CASE NO. S LANCASTER COUNTY BOARD OF EQUALIZATION, Petitioner, and. JON L. LARGE, Respondent and Cross-Petitioner

Transcription

1 CASE NO. S '_"I" ~ l, i'),'i' 'I' IN THE SUPREME COURT OF THE STATE OF NEBRASKA LANCASTER COUNTY BOARD OF EQUALIZATION, Petitioner, and JON L. LARGE, Respondent and Cross-Petitioner vs, NORMAN H. AGENA, LANCASTER COUNTY ASSESSOR, Respondent. APPEAL FROM THE NEBRASKA TAX EQUALIZATION AND REVIEW COMMISSION BRIEF OF RESPONDENT AND CROSS-PETITIONER, JON L. LARGE AND BRIEF ON CROSS-APPEAL AGAINST NORMAN H. AGENA, LANCASTER COUNTY ASSESSOR PREPARED AND SUBMITTED BY: William F, Austin, #10140 ERICKSON & SEDERSTROM, P.C. 301 S, 13th Street, Suite 400 Lincoln, NE (402) waust@eslaw.com

2 TABLE OF CONTENTS Page TABLE OF CONTENTS TABLE OF AUTHORITIES JURISDICTIONAL STATEMENT STATEMENT OF THE CASE PROPOSITION OF LAW i ii I I I STATEMENT OF FACTS 1 ARGUMENT 1 BRIEF ON CROSS-APPEAL. 3 JI8124doc

3 TABLE OF AUTHORITIES Cased Cited Pages Sullivan v. City ofomaha, 146 Neb. 297, 21 N.W.2d 510 (1946) 1,2 Other 16A Am.Jur.2d Constitutional Law 203 (2008) 1, Neb. Laws L.B ii

4 JURISDICTIONAL STATEMENT Respondent Jon L. Large, hereinafter referred to as "Taxpayer," accepts the Jurisdictional Statement ofpetitioner Lancaster County Board ofequalization as correct. STATEMENT OF THE CASE Taxpayer accepts the Statement of the Case of Petitioner Lancaster County Board of Equalization as correct. PROPOSITION OF LAW I. An unconstitutional statute cannot repeal or in any way affect an existing one and if a repealing statute is unconstitutional, the statute that it attempts to repeal remains in full force and effect. Sullivan v. City a/omaha, 146 Neb. 297, 21 N.W.2d 510 (1946). 16A Am.Jur.2d Constitutional Law 203 (2008). STATEMENT OF FACTS Taxpayer accepts the Statement of Facts of Petitioner Lancaster County Board of Equalization as correct. ARGUMENT The Taxpayer finds himself in the anomalous position of being cast as a Respondent notwithstanding that his interests are actually aligned with those of the Petitioner in this case. Thus, in short, we agree with and adopt the position ofthe Petitioner to the effect that Section 35 of2006 Neb. Laws L.B. 808 should be declared unconstitutional and that the decision ofthe Tax Equalization and Review Commission should be reversed and judgment entered in favor of the Taxpayer and the Petitioner. Taxpayer would point out that the effect of such a declaration of 1

5 unconstitutionality should not cause the special valuation provisions relating to agricultural land to be nonexistent. Rather, ifthe statutory section is declared unconstitutional and void, the effect should simply be to reinstate the prior law. See Sullivan v. City of Omaha, 146 Neb. 297, 21 N.W.2d. 510 (1946); 16A Am.Jur.2d Constitutional Law 203 (2008). 2

6 BRIEF ON CROSS-APPEAL AGAINST RESPONDENT NORMAN H. AGENA, LANCASTER COUNTY ASSESSOR TABLE OF CONTENTS TABLE OF AUTHORITIES 4 JURISDICTIONAL STATEMENT.. 6 STATEMENT OF THE CASE 7 ASSIGNMENTS OF ERRORS 8 PROPOSITIONS OF LAW 8 STATEMENT OF FACTS 11 ARGUMENT THE TERC IMPROPERLY REVERSED THE FACTUAL CONCLUSION OF THE BOARD THAT THE SUBJECT PROPERTY WAS PRIMARILY USED FOR AGRICULTURAL PURPOSES 13 (a) The Subject Property met the factual criteria established by the Board 13 (b) The TERC improperly ignored the directive issued by the Property Tax Administrator. 14 (c) The TERC disregarded the presumption accorded to decisions ofthe Board...15 (d) There was a lack ofclear and convincing evidence to overturn the decision ofthe Board 19 II. THE TERC IMPROPERLY RECEIVED THE TESTIMONY OF COMMISSIONER RAY STEVENS 21 CONCLUSION HlX 3

