THE STATE TAX COMMISSION OF MISSOURI
|CERNER PROPERTY DEVELOPMENT, INC,||)||Appeal Nos. 18-30023 through 18-30024|
|GAIL MCCANN BEATTY, ASSESSOR, JACKSON COUNTY, MISSOURI||)
DECISION AND ORDER
The decisions of the Board of Equalization of Jackson County (BOE) are SET ASIDE. Cerner Property Development, Inc., (Complainant) presented substantial and persuasive evidence to rebut the presumption of correct assessment by the BOE and to establish the true value in money (TVM) of the properties in these appeals as of January 1, 2018 under the economic conditions of January 1, 2017.
Complainant appeared by Counsel Brian Howes.
Respondent appeared by Counsel Tamika Logan.
Case heard and decided by Chief Counsel Maureen Monaghan (Hearing Officer).
Complainant appealed the valuation of the subject properties on the ground of overvaluation. The value as of January 1 of the odd numbered year remains the value of January 1 of the following even numbered year unless there is new construction or improvement to the property. Section 137.115.1. The State Tax Commission (STC) takes this appeal to determine the TVM of the subject property as of January 1, 2018, under the economic conditions that existed as of January 1, 2017.
The Hearing Officer, having considered all of the competent evidence upon the whole record, enters the following Decision and Order.
FINDINGS OF FACT
- Jurisdiction over these appeals is proper. Complainant timely appealed to the STC.
- Evidentiary Hearing. The issue of overvaluation was presented at an evidentiary hearing held on June 3, 2019, at the Jackson County Government Building, Kansas City, Missouri.
- Identification of Subject Property. The subject properties are identified as 49-130-03-10-00-0-00-000 and 49-130-03-11-00-0-00-000 located at 9501 Hillcrest Road, Kansas City, Missouri. The land was acquired in 2013 and the improvements were constructed in 2017. The site is approximately 71.66 acres. The improvements consist of two connected office buildings with surface parking. The buildings have 858,561 square feet of gross building area or 746,510 square feet net rentable area. The buildings include a conference space, clinic, fitness area, cafeteria, lobby, dock, central plant and mechanical penthouses. It is occupied by the owner.
- Respondent assessed the subject property
|Appeal Number||Parcel Number||TVM|
The properties were classified as commercial.
- Board of Equalization. The BOE sustained the assessment of the properties.
- Complainant’s Evidence. Complainant offered as evidence the following exhibits:
|A||Appraisal Report of Gerald Maier (Maier)||Admitted|
|B||Written Direct Testimony (WDT) of Maier||Admitted|
Complainant offered the appraisal report and testimony of Maier. Maier is an appraiser with Mainland Valuation Services. He is a Certified General Appraiser in the States of Missouri, Kansas, Oklahoma, and Nebraska and a member of the Appraisal Institute.
He appraised the subject properties with an effective date of January 1, 2018. Maier determined the highest and best use of the property as improved was as a single tenant office building. He developed the cost, income and sales comparison approaches.
Under the cost approach, Maier developed a valuation for the land reviewing the sale prices of land within the market. He estimated the replacement cost new and depreciation. The property suffers from functional obsolescence due to super-adequacy and economic obsolescence from the lack of market demand. The indication of value under this approach was $87,260,000, however, Maier stated that he believes this approach is the least reliable due to the large amount of depreciation and because investors would rely on the income and sales comparison approaches.
Under the sales comparison approach, Maier looked at three categories of sales (build-to-suit sale-leasebacks, second generation leased fee sales, and fee simple sales.) After selecting the most appropriate sales and making adjustments to their sale prices, the indication of value was $77,270,000.
Under the income approach, Maier consider three categories of leases and analyzed the market rents. Maier concluded a market rent of $21 per square foot. He also looked to the market to develop vacancy and collection rate as well as expense rates. He further developed a loaded capitalization rate of 12%. The indication of value under this approach was $78,360,000.
