XIAOGANG AND SHERRI CHENG v. JAKE ZIMMERMAN, ASSESSOR, ST. LOUIS COUNTY, MISSOURI

STATE TAX COMMISSION OF MISSOURI

XIAOGANG AND SHERRI CHENG, )
)
Complainants, ) Appeal No. 21-10187
) Parcel No. 18K24146
v. )
)
JAKE ZIMMERMAN, ASSESSOR, )
ST. LOUIS COUNTY, MISSOURI, )
)
Respondent. )

DECISION AND ORDER

Xiaogang and Sherri Cheng (Complainants) appeal the St. Louis County Board of Equalization’s (BOE) decision finding the true value in money (TVM) of the subject property on January 1, 2021, was $680,000.  Complainant alleges overvaluation and argued that the TVM as of that date was $650,000.[1]  Complainant did not produce substantial and persuasive evidence of overvaluation.  The BOE decision is affirmed.  The TVM of the subject property on January 1, 2021, was $680,000.

The evidentiary hearing was held on March 31, 2022, via Webex.  Complainant Xiaogang Cheng appeared pro se.  Respondent was represented by counsel, Tim Bowe.

FINDINGS OF FACT

  1. The Subject Property. The subject residential real property is located at 200 Brighton Way, Clayton, Missouri.  The subject property consists of a 10,454 square foot lot that includes a 2,257 square-foot one-story single family home, with four bedrooms and three bathrooms.  The home was built in 1951.  Complainants testified that they purchased the subject property in 2013 for around $550,000.
  2. Assessment and Valuation. The BOE determined the TVM of the subject property as of January 1, 2021, was $680,000.  The BOE decision indicates this value represents a reduction from the Assessor’s appraised value of $737,000.
  3. Complainants’ Evidence. Complainants introduced Exhibit A, a nine-page document consisting of pictures and descriptions of condition issues with the subject property.  Exhibit A also contains a summary of the three comparable properties Respondent used in his assessment, as well as a list of ten comparable properties that Complainants believe are better comparables to use for valuation than those used by Respondent.  Respondent did not object to Exhibit A’s admissibility, and Exhibit A was admitted into evidence.

Complainant testified the subject property has several permanent condition issues which affect its market value.  These are described in detail in Exhibit A and summarized as follows:

  1. Garage flooding. The garage is located on the rear side of the home and its drainage system is not connected to the storm sewer on the street.  As a result, when it rains water accumulates in and around the garage.  There is only one drainage hole in the garage.  While there is a sump pump to pump the rainwater out, Complainant’s testified that it is inefficient and cannot handle the volume of water during a continuous heavy rain.
  2. Basement leak. As the house was built in 1951, there is no draining system built around the foundation of the basement.  As a result, rainwater leaks into the basement from the side and lowest point of the basement, causing damage, unpleasant odors, and an environment susceptible to mold growth.
  3. Roof leak. There is a roof leak around the chimney, despite Complainants replacing the roof after they purchased the home.  The leak causes wall and ceiling bubbling and other damage, requiring frequent refinishing and painting.
  4. Bathtub leaks. The plumbing systems of two bathtubs on the ground floor are leaking, causing damage to the ceiling above the garage.  Complainants have hired plumbers to try and determine the exact nature of the problem, but the plumbers are not sure what is causing the leaks.
  5. Exposed pipes. Being an older home, all the water pipes are exposed either outdoors or in the garage.  In 2014, one of the pipes in the garage burst causing damage.  Being exposed, there is a higher risk of the water pipes freezing and bursting during winter temperatures.
  6. Termites. Termites have caused damage to the house, particularly in the basement ceiling.  Complainants hired an exterminator to control the presence of termites.
  7. Narrow driveway. The driveway leading to the garage entrance in the rear of the home is very narrow, making it difficult to park vehicles in the garage.  Complainants therefore rarely use the garage for vehicles.  Instead, they use it primarily for storage.

Complainants did present all of these condition issues to the BOE.

Complainant Xiaogang Cheng testified that he is not a licensed appraiser and has no professional training or experience making market-based adjustments to comparable properties.  However, Complainants researched the area around their neighborhood and found ten comparable sales which are listed in Exhibit A.  Complainants selected these ten sales after examining the listings of these properties on Zillow and deeming them to be similar to the subject property.  After adding up the total sales prices and dividing by ten, Complainants calculated the average sale price of these properties to be $643,000.  Complainants used this figure to assert a proposed value of $650,000 for the subject property as of January 1, 2021.  Complainants argue that two of the Respondent’s comparables are from 2018 and therefore out of date, and that in general the three comparable properties selected by Respondent are very different in size, structure, features, and other amenities.

  1. Respondent’s Evidence. Respondent introduced Exhibit 1, the BOE’s October 29, 2021, Decision Letter.  Complainant did not object.  Exhibit 1 was admitted into evidence.
  2. Value. The TVM of the subject property as of January 1, 2021, was $680,000.

CONCLUSIONS OF LAW

  1. Assessment and Valuation. Pursuant to Article X, Sections 4(a) and 4(b), Mo. Const. of 1945 real property and tangible personal property is assessed at its value or such percentage of its value as may be fixed by law for each class and for each subclass. Article X, Sections 4(a) and 4(b), Mo. Const. of 1945.  Residential real property is assessed at 19% of its TVM as of January 1 of each odd-numbered year.  Section 137.115.5(1)(a).  The TVM is “the fair market value of the property on the valuation date[.]”  Snider v. Casino Aztar/Aztar Mo. Gaming Corp., 156 S.W.3d 341, 346 (Mo. banc 2005) (internal quotation omitted).  The fair market value is “the price which the property would bring from a willing buyer when offered for sale by a willing seller.”  Mo. Baptist Children’s Home v. State Tax Comm’n, 867 S.W.2d 510, 512 (Mo. banc 1993).  “True value in money is defined in terms of value in exchange not value in use.”  Tibbs v. Poplar Bluff Assocs. I, L.P., 599 S.W.3d 1, 7 (Mo. App. S.D. 2020) (internal quotation omitted).  “Determining the true value in money is an issue of fact for the STC.”  Cohen v. Bushmeyer, 251 S.W.3d 345, 348 (Mo. App. E.D. 2008).

“For purposes of levying property taxes, the value of real property is typically determined using one or more of three generally accepted approaches.”  Snider, 156 S.W.3d at 346. The three generally accepted approaches are the cost approach, the income approach, and the comparable sales approach.  Id. at 346-48.  The STC has wide discretion in selecting the appropriate valuation method but “cannot base its decision on opinion evidence that fails to consider information that should have been considered under a particular valuation approach.”  Id., at 348.

The comparable sales approach “is most appropriate when there is an active market for the type of property at issue such that sufficient data are available to make a comparative analysis.”  Snider, 156 S.W.3d at 348.  For this reason, the comparable sales approach is typically used to value residential property.  “The comparable sales approach uses prices paid for similar properties in arms-length transactions and adjusts those prices to account for differences between the properties.”  Id. at 347-48 (internal quotation omitted).  “Comparable sales consist of evidence of sales reasonably related in time and distance and involve land comparable in character.”  Id. at 348.

  1. Evidence. “Although technical rules of evidence are not controlling in administrative hearings, fundamental rules of evidence are applicable.” Mo. Church of Scientology v. State Tax Comm’n, 560 S.W.2d 837, 839 (Mo. banc 1977). The hearing officer is the finder of fact and determines the credibility and weight of the evidence.   Kelly v. Mo. Dep’t of Soc. Servs., Family Support Div., 456 S.W.3d 107, 111 (Mo. App. W.D. 2015).  “It is within the purview of the hearing officer to determine the method of valuation to be adopted in a given case.” Tibbs v. Poplar Bluff Assocs. I, L.P., 599 S.W.3d 1, 9 (Mo. App. S.D. 2020).   The hearing officer “may inquire of the owner of the property or of any other party to the appeal regarding any matter or issue relevant to the valuation, subclassification or assessment of the property.”  Section 138.430.2. The Hearing Officer’s decision regarding the assessment or valuation of the property may be based solely upon his inquiry and any evidence presented by the parties, or based solely upon evidence presented by the parties. Id.
  2. Complainant’s Burden of Proof. The taxpayer bears the burden of proof and must show by a preponderance of the evidence that the property was overvalued.  Westwood P’ship v. Gogarty, 103 S.W.3d 152, 161 (Mo. App. E.D. 2003).  The BOE’s valuation is presumptively correct. Tibbs, 599 S.W.3d at 7.  The “taxpayer may rebut this presumption by presenting substantial and persuasive evidence that the valuation is erroneous.”  Id. (internal quotation omitted).  The taxpayer also must prove “the value that should have been placed on the property.” Id.           “Substantial evidence is that evidence which, if true, has probative force upon the issues, and from which the trier of fact can reasonably decide the case on the fact issues.”  Savage v. State Tax Comm’n, 722 S.W.2d 72, 77 (Mo. banc 1986) (internal quotation omitted).  Evidence is persuasive when it has “sufficient weight and probative value to convince the trier of fact.”  Daly v. P.D. George Co., 77 S.W.3d 645, 651 (Mo. App. E.D. 2002); see also White v. Dir. of Revenue, 321 S.W.3d 298, 305 (Mo. banc 2010) (noting the burden of persuasion is the “party’s duty to convince the fact-finder to view the facts in a way that favors that party”).
  3. Complainant Did Not Produce Substantial and Persuasive Evidence of Overvaluation.

