2017 Commercial Ratio St. Louis County

December 20th, 2019

STATE TAX COMMISSION OF MISSOURI

IN RE THE MATTER OF THE: )  
2017-2018 ST. LOUIS COUNTY )  
COMMERCIAL RATIO APPEALS ) In re: PAR and Sansone appeals
          Complainants, )  
v. )  
JAKE ZIMMERMAN, ASSESSOR, )  
ST. LOUIS COUNTY, MISSOURI )  
           Respondent. )  

 

ORDER AFFIRMING THE HEARING OFFICER DECISION AND ORDER UPON APPLICATION FOR REVIEW

            Crown Diversified Industries Corp., et al., (Complainants) filed a joint application for review of the hearing officer’s decisions and orders holding Complainants did not present substantial and persuasive evidence establishing discriminatory commercial real property tax assessments.[1]  The hearing officer’s decisions and orders are affirmed.[2]

BACKGROUND

This appeal involves the alleged discriminatory assessment of approximately 2,600 commercial properties in St. Louis County.  Complainants alleged the St. Louis County Assessor (Respondent) imposed discriminatory property tax assessments by either intentionally assessing the subject properties at more than 32% of fair market value, or at a ratio grossly excessive to the average 2017 commercial assessment ratio for St. Louis County.  Following an evidentiary hearing, the hearing officer issued decisions and orders concluding Complainants failed to present substantial and persuasive evidence of discrimination.

Complainants filed a joint application for review asserting the hearing officer’s decisions and orders are erroneous and arbitrary because they: (1) failed to make findings of fact regarding sales chasing and regressive taxation; (2) relied on 2017 assessment data rendered unreliable due to sales chasing; (3) is against the weight of persuasive evidence showing discriminatory assessment practices; (4) utilizes the median as the measure of the central tendency of quantify the overall assessment level; (5) erroneously concludes vertical inequities are irrelevant to determining the appraisal level; (6) failed to make findings of fact regarding the common level of assessment; (7) is against the weight of persuasive evidence showing the 2017 assessments were regressive; (8) failed to compare the assessment level of the subject properties to the common level of assessment; and (9) failed to make findings of fact and conclusions of law regarding whether the assessment violates law requiring the assessor to make a new assessment every two years, and violates article X, section 1, of the Missouri Constitution, article X, section 3, of the Missouri Constitution, article X, section 4(b) of the Missouri Constitution, and Amendment XIV of the United States Constitution by failing to ensure uniform taxation.  Finally, Complainants assert the hearing officer abused her discretion by quashing the depositions of Respondent and Respondent’s review appraisers and not allowing additional discovery on Respondent’s assessment practices.

Complainants and Respondent submitted ratio studies to show the common assessment level of St. Louis County commercial property.  A ratio study analyzes a representative sample of properties to produce statistically valid inferences regarding the level and uniformity of the appraisal and assessment of an entire class of property.  A ratio study enables analysis of the assessment level and uniformity by comparing the taxing authority’s valuations of the representative sample to a market value proxy, usually derived from recent sale prices.[3]

A ratio study compiles this data from each property in the representative sample to calculate various measures of the “central tendency” of the data.  A central tendency identifies the center of distribution within a data set, and is often calculated as an average or median.  These measures quantify the overall assessment level of the representative sample and, by extension, the overall assessment level of a class of property at a given time in a specific jurisdiction.  The overall assessment level is compared to the actual assessment level of a specific property to determine if the taxpayer is subjected to a discriminatory assessment.

Sales chasing undermines the accuracy of ratio studies.  Sales chasing occurs when sold properties are selectively reappraised to their sale price.  Because a ratio study utilizes statistical inferences from a representative sample of properties to measure assessment uniformity, including selectively reappraised properties in the study undermines the representative sample and, by extension, the validity of the statistical inferences derived from that sample.  For instance, if sold properties are selectively reappraised to their sales prices, the ratio of the appraised value to market value for these properties would be 1:1.  The presence of a practically significant number of selectively reappraised sold properties will skew measures of central tendency toward the middle, giving the appearance of more assessment uniformity than is actually present.  Under these circumstances, the ratio study is invalid, and a new study should be conducted to establish valid statistical measures of assessment performance.

Complainants submitted two ratio studies by Robert Gloudemans, an expert in the field of appraisal, mass appraisal, and assessment ratio studies.  Gloudemans’ first study utilized Respondent’s commercial property sales data, and calculated a median assessment level of 95.4%, and a weighted mean of 88.9%.  Gloudemans discarded this ratio study based on his conclusion sales chasing rendered Respondent’s 2017 assessment data unreliable and biased.

