Monett Battle of Westport Fund, Inc. v. Gail McCann Beatty, Assessor, Jackson County

STATE TAX COMMISSION OF MISSOURI

MONETT BATTLE OF WESTPORT FUND, INC.,	)
Complainant.	)	Appeal No. 19-30291
	)	Parcel No. 46-210-05-06-00-0-00-000
	)
v.	)
	)
GAIL McCANN BEATTY, ASSESSOR,	)
JACKSON COUNTY, MISSOURI,	)
Respondent.	)

 

DECISION AND ORDER

            Monett Battle Fund of Westport, Inc., (Complainant) appeals the Jackson County Board of Equalization’s (BOE) decision finding the true value in money (TVM) of the subject commercial property as of January 1, 2019, was $91,000.  Complainant asserts the property is overvalued and misclassified.  Complainant did not produce substantial and persuasive evidence of overvaluation or misclassification.  The BOE decision is AFFIRMED.^[1]

The evidentiary hearing was conducted remotely via WebEx on June 17, 2021.  Complainant was represented by counsel Daniel Smith.  Respondent was represented by counsel Tara Moreland.

FINDINGS OF FACT

1. The Subject Property. The subject property is a 2.2 acre vacant lot located at 5001 East 59th Street, in Kansas City, Missouri.
2. Assessment and Valuation. Respondent classified the subject property as commercial and set the TVM at $494,500. The BOE classified the subject property as commercial and reduced the TVM to $91,000.
3. Complainant’s Evidence. Complainant introduced Exhibits A through D. Each exhibit was admitted into evidence. Complainant’s exhibits are as follows.

Exhibit A	Valuation report prepared by Daniel Smith
Exhibit B	Complainant’s pre-hearing brief and appendix
Exhibit C	Smith’s written direct testimony
Exhibit D	Complainant’s complaint for review of assessment

 

Complainant is a non-profit organization dedicated to preserving historic battlefields.  The subject property is the site of a Civil War battlefield.  Complainant has conducted educational tours of the site and seeks to further develop and preserve the historic battlefield site.

The prior owner operated a warehouse on the subject property.  In 2011, the Jackson County Collector foreclosed the subject property for non-payment of property taxes.  The court administrator held a public auction.  The subject property was later deeded to the Land Trust of Jackson County.  In 2012, Complainant and the Land Trust executed a special warranty deed conveying the property to Complainant for $10.  (Ex. B at 57)

The conveyance of the subject property from the Land Trust to Complainant required resolutions from both Jackson County and the City of Kansas City.  The resolutions include statements acknowledging Complainant was acquiring the property for restoration of the battlefield consistent with the best interests of the community.  (Ex. B at 61, 62)

When Complainant acquired the property, it was improved with a warehouse.  Complainant demolished the warehouse.  As of January 1, 2019, there were no remaining improvements with any value.  Complainant obtained a landscaping bid estimating it would cost $124,500 to remove debris, install a temporary entrance, and re-grade the site.  (Ex. B at 75)

Complainant asserts the TVM of the subject property as of January 1, 2019, was no more than $9,000.  (Ex. A at 10; Ex. C at 141)[2]  Complainant’s value estimate is based on the valuation report in Exhibit A.  The valuation report was prepared by Daniel Smith, who is Complainant’s chairman and counsel in the instant appeal.  To estimate the value of the subject property, Smith compared the subject property to three nearby properties.

Property 1 is a 0.98 acre parcel immediately adjacent to and east of the subject property.  (Ex. A at 4)  The property is vacant with no improvements.  In May 2016, the Land Bank of Kansas City sold the property for $2,000.

Property 2 is a vacant 5.94 acre parcel located approximately 250 feet from the subject property.  Complainant owns the property and includes it as part the Big Blue Battlefield Park. Complainant asserts Respondent assessed the market value of this property at a rate equivalent to $1,930 per acre in 2015, $2,510 per acre in 2017, and $3,771 per acre in 2019.  (Ex. A at 6)

Property 3 is a vacant 3.97 acre parcel located approximately 500 feet from the subject property. Complainant asserts Respondent assessed the market value of this property at a rate equivalent to $2,615 per acre in 2015, $3,397 per acre in 2017, and $3,910 per acre in 2019.

Complainant estimated the value of the subject property by averaging the sale price of Property 1 ($2,000 per acre) and Respondent’s 2017 assessments of Property 2 ($2,715 per acre) and Property 3 ($3,397 per acre).  (Ex. A at 8)  The average of these values is  $2,635 per acre.  The product of multiplying the subject property’s acreage (2.205 acres) by the value average ($2,635) is $5,810, which Complainant asserts is the “preliminary” TVM of the subject property as of January 1, 2019.   (Ex. A at 8)

Smith adjusted the preliminary value estimate to account for remedial landscaping and deed restrictions.  Smith estimated landscaping costs of at least $50,000, with a range up to $124,500 based on a bid included in Exhibit B.

