Virginia International Gateway v. City of Portsmouth ( 2019 )

PRESENT: All the Justices
VIRGINIA INTERNATIONAL GATEWAY, INC.
OPINION BY
v. Record No. 180810 JUSTICE WILLIAM C. MIMS
October 31, 2019
CITY OF PORTSMOUTH
FROM THE CIRCUIT COURT OF THE CITY OF PORTSMOUTH
James C. Hawks, Judge
In this case, we consider whether a real estate appraiser must be licensed in Virginia to
offer expert testimony in a tax-assessment dispute. We also consider whether the taxpayer met
its burden of proving that the assessment overvalued the subject property.
I. BACKGROUND AND MATERIAL PROCEEDINGS BELOW
Virginia International Gateway, Inc. (“VIG”) owns a marine container terminal in the
City of Portsmouth fronting the Elizabeth River. The terminal consists of 610 acres including a
wharf, buildings, eight “ship-to-shore” (“STS”) cranes, and other improvements. When
container ships dock at the wharf, the STS cranes unload shipping containers onto a large
container yard. Surrounding the container yard is a system of 30 remotely operated rail-mounted
gantry cranes. These gantries straddle the container yard, moving along the rails to pick up and
place containers onto waiting trucks. The terminal also uses four rubber-tire gantry cranes for
this task. The rubber-tire gantries differ from the rail-mounted gantries in that they are diesel-
powered rather than electric, require an onboard driver to operate, and have tires permitting them
to move freely around the yard.
For taxation purposes, VIG’s real property includes the land, buildings and improvements
on the land, the wharf, and the eight STS cranes which are considered fixtures. For the 2015–16
tax year, the City assessed the total value of VIG’s real property at $361,084,820 with the
following valuations:
Land: $72,946,280
Buildings: $34,357,850
Improvements: $98,425,460
Wharf: $92,998,850
STS Cranes: $62,322,200
Other Real Property: $34,180
The rail-mounted gantries and rubber-tire gantries are considered personal property for tax
purposes. The City assessed the 30 rail-mounted gantries at $27,467,070 and the four rubber-tire
gantries at $2,809,250 in both 2015 and 2016.
VIG believed the assessments for its real and personal property were above fair market
value. It filed separate applications to correct the 2015–16 real estate and personal property
assessments pursuant to Code § 58.1-3984. The City answered, denying that the assessments
exceeded fair market value. In addition, the City filed a counterclaim to the real property
application contending that the fair market value was actually several hundred thousand dollars
more than the assessment. The trial court consolidated the two cases for trial, which occurred in
late 2017.
A. Evidence of Real Property Valuation
At trial, VIG offered expert testimony to support its position that the actual fair market
value of the real property was $197,217,000. It relied on Glen Fandl, a taxation consultant and
real estate appraiser with experience evaluating complex industrial properties, to establish the
value of the land, buildings, improvements, and wharf—every aspect of the real property except
the STS cranes. Fandl held an active New York real estate appraisal license for all times relevant
to this appeal. His work with VIG began in 2015, when he reviewed the City’s assessments,
visited the property, and arrived at a preliminary valuation of the real estate “in the hope of
settling the case informally.” When litigation became inevitable, Fandl obtained a temporary
Virginia license active from January 28, 2016 to January 27, 2017, then conducted a formal
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appraisal of the property’s value. Fandl acknowledged that he based his formal appraisal on the
initial valuation he developed in 2015 but testified that once he obtained Virginia licensure, he
updated his findings to comply with the Uniform Standards of Professional Appraisal Practice
(“USPAP”) and other requirements for formal appraisals. He completed his appraisal report in
October 2016.
The City objected to Fandl’s testimony and expert qualification because he lacked
Virginia licensure at the time of trial. After hearing argument, the trial court overruled the
objection. It explained: “I understand that, you have to be licensed to work as an appraiser. But
to qualify as an expert in this court is my determination, and I recognize Mr. Fandl as
[eminently] qualified to testify both as to personal and real estate issues before this [c]ourt.”
