STATE TAX COMMISSION OF MISSOURI
| BRANT SMITH, | )
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| Complainant, | ) | |
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| v. | ) | Appeal No. 17-10167 |
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Parcel/Locator No. 18H443376 | |
| JAKE ZIMMERMAN, ASSESSOR, | ) | |
| ST. LOUIS COUNTY, MISSOURI,
Respondent |
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DECISION AND ORDER
HOLDING
The decision of the St. Louis County Board of Equalization (BOE) is SET ASIDE. Complainant Brant W. Smith (Complainant) did not present substantial and persuasive evidence to rebut the presumption of correct assessment by the BOE. Respondent Jake Zimmerman, Assessor, St. Louis County, Missouri, (Respondent) presented substantial and persuasive evidence to rebut the presumption of correct assessment by the BOE.
Complainant appeared pro se.
Respondent appeared by counsel Steve Robson.
Case heard and decided by Senior Hearing Officer Amy S. Westermann (Hearing Officer).
ISSUE
Complainant appealed on the ground of overvaluation. Respondent initially set the true value in money (TVM) of the subject property at $259,100, as residential property, as of January 1, 2017. The BOE valued the subject property at $239,300, thereby lowering Respondent’s valuation. The State Tax Commission (STC) takes this appeal to determine the TMV for the subject property as of January 1, 2017.
The Hearing Officer, having considered all of the competent evidence upon the whole record, enters the following Decision and Order.
FINDINGS OF FACT
- Jurisdiction. Jurisdiction over this appeal is proper. Complainant timely appealed to the State Tax Commission.
- Evidentiary Hearing. The issue of overvaluation was presented at an evidentiary hearing on May 7, 2018, at the St. Louis County Government Building, 41 South Central Avenue, Clayton, Missouri.
- Identification of Subject Property. The subject property is identified by parcel/locator number 18H443376. It is further identified as 6404 Cates Avenue Unit 1E, University City, St. Louis County, Missouri. (Exhibit C; Exhibit 1)
- Description of Subject Property. The subject property consists of a garden-style, single-family condominium unit with 1,844 square-foot (gross living area) built in 2006. (Exhibit 1) The home includes three bedrooms; two full bathrooms; one fireplace; basement garage parking with two assigned spaces; a covered deck; and a brick exterior. (Exhibit 1) The subject property has a quality of construction rating of Q5[1] and a condition rating of C3[2]. (Exhibit 1)
- Assessment. Respondent set a TVM for the subject property of $259,100, residential, as of January 1, 2017.
- Board of Equalization. The BOE set a TVM of the subject property at $239,300, residential, as of January 1, 2017.
- Complainants’ Evidence. Complainant opined that the TVM of the subject property was $200,000 as of January 1, 2017. To support his opinion of value, Complainant offered the following exhibits:
| Exhibit A | Real Estate Information: Ownership, Legal and Assessments for subject property’s “sister unit” on same floor/opposite hall as subject property, 6404 Cates Avenue Unit 1W, St. Louis, MO 63130, showing Respondent’s appraised value of $194,600 ($36,970 assessed) as of January 1, 2017 |
| Exhibit B | List of 580 sales of properties between January ,1 2014, and March 20, 2017, located within one mile of subject property; highlighting 231 properties sold in 2016 and 2017; lowest sale price of highlighted properties was $600; highest sale price of highlighted properties was $1,434,319 |
| Exhibit C | Change of Assessment Notice for subject property dated May 8, 2017, showing five comparable properties used by Respondent to determine TVM of subject property, two of which located further than one mile from subject property |
Respondent did not object to Complainant’s exhibits, all of which were admitted into the record.
Complainant testified that he had purchased the subject property in 2006 for approximately $285,000. Complainant testified that the subject property had been purchased through a realtor working on behalf of Complainant and that it had been publicly advertised. Complainant testified that the subject property was encumbered by a mortgage of between $235,000 and $240,000. Complainant testified that he had not listed it for sale within the three years preceding the evidentiary hearing and, if he were to list the subject property for sale, he would list it for approximately $230,000. Complainant testified that no offers had been made to purchase the subject property and that the property had not been appraised in the three years preceding the evidentiary hearing. Complainant testified that he had not made any improvements to the subject property between January 1, 2015, and January 1, 2017.
