AT&T Mobility LLC v. Assessors of Caldwell, Daviess, Harrison, Henry, & Mercer County

THE STATE TAX COMMISSION OF MISSOURI

AT&T MOBILITY, LLC,	) ) ) ) ) )	Appeal Nos.  16-46002 through 16-46004 16-54514 through 16-54518 16-59000 through 16-59004 16-59500 through 16-59508 16-70002
Complainant,	) )
v.	) )
ASSESSORS OF CALDWELL COUNTY, MISSOURI, DAVIESS COUNTY, MISSOURI, HARRISON COUNTY, MISSOURI, HENRY COUNTY, MISSOURI, and MERCER COUNTY, MISSOURI	) ) ) ) )
Respondents.	) )

 

DECISION AND ORDER

HOLDING

            The decisions of the Boards of Equalization of Caldwell, Daviess, Harrison, Henry, and Mercer counties (BOEs) are SET ASIDE.  Complainant AT&T Mobility, LLC, (Complainant) presented substantial and persuasive evidence to rebut the presumption of correct assessment by the BOEs and to establish the true value in money (TVM) of the business personal property in these appeals as of January 1, 2016.

Complainant appeared by Counsel Thomas Caradonna.

Respondents, who are the Assessors of Caldwell, Daviess, Harrison, Henry, and Mercer counties (collectively referred to as Respondents), appeared by Counsel Patricia Hughes.

Case heard and decided by Senior Hearing Officer Amy S. Westermann (Hearing Officer).

 

ISSUE

            Complainant appealed the valuation of the subject property in each of the counties, referenced above, on the ground of overvaluation.  The State Tax Commission (STC) takes this appeal to determine the TVM of the subject property as of January 1, 2016.

In summary, Complainant argued that the proper method for valuing the subject property in these appeals was the cost approach using the replacement-cost-new-less-depreciation (RCNLD) method as determined by Complainant’s appraisal expert.  Complainant argued that it had complied with Section 137.122^[1] in its 2016 declarations and renditions Complainant filed with Respondents.  Complainant argued that its evidence established the TVM determined by the statutory method, original cost less depreciation by application of the Modified Accelerated Cost Recover System (MACRS), supported the value opined by Complainant’s appraisal expert.  Complainant further argued that Respondent had presented no substantial and persuasive evidence to rebut Complainant’s evidence.

The underlying theme of Respondents’ case was their argument that the assessors of each of the counties had attempted to verify the accuracy of Complainant’s declarations with regard to the subject property’s original cost in the year of acquisition but had not received the “source documents” from Complainant to so verify.  Some of Respondents’ evidence implied that Respondents believed a correlation existed between Complainant’s revenue from the operation and use of the subject property and the value of the subject property.  Respondents argued that they believed Complainant’s reported original costs “should be higher.”  (Tr. 7)  Respondents argued that they had rejected Complainant’s valuation of the subject property based on information from Respondents’ consultant, Cell Tower Solutions (CTS).  (Tr. 9)  Respondents argued that a 15-year life should apply to the subject property under Section 137.122, which, if applied to the costs declared by Complainant in its 2016 declarations and renditions of the subject property, would result in values higher than those initially assessed by Respondents.  (Tr. 10-12)  Respondents argued that Complainant’s evidence was not substantial and persuasive to rebut the assessment of the BOEs and to establish the TVM of the subject property as of January 1, 2016; therefore, the STC should affirm the BOEs’ valuations.  (Tr. 12)

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

FINDINGS OF FACT

1. Jurisdiction over these appeals is proper.  Complainant timely appealed to the STC.
2. Evidentiary Hearing.  The issue of overvaluation was presented at an evidentiary hearing held on August 18 and 19, 2018, at the Truman State Office Building, 301 West High Street, Jefferson City, Missouri.
3. Identification of Subject Property. The subject property consists of wireless telecommunication property used in the operation of Complainant’s 23 cell tower sites located in five counties in northwest Missouri.  The subject property includes antennas, cabling, wireless network equipment, radio frequency equipment, and electronic and power equipment.^[2]  (Tr. 6)  The subject property is further identified in the table below:

Appeal No.	County	Account No.
16-46002	Caldwell	00000646-08C4
16-46003	Caldwell	0000408A-29C4
16-46004	Caldwell	0000848A-D3R24
16-54514	Daviess	9020-COM-1220P
16-54515	Daviess	9021-COM-063F
16-54516	Daviess	9022-COM-2060
16-54517	Daviess	9108-COM-0970
16-54518	Daviess	9109-COM-1230F
16-59000	Harrison	00383-COM-10030
16-59001	Harrison	00979-COM-15R50
16-59002	Harrison	03927-COM-19020
16-59003	Harrison	04539-COM-07030
16-59004	Harrison	66178
16-59500	Henry	0021-0000081-2006
16-59501	Henry	0021-0000083-2006
16-59502	Henry	0021-0000091-2005
16-59503	Henry	0021-0000092-2005
16-59504	Henry	0021-0000102-2002
16-59505	Henry	0021-0000116-2003
16-59506	Henry	0021-0000117-2003
16-59507	Henry	0021-000097-204
16-59508	Henry	0021-000056-2016
16-70002	Mercer	5004.01

 

4.   Respondents assessed the subject property in their respective counties as set forth in the table below:

Appeal No.	County	Respondents’ Assessed Value
16-46002	Caldwell	$163,816
16-46003	Caldwell	$870
16-46004	Caldwell	$263,534
TOTAL	Caldwell	$428,220
16-54514	Daviess	$159,937
16-54515	Daviess	$235,995
16-54516	Daviess	$137,879
16-54517	Daviess	$125,899
16-54518	Daviess	$161,482
TOTAL	Daviess	$821,192
16-59000	Harrison	$150,705
16-59001	Harrison	$147,255
16-59002	Harrison	$152,625
16-59003	Harrison	$148,395
16-59004	Harrison	$141,464
TOTAL	Harrison	$740,444
16-59500	Henry	$59,904
16-59501	Henry	$189,109
16-59502	Henry	$186,565
16-59503	Henry	$174,887
16-59504	Henry	No value provided.
16-59505	Henry	$201,878
16-59506	Henry	$156,565
16-59507	Henry	$187,615
16-59508	Henry	$205,881
TOTAL	Henry	$1,362,404
16-70002	Mercer	$166,517
TOTAL	Mercer	$166,517
GRAND TOTAL		$3,518,777.00

 

5. Board of Equalization.  The BOEs of Caldwell, Daviess, Harrison, Henry, and Mercer Counties assessed the subject property in their respective counties as set forth in the table below:

Appeal No.	County	BOEs’ Assessed Value
16-46002	Caldwell	$163,816
16-46003	Caldwell	$870
16-46004	Caldwell	$263,534
TOTAL	Caldwell	$428,220
16-54514	Daviess	$159,937
16-54515	Daviess	$235,995
16-54516	Daviess	$137,879
16-54517	Daviess	$125,899
16-54518	Daviess	$161,482
TOTAL	Daviess	$821,192
16-59000	Harrison	$150,705
16-59001	Harrison	$147,255
16-59002	Harrison	$152,625
16-59003	Harrison	$148,395
16-59004	Harrison	$141,464
TOTAL	Harrison	$740,444
16-59500	Henry	$59,904
16-59501	Henry	$189,109
16-59502	Henry	$186,565
16-59503	Henry	$174,887
16-59504	Henry	No value provided.
16-59505	Henry	$201,878
16-59506	Henry	$156,565
16-59507	Henry	$187,615
16-59508	Henry	$205,881
TOTAL	Henry	$1,362,404
16-70002	Mercer	$166,517
TOTAL	Mercer	$166,517
GRAND TOTAL		$3,518,777.00

 

6. Complainant’s Evidence. Complainant filed their 2016 business personal property declarations and renditions with each of the counties involved in the instant appeals, pursuant to Section 137.122.3:

