State Tax Commission of Missouri
CHRISTOPHER & MAGGIE HOFFMANN,)
v.) Appeal Number 06-10423
PHILIP MUEHLHEAUSLER, ASSESSOR,)
ST. LOUIS COUNTY,MISSOURI,)
DECISION AND ORDER
Assessment made by the Assessor is SET ASIDE.Hearing Officer finds presumption of correct assessment rebutted.True value in money for the subject property for tax year 2006 is set at $155,900, commercial assessed value of $49,890.
Complainant, Christopher Hoffman, appeared in person and by Counsel Shulamith Simon,Clayton,Missouri.
Respondent appeared by Counsel, Paula J. Lemerman, Associate County Counselor.
Case heard and decided by Senior Hearing Officer W. B. Tichenor.
The Commission takes this appeal to determine the true value in money for the subject property on January 1, 2006.
Complainants appeal, on the ground of overvaluation, the decision of the St. Louis County Assessor, setting the appraised value for the property under appeal at $391,200, assessed value of $125,190, as commercial property.Complainants proposed a value of $140,000, assessed value of $44,800.A hearing was conducted on December 6, 2007, at theSt. LouisCountyGovernmentCenter,Clayton,Missouri. Transcript of hearing filed with Commission on January 9, 2008.
The Hearing Officer, having considered all of the competent evidence upon the whole record, enters the following Decision and Order.
Complainant Christopher Hoffman testified on behalf of Complainants in support of a valuation based upon the purchase of the subject tract and a conversion of the improvement on the property at the time of purchase.Mr. Hoffman also provided testimony relative to a valuation utilizing the income approach to value.The following exhibits were offered and received into evidence:
Exhibit A – Plat of subject property
Exhibit B – Certified Copy of Quit Claim Deed, dated January 26, 2006
Exhibit C – Plot Plan
Exhibit D – Floor Plan
Exhibit F – Photograph of front of subject building
Exhibit G – Photograph of front and west side of subject building
Exhibit H – Photograph of front and east side of subject building
Exhibit J – Photograph of the property before the conversion of the structure
Exhibit K – Photographs of the roof removal and reinstallation for the conversion
Exhibit L – Construction Cost Summary
Exhibit M – Written Direct Testimony of Mr. Hoffman, part of Answer 21 stricken, by order dated November 27, 2007.
Exhibits E & I were filed with the Hearing Officer prior to Evidentiary Hearing, but withdrawn at Hearing.
Respondent placed into evidence the testimony of Mr. David Winkler, appraiser forSt. LouisCounty. The following exhibits were offered and received into evidence.
Exhibit 1 – Certified Property Record Card containing cost and income approaches to value
Exhibit 2 – Certified Copy of Quit Claim Deed
Exhibit 3 – Certified Copy of Certificate of Value
Exhibit 4 – Photographs of subject property
Exhibit 5 – Written Direct Testimony of Mr. Winkler, Questions and Answers 9 – 15, and 18 stricken by Order, dated November 27, 2007.
Exhibit 6 – 2007 BOE Document
The stricken questions and answers were made as an offer of proof by Counsel for Respondent at hearing.Counsel for Complainant objected to the Offer of Proof.Ruling of November 27, 2007, sustained.Exhibit 6 was only received as to talking point number 3.None of the other portions of the document are relevant to the value issue in the present appeal.
Exhibit 1 advocated a value under an income approach of $200,900, a value under the cost approach of $226,800.
FINDINGS OF FACT
1.Jurisdiction over this appeal is proper.Complainants timely appealed to the State Tax Commission from the Assessor’s valuation.Complainants did not receive a notice of increased assessment whereby an appeal to the Board of Equalization could be made.
2.The subject property is located at 160 Manion Park Road, Florissant, Missouri.The property is identified by locator number 09K641109.The property consists of .16 of an acre lot (90.4 x 78.5 x 90.4 x 76.66).As of tax date (January 1, 2006) the lot was improved with a 28 x 52 two-story brick and vinyl-sided office building with two single vehicle garage bays.The improvement was a single-story frame four bays garage converted into the two-story structure.The conversion occurred in late 2005 and early 2006.The property was occupied by early February 2006.
3.Complainant’s evidence was substantial and persuasive to rebut the presumption of correct assessment.
4.The total cost of the conversion of the subject structure was $140,900 – $127,569 (labor and materials – Exhibit I) + $500 (crane for roof removal and replacement – Testimony of Mr. Hoffman) + $12,800 (10% profit margin – Testimony of Mr. Hoffmann), = $140,869, rounded to $140,900.The value of the land was $15,000 (Testimony of Mr. Hoffman, Exhibit 3).
