Arsenal Street LLC v. Bushmeyer (SLCY)

April 29th, 2009

State Tax Commission of Missouri





v.)Appeal(s) Number 05-20386 and 05-20387











Decision of the St. Louis City Board of Equalization sustaining the assessment made by the Assessor is AFFIRMED.Hearing Officer finds that the subject property was not overvalued nor was there an intentional plan by the assessing officials to assess the property at a ratio greater than 32% or at a ratio grossly excessive than the average 2005 commercial assessment ratio for St. Louis City.

Complainant appeared by Counsel Thomas Campbell.

Respondent appeared by Counsel Carl Wes Yates.

Case heard and decided by Hearing Officer Maureen Monaghan.


The Commission takes these appeals to determine (1) the true value in money for the subject property on January 1, 2005 (overvaluation) and (2) whether there was an intentional plan by the assessing officials to assess the property under appeal at a ratio greater than 32% of true value in money, or at a ratio grossly excessive than the average 2005 commercial assessment ratio for St. Louis City (discrimination).


Complainants appeal, on the ground of overvaluation and discrimination, the decision of the St. Louis City Board of Equalization, which sustained the valuation and assessment of the subject properties.

The Assessor determined the value of the subject parcels at $2,259,374, assessed value $723,000, classified as commercial property with an assessment ratio of 32%.The Board of Equalization sustained the valuations and assessment.

A hearing was conducted on December 11-12, 2008, at the St. Louis City Hall, St. Louis, Missouri.Evidence as to the commercial assessment ratio was heard.Case was reconvened on March 27, 2009, at the St. Louis City Hall, St. Louis, Missouri to accept evidence as to the value of the subject properties.

The Hearing Officer, having considered all of the competent evidence upon the whole record, enters the following Decision and Order.

Complainant’s Evidence

The following exhibits were received into evidence on behalf of Complainants.




Appraisal Report


Addendum to Report


PPRC 2005 Cycle Ratio Study


WDT of John Hottle


WDT Steven Gardner


WDT Richard Almy


IAAO Recommendations to STC on Ratio Studies


Respondent objected to Exhibit B on grounds of speculation, lack of foundation, not compliance with appraisal requirements of statutes and CSR.Objection was denied.Objection denied as to Exhibit F as to not being filed in advance pursuant to STC’s Order.

Respondent’s Evidence




State Tax Commission 2005-2006 Cycle Ratio Study


PPRC’s 2003 Cycle Ratio Study


Form 11, Form 11A


WDT of Vincent Knopp


WDT of Lucille Pounds


Appraisal Report


Objection to Exhibits 1-3 as to not being filed in advance pursuant to STC’s Order.Objection overruled.


1.                  Jurisdiction over this appeal is proper.Complainant timely appealed to the State Tax Commission from the decision of the St. Louis City Board of Equalization.

2.                  The subject property is located at 5850 Arsenal Street, St. Louis, Missouri and is also known as Campbell Plaza.The improvements to the parcels include three buildings with a total of 70,966 square feet, 60,000 square feet net rentable area, on a 4.324 acre lot.Building #1 is a three story improvement built in 1872 with 34,320 square feet and 11,440 square foot basement.Building #2 is a four-story improvement built in 1914 with 29,788 square feet and a 7,447 square The entire property was extensively renovated in 1972 and is used as office space.The property includes parking and landscaping.

3.                  The true value in money for the subject property in 2005 was $2,721,000.

4.                  The Sansone Company, a property management firm, initially handled these properties before the Board of Equalization.They hired the University of Missouri, more specifically the Public Policy Research Center (PPRC), to perform a sales ratio study on the commercial properties within St. Louis City as of January 1, 2005.Steven Gardner with PPRC testified that the “purpose of a ratio study is to produce a statistically valid inference about the entire population of properties based upon an examination of sample properties…A ratio study is a statistical analysis from which a party may infer whether the same class of real property in a taxing jurisdiction is valued at the level prescribed by statute.”PPRC combined the tax rolls for 2005 and 2006.They then eliminated parcels from their samples for reasons such as new construction in 2005, tax abated property, tax exempt property, residential property.The properties were then stratified by location.

PPRC then looked at the sales information in the City via certificates of value.The sales occurred from July 1, 2004, to June 30, 2005; six months prior and six months after the assessment date of January 1, 2005.The sales were reviewed to determine that they were open market sales transactions.