Complainants did not produce substantial and persuasive evidence to support their $650,000 opinion of value.

The comparable sales approach is typically used to value residential properties improved with a single-family home.  “The comparable sales approach uses prices paid for similar properties in arms-length transactions and adjusts those prices to account for differences between the properties.”  Snider, 156 S.W.3d at 347-48 (internal quotation omitted).  While Complainants offered a list of ten comparable sales of properties which they believe to be superior to Respondent’s in determining the value of the subject property, these sales are not persuasive evidence as no adjustments are made to account for differences between the subject property and these other properties.  For example, according to Complainant’s list, one of Complainants’ comparables, 230 Lancaster Dr., sold for $691,600 on March 3, 2019, despite having one less bedroom and a smaller square foot living area than the subject property.

Further, Complainants’ calculation of an average sale price of the comparables to determine the fair market value of the subject property is not a generally accepted approach to value property.  Last, Complainant has not shown the specific source of the data for those sales included in Exhibit A, the reliability of such data, and other characteristics of the listed properties and sales, such as the style of home, amenities, and the conditions of the sale.  Therefore, Complainants did not produce substantial and persuasive evidence that these other sales prove overvaluation.

Complainant also testified that the issues with the subject property, such as the garage flooding, etc. should be taken into account when concerning its market value.  However, such evidence neither shows that such issues were not considered by the BOE, nor the monetary impact such issues have on the TVM of the subject property as of January 1, 2021.

While a property owner’s opinion of value is generally admissible, the opinion lacks “probative value where it is shown to have been based upon improper elements or an improper foundation.”  Shelby Cty. R-IV Sch. Dist. v. Herman, 392 S.W.2d 609, 613 (Mo. 1965); see also Cohen v. Bushmeyer, 251 S.W.3d 345, 349 (Mo. App. W.D. 2008) (noting a property owner’s opinion of value loses probative value when it rests on an improper foundation).

Complainant did not produce substantial and persuasive evidence showing that the subject property was overvalued.  Therefore, Complainant’s evidence does not provide the necessary foundation and elements to support his overvaluation claim.  Because the STC “cannot base its decision on opinion evidence that fails to consider information that should have been considered” under a recognized approach to value, Snider, 156 S.W.3d at 348, the BOE decision is affirmed.

CONCLUSION AND ORDER

The BOE decision is affirmed. The TVM of the subject property as of January 1, 2021, was $680,000, with an assessed value of $129,200.

Application for Review

A party may file an application for review of this decision within 30 days of the mailing date set forth in the certificate of service for this decision.  The application “shall contain specific detailed grounds upon which it is claimed the decision is erroneous.”  Section 138.432.  The application must be in writing, and may be mailed to the State Tax Commission of Missouri, P.O. Box 146, Jefferson City, MO 65102-0146, or emailed to Legal@stc.mo.gov.  A copy of the application must be sent to each person listed below in the certificate of service.  Failure to state specific facts or law upon which the application for review is based will result in summary denial.  Section 138.432.

Disputed Taxes

The Collector of St. Louis County, and the collectors of all affected political subdivisions therein, shall continue to hold the disputed taxes pending the possible filing of an application for review, unless the disputed taxes have been disbursed pursuant to a court order under the provisions of section 139.031.

SO ORDERED July 1, 2022.

Benjamin C. Slawson

Senior Hearing Officer
State Tax Commission

Certificate of Service

I hereby certify that a copy of the foregoing has been electronically mailed and/or sent by U.S. Mail on July 1, 2022, to: Complainant(s) and/or Counsel for Complainant(s), the County Assessor and/or Counsel for Respondent and County Collector.

Amy S. Westermann
Chief Counsel

[1] Complainant timely filed a complaint for review of assessment. The State Tax Commission (STC) has authority to hear and decide Complainant’s appeal.  Mo. Const. art. X, sec. 14; Section 138.430.1, RSMo 2000.  All statutory citations are to RSMo 2000, as amended.

POPLAR BLUFF HOUSING ASSOCIATES v. CHRIS RICKMAN, ASSESSOR, BUTLER COUNTY, MISSOURI

STATE TAX COMMISSION OF MISSOURI

POPLAR BLUFF HOUSING ASSOCIATES, )
Complainant, )
) Appeal No. 21-45500
) Parcel No. 13-02-10.0-002-006-013.000
v. )
)
CHRIS RICKMAN, ASSESSOR, )
BUTLER COUNTY, MISSOURI, )
)
Respondent. )

DECISION AND ORDER

Poplar Bluff Housing Associates (Complainant) appeals the Butler County Board of Equalization’s (BOE) decision affirming Respondent’s value of $1,629,460 as of January 1, 2021.[1]  Complainant alleges overvaluation and proposes a value of $926,249.  The BOE decision is set aside.  The true value in money (TVM) of the subject property as of January 1, 2021, was $926,250.

FINDINGS OF FACT

  1. The Subject Property. The subject residential property consists of a federally subsidized housing development known as the Oak Grove Apartments located at 1295 Velma Street in Poplar Bluff, Missouri.  The property has 44 one- and two-bedroom apartments.
  2. Assessment and Valuation. The BOE determined the TVM of the subject property as of January 1, 2021, was $1,629,460.
  3. Complainant’s Evidence. Complainant introduced Exhibits A through F.  Complainant’s exhibits are summarized as follows:
Exhibit A Land Use Restriction Agreement (LURA) for subject property.
Exhibit B Oak Grove Apartments rent roll as of January 1, 2021.
Exhibit C 2018-2019 Oak Grove Audited Financial Statements
Exhibit D 2019-2020 Oak Grove Audited Financial Statements
Exhibit E 2021 Oak Grove Subsidized-Housing-Worksheet
Exhibit F Written direct testimony of Sheila Calvert

Calvert testified she is the General Manager for the property management company Complainant hired to manage the subject property.  Calvert’s testified she is familiar with documents labelled Exhibits A through F.

Exhibit A is a copy of the LURA restricting use of the subject property and requiring compliance with Section 42 of the Internal Revenue Code.  Exhibits B, C, and D include rent rolls and audited financial statements showing the actual income and expense data for the subject property.  Exhibit E is the subsidized housing worksheet summarizing the data from Exhibits B, C, and D.  Collectively, Complainant’s Exhibits show the subject property is a federally subsidized, rent-restricted housing development generating net operating incomes of $67,559 in 2018; $48,065 in 2019; and $60,827 in 2020.  Complainant applied an overall capitalization rate of 6.35% for each year, resulting in estimated values of $1,063,921 in 2018; $756,921 in 2019; and $957,906 in 2020.  Complainant’s proposed value of $926,249 is based on the average of these three estimated values; i.e., ([1,063,921+ 756,921 + 957,906] / 3 = 926,249.33)

  1. Respondent’s Evidence. Respondent introduced no exhibits.  Respondent testified the BOE value should be affirmed because Complainant voluntarily dismissed an appeal from the prior assessment setting the same value as the 2021 assessment. Respondent also testified Complainant’s appeals from the 2015 and 2017 assessments resulted in stipulated values higher than Complainant’s current proposed value of $926,249.  Respondent testified the stipulations and dismissals show the BOE value represents the subject’s TVM as of January 1, 2021.
  2. Value. The TVM of the subject property as of January 1, 2021, was $926,250.