7 TABLE OF AUTHORITIES Cased Cited Castellano v. Bitkower, 216 Neb. 806,812,346 N.W.2d 249, 253 (1984) 10, 16 Davis v. Wimes, 263 Neb. 504, 641 N.W.2d 37 (2002) 15 Firethorn Investment v. Lancaster County Board0/Equalization, 261 Neb. 231, 622 N.W.2d 605 (2001) 11, 20 Lancaster County Board0/Equalization v. Condev West, Inc., 7 Neb.App. 319, 581 N.W.2d 452 (1998) 11, 20 Northern Natural Gas Company v. State Board0/Equalization and Assessment, 232 Neb. 806,443 N.W.2d 249 (1989) 20 Omaha Country Club v. Douglas County BoardofEqualization, 11 Neb.App. 171, 645 N.W.2d 821 (2002) 9, 16 Phelps County BoardofEqualization v. Graf, 258 Neb. 810,606 N.W.2d 736 (2000)... 10, 16 Pittman v. Sarpy County Board0/Equalization, 258 Neb. 390, 603 N.W.2d 447 (1999)9, 10, 16 9, 10, 16 Sasich v. City ofomaha, 216 Neb. 864,347 N.W.2d 93 (1984) 21 State ex rel. People/or Responsible Omaha Urban Development v. Conley, 236 Neb. 122,459 N.W.2d 222 (1990) 21 YMCA ofomaha v. Douglas County, 60 Neb. 642, 83 N.W. 924 (1900) 19 Young Women's Christian Association 0/Lincoln v. City 0/Lincoln, 177 Neb. 136, 128 N.W.2d 600 (1964) 9, 20 Statutes Cited Neb. Rev. Stat (Reissue 1997) 18 Neb. Rev. Stat (Cum. Supp. 2006).18 Neb. Rev. Stat (1) (Cum.Supp. 2006) 15 Neb. Rev. Stat (2007 Supp.) 7 Neb. Rev. Stat (Cum.Supp. 2006) 7, 8, 9,13 JI8124.doc 4

8 Neb. Rev. Stat (8) (Cum.Supp. 2006) 10, 15 Neb. Rev. Stat (Cum.Supp. 2006) 6, 7 Other Supreme C0U11 Rules of Practice and Procedure, Rule IE 6 5

9 JURISDICTIONAL STATEMENT Norman H. Agena, the Lancaster County Assessor and Respondent (the "Assessor") herein, filed an appeal with the Nebraska Tax Equalization and Review Commission (the "TERC") challenging the decision ofthe Lancaster County Board ofequalization (the "Board") reinstating the special agricultural valuation for certain property owned by Taxpayer. (Tl9) On January 18, 2008, the TERC rendered its decision, finding that the Taxpayer's property was not eligible for special agricultural valuation as of the assessment date ofjanuary I, 2007, and reversed the action of the Board. (T26) The Board filed its Petition for Judicial Review on February IS, 2008, pursuant to Neb. Rev. Stat (Cum.Supp. 2006), which provides, in pertinent part, that: (I) Any party aggrieved by a final decision in a case appealed to the commission, any party aggrieved by a final decision of the commission on a petition, or any party aggrieved by an order of the commission issued pursuant to section or sections to shall be entitled to judicial review in the Court of Appeals... This cross-appeal against the Assessor is authorized by Supreme COUli Rules of Practice and Procedure, Rule IE, which provides: The proper filing of an appeal shall vest in an appellee the right to a cross-appeal against any other patty to the appeal. The cross-appeal need only be asserted in the appellee's briefas provided by Rule 9D(4). 6