Smith also asserts the alleged deed restriction on the subject property is “a constructive trust limiting its use to the specific historic preservation objective of inclusion the Big Blue Battlefield Park.”  (Ex. A at 10)  Smith asserts the property is essentially unmarketable because “[t]he owner is not at liberty to offer to sell the property for a commercial or a residential use.”  Based on the valuation analysis and the two adjustment factors, Smith concludes the TVM of the subject property as of January 1, 2019, “does not exceed $9,000.00.”  (Ex. A at 10)

4. Respondent’s Evidence. Respondent submitted the written direct testimony of Christina Drews with attachments labelled as Exhibits A through D.[3] Drews is the Special Assessment Tax and Records Coordinator for Jackson County, Missouri.  At the hearing, Drews testified she is not an appraiser and that she does not deal with valuation issues in her role as the Special Assessment Tax and Records Coordinator.

Exhibits 1 through 4 were admitted into evidence.  Each exhibit contain a single aerial photograph of the subject property showing the former warehouse in various states of demolition.  Drews identified the photographs of the subject property and testified the photographs in Exhibits 2, 3, and 4 were taken in 2016, 2018, and 2020, respectively.  (WDT at 16-18)  Exhibit 4 shows demolition debris on the site of the former warehouse.

Drews testified the subject property is classified as commercial property and that it was formerly exempt from taxation.  (WDT at 12-13)  Drews also testified there is no indication of any agricultural activity on the subject property.  (WDT at 19-20)

CONCLUSIONS OF LAW

1. Assessment and Valuation. Commercial real property is assessed at 32% of its TVM as of January 1 of each odd-numbered year. Section 137.115.5(1)(c).  In an even-year appeal, the TVM of the “property as newly constructed or improved shall be determined as of January 1 of the odd-numbered year.” 12 CSR 30-3.001(2); 12 CSR 30-3.015(1).

“True value in money is the fair market value of the property on the valuation date, and is a function of its highest and best use, which is the use of the property which will produce the greatest return in the reasonably near future.”  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; see also St. Louis Cty. v. Sec. Bonhomme, Inc., 558 S.W.2d 655, 659 (Mo. banc 1977).

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 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”).
4. Complainant Did Not Produce Substantial and Persuasive Evidence of Overvaluation.

The subject property is a 2.2 acre vacant lot littered with remnants of a demolished warehouse.  The Land Bank sold the adjacent 0.98 acre parcel for $2,000.  Respondent’s valuation of nearby vacant properties is a fraction of the value attributed to the subject property.  Yet, the BOE valued the subject 2.2 acre vacant lot at $91,000, or $41,360 per acre.  Complainant asserts these facts prove overvaluation.

An overvaluation claim requires more than casting doubt on the BOE value.  Complainant bears the burden of proving “the value that should have been placed on the property.”  Tibbs, 599 S.W.3d at 7.  Complainant’s valuation report is not a valid sales comparison approach based on market data compiled from multiple open-market, arm’s-length transactions.  Instead, Complainant relies on a single sale by the Land Bank involving a foreclosed property and Respondent’s assessment of two nearby properties.  This approach does not yield substantial and persuasive evidence of value.

The Land Bank sale lacks the indicia of an open-market, arm’s-length transaction.  Complainant provides no evidence indicating the sale was an open-market, arm’s-length transaction.  This sale is not persuasive evidence of value.

Complainant’s reliance on Respondent’s assessment of two nearby properties is also unpersuasive.  While Respondent is obligated to assess property according to its TVM, the STC determines the TVM by sales, not assessments.  “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.  Complainant did not produce evidence of arm’s-length sales or of the adjustments necessary to compare one property to another.  The STC “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 lack of open market, arms-length sales renders Complainant’s valuation report unpersuasive.

The lack of market data to support the assessment data is crucial because the premise of Complainant’s overvaluation claim is that Respondent correctly valued the nearby properties but overvalued the subject property.  Complainant’s approach begs the question because, on this record, it is equally likely that Respondent under-assessed the nearby properties and accurately valued the subject property.  The lack of market data renders Complainant’s overvaluation claim and proposed value unpersuasive.

Finally, Complainant asserted the special warranty deed acts as a “constructive trust” on the property, thus limiting its value.  (Resp. Supp. Br. at 3)   A constructive trust is an equitable remedy arising “by operation of law, or, more accurately, by construction of the court, regardless and independently of any actual or presumed intention of the parties to create a trust[.]”  Schultz v. Schultz, 637 S.W.2d 1, 4 (Mo. banc 1982).  There is no evidence a court has entered an order imposing a constructive trust on the property, and the STC lacks authority to do so.   Moreover, even if the special warranty deed otherwise limits the marketability of the subject property, there is no substantial and persuasive evidence of the extent of any resulting diminution in value.  Nor is there evidence of the actual market value from which any diminished value would be calculated.  The claim that the subject property’s value is diminished by a constructive trust does not show overvaluation or the value that should have been placed on the property.

The BOE’s decision setting the TVM of the subject property at $91,000 as of January, 1, 2019 is affirmed.

6. Complainant Did Not Produce Substantial and Persuasive Evidence of Misclassification.

Complainant asserts the subject property should be classified as agricultural, not commercial.  In pertinent part, Section 137.016.1(2) defines “agricultural and horticultural property” as “all real property used for agricultural purposes and devoted primarily to the raising and harvesting of crops; to the feeding, breeding and management of livestock which shall include breeding, showing, and boarding of horses; to dairying, or to any other combination thereof; and buildings and structures customarily associated with farming, agricultural, and horticultural uses.”  There is no evidence of agricultural use.

