AT&T Mobility, LLC v. Beverly Alden, Assessor, Caldwell County, Sally Black, Assessor, Daviess County, Lila Craig, Assessor, Harrison County, Scott Largent, Assessor, Henry County, and Diana Blunk, Assessor, Mercer County,

July 2nd, 2020

STATE TAX COMMISSION OF MISSOURI

AT&T MOBILITY, LLC, )
)
Complainant, )
)
v. )
)
BEVERLY ALDEN, ASSESSOR, ) Appeal No. 16-46002 through
CALDWELL COUNTY, MISSOURI, )                    16-46004
)
SALLY BLACK, ASSESSOR, ) Appeal No. 16-54514 through
DAVIESS COUNTY, MISSOURI, )                    16-54518
)
LILA CRAIG, ASSESSOR, ) Appeal No. 16-59000 through
HARRISON COUNTY, MISSOURI, )                    16-59004
)
SCOTT LARGENT, ASSESSOR, ) Appeal No. 16-59500 through
HENRY COUNTY, MISSOURI, )                    16-59508
)
DIANA BLUNK, ASSESSOR, ) Appeal No. 16-70002
MERCER COUNTY, MISSOURI, )
Respondents. )

DECISION AND ORDER AFFIRMING HEARING OFFICER DECISION

UPON APPLICATION FOR REVIEW

HOLDING

The assessors of five counties (Respondents) filed an application for review of the Hearing Officer’s decision and order setting aside the decisions of the county boards of equalization (BOE) and determining the true value in money (TVM) of the subject property.[1] The Hearing Officer determined the TVM of the subject property as of January 1, 2016 was $1,831,712. The Hearing Officer’s decision and order is AFFIRMED.[2]

FINDINGS OF FACT AND PROCEDURAL HISTORY

            AT&T Mobility, LLC, (Complainant) owns the subject property, which consists of wireless telecommunication components used in 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.

Respondents are the assessors of Caldwell, Daviess, Harrison, Henry, and Mercer counties. Complainant owns the subject property, which consists of wireless telecommunication components used in 23 cell tower sites located in these five counties.

Section 137.122 requires Complainant to annually file a list of personal property located in each county.[3] The lists are filed under oath or affirmation and include a description of each item, its acquisition year, and the acquisition cost of each item. Section 137.122.3.   Prior to 2016, Respondents accepted Complainant’s reported costs.

In 2016, Respondents accepted Complainant’s reported original costs for 22 of the 23 cell tower sites, but disregarded Complainant’s determination of the economic life of the property.   Respondents calculated the TVM of property acquired after January 2, 2006 by applying a 15-year class life with a residual of 15% of costs. For property acquired before January 2, 2006, Respondents calculated the TVM at 30% of cost. Respondents concluded the TVM of Complainant’s business personal property as of January 1, 2016 was $3,518,777.

Complainant timely appealed the assessments to the county boards of equalization. (BOEs). The BOEs affirmed Respondents’ valuations. Complainant timely appealed the assessments to the State Tax Commission (STC) on grounds of overvaluation. Following an evidentiary hearing, the Hearing Officer set aside the BOE valuations and determined the TVM of the subject property as of January 1, 2016 was $1,831,731. Respondents timely filed an application for review.

Prior to the evidentiary hearing, Complainant produced its costs records of the subject property for Respondents’ review. At the evidentiary hearing, Complainant introduced exhibits and evidence.

Complainant introduced an appraisal report prepared by certified appraiser Carl R. E. Hoemke, who specializes in valuing telecommunications property. Hoemke testified the preferred appraisal method for the subject property was the “replacement cost new less depreciation” method (RCNLD). Hoemke based his conclusion on the fact frequent technological advancements in wireless technology causes manufacturers and suppliers to discontinue or change products and requires telecommunications companies like Complainant to make large and frequent acquisitions of new wireless telecommunication property. Given these circumstances, Hoemke testified the RCLND method is preferred because utilizing a cost of reproduction method rather than a replacement cost method would likely result in gross over-valuation without an extensive functional obsolescence analysis.   Hoemke credibly testified the proper methodology for determining the TVM of the subject property was the RCNLD method.