CONCLUSIONS OF LAW

  1. Assessment and Valuation. Residential real property is assessed at 32% of its TVM as of January 1 of each odd-numbered year. Section 137.115.5(1)(a).  The TVM is “the fair market value of the property on the valuation date[.]”  Snider v. Casino Aztar/Aztar Mo. Gaming Corp., 156 S.W.3d 341, 346 (Mo. banc 2005) (internal quotation omitted).  The fair market value is “the price which the property would bring from a willing buyer when offered for sale by a willing seller.”  Mo. Baptist Children’s Home v. State Tax Comm’n, 867 S.W.2d 510, 512 (Mo. banc 1993).  “True value in money is defined in terms of value in exchange not value in use.”  Tibbs v. Poplar Bluff Assocs. I, L.P., 599 S.W.3d 1, 7 (Mo. App. S.D. 2020) (internal quotation omitted).  “Determining the true value in money is an issue of fact for the STC.”  Cohen v. Bushmeyer, 251 S.W.3d 345, 348 (Mo. App. E.D. 2008).

In pertinent part, Section 137.076.2 requires the use of an “income-based approach” to value real property with “federal or state imposed restrictions in regard to rent limitations, operations requirements, or any other restrictions imposed upon the property in connection with … Section 42 of the Internal Revenue Code[.]”  The statutorily mandated “income-based approach” requires “the use of direct capitalization methodology and computed by dividing the net operating income of the parcel of property by an appropriate capitalization rate not to exceed the average of the current market data available in the county of said parcel of property.”   The Section 137.076.2 income approach utilizes the subject property’s “actual income and expenses” because they “reflect the only use … that is readily available in the reasonably near future: as low-income housing subject to rent-restricted income.”  Tibbs, 599 S.W.3d at 11 (emphasis added).

  1. Evidence. The hearing officer is the finder of fact and determines the credibility and weight of the evidence. Kelly v. Mo. Dep’t of Soc. Servs., Family Support Div., 456 S.W.3d 107, 111 (Mo. App. W.D. 2015). “Although technical rules of evidence are not controlling in administrative hearings, fundamental rules of evidence are applicable.”  Mo. Church of Scientology v. State Tax Comm’n, 560 S.W.2d 837, 839 (Mo. banc 1977).
  2. Complainant’s Burden of Proof. The taxpayer bears the burden of proof and must show by a preponderance of the evidence the property is overvalued.  Westwood P’ship v. Gogarty, 103 S.W.3d 152, 161 (Mo. App. E.D. 2003).  The BOE’s valuation is presumptively correct. Tibbs, 599 S.W.3d at 7.  The “taxpayer may rebut this presumption by presenting substantial and persuasive evidence that the valuation is erroneous.”  Id. (internal quotation omitted).  The taxpayer also must prove “the value that should have been placed on the property.”  Id.  “Substantial evidence is that evidence which, if true, has probative force upon the issues, and from which the trier of fact can reasonably decide the case on the fact issues.”  Savage v. State Tax Comm’n, 722 S.W.2d 72, 77 (Mo. banc 1986) (internal quotation omitted).  Evidence is persuasive when it has “sufficient weight and probative value to convince the trier of fact.”  Daly v. P.D. George Co., 77 S.W.3d 645, 651 (Mo. App. E.D. 2002); see also White v. Dir. of Revenue, 321 S.W.3d 298, 305 (Mo. banc 2010) (noting the burden of persuasion is the “party’s duty to convince the fact-finder to view the facts in a way that favors that party”).
  3. Complainant Produced Substantial and Persuasive Evidence of Overvaluation.

Complainant produced substantial and persuasive evidence establishing the subject property’s actual net operating income for the three years prior to 2021.  Complainant applied a 6.35% capitalization rate.  Respondent testified the 6.35% rate was higher than that utilized in the disposition of other subsidized housing appeals in Butler County, but there is no persuasive evidence showing Complainant’s 6.35% rate “exceed[s] the average of the current market data available in the county.”  Section 137.076.2.  Collectively, Complainant’s Exhibits A through F are substantial and persuasive evidence showing both Section 137.076.2 applies and that Complainant’s estimated value is based on methodology required by the statute.  The actual income and expense data for the three years preceding 2021 persuasively establishes that the subject’s TVM as of January 1, 2021, was $926,250.

Respondent’ evidence – consisting primarily of testimony regarding past settlements and dismissals – does not change the analysis.  The general rule is that evidence of settlement offers or completed settlements “in the same or in a different case” are generally inadmissible.  In the Matter of Rate Increase Request for Liberty Utilities (Missouri Water), LLC, 592 S.W.3d 82, 94 (Mo. App. W.D. 2019) (internal quotation omitted).  “The desire to encourage settlements is fully applicable to settlement of administrative actions.”  Id.  Evidence of settlement agreements is “highly prejudicial,” Daniel v. Indiana Mills & Mfg., Inc., 103 S.W.3d 302, 316 (Mo. App. S.D. 2003), and admitting such evidence undermines the policy of encouraging settlements.  Hancock v. Shook, 100 S.W.3d 786, 799 (Mo. banc 2003).

While Complainant did not specifically object to the admissibility of Respondent’s testimony regarding prior settlements and dismissals, Respondent’s testimony is not substantial and persuasive evidence supporting the BOE value.  The relevance of past settlements or dismissals is limited because settlement often represents a “compromise position … less favorable than the result a party might seek at trial.”  Hancock, 100 S.W.3d at 799.  Prior settlements and dismissals do not constitute an admission of the subject’s value as of January 1, 2021, and they are not market-based evidence supporting the BOE value.  Instead, they simply show the end result of an unknown prudential calculus leading to a compromise resolution of past appeals.  The prior settlements and dismissals do not undermine the persuasiveness of Complainant’s evidence showing the subject’s TVM as of January 1, 2021, was $926,250.

CONCLUSION AND ORDER

The BOE’s decision affirming Respondent’s value of $1,629,460 as of January 1, 2021, is set aside.  The TVM as of January 1, 2021, was $926,250.

Application for Review

A party may file an application for review of this decision within 30 days of the mailing date set forth in the certificate of service for this decision.  The application “shall contain specific detailed grounds upon which it is claimed the decision is erroneous.”  Section 138.432.  The application must be in writing, and may be mailed to the State Tax Commission of Missouri, P.O. Box 146, Jefferson City, MO 65102-0146, or emailed to Legal@stc.mo.gov.  A copy of the application must be sent to each person listed below in the certificate of service.  Failure to state specific facts or law upon which the application for review is based will result in summary denial.  Section 138.432.

Disputed Taxes

The Collector of Butler County, and the collectors of all affected political subdivisions therein, shall continue to hold the disputed taxes pending the possible filing of an application for review, unless the disputed taxes have been disbursed pursuant to a court order under the provisions of section 139.031.

SO ORDERED July 1, 2022.

Eric S. Peterson

Senior Hearing Officer
State Tax Commission

Certificate of Service

I hereby certify that a copy of the foregoing has been electronically mailed and/or sent by U.S. Mail on July 1, 2022, to: Complainant(s) and/or Counsel for Complainant(s), the County Assessor and/or Counsel for Respondent and County Collector.

Amy S. Westermann
Chief Counsel

[1] Complainant timely filed a complaint for review of assessment. The State Tax Commission (STC) has authority to hear and decide Complainant’s appeal.  Mo. Const. art. X, sec. 14; Section 138.430.1, RSMo 2000.  All statutory citations are to RSMo 2000, as amended.

GARY SINGLETON v. JAKE ZIMMERMAN, ASSESSOR, ST. LOUIS COUNTY, MISSOURI

STATE TAX COMMISSION OF MISSOURI

GARY SINGLETON, )
)
Complainant, ) Appeal No. 21-10165
) Parcel No. 24N120747
v. )
)
JAKE ZIMMERMAN, ASSESSOR, )
ST. LOUIS COUNTY, MISSOURI, )
)
Respondent. )

DECISION AND ORDER

Gary Singleton (Complainant) appealed the St. Louis County Board of Equalization’s (BOE) decision finding the true value in money (TVM) of the subject residential property was $229,000 as of January, 1, 2021.[1] Complainant alleges overvaluation and discrimination and proposes a value of $200,000.  The BOE decision is affirmed.  The TVM of the subject property as of January 1, 2021, was $229,000.

