Athena Providence Place, et al. v. David Quinn, in his capacity as Tax Assessor of the City of Providence, et al., C.A.

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STATE OF RHODE ISLAND AND PROVIDENCE PLANTATIONS PROVIDENCE, SC. SUPERIOR COURT (FILED: April 25, 2019) Athena Providence Place, et al., Petitioners, v. David Quinn, in his capacity as Tax Assessor of the City of Providence, et al., Respondents. : : : : : : : : C.A. No. PC-2015-5520 C.A. No. PC-2016-0729 (consolidated cases) DECISION LICHT, J. Petitioners are taxpayer unit owners of Athena Providence Place (collectively referred to as Petitioners), a residential condominium development located at 903 Providence Place in Providence, Rhode Island (the Property or The 903).1 Petitioners filed a Petition for Relief from Assessment claiming that David Quinn (Assessor or Quinn), in his capacity as Tax Assessor of the City of Providence, illegally increased their assessed values for the assessment dates December 31, 2013 (Tax Year 2014) and December 31, 2014 (Tax Year 2015). The Court exercises jurisdiction pursuant to G.L. 1956 § 44-5-26 and makes the following findings of fact and conclusions of law pursuant to Rule 52 of the Superior Court Rules of Civil Procedure. 1 The Court is unclear as to why the Property is called “1000 Providence Place” when its street postal numerical designation is 903, not 1000. I Facts and Travel2 The 903 is a developed property located at 903 Providence Place in Providence, Rhode Island. The Property consists of 330 dwelling units and associated parking and storage spaces. For ten years immediately prior to the Tax Year 2014, the Property was subject to an amended tax stabilization agreement (TSA), which included assessed values of the Property for the ten years beginning with the assessment date as of December 31, 2003 (for Tax Year 2004) and ending with the assessment date as of December 31, 2013 (for Tax Year 2014). See Walter Pastor Aff. (Pastor Aff.) Ex. 1. In 2012, prior to the expiration of the TSA, the City of Providence (the City), in conjunction with Vision Government Solutions, Inc. (Vision), a mass appraisal contractor, performed and completed a citywide reassessment update program of property values (2012 Revaluation).3 The 2012 Revaluation determined the assessed values as of December 31, 2012, for the Tax Year 2013, for all real estate in the City including each of the Property’s 330 dwelling units, notwithstanding that the TSA provided for an agreed assessment and stabilized payments for the Property through the Tax Year 2013. In April of 2013, as part of the 2012 Revaluation process, the Assessor individually notified each of the Property’s taxpayer-owners by letter (April 5, 2013 Notice) of the City’s new citywide revaluation assessments of their units and that the 2012 Revaluation represented 100% of the fair market value for their units as of December 31, 2012. (Pastor Aff. Ex. 2.) The City 2 The parties stipulated to basic facts for the Court’s consideration of this matter and they are incorporated herein. 3 Pursuant to the aforementioned applicable statutes, the City performs an assessment of property valuations on December 31 in each year at 12:00 A.M. midnight, a statistical update every three (3) years from the date of the last revaluation and a full revaluation of real property every nine (9) years. See §§ 44-5-1, 44-5-11.5(4) and 44-5-11.6(a)(2)(ii). 2 also informed Petitioners that Vision would be conducting informal appeal hearings to review the new citywide revaluation assessments with taxpayers who wished to challenge them. Walter Pastor (Pastor), the manager of the Property, attended such a hearing with Vision and contended that the new assessments were too high. After that hearing, the City’s Assessor sent each of the Property’s taxpayer-owners a second notice (June 14, 2013 Notice) affirming the 2012 Revaluation without change. The April 5, 2013 Notice and the June 14, 2013 Notice were the only notices of reassessment the City provided to the Property’s taxpayer-owners for the 2013, 2014 and 2015 tax years. Even though the 2012 Revaluation set new values for the Property, the City taxed the Property for the Tax Year 2013 based on the TSA. However, following the expiration of the TSA and prior to the issuance of the Property’s 2014 and 2015 tax bills, the City revalued and reassessed each of the Property’s 330 dwelling units (2013 Revaluation). As a result of and following the 2013 Revaluation, the Assessor issued property tax bills in June of 2014 (2014 Tax Bill) and in June of 2015 (2015 Tax Bill) based upon the values in the 2013 Revaluation, not the 2012 Revaluation. As applied to their 2014 Tax Bill and 2015 Tax Bill, the 2013 Revaluation’s assessed values of the Property’s 330 units were approximately thirty percent higher than the 2012 Revaluation. The parties have stipulated that Petitioners, for the Tax Year 2014 and the Tax Year 2015, complied with