STATE TAX COMMISSION OF MISSOURI
|Complainant.||)||Appeal Nos. 19-10272|
|)||Parcel/Locator Nos. 28P630453|
|JAKE ZIMMERMAN, ASSESSOR,||)|
|ST. LOUIS COUNTY, MISSOURI.||)|
DECISION AND ORDER SETTING ASIDE HEARING OFFICER DECISION
UPON APPLICATION FOR REVIEW
On July 2, 2021, the Hearing Officer entered a single Decision and Order (Decision) affirming the Board of Equalization of St. Louis County (BOE) with regard to 121 appeals involving commercial real properties, which had been consolidated for efficiency, ease of administration, and evidentiary hearing. Appeal No. 19-10272, concerning the subject property owned by Fazimo, Inc., (Complainant) was among the 121 appeals. Following the issuance of the Hearing Officer’s Decision in all 121 appeals, Complainant and Jake Zimmerman, Assessor, St. Louis County, Missouri, (Respondent) filed timely their joint Application for Review of the Hearing Officer’s Decision along with their stipulation with regard to only Appeal No. 19-10272.
The Hearing Officer’s Decision is SET ASIDE with regard to only Appeal No. 19-10272 for the sole purpose of allowing Complainant and Respondent to submit their agreed-upon stipulation as to the value of the subject property as of January 1, 2019, to be placed on an agenda for a Meeting of the State Tax Commission as an item for a vote of the Commission.
Segments of the Hearing officer’s Decision may have been incorporated into the Commission’s Decision and Order without further reference.
FINDINGS OF FACT AND PROCEDURAL HISTORY
The subject property is identified by parcel/locator number 28P630453. It is further identified as 910 Brookwood Ctr., Fenton, St. Louis County, Missouri. The subject property is commercial real property consisting of 3.32 acres improved by a strip retail shopping center with 29,850 square feet of leaseable building area.
Respondent valued the subject property at $3,944,300, as of January 1, 2019. Complainant appealed to the BOE. The BOE valued the subject property at $3,944,300, as of January 1, 2019. Complainant timely filed its appeal with the STC proposing a value of $2,900,000. A hearing officer was assigned, and Appeal No. 19-10272 was consolidated with 120 other similar appeals involving commercial property for efficiency, ease of administration, and evidentiary hearing. All 121 consolidated appeals proceeded to an evidentiary hearing.
Prior to the evidentiary hearing, counsel for Complainant filed nearly 200 exhibits related to the consolidated appeals. Unlike other appeals in the consolidated group, Complainants’ counsel filed an appraisal report and written direct testimony of the appraiser who prepared the report for Appeal No. 19-10272. However, at the evidentiary hearing, Complainant’s counsel did not call as a witness the appraiser who prepared the report. Complainant’s counsel never moved to introduce into evidence the appraisal report or the written direct testimony of the appraiser who prepared the appraisal report regarding the subject property in Appeal No. 19-10272.
The Hearing Officer subsequently issued his Decision with findings of fact and conclusions of law for all 121 appeals. With regard to Appeal No. 19-10272, the Hearing Officer specifically found that:
In appeal 19-10272, Complainants’ counsel filed an appraisal report and written direct testimony but never moved to introduce either exhibit into evidence. . . . Even if an exhibit is marked and identified, it is not evidence unless and until it is formally introduced as evidence. Mo. Church of Scientology, 560 S.W.2d at 839-40 (holding that 22 proposed exhibits marked and identified, but never offered nor accepted as evidence, were not properly before the STC and would not be considered). Thus, when an appraisal report is provided to the STC prior to a hearing but is “never formally offered into evidence at the hearing[,]” the appraisal report cannot be considered as evidence. Moore v. State Tax Comm’n, 862 S.W.2d 407, 411 (Mo. App. E.D. 1993). The appraisal report and written direct testimony were not introduced into evidence pursuant to Section 536.070(5) and, therefore, cannot be considered by the STC as evidence supporting the overvaluation claim in appeal 19-10272.
The Hearing Officer affirmed the BOE’s valuations of the subject properties in all 121 of the consolidated appeals, including in Appeal No. 19-10272.
Complainant and Respondent subsequently filed timely a joint application for review, which was received by the STC on July 23, 2021, within 30 days of the Hearing Officer’s Decision. Section 138.432. In their joint Application for Review, the parties stated that the reason for filing the joint Application for Review was to request the Commission to set aside the Hearing Officer’s Decision with regard to only Appeal No. 19-10272 because the parties had reached a mutual agreement and stipulation regarding the value of the subject property in Appeal No. 19-10272 prior to the Hearing Officer’s Decision becoming final. The parties requested that the Hearing Officer’s Decision with regard to only Appeal No. 19-10272 be set aside for the sole purpose of submitting the agreed upon stipulation, which was attached to their joint Application for Review. (Appendix A) The parties’ joint Application for Review was taken under advisement.
CONCLUSIONS OF LAW
Point on Review
In their single point on review, Complainant and Respondent together request the Commission to set aside the Hearing Officer’s Decision with regard to only Appeal No. 19-10272 for the sole purpose of allowing Complainant and Respondent to submit their agreed-upon stipulation as to the value of the subject property as of January 1, 2019, to be placed on an agenda for a Meeting of the State Tax Commission as an item for a vote of the Commission.
Standard of Review
A party subject to a Decision and Order of a hearing officer of the STC may file an application requesting the case be reviewed by the STC. Section 138.432. The STC may then summarily allow or deny the request. Section 138.432. The STC may affirm, modify, reverse, set aside, deny, or remand to the Hearing Officer the Decision and Order of the Hearing Officer on the basis of the evidence previously submitted or based on additional evidence taken before the STC. Section 138.432.