FINDINGS OF FACT

  1. The Subject Property. The subject residential property consists of a single-family home located at 1326 Craig Road in Kirkwood, Missouri.
  2. Assessment and Valuation. The BOE determined the TVM of the subject property as of January 1, 2021, was $229,000.
  3. Complainant’s Evidence. Complainant introduced Exhibits A through D.  Complainant’s exhibits are summarized as follows:
Exhibit A Letter from Complainant
Exhibit B Series of 12 photographs showing the downhill slope from a large, neighboring residence and several mature, dead oak trees Complainant testified were caused by water drainage from the neighboring residence.
Exhibit C BOE Appeal Form showing Complainant proposed a value of $200,000.
Exhibit D Stipulation in appeal 19-10802 showing Complainant and Respondent settled Complainant’s 2019 STC appeal regarding the subject property with a stipulated TVM of $209,000.

Complainant testified the property taxes on the subject property are difficult to afford because he is a retiree on fixed income.  Complainant testified Exhibit D shows the 2021 assessment is excessive because the parties settled the 2019 appeal regarding the subject property with a stipulated value of $209,000.

Complainant also testified the subject property began experiencing excessive water runoff following the construction of a large residence on a neighboring lot.  Complainant testified the neighboring residence was constructed in approximately 2013.  Complainant testified the resulting water runoff has caused areas of the subject property to be persistently wet, resulting in the death of several large oak trees and some dogwood trees.  Complainant testified there is water intrusion into the subject’s basement following heavy rains because of the runoff from the adjacent residence.  Complainant testified the home on the subject property needs a new roof and tuck pointing on the chimney.  Complainant offered no evidence of comparable sales.

  1. Respondent’s Evidence. Respondent’s evidence consisted solely of Exhibit 1, a copy of the BOE decision letter determining the subject appraised value as of January 1, 2021, was $229,000.
  2. Value. The TVM of the subject property as of January 1, 2021, was $229,000.

CONCLUSIONS OF LAW

  1. Assessment and Valuation. Residential real property is assessed at 32% of its TVM as of January 1 of each odd-numbered year. Sections 137.115.1; 137.115.5(1)(a).  The TVM is “the fair market value of the property on the valuation date[.]”  Snider v. Casino Aztar/Aztar Mo. Gaming Corp., 156 S.W.3d 341, 346 (Mo. banc 2005) (internal quotation omitted).  The fair market value is “the price which the property would bring from a willing buyer when offered for sale by a willing seller.”  Mo. Baptist Children’s Home v. State Tax Comm’n, 867 S.W.2d 510, 512 (Mo. banc 1993).  “True value in money is defined in terms of value in exchange not value in use.”  Tibbs v. Poplar Bluff Assocs. I, L.P., 599 S.W.3d 1, 7 (Mo. App. S.D. 2020) (internal quotation omitted).  “Determining the true value in money is an issue of fact for the STC.”  Cohen v. Bushmeyer, 251 S.W.3d 345, 348 (Mo. App. E.D. 2008).
  2. Evidence. The hearing officer is the finder of fact and determines the credibility and weight of the evidence. Kelly v. Mo. Dep’t of Soc. Servs., Family Support Div., 456 S.W.3d 107, 111 (Mo. App. W.D. 2015). “Although technical rules of evidence are not controlling in administrative hearings, fundamental rules of evidence are applicable.”  Mo. Church of Scientology v. State Tax Comm’n, 560 S.W.2d 837, 839 (Mo. banc 1977).
  3. Complainant’s Burden of Proof. The taxpayer bears the burden of proof and must show by a preponderance of the evidence the property is overvalued.  Westwood P’ship v. Gogarty, 103 S.W.3d 152, 161 (Mo. App. E.D. 2003).  The BOE’s valuation is presumptively correct. Tibbs, 599 S.W.3d at 7.  The “taxpayer may rebut this presumption by presenting substantial and persuasive evidence that the valuation is erroneous.”  Id. (internal quotation omitted).  The taxpayer also must prove “the value that should have been placed on the property.”  Id.  “Substantial evidence is that evidence which, if true, has probative force upon the issues, and from which the trier of fact can reasonably decide the case on the fact issues.”  Savage v. State Tax Comm’n, 722 S.W.2d 72, 77 (Mo. banc 1986) (internal quotation omitted).  Evidence is persuasive when it has “sufficient weight and probative value to convince the trier of fact.”  Daly v. P.D. George Co., 77 S.W.3d 645, 651 (Mo. App. E.D. 2002); see also White v. Dir. of Revenue, 321 S.W.3d 298, 305 (Mo. banc 2010) (noting the burden of persuasion is the “party’s duty to convince the fact-finder to view the facts in a way that favors that party”).
  4. Complainant Did Not Produce Substantial and Persuasive Evidence of Overvaluation.

Single-family homes are typically valued with the sales comparison approach because of the ready availability of sales data.  Complainant did not perform a sales comparison analysis, a comparative market analysis, or any other evidence of market-based transactions of similar homes.

Complainant persuasively testified the property taxes on the subject property are difficult to afford because he is a retiree on fixed income.  The undersigned hearing officer, however, is bound by the General Assembly’s directive to review the assessment to determine “the correct valuation to be placed on such property” and to “correct any assessment or valuation which is shown to be unlawful, unfair, improper, arbitrary or capricious.”  Section 138.430.1.  As established, the benchmark for assessments is the property’s TVM, or fair market value as of January 1, 2021. Sections 137.115.1; 137.115.5(1)(a).  A property’s fair market value does not vary according to the owner’s ability to pay the taxes.  Consequently, for purposes of this STC appeal, Complainant’s ability to afford property taxes is not a basis for concluding the subject is overvalued.

Complainant testified Exhibit D shows the parties settled the 2019 appeal regarding the subject property with a stipulated value of $209,000.  Complainant testified the 2021 reassessment at $229,000 was made just months after the parties stipulated the value was $209,000.   The stipulated value for the 2019 appeal reflects the subject’s value as of January 1, 2019, two years prior to the January 1, 2021, valuation date at issue in this appeal.   There is no evidence in the record showing the 9.6% increase in value between January 1, 2019, and January 1, 2021, exceeds the subject’s market-based price appreciation.[2]   Exhibit D is not substantial and persuasive evidence showing the subject was overvalued as of January 1, 2021.

Complainant testified the large, neighboring residence created water drainage issues causing the death of several large, mature oak trees as well as several dogwood trees. Given Complainant’s horticultural background and knowledge, his testimony persuasively establishes the tree mortality is a result of the water drainage from the neighboring residence.  However, Complainant testified the oak trees died in late 2021, after the January 1, 2021, valuation date.  Therefore, oak tree mortality could not be a detriment to the subject’s value as of January 1, 2021.  Moreover, even if tree loss was predictable as of January 1, 2021, Complainant offered no evidence showing the impact of the tree loss on the subject market value as of January 1, 2021.  Complainant testified it would likely cost between $4,000 and $5,000 to remove the trees, but there is no evidence showing this unverified estimate in fact negatively impacted the subject’s January 1, 2021, market value.

Finally, Complainant testified the drainage issues caused intermittent water intrusion during heavy rains.  There is no evidence quantifying the effect, if any, of this water intrusion on the subject’s January 1, 2021, market value.  Complainant did not produce substantial and persuasive evidence of overvaluation.

  1. Complainant Did Not Produce Substantial and Persuasive Evidence of Discrimination.

Both the United States and Missouri constitutions prohibit discriminatory taxation of similarly situated taxpayers.  Savage v. State Tax Comm’n of Missouri, 722 S.W.2d 72, 78 (Mo. banc 1986).   To prove discrimination, a property owner must first prove the fair market value of the subject property on the valuation date.  Id.  After proving fair market value, the property owner can prove discrimination by showing an “intentional systematic undervaluation . . . of other taxable property in the same class.”  State ex rel. Ashby Rd. Partners, LLC, v. State Tax Comm’n, 297 S.W.3d 80, 85 (Mo. banc 2009) (internal quotation omitted).  In the absence of intentional discrimination, a discrimination claim requires proof that the level of assessment is “so grossly excessive as to be inconsistent with an honest exercise of judgment.”  Savage, 722 S.W.2d at 78.