On cross examination, in response to questioning regarding Exhibit B, Complainant testified that he had “no idea” of the meaning of the sale validity codes related to the highlighted sales. Complainant testified the he did not know the identity of the buyers and sellers related to the highlighted sales.
- Respondent’s Evidence. Respondent advocated lowering the BOE’s determination of TVM to $233,000. To support his opinion of value, Respondent offered the following exhibit:
| Exhibit 1 | Appraisal Report of Missouri State Certified Residential Real Estate Appraiser Nancy McGrath (the Appraiser) valuing the subject property at $233,000, as residential, as of January 1, 2017 |
Complainant did not object to Respondent’s exhibit, which was admitted into the record.
Exhibit 1 contained a grid comparing the Appraiser’s chosen comparable properties to the subject property. The sale prices of the comparables ranged from $225,000 to $265,000. The sale dates of Comparable Nos. 1, 2, and 3 ranged from April 2015 to November 2016. Comparable No. 4 was a pending sale; Comparable No. 5 was an active listing. (Exhibit 1)
The Appraiser made no market-based adjustments to Comparable No. 1, which had sold in April 2015 for $225,000, nearly two years before the relevant tax date. Comparable No. 1 was located in the same building as the subject property and had identical features as the subject property. (Exhibit 1) The adjusted sale price of Comparable No. 1 was $225,000. (Exhibit 1) The Appraiser made no market-based adjustments to Comparable No. 4, which was a pending sale scheduled to close on May 25, 2018, for $252,000, nearly 18 months after the relevant tax date. Comparable No. 4 was located in the same building as the subject property and had identical features as the subject property. (Exhibit 1) The adjusted sale price of Comparable No. 4 was $252,000. (Exhibit 1) The Appraiser made only one market-based positive adjustment to Comparable Nos. 2 and 3 in the amount of $10,500 to account for approximately 349 fewer square feet of gross living area than the subject property. The adjusted sale prices of Comparable Nos. 2, and 3 were $255,500 and $275,500, respectively. (Exhibit 1) The Appraiser made only one market-based negative adjustment to Comparable No. 5 in the amount of $12,000 to account for its status as a listing rather than a closed sale. Comparable No. 5 was located in the same building as the subject property and had identical features as the subject property. (Exhibit 1)The adjusted sale price of Comparable No. 5 was $253,000. (Exhibit 1) The Appraiser placed the most weight on Comparable Nos. 1 and 2 due to their similarities to the subject property. (Exhibit 1)
Respondent also presented the testimony of the Appraiser. The Appraiser testified that she had used the comparative sales approach to arrive at an opinion that the subject property’s TVM was $233,000 as of January 1, 2017. On cross examination, the Appraiser testified that four of the five comparable were not on the first floor of their buildings. The Appraiser testified that Comparable Nos. 1 and 3 were third floor units in the same building as the subject property and that Comparable No. 4 was a fourth floor unit in the same building as the subject property. The Appraiser testified that she did not see any market evidence to suggest making an adjustment to the sale prices of the comparables due to the floor on which they were located. The Appraiser further testified that Comparable No. 2 was located in a building only one block from the subject property. In response to cross examination regarding a property shown on Complainant’s Exhibit B, 6415 Cates Avenue, the Appraiser testified that she did not know anything about the back-to-back sales of that property. According to Exhibit B, the sales occurred only days apart, on November 1, 2016, and November 17, 2016. The Appraiser further testified that she had conducted her search for comparable sales by looking at comparables ranging from 400 square feet less than to 400 square feet more than the subject property and that 6415 Cates Avenue must have fallen outside those parameters. On re-direct, the Appraiser testified that the sale validity codes shown on Exhibit B with regard to 6415 Cates Avenue indicated that one of the sales was not an open market sale and could have been a foreclosure.
