Boulders at Katy Trail v. Shipman (St. Charles)

 

BOULDERS AT KATY TRAIL,)

)

Complainant,)

)

v.) Appeal Number 09-32678

)

SCOTT SHIPMAN, ASSESSOR,)

ST. CHARLES COUNTY, MISSOURI,)

)

Respondent.)

 

 

DECISION AND ORDER

 

HOLDING

 

Decisions of the St. Charles County Board of Equalization sustaining the assessments of the Assessor are SET ASIDE in part and AFFIRMED in part.True value in money and Assessed Values for the subject properties[1] for tax years 2009 and 2010 are set at the values listed in FINDING OF FACT 8, infra.Complainant appeared by Counsels, Steven D. Graham and Patrick L. Cullerton, St. Louis, Missouri.Respondent appeared by Assistant County Counselor, Charissa Mayes.

Evidentiary Hearing was conducted by Senior Hearing Officer W. B. Tichenor.

Decision rendered by the Commission.

ISSUE

Complainant appeals, on the ground of overvaluation, the decisions of the St. Charles County Board of Equalization, which sustained the valuations of the subject properties.The Commission takes this appeal to determine the true value in money for the subject properties on

January 1, 2009.The Commission, having considered all of the competent evidence upon the whole record, enters the following Decision and Order.

FINDINGS OF FACT

1.Jurisdiction.Jurisdiction over this appeal is proper.Complainant timely appealed to the State Tax Commission from the decision of the St. Charles County Board of Equalization.Senior Hearing Officer W. B. Tichenor conducted an evidentiary hearing April 12, 2011, at the St. Charles County Administration Building, St. Charles, Missouri.Transcript filed with the Commission on May 31, 2011.Complainant’s Brief received by the Commission on August 15, 2011.Brief of Respondent received by the Commission on September 12, 2011.Complainant’s Reply Brief received by the Commission on October 3, 2011.

2.Assessment.The combined appraised value placed on the individual parcels under appeal by the Assessor was $16,210,263, a combined residential assessed value of $3,079,950.[2]The Board sustained the assessments for each parcel.Finding of Fact 3 provides the Assessor/BOE appraised values for each property under appeal.

3.Subject Properties.The subject properties consist of 104 units of a 240 unit[3] apartment/condominium complex known as The Boulders at Katy Trail in St. Charles, Missouri.A total of 136 condominium units had previously sold in the following years: In 2006, 61 units sold; in 2007, 59 units sold; and in 2008, 16 units sold.[4]

The 104 units are identified as follows:[5]

*The value cannot be increased above the Assessor/BOE value based on Respondent’s evidence, See, Evidence of Increase in Value, infra.

 

The properties under appeal are further identified and described as follows:

The units are either one-story garden or two-story townhouse apartments.There are seven different model types.The property of which the 104 subject parcels are a part was constructed originally in 2003 as an apartment complex, but beginning in April 2006 the units were marketed for sale as condominium units.As of January 1, 2009, the 104 units were managed as apartment rentals, under a marketing effort for sale as condominiums.As of the valuation date none of the individual units had ever been owner-occupied all had a past history of being apartment rental properties.

Eight units were used as models.The model units were available for sale as of January 1, 2009.The remaining 96 units made up the inventory of possible rental apartments.A total of 75 of the 96 apartments were leased and occupied as of January 1, 2009.

4.Complainant’s Evidence.Complainant presented the following evidence which was received into the record:

 

Mr. Zink testified under cross and redirect examination at the evidentiary hearing.[10]

There was no evidence of new construction and improvement from January 1, 2009, to January 1, 2010, therefore the assessed value for 2009 remains the assessed value for 2010.[11]

Complainant’s evidence was not substantial and persuasive to rebut the presumption of correct assessment by the Board and establish the true value in money for the combined 104 units as of January 1, 2009, to be $12,360,000, as proposed.

