STATE TAX COMMISSION OF MISSOURI
|BROWNING FERRIS INDUSTRIES OF ST. LOUIS, INC., BFI
WASTE SYSTEMS OF NORTH AMERICA, LLC (as Successor by Merger)
|)||Appeal No. 19-14575|
|Complainant,||)||Parcel No. 14N320131|
|JAKE ZIMMERMAN, ASSESSOR,||)|
|ST. LOUIS COUNTY, MISSOURI,||)|
DECISION AND ORDER
Browning Ferris Industries of St. Louis, Inc., BFI Waste Systems of North America, LLC (as Successor by Merger), (Complainant) appeals the St. Louis County Board of Equalization’s (BOE) decision finding the true value in money (TVM) of the subject commercial property on January 1, 2019, was $903,300. The sole issue is overvaluation. Complainant produced substantial and persuasive evidence showing the subject property – a closed sanitary landfill – had no market value on January 1, 2019. The TVM of the subject property on January 1, 2019, was $0. The BOE decision is SET ASIDE.
Complainant was represented by attorney Nicholas Roark. Respondent was represented by attorney Steven Robson. The parties waived an evidentiary hearing and submitted the appeal on the record.
FINDINGS OF FACT
- The Subject Property. The subject property is a closed sanitary landfill located at 2520 Adie Road in Maryland Heights, Missouri. The subject property consists of an 84.89 acre lot improved with three buildings and a 48-square-foot kiosk. One of the three buildings is a 2,400 square foot utility shed associated with the equipment for discharging landfill gases. The other two buildings are small utility sheds. The property is zoned “M-1 – Light Industrial District” by the City of Maryland Heights.
The subject property has approximately 995 feet of frontage along the south side of Adie Road, 2,170 feet of frontage on the west side of Schaefer Road, and 730 feet of frontage on the northwest side of Dorsett Road. Adie Road and Schaefer Road are three-lane roads with a through-traffic lane in each direction and center turn lanes. Dorsett Road is a two-lane road.
- Assessment and Valuation. Respondent classified the subject property as commercial and determined the TVM on January 1, 2019, was $903,300. The BOE determined the TVM on January 1, 2019, was $903,300.
- Complainant’s Evidence. Complainant submitted Exhibits C and D and the written direct testimony (WDT) of Missouri licensed appraiser Thomas McReynolds. Exhibit C is McReynolds’ appraisal report. Exhibit D is a “Compost and Mulch Facility And Master Operating Agreement” between Allied Services, LLC, and St. Louis Composting, Inc. Respondent did not object to Complainant’s evidence.
McReynolds has been engaged in commercial real estate appraisal since 1976. (WDT at 5; Ex. C at 34). From 1976 to 2001, McReynolds was an appraiser with McReynolds Appraisal Company, Inc. Since 2001, McReynolds has been a principal at the appraisal firm of McReynolds Von Trapp, P.C. McReynolds is an MAI Designated Member of the Appraisal Institute and has been the chair or a member of multiple Appraisal Institute committees and boards. McReynolds has testified as an expert witness before the State Tax Commission of Missouri, Missouri circuit courts, federal bankruptcy courts, and federal district courts. (WDT at 12; Ex. C at 34)
From 1972 to 1995, the subject property was used as a sanitary landfill. In January 1995, the landfill was closed and capped. (Ex. C at 10) The closed landfill is subject to state-mandated environmental monitoring and remediation requirements requiring the capture and disposal of the methane gas and liquid leachates emitted by the closed landfill. (Ex. C at 11)
The methane gas is captured by approximately 130 reclamation wells. The wells consist of perforated PVC pipes connected to hoses on the surface of the property. The hoses are connected to a vacuum pump system that collects the gas and stores it in a pressurized tank. The gas is burned off periodically. (Ex. C at 24)
The leachates are captured by a drainage system consisting of perforated pipes along the lower parts of the property. The pipes collect the leachate and transfer it to a holding tank. The leachate is discharged from the holding tank into the sewer system. (Ex. C at 24) The monitoring and collection of methane gas and liquid leachates costs approximately $400,000 per year and will continue to at least 2025, and likely longer. (Ex. C at 11, 32)
As of January 1, 2019, the landfill was still producing approximately 4,000,000 gallons of leachate annually along with substantial amounts of methane gas. The volumes of leachate and methane gas have remained constant for years. Consequently, “it is probable that the ongoing leachate and methane collection and disposal at the subject property will be extended well beyond the current 30-year requirement.” (Ex. C at 12).