For the reasons that follow, the Commission finds the parties’ argument to be persuasive. After reviewing the whole record and having considered the Hearing Officer’s Decision, the Application for Review of the parties, and the exhibits and evidence filed prior to the evidentiary hearing, the Commission sets aside the Hearing Officer’s decision only with regard to Appeal No. 19-10272 for the sole purpose of allowing the parties to submit their agreed-upon stipulation to be placed on an agenda for a Meeting of the State Tax Commission as an item for a vote of the Commission.
Contested cases before an administrative agency may be resolved by stipulations or agreements among the parties. See Section 536.060. Here, along with their Application for Review, the parties filed their agreed-upon stipulation, which is attached as Appendix A of this Decision. The stipulation specifically provided that the parties “reached an agreed settlement by stipulation” for Appeal No. 19-10272 such that the proper assessed valuation for the appeal for tax years 2019 and 2020 should be as follows:
|APPEAL NO||CURRENT ASSESSED VALUE||STIPULATED ASSESSED VALUE||STIPULATED APPRAISED VALUE|
According to the record in Appeal No. 19-10272, Respondent valued the subject property at $3,944,300. The BOE valued the subject property at $3,944,300. When Complainant filed its appeal with the STC, Complainant proposed a value of $2,900,000. These values constitute a range of $2,900,000 to $3,944,300. The value of the subject property as agreed upon by the parties and as shown in Appendix A falls within the range of values shown in the record.
The Hearing Officer’s Decision is SET ASIDE with regard to only Appeal No. 19-10272 for the sole purpose of allowing Complainant and Respondent to submit their agreed-upon stipulation as to the value of the subject property as of January 1, 2019, to be placed on an agenda for a Meeting of the State Tax Commission as an item for a vote of the Commission. No other appeal in the consolidated group is in any way affected by this decision of the Commission. Segments of the Hearing Officer’s Decision, including the findings of fact and conclusions of law therein, may have been incorporated without reference in this final decision of the Commission.
Judicial review of this Order may be had in the manner provided in Sections 138.432 and 536.100 to 536.140 within 30 days of the mailing date set forth in the Certificate of Service for this Order.
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.
If no judicial review is made within 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.
SO ORDERED August 13, 2021.
STATE TAX COMMISSION OF MISSOURI
Gary Romine, Chairman
Victor Callahan, Commissioner
Will Kraus, Commissioner
Certificate of Service
I hereby certify that a copy of the foregoing has been electronically mailed and/or sent by U.S. Mail on August 13th, 2021, to: Complainant(s) and/or Counsel for Complainant(s); County Assessor and/or Counsel for Respondent; County Collector; and County Clerk.
Appeal No. 19-10272
Application for Review Appendix A
STATE TAX COMMISSION OF MISSOURI
|NORTHWEST ENTERPRISES INC., et al.||)|
|Complainant.||)||Appeal No. 19-10052, et al.|
|)||Parcel/Locator Nos. (Appendix Attached)|
|JAKE ZIMMERMAN, ASSESSOR,||)|
|ST LOUIS COUNTY, MISSOURI,||)|
DECISION AND ORDER
Northwest Enterprises, Inc., and a number of other property owners (Complainants), appeal the St. Louis County Board of Equalization’s (BOE) decisions determining the true value in money (TVM) of the subject commercial properties as of January 1, 2019. Complainants did not produce substantial and persuasive evidence of overvaluation. The BOE decisions are affirmed.
Complainants were represented by attorney Brian Mueller. Respondent was represented by attorney Steven Robson. The evidentiary hearing was conducted via WebEx on December 21, 2020.
This matter involves 121 appeals consolidated for administrative efficiency. A second amended scheduling order dated September 17, 2020, established a discovery and exchange schedule requiring the parties to exchange exhibits and file them with the State Tax Commission (STC). In 99 of the 121 appeals, Complainants exchanged and filed exhibits specific to the subject property for that appeal. Complainants also exchanged and filed over 100 “common exhibits” consisting of Respondent’s discovery responses, market reports, investor surveys regarding capitalization rates, and 105,000 pages of property record cards listing data for thousands of properties.
Complainants’ Property-Specific Exhibits
All property-specific exhibits include some combination of a comparable sales chart, a page entitled “Owner’s Opinion of Value,” and a capitalization rate survey. Most property-specific exhibits include all three items. Some include two or fewer. Several property-specific exhibits also include income and expense statements, photos, or other documentation. No witness testified regarding the authenticity or foundation of any of Complainants’ exhibits in any appeal.
The comparable sales charts list the property address, zip code, property use, land and building areas, sale price, sale date, and property grade. None of the charts state whether the sales were arms-length transactions. None of the charts include market-based adjustments accounting for property differences. None of the listed values are averaged or otherwise reconciled.
All Owner’s Opinion of Value pages include three charts. The first chart lists property data including the address, lot size, building size and class, and the TVM assigned by the BOE. The second chart is denominated the “County Income Method” and lists the income, expense, and capitalization rate data Respondent purportedly utilized to estimate the TVM of the subject property. The third chart is denominated as the “Actual Income Method” and, in most cases, lists the owner’s purported income and expense assumptions and the capitalization rate utilized to calculate the proposed value.
Most “Actual Income Method” charts use Respondent’s purported income and expense data but estimate a lower TVM based on a higher capitalization rate. The higher capitalization rates are based on a one-page excerpt from an investor survey. The survey lists estimated capitalization rates applicable to either “stabilized” or “value add” properties in “St. Louis.” Complainants do not derive market-based capitalization rates from comparable sales, the band of investment method, or a debt coverage ratio analysis.
Some “Actual Income Method” charts propose a lower net operating income (NOI) to estimate a reduced TVM. Some of these charts substitute a lower NOI with no documentation or explanation. Others are accompanied by documents which purport to be income and expense statements or other supporting documentation. There is no indication as to whether Complainants’ lower NOI estimates are based on market rent or contact rent.
At least one “Actual Income Method” chart uses both a higher capitalization rate and a lower net operating income (NOI) to estimate a value less than that assigned by the BOE. Finally, at least two Owner’s Opinion of Value charts indicate Complainant and Respondent agree on a value that is less than the BOE value. Complainants provide no explanation as to why these appeals remain outstanding even though Complainants’ exhibits imply the parties agree on value.
