Ventas Realty Limited Partnership v. City of Dover

1. Does public policy require the trial court to reject the city's argument that nursing expenses should be reduced and the petitioner should be turning away complicated patients in order to reduce nursing expenses and, as such, allow the city to determine how much nursing staff is appropriate? Record Citation: Pltf. Trial Mem orandum at pgs. 7-9, 12 (Appendix at 9-11, 14) [hereinafter App.]; Pltf. Mot. to Reconsider at pg. 3-4 (App. at 23-24) 2. Is the trial court required to consider the impact its decision has third party individuals, namely nursing home patients?

Record Citation: Id.

3. Did trial court err in adopting the city's argument that the petitioner should reduce its nursing expenses to 35% of gross revenue without considering that the petitioner's patients require intensive nursing care, the critical shortage of nurses in the employment market, and the fact that state law mandates certain health care duties must be carried out by nurses versus lesser skilled care providers?

Record Citation: Id.

4. Did the trial court err in no t considering the effect of state and federal regulations on the petitioner's income and expenses? Record Citation: Pltf. Mot. to R econsider at pgs. 1-2, 4 (App. at 21-22, 24) 5. Did trial court err by rely ing on data and facts from after the assessment date? Record Citation Record Citation: Pltf. Trial Memorandum at pg. 7. (App. at 9) 6. Did the trial court err in us ing projected income and expenses for the tax year after the assessment date and not using the property's actual income and expenses for the year prior to determine fair market value? Record Citation: Id.

7. Did the trial court erred in basing its decision in part on a sale price, which neither appraiser considered to be market value, and was the result of a transaction that neither party considered an arm's length transaction? Record Citation: Pltf. Trial Memorandum at pgs. 16-17 (App. at 18-19).

This is an appeal from the Strafford Superior Court’s (Howard, J.) denial of the plaintiff’s, Ventas Realty Limited Partnership, [hereinafter Ventas] petition to abate property taxes assessed by the defendant, City of Dover [hereinafter City] on a nursing home facility for 2014. The Superior Court held Ventas had “not sufficiently proved the property’s fair market value under the income capitalization approach, and accordingly has not met its burden of proof to show that it is entitled to an abatement for the 2014 tax year.” Brief at pg. 49.

In 2014, Ventas owned property in Dover utilized as a skilled nursing facility. Brief at pg. 31. Until 2013, Kindred Healthcare leased this property. Id. When Kindred Healthcare did not renew its lease, Ventas, in May of 2013, leased the property to National Healthcare Associates [hereinafter NHCA], which operated the facility as the Dover Center for Health and Rehabilitation [hereinafter facility]. Id. On April 1, 2014, the City of Dover, assessed the property at $4, 308, 500. Id. The facility was originally built in 1969, and underwent new construction in the mid-1980’s. Id. at pg. 32. As of April 1, 2014, the facility was in need of substantial improvements. See Id. For example, it needed significant electrical work in order to meet current building code. App. at pg. 4. The backup generator was insufficient to heat the entire building, which Ventas discovered one Thanksgiving Day when the building lost power. Id.

Further, the facility was described as “tired” and “worn” with many outdated fixtures including cabinets and flooring. Brief at pg. 32; Trial Transcript at pg. 83/lines 5-13 [hereinafter Trans.]. The director of operations testified that facility looked, in April 2014 “dark, [and] kind of dingy looking” and, “there [were] a lot of physical plant issues, in terms of wear and tear on the building.” Trans. at pg. 83/lines 5-13. It only had a few individual patient rooms (the facility had only six as of April 1, 2014) and the majority of the rooms were fitted for double occupancy. Id. at pg. 84/lines 15-17. The hall rugs were stained and the patient rooms had outdated bed boards, windows, and closets. Id. at pg. 83/lines 5-13.