In addition to ongoing environmental monitoring and remediation, McReynolds asserts there is a “virtual prohibition of re-use” of closed sanitary landfills because “this type of landfill continues to settle over time and therefore they do not have the bearing capacity to support buildings.” (Ex. C at 12)
Aside from continuing use as a closed sanitary landfill, the only other use of the subject property as of January 1, 2019, was for processing yard waste. St. Louis Composting, Inc., leases approximately eight acres of the subject property to convert yard waste into mulch and compost. (Ex. C at 25) The lease generates $12,000 in annual income. (Ex. C at 25; Ex. D at 5) St. Louis Composting pays approximately $15,000 per year to mow grass on the subject property. (Ex. C at 25)
An affiliate of Complainant has a separate agreement with St. Louis Composting for the disposal of yard waste at the subject property. The affiliate pays a tipping fee to St. Louis Composting in return for St. Louis Composting accepting the yard waste. The terms of this contract were not disclosed. McReynolds noted “the income generated by the tipping fees flows to St. Louis Composting and does not contribute to the income of the subject property and therefore has no impact on the value of the real property.” (WDT at 30)
McReynolds concluded the ongoing, state-mandated environmental monitoring and remediation, in conjunction with the development limitations, mean the highest and best use of the property is its existing use as a closed sanitary landfill, with a portion used for processing yard waste. (Ex. C at 32) Even if the $12,000 in annual income generated by the lease is attributed to the subject property, it does not offset the $400,000 in ongoing, state-mandated environmental monitoring and remediation costs that will continue through at least 2025 and likely longer. Consequently, the subject property “produces a significant monetary liability to the owner of the property and thus there is no economic benefit to ownership and no economic use to which this property can be put.” (WDT at 29) The net result is that the subject property’s highest and best use is not an “economically beneficial use” so the subject property “has no economic value.” (Ex. C at 32) Because the subject property had no economically beneficial use and no economic value on January 1, 2019, McReynolds concluded the TVM of the subject property on January 1, 2019, was $0. (Ex. C at 6, 33; WDT at 28, 34)
Complainant’s evidence establishes that as of January 1, 2019, the subject property was a closed sanitary landfill subject to use restrictions leaving the property with no financially feasible use as of January 1, 2019.
- Respondent’s Evidence. Respondent submitted Exhibits 1 and 3. The first page of Exhibit 1 is the BOE decision determining the TVM of the subject property on January 1, 2019, was $903,300. Complainant did not object to Respondent’s evidence.
Exhibit 3 includes a “Commercial/Industrial Review Document” for the subject property, also referred to as a property record card (PRC). The PRC for the subject property consists of the first eight pages of Exhibit 3. The PRC details the model data and calculations Respondent utilized to estimate the value of the subject property. Respondent estimated the market value of the 84.89 acres of land was $651,000. (Ex. 3 at 1, 8) There was no testimony or evidence regarding the calculation or reliability of the land value estimate.
Respondent utilized the cost approach to estimate an improvement value of $252,300. Respondent’s improvement value is based on the adjusted replacement cost new, less depreciation. (Ex. 3 at 2-4) The $252,300 improvement value is based on the following items:
Item PRC cost value
|2,400 square foot building||$59,150|
Respondent added the improvement and land values to calculate an estimated TVM of $903,300 ($252,300 + $651,000 = $903,300). (Ex. 2 at 8) Respondent’s estimated TVM of $903,300 is the same as the BOE value. Respondent submitted no evidence showing the replacement costs of the improvements reflect market value.