the statutes that require filing an Annual Return or account, paying the taxes and exhausting all administrative remedies. For the Tax Year 2014, Petitioners filed suit on December 18, 2015, in Providence County Superior Court and did the same for the Tax Year 2015 on February 18, 2016. Following a period of discovery, on November 29, 2017, Petitioners filed a Motion for Partial Summary Judgment. In response, Respondents filed an Objection to Petitioners’ Motion for Partial Summary Judgment and a Cross-Motion for Partial Summary 3 Judgment. On January 25, 2018, the Court heard and denied all motions. Subsequently, the parties agreed to submit the matter to the Court for a decision on the merits based upon stipulated facts, written submissions, affidavits and depositions. A summary of the evidence presented to the Court follows. II Presentation of Witnesses The Court has reviewed the affidavits and associated exhibits of Pastor and Janesse Muscatelli, the Acting Tax Assessor for the City. Additionally, the Court reviewed the depositions of David Quinn; Elyse Pare, the former deputy assessor for the City between December 2011 to January of 2015; and Stephen Ferreira of Vision. The Court will briefly summarize the salient points of their testimony. A Walter Pastor Since 2011, Pastor has been responsible for managing the business aspects of the Property. In 2013, Pastor was promoted to manager of the Property and as such, was informed of the assessed values, notices of assessment and property taxes for each unit of the Property. After reviewing the proposed assessed values in the 2012 Revaluation, which he believed would be used for the Tax Year 2014 and the Tax Year 2015, Pastor requested, on behalf of the Property’s taxpayer-owners, an informal hearing with Vision to review and challenge the new assessments as excessive. At the hearing, Pastor provided evidence to Vision and the City that the proposed assessed values in the 2012 Revaluation were excessive. The hearing was to no avail, and the 2012 Revaluation assessments were reconfirmed in the June 14, 2013 Notice. Pastor further stated that he received no notice of the 2013 Revaluation until the bills for the Tax Year 2014 were sent to the unit owners. 4 B David Quinn Quinn served as the Tax Assessor of the City from 2012 to 2017. Quinn testified that as part of the 2012 Revaluation, the City engaged Vision and confirmed that The 903 was revalued as part of the 2012 Revaluation. (Quinn Dep. 7:4-12, Apr. 11, 2017.) He testified generally as to how Vision conducted a statistical update or full revaluation. Id. at 7:18-8:8. Regarding Vision’s specific approach used to determine the values for the Property for the 2012 Revaluation, Quinn testified that the Property was atypical; because it was under the TSA, it was not “analyzed for straight market value.” Id. at 25:13-15. While Quinn repeated that Vision considered the TSA, he had no idea how Vision used the TSA to affect value. Id. at 33:20-34:6. He simply relied on his twenty-five years’ experience with Vision that they would do “correct work.” Id. at 35:24-36:5. Quinn also testified that in the spring of 2014 following the expiration of the TSA, the Assessor’s office reassessed or revalued The 903’s residential units and applied the new assessments for the Tax Year 2014 and the Tax Year 2015. Id. at 40:21-41:6. Quinn, Elyse Pare and two other appraisers, Michael Murphy and Barry Sullivan, prepared the new assessments. Id. at 41:7-16. As part of the analysis, Quinn was responsible for signing off on the final values. Id. at 43:3-5. In making the new assessments after the expiration of the TSA, the Assessor’s office relied mostly on a sales analysis but also used the other accepted methods of appraisal, namely, the income and cost approaches. Id. at 43:12-44:7. Quinn acknowledged that, unlike the 2012 Revaluation, notices were not sent to the Petitioners to inform them of the 2013 Revaluation other than the tax bills. Id. at 49:16-50:1. Quinn concluded his testimony by saying it was an established practice that once a tax 5 stabilization agreement expires, the Assessor’s office would revalue and reassess those properties for the remaining tax years in that cycle. Id. at 51:8-12. C Stephen Ferreira Stephen Ferreira (Ferreira) of Vision and the lead person on the 2012 Revaluation of the Property, identified the revaluation manual used by the Assessor that contained a summary of the work that was performed on the Property. (Ferreira Dep. 6:15-23, Apr. 12, 2017.) He then discussed in general terms the revaluation process and Vision’s role, including importing data from the revaluation firm previously employed by the City. Id. at 8:6-17; 10:13-24. Ferreira was questioned extensively about the property tax card of one of the units in The 903, namely, Unit 126. Id. at 11:1-12:24. He stated that calculation of value starts with a base rate for condominiums which is adjusted for the actual