Fandl relied on a combination of the cost and sales-comparison methods to appraise the
property. He followed the City’s practice of assessing the unimproved land, buildings,
improvements, and the wharf separately. Fandl appraised the unimproved land by comparing the
property to commercial property sales around Portsmouth as well as sales of similar, though
undeveloped, waterfront parcels around the country. He divided the unimproved land into the
same categories used by the City, concluding that the waterfront acreage was worth $9,030,000;
the commercial land was worth $16,117,000; the wetlands were worth $1,284,000; and the
remaining land was worth $34,000. He opined that the unimproved land was worth a total of
$26,465,000. Fandl employed the Marshall & Swift Valuation Service—a standard costing
manual for commercial real estate appraisal—to estimate the replacement cost of the buildings
and account for their depreciation. He concluded that the buildings had a total fair market value
of $18,508,000.
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Fandl then considered the improvements to the property—what he described as any
improvements to the land other than the buildings or wharf, such as concrete pads, asphalt, curbs,
and rails. To appraise the improvements, Fandl used the original cost information from when the
terminal was first constructed, then trended those costs forward to the relevant date and adjusted
for depreciation using schedules in Marshall & Swift as well as supplemental information from
sources such as highway department data. He concluded that the fair market value of all the
improvements was $61,125,650. He used the same approach to assess the wharf, which he
appraised at $53,918,000. Fandl appraised the total fair market value of all real property other
than the STS cranes at $163,017,000.
VIG then called Maarten Verheijen, a broker specializing in buying and selling container-
handling equipment used by marine ports, to testify regarding the value of the STS cranes and
other port equipment. The trial court qualified Verheijen as an expert in the field of valuing
specialized marine terminal equipment, including STS cranes, rail-mounted gantries, and rubber-
tire gantries. Verheijen acknowledged that he was unfamiliar with USPAP, International
Valuation Standards, or the sales-comparison, income, and cost methods, the three primarily
accepted appraisal methods in Virginia. When asked on cross-examination whether he was
familiar with those valuation methods, he responded: “[I]f you are referring to any standards of
appraising in the United States, then, no, we’ve never heard of them. We’ve never—we do not
adhere to those standards because we are not from the United States.” When asked whether he
was familiar with “the actual steps that are required by appraisal organizations in Virginia and
the United States,” Verheijen testified that he was “not familiar with any steps that any appraisal
organization here would use.” Instead, he said that he used a “customer-centric approach” that
incorporated elements of the sales-comparison method in valuing VIG’s property.
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Verheijen considered a variety of factors in assessing the value of the STS cranes,
including market trends, the relative value of different currencies, the cranes’ size and age, the
cost of a new crane, modification costs, and warranty costs. He determined that the primary
market for the STS cranes would be overseas. Consequently, the valuation would have to
account for transportation costs and electrical conversion costs because North America uses an
electrical system incompatible with any other location in the world. Verheijen emphasized that
transporting an STS crane is a risky and expensive proposition, sometimes costing more than the
value of the crane itself. For this reason, he opined, transportation costs must be included in the
overall valuation of the crane. Moreover, he testified that because buyers of STS cranes always
bear the cost of transportation, those costs factor into sales prices. Concluding that a buyer
would pay no more than sixty percent of the value of a new crane and applying his analysis to
the specific characteristics of VIG’s eight STS cranes, he testified that their total fair market
value was $34,200,000.
Thus, through the testimony of Fandl and Verheijen, VIG presented evidence that the
total fair market value of all of the terminal’s real property was $197,217,000—a figure
$163,867,820 lower than the City’s assessment.
B. Evidence of Personal Property Valuation
VIG also challenged the City’s assessment of its personal property, primarily contesting
the value of the rail-mounted and rubber-tire gantries. The City used a standard formula of fifty
percent of original cost to assess the personal property. VIG maintained that this default
approach resulted in overvaluation.
