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Fairfield Merrittview Limited Partnership v. City of Norwalk

Court of Appeals of Connecticut

April 11, 2017

FAIRFIELD MERRITTVIEW LIMITED PARTNERSHIP
v.
CITY OF NORWALK ET AL

          Argued October 27, 2016

         Appeal from Superior Court, judicial district of Stamford-Norwalk, Hon. Arnold W. Aronson, judge trial referee.

          James R. Fogarty, with whom, on the brief, were Frank W. Murphy and Kara A. Murphy, for the appellants (plaintiff et al.).

          Carolyn M. Colangelo, assistant corporation counsel, with whom were Mario F. Coppola, corporation counsel, and, on the brief, Robert F. Maslan, Jr., former corporation counsel, for the appellees (defendants).

          Alvord, Sheldon and Harper, Js.

          OPINION

          SHELDON, J.

         In this real estate tax appeal, the defendant city of Norwalk[1] appeals from the judgment of the trial court sustaining the appeal of the plaintiff, Fairfield Merrittview SPE, LLC, [2] pursuant to General Statutes § 12-117a, [3] and ordering the reduction of the defendant's tax assessment levied against the plaintiff's real property. The defendant raises two arguments in support of its claim that the court erred when it reduced the subject property's assessed fair market value, as of October 1, 2008, from $49, 036, 800 to $34, 059, 753.[4] First, the defendant claims that the court improperly relied upon a 2006 ‘‘annual income and expense report'' to calculate the property's net rentable area, when instead it should have used the plaintiff's December 2008 rent roll for that purpose, because the 2008 rent roll assertedly reflected the subject property's net rentable area as of October 1, 2008, more accurately than the 2006 report. Second, the defendant argues that the court improperly excluded $190, 000 of ‘‘other income'' attributable to the subject property from its calculations and, therefore, the court's calculation regarding the property's potential gross income was clearly erroneous. We affirm the judgment of the trial court.

         The record reveals the following facts. The subject property, an eight story, class A multitenant office building that was constructed in 1985, sits on a 4.3 acre parcel located at 383 Main Avenue in Norwalk. The ground floor of the property consists of a lobby, a cafeteria, a fitness center and a conference room, which are all maintained for the benefit of the building's tenants. These amenities account for approximately 6400 square feet of space. Additionally, there is a three level parking garage underneath the building which provides 743 parking spaces on a total surface area of 150, 227 square feet. The area surrounding 383 Main Street consists of high density commercial developments, as well as retail and corporate offices. The subject property's location provides quick access to: the Merritt Parkway; the Route 7 connector highway, which provides access to Interstate 95; and the Metro-North passenger train station, which operates between New Haven and New York City.

         On October 1, 2008, as part of a citywide revaluation, the defendant's assessor determined that the subject property had a fair market value[5] of $49, 036, 800. Thereafter, the plaintiff appealed to the Board of Assessment Appeals of the City of Norwalk (board), pursuant to General Statutes § 12-111, [6] claiming that the property's assessed value grossly exceeded its actual value.[7] The board dismissed the appeal and upheld the property's assessed value and corresponding tax assessment. On July 21, 2009, the plaintiff appealed, pursuant to § 12-117a, to the Superior Court for the judicial district of Stamford-Norwalk. There, the plaintiff renewed its claim that the defendant's assessment of the subject property was grossly excessive, and therefore warranted reduction. A two day trial was then held on December 14 and 15, 2011.

         During the trial, each party called an appraiser to testify as to the subject property's October 2008 fair market value. Eric Michel testified on behalf of the plaintiff; Michael Fazio testified on behalf of the defendant. Both witnesses stated that they employed the sales approach[8] and the income capitalization approach[9] to determine the property's fair market value. Ultimately, each appraiser testified that the income capitalization approach was the most appropriate method for determining the property's fair market value as of October 1, 2008 because a prospective purchaser would most likely use that method when attempting to purchase the property.[10] Using the income capitalization approach, Michel concluded that the property had a fair market value of $30, 500, 000 as of October 1, 2008, whereas Fazio concluded that the property then had a fair market value of $49, 400, 000.