- Presumption of Correct Assessment Rebutted – TVM Established. Complainant did not present substantial and persuasive evidence to rebut the presumption of correct assessment by the BOE. Respondent presented substantial and persuasive evidence to rebut the presumption of correct assessment by the BOE and establishing that the TVM of the subject property was $233,000, as of January 1, 2017.
CONCLUSIONS OF LAW AND DECISION
Jurisdiction
The STC has jurisdiction to hear this appeal and 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, RSMo.
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%; and agricultural property at 12%. Section 137.115.5 RSMo (2000) as amended.
Investigation by Hearing Officer
In order to investigate appeals filed with the STC, the Hearing Officer may inquire of the owner of the property or of any other party to the appeal regarding any matter or issue relevant to the valuation, subclassification, or assessment of the property. Section 138.430.2 RSMo (2000) as amended. The Hearing Officer’s decision regarding the assessment or valuation of the property may be based solely upon his inquiry and any evidence presented by the parties or based solely upon evidence presented by the parties. Id.
Board Presumption and Computer-Assisted Presumption
There exists a presumption of correct assessment by the BOE – the BOE presumption. There also exists by statutory mandate a presumption that the assessor’s original valuation was made by a computer, computer-assisted method or a computer program – the computer-assisted presumption. These two presumptions operate with regard to the parties in different ways.
The BOE presumption operates in every case to require the taxpayer to present substantial and persuasive evidence to rebut it. If Respondent is seeking to prove a value different than that set by the BOE, then Respondent is required to rebut the BOE presumption.
The computer-assisted presumption only comes into play if the BOE lowered the value of the assessor and Respondent is seeking to sustain the original assessment and it has not been shown that the assessor’s valuation was not the result of a computer-assisted method. The BOE valuation is assumed to be an independent valuation.
In the present appeal, the BOE determined the TVM of the subject property to be $239,300, thereby lowering the initial valuation of Respondent, which was a result of a computer-assisted method of valuation. Both Complainant and Respondent are now seeking to lower the BOE’s valuation; therefore, the BOE presumption applies to Complainant and to Respondent. The computer-assisted presumption is not applicable in this case.
Presumption In Appeal
There is a presumption of validity, good faith, and correctness of assessment by the BOE. 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). This presumption is a rebuttable rather than a conclusive presumption. It places the burden of going forward with some substantial evidence on the taxpayer – the 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. 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). 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 BOE’s valuation is erroneous and the TVM that should have been placed on the property. Hermel, supra; Cupples-Hesse Corporation v. State Tax Commission, 329 S.W.2d 696, 702 (Mo. 1959).
Substantial evidence can be defined as such relevant evidence as a reasonable mind might accept as adequate to support a conclusion. See, Cupples-Hesse, supra. 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. Brooks v. General Motors Assembly Division, 527 S.W.2d 50, 53 (Mo. App. 1975).
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).
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).
Generally, a property owner, while not an expert, is competent to testify to the reasonable market value of his own land. Cohen, 251 S.W.3d at 348-49; Carmel Energy, Inc. v. Fritter, 827 S.W.2d 780, 783 (Mo. App. W.D. 1992). “However, when an owner’s opinion is based on improper elements or foundation, his opinion loses its probative value.” Carmel Energy, Inc., 827 S.W.2d at 783. A taxpayer does not meet his burden if evidence on any essential element of his case leaves the STC “in the nebulous twilight of speculation, conjecture and surmise.” See Rossman v. G.G.C. Corp. of Missouri, 596 S.W.2d 469, 471 (Mo. App. E.D. 1980).
Respondent’s Burden of Proof
Respondent, when advocating a value different from that determined by the original valuation or a valuation made by the BOE, 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. Hermel, Inc., 564 S.W.2d at 895; Cupples-Hesse, 329 S.W.2d at 702; Brooks, 527 S.W.2d at 53.
In this case, Respondent presented the Appraiser’s report, Exhibit 1, and the Appraiser’s testimony to support his opinion that the subject property’s TVM was $233,000, as of January 1, 2017.
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).
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).
