Francesco R. Russo & Eric D. Lougin v. Stephen J Conway, Assessor City of St. Louis

June 8th, 2018

STATE TAX COMMISSION OF MISSOURI

 

FRANCESCO R. RUSSO & ERIC D. LOUGIN, )

)

 
  )  
              Complainants, )  
  )  
v. ) Appeal No. 17-20072
  )

)

Parcel/Locator No.

2288-06-0070-0

STEPHEN J. CONWAY,  ASSESSOR, )  
CITY OF ST. LOUIS, MISSOURI,

Respondent.

)

)

 

 

DECISION AND ORDER

 

HOLDING

 

The decision of the City of St. Louis Board of Equalization (BOE) is SET ASIDE with regard to classification of the subject property.  Complainants Francesco R. Russo (Mr. Russo) and Eric D. Lougin (Mr. Lougin) (collectively referred to as Complainants) presented substantial and persuasive evidence to rebut the presumption of correct classification of the subject property.  Complainants did not present substantial and persuasive evidence to establish discrimination in the assessment of the subject property.

Complainants appeared pro se.

Respondent Stephen J. Conway, Assessor, City of St. Louis, Missouri, (Respondent) appeared by counsel Georganna Ekpo.

Case heard and decided by Senior Hearing Officer Amy S. Westermann (Hearing Officer).

 

 ISSUE

Complainants appealed on the grounds of misclassification and discrimination in assessment.  Respondent initially set the assessed value of the subject property at $127,000, as commercial property, as of January 1, 2017.  Subsequently, the BOE set the assessed value of the subject property at $127,000, as commercial property, thereby sustaining Respondent’s valuation.  The State Tax Commission (STC) takes this appeal to determine the proper classification for the subject property as of January 1, 2017, and whether discrimination in assessment occurred.

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 this appeal is proper.  Complainant timely appealed to the State Tax Commission.
  2. Evidentiary Hearing. The issues of misclassification and discrimination were presented at an evidentiary hearing on March 1, 2018, in the 22nd Circuit Court, 10 N. Tucker Blvd., St. Louis, Missouri.
  3. Identification of Subject Property. The subject property is identified by parcel/locator number 22880600700.  It is further identified as 3716 Grandel Square, St. Louis, Missouri.  (Complaint)
  4. Description of Subject Property. The subject property consists of a 6,012 square foot, three-story structure built in approximately 1888.  (WTD of Chris Roth)  The subject property is used as a bed and breakfast and as a residence by Complainants.  (WTD of Chris Roth)
  5. Assessment. Respondent set an assessed value for the subject property of $127,000, commercial, as of January 1, 2017.
  6. Board of Equalization. The BOE set an assessed value for the subject property of $127,000, commercial, as of January 1, 2017.
  7. Complainant’s Evidence. Complainants did not challenge the BOE’s determination of the true value in money (TVM) of the subject property.  Complainants opined that the subject propety’s proper classification as of January 1, 2017, was residential.  To support their opinion of classification, Complainants offered as evidence the following exhibits:
EXHIBIT DESCRIPTION OBJECTION

(Respondent made a continuing objection on the grounds of lack of relevance and lack of foundation with regard to the admission of all of Complainants’ exhibits and testimony)

