State Tax Commission of Missouri
|CINEMA 16 LLC||)|
|-vs-||)||Appeal No. 13-33030|
|RICK KESSINGER, ASSESSOR,||)|
|GREENE COUNTY, MISSOURI||)|
DECISION AND ORDER
Decision of the Greene County Board of Equalization sustaining the assessment made by the Assessor is SET ASIDE. Complainant presents substantial and persuasive evidence to rebut the presumption of correct assessment by the Board of Equalization. Market value is set at $4,300,000 (commercial assessed value $1,376,000).
An evidentiary hearing was held on March 5, 2015, in the Historic Greene County Courthouse, Springfield, Missouri.
Complainant represented by Patrick J. Boyle, Attorney at Law.
Respondent appeared by Aaron M. Klusmeyer, Attorney at Law.
Complainant submitted the following exhibits:
A CV of Thomas Slack, Appraiser
B Appraisal report by Thomas Slack
C Written Direct Testimony of Thomas Slack
Respondent submitted the following exhibits:
1 Appraisal report of Conan Dougherty
2 Written Direct Testimony of Conan Dougherty
Complainant appeals, on the grounds of overvaluation and discrimination, the decision of the Greene County Board of Equalization, which sustained the Assessor’s valuation of the subject property. No evidence of discrimination was presented at hearing and thus said issue is waived. The Commission takes this appeal to determine the true value in money for the subject property on January 1, 2013. The value as of January 1 of the odd numbered year remains the value as of January 1 of the following even numbered year unless there is new construction and improvement to the property. Section 137.115.1 RSMo
DECISION AND ORDER
The Hearing Officer, having considered all of the competent evidence upon the whole record, enters the following Decision and Order.
FINDINGS OF FACT
- Jurisdiction. Jurisdiction over this appeal is proper. Complainant timely appealed to the State Tax Commission from the decision of the Greene County Board of Equalization.
- Identification of Subject Property. The subject property is identified by map parcel number 88-18-12-305-147. It is further identified as 4005 South Avenue, Springfield, Greene County, Missouri.
- Description of Subject Property. The subject property is an irregularly shaped site containing 9.39 acres, more or less. The site is improved with a 54,834 square foot brick over block building designed to be used as a 16 screen sloped-floor theater. A portion of the interior has been converted to stadium (stair step) seating. (Stadium seating almost always enhances attendance but cannot accommodate as many patrons.) The improvements contain an 8,011 square foot mezzanine space. The improvements were constructed in 1995/1996 and have typical interior finish. The site is further improved with 631 stripped parking spaces, 16 handicapped parking spaces and 2 loading spaces. The property has a tree line along the western boundary and minimal landscaping. Ex. B, p. 26-27.
- Highest and Best Use. The highest and best use of a property depends upon what is legally permissible; physically possible; financially feasible; and produces maximum profitability. The current operation as a theater or, alternatively, as a church or school, is the highest and best use. Ex. B, p. 30.
- Functional Obsolescence. New theaters are being built with only 12 to 14 screens. Ex. B, p. 36. New theater buildings allow for 3,900 to 4,300 square feet per screen. The subject property only allows for 3,421 square feet per screen resulting in auditoriums that are not as comfortable as the current market demands. Ex. B, p. 42. Additionally, new digital projection equipment reduces the need for mezzanine space. Ex. B, p. 23. Newer theaters include amenities such as lounge seating with recliners and concession areas which have bars rather than game rooms. Current attendance is not adequate to justify correcting this obsolescence. Ex. B, p. 23.
- External Obsolescence. A number of factors create economic obsolescence in the subject property. In the recent past, 29 new screens have been added in the subject’s immediate area. This, coupled with competition from Blockbuster and NetFlix; and the movie industry producing fewer movies, has resulted in a reduction in the subject’s attendance by approximately 40%, with no likelihood of improving attendance. Ex. B, p. 23.
- Complainant’s Income Approach Reliable. Complainant’s income approach indicated a value of $4,370,000. Complainant’s appraiser testified that he gave most weight to the income approach. However, in his appraisal report he indicated that he only gave this approach some weight but points out that varying terms and rental rates make lease analysis inconsistent. Ex. B, p. 56. He based his income calculations on actual historical income of the subject because comparable property revenues were not available for comparison. Ex. B, p. 48. Complainant’s appraiser testified that alternate uses, such as big box retail, would not produce a higher income for the subject.
- Complainant’s Cost Approach Not Reliable. Complainant’s cost approach indicates a value of $4,370,000. Complainant’s appraiser gave no weight to this approach because of the age of the property and because the functional and economic obsolescence limits the reliability of the cost approach. Ex. B, p. 56.
