Owl Street Associates, LLC v. Town of Thornton Docket Nos ......Owl Street Associates, LLC v. Town of Thornton Docket Nos.: 21244-04PT/22474-05PT DECISION The “Taxpayer” appeals,

Owl Street Associates, LLC

v.

Town of Thornton

Docket Nos.: 21244-04PT/22474-05PT

DECISION

The “Taxpayer” appeals, pursuant to RSA 76:16-a, the “Town’s” 2004 and 2005

assessments as follows: (the “Property”).

2004 Map/Lot Property Description Land Value Improvement

Value Total Value

16-01-08GSCTR Activity Center $ 320,200 $ 199,900 $ 520,100 16-01-08 Clubhouse, 5 holes of golf course, 33 unit

approvals and 44.21 acres $ 217,800 $ 994,700 $ 1,212,500

16-01-09 11 acres and 1.3 golf course holes $ 22,900 $ 65,000 $ 87,900 16-01-21 1.61 acres and 0.33 golf course hole $ 2,900 $ 16,500 $ 19,400 16-01-22 1.86 acres and 0.33 golf course hole $ 3,300 $ 16,500 $ 19,800 16-01-23 1.79 acres and 0.34 golf course hole $ 3,200 $ 17,000 $ 20,200 16-01-8GS07 Green Scapes undeveloped site #7 $ 76,200 $ 76,200 16-01-8GS08 Green Scapes undeveloped site #8 $ 76,200 $ 76,200 16-01-8GS10 Green Scapes undeveloped site #10 $ 77,100 $ 77,100 16-01-8GS11 Green Scapes undeveloped site #11 $ 77,100 $ 77,100 16-01-8GS12 Green Scapes undeveloped site #12 $ 77,300 $ 77,300 16-01-8GS13 Green Scapes undeveloped site #13 $ 78,200 $ 78,200 16-01-8GS14 Green Scapes undeveloped site #14 $ 78,200 $ 78,200 16-01-8GS15 Green Scapes undeveloped site #15 $ 77,100 $ 77,100 16-01-8GS16 Green Scapes undeveloped site #16 $ 77,200 $ 77,200 16-01-8GS17 Green Scapes undeveloped site #17 $ 77,000 $ 77,000 16-01-8GS18 Green Scapes undeveloped site #18 $ 77,000 $ 77,000

Owl Street Associates, LLC v. Town of Thornton Docket Nos.: 21244-04PT/22474-05PT Page 2 of 23

2005 Map/Lot Property Description Land Value Improvement

Value Total Value

16-01-08GSCTR Activity Center $320,200 $430,600 $750,800 16-01-08 Clubhouse, 5 holes of golf course, 33 unit

approvals and 44.21 acres $ 217,800 $ 994,700 $ 1,212,500

16-01-09 11 acres and 1.3 golf course holes $ 22,900 $ 65,000 $ 87,900 16-01-21 1.61 acres and 0.33 golf course hole $ 2,900 $ 16,500 $ 19,400 16-01-22 1.86 acres and 0.33 golf course hole $ 3,300 $ 16,500 $ 19,800 16-01-23 1.79 acres and 0.34 golf course hole $ 3,200 $ 17,000 $ 20,200 16-01-8GS11 Green Scapes undeveloped site #11 $ 77,100 $ 77,100 16-01-8GS12 Green Scapes undeveloped site #12 $ 77,300 $ 77,300 16-01-8GS16 Green Scapes undeveloped site #16 $ 77,200 $ 77,200 16-01-8GS17 Green Scapes undeveloped site #17 $ 77,000 $ 77,000 16-01-8GS18 Green Scapes undeveloped site #18 $ 77,000 $ 77,000

The Taxpayer was represented by Mr. Thomas N.T. Mullen, a principal of Owl Street

Associates, LLC (“OSA”) and his daughter, Attorney Kelly M. Wieser.

For the reasons stated below, the appeals for abatement are denied.

The Taxpayer has the burden of showing, by a preponderance of the evidence, the

assessment was disproportionately high or unlawful, resulting in the Taxpayer paying a

disproportionate share of taxes. See RSA 76:16-a; Tax 201.27(f); Tax 203.09(a); Appeal of City

of Nashua, 138 N.H. 261, 265 (1994). To establish disproportionality, the Taxpayer must show

the Property’s assessment was higher than the general level of assessment in the municipality.

Id. The Taxpayer did not carry this burden.

The Taxpayer argued the assessments were excessive because:

Activity Center

(1) the Owl’s Nest Activity Center (“Activity Center”), since it began operations in 2005, has

been run at a significant loss (Taxpayer Exhibit No. 1 – 04-12-07) and has functional

obsolescence due to its unique and specific functions;

Owl Street Associates, LLC v. Town of Thornton Docket Nos.: 21244-04PT/22474-05PT Page 3 of 23 (2) membership in the Activity Center by Owl’s Nest property owners is optional and no deeded

rights to the Activity Center are given to Owl’s Nest property owners;

(3) the Town’s land base rate and condition factor adjustments are excessive and dissimilar from

those utilized in assessing the golf course clubhouse;

(4) revising the land base rate and adjustment factors to be similar to those utilized in assessing the

clubhouse produces an assessed value in 2004 of $235,532 and $466,232 for 2005;

