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Board of Review of Macon County v. Property Tax Appeal Board

March 27, 1998


Administrative Review of Property Tax Appeal Board Nos. 952482I3 952483I3 952484I3 952485I3 952486I3 952487I3 952488I3 952489I3 952490I3 952491I3 952492I3

The opinion of the court was delivered by: Justice Green


Respondent, A.E. Staley Company (Staley), the owner of a large, corn wet mill in Decatur (Staley property), brought a complaint before petitioner, the Board of Review of Macon County (Review Board), alleging the Staley property had been overassessed for the 1995 tax year. 35 ILCS 200/16-95 (West 1996). According to the record, the Staley property had received a tax assessment for that year in the amount of $10,735,357 (based on an assigned fair market value (FMV) of $32,521,500). The Review Board upheld the assessment.

Staley appealed the Review Board's decision to respondent, the Property Tax Appeal Board of the State of Illinois (PTAB). 35 ILCS 200/16-160, 16-180, 16-185 (West 1996). Following a hearing, the PTAB entered a written order on June 17, 1997, lowering the property tax assessment on the Staley property to $3,466,050 (based on a reduced FMV of $10,500,000). Pursuant to section 16-195 of the Illinois Property Tax Code (Tax Code), final administrative decisions of the PTAB are directly reviewable in the appellate court where, as here, a change in assessed valuation of $300,000 or more is sought. 35 ILCS 200/16-195 (West 1996). Accordingly, the Review Board and the County of Macon (Macon County), petitioners herein, brought administrative review of the PTAB's decision directly to this court pursuant to section 16-195 of the Tax Code and section 3-113 of the Administrative Review Law (735 ILCS 5/3-113 (West 1996)). We affirm.

For the year 1985, the parties had stipulated to a FMV for the Staley property of $25 million, which was more than twice as much as the $10,500,000 FMV found here by the PTAB, but many changes had taken place in the decade involved.

The following evidence is undisputed. The Staley property consists of 2,665,881 square feet or approximately 240 acres of land. The Staley property is considered an industrial complex and contains 105 buildings. In addition, the Staley property contains 233 grain silos and several grain elevator facilities (hereafter collectively referred to as grain elevator facilities). Staley no longer uses 800,000 square feet of the property, apparently because of obsolescence, and it has been abandoned. The majority of the buildings in use are for processing corn products, such as corn sweetener and cornstarch. All of the buildings were constructed in stages from 1910 to 1994, 12% of the Staley property is designed for office and laboratory space, and 88% of the buildings on the Staley property are multistoried.

Staley keeps a minimum supply of grain in storage and, as a result, uses only one-fourth of its grain storage capacity. As a result, many of the grain elevator facilities have not been maintained and are deteriorating. Since 1985, Staley has discontinued producing certain products at the Staley plant; thus, many buildings on the Staley property have become obsolete. Staley is currently in the process of modernizing the plant in the starch production area, which will cost approximately $20 million.

The appraisal evidence before the PTAB consisted mostly of the testimony of Terrance P. McCormick for Staley and David Craig on behalf of Macon County.

McCormick's summary Conclusions listed the rounded FMV of the Staley property as of January 1, 1995, using the three different valuation approaches, as follows: (1) cost approach, $10,750,000; (2) sales comparison approach, $10,250,000; and (3) income capitalization approach, $10,050,000. Based on these three approaches, McCormick's reconciled opinion of the FMV of the Staley property was $10,500,000.

McCormick testified concerning his appraisal of the Staley property, as follows: (1) in the past, he has appraised approximately 300 large industrial properties, with over 10 of those properties exceeding 1 million square feet; (2) he defined FMV as the "likely price knowledgeable an informed buyer and seller would agree under normal conditions *** of the market"; and (3) the highest and best use of the Staley property, as vacant, was industrial and, as improved, its present use. He also stated the Uniform Standard of Professional Practice guide recommends that the three approaches he used (cost, sales comparison, and income capitalization) should be used in all cases.

Using the cost approach, McCormick testified he valued the Staley property land at $7,500 per acre, for a total of $1,800,000 (7,500 multiplied by 240). To estimate the cost of the buildings, he used reproduction cost rather than replacement cost. His estimated reproduction cost of all buildings and silos was approximately $163,500,000. Market sales indicated a market depreciation of between 88% and 99%. Based on an age-life method, he applied 96% depreciation (2% annual depreciation) to all buildings and improvements. This was a result of his determination that the effective age of the buildings was 48 years (48 multiplied by 2%). McCormick estimated the economic life of the buildings was 60 years, which left a remaining economic life of 12 years. McCormick concluded that the total depreciated value of the buildings, improvements, grain elevator facilities, storage tanks, and dryers was $8,929,629. This depreciated value, added to the land value of $1,800,000, resulted in a total value of $10,729,629 (rounded to $10,750,000) using the cost approach.

Using the income capitalization approach, McCormick testified he found five rentals of older industrial complexes that indicated rental rates between $0.35 per square foot and $1.40 per square foot. He determined the Staley property had a rental rate of $0.50 per square foot after discounting for its extremely large size, multistory nature, age, condition, and location. He concluded the $0.50-per-square-foot operating income was $1,332,941, less management fees (25%) of $333,235, for a total net operating income of $999,706. Next, McCormick stated the proper capitalization rate was 15.5% based on a market analysis of sales properties indicating an overall capitalization rate range between 14.3% and 15.5%. McCormick divided the net operating income of $999,706 by 15.5%, for an indicated value of $6,449,716, and added the value of the grain elevator facilities, which was $3,593,934, for a total of $10,043,650 (rounded to $10,050,000) using the income capitalization approach.

Using the sales comparison approach, McCormick testified he did a separate analysis of the grain elevator facilities and the rest of the Staley property because the comparable sales he found did not have grain elevator facilities. McCormick indicated he used 13 properties sold on the market to compare with the Staley property (all property except the grain elevator facilities), and those properties sold from $0.59 per square foot to $5.89 per square foot. The 13 properties sold between December 1989 and September 1995. The 13 properties ranged in age from 19 to 79 years old and ranged in size from 170,000 to 2,479,000 square feet. Based on the 13 comparable sale properties, McCormick adjusted for differences (land to building ratio, percent of one-story area, and percent of office area) and determined the Staley property was valued at $2.50 per square foot. Applying the $2.50 per square foot, McCormick opined that the Staley property (all property except the grain elevator facilities) had a FMV of $6,664,703 using the sales comparison approach.

McCormick valued the grain elevator facilities separately. He used six comparable sales. Based thereon, he indicated the grain elevator facilities were worth $0.35 per bushel of capacity (here, the silos have a total capacity of 10,268,382 bushels), for a total value of $3,593,934. Thus, using the sales comparison approach, McCormick concluded the Staley property had a FMV of $10,258,637 ($6,664,703 in buildings plus $3,593,934 in grain elevator facilities), which was rounded to $10,250,000. McCormick concluded that based on all three ...

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