State Tax Commission of Missouri
CARAFIOL’S PROPERTIES CO.,)
)
Complainant,)
)
v.)Appeal No.09-10087 – 09-10089
)
JAKE ZIMMERMAN, ASSESSOR,)
ST. LOUIS COUNTY, MISSOURI,)
)
Respondent.)
ORDER
SETTING ASIDE HEARING OFFICER DECISION
UPON APPLICATION FOR REVIEW
On August 10, 2011, Senior Hearing Officer W. B. Tichenor entered his Decision and Order (Decision) setting aside the assessments by the St. Louis County Board of Equalization.
Respondent filed his Application for Review of the Decision.[1]Complainant filed its Response.[2]Respondent filed his Reply.[3]
DECISION
Respondent’s Grounds for Review
Respondent sets forth three grounds for review of the Decision.[4]These are:
1. The Hearing Officer erred in his determination of the total square footage of the subject property.
2. The Hearing Officer erred in his determination that only the income approach was appropriate in valuing the subject property.
3. The Hearing Officer erred in his adoption of the Complainant’s income approach.
Commission Rulings
Square Footage
The Hearing Officer did not err on this point.Respondent asserts that the Findings of Fact 4 and 5 in the Decision are in error.Finding of Fact 4 provides the Subject Property – Description.Finding of Fact F sets forth the Subject Property – Rentable Area.
In Finding of Fact 4, the Hearing Officer found, “The subject property consists of 5.94 acres improved by a retail center built in or around 1973 with 72,430 square feet above grade space and 23,872 square feet of below grade warehouse area.”Respondent contends this is in error because the testimony by their appraiser was that the above grade area was 78,612 square feet and 35,365 square feet of below grade area.Respondent claims the above grade area of 72,430 understates the amount of total square footage by approximately 6,200 square feet.
The first question is whether there was evidence in the record that supports the finding of the Hearing Officer?The following provides evidence upon which the Hearing Officer was able to base his Finding of Fact 4.
1. Exhibit A – Summary of Important Data and Conclusions – Property Data – Improvements states the improvements consist of a “Retail center built in or around 1973 with 72,430 square feet of above grade space and 23,872 square feet of below grade space.”
2. Exhibit B – Written Direct Testimony of David J. Sebelius, Q & A 31 states:
Q:What is the total square footage of the property?
A:There is 72,430 square feet above grade, and 23,872 square feet below grade.
3. Exhibit A – Improvement Data, p. 44 states:“County records indicate the size of the structure as 96,677 square feet, however, the actual gross space is 96,302 square feet, which is a minor discrepancy given the size of the overall property.It should be noted that this includes 72,430 square feet of retail space above grade and 23,872 square feet of warehouse space below grade.”
It is clear that the 72,430 square footage amount identified by Complainant’s appraiser had reference to rentable area.Given that neither appraiser developed a cost approach, the Hearing Officer identifying in Finding of Fact 4 the above grade area to be the same as the rentable area presents no deficiency in the Decision.Respondent provides no argument or rationale as to how Finding of Fact 4 in any manner resulted in an error in the conclusion of value under the income approach as presented in the Decision.Finding of Fact 5 only reinforces that the Hearing Officer was making a finding as to the above grade rentable area in Finding of Fact 4.While it might have been preferable for the Hearing Officer to describe the property in terms of total square footage for the retail center, his utilization of rentable area provides no grounds for reversal or modification of the Decision.
The final question is whether there is evidence in the record to support Finding of Fact 5 that the rentable area to be used for income calculations is 72,430 square feet?Yes, the evidence in the record establishes the rentable area for the subject property to be 72,430 square feet, as shown by the Rent Roll at page 67 of Exhibit 1.The individual unit square footage totals 72,430 square feet.
More importantly, Respondent’s argument on this point provides no claim whatsoever that the Hearing Officer’s Findings in any manner resulted in an erroneous conclusion of value.Assuming that the Hearing Officer in Finding of Fact 4 had indicated the square footages put forth by Respondent’s appraiser,[5] there is no showing how that would have altered the income approach.Respondent is arguing about a difference without a distinction and certainly without any impact on the final decision of the Hearing Officer to find value relying on the income approach.
Findings of Fact 4 and 5 were correct, consistent with the evidence and did not constitute any abuse of discretion in light of the Respondent not having provided an opinion or data as the rentable area that was contrary to that of 72,430 square feet.