Golf Course Properties

(5) the profit and loss statement of the golf operation for the last eight years has consistently

shown the golf course operates at a significant loss (Taxpayer Exhibit No. 8 – 04-12-07);

(6) the Town’s assessment of the golf course does not take into account the seasonal operation

of the course and thus the assessment should be reduced by approximately 50% for the

approximately half year operation of the golf course;

(7) the land value for the acres associated with the golf course is excessive because many of the

acres are necessary for the density requirements in developing the Link Side and Green Scapes

villages and because some of the septic systems for the units in those villages have easements on

the golf course;

(8) the actual cost of constructing the golf course is not necessarily indicative of its value

because six holes had to be rebuilt after being eroded by rain;

(9) the Town’s assessment for the remaining 33 unit approvals is incorrect because no land

remains associated with the golf course on which to build those units and no final subdivision

approval has been received;


Green Scapes Sites

(10) the Town’s assessments improperly include some intangible values such as the Activity

Center’s initiation fee;

(11) recent sales in 2005 and 2006 by OSA at $55,000 per site compared to the earlier $80,000-

$110,000 sale prices are more indicative of the site component value because the earlier sales

had been “heavy loaded” with the developer’s profit related to the construction of the units;

(12) the change in allocation of site value resulted after the Town based its assessments on those

earlier higher site value sale prices; and

(13) the actual taxable market value of the individual undeveloped sites is $40,000 because an

estimated $15,000 value for the Activity Center initiation fee needs to be deducted from the

$55,000 sale price.

The Town, represented by Avitar Associates of New England, Inc. (“Avitar”), argued the

assessments were proper because:

Activity Center

(1) the Activity Center was built to provide athletic facilities including swimming pools and

meeting and catering facilities for property owners at Owl’s Nest;

(2) a significant portion of the Activity Center is also used by OSA for office and marketing

purposes;

(3) the Activity Center was built in 2004 for a total cost relative to real estate of just under

$900,000 and is very functional in providing the athletic amenities to Owl’s Nest owners and

office space for OSA;

(4) the land assessment base rate of $100,000 was based on Green Scapes site sales and the 200

condition factor adjustment reflects the commercial use of this property;


Golf Course Property

(5) the golf course improvement value was derived from Marshal Valuation Service (“Marshal

Valuation”) Class III estimates of cost per hole to construct golf courses;

(6) the profit and loss statement submitted by the Taxpayer (Taxpayer Exhibit No. 8 – 04-12-07)

includes the interest payment on outstanding debt and the income analysis does not provide a

good indication of the golf course property’s market value;

(7) the 33 unit approvals have the potential to be utilized in future developments adjacent to the

golf course or to be transferred for greater development density with any additional land such as

the adjoining “Pike Property”;

(8) the Town’s overall assessed value for the golf course related properties is significantly less

than the total cost of the golf course development and related improvements;

Green Scapes Site

(9) the undeveloped Green Scapes sites owned by OSA received an abatement for the unfinished

condition of the road and the fact they were collectively held by the developer;

(10) OSA’s decision to reduce the selling price allocated to an undeveloped site to $55,000 is

not a proper basis for valuing the sites because OSA has the sole discretion of allocating the total

sale price between site value and unit construction costs; and

(11) one of the $55,000 sales involved a buyer utilizing the investment to complete an IRS Code

Section 1031 tax deferred exchange and the unit was leased back to OSA for two years as a

model and “golf and stay” package unit.

The parties stipulated the 2004 and 2005 levels of assessment were 96.4% and 90.8%.

The parties also agreed the board could take official notice pursuant to RSA 541-A:31, VI(d) of

the testimony and evidence received in the individual property owner’s appeals (Gary and

Owl Street Associates, LLC v. Town of Thornton Docket Nos.: 21244-04PT/22474-05PT Page 6 of 23 Andrea Atturio, et. al. v. Town of Thornton, Docket No. 21276-04PT, et. al.) heard on April 3

and 4, 2007. Because the board has considered the evidence submitted in both groups of

appeals, references to exhibits are followed with the date of the hearing at which they were

submitted.

On May 3, 2007 the board viewed, from the exterior, the Property including the golf

course, the club house with a restaurant, the Activity Center and many of the areas designated on

the “Master Plan” (collectively shown on Taxpayer Exhibit No. 1 – 04-03-07 and Municipality

Exhibit No. A – 04-03-07) for future development.

Board’s Rulings

Based on the evidence, the board finds the Taxpayer did not carry its burden to show the

assessed values were disproportionate to market value.

Overview

Before proceeding to the board’s detailed findings, an overview of the OSA development

in the Town of Thornton and in the adjoining Town of Campton is helpful in understanding the

board’s conclusions. Based on the testimony and Master Plan, OSA owned, as of April 1, 2004,

nearly 280 acres in Thornton. The acreage is comprised of the original acquisitions of 110.81

acres and the Pike Industries land (acquired in February 2004) of 167.05 acres in Thornton. The

OSA development is bisected by the Campton-Thornton town line and includes approximately

235 additional acres in the Town of Campton.1 The Master Plan depicts the development of

single-family lot villages, single-unit condominium villages and duplex condominium villages

arranged to take advantage of views of the mountains and the eighteen hole championship golf

1 The board has estimated the OSA acreage in Campton by reviewing the assessment-record cards contained in Docket No. 21309-04, Owl Street Associates, LLC v. Town of Campton and the various individual site owners at Pine Ridge Village (Campton) who had filed appeals with the board. It is simply an estimate to provide an indication of the overall scope of the development in both towns.

