Delmar Poe v. Zimmerman (SLCO)

State Tax Commission of Missouri

 

DELMAR POE,)

)

Complainant,)

)

v.)Appeal Nos.09-10815 & 09-10838

)

JAKE ZIMMERMAN, ASSESSOR,)

ST. LOUIS COUNTY, MISSOURI,)

)

Respondent.)

 

ORDER CORRECTING NUNC PRO TUNC

ORDER OVERRULING HEARING OFFICER DECISION

UPON APPLICATION FOR REVIEW

 

Order Overruling Hearing Officer Decision Upon Application for Review is corrected nunc pro tunc as follows:

Appeal No. 09-10815 – assessed value of $35,160 is stricken and the amount of $35,150 is inserted in lieu thereof.

Appeal No. 09-10838 – assessed value of $35,160 is stricken and the amount of $35,150 is inserted in lieu thereof.

In all other respects said Order is affirmed as issued.

SO ORDERED February 22, 2012.

STATE TAX COMMISSION OF MISSOURI

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W. B. Tichenor

Senior Hearing Officer

 

DELMAR POE and)

DENNIS & PATRICIA WAGNER,)

Tenants in Common,)Appeal No.09-10800

And)

DELMAR POE,)Appeal Nos.09-10801,

Complainants,)09-10803 – 09-10808.

)09-10812 – 09-10833,

)09-10836 – 09-10838

v.)

)

JAKE ZIMMERMAN, ASSESSOR,)

ST. LOUIS COUNTY, MISSOURI,)

Respondent.)

 

ORDER

OVERRULING HEARING OFFICER DECISION

UPON APPLICATION FOR REVIEW

 

On June 29, 2011, Senior Hearing Officer W. B. Tichenor entered his Decision and Order (Decision), Affirming in part and Setting Aside in part the assessments by the County Board of Equalization.On July 5, 2011, the Hearing Officer was informed by Counsel for Respondent of a discrepancy in the calculation of assessed values as it related to true value in money for three appeals.^[1]The Hearing Officer subsequently issued his Order Nunc Pro Tunc correcting the Decision issued June 29, 2011.

APPLICATIONS FOR REVIEW^[2]

Complainant’s Application for Review

On July 14, 2011 Complainant filed his Application for Review.^[3]On August 17, 2011, Respondent filed his Response to the Application for Review.On September 1, 2011, Complainant filed his Reply to Respondent’s Response.

Respondent’s Application for Review

On July 29, 2011 Respondent filed his Application for Review.On September 1, 2011, Complainant filed his Response to the Application for Review.On September 28, 2011, Respondent filed his Reply to Complainant’s Response.

CONCLUSIONS OF LAW

Standard Upon Review

The Commission 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 Commission to decide.^[4]

The Commission as the trier of fact may consider the testimony of the owner or 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 Commission is not bound by the opinions of the owner or an expert who testifies on the issue of reasonable value, but may believe all or none of the owner’s or expert’s testimony and accept it in part or reject it in part.^[5]

DECISION

The Commission will first take up the Complainant’s Application for Review, the Response and Reply thereto and then proceed to Respondent’s Application for Review.

Complainant’s Application for Review

Allegations of Error

Complainant presents the following allegations of error on the part of the Hearing Officer.^[6]

1.                  The Hearing Officer erred in not acknowledging Complainant’s objection to the use of three of Respondent’s gross rent multiplier sales and recognizing that it was agreed at hearing they would not be used since they were in different neighborhoods than the subject.

 

2.                  The Hearing Officer erred in not making an allowance for a greater decline in values to account for the change in economic conditions during 2007 to 2009.

 

3.                  The Hearing Officer erred in not making an allowance to the 2009 sale of 7004 Dartmouth for an $8,000 federal tax credit received as an incentive to buy the property.

 

4.                  The Hearing Officer erred in not making further adjustments to the Gross Rent Multipliers (GRM) used in the Decision to account for time of sale decline.

 

Rulings on Allegations of Error

Objection to GRM Sales

The three sales which Complainant objected to being used were the sales of the properties at 7746 Wild Plum, 7742 Delmar and 7732 Gannon.However, Counsel for Respondent did not stipulate or otherwise agree at hearing that these would not be used in reaching an indication of true value in money on the properties under appeal.The Hearing Officer made no ruling that sustained the objection and struck these sale properties from the Hackman appraisals on the subject properties.Accordingly, Complainant’s allegation of error is not well founded.It provides no basis for modifying the Decision.