Appeal No.	County	Complainant’s Reported TVM Based on Section 137.122
16-46002	Caldwell	$81,241.21
16-46003	Caldwell	$752.83
16-46004	Caldwell	$50,086.12
TOTAL	Caldwell	$132,080.16
16-54514	Daviess	$58,721.19
16-54515	Daviess	$117,221.85
16-54516	Daviess	$103,199.71
16-54517	Daviess	$62,408.36
16-54518	Daviess	$79,472.42
TOTAL	Daviess	$421,023.53
16-59000	Harrison	$73,050.24
16-59001	Harrison	$64,704.67
16-59002	Harrison	$66,723.63
16-59003	Harrison	$90,299.96
16-59004	Harrison	$84,755.04
TOTAL	Harrison	$379,533.54
16-59500	Henry	$110,667.06
16-59501	Henry	$94,295.65
16-59502	Henry	$76,922.57
16-59503	Henry	$123,266.11
16-59504	Henry	$75,561.02
16-59505	Henry	$120,569.05
16-59506	Henry	$68,720.40
16-59507	Henry	$103,818.15
16-59508	Henry	$124,829.32
TOTAL	Henry	$898,649.33
16-70002	Mercer	$61,764.88
TOTAL	Mercer	$61,764.88
GRAND TOTAL		$1,893,051.44

 

At the Evidentiary Hearing, Complainant presented experts and testimony regarding the TVM of the subject property as of January 1, 2016, as follows:

Appeal No.	County	Complainant’s Opinion of TVM (RCNLD)
16-46002	Caldwell	$60,296.00
16-46003	Caldwell	$111.00
16-46004	Caldwell	$66,716.00
TOTAL	Caldwell	$127,123.00
16-54514	Daviess	$37,115.00
16-54515	Daviess	$57,543.00
16-54516	Daviess	$74,780.00
16-54517	Daviess	$66,312.00
16-54518	Daviess	$150,864.00
TOTAL	Daviess	$386,614.00
16-59000	Harrison	$60,017.00
16-59001	Harrison	$60,344.00
16-59002	Harrison	$79,278.00
16-59003	Harrison	$76,318.00
16-59004	Harrison	$68,658.00
TOTAL	Harrison	$344,615.00
16-59500	Henry	$133,759.00
16-59501	Henry	$82,089.00
16-59502	Henry	$81,165.00
16-59503	Henry	$137,388.00
16-59504	Henry	$83,633.00
16-59505	Henry	$121,787.00
16-59506	Henry	$78,241.00
16-59507	Henry	$91,099.00
16-59508	Henry	$102,358.00
TOTAL	Henry	$911,519.00
16-70002	Mercer	$61,841.00
TOTAL	Mercer	$61,841.00
GRAND TOTAL		$1,831,530.00

 

Complainant offered as evidence the following exhibits:

Exhibit	Description	Ruling
A[3]	Written Direct Testimony (WDT) of Carl R.E. Hoemke (Hoemke)	Admitted
B[4]	Appraisal Reports of Hoemke	Admitted
A-1	WDT of James W. Stegeman (Stegeman)	Admitted
A-2	Curriculum Vitae and Report of Stegeman	Admitted
B	Replacement Cost New Process & Approach Report of Stegeman (Exhibit 7 of Appraisal Report of Hoemke)	Admitted
C	WDT of Gary Wiggins (Wiggins)	Admitted
D[5]	2016 Business Personal Property Declarations and attached Renditions of Business Personal Property	Admitted
F	Internal Revenue Service Bulletin: 2011-18 Rev. Proc. 2011-22	Admitted in part; excluded in part:  the language in the left margin referring to “AT&T” and “AT&T Mobility” is stricken.
G	Deposition of Christopher Shrewsbury	Admitted
H	2016 Rendition of Business Personal Property for 2356 NW Hwy 7, Clinton, MO, in Henry County	Admitted
R-B	Written Rebuttal Testimony (WRT) of James J. Kientzy (Kientzy)	Admitted
R-C	Engineering Lists with information available to RF Engineers, which do not include costs or date of installation	Admitted
SUR-A	Surrebuttal Testimony of Gary A. Hunter (Hunter)	Admitted

 

Hoemke’s Testimony and Appraisal Report

            Hoemke testified that he is a professional appraiser and a member of the American Society of Appraisers.  (Exhibit A)  He has appeared before taxation officials in over 20 states.  (Exhibit B)  Hoemke holds a bachelor’s degree in business administration and finance.  (Id.)  Hoemke testified that he has been in the appraisal and valuation business for more than 30 years.  (Exhibit A)  Hoemke testified that he currently is a partner with Economics Partners LLC.  (Id.)  Economics Partners LLC is a consulting, valuation, and property tax advisory firm.  (Id.)  Prior to his current position, Heomke was a partner at Ernst & Young, a managing director at Standard & Poor’s, and a managing director at Duff & Phelps.  (Exhibit B)

Hoemke specializes in the appraisal of tangible personal property used in the telecommunications industry.  (Exhibit A)  He regularly appraises antennas, cabling, and wireless property components like the subject property.  (Id.)  Hoemke prepared appraisal reports for the subject property located in each of the counties involved in these appeals, i.e., Caldwell, Daviess, Harrison, Henry, and Mercer.  Hoemke considered the cost approach, the market approach, and the income approach but ultimately used the cost approach because it provided the most reliable and best evidence of TVM for the subject property.  (Exhibit A)

In arriving at an opinion of value using the cost approach, Hoemke first had to estimate the replacement cost new (RCN) of the subject property.  (Exhibit A)  CostQuest Associates (CQA), a nationally recognized cost-estimation firm specializing in telecommunications network property, assisted Hoemke with determining the RCN.  (Id.)  Hoemke testified that RCN is the proper starting point for developing an opinion of the subject property’s value using the cost approach because the wireless industry is in a constant period of transformation and because advances in technology mean that wireless carriers have to make large and frequent acquisitions of the type of property that exists at cell tower sites.  (Id.)  Hoemke testified that, as these changes occur, existing equipment becomes discontinued by the manufacturer and can no longer be acquired.  (Id.)  Hoemke testified that the use of a reproduction cost rather than the RCN would likely result in gross over-valuation without an extensive analysis of functional obsolescence.  (Id.)

Hoemke analyzed all three forms of depreciation – physical, functional, and external – for the subject property.  (Exhibit A)  Hoemke measured physical depreciation for the subject property by applying percent good factors to RCN based upon the expected economic life of the property, which is commonly referred to as the property’s service life or useful life.  (Id.)  For the subject property, Hoemke determined useful lives based on a review of the property’s retirement experiences, technology changes and forecasts, various appraisal guides, and appraisal judgment.  (Id.)  Hoemke explained and included the percent good factors in his appraisal report.  (Exhibit B)  Hoemke made no deductions for functional or external obsolescence.  (Exhibit A)

On cross examination, Hoemke testified that his report relied on the cost data supplied by CQA, which information is “from all of the [wireless] companies, respectively, to determine the market level of costs for all of the components that . . . lead up to the . . . replacement cost of the asset.”  (Tr. 17-18)  The pricing for each of the components comprising the subject property was not stated in CQA’s report but was contained in Stegeman’s work file.  (Tr. 18)  In response to questioning regarding the accuracy and reliability of CQA’s pricing information, Hoemke testified that CQA’s values of the components were compared to the costs for components at cell tower sites that were being constructed.  The comparisons gave Hoemke confidence that CQA’s report provided a “good prediction of what a replacement cost new would be.”  (Tr. 20-21)

In his report, Hoemke described the subject property as depreciable “network assets,” which consisted of the following categories:  (1) antennas, amplifiers, and cables with a useful life of five years; (2) radio frequency equipment with a useful life of six years; (3) power equipment with a useful life of 12 years; and (4) transport assets with a useful life of six years.  (Exhibit B)  Hoemke determined the RCN by:

applying appropriate equipment prices to each cell site network component described [in the report]. Using technology available for purchase, we primarily relied on vendor-specific equipment pricing information provided by AT&T’s procurement and financial planning groups for the network component and equipment prices. This pricing information was either current as of the Valuation Date, or reflected in AT&T’s 2015 equipment purchases. Additionally, as per Missouri Revised Statutes Section 137.122[,] we did not include charges for freight, sales/use tax, and installation. For the small amount of network-related CIP [construction in progress] that was reflected on AT&T’s books, we relied upon the historical asset acquisition costs by vintage year, and applied appropriate trend factors to determine the [RCN].