The RCNLD method involves two main steps. First, the appraiser calculates “replacement cost new” (RCN), which is the cost to build a property of comparable utility with modern design, materials, and workmanship. Second, the appraiser subtracts depreciation value from the RCN to estimate the TVM of the subject property.

Hoemke determined the RCN of the subject property with cost data supplied by CostQuest Associates (CQA), a nationally recognized cost estimation firm specializing in telecommunications network property. Hoemke used the CQA data to calculate the RCN. Hoemke then calculated depreciation by considering physical, functional, and external factors. Hoemke determined physical depreciation by determining the expected economic life of the property based on his appraisal experience and a variety of data showing the expected service or useful life of the property.   Hoemke made no deduction for functional or external obsolescence.

CQA utilizes data from wireless companies to determine the replacement cost of an asset. The president of CQA, James Stegeman, conducted on site evaluations of the subject property to determine cell traffic, the functionality required for each site, the types, sizes, and quantity of equipment, and the current cost of that equipment. Stegeman credibly testified he did not calculate the RCN according to Complainant’s original acquisition costs. Instead, Stegeman used the most recent and efficient network technologies that provide the same utility as the subject property as of the valuation date. Stegeman’s testimony regarding the RCN calculation reinforces Hoemke’s testimony that RCNLD is the preferred valuation method.

Gary Wiggins, an Assistant Vice President of Tax for AT&T Services, testified regarding Complainant’s 2016 business personal property declarations. Wiggins formerly served as Chief Appraiser of commercial property in the Jackson County, Missouri, and as an STC Commissioner.

Wiggins testified Complainant reported the subject property pursuant to section 137.122. Wiggins credibly 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 it to a rendition for the relevant tax year. The rendition contains the address and parcel number of the property, the accounting asset category for the property, the acquisition year, the cost, and the market value as determined by the section 137.122 depreciation schedule. 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. Complainant uses guidance from the U.S. Internal Revenue Service (IRS) to determine the “lives” to apply to each item of the subject property. Pursuant to IRS guidance, Complainant reported the antenna and cabling has a seven year life, other equipment has a five year life, and the tower accessories have a 15 year life. The 2016 declarations were submitted as background for the 2016 assessments and to support the determination of the TVM of the subject property.

Wiggins credibly testified Complainant obtained the subject property in “large quantities” through a “very mechanized process” and that suppliers do not generate invoices for specific equipment. When Complainant purchases equipment in bulk, a purchase order documents the transaction, including the price and quantity. When specific equipment is shipped to a specific cell tower site, the costs associated with that equipment is then associated with the cell site.

Respondents principally relied on a wireless tower analysis report prepared by Christopher Shrewsbury and testimony from Beverly Alden, the Caldwell County Assessor.

Shrewsbury is the director of radio frequency engineering and a valuation specialist for CTS, a consulting company that assists clients with identifying telecommunication equipment and estimating its original cost and age of installation.

Shrewsbury is an electrical engineer, not an appraiser, and has no education or specialized training in real property or personal property appraisal. Shrewsbury admitted that no commission, tribunal or court had ever qualified him as an expert witness on original cost. Shrewsbury acknowledged he “wouldn’t know how” to provide an opinion of fair market value because the “assessor does that.”

Shrewsbury compiled a report regarding one of the 23 cell towers at issue in this appeal. For the single site he inspected, Shrewsbury admitted that CTS had initially estimated the value of the subject property at that site to be $334,000, which was within $9,000 of Complainant’s reported original cost. After completing his analysis, Shrewsbury estimated that the original cost of the equipment at that single site was $737,198. When asked why his estimate of original cost increased so dramatically from CTS’s initial estimate, Shrewsbury stated he made the change because the subject property was under appeal. Shrewsbury’s reasoning for the change was unsound and his testimony is not persuasive.

Alden testified that Respondents accepted Complainant’s 2016 reported original cost for the subject property. For property placed in service after January 2, 2006, Respondents calculated the TVM by using a 15 year life with 15% of cost residual value. Respondents justified this approach by relying on asset classes 48.2 and 48.14 in IRS Publication 946, both of which apply to wired communication infrastructure, not wireless communication infrastructure. For property placed in service prior to January 2, 2006, Respondents calculated TVM at 30% of cost. Respondents provided no explanation for adopting this approach.