Verheijen also served as VIG’s personal property valuation expert, testifying as to the
value of both types of gantries. He determined that there was little, if any, domestic market for
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the rail-mounted gantries, so—as with the STS cranes—he discounted their valuation by the
transportation and technological refitting costs necessary for them to become operational in a
foreign market. Accounting for these additional costs, Verheijen concluded that the rail-mounted
gantries had a fair market value of $19,500,000 in 2015 and $16,500,000 in 2016. Unlike the
STS cranes and rail-mounted gantries, Verheijen determined that there was a domestic market
for the rubber-tire gantries and thus no corresponding need to discount for transportation-related
expenses. He opined that VIG’s four rubber-tire gantries had a fair market value of $1,900,000
in 2015 and $1,600,000 in 2016.
The City called David Cole, an appraiser specializing in machinery and equipment
valuations, as its personal property valuation expert. The trial court qualified him as an expert
based on his “vast knowledge of different items of equipment,” noting that his inexperience with
marine terminal equipment went only to the weight of his opinion. Cole relied on the cost
approach for valuing the rail-mounted gantries and both a cost and sales-comparison approach
for the rubber-tire gantries. He concluded that, after accounting for depreciation and functional
obsolescence, the 30 rail-mounted gantries had a total fair market value of $34,800,000 in 2015
and $27,300,000 in 2016. He appraised the four rubber-tire gantries at a total value of
$2,255,000 in 2015 and $2,085,000 in 2016. Based on these figures, the City contended that
VIG was unable to show that the City’s assessment exceeded the personal property’s fair market
value.
Cole also challenged Verheijen’s inclusion of transportation-related costs in his appraisal.
He observed that, although Verheijen did not define his approach to valuation, he believed
Verheijen had employed a “fair market value removed” method. This approach, Cole testified,
deducts the cost of removing the asset to another location from the asset’s fair market value. As
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such, he opined, Verheijen’s valuation did not comply with the definition of “fair market value”
required for Virginia appraisals.
C. The Final Order
On March 22, 2018, the trial court entered a final order dismissing both of VIG’s
applications as well as the City’s counterclaim. The trial court dismissed VIG’s real estate case
because it reversed its prior decision to qualify Fandl as an expert. The order indicated that the
trial court maintained its twice-iterated view that Fandl was “[eminently] qualified to testify,”
noting that “his history of licensure in the State of New York and twice temporarily in Virginia,
along with his previous designation as an appraiser by the American Society of Appraisers, was
adequate evidence of his expertise enabling him to formulate a knowledgeable opinion as to real
estate values.” Nevertheless, the trial court found that “it was an abuse of power to recognize
Mr. Fandl as an expert in real estate values in Virginia and permit his testimony because his
appraisal work was unlicensed and he was again unlicensed at the time he gave his testimony.”
It expressly adopted the reasoning in Appalachian Power Co. v. Orr, 40 Va. Cir. 370(Washington Cty. 1996), and Commonwealth Transportation Commissioner v. Baxter, 44 Va.
Cir. 148 (Spotsylvania Cty. 1997), to hold that its decision to exclude Fandl was “a trial judge’s
aversion to exercising a power which will serve to promote illegal conduct.” In essence, the trial
court ruled that qualifying Fandl as an expert would be a misuse of judicial power because it
would promote illegal conduct given Virginia’s statutory licensure requirement for real estate
appraisers.
The trial court additionally rejected Verheijen’s opinion on the personal property’s value,
largely because he included transportation-related costs in his appraisals. It noted that costs of
removal are not part of Virginia’s definition of fair market value and their inclusion rendered
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Verheijen’s testimony “flawed.” These costs, it held, “are not required by the general
understanding of fair market value and are too speculative to be considered as a special factor in
valuing” the gantries. The trial court ultimately determined that VIG failed to carry its burden of
establishing that the City overvalued the personal property. Thus finding VIG’s evidence of fair
market value lacking as to both the real and personal property, the trial court declined to adjust
any of the assessments at issue.
We awarded VIG this appeal.
II. ANALYSIS
VIG’s assignments of error raise two primary issues: whether a real estate appraiser must
have an active Virginia license to testify as an expert and whether VIG failed to rebut the
presumption that the City’s assessments were correct.