Greater Decline in Values

Complainant’s argument as to a greater decline in values is not established by market data on the record that would warrant the Hearing Officer having made some further adjustment for time of sale in the Hackman sales comparison or gross rent multiplier methodology.It is obvious that the Hearing Officer did not give any probative weight to Complainant’s general testimony concerning the economic conditions in the housing market from 2007 to 2009.This was not error on the Hearing Officer’s part.The Hearing Officer was well within his exercise of discretion as the trier of fact to conclude a lack of sufficient basis to support adjustment as argued by Complainant.The allegation of error is not well taken.It provides no basis for modifying the Decision.

$8,000 Federal Tax Credit

Complainant’s testimony that as to there being an $8,000 federal tax credit involved in the sale of the 7004 Dartmouth property is part of the record.That does not establish that the sale price of the property must be adjusted to account for the tax credit.What is not a part of the record is any evidence that under generally accepted appraisal practices that a federal tax credit is factored into calculations when appraising property for ad valorem tax purposes.The seller received no benefit from the tax credit, only the purchaser.The price the seller received was the sale price.Complainant’s argument is somewhat akin to the argument often put forth that the sales price has to be reduced by the amount of the real estate sales person’s commission.That argument is without merit, as is this tax credit argument.The Hearing Officer properly refrained from making any adjustment based upon the existence of a federal tax credit on the purchase of the 7004 Dartmouth property.The allegation of error has no basis in sound appraisal practice.It cannot support a modification of the Decision.

Additional Adjustments to GRMs

The final argument Complainant makes is that the Gross Rent Multipliers used by the Hearing Officer should have been adjusted to account for a time of sale factor.A review of Mr. Poe’s cross-examination of Respondent’s appraiser reveals that there was some limited interrogation relative to Mr. Hackman’s time of sale adjustment to his comparable sales.^[7]Mr. Hackman was also questioned as to making a time of sale adjustment on the GRM sales.The appraiser concluded that it might be reasonable to adjust for time of sale to the gross rent multiplier sales since such an adjustment had been done on the comparable sales analysis.^[8]

There was no cross-examination or rebuttal evidence addressing the method or need for a time of sale adjustment to the sale prices for calculation of the GRM on the sale properties relied on by Mr. Hackman.Given the fact that the Hearing Officer omitted in his Decision any determination relative this matter, the Commission concludes that the Hearing Officer determined a lack of sufficient evidence to make any time of sale adjustment as is advocated by Complainant.The Commission concludes the Hearing Officer did not err on this point.Complainant’s allegation of error fails to establish a basis for modification of the Decision.

Conclusion as to Complainant’s Application for Review

The Commission finds none of Complainant’s points to be persuasive to warrant a modification of the Hearing Officer’s Decision.

Respondent’s Application for Review

Allegations of Error

Respondent asserts the following allegations of error on the part of the Hearing Officer.^[9]

1.                  The Hearing Officer erred in adjusting the Hackman GRMs to account for differences in rents between the subject properties and the appraiser’s properties.^[10]

2.                  The Hearing Officer erred in stating in his Decision: “To this median value, Mr. Hackman would then apply an adjusted gross rent multiplier of 130 instead of 140.”Mr. Hackman did not adjust the concluded GRM, but revised his development of the GRM.

3.                  The Hearing Officer erred in rejecting the Sales Comparison Approach presented by Respondent’s appraiser.

Rulings on Allegations of Error

Adjustment to Account for Rent Differences

Respondent’s point is well taken.The Hearing Officer erred in making adjustment to the gross rent multiplier factors that were presented by Respondent’s appraiser and not applying the Respondent’s revised GRM.The revised GRM of 130 is appropriate to be used to value the properties under appeal.

Misstatement of Appraiser’s Actions

Respondent’s point is well taken.The Hearing Officer incorrectly stated in his Decision the action of Respondent’s appraiser.Respondent’s Appraiser revised his development of the gross rent multiplier to arrive at a factor of 130.