Respondent’s PRC also utilizes the income approach. The PRC model income and expense estimates assume the 2,400 square foot building could generate a total net income of $18,200 with “direct overall capitalization” rate of 10.73%. (Ex. 3 at 7) Dividing the net income of $18,200 by the 10.73% capitalization rate yields an estimated value of $169,600. (Ex. 3 at 7) The “residual land value” was estimated at zero, resulting in a total indicated value of $169,600 for the income approach. (Ex. 3 at 7-8) Respondent introduced no testimony or other evidence regarding the accuracy of the PRC data or whether the data demonstrates market demand for the subject property.
- Value. The TVM of the subject property on January 1, 2019, was $0.
CONCLUSIONS OF LAW
- Assessment and Valuation. Commercial real property is assessed at 32% of its TVM as of January 1 of each odd-numbered year. Section 137.115.5(1)(c). “True value in money is the fair market value of the property on the valuation date, and is a function of its highest and best use, which is the use of the property which will produce the greatest return in the reasonably near future.” Snider v. Casino Aztar/Aztar Mo. Gaming Corp., 156 S.W.3d 341, 346 (Mo. banc 2005) (internal quotation omitted). The fair market value is “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). “True value in money is defined in terms of value in exchange not value in use.” Tibbs v. Poplar Bluff Assocs. I, L.P., 599 S.W.3d 1, 7 (Mo. App. S.D. 2020) (internal quotation omitted). “Determining the true value in money is an issue of fact for the STC.” Cohen v. Bushmeyer, 251 S.W.3d 345, 348 (Mo. App. E.D. 2008).
“For purposes of levying property taxes, the value of real property is typically determined using one or more of three generally accepted approaches.” Snider, 156 S.W.3d at 346. The three generally accepted approaches are the cost approach, the income approach, and the comparable sales approach. Id. at 346-48; see also St. Louis Cty. v. Sec. Bonhomme, Inc., 558 S.W.2d 655, 659 (Mo. banc 1977). The STC has wide discretion in selecting the appropriate valuation method but “cannot base its decision on opinion evidence that fails to consider information that should have been considered under a particular valuation approach.” Snider, 156 S.W.3d at 348. An assessment will not be upheld “where it is clear that the assessment does not take into account all factors relevant to a determination of true value in money.” Stephen & Stephen Properties, Inc., v State Tax Comm’n, 499 S.W.2d 798, 802 (Mo. 1973).
- Evidence. The hearing officer is the finder of fact and determines the credibility and weight of the evidence. Kelly v. Mo. Dep’t of Soc. Servs., Family Support Div., 456 S.W.3d 107, 111 (Mo. App. W.D. 2015). “Although technical rules of evidence are not controlling in administrative hearings, fundamental rules of evidence are applicable.” Mo. Church of Scientology v. State Tax Comm’n, 560 S.W.2d 837, 839 (Mo. banc 1977).
- Complainants’ Burden of Proof. The taxpayer bears the burden of proof and must show by a preponderance of the evidence that the property was misclassified or overvalued. Westwood P’ship v. Gogarty, 103 S.W.3d 152, 161 (Mo. App. E.D. 2003). The BOE’s valuation is presumptively correct. Tibbs, 599 S.W.3d at 7. The “taxpayer may rebut this presumption by presenting substantial and persuasive evidence that the valuation is erroneous.” Id. (internal quotation omitted). The taxpayer also must prove “the value that should have been placed on the property.” Id. “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). Evidence is persuasive when it has “sufficient weight and probative value to convince the trier of fact.” Daly v. P.D. George Co., 77 S.W.3d 645, 651 (Mo. App. E.D. 2002); see also White v. Dir. of Revenue, 321 S.W.3d 298, 305 (Mo. banc 2010) (noting the burden of persuasion is the “party’s duty to convince the fact-finder to view the facts in a way that favors that party”).
