How does New Mexico set the market value of my land for property tax, and can I challenge the state's number?

Plain-English summary

Central Valley Electric Cooperative is an electric utility based in Artesia, New Mexico. It owns about 35 acres in Eddy County, just outside the Artesia city limits, where its business offices and a service building sit. For property tax purposes, the Property Tax Division proposed valuing the tract at $396,400 — about $11,325 per acre. The cooperative protested, arguing the raw land was worth only $1,000 per acre ($35,000). Only the value of the raw land was in dispute; the improvements weren't at issue.

New Mexico values property at its market value, and Section 7-36-15 requires the valuing authority to use comparable sales — turning to income or cost methods only when comparable-sales data is unavailable or unreliable (Bakel v. Bernalillo County Assessor). Comparability turns on factors like size, location, access, utilities, and how close in time the comparable sold (In re Kinscherff). Ordinarily the state's value is presumed correct (§ 7-38-6), but here the cooperative rebutted that presumption with the Department's own letter admitting its $11,000-per-acre figure was "probably too high."

That left Hearing Officer Gerald B. Richardson to pick a value from a thin record, with the two appraisals nearly $10,000 per acre apart:

• The taxpayer's appraiser (Mr. Kunkel): $1,000/acre. He relied on two large vacant/agricultural parcels about five miles from Artesia. The Hearing Officer rejected this — those parcels ignored the subject property's far more valuable location near Artesia's central business district, a factor more significant than parcel size.
• The Department's appraiser (Mr. Odenheim): about $11,000/acre. He used three smaller parcels in Carlsbad (not Artesia) after failing to find Artesia industrial-land sales. The Hearing Officer was troubled that these were in a different market and smaller in size, and that Odenheim never explained why he ignored a prime Artesia commercial sale.
• The tie-breaker — the "Schlumberger property." A genuinely comparable 20.91-acre local tract, accessed off the same road and usable for industrial purposes, had sold in October 1995 for about $6,000 per acre. Treating its drawbacks (possible contamination, no city water) as roughly offsetting the subject property's drawback (a high-voltage transmission-line easement), and cross-checking against a "prime" Artesia commercial parcel (~$8,000/acre, less a $2,000 adjustment), the Hearing Officer settled on $6,000 per acre.

Calling it "solomonic justice," he ordered the Department and the Eddy County Assessor to change their records to reflect $6,000 per acre for the land — cutting the valuation from roughly $396,000 to about $210,000.

What this means for you

New Mexico values property by comparable sales first

Under Section 7-36-15, the default (and usually required) method for valuing real property is comparable sales. The income and cost approaches are fallbacks, permitted only when comparable-sales data is unavailable or unreliable. If you're challenging or supporting a valuation, build your case on genuinely comparable sales — and be ready to defend why each one is (or isn't) comparable on size, location, access, utilities, and timing.

Location can outweigh lot size in a comparability fight

Both appraisers leaned on parcel size, but the Hearing Officer treated proximity to the business district as the more important factor: land near town, usable for commercial purposes, is worth more than similar-sized farmland miles away. When you pick comparables, match the highest-and-best-use and location of the subject property, not just its acreage.

The state's value is presumed correct — until you rebut it

Section 7-38-6 puts the initial burden on the taxpayer: the Division's or assessor's value is presumed correct. Here the cooperative rebutted that presumption using the Department's own written admission that its number was too high. Concrete evidence — an appraisal, a concession, market data — is what shifts the analysis; simply asserting a lower number is not enough.

You can protest, and the deadlines are waivable

The cooperative filed a timely written protest within days of the Notice of Valuation (§ 7-38-22). Note also that the statutory deadlines for deciding a protest (§ 7-38-23) were waived by agreement at the hearing — a reminder that these procedural timelines exist and, where useful, the parties can extend them.

Common questions

Q: Can I challenge the county's or the state's valuation of my property?
A: Yes. File a timely written protest of the Notice of Valuation under § 7-38-22. Here the cooperative protested within days and obtained a large reduction, though not the full cut it sought.