RULING
Exhibit A Audio recording of Complainants’ hearing before BOE Lack of relevance/foundation Admitted to be given weight deemed necessary
Exhibit B City of St. Louis Classification Specification for Real Property Appraiser I Lack of relevance Admitted to be given weight deemed necessary
Exhibit C City of St. Louis Hotel/Motel Bed and Breakfast Business License for subject property dated 02/01/18 to 01/31/19 No specific objection Admitted
Exhibit D City of St. Louis Department of Public Safety Certificate of Occupancy and Zoning dated June 10, 2013, stating subject property may be used/operated as “COMMERCIAL” and “BED & BREAKFAST (GUEST HOUSE 4 ROOMS) 1ST & 2ND FLS ONLY” No specific objection Admitted
Exhibit D-BIS Application for permit to use subject property as a bed and breakfast dated 10/28/09 and 11/06/13, approving four rooms and containing remarks: “APPLICANT HAS TO REAPPLY TO ADD 3 ROOMS BACK WHEN THEY MEET REQUIREMENTS TO USE 3RD FLOOR.” No specific objection Admitted
Exhibit E Section 137.016 RSMo defining “Residential property” No specific objection Admitted
Exhibit F Section 315.005 RSMo defining “Guest room” Lack of relevance because statute applies to hotels/motels and not to bed and breakfasts Admitted to be given weight deemed necessary
Exhibit G Google dictionary definition of “unit” Lack of relevance; best evidence rule; speculation – statutes and case law define “unit” Excluded
Exhibit H Definitions and Frequently Asked Questions provided by Respondent to Complainants pursuant to a Sunshine Law Records Request; defining “All-Suite: Property with guestroom inventory that exclusively consists of rooms offering more space and furniture than a typical hotel room, including a designated living area or multiple rooms.” Lack of relevance; cumulative to statute Admitted
Exhibit I Change of Assessment Notice dated May 2017 and notifying Complainants of change in appraised value and assessed value of subject property; assessing subject property at 32% of TVM; stating two different values and commercial classification for same taxing cycle beginning January 1, 2017 No specific objection Admitted
Exhibit II Change of Assessment Notice dated May 2017 with interlineation and handwritten date May 2016 and notifying Complainants of change in appraised value and assessed value of subject property; assessing subject property at 19% of TVM; stating two different values and residential classification for same taxing cycle beginning Janary 1, 2017 No specific objection Admitted
Exhibit J Spreadsheet from tax records for subject property showing classification codes consistent from 2007 to 2016 No specific objection Admitted
Exhibit J-BIS 2016 Real Estate Tax Bill for subject property showing sub-class of property as residential No specific objection Admitted
Exhibit K Printed version of website for subject property, http://www.grandcenterinn.com/private –rooms—suites.html No specific objection Admitted
Exhibit L Cover letter dated June 21, 2017, from Respondent’s counsel to Complainants with two printed pages from a lodging reservation website, Reservations.com, showing a total of six rooms (four labeled as “rooms” and two labeled as “suites”) within the subject property available for rent No specific objection Admitted
Exhibit M Cover letter dated June 27, 2017, from Respondent’s counsel to Complainants with 16 printed pages from a lodging reservation website, Bedandbreakfast.com, showing a total of seven rooms (four labeled as “rooms” and three labeled as “suites”) within the subject property available for rent No specific objection Admitted
Exhibit N Written correspondence dated July 5-6, 2017,  between Complainants and Respondent and printed pages from a lodging reservation website, AirBnB.com, showing a total of “4 Independent Apts.,” one of which was specifically described as having two bedrooms and two bathrooms and accommodating six individuals No specific objection Admitted
Exhibit O Wikipedia definition of “Hearsay in United States law” Lack of relevance; Hearing Officer determines what constitutes hearsay Excluded
Exhibit P Copy of Complainants’ Motion for Revision of Scheduling Order No specific objection Admitted
Exhibit Q Letter dated June 16, 2017, from Complainants to Respondent purporting to document an in-person meeting between Complainants and then-Assessor Freddie Dunlap concerning the 2017 assessment and past assessments and requesting documentation and the Assessor’s Office’s refusal to provide the documentation requested Lack of relevance; no relation to proving TVM of subject property on Janary 1, 2017, and no bearing on whether subject property was discriminated against when compared to other properties Admitted to be given weight deemed necessary
Exhibit R 2017 Appeal of Real Estate form for subject property filed with BOE alleging improper classification, assessment not equalized with similar adjacent properties, assessment not equalized with similar properties in same neighborhood, and parcel subject to tax abatement No specific objection Admitted
Exhibit S 2017 Complaint for Review of Assessment form for subject property filed with STC No specific objection Admitted
Exhibit T Findlaw.com annotation to the Fourteenth Amendment to the United States Constitution No specific objection Admitted
