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2019-05-13 Special MeetingKODIAK ISLAND BOROUGH Citizens Board of Equalization Special Meeting May 13, 2019 A meeting of the Kodiak Island Borough Citizens Board of Equalization was held on May 13, 2019, in the Borough Chambers of the Kodiak Island Borough Building, 710 Mill Bay Road. The meeting was called to order at 5:30 p.m. Present were Mark Anderson, Bryan Ferris, Ed Mahoney and John Parker. Staff members present were Borough Lead Property Appraiser and Acting Assessor Debra Rippey, contract representative Bill Roberts, Borough Clerk Tara Welinsky, and Deputy Clerk Alise Rice and Borough Attorney Scott Brandt -Erichsen. OATH administrated to Borough Lead Property Appraiser and Acting Assessor Debra Rippey. ANDERSON moved to excuse Board members Laird and Morton who were absent due to personal leave. VOICE VOTE ON MOTION CARRIED UNANIMOUSLY. NOMINATIONS A. CHAIRPERSON OF THE BOARD MAHONEY moved to nominate Anderson as chairperson. VOICE VOTE ON MOTION CARRIED UNANIMOUSLY. B. VICE -CHAIRPERSON OF THE BOARD MAHONEY moved to nominate Parker as vice -chairperson. VOICE VOTE ON MOTION CARRIED UNANIMOUSLY. APPROVAL OF AGENDA PARKER moved to approve the agenda. VOICE VOTE ON MOTION CARRIED UNANIMOUSLY. APPROVAL OF MINUTES 1. Special meeting minutes of May 6, 2016. MAHONEY moved to approve the minutes as submitted. VOICE VOTE ON MOTION CARRIED UNANIMOUSLY. ITEMS OF BUSINESS Clerk read the following aloud: The granting of any appeal or part thereof shall require the concurring vote of at least three board members. Any appeal or part thereof which is not granted by the board shall be considered denied. • The burden of proof rests with the appellant, who must convince the board by clear and convincing evidence that the assessment was unequal, excessive, improper, or undervalued based on the facts stated in a written appeal or proven at the appeal hearing in accordance with the Borough ordinances. Kodiak Island Borough Board of Equalization Minutes May 14, 2015 Page 1 • If the valuation is found to be too low, the board may raise the assessment. • Evidence shall only be presented by the appellant and the assessor or their authorized representative. The board shall not be restricted by the formal rules of evidence; however, the chairperson may exclude evidence irrelevant to the issues appealed. • The board of equalization may, in its discretion, decline to accept documents offered at the hearing which should have been provided by April 16'h, 2019. In exercising this discretion, the board shall consider the relevance and probative value of the documents which are under consideration, accepting those documents which in all fairness are necessary to a fair resolution of the appeal. Prior to the board meeting, the appellant and assessor may agree to an extension of time for the production of evidence. Ferris disclosed that he was an appellant before he withdrew his appeal. He felt that he could treat both parties fairly and approach this case without any preconceptions or bias. Chair Anderson asked if anyone on the Board of Equalization needed to disclose any ex parte communications. Parker disclosed that he had met with the Borough Clerk and Borough Attorney regarding procedural matters. Chair Anderson asked if anyone needed to disclose any financial interests. None were declared. Chair Anderson stated that Trident has asked to hear all cases as one. PARKER moved to hear testimony of the entire spectrum of six case but decide and vote separately on each appeal. CLERK'S Note: Non -objection to the request to combine the hearings. VOICE VOTE ON MOTION CARRIED UNANIMOUSLY Chair Anderson stated that Trident asked to extend the time allowed to present evidence and argument. PARKER moved to extend the time limit from five minutes to 45 minutes to present evidence and argument for all parcels in mass. ROLL CALL VOTE ON MOTION CARRIED UNANIMOUSLY: Anderson, Ferris, Mahoney, and Parker. CLERKS's Note: Clerk suggested to Chair Anderson to ask the Appellant (Scott Broadwell attorney for Trident Seafood Corporation) to clarify the record as to confidential information and whether that request has been withdrawn. The Appellant stated that they no longer claim privilege. APPELLANT'S PRESENTATION OF EVIDENCE AND ORAL ARGUMENT OATH administrated to Appellant, Scott Broadwell attorney for Trident Seafood Corporation. Mr. Broadwell stated the code allows, with discretion, to accept additional documents. Mr. Per E. Bjorn -Roti, appraiser for Trident, has handouts he would like to distribute to the board. Kodiak Island Borough Board of Equalization Minutes May 14, 2015 Page 2 Mr. Broadwell stated according to Alaska Law and as the Alaska Supreme Court has noted, an appraiser must evaluate the whole range of factors that influence value in a property when appraising and assessing. It is Trident's position that this did not occur and as a result the assessment is both excessive and improper. Mr. Broadwell turned it over to Mr. Bjorn -Roti. OATH administrated to Appellant, Appraiser, Mr. Per E. Bjorn -Roti, MAI Mr. Bjorn -Roti provided oral testimony for his report. Mr. Bjorn -Roti stated that the assessor has wide latitude to arrive at full and true market value. Full and true market value is premised on market information. Mr. Bjorn -Roti stated that the cost approach method cannot be performed independently of market research and market analysis. He stated the assessor did not have access to information due to non- disclosure regulations in Alaska. Mr. Bjorn -Roti had access to this information and believed the current assessment was excessive. Mr. Bjorn -Roti read from his report regarding step 6 of the cost approach method which states that the assessor will estimate the amount of depreciation in improvements and if necessary allocate it among the three major categories: physical deterioration, functional obsolescence and external obsolescence. Mr. Bjorn -Roti defined external obsolescence as the loss in value caused by factors outside a property. Mr. Bjorn-Roli stated that KIB failed to fully perform the cost approach. He stated that KIB failed to complete step 6 of the cost approach and account for external depreciation. Mr. Bjorn -Roti presented testimony urging the BOE to include a higher rate of external depreciation resulting in a lower assessed value. Testimony included three methods used to measure external obsolescence or external depreciation: utilization analysis, a sales comparison approach, and market feasibility and income approach. Mr. Bjorn -Roti noted other issues. He noted that the assessment has doubled on the employee housing since the sale in 2014 in a relatively stable market. He stated that not all capital expenditures that Trident has made are value contributing. He stated that the assessor valued the employee housing as apartments; the cost category should be a rooming house. He stated that occupancies were misidentified with regards to the restaurant. He stated that if the kitchens are not used, this is functional obsolescence. Mr. Bjorn -Roti stated that the assessor used the cost year 1964 to assess the SOK building (Liberty ship); he stated it should be analyzed at 1945. He also stated that it was assessed as a normal building, which it is not. It is a ship and less suitable for a single use. KIB raised a concern that Mr. Bjorn-Roli's appraisal valued the property as an integrated highest and best use. Mr. Bjorn -Roti did this based on how the property would sell. They would sell together. Mr. Bjorn -Roti made the statement that by operating the property as integrated highest and best use, the market participants are curing the functional and external depreciation. Mr. Bjorn -Roti appraised the properties as noncontiguous assets. He stated that appraisals of individual parcels resulted in higher functional depreciation and higher external depreciation. Modifications to the appraisal were handed out Kodiak Island Borough Board of Equalization Minutes May 14, 2015 Page 3 CLERK's note: The Assessor stated a non -objection to the additional exhibit and the Board authorized the inclusion of the additional exhibit in the record. Mr. Bjorn -Roti presented a new appraisal analysis for valuation for standalone assets. Mr.Bjorn-Roti argued that the value of the property considered together as a going concern should be considered, and that the value would actually be lower if they were separate. ASSESSOR'S PRESENTATION OF EVIDENCE AND ORAL ARGUMENT Borough Lead Property Appraiser and Acting Assessor Debra Rippey stated that KIB was accused of using an improper method of assessment for the properties because they did not consider the six noncontiguous properties as a "going concern". She stated that neither KIB, nor any other assessing department in Alaska, is obligated to assess noncontiguous properties as a going concern for an integrated economic use. Rippey noted that Trident's properties are of different types and uses. The highest and best use is not necessary tied to the going concern. The parcels are separate with separate uses and can be sold on the market separately. Previous Assessor, Bill Roberts, contracted by KIB presented information germane to the appeals. OATH administrated to Previous Assessor, Bill Roberts. Roberts stated that fair and equitable is the mantra of the assessing office; the tax burden is spread evenly and fairly to all tax payers. Robert's stated that there are no statutes in KIB or the State of Alaska that states that assessing must consider property owned by the same entity as a single entity and appraise it as such and parse out the value to each individual piece. He stated that assessing property of people with multiple parcels of property as if they were a combined enterprise will destroy "fair and equitable". Roberts stated that cost approach was not improper; physical, functional, and external depreciation were considered. He maintained that cost approach is the best approach to use for special use properties. A market approach was not used. Roberts stated that Trident's appraisal subtracted 5,000 square feet on the residential properties because the kitchens were not being used. He questioned if this was the highest and best use. Roberts stated that external depreciation is outside of the property; it is not also within the ownership because the owner decides he doesn't need it. This is not highest and best use. Roberts stated that the line item value estimates do not necessarily represent what you could sell those properties for as single properties. Roberts stated that the assessing department considered functional depreciation; the Star of Kodiak received an extra 20% depreciation. The per square foot value for the older plants covered the depreciation. Roberts stated that he did not use sales information. He stated the highest and best use for Marcy J Warehouse is not necessarily tied to Trident. Roberts stated the highest and best use for the apartments may be a dormitory; the highest and best use for KPM is not a warehouse. It is a standalone property. Roberts stated that the Assessing department cannot take ownership or management into account. Regarding the apartments, Roberts stated the lower floor was assessed as a restaurant. The building discrepancy that does need to be fixed is the size of the restaurant/cafeteria. This was adjusted from Kodiak Island Borough Board of Equalization Minutes May 14, 2015 Page 4 9,000 square feet to 4,000 square feet. It was recommended to reduce the assessment approximately $93,000. There were other adjustments that would increase the assessment; those were not made. Roberts stated that what Trident does with their new plant will affect other plants, but this is not part of the assessment. Chair Anderson moved for a 5 -minute break. APPELLANT'S REBUTTAL Mr. Broadwell stated that the assessor gave testimony about the economic performance of the other processors on the dock and there was no evidence on the record about that. The Lash dock sale was raised in the written materials because the code does allow the board to consider heresy if it is guaranteed to be from a trustworthy source. It was stated that there was no statute that required the properties to be considered as an integrated use. Mr. Broadwell read the decision from the 9" circuit in 1950 regarding properties that were noncontiguous with a unitary purpose. There were projections made by the assessor and materials were submitted to support this. These materials were dated March and April, whereas the assessment is as of January 1'' and those materials were unavailable to market participants at that time. Mr. Bjorn -Roti stated that this was not a disagreement over an integrated highest and best use versus a standalone use, replacement cost estimates, or land values. The major area of disagreement was with respect to the issue of external depreciation. The cost approach requires that all relevant information be considered; market research is required. Mr. Bjorn -Roti stated that the assessor is ignoring evidence that there is excess capacity within the seafood processing market in Kodiak. Market evidence that was submitted by Roberts concerning external depreciation was in regard to their management. Mr. Bjorn -Roti stated they are not bad managers. Mr. Bjorn -Roti stated that the issue is whether there is external depreciation in the market place due to excess capacity. If there is, it must be addressed within the cost approach. Mr. Bjorn-Roli agreed that not all the parcels are tied as an integrated highest and best use, specifically mentioning the warehouse. Ownership does not indicate highest and best use; highest and best use dictates that it is an integrated use. Mr. Bjorn-Roli stated that he reduced the square footage of the rooming house; this is appropriate and common practice if it is not value contributing. He spoke about the earthquake damage to the foundation, and how it was not considered. ASSESSOR'S REBUTTAL Roberts stated that he was unaware of the earthquake damage. Roberts stated that a dormitory does not have to make money, but it still can be operated as an apartment. Roberts stated that another plant is coming in and this will affect excess capacity. He stated that the assessing department is not improper saying there is enough fish to process. He stated that Kodiak Island Borough Board of Equalization Minutes May 14, 2015 Page 5 assessing does not have to consider the properties as a going concern. Roberts stated that he considered the economic effect of the properties together. Roberts stated he used the cost approach method and considered all the depreciation; the assessing department did not consider a going concern. BOARD DISCUSSION Parker clarified that all material presented by the appellant was considered evidence and could be questioned. Mahoney asked if Trident had other going concerns in the state. Mr. Bjorn -Roti stated that they do have other non-contiguous properties. He stated the issue was external depreciation and not whether it is a going concern. Mahoney asked if other communities have assessed Trident's properties as a going concern. Mr. Bjorn -Roti stated that none came to mind. Mahoney asked if there was a mistake on pg. 72. Mr. Bjorn -Roti stated he wouldn't be able to answer without a site plan. Anderson asked Roberts if SOK (ship) was assigned 20% functional depreciation. Roberts stated it was given an extra 20% depreciation because it was a ship. Mahoney asked the appellant to elaborate on his statement that property would be damaged if considered separately. Mr. Bjorn -Roti stated that the properties highest and best use is to operate together. Operating together cures some of the functional obsolescence and external depreciation that is present in the market place. He stated that this is because the number of competitors and buyers that exist. External depreciation is greater on a standalone basis. Function depreciation would go up on a standalone basis because the properties don't work well separately. He used yard size, too much or too small, as an example. Mr. Bjorn -Roti stated that the 20% on SOK is not an adjustment for external depreciation. Parker asked if there was a definitive answer as to which properties needed to be considered to constitute a going concern. Mr. Bjorn -Roti stated that the properties can be valued under a highest and best use both as integrated units or standalone. He stated that the assets that are interrelated and maximize value include KNI, SOK, KPM and the employee housing. He agreed it did not include the Marcy J. warehouse. EXECUTIVE SESSION MAHONEY moved to convene into EXECUTIVE SESSION for deliberation as a quasi-judicial board. Seconded by PARKER. ROLL CALL VOTE CARRIED UNANIMOUSLY: Ferris, Mahoney, Parker, Anderson Invited Borough Clerk and Borough Attorney into executive session. Reconvened at 8:40 p.m. DECISION FOR Case No. 2019-06, Property ID # 24354. Kodiak Island Borough Board of Equalization Minutes May 14, 2015 Page 6 Motion by MAHONEY to uphold the assessor's valuation based upon the appellant's lack of convincing evidence that the Assessor's method was improper or excessive. Second by PARKER ROLL CALL VOTE CARRIED UNANIMOUSLY: Mahoney, Parker, Anderson, Ferris The board upheld the Assessor's valuation based upon the appellant's lack of convincing evidence that the Assessor's method was improper or excessive. The board found that the properties were not linked intrinsically as an integrated unit. The board stated that they have all functioned separately before and found no evidence of changes presented that would prevent it in the future. DECISION FOR Case No. 2019-07, Property ID # 14840. Motion by MAHONEY to uphold the assessor's valuation based upon the appellant's lack of convincing evidence that the Assessor's method was improper or excessive. Second by FERRIS ROLL CALL VOTE CARRIED UNANIMOUSLY: Parker, Anderson, Ferris, Mahoney The board upheld the Assessor's valuation based upon the appellant's lack of convincing evidence that the Assessor's method was improper or excessive. The board found that the properties were not linked intrinsically as an integrated unit. The board stated that they have all functioned separately before and found no evidence of changes presented that would prevent it in the future. DECISION FOR Case No. 2019-08, Property ID # 15559. Motion by MAHONEY to uphold the assessor's valuation based upon the appellant's lack of convincing evidence that the Assessor's method was improper or excessive. Second by PARKER Anderson clarified that the board had accepted the assessor's revised valuation. The clerk read the assessor's revised valuation of $2,268,700 into the record. Motion by MAHONEY to amend the motion to uphold the revised assessor's valuation based upon the appellant's lack of convincing evidence that the Assessor's method was improper or excessive. Second by PARKER ROLL CALL VOTE TO AMEND CARRIED UNANIMOUSLY: Anderson, Ferris, Mahoney, Parker The board accepted the assessor's recommended value based upon the appellant's lack of convincing evidence that the Assessor's method was improper or excessive. The board found that the properties were not linked intrinsically as an integrated unit. The board stated that they have all functioned separately before and found no evidence of changes presented that would prevent it in the future. ROLL CALL VOTE ON MAIN MOTION AS AMENDED CARRIED UNANIMOUSLY: Ferris, Mahoney, Parker, Anderson DECISION FOR Case No. 2019-09, Property ID # 15560. Motion by PARKER to uphold the assessor's valuation based upon the appellant's lack of convincing evidence that the Assessor's method was improper or excessive. Second by FERRIS ROLL CALL VOTE CARRIED UNANIMOUSLY: Mahoney, Parker, Anderson, Ferris The board upheld the Assessor's valuation based upon the appellant's lack of convincing evidence that the Assessor's method was improper or excessive. The board found that the properties were Kodiak Island Borough Board of Equalization Minutes May 14, 2015 Page 7 not linked intrinsically as an integrated unit. The board stated that they have all functioned separately before and found no evidence of changes presented that would prevent it in the future. DECISION FOR Case No. 2019-10, Property ID # 16248. Motion by PARKER to uphold the assessor's valuation based upon the appellant's lack of convincing evidence that the Assessor's method was improper or excessive. Second by MAHONEY ROLL CALL VOTE CARRIED UNANIMOUSLY: Parker, Anderson, Ferris, Mahoney The board upheld the Assessor's valuation based upon the appellant's lack of convincing evidence that the Assessor's method was improper or excessive. The board found that the properties were not linked intrinsically as an integrated unit. The board stated that they have all functioned separately before and found no evidence of changes presented that would prevent it in the future. DECISION FOR Case No. 2019-11, Property ID # 16249 Motion by FERRIS to uphold the assessor's valuation based upon the appellant's lack of convincing evidence that the Assessor's method was improper or excessive. Second by PARKER ROLL CALL VOTE CARRIED UNANIMOUSLY: Anderson, Ferris, Mahoney, Parker The board upheld the Assessor's valuation based upon the appellant's lack of convincing evidence that the Assessor's method was improper or excessive. The board found that the properties were not linked intrinsically as an integrated unit. The board stated that they have all functioned separately before and found no evidence of changes presented that would prevent it in the future. Anderson read the following statement: According to Appellate Rule 602, the Appellant or the Assessor has the right of appeal to the Superior Court of the State of Alaska from our final decision. Should you wish to exercise your right of appeal, you must do so by notifying the Borough attorney and initiating the process within 30 days from the date of our written decision. Failure to do so will forever bar you from any appeal of this decision. The board agreed to a Special Meeting on Thursday, May 16, 2019 at noon, to certify their actions to the Assessor. ADJOURNMENT Parker 8:53 moved to adjourn the meeting. ROLL CALL VOTE ON MOTION CARRIED UNANIMOUSLY: Anderson, Ferris, Mahoney, and Parker. The meeting adjourned at 8:53 p.m. ATTEST: 4ark Anderson, Chairperson Approved: �� 14C, ;21�7/ / Kodiak Island Borough Board of Equalization Minutes May 14, 2015 Page 8 C Clerk's note: Per KIBC 3.35.050 (E1) The board of equalization summary certification will constitute the board minutes. Per KIBC 3.35.050 (E9) Certification. The board shall certify its actions to the Assessor within seven days following its adjournment. Kodiak Island Borough Board of Equalization Minutes May 14, 2015 Page 9