         Despite their different conclusions, both appraisers agreed on several factors relevant to the trial court's decision. Both appraisers agreed: that the property's highest and best use, [11] as improved, was its continued use as a multitenant office building; that, in applying the income capitalization approach, the direct capitalization method[12] was the preferred method for determining the property's fair market value; that, pursuant to the direct capitalization method, the applicable vacancy and collection rate was 10 percent; and that the property's market rental value, pursuant to General Statutes § 12-63b, [13] should be valued at $25 per square foot. They disagreed, however, on several figures included in the direct capitalization formula. Specifically, they disagreed as to: (1) the property's net rentable area; (2) the property's potential gross income; and (3) the overall capitalization rate[14] that should be applied under the direct capitalization formula. Their differences, more particularly, were as follows.

         Regarding the property's net rentable area, Michel testified that his calculation was based upon the tax assessor's field assessment card, which reported that the property had a net rentable area of 238, 879 square feet. Fazio's calculation, on the other hand, was based on an oral representation by Tara Deluca, an agent of the plaintiff, that the property had a net rentable area of 256, 974 square feet.

         As for the property's potential gross income (PGI), Michel testified that he multiplied the market rental value of $25 per square foot, on a ‘‘gross electric basis, ''[15]by 238, 879 square feet of net rentable area to arrive at a PGI of $5, 971, 975. Fazio's calculation, by contrast, resulted in a PGI of $7, 847, 825. Although Fazio agreed that the market rental value was $25 per square foot, he included two additional reimbursements which he found to increase the property's value by $4.80 per square foot.[16] Additionally, Fazio's formula included $190, 000 in ‘‘other income'' that he believed to be attributable to the property, which included ‘‘conference room income, tenant other income, and . . . interest income.''

         Concerning the overall capitalization rate, both appraisers agreed that as of October 1, 2008, the capitalization rate was 7.5 percent. They disagreed, however, as to what effective tax rate should be added to that figure to arrive at the overall capitalization rate; Michel testified that 1.35 percent should be added, resulting in an overall capitalization rate of 8.85 percent, while Fazio testified that 1.39 percent should be added, resulting in an overall capitalization rate of 8.89 percent.

         On August 6, 2012, the trial court, Hon. Arnold W. Aronson, judge trial referee, issued its memorandum of decision. With regard to the property's net rentable area, the court noted that several documents admitted into evidence reflected dramatically different figures and that, depending on which exhibit it relied upon, the property's net rentable area varied by approximately 15, 000 square feet. After reviewing the evidence presented, the court concluded that it was ‘‘ more credible to turn to the 2006 annual income and expense report filed by [the plaintiff] with the city's assessor, as required by General Statutes § 12-63c, showing the subject's gross square footage at 249, 986 [square feet] and [net rentable area] at 243, 586 [square feet].''[17] With regard to the property's PGI, the court rejected Michel's proposal of $25 per square foot on a gross electric basis as well as Fazio's inclusion of reimbursements and ‘‘other income.'' Instead, the court compared the subject property's market rent to its contract rent and concluded that a value of $26 per square foot was ‘‘a fair resolution of the subject's potential gross income, as of October 1, 2008.'' Accordingly, the court multiplied the market value of $26 per square foot by the net rentable area of 243, 586 square feet, resulting in a PGI of $6, 333, 236, as of October 1, 2008.[18] Finally, with regard to the overall capitalization rate, the court adopted Fazio's proposed overall capitalization rate of 8.89 percent. Applying these figures to the direct capitalization formula, the court concluded that the subject property's fair market value, as of October 1, 2008, was $34, 059, 753. Because this figure was less than the defendant's assessment of $49, 036, 800, the court ordered a reduction in the assessment to reflect the difference in the property's fair market value. Thereafter, the defendant filed its appeal.

         Additional facts will be set forth as necessary.

         I

         The defendant first claims that the court's factual finding regarding the property's net rentable area was clearly erroneous. Specifically, the defendant argues that, in determining the net rentable area of the property, the trial court improperly relied on a 2006 annual income and expense report to determine the building's gross square footage. See footnote 17 of this opinion. The defendant argues that the information in that report as to the property's net rentable area was outdated, and thus that the court should have used the plaintiff's 2008 rent roll to determine that area instead. The defendant contends that, by relying on such outdated information, the court failed to account for 14, 687 square feet of net rentable area, thereby erroneously reducing the property's fair market value by $3, 865, 870. We find no error.