Exhibit U General Warranty Deed dated October 12, 1999; Parcel Development Agreement dated October 12, 1999;  Letter from Grand Center, Inc., purporting to confer tax abatement upon a proposed development in the 3700 block of Grandel Square Lack of relevance; no relation to proving TVM of subject property on Janary 1, 2017, and no bearing on whether subject property was discriminated against when compared to other properties Admitted for limited purpose of supporting Complainants’ claim of discrimination and not to establish existence of tax abatement for subject property
Exhibit V Email correspondence between Attorney William T. Zorn on behalf of Complainants, Deputy Assessor Shawn T. Ordway, and Redevelopment Coordinator for the City St. Louis David Donald Lack of relevance; no relation to proving TVM of subject property on Janary 1, 2017, and no bearing on whether subject property was discriminated against when compared to other properties Admitted for limited purpose of supporting Complainants’ claim of discrimination and not to establish existence of tax abatement for subject property
Exhibit W Copy of Assessment History of subject property from 2003 to 2006 Lack of relevance; no relation to proving TVM of subject property on Janary 1, 2017, and no bearing on whether subject property was discriminated against when compared to other properties Admitted for limited purpose of supporting Complainants’ claim of discrimination and not to establish existence of tax abatement for subject property
Exhibit X City of St. Louis Commercial Report Form purporting to refer to tax abatement (mostly illegible) Lack of relevance; no relation to proving TVM of subject property on Janary 1, 2017, and no bearing on whether subject property was discriminated against when compared to other properties Excluded
Exhibit Y STC Assessor’s Manual description of the Assessment Cycle and How the Tax is Determined No specific objection Admitted
Exhibit Z Graph provided by Respondent during discovery showing the percent change in assessed value of residential and commercial properties in the City of St. Louis from 1997 to 2017 No specific objection Admitted
Exhibit AA Change of Assessment Notice dated April 1, 2007, and notifying Complainants of change in appraised value and assessed value of subject property No specific objection Admitted
Exhibit BB Change of Assessment Notice dated May 2009 and notifying Complainants of change in appraised value and assessed value of subject property No specific objection Admitted
Exhibit CC Change of Assessment Notice dated May 2011 and notifying Complainants of change in appraised value and assessed value of subject property No specific objection Admitted
Exhibit DD Change of Assessment Notice dated May 2012 and notifying Complainants of change in appraised value and assessed value of subject property No specific objection Admitted
Exhibit DD-BIS Letter dated April 30, 2007, from the Office of the Assessor to Complainants documenting an adjustment to the assessment of the subject property Lack of relevance; no relation to proving TVM of subject property on Janary 1, 2017, and no bearing on whether subject property was discriminated against when compared to other properties Admitted
Exhibit EE Statement of Personal Property Tax Delinquency issued by the City of St. Louis Collector of Revenue dated January 14, 2013, related to subject property Lack of relevance; hearsay Admitted
Exhibit EE-BIS Copy of notes from meeting between representatives of eight bed and breakfast establishments in the City of St. Louis, Deputy Assessor Shawn T. Ordway, and 6th Ward Alderman Christine Ingrassia Lack of relevance; no relation to proving TVM of subject property on Janary 1, 2017, and no bearing on whether subject property was discriminated against when compared to other properties Admitted to be given weight deemed necessary
Exhibit EE-TER STC Personal Property Manual description of tax situs, real property, and tangible personal property No specific objection Admitted
Exhibit FF Change of Assessment Notice dated May 2013 and notifying Complainants of change in appraised value and assessed value of subject property No specific objection Admitted
Exhibit GG Address and Property Information Data for 3733 Washington Blvd. for tax year 2013 Lack of relevance Excluded
Exhibit HH Address and Property Information Data for 3740 Grandel Square for tax year 2013 Lack of relevance Excluded
Exhibit II Change of Assessment Notice dated May 2017 and notifying Complainants of change in appraised value and assessed value of subject property No specific objection Admitted
Exhibits JJ, KK, LL Comparable properties located at 3733 Washington Blvd.; 3740 Grandel Square; and 3724 Olive Street offered for purpose of showing that subject property was assessed at full market value while comparable properties all were undervalued Lack of relevance because exhibits do not establish whether comparables are above, equal to, or below TVM of subject property; exhibits assume facts not in evidence in that Complainants did not conduct a ratio study, which is the only evidence that can show whether comparable properties were undervalued Admitted to be given weight deemed necessary
Exhibit MM STC Assessor’s Manual page 49 of 164 describing Office Review Lack of relevance Excluded
Exhibit NN Withdrawn N/A N/A
Exhibits OO and PP Printed Facebook pages displaying photographs and posts from Vince Schoemehl and Janese Henry Lack of relevance Excluded