5.Respondent’s Evidence.Respondent presented the following evidence which was received into the record:

Exhibit	Description
1	Appraisal Report – Thomas P. Babb[12] – Units 202I, 202K, 202J, 202E & 202F
2	Appraisal Report – Thomas P. Babb – Units 300D, 302C, 300B & 302A
3	Appraisal Report – Thomas P. Babb – Units 322D, 322B, 322A, 324W, 324D, 324C, 324B, 324A, 212A, 214B, 202B & 214L
4	Appraisal Report – Thomas P. Babb – Units 322J, 322I, 322F, 322E, 324L, 324L, 324J, 324I, 324F, 212L, 212K, 212J, 212H, 202L, 214E, 214F, 214G, 214I, 214K, 202J, 202F, 200K, 200I, 200G, & 200E
5	Appraisal Report – Thomas P. Babb – Units 300H, 300F, 302G, & 302E
6	Appraisal Report – Thomas P. Babb – Units 300L, 302K, & 204K
7	Appraisal Report – Thomas P. Babb – Units 102L, 102K, 102G, & 106H
8	Appraisal Report – Thomas P. Babb – Units 202C, 202A, 200B & 200D
9	Appraisal Report – Thomas P. Babb – Units 102D, 102B, 102A, 104C, 104B, 104A & 106A
10	Appraisal Report – Thomas P. Babb – Units 331, 334, 326, 329, 317, 320, 315, 305, 308, 208, 211 & 210
11	Appraisal Report – Thomas P. Babb – Units 300C & 302D
12	Appraisal Report – Thomas P. Babb – Units 332L, 332K, 327L, 327K, 318L, 318K, 318J, 312J, 312I, 306J, 209L, 332G, 312G, 306H, 306G & 306E

 

13	Appraisal Report – Thomas P. Babb – Units 300K, 300L, 204L, 300G, 302H & 206G
14	Written Direct Testimony – Thomas P. Babb
15	Summary of Exhibits 1 – 13

 

Mr. Babb testified under cross and redirect examination at the evidentiary hearing.[13]

6.Values Above Original Assessment.Respondent’s appraisals for those parcels with values marked by an asterisk in Finding of Fact 3 were accepted only to sustain the original assessment made by the Assessor and affirmed by the Board, and not for the purpose of raising the assessment above that value.See, Evidence of Increase in Value, infra.

7.2009 Sales.Ten of the properties under appeal sold in 2010.[14]The sales date for each of these properties is at a time relevant to the valuation date of January 1, 2009.The sale prices for these properties establish the market value as of January 1, 2009. See, Determination of Value, Sale of Ten Properties in 2009, infra.The ten properties which sold during 2010 are listed as follows:

 

8.True Value in Money and Assessed Values.The true values in money for the properties under appeal and the assessed values are set as follows[15]:

 

CONCLUSIONS OF LAW AND DECISION

Jurisdiction

The Commission has jurisdiction to hear this appeal and correct any assessment which is shown to be unlawful, unfair, arbitrary or capricious.The Commission shall issue a decision and order affirming, modifying or reversing the determination of the board of equalization, and correcting any assessment which is unlawful, unfair, improper, arbitrary, or capricious.[19]

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.[20]The constitutional mandate is to find the true value in money for the property under appeal. By statute real and tangible personal property is assessed at set percentages of true value in money.[21]In an overvaluation appeal, true value in money for the property being appealed must be determined based upon the evidence on the record that is probative on the issue of the fair market value of the property under appeal.

Presumption In Appeals

There is a presumption of validity, good faith and correctness of assessment by the County Board of Equalization.[22]This presumption is a rebuttable rather than a conclusive presumption.It places the burden of going forward with some substantial evidence on the taxpayer – Complainant.When some substantial evidence is produced by the Complainant, “however slight,” the presumption disappears and the Commission, as trier of facts, receives the issue free of the presumption.[23]The presumption of correct assessment is rebutted when the taxpayer, or Respondent, when advocating a value different than determined by the Board, presents substantial and persuasive evidence to establish that the Board’s valuation is erroneous and what the fair market value should have been placed on the property.[24]Complainant’s evidence was not substantial and persuasive to rebut the presumption of correct assessment by the Board.Respondent’s evidence was substantial and persuasive to rebut the presumption of correct assessment by the Board and to establish value in those appeals not otherwise decided by the actual sale of a given property.