10 STATEMENT OF THE CASE A. Nature ofthe Case This is an appeal from a decision ofthe TERC reversing the action ofthe Board that had reinstated the eligibility ofcertain property owned by the Taxpayer for special valuation pursuant to Neb. Rev. Stat (2007 Supp.). Respondent Norman Agena (the "Assessor") appealed the action ofthe Board to the TERC, which reversed the decision ofthe Board. B. Issue Before the Tax Equalization Review Commission The issue before the TERC was whether or not the subject property owned by the Taxpayer is "primarily used" for agricultural 01' horticultural purposes. C. How the Issues were Decided The TERC found that the Subject Property owned by the Taxpayer is used for commercial production of agriculture (T36), but that such is not the primary use of the property (T42) and therefore the property does not constitute agricultural or horticultural land as defined by Neb. Rev. Stat (1). D. Scope ofreview In an appeal from a decision of the TERC, Neb. Rev. Stat (Cum.Supp. 2006) provides: The review shall be conducted by the court for error on the record of the commission. If the court determines that the interest of justice would be served by the resolution of any other issue not raised before the commission, the court may remand the case to the commission for further proceedings. The court may affirm, reverse, or modify the decision of the commission or remand the case for further proceedings. 31S124.doc 7

11 ASSIGNMENTS OF ERROR The TERC erred: (l) In concluding that the primary use of the subject property was not for agricultural or horticultural purposes as defined by Neb. Rev. Stat (2) (Cum.Supp. 2006). (2) In disregarding the plain language of the directive issued by the Property Tax Administrator as to how the Assessor should determine primary use. (3) In failing to accord to the decision of the Board the proper presumption that the Board had faithfully performed its official duties, that it had acted upon sufficient competent evidence to justify its actions, and that such presumption would remain until rebutted by clear and convincing evidence. (4) By concluding that a difference of opinion on "primary use" constitutes clear and convincing evidence that the Board acted in an arbitrary and unreasonable fashion. (5) By admitting, over relevance and foundational objections, testimony of a dissenting County Commissioner regarding his opinion as to factors that should be considered in determining agricultural or horticultural purpose. PROPOSITIONS OF LAW 1. AGRICULTURAL LAND AND HORTICULTURAL LAND MEANS A PARCEL OF LAND WHICH IS PRIMARILY USED FOR AGRICULTURAL OR HORTICULTURAL PURPOSES, INCLUDING WASTELAND LYING IN OR ADJACENT TO AND IN COMMON OWNERSHIP OR MANAGEMENT WITH OTHER AGRICULTURAL LAND AND HORTICULTURAL LAND. Neb. Rev. Stat (Cum.Supp. 2006). 8

12 II. AGRICULTURAL OR HORTICULTURAL PURPOSES MEANS USED FOR THE COMMERCIAL PRODUCTION OF ANY PLANT OR ANIMAL PRODUCT IN A RAW OR UNPROCESSED STATE THAT IS DERIVED FROM THE SCIENCE AND ART OF AGRICULTURE, AQUACULTURE, OR HORTICULTURE. Neb. Rev. Stat. 77- I359(2) (Cum.Supp, 2006). III. WHETHER THE PRIMARY USE OF PROPERTY IS FOR AGRICULTURAL OR HORTICULTURAL PURPOSES MUST IN EACH INSTANCE BE DETERMINED BY ITS OWN FACTS. Young Women's Christian Association of Lincoln v. City of Lincoln, 177 Neb. 136, 128 N.W.2d 600 (1964). IV. A DECISION OF A COUNTY BOARD OF EQUALIZATION IS ENTITLED TO THE PRESUMPTION THAT THE COUNTY BOARD OF EQUALIZATION HAS FAITHFULLY PERFORMED ITS OFFICIAL DUTIES AND HAS ACTED UPON SUFFICIENT, COMPETENT EVIDENCE TO JUSTIFY ITS ACTIONS; THAT PRESUMPTION REMAINS UNTIL REBUTTED BY CLEAR AND CONVINCING EVIDENCE. Pittman v. Sarpy County BoardofEqualization, 258 Neb. 390,603 N.W.2d 447 (1999). Omaha Country Club v. Douglas County Board ofequalization, 11 Neb.App. 171, 645 N.W.2d 821 (2002). 9

