Sonoma Apartment Associates v. United States ( 2017 )


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  •                 In the United States Court of Federal Claims
                                                         No. 13-940C
                                            (Filed Under Seal: September 22, 2017)
                                         (Reissued for Publication: November 3, 2017)*
    
    *************************************
    SONOMA APARTMENT ASSOCIATES, *
    A California Limited Partnership,   *
                                        *                                         Trial; Section 515 of the Housing Act of
                          Plaintiff,    *                                         1949; Breach of Contract; Expectancy
                                        *                                         Damages; Lost Profits Versus Lost Asset
     v.                                 *                                         Value; Postbreach Evidence; Discount
                                        *                                         Rates; Tax Neutralization Payment;
    THE UNITED STATES,                  *                                         Third-Party Standing
                                        *
                          Defendant.    *
    *************************************
    
    Daphne A. Beletsis and Deborah S. Bull, Santa Rosa, CA, for plaintiff.
    
    Matthew P. Roche and Jeffrey A. Regner, United States Department of Justice, Washington, DC,
    for defendant.
    
                                                         OPINION AND ORDER
    
    SWEENEY, Judge
    
            Plaintiff Sonoma Apartment Associates, a California Limited Partnership, obtained a loan
    from the federal government to construct rural low- and moderate-income housing. Plaintiff was
    contractually entitled to prepay the balance of the loan after twenty years, but when it sought to
    exercise this right, the government denied its request. After the government conceded liability
    for breach of contract, the court held a trial on the issue of damages. As explained in more detail
    below, the court awards damages to plaintiff in an amount to be determined in accordance with
    the court’s findings and conclusions.
    
                                                        TABLE OF CONTENTS
    
    I. FACTS.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
         A. Plaintiff’s Contract With the Government and the Government’s Breach of That
              Contract. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
    
    
               *
              For the reasons stated during the November 3, 2017 status conference, the court
    reissues this decision for publication without redactions.
            B. Plaintiff and Its Partners. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
            C. Sonoma Village Apartments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
            D. The April 11, 2011 Appraisal Report. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
    
    II. PROCEDURAL HISTORY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
    
    III. NONMONETARY RELIEF. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
    
    IV. EXPECTANCY DAMAGES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
         A. Legal Standards.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
             1. Expectancy Damages. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
             2. Date for Calculating Damages. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
             3. Discounting to Present Value. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
         B. The Parties’ Experts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
         C. The Parties’ Methodologies and Calculations.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
             1. Plaintiff’s Approach. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
                   a. Past Lost Profits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
                           i. Restricted Scenario. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
                           ii. Unrestricted Scenario. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
                           iii. Total Past Lost Profits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
                   b. Future Lost Profits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
                           i. Restricted Scenario. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
                           ii. Unrestricted Scenario. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
                           iii. Discounting to Present Value. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
                   c. Total Lost Profits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
                   d. Using Fair Market Value to Test the Reasonableness of the Lost Profits
                           Calculations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
             2. Defendant’s Approach. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
                   a. Unrestricted Scenario. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
                   b. Restricted Scenario. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
                   c. Total Damages. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
                   d. Dr. Ben-Zion’s Test to Assess the Reasonableness of His Calculations. . . . 49
         D. Analysis.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
             1. Methodology for Computing Plaintiff’s Expectancy Damages. . . . . . . . . . . . . . . 51
             2. Postbreach Evidence. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
             3. Past Damages. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
                   a. Estimating Plaintiff’s Past Income in the Unrestricted Scenario. . . . . . . . . . 54
                           i. Rents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
                           ii. Nonrental Income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
                           iii. Vacancy Rate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
                           iv. Conversion-Related Lost Income.. . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
                   b. Estimating Plaintiff’s Past Expenses in the Unrestricted Scenario. . . . . . . . 57
                           i. Data. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
    
    
                                                                        -2-
                               ii. Loan-Related Expenses and the Mortgage Interest Rate. . . . . . . . . . . 58
                         c. Estimating Plaintiff’s Past Income in the Restricted Scenario.. . . . . . . . . . . 60
                         d. Estimating Plaintiff’s Past Expenses in the Restricted Scenario. . . . . . . . . . 60
                    4. Future Damages. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
                         a. Projecting Plaintiff’s Future Income in the Unrestricted Scenario. . . . . . . . 60
                               i. Data. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
                               ii. Nonrental Income and Vacancy Rate. . . . . . . . . . . . . . . . . . . . . . . . . . 61
                         b. Projecting Plaintiff’s Future Expenses in the Unrestricted Scenario.. . . . . . 61
                         c. Projecting Plaintiff’s Future Income in the Restricted Scenario. . . . . . . . . . 62
                         d. Projecting Plaintiff’s Future Expenses in the Restricted Scenario. . . . . . . . 62
                         e. Calculating Projected Net Income in the Restricted Scenario. . . . . . . . . . . . 62
                    5. Discounting Plaintiff’s Damages. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
                         a. Postjudgment Discount Rate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
                         b. Prejudgment Discount Rate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
                    6. Conclusion. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
    
    V. TAX NEUTRALIZATION PAYMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
        A. Legal Standard. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
        B. The Parties’ Experts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
        C. Plaintiff’s Position.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
             1. The Tax Consequences of Converting Sonoma Village Apartments to a Market-
                   Rate Rental Property. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
                   a. Computing Tax Liability Assuming a Conversion.. . . . . . . . . . . . . . . . . . . . 69
                   b. Computing Tax Liability Assuming the Status Quo. . . . . . . . . . . . . . . . . . . 72
                   c. Calculating Net Tax Liability.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
             2. The Tax Consequences of the Lump-Sum Damages Award. . . . . . . . . . . . . . . . . 74
             3. Determining the Tax Neutralization Payment. . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
        D. Defendant’s Response.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
        E. Analysis. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
    
    VI. CONCLUSION.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
    
                                                                  I. FACTS
    
            This section contains the court’s findings of fact as required by Rule 52(a)(1) of the Rules
    of the United States Court of Federal Claims.1
    
    
    
    
              1
              The court derives these facts from the parties’ Joint Stipulation of Facts (“Jt. Stip.”), the
    transcript of testimony elicited at trial (“Tr.”), the exhibits admitted into evidence during trial
    (“PX,” “DX,” or “JX”), and the relevant statutes and regulations. Citations to the trial transcript
    will be to the page number of the transcript and the last name of the testifying witness.
    
                                                                        -3-
        A. Plaintiff’s Contract With the Government and the Government’s Breach of That
                                             Contract
    
           On September 4, 1984, plaintiff executed an agreement with the Farmers Home
    Administration of the United States Department of Agriculture in which the government agreed,
    pursuant to section 515 of the Housing Act of 1949, Pub. L. No. 81-171, 63 Stat. 413 (as added
    by Pub. L. No. 87-723, § 4(b), 76 Stat. 670, 671-72 (1962)), to lend plaintiff $1,261,080 to
    construct a low- and moderate-income housing project at 59 West Agua Caliente Road in
    Sonoma, California. Jt. Stip. ¶ 1; JX 1; see also Jt. Stip. ¶ 1 (indicating that the project is known
    as Sonoma Village Apartments). Plaintiff agreed to repay the loan in installments over a fifty-
    year period ending October 27, 2035. Jt. Stip. ¶ 4.
    
            In conjunction with the loan agreement, plaintiff executed two promissory notes in favor
    of the government, one for $1,222,650, and the other for $38,430. Id. ¶ 3. Both promissory
    notes included the following provision: “Prepayments of scheduled installments, or any portion
    thereof, may be made at any time at the option of Borrower providing the loan is in a current
    status.” Id. ¶ 5. The promissory notes, in turn, were secured by a deed of trust that was recorded
    in Sonoma County, California on October 28, 1985. Id. ¶ 6. The deed of trust included a rider
    containing the following language:
    
           The borrower and any successors in interest agree to use the housing for the
           purpose of housing people eligible for occupancy as provided in section 515 of
           Title V of the Housing Act of 1949 and [Farmers Home Administration]
           regulations then extant during this 20-year period, beginning the date this
           instrument is filed of record.
    
    Id. ¶ 7; JX 4 at 6. The aforementioned twenty-year period ended on October 27, 2005. Jt. Stip.
    ¶ 8. Plaintiff would not have accepted the loan from the government had it not been provided
    with the ability to prepay the loan after twenty years. Tr. 51 (Gullotta). Indeed, plaintiff always
    intended to prepay the loan after twenty years. Id. at 54, 100.
    
            By accepting the loan from the Farmers Home Administration, plaintiff agreed to comply
    with United States Department of Agriculture regulations pertaining to the section 515 program,
    including regulations requiring the submission of annual financial reports and regulations
    regarding the management of housing projects. Jt. Stip. ¶¶ 13-14; 7 C.F.R. §§ 3560.102, .308
    (2017); 7 C.F.R. §§ 1930.113, .124, & pt. 1930, subpt. C, ex. B (1985). The requirements set
    forth in these regulations are much more onerous than those for managing market-rate rental
    properties. Tr. 344-45 (Williams); see also id. at 44-45 (Gullotta) (characterizing the
    requirements of the section 515 program as “complex[]”). Indeed, in addition to submitting
    annual financial reports, properties in the section 515 program must submit to annual third-party
    audits, process lengthy rental applications, and engage in a time-consuming income-verification
    process. Id. at 344-45 (Williams). Further, the government reviews and approves the properties’
    budgets, monitors the properties’ reserve capital accounts and all capital improvements, and
    
    
                                                     -4-
    controls the properties’ ability to increase rents.2 Id. at 346-47, 349; see also id. at 850-51
    (Pedrotti) (explaining that the government approves rent increases based on its analysis of a
    property’s operating expenses, and prefers that any increases will not result in net profits
    exceeding $2000). The government also limits the amount of income that may be distributed to
    plaintiff from operating Sonoma Village Apartments. See, e.g., 7 C.F.R. § 3560.305 (2017)
    (allowing borrowers a return on their investment under certain circumstances); JX 1 at 3
    (reflecting that funds in plaintiff’s reserve account could be used, with the government’s
    approval, “[t]o pay dividends to the partners of up to 8 percent per annum of the borrower’s
    initial investment of $64,350.00,” but if the “return on investment for any year exceed[ed] 8
    percent,” the government could “require that the borrower reduce rents the following year and/or
    refund the excess return on investment to the tenants or use said excess in a manner that [would]
    best benefit the tenants”); see also JX 34 at 1 (indicating, in plaintiff’s 2013 budget and 2014
    proposed budget, that plaintiff would receive only $5310 per year from operating Sonoma
    Village Apartments); PX 54 at 74 (reflecting, in a budget history spreadsheet for 2008 through
    2010, that plaintiff proposed receiving $5310 per year from operating Sonoma Village
    Apartments).
    
            After plaintiff executed the loan agreement, the promissory notes, and the deed of trust
    (collectively, “the contract”), Congress, concerned with the loss of low-income housing that was
    caused, in part, by loan prepayments, enacted two statutes that retroactively limited borrowers’
    rights to prepay the balance of loans made through the section 515 program: the Emergency Low
    Income Housing Preservation Act of 1987, Pub. L. No. 100-242, 101 Stat. 1877 (1988), and the
    Housing and Community Development Act of 1992, Pub. L. No. 102-550, 106 Stat. 3672.
    
            On November 5, 2010, plaintiff submitted a written request to Rural Development–the
    agency within the United States Department of Agriculture responsible for the rural housing
    programs formerly administered by the Farmers Home Administration, Jt. Stip. ¶ 2–to prepay the
    balance of its loan. Id. ¶ 9. Its request reflected that it intended to prepay the balance of the
    loan–approximately $1.2 million–without refinancing, and that it possessed the financial
    resources to do so. JX 5 at 2-4; Tr. 56 (Gullotta); see also Tr. 56-57 (Gullotta) (indicating that at
    the time of trial, plaintiff still had the wherewithal to prepay the balance of the loan without
    refinancing). However, Rural Development did not accept plaintiff’s request to fully prepay the
    balance of its loan. Jt. Stip. ¶ 10. Rather, on January 3, 2011, Rural Development offered
    plaintiff certain incentives in lieu of accepting prepayment. Id. Rural Development’s refusal to
    accept full prepayment constitutes a breach of contract. Id. ¶ 11.
    
    
    
            2
               In addition to reviewing and approving the amount of rent that plaintiff can charge its
    tenants, the government limits the amount of rent that plaintiff can retain. Tr. 353 (Williams).
    Specifically, of the rent it collects from its tenants, plaintiff is entitled to retain the base rent–“the
    rent that is approved in the budget for [it] to spend on operations.” Id. If it collects more than
    the base rent, as it does with respect to approximately twelve tenants at Sonoma Village
    Apartments, the overage is sent to the government. Id. at 353-54.
    
                                                       -5-
                                           B. Plaintiff and Its Partners
    
            Plaintiff was formed on August 27, 1984. JX 51 at 1. Originally, it had two
    partners–Richard Gullotta and Richard Parasol–who each owned a 2.5% general partnership
    interest and a 47.5% limited partnership interest. Tr. 53, 100 (Gullotta). Mr. Parasol sold his
    limited partnership interest to a married couple–the Belks–and after her husband’s death, Mrs.
    Belk sold the interest to Richard Gullotta’s children,3 id. at 53-54, 100-01, Mark Gullotta, Eric
    Gullotta, and Karen Kass (née Gullotta),4 id. at 46, 100. Thus, at the time of the government’s
    breach of contract in 2011, plaintiff had two general partners and four limited partners, as
    follows:
    
                                                                              Partnership
                                Sonoma Apartment Associates                     Interest
                                                 General Partners
                        Richard Gullotta                                     2.5%
                        Richard Parasol                                      2.5%
                                                 Limited Partners
                        Richard Gullotta                                     47.5%
                        Mark Adrien Gullotta Revocable Living Trust          47.5%
                        Eric S. Gullotta Revocable Living Trust              1/3 of 47.5%
                        Karen N. Gullotta Revocable Living Trust             1/3 of 47.5%
    
    Id. at 46, 104-05; JX 51. All profits received and losses incurred by the partnership are allocated
    to its partners in accordance with the partnership agreement, JX 57 at 17, 27, 41-42; Tr. 1194,
    1200 (Krabbenschmidt); see also Tr. 1194-95 (Krabbenschmidt) (explaining that under the
    Internal Revenue Code, the partners can “modify the way the income is allocated between the
    partners all the way up until April 15th . . . following the year end”), and the partners are
    responsible for paying taxes on their shares of any profits, Tr. 1193-94 (Krabbenschmidt); see 26
    U.S.C. § 701 (2012) (“A partnership as such shall not be subject to the income tax imposed by
    this chapter. Persons carrying on business as partners shall be liable for income tax only in their
    
    
             3
             Although the Belks’ limited partnership interest was purchased by Richard Gullotta’s
    children’s revocable living trusts, JX 51, the court will, for simplicity, refer to the children as the
    owners of the limited partnership interest.
             4
                 For clarity, the court will refer to Richard Gullotta and his children by their first and last
    names.
    
                                                         -6-
    separate or individual capacities.”). Further, the partnership’s available cash flow is distributed
    to its partners in accordance with the partnership agreement. JX 57 at 18, 41-42.
    
             Richard Gullotta conceived of and developed plaintiff’s low- and moderate-income
    housing project. Tr. 48-50 (Gullotta). He has extensive financial and real estate experience.
    With respect to his financial experience, Richard Gullotta received an undergraduate degree in
    accounting in 1965, worked for several years as a revenue agent for the Internal Revenue Service,
    became a Certified Public Accountant (“CPA”) in 1972, and received a master’s degree in
    taxation in 1976. Id. at 41-42. In his CPA practice, he prepares approximately 750 income tax
    returns per year, including his own return and the returns of his children. Id. at 43, 60; see also
    id. at 57 (reflecting that Richard Gullotta has been preparing tax returns since 1969), 90
    (indicating Richard Gullotta’s intention to “continue [his] CPA practice” as long as he could
    “help people”). With respect to his real estate experience, Richard Gullotta became a licensed
    real estate broker in 1990, and was accredited as a national mortgage loan originator in 2010. Id.
    at 41-43. He owns a number of rental properties–mostly single family residences–that he
    manages with his wife. Id. at 43-45, 97; see also id. at 97 (reflecting that Richard Gullotta and
    his wife managed nine rental properties in 2014). In addition, he owns, either personally or as a
    partner, ten low-income rental properties that are managed by a third-party management
    company. Id. at 43-46.
    
            On their 2015 federal income tax return, Richard Gullotta and his wife reported an
    adjusted gross income of $415,220. JX 81 at 2; see also DX 18 (indicating that the couple’s
    adjusted gross income fluctuated between 2011 and 2015, with a high of $430,096 in 2011 and a
    low of $275,222 in 2014). Approximately half of their income was derived from Richard
    Gullotta’s CPA practice. JX 81 at 2, 53. In addition, a small percentage of their income came
    from unemployment compensation. Id. at 2; see also Tr. 94-96 (Gullotta) (indicating that in
    2014, Richard Gullotta received unemployment compensation for the six months following the
    tax season, during which time he earned no income from his CPA practice or as a property
    manager). Richard Gullotta and his wife also reported total passive activity losses of $409,345
    for 2015,5 which included $13,994 in unallowed losses attributable to the operation of Sonoma
    
    
           5
              A passive activity loss, as the term is used in this decision, is a loss incurred by a
    property owner who does not materially participate in the property. Tr. 72 (Gullotta); accord 26
    U.S.C. § 469(c)(1)-(2); see also Tr. 72 (Gullotta) (defining “material participation” as “put[ting]
    in 500 hours”). A passive activity loss incurred in one year can be carried forward and used to
    offset income from passive activities in the following year. Tr. 71, 77 (Gullotta); 26 U.S.C.
    § 469(b), (d)(1). Indeed, a property owner can continue to carry forward the loss to subsequent
    years until the entire loss is exhausted. Tr. 75 (Gullotta), 1247 (Krabbenschmidt). Although the
    loss has no other effect on a property owner’s tax liability, id. at 76, 130, 155 (Gullotta), a
    property owner must report its passive activity losses on his or her federal income tax returns, id.
    at 76. The amount reported on a particular year’s income tax return may not ultimately reflect
    the amount of passive activity losses incurred in that year. See id. at 125-35 (reviewing Richard
    Gullotta’s reported passive activity losses from 2011 to 2015, and reflecting Richard Gullotta’s
    
                                                     -7-
    Village Apartments. JX 81 at 32, 65-66; see also JX 58 at 22-23 (reporting a $301,977 passive
    activity loss for 2011, $154,612 of which was carried forward from 2010); JX 59 at 22-23
    (reporting a $394,068 passive activity loss for 2012, $301,977 of which was carried forward from
    2011); JX 60 at 33-34 (reporting a $584,493 passive activity loss for 2013, $425,318 of which
    was carried forward from 2012); JX 61 at 28-29 (reporting a $347,108 passive activity loss for
    2014, after carrying forward $631,758 from 2013); JX 81 at 32 (reporting a $409,345 passive
    activity loss for 2015, $347,108 of which was carried forward from 2014); Tr. 137-38 (Gullotta)
    (reflecting that Richard Gullotta anticipated carrying forward passive activity losses for the
    indefinite future). At the time of trial (October 2016), Richard Gullotta was nearly seventy-three
    years old, and would therefore turn ninety-two years old in 2035, “if [he was] alive.”6 Tr. 89
    (Gullotta).
    
            Mark Gullotta and his wife reported an adjusted gross income of $282,572 on their 2015
    federal income tax return. JX 67 at 1; see also DX 16 (indicating that the couple’s adjusted gross
    income in 2015 far exceeded the adjusted gross income they reported for the previous four years,
    which ranged from $133,583 to $162,505). They also reported a $13,334 passive activity loss,
    all of which was carried forward from the previous year and was attributable to the operation of
    Sonoma Village Apartments. JX 67 at 15-16. Mark Gullotta is a CPA and an attorney, and his
    wife is a CPA. Id. at 2. They have three children. Id. at 1.
    
            Eric Gullotta and his wife reported an adjusted gross income of $12,585 on their 2014
    federal income tax return, most of which was derived from business profits described on two
    Schedule Cs. JX 55 at 1, 5-8; see also DX 17 (reflecting similarly low adjusted gross incomes
    
    
    explanation that one year’s passive activity loss might not match the passive activity loss carried
    forward into the following year if something happened in the meantime that required an
    adjustment to that loss), 154-55 (explaining that an adjustment to an amount of passive activity
    loss carried forward from the prior year could be due to a partner filing an income tax return
    before receiving the K-1 statement from the partnership’s tax preparer). But see id. at 1267
    (Krabbenschmidt) (indicating that “most people” do not file their income tax returns before
    receiving their K-1 statements, and that even if a taxpayer did so, his or her income tax return
    would be required to contain “a good faith estimate” of the amounts that would appear on the K-
    1 statement). However, the parties dispute whether a property owner must report an adjustment
    of the amount of passive activity losses incurred in a particular year after the federal income tax
    return for that year has been filed. Compare id. at 125 (Gullotta) (reflecting Richard Gullotta’s
    averment that there is no requirement to notify the Internal Revenue Service when adjusting a
    passive activity loss to be carried forward to the following year), with id. at 1264
    (Krabbenschmidt) (reflecting Mr. Krabbenschmidt’s averment that the Internal Revenue Service
    “typically . . . likes to see you file an amended tax return to properly report” passive activity
    losses).
           6
             Richard Gullotta mistakenly testified that he would be ninety-three years old in 2035,
    Tr. 89 (Gullotta), a minor discrepancy.
    
                                                    -8-
    for 2011 through 2013). They also reported a $17,750 passive activity loss, $5,253 of which was
    carried forward from the previous year and all of which was attributable to the operation of
    Sonoma Village Apartments. JX 55 at 21-22. Eric Gullotta is a tax attorney, id. at 5, and
    “started his own law practice in approximately 2011,” Tr. 1205 (Krabbenschmidt). For the first
    four years of his new law practice, he “had almost an . . . equal amount of operating expenses
    offsetting [the law practice’s] gross income.” Id. at 1205-06; accord DX 17. Indeed, in 2014,
    Eric Gullotta’s law practice had gross income of $293,924, expenses of $282,626, and profits of
    $11,298. JX 55 at 5. He attributed the law practice’s high amount of expenses to the cost of
    starting a new law practice, and did not expect that the costs would be so high in the future. Tr.
    1206 (Krabbenschmidt). Eric Gullotta’s wife is a realtor, and in 2014 she reported gross receipts
    of $59,320, expenses of $43,813, and profits of $15,507. JX 55 at 7. The couple has three
    children. Id. at 1.
    
            Karen Kass and her husband reported an adjusted gross income of $72,841 on their 2015
    federal income tax return. JX 72 at 1; see also DX 19 (indicating that the couple’s adjusted gross
    income was $110,244 in 2013 and $45,743 in 2014); JX 68 at 1 (reflecting, on Karen Gullotta’s
    2011 federal income tax return, a filing status of “single” and an adjusted gross income of
    $84,922); JX 69 at 1 (reflecting, on Karen Gullotta’s 2012 federal income tax return, a filing
    status of “single” and an adjusted gross income of $92,618). They also reported a $12,497
    passive activity loss, all of which was carried forward from the previous year and was
    attributable to the operation of Sonoma Village Apartments. JX 72 at 18-19. Karen Kass is an
    attorney and her husband is an accountant.7 Id. at 2. The couple has one child. Id. at 1.
    
            The trial record lacks any evidence concerning the financial situation of the remaining
    partner, Mr. Parasol.
    
            Plaintiff’s financial statements are audited annually by “[a]n independent CPA firm.” Tr.
    60-61 (Gullotta). The firm provides its certified audits to the government, and the government
    has never identified any problems with the certified audits. Id. at 61. The firm also prepares
    plaintiff’s income tax returns, and Richard Gullotta relies on those returns when preparing his
    and his children’s income tax returns. Id.
    
    
    
    
           7
               Defense counsel represented to a testifying witness that Karen Kass stated during her
    deposition that she was not currently working, but planned on going back to work. Tr. 813.
    However, Karen Kass did not testify during trial, nor was her deposition testimony offered into
    evidence. In addition, defense counsel twice represented to testifying witnesses that Karen
    Kass’s husband stated during his deposition that he would be taking the CPA examination and, if
    he became a CPA, expected his income to increase. Id. at 808-09, 1213. However, Mr. Kass did
    not testify during trial, nor was his deposition testimony offered into evidence.
    
                                                    -9-
                                    C. Sonoma Village Apartments
    
            The low- and moderate-income housing project that plaintiff constructed with the
    proceeds of the Farmers Home Administration loan–Sonoma Village Apartments–is a thirty-unit
    apartment complex consisting of fourteen one-bedroom/one-bathroom units, eight two-
    bedroom/one-bathroom units, four three-bedroom/one-bathroom units, and four three-
    bedroom/one-and-one-half-bathroom units.8 Id. at 1009 (Weinberg); Jt. Stip. ¶¶ 1, 12; PX 54 at
    2, 99. Its neighborhood–an area of the Sonoma Valley region situated between the town of
    Sonoma and a corridor containing wineries and vineyards–is oriented toward lower-income
    housing. Tr. 169-70 (Burwell). Historically, Sonoma Village Apartments has no vacancies and
    there is always a waiting list for its units. Id. at 195.
    
             The property manager for Sonoma Village Apartments is AWI Management Corporation
    (“AWI”), which is owned by Tina Williams and her husband. Id. at 342-43, 345 (Williams).
    Ms. Williams has managed Sonoma Village Apartments since its inception. Id. at 345. Indeed,
    Ms. Williams has managed affordable multifamily housing properties since 1983, and at the time
    of trial, simultaneously managed 135 such properties, including ten properties owned by Richard
    Gullotta. Id. at 342-43; see also id. at 344 (indicating that Ms. Williams has managed
    approximately eighty Rural Development properties). Additionally, she managed two rural
    market-rate rental properties–a fifty-unit complex in Middletown, California, and a twenty-unit
    complex in Weaverville, California–for a period of approximately five years beginning in 2009.
    Id. at 373-75. Due to the work involved in complying with the extensive requirements of the
    section 515 program, AWI’s management services are more costly than the management services
    provided for market-rate rental housing. Id. at 351. At the time of trial, AWI charged plaintiff
    $52 per unit, id., an amount approved by Rural Development based on a biennial survey
    conducted by its national office, id.; accord id. at 852 (Pedrotti).
    
            If plaintiff were allowed to prepay the balance of its loan, Richard Gullotta would
    personally manage Sonoma Village Apartments; he would have an employee on site to handle
    tenant complaints and would use contractors to handle maintenance issues. Id. at 83-84
    (Gullotta). Additionally, plaintiff would make certain capital improvements to reduce its
    ongoing repair and maintenance costs. Id. at 84-85. Indeed, had Rural Development accepted
    plaintiff’s tender of prepayment in 2011, plaintiff would have incurred expenses of $378,424 to
    renovate the property, including $25,000 for reroofing, $73,824 for exterior painting and repairs,
    $54,600 for repaving the parking area, and $225,000 ($7,500 per unit) for interior upgrades. Jt.
    Stip. ¶ 15. During these renovations, plaintiff would experience a decrease in rental income. Id.
    ¶ 16.
    
    
    
           8
             Although the parties jointly stipulated that Sonoma Village Apartments included four
    three-bedroom/two-bathroom units, Jt. Stip. ¶ 12, the evidence in the trial record reflects that
    these four units each contained only one-and-one-half bathrooms, PX 54 at 99-100; Tr. 1009
    (Weinberg).
    
                                                   -10-
            Finally, under the current tenants’ leases, plaintiff would be required to provide at least
    sixty days advanced notice of a rent increase. Tr. 854 (Pedrotti). If, after the notice period, a
    tenant failed to pay rent, then plaintiff could initiate eviction proceedings. Id. at 854-55.
    
                                D. The April 11, 2011 Appraisal Report
    
           In conjunction with plaintiff’s request to prepay the balance of its loan, Rural
    Development commissioned an appraisal of Sonoma Village Apartments to determine what its
    market value might be as conventional unsubsidized housing. PX 54 at 25. The appraisal was
    conducted by two appraisers from the Howard Levy Appraisal Group, Inc., id. at 5, both of
    whom were licensed in California as certified general appraisers and one of whom held an MAI
    designation,9 id. at 7. Their report, issued on April 11, 2011 (“the Levy appraisal”), was
    reviewed and approved by Rural Development. Id. at 2-3, 5.
    
           The appraisers analyzed Sonoma Village Apartments using two approaches. Id. at 54, 63.
    One, the sales comparison approach,
    
           is based upon the assumption that an informed purchaser will pay no more for a
           property than the cost of acquiring an existing property of the same utility. This
           approach estimates market value by comparing the sales prices of recent similar
           transactions with the various attributes of the property under appraisement. Any
           dissimilarities are resolved by making appropriate adjustments. These differences
           may pertain to time, age, location, construction, condition, size or external
           economic factors.
    
    Id. at 62. Under this approach, the appraisers compared Sonoma Village Apartments to eight
    similar properties in Sonoma County that had then recently sold,10 id. at 79-92, and concluded
    that Sonoma Village Apartments would be worth $100,000 per unit, or $3,000,000 total, id. at
    91-92, 108.
    
           The second approach used by the appraisers, the income approach,
    
           converts the anticipated future benefits of property ownership (dollar income) into
           an estimate of present value. The Income Approach is generally selected as the
    
    
           9
              To obtain an MAI designation, an appraiser must have a certain amount of experience
    (which is peer-reviewed over a four-year period), pass a comprehensive examination, and submit
    a demonstration appraisal report. Tr. 162 (Burwell). Only approximately 6500 appraisers
    possess the MAI designation. Id. at 163.
           10
              One property was located in Rohnert Park, four properties were located in Santa Rosa,
    and three properties were located in Sonoma. PX 54 at 79-86. Six of the properties sold in 2010,
    one property sold in 2009, and the remaining property sold in late 2008. Id.
    
                                                    -11-
           preferred technique for income-producing properties because it most closely
           reflects the investment rationale and strategies of typical buyers. To utilize the
           Income Approach, the appraiser must project net income, select an appropriate
           capitalization rate and then capitalize the net income into value, applying the
           proper discounting procedure.11
    
    Id. at 62 (footnote added); accord id. at 93. The specific steps involved in this approach are:
    
           First, a market rent is determined for the subject property based upon recent
           rentals in the market area. Then, vacancy and expenses are deducted to arrive at a
           net operating income which is divided by the capitalization rate to arrive at the
           market value.
    