- Complainant Produced Substantial and Persuasive Evidence of Overvaluation.
Complainant produced substantial and persuasive evidence showing that on January 1, 2019, the subject property had no market value. Complainant’s evidence persuasively demonstrated that as of January 1, 2019, the subject property was used primarily for ongoing, state-mandated environmental monitoring and remediation efforts at an annual cost of approximately $400,000. Complainant’s unrebutted evidence shows the $400,000 annual environmental costs are of indefinite duration and will likely continue for years. These expenses are offset only by the $12,000 annual lease with St. Louis Composting. Consequently, the record persuasively establishes the income generated by the subject property results in a “significant monetary liability to the owner of the property” with no attendant “economic benefit to ownership and no economic use to which this property can be put.” (WDT at 29) The net result is that the subject property had “no economically beneficial use and therefore it has no economic value” as of January 1, 2019. (Ex. C a
Respondent’s PRC reinforces this conclusion. Respondent’s PRC assumes the 2,400 square foot building on the subject property could generate a total annual net income of $18,200. (Ex. 3 at 7) Taken at face value, Respondent’s income projection would offset less than 5% of the $400,000 in annual environmental monitoring and remediation expenses incurred by the subject property. On this record, the preponderance of the evidence persuasively establishes that neither the actual nor the projected market-based income of the subject property offsets more than a small fraction of the annual expenses. The limited income potential and substantial ongoing environmental monitoring and remediation costs persuasively supports McReynolds’ conclusion that the subject property lacks market value.
Complainant’s evidence also persuasively establishes the lack of any financially feasible use will likely persist for the reasonably foreseeable future. There is a “virtual prohibition of re-use” of the subject property due to ongoing surface subsidence rendering most of the subject property unable to support buildings. (Ex. C at 12) Respondent submitted no evidence rebutting this conclusion. The fact that most of the subject property is unsuitable for construction creates both a present and prospective limitation on the subject property’s development potential and value. Collectively, the practical use restrictions and substantial liability for prospective purchasers persuasively support McReynolds’ conclusion there is “no economic use to which this property can be put” and that the subject property had no market value on January 1, 2019. (WDT at 29; Ex. C at 33)
Finally, Respondent’s evidence does not undermine the persuasiveness of Complainant’s evidence. The BOE decision in Respondent’s Exhibit 1 consists of a single page affirming Respondent’s value without explanation. McReynolds’ appraisal report and WDT rebutted the BOE value shown in Exhibit 1. Once rebutted, a presumption “disappears from the case and the fact-finder receives the issue free from any presumption.” Deck v. Teasley, 322 S.W.3d 536, 539–40 (Mo. banc 2010).
Respondent’s PRC does not undermine Complainant’s evidence. Respondent utilized the cost approach to estimate a TVM of $903,000. Respondent’s TVM estimate is based on the sum of the $252,300 improvement value and $651,000 in estimated land value. There was no testimony or other evidence explaining the basis or reliability of the PRC land value. The lack of evidence regarding the basis or reliability of the estimated land value is particularly significant when, as in this case, the subject property is unique from the vast majority of other commercial parcels in St. Louis County. On this record, the land value estimate in Respondent’s PRC is unpersuasive.
The improvement value estimate is similarly unpersuasive. Respondent introduced no testimony or any other evidence showing the PRC improvement value reflects market demand for buildings constructed on the closed sanitary landfill. This omission is crucial because the TVM of the subject property is “the price which the property would bring from a willing buyer when offered for sale by a willing seller.” Mo. Baptist Children’s Home, 867 S.W.2d at 512. The cost approach incorporates this market-based concept through the “principle of substitution” which “affirms that a knowledgeable buyer would pay no more for a property than the cost to acquire a similar site and construct improvements of equivalent desirability and utility without undue delay.” Appraisal Institute, The Appraisal of Real Estate 563-64 (14th ed. 2013). It follows that a property “with no utility would not be recreated, and the value of the property would be low.” Id. at 568. Respondent’s cost estimates do not demonstrate any market demand for closed landfill properties subject to severe development restrictions and substantial environmental remediation costs of indefinite duration.