Complainants’ Common Exhibits
Complainants filed over 100 exhibits referred to as “common exhibits.” The common exhibits include approximately 1,700 pages of investor surveys and market reports detailing current and projected market conditions and/or capitalization rates for various types of commercial properties on a national, regional, or local level.
Some of the reports are specific to particular types of commercial properties, such as property devoted to office or industrial uses. Other reports are specific to particular companies. For instance, Exhibits RR and ZZ are tenant profile reports for Family Dollar and Dollar General Stores, respectively. Exhibit VVVVVV is a tenant profile report for CVS pharmacies. None of the surveys or reports included in the common exhibits refer specifically to any subject property.
The common exhibits also include Respondent’s discovery responses and 105,000 pages of property record cards. The property record cards are denominated as Exhibits AAAAAAAA (183), BBBBBBBB (184), YYYYYY (181), and ZZZZZZZ (182). Complainants do not correlate the common exhibits to any specific appeal.
At the evidentiary hearing, Complainants’ counsel explained the property-specific exhibit in appeal 19-10053. This exhibit consists of four items: (1) a comparable sales chart; (2) an “Owner’s Opinion of Value” chart asserting a lower value based on increasing the pre-tax capitalization rate from 7.0% to 9.0%; (3) an investor survey indicating the capitalization rate for stabilized, class B industrial properties in “St. Louis” ranged from 8.5% to 9.5%; and (4) a photograph showing the proximity of the subject property to a landfill. Complainants’ counsel moved for admission of the exhibit. Respondent objected on grounds that Complainants’ counsel was testifying improperly and that there was no witness testimony laying a foundation for the exhibit.
The parties agreed to utilize appeal 19-10053 as the template for admitting the remaining property-specific exhibits into evidence. Complainants’ counsel confirmed that like appeal 19-10053, the remaining property-specific exhibits consisted of essentially the same types of evidence; namely, some combination of a comparable sales chart, an owner’s opinion of value chart, an investor survey listing a range of capitalization rates and, in some appeals, various additional documentation supporting the proposed value. Based on this understanding, Complainants’ counsel moved to introduce the property-specific exhibits in the remaining appeals. Respondent objected to the remaining property-specific exhibits on grounds counsel was testifying and that Complainants did not lay a foundation for admission of the exhibits.
Respondent’s exhibits and evidence consisted solely of the BOE decisions for each subject property. Complainants objected to Respondent’s exhibits on grounds the BOE decisions are inadmissible hearsay and that the BOE decisions are not presumptively correct.
Subsequent review of Complainants’ voluminous exhibits shows that, unlike appeal 19-10053 and every other appeal with a property-specific exhibit, Complainants’ counsel filed an appraisal report and written direct testimony in appeal 19-10272. Complainant’s counsel did not call as a witness the appraiser who prepared the report. Moreover, Complainant’s counsel never moved to introduce into evidence the appraisal report or the written direct testimony of the appraiser who prepared the appraisal report regarding the subject property in appeal 19-10272.
FINDINGS OF FACT
- The subject properties are commercial properties located in St. Louis County, Missouri. Complainants own the subject properties.
- There are no property-specific exhibits in the following 22 appeals: 19-10052, 19-10090, 19-10107, 19-10108, 19-10122, 19-10146, 19-10162, 19-10199, 19-10217, 19-10252, 19-10257, 19-10270, 19-10276, 19-10294, 19-10403, 19-10404, 19-10405, 19-10406, 19-10407, 19-10413, 19-11863, and 19-11865. In these appeals, Complainants rely exclusively on the common exhibits.
- The common exhibits include capitalization rate surveys and market reports covering the entire United States, the Midwest, the St. Louis metropolitan area, or various submarkets within the greater St. Louis market. Some market reports focus on specific sectors such as life sciences or breweries. Other market reports are specific to the tenant profiles or financial concerns of particular companies. None of the common exhibits refer to any subject property. Complainants introduced no evidence tying any of the common exhibits to any specific subject property.
- In 99 appeals, Complainants submitted property-specific exhibits. Most property-specific exhibits purport to offer Complainant’s opinions of value. All such opinions of value are less than the TVM determined by the BOE. No Complainant or any other witness testified at the hearing regarding an opinion of value or any other matter.
- Complainants did not move to introduce any appraisal reports or written direct testimony into evidence.
- Complainants’ purported opinions of value are based on the income approach with support from the sales comparison approach. Complainants did not introduce any witness testimony regarding either approach to value or any other matter.
- For the income approach, most Complainants assert a lower TVM based on a higher capitalization rate.
- Complainants’ proposed capitalization rates are based on market reports and investor surveys. The capitalization rate evidence in the property-specific exhibits consists exclusively of excerpts from investor surveys listing a range of estimated capitalization rates applicable to either “stabilized” or “value add” properties in “St. Louis.” Complainants did not derive capitalization rates from sales of comparable properties, a band of investment analysis, or a debt ratio coverage analysis.
- Some Complainants assert a lower NOI to reduce the estimated TVM. Others assert both a lower NOI and a higher capitalization rate. Complainants introduced no witness testimony laying a foundation for any documentation regarding any lower NOI estimates. There is no persuasive evidence showing the market rent or expenses for any subject property.
- For the sales comparison approach, Complainants include comparable sales charts listing the property location, sale price, sale price per square foot, sale date, and property class. There was no witness testimony laying a foundation for any data in the comparable sales charts.
- The comparable sales charts include no evidence showing the listed properties are comparable to the subject property or whether the sales were arm’s-length transactions. The charts include no adjustments accounting for property differences.
- In some appeals, the property-specific exhibit lists no proposed value.
- Complainants’ counsel filed exhibits in appeal 19-10272 consisting of an appraisal report and the written direct testimony of the appraiser. Complainants’ counsel did not move to introduce either exhibit into evidence.