 

Respondent made a continuing objection to all of Complainants’ exhibits on the ground that Complainants failed to adhere to the Hearing Officer’s scheduling order issued on February 9, 2018 (February 9 Order), which required the parties to exchange “any and all evidence” they intended to present prior to the Evidentiary Hearing.  Respondent argued that he did not receive any Written Direct Testimony (WDT) from Complainants prior to the Evidentiary Hearing pursuant to the February 9 Order.  Respondent argued that Complainants’ exhibits lacked relvance and foundation because Respondent was not made aware of who would testify at the Evidentiary Hearing and how Complainants’ exhibits would be used in conjunction with any testimony.  After hearing argument of the parties regarding the objection, the Hearing Officer generally overruled the objection and allowed Complainants to introduce live testimony and their exhibits subject to Respondent’s continuing objection.  Respondent was allowed to make specific objections to exhibits as they were introduced, and the Hearing Officer ruled on specific objections as shown in the table, above.  With regard to the admission of Complainants’ live testimony, the objections of relevance and foundation are hereby overruled because Respondent was provided ample opportunity to cross examine Complainants’ sole witness, Mr. Lougin, during the Evidentiary Hearing.          

Mr. Lougin testified that, in 2005, Complainants had purchased multiple parcels classified as residential property, which included the subject property, for approximately $250,000.[1]  Mr. Lougin testified that the subject property had been listed with a realtor and publicly advertised.  Mr. Lougin testified that the subject property had not been listed for sale withing the three years prior to the Evidentiary Hearing.  Mr. Lougin testified that the subject property had been appraised as residential property within the three years preceding the date of the Evidentiary Hearing but that he did not recall the appraisal amount.  Mr. Lougin testified that Complainants had not made any improvements to the subject property between January 1, 2015, and January 1, 2017.  Mr. Lougin testified that the subject property should be classified as residential property as of January 1, 2017.

Mr. Lougin testified that Respondent’s appraiser Chris Roth (the Appraiser) had assessed the subject property as commercial in March 2017.  Mr. Lougin testified that the subject property did not have seven distinct guestrooms but had four units.  Mr. Lougin testified that Respondent’s employees had used Complainants’ website to determine the number of rooms for rent but had misinterpreted the information on the website.  Mr. Lougin testified that Complainant’s can’t and don’t have the ability to rent seven rooms within the subject property.  Mr. Lougin testified that Complainants did not know the TVM of the subject property on January 1, 2017, but the evidence showed the ratio of assessment was higher on the subject property than on other neighboring properties.         

On cross examination, Mr. Lougin testified that he has maintained the website for the subject property since 2010 or 2011.  Mr. Lougin testified that he makes all of the changes to the website even though Mr. Russo also has access to the website.  Mr. Lougin testified that the number of rooms available for rent on January 1, 2017, was four units.  Mr. Lougin testified that he did not know who had provided information regarding the subject property to Reservations.com and did not know the source of the information on that website.  Mr. Lougin testified that he had provided information regarding the subject property to AirBnB.com.  Mr. Lougin testified that he did not know the source of the information on Bedandbreakfast.com.  Mr. Lougin testified that Complainants track rentals through reservation software and did not provide any of the information from their reservation software to websites and such information might not accurately reflect rentals from a historical perspective.  Mr. Lougin testified that the Appraiser had offered to verify the number of rooms but Complainants did not allow the Appraiser inside the subject property because he allegedly had previously made false statements.  Mr. Lougin testified that if an inspection had been ordered through discovery, the case would not have proceeded to an evidentiary hearing.