“For purposes of levying property taxes, the value of real property is typically determined using one or more of three generally accepted approaches.” Snider v. Casino Aztar/Aztar Missouri Gaming Corp., 156 S.W.3d 341, 346 (Mo. banc 2005), citing St. Louis County v. Security Bonhomme, Inc., 558 S.W.2d 655, 659 (Mo. banc 1977). “Each valuation approach is applied with reference to a specific use of the property—its highest and best use.” Snider, 156 S.W.3d at 346-47, citing Aspenhof Corp., 789 S.W.2d at 869. “The method used depends on several variables inherent in the highest and best use of the property in question.” Snider, 156 S.W.3d at 347.
“Each method uses its own unique factors to calculate the property’s true value in money.” Id. “The ‘comparable sales approach’ uses prices paid for similar properties in arms-length transactions and adjusts those prices to account for differences between the properties. Id. at 348. “Comparable sales consist of evidence of sales reasonably related in time and distance and involve land comparable in character.” Id. (quotation omitted). “This approach is most appropriate when there is an active market for the type of property at issue such that sufficient data [is] available to make a comparative analysis.” Id.
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:
- Buyer and seller are typically motivated.
- Both parties are well informed and well advised, and both acting in what they consider their own best interests.
- A reasonable time is allowed for exposure in the open market.
- Payment is made in cash or its equivalent.
- Financing, if any, is on terms generally available in the Community at the specified date and typical for the property type in its locale.
- 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.
Real Estate Appraisal Terminology, Society of Real Estate Appraisers, Revised Edition, 1984; see also, Real Estate Valuation in Litigation, J. D. Eaton, M.A.I., American Institute of Real Estate Appraisers, 1982, pp. 4-5; Property Appraisal and Assessment Administration, International Association of Assessing Officers, 1990, pp. 79-80; Uniform Standards of Professional Appraisal Practice, Glossary.
Discussion
In this case, Complainant’s evidence was not substantial and persuasive to rebut the presumption that the BOE’s determination of the TVM of the subject property was correct. Substantial evidence can be defined as such relevant evidence that a reasonable mind might accept as adequate to support a conclusion. Cupples Hesse Corp., 329 S.W.2d at 702. 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.
Complainant did not present evidence using one or more of the three court-approved approaches to valuing property to support his opinion that the TVM of the subject property was $200,000 as of January 1, 2017. Notably, with regard to Exhibit B, one would be forced to speculate in deciding which of the highlighted sales involved properties were comparable to the subject property. The sale prices ranged widely from only $600 to $1,434,319. No market based adjustments were made to the highlighted sales for their similarities and differences with the subject property. Moreover, Complainant testified that he did not know the meaning of the sale validity codes for the highlighted sales and did not know the identity of the buyers and sellers. Based upon a review of the sale validity codes and their meanings, which are posted on Respondent’s online Real Estate Database, one can reasonably conclude that some of the highlighted sales were not valid sales but involved foreclosures or other non-market transactions.
Respondent, however, presented substantial and persuasive evidence to rebut the presumption that the BOE’s determination of the TVM of the subject property was correct. The Appraiser’s report and the Appraiser’s testimony established that the Appraiser reviewed the sales or pending sales of five comparable properties to determine that the BOE’s valuation should be reduced by 2.6%. The adjusted sale prices of Comparable Nos. 1 and 4 were particularly persuasive given that those properties were located within the same building as the subject property and had features identical to those of the subject property. From this evidence, one can reasonably conclude that the TVM of the subject property was $233,000 as of January 1, 2017.
ORDER
The TVM for the subject property as determined by the BOE is SET ASIDE. The assessed value for the subject property for tax year 2017 is set at $44,270 residential ($233,000 TVM).
Application for Review
A party may file with the STC 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 Collector of St. Louis 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 July 3rd, 2018.
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 3rd day of July, 2018, to: Complainants(s) counsel and/or Complainant, the County Assessor and/or Counsel for Respondent and County Collector.
Jacklyn Wood
Legal Coordinator
[1] Q5 rating is described as dwellings with economy of construction and basic functionality.
[2] C3 condition means that the improvements are well maintained and feature limited depreciation due to normal wear and tear.