    Id. With respect to the market rent element of the analysis, the appraisers determined the
    reasonable market rents for each unit type at Sonoma Village Apartments:
    
                                                             Monthly
                                       Unit Type            Market Rent
                                    1 Bed/1 Bath                   $850
                                    2 Bed/1 Bath                  $1,000
                                    3 Bed/1 Bath                  $1,100
                                    3 Bed/1.5 Bath                $1,175
    
    Id. at 99-100. Thus, after adding an amount for miscellaneous income, the appraisers projected
    that the property would generate annual gross income of $358,800. Id. at 11, 100, 107.
    
           11
               The capitalization rate is the rate of return for a property based on the property’s
    income, Tr. 206, 209 (Burwell), and is “used by appraisers to estimate the fair market value of a
    property at any given time,” id. at 500 (Ben-Zion). Specifically, the capitalization rate for a
    particular property is the net income of the property (before debt service) divided by the
    property’s purchase price. Id. at 201 (Burwell); see also PX 42 (indicating the capitalization rates
    for major apartment complex sales in Sonoma Valley for 2010 through 2015, which ranged from
    an average of 6.4% in 2011-2012 to an average of 5.47% in 2014-2015); Tr. 949 (Weinberg)
    (defining “debt service” as the amount needed “to cover the cost of [a] mortgage”). Thus, to
    estimate a capitalization rate for a property, one analyzes sales of comparable properties. PX 54
    at 93; Tr. 500 (Ben-Zion). The capitalization rate is “a reflection of what the market thinks at the
    time is a fair return to the invested capital and a risk factor.” Tr. 494 (Ben-Zion); accord id. at
    494-95 (indicating that “whenever one uses a cap[italization] rate into the future, since the future
    is unknown, it’s appropriate to use a cap[italization] rate that contains both the risk and
    uncertainty about the future and the interest rate”).
    
                                                     -12-
    Accounting for projected vacancies and credit losses (using a standard 5% vacancy factor), id. at
    101, 107, the appraisers determined that the property’s annual effective gross income would be
    $340,860, id. at 107. The appraisers then projected the property’s operating expenses and
    reserves using historical data from the property and actual expenses incurred by comparable
    properties in Sonoma County.12 Id. at 101-03; see also id. at 101 (indicating that the appraisers
    “utilized information on expenses” from the Institute for Real Estate Management (“IREM”)
    “[a]s an additional aid in determining reasonable expense projections”), 101-03 (reflecting that
    the projected operating expenses did not include debt service). They concluded that the
    property’s annual total expenses would be $145,120, which is 43% of effective gross income. Id.
    at 103, 107; see also id. at 103 (“The subject’s total expenses equate to 43% of [effective gross
    income] while the comparable sales showed a range of 32% to 45% of [effective gross income].
    The subject’s projected expense ratio is within the range provided by the comparables, albeit
    toward the high end, and is thus considered reasonable.”). Upon subtracting the total expenses
    from the effective gross income, the appraisers projected that the property would generate annual
    net income of $195,740. Id. at 11, 107. Finally, the appraisers determined that an appropriate
    capitalization rate was 6.5%, id. at 103-07, and, upon applying this rate to the property’s
    projected annual net income, concluded that the property’s value under the income approach
    would be $3,010,000, id. at 11, 107.
    
            Ultimately, because investors would give more weight to a value determined under an
    income approach, and because the value determined under the sales comparison approach
    supported that value, the appraisers concluded: “The hypothetical market value of the leased fee
    interest of the subject property, based on the condition that the improvements comprise
    conventional unsubsidized market rate housing, and assuming stabilized occupancy at market
    rents, as of April 11, 2011, is therefore estimated to be $3,010,000.”13 Id. at 108.
    
    
           12
              Two of the properties were located in Sonoma, one property was located in Petaluma,
    and the remaining property was located in Santa Rosa. PX 54 at 101.
           13
               During trial, Richard Gullotta provided his lay opinion, pursuant to Rule 701 of the
    Federal Rules of Evidence, that if Sonoma Village Apartments was a market-rate rental property,
    it would be worth between $200,000 and $250,000 per unit–between $6,000,000 and $7,500,000
    in total. Tr. 86-88 (Gullotta). He further testified that, in his opinion, Sonoma Village
    Apartments, as a subsidized housing complex, was worthless. Id. at 86-87. In contrast, Sandra
    Pedrotti, Rural Development’s area specialist who oversees approximately twenty-five section
    515 properties in northern California, id. at 842-43 (Pedrotti), testified that there is an active
    market for section 515 properties, including Sonoma Village Apartments, and that half of the
    properties in her portfolio had transferred to new owners, id. at 853, 858-59; see also id. at 861
    (reflecting that Ms. Pedrotti had “no idea” what Sonoma Village Apartments was worth). One of
    defendant’s experts agreed with Ms. Pedrotti that there is an active market for section 515
    properties, including for Sonoma Village Apartments. Id. at 910-11 (Weinberg). The court is
    nonetheless aware, as defense counsel acknowledged during closing arguments, that purchasers
    of these properties make their purchases for the tax write-offs. See Tr. 1529.
    
                                                   -13-
                                    II. PROCEDURAL HISTORY
    
            Plaintiff filed suit in the United States Court of Federal Claims (“Court of Federal
    Claims”) on November 27, 2013, alleging that Rural Development improperly refused its request
    to prepay the balance of its loan. Plaintiff thereafter filed an amended complaint in which it
    asserted two claims for relief: breach of contract and a violation of the Takings Clause of the
    Fifth Amendment to the United States Constitution. In its prayer for relief, plaintiff sought
    monetary damages for defendant’s alleged breach of contract, just compensation for defendant’s
    alleged taking, prejudgment interest as permitted by law, and any additional relief the court
    deemed just and proper.
    
            After the parties concluded fact discovery, plaintiff filed a motion for partial summary
    judgment as to the government’s liability for breach of contract and defendant filed a motion to
    dismiss plaintiff’s Fifth Amendment takings claim. In its December 30, 2015 Opinion and
    Order, the court granted both motions. Sonoma Apartment Assocs. v. United States, 124 Fed.
    Cl. 595 (2015). As a result, the sole remaining issue was the amount of damages, if any, due
    plaintiff for the government’s breach of contract.
    
            On May 2, 2016, the parties exchanged expert reports on the issue of damages. The
    report of one of plaintiff’s experts contained a new claim for a “tax neutralization payment”–a
    payment to neutralize the negative tax consequences of receiving a lump-sum damages award.
    Shortly after receiving this report, defendant filed a motion for partial summary judgment,
    contending that plaintiff could not recover such a payment. The court denied defendant’s motion
    in its August 24, 2016 Opinion and Order, concluding that the award of a tax neutralization
    payment was not barred as a matter of law and that plaintiff was therefore entitled to present
    evidence on the issue at trial. Sonoma Apartment Assocs. v. United States, 
    127 Fed. Cl. 721
    (2016).
    
            The parties and the court toured Sonoma Village Apartments on October 18, 2016, after
    which the court conducted a seven-day trial. During its case-in-chief, plaintiff presented the
    testimony of Richard Gullotta, Ms. Williams, and two expert witnesses–Dana Burwell, a certified
    general appraiser, and Barry Ben-Zion, Ph.D., an economist.14 Defendant, during its case-in-
    chief, presented the testimony of Ms. Pedrotti and two expert witnesses–Brad Weinberg, a
    
    
    
    
           14
               The court qualified Mr. Burwell, without objection, “as an expert in the field of
    appraisal to testify about the elements of discounted cash flow analysis as well as renovation
    costs and rent loss during the conversion period.” Tr. 165. The court qualified Dr. Ben-Zion,
    over defendant’s objection, id. at 408, 415, as an expert who could perform “a damage
    calculation based on forensic economic concepts” and who would opine on “[a]ll of plaintiff’s
    economic damages including tax neutralization,” id. at 416-17.
    
                                                   -14-
    certified general appraiser and certified valuation analyst, and Jon Krabbenschmidt, a CPA.15
    Plaintiff presented rebuttal testimony from Dr. Ben-Zion.
    
             After trial, the parties submitted posttrial memoranda and orally presented closing
    arguments. In its opening posttrial memorandum, plaintiff asserts that the court could
    compensate it for the government’s breach of contract in one of two ways. Plaintiff’s preference
    is for the court to declare that the government’s breach excuses plaintiff’s future performance
    under the contract, and to award it monetary damages for the period between the date of breach
    (January 3, 2011) and the date of trial (estimated to be December 31, 2016).16 Alternatively,
    plaintiff requests that the court award it monetary damages consisting of past damages for the
    period between the date of the government’s breach and the date of trial, future damages for the
    period between the date of trial and the date that the loan agreement will expire (October 27,
    2035), and a tax neutralization payment. The court begins by addressing plaintiff’s request for
    nonmonetary relief.
    
                                    III. NONMONETARY RELIEF
    
          As plaintiff correctly notes, “[i]n general the same contract law is applied when the
    government is party to a contract as applies to contracts between private parties.” Ace
    
    
           15
               The court qualified Mr. Weinberg, without objection, “as an expert in the field of
    appraisal and valuation of multifamily real estate, the calculation of discounted cash flows, and
    the analysis of plaintiff’s damages . . . .” Tr. 869. The court qualified Mr. Krabbenschmidt,
    without objection, “as an expert in the field of tax calculation as well as the calculation of tax
    gross-ups in particular.” Id. at 1174.
           16
                Although plaintiff does not specifically request that the court declare that the
    government’s breach of contract excuses plaintiff’s future performance under the contract, it
    devotes an entire section of its opening posttrial memorandum to arguing that it has the right to
    cease performance under the contract in light of defendant’s breach. Moreover, plaintiff’s
    posttrial memoranda contain multiple suggestions that the court should make the requested
    declaration. See, e.g., Pl.’s Posttrial Memo. 1 (“What is disputed in this case is whether
    [plaintiff’s] future performance is excused . . . .”), 2 (“[I]f the Court orders that [plaintiff’s]
    obligation to perform under the contract in the future is excused by the Government’s breach,
    only damages up to the date of trial need be awarded by the Court.”), 46 (“[Plaintiff] seeks to be
    permitted to exercise the normal right of a non-breaching party to cease performance under a
    contract. It seeks past and (if necessary) future damages.”), 47 (“If the Court finds that [plaintiff]
    is required to continue performing under the contract despite the Government’s breach, [plaintiff]
    requests an award of . . . future damages . . . .”); Pl.’s Posttrial Reply 32 (“Unless the Court
    acknowledges [plaintiff’s] right as a non-breaching party to cease performing, Plaintiff will now
    operate Sonoma Village Apartments as an indentured servant of the Government until 2035, at a
    tremendous loss.”). Accordingly, the court construes plaintiff’s arguments and suggestions as a
    request for the aforementioned declaration.
    
                                                    -15-
    Constructors, Inc. v. United States, 
    499 F.3d 1357
    , 1360 (Fed. Cir. 2007). Thus, just as with any
    contract between private parties, if the government breaches a contract, the nonbreaching party
    has the right to cease performance. Stone Forest Indus., Inc. v. United States, 
    973 F.2d 1548
    ,
    1550 (Fed. Cir. 1992); Malone v. United States, 
    849 F.2d 1441
    , 1446 (Fed. Cir. 1988). However,
    in this case, the government refused to accept plaintiff’s tender of the balance of the loan,
    effectively requiring plaintiff to continue performance. Plaintiff therefore requests a declaration
    from this court that it is entitled cease performance. Unfortunately for plaintiff, its request runs
    up against this court’s jurisdictional limitations.
    
            The Court of Federal Claims possesses jurisdiction to entertain claims for breach of
    contract against the United States. 28 U.S.C. § 1491(a)(1) (2012); Loveladies Harbor, Inc. v.
    United States, 
    27 F.3d 1545
    , 1554 (Fed. Cir. 1994) (en banc). However, except in a limited
    number of statutorily defined circumstances not relevant here,17 the court cannot award
    nonmonetary equitable relief. See Bowen v. Massachusetts, 
    487 U.S. 879
    , 905 & n.40 (1988);
    Gonzales & Gonzales Bonds & Ins. Agency, Inc. v. Dep’t of Homeland Sec., 
    490 F.3d 940
    , 943
    (Fed. Cir. 2007); Kanemoto v. Reno, 
    41 F.3d 641
    , 644-45 (Fed. Cir. 1994). Plaintiff’s request
    for a declaration that it is entitled to cease contract performance is, in essence, a request for
    specific performance because plaintiff can only cease performance if it pays the balance of the
    loan, and Rural Development will not accept the payment tendered by plaintiff as contractually
    required without a court order. Specific performance is an equitable remedy. Texas v. New
    Mexico, 
    482 U.S. 124
    , 131 (1987). As such, it cannot be ordered by this court. See also Glidden
    Co. v. Zdanok, 
    370 U.S. 530
    , 557 (1962) (Harlan, J., plurality opinion) (“From the beginning
    [the United States Court of Claims, the predecessor to the Court of Federal Claims,] has been
    given jurisdiction only to award damages, not specific relief.”); Larson v. Domestic & Foreign
    Commerce Corp., 
    337 U.S. 682
    , 704 (1949) (holding that “in the absence of a claim of
    constitutional limitation,” specific “relief cannot be had against the sovereign”); District of
    Columbia v. Barnes, 
    197 U.S. 146
    , 152 (1905) (noting that the United States Court of Claims
    was “unable to grant a decree for specific performance, or exercise the peculiar powers of a court
    of equity”); United States v. Jones, 
    131 U.S. 1
    , 14-19 (1899) (holding that the Tucker Act does
    not authorize suits “for equitable relief by specific performance”); Massie v. United States, 
    226 F.3d 1318
    , 1321-22 (Fed. Cir. 2000) (noting that the Court of Federal Claims lacks the ability to
    direct specific performance).
    
            Moreover, the decisions relied upon by plaintiff for the proposition that courts have
    directed specific performance do not control the result in this case. Those decisions concerned
    
    
           17
               See 28 U.S.C. § 1491(a)(2) (providing the court with jurisdiction to issue, “as incident
    of and collateral to” an award of money damages, “orders directing restoration to office or
    position, placement in appropriate duty or retirement status, and correction of applicable
    records”); id. (providing the court with jurisdiction to render judgment in nonmonetary disputes
    arising under the Contract Disputes Act of 1978); id. § 1491(b)(2) (providing the court with
    jurisdiction to award declaratory and injunctive relief in bid protests); id. § 1507 (providing the
    court with jurisdiction to issue declaratory judgments under 26 U.S.C. § 7428).
    
                                                   -16-
    the claims of at least seventeen other owners of rural low- and moderate-income housing projects
    whose attempts to prepay the balance of their loans were rebuffed by the government. See
    generally Atwood-Leisman v. United States, 
    72 Fed. Cl. 142
     (2006). Two of the owners–
    Kimberly Associates and Atwood-Leisman–filed suit in both the Court of Federal Claims and the
    United States District Court for the District of Idaho.18 Id. at 146-47, 147 n.10. In their suit in
    the Court of Federal Claims, the owners sought only monetary damages for the government’s
    breach of contract, both for damages incurred up until they filed suit and for damages they would
    continue to incur. See 2d Amend. Compl. Prayer for Relief ¶ 1, Atwood-Leisman, 72 Fed. Cl. at
    142 (No. 98-815C). By comparison, in their district court suits, the owners sought orders
    directing the government to accept their prepayments and quieting title to their properties. See
    Atwood-Leisman, 72 Fed. Cl. at 146, 147 n.10; Kimberly Assocs. v. United States, No. 98-83,
    slip op. (D. Idaho Dec. 12, 2002), aff’d, 109 F. App’x 138 (9th Cir. 2004) (indicating that the
    government voluntarily dismissed its appeal and affirming the district court’s denial of a motion
    to intervene); Atwood-Leisman v. United States, No. 98-416, slip op. (D. Idaho Nov. 18, 2002);
    see also 2d Amend. Compl. ¶ 36, Atwood-Leisman, 72 Fed. Cl. at 142 (No. 98-815C) (reflecting
    the owners’ recognition that although their suits to quiet title were properly brought in the district
    court, they could only be made whole by filing a breach-of-contract suit for money damages in
    the Court of Federal Claims). The district court possessed the authority to grant the relief
    requested by the owners pursuant to 28 U.S.C. § 2410(a), which provides that “the United States
    may be named a party in any civil action or suit in any district court . . . to quiet title to . . . real or
    personal property on which the United States has or claims a mortgage or other lien.” See also
    Kimberly Assocs. v. United States, 
    261 F.3d 864
    , 868 (9th Cir. 2001) (holding that the claim of
    Kimberly Associates was cognizable under 28 U.S.C. § 2410); Kimberly Assocs., No. 98-83, slip
    op. (granting the requested relief); Atwood-Leisman, No. 98-416, slip op. (granting the requested
    relief). The Court of Federal Claims is not a district court. Ledford v. United States, 
    297 F.3d 1378
    , 1382 (Fed. Cir. 2002) (per curiam); accord 28 U.S.C. § 451 (defining “district court” as
    those courts described in chapter 5 of title 28 of the United States Code); Lightfoot v. Cendant
    Mortg. Corp., 
    137 S. Ct. 553
    , 563 (2017) (distinguishing between “the Court of Federal Claims”
    and “federal district courts”). Accordingly, it lacks the authority to grant the type of equitable
    relief that the district court granted to Kimberly Associates and Atwood-Leisman.19 Accord
    Dwen v. United States, 
    62 Fed. Cl. 76
    , 80 (2004) (“Plainly stated, the court is without
    jurisdiction to entertain a stand alone claim to quiet title.”).
    
           Finally, plaintiff’s statement that “nothing prevents the court from acknowledging that,
    under settled law, [plaintiff] has the right not to continue to perform in the face of the
    Government’s breach,” Pl.’s Posttrial Reply 21, is not well taken. An “acknowledgment” that
    
    
            18
              Kimberly Associates and Atwood-Leisman were plaintiffs in the same Court of
    Federal Claims suit, but were plaintiffs in separate district court suits.
            19
              If plaintiff desired the type of relief obtained by Kimberly Associates and Atwood-
    Leisman, it could have filed a quiet title action in district court and a companion suit in the Court
    of Federal Claims for money damages.
    
                                                       -17-
    plaintiff has the right to cease performance is tantamount to a declaratory judgment, which, as
    explained above, the court is without authority to issue. Moreover, such an “acknowledgment” is
    unnecessary for the court to grant plaintiff the other relief that it seeks–an award of money
    damages.
    
             In sum, the court declines plaintiff’s invitation to award it the nonmonetary equitable
    relief it describes in its posttrial memoranda.20
    
                                     IV. EXPECTANCY DAMAGES
    
            Shifting to plaintiff’s request for monetary relief, the court first reviews plaintiff’s request
    for $6,072,317 in expectancy damages, namely, the profits it has and will lose as a result of the
    government’s breach of contract: $897,209 for the period between the date of the breach and the
    date of trial, and $5,175,108 for the period between the date of trial and the date that the loan
    agreement will expire. Defendant contends that plaintiff has not met its burden of proving the
    claimed expectancy damages, and that the evidence in the trial record instead reflects that
    plaintiff is entitled to expectancy damages of $1,090,000.
    
                                            A. Legal Standards
    
                                          1. Expectancy Damages
    
            “The general rule in common law breach of contract cases is to award damages that will
    place the injured party in as good a position as he or she would have been [in] had the breaching
    party fully performed.” Estate of Berg v. United States, 
    687 F.2d 377
    , 379 (Ct. Cl. 1982). “One
    way the law makes the non-breaching party whole is to give him the benefits he expected to
    receive had the breach not occurred.” Glendale Fed. Bank, FSB v. United States, 
    239 F.3d 1374
    ,
    1380 (Fed. Cir. 2001). These expected benefits–expectancy damages–“are recoverable provided
    they are actually foreseen or reasonably foreseeable, are caused by the breach of the promisor,
    and are proved with reasonable certainty.” Bluebonnet Sav. Bank, F.S.B. v. United States, 
    266 F.3d 1348
    , 1355 (Fed. Cir. 2001); accord Fifth Third Bank v. United States, 
    518 F.3d 1368
    ,
    1374-75 (Fed. Cir. 2008).
    
             In this case, expectancy damages can be measured in two ways: by “the market value of a
    lost income-producing asset (‘lost asset’ or ‘lost asset value’ damages),” or by the “future lost
    profits that could have been derived from the lost income-producing asset (‘lost profits’
    damages).” Anchor Sav. Bank, FSB v. United States, 
    597 F.3d 1356
    , 1369 (Fed. Cir. 2010);
    accord First Fed. Lincoln Bank v. United States, 
    518 F.3d 1308
    , 1317 & n.4 (Fed. Cir. 2008)
    
    
            20
               Plaintiff’s request for nonmonetary equitable relief is also problematic because, as
    defendant notes, plaintiff did not set forth such relief in its amended complaint, and the court had
    previously advised plaintiff–during a telephonic status conference and in a subsequent order–that
    it lacked jurisdiction to grant such relief. See Order, Sept. 29, 2014.
    
                                                     -18-
    (distinguishing between the lost value of an asset and the lost earnings from that asset); Spectrum
    Scis. & Software, Inc. v. United States, 
    98 Fed. Cl. 8
    , 14 (2011) (“Although both forms of
    damages–lost profits and the value of a lost asset–are often pursued alternatively in the same
    case, they are different, particularly in terms of their respective proof demands.”). With respect
    to the former approach, “[t]he market value of income-generating property reflects the market’s
    estimate of the present value of the chance to earn future income, discounted by the market’s
    view of the lower future value of the income and the uncertainty of the occurrence and amount of
    any future property.” First Fed. Lincoln Bank, 518 F.3d at 1317. With respect to the latter
    approach, lost profits are “a recognized measure of damages, where their loss is the proximate
    result of the breach and the fact that there would have been a profit is definitely established, and
    there is some basis on which a reasonable estimate of the amount of the profit can be made.”
    Neely v. United States, 
    285 F.2d 438
    , 443 (Ct. Cl. 1961). “‘When the defendant’s conduct
    results in the loss of an income-producing asset with an ascertainable market value, the most
    accurate and immediate measure of damages is the market value of the asset at the time of
    breach–not the lost profits that the asset could have produced in the future.’” First Fed. Lincoln
    Bank, 518 F.3d at 1317 (quoting Schonfeld v. Hilliard, 
    218 F.3d 164
    , 176 (2d Cir. 2000)).
    However, there is no requirement that expectancy damages be measured using the lost asset
    approach instead of the lost profits approach. Anchor Sav. Bank, FSB, 597 F.3d at 1369.
    
            “If a reasonable probability of damage can be clearly established, uncertainty as to the
    amount will not preclude recovery.” Locke v. United States, 
    283 F.2d 521
    , 524 (Ct. Cl. 1960);
    see also Energy Capital Corp. v. United States, 
    302 F.3d 1314
    , 1325 (Fed. Cir. 2002) (“To
    recover lost profits for breach of contract, the plaintiff must establish by a preponderance of the
    evidence that . . . a sufficient basis exists for estimating the amount of lost profits with
    reasonable certainty.” (citation omitted)). Indeed, “[t]he ascertainment of damages is not an
    exact science, and where responsibility for damage is clear, it is not essential that the amount
    thereof be ascertainable with absolute exactness or mathematical precision.” Bluebonnet Sav.
    Bank, F.S.B, 266 F.3d at 1355; accord Specialty Assembling & Packing Co. v. United States,
    
    355 F.2d 554
    , 572 (Ct. Cl. 1966) (per curiam). Thus, a court may award damages if “a
    reasonable basis of computation is afforded” and “the evidence adduced enables the court to
    make a fair and reasonable approximation of the damages.” Locke, 283 F.2d at 524; accord
    Specialty Assembling & Packing Co., 355 F.2d at 572; cf. Fifth Third Bank, 518 F.3d at 1378-79
    (“We [have] interpreted the ‘reasonable certainty’ standard to apply only to the fact of damages,
    after which the court may ‘make a fair and reasonable approximation of the damages.’” (quoting
    Bluebonnet Sav. Bank, F.S.B, 266 F.3d at 1357)). Further, in determining the amount of
    damages, a court “may act upon probable and inferential as well as direct and positive proof.”
    Locke, 283 F.2d at 524; see also Fifth Third Bank, 518 F.3d at 1375 (noting that in breach-of-
    contract cases, “proof of damages to a reasonable certainty” is an issue of fact); Cal. Fed. Bank,
    FSB v. United States, 
    245 F.3d 1342
    , 1350 (Fed. Cir. 2001) (“Both the existence of lost profits
    and their quantum are factual matters . . . .”).
    
    
    
    
                                                   -19-
                                    2. Date for Calculating Damages
    
           Damages for breach of contract are typically measured as of the date when performance
    was due, which is often “the date of breach.” Energy Capital Corp., 302 F.3d at 1330. For
    example, when the nonbreaching party is claiming “damages for lost income-producing
    property,” such damages are
    
           properly determined as of the time the property is lost (usually the time of the
           breach) because the market value of the lost property reflects the then-prevailing
           market expectation as to the future income potential of the property, and it is
           precisely this opportunity that the nonbreaching party has lost.
    
    First Fed. Lincoln Bank, 518 F.3d at 1317. This “rule does not apply, however, to anticipated
    profits or to other expectancy damages that, absent the breach, would have accrued on an
    ongoing basis over the course of the contract. In those circumstances, damages are measured
    throughout the course of the contract.” Energy Capital Corp., 302 F.3d at 1330. Consequently,
    “[a] court may consider post-breach evidence when determining damages in order to place the
    non-breaching party in as good a position as he would have been [in] had the contract been
    performed.” Fifth Third Bank, 518 F.3d at 1377; accord Anchor Sav. Bank, FSB, 597 F.3d at
    1369-70; see also Fifth Third Bank, 518 F.3d at 1377 (holding that “it was appropriate, and
    certainly not clear error, for the [Court of Federal Claims] to consider the improved markets for
    conversion and branch sales” that occurred after the government’s breach of contract “to
    compensate [the plaintiff] for the damage sustained” from being forced to convert “to stock
    ownership” and sell one of its divisions); Fishman v. Estate of Wirtz, 
    807 F.2d 520
    , 551-52 (7th
    Cir. 1986) (affirming the district court’s valuation of a going concern, which was based on the
    concern’s gains in the ten-year period following the date of injury, and noting that it “[knew] of
    no case that suggests that a value based on expectation of gain is more relevant and reliable than
    one derived from actual gain”); Neely, 285 F.2d at 443 (concluding, in a case in which the
    government breached a contract that allowed plaintiff to mine coal on certain land, that the
    profits subsequently realized by another entity from strip-mining that land “would furnish some
    basis for a fairly reliable estimate of what plaintiff’s profits would have been”); Restatement
    (Second) of Contracts § 352 cmt. b, illus. 6 (Am. Law Inst. 1981) (noting, in a situation where
    the breaching party failed to construct facilities for a new business within the time provided for
    in the contract, that the nonbreaching party could attempt to prove its lost profits with records of
    the new business’s “subsequent operation and the operations of similar” businesses); cf. Sinclair
    Ref. Co. v. Jenkins Petroleum Process Co., 
    289 U.S. 689
    , 698 (1933) (remarking that when a
    court is “measuring the damages for a breach of contract” and “years have gone by before the
    evidence is offered” at trial, “[e]xperience is then available to correct uncertain prophecy”–“not
    to charge the offender with elements of value nonexistent at the time of his offense,” but “to
    bring out and expose of light the elements of value that were there from the beginning”).
    
    
    
    
                                                    -20-
                                    3. Discounting to Present Value
    
             When “computing the damages recoverable for the deprivation of future benefits, . . .
    adequate allowance [must be] made, according to circumstances, for the earning power of
    money[.]” Chesapeake & Ohio Ry. Co. v. Kelly, 
    241 U.S. 485
    , 491 (1916); accord Jones &
    Laughlin Steel Corp. v. Pfeifer, 
    462 U.S. 523
    , 536 (1983) (remarking that when an “award of
    damages to replace [a] lost stream of income . . . is paid in a lump sum at the conclusion of the
    litigation, and when it–or even a part of it–is invested, it will earn additional money”). Thus,
    “where it is reasonable to suppose that interest may safely be earned upon the amount that is
    awarded, the ascertained future benefits ought to be discounted in the making up of the award.”
    Chesapeake & Ohio Ry. Co., 241 U.S. at 490.
    
            A key factor in discounting a damages award is choosing the appropriate discount rate,
    which “is a question of fact.” Energy Capital Corp., 302 F.3d at 1332. “[T]he discount rate
    performs two functions: (i) it accounts for the time value of money; and (ii) it adjusts the value
    of the cash flow stream to account for risk.” Id.; accord id. at 1331 (noting that “anticipated net
    cash flows . . . are . . . discounted to present value to account for both: (i) the time value of
    money; and (ii) business and financial risks”). “In a given case, it is for the fact-finder to
    determine the method of adjusting for risk which most closely represents the value of damages.”
    Id. at 1334.
    
            As a general rule, “[t]o prevent the unjust enrichment of the plaintiff, damages that would
    have arisen after the date of judgment . . . must be discounted to the date of judgment.” Id. at
    1330. Further, “the risk portion of the discount rate applied to post-judgment lost profits must
    also be applied to the lost profits claimed between the time of the breach and judgment.”
    Franconia Assocs. v. United States, 
    61 Fed. Cl. 718
    , 766 (2004); accord id. (“[W]hile the court
    need not reduce to present value the post-breach, pre-judgment lost profits, it must . . . still
    reduce those anticipated profits to account for risk, at least in a case such as this, where a
    hypothetical transaction is involved.”).
    
                                         B. The Parties’ Experts
    
            The parties presented the testimony of three experts on the issue of expectancy damages.
    Plaintiff’s first expert witness was Mr. Burwell. Mr. Burwell is licensed in California as a
    certified general appraiser, and works primarily in Marin, Napa, and Sonoma Counties for a wide
    range of clients. PX 40; Tr. 160, 163, 171 (Burwell). He is a member of the Appraisal Institute
    and holds an MAI designation. PX 40; Tr. 163 (Burwell). During his career as an appraiser,
    which began in 1988, Mr. Burwell has appraised market-rate multifamily dwellings in Sonoma
    County between thirty and fifty times. Tr. 163, 171-72 (Burwell). In addition, he has been
    qualified to testify as an expert appraiser between ten and fifteen times. Id. at 163-64. Mr.
    Burwell was asked to perform the following five tasks: (1) determine the market rents for
    Sonoma Village Apartments for 2011, 2012, 2013, 2014, and 2015; (2) estimate the “market rent
    over the term of the contract”; (3) determine a discount rate; (4) ascertain the cost of renovating
    
    
                                                    -21-
    the apartments when converted to market-rate apartments; and (5) estimate amounts for repair
    and maintenance. Id. at 165-66.
    
