El Dorado Springs Estates v. Paul Johnson

February 17th, 2006

State Tax Commission of Missouri





v.)Appeals No 97-49503 and 97-49504,

)99-49501 and 97-49502







Complainant failed to present substantial and persuasive evidence establishing that the Cedar County Board of Equalization had overvalued the subject property for tax years 1997 through 2002.However, because neither party properly applied the Commission approved methodology for valuing subsidized properties, the Tax Commission sets value in accord with said approved methodology.The decisions of the Cedar County Board of Equalization are SET ASIDE.The proposed values, and the Tax Commission values, are as follows:





















The subject property consists of two parcels.Because this is a single development sharing income and expenses, it has been valued as a single unit.For the purposes of dividing value between the two parcels, if same is necessary, 51% of value is attributable to parcel number 90-3-8-28-4-3-2 and 49% of value is attributable to parcel number 90-3-8-28-4-3-1.


The issue in this case is the true value in money of the subject property for tax years 1997 through 2002.


Complainant appeals the assessment of its subsidized housing apartment complex.The Cedar County Assessor determined, and the Board of Equalization affirmed, that the subject property had a market value of $477,315 (assessed value $90,690) for tax years 1997 and 1998; $477,300 (assessed value $90,690) for tax years 1999 and 2000; and $484,737 (assessed value $92,100) for tax years 2001 and 2002.At hearing, Respondent proposed a value of $520,512 (assessed value $98,900) for all tax years in question.Complainant proposed a value of $350,000 (assessed value $66,500) for tax years 1997 and 1998; $325,000 (assessed value $61,750) for tax years 1999 and 2000; and $300,000 (assessed value $57,000) for tax years 2001 and 2002.

At Complainant’s request, these appeals were stayed pending the Tax Commission’s decision in Maryville Properties, L.P. v. Pat Nelson, Assessor of Nodaway County, Missouri, STC Appeal No. 97-74500.Said stay was continued, pending judicial review of the Maryville Properties case.On May 6, 2004, the Tax Commission issued its order lifting the stay and setting discovery and exchange schedules.

A hearing was held on June 22, 2005, at the Cedar County Courthouse in Stockton, Missouri.Complainant was represented by Cathy J. Dean, Esq.Respondent appeared pro se.


For the purpose of submitting exhibits, both the El Dorado Springs appeals and the Stockton Estates appeals (Numbers 97-49502, 99-49500 and 01-49500) were submitted into the same record.The following exhibits were submitted by the parties and accepted into the record:

Complainant’s Exhibits


Appraisal Qualifications of Teddy J. Blaylock, MAI


Income and Expense Worksheets


Appraisal Report – El Dorado Springs Estates, L.P.


Appraisal Report – Stockton Estates, L.P.


Missouri Housing Development Commission Low-Income Housing Tax Credit

Program Compliance Manual


Rural Development Policy and Procedures


Tenant Selection Criteria


Marketing Plan


Phone Inquiry List


Checklist for Rent-Up


Rental Application


Applicant/Tenants Statement of Income Assets and Deductions (Tenant Profile)


