Mandated Disclosure of Municipal Equalization Ratios in Tax Abatement Cases

Introduction

In the case of Pheasant Lane Realty Trust v. City of Nashua, the Supreme Court of New Hampshire examined the legal framework governing tax abatement contests and the obligations imposed on municipalities when determining property tax assessments. This judgment addresses critical issues such as a municipality’s duty to disclose its preferred equalization ratio and the evidentiary requirements a taxpayer must meet to prove that it has been over-assessed relative to the general level of assessment within the city.

The dispute arose after the City of Nashua, following its 2018 reappraisal utilizing a Computer Assisted Mass Appraisal (CAMA) system, assessed a significant portion of the Pheasant Lane Mall at valuations that did not incorporate an equalization ratio. In response, Pheasant Lane Realty Trust, which owned part of the mall, argued that it had paid a disproportionate share of property taxes for the 2018, 2019, and 2020 tax years. Although the trial court declined an abatement for 2018, it granted abatements for the 2019 and 2020 tax years. The City subsequently appealed the decision on two primary grounds: challenging the disclosure obligation regarding equalization ratios and disputing whether the burden of proof was met.

Summary of the Judgment

The Supreme Court affirmed the trial court’s decision on several key points. First, the Court declined to overrule its prior holding in APPEAL OF CITY OF NASHUA (138 N.H. 261, 1994) which mandates that a municipality disclose its preferred equalization ratio in abatement contests. Second, the Court held that the trial court did not err in finding that Pheasant Lane Realty Trust had indeed met its burden to demonstrate that it paid a disproportionate amount of taxes in 2019 and 2020, based upon the Department of Revenue Administration’s (DRA) equalization ratios.

Specifically, the Court observed that while Nashua had not adopted an equalization ratio in its assessment process, the taxpayer’s use of the DRA’s equalization ratios for the relevant years (88.8% for 2019 and 83.0% for 2020) adequately established that the property’s assessed values—at 104.3% and 133.5% of its fair market value, respectively—exceeded the general level of assessment in the municipality. Therefore, the trial court’s rulings were upheld, and the City’s arguments regarding the alleged misapplication of FMV in comparison to previous assessments were rejected.

Analysis

Precedents Cited

The judgment extensively references several precedents that collectively shape the legal doctrine governing tax abatements and assessment ratios:

• APPEAL OF CITY OF NASHUA, 138 N.H. 261 (1994): This case established the principle that a municipality is required to disclose its preferred equalization ratio when contesting tax abatements. The Court reaffirmed this holding in its decision, emphasizing that municipalities must provide a good faith offering of their equalization methodology if they use a uniform ratio to convert fair market values into assessed values.
• New Hampshire Highway Hotel, Inc. v. City of Concord, 119 N.H. 122 (1979): Reaffirmed the broad powers that a superior court has in ordering abatements, ensuring that decisions based on tax assessments and abatements are made in line with equitable principles.
• Appeal of City of Berlin, 174 N.H. 733 (2022): This case provided additional context regarding the evidentiary burden on the taxpayer in demonstrating that the property tax assessments imposed exceeded the general level of assessment.
• Merrimack Premium Outlets v. Town of Merrimack, 174 N.H. 481 (2021): Although primarily concerned with statutory authority for reassessments, it was cited here to address arguments regarding shifts in statutory schemes. The Court distinguished its holding from that of Merrimack Premium Outlets by noting that the latter did not address the specific issues of equalization ratios in tax abatement cases.
• PUBLIC SERV. CO. OF N.H. v. TOWN OF SEABROOK, 133 N.H. 365 (1990): Cited to underline the significance of an equalization ratio in ensuring that property assessments maintain proportionality across the municipality.

Legal Reasoning

The Court’s reasoning is founded on a strict adherence to established legal principles while acknowledging the evolving statutory context:

• Disclosure Obligation: The City’s argument to overturn the APPEAL OF CITY OF NASHUA holding was countered by a detailed stare decisis analysis, emphasizing that even statutory amendments do not automatically nullify established doctrines unless confronted by multiple factors such as practical workability and reliance interests. The Court noted that a municipality’s obligation to disclose an equalization ratio is rooted in principles of proportionality and fairness.
• Burden of Proof: In tax abatement cases, the taxpayer must prove by a preponderance of evidence that it has been over-assessed relative to the general level of assessment. Here, the taxpayer introduced the DRA’s equalization ratios as surrogates for an undisclosed municipal ratio. The Court reasoned that since Nashua did not assert any alternative method nor stipulate to the DRA’s ratios, the taxpayer’s evidence was sufficient.
• Application of FMV and Equalization Ratios: The City argued that the ratios were wrongly applied due to differences in assessment years. However, the Court clarified that the relevant equalization ratios for the tax years in question (2019 and 2020) adequately demonstrated that the property was assessed at significantly higher multiples of its FMV when compared to the general level established by the DRA data.

Impact of the Judgment

The decision in Pheasant Lane Realty Trust v. City of Nashua reinforces and clarifies several pivotal aspects of property tax law in New Hampshire:

• Enhanced Transparency: Municipalities are once again reminded of their obligation to disclose any equalization ratios used—or to explain their absence—ensuring that taxpayers are provided with a clear benchmark for contesting assessment disparities.
• Burden-Shifting in Abatement Cases: The ruling reaffirms that taxpayers may rely on objective data, such as the DRA’s equalization ratios, when a municipality fails to offer its own ratio. This precedent defines the evidentiary framework more precisely, potentially simplifying future disputes regarding assessed values.
• Stare Decisis and Legal Stability: By refusing to overrule its earlier decisions, the Court upholds the principle of stare decisis, thereby promoting consistency in tax assessment jurisprudence. This stability is critical for municipalities and taxpayers alike.

Complex Concepts Simplified

The Judgment contains several intricate legal and tax valuation concepts that warrant simplification for broader comprehension:

• Equalization Ratio: An equalization ratio is a figure used to adjust the fair market value (FMV) of a property to arrive at its assessed value for taxation. It ensures that assessments are proportional across different properties within a municipality.
• General Level of Assessment: This refers to the common percentage at which properties in a municipality are assessed relative to their FMV. It acts as a benchmark to evaluate whether a specific property has been over- or under-assessed.
• Preponderance of Evidence: In civil disputes such as tax abatement cases, the party making a claim (here, the taxpayer) must prove that their assertions are more likely true than not.
• Stare Decisis: A legal principle that obligates courts to follow precedent, ensuring that decisions in similar cases remain consistent over time.

Conclusion

The Supreme Court’s decision in Pheasant Lane Realty Trust v. City of Nashua is significant for several reasons. First, it reinforces the established doctrine that municipalities must disclose any equalization ratio used in property tax assessments, or at least explain why one is not used. This ensures fairness and transparency in the tax abatement process. Second, by affirming that the taxpayer met its burden of proving that it paid a disproportionate amount of taxes—based on the DRA’s equalization ratios—the Court provided further clarity on the evidentiary standards required in such cases.

Ultimately, this judgment not only upholds earlier precedents but also delineates clear guidelines for both municipalities and taxpayers in future tax abatement contests. The preservation of the disclosure requirement and the acceptance of alternative methodologies (i.e., the DRA ratios) reinforce fairness in the tax assessment process, thereby benefiting the broader legal and administrative framework governing property taxes in New Hampshire.