CAF Investment Co. v. Saginaw Township

428 410 Mich 428 TOWNSHIP COMPANY v SAGINAW CAF INVESTMENT 3). (Calendar 11, 60744, January Argued No. 1979 60745. Docket Nos. 24, Rehearing February 411 Mich 1119. denied 1981. Decided challenged Company 1971 tax the C.A.F. Investment by Saginaw Township which the of real assessment long Kresge Company for K- on a term plaintiff S.S. leases to 1975, dispute, through years 1971 now in Mart store. For the plaintiff the of the under terms income to the actual rental parties low, expert relatively for both but witnesses lease was fairly economic conditions reflects have conceded that lease 1963, of the year the was made. The valuation lease for 1971, $1,442,364, computed township property by was capitalization rental derived from of "economic value” from a operations K-Mart stores. The analysis of similar an argued value determined plaintiff that the true cash should be under the terms of the by capitalizing rental income the actual $787,500 lease, for should have been the valuation and essentially sustained 1971. The State Commission [2, ^{[10] [7]} [6, ^[13] [1, [5-9,11-20, [3, 4, [9-12,16] 72 ^{[19] [22] [20] [31]} [24] [27, ^[30] 46 72 72 Am Jur 8, 22] 22] 72 28] 34 72 72 Am Jur 72 ¶ 72 Am Jur 72 Am Jur Am Jur 25] 1052. 12, Am Jur 5 Am Jur 5 Am Jur Am Am Am Am Am Am 72 15, Am Jur 23-26, Jur Jur Jur Jur Jur Jur Am Jur Am Jur 2d, Judgments 2d, 2d, 17, 18, 21, 2d, 2d, 2d, 2d, 2d, 2d, 2d, 2d, 2d, References 2d, 2d, State and Local Taxation State and Local 28-31] State and Local Taxation §§ 2d, Federal Taxation ¶ State and Local Taxation 787. State and Local Taxation State State State Statutes 271. State and Local Taxation Appeal Appeal 2d, 2d, State State and Local 34 Am Jur State 23, and Local Taxation 763. and Local Taxation 770 et and Error 744 § and Error 820 §§ and Local Taxation §§ 25, Local Taxation and 400, Points in Headnotes 26] Taxation Local Taxation 768. 2d, 416. 33 § 1861. § Federal Taxation ¶ Am Taxation 759. § §§ Jur et et 761. § §§ § §§ § § 761, 759, 754. seq. seq. 759, 759, 2d, § 763. § 770 et 765, 761. Federal Taxation seq. 127. 766. seq. 8960 et seq. Saginaw Twp CAF Investment 1981] township’s assessment; Supreme Court reversed the deci- commission, newly sion of remanded formed Tax hearing Tribunal for a de novo to determine the true cash upon value of based from it. 392 Upon predicated Mich 442. remand the Tax Tribunal valuation plaintiffs property "capable on the amount of income the was producing” years through 1975, of by for the which were dispute. then included Appeals, in the Court The D. P. Walsh, P.J., JJ., Quinn Stair, and and reversed and remanded to the Tax a Tribunal for redetermination in accordance with (Docket 28516). Supreme opinion the of the Court Nos. appeals, arguing require Defendant that the decision did plaintiff’s property solely upon the valuation of the to be based opinion by Ryan, joined by the actual rent. In an Justice Chief Kavanagh Levin, Justice Coleman and Justices the Su- preme Court held: presumptuous upon was 1. It for the Tax Tribunal to embark legal analysis question clearly presented a of a that was to and by Supreme prior appeal. decided the Court on the The doc- appellate the trine of law of the case is that if an court has legal question decided remanded the case further proceedings, legal questions the decided thus will not be differ- ently subsequent appeal decided on a in the same case where materially controlling the remain facts the same. The facts in dispute virtually this remain identical with those which ob- dispute Supreme by tained when the was first decided the Court, through other than the extension of the valuations 1975. appraisals Tribunal, by parties The submitted the to the Tax in essence, used the same methods of valuation and arrived at virtually presented the same values as had before. been The appraisal Tax Tribunal on relied an which substituted the rental, income, hypothetical economic or for the actual rent of plaintiff’s property lease, despite the under the the Court’s prior rejection proper of that criterion as a basis of valuation. basing upon compa- The in error valuation the rental value of clearly prior rable was stated in decision of the upon Court. In its decision remand the Tax Tribunal has attempted justify essentially the same method of evaluation erroneous; fact, that was held to be it the same used figure per square "economic rental” of $2 foot which the State Tax Commission had used in its calculations. The conclusions by prior required only the Tax Tribunal that the decision that value, determining actual income be cash true "considered”» ignored and that actual could income then it did not because accurately comparable prop- reflect current rates on of return 410 Mich 428 market, significance erty the Court underestimates the appraisers All the testified that the to actual income. attached capitalization the best method was indication income rely heavily upon repre- cash flow value. Commercial investors capitalization judge by the fair actual income sented property. had that method valuation market value Once chosen, provided income” of "economic been consideration imperative. prior

by left that The decision no doubt statute was nothing other than actual income "economic income” meant of this case. under the circumstances capitalization-of-income method 2. under the A calculation figure. figure yields projected alone will income Often fair value of The defendant reflect the market argues any projected figure on the basis calculated in the of actual income evaluates the lessor’s interest property, has a in the and that the lessee measurable interest advantage enjoys by renting prop- land due to economic prevailing erty less rate in the for an amount that is than proposition might merit that have in current market. Whatever appraisal, of real consideration of a so-called science estate employed means Tribunal is lessee’s interest prior testimony foreclosed Court’s decision. experts tax was that order to evaluate the entire commission interest, consisting property, the of both lessor’s and lessee’s anytime hypotheti- below market rent or actual income fell the comparable property cal income of actual income would be ignored, ignored very was in this and it case for reason. equal 3. of the True cash value must the fair market value experts property to the owner. All conceded that economic case, accurately income most reflected that value. In this income, nothing economic income is other than actual since for years question the in eco- the lease rental reflected current a true nomic circumstances and bore demonstrable relation to equate hypothetical cash value. To economic with in- income every under come situation where actual rent a prevailing lease was less than the market rental would be to ignore prospective judg- a effect the lease on investor’s regarding property. ment market That was fair value of very confronting appeal. situation on the Court first may The consideration of actual income diluted potential comparable property. reference to the income of may 4. In other cases or there well be other circumstances require adjustment pro- considerations to the necessarily jected figure an accurate true cash income arrive at opinion The first valuation. mentioned some to illustrate that CAF Saginaw Twp 1981] projected figure by capitalization income arrived at of actual truly picture property’s income not reflect a accurate of a value, ignore fair market not as reasons the use of actual calculating projected income in this case. argument 5. The defendant’s that this method of valuation requirements uniformity violates the constitutional of assess- process begs question. ment and due The touchstone of selling price uniform assessment is the true cash value or usual property. recognize of the Assessment decisions must limita- bearing selling price tions or restrictions which have a on the property may physical Parcels of real similar have characteristics, but differences in economic factors will deter- selling price. Properties mine their usual encumbered differ- terms, restrictions, zoning restrictions, ent lease or deed al- though similar, physically would not have the same cash value open incongruous, on the market. It would be indeed violative uniformity, parcels of the rule of to assess two of real despite selling prices the same the fact that the usual are requirements different. There is no violation of the of uniform- ity process premised or in an due assessment on true cash value as defined the Court. failing capitaliza- 6. In to use actual income as the of its basis income, disregarded tion Tribunal the mandate of thereby the Court in its first decision this case and commit- specific ted error. The Tax Tribunal is directed to enter a order using figures opinion, put forthwith set forth in the Court’s protracted litigation. end to this an signed opinion Court, Justice Levin and also wrote separately to address some of the considerations treated in the opinions. other market, 1. constitutional standard is the "true cash able, arm’s-length value”. If a bargain, desirable tenant is in an tenant, to obtain more favorable than a less terms desirable pays going rent it is nevertheless the market rate for such a terms, If tenant. a desirable tenant obtains favorable it is desirable; because that pays tenant the rent fair having market value of that desirable tenant. If another tenant rent, pays higher it is not because the is worth more tenancy but because the actual market value of its is of less value, due, example, greater anticipated to the wear and property greater insecurity tear to or financial the the case, any might pay In tenant. what another tenant is irrele- determining property vant to the true cash value of encum- by property bered a lease. The value of the is its is, i.e., say value as it as encumbered. To that its value would Mich 428 higher another when it cannot be if it rented to tenant be were deny legal and is to the economic to another tenant rented property reality value is affected the encumbrance. zoning its or in the same manner as value is affected a lease deed restrictions. argument should be the lessee’s interest valued 2. The that is an alternative form the well as the lessor’s interest as another, argument property be at what that the should valued pay: hypothetical interest the lessee’s the tenant would him, i.e., degree which lease is "favorable” to the to the paying the between he is and what owner difference what Thus, valuing presumably from another tenant. would obtain property again if to the it the lessee’s interest seeks value Moreover, actually it is encumbered. were unencumbered when hypotheti- valuing would be the lessee’s interest to substitute To do so for the reserved the lease. would cal rental rental thus income and to to eliminate all relation

be reverse, silentio, Separately valuing CAF sub the first decision. combining it lessee’s interest and with the lessor’s interest opposed original produce diametrically to the CAF will a result opinion. taxing permitted not to have 3. The authorities should be it ways property the lease or it encumbered both —either buy one found to for what even is not. No could be unless it the owner claims it is worth were "encumbered” with goes K-Mart lease the assured cash flow that with it. and taxing legitimately cannot allow authorities The Court local or is a the Tax Tribunal to evaluate as if there K- encumbrance, any alone at Mart lease which makes saleable assessments, ignore price justify would current that ignore To rent reserved lease. the lease denies the possi- circumstances which made construction of the structure ble. The lease embodies the commitment of the lessor lessee, long occupancy by thereby to a lessee term of each creating might forgoing value not which otherwise exist and opportunities. specialized large other This kind of structure not have would been constructed but for the "encumbrance” of long-term lease there from some desirable lessee. Since would encumbrance, no structure such it is to tax without an appropriate he rented to evaluate the as if it could holding someone else. interests in natural Cases severable estate, aspects part land must be assessed as of the real owned, although specific separately pursuant were decided statutory inapposite. directives and are In them identifia- ble, clearly subject severable were to ad valorem interests Saginaw Twp CAF 1981] question taxation and the they was to whom should be as- sessed, the owner of the fee or the owner of the severed question is, interest. In this case the is whether a leasehold purposes, separate ad apart valorem tax an interest from fee, and, so, if to whom it should be assessed. The fee apart cannot be valued from the lessee’s use and the mutual commitments of the lessor and lessee in the lease. proper 4. Even if it were to value the lessee’s interest or the tenant, rental that could be obtained from another there is no

