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October 4, 1991


Appeal from the Superior Court of the District of Columbia; Hon. Annice McBryde Wagner, Trial Judge

Ferren, Terry, and Schwelb, Associate Judges. Opinion for the court by Associate Judge Ferren. Opinion by Associate Judge Schwelb, Concurring in the judgment.

The opinion of the court was delivered by: Ferren

Appellant Wolf and other general partners of MidCity Investment Company appeal from a decision of the Tax Division of the Superior Court denying their petition for a partial refund of real property taxes for tax year 1986. Appellants own the office building located at 1001 Connecticut Avenue, Northwest, on the corner of K Street (above the Farragut North Metro station). They maintain that the trial court (1) erred in concluding that the District conducted an independent assessment for tax year 1986 when, as appellants see it, the District simply reiterated its proposed 1985 assessment; (2) erred in upholding the District's comparable sales and income valuation methods, since the District's calculations failed to consider the actual leasing and financing arrangements encumbering this and other comparable properties; and (3) erred in approving the District's initial 1986 tax assessment after the District, at trial, "abandoned" that initial assessment in an attempt to prove the building was worth more. Finding no errors, we affirm.


The office building at 1001 Connecticut Avenue, N.W., built in the 1950s and never renovated, is located at one of the best commercial sites in the city. In tax year 1985, the District's proposed assessment was $14,620,500, of which $9,149,400 was allocated to land and $5,471,100 was allocated to the building and other improvements. Upon appeal to the Board of Equalization and Review (the Board), the proposed 1985 assessment was reduced to $13,539,022.

For tax year 1986, the parcel was assessed at the same value as it was for 1985: $14,620,500, with $9,149,400 allocated to land and $5,471,100 allocated to building and other improvements. Unlike the previous year, the Board affirmed the proposed 1986 assessment. Appellants paid the tax and filed a timely petition for refund in Superior Court, alleging that the proper assessment should be $10,356,360, the building's assessed value in tax year 1984. Before trial, the District amended its answer to say that the proper valuation of the property, including the building and other improvements, was $17,830,000. *fn1

During the two day trial, both Robert L. Klugel, Chief of the Real Property Tax Section of the District of Columbia Department of Finance and Revenue, and Troy Davis, the District's line assessor, testified regarding the methods they used to determine the total value of 1001 Connecticut Avenue. *fn2 Both witnesses considered two of the three accepted procedures for valuation; *fn3 the "comparable sales approach," i.e., comparing recent sales of properties similar to 1001 Connecticut Avenue, see 9 DCMR § 307.3 (1986), and the "income approach," i.e., using statutory guidelines to determine the amount an investor would be willing to pay to receive the future income stream that the property is expected to yield, see id. § 307.5. After calculating the total value of the property, the assessors obtained the estimated value of the building by using the standard "building residual" method under which they subtracted the land value, $9,149,400, from the total value, $14,620,500, to arrive at a figure of $5,671,100 for improvements.

Klugel also testified that for tax year 1986 he directed all line assessors to give considerable weight to the 1985 assessments arrived at for 1985 but to alter them if market data and other considerations warranted a change. He explained that economic conditions in the early 1980s, which included overbuilding and high interest rates, had resulted in an oversupply of office space, making it unlikely that building values would increase between January 1, 1984 (the valuation date for tax year 1985) and January 1, 1985 (the valuation date for tax year 1986). For the 1985 assessments the Board had reduced, Klugel directed assessors to determine the validity of the Board's valuations in light of available data. Where the 1985 Board valuations appeared justified, these were to be used as base figures for 1986 assessments, but where Board figures were unjustified, assessors were to use the Department's originally proposed 1985 figures. In all cases, 1985 valuations were to be modified if available information demonstrated a reason to change the valuation for 1986. Klugel stressed to his assessors that each property "starts off a tax year fresh." Assessors, therefore, were not to see themselves bound by the Board's prior year valuations.

Appellant Wolf, whose law firm in the building had received a below-market rental rate, testified that the proper 1986 assessed value for the building was the property's tax year 1984 valuation. He argued that the value of the building had not increased between January 1, 1983 and January 1, 1985 because the actual net income from the building had not increased during that period. He explained that the building was in a "time warp" because of "the structure, its age, its amenities, its lack of amenities, and first and foremost, its [below market rate] leases." In addition, he concluded that the net operating income from the property went from $1,136,440 in 1982 to $1,218,512 in 1983 and back down to $1,167,944 in 1984. He did not, however, estimate future "income earning potential," nor did he use the comparable sales method of valuation.

The trial court sustained the Department's assessment for tax year 1986, concluding that the assessment figure represented "a reasonable and conservative estimate of value in view of other sales and upon review of the indicated value obtained by the income capitalization approach." The court was satisfied that the Department had conducted a new assessment for 1986 because the assessor had made an independent analysis that took into consideration new information not available in the prior year. The court concluded that, overall "the assessors applied the generally recognized approaches to value in making the assessment for tax year 1986. The resulting assessment appears to be justified from the evidence. Therefore, the decision of the Board of Equalization and Review should be affirmed" (citation omitted).

The trial court also found appellants' proposed valuation "flawed factually and legally" primarily because their income approach to value was based on "a snapshot of a single year's income and expenses" and because they had made no effort to take into account longer term income potential or comparable sales.


