Court wants further review of Durham tax-value decision

Feb. 08, 2014 @ 05:09 PM

A N.C. Court of Appeals panel has told officials to reconsider their efforts to tax a Durham County house that sold in 2011 for $525,000 as though it’s worth $914,684.
The unanimous decision, handed down on Tuesday, said the N.C. Property Tax Commission had failed to explain its reasoning or show that it’d followed the correct legal procedure for resolving the valuation dispute.
Its silence on those points “undermines our confidence in the commission’s conclusion that the county had met its ultimate burden of establishing a true value,” Judge Ann Marie Calabria said for her colleagues, quoting a previous decision.
The house in question is on Kinsale Drive in the Oaks III subdivision, just inside the Chapel Hill town limits. The town lies mostly in Orange County, but its easternmost portion reaches into Durham County.
The case began in 2011, when the home’s then-owner challenged a 3-year-old county tax valuation that pegged its worth at nearly $1.1 million.
Durham’s Board of Equalization and Review on the owner’s request lowered the value to $914,684.
But that didn’t satisfy the owner, who appealed to the state commission and presented testimony from a residential appraiser who said the house suffered from an “inferior quality of construction,” Calabria said.
Its problems included a bowed rear wall, settling-induced cracks in its brickwork and standing water in the basement, she said.
The appraiser, Brett Leyburn, thought the property worth $610,000 and did not necessarily consider only Durham County homes when he looked for others to compare it to.
“County lines do not determine value,” he told the state commission.
But the county’s appraiser, Sheila Thompson, did look only at other Durham properties for comparisons. Specifically, she compared the Kinsale Drive property to homes in Hope Valley, which as Calabria noted is about five miles away.
The discrepancy mattered legally because of the way North Carolina’s appellate courts want the commission to weigh valuation disputes.
Normally, judges and the commission should presume that a county’s value estimate is correct, Calabria said.
But when a taxpayer shows there’s a good chance the county used an “arbitrary or illegal method of valuation,” the burden of proof shifts to the county to show it got things right.
And in deciding cases, the state Property Tax Commission has to spell out its reasoning and show that it correctly accounted for the changing burden of proof.
However, in the Kinsale Drive case, its ruling “did not explain how” it weighed the evidence or give judges any reason to think it’d “properly applied the burden-shifting analysis in reaching its conclusions,” Calabria said.
The ruling continued a slap-down of the commission that’s played out on the larger stage of a nearly $10 million tax dispute between Durham County and IBM over the proper valuation of an IBM subsidiary’s computer equipment.
In the IBM dispute, the state Property Tax Commission consistently sided with the county’s take on the matter, and the Court of Appeals and the N.C. Supreme Court as consistently ruled it hadn’t properly accounted for the change in the burden of proof.
The Court of Appeals in 2012 finally settled the matter with a ruling that said the commission had put judges in a “ridiculous position” by failing to heed their orders. The county appealed, but the Supreme Court refused to hear it out.
Calabria’s opinion in the Kinsale Drive case spoke also for Court of Appeals Judges Robert C. Hunter and Robert N. Hunter Jr.
Robert C. Hunter is a Democrat. Calabria and Hunter Jr. are Republicans.