STATE TAX COMMISSION OF MISSOURI
| BURGER KING CORPORATION, | ) | |
| Complainant, | ) | Appeal No. 19-10565 |
| ) | ||
| v. | ) | Parcel No. 10G430355 |
| ) | ||
| JAKE ZIMMERMAN, ASSESSOR, | ) | |
| ST. LOUIS COUNTY, MISSOURI, | ) | |
| Respondent. | ) | |
| ) |
DECISION AND ORDER
Burger King Corporation (Complainant) appeals the St. Louis County Board of Equalization’s (BOE) decision finding that the fair market value of the subject commercial property on January 1, 2019, was $520,000. Complainant asserts the true value in money (TVM) of the subject property on January 1, 2019, was $378,400. Complainant did not produce substantial and persuasive evidence of overvaluation. The BOE decision is affirmed.[1]
Complainant appeared through counsel David Adam. Respondent appeared through counsel Steven Robson. The evidentiary hearing was conducted remotely via WebEx on October 27, 2020.
FINDINGS OF FACT
- The Subject Property. The subject commercial property is located at 10890 West Florissant Avenue in Ferguson, Missouri. The subject property consists of a 0.48 acre lot and an approximately 3,467 square foot building used as a fast-food restaurant.
The subject property adjoins a separate commercial parcel owned by Complainant and utilized for a drive-thru lane and parking. The subject property and adjoining parcel are separate tax parcels. Complainant did not appeal the BOE’s valuation of the adjoining parcel. Complainant only appeals the BOE’s valuation of the subject property.
- Assessment. Respondent separately assessed the subject property and the adjoining parcel. Respondent valued the properties as follows:
Parcel Land Value Improvements Value Total Appraised Value
| Subject Property | $ 167,300 | $ 360,300 | $ 527,600 |
| Adjoining Parcel | $ 191,700 | $ 49,900 | $ 241,600 |
| Totals | $ 359,000 | $ 410,200 | $ 769,200 |
The BOE reduced the appraised value of the subject property to $520,000.
- Complainant’s Evidence. Complainant submitted Exhibit A. Exhibit A is an appraisal report prepared by David Allen, a licensed Missouri appraiser.
Mr. Allen appraised “two adjoining commercial parcels totaling 1.03 acres improved with a 3,467 sf +/- commercial fast-food building addressed as 10890 W Florissant Ave.” (Ex. A at 5). Mr. Allen estimated the combined market value of the two parcels as of January 1, 2019, was $620,000. (Ex. A at 73). Mr. Allen testified the highest and best use of subject property and adjoining parcel favored appraising the parcels together. Mr. Allen did not separately appraise the subject property and offered no opinion of the value of the subject property.
Mr. Allen considered the cost approach, the income approach, and the comparable sales approach. Mr. Allen did not utilize the cost approach because it is typically not used to value older buildings. (Ex. A at 73).
Mr. Allen’s income approach analysis concluded that the estimated combined value of the subject property and the adjoining parcel as of January 1, 2019, was $615,000. (Ex. A at 61). Mr. Allen estimated a market rental rate of $18.00 per square foot as determined by the rents generated from four comparable properties. (Ex. A at 51-56). Mr. Allen estimated a capitalization rate of 8.50% based on real estate investor research and a band of investment analysis considering the return required to cover mortgage interest and provide a competitive equity dividend. (Ex. A at 59-60). Finally, Mr. Allen divided the estimated annual net operating income ($52,389) by the estimated capitalization rate (.085) to conclude that the combined value of the two parcels as on January 1, 2019 was $616,341. Mr. Allen rounded the estimate to $615,000. (Ex. A. at 61).
Mr. Allen’s comparable sales analysis concluded that the estimated value of the subject property and the adjoining parcel as of January 1, 2019, was $625,000. (Ex. A at 72). Mr. Allen utilized five comparable properties and included adjustments for location, condition, and size. (Ex. A at 63-69; 71-72).
Mr. Allen concluded the comparable sales approach was “most applicable to value due to the recent sales of similar commercial buildings that were acquired for either investment, by an owner-user, or for redevelopment of the site.” (Ex. A at 72). Mr. Allen reconciled the values indicated by the income and comparable sales approaches – $615,000 and $625,000 respectively – to conclude “that the estimated Market Value in Fee Simple as of January 1, 2019 is $620,000.” (Ex. A at 73).
Both Exhibit A and Mr. Allen’s testimony were limited to determining the combined market value of the subject property and the adjoining parcel. Neither Exhibit A nor Mr. Allen’s testimony offered an opinion of the separate value of the subject property or identified a method for apportioning separate value to the subject property.
Complainant asserted the TVM of the subject property on January 1, 2019, was $378,400. This value is based on an apportionment methodology proposed by Complainant’s counsel during Mr. Allen’s direct examination. Counsel proposed the value of the subject property could be calculated in two steps. First, counsel subtracted Mr. Allen’s estimated combined value ($620,000) from the combined value assigned by Respondent ($769,200) to calculate a difference of $149,200; i.e., ($769,200 – $620,000 = $149,200). Second, counsel subtracted $149,200 from Respondent’s valuation of the subject property ($527,600) to conclude that that the market value of the subject property should be $378,400; i.e., ($527,600 – $149,200 = $378,400).
Counsel asserted his proposed apportionment methodology was a matter of arithmetic and required no expert testimony. Counsel asked Mr. Allen if this method was appropriate. Mr. Allen testified he could not speak to the individual value of the subject property because his appraisal was limited to determining the combined value of the subject property and the adjoining parcel as of January 1, 2019. Mr. Allen offered no opinion regarding the separate value of the subject property or the validity of counsel’s proposed method of apportioning value to the subject property.
- Respondent’s Evidence. Respondent submitted Exhibit 1. Exhibit 1 is the BOE Findings and Notice of Decision showing that Respondent valued subject property at $527,600 as of January 1, 2019. Exhibit 1 shows the BOE lowered the value to $520,000.
- Value. The TVM of the subject property on January 1, 2019, was $520,000.
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). “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). The “proper methods of valuation and assessment of property are delegated to the Commission.” Savage v. State Tax Comm’n, 722 S.W.2d 72, 75 (Mo. banc 1986). “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 347-48. - 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). The finder of fact in an administrative hearing determines the credibility and weight of expert testimony. Hornbeck v. Spectra Painting, Inc., 370 S.W.3d 624, 632 (Mo. banc 2012). 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.
- Complainant’s Burden of Proof. The taxpayer bears the burden of proof and must show by a preponderance of the evidence that the property was overvalued or misclassified. Westwood P’ship v. Gogarty, 103 S.W.3d 152, 161 (Mo. App. E.D. 2003). The BOE’s valuation is presumptively correct. Tibbs v. Poplar Bluff Assocs. I, L.P., 599 S.W.3d 1, 7 (Mo. App. S.D. 2020). The “taxpayer may rebut this presumption by presenting substantial and persuasive evidence that the valuation is erroneous” and 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, 722 S.W.2d at 77 (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 Did Not Prove Overvaluation.
Complainant asserts the TVM of subject property on January 1, 2019, was $378,400. Complainant’s proposed value is unpersuasive for at least three reasons.
First, the TVM of the subject property is a factual issue and must be supported by evidence. See Cohen, 251 S.W.3d at 348 (noting that determining the TVM “is an issue of fact for the STC”). Neither Exhibit A nor Mr. Allen’s testimony provided any opinion of value for the subject property or a basis for apportioning value to the subject property. Instead, Complainant’s proposed value is based on an apportionment methodology proposed by counsel and not endorsed by Mr. Allen. Counsel’s questions and unsworn assertions are not evidence. Sansone Law, LLC v. J & M Securities, LLC, 589 S.W.3d 74, 86 (Mo. App. E.D. 2019). Consequently, even if Exhibit A persuasively established the combined TVM of the subject property and the adjoining parcel, Complainant’s proposed apportionment methodology is based on counsel’s non-evidentiary assertions, not substantial and persuasive evidence of value.