Authorization for Release of Information for Tenant Tracker


Renter’s Screening Application


Authorization for Release of Information for Renter’s Screening


Employment Verification


Verification of Unemployment Benefits


AFDC or Other Assistance Inquiry


Social Security Administration Verification of Benefits


Certification of Disability


Verification of Military Compensation


Verification of Pension and Annuity Data


Verification of Child Support Payments


Student Certification Form


Student Income Verification


Verification of Unemployment Benefits


Verification from Landlord


Bank Verification


Child Care Verification


Section 8 Assistance Questionnaire


Live-In Care Attendant


Self-Employment Verification


Zero Income Worksheet


Zero Income Verification


Statement of Gifts Received By The Family


Criminal Record Check


Marital Separation Status Verification


Home Rental Housing Production Program


USDA Rural Housing Service Tenant Certification


Instructions for USDA-Rural Housing Service Tenant Certification


Tenant Emergency Information


Application Response


Fairway Management Notice of Unfavorable Action on Application


Notice of Withdrawn Application from Waiting List


Waiting List Form


In-House Waiting List Form


Missouri Housing Development Commission Trust Fund Program Rent

Calculation Worksheet


Rental and Occupancy Charge and/or Utility Allowance Charges


Lease Agreement


Addendum to Lease Accessible Unit


Rental Agreement for a Drug-Free Property


Security Deposit Agreement Addendum to Lease


Smoke Detector Addendum to Lease


Waterbed Agreement Addendum to Rental Agreement


Addendum to Lease Alternative Rental Assistance


Rules and Regulations


Apartment Cleaning Procedures


Apartment Cleaning Procedures Suggest Supplies to Help You Clean

Your Apartment


Apartment Cleaning Procedures For Checkout


Apartment Cleaning Procedures Escrow Deposit Refunds


Apartment Cleaning Procedures Guidelines To Deductions From Escrow

Deposit For Damages & Cleaning


Apartment Inspection


Pest Control


Energy Conservation


Pet Ownership Policy


Pet Ownership Policy Pet Application


Pet Ownership Policy Questionnaire For Existing Pet Owners


Notice of Pet Violation


Evidence of Utility Transfer


Evidence of Receipt of Keys


Change in Household Status Form


Marital Separation Status Verification


Rent Roster Procedure


Sample Rent Roster


Missouri Housing Development Commission Summary LIHTC Tenant

Income and Rent Roll Reports


Weekly Report Delinquencies


Weekly Report Vacancies


Current Recipients of Lower Rent


Recertification Notice


Recertification Application


Happy Anniversary!90-Day Reminder Notice


Annual Recertification 30-Day Warning Notice


Recertification Non-Compliance Notice


Notice of Violation


Late Rent Warning Letter


Notice of Delinquent Rent Warning


Correspondence Log For Each Tenant


Notice of Periodic Apartment Inspection


Housekeeping Inspection Checklist


Inspection Follow-Up Letter


Maintenance Checklist


Maintenance Request Form


Notice Of Rent And/Or Utility Change


Notice of Rent Change


Water and Sewer Charges


Water Meter Log


Sewer Meter Log


Notice to Terminate Lease


Notice of Intent to Vacate Apartment


Notice of Move-Out Inspection


Checklist for Move-Out


Notice of Abandoned Personal Items


Termination/Eviction Status


Security Deposit Disposition State


Vacancy Notice


Vacancy Or Transfer Notice


Management Plan for Maryville Properties


Management Agreement For FmHA Multiple Family Housing

Projects-Maryville Properties


Petty Cash Voucher


Purchase Order Number Request Tracking Sheet


Quotes and Bids Form


Required 1099 Information


Vendor List


Warranty/New Construction Request Form


Expense Report


Incident Report


Safeguarding Your Tax Credits


Testimony of Fred Kay in the Maryville Properties litigation


Testimony of Charles Marks in the Maryville Properties litigation


Testimony of Pete Ramsel in the Maryville Properties litigation


Testimony of Reid Teaney in the Maryville Properties litigation


Prefiled Written Direct Testimony of Jack Blaylock

Respondent’s Exhibits


Sales No. 1


Sales No. 1 with Signature


Sales No. 2




1.Jurisdiction over this case is proper.Complainant timely filed its appeals from the decisions of the Cedar County Board of Equalization.

2.The property is identified as parcel numbers 90-3-8-28-4-3-2 and 90-3-8-28-4-3-1, more commonly known as El Dorado Springs Estates, 1303 Greenridge Road, El Dorado Springs, Cedar County, Missouri.The value of the development is divided almost equally between the two parcels with 51% of value attributed to parcel 90-3-8-28-4-3-2 and 49% of value attributed to parcel 90-3-8-28-4-3-1.

3.The subject property is a rectangular lot containing a total of 2.93 acres.The lot faces northward onto McCray Avenue, an asphalt paved public street.The tract is level to slightly sloping and is at street grade.All public utilities are extended to the site.

The subject site is improved with six separate buildings each containing four living units.Each living unit contains three rooms consisting of a living room, kitchen/breakfast area, one bedroom and one bath.Each unit has a utility storage closet within which is located the electric water heater.

The building improvements have poured concrete footings and foundations with concrete slab flooring.The roof covering is fiberglass shingles.All exterior wall surfaces have brick or vinyl siding.

One of the buildings has a community room, utility room housing coin operated washers and dryers, a common bath and a small office.This area contains approximately 644 square feet.

Each building contains 2,503 square feet or 625 square feet per apartment.The community room/laundry in the one building increases the size of this building to 3,147 square feet.The total area within the six buildings is approximately 15,662 square feet.