Income Approach
Respondent’s second point is that the Hearing Officer’s determination that only the income approach was appropriate in valuing the subject property and not giving weight to the sales comparison approach is a misguided interpretation of sound appraisal practice.The point is not well taken.Respondent provides several citations to The Appraisal of Real Estate, Appraisal Institute, Eleventh Edition, 1996, in support of this line of argument.However, the Hearing Officer was not appraising the subject property, nor was he making an interpretation of appraisal practice.The appraisal of the property was the responsibility of the parties’ appraisers, not the Hearing Officer.
The Decision is clear the Hearing Officer gave consideration to both the sales comparison and income approaches as presented by each appraiser.He gave his review of each appraisal and provided his rationale for not placing any reliance on either sales comparison approach.[6]The Hearing Officer met his responsibility as the concluder of law and the trier of facts in the appeal.
The standard for the Hearing Officer is not to appraise the property that is the subject of an appeal before the Commission.If that was the standard, then there would be no need to have appraisers develop appraisal reports and provide opinions of value.Instead all that would be necessary would be for each party to provide the essential cost, sales and income data for the property.The Hearing Officer would then simply develop all three approaches to value and reconcile the indicated values to arrive at his “appraiser’s” opinion of value.That is not what is required of the Hearing Officer.That is not what a Hearing Officer does.
The Hearing Officer is to weigh the evidence.In his process of weighing the evidence, he may be persuaded that some weight should be given to each approach to value presented.He may however be persuaded that only one approach to value should be considered.In either case, the Hearing Officer has not erred as a matter of law in arriving at his decision on the fair market value of a property.He has simply been persuaded as to what constitutes substantial and persuasive evidence on the issue of true value in money.
Whatever appraisal treatises may have to say about sound appraisal practice is not applicable to the weighing of evidence by a Hearing Officer.Weighing of evidence does not constitute an interpretation, well-founded or misguided, of sound appraisal practice.The Respondent seems to be asserting that a Hearing Officer is somehow bound to give some weight to each appraisal approach presented in a given case.The defect in the assertion is that no case law was provided to support such a claim.In point of fact, the case law is counter to such a line of argument.
The Hearing Officer is not bound by any single formula, rule or method in determining true value in money, but 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.[7]
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 he may deem it entitled to when viewed in connection with all other circumstances. The Hearing Officer is not bound by the opinions of experts who testify on the issue of reasonable value, but may believe all or none of the expert’s testimony and accept it in part or reject it in part.[8]
The Commission will not lightly interfere with the Hearing Officer’s Decision and substitute its judgment on the credibility of witnesses and weight to be given the evidence for that of the Hearing Officer as the trier of fact.[9]
The Hearing Officer properly gave his rationale for rejecting the sales comparison approach.The fact that Respondent disagrees with his rejection of that approach does not establish any reversible error.The Hearing Officer did not err in finding fair market value relying on only the income approach.
Adoption of Complainant’s Income Approach
Respondent’s third point is the Hearing Officer erred in his determination of value based upon the income approach presented on behalf of Complainant.This point is well taken.The assertions of error go to how the Complainant’s appraiser developed his income approach and the Hearing Officer’s adoption of his approach in its entirety with no alterations.Although the Hearing Officer was persuaded the income approach was reflective of how a hypothetical purchaser on January 1, 2009, would have arrived at a purchase price for the Complainant’s property, the Hearing Officer placed too much weight on the Complainant’s approach and did not consider all the evidence.
Income
A review of the subject property and market indicates that use of the actual income of the property ($449,581) is appropriate.For calculation of the Total Rental Income, the income that could be generated from the vacant space must be determined.The Complainant used a rental rate of $10 per square foot.Given the subject’s history and the market data provided by the appraisers, a market rate of $10 per square foot seems too high for the space available at the subject property.A more appropriate rate of $5 per square foot should be used.($169,455).The next step is to determine a vacancy rate.The actual vacancy rate of the subject is 40%, however, the lower rental rate for the vacant space should reduce the vacancy rate therefore a 30% rate is appropriate after review of the market and the subject property ($185,710.80).The last step is to determine the amount of additional income.The Complainant suggests $44,201 from review of the subject property.However, the Complainant’s appraiser suggests that the amount seems low.An additional income amount of $50,000 is appropriate.