- The TVM of each subject property is the value determined by the BOE. The subject properties and corresponding BOE values are identified in the attached appendix. The appendix is incorporated into the findings of fact.
CONCLUSIONS OF LAW
- Assessment and Valuation. Commercial real property is assessed at 32% of its TVM as of January 1 of each odd-numbered year. Section 137.115.5(1)(c). “True value in money is the fair market value of the property on the valuation date, and is a function of its highest and best use, which is the use of the property which will produce the greatest return in the reasonably near future.” Snider v. Casino Aztar/Aztar Mo. Gaming Corp., 156 S.W.3d 341, 346 (Mo. banc 2005) (internal quotation omitted). The fair market value is “the price which the property would bring from a willing buyer when offered for sale by a willing seller.” Mo. Baptist Children’s Home v. State Tax Comm’n, 867 S.W.2d 510, 512 (Mo. banc 1993). “Determining the true value in money is an issue of fact for the STC.”
Cohen v. Bushmeyer, 251 S.W.3d 345, 348 (Mo. App. E.D. 2008).
“For purposes of levying property taxes, the value of real property is typically determined using one or more of three generally accepted approaches.” Snider, 156 S.W.3d at 346. The three generally accepted approaches are the cost approach, the income approach, and the comparable sales approach. Id. at 346-48; see also St. Louis Cty. v. Sec. Bonhomme, Inc., 558 S.W.2d 655, 659 (Mo. banc 1977). The STC has wide discretion in selecting the appropriate valuation method but “cannot base its decision on opinion evidence that fails to consider information that should have been considered under a particular valuation approach.” Snider, 156 S.W.3d at 348.
- Evidence. The hearing officer is the finder of fact and determines the credibility and weight of the evidence. Kelly v. Mo. Dep’t of Soc. Servs., Family Support Div., 456 S.W.3d 107, 111 (Mo. App. W.D. 2015). 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.” Section 138.430.2. “Although technical rules of evidence are not controlling in administrative hearings, fundamental rules of evidence are applicable.” Mo. Church of Scientology v. State Tax Comm’n, 560 S.W.2d 837, 839 (Mo. banc 1977).
In appeal 19-10272, Complainants’ counsel filed an appraisal report and written direct testimony but never moved to introduce either exhibit into evidence. Section 536.070(2) provides:
“Each party shall have the right to call and examine witnesses, to introduce exhibits, to cross-examine opposing witnesses on any matter relevant to the issues even though that matter was not the subject of the direct examination, to impeach any witness regardless of which party first called him or her to testify, and to rebut the evidence against him or her.”
(Emphasis added). Except for the admission of agency “records and documents” pursuant to Section 536.070(5), “[n]o mention is made of other procedures for admission of exhibits as a part of the record” in an administrative hearing. Mo. Church of Scientology, 560 S.W.2d at 839. It follows that exhibits not introduced into evidence pursuant to Section 536.070(2) “will not be considered a part of the record for review.” Id. at 840.
Complainant’s counsel never moved to introduce the appraisal report or written direct testimony in Appeal 19-10272 into evidence. Even if an exhibit is marked and identified, it is not evidence unless and until it is formally introduced as evidence. Mo. Church of Scientology, 560 S.W.2d at 839-40 (holding that 22 proposed exhibits marked and identified, but never offered nor accepted as evidence, were not properly before the STC and would not be considered). Thus, when an appraisal report is provided to the STC prior to a hearing but is “never formally offered into evidence at the hearing[,]” the appraisal report cannot be considered as evidence. Moore v. State Tax Comm’n, 862 S.W.2d 407, 411 (Mo. App. E.D. 1993). The appraisal report and written direct testimony were not introduced into evidence pursuant to Section 536.070(5) and, therefore, cannot be considered by the STC as evidence supporting the overvaluation claim in appeal 19-10272.
Complainants objected to Respondent’s introduction of the BOE decisions into evidence on grounds the decisions are admissible only if Respondent establishes the authenticity and chain of custody of all written evidence presented to the BOE. Complainants cite no authority for this argument. The objection is overruled.
Complainants also objected on grounds the BOE decisions are inadmissible “if they are intended to prove that the Board of Equalization’s decision should be entitled to a presumption of correctness.” Complainants cite no case law supporting this argument, while overlooking nearly a century of case law holding that BOE decisions are presumptively correct. The objection is overruled.
Respondent objected to Complainants’ exhibits on grounds that counsel was improperly testifying and that no witness laid a foundation for any exhibit. It is unnecessary to resolve Respondent’s objections to the admissibility of Complainants’ exhibits. As established below, Complainants’ exhibits lack sufficient probative value to satisfy Complainants’ burden of proof.
- Complainants’ Burden of Proof. The taxpayer bears the burden of proof and must show by a preponderance of the evidence that the property was misclassified or overvalued. Westwood P’ship v. Gogarty, 103 S.W.3d 152, 161 (Mo. App. E.D. 2003). The BOE’s valuation is presumptively correct. Tibbs v. Poplar Bluff Assocs. I, L.P., 599 S.W.3d 1, 7 (Mo. App. S.D. 2020). The “taxpayer may rebut this presumption by presenting substantial and persuasive evidence that the valuation is erroneous.” Id. (internal quotation omitted). The taxpayer also must prove “the value that should have been placed on the property.” Id. “Substantial evidence is that evidence which, if true, has probative force upon the issues, and from which the trier of fact can reasonably decide the case on the fact issues.” Savage v. State Tax Comm’n, 722 S.W.2d 72, 77 (Mo. banc 1986) (internal quotation omitted). Evidence is persuasive when it has “sufficient weight and probative value to convince the trier of fact.” Daly v. P.D. George Co., 77 S.W.3d 645, 651 (Mo. App. E.D. 2002); see also White v. Dir. of Revenue, 321 S.W.3d 298, 305 (Mo. banc 2010) (noting the burden of persuasion is the “party’s duty to convince the fact-finder to view the facts in a way that favors that party”).