Each unit is heated with electric baseboard heaters.Cooling is by built-in wall air conditioning units.Public sewer, water, trash pick-up, telephone, and electricity are available to each unit.

Floor coverings are carpet in the living and bedrooms and vinyl in the kitchen, bath and utility areas.Walls and ceilings are painted sheetrock.Kitchen cabinets are constructed of pressed wood with Formica counter tops.The bath vanity is of the same construction.The windows are metal, double hung with mini-blinds.Appliances consist of a refrigerator and freestanding electric stove.Concrete walks and small patios are provided at the exterior of each unit.A gazebo is located at the south side of the development with a small sitting area.

Parking is provided at the front of the units.A total of 22 spaces are available at the site, with two of these spaces designated as handicap accessible.

4.The apartment complex was placed in service on September 1, 1990.

5.The property is zoned for residential use and the highest and best use of the property is for apartments.The building improvements are in good physical condition having experienced a good level of maintenance.The age of the buildings places the improvements in their early life with many years of remaining economic life.There is a reasonable demand for this type of housing unit in this neighborhood.The income produced by the land and building improvements has a reasonable degree of stability and durability for many years into the future.Rent restrictions placed upon the occupancy of the buildings by the United States Government, in exchange for a favorable interest rate, will have an effect on the dollar amounts that can be collected.

6.The apartments are restricted to low income senior citizens earning 60% or less of the area median income under the Low Income Housing Tax Credit (LIHTC) program administered by the Missouri Housing Development Commission.

7.In exchange for accepting restrictions on tenant eligibility, based on personal or family income levels, and restrictions on initial rent levels as well as future rental increases, developers are given low interest rate loans and are granted credits that can be applied toward federal and state income tax liabilities.Said credits are not to be considered when determining market value of subsidized properties.Maryville Properties, L.P. v. Nelson, 83 S.W.3d 608 (Mo. W.D. 2002).

8.The property is rent restricted through the year 2040.The property was financed with a 97% loan with an interest rate of 8.5%.Said interest rate was subsequently reduced to 1%.Owner’s equity contribution was 3%.

9.We presume that Respondent’s initial valuation, approved by the Board of Equalization, was based upon a cost approach, although no supporting documents were presented at hearing.Complainant’s appraiser also prepared a cost approach to value.

A cost approach is not a reliable indicator of value for the subject property.A cost approach looks at the replacement cost new of the improvements, less depreciation, to arrive at value.However, said approach cannot account for the problem of rent restrictions.Financing tools may limit resale value, but they do not create either external obsolescence or functional obsolescence, the two methods typically used to attempt to account for the impact of the rent restrictions on value.External obsolescence is caused by conditions outside the property such as a lack of demand, changing property uses in the area, or national economic conditions.Functional obsolescence is caused by internal property characteristics such as a poor floor plan, inadequate mechanical equipment, or functional inadequacy or superadequacy due to size or other characteristics.

Further, a cost approach has no mechanism for measuring the advantages of a low interest non-recourse loan and the right to collect extremely high management fees.Market rate management fees rarely exceed 5 to 7% of effective gross income.The subject property has on site management fees of 9.3%; off site management fees of 14.4% and auditing fees of 2.4%.In this project, and most similar projects, the General Partner in El Dorado Springs Estates, L.P. and the president of the management company, Fairway Management, Inc. are the same individual.A prudent purchaser would establish a similar management company so that the purchaser could reap the benefits of this off site management fee.Thus attempting to calculate an obsolescence adjustment based solely upon a capitalization of rent lost without factoring in the benefits of the ability to collect high management fees tends to understate the benefits flowing from the property.And, to this point, no one has attempted to quantify the advantages of a low interest non-recourse loan through a cost approach to value.We have not been provided a complete copy of the loan documents, so we do not specifically find that this project was financed with a non recourse loan.

Inasmuch as a cost approach is not capable of measuring all the advantages or disadvantages inherent in a subsidized housing project, Complainant’s cost approach is not a reliable indicator of value for the subject property.Likewise, if the Board’s opinion of value was based upon a cost approach, said value is not reliable.

10.A sales comparison approach is not a reliable indicator of value for the subject property.There is no record of any subsidized projects ever being sold in Missouriin open market, arm’s-length transactions, and, consequently, there is no way to measure or accurately adjust for market reaction to the various benefits and limitations associated with subsidized projects.

