Branson Airport v. Strahan (Taney)

State Tax Commission of Missouri

BRANSON AIRPORT LLC,)

)

Complainant,)

)

v.                                                                            ) Appeal No.10-89502

)

JAMES STRAHAN, ASSESSOR,)

TANEY COUNTY, MISSOURI,)

)

Respondent.)

DECISION AND ORDER

 

HOLDING

Decision of the Taney County Board of Equalization reducing the assessment made by the Assessor is SET ASIDE.Complainant presented substantial and persuasive evidence to rebut the presumption of correct assessment by the Board of Equalization and establish that Complainant’s Leasehold had no value.

True value in money for the Complainant’s Leasehold for tax year 2010 is set at $0, commercial assessed value of $0.

Complainant appeared by Counsel, Ellen J. Pantaenius, HUSCH BLACKWELL LLP, Kansas City, Missouri.[1]

Respondent appeared by Counsel, Jason Coatney, KECK AUSTIN, Springfield, Missouri.

Case decided by Senior Hearing Officer W. B. Tichenor.

ISSUE

Complainant appeals, on the ground of overvaluation, the decision of the Taney County Board of Equalization, which reduced the valuation of the subject property.The Commission takes this appeal to determine the true value in money for the subject property on January 1, 2010.[2]More specifically, the issue to be decided is presented in two parts: (1) whether the Complainant’s Leasehold has bonus value and therefore is to be taxed; or (2) whether under section 137.115.1 the Complainant’s Leasehold has value and therefore is to be taxed.The Hearing Officer, having considered all of the competent evidence upon the whole record, enters the following Decision and Order.

FINDINGS OF FACT

A.                Jurisdiction.Jurisdiction over this appeal is proper.Complainant timely appealed to the State Tax Commission from the decision of the Taney County Board of Equalization.

B.                 Evidentiary Hearing.An evidentiary hearing was held on November 5, 2012, at the Taney County Justice Center, Forsyth, Missouri.

C.                 Respondent’s Memorandum.Counsel for Respondent was given until and including November 15, 2012, to submit any memorandum addressing the issue of case law construction of the word “costs” in section 137.115 RSMo.On November 19, 2012, Counsel for Respondent informed the Hearing Officer that Respondent would not be submitting any memorandum on the matter.

D.Leasehold Real Property.The Complainant’s Leasehold is on real property identified by map parcel number 20-2.0-10-000-000-001.010L.[3]The real property is located at 4000 Branson Airport Blvd, Hollister, Missouri and is otherwise known as the Branson Airport.[4]A complete description of the real property with photographs and blueprints is found in Exhibit K.[5]

E.Subject Property.The subject property is Complainant’s possessory interest – Leasehold – under the Operating Lease Agreement dtd 6/1/07.Subject property may also be referred to as Leasehold or Complainant’s property in this Decision and Order.

F.Assessment.The Assessor appraised the Complainant’s property at $15,165,000, a commercial assessed value of $4,852,800.The Board of Equalization reduced the value to $2,500,000, a commercial assessed value of $800,000.[6]

G.Complainant’s Basis for Appeal.Complainant asserts the BOE’s valuation was incorrect on two grounds: (1) it was based on a finding of “bonus value” in the Leasehold, where none exists; or (2) it did not take into consideration the provisions of section 137.115.1 RSMo relative to the valuation of the possessory interest in real property within a qualifying airport.[7]

H.Complainant’s Exhibits.The following exhibits were received into evidence on behalf of Complainant:

I.Respondent’s Exhibits.Respondent did not file any exhibits or written direct testimony.

J.Uncontroverted Facts.The following uncontroverted facts are established by the evidence filed on behalf of Complainant:

1.                  Taney County, Missouri (Taney County) holds record title to certain land located in the City of Branson, Taney County, Missouri, and the buildings, structures, and other improvements located on the land, which land and improvements together comprise the Airport.[10]

2.                  Taney County is exempt from taxation pursuant to § 137.100(2) RSMo, (hereafter references to the Revised Statutes of Missouri will be by section number only) which provides:

“The following subjects are exempt from taxation for state, county or local purposes:

. . . .