Q: The state's value is "presumed correct." Doesn't that mean I'll lose?
A: Not necessarily. The presumption (§ 7-38-6) can be rebutted with evidence. In this case the taxpayer used the Department's own letter conceding its value was "probably too high," which removed the presumption and left the value open for the Hearing Officer to decide on the record.

Q: Which appraisal method controls?
A: Comparable sales. Section 7-36-15 makes market value by comparable sales the primary method; income or cost approaches are used only when comparable-sales data is unavailable or unreliable (Bakel). The whole dispute here was over which sales were truly comparable.

Q: The Hearing Officer didn't adopt either appraiser's number. Can he do that?
A: Yes. Once the presumption of correctness was rebutted, the value became an open question to be decided on the hearing record. Finding neither appraisal fully persuasive, the Hearing Officer independently determined market value ($6,000/acre) from the most comparable sale and a cross-check — what he described as "solomonic justice."

Citations and references

Statutes:

• § 7-36-15 NMSA 1978 — property is valued at market value, determined by the comparable-sales, income, or cost methods (or a combination), applying generally accepted appraisal techniques; comparable sales is primary, with income/cost used only when comparable-sales data is unavailable or unreliable
• § 7-38-6 NMSA 1978 — values of property determined by the Division or the county assessor are presumed to be correct
• § 7-38-22 NMSA 1978 — timely written protest of a determination of value
• § 7-38-23 NMSA 1978 — requirement that a protest decision issue within 120 days of the protest and 30 days of the hearing; waived by the parties here

Cases cited:

• Bakel v. Bernalillo County Assessor, 95 N.M. 723, 625 P.2d 1240 (Ct. App. 1980) — property must be valued using comparable sales; income or cost methods may not be used unless comparable-sales data is unavailable or unreliable
• In re Kinscherff, 89 N.M. 669, 556 P.2d 355 (Ct. App.), cert. denied, 90 N.M. 8, 558 P.2d 620 (1976) — factors bearing on comparability: size, shape, location, topography, road access, utility availability, use, use restrictions, and proximity of the date of sale

Source

• Listing: New Mexico Decisions & Orders
• Decision post: Central Valley Electric Cooperative, Inc.
• Decision PDF: D&O 96-22

Original ruling text

BEFORE THE SECRETARY
OF THE TAXATION AND REVENUE DEPARTMENT
OF THE STATE OF NEW MEXICO

IN THE MATTER OF THE PROTEST OF
CENTRAL VALLEY ELECTRIC COOPERATIVE, INC.,
CAB NO. 240002, PROTEST TO VALUATION OF
PROPERTY AS DETERMINED BY THE PROPERTY
TAX DIVISION. No. 96-22
DECISION AND ORDER

This matter came on for hearing before Gerald B. Richardson, Hearing Officer, on June
26, 1996. Central Valley Electric Cooperative, Inc. (hereinafter "Taxpayer") was represented
by George Graham, Esq. The Taxation and Revenue Department (hereinafter "Department")
was represented by Bridget A. Jacober, Esq. At the end of the hearing the parties agreed to
waive the requirements of Section 7-38-23 NMSA 1978 that the decision on this protest be
rendered within 120 days of the Taxpayer’s protest and within 30 days from the hearing date.

Based upon the evidence and arguments presented IT IS DECIDED AND ORDERED
as follows:

FINDIN F FACT

1. The Taxpayer is an electric utility company located in Artesia, New Mexico.

7 Se The Taxpayer owns a tract of land in Eddy County, New Mexico located
adjacent to the city limits of Artesia, New Mexico consisting of approximately 35 acres,

hereinafter referred to as “the subject property". The Taxpayer’s business offices and a service

building are located on this tract.

i On March 28, 1996, the Department mailed the Taxpayer a Notice of Valuation
which proposed a value of $396,400 for the subject property, which represents a value of
$11,325 per acre.

4. On April 3, 1996, the Taxpayer mailed the Department a letter protesting the
   value proposed by the Department for the subject property and proposing that the property be
   valued at $1,000 per acre or $35,000.

od Although the subject property contains improvements, only the Department's
determination of the value of the raw land is at issue herein.

