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Williams v. Opportunity Homes Limited Partnership

Supreme Court of Louisiana

March 13, 2018

ERROL G. WILLIAMS, ASSESSOR, PARISH OF ORLEANS
v.
OPPORTUNITY HOMES LIMITED PARTNERSHIP AND LOUISIANA TAX COMMISSION

         ON WRIT OF CERTIORARI TO THE COURT OF APPEAL, FOURTH CIRCUIT, PARISH OF ORLEANS

          HUGHES, J.

         At issue in these consolidated cases is the correctness of administrative decisions issued by the Louisiana Tax Commission ("Commission") on review of the valuations, for the 2014 and 2015 tax years, by the Orleans Parish Tax Assessor ("Assessor") of a low-income housing development, owned by Opportunity Homes Limited Partnership ("Opportunity Homes"), for purposes of assessment of ad valorem taxes. The Commission ruled in favor of Opportunity Homes for both tax years. The administrative decisions were upheld by the district court but reversed by the appellate court. For the reasons that follow, we reverse the appellate court and reinstate the assessment values as determined by the Commission.

         FACTS AND PROCEDURAL HISTORY

         The factual and procedural history of this case was concisely set forth by the appellate court as follows:

Opportunity Homes describes itself as a "scattered-site, low income affordable housing development." It consists of thirty-two (32) single- and double-unit residential buildings. The separate properties are connected by way of a Tax Credit Regulatory Agreement ("TCRA"). Opportunity Homes notes the TCRA prohibits separation and sale of the various properties, and restricts the chargeable rents to "no more than sixty percent (60%) of the Area Median Income ("AMI")" for an extended period of time, but the rates are even lower for some buildings.
Pursuant to the powers and authority delegated to him by La. R.S. 47:1903, La. R.S. 47:1957, and La. R.S. 47:2323, Assessor Williams determined the fair market value ("FMV") of Opportunity Homes' scattered-site properties using what is known as the "market approach." In using this particular approach, Assessor Williams determined the FMV of Opportunity Homes' properties to be $4, 200, 900 and $4, 083, 610 for tax years 2014 and 2015, respectively.[1]
Pursuant to its authority under La. Const. Art. VII, § 18, the Commission reviewed the "correctness" of Assessor Williams' assessment. At a January 13, 2015 hearing, counsel for Opportunity Homes noted that in 2013, the same properties were valued at $1, 525, 000, and assessed accordingly. The Commission relied on assessments by Randy Harrington, its own staff appraiser, who used what is known as the "income approach" and reached FMVs of $1, 525, 000 for both tax years 2014 and 2015, which assessments specifically excluded the value of "Low Income Housing Tax Credits" ("LIHTCs") received by the taxpayer for encumbering the properties with below-market-value rents. Counsel for Opportunity Homes noted that pursuant to adopted and promulgated regulations, the income approach is the "recommended" approach for determining the FMV of "affordable rental housing." Based on the foregoing, the Commission moved to accept the staff recommendations as to each tax year.
As a result of the Commission's actions, on September 2, 2015, Assessor Williams commenced suit in the district court pursuant to La. R.S. 47:1998, La. R.S. 47:1989 and La. R.S. 49:964. The district court affirmed the Commission's decision, finding that the Commission's decision "was not in violation of any constitutional or statutory provisions, was not in excess of its statutory authority, was not made upon unlawful procedure, or affected by other error of law, was not arbitrary or capricious or characterized by abuse of discretion or clearly unwarranted exercise of discretion." The district court further noted the decision "was clearly supported by the testimony and preponderance of the evidence before it, where [the Commission] had the opportunity to judge the credibility of witnesses by first-hand observation."

Williams v. Opportunity Homes Limited Partnership, 16-1185, pp. 1-3 (La.App. 4 Cir. 5/10/17), 220 So.3d 188, 189-90. Upon review, the appellate court ruled that the Commission's decisions were "in violation of statutory provisions, in excess of its authority, . . . based upon unlawful procedures, " and "legally incorrect." Id., 16-1185 at p. 4, 220 So.3d at 191. Accordingly, the appellate court reversed and reinstated the Assessor's fair market values for the 2014 and 2015 tax years. Id.