CONCLUSIONS OF LAW

Respondents’ Application for Review

            Respondents assert the Hearing Officer’s decision and order is erroneous because:

(1) the Commission failed to require Complainant to produce records of the original cost of the subject property;

(2) Complainant’s 2016 business personal property declarations were inadmissible, unauthenticated hearsay;

(3) Complainant’s experts’ reports and testimony relied on undisclosed data and non-specific records; and

(4) the Hearing Officer applied a “revenue procedure” rather than the Modified Accelerated Cost Recovery System (MACRS) to determine depreciation.

Standard of Review

A party subject to a Decision and Order of a Hearing Officer with the STC may file an application requesting the case be reviewed by the STC. Section 138.432. The STC may then summarily allow or deny the request. Id. The STC may affirm, modify, reverse, set aside, deny, or remand the Decision and Order of the Hearing Officer on the basis of the evidence previously submitted or based on additional evidence taken before the STC. Id.

The Commission reviews the Hearing Officer’s decision and order de novo. Lebanon Properties I v. North, 66 S.W.3d 765, 770 (Mo. App. 2002). “The extent of that review extends to credibility as well as questions of fact.” Id. The Commission “is free to consider all pertinent facts and estimates and give them such weight as reasonably they may be deemed entitled to.” St. Louis Cty. v. State Tax Comm’n, 515 S.W.2d 446, 450 (Mo. 1974).

STC’s Ruling

For the reasons that follow, the STC finds Complainants’ arguments to be unpersuasive. The STC, having thoroughly reviewed the whole record and having considered the Hearing Officer’s Decision, the Application for Review of Respondents, and Complainant’s Response, concludes that the Hearing Officer’s Decision was correct and proper and not erroneous.

To obtain an assessment reduction based on overvaluation, Complainant bears the burden of proving the true value in money of the subject property on the valuation date. Hermel, Inc., v. State Tax Comm’n, 564 S.W.2d 888, 897 (Mo. banc 1978). The “true value in money” is the same as fair market value, and refers to “the price which the property would bring from a willing buyer when offered for sale by a willing seller.” Mo. Baptist Children’s Home v. State Tax Comm’n, 867 S.W.2d 510, 512 (Mo. banc 1993). Determining the proper method of valuation is delegated to the Commission. Hermel, 564 S.W.2d at 897. Determining the true value in money is a factual issue. Parker v. Doe Run Co., 553 S.W.3d 356, 360 (Mo. App. 2018). The Hearing Officer, as the trier of fact, determines both the credibility and weight of the evidence.   Exchange Bank of Missouri v. Gerlt, 367 S.W.3d 132, 135-36 (Mo. App. 2012).

The BOE’s valuation is presumed correct. Hermel, Inc. v. State Tax Comm’n, 564 S.W.2d 888, 895 (Mo. banc 1978). The BOE presumption is rebuttable with “substantial controverting evidence.” Id.; see also Cupples Hesse Corp. v. State Tax Comm’n, 329 S.W.2d 696, 702 (Mo. 1959) (presumption of valid assessment rebutted with substantial evidence).[4]

“Substantial evidence is that evidence which, if true, has probative force upon the issues, and from which the trier of fact can reasonably decide the case on the fact issues.” Savage v. State Tax Comm’n, 722 S.W.2d 72, 77 (Mo. banc 1986) (internal quotation omitted). If the taxpayer produces substantial evidence rebutting the BOE presumption, “the burden of proof on the facts and inferences would still rest on petitioner, for it is the moving party seeking affirmative relief.” Cupples Hesse, 329 S.W.2d at 702. The taxpayer must then produce “persuasive” evidence sufficient to convince the trier of fact. White, 321 S.W.3d at 305; see also Daly v. P.D. George Co., 77 S.W.3d 645, 651 (Mo. App. 2002) (evidence is persuasive when it has “sufficient weight and probative value to convince the trier of fact”).