The lack of private rooms placed the facility at a competitive disadvantage because patients are more likely to request an individual versus a shared room1. Trans. at pg. 84/lines 22-24. Moreover, because many of the patients had significant “co-morbidities” such as infections, private rooms were often necessary to insure safe patient care. Id. at pg. 84/line 24 to pg. 85/line 3. As a result, in 2014, Ventas was in the process of obtaining a “Certificate of Need” [hereinafter CON] which, if granted, would allow it fund over $2. 6 million in improvements. Trans at pg. 85/lines 4-7; pg. 87/lines 10-17. The CON was issued in April of 2015 so, as of the time of the defendant’s April 1, 2014 assessment, no work had been done. Brief at pg. 32-3. Moreover, due to the significant repairs that were needed with the physical plant, many of the anticipated renovations could not be completed. Trans. at pg. 88/line 24 to pg. 89/line 8. On April 1, 2014, the facility primarily served patients who h ad been discharged from a hospital and needed additional rehabilitative care before they could return home. Brief at pg. 32. This is in contrast to other “comparable” nursing home facilities, which provided long term/residential care to their patients. See Id. In particular, the Ventas facility is well-known for its respiratory therapy services. Trans. at pg. 91/lines 19-25; pg. 92/lines 2-7. Given the acuity level of the patients, the facility needs to provide significant skilled nursing care and other support services such as radiology, laboratory and intravenous drug administration, well above comparable long-term care facilities. App. at pg. 10. Many of the patient care tasks, such as respiratory therapy, can only be done by specialists whose numbers are not needed in comparable long-term care facilities. See Trans. at pg. 92/lines 2-7. In addition, the facility’s patient turnover is more frequent than in other, long-term care facilities, which also required Ventas to employ additional support staff. See Id. at pg. 100/line 24 to pg. 101/line 6.

In July of 2015, Ventas, as part of a corporate restructuring, formed a new real estate investment trust called Care Capital Properties, LLC [hereinafter CCP]. Brief at pg. 33. As part of this restructuring, Ventas transferred to CCP in August of 2015. Id. The transfer was part of a large corporate in which Ventas transferred 355 skilled nursing facilities to the newly created CCP, which share the same address and staff with common directors as Ventas. Trans. at pg. 75/lines 1-9. Both appraisers agreed that this transfer was not an “arms-length sale” and no money changed hands between Ventas and CCP. See Trans. at pg. 45/lines 1-14; pg. 181/lines 2-6. However, the transfer tax stamp on the deed indicates CCP acquired the property for $4, 308, 500, which is the same amount of the defendant’s April 1, 2014 assessment. Brief at pg. 33.

Ventas filed an abatem ent petition in August of 2015 and a bench trial was conducted in June of 2018. At trial, Ventas’ expert utilized an income capitalization method to determine the properties’ fair market value. Brief at pg. 34. To arrive at this number, Ventas’ expert first calculated the facility’s gross income ($10, 147, 068) and expenses ($9, 936, 601) by stabilizing the facility’s actual numbers reported for May 1, 2013 through December 31, 2013, and the trailing eleven (11) months preceding the April 1, 2014 assessment. Id. Ventas’ expert chose May 1, 2013, the date when NHCA began operating the facility, as his starting point. Id. He compared the income and expenses to competitor’s income and expenses, and determined the subject’s expenses were reasonable. Trans. at pg. 33/lines 19-23. From these gross numbers, Ventas then calculated the net operating income and from that subtracted replacement reserves, added back property taxes. Brief at pg. 35. Finally, Ventas reduced the net operating income by 20% to account for income allocated to the business, multiplied that number by a capitalization rate of 12.6% and subtracted $150, 000 for depreciated personal property, ultimately concluding the property had a fair market value of $1, 700, 000. Id.

The City’s expert, who also used the income capitalization approach, took the facility’s actual expense numbers for May 1, 2013 through December 31, 2014. Brief at pg. 36-7. From that, she determined the facilities’ forecasted gross income to be $10, 063, 865, or about $60, 000 less than Ventas’ expert. Id. at pg. 36. However, the City’s expert determined the appropriate gross expenses were $9, 016, 402, or about $900, 000 less than Ventas’ expert, again reduced expenses from other nursing homes in the area. Id. at pg. 37. With a net operating income of $1, 047, 463, using a capitalization rate of $13.5%, and reducing that number for furniture, fixtures, equipment and business assets, the City’s expert concluded the property had a fair market value of $4, 700, 000 as of April 1, 2014. Id.

The most significant area of disagreement between the two experts was the calculation of the facility’s gross expenses. See Brief at pgs. 44-5. In the area of nursing costs, Ventas’ expert opined the appropriate number was $3, 471, 204 while the City opined the appropriate amount was $2, 899, 095, or a difference of over $500, 000. Id. at 36, note 5.