5.The true value in money of the subject property as of January 1, 2006 was $155,900. (See, Hearing Officer Finds Value, infra).
CONCLUSIONS OF LAW AND DECISION
The Commission has jurisdiction to hear this appeal and correct any assessment which is shown to be unlawful, unfair, arbitrary or capricious.Article X, section 14, Mo. Const. of 1945; Sections 138.430, 138.431, RSMo.The hearing officer shall issue a decision and order affirming, modifying or reversing the determination of the Assessor, and correcting any assessment which is unlawful, unfair, improper, arbitrary, or capricious.Section 138.431.4, RSMo.
Presumption In Appeals
Notwithstanding the provision of Section 138.431.3, RSMo – “There shall be no presumption that the assessor’s valuation is correct,” – the Supreme Court of Missouri has held, “A tax assessor’s valuation is presumed correct.”Snider v. Casino Aztar/Aztar Missouri Gaming Corp., 156 S.W.3d 341 (Mo. 2005).Citing to Hermel, supra; and Cupples Hesse Corp. v. State Tax Commission, 329 S.W.2d 696, 702 (Mo. 1959).
The presumption of correct assessment is rebutted when the taxpayer, or respondent when advocating a value different than that determined by the Assessor, presents substantial and persuasive evidence to establish that the assessor’s valuation is erroneous and what the fair market value should have been placed on the property.Snider, Hermel & Cupples Hesse, supra.
In the present case, because no notice of increased assessment was sent to the taxpayer, the Hearing Officer, following the Supreme Court holding in Snider, finds that the presumption of correct valuation by the Assessor has been rebutted by Complainant’s evidence.In addition, Exhibit 1 also rebuts that the Assessor’s original valuation at $391,200 was correct.
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.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).It is the fair market value of the subject property on the valuation date.Hermel, supra.
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 is 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.
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.
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, at 615 (Mo. App. W.D. 2000); Hermel, supra;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. Div. 2 1974).
Complainants’ Burden of Proof
In order to prevail, Complainants 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, 2005.Hermel, Inc. v. State Tax Commission, 564 S.W.2d 888, at 897.Substantial evidence can be defined as such relevant evidence as a reasonable mind might accept as adequate to support a conclusion.See, Cupples-Hesse Corporation v. State Tax Commission, 329 S.W.2d 696, 702 (Mo. 1959).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.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).
Complainants’ evidence was substantial and persuasive to rebut the presumption of correct assessment.It was not substantial and persuasive to establish the value proposed of $140,000.However, the evidence on the record as addressed below did establish true value in money for the property under appeal.
Hearing Officer Finds Value
The owner of property is generally held competent to testify to its reasonable market value. Boten v. Brecklein, 452 S.W.2d 86, 95 (Sup. 1970).The owner’s opinion is without probative value however, where it is shown to have been based upon improper elements or an improper foundation.Shelby County R-4 School District v. Hermann, 392 S.W.2d 609, 613 (Sup. 1965).The opinion of value presented Mr. Hoffman omitted the cost of a crane for the removal and replacement of the roof on the renovated structure and any profit for the renovation project.However, the opinion of value tendered was based upon all other costs for the renovation and the amount which had been given in trade for the subject tract.
Actual Cost of Construction
The actual cost, including a contractor’s profit, incurred in converting the one story, four bays, garage into a two story office building with two garage bays is substantial and persuasive evidence to establish an indicated value under the cost approach.Mr. Hoffman is a contractor, with 20 years experience in construction.He has extensive experience in the costs for the type of construction work which was necessary to convert a garage into an office and garage building.
The actual cost figures provided in Exhibit I along with Mr. Hoffman’s testimony are sufficient to establish that the replacement cost new of the subject improvement on January 1, 2006, would be $140,900.There was no evidence to rebut the actual construction costs.The cost methodology in Exhibit 1 is unpersuasive to establish value in the face of the actual costs expended for the subject rehab project.The appropriate method for arriving at the indicated true value in money of the subject property is the actual costs of construction plus the land value.
Evidence of the actual sales price of property is admissible to establish value at the time of an assessment, provided that such evidence involves a voluntary purchase not too remote in time.The actual sale price is a method that may be considered for estimating true value.The actual sales price, between a willing seller who is not obligated to sell and a willing buyer who is not compelled to buy, establishes an outer limit on the value of real property. St. Joe Minerals Corp. v. STC, 854 S.W.2d 526 (App. E.D. 1993).
The amount of $15,000 for land value is based upon a timely transaction by which the Complainants took title to the subject lot in exchange for the amount of $15,000 which was owed on construction work which Mr. Hoffmann had done for the owner of the lot.It was a transaction between a willing buyer and willing seller at a time relevant to the tax date of
January 1, 2006.The consideration was a cash equivalent – $15,000 work of construction work owed by the seller to the buyer.There was no special financing involved.The transaction was for all intents and purposes a sale of the lot, as then improved for $15,000.