Expenses
Complainant’s appraiser made an analysis of the expenses from a historical performance of the subject property.[10]Respondent’s appraiser, in contrast merely compiled averages of some, but not nearly all, of the subject’s historical expenses.An appraiser should look at, not only the subject property’s expense history, but also the market data.The subject property’s expenses may be influenced by the quality of management for that property.Reviewing the market provides typical expenses for properties similar to the subject.A review of properties provided by the Complainant’s appraiser indicates that an expense ratio of 35% is appropriate.
Capitalization Rate
The Hearing Officer erred in adopting the Complainant’s overall capitalization rate of 13.25%.[11]The Complainant’s appraiser used several methods to determine the capitalization rate.Under the Band of Investment technique, the appraiser calculated a rate of 10.16%.Using the Debt Coverage Ratio Analysis, the appraiser determined a rate of 9.67%.Reviewing sales data, the appraiser determined rate range of 7.65 to 9.81%.After performing all of these analysis, the appraiser then went outside of the range and concluded on a rate of 13.25%.The increase has no support from analysis of the market.
A capitalization rate of 10.16% is appropriate.An effective tax rate of 3.07% is appropriate.Therefore an overall rate of 13.23% should be used.
Conclusion
A review of the record in the present appeal provides support for the argument presented by the Respondent.The Commission finds that the Hearing Officer acted in an arbitrary or capricious manner or abused his discretion as the trier of fact and concluder of law in this appeal.[12]
After a review of all evidence, the Commission will make it own determination as to valuation under the income approach.
|
Potential Gross Income |
Actual income |
$449,581.00 |
|
Vacant space |
$5 per square feet |
$169,455.00 |
|
Less vacancy |
30% |
($185,710.80) |
|
Total Rental Income |
|
$433,325.20 |
|
Additional Income |
|
$50,000.00 |
|
EGI |
|
$483,325.20 |
|
Expenses |
35% |
($169,163.82) |
|
NOI |
|
$314,161.38 |
|
Cap Rate |
13.23% |
$2,374,613.61 |
|
|
True Value |
$2,374,600.00 |
ORDER
The Commission upon review of the record and Decision in this appeal, finds the Hearing Officer erred in application of the income approach. Accordingly, the Decision is overturned.
The assessed value for subject property in Appeal 09-10087 for tax years 2009 and 2010 is set at $136,777.
The assessed value for subject property in Appeal 09-10088 for tax years 2009 and 2010 is set at $179,330.
The assessed value for subject property in Appeal 09-10089 for tax years 2009 and 2010 is set at $443,765.
The Decision and Order of the hearing officer, including the findings of fact and conclusions of law therein, is incorporated by reference, as if set out in full, in this final decision of the Commission.
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.
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 of St. Louis 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 assessment in this appeal.
SO ORDERED August 8, 2012.
STATE TAX COMMISSION OF MISSOURI
Bruce E. Davis, Chairman
Randy B. Holman, Commissioner
DECISION AND ORDER
HOLDING
Decisions of the St. Louis County Board of Equalization reducing the assessments made by the Assessor are SET ASIDE.
True value in money for the subject property in Appeal 09-10087 for tax years 2009 and 2010 is set at $147,600, commercial assessed value of $47,230.
True value in money for the subject property in Appeal 09-10088 for tax years 2009 and 2010 is set at $193,520, commercial assessed value of $61,930.
True value in money for the subject property in Appeal 09-10089 for tax years 2009 and 2010 is set at $478,880, commercial assessed value of $153,240.
Complainant appeared by Counsel, Paul J. Puricelli, Stone, Leyton & Gershman, Clayton, Missouri.
Respondent appeared by Associate County Counselor, Edward W. Corrigan.
Case heard and decided by Senior Hearing Officer W. B. Tichenor.
ISSUE
Complainant appeals, on the ground of overvaluation and discrimination[13], the decisions of the St. Louis County Board of Equalization, which reduced the valuations of the subject properties.The Commission takes these appeals to determine the true value in money for the subject properties on January 1, 2009.The Hearing Officer, having considered all of the competent evidence upon the whole record, enters the following Decision and Order.
FINDINGS OF FACT
1.Jurisdiction.Jurisdiction over these appeals is proper.Complainant timely appealed to the State Tax Commission from the decision of the St. Louis County Board of Equalization.A hearing was conducted on April 26, 2011, at the St. Louis County Government Center, Clayton, Missouri.The Transcript (Tr.) was received by the Legal Section of the Commission on June 16, 2011.