A. Licensure and Qualification of Real Estate Appraisal Expert
To the extent the trial court’s decision excluding Fandl turned on its interpretation of a
statute, that interpretation presents a question of law we review de novo. See Conyers v. Martial
Arts World of Richmond, Inc., 273 Va. 96, 104 (2007). “The admission of expert testimony is
committed to the sound discretion of the trial judge, and we will reverse a trial court’s decision
only where that court has abused its discretion.” Brown v. Corbin, 244 Va. 528, 531 (1992).
“Where a statute designates express qualifications for an expert witness, the witness must satisfy
the statutory criteria in order to testify as an expert.” Commonwealth v. Allen, 269 Va. 262, 273
(2005). In the absence of overt criteria, however, ordinary principles governing expert testimony
apply. Id.8
1. Development of the Statutory Scheme
Code § 54.1-2011(A) provides that it is “unlawful to engage in the appraisal of real estate
or real property for compensation or valuable consideration in this Commonwealth without first
obtaining a real estate appraiser’s license.” Code § 54.1-2010, in turn, sets forth various
categories of people who are exempt from this licensure requirement. Nothing in the statute
prior to 1995 could be construed as relating to expert testimony, although the question of
unlicensed appraisal testimony arose from time to time in the lower courts.
Seeking guidance on how to resolve that issue, in 1993 the Amherst County
Commonwealth’s Attorney asked the Attorney General whether a real estate broker without a
real estate appraisal license could testify, for compensation, regarding the value of real property
in judicial proceedings. 1993 Op. Atty. Gen. 211, 211. The Attorney General opined that under
Code §§ 54.1-2010 and 54.1-2011,
it is unlawful for anyone, including a licensed real estate broker,
who does not have a real estate appraiser’s license to testify for
compensation about the value of real estate in any court
proceeding, unless permitted under applicable statutory exceptions.
Id. at 212. Several months after the Attorney General offered his opinion, the Circuit Court of
Arlington County faced the same question as a dispositive issue. Lee Gardens Arlington Limited
Partnership challenged the County’s 1992 real estate tax assessment of a large apartment
complex it owned, offering a tax consultant named George Byrne as its compensated expert to
testify regarding the property’s value. The County objected to Byrne’s testimony because he
lacked a Virginia real estate appraiser’s license. Relying on the Attorney General’s opinion, the
circuit court refused to qualify Byrne and ultimately granted the County’s motion to strike Lee
Gardens’ case. The circuit court entered its final order on November 18, 1994, and a notice of
appeal was filed shortly thereafter.
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Meanwhile, at the start of the 1995 legislative session, House Bill 2087 was introduced.
Among other things, it made inconsequential edits to Code § 54.1-2010 having no effect on Lee
Gardens’ case. After passing the House, the bill was referred to the Senate Committee on
General Laws. On February 15, 1995, that Committee proposed an additional amendment,
inserting a new subsection B that read:
Nothing contained herein shall proscribe the powers of a judge to
determine who may qualify as an expert witness to testify in any
legal proceeding. This provision is declarative of existing law. 1
This new language, if adopted, would directly affect the issue in Lee Gardens’ pending appeal.
Less than a week later, Lee Gardens filed its petition for appeal in this Court. The full House
and Senate approved the Committee’s amendments and passed the bill unanimously. The
Governor signed it into law on March 16, 1995. 1995 Acts ch. 327. On May 26, 1995, this
Court granted Lee Gardens’ petition for appeal.
The new Code § 54.1-2010(B) took effect on July 1, 1995. On July 7, 1995, Lee
Gardens—represented by Virginia-licensed counsel based in a Maryland office—filed its
opening brief citing only preexisting language from that statute, apparently unaware of the newly
enacted and highly relevant subsection B. The County filed its brief on August 3, 1995,
similarly quoting the statute’s long-standing language but failing to reference new subsection B.
Lee Gardens’ reply brief omitted any reference to Code § 54.1-2010 entirely.
