Valuation of Harley-Davidson’s property in York County must account for environmental contamination of the property, the Pennsylvania Supreme Court ruled in remanding a tax assessment appeal in Harley-Davidson Motor Co. v. Springettsbury Twp., __ A.3d __ (No. 82 MAP 2014, filed Sept. 29, 2015). The Court upheld aspects of the valuation based on the potential for future subdivision of the property and a 5% reduction for environmental “stigma.”
At issue in this case is the proper determination of the fair market value of Harley-Davidson’s 229-acre commercial/industrial property in York. Approximately 110 acres contain buildings and other improvements, including a motorcycle manufacturing plant; 119 acres are “excess” land. The property is environmentally contaminated from its prior use by the U.S. Navy for weapons manufacturing. Pursuant to a 1995 settlement agreement, Harley-Davidson and the federal government agreed to share 100% of the remediation costs.
Harley-Davidson filed a de novo appeal of its 2003 tax assessment and the trial court conducted a trial on the assessments for 2004 through 2010. Relevantly, the taxing authority’s expert, Bernard Camins, based his valuation on, inter alia, a 5% stigma reduction for the environmental issues, the property’s “highest and best use” for warehousing/office use, and the value of developing any suitable excess land. Camins did not factor the cost of remediation into his appraisal because of the 1995 settlement agreement. In ruling in favor of the taxing authority, the trial court credited Camins’ testimony and specifically found that his valuation was based on the present condition of the property and not as if it had been subdivided. Nevertheless, the trial court adopted Camins’ pre-reduction market values as the parcel’s assessed values. Harley-Davidson appealed.
On appeal, a divided Commonwealth Court affirmed in part and vacated and remanded in part. In re: Appeal of Harley-Davidson Motor Co., 80 A.3d 506 (Pa. Cmwlth. 2013). The Court affirmed the trial court’s determination that the property’s highest and best use was warehouse and office space, with the excess land being suitable for development. The Court vacated the trial court’s assessments, however, because it did not consider the impact of Harley-Davidson’s environmental obligations and because Camins impermissibly valued the property as already subdivided. The Court also rejected Camins’ 5% stigma reduction as arbitrary and lacking support in the record.
On further appeal, the Supreme Court affirmed in part and reversed and remanded in part. Writing for the 3-2 majority, Justice Todd rejected Commonwealth Court’s determination that Camins impermissibly valued the property as though it were already subdivided, finding that his consideration of hypothetical uses for the property was appropriate. The Supreme Court agreed with the intermediate court that a remand was necessary to consider the impact of environmental contamination on the property’s value, including the effect of a potential purchaser’s possible remediation liability, maintenance responsibilities and limitations on use. Finally, the Court observed that “environmental stigma,” while an inherently imprecise concept, is relevant to assessing fair market value. The Court held that in this case, the trial court properly relied upon Camins’ 5% devaluation because it was based on facts of record and Camins’ professional experience and judgment.
Chief Justice Saylor, joined by Justice Eakin, filed a concurring opinion agreeing with most of the majority’s analysis. Chief Justice Saylor disagreed with the majority’s conclusion that Camins did not value the property as already subdivided, noting that in his expert report he valued each portion of the property separately and then simply added the values together to arrive at the aggregate market value of the entire property.