Complainant’s discrimination claim as denominated on the complaint for review of assessment must fail because he did not “first prove the fair market value of the subject property on the valuation date.”  Savage, 722 S.W.2d at 78.    Further, though not asserted, if Complainant proceeded on the theory the BOE value represented fair market value, the Complainant’s still offered no evidence of discrimination.  There is no evidence Respondent singled out Complainant’s property for discriminatory assessment.  Nor is there any evidence of “intentional systematic undervaluation . . . of other taxable property in the same class.”  Ashby Rd. Partners, 297 S.W.3d at 85.  Complainant did not produce substantial and persuasive evidence of discrimination.

CONCLUSION AND ORDER

The BOE’s decision finding the subject property’s appraised value was $229,000 as of on January 1, 2021, is affirmed.   The TVM as of January 1, 2021, was $229,000.

Application for Review

A party may file an application for review of this decision within 30 days of the mailing date set forth in the certificate of service for this decision.  The application “shall contain specific detailed grounds upon which it is claimed the decision is erroneous.”  Section 138.432.  The application must be in writing, and may be mailed to the State Tax Commission of Missouri, P.O. Box 146, Jefferson City, MO 65102-0146, or emailed to Legal@stc.mo.gov.  A copy of the application must be sent to each person listed below in the certificate of service.  Failure to state specific facts or law upon which the application for review is based will result in summary denial.  Section 138.432.

Disputed Taxes

The Collector of St. Louis County, and the collectors of all affected political subdivisions therein, shall continue to hold the disputed taxes pending the possible filing of an application for review, unless the disputed taxes have been disbursed pursuant to a court order under the provisions of section 139.031.

SO ORDERED July 1, 2022.

Eric S. Peterson

Senior Hearing Officer
State Tax Commission

Certificate of Service

I hereby certify that a copy of the foregoing has been electronically mailed and/or sent by U.S. Mail on July 1, 2022, to: Complainant(s) and/or Counsel for Complainant(s), the County Assessor and/or Counsel for Respondent and County Collector.

Amy S. Westermann
Chief Counsel

[1] Complainant timely filed a complaint for review of assessment. The State Tax Commission (STC) has authority to hear and decide Complainant’s appeal.  Mo. Const. art. X, sec. 14; Section 138.430.1, RSMo 2000.  All statutory citations are to RSMo 2000, as amended.

[2] [(229,000 – 209,000) / 209,000] = 0.956.

VAD REALTY, LLC, v. JAKE ZIMMERAN, ASSESSOR, ST. LOUIS COUNTY, MISSOURI

STATE TAX COMMISSION OF MISSOURI

V A D REALTY LLC, )
)
Complainant, )
) Appeal No. 10223
v. ) Parcel No. 25T630256
)
JAKE ZIMMERMAN, ASSESSOR, )
ST. LOUIS COUNTY, MISSOURI, )
Respondent. )
)

 

DECISION AND ORDER

VAD Realty LLC, (Complainant) appeals the St. Louis County Board of Equalization’s (BOE) decision classifying the subject property as residential with an appraised value of $148,400 as of January 1, 2020.[1]   Complainant alleges misclassification and overvaluation.  Complainant asserts the property should be classified as agricultural and proposes either a productivity value of $660 or a fair market value of $63,000.

The BOE decision is set aside.  The property is agricultural and its market value as of January 1, 2020, was $63,000.[2]

Complainant is represented by counsel Anthony Soukenik.  Respondent is represented by counsel Tim Bowe.  The parties filed post-hearing briefs.

FINDINGS OF FACT

  1. The Subject Property. The subject property is a vacant, undeveloped, 9.06-acre lot located in a residential subdivision in unincorporated western St. Louis County.  The western lot line is 887 feet north to south.   The northern lot line is 1,102 feet and lies on a northwest to southeast plane.  The eastern and southern lot lines are irregular and create an approximately 340-foot long, 40-foot wide peninsula extending southeast from the main lot area and out to a public cul-de-sac.  The peninsula provides the only access to the subject property from a public street.  There is no road onto or within the subject property.  The elevation at the far eastern edge of the peninsula adjoining the cul-de-sac is 572 feet above sea level.  The western edge of the lot is dissected by two deep ravines, with a high point that is 692 feet above sea level.  Given the topography and the irregular boundaries, the subject property consists almost entirely of steep inclines descending from ridges and into ravines.  The lot is approximately 99 percent wooded, with a very small cleared area in the southeast corner, near the bottom of a steep slope.

Complainant has owned the subject property since 2001 and has never listed or marketed it for sale.  Complainant’s owner has used the property to gather firewood for personal use and for outdoor recreation.

  1. Assessment and Valuation. The BOE classified the subject property as residential with an appraised value of $148,400.
  2. Complainant’s Evidence. Complainant introduced Exhibits A through E.  Complainant’s exhibits are summarized as follows:
Exhibit A Restricted appraisal report prepared by Edward Dinan, MAI, and appraiser Jordan Liener.  The report concludes residential development is “cost prohibitive,” the highest and best use of the subject property is for continued recreational use, and the TVM as of January 1, 2019, was $63,000.
Exhibit B Dinan’s written direct testimony.
Exhibit C Leiner’s written direct testimony.  Leiner testified he assisted Dinan with the appraisal and concurred in the result.  Respondent objected to Exhibit C because Leiner was not present to testify.  The hearing officer admitted Exhibit C, stating it would be given the weight it was due.
Exhibit D Written direct testimony of Nadir Djavaherian.  Djavaherian is Complainant’s owner and sole member.  Djavaherian testified the subject property has no public utilities and that he acquired the for harvesting firewood and outdoor recreation.   Djavaherian testified he has “explored” residential development but the steep topography and limited access creates  “prohibitive cost.”
Exhibit E St. Louis County parcel maps with topographical intervals and parcel boundaries; four ground-level photographs.  The first parcel map shows all adjacent properties are improved with homes and/or other buildings.

 

Dinan’s appraisal report concluded the highest and best use of the subject property is for continued recreational use.  (Ex. A at 7)   Dinan used the sales comparison approach to estimate the subject’s value.  Dinan compared the subject to four vacant parcels which sold between June 2016 and August 2018.  Like the subject, all four parcels are located in western St. Louis County and are zoned for residential use.  The parcels ranged from 9.12 acres to 11.31 acres.  (Id. at 8)  Like the subject, three of the four parcels are approximately 99 percent wooded. One is 80 percent wooded.  Like the subject, three of the four parcels have “steeply sloping” topography.  One has “moderate” topography.  Like the subject, all four comparable properties are shaped irregularly, though only one has “poor” access similar to the subject.  Unlike the subject, all four comparable properties have electric service.  Dinan applied negative adjustments ranging from 8 percent to 18 percent, yielding adjusted values ranging from $5,794 to $11,963 per acre.  The median adjusted value of the four comparable properties is $7,045, with a mean of $7,962.[3]  Dinan’s concluded value of $7,000 per acre is consistent with the median adjusted sale price of the four comparable sales.  Multiplying the subject’s 9.06 acres by $7,000 results in an estimated, rounded value of $63,000.  (Id.)

At the evidentiary hearing, Dinan testified the “salient point” is the subject property is a “leftover” parcel never developed along with the rest of the subdivision.  Dinan testified the property’s configuration and topography mean the only access is via the steep “peninsula” adjoining the cul-de-sac on the east side of the property.  While access is legally possible, Dinan testified the only viable home site is on a small portion of relatively level ground on a ridgetop along the western side of the property.   Because the only home site is on the high ground on the west side, and the only access is approximately 120 feet lower on the east side, access to a home site would require clearing a path through the woods, a “tremendous” amount of grading, and the installation of an approximately 1,000-foot road supported by large retaining walls.  Dinan testified the retaining walls alone would cost approximately $145,000.  Finally, Dinan testified the property is not connected to sewer, water, gas, or electric service.  Dinan concluded the cost to create access for a potential home site shows residential development is not economically feasible as of the valuation date.

On cross-examination, Dinan conceded it is “possible” to build on the subject property despite the steep inclines.   Dinan further conceded he was unaware of any legal restriction on residential development.  Nonetheless, Dinan reiterated his conclusion residential development is not economically feasible as of the valuation date.