Appeal 09-10087 – The Assessor appraised the property at $864,200, a commercial assessment of $276,540.[15]The Board reduced the value to $648,100, a commercial assessment of $207,390.
Appeal 09-10088 – The Assessor appraised the property at $1,020,100, a commercial assessment of $326,430.The Board reduced the value to $850,000, a commercial assessment of $272,000.
Appeal 09-10089 – The Assessor appraised the Property at $3,305,100, a commercial assessment of $1,057,630.The Board reduced the value to $2,100,000, a commercial assessed value of $672,000.
Total Combined Assessor’s Value |
$5,189,400/$1,660,600 |
|
Total Combined BOE Value |
$3,598,100/$1,151,390 |
|
Total Combined Complainant’s Proposed Value |
$800,000/$256,000 |
|
Total Combined Respondent’s Proposed Value |
$4,200,000/$1,344,000 |
3.Subject Property – Identification.
The subject property in appeal 09-10087 is located at 12190 St. Charles Rock Road, Bridgeton, Missouri.The property is identified by locator number 11N230491.
The subject property in appeal 09-10088 is located at 12146 St. Charles Rock Road, Bridgeton, Missouri.The property is identified by locator number 11N230482.
The subject property in appeal 09-10087 is located at 12100 St. Charles Rock Road, Bridgeton, Missouri.The property is identified by locator number 11N240667.
The three properties are operated as a single economic unit.It is otherwise known as Bridgeton Plaza or Bridgeton Square.The three properties shall be collectively referred to in this Decision as the “subject property,” “subject” or “property under appeal.”The subject is a multi-tenant community retail shopping center.
4.Subject Property – Description.The subject property consists of 5.94 acres improved by a retail center built in or around 1973 with 72,430 square feet above grade space and 23,872 square feet of below grade warehouse area.There are three buildings which make up the improvements.[16]Photographs of the subject are found in Exhibit A, following the Summary of Important Data and Conclusions, and Exhibit 1, pp. 17 – 25.Detailed descriptions of the improvements are found in Exhibit A, pp. 44 – 48, and Exhibit 1, pp. 26 – 28.
5.Subject Property – Rentable Area.The subject was specifically designed for the Carafiol’s retail furniture business.The specificity of the design limits its attractiveness to other tenants, and the lower level space offers little to no appeal to non-furniture retailers.This space was vacant on the valuation date and has been for some time.There was no market for the lower level space as there was superior quality space on the market as of the valuation date that has not been leased.There has been no leasing inquiry activity that has lead to any negotiation.The space is costly to maintain.It had no rental market as of the valuation date and is not leasable.Therefore, it is appropriate to not include it in the overall square footage for this appraisal.The appropriate rentable area to be used for income calculations is 72,430 square feet.[17]
6.Subject Property – Factors Impacting Value. The value of the subject property as of January 1, 2009, is negatively impacted by a variety of factors not necessarily shared with other properties which might be considered to be either sale or rental comparables.The property has had significant difficulty retaining and attracting tenants because of its physical characteristics and its location.The property suffers from a high large area of space that has been vacant for some time.Extraordinary attempts have been made by management to keep the tenants which the property does have and retain new tenants.There are significant physical improvements that need to be made to the property.[18]
7.Complainant’s Evidence.Complainant submitted the following exhibits which were received into the record:
|
EXHIBIT |
DESCRIPTION |
|
A |
|
|
B |
Written Direct Testimony – Mr. Sebelius |
|
C |
Mr. Sebelius and Mr. Carafiol also testified at the evidentiary hearing.
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.[21]
Complainant’s evidence was substantial and persuasive to rebut the presumption of correct assessment by the Board and establish the true value in money as of January 1, 2009, to be $820,000.See, Complainant Proves Value of $820,000, infra.
8.Respondent’s Evidence.Respondent submitted the following exhibits which were received into the record:
|
EXHIBIT |
DESCRIPTION |
|
1 |
|
|
2 |
Cap Rate Summary Data |
|
3 |
Written Direct Testimony – Mr. Kiene |
Mr. Kiene testified at the evidentiary hearing.
9.Allocation of Value.The allocation of value based on the percentage of the value of each parcel to the combined values as set by the Board is as follows:
Appeal 09-10087 – The Board value of $648,100 represents .18% of the total combined Board value of $3,598,100.