Appellants argue that the trial court erred in concluding that the District conducted a genuine reappraisal of their property for tax year 1986 because, they maintain, the District simply reiterated its own tax year 1985 assessment despite the Board's reduction of that 1985 assessment. They rely on District of Columbia v. Burlington Apartment House Co., 375 A.2d 1052 (D.C. 1977) (en banc), in which we held that "an equalized assessment from the Board . . . becomes the basis for taxation until a subsequent reassessment has been made according to law." Id. at 1056. In Burlington Apartment House, we refused to validate an assessment that "was exactly the same as that which had been set for the previous fiscal year by the Board," because "it is clear that the figure was not based upon a reassessment utilizing updated sources of information, but rather was simply a routine repetition of the [previous year's] assessment." Id. at 1056 n.8.

Assessments are not necessarily invalid because they are the same as in the previous year. *fn4 See Brisker v. District of Columbia, 510 A.2d 1037, 1040 (D.C. 1986). Nor are they invalid because, in the course of reassessing, the assessor looked at the prior assessment. See id. In this case, the trial court specifically found as a matter of fact that the reassessment relied on updated sources of information:

The taxpayer attempted to show that no assessment was made for the property for tax year 1986 because the same assessment for 1985, which had been rejected by the Board of Equalization and Review, was repeated. Although the assessment for both years was the same, the evidence shows that the property was assessed again in tax year 1986. The fact that the new assessor relied in part upon information developed by the prior assessor does not alter the validity of the assessment. He made an independent analysis, conferred with his superior, and concurred in the results. Further, additional information was taken into consideration when the assessment was made for tax year 1986.

Wagner, J., Findings of Fact, Conclusions of Law and Order Affirming Assessment at 11 (Aug. 18, 1989) (Order).

Our review of Tax Division appeals is the same as it is for other civil cases tried without a jury. See D.C. Code § 47-3304 (a) (1990). "The trial court's factual findings are binding upon this court 'unless they are clearly erroneous; if the findings are acceptable, we will not disturb the court's judgment unless it is plainly wrong or without evidence to support it.'" George Washington Univ. v. District of Columbia, 563 A.2d 759, 761 (D.C. 1989) (quoting Rock Creek Plaza-Woodner Ltd. Partnership v. District of Columbia, 466 A.2d 857, 859 (D.C. 1983)); see D.C. Code § 17-305(a) (1989).

Appellants argue that the testimony at trial clearly shows that the 1986 assessment was merely a routine reiteration of the original 1985 assessment and that assessor Davis felt compelled merely to repeat the 1985 assessment made by Klugel, his superior. *fn5 The trial court, however, found otherwise:

5. . . . After going over the data with Mr. Klugel, [Mr. Davis] agreed with the figure indicated by the Chief of Standards and Review. Mr. Davis had also examined the income for the subject property for at least two years and market data for other income producing properties in the city. Mr. Davis and Mr. Klugel also reviewed equalization charts . . . .

7. . . . In this case the line assessor concurred with the Conclusions reached by Mr. Klugel after reviewing all the available data. . . .

8. . . . For tax year 1986, [Mr. Klugel] also had the owners' income and expense statement for 1983, as well as the information about income streams for other office buildings in the city. He also had leasing information for the subject property. Based upon the information, he felt the change from the Board's results in the prior year was justified as did Mr. Davis.

Order at 4-6. We cannot say that the court's decision to credit the testimony of the assessors was "plainly wrong or without evidence to support it." D.C. Code § 17-305(a). "Where there are two permissible views of the evidence, the factfinder's choice between them cannot be clearly erroneous." Anderson v. Bessemer City, 470 U.S. 564, 574, 105 S. Ct. 1504 , 84 L. Ed. 2d 518 (1985). Mr. Davis testified that he made use of some figures from 1985 but that he had independently evaluated them with attention to "arriving at the best equalization among office buildings;" he also conducted an independent comparable sales analysis. In addition, assessor Davis flatly denied appellant Wolf's charge that Klugel had told him to repeat the prior year's assessment. Klugel testified, moreover, that he had evaluated new data on income streams that had not been available to him in 1985. Under these circumstances, we cannot say the trial court's judgment was unsupported by the evidence.


We turn to appellant's challenge to the District's valuation methods. "The assessed value of property for real properly taxation purposes shall be the 'estimated market value' of the property on January 1st of the year preceding the tax year." District of Columbia v. Washington Sheraton Corp., 499 A.2d 109, 112 (D.C. 1985) (citing D.C. Code § 47-820 (a) (1981)). The D.C. Code defines "estimated market value" as:

100 per centum of the most probable price at which a particular piece of real property, if exposed for sale in the open market with a reasonable time for the seller to find a purchaser, would be expected to transfer under prevailing market conditions between parties who have knowledge of the uses to which the property may be put, both seeking to maximize their gains and neither being in a position to take advantage of the exigencies of the other.

D.C. Code § 47-802(4)(1990). In determining the "estimated market value," the assessor must "take into account any factor which might have a bearing on the market value of the real property . . . ." Id. § 47-820 (a). The regulations promulgated under the statute "give the Director of Finance and Revenue discretion in choosing the method or approach for an assessor to use in estimating the market value of a particular property." Safeway Stores, Inc. v. District of Columbia, 525 A.2d 207, 209 (D.C. 1987); see 9 DCMR § 307.2 (1986) (Director may apply "one or more of the generally recognized approaches to valuation set forth in this section or any other method the Director deems necessary to arrive at estimated market values"). Appellants argue the District incorrectly applied two of the "generally recognized" approaches to valuation: the "income" and "comparable sales" methods.


The "income" approach to valuation "bases assessed value on the amount that investors would be willing to pay to receive the income that the property could be expected to yield. . . ." 9 DCMR § 307.5(1986). That approach

entails deriving a "stabilized annual net income" by reference to the income and expenses of the property over a period of several years. That annual net income is then divided by a capitalization rate -- a number representing the percentage rate that taxpayers must recover annually to pay the mortgage, to obtain ...

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