The fact that the property was not advertised in an open market environment does not negate that the transaction sets value for the land.There is no other evidence of the fair market value of the subject tract.There is no evidence in the record whereby the Hearing Officer can conclude that if the property had been placed on the open market as it existed prior to the conversion of the structure that it would have demanded a value greater than $15,000.
The land value set out in Exhibit 1 is not supported by any sources.For the Hearing Officer to conclude a land value as set forth in Exhibit 1 would be to engage in an act of pure speculation and conjecture.The only evidence of land value is the barter transaction.It is credible evidence.It is persuasive. The owner’s opinion that the value of the subject land was $15,000 is well founded.The debt for construction work owed by the seller of the land was $15,000.Mr. Hoffman was willing to accept, in the place of cash payment for his bill, the title to the land.
Exclusion of Unsupported Opinions of Value
The Commission in February of 2007 established its standard relative to unsupported opinions of value.In the Order ruling on objections issued by the Hearing Officer November 27, 2007, the Hearing Officer applied that standard.The relevant provisions of that Order are set out as follows:
An expert’s opinion must be founded upon substantial information, not mere conjecture or speculation, and there must be a rational basis for the opinion.Missouri Pipeline Co. v. Wilmes, 898 S.W.2d 682, 687 (Mo. App. E.D. 1995). The facts upon which an expert’s opinion is based, like the facts sufficient to support a verdict, must measure up to the legal requirements of substantiality and probative force; the question of whether such opinion is based on and supported by sufficient facts or evidence to sustain the same is a question of law for the court.Robinson v. Empiregas Inc. of Hartville, 906 S.W.2d 829 (S.D. 1995).The Hearing Officer cannot ignore a lack of support in the evidence for calculations and adjustments made by an expert witness in the application of any particular valuation approach.Drey v. State Tax Commission, 345 S.W.2d 228, 234-236 (Mo. 1961); Snider v. Casino Aztar/Aztar Missouri Gaming Corp., 156 S.W.3d, 341, 348 (Mo. 2005).
An expert’s opinions must be supported by market derived facts.It is not possible to find that Mr. Winkler’s opinion of value rises to the level of substantial and persuasive evidence. The facts upon which the expert’s opinion is based in the development of his cost approach are not demonstrated to have been derived and supported by sufficient market data and analysis.The test requires that the underlying market data be tested for accuracy before it can be conclude that the appraiser’s opinion is accurate.The opinion of value presented in the testimony (Q & A 9, Exhibit 5), and objected to, is founded on an insufficient basis. See, Cook Composites & Polymers v. Rinehart, STC Appeal Nos. 03-32096 & 04-32002, Commission Order Affirming Hearing Officer Decision, 2/26/07; Hearing Officer Decision, 11/14/06.
Following the Cook Composites standard, the conclusion of value derived under the income approach by Respondent’s expert was also excluded.In like manner, no probative weight could be given to the conclusion of value derived from Mr. Hoffman’s income approach, no withstanding that both approaches to value were similar in various respects.Neither was “founded upon substantial information” shown to be “supported by market derived facts” as required by Cook Composites.The bare recitation of the factors which made up each income approach, without the supporting market information does not meet the Cook Composites standard.
The assessed valuation for the subject property as determined by the Assessor forSt. LouisCountyfor the subject tax day is SET ASIDE.
The assessed value for the subject property for tax year 2006 is set at $49,890.
A party may file with the Commission an application for review of this decision within thirty (30) days of the mailing of such decision.The application shall contain specific grounds upon which it is claimed the decision is erroneous.Failure to state specific facts or law upon which the appeal is based will result in summary denial.Section 138.432, RSMo 2000.
If an application for review of this decision is made to the Commission, any protested taxes presently in an escrow account in accordance with this appeal shall be held pending the final decision of the Commission and an order to the Collector to release and disburse the impounded taxes.§139.031.3, RSMo.If no application for review is received by the Commission within thirty (30) 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.If any or all protested taxes have been disbursed pursuant to Section 139.031(8), RSMo, either party may apply to the circuit court having jurisdiction of the cause for disposition of the protested taxes held by the taxing authority.
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 January 18, 2008.
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 18thday of January, 2008, to:Shulamith Simon, 230 S. Bemiston, Suite 1100, St. Louis, MO 63105, Attorney for Complainants; Paula Lemerman, Associate County Counselor, Attorney for Respondent; Philip A. Muehlheausler, Assessor; John Friganza, Collector, County Government Center, 41 South Central Avenue, Clayton, MO 63105.