1
The term “declarative of existing law” is used occasionally by the General Assembly
when it wishes to clarify a statute or correct an interpretation of a statute with which it disagrees.
It typically is placed in a second enactment clause rather than in the codified statutory language.
See, e.g., 2016 Acts ch. 186 (“Be it enacted by the General Assembly of Virginia: 1. That
§ 64.2-719 of the Code of Virginia is amended and reenacted as follows: . . . . 2. That the
provisions of this act are declarative of existing law.”).
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The Court issued its opinion in Lee Gardens Arlington Limited Partnership v. Arlington
County Board, 250 Va. 534 (1995), on November 3, 1995. It characterized the case as
presenting a question of first impression: “[W]hether a person unqualified to obtain an
appraiser’s license can testify as an expert witness on real estate valuation.” Id. at 539. To
answer that question, the Court adopted the Attorney General’s conclusion from the 1993
opinion to hold that the circuit court had properly refused to accept Byrne’s testimony. Id. at
540. It observed that the “General Assembly is presumed to have knowledge of the Attorney
General’s interpretation of statutes and the General Assembly’s failure to make corrective
amendments evinces legislative acquiescence in the Attorney General’s interpretation.” Id.
(quoting City of Winchester v. American Woodmark Corp., 250 Va. 451, 458 (1995)). The Court
concluded: “Had the legislature intended to make ‘corrective amendments’ to Chapter 20.1 of
Title 54.1 enacted in 1990, it could have done so. It did not.” Id.Lee Gardens did not accurately reflect Virginia statutory law at the time it was decided,
largely because the General Assembly’s 1995 enactment of subsection B was a corrective
amendment that apparently was intended to reject the Attorney General’s interpretation. The
opinion’s silence regarding the amendment subsequently posed a challenge for trial courts. For
instance, in Appalachian Power Co. v. Orr, 40 Va. Cir. 370, 370 (Washington Cty. 1996), the
circuit court applied Lee Gardens to hold that although a potential appraisal expert “is probably
eminently qualified and, most likely, could qualify as an expert in this court, he is not allowed to
render his expert opinion in the context of this case if he is compensated unless he is a licensed
appraiser.” It acknowledged Appalachian Power’s contention that the 1995 amendment may
have gone unnoticed by the Lee Gardens Court and noted that, in its “humble opinion, there was
room for at least a footnote reference to the same in that opinion.” Id. at 371. Nevertheless, the
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circuit court acknowledged that Lee Gardens constituted binding precedent. “If it is to be
changed,” the court noted, “it must be done by the legislature.” Id.The circuit court in Commonwealth Transportation Commissioner v. Baxter, 44 Va. Cir.
148, 152 (Spotsylvania Cty. 1997), addressed the same issue one year later, ruling that an
unlicensed appraiser could not testify as an expert for compensation. Similarly observing that
Lee Gardens did not acknowledge the 1995 amendment, the court concluded that the
amendment’s language effectively adopted the Attorney General’s opinion: “When the
legislature enacted the amendment, and qualified it with the proviso that the amendment is
‘declarative of existing law,’ the legislature evinced acquiescence in the Attorney General’s
interpretation.” Id. at 151.
The Baxter court offered a further rationale for its decision rooted in Code
§ 54.1-2011(A)’s prohibition of providing compensated real estate appraisals without a license:
By definition, an appraisal involves an analysis, opinion or
conclusion relating to the value of real estate. If a court were to
allow such testimony, it would be condoning, even abetting,
unlawful conduct. For that reason alone, a court should not qualify
such a person and allow him to testify as an expert witness about
the results or product of his appraisal.
Id. (citation omitted). The circuit court ultimately “exercise[d] its power to refuse to qualify an
unlicensed appraiser as an expert witness so as to allow that witness to give an opinion about the
value of real estate that would be based upon, and the product of, an unlawful appraisal,”
creating an example that the trial court in this case would follow. Id. at 152.