Owl Street Associates, LLC v. Town of Thornton Docket Nos.: 21244-04PT/22474-05PT Page 7 of 23 course developed by OSA in 1997-1999. During the two years under appeal only some of the

villages were under development, including Haartz Intervale, Link Side, Green Scapes, and Pine

Ridge (in Campton). On its view, the board noted ongoing development of other villages

subsequent to the years under appeal.

The Owl’s Nest development is adjacent to Interstate 93, is fronted on the west side by

the Pemigewasset River and has “spectacular views from every corner of the [golf] course”

(Municipality Exhibit No. B – 04-12-07, p. 1). The eighteen hole championship golf course was

professionally designed by Mark Mungeam of Cornish, Silva and Mungeam Inc. and includes a

club house with a restaurant, a “cart barn”, and a maintenance facility. Adjacent to Green Scapes

is the current Activity Center which contains an exercise room, a tennis court, an outdoor pool,

an indoor pool, a catering kitchen and the sales and business offices of OSA.

Different from most other recreational developments, the amenities such as the golf

course, club house and Activity Center are currently not part of any unit owners association. The

ownership of these amenities is retained by OSA but the golf course and club house are open to

Owl’s Nest residents and the general public. However, the general public has no access to the

Activity Center. Access to the Activity Center and preferred access and privileges to the golf

course and club house are through memberships, either given by OSA at the time of the purchase

of a lot, site or unit, or in the future through a separate membership purchase by subsequent

owners at Owl’s Nest. However, only owners of property at Owl’s Nest have the ability to be

members and join the Activity Center and the Owl’s Nest Player’s Club Membership, which

provides for preferred “tee times” and other privileges to the golf course (Taxpayer Exhibit No. 7

– 04-03-07). The only areas currently held in common through associations are the

Owl Street Associates, LLC v. Town of Thornton Docket Nos.: 21244-04PT/22474-05PT Page 8 of 23 infrastructures supporting the various villages such as developed roads, common septic systems

and land in the immediate village vicinity.

Detailed Findings

Because the Property under appeal is part of a common development scheme, the board

finds the highest and best use of the Activity Center and golf course are as amenities for the

development of the integrated recreational residential development.

Activity Center and Golf Course

The Taxpayer presented financial statements for the Activity Center and the golf course

which show both enterprises losing money and thus, argued their values were significantly less

than those assessed by the Town. The board finds the capitalization of the income of the

Activity Center and the golf course are not good measures of their value as integrated amenities

for the overall development scheme. As the Town noted, and the board agrees, both the Activity

Center and the golf course properties are special purpose improvements and constructed for

specialized functions. 2 Thus their highest and best use is to be considered for that purpose. The

Appraisal Institute: The Appraisal of Real Estate, pp. 25-26, (12th ed. 2001). Legal Issues and

Property Valuation and Taxation: Including Cases and Materials, p. 41 (1994). The New

Hampshire Supreme Court has held properties which are designed for special purposes to

achieve a highest and best use should be valued reflecting those specialized improvements. 590

2 Properties not used in conventional ways and for which there may be no conventional market are typically referred to as “special use” properties and the board has had some experience in reviewing the proportionality of their assessments in tax abatement appeals. See, e.g., North Country Environmental Service, Inc. v. Town of Bethlehem, BTLA Docket Nos.: 19709-02PT/20384-03PT/21064-04PT (May 7, 2007) (sanitary landfill); Creative Biomolecules, Inc. v. City of Lebanon, BTLA Docket No.: 16861-96PT (January 31, 2000) (biopharmaceutical facility with specialized improvements; replacement cost approach used to estimate value); Fox v. Town of Canterbury, BTLA Docket No.: 17207-96PT (July 13, 1998) (smokehouse); and Person v. Town of Campton, BTLA Docket No.: 14762-93PT (May 3, 1996) (concrete mixing plant). In the Person case, the board noted: “We find the cost approach is generally the best approach to use for valuing a special purpose property.” Id.

Owl Street Associates, LLC v. Town of Thornton Docket Nos.: 21244-04PT/22474-05PT Page 9 of 23 Realty Company, Ltd. v. City of Keene, 122 N.H. 284, 286 (1982). In short, the board finds the

Taxpayer’s argument to value the Activity Center and the golf course in isolation from the

ongoing recreation development by OSA does not reflect the highest and best use of the

specialized improvements and thus does not capture their contributory market value to the

Property as a whole.

Further, the Town’s building value of $520,100 for 2004 (partially constructed) and

$755,800 for 2005 for the Activity Center does not appear unreasonable compared to the

Taxpayer’s construction costs of the Activity Center in 2003 and 2004 of just under $900,000.