probative support evidence in this record which would a valua- upon tion other than actually one based the income derived reaching from the In its result the Tax Tribunal comparable. relied on evidence of leases asserted to be The comparability evidence of in each instance was either inade- quate only or nonexistent. The evidence offered was of leases in years other with other tenants or with K-Mart in other commu- nitieSj Saginaw. all a considerable distance from Nor is there any assuming paid basis for that K-Mart would have in 1971 12-year-old building and 1975 for the lease of an 8- or as much willing pay building as was then for a brand new located community. in a different township presented 5. The an estimate of true cash value reproduction approach. based on the cost But both of the township’s existing witnesses testified that an lease had no effect on the approach. estimate arrived at the cost The requires Court’s first CAF decision that the lease be any considered and that method of valuation which does not Moreover, rejected. take into account the effect of a lease be indicating there buyers was no evidence and sellers of approach, commercial sharp use a cost in contrast to buyers evidence that and sellers of commercial use capitalization approach. buyers of income If and sellers of commercial technique, do not use a estimates of value bearing derived from price it have no on the market property, the constitutional standard. only 6. comparable evidence of sales used in the town- ship’s analysis equally market faulty. The witness relied on stores, two sales of K-Mart one in 1968 and one in in largest second-largest metropolitan areas of the state. suppose There is no reason to that these sales of what were buildings metropolitan then almost new in areas are reliable 12-year-old indicators of building Saginaw what an 8- or Township would sell for in 1971 or 1975. These sales values years years question before the tax and leases of other stores widely built differing at different times in locations across the 410 Mich probative current market rental would of what a state are not disregard building. taxing wish to When authorities be for this lease, up something them to come with the burden is on produced regarding highly artificial evidence better than buildings altogether locations of different rentals and sales adoption many years apart. It was "error of law or built uphold wrong principles” Tribunal to the assess- for the Tax present although taxing any failed to authorities ment probative support the assessment and lessor evidence unimpeached presented evidence. substantial paramount Moody say that 7. Justices and Williams Moody’sunderlying unformity. Justice concern consideration is property permitted appears to be to be that if commercial lease, income from a assessed on the basis advantage setting by a lease owners will be able to obtain a tax types the market rate. Owners of other rate lower than reproduction by comparable property assessed sales or pay therefore a non-uniform rate when com- method would pared property That concern is mis- to commercial owners. income-producing property placed no because rational owner by many to reduce rental an amount would choose greater possibly than be saved in taxes. Justice times could points by Ryan correctly uniformity out that is achieved adher- standard, ing true cash to the constitutional market-based standard, value. If assessors adhered to that all assessments would, perforce, be uniform at of true cash value. Uni- 50% formity by adhering single approach is not achieved to a approach may by many The cost be followed asses- valuation. sors, relationship reproduc- but since there is no real between value, reproduction adjusted tion cost and cost has to be highly subjective economic obsolescence. That introduces a element, responsible uniformity frequently one for the lack of guideline in assessments. There is no for economic obsolescence. uniformity by attempting all Neither is advanced to assess appears equal property which as if it value. similar were physical similarity reproduction Neither nor cost is the stan- dard, any attempt property to avoid the value set for the dilute, strengthen, uniformity the market is to rather than of assessment. truly 8. If there are a substantial number of situations which a current rental market excess reserved rental standpoint creates a favorable with the lease from lessee’s consequence support that the does not its fair share of burden, Legislature rectify the tax the situation can allowing taxing local authorities to tax that favorable lease Saginaw Twp CAF 1981] Similarly, lessee. the concern that a owner will except withhold income information from a tax assessor when advantage exaggerated. such information is to the owner’s In those instances where the owner of a business also owns the property, may the income derived be more reflective of the business conducted on the than the value of the property and therefore not a reliable indicator of the value of property. relevant, When such information is as in the case, determining instant prop- the true cash value of the erty, implied right assessors have an to obtain such provides information under the statute which that income is a determining property’s selling factor to be considered in price. present inadequate To the extent that the statute is power adequate to set assessments does not constitute an mechanism, Legislature, again, provide enforcement can solution. Fitzgerald, dissenting, Supreme Court, Justice wrote that the 1974, required when it decided this case in that actual income be determining considered the Tax Tribunal in true value; require cash necessarily it did not that it be used in all certainly exclusively. circumstances and not that it be used Court set forth a non-exhaustive list of other items to be considered in addition to those listed in the statute. Another may properly factor which be taken into account here is the value of the lessee’s interest in the The Court of Appeals Supreme previous holding misconstrued the Court’s requiring that actual income "must constitute” the basis for income, the valuation. determining Actual if it is relevant to selling price, only the many usual is one of items to be consid- ered, may rejected it inappropriate applied be if it is as to particular the facts of a case. The Tax Tribunal considered during proceedings actual upon income rejected its remand and because, among things, its use in this case other the relation- ship plaintiff tenant, between the and its and their lease were typical not of the normal market. The Tax Tribunal found that developers a limited enjoyed number of for K-Mart a favored tenant, being status and highly that the a desirable commercial tenant, could receive more favorable terms than a more mar- ginal rejecting tenant. The Tax Tribunal was correct in plaintiff’s appraisal predicated solely because it was on the Therefore, income from the lessor’s interest in the suificiently complied Tribunal previous with the Court’s opinion. agreed Justice Ryan Williams with Justice that the Tax Tribunal, upon remand, by using method, the same assessment 410 Mich rent, directly capitalizing of actual "market” rent instead opinion case in this case that the first violated the Court’s However, again. did not he must reversed and remanded be opinion Ryan agree remanded for a the first with Justice that income, it that forbade reference based determination property, potential comparable the actual of or that to income "plugged per-square-foot be into” a need rental value opinion projected income. The first stated formula to arrive at require statutory terms does not that "consideration” projected Tribunal its determination of that the Tax make items; may upon any or "consideration” income one all of application some items is that or all well indicate "plugging in” inappropriate. not limited The tribunal is requires reach a the statute the assessor to actual rent because i.e., value”, result, particular particular apply not to "cash assessing agency capitalization. The such as income formula long may accepted recognizes any as it formula so use components in the Insofar as various of value set forth statute. considered, inter- is term must be "economic income” preted meaning agreed with actual income. Justice Williams as Moody importance to the of the constitutional re- Justice uniformity. obviously, quirement all But does require all not the the same assessment because is of the unfavorable lease and same. The resolution the issue components statutory consideration of all of of valuation assessing agency, first be with must made review, judicial rather and the should be re- restricted case proceedings. manded for further Moody dissented: Justice suggestion Supreme opinion, 1. There is no in the Court’s case, when decided this that actual income must consti- first income tute for The Court held that actual basis valuation. ignored any cannot and must be considered determination of true cash value. Consideration of the various factors application well of some or enumerated indicate all thing say inappropriate. particular factors It is one that a value; determining it is item must be "considered” in terms of totally thing particular say “con- another that a item must support stitute the There is no basis” valuation. starting point for conclusion that actual income must be the calculating previously that eco- value. The Court has stated However, the nomic or actual income is to be considered. "present merely one of a economic of structures” statutory number must be considered in deter- terms which Saginaw Twp CAF 1981] mining true cash value. While one or another of the terms case, given equally. control in a all terms must be considered income, 2. The definition of economic income as actual and rejection reproduction approaches, cost and market comport any jurisdiction do not with the decision of other in question. the United States which has considered the Other construing statutory language applied courts similar have simi- analyses lar in cases of a tax assessment on land long-term unprofitable majority encumbered lease. The jurisdictions have concluded that where there is evidence that lease was made under distress or boom conditions rent, weight given which affects the actual to be to the accordingly. actual rent must be discounted The effect of reli- determining ance on actual tax assessments is the principle taxation; uniformity destruction of the and full, potential earning capacity assessment based is the most fundamentally distributing fair and even-handed method of Thus, reproduction approaches tax burden. cost and market are equally capitalization approach valid as the income in calcu- lating property. true cash value of The effect of reliance on and, give therefore, actual income is to tax relief to subsidize expense the unwise businessman at the of the wise business- taxpayers statutory man and the other of the state. The lan- guage is sufficient to include the income which could be ob- proper property. tained and efficient use of the To hold penalize competent diligent otherwise would be to incompetent to reward the or indolent. statutory 3. While the definition of true cash value contains terms, important various it is without doubt that the most setting "present element in the commercial is the economic income of always structures”. Economic income will almost Thus, dictate the level of commercial tax assessment. by defining income, economic income as actual the Court shows a rather narrow and unrealistic attitude toward tax Michigan. Property assessment in tax its nature is cumula- tive; every right it is a táx on and interest that attaches to real proper valuation, therefore, A assessed must include rights the value property, of all which inhere in the including right possession to current under a lease. Where paid right the rent is less than the current market rate for the possession, right proportion. value will increase land, In order to establish the true value of the value of the right income, interest, to receive the lessor’s must be combined right possession, with the value of the the lessee’s interest. prior Because the Court’s decision focuses on the lessor’s 410 Mich 428 lease, right to under the a receive income distorted view of the And, any true cash value results. while it is true that sale of property the lessor’s interest in the would reflect the unfavora- lease, sale of the ble a lessee’s interest would result in a rate of higher relatively return which would be much than the low expense suggest. By analysis, rental would a similar the Tax attempted Tribunal to ascertain the true cash value of the i.e., plaintiff’s property, a of combination the lessor’s interest approach and the lessee’s interest in the Such an eminently truly fair and sensible. It endeavors to ascertain the selling price property, by "usual” of the as mandated Legislature. very determining prop- 4. Actual income is a limited tool assessment, erty procedural tax and its use creates difficulties addition, taxing taxpayers for the authorities. In the class of capable making are who use of the actual income method is extremely testimony limited. It is clear from in the Tax Tribu- hearing majority nal that under normal circumstances the taxpayers Michigan property by have their assessed reproduction approach. Only income-producing property cost by capitalization approach. can be assessed use of the income then, only advantage taxpayer But even when it is to the necessary supplied will the information be to the assessor to capitalization approach use the income for tax assessment purposes. method, Under this because there is no law that requires taxpayer supply this information to the tax assessor, ability manipulate property to control and tax taxpayer assessment rests in the hands of the alone. If the Legislature wanted actual income to be the method or basis for assessment, property provided indepen- tax it would have some Also, dent means for the assessor to ascertain actual income. highly unlikely Legislature would make such a present definition for the economic income of structures when segment taxpayers a limited of a class of would be affected it, by particularly requirement in view of the constitutional uniformity property tax assessment. 5. The framers of the Constitution of 1963 considered uni- formity paramount goal property of taxation the of all tax principle requires assessments. This neither mathematical equality required nor matematical certitude. What is is that properties similar within the same district be assessed on a However, very parcels similar may basis. even similar of land possess differing may disparity attributes which lead to a in tax disparity may assessment. The in assessment not constitute a principle treatment, uniformity violation of the but it Saginaw Twp CAF 1981] something plaintiff indicate that is amiss. The contends that property long-term unprofitable the encumbrance on this of a any lease should form the basis for assessment of its value. But parcel by another with similar structures not encumbered a long-term unprofitable greater considerably lease would bear a reproduction tax burden because it would be assessed method, property state, cost as is most of the in the rather than here, disparity clearly the use of actual income. A exists but any it is not the result of innate differences between this hypothetical property and a which is similar but plaintiff’s unencumbered disparity lease. The results taxpayer because one has saddled his with such a lease, taxpayer reaped profit while another has from his land. taxpayer To allow business acumen of the to form the control- ling basis of tax assessment would obliterate the principle addition, consistency. permit taxpayer In it would manipulate taxing process purposes, regard- for his own happens property less of what to the rest of the owners of the hardly state. It can be said that the framers of the Constitution Legislature or the intended such a result. Valid limitations on disparate the use of land exist which will lead to valua- similarly properties. tions of situated No violation of the doc- uniformity trine of occurs where the tax assessors take such However, limitations into account. in each case the limitation imposed property by was on the party. the actions of a third In Michigan no case have the courts of sanctioned a limitation imposed property by which was property on the owner. Legislature 6. If "present intended the term economic income”, income of structures” to mean "actual it has created arbitrary an and irrational classification that cannot be sus- equal protection grounds. tained on uniformity There can uniformity be no special group taxpayers taxation if a can property claim that tax must be based on the actual income self-imposed, derived from a unfavorable lease. Tribunal, remand, 7. The Tax did consider actual income evolving in required its assessment. It was not to base its valuation on any that to factor the exclusion of other considera- tion. properly Because the Tax Tribunal determined the true property cash plaintiff value of the owned its assessment should be sustained. (1977) App 559; 79 Mich 262 NW2d 863 affirmed.

Opinion op the Court Judgment Appeal — op — 1. Law the Case. question A appellate of law decided an court will not be Mich 428 subsequent appeal in the same case differently on a decided materially the same. remain

where the facts Appeal — Judgment — Case. 2. Law ruling Supreme becomes the law of the Court a case A subject govern new is to review thereaf- trial and not case ter; of law reached on the if it that the conclusions is claimed erroneous, remedy hearing is a motion for a were former rehearing. — Property — — — Valuation Income 3. Tax Economic Taxation Long-Term — Lease. Actual Income Prop- property, General of real as used Economic income Act, erty income where the was Tax means actual long-term lease which for use as a retail store under rented fairly at outset of its economic circumstances reflected term, suggestion was no the lease made and there was negotiations; by arm’s-length the fact actual other than comparable prop- return on less than the rate of was require erty current market conditions does not valua- under capable on the income which it was tion based (MCL prevailing producing at the rate in the current market 7.27). 211.27; MSA Property — — — 4. Tax Economic Income Actual In- Taxation —come and Phrases. Words nothing than the actual income of "Economic income” other property in a received under a real case where rental current economic circumstances lease reflected (MCL relationship true value and bore a demonstrable cash 7.27). 211.27; MSA Capitaliza- Property — — — 5. Income Taxation Valuation tion. Tribunal, approach using capitalization The Tax the income property, to the rental under valuation of limited existing long-term projected an lease as the sole measure of projected capitalization; basis income for may necessary adjusted any be for are relevant factors which reflecting to arrive at a valuation the true cash value of 7.27). (MCL property 211.27; MSA Property Uniformity — — — — 6. True Taxation Tax Assessment Cash Value.

The touchstone of assessment is the true cash value or uniform however, selling price property; usual assessment deci- recognize which have a sions must limitations or restrictions Saginaw Twp CAF 1981] (Const bearing selling price 1963, 9, 3; property on the art § 7.27). 211.27; MCL MSA — Property — — 7. Taxation Tax True Cash Valuation Value. physical property Parcels of real have similar characteris- tics, but differences economic factors will determine the parcels; selling price physically properties usual similar terms, zoning restrictions, encumbered different lease or deed would not have the cash restrictions same value (Const 7.27). 1963, 9, 3; 211.27; open market art MCL MSA § Property — —Tax 8. Taxation Valuation. uniformity

It rule of would violate the in taxation to assess two parcels property despite of real the same the fact that their (Const 1963, selling prices 3; usual are different art MCL § 7.27). 211.27; MSA Separate Opinion by Levin, J. Property Long-Term — — — —

9. Tax Taxation Assessment Lease Actual Income. property The constitutional standard for valuation of real is the market, value”; able, if a tenant ”true cash desirable in an arm’s-length bargain, to obtain more favorable terms a than tenant, pays going less desirable the rent it is nevertheless the tenant, might market a rate for such and what another tenant pay determining is irrelevant cash to the true value of (Const 1963, long-term 9, 3; encumbered art lease MCL § 7.27). 211.27; MSA Property Long-Term — — — 10. Taxation Tax Assessment Lease. Valuing the lessee’s interest as well lessor’s interest assessing property subject real to a lease is an another, way valuing alternative at what hypothetical, pay, tenant would because lessee’s interest is degree him, i.e., to which lease is ’’favorable” paying difference what between he is and what the owner tenant, presumably would obtain from another and thus seeks value the as if it were unencumbered the lease (MCL 7.27). actually 211.27; when it is encumbered MSA Property — — — Long-Term 11. Taxation Assessment Lease. holding aspects Cases that severable interests in natural of land part although must separately assessed as the real estate owned, pursuant statute, inapposite are in a case where the question is, purposes, whether leasehold valorem tax ad fee, and, separate apart so, an interest from the if to whom Mich 428 apart assessed; from the the fee cannot be valued it should be of the lessor and use and the mutual commitments lessee’s 7.27). (MCL211.27; MSA in lessee reñected the lease Property — — — Evidence. Tax Assessment 12. Taxation disregard taxing wish to lease When authorities being subject property assessed is which the commercial real capitalization in- than of actual some method other use come, up something them to come with better the burden regarding highly rentals in evidence and sales than artiñcial buildings many years altogether built different locations 7.27). (MCL211.27; apart MSA Property Uniformity. — — — 13. Taxation Tax Assessment adhering Uniformity achieved to the constitu- of assessment is standard, value; the cost tional market-based true cash if used, approach no since there is real relation- to assessment value, reproduction reproduction ship cost cost between obsolescence, subjec- adjusted highly has to be for economic uniformity frequently responsible tive the lack element 7.27). (Const 9, 1963, 211.27; 3; in art MCL MSA § assessments Property Uniformity. — — — 14. Tax Assessment Taxation by attempting Uniformity of assessment is not advanced to assess appears equal property all which similar as if it were value 7.27). (Const 9, §3; 211.27; art MCL MSA J. Dissenting Opinion Fitzgerald, Property — — — 15. Tax True Cash Value Taxation Actual Income. relevant, produced by property, Actual income real if it is must determining prop- be considered in cash value true erty Act, Property not under the General Tax but it need necessarily certainly used be in all circumstances and should consideration, exclusively; rejected, used be after be inappropriate applied particular if it is to the facts of a case (MCL 7.27) 211.27; MSA Property — — — 16. Taxation Tax True Cash Value Lessee’s Interest. Among may properly the items which taken into account determining value true cash of real under Act, Property General Tax in addition to the items mentioned statute, is the value of lessee’s interest 7.27). (MCL 211.27; MSA Saginaw Twp CAF 1981] Property — — — 17. Taxation True Cash Value Actual Long-Term — Lease. Income correctly rejected appraisal The Tax Tribunal considered and an predicated solely of real which was on the income property from the lessor’s interest in the where found that property the relation between the owner of the and its tenant market, typical particular were not of the normal and that the tenant, being highly developer a desirable commercial of dis- stores, count could receive more favorable lease terms than a (MCL 7.27). marginal 211.27; more tenant MSA Concurring by Dissenting Opinion Williams, J. 1, 5,2, 23, headnotes 27. See — —

18. Taxation Law of the Valuation Case. Tribunal, by upon Court, by Supreme Use the Tax remand capitalization a of "market” rent of with a unfavorable lease instead of the actual rent under the lease directly must be reversed where that use violated the Court’s (MCL 7.27). previous opinion 211.27; in the matter MSA — Capitalization — 19. Taxation Valuation of Income. Property requires by The General Tax Act "consideration” assessing body of the items listed in the statute but does not require assessing body make its determination of projected property upon any items; income of one or all of the may application "consideration” well indicate that the of some (MCL inappropriate or all of the items is in a certain case 7.27). 211.27; MSA — — Capitalization — 20. Taxation Valuation Cash Value Income. Property requires The General Tax Act the assessor to reach a particular result, i.e., value”, apply particular "cash not to a valuation; formula of "plugging the assessor is not limited capitalize in” may actual rent to any accepted income but use long recognizes formula components so as it the various (MCL 7.27). 211.27; value set forth in the statute MSA — — — 21. Taxation Economic Income Actual Income Words and Phrases. income”,

The term "economic insofar as it is considered valuing property Property assessor in under the General Tax Act, (MCL interpreted meaning must be 7.27). 211.27; MSA Mich 428 Long-Term — — Lease. 22. Assessment Taxation long- an with unfavorable of the valuation of The issue statutory items valua- and consideration term lease Property Act must first Tax under the General tion assessing body, by the with rather restricted be addressed (Const 211.24, 211.27, 6, §28; judicial art MCL review 7.210). 7.24, 211.151; 7.27, MSA Moody, Jr., J. Dissenting Opinion Blair — Property — — Income Tax Valuation Economic 23. Taxation — Actual Income. ignored and cannot be must income of structures Actual any of true cash value of real determination considered Act; however, Property property, under General merely present a of structures one of economic income statutory which must be considered deter- number of terms value, mining one or another of terms true cash and while case, given all terms must be considered control in 7.27). (MCL211.27; equally MSA Property — 24. Taxation Tax. cumulative; every right Property it is tax on tax its nature proper property; to real and interest that attaches assessed valuation, therefore, rights the value of all the must include the which inhere in Property — — — 25. Valuation Cash Value. Taxation Tax True possession right property of under a is a The current real lease paid right property, in the and if the rent for the which inheres rate, right possession than market then less the current right possession the value of the of current will increase therefore, proportion; value in order establish true of assessment, determining property land in tax the value of income, right interest, to receive the lessor’s must be possession, of the lessee’s interest combined with value 7.27). (MCL211.27; MSA Capitalization Property — — — 26. of Taxation Tax Assessment — Income Actual Income. produced by property very Actual real is a limited tool in determining property proce- its use creates tax assessment and authorities; taxing Legislature had dural difficulties for if the capitaliza- wanted actual income to be used for assessment income, independent provided tion of it have some would income, means but it is for the assessor to ascertain actual "present highly unlikely Legislature would defíne Saginaw Twp CAF Investment 1981] economic income of structures" to be actual income when (MCL taxpayers a limited class of would be affected 7.27). 211.27;MSA Property Uniformity — — — 27. Taxation Tax Constitutional Law. uniformity The framers Constitution considered (Const paramount goal of all taxation the assessments 9, 1963, §3). art Property Uniformity — — — — 28. Tax Taxation Assessment Law. Constitutional principle uniformity requires The taxation neither mathe- equality certitude; required matical nor mathematical what properties is that similar with same be assessed on district basis, done, a similar if this is the actual amount of taxes (Const paid 1963, 9, on to be such be the will same art §3). Property Uniformity — — — —

