IPT ANNUAL CONFERENCE
7/2/2014
A WINNING GAME PLAN
FOR INDUSTRIAL
PROPERTY TAX APPEALS
Wade E. Norwood, Esq.
Tim M. Landolt, ASA, MBA
Principal
L a w Offi c e s o f Wa d e E . N o r w o o d
P a s a d e n a , C a l i fo r n i a
w a d e @ ca l p r o p e r tyta x . c o m
President & CEO
Vi s ta Va l u a ti o n s , L L C
S a c r a m e n to , C a l i fo r n i a
ti m . l a n d o l t@ vi s ta va l . c o m
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LEARNING OBJECTIVES
1. Evaluate: the merits of an appeal
2. Optimize: your position to maximize success
3. Define: the valuation scope of work
4. Strategize: negotiation and litigation plan
IPT 2014 ANNUAL CONFERENCE
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A WINNING GAME PLAN
“How you run the race your planning, preparation,
practice, and performance
- counts for everything.
Winning or losing is a byproduct, and aftereffect, of
that effort.”
- John Wooden
Source: www.sportsspectrum.com
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GAME PLAN OVERVIEW
The “Pre-Season” – Evaluation Time
Pre-Game – Settle/Drop/Hearing
Game Time! – Hearing Strategy
Post-Game Breakdown – What’s Next
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THE PRE-SEASON: EVALUATION TIME
Preliminary Analysis – Do we have a problem?
The Draft – Who can help us?
Advanced Analysis – How big is the problem?
Cost Benefit Analysis – Is it economic to solve?
Decision Time – Go/No-Go
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THE PRE-SEASON: PRELIM ANALYSIS
Determine your timeline
Test the property value
Preliminary Assessment Testing - “PAT”
Phased Valuation Analysis & Scope of Work
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THE PRE-SEASON: DRAFT DAY
Choosing the right team
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THE PRE-SEASON: ADVANCED ANALYSIS
Advanced Assessment Testing
Focus on data gathered during testing phase
Obtain preliminary range of value/settlement
Evaluate three traditional approaches to value
Testing & Quantification of Obsolescence
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THE PRE-SEASON: ADVANCED ANALYSIS
Trended Investment Method & Marshall
Specific Testing Issues
Review and test the approaches to meet the
burden of proof
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THE PRE-SEASON: COST/BENEFIT ANALYSIS
How much will the case cost to litigate?
What are the chances of success?
Go/No-Go Decision
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GAME PLAN OVERVIEW
The “Pre-Season” – Evaluation Time
Pre-Game – Settle/Drop/Hearing
Game Time! – Hearing Strategy
Post-Game Breakdown - What’s Next
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PRE-GAME: NEGOTIATION
Preliminary Negotiations
Getting to know the Assessor
Initial presentation
 Company
 Facility
 Industry
 Issues
Follow-up
Negotiation strategies
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PRE-GAME: NEGOTIATION
The Game Plan
Analyze the Assessor’s
valuation
Find the flaws
Tailor your presentation
to your strategy
Review the prior Board
decisions & Case law
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PRE-GAME CASE STUDY
Case Study #1:
Integrated Warehouse/Distribution Center
Prior appeals unsuccessful
Case based on sales comparison approach of
large industrial warehouses
Assessor persuaded the board that the facility in
question was “special use” and won year after
year
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PRE-GAME CASE STUDY
Highlight the Assessor’s Position and Use It
New Appraisal based on “special use” argument
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PRE-GAME CASE STUDY
Case Study #1:
Integrated Warehouse/Distribution Center
Assessment Based on Historic Costs & MVS
High Historic Costs Due to Past Expansion
Continuous Upgrades & Equipment Acquisitions
Assessor’s Valuation Assumptions
Special Design Features Add Significant Value
Considers Property “state-of-the-art”
Special Purpose/Limited Use
No Comparable Sales or Income Data Exists
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PRE-GAME CASE STUDY
Case Study #1:
Integrated Warehouse Distribution Facility
Comparable Sales of similar-use facilities on
National basis
Facility not “state-of-the-art”, Design Obsolete
Resulting Highest and Best Use
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PRE-GAME CASE STUDY
Subject Property
Modern Replacement
750,000 SF
450,000 SF
VS.
800 Employees
75 lines/min
Reproduce > Replace
On Unit Basis
150 Employees
125 lines/min
Lower Operating Cost
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PRE-GAME CASE STUDY
Key Points of Analysis
HBU – General Market vs. Limited Use
Functional Obsolescence
 Excess Capital Costs
 Excess Operating Costs
Comparables Sales & Leases – National Basis
Results
Case Settled on Favorable Terms
Adjustments Carried-over for Subsequent
years
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GAME TIME!
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GAME TIME!: CASE STUDY
Case Study #2:
Food Processing Plant
Assessor failed to recognize economic
obsolescence
Nearly all industrial facilities decreased in
market value
Why is subject different?
Full production doesn’t mean no EO
Seek admissions on cross
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GAME TIME!: CASE STUDY
Case Study #2:
Food Processing Plant
or
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GAME TIME!: CASE STUDY
Case Study #3:
Food Processing Plant
Facility Converted from Multiple Products
to Single-Product
Plant reconfiguration incurred significant capital
costs
New Capital Costs resulted in dramatic increase
of assessed value
Large sections of plant abandoned or not in use
Reconfigured plant still high-cost producer
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GAME TIME!: CASE STUDY
Case Study #3:
Food Processing Plant
Assessor’s fee-appraiser unfamiliar with
specific industry segment
Both Appraisers Completed all Three
Approaches to Value
Difference in Methods & Execution Drives
Decision
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GAME TIME!
Case Study #3:
Food Processing Plant
Case Highlights
A Tale of Two Appraisals
Cost Approach
Sales Comparison Approach
Income Approach
What Board had to Say
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7/2/2014
GAME PLAN OVERVIEW
The “Pre-Season” – Evaluation Time
Pre-Game – Settle/Drop/Hearing
Game Time! – Hearing Strategy
Post-Game Breakdown - What’s Next
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POST-GAME BREAKDOWN
Evaluating the Decision
Is further appeal warranted?
What are your options?
How about next year?
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Questions?
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