The parties put on sales evidence indicating that apartment units were selling from $8,000 per unit to $30,000 per unit.Complainant asserts a value of $14,580 per unit while Respondent asserts a value of $21,670 per unit.

In his appraisal report, Complainant’s appraiser used three sales occurring in 1993, 2000 and 1997.Those sales had unadjusted values of $15,000 per unit, $30,000 per unit and $21,417 per unit.Significant adjustments were made for external and functional obsolescence “due to it [the subject] being rent restricted.”However, no market data was available to support of these adjustments.

In addition to the sales listed in his appraisal report, Complainant’s appraiser also gives significant weight to five rent restricted properties involved in a bankruptcy and under contract to sell out of that bankruptcy for $13,500 per unit.Properties in bankruptcy are generally considered to be distressed properties and fail to satisfy the definition of market:i.e. the price a property would bring when offered for sale by one willing or desirous to sell and bought by one who is willing or desirous to purchase but who is not compelled to do so.

Respondent bases his opinion of value on two sales within the county, one property selling for $8,000 per unit and one property selling for $28,570 per unit.Respondent averaged the value of the two sales to reach his opinion of value.No adjustments were made for market reaction to areas of significant variation.

While both parties’ sales are useful to bracket the market, neither party’s sales are reliable indicators of value for the subject property inasmuch as they fail to establish the market value for subsidized housing projects.

11.Calculating value based upon actual income, actual expenses, and actual interest and capitalization rates is the best way to recognize all benefits and risks associated with subsidized housing.Lake Ozark Village v. Whitworth, Appeals No. 97-47000, 99-47003 and 01-47002. The Uniform Standards of Professional Appraisal Practice allows appraisers to deviate from traditional approaches to value when required by the jurisdiction.Advisory Opinion 14.Although Complainant’s appraiser did not strictly adhere to the Lake Ozark formula, his values under his direct capitalization approach of $549,000, $521,000 and $493,000 are very similar to our calculation of the Lake Ozark numbers at $576,350, $544,350 and $502,840.The only difference between our calculation of value and Complainant’s direct capitalization values is our choice to use a 15% return on equity rather than Complainant’s proposed 20% return on equity.

Complainant’s income approach goes astray in its reliance upon the discounted cash flow method rather than the direct capitalization method to determine value.In his discounted cash flow, Complainant’s appraiser attempts to forecast income, vacancy, expenses and reversion through the year 2040.

The use of the discounted cash flow method (DCF) is problematic.Courts have seldom discussed the discounted cash flow analysis in the most positive of terms.In University Plaza Realty v. Hackensack, 12 N.J. Tax 354 (Tax 1992)aff’d 624 A.2d 1000 (App. Div.), the court stated:“The DCF method, as applied to tax valuation proceedings, is an amalgam of interdependent, attenuated assumptions of limited probative value.Whatever may be its utility in other contexts, its use in this case can only be described as an exercise in financial haruspication.” [divining the future by reading the entrails of sacrificial animals].In Northwest Racquet Swim & Health Clubs, Inc. v. County of Dakota, 557 N.W.2d 582 (Minn. 1997) the court held that a DCF analysis can only provide accurate results if the forecasts are based on accurate, reliable information.In Daft & Co. v. Travelocity.com, 2004 WL 1152338 (Del. 2004), the court held that “the utility of a DCF analysis, however, depends on the validity and reasonableness of the data relied upon. . . .Methods of valuation, including a discounted cash flow analysis, are only as good as the inputs to the model.”In Equitable Life Assurance Society of U.S. v. County of Ramsey, 530 N.W.2d 544 (Minn. 1995), the court held:“We recognize that accurate forecasting is a crucial part of any income capitalization method, and that income and expense projections that are not warranted by market evidence can result in unsupported market values.(citations omitted).A DCF analysis can only provide accurate results if the forecasts are based on accurate, reliable information.We further recognize that the compounding effects in the projection of income and expenses can magnify even slight errors to produce unreasonable results.The Uniform Standards of Professional Appraisal Practice.”