29. Tax Taxation Assessment Constitutional Law. parcels possess very may differing Even similar of land attributes may assessment, disparity may lead which to a tax but that principle uniformity not in constitute a itself violation (Const 3). 1963, of taxation art § Property — — — 30. Taxation Tax Assessment Limitations Use. Valid limitations on the use of land exist which will lead to disparate similarly properties, valuations of situated but in recognized each where case such a limitation has been it has imposed by party, been third owner 7.27). (MCL211.27; himself MSA Property — — — 31. Taxation Economic Income Actual Long-Term — — — Equal Income Lease Uni- Protection formity. Legislature, ''present if it intended the term economic in- Property come of structures" as used in the General Tax Act to income", arbitrary mean "actual has an created irrational equal protection classiñcation that cannot be sustained on and grounds; uniformity uniformity be no there can of taxation aif special group taxpayers claim that tax can must be self-imposed, based on the actual income derived from a unfa- lease, especially taxpayer may vorable where a choose whether thereby require to reveal the actual its use to Mich 428 410 446 Opinion of the Court (US 1963, Const, XIV; Am Const control assessment valuation 7.27). 1963, 211.27; 1, 9, 3; §2; MSA art MCL § art Const Miller, Cohn Charles Honigman, Schwartz & (by Shapiro) B. and Michael plaintiff. for H. Tobias Crane, & Crane Kessel defendant. long has a address a conflict which J. We Ryan, of Saginaw out arising protracted history appellee’s prop-

Township’s 1971 tax assessment was parties original dispute The between erty. 1974 in unani- Court initially resolved this CAF Fitzgerald. opinion mous written Justice Comm, 442; Co v State Tax 392 Mich (1974). 588 The Court reversed 221 NW2d to tax and remanded decision of the commission consistent with proceedings the Tax Tribunal1 for opinion. thereafter two The Tax Tribunal conducted hearings culminating opin- in a lengthy weeks appeal right 1976. On as of April ion dated again Appeals, the Court of the Tax Tribunal was for redeter- reversed and case was remanded Appeals Court mination. The concluded the dictates of tribunal failed follow this Court’s Saginaw CAF Investment Co v earlier decision. (1977). Twp, 559; 863 App Mich NW2d again We have leave granted appeal. (1978). Mich

I giving dispute facts rise to are exten- this 1During Legislature appeal, the Tax the course enacted appeals jurisdiction Tribunal tax Act which transferred over seq.; from the MCL 205.701 et tax commission to the Tribunal. 7.650(1) et seq. MSA Saginaw Twp CAF Investment 447 1981] op Opinion the Court our sively prior stated in decision and need not be here. repeated length at

It suffices that C.A.F. say disagrees with Saginaw Township’s assessed valuation of commer- property cial owned the company. The property is encumbered lease with the S.S. Kresge Company for a K-Mart store. The lease is expected expire, not until 1998 op- if available are tions exercised. Under the economic conditions years for in dispute, assessment now 1971- 1975, actual income under the lease is relatively Expert conceded, low. witnesses for both parties however, the lease reflects 1963 fairly eco- conditions, nomic year the lease made. was before, When this case was here C.A.F. was challenging Saginaw Township’s true cash valua- $1,442,364 tion of for the subject property.2 That general "True is cash value” the basis for the uniform ad valorem 1963, 9, Legislature, of taxation real Const art 3. The § during period question, the MSA in defined "true cash value” in MCL 7.27, 211.27; mean, essence, selling price” the "usual of market, open taking such on the into account various other factors, including "present economic income of structures”. 211.27; provided pertinent part: MCL MSA 7.27 " selling price place 'Cash value’ means the usual at the where the applied to which the term shall be at the time of assess- ment, being price which could be obtained for at private sale, Any and at forced or auction sale. or sale other disposition by any agency political or state or subdivision of lands acquired delinquent any appraisal taxes or made in connection controlling therewith shall not be considered as cash evidence true purposes. determining value for assessment In the value the assessor advantages shall quality disadvantages location, also consider the and soil, zoning, use, existing present economic income of structures, including present farm structures and economic income of being land put when the land farmed or otherwise to income producing use, quantity timber, standing power and value water mines, privileges, minerals, quarries, deposits or other valuable known to be available therein and their value. "Except provided, property as hereinafter shall at be assessed 50% 9, of its true cash value accordance with article section 3 of the constitution.” 1973 PA 109. 293, 1; This section has since been amended 1976 PA PA § 411, 1; § 1978 PA 1.§ 410 Mich Opinion the Court appealed to the State Tax had been

determination essentially sustained town- which Commission ship’s making decision, In assessment. earlier upon heavily the testi- relied the tax commission mony appraiser. Dan- Daniels, a staff of Norman $1,600,- cash valuation a true submitted iels had 000 capitálization upon of income both based depreciated reproduction methods of cost and the appraisal. of for calculation The Daniels’ basis projection capitalized income value was comparable prop- expected for return rental repre- simplest erty. terms, this to its Reduced value, per of $2.00 "economic rental” sented an operations upon square of similar foot based Implicit properties.3 in the valuation was K-Mart property to rent in the available was then that marketplace, course was not the case.

which of appeal Court, C.A.F. contended to this On statute, value”, defined could "true cash to the actual determined reference of with S.S. the terms the lease realized under capitalized Basing Kresge. in- his calculations appraiser, income, the C.A.F. come value on actual $787,500. Nelson, arrived at a valuation Dean figure accurately re- this C.A.F. contended tax reli- true value. The commission’s flected cash upon "hypothetical rental” or an "economic ance appraisal, argued, income” as a basis for C.A.F. selling relationship had no reasonable to the usual price property which is or fair market value statutory de- standard for the constitutional termining true cash value. defended valuation

The tax commission its figures pointing out that C.A.F.’s actual rental unreasonably low the lease resulted in an under income”, rental”, "po "hypothetical terms rental "economic income/rent”, comparable property” and "rate of return on tential are used throughout opinion. interchangeably this Saginaw Twp 1981] CAF Opinion of the Court capitalized equated valuation. The tax commission language statutory "economic income” with appraisal Thus, term "economic rental”. tax commission contended that if under a leased lease a rental which proves years unduly in later low in the face changes, ignored economic rent could be potential and the rental income of the open market could be utilized. Fitzgerald incisively Justice framed the issue presented to this Court as follows: law,

"[W]hether, Michigan under the tax commission give weight was entitled to consider and evidence upon valuation based rate of compara- return which ble, present unencumbered could earn in the marketplace existing long- the face of an unfavorable term lease with an actual rate of return which is substantially present 'going less than the rate’.” 392 Mich 447.

This Court held that under the circumstances presented, the was, case the answer It "No”. was that, statute, held as used in the "economic in- come” meant Id., "actual income”. 454. To the capitalization extent that the of income method is determining value, used for true cash the assessor obligated was to use the actual income under the existing long-term lease as the basis his for calcu- lations. Id. The record indicated that the lease was product arm’s-length the an transaction and fairly reflected economic conditions at the outset. permitted To the extent that the tax commission ignored, township’s actual income to be the valua- clearly hypothetical tion was in error. A rental comparable properties income based on at leased improper more favorable rates an was basis determining Id., true cash value. 455. Mich 428 Opinion the Court and commission the tax

This Court reversed of true cash value for a determination remanded procedural upon to a income. Due actual based by commission, a full the tax committed error also hearing Tax Tribunal. the was held novo de developed surprisingly, at the evidence Not essentially hearing mirrored that taken on remand appraiser, original hearing. C.A.F. at the Nelson, of C.A.F. testified on behalf Dean again 1971 assessed valuation at a arrived capitalizing under the $787,500 ap- expanded existing long-term his lease. Nelson intervening years praisal to 1975. The to cover highest $950,- his calculations was under valuation figures, year These 1974. for the assessment 500 according represented Nelson, fair market investor. to a commercial of the value opined look at investors would Nelson existing lease determine flow under the cash of the fair market value again of the Daniels testified behalf Norman testimony appraisal township. cor- were His by appraiser, commission roborated a fellow tax relia- Both testified that the most Russell Galvin. determining fair market value method of ble capitalization of income was valuation alternative methods of method. Two capitali- validity utilized to check the were deter- zation of income method.4 Both witnesses years for the mined that the valuations assessment question 1971; $1,509,000 in as follows: were utilizing unanimous capitalization of income reasonable assessment of fair market valuation and therefore, appropriate It should other which is the opinion circumstances. appraisal noted that our proper methods to determine true method reflected appraisers See 392 Mich at basis prior decision the tribunal’s in the instant case the most accurate and left open it is that cash value fn 2. It was the the assessment. prospect method, 1981] CAF Twp Saginaw Opinion of the Court $1,570,000 1972; $1,640,000 $1,705,000 in 1973; in 1974; $1,771,000 in and 1975. figures

Daniels and Galvin testified that these property reflected the true cash value of the entire just and not the value of the lessor’s interest under the lease as reflected use of actual rental suggested by appraiser. income alone as the C.A.F. experts explained that, both On cross-examination they essence, in hypothetical this meant that looked to the property subject rental ignored make to their calculations and actual rent They received under the lease. even so went far say to determine total value of the subject property, actual rent received was irrele- exception vant. Daniels admitted that with the change vacancy factor, in the there no was appraisal difference between first submitted originally tax commission and the second appraisal provided to the Tax Tribunal at this hearing. taking testimony

After the above the Tax Tribu- supplemental findings fact, nal made none of pertinent pres- which are ent to the resolution of the appeal,5 The Tax Tribunal then framed the developed following The Tax Tribunal additional facts and hearing circumstances at the on remand: At triggered "1. time the initial assessment this appeal, petitioner praised provide appraisal reap- refused to firm that all the in the assessment district with the income expense appeal on data which this is based. During hearing petitioner, "2. represented by only this counsel at hearing, objected mortgage to the introduction of the petitioner’s 31, 1966, balance sheet for December which were both by respondent 13, respectively, introduced as its Exhibits No. 11 and which were admitted as evidence. 13) (respondent’s "3. balance sheet Exhibit indicated the total subject $1,057,318.88, (re- mortgage cost was while the 11) spondent’s petitioner $1,250,000 Exhibit indicated was on loaned subject $192,681 15, 1963, mortgage or November for a loan of explanation excess cost. Petitioner offered no for this excess. developers country "4. That there are or three four in the who 410 Mich 428 452 Opinion of the Court necessary legal for it to it deemed issue which dispute presented: real "Where in the resolve subject property currently lease which to a provides than the normal market less property a to be on value rent, predicated assessed is such income?” the actual level of on statutory analysis, lengthy Tax Tri- the After a essentially the tax commission’s reaffirmed bunal C.A.F. With earlier assessment capitalization and ex- the rates modification to pense figures, predicated the the Tax Tribunal capitalization of on the value of the employed by appraisal the income method of appraiser, Daniels. Mar- tax ket Norman commission rent to in was utilized lieu of actual income develop properties. adequate was no 'K-Mart’ There have been able explanation why this was offered as so. 'Triple very Kresge Company "5. is a desirable AAA’[sic] That S.S. standpoint. an tenant from economical predicated appraiser, making appraisal petitioner’s "6. in his That petitioner. only, on on rental income did so instructions lease witnesses, respondent’s appraiser IV "7. a Level certification weeks One of Commission, spent eight preparing the for the State Tax utilizing appraisal rent income valuation on this market approach. compel taxpayers to income and "8. That assessors cannot furnish expense appraising on method. data for use in an income valuation only data those are "9. That can obtain such from that assessors willing give it. respondent’s ap- petitioner’s appraisers "10. made That both praisals request years respectively, and the for the tax 1971 and at prepared the and testified to estimates of value for tribunal intervening 1972, years. the 1974 tax petitioner’s appraiser prepared appraisal "11. an That had not approach grounds the the or 'market’ on the based on 'cost’ utilizing the lease income method was best method and that acting was on rental income in lieu of market rent he client, petitioner. instructions his Respondent’s appraiser prepared expert "12. other a 'cost’ witness but, approach appraisal together respon- and dent’s for with 'market’ expert prepared ap- method first witness who 'income’ praisal, agreed method to be not be that the 'income’ method was best provided subject property could used predicated substandard rent’ that the value with rental income when such income the lease alone compared case to market rent and that in this 'market valuing property.” used was them Twp Saginaw CAF 1981] Opinion Court $1,389,452 reach a valuation of assessment 1971-1974. The 1975 years year assessment valua- $1,473,506. tion determined was to be Emphasized throughout the opinion was the Tax Legislature Tribunal’s belief did not in- tend the use of actual income to determine true cash value when that figure represented portion the commercial potential appraisal involved. The submitted Nelson, appraiser C.A.F. Dean consisting capi- of a talization of actual the long-term income under lease, little, was considered to "of if be evi- any, dentiary value”. The foremost for rejec- reason its tion the appraisal’s was failure to predicate valua- tion on "the amount of income the subject prop- capable producing”. erty Court Appeals The reversed the decision of the Tax Tribunal and again remanded. The Court reasoned that our prior required decision that of actual capitalization income form the basis of the ignor- tribunal’s calculations and that held by ing actual income the adopting appraisal comparable upon based rate of return of unen- cumbered property, the Tax Tribunal committed a CAF clear error of Investment Co v Saginaw law. Twp, 79 Mich App 262 546-565; NW2d (1977).