6. The subject property is located at the corner of Richey Avenue and Thirteenth
   Street, both of which are arterials from which the property has access. The property borders
   upon the Artesia city limits. Because the property is outside of the city limits, it is not subject
   to zoning restrictions which would limit the uses to which the property can be put. The
   property has all utilities available to it. The property has a utility easement through which a
   large electric transmission line runs diagonally across the property. The uses of the
   surrounding properties vary from vacant land, a Junior High School, a federal law enforcement
   academy, a nursing home, medium density residential to light industrial uses. Most of the
   subject property remains vacant land.

7. The Taxpayer’s expert appraiser, Mr. Kunkel, appraised the subject property at
   $1,000 per acre based primarily upon two sales of large parcels of vacant land in the vicinity
   of Artesia. Sale 3, located at 76 East Cottonwood Road was a sale of a 20 acre parcel in
   February of 1992 for $21,152. The property is located five miles north of the subject property

and has good access from U.S. Highway 285 on to Cottonwood Road. Sale 5, located at 6

East Cottonwood Road, was a sale of a 30 acre vacant parcel of land in April of 1990 for
$30,000. The property is located five miles north of the subject property and has good access
from U.S. Highway 285 on to Cottonwood Road. Both properties have utilities available and
both had chili dehydration facilities constructed upon them after their sale. These properties
are located about 5 miles outside of the Artesia city limits and are surrounded by land which
is largely agricultural and/or vacant land.

8. Another property sale reviewed by Mr. Kunkel but not considered by him to be
   given much weight as a comparable sale was the sale of a property located at 2208 West Main
   Street in Artesia. The property was a vacant 3.14 acre parcel of land within the Artesia city
   limits which was zoned for commercial development. The sale price was $25,000 representing
   a per acre value of $7,962. Mr. Kunkel did not consider it to be comparable to the subject
   property because the property is located within the Artesia business section on the town’s main
   arterial. He considers it as representative of the top dollar paid for commercial property within
   the business section of Artesia.

9. The Department's expert appraiser, Mr. Odenheim, was unable to locate any
   information on sales of vacant light-industrial use property in the Artesia area at the time he
   performed his appraisal. Because of this, he looked for information of such sales in the
   Carlsbad and Roswell areas. Mr. Odenheim found none in the Roswell area, but he found
   sales or sales listings in the Carlsbad area. Although these sales or sales listings were for
   improved properties, Mr. Odenheim abstracted from the sale value the value of the

improvements to arrive at a value for the vacant land.

10. Mr. Odenheim’s first comparable property was a sales listing of a 2.35 acre
    parcel located on the southern outskirts of Carlsbad at 3627 National Parks Highway. The
    listing price was $150,000 and after abstracting the value of the improvements, the abstracted
    value of the land was $24,730 or $10,523 per acre.

11. | Mr. Odenheim’s second comparable property was a sale in July of 1992 of a
    2.09 acre parcel located on the southern outskirts of Carlsbad at 4305 National Parks Highway.
    The sale price was $175,000 and after abstracting the value of the improvements, the abstracted
    value of the land was $22,500 or $10,765 per acre. The property is presently used by El Paso
    Natural Gas Company for its service center.

12. Mr. Odenheim’s third comparable property was a sale of a 2.1 acre parcel in
    July of 1993, located just outside of the Carlsbad city limits at 2903 Pecos Highway. The sale
    price was $150,000 and after abstracting the value of the improvements, the abstracted value
    of the land was $25,550 or $12,023 per acre. The property is used by the Public Service
    Company of New Mexico for its service center.

13. In May of 1996, Mr. Odenheim obtained information of another sale of property
    which could be considered comparable with some possible adjustments for factors described
    below. Because he did not obtain this information until after his appraisal of the subject
    property was completed, it was not considered at the time he appraised the subject property.
    The property, hereinafter referred to as the "Schlumberger property" is located one and one-
    half miles east of the subject property. The property consists of 20.91 acres of vacant land
    with access from Richey Avenue which was purchased for industrial development. The sale

occurred in October of 1995 and the sales price was $122,272 representing a value of

approximately $6,000 per acre. The property does not have city water available to it and it
may not be entirely comparable because of the existence of contamination on the property.

14.‘ The market value of the subject property as determined by comparable sales is
$6,000 per acre.