As of January 1, 2019, the subject property was a closed sanitary landfill with severely limited development potential and insufficient actual or potential income to offset the ongoing, state-mandated environmental monitoring and remediation expenses. Complainant produced substantial and persuasive evidence showing there was no financially feasible use for the subject property and that the TVM of the subject property on January 1, 2019, was $0.
CONCLUSION AND ORDER
The BOE’s decision is set aside. The TVM of the subject property on January 1, 2019, was $0. The TVM and assessed value of the subject property for 2019 and 2020 was $0.
Application for Review
A party may file with the STC an application for review of this decision within 30 days of the mailing date set forth in the certificate of service for this decision. The application “shall contain specific detailed grounds upon which it is claimed the decision is erroneous.” Section 138.432. The application must be in writing, and may be mailed to the State Tax Commission of Missouri, P.O. Box 146, Jefferson City, MO 65102-0146, or emailed to Legal@stc.mo.gov. A copy of the application must be sent to each person 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.
The Collector of St. Louis County, and 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 the disputed taxes have been disbursed pursuant to a court order under the provisions of section 139.031.
SO ORDERED September 10, 2021.
Eric S. Peterson
Senior Hearing Officer
State Tax Commission
Certificate of Service
I hereby certify that a copy of the foregoing has been electronically mailed and/or sent by U.S. Mail on September 10, 2021, to: Complainant(s) and/or Counsel for Complainant(s), the County Assessor and/or Counsel for Respondent and County Collector.
Contact Information for State Tax Commission:
Missouri State Tax Commission
421 East Dunklin Street
P.O. Box 146
Jefferson City, MO 65102-0146
 Complainant timely filed a complaint for review of assessment. The State Tax Commission (STC) has authority to hear and decide Complainant’s appeal. Mo. Const. art. X, sec. 14; Section 138.430.1, RSMo 2000. All statutory citations are to RSMo 2000, as amended.
 All citations to McReynolds’ WDT refer to the numbered questions and answers.
 Exhibit 1 also includes BOE decisions for other properties at issue in separate appeals.
 Exhibit 3 also includes PRCs for other properties at issue in separate appeals.
 Respondent rounded the sum of the improvement costs from $252,320 to $252,300. (Ex. 3 at 8).
 The overall capitalization rate was based on a pre-tax cap rate of 7% and an effective tax rate of 3.73%.
 In pertinent part, Section 260.227.1 provides “the operator of a sanitary landfill shall be responsible for postclosure monitoring and care … for thirty years after closure; provided, however, that the department may shorten or extend the postclosure period.” The statute further provides the Missouri Department of Natural Resources “may extend the postclosure period if it finds that site conditions warrant an extension unless the operator demonstrates that the area does not and in all likelihood will not present a threat to public health or the environment.”
 McReynolds’ appraisal report does not include separate documentation of the data underlying his analysis and conclusion. An expert appraisal report, however, can be substantial and persuasive evidence of value even if “the precise numerical derivation of the figure set forth in the expert’s testimony was not placed in evidence[.]” Equitable Life Assur. Soc. of U.S./Marriott Hotels, Inc. v. State Tax Comm’n, 852 S.W.2d 376, 382 (Mo. App. E.D. 1993). It is sufficient that “the narrative explanation” of the report is “sufficiently explained and justified to enable the Commission to evaluate the weight that should properly be accorded to the data supplied.” Id. McReynolds’ appraisal report and WDT sufficiently explain the basis of his opinion and constitute substantial and persuasive evidence rebutting the BOE presumption and showing the subject property had no market value as of January 1, 2019.
 Real property is reassessed as of January 1 of each odd-numbered year. Section 137.115.1. Absent new construction or improvements to a parcel of real property, the assessed value as of January 1 of the odd year remains the assessed value as of January 1 of the following even year. Id.