On appeal, Saginaw Township contends that Court Appeals misconstrued our earlier deci- sion; that our decision did not valua- require the tion of C.A.F.’s solely on be based rent; actual that actual rent need be consid- along factors; ered with other relevant and that if in light of unusual actual circumstances income did not reflect the true cash value the entire property, income disre- properly could be garded. The township argues also to predicate Mich op Opinion the Court a received under the actual income on

valuation effectively taxpayer a lease allows against tax real estate assessment "freeze” his violates the values which land future inflation uniformity requirement of of assess- constitutional ment. ap- Appeals responds the Court of

C.A.F. plied Tax case Tribunal law of the correctly inconsistent; found it to be decision only appraisal which conformed with that the principles our mandated of true cash value prior Nelson’s; and that the was Dean decision appraisal partial upon an reliance Tribunal’s hypothetical clear conflict on was based with our

prior decision. /

II dispenses doctrine with law of case again legal ques- Court to consider need this prior neces- our decision and tions determined sary generally stated, the doctrine is that to it. As legal passed question appellate if an and remanded court has proceedings, the case for further legal appel- questions thus determined differently late court subsequent appeal determined on will in the same case where Corporation materially the & facts remain same. Corp, 379 Comm American Motors Securities v (1967); Sack- 531; Mich ett, 152 NW2d 666 Palazzolo v (1931); 289; 254 Mich 236 NW 786 American 421; 185 Martinek, Ins Co of 216 Mich Newark v (1921); Telephone Michigan 683 NW Allen v Bell (1975); Topps- App Co, 61 232 62; Mich NW2d 302 Lansing, App Toeller, 720; 209 Inc v 47 Mich (1973). NW2d 843 principle recognized application

The this was of early judicial history in of this state. In Pierce the Twp Saginaw CAF v 455 1981] Opinion the Court Underwood, 186-187; Mich NW (1897), Justice Montgomery stated: term,

"This case was before the court at a former and reported 344], is in 103 Mich NW to which [61 reference is made a statement of the facts. The case circuit, at has retried the in been and has resulted in judgment plaintiff. verdict favor of the brief The appellant raises questions the same were which reargues in discussed the former case and them. We questions disposed cannot review the which were there it of. If claimed the conclusions of law reached hearing erroneous, on the former were the remedy byis rehearing, ruling a motion for a but this court in a trial, case law of govern becomes the the case to a new subject review thereafter.” controlling dispute The facts in the instant re- virtually main identical with those which obtained dispute we time, when decided this the first other through than extension the valuations 1975. appraisals parties submitted at hearing remand, essence, on in utilized the same virtually methods of valuation and arrived at same determinations of true cash value as before. township appeal The issues framed on this nothing polemic are more than restatements question prior appeal. decided on present appeal

Determinative is the appraisal Tribunal’s reliance of Norman Daniels which substituted the economic rental or hypothetical income for the actual rent subject despite lease, under the prior rejection this Court’s of that criterion as a proper basis of valuation. The cross-examination hearing part, Daniels at was, on remand follows: Well, true, Daniels, but isn’t Mr.

"Q. 410 Mich op Opinion the Court case, rent this the actual in arriving total value at irrelevant? K-Mart was received from again? "A. What’s value, the actual rent arriving In at total wasn’t

”Q. from K-Mart irrelevant? by received C.A.F. value, yes. valuing

"A. In the total Yes, "Q. it was irrelevant?

"A. Yes. at any actual rent ”Q. So had not considered you if your in all, exactly out the same you have come would total value? estate, valuing simple yes.”

"A. In fee ap- of Daniels’ acceptance The Tribunal’s Tax income is hypothetical on the use praisal based per square its by adoption evidenced $2.00 op- used Daniels as figure foot income rental rental square foot actual posed per to the $1.30 basing figure. upon The error valuation clearly was comparable rental value Fitzgerald prior our decision: stated Justice ultimate determination "The Tax Commission’s State $1,440,000 part upon true is based cash value income’ testimony of Norman Daniels on 'economic upon capitalization. To extent is based such evidence, upon hypothet- a the ultimate valuation relies of actual ical rental income consideration without demonstrably rental related to fair market comport value. Such a valuation does not with statutory standard of 'true cash constitutional at value’.” 392 Mich 454-455. guilty the Tax Tribunal

Remarkably, for the tax commis- same error which we reversed It Tax sion previously. presumptuous was legal analysis Tribunal embark upon to and decided question clearly presented that was prior appeal. this Court on Tribunal’s Saginaw Twp CAF 1981] Opinion of the Court division of the C.A.F. into "leased fee” purposes and "leasehold” interests for ing of establish- the true cash value of the "entire” subterfuge inappropriate justify an to the tribu- reject nal’s determination to the use of actual potential income when it falls below rental comparable properties currently value of on the market, and is unwarranted. The tax commission prior was reversed this Court in our decision hypothetical for its use of income rather than projected figure. income to reach a income remand, In its decision on at- tribunal has tempted justify essentially the same method of fact, valuation. In the Tax Tribunal used the same figure per square "economic rental” foot $2.00 supplied by Norman Daniels that the tax commis- employed sion had its calculations. We hold again once that such a method of valuation is erroneous. reasoning upon remand,

The Tax Tribunal’s township’s argument appeal, is that our prior required only decision that actual income be determining "considered” in true cash value and given that it once had "consideration” to actual accurately income and determined that it did not comparable prop- reflect current rates of return of erty open market, on the actual income could be ignored. signifi-

The Tax Tribunal’s estimation of the placed cance this Court dispute on actual income in this woefully falls short of the mark.6 All the Fitzgerald township It is contended and Justices Moody that when we directed the Tax Tribunal to "consider” actual previous 6, opinion, required only income in our 392 Mich fn we using that the tribunal think about actual income as the basis of its calculation, option disregard with the it if so chose. The conten tion is untenable. To construe "consider” in that manner is mani (then commission) festly illogical since the Tax Tribunal the tax had hearing, received into evidence at the first the one reviewed in our 410 Mich Opinion of the Court capitalization appraisers of in- that testified of value. indication was the best method come upon heavily rely cash flow investors Commercial represented capitalization of actual Having judge market value the fair valuation, consideration by that method chosen provided was statute income” as "economic prior imperative. left no doubt decision Our nothing than ac- other income” meant "economic of this case. under the circumstances tual income supra, Comm, 454. State Tax Co v CAF Investment the record indi- "[I]n this case much: We said as fairly reflects rental lease cates economic of the lease at the outset circumstances to true relation a demonstrable term and bears fact that Id., 456, than the fn 6. Other cash value”. the rate of return less than income was actual comparable might property under current receive suggestion conditions, no that there was market by arm’s- at other than arrived the lease was length negotiations. A capitalization-of-income A under the calculation figure. projected yields Often, income method here, figure the fair market alone will reflect that Township property. Saginaw and value of the throughout have maintained Tax Tribunal Nelson, appraiser, testimony previous opinion, the C.A.F. of Dean property question in who maintained that must we ordered the Tax Tribunal already thought the true cash value of the Patently, income. when determined with reference to actual it had actual income to "consider” Indeed, about, quoted rejected, we and its use. property recognition arrived of the "was tribunal’s that its valuation contained the noted at after 'consideration of all the information [in Tribunal) added; (emphasis (quoting ”. 392 Mich 447 the Tax facts]’ backdrop plain original). Against that it brackets in this it to "con- when we ordered tribunal had considered actual context, interpretation In this reasonable sider” the same. "consider” is "use”. Twp Saginaw 1981] CAF Opinion of the Court proceedings, pro- however, of these that course jected by capitalization income, as reflected long-term lease, received under actual income does not reflect the true cash value of the entire property. argue, they any projected

Instead, in- figure calculated on the actual in- come basis.of (C.A.F) only the in come values lessor’s interest (K-Mart) ignores the lessee’s lease, under the and that interest the lessee has interest in the measurable land due to the eco- advantage enjoys renting it nomic for prevailing an amount that is less than the rate in the current market. proposition might merit that in

Whatever have appraisal, real the science of estate consideration of a so-called lessee’s interest ployed by the means em- the Tax Tribunal is foreclosed our prior Testimony decision. of the tax commission experts was that order to value the entire property, consisting of both the lessor’s and les- anytime interest, see’s actual income fell below the hypothetical comparable market rent or property income of ignored, income would be ignored very was this case that reason. methodology The fault of this is that true cash equal value must the fair market value experts to the All that owner. conceded accurately economic income most reflected And, us, value. on the in- facts before economic nothing income, come was other than actual since years it had been determined for the question the lease rental eco- reflected current nomic circumstances and bore a demonstrable re- equate Moreover, lation to true to cash value. hypothetical economic income with income ev- ery situation where actual under a rent prevailing lease is less than the market rental 410 Mich Opinion of the Court of the lease on a the effect ignore would be to the fair regarding judgment investor’s prospective That was the very of the market value prior confronting appeal. this Court situation the consideration actual We refused allow potential to the diluted reference income to be then, and we do so comparable property income of now.7

B In there well be other circum- other cases require necessarily stances or considerations that figure income projected to the actual adjustment at an accurate true cash valuation. These arrive and prior appar- mentioned in our decision were the tribunal’s confusion on were a source of ently Fitzgerald in 392 stated Mich at remand. Justice 455-456: case, holding do "By the in this we not mean to assessor, utilizing

suggest the tax the income valuation, to, capitalization approach to is limited accept, figure existing rental under an must long-term and projected lease as the sole measure of income capitalization. In most cases such an

basis approach to true cash value would lead to distorted right repossession valuation. Such factors as the lease, length the land at lease term often figure current market the end of the suggest projected income part adjusted should at least to reflect appropriate It may conditions. also be adjust projected figure to where in circumstances financing was obtained at a much more favorable rate, going high rate than the current and there is a appraiser adjust It should be for C.A.F. did noted that capitalization reversionary interest under rate to reflect the owner’s acknowledged validity presumably the lease. The Tax Tribunal providing further calculations of adjustment by for the valuation of that interest such an modifying capitalization employing it in their rate before projected income. Saginaw Twp 461 CAF Investment 1981] Opinion op the Court capitalization, rate of in order to current reflect the fact income-earning capacity greater than consideration of the unfavorable capitalization lease rental at current suggest. which it rates would alone Furthermore, we can envision circumstances may inappropriate to be consider lease term component projected Finally, rental as a income. facts, peculiar may there be such to the circumstances consideration, under capitalization approach as would indicate that the income speculative

is too to be a relia- ble indicator of valuation. In such circumstances may upon tax assessor reliable method of valuation.” phasis base his assessment a more (Footnotes omitted; em- added.) Emphasized are certain "adjustments” project income. The factors mentioned are no means exhaustive. were mentioned to illustrate They arrived at of a projected figure income virtue capitalization of actual income not reflect a accurate of a fair market truly picture property’s Twp value. See Port Sheldon v Ottawa County, 80 Ramblewood 91; (1977); Mich 263 299 App NW2d City Wyoming, Associates v 342; 82 App Mich Wolverine Tower Associates (1978); NW2d Arbor, v Ann 780; 96 Mich 293 NW2d 669 App (1980). They were not mentioned as reasons ignore the in calculating use of actual projected income in the case. instant right

The repossession length and the lease the instant case value in were accorded the Tax Tribunal’s calculations by adjusting capitalization. rate of

C precise error the tribunal’s calculation indicated, true cash value and the having been Tax Tribunal fact having findings made detailed 410 Mich op Opinion the Coukt figures to be expense capitalization on the the utilized, per square foot rental value "plugged into” the formula to need now income.8 projected arrive at

Ill predicate Saginaw Township contends given upon taxpayer’s value of a rate lease, economically of return under an unfavorable 8 IV, post. See Part The Tax set forth its calculations as follows: Tribunal

1971 (at (5%) ft.) $214,522 $2/sq. Gross Income -10,726 Vacancy & Credit Loss 203,796 Effective Gross Income Expenses -33,866 $169,330 Net Income Rate Overall 10.00 % Tax Rate 2.23 Capitalization Rate 12.23 % approach: Value income estimate _ $169,930 $1,389,452 .1223

1975 ft.) $241,339 (at $2.25/sq. Gross Income (5%) -12,067 Vacancy & Credit Loss 229,272 Effective Gross Income Expenses -41,400 $187,872 Net Income Overall Rate Tax Rate 10.50 % 2.25 Capitalization Rate 12.75 % approach: Value estimate income $187’872 = $1,473,506 .1275 findings The Tax Tribunal made of fact that the actual rental per square

income for the foot under the $1.30 $1.60 lease was years respectively. 1971 and 1981] CAF Twp Saginaw v Opinion of the Court valuating while on the other hand unencumbered property at level, current market is violative of requirements uniformity the constitutional process.9 assessment and due expressed The Tax Tribunal much the same opinion In the Tax concern. Tribunal’s prop- must a valuation method reflect the value of érty market, on the investment but must also produce uniformity of assessment. Because deter- projected mination of based depend upon provided rental would the rental long-term lease, the Tax felt Tribunal uniform- ity of assessment could never be achieved unless every market rent was utilized in calculation. primacy We are not unmindful of the of uni formity equality in assessment. See Allied Supermarkets, Detroit, 460; Inc Mich (1974); Appeal In re NW2d Corp, of General Motors (1965). 373; 376 Mich 137 NW2d 161 township’s argument, begs question. however, The of touchstone uniform assessment the true selling price property. cash value or usual of the recognize Assessment decisions must limitations or bearing selling restrictions which have a on the price property. Burn, Brae Inc v Bloomfield (1957). Hills, 425; 350 Mich 86 166 NW2d township’s appraiser prop- testified that the erty bought in the instant case would be and sold upon based the actual contract rent received under lease. We find that with certain adjustments represented this the true cash value 9 9, 3, provides, part, Const art in as § follows: legislature provide “The shall for true the determination of cash property; proportion value such such of true cash value at which * * uniformly shall be assessed grant authority, Legislature Pursuant this constitutional 7.27, 211.27; enacted MCL cussed at MSA set which has been forth and dis- length above. 428 410 Mich op Opinion the Court by assess- is achieved Uniformity at true cash value with the same all

ing level. consistent to the Tax Tribunal’s answer find C.A.F.’s We persuasive. assessment uniformity concern characteris- physical have similar Properties may will deter- tics, factors economic but differences properties. selling price mine the usual terms, lease different Properties encumbered restrictions, although restrictions, zoning or deed similar, same cash not have the would physically Kensington Hills market. See open on the value Twp, 368; Co v Milford App 10 Mich Development v Grosse Lochmoor Club (1968); 159 NW2d Woods, 394; 159 NW2d Pointe App 10 Mich (1968). violative of indeed incongruous, It would properties two uniformity, rule of to assess selling their usual despite the fact same are different. prices violations uniformity process or due

We find no on true cash value as premised an assessment Court. defined this

IV failing We to use actual conclude income, the Tax capitalization its basis of Invest- mandate of CAF disregarded Tribunal Comm, 442; 221 ment Co v State Tax 392 Mich (1974), committed error. thereby NW2d specific to enter a We direct the Tax Tribunal exces- bring order forthwith an end to this sively protracted litigation. expen- income and

Using taxpayer’s (which Tax Tribunal as accepted by ses were accurate), factor, the rate of vacancy CAF Saginaw Twp 465 1981] Opinion op the Court return and tax adopted rate Tribunal, the values for 1971 and 1975 are as follows:

1971 $1.31/sf $1.63/sf 141,000 Gross income 174.554 Vacancy -2,820 (2%) and credit loss -0- gross 138,180 Effective 174.554 -33,866 Expenses -41,064 104,314 133,490 Net Income Overall rate 10.50% 10.00% Tax rate 2.23% 2.25%

12.23% 12.75% Value Estimate: 1975_ 197X_ 104,314. 133,490. .1275 $852,935.40 $1,046,980.30

The 1971 applied 1972, value was to the years 1973, and 1974 Thus, as well.10 capitalization income yields figures: the following

Tax Year Cash Value Assessment Level Assessment 852,935.40 $145,340.19 $ 17.04%

1972 1973 1974 1975 50.00% 852.935.40 852.935.40 426.467.70 413,161.90 48.44% 50.00% 852.935.40 426.467.70 1,046,980.30 523,490.15 50.00% It is hereby ordered that the Tax Tribunal enter a final order in accordance foregoing with the figures. Interest on any refund shall be calculated prescribed 7.650(37)(4). by MCL 205.737(4); MSA 1972, years As to explained 1973 and the Tax Tribunal parties that the years had submitted "estimates of value” for those opinions” but characterized "these as "unsubstantiated estimates” and stated its solely conclusion it should "restrict their use determining that no unusual fluctuation of true cash value occurred intervening years”. in the tax The Tax Tribunal concluded that no evidence that "[t]here [was] such fluctuation occurred”. 410 Mich Opinion by Levin, J. being involved. costs, public question

No JJ., Kavanagh C.J., Levin, and Coleman, and Ryan, J. with concurred (concurring). I am in J. with Levin, agreement Ryan’s and have disposition analysis Justice to separately his I write signed opinion. therefore in the treated the considerations address some of opinions. other

I lessor, K-Mart, C.A.F., as The lease between Moody’s opinion lessee, to in Justice referred as is for the lessor. Justice unfavorable lease as an saying Fitzgerald’s opinion some- seems thing K-Mart able to receive more akin: that was marginal a more ten- lease terms than favorable justifying a factor the and that that was ant considering It income. is Tribunal in not suggested interest, well that the lessee’s as further interest, valued to arrive should be lessor’s and therefore true value. at the combined