complex. Id. at 13:4-10. While his testimony was somewhat convoluted, it appears that in the revaluation manual there was a Complex Codes Report, which for The 903 had a complex adjustment of .46, and that adjustment was used in arriving at the base rate of 145.29. Id. at 19:18-20:15. The Court infers the “base rate” to be a per square foot value because it is multiplied by the effective area of the unit, which for Unit 126 was 1203 square feet. An additional adjustment was made for bathrooms. A depreciation factor of eight percent was applied which resulted in an assessed value of $166,900. Id. at 13:1-15:20. Ferreira was next questioned as to what role the TSA played in the valuation. Id. at 18:22-19:5. He then testified that the complex code was developed through discussions with the Assessor who instructed Vision to value the units as apartments not condominiums. Id. at 20:1924. Ferreira testified that discussions with the Assessor were not thorough conversations because 6 the taxes for the Property had already been determined, and the designation of .46 was a judgment call. Id. at 21:13-22:11. Ferreira testified that the existence of the TSA would not lead to a decrease in the value of the Property, but rather considering it as an apartment complex as opposed to individual marketable condominium units would result in a lower value. Id. at 22:1923:12. While normally an income approach would be involved in valuing an apartment complex, with no income and expense data The 903 was valued using a cost approach modified by the complex code. Id. at 24:12-18. If it were valued as a condominium, a market approach would have been employed. Id. at 30:8-23. Finally, Ferreira testified that between the 2012 and 2015 Revaluations, Vision did not work with the City on developing interim values for the Property. Id. at 27:20-23. D Elyse Pare From December 2011 to January of 2015, Elyse Pare (Pare) worked for the City as a deputy assessor. During her time as a deputy assessor for the City, Pare worked on the 2012 Revaluation. (Pare Dep. 7:5-8, Apr. 14, 2017.) She testified that she also participated in the 2013 Revaluation. Id. at 10:3-14. She could not confirm whether the City conducted any other interim revaluations except the 2013 Revaluation of The 903. Id. at 11:19-22. However, she stated that the City does reassess between revaluations for “any property that did undergo a classification change, building permit, anything like that.” Id. at 12:2-7. However, she was unaware of any manual or written guidelines for when to do a reassessment between revaluations. Id. at 12:22-13:8. Pare testified the 2013 Revaluation was led by the Assessor, and she participated as his deputy, aided by two appraisers. They conducted cost and sales analyses. Id. at 18:5-21. Pare testified that the Property owners never received revaluation notices similar 7 to the notices Vision sent out in 2016. The owners were notified of the 2013 Property Revaluation when they received their tax bills. Id. at 17:20-18:1. E Janesse Muscatelli Janesse Muscatelli (Muscatelli) was the Acting Tax Assessor for the City in October 2017. Muscatelli provided the Court with a copy of the City’s certified tax rolls and a copy of a tax roll specific to the Property, which includes assessed values for each unit on the Property for the 2013, 2014 and 2015 tax years. It is to be noted that the certified tax roll for the Tax Year 2013 (the last year of the TSA) assigned values per unit and not as a single apartment building. (Muscatelli Aff. Exs. A-F.) III Standard of Review In a non-jury trial, the standard of review is governed by Rule 52(a) of the Superior Court Rules of Civil Procedure, which provides that “[i]n all actions tried upon the facts without a jury . . . the court shall find the facts specially and state separately its conclusions of law thereon.” Super. R. Civ. P. 52(a). In a non-jury trial, “‘[t]he trial justice sits as a trier of fact as well as of law.”’ Parella v. Montalbano, 899 A.2d 1226, 1239 (R.I. 2006) (quoting Hood v. Hawkins, 478 A.2d 181, 184 (R.I. 1984)). “‘Consequently, he [or she] weighs and considers the evidence, passes upon the credibility of the witnesses, and draws proper inferences.”’ Id. (quoting Hood, 478 A.2d at 184). It is well established that “assigning credibility to witnesses presented at trial is the function of the trial justice, who has the advantage of seeing and hearing the witnesses testify in court.” McBurney v. Roszkowski, 875 A.2d 428, 436 (R.I. 2005). The trial justice may also “‘draw inferences from the testimony of witnesses, and such inferences, if reasonable, are 8 entitled on review to the same weight as other factual determinations.”’ DeSimone Elec., Inc. v. CMG, Inc., 901 A.2d 613, 621 (R.I. 2006) (quoting Walton v. Baird, 433 A.2d 963, 964 (R.I. 1981)). “When rendering a decision in a non-jury trial, a trial justice ‘need not engage in extensive analysis and discussion of all the evidence. Even brief findings and conclusions are sufficient if they address and resolve the controlling and essential factual issues in the case.’” Parella, 899 A.2d at 1239 (quoting Donnelly v. Cowsill, 716 A.2d 742, 747 (R.I. 1998)). The trial justice need not “‘categorically accept or reject each piece of evidence in his [or her] decision for [the Supreme] Court to uphold it because implicit in the trial justices [sic] decision are sufficient findings of fact to support his [or her] rulings.’” Notarantonio v. Notarantonio, 941 A.2d 138, 147 (R.I. 2008) (quoting Narragansett Elec. Co. v. Carbone, 898 A.2d 87, 102 (R.I. 2006)). IV Analysis A Property Assessment Generally All taxable real property in any city or town is to be assessed at its full, fair cash value or a uniform percentage thereof. Sec. 44-5-12. The General Assembly has mandated that all real property be revalued every nine (9) years of the date of the prior revaluation and shall conduct an update of real property every three (3) years from the date of the last revaluation. Sec. 44-511.5(4). There is no obligation to revalue or update certain tax-exempt property or property which makes payments in lieu of taxes. Sec. 44-5-11.6(e). 9 The General Assembly has empowered certain towns to revalue in non-revaluation or update years and even in the middle of a year under very specific circumstances. See §§ 44-5-13.2 to 13.39. In Picerne v. DiPrete, the Supreme Court was confronted with the issue of “whether defendants’ revaluation of plaintiffs’ properties was intentionally selective and made in a discriminatory manner.” 428 A.2d 1074, 1076-77 (R.I. 1981). In examining this issue, the Court reviewed the attention other jurisdictions gave to this issue and found that “selective assessments are generally held unlawful as discriminatory against the complaining taxpayer.” Id. at 1077. B The Parties’ Arguments Petitioners argue that the City unlawfully increased the assessed values of their units by approximately thirty percent in the Tax Year 2014 and the Tax Year 2015. They contend that 2013 Revaluation conducted by the City was an illegal interim revaluation and assessment of the Property for the Tax Year 2014 and the Tax Year 2015. Petitioners assert that there is no statutory provision in Rhode Island provided by the General Assembly that has delegated to cities and towns the authority to conduct a selective, interim revaluation of property between citywide revaluations. In rebutting Respondents’ principal argument, Petitioners argue that even if the City had the inherent authority to conduct selective, interim revaluations where there are changes in the condition of the property, the City’s interim revaluation of The 903 is not based on changes in the physical condition of the Property, but rather the expiration of the TSA. Finally, Petitioners admit that had the City elected to omit the Property from the 2012 Revaluation, it would have been expressly authorized by § 44-5-23 to revalue the Property following the expiration of the TSA for the Tax Year 2014 and the Tax Year 2015. 10 In response, Respondents argue that the Assessor properly assessed the Property as of December 31, 2013, after the TSA, because the expiration of the TSA is a change in property conditions which caused an increase in value. Furthermore, the Respondents argue the Assessor provided appropriate statutory notice and assessed values to the taxpayer-owners that the City would be assessing The 903 as of December 31, 2013 and December 31, 2014. C The Court’s Findings There is no dispute that once a tax stabilization agreement expires, the property which was the subject of the agreement is to be assessed as all other real estate in the municipality. The City had the right to tax The 903 at its full and fair cash value for the Tax Year 2014 and the Tax Year 2015. The issue for this Court is whether the City could use the value determined in the 2013 Revaluation after having already assigned it a value in the 2012 Revaluation. Although Quinn and Pare testified that properties were revalued in non-revaluation years if a TSA expired or a significant physical improvement was made to a parcel, the Court found no evidence in the record submitted that any other properties were revalued as of December 31, 2013. There is no question that the 2013 Revaluation was selective, but this Court’s inquiry cannot stop with that finding. The Court must determine if the 2013 Revaluation was discriminatory or arbitrary. The City has contended that there was a change in condition of the Property once the TSA expired. It asserts that the existence of the TSA would deflate its value. Ferreira did not concur with that assertion. See Ferreira Dep. 22:19-23:12. The Court cannot accept the City’s contention. If the TSA influences value at all, and the Court is not sure that it did in its last year, 11 it would be to increase value because the taxes are less than similar properties without