 

(Exhibit B, p. 5)

 

Stegeman’s Testimony and Report

            Stegeman testified that he is president of CQA, a firm that designs and develops replacement cost models for use in determining a RCN for wireless network property.  (Exhibit A-1)  He has 30 years of experience analyzing costs of telecommunications property, including developing cost models used by wireline and wireless companies, state and federal government agencies, and foreign entities.  (Exhibits A-1 and A-2)  He has appeared before taxation officials in 12 states.  (Exhibit A-2)  Stegeman holds a bachelor’s degree in mathematics and statistics and a master’s degree in statistics.  (Exhibit A-2) 

In determining a RCN for the subject property, Stegeman visited the cell tower sites where the subject property was located.  (Exhibit A-1)  Stegeman evaluated the attributes of the subject property; reviewed cellular demand based on “busy hour” cell traffic at each site; defined the functionality required for each radio access network site in each county; identified the types, sizes, and counts of the equipment required; and collected the current cost of the equipment to determine the efficient RCN of the subject property.  (Id.)  Stegeman testified that he did not use the costs paid by Complainant for the existing property at the cell tower sites as RCN; rather, he used the most recent and most efficient network technologies that provide the same utility as that of the subject property as of January 1, 2016.  (Id.; Tr. 154)  Stegeman also reviewed Complainant’s invoice information for 33 new cell tower sites in Missouri that had been built in 2014 and 2015 in order to compare his numbers and to validate “what the cost to build new would be.”  (Tr. 154)  Stegeman testified that the actual costs that Complainant paid for the subject property already in place at the cell tower sites on January 1, 2016, was not relevant to determining RCN because RCN is “all based upon what we replace today.”  (Tr. 155)  Stegeman created a report describing his methodology for determining RCN, summarizing the costs by asset class, and setting out the detailed cost for each item of the subject property.  (Exhibit B)  Stegeman’s report was incorporated into Hoemke’s report as Exhibit 7.  (Id.)

On cross examination, in discussing RCN, Stegeman testified that if an item of the subject property had been purchased as recently as 2015 the item could be replaced with more recent and efficient network technology on January 1, 2016.  (Tr. 116)  Stegeman testified that he also looked at recent costs from various sources to identify what a market participant would pay on January 1, 2016, as a method of verifying the cost used in the CQA report.  (Tr. 118)  Stegeman testified that the various sources included reviewing work performed with other clients, the Federal Communications Commission, state agencies, and equipment pricing catalogs.  (Id.)  Stegeman also reviewed the available invoices showing the amount Complainant had paid for some of the equipment.  (Id.)  Stegeman testified that his conclusions of RCN were consistent with the cost information AT&T provided and that the information AT&T provided was consistent with what a market participant would pay for the equipment.  (Tr. 119)

Wiggins’ Testimony

            Wiggins testified that he is Assistant Vice President of Tax for AT&T Services.  (Exhibit C)  Wiggins testified that his career began in the early 1970s as a residential appraiser before he became Chief Appraiser of commercial property in the Jackson County, Missouri, Assessor’s Office.  (Id.)  Beginning in 1980, Wiggins served four years as a Commissioner of the STC.  (Id.)  Wiggins left the STC for a position with AT&T and since then has been involved in property tax matters for AT&T.  (Id.)

Wiggins testified that his responsibilities include AT&T’s property tax matters in 37 states, and, more specifically, the preparation and filing of Complainant’s business personal property declarations for property located at various cell tower sites in Missouri.  (Id.)  Wiggins testified that Complainant followed the requirements of Section 137.122 for reporting the subject property in the counties involved in these appeals.  (Exhibits C and D)  Wiggins testified that, in the ordinary course of business, a representative of Complainant with knowledge of personal property reporting prepares a county declaration form and attaches to it the relevant tax year’s rendition of business personal property.  (Id.)  The rendition contains the address and parcel number of the property at issue, the accounting asset category for the property, the acquisition year, the cost, and the market value as determined by the depreciation schedule in Section 137.122.  (Id.)

Wiggins testified that the cost for business personal property recorded on the rendition is generally the total price paid for the property less freight, installation, and sales and use taxes.  (Exhibit C)  If installation is included with the purchase price and not charged separately, that cost also would be included on the rendition.  (Id.)  Wiggins testified that Complainant uses guidance from the U.S. Internal Revenue Service (IRS) regarding MACRS to determine the “lives” to apply to each item of the subject property.  (Tr. 217, 222)  For the subject property at issue in these appeals, Complainant used the revenue procedure, Rev. Proc. 2011-12, described in Exhibit F to determine the MACRS lives of the property.  (Tr. 221; Exhibit F)  Rev. Proc. 2011-22, stated, in relevant part:

SECTION 1. PURPOSE

This revenue procedure provides a safe harbor method of accounting for determining the recovery periods for depreciation of certain tangible assets used by wireless telecommunications carriers.

. . .

SECTION 3. WIRELESS TELECOMMUNICATION ASSETS

.1 Wireless telecommunication assets include a mobile telephone switching office (MTSO) and cell sites. The functions of the MTSO and cell sites are comparable to those of a wireline telephone central office and the associated land line cables.

. . .

.4 A typical cell site consists of cell site equipment, a self-supporting antenna support structure (also known as a tower) for mounting antennas, and related support and power equipment. Cell site equipment typically includes a base transceiver station or generational equivalent (which may include, for example, vocoders, modems, channel cards, transceivers/amplifiers cards, modulators, demodulators, and combiners), antennas, and alarm and support equipment, and also may include microwave equipment. In some cases, cell site equipment includes a base station controller.

The antenna system at the cell site generally consists of the antennas (with or without remote electrical tilt functionality (RET)), coaxial and jumper cables from the antennas to the base transceiver station (antenna cables), and RET equipment.

. . .

SECTION 4. SCOPE

This revenue procedure applies to a taxpayer that has a depreciable interest in wireless telecommunication assets (as described in section 3 of this revenue procedure) used primarily to provide wireless telecommunication or broadband services by mobile phones (for example, cell phones or smartphones). This revenue procedure does not apply to a taxpayer that is primarily a cable operator. The determination of whether a taxpayer is within the scope of this revenue procedure is made by each member of a consolidated group, by a partnership, or by an S corporation.

 

(Exhibit F)

Rev. Proc. 2011-12 also provided descriptions of the categories of assets that could be depreciated using the procedure and the recovery periods for the assets.  The recovery periods ranged from five years for assets such as computer-based switching equipment to 40 years for a MTSO building^[6].  (Exhibit F)  Wiggins testified that, with regard to the larger categories of the subject property, Complainant followed Rev. Proc. 2011-22 to report antenna and cabling as a unit with a seven-year life, other equipment with a five-year life, and the tower accessories with a 15-year life.  (Tr. 222)

Wiggins testified that, for purposes of the instant appeals, Complainant was relying on Hoemke’s appraisal for proof of TVM.  He also testified that “the Missouri statutory formula for business personal property provides credible evidence and support of true value in money as determined by our appraiser’s valuation.”  (Id.)