The Superior Court issued its decision in August of 2018. Brief at pgs. 3-49. In its order, the Court found the equalization rate for Dover in 2014 was 95.1. Id. at pg. 39. The Superior Court also found the income capitalization method was, consistent with the parties’ agreement, the most appropriate method to value the property. Id. at pg. 40. After considering both experts’ opinions, the Court ruled the income capitalization method required consideration of both the facility’s actual expenses and income, and market projections of what the facility could spend and earn. See Id. at pg. 45.

The Superior Court was critical of Ventas’ expert who, it found, “did not utilize comparable properties as evidence of market projections... Rather, he merely explains why actual income and expenses of comparable properties are different from the actual income and expenses of the subject property.” Id. at pgs. 43-4. The Court therefore concluded that Ventas’ expert did not establish sufficiently reliable income to show the facility’s future income. Id. With regard to the adjustments made by the City’s expert to Ventas’ expenses, the Court ruled that an assessment must be based upon the property’s fair market value as determined by the market income and expense, not its actual income and expenses. Brief at pgs. 41-2. The Court found that, it is only when the property’s specific characteristics render its ability to generate market level income unlikely will the Court consider its actual income to be indicative of the fair market value. Id. at pgs. 45-6. The Court concluded that Ventas did not establish the fair market value or demand for its specialized services in 2014 in comparison to its competitors as well as how Ventas’ actual expenses differ from what its competitors experience on the open market. See Id.

Finally, the Court ruled that Ventas’ representation to the City assessor that the property had a value of $4, 308, 500 when it was transferred to another realty trust as part of a corporate restructuring, “casts further doubt” on its claim that its paying a disproportionate amount of taxes. Brief at pg. 48. The Superior Court denied Ventas’s petition for an abatement and Ventas’ motion for reconsideration, Brief at pgs. 30-49, 51.

1. The Superior Court inappropria tely reduced the nursing and medical costs incurred by the facility when it determined the property value under the income capitalization method. Specifically, the City’s proposal in its assessment to reduce nursing expenses by $500, 000 should not have been credited as it was not supported by any evidence that demonstrated such a reduction could have been made without endangering patient health or that the “comparable facilities” which supported the appraisal actually performed patient care services that were similar to the plaintiff.

2. Public policy would not condone the adoption o f an assessment that arbitrarily lowers nursing expenses.

3. The 2015 transfer of the facility was not an arms-length sal e and, therefore, was entitled to no consideration by the Superior Court.

“Determination of fair market value is an issue of fact." Appeal of Pennichuck Water Works, 160 N.H. 18, 37 (2010); see also City of Manchester v. Town of Auburn, 125 N.H. 147, 155 (1984) (valuation of property is a question of fact). Questions of fact are reviewed for an unsustainable abuse of discretion. In re: Martel, 157 N.H. 53, 56 (2008). However, this Court reviews issues of law de novo. See In re: Wilson, 161 N.H. 659. 661 (2011).

A regulated industry can show that, due to the restrictive environment in which it operates, the market value of its property is so impacted that it renders the assessment disproportional. See Appeal of P.S.N.H., 170 N.H. 87, 95 (2017).

Governmental restrictions imposed upon the property can also considered in determining the property’s fair market value. See N.E. Power Co. v. Town of Littleton, 114 N.H. 594, 605 (1974) (restrictions imposed by federal license on property is a relevant factor in determining fair market value). In Royal Gardens Co. v. City of Concord, 114 N.H. 668, 671 (1974), for example, the Supreme Court held that the impact of federal regulations on the amount of rent that a facility could charge its tenants was relevant in determining the property’s value under the income capitalization method. See also Cascade Court Ltd. Ptnr. v. Noble, 20 P.3d. 997, 1000-1 (Wash. App. 2001) (appraisal should have considered the rent restrictions imposed by statute when valuing property).

The single largest area of discrepancy between the experts’ opinions vis-a-vis the income capitalization method was the expenses associated with nursing care. Brief at pg. 36. Ventas’ expert used the stabilized expenses for May 1, 2013 through December 31, 2013, and the trailing eleven (11) months preceding the April 1, 2014 assessment. Brief at pg. 35. The City’s expert rationalized the facilities actual expenses against “comparable” facilities. Brief at pg. 35; Trans at pg. 223/lines 13- 16. The result was a difference of approximately $500, 000, largely composed of nursing expenses. Brief at pg. 36, note 5.