Gloudemans conducted a second ratio study to filter out sales chasing.  Gloudemans (1) filtered sales to remove properties that had changes in use, new construction, demolitions or other significant changes; (2) used certified 2016 values in place of 2017 values; and (3) adjusted measures of central tendency upward to account for market appreciation between 2016 and 2017.  Gloudemans adjusted the mean and weighted mean upward by 3.56%.  Gloudemans’ second study concluded the median 2017 assessment level was 88.8% and the weighted mean was 78.4%.  Gloudemans also calculated a 0.346 coefficient of dispersion and a price related bias coefficient of -0.104.

Gloudemans testified Respondent’s 2017 assessment data was unreliable due to lack of data, staff vacancies, and sales chasing.  Gloudemans further testified Respondent’s commercial assessments are highly regressive because they taxed lower valued properties at a greater percentage of fair market value than higher valued properties.  Gloudemans acknowledged Complainants own properties cross a wide spectrum of values, and he identified no threshold for determining which Complainants are paying more or less of their share of the tax burden.

Based on his conclusion Respondent’s assessments were regressive, Gloudemans testified the appropriate measure of common level of assessment was the weighted mean, stratified by geographical area.  Gloudemans recommended the weighted mean for the purpose of equalizing the amount of taxes paid.  Alternatively, Gloudemans testified the value-weighted median was appropriate.  Gloudemans acknowledged the median was the appropriate measure to determine the common level of assessment for commercial properties in St. Louis County.

Respondent presented testimony from Josh Meyers, an expert in the field of mass appraisal and assessment ratio studies.  Myers prepared a ratio study based on Respondent’s 2017 data.  Myers calculated a median appraisal level of 93.714%, a weighted mean of 85.042%, a coefficient of dispersion of 21.41, and a price related bias of -0.032.  Myers also tested for sales chasing by comparing the percentage of change in value sold and unsold properties from 2015 to 2017.  Myers concluded the median sold property changed in value by 3.384% relative to unsold properties.  Myers acknowledged his testing indicated statistically significant sales chasing, but concluded it was not practically significant and did not invalidate his ratio study based on 2017 assessment data.

FINDINGS OF FACT

            Based on the entire record, the Commission enters the following findings of fact:

  1. The subject properties are commercial properties located in St. Louis County, Missouri. Nearly 1,200 of the approximately 2,600 subject properties are valued at more than $1,000,000.
  2. Respondent assessed the subject properties at the statutory rate of 32% of Respondent’s estimate of fair market value.
  3. Respondent’s computer assisted mass appraisal system utilizes the income and cost approaches to value commercial property.
  4. After the system establishes values, Respondent’s appraisers review each valuation individually.  Respondent’s review appraisers made changes without adequate supervision, notes, or documentation.
  5. Complainants’ properties were appraised with the same methodology applied to all other St. Louis County commercial properties.
  6. Complainants appealed Respondent’s assessments to the St. Louis County Board of Equalization (BOE), and timely appealed the BOE decisions to the State Tax Commission (Commission).
  7. When a property owner appeals Respondent’s valuation, their tax liability is based on the value assigned by the BOE and the applicable tax levy.  If the Commission reduces a property valuation, St. Louis County issues a tax refund based on the corrected value.
  8. The median appraisal level for commercial properties in St. Louis County during the 2017 assessment cycle was between 93.7% and 95.4% of fair market value.  These appraisal levels are similar in that both fall within the 90% to 110% of fair market value range established by the International Association of Assessing Officers (IAAO).
  9. The assessment level is calculated multiplying the 32% statutory assessment rate for commercial property by the median ratios of appraised value to fair market value calculated in each study.  The median appraisal levels calculated in the experts’ ratio studies yield a median assessment level between 30.0% and 30.5%.  These median assessment levels are 6.3% and 4.7% below the 32% statutory assessment level.
  10. There is no persuasive evidence of practically significant sales chasing invalidating ratio studies based on the 2017 assessment data.  Gloudemans’ ratio study based on 2017 data concluded the median increase in value of sold properties relative to unsold properties was 3.93%.  Gloudemans’ conclusion the 3.93% difference between sold and unsold properties proves practically significant sales chasing is not persuasive in light of the fact the IAAO textbook he authored states a tolerance level of up to 5% is permissible.
  11. Myers concluded the median increase in value of sold properties relative to unsold properties was 3.38%. Myers persuasively concluded that while his testing indicated statistically significant sales chasing, it was within the 5% tolerance level and was not so practically significant as to require invalidating a ratio study based on 2017 assessment data.
  12. There is no persuasive evidence showing actionable regressivity in the 2017 assessment of St. Louis County commercial property.  The preferred indicator of regressivity is the price related bias coefficient (PRB).  The PRB should generally fall between -0.05 and 0.05, but measures within -0.10 and 0.10 are acceptable.  Gloudemans calculated a PRB of -0.063.  Myers calculated a PRB of -0.032.  Both values are within the acceptable range set by the IAAO.

