Forest Hills Cooperative v. City of Ann Arbor
305 Mich. App. 572
| Mich. Ct. App. | 2014Background
- Forest Hills Cooperative (nonprofit housing cooperative) owned 39 residential buildings plus common buildings on eight tax parcels in Ann Arbor; property participated in HUD Section 236 regulatory/subsidy program.
- Forest Hills petitioned the Michigan Tax Tribunal challenging assessed true cash values for tax years 2000–2009; hearing officer used a cost-less-depreciation approach and issued a proposed opinion; Tax Tribunal adopted it (with a minor chart correction).
- Forest Hills also sued in circuit court seeking (1) a declaration that MCL 211.27 requires using actual income or transfer values (or is unconstitutional as applied) and (2) injunctive/other relief; defendants moved to dismiss for lack of subject-matter jurisdiction.
- Key expert positions: Forest Hills’ expert offered (a) capitalization-of-income using cooperative carrying charges and (b) a “transfer value” from bylaws; City Assessor relied mainly on a market/cost-based approach and rejected income-capitalization for the co-op.
- The Court of Appeals: affirmed in part, reversed in part, and remanded to the Tax Tribunal to (a) make an independent determination of any functional and economic obsolescence for improved parcels and (b) independently determine value for the vacant parcel; affirmed circuit-court dismissal for lack of jurisdiction over Forest Hills’ declaratory claim.
Issues
| Issue | Forest Hills’ Argument | City/Defendants’ Argument | Held |
|---|---|---|---|
| Did Tax Tribunal improperly “rubber-stamp” assessor values / fail to make independent true cash value determinations? | Tribunal merely adopted roll values and failed to independently determine true cash value. | Tribunal may adopt assessed values if supported by competent, substantial evidence; it reviewed the hearing officer de novo. | Mixed: Tribunal erred as to obsolescence and vacant parcel (remand required); otherwise adoption of cost approach supported. |
| Should capitalization-of-income (actual income) or transfer-value methods have been required? | MCL 211.27(1)/(4) and precedent require use of actual income (or transfer values) for nonprofit co-ops. | Statute does not mandate a particular valuation method; present economic income definition excludes certain co-ops; Tribunal reasonably rejected Forest Hills’ income and transfer methods. | Held for City: No statutory requirement to use Forest Hills’ capitalization or transfer-value methods; Tribunal did not adopt a wrong legal principle. |
| Did Tax Tribunal fail to address functional/economic obsolescence for improved parcels? | Hearing officer said insufficient evidence to estimate obsolescence; Tribunal adopted opinion without adequate independent finding. | Vacancy rates and Meadowlanes analysis support little or no economic obsolescence; Tribunal’s de novo review acceptable. | Remanded: Court finds error of law because Tribunal misunderstood hearing officer’s finding and failed to independently determine functional and economic obsolescence. |
| Was uncapping of taxable value handled improperly (must assign separate parcel numbers / confine uncapping to transferred unit)? | Uncapping must be confined to transferred unit; separate parcel numbers required to protect non-transferred units from higher taxes. | GPTA allows uncapping of ownership interest in a co-op; municipality may track transfers without assigning each unit a separate parcel number. | Held for City: No error; uncapping may be applied proportionally without separate parcel numbers where owner is single entity and transfers are tracked. |
| Did the circuit court have jurisdiction to grant declaratory relief challenging MCL 211.27 and assessor methods? | Circuit court may decide facial/as-applied constitutional questions and declare statute invalid. | Tax Tribunal has exclusive, original jurisdiction over assessment/valuation disputes; characterizing assessment complaints as constitutional does not divest Tribunal. | Held for City: Circuit court lacked subject-matter jurisdiction because the claim was essentially a challenge to assessments; exclusive Tax Tribunal jurisdiction applies. |
Key Cases Cited
- Great Lakes Div. of Nat’l Steel Corp. v. City of Ecorse, 227 Mich. App. 379 (discussion of Tax Tribunal evidentiary standard and adoption of assessor values when supported by competent, substantial evidence)
- Meadowlanes Ltd. Dividend Housing Ass’n v. City of Holland, 437 Mich. 473 (treatment of cost approach and consideration of federal subsidies and economic obsolescence for subsidized housing)
- Michigan Properties, LLC v. Meridian Township, 491 Mich. 518 (standard of appellate review for Tax Tribunal; fraud/error of law/wrong principles limitation)
- Pontiac Country Club v. Waterford Township, 299 Mich. App. 427 (Tax Tribunal may adopt assessed valuation if supported by competent, substantial evidence; true cash value = fair market value)
- CAF Investment Co. v. State Tax Commission (CAF I), 392 Mich. 442 (actual income is required consideration under earlier statute for income-capitalization approach)
- CAF Investment Co. v. Saginaw Township (CAF II), 410 Mich. 428 (reaffirmation that actual income is controlling under prior statutory regime)
- Pinelake Housing Coop v. Ann Arbor, 159 Mich. App. 208 (approved a particular income-capitalization approach for a co-op under narrow facts)
- Colonial Square Coop. v. Ann Arbor, 263 Mich. App. 208 (uncapping: municipality must track transfers and cannot simply uncap entire parcel proportionally without demonstrating which units transferred)
- President Inn Prop., LLC v. Grand Rapids, 291 Mich. App. 625 (Tax Tribunal de novo review; burden of proof in property tax hearings)