PPRC had 177 sales in their study.They compared the sales with the assessments by the Assessor’s Office.They concluded that the level of assessment for Commercial properties in the City of St. Louis is between 22% and 24%; the median level is 24.2%.

5.                  The median level of assessment for commercial property in the City of St. Louis in 2005 was 24.2%.



The Commission has jurisdiction to hear this appeal and correct any assessment which is shown to be unlawful, unfair, arbitrary or capricious.The hearing officer shall issue a decision and order affirming, modifying or reversing the determination of the board of equalization, and correcting any assessment which is unlawful, unfair, improper, arbitrary, or capricious.[1]

Official and Judicial Notice

Agencies shall take official notice of all matters of which the courts take judicial notice.[2]

Courts will take judicial notice of their own records in the same cases.[3]In addition, courts may take judicial notice of records in earlier cases when justice requires[4] or when it is necessary for a full understanding of the instant appeal.[5] Courts may take judicial notice of their own records in prior proceedings involving the same parties and basically the same facts.[6]

Presumptions In Appeals

There is a presumption of validity, good faith and correctness of assessment by the CountyBoardof Equalization.[7]

The presumption in favor of the Board is not evidence.A presumption simply accepts something as true without any substantial proof to the contrary.In an evidentiary hearing before the Commission, the valuation determined by the Board, even if simply to sustain the value made by the Assessor, is accepted as true only until and so long as there is no substantial evidence to the contrary.

The presumption of correct assessment is rebutted when the taxpayer presents substantial and persuasive evidence to establish that the Board’s valuation is erroneous.[8]

Grounds for Appeal

Complainant appealed on the grounds of (1) overvaluation and (2) discrimination.


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.[9]It is the fair market value of the subject property on the valuation date.[10]

Market value is the most probable price in terms of money which a property should bring in competitive and open market under all conditions requisite to a fair sale, the buyer and seller, each acting prudently, knowledgeable and assuming the price is not affected by undue stimulus.

Implicit in this definition is the consummation of a sale as of a specific date and the passing of title from seller to buyer under conditions whereby:

1.Buyer and seller are typically motivated.


2.Both parties are well informed and well advised, and each acting in what they consider their own best interests.


3.A reasonable time is allowed for exposure in the open market.


4.Payment is made in cash or its equivalent.


5.Financing, if any, is on terms generally available in the Community at the specified date and typical for the property type in its locale.


6.The price represents a normal consideration for the property sold unaffected by special financing amounts and/or terms, services, fees, costs, or credits incurred in the transaction.[11]


Valuation Date

Assessment of real property in Missouri is under a two year assessment cycle.The assessor is to value property as of January 1, of the odd-numbered year.The assessed value established for the odd-numbered year, remains the value for the following even-numbered year in the absence of new construction and improvement to the property.[12]

Methods of Valuation

Proper methods of valuation and assessment of property are delegated to the Commission.It is within the purview of the Hearing Officer to determine the method of valuation to be adopted in a given case.[13]

Missouri courts have approved the comparable sales or market approach, the cost approach and the income approach as recognized methods of arriving at fair market value.[14]

The cost approach is most appropriate when the property being valued has been recently improved with structures that conform to the highest and best use of the property or when the property has unique or specialized improvements for which there are no comparables in the market.[15] While reproduction cost is the best indicator of value for newer properties where the actual costs of construction are available, replacement cost may be more appropriate for older properties.

The “income approach” determines value by estimating the present worth of what an owner will likely receive in the future as income from the property. The income approach is “based on an evaluation of what a willing buyer would pay to realize the income stream that could be obtained from the property when devoted to its highest and best use….”[16] This approach is most appropriate in valuing investment-type properties and is reliable when rental income, operating expenses and capitalization rates can reasonably be estimated from existing market conditions.

The “comparable sales approach” uses prices paid for similar properties in arm’s-length transactions and adjusts those prices to account for differences between the properties. “Comparable sales consist of evidence of sales reasonably related in time and distance and involve land comparable in character.”[17] This approach is most appropriate when there is an active market for the type of property at issue such that sufficient data are available to make a comparative analysis.

The commission’s choice of valuation approaches must comply with the law. Both section 137.115 and article X, section 4(b) of the Missouri Constitution require that real property in Missouri be taxed according to its true value in money. True value is a function of the property’s highest and best use.[18]


The Complainant presented an appraisal report and testimony from a certified appraiser for the subject properties.The appraiser developed the sales comparison approach and the income approach.The cost approach was not developed due to the age and condition of the improvements and lack of sales in the subject neighborhood.

The Complainant’s appraiser placed most weight on the income approach.The Complainant looked at four rental properties for rental income.The rental rates ranged from $9.54 per square foot to $13.50 per square foot; three of the properties were in the range of $13-$13.50 per square foot.If the appraiser would have concluded on a rate of $12.50, which is below the rate of the majority of his comparable properties, the gross rental income would be $750,000 (60,000 square feet of net rentable area x $12.50).The appraiser instead used the subject’s actual income for December 2004 multiplying it by 12 for a whole year’s income. The appraiser should have used the market rents and then calculated the vacancy rate.The stabilized vacancy rate for this property is 25%.Using the market rents and vacancy rates and adding in the other income, the resulting effective gross income is $594,000.

On expenses, the appraiser incorrectly included the property taxes.The Complainant selected a cap rate of 10% after a review of sales and investor surveys.The appraiser looked at sales of 18 properties.The sales occurred from January 1999 to August 2003.The range of rates was from 7.3% to 13.9%.The appraiser also looked at investor surveys reported in Korpacz Real Estate Investor Survey which provided a range of capitalization rates from 6% to 11%.The appraiser did not account for the effective tax rate in determining his overall cap rate.

After removing the property tax expenses and correcting the income figure, the resulting indicated value is $2,731,260.

The Respondent’s appraiser also developed the income approach to value.The appraiser used a rental rate of $12.50 per square foot based upon 60,000 net rental area, added in the income for the cell tower, then deducted for vacancy of 25% based upon the property’s actual vacancy.The appraiser did not deduct for property taxes as the purpose of this valuation is to estimate the market value for ad valorem real estate taxes but accounted for the taxes by added the effective tax rate into the cap rate.The Respondent’s expenses were nearly identical to the Complainant’s expenses after excluding the taxes.($324,000)The Respondent determined the net operating income to be $270,500.

The Respondent’s appraiser then determined an overall cap rate to apply.The Respondent’s appraiser also looked to Korpacz Real Estate Investor Survey and found the capitalization rate range of 6.5% to 10.5%.The appraiser also developed a band of investment method to determine the cap rate.The appraiser surveyed local lenders to determine the typical loan terms available.The appraiser found and applied the following: 80% loan to value ratio at 6% for a term of 20 years; the equity investor require 12% return for 20% investment.Based upon this information, the appraiser developed a capitalization rate of 7.2% which falls within the range of the surveys.The appraiser added the effective tax rate to the capitalization rate for an overall rate of 9.94%.By applying the overall rate of 9.94% to the net income, the resulting indicated value is $2,721,000.

Both appraisers developed the sales comparison approach.The Complainant’s appraiser found three comparable sales.After making adjustments for location, size, age, and parking, the appraiser found a range of values from $31 to $38 per square foot.The appraiser concluded on a price per square foot of $35.He applied the price per square foot to the total square footage of the building of 70,966 for a total value of $2,483,000.This value supports the findings of the income approach.

Complainant failed to meet his burden of proof.In order to prevail, Complainants 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 January 1, 2005.[19]

In any case in St. Louis City where the assessor presents evidence which indicates a valuation higher than the value finally determined by the assessor or the value determined by the board of equalization, whichever is higher, for that assessment period, such evidence will only be received for the purpose of sustaining the assessor’s or board’s valuation, and not for increasing the valuation of the property under appeal.Section 138.060, RSMo; 12 CSR 30-3.075.


Claims of discriminatory assessment are well-known in Missouri law.Savage, supra; Koplar v. State Tax Com’n, 321 S.W.2d 686 (Mo. 1959); Cupples Hesse, supra; and, State ex rel. Platz v. State Tax Commission, 384 S.W.2d 565 (Mo. 1964).If discrimination is shown, and if Taxpayers demonstrate that their property is overassessed, then their property taxes will be lowered. Savage, 722 S.W.2d at 79 (taxpayer has the right to have his “assessment reduced to the percentage of that value at which others are taxed”).Absent such a showing, there is no relief to award to the taxpayer.

In order to obtain a reduction in assessed value based upon discrimination, the Complainants must (1) prove the true value in money of their property on January 1, 2005; and (2) show an intentional plan of discrimination by the assessing officials resulting in an assessment of that property at a greater percentage of value than other property, generally, within the same class within the same taxing jurisdiction.[20]Evidence of value and assessments of a few properties does not prove discrimination.Substantial evidence must show that all other property in the same class, generally, is actually undervalued.[21]The difference in the assessment ratio of the subject property the average assessment ratio in the subject county must be shown to be grossly excessive.[22]No other methodology is sufficient to establish discrimination.[23]

In other words, the difference between the actual assessment level of the subject property (32%) and the average level of assessment for all commercial property, taken from a sufficient representative sample in St. Louis County, (24.2%) must demonstrate a disparity that is grossly excessive.[24]

In this instance, the correct market value of the subject property was $2,721,000.The subject property was given an assessed value of $723,000. Complainant did establish that the average assessment ratio for the city of St. Louis for January 1, 2005, was 24.2% rather than the statutorily mandated 32%.At 24.2%, the assessed value for the subject property should have been $658,482 (Market Value found by the hearing officer $2,721,000 x .242).Instead, the assessed value for the subject property, as determined by the Board of Equalization, was $723,000.The question issue is whether the difference between the average assessment level for the city (24.2%) and the assessment level for the taxpayer’s property ($723,000 / $2,721,000 = 26.57%) is grossly excessive.

In Savage, the Supreme Court ruled that the State Tax Commission was amply justified in determining that the difference between the average assessment level for the county and the assessment level for the taxpayer’s property was grossly excessive and therefore unconstitutionally discriminatory. The State Tax Commission, in Savage, found that the average level of assessment for Greene County was 20.9%.It further found that the Taxpayer’s property was assessed at 33 1/3 %.The State Tax Commission found that the assessment was grossly excessive.The Court agreed that the disparity in that case was so grossly excessive as to be entirely inconsistent with an honest exercise of judgment and therefore had the effect of intentional discrimination.

The “average level of assessment” means the “arithmetical median of the varying percentages of true value applied by … the assessor in assessing properties within a taxing district.”In the case at bar, the arithmetical median of the varying percentages of true value applied by the assessor in assessing properties within St. Louis City in 2005 is 24.2%.The Complainant’s property was assessed at 26.57% of its true value.

The next step is to determine if the disparity in this case is so grossly excessive as to be entirely inconsistent with an honest exercise of judgment or simply a “de minimus error of judgment on the part of assessor” recognizing that absolute uniformity is an unattainable ideal. In this situation, the difference between the average assessment level for the city (24.2%) and the assessment level for the taxpayer’s property (26.57%) was grossly excessive and therefore unconstitutionally discriminatory.

The “co-efficient of dispersion” (COD) measures uniformity of ratios.COD measures the average deviation from the median and expresses it as a percentage of the median ratio.  The lower the COD, the more uniform the assessments within a particular jurisdiction. The IAAO sets standards for Assessment Ratio Studies including the acceptable Coefficient of Dispersion (COD). The IAAO finds that for commercial property in large urban jurisdictions a 15% to 20% COD is considered “good dispersion.”

Since the average level of assessment for St. Louis City for the 2005 assessment cycle is 24.2% and the Complainant’s assessment of 26.57%, the Complainant’s assessment is within an acceptable COD (COD of 15-20%).Since the Complainant’s assessment is within an acceptable COD, the Complainant’s assessment cannot be considered to be so grossly excessive as to be entirely inconsistent with an honest exercise of judgment or inconsistent with a “de minimus error of judgment on the part of assessor” recognizing that absolute uniformity is an unattainable ideal.[25]


The assessed valuation for the subject property as determined by the Assessor and sustained by the Board of Equalization for St. Louis City for the subject tax day is AFFIRMED.

A party may file with the Commission an application for review of this decision within thirty (30) days of the mailing date shown in the Certificate of Service.The application shall contain specific grounds upon which it is claimed the decision is erroneous.Said application must be in writing addressed to the State Tax Commission of Missouri, P.O. Box 146, Jefferson City, MO65102-0146, and a copy of said application must be sent to each person at the address listed below in the certificate of service.