13 V. THE NEBRASKA TAX EQUALIZATION AND REVIEW COMMISSION CAN GRANT RELIEF ONLY IF THE ACTION OF A COUNTY BOARD OF EQUALIZATION WAS UNREASONABLE OR ARBITRARY. Neb. Rev. Stat (8) (Cum.Supp. 2006). VI. A DECISION IS ARBITRARY WHEN IT IS MADE IN DISREGARD OF THE FACTS OR CIRCUMSTANCES AND WITHOUT SOME BASIS THAT WOULD LEAD A REASONABLE PERSON TO THE SAME CONCLUSION. Pittman v. Sarpy County Board ofequalization, supra. Phelps County BoardofEqualization v. Oraj, 258 Neb. 810, 606 N.W.2d 736 (2000). VII. THE TERM "UNREASONABLE" CAN BE APPLIED TO AN ADMINISTRATIVE DECISION ONLY IF THE EVIDENCE PRESENTED LEAVES NO ROOM FOR DIFFERENCES OF OPINION AMONG REASONABLE MINDS. Pittman v. Sarpy County BoardofEqualization, supra. VIII. CLEAR AND CONVINCING EVIDENCE MEANS AND IS THAT AMOUNT OF EVIDENCE WHICH PRODUCES IN THE TRIER OF FACT A FIRM BELIEF OR CONVICTION ABOUT THE EXISTENCE OF A FACT TO BE PROVED. Castellano v. Bitkower, 216 Neb. 806,812,346 N.W.2d 249, 253 (1984).. 10

14 IX. WHEN REVIEWING AN ORDER OF THE TAX EQUALIZATION AND REVIEW COMMISSION FOR ERRORS APPEARING ON THE RECORD, THE APPELLATE COURT'S INQUIRY IS WHETHER THE DECISION CONFORMS TO LAW, IS SUPPORTED BY COMPETENT EVIDENCE, AND IS NEITHER ARBITRARY, CAPRICIOUS, NOR UNREASONABLE. Lancaster County Board ofequalization v. Condev West, Inc., 7 Neb.App. 319, 581 N.W.2d 452 (1998). Firethorn Investment v. Lancaster County Board ofequalization, 261 Neb. 231, 622 N.W.2d 605 (2001). STATEMENT OF FACTS The Taxpayer is the owner oflot 19, an Irregular Tract, located in the Northwest Quarter ofsection 20, Township 8 North, Range 8 East ofthe 6th P.M., Lancaster County, Nebraska (the "Subject Property"), (EI8,1:16, Vol. II.) The Subject Property comprises acres, (E18,1:16, Vol. II), in area and is improved with a residence and a garage, (E18,2:16, Vol. II). The Assessor classified acres of the parcel as "ag acres." (E18,3:16, Vol. II.) Approximately acres are leased to one Owen Cheney, a farmer, for the production of corn and soybeans. (E26,2: 13, Vol. II.) The fields are not fenced and are farmed in conjunction with other lands leased or owned by Mr. Cheney. (37:9-17.) The lessee produced approximately 1,640 bushels of corn and 175 bushels of soybeans on the Subject Property in 2006, with a total cash value (at $3.00 per bushel for corn and $6.00 per bushel for soybeans) of $5,968. The Taxpayerreceived as cash rent for 2006 the sum of$1,157. (E26,1 :13, Vol. II.) dox II