On cross examination, Wiggins testified that Complainant obtained the subject property from suppliers and vendors in “large quantities” through “electronic relationships” or purchase orders, which was a “a very mechanized process” performed by Complainant’s supplier management division.  (Tr. 161)  Wiggins testified that primary equipment suppliers, such as suppliers of radio frequency equipment, do not ever create invoices.  (Tr. 162)  Turf vendors, who primarily install equipment, might bring a certain piece of equipment to a particular site and might create an invoice to reflect the installation service and the cost of the equipment.  (Tr. 162-63)  Wiggins testified that Complainant had provided Respondent with all of the invoices and cost information Complainant could extract from its accounting system.  (Tr. 163)  Wiggins testified that Complainant’s accounting records are audited annually and certified to Complainant’s shareholders and that the accounting records provide the data for Complainant’s business personal property declarations filed with taxing jurisdictions.  (Tr. 164-65)

Wiggins testified that Complainant engages in bulk purchasing of assets for 65,000 to 70,000 cell tower sites and might buy 10,000 “widgets” at a time.  (Tr. 175-76)  A purchase order would document the transaction, including the number and type of “widgets” bought and their price.  (Tr. 177)  Those “10,000 widgets might be shipped to a significant number of local warehouses.”  (Tr. 175)  When a “widget” is requested to be shipped to a specific cell tower site, the costs associated with that widget “go with it” and the cost of the widget is then associated with its cell tower site.  (Tr. 176)

Wiggins further testified that Rev. Proc. 2011-12 operates as a modification to the original MACR’s lives in Section 137.122, and that Section 137.122 specifically allows the modification by its reference to IRS publications and their successors.  (Tr. 223)

7. Respondents’ Evidence. Respondents argued that Complainant was unable to provide substantial and persuasive evidence to rebut the BOEs’ valuations in each appeal and that the BOEs’ valuations should be affirmed.  Specifically, Respondents argued that the methodology of Complainant’s appraiser did not meet USPAP guidelines and was not based upon substantial and credible evidence.  To support their arguments, Respondents offered their exhibits and evidence and opined that the TVM of the subject property as of January 1, 2016, was as follows:

Appeal No.	County	Respondents’ Opinion of TVM Presented at Hearing
16-46002	Caldwell	$145,385.92
16-46003	Caldwell	$2,923.23
16-46004	Caldwell	$113,196.89
TOTAL	Caldwell	$261,506.04
16-54514	Daviess	$88,289.99
16-54515	Daviess	$218,907.44
16-54516	Daviess	$163,721.70
16-54517	Daviess	$106,947.13
16-54518	Daviess	$131,630.90
TOTAL	Daviess	$709,497.16
16-59000	Harrison	$129,583.09
16-59001	Harrison	$104,103.40
16-59002	Harrison	$125,848.95
16-59003	Harrison	$133,912.42
16-59004	Harrison	$116,684.18
TOTAL	Harrison	$610,132.04
16-59500	Henry	$176,043.68
16-59501	Henry	$175,715.43
16-59502	Henry	$114,197.51
16-59503	Henry	$179,829.70
16-59504	Henry	$126,836.70 (Respondents revised this value to $395,923 in Exhibits 1 and 40.)
16-59505	Henry	$207,951.12
16-59506	Henry	$120,002.99
16-59507	Henry	$157,172.55
16-59508	Henry	$174,082.12
TOTAL	Henry	$1,431,831.80 ($1,700,918.10 utilizing revision noted above)
16-70002	Mercer	$97,050.93
TOTAL	Mercer	$97,050.93
GRAND TOTAL		$3,379,104.27 (utilizing revisions noted above)

 

Respondents offered as evidence the following exhibits:

 

Exhibit	Description	Ruling
1[7]	Wireless Tower Analysis Report of Christopher Shrewsbury (Shrewsbury)	Admitted
2	WDT of Shrewsbury	Admitted
3	WDT of Beverly Alden (Alden)	Admitted
4	Example of Complainant’s Rendition	Admitted
5	Renditions submitted by Complainant	Admitted
6	Sample List of Appealed Property (Caldwell County)	Admitted
7	IRS Publication 946 for use in 2017	Admitted
8	Broz v. Commissioner of Internal Revenue, 137 U.S.TaxCt.R. 25 (Docket No. 21629-06, July 7, 2011)	Admitted
9 – 31	Respondents’ itemized lists of subject property with valuation	Admitted
32	WRT of Shrewsbury	Admitted
33	WRT of Lisa A. Hobart (Hobart)	Admitted
34	Surrebuttal Testimony of Shrewsbury	Admitted to be given weight appropriate in context of all evidence
35	Revision of Exhibit 1 p. 28	Admitted
36	Cell tower traffic report by voice and data, AT&T 1474 document	Admitted
37	eNodeB-MTBF, AT&T 1475 document	Admitted
38	NodeB-MTBF Metric, AT&T 1476 document	Admitted
39	Surrebuttal Testimony of Alden	Admitted to be given weight appropriate in context of all evidence
40	Value Calculation using 15-year MACRS of Henry County site	Admitted
41	Deposition of Wiggins	Admitted
42	AT&T Financial Review 2015 (excerpts), https://www.att.com/investor/ATT_Annual/2015/ downloads/att_ar2015_completefinancialreview.pdf	Admitted
43	Google search result for “AT&T isupplier portal, https://www.google.com/search (7/13/2018); iSupplier Job Aid for “Create Invoice”	Admitted
44	Publication of Nevada Department of Taxation, Division of Local Government Services, “Expected Life Study: Telecommunications and Cable Assets”; quoting STC Assessor’s Manual regarding Cable Television Systems (p. 231)	Admitted to be given weight appropriate in context of all evidence

 

Shrewsbury’s Testimony and Report

            Shrewsbury testified that he is Director of RF (radio frequency) Engineering and valuation specialist for CTS.  (WDT of Shrewsbury)  Shrewsbury has a bachelor’s degree in electrical engineering.  (Exhibit G, p. 11)  Shrewsbury testified that he has 23 years of experience as a RF engineer, an implementation manager, an equipment engineer, and a sales engineer for third-party suppliers in the telecommunications industry.  (WDT of Shrewsbury)  Shrewsbury testified that a RF engineer “generates the equipment list or Bill of Material [for a cell tower site under construction] and it is empirical (sic) they know all of the equipment present on the site before a proper design can be performed.”  (Id.)  Shrewsbury testified that a RF engineer would be familiar with the need for particular equipment on a cell tower site and would work with equipment engineers, original equipment manufacturers (OEM), and general contractors “to develop a workable installation design.”  (Id.)  Shrewsbury testified that a RF engineer would “[n]ot necessarily” need to know the cost of the equipment being installed but that he was “intimately involved in developing the budget for the market.”  (Id.)

Shrewsbury testified that he was employed by AT&T Wireless as an engineering support manager in the late 1990s until 2002.^[8]  (Tr. 310-12)  During his employment for AT&T Wireless, Shrewsbury did not have any responsibility for budgets, acquisition, or procurement of equipment like the subject property at issue in these appeals.  (Tr. 314)  Shrewsbury testified that he worked for five companies after leaving AT&T Wireless and before working for CTS, all of which were involved in the installation of cell towers or the sale of cell tower equipment.  (Tr. 317-21)  Although some of the companies had dealings with Complainant, Shrewsbury was not involved in Complainant’s purchases of equipment, never worked with Complainant’s property tax group, and was never involved in the preparation of Complainant’s property tax returns.  (Tr. 321-22)

Shrewsbury testified that CTS is a consulting company that assists clients, often local governments and assessors, in (1) identifying telecommunication equipment in their areas; (2) creating a “viable equipment list” for each site; and (3) estimating original cost of the equipment and age of installation.  (WDT of Shrewsbury)  Shrewsbury testified that, in every state where CTS had performed work, CTS had “found that some companies have grossly under-reported their cost, so we have been able to assist Assessors in providing a more accurate listing, description and original cost estimates of the property that should be included in the assessment so that the levy of property taxes is more fair for all taxpayers, especially the companies who have reported accurately.”  (Id.)