DISCUSSION

The sole issue to be determined herein in the market value of the raw land only of the
subject property. Section 7-36-15 NMSA 1978 governs the methods for valuing property for
property taxation purposes regardless of whether the county assessor or the Department is the
valuing authority. Specifically, Subsection B. of Section 7-36-15 provides in pertinent part:

. . . the value of property for property taxation purposes shall be
its market value as determined by application of the sales of

comparable property, income or cost methods of valuation or any

combination of these methods. In using any of the methods of

valuation authorized by this subsection, the valuation authority

shall apply general accepted appraisal techniques.
This provision has been interpreted to require that property be valued by the use of comparable
sales, and the income or cost methods of valuation may not be used unless comparable sales
data is unavailable or unreliable. Bakel v. Bernalillo County Assessor, 95 N.M. 723, 625
P.2d 1240 (Ct.App. 1980). The factors to be considered in determining the comparability of
properties are size, shape, location, topography, accessibility to roads, availability of public
utilities, use of the property, restrictions upon use and proximity of the date of sale. In re
Kinscherff, 89 N.M. 669, 556 P.2d 355 (Ct.App.), cert. denied, 90 N.M. 8, 558 P.2d 620
(1976).

Section 7-38-6 NMSA 1978 provides that,"[V]Jalues of property for property taxation

purposes determined by the division or the county assessor are presumed to be correct.” In

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this case, the presumption of correctness has been rebutted by the Taxpayer by its introduction
into evidence of a letter from the Department admitting that it was now of the opinion that its
valuation at $11,000 per acre "is probably too high". Taxpayer Exhibit C. Thus, the value
of the subject property remains an open question to be determined based upon the hearing
record. There was a general consensus that the lack of closely comparable sales data made the
appraisal of the subject property difficult. An examination of the two appraisals tendered by
the parties reflects a widely divergent approach to which sales were considered to be
comparables by the appraisers for the Taxpayer and the Department. This resulted in a
$10,000 per acre price differential between the two appraisals.

Mr. Kunkel, the Taxpayer’s appraiser, placed heavy weight on two sales of large
parcels of vacant agricultural land. In choosing these sales as comparables, Mr. Kunkel gave
great weight to the fact that these parcels, at 20 acres and 30 acres respectively, reflect sales
of parcels of land of similar size to the subject property and are similarly located outside of
the city limits, thus allowing practically any use of the property desired by the owner. Mr.
Kunkel also pointed out the large tracts of vacant or agricultural land in the vicinity of the
subject property as another basis for comparability. While these factors are comparable, I do
not find the property sales relied upon by Mr. Kunkel to be comparable in another more
significant manner. Mr. Kunkel’s comparables are located nearly five miles from Artesia’s
central business district, while the subject property is near or adjacent to the business district
of Artesia. Although only the value of the raw land is at issue, the Taxpayer uses the subject
property for its business offices, where customers can come to arrange for electric service, pay

bills and conduct other business with the Taxpayer. Presumably, the location of the property

is not only convenient for the Taxpayer's customers, but it is also convenient for the Taxpayer
itself in conducting its business affairs. The property’s location near Artesia’s central business
district is a significant factor which was completely overlooked by Mr. Kunkel in his choice
of comparable property sales, and is a factor of more significance than the size of the parcel
itself, for it substantially increases the value of the property in terms of its usefulness for
commercial purposes. This is confirmed by the value of another sale which was not given
much weight by Mr. Kunkel, the property at 2208 West Main Street in Artesia, which sold for
nearly $8,000 per acre. This parcel was disregarded by Mr. Kunkel because it was in the
Artesia central business district, was a parcel of smaller size and was located on Artesia’s main
business arterial. Undoubtedly, this is prime commercial real estate for Artesia. It is zoned
for commercial use, which is a use to which the subject property can also be used and would
be a much higher and better use than the vacant agricultural property sales from which Mr.
Kunkel derived his values. The biggest differences between the Main Street property and the
subject property are that the Main Street property is located in an even better business location,
being on the main business arterial, rather than a secondary one, and the Main Street property
is smaller, which, Mr. Odenheim testified, would justify some price enhancement, since
smaller parcels trade at a premium when compared to larger parcels. Additionally, the
existence of the utility easement on the subject property would be a detraction to the value of
the subject property. All of these differences would justify a downward adjustment from

$8,000 per acre for the subject property, but the location of the subject property near the

central business district and the commercial uses to which the property may be put’ make it
far more similar to the Main Street property than the large tracts of agricultural land used by
Mr. Kunkel as his primary comparables.