In this instance, Complainant’s appraiser attempts to predict income, expenses and vacancy rates through the year 2040.Based on his DCF analysis he determines value to be $258,000, $242,000 and $214,000.It is beyond anyone’s expertise to determine what market rents will be in the year 2010, much less 2040.This Hearing Officer declines to engage in such speculation.

12.The correct mortgage constant for the subject property is .025423 based upon a 1% loan.The correct equity dividend rate is .004500 based upon 3% equity at a return of 15%.Market dividend rates are between 9% and 18%.It is not wholly clear that individuals who invest in subsidized housing projects are placing their funds at higher risk than other investments which would warrant a 20% equity dividend rate.The effective tax rate for tax years 1997 and 1998 was .008968.The effective tax rate for tax years 1999 and 2000 was .009139.The effective tax rate for tax years 2001 and 2002 was .010063.

13.The correct value for the subject property is calculated as follows:




Effective Gross Income








Net Operating Income







Loan to Value x Loan Constant

(.97 x .025423)

1% loan

Equity x Equity Dividend Rate

(.03 x .15)

Tax Rate










Overall Cap Rate






NOI / Overall Cap Rate


Say $576,350


Say $544,350


Say $502,840



The Commission has jurisdiction to hear this appeal and correct any assessment which is shown to be unlawful, unfair, arbitrary or capricious. Article X, Section 14, Mo. Const. of 1945, Sections 138.430, 138.431, RSMo.

Board of Equalization Presumption

There is a presumption of validity , good faith and correctness of assessment by the Board of Equalization. Hermel, Inc. v. STC, 564 S.W.2d 888, 895 (Mo. banc 1978); Chicago, Burlington & Quincy Railroad Co. v. STC, 436 S.W.2d 650, 656 (Mo. 1968); May Department Stores Co. v. STC, 308 S.W.2d 748, 759 (Mo. 1958).

Standard for Valuation

Section 137.115, RSMo, requires that property be assessed based upon its true value in money which is defined as the price a property would bring when offered for sale by one willing or desirous to sell and bought by one who is willing or desirous to purchase but who is not compelled to do so. True value in money is defined in terms of value in exchange and not value in use. Mo. Const. Art. X, Section 4(b); St. Joe Minerals Corp v. State Tax Commission, 854 S.W.2d 526, 529 (Mo. App. E.D. 1993); Missouri Baptist Children’s Home v. State Tax Commission, 867 S.W.2d 510, 512 (Mo. banc 1993). It is the fair market value of the subject property on the valuation date. Hermel, supra, at 897.

Complainant’s Burden of Proof

In order to prevail, Complainant must present an opinion of market value and substantial and persuasive evidence that the proposed value is indicative of the market value of the subject property on the tax day. Hermel, supra, at 897. Substantial evidence can be defined as such relevant evidence as a reasonable mind might accept as adequate to support a conclusion. See Cupples‑Hesse Corporation v. State Tax Commission, 329 S.W.2d 696, 702 (Mo. 1959). Persuasive evidence is that evidence which has sufficient weight and probative value to convince the trier of fact. The persuasiveness of evidence does not depend on the quantity or amount thereof but on its effect in inducing belief. Brooks v. General Motors Assembly Division, 527 S.W.2d 50, 53 (Mo. App. 1975).

Duty to Investigate

In order to investigate appeals filed with the Commission, the Hearing Officer has the duty to 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. The Hearing Officer’s decision regarding the assessment or valuation of the property may be based solely upon her inquiry and any evidence presented by the parties, or based solely upon evidence presented by the parties. Section 138.430.2, RSMo.

Weight to be Given Evidence

The Hearing Officer is not bound by any single formula, rule or method in determining true value in money, but is free to consider all pertinent facts and estimates and give them such weight as reasonably they may be deemed entitled. The relative weight to be accorded any relevant factor in a particular case is for the Hearing Officer to decide. St. Louis v. Security Bonhomme, Inc., 558 S.W.2d 655, 659 (Mo. banc 1977); St. Louis County v. STC, 515 S.W.2d 446, 450 (Mo. 1974); Chicago, Burlington & Quincy Railroad Company v. STC, 436 S.W.2d 650 (Mo. 1968).