A market, "true The constitutional standard is the able, an If a cash value”.1 desirable tenant bargain, arm’s-length favorable to obtain more pays tenant, the rent it terms than a less desirable is going such a market rate for nevertheless favorable tenant. If a desirable tenant obtains legislature provide shall Constitution states that While the "[t]he 3, 9, value”, it of Legislature Const art § for the determination does not true cash empower standard other than to establish a qualify I standard "true cash value”. or constitutional upon statutory unpersuasive argument term based therefore find 211.27; (emphasis supplied). selling price”. "usual MCL MSA 7.27 1981] CAF Saginaw Twp Opinion by Levin, J.

terms, it is because that tenant desirable; pays having rent is the fair of pays market value higher desirable tenant. If another tenant rent, it is not because is worth more tenancy but because the actual market value of its example, greater due, value, is anticipated less to the wear and tear or greater insecurity of financial In a tenant. perfect market differential rentals between comparable properties tenants of will not necessar- ily proper- a lead to different market value for the valuing ties. An investor the income stream to be provided by long-term a lease with a less desirable capitalization apply tenant would a rate discount- ing higher paid by the rentals that tenant recognition of the tenant’s characteristics that charge higher caused the landlord to a rental. any might pay case, In what another tenant is determining irrelevant the cash true value of property by long-term encumbered a lease. The property i.e., value of the is is, its value as it as say higher encumbered. To that its value would be if it were rented to another tenant when it cannot deny legal be rented to another tenant is to the reality and economic of the As encumbrance. Jus- implies,2 property tice the value of is af- Ryan Ass’n, Moody, relying Justice on NeBoShone Inc v State Tax Comm, 324; App (1975), attempts 58 Mich 227 NW2d 358 to distin Ryan guish by by saying the instant case from those cited Justice zoning that the case of a or deed "the restriction limitation was imposed by party” the actions a third a whereas lease is a self- imposed restriction. Appeals In NeBoShone the Court of held that where a seven-mem- large ber association owned a tract of used their own recreation subject and the sale an interest in the was approval by members, majority such a restriction should be by any taken into account the assessor because the owners could bar period years for a sale and claim there was no market or true cash NeBoShone, addressing value. Without clear merits of is that danger presented presented in that case is not In here. NeBo- Shone the seven association members had an incentive to hold down 410 Mich Levin, J. Opinion its value manner as in the same a lease

fected zoning restrictions. or deed is affected argument interest should the lessee’s interest is an as the lessor’s as well be valued prop- argument form of alternative hypotheti- another, erty at what be valued should pay: interest is the lessee’s would cal tenant him, degree is "favorable” to lease to which the paying is and what he i.e., the difference between presumably from obtain the owner would what valuing Thus, interest lessee’s another tenant. again if it were as value the seeks to actually encumbered. when it is unencumbered valuing Moreover, interest would be the lessee’s hypothetical rental for the rental to substitute tobe elimi- To do so would in the lease. reserved thus to income and to actual nate all relation reverse, rately Sepa- silentio, first CAF decision. sub combining valuing interest lessee’s produce a will original result interest it with the lessor’s diametrically opposed opinion. CAF to the Adding lessee’s inter- value an enhanced property interest where est to the lessor’s taxing them to- to a lease bound gether unjustified Internal Revenue as the impru- saying taxpayer he to a was Service Treasury buy bonds number to dent 90-day ago buy years now at he could when 5% Treasury income from at and that his bills 15% purposes, to bonds, be deemed be for tax will those 15%._ income-producing. property A

their assessment long-term since the was lessor, however, than could ever would lose more gained by reducing no incentive to take the assessment. With be rent, to of the lease on no reason not consider effect lower the owner there is property property’s is not a case' of true cash value. This rather, lease, assessor; controlling entered into and conditions, upon The Constitution controls the assessor. based market requires the of the market. dominance Saginaw Twp 1981] CAF Opinion Levin, J. opinions Tribunal, The Tax and the which would proceed portion decision, sustain its as if the taxing authority, lease which is favorable to the portion gave improve- i.e., the which rise to the obliges ment and K-Mart to remain at this loca- years, viable, tion for a minimum 20of but the portion taxing which the authorities find unfavora- ble, i.e., terms, the rental is not viable and the computed willing rent should be as if K-Mart were to enter into a brand new lease at location this at a rental which reflects increased costs of construc- financing tion and not borne this land- —costs (in 12-year building lord when this 8- or old respectively) taxing and 1975 was constructed. The permitted authorities should not be to have it both ways is encumbered or it is —either not. buy

No one could found this for what even the owner it claims is worth it unless were "encumbered” with the K-Mart lease and the goes assured cash flow that with it. This Court legitimately taxing cannot allow local authorities or the Tax Tribunal to evaluate as if is a encumbrance, there K-Mart lease which alone any price justify makes saleable at that would ignore assessments, current the rent reserved in that lease.

Finally, ignore the lease denies the circum- stances which made construction of the structure possible. willing one, lessee, No or lessor would be mortgagee provide to erect and no would funds for improvement an without some assurance that possession paying lessee can remain in if it is improvement or that it will remain if the paying improvement, especially landlord is for the building designed specifica- if the lessee’s tions. The lease embodies the commitment of the 428 410 Mich Opinion Levin, J. creating thereby lessee, value each and the

lessor forgoing might otherwise exist and not which specialized large, opportunities. kind of This other but for been constructed not have structure would long-term lease from some of a the "encumbrance” be no structure there would Since desirable lessee. encumbrance, it is not such an to tax without if it appropriate as could to evaluate else. be rented someone opinions the Tax Tri- sustain which would constitutionally for the bunal substitute would prescribed of true cash standard market-based ignoring hypothetical value, the lease value a dimension on of this which alone creates value might or less be still vacant which otherwise land Nothing valuably improved. in the record shows a entered into if this lease had been that producing as erected would have been structure when even based in taxes are derived much actual income. B General,3 relied on to re Petition of Auditor In argument support the lessee’s that the value of In to the that interest should be assessed lessor. this Court said: case estate parcel "It is in this state of real the rule 3390, 3391, at 1929 CL entirety, must be assessed as an timber, value, standing including worth of mineral

cash etc., rights, power privileges,’ 3415. This 'water § legislative policy the fact emphasized by i.e., single exception, the inter- statute mentions common, 3394.” ests of tenants § General, 581; In re Petition of Auditor 245 NW 260 Mich (1932). 1981] CAF Saginaw Twp Opinion by Levin, J. urged 'parcel It is "[t]o that this assess of real * * * entirety’ requires

estate as an the les- sor’s and the lessee’s interest be considered.” Such reading beyond extends Auditor General its precedential bounds. In Auditor General this "flowage rights” Court held that sold the land- owner before assessment of taxes should have been holding, assessed the In to landowner. so the Court controlling holding found two earlier decisions rights4 standing that mineral and timber5 must be part although sepa- assessed as rately the of real estate cases, owned. In all the three Court relied specific statutory directives6 and concluded that aspects natural of the land which were still at- tached should be assessed to the of the land. owner statutory of list factors to be considered specifically assessor included the natural elements standing timber, involved in those water cases— privileges and minerals.7 The Courts understand- 4 Co, (1916). Curry Superior 445; v Lake Iron 190 Mich 157 19NW 5 (1888). 18; Twp, Fletcher 72 v Alcona Mich 40 36NW 6 property, personal, jurisdiction "That all real and within the state, expressly exempted, subject this CL not shall be to taxation.” 1897 3824; 1915 CL 3995. purpose taxation, "For real shall all include lands state, buildings thereon, within the nances CL appurte- and all and fixtures and thereto, except expressly exempted by such as are law.” 1897 3825; CL 1915 3996. value,’ act, "The words 'cash whenever used in this be shall held selling price place mean the usual at the where the to which applied assessment, being price the term is shall be at the time sale, private which could be obtained therefor at and at or forced determining auction sale. In the and value of the value the also assessor shall consider advantages location, soil, disadvantages quantity quality and timber, mines, standing power privileges, water minerals, quarries deposits or other valuable known be available 3850; therein and their value.” 1897 CL 1915 CL 4021. supra, Curry, p In enacting the Court also noted that in Legislature changed prior PA 51 policy by requiring that all rights separately. mineral repealed manifesting in lands should be assessed This act was later, years Curry interpreted four which the Court legislative require intent assessment of mineral rights to the owner of fee. 410 Mich Levin, J. Opinion must include

ably the assessment concluded of the land. all such elements value of predecessors the and its General In Auditor in natural re- interests identifiable, severable clearly subject taxa- to ad valorem were sources question whom such interests was to tion and or the owner of the fee assessed—the should be In the instant case interest. severed owner question posed is, for ad a leasehold whether separate purposes, an interest tax valorem apart so, and, if to whom should the fee from be valued that the fee cannot I conclude assessed. apart the mutual com- use and from the lessee’s in the and lessee reflected of the lessor mitments lease.

II proper value the lessee’s Even if it were to be obtained from the rental that could interest or probative tenant, no in there is evidence another support a would valuation other this record which actually upon the income derived than one based no evidence a There is from this comparable property in the a rental or sale of period say Tri-City area, noth- in the 1971-1975 building ing in this of the immediate area which situated. are

Evidence of K-Mart or other tenants what buildings paying comparable in other areas (or tenant worthless without evidence that another itself) building. K-Mart to rent this could be found not, record at as far as this K-Mart does least buildings. appears 12-year-old shows, 8- It rent or it it also wants that when wants a new location proba- building. The new It doesn’t take leftovers. Saginaw Twp 1981] CAF Opinion by Levin, J. bility building empty is that if this had been responsible date, the tax no tenant would have been found to rent is and if were be rented obliged spend or sold someone would be converting considerable sum stores it either to smaller generally toor another use. That has been history Grant, Arlan’s, and discount other department stores which have been vacated. nothing justify There is in this record to any pay conclusion that tenant could be found to more than the K-Mart rental of per square $1.31 $1.63 actually years foot or, derived those indeed, that a tenant could be found who would pay even that much. reaching

In its result the Tax Tribunal relied on comparable. evidence evidence leases asserted to comparability in each instance was inadequate either or non-existent. The evi- years dence offered was of leases in other with other tenants or ties considerable distance from with K-Mart various communi- Township Saginaw, than

other all a

Saginaw.8 This lease was entered into 1962 and con- completed 107,- struction was in 1963. There are square $137,287, feet. The base rent is or $1.28 per square pays foot. K-Mart additional rental of gross $6,864,350. sales in 1% excess of Under this "unfavorable” lease the landlord (base received additional rentals and combined percentage) per-square-foot rentals as follows: Combined Square Foot

Additional 3,863.00 $ 1971 1972 $1.31 18,060.20 1.45 1.53 25,397.01 1973 1974 32,664.06 1.58 37,267.00 1.63 1975 presented relating The evidence to K-Mart located in stores Saginaw incomplete. among was Two such were stores listed properties comparable missing asserted to be but was either each Thus, building. comparison possible. size or the rental of the no was 410 Mich Opinion Levin, J. Tribunal, testimony of an based

The Tax ap- who Commission for the State Tax appraiser the "current township, found that for peared square foot in per rental income” was $2.00 The basis for in 1975. foot per square and $2.25 "comparable” table of following is the figures those rentals: Square Footage Rate Year

Lessee Location 31,895 71,556 1.41 ’63 Yankee Bargain City Mt. Pleasant County 1.51 ’65 ’66 Monroe Westland Sault Ste. Marie 86,228 33,160 40,861 52,571 Topps Tempo Tempo 1.51 1.15 ’67 Alpena 1.30 ’67 Lapeer 2.19 2.45 2.19 ’72 ’73 ’73 ’73 W.T.Grant W.T.Grant W.T.Grant W.T.Grant 56,216 Hillsdale Albion 52,571 94,557 City 2.21 Traverse Walker Ypsilanti Co) (Kent 118,433 ’65 ’65 ’66 1.90 K-Mart K-Mart K-Mart K-Mart 83,134 2.08 109,884 121,298 2.09 2.20 2.50 Westland ’69 ’69 Warren Lansing 119,650 122,362 123,062 K-Mart Lansing Lansing 2.55 ’70 K-Mart K-Mart area area 2.44 ’70 shown.) (Only percentage leases are new leases, all of brand were apparently, These tenant, or at least there stores for the built otherwise. nothing to indicate compiled by The foregoing "comparables” list township’s indicate that witness does K-Mart’s rent- rent K-Mart market. pays below plus built in 1969 of and $2.50 als stores $2.20 par with the rent overage are on a sales 1% Grant, tenants, who are paid e.g., other W.T. now defunct. vary rentals foregoing list indicates example, depending on location. For

greatly into in on two K-Mart entered rentals leases Saginaw Twp CAF 475 1981] by Opinion Levin, J. Lansing, one in Warren and one are and $2.20 respectively, $2.50, a of variance almost 14%. any assuming Nor is for there basis that K-Mart paid in would have 1971 and 1975 for the of lease 12-year-old building an 8- or as much as it was willing pay building then to for a new brand community. located in simply different These rentals comparables. are not ignored repro- Tribunal, effect, The Tax approaches duction cost and market to value and solely determined the value on the basis of the using approach higher square per income foot Although rates and $2.00 the Tax Tribu- $2.25. ignored approaches nal these alternative to valua- thought tion, I it mention them because be that on still another remand the Tax Tribunal properly could them. consider township presented an estimate true cash reproduction approach.9 value based on the cost applied by examining prop method This the structure on the erty calculating present reproducing and cost of it. The current reproduction depreciated physical then cost is wear-and-tear and building economic obsolescence. The value to ascribed is then combined with an estimate of the land value to arrive at an estimate of the value of the Comparables generally properties, are available for most kinds offices, properties residences and small commercial and but there are properties comparables simply some sales are for which there are no because infrequent so unique or the is so there nothing comparable neighborhood. case, in the In such a resort must income-produc- be to had another method of valuation. In the case of ing property, bought largely and sold on the basis of the net produce, probably will method Indeed, the income method is most accurate valuation, again comparable absent evidence sales. comparables, where they there are will tend reinforce the by approach. Where, however, result reached the income there no are comparables encourage appraisers pseudo- we should not to create comparables divergent properties. based sales of Valuation based upon entirely probably income is accurate and would used seller; buyer go through there is no need the rituals adjusting non-comparables nomic obsolescence. The latter methods reproduction reducing cost eco- being subject manipulation, except we should endorse their use where more reliable evidence of market value is unavailable. Mich Levin, J. Opinion testified township’s assessors

But both on the estimate no effect existing lease had an first CAF approach. the cost Our at by arrived lease be con- required that decision that method valua- required any sidered10 and the effect of a into account tion did not take which Moreover, was no evidence there rejected. lease be commercial and sellers of indicating buyers that sharp in contrast approach, use a cost and of commercial buyers sellers evidence that ap- capitalization use prop- commercial If and sellers of proach. buyers technique, of value not a estimates erty do use bearing no on the market it have derived from standard. the constitutional price property, sales used in only comparable evidence The is equally faulty. market township’s analysis sales of K- The witness relied five township’s stores, three were inappo- conceded that Mart but net-net, buildings were of with they site because on only leases. He therefore relied percentage, (a sales, of a a 1968 sale Westland K-Mart two suburb) 1965 of a K-Mart in Detroit and a sale (a Rapids Walker Grand suburb).11_ 10 in As stated the first CAF decision: long- "It indicates that because this case record fairly at outset term lease rental of the lease term and bears a demonstrable relation reflects economic circumstances to true cash require value its CAF Investment Co v State that we consideration.” (1974). Comm, 442, 455, 6; 392 fn 588 Mich 221 NW2d price The built and in 1968 at a which Westland store was sold per gross square yielded a rent $12.97 worked out foot and = multiplier multiplier (gross gross price). sale of 8.94 rental rent X store, 118,433 built in 1964 had Walker and sold square per gross equalled square for a rent $15.33 feet which foot multiplier of 10.95. gross figures averaged adjusted produce These and a rent were per square multiplier $15 1971 and 1975 for both and value per square foot in 1971 and foot in 1975. $16.50 figures Township gross Multiplying Saginaw store’s these footage, appraiser square township’s up came with income and $1,800,000 $1,420,000 $1,609,000 respectively and and for 1971 and CAF 1981] Saginaw Twp Opinion by Levin, J. suppose