Rejection of Sales Comparison Approach

The final argument Respondent presents is that the Hearing Officer erred in not relying on the sales comparison approach.If the Hearing Officer had neither recognized, nor considered the sales comparison presented by Mr. Hackman, then the Commission would have a basis to remand the appeal to the Hearing Officer for a complete analysis to consider that evidence.^[11]However, that is not the case in this appeal.The Hearing Officer did recognize and did consider the Hackman sales comparison approach.He addressed in detail the approach presented.He

did not find it persuasive.Finding a given approach to value as not being persuasive does not constitute an error on the part of a hearing officer.

A hearing officer may consider the testimony an expert witness and give it as much weight and credit as he or she may deem it entitled to when viewed in connection with all other circumstances.A hearing officer is not bound by the opinions of an expert, who testifies 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.^[12]

Commission Finds Values

True Value in Money for each of the properties is concluded by applying the GRM of 130 to the rental of each property, Assessed Value being 19% of the True Value in Money, as shown in the following table:

*concluded value applying 130 GRM is greater than value set by Assessor/BOE, so the assessed value cannot be increased above that found by the Assessor/BOE.^[13]

 

ORDER

The Commission upon review of the record and Decision in this appeal, finds the Decision of the Hearing Officer should be and is overruled.

The assessed value for the subject properties for tax years 2009 and 2010 are set as hereafter listed:

*2010 Value

Judicial Review

Judicial review of this Order may be had in the manner provided in Sections 138.432 and 536.100 to 536.140, RSMo within thirty days of the mailing date set forth in the Certificate of Service for this Order.

Disputed Taxes

If judicial review of this decision is made, any protested taxes presently in an escrow account in accordance with this appeal shall be held pending the final decision of the courts unless disbursed pursuant to Section 139.031.8, RSMo.

If no judicial review is made within thirty 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.

SO ORDERED February 7, 2012.

STATE TAX COMMISSION OF MISSOURI

Bruce E. Davis, Chairman

Randy B. Holman, Commissioner

 

 

DECISION AND ORDER

 

HOLDING

 

Decisions of the St. Louis County Board of Equalization are AFFIRMED in part and SET ASIDE in part.True value in money for the subject properties for tax years 2009 and 2010 are as set in FINDING OF FACT 7, infra, the residential assessed values are as set in the ORDER, infra.

Complainant Delmar Poe appeared pro se.Respondent appeared by Associate County Counselor, Paula J. Lemerman.

Case heard and decided by Senior Hearing Officer W. B. Tichenor.

ISSUE

Complainants appeal, on the ground of overvaluation, the decisions of the St. Louis County Board of Equalization in the valuations of the subject properties.The Commission takes the appeals to determine the true value in money for the subject properties 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 these appeals is proper.Complainants timely appealed to the State Tax Commission from the decision of the St. Louis County Board of Equalization.A hearing was conducted on December 9, 2010, at the St. Louis County Government Center, Clayton, Missouri.Transcript of the hearing was filed with the Commission on February 28, 2011.

2.Assessment and Proposed Values.The Assessor’s and the Board’s assessments, with the proposed values by each party at hearing are as set out below.[14]All of the properties were assessed as residential properties.[15]

 

3.Subject Properties.The subject properties are identified follows[18]:

 

4.Complainant’s Evidence.Mr. Poe testified in his own behalf.The following exhibits were offered into evidence on behalf of Complainants:

 

Complainants offered the following exhibits as rebuttal exhibits:

Exhibit E is not received into evidence.The Hearing Officer finds no basis upon which a gross rent multiplier could be extracted based on the appraised value by the assessor as opposed to the sale price of the subject.Accordingly, the Exhibit does not rebut Mr. Hackman’s development of his gross rent multipliers.

5.Respondent’s Evidence.Respondent presented the testimony and appraisal reports of Ross Hackman, Residential Real Estate Appraiser for St. Louis County Assessor’s Office.The following exhibits were offered into evidence on behalf of Respondent:

 

Exhibits 3, 4 and 5 do not constitute “rebuttal” of the Complainants’ cited exhibits.Respondent’s three exhibits provide additional information relative to the properties cited in Complainants’ exhibits.The Exhibits consist of a summary chart prepared by Mr. Hackman and supporting documents from the Assessor’s files on the various properties referenced in the summary chart.The Exhibits are received as supplemental information to Complainant’s sales information on the properties covered by Exhibits A-4, A-5, A-6 and A-7.