In its order, the Superior Court made much of the fact that the plaintiff used its actual expenses and costs versus market expenses and costs. See Brief at pg. 41-2. In making this ruling, the Superior Court seemed to believe that a property’s actual expenses and income is not appropriate could never be used in calculating its fair market value. Id. at pg. 36, note 5. The Supreme Court, however, has never made such a holding, and, in certain circumstances, has held that actual income and expenses should be considered instead of market income and expenses. See Royal Gardens, 114 N.H. at 671; Rollsworth Tri-City Trust v. City of Sommersworth, 126 N.H. 333, 336-7 (1985) (court may use actual costs and income versus market rates if it finds actual costs and income are comparable to the market); see also Demoulas v. Town of Salem, 116 N.H. 775, 782 (1976) (“We do not mean to suggest that consideration of actual income is improper in all cases”). To find that Ventas failed to sustain its burden of proof solely because it used actual expenses versus “market expenses” was erroneous.

At trial, the Superior Court heard testimony that the facility is unique from many other nursing homes that were used as comparable properties in the area of patient care. Specifically, the Ventas facility is not a long-term care facility that treats medically stable clients, but instead is predominantly used for short term, rehabilitation care. App. at pg. 10. The plaintiff’s facility receives patients who, after discharge from local hospitals, are too sick or infirm to return home immediately without skilled intervention and/or short term rehabilitation. Trans. at pg. 103/lines 4- 17. The facility is especially well-known in the area of providing respiratory therapy and rehabilitation and has a full time respiratory therapist. See Trans. at pg. 91/lines 19-25; pg. 92/lines 2-7. In order to accomplish its goals, it relies heavily on its nursing and support staff. Id. at pg. 105/lines 17-21. The City produced no comparable property that offered the same mix of services that the plaintiff offered. For example, it pointed to no comparable property that was uniquely focused, like the plaintiff, on short-term rehabilitation. See Trans. at pg. 97/line 20 to pg. 99/line 9. It pointed to no comparable property that had as an extensive new patient admittance numbers as the plaintiff. See App. at pg. 10 (facility had 1119 admissions and discharges while closest comparable facility only had 751); Trans. at pg. 102/lines 2-10. It found no comparable property that had as extensive a pulmonary rehabilitation service2, Trans. at pg. 226/lines 13-16; pg. 105/lines 8-12, or made extensive use of intravenous medications, id. at 105/lines 14- 16. The City’s appraiser did not even consider the number of independent or assisted living beds each facility had to be “relevant to the analysis.” Trans. at pg. 186/lines 9-12. Therefore, under Royal Gardens, given the unique nature of the property, it was quite appropriate and even necessary for the Court to consider actual expenses versus market expenses under the income capitalization calculation. Further, the nursing profession is regulated by statute and regulations developed by the Board of Nursing. Each level of the nursing profession, from registered nurse, to licensed practical nurse, to nurse’s aide, have clearly defined roles, which describe what they can and cannot do. For example, only nurses and specially trained licensed practical nurses can administer intravenous medications. See RSA 326-B:13, III. The ability for a nurse to delegate medication administration to a nursing assistant is subject to a number of restrictions. See e.g. N.H. Code Admin. R. (Nur) §404.09-11; §404.04(b)(4). The delivery of medication through certain types of delivery systems, the calculation of medication dosages, and the delivery of the initial medication dose cannot be delegated at all. Id. at §404.07(d). A nurse cannot delegate patient care tasks to a nursing assistant except under limited circumstances, and must both rigorously monitor the assistant and be ready to take over care if the situation requires. See Id. at § 404.06. It is therefore not surprising that the plaintiff’s facility administrator largely allows the nursing directors to set the appropriate costs and staffing levels that are necessary. Trans. at pg. 89/line 12 to pg. 91/line 3; pg. 104/lines 21-23. Executives making nursing staff level decisions are mainly made by nurses. Id. at pg. 90/lines 11-23. Therefore, Ventas contends the only way one can truly determine if the plaintiff’s actual nursing costs were too high is to have someone who is familiar with nursing and patient care roles to examine the numbers. When cross-examined, however, the City’s expert admitted that she had no medical or nursing training. Trans. at pg. 178/lines 13-18. Aside from reviewing Medicare and Medicaid reimbursement numbers, she made no effort to ascertain the acuity levels of the clients in the plaintiff’s facility or the comparable facilities. Trans. at pg. 177/lines 16-20; pg. 225/lines 10-12. She made no attempt to determine how many assisted living and independent care beds were in each comparable facility. Id. at pg. 186/lines 9-12. Without knowing what the patients at each facility needs in terms of care, the City appraiser candidly admitted, forecasting accurate patient expenses is reduced to guess work. Id. at pg. 227/lines 6-93. Therefore, she had no idea what tasks could only be performed by nurses, what tasks could be delegated by the nursing staff or nurses’ assistants or non-nursing staff. She, likewise, had no idea what a safe staffing level was for this facility, given its patient needs, and whether the suggested cuts to the facility expenses would cause the remaining nurses to (a) risk their licenses through the inappropriate delegation of nursing tasks, or (b) risk patient health and safety by not having enough care gives to provide the attention they need. She certainly had no idea if her “comparable facilities” were skimping on staff. Id. at pg. 228/line 21 to pg. 29/line 24. In sum, the Superior Court, in accepting the City’s appraiser’s opinion on this point, fell into the same trap that led another trial court into reversible error in the Royal Gardens case. Specifically, the Court failed to take into account the fact that nurses can only perform certain tasks at the facility, and cannot delegate those tasks to lesser trained medical staff. It failed to take into account the unique nature of the plaintiff’s facility given the care it provides. It failed to consider that the other facilities offered by the City’s appraiser were not comparable at all in many important areas, such as acuity of patients and patient turnover. The Court certainly heard no evidence from the City that suggests that the facility was overstaffed for the type of care it provided, especially given the acuity level of the patients it treats. Therefore, absent evidence from the City that demonstrated the facility’s expenses were excessive for this particular property, it was error for the Trial Court to adopt the City’s opinion as to appropriate nursing expenses, which was based on a “market rate, ” and thus, the City’s capitalization of income calculation. 1. The evidence supports the reasonableness of the nursing expenses.