         Both Opportunity Homes and the Commission sought review in this court, and we granted the writ applications. Williams v. Opportunity Homes Limited Partnership, 17-0955, 17-0957 (La. 10/27/17), 228 So.3d 1228, 228 So.3d 1231.

         Opportunity Homes urges this court to reverse, contending the appellate court decision: is in conflict with other jurisprudence, harms the administrative authority of the Commission; negatively impacts statewide uniformity for ad valorem property assessment and taxation; misinterprets jurisprudence and law (including the Louisiana Administrative Procedure Act ("APA"), La. R.S. 49:950 et seq., relative to review of administrative agency decisions); and, alternatively, should have remanded the matter to the Commission to determine whether the market/sales comparison approach could have been applied to value the subject property so as to ensure statewide uniformity. The Commission additionally asserts that the appellate court erred in reversing the decisions of the Commission and the district court since there was "no evidence to reinstate prior assessed values of the Orleans Parish Assessor."

         LAW AND ANALYSIS

         The essence of the dispute between the Assessor and Opportunity Homes is whether the method of valuing Opportunity Homes' low-income housing development for purposes of ad valorem taxation should be via the "market approach, " as asserted by the Assessor, or via the "income approach, " as asserted by Opportunity Homes.

         As stated in La. Const. Art. VII, § 18(A), "[p]roperty subject to ad valorem taxation shall be listed on the assessment rolls at its assessed valuation, which . . . shall be a percentage of its fair market value. The percentage of fair market value shall be uniform throughout the state upon the same class of property."[2] Each assessor is authorized by La. Const. Art. VII, § 18(D), to "determine the fair market value of all property subject to taxation within his respective parish or district except public service properties, which shall be valued at fair market value by the Louisiana Tax Commission or its successor."

         The fair market value shall be determined in accordance with criteria established by law, which must be uniformly applied throughout the state. La. Const. Art. VII, § 18(D); La. R.S. 47:2323(A). Fair market value is defined by La. R.S. 47:2321 as "the price for property which would be agreed upon between a willing and informed buyer and a willing and informed seller under usual and ordinary circumstances; it shall be the highest price estimated in terms of money which property will bring if exposed for sale on the open market with reasonable time allowed to find a purchaser who is buying with knowledge of all the uses and purposes to which the property is best adapted and for which it can be legally used."

         In furtherance of maintaining the uniformity required by La. Const. Art. VII, § 18(D), La. R.S. 47:2323(A) provides that "[u]niform guidelines, procedures and rules and regulations as are necessary to implement said criteria shall be adopted by the Louisiana Tax Commission only after public hearings held pursuant to the Administrative Procedure Act." Furthermore, each assessor is required by Section 2323(B) to "follow the uniform guidelines, procedures, and rules and regulations in determining the fair market value of all property subject to taxation within his respective parish or district, " and "[a]ny manual or manuals used by an assessor shall be subject to approval by the Louisiana Tax Commission or its successor agency."

         Three approaches for determining fair market value are set forth in Section 2323(C), as follows: "The fair market value of real and personal property shall be determined by the following generally recognized appraisal procedures: the market approach, the cost approach, and/or the income approach." In utilizing the market approach, an assessor is required to "use an appraisal technique in which the market value estimate is predicated upon prices paid in actual market transactions and current listings." La. R.S. 47:2323(C)(1). In utilizing the cost approach, an assessor is required to "use a method in which the value of a property is derived by estimating the replacement or reproduction cost of the improvements; deducting therefrom the estimated depreciation; and then adding the market value of the land, if any." La. R.S. 47:2323(C)(2). In utilizing the income approach, an assessor is required to "use an appraisal technique in which the anticipated net income is capitalized to indicate the capital amount of the investment which produces the net income." La. R.S. 47:2323(C)(3).

         Revised Statute 47:1837(D) requires: "In order to promote compliance with the requirements of the constitution and laws of the state, the tax commission shall issue and, from time to time, may amend or revise rules and regulations containing minimum standards of assessment and appraisal performance . . . ."[3] In compliance with that responsibility, the Commission issued the ...


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