Also on cross examination, Mr. Lougin disputed the accuracy of Respondent’s exhibits showing the subject property contained seven rooms.  Mr. Lougin testified that, prior to and as of January 1, 2017, Complainants were renting four units within the subject property.  Mr. Lougin testified that the Blue Suite and the Fox Suite are a single unit even though they can be booked either separately or in conjunction.  Mr. Lougin testified that no doors separate the suites, which constitute one continuous space.  Mr. Lougin testified that Complainants conduct their business such that guests have the ability to rent only half of the entire space but that Complainants cannot control whether guests actually roam throughout the entire space.

In rebuttal, Mr. Lougin testified that the subject property did not have seven units but had four units.

  1. Respondent’s Evidence. Respondent offered as evidence the following exhibits:
EXHIBIT DESCRIPTION OBJECTION RULING
WDT Pre-filed written direct testimony of Respondent’s appraiser Chris Roth (the Appraiser) No legal objection Admitted
Exhibit 1 Respondent’s 2017 Reassessment Guidelines on Classification of B&B (Short Term Stay) No legal objection Admitted
Exhibit 2 8 printed pages from website for subject property, http://www.grandcenterinn.com/private –rooms—suites.html; describing four suites and three rooms; describing Penthouse as not available to book now; including a disclaimer, “ACCOMMODATIONS SHOWN MAY NOT BE ALL AVAILABLE AT THE SAME TIME FOR RENT” No legal objection Admitted
Exhibit 3 8 printed pages from website for subject property, https://www.bedandbreakfast.com; stating seven rooms available but describing two suites and four rooms No legal objection Admitted
Exhibit 4 5 printed pages from a lodging reservation website, Bedandbreakfast.com, showing a total of seven rooms (four labeled as “rooms” and three labeled as “suites”) within the subject property available for rent No legal objection Admitted
Exhibit 5 Residential Appraisal Card for subject property from 1962 showing subject property being used as a hotel with 12 rooms for rent and a one to three-room apartment for the owner’s living quarters No legal objection Admitted
Exhibit 6 2010 bed and breakfast permit issued by City of St. Louis Board of Public Service noting “Guest Rooms: 7 rooms” No legal objection Admitted
Exhibit 7 Application to operate bed and breakfast with “7 ROOMS” within subject property dated October 28, 2009, and signed by Mr. Russo No legal objection Admitted

 

In his live testimony, the Appraiser testified that subject property is used as a bed and breakfast and that he believes the subject property is owner occupied.  The Appraiser testified that he viewed Complainants’ website to determine the number of rooms for rent.  The Appraiser testified that he made the determination to change the classification of the subject property from residential to commercial and that his determination was not reviewed by anyone else in Respondent’s office.  The Appraiser testified that he inspected the exterior of the subject property in March 2017 and considered only Complainants’ website in concluding the subject property had seven rooms to rent.  The Appraiser testified that he spoke to Complainants but that they did not provide any additional information about the number of rooms for rent.  The Appraiser testified that he had reviewed Complainants’ website prior to the BOE hearing and that the website had been changed to six rooms available for rent.

On cross examination, the Appraiser testified that he believed he spoke to Mr. Lougin on the day he conducted the exterior inspection of the subject property.  The Appraiser testified that the person he spoke to “was worked up” and said he “needed to get a lawyer and get his papers in order.”  The Appraiser reiterated that he believed the subject property was owner occupied.  The Appraiser admitted that he was not a licensed appraiser but that he was not required to be licensed because he was employed by an assessor’s office.