(2) Lands and other property belonging to any city, county or other political subdivision in this state, including market houses, town halls and other public structures, with their furniture and equipments, and on public squares and lots kept open for health, use or ornament; . . . .”[11]

3.                  The Branson, Missouri Regional Airport Transportation Development District (District) leases the Airport from Taney County pursuant to that certain Airport Lease dated June 1, 2007, recorded in the official records of Taney County, Missouri, on June 28, 2007, as Document No. 2007L33858 (Airport Lease).[12]

4.                  The District is a political subdivision of the State of Missouri pursuant to Mo. Rev. Stat. § 238.205.[13]

5.                  As a political subdivision, the District, like Taney County, is exempt from taxation pursuant to Mo. Rev. Stat. § 137.100(2).[14]

6.                  Complainant leases the Airport from the District pursuant to that certain Operating Lease Agreement dated June 1, 2007 (Operating Lease).[15]

7.                  The District issued bonds (Bonds) for the purpose of constructing the buildings and other improvements comprising the Airport (Airport Improvements).[16]

8.                  Rent under the Operating Lease, as set forth in Section 5.1(b) of the Operating Lease, is equivalent to the principal, interest, and expenses associated with the Bonds issued by the District for the purpose of constructing the Airport.Rent under the Operating Lease is the same as contract rent.[17]

9.                  Under Section 5.2 of the Operating Lease, Complainant also must reimburse the District for all reasonable expenses incurred by the District in connection with the Bonds and the transactions contemplated by the Operating Lease and the Airport Lease and must pay the fees and costs incurred by the Bond trustee and certain professionals, including accountants and engineers, under that certain Indenture of Trust dated as of June 1, 2007, executed in connection with the Bonds (Indenture), the Airport Lease, the Operating Lease and certain other financing documents.[18]

10.              The Operating Lease further provides in Section 6.2(b) that Complainant shall pay all operating expenses of the Airport and Branson Creek Boulevard.[19]

11.              Upon full payment of the Bonds, the Operating Lease and the Airport Lease will terminate and the Airport will be surrendered to Taney County, as set forth in Section 3.2(a) of the Operating Lease and Section 6(a) of the Airport Lease, and as further described in Section 4.04(c) (5) of the Indenture.[20]

12.              The Assessor Manual published by the State Tax Commission of Missouri (Assessor Manual) states that a leasehold interest in real property owned by a political subdivision “should be valued by the bonus value method which is defined as the difference between economic rent and the contract rent for use and occupancy of the premises.”[21]

13.              The Taney County, Missouri Assessor’s Office (Assessor) placed the true market value of the leased fee interest in the Airport Land at zero because the Airport Land is owned by Taney County, which is exempt from taxation, and is leased by the District, which also is exempt from taxation.[22]

14.              The Assessor did not follow the Assessor Manual or Missouri case law precedent regarding “bonus value” and instead calculated the true market value of the Leasehold using the Honeycutt Cost Appraisal method.[23]

15.              The Assessor determined that the true market value of the Leasehold, applying the Honeycutt Cost Appraisal method, was $15,165,000.00.[24]

16.              The Assessor multiplied the true market value he concluded of the Leasehold by 0.32, which is the percentage used for commercial property, to determine the assessed value of the Leasehold.[25]The Assessor, thereby, set the assessed value at $4,852,800.00.[26]

17.           Following an appeal of the Assessor’s valuation, the BOE reduced the true value in money (fair market value) of the Leasehold to $2,500,000.00 and the assessed value to $800,000.00 at its meeting held on July 28, 2010.[1]

18.     The official record of the BOE’s hearing on July 28, 2010, does not describe the formula that the BOE used or the information that it considered in establishing the true value in money and assessed value of the Leasehold and makes no reference to the Assessor Manual or Missouri case law precedent regarding “bonus value”.[2]

 19.     The Appraisal of the Leasehold, prepared by State Certified General Real Estate Appraiser David Mathewson (Appraiser) and dated as of January 1, 2010[3] (Appraisal), concluded that the Airport would require an average annual enplanement count of 336,506 just to satisfy its payment obligations under the Operating Lease.[4]

 

20.     The Appraisal further noted that, in light of current market trends of decreasing enplanement counts, “it would not be reasonable to assume the subject tenant obligation would be meet (sic, met) in the foreseeable future.”[5]

 

21.     Based upon the Appraiser’s conclusions that: (1) the current net income stream for the Airport has not reached a breakeven point at which it can cover all expenses of operation; (2) is not likely to reach this level for a few years; and (3) because a different tenant would be required to establish a reserve fund of several million dollars, as Taxpayer has done, the Appraiser opined that the Leasehold has no value.[6]

 

22.     The Appraiser further concluded based upon an examination and study of the current Lease terms and a review and analysis of the actual income and expenses that “there is NO LEASEHOLD VALUE [emphasis in original] found in the subject property.[7]

 

23.     Neither the Assessor nor the BOE applied Mo. Rev. Stat. § 137.115.1 in calculating the true value in money of the Leasehold, i.e., possessory interest in the Airport.[8]

 