The board also finds the Town’s site value of $320,200 for the Activity Center is not

unreasonable given the fact the Activity Center is utilized both for recreational purposes by

residents of Owl’s Nest and for the sales and management offices of OSA and is in a central and

convenient location to the ongoing development at Owl’s Nest. A prospective purchaser of the

Property would likely attribute at least the Town’s assessed value to the Activity Center for its

dual purposes.

The Taxpayer argued in its prehearing statement the Activity Center only had a nominal

value of $100 basing its assertion on the holdings of Waterville Estates Association v. Town of

Campton, 122 N.H. 506 (1982). The Taxpayer argued “[t]he subject property is so heavily

encumbered by promises of access to existing and future owners that is of doubtful value to any

potential purchaser.” The prehearing statement further argued, “[a]t some point down the road,

Owl’s Nest, will become its own village district and OSA will turn over this and future such

centers in other sections of the resort for a dollar and other considerations such as taking the

monkey off of our backs.”


The board finds OSA has structured its development significantly different than the

common area described in Waterville Estates. In Waterville Estates, the town attempted to

assess the common property owned by a nonprofit homeowners association. The common

property was so encumbered with rights to the benefit of all the unit owners the court found the

homeowners association assessment should be abated. Here, OSA has chosen to retain

ownership in the Activity Center and has not implemented any formation of an overall

homeowners association. Only the common property pertinent to each separate village (e.g., the

immediate land surrounding units, the roads and septic systems at Green Scapes, Link Side, etc.)

has been transferred to separate village homeowners associations. While the unit owner’s

potential access through “memberships” to the Activity Center contributes to the individual

unit’s value, OSA retains ownership and control of the Activity Center and has not granted any

deeded rights to it as was the case in Waterville Estates. Here, the Taxpayer retains full

ownership and control of the Activity Center and yet wants to be free of any tax liability, arguing

it is encumbered by promises of access. OSA’s retention of full ownership of the Activity

Center and the lack of any documented transfer of access to it that “is sufficiently akin to an

easement,” Waterville Estates at 510, leads the board to conclude the Activity Center assessment

should not be abated as it retains significant transmissible value. To receive a lower or nominal

assessed value under the holdings of the Waterville Estates, the Activity Center would to need be

encumbered with similar restrictions “sufficiently akin to an easement”. Lacking that structure

of the real property rights, the board finds the Taxpayer failed to prove the assessed value of the

Activity Center is disproportionate, especially in light of its construction cost of just under

$900,000, its specialized dual purposes and the ability for the Taxpayer to control its use and

function. If, at some future date, the ownership and control of the Activity Center changes to

Owl Street Associates, LLC v. Town of Thornton Docket Nos.: 21244-04PT/22474-05PT Page 11 of 23 more closely resemble those in Waterville Estates, the board acknowledges a review of the

assessment would be warranted as the value in the Activity Center may, at that time, be inherent

in the value of each individual unit.

At hearing the Taxpayer presented an alternative argument to its prehearing argument of

a nominal value of $100. The Taxpayer acknowledged sales and management office uses of the

Activity Center, but argued the assessment should be $235,532 and $466,323 for tax years 2004

and 2005 respectively based on employing a lower land base rate and adjustment. The Taxpayer

presented no market evidence to support its lower assessed value other than reworking the land

calculations on the assessment-record card. As already noted, the board finds the Town’s land

value, being higher than residential site value, is not unreasonable given its excellent central

location and its more intense commercial use.

The board also finds the Town’s cost approach for valuing the golf improvements by

utilizing the Marshal Valuation is a reasonable approach to estimating the contributory value of

the golf course to the Property as a whole. Avitar testified the golf course improvements are split

between several assessment-record cards, and are assessed utilizing the high-end of “class three”

or low-end of “class four” cost range per golf hole, as detailed in section 67, page one of the

December 2005 Marshal Valuation Service Manual (submitted as part of the Town’s prehearing

statement).

The Town’s assessed values are less than the cost to develop the golf course as testified

to by Mr. Mullen and Mr. Michael Somma, OSA’s Director of Operations and Chief Financial

Officer, and are supported by the quality of the golf course as described at OSA’s website

(Municipality Exhibit No. B – 04-12-07) and by the board’s May 3, 2007 view of the Property.


The Taxpayer further argued a negative 50% adjustment should be applied to the golf

course assessments due to the course’s northern location and seasonable operation. The board

finds such an adjustment is not warranted because it defies the logic of why a recent investment

of several million dollars to construct a golf course would be immediately discounted 50% due to

its location. Anyone investing such funds in a golf course expects to recover over time those

costs by both the operation of the golf course and the value it contributes toward the

development of the adjoining sites and lots.

In short, the Taxpayer failed to prove the assessed value for the Activity Center and the

golf course exceed what a prospective purchaser would expect to pay (or what an owner would

expect to receive) for their contribution to the value of the Property as a whole. The evidence of

the current and proposed development and the board’s view of the Property indicate the

developed properties would not be as desirable or substantial without the presence of the high

quality golf course and other amenities (Activity Center, roads, water system and utilities).

Having those amenities in place reduces the risk of and facilitates the future development of

homes on the substantial undeveloped areas of Owl’s Nest.