The Hearing Officer correctly determined Complainant produced substantial and persuasive evidence proving the TVM of the subject property. Hoemke’s testimony and appraisal report established the preferred appraisal method for the subject property was the “replacement cost new less depreciation” method (RCNLD). Hoemke credibly testified that frequent technological advancements in wireless technology renders the original cost of equipment a less reliable starting point for valuation than the replacement cost. Thus, the RCNLD method, which is a generally accepted appraisal technique for valuing business personal property, is preferable in this context. Respondents offered no persuasive evidence countering Complainant’s evidence of value. Respondents did not conduct an appraisal. Respondents’ valuation witness produced a report on only one of the 23 cell sites at issue in this appeal and declined to calculate depreciation, which is a necessary step in the cost approach method. The Hearing Officer’s determination of the TVM of the subject property is supported by substantial and persuasive evidence.

Rather than explaining how and why the Hearing Officer’s determination of TVM is incorrect, Respondents’ application for review focuses on discovery disputes and credibility determinations. Each of Respondents’ four arguments are meritless.

  1. The Hearing Officer did not err in not compelling Complainant to produce records of the original cost of the subject property.

            Respondents assert the Hearing Officer failed to require Complainant to produce individual invoices and purchase records showing the original cost specific equipment purchases from the original manufacturer. This argument fails for two independently sufficient reasons.

First, the record supports the Hearing Officer’s finding that Complainant in fact did produce its cost records regarding the subject property. Wiggins testified suppliers do not generate invoices for specific equipment because Complainant obtained the subject property in “large quantities” through a “very mechanized process.” Complainant’s bulk purchases reflect the price and quantity of the equipment, but when specific equipment is shipped to a specific cell tower site, the costs of that equipment becomes associated with the cell site. Moreover, with exception of one of the 23 cell tower sites, Respondents declined the opportunity to inspect the property at issue. The record supports the Hearing Officer’s conclusion that Complainant produced the cost records it had and that Respondents were not prevented from preparing their case.

Second, Respondents’ focus on Complainant’s alleged failure to fully disclose records of original costs overlooks the fact that Complainant proved the TVM of the subject property with a cost approach premised on the replacement cost, not the original cost. Because Complainant proved value based on replacement cost rather than original cost, Respondents’ argument that Complainant should have been required to produce additional documentation regarding original cost does nothing more than confirm the Hearing Officer’s finding that additional discovery on this matter “would lead to cumulative and superfluous material.”

  1. The Hearing Officer did not err in admitting Complainant’s 2016 business personal property declarations into evidence.

Respondents assert Complainant’s 2016 business personal property declarations were inadmissible because they were unauthenticated hearsay. Respondents assert Wiggins’ testimony regarding the declaration was insufficient because he works for AT&T Services, LLC, not Complainant (AT&T Mobility, LLC). Respondents cite no legal authority to support their argument.

Business records are admissible when a qualified witness has “sufficient knowledge of the business operation and methods of keeping records of the business to give the records probity.” CACH, LLC v. Askew, 358 S.W.3d 58, 64 (Mo. banc 2012) (internal quotation omitted). Therefore, admissibility is conditioned on the witnesses’ knowledge, not the formalities of the witnesses’ affiliation with a specific entity within a broader corporate structure. Cf. NorthStar Educ. Fin., Inc. v. Scroggie, 581 S.W.3d 641, 649 (Mo. App. 2019) (the CFO of a successor-in-interest had sufficient knowledge to lay a foundation for the admission of loan applications and promissory notes even though he was not affiliated with the banks represented in the sale, transfer, and assignment chains because he was affiliated with other entities in the chain of title).

Wiggins, an assistant vice president of tax for AT&T Services, credibly testified he is responsible for AT&T tax matters, including the preparation of Complainant’s business personal property declarations for the subject property. Wiggins testified that as a member of the AT&T management team, he works for all AT&T entities, including specific responsibility for the declarations at issue. The record shows Wiggins had sufficient personal knowledge of Complainant’s business operation and record keeping to lay the foundation for admitting the declarations into evidence. The Hearing Officer did not erroneously admit the declarations into evidence.[5]

  1. The Hearing Officer did not err in relying on the testimony and reports of Complainant’s experts.

Respondents assert the Hearing Officer erroneously relied on Complainant’s experts because their testimony and reports were based on undisclosed data and non-specific records. The record shows Complainant’s appraiser (Hoemke) and cost analyst (Stegeman) included written reports in their work files, and both were produced to Respondents. In particular, Hoemke’s testimony appraisal report showing the TVM of the subject property included substantial details and data, which the Hearing Officer found to be “credible and convincing.” The record supports the Hearing Officer’s conclusion.