The New Hampshire Constituti on mandates that a municipality assess all taxpayers at the same proportion of fair market value. See Appeal of Andrews, 136 N.H. 61, 64 (1992). The plaintiff must prove by a preponderance of the evidence that it is paying more than its proportional share of taxes. See Id. To carry this burden, the plaintiff must establish that the subject property is assessed at a higher percentage of its fair market value than the percentage at which property is generally assessed in a town as of April 1 of the subject year. See Appeal of the Town of Sunapee, 126 N.H. 214, 217 (1985). Fair market value under the tax statute means the price, which the property will bring in a fair market, after reasonable efforts have been made to find the purchaser who will give the highest price for it. See Public Sen. Co. of N.H. v. Town of Seabrook, 126 N.H. 740, 742, (1985). To establish disproportionally, the plaintiff must show that their assessment is higher than the general assessment in the Town for the particular tax year. See Andrews, 136 N.H. at 64. Federal and State regulations limit the amount of income that can be generated by a particular property must be considered by the Court in determining value for the subject property. See Royal Gardens, 114 N.H. at 671-72. The uncontroverted trial testimony was that the patient census drives revenue and dictates expense patterns. Trans. at pg. 29/lines 17-20. The subject’s overall expenses were lower than the other facilities in the area, with the exception of Rochester Manor. 5 Trans. at pg. 33/lines 2-10. As for nursing expenses, the evidence demonstrated that the plaintiff’s expense are reasonable. The City’s own appraiser acknowledged that nursing expenses typically represent “30-45% of gross revenues, or nearly half of all operating expenses … [and] in recent years, nursing expenses have increased more than the general rate of inflation as a result of a nurse shortage combined with in thriving economy and low unemployment”. See

Confidential Appendix at pg. 230 [hereinafter Conf. App.]. In fact, the City’s appraiser determined that the subject property’s total nursing expenses equaled 42.6% of the gross revenue, which is in the range she found as typical. (emphasis added.) 6 See Id. at pg. 143.

Twice each year the State of New Hampshire reviews what of car e skilled nursing facilities are providing to its patients. Trans. at pg. 92/lines 13-17. From the information provided state issues a rating, known as CMI rating, from data it collects from the facilities. Trans. at pg. 92/lines 9-15. At the time of assessment, the subject property had a two-star rating. Trans. at pg. 106/lines 11-13. A two-star rating means they are understaffed. Trans. at pg. 93/lines 21-23. Accordingly, cutting nursing staff further is inappropriate. Trans. at pg. 107/lines 1-2. In fact, cutting nursing expense can have a negative impact. Trans. at pg. 77/line through pg. 78/line 7.