- Complainants Did Not Prove Overvaluation. In the appeals with no property-specific exhibits, there is no evidence establishing the TVM of the subject property. For nearly 150 years, Missouri law has recognized the self-evident proposition that “if there be no evidence sufficient in law to make a prima facie case on this issue, plaintiff cannot be entitled to recover.” Callahan v. Warne, 40 Mo. 131, 135 (Mo. 1867). The lack of property-specific evidence of value in these appeals requires affirmance of the BOE’s presumptively correct values.
The appeals with property-specific exhibits fare no better. Complainants offered no witness testimony to authenticate or lay a foundation for any exhibits. Complainants’ counsel asserted the exhibits are accurate, but “[b]are assertions by counsel do not prove themselves and are not evidence of the facts presented.” Andersen v. Osmon, 217 S.W.3d 375, 381 (Mo. App. W.D. 2007); see also Schubert v. Trailmobile Trailer, L.L.C., 111 S.W.3d 897, 906 (Mo. App. S.D. 2003) (noting that counsel’s statements are not a substitute for proof). Even if these foundational deficiencies are downplayed, Complainants’ exhibits do not establish the necessary facts or utilize the appropriate methodology to persuasively estimate value according to the income approach or the comparable sales approach.
“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.” Snider, 156 S.W.3d at 347; see also Equitable Life Assur. Soc. of U.S./Marriott Hotels, Inc. v. State Tax Comm’n, 852 S.W.2d 376, 380 (Mo. App. E.D. 1993) (noting the income approach discounts “future dollars to present levels in order to compensate for risk and the elapsed time required to recapture the initial investment”). “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.” Snider, 156 S.W.3d at 347.
The income approach “is applied in three steps: (1) net income is forecasted for a specified number of years; (2) an appropriate discount factor or capitalization rate is selected; and (3) the proper discounting and/or capitalization procedure is applied.” Drury Chesterfield, Inc. v. Muehlheausler, 347 S.W.3d 107, 113 (Mo. App. E.D. 2011). Even if the foundational deficiencies in Complainants’ exhibits are downplayed, Complainants’ application of the income approach fails at both the first and second steps.
Complainants failed to produce substantial and persuasive evidence of the NOI of any subject property. There is no evidence any of the data in any of Complainants’ exhibits is accurate and reliable. While counsel asserted the exhibits are accurate, counsel’s statements are not evidence and are not a substitute for proof. Andersen, 217 S.W.3d at 381; Schubert, 111 S.W.3d at 906. Whether considered alone or in conjunction with counsel’s assurances, none of the exhibits in these appeals are substantial and persuasive evidence showing a lower NOI warranting a reduced valuation.
Complainants also failed to produce substantial and persuasive evidence of the appropriate capitalization rate for any subject property. To estimate the present worth of future income, the income approach employs “a capitalization method of valuation … derived from the market, which reduces the need for unsubstantiated, subjective judgments.” Drury Chesterfield, 347 S.W.3d at 113. The capitalization rate represents the market-based estimate of the rate of return expected from the NOI generated by the subject property. See State ex rel. State Highway Comm’n v. Mann, 624 S.W.2d 4, 7 (Mo. banc 1981) (noting the income approach estimates value by “using the net return of the property to determine a logical selling price”). In direct capitalization, value is estimated by dividing the NOI by the market capitalization rate for the subject property. Parker v. Doe Run Co., 553 S.W.3d 356, 364 (Mo. App. S.D. 2018); see also Appraisal Institute The Appraisal of Real Estate 491 (14th ed. 2013) (explaining the capitalization rate converts one year’s expected income into an indication of value by dividing estimated net operating income by an appropriate rate). Determining the appropriate capitalization rate is critical because nominally small changes yield significant changes to value estimates.
“Deriving capitalization rates from comparable sales is the preferred technique when sufficient information about sales of similar, competitive properties is available.” Appraisal of Real Estate at 493; see also Snider, 156 S.W.3d at 347 (noting the appropriate capitalization rate is that which “can reasonably be estimated from existing market conditions”). The capitalization rate can also be estimated using the band of investment method, the debt coverage ratio analysis, or investor surveys. Appraisal of Real Estate at 495–99. Investor surveys, however, “are generally used as support rather than as primary evidence of a capitalization rate.” Id. at 499.
Complainants do not utilize the preferred technique of extracting a market-based capitalization rate from comparable sales. Nor do Complainants utilize the band of investment method or the debt coverage ratio method. Instead, Complainants’ proposed capitalization rates are based exclusively on investor surveys presenting a range of estimated capitalization rates applicable to either “stabilized” or “value add” properties in “St. Louis.” There is no property-specific evidence of localized market factors influencing the investment risk and, therefore, the capitalization rates for the subject properties located in distinct submarkets within the greater St. Louis market. Aside from simply picking a number from a range of values in a regional survey, there is no evidence to further inform the selection of the appropriate capitalization rate for any of the subject properties. The net result is that Complainants’ proposed capitalization rates – and by extension their proposed values – are based on the type of “unsubstantiated, subjective judgments” that a market-based approach is designed to avoid. See Drury Chesterfield, Inc., 347 S.W.3d at 113.
The significance of omitting market-derived capitalization rates based on comparable sales is amplified by the fact Complainants rely on comparable sale charts as an indication of value. If, as Complainants’ exhibits imply, the comparable sale charts are evidence of value, then the purported comparable sales could be used to estimate market-extracted capitalization rates. By including comparable sales charts in their exhibits, Complainants tacitly concede “sufficient information about sales of similar, competitive properties is available” to develop capitalization rates from comparable sales. See The Appraisal of Real Estate at 493. That Complainants elected not to utilize this data to at least supplement the surveyed capitalization rates further undermines both the persuasiveness of their proposed capitalization rates and their purported comparable sales. Complainants’ income approach does not yield substantial and persuasive evidence of value.