24.     Mo. Rev. Stat. § 137.115.1 provides in relevant part:

“The true value in money of any possessory interest in real property in subclass (3), where such real property is on or lies within the ultimate airport boundary as shown by a federal airport layout plan, as defined by 14 CFR 151.5, of a commercial airport having a FAR Part 139 certification and owned by a political subdivision, shall be the otherwise applicable true value in money of any such possessory interest in real property, less the total dollar amount of costs paid by a party, other than the political subdivision, towards any new construction or improvements on such real property completed after January 1, 2008, and which are included in the above-mentioned possessory interest, regardless of the year in which such costs were incurred or whether such costs were considered in any prior year.”[9]

 

25.     Taxpayer’s interest in the Airport pursuant to the Operating Lease is a possessory interest in subclass (3) real property.[10]

 

26.     The Airport has a Part 139 classification.[11]

 

27.     The Airport is owned by Taney County and the District, which are political subdivisions of the State of Missouri.[12]

 

28.     The Airport Improvements are located within the Airport boundary shown on the Airport layout plan.[13]

 

29.     District and Taxpayer are separate and distinct entities.

 

30.     Complainant funded approximately $27,735,951.00 of the cost of developing and constructing the Airport.[14]

 

31.     The Airport was completed in May 2009.[15]

 

32.     The Assessor did not deduct the cost paid by Taxpayer toward the construction of the Airport, as required Mo. Rev. Stat. § 137.115.1, in determining the true value in money or assessed value of the Leasehold.[16]

 

33.     Even if the Assessor’s value for the Leasehold had been properly calculated, the application of § 137.115.1 would result in a negative value thereby requiring an assessed value of $0.00.

 

34.     The BOE also did not deduct the cost paid by Taxpayer toward the cost of construction of the Airport, as required by § 137.115.1, in setting the true value in money and the assessed value of Leasehold.[17]

 

35.     Even if the Assessor’s value for the Leasehold had been properly calculated, the application of § 137.115.1 would result in a negative value thereby requiring an assessed value of $0.00.

 

36.    Valuation of Leasehold – Bonus Value.   There is no bonus value to the Lease. Therefore the Leasehold has no value under the bonus value concept.

 

37.     Valuation of Leasehold – § 137.115.1 Value. The costs paid by Complainant toward the cost of the construction of the Airport were greater than the true value in money of the Leasehold. Therefore the Leasehold has no value under the requirement of § 137.115.1. RSMo.

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 hearing officer shall issue a decision and order affirming, modifying or reversing the determination of the board of equalization, and correcting any assessment which is unlawful, unfair, improper, arbitrary, or capricious.[18]

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.[19] 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.[20]

Presumption In Appeals

There is a presumption of validity, good faith and correctness of assessment by the County Board of Equalization.[21] 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 Hearing Officer, as trier of facts, receives the issue free of the presumption.[22] The presumption is not evidence of value. The presumption of correct assessment is rebutted when the taxpayer 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.[23]

Complainant established prima facie that the Board’s value was in error, as well as the Assessor’s. Complainant’s evidence established there was no bonus value for the Leasehold and that under § 137.115.1 there was no Leasehold value. No evidence was presented that rebutted there was no bonus value and no value under § 137.115.1.

Valuation of Leasehold

            The appropriate method for valuation of the leasehold is by the bonus value method and the § 137.115.1 method. See, FINDING OF FACT J.12 & 24, supra.

Complainant’s Burden of Proof

 

In order to prevail, Complainant must present an opinion of market value for the Leasehold and substantial and persuasive evidence that the proposed value is indicative of the market value of the subject property on January 1, 2009.[24] 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.”[25] A valuation which does not reflect the fair market value (true value in money) of the property under appeal is an unlawful, unfair and improper assessment.

Substantial evidence can be defined as such relevant evidence as a reasonable mind might accept as adequate to support a conclusion.[26] 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.[27] Complainant satisfied its burden of proof in this appeal.

The issue to be decided boils down to a determination as to the applicability of either one of two possible legal standards to the undisputed material facts, either one of which would require that the Leasehold be given a zero assessed value. In this particular case, Complainant’s evidence has established that both legal standards are applicable.

No Bonus Value

            Complainant’s uncontroverted and unchallenged evidence established that there is no bonus value to the Operating Lease which forms the basis for Complainant’s possessory interest in the real property in this appeal. See, FINDING OF FACT K, supra.

No Section 137.115.1 Leasehold Value

            Complainant’s uncontroverted and unchallenged evidence established that the total dollar costs paid by Complainant exceeded the true value in money of Complainant’s possessory interest in the real property in this appeal. See, FINDING OF FACT L, supra.

ORDER

The assessed valuation for the subject property as determined by the Board of Equalization for Taney County for the subject tax day is SET ASIDE.

The assessed value for the subject property for tax year 2010 is set at $0.