            Plaintiff’s second expert witness was Dr. Ben-Zion. Dr. Ben-Zion is an economist who
    holds a bachelor’s degree, a master’s degree, and a doctorate in economics, and is currently a
    professor emeritus at Sonoma State University. Id. at 390-91 (Ben-Zion); PX 1. During his
    thirty-one-year tenure at Sonoma State University, Dr. Ben-Zion taught economics at the
    undergraduate and graduate levels, including a graduate-level course–managerial economics–in
    which he taught his students how to understand financial statements and tax returns. PX 1; Tr.
    391-93, 395 (Ben-Zion). He also conducted research in three areas: regional economic
    projections, finding reliable statistics concerning the economy, and forensic economics. PX 1;
    Tr. 396-97 (Ben-Zion). With respect to the latter area of research, Dr. Ben-Zion has been
    working as a forensic economist since 1972, Tr. 397 (Ben-Zion), and is a member of three
    professional organizations for forensic economists, id. at 401-02; PX 1. Further, as a forensic
    economist, Dr. Ben-Zion has prepared economic analyses for legal cases “[m]any, many
    hundreds of times,” including cases in which an individual has lost the ability to earn income,
    cases involving commercial damages, and family law cases in which he has been asked to value
    assets, such as a family business.21 Tr. 402-03 (Ben-Zion); accord id. at 408 (reflecting that Dr.
    Ben-Zion has prepared between 150 and 200 business valuations, either in breach-of-contract
    cases or family law cases); PX 1. Dr. Ben-Zion “was asked to estimate the economic damages”
    to plaintiff resulting from its inability to convert Sonoma Village Apartments to a market-rate
    rental property due to the government’s breach of contract. Tr. 417-18 (Ben-Zion).
    
            Defendant’s sole expert witness on the issue of expectancy damages was Mr. Weinberg.
    Like Mr. Burwell, Mr. Weinberg is licensed in California as a certified general appraiser, is a
    member of the Appraisal Institute, holds an MAI designation, and has been previously qualified
    as an expert. Id. at 863, 865 (Weinberg); DX 1. Mr. Weinberg is also a certified valuation
    analyst. DX 1; Tr. 865 (Weinberg). Currently, he is a partner in the evaluation group at
    Novogradac & Company LLP (“Novogradac”), an accounting and consulting firm that
    
    
           21
                Dr. Ben-Zion testified that during the course of providing economic analyses in family
    law cases, he has reviewed at least 300 appraisal reports concerning family homes, family-owned
    rental properties, and family-owned commercial properties. Tr. 512-13 (Ben-Zion); accord id. at
    758. He further testified that he has “some knowledge of the real estate market in Sonoma
    County . . . because [he is] an economist who has lived in the county . . . since 1969
    continuously,” has been “hired by the county to make economic projections that included
    housing demand [and] housing construction,” and has been “asked by the county to analyze the
    impact of Proposition 13,” which “limit[ed] the property taxes to a certain percentage of assessed
    value” and prevented taxes from increasing “more than 2% per year.” Id. at 513-14. Finally, he
    testified that he has “constructed two commercial shopping centers and a rather large office
    building and managed them for quite a few years and sold them,” and still has “some rental
    property, including one [property] in Sonoma Valley.” Id. at 515. However, Dr. Ben-Zion was
    not offered, or qualified, as an expert in real estate.
    
                                                   -22-
    specializes in affordable housing. Tr. 862-63 (Weinberg). The evaluation group conducts
    market studies and appraisals throughout the country, primarily for multifamily developments.
    Id. at 863. Mr. Weinberg has worked for Novogradac for more than twenty years, but he only
    recently moved to California to work in its San Francisco office. Id. at 864; accord id. at 992
    (indicating that Mr. Weinberg moved to California in June 2016). Approximately 80% of his
    work concerns affordable housing, while another 15% of his work concerns market-rate housing.
    Id. at 866; see also id. at 909 (noting that he has appraised section 515 properties throughout the
    nation for twenty years, for developers and lenders, in both sales and refinancing contexts). He
    has conducted approximately twenty appraisals in Sonoma County,22 id. at 992, and “close to
    fifty [United States Department of Agriculture] deals in California over the last seven, eight
    years,” id. at 1135. In conducting appraisals, Mr. Weinberg is obligated to abide by the Uniform
    Standards of Professional Appraisal Practice. Id. at 922-23. Mr. Weinberg “was asked to
    determine the quantum of damages related to” plaintiff’s inability to convert Sonoma Village
    Apartments to a market-rate rental property due to the government’s breach of contract. Id. at
    869.
    
                           C. The Parties’ Methodologies and Calculations
    
            The parties take different approaches in calculating plaintiff’s expectancy damages.
    Plaintiff measures its damages by the profits it has lost, and will continue to lose, as a result of
    Rural Development’s refusal to allow plaintiff to prepay the balance of its loan and exit the
    section 515 program. Defendant, in contrast, measures plaintiff’s damages by the value of the
    property that plaintiff lost as a result of the government’s breach of contract. Notwithstanding
    these distinct approaches, the parties’ calculations share similar elements. First, both parties
    calculate what plaintiff’s total net income would be for the duration of the contract under the
    status quo, in other words, in light of the government’s breach of contract (“the restricted
    scenario”). Second, both parties calculate what plaintiff’s total net income would have been for
    the same time period had the government not breached the contract (“the unrestricted scenario”).
    Third, both parties compare the restricted scenario to the unrestricted scenario to determine
    plaintiff’s loss. Finally, both parties apply a discount rate to ascertain the present value of
    plaintiff’s loss. The court describes how each party incorporates these elements into their
    approaches, beginning with plaintiff.
    
                                         1. Plaintiff’s Approach
    
            As previously noted, plaintiff uses the lost profits approach to measure its damages and
    separates its lost profits into two distinct time periods: (1) the period between the date of the
    government’s breach of contract and the date of trial, for which plaintiff seeks the profits it
    actually lost, and (2) the period between the date of trial and the date that the loan agreement will
    
    
           22
              Mr. Weinberg did not specify the types of properties that he appraised in Sonoma
    County, in what parts of Sonoma County the properties were located, or when he conducted the
    appraisals.
    
                                                    -23-
    expire, for which plaintiff seeks its projected lost profits. Accord id. at 418-19, 736 (Ben-Zion).
    Dr. Ben-Zion calculated plaintiff’s lost profits for each time period using data provided by
    plaintiff, Mr. Burwell, and Ms. Williams, as well as information that he downloaded from the
    IREM’s website. Id. passim.
    
                                           a. Past Lost Profits
    
                                          i. Restricted Scenario
    
            With respect to the first time period plaintiff specifies, the date of the government’s
    breach of contract through the date of trial, Dr. Ben-Zion used data from plaintiff’s financial
    statements–both the actual income received and the actual expenses incurred–to determine
    plaintiff’s net income in the restricted scenario. Id. at 423, 442-44, 746, 751-52; see also id. at
    747 (explaining that the amounts for 2016 are annualized from the actual income received and
    expenses incurred during the first quarter of 2016). He concluded that in the restricted scenario,
    plaintiff realized total net income of $146,330 for the 2011 to 2016 time period. See id. at 471-
    72; PX 52 at 1; PX 53 at 1; see also Tr. 443-44 (Ben-Zion) (specifying plaintiff’s net income for
    2011, 2012, 2013, and 2014), 444-45 (characterizing Sonoma Village Apartments as essentially
    unprofitable).
    
                                        ii. Unrestricted Scenario
    
           To calculate net income for the 2011 to 2016 time period in the unrestricted scenario, Dr.
    Ben-Zion estimated both the income that plaintiff would have received by charging market rents
    and the expenses that plaintiff would have incurred in operating Sonoma Village Apartments as a
    market-rate rental property.
    
             Dr. Ben-Zion based his rental income estimates on data provided by Mr. Burwell. PX 52
    at 1; PX 53 at 1; Tr. 516, 678, 684, 708, 729 (Ben-Zion). Mr. Burwell, in turn, used data
    compiled by Scott Gerber as the basis for calculating the rental income that plaintiff would have
    received in the unrestricted scenario. Tr. 166 (Burwell). Mr. Gerber is a commercial real estate
    broker who handles multifamily properties in the North Bay market, which includes Sonoma
    County. Id. at 166, 168-69, 256. He prepares biannual surveys of rents at multifamily properties
    in the North Bay, id. at 174-75; his surveys are “well known” and are “considered the standard
    for understanding multifamily trends in the North Bay,” id. at 174; accord id. at 175 (indicating
    that “a lot of professionals” rely on Mr. Gerber’s surveys), 259 (“Appraisers rely on commercial
    real estate brokers to develop market transactions, rent transactions, [and] sales transactions.”),
    322 (“Appraisers rely very strongly on commercial real estate brokers for leads, information on
    sales, rent comp[arable]s, [and] investment surveys. . . . [T]hey are involved in the transactions
    and they tell us a tremendous amount . . . .”); PX 54 at 43 (reflecting that data from Mr. Gerber’s
    rent survey for Sonoma Valley were used in the Levy appraisal). The survey that Mr. Gerber
    prepares for the Sonoma Valley market is based on data from seven properties (300 units total),
    and specifies the average monthly rent for one-, two-, and three-bedroom units; the average
    
    
                                                    -24-
    square footage of each unit type; the average rent per square foot; and the vacancy rate. Tr. 167-
    68 (Burwell), 176-77; accord PX 41.
    
            After obtaining the data from Mr. Gerber’s rent surveys, Mr. Burwell visited the seven
    apartment complexes that Mr. Gerber surveyed. Tr. 183 (Burwell). But see id. at 254-55
    (reflecting that Mr. Burwell did not visit the apartment complexes or speak with anyone at the
    apartment complexes until after he provided his data to Dr. Ben-Zion). He inspected the
    properties and spoke with “a couple of on-site managers” and some tenants. Id. Although all of
    the properties are older and cater to lower-income households, they differ in the number and
    types of amenities provided to tenants. Id. at 185; see also id. at 183-84 (indicating that Mr.
    Burwell considered some of the properties to be superior to Sonoma Village Apartments, some
    of the properties to be inferior to Sonoma Village Apartments, and the remainder to be roughly
    the same as Sonoma Village Apartments); cf. id. at 196-97 (indicating that the utilities paid for
    by the landlords at the seven properties and Sonoma Village Apartments were “pretty much the
    same”). Mr. Burwell explained that in a sophisticated market, the number and quality of
    amenities are priced into rents, but in an unsophisticated market like Sonoma Valley, rents are
    not affected by amenities. Id. at 187-88. Accordingly, Mr. Burwell did not adjust the average
    rents or average rents per square foot supplied in Mr. Gerber’s rent surveys to account for any
    differences in amenities between the seven surveyed properties and Sonoma Village Apartments.
    Id.
    
            Thus, for each of the unit types at Sonoma Village Apartments, Mr. Burwell used Mr.
    Gerber’s average rent per square foot to calculate the rents that plaintiff could obtain on the open
    market for 2011 through 2015.23 Id. at 190-91, 266, 324. Mr. Burwell then reduced those gross
    rents to account for possible vacancies using the vacancy rates supplied by Mr. Gerber. Id. at
    192. Those adjustments gave Mr. Burwell plaintiff’s effective gross income for each year. Id.
    Mr. Burwell’s conclusions are summarized in the following table:
    
                                    2011         2012        2013         2014         2015
                Monthly
                Market Rents
                 1 Bed/1 Bath      $946.50     $1003.29    $1003.29     $1066.39    $1173.66
                 2 Bed/1 Bath     $1158.00     $1158.00    $1158.00     $1266.08    $1374.16
                 3 Bed/1 Bath     $1407.60     $1407.60    $1407.60     $1519.80    $1642.20
                 3 Bed/1.5 Bath   $1428.00     $1509.60    $1509.60     $1652.40    $1652.40
    
    
    
           23
              Plaintiff’s experts did not possess data from Mr. Gerber’s 2016 rent surveys. Tr. 235
    (Burwell), 433 (Ben-Zion).
    
                                                    -25-
                   Monthly Gross     $406,289    $419,746    $419,746   $452,963     $487,235
                   Income24
                   Vacancy Rate          3.5%        4.1%        1.5%        0.9%        2.4%
                   Effective Gross   $392,069    $402,537    $413,450   $448,886     $475,517
                   Income
    
    PX 43.
    
            Dr. Ben-Zion used the estimated rents supplied by Mr. Burwell to determine gross rental
    income. See PX 52 at 2; PX 53 at 2; Tr. 423, 440, 678-79, 684 (Ben-Zion). However, rather
    than using the actual vacancy rates experienced in Sonoma Valley to arrive at an effective gross
    income, Dr. Ben-Zion used a uniform 3% vacancy rate for each year.25 PX 52 at 2; PX 53 at 2.
    He then further adjusted the estimated gross rental income by adding an estimated amount of
    “other income” (2.3% of the gross rental income)–essentially laundry and vending income, Tr.
    749 (Ben-Zion)–to project the annual net rental income amounts. PX 52 at 2; PX 53 at 2.
    Finally, Dr. Ben-Zion divided the net rental income he estimated for 2011 in half to reflect the
    receipt of only six months of market-rate rental income beginning on July 1, 2011.26 See PX 52
    at 2; PX 53 at 2; Tr. 441 (Ben-Zion).
    
            Next, Dr. Ben-Zion made an adjustment to account for plaintiff’s costs of making certain
    capital improvements to the property and the rental income that plaintiff would lose during such
    renovations. PX 52 at 2; PX 53 at 2. He did so by reducing the estimated net rental income for
    2011 by the renovation costs–stipulated by the parties to be $378,424, Jt. Stip. ¶ 15–and six
    
    
              24
                   Monthly gross income and effective gross income amounts are rounded to the nearest
    dollar.
              25
               Dr. Ben-Zion did not testify regarding the origin of the 3% vacancy rate that he used to
    calculate past damages in the unrestricted scenario. However, the trial record as a whole
    indicates that he used the 3% “long term market vacancy” rate supplied by Mr. Burwell. See PX
    39 (containing some of the information that Mr. Burwell provided to Dr. Ben-Zion); Tr. 194-96
    (Burwell) (indicating the basis for the 3% vacancy rate). In fact, it bears noting that 3% is greater
    than the average of the actual vacancy rates noted by Mr. Burwell (2.5%).
              26
               Presumably, Dr. Ben-Zion posited that plaintiff would receive income from restricted
    rents from January 1, 2011, to June 30, 2011. Indeed, as explained below, Dr. Ben-Zion
    subtracted six months of restricted rental income from 2011’s estimated net rental income to
    account for the fact that there would be no tenants at Sonoma Village Apartments for the first six
    months of the year. However, the trial record lacks any evidence that Dr. Ben-Zion credited
    plaintiff with six months of restricted rental income before he deducted the amount to reflect the
    vacancies. See also infra note 27.
    
                                                     -26-
    months of lost rental income, which he determined was $144,598.27 PX 52 at 2; PX 53 at 2;
    accord Tr. 1366-67 (Ben-Zion); see also id. at 216-18 (Burwell) (reflecting Mr. Burwell’s
    conclusions, which he believed were confirmed in part by two apartment complex renovations
    that he observed while he was working on this case, that it would take five to six months to
    complete the interior renovations, that units would need to be vacant to complete these
    renovations, and that no rent would be collected during the renovations), 968 (Weinberg)
    (indicating that the $144,598 amount came from Mr. Burwell’s expert report); PX 39 (containing
    Mr. Burwell’s conclusion that “[r]ent loss during renovation is 5-6 month[s’] rent loss at contract
    rent”).
    
            Dr. Ben-Zion then used two methods to estimate the expenses that plaintiff would have
    incurred in the unrestricted scenario. Tr. 446 (Ben-Zion). Under the first method, which he
    believed was the more reasonable method, id. at 817, 823-24, Dr. Ben-Zion relied on data
    supplied by Ms. Williams, id. at 446, 450; PX 53. At Richard Gullotta’s request, Ms. Williams
    estimated the expenses that plaintiff would have incurred operating Sonoma Village Apartments
    as a market-rate rental property from 2011 through 2016. Tr. 376-77 (Williams). Ms. Williams
    based her estimates on the actual expenses incurred by plaintiff (some of which would be the
    same under both the restricted and unrestricted scenarios), information provided by Richard
    Gullotta regarding how the property would be managed in the unrestricted scenario, and her
    experience in managing multifamily rental properties. Id. at 356-57, 358, 361. The following
    table summarizes the bases for Ms. Williams’s estimates:
    
    
    
    
           27
               As plaintiff’s counsel confirmed during closing arguments, Tr. 1486-89, it appears that
    Dr. Ben-Zion made two adjustments for lost rental income for 2011, effectively double counting
    six months of lost income. Initially, when estimating the net rental income that plaintiff would
    have received in 2011, Dr. Ben-Zion started with a baseline of six months of net rental income at
    market rents ($201,692), rather than a full year of net rental income. See id. at 1365-66 (Ben-
    Zion); PX 52 at 2; PX 53 at 2. He then subtracted “[l]ost rent (6 mos.)” ($144,598) from that
    amount, which appears to reflect the unrestricted rental income that would be lost due to the
    renovations. See PX 52 at 2; PX 53 at 2; Tr. 218 (Burwell) (reflecting Mr. Burwell’s estimate
    that it would take “five to six months” to accomplish the renovations and that plaintiff would
    lose 100% of the rent for that time period), 441-42, 1364, 1367 (Ben-Zion).
    
                                                   -27-
          Expense Item             Basis or Bases for Ms. Williams’s Estimate
                                 Operating Expenses
    Maintenance and Repairs      (1) Richard Gullotta’s representation that he
    Payroll                      would not have any on-site employees, (2) her
                                 knowledge of the state requirement that a
                                 responsible person be available to advise the
                                 owner of any issues, and (3) her personal
                                 experience regarding the amount of a typical
                                 monthly stipend for the responsible person
    Maintenance and Repairs      Actual expenses, reduced to accommodate
    Supply                       Richard Gullotta’s representation that he would
                                 contract out more maintenance and repair work
    Maintenance and Repairs      (1) Actual expenses, increased to accommodate
    Contract                     (a) Richard Gullotta’s representation that he
                                 would contract out more maintenance and repair
                                 work and (b) actual experience in turning over an
                                 average of eight apartments per year; and (2) her
                                 “best guess”
    Painting                     Actual experience in turning over an average of
                                 eight apartments per year
    Grounds                      Her knowledge of the cost to hire a third party to
                                 “mow and blow” once per month and trim hedges
                                 once per year
    Services (mainly pest        Actual expenses
    control)
    Annual Capital Budget        Average of annual actual expenses
    Other Operating Expenses     Average of annual actual expenses
                                      Utilities
    Electricity; Water; Sewer;   Actual expenses
    Fuel (Oil/Coal/Gas); Trash
    Removal
                               Administrative Expenses
    Site Manager Payroll;        Richard Gullotta’s representation that he would
    Management Fee               personally manage the property and not have any
                                 on-site employees
    
                                        -28-
             Legal                          Average of annual actual expenses
             Advertising                    Average of annual actual expenses
             Telephone                      Actual expenses
             Office Supplies                Actual expenses, reduced by half to account for
                                            the elimination of paperwork required by Rural
                                            Development
             Office Furniture and           Average of annual actual expenses
             Equipment
             Training                       Actual expenses for a required fair housing
                                            course
             Other Administrative           Average of annual actual expenses
             Expenses
                                          Taxes and Insurance
             Real Estate Taxes              Actual expenses, but she believes that they would
                                            change in the unrestricted scenario
             Other Taxes, Licenses, and     Actual expenses, but she believes that they would
             Permits                        change in the unrestricted scenario
             Property and Liability         Actual expenses, but she believes that they would
             Insurance                      change in the unrestricted scenario
             Fidelity Coverage              Actual expenses, but she believes that they would
             Insurance                      change in the unrestricted scenario
    
    Id. at 357-72, 380-81, 384-86; PX 10. Ultimately, Ms. Williams estimated amounts for each
    expense item save two: Site Manager Payroll and Management Fee. PX 10. For those two
    items, she estimated $0 in expenditures due to Richard Gullotta’s representation that he would
    personally manage Sonoma Village Apartments. Tr. 380 (Williams); accord id. at 83-84
    (Gullotta), 710 (Ben-Zion); cf. id. at 379-80 (Williams) (agreeing that it was a good idea to have
    an on-site manager and an on-site maintenance person). In addition, Ms. Williams indicated that
    plaintiff would incur expenses for bookkeeping and accounting services, but she could not say
    how much those services would cost. Id. at 365-66 (Williams). Dr. Ben-Zion used the amounts
    estimated by Ms. Williams in his calculations. Compare PX 10 (Ms. Williams’s estimated
    expenses), with PX 53 at 2 (Dr. Ben-Zion’s estimated expenses). He commented, however, that
    although he did not include any amounts for a management fee, there is a cost associated with
    this item that should be accounted for in the calculation of plaintiff’s lost profits. Tr. 450, 680-
    83, 706 (Ben-Zion); see also id. at 679-83 (indicating that Dr. Ben-Zion proposed a $1000
    management fee based on his experience managing properties and a monthly amount he was
    
                                                    -29-
    recently charged for the management of a small property, but also describing the amount as
    “random[]” and acknowledging that he did not know what management companies charge
    today). Finally, it bears noting that for 2011, Dr. Ben-Zion divided each expense item in half to
    reflect his assumption that expenses would be incurred for only six months that year. Compare
    PX 10 (Ms. Williams’s estimated expenses), with PX 53 at 2 (Dr. Ben-Zion’s estimated
    expenses). However, he did not make any adjustments based on the likelihood that plaintiff
    would incur the full amount of at least some of the expenses–for example, training and real estate
    taxes–despite only receiving six months of rental income. Accord Tr. 1156 (Weinberg).
    
            Under the second method of estimating expenses, which he provided as a way to check
    the results of the first method, id. at 817, 823 (Ben-Zion), Dr. Ben-Zion relied on information
    that he downloaded from the IREM website, id. at 461-62, 716-17; PX 52; cf. Tr. 717 (Ben-Zion)
    (indicating that the information downloaded by Dr. Ben-Zion was offered by the IREM for free
    as a sample of the information available in the products that they offered for purchase). “IREM
    surveys apartment community owners throughout the country and compiles detailed operating
    expense information on a per square foot [basis] or as a percent of [projected gross income].”
    PX 54 at 101; accord Tr. 423 (Ben-Zion) (explaining that the IREM “provides guidelines of what
    percentage expenses you would expect in apartment buildings”). Dr. Ben-Zion downloaded
    information for “Anytown, USA,” Tr. 467, 719 (Ben-Zion), which Dr. Ben-Zion assumed
    represented the national average, id. at 467, 721; see also id. at 725 (acknowledging that the
    downloaded information likely did not include data from Sonoma County). Dr. Ben-Zion did not
    know what years the information represented. Id. at 722, 733.
    
            From the “Anytown, USA” information that he downloaded from the IREM website, Dr.
    Ben-Zion used the median expense percentages for low-rise apartment complexes with more than
    twenty-four units. Id. at 725; see also id. at 725 (acknowledging that the data used by Dr. Ben-
    Zion was derived from information concerning thirty-seven buildings with an average of 222
    apartments per building). Dr. Ben-Zion represented that this data reflected that on average, net
    operating income was 63.3% of gross possible income. Id. at 469-70. He further represented
    that the remaining 36.7% of gross possible income reflected expenses; for example, the
    management fee was 3.8% of gross possible income. Id. at 470. In estimating plaintiff’s
    expenses using the IREM information, Dr. Ben-Zion used the following categories and items of
    expenses: management and administrative costs (management fee and other administrative
    costs), operating costs (supplies, fuel for heating, electricity, water, gas, building services, other
    administrative costs), maintenance (security, ground maintenance, maintenance/repairs, painting
    and decorating), real estate taxes, other taxes and permits, insurance, recreational amenities, and
    other payroll. PX 52 at 3-9; see also Tr. 728 (Ben-Zion) (reflecting Dr. Ben-Zion’s
    acknowledgment that he used expense items that were not applicable to Sonoma Village
    Apartments). Applying the percentages associated with each expense item, Dr. Ben-Zion
    calculated the annual expenses that plaintiff would have incurred in the unrestricted scenario.
    PX 52 at 2. Then, as he did when estimating expenses under the first method, Dr. Ben-Zion
    divided each expense item in half for 2011 to reflect his assumption that expenses would be
    
    
    
                                                    -30-
    incurred for only six months; in doing so, he again did not account for expenses that would be
    incurred for the entire year regardless of the amount of income received. Id.
    
            Then, under both methods for estimating expenses, Dr. Ben-Zion added an estimated
    interest expense, PX 52 at 2; PX 53 at 2, to account for the “opportunity cost of invested capital,”
    Tr. 450 (Ben-Zion). Dr. Ben-Zion explained that if Richard Gullotta proceeded as he intended
    and paid the $1.2 million balance of the loan with cash instead of refinancing, he would lose the
    opportunity to earn money by investing that cash elsewhere. Id. at 453. Dr. Ben-Zion concluded
    that the best–and most conservative–method of accounting for this opportunity cost was to
    deduct from plaintiff’s estimated income the interest that plaintiff would have paid if it
    refinanced the loan. Id. at 453-54. For his calculations, Dr. Ben-Zion assumed that plaintiff
    would have obtained a thirty-year mortgage on July 1, 2011, at a 4.3% interest rate. Id. at 454.
    
             The 4.3% interest rate used by Dr. Ben-Zion was provided by Mr. Burwell.28 Mr.
    Burwell, in turn, obtained this interest rate by contacting a local, privately owned, commercial
    bank that lends money to apartments. Id. at 219 (Burwell); see also id. at 241-42 (explaining that
    “the local bank market is stronger for smaller multifamily properties” while other lenders, such
    as life insurance and credit companies, are more likely to finance mortgages for large apartment
    properties acquired by institutional investors), 328 (noting that nationwide lending rates for large
    institutional properties are not applicable because those properties and their buyers are different
    from the type of property and ownership in this case). He was “quoted a lending rate of 4.3% for
    a five-year loan with a thirty-year amortization” for 2011. Id. at 219; see also id. at 284-85
    (indicating that these were the terms on the bank’s offering sheets, but that Mr. Burwell did not
    know whether the bank actually lent money under these terms), 326 (indicating that loan terms
    are confidential). Although one other bank was a major lender to apartments in the area, Mr.
    Burwell did not contact that bank to obtain their 2011 lending rates. Id. at 285. Nor did Mr.
    Burwell use the rates published in the Appraisal Institute’s national magazine, which are similar
    to the “national rates for institutional properties” published in the Korpacz survey. Id. at 287; see
    also id. at 932-33 (Weinberg) (explaining that the Korpacz survey is a widely used resource that
    provides the expected changes in rents and expenses based on a survey of market participants).
    However, he noted that the 4.3% interest rate was within the range of rates provided in Mr.
    Gerber’s rent survey. Id. at 286, 339 (Burwell); see also id. at 327 (noting that Mr. Gerber’s
    position as a broker allows him access to detailed information regarding mortgage interest rates).
    
    
    
    
           28
              Although Dr. Ben-Zion did not affirmatively state the source of the interest rate, the
    evidence in the trial record reflects that the interest rate was provided by Mr. Burwell. See Tr.
    219, 283-84 (Burwell).
    
                                                    -31-
    Ultimately, Dr. Ben-Zion calculated the amount that plaintiff’s estimated income should be
    reduced each year to reflect the mortgage interest that it would have paid.29 PX 52 at 2; PX 53 at
    2.
    
                                        iii. Total Past Lost Profits
    
             Once he determined plaintiff’s net income for the 2011 to 2016 time period in both the
    restricted and unrestricted scenarios, Dr. Ben-Zion subtracted the former from the latter to arrive
    at plaintiff’s lost profits. Tr. 471 (Ben-Zion). Using the expense data provided by Ms. Williams,
    Dr. Ben-Zion determined that plaintiff would have realized net income of $1,043,539 in the
    unrestricted scenario and, after subtracting the $146,330 that plaintiff actually realized in the
    restricted scenario, concluded that plaintiff lost profits of $897,209. PX 53 at 1-2. Alternatively,
    using the expense information that he downloaded from the IREM website, Dr. Ben-Zion
    determined that plaintiff would have realized net income of $761,375 in the unrestricted scenario
    and, after subtracting the $146,330 that plaintiff actually realized in the restricted scenario,
    concluded that plaintiff lost profits of $615,045. PX 52 at 1-2. Dr. Ben-Zion did not discount
    either amount–$897,209 or $615,045–because they represented past damages, which “would
    normally not be discounted to present value.” Tr. 420 (Ben-Zion); accord id. at 506-07 (“[W]e
    don’t discount past damages for interest or inflation.”). Indeed, he commented that one would
    only discount past damages if there was some uncertainty regarding what the income or expenses
    would be; in such cases, a risk factor could be applied. Id. at 495, 508; accord id. at 506 (“[Y]ou
    don’t need the interest rate to discount the past, only the . . . risk and uncertainty factor.”), 509
    (“Past damages are never discounted for interest.”); see also id. at 507 (“[I]f you want to apply a
    risk factor to the past and the risk factor is 1%, you can discount the total calculations by 1% for
    the past.”).
    
                                          b. Future Lost Profits
    
                                          i. Restricted Scenario
    
            With respect to the second time period plaintiff specifies, the date of trial through the date
    that the loan agreement will expire, Dr. Ben-Zion appears to have projected plaintiff’s future net
    income in the restricted scenario by increasing plaintiff’s projected gross rental income for 2016
    by a set percentage each year through 2035, determining projected net rental income by adjusting
    the projected gross rental income to account for projected vacancies and the receipt of other
    projected income, increasing plaintiff’s projected expenses for 2016 by a set percentage for each
    
    
    
    
           29
               Because Dr. Ben-Zion assumed that plaintiff would obtain a mortgage on July 1, 2011,
    he specified only six months of interest expense for 2011. PX 52 at 2; PX 53 at 2. However,
    Richard Gullotta was prepared to prepay the balance of the loan at the time of the government’s
    breach of contract on January 3, 2011. See Jt. Stip. ¶ 9; JX 5.
    
                                                    -32-
    year through 2035, and then subtracting the projected expenses from the projected net rental
    income to arrive at each year’s projected net income.30
    
            To determine the percentage for increasing plaintiff’s projected gross rental income, Dr.
    Ben-Zion considered two factors: (1) that from 2005 to 2015, rents at Sonoma Village
    Apartments increased annually by 2%,31 id. at 426-27; and (2) that the Congressional Budget
    Office projects that inflation will be approximately 2% per year for the next fifteen years, id. at
    439. Accordingly, he opined that it was reasonable to project that the future rent growth rate in
    the restricted scenario would continue to be 2%. Id. at 437-39.
    
