Appeal from the Superior Court of the District of Columbia; (Hon. Emmet G. Sullivan, Trial Judge).
Before Rogers, Chief Judge, and Terry and Schwelb, Associate Judges.
The opinion of the court was delivered by: Rogers
ROGERS, Chief Judge : Appellants William B. Wolf, Sr., William B. Wolf, Jr., and Charles Goldsmith appeal from the judgment reducing the assessed values of their commercial real property from $6,980,000 to $6,285,000 for tax year 1986 and from $7,659,906 to $7,494,000 for tax year 1987. *fn1 Maintaining that greater reductions were required, appellants contend that the trial Judge erred by accepting the appraisal of the court-appointed expert because (1) in using the income approach for estimating the value of the property, the appraiser incorrectly used actual net income figures for the year following the relevant tax appraisal dates as the stabilized annual net income, and (2) in relying on the appraiser's use of the comparable sales approach to determine land value, the Judge failed to make findings of fact on the sales used by the appraiser in concluding that the District government assessor's determinations of the property's land values for 1986 and 1987 were not unreasonable. They also contend that the Judge erred by accepting appellee's assessment for tax year 1987 in an amount 37.5 percent higher than the 1986 assessment. We affirm.
The facts are undisputed. As general partners of ICONN Associates appellants own commercial real property located on the southwest corner of Connecticut Avenue and Eye Street, N.W., in the District of Columbia. *fn2 The irregularly shaped land is improved by a 12-story commercial office building that was built in 1961. The building's total available rental space for commercial and retail purposes is 65,149 square feet.
The District of Columbia government originally assessed the value of the property for tax year 1986 at $6,980,000, allocating $3,257,280 to land and $3, 722,720 to improvements, and for tax year 1987 at $8,656,000, allocating $4,478,760 to land and $4,177,240 to improvements. When appellants challenged the assessments, the Board of Equalization and Review declined to revise the 1986 assessment but reduced the 1987 assessment from $8,656,000 to $7,659,906, allocating $4,478,760 to the land and $3,181,146 to improvements. Dissatisfied with both outcomes, appellants appealed the assessments, seeking reductions for each tax year. *fn3 See D.C. Code §§ 47-825 (i), -3303 (1987) Repl.).
At the trial, the witnesses on value for appellants and the District of Columbia gave widely divergent appraisals of the property's market value. *fn4 Concerned with the possibility that both witnesses were not objective, *fn5 the trial Judge appointed an expert appraiser, William S. Harps. *fn6 The Judge found Mr. Harps to be qualified as an expert appraiser for purposes of determining the fair market value of the property.
Thereafter, Mr. Harps appraised the property at $6,285,000 for tax year 1986, allocating $3,257,280 to the land $3,027,720 to improvements, and at $7,494,000 for tax year 1987, allocating $4,478,760 to the land and $3,015,240 to improvements. To determine the property's market value for each year, Mr. Harps used an income approach to valuation. Under this method, he divided the actual net income of $846,038 for 1985 by a capitalization rate of .13465 to arrive at the $6,285,000 figure for 1986, and divided the actual net income of $1,048,450 for 1986 by a capitalization rate of .1399 to arrive at the $7,494,000 figure for 1987. Using a comparable sales method, Mr. Harps concluded that the District government assessor's land value determinations of $3,257,280 for tax year 1986 and $4,478,760 for tax year 1987 were "not unreasonable," and he adopted these figures as the estimated market values for tax years 1986 and 1987, respectively. *fn7
The trial Judge credited Mr. Harps' testimony, methodology, and appraisal of the property, and reduced the assessed value from $6,980,000 to $6,285,000 for tax year 1986 and from $7,659,906 to $7,494,000 for tax year 1987. The Judge then ordered the District to refund the amount of the overpaid taxes to appellants. See note 1, (supra) .
Appellants contend that the trial Judge erred by accepting Mr. Harps' appraisal of appellant's property for tax years 1986 and 1987 because, in applying the income approach to valuation, Mr. Harps used actual net income for the year following the valuation date as the stabilized annual net income to be capitalized. They argue that this approach was inappropriate because the District government's assessor would not have had access to such net income figures during his original assessment of the property's value and a hypothetical purchaser would not have had access to such figures on the valuation date. *fn8
The trial court's factual findings are binding upon this court unless they are clearly erroneous, and the court will not disturb the 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 also D.C. Code § 17-305 (a) (1989). The trial Judge evaluates the factual issues de novo, pursuant to D.C. Code § 47-3303, and, although the Judge may not "arbitrarily reject" expert testimony, the Judge "may adopt the rationale of one testifying expert over the other, or even disregard the Conclusions of both." fDistrict of Columbia v. Washington Sheraton Corp., 499 A.2d 109, 112 (D.C. 1985). We find no error by the trial Judge in accepting Mr. Harps' appraisals of the property.
For taxation purposes, the assessed value of real property is "the 'estimated market value' of the property on January 1st of the year preceding the tax year." *fn9 Id. (citing D.C. Code § 47-820 (a) (1981)). *fn10 Thus, in appraising appellants' property, Mr. Harps had to determine its market value as of January 1, 1985, for tax year 1986 and its market value as of January 1, 1986, for tax year 1987.
The three generally accepted approaches for determining market value are the replacement cost approach, the comparable sales approach, and the income approach. Id. at 113; 9 DCMR § 307.3-.5. While an appraiser must consider all three of these approaches, the appraiser may, in the exercise of discretion, ultimately rely on one method in determining a property's market value. Safeway Stores, Inc. v. District of Columbia, 525 A.2d 207, 209 (D.C. 1987) (citing 9 DCMR § 307.2); District of Columbia v. Washington Sheraton Corp., supra, 499 A.2d at 113. In ...