The Taxpayer also argued that much of the land under the golf course is necessary to

meet the one unit per acre density requirement of Thornton’s subdivision regulations since the

Link Side and Green Scapes sites are significantly less than one acre in size. The Taxpayer

noted a number of the septic systems’ leach fields for Link Side exist by easement on the golf

course. Contrary to the Taxpayer’s argument that these easements and the small size of the sites

have a negative affect upon the site values and the golf course value, their relationship is

synergetic, enhancing the site’s utility and value while freeing up open space for the golf course.

The Taxpayer’s arguments are based on the premise the components of the development should

Owl Street Associates, LLC v. Town of Thornton Docket Nos.: 21244-04PT/22474-05PT Page 13 of 23 be viewed and valued in isolation from each other unless there is a negative impact on each

other. In reality the approval, construction and the resulting designed interrelationship of the

various components of this integrated recreational development increases, not decreases, the

value of the components and their proper valuation must consider this integrated highest and best

use. The number (density) of individual units possible due to the synergy in the overall design

scheme for the Property is increased. The fact the land necessary for some septic systems is also

used for part of the golf course is a good example of the Property being consciously used at its

highest and best use. The design was legal (the Town approved it), it was physically possible (it

was built), and it maximizes the value of the land and financial return to the owner.

Unit Approvals

The Town also assessed 33 unit approvals at $7,500 each, (initially assessed as 39 unit

approvals but abated to 33) for the remaining development potential associated with the Property

based on the one unit, one acre density requirement. The 33 unit approval potential appears to be

derived from the 2000 “Land Dedication Agreement” (the “Agreement”) (Taxpayer Exhibit

No. 9 – 04-12-07) and the “Dedicated Land Plan and Master Plan for Owl Street Associates,

LLC” (Municipality Exhibit No. A) where OSA and the Town agreed to the ultimate density

capabilities of the initial 110.81 acres acquired as “residential development land” and the

adjoining 167.05 Pike Industries acres acquired by the Taxpayer in February 2004. The

Taxpayer argued the remaining 33 unit approvals have not received specific subdivision approval

from the Thornton planning board and cannot be accommodated within the existing development

without encroaching upon the golf course. The Taxpayer did concede, however, that the

maximum density calculation can be allocated to the Pike Industries land along with the 167.05

units attributable to the Pike Industries land itself.

Owl Street Associates, LLC v. Town of Thornton Docket Nos.: 21244-04PT/22474-05PT Page 14 of 23 The board finds any prospective purchaser would place some value on the vested rights

contained in the recorded Agreement because they provide some certainty (diminished risk) of

the ultimate density capability of the land of the overall development. We disagree with the

Taxpayer’s contention that those “density approvals” (see section 3 of the Agreement) are of no

value. One of the stated provisions of the Agreement is that “it is in the interest of OSA and the

Town of Thornton that the residential unit density capability of the land which is the subject of

this Agreement be determined and agreed to by the parties so that future planning of the property

can occur with a certainty as to the total number of dwellings that may be built over time”. This

clearly provides the Taxpayer with a transmissible right that must be valued. The Town’s value

of $7,500 per site is 5-10% of the retail site/lot sale prices which have occurred at Owl’s Nest

and was not shown by the Taxpayer to be an unreasonable estimate of the transmissible value of

those vested rights.

Green Scapes Site Value

The Taxpayer presented three arguments relative to the Town’s assessment of the Green

Scapes undeveloped sites being excessive:

1) the Town’s base rate value of approximately $85,000 is excessive compared to the base rate

value for larger lots located in Haartz Intervale;

2) the average site area of 0.112 acres is not as valuable as the several acre lots in Haartz

Intervale; and

3) the sales of sites included a significant number of intangible non-taxable components, which

when subtracted from the later lower sale prices of $55,000, indicates a net site value of $40,000

for undeveloped Green Scapes sites.

Owl Street Associates, LLC v. Town of Thornton Docket Nos.: 21244-04PT/22474-05PT Page 15 of 23 The Taxpayer argued the condominium sites at Green Scapes are significantly smaller

than the average lot size at Haartz Intervale and the Town utilized a different base rate and

arrived at similar values despite the large lot/site size discrepancy. The Taxpayer graphically

noted the size difference between the Haartz Intervale lots and the condominium lots in Taxpayer

Exhibit No. 4 – 04-03-07. The Taxpayer argued the Town’s base rate of $34,000, as utilized in

Haartz Intervale, should be utilized at Green Scapes rather than the $85,000 base rate employed

by Avitar. The board finds the Taxpayer’s argument is groundless and does not recognize the

governing tenet of proportionality, - that property be assessed relative to market value. See RSA

75:1.

When assessing property utilizing a computer assisted mass appraisal system, assessors

develop “assessment models” (land base rates being one of them) which are derived from and

reflective of the primary motivating factors observed from market data (sales) and are applied

during assessing by utilizing common units of comparison such as acres, square feet or gross

living area of buildings. However, while these units of comparison usually relate to physical

dimensions, they are intended to capture the tangible and intangible real property rights of use

and enjoyment that are embodied in the physical features of real property. As a consequence, the

right to be able to build a dwelling can be encompassed on a lot of 10 acres or in a condominium

lot of 0.10 of an acre and yet that right to build may have very similar value with the excess area

or acreage having incrementally nominal additional value. In Haartz Intervale the lots were

created by a prior developer and are several acres in size. There the Town utilized a primary

base rate of $34,000 for the primary one acre site and any additional supplemental land was

assessed at $1,800 per acre. The real estate rights of the Haartz Intervale lots include the ability

to build, the enjoyment of views, the close proximity to the Owl’s Nest golf course and the

Owl Street Associates, LLC v. Town of Thornton Docket Nos.: 21244-04PT/22474-05PT Page 16 of 23 access to memberships in the Owl’s Nest Player’s Club and the Activity Center. Condominium

sites at Green Scapes are, as the Taxpayer argued, much smaller averaging just over 0.10 of an

acre in size. Those sites were assessed by the Town at $85,000 for a standard condominium site

which appears to be 0.2 of an acre based on a review of the assessment-record cards available.

However, the condominium sites at Green Scapes encapsulate nearly identical property rights as

the larger Haartz Intervale lots. The condominium sites have the right to build, provide views,

are in close proximity to the golf course and provide access through memberships to the Owl’s

Nest Player’s Club and the Activity Center. The ability for condominium sites to be much

smaller than single-family sites is due to their common areas, roads and septic systems, which

are shared with other sites within their respective villages. Thus the fact the Town has chosen to

have different base rates for condominium sites in Owl’s Nest versus single-family lots in Owl’s

Nest is not evidence of disproportionality but just the opposite. For the Town’s assessment

model to be reflective of the sale prices, much higher base rates relative to lot/site size are

necessary to reflect market value. Further, as the Town testified, the base rates vary not only due

to the concentration of rights in a smaller area, but also allow the major land adjustment factors

(e.g., undeveloped versus developed, views, topography, etc.) to be kept similar regardless of the

form of land subdivision.

The Taxpayer argued the earlier sales of undeveloped land at Green Scapes (Taxpayer

Exhibit No. 2 – 04-12-07), with indicated site values of $80,000-$110,000, are not representative

of the sites’ market values because those sales included intangible items and a “front loading” of

developer profit for the subsequent construction of the units. The Taxpayer, however, provided

no replacement cost figures to support such assertion. The Taxpayer also asserted the

subsequent sales of sites for $55,000 are more indicative of the true value of the sites after the

Owl Street Associates, LLC v. Town of Thornton Docket Nos.: 21244-04PT/22474-05PT Page 17 of 23 portion of the sales price attributable to the Green Scapes initiation fee of $15,000 is subtracted,

resulting in a site value of $40,000.

The board finds neither argument compelling to prove the Town’s assessments, which

range from $76,200 to $78,200 for undeveloped sites, are excessive. The board finds the four

Green Scapes sites’ sales in 2005 and 2006 for $55,000 were not indicative of market value and

thus has given them no weight. See Society Hill at Merrimack Condo. Assoc. v. Town of

Merrimack, 139 N.H. 253, 256 (1994); and Appeal of Town of Peterborough, 120 N.H. 325, 329

(1980) (Tribunal has discretion to evaluate and determine the credibility of the sales price being

indicative of market value). These sale prices are approximately half of prior Green Scapes site

sales and were, based on the testimony of Mr. Mullen, an allocation of the rights being

transferred by deed for the site and their rights relative to the unit construction being created by a

construction contract. Mr. Mullen stated this was done to: 1) attribute certain development costs

more appropriately to the unit construction contract; and 2) reduce the property tax assessment

basis and thus reduce OSA’s tax liability on its inventory of unsold sites. The documents

submitted (Taxpayer Exhibit Nos. 5 and 6 – 04-12-07) indicate the prior transaction price of

approximately $110,000 was now being split between $55,000 for the site and the balance

attributed to the architectural fee, water hook up availability charge, septic system hook up and

Owl’s Nest Player’s Club Membership by being applied to the construction contract price (see

closing memorandum in each exhibit). For a number of reasons, the board finds these prior sales

are at market value and, thus, the later sales of $55,000 do not form a basis for an abatement.

First, the board notes that such allocation was done at the sole discretion of OSA and is

only applicable to the Green Scapes units because purchasers of lots at Haartz Intervale and

stand alone condominium sites at Link Side have the ability to contract with builders other than

Owl Street Associates, LLC v. Town of Thornton Docket Nos.: 21244-04PT/22474-05PT Page 18 of 23 OSA. Green Scapes was developed as a duplex development which necessitates OSA to

coordinate the construction and “marriage” of the two separately owned units within a

reasonable construction time frame.

Second, the total cost of construction (site acquisition and unit contract price) at Green

Scapes (Taxpayer Exhibit No. 2 – 04-12-07) for similar two and three bedroom units does not

change significantly (with the exception of minor modifications noted by Mr. Mullen at hearing)

and thus, it is clearly seen that the allocation ($55,000 v. $110,000) is arbitrary for the purpose of

avoiding property taxation.

Third, evidence that the higher sale prices are indicative of real property value is

supported by the fact Meredith Savings Bank, which financed most of the purchases of lots and

sites, typically financed at 80% of the higher transaction price based both on the Taxpayer’s

testimony and in the various purchase and sale and closing documents submitted by both parties.