Appeal 09-10088 – The Board value of $850,000 represents .236% of the total combined Board value of $3,598,100.
Appeal 09-10089 – The Board value of $2,100,000 represents .584% of the total combined Board value of $3,598,100.
10.Conclusion of Value.The combined value of the subject properties is $820,000.See, Complainant Proves Value of $820,000, infra.The allocation of that value between the three properties, with their assessed values, has been calculated based upon the percentages in Finding of Fact 9, as follows:
Appeal 09-10087 – $820,000 x .18% = $147,600, assessed commercial value of $47,230.
Appeal 09-10088 – $820,000 x .236 = $193,520, assessed commercial value of $61,930.
Appeal 09-10089 – $820,000 x .584 = $478,880, assessed commercial value of $153,240.
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.[23]
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.[24]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.[25]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.[26]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.[27]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.[28]Upon presentation of the Complainant’s evidence[29] the presumption in this appeal disappeared.The case is decided free of the presumption.
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.[30]True value in money is defined in terms of value in exchange and not value in use.[31]It is the fair market value of the subject property on the valuation date.[32]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.[33]
Both appraisers valued the subject under the Standard for Valuation.[34]
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.[35]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.[36] Complainant’s appraiser developed the comparable sales (market approach) and the income approaches to value.[37]Respondent’s appraiser also utilized the sales comparison and income approaches to value.[38]The income approach is appropriate in this appeal to conclude value.It is most representative of what a knowledgeable investor purchaser would give for the property under appeal on January 1, 2009.
Opinion Testimony by Experts
If specialized knowledge will assist the trier of fact to understand the evidence or to determine a fact in issue, a witness qualified as an expert on that subject, by knowledge, skill, experience, training, or education, may testify thereto.The facts or data upon which an expert bases an opinion or inference may be those perceived by or made known to the expert at or before the hearing and must be of a type reasonably relied upon by experts in the field in forming opinions or inferences upon the subject and must be otherwise reliable, the facts or data need not be admissible in evidence.[39]The relative weight to be accorded any relevant factor in a particular case is for the Hearing Officer to decide.[40]The Hearing Officer is not bound by the opinions of experts on the issue of valuation, but may believe all or none of the expert’s testimony and accept it in part or reject it in part.[41]
The Hearing Officer was presented with the appraisal work and testimony of each party’s expert.Upon consideration and review of the appraisals and testimony of both Mr. Sebelius and Mr. Kiene, the Hearing Officer is persuaded by the conclusion of value determined under the income approach by Mr. Sebelius.
Complainant Proves Value of $820,000
In order to prevail, 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]
Sebelius Appraisal
The appraisal report of Mr. Sebelius presented on behalf of Complainant met the evidentiary standard of substantial and persuasive.The value concluded under the Sales Comparison Approach was $800,000.The Income Approach yielded a value of $820,000.The Income Approach was the most appropriate methodology to utilize for the present appraisal problem.Mr. Sebelius recognized the actual economic condition and circumstances affecting the subject property.
The hypothetical purchaser for this property on January 1, 2009, would look very closely at and be most influenced by the actual income and expenses of the Carafiol property.The recent history of the property demonstrates the significant decline in net operating income.Any prospective purchaser on January 1, 2009, would certainly understand that the income stream being purchased was a diminishing revenue source.
The evidence supports a conclusion of value of $820,000 under the Sebelius income methodology.
Kiene Appraisal
The conclusion of value by Mr. Kiene under the income approach was not persuasive.The total projected income exceeded the actual income for 2008 by over $100,000.The appraiser opted for only a 20% vacancy even though the past history of the subject clearly established a vacancy of 40% or more.The expenses allowed by Mr. Kiene were over $114,000 less than what the actual stabilized expenses for 2006, 2007 and 2008 were.The Kiene conclusion of value under the income approach greatly overvalued the subject.[46]
There is no evidence to support such deviations from the actual income and expense figures for the subject’s performance.The reliance on “industry norms” for income, vacancy rates and expenses has its place when the valuation problem involves the development of an income approach for an owner occupied facility.However, when the property being appraised is a leased structure or structures, the “industry norms” will only undervalue or, as in this instance, overvalue the property.Applying industry norms to properties that are operating above the norm in income, and below the norm in vacancy and expenses would only under value the properties.In like manner, the utilization of an industry norm to properties that are below the standard in income, but above in vacancy and expenses results in an overvaluation of such properties.