Both circuit courts reached erroneous conclusions largely due to their reliance on Lee
Gardens. The court in Orr, in its attempt to reconcile the statutory text with Lee Gardens,
looked ahead to future legislative action when the 1995 amendment had already clarified that the
court had the power to qualify the unlicensed appraiser as an expert. Similarly, the Baxter court
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misconstrued the effect of the “declarative of existing law” provision. Far from “evinc[ing]
acquiescence in the Attorney General’s interpretation,” as Baxter held, that language appears to
have been intended to repudiate the 1993 opinion.
In light of this background, the 1995 amendment to Code § 54.1-2010(B) provides that a
trial court may qualify a person as an expert witness to testify regarding the value of real estate
without regard to his or her Virginia licensure status. 2 It did not, however, render licensure
status irrelevant. Licensure remains an important consideration in assessing a prospective
expert’s qualifications. Code § 54.1-2010(B) stands only for the proposition that a trial court
cannot refuse to qualify an otherwise appropriate expert solely for the lack of an active Virginia
license at trial. With these principles in mind, we turn to the trial court’s decision in this case.
2. Effect on Fandl’s Qualification
In its final order, the trial court acknowledged that Fandl’s “history of licensure in the
State of New York and twice temporarily in Virginia, along with his previous designation as an
appraiser by the American Society of Appraisers, was adequate evidence of his expertise
enabling him to formulate a knowledgeable opinion as to real estate values.” Despite its belief
that Fandl was qualified to testify as an expert and that it had the power to qualify him, it refused
to do so because it found that Fandl’s “appraisal work was unlicensed and he was again
unlicensed at the time he gave his testimony.” This was error.
Although the trial court referenced Lee Gardens, Orr, and Baxter, it primarily relied on
the aversion to promoting illegal conduct discussed in Baxter to justify excluding Fandl. As an
2
In 1999, the General Assembly removed the sentence, “This provision is declarative of
existing law,” from § 54.1-2010(B). 1999 Acts ch. 259. The reason for this removal is not
apparent from the legislative record, and we decline to speculate as to the legislature’s
motivation. The removal of the sentence four years after it was added does not bear upon our
analysis.
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initial matter, the trial court’s finding that Fandl’s appraisal work was unlicensed is without
evidentiary support. Although Fandl did develop an informal, preliminary valuation in 2015
prior to obtaining a Virginia license, he secured a temporary Virginia appraisal license effective
from January 28, 2016 to January 27, 2017. During this period of active licensure, Fandl
updated his initial valuation and brought it into compliance with the standards governing real
estate appraisals in Virginia. He completed his final appraisal report in October 2016, within the
period of active licensure. Fandl’s testimony addressed only the appraisal for which he was
licensed. As such, there could be no reasonable concern that permitting his testimony would
condone or promote an unlawful activity even though he lacked a Virginia license at trial.
This lack of licensure at trial was the other ground on which the trial court excluded
Fandl’s testimony. As discussed at length above, this testimony was unobjectionable under Code
§ 54.1-2010(B). The trial court’s two bases for excluding Fandl respectively sought to prevent
illegal conduct that did not exist and relied upon an incorrect statement of law regarding
unlicensed appraisal testimony. The exclusion of his testimony thus constituted an abuse of its
discretion. See Landrum v. Chippenham & Johnston-Willis Hosps., Inc., 282 Va. 346, 352
(2011) (holding that a trial court abuses its discretion “by giving significant weight to an
irrelevant or improper factor”); Porter v. Commonwealth, 276 Va. 203, 260 (2008) (holding that
“[a circuit] court by definition abuses its discretion when it makes an error of law” (quoting
Koon v. United States, 518 U.S. 81, 100 (1996))).
B. Personal Property Valuation
VIG’s remaining assignments of error challenge the trial court’s failure to order corrected
personal property assessments. As we analyze personal property assessment, which is distinct
from real estate assessment, the recent decision in Western Refining Yorktown, Inc. v. County of
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York, 292 Va. 804 (2016), stands front and center in our jurisprudence. We will follow its
methodology as we consider VIG’s personal property case.