            With respect to the percentage for increasing plaintiff’s projected expenses, which is only
    applicable to the projections based on the data provided by Ms. Williams, Dr. Ben-Zion
    apparently used the same percentage that he used to increase plaintiff’s projected expenses under
    the unrestricted scenario: 2%.32 See id. at 738 (reflecting that Dr. Ben-Zion calculated future
    expenses by taking “what would have existed in 2016 for the expenses and increased them by
    2%,” but not specifying whether he took this approach in both the restricted and unrestricted
    scenarios); see also id. at 476, 478-79, 710-11 (indicating that Dr. Ben-Zion increased the
    amount of projected expenses in the unrestricted scenario each year by 2%–the rate of inflation
    projected by the Congressional Budget Office for the next fifteen years); PX 53 at 3-8 (reflecting
    a 2% increase in projected expenses in the unrestricted scenario for 2017 through 2035).
    
                                        ii. Unrestricted Scenario
    
           After calculating each year’s projected net income under the restricted scenario, Dr. Ben-
    Zion performed the same task for the unrestricted scenario. To do so, he projected both the
    income that plaintiff would receive by charging market rents and the expenses that plaintiff
    would incur in operating Sonoma Village Apartments as a market-rate rental property.
    
    
    
    
           30
              There is no direct evidence regarding the precise methodology used by Dr. Ben-Zion to
    determine plaintiff’s projected net income in the restricted scenario, but the trial record as a
    whole strongly suggests that Dr. Ben-Zion took this approach.
           31
              Dr. Ben-Zion may have obtained this data from Mr. Burwell. See PX 39 (containing
    Mr. Burwell’s determination that “[l]ong term restricted rent growth is estimated at 2.0%”); Tr.
    200 (Burwell) (indicating Mr. Burwell’s determination that, historically, rents in the restricted
    scenario increased annually by 2%).
           32
               The trial record contains no direct evidence that Dr. Ben-Zion used the same approach
    in both scenarios; the only direct evidence of the rate for increasing projected expenses pertains
    to the unrestricted scenario. See Tr. 476, 478-79 (Ben-Zion).
    
                                                    -33-
             Dr. Ben-Zion based his income projections on data provided by Mr. Burwell. Id. at 440-
    41, 480, 739-40; PX 52 at 1; PX 53 at 1. Mr. Burwell, in turn, determined that the long-term
    market rent growth rate would be 3.5%. PX 39; Tr. 197-98, 273-74, 291, 310, 325 (Burwell).
    He based his determination on Mr. Gerber’s finding that the market rent growth rate in Sonoma
    Valley for 2011 through 2015 was slightly above 5%, Tr. 198, 274, 325 (Burwell), and his own
    assumption that market rents “would probably increase less going forward in the future once they
    get marked up to market,” id. at 198; see also id. at 275 (“I do read a lot on rental trends in . . .
    Sonoma County [and the] Bay Area.”). Mr. Burwell did not base his determination on inflation
    rates because of his belief that the growth rate in market rents would continue to outpace the rate
    of inflation due to the insufficient supply of apartment units in Sonoma Valley. Id. at 199. Dr.
    Ben-Zion accepted Mr. Burwell’s 3.5% growth rate and, using 2016 as the base year, projected
    the gross rental income for each year from 2017 to 2035. Id. at 440-41, 473 (Ben-Zion); see also
    id. at 480-81 (reflecting that Dr. Ben-Zion did not use the same growth rate that he used to
    increase future expenses–the projected rate of inflation–because “the rate of inflation and the rate
    of rent increases diverge[d] from each other considerably . . . in the past”).
    
            Next, Dr. Ben-Zion reduced the projected annual gross rental income amounts to account
    for projected vacancies using the vacancy rate supplied by Mr. Burwell. Id. at 473; accord PX 52
    at 3-9; PX 53 at 3-8. Mr. Burwell, in turn, determined that the long-term vacancy rate would be
    3%. PX 39; Tr. 194, 196 (Burwell). He based his determination on two factors: (1) the fact that
    the vacancy rate in Sonoma County for the prior ten years “has probably been 2% or less,” Tr.
    194 (Burwell); and (2) his assumption that increased demand for apartment units will result in
    increased supply, and, consequently, a higher vacancy rate, id. at 194, 196. He did not account
    for collection losses in his projected long-term vacancy rate, id. at 288, because collection losses
    are likely nominal, collection losses are not tracked for Sonoma Valley, and there is no
    information upon which he could estimate collection losses, id. at 328-29. After applying this
    vacancy factor, and adding an amount for “other income” (2.3% of gross rental income), Dr.
    Ben-Zion obtained plaintiff’s projected net rental income for each year from 2017 to 2035. PX
    52 at 3-9; PX 53 at 3-8.
    
            Dr. Ben-Zion then used–as he did for the 2011 to 2016 time period–two methods to
    project plaintiff’s future expenses in the unrestricted scenario. Under the first method of
    projecting expenses, Dr. Ben-Zion used the data supplied by Ms. Williams for 2016 as a starting
    point.33 PX 53 at 2-3; Tr. 476 (Ben-Zion). He then increased those projected expenses each year
    by 2%–the rate of inflation projected by the Congressional Budget Office for the next fifteen
    years. PX 53 at 3-8; Tr. 476, 478-79, 710-11 (Ben-Zion); see also id. at 547 (Ben-Zion)
    (reflecting that Dr. Ben-Zion increased real estate taxes by 2% per year due to the 2% limit
    imposed by Proposition 13), 709-10 (reflecting that if there was a management fee, Dr. Ben-Zion
    
    
           33
              Again, Dr. Ben-Zion did not include any amounts for a management fee or for
    bookkeeping and accounting services, PX 53 at 3-8, even though he believed that management
    fees should be accounted for, Tr. 450, 680-83, 706 (Ben-Zion), and Ms. Williams believed that
    there would be some cost for bookkeeping and accounting services, id. at 366 (Williams).
    
                                                    -34-
    would have increased it by 3.5% per year). He explained that it was reasonable to use this
    projected inflation rate because it was determined by forecasting experts and because economists
    consider the Congressional Budget Office to be a reliable source. Tr. 481-82 (Ben-Zion). In
    addition, he noted that the Congressional Budget Office’s inflation rate is derived from the
    nationwide Consumer Price Index and applies to all goods and services. Id. at 482, 711; see also
    id. at 711 (noting that one of the components of the Consumer Price Index is rents). Under the
    second method of projecting expenses, Dr. Ben-Zion applied the percentages set forth in the
    information that he downloaded from the IREM website to each year’s projected gross rental
    income, id. at 722, with the exception of real estate taxes, which he increased by 2% per year due
    to the 2% limit imposed by Proposition 13, id. at 729, 743; see also id. at 744 (reflecting Dr. Ben-
    Zion’s acknowledgment that real estate taxes included both ad valorem taxes and direct
    assessments, and that Proposition 13 did not apply to direct assessments). See generally PX 52 at
    3-9. Then, under both methods for projecting expenses, Dr. Ben-Zion added the projected
    interest expense described above. PX 52 at 3-9; PX 53 at 3-8. Upon taking this final step, Dr.
    Ben-Zion arrived at a projected net income for each year from 2017 to 2035. PX 52 at 3-9; PX
    53 at 3-8.
    
                                    iii. Discounting to Present Value
    
            Once Dr. Ben-Zion determined plaintiff’s projected net income for each year from 2017
    to 2035 in both the restricted and unrestricted scenarios, his next step was to discount those
    amounts to their present value. Tr. 591-92 (Ben-Zion); see PX 52 at 3-9 (showing that Dr. Ben-
    Zion discounted the projected income for each year in the unrestricted scenario); PX 53 at 3-8
    (same); see also Tr. 308 (Burwell) (“[T]he discount rate applies to a future stream of income or
    cash flows . . . .”), 420 (Ben-Zion) (“The future has to be discounted to present value as of the
    date of the trial.”). To accomplish this task, he was required to select an appropriate discount
    rate.
    
            According to Dr. Ben-Zion, a discount rate generally includes two components–an
    “interest rate” and a “risk and uncertainty rate.” Tr. 497-98 (Ben-Zion). But see id. at 766
    (explaining that a discount rate “potentially” has three components: (1) a risk and uncertainty
    component, (2) an interest component, and (3) an inflation component). In this case, plaintiff’s
    experts opined, the discount rate is comprised of a capitalization rate–which itself includes an
    interest component and a risk component–and a growth rate. Id. at 206-07, 212, 302, 334-35
    (Burwell), 494-95, 767 (Ben-Zion); see also id. at 308 (Burwell) (indicating that another name
    for the “capitalization rate” is the “property discount rate”).
    
            Mr. Burwell provided Dr. Ben-Zion with a 7% discount rate. Id. at 206 (Burwell), 492,
    495-96, 762-63 (Ben-Zion); PX 39. This discount rate includes two components: (1) a
    capitalization rate of approximately 5.5%, Tr. 209, 334 (Burwell), which Mr. Burwell based on
    his knowledge of the Sonoma Valley market and data from Mr. Gerber indicating an average
    capitalization rate for 2015 of 5.47%, id. at 208-09; PX 42, and (2) a growth rate of “a little less
    than 2%,” Tr. 212 (Burwell). See generally id. at 206, 210, 304-05 (explaining that arriving at a
    
    
                                                    -35-
    discount rate is “somewhat subjective” in that there are no published discount rates for the North
    Bay area that can be used as a reference). The rate does not account for any debt that plaintiff
    might have or incur on Sonoma Village Apartments. Id. at 309.
    
             Adopting the 7% discount rate, Dr. Ben-Zion discounted the net income figures for each
    year in the unrestricted scenario, presumably discounted the net income figures for each year in
    the restricted scenario,34 and then summed the resulting amounts under each scenario. See PX
    52; PX 53. For the unrestricted scenario, he determined that under the method of projecting
    expenses based on the data provided by Ms. Williams, plaintiff’s total future net income would
    be $5,261,608 in present dollars, PX 53 at 1, 8, and that under the method of projecting expenses
    based on the information that he downloaded from the IREM website, plaintiff’s total future net
    income would be $3,969,912 in present dollars, PX 52 at 1, 9. Then, for the restricted scenario,
    he determined that plaintiff’s total future net income would be $86,500 in present dollars. PX 52
    at 1; PX 53 at 1. Subtracting the projected profits in the restricted scenario from the projected
    profits in the unrestricted scenario, Dr. Ben-Zion concluded that plaintiff’s future lost profits
    were either $5,175,108 (using Ms. Williams’s data), PX 53 at 1, or $3,883,412 (using IREM
    information), PX 52 at 1.
    
                                          c. Total Lost Profits
    
            To determine plaintiff’s total lost profits from the date that the government breached the
    contract to the date that the loan agreement will expire, Dr. Ben-Zion summed his determinations
    of past lost profits and future lost profits, as reflected in the following table:
    
    
    
    
           34
               There is no direct evidence that Dr. Ben-Zion used a 7% discount rate in the restricted
    scenario, but given that the trial record contains no evidence that plaintiff used a discount rate
    other than 7%, the court presumes that Dr. Ben-Zion used the same 7% discount rate in both
    scenarios.
    
                                                   -36-
                                         Using Ms. Williams’s               Using IREM
                                                Data                        Information
            Past
            Unrestricted Scenario       $1,043,539                      $761,375
            Restricted Scenario           $146,330                      $146,330
            Net Lost Profits                                $897,209                 $615,045
    
    
            Future
            Unrestricted Scenario       $5,261,608                     $3,969,912
            Restricted Scenario            $86,500                       $86,500
            Net Lost Profits                           $5,175,108                   $3,883,412
    
    
            Total Lost Profits                         $6,072,317                   $4,498,457
    
    PX 52 at 1; PX 53 at 1. In short, when basing his projected expenses on the data provided by
    Ms. Williams, Dr. Ben-Zion determined that plaintiff’s lost profits were $6,072,317, PX 53 at 1,
    and when basing his projected expenses on the information that he downloaded from the IREM
    website, Dr. Ben-Zion determined that plaintiff’s total lost profits were $4,498,457, PX 52 at 1.
    
      d. Using Fair Market Value to Test the Reasonableness of the Lost Profits Calculations
    
            After calculating plaintiff’s total lost profits, Dr. Ben-Zion tested the reasonableness of
    his conclusions by calculating the damages that plaintiff would receive under the lost asset
    methodology. Tr. 548 (Ben-Zion). The starting point for his test was the fair market value of
    Sonoma Village Apartments in the unrestricted scenario in 2016, as calculated by Mr. Burwell.35
    Id. at 549; accord PX 44. Dr. Ben-Zion distinguished the determination of a property’s fair
    market value from the determination of the equity and debt held in the property, noting that “the
    value of the property is independent of what the debt is of its owners.” Tr. 759 (Ben-Zion);
    accord id. at 760 (“[I]f you are just estimating the fair market value of the property, the debt on
    the property has no impact on the value.”). Determining the amount of equity in a property, he
    
    
           35
                According to the trial transcript, Dr. Ben-Zion testified that the fair market value
    calculated by Mr. Burwell was $5,000,070. See Tr. 549 (Ben-Zion). In light of the information
    contained in the exhibit prepared by Mr. Burwell, PX 44, the amount set forth in the transcript
    reflects a transcription error or a misstatement by Dr. Ben-Zion.
    
                                                     -37-
    explained, requires a threshold determination of the property’s fair market value, and the
    subtraction from that value of the amount of any debt held on the property. Id. at 760; accord id.
    at 761 (“There is no independent way of valuing the fair market value of the equity without first
    determining the fair market value of the property.”).
    
            Mr. Burwell determined that the fair market value of Sonoma Village Apartments was
    $5,070,000; he arrived at this amount by multiplying $506,724, his estimated gross rental income
    generated by the property in 2016, by ten, his estimated gross rent multiplier for 2016. PX 44;
    accord Tr. 203, 215, 295 (Burwell); see also id. at 201 (explaining that the gross rent multiplier
    for a particular property is the sales price of the property divided by the gross rents generated by
    the property), 201-02 (indicating that gross rent multipliers are used by lenders and borrowers,
    and are “strongly relied upon [by] buyers of smaller apartment complexes, properties that are
    twenty to fifty units in size”), 297-98 (reflecting that Mr. Burwell determined fair market value
    using a “sales approach”). But see Tr. 982-84 (Weinberg) (labeling the gross rent multiplier
    method of valuation as “the least accurate approach” and stating that such an approach should
    only be used, if at all, for form-based appraisals of “very small properties”). He estimated the
    property’s gross rental income using the data he obtained from Mr. Gerber. Tr. 203, 215
    (Burwell). Similarly, Mr. Burwell used Mr. Gerber’s data to determine the gross rent multiplier;
    specifically, he used an average of gross rent multipliers for recent comparable sales in Sonoma
    County. Id. at 204, 215; see also PX 42 (indicating that in 2014-2015, the average gross rent
    multiplier in Sonoma County was 10.2); Tr. 205 (Burwell) (averring that a gross rent multiplier
    of ten “is very reasonable”).
    
           Next, from the $5,070,000 fair market value, Dr. Ben-Zion subtracted the value of
    Sonoma Village Apartments in the restricted scenario. Tr. 549 (Ben-Zion). Mr. Burwell had
    determined that the property had no value in the restricted scenario. Id. at 205-06 (Burwell), 549
    (Ben-Zion). However, Dr. Ben-Zion opted to use the value determined by defendant’s expert,
    Mr. Weinberg: $167,000. Id. at 549-51 (Ben Zion); see also DX 12 at 2 (indicating that the
    value of the property in the restricted scenario would be $167,472); DX 14A (same); Tr. 975
    (Weinberg) (same).
    
            Dr. Ben-Zion further reduced the $5,070,000 fair market value by the value of Sonoma
    Village Apartments in 2035 in the unrestricted scenario, in present dollars. Tr. 551 (Ben-Zion).
    This amount–$725,000–was based, once again, on data supplied by Mr. Weinberg (a terminal
    value of $3,800,000 and an 8.75% discount rate). Id. at 551-52; see also DX 11A at 2 (indicating
    that the property had a terminal value of $3,820,292 in 2035 in the unrestricted scenario).
    
             The final amount that Dr. Ben-Zion subtracted from the $5,070,000 fair market value was
    the residual value of Sonoma Village Apartments in 2035 in the restricted scenario. Tr. 552-53
    (Ben-Zion). Mr. Burwell indicated that in 2035, the property would be a teardown, valueless
    aside from the land value (which includes the right to build a thirty-unit apartment complex). Id.
    at 229, 289-91 (Burwell); accord id. at 205-06 (indicating that the property has no value in the
    restricted scenario); see also id. at 552-53 (Ben-Zion) (“I don’t know what is today’s fair market
    
    
                                                    -38-
    value. I can only tell you what Mr. Burwell said. I understood he said that it has no market. . . .
    That suggests zero value. But maybe it is not zero. . . . I will leave it up to Your Honor to
    decide what value it might have under the restricted scenario.”).
    
            Performing the calculations described by Dr. Ben-Zion results in a total amount of
    $4,178,000. Because this amount is “close to” his calculated future lost profits of either
    $5,175,108 or $3,883,412, id. at 553 (Ben-Zion), Dr. Ben-Zion implied that his calculated future
    lost profits were reasonable, see id. at 554-55 (explaining that Mr. Weinberg’s lost asset value
    determination was not reasonable because it was premised on incorrect inputs).
    
                                        2. Defendant’s Approach
    
             Defendant does not dispute that plaintiff is entitled to expectancy damages. Rather, it
    disputes the methodology chosen by plaintiff to measure its damages and the amount of lost
    profits that plaintiff calculated using that methodology. Accordingly, through its expert, Mr.
    Weinberg, defendant provides its own determination of plaintiff’s lost profits using a lost value
    approach, concluding that plaintiff is entitled to recover expectancy damages of $1,090,000. See
    generally DX 14A.
    
            Because Mr. Weinberg measured plaintiff’s damages by the value of Sonoma Village
    Apartments that plaintiff lost as a result of the government’s breach of contract, he did not
    calculate damages separately for the pretrial and posttrial time periods. Instead, he calculated
    damages as of the date of the government’s breach–January 3, 2011. Id.; Tr. 969 (Weinberg); see
    also Tr. 969 (Weinberg) (reflecting that Mr. Weinberg calculated damages through September
    2035), 1020 (explaining that “[y]ou can’t take into consideration actual future events,” but must
    instead “determine what the expectation was of investors, buyers, and sellers in the market as of
    the January 2011 date”). In broad strokes, Mr. Weinberg first determined the value of Sonoma
    Village Apartments in the unrestricted scenario by projecting plaintiff’s income, expenses, and
    debt service; deducting the renovation costs and the income projected to be lost during the
    renovations; making adjustments to account for the value of the property at the end of the
    damages period;36 and discounting the resulting cash flow to its present value. See DX 11A.
    Then, Mr. Weinberg determined the value of Sonoma Village Apartments in the restricted
    scenario by projecting plaintiff’s income, expenses, and debt service; making adjustments to
    account for the value of the property at the end of the damages period;37 and discounting the
    
    
           36
              These adjustments appear on the spreadsheet summarizing Mr. Weinberg’s
    calculations in the unrestricted scenario. See DX 11A at 2 (indicating, under the heading
    “Reversion Calculation,” a “Terminal Rate” of 8%, a “Sales Cost” of 4%, a “Terminal Value” of
    $3,820,292, a “Loan Payoff” of $407,202, and “Net Proceeds” of $3,413,090). However, Mr.
    Weinberg did not explain the adjustments during his trial testimony.
           37
              These adjustments appear on the spreadsheet summarizing Mr. Weinberg’s
    calculations in the restricted scenario. See DX 12 at 2 (indicating, under the heading “Reversion
    
                                                   -39-
    resulting cash flow to its present value. See DX 12. Finally, Mr. Weinberg subtracted the value
    of Sonoma Village Apartments in the restricted scenario from the value of Sonoma Village
    Apartments in the unrestricted scenario, and then adjusted the resulting amount to account for a
    presumed judgment date of December 31, 2016. See DX 14A; Tr. 870-71, 968-69 (Weinberg).
    
            To prepare his report on plaintiff’s damages due to the government’s breach of contract,
    Mr. Weinberg visited Sonoma Village Apartments in March 2016, touring the property and its
    neighborhood. Tr. 871-73 (Weinberg). He found the property to be of “very average
    construction typical with section 515 developments, and . . . in fair to average condition . . . .”
    Id. at 881. He also found the property to be “generally functional” as a section 515 property, and
    “generally functional,” but “at the lower end of that functionality,” as a market-rate rental
    property. Id. at 882.
    
            In addition to visiting Sonoma Village Apartments, Mr. Weinberg conducted a market
    rent survey for seven properties that he deemed reasonably comparable to Sonoma Village
    Apartments. Id. at 873, 875, 992-93; see also id. at 877 (indicating that he ascertained the
    primary market area for Sonoma Village Apartments–the area from which most of the property’s
    tenants will come–to assist in identifying comparable properties). As part of his survey, he
    attempted to obtain, in addition to current rents, information regarding rent concessions,
    amenities (both inside the units and for the property as a whole), who pays for utilities, any
    renovations, and the general operation of the property. Id. at 874; accord id. at 884-86. He also
    sought rents for 2011, but was unable to obtain them. Id. at 1002-03. Further, Mr. Weinberg
    performed several other analyses, including analyses of the state of the local economy as of the
    end of 2010, id. at 875-76, the area’s demographics as of the end of 2010, id. at 876, the area’s
    median income at the end of 2010, id. at 878; see also id. at 878-79 (noting that the median
    income for the primary market area was lower than the median income for Sonoma County,
    which, in turn, was higher than the national median income), and Sonoma Village Apartment’s
    neighborhood, id. at 879-80.
    
                                        a. Unrestricted Scenario
    
            After collecting the data he deemed relevant, Mr. Weinberg determined the rents that
    plaintiff could have charged had the government not breached the contract, in other words, the
    rents that plaintiff could have charged in the unrestricted scenario. Mr. Weinberg based his
    estimated rents on the information that he obtained from his survey of current market rents for
    the properties he found to be comparable to Sonoma Village Apartments, adjusting the amounts
    for differences in included utilities and amenities. Id. at 883, 889, 891, 894, 993. Once he
    determined the market rents that could be achieved by Sonoma Village Apartments for 2016, he
    deflated those rents by 35% to ascertain the rents that Sonoma Village Apartments could have
    
    
    Calculation,” a “Terminal Rate” of 8%, a “Sales Cost” of 4%, and “Net Proceeds” of $1,409,316,
    and further indicating, under a column titled “Reversion Year 2036,” net income of $117,443).
    However, Mr. Weinberg did not explain the adjustments during his trial testimony.
    
                                                   -40-
    obtained on the open market in 2011. Id. at 895-96, 913, 926, 995-96; DX 7A; see also id. at
    898, 912, 1028, 1032 (explaining that his adjustment removed the real estate market trends from
    2011 to 2016); cf. id. at 895, 898 (reflecting that Mr. Weinberg would have liked to have used
    data from 2011 to determine achievable market rents for 2011, but he was unable to go back in
    time to perform such a survey). Mr. Weinberg opined that his approach–using current rents and
    deflating them back to the desired date–was “standard practice,” but he could not identify any
    literature that supports the use of his approach. Tr. 1006 (Weinberg). He also agreed that his
    results do not comport with what actually happened to market rents from 2011 though 2016, but
    that they reflect “what an investor would have expected to have happened as of 2011.” Id. at
    1029; accord id. at 1030 (“[When you are] expecting what’s going to happen to your property
    over the next however many years, you’re going to base it on information that you had at the
    time.”), 1034 (“People sitting . . . in January 2011 did not have the expectation there was going to
    be substantial rent growth over the next few years, . . . and no investor would have considered
    it.”); see also id. at 922-23 (indicating that the Uniform Standards of Professional Appraisal
    Practice and the standards of the Appraisal Institute contain “very specific guidelines and
    instructions on how you have to deal with retrospective values,” and that “you can[not] take into
    consideration the events that occurred that you would not have known at the time after the date of
    value”).
    
            Mr. Weinberg derived the 35% deflation rate from Sonoma County rent data published by
    Real Answers, an entity that collects real estate data. Id. at 896-87, 996; see also id. at 998
    (acknowledging that Real Answers did not specifically break out data for Sonoma Valley), 1003-
    04 (reflecting Mr. Weinberg’s inability to obtain deflation rates from comparable properties),
    1006-07 (reflecting that Mr. Weinberg did not encounter Mr. Gerber’s rent surveys during his
    research). He then checked his conclusion by reviewing a rent survey that Novogradac had
    conducted in another town in Sonoma County–Rohnert Park–in 2009. Id. at 898, 996, 1000-02.
    Mr. Weinberg did not use or rely on the Levy appraisal to project plaintiff’s damages even
    though he had access to it, id. at 1008, 1011, 1124, because, he averred, it would violate appraisal
    standards to use the data contained in another appraisal report without verifying it himself, id. at
    1014; accord id. at 1113 (“I can’t rely on other people’s work. So anything that I would have . . .
    used from [the Levy appraisal], I would have had to have reconfirm[ed] the data . . . .”), 1125 (“I
    can’t just trust somebody else’s third-party report.”). Mr. Weinberg’s conclusions are
    summarized in the following table:
    
    
    
    
                                                   -41-
                                            2016 Achievable       Adjusted 2011
                           Unit Type         Market Rents            Rents
                       1 Bed/1 Bath                       $1500               $975
                       2 Bed/1 Bath                       $1750              $1138
                       3 Bed/1 Bath                       $1850              $1203
                       3 Bed/1.5 Bath                     $2025              $1316
    
    DX 7A.
    
            Using the rents that he determined for 2011, Mr. Weinberg calculated plaintiff’s
    estimated gross rental income for 2011. DX 11A. Then, to that amount, Mr. Weinberg added an
    estimated amount for other income (2.7% of gross rental income) and subtracted an estimated
    amount to account for vacancies (5% of gross rental and nonrental income) to determine
    plaintiff’s estimated net rental income for 2011.38 Id.; see also Tr. 929-30 (Weinberg) (reflecting
    that Mr. Weinberg’s estimated vacancy losses incorporated estimated collection losses, in other
    words, amounts that plaintiff might expect to lose due to tenants not paying rent), 1039
    (reflecting that Mr. Weinberg’s vacancy rate was “an estimate based on a variety of data points”),
    1040-41 (reflecting that Mr. Weinberg used an estimated 5% vacancy rate, which incorporates an
    estimated 2-3% rate for vacancies and an estimated 1-3% rate for collection losses), 1041-42
    (reflecting that Mr. Weinberg’s estimate of collection losses is derived from his survey of
    operating expenses for properties he found comparable to Sonoma Village Apartments, which is
    described in more detail below). However, due to the need to account for the time that it would
    take for Sonoma Village Apartments to convert from 100% restricted rents to 100% market rents,
    Tr. 915 (Weinberg), Mr. Weinberg did not use the net rental income that he calculated for 2011
    as the baseline for projecting plaintiff’s net rental income for 2012 and beyond. Rather, as
    explained in the following paragraph, Mr. Weinberg separately projected plaintiff’s net rental
    income for 2012 and 2013 and then used 2014 as the baseline for subsequent years.
    
             According to Mr. Weinberg, the conversion from 100% restricted rents to 100% market
    rents generally does not occur all at once because tenants are entitled to remain in their units
    pursuant to the terms of their leases until the leases expire, tenants are entitled to sixty days
    advance notice of rent increases, and property owners want to avoid the bad publicity that might
    result from evicting all of their lower-income tenants at the same time. Id. at 915-17, 1088,
    1090-91. Instead, Mr. Weinberg stated, property owners typically find it most prudent to wait for
    tenants to leave on their own volition due to the expiration of their leases and the subsequent
    increase in rent. Id. at 917-18, 1088, 1090-91, 1094-95, 1138-39; see also id. at 919, 1090-92
    
           38
              Although Mr. Weinberg uses the term “effective gross income” to describe the
    adjusted amount, the court uses the term “net rental income” to be consistent with plaintiff’s
    usage.
    
                                                   -42-
    (acknowledging that property owners sometimes offer incentives to tenants to terminate their
    leases early), 1095 (remarking that “85% of the tenants turn over in the first two years”). Mr.
    Weinberg explained that in such cases, appraisers typically assume a three-year conversion
    period, and that a three-year time frame is realistic.39 Id. at 918-19; see also id. at 1095
    (reflecting that Mr. Weinberg’s opinion is based on his “experience with . . . close to two dozen
    repositionings where [he] actually worked with property owners to reposition the property” and
    what “is actually . . . happening at properties in the area”), 1137-38 (clarifying that his
    repositioning experience was with multifamily properties in general, and not just with affordable
    housing). But see id. at 1089 (reflecting that Mr. Weinberg did not know the length or expiration
    date of the leases at Sonoma Village Apartments, but that his prior experience with the United
    States Department of Agriculture suggested to him that plaintiff uses one-year leases), 1136
    (reflecting Mr. Weinberg’s understanding, based on experience, that Rural Development uses
    one-year leases for section 515 properties). Thus, Mr. Weinberg’s projected gross rental income
    for 2011, 2012, and 2013 reflects a mix of restricted and market rents. Id. at 919-20. From 2014
    forward, Mr. Weinberg’s projected gross rental income–and, consequently, his projected net
    rental income–reflects only market rents. Id. at 920, 1027, 1031-32.
    
             Next, Mr. Weinberg estimated the expenses that plaintiff would have incurred in 2011.
    He did so by examining the historic expenses incurred by Sonoma Village Apartments; he gave
    this data a great deal of weight, but recognized that certain expenses would be higher in the
    unrestricted scenario. Id. at 928-29. He also examined the expenses incurred by other properties
    “in the area” that he obtained from audited information in Novogradac’s possession. Id. at 930-
    31, accord id. at 1068. Specifically, Mr. Weinberg “attempt[ed] to identify properties of similar
    size, geographic location, and . . . geographic similarities in terms of demographics to use as
    comparables.” Id. at 1063; accord id. at 1068 (reflecting that Mr. Weinberg “extracted data . . .
    for properties that are most similar in size, age, condition, and general geographic
    characteristics”); see also id. at 1063-67 (reflecting the similarities and differences that Mr.
    Weinberg perceived between Sonoma Village Apartments/Sonoma Valley and his selected
    comparable properties/locations); cf. id. at 1061-62 (reflecting that Mr. Weinberg did not
    consider data from the IREM to estimate the expenses that plaintiff would incur in 2011). The
    Novogradac database included information from eight properties that met Mr. Weinberg’s
    criteria; some of the pertinent characteristics of these properties are summarized in the following
    table:
    
    
    
    
           39
               Defendant did not retain Mr. Krabbenschmidt to provide an opinion on plaintiff’s
    expectancy damages. See infra Section V.B. Nevertheless, Mr. Krabbenschmidt testified that
    he had personally converted “very low-income housing to much more upscale housing,” and that
    despite planning for a one-year conversion, the conversion actually took three years. Tr. 1193
    (Krabbenschmidt).
    