I also have some concerns with the three Carlsbad sales or sales listings used by Mr.
Odenheim as comparables to justify a value of $11,000 per acre for the subject property.
These properties are all of much smaller size than the subject property, and Mr. Odenheim
acknowledged that smaller size was a factor which would enhance the value of a property when
compared to a larger parcel. The matter that concerns me the most, however, is their location
in Carlsbad, rather than Artesia. While Mr. Odenheim testified that he used Carlsbad sales
because he couldn’t find sales of vacant industrial land in Artesia, and he did not find there to
be significant differences in the economies of Carlsbad and Artesia to justify any price
differentials, it was never explained why he did not consider the sale of vacant commercial land
on Main Street in Artesia to be comparable. The fact that the Main Street property was
considered to be prime commercial real estate in Artesia, and was considered by Mr. Kunkel
to represent the top of the Artesia market for commercial real estate throws into question Mr.
Odenheim’s conclusion that the Carlsbad and Artesia commercial real estate markets are
comparable. There appears to be a differential of $3,000 to $4,000 per acre between Carlsbad
and Artesia for commercial real estate assuming that the Carlsbad properties are equally

"prime" when compared to the Main Street property.

' While the properties primarily relied upon by Mr. Kunkel for comparable sales may also be used for
commercial uses, since they are located in the county and are outside of the city’s zoning restrictions, the
commercial viability of the properties is substantially less than the subject property because of their distant
location from Artesia’s central business district when compared to the subject property.

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Not being convinced of the value of the subject property based upon either appraisal
offered by the opposing parties, this decision maker is left in the unenviable position of
determining a value for the subject property even though he is even less familiar with the
Artesia real estate market than either of the expert appraisers who testified. In making this
determination, I am guided by the recently developed information on the Schlumberger
property sale. This property is of comparable size to the subject property, is accessed off of
the same arterial and the property may be used for industrial purposes like the subject property.
There are also some differences between the properties. The Schlumberger property does not
have city water and the property may be contaminated, although their was insufficient
information on this to assess the extent of contamination to carefully assess the impact it would
have on the value of the property. The subject property has a high voltage transmission line
dissecting it and the utility easement for the line is between 35 and 70 feet wide.* Although
I have insufficient information to quantify precisely how these differential factors affect the
value of the properties, I will assume that the negatives represented by the utility easement and
the potential contamination and lack of city water largely offset each other and that the $6,000
value per acre for the Schlumberger property may be considered representative of the value
of the subject property. In making this conclusion, I take some comfort that this value appears
reasonable when compared to the Main Street property. A $2,000 downward adjustment would
compensate for the fact that the subject property is less "prime" than the Main Street property
which was valued at almost $8,000 per acre and would also take into account the smaller size

of the Main Street tract. Given the lack of better information upon which to base my decision,

2 The testimony as to the width of the easement was inconclusive.

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I will render solomonic justice and determine that the market value of the subject property as
determined by comparable sales to be $6,000 per acre.
CONCLUSIONS OF LAW

ci The Taxpayer filed a timely, written protest to the Department’s determination
of value for the subject property, pursuant to Section 7-38-22 NMSA 1978 and jurisdiction lies
over the parties and the subject matter of this protest.

2. Pursuant to Section 7-36-15 NMSA 1978 the proper method for determining the
   value of the subject property is the use of comparable sales to determine market value.

3: The Taxpayer’s evidence rebutted the presumption of correctness of the
Department’s valuation of the subject property.

4. The market value of the subject property as determined by comparable sales is
   $6,000 per acre.

IT IS THEREFORE ORDERED that the Department and the Eddy County Assessor
change their valuation records to reflect a value of $6,000 per acre for the land portion of the
subject property.

DONE, this 29TH day of August, 1996.

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