Maier gave significant consideration to the sales comparison approach. The income approach was considered generally supportive of the value indication using the sales comparison approach. Maier reconciled the valuations for an opinion of value of $77,500,000.
- Respondents’ Evidence. Respondent offered as evidence the following exhibits:
|1||Screen Shots of Property Record Card||Admitted|
|3||Parcel 49-130-03-10-00-0-00-000 Cost and Income Valuation||Admitted|
|4||Parcel 49-130-03-11-00-0-00-000 Cost Valuation||Admitted|
|5||Valbridge Property Advisor’s Appraisal Report||Excluded|
|6||WDT Luke Walters (Walters)||Admitted|
Complainant moved to exclude all exhibits for being untimely filed. An order required the parties to file exhibits on or before March 28, 2018. Respondent did not file their exhibits until April 2, 2019. The motion was overruled as the exhibits were part of the assessment file, Respondent’s opinion of value had not changed and Complainant had the exhibits sixty days prior to hearing.
Complainant objected to Exhibit 5 as hearsay, lack of foundation and relevance. Exhibit 5 is an appraisal report. The appraiser and author of the report was not present for cross-examination and did not testify to the report. The appraisal report is dated June 30, 2017 and the improvements were not completed at the time of valuation. The objections were sustained.
Walters testified for Respondent. He was employed by Respondent on October 29, 2018 as the commercial supervisor. He is a certified appraiser in Missouri and Kansas. He did not have an opinion of value for the properties. He testified to Respondent’s computer assisted mass appraisal of the property. He understood that the valuation was based on the income approach with consideration to Exhibit 5. Walters testified that permit information is kept by the Respondent. The information is used for cost information on the property. He identified the property record cards on the subject property and the cost approaches for each parcel and the income approach for one parcel.
On cross-examination, Walters agreed that in comparing the income approach by the Respondent and Complainant the market rent used was $26 per square foot and $21 per square foot; the vacancy and collection rates were 10% and 16%; the expense rates were 30% and 30.78%; and the capitalization rates were 11% and 12%, respectively.
Walters also testified that if he used the same rent, vacancy and collection rate, expense rate and capitalization rate to develop an income approach for Parcel 49-130-03-11-00-0-00-000, as was used by Respondent for the other parcel, the indication of value would have been approximately $62,000,000.
- Rebuttal Evidence of Complainant. Complainant called Scott Siemers (Siemers) as a rebuttal witness. He is Vice-President for Complainant. He was involved in the purchase of the property as well as the construction of the subject properties. He testified as to the Marion Labs property. He stated that Complainant purchased the parcels for $12,000,000. At the time of the purchase, the parcels were improved with five buildings of 792,000 square feet and a four-story garage. The property had been on the market for several years. It was initially listed at $100,000,000. It was constructed for a single tenant. After Marion Labs vacated the building, one floor of the building was rented.
- Presumption of Correct Assessment Rebutted – TVM Established. Complainant presented substantial and persuasive evidence to rebut the presumption of correct assessment by the BOE and to establish the TVM of the subject property as of January 1, 2018 at $77,500,000.
CONCLUSIONS OF LAW AND DECISION
The STC has jurisdiction to hear this appeal and to correct any assessment which is shown to be unlawful, unfair, arbitrary, or capricious, including the application of any abatement. The Hearing Officer shall issue a decision and order affirming, modifying or reversing the determination of the BOE, and correcting any assessment which is unlawful, unfair, improper, arbitrary, or capricious. Article X, Section 14, Mo. Const. of 1945; Sections 138.430, 138.431, 138.431.4.
Basis of Assessment
The Constitution mandates that real property and tangible personal property be assessed at its value or such percentage of its value as may be fixed by law for each class and for each subclass. Article X, Sections 4(a) and 4(b), Mo. Const. of 1945. The constitutional mandate is to find the true value in money for the property under appeal. By statute, real property and tangible personal property are assessed at set percentages of true value in money: residential property at 19%; commercial property at 32%; agricultural property at 12%; personal property at 33.33%. Section 137.115.5.