                                                   -43-
                                                             Operating
                                                            Expenses as       Vacancy
                                            Number of       a Percent of     Collection
                                     40
                   Project Location           Units           Revenue        Percentage
                 Santa Rosa,                         111            50%               0%
                 Sonoma County
                 Santa Rosa,                          80            51%               0%
                 Sonoma County
                 Santa Rosa,                         120            57%               3%
                 Sonoma County
                 Waterford,                           40            80%               7%
                 Stanislaus County
                 King City,                           50            65%               3%
                 Monterey County
                 Vallejo,                             76            60%               6%
                 Solano County
                 Gilroy,                              84            35%               4%
                 Santa Clara County
                 St. Helena,                          50            76%               1%
                 Napa County
    
    DX 9. Using all of this information, id. at 931-32, Mr. Weinberg projected expenses for 2011 in
    eight categories: (1) administrative and marketing expenses, (2) maintenance and operating
    expenses, (3) utilities, (4) payroll, (5) management fees, (6) insurance, (7) real estate taxes, and
    (8) replacement reserve, DX 11A. Mr. Weinberg explained how he determined the projected
    expenses in six of these categories.
    
            First, with respect to utilities and insurance, Mr. Weinberg based his projections on what
    actually occurred at Sonoma Village Apartments rather than on data from comparable properties.
    Tr. 1069, 1116 (Weinberg).
    
            Second, with respect to payroll, Mr. Weinberg assumed that plaintiff would have, due to
    the size of Sonoma Village Apartments, two part-time, on-site employees: one to manage the
    property and the other to maintain the property. Id. at 940, 1078; DX 10. Although he
    
    
           40
              The court takes judicial notice, pursuant to Rule 201(b)(2) of the Federal Rules of
    Evidence, of the counties in which each project is located.
    
                                                    -44-
    acknowledged that Richard Gullotta intended to manage the property himself and use contractors
    for maintenance issues, Tr. 1078-79, 1081 (Weinberg), and therefore would not actually incur
    these expenses, id. at 1082, he did not believe that an eighty- or ninety-year-old man with a full-
    time job could effectively perform these tasks, and that regardless of whether a property owner
    assumed these tasks without compensation, there remains a cost of performing these tasks that
    should be taken into account, id. at 942-43, 1079. Accordingly, Mr. Weinberg projected an
    amount for payroll for 2011. Id. at 940-41, 1078; DX 11A; see also Tr. 1079, 1134-35 (reflecting
    that if he assumed that Richard Gullotta would manage the property himself and rely on
    contractors, he would have eliminated the maintenance payroll expense, but increased the
    maintenance expense).
    
           Third, with respect to management fees, Mr. Weinberg again acknowledged that Richard
    Gullotta intended to manage the property himself, Tr. 1078, 1081 (Weinberg), but explained that
    even when an owner self-manages a property, he would recommend that the owner “actually take
    an operating expense for that,” id. at 1079. Therefore, he evaluated the management fees at
    comparable properties and determined that an appropriate fee would be 7% of plaintiff’s
    estimated net rental income. Id. at 945.
    
            Fourth, with respect to real estate taxes, Mr. Weinberg explained that real estate taxes in
    California have two components–an ad valorem tax based on the assessed value of the property
    and any direct assessments–and that, as Dr. Ben-Zion previously acknowledged, only the ad
    valorem tax is subject to the limits imposed by Proposition 13. Id. at 946; see also id. at 946,
    1054-56 (noting that direct assessments have increased to make up for the limits imposed by
    Proposition 13). He further explained that because the ad valorem tax increases when the
    underlying property is sold, appraisers in California assume a sale, and the attendant
    reassessment of the property, when projecting the real estate taxes owed for the property. Id. at
    946-47, 1057; see also id. at 947 (explaining that an appraisal is used to determine the market
    value of a property, and market value “only can be monetized in the form of an exchange”
    between a buyer and a seller), 1057-58 (same). Accordingly, to determine the real estate taxes
    owed by plaintiff in 2011, Mr. Weinberg assumed that Sonoma Village Apartments sold on the
    date that the government breached the contract, determined the new assessed value of Sonoma
    Village Apartments, calculated the ad valorem tax owed on that assessed value, and then added
    the direct assessments to the ad valorem tax. Id. at 946-47, 1050, 1057; accord id. at 1012; see
    also id. at 1046, 1049-50 (indicating that the direct assessment component of the 2011 real estate
    taxes was derived from the actual direct assessments); cf. id. at 1030, 1057-58 (acknowledging
    that the trial record does not include any evidence that plaintiff intended to sell Sonoma Village
    Apartments), 1073 (reflecting that had Mr. Weinberg not assumed a sale, his projected real estate
    taxes would be lower, which comports with the fact that his projected real estate taxes “deviate
    significantly from the actual[]” real estate taxes).
    
           And fifth, with respect to the replacement reserve, Mr. Weinberg explained that it was
    “standard practice” for a property owner to set aside funds every year in a reserve account to be
    available for capital expenditures. Id. at 948. He further noted that there are “industry standards”
    
    
                                                   -45-
    that describe a range of reasonable reserve amounts that are based on the unit mix and age of the
    property. Id. According to Mr. Weinberg, the range for a property similar to Sonoma Village
    Apartments is $300 to $400 per unit, and so he used $350 per unit in his calculations. Id. But
    see DX 11A (including an expense item for “Replacement Reserve,” but failing to show an
    amount of $10,500 ($350 x 30 units) for 2011 or any year thereafter).
    
            After estimating the total amount of expenses that would be incurred by plaintiff in 2011
    in the unrestricted scenario, Mr. Weinberg subtracted that amount from the estimated net rental
    income for 2011 to determine estimated net income for 2011.41 DX 11A; Tr. 954-55 (Weinberg).
    
            Next, Mr. Weinberg projected plaintiff’s income and expenses for 2012 through 2035 by
    applying a growth rate to the relevant baseline amounts. See generally DX 11A. With respect to
    projected net rental income, Mr. Weinberg used 2014 as the baseline year for applying the
    growth rate because that was the first year after the conversion to 100% market rents. See Tr.
    919, 1015-16 (Weinberg). He determined that the appropriate growth rate was 2.5%. Id. at 932,
    1085; see also id. at 1015-16 (explaining that his projected net income did not increase at an
    annual rate of 2.5% from 2011 to 2014 because the projected net income for those years is based
    on differing mixes of restricted and market rents). See generally DX 11A. He based this rate on
    data published in the Korpacz survey, his own discussions with investors, the interviews he
    conducted during his rent survey, and information from Novogradac’s database. Id. at 932-33,
    939, 1017-19; see also id. at 1018 (reflecting that Mr. Weinberg did not have access to long-term
    historical data regarding growth rates, but if he did, he would have considered it).
    
            Then, with respect to projected expenses, Mr. Weinberg used 2011 as the baseline year
    for applying the growth rate. See generally DX 11A. He used the same 2.5% growth rate that he
    used for projecting future net rental income. Tr. 932, 1055, 1060, 1085 (Weinberg). He
    explained that it was standard practice to use the same inflation rate for rental income and
    expenses because it prevented the manipulation of property valuations that resulted from
    projecting that rental income increased at a greater rate than expenses. Id. at 934-35. He further
    explained that historically, the long-term trend was for rental income to increase at a similar rate
    as expenses. Id. at 935-36, 1055, 1130-31. Because Mr. Weinberg used the same growth rate to
    project future income and expenses, his projected expenses–postconversion–were 55.3% of his
    projected net rental income. Id. at 1070, 1118; cf. DX 9 (indicating that the comparable
    properties that Mr. Weinberg used to assist in his estimation of plaintiff’s expenses had expense-
    to-income ratios of 50%, 57%, 80%, 65%, 60%, 35%, and 76%).
    
            Once Mr. Weinberg projected plaintiff’s net income for each year from 2011 through
    2035, he reduced those amounts by debt service to arrive at an amount for after-debt cash flow.
    Id. at 954-55; DX 11A. To determine the amount of debt service for 2011, Mr. Weinberg
    reviewed information contained in “files from the time frame” that indicated “what interest rates
    
    
           41
              Although Mr. Weinberg uses the term “net operating income,” the court uses the term
    “net income” to be consistent with plaintiff’s usage.
    
                                                    -46-
    were in that market,” and a Novogradac publication that provides information regarding
    mortgage interest rates for conventional and affordable multifamily housing that “tend[s] to be
    smaller . . . , noninstitutional grade properties.” Tr. 950-51 (Weinberg); accord id. at 1083
    (reflecting that Mr. Weinberg reviewed a Novogradac publication and “appraisal files from back
    around the time frame to see what actual rates were for properties that [Novogradac] worked
    on”). Mr. Weinberg assumed a $1,171,000 loan, which was the balance of plaintiff’s current
    mortgage, and a 5.5% interest rate. Id. at 1083, 1119; see also DX 11A (indicating that the
    estimated debt service for 2011 was $59,959.80 and the estimated debt service for each
    subsequent year was $79,834).
    
            After Mr. Weinberg determined each year’s projected after-debt cash flow,42 he
    discounted those amounts to their present value. To accomplish this task, he was required to
    select an appropriate discount rate. See also Tr. 956-57 (Weinberg) (indicating that while the
    determination of a discount rate is “not an exact science,” it also is not subjective because it is
    based on mathematics and reason).
    
            According to Mr. Weinberg, a discount rate generally includes two components, one that
    accounts for the “time value of money,” and one that accounts for “the risk associated with a
    particular investment.” Id. at 951. Mr. Weinberg described two types of discount rates: (1) an
    equity discount rate, which incorporates the risk that a property owner might not recover its
    equity in the property after any mortgages have been satisfied, and (2) a property discount rate,
    which is based on the assumption that there is no debt associated with the property. Id. at 952;
    see also id. (indicating that “equity tends to have a higher rate of return”). Because Mr.
    Weinberg projected plaintiff’s cash flows on an after-debt basis, they were equity cash flows. Id.
    at 954-55. Therefore, he used an equity discount rate to determine present value. Id. at 954; see
    also id. at 957 (indicating that this approach was the accepted methodology in the appraisal
    industry). To determine the proper rate, he first calculated an overall discount rate by blending
    the appropriate equity rate of return and mortgage interest rate, arriving at 6.25%.43 Id. at 953,
    958-59; accord id. at 953 (indicating that the blended rate can be calculated by multiplying the
    equity rate of return by 25%, multiplying the mortgage interest rate by 75%, and then summing
    
    
    
    
           42
               For 2035, Mr. Weinberg added to the projected after-debt cash flow an amount to
    reflect the value of the property at the end of the contract period. DX 11A at 2; Tr. 551 (Ben-
    Zion). This amount–$3,413,090–equals the terminal value of the property–$3,820,292–minus
    the amount necessary for plaintiff to pay off the assumed loan–$407,202. DX 11A at 2.
           43
               Although Mr. Weinberg testified that he arrived at a 6.3% overall discount rate, Tr.
    959, 1099 (Weinberg), other evidence in the trial record reflects that this percentage is rounded
    up from 6.25%, see, e.g., id. at 507 (Ben-Zion) (reporting that Mr. Weinberg “says that the
    cap[italization] rate is 6.25%”), 1099 (Weinberg) (indicating that his discount rate was 8.75%
    and his growth rate was 2.5%).
    
                                                     -47-
    the results44); see also id. at 1099 (labeling the 6.25% overall discount rate as the “equity
    capitalization rate,” and not “a property capitalization rate”). Then, to that percentage, he added
    the same 2.5% growth rate that he used to project income and expenses forward from the
    baseline year, id. at 959, 1086, arriving at an 8.75% discount rate, id. at 1086, 1099. Applying
    the 8.75% discount rate to his projected after-debt cash flows in the unrestricted scenario, both
    prejudgment and postjudgment, Mr. Weinberg calculated a net present value of $1,629,059. DX
    11A at 2; DX 14A.
    
                                         b. Restricted Scenario
    
             For the restricted scenario, Mr. Weinberg used the actual income and expenses from
    plaintiff’s approved budget for 2011. Tr. 883, 927-28, 1020-21 (Weinberg). He then applied a
    2.5% growth rate to determine the net rental income, id. at 1022; see also id. at 1024 (explaining
    that the 2.5% growth rate is “somewhat budget based” and that the growth rate actually
    experienced by Sonoma Village Apartments was “not important . . . because the limitation on
    distributions means [plaintiff is] not going to get the [net income] anyway”), and expenses, see
    DX 12 (reflecting that expenses increased by 2.5% each year), for each subsequent year. After
    Mr. Weinberg projected each year’s net income, he subtracted an amount for debt service to
    arrive at a potential after-debt cash flow. DX 12; see also id. at Tr. 949 (Weinberg) (indicating
    that the amount Mr. Weinberg determined for debt service was based on the effective interest
    rate of the loan that plaintiff obtained from the government). Then, to account for the limitation
    on distributions imposed by Rural Development, Mr. Weinberg reduced those potential after-debt
    cash flows to determine plaintiff’s projected maximum return on investment. DX 12; Tr. 1122
    (Weinberg). As a consequence of the distribution limitation, Mr. Weinberg determined that
    plaintiff would obtain a maximum return of investment of $5310 every year. DX 12.
    
            Mr. Weinberg applied two different discount rates to his projected maximum returns on
    investment. Id. at 2; Tr. 1096-97, 1121-22 (Weinberg). For the prejudgment period, he used a
    “safe rate” because there is no risk of the unknown associated with events that had already
    occurred. Tr. 1097, 1101-02 (Weinberg); see also id. at 1102 (explaining that the projected
    maximum returns on investment still needed to be discounted to reflect “the time value of
    money”). That rate was 4.12%. DX 12 at 2; see also Tr. 1098 (Weinberg) (indicating that the
    rate was “4% or 4.17%”), 1101 (indicating that the risk component of the 8.75% discount rate
    was 4.5% or 4.6%), 1121 (indicating that the rate was “just over 4%”). In contrast, for the
    postjudgment period, Mr. Weinberg used a 10.5% discount rate. DX 12 at 2; Tr. 1120
    (Weinberg). This rate was based on the fact that plaintiff faced a limitation on distributions of
    8% of its initial investment and a 2.5% growth rate. Tr. 1120 (Weinberg). After calculating the
    
    
    
           44
               Based on this information, the fact that Mr. Weinberg presumed a 5.5% mortgage
    interest rate, and the fact that Mr. Weinberg calculated a 6.25% blended discount rate, the
    following equation can be used to determine the equity rate of return: (equity rate of return ×
    25%) + (5.5% × 75%) = 6.25%. Solving the equation, the equity rate of return is 8.5%.
    
                                                   -48-
    present value of each year’s projected maximum return on investment,45 Mr. Weinberg summed
    the resulting amounts, DX 12, calculating a net present value of $167,472, id. at 2; DX 14A.
    
                                           c. Total Damages
    
            To determine plaintiff’s total damages, Mr. Weinberg began with the net present value of
    plaintiff’s after-debt cash flow in the unrestricted scenario of $1,629,059. DX 14A; Tr. 968
    (Weinberg). From that amount, he subtracted the stipulated renovation costs of $378,424. DX
    14A. He also subtracted $144,598 for the rental income that plaintiff would lose during the
    renovations, an amount that was projected by Mr. Burwell. Id.; Tr. 968 (Weinberg); accord Tr.
    1087 (reflecting that Mr. Weinberg did not separately project the amount of rental income that
    plaintiff would lose during renovations). From this subtotal, Mr. Weinberg subtracted the net
    present value of plaintiff’s after-debt cash flow in the restricted scenario of $167,472 to
    determine that plaintiff would incur damages of $938,565 due to the government’s breach of
    contract. DX 14A; Tr. 968, 1121 (Weinberg). Mr. Weinberg then adjusted that amount to
    account for a December 31, 2016 date of judgment by applying an annual 2.5% growth rate, Tr.
    1097-98 (Weinberg), and concluded that plaintiff should receive compensation of $1,090,000, id.
    at 969; DX 14A.
    
                d. Dr. Ben-Zion’s Test to Assess the Reasonableness of His Calculations
    
            As described above, Dr. Ben-Zion performed some additional calculations to test the
    reasonableness of his future lost profits determination, and in doing so, used data supplied by Mr.
    Weinberg. See supra Section IV.C.1.d. As his starting point, Dr. Ben-Zion used the 2016 fair
    market value of Sonoma Village Apartments in the unrestricted scenario determined by Mr.
    Burwell; Mr. Burwell, in turn, calculated the fair market value using estimated gross rental
    income and an estimated gross rent multiplier. See id. Consequently, Mr. Burwell’s fair market
    value did not account for any debt that might be held on the property. Tr. 973 (Weinberg).
    However, all of the data from Mr. Weinberg that Dr. Ben-Zion used in his calculations–the
    $167,000 for the value of the property in the restricted scenario, the $3,800,000 for the value of
    the property in 2035 in the unrestricted scenario, and the 8.75% discount rate–were based on
    after-debt (in other words, equity) cash flows. Id.; accord DX 11A at 2; DX 12 at 2.
    Accordingly, Mr. Weinberg opined, Dr. Ben-Zion’s calculations would not yield accurate results.
    Tr. 972-73 (Weinberg); see also id. at 982, 984 (remarking that Dr. Ben-Zion also improperly
    mixed Mr. Weinberg’s 2011 data with Mr. Burwell’s 2016 data).
    
            Mr. Weinberg performed his own calculations to demonstrate what the results of Dr. Ben-
    Zion’s test would have been had Dr. Ben-Zion taken all of his inputs from Mr. Weinberg’s data.
    Id. at 974-76, 985. First, Mr. Weinberg calculated the value of the property in the unrestricted
    
    
           45
             For 2035, Mr. Weinberg added to the projected maximum return on investment an
    amount that apparently reflected the value of the property at the end of the contract period:
    $1,409,316. See DX 12 at 2.
    
                                                   -49-
    scenario. Id. at 975-76; DX 28. He started with the amount that he determined represented the
    net present value of plaintiff’s lost income in the unrestricted scenario–$1,629,059. DX 28; Tr.
    975 (Weinberg); see also Tr. 975 (Weinberg) (noting that this amount is based on projected after-
    debt cash flows). From that amount he subtracted the stipulated renovation costs of $378,424
    and the rental income that would be lost due to the renovations of $144,598. DX 28; Tr. 975
    (Weinberg). He then added to the result the balance of plaintiff’s loan–$1,171,708–to arrive at a
    value of $2,277,745. DX 28; Tr. 976, 985 (Weinberg).
    
            Second, Mr. Weinberg calculated the value of the property in the restricted scenario. DX
    28; Tr. 975-76 (Weinberg). He began with the amount that he determined represented the net
    present value of plaintiff’s lost income in the restricted scenario–$167,472. DX 28; Tr. 975
    (Weinberg); see also Tr. 975 (Weinberg) (noting that this amount is based on projected after-debt
    cash flows). He then added to that amount the balance of plaintiff’s loan–$1,171,708–to arrive at
    a value of $1,339,180. DX 28; Tr. 976, 985 (Weinberg).
    
           Finally, Mr. Weinberg subtracted his estimated value in the restricted scenario from his
    estimated value in the unrestricted scenario. DX 28; Tr. 976 (Weinberg). The result–
    $938,565–is the same amount that he projected for plaintiff’s damages. Compare DX 28, and Tr.
    976, 985-86 (Weinberg), with DX 14A, and Tr. 968 (Weinberg).
    
            Mr. Weinberg then performed the calculations described by Dr. Ben-Zion using Mr.
    Burwell’s data, rather than his own (for the most part). DX 29; Tr. 977-90, 986-87 (Weinberg).
    His starting point was Mr. Burwell’s determination that the fair market value of Sonoma Village
    Apartments in 2011 in the unrestricted scenario was $3,660,000. PX 44; DX 29; Tr. 977, 980-
    81, 987 (Weinberg). Because this value incorporated the assumption that the property had been
    renovated, Mr. Weinberg subtracted from it the stipulated renovation costs of $378,424 and the
    rental income that would be lost due to the renovations of $144,598. DX 29; Tr. 977, 1108, 1112
    (Weinberg). Further, because this value did not reflect the conversion of the property from
    affordable housing to market-rate housing, Mr. Weinberg subtracted from it $160,000, an amount
    he calculated to reflect a three-year conversion period. DX 29; Tr. 978, 1108-09, 1114
    (Weinberg). Mr. Weinberg labeled the resulting amount–$2,976,978–“the as-is value of the
    property.” Tr. 978, 987 (Weinberg).
    
            From this “as-is value,” Mr. Weinberg subtracted the balance of plaintiff’s loan–
    $1,171,708–to determine the value of plaintiff’s equity in Sonoma Village Apartments in the
    unrestricted scenario. Id. at 979, 987; DX 29. He then reduced this amount by the equity value
    that he calculated for the property in the restricted scenario–$167,472–and the terminal value of
    the property calculated by Dr. Ben-Zion based on his data–$725,000. DX 29; Tr. 979-80, 987
    (Weinberg). He arrived at a figure of $912,798, which was similar to the result he achieved
    when using his own data. DX 29; Tr. 980, 987 (Weinberg). He therefore concluded that a
    correct application of Dr. Ben-Zion’s test supported his own damages calculations. Tr. 980
    (Weinberg).
    
    
    
                                                   -50-
                                               D. Analysis
    
             It is undisputed that plaintiff is entitled to expectancy damages in this case; indeed, the
    court finds that plaintiff has established, by a preponderance of the evidence, a sufficient basis
    for estimating its damages with reasonable certainty. Further, as noted above, the parties do not
    dispute certain aspects of the calculation of plaintiff’s expectancy damages, such as the need to
    calculate plaintiff’s net income in the restricted and unrestricted scenarios, the need to compare
    the restricted and unrestricted scenarios, and the need to discount plaintiff’s future stream of
    income to its present value. Instead, the parties disagree on the proper methodology for
    calculating plaintiff’s expectancy damages, whether postbreach evidence can be used to calculate
    plaintiff’s expectancy damages, what data should be used to calculate plaintiff’s projected
    income and expenses in both the restricted and unrestricted scenarios, and the proper discount
    rate or rates. The court, having carefully reviewed the evidence in the trial record, the parties’
    posttrial briefs, and the parties’ closing arguments, resolves each dispute in turn.
    
                   1. Methodology for Computing Plaintiff’s Expectancy Damages
    
             As a threshold matter, the parties disagree on the methodology that should be used to
    calculate plaintiff’s expectancy damages. As previously noted, such damages can be measured in
    this case in one of two ways: (1) by determining the value of Sonoma Village Apartments as a
    market-rate rental property and then subtracting from that amount the value of the property as-is,
    or (2) by determining the profits that plaintiff would have received from operating Sonoma
    Village Apartments as a market-rate rental property and then subtracting from that amount the
    profits that plaintiff will actually receive. See Anchor Sav. Bank, FSB, 597 F.3d at 1369; First
    Fed. Lincoln Bank, 518 F.3d at 1317 & n.4. Notwithstanding plaintiff’s apparent use of the lost
    profits approach to calculate damages, defendant argues that plaintiff “elected to prove its
    damages based on the value of the apartment complex” and therefore used the incorrect standards
    to calculate its damages. Def.’s Posttrial Resp. 8. Defendant also argues that “[t]he proper
    method of calculating lost profits that are based entirely on a single asset is through a valuation
    of that asset at the time of breach.” Id. at 4. Neither argument is convincing.
    
            According to defendant, plaintiff “elected to prove its damages using the discounted cash
    flow method set forth in [Franconia Associates], which calculates the difference in the values of
    the property in the breach and non-breach worlds.” Id. at 8. This assertion is based on a
    misreading of Franconia Associates. In Franconia Associates, a section 515 case, the plaintiffs’
    damages expert used what the court labeled a “discounted cash flow method” to determine the
    plaintiffs’ damages. 61 Fed. Cl. at 753-54. Although the discounted cash flow method is a way
    to determine the market value of an income-producing asset, see Energy Capital Corp., 302 F.3d
    at 1331, the plaintiffs’ damages expert used this method to calculate lost profits damages and not,
    as defendant asserts, to calculate lost asset damages, see, e.g., Franconia Assocs., 61 Fed. Cl. at
    754 (“[T]he discounted cash flow method employed by [the expert] is typically used by
    economists, appraisers and damages experts and, if properly executed with the appropriate
    factual predicates, would establish the lost profits owed the . . . plaintiffs with the certainty
    
    
                                                    -51-
    required by the law.” (citing Energy Capital Corp., 302 F.3d at 1328-34)). Indeed, the court’s
    description of the expert’s approach mirrors the approach taken by plaintiff’s experts in this case.
    See id. at 753-54; accord id. at 758 (“[The expert’s] basic methodology was to compare the
    discounted cash flows that plaintiffs would earn under the program (the restricted model) with
    the discounted cash flows that they would have earned had they been allowed to prepay their
    mortgages and convert their properties to market-rate operations (the unrestricted model).”).
    
            Defendant’s second contention–that plaintiff’s expectancy damages calculation must be
    based on the value of Sonoma Village Apartments at the time of the breach of contract–fares no
    better. In advancing this argument, defendant blurs the distinction between the two methods for
    measuring expectancy damages articulated in Anchor Savings Bank, FSB (lost asset value and
    lost profits). It is certainly possible to determine the profits lost from a single asset without
    valuing the asset from which those profits arise; indeed, the Court of Federal Claims in Anchor
    Savings Bank, FSB measured a portion of the plaintiff’s damages by the profits it lost from its
    single lost income-producing asset. See 597 F.3d at 1370. Accordingly, a plaintiff seeking to
    establish its expectancy damages using the lost profits approach need not conform to the
    standards for proving damages under the lost asset approach.
    
            Moreover, to the extent that defendant is contending that plaintiff’s expectancy damages
    may only be calculated using the lost asset method, the case law does not compel that conclusion.
    In First Federal Lincoln Bank, the United States Court of Appeals for the Federal Circuit
    (“Federal Circuit”) remarked: “‘When the defendant’s conduct results in the loss of an
    income-producing asset with an ascertainable market value, the most accurate and immediate
    measure of damages is the market value of the asset at the time of breach–not the lost profits that
    the asset could have produced in the future.’” 518 F.3d at 1317 (quoting Schonfeld, 218 F.3d at
    176). However, the Federal Circuit later noted in Anchor Savings Bank, FSB that neither First
    Federal Lincoln Bank nor Schonfeld “mandate[d] that one measurement method must invariably
    used, as opposed to the other,” and that the lost asset approach may not be appropriate when the
    evidence that could be used to measure damages is a choice “between (1) equivocal evidence as
    to the market value of an income-generating asset many years earlier, unenhanced by interest,
    and (2) reliable evidence as to the actual earnings the asset would have produced over the
    pertinent period.” 597 F.3d at 1369-70.
    
            In this case, due to the ongoing government restrictions on plaintiff’s use of the property,
    plaintiff has never had the opportunity to operate Sonoma Village Apartments as a market-rate
    rental property, meaning that there is no direct evidence of plaintiff’s income and expenses in
    such a situation from which market value could be calculated. See generally PX 54 at 62
    (explaining that the income approach for estimating the market value of a property, in which “the
    anticipated future benefits of property ownership” are converted “into an estimate of present
    value,” is “the preferred technique for [valuing] income-producing properties”). Information
    from actual operations as a market-rate rental property would provide the best evidence in
    determining the market value of Sonoma Village Apartments. See also Neely, 285 F.2d at 443
    (noting that lost profits for “a new enterprise” are difficult to ascertain, “especially . . . where the
    
    
                                                      -52-
    breach occurred before operations began”); cf. First Fed. Lincoln Bank, 518 F.3d at 1317 (“The
    market value of [a] lost property reflects the then-prevailing market expectation as to the future
    income potential of the property, discounted by the market’s view of the lower future value of the
    income and the uncertainty of the occurrence and amount of any future property.”). Without
    direct evidence from actual operations, the market value of Sonoma Village Apartments would
    instead need to be determined by evaluating indirect evidence, such as the income received and
    expenses incurred by comparable properties operating on the open market. Such indirect
    evidence, which Mr. Weinberg used to estimate the market value of Sonoma Village Apartments,
    is the same type of evidence that is required to calculate the profits that plaintiff would have
    realized had it been able to operate Sonoma Village Apartments as a market-rate rental property
    from 2011 to 2035. In other words, the quality of the evidence necessary to determine lost asset
    damages is exactly the same as the quality of the evidence necessary to determine lost profits
    damages. Cf. Franconia Assocs., 61 Fed. Cl. at 757 (remarking that notwithstanding the lack of
    “a record of operating as a commercial property,” a section 515 property owner’s “ability to
    recover lost profits based on the extension of an existing business is not barred by a per se rule of
    disallowance, but rather hinges on the quality of the evidence presented”). Thus, plaintiff’s
    decision to measure its damages by its lost profits, as the plaintiffs did in Franconia Associates, is
    both legally sound and appropriate for the factual circumstances presented in this case.
    
                                         2. Postbreach Evidence
    
             The parties’ next two disputes, which are related to their dispute regarding the proper
    methodology for calculating plaintiff’s expectancy damages, concern the date(s) from which
    plaintiff’s damages should be measured and the evidence that plaintiff is entitled to use to prove
    its damages. Plaintiff contends that it is entitled to two types of lost profits damages–damages
    that it has already incurred (past damages) and damages that it will incur (future damages)–and
    that its damages should be based, to the extent possible, on evidence that postdates the
    government’s breach of contract. Defendant disagrees, arguing that all damages should be
    calculated from the date of breach and that postbreach information should be disregarded.
    
            The court has already concluded that it was proper for plaintiff to measure its expectancy
    damages using the lost profits approach, rather than the lost asset approach espoused by
    defendant. When calculating profits that would be lost “on an ongoing basis over the course of
    the contract . . . , damages are measured throughout the course of the contract.” Energy Capital
    Corp., 302 F.3d at 1330. Consequently, courts may consider postbreach evidence when
    determining lost profits. See Anchor Sav. Bank, FSB, 597 F.3d at 1369-70; Fifth Third Bank,
    518 F.3d at 1377; Fishman, 807 F.2d at 551-52; Neely, 285 F.2d at 443; Restatement (Second) of
    Contracts, supra, § 352 cmt. b, illus. 6.
    
