Should Value Contentions in Taxation Proceedings Be Admissible in Eminent Domain?

Check out the recent decision of the Kansas Supreme Court in Kansas City Mall Associates v. Unified Government of Wyandotte County, No. 102,163, that came down recently. It held that although as a general rule the value of land for ad valorem taxation purposes is inadmissible in eminent domain cases, the owner’s value contentions in tax assessment proceedings are admissible as an admission against interest. Quoting from the Court’s syllabus:

“Generally, assessed property valuations for tax purposes is not admissible as evidence of fair market value of property in an eminent domain action. But statements made by the owner about the property’s value in an appeal of a tax assessment that are inconsistent with the owner’s position in the eminent domain trial are admissible as admissions against interest.”

So it remains to be seen if the Kansas courts will follow the same rule when the shoe is on the other foot — when it so happens that the taxing authority contends in taxation valuation proceedings that the value of the subject property is higher than what it offers in later condemnation proceedings. Yes, cases like that do come along from time to time.

The problem is that not only are tax assessments notoriously unreliable, but the law that governs them is based on a different policy than the law of eminent domain. In taxation, it allows the owner to minimize taxes and hence it encourages conservative valuation, whereas in eminent domain the owner is entitled to the highest price that the property would fetch in a voluntary sales transaction. Most important, when an error is made in valuation for taxation, it can be fixed by reassesment, whereas in eminent domain once the judgment is final, the value determined by it is not subject to change.

So stay tuned and see what happens in Kansas when the parties’ roles are reversed, and it is an owner who wants the government’s taxation valuation contentions admitted into evidence in an eminent domain action. You think this rule will cut both ways, or will the courts then stick to the general rule of excluding valuation for tax purposes?