As a result of the foregoing, the Hearing Officer places no probative weight on the conclusion of value under the Kiene income approach.
Sales Comparison Methodologies
Both appraisers developed a sales comparison approach to value.Mr. Sebelius relied upon three sales.Mr. Kiene used four sales of which two were the same as two of the Sebelius comparables.The Sebelius sales information included net operating income data for each sale.
The net operating income per square foot of net rentable area for the three Sebelius sales calculates, respectively to: $7.50, $8.48 and $9.43.[47]This is compared to the net operating income per square foot of net rentable area for the subject of only $1.83.[48]Based on that information, all three sales were significantly superior to the subject on an economic basis.In other words, the income streams which the sales comparables produced were vastly greater than the subject’s income stream.This calls into question the actual comparability of the sales properties.
The Kiene sales data did not provide any information as to net operating income. Accordingly, it is not possible, as to the two properties which were not also in the Sebelius approach, to make a determination as to how economically comparable these two properties were to the subject.However, the two sales which Mr. Kiene used that were also part of the Sebelius appraisal suffer from the same high level of incomparability based upon the extreme economic difference between the sales and the subject.
From all of the foregoing, the Hearing Officer finds that the sales comparison approaches are not persuasive to establish value.Accordingly, no weight is given to the opinions of value concluded there under.
Conclusion
The income approach developed by Complainant’s appraiser rebutted the presumption of correct assessment by the Board and established true value in money to be $820,000.
ORDER
The assessed valuations for the subject properties as determined by the Board of Equalization for St. Louis County for the subject tax day are SET ASIDE.
The assessed value for the subject property in Appeal 09-10087 for tax years 2009 and 2010 is set at $47,230.
The assessed value for the subject property in Appeal 09-10088 for tax years 2009 and 2010 is set at $61,930.
The assessed value for the subject property in Appeal 09-10089 for tax years 2009 and 2010 is set at $153,240.
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 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, MO65102-0146, 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. [49]
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.If no Application for Review is filed with the Commission within thirty days of the mailing date set forth in the Certificate of Service, the Collector, 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 assessment 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 August 10, 2011.
STATE TAX COMMISSION OFMISSOURI
W. B. Tichenor
Senior Hearing Officer
[4] The Commission has stated the grounds according to its understanding of the matters addressed by Respondent in his Application for Review.
[5] There were various inconsistencies with the Kiene square footages.On page 5 of Exhibit 1, the appraiser identified three parts of the subject improvements, with areas of 6,198, 15,290 and 78,612 square feet.This is a total above grade square footage of 100,100.On pages 9, 26 and 27 of Exhibit 1, Mr. Kiene identifies these areas as having 6,198, 15,290 and 57,124 above grade square feet, with the third structure having 35,365 square feet of basement storage area.On page 9, he gives the “gross building area” as 113,977.In Exhibit 2, Q & A 14, Mr. Kiene again identifies the same three areas with the same square footages as on page 5 of his appraisal. He then states: “The gross building area is 113,977 square feet including 33,365 square feet of basement storage area.These retail structures contain approximately 78,612 square feet above grade and 35,365 square feet below grade space.”Allowing that the 33,365 is a typographical error and should have read 35,365, the gross building area for the largest structure would be 113,977.If the area of the three buildings is 6,198, 15,290 and 78,612, with 35,365 basement area, the gross area would total 135,465 square feet.If the area of the three buildings is 6,198, 15,290 and 57,124 with 35,365 basement area, the gross area would total 113,977 square feet.Counter to this is the Sebelius appraisal which notes on p. 44 that county records indicate the size of the structure (apparently all three areas or buildings) as 96,677, however, Sebelius who had access to the site plan for the subject property (Exhibit A, p. 34) asserts the actual gross space is 96,302.
[6] DECISION – Sebelius Appraisal, pp. 9 – 10; Kiene Appraisal, pp. 10 – 11; Sales Comparison Methodologies, pp. 11 – 12.
[7] 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).
[8] St. Louis County v. Boatmen’s Trust Co., 857 S.W.2d 453, 457 (Mo. App. E.D. 1993); Vincent by Vincent v. Johnson, 833 S.W.2d 859, 865 (Mo. 1992); Beardsley v. Beardsley, 819 S.W.2d 400, 403 (Mo. App. 1991); Curnow v. Sloan, 625 S.W.2d 605, 607 (Mo. banc 1981).