Second, even if the apportionment methodology proposed by Complainant’s counsel is considered, it does not comport with any of the three generally accepted approaches to estimating value. It is not based on reproduction cost, income capitalization, or comparable sales. See Snider, 156 S.W.3d at 347-48. Instead, Complainant’s counsel proposed subtracting the difference between Respondent’s and Mr. Allen’s estimates of the combined value of the subject property ($769,200 – $620,000 = $149,200) from Respondent’s valuation of the subject property to property to conclude the TVM of subject property as of January 1, 2019 was $378,400 ($527,600 – $149,200 = $378,400).[2] This equation uses Respondent’s original value as the constant from which the proposed value is calculated. Respondent’s original value, however, was negated and rendered irrelevant when the BOE lowered the subject property’s value. Complainant’s approach, therefore, seeks to calculate the correct TVM of the subject property based on Respondent’s incorrect value that was negated by the BOE’s decision.
Finally, in addition to having no basis in any recognized approach to value, Complainant’s approach is premised on the unsupported assumption that all of the purported overvaluation is attributable exclusively to the subject property. As noted, Complainant’s proposed value of $378,400 is calculated by subtracting the difference between Respondent’s and Mr. Allen’s estimates of the combined value of the subject property ($149,200) from Respondent’s singular valuation of the subject property ($527,600). By subtracting the purported combined overvaluation of both properties from Respondent’s valuation of the subject property, Complainant’s proposed apportionment method necessarily assumes all overvaluation is attributable exclusively to the subject property. No substantial and persuasive evidence supports this assumption. Consequently, even if one assumes for the sake of argument that Complainant’s proposed apportionment method is sound, Complainant’s proposed value is unpersuasive because there is no substantial and persuasive evidence showing that all of the purported overvaluation is attributable to the subject property.
Complainant elected to individually appeal the value of the subject property. Complainant’s only evidence of value, however, is limited to estimating the combined value of the subject property and the adjoining parcel. Complainant provided no persuasive evidence apportioning value to the subject property or establishing a method for doing so. Complainant, therefore, has not satisfied its burden of proving “the value that should have been placed on the property.” Tibbs, 599 S.W.3d at 7. Complainant’s overvaluation claim is denied.
CONCLUSION AND ORDER
The BOE’s decision is affirmed. The TVM of the subject property on January 1, 2019, was $520,000.
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.
Disputed Taxes
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 February 12, 2021.
STATE TAX COMMISSION OF MISSOURI
Eric S. Peterson
Senior Hearing Officer
Certificate of Service
I hereby certify that a copy of the foregoing has been electronically mailed and/or sent by U.S. Mail on February, 12, 2021, to: Complainant(s) and/or Counsel for Complainant(s), the County Assessor and/or Counsel for Respondent and County Collector.
Elaina McKee
Legal Coordinator
Contact Information for State Tax Commission:
Missouri State Tax Commission
421 East Dunklin Street
P.O. Box 146
Jefferson City, MO 65102-0146
573-751-2414
Fax 573-751-1341
[1] 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.
[2] Complainant’s proposed value of $378,400 can also be calculated by subtracting the BOE value of the adjoining parcel ($241,600) from the value estimate in Exhibit A ($620,000 – $241,600 = $378,400). Additionally, Complainant’s proposed value can be calculated by subtracting the difference between the estimated combined value in Exhibit A from the combined BOE value ($761,600 – $620,000 = $141,600) and subtracting this difference from the $520,000 BOE value assigned to the subject property ($520,000 – $141,600 = $378,400). Each of these alternative equations are premised on the unsupported assumption that all overvaluation is exclusively attributable to the subject property. Moreover, like Complainant’s proposed apportionment, each of these alternative equations utilizes different and allegedly incorrect values assigned by the BOE or Respondent as the constant for calculating the correct TVM for the subject property. Complainant’s proposed value of $378,400 is an arithmetic coincidence, not a recognized valuation methodology.