State Tax Commission of Missouri
v.)Appeal(s) Number 05-20397 and 05-20398
ED BUSHMEYER, ASSESSOR,)
ST. LOUIS CITY,MISSOURI,)
DECISION AND ORDER
Decision of the St. Louis City Board of Equalization sustaining the assessment made by the Assessor is AFFIRMED.The State Tax Commission finds that subject property was not overvalued nor was the assessment grossly excessive as to constitute discrimination.
Complainant appeared by Counsel Thomas Campbell.
Respondent appeared by Counsel Carl Wes Yates.
Case heard and decided by Hearing Officer Maureen Monaghan.
The Commission takes these appeals to determine (1) the true value in money for the subject property on January 1, 2005 (overvaluation) and (2) whether there was an intentional plan by the assessing officials to assess the property under appeal at a ratio greater than 32% of true value in money, or at a ratio grossly excessive than the average 2005 commercial assessment ratio for St. Louis City (discrimination).
Complainant appeals, on the ground of overvaluation and discrimination, the decision of the St. Louis City Board of Equalization, which sustained the valuation and assessment of the subject property.
The Assessor determined the value of the subject parcels at $983,437, assessed value $314,700, classified as commercial property with an assessment ratio of 32%.The Board of Equalization sustained the valuations and assessment.
A hearing was conducted on December 11-12, 2008, at the St. Louis City Hall, St. Louis, Missouri.Evidence as to the commercial assessment ratio was heard.Case was reconvened on March 26, 2009, at the St. Louis City Hall, St. Louis, Missouri to accept evidence as to the value of the subject properties.
The Hearing Officer, having considered all of the competent evidence upon the whole record, enters the following Decision and Order.
The following exhibits were received into evidence on behalf of Complainants.
PPRC 2005 Cycle Ratio Study
WDT of John Hottle
WDT Steven Gardner
WDT Richard Almy
IAAO Recommendations to STC on Ratio Studies
Respondent objected to Exhibit B on grounds of speculation, lack of foundation, not compliance with appraisal requirements of statutes and CSR.Objection overruled.Objection overruled as to Exhibit F as to not being filed in advance pursuant to STC’s Order.
State Tax Commission 2005-2006 Cycle Ratio Study
PPRC’s 2003 Cycle Ratio Study
Form 11, Form 11A
WDT of Vincent Knopp
WDT of Lucille Pounds
Objection to Exhibits 1-3 as to not being filed in advance pursuant to STC’s Order. Objection overruled.
FINDINGS OF FACT
1. Jurisdiction over these appeals is proper.Complainant timely appealed to the State Tax Commission from the decision of the St. Louis City Board of Equalization.
2. The subject property is located at 5311 and 5235 Manchester Ave, St. Louis, MO.The 3.72 acre lot has improvements of an office, cold storage, and warehouse of approximately 62,828 square feet.The improvement, which is concrete block/masonry/frame, was built in seven sections from 1920 to 1972 and the building was in fair to average condition in 2005.The ceiling heights vary but generally range from 12’ – 14’.
3. Given the ages of the construction and the fact that the building has had seven additions, there is some loss of functional utility.A newly built warehouse facility would provide a much more open design and higher ceilings.
4. The subject’s property’s true value in money on January 1, 2005, is $1,546,000.
5. The Sansone Company, a property management firm, initially handled these properties before the Board of Equalization.They hired the University of Missouri, more specifically the Public Policy Research Center (PPRC), to perform a sales ratio study on the commercial properties within St. Louis City as of January 1, 2005.Steven Gardner with PPRC testified that the “purpose of a ratio study is to produce a statistically valid inference about the entire population of properties based upon an examination of sample properties…A ratio study is a statistical analysis from which a party may infer whether the same class of real property in a taxing jurisdiction is valued at the level prescribed by statute.”PPRC combined the tax rolls for 2005 and 2006.They then eliminated parcels from their samples for reasons such as new construction in 2005, tax abated property, tax exempt property, residential property.The properties were then stratified by location.
PPRC then looked at the sales information in the City via certificates of value.The sales occurred from July 1, 2004, to June 30, 2005; six months prior and six months after the assessment date of January 1, 2005.The sales were reviewed to determine that they were open market sales transactions.
PPRC had 177 sales in their study.They compared the sales with the assessments by the Assessor’s Office.They concluded that the median level of assessment for Commercial properties in the City of St. Louis is 24.2%.
6. The median level assessment for commercial property in the City of St. Louis for 2005 is 24.2%
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.
Official and Judicial Notice
Agencies shall take official notice of all matters of which the courts take judicial notice.
Courts will take judicial notice of their own records in the same cases.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. Courts may take judicial notice of their own records in prior proceedings involving the same parties and basically the same facts.
Presumptions In Appeals
There is a presumption of validity, good faith and correctness of assessment by the City Board of Equalization.
The presumption in favor of the Board is not evidence.A presumption simply accepts something as true without any substantial proof to the contrary.In an evidentiary hearing before the Commission, the valuation determined by the Board, even if simply to sustain the value made by the Assessor, is accepted as true only until and so long as there is no substantial evidence to the contrary.