Comparable Sales Approach
“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.” Snider, 156 S.W.3d at 348. “Comparable sales consist of evidence of sales reasonably related in time and distance and involve land comparable in character.” Id. at 348. Unless the comparable properties are identical to the subject property, adjustments are required. The Appraisal of Real Estate (14th ed. 2013) 388. Consequently, absent proof the comparable properties are identical to the subject property, the STC “cannot base its decision on opinion evidence that fails to consider” the adjustments that “should have been considered” in applying the comparable sales approach. Snider, 156 S.W.3d at 348; see also In re Marriage of Patrick, 201 S.W.3d 591, 598 (Mo. App. S.D. 2006) (holding the circuit court properly disregarded a “comparative market analysis” that failed to make monetary adjustments to account for property differences because the analysis “did not meet the requirements of the comparable sale approach method for valuation of real estate”).
Complainants’ comparable sales approach is based on comparable sales charts listing the property location, sale price, sale price per square foot, sale date, and the property class of purported comparable sales. Simply listing sales and property data does not establish the properties are comparable, particularly since the sale prices of some purported comparable properties vary by a factor exceeding 100. There is no explanation as to why properties with exponential price variations are comparable to the subject properties. Complainants make no adjustments to account for property differences, yet there is no evidence the subject properties are identical to any of the purported comparable properties. Therefore, even if the data in Complainant’s sales comparison charts were verified, the lack of adjustments is a fatal flaw in Complainant’s comparable sales approach. Complainants’ comparable sales approach yields no substantial and persuasive evidence of value.
CONCLUSION AND ORDER
The BOE’s decision is affirmed. The TVM of the subject properties as of January 1, 2019, is set forth in the attached appendix.
Application for Review
A party may file with the STC an application for review of this decision within 30 days of the mailing date set forth in the certificate of service for this decision. The application “shall contain specific detailed grounds upon which it is claimed the decision is erroneous.” Section 138.432. The application must be in writing, and may be mailed to the State Tax Commission of Missouri, P.O. Box 146, Jefferson City, MO 65102-0146, or emailed to Legal@stc.mo.gov. A copy of the application must be sent to each person 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.
The Collector of St. Louis County, and 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 the disputed taxes have been disbursed pursuant to a court order under the provisions of section 139.031.
SO ORDERED July 2, 2021.
Eric S. Peterson
Senior Hearing Officer
State Tax Commission
Certificate of Service
I hereby certify that a copy of the foregoing has been electronically mailed and/or sent by U.S. Mail on July 2, 2021, to: Complainant(s) and/or Counsel for Complainant(s), the County Assessor and/or Counsel for Respondent and County Collector.
Contact Information for State Tax Commission:
Missouri State Tax Commission
421 East Dunklin Street
P.O. Box 146
Jefferson City, MO 65102-0146
Appeal No. Complainant Parcel No. BOE Value
|19-10052||NORTHWEST ENTERPRISES INC||09O240177||$525,000|
|19-10053||D AND M VENTURES LLC||09P620127||$776,100|
|19-10054||MISSISSIPPI VALLEY EQUIPMENT COMPANY||10E610142||$1,200,000|
|19-10055||WESTERN OIL INC||10E620075||$2,129,100|
|19-10056||MIDWEST INDUSTRIAL PROPERTIES LLC SERIES 2||10K230073||$3,551,100|
|19-10057||MIDWEST INDUSTRIAL PROPERTIES LLC SERIES 3||10K240094||$2,449,200|
|19-10059||MO Bottom Realty LLC||10M330353||$1,474,300|
|19-10061||MARCH GROUP LLC||10O530133||$1,689,100|
|19-10063||Montgomery First National Bank||11N220182||$1,073,300|
|19-10064||FRANK S LETA||11N240465||$2,221,700|
|19-10065||GSS PROPERTIES LLC||11N430114||$580,000|
|19-10068||MIDLAND STORAGE LLC ETAL||14M120323||$2,343,900|
|19-10075||WEST PINE LP ETAL||14O630451||$1,295,400|
|19-10077||SCOTT D SAUNDERS||15J421084||$343,900|
|19-10078||Wise El Santo Company||15M120230||$2,565,000|
|19-10082||LACKLAND BUILDING LLC||15N410123||$1,210,500|
|19-10083||LACKLAND BUILDING LLC||15N410145||$1,766,000|
|19-10085||WESTLINE BUILDING LLC||15N430253||$912,000|
|19-10086||SCHUETZ INVESTMENTS LP||15N440203||$1,394,000|
|19-10087||SCHUETZ INVESTMENTS LP||15N531411||$1,500,000|
|19-10088||PLAZA REALTY INC||15O630155||$4,034,200|
|19-10101||Olivette Executive Building LLC||16L220266||$52,300|
|19-10102||Olivette Executive Building LLC||16L220301||$1,126,500|
|19-10104||BAUR I LLC||16M340541||$581,100|
|19-10105||FAE HOLDINGS LLC||16M520082||$4,721,500|