Standard for Valuation

Section 137.115, RSMo, requires that property be assessed based upon its true value in money which is defined as the price a property would bring when offered for sale by one willing or desirous to sell and bought by one who is willing or desirous to purchase but who is not compelled to do so.[25]True value in money is defined in terms of value in exchange and not value in use.[26]It is the fair market value of the subject property on the valuation date.[27]Market value is the most probable price in terms of money which a property should bring in competitive and open market under all conditions requisite to a fair sale, the buyer and seller, each acting prudently, knowledgeable and assuming the price is not affected by undue stimulus.

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

1.Buyer and seller are typically motivated.

 

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

 

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

 

4.Payment is made in cash or its equivalent.

 

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

 

6.The price represents a normal consideration for the property sold unaffected by special financing amounts and/or terms, services, fees, costs, or credits incurred in the transaction.[28]

 

Both appraisers properly addressed the appraisal problem under the Standard for Valuation.[29]

Methods of Valuation

Proper methods of valuation and assessment of property are delegated to the Commission.It is within the purview of the Commission to determine the method of valuation to be adopted in a given case.[30]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.[31] Complainant’s appraiser valued the subject properties using a discounted sellout methodology.[32]Respondent’s appraiser developed both the cost and sales comparison approaches in arriving at his conclusion of value for each of the subject properties.[33]Mr. Babb’s

sales comparison approach constituted substantial and persuasive evidence to establish the fee simple value of each property under appeal.

Determination of Value

Appraisal Approaches

Complainant’s Appraisal

Appraiser Zink valued the 104 properties as a single economic unit being operated as an apartment complex, as has been done since The Boulders was developed, but recognizing the individual apartments will one by one be converted and sold as condominiums, as had been done with the 136 sold condominiums.In other words, the development is in the process of being converted from an apartment complex to a totally owner occupied condominium development, a process that has been going on since 2006.

Under his methodology, Mr. Zink concluded his value based on a sale of all 104 units to a single investor purchaser.[34]To determine the price that such a purchaser would pay for the 104 apartments, the appraiser developed a sales comparison approach in conjunction with a discounted sellout analysis to estimate the market value of the subject.The Zink approach covered both the value of the rental income for the leased units and the future value from the eventual sale of all the units for condominium ownership.This analysis reflects what a single investor purchaser would pay for the 104 units recognizing the income from units being rented and income from units being converted to condominiums and sold over a 20 year period until all 104 units are held by individual owners.[35]

Respondent’s Appraisal

Appraiser Babb valued each of the individual properties as single condominium units under a fee simple basis.Although he developed a cost approach, his conclusion of value in each instance rested on his sales comparison analysis.The subject units fell into eight groups of properties based upon the type of model and the square footage of the living area.[36]Sales of units within The Boulders at Katy Trails were used in every instance as Mr. Babb’s comparables. His conclusion of value was based upon the sale of each of the 104 units to 104 separate individual owner occupants.[37]

Subject Units Legal Position on 1/1/09

While the entire Boulders complex was converted to a condominium form of ownership in late spring/early summer of 2006,[38] the 104 units that are the subjects of this appeal, on January 1, 2009, were still under the ownership of the Complainant.[39]The 104 units as of January 1, 2009, existed as rental apartments and display models yet to be converted into individual owner occupied condominium units.They had been platted as separate properties hence the individual map parcel numbers for each property.In order to finalize the conversion of each apartment unit into an individual condominium there are additional legal requirements that would have to be completed.[40]In addition, on January 1, 2009, 75 of the 104 units were occupied as rental units.Of the remaining 29 units, 8 were display models, but the other 21 existed as vacant rental units under the existing operation.The units were being marketed for sale and lease.[41]The sale of the 75 leased units would be subject to the existing leases.The 29 non-leased units were available to sale on January 1, 2009, as individual condominiums.

Highest and Best Use

Both appraisers presented their highest and best use analysis.The Zink analysis is found on pages 39 – 41 of his appraisal.He concluded the highest and best use of the property as improved “is consistent with the current use, as a condominium conversion development.”The

Babb analysis is found on page 12 of each of his appraisals.He found the highest and best use of the subject property “is its current use.”

