Augusta County likely will seek a new trial in a case over whether McKee Foods Corp.’s Stuarts Draft plant had been properly assessed.
Last month, the Virginia Supreme Court agreed with McKee’s appeal, overturning a decision by Judge James Lane made following a four-day bench trial in December 2017. Lane ruled in Augusta County Circuit Court the assessment of the McKee property at 272 Patton Farm Road for the tax years 2011 through 2014 had been correct.
McKee argued during the 2017 trial that had the assessment properly adjusted the value for depreciation, the company would have owed nearly $85,000 less in taxes.
Lane, as noted by the court in its decision, has since retired, meaning the case cannot be returned for review by the original judge. Although the case has been remanded for a second trial, a new circuit court review could be made without one if both parties agreed.
But James Benkahla, Augusta County’s attorney, said last week he anticipates the county will ask for a new trial as permitted in the decision.
Real estate appraisers hired by the county assessed McKee’s property at about $31.7 million for 2011 through 2014. The property consists of an 826,619-square-foot industrial building on 171.5 acres, according to court records.
Augusta hired Blue Ridge Mass Appraisal Co. to appraise property in the county for its five-year assessment cycle through 2013, court records state. In that cycle, the McKee site was identified as an industrial-use property.
The $31.7 million assessment was reduced following an appeal to the county’s Board of Assessors to $28.5 million and affirmed following a further appeal to the Board of Equalization.
For the five-year reassessment cycle starting in 2014, the county hired Wingate Appraisal Service, which classified McKee’s property as special-use property, according to court records. The assessment remained at about $31.7 million, which was unchanged following McKee’s appeal to the Board of Equalization.
McKee, a Tennessee-based company that makes Little Debbie snacks, argued the assessment exceeded the property’s true market value, relying on a cost approach instead of a sales approach without adjusting for depreciation.
John Lifflander, an industrial and commercial appraiser testifying as an expert for McKee, described the “errors” in the assessment method used for the county’s appraisal as “egregious, and actually, a bit perplexing,” according to court records. In the earlier assessments, he argued, the depreciation had been arrived at by setting a preconceived number and working toward getting to that value.
A second commercial real estate appraiser, Stuart Holtzman, testifying for McKee argued the property had been assessed far above market value. Holtzman concluded the property should have been valued at $16.4 million from 2011 to 2013 and $17.2 million in 2014.
During the trial, the county’s expert, real estate appraiser William Harvey, who had appraised the McKee property for the 2011 through 2013 tax years, argued that Holtzman’s appraisal report was inappropriate for several reasons. Harvey said Holtzman did not develop an income approach and that he mainly considered vacant properties when making a sales comparison.
In making his ruling, Lane stated he had not found anything in the case showing that the appraisals had been done improperly. Essentially, he said, the expert witnesses for Augusta County and McKee created a stalemate through their opposing evidence, which didn’t override a presumption that the county’s assessment had been conducted appropriately.
But the Supreme Court, in an opinion issued by Chief Justice Donald Lemons on July 18, found Lane erred on five points when ruling in favor of Augusta County, including a failure to order new assessments based on fair market values for those years proven at trial “because McKee’s evidence is sufficient to rebut the presumption that the assessments were correct.”
McKee Foods, a privately held family-run company with headquarters in Collegedale, Tennessee, has annual sales of about $1.4 billion and employs 6,200 in four states, according to a May corporate news release.
In October 2014, McKee announced plans for a $34 million expansion of its Stuarts Draft facility. The company was slated to receive a $300,000 performance-based grant from the Virginia Investment Partnership program in exchange for the expansion, with additional funding through the Virginia Jobs Investment Program.