15 In addition to the tenant farming, the Taxpayer testified that he was in the process of establishing a vineyard on the Subject Property, (20: 13-23), and that the portion of the Subject Property devoted to vineyard was shown in a photograph, (40:15-22) (E30,7:13, Vol. II). Taxpayer also testified that he had planted fruit trees along an entrance drive, (28: 11-25), that portion of the Subject Property being shown in a photograph received as E30,5:13, Vol. II, (35: 17-36:I). The Subject Property lies outside the corporate limits of any municipality or sanitary and improvement district, (110: 11-13), and is zoned for agriculture, (110: 14-15). Since tax year 2002, a portion of the Subject Property was accorded special valuation as agricultural or horticultural land. (38: ) However, subsequent to the passage of 2006 Nebraska Law L.B. 808 by the 99th Legislature, the Assessor began a review of properties that were specially valued, (E33,1:14, Vol. II), and concluded that the property oftaxpayer no longer qualified for special valuation because it was not primarily used for agricultural or horticultural purposes, (E35,1: 14, Vol. II). The Taxpayer filed a protest from this determination with the Board, (36,1:14, Vol. II), which, in reviewing the application for special valuation, considered three factors in making its determination that the Subject Property should not be disqualified. (44:19-21.) First, it determined that the Subject Property had a Farm Service Agency (FSA) number assigned to it. (44:22-45:1.) Second, it made a determination that gross income was generated from the production of plant or animal product in a raw or unprocessed state that is derived from the science and art of agriculture, aquaculture or horticulture. (45:1-4.) Third, it determined that the majority of the acres comprising the Subject Property were used for the production of a plant or animal product in a raw or unprocessed state that is derived from the science and art of agriculture, aquaculture or horticulture. (45:4-6; 48:9-25.) These factors, according to County Commissioner Larry Hudkins, were applied consistently in reviewing 12

16 special valuation reviews by the Board. (46:11-16.) Finding that the applicable criteria were met, the Board reinstated the special valuation for the Subject Property. (E28,1: 13, Vol. II.) The Assessor appealed this decision to the TERC, which, after receiving exhibits and hearing testimony, including the testimony of a dissenting County Commissioner, (67:13-80:23), reversed the decision ofthe Board. Tins appeal and cross-appeal ensued. ARGUMENT 1. THE TERC IMPROPERLY REVERSED THE FACTUAL CONCLUSION OF THE BOARD THAT THE SUBJECT PROPERTY WAS PRIMARILY USED FOR AGRICULTURAL PURPOSES. (a) The Subject Propeliy met the factual criteria established by the Board. The facts surrounding this dispute are apparently not in dispute. The Subject Property consists of acres, (EI8,I:16, Vol. II), of which acres are used for the commercial production of com and soybeans, (E26,2:13, Vol. II), while other portions of the tract are in the process of being converted to vineyard and orchard use, (21:16-22:16; 28:8-30:8). Prior to tax year 2007, acres of the Subject Property were accorded special valuation for agricultural purposes with the remaining area constituting the home site. (E18,3:16, Vol. II.) In March of 2007, the Taxpayer received a notice of disqualification from the Assessor stating that the Subject Property had been disqualified from special valuation for the following reason: "The parcel is not used primarily for agricultural or horticultural purposes, as required by Neb. Rev. Stat , as revised during the 2006 Legislative Session by LB 808." (E35,1:14, Vol. II.) The Taxpayer filed a timely protest with the Lancaster County Clerk and a hearing on the protest 13

17 was conducted before the Board on May 8, The Board had established essentially three criteria for determining primary use: (I) whether the parcel had a Farm Service Agency number assigned to it; (2) whether gross income was generated from production ofa plant or animal product in a raw or unprocessed state that is derived from the science and art of agriculture, aquaculture or horticulture; and (3) whether the majority of acres in the parcel were used for the production of a plant or animal product in a raw or unprocessed state that is derived from the science and alt of agriculture, aquaculture or horticulture, (Testimony oflarry Hudkins 44: 19-45:6.) At the May 8, 2007, hearing, the Taxpayer showed that ofthe acres comprising the Subject Property, acres or 78.54% of it was being used for the production of corn and soybeans. (E26,1: 13, Vol. II.) The Taxpayer showed that income was derived from the Subject Property through the commercial production of corn and soybeans to the extent of some $5,968 of which the Taxpayer received a portion as cash rent in the amount of $1,157. (E26,1:13, Vol. II.) As required by the Board, the Taxpayer showed that the Subject Property had been given a farm number by the FSA. (E2,2:14, Vol. II.) Thus, all criteria established by the Board were met by the Taxpayer to show that the primary use of the property was for agricultural or horticultural purposes. (b) The TERC improperly ignored the directive issued by the Property Tax Administrator. The nub of the argument involves the use by the Board of criteria (3), area of use, to determine "primary use." Criteria number (3) was developed by the Board consistent with Directive "Determining whether a Parcel ofland Qualifies as Agricultural or Horticultural 14