Shrewsbury testified that he had developed his report, Exhibit 1, in relation to a single cell tower site located in Henry County, identified as Appeal No. 16-59504.  Shrewsbury concluded that the original cost of the equipment at the site was significantly higher than the cost Complainant reported as the original cost of the equipment on its rendition of property for the site.  (WDT of Shrewsbury)  Shrewsbury testified that he believed the original cost was higher than the reported original cost because CTS did not have copies of original invoices and purchase contracts from Complainant to assist CTS in verifying its estimates of original costs.  (Id.)  Shrewsbury testified that he understood the State of Missouri uses MACRS to value personal property but that he did not calculate depreciation.  (Id.)  Shrewsbury testified that certain components of the subject property could have an economic life of 15 to 20 years.  (Id.)

On cross examination, Shrewsbury admitted that he had never before testified as a witness in a property tax case before an administrative tribunal, state court, or federal court in Missouri or any other state.  (Tr. 284)  Shrewsbury admitted that he had never been qualified as an expert witness on original cost opinions by any tax commission, tribunal, or court.  (Id.)  Shrewsbury admitted that he was not a real property or personal property appraiser and that he had no education or specialized training in real property or personal property appraisal.  (Tr. 286-87)

Shrewsbury testified that his involvement in the instant appeals was limited to providing a picture of the cost of the cell tower equipment at one cell tower site in Henry County as of January 1, 2016, and an estimate of the year of acquisition cost or original cost.  (Tr. 287-88)  He did not visit all of the sites involved in these appeals.  (Tr. 291)  Shrewsbury testified that his report provided “a professional opinion, based on data that [he had] researched” but that the report was not a valuation or appraisal of the subject property under USPAP.  (Tr. 289, 293)  Shrewsbury testified that he “wouldn’t know how” to provide an opinion of fair market value because the “assessor does that.”  (Tr. 290)  Shrewsbury admitted that he “had no idea” what Missouri requires to be reported on personal property declarations.  (Tr. 293)

During his cross examination, Shrewsbury testified that he analyzed the subject property at the Henry County site by grouping the equipment into “buckets,” presumably meaning categories.  Shrewsbury categorized some of the components of the subject property differently than Complainant’s method of categorizing the components of the subject property.  (Tr. 299-304)  Shrewsbury testified that he does not “nickel and dime companies” or “go after smaller items . . . that would be two, three thousand dollars,” so he did not dispute Complainant’s reporting of some property.  (Tr. 305)  Shrewsbury used Tessco, a supplier of wireless telecommunications equipment, as his most frequent source for pricing the subject property even though Complainant did not use Tessco as a supplier of the subject property.  (Tr. 306; Exhibit 1, p. 9)  Shrewsbury also used Alibaba, a “leading supplier of OEM components, equipment, and supplies . . . of product made in China,” as a pricing source for “bench line cost.”  (Tr. 309; Exhibit 1, p. 9)

In relation to the subject property at the Henry County site Shrewsbury visited, Shrewsbury admitted that, in early 2016, CTS initially estimated the original cost of the subject property within $9,000 of Complainant’s reported original cost for the property at the site.  (Tr. 336-38)  Shrewsbury began his employment with CTS later, in August 2016.  After conducting his analysis, Shrewsbury’s estimate of the original cost of the subject property at the Henry County site increased from CTS’s previous estimate, from approximately $334,000 to $737,198.  When asked why the estimate of original cost changed so dramatically from CTS’s initial estimate to Shrewsbury’s estimate, Shrewsbury stated that he made the change because he understood the subject property was under appeal.  (Id.; Exhibit 1, p. 28; Exhibit 35)

Alden’s Testimony

            Alden testified that she is the assessor for Caldwell County, one of the Respondents in the instant appeals.  Alden testified on behalf of all of the assessors in the instant appeals.  (Tr. 232)  Alden has been the assessor of Caldwell County since 2001 and attended and passed the required training for Missouri assessors and completed regular continuing education.  (WDT of Alden)  Alden testified that she has no specialized training in assessing personal property but has supervised the assessment of personal property during her term in office.  (Id.)

Alden testified that Respondents had accepted Complainant’s 2016 reported original cost for the subject property but had applied depreciation recovery periods of 15 years for the subject property placed in service after January 1, 2006, and a 30-percent residual for the subject property placed in service prior to January 1, 2006.^[9]  (Tr. 233-34)  Alden testified that the subject property placed in service prior to January 1, 2006, had a longer recovery period, and, thus, a higher value, than property placed in service after January 1, 2006.  (Tr. 233-35)  Alden testified that Respondents based the determinations for recovery periods on IRS Publication 946, regardless of the type of equipment being depreciated, and on MACRS.  (WDT of Alden; Exhibit 7; Tr. 233, 237-39, 279-80)  Alden admitted that Publication 946 did not have a class for wireless telecommunications property, but Respondents interpreted asset classes 48.2 and 48.14 to include the subject property.  (Tr. 240-43)  Alden testified that the original cost of property is used as the starting point in the cost approach to value and that Respondents had not been able to get original invoices and purchase records from Complainant even though they were requested.  (WDT of Alden)  On cross examination, Alden testified that she is not an appraiser and has no appraisal training or credentials.  (Tr. 232)

8. Rebuttal Evidence – Complainant. Kientzy, Director of Radio Access Network for Complainant, testified that his employment group is responsible for the performance of Complainant’s equipment at cell tower sites.  (Tr. 388-91)  Specifically, Kientzy’s group conducts high-level investigations of equipment performance and performance degradation.  (Tr. 389)  Kientzy testified that he is aware of costs of various items of equipment due to his position as a director but that it is uncommon for a RF Engineer to be familiar with costs for individual items of property like the subject property.  (Exhibit R-B)  Kientzy disagreed with Shrewsbury’s report, which stated that Complainant’s RF engineers and implementation managers are made aware of equipment cost and date of installation; rather, cost and date of installation are tracked by Complainant’s accounting system for use in reporting the business personal property at each wireless cell tower site.  (Id.)

Kientzy testified that, based on his knowledge, Complainant’s major suppliers of cell tower equipment in Missouri are Alcatel, Andrew, Commscope, Lucent Technologies, and Nokia.  (Tr. 393-95)   Kientzy testified that Complainant does not obtain its cell tower equipment from Tessco or from Chinese manufacturers who sell through Alibaba.  (Id.)  Kientzy testified that all of the business personal property at a typical cell tower site in rural Missouri counties costs Complainant $150,000 to $300,000.  Kientzy further testified that he did not know how Shrewsbury determined his conclusion of original cost, which, in the case of one site in Henry County, was over $700,000.  (R-B)

Hunter, Assistant Vice President of Tax for AT&T Services, testified that he was Director of Tax/Research and Planning for AT&T Services as of January 1, 2016.  (SUR-A)  Hunter testified that, in the course of his duties, he exhausted all attempts to locate invoices and purchase orders for the subject property in these appeals.  Hunter testified that “it was a fruitless exercise” because Complainant’s method of purchasing the property for use at wireless cell tower sites, particularly electronic equipment, is purchased in bulk and stored in various staging warehouses until the property is sent to the cell tower sites as needed.  (SUR-A)  According to Hunter, once the property reaches its staging location, the property loses its link to any invoice that might be related to it.  “Equipment costs are then assigned to deployed cell tower locations in the accounting system, along with the date the equipment was placed in service.”  (Id.)  Due to the “enormous amount” of property purchased annually for the cell tower sites, it is impractical and unnecessary to track the property to invoices or to retain a link to invoices because the cost, date, and location of the property is entered into the accounting system at the time it is put in service.  (Id.)

9. Rebuttal Evidence – Respondent.  Shrewsbury, who admitted he is not an appraiser, testified that RCN cannot be determined based on recent technologies that provide the same utility as the subject property.  (Exhibit 32)

Hobart, a licensed general appraiser from Michigan and a consultant to Respondents, did not appraise the subject property.  Hobart testified that, in order to appraise the subject property, an appraiser would need access to detailed asset records, the acquisition cost, the date of acquisition, the original cost, and any sales or income data.  (Exhibit 33)  Hobart testified that customer usage of the property could be important to estimate depreciation.  (Id.)  Hobart testified that, where sufficient reliable information is available, RCN minus depreciation is an accepted methodology for valuing personal property.  (Id.)  Hobart testified that MACRS depreciation described in Section 137.122 is relatively easy to apply and has the potential for creating greater uniformity in taxation.  (Id.)

