Mandamus. Fulton Superior Court. Before Judge Baxter.
Robert D. Feagin, John F. Woodham, Hurt Stolz, Irwin W. Stolz, Jr., for appellant.
Ichter Thomas, Cary Ichter, Cheryl M. Ringer, R. David Ware, Shalanda M. J. Miller, for appellees.
Alston & Bird, Glenn R. Thomson, Clark R. Calhoun, amici curiae.
HUNSTEIN, Justice. All the Justices concur.
In 2009, John Sherman, a resident and taxpayer of Fulton County, filed suit, on behalf of himself and all others similarly situated, against the Fulton County Board of Assessors (hereinafter, " FCBOA" ), along with its Chief Appraiser and each of its members in their official capacities, to challenge the FCBOA's method of valuing leasehold estates arising from a sale-leaseback bond transaction involving the Development Authority of Fulton County (hereinafter, " DAFC" ). As described in an earlier appeal arising from this same case, the sale-leaseback transaction at issue here was structured as follows:
A bond transaction leasehold estate is created when a local development authority, in accordance with its redevelopment powers, enters into a bond transaction agreement with [296 Ga. 794] a private developer of certain real property. The local development authority issues revenue bonds under a financing program to the developer, who conveys to the authority fee simple title to the property. The development authority and the developer then enter into a multi-year lease arrangement whereby the authority, as owner, leases the property to the developer. The resulting lease payments are used by the local development authority to make the principal and interest payments on the revenue bonds. The terms of the agreement allow the developer to repurchase the fee simple estate for a nominal amount once the revenue bonds are paid down or retired.
As part of the transaction, the parties enter into a written agreement that sets forth a specific method for determining the fair market value of the resulting leasehold estate held by the private developer. The method estimates the initial fair market value of the leasehold estate to be 50 percent of the fair market value of the fee simple estate. The estimated value of the leasehold estate is then " ramped up" by five percent per year. By the eleventh year, the leasehold estate is valued at 100 percent of the fair market value of the fee simple estate.
Sherman v. Fulton County Bd. of Assessors, 288 Ga. 88, 89 (701 S.E.2d 472) (2010) (hereinafter, " Sherman I " ). Sherman claims that this so-called " 50% ramp-up" methodology results in the valuation of the developers' leasehold estates at less than fair market
value, in violation of defendants' statutory and constitutional duties to ensure that ad valorem taxes are assessed uniformly and at fair market value.
In October 2009, the trial court granted the defendants' motion to dismiss/motion for judgment on the pleadings, and, on appeal, this Court reversed. Sherman, 288 Ga. at 95. The Court held that the case was not subject to dismissal because, while there was no dispute as to the valuation methodology employed, there was no way to conclusively determine at that stage of the proceedings that such methodology actually resulted in a fair valuation of the leasehold estate. Id. at 93. This Court reasoned:
[Defendants] argue that their initial valuation of the fee simple estate follows an authorized appraisal approach and takes into account some of the factors referenced above, such as similarly leased properties in the area and the market rents in the area. However, a valuation of the fee simple [296 Ga. 795] estate is just the first step. [Defendants] will need to offer evidence as to how their method applied to the leasehold estate incorporates the requisite factors. They assert that we should just assume that every leasehold estate is worth 50 percent of its fee simple estate, but offer no evidence to support this assumption. Without such evidence, and in light of the affidavit filed by Sherman to the contrary, we are unable to determine, pursuant to DeKalb County Bd. of Tax Assessors v. W.C. ...