Complainant included a photograph showing a portion of the subject property reverting to native vegetation.  (Ex. B at 11)  Evidence of vegetative succession on a portion of the property does not show the property is “devoted primarily to the raising and harvesting of crops” as required by Section 137.016(2).  There is no evidence of livestock on the property.  Nor is there evidence of “buildings and structures customarily associated with farming, agricultural, and horticultural use.”  There is no substantial and persuasive evidence of any agricultural or horticultural use as of January 1, 2019.

Complainant asserts the subject property should be classified as agricultural property pursuant to 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:

(1)  Immediate prior use, if any, of such property;

(2)  Location of such property;

(3)  Zoning classification of such property; except that, such zoning classification shall not be considered conclusive if, upon consideration of all factors, it is determined that such zoning classification does not reflect the immediate most suitable economic use of the property;

(4)  Other legal restrictions on the use of such property;

(5)  Availability of water, electricity, gas, sewers, street lighting, and other public services for such property;

(6)  Size of such property;

(7)  Access of such property to public thoroughfares; and

(8)  Any other factors relevant to a determination of the immediate most suitable economic use of such property.

Complainant argues analysis of the Section 137.016.5 factors requires consideration of Complainant’s non-profit status and “overall efforts to reclaim the dwindling industrial park and to restore the larger tract on which the subject property is located.”  (Ex. B at 5)  Section 137.016.5 provides the eight factors are a guide to classifying property “used for a … not-for-profit[.]”  The fact a property is used by a non-profit requires consideration of the enumerated factors, but non-profit status is not a factor for classification.  On this record, the statutory factors do not show the “immediate most suitable economic use” of the subject property indicates agricultural classification.

1. Immediate Prior Use

When Complainant purchased the property, it was improved with a warehouse.   The immediate prior use of the subject property was commercial.   There is no evidence of any immediate, prior agricultural use.  This factor does not favor agricultural classification.

2. Location

The property is located in an urban neighborhood.  Complainant asserts the property is located in a “dwindling industrial park.”  While an urban location in an industrial park does not preclude agricultural classification, this factor does not favor re-classifying the subject property as agricultural.[4]

3. Zoning

The property is zoned for commercial and industrial use.  There is no evidence showing the immediate most suitable economic use is for agricultural use.  This factor does not favor reclassifying the subject property as agricultural.

4. Other Legal Restrictions

Complainant asserts the special warranty deed “effectively restricts the land to reclamation as a green space meadow” and that “[a] meadow is the archetype of an agricultural use.”   (Ex. B at 11)   The deed references resolutions by the Kansas City council and the Jackson County legislature approving transfer of the subject property to Complainant for restoration of the battlefield.   There is no express restrictive covenant in the deed restricting all commercial activity or permitting only agricultural activity on the subject property.  This factor is neutral.

5. Availability of water, utilities, and public services

The subject property has access to water, utilities, and public services.  The availability of these services would enable commercial use.  The availability of services enables a broader range of uses, including commercial uses.  This factor does not favor re-classifying the subject property as agricultural.

6.  Size

The subject property is a 2.2 acre lot.  As evidenced by the former use of the subject property as a warehouse, the property is large enough to support commercial use.   This factor does not favor re-classifying the property as agricultural.

7. Accessibility

The subject property has access to public thoroughfares.  As evidenced by the former use of the subject property as a warehouse, the property has sufficient access to support commercial use.   This factor does not favor re-classifying the property as agricultural.

8. Other Factors

The record does not establish any other factors showing the immediate most suitable economic use of the subject property is as agricultural property.

Complainant did not produce substantial and persuasive evidence that the subject property was used for an agricultural or horticultural purpose as of January 1, 2019.  The Section 137.016.5 factors do not establish that the immediate most suitable economic use of the subject property is as agricultural property. The BOE’s classification of the subject property as commercial property is affirmed.

CONCLUSION AND ORDER

Complainant did not produce substantial and persuasive evidence of overvaluation or misclassification.  The TVM of the subject commercial property as of January 1, 2019, was $91,000.

Application for Review

A party may file with the STC 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 Jackson 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 August 13, 2021.

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 August 13, 2021, to:  Complainant(s) and/or Counsel for Complainant(s), the County Assessor and/or Counsel for Respondent and County Collector.

 

Elaina McKee
Legal Coordinator

 

Contact Information for State Tax Commission:
Missouri State Tax Commission
421 East Dunklin Street
P.O. Box 146
Jefferson City, MO 65102-0146
573-751-2414
Fax 573-751-1341

 

 

 

[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] All citations to Exhibit C are to the line number reflected on the right edge of each page.

[3] Per the December 8, 2020, scheduling order, Respondent’s exhibits will be referred to as Exhibits 1-4.

[4] Section 137.016.1(2) specifically authorizes agricultural classification for “urban and community gardens.”  There is no evidence the property is used as an urban and community garden.