10. Presumption of Correct Assessment Rebutted – TVM Established. Complainant presented substantial and persuasive evidence to rebut the presumption of correct assessment by the BOEs and to establish the TVM of the subject property as of January 1, 2016.

CONCLUSIONS OF LAW AND DECISION

Jurisdiction

The STC has jurisdiction to hear this appeal and to correct any assessment which is shown to be unlawful, unfair, arbitrary, or capricious, including the application of any abatement.  The Hearing Officer shall issue a decision and order affirming, modifying or reversing the determination of the BOE, and correcting any assessment which is unlawful, unfair, improper, arbitrary, or capricious.  Article X, Section 14, Mo. Const. of 1945; Sections 138.430, 138.431, 138.431.4. 

Basis of Assessment

The Constitution mandates that real property and tangible personal property be assessed at its value or such percentage of its value as may be fixed by law for each class and for each subclass.  Article X, Sections 4(a) and 4(b), Mo. Const. of 1945.  The constitutional mandate is to find the true value in money for the property under appeal.  By statute, real property and tangible personal property are assessed at set percentages of true value in money:  residential property at 19%; commercial property at 32%; agricultural property at 12%; personal property at 33.33%.  Section 137.115.5.

 

Weight to be Given Evidence

The Hearing Officer is not bound by any single formula, rule, or method in determining true value in money and 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 County 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 deemed necessary when viewed in connection with all other circumstances.  Beardsley v. Beardsley, 819 S.W.2d 400, 403 (Mo. App. W.D. 1991).  The Hearing Officer, as the trier of fact, is not bound by the opinions of experts but may believe all or none of the expert’s testimony or accept it in part or reject it in part.  Exchange Bank of Missouri v. Gerlt, 367 S.W.3d 132, 135-36 (Mo. App. W.D. 2012).

Complainant’s Burden of Proof

To obtain a reduction in assessed valuation based upon an alleged overvaluation, the Complainant must prove the true value in money of the subject property on the subject tax day.  Hermel, Inc., v. State Tax Commission, 564 S.W.2d 888, 897 (Mo. banc 1978).  True value in money is defined as the price that the subject property would bring when offered for sale by one willing but not obligated to sell it and bought by one willing or desirous to purchase but not compelled to do so.  Rinehart v. Bateman, 363 S.W.3d 357, 365 (Mo. App. W.D. 2012); Cohen v. Bushmeyer, 251 S.W.3d 345, 348 (Mo. App. E.D. 2008); Greene County v. Hermel, Inc., 511 S.W.2d 762, 771 (Mo. 1974).  True value in money is defined in terms of value in exchange and not in terms of value in use.  Stephen & Stephen Properties, Inc. v. State Tax Commission, 499 S.W.2d 798, 801-803 (Mo. 1973).  In sum, true value in money is the fair market value of the subject property on the valuation date.  Hermel, Inc., 564 S.W.2d at 897.

“’True value’ is never an absolute figure, but is merely an estimate of the fair market value on the valuation date.”  Drury Chesterfield, Inc., v. Muehlheausler, 347 S.W.3d 107, 112 (Mo. App. E.D. 2011), citing St. Joe Minerals Corp. v. State Tax Comm’n of Mo., 854 S.W.2d 526, 529 (Mo. App. E.D. 1993).  “Fair market value typically is defined as the price which the property would bring when offered for sale by a willing seller who is not obligated to sell, and purchased by a willing buyer who is not compelled to buy.”  Drury Chesterfield, Inc., 347 S.W.3d at 112 (quotation omitted).

A presumption exists that the assessed value fixed by the BOE is correct.  Rinehart, 363 S.W.3d at 367; Cohen, 251 S.W.3d at 348; Hermel, Inc., 564 S.W.2d at 895.  “Substantial and persuasive controverting evidence is required to rebut the presumption, with the burden of proof resting on the taxpayer.”  Cohen, 251 S.W.3d at 348.  Substantial evidence can be defined as such relevant evidence that a reasonable mind might accept as adequate to support a conclusion.  Cupples Hesse Corp. v. State Tax Commission, 329 S.W.2d 696, 702 (Mo. 1959).  Persuasive evidence is evidence that has sufficient weight and probative value to convince the trier of fact.  Cupples Hesse Corp., 329 S.W.2d at 702.  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).  See also, Westwood Partnership v. Gogarty, 103 S.W.3d 152 (Mo. App. E.D. 2003); Daly v. P. D. George Co., 77 S.W.3d 645 (Mo. App. E.D. 2002); Reeves v. Snider, 115 S.W.3d 375 (Mo. App. S.D. 2003).

There is no presumption that the taxpayer’s opinion is correct.  The taxpayer in a STC appeal still bears the burden of proof.  The taxpayer is the moving party seeking affirmative relief.  Therefore, the Complainant bears the burden of proving the vital elements of the case, i.e., the assessment was “unlawful, unfair, improper, arbitrary or capricious.”  Westwood Partnership, 103 S.W.3d 152 (Mo. App. E.D. 2003); Daly v. P. D. George Co., 77 S.W.3d 645 (Mo. App. E.D. 2002); Reeves v. Snider, 115 S.W.3d 375 (Mo. App. S.D. 2003); Industrial Development Authority of Kansas City v. State Tax Commission of Missouri, 804 S.W.2d 387, 392 (Mo. App. W.D. 1991).

Section 137.122

Section 137.122 provides a statutory standardized methodology for estimating the value of business personal property for mass appraisal purposes relying upon the federal MACRS life tables to determine the appropriate “class life” of depreciable tangible personal property used in a trade or business or for production of income to establish uniformity in the assessment of depreciable tangible personal property.  Section 137.122 applies to business personal property placed in service after January 2, 2006.  The methodology presented by Section 137.122 is a cost approach to value with more than straight line (normal) depreciation.  For property placed in service after January 2, 2006, the valuation under Section 137.122 is presumed to be correct but can be “disproved by substantial and persuasive evidence of the true value in money under any method determined by the state tax commission to be correct . . . .”  For the purposes of appeal, salvage or scrap value can only be applied to property not actually in use.  For property placed in service prior to January 2, 2006, there is no presumption that the Section 137.122 methodology is correct, although assessors are not precluded from using such a methodology.

“Business personal property” is tangible personal property that is used in a trade or business for the production of income and that has a determinable life of longer than one year, including supplies used by the business, but not livestock; farm machinery; grain and other agricultural crops in an unmanufactured condition; property subject to the motor vehicle registration provisions of Chapter 301; property assessed under Section 137.078 (broadcasting equipment); the property of rural electric cooperatives under Chapter 394; or property assessed by the STC under Chapters 151 (railroads), 153 (bridge, express, public utilities), and 155 (aircraft), and Section 137.022 and Sections 137.1000 to 137.1030 (private car companies).  Section 137.122.1.

Each assessor shall use the standardized schedule of depreciation in this section to determine the assessed valuation of depreciable tangible personal property for the purpose of estimating the value of such property subject to taxation under this chapter.  Section 137.122.2.  The assessor shall apply the class life and recovery period to the original cost of the property according to the depreciation schedule.  Section 137.122.3.  The percentage shown for the first year shall be the percentage of the original cost used for January first of the year following the year of acquisition of the property, and the percentage shown for each succeeding year shall be the percentage of the original cost used for January first of the respective succeeding year.  Id.  Depreciable tangible personal property in all recovery periods shall continue in subsequent years to have the depreciation factor last listed in the appropriate column so long as it is owned or held by the taxpayer.  Id.