|19-10106||MIDWEST INDUSTRIAL PROPERTIES LLC SERIES 4||16M540145||$1,403,500|
|19-10107||BAUR II LLC||16M620182||$782,700|
|19-10108||10230 PAGE INDUSTRIAL BLVD LLC||16M620357||$831,200|
|19-10110||WESTERN OIL INC||16R340261||$725,100|
|19-10111||Olivette Executive Building LLC||17L540822||$700,000|
|19-10117||SHOPPES AT WESTGATE LLC||17O440844||$4,049,200|
|19-10118||OZARK BUILDING MATERIALS CO INC||17T310182||$549,800|
|19-10119||THF Chesterfield Development LLC||17U340089||$1,205,500|
|19-10121||JOAN LEE LLC AMBASSADOR FLOOR CO||17V340143||$4,125,000|
|19-10122||SPIRIT PLAZA AIRPORT ROAD LLC||17V340220||$2,360,000|
|19-10123||CHESTERFIELD AIRPORT PROPERTY GROUP LLC||17V610073||$14,612,600|
|19-10138||MARY BRENT BUILDING PARTNERSHIP||18K310788||$4,456,200|
|19-10141||CLAYTON SQUARE LLC||18K331150||$2,314,800|
|19-10151||First National Bank||19M340652||$1,881,400|
|19-10152||BALLAS OFFICE PARTNERS LP ETAL||19O330145||$1,830,000|
|19-10153||First National Bank||19S411000||$1,500,000|
|19-10159||WHITE BUILDING LP||20K240437||$49,500|
|19-10160||JEANNE MARIE MARGULIS||20K241748||$6,560,000|
|19-10161||WHITE BUILDING LP||20K242004||$472,900|
|19-10162||WHITE HANLEY 1 LLC||20K310493||$1,600,000|
|19-10173||MCKEAN RENTAL COMPANY||21K320460||$711,800|
|19-10174||MCKEAN RENTAL COMPANY||21K320671||$458,500|
|19-10182||WEBSTER CENTRE II LLC||22J110919||$305,600|
|19-10186||ROCK HILL PARTNERS LLC||22L531321||$1,575,000|
|19-10187||BROWNE AND SONS FOODLINER INC||22M241317||$5,577,500|
|19-10189||HORN LAKE PROPERTIES LLC||22P620452||$3,581,300|
|19-10190||HORN LAKE PROPERTIES LLC||22P620591||$8,844,700|
|19-10191||MANCHESTER COMMONS LLC||22Q310116||$4,577,400|
|19-10198||CONWAY CENTRE LLC ETAL||23M111064||$1,115,000|
|19-10199||OK HATCHERY FEED AND GARDEN STORE INC||23M120224||$622,300|
|19-10200||GH ADAMS LLC||23M120875||$190,900|
|19-10207||LAND WEST NO 1 LLC||23Q540510||$1,339,400|
|19-10211||WESTLAND PROPERTIES LLC||23V120115||$1,300,800|
|19-10213||CEDAR CREEK LODGE APT HOMES LLC||24H111591||$157,600|
|19-10215||Montgomery First National Bank||24K330927||$1,968,000|
|19-10216||Pioneer Place LLC||24M441625||$6,282,000|
|19-10217||Pioneer Place LLC||24M441634||$4,400,000|
|19-10218||Pioneer Place LLC||24M441643||$872,800|
|19-10219||CAHOKIA PROPERTIES LLC||24M441973||$1,105,000|
|19-10220||C AND S PROPERTIES OF STL LLC||24M521167||$790,000|
|19-10223||STNT PROPERTIES LLC||24N611245||$443,500|
|19-10228||L AND J LLC||24U620486||$514,200|
|19-10229||OLD STATE INVESTMENTS LLC||24U621014||$566,500|
|19-10230||OLD STATE INVESTMENTS LLC||24U640440||$1,021,900|
|19-10231||OLD STATE INVESTMENTS LLC||24U640514||$536,200|
|19-10232||OLD STATE INVESTMENTS LLC||24U640532||$2,110,200|
|19-10233||WESTRIDGE OFFICE HOLDING||24V410264||$746,800|
|19-10234||WESTRIDGE OFFICE HOLDING||24V410275||$67,940|
|19-10235||WESTRIDGE OFFICE HOLDING||24V420483||$970,300|
|19-10236||WESTRIDGE OFFICE HOLDING||24V420494||$970,300|
|19-10237||WESTRIDGE OFFICE HOLDING||24V420506||$453,900|
|19-10245||ROCK DEVELOPMENT INC||25L420402||$990,000|
|19-10246||STREIB REAL ESTATE LLC||25L510268||$184,600|
|19-10248||Watson Plaza LLC||25M340592||$8,900,000|
|19-10249||Watson Plaza LLC||25M340608||$2,817,000|
|19-10252||GOLTERMAN HOLDING LLC ETAL||25O420373||$1,935,000|
|19-10257||MERAMEC VALLEY BANK||26Q620844||$620,500|
|19-10258||BRADLEY DAILY LLC||26Q640910||$307,300|
|19-10261||ROSS BUILDING LLC||27P130095||$572,100|
|19-10262||SOUTH PROPERTIES INC||28H440608||$538,000|
|19-10263||Montgomery First National Bank||28J121094||$1,100,000|
|19-10264||MILFORD BROTHERS INC||28J410327||$880,500|
|19-10265||SARACINO BROS REAL ESTATE INVESTMENTS||28K541325||$78,600|
|19-10266||SARACINO BROS REAL ESTATE INVESTMENTS||28K541336||$694,300|
|19-10268||First National Bank||28L220124||$296,400|
|19-10269||LETA VENTURE II LLC||28L620580||$2,507,900|
|19-10270||SLM PROPERTIES LLC||28M110255||$1,200,000|
|19-10281||SUMMIT AT GRAVOIS BLUFFS LLC||29O240771||$4,781,500|
|19-10283||GRAVOIS BLUFFS SOUTH 6G4 LLC||29O330201||$2,447,400|
|19-10284||GRAVOIS BLUFFS SOUTH 6G3 LLC||29O330210||$2,098,100|
|19-10287||GRAVOIS BLUFFS I LLC||29O610116||$4,600,000|
|19-10288||GRAVOIS BLUFFS SOUTH 6E1 LLC||29O610172||$708,700|
|19-10289||GRAVOIS BLUFFS EAST 1 LLC||29O640223||$1,506,600|
|19-10294||LAND WEST NO 7 LLC||30K110353||$810,300|
|19-10295||WESTERN OIL INC||30K120291||$773,800|
|19-10403||Manchester Properties At Marshall Avenue LLC||21K220393||$869,400|
|19-10404||North Lights Properties LLC||14L422501||$1,256,300|
|19-10405||North Lights Properties LLC||14L422510||$473,500|
|19-10406||North Lights Properties LLC||14L422521||$356,900|
|19-10407||North Lights Properties LLC||14L422543||$342,000|
|19-10413||Watchtower Asset Management LLC||14O340215||$850,000|
|19-11863||GRAVOIS BLUFFS I LLC||29O630158||$10,191,700|
|19-11865||The James Avenue LLC||22J531310||$865,000|
 All statutory citations are to RSMo. 2000, as amended, unless indicated otherwise.