  1. The Hearing Officer correctly determined depreciation.

            Respondents assert the Hearing Officer erroneously applied a “revenue procedure” rather than the MACRS table to determine depreciation.   Respondents appear to argue depreciation must be calculated according to section 137.122.3. This argument fails for multiple reasons. First, the statutory depreciation table applies only “for purposes of mass appraisal.” Section 137.122 may be relevant to an appraisal establishing the TVM of specific personal property, but it is not necessarily dispositive. Second, Complainants proved depreciation according to its appraisal and cost experts, not a “revenue procedure” or MACRS tables. Third, Respondents presented no credible evidence supporting their use of a 15-year class life with a residual of 15% of costs for property acquired after January 2, 2006 or for calculating TVM at 30% of cost for property acquired before January 2, 2006. Finally, the Hearing Officer correctly rejected Respondents’ argument that asset classes 48.2 and 48.14 in IRS Publication 946 governed depreciation of the subject property because those asset classes apply to wired communication infrastructure, not wireless communication infrastructure. The Hearing Officer did not erroneously determine depreciation.

The STC finds that a reasonable mind could have conscientiously reached the same result as the Hearing Officer based on a review of the entire record. Hermel, Inc. v. STC, 564 S.W.2d 288 (Mo. 1978); Black v. Lombardi, 970 S.W.2d 378 (Mo. App. E.D. 1998). The TVM of the subject property is set forth, 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 $20,097
16-46003 Caldwell $111. $37
16-46004 Caldwell $66,716 $22,236
TOTAL Caldwell   $127,123   $42,370
16-54514 Daviess $37,115 $12,370
16-54515 Daviess $57,543 $19,179
16-54516 Daviess $74,780 $24,924
16-54517 Daviess $66,312 $22,102
16-54518 Daviess $150,864 $50,283
TOTAL Daviess   $386,614   $128,858
16-59000 Harrison $60,017 $20,004
16-59001 Harrison $60,344 $20,113
16-59002 Harrison $79,278 $26,423
16-59003 Harrison $76,318 $25,437
16-59004 Harrison $68,658 $22,884
TOTAL Harrison   $344,615   $114,861
16-59500 Henry $133,759 $44,582
16-59501 Henry $82,089 $27,360
16-59502 Henry $81,165 $27,052
16-59503 Henry $137,388 $45,791
16-59504 Henry $83,633 $27,875
16-59505 Henry $121,787 $40,592
16-59506 Henry $78,241 $26,078
16-59507 Henry $91,099 $30,363
16-59508 Henry $102,358 $34,116
TOTAL Henry   $911,519   $303,809
16-70002 Mercer $61,841 $20,612
TOTAL Mercer   $61,841   $20,612
TOTALS     $1,831,712   $610,510

ORDER

            The Decision of the Hearing Officer is AFFIRMED. The Decision and Order of the Hearing Officer, including the findings of fact and conclusions of law therein, is incorporated by reference, as if set out in full, in this final Decision and Order of the STC.

Judicial review of this Decision and Order may be had in the manner provided in Sections 138.432 and 536.100 to 536.140 within thirty days of the mailing date set forth in the Certificate of Service for this Decision and Order. If judicial review of this Decision and Order is made, any protested taxes presently in an escrow account in accordance with this appeal shall be held pending the final decision of the courts unless disbursed pursuant to Section 139.031.8.

If no judicial review is made within thirty days, this Decision and Order is deemed final and the Collector of the affected Counties, as well as the collectors of all affected political subdivisions therein, shall disburse the protested taxes presently in an escrow account in accord with the decision on the underlying assessment in this appeal.

 

SO ORDERED July 2, 2020.