The presumption of correct assessment is rebutted when the taxpayer presents substantial and persuasive evidence to establish that the Board’s valuation is erroneous.
Grounds for Appeal
Complainant appealed on the grounds of (1) overvaluation and (2) discrimination.
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, 2005.Substantial evidence can be defined as such relevant evidence as a reasonable mind might accept as adequate to support a conclusion.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.
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.It is the fair market value of the subject property on the valuation date.
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 each 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.
Assessment of real property in Missouri is under a two year assessment cycle.The assessor is to value property as of January 1, of the odd-numbered year.The assessed value established for the odd-numbered year, remains the value for the following even-numbered year in the absence of new construction and improvement to the property.
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.
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.
The cost approach is most appropriate when the property being valued has been recently improved with structures that conform to the highest and best use of the property or when the property has unique or specialized improvements for which there are no comparables in the market. While reproduction cost is the best indicator of value for newer properties where the actual costs of construction are available, replacement cost may be more appropriate for older properties.
The “income approach” determines value by estimating the present worth of what an owner will likely receive in the future as income from the property. The income approach is “based on an evaluation of what a willing buyer would pay to realize the income stream that could be obtained from the property when devoted to its highest and best use….” This approach is most appropriate in valuing investment-type properties and is reliable when rental income,
operating expenses and capitalization rates can reasonably be estimated from existing market conditions.
The “comparable sales approach” uses prices paid for similar properties in arms-length transactions and adjusts those prices to account for differences between the properties. “Comparable sales consist of evidence of sales reasonably related in time and distance and involve land comparable in character.” This approach is most appropriate when there is an active market for the type of property at issue such that sufficient data are available to make a comparative analysis.
The commission’s choice of valuation approaches must comply with the law. Both section 137.115 and article X, section 4(b) of the Missouri Constitution require that real property in Missouri be taxed according to its true value in money. True value is a function of the property’s highest and best use.
Both appraisers developed a sales comparison approach to value.The Complainant’s appraiser concluded on a value of $775,000.The Respondent’s appraiser concluded on a value of $1,818.000.The Respondent’s appraiser also developed an income approach and concluded on a value using that approach of $1,784,000.The Respondent’s appraiser did place most weight on the sales comparison approach and used the income approach to support his value under the sales comparison.
The Complainant’s appraiser used three sales in his sales comparison approach.The gross adjustments to the per square foot sale price ranged from 40% to 75% resulting in a range of values of $14-$15 per square foot.The Complainant’s appraiser used a square footage of 55,216 by not including the mezzanine square footage which is an additional 7,612 square feet.One of the adjustments made by the appraiser was for ceiling height.The subject property has a ceiling height of 12 to 14 feet which is indicative of its age.New warehouses are built with higher ceilings.Sale number 1 was adjusted -5% as the appraiser believed it had a ceiling height of 20-25 feet when it actually had a ceiling height of 10-25 feet.
Another adjustment made by the Complainant’s appraiser was for condition.The appraiser deemed the subject property in fair condition, Sales 1 and 2 were deemed average condition and sale 3 was deemed in good condition.Sale 1 was adjusted by -10% , Sale 3 was adjusted by -15%.The appraiser also adjusted Sale 2 by -15% (the same adjustment as Sale 3) although it was in average condition like Sale 1.
The Respondent’s appraiser used four sales.The gross adjustments ranged from 23.5% to 50% with a resulting range of $28.10 to $30.29.The mean average of the sales was $28.73 to which the appraiser applied to a square footage figure of 62,828 or an indicated value of $1,805,000.One of the concerns with the Respondent’s appraiser’s sales comparison approach was the use of a 2007 sale.In the Respondent’s sales comparison the appraiser used Sale 2 which was neighboring the subject property.The sale property was the closet to the subject property as to location as well as age and size.The adjusted price for Sale 2 was $28.12.
The Respondent’s appraiser also developed an income approach.The appraiser used rental income of non-refrigeration warehouses to determine a value.The value determined ($1,784,000) was used to support his valuation.
The Complainant’s sales comparison approach was not persuasive.The comparable properties were not sufficiently like the subject property as indicated by the amount of the adjustments made to the comparable properties.The Respondent’s sales comparison approach as supported by the income approach was persuasive. The only reservation the Hearing Officer would have is the amount of square footage of the mezzanine.The additional square footage contained in the mezzanine of the subject property is not likely to be of interest to a potential buyer using this space for warehousing.The Hearing Officer applied the sale price of $28 per square foot to a square footage of 55,216 and concluded an indicated value for the subject property of $1,546,048.
In any case in St. Louis City where the assessor presents evidence which indicates a valuation higher than the value finally determined by the assessor or the value determined by the board of equalization, whichever is higher, for that assessment period, such evidence will only be received for the purpose of sustaining the assessor’s or board’s valuation, and not for increasing the valuation of the property under appeal.Section 138.060, RSMo; 12 CSR 30-3.075.
