Nos. FST CV 06 4009707 S, FST CV 06 4009708 S
November 14, 2008
MEMORANDUM OF DECISION
This is an appeal from tax assessments for 3 parcels of properties, all owned by the plaintiff, Saugatuck Harbor Yacht Club, Inc. The three assessment appeals were consolidated and tried to the Court (Downey, J.), on September 23 and 24, 2008.
The defendant, Town of Westport, had appraised the property at $14,500,00. The same property was valued at $13,079,570 for a town wide re-evaluation as of October 1, 2005. The plaintiff offered testimony from its own appraisers that the fair market value of the property as of October 1, 2005, was $8,500,000. Both sides seek court resolution of this situation.
The plaintiff has taken this tax assessment appeal pursuant to General Statutes § 12-117a, claiming that its property has been overassessed. In § 12-117a tax appeals, "the trial court tries the matter de novo and the ultimate question is the ascertainment of the true and actual value of the [taxpayer's] property . . . At the de novo proceeding, the taxpayer bears the burden of establishing that the assessor has overassessed its property. Xerox Corp. v. Board of Tax Review, 240 Conn. 192, 204, 690 A.2d 389 (1997); Ireland v. Wethersfield, 242 Conn. 550, 556, 698 A.2d 888 (1997); Newbury Commons Ltd. Partnership v. Stamford, 226 Conn. 92, 104, 626 A.2d 1292 (1993); see Burritt Mutual Savings Bank of New Britain v. New Britain, 146 Conn. 669, 675, 154 A.2d 608 (1959). Once the taxpayer has demonstrated aggrievement by proving that its property was overassessed, the trial court [will] then undertake a further inquiry to determine the amount of the reassessment that would be just. The trier of fact must arrive at [its] own conclusions as to the value of [the taxpayer's property] by weighing the opinion of the appraisers, the claims of the parties in light of all the circumstances in evidence bearing on value, and his own general knowledge of the elements going to establish value . . ." (Citations omitted; internal quotation marks omitted.) United Technologies Corp. v. Town of East Windsor, 262 Conn. 11, 22-23, 807 A.2d 955 (2002). "The court shall have power to grant such relief as to justice and equity appertains, upon such terms and in such manner and form as appear equitable." General Statutes § 12-117a.
An appellant has the initial burden of proving that his property has been overassessed. "In an appeal . . . from a board of tax review, the court performs a double function. The court must first determine whether the plaintiff has met his burden of establishing he is, in fact, aggrieved by the action of the board. Only when the court finds that the action of the board will result in the payment of an unjust and, therefore, illegal tax, can the court proceed to exercise its broad discretionary power to grant such relief as is appropriate." Beacon Hill Condominium Assn. v. Town of Beacon Falls, 41 Conn.App. 249, 253 (1996), quoting Gorin's, Inc. v. Board of Tax Review, 178 Conn. 606, 608, 424 A.2d 282 (1979).
"If the trial court finds that the taxpayer has failed to meet his burden because, for example, the court finds unpersuasive the method of valuation espoused by the taxpayer's appraiser, the trial court may render judgment for the town on that basis alone." Ireland v. Town of Wethersfield, supra, 242 Conn. 557-58. Where a taxpayer is unable to prove that the valuation is unjust, the trial court may properly refuse to adjust the valuation. Union Carbide Corp. v. Danbury, 257 Conn. 865, 873, 778 A.2d 204 (2001).
"[P]roper deference must be given to the judgment and experience of assessors . . . The law contemplates that a wide discretion is to be accorded to assessors, and unless their action is discriminatory or so unreasonable that property is substantially overvalued and thus injustice and illegality will result, their opinion and judgment should control in the determination of value for taxation purposes." (Citations omitted; emphasis added; internal quotations marks omitted.) Connecticut Coke Co. v. New Haven, 169 Conn. 663, 668, 364 A.2d 178 (1975); Federated Dept. Stores, Inc. v. Board of Tax Review, 162 Conn. 77, 86, 291 A.2d 715 (1971).