The Superior Court was incorrec t in finding that the plaintiff’s appraiser failed to compare its services to the competitors/market. Brief at pg. 46-7. The clear evidence show that he compared the subjects expense to the expense of three other local facilities.7 Conf. App. at 44; see also Trans.at pg. 31/line25 through pg. 32/line 22. After comparing with the competitors, the taxpayer’s appraiser concluded the subject’s expenses were reasonable. Trans. at pg. 33/line 19-23. This finding is buttressed by the City’s appraiser determination that the subject property’s total nursing expenses equaled 42.6% of the gross revenue, which is in the range she found as typical, supporting that the subject properties expenses are market expenses. (emphasis added.) See Conf. App. at pg. 221. When asked whether she would need to know the patient care level for each patient in the facility before making a decision if a nurse is needed, the City’s appraiser responded, “that’s getting into a level of detail that nobody is going to look at for an appraisal.” Trans. at pg. 227/lines 3-4. She agreed that taxpayer and its competitors have an obligation to provide an appropriate level of medical care to its patients and that those are decisions that need to be made by medical professionals and not appraisers. Trans. at pg. 227/line 10 to pg. 228/line 2. She further agreed that refusing to treat a patient due to a high level of care is morally problematic and bad business. Trans. at pg. 228/lines 8-20. Therefore, the Superior Court’s finding which accepted the City appraiser’s opinion regarding nursing expenses at the petitioner’s facility is an unsustainable exercise of discretion. 2. The taxpayer is not required to demonstrate that its patient level of care will not change in 2014.

The Superior Court stated “The court recognizes that the facil ities specialized services may make some of its expense higher than that of competitors which do not offer those services. However, Ventas has not established the market value of these services or the demand for those services in 2014 compared to its competitors. Instead, Ventas merely points to the specific services and the increased output of typical services to explain why its actual expense from prior years differ from the actual expenses of its competitors. As discussed above, Ventas is not entitled to a tax abatement merely because it can distinguish its services and occupancy from other comparable properties, rather it must show that it has been assessed above its fair market value compared to other properties.” Brief at pg. 46. The Superior Court stated further “the taxpayer cannot merely point to its actual income and expenses to prove that it cannot generate market level net income. Rather, the taxpayer must demonstrate that the property specific characteristics-in this case, its services render its ability to generate income at the market level unlikely.” Id. at 45-6. Firstly, the subject provides s pecialty care and is known for pulmonary/respiratory program. Trans. at pg. 91/line 16 to pg. 92/line 7. In fact, th plaintiff’s competitors do not have a full-time respiratory therapist. Trans. at pg. 99/lines 15-20. The subject property caters to different patient populations from its competitors. Trans. at pg. 99/lines 3-9. The plaintiff treats a significant amount of post-acute patients who are clinically complex and in need of skilled care. Trans. at pg. 103/line 4-17. Ventas relies on the nursing professionals to determine staffing levels to meet the needs of the patient population that they service. Trans. pg. 104/lines 14-20. The City admits the facilities that treats patients with greater medical needs will have higher expenses than those who treat lower acuity levels. Trans. pg. 195/lines 17-21.

Secondly, to the extent the Superior Court decision requires the subject property to take patients with less care requirements like its competitors, this is contrary to law and an unsustainable exercise of discretion. Such a requirement would tax all nursing facilities based on the highest performing facilities who do not services to complex medical care patients. Under this rationale, all nursing homes should be assessed like those facilities that only take private pay and insurance patients, leaving Medicare and Medicaid facilities at a disadvantage. This has never been the standard in New Hampshire and overlooks that this facility was in poor condition compared to its competitors. 8 At the time of the assessment, only the subject facility was contemplating a certificate of need. In fact, after taking over on May 1, 2013, one the first thing their contacts at the hospital that refer them patients told them was they have been waiting for some time for the renovations to the subject facility. Trans. pg. 82/lines 17-25. There is a lot of competition in the area and the subject relies heavily on Wentworth-Douglas Hospital, which had recently under-went its own renovation. Trans. pg. 84/lines 3-14. The hospital was getting some concerns back from patients when they came to the subject and the hospital expected it to change. Id.

The subject property was worn, dark and dingy. The hall rugs were stained. There were issues with the closets, beds, bathrooms and windows. There were issues with the generator, electrical issues and HVAC issues. Trans. pg. 83/lines 19- 24. The city’s appraiser acknowledges that the building conditions impacts hospital referrals. Trans. pg. 192/line 23 through pg. 193/line 1. Despite that, the city’s appraiser adjusted the subject’s income and expenses based on facilities in superior condition.