Weight to be Given Evidence
The Hearing Officer is not bound by any single formula, rule, or method in determining true value in money and is free to consider all pertinent facts and estimates and give them such weight as reasonably they may be deemed entitled. The relative weight to be accorded any relevant factor in a particular case is for the Hearing Officer to decide. St. Louis County v. Security Bonhomme, Inc., 558 S.W.2d 655, 659 (Mo. banc 1977); St. Louis County v. STC, 515 S.W.2d 446, 450 (Mo. 1974); Chicago, Burlington & Quincy Railroad Company v. STC, 436 S.W.2d 650 (Mo. 1968).
The Hearing Officer, as the trier of fact, may consider the testimony of an expert witness and give it as much weight and credit as deemed necessary when viewed in connection with all other circumstances. Beardsley v. Beardsley, 819 S.W.2d 400, 403 (Mo. App. W.D. 1991). The Hearing Officer, as the trier of fact, is not bound by the opinions of experts but may believe all or none of the expert’s testimony or accept it in part or reject it in part. Exchange Bank of Missouri v. Gerlt, 367 S.W.3d 132, 135-36 (Mo. App. W.D. 2012).
Complainant’s Burden of Proof
To obtain a reduction in assessed valuation based upon an alleged overvaluation, the Complainant must prove the true value in money of the subject property on the subject tax day. Hermel, Inc., v. State Tax Commission, 564 S.W.2d 888, 897 (Mo. banc 1978). True value in money is defined as the price that the subject property would bring when offered for sale by one willing but not obligated to sell it and bought by one willing or desirous to purchase but not compelled to do so. Rinehart v. Bateman, 363 S.W.3d 357, 365 (Mo. App. W.D. 2012); Cohen v. Bushmeyer, 251 S.W.3d 345, 348 (Mo. App. E.D. 2008); Greene County v. Hermel, Inc., 511 S.W.2d 762, 771 (Mo. 1974). True value in money is defined in terms of value in exchange and not in terms of value in use. Stephen & Stephen Properties, Inc. v. State Tax Commission, 499 S.W.2d 798, 801-803 (Mo. 1973). In sum, true value in money is the fair market value of the subject property on the valuation date. Hermel, Inc., 564 S.W.2d at 897.
“’True value’ is never an absolute figure, but is merely an estimate of the fair market value on the valuation date.” Drury Chesterfield, Inc., v. Muehlheausler, 347 S.W.3d 107, 112 (Mo. App. E.D. 2011), citing St. Joe Minerals Corp. v. State Tax Comm’n of Mo., 854 S.W.2d 526, 529 (Mo. App. E.D. 1993). “Fair market value typically is defined as the price which the property would bring when offered for sale by a willing seller who is not obligated to sell, and purchased by a willing buyer who is not compelled to buy.” Drury Chesterfield, Inc., 347 S.W.3d at 112 (quotation omitted).
A presumption exists that the assessed value fixed by the BOE is correct. Rinehart, 363 S.W.3d at 367; Cohen, 251 S.W.3d at 348; Hermel, Inc., 564 S.W.2d at 895. “Substantial and persuasive controverting evidence is required to rebut the presumption, with the burden of proof resting on the taxpayer.” Cohen, 251 S.W.3d at 348. Substantial evidence can be defined as such relevant evidence that a reasonable mind might accept as adequate to support a conclusion. Cupples Hesse Corp. v. State Tax Commission, 329 S.W.2d 696, 702 (Mo. 1959). Persuasive evidence is evidence that has sufficient weight and probative value to convince the trier of fact. Cupples Hesse Corp., 329 S.W.2d at 702. The persuasiveness of evidence does not depend on the quantity or amount thereof but on its effect in inducing belief. Brooks v. General Motors Assembly Division, 527 S.W.2d 50, 53 (Mo. App. 1975). See also, 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).