In order to obtain a reduction in assessed value based upon discrimination, the Complainant must (1) prove the true value in money of their property on January 1, 2005; and (2) show an intentional plan of discrimination by the assessing officials resulting in an assessment of that property at a greater percentage of value than other property, generally, within the same class within the same taxing jurisdiction or show that the level of an assessment is so grossly excessive as to be inconsistent with an honest exercise of judgment. 
There is no evidence that there was an intentional plan of discrimination by the assessing officials so we must determine if the Complainant has presented substantial and persuasive evidence to show that the level of their assessment is so grossly excessive as to be inconsistent with an honest exercise of judgment.“By requiring that the level of an assessment be so grossly excessive as to be inconsistent with an honest exercise of judgment in cases in which intentional discrimination is not shown, the courts and the Commission refrain from correcting assessments which reflect no more than de minimus errors of judgment on the part of assessors. Such a standard recognizes that ‘[w]hile practical uniformity is the constitutional goal, absolute uniformity is an unattainable ideal’.” 
Where there is a claim of discrimination based upon a lack of valuation consistency, Complainant must first prove the level of assessment for the subject property in 2005. This is done by independently determining the market value of the subject property and dividing the market value into the assessed value of the property as determined by the Assessor’s office.
Complainant must then prove the average level of assessment for commercial property in St. Louis City for 2005.This is done by (a) independently determining the market value of a representative sample of commercial properties in St. Louis City; (b) determining the assessed value placed on the property by the Assessor’s office for the relevant year; (c) dividing the assessed value by the market value to determine the level of assessment for each property in the sample; and (d) determining the mean and median of the results.
The difference between the actual assessment level of the subject property and the average level of assessment for all commercial property, taken from a sufficient representative sample in St. Louis City, must demonstrate a disparity that is grossly excessive.
In this instance, the subject property was undervalued on the tax day and that the correct market value of the subject property was $1,546,000 on January 1, 2005. (see Valuation).Complainant established that the median assessment ratio for the city for January 1, 2005 was 24.2% rather than the statutorily mandated 32%.At 24.2%, the assessed value for the subject property should have been $374,143.Instead, the assessed value for the subject property, as determined by the Board of Equalization, was $314,700, or 20.4%.
The Complainant failed to sustain his burden of proof that the property’s assessment is so grossly excessive as to be entirely inconsistent with an honest exercise of judgment or inconsistent with a “de minimus error of judgment on the part of assessor” recognizing that absolute uniformity is an unattainable ideal.
The assessed valuation for the subject property as determined by the Assessor and sustained by the Board of Equalization for St. Louis City for the subject tax day is AFFIRMED.
A party may file with the Commission an application for review of this decision within thirty (30) days of the mailing date shown in the Certificate of Service.The application shall contain specific 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 appeal is based will result in summary denial. 
The Collector of St. Louis City, as well as the collectors of all affected political subdivisions therein, shall continue to hold the disputed taxes pending a filing of an Application for Review, unless said taxes have been disbursed pursuant to a court order under the provisions of 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 April 29, 2009.
STATE TAX COMMISSION OFMISSOURI
Certificate of Service
I hereby certify that a copy of the foregoing has been mailed postage prepaid this 29th day of April, 2009, to:Thomas Campbell, 101 South Hanley Road, Suite 1700, St. Louis, MO 63105, Attorney for Complainant; Carl W. Yates III, Associate City Counselor, 314 City Hall, St. Louis, MO 63103, Attorney for Respondent; Ed Bushmeyer, Assessor, 120 City Hall, St. Louis, MO 63103; Gregory Daly, Collector, 110 City Hall, St. Louis, MO 63103.
 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).
 – 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).
 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).
 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).
 Hermel, supra; Cupples-Hesse Corporation v. State Tax Commission, 329 S.W.2d 696, 702 (Mo. 1959).
 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).
 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).
 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.
 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).
 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).
 Stephen and Stephen Properties, Inc. v. State Tax Commission, 499 S.W.2d 798 (Mo.1973). Snider v. Casino Aztar/Aztar Missouri Gaming Corp., 156 S.W.3d 341 (Mo. 2005).
 See State ex rel. Missouri Highway and Transportation Commission v. Union Realty and Securities Co., 827 S.W.2d 768, 770 (Mo. App. 1992).
 Savage v. State Tax Commission, 722 S.W.2d 72 (S.Ct. 1986), Westwood Partnership v. Gogarty
103 S.W.3d 152 (Mo. App. E.D. 2003.)
 Sperry Corp. v. State Tax Commission, 695 S.W.2d 464, 468 (Mo. banc 1985) (quoting Sunday Lake Iron Company v. Wakefield Tp., 247 U.S. 350, 353, 38 S.Ct. 495, 495, 62 L.Ed. 1154, 1156 (1918)). See also Brandel v. State Tax Commission of Missouri, 716 S.W.2d 886, 888-89 (Mo. App. 1986).