The Hearing Officer as the trier of fact may consider the testimony of an expert witness and give it as much weight and credit as she may deem it entitled to when viewed in connection with all other circumstances. The Hearing Officer is not bound by the opinions of experts who testify on the issue of reasonable value, but may believe all or none of the expert’s testimony and accept it in part or reject it in part. St. Louis County v. Boatmen’s Trust Co., 857 S.W.2d 453, 457 (Mo. App. E.D. 1993); Vincent by Vincent v. Johnson, 833 S.W.2d 859, 865 (Mo. 1992); Beardsley v. Beardsley, 819 S.W.2d 400, 403 (Mo. App. 1991); Curnow v. Sloan, 625 S.W.2d 605, 607 (Mo. banc 1981).

Opinion Testimony by Experts

If specialized knowledge will assist the trier of fact to understand the evidence or to determine a fact in issue, a witness qualified as an expert on that subject, by knowledge, skill, experience, training, or education, may testify thereto.

The facts or data upon which an expert bases an opinion or inference may be those perceived by or made known to the expert at or before the hearing and must be of a type reasonably relied upon by experts in the field in forming opinions or inferences upon the subject and must be otherwise reliable, the facts or data upon which the expert relies need not be admissible in evidence. Section 490.065, RSMo; Courtroom Handbook on Missouri Evidence, Wm. A. Schroeder, Sections 702‑705; pp. 325‑350; Wulfing v. Kansas City Southern Industries, Inc., 842 S.W.2d 133 (Mo. App. E.D. 1992).

Courts Defer to State Tax Commission Decisions

The Missouri Supreme Court, in Savage v. State Tax Commission of Missouri, 722 S.W.2d 72 (Mo. banc 1986), observed:

Our review of the Commission’s decision is ordinarily limited to whether that decision is “supported by competent and substantial evidence upon the whole record or whether it was arbitrary, capricious, unreasonable, unlawful or in excess of its jurisdiction.” Evangelical Retirement Homes of Greater St. Louis, Inc. v. State Tax Com’n, 669 S.W.2d 548, 552 (Mo. banc 1984); Section 536.140.01, RSMo 1978. In matters of property tax assessment, this Court has acknowledged “the wisdom of the General Assembly in providing an administrative agency to deal with this specialized field.” State ex rel Cassilly v. Riney, 576 S.W.2d 325, 328 (Mo. banc 1979). Thus we recognize that the courts may not assess property for tax purposes, Drey v. State Tax Commission, 345 S.W.2d 228, 238‑9 (Mo. 1961), that proper methods of valuation and assessment of property are delegated to the Commission, C & D Investment Co. v. Bestor, 624 S.W.2d 835, 838 (Mo. banc 1981) and that on review, “[t]he evidence must be considered in the light most favorable to the administrative body, together will all reasonable inferences which support it, and if the evidence would support either of two opposed findings, the reviewing court is bound by the administrative determination.” Hermel, Inc. v. State Tax Commission, 564 S.W.2d 888, 894 (Mo. banc 1978) (citation omitted). When read together, our cases demonstrate that this Court is loathe to substitute its judgment for the expertise of the Commission in matters of property tax assessment. Absent clear cause, we will “stay our hand[s].” Pierre Chouteau Condominiums v. State Tax Commission, 662 S.W.2d 513, 517 (Mo. banc 1984).

Official Notice

Agencies shall take official notice of all matters of which the courts take judicial note. Section 536.070(6), RSMo.

Courts will take judicial notice of their own records in the same cases. State ex rel. Horton v. Bourke, 129 S.W.2d 866, 869 (1939); Barth v. Kansas City Elevated Railway Company, 44 S.W. 788, 781 (1898). In addition, courts may take judicial notice of records in earlier cases when justice requires ‑ Burton v. Moulder, 245 S.W.2d 844, 846 (Mo. 1952); Knorp v. Thompson, 175 S.W.2d 889, 894, transferred 167 S.W.2d 205 (1943); Bushman v. Barlow, 15 S.W.2d 329, 332 (Mo. banc 1929) ‑ or when it is necessary for a full understanding of the instant appeal. State ex rel. St. Louis Public Service Company v. Public Service Commission, 291 S.W.2d 95, 97 (Mo. banc 1956).

Commission Determines Methodology

It is within the State Tax Commission’s discretion to determine what method or approach it shall use to determine the true value in money of property. Hermel, Inc. v. State Tax Commission, 564 S.W.2d 888, 896; Chicago, Burlington & Quincy Railroad Co. v. State Tax Commission, 436 S.W.2d 650, 657 (Mo. 1968), cert den. 393 U.S. 1092 (1969); St. Louis County v. Security Bonhomme, Inc., 558 S.W.2d 655, 659 (Mo. banc 1997).