  1. Presumption of Correct Assessment Rebutted – Proper Classification Established. Complainants presented substantial and persuasive evidence to rebut the presumption of correct assessment with regard to classification by the BOE and to establish that the proper classification of the subject property as of January 1, 2017, was residential.
  2. Discrimination in Assessment Not Established. Complainants did not present substantial and persuasive evidence establishing that Respondent engaged in an intentional plan of discrimination, which resulted in an assessment of the subject property at a greater percentage of value than other property within the same class and the same taxing district, or, that the level of assessment was so grossly excessive as to be inconsistent with an honest exercise of judgment; therefore, the claim of discrimination in assessment fails.

CONCLUSIONS OF LAW AND DECISION

Jurisdiction

The STC has jurisdiction to hear this appeal and correct any assessment which is shown to be unlawful, unfair, arbitrary or capricious.  The Hearing Officer shall issue a decision and order affirming, modifying or reversing the determination of the BOE, and correcting any assessment which is unlawful, unfair, improper, arbitrary, or capricious.  Article X, Section 14, Mo. Const. of 1945; Sections 138.430, 138.431, 138.431.4, RSMo. 

Investigation by Hearing Officer

In order to investigate appeals filed with the STC, 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 RSMo (2000) as amended.  The Hearing Officer’s decision regarding the assessment or valuation of the property may be based solely upon his inquiry and any evidence presented by the parties or based solely upon evidence presented by the parties.  Id.

Basis of Assessment

The Constitution mandates that real property and tangible personal property be assessed at its value or such percentage of its value as may be fixed by law for each class and for each subclass.  Article X, Sections 4(a) and 4(b), Mo. Const. of 1945.  The constitutional mandate is to find the true value in money for the property under appeal.  By statute, real property and tangible personal property are assessed at set percentages of true value in money:  residential property at 19%; commercial property at 32%; and agricultural property at 12%.  Section 137.115.5 RSMo (2000) as amended.

Classification of Real Property

According to Missouri law, “residential property” is all real property (1) improved by a structure which is used or intended to be used for residential living by human occupants; (2) vacant land in connection with an airport; (3) land used as a golf course; (4) manufactured home parks; (5) bed and breakfast inns in which the owner resides and uses as a primary residence with six or fewer rooms for rent; and (6) time-share units as as defined in Section 407.600 except to the extent such units are actually rented and subject to sales tax under Section 144.020.1(6); but residential property shall not include other similar facilities used primarily for transient housing.  Section 137.016.1(1) RSMo (2016).  The classification is determined by the actual use put to the property.  Northtown Village v. Don Davis, Assessor, Jasper County. Mo., Appeal Nos. 03-62558 (May 27, 2004) (providing that the definitions in Section 137.016 (2000) illustrate that “the classification turns on the actual use put to the property.)   

Discrimination in Assessment (Assessment Ratio)

To obtain a reduction in the assessment of real property based upon discrimination, the complaining taxpayer must (1) prove the true value in money of the subject property as of the taxing date; and (2) show an intentional plan of discrimination by the assessor, which resulted in an assessment at a greater percentage of value than other property within the same class and the same taxing district, or, in the absence of such an intentional plan, show that the level of assessment is “so grossly excessive as to be inconsistent with an honest exercise of judgment.”  Zimmerman v. Mid–America Financial Corp., 481 S.W.3d 564, 571 (Mo. App. E.D. 2015), quoting Savage v. State Tax Comm’n of Missouri, 722 S.W.2d 72, 78 (Mo. banc 1986).  Evidence of value and assessments of a few properties does not prove discrimination.  Substantial evidence must show that all other property in the same class, generally, is actually undervalued.   State ex rel. Plantz v. State Tax Commission, 384 S.W.2d 565, 568 (Mo. 1964). The difference in the assessment ratio of the subject property and the average assessment ratio in the subject county must be shown to be grossly excessive.  Savage, 722 S.W.2d at 79.  No other methodology is sufficient to establish discrimination.  Cupples-Hesse, supra.