STATE TAX COMMISSION OF MISSOURI

 

 

_____________________________________

Gary Romine, Chairman

 

 

_____________________________________

Victor Callahan, Commissioner

 

 

_____________________________________

Will Kraus, Commissioner

 

 

 

 

 

Certificate of Service

I certify that copy of the foregoing has been sent electronically or mailed postage prepaid on July 2, 2020, to:

Patricia L. Hughes, Counsel for Respondents, 17 West Kansas, Liberty, MO, 64068, trish.hughes@libertylawoffices.com

Thomas L. Caradonna, Counsel for Complainant, 600 Washington Ave., Ste. 2500, St. Louis, MO 63101 tcaradonna@lewisrice.com

Caldwell County Assessor, ccassessor13@gmail.com

Daviess County Assessor, assessordaviessco@gmail.com

Harrison County Assessor, harco@grm.net

Henry County Assessor, henrycoassessor@gmail.com

Mercer County assessor@grm.net

 

Caldwell County Collector, cctreasurer13@gmail.com

Daviess County Collector, colltreas@daviesscountymo.gov

Harrison County Collector, hctreas@grm.net

Henry County Collector, henrycollector1@yahoo.com

Mercer County Collector, mercerco.coll.treas@gmail.com

 

Caldwell County Clerk, countyclerk1@gmail.com

Daviess County Clerk, countyclerk@daviesscountymo.gov

Harrison County Clerk, hcclk@grm.net

Henry County henrycoclerk1@yahoo.com

Mercer County mcclerk@grm.net

 

 

Elaina McKee

Legal Coordinator

 

 

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[6] 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. 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.[7] (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.  Assessment. 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[8] Written Direct Testimony (WDT) of Carl R.E. Hoemke (Hoemke) Admitted
B[9] 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[10] 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[11]. (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[12] 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.[13] (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.[14] (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.[15]

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] The Hearing Officer’s decision and order is incorporated as if fully set forth herein.

[2] The Commission has authority to decide this appeal. AT&T timely appealed the BOE decision, and Respondents timely filed an application for review of the hearing officer’s decision and order. Section 138.432 authorizes the Commission to “affirm, modify, reverse, or set aside the decision and order of the hearing officer[.]” All statutory citations are to RSMo 2000, as amended.

[3] Section 137.122.3 provides a standard methodology for estimating the value of business personal property “for purposes of mass appraisal.” The statutory methodology relies on the actual cost of the property and the IRS Modified Accelerated Cost Recovery System (MACRS) life tables to determine the “class life” of depreciable tangible personal property used in a trade, business or for the production of income. The method is only required for property in service after January 2, 2006.

[4] Section 138.060.1 provides “[t]here shall be no presumption that the assessor’s valuation is correct.” The plain language of the statute negates the former presumption the assessor’s valuation is correct, but leaves intact the longstanding presumption the BOE’s valuation is correct.   Cohen v. Bushmeyer, 251 S.W.3d 345, 348 n.2 (Mo. App. 2008); Parker v. Doe Run Co., 553 S.W.3d 356, 360 (Mo. App. 2018).

[5] Further, an evidentiary error is reversible only if it is prejudicial.  Dunn v. St. Louis–San Francisco Ry. Co., 621 S.W.2d 245, 252 (Mo. banc 1981). The erroneous admission of evidence is prejudicial if error is “outcome-determinative.”  Williams v. Trans States Airlines, 281 S.W.3d 854, 872 (Mo. App. 2009); see also S.F.M.D. v. F.D., 477 S.W.3d 626, 636 (Mo. App. 2015) (prejudice from evidentiary error occurs if the complaining party shows there is a reasonable probability the error affected the outcome). Complainant’s 2016 business personal property declarations were not the basis for the hearing officer’s determination of the TVM of the subject property. Therefore, even if the Commission assumes for the sake argument that the 2016 declarations were inadmissible, Respondents’ argument fails because the declarations did not establish value and could not constitute outcome determinative prejudicial error.

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

[7] 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)

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

[9] 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.

[10] Exhibit E was not offered.

[11] 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.

[12] 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.

[13] 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)

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

[15] 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.