Zink Analysis

Mr. Zink performed his highest and best use analysis as if the properties under appeal were a single economic unit both as vacant and as improved.The As Vacant analysis presents somewhat of an anomaly since the 104 properties are disbursed among existing residential structures and in fact form essential parts of those structures.The spaces which the 104 properties occupy cannot become vacant, unimproved space without the demolition of the existing buildings in which they are located.Accordingly, the As Vacant analysis, although required by sound appraisal practice will not logically fit the present situation, and is of no real value in addressing the present appraisal problem.

The As Improved analysis is more helpful in the existing appraisal problem.Mr. Zink again analyzed the situation as if the 104 properties were a single economic unit under the four elements which constitute highest and best use – Legal Permissibility, Physical Possibility, Financial Feasibility and Maximum Profitability.The final conclusion was that the highest and best use of the property, as improved, is consistent with the current use, as a condominium conversion development.

Babb Analysis

Mr. Babb’s analysis appears in the top half of page 12 of his appraisals.The appraiser simply concluded: “After considering the location, surroundings, economic and social forces, physical setting and the potential uses as of the date of the appraisal, it is my opinion that the highest and best use of the subject property is its current use.”

It appears that the appraiser’s conclusion to then be that the highest and best use of the subject property (104 apartment units) is to continue the operation of the properties as apartments, available for sale to be converted to individual owner occupied condominium homes.

Burden of Proof

Complainant must present an opinion of market value and substantial and persuasive evidence that the proposed value is indicative of the market value of the subject property on January 1, 2009.[42]There is no presumption that the taxpayer’s opinion is correct. The taxpayer in a Commission 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.”[43]

Substantial evidence can be defined as such relevant evidence as a reasonable mind might accept as adequate to support a conclusion.[44]Persuasive evidence is that evidence which has sufficient weight and probative value to convince the trier of fact.The persuasiveness of evidence does not depend on the quantity or amount thereof but on its effect in inducing belief.[45]

Complainant’s appraisal evidence failed to meet the standard of substantial and persuasive evidence to establish the fair market value of the 104 subject properties in fee simple.

Respondent, when advocating a value different from that determined by the original valuation or a valuation made by the Board of Equalization, must meet the same burden of proof to present substantial and persuasive evidence of the value advocated as required of the Complainant under the principles established by case law.[46]Respondent’s appraisals met the standard of substantial and persuasive evidence to establish the fair market value of the 104 subject properties in fee simple that had not sold by the end of 2009.

Accordingly, the record provides substantial and persuasive evidence to make a determination as to the values of the individual properties under appeal.

Sale of Ten Properties in 2009

In 2009, ten properties sold.[47]Evidence of the actual sales price of property is admissible to establish value at the time of an assessment, provided that such evidence involves a voluntary purchase not too remote in time. The actual sale price is a method that may be considered for estimating true value.[48]Respondent’s appraiser used seven of these sales in his sales comparison approaches.Specifically, Mr. Babb used the seven sales as comps in the following instances:

 

Mr. Babb made time of sale adjustments for the seven 2009 sales which he used.He made an upward adjustment to each sales price apparently to reflect that after January 1, 2009, the value of the property had increased.A review of the appraisals fails to provide any explanation or discussion as to the basis for the upward time of sale adjustments for the 2009 sales.At page 10 of each appraisal is a discussion under Neighborhood Description which states the following:“As documented through paired sales and biennial trend analysis, the subject’s property value is decreasing by an annual trend of 6.32% (report attached).”

The following page of the appraisal contains the report, which provides paired sales analysis into 2008.It does conclude a -6.32 % decline in value.There is no data which provides a factor to establish that values increased or decreased during 2009, or the rate of any asserted increase.There is no data upon which a conclusion can be made that values decreased from 1/1/09 to the time of sales during 2009.This would be required in order for an upward time of sale adjustment to be made to the 2009 sales for the 1/1/09 valuation date.There is no testimony from Mr. Babb to substantiate the basis for the time of sale adjustment.“Where the basis for a test as to the reliability of the testimony is not supported by a statement of facts on which it is based, or the basis of fact does not appear to be sufficient, the testimony should be rejected.”[49]

On this point the Commission is left with what appears from the four corners of Mr. Babb’s appraisal to be an upward adjustment to the sales prices which is based only on conjecture.Accordingly, the Commission concludes that the actual 2009 sale prices for these ten properties, without a time of sale adjustment, are determinative of the fair market value for the properties as of January 1, 2009, and must be so valued for purpose of this appeal.