- Complainant’s Comparable Sales Approach. The appraiser testified that, as of the tax day, theaters are bought and sold based upon attendance and value per screen. Complainant’s appraiser used eight comparables to determine his opinion of value. Four of the comparables were actual sales; one was the sale of a leased fee; two were listings; and one was an allocation. Only one comparable was in Springfield. Complainant’s appraiser testified that, in addition to attempting to find comparables of similar size, age and condition; he also did “ring” analysis to determine the similarity of relevant characteristics of the proposed comparables. A ring analysis looks at demographics such as population, number of households, and household income (buying power). The appraiser looked at rings of one mile and three miles. Based upon this ring analysis, the appraiser could make location adjustments, even though the comparables were located in different states. Ex. B, p. 41 – 43. After adjustments, the sales indicated a range of value between $160,000 and $325,000 per screen; with the majority indicating a range of value between $215,000 and $275,000 per screen. Based upon these comparables, the appraiser concluded a value of $260,000 per screen or $4,160,000. Ex. B, p. 42, 56.
- Respondent’s Income Approach not Reliable. Respondent’s appraiser testified that he should not have included FF&E in his income approach. Ex. 1, pg. 28. He testified that he was not aware of whether or not his comparable leases were build-to-suit leases or renewals. He testified that all the information he used came directly from appraisals submitted by two taxpayers. He utilized an average of the lease information supplied. He testified that, if those leases have all been original leases, his proposed value would not reflect any change in the income producing capability of the property over the life of the property. Respondent’s appraiser demonstrated that market leases should be 8% to 12% of theater revenue. The subject’s lease is currently 17.69% of revenue. Rent per screen should be between $38,892 and $48,186 per screen. The subject rent is $62,691 per screen. By averaging comparable lease information, Respondent’s appraiser determined that a per screen lease rate of $48,000 was supported. No adjustments were made to any of the comparables. Ex. 1, pg. 26. Using the $48,000 per screen rent, deducting vacancy and collection and 5% expenses and capitalizing the result at 10.5%, Respondent determined a value for the subject of $6,601,000, without adjustment for FF&E. Respondent’s appraiser also indicated that the range of value under the income approach was $5,200,000 to $8,453,000, but didn’t indicate where these numbers came from. Ex. 1, pg. 28.
Respondent’s income approach is not reliable inasmuch as Respondent’s appraiser based his opinion of value of the averaged rent per screen. This is not an acceptable appraisal methodology. As indicated by Respondent’s appraiser, the value was more than $3,000,000 different between the low end of the range and high end of the range. The appraiser’s job was to study the various comparables and follow some logical analysis tending to demonstrate where the characteristics of the subject would place it within the range of possible values. This cannot be accomplished by merely determining the mathematical average of possible values.
- Respondent’s Cost Approach not Reliable. Respondent’s appraiser testified that he should not have included FF&E in his cost approach. He further testified that if he had valued the land as the assessor had originally, his property value would be less than the value proposed by Complainant.
The age of the property, the inclusion of FF&E in the cost calculations, and the potentially discriminatory adjustment of land value makes the cost approach not reliable.
- Respondent’s Sales Comparison Approach not Reliable. Six of Respondent’s comparables were located in other states. Respondent’s appraiser testified that he made no location adjustments because “it is assumed that they are located near other big box and strip retail sites”. Ex. 1, pg. 24, 25. The assumption that theaters are located near big box or retail sites is not unreasonable. What is unreasonable is the assumption that retail sites all have the same impact on value. More heavily populated areas and/or areas with populations with more expendable income could impact the value of the retail site. Respondent’s appraiser testified that sales with leased fees would reflect a higher value than fee simple sales. He further testified that he did not verify any of the information concerning his comparable sales to determine if they had leases in place. Respondent’s appraiser presented eight comparables indicating a per screen sales price of $149,000 to $678,000. The average sales price per screen was $401,625 which he rounded to $400,000 per screen as his estimate of value for the subject property. Ex. 1, pg. 24, 25.
Respondent’s sales comparison approach is not reliable because the appraiser did little to test the comparability of the sales he used. No location adjustments were made. Minimal size adjustments were made. The bulk of his analysis consisted of determining sales price per screen, averaging the results and applying it to the subject property.
- No New Property Improvements. There is no evidence of new construction of property improvements between January 1, 2013 and January 1, 2014, which would warrant a change in value between the odd and even-numbered years.
- Presumption of Correct Assessment Rebutted. 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, 2013 and January 1, 2014, to be $4,300,000 (commercial assessed value $1,376,000), as proposed.
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. 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. Article X, Section 14, Mo. Const. of 1945; Sections 138.430, 138.431, 138.431.4, RSMo.
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 and tangible personal property are assessed at set percentages of true value in money. Section 137.115.5, RSMo – residential property at 19% of true value in money; commercial property at 32% of true value in money and agricultural property at 12% of true value in money.
Presumption In Appeal
There is a presumption of validity, good faith and correctness of assessment by the County Board of Equalization. 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).
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. Hermel, supra; Cupples-Hesse Corporation v. State Tax Commission, 329 S.W.2d 696, 702 (Mo. 1959).