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. 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. [28]

Disputed Taxes

The Collector of Taney County, 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 December 5, 2012.

STATE TAX COMMISSION OF MISSOURI

 

 

_____________________________________

W. B. Tichenor

Senior Hearing Officer

 

 

 

Certificate of Service

 

I hereby certify that a copy of the foregoing has been mailed postage prepaid on this 5^th day of December, 2012, to: Ellen Pantaenius, 4801 Main Street, Suite 1000, Kansas City, MO 64112, Attorney for Complainant; Jason Coatney, 3140 E. Division, Springfield, MO   65802, Attorney for Respondent; James Strahan, Assessor, P.O. Box 612, Forsyth, MO 65653; Donna Neeley, Clerk, P.O. Box 156, Forsyth, MO 65653; Sheila Wyatt, Collector, P.O. Box 278, Forsyth, MO 65653.

 

___________________________

Barbara Heller

Legal Coordinator

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

 

 

 

[1] Exhibit J.

 

[2] Exhibit J.

 

[3] Review of the appraisal and Exhibit A to Exhibit K establish that irrespective of the effective date of the appraisal being 1/1/10, the conclusion that the Leasehold had no bonus value as of 1/1/10 would have been equally applicable to the date of 1/1/09, with all improvements completed as of that date.

 

[4] Exhibit K, Page 60.

 

[5] Exhibit K, Page 60.

 

[6] Exhibit K, Page 61.

 

[7] Exhibit A, p. 2, to Exhibit K

 

[8] Exhibits H and J.

[9] Exhibit L.

 

[10] Exhibit M.

 

[11] Exhibit N.

 

[12] Exhibits A, C and O.

 

[13] Exhibit P.

[14] Exhibit Q & Exhibit A to Exhibit Q

 

[15] Exhibit R.

[16] Exhibit H.

 

[17] Exhibit J.

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

 

[19] Article X, Sections 4(a) and 4(b), Mo. Const. of 1945

 

[20] Section 137.115.5, RSMo

 

[21] Hermel, Inc. v. STC, 564 S.W.2d 888, 895 (Mo. banc 1978); Chicago, Burlington & Quincy Railroad Co. v. STC, 436 S.W.2d 650, 656 (Mo. 1968); May Department Stores Co. v. STC, 308 S.W.2d 748, 759 (Mo. 1958)

 

[22] United Missouri Bank of Kansas City v. March, 650 S.W.2d 678, 680-81 (Mo. App. 1983), citing to State ex rel. Christian v. Lawry, 405 S.W.2d 729, 730 (Mo. App. 1966) and cases therein cited.

 

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

 

[24] Hermel, supra. The value to be assigned for the 2010 tax year is based upon the presumption that the improvements completed in May 2009 were in place as of 1/1/09 and thereby valued under the economic conditions existing on that date.

 

[25] See, 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). Industrial Development Authority of Kansas City v. State Tax Commission of Missouri, 804 S.W.2d 387, 392 (Mo. App. 1991).

 

[26] See, Cupples-Hesse, supra.

Substantial and persuasive evidence is not an extremely high standard of evidentiary proof.   It is the lowest of the three standards for evidence (substantial & persuasive, clear and convincing, and beyond a reasonable doubt). It requires a small amount of evidence to cross the threshold to rebut the presumption of correct assessment by the Board. The definitions, relevant to substantial evidence, do not support a position that substantial and persuasive evidence is an extremely or very high standard.

“Substantial evidence: Evidence that a reasonable mind would accept as adequate to support a conclusion; evidence beyond a scintilla.” Black’s Law Dictionary, Seventh Edition, p. 580.

The word scintilla is defined as “1. a spark, 2. a particle; the least trace.” Webster’s New World Dictionary, Second College Edition. Black’s definition at 1347 is “A spark or trace <the standard is that there must be more than a scintilla of evidence>.” There must be more than a spark or trace for evidence to have attained the standard of substantial. Once there is something more than a spark or trace the evidence has reached the level of substantial. Substantial evidence and the term preponderance of the evidence are essentially the same. “Preponderance of the evidence. The greater weight of the evidence; superior evidentiary weight that, though not sufficient to free the mind wholly from all reasonable doubt, is still sufficient to incline a fair and impartial mind to one side of the issue rather than the other.” Black’s at 1201. Substantial evidence is that a reasonable mind would accept as adequate to support the conclusion. Preponderance is sufficient to incline a fair and impartial mind to one side of the issue rather than the other, i.e. support the proposed conclusion.

 

[27] Brooks v. General Motors Assembly Division, 527 S.W.2d 50, 53 (Mo. App. 1975).

 

[28] Section 138.432, RSMo.