When a taxpayer challenges an incorrect personal property tax assessment pursuant to
Code § 58.1-3984, “it is well settled that there is a presumption in favor of the correctness of a
tax assessment and the burden is upon the property owner who questions it to show that the value
fixed by the assessing authority is excessive.” Id. at 817 (quoting Norfolk & W. Ry. Co. v.
Commonwealth, 211 Va. 692, 695 (1971)). The presumption does not give way “even if the
assessor is unable to come forward with evidence to prove [its] correctness.” Id. It is therefore
not enough for the taxpayer to prove that the assessment is flawed. Instead, the “taxpayer
seeking relief from an allegedly erroneous assessment has the burden to show that the assessment
exceeds fair market value.” Id. at 818 (quoting County of Albemarle v. Keswick Club, L.P., 280
Va. 381, 388 (2010)). We view the evidence and all reasonable inferences arising from that
evidence in the light most favorable to the prevailing party at trial—here, the City—and will
reverse for insufficient evidence only if the trial court’s decision is plainly wrong or unsupported
by the evidence. Id. at 815.
Western Refining is particularly instructive because the taxpayer there, like VIG,
contested assessments of highly specialized personalty with limited marketability. 292 Va. at
809–10. At issue in Western Refining was the valuation of machinery and tools used in an oil
refinery. Id. at 810. York County assessed the equipment at 25 percent of its original cost,
concluding that it was worth $96.1 million in 2010 and $99.1 million in 2011. Id. The refinery
challenged these valuations by retaining an expert appraiser with extensive oil industry
experience. Id. at 811. The expert used the sales-comparison, income, and cost approaches to
assess the equipment’s value, reaching a final appraisal by determining the site’s overall value
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then deducting each component, such as real estate and improvements, until all that remained—
in his opinion—was the value of the machinery and tools. Id. at 813. That amount, he
concluded, was $32 million in 2010 and $24 million in 2011. Id. The County defended its
assessment by retaining its own expert who similarly applied the three accepted valuation
approaches. Id. The County’s expert, however, concluded that the equipment was worth $215.4
million in 2010 and $198 million in 2011. Id. The circuit court found that the County’s
assessment was prima facie correct and rejected the refinery’s expert testimony for using a
flawed methodology. Id. at 815. Concluding that the refinery failed to prove the County had
assessed the equipment at more than its fair market value, the court declined to alter the
assessment. Id.
We affirmed the circuit court’s ruling, finding that, under the presumption of correctness
and the deferential standard of review, the refinery’s evidence did not prove that the County
overvalued its equipment. Id. at 816. In reaching this conclusion, we identified several reasons
why the refinery failed to rebut the presumption of correctness. We initially observed that the
legislature had expressly approved personal property valuations using a fixed percentage of
original cost. Id. at 817. Recognizing that this uniform approach may not necessarily render an
accurate valuation when applied to a particular chattel, we emphasized that fixed-percentage-of-
original-cost valuations are “not the final word”—instead, taxpayers who believe this
methodology overvalues their property can obtain an independent appraisal and ask the
municipality to reconsider its assessment. Id. The refinery did so, and we recognized that the
County “gave careful consideration to the appraisal but rejected it.” Id. at 822. The County then
retained an independent appraisal expert to support its position that the original valuation did not
overvalue the equipment. Id. at 825–26. After “hear[ing] extensive testimony concerning the
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flaws with [the refinery’s] approach,” the circuit court rejected the refinery’s expert evidence and
accepted that of the County. Id. at 824. We ultimately concluded that the evidence before the
circuit court “established a possible range of values for the refinery’s machinery and tools” and
that, in light of the presumption of correctness, the refinery had not proven that the County
overvalued its equipment. Id.
This analysis guides our resolution of this factually and legally similar case. Here, the
City assessed VIG’s personal property, the gantries, at fifty percent of original value, resulting in
what VIG considered an overvaluation. VIG retained Verheijen to provide an independent
appraisal to challenge the City’s assessment. The City refused to change its assessment and
retained Cole, its own independent appraisal expert, who testified that Verheijen’s methodology
was flawed and that the City’s assessment did not overvalue the gantries. The trial court, like the
Western Refining court, rejected Verheijen’s methodology and accepted the City’s evidence,
entering a verdict for the City.