“Class life” is defined as the class life of property as set out in the federal MACRS life tables or their successors under the Internal Revenue Code as amended.  Section 137.122.1(2).  “Original cost” is defined as the price the current owner, the taxpayer, paid for the item without freight, installation, or sales or use tax.  Section 137.122(4).  “Placed in service” is defined as when the property is ready and available for a specific use, whether in a business activity, an income-producing activity, a tax-exempt activity, or a personal activity.  Section 137.122(5).  Even if the property is not being used, the property is in service when it is ready and available for its specific use.  Id.

Such estimate of value determined under this section shall be presumed to be correct for the purpose of determining the true value in money of the depreciable tangible personal property, but such estimation may be disproved by substantial and persuasive evidence of the true value in money under any method determined by the state tax commission to be correct, including, but not limited to, an appraisal of the tangible personal property specifically utilizing generally accepted appraisal techniques, and contained in a narrative appraisal report in accordance with the Uniform Standards of Professional Appraisal Practice or by proof of economic or functional obsolescence or evidence of excessive physical deterioration.  Section 137.122.4 (emphasis added).  For purposes of appeal of the provisions of this section, the salvage or scrap value of depreciable tangible personal property may only be considered if the property is not in use as of the assessment date.  Id.

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.  See, Nance v. STC, 18 S.W.3d 611, 615 (Mo. App. W.D. 2000); Hermel, Inc., 564 S.W.2d at 897; Xerox Corp. v. STC, 529 S.W.2d 413 (Mo. banc 1975).  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.  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. 1974).

Cost Approach

            In its simplest form, the cost approach is the current cost of the subject property as if new less all forms of depreciation.  Valuing Machinery and Equipment: The Fundamentals of Appraising Machinery and Technical Assets, Second Ed., American Society of Appraisers, 2005, p. 43.  In the assessment of business personal property, the cost approach estimates market value on the premise that the cost new of the subject property is reduced by an amount equivalent to the total loss in value that has occurred through all forms of depreciation.  Property Assessment Valuation, Second Ed., IAAO,1996, p. 360.

“Cost” can be original acquisition, replacement, or reproduction cost.  Id.  The reproduction cost is the cost of producing an exact duplicate of the subject property using the same or very similar materials, design, and workmanship.  Reproduction cost includes the added expense of obsolete or costly design, building techniques, and material.  The replacement cost is the cost of producing a property with the same utility as the subject property but using modern materials, design, and workmanship.  Id., p. 131.  Cost estimation is not an exact science.  Id., p. 132.  “The usefulness of cost as a representation of value must be kept in its proper context.”  Id.  “The assessor should remember that the objective is market value, not cost.”  Id.

 Depreciation

            In valuing personal property using the cost approach, the percent of loss in value due to depreciation is most often applied to the property’s replacement cost or reproduction cost.  Property Assessment Valuation, Second Ed., IAAO,1996, p. 360.  Personal property loses value for all the same reasons and in all the same ways as real property with three major exceptions:  (1) economic lives over which physical deterioration is measured are typically much shorter; (2) personal property is often based on technology and more subject to functional obsolescence than real property; and (3) location does not greatly affect personal property because it is moveable.  Id., p. 361.

Discussion

            In this appeal, both parties presented substantial evidence to support their opinions of the value of the subject property as of January 1, 2016.  Substantial evidence is that which is relevant, adequate, and reasonably supports a conclusion.  Cupples Hesse Corp., 329 S.W.2d at 702.  However, given the evidence in the whole record, only Complainant’s evidence of value was both substantial and persuasive.  Persuasive evidence is that which causes the trier of fact to believe, more likely than not, the conclusion advocated is the correct conclusion.  Id.

Here, Complainant filed its 2016 declarations and renditions of the subject property pursuant to Section 137.122 with Respondents.  According to Section 137.115.4:

The person listing the property shall enter a true and correct statement of the property, in a printed blank prepared for that purpose.  The statement, after being filled out, shall be signed and either affirmed or sworn to as provided in section 137.155.The list shall then be delivered to the assessor.

 

The list of property must be supported by oath or affirmation.  Section 137.155.2.

The evidence established that, in the ordinary course of business, a representative of Complainant with knowledge of personal property reporting prepared a declaration form and attached to it Complainant’s 2016 rendition of business personal property for each county.  The rendition contained the address and parcel number of the property at issue, the accounting asset category for the property, the acquisition year, the cost, and the market value as determined by the depreciation provided for in Section 137.122.  Complainant used guidance from the IRS regarding MACRS to determine the “lives” to apply to each item of the subject property.  Specifically, Complainant used the revenue procedure described in Exhibit F to determine the MACRS lives of the property.

Although Respondents had accepted Complainant’s reported original costs of the subject property prior to 2016, Respondents believed that Complainant’s 2016 declarations and renditions were not verifiable because Complainant did not provide all of the invoices and purchase orders showing the actual original costs for the subject property.  Nevertheless, Respondents accepted Complainant’s reported original costs for 22 of the 23 cell tower sites in 2016 but disregarded Complainant’s determination of depreciation and applied a 15-year class life or 30-percent residual to the subject property at all 23 cell tower sites.  Complainant subsequently appealed to the BOEs, respectively.

Under Missouri law, taxpayers, including corporations such as Complainant, are required to report their business personal property correctly.  Given the statutory requirement of correctly reporting personal property under oath or affirmation and given that Complainant indeed filed its lists describing the subject property along with cost and acquisition year and then later produced as many invoices and purchase orders for the subject property as Complainant could extract from its accounting system, Respondents’ claim – that they were unable to verify the declarations, so they formed a belief that the subject property’s value should have been higher due to the alleged absence of “source documents” showing the actual original cost of the subject property – is weak and not persuasive.

The evidence established that Complainant buys equipment in large quantities to operate approximately 70,000 cell tower sites in the United States.  The equipment is stored until needed at a particular site.  Wiggins testified that the relationship between Complainant and its equipment suppliers and vendors is “electronic” and “mechanized” such that invoices are not always created to record the actual cost of a single item of equipment.  Wiggins testified that Complainant follows guidance from the IRS, specifically the revenue procedure in Exhibit F, to determine the MACRS recovery periods depending on the asset class for each item of equipment.

For purposes of the instant appeals, Complainant’s appraiser, Hoemke, performed a detailed appraisal of all of the subject property situated at all 23 cell tower sites.  Hoemke is a certified appraiser who has more than 30 years of experience valuing business property and who specializes in valuing telecommunications property.  Hoemke formed an opinion of the subject property’s value by developing the cost approach using the RCNLD method, replacement-cost-new-less-depreciation.  The cost approach is one of the three Court-approved methods of determining value.

Hoemke’s use of the RCN rather than original cost as the starting point for determining TVM was reasonable in this situation because, as the evidence as a whole established, wireless technology is constantly being transformed and advanced, causing manufacturers and suppliers to discontinue or change existing equipment and requiring companies like Complainant to make large and frequent acquisitions of property like the subject property.  Hoemke relied upon data from Stegeman’s estimate of the RCN as well as the use, functionality, and cost of replacement equipment.  Stegeman is a statistician with 30 years of experience calculating costs of telecommunications property.  In calculating depreciation, Hoemke relied on his appraisal judgment to determine useful life the subject property based on his discussions and research with Complainant’s internal experts.  Hoemke then calculated depreciation by applying “percent good factors” to the RCN based on the subject property’s remaining useful life.

The testimony and analyses of Complainant’s experts are credible and convincing.