Only after the trial court determines that the taxpayer has met his initial burden of proof that his property has been over-assessed shall the court then determine the true and actual value of the property. In determining the property's value, "[t]he trier of fact must arrive at his own conclusions as to the value of [the taxpayer's property] by weighing the opinion of the appraisers, the claims of the parties in light of all the circumstances in evidence bearing on value, and his own general knowledge of the elements going to establish value." (Internal quotation marks omitted.) Ireland v. Town of Wethersfield, supra, 242 Conn. 556-57.
The true and actual value of the property as defined in General Statutes § 12-63 is intended to mean the fair market value. Uniroyal, Inc. v. Board of Tax Review, 174 Conn. 380, 385, 438 A.2d 782 (1978).
1. The plaintiff is a corporation which owns and operates a private yacht club in a Residence AA zone in Westport, Connecticut. In accordance with the June 12, 1958 zoning special permit, as amended, under which it was permitted to establish and under which it operates, the plaintiff's yacht club consists of approximately 160 members who are mostly residents of Westport, Weston, Wilton, and Norwalk, but who may reside anywhere, and who come from all walks of life, from young people who are starting out with families, to retirees, doctors, lawyers, policemen, nurses, salesmen, businessmen, and entrepreneurs. (Plaintiff's Exhibit [Exh.] 1; Transcript [Tr.] Volume I, 9/23/08 [Vol. I], pp. 23-24; 26; 37; Defendant's Exhs. J and K.)
2. The Plaintiff's yacht club may not, and does not, have a restaurant or sell alcoholic beverages of any kind, and it must and does operate as a "non-profit club." (Plaintiff's Exh. 1; Defendant's Exhs. J and K; Tr. Vol. I, pp. 21-23.) It does not sell any food or drink. (Tr. Vol. I, p. 40.) It is a private yacht club which does not conduct commercial activities. (Tr. Vol. I, pp. 37-39.)
3. The subject property consists of five parcels aggregating to 14.68 acres of land, 10 acres of which are the land submerged beneath the body of water known as the Duck Pond, which serves at the plaintiff's yacht basin. (Plaintiff's Exh. 2, p. 31, Appraisal Report of George W. Sherwood, IV; Defendant's Exh. L, p. 33, Appraisal Report of Christopher Kerin.)
4. The subject property is not waterfront property in the classic sense, as it is not on the waterfront of Long Island Sound. A boater must navigate from the Duck Pond boat basin through a dredged channel, past the Cedar Point Yacht Club, past the town mooring fields and the town marina in order to reach the open waters of Long Island Sound. (Tr. Vol. I, p. 25.)
5. The 4.68 acres of uplands of the subject property are improved by a clubhouse, which dates back to the 1880s and contains one finished floor, a junior clubhouse, small garage, parking area, a wood shop, pool house, swimming pool and hauling site. (Tr. Vol. I, p. 15; 48; 155-56; Plaintiff's Exh. 2, p. 31; Defendant's Exh. L, p. 33.) There are 155 primary boat slips and 10 secondary boat slips, accommodating both power boats (about 65 percent) and sail boats (about 35 percent), from as small as 7 feet to as large as 62 feet in length. (Tr. Vol. I, p. 24.) There is an area of .93 acres along the edge of the boat basin which is a narrow, inclined strip of rip-rap stone which serves the purposes of bulkheading and drainage and erosion control. (Tr. Vol. I, p. 49; Plaintiff's Exh. 2, p. 9.)
6. The Assessor determined the aggregate full market value of the five assembled parcels addressed in the three appeals to be $13,079.570.
a) As shown in the legal descriptions attached to the three complaints, Docket No. FST-CV-06-4009706-S covers Lots ID Nos. 5-13, 5X (which is the Duck Pond) and 5Y, known collectively as 6 Great Marsh Road; Docket No. FST-CV-06-4009707-S covers Lot ID No. 5-12, known as 18 Great Marsh Road; and Docket No. FST-CV-06-4009708-S covers Lot ID No. 5-11, known simply as Great Marsh Road.
b) This figure was admitted by the defendants in paragraph 2 of each of its answers to the applications. The defendant's appraiser, at page 31 of his appraisal report, Defendant's Exhibit L, put the total figure at $13,214,300.