6.Assessed Values for 2009 & 2010.The Property in Appeal 09-10838 was damaged by fire in 2009, therefore, the appraised and assessed values for 2010 must be adjusted to account for this fact.Respondent’s appraisal of this property for the 2010 tax year reduced the

2009 value of $85,000.Complainant, while not agreeing to Respondent’s 2009 value, did agree at hearing that a difference in value of $85,000 between 2009 and 2010 would be appropriate.[23]

As to all other appeals there was no evidence of new construction and improvement for any of the properties from January 1, 2009, to January 1, 2010, therefore the assessed values for 2009 remain the assessed values for 2010 in those appeals.[24]

7.True Values in Money.The true values in money for the properties under appeal are as set out in the following chart:See, Hearing Officer Finds Values, infra.

*2010 Value

CONCLUSIONS OF LAW AND DECISION

Jurisdiction

The Commission has jurisdiction to hear these appeals 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.[26]

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.[27]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.[28]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.

Presumption In Appeals

There is a presumption of validity, good faith and correctness of assessment by the County Board of Equalization.[29]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, “however slight,” the presumption disappears and the Hearing Officer, as trier of facts, receives the issue free of the presumption.[30]The presumption of correct assessment is rebutted when the taxpayer, or Respondent when advocating a value different than that found by the Board, 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.[31]The evidence on the record rebutted the presumption that the Board had correctly valued the properties under appeal.The appeals are 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.[32]True value in money is defined in terms of value in exchange and not value in use.[33]It is the fair market value of the subject property on the valuation date.[34]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.[35]

 

Evidence of Increase in Value

In any case in St. Louis County 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.[36]The evidence presented by the Respondent in nineteen appeals advocated a value higher than the Assessor’s original appraised value.[37]In these nineteen appeals, under the Commission rule just cited and Supreme Court decision[38] the assessed values for those properties cannot be increased above the original assessed value calculated from the Assessor’s original appraised value.

Complainant’s Valuation – Exhibits A-1 and A-2

Mr. Poe presented in each appeal his Exhibit A-1 and Exhibit A-2.

Exhibit A-1 – Income Valuation

Exhibit A-1 provided the monthly unit rents and the total annual unit and building rent for each property.A vacancy factor was then applied and the expenses, including an amount for real estate taxes, attributable to the operation of the individual property were listed.The vacancy allowance and expenses were subtracted from the potential gross income to arrive at a net operating income.Mr. Poe then capitalized this at an 8% factor.The resulting indicated value in the various appeals was significantly below that value which the taxpayer advocated for each property.

The direct capitalization income approach to value is not generally utilized for rental properties such as the subject properties.The illustration provided in each of Mr. Poe’s Exhibits A-1 reinforced the fact that valuation for the individual property could not be estimated relying on such a methodology.Accordingly, the information provided in Exhibits A-1 does not establish a fair market value.

Exhibit A-2 – Return on Investment

Complainant’s Exhibit A-2 in each appeal performed a calculation demonstrating a comparison of the net return on the investment for each given property based on using the appraised value determined by the Board and the value advocated by the taxpayer.The conclusion derived in each appeal was that the rent being received on the property was not sufficient to service the debt required for a purchase at the Board value and to also cover expenses.In other words, an investor purchasing at the value indicated by the Board’s value would lose money.However, a purchase at the value tendered by the Complainant would provide a return, albeit small, on the investment after debt service and payment of expenses.

This analysis demonstrated that the value set by the BOE could not be supported by the rent received.A conclusion not challenged or rebutted by Respondent.However, the analysis did not establish the true value in money for each of the properties as of January 1, 2009.

Respondent’s Valuation Methodology

In each appeal, Respondent’s Appraiser – Ross Hackman – testified in support of his appraisal of each property.Mr. Hackman developed both the sales comparison approach and the income approach utilizing a gross rent multiplier.

Sales Comparison Approach

The appraiser presented a sales comparison approach in which sales comparables were listed and adjustments made to arrive at an adjusted sales price for each of the properties under appeal.Four sale properties were used to determine an indicated value under this approach for each of the properties under appeal.