            Nevertheless, defendant argues that plaintiff cannot use postbreach evidence in this case
    because Sonoma Village Apartments has never operated as a market-rate rental property and,
    thus, there is no actual evidence of the profits it lost after the government’s breach of contract. In
    advancing this argument, defendant relies on Anchor Savings Bank, FSB, in which the plaintiff
    
    
                                                    -53-
    sought damages to compensate for an entity that it was forced to sell to another financial
    institution as a result of the government’s breach of contract. 597 F.3d at 1370. The Court of
    Federal Claims “concluded that the most accurate approach was to base the award of damages”
    on the postbreach profits realized by the entity under the ownership of the other financial
    institution, and the Federal Circuit affirmed that ruling. Id. Significantly, however, the Federal
    Circuit did not limit the use of postbreach evidence to evidence of a lost income-producing
    asset’s actual profits as a going concern. Accordingly, the court rejects defendant’s argument;
    plaintiff is entitled use postbreach evidence to calculate its damages. In other words, plaintiff
    may recover past damages based on actual financial information and market conditions from
    2011 through 2016, and future damages based on its estimated 2016 data.
    
                                            3. Past Damages
    
            With respect to plaintiff’s claim for past damages, the parties have a number of disputes
    pertaining to the estimation of damages in both the restricted and unrestricted scenarios. The
    court begins by addressing the parties’ disagreements related to the unrestricted scenario.
    
                 a. Estimating Plaintiff’s Past Income in the Unrestricted Scenario
    
                                                 i. Rents
    
            The parties’ first disagreement regarding the estimation of income in the unrestricted
    scenario concerns what rents should be used. Plaintiff contends that the appropriate rents are
    those that Mr. Burwell derived from the survey of actual rents prepared by Mr. Gerber.
    Defendant counters that the appropriate rents are those that Mr. Weinberg derived by deflating
    2016 rents to what they would be in 2011 and then increasing those 2011 rents by 2.5% per year
    thereafter.
    
            The court finds that plaintiff’s use of the rents that Mr. Burwell derived from the survey
    of actual rents prepared by Mr. Gerber is fair and reasonable. The trial record reflects that both
    Mr. Gerber and Mr. Burwell have extensive knowledge of the Sonoma Valley and Sonoma
    County rental markets. In addition, Mr. Gerber’s rent survey for Sonoma Valley includes data
    from seven properties–a not insignificant sample size. Furthermore, Mr. Burwell compared the
    properties in Mr. Gerber’s rent survey to Sonoma Village Apartments and reasonably determined
    that there was no need to adjust the data supplied by Mr. Gerber to account for any differences in
    the properties’ amenities. Finally, Mr. Burwell appropriately accounted for size-related
    differences between Sonoma Village Apartments and the properties surveyed by Mr. Gerber by
    using the average-rent-per-square-foot figures calculated by Mr. Gerber.
    
             In contrast to the straightforward method that Mr. Burwell used to estimate rents
    (applying actual rents per square foot in Sonoma Valley to Sonoma Village Apartments), Mr.
    Weinberg employed a more complicated method and used less trustworthy data, reducing the
    reliability of his resulting rents. Specifically, Mr. Weinberg estimated 2016 rents for Sonoma
    
    
                                                   -54-
    Village Apartments based on his own rent survey, and then, to estimate 2011 rents for Sonoma
    Village Apartments, deflated the 2016 rents by 35% based on Sonoma County rent data
    published by Real Answers. Problematically, Mr. Weinberg could not say whether the Real
    Answers data included properties in Sonoma Valley, and was unable to obtain–and therefore did
    not use–deflation rates from properties comparable to Sonoma Village Apartments. Thus, his
    use of a 35% deflation rate to estimate 2011 rents may not accurately remove the real estate
    market trends from the 2016 rents. Moreover, an inaccurate deflation rate would magnify any
    inaccuracies in Mr. Weinberg’s 2016 estimated rents, further reducing the reliability of his
    estimated 2011 rents. In short, defendant’s rent estimates are inferior to plaintiff’s. Defendant
    therefore has not persuaded the court that plaintiff’s rent estimates are not fair and reasonable.
    
                                          ii. Nonrental Income
    
            The parties’ next dispute regarding the estimation of income in the unrestricted scenario
    concerns the income received by plaintiff that is not derived from rent. Both parties account for
    this nonrental income using a percentage of gross rental income–plaintiff uses 2.3% and
    defendant uses 2.7%. Notwithstanding its use of a different percentage of gross rental income to
    calculate plaintiff’s damages, defendant has not provided any evidence that 2.3% is not a fair and
    reasonable percentage. Accordingly, the court finds that 2.3% of gross rental income is an
    appropriate approximation of nonrental income.
    
                                            iii. Vacancy Rate
    
           The parties’ third disagreement regarding the estimation of income in the unrestricted
    scenario concerns the vacancy rate. Plaintiff proposes the use of a 3% vacancy rate that does not
    account for collection losses, while defendant proposes the use of a 5% vacancy rate that
    incorporates a 1-3% collection loss rate.
    
            The court finds that a 3% vacancy rate is fair and reasonable. The trial record reflects that
    the 3% vacancy rate proposed by plaintiff was supplied by Mr. Burwell, who based the rate on
    historically low vacancy rates for Sonoma County (2% or less) and the probability that those
    rates will increase due to an increased supply of apartment units. Mr. Burwell did not account
    for collection losses in his vacancy rate because such losses are likely nominal, such losses are
    not tracked in Sonoma Valley, and there is no data upon which he could estimate such losses.
    Mr. Burwell, as noted above, is well-versed in the Sonoma Valley and Sonoma County markets,
    making his assumptions and conclusions particularly credible.
    
            Mr. Weinberg’s testimony that his vacancy rate incorporated a 2-3% rate for vacancies
    supports plaintiff’s position. However, Mr. Weinberg also incorporated a 1-3% rate for
    collection losses in his vacancy rate, which was based on his survey of operating expenses for
    properties he deemed comparable to Sonoma Village Apartments. However, only three of these
    properties are located in Sonoma County, and two of those properties had a 0% collection loss
    rate. In other words, Mr. Weinberg’s data for collection losses in Sonoma County do not
    
    
                                                    -55-
    contradict Mr. Burwell’s testimony. Accordingly, the court accepts Mr. Burwell’s collection
    loss-free vacancy rate.
    
                                  iv. Conversion-Related Lost Income
    
            The parties’ final dispute concerning the estimation of plaintiff’s income in the
    unrestricted scenario relates to the conversion of Sonoma Village Apartments to a market-rate
    rental property. To account for the income that would be lost due to the conversion, plaintiff
    proposes eliminating six months of income from 2011 based on the assumption that plaintiff
    would have removed all of the tenants of Sonoma Village Apartments on January 3, 2011, kept
    the apartment units empty for six months during renovations, and then filled the apartment units
    with new tenants paying market rents on July 1, 2011. Defendant, in contrast, proposes a three-
    year conversion period during which the tenants leave Sonoma Village Apartments through
    normal attrition.
    
            Plaintiff’s method of accounting for the conversion of Sonoma Village Apartments to a
    market-rate rental property likely does not reflect what actually would have happened had the
    government not breached the contract. Plaintiff would have faced serious legal and/or financial
    consequences had it removed all of the property’s tenants on January 3, 2011. Indeed, the trial
    record contains no evidence reflecting that plaintiff actually planned to remove all of its tenants
    in one fell swoop, and no evidence that plaintiff accounted for the financial consequences of such
    an action (for example, making incentive payments or paying for legal representation) in its
    damages calculations. Rather, the evidence in the trial record suggests that plaintiff assumed the
    removal of all of its tenants on the date of breach to avoid having to perform the more
    complicated–but more accurate–task of calculating conversion costs based on the actual
    expiration dates of the existing leases. In sum, plaintiff’s approach is a simplistic way of
    estimating the rental income it would lose upon the conversion.
    
             Defendant’s approach is similarly simplistic. Defendant assumes that a certain number of
    existing tenants would have left in 2011, an additional number of existing tenants would have
    left in 2012, and the remaining existing tenants would have left in 2013, all on their own volition.
    However, this assumption is based not on the expiration dates of the existing leases, but instead
    on Mr. Weinberg’s experience in repositioning market-rate and affordable multifamily
    properties. Moreover, defendant’s approach is based on the assumption that plaintiff would
    decide to eschew a mass removal of tenants to avoid a possible public relations problem, but
    there is no evidence that plaintiff had, or would have acted on, any such concern.
    
           Neither parties’ approach for accounting for the conversion of Sonoma Village
    Apartments to a market-rate rental property likely reflects what actually would have occurred had
    the government not breached the contract. Plaintiff envisions a mass removal of tenants without
    accounting for the financial consequences of such an action, while defendant posits a three-year
    conversion period that is untethered to the actual remaining terms of the existing leases. Overall,
    however, the court finds that the evidence tips in defendant’s favor for four reasons. First, to the
    
    
                                                   -56-
    extent that plaintiff’s approach is to be taken literally, it fails to account for the financial
    consequences of removing all of the tenants on the date of breach. Second, to the extent that
    plaintiff’s approach is treated as a simplified method of estimating conversion costs, it overstates
    the amount of market rent and understates the amount of restricted rent that plaintiff would earn
    in 2011. Third, it is apparent that Dr. Ben-Zion erred by double counting plaintiff’s rent loss
    (starting with a baseline of only six months of rent in 2011 and then subtracting an additional six
    months of rent in that same year), detracting from the overall reliability of his methodology.
    Finally, Mr. Weinberg has significant experience in repositioning multifamily properties. In
    short, defendant’s method of accounting for the conversion using a three-year conversion period
    is grounded on more compelling evidence and is therefore more persuasive. Thus, the court finds
    that defendant’s method should be used in calculating plaintiff’s damages.
    
                b. Estimating Plaintiff’s Past Expenses in the Unrestricted Scenario
    
                                                  i. Data
    
             With respect to plaintiff’s expenses in the unrestricted scenario, the parties’ first
    disagreement concerns the data that should be used to estimate the expenses. Plaintiff contends
    that its estimated expenses should be calculated using one of three sources: (1) the data provided
    by Ms. Williams; (2) the information that Dr. Ben-Zion downloaded from the IREM website; or
    (3) an expense-to-income ratio derived from the Levy appraisal (43%), Ms. Williams’s data
    (ranging from 23.6% to 29.2% for 2012 to 2016), or the IREM information (37%). Defendant
    proposes using the expense-to-income ratio of 55.3% that was determined by Mr. Weinberg.
    
            Plaintiff’s preferred approach for estimating its expenses in the unrestricted scenario–the
    approach upon which its request for expectancy damages is based–is to use the data provided by
    Ms. Williams. The court found Ms. Williams to be a credible witness with an extraordinary
    amount of experience in managing affordable multifamily housing properties. Unfortunately, she
    was unable to provide satisfactory testimony regarding several expense items. For example,
    although Ms. Williams proposed $0 in expenditures for a management fee, Dr. Ben-Zion
    determined that plaintiff’s estimated expenses should include a management fee. In addition,
    Ms. Williams stated that plaintiff would incur bookkeeping and accounting expenses, but could
    not testify regarding the cost of such services. And, Ms. Williams estimated the costs of taxes
    and insurance based on the actual expenses that plaintiff incurred, but testified that it was her
    belief that these expenses would change in the unrestricted scenario. These problems render Ms.
    Williams’s data unusable because without credible amounts for all pertinent expense items,
    plaintiff’s estimated expenses would be significantly understated.
    
            The court need not dwell too long on plaintiff’s proposed use of the information that Dr.
    Ben-Zion downloaded from the IREM website. That information is completely unreliable and
    will not be considered by the court because Dr. Ben-Zion was unable to state with any certainty
    what geographic area or time period the information represented.
    
    
    
                                                   -57-
            Thus, the court is left to consider the expense-to-income ratios proposed by the parties.
    In light of its rejection of the estimated expenses based on Ms. Williams’s data and on the
    information that Dr. Ben-Zion downloaded from the IREM website, the court declines to credit
    the expense-to-income ratios derived from those estimated expenses. Plaintiff does suggest,
    however, that the expense-to-income ratio set forth in the Levy appraisal would result in a fair
    and reasonable estimation of plaintiff’s expenses. The court agrees.
    
            The 43% expense-to-income ratio set forth in the Levy appraisal was determined by
    qualified appraisers at Rural Development’s request; was reviewed and accepted for use by Rural
    Development; was calculated shortly after the government’s breach of contract; was derived from
    projected income and expenses that were, in turn, based on data from comparable properties in
    Sonoma County that had recently sold; and fell within the range of ratios for the comparable
    properties identified by the appraisers (32% to 45%). In short, there are numerous indications
    that the ratio is reliable.
    
            The 55.3% expense-to-income ratio calculated by Mr. Weinberg is not as well-supported.
    First, Mr. Weinberg’s ratio is based on income estimates that the court has rejected. Second, Mr.
    Weinberg’s ratio is based on expenses that he derived, in part, from examining the expenses
    incurred by other properties that he deemed similar to Sonoma Village Apartments; while these
    properties may indeed be similar to Sonoma Village Apartments on a number of variables, there
    are some glaring dissimilarities. For example, all of the properties are larger than Sonoma
    Village Apartments, with five of the eight properties being more than twice as large. And, five of
    the properties are located outside of Sonoma County, with three being more than 100 miles from
    Sonoma.46 In other words, the data underlying Mr. Weinberg’s expense-to-income ratio is not as
    strong as the data used in the Levy appraisal. Thus, the court finds that it is fair and reasonable to
    use a 43% expense-to-income ratio to estimate plaintiff’s expenses in the unrestricted scenario
    for 2011 through 2016.47
    
                      ii. Loan-Related Expenses and the Mortgage Interest Rate
    
           Because the 43% expense-to-income ratio set forth in the Levy appraisal and adopted by
    the court does not account for any loan-related expenses, the court must resolve an additional
    dispute: whether plaintiff’s estimated net income should reflect plaintiff obtaining a new loan to
    finance the prepayment of its existing loan. Plaintiff contends that it would not have obtained a
    new loan to finance its loan prepayment, and therefore it did not subtract estimated mortgage
    
    
           46
              The court takes judicial notice, pursuant to Rule 201(b)(2) of the Federal Rules of
    Evidence, that the cities of Waterford, King City, and Gilroy are all more than 100 miles from
    Sonoma as the crow flies.
           47
              Because the court concludes that plaintiff’s expenses should be estimated using an
    expense-to-income ratio, there is no need to address the parties’ disputes regarding individual
    expense items, such as maintenance payroll and real estate taxes.
    
                                                    -58-
    payments (in other words, debt service) from its estimated net rental income. Instead, to account
    for the opportunity cost of prepaying the balance of its loan, it subtracted from its estimated net
    rental income an interest expense–an amount equal to the interest that it likely would pay on a
    new loan. Defendant, in contrast, assumed that plaintiff would obtain a new loan and therefore
    subtracted estimated mortgage payments from the net income it projected for plaintiff.
    
            As an initial matter, the court agrees with plaintiff that estimated mortgage payments
    should not be subtracted from its estimated net rental income. Richard Gullotta testified that
    plaintiff intended, and had the financial means, to prepay the balance of its loan without
    obtaining a new loan, and plaintiff supported this testimony with documentary evidence.
    Defendant did not offer any evidence to the contrary.
    
            Further, the court finds that it was appropriate for plaintiff to account for the opportunity
    cost of prepaying the balance of its loan by subtracting an interest expense from its estimated net
    rental income. As Dr. Ben-Zion testified, by prepaying the balance of the loan using cash,
    plaintiff would forgo the opportunity to invest that cash elsewhere. Because plaintiff was willing
    and able to prepay the balance of its loan at the time the government breached the contract, the
    interest expense shall be subtracted from plaintiff’s estimated net rental income beginning from
    the date of breach.
    
           The court also finds that it was proper for plaintiff to use mortgage interest to measure its
    opportunity cost. Dr. Ben-Zion testified that the interest that plaintiff would have paid had it
    obtained a new loan to finance the prepayment of its existing loan was the best, and most
    conservative, proxy for plaintiff’s opportunity cost, and defendant did not challenge this
    proposition.
    
            Three pieces of information are required to calculate the mortgage interest that constitutes
    plaintiff’s interest expense: (1) the hypothetical new loan’s amount, (2) the hypothetical new
    loan’s term, and (3) the hypothetical new loan’s interest rate. The evidence in the trial record
    reflects that the parties do not dispute that the amount of the hypothetical new loan should be the
    balance of plaintiff’s existing loan, or that the term of the hypothetical new loan should be thirty
    years. Rather, the only dispute concerns the mortgage interest rate that should be used. Plaintiff
    proposes a 4.3% interest rate, which is based on Mr. Burwell’s discussion with a local lender and
    falls within the range of interest rates published by Mr. Gerber. Defendant proposes a 5.5%
    interest rate, which is based on historical information from files in Mr. Weinberg’s possession
    pertaining to the local market and information from a Novogradac publication. Although both
    parties provide support for their proposed interest rates, the quality of the supporting information
    differs. Plaintiff’s proposed interest rate is based on a single data point, and even though the
    interest rate is within the range of interest rates published by Mr. Gerber, Mr. Burwell did not
    specify the precise range, whether 4.3% was near the top or bottom of the range, or the market of
    the properties connected with the range. In contrast, defendant’s proposed interest rate was based
    on historical information regarding actual interest rates in the local market and information
    regarding interest rates for affordable housing. Given the superior–and thus more
    
    
                                                    -59-
    compelling–evidence provided by defendant, the 5.5% interest rate proposed by defendant is
    more persuasive. Therefore, the court finds that a 5.5% interest rate should be used in calculating
    plaintiff’s interest expense.
    
                   c. Estimating Plaintiff’s Past Income in the Restricted Scenario
    
            Turning to the restricted scenario for 2011 through 2016, the parties first dispute how to
    estimate plaintiff’s net rental income. Plaintiff contends that the income that it actually received
    should be used to compute its past damages. Defendant contends that plaintiff’s past net rental
    income should be computed by applying an annual 2.5% growth rate to the net rental income that
    plaintiff received in 2011. The court has previously concluded that it is appropriate for plaintiff
    to use postbreach information to more precisely calculate its damages, and found that plaintiff
    can estimate its rental income from 2011 through 2016 based on actual market rents for those
    years. In addition, plaintiff’s income from 2011 through 2016 is actually known. Thus,
    plaintiff’s use of its actual income in the restricted scenario to calculate its past damages is fair
    and reasonable.
    
                  d. Estimating Plaintiff’s Past Expenses in the Restricted Scenario
    
            With the exception of their dispute concerning discounting, which the court addresses
    below, the parties’ final disagreement on past damages concerns how to estimate plaintiff’s
    expenses in the restricted scenario. Plaintiff contends that the expenses that it actually incurred
    should be used to compute its past damages. Defendant contends that plaintiff’s past expenses
    should be computed by applying an annual 2.5% growth rate to the expenses that plaintiff
    incurred in 2011. The court has previously concluded that it is appropriate for plaintiff to use
    postbreach information to more precisely calculate its damages, and notes that plaintiff’s
    expenses for 2011 through 2016 are actually known. Thus, plaintiff’s use of its actual expenses
    in the restricted scenario to calculate its past damages is fair and reasonable.
    
                                           4. Future Damages
    
           With respect to future damages, the parties’ disputes concern the projection of income
    and expenses from 2017 to 2035 in both the restricted and unrestricted scenarios. The court first
    addresses the disputes related to the unrestricted scenario projections.
    
                 a. Projecting Plaintiff’s Future Income in the Unrestricted Scenario
    
                                                  i. Data
    
            The parties’ first disagreement is how to project plaintiff’s rental income in the
    unrestricted scenario. Plaintiff contends that its future rental income should be computed by
    applying an annual 3.5% growth rate to the 2016 rents supplied by Mr. Burwell. Defendant
    contends that plaintiff’s future rental income should be computed by applying an annual 2.5%
    
    
                                                    -60-
    growth rate to the 2014 rents supplied by Mr. Weinberg. As an initial matter, in light of its
    previous findings, the court concludes that the appropriate starting point for projecting plaintiff’s
    future income is the 2016 rents supplied by Mr. Burwell. Thus, the only issue is the growth rate
    that should be applied to those rents.
    
            Plaintiff’s proposed 3.5% growth rate was supplied by Mr. Burwell. Mr. Burwell, in turn,
    based his growth rate on Mr. Gerber’s finding that the market rent growth rate in Sonoma Valley
    for 2011 through 2015 was slightly above 5%, and his own assumption that market rents would
    increase at a slower rate in the future once they were “marked up to market.” Mr. Burwell did
    not base his growth rate on inflation because of his belief that rent increases would outpace
    inflation due to the insufficient supply of apartment units in Sonoma Valley. Defendant’s
    proposed 2.5% growth rate was supplied by Mr. Weinberg, who based his growth rate on data
    published in the Korpacz survey, his own discussions with investors, the interviews he conducted
    during his rent survey, and information from Novogradac’s database. From these facts, it is
    apparent that Mr. Burwell’s growth rate was based exclusively on actual data from Sonoma
    Valley and his experience in the Sonoma Valley market. In contrast, while some of the data that
    Mr. Weinberg used to determine his growth rate appears to be market-specific (for example, the
    data gleaned from his rent survey interviews), Mr. Weinberg did not describe the data with the
    specificity necessary to ascertain its applicability to the Sonoma Valley market. Accordingly, the
    court finds that the 3.5% growth rate proposed by plaintiff is fair and reasonable.
    
                                ii. Nonrental Income and Vacancy Rate
    
            The parties’ other disagreements regarding the projection of income in the unrestricted
    scenario concern the income received by plaintiff that is not derived from rent and the vacancy
    rate. The court previously found, when addressing plaintiff’s claim for past damages, that 2.3%
    of gross rental income is a fair and reasonable approximation of nonrental income, and that 3% is
    a fair and reasonable vacancy rate. These findings also apply to plaintiff’s claim for future
    damages.
    
                b. Projecting Plaintiff’s Future Expenses in the Unrestricted Scenario
    
            Similarly, the parties’ disputes regarding the projection of plaintiff’s future expenses in
    the unrestricted scenario mirror their expenses-related disputes with respect to plaintiff’s claim
    for past damages. Thus, in projecting plaintiff’s future expenses, the court finds it fair and
    reasonable to use a 43% expense-to-income ratio to calculate plaintiff’s non-loan-related
    expenses and a 5.5% mortgage interest rate to calculate plaintiff’s interest expense.48
    
    
    
           48
              Because plaintiff’s projected expenses will be calculated as a percentage of plaintiff’s
    projected income, the court need not resolve the parties’ dispute concerning the appropriate
    growth rate to apply to plaintiff’s future expenses. Plaintiff’s projected expenses will grow at the
    same rate as plaintiff’s projected income.
    
                                                    -61-
                  c. Projecting Plaintiff’s Future Income in the Restricted Scenario
    
            Turning to the restricted scenario for 2017 through 2035, the parties first dispute how to
    project plaintiff’s net rental income. Plaintiff contends that its future net rental income should be
    computed by applying an annual 2% growth rate to the net rental income that it received in 2016.
    Defendant contends that plaintiff’s future net rental income should be computed by applying an
    annual 2.5% growth rate to the net rental income that plaintiff received in 2011. The court
    previously found that plaintiff is entitled to use actual data for the 2011 to 2016 time period in its
    damages calculations. Thus, the only issue is the appropriate growth rate to be applied to
    plaintiff’s 2016 net rental income.
    
            Plaintiff’s proposed growth rate was supplied by Dr. Ben-Zion, who based his rate on the
    fact that rents at Sonoma Village Apartments increased by 2% annually from 2005 through 2015,
    and the fact that the Congressional Budget Office projects that inflation will be approximately
    2% for the next fifteen years. Defendant’s proposed growth rate was supplied by Mr. Weinberg,
    who indicated that his growth rate was “somewhat budget based . . . .” Tr. 1024 (Weinberg).
    Because the growth rate proposed by plaintiff was actually–and not somewhat–based on
    plaintiff’s budget, the court finds the use of a 2% growth rate to be fair and reasonable.
    
                 d. Projecting Plaintiff’s Future Expenses in the Restricted Scenario
    
             The parties’ next dispute is how to project plaintiff’s expenses in the restricted scenario.
    Plaintiff apparently proposes computing its future expenses by applying an annual 2% growth
    rate to the expenses it incurred in 2016. Defendant contends that plaintiff’s future expenses
    should be computed by applying an annual 2.5% growth rate to the expenses that plaintiff
    incurred in 2011. The court previously found that plaintiff is entitled to use actual data for the
    2011 to 2016 time period in its damages calculations. Thus, the only issue is the appropriate
    growth rate to be applied to plaintiff’s 2016 expenses.
    
            Although the trial record lacks any direct evidence indicating that plaintiff is proposing a
    2% growth rate, the court finds that a different growth rate would be inappropriate because it
    would make no sense to set a growth rate for expenses that outpaces the 2% growth rate for
    income that the court has already found to be fair and reasonable. Indeed, defendant proposes
    that future income and expenses in the restricted scenario increase at the same 2.5% rate.
    Accordingly, the court finds it fair and reasonable to apply an annual 2% growth rate to project
    plaintiff’s future expenses.
    
                    e. Calculating Projected Net Income in the Restricted Scenario
    
            The final non-discounting-related issue implicated by the parties’ positions on plaintiff’s
    projected income in the restricted scenario is how, precisely, plaintiff’s future net income should
    be calculated. Although calculating net income normally requires subtracting expenses from
    income, defendant asserts that the calculation is not so simple when projecting plaintiff’s future
    
    
                                                     -62-
    net income in the restricted scenario due to the distribution limitation imposed by United States
    Department of Agriculture regulations. The distribution limitation, defendant contends, would
    result in plaintiff’s net income being capped at $5310 per year through 2035. Unfortunately,
    there is no evidence in the trial record that indicates whether plaintiff took the distribution
    limitation into account when projecting future net income in the restricted scenario.
    
            The court finds that notwithstanding its previous findings with respect to the growth rates
    that should be used to project plaintiff’s income and expenses in the restricted scenario, the
    distribution limitation would affect plaintiff’s future net income. Accordingly, to the extent that
    plaintiff’s future net income is projected to exceed $5310 in a particular year, plaintiff’s
    projected income for that year should be capped at $5310.
    
                                   5. Discounting Plaintiff’s Damages
    
            The parties’ final dispute concerns the appropriate prejudgment and postjudgment
    discount rates.49 As an initial matter, the court concludes, following Franconia Associates, that
    “the risk portion of the discount rate applied to post-judgment lost profits” should be applied to
    postbreach, prejudgment lost profits. 61 Fed. Cl. at 766. Thus, the court first addresses the
    postjudgment discount rate.
    
                                     a. Postjudgment Discount Rate
    
            Plaintiff proposes applying a 7% property discount rate to its future damages, and
    apparently applied that discount rate to its projected future income in both the restricted and
    unrestricted scenarios. Defendant proposes using an 8.75% equity discount rate in the
    unrestricted scenario and a 10.5% equity discount rate in the restricted scenario.
    
             The first issue implicated by the parties’ proposals is whether the cash flows in the
    restricted scenario should be discounted at a different rate than the cash flows in the unrestricted
    scenario. Because the risks associated with operating a section 515 property differ from those
    associated with operating a market-rate rental property, the court finds that it is appropriate to use
    different discount rates in each scenario. Accord id. at 764-66.
    
             Related to the first issue is the question of whether the discount rate to be applied in the
    restricted scenario should account for the government-imposed limitation on distributions. The
    court previously found that plaintiff’s future net income in the restricted scenario should account
    
    
           49
                For the purposes of calculating damages, both parties assumed a judgment date of
    December 31, 2016, which coincides with the date that divides plaintiff’s past damages from
    plaintiff’s future damages. Consequently, plaintiff refers to discounting past and future damages.
    However, because the judgment date will not coincide with the date that divides plaintiff’s past
    damages from plaintiff’s future damages, the court refers to discounting prejudgment and
    postjudgment damages.
    
                                                    -63-
    for the distribution limitation. Therefore, the discount rate for the restricted scenario should also
    account for the distribution limitation.
    
            The third issue implicated by the parties’ proposals is whether it is more appropriate to
    use a property discount rate–as plaintiff proposes–or an equity discount rate–as defendant
    proposes. The court has previously found that estimated mortgage payments should not be
    subtracted from plaintiff’s projected net income in the unrestricted scenario because plaintiff
    would not have obtained a new loan to finance the prepayment of its existing loan. In other
    words, the court found that there would be no debt associated with Sonoma Village Apartments
    in the unrestricted scenario. Consequently, the appropriate discount rate to use in that scenario–
    as explained by Mr. Weinberg–is a property discount rate. Because plaintiff is the only party that
    proposed a property discount rate, and because plaintiff provided sufficient evidence of the
    appropriate property discount rate (Mr. Burwell’s testimony, which was based on his knowledge
    of the Sonoma Valley market and the data that he obtained from Mr. Gerber), the court finds that
    use of a 7% property discount rate for the unrestricted scenario is fair and reasonable.
    
             Finally, with respect to the discount rate that should be used in the restricted scenario, the
    court notes that defendant is the only party that accounted for the different risks inherent in the
    restricted and unrestricted scenarios, and the only party that accounted for the government-
    imposed distribution limitation. Thus, the court adopts defendant’s formula for calculating the
    appropriate discount rate: discount rate = 8% distribution limitation + growth rate. Because the
    court has previously found plaintiff’s 2% growth rate in the restricted scenario to be fair and
    reasonable, the court finds that the fair and reasonable discount rate for the restricted scenario is
    10%.
    
                                      b. Prejudgment Discount Rate
    
            Having determined the appropriate postjudgment discount rates, the court can turn to the
    issue of prejudgment discounting. Although plaintiff argues that its past lost profits should not
    be discounted at all, an argument already rejected by the court, plaintiff also contends that if its
    past lost profits must be discounted, they should be discounted by a rate that only reflects risk
    and uncertainty–either 1%, a rate suggested by Dr. Ben-Zion, or 1.56%, a rate that plaintiff
    offered in its posttrial reply brief as being derived from Mr. Weinberg’s testimony. Defendant
    contends that the net income in the unrestricted scenario should be discounted using an 8.75%
    discount rate and the net income in the restricted scenario should be discounted using a 4.12%
    “safe” discount rate.
    
            Because the prejudgment discount rates should reflect only the risk component of the
    postjudgment discount rates, and because neither party proposed such a rate, the court rejects
    both parties’ proposals. The court previously concluded that the postjudgment discount rate that
    should be used in the unrestricted scenario is 7%, which is composed of a capitalization rate of
    approximately 5.5% and a growth rate of “a little less than 2%.” There is no evidence in the trial
    record reflecting how much of the 5.5% capitalization rate represents risk. Because plaintiff bore
    
    
                                                     -64-
    the burden of establishing how much risk was reflected in its capitalization rate, and failed to
    meet that burden, the court finds that the fair and reasonable prejudgment discount rate for the
    unrestricted scenario is 5.5%. In addition, the court previously concluded that the postjudgment
    discount rate that should be used in the restricted scenario is 10%, which is based on the equation
    proposed by defendant and composed of the 8% distribution limitation and a 2% growth rate.
    The trial record contains no evidence regarding what portion, if any, of the 8% distribution
    limitation reflects risk. Because the burden of persuasion shifted to defendant to establish how
    much of the 8% distribution limitation accounts for risk (since defendant was the party who
    proposed using 8% as a component of the discount rate that should be applied in the restricted
    scenario), and defendant failed to meet that burden, the court finds that the fair and reasonable
    prejudgment discount rate for the restricted scenario is 0%.
    