18 Land" issued by the Nebraska Department of Property Assessment and Taxation on March 9, (E3: 16, Vol. II.) On page three thereof, the Property Tax Administrator provides a definition ofthe phrase "primarily used" as follows: Primarily used means for the most part. It could be determined by area used or other criteria uniformly applied. Case law usually refers to "primarily" as more than fifty-one percent. (E3,3:16, Vol. II.) It falls within the duties of the Property Tax Administrator to "prepare, issue, and annually revise guides for county assessors in the form of property tax laws, rules, regulations, manuals, and directives." Neb. Rev. Stat (1) (Cum.Supp. 2006). And, while an appellate court is obligated to reach an independent conclusion on a question of law, irrespective ofthe decision made by the court below, deference should be given to an agency's interpretation of its own regulations, unless plainly erroneous or inconsistent. Davis v. Willies, 263 Neb. 504, 641 N.W.2d 37 (2002). Thus, in making its determination that the Taxpayer's property was "primarily used" for agricultural or horticultural purposes, the Board had not only established its own reasonable criteria for making that determination, but it was also conforming to an authoritative directive issued by the Property Tax Administrator to the effect that "area" was a sound basis upon which to predicate primary use. The Board's application of the statute in question to the Subject Property was reasonable, and, according to Commissioner Larry Hudkins, the Board applied the statute in a uniform fashion as to all properties similarly situated. (46:11-16.) (c) The TERC disregarded the presumption accorded to decisions ofthe Board. On appeal, it was the duty of the TERC to affirm unless the action of the Board was unreasonable or arbitrary. Neb. Rev. Stat (8) (Cum.Supp. 2006). To show that an 15

19 action of the Board was unreasonable or arbitrary, the TERC has to be presented with proof by clear and convincing evidence. Omaha Country Club v. Douglas County Board ofequalization, II Neb.App. 171,645 N.W.2d 821 (2002). A decision is arbitrary when it is made in disregard of the facts and circumstances and without some basis which could lead a reasonable person to the same conclusion. Phelps County Board ofequalization v. Graf, 258 Neb. 810, 606 N.W.2d 736 (2000). A decision is unreasonable only if the evidence presented leaves no room for differences ofopinion among reasonable minds. Pittman v. Sarpy County BoardofEqualization, 258 Neb. 390, 603 N.W.2d 447 (1999). Clear and convincing evidence means and is that amount of evidence which produces in the trier of fact a firm belief or conviction about the existence ofa fact to be proved. Castellano v. Bitkower, 216 Neb. 806, 812, 346 N.W.2d 249, 253 (1984). Curiously, in its decision and order, the TERC quoted the applicable law, and then proceeded to ignore it. It also ignored the presumption that the Board had faithfully performed its official duties and had acted upon sufficient competent evidence to justify its actions, which presumption remains until rebutted by clear and convincing evidence. Pittman, supra. Instead, the TERC relied upon testimony of Rob Ogden, Deputy County Assessor for Lancaster County, who testified that the Assessor's Office took a different approach to calculating when property was "primarily used" for agricultural or horticultural purposes. Essentially, the Assessor's approach was to capitalize the rental income from the agricultural lease by which he imputed income off the land of $26,000. (92:6-14.) Then, he compared that to the value of the home and the home site, which he determined had a value of $180,000. (92: ) Since his capitalized rental income was far less than the value ofthe residence, he then concluded that the primary use was residential. (95: I0-11.) Of course, this approach, even 16