Where there is a claim of discrimination based upon a lack of valuation consistency, the complainant has the burden to prove the level of assessment for the subject property in the relevant tax year.  This is done by independently determining the market value of the subject property and dividing the market value into the assessed value of the property as determined by the assessor’s office.  The complainant must then prove the average level of assessment for residential property in St. Louis County for the relevant tax year.  This is done by (a) independently determining the market value of a representative sample of residential properties in the county; (b) determining the assessed value placed on the property by the assessor’s office for the relevant year; (c) dividing the assessed value by the market value to determine the level of assessment for each property in the sample; and (d) determining the mean and median of the results.  This process is commonly known as a ratio study.

To establish discrimination, the difference between the actual assessment level of the subject property and the average level of assessment for all residential property, taken from a sufficient representative sample in St. Louis County must demonstrate a disparity that is grossly excessive.  See Savage, supra.

Missouri courts have consistently held that (1) a taxpayer alleging discrimination must show the true value in money of his property as a necessary part of his discrimination claim; and (2) the proper method of determining discrimination is to compare the actual level of assessment of the subject property as determined by the assessor to the common level of assessment for the subject property’s subclass.  Mid-America Financial Corp., 481 S.W.3d at 574, citing Savage, 722 S.W.2d at 72.

“By requiring that the level of an assessment be so grossly excessive as to be inconsistent with an honest exercise of judgment in cases in which intentional discrimination is not shown, the courts and the STC refrain from correcting assessments which reflect no more than de minimus errors of judgment on the part of assessors.”  Mid-America Financial Corp., 481 S.W.3d at 571 (internal quotation omitted).  “This standard recognizes that while practical uniformity is the constitutional goal, absolute uniformity is an unattainable ideal.”  Id. (internal quotation omitted).

In deciding whether the assessment of the subject property is “grossly excessive” or nothing more than a “de minimus error of judgment,” the STC must determine the common level of assessment for the class of property at issue within the taxing district.   In Savage, 722 S.W.2d at 79, the Missouri Supreme Court reasoned:

The “common level of assessment” has been defined as a single ratio of true value used in assessing each property in a taxing district.  [citation omitted]  The “average level of assessment” means the “arithmetical mean of the varying percentages of true value applied by . . . the assessor in assessing properties within a taxing district.”  [citation omitted]

A taxpayer has the right to have his “assessment reduced to the percentage of that value at which others are taxed[.]” [citation omitted]

 

The Missouri Supreme Court has held that the proper method of analyzing discrimination compares the common level of assessment for similarly-situated properties to the actual level of assessment imposed on the subject property.  Mid-America Financial Corp., 481 S.W.3d at 571; Savage, 722 S.W.2d at 74.  A necessary component of this comparison is the TVM of both the subject property and the similarly-situated properties, i.e., properties within the same class as the subject property.  See Id.; see also Savage, 722 S.W.2d at 74.  Once the TVM of the subject property and the similarly-situated properties has been determined, the STC can calculate at what percentage or ratio of TVM the subject property and the similarly-situated properties, respectively, have been assessed.  Mid-America Financial Corp., 481 S.W.3d at 571.  This determination requires a comparison not between the common level of assessment and the statutory assessment ratio, but between the common level of assessment and the actual level of assessment for the subject property.  Id. at 574.   Neither Missouri courts nor the STC has established a “bright-line” test to identify what constitutes a grossly excessive assessment as opposed to a mere de minimus error in judgment.  Id. at 575.  The assessment in each given case must be analyzed against the assessment under the median ratio to address the grossly excessive factor.  Id.  The STC has found a 5% disparity between the common level of assessment and the actual level assessment to be de minimusTown and Country Racquet Club v. Morton, 1989 WL 41005 (Missouri State Tax Commission) (affirmed on appeal in Town & Country Racquet Club v. State Tax Commission of Missouri, 811 S.W.2d 403 (Mo. App. E.D. 1991).

