates. Zion argued against the credit to Edison for personal property which, according to the circuit court, was improperly included in the 1976 real property valuation. They also joined the Board in contesting the circuit court's finding with respect to the 1975 deduction for pollution-control facilities.
The appellate court made the following determinations: (1) that the Board and the circuit court should have used the three-year study in determining the median level of assessment for both 1975 and 1976; (2) that, as a result, the proper level of assessment for 1975 and 1976 was 31.75% and 31.93%, respectively; (3) that the circuit court erred in crediting Edison for the 1976 tax year, since the Board's determination of the value of personal property was not against the manifest weight of the evidence; (4) that the finding of the Board and the circuit court — that capitalized operator training costs increased the real property's value — was also not against the manifest weight of the evidence; and (5) that the circuit court erred in removing the pollution-control facilities from the local tax rolls prior to the State's assessment of those facilities for the 1975 tax year. We granted Edison's petition for leave to appeal from the appellate court's decision. 87 Ill.2d R. 315(a).
Four issues are raised on appeal: (1) Did the appellate court err in holding that the proper level of assessment of real property for 1975 and 1976 was 31.75% and 31.93% of the actual value of the plant? (2) Should certain assets, which were certified by the State as pollution-control facilities, be included in the local assessment for the 1975 tax year? (3) Should personal property in the amount of $9,372,978 be deducted from the real property assessment for 1976? and (4) Should capitalized operator-training costs be included in the valuation of the plant?
Turning to the first issue, we note that all of the parties to this litigation have utilized the Department's yearly assessment/sales ratio studies. The Department is responsible for equalizing the level of assessments among the counties of the State of Illinois. (Ill. Rev. Stat. 1975, ch. 120, par. 627.) In order to insure the constitutionally required uniformity (Ill. Const. 1970, art. IX, sec. 4(a)), the Department is directed by statute to lower or raise the total assessed value of property in the several counties, as certified to it by the county clerks, so that, in counties throughout the State, property will be assessed at 33 1/3% of its fair cash value as specified by law. (Ill. Rev. Stat. 1975, ch. 120, par. 627.) In carrying out this responsibility, the Department relies upon sale ratio studies which it prepares. These studies compare actual sale prices to assessed valuations to determine the percentage relationship between the valuation placed on locally assessed property and its actual, fair cash value. Ill. Rev. Stat. 1975, ch. 120, par. 627.
The Revenue Act of 1939, as amended (Ill. Rev. Stat. 1975, ch. 120, par. 482 et seq.), provides that real property is to be valued at 33 1/3% of its fair cash value. The statute further defines the term "33 1/3%" as follows:
"The term `33 1/3%' means 33 1/3% of the actual value of real and personal property, as determined by the Department's assessment to sales ratio studies for the 3 most recent years preceding the assessment year, adjusted to take into account any changes in assessment levels implemented since the data for such studies were collected." Ill. Rev. Stat. 1975, ch. 120, par. 482(24).
For the 1975 assessment year, the Department compared assessments to actual sales to develop ratio studies. These studies showed a median level of 1975 assessments to 1972 sales of 35.11%. The levels of 1975 assessments to 1973 and 1974 sales were 32.84% and 27.29%, respectively. Thus, the average level of assessment for the three years preceding the 1975 assessment date was 31.75%. This was the level of assessment adopted by the appellate court. In the instant appeal, the board of review and Zion request our affirmance of the appellate court's decision on this issue.
Likewise, for the 1976 tax year, the Department compared assessments to actual sales to develop ratio studies. These studies showed a median level of 1976 assessments to 1973 sales of 36.90%. The levels of 1976 assessments to 1974 and 1975 sales were 30.66% and 28.22%, respectively. Therefore, the average level of assessment for the three years preceding the 1976 assessment date was 31.93%.
On April 4 and 5, 1978, the Board convened to hear evidence regarding the proper assessment and valuation of the plant for the tax years 1975 and 1976. At this time, the Board heard the testimony of seven witnesses and received over 70 documentary exhibits into evidence. During these proceedings, each of the various parties urged the Board to adopt their particular method of utilizing the Department's median sales ratios to arrive at the correct level of assessment. Although the litigants disagreed with each others' methodologies, they all used the median levels furnished by the Department. Indeed, this court has allowed the use of these types of studies and the sales ratios produced thereby. (People ex rel. Wenzel v. Chicago & North Western Ry. Co. (1963), 28 Ill.2d 205; People ex rel. Hillison v. Chicago, Burlington & Quincy R.R. Co. (1961), 22 Ill.2d 88.) Since the parties have all utilized the Department's median levels, we are confronted with a single question: What is the correct method for determining the proper level of assessment to be applied to Edison's plant for the subject tax years?
The Board is charged with the statutory duty of establishing "by rules an informal procedure for the determination of the correct assessment of property which is the subject of an appeal." (Ill. Rev. Stat. 1975, ch. 120, par. 592.2.) Pursuant to this authority the Board promulgated Rule 4D, which states: "The decisions of the Property Tax Appeal Board will be based upon equity and the weight of evidence." That same standard is also found in the Revenue Act of 1939, as amended (Act): "The Board shall make a decision in each appeal or case heard by it, and such decision shall be based upon equity and the weight of the evidence." (Ill. Rev. Stat. 1975, ch. 120, par. 592.4.) Under its Rule 4D, the Board applies a level of assessment based on a one-year sales ratio study if necessary to reach an equitable determination regarding an assessment.
After conducting hearings, the Board found that the proper level of assessment for 1975 and 1976 was 27.29% and 28.22%, respectively, as determined by the Department's one-year assessment-to-sales ratio study for the years immediately preceding the subject tax years. The Board relied upon the testimony of Ms. Barbara Moore, supervisor of research and standards at the Department, in adopting a one-year sales ratio study. In response to questioning from the Board, regarding the proper level of assessment, Ms. Moore stated that, for both years, the single-year average adjusted for policy changes would produce the most appropriate level ...