State Tax Commission of Missouri
CEDAR CREEK APARTMENTS,)
)
Complainant,)
)
v.) Appeal Nos.09-10352, 09-10353
)& 09-10354
JAKE ZIMMERMAN, ASSESSOR,)
ST. LOUIS COUNTY,MISSOURI,)
)
Respondent.)
DECISION AND ORDER
HOLDING
Decisions of the St. Louis County Board of Equalization sustaining the assessments made by the Assessor in Appeals 09-10352 and 09-10354 and reducing the assessment in Appeal 09-10353 are SET ASIDE.
True values in money for the subject properties for tax years 2009 and 2010 are set at:Appeal 09-10352 – $71,090, residential assessed value of $13,510; Appeal 09-10353 – $5,026,063, residential assessed value of $954,950; and Appeal 09-10354 – $2,011,847, residential assessed value of $382,250.
Complainant appeared by Counsel Thomas L. Caradonna, Lewis, Rice & Fingersh, L.C., St. Louis.
Respondent appeared by Associate County Counselor Paula J. Lemerman.
Case heard and decided by Senior Hearing Officer W. B. Tichenor.
ISSUE
Complainant appeals, on the ground of overvaluation, the decisions of the St. Louis County Board of Equalization, which sustained in part and reduced in part the valuation of the subject properties.The Commission takes this appeal to determine the true value in money for the subject property 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 this appeal 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 5, 2011, at the St. LouisCountyGovernmentCenter,Clayton,Missouri.
2.Assessment.The Assessor appraised the property in Appeal 09-10352 at $80,800, a residential assessment of $15,350.[1]The Board sustained the assessment.
The Assessor appraised the property in Appeal 09-10353 at $6,783,600, a residential assessment of $1,288,880.The Board reduced the true value in money to $5,616,000, a residential assessment of $1,067,040.
The Assessor appraised the property in Appeal 09-10354 at $2,249,200, a residential assessment of $427,350.The Board sustained the assessment.
The total combined true value in money is $7,946,000, with a total combined assessed value of $1,509,740
3.Subject Property.[2]The subject property is located at 7912 Olde English Road, St. Louis County, Missouri.The respective properties are identified by parcel numbers 24H111591, 25H430875 and 25H120135.The property consists of a 228 unit, multi-family residential development known as Cedar Creek Lodge Apartments.The three properties are a single economic unit and will therefore be referred to as the “property,” “subject property” or “property under appeal.”
The property consists of an 11.84 acre tract of land.It is improved by eight, three story wood frame apartment buildings, with 7,242 square feet of basement area, a club house and a laundry/maintenance building, constructed in 1973.A breakdown of the apartment units within the eight buildings is as follows:
|
Unit Type |
# of Units |
Size (SF) |
Total Area |
|
1BR/1 BA |
24 |
518 |
12,432 |
|
1BR/1 BA |
48 |
544 |
26,112 |
|
2BR/1BA |
36 |
680 |
24,480 |
|
2BR/1BA |
120 |
736 |
88,320 |
|
Totals |
228 |
|
151,344 |
4.Complainant’s Evidence.Complainant presented the appraisal[3] and written direct testimony[4] of Kent D. Gastreich, Missouri Certified General Appraiser, W. H. Heyden & Associates, Inc.Mr. Gastreich testified under cross-examination.[5]
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.[6]
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 $7,109,000. See, Complainant Proves Value, and Detailed Analysis of Gastreich Appraisal, infra.
5.Respondent’s Evidence.Respondent did not file and exchange exhibits in accordance with the Commission Order and therefore was precluded from offering exhibits or testimony on the issue of fair market value.[7]During Cross-examination of Complainant’s expert witness, Counsel for Respondent offered into evidence Exhibit 1 and Exhibit 2, objection was made to each exhibit, objections were sustained and objectionable parts of each exhibit were stricken.Exhibits 1 and 2 were then received into evidence as to those portions not stricken.[8] The exhibits did not rebut any portion of Complainant’s evidence.The Exhibits provided no basis upon which a conclusion of the fair market value of the property under appeal could be made.
6.Allocation of Value.The true value in money for the subject property of $7,109,000 must be allocated among the three individual parcels.Based upon the assessments by the Assessor/BOE, the percentages of value for each parcel to the total value has been calculated as follows:Appeal 09-10352 – .01%; Appeal 09-10353 – .707%, and Appeal 09-10354 – .283%.Therefore, the total value of $7,109,000, is allocated to the separate parcels as follows: Appeal 09-10352 – $71,090, assessed value of $13,510; Appeal 09-10353 – $5,026,063, assessed value of $954,950; and Appeal 09-10354 – $2,011,847, assessed value of $382,250.
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.[9]
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.[10]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.[11]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.The only evidence on the record in this appeal that is probative on the issue of the fair market value of the property under appeal consists of the appraisal, written direct testimony and testimony at hearing of Kent D. Gastreich, Complainant’s expert witness.Accordingly, consistent with the constitutional mandate, the Hearing Officer must find the true value in money for the subject property based upon those sources.
Presumption In Appeals
There is a presumption of validity, good faith and correctness of assessment by the County Board of Equalization.[12]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.[13]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.[14]Upon presentation of the Complainant’s evidence[15] 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.[16]True value in money is defined in terms of value in exchange and not value in use.[17]It is the fair market value of the subject property on the valuation date.[18]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.[19]
Complainant’s appraiser concluded value under the Standard for Valuation.[20]
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.[21]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.[22]Complainant’s appraiser gave consideration to all three recognized approaches to value.He developed both the sales comparison and income approaches, and concluded his final value based upon the indicated value of the income approach.[23]
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.[24]
Kent D. Gastreich was qualified by his knowledge, skill, experience, training and education to testify as an expert on the subject of the fair market value of the subject property as of January 1, 2009.The facts and data upon which Mr. Gastreich based his opinion of value were of a type reasonably relied upon by experts in the appraisal of real estate and they are found to be otherwise reliable.Therefore, the opinion of value concluded by the appraiser was competent and relevant evidence on the issue before the Hearing Officer on the fair market value of the property under appeal.