20 if acceptable, was applied in a patently incorrect fashion by the Assessor since he concluded that the parcel showed $1,300 ofincome from agricultural use. (91:14-20.) The actual income from agricultural was the value of the crops grown thereon, which represented nearly $6,000 in income from agriculture from this particular tract of ground. (EI5,2:16 Vol. II.) Thus, even if this approach did show primary use, the capitalized income stream was about one-fifth ofwhat it should have been. The proper capitalization in the vicinity of some $125,000 much more closely approximated the value assigned to the home site, and this didn't even take into consideration the fact that there was other agricultural activity, i.e., the vineyard in process, located on the property. Nevertheless, the TERC apparently accepted this approach, and posited the unsupported theorem that "Greater value is then an indicator of the primary use of the parcel." (T39) The TERC also theorized that, because the minimum size allowed by Lancaster County Zoning Regulations for construction of a residence without creation of a subdivision or zoning variance is twenty acres, and because the Subject Property is just over twenty acres, this was evidence of the Taxpayer's motivation for purchase of the parcel was for use as a residence, concluding that the evidence thus showed that the Subject Property was purchased for residential use. (T37) There are a number of inherent problems with the approach taken by the TERC. First, if a farmer should build a $400,000 house on his property, he had better be sure that he has over 100 acres to devote to farming 01' the Assessor will not consider the property a farm, based on the values assigned to ag land in the instant case. Indeed, if primary use is based solely upon greater value, then Nebraska is apparently not an agricultural state, much to the surprise ofus all. Out of a total assessed value in the state of Nebraska of $124,367,147,604, ag land represents only $28,265,476,662, the remaining amount representing residential, ($69,260,735,251), and doe 17

21 commercial, railroad and public service property. (Nebraska Department of Revenue Property Assessment Division Research Reports State Total Values by Property Type.) Furthermore, the testimony before the TERC does not reflect a residential use of the property. The Taxpayer, Jon Large, testified as follows regarding his motivation for acquiring the property: Q. And can you tell us, when you purchased the property, was it your intention to use it as a dwelling unit also? A. Also, yes. Q. Was that the primary reason for buying the property, was to live on it? A. Yes, I wanted to live there, but I wanted to live on a piece of agricultural property, sir. (25:20-26:2.) Both the Assessor and the TERC considered the size of the parcel to be a factor in determining primary use. However,' their rationale and conclusion are both faulty. Because the minimum site size allowed by Lancaster County for construction of a residence without creation of a subdivision or receipt of a zoning variance is 20 acres, the Assessor and TERC concluded that the acre size ofthe Subject Property militated in favor of a finding for residential use. However, the better approach is to consider the statute applicable to county zoning, which recognizes that counties cannot regulate buildings utilized for agricultural purposes on a farmstead of twenty acres or more which produces $1,000 01' more of farm products each year. (See Neb. Rev. Stat ,03.) (See, also, Neb. Rev. Stat. IS-90S relating to zoning of cities ofthe primary class to the effect that a "farmstead is defined as property oftwenty acres or ,doc 18

22 more which produces one thousand dollars or more of farm products each year.") Contrary to the speculation engaged in by the TERC regarding the Taxpayer's motives in acquiring the Subject Property, the fact is that this acre parcel produces more than $1,000 of farm products each year and qualifies under the county zoning statutes as a farmstead. Finally, the motive of the Taxpayer in purchasing the property is irrelevant. It is the actual use that determines its tax status. (See YMCA a/omaha v. Douglas County, 60 Neb. 642, 83 N.W. 924 (1900).) Overall, the approach of the Assessor might be a reasonable approach. The approach suggested by the dissenting County Commissioner who testified at the hearing over objection, might also be a reasonable approach. The point, however, is that the approach of the Board was not only reasonable under the facts presented, but consistent with the directive from the Property Tax Administrator, and entitled to a presumption of correctness. That the Assessor might disagree is irrelevant, and even the TERC itself was forced to concede on page 15 of its order that: The fact that the number of acres used for commercial production exceeds the number of acres used for all other purposes indicates that commercial production is the primary use of the subject property. (T40) (d) There was a lack of clear and convincing evidence to overturn the decision of the Board. Therefore, one must ask: Where is the clear and convincing evidence that overcomes the statutory presumption to be accorded to the actions of the Board? Where is the clear and convincing evidence of arbitrariness and unreasonableness, i.e., that the Board's actions lacked 19