Income Approach

Rental Comparables

Mr. Hackman provided ten rental comparables from which he concluded a gross monthly rent for each property.In 16 of the appeals, the appraiser use three rental comparables, in 13, he used four rental comparables and in 4 he used six rental comparables. He did not actually conclude a value from this information alone, but only concluded what he believed should be an estimated monthly rent for each property.The estimated monthly rent was then applied to a gross rent multiplier to arrive at an indicated value by the income approach.

Gross Rent Multiplier

To develop his gross rent multiplier (GRM), Mr. Hackman drew from the sales of eleven properties.These properties had sold in a time range from January 2007 to December 2009.The properties yielded gross rent multipliers ranging from 126 to 159.Mr. Hackman concluded on 140 as the gross rent multiplier to be use in his appraisal.

Revised Methodology

At the hearing, Mr. Hackman made a revision to his methodology for arriving at his opinion of value for each property.[39]He elected to use the actual rents for the subject properties and the ten rental comparables provided in the appraisal and use the median of those 43 rents[40] to conclude a market rent.To this median value, Mr. Hackman would then apply an adjusted gross rent multiplier of 130 instead of 140.This produced an indicated value for each property under the GRM methodology.To arrive at his final conclusion of value, he then weighted his conclusion of value for each property as 75% – sales and 25% – GRM income.From this revision of methodology, Revised Exhibit 6 was submitted which provides the concluded value by Mr. Hackman for each of the properties under appeal.

Hearing Officer Finds Value

The record provides substantial and persuasive evidence to arrive at a determination of the true value in money for the properties under appeal.Substantial evidence can be defined as such relevant evidence as a reasonable mind might accept as adequate to support a conclusion.[41]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.[42]The evidence rebuts the presumption of correct assessment and establishes the fair market values of Complainants’ properties as hereinafter determined.

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.[43]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.[44]The Hearing Officer finds the utilization of a gross rent multiplier to provide a sound basis for the valuation of the subject properties.The sales comparison approach, as will addressed below, was not persuasive to establish value in the face of the conclusions of value derived under the gross rent multiplier analysis.

Gross Rent Multiplier

A gross rent multiplier analysis is a type of income approach.It is a direct capitalization procedure.Gross rent multipliers are used to compare the income-producing characteristics of rental properties.A GRM is applied to rental income only and can be calculated on a monthly or

annual basis.In developing a rent multiplier it is essential that the rent of the properties used to derive the multiplier is comparable to that of the subject.[45]

Gross Rent Multiplier has been defined in the following terms:

“That approach in appraisal analysis which is based upon the proposition that an informed purchaser would pay no more for a property than the cost of obtaining a return (in income or amenities) of the same amount and embodying the same risk as that involved in the subject property.This approach is applicable when sufficient numbers of comparable properties are rent at the time of sale.The gross income (rent) multiplier approach is not applicable when few of not comparable properties are rented in the competitive market.This approach also is questionable in market situations in which market rentals and sales prices do not bear a constant relationship to each other.”[46]

 

To determine the comparability of the rental properties relied upon by Mr. Hackman in his GRM analysis it is necessary to make a comparison between the rents of the eleven properties which form the basis for the Hackman GRM of 130 and the rents of the properties under appeal.More specifically, the most appropriate unit of comparison must be used.In other words the gross monthly rent does not provide the most accurate data for comparison.The monthly rent must be reviewed and analyzed on the basis of the per square foot rental amounts of both the GRM and Subject properties.Using the per square foot rent accounts for the fact that there are variances in the sizes of the GRM apartments as compared to the Subject apartments.

Per Square Foot Rent

GRM – Properties

The monthly per square foot rents for the eleven properties utilized to calculate the gross rent multiplier are as follows:

 

 

The square foot range is from 2,104 to 3,200, with a median of 2,700, and a mean of 2,628.The rent on a per square foot basis is in a range from .50 to .87 with a median of .65, and a mean of .67.

Subject Properties

The subject properties have the following per square foot rents:[48]

 

The square foot range is from 2,288 to 3,400, with a median of 2,652, and a mean of 2,695.The rent on a per square foot basis is in a range from .46 to .65 with a median and a mean of .55.