Failure to state specific facts or law upon which the appeal is based will result in summary denial. [26]

The Collector of St. Louis City, as well as the collectors of all affected political subdivisions therein, shall continue to hold the disputed taxes pending a filing of an Application for Review, unless said taxes have been disbursed pursuant to a court order under the provisions of Section 139.031.8, RSMo.

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 April 29, 2009.






Maureen Monaghan

Hearing Officer




Certificate of Service


I hereby certify that a copy of the foregoing has been mailed postage prepaid this 29th day of April, 2009, to:Thomas Campbell, 101 South Hanley Road, Suite 1700, St. Louis, MO 63105, Attorney for Complainant; Carl W. Yates III, Associate City Counselor, 314 City Hall, St. Louis, MO 63103, Attorney for Respondent; Ed Bushmeyer, Assessor, 120 City Hall, St. Louis, MO 63103; Gregory Daly, Collector, 110 City Hall, St. Louis, MO 63103.





Barbara Heller

Legal Coordinator




[1] Article X, section 14, Mo. Const. of 1945; Sections 138.430, 138.431, 138.431.4, RSMo.


[2] Section 536.070(6), RSMo.


[3] 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).


[4]Burton v. Moulder, 245 S.W.2d 844, 846 (Mo. 1952); Knorp v. Thompson, 175 S.W.2d 889, 894 (1943); Bushman v. Barlow, 15 S.W.2d 329, 332 (Mo. banc 1929).


[5] State ex rel St. Louis Public Service Company v. Public Service Commission, 291 S.W.2d 95, 97 (Mo. banc 1956).


[6] In re Murphy, 732 S.W.2d 895, 902 (Mo. banc 1987); State v. Gilmore, 681 S.W.2d 934, 940 (Mo. banc 1984); State v. Keeble, 399 S.W.2d 118, 122 (Mo. 1966).


[7] 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).


[8] Hermel, supra; Cupples-Hesse Corporation v. State Tax Commission, 329 S.W.2d 696, 702 (Mo. 1959).


[9] 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).


[10] Hermel, supra.


[11] Real Estate Appraisal Terminology, Society of Real Estate Appraisers, Revised Edition, 1984; See also, Real Estate Valuation in Litigation, J. D. Eaton, M.A.I., American Institute of Real Estate Appraisers, 1982, pp. 4-5; Property Appraisal and Assessment Administration, International Association of Assessing Officers, 1990, pp. 79-80; Uniform Standards of Professional Appraisal Practice, Glossary.


[12] Section 137.115.1, RSMo; 12 CSR 30-3.001(1).


[13] See, Nance v. STC, 18 S.W.3d 611, at 615 (Mo. App. W.D. 2000); Hermel, supra; Xerox Corp. v. STC, 529 S.W.2d 413 (Mo. banc 1975).


[14] St. Joe Minerals Corp. v. STC, 854 S.W.2d 526, 529 (App. E.D. 1993); Aspenhof Corp. v. STC, 789 S.W.2d 867, 869 (App. E.D. 1990); Quincy Soybean Company, Inc., v. Lowe, 773 S.W.2d 503, 504 (App. E.D. 1989), citing Del-Mar Redevelopment Corp v. Associated Garages, Inc., 726 S.W.2d 866, 869 (App. E.D. 1987); and State ex rel. State Highway Comm’n v. Southern Dev. Co., 509 S.W.2d 18, 27 (Mo. Div. 2 1974).


[15] Stephen and Stephen Properties, Inc. v. State Tax Commission, 499 S.W.2d 798 (Mo.1973); Snider v. Casino Aztar/Aztar Missouri Gaming Corp., 156 S.W.3d 341 (Mo. 2005).


[19] Hermel, Inc. v. State Tax Commission, 564 S.W.2d 888, at 897.


[20] Koplar v. State Tax Commission, 321 S.W.2d 686, 690, 695 (Mo. 1959).


[21] State ex rel. Plantz v. State Tax Commission, 384 S.W.2d 565, 568 (Mo. 1964).


[22] Savage v. State Tax Commission of Missouri, 722 S.W.2d 72, 79 (Mo. banc 1986).


[23] Cupples-Hesse Corporation v. State Tax Commission, 329 S.W.2d 696 (Mo. 1958).


[24] Savage v. State Tax Commission of Missouri, 722 S.W.2d 72, 79 (Mo. banc 1986).


[26] Section 138.432, RSMo 2000.