It is also within the State Tax Commission’s authority to ascertain the correct or modern means of determining value according to a particular method or approach that it adopts to ascertain valuation, and it is within the Commission’s discretion to determine what factors should be considered in fixing the “true value in money” for property under a valuation method or approach adopted for use in a particular case. Hermel, Inc. v. State Tax Commission, supra. The relative weight to be accorded any relevant factor in a particular tax assessment case is for the State Tax Commission to determine. St. Louis County v. State Tax Commission, 515 S.W. 446, 450 (Mo. 1974). State Tax Commission decisions must declare the propriety of and the proper elements to consider in adopting a valuation approach, and must provide a definite indication as to the weight accorded each approach or method, i.e., how the final decision is weighed between the various approaches, methods, elements and factors. St. Louis County v. State Tax Commission, 515 S.W.2d 446, 451(Mo. 1974). The determination of “true value in money” of any property is a factual issue for the State Tax Commission, O’Flaherty v. State Tax Commission, 698 S.W.2d 2, 3 (Mo. banc 1985).

Proper Methodology

In Lake Ozark Village v. Whitworth, we stated:In this case, and all subsequent subsidized housing cases, the correct methodology for valuing subsidized housing projects is the methodology set out in Maryville Properties. That methodology is accurate because (1) rent restrictions are considered through the use of actual income rather than market income; (2) additional management requirements and expenses are accounted for through use of actual expenses which are in excess of market expenses; and (3) the actual loan‑to‑value ratio and the subsidized interest rate demonstrates and accounts for any and all risks involved in the property as well as the benefits flowing to the property. It is “economic reality.”

It is within the authority and expertise of the Tax Commission to determine which valuation methodology best represents value in a given situation or for a particular category of properties. Hermel, supra. After carefully considering the benefits and risks associated with subsidized housing, the State Tax Commission, in Maryville Properties, determined that calculating value based upon actual income, actual expenses, and actual interest and capitalization rates was the best way to recognize all benefits and risks associated with subsidized housing.


The values placed upon the subject property for tax years 1997 through 2002 are hereby SET ASIDE.The clerk is hereby ordered to place the following values on the subject property:

Tax Year

Market Value

Assessed Value










The assessed value may be divided between the parcels as follows:

Tax Year

90-3-8-28-4-3-2 (51%)

90-3-8-28-4-3-1 (49%)










A party may file with the Commission an application for review of a hearing officer decision within thirty (30) days of the mailing of such decision. The application shall contain specific detailed grounds upon which it is claimed the decision is erroneous. Failure to state specific facts or law upon which the appeal is based will result in summary denial.

If an application for reviewof a hearing officer decision is made to the Commission, any protested taxes presently in an escrow account in accordance with this appeal shall be held pending the final decision of the Commission. If no application for review is received by the Commission within thirty (30) days, this decision and order is deemed final and the Collector of Cedar County as well as the collectors of all affected political subdivisions therein, shall disburse the protested taxes presently in an escrow account in accord with the decision on the underlying assessment in this appeal. If any protested taxes have been disbursed pursuant to Section 139.031(8), RSMo, either party may apply to the circuit court having jurisdiction of the cause for disposition of the protested taxes held by the taxing authority.

Any Finding of Fact which is a Conclusion of Law or Decision shall be so deemed. Any Decision which is a Finding of Fact or Conclusion of Law shall be so deemed.

SO ORDERED February 17, 2006


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Luann Johnson

Senior Hearing Officer

Certificate of Service

I hereby certify that a true copy of the foregoing was mailed, postage prepaid, this 17th day of February, 2006, to:Cathy Dean, 700 West 47th Street, Suite 1000, Kansas City, MO 64112, Attorney for Complainant; Michael Ash, Prosecuting Attorney, 113 South Street, P.O. Box 641, Stockton, MO 65785, Attorney for Respondent; Paul Johnson, Assessor, P.O. Box 580, Stockton, MO 65785; Mary Cain, Clerk, P.O. Box 126, Stockton, MO 65785; Joan Haines, Collector, P.O. Box 280, Stockton, MO 65785.



Barbara Heller

Legal Coordinator