(A) General - The
true value of improvements may be determined by either the market data, income
or cost approach. Regardless of the approach used the total of the depreciated
value of the improvements to land and the "true value" of the land should be
the "true value" of the property as a whole, as defined in rule
5703-25-05 of the Administrative
Code. While the cost approach will generally be used one of the other
approaches should be used as a check on whether the determination of
depreciation or obsolescence is correct.
In arriving at the value of the depreciated improvements by the
market data approach the value of the entire property is estimated by the use
of comparable sales after allowing for variations. The land value determined
according to rule
5703-25-11 of the Administrative
Code is then subtracted to arrive at the value of the improvements in their
present or depreciated condition.
The building residual technique is used to estimate improvement
values by the income approach. After land value is arrived at the value of the
improvements is estimated by capitalizing the net income remaining after
deduction for all expenses including interest on the land value.
In the use of the cost approach to estimate improvement value
the replacement cost new is first estimated. From the cost new deductions are
made for depreciation including physical deterioration, functional and economic
obsolescence to arrive at the value of the improvements in their present
condition.
(B) When a
general sexennial reappraisal is being made by the county auditor under the
provisions of section
5713.01 of the Revised Code, all
prices used in determining the replacement cost of buildings, structures,
fixtures and improvements to land
shall
will be prices prevailing during the year immediately
preceding the tax lien date of the year the reappraisal is to be effective for
tax purposes.
The county auditor is directed and ordered to prepare, or have
prepared under the auditor's supervision, schedules of all building costs that
will be used in appraising buildings, structures, fixtures and improvements to
land in the county. The auditor shall
will prepare separate schedules for residential,
commercial, industrial and farm buildings. Building cost schedules
shall
will be
based on the prices of labor, materials, architects' or engineers' fees, plus
contractors' overhead and profit, and other charges for the class, type or
grade of building in the area to be appraised prevailing during the period
specified by the preceding paragraph
Residential building cost schedules shall
will include at
least six grades of construction, ranging from very
cheap to very expensive; namely, very cheap, cheap, ordinary or average, good,
extra good or expensive, very expensive. Each grade
shall
will be
identified by number or letter. Additional grading may be obtained by adding or
deducting a percentage for each grade by using a plus or minus sign, followed
by the per cent used.
Farm building cost schedules shall
will include all
farm buildings (exclusive of the farm dwelling which shall
will be priced
according to the residential schedule) including general and special type
barns, milk houses, machinery sheds, grainaries
granaries,
corn cribs, silos, hog houses, and other miscellaneous farm buildings.
The various schedules are to be used in estimating the
replacement cost of each building, fixture or improvement to land thereto. In
the third calendar year following the sexennial reappraisal each value
shall
will be
updated, either by percentage or otherwise so that it accurately reflects
current market value in the county as of January of the current tax year. The
selection of the method of updating values will depend on the manner in which
the triennial update or equalization of true and taxable values required by
rule 5703-25-06 of the Administrative
Code is performed. The method selected should be one that will insure that the
taxable values of new buildings, etc. will equal thirty-five per cent of the
current true value in the same uniform manner as all other real
property.
One set of all building schedules of every class, type and
grade shall
will be kept on file in the county auditor's office
and open for public inspection during the regular office hours
(C) Building inspection - Each
building
shall
will be measured to determine the number of square or
cubic feet it contains, and a sketch
shall
will be drawn on
the property record card. Major buildings such as dwellings and barns
shall
will be
sketched on the property record card with other minor buildings to be numbered,
the number encircled to appear in the space for the sketch of buildings in its
proper relation to the dwelling and barn, etc.
The exterior, and if possible, the interior of each building
shall
will be
inspected with notations being made on the record card of construction
features, physical conditions, and other factors that would affect value. Each
building shall
will be graded according to quality of
construction.
Each county auditor shall
will describe in
detail on the record card or sheet, and shall
will itemize,
the precise industrial and commercial property that the auditor is valuing as
"real property" as distinguished from "personal property." In questions of the
classification of property as real or personal the county auditor
shall
will be
guided by rule
5703-3-01 of the Administrative
Code.
(D) Estimation of
depreciation and obsolescence - When the cost approach is used in appraising
the buildings an estimate
shall
will be made of depreciation including all types of
obsolescence that
must
are to be deducted from replacement cost new of
the improvements so that the total value of depreciated improvements and the
land
shall
will be equal to the true value of the entire property
as defined in rule
5703-25-05 of the Administrative
Code.
(1) In arriving at the true value, among
other factors, the utility of the improvements to the land
shall
will be
considered. In the appraisal of commercial or investment type property the
county auditor is directed to consider the terms of all outstanding leases and
the amount, quality, and durability of income that the property would produce
under normal management and the actual amounts being currently returned on
similar investments, and to reflect these factors in the final determination of
true value in money in any uniform logical way that the auditor may see
fit.
(2) Depreciation and
obsolescence
shall
will depend upon the following three factors:
(a) Physical depreciation is a loss in value
resulting from physical deterioration due to age, wear and tear,
disintegration, and the action of the elements. The amount deducted for
physical depreciation
shall
will reflect
loss in value due to general deterioration and the need for
rehabilitation.
(b) Functional
obsolescence is a loss in value resulting from poor planning, overcapacity or
undercapacity, due to age, size, style, technological improvements or other
causes within the property. There are two types of functional obsolescence:
(i) Curable functional obsolescence which may
be estimated at the amount it would cost to modernize the
improvements.
(ii) Incurable
functional obsolescence which may be estimated by considering the amount it
would cost to replace the improvements with a modern structure suitable for the
same purpose, or by the capitalization of the loss of income due to the degree
of in-utility or extraordinary operating costs related to the
structure.
(c) Economic
obsolescence is a loss due to external economic forces, such as changes in the
use of land, location, zoning or legislative enactments that might restrict or
change property rights and values and other similar factors.
(3) In arriving at the rate of
depreciation and obsolescence to be applied to buildings, structures, fixtures,
and improvements to land, the auditor
shall
will consider,
among other things, the following:
(a) The
rental income and sale prices in the current market for properties of similar
type and condition.
(b) Type of
construction.
(c) Type and extent
of replacements, restorations, or modernizations
(d) Type and extent of replacements,
restorations, or modernizations.
(e) Age.
(f) Actual use compared to use for which
constructed.
(g)
Location.
(h) Rapidly changing
technological improvements in construction methods.
(i) Rapidly changing technological changes in
manufacturing processes.
(j)
Changes in consumer demand and other external economic forces.
(k) Any other recognized factor which may
have a particular applicability in a given case.