7. The plaintiff's expert witness, George W. Sherwood, IV ("Sherwood"), has extensive experience appraising marinas and yacht clubs, both for private property owners and for municipalities, as well as for state and federal governmental agencies. He has appraised marinas and marine-related properties along the entire coast of the State of Connecticut, from Fairfield County to New London County, and into Rhode Island, and has received training at the International Marina Institute specific to the valuation of marinas and marine-related properties. (Tr. Vol. I, pp. 42-44.) He has been qualified as an expert witness in state and federal courts and was qualified by the Court in this particular case, without objection from the defendant, as an expert appraiser generally and specifically as an expert appraiser of marinas. (Tr. Vol. I., pp. 44-45.)
8. Sherwood and the defendant's appraiser, Christopher Kerin ("Kerin") both concluded that the highest and best use of the property is determined by the four tests of what is legally permissible, physically possible, financially feasible and maximally profitable, and that the highest and best use of the subject property, as improved, is its continued present use as a noncommercial marina/yacht club. (Tr. Vol. I, pp. 52-53; 156-57; Tr. Volume II, 9/24/08 ("Vol. II"), pp. 7-9; Plaintiff's Exh. 2, p. 43; Defendant's Exh. L, p. 33.) A marina is a place where people dock their boats and a yacht club is one use of a marina. Whether a marina is used as a private, non-commercial club, like the subject property, or as a public, municipal or corporate commercial or non-commercial operation is a matter of the marina owner's choice. (Tr. Vol. I, pp. 53-54.)
9. Sherwood employed two methods for appraising the value of the subject property, the sales comparison approach, utilizing comparable sales of other marina properties, and the income capitalization approach, both of which are widely utilized and commonly relied upon in appraising marina properties. (Tr. Vol. I, p. 50.)
10. The cost approach was not applicable to valuing the subject property, as the unique nature of the subject property and the physical age of the structures located there would probably have yielded an unsupported value. (Tr. Vol. I, pp. 15; 51; 133; 135.)
11. Sherwood used marinas in Groton, Clinton, and Norwalk as comparable sales and made appropriate adjustments for a variety of factors for the purpose of comparing them accurately to the subject property. (Plaintiff's Exh. 2, pp. 47-60.) These adjustments included upward adjustments based on the subject property's superior location, and downward adjustments based on the economies of scale which the subject property achieves through having more boat slips than any of the comparable marinas. Based on this method, Sherwood arrived at a value of $50,000 per boat slip and based on 175 boat slips, arrived at a value of $8,750,000. (Tr. Vol. I, p. 55.) The value per boat slip is not a fair market value for the slip; rather, it is the customary unit of measure used in appraisals of marina properties. (Tr. Vol. I, pp. 56; 91-92; 126-27; Plaintiff's Exh. 2, pp. 59-60.) A boat slip in a private yacht club cannot be sold on the open market and has no fair market value. (Tr. Vol. 1, p. 127.)
12. Sherwood also used the income capitalization approach to determine the fair market value of the subject property, as this method mimics the income which can be generated by the subject property, notwithstanding the fact that the subject property is a privately operated, not-for-profit enterprise. This is an accepted methodology by which the marina can be analyzed. It is one of the most accurate, useful techniques for developing the fair market value of the subject property. (Tr. Vol. I, p. 71.)
13. In preparing his income capitalization approach, Sherwood used 12 comparable marinas, located in Norwalk (2), Stratford, Milford, Bridgeport, Clinton (3), Old Saybrook (3), and Westbrook. (Plaintiff's Exhibit 2, pp. 61-72.)
14. Using the income capitalization approach and a capitalization rate of 10.51 percent, Sherwood arrived at a value of $47,143 per boat slip, for a total value of $8,250,000. (Tr. Vol. I, pp. 59-60; Plaintiff's Exh. 2, p. 80.)