Lastly, there is no evidence to indicate that the patient acuity levels will improve in 2014. The property was still not renovated and still maintained pulmonary programs. The city’s appraiser agreed that the facility’s acuity levels will continue to increase, placing greater demands on professional caregiving. Trans. pg. 193/lines 13-16; Conf. App. at pg. 158. Accordingly, the Superior Court’s ruling is unsustainable.

Arbitrary reduction of the facility’s nursing expenses raises significant public policy questions. The definition of public policy is somewhat amorphous, and can be based upon a statutory or non-statutory source. See Karch v. BayBank, FSB, 147 N.H. 525, 537 (2002) (discussing public policy definition in the context of a common law wrongful discharge claim). Something may be contrary to public policy if it “is injurious to the interests of the public, contravenes some established interest of society, violates some public statute, is against good morals, tends to interfere with the public welfare or safety, or, as it is sometimes put, if it is at war with the interests of society and is in conflict with the morals of the time.” Harper v. Healthsource N.H., Inc., 140 N.H. 770, 775 (1996) (citations omitted). This Court has previously observed “the public has a substantial interest in the operation of private hospitals.” Bricker v. Sceva Speare Mem. Hosp., 111 N.H. 276, 279 (1971). Likewise, in Harper, this Court has held that the relationship between a medical provider and their patient is of significant public concern. See 140 N.H. at 776. In Harper, for example, this Court held that a physician’s claim that he was terminated because he believed an insurance company was making erroneous entries in patient files showed a possible violation of public policy. Id. at 777. Though it operates as a for profit entity, the facility provides a significant service to the people of Dover. It cares for some of the city’s most acutely ill population, especially in the area of respiratory and short-term rehabilitation. These patients are also some of the poorest citizens, as the overwhelming majority of its patients are dependent upon Medicare. See App. at pg. 22 (89% of facility’s revenue flows from Medicare/Medicaid recipients, with 60% being Medicaid patients). Therefore, the facility is limited to what it can charge patients, but is still expected to maintain a necessary level of care. Moreover, if the facility’s staffing drops to a point where patient care is impacted, hospital referrals, which are the facility’s primary source of new patients, will disappear. It goes without saying that providing safe health care for acutely sick patients is something that public policy would encourage. As shown above, the Superior Court credited an assessment of the property, which arbitrarily concluded the facility was spending too much in nursing services. It made this determination despite the fact that no evidence was introduced showing where the facility was overstaffed or, more important, whether a reduction in staff would impact the patients’ care. The end result requires the facility either to cut staff, possibly below safe levels, or shut its doors.

To make this determination without any reliable evidence from a medically trained professional, requires the Superior Court to engage in guesswork. Patient safety and patient care, as a matter of public policy, should not be left to chance. Therefore, Ventas submits that the decision to accept the City’s appraisal, which reduced the facility’s expenses by hundreds of thousands of dollars without any medical evidence showing how these cuts would affect the level of care or patient safety, was contrary to public policy.

In a tax abatement action, the critical piece of information is the property’s fair market value as of the date of the assessment. See Bedford Dev. Co. v. Town of Bedford, 122 N.H. 187, 188 (1982). In calculating the facility’s value as of April 1, 2014, Ventas’ expert considered the expenses incurred up to April 1, 2014. App at pg. 6. The City’s expert, however, used the facility’s income and expenses incurred through December 31, 2014. Brief at pg. 44. The Superior Court found the City’s opinion more reliable, citing Coliseum Vickery Realty Co. v. Nashua, 126 N.H. 368 (1978) and a number of unpublished Board of Tax and Land Appeal decisions, for the proposition that “an assessor must utilize market projections in addition to the property’s actual income and expenses to forecast a property’s future net income. Brief at pg. 42.

A review of the Vickery case does not stand for the proposition that an assessor can use post assessment information to justify their opinion of value as of the date of assessment. Instead, Vickery only stands for the proposition that the trier of fact can consider market rate expenses or income instead of the subject’s actual expenses and income if it finds the subject property was capable of performing better than it actually did on the open market. 126 N.H. at 369-70. In fact, this court found that it was improper to use data post-assessment date in reaching the assessed value. Rollsworth, 126 N.H. at 337.