In their post-hearing brief, Respondents argue that Shrewsbury’s valuation of the subject property at one cell tower site in Henry County “demonstrates that the actual cost of the subject property [at all of the cell tower sites] was substantially higher than declared by Complainant.”  The Hearing Officer disagrees.  The evidence established that, in early 2016 – prior to Shrewsbury’s employment with CTS – CTS initially estimated the original cost of the subject property at the same cell tower site to be within $9,000 of Complainant’s reported original cost for the property at the site.  When asked why CTS’s initial estimate of original cost changed so dramatically after his employment with CTS began in the summer of 2016, Shrewsbury testified that he made the change to the estimate because he understood the subject property was under appeal.  Shrewsbury’s stated reasoning for the change is unsound.  Furthermore, Shrewsbury did not visit all 23 cell tower sites.  Shrewsbury’s sources for estimating cost at the only site he visited were not sources from which Complainant obtains equipment like the subject property.  Once he estimated cost, Shrewsbury did not calculate depreciation.  Shrewsbury is not an appraiser and is not qualified as an expert in valuing business personal property.  Shrewsbury’s flawed valuation of the subject property at the single cell tower site he visited is speculative, at best; thus, one cannot reasonably infer from Shrewsbury’s flawed valuation of the subject property at one cell tower site in Henry County that the subject property’s original costs at all of the cell tower sites were substantially higher than the costs declared by Complainant in 2016.

With regard to depreciation, Respondents argue that depreciation must be deducted from original cost; thus, invoices and purchase orders are necessary to document original cost.  Shrewsbury testified that RCN cannot be determined based on recent technologies that provide the same utility as the subject property.  However, Hobart, one of Respondent’s witnesses and a licensed general appraiser, testified that RCN minus depreciation is an accepted methodology under the cost approach for determining value where sufficient reliable information is available.  In determining the value of personal property using the cost approach, depreciation is most often applied to replacement cost or reproduction cost.  Property Assessment Valuation, Second Ed., IAAO,1996, p. 360.

In any event, Shrewsbury did not calculate depreciation after estimating the cost of the subject property situated at the single cell tower site he visited; rather, he testified that certain components could have an economic life of 15 to 20 years.  Respondents applied a 30-percent residual to the subject property placed in service prior to January 1, 2006, without explanation.  Respondents applied depreciation recovery periods of 15 years to the subject property placed in service after January 1, 2006, based on their interpretation of Asset Classes 48.2 and 48.14 in IRS Publication 946, which did not have an asset class for wireless telecommunications property:

Asset Class 48.2 applies to radio and television broadcasting equipment, including telegraph, ocean cable, and satellite communications, and property comparable to telephone distribution plants.  Asset Class 48.14 applies to telephone distribution plants, and the assets listed relate to wired communications.  None of the assets described in Asset Classes 48.2 and 48.14 describe the subject property.  Respondents’ approach to depreciating the subject property was erroneous.^[10]

Consequently, the evidence established that only Complainant’s expert, Hoemke, properly and completely developed the cost approach to form an opinion of value.  Complainant presented substantial and persuasive evidence to rebut the presumption of correct assessment by the BOEs and to establish the TVM of the subject property as of January 1, 2016.

ORDER

The valuations for the subject properties as determined by the BOE’s for the subject tax day are SET ASIDE.  The TVM of the subject properties as of January 1, 2016, is set forth in the table below:

Appeal No.	County	TVM as of January 1, 2016	Assessed Value as of January 1, 2016 (rounded to nearest $1)
16-46002	Caldwell	$60,296.00	$20,097
16-46003	Caldwell	$111.00	$37
16-46004	Caldwell	$66,716.00	$22,236
TOTAL	Caldwell	$127,123	$42,370
16-54514	Daviess	$37,115.00	$12,370
16-54515	Daviess	$57,543.00	$19,179
16-54516	Daviess	$74,780.00	$24,924
16-54517	Daviess	$66,312.00	$22,102
16-54518	Daviess	$150,864.00	$50,283
TOTAL	Daviess	$386,614.00	$128,858
16-59000	Harrison	$60,017.00	$20,004
16-59001	Harrison	$60,344.00	$20,113
16-59002	Harrison	$79,278.00	$26,423
16-59003	Harrison	$76,318.00	$25,437
16-59004	Harrison	$68,658.00	$22,884
TOTAL	Harrison	$344,615.00	$114,861
16-59500	Henry	$133,759.00	$44,582
16-59501	Henry	$82,089.00	$27,360
16-59502	Henry	$81,165.00	$27,052
16-59503	Henry	$137,388.00	$45,791
16-59504	Henry	$83,633.00	$27,875
16-59505	Henry	$121,787.00	$40,592
16-59506	Henry	$78,241.00	$26,078
16-59507	Henry	$91,099.00	$30,363
16-59508	Henry	$102,358.00	$34,116
TOTAL	Henry	$911,519.00	$303,809
16-70002	Mercer	$61,841.00	$20,612
TOTAL	Mercer	$61,841.00	$20,612

 

Application for Review

A party may file with the Commission an application for review of this decision within thirty days of the mailing date set forth in the Certificate of Service for this Decision.  The application shall contain specific facts or law as 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, MO 65102-0146, 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 application for review is based will result in summary denial.  Section 138.432, RSMo

Disputed Taxes

The Collectors of Caldwell, Daviess, Harrison, Henry, and Mercer Counties, as well as the collectors of all affected political subdivisions therein, shall continue to hold the disputed taxes pending the possible filing of an Application for Review, unless 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 10th, 2019.

STATE TAX COMMISSION OF MISSOURI

 

Amy S. Westermann

Senior Hearing Officer

 

Certificate of Service

I hereby certify that a copy of the foregoing has been sent electronically or mailed postage prepaid this 10th day of April, 2019, to: Complainants(s) counsel and/or Complainant, the County Assessor and/or Counsel for Respondent and County Collector.

Jacklyn Wood

Legal Coordinator

 

^[1] All statutory references are to RSMo 2000, as amended, unless otherwise indicated.

^[2] Along with its Post-Hearing Brief, Complainant filed Addendum B-1, which was a detailed list containing a description for each item of property subject to these appeals, and Addendum B-2, which is Complainant’s 2016 Rendition of Business Personal Property at issue in these appeals.  Addendum B-1 listed for each item of the subject property (1) the parcel number and site address of its physical location; (2) its inventory “tag” number; (3) its asset class; (4) its manufacturer’s name; and (5) its manufacturer’s part number.  Addendum B-2 listed for each item of subject property (1) its asset category; (2) its acquisition year; (3) its cost; and (4) its market value.  The dates of acquisition of each item of the subject property ranged from as early as 1990 to as recently as 2015, but, on the face of the documents, the majority of the items of the subject property appear to have been acquired after 2006.  (Complainant’s Post-Hearing Brief, Addendum B-2)

^[3] Respondents filed objections to Complainant’s Exhibits A, A-1, B, C, and D.  Respondents’ objections are hereby overruled.

^[4] Hoemke provided separate WDT and created a separate appraisal report for each of the counties involved in these appeals in which he valued the specific items of the subject property physically located within each of the counties.

^[5] Exhibit E was not offered.

^[6] The parties did not dispute that the buildings on the cell tower sites which house equipment were not assessed as depreciable personal property and that their values are not at issue in these appeals.

^[7] Complainant filed objections to Respondents’ Exhibits 1 through 31.  Complainant’s objections are hereby overruled; Respondents’ Exhibits 1 through 31 are admitted to be given the weight deemed appropriate in the context of all of the evidence.

^[8] Shrewsbury admitted that, while employed with AT&T Wireless, his work performance was criticized; human resources directed him to attend anger management classes; and he was involved in a hostile work environment claim that resulted in his separation from the company.  (Tr. 314-16)  Shrewsbury testified that he has applied for a job with Complainant within the last couple of years but has not been hired.  (Tr. 316)

[9] Section 137.122 excludes business personal property placed in service prior to 2006.

^[10] As Complainant notes in its Post-Hearing Brief, Alden’s reliance on Exhibit 8, Broz v. Commissioner of Internal Revenue, 137 U.S.T.C. 25, to justify the use of Publication 946 is misplaced.  There, the Court reviewed depreciation deductions for wireless cellular equipment for tax years 1996 and 1998-2001.  The Court noted in footnote 2 that the IRS updated class life guidance for the cellular service industry in Rev. Proc. 2011-22 (Exhibit F), which applies to the subject property in these appeals and tax years after 2010.  Alden admitted that she did not review Rev. Proc. 2011-22.