July 10, 2017

Board of Directors IAAO
IAAO Headquarters 314 West 10th Street
Kansas City, Missouri 64105

Re: Big Box Valuation Paper

Dear Board Members:

I am the President of American Property Tax Counsel ("APTC"), the preeminent organization of real estate tax attorneys in North America. On behalf of the APTC, we offer these comments regarding your Special Committee on valuing Big Box properties.

Our primary concern is that the report is misleading. The purpose of the report does not appear to teach generally accepted appraisal methods but, instead, to advocate for changes to longaccepted definitions of property rights while professing it is a defense of the status quo.

The paper is essentially written as an activist piece designed to give assessors questionable legal arguments to be used in pending litigation to the end of influencing the decisions in those appeals. Whether that scheme is ethical will be addressed later in these comments.

As attorneys, our concern is the accuracy of the legal arguments advanced in the paper. The starting point is to ask the question, "why would the assessor's organization attempt to write a paper addressing legal theory and not one on appraisal methodology?" Again, it appears to be nothing more than an attempt to support new legal/appraisal theories to gain an advantage in pending litigation and to shape public opinion to support a new way of valuing and taxing retail properties instead of valuing the properties in fee simple.

Some decisions cited in the paper are misleading. Often, numerous cases from one state or another were ignored. Decisions that did not support the new narrative from states such as Michigan, Kansas, California, Massachusetts, Ohio, Indiana, Pennsylvania & Oregon were never even mentioned. But, the paper included cases from Ohio that were all overturned by a statutory change. ln as much as the changes were 3 to 4 years ago, it seems the inclusion of these irrelevant cases was careless or intentional, at worst. The Supreme Court of Ohio recently issued the first decision of a case reflective of the new law. Terraza 8, LLC v. Franklin County Board of Revision, 2017-0hio-4415 (June 22, 2017). The paper, at a minimum, should be corrected and updated on the Ohio cases and include a robust and accurate discussion of the relevant cases ignored by the authors.

A Kentucky case was cited with a notation it was appealed. In fact, discretionary review of that case was denied but the court ordered that case's decision be de-published. lt is inappropriate for the report to cite or rely on a de-published decision.

Another case citation was to a lower level Idaho administrative body but the report reads as if it was a case decided by an appellate court. The Idaho Board of Tax Appeals is not a court. Its decisions are not precedent and are appealed de novo to the District Court. If Idaho does not consider the case to have any precedent, why is it included in the IAAO paper? A similar concern was raised about the citations to non-precedential cases in Florida.

ATPC members also expressed concerns over how the decisions in North Carolina and other states were misconstrued in the report.

Any rational reading of this report would lead to a conclusion that it is not credible because the paper steers one to accept as true that it is a discussion of the current law on the valuation of big boxes. It is not. It advocates for a very significant change in appraisal methodologies and property rights. The IAAO is attempting to legislate through Standards. Any change to the law as to what property rights are to be valued and taxed should be left to each state and respectful of the obligation to value all property in a uniform and equal manner and without regard to the owner or tenant.

Another important concern relates to the ethical issue of whether it is appropriate for the IAAO to interject the organization into pending matters to influence the end results.

The IAAO Code of Ethics suggests that it is not appropriate for the IAAO to do so for many reasons. For instance, the Code provides:

• "It is unethical for members to conduct their professional duties in a manner that could reasonably be expected to create the appearance of impropriety ...
• It is unethical to perform any appraisal, assessment, or consulting service that is not in compliance with the IAAO governing documents or the Uniform Standards of Professional Appraisal Practice ...
• It is unethical for members to accept an appraisal or assessment-related assignment that can reasonably be construed as being in conflict with their responsibility to their jurisdiction, employer, or client, or in which they have an unrevealed personal interest or bias ...
• It is unethical to accept an assignment or responsibility in which there is a personal interest without full disclosure of that interest ...
• It is unethical to accept an assignment or participate in an activity where a conflict of interest exists and could be perceived as a bias, or impair objectivity ...
• It is unethical to knowingly fail to observe the requirements of the Uniform Standards of Professional Appraisal Practice ... "

There are pending cases across the country on this very issue, including many in the home states of the authors of this report. This paper imbeds the IAAO into pending litigation with no acknowledgment of that in the report. The report is silent on the pending matters where one or more authors are a party. The paper is silent on the conflicts of interest of the authors, the Board of Directors and the organization.

The IAAO, in its amicus brief in the Menard v. City of Escanaba case before the Michigan Supreme Court, said, "Given its significant authoritative status in the appraisal industry, all appraisers are encouraged to follow the standards in the Appraisal Institute's treatise, The Appraisal of Real Estate." This report advocates for methods specifically repudiated in the Appraisal of Real Estate, 14 th edition. To adopt the report would be contrary to the pronouncements made by the IAAO to the Michigan Supreme Court and violate of the IAAO Code of Ethics' requirement to observe the requirements of USPAP.

While the APTC strongly disagrees with the paper's definitions and misrepresentations of appraisal methodology, fee simple, property rights vs. contract rights, the applicability of build-to-suit and/or sale leaseback rental and sales information, and many other issues in the paper, the APTC will leave that critique to appraisal organizations such as the Appraisal Institute and those members of the Appraisal Institute with expertise in the fields of appraisal methodology and USP AP compliance.

In summary, the concerns of the APTC relate to (1) the misrepresentation of the law; (2) the appropriateness of the IAAO advocating to change the law of ad valorem taxation and the long accepted definitions; and (3) the ethical issues relating to conflicts of interest and the misrepresentations.

For these reasons APTC formally submits its objections to the IAAO Paper and requests it be withdrawn. The APTC stands ready and willing to participate in any meaningful discussions with the IAAO relative to this issue.

Respectfully yours,
Stephen Paul, Esq.
President, American Property Tax Counsel
Partner, Faegre Baker Daniels
300 North Meridian Street, Suite 2700
Indianapolis, Indiana 46204