Comparison of the GRM and Subject Properties

On a square foot basis, the GRM properties generally fall within the square footage of the subject properties.The median square footage for the GRM and the Subjects are within less than 50 square feet or a variance for the GRM properties of only 1.9% larger than the Subjects.The average is also close, with the Subjects average square footage being only 2.6% larger (67 sq. ft.) than the average GRM property.However, when the two sets of properties are compared on the

per square foot rental which each obtains, the GRM properties are clearly superior rental properties.

A comparison of the per square foot rent of the GRM properties and the subjects shows that the median and average of the GRM properties commanded a higher per square foot rent than the subjects.The GRM average rent is 12 cents or 21.9% above the Subjects average.The median GRM rent is ten cents above the subjects’ median.That calculates to an 18% superior status for the GRM properties.In other words, the median GRM property is a rental property that obtains gross rents 18% above the median subject property.The average GRM property is rented on a per square foot basis at a rate 21.9% above the Subjects.

The median or average GRM property accordingly will achieve a higher sale price from the hypothetical investor purchaser than the median or average Subject property.In order to account for the superior financial position of the GRM properties, an adjustment to the GRM is required.This is necessary to account for the fact that the Subject properties, in general, do not command the same per square foot rentals as the GRM properties.In point of fact only three of the Subject properties have a per square foot rental of 60 cents or more, while 9 of the 11 GRM properties rent at a rate of 62 cents or more.It is this fundamental financial disparity that requires a downward adjust to the GRM factors calculated.

Adjustment of Gross Rent Multipliers

The Hearing Officer considered running calculations for each of the GRM properties based upon the individual per square foot rental against the Subject properties individual per square foot rentals.However, this would have involved 308 calculations and would have produced 154 adjusted GRMs from the Hackman list.A more practical approach is to simply utilize the median/average of 55 for the Subject properties against each of the GRM properties.This provides the mathematical factor of what percentage of per square foot rent the Subjects as a whole have to each of the individual GRM properties.

For example:7004 Dartmouth had a per square foot rental of 62 cents, the Subject median/average of 55 represents .887 of the GRM rental.This then is applied to the GRM for that property (126) to provide an adjusted GRM of 111.76, rounded to 112.When this calculation is carried out for all eleven GRM properties the following adjusted GRMs are provided to account for the economic standing of the Subject properties as compared to the GRM properties.

 

The resulting range is from 82 to 158, with a median of 121 and a mean of 120.

A gross rent multiplier of 121 is appropriate for the valuation of the subject properties.

Subject Rents – Market Rents

Mr. Hackman utilized a total of ten rental properties for his calculation of an estimated monthly rent for the subject properties.Four rental comparables were used in thirteen appeals, three rental comparables were used in sixteen appeals and six rental comparables were used in the remaining four appeals.The per square foot rental range for the ten comparables was from 59 to 71 cents, with a median of 64 and a mean of 65.This compares to the Subjects’ rents on a per square foot basis in a range from .46 to .65 with a median and a mean of .55.Only four of the 33 Subjects were able to obtain a rent of 59 cents are greater.In other words, the rental

comparables used by the appraiser were from properties that as a group were renting at 116% of the Subjects’ median rent.[50]

The Subjects comprise a universe of 33 rental properties, all very similar and all obtaining rental rates that are in a very compact range.The rents being obtained for the Subjects constitute market rent for these properties.There is no evidence that Mr. Poe is artificially depressing the rents on his properties.Such a line of argument flies in the face of basic logic.Mr. Poe is a knowledgeable, well-informed owner of rental properties.[51]

The Subjects differ from other rental properties in the area in that Mr. Poe made a conscious effort to not do significant rehab work, as was being done in the early 2000’s by individuals who were purchasing, rehabbing and then reselling.[52]This is not the level of trade that the Subjects would come in on January 1, 2009.Since they have not been rehabbed they would not benefit from the additional purchase price such other properties would bring.Likewise, the Subjects could not command the higher rents that rehabbed properties were able to obtain in 2008-09.Mr. Poe’s management philosophy for the Subjects is “to keep money coming in.”That means keeping his properties rented, holding the vacancy levels down.[53]

There is no need to adjust the actual rents.A well informed and advised investor purchaser acting in what is considered the purchaser’s own best interests will look to the actual rent being received on any given property.That is the rent the property must be taken at.The properties on January 1, 2009, were under existing leases which would have been binding on the hypothetical purchaser.To postulate that a property renting for .52 per square foot under an existing lease could be leased by the purchaser on 1/1/09 at 61 cents[54] ignores reality.It does not reflect the market, it distorts the market.