 The appraisal report prepared by Complainant’s appraiser opined a value of $2,780,000. The appraisal report was not introduced or admitted into evidence and, therefore, is not considered as support for this decision.
 Complainants timely filed complaints for review of assessment. The State Tax Commission (STC) has authority to hear and decide Complainants’ appeals. Mo. Const. art. X, sec. 14; section 138.430.1, RSMo 2000. All statutory citations are to RSMo 2000, as amended.
 In some comparable sales charts, the listed sale prices vary exponentially. For instance, the chart in appeal 19-10246 lists sales ranging from $22,000 to $2,414,900. There is no explanation why the properties are comparable when the sale prices are separated by a factor exceeding 100. Similar examples include appeal 19-10213 (sale prices ranging from $75,000 to $2,000,000) and appeal 19-10182 (sale prices ranging from $75,000 to $5,000,000).
 In some cases, the Owner’s Opinion of Value page does not list a proposed value. See eg., appeals 19-10246, 19-10269, 19-10288, and 19-10295.
 Exhibit SSSSSSS (175) in appeal 19-10082 indicates Respondent assumed an NOI of $132,467 and a 7.50% pre-tax capitalization rate. The “Actual Income Method” chart utilizes a 7.50% capitalization rate but assumes an NOI of $111,335. The exhibit includes no documentation supporting either NOI figure.
 Exhibit SSSSSSS (175) in appeal 19-10057 includes a comparable sales chart, an Owner’s Opinion of Value page, a capitalization rate survey, a “Commercial Rent Roll” and a partially redacted document purporting to be an “Income Statement.” Similarly, Exhibit TTTTTTT (176) in appeal 19-10077 includes a black and white photograph of pick-up truck and a police report regarding a vacuum allegedly stolen from a car wash. As with every exhibit in every appeal, there was no witness testimony laying a foundation for either exhibit.
 Exhibit SSSSSSS (175) in appeal 19-10065 asserts a higher capitalization rate and lower NOI with no documentation supporting the lower NOI. The higher capitalization rate is based on a one-page excerpt from an investor survey.
 Exhibit SSSSSSS (175) in appeal 19-10055 includes an Owner’s Opinion of Value page indicating the BOE valued the subject property at $2,129,100 and that both the “County Income Method” and Complainant’s “Actual Income Method” yield a TVM of $1,526,155. See also Appeal 19-10110 (indicating the BOE valued the subject property at $725,100 while both the “County Income Method” and “Actual Income Method” yield a TVM of $225,574).
 At the hearing, Complainant’s counsel conceded the BOE decisions are admissible as business records pursuant to Section 536.070(10).
 See Tibbs v. Poplar Bluff Assocs. I, L.P., 599 S.W.3d 1, 7 (Mo. App. S.D. 2020) (holding the BOE’s valuation is presumptively correct); Parker v. Doe Run Co., 553 S.W.3d 356, 360 (Mo. App. S.D. 2018) (“A county board of equalization’s valuation is presumed correct”); Rinehart v. Bateman, 363 S.W.3d 357, 367 (Mo. App. W.D. 2012) (the value fixed by the BOE is presumed correct); Drury Chesterfield, Inc. v. Muehlheausler, 347 S.W.3d 107, 115 (Mo. App. E.D. 2011) (affirming the STC’s decision because taxpayer did not overcome presumption the BOE’s valuation was correct); Cohen v. Bushmeyer, 251 S.W.3d 345, 348 (Mo. App. W.D. 2008) (noting the BOE’s value is presumptively correct); Indus. Dev. Auth. of Kansas City v. State Tax Comm’n of Missouri, 804 S.W.2d 387, 392 (Mo. App. W.D. 1991) (noting the BOE valuation is presumed correct); Hermel, Inc. v. State Tax Comm’n, 564 S.W.2d 888, 895 (Mo. banc 1978) (noting the BOE valuation is presumed correct); Iron Cty. v. State Tax Comm’n, 437 S.W.2d 665, 673 (Mo. banc 1968) (noting there is a rebuttable presumption the BOE’s valuation is correct); Cupples Hesse Corp. v. State Tax Comm’n, 329 S.W.2d 696, 700 (Mo. 1959) (noting the values fixed by “reviewing boards” are presumed correct); May Dep’t Stores Co. v. State Tax Comm’n, 308 S.W.2d 748, 759 (Mo. 1958) (noting the BOE valuation is presumed correct); State ex rel. Thompson v. Bethards, 9 S.W.2d 603, 604 (Mo. banc 1928) (noting the BOE valuation is presumed correct).
 For example, if the NOI is $1,000,000, increasing the capitalization rate from 7% to 9% decreases the value estimate from $14.28 million to $11.11 million.
 Unlike Complainants’ property-specific exhibits, Complainants’ “common exhibits” repeatedly distinguish between the greater St. Louis market and distinct submarkets. For instance, Exhibit YYYYY (129) notes that despite an overall 6.21% vacancy rate in the “St. Louis industrial market,” the “story of low vacancy is not the same in every submarket across the region” and that the vacancy rates in the Earth City and North County submarkets are nearly twice the average at “11.05% and 11.13% respectively.” Similarly, Exhibit DDDDD (108) lists the different rents and vacancy rates in 17 separate submarkets within the greater St. Louis Metropolitan Statistical Area. Complainants’ common exhibits therefore refute the implicit premise in the property-specific exhibits that the capitalization rate for a specific properties in various submarkets can be reliably estimated solely from a general survey of the “St. Louis” market.
 The overvaluation claims in some appeals also fail because the property-specific exhibits include no opinion of value. Complainants’ burden of proof includes proving “the value that should have been placed on the property.” Tibbs, 599 S.W.3d at 7.