There is no reason to sale in 1965 building preceding of a located in Walker built the year building or a sale in 1968 of a in Westland very year built that ais reliable indicator of what 12-year-old building Saginaw an or 8- located in Township would sell for in 1971 1975. or As shown table, in the first the base rentals Walker (located largest and Westland stores in the and state) largest metropolitan second areas of the were The rents in $1.90 Westland $2.09.12 greater Walker are Saginaw or 1/3 more than pays per square store; 62¡¿ K-Mart more foot in Also, Walker and more in Westland. 81^ years these stores were built between and 5 financing later. Differences construction and may explain differential, costs some of the I but expect would location —the value of the land —is another substantial factor.13

Manifestly, sales values based on the Westland properties and Walker with entered leases into years years question before the tax in and leases widely of other stores in built at different times differing way locations, all the from the Soo to $1,777,000 respectively averaged for 1975 which he out to indicate a approach $1,515,000 via value the market for 1971 and $1,785,000 for 1975. 12 percentage All three leases were base leases over rent on 1% approximately land, $6,518,837 (Walker, $6,917,250; the same amount of sales West- $6,864,350). Saginaw, approxi and all The stores are mately Saginaw, (Walker, 118,433 s.f.; 109,884 Westland, the same size and s.f. s.f.). 107,261 township’s by averaging Since the market estimates were derived properties, the nil. practically data from The two their statistical value township’s witnesses could at have arrived the same result averaging on Also, pairs gross multiplier innumerable of values. rent "comparables” 22%, by approximately discrep these two differed a ancy $284,000 per year which would have amounted to a in difference 1971-1974 assessments as calculated Tribunal and a $360,000 difference in the 1975 assessments. These differences indi "comparables” cate that the were not similar to each other and that analysis which, presented closer factual should have been to show if either, really comparable plaintiff’s property. was to the 410 Mich Opinion Levin, J. probative a current

Kalamazoo, of what not are 12-year-old 8- or this rental would be market store located Township Saginaw in the tax in years and 1975. that if K-Mart

Moreover, is no evidence there not, it would if that into this lease had entered given or have moved in 1971 the chance building newly some other location at constructed Township adjoining community, Saginaw anor in higher of increased costs rental because at a albeit financing. construction K- at this location the commitment made Absent paid might site and some other Mart have chosen competitive locational and other more because of advantages. Merely this does well store

because not do at mean that K-Mart could better does not given if in the area or that another location choice today it remain at this site. would proof suggesting the burden of I am not that taxing suggesting Rather, I am authorities. disregard they lease, when wish up something on them to come with burden is produced highly artificial evidence better than the altogether regarding in different rentals and sales buildings many apart. years We locations of built buildings. nothing They these know about other tenants. We be tailored to the needs of their nothing values either at the time know about land question. year tax of construction or expect paradigm store I K-Mart would changed years that what itself has over the being substantially 1975 is was built 1971 and may from what built in 1963. K-Mart different was willing pay modern, for more less be more a intensive, fuel or otherwise labor more efficient have changed more efficient It its con- store. cept or alone whether K-Marts are best situated part shopping a center. 1981] CAF Saginaw Twp Opinion by Levin, J. adoption wrong princi-

It was "error of law or ples”14 uphold for the Tax Tribunal the assess- although taxing ment authorities failed to present any probative support evidence to presented assessment and the lessor substantial unimpeached evidence.

Ill says, Justice and Justice Williams con- Moody point, paramount curs with him on this uniformity. consideration is

A underlying appears Justice concern Moody’s permitted be that if commercial to be long- assessed on the basis actual income from a lease, term owners will be able to obtain a tax advantage setting a rental than lower types market. of other Owners assessed comparable reproduction sales or method pay would therefore a non-uniform rate when compared to commercial owners. This misplaced concern is because no rational owner of income-producing property would choose to reduce greater many rental an amount times possibly than could saved taxes. correctly points Justice out that uniform- Ryan

ity by adhering is achieved to the constitutional standard, market-based true If cash value.15 asses- sors standard, adhered to that all assessments perforce, would, be uniform. All assessments would be at of true cash value. 50% The reason there is adjust need to assessments lack of because 1963, Const art 28.§ Ryan’s opinion, p See cases cited in Justice 464. 410 Mich by Opinion Levin, J. prop- non-uniformity not assess assessors do is that price. erty solely market on the basis adhering by Uniformity to a is not achieved ap- single approach the cost While valuation. many by assessors, may proach since be followed reproduction relationship between is no real there reproduction has to be ad- value, cost cost and justed That introduces obsolescence. for economic respon- frequently highly subjective element, one a sible uniformity in assessments.

for the lack of guideline for economic obsolescence. There is no attempting by uniformity advanced is property Neither appears if similar as all which assess physical similarity equal Neither value. were any reproduction standard, and cost is nor property by attempt value set for the to avoid the strengthen, dilute, than rather the market is to uniformity of assessment.16

B truly If number situa- there are a substantial in excess of a current rental market tions which from the the lease reserved rental creates a favorable lessee’s consequence standpoint with property support of the tax fair share does not its Legislature may very burden, able to well be allowing taxing rectify authori- the matter local just to the lessee ties to tax that favorable lease it allowing built on of structures did taxation tax-exempt land.17

Similarly, owner concern that a from a tax asses- withhold income information will sor advantage except is to the owner’s such information when exaggerated. instances In those 16See 1979 PA 114. 322.424-322.425;

17 MCL MSA 13.724-13.725.

1981] CAF Twp Saginaw Dissenting Opinion Fitzgerald, J. where the owner property, a business also owns the the income derived be more reflec- tive of the business conducted on the than the value of the and therefore not a reliable indicator of the value When such information is as in the relevant, determining case, to instant the true cash value of property, may implied right assessors an have to obtain such information under the statute provides which that income is a factor to be con- determining property’s selling in sidered price.18 present To the extent that statute is inadequate power and the to assess does not con- adequate an mechanism, stitute Legislature, again, enforcement provide

can a solution. (dissenting). J. We are asked to Fitzgerald, complied determine whether the Tax Tribunal holding with our in CAF Investment Co v State (1974), Comm., Tax 442; 392 221 Mich 588 NW2d in proceedings the remand in held this case. opinion,

In our 1974 we stated that actual in come which was "relevant to a determination of selling price1 "demonstrably 'usual or related to 2 fair market value” must be considered the Tax determining Tribunal the in Thus, true cash value.3 relationship having to true cash value been required only established, we that actual income necessarily be considered; not that it be used in all certainly circumstances and it not that be used exclusively. CAF Investment Co Tax v State supra, Comm, 392 Mich set 455-456. We forth a may nonexhaustive list of other factors which be 18 211.27; MCL MSA 7.27. 1 Comm, 442, 454; CAF Investment Co v State 392 Mich 221 (1974). NW2d 588 2Id., 455.

3 value, 211.27; For the definition of cash see MCL MSA 7.27. 410 Mich Dissenting Opinion Fitzgerald, J. in MCL listed to those addition considered not mentioned 7.27. Another factor 211.27; MSA account be taken into earlier, may properly which in the interest of the lessee’s here, is the value property.4 case, miscon- Appeals the Court

In the instant requir- holding opinion by in our strued constitute basis "must ing that actual income v Saginaw Co Investment CAF for the valuation”. (1977). 564; 262 NW2d App 79 Mich Twp, above, actual required we As stated Tribunal. by the Tax income be considered income, if actual holding I reiterate our selling of "usual to a determination relevant at true cash price”, must be considered arriving consid- many one of factors be value.5 It is only inappropriate if it is rejected ered and case. CAF particular of a to the facts applied Comm, 392 Mich 456. Co v State Tax considered The Tax Tribunal 4 General, 578, 581; NW 260 Mich 245 In In re Petition of Auditor (1932), 522 Court stated: this parcel be a of real estate must "It is the rule in this State that 3390, 3391), value, including ([1929 entirety at as cash CL] assessed an standing timber, rights, power privi- and of mineral 'water worth leges,’ 3415). (§ emphasized by legislative policy fact is the etc. This i.e., only single exception, a the interests of that the statute mentions common, in 3394.” tenants § * * * entirety” requires "parcel as To assess this of real estate an of that the the to lease. the be considered. A review lessor’s and Property lessee’s interest by Legislature attempt Tax the General Act discloses no distinguish by separately the and tax the interests created between Rather, property is on the tax levied itself. Moody’s opinion notes, permits majority a As Justice of states earning along potential consideration of actual income with full Comm, Moody, J., p capacity: 495. CAF Co v State Tax Investment See, also, Anno: Income rental value as a factor evaluation or 4a, 8b, 8c, taxation, 2, purposes real for 96 ALR2d §§ ordinarily it that where annotator concludes that is well settled may determining for taxation actual income be considered in value purposes. the weight to The relative accorded actual income left be particu taxing authority determined on the discretion be lar facts of each case. Saginaw Twp 1981] CAF Dissenting Opinion by Fitzgerald, J. proceedings rejected the remand and use its as inappropriate Among things, in this case. other opinion the ship in its tribunal noted that the relation- lease between C.A.F. and tenant its typical of the were not normal market because of enjoyed the favored status the limited number developers being lessee, of K-Mart and because the highly tenant, a desirable commercial could re- ceive more favorable lease terms than a more marginal Furthermore, tenant.6 the tribunal was rejecting appraisal correct in C.A.F.’s since was predicated solely on thé income from the lessor’s not interest on other relevant factors. sufficiently

I conclude that the Tax Tribunal complied holding opinion.7 I, with the in our 1974 appraiser only develop "Petitioner’s testified that there are 3 or county develop Kresge who ers Company. Although rated on or a favored can 'K-Mart’ for stores S.S. [sic] cryptic this somewhat comment not elabo was explained, suggests developers enjoy that fact that certain Kresge Company, with S.S. status and as such the relation ship typical and the lease between Petitioner and its tenant is not the normal market.” testimony Kresge "The indicated that S.S. from a financial stand- point highly suggests is a desirable commercial tenant. The evidence Kresge Company, and we conclude therefore that S.S. as such a tenant, favored could receive more favorable as lease terms to the square per required amount of pay, rent foot it would which in turn, recognized by capitalization unless use a lower rate would result in a subnormal valuation. We no find evidence in Petitioner’s appraisal given any that this factor was consideration and conclude resulting questionable appraisal as such that the of.” reason there- disapprove portion 7 I opinion of that Tribunal’s which states: "Accordingly, guided Supreme and controlled as we are prior Court’s determination in this case 'economic income’ means 'actual providing income’ we therefore conclude that in its consid- contemplation Legislature eration it not was within the of the such a method be used when the actual income realized under represented portion adverse lease terms of the commercial potential involved.” reject income, The tribunal consideration of actual rule, general actual involving cases, in cases adverse lease terms. In all together income must be considered with all other relevant 410 Mich 428 484 Opinion Williams, J. Appeals of and

therefore, the Court would reverse findings Tribunal. Tax reinstate the (concurring part and in with dis J. Williams, part senting from both Justices Ryan (1) opinion held, inter alia: 1974 CAF1 Our Moody). assessing agency may a number of consider determining components true value different including comparable proper value, values cash statutory term "economic income” ties and (2) statutory property; subject term from equates rent, not with "actual” "economic income” (3) assessing agency rent; since "market” by capitalizing "market” true value reached cash rent,2 case must re than "actual” be rather proceedings "for consistent versed and remanded opinion.”3 with this

Upon remand, the used the same Tax Tribunal capitalization formula, and, for assessment contrary, again all the record shows arrogance capitalized ignorance through or "mar- I ket” instead of "actual” rent. concur with rent doing my the tribunal so Brother Ryan opinion directly and the violated our 1974 CAF again. remanded once case must be reversed and my However, I dissent from Brother Ryan’s following pertinent statements, tribunal’s response opinion to our remand. His states:_ may only rejected particular factors and it the the basis facts case, involved. In this because the tribunal considered and case here, unique rejected on the facts involved actual income basis gratuitous I do not believe that this statement affected the outcome this case. 1 442; Comm, v Tax 392 Mich 221 NW2d CAF Investment Co State (1974). approved by the the Court of This action was Tax Tribunal: Saginaw Twp, Appeals reversed and CAF Investment Co v remanded. (1977). 559; App 262 NW2d 863 Mich Comm, supra, 457. 392 Mich CAF Investment Co State Saginaw Twp 1981] CAF 485 Williams, J. Opinion a) "This Court the reversed tax commission and remanded for a determination of true cash value on based actual income.” b) "We refused allow the consideration actual potential be income to diluted to the reference comparable property then, income of and dowe so now.”

c) precise "The error in the tribunal’s calcula- having indicated, tion true cash value been and having findings Tribunal made detailed expense capitalization figures fact utilized, be per square the actual foot rental value 'plugged need now be into’ the formula to projected arrive at income.” The fact of the matter opinion is the 1974 CAF stated: a) "Reversed and remanded to the Tax Tribunal proceedings opinion.” for consistent with this c) point &b "We out that 'consideration’ of the enumerated factors 211.27; under MCL MSA 7.27 require taxing authority does not deter- projected capitali- mine income under the income approach upon any zation one or all of the enu- or actual income ('economic’ being merated factors one of those

factors) long so as the valuation comports with the statute’s definition true cash selling price place value as 'usual at the where the applied to which the term is at shall be being price of assessment, time which private could sale, be obtained at at or forced auction sale.’ 'Consideration’ may of the various factors well indicate that application of some or all enumerated factors is inappropriate.”4 according

Therefore, on remand, to our 1974 opinion assessing agency CAF is not limited to "plugging capitaliza- rent” in the income Comm, supra, CAF Investment Co v State Tax 6. Mich fn 410 Mich Opinion Williams, J. 7.24, 211.24; MSA formula, MCL for under tion assessor particular required result, reach specific apply formula, value”, not i.e., "cash consequence, capitalization. aAs income such as the of any assessing agency of a number use one long recognizes accepted as it formulas so components 211.27; forth in MCL set value various determining the "In That section states: 7.27. MSA value the assessor economic * * * present consider shall also ** in- *.” Insofar as "economic interpreted considered, that term must come” income. as actual argument matter, of this

Further, on second requirement import of constitutional of the particularly uniformity the assess stressed was particularly important ing agency and considered by my whom I concur on this with Brother Moody, question point. formity ing. the rule of uni is no There significance paramount in all assess

is of my Ryan obviously, observed, But Brother require property assessment does not same all property However, is not same. because all question decided, to be what is still leaves the this the particular a lease of focus the assessment: of piece incidentally significant value, to a attached piece property particular property, or, of of of a significant value, lease inci with an unfavorable dentally statutory Obviously, issue and all attached? this components be considered.

value must Importantly, from the the answers must first come assessing agency, 211.24; 7.24, with MCL MSA judicial rather restricted review.5 6, Michigan speaking to Article 28 of the Constitution of § regarding scope judicial review of administrative decisions the property tax, pertinent part: states in fraud, adoption wrong error of law or the "In absence agency principles, provided appeal may any any no final be taken to court from any deci- for the tax laws from administration relating or allocation.” sion to valuation also, See, 211.152; 7.210, citing as the stan- MCL MSA the above Sagiñaw Twp 1981] CAF Dissenting Opinion Moody, Jr., Blair J. conclusion, In I reverse and for would remand proceedings further inconsistent with the 1974 opinion. this CAF and (dissenting). J. I dissent. Moody, Jr.,