Consistent with his written direct testimony, Djavaherian testified at the evidentiary hearing he has used the subject property to gather firewood for personal use and for outdoor recreation.  Djavaherian also testified he acquired the subject property to provide a “buffer” between his home and others in the area.   Djavaherian has since sold his home, but did not offer the subject property for sale along with his former home.  In his written testimony, Djavaherian testified “[o]ur realtor advised against it given a typical buyer would not be interested in maintaining such a large parcel and incurring the annual real estate tax burden.”  (Ex. D at 17) [4]   He has no plans to log the subject property.

  1. Respondent’s Evidence. Respondent introduced Exhibit 1, the BOE decision classifying the subject property as residential and setting an “appraised value” of $148,400.  Respondent introduced no other evidence.
  2. Classification and Value.  The subject property is agricultural.  The TVM as of January 1, 2020, was $63,000.

CONCLUSIONS OF LAW

  1. Assessment and Valuation. Agricultural real property is assessed at 12% of its TVM as of January 1 of each odd-numbered year. Section 137.115.5(1)(b).  The TVM is “the fair market value of the property on the valuation date[.]”  Snider v. Casino Aztar/Aztar Mo. Gaming Corp., 156 S.W.3d 341, 346 (Mo. banc 2005) (internal quotation omitted).  The fair market value is “the price which the property would bring from a willing buyer when offered for sale by a willing seller.”  Mo. Baptist Children’s Home v. State Tax Comm’n, 867 S.W.2d 510, 512 (Mo. banc 1993).  “True value in money is defined in terms of value in exchange not value in use.”  Tibbs v. Poplar Bluff Assocs. I, L.P., 599 S.W.3d 1, 7 (Mo. App. S.D. 2020) (internal quotation omitted).  “Determining the true value in money is an issue of fact for the STC.”  Cohen v. Bushmeyer, 251 S.W.3d 345, 348 (Mo. App. E.D. 2008).

“For purposes of levying property taxes, the value of real property is typically determined using one or more of three generally accepted approaches.”  Snider, 156 S.W.3d at 346. The three generally accepted approaches are the cost approach, the income approach, and the comparable sales approach.  Id. at 346-48.

Agricultural property is typically valued according to land grades and productive values established by STC regulations.  12 CSR 30-4.010.  Unlike other agricultural property, “[f]orest land, whose cover is predominantly trees and other woody vegetation, should not be assigned to a land classification grade based on its productivity for agricultural crops.”  12 CSR 30-4.010(2)(A). “Forest land may or may not be in use for timber production, wildlife management, hunting, other outdoor recreation, or similar uses[.]”  Id.  These regulations indicate vacant forest land used for recreational purposes may be classified as agricultural.

  1. Evidence. The hearing officer is the finder of fact and determines the credibility and weight of the evidence. Kelly v. Mo. Dep’t of Soc. Servs., Family Support Div., 456 S.W.3d 107, 111 (Mo. App. W.D. 2015). “Although technical rules of evidence are not controlling in administrative hearings, fundamental rules of evidence are applicable.”  Mo. Church of Scientology v. State Tax Comm’n, 560 S.W.2d 837, 839 (Mo. banc 1977).
  2. Complainant’s Burden of Proof. The taxpayer bears the burden of proof and must show by a preponderance of the evidence that the property was misclassified or overvalued.  Westwood P’ship v. Gogarty, 103 S.W.3d 152, 161 (Mo. App. E.D. 2003).  The BOE’s classification of the subject property is presumptively correct. Rinehart v. Bateman, 363 S.W.3d 357, 367 (Mo. App. W.D. 2012).  The BOE’s valuation is also presumptively correct.  Tibbs, 599 S.W.3d at 7.  The “taxpayer may rebut this presumption by presenting substantial and persuasive evidence that the valuation is erroneous.”  Id. (internal quotation omitted).  The taxpayer also must prove “the value that should have been placed on the property.” Id.   “Substantial evidence is that evidence which, if true, has probative force upon the issues, and from which the trier of fact can reasonably decide the case on the fact issues.”  Savage v. State Tax Comm’n, 722 S.W.2d 72, 77 (Mo. banc 1986) (internal quotation omitted).  Evidence is persuasive when it has “sufficient weight and probative value to convince the trier of fact.”  Daly v. P.D. George Co., 77 S.W.3d 645, 651 (Mo. App. E.D. 2002); see also White v. Dir. of Revenue, 321 S.W.3d 298, 305 (Mo. banc 2010) (noting the burden of persuasion is the “party’s duty to convince the fact-finder to view the facts in a way that favors that party”).
  3. Complainant Produced Substantial and Persuasive Evidence of Misclassification.

Section 137.016.5 provides a statutory basis for “subclassifying real property into one of the three constitutionally authorized subclassifications if the property does not otherwise fit within one of the statutory definitions set forth at section 137.016.1.”   Bateman, 363 S.W.3d at 365 n.14.  The subject property does not satisfy the statutory definitions of residential, commercial, or agricultural property provided in Section 137.016.1(1), (2), or (3).  Consequently, the proper classification requires analysis of the eight factors set forth in Section 137.016.5.  Section 137.016.5 provides:

All real property which is vacant, unused, or held for future use; which is used for a private club, a not-for-profit or other nonexempt lodge, club, business, trade, service organization, or similar entity; or for which a determination as to its classification cannot be made under the definitions set out in subsection 1 of this section, shall be classified according to its immediate most suitable economic use, which use shall be determined after consideration of:

(Emphasis added).

  1. Immediate Prior Use

The subject property is undeveloped, vacant land that is approximately 99 percent forested.  The subject property has never been developed or used for residential or commercial purposes.  While there is no evidence the subject property has been used to raise crops or livestock, the substantial and persuasive evidence in the record shows the immediate prior use of the property is as forest land for outdoor recreation.

  1. Location

The property is located in a residential subdivision in western St. Louis County.  The area is mostly residential, but there are agricultural parcels.  An adjacent property along the subject’s western border is classified as partially agricultural.  The subject’s location in a predominantly residential area is not dispositive given the existence of the adjacent partially agricultural parcel and the presence of other agricultural parcels in the area.  The location factor is neutral.

  1. Zoning

The property is zoned for residential use. Section 137.016, however, does not define classifications according to zoning.  To the contrary, “a zoning classification shall not be considered conclusive, if upon consideration of all factors, the zoning classification does not reflect the immediate most suitable economic use of the property.” Section 137.016.5(3). Thus, the statute expressly contemplates classifications inconsistent with the current zoning and relegates it to one of eight non-dispositive factors.  Bateman v. Rinehart, 391 S.W.3d 441, 448 (Mo. banc 2013).

The substantial, persuasive, and uncontradicted exhibits in the record establishes residential zoning does not reflect the “immediate most suitable economic use of the property.”  (Ex. A at 3, 7; Ex. B at 30-37; Ex. D at 11-18)  Dinan and Djavaherian’s evidentiary hearing testimony confirmed residential development was infeasible due to the subject’s steep topography, irregular configuration, and lack of utility service. The substantial and persuasive evidence in the records shows the immediate most suitable economic use is “[c]ontinued recreational use until development becomes feasible.”  (Ex. A at 7; Ex. B at 30).  The fact the subject is zoned residential is not conclusive.

  1. Other Legal Restrictions

Complainant asserts neighboring homeowners would likely mount a legal challenge to residential development.  This assertion is speculative.  There is no substantial and persuasive evidence of any other legal restrictions precluding residential development.

  1. Availability of water, utilities, and public services

The subject property does not have connections to water, utilities, or public sewers.  The property has access to a public street via a cul-de-sac, but the substantial and persuasive evidence from Complainant’s appraiser and Complainant’s owner establish the subject’s topography and irregular configuration makes residential development economically infeasible as of the valuation date.   The substantial and persuasive evidence in the record shows residential use is not the subject’s immediate most suitable economic use.  The substantial and persuasive evidence in the record shows the subject’s immediate most suitable economic use is continued use as forest land for outdoor recreation.

  1. Size

The subject property is a 9.06-acre undeveloped lot.  Typically, parcels of this size are suitable for multiple uses.  However, the substantial and persuasive evidence in the record shows the subject’s steep topography limits possible home sites to a less than one acre portion on the highest, western edge of the property.  Considered in conjunction with the subject’s steep topography, the subject’s size and irregular configuration require construction of approximately 1,000 feet of road and retaining walls traversing the peninsula from the cul-de-sac on the eastern edge of the property through wooded areas and over steep slopes in order to access the potential home site on the western edge of the property.  The subject property’s size therefore creates additional costs contributing to the economic infeasibility of residential development.  This factor does not favor residential classification.