[9] Black v. Lombardi, 970 S.W.2d 378 (Mo. App. E.D. 1998); Lowe v. Lombardi, 957 S.W.2d 808 (Mo. App. W.D. 1997); Forms World, Inc. v. Labor and Industrial Relations Com’n, 935 S.W.2d 680 (Mo. App. W.D. 1996); Evangelical Retirement Homes v. STC, 669 S.W.2d 548 (Mo. 1984); Pulitzer Pub. Co. v. Labor and Indus. Relations Commission, 596 S.W.2d 413 (Mo. 1980); St. Louis County v. STC, 562 S.W.2d 334 (Mo. 1978); St. Louis County v. STC, 406 S.W.2d 644 (Mo. 1966).
[12] Hermel, Inc. v. STC, 564 S.W.2d 888 (Mo. 1978); Black v. Lombardi, 970 S.W.2d 378 (Mo. App. E.D. 1998); Holt v. Clarke, 965 S.W.2d 241 (Mo. App. W.D. 1998); Smith v. Morton, 890 S.W.2d 403 (Mo. App. E.D. 1995); Phelps v. Metropolitan St. Louis Sewer Dist., 598 S.W.2d 163 (Mo. App. E.D. 1980).
[13] No evidence was filed and exchanged that would establish an intentional plan by the assessing officials to assess the properties under appeal at a ratio greater than 32% of true value in money, or at a ratio greater than the average 2009 commercial assessment ratio for St. Louis County, accordingly, the claim of discrimination as a ground for appeal was deemed to have been abandoned at the evidentiary hearing.Tr. 3:9-16
[14] Assessment figures are taken from the Complaints for Review of Assessment and the Board decision letters.
[15] Commercial property is assessed at 32% of true value in money (fair market value), Section 137.115.5(1), RSMo
[17] Exhibit A – Improvement Data, p. 44; See Also: Exhibit B – Q/A 31 & 32; Exhibit C – Q/A 21 & 22
[26] 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)
[27] 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.
[28] Hermel, supra; Cupples-Hesse Corporation v. State Tax Commission, 329 S.W.2d 696, 702 (Mo. 1959)
[30] St. Joe Minerals Corp. v. State Tax Commission, 854 S.W.2d 526, 529 (Mo. App. E.D. 1993); Missouri Baptist Children’s Home v. State Tax Commission, 867 S.W.2d 510, 512 (Mo. banc 1993).
[31] Daly v. P. D. George Company, et al, 77 S.W.3d 645, 649 (Mo. App E.D. 2002), citing, Equitable Life Assurance Society v. STC, 852 S.W.2d 376, 380 (Mo. App. 1993); citing, Stephen & Stephen Properties, Inc. v. STC, 499 S.W.2d 798, 801-803 (Mo. 1973).
[33] 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.
[35] See, Nance v. STC, 18 S.W.3d 611, at 615 (Mo. App. W.D. 2000); Hermel, supra;Xerox Corp. v. STC, 529 S.W.2d 413 (Mo. banc 1975).
[36] 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. Div. 2 1974).
[37] Exhibit A – Market Approach, pp. 57 – 67; Exhibit A – Income Approach, pp. 68 – 89; Exhibit B – Q/A 40 – 69
[38] Exhibit 1 – Sales Comparison Approach, pp. 40 – 56; Exhibit 1 – Income Approach, pp. 36 – 39; Exhibit 3 – Q/A 20 – 49
[39] Section 490.065, RSMo; State Board of Registration for the Healing Arts v. McDonagh, 123 S.W.3d 146 (Mo. SC. 2004); Courtroom Handbook on Missouri Evidence, Wm. A. Schroeder, Sections 702-505, pp. 325-350; Wulfing v. Kansas City Southern Industries, Inc., 842 S.W.2d 133 (Mo. App. E.D. 1992).
[40] 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).
[41] St. Louis County v. Boatmen’s Trust Co., 857 S.W.2d 453, 457 (Mo. App. E.D. 1993); Vincent by Vincent v. Johnson, 833 S.W.2d 859, 865 (Mo. 1992); Beardsley v. Beardsley, 819 S.W.2d 400, 403 (Mo. App. 1991); Curnow v. Sloan, 625 S.W.2d 605, 607 (Mo. banc 1981).
[43] 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).