While not testified to at hearing, the board noticed during deliberations several of the submitted

closing documents indicate appraisals were performed by Loon Point Appraisal on behalf of

Meredith Savings Bank; however, none were submitted or referenced by the Taxpayer. The

board can only assume Meredith Savings Bank, acting as a prudent lender in compliance with the

banking standards and regulations, had such appraisals prepared to justify its level of lending

(80%) of the total real estate rights being transferred and further that such appraisals relate to

valuing real not personal property.

Fourth, the $55,000 sale price does not comport with usual market land and building

ratios while the earlier sale price of $110,000 does. Appraisal and market phenomenon

recognizes there is a fairly consistent relationship between the value of an underlying lot for

Owl Street Associates, LLC v. Town of Thornton Docket Nos.: 21244-04PT/22474-05PT Page 19 of 23 residential purposes and the overall market value of a developed property. Estimating land value

by this process is termed the “allocation method” and the relationship is typically referred to as a

land to building ratio.3 Residential lots commonly comprise 25 to 33 percent of the overall value

(frequently expressed as a 1 to 3 or 1 to 2 land to building ratio). Such land to building ratios

provide guidance of the magnitude (and reasonableness) of each component’s contribution to the

overall value and can be extracted from the market by comparing sales of unimproved and

improved properties such as those that have occurred at Green Scapes listed below.

Map/Lot/Sublot Street Location

Grantor/Grantee (Land/Site and Building) Sale Price Sale Date

Green Scapes Construction Cost (Size)

(Taxpayer Exhibit No. 2)

Green Scapes Total Cost

16/000001/08GS01 - Green Scapes # 1 OSA to Olson (Site only) $100,000 3/11/2004 $280,288 (2 bedroom) $380,288

16/000001/08GS02 - Green Scapes # 2 OSA to Schumacher (Site only) $80,000 12/5/2003 $211,925 (2 bedroom) $291,925

16/000001/08GS03 - Green Scapes # 3 OSA to Collins (Site only) $80,000 4/21/2004 $320,000 (3 bedroom) $400,000

16/000001/08GS04 - Green Scapes # 4 OSA to Palmer (Site only) $80,000 6/22/2004 $287,356 (3 bedroom) $367,356

16/000001/08GS05 - Green Scapes # 5 OSA to Pingitore (Site only) $100,000 2/6/2004 $200,000 (2 bedroom) $300,000

16/000001/08GS06 - Green Scapes # 6 OSA to Olson (Site only) $100,000 8/30/2004 $330,404 (3 bedroom) $430,404

16/000001/08GS07 - Green Scapes # 7 OSA to Balcom (Site only) $55,000 1/25/2005 $295,000 (2 bedroom) $350,000

16/000001/08GS08 - Green Scapes # 8 OSA to Rogozinski (Site only) $55,000 7/5/2005 $395,000 (3 bedroom) $450,000

16/000001/08GS09 - Green Scapes # 9 OSA to Chong (Site only)

(Chong to OSA) OSA to Dineen

$80,000 $80,000 $110,000

12/12/2003 5/24/2005 9/6/2005 $250,000 (2 bedroom) $360,000

16/000001/08GS10 - Green Scapes #10 OSA to Durney (Site only) $55,000 4/6/2005 $374,500 (3 bedroom) $429,500

16/000001/08GS13 - Green Scapes # 13 OSA to Nykvist (Site only) $55,000 Feb-06 $0 $55,000

16/000001/08GS14 - Green Scapes # 14 OSA to Meehan (Site only) $125,000 9/29/2005 $325,000 (3 bedroom) $450,000

16/000001/08GS15 - Green Scapes # 15 OSA to Chong (Site only) $80,000 5/24/2005 $0 $80,000

3 “Allocation: A method of estimating land value in which sales of improved properties are analyzed to establish a typical ratio of land to total property value…. ” Appraisal Institute, The Appraisal of Real Estate, 12th ed. at 335. “The allocation method is also known as the land ratio method. In theory, for a given type of property and area there tends to be a consistent overall relationship between land and improvement value.” The International Association of Assessing Officers, Property Appraisal and Assessment Administration 1990 at 196.


Comparing the unit sale prices to total cost (site sale price plus construction costs) for

units 1-6, 9 and 13 indicates the two bedroom units have a land/building ratio ranging from

approximately 31-38%, while the three bedroom units have ratios between 20-28%. These land

to building ratios are reasonable and in the expected range based on the board’s experience.4

(These ratios are also supported by calculating ratios of the two Link Side properties (units 4 and

14) that have resold after being built upon. Unit 4’s site sale price of $115,000 compared to its

improved sale price of $455,000 indicates a ratio of 25% while unit 14’s site price of $95,000

compared to its improved sale price of $410,000 produces a ratio of 23%).

The land to building ratios of the three properties (units 7, 8 and 10) the Taxpayer

subsequently sold at the attributed price of $55,000 range from a low of 12% to a high of 16%,

well below normal market land to building ratios. These low ratios reflect the lack of market

forces influencing the sale price and demonstrate the $55,000 price was contrived to reduce

OSA’s tax liability because of OSA’s control over the construction of the duplex units and

ability to include the balance of the market site value in the contract construction prices. The

board finds this manipulation of the allocation of total property value results in a significant

understatement of the land value.