CONCLUSIONS OF LAW

In determining the true value in money, the Commission is not bound by any single formula, rule of method, but is free to consider all pertinent facts and estimates and give them such weight as reasonably they may be deemed entitled to.  St. Louis Cty. v. State Tax Comm’n, 515 S.W.2d 446, 450 (Mo. 1974).  The Commission reviews the hearing officer’s decision and order de novo.  Lebanon Properties I v. North, 66 S.W.3d 765, 770 (Mo. App. 2002).  “The extent of that review extends to credibility as well as questions of fact.”  The Commission reviews the record and makes independent factual findings.  Id.  Determining fair market value is a factual issue.  Parker v. Doe Run Co., 553 S.W.3d 356, 360 (Mo. App. 2018).

 

 

  1. There was no substantial and persuasive evidence of practically significant sales chasing in the 2017 assessment.

 

Complainants assert any ratio study relying on Respondent’s 2017 data is invalid because Respondent’s 2017 commercial property assessments involved statistically and practically significant “sales chasing.”[4]  A primary way to test for sales chasing is to compare the change in value of sold properties relative to the change in value of unsold properties.   When assessment data shows sold properties increased in value by more than 5% relative to unsold properties, sales chasing is generally considered practically significant, and may invalidate ratio studies based on that assessment data.  Gloudemans determined the median value of sold properties increased 3.93% relative to unsold properties.  Myers calculated a 3.38% difference.  While the relative increase in the value of sold properties indicates statistically detectable sales chasing, it does not necessarily demonstrate practically significant sales chasing requiring the Commission to disregard ratio studies using the 2017 assessment data.  Gloudemans made this very point in an International Association of Assessing Officers (IAAO) mass appraisal textbook, stating a tolerance of range of up to 5% may be appropriate.  See Robert Gloudemans & Richard Almy, Fundamentals of Mass Appraisal 394 (2011).

Consistent with Gloudemans’ IAAO textbook, Myers offered a data-based justification for adopting a 5% tolerance level.  Myers testified that from 2015 and 2017, 55% of unsold properties changed by at least 5%, 39% changed by at least 10%, and 21% changed by at least 20%.  This data shows both sold and unsold properties demonstrated significant value changes, and provided a reasonable justification for Myers’ use of a 5% tolerance level.  Further, as Gloudemans noted in Fundamentals of Mass Appraisal, sold properties are often concentrated in growth areas exhibiting greater value increases than other areas.  Id. at 394.  “For this reason, it can be prudent to allow an acceptable window or tolerance zone, say, 3 percent or 5 percent, before concluding that any observed differences are meaningful.”  Id.  (Emphasis added).  Gloudemans’ ratio study showed the three areas with the highest densities of valid sales were also three of the four areas exhibiting the highest median change in value between sold and unsold properties.  Given these circumstances, Myers’ adoption of a 5% tolerance level is consistent with the “prudent” 3% to 5% range recommended in the IAAO textbook by Gloudemans.[5]

The 5% tolerance range encompasses Gloudemans’ conclusion sold properties increased 3.93% relative to unsold properties and Myers’ conclusion there was a 3.38% difference.  There was substantial and persuasive evidence supporting the hearing officer’s conclusion there was no practically significant sales chasing requiring the Commission to disregard ratio studies based on the 2017 assessment data.[6]

 

  1. The median is the appropriate measure for determining the common level of assessment.

 

Complainants assert the hearing officer erroneously utilized the median assessment level as the appropriate measure for determining the common level of assessment. Complainants argue “substantial regressivity” in the 2017 commercial assessment data requires use of the weighted mean stratified by geographic area or the value weighted median.  Application for Review at 52.[7]

Complainants’ argument for utilizing the value weighted mean or median is premised on their assertion the 2017 St. Louis County commercial assessments exhibit substantial regressivity.  The preferred indicator of regressivity is the price related bias coefficient (PRB).  IAAO Standard on Ratio Studies § 9.2.7, p. 19 (2013).   Ideally, the PRB should fall between -0.05 and 0.05, but measures within -0.10 and 0.10 are generally acceptable.  Id.  Gloudemans calculated a PRB of -0.063.  Myers calculated a PRB of              -0.032.  Both values are within the acceptable range set by the IAAO.  Complainants did not produce persuasive evidence proving actionable regressivity, thus negating the basis of their argument the value weighted mean or median are the appropriate measures for determining the common level of assessment.[8]

Further, even if there was substantial regressivity, the legal analysis of Complainants’ discrimination claims requires comparing the actual assessment level applied to specific property to the “average level of assessment” of St. Louis County commercial properties to determine if the disparity is “so grossly excessive as to be inconsistent with an honest exercise of judgment.”  Savage v. State Tax Comm’n, 722 S.W.2d 72, 78-79 (Mo. banc 1986).  Because a discrimination claim requires proof the subject property is being assessed differently than other similarly classified properties, “the proper method in analyzing discrimination compares the median level of assessment for similarly situated properties . . . to the actual level of assessment imposed on the property.”  Zimmerman v. Mid-America Fin. Corp., 481 S.W.3d 564, 571 (Mo. App. 2015) (emphasis added).  Complainants cite no case requiring use of value weighted measures of central tendency instead of the unweighted median.

Finally, when assessments are regressive, lower value properties are taxed at a greater percentage of fair market value than higher value properties.  A value weighted measure of central tendency gives equal weight to each dollar of value in the sample, thus assigning more weight to high value properties and less weight to low value properties.  A value weighted mean or median is not the best measure of the common assessment level for all commercial properties because it emphasizes the assessment level for high value properties.  A value weighted mean or median, therefore, is generally unsuitable for capturing the existence or extent of regressive assessments on lower value properties.[9]  While a value weighted measure may be appropriate for indirect equalization to ensure property tax revenues are equitably apportioned among jurisdictions sharing a common tax burden, the issue here is simply whether the assessment of a specific property is grossly excessive relative to the “average” assessment level for St. Louis County commercial properties.   The hearing officer’s use of the median was supported by the evidence and was not arbitrary or erroneous.

  1. The hearing officer correctly compared the actual assessment level of assessment to the common assessment level.

 

            Complainants assert the hearing officer failed to compare the actual level of assessment for the subject properties to the common level of assessment for St. Louis County commercial properties.[10]  Complainants asserted the fair market values of their properties were established either by the BOE decisions or the hearing officer’s decisions granting relief on overvaluation claims, and correcting the assessor’s value to fair market value.  Complainants therefore effectively concede their properties were actually assessed at the statutory rate of 32% of fair market value.[11]  Consistent with Complainant’s arguments, the hearing officer determined the subject properties were actually assessed at 32%.  The remaining unresolved issue was whether the 32% assessment level was grossly excessive relative to the median assessment level.  The hearing officer concluded “the medians determined by the experts were 93.7% and 95.4%” and both “medians fall within the performance standards of the IAAO.”  In other words, there was no gross disparity between the median assessment level and the actual assessment level and, therefore, no discrimination.

Complainants assert the hearing officer’s conclusion that the actual level of assessment was 32% is foreclosed by Zimmerman v. Mid-Am. Fin. Corp., 481 S.W.3d 564 (Mo. App. 2015).  Zimmerman held the actual assessment level is based on the assessor’s original value, even when that value is adjusted by the BOE.  Zimmerman, 481 S.W.3d at 575.  Zimmerman reasoned the assessor’s original value determined the actual assessment level because the original value was the “basis” of the property owner’s “tax bill” and “tax liability.”  Id. at 574.  Zimmerman therefore tied the actual assessment level to the valuation decision establishing the property owner’s tax liability.  By doing so, Zimmerman is consistent with the principle that an assessment is discriminatory if it causes the property owner “to bear an unfair share of the property tax burden compared to the other properties.”  Crowell, 561 S.W.3d at 892.[12]  Because the purpose of the discrimination remedy is to relieve a property owner of a disproportionate tax burden, it follows that the actual level of assessment is based on the valuation decision establishing the property owner’s actual tax liability.  Thus, when a reviewing body remedies the assessor’s overvaluation by reducing the value to market value, the corrected valuation may cure any alleged discrimination by narrowing the disparity between the actual assessment level and the common assessment level to an acceptable level.  See Ulman v. Evans, 247 S.W.2d 693, 697 (Mo. 1952) (the BOE’s reduction of the assessor’s valuation of the plaintiff’s lot “may have obviated the discrimination of which the plaintiff claims”).

This case is materially distinguishable from Zimmerman and akin to Ulman.  Unlike Zimmerman – where the court assumed the assessor’s original value was basis of the property owner’s tax liability – the record in this case shows Complainants’ actual tax liabilities were based on the market values assigned by the BOE and the Commission.  Thus, the actual assessment level establishing Complainants’ actual tax liabilities was based on the values assigned by the BOE or the Commission, and not, as in Zimmerman, by Respondent’s original value.[13]  Because Complainants’ properties were ultimately assessed and taxed based on fair market value, the actual assessment level was 32%.   Therefore, as the hearing officer concluded, the dispositive issue was whether the 32% actual assessment level was grossly excessive relative to the approximately 30% median assessment level calculated by both Gloudemans and Myers.

There is no bright-line test to determine when an assessment transitions from an error in judgment to “grossly excessive” and discriminatory.  Zimmerman, 481 S.W.3d at 575.  Savage held a 59% disparity was grossly excessive.  Savage, 722 S.W.2d at 78.  Zimmerman held a 43% disparity was grossly excessive.  Zimmerman, 481 S.W.3d at 576.  Similarly, in Ben Enterprises v. Morton, Appeal No. 89-11166, 1991 WL 130907 at *6-7 (Mo. State Tax Comm’n May 17, 1991), the Commission compiled a list of cases from other jurisdictions holding disparities in excess of 30% were grossly excessive to support the conclusion a 9.6% disparity was not grossly excessive.[14]

While Savage, Zimmerman, and cases from other jurisdictions establish a disparity in excess of 30% is generally grossly excessive, the Commission has repeatedly concluded disparities of less than 15% are not grossly excessive.[15]  The median assessment levels calculated by Gloudemans (30.53%) and Myers (29.98%) are 4.6% and 6.3% below the 32% actual assessment level applied to Complainants’ properties.  This disparity is considerably less than the 43% disparity in Zimmerman, the 59% disparity in Savage, and is within the range the Commission previously concluded is permissible.  Complainants provide no persuasive authority or argument showing the single digit disparity in this case is grossly excessive.  Complainants’ discrimination claims are denied.

  1. The hearing officer’s findings of fact were sufficient.

 

Complainants assert the hearing officer’s findings of fact are insufficient to permit meaningful judicial review.  Application for Review at 30, 68.[16]  This argument fails because judicial review is directed at the Commission’s final decision, not the hearing officer’s decision and order.  Crowell v. Cox, 525 S.W.3d 578, 582 (Mo. App. 2017) (sections 536.100 to 536.140 authorize the circuit court “to examine and correct the agency decision”); Snider v. Casino Aztar/Aztar Missouri Gaming Corp., 156 S.W.3d 341, 346 (Mo. banc 2005) (appellate courts review the Commission’s decision).[17]  Because the judicial review is directed at the Commission’s decision, Complainants’ assertion the hearing officer’s findings are insufficient for judicial review misses the mark.

Even though judicial review is directed at the Commission’s decision, section 138.431.5 provides the parties “shall be duly notified of a hearing officer’s decision and order, together with findings of fact and conclusions of law.”  The hearing officer’s decision and orders satisfy this requirement.   Generally, findings of fact must:

constitute a factual resolution of the matters in contest before the commission; must advise the parties and the circuit court of the factual basis upon which the commission reached its conclusion and order; must provide a basis for the circuit court to perform its limited function in reviewing administrative agency decisions; must show how the controlling issues have been decided.

 

St. Louis Cty. v. State Tax Comm’n, 515 S.W.2d 446, 448 (Mo. 1974); see also section 536.090.  A detailed summary of the evidence is not required.  Iron Cty. v. State Tax Comm’n, 480 S.W.2d 65, 69 (Mo. 1972).

The hearing officer detailed Gloudemans’ and Myers’ testimony, as well the data and methodology they used to account for sales chasing in their ratio studies.  The hearing officer noted Gloudemans’ and Myers’ calculated coefficients of dispersion above 5.0, which does not support practically significant sales chasing.  The hearing officer also noted both experts determined the values of sold properties relative to unsold properties increased by less than 4%, which is within the “3 percent or 5 percent” tolerance level Gloudemans’ recommends Fundamentals of Mass Appraisal.  Based on these facts, the hearing officer specifically noted there was evidence of sales chasing, but concluded it was not “practically significant” and “not large enough to warrant corrective action.”  These findings, adopted herein by the Commission, are sufficient to show the factual basis for the decision and “how the controlling issues have been decided.”  St. Louis Cty., 515 S.W.2d at 448.

Complainant’s assertion the hearing officer failed to make sufficient findings of fact regarding regressivity is similarly flawed.  The hearing officer found there was “some degree of regressivity” but concluded the experts’ PRB calculations showed the regressivity was within the “acceptable range set by the IAAO.”  The hearing officer also noted not all Complainants own lower valued properties affected by regressivity, and that Gloudemans – Complainant’s own expert – testified there was no threshold for showing which Complainants, if any, were paying a disproportionate share of taxes.  These facts, considered in conjunction with the conclusion there was some non-actionable regressivity, provide an adequate factual showing how the issue was decided.  St. Louis Cty., 515 S.W.2d at 448.

Finally, Complainants assert the hearing officer failed to make a finding of fact regarding the common level of assessment.  The hearing officer found the median is the appropriate measure of central tendency for evaluating the appraisal level.  The hearing officer detailed the data and methodology in the ratio studies.  The studies concluded the overall median appraisal level was between 93.7% and 95.4% of fair market value, yielding a median assessment level between 29.98% and 30.53%.  The hearing officer noted both medians fall within the IAAO performance standards recommending the overall assessment level be within 10% of the 32% statutory assessment level for commercial property.   In other words, these median assessment levels were so similar it was immaterial which level was utilized.  As with the findings regarding sales chasing and regressivity, Complainants’ disagreement with the hearing officer’s findings regarding the existence and extent of sales chasing and tax regressivity do not render those findings insufficient.  The hearing officer’s findings regarding the common assessment level show the factual basis for the decision and “how the controlling issues have been decided.”  St. Louis Cty., 515 S.W.2d at 448.

  1. The hearing officer did not erroneously fail to enter findings of fact regarding Complainants’ three abandoned claims.

 

Complainants assert the hearing officer failed to make findings of fact and conclusions of law regarding whether the assessment violates law requiring the assessor to make a new assessment every two years.[18]  Complainants presented no evidence supporting this claim.  Without evidence, there are no facts to be found.  The hearing officer did not err by declining to enter factual findings on abandoned claims.

Complainants assert the assessment violates Article X, section 1, Article X, section 3, and Article X, section 4(b) of the Missouri Constitution by “failing to provide for determining the value of the property for the taxation as fixed by law.”  Application for Review at 71.  The quoted language is excerpted from the final sentence of article X, section 3, which provides “Except as otherwise provided in this constitution, the methods of determining the value of property for taxation shall be fixed by law.”  Mo Const., art. X, sec. 3. This sentence simply provides valuation methodologies are established by law, constitutional or otherwise.  Complainants introduced no evidence showing the methods of determining value are not “fixed by law.”  The hearing officer did err by not entering findings of fact regarding an abandoned claim, and the Commission likewise declines to do so.

Finally, Complainants assert the hearing officer failed to enter findings regarding whether the assessment violates article X, section 3 of the Missouri Constitution and Amendment XIV of the United States Constitution by failing to ensure uniform taxation.  The article X, section uniformity clause is satisfied when taxes are: (1) “uniform;” (2) “upon the same class or subclass of subjects;” (3) “within the territorial limits;” (4) “of the authority levying the tax.”  Mo. Const. art. X, sec. 3.  “[W]hile tax rates are susceptible to uniformity within a class of property such as the residential property in this case, property values are not.”  Armstrong-Trotwood, LLC v. State Tax Comm’n, 516 S.W.3d 830, 836 (Mo. banc 2017) (emphasis added).  Therefore, the article X, section 3 uniformity clause “does not apply to valuations, nor does it impose any obligations or limitations on authorities responsible for valuing or assessing property.”  Id.  Instead, Complainants’ discrimination claim involves 14th Amendment principles by alleging discriminatory valuations, not a lack of uniform tax rates.  The record is devoid of evidence showing any of the subject commercial properties were taxed at a rate other than the 32% rate mandated by section 137.115.5(1)(c), and the hearing officer’s decision and order resolved the factual issues underlying Complainants 14th Amendment claim.

  1. The hearing officer did not abuse her discretion by quashing the depositions of Respondent and Respondent’s review appraisers and overruling certain discovery requests.

 

Complainants assert the hearing officer abused her discretion by preventing certain deposition and discovery.[19]  An abuse of discretion occurs when a decision is “clearly against the logic of the circumstances . . . and is so unreasonable and arbitrary that it shocks the sense of justice and indicates a lack of careful, deliberate consideration.”  Cox v. Kansas City Chiefs Football Club, Inc., 473 S.W.3d 107, 114 (Mo. banc 2015).

Complainants assert the hearing officer abused her discretion by quashing Respondent’s deposition.  The hearing officer permitted the depositions of Sandy Youtzy, Respondent’s chief administrative manager, and John Gillick, Respondent’s commercial assessment analyst because both had direct knowledge of St. Louis County assessment practices, including the final review process.  However, the hearing officer concluded Complainants failed to show Respondent had relevant information that could not be obtained from other sources within the assessor’s office.  This conclusion does not indicate a lack of careful consideration, as there is no right to unduly burdensome, cumulative discovery.

Complainants assert the hearing officer abused her discretion by failing to permit the deposition of eleven review appraisers and not permitting access to additional data in Respondent’s computer assisted mass appraisal system.  After discovering the names of the review appraisers, Complainants waited nearly two months and until days prior to the evidentiary hearing to notice depositions of all eleven appraisers.   Complaints asserted the review appraisers had information showing Respondent’s appraisal process was flawed.  Aside from the delay in noticing the depositions, Complainants had no persuasive explanation of the relevance of this information to their discrimination claims because they could not explain how the alleged flaws applied only to their properties and not to St. Louis County commercial properties generally.  Further, the record shows a number of Complainant’s exhibits on Respondent’s data, and there is no persuasive basis for concluding the hearing officer abused her discretion by preventing additional discovery to avoid further delay so Complainants could explore tenuous claims.  This claim is denied.

CONCLUSION

            Complainants did not produce persuasive evidence or argument supporting their discrimination claims or their assertions the hearing officer’s decision and order was arbitrary and erroneous.  Complainant’s discrimination claims are denied.  The hearing officer’s decisions and orders are affirmed.

ORDER

            The Commission affirms the hearing officer’s decisions and orders denying Complainants’ claims of discriminatory property tax assessments.

The parties may seek judicial review as provided in section 138.432 and sections 536.100 to 536.140.   If judicial review is sought, any protested taxes presently in escrow pursuant to this appeal shall he held pending a final judicial decision, unless disbursed pursuant to section 138.031.8.

If judicial review is not timely sought, this decision and order is deemed final, and the Collector of St. Louis County, and the collectors of all affected political subdivisions, shall disburse all protested taxes presently in escrow in a manner consistent with this decision and order.

 

SO ORDERED on the 4th day of December, 2019.

[1] The Commission has authority, “under such rules as may be prescribed by law, to hear appeals from local boards in individual cases and, upon such appeal, to correct any assessment which is shown to be unlawful, unfair, arbitrary or capricious.”  Mo. Const. art. X, § 14.  Section 138.430.1 authorizes the Commission to hear appeals concerning assessment, valuation, the method or formula used in determining valuation, or assignment of a discriminatory assessment.  Section 138.432 authorizes the Commission to “affirm, modify, reverse, or set aside the decision and order of the hearing officer[.]”  All statutory citations are to RSMo 2000, as amended.

[2] The hearing officer’s decisions and orders are incorporated into the Commission’s decision and order.

[3] For example, if Respondent values a property at $100,000, but fair market value is $110,000, Respondent’s valuation is 0.91, or 91% (100,000 ÷ 110,000) of fair market value.  In this hypothetical, the assessment level is calculated by multiplying the 32% statutory assessment rate by the 0.91 valuation ratio (0.32 x 0.91), resulting in an assessment level of 0.291 or 29.1% of fair market value.

 

[4] For organizational purposes, the Commission will consolidate Complainants’ arguments and address them out of order.  This section addresses points III and IV of Complainants’ joint application for review.

[5] Complainants argue at length that Myers’ use of a 5% tolerance range is unreasonable because he utilized a 3% tolerance range in a ratio study conducted four years ago in Mecklenburg County, Virginia.  Complainants’ effort to impeach Myers with a different study, in a different jurisdiction, under different conditions is unpersuasive.

[6] In addition to comparing the change in value of sold properties relative to the change in value of unsold properties, sales chasing can be detected by calculating the coefficient of dispersion.  A coefficient of dispersion that is less than 5.0 indicate measures of assessment uniformity may be impacted by sales chasing.  Both experts calculated a coefficient of dispersion greater than 5.0, further undermining Complainant’s sales chasing argument.

[7] The section addresses points V, VI, and VIII of Complainants’ joint application for review.

[8] Complainant’s failure to prove actionable regressivity also renders it unnecessary to address their argument in point VI that “vertical inequities” resulting from regressivity can result in discriminatory assessments.

 

[9] The fact a value weighted mean is not itself a measure of regressivity is confirmed by the fact it is simply one half of the equation for calculating the price related differential, an equation which measures assessment regressivity or progressivity by dividing the mean by the weighted mean.  The price related differential, however, is not a preferred indicator of regressivity as it “may not provide an accurate indication of assessment regressivity or progressivity.”  IAAO Standard on Ratio Studies 19 (2013).  Complainants’ argument for adopting a value weighted mean due to “substantial regressivity” distills to reliance on one half of a disfavored equation for measuring regressivity.  The argument is not persuasive.