Blair overstating obvious, Without this case has had long history. peti- 1962-1963, In a and tortuous Company, tioner, C.A.F. Investment constructed a Kresge tenant, K-Mart store for pany, the S.S. Com- its parcel Saginaw on a 10.55-acre of land in Township. Prior construction agreement store, C.A.F. into a entered lease with years its tenant for a of 20 term with three re- options years pro- newal of five each. The lease per year $137,287 vided for fixed rental of with gross exceeding an additional sum of sales 1% per year. $6,864,350 petitioner appealed

In 1971 tax as Michigan sessment its leased to the (hereinafter STC). State Tax Commission The STC sustaining an entered order the assessment and Appeals granted the Court of affirmed. This Court appeal leave to and reversed the decision Appeals Court of and the STC and remanded to findings the Tax Tribunal consistent with this opinion. Court’s CAF Co Investment v State Tax (1974). Comm, 442; 392 Mich 221 588 NW2d April, In the Tax Tribunal after conduct- ing lengthy hearings its reached decision. Peti- appealed tioner the decision the of Tax Tribunal Appeals and the Court of reversed and remanded Sagi- for redetermination. CAF Investment Co v (1977). Twp, App naw 79 559; Mich 262 NW2d 863 dard of review in individual assessment State cases before the Commission. 1During pendency appeal, Legislature the of this initial trans jurisdiction appeals ferred to over tax from the tax commission 7.650(1) seq. seq.; the Tax Tribunal. MCL 205.701 et MSA et 428 Mich Opinion Moody, Jr., J. Dissenting Blair Court and leave this appealed Respondent (1978). Mich granted. was appeal backdrop which forms the within summary This it this in case. While must be reached a decision merely this case is said some that could be involving a line tax cases long a another local assessment taxpayer between dispute all authorities, significance to this case is of crucial and, therefore, taxpayers Michigan history the whole depth to examine imperative mind, this in this discussion of the matter. With First, the decision of parts. consist of three will will be Appeals the Court of panel of present Second, this original decision of analyzed. Third, which upon. an issue Court will be focused disposi- in the which is prior appeal not raised was this will be addressed. tive of matter

I reversing present Appeals panel, The Court Tribunal, tribunal the Tax determined Court’s complied had not with the dictates this earlier decision. The Court found the tribunal tax appraisal purposes had based its for comparable of return unencum- upon rate The failure of the tribunal to base bered projected upon its income calculations income of the constituted clear error law. captured Appeals analysis Court of terse quoted

in the two which are following paragraphs, Saginaw CAF Co v in their entirety, Twp, supra, App 79 Mich 564: opinion, Supreme "In its Court held that purpose property finding petitioner’s cash value’ of 'true capitalization approach, using the of income 1981] CAF 489 Saginaw Twp Dissenting Opinion Jr., Moody, J. Blair upon the tribunal could not base its valuation a rate of comparable could return which unencumbered petitioner’s property market where earn the current in fact encumbered an was unfavorable lease. it

"The Court noted that there be cases in which inappropriate to consider term rental as would be lease however, case, In component projected income. this required the Court the actual income from the constitute must ignored lease could not and that the basis for the valuation. *”2_ *"The tribunal need not utilize actual income as the sole basis for valuation, may adjust figure but to reflect other factors that However, selling price’ would affect the 'usual of the (Citations starting point income must be the for such calculations.” omitted.) (Emphasis changed.)_ analysis Appeals

The of the Court of is defective suggestion origi- on two levels. There is no in the 2 1963, 9, provides pertinent part: Const art § legislature provide general "The shall for the uniform ad valorem tangible personal property exempt by taxation of real and not law. legislature provide shall for the determination of true cash value property; proportion of such property of true cash value at which such assessed, not, uniformly January shall be which shall after 1, 1966, percent; system equalization exceed 50 and for a assessments.” mandate, response Legislature In to this constitutional has defined term "true cash value” as follows: " selling price place 'Cash value’ means the usual at the where the applied to which the term is shall be at the time assess- ment, being price which could be obtained for the at sale, private disposition by acquired Any and at forced or auction sale. sale or other any agency political the state or or subdivision of lands delinquent any appraisal taxes or made in connection controlling therewith shall not be considered as evidence of true cash purposes. determining value for assessment In the assessor value location, advantages disadvantages shall also consider the soil, quality zoning, use, existing present economic income of income of structures, including present farm structures and economic being put land when the land is farmed or otherwise to income producing use, quantity timber, standing power and value of water mines, privileges, minerals, quarries, deposits or other valuable known to be available therein and their value. "Except provided, property as hereinafter shall be assessed at 50% of its true cash value in accordance with article section 211.27; constitution.” MCL MSA 7.27. 410 Mich Opinion Dissenting Jr., Moody, J. Blair must consti- that actual income

nal CAF decision that This Court held the for valuation. tute basis must be ignored cannot be income actual of true cash determination any in considered The Court said: value. of the enumerated 'consideration’ point out that "We require 211.27; 7.27 does not MCL MSA under

factors that projected income taxing authority determine the approach upon any one capitalization the income under or all of the enumerated ('economic’ or actual factors factors) long as the valua- those so being one of income of true cash definition comports with statute’s tion selling price place where the at as 'usual value applied shall be at the the term is property to which assessment, being price which could be time of sale, at private at and not for the obtained of the various sale.’ 'Consideration’ forced or auction application of some that may well indicate factors inappropriate. For exam- factors is or all enumerated (in statutory parlance a in lease rental ple, the event income’) were not arrived at on component of 'economic bargaining respects in length or other the basis of arm’s selling price’, as statuto- relationship to 'usual had no rily defined, taxing appropriate for the it would be component of ignore rental as a authority to lease It in this case record valuation. is because fairly reflects eco- indicates that lease rental of the lease term and nomic circumstances at the outset to true cash value that bears a demonstrable relation v State require CAF Investment we its consideration.” Comm, supra, 392 fn 6. Mich item must thing say particular It is one that a value; determining be "considered” terms thing particular another totally say of valuation. item must "constitute the basis” addition, for the Court support In there is no be income "must Appeals conclusion calculating value. As starting point” decision so quotation above from this Court’s CAF Twp Saginaw CAF 1981] Moody, Jr., J. Dissenting Opinion Blair vividly demonstrates, income or actual economic present However, eco- considered. is to be merely of a one structures income of nomic statutory must consid- terms which be number determining one or true cash value. While ered controlling given in a the terms another determining value, all must true cash situation equally. be considered panel present the decision of

Because original Appeals CAF deci- extends Court beyond Court, the stated this the bounds sion viewed as erroneous. must be decision

II Appeals Having of the Court determined error, examine this in we must decision was original to ascertain the CAF decision Court’s impera- holding Further, it is of this Court. exact light original in CAF decision to review the tive practical problems which and certain theoretical analysis and result on this Court’s cast doubt that case. controversy very in the heart of the

At original decision was the definition CAF Legislature had de- term "true cash value”. fined the term as follows: " value’, selling price at 'Cash means the usual applied term is place shall be at property where the to which the assessment, being price the time of private at which could obtained for the be sale, Any or at forced or auction sale. sale and not agency political or disposition by any other the state or delinquent taxes or acquired lands subdivision of connection appraisal therewith shall any made true cash value controlling evidence of be considered as determining the value the purposes. for assessment In advantages and disad- also consider the assessor shall 410 Mich 428 Dissenting Opinion Moody, Jr., J. Blair soil, use, location, zoning, existing vantages quality structures, including farm present economic income of land when present economic income structures the land is producing put to income being farmed or otherwise timber, use, standing quantity and value of mines, minerals, quarries, power privileges, water deposits available known be or other valuable and their value. therein provided, property

"Except as hereinafter shall be in accordance at of its true cash value assessed 50% (Emphasis section 3 of the constitution.”3 with article added.) PA 109. assessing the value appraiser The STC tax interpreted owned C.A.F. "present economic income structures” phrase term being appraisal with a standard synonymous rent”. Economic rent is a hypo- called "economic me- figure approximate thetical derived from per square dian ratio which rental foot bears to properties. foot for similar per square actual sales figure computed, the economic rental With appraiser STC then calculated the value of the C.A.F. the use of two standard property by whole appraisal techniques, "reproduction namely approach approach. Repro- cost” and the "market” duction money, cost is defined as the amount of market, prices based on current in the that would required duplicate building improve- or replica, ment with a new or made of the same or similar The value of basically materials. following the is arrived at the for- property reproduction mula: estimated or replacement cost new, building of the accrued depre- less estimated ciation, plus the The "mar- estimated land value. ket” approach comparison property uses a of the Legislature It is noted that has enacted certain amendments however, amendments, statutory provision. affect this None of the the decision in this case. Saginaw Twp CAF Investment 1981] Moody, Jr., J. Dissenting Opinion Blair proper- comparable of other with the actual sales value. on estimated land approaches rely ties. Both inclusion approach provides Neither produced by tech- appraisal the STC’s rejected Court This saying: niques, position that determination "The tax commission’s (the in- equivalent of 'economic

of come’) rental’ 'economic proceed context property in a tax valuation assumption was available on the rent that The tax would marketplace. in the commission statutory of term equate us the definition have 211.27; in MCL MSA 7.27 income’ as found 'economic thereby justify concept rent’ and with their of 'economic piece purposes, the fact that ignoring, for valuation question in the is not available rental lease. marketplace by virtue of existence of 'economic that such a construction We conclude income’ Co v permissible.” is not CAF Investment State Comm, 392 451-452. Mich statutory went on further to define the The Court "economic as actual income: term income” rent’, is not "Unlike 'economic 'economic income’ fact, statutory term of Given this well-defined art. meaning of this term derived from the statu- must be context within which term tory constitutional it apparent is used. From Legislature relation fair market this context 'economic income’ would have intended that (or selling price’ to the definition of 'usual value) under assessment. The permits tax commission’s the assessor to construction that actual income relevant to a determination contend ignored. Legisla- selling price’ may If the 'usual urged by the tax com- ture intended construction incumbent make upon body such mission was intention apparent statutory language. by its choice legislative expression this Given a failure clear regard, a construction is not tenable. We conclude such 410 Mich Dissenting Opinion Moody, Jr., Blair J. 211.27; 'economic income’ as used MCL MSA omitted.) (Footnote 7.27 means actual income.” CAF Comm, Co v State Tax 392 Mich 454. Investment the "reproduction Because cost” and "market” approaches require hypothetical, the use of esti- value, mated approach neither was held to be the CAF Court substi- In applicable. place, their tuted the "income capitalization” approach. This permits method of real estate evaluation the esti- mation of value based on factual data with respect to income It yield property. is a mathemati- process converting cal the stream of income derived from real estate into capital value. Value present be based on the prospective income from the It also may be based on potential earning of the land. Since capacity capitalization approach provided means for determining value based upon actual income, this Court approach. endorsed the

This Court concluded its discussion by saying: "It because in this case the record indicates lease fairly rental reflects economic circumstances at the outset of the lease term and bears a demonstrable relation to true cash value that we require its consideration.” CAF Co v State Comm, 392 Mich fn 6.

This Court’s definition of economic income as income and the rejection Court’s reproduction cost and approaches market is inher- ently suspect ways. several

A This Court’s CAF decision not comport does with the decision of any other jurisdiction the United Saginaw Twp CAF Investment 1981] Dissenting Opinion Moody, Jr., Blair J.

States which has considered the question. Constru- ing state property tax statutes with simi- language statute, lar to the Michigan in the context of a tax assessment on land encumbered by a lease, unprofitable the various courts have applied three differing but amazingly similar analyses.'

First, there is a minority of jurisdictions which absolutely rejects the use of actual income but rather on the potential relies full earning capacity of the land regardless of the lease. Donovan v Haverhill, 69; 247 Rich (1923); Mass NE 564 141 mond, F & P R Commonwealth, Co v 203 294; Va 124 Yadco, Inc v Yankton (1962); SE2d 206 (1975). County, 651; 89 SD 237 NW2d 665 Cf. State ex rel Center, Park Plaza Shopping Inc v Board of Madison, Review for 469; 61 Wis 2d 213 NW2d 27 (1973).

The second group, which comprises the majority courts, of permits the consideration of actual in come along potential with full earning in capacity determining the value of property. courts, These however, place little emphasis on actual income and allow actual income to be disregarded in most cases of favor earning capacity. Rowland v City of Tyler, 5 SW2d 756 (Tex Comm Appeals, of 1928); People rel Gale Tax Comm of ex v New York City, 17 AD2d 225; 233 In (1962); NYS2d 501 the Matter of the Ad Valorem of Prop Valuation erty of Pine Raleigh Corp, 398; 258 NC 128 SE2d (1963); 855 McCrory Park, Stores Corp v Asbury 89 NJ Super 234; 214 C C (1965); 526 Anderson A2d Stores Co v State Comm, Tax 91 413; Idaho 422 (1967); P2d 337 Springfield Marine Prop Bank v erty Appeal Board, 428; 44 Ill 2d 256 NE2d (1970); 334 (Rochester), Crossroads Center Inc v Taxation, Comm’r of 440; 286 Minn 530 176 NW2d Mich 428 410 496 Dissenting Opinion Moody, Jr., J. Blair Cooperative, v Trico Electric Pima County (1970); v Kargman (1971); 517; P2d 1219 Ariz 489 App 15 Jacobs, Demoulas (1974); 696; A2d 543 113 RI 325 (1976). Salem, 775; A2d 588 v Town 116 NH found in older group jurisdictions, The third decisions, on the ac emphasis places substantial But from the encumbered earnings tual its CAF courts, Court unlike this even these ca decision, "earning allow consideration denigrate the cost wholly and do not pacity” to valuation. approaches or market reproduction Estate, B P Bishop In re Taxes 27 Hawaii Meriden, 5; A 184 Somers (1923); Conn (1934). of those

Representative analysis jurisdic- use abrogate totally tions which is the determining valuations Su- from Massachusetts following statement preme Court: matter, practical is a and mathematical

"Taxation public uniformity in the distribution burden arising governmental expenses impossible an from The difference income derived attainment. realty substantially parcels owners from different might imprudent the same market value be due management, irresponsible disadvantageous tenants or receiving leases. tax to the owner the smaller than it is to a undoubtedly income is neighbor a heavier burden greater inequality Such who obtains a income. It cannot arises from business and economic conditions. v taxing Colony be to the R Co attributed statute.” Old Boston, 439, 446; 35 Assessors of 309 Mass NE2d (1941). There is a thread between this state- common court, ment and the statement of a New York and ratio- representative analysis which is Saginaw Twp CAF 1981] Moody, Jr., J. Dissenting Opinion by Blair nale of the majority jurisdictions. That court said: outstanding

"An may lease abe benefit or a detri- ment subject property, duration, and thus its covenants and the rental fixed are simply elements along many with other considerations used to arrive at value of the The amount of rental fixed lease, though negotiated even at length, arm’s could very misleading, as to the true value of property, for it is well many known that rental may contracts be at inadequate excessive or poor rentals because of business judgment part on the party Then, of one or another. too, long-term rental contracts be made in boom depression, times or in times of so do not necessarily change And, reflect Justice ately true value on a in times. as Mr. Bergan, court, sitting in this very appropri- has said, 'Assessments cannot be made to trail behind every turn in the fortunes of real property. There are times when must bear a share of taxation proportionate to though value even it may then have no income, or an income inadequately focused to true value. There are times when full ephem- measure of surges eral in of increased income should not be reflected assessments fairness to the owner.’ course, "Of outstanding an bona fide lease and the rental thereby established are matters to be considered in determining 'full value’ of the whole property, improvements. land and Value arrived at capitalization cases, is, of the fair rental value in ordinary * * * guide the surest appraisal. to a sound But when there is evidence that factors such as leases made under distress or boom conditions affect the rent, weight given to be to the actual rent * * * must be discounted accordingly. "So, the existence of an outstanding lease at an * * * unrealistically low rental property, is not to be used as a calculating basis for actual value.” (Citation omitted.) added.) (Emphasis Gale, People ex rel supra, 229-230.