         ‘‘Our review of the court's determination in a tax appeal is limited. [W]e do not examine the record to determine whether the trier of fact could have reached a conclusion other than the one reached. Rather, we focus on the conclusion of the trial court, as well as the method by which it arrived at that conclusion, to determine [if] it is legally correct and factually supported. . . . We will reverse the decision only if it is clearly erroneous.'' (Citation omitted; internal quotation marks omitted.)Pilot's Point Marina, Inc. v. Westbrook, 119 Conn.App. 600, 602, 988 A.2d 897 (2010). ‘‘A finding of fact is clearly erroneous when there is no evidence in the record to support it . . . or when although there is evidence to support it, the reviewing court on the entire evidence is left with the definite and firm conviction that a mistake has been committed. . . . In making this determination, every reasonable presumption must be given in favor of the trial court's ruling.'' (Internal quotation marks omitted.) Albemarle Weston Street, LLC v. Hartford, 104 Conn.App. 701, 706, 936 A.2d 656 (2007).

         ‘‘[I]n an appeal pursuant to § 12-117a, 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.'' (Footnote omitted; internal quotation marks omitted.) Xerox Corp. v. Board of Tax Review, 240 Conn. 192, 204, 690 A.2d 389 (1997). ‘‘Whether a property has been overvalued for tax assessment purposes is a question of fact for the trier.'' (Internal quotation marks omitted.) Konover v. West Hartford, 242 Conn. 727, 735, 699 A.2d 158 (1997); New-bury Commons Ltd. Partnership v. Stamford, 226 Conn. 92, 103, 626 A.2d 1292 (1993). ‘‘The trier arrives at his own conclusions as to the value of land 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 including his own view of the property.'' O'Brien v. Board of Tax Review, 169 Conn. 129, 136, 362 A.2d 914 (1975). ‘‘Because a tax appeal is heard de novo, a trial court judge is privileged to adopt whatever testimony [it] reasonably believes to be credible.'' (Emphasis omitted; internal quotation marks omitted.) Aetna Life Ins. Co. v. Middle-town, 77 Conn.App. 21, 28, 822 A.2d 330, cert. denied, 265 Conn. 901, 829 A.2d 419 (2003). ‘‘The court has wide discretion in the admission of evidence and in determining what weight to give any such evidence.'' Nolan v. Milford, 92 Conn.App. 607, 609, 886 A.2d 493 (2005).

         The defendant claims that the court erroneously relied upon the plaintiff's 2006 annual income and expense report.[19] We disagree. The evidence regarding the property's net rentable area consisted of exhibits and trial testimony; we address each in turn.

         Throughout the course of the two day trial, the court received several pieces of documentary evidence regarding the property's net rentable area, including: the plaintiff's 2006, 2007, and 2008 rent rolls; the city assessor's field card; and the plaintiff's 2006 annual income and expense report. A review of these documents reveals that the plaintiff's December 2006 rent roll, January 2007 rent roll, and 2006 annual income and expense report consistently stated that the subject property had a gross building area of 249, 986 square feet. The plaintiff's December 2007 rent roll, however, reported a gross building area of 260, 147 square feet, reflecting an increase of approximately 10, 200 square feet. Similarly, the plaintiff's December 2008 rent roll reflected an additional increase of approximately 4500 square feet, resulting in a gross building area of 264, 673 square feet.

         In addition to these documents, the court heard testimony from both appraisers regarding the property's net rentable area. On direct examination, Michel testified that when he calculated the property's fair market value, he relied on the 2008 tax assessor's information, which reported that the property had 238, 879 square feet in rentable area. Michel explained that, by using this figure, he was able to compare his appraisal to the tax assessor's appraisal using identical information. Michel testified on cross-examination that, before he performed his appraisal, he reviewed twelve years' worth of information on the subject property and noted that its net rentable area ranged from 230, 000 to 260, 000 square feet throughout that period. Michel testified that this was an indication that the net rentable area of the property varied depending on the market. Michel also testified that the city assessor's field cards often reflected the assessor's personal opinion as to the property's net rentable area and that, often times, such information was incorrect. Michel ...


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