[10] This section addresses point IX of Complainants’ application for review.

[11] Section 137.115.5(1)(c) provides commercial real property shall be assessed at 32% of its true value.

[12] See also Allegheny Pittsburgh Coal Co. v. Cnty. Comm’n of Webster Cnty., W. Va., 488 U.S. 336, 346 (1989) (“the fairness of one’s allocable share of the total property tax burden can only be meaningfully evaluated by comparison with the share of others similarly situated relative to their property holdings”) (emphasis added)).  A taxpayer’s “allocable share” of the property tax burden is calculated by multiplying the assessed value by the local tax levy.  A discrimination claim is based on assessed value, not a comparison of the tax levies imposed by different local taxing authorities.

[13] Section 138.060.2 confirms this conclusion.  In pertinent part, section 138.060.2 provides: “The county clerk shall keep an accurate record of the proceedings and orders of the board, and the assessor shall correct all erroneous assessments, and the clerk shall adjust the tax book according to the orders of such board and the orders of the state tax commission….”  (Emphasis added).  Because “the assessor shall correct all erroneous assessments . . . according to the orders of” the BOE and the Commission, and the clerk must “adjust the tax book” accordingly, the plain language of section 138.060.2 demonstrates the assessor’s erroneous assessments are not the actual assessment level establishing the property owner’s actual tax liability.  To the contrary, when, as in this case, the record demonstrates the statutory mandate was followed, the assessor’s corrected, erroneous assessment is discarded for tax purposes, and does not represent the actual assessment level for that property.

[14] See Piscataway Ass’n Inc., v. Twp. of Piscataway, 376 A.2d 527 (N.J. Super 1977) (30.8% disparity); Cty. of Ada, v. Red Steer Drive-Ins of Nevada, Inc., 609 P.2d 161 (Idaho 1980) (37% disparity); Chastain’s Inc., v. State Tax Comm’n, 241 P.2d 167 (Idaho 1952) (30.4% disparity); Kavet v. Bd. of Assessors, 379 N.E.2d 587 (Mass 1978) (44.6% disparity); Washington Cty. Bd. of Supervisors v. Greenville Mill, 437 So.2d 401 (Miss. 1983) (150% disparity); Louisville & Nashville Ry. Co. v. Pub. Serv. Comm’n, 631 F.2d 426 (6th Cir. 1980) (58.7% disparity); People ex rel. McDounough v. Grand Trunk Western Ry. Co., 192 N.E. 645 (Ill. 1934) (34.3% disparity); City of Dallas v. Union Tower Corp., 703 S.W.2d 275 (Tx. App. 1985) (40.6% disparity); see also In re Quality Beverage Co., Inc., 170 B.R. 310, 313 (S.D. Tex. Bankr. 1994) (disparities between 33% and 75% are grossly excessive).

[15] See Foci Enterprise, LLC v. Zimmerman, Appeal No. 15-10103 (Mo. St. Tax Comm’n April 3, 2018) (3% disparity not grossly excessive); Arsenal Street, LLC v. Bushmeyer, 2009 WL 1266292, *7 (Mo. St. Tax Comm’n April 29, 2009) (9.8% disparity not grossly excessive); West County BMW v. Muehlheausler, 2009 WL 752505 *8 (Mo. St. Tax Comm’n Mar. 17, 2009) (14% disparity not grossly excessive); Ben Enterprises, 1991 WL 130907 (9.6% disparity not grossly excessive);Town & Country Racquet Club v. Morton, 1989 WL 41005 *13 (Mo. St. Tax Comm’n Mar. 3, 1989) (5% disparity not grossly excessive).

[16] This section addresses the arguments raised in points II and VII of Complainants’ joint application for review.

[17] The statutory basis for this conclusion is as follows.  Section 138.432 authorizes the Commission to resolve appeals from the hearing officer’s decision by entering its own decision and order with findings of fact and conclusions of law.  Section 138.432 further provides “[t]he decision of the commission shall be subject to judicial review in the manner provided by subsection 4 of section 138.470.”  Section 138.470.4 provides for judicial review pursuant to “sections 536.100 to 536.140.”  Section 536.100.1 authorizes judicial review only if the person aggrieved by the agency’s “final decision” has “exhausted all administrative remedies[.]”  Thus, the “final decision” subject to judicial review following the exhaustion of “all administrative remedies” is the Commission’s decision, not the hearing officer’s decision and order.

[18] This section addresses point X of Complainants’ application for review.

[19] This section addresses point IX of Complainants’ application for review.