                                              6. Conclusion
    
            As reflected by the above analysis, and as permitted by binding precedent, the court did
    not accept either party’s damages calculations in their entirety. See Precision Pine & Timber,
    Inc. v. United States, 
    596 F.3d 817
    , 833 (Fed. Cir. 2010) (“As the fact finder in the bench trial,
    the judge is responsible for deciding what evidence to credit or reject and what result to reach.
    Just as a jury may find for a party without believing everything that party’s witnesses say, a judge
    may award damages, even if he does not fully credit that party’s methodology.”). Rather, the
    court has accepted elements of plaintiff’s approach and elements of defendant’s approach in
    determining the expectancy damages to which plaintiff is entitled. Consequently, the parties
    must recalculate plaintiff’s expectancy damages to conform with the court’s findings and
    conclusions.
    
                              V. TAX NEUTRALIZATION PAYMENT
    
            In addition to its expectancy damages, plaintiff seeks a tax neutralization payment of
    approximately $2,136,681, representing compensation for the increased amount of federal and
    state income taxes that it alleges its partners would owe due to plaintiff receiving a lump-sum
    damages award in lieu of a twenty-four-year-long stream of market-rate rental income.50 In other
    words, plaintiff seeks to “gross up” its damages award to offset its partners’ purported increased
    tax burden. In its August 24, 2016 Opinion and Order, the court held that plaintiff could present
    evidence in support of this claim.51 Sonoma Apartment Assocs., 127 Fed. Cl. at 721.
    
    
    
    
           50
             The precise amount of the tax neutralization payment depends on the amount of
    expectancy damages awarded by the court.
           51
             The court incorporates in this decision the analysis of relevant precedent set forth in its
    August 24, 2016 Opinion and Order.
    
                                                    -65-
                                           A. Legal Standard
    
             As with a claim for lost profits or any other damages claim, a plaintiff in a breach-of-
    contract suit seeking to gross up a lump-sum damages award to account for an increased tax
    burden must prove, by a preponderance of the evidence, foreseeability, causation, and reasonable
    certainty.52 Ind. Mich. Power Co. v. United States, 
    422 F.3d 1369
    , 1373 (Fed. Cir. 2005); Energy
    Capital Corp., 302 F.3d at 1325-26. As noted above, with respect to the “reasonably certainty”
    element, “[i]f a reasonable probability of damage can be clearly established, uncertainty as to the
    amount will not preclude recovery.” Locke, 283 F.2d at 524. Indeed, “it is not essential that the
    amount of damages be ascertainable with absolute exactness or mathematical precision. It is
    enough if the evidence adduced is sufficient to enable a court . . . to make a fair and reasonable
    approximation.” Specialty Assembling & Packing Co., 355 F.2d at 572 (citations omitted); see
    also San Carlos Irr. & Drainage Dist. v. United States, 
    111 F.3d 1557
    , 1563 (Fed. Cir. 1997)
    (“[C]ontract law precludes recovery for speculative damages.”). This rule applies with equal
    force to damages awards that compensate for adverse tax consequences. See Bank of Am., FSB
    v. Doumani, 
    495 F.3d 1366
    , 1374 (Fed. Cir. 2007) (affirming the decision of the Court of Federal
    Claims not to gross up the damages award due, in part, to the fact that the plaintiff’s tax rate was
    “highly variable”); Home Sav. of Am. v. United States, 
    399 F.3d 1341
    , 1355-56 (Fed. Cir. 2005)
    (affirming a tax gross-up award over the government’s objections that (1) the plaintiff could
    avoid paying income taxes using “tax planning resources” and (2) “future tax rates are
    unknown”); Medcom Holding Co. v. Baxter Travenol Labs., Inc., 
    106 F.3d 1388
    , 1404 (7th Cir.
    1997) (“We give great deference to the district court in exercising its equitable discretion. The
    district court concluded that compensating for tax effects was inappropriate and speculative. . . .
    We cannot say that the district court abused its discretion in refusing to increase the damage
    award to reflect potential tax effects.”); Paris v. Remington Rand, Inc., 
    101 F.2d 64
    , 68 (2d Cir.
    1939) (“To calculate such an item of damages permits of wide speculation. If such damages are
    awarded, the amount of tax differential will depend on the method by which [the plaintiff] has
    kept his books–cash or accrual basis. Damages would vary in each instance. Another
    consideration would be the taxpayer’s financial position and other earnings of the year which
    would enter into the calculations so that it would be highly speculative to find the amount of the
    damages due to [the defendant’s] breach of contract.”); Anchor Sav. Bank, FSB v. United States,
    
    123 Fed. Cl. 180
    , 185 (2015) (rejecting the suggestion that a tax gross-up payment was improper
    due to the “numerous variables and ambiguities inherent in assessing [the plaintiff’s] future tax
    liability” because such payments are “based on a projection of plaintiff’s tax liability, which
    
    
           52
               Defendant does not dispute that plaintiff has established the foreseeability and
    causation elements of its tax neutralization claim. Indeed, the receipt of lump-sum damages
    awards in breach-of-contract cases will very likely have tax consequences for the recipients; in
    such cases, the tax consequences are both foreseeable results of the breach of contract and
    proximately caused by the breach of contract. Therefore, plaintiff has met its burden of proof on
    these elements. Thus, the only issue before the court is whether plaintiff has established the
    existence of a sufficient basis for determining a tax neutralization payment with reasonable
    certainty.
    
                                                   -66-
    inevitably entails a certain degree of uncertainty” and because “[t]he Federal Circuit does not
    require ‘absolute exactness or mathematical precision.’” (quoting Bluebonnet Sav. Bank, F.S.B.,
    266 F.3d at 1355)).
    
             In a breach-of-contract case, “proof of damages to a reasonable certainty” is an issue of
    fact, Fifth Third Bank, 518 F.3d at 1375, as is “whether [a damages] model is or is not too
    speculative to be reliable,” Dairyland Power Coop. v. United States, 
    645 F.3d 1363
    , 1371 (Fed.
    Cir. 2011). Further, as with its determination of expectancy damages, the court, in determining
    the amount of a tax neutralization payment, “may act upon probable and inferential as well as
    direct and positive proof.” Locke, 283 F.2d at 524.
    
                                          B. The Parties’ Experts
    
            In support of its claim for a tax neutralization payment, plaintiff again presented the
    testimony of Dr. Ben-Zion. In addition to the credentials noted above, Dr. Ben-Zion is the author
    of one of the leading articles on the topic of tax neutralization in which he sought to demonstrate
    that when an individual is compensated for a lost stream of future income with a lump sum
    payment, the adverse tax consequences of the lump sum payment should be mitigated by a tax
    neutralization payment. Tr. 398-400 (Ben-Zion); see also PX 1 (citing Barry Ben-Zion,
    Neutralizing the Adverse Tax Consequences of a Lump-Sum Award in Employment Cases, 13 J.
    Forensic Econ. 233 (2000)53). He has testified on the topic of tax neutralization in wage and
    employment cases between forty and fifty times. See Tr. 404-05 (Ben-Zion); see also id. at 649
    (indicating that Dr. Ben-Zion has testified in approximately 150 cases arising under the
    Employers’ Liability Act, 45 U.S.C. §§ 51-60 (2012), and in thirty to forty maritime cases). In
    most of those cases, Dr. Ben-Zion based his damages calculations on five years of lost income
    because the plaintiffs were expected to mitigate their damages within five years, id. at 769; see
    also id. at 650 (indicating two instances in which Dr. Ben-Zion projected income for several
    decades into the future), and discounted future lost income by 1%, which is the “real differential
    between the interest rate and the wage growth rate,” id. at 770; accord id. at 658. In contrast, Dr.
    Ben-Zion has not testified on the topic of tax neutralization in any nonemployment cases. Id. at
    411. But see id. at 771 (reflecting that Dr. Ben-Zion has performed a tax neutralization
    calculation in a “commercial damage case, but not a real estate commercial damage case”).
    Further, Dr. Ben-Zion is not a CPA or a licensed tax preparer, has not studied or taught federal
    taxation, and has not prepared any income tax returns for the last ten years. Id. at 409-10. Dr.
    Ben-Zion was asked, as part of his estimation of plaintiff’s economic damages, to determine the
    tax consequences of plaintiff receiving a lump-sum damages award for its lost profits rather than
    the future stream of income that would have resulted absent the government’s breach of contract.
    Id. at 556.
    
    
    
    
           53
                Defendant submitted this article as an exhibit to its pretrial motion in limine, but the
    article is not part of the trial record.
    
                                                     -67-
            To rebut Dr. Ben-Zion’s testimony, defendant offered the testimony of Mr.
    Krabbenschmidt. Mr. Krabbenschmidt is a CPA, and has been a partner at Novogradac since
    1992. Id. at 1163 (Krabbenschmidt); DX 2. He estimates that during his professional career, “at
    least half of [his] activity . . . is doing tax work for” individuals, partnerships, and corporations.
    Tr. 1166 (Krabbenschmidt); see also id. at 1176 (indicating that Mr. Krabbenschmidt has
    prepared “thousands of tax returns” during his “thirty-seven years of experience”). Mr.
    Krabbenschmidt has written a handbook and taught classes on the tax credit available to
    investors willing to invest capital in low-income housing. Id. at 1166-68. He has also taught
    classes on renewable energy tax credits and tax credits in general. Id. at 1169. Mr.
    Krabbenschmidt is the general partner for three multifamily apartment complexes and has helped
    develop at least two low-income housing properties. Id. at 1170. He has provided expert
    testimony at trial on numerous prior occasions regarding tax credits, the rights and
    responsibilities under partnership agreements, debt conversions, and general accounting for
    multifamily housing, id. at 1171-73, but has never testified in court regarding tax neutralization
    damages, id. at 1294. In both his practice and his expert testimony, Mr. Krabbenschmidt has
    performed tax gross-up calculations, id. at 1171-73, but he has never performed forensic
    accounting for tax gross-up damages, id. at 1295. Mr. Krabbenschmidt was asked to review Dr.
    Ben-Zion’s report and identify and address any calculation or theoretical issues. Id. at 1174.
    
                                          C. Plaintiff’s Position
    
           To determine the tax neutralization payment to which he believes plaintiff is entitled, Dr.
    Ben-Zion calculated what the tax consequences would have been for all but one of plaintiff’s
    partners had Sonoma Village Apartments been converted to a market-rate rental property in
    2011, calculated the tax consequences of the lump-sum damages award for each of those
    partners, and then calculated the difference between the two scenarios.54 Tr. 559-61 (Ben-Zion).
    Each of these steps is described in more detail below.
    
      1. The Tax Consequences of Converting Sonoma Village Apartments to a Market-Rate
                                      Rental Property
    
           Dr. Ben-Zion began his tax neutralization analysis by determining what the tax
    consequences for each of the partners would have been had Sonoma Village Apartments been
    converted to a market-rate rental property in 2011. Id. at 559. To make this determination, he
    
    
    
           54
                Plaintiff presented evidence regarding the increased tax burden that would be faced by
    Richard Gullotta, Mark Gullotta, Eric Gullotta, and Karen Kass, but did not present any evidence
    that Mr. Parasol would face an increased tax burden. See Tr. 558-59 (Ben-Zion). Indeed,
    plaintiff is not seeking compensation for any adverse tax consequences suffered by Mr. Parasol.
    Thus, unless otherwise specified, the court’s use of “the partners” or “each partner” in
    conjunction with plaintiff’s claim for a tax neutralization payment refers to all of the partners
    except Mr. Parasol.
    
                                                     -68-
    needed to compute each partner’s tax liability assuming that a conversion had occurred
    (“conversion scenario”), compute each partner’s tax liability assuming the status quo (“status quo
    scenario”), and then calculate each partner’s net tax liability by subtracting the latter from the
    former.55 Id. at 596, 598.
    
                         a. Computing Tax Liability Assuming a Conversion
    
            The starting point for Dr. Ben-Zion’s analysis was to compute each partner’s tax liability
    in the conversion scenario. As his initial step, Dr. Ben-Zion determined each partner’s adjusted
    gross income for 2011 through 2035. Tr. 559-60 (Ben-Zion). For 2011 through either 2014
    (Eric Gullotta) or 2015 (Richard Gullotta, Mark Gullotta, and Karen Kass), Dr. Ben-Zion used
    the adjusted gross income from each partner’s federal income tax returns. Id. at 559, 579, 798-
    99, 807; see also id. at 659-60 (reflecting that Dr. Ben-Zion assumed the accuracy of the adjusted
    gross income amounts reported on the partners’ tax returns because the partnership income was
    based on audited financial statements, and the Internal Revenue Service has never challenged the
    partners’ tax returns).
    
            For 2016 through 2035, Dr. Ben-Zion projected each partner’s adjusted gross income by
    assuming that the partners would have the same income that they had in either 2014 (Eric
    Gullotta) or 2015 (Richard Gullotta, Mark Gullotta, and Karen Kass). Id. at 580-81, 612, 786,
    801; see also id. at 651 (“[W]e don’t have a way of knowing what the future income of the
    partners will be.”). One consequence of this assumption is that the income projections would not
    reflect any passive activity losses of which the partners might take advantage. Id. at 782; cf. id.
    at 137-38 (Gullotta) (reflecting that Richard Gullotta anticipated carrying forward passive
    activity losses for the indefinite future). However, Dr. Ben-Zion opined that the existence of
    passive activity losses had no effect on his calculations because they would almost equally affect
    both the income that plaintiff would have earned but for the government’s breach of contract and
    the income that will result from the lump-sum damages award. Id. at 640-43, 783, 1354, 1356
    (Ben-Zion); see also id. at 1303 (Krabbenschmidt) (“The passive loss rules apply regardless of
    when that income [from passive activities] is received . . . .”).
    
             Another consequence of Dr. Ben-Zion’s assumption that the partners’ incomes would
    remain flat after 2015 is that Dr. Ben-Zion probably overestimated Richard Gullotta’s future tax
    liability due to the unlikelihood that Richard Gullotta, currently in his early seventies, would
    continue work full-time through 2035. Id. at 580-81 (Ben-Zion); see also id. at 89 (Gullotta)
    (indicating that Richard Gullotta was seventy-two years old at the time of trial and would turn
    
    
           55
                Dr. Ben-Zion’s tax neutralization analysis for Richard Gullotta is reflected in
    plaintiff’s exhibits 17 through 21. See generally Tr. 587-98, 608-25 (Ben-Zion). His tax
    neutralization analysis for Eric Gullotta is reflected in plaintiff’s exhibits 22 through 26. See
    generally id. at 625-30. His tax neutralization analysis for Karen Kass is reflected in plaintiff’s
    exhibits 27 through 31. See generally id. at 631-32. And, his tax neutralization analysis for
    Mark Gullotta is reflected in plaintiff’s exhibits 32 through 36. See generally id. at 632-34.
    
                                                    -69-
    ninety-two years old in 2035), 1230-32 (Krabbenschmidt) (indicating that according to the
    mortality tables published by the Social Security Administration, Richard Gullotta had a life
    expectancy of thirteen years). However, Dr. Ben-Zion stated that overestimating Richard
    Gullotta’s future tax liability results in a more conservative estimate of the adverse tax
    consequences. Id. at 580-81 (Ben-Zion); accord id. at 651-52; see also id. at 652, 821
    (explaining that the overstatement of Richard Gullotta’s future tax liability was greater than the
    understatement of the Gullotta children’s future tax liabilities).
    
            A third consequence of the flat-income assumption is that it does not account for the
    expected changes in all of the partners’ earning potential. See, e.g., id. at 791-94 (reflecting that
    Dr. Ben-Zion would not change his assumption of static income if Eric Gullotta expected to earn
    more income than he currently earns sooner rather than later), 804-05 (reflecting that Dr. Ben-
    Zion would not change his assumption of static income if Eric Gullotta expected his business
    expenses to decrease, leading to an increase in income), 808-14 (reflecting Dr. Ben-Zion’s lack
    of knowledge regarding whether the income of Karen Kass’s husband would increase if he
    became a CPA, and his agreement that if Karen Kass was not presently working, her income
    would increase if she reentered the workforce). Dr. Ben-Zion explained that there would be no
    way to predict how and when the partners’ incomes might change. Id. at 820; accord id. at 1203,
    1233, 1307, 1335 (Krabbenschmidt) (remarking that it is not worth projecting taxable income
    beyond three years in the future); cf. id. at 786-806 (Ben-Zion) (reflecting that Dr. Ben-Zion did
    not investigate the amounts set forth on the first page of each partner’s federal income tax
    returns).
    
            Once he projected the partners’ adjusted gross incomes, Dr. Ben-Zion added to each of
    those amounts the share of the projected net income that would have been allocated to the partner
    by the partnership in the conversion scenario, id. at 560, 572-73, 594, 610-11, after adjusting for
    depreciation, id. at 588, 594, 610, 612.56
    
          Then, Dr. Ben-Zion subtracted the standard deduction from the partners’ projected annual
    incomes (adjusted gross incomes plus conversion-scenario partnership incomes) to project the
    
    
    
           56
               Dr. Ben-Zion’s net income amounts were based on Mr. Gerber’s, and not Mr.
    Burwell’s, rents. See Tr. 423 (Ben-Zion) (“I used the Gerber numbers as the projected rents.”);
    see also id. at 587 (reflecting Dr. Ben-Zion’s acknowledgment that his tax neutralization
    calculations were not “revised”). In addition, Dr. Ben-Zion performed two net income
    calculations, one in which he assumed that Ms. Williams’s projected expenses were used to
    determine lost profits, and another in which he assumed that the information he downloaded
    from the IREM website was used to determine lost profits. Id. at 561, 587, 595-96, 598.
    Because the court has found that plaintiff’s lost profits should be based on different rents and
    expenses, see supra Section IV.D, plaintiff would need to amend the net income amounts used by
    Dr. Ben-Zion in his tax neutralization calculations if the court concludes that plaintiff is entitled
    to a tax neutralization payment.
    
                                                    -70-
    partners’ taxable incomes.57 Id. at 573, 589; see also id. at 774 (indicating that Dr. Ben-Zion did
    not use any information from the partners’ federal income tax returns beyond the first two pages
    because he assumed the use of the standard deduction). He used the standard deduction, rather
    than the partners’ itemized deductions, for three related reasons. Id. at 561-65. His first reason
    was that using the standard deduction simplifies the calculation. Id. at 562, 564, 573. His second
    reason was that because use of the standard deduction increases taxable income and, therefore,
    income tax liability, its use results in a more conservative estimate of adverse tax consequences.
    Id. at 562, 573-74; accord id. at 649. His third reason was that the partners might not be able to
    benefit from itemizing their deductions in the year of the lump-sum damages award because, as a
    result of the increase in income from that award, they might be subject to the alternative
    minimum tax, which is calculated without the benefit of certain otherwise-allowable
    deductions.58 Id. at 563-64, 581-82, 584-85; see also id. at 564-65, 584-86, 645-46, 818
    (contending that taxpayers subject to the alternative minimum tax cannot take advantage of the
    state income tax deduction); cf. id. at 581 (reflecting that Richard Gullotta is already subject to
    the alternative minimum tax). According to Dr. Ben-Zion, use of the standard deduction is “a
    common methodology.” Id. at 578.
    
             After calculating each partner’s annual taxable incomes, Dr. Ben-Zion projected the
    partners’ annual tax liabilities. Id. at 560. For 2011 through 2015, he used the actual federal and
    state income tax rates. See id. at 589. For 2016 through 2035, he projected the partners’ tax
    liabilities using two assumptions, both of which he considers to be “common.” Id. at 578; accord
    id. at 649-50 (reflecting Dr. Ben-Zion’s assertion that a court has never rejected his assumption
    of constant tax rates, even when projecting income many decades into the future). His first
    assumption was that income tax brackets would remain constant from 2015 through 2035, id. at
    576-78, even though the government annually adjusts the brackets to keep pace with inflation, id.
    at 575-77. Dr. Ben-Zion stated that the elimination of this “bracket creep” from his tax liability
    calculation results in an overstatement of the partners’ tax liabilities and, therefore, a more
    conservative estimate of the adverse tax consequences. Id. at 577; accord id. at 567, 574. Dr.
    Ben-Zion’s second assumption, which he labels “conservative,” was that the income tax rates
    would remain constant from 2015 through 2035 “because nobody can predict how Congress
    might change the tax structure.” Id. at 578; accord id. at 648-49, 651. Dr. Ben-Zion averred that
    
    
    
           57
              Although Dr. Ben-Zion testified, unchallenged, that he subtracted the standard
    deduction from each partner’s annual incomes to determine their taxable incomes, Tr. 573, 589
    (Ben-Zion), the spreadsheets showing Dr. Ben-Zion’s calculations do not clearly reflect the
    subtractions, see PX 17; PX 22; PX 27; PX 32.
           58
              Congress created the alternative minimum tax to ensure the payment of federal income
    taxes by wealthy individuals who used deductions to avoid the payment of such taxes. Tr. 1221-
    22 (Krabbenschmidt). When calculating the alternative minimum tax, a taxpayer cannot take
    advantage of certain deductions, such as state income taxes, property taxes, and charitable
    contributions. Id. at 1222-23.
    
                                                   -71-
    this assumption results in the overstatement of the partners’ tax liabilities and, therefore, the
    understatement of the tax consequences faced by the partners. Id. at 648-49.
    
            Next, Dr. Ben-Zion discounted the partners’ projected tax liabilities for 2017 through
    2035 to their present value. Id. at 560, 592. He used the same 7% discount rate that he used to
    discount plaintiff’s projected future net income because “[t]he taxes depend on that income.” Id.
    at 592; accord id. at 653, 656; see also id. at 656-57 (“The tax depends on the income. So if
    there is uncertainty about the income, the same uncertainty should apply to the tax on that
    income and, therefore, it should be appropriate to discount the [tax] in the same proportion that
    we discounted . . . the [income].”), 771 (explaining that if he discounted the future taxes at 1%
    while the projected future net income remained discounted at 7%, there would be no need for a
    tax neutralization payment).
    
            Finally, Dr. Ben-Zion added each partner’s estimated tax liabilities for 2011 through 2016
    to the present value of his or her projected tax liabilities for 2017 through 2035 to arrive at the
    partners’ total estimated tax liabilities in the conversion scenario. Id. at 596.
    
                         b. Computing Tax Liability Assuming the Status Quo
    
             Once he estimated each partner’s tax liability in the conversion scenario, Dr. Ben-Zion
    needed to estimate the partners’ tax liabilities in the status quo scenario.59 Id. at 596. To do so,
    he first determined each partner’s adjusted gross income for 2011 through 2035. Id. at 591. For
    2011 through either 2014 (Eric Gullotta) or 2015 (Richard Gullotta, Mark Gullotta, and Karen
    Kass), Dr. Ben-Zion used the adjusted gross income from the partners’ federal income tax
    returns. PX 19; PX 24; PX 29; PX 34.60 For 2016 to 2035, he projected each partner’s adjusted
    
    
    
    
           59
               Dr. Ben-Zion’s process for projecting the partners’ tax liabilities in the status quo
    scenario mirrors the process he used for projecting the partners’ tax liabilities in the conversion
    scenario. Compare PX 17, and PX 22, and PX 27, and PX 32 (showing Dr. Ben-Zion’s
    calculations for the conversion scenario), with PX 19, and PX 24, and PX 29, and PX 34
    (showing Dr. Ben-Zion’s calculations for the status quo scenario). Thus, the consequences and
    criticisms of the process used in the latter scenario also apply to the former scenario.
           60
              These four exhibits contain spreadsheets showing Dr. Ben-Zion’s calculations. The
    court compared the annual incomes on the spreadsheets to the adjusted gross incomes reported
    on the partners’ tax returns. See JX 52 at 1; JX 53 at 1; JX 54 at 1; JX 55 at 1; JX 58 at 1; JX 59
    at 1; JX 60 at 1; JX 61 at 1; JX 63 at 1; JX 64 at 1; JX 65 at 1; JX 66 at 1; JX 67 at 1; JX 68 at 1;
    JX 69 at 1; JX 70 at 1; JX 71 at 1; JX 72 at 1; JX 81 at 2. The annual incomes used by Dr. Ben-
    Zion matched the partners’ annual adjusted gross incomes.
    
                                                     -72-
    gross income by assuming that the partners would have the same income that they had in either
    2014 (Eric Gullotta) or 2015 (Richard Gullotta, Mark Gullotta, and Karen Kass). PX 19; PX 24;
    PX 29; PX 34.61
    
            Next, Dr. Ben-Zion added to the partners’ adjusted gross incomes the share of the
    projected net income that each partner would receive from the partnership in the status quo
    scenario, PX 19; PX 24; PX 29; PX 34, after adjusting for depreciation, PX 19; PX 24; PX 29;
    PX 34; Tr. 597 (Ben-Zion); see also Tr. 597 (Ben-Zion) (explaining that because the permitted
    depreciation is greater than the net income, a loss is generated for all future years). Then,
    presumably, Dr. Ben-Zion subtracted the standard deduction from the partners’ projected annual
    incomes (adjusted gross incomes plus status-quo-scenario partnership incomes) to project their
    taxable incomes.62
    
           After calculating each partner’s annual taxable incomes, Dr. Ben-Zion projected the
    partners’ annual tax liabilities. PX 19; PX 24; PX 29; PX 34. It appears that for 2011 through
    2015, he used the actual federal and state income tax rates.63 And, it appears that for 2016
    through 2035, he projected the partners’ tax liabilities using the assumptions that the income tax
    brackets and income tax rates would remain constant at 2015 levels.64
    
           61
              These four exhibits contain spreadsheets showing Dr. Ben-Zion’s calculations. The
    court compared the annual incomes on the spreadsheets for either 2014 or 2015 to the adjusted
    gross incomes reported on the partners’ tax returns for the relevant year. See JX 55 at 1; JX 67 at
    1; JX 72 at 1; JX 81 at 2. The annual incomes used by Dr. Ben-Zion matched the partners’
    annual adjusted gross incomes.
           62
                Although Dr. Ben-Zion testified, unchallenged, that he subtracted the standard
    deduction from each partner’s projected annual incomes to determine their projected taxable
    incomes in the conversion scenario, Tr. 573, 589 (Ben-Zion), he did not so testify regarding the
    status quo scenario. However, because Dr. Ben-Zion’s process for projecting the partners’ tax
    liabilities in the status quo scenario mirrors the process he used for projecting the partners’ tax
    liabilities in the conversion scenario, see supra note 59, the court finds it likely that he subtracted
    the standard deduction in both scenarios.
           63
               Although Dr. Ben-Zion testified that he used the actual federal and state income tax
    rates for 2011 through 2015 to determine the partners’ annual tax liabilities in the conversion
    scenario, Tr. 589 (Ben-Zion), he did not so testify regarding the status quo scenario. However,
    because Dr. Ben-Zion’s process for projecting the partners’ tax liabilities in the status quo
    scenario mirrors the process he used for projecting the partners’ tax liabilities in the conversion
    scenario, see supra note 59, the court finds it likely that he used the actual federal and state
    income tax rates for 2011 through 2015 in both scenarios.
           64
               Although Dr. Ben-Zion testified that he used the actual federal and state income tax
    rates for 2015 to project the partners’ future annual tax liabilities in the conversion scenario, Tr.
    578 (Ben-Zion), he did not so testify regarding the status quo scenario. However, because Dr.
    
                                                     -73-
           Then, Dr. Ben-Zion discounted the partners’ projected tax liabilities for 2017 through
    2035 to their present value using a 7% discount rate. PX 19; PX 24; PX 29; PX 34.
    
            Finally, Dr. Ben-Zion added each partner’s estimated tax liabilities for 2011 through 2016
    to the present value of his or her projected tax liabilities for 2017 through 2035 to arrive at the
    partners’ total estimated tax liabilities in the status quo scenario. PX 19; PX 24; PX 29; PX 34.
    
                                    c. Calculating Net Tax Liability
    
            The final step in Dr. Ben-Zion’s determination of the tax consequences for each partner if
    plaintiff had been allowed to begin charging market rents in 2011 was to subtract each partner’s
    estimated tax liability in the status quo scenario from his or her estimated tax liability in the
    conversion scenario to determine the partners’ net tax liabilities. Tr. 598, 623-24 (Ben-Zion).
    
                    2. The Tax Consequences of the Lump-Sum Damages Award
    
            In the second stage of his tax neutralization analysis, Dr. Ben-Zion determined the effect
    that the lump-sum damages award would have on each partner’s income tax liability in the
    presumed year of payment, 2017.65 Id. at 560-61. He did so by adding each partner’s share of
    the lump-sum damages award to the partner’s projected income for 2017.66 Id. at 614, 623.
    From that total, he subtracted an amount for depreciation to arrive at the partners’ taxable
    incomes. Id. He did not subtract any amounts to account for “the possibility that [plaintiff]
    could have . . . tak[en] some money and invest[ed] in capital improvements that [the partners
    could] write off as an expense to reduce their tax on the lump sum,” because such capital
    
    
    
    Ben-Zion’s process for projecting the partners’ tax liabilities in the status quo scenario mirrors
    the process he used for projecting the partners’ tax liabilities in the conversion scenario, see
    supra note 59, the court finds it likely that he used the actual 2015 federal and state income tax
    rates in both scenarios.
           65
               Although Dr. Ben-Zion does not testify to the precise year that he presumed payment, a
    comparison of the exhibits that he prepared reflecting his tax neutralization analysis for Richard
    Gullotta indicates that he presumed payment in 2017. Compare PX 19 (indicating that Richard
    Gullotta’s projected taxable income for 2017 is $406,276), with PX 20 (reflecting that Dr. Ben-
    Zion added Richard Gullotta’s share of the lump-sum damages award to taxable income of
    $406,276).
           66
               The lump-sum damages award used by Dr. Ben-Zion in his tax neutralization analysis
    is based, in part, on amounts and discount rates rejected by the court. Accordingly, if the court
    concludes that plaintiff is entitled to a tax neutralization payment, plaintiff would need to
    recalculate the tax consequences of the lump-sum damages award using the corrected amount of
    lump-sum damages.
    