Any given market of rental rates is always a range.Certain properties will rent within the lower half of the range, other properties will rent within the upper half of the range.However, to simply apply a median or mean rental rate or some other rate concluded to be “market” to all properties does not accurately represent the market.To apply such a methodology overvalues properties that fall below the median/mean and undervalues properties that are above the median/mean.Likewise to apply some rental rate to the Subject properties that is higher than what they have been able to command in a competitive market is to value the properties based upon inappropriate data.

To assume that any well informed purchaser is going to base his purchase price of the Subjects upon income data higher than what they were actually producing ignores the limitation placed upon the properties by the existing lease agreements.The purchase of any of the subjects is driven by the income stream for that given property, not by the income stream from a group of other properties.The appropriate rent figure to which the concluded gross rent multiplier is to be applied is to be the actual rent for each property.

Indicated Values under Gross Rent Multiplier

The values indicated for each of the properties under appeal when the gross rent multiplier of 121 is applied to the monthly gross rent each property would have commanded on

January 1, 2009, are as set out in the following chart: *values derived are greater than the Assessor/BOE value, therefore, the value defaults to the Assessor/BOE value.

 

Indicated Values Under Sales Comparison Approach Not Persuasive

Mr. Hackman also concluded an indicated value under the sales comparison approach relying on four sales properties.[56]The values determined for each property under the sales comparison approach constituted seventy-five percent of the final value determined by the appraiser for each property.[57]The various adjustments made by the appraiser for physical differences seem appropriate for each of the properties under appeal.

The only point at which the Hearing Officer takes exception to the determination of value under the sales comparison approach is that there is no adjustment to account for the variations between the subject’s rents and the sale properties rents.This economic difference is critical to accurately reflect the value of the Subjects.All of the adjustments to each sale comparable, other than the date of sale adjustment, address physical characteristics of each property in comparison to each property under appeal.Adjustments for condition and various amenities do not directly address the difference in a per square foot rent for a comparable that is superior or inferior to the per square foot rent of the property being appraised.

The per square foot rents of Mr. Hackman’s four sale properties were: .57, .65, .65 and .63.The Subjects’ per square foot rent as a percentage of each sale property’s per square foot rent calculates as follows:

 

The net adjustments made in the Hackman appraisals do not capture the full economic differences that exist between a given property under appeal and the sale comparables.The adjustments for physical features capture only a portion of the economic variances between each subject and each comparable.The Hearing Officer’s analysis of the economic variances for each of the subject properties versus the four sale comparables as set forth in the chart presented above raised serious question as to the reliability of the conclusions of value for the properties under appeal.The Hearing Officer concluded that while some of the subjects and comparables are close in their economic positions, the large part of Complainant’s properties are significantly economically inferior to sale properties.Accordingly, the Hearing Officer was not persuaded

that the concluded values under the sales comparison approach were representative of market value as of January 1, 2009.

Conclusions of Value

The values indicated under application of the Gross Rent Multiplier provide the best evidence of the true value in money for the properties under appeal as of January 1, 2009.

In Appeals 09-10805, 09-10819, 09-10823, 09-10824, 09-10828, 09-10831, 09-10832, and 09-10833 the values indicated under the Gross Rent Multiplier were higher than the Assessor/BOE values and therefore, the value in those appeals is reduced to the Assessor/BOE value, as per Evidence of Increase in Value, supra.

In Appeals 09-10822 and 09-10826 the values indicated were slightly greater than the BOE values, but below the Assessor values, and therefore, the value in those appeals is increased to the values indicated under application of the Gross Rent Multiplier,as per Evidence of Increase in Value, supra.

ORDER

The assessed valuations for the subject properties as determined by the Board of Equalization for St. Louis County for the subject tax day are AFFIRMED in part[59] and SET ASIDE in part.

The assessed value for the subject properties for tax years 2009 and 2010 are set as hereafter listed:

*2010 Value

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, 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. [60]

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 these appeals.

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 June 29, 2011.

STATE TAX COMMISSION OFMISSOURI

W. B. Tichenor

Senior Hearing Officer