23 some basis that could lead a reasonable person to the same conclusion or that the evidence leaves no room for differences ofopinion among reasonable minds? Whether use ofproperty is entitled to a statutory exemption is a matter that must in each instance be determined by its own facts. Young Women's Christian Association oflincoln v. City oflincoln, 177 Neb. 136, 128 N.W.2d 600 (1964); Northern Natural Gas Company v. State BoardofEqualization and Assessment, 232 Neb. 806, 443 N.W.2d 249 (1989). On the facts and on the ground, there is really little doubt that this land is primarily devoted to agricultural and horticultural uses. This is not a situation where a taxpayer has planted ten pecan trees and demanded special valuation, or where a flock of fowl was kept upon the property and a claim of agricultural use made. To the contrary, there are full-fledged crops grown upon over acres of the Subject Property utilized by a real fanner in conjunction with other adjacent tracts of ground. One need only look at the photographs of the Subject Property submitted as Exhibit 30, (E30,1-10:13, Vol. II), to see that the Subject Property looks every bit like any other thriving farm in Nebraska. As the Court is aware, appellate review of a final decision of the TERC is conducted for errors on the record of the TERC. Firethom Investment v. Lancaster County Board of Equalization, 261 Neb. 231, 622 N.W.2d 605 (2001); Lancaster County Board ofequalization v. Condev West, Inc., 7 Neb.App. 319, 581 N.W.2d 452 (1998). When reviewing an order of the TERC for errors appearing on the record, the appellate court inquires into whether the decision conforms to the law, is supported by competent evidence, and is neither arbitrary, capricious, nor unreasonable, Id. Here, it was the statutory duty of the TERC to affirm the action of the Board unless the evidence showed that the Board acted unreasonably or arbitrarily. Clearly, the TERC exceeded its statutory authority by simply substituting its opinion for that of the Board when the Board's 20

24 opinion was both reasonable and supported by competent evidence. Therefore, the Taxpayer suggests that the TERC's decision does not conform to the law since it is unsupported by the clear and convincing evidence necessary to overturn the presumptively correct decision of the Board that granted to the Subject Property special valuation. II. THE TERC IMPROPERLY RECEIVED THE TESTIMONY OF COMMISSIONER RAY STEVENS. Commissioner Ray Stevens, a member of the Board, testified to the effect that income derived from commercial production should be compared to the total value of the property, in addition to the factors utilized by the Board and by the Assessor. (73:16-22.) The Taxpayer objected to receipt ofthe testimony ofmr. Stevens on foundational and relevance grounds. Mr. Stevens was not qualified as an expert and should not have been allowed to testify as to how he, as a dissenting Board member, would have decided the issue. Since he was not proffered as an expert, his mere position as a Board member who dissented from the majority determination should have no relevance to the present proceeding. In a somewhat analogous situation, this Court has concluded that, in determining whether the exercise of legislative authority by a governing body is within its statutorily granted powers, a reviewing COUll is not concerned with motives, purposes, or personal beliefs ofany individual board member. State ex rel. People for Responsible Omaha Urban Development v. Conley, 236 Neb. 122, 459 N.W.2d 222 (1990); Sasich v. City ofomaha, 216 Neb. 864,347 N.W.2d 93 (1984). The Taxpayer suggests that the reception of the testimony of Mr. Stevens was improper and that it was error for the TERC to rely on that evidence. J18124.doe 21

25 CONCLUSION The Taxpayer submits to the Court that, if Section 35 of L.B. 808 is constitutional, then its application to the subject property clearly militates in favor of granting the special valuation accorded to agricultural or horticultural property. The Subject Property is, by any reasonable standard, a piece of farm ground, having its designated FSA, being used for the commercial production of corn and soybeans, and having the majority of the acreage of the acre farmstead devoted to that purpose. Taxpayer respectfully suggests that the TERC overstepped its bounds by substituting what it deemed to be its own reasonable approach for the perfectly supportable and reasonable approach of the Board. The TERC's order and decision should be reversed and the determination of the Board granting special valuation to the Subject Property should be reinstated. DATED this I;~ day ofjune, Respectfully Submitted,, By: \.J~')~'>-&U<K~ William F. Austin, #101 ERICKSON & SEDERSTROM, P.C. 301 S. 13th Street, Suite 400 Lincoln, NE Telephone: (402) doc 22