All the jurisdictions express the concern 410 Mich Jr., Dissenting Opinion J. Moody, Blair in on actual income of reliance net effect the determining destruction of the tax assessments is uniformity principle All the taxation. in the po- full on that assessment based courts indicate fundamentally earning capacity is the most tential fair and even-handed distributing the method of reproduction Thus, market cost and tax burden. equally approaches income valid as the are calculating approach capitalization true cash property. value of jurisdictions policy level, look all of these

aOn great upon the effect reliance disdain with give and, The to tax effect is relief actual income. unwise at therefore, businessman subsidize expense and the rest of the wise businessman taxpayers The North Carolina of the state. Supreme has said well: Court statute], fixing "The assessment statute [tax valuing property for guide must use in which assessors therefrom, taxes, past 'the income includes as factor But to probable future the income referred its is not income.’ language income. is suffi- necessarily which could be obtained cient include hold proper and efficient use To competent penalize otherwise would diligent or incompetent and to reward the indolent.” added.) Raleigh Corp, In Property Pine re (Emphasis supra, 403.

B important stop point It is at and reflect this legislative on the true value. definition of cash terms, it is While the definition contains various important without doubt the most element setting "present economic commercial al- income of Economic income will structures”. Saginaw Twp 1981] CAF by Dissenting Opinion Moody, Jr., J. Blair always prop- the most dictate level of commercial defining erty Thus, tax assessment. economic betrays income, income as actual this Court rather narrow and unrealistic property attitude toward Michigan.

tax in assessment Property cumulative; tax its nature is ais every right tax on each and and interest property. proper attaches to A real assessed valua- tion, therefore, must include the value of all the rights property. in which inhere right possession to current under a lease is right property. If, which in the inheres as in the paid right posses- case, instant the rent for the rate, sion less than the current market then the right possession value of current will in- proportion. appraiser crease As the for the ably State Tax Commission so demonstrated on remand, a and a lessor’s lessee’s interest is thus In created the land. order to establish the true right land, value of the income, the value of the to receive interest, the lessor’s must be combined right possession, with the value lessee’s interest.

Because this Court’s first CAF decision focuses right lessor’s to receive income under the lease, a distorted view of the cash true value of the any And, results. while it is true that sale the lessor’s interest in the would lease, converse, reflect the unfavorable a sale property, lessee’s interest in the would result a rate return which would be much higher relatively expense than the low rental suggest. would

By using analysis employed a similar to that attempted here, on remand the Tax Tribunal prop- ascertain the true cash value of C.A.F. erty, i.e., a combination of the lessor’s interest and Mich Dissenting Opinion Moody, Jr., J. Blair in the interest ap- lessee’s Such an It truly fair and sensible. eminently

proach the "usual selling price” of ascertain endeavors Legislature.4 by the as mandated

C tool in determin- is a limited very Actual and its use creates tax assessment ing property taxing In for the authorities. procedural difficulties addition, are capable of individuals who the class is income method also making of use of the actual exchange following The be- extremely limited. Daniels, the tax Judge Cramer and Norman tween Commission, at the the State Tax appraiser for the into hearings brings problem Tribunal focus: guess really get- I what I’m Well is—well

"Cramer: opinions opinion my colleague Levin states: "The The Justice would the would sustain the Tax Tribunal substitute for which constitutionally prescribed market-based standard of true cash value value, hypothetical ignoring the which alone creates value of a lease accurately does not reflect this on land”. That statement dimension opinion. the of this conclusion by as Constitution and defined "True cash value” mandated the selling price” Legislature is not to be based alone the upon opinion. nent as "the usual according original even to the CAF actual income calculations ignored compo- contrary, may be as a On actual income author, given correctly analyzed by its valuation in a case. As opinion only my colleague required Fitzgerald, Justice the first CAF under of this case. "consideration” of actual income It the circumstances require any to factor. did not its use the exclusion of other remand, appropriately rejected On the Tax actual income Tribunal approach ignore not as the did the sole criterion value. The tribunal’s it in combina- actual income received the lessor but considered tion with the lessee’s interest. addition, probative In to conclude was no evidence whatsoever there upon that than a based could sold more opinion value income, Levin, suggested is to actual ignore as Justice preponderance of the record and the evidence would findings My colleague presents support an factual tribunal. argument respect probativeness with to which the evidence tribunal, assertion, clearly chosen not to if faced with this could have accept. Saginaw Twp CAF 1981] Dissenting Opinion Moody, Jr., J. Blair ting approach primary at is the cost basis of—of Michigan? assessment the State of Yes, say approach "Daniels: I would it is. cost primary basis used. approach

"Cramer: When —when does the income significant given become a valuing criteria [sic] property? general approach If general the cost is a it’s a —if come into basis, when does cost approach play? approach, The income I’m sorry. Well, I give "Daniels: think weight we to more approach

income when the information is available so can approach. we make you "Cramer: What do mean when the information’s available? Well, assessor, typical "Daniels: to the all data this fact, companies

not available to them. In give most refuse to expense their income and data their to assessor. "Cramer: Why is that? "Daniels: they’re required Because do it. requires

There’s no law that them to furnish that to the assessor. So approach, rely most them have to on the cost probably which the upper sets limit of value obsolescence, not take into effect economic [sic] that, things such approach as—as well as the income would. But I think most go assessors are forced to approach the cost just approach because the income necessary yeah—the necessary data an in- make — approach come isn’t available to them they have no way forcing taxpayer give each to that data to them. They’re— Well, "Cramer: would it be a fair then conclusion generally that you get expense when do the data and you get do lease information it is when that informa- tion advantage is of taxpayer, provide the that information? Well, "Daniels: always almost taxpay- when it’s to the advantage

er’s then the —.” It is clear from this testimony under nor- mal circumstances the majority in taxpayers Michigan have their property by assessed the re- production approach. cost Only income-producing 410 Mich Opinion by Dissenting Moody, Jr., J. Blair in terms of actual income assessed can be approach. capitalization But the income use of taxing regard are authorities in this the

even virtually hamstrung. Only it is to advan- when necessary tage taxpayer informa- will the supplied for the assessor to to the assessor tion be capitalization approach for tax use the income purposes. this method abil- Under assessment manipulate property ity tax assess- control taxpayer alone. hands of the ment rests logic situation, if the would dictate In this Legislature income to be the actual wanted tax assessment or the method basis independent provided means for would have some Also, it income. to ascertain assessor Legislature highly unlikely that would seem "present income struc- define economic would seg- a limited as actual when tures” group- persons fall into a ment of a ing would class definition. affected such a that would be particularly true constitutional where the This Legislature to the to define term mandate in the value” is found same constitu- "true cash requires uniformity prop- section which tional erty tax assessment.

Ill previous an discussion sets forth issue its which was not addressed this Court original parties by CAF decision and is raised time. here for first This issue concerns uniformity of constitutional mandate of taxation. dispositive It is matter. provision re-

In the which same constitutional quires Legislature "provide for the deter- that the the constitu- mination true cash value” found Saginaw Twp 1981] CAF Dissenting Opinion by Moody, Jr., J. Blair uniformity of tional mandate of taxation. Const pertinent part: 1963, 9, § 3 reads in art legislature provide general "The shall for the uniform tangible prop- ad valorem of personal taxation real and added.) erty exempt by (Emphasis not law.” The constitutional framers uniform- considered ity paramount goal of taxation of all assessments. official Convention Committee 9, § Comment art is illustrative: important objective "The uniformity constitutional assessment, regardless of of the level at which Permitting is commonly Legislature assessed. to fix possibility offers the moving standard to a more per realistic such level as the 50 cent cash value currently by the used State Commission. On this uniformity basis actual could achieved and a tax- payer aggrieved by pre- an assessment over the level provides scribed could law obtain relief. This section Legislature standard set shall not per Recognizing exceed 50 currently cent. jurisdictions that some per cent,

assess some excess of 50 effective postponed date this limitation has been added.) Record, (Emphasis until 1966.” 2 Official Consti- tutional p Convention 3398.

Cognizant of the intent of the drafters of the always recognized Constitution, this Court has importance principle uniformity. This Court has said: value,

"With the destruction of the standard of cash of uniformity impera- standard becomes even more tive, from tax unit tax unit but as to the taxpayer individual any within a unit. If there ever was question control, as to which principle should equal regardless recog- treatment cash value is now added.) being (Emphasis nized as primary.” Ap- In re 410 Mich by Opinion Dissenting Moody, Jr., Blair J. 373, 379; 137 Corp, 376 Mich peal of General Motors (1965). NW2d requires principle uniformity of taxation of The equality nor mathematical mathematical neither proper- required that similar is What certitude. be on a district assessed within the same ties of done, the actual amount If that is similar basis. paid will the same. taxes to be be very recognized, however, that even must It be differing parcels may possess attri- of land similar disparity may in tax to a assess- butes which lead may disparity in tax assessment ment. Such a princi- a violation of in and of itself constitute ple uniformity that indicate some- but thing is amiss. present in the contends that one

Petitioner case property it is is that encum- of the attributes its unprofitable by long-term lease. Petitioner a bered long-term unprofitable this further contends projecting any form the basis for lease should property. what this do to of its But will assessment principle uniformity? parcel Positing another for the moment that upon property Saginaw Township which exists structures to those found on there are similar property but structures are not encum- C.A.F. such by long-term unprofitable lease, there can bered a hypothetical property little will be doubt this greater considerably tax than bear burden property. C.A.F. This will so because actual tax income will not be the basis of assessment property, Rather, as is most this state, based will be assessed this reproduction upon economic rent means cost method. disparity disparity clearly

A exists here. But the Saginaw Twp 1981] CAF Moody, Jr., J. Dissenting Opinion Blair any not the result of innate differences between properties. disparity the two results because taxpayer, poor judg- the one because of business ment, has saddled his with a unprofitable taxpayer, lease while the other be- judgment, reaped cause of sound business has profit disparity If from his land. this should be significant sanctioned as a viable difference taxing authorities, the net effect is to reward the penalizing unwise businessman while the conscien- tious businessman.

To allow business acumen to form the control- ling Michigan basis of tax assessment principal concept would obliterate the of consis- tency. Such a conclusion would seem fundamen- tally unfair would result doctrine of uniformity becoming addition, a mere sham. In proposition permit taxpayer such a actually manipulate would taxing process for his own purposes. regard, exchange In this between Judge attorney Cramer and the for C.A.F. at the hearing enlightening: Tax Tribunal I through imprudence ’’Cramer: see. So if a man or foresightedness whatever, lease, or enters into a he can thereby, part, influence and determine what his going assessments are to be. That’s correct.

’’[Counsel]: ’’Cramer: And he has to be oh treated that basis regardless happens of what property to the rest of the owners of the state. That’s correct.”

’’[Counsel]: hardly It can be said that the framers of the Legislature Constitution or the intended such a result.

Valid limitations on the use of land exist disparate similarly which will lead to valuations of 410 Mich 428 506 Dissenting Opinion Moody, Jr., J. Blair jurisdiction this The courts of properties. situated and have limitations such valid recognized have uniform- no violation of doctrine found that take such taxing authorities ity occurs where the assessing prop- into limitations consideration when Co v Development See, e.g., Kensington Hills erty. 330 Milford 368; NW2d Twp, App Mich Woods, Pointe v Grosse Lochmoor Club (1968); (1968). 394; 159 App Mich NW2d cases, however, the limita- In of the cited each party. the actions of a third imposed by tion was jurisdiction have courts of this In no case imposed on a limitation which was sanctioned himself. To the owner property specifically has Appeals the Court of contrary, limita- self-imposed that a proposition rejected can form the nucleus on the use of tion Ass’n, tax reduction. NeBoShone for a Comm, 324; 227 Inc v State App 58 Mich (1975). The NeBoShone Court said: NW2d 358 self-impose private "A a restric- individual could might paying or limit whereby tion he be able avoid govern- due just his share of the ad valorem taxes NeBoShone, supra, ment, corporation.” 334. nor can a on all present essentially case is Finally, fours with a Court case Supreme United States tax as- property which the Court struck down a Amend- sessment as violative of Fourteenth ment the United a state States Constitution and provision requiring uniformity constitutional Co, Fargo & Johnson v Wells tax assessment. (1915). In 234; 62; US 36 S Ct 60 L Ed Johnson, on attempted the state to assess taxes "gross net property income” derived from corporation All other assessments within the state. Saginaw Twp CAF 1981] Dissenting Opinion by Moody, Jr., Blair J. regardless property were made of the net in- come derived therefrom.

The Court found that such an assessment was principle uniformity, saying: anathema to the enough "It say upon point that, this in our opinion, the record does payment show that the to the companies, railroad if not the basis of the assess- Board, by ments made principal was the factor in fixing the value of the property express of the compa- State, nies for taxation in question arises, and the was such administration of the statute contrary to the requirement constitution, of the South Dakota already quoted, requiring all taxation in proportion to be to the assessed, property value to be corporation and property assessed, be, as by near as the same methods provided assessing as are the value of individual property. other than those appears It statutes, that the South Dakota relating railroads, telephone, tele- graph, express sleeping and companies, car do not authorize a that gross income, valuation which considers and corporations individuals and other are taxed ac- cording to the value of their property, without refer- ence to the words, income derived In therefrom. other by corporations owned other and individuals is worth, assessed for what it is fairly valuation for taxation is not fixed gives a method which control- ling effect to the gross amount of the income derived therefrom. We concur with the Appeals Court of procedure such is in provision violation of the constitution, South Dakota requiring specifically all taxes upon levied and corporation assessed shall be as near may as the same methods as are provided for upon the assessment of taxes individual stringent

"The provisions of the constitution of South Dakota, force, then in required adoption of a rule valuation, be, might near as of like character assessing State, corporate individual and property in the here, shows, the record the valuation of the express companies was principally based upon gross incomes, their determined the method 410 Mich by Opinion Dissenting Moody, Jr., J. Blair already of the statute administration Such described. upon illegal, although law its face be be would added.) supra, (Emphasis unobjectionable.” Johnson, 241-242. represent present

Although of the case the facts flip-side case, it clear that if of Johnson "present Legislature term eco- intended the in- to mean "actual of structures” nomic income arbitrary Legislature come”, has created an that cannot be sus- and irrational classification uniformity equal protection on tained grounds. uniformity if can no of taxation There prop- group special of can claim individuals erty must be tax based self-imposed, lease. from unfavorable derived

IV Appeals conclusion, of has erred In the Court original extending CAF decision this Court’s be- yond addition, Court. In the limits stated this original analysis this CAF decision an Court’s jurisdic- law all that it conflicts with the shows subject, that have considered the could be tions acceptance interpreted obligate of a dis- property, cash torted view of true value rewarding penalize competent could while incompetent, taxpayers permits certain manipulate tax assessments. use of actual income as the standard

measure tax assessment is violative requirement uniformity the state constitutional It even more evident that this taxation. becomes standard uniformity the constitutional mandate shatters particular taxpayers may when Saginaw Twp 1981] CAF Investment v Dissenting Opinion Moody, Jr., Blair J.

chose when or when not to reveal their actual require income to its use to control assessment evaluation. Although respectfully it is this submitted defining

Court erred "economic income” as income”, Tribunal, "actual remand, the Tax did evolving consider actual income in its assessment. required It was not to base its evaluation on that any factor to the exclusion of other consideration. properly Because the Tax Tribunal determined the true cash value of the owned C.A.F. Company, the tribunal’s assessment should be sustained.

Case Details

Case Name: CAF Investment Co. v. Saginaw Township

Court Name: Michigan Supreme Court

Date Published: Feb 24, 1981

Citation: 302 N.W.2d 164

Docket Number: Docket Nos. 60744, 60745. (Calendar No. 3)

Court Abbreviation: Mich.