Despite agreeing that it is improper to use data after April 1, 2014, the Superior Court the City’s Appraiser’s conclusion reliable because she “relied on several other valid factors to reach her conclusion. Brief at pg. 44. This was in error as it ignores the fact that the City’s post assessment data is unreliable. See Rollsworth, 126 N.H. at 337 (reversing trial court for using income derived from rents received post-assessment date). Here, the City’s appraised used income and expense data for all of 2014. 9 Conf. App. at pgs. 221-222; Trans. at pg. 145/lines 14- 18. Because City’s projections are based on the entire 2014, then her entire analysis is tainted and unreliable. Trans. pg. 146/line 4 through pg. 147/line 16.

The Superior Court, citing a Board of Tax and Land Appeal decision, ruled that Ventas’ representation of the property’s value during a 2015 transfer could corroborate the City’s assessment value. Brief at pgs. 48-9. Under New Hampshire law. “unless it is found on evidence that the sale was not consummated in a fair market, the sale price of a piece of property stands as evidence of its value.” Poorvu v. City of Nashua, 118 N.H. 632, 633 (1978). A corporate restructuring generally does not constitute a bona fide sale. See e.g. Texas Antilles, Ltd. v. Creque, 273 F.Supp 2nd 660, 663 (D.V.I. 2003) (transfer of property as part of corporate restructuring was not a sale and therefore did not trigger a right of first refusal) (citing cases).

In this case, the 2015 transfer was not a “sale” and the Court should not have considered it. Instead, it was a transfer between two related corporate entities that was necessary to achieve a corporate restructuring. Trans.at pg. 75/lines 1-9. There was no exchange of any money between these companies. The property was not advertised for sale on the open market. Ventas did not retain a realtor to assist in the marketing of the property. There is no evidence that Ventas entertained other bids for the property. Indeed, Ventas made an economic decision to pay the assessed amount in transfer tax stamps because (a) the transfer did not fall within one of exceptions found in RSA 78-B: 2 that existed in 2015, and (b) it would be cheaper to pay the transfer tax than to hire an attorney and litigate the issue with the Department of Revenue Administration if there was a challenge to the transfer tax amount. Further, neither expert considered this transfer as a comparable sale or based their opinion of value on this transfer. See Trans. at pg. 45/lines 1-14 & pg. 181/lines 2-6. More important, the 2015 transfer, even if it could be considered an arms- length transaction, would not be relevant in the present case. As stated above, the issue the Court must determine is the subject property’s fair market value on the date of the assessment. See Bedford Dev. Co. v. Town of Bedford, 122 N.H. 187, 188 (1982). How the property performed after the April 1, 2014 assessment is, as recognized by the Superior Court, not appropriate for consideration. Brief at pg. 44. Therefore, an arms’ length transfer that occurred in July 2015 would almost certainly be based upon data that was not available to a purchaser on April 1, 2014 (that is, income and expenses that occurred between April 1, 2014 and July 2015). Finally, the July 2015 transfer occurred after the facility received a Certificate of Need in April 2015, which allowed it to expend over $2 million in much needed improvements. The issuance of that certificate would certainly have a dramatic impact on the property value as it could now conduct needed upgrades, improvements and increase the number of private rooms. As such, any transfer that occurred after April 2015, arms-length or not, would not be reflective of the property’s value in 2014. Therefore, as there was no evidence that the 2015 transaction was a “fair market sale” it should not have been considered by the Court.

The Superior Court erred in its September 2018 decision becaus e it credited the City’s opinion of value which (1) reduced Ventas’ operating expenses without any analysis as to how the reduction would impact patient care and (2) considered expenses for the facility that were incurred after April 1, 2014. The Superior Court also erred when it considered the amount of tax stamps paid by Ventas in a 2015 intracompany transfer as indicative of Ventas’ opinion of the property’s fair market value. Therefore, the September 29, 2018 order should be reversed and this case remanded for a further hearing to determine the property’s fair market value as of April 1, 2014.

I hereby certify that this docum ent complies with the word limitation set forth in Supreme Court Rule 16(11). The total number of words are 6902.

D a t e: M a y 1 4, 2 0 1 9 / s / K e v in P. R a u s e o K e v in P. R a u s e o, E s q.

I hereby certify the above Brief has been served in accordance 2018 Supreme Ct. Supp. R. 18 to Walter Mitchell, Esq.

D a t e: M a y 1 4, 2 0 1 9 / s / K e v in P. R a u s e o K e v in P. R a u s e o, E s q.