a TSA. Generally, lower taxes means higher value. Furthermore, the City’s effort to equate the expiration of the TSA with making a significant improvement to property is unavailing. Nothing in chapter 5 of title 44 addresses the concept of change in condition. New construction, whether an addition or a new building, is the creation of new property and it can be valued and taxed even if created between revaluations because all real property is “liable to taxation unless otherwise specially provided.” Sec. 44-3-1. The expiration of a tax stabilization agreement means the property owner loses a tax benefit but it in no way creates new property or changes the physical characteristics of the property. The 903 was physically the same in 2013 as it was in 2012. Quinn and Ferreira both testified that when under the TSA, The 903 was assessed as an apartment complex but once the TSA expired, it was to be assessed as condominiums. The evidence does not support this contention. First, in the tax roll for the Tax Year 2013, values were placed on individual units and not on the Property as a whole. Moreover, Ferreira testified meticulously how Unit 126 was valued, and he repeatedly refers to condominiums. Here are some examples: “It goes out and gets the base rate for condominium.” Ferreira Dep. at 13:4-5. “It starts with the basic base rate for style 55, which is condominium. Then there’s a size adjustment for condos . . . to the condo initial base rate . . .” Id. at 13:20-23. Ferreira then defines a complex code adjustment of .46, which he said was an adjustment to reflect the TSA, but he could not articulate in any way how that figure was arrived at other than to say that it was “a judgment call.” Id. at 22:2-11. When asked what materials were used to make the call, he responded “Nothing specific except our discussions with the assessor.” Id. 12 at 22:12-14. Page nine in the Complex Codes Report has 61 different properties with adjustments ranging from .24 to 1.35, although there is only one property above .95. Id. at Ex. 5. No explanation for this range has been provided. Moreover, Ferreira testified that in appraising an apartment complex, an income approach is used and that was not done here. Id. at 28:18-24. To repeat, while the City argues that because The 903 was valued as an apartment complex in the 2012 Revaluation, it needed to be revalued in the 2013 Revaluation as condominiums, the Court finds no convincing evidence that supports that position. Pare and Quinn both testified generally as to how the Property was valued in the 2013 Revaluation. The work was all done in the Assessor’s office without any input from Vision. A sales approach was used supplemented by any lease information. However, Petitioners were deprived of the process that occurs during a revaluation or update. The statute contemplates the use of “contracted property revaluation companies.” See § 44-5-11.5(3)(vi); see also § 44-511.6(b)(4) (requiring “a hearing and/or appeal process”). Petitioners have been deprived of the benefit of both. Vision was not involved in the 2013 Revaluation, and Petitioners received no notice of the results of the 2013 Revaluation until they received their tax bills. While they did have the opportunity to appear before the Tax Assessor and Board of Tax Assessment Review, that occurred after, not before, the bills were sent out. IV Conclusion The Court finds that the City had a right to use a value for the Property other than the value in the TSA once the TSA expired. The City did revalue the Property in the 2012 Revaluation, and it should have used that value for the Tax Year 2014 and the Tax Year 2015. Instead, it selectively revalued The 903 for those years by conducting the 2013 Revaluation. That 13 revaluation was arbitrary in that the City justified its action by contending there was a change of condition when there was not one, and even if there was, there is no statutory basis to support revaluation for that reason. The 2013 Revaluation was discriminatory because all the procedural and substantive benefits of a revaluation afforded to all the City’s taxpayers were not afforded the Petitioners in the 2013 Revaluation. As such, the Court declares the 2013 Revaluation to be illegal and invalid, and the Petitioners’ tax bills for the Tax Year 2014 and the Tax Year 2015 shall be revised based on the 2012 Revaluation. Counsel shall confer and present the appropriate judgment. 14 RHODE ISLAND SUPERIOR COURT Decision Addendum Sheet TITLE OF CASE: Athena Providence Place, et al. v. David Quinn, in his capacity as Tax Assessor of the City of Providence, et al. CASE NOS: PC-2015-5520 PC-2016-0729 (consolidated cases) COURT: Providence Superior Court DATE DECISION FILED: April 25, 2019 JUSTICE/MAGISTRATE: Licht, J. ATTORNEYS: For Plaintiff: For Defendant: Michael T. Eskey, Esq. Lisa Fries, Esq. Jillian H. Barker, Esq. Samuel A. Budway, Esq. 15

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