15. The average of the fair market value of the subject property determined according to the sales comparison approach and the fair market value determined according to the income capitalization approach yielded the appraised value of $8,500,000. (Tr. Vol. I., p. 60; Plaintiff's Exh. 2, p. 80.)
16. Kerin's appraisal report is based not on values of boat slips, but on the fair market values of club membership interests for two properties, one of which is not a marina, but a beach club which sells condominium interests in lockers, but does not have any boat slips. (Defendant's Exh. L, pp. 35-40; Tr. Vol. I, pp. 149-50.) The other is a yacht club which, unlike the plaintiff, sells its memberships on the open market. (Tr. Vol. II, p. 20.)
17. Memberships in the plaintiff's yacht club cannot be sold and members cannot sell their assigned boat slips, as they do not own them. If a member wants to leave the yacht club, he simply resigns and the boat slip he used becomes available to another member. (Tr. Vol. I, pp. 138-39.) The plaintiff does not sell its boat slips and cannot sell them, as that would be a commercial enterprise which is not permitted under the Westport Zoning Regulations. (Defendant's Exh. M, §§ 11 and 12; Tr. Vol. I, p. 122.)
18. Kerin's dockominium membership sellout approach to valuing the subject property is not a commonly accepted approach. Sherwood, the more experienced marina appraiser, has not seen or heard of it being used. (Tr. Vol. II, pp. 107-08; 114.)
19. Kerin's dockominium membership sellout approach to valuing the subject property is invalid, as it does not value the real property at all; rather it values a business model, and one which neither exists at the site nor is legally permissible at the site under the Westport Zoning Regulations. (Tr. Vol. II, p. 42; Defendant's Exh. M, §§ 11 and 12.)
20. Kerin's dockominium membership sellout approach to valuing the subject property is invalid because the plaintiff cannot sell memberships or boat slips, and such sales would constitute commercial enterprise which is not legal under the Westport Zoning Regulations. In addition, dockominiums are used by owners to live on their boats part-time or full-time, which is not legal under the Westport Zoning Regulations. The membership sellout approach is, therefore, incompatible with the "legally permissible" test of highest and best use analysis, or as Kerin himself testified, "For highest and best use, you can't consider uses that are not legally possible for the property." (Tr. Vol. I, p. 158; Vol. II, p. 58.)
21. Kerin's dockominium membership sellout approach to valuing the subject property is not appropriate because it is based on the sale of dockominiums — boat slips owned as condominium units — and condominium development is neither a permitted use nor special permit use in the Residence AA zone where the subject property is located. (Tr. Vol. II, p. 42; Defendant's Exh. M, §§ 11 and 12.)
22. The use by Kerin of the Roton Point Beach Club as a comparable property for valuation purposes is not applicable because it has no boat slips and is neither a marina nor a yacht club. (Tr. Vol. II, pp. 50; 59.)
23. Kerin's appraisal report, which was not prepared and provided to the plaintiff or the defendant until about three weeks prior to trial and well over a year after Sherwood's report had been provided to the defendant and Kerin, and which was disclosed only after the defendant was sanctioned for failing to provide it, came in at a value of approximately $1,500,000 in excess of Kerin's own town-wide revaluation value. (Tr. Vol. II, pp. 35-36.)
The plaintiff has successfully borne its burden of proving that it is aggrieved by the overassessment of its real property by the defendant. Its expert appraiser of marinas presented a highly credible, sound approach to valuation, whereas the defendant's appraiser, who lacks the experience and qualifications of the plaintiff's expert with respect to the valuation of marina properties, presented a novel, but inappropriate, and flawed methodology. Moreover, the timing of the production of his appraisal report, as well as his $1,500,000 increase over both his original valuation made during the town-wide revaluation, were strategically suspicious. Finally, the defendant's appraiser's valuation was inconsistent with the appraisal he performed about a year earlier with respect to a portion of the subject property in connection with the proposed condemnation of a sewer easement. The defendant's appraisal was not persuasive. The court, therefore, grants the plaintiff's appeal and finds that the fair market value of the subject property, as assembled, as of October 1, 2005, is $8,500,000.