  1. Access to Public Thoroughfares

The subject property has walk-in access from public thoroughfares.  There are no interior driveways permitting vehicular access.  The substantial and persuasive evidence in the records shows constructing a road on the subject property is cost-prohibitive for purposes of residential development.  This factor does not favor residential classification.

  1. Other Factors

The subject’s history is not consistent with continued residential classification.  The subject is located in a residential subdivision.  Unlike every other adjacent parcel, the subject property was never developed.  As Complainant’s appraiser testified, the subject is a “leftover” parcel precisely because the steep topography and irregular configuration have been and remain cost-prohibitive factors for residential development.  The fact the subject has remained undeveloped while every adjacent parcel is used for entirely or partially for residential purposes is consistent with the evidence showing residential use is not an economically feasible use of the subject property.

Complainant produced substantial and persuasive evidence showing that as of the valuation date, residential development and use is cost prohibitive.  The immediate most suitable economic use of the subject property is not residential use.  Complainant’s evidence persuasively established the subject property is vacant forest land used for outdoor recreation.  STC regulations indicate “forest land” used for “outdoor recreation, or similar uses” may qualify for agricultural classification.  12 CSR 30-4.010(2)(A).  The BOE’s classification of the subject property as residential property is set aside.  The subject property is agricultural.

Respondent’s Arguments

Respondent offers five arguments in opposition to agricultural classification.  None of these arguments undermine the conclusion Complainant produced substantial and persuasive evidence showing the subject property should be classified as agricultural.

First, Respondent asserts the subject property does not satisfy the Section 137.016.1(2) definition of “agricultural and horticultural property” because it was not “devoted primarily to the raising and harvesting of crops” or “to the feeding, breeding and management of livestock[.]” (Resp. Br. at 2-3, 5, 7-10, 13)  The fact the subject is not used to raise crops or livestock simply reinforces the conclusion that the appropriate classification must be based on the Section 137.106.5 factors governing the classification of property that does not otherwise fit within the Section 137.016.1 definitions of residential, agricultural, or commercial property.  Bateman, 363 S.W.3d at 366 n.13 (noting “section 137.016.5 provides for a means of subclassifying real property into one of the three constitutionally authorized subclassifications if the property does not otherwise fit within one of the statutory definitions set forth at section 137.016.1”).  Respondent’s observation the subject property is not used for raising crops or livestock does not alter the conclusion that the Section 137.016.5 factors favor agricultural classification.

Second, Respondent cites several STC decisions for “guidance” regarding the proper classification of the subject property.  (Resp. Br. at 3-5)[5]  Respondent asserts Markirk Development, LLC v. Koons, 2012WL4842834 (Mo. St. Tax Comm’n, Sep. 2, 2012) is the “[m]ost similar” case and supports residential classification.   (Id. at 3)  Markirk is materially distinguishable and unpersuasive.

Unlike the subject’s nine-acre, steeply sloping and wooded lot, the subject properties in Markirk were 26 residential lots platted and marketed for residential use.  Makirk at 2.  Unlike the subject property, the lots in Markirk had “sanitary and storm sewers, electrical, telephone and cable lines installed to the platted areas.”  Id. at 2.  Given these facts, the owner’s attempt to seed fescue in December 2010 – months after the planting times recommended by the University of Missouri and immediately prior to the January 1, 2011, valuation date – “accomplished nothing” and did not overcome the fact the properties were platted and marketed for residential use.  Id. at 5.  Markirk is materially distinguishable and does not support Respondent’s argument.

Respondent also attempts to distinguish three decisions in which the STC reclassified “seemingly similar” vacant lands from residential to agricultural.   (Resp. Br. at 4-5)[6]   As in this case, the salient point in each of these three decisions is that the subject properties did not meet the Section 137.016.1 definitions of residential, agricultural, or commercial property and Section 137.016.5 factors favored agricultural classification.   For instance, in Kozlowski, the hearing officer concluded a 0.93-acre vacant, wooded, and steeply sloping parcel should be classified as agricultural in part because it was not “suitable for a residence.”  2018 WL 3764601 at 9.  The same is true here.  Contrary to Respondent’s argument, Kozlowski supports an agricultural classification in this case.[7]

Third, Respondent asserts 12 CSR 30-4.010, which sets agricultural productive values and provides certain forest land should not be assigned an agricultural productive value, applies only to “land that is already classified as agricultural land[.]” (Resp. Br. at 6)  Respondent’s argument is based on the prefatory “Purpose” of 12 CSR 30-4.010, which is “to publish a range of productive values for agricultural and horticultural land for the ensuing tax year.”  Respondent concludes this language shows the regulation “simply establishes that forest and horticultural land that are already classified as agricultural, are treated differently than cultivated agricultural land” and is “irrelevant” to the classification of the subject property.  (Resp. Br. at 6)   Respondent is incorrect.

The regulation includes a prefatory sentence – the “Purpose” – followed by the operative regulatory text.  See State v. Shanklin, 534 S.W.3d 240, 242 (Mo. banc 2017) (holding article I, section 35 of the Missouri Constitution included “prefatory” language providing a “purpose and context” for the amendment while the subsequent “operative” language defined the legal effect of the amendment).  The stated “Purpose” of 12 CSR 30-4.010 simply provides context for the subsequent and operative regulatory text establishing valuation methods for agricultural property.  Nothing in the operative regulatory text distinguishes the valuation of lands “already classified” as agricultural from those reclassified as agricultural by the STC.[8]  Nor does the operative regulatory text purport to limit the STC’s authority to reclassify property pursuant to the Section 137.016.5 factors.[9] While not dispositive as to the factual issues of the subject’s property classification, 12 CSR 30-4.010(2)(A) recognizes forest lands, including those used for “outdoor recreation,” may be classified and valued as agricultural property.  As established, Complainant’s evidence persuasively demonstrated the subject property is should be classified as agricultural.

Fourth, Respondent argues the Section 137.016.5 factors do not support agricultural classification.  The substantial and persuasive evidence in the record shows otherwise.

Finally, Respondent asserts the subject property should be classified as commercial because “forest land fits neatly into 137.016.1(3), RSMo as ‘all other real property not included in the property listed in subclasses (1) and (2) of Section 4(b) of Article X of the Missouri Constitution[.]'”  (Resp. Br. at 13)  In other words, Respondent argues that because the subject property does not meet the statutory definitions of residential or agricultural, it has to be commercial.  As established, this argument overlooks the fact Section 137.016.5 provide a basis for classifying as agricultural property that does not otherwise fit the Section 137.016.1 definitions of residential, agricultural, or commercial property.[10]  The substantial and persuasive evidence in the records shows the subject property “ends up being classified as agricultural following evaluation of the factors set forth in section 137.016.5[.]”  Bateman, 363 S.W.3d at 365 n.14

  1. Complainant Produced Substantial and Persuasive Evidence of Overvaluation.

Agricultural property may be valued according to productive values set by regulation or by its fair market value.  When, as in this case, real property is classified as agricultural pursuant to Section 137.016.5, the assessment is based on “its fair market value.”  Section 137.017.4.[11]  Bateman, 363 S.W.3d at 365–66; see also 12 CSR 30-4.010(2)(A) (providing forest land covered predominantly by trees and other woody vegetation should not be assigned to a land classification grade based on its productivity for agricultural crops).

Complainant’s appraiser performed a valid sales comparison approach persuasively estimating the subject’s TVM was $63,000 as of January 1, 2019.  (Ex. A at 7)  Aside from the BOE decision, Respondent produced no evidence contradicting this conclusion.  The TVM of the subject property was $63,000 as of January 1, 2019.

CONCLUSION AND ORDER

The BOE’s decision classifying the subject property as residential with an appraised value of $148,400 is set aside.  The subject property is agricultural with a TVM of $63,000 for tax year 2020.

Application for Review

A party may file an application for review of this decision within 30 days of the mailing date set forth in the certificate of service for this decision.  The application “shall contain specific detailed grounds upon which it is claimed the decision is erroneous.”  Section 138.432.  The application must be in writing, and may be mailed to the State Tax Commission of Missouri, P.O. Box 146, Jefferson City, MO 65102-0146, or emailed to Legal@stc.mo.gov.  A copy of the application must be sent to each person listed below in the certificate of service.  Failure to state specific facts or law upon which the application for review is based will result in summary denial.  Section 138.432.