Remaining 94 Properties

The properties noted in Finding of Fact 3 with an asterisk were valued by Respondent’s appraiser at a value greater than the Assessor/BOE value.By operation of law, the assessed value cannot be increased above that set by the Assessor and sustained by the Board for these properties.See, Evidence of Increase in Value, infra; Finding of Fact 3, supra.Accordingly in those instances where the Babb value is greater than the Assessor/BOE value, the Babb value will not be used, but the value set by the Assessor/BOE will be affirmed.

It is understood that not all 94 properties would have sold on a single day, however, for purpose of determining value of each individual unit, it is necessary to assume what each unit would have in fact sold for on January 1, 2009.This is the assumption of the hypothetical sale between the willing buyer and seller of each separate unit which is to be followed.On that basis,

the valuation data and conclusions provided by Mr. Babb provide persuasive evidence of value in fee simple for the properties.

The Commission is not persuaded that the discounted sellout methodology utilized by Complainant’s appraiser captured the fee simple value of the individual properties.Mr. Zink’s methodology was founded upon a number of assumptions as to future rental income and expenses and future sales prices for the individual properties which cannot in the mind of the Commission be validated by market data to demonstrate that the concluded values are reflective of the fee simple value of the properties under appeal.Accordingly, Complainant failed to rebut the presumption of correct assessment by the Board and establish the true value in money as of January 1, 2009, for the subject properties.

Evidence of Increase in Value

In any case in St. Charles County where the assessor presents evidence which indicates a valuation higher than the value finally determined by the assessor or the value determined by the board of equalization, whichever is higher, for that assessment period, such evidence will only be received for the purpose of sustaining the assessor’s or board’s valuation, and not for increasing the valuation of the property under appeal.[50]Under the Commission rule just cited and Supreme Court decision[51] the assessed values for those parcels marked with an asterisk (*) by the Respondent’s proposed values in Finding of Fact 3, supra, cannot be increased above the assessed value established by the Assessor/BOE in each particular appeal, based upon evidence tendered by Respondent.

ORDER

The assessed valuations for the subject properties as determined by the Assessor and sustained by the Board of Equalization for St. Charles County for the subject tax day are SET ASIDE in part and AFFIRMED in part.

The assessed values for the subject properties for tax years 2009 and 2010 are set as follows:

 

Judicial Review

Judicial review of this Order may be had in the manner provided in Sections 138.432 and 536.100 to 536.140, RSMo within thirty days of the mailing date set forth in the Certificate of Service for this Order.The party filing for judicial review shall so notify the Collector of St. Charles County at the time of filing for judicial review.

Disputed Taxes

If judicial review of this decision 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, RSMo.

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

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 December 29, 2011.

STATE TAX COMMISSION OFMISSOURI

 

 

_____________________________________

Bruce E. Davis, Chairman

 

 

_____________________________________

Randy B. Holman, Commissioner

 

 

 

Certificate of Service

 

I hereby certify that a copy of the foregoing has been mailed postage prepaid on this 29^thday of December, 2011, to:Steven Graham, Thompson Coburn LLP, One US Bank Plaza, St. Louis, MO 63101, Attorney for Complainant; Joseph Smith, Assistant County Counselor, 100 North Third Street, Room 216, St. Charles, MO 63301, Attorney for Respondent; Scott Shipman, Assessor, 201 North Second, Room 247, St. Charles, MO 63301-2870; Ruth Miller, Registrar, 201 North Second Street, Room 529, St. Charles, MO 63301; Michelle McBride, Collector, 201 North Second Street, Room 134, St. Charles, MO 63301.

 

 

___________________________

Barbara Heller

Legal Coordinator

Barbara.Heller@stc.mo.gov

 

 

 

Contact Information for State Tax Commission:

Missouri State Tax Commission

301 W. High Street, Room 840

P.O. Box 146

Jefferson City, MO 65102-0146

573-751-2414

573-751-1341 Fax