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Kentucky Board of Tax Appeals Determines Value of Automobile Manufacturing Plant to be Nearly Half the Value Asserted by Property Valuation Administrator

12.06.2010

In Ford Motor Co. v. Jefferson County Prop. Valuation Adm’r, File Nos. K08-S-166 and K09-S-338, Order No. K-20934 (KBTA Sept. 22, 2010), the Kentucky Board of Tax Appeals (“KBTA”) reversed the Jefferson County Board of Assessment Appeals’ (“BAA”) decision that the fair cash value of Ford Motor Company’s (“Ford”) Kentucky Truck Plant (“Plant”) was $51,000,000 for 2008 and 2009, increased by the County Administrator at the KBTA trial to $67,900,000 for 2008 and between $67,900,000 and $64,000,000 for 2009, determining that the fair cash value was $39,000,000 for 2008 and $35,000,000 for 2009.

The Plant at issue is Ford’s largest assembly plant in North America.  The Plant, built in 1969 and expanded in the 1990s, consists of approximately 413 acres of land with approximately 4.3 million square feet of improvements thereon.

For tax years 2008 and 2009, the Jefferson County Property Valuation Administrator (“PVA”), originally assessed the Plant at a fair cash value of $51,000,000.  The BAA, upon first appeal by Ford, upheld the PVA’s assessed value for both tax years.

In an appeal before the KBTA, Ford asserted that the fair cash value of the Plant was $39,000,000 for 2008 and $35,000,000 for 2009 and the PVA increased the value at trial, and asserted that the fair cash value was $67,900,000 for 2008 and between $67,900,000 and $64,000,000 for 2009.

At the KBTA, Ford presented testimony and reports from two experts to support its asserted values – one expert on automotive engineering plant processes and one real property valuation expert with particular experience valuing “jumbo” industrial properties.  The PVA presented testimony and a report from a local real property valuation expert to support its asserted values.

Both real property valuation experts agreed that the sales comparison approach was the most reliable method for assessing the value of the Plant, but the comparables used by each of the experts differed materially; the value of the land was not materially disputed.  The opinion of value of Ford’s expert comprised of six (6) sales, five (5) of which were light vehicle assembly plants similar to Ford’s Plant.  The sixth sale was a large office equipment manufacturing plant similar in size to Ford’s Plant.  None involved sale/leaseback transactions.  The opinion of value of the PVA’s expert was based on of five (5) sales, only one (1) of which was a light vehicle assembly plant similar to Ford’s plant, and three (3) of which involved sale/leaseback transactions.

The KBTA applied the sales comparison method and found that the comparable sales used by Ford were more reliable than those of the PVA.  The KBTA stated that the PVA’s comparable sales were “flawed in as much as he relied upon sales of plants which were under lease.  That is not an accurate method of determining fair cash value in these cases.”  The KBTA expounded that such, “comparable sales do not take into account the actual characteristics of the realty in these cases.  It includes, by the fact of the going concern value of an occupied lease, a measure which inflates the price because more than real estate is in the sale.”

Accordingly, the KBTA entered Ford’s asserted values of $39,000,000 for 2008 and $35,000,000 for 2009 as the fair cash value of the Plant.  The value of the improvements under the KBTA’s determination translate to roughly $3.29/square foot for 2008 and $2.36/square foot  for 2009, and $9.07/square foot for 2008 and $8.14/square foot for 2009 when valued as improved.

The PVA announced it would not appeal the decision.  The authors’ law firm represented Ford in this case.

If you have questions about this topic or any other legal issue, please contact any member of the firm's State and Local Tax Team.

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