Complainant Proves Value
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.[25]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.”[26]
Substantial evidence can be defined as such relevant evidence as a reasonable mind might accept as adequate to support a conclusion.[27]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.[28]
Complainant’s evidence met the required standard to establish the true value in money for the property under appeal as of January 1, 2009.
Adjustment to Appraisal for Real Estate Taxes
Mr. Gastreich elected to address the issue of the real estate taxes by including a stabilized amount in the expenses for the subject property under his income approach, instead of adding an effective tax rate to the capitalization rate.This was concluded based upon consideration given to the actual taxes for 2007 and 2008 and the taxes for the sales properties used in his sales comparison analysis.[29]The testimony of the appraiser was that this was an accepted methodology.[30]The utilization by Mr. Gastreich of this methodology in no way detracts from the probative value of his appraisal.The appraiser’s conclusion notwithstanding, the Hearing Officer considers the better approach in an appeal before the Commission to not include the real estate taxes in expenses, but to utilize the effective tax rate as a component of the overall rate to capitalize the net operating income.
Accordingly, the Hearing Officer has removed the amount for real estate taxes ($87,000) from the Operating Expenses.[31]This results in total expenses of $658,066.The Net Operating Income (NOI) then becomes $688,579.The effective tax rate for the subject property is
.01186.[32]The overall rate is .09686.[33]The NOI capitalized by the Overall Rate produces an indicated value of $7,109,000.[34]
Conclusion of Value
The presumption of correct assessment by the Board is rebutted and the true value in money for the subject property as of January 1, 2009, is established to be $7,109,000.
Detailed Analysis of Gastreich Appraisal
In an appeal such as this where the appraisal presented on behalf of Complainant was prepared in accordance with the standards and reporting requirements accepted and utilized in the real estate appraisal field.[35]Where there is no countervailing or rebuttal evidence placed against the Complainant’s conclusion of value as established by the submitted appraisal report and the supporting testimony, the Hearing Officer foregoes any detailed analysis of the appraisal.Any such analysis would serve no useful purpose, as a reading of Exhibits A and B provides no basis upon which the Hearing Officer could have reasonably and logically rejected the conclusion of value reached, subject to the correction relative to accounting for the real estate taxes made above.
ORDER
The assessed valuations for the subject properties as determined by the Assessor and sustained or reduced 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 No. 09-10352 for tax years 2009 and 2010 is set at $13,510.
The assessed value for the subject property in Appeal No. 09-10353 for tax years 2009 and 2010 is set at $954,950.
The assessed value for the subject property in Appeal No. 09-10354 for tax years 2009 and 2010 is set at $382,250.
Application for Review
A party may file with the Commission an application for review of this decision within thirty days of the mailing date set forth in the Certificate of Service.The application shall contain specific facts or law as grounds upon which it is claimed the decision is erroneous.Said application must be in writing addressed to the State Tax Commission of Missouri, P.O. Box 146, Jefferson City, 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. [36]
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 July 19, 2011.
STATE TAX COMMISSION OFMISSOURI
_____________________________________
W. B. Tichenor
Senior Hearing Officer
Certificate of Service
I hereby certify that a copy of the foregoing has been mailed postage prepaid on this 19thday of July, 2011, to:Thomas Caradonna, 600 Washington Avenue, Suite 2500, St. Louis, MO 63101, Attorney for Complainant; Paula Lemerman, Associate County Counselor, County Government Center, 41 South Central Avenue, Clayton, MO 63105, Attorney for Respondent; Jake Zimmerman,Assessor, County Government Center, 41 South Central Avenue, Clayton, MO 63105; John Friganza, Collector, County Government Center, 41 South Central Avenue, Clayton, MO 63105.
___________________________
Barbara Heller
Legal Coordinator
Contact Information for State Tax Commission:
Missouri State Tax Commission
301 W. High Street, Room 840
P.O. Box 146
Jefferson City, MO 65102-0146
573-751-2414
573-751-1341 Fax
[1] Residential property is assessed at 19% of true value in money (fair market value), Section 137.115.5(1), RSMo
[12] 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)
[13] 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.
[14] Hermel, supra; Cupples-Hesse Corporation v. State Tax Commission, 329 S.W.2d 696, 702 (Mo. 1959)
[16] 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).
[17] 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).
[19] 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.
[21] 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).
[22] 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).
[24] 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).
[26] 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).
[32] 2009 Tax Rate = $6.2407 (Exhibit A – Assessment and Current Taxes, p. 50);
6.2407 ÷ 100 = 0.062407 x .19 = 0.01185733, rounded to .01186; or
6.2407 x .19 = 1.185733 ÷ 100 = 0.01185733, rounded to .01186
[35] Exhibit A – Page 2 of Transmittal Letter, 12/17/2010: Title XI of Financial Institutions Reform, Recovery, and Enforce Act of 1989 (FIRREA – Pub. L. 101-73, 103 Stat. 183, 12 USC § 3331 et seq.); the Regulations and Statements of General Policy promulgated under the authority of FIRREA, as specified in 12 CFR Part 323; the Appraisal Requirements of the Federal Deposit Insurance Corporation; the Uniform Standards of Professional Appraisal Practice promulgated by the Appraisal Foundation.