On review of the trial court’s ruling, we first recognize that although the City’s fifty-
percent-of-original-cost methodology creates a higher actual tax rate than that in Western
Refining, it remains an approach expressly authorized by the General Assembly. See Code
§ 58.1-3503(A)(18); Western Refining, 292 Va. at 816. The presumption of correctness means
that the City’s fifty-percent-of-original-cost methodology is prima facie appropriate “even if the
assessor is unable to come forward with evidence to prove [its] correctness.” Western Refining,
292 Va. at 817. Here, however, the City not only came forward with evidence of the
assessment’s correctness in the form of Cole’s independent appraisal, it also presented evidence
that VIG’s appraisal of the gantries was flawed.
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VIG contends that the trial court improperly rejected Verheijen’s methodology and did
not accord sufficient weight to his status as one of the only container terminal valuation experts
in the world. Although Verheijen’s expertise is undisputed, he readily acknowledged that his
appraisal methodology did not comply with the ordinary principles of valuation used in Virginia.
Whereas the refinery’s expert in Western Refining simply made mistakes in his application of the
otherwise appropriate sales-comparison, income, and cost approaches, Verheijen testified that he
was unfamiliar with these methods and instead used a “customer-centric approach” that
incorporated some characteristics of the sales-comparison method.
Moreover, in urging us to accept Verheijen’s appraisal, VIG asks us to recognize a novel
and significant cost factor relating to transportation of personalty. VIG contends that because the
only feasible markets for its personal property are abroad, transportation and related costs—such
as retrofitting for compatibility with a foreign electrical system—should be deducted from the
property’s fair market value.
VIG’s arguments are intriguing. We need not, however, determine whether
transportation and related costs are an appropriate component of fair market value in this case.
The trial court found that VIG’s evidence of removal and conversion costs for the gantries was
“too speculative to be considered as a special factor in valuing these cranes.” Largely owing to
the unique nature of the gantries and the relatively small market for them, VIG had only scant
evidence with which it sought to estimate the cost of moving them. The trial court, as fact
finder, reasonably determined that VIG’s evidence of transportation costs was too speculative to
be considered. 3
3
We specifically note that VIG’s argument regarding transportation-related costs for the
STS cranes is distinct from its personal property argument, not least because the STS cranes are
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Additionally, as the trial court observed, these transportation-related costs largely account
for the difference between the City’s assessment and VIG’s opinion of the gantries’ fair market
value. But for these costs, VIG lacks a colorable argument that the City overvalued its personal
property. The City, for its part, put on evidence that VIG’s methodology was flawed because of
its failure to adhere to recognized valuation approaches. Its evidence also tended to show that
the original assessment did not overvalue the personal property.
The trial court, as the trier of fact in this case, was responsible for the difficult task of
assessing the witnesses’ credibility, parsing their conflicting testimony, and ultimately weighing
the evidence. Western Refining, 292 Va. at 816. Because the City prevailed at trial, we must
view that evidence in the light most favorable to it. So viewed, and in light of the combined
weight of the considerations articulated above, we hold that there was sufficient evidence in the
record to support the trial court’s ruling that VIG did not rebut the presumption of correctness.
Accordingly, it did not err in declining to adjust the personal property assessment.
III. CONCLUSION
The trial court’s exclusion of Fandl—whose testimony formed the vast majority of VIG’s
evidence in the real estate case—was an abuse of discretion. We reverse the real estate case and
remand it for further proceedings. The trial court did not err in ruling that VIG failed to
overcome the presumption of the personal property assessment’s correctness. Accordingly, we
affirm the personal property case.
Affirmed in part,
reversed in part,
and remanded.
considered real estate. We do not consider this separate argument here because, as noted earlier,
the trial court did not rule on the STS cranes’ assessment.
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