Disputed Taxes

The Collector of St. Louis County, and the collectors of all affected political subdivisions therein, shall continue to hold the disputed taxes pending the possible filing of an application for review, unless the disputed taxes have been disbursed pursuant to a court order under the provisions of section 139.031.

SO ORDERED July 1, 2022.

Eric S. Peterson

Senior Hearing Officer
State Tax Commission

Certificate of Service

I hereby certify that a copy of the foregoing has been electronically mailed and/or sent by U.S. Mail on July 1, 2022, to: Complainant(s) and/or Counsel for Complainant(s), the County Assessor and/or Counsel for Respondent and County Collector.

Amy S. Westermann
Chief Counsel

[1] Complainant timely filed a complaint for review of assessment. The State Tax Commission (STC) has authority to hear and decide Complainant’s appeal.  Mo. Const. art. X, sec. 14; Section 138.430.1, RSMo 2000.  All statutory citations are to RSMo 2000, as amended.

[2] The evidentiary hearing was conducted by a former STC hearing officer.  The appeal was reassigned to the undersigned hearing officer for a decision and order.  Section 138.431.2.

[3] The $7,045 median is calculated as follows: ([$6,887 + $7,203] / 2 = $7,045).

[4] All citations to written direct testimony refer to the numbered question and answer.

[5] Respondent correctly notes past STC decisions and orders provide “guidance,” not precedent. Administrative agency decisions “are not from courts of law and are not precedential.” Cent. Hardware Co. v. Dir. of Revenue, 887 S.W.2d 593, 596 (Mo. banc 1994). Therefore, an administrative agency “is not bound by its previous decisions, so long as its current decision is not otherwise unreasonable or unlawful.” Laclede Gas Co.’s Verified Application to Re-Establish & Extend the Fin. Auth. Previously Approved By the Comm’n v. Mo. Pub. Serv. Comm’n, 526 S.W.3d 245, 252 (Mo. App. W.D. 2017).  STC decisions and orders are non-binding, persuasive authority aiding the consistent disposition of factually analogous cases.

[6]  Respondent cites Rowlett v. Berry, 2018 WL 6112359 (Mo. St. Tax Comm’n, November 13, 2018); Kozlowski v. Zimmerman, 2018 WL 3764601 (Mo. St. Tax Comm’n, July 31, 2019); and Shelton v. Zimmerman, 2018 WL 3764595 (Mo. St. Tax Comm’n, July 31, 2018).

[7] Likewise, in Shelton, an STC hearing officer reclassified a 0.23-acre vacant parcel from residential to agricultural in part because most of the subject property was “hilly and covered with trees” and “not suitable for a residence as of January 1, 2017, even if local ordinance allowed one to be built.”  Similar to Shelton and Kozlowski, the hearing officer in Rowlett reclassified a 1.4-acre, vacant, wooded, and steeply sloping parcel from residential to agricultural.  Like Kozlowski, Shelton and Rowlett are factually analogous to this case and support reclassifying the subject property from residential to agricultural.

[8] Respondent’s argument that the valuation methods prescribed by12 CSR 30-4.010 apply only to property “already classified” as agricultural also implies the valuation of properties reclassified by the STC are valued by some other method.  Respondent’s argument runs headlong into the constitutional mandate that “[t]he same percentage of value shall be applied to all properties within any subclass.”  Mo. Const. art. X, sec. 4(b).

[9]  In any event, agency regulations cannot conflict with statutory mandates.  See Union Elec. Co. v. Dir. of Revenue, 425S.W.3d 118, 125 (Mo. banc 2014).

[10] See also Bateman, 363 S.W.3d at 365 n.14 (noting “real property that ends up being classified as agricultural following evaluation of the factors set forth in section 137.016.5 is ‘vacant, unused’ land because it is not being ‘used for agricultural purposes,’ excluding it from the ambit of section 137.016.1(2)’s definition of ‘agricultural.'” (Emphasis in original).

[11] In 1995, Section 137.016 was amended and subsection 3 was renumbered subsection 5. Section 137.017.4, however, was not amended include the correct reference to Section 137.016.5.  Thus, the reference in Section 137.017.4 to “agricultural and horticultural property under subsection 3 of section 137.016” is actually a reference to the multi-factor test now found in Section 137.016.5.  Bateman, 363 S.W.3d 357 at 365 n.13.

STEVEN CARL VIRES v. JAKE ZIMMERMAN, ASSESSOR, ST. LOUIS COUNTY, MISSOURI

STATE TAX COMMISSION OF MISSOURI

STEVEN CARL VIRES, )
)
Complainant, )
) Appeal No. 21-18351
v. ) Parcel No. 29L140353
)
JAKE ZIMMERMAN, ASSESSOR, )
ST. LOUIS COUNTY, MISSOURI, )
)
Respondent. )

DECISION AND ORDER

Steven Carl Vires (Complainant) appeals the St. Louis County Board of Equalization’s (BOE) decision finding the true value in money (TVM) of the subject residential property was $264,600 as of January, 1, 2021.[1] Complainant alleges overvaluation and proposes a value of $230,000.  Complainant did not appear for the June 23, 2022, evidentiary hearing.  The BOE decision is affirmed.

FINDINGS OF FACT

The evidentiary hearing was scheduled for June 23, 2022, at 10:00 a.m.  Respondent’s counsel, Tim Bowe, timely appeared at the evidentiary hearing.  Complainant did not appear.  Complainant did not seek a continuance or otherwise communicate any intent to proceed with the appeal.

CONCLUSIONS OF LAW

Section 138.430.5 governs the disposition of appeals by an STC hearing officer.  The statute provides: “[u]nless an appeal is voluntarily dismissed, a hearing officer, after affording the parties reasonable opportunity for fair hearing, shall issue a decision and order affirming, modifying, or reversing the determination of the board of equalization, and correcting any assessment which is unlawful, unfair, improper, arbitrary, or capricious.”

The parties were afforded notice and a reasonable opportunity to participate in the evidentiary hearing.   Complainant did not voluntarily dismiss the appeal.

Complainant bore the burden of proof and was required to show by a preponderance of the evidence that the subject property was overvalued.  Westwood P’ship v. Gogarty, 103 S.W.3d 152, 161 (Mo. App. E.D. 2003).  Complainant did not appear at the evidentiary hearing and produced no evidence to support his overvaluation claim.  Complainant’s failure to appear and present evidence necessarily means Complainant did not meet his burden of proving overvaluation.  As Missouri law has recognized for over 150 years, “if there be no evidence sufficient in law to make a prima facie case on this issue, plaintiff cannot be entitled to recover.”  Callahan v. Warne, 40 Mo. 131, 135 (Mo. 1867).  The BOE decision is affirmed.  Section 138.430.5

CONCLUSION AND ORDER

The BOE’s decision is affirmed.  The TVM of the subject property as of January 1, 2021, was $264,600.

Application for Review

A party may file an application for review of this decision within 30 days of the mailing date set forth in the certificate of service for this decision.  The application “shall contain specific detailed grounds upon which it is claimed the decision is erroneous.”  Section 138.432.  The application must be in writing, and may be mailed to the State Tax Commission of Missouri, P.O. Box 146, Jefferson City, MO 65102-0146, or emailed to Legal@stc.mo.gov.  A copy of the application must be sent to each person listed below in the certificate of service.  Failure to state specific facts or law upon which the application for review is based will result in summary denial.  Section 138.432.

Disputed Taxes

The Collector of St. Louis County, and the collectors of all affected political subdivisions therein, shall continue to hold the disputed taxes pending the possible filing of an application for review, unless the disputed taxes have been disbursed pursuant to a court order under the provisions of section 139.031.

SO ORDERED July 1, 2022.

Eric S. Peterson

Senior Hearing Officer
State Tax Commission

Certificate of Service

I hereby certify that a copy of the foregoing has been electronically mailed and/or sent by U.S. Mail on July 1, 2022, to: Complainant(s) and/or Counsel for Complainant(s), the County Assessor and/or Counsel for Respondent and County Collector.

Amy S. Westermann
Chief Counsel

[1] Complainant timely filed a complaint for review of assessment. The State Tax Commission (STC) has authority to hear and decide Complainant’s appeal.  Mo. Const. art. X, sec. 14; Section 138.430.1, RSMo 2000.  All statutory citations are to RSMo 2000, as amended.