Substantial evidence can be defined as such relevant evidence as a reasonable mind might accept as adequate to support a conclusion. See, Cupples-Hesse, supra. 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).
Complainant’s Burden of Proof
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, 2013 and January 1, 2014. Hermel, supra. 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.” 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). A valuation which does not reflect the fair market value (true value in money) of the property under appeal is an unlawful, unfair and improper assessment.
“Where the basis for a test as to the reliability of the testimony is not supported by a statement of facts on which it is based, or the basis of fact does not appear to be sufficient, the testimony should be rejected.” Carmel Energy at 783.
A taxpayer does not meet his burden if evidence on any essential element of his case leaves the Commission “in the nebulous twilight of speculation, conjecture and surmise.” See, Rossman v. G.G.C. Corp. of Missouri, 596 S.W.2d 469, 471 (Mo. App. 1980). 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).
Standard of Valuation
True value in money is defined in terms of value in exchange and not value in use. 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).
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 a 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:
- Buyer and seller are typically motivated.
- Both parties are well informed and well advised, and both acting in what they consider their own best interests.
- A reasonable time is allowed for exposure in the open market.
- Payment is made in cash or its equivalent.
- Financing, if any, is on terms generally available in the Community at the specified date and typical for the property type in its locale.
- 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.
Official and Judicial Notice
Agencies shall take official notice of all matters of which the courts take judicial notice. Section 536.070(6), RSMo. Courts will take judicial notice of their own records in the same cases. State ex rel. Horton v. Bourke, 129 S.W.2d 866, 869 (1939); Barth v. Kansas City Elevated Railway Company, 44 S.W. 788, 781 (1898).
In addition, courts may take judicial notice of records in earlier cases when justice requires or when it is necessary for a full understanding of the instant appeal. Burton v. Moulder, 245 S.W.2d 844, 846 (Mo. 1952); Knorp v. Thompson, 175 S.W.2d 889, 894 (1943); Bushman v. Barlow, 15 S.W.2d 329, 332 (Mo. banc 1929); State ex rel St. Louis Public Service Company v. Public Service Commission, 291 S.W.2d 95, 97 (Mo. banc 1956).
Courts may take judicial notice of their own records in prior proceedings involving the same parties and basically the same facts. In re Murphy, 732 S.W.2d 895, 902 (Mo. banc 1987); State v. Gilmore, 681 S.W.2d 934, 940 (Mo. banc 1984); State v. Keeble, 399 S.W.2d 118, 122 (Mo. 1966).
Investigation by Hearing Officer
In order to investigate appeals filed with the Commission, the Hearing Officer may inquire of the owner of the property or of any other party to the appeal regarding any matter or issue relevant to the valuation, subclassification or assessment of the property. The Hearing Officer’s decision regarding the assessment or valuation of the property may be based solely upon his inquiry and any evidence presented by the parties, or based solely upon evidence presented by the parties. Section 138.430.2, RSMo
Weight to be Given Evidence
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. 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 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. 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).
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).
The Supreme Court of Missouri has also held that 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. St. Joe Minerals Corp., supra
Opinion Testimony by Experts
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 State Tax Commission cannot ignore a lack of support in the evidence for adjustments made by the expert witnesses in the application of a 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).
The testimony of an expert is to be considered like any other testimony, is to be tried by the same test, and receives just so much weight and credit as the trier of fact may deem it entitled to when viewed in connection with all other circumstances. The Hearing Officer, as the trier of fact, has the authority to weigh the evidence and 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 may accept it in part or reject it in part. Beardsley v. Beardsley, 819 S.W. 2d 400, 403 (Mo. App. 1991); Curnow v. Sloan, 625 S.W. 2d 605, 607 (Mo. 1981); Scanlon v. Kansas City, 28 S.W. 2d 84, 95 (Mo. 1930).
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.
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).
The assessed valuation for the subject property as determined by the Assessor and sustained by the Board of Equalization for Greene County for tax years 2013 and 2014 is SET ASIDE. The Clerk is hereby Ordered to place a new assessed value of $1,376,000 (market value $4,300,000) on the subject property.
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 Greene 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.
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 10th day of April, 2015.
STATE TAX COMMISSION OF MISSOURI
Senior Hearing Officer
Certificate of Service
I hereby certify that a copy of the foregoing has been sent electronically or mailed postage prepaid this 10th day of April, 2015, to: Complainants(s) counsel and/or Complainant, the county Assessor and/or Counsel for Respondent and county Collector.
Patrick J. Boyle, Attorney for Complainant email@example.com
Aaron Klusmeyer, Attorney for Respondent firstname.lastname@example.org
Rick Kessinger, Assessor email@example.com
Shane Schoeller, Clerk firstname.lastname@example.org
Scott Payne, Collector email@example.com
Leah Betts, Collector firstname.lastname@example.org