                                                    -74-
    improvements could also be made if plaintiff was not receiving a lump-sum damages award, and
    there would not be “a significant difference” in the tax consequences between the two situations.
    Id. at 818-19. Finally, using those taxable incomes and the relevant tax brackets, Dr. Ben-Zion
    determined each partner’s estimated tax liability for 2017. Id. at 614-15, 623.
    
                            3. Determining the Tax Neutralization Payment
    
             To determine the tax neutralization payment to which he believes each partner is entitled,
    Dr. Ben-Zion subtracted the additional tax liability that the partner would have incurred had the
    government not breached the contract from the tax liability that the partner will incur as a result
    of being allocated his or her share of the lump-sum damages award. Id. at 617. Dr. Ben-Zion
    then adjusted that amount to account for the fact that the tax neutralization payment itself is
    subject to taxation. Id. at 619-60. He did so by taking each partner’s taxable income for 2017
    and increasing it by an amount that would “produce the same net income after tax that he [or she]
    would have” received had the government not breached the contract. Id. at 620; accord id. at
    624. This increased amount is the partner’s tax neutralization payment. See also id. at 561
    (reflecting Dr. Ben-Zion’s opinion that all of the partners will face an adverse tax consequence
    from the lump-sum damages award because none of them currently is in the highest marginal tax
    bracket). And, Dr. Ben-Zion opined, the total of the partners’ tax neutralization payments is the
    total tax neutralization payment to which plaintiff is entitled. Id. at 635-36.
    
                                        D. Defendant’s Response
    
           Defendant contends that plaintiff has not established its entitlement to a tax neutralization
    payment with reasonable certainty, and advances four overarching arguments in support of its
    contention.
    
            Initially, defendant argues that Dr. Ben-Zion’s methodology for calculating the tax
    neutralization payment was flawed, identifying four such flaws in particular. First, defendant
    notes that Dr. Ben-Zion used the same methodology that he uses in wage and employment cases,
    and contends that this methodology is too simplistic to be used in a case, like this, that involves a
    partnership with five partners and almost twenty years of future lost profits.
    
             The second methodological flaw identified by defendant is that Dr. Ben-Zion made no
    effort to incorporate known information regarding the partners’ future incomes into his
    calculation, or to request any such information in the first instance. Specifically, defendant
    remarks that Dr. Ben-Zion ignored the effects of the ages and life expectancies of Richard
    Gullotta and his wife, the unlikelihood that Eric Gullotta’s income would remain at its very low
    2014 levels, and the effect of Karen Kass returning to the workforce and of her husband
    becoming a CPA.67
    
    
           67
             There is no evidence in the trial record that Karen Kass is not currently in the
    workforce or that her husband is attempting to become a CPA. Rather, defense counsel made
    
                                                    -75-
            The third methodological flaw noted by defendant is that Dr. Ben-Zion’s decision to
    ignore the effects of the partners’ passive activity losses was both unsupported by any
    calculations and not in accordance with the Internal Revenue Code. Regarding the former
    contention, defendant acknowledges Dr. Ben-Zion’s assertion that the partners’ carried-forward
    passive activity losses could be used to offset a lump-sum damages award and future net income
    in the unrestricted scenario to equal effect, meaning that they would have no discernible effect on
    his tax neutralization analysis. However, defendant remarks, Dr. Ben-Zion did not provide any
    calculations in support of his assertion. With respect to its contention that Dr. Ben-Zion’s
    calculations did not comport with the Internal Revenue Code, defendant, relying on the testimony
    of Mr. Krabbenschmidt, explains that a lump-sum damages award would not simply be added to
    the partners’ adjusted gross incomes, but would first be placed in a “passive-activity basket” and
    reduced by any existing passive activity losses.
    
           The final methodological flaw urged by defendant, again relying on the testimony of Mr.
    Krabbenschmidt, is that Dr. Ben-Zion erroneously included wage income when calculating the
    tax consequences of the lump-sum damages award while at the same time excluding wage
    income when calculating the tax consequences had plaintiff been permitted to convert Sonoma
    Village Apartments to a market-rate rental property in 2011. As a result, defendant contends, Dr.
    Ben-Zion overstates the partners’ adverse tax consequences.
    
           Defendant’s second overarching argument is that plaintiff’s partners have the ability to
    employ certain tax strategies that would substantially reduce or eliminate any adverse tax
    consequences of a lump-sum damages award. As explained by Mr. Krabbenschmidt, the partners
    could amend the partnership agreement to reallocate the income among themselves, Richard
    Gullotta and his wife could each gift up to $28,000 to each of their children, and plaintiff could
    make deductible capital improvements to Sonoma Village Apartments.
    
           Third, defendant argues that plaintiff should not be awarded a tax neutralization payment
    because the partners, and not plaintiff, will incur the tax liabilities, and because any payment
    made to plaintiff would be distributed to the partners in accordance with the partnership
    agreement and not in accordance with the amounts calculated by Dr. Ben-Zion. Indeed,
    defendant avers, if Dr. Ben-Zion’s calculations are accepted, all of the partners except Eric
    Gullotta would receive a larger tax neutralization payment than what Dr. Ben-Zion calculated for
    them, while Eric Gullotta would receive significantly less than what Dr. Ben-Zion calculated for
    him.
    
            Finally, defendant argues that the federal and state income tax rates used by Dr. Ben-Zion
    are speculative. It avers that plaintiff has the burden of proving future federal and state income
    tax rates through 2035, but rather than offering expert testimony on what the income tax rates
    
    
    
    these representations to testifying witnesses based on deposition testimony that was not admitted
    into evidence.
    
                                                   -76-
    might be, plaintiff relied on Dr. Ben-Zion’s explanation that he assumed unchanging income tax
    rates because it was impossible to predict future income tax rates.
    
                                                E. Analysis
    
           In its August 24, 2016 Opinion and Order, the court held that plaintiff was entitled to
    present evidence on its claim for a tax neutralization payment because such a claim was not
    barred as a matter of law. Sonoma Apartment Assocs., 127 Fed. Cl. at 732. In so concluding,
    the court explained:
    
           The purpose of a tax gross-up payment in a breach-of-contract suit is to “ensure
           that damages awarded effectively compensate plaintiffs for the harm caused by
           defendant’s action.” In short, damages should make the nonbreaching party
           whole. If plaintiff here can prove, by a preponderance of evidence, that a lump-
           sum damages award would result in it paying more taxes than it would have paid
           in the absence of the breach of contract, then it is made whole only if it receives a
           payment to offset its increased tax burden. Indeed, if plaintiff can make the
           requisite showing, a tax neutralization payment is particularly appropriate because
           the breaching party is the federal government. Without the award of a tax gross-
           up payment, the government would benefit twice from its breach: first–in its
           proprietary capacity as a contracting party–by requiring plaintiff to continue to
           provide low- and moderate-income housing when plaintiff was not contractually
           required to do so, and then–in its role as a tax collector–from collecting more tax
           payments than it would have collected absent its breach. The government should
           not be enriched from breaching its contracts.
    
    Id. (citations omitted) (quoting Anchor Sav. Bank, 123 Fed. Cl. at 183); accord id. at 734. After
    carefully reviewing the evidence in the trial record, the parties’ posttrial briefs, and the parties’
    closing arguments, the court finds that plaintiff would not be made whole without a tax
    neutralization payment. In other words, and as explained in more detail below, plaintiff has
    established, by a preponderance of the evidence, both “a reasonable probability” that it will suffer
    adverse tax consequences due to the government’s breach of contract, Locke, 283 F.2d at 524,
    and the existence of sufficient evidence to allow for the “fair and reasonable approximation” of
    those adverse tax consequences, Specialty Assembling & Packing Co., 355 F.2d at 572.
    
            Plaintiff’s approach to calculating its tax neutralization payment, as presented by Dr. Ben-
    Zion, is straightforward: (1) estimate the difference between the amount of income taxes that the
    partners would have paid had the government not breached the contract and the amount of
    income taxes that the partners will actually pay, based on projections of their nonpartnership
    income, their partnership income, and federal and state tax income rates; (2) estimate the amount
    of income taxes that the partners would pay upon receipt of a lump-sum damages award, based
    on their estimated income in 2017, their shares of the lump-sum damages award, and projected
    2017 federal and state tax income rates; (3) compute the difference between the two amounts;
    
    
                                                    -77-
    and (4) increase the resulting tax neutralization payment to account for the fact that it, too, will
    be subject to state and federal income tax. This approach is logical and reasonable. Indeed,
    defendant does not challenge plaintiff’s overall framework for determining the amount of a tax
    neutralization payment. Rather, defendant contends, for a number of reasons, that this
    framework cannot be applied to the facts of this case.
    
             One of the reasons that defendant offers for rejecting plaintiff’s approach is that “the tax
    liability does not belong to” plaintiff. Def.’s Posttrial Resp. 62; see also id. (noting that “[t]ax
    gross-up damages have been allowed in cases where the tax liability belongs to parent entities
    where those entities are totally or severally liable for the tax”). In other words, defendant
    challenges plaintiff’s standing to pursue a tax neutralization payment on behalf of the partners.68
    “[T]he question of standing is whether the litigant is entitled to have the court decide the merits
    of the dispute or of particular issues.” Warth v. Seldin, 
    422 U.S. 490
    , 498 (1975). The standing
    inquiry involves both Article III “case or controversy” limitations on federal jurisdiction and
    “prudential limitations on its exercise.”69 Id. As a general rule, a plaintiff “must assert his own
    legal rights and interests, and cannot rest his claim to relief on the legal rights or interests of third
    parties.” Id. at 499; see also First Annapolis Bancorp, Inc. v. United States, 
    644 F.3d 1367
    , 1373
    (Fed. Cir. 2011) (“A plaintiff must be in privity with the United States to have standing to sue the
    sovereign on a contract claim.”). However, “there may be circumstances where it is necessary to
    
    
            68
                Defendant never uses the word “standing.” In fact, the court is uncertain that
    defendant intended to advance a standing argument when it asserted that plaintiff did not own the
    tax liabilities at issue in its claim for a tax neutralization payment. The court’s uncertainty is
    premised on several factors. First, defendant does not raise the tax liability ownership issue as a
    threshold matter, but instead raises the issue as part of its third overarching argument in
    opposition to plaintiff’s claim. Second, defendant only raises the issue as part of its contention
    that a tax neutralization payment awarded to plaintiff would not “flow through to the partners in
    proportion to” the adverse tax consequences they would each suffer. Def.’s Posttrial Resp. 62.
    Third, defendant does not reference any case law regarding standing. Finally, defendant did not
    raise standing as an issue when seeking the dismissal of plaintiff’s claim for a tax neutralization
    payment in its motion for partial summary judgment. Plaintiff, for its part, merely states: “Here,
    there is no standing argument, and there is a single plaintiff that has established the tax
    implications of a lump sum award to its partners.” Pl.’s Posttrial Reply 30.
            69
               Congress created the Court of Federal Claims under Article I of the United States
    Constitution. 28 U.S.C. § 171(a). Courts established under Article I are not bound by the “case
    or controversy” requirement of Article III. Zevalkink v. Brown, 
    102 F.3d 1236
    , 1243 (Fed. Cir.
    1996). However, the Court of Federal Claims and other Article I courts traditionally have
    applied the “case or controversy” justiciability doctrines in their cases for prudential reasons. See
    id.; CW Gov’t Travel, Inc. v. United States, 
    46 Fed. Cl. 554
    , 558 (2000); see also Anderson v.
    United States, 
    344 F.3d 1343
    , 1350 n.1 (Fed. Cir. 2003) (“The Court of Federal Claims . . .
    applies the same standing requirements enforced by other federal courts created under Article
    III.”).
    
                                                      -78-
    grant a third party standing to assert the rights of another.” Kowalski v. Tesmer, 
    543 U.S. 125
    ,
    129-30 (2004); accord Singleton v. Wulff, 
    428 U.S. 106
    , 114 (1976) (“Like any general rule,
    however, this one should not be applied where its underlying justifications are absent.”).
    Specifically, litigants may
    
           bring actions on behalf of third parties, provided three important criteria are
           satisfied: The litigant must have suffered an “injury in fact,” thus giving him or
           her a “sufficiently concrete interest” in the outcome of the issue in dispute, the
           litigant must have a close relation to the third party, and there must exist some
           hindrance to the third party’s ability to protect his or her own interests.70
    
    
    
           70
                When the United States Supreme Court (“Supreme Court”) finds third-party standing,
    it typically does so when a litigant argues that its injuries result from the violation of a third
    party’s constitutional rights. See, e.g., Sessions v. Morales-Santana, 
    137 S. Ct. 1678
    , 1688-89
    (2017) (holding that a son who was making a claim for United States citizenship had standing to
    “seek to vindicate his father’s right to the equal protection of the laws”); U.S. Dep’t of Labor v.
    Triplett, 
    494 U.S. 715
    , 720 (1990) (holding that a lawyer had standing to argue that “the fee
    scheme he [was] accused of violating contravene[d the] due process rights” of “the black lung
    claimants who hired him”); Sec’y of State v. Joseph H. Munson Co., 
    467 U.S. 947
    , 954-58
    (1984) (allowing a professional fundraising company to argue that a charitable-solicitation statute
    that limited its commission violated its clients’ First Amendment rights). The Federal Circuit has
    also found third-party standing in this circumstance. See, e.g., Rack Room Shoes v. United
    States, 
    718 F.3d 1370
    , 1372-75 (Fed. Cir. 2013) (holding that importers had standing to pursue
    the equal protection claims of purchasers). However, the Federal Circuit, another federal
    appellate court, and at least one federal district court have also applied the Supreme Court’s test
    for third-party standing to situations in which litigants asserted the nonconstitutional claims of
    third parties. See Willis v. Gov’t Accountability Office, 
    448 F.3d 1341
    , 1348-49 (Fed. Cir.
    2006) (rejecting, in a suit to recover attorney’s fees under a fee-shifting statute, an attorney’s
    attempt to assert her client’s claim for attorney’s fees because the client’s ability to claim the fees
    “would be undermined if [the attorney] could independently pursue an award”); Mid-Hudson
    Catskill Rural Migrant Ministry, Inc. v. Fine Host Corp., 
    418 F.3d 168
    , 172-74 (2d Cir. 2005)
    (holding that an organization had “standing to bring suit on its own behalf for injuries it sustained
    as an organization” from the defendant’s breach of contract, but lacked “standing to sue on behalf
    of its volunteers” for the same breach of contract because it did “not demonstrate[] a hindrance to
    the volunteers’ ability to protect their own interests”); One Thousand Friends of Iowa v. Mineta,
    
    250 F. Supp. 2d 1064
    , 1067-68 (S.D. Iowa 2002) (holding, in a suit challenging improvements to
    two federal highway interchanges, that a shopping mall, which was organized as a limited
    partnership, “lack[ed] third-party standing to sue on the basis of alleged injury to its employees’
    health, safety and comfort” that would result from the improvements because “there [was] no
    allegation or evidence [the shopping mall had] a personal or legal responsibility to protect the
    interests of its employees” and because the shopping mall “failed to allege an obstacle to its
    employees protecting their own health, safety and comfort”).
    
                                                     -79-
    Powers v. Ohio, 
    499 U.S. 400
    , 410-11 (1991) (footnote added) (citations omitted) (quoting
    Singleton, 428 U.S. at 112-16); see also Helferich Patent Licensing, LLC v. N.Y. Times Co., 
    778 F.3d 1293
    , 1305 (Fed. Cir. 2015) (remarking that “the very existence” of “traditional
    non-constitutional third-party standing doctrine . . . presupposes that one person may be
    adversely affected by (suffer injury in fact from) legal constraints on another and yet not have a
    legal right to seek elimination of those constraints”). In this case, all three requirements are
    satisfied: plaintiff has suffered an injury due to the government’s breach of contract; the partners
    have a close relationship to the partnership in that the partners jointly own the partnership; and
    the partners could not pursue a claim for a tax neutralization payment on their own behalf–even
    though the adverse tax consequences flow directly from the government’s breach its contract
    with plaintiff–because they are not in privity with the government. Thus, plaintiff has standing to
    assert a claim for a tax neutralization payment that compensates its partners for the adverse tax
    consequences they will sustain due to the government’s breach of contract.
    
            Relatedly, defendant takes issue with the fact that the total tax neutralization payment
    calculated by Dr. Ben-Zion will be awarded to plaintiff and distributed in accordance with the
    partnership agreement, rather than in accordance with the individual amounts that Dr. Ben-Zion
    calculated for each partner. However, the determination of whether plaintiff is entitled to a tax
    neutralization payment is based solely on whether defendant’s breach of contract caused
    plaintiff’s partners to incur additional tax liabilities, not on how plaintiff ultimately distributes
    the payment to the partners. Thus, the distribution provisions in the partnership agreement–
    which can be amended if the partners so choose–are irrelevant to the viability of plaintiff’s claim.
    
            Defendant next argues that Dr. Ben-Zion’s methodology is, in general, too simple to be
    applied in this case. To be sure, Dr. Ben-Zion is usually tasked with calculating adverse tax
    consequences in wage and employment cases that concern a single employee with a simple tax
    situation, and a short stream of future income. It is also true that plaintiff is composed of five
    partners, each with unique income and income tax situations, and at least four of whom file
    complex tax returns.71 However, the fact that this case presents a more complicated scenario than
    the scenario typically encountered by Dr. Ben-Zion is no reason to reject Dr. Ben-Zion’s
    methodology. Indeed, requiring Dr. Ben-Zion’s methodology to account for every possible event
    that might affect the partners’ future tax liabilities risks making the necessary calculations so
    complex and unwieldy that the amount of a tax neutralization payment could never be
    determined, notwithstanding the appropriateness of the remedy. Moreover, requiring the use of a
    more complex methodology in this case would unduly punish plaintiff, who would not have had
    to forecast almost two decades of tax liabilities but for the government’s breach of contract.
    
           Several other arguments advanced by defendant are variations of its attack on the
    simplicity of Dr. Ben-Zion’s methodology. For example, defendant argues that Dr. Ben-Zion
    ignored known, or easily discoverable, information in calculating the tax neutralization
    
    
           71
             Again, the court notes that the trial record contains no information regarding the
    income or income tax situation of the fifth partner, Mr. Parasol.
    
                                                    -80-
    payment–namely, the expectations that Eric Gullotta and Karen Kass had regarding their future
    incomes and the life expectancies of Richard Gullotta and his spouse. With respect to the
    partners’ expectations regarding their future incomes, the court finds that projections of future
    income based on current expectations are no more certain than projections of future income
    based on current income. Thus, regardless of whether Dr. Ben-Zion was obligated to investigate
    the partners’ tax situations beyond reviewing their income tax returns, the information he would
    have gleaned from any such investigation would not have increased the certainty of his
    projections. On the other hand, Dr. Ben-Zion should have considered the life expectancy of
    Richard Gullotta when calculating how long Richard Gullotta could continue to earn income,
    either from his CPA practice or from plaintiff’s operation of Sonoma Village Apartments.72 It
    was unreasonable for Dr. Ben-Zion to have assumed that Richard Gullotta would continue to
    receive income, and therefore, pay income taxes, beyond his life expectancy. The only evidence
    in the trial record concerning Richard Gullotta’s life expectancy was presented by Mr.
    Krabbenschmidt, who indicated that pursuant to the Social Security Administration’s mortality
    tables, Richard Gullotta could expect to live thirteen years beyond the date of trial.73
    Accordingly, plaintiff shall correct Dr. Ben-Zion’s calculation to reflect that Richard Gullotta
    (and, necessarily, Richard Gullotta’s spouse74) would not receive any income or incur any tax
    liability beyond 2029.75
    
    
            72
                There is no evidence in the trial record that Richard Gullotta’s spouse is one of
    plaintiff’s partners.
            73
             The trial record does not contain any evidence regarding Richard Gullotta’s life
    expectancy at the time the government breached the contract.
            74
               The income earned and taxes owed by Richard Gullotta’s spouse should be disregarded
    at the end of Richard Gullotta’s life expectancy because (1) only Richard Gullotta, and not his
    spouse, is a partner of plaintiff, (2) there is no evidence in the trial record that Richard Gullotta’s
    share in plaintiff would pass to his spouse upon his death, and (3) the trial record lacks any
    evidence regarding the income earned by Richard Gullotta’s spouse separate and apart from
    Richard Gullotta.
            75
              There is no evidence in the trial record suggesting that plaintiff’s ability to recover
    damages through the expiration of its contract with the government is affected by the assumption
    that Richard Gullotta will die before the contract’s expiration. Indeed, the partnership agreement
    provides for the continuation of the partnership upon the death of one of the general partners.
    See JX 57 at 28 (“In the event of the . . . death . . . of a General Partner, the business of the
    Partnership shall be continued with Partnership property by the remaining General Partners[.]”),
    33-34 (“The Partnership shall be dissolved on the earlier of the expiration of the term of the
    Partnership or upon . . . [t]he . . . death . . . of a General Partner who is at that time a sole General
    Partner subject to the right of the Partners to continue the Partnership . . . or . . . [a]ny other event
    causing the dissolution of the Partnership under the laws of the state . . . .”); see also Cal. Corp.
    Code § 15908.01 (West 2008) (addressing nonjudicial dissolution of limited partnerships).
    
                                                      -81-
            Defendant also contends that Dr. Ben-Zion’s methodology is too simple because it fails to
    account for the partners’ ability to use their passive activity losses to offset their income from the
    lump-sum damages award. Dr. Ben-Zion testified that he did not account for this possibility
    because the partners would be able to use their passive activity losses in both the breach and
    nonbreach worlds to almost equal effect, thereby eliminating any substantial impact they would
    have on his tax neutralization payment calculation. Defendant’s expert, Mr. Krabbenschmidt,
    did not refute Dr. Ben-Zion’s assertion, and the court has no reason not to accept it, even in the
    absence of supporting calculations.
    
             Also related to defendant’s simplicity argument is defendant’s contention that Dr. Ben-
    Zion failed to account for the possibility that the partners could use tax avoidance strategies to
    mitigate any adverse tax effects of the lump-sum damages award. All of the strategies that
    defendant identifies–amending the partnership agreement, taking advantage of the tax codes’ gift
    tax provisions, making deductible capital improvements to Sonoma Village Apartments–are
    strategies that the partners may or may not choose to use. Indeed, the partners may not want to
    (or be able to) amend the partnership agreement for reasons unrelated to their income tax
    liabilities, may have other plans for taking advantage of the gift tax exclusions available to them,
    and may not want to expend their own funds to make capital improvements. While the partners
    may ultimately decide to utilize a tax avoidance strategy, defendant has not established that the
    partners would actually do so upon their receipt of the lump-sum damages award. Cf. Home Sav.
    of Am., 399 F.3d at 1355-56 (affirming a tax gross-up award over the government’s objection
    that the plaintiff could avoid paying income taxes using “tax planning resources”). Thus, the
    court declines to assume that the partners would use one or more of these strategies to reduce
    their tax liabilities.
    
            Having addressed all of defendant’s simplicity-related challenges, the court turns to
    defendant’s two remaining objections to plaintiff’s claim for a tax neutralization payment. First,
    defendant contends that Dr. Ben-Zion erroneously included wage income when calculating the
    tax consequences of the lump-sum damages award while at the same time excluding wage
    income when calculating the tax consequences of plaintiff being permitted to convert Sonoma
    Village Apartments to a market-rate rental property in 2011. The court agrees with defendant.
    When calculating the tax consequences of converting Sonoma Village Apartments to a market-
    rate rental property in 2011 (the first step of his analysis), Dr. Ben-Zion subtracted the stream of
    future income taxes that each partner would pay in the status quo scenario from the stream of
    future income taxes that each partner would pay in the conversion scenario. In both scenarios,
    the income taxes were based on two sources of income: (1) wage and other non-real-estate
    income, which would be the same in both scenarios, and (2) the income derived from operating
    Sonoma Village Apartments, which would be different in each scenario. Because the income
    taxes on the wage and other non-real-estate income would be the same in both scenarios, the tax
    consequences of converting Sonoma Village Apartments to a market-rate rental property in 2011
    are based solely on the income derived from operating Sonoma Village Apartments. Accord Tr.
    1387 (Ben-Zion) (“The tax on the base income falls out.”). However, when determining the tax
    consequences of a lump-sum damages award (the second step of his analysis), Dr. Ben-Zion
    
    
                                                    -82-
    included wage and other non-real-estate income in his calculations. By including wage and other
    non-real-estate income when calculating the tax consequences of the lump-sum damages award
    when such income does not affect the tax consequences of converting Sonoma Village
    Apartments to a market-rate rental property in 2011, Dr. Ben-Zion improperly inflated the
    amount of income taxes that the partners would owe in the year of the lump-sum damages award,
    resulting in an overstatement of the partners’ adverse tax consequences. Accordingly, when
    recalculating the tax neutralization payment it is owed, plaintiff shall omit wage and other non-
    real-estate income from Dr. Ben-Zion’s computation of the tax consequences of the lump-sum
    damages award.
    
             Defendant’s other remaining argument is that the income tax rates used by Dr. Ben-Zion
    to project the partners’ future income tax liabilities are too speculative. In calculating the tax
    neutralization payment, Dr. Ben-Zion used the federal and state income tax rates for 2015 to
    project the partners’ tax liabilities for each year from 2016 through 2035 because it was
    impossible to predict how Congress might change the income tax rates in the future. The court
    finds Dr. Ben-Zion’s use of 2015 income tax rates to project future tax liabilities to be
    reasonable. As Dr. Ben-Zion recognized, it is impossible to predict what Congress might do in
    the future–certainly, plaintiff and other similarly situated parties whose contracts with the
    government specifically provided the option to prepay their loans after twenty years never would
    have predicted that Congress, even for the noblest of reasons, would enact laws abrogating their
    previously established contractual rights. Therefore, Dr. Ben-Zion’s use of existing income tax
    rates is no more speculative than the use of any other income tax rates.
    
            As a final matter, the court must address the discount rate that should be used when
    calculating the tax neutralization payment to which plaintiff is entitled. Dr. Ben-Zion testified
    that the proper discount rate is the rate that was used to calculate plaintiff’s expectancy damages,
    and defendant did not counter this testimony. Accordingly, the court finds that the tax
    neutralization payment should be calculated using the postjudgment discount rates that it
    previously found to be fair and reasonable; in other words, a discount rate of 7% should be
    applied to projected tax liabilities in the conversion scenario and a discount rate of 10% should
    be applied to projected tax liabilities in the status quo scenario.
    
            As reflected by the above analysis, and as permitted by binding precedent, the court did
    not accept plaintiff’s tax neutralization analysis in its entirety. See Precision Pine & Timber,
    Inc., 596 F.3d at 833 (“[A] judge may award damages[] even if he does not fully credit that
    party’s methodology.”). Consequently, plaintiff must recalculate its tax neutralization payment
    to conform with the court’s findings and conclusions.
    
                                           VI. CONCLUSION
    
            When the federal government acts, even when it does so for the public good, its actions
    can adversely affect the rights of individual citizens. This tension between private rights and the
    public good is illustrated by what happened in this case: Congress enacted statutes to stem the
    
    
                                                    -83-
    loss of available low-income housing to assist low-income households, but in doing so, it
    required Rural Development to breach existing contracts with the owners of low-income
    housing, like plaintiff, who tried to exercise their contractual right of prepayment. The
    government’s breach in this case both injured plaintiff financially and damaged Richard
    Gullotta’s trust that the government will honor its contractual obligations. Unfortunately, neither
    injury is fully compensable by the court: The court cannot award plaintiff the attorneys’ fees and
    costs that it incurred in pursuing its claim against the government.76 Nor can the court award
    plaintiff the relief that it truly seeks–an order directing the government to abide by the terms of
    the contract that it drafted.
    
            What the court can do is–as best as it can–compensate plaintiff for the benefits it
    expected to receive from operating Sonoma Village Apartments as a market-rate rental property
    had the government not breached the contract, and ensure that such compensation does not
    further enrich the government at plaintiff’s expense. Thus, the court awards plaintiff expectancy
    damages and a tax neutralization payment.
    
            As discussed above, the court did not adopt either party’s position on damages in its
    entirety. Accordingly, the court cannot enter judgment until plaintiff’s damages are recalculated
    in accordance with the court’s findings and conclusions. To facilitate the prompt entry of
    judgment, the court adopts the following procedure:77
    
            •    By no later than 12:00 p.m. (EST) on Monday, November 6, 2017, the
                 parties shall file a joint status report proposing the amount of judgment that
                 should be entered in this case, assuming that the judgment will be entered on
                 Thursday, November 9, 2017. The parties shall specify how much of the
                 proposed amount is to compensate for plaintiff’s expectancy damages and
                 how much of the proposed amount is attributable to the tax neutralization
                 payment. Agreeing to an amount of judgment does not signify agreement with
                 the court’s findings and conclusions, waive any arguments or rights the parties
                 might otherwise have, or impact either party’s right to an appeal.
    
            •    If the parties disagree as to the amount of either component of the proposed
                 judgment, each party shall, in the joint status report, indicate its proposed
    
    
            76
                Although not taken into consideration by the court in determining damages, the court
    observes that in this breach-of-contract case arising from the government’s refusal to allow
    plaintiff to exercise its contractual right to prepay the balance of its loan, plaintiff is not entitled
    to an award of attorneys’ fees, costs, and expenses. Had this case arisen under the Takings
    Clause of the Fifth Amendment, every element of plaintiff’s monetary damages would be
    compensated.
            77
              The court derives this procedure from the one adopted by the court in Franconia
    Associates, 61 Fed. Cl. at 771.
    
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               amounts and explain why its proposed amounts most accurately conform to
               the court’s findings and conclusions. These proposed amounts should be
               based on the assumption that the judgment will be entered on Friday,
               December 1, 2017. Then, by no later than Friday, November 17, 2017,
               each party shall file a response addressing why the other party’s proposed
               amount does not most accurately conform to the court’s findings and
               conclusions.
    
           •   The parties shall not use this process to reargue or seek reconsideration of any
               of the issues resolved by the court’s findings and conclusions.
    
            Finally, due to the existence of a protective order in this case, the court has filed the
    decision under seal. The parties shall confer to determine any agreed-to proposed redactions.
    Then, by no later than Friday, September 29, 2017, the parties shall file, under seal, a joint
    status report indicating their agreement with any proposed redactions, attaching a copy of those
    pages of the court’s decision containing proposed redactions, with all proposed redactions
    clearly indicated. In addition, defendant shall file, pursuant to paragraph 11 of the protective
    order, redacted versions of the documents it previously filed under seal (electronic case filing
    numbers 74, 85, and 117).
    
           IT IS SO ORDERED.
    
                                                          s/ Margaret M. Sweeney
                                                          MARGARET M. SWEENEY
                                                          Judge
    
    
    
    
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