There is no presumption that the taxpayer’s opinion is correct. The taxpayer in a STC appeal still bears the burden of proof. The taxpayer is the moving party seeking affirmative relief. Therefore, the Complainant bears the burden of proving the vital elements of the case, i.e., the assessment was “unlawful, unfair, improper, arbitrary or capricious.” Westwood Partnership, 103 S.W.3d 152 (Mo. App. E.D. 2003); Daly v. P. D. George Co., 77 S.W.3d 645 (Mo. App. E.D. 2002); Reeves v. Snider, 115 S.W.3d 375 (Mo. App. S.D. 2003); Industrial Development Authority of Kansas City v. State Tax Commission of Missouri, 804 S.W.2d 387, 392 (Mo. App. W.D. 1991).
Methods of Valuation
Proper methods of valuation and assessment of property are delegated to the Commission. It is within the purview of the Hearing Officer to determine the method of valuation to be adopted in a given case. See, Nance v. STC, 18 S.W.3d 611, 615 (Mo. App. W.D. 2000); Hermel, Inc., 564 S.W.2d at 897; Xerox Corp. v. STC, 529 S.W.2d 413 (Mo. banc 1975). Missouri courts have approved the comparable sales or market approach, the cost approach, and the income approach as recognized methods of arriving at fair market value. St. Joe Minerals Corp. v. STC, 854 S.W.2d 526, 529 (App. E.D. 1993); Aspenhof Corp. v. STC, 789 S.W.2d 867, 869 (App. E.D. 1990); Quincy Soybean Company, Inc., v. Lowe, 773 S.W.2d 503, 504 (App. E.D. 1989), citing Del-Mar Redevelopment Corp v. Associated Garages, Inc., 726 S.W.2d 866, 869 (App. E.D. 1987); and State ex rel. State Highway Comm’n v. Southern Dev. Co., 509 S.W.2d 18, 27 (Mo. 1974).
In this case, Complainant’s evidence was substantial. Substantial evidence can be defined as such relevant evidence that a reasonable mind might accept as adequate to support a conclusion. Cupples Hesse Corp. v. State Tax Commission, 329 S.W.2d 696, 702 (Mo. 1959). The testimony and the appraisal report of Complainant’s expert was credible. The expert based his reports on inspection of the property, cost of construction, similar comparable properties and the income potential and market’s reaction.
Complainant’s evidence was persuasive. Persuasive evidence is evidence that has sufficient weight and probative value to convince the trier of fact. Cupples Hesse Corp., 329 S.W.2d at 702. Complainant’s evidence included the report and thorough analysis by a certified appraiser. Consequently, it is reasonable to conclude that the BOE’s determination of value was incorrect and that Complainant’s opinion of value is correct.
The valuations for the subject properties as determined by the BOE’s for the subject tax day are SET ASIDE. The TVM of the subject properties as of January 1, 2018, is set at:
|Appeal Number||Parcel Number||TVM|
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, MO 65102-0146, and a copy of said application must be sent to each person at the address listed below in the certificate of service.
Failure to state specific facts or law upon which the application for review is based will result in summary denial. Section 138.432, RSMo
The Collector of Jackson County, Missouri, as well as the collectors of all affected political subdivisions therein, shall continue to hold the disputed taxes pending the possible filing of an Application for Review, unless said taxes have been disbursed pursuant to a court order under the provisions of Section 139.031.8, RSMo.
Any Finding of Fact which is a Conclusion of Law or Decision shall be so deemed. Any Decision which is a Finding of Fact or Conclusion of Law shall be so deemed.
SO ORDERED this 1st day of July, 2019
STATE TAX COMMISSION OF MISSOURI
Certificate of Service
I hereby certify that a copy of the foregoing has been sent electronically or mailed postage prepaid this 1st day of July 2019, to: Complainants(s) counsel and/or Complainant, the County Assessor and/or Counsel for Respondent and County Collector.
 All statutory references are to RSMo 2000, as amended.