In my prior blog on April 4, 2019, I wrote about the City of Baltimore’s proceedings to condemn the Pimlico Race Course and the “Preakness Stakes.” One of the issues discussed was what would be the measure of damages the City would have to pay as just compensation. I wrote that a racetrack should qualify as a specialty. The valuation of property as a specialty requires the summation method. One would calculate the depreciate value of the physical improvements and add that value to the land.
One of New York’s most knowledgeable real estate appraisers, Daniel F. Sciannameo, MAI, was quick to refer me to the Court of Appeals decision in Matter of Saratoga Harness Racing Inc. v Williams, Assessor of the City of Saratoga Springs, 91 NY2d 639 (1998). Saratoga was a tax certiorari case. The Court held that the track was not a specialty because there is a market for racetrack properties. The Court approved valuing the property by the comparable income method, or capitalization of income.
As the Court stated: This Court has limited the use of the reproduction cost method to properties considered “specialties” (Matter of Allied Corp v Town of Camillus, 80 NY2d 351, 357, supra). Allied Corp. defined “specialty” properties as those “that are ‘uniquely adapted to the business conducted upon [them] or use made of [them] and cannot be converted to other uses without the expenditure of substantial sums of money’” (Matter of Allied Corp v Town of Camillus, supra, 80 NY2d, at 357, quoting Matter of Great Atl.& Pac. Tea Co. v Kiernan, 42 NY2d 236, 240 [emphasis in original]). Four criteria have emerged for determining whether a property qualifies as a “specialty”:
- The improvement must be unique and must be specially built for the specific purpose for which it is designed;
- There must be a special use for which the improvement is designed and the improvement must be so specially used;
- There must be no market for the type of property and no sales of property for such use; and
- The improvement must be an appropriate improvement at the time of the taking or assessment and its use must be economically feasible and reasonably expected to be replaced” (id. [emphasis added]).
This does not mean that a property can never be valued on the summation basis if the facts allow. For example, in Matter of County of Suffolk (Van Bourgodien Nurseries), 47 NY2d 507 (1979), the County condemned a 19-acre parcel which was used as a flower growing nursery business. The property included a large greenhouse complex and several residences. The Court of Appeals held it was to be valued as a specialty.
So, how would Maryland value a racetrack? We know that in Florida, Calder Race Course was held properly valued in a tax certiorari case by the cost approach. Calder Race Course v Overstreet, 363 So.2d 631 (Dis. Ct. Apls. 1978).
The Pimlico Race Course itself last sold from a trust in 1979. Upon the sale, the beneficiaries sued alleging that an inadequate price for the track. The Court found that the racetrack was properly valued by the summation or cost approach. Cosden v Mercantile Safe Deposit & Trust, 398 A2d 460 (Ct. of Special Apls. 1979). The chances are that unlike New York, the cost approach may be utilized in Maryland. It is certainly something that the City of Baltimore should consider.