Fifth, the $40,000 residual site value ($55,000 minus the Activity Center initiation fee of

$15,000) argued by the Taxpayer defies common sense and simple market comparison. The

Town testified the basic lot value with no amenities or views for non-Owl’s Nest properties in

Thornton was $34,000. These lots are the typical rural raw land sites, as the board noted on its

view, that have no utilities or amenities other than access on a public road. Green Scapes sites,

4 The agency's experience, technical competence, and specialized knowledge may be utilized in the evaluation of the evidence. See RSA 541-A:33, VI; Appeal of Nashua, 138 N.H. 261, 264-65 (1994); and see also Petition of Grimm, 138 N.H. 42, 53 (1993) (administrative board may use expertise and experience to evaluate evidence).

Owl Street Associates, LLC v. Town of Thornton Docket Nos.: 21244-04PT/22474-05PT Page 21 of 23 on the other hand, have water and sewer to site, a developed road infrastructure, proximity to and

view of the golf course, views to the westward mountains and an opportunity to access the

Activity Center. Certainly such sites are worth significantly more than $40,000.

The Taxpayer argued the Activity Center initiation fee of $15,000 was waived at the time

of the negotiations with the initial purchasers and is an intangible personalty item that must be

deducted from the sale price. The board has rejected that argument for the reasons contained in

the decision of the companion case (Docket No. 21276-04PT et. al.) and is incorporated by

reference herein. OSA’s waiver is largely a marketing tool completely within its control to

entice prospective purchasers to buy property at Owl’s Nest. While OSA retains the right to, in

the future, charge subsequent generation purchasers the Activity Center initiation fee, no

evidence exists of such occurring in the limited number of “second” and “third” generation sales

which have already occurred.

Sixth, the board gives no weight to the justification of the $55,000 price contained in the

gross profit calculations of Taxpayer Exhibit No. 3 – 04-12-07 because the calculation does not

take into account all of the development costs that are part of the integrated infrastructure in this

recreational development.

In short, to abate the site values to $40,000 would defy the market dynamics discussed

above and cause the assessments to be disproportionate. The board finds the Town’s

assessments of the undeveloped sites in the $76,000-$78,000 range are, if anything, conservative

based on the board’s findings above and the provisions of RSA 674:37-a that approved lots or

sites “be assessed and appraised as separate estates pursuant to RSA 75:9…. ”


In conclusion, the board finds the arguments presented by the Taxpayer failed to prove

the Property was disproportionately assessed when viewed at its highest and best use as an

integrated recreational residential development.

Because the Owl’s Nest development is partially in the Town of Campton and

notwithstanding any settlements that may have been reached relative to properties in Campton, a

courtesy copy of this decision is being sent to the Campton Selectmen for any effect it might

have on subsequent year assessments in Campton.

A motion for rehearing, reconsideration or clarification (collectively “rehearing motion”)

of this decision must be filed within thirty (30) days of the clerk’s date below, not the date this

decision is received. RSA 541:3; Tax 201.37. The rehearing motion must state with specificity

all of the reasons supporting the request. RSA 541:4; Tax 201.37(b). A rehearing motion is

granted only if the moving party establishes: 1) the decision needs clarification; or 2) based on

the evidence and arguments submitted to the board, the board’s decision was erroneous in fact or

in law. Thus, new evidence and new arguments are only allowed in very limited circumstances

as stated in board rule Tax 201.37(f). Filing a rehearing motion is a prerequisite for appealing to

the supreme court, and the grounds on appeal are limited to those stated in the rehearing motion.

RSA 541:6. Generally, if the board denies the rehearing motion, an appeal to the supreme court

must be filed within thirty (30) days of the date on the board’s denial.

Owl Street Associates, LLC v. Town of Thornton Docket Nos.: 21244-04PT/22474-05PT Page 23 of 23 SO ORDERED. BOARD OF TAX AND LAND APPEALS __________________________________ Paul B. Franklin, Chairman __________________________________ Douglas S. Ricard, Member

Certification I hereby certify a copy of the foregoing Decision has this date been mailed, postage prepaid, to: Kelly M. Wieser, Esq., Wieser Law, PLLC, PO Box 1528, Campton, NH 03223 and Thomas N.T. Mullen, c/o Owl's Nest Golf Club, PO Box 470, Campton, NH 03223, Taxpayer’s Representatives; Avitar Associates of New England, Inc., 150 Suncook Valley Highway, Chichester, NH 03258, Municipality Contracted Assessing Firm; Chairman, Board of Selectmen, Town of Thornton, 16 Merrill Access Road, Thornton, NH 03223, Municipality; and Chairman, Board of Selectmen, Town of Campton, 1307 NH Route 175, Campton, NH 03223, courtesy copy. Date: October 12, 2007 __________________________________ Anne M. Stelmach, Clerk

Documents

Owl Street Associates, LLC v. Town of Thornton Docket Nos ......Owl Street Associates, LLC v. Town of Thornton Docket Nos.: 21244-04PT/22474-05PT DECISION The “Taxpayer” appeals,