Presumption in Appeal

There is a presumption of validity, good faith and correctness of assessment by the BOE.  Hermel, Inc. v. STC, 564 S.W.2d 888, 895 (Mo. banc 1978); Chicago, Burlington & Quincy Railroad Co. v. STC, 436 S.W.2d 650, 656 (Mo. 1968); May Department Stores Co. v. STC, 308 S.W.2d 748, 759 (Mo. 1958).  This presumption is a rebuttable rather than a conclusive presumption.  It places the burden of going forward with some substantial evidence on the taxpayer.  When some substantial evidence is produced by the Complainant, “however slight,” the presumption disappears and the Hearing Officer, as trier of facts, receives the issue free of the presumption. United Missouri Bank of Kansas City v. March, 650 S.W.2d 678, 680-81 (Mo. App. 1983), citing State ex rel. Christian v. Lawry, 405 S.W.2d 729, 730 (Mo. App. 1966) (citations omitted).  The presumption is not evidence of classification.  The presumption of correct assessment is rebutted when the taxpayer presents substantial and persuasive evidence to establish that the BOE’s determination was erroneous and what the determination should have been.  See Hermel, supra; Cupples-Hesse Corporation v. State Tax Commission, 329 S.W.2d 696, 702 (Mo. 1959).

Complainant’s Burden of Proof

A presumption exists that the assessment set by the BOE is correct.  Rinehart, 363 S.W.3d at 367; Cohen, 251 S.W.3d at 348; Hermel, Inc., 564 S.W.2d at 895.  “Substantial and persuasive controverting evidence is required to rebut the presumption, with the burden of proof resting on the taxpayer.” Cohen, 251 S.W.3d at 348.  Substantial evidence can be defined as such relevant evidence that a reasonable mind might accept as adequate to support a conclusion.  Cupples Hesse Corp. v. State Tax Commission, 329 S.W.2d 696, 702 (Mo. 1959).  Persuasive evidence is evidence that has sufficient weight and probative value to convince the trier of fact.  Cupples Hesse Corp., 329 S.W.2d at 702.  The persuasiveness of evidence does not depend on the quantity or amount thereof but on its effect in inducing belief.   Brooks v. General Motors Assembly Division, 527 S.W.2d 50, 53 (Mo. App. 1975). See also, Westwood Partnership v. Gogarty, 103 S.W.3d 152 (Mo. App. E.D. 2003); Daly v. P. D. George Co., 77 S.W.3d 645 (Mo. App. E.D. 2002); Reeves v. Snider, 115 S.W.3d 375 (Mo. App. S.D. 2003).

There is no presumption that the taxpayer’s opinion is correct. The taxpayer in a STC appeal still bears the burden of proof.  The taxpayer is the moving party seeking affirmative relief.   Therefore, the Complainant bears the burden of proving the vital elements of the case, i.e., the assessment was “unlawful, unfair, improper, arbitrary or capricious.”  Westwood Partnership v. Gogarty, 103 S.W.3d 152 (Mo. App. E.D. 2003); Daly v. P. D. George Co., 77 S.W.3d 645 (Mo. App. E.D. 2002); Reeves v. Snider, 115 S.W.3d 375 (Mo. App. S.D. 2003); Industrial Development Authority of Kansas City v. State Tax Commission of Missouri, 804 S.W.2d 387, 392 (Mo. App. W.D. 1991).

Generally, a property owner, while not an expert, is competent to testify to the reasonable market value of his own land.  Cohen, 251 S.W.3d at 348-49; Carmel Energy, Inc. v. Fritter, 827 S.W.2d 780, 783 (Mo. App. W.D. 1992).  This implies that a property owner also is competent to testify as to the reasonable classification of his own land.  “However, when an owner’s opinion is based on improper elements or foundation, his opinion loses its probative value.”  Carmel Energy, Inc., 827 S.W.2d at 783.  A taxpayer does not meet his burden if evidence on any essential element of his case leaves the STC “in the nebulous twilight of speculation, conjecture and surmise.”  See Rossman v. G.G.C. Corp. of Missouri, 596 S.W.2d 469, 471 (Mo. App. E.D. