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Ford Elsaesser ISB #2205 Katie Elsaesser ISB #9287 ELSAESSER ANDERSON, CHTD. 414 Church Street, Suite 201 P.O. Box 1049 Sandpoint, ID 83864 Tel: (208) 263-8517 Fax: (208) 263-0759 Attorney for Plaintiffs
IN THE DISTRICT COURT OF THE FIRST JUDICIAL DISTRICT OF THE STATE OF IDAHO, IN AND FOR THE COUNTY OF BONNER
CARMIN CAPITAL LLC a Washington State Limited Liability Corporation; MATTHEW J. SPILKER and BECKY E. SPILKER; RUSSELL D. WILLIAMS and DIANA C. WILLIAMS; PHILLIP R. PETERSON and RITA L. PETERSON; ABSALONSON TRUST, Randy Absalonson and Sandra Absalonson as Trustee of the Absalonson Trust; THOMAS L. CLEVENGER and SANDRA S. CLEVENGER; RICHARD JOHN VIETH and LYNNE S. VIETH; DAVID D. POWERS and SALLY N. POWERS; THOMAS RICHARD WAKELEY and JENNIFER ANN LEHN; ESTATE OF NORMAN S. THOMPSON, Elizabeth Scott as Personal Representative of the Estate of Noman S. Thompson; JOHN D. CHRISTENSON and MARCIA R. CHRISTENSON; DAVID JOHN NELSON and KERRY H. NELSON; ROBERT E. CRAVEN, JR.; BRYAN D. DEARDON and MICHELLE R. DEARDON; MARCIA A. BELLES and BERT A. BELLES; NANCY J. RENZI and THOMAS M. RENZI; OLMSTEAD TRUST, Lyle Olmstead as Trustee of the Olmstead Trust; COOPER CHING CHAO and JOSELLE LEE-CHAO; JOHN T. BRUMLEY, DIANE I. BRUMLEY, JENNIFER K. BRUMLEY, and KEVIN A. WALKER; MARK W. HOUK and INEZ F. HOUK; JOHN STEVEN DAVIS & NANCY L. DAVIS; ASHLEY WOLFE and HARRISON WOLFE; DANIEL E LANGSDORF & MICHELE LANGSDORF; PRIEST LAKE LEGACY LLC, A Washington State Limited liability corporation; STEPHEN C. RICE and JULIE R. RICE; MATTHEW J. ALICE and PAULA A. ALICE; ALBERT J. MARTINEZ; ERICKSON TRUST, Vincent and Socorro Erickson, Trustees of the Erickson Trust; DOUGLAS PARKER Plaintiffs, v. BONNER COUNTY BOARD OF EQUALIZATION Defendant.
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Case No. CV-2017-1110 PLAINTIFFS/APPELLANTS
CLOSING ARGUMENT
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COMES NOW, CARMIN CAPITAL ET. AL. by and through their attorneys FORD ELSAESSER
AND KATHERINE ELSAESSER, of ELSAESSER ANDERSON, CHTD. and hereby submits this
closing argument as follows.
STANDARD OF REVIEW
The district court determines the appeal of the county assessor's valuation in a trial de novo
without a jury as though it were an original proceeding in that court. The Senator, Inc. v. Ada Cty.,
Bd. of Equalization, 138 Idaho 566, 569, 67 P.3d 45, 48 (2003) citing Riverside Dev. Co. v.
Vandenberg, 137 Idaho 382, 48 P.3d 1271 (2002). The county assessor's valuation of property for
purposes of taxation is presumed correct, and the burden of proof is on the taxpayer to show by
clear and convincing evidence that the taxpayer is entitled to the relief claimed. The Senator, Inc. v.
Ada Cty., Bd. of Equalization, at page 48 citing to Roeder Holdings, L.L.C. v. Board of
Equalization of Ada County, 136 Idaho 809, 41 P.3d 237 (2001).
ISSUES BEFORE THE COURT
1. Whether the values set by the Assessor accurately reflected the market value of the 2017
Plaintiffs/Appellants’ properties, on January 1, 2017, and January 1, 2016 for the Parker parcel.
2. Whether the Assessor failed to consider proper measures of applicable land sales and
licensed appraisal information, and application of this information to determine market value.
3. Whether the Assessor erroneously refused to consider comparable sales and other market
data available before January 1, 2017 (and January 1, 2016 for the Parker parcel), including but not
limited to the Department of Lands lease lot auction results for the preceding year.
4. Whether the Assessor, failed to use, recognize, or apply all applicable sales data to
Plaintiffs/Appellants’ 2017 ( 2016 for the Parker Parcel) property assessment.
5. Whether the Assessor unfairly assesses property by using a hand-drawn, surveyed line that
is an estimation for front footage assessment without verification that the meandering line adds
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value or utility to the Plaintiffs/Appellants’ parcels.
6. Whether the Assessor’s method for measuring waterfront on Plaintiffs/Appellants’ parcels
creates two classes within the same class of residential properties in violation of the Constitution.
7. Whether the Assessor’s basis for valuation on the Plaintiffs/Appellants’ parcels, which only
considers waterfront footage without consideration of the characteristics of the rest of the parcel, is
an inaccurate method considering the great variations of characteristics parcels can have along the
waterfront.
SUMMARY OF FACTS PROVEN AT TRIAL
1. The parcels of Property at issue were sold by the State of Idaho with the Department of
Lands (“DOL”) under statutory duty to obtain market value.
2. The DOL had professional appraisers set the market value as the floor price for the auction
for each parcel.
3. All parties agree that the State of Idaho fulfilled its statutory duty.
4. Reserve or floor price of parcels sold by DOL were the market value of property.
5. Auctions for Priest Lake parcels meet the standard for market value to be used in
determining market value for assessment as set forth in Idaho Code §63-201(15).
6. Assessor’s office operates under the belief there are different market values for taxation
purposes.
7. Assessor attributes values of comparable sales to land and marginally attributes sale price
to structures on property through its extraction process.
8. The DOL hired surveyors who estimated the meandering line on the plats and did not
conduct actual surveys for the delineated meandering line.
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9. In 2017 the Assessor included the entire estimated front footage line in an assessment
without review unless landowner appealed.
10. The meandering line is an estimate which is indicated by the plus and minus next to the
number on the plats.
11. The meandering line is a fluid number that changes depending on soil accretion, beach
cleaning of rocks to one location, and other items.
12. The meandering line of waterfront does not change the functional use of the lakefront
property.
13. The current use of meandering line on Priest Lake parcels creates two separate groups of
lakefront parcels within the same property class being assessed using entirely different
valuation methods.
14. The average increase from the purchase price of Plaintiff’s parcels to the relevant tax year
appealed exceed 48%, with the highest appeal at over 91%.
LEGAL STANDARD
Market Value is defined in Idaho Code §63-201 as:
“[T]he amount of United States dollars or equivalent for which, in all probability, a
property would exchange hands between a willing seller, under no compulsion to
sell, and an informed, capable buyer, with a reasonable time allowed to consummate
the sale, substantiated by a reasonable down or full cash payment.
The requirement that all property be assessed at its actual cash value is secondary to the
constitutional mandate of equality of taxation. Washington Cty. v. First Nat. Bank, 35 Idaho 438,
206 P. 1054, 1056 (1922). The court in Washington Cty. v. First Nat. Bank further explained the
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mandate of equality of taxation:
Where certain property is assessed at a higher valuation than all other property, the court
will enforce the requirement of uniformity by a reduction of the taxes on the property
assessed at the higher valuation, if it be shown that the difference is the result, not of mere
error in judgment, but of fraud or of intentional and systematic, discrimination. This action
will be taken even though the reduction of the assessment will result in an assessment at less
than cash value. This is done, not because the court approves the assessment of property at
less than its cash value, but because, in such cases, it is the only practicable method of
enforcing the constitutional right of the plaintiff. Id. at 1056.
All taxes shall be uniform upon the same class of subjects within the territorial limits, of the
authority levying the tax, and shall be levied and collected under general laws, which shall prescribe
such regulations as shall secure a just valuation for taxation of all property, real and personal:
provided, that the legislature may allow such exemptions from taxation from time to time as shall
seem necessary and just, and all existing exemptions provided by the laws of the territory, shall
continue until changed by the legislature of the state: provided further, that duplicate taxation of
property for the same purpose during the same year, is hereby prohibited. Idaho Const. art. VII, § 5.
The Idaho Constitution does not permit two separate groups of lakefront parcels within
the same property class being assessed using entirely different valuation methods. Wilson v.
Bonner County, Idaho State Tax Appeal 15-A-1044 and 15-A-1045 (2015) and Allan and Deana
Ruddach v. Bonner County, Idaho State Tax Appeal 15-A-1051 (2015).
ILLUSTRATIONS FOR CLOSING
Per the request of the Court there is a map of Priest Lake with the requested information that
has been approved by Defendant’s counsel incorporated below into this closing (Illustration A)
along with a chart of the information for all 29 parcels with further calculations for ease of reference
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to Exhibits, values, and variances (Illustration B).
Illustration A
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Illustration B
Plaintiff
Lands purchase price without buyer fee
County Assessment
County Assesment Without Site Improvements
Increase from Auction Sale
Ed Morse Valuation
Market Increase
Per Ed Morse
Variance in increase from
County to Market
Total Variance betweeen County and Market
Appraisal Exhibit
Number
BOE Appeal Exhibit
Number Assessor
Exhibit LetterPowers, David & Sally 665,000.00$ 1,049,545.00$ 1,023,545.00$ 53.92% 750,000.00$ 12.78% 41.13% 273,545.00$ 60 25 TWakely, Thomas & Lehn, Jennifer 465,000.00$ 785,875.00$ 759,875.00$ 63.41% 520,000.00$ 11.83% 51.59% 239,875.00$ 66 31 AAHouk, Mark & Inez 410,000.00$ 797,188.00$ 784,188.00$ 91.27% 570,000.00$ 39.02% 52.24% 214,188.00$ 52 17 NAlice, Matthew & Alice * 400,000.00$ 708,095.00$ 695,095.00$ 73.77% 490,000.00$ 22.50% 51.27% 205,095.00$ 41 6 CMartinez, Albert 475,000.00$ 781,069.00$ 768,069.00$ 61.70% 580,000.00$ 22.11% 39.59% 188,069.00$ 54 19 PBelles, Marcia & Burt 380,000.00$ 686,571.00$ 673,571.00$ 77.26% 490,000.00$ 28.95% 48.31% 183,571.00$ 42 7 DAbsalonson Trust 485,000.00$ 740,511.00$ 727,511.00$ 50.00% 545,000.00$ 12.37% 37.63% 182,511.00$ 40 5 BWolfe, Ashley and Harrison 600,000.00$ 968,432.00$ 955,432.00$ 59.24% 775,000.00$ 29.17% 30.07% 180,432.00$ 68 33 CCWilliams, Russell & Diana 425,000.00$ 711,349.00$ 698,349.00$ 64.32% 525,000.00$ 23.53% 40.79% 173,349.00$ 67 32 BBPeterson, Phillip & Rita 365,000.00$ 693,919.00$ 680,919.00$ 86.55% 510,000.00$ 39.73% 46.83% 170,919.00$ 59 24 SRenzi, Thomas & Nancy 474,000.00$ 704,377.00$ 691,377.00$ 45.86% 525,000.00$ 10.76% 35.10% 166,377.00$ 62 27 VDavis, John & Nancy $ 437,000.00 752,875.00$ 739,875.00$ 69.31% $ 575,000.00 31.58% 37.73% 164,875.00$ 49 14 KClevenger, Thomas & Sandra 465,000.00$ 700,891.00$ 687,891.00$ 47.93% 525,000.00$ 12.90% 35.03% 162,891.00$ 47 12 ILangsdorf, Danny & Michele 413,000.00$ 735,751.00$ 722,751.00$ 75.00% 570,000.00$ 38.01% 36.99% 152,751.00$ 53 18 OVieth, Ricchard & Lynne 450,000.00$ 686,947.00$ 673,947.00$ 49.77% 525,000.00$ 16.67% 33.10% 148,947.00$ 65 30 ZErickson Trust 455,000.00$ 636,967.00$ 623,967.00$ 37.14% 480,000.00$ 5.49% 31.64% 143,967.00$ 51 16 MRice, Stephen & Julie 480,000.00$ 660,720.00$ 647,720.00$ 34.94% 520,000.00$ 8.33% 26.61% 127,720.00$ 63 28 WBrumley, John & Diana 345,000.00$ 508,077.00$ 495,077.00$ 43.50% 375,000.00$ 8.70% 34.80% 120,077.00$ 43 8 EParker, Douglas 528,000.00$ 782,812.00$ 769,812.00$ 45.80% 650,000.00$ 23.11% 22.69% 119,812.00$ 58 23 DDCraven, Robert Jr. 540,000.00$ 700,395.00$ 687,395.00$ 27.30% 575,000.00$ 6.48% 20.81% 112,395.00$ 48 13 JOlmstead Trust 535,000.00$ 700,150.00$ 687,150.00$ 28.44% 575,000.00$ 7.48% 20.96% 112,150.00$ 57 22 RNorman S. Thompson Estate 391,000.00$ 538,432.00$ 525,432.00$ 34.38% 420,000.00$ 7.42% 26.96% 105,432.00$ 56 21 YDeardon, Bryan & Michelle 390,000.00$ 533,637.00$ 520,637.00$ 33.50% 420,000.00$ 7.69% 25.80% 100,637.00$ 50 15 LChristenson, John & Marcia 396,604.00$ 522,084.00$ 509,084.00$ 28.36% 415,000.00$ 4.64% 23.72% 94,084.00$ 46 11 HPriest Lake Legacy LLC 503,604.00$ 707,338.00$ 694,338.00$ 37.87% 605,000.00$ 20.13% 17.74% 89,338.00$ 61 26 USpilker, Matthew & Becky 552,000.00$ 684,274.00$ 671,274.00$ 21.61% 595,000.00$ 7.79% 13.82% 76,274.00$ 64 29 XNelson, David & Kerry 393,000.00$ 510,531.00$ 497,531.00$ 26.60% 425,000.00$ 8.14% 18.46% 72,531.00$ 55 20 QChao, Cooper & Joselle 418,604.00$ 510,829.00$ 497,829.00$ 18.93% 440,000.00$ 5.11% 13.81% 57,829.00$ 45 10 GCarmin Capital LLC 512,604.00$ 668,422.00$ 655,422.00$ 27.86% 610,000.00$ 19.00% 8.86% 45,422.00$ 44 9 FAverage 48.81% 16.95% 31.87% 144,312.52$ Lowest 18.93% 5.11% 8.86% 45,422.00$ Highest 91.27% 39.73% 52.24% 273,545.00$
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ARGUMENT
In summary, this appeal hinges on two broad positions that Defendants have taken in
regards to parcels owned on Priest Lake that were formally owned by the State of Idaho. First is
that the auctions, which have a base price set at market value, as determined by professional
appraisers, are not valid sales and the Bonner County Assessor (“Assessor”) is flat out prohibited
in using the Department of Lands Auction Sales at Priest Lake when determining land values of
similar parcels. Second, is Defendant’s position that the meandering line depicted on the
Plaintiffs/Appellants’ plats, which testimony evidenced was just a freehand drawing by a
surveyor with an estimation on shoreline footage, is a fair measurement for assessment for
taxation even though the line is not an exact measurement, the Assessor is currently not assessing
all of Priest Lake on the meandering line measurement, and the meandering line adds no utility
to the parcels.
I. Background on Priest Lake Lessee Appeals after Purchase
The real property parcels at issue are parcels that were previously owned by the State of
Idaho and part of the land auctions in 2014, 2015, and 2016. Subsequent to Plaintiffs/Appellants
purchase of the parcels, Assessor ascribed large land values to each parcel purchased at the auction
which did not reflect the market value of the land. The Assessor also used the estimated line drawn
on the plats by the surveyor for the Department of Lands to assess new land owners on the
meandering line rather than pin-to-pin line for lake frontage. Tax assessments by many new parcel
owners were appealed to the Bonner County Board of Equalization (“BOE”) in 2015, 2016, and
2017. In 2015 the BOE rolled the assessed values back to the auction prices for the land of those
who appealed. In 2016 the BOE rolled back the assessed values to those based on pin-to-pin lake
frontage and not the estimated meandering line. In 2017 the BOE, with a few exceptions, upheld
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the assessments for those that appealed. The Plaintiffs are 28 parcel owners who appealed in 2017
and 1 parcel owner who appealed 2016.
II. Market Value of Parcels
The issue of market value before the court stems from two fundamental problems. The
first is the refusal of the Assessor’s office to utilize the Auction Sales in setting their assessments
of parcels on Priest Lake, even though the sale occurs at market value and meets the criteria of
an arms-length transaction that can be used as a comparable. The second is the manner in which
the Assessor uses an extraction method for determining the front footage price for parcels of
property on Priest Lake, which attributes over 80 percent of comparable sales to land value and
sets the front footage rate base on those sales without calibrating those values with comparable
land sales to ensure an accurate value.
A. Use of Department of Land Auction Sales and Appraisals
The Plaintiffs/Appellants in this matter are a unique case in that the parcels at issue are
properties that have been recently appraised and purchased at market value within the last three
years. At the time of the appeals to the district court Plaintiffs/Appellants had purchased their
property within the three years prior to the appeal, with twelve of the parcels at issue being
purchased in 2016. Currently the Department of Lands is offering parcels for sale through three
methods: the Voluntary Auction for Ownership (“VAFO”), Un-leased Land Auction (ULA), and
the Land Use Permit (“LUP”). (For the purpose of this closing any reference to “Auction Sales”
includes all three methods from the State of Idaho for Priest Lake parcels and if specifically
related to a type of auction the specific acronym will be used).
The 2016 Auction Sales were market sales that should have been included in the sale data
for 2016 that the Assessor uses to determine market value for similar parcels at Priest Lake but
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as testimony evidenced, the sales are not used at all by the Assessor. Additionally, properties of
similar type and location are being sold in a similar manner each year at market value through a
systematic and widely marketed auction program, which was designed to keep the market stable
and obtain best value for the parcels. Defendant does not dispute that the State of Idaho received
market value for Plaintiffs/Appellants parcels purchased at auction and maintained that the
current auctions are receiving market value for the land.
As the testimony of Mr. Morse at trial, and further explained on page number 8 of the
appraisals that were admitted as Exhibits 40-68, the Auction Sales qualify as sales for
determining market value for the following reasons: sales were planned to give buyers time to
secure financing; appraisals, title insurance and deposits were refundable if bid/sale was not
successful; sales are conducted during active part of season, spring, summer or fall; advertising
in advance for a good number of bidders; appraisals of the property and reserve prices at market
value; allowed for adequate closing, inspection, financing time; full disclosure of costs and
conditions; included pre-auction inspections, listing agent participation, and buyer inspections;
and the properties had signage, MLS listings, advertising, and broker participation to attract
buyers.
Defendant’s expert Ms. Berscheid testified that the Idaho Ratio Study Manual (Exhibit
GG) prohibited the use of the Auction Sales data from being used because the State of Idaho is
the seller. As set forth in Exhibit GG the guideline states as a presumption that sales involving
the state to be unsuitable, however that study goes further and references the International
Association of Assessing Officers (“IAAO”) standards and discusses foreclosure related sales
may influence the broader market and should not be automatically excluded. Specifically set
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forth in the ratio study guidelines is: “inclusion is especially important when such sales become
dominant in an area.”
Defendant’s expert, Ms. Berscheid, further testified that the IAAO standard 5.3 prohibits
the use of the Auction Sales because the sales are sales involving a government entity. However,
the language as set forth in the text of 5.3 is permissive, not mandatory, which states “the sales
listed are often found to be invalid and can be excluded unless a larger sample size is needed.”
(Exhibit HH) In addition to IAAO 5.3 not being an outright prohibition it also sets forth an
exception in 5.3.1 which allows consideration in ratio studies if the governmental sales have
affected the market in specific market areas or neighborhoods. As Mr. Morse testified, the
auctions are having an effect on the market as it is the biggest land seller on Priest Lake with the
most inventory and it is being sold in an orderly disposition. This information was further
backed up by testimony of Sheryl Reeve, a licensed local appraiser, at the BOE for the Rice
parcel, which stated that Mrs. Reeve gathered data from all the sales, other appraisers, other
lenders, investors, buyers, sellers and realtors, and there is no indication of the Assessor’s
increase in properties at Priest Lake (Exhibit 35 – Pages 75-76 – Transcript pages 297-298).
The auction sales should be used by the Assessor in setting assessed value because they show the
history of sales in the market/neighborhood area, and have a large part of inventory on the
market that is available for sale.
Ms. Berscheid testified that the Auction Sales are not affecting the market even though a
similar land sale by a private owner of the that amount of land would affect the market. The
justification provided by Ms. Berscheid is that the Auction Sales are not valid transactions so the
Auction Sales cannot be considered. Ms. Berscheid avoided directly responding to the question
of affecting the market price and returned full circle to invalid sales. Ms. Berscheid conceded
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that the ULA sales would have an affect on the market but testified, without any basis for her
number, that ULA account for 6% percent of sales. However, as testified by Mr. Morse. the
sales are having an affect on the market and the VAFO sales, along with the ULA sales, are at
market value which discredits the blanket bar on the Auction Sales that the Assessor has
implemented. This testimony is verified by Sheryl Reeves sworn testimony at the BOE that ever
since the Auction of the lease lots has commenced it has affected values up there. (Exhibit 35 –
Pages 76 – Transcript pages 298).
The Assessor has blanketly used a one-line item in a ratio study manual and the IAAO
Standard 5.3 as the applicable in stating the Auction Sales are not allowed to be used. At the
Board of Equalization appeals, the Assessor’s staff stated on record that the Assessor is
prohibited from using the Auction Sales even though that is not statutorily accurate and does not
include exceptions that would apply to the Auction Sales. See: Transcripts of Board of
Equalization Hearings, Exhibit 35, at:
Page 20- Transcript Page 74- Lines 2-4; Page 26- Transcript Page 101- Lines 8-9; Page 31- Transcript Pages 102-121; Page 36- Transcript Page 139- Lines 4-7 Page 40- Transcript Page 154- Lines 8-11; Page 43- Transcript Page 168- Lines 1-7; Page 51- Transcript Page- 200- Lines 1-7; Page 53- Transcript Page- 209-Lines 6-13; Page 72- Transcript Page 285- Lines 19-25 Page 82- Transcript Page 323 – Lines 20-24
Additionally, Ms. Berscheid testified that there is more than one market value without
any support for that assertion. Assessor’s position that the state is receiving market value but
that market value is not that same as market value per Idaho Code is without merit. Ms.
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Berscheid is saying that the state is obtaining market value but at the same time that that sale is
not at market value.
The Langsdorf Parcel illuminates the dramatic difference the Assessor’s market value is
from the actual market sale of the property. The Langsdorf parcel was purchased in 2016, which
makes it a qualifying sale for the Assessor to use for the 2017 assessment. The parcel was sold at
the 2016 VAFO at the reserve price, which is set at market value, for a purchase price of
$413,000.00. However, the Assesor assessed the parcel’s land value at $722,751.00. That
market value is a drastic difference of $309,751.00, or seventy-five percent (75%). The
Defendant put forth no substantiated evidence as to why such a wide discrepancy.
As set forth in Illustration B the average variation between the purchase price of the
parcels and the Assessor assessed value is almost fifty percent (48.81%). Even if the court
accounts for the fact that market value has some range rather than a definite figure there is no
evidence or justification for a variation of such a great range. If the Assessor’s assessment of the
land value were to hold true then there would be investors scooping up the lots if the potential
gain was an immediate nineteen (19%) to ninety-one percent (91%) gain.
Mr. Morse’s appraisals include a summary of the Priest Lake Lot Auctions which
documents that in the seven auctions held from August of 2014 and August of 2017 a total of
203 parcels have been sold for a total of $96,699,184. Page 10 of Exhibits 40-68. The depiction
also sets forth that not every lot put up for auction sells, which is another example of the Auction
sales being market sales. If the Assessor’s assessments were to be determined by this court to be
market value at an average discrepancy of 48.81 percent, it would mean the state left a potential
of $47,198,871.71 on the table when it sold the 203 parcels from August 2014 through August
2017. If the court considers just the sales for 2016 ($20,837,832) then the money the state
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missed according to the Assessor’s view of the Priest Lake market would be an estimated ten
million dollars. Ms. Berscheid cannot say in the same breath that the State is obtaining market
value if the Assessor states market value is dramatically higher.
As Mr. Morse testified, the land values in the ULA result he reviewed were accurate
market value for that year. When Mr. Morse relied on Auction Sales in his appraisals, he used
ULA rather than VAFO to remove the alleged bias or invalidity of the sales the Assessor alleges
exists for those who own the improvements or owners who felt forced to purchase. However,
Mr. Morse testified that the VAFO auction values were accurate market values and VAFO sales
meet the standards of Market Value per Idaho code 63-201(15). The only response set forth by
Defendant through Ms. Berscheid, as to why the lots were not being snapped up by investors if
the lots were severely undervalued for the Auction Sales, is that outside buyers would have to
pay for the improvements from a Lessee on top of the land. However, this argument does not
hold water as there are no improvements to purchase from a Lessee in the ULA and anyone can
request an unleased parcel go up for auction. Mr. Clemons agreed in his testimony that the
rumor at the Assessor’s office of reasons a market buyer wouldn’t purchase at the Auction Sales
would not apply to ULA sales.
When the Auction Sales are looked at in the criteria of Idaho Code 63-201 all of the
elements are there to meet the definition of Market Value.
Willing Seller
The state is a willing seller, as testimony was provided there is not mandate for
the land to be sold by a certain date. The State of Idaho has elected to try and obtain a
better return for its investments on the endowment land and has started the current
auction system, which as Mr. Christensen testified to, is currently offered through 2024
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but the State of Idaho can always change the policy. Although the state is required to sell
land at appraised value it is not under compulsion to sell.
Ms. Berscheid incorrectly testified to the current divestment of land prevents the
state from being a willing seller because in her opinion the state cannot let it sit on the
market until the appropriate price comes around. As the testimony of Mr. Christensen and
Mr. Morse evidenced, there is no requirement that the all parcels be sold by a certain date
but rather offers several options for sale of the land and the option to lease the parcel. As
a result, the Department of Land can allow the Priest Lake parcels to sit on the market
until a buyer comes and pay the appraised price at minimum at auction. Ms. Berscheid
conceded the lots have the ability to not be sold, which is supported by the chart on Mr.
Morse’s page 10 of Exhibits 40-68 which show that some parcels have been put up for
auction and the minimum bid was not met so the parcel was not sold.
Informed, Capable Buyer
The buyers at Auction Sales are informed, capable buyers. The standard of
informed and capable buyer is met in the Auction Sales. The terms of the sales are set
forth ahead of time and potential buyers are aware of the procedure, costs, conditions,
and sale dates well in advance of the auction.
Reasonable Time Allowed to Consummate the Sale
As testified to by Mr. Morse the Auction Sales allowed for reasonable time to
consummate the sale. The Auction Sales allow for adequate closing, inspection, and
financing time. The organization of the Auction Sales allow for due diligence prior to
auction and allows for pre-qualifications for financing and appraisals.
Substantiated by a Reasonable Down or Full Cash Payment
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Buyers at Auction Sales purchase the property with a full cash payment upon being
the highest bidder. Interested parties for Auction Sales are required to put a refundable
deposit in order to bid, similar to an earnest money deposit with the exception of the deposit
being refundable. The cash price at auction is guaranteed to be at least at the appraised
value.
Ms. Berscheid testified to the definition of Market Value includes a “willing buyer.”
Defendant’s submitted a letter with no date or record number as Exhibit II, from an BOE
appellant that was not part of this appeal, nor evidence in any of the Board of Equalization
records of this matter, as evidence to why the Auction Sales should not be included. Along with
the term willing buyer, Ms. Berscheid tried to include the term “typical motivation” as part of the
definition of market value. As conceded by Ms. Berscheid the terms willing buyer and typical
motivation are not terms in the relevant statutory definition. Although willing buyer and typical
motivation should not be considered by the court, the evidence supports that the Auction Sales
meet these additional criteria proffered by the Defendant.
The evidence before this court and testimony by Mr. Morse shows that the parcels
purchased at the Auction Sales are by willing buyers with typical motivation of both the buyer
and seller, as there is not a mandate to sell the parcels by a certain date from the State and the
auction of leased land is through a voluntary auction that the lessee has to petition to be
auctioned and the name of the Lessee land auction includes the words Voluntary Auction. If a
parcel owner does not want to purchase the property the owner can still continue to lease or sell
the owner’s improvements and interest in the lease as allowed before the auctions commenced in
2014.
B. Market Value Determination and the Flaws with the Extraction Method
Page 18
Each Parcel was assessed individually by Mr. Morse and his findings of value on each
parcel are set forth in his appraisals. (Exhibits 40-68 and summarized in Illustration B). These
values reflect sales of the area that apply and use the preferred methodology of comparing like to
like on sales for determining value and bracketing. As set forth, the problems in using the
extraction method is that it is being used when it is not necessary as there are land sales that are
comparable in the relevant years. Additionally, the extraction method creates high front footage
values that are not supported by the market by subtracting the assessed improvements from the
reported sale and attributing the balance to land value. Finally, the extraction is set forth by all
authorities for conducting appraisals, as a last choice for obtaining value for a property.
Examples of the flaws in the extraction method can be found by reviewing the sales of
188 South Shores Rd, 440 S. Diamond Park Rd., and 188 N. Diamond Park Rd., (Exhibit 38)
which are the three comparable sales used for fifteen of the appealed parcel values. (Parcels that
assessor used these comparable in determining value are documented in Exhibits: F, G, H, I, L,
O, P, Q, S, T, V, W, Y, Z, BB).
1. 188 South Shores Road is a 16-year-old custom-built log cabin with a detached
garage with an apartment, shed, boatlift, boat dock, and boat slip that has 160 feet of
front footage and was sold for $1,000,000. The Assessor attributed eighty-five
percent (85%) or $843,010 of that sale to land and only $156,990 of that sale to the
above list of extensive buildings and structures. As demonstrated by the “Pro-Val”
sheets in Exhibit 38 for this property, the assessed value increased on that parcel in
2017 by $208,540 with 92% of that increased assessment allocated to the land value
increase.
Page 19
2. Looking at the 440 S. Diamond Park Rd. sale, the Assessor allocated eighty-one
percent (81%) of the $543,759 sale price to the land value. The 2017 assessment for
this parcel illuminates the problem with the Assessor’s allocation of land to
improvement value. As demonstrated by the “Pro-Val” sheets in Exhibit 38 for this
property, in 2017 the assessed value increased by $38,994 for the parcel but over one
hundred percent (101%) of the increase was attributed to land while the
improvements were further decreased in value.
3. 188 North Diamond Park Road for $585,000 the Assessor attributed eighty-two
percent (82%) of the sale to the land value and one hundred percent of the assessment
increase, documented on the “Pro-Val” sheet in Exhibit 38, was attributed to land
value.
The above sales being used to obtain the front footage of parcels document the issues
from the Assessor’s current manner in which extraction is utilized. Ms. Berscheid testified that
the Assessor’s values on the buildings and structures are accurate and counters that either way as
sale prices are often comparable to the total assessment so the Assessor’s valuation is accurate.
However, that testimony was anecdotal with no documentation or specifics to support the
testimony and does not resolve the problem of incorrectly valuing land. The problem arises
during the extraction method to obtain land value for front footage prices when the Assessor puts
too high of a value on land and not on structures. That high value the Assessor “extracts” from a
sale towards land is then used as justification to charge similar parcels of land at high front
footage prices that do not match the current Priest Lake market. As Mr. Morse testified it is an
inaccurate method and should only be used in rare cases and the results as reviewed are
significantly higher per front foot that was found supported in the marketplace. Mr. Morse
Page 20
testified that the values obtained at the Auction Sales for land correlate with other land only
sales.
As Mr. Morse testified the extraction method is not as reliable as a direct sales
comparison (like with like), such as using vacant land sales to determine land values. Mr. Morse
further elaborated that using a depreciated value of an improvement and concluding the rest of
the purchase price is the land value cannot produce credible results, especially if it is not
calibrated with land sales on the marketplace. The three comparable sales listed above show the
Assessor is extracting high land values that do not align with the evidence provided on
comparable land sales. As cited in all the Exhibit 40-68 (specifically page 36 of Exhibit 42) the
Appraisal of Real Estate 9th ed., a text published by the Appraisal Institute, the recognized
appraisal authority states:
Extraction is a variant of the allocation method in which land is extracted from the sale price of an improved property by deducting the contribution of the improvements which is estimated from their depreciated costs. The remaining value represents the value of the land. ... The land value estimates produced with the extraction method can be used with data gathered from vacant land sales in sales comparison. Sometimes, the extraction technique is applied to assessment ratios rather than numerical amounts. However, value indication derived in this way is un-persuasive because the assessment ratios may be unreliable and the extraction method does not reflect market considerations. [Emphasis added]
Although each parcel was not discussed individually, each appraisal admitted into
evidence supports the same conclusion, the value on each parcel by the Assessor does not align
with available market information. As summarized in Illustration B, the market increases
documented in each of Mr. Morse’s appraisals averaged at just under seventeen percent (17%)
since the purchase of each parcel which is almost a thirty-two percent (32%) discrepancy with
the Assessor’s assessments based on their extraction method. Even on parcels that Mr. Morse
Page 21
concluded had a higher increase compared to the other parcels at issue, such as the three parcels
that had an increase of 38-39.73%, the market values are drastically under where the Assessor is
setting the value. The total variance column of Illustration B shows the differences range from
just over $45,000 to over $273,000. Those variations of market value are drastic and Ms.
Berscheid and Mr. Clemons provided no testimony and Defendant’s offered no evidence to
support.
Mr. Morse utilized two methods of comparisons to value the parcels, a direct sales
comparison and a bracketing technique to arrive at his values. The direct sales approach uses
adjustments to the most similar sales and compare the sales to the subject parcel. The bracketing
technique using sales that are inferior, superior, and most similar to indicate a bracketed value
range of probable sale price for subject property. If a parcel is unable to be bracketed the
bracketing analysis is limited in use. A parcel may not be bracketed if the parcel is inferior to all
other sales, such as the Brumley parcel (Exhibit 43: Pages 42-43) which is a larger parcel and a
very steep slope and rocky shore.
III. Meandering Line Measurement of Shoreline
The issue of Meandering Line Measurement (“Meandering”) versus Pin-to-Pin or Point-to-
Point Measurement (“PTP”) has three fatal flaws as it applies to the parcels at issue. The first
flaw is that the meandering lines depicted on the Department of Land Plats are not surveyed lines
and are estimations, while the PTP measurements on the plat are surveyed lines. The second
flaw is that in 2016, 2017 parcels with the estimated Meandering line were assessed for
additional front footage that parcels with PTP lines only are not, which created unfair and
unequal taxation for the parcels at issue. The third is that the Meandering line includes non-
Page 22
beneficial parts of shore lines that do not add value to the parcel or improve the functional use of
the property, such as rock piles from clearing beaches, inlets, and oddly shaped shorelines.
A. Meandering Lines depicted on Plats are estimations and not surveyed lines
Mr. Morse testified and Defendant offered no contradicting evidence that the Meandering
lines on the plats of the parcels are not surveyed lines. Rather the surveyor hired by the
Department of Lands hand drew the lines and put an estimated number of feet on the plat. This
estimated number, which on the face of the plat has a plus or minus next to it, is being directly
put in as the front footage for the parcel by the Assessor regardless of the accuracy. There is
documentation that shows the Meandering line has included items that should not be included
such as rocks from clearing beaches and docks.
Mr. Morse testified and evidence before the court in the appraisals shows the various
ways a shoreline can be measured and a hand drawn line is not acceptable method. (Exhibits
40-68, specific pages vary but summary can be found on page 21 of Exhibit 41). As shown in
the depiction in the appraisal irregular front does not equate utility. As Mr. Morse testified in the
case of shoreline that is not straight there is typically a PTP measurement of the shoreline rather
than a surveyed line that includes land accretions and rock clearing piles. One of the most
dramatic issue is that the Meandering line is a hand drawn estimated line that the Assessor is
taking at face value as added value to the property even though the Department of Land plats
include PTP measurements.
Ms. Berscheid testified that each parcel is individually reviewed before the use of the
Meandering line. However, the only review of the Alice parcel by the Assessor (Exhibits 41
and Exhibit C) that determined the Meandering line included shoreline items that it should be
removed from the front footage calculations occurred after the third appeal to the BOE. This was
Page 23
an error of 49 feet that, since the purchase in 2014, had not been reviewed for removal by the
Assessor. That was a value change of over $156,000 that only happened as a result of forcing the
Assessor to actually review the Meandering line. Ms. Berscheid conceded that the Assessor’s
office had visited the parcels twice and still proceeded with the Meandering line estimation as
drawn on plat which contradicts her testimony that each parcel’s meandering line was reviewed
to ensure the bump and curves were beneficial. The current Meandering line for Alice after the
modification still has additional issues that will be discussed below on functional use of the
property as depicted by the Meandering line.
B. Appellants are being unequally assessed which violates the Idaho Constitution.
Even if the court is to find that an estimated shoreline measurement can be used to
determine front footage it does not resolve the issue of unequal taxation. As set forth above, the
Idaho Constitution requires that all taxes be uniform upon the same class of subjects within the
territorial limits. The Assessor is not uniformly assessing parcels on Priest Lake currently and
did not in 2016 or 2017. Ms. Berscheid testified around only half of the lake was being assessed
on Meandering Line while the rest were being assessed on PTP measurements.
Parcels from the Auction Sales have a surveyed line (PTP) and include an estimated hand
drawn line (Meandering). The testimony of Ms. Berscheid is that the bumps, curves, and rock
piles on the shore line outlined on the Meandering add utility to the parcel and as a result the
policy of the Assessor’s office is to use the Meandering line when that information is available.
However, in 2016 and 2017 at least half of the parcels on Priest Lake which can have what is
termed by the Assessor as “added utility” that are not being assessed on those front footage
measurements.
Plaintiff/Appellants vehemently disagree that irregular shorelines and rock piles add
Page 24
value to their parcel at an average price of $4,247 a front foot. However, even if that were to be
found by the court that Meandering is as an acceptable assessment method for front footage, it
does not resolve that issue that only half of the lake is being assessed for the additional front
footage and “added utility” while the other half of Priest Lake land owners benefit from not
having that line delineated on a plat or depicted by the Bonner County Planning department.
C. Bumps, curves, and rock piles do not increase lot utility
In addition to the estimate nature of the hand drawn Meander on Department of Lands
Plats and the inequality of two different assessment methods on Priest Lake the bumps, curves,
and rock piles depicted on the Meandering line do not increase lot utility. The Meandering line
affects each parcel individually but overall the shape problems include protrusions, inlets, and
curved shorelines.
An example of the problems with protrusions on the meandering are illustrated with the
Alice Property (Exhibit 41 – Pages 17-18). The three protrusions on the shoreline are visible in
the photos on the appraisal and a curve to the shore near the side. Although the BOE removed
49 feet by eliminating the dock (which is already assessed as an improvement) and one rock pile,
the Assessor is still including a rock outcropping visible on the center of the shoreline leaving an
increase of footage from PTP of 14.7 feet which creates an increase in the assessed value of over
$40,000. As noted in the appraisal the protrusion is flood prone and has limited utility to the
parcel.
A visual example of the lack of utility of the meandering shoreline with a curved
shoreline is found on the Deardon property (Exhibit 50- Pages 18-19). Ms. Berscheid testified
that a shoreline with curves has added utility without any explanation as to what that exactly is
that utility. The shape of the shore not being a straight line, as documented in the appraisal
Page 25
pictures, does not benefit the property. The additional 9.46 that the Deardon property is being
assessed increases the overall assessed value by over $40,000 while not providing any added
utility to the parcel.
A visual example of the lack of increased value or functional use of the property with an
inlet on the shoreline can be found on the Williams property (Exhibit 67 – Pages 17-19). The
additional 9.08 feet that is assessed on the Meandering line is an inlet of the water into the
property. In direct contradiction to the protrusions as added utility argument of the Assessor,
inlets are also seen as added utility. In the case of the Williams property is adds $39,879.36 to
have a water inlet depicted on the Meandering line.
It is the PTP measurement of the parcel that determines how much utility a shoreline has
when it comes to setbacks for improvements, privacy, and utility.
CONCLUSION
In conclusion the Assessor’s methods for valuing the parcels at issue are not correct and
the application of the Assessor’s methods violate Idaho law. The Assessor did not find market
value as defined by Idaho Code and incorrectly excluded market sales to set the values of the
parcels at issue. The position that the Assessor cannot use the Auction Sales as a point of law is
not only incorrect but as applied has resulted in inaccurate market values.
In addition to inaccurate market values set by an invalid front footage rate the values or
parcels assessed on the hand drawn, Meandering line with an estimation is not permissible. The
Meandering line is not an accurate method of measuring the shoreline for the purposes of finding
market value and in 2016 and 2017 the parcels at issue were assessed unequally in comparison to
other parcels on Priest Lake who are assessed on PTP measurements.
Plaintiff/Appellants request the court find the following:
Page 26
1. The market value of the parcels be set at market value as set by the testimony of Mr.
Morse and evidence before the court as Exhibits 40-68 and summarized in Illustration B.
2. The Auction Sales are market value as defined in Idaho Code §63-201(15).
3. The estimated hand drawn line is not a valid measurement for assessment purposes where
there is a surveyed PTP measurement on the plat.
4. It was unconstitutional to assess the parcels at issue on the Meandering line front footage
while over half of the parcels at Priest Lake in 2016 and 2017 were assessed on the PTP
line for front footage.
5. The shoreline variations in shape, as depicted on the hand drawn Meandering line, do not
add utility to the parcels at issue.
Respectfully submitted this 8th of November 2018.
ELSAESSER ANDERSON, CHTD. /s/Katherine Elsaesser____ Katherine Elsaesser, Attorney for Plaintiffs
CERTIFICATE OF SERVICE
I hereby certify that on this 8th day of November, 2018 I served a true and correct copy of the foregoing on the individuals listed below, by the following method:
Pat Braden, Attorney at Law- via email [email protected] /s/Katherine Elsaesser
Plaintiff
State Dept of Lands purchase price without buyer fee
County Assessment
County Assesment Without Site Improvements
Increase from Auction Sale
Ed Morse Valuation
Market Increase Per Ed Morse
Variance in increase from County to Market
Total Variance betweeen County and Market
Appraisal Exhibit Number
BOE Appeal Exhibit Number
Assessor Exhibit Letter
Powers, David & Sally 665,000.00$ 1,049,545.00$ 1,023,545.00$ 53.92% 750,000.00$ 12.78% 41.13% 273,545.00$ 60 25 TWakely, Thomas & Lehn, Jennifer 465,000.00$ 785,875.00$ 759,875.00$ 63.41% 520,000.00$ 11.83% 51.59% 239,875.00$ 66 31 AAHouk, Mark & Inez 410,000.00$ 797,188.00$ 784,188.00$ 91.27% 570,000.00$ 39.02% 52.24% 214,188.00$ 52 17 NAlice, Matthew & Alice * 400,000.00$ 708,095.00$ 695,095.00$ 73.77% 490,000.00$ 22.50% 51.27% 205,095.00$ 41 6 CMartinez, Albert 475,000.00$ 781,069.00$ 768,069.00$ 61.70% 580,000.00$ 22.11% 39.59% 188,069.00$ 54 19 PBelles, Marcia & Burt 380,000.00$ 686,571.00$ 673,571.00$ 77.26% 490,000.00$ 28.95% 48.31% 183,571.00$ 42 7 DAbsalonson Trust 485,000.00$ 740,511.00$ 727,511.00$ 50.00% 545,000.00$ 12.37% 37.63% 182,511.00$ 40 5 BWolfe, Ashley and Harrison 600,000.00$ 968,432.00$ 955,432.00$ 59.24% 775,000.00$ 29.17% 30.07% 180,432.00$ 68 33 CCWilliams, Russell & Diana 425,000.00$ 711,349.00$ 698,349.00$ 64.32% 525,000.00$ 23.53% 40.79% 173,349.00$ 67 32 BBPeterson, Phillip & Rita 365,000.00$ 693,919.00$ 680,919.00$ 86.55% 510,000.00$ 39.73% 46.83% 170,919.00$ 59 24 SRenzi, Thomas & Nancy 474,000.00$ 704,377.00$ 691,377.00$ 45.86% 525,000.00$ 10.76% 35.10% 166,377.00$ 62 27 VDavis, John & Nancy $ 437,000.00 752,875.00$ 739,875.00$ 69.31% $ 575,000.00 31.58% 37.73% 164,875.00$ 49 14 KClevenger, Thomas & Sandra 465,000.00$ 700,891.00$ 687,891.00$ 47.93% 525,000.00$ 12.90% 35.03% 162,891.00$ 47 12 ILangsdorf, Danny & Michele 413,000.00$ 735,751.00$ 722,751.00$ 75.00% 570,000.00$ 38.01% 36.99% 152,751.00$ 53 18 OVieth, Ricchard & Lynne 450,000.00$ 686,947.00$ 673,947.00$ 49.77% 525,000.00$ 16.67% 33.10% 148,947.00$ 65 30 ZErickson Trust 455,000.00$ 636,967.00$ 623,967.00$ 37.14% 480,000.00$ 5.49% 31.64% 143,967.00$ 51 16 MRice, Stephen & Julie 480,000.00$ 660,720.00$ 647,720.00$ 34.94% 520,000.00$ 8.33% 26.61% 127,720.00$ 63 28 WBrumley, John & Diana 345,000.00$ 508,077.00$ 495,077.00$ 43.50% 375,000.00$ 8.70% 34.80% 120,077.00$ 43 8 EParker, Douglas 528,000.00$ 782,812.00$ 769,812.00$ 45.80% 650,000.00$ 23.11% 22.69% 119,812.00$ 58 23 DDCraven, Robert Jr. 540,000.00$ 700,395.00$ 687,395.00$ 27.30% 575,000.00$ 6.48% 20.81% 112,395.00$ 48 13 JOlmstead Trust 535,000.00$ 700,150.00$ 687,150.00$ 28.44% 575,000.00$ 7.48% 20.96% 112,150.00$ 57 22 RNorman S. Thompson Estate 391,000.00$ 538,432.00$ 525,432.00$ 34.38% 420,000.00$ 7.42% 26.96% 105,432.00$ 56 21 YDeardon, Bryan & Michelle 390,000.00$ 533,637.00$ 520,637.00$ 33.50% 420,000.00$ 7.69% 25.80% 100,637.00$ 50 15 LChristenson, John & Marcia 396,604.00$ 522,084.00$ 509,084.00$ 28.36% 415,000.00$ 4.64% 23.72% 94,084.00$ 46 11 HPriest Lake Legacy LLC 503,604.00$ 707,338.00$ 694,338.00$ 37.87% 605,000.00$ 20.13% 17.74% 89,338.00$ 61 26 USpilker, Matthew & Becky 552,000.00$ 684,274.00$ 671,274.00$ 21.61% 595,000.00$ 7.79% 13.82% 76,274.00$ 64 29 XNelson, David & Kerry 393,000.00$ 510,531.00$ 497,531.00$ 26.60% 425,000.00$ 8.14% 18.46% 72,531.00$ 55 20 QChao, Cooper & Joselle 418,604.00$ 510,829.00$ 497,829.00$ 18.93% 440,000.00$ 5.11% 13.81% 57,829.00$ 45 10 GCarmin Capital LLC 512,604.00$ 668,422.00$ 655,422.00$ 27.86% 610,000.00$ 19.00% 8.86% 45,422.00$ 44 9 FAverage 48.81% 16.95% 31.87% 144,312.52$ Lowest 18.93% 5.11% 8.86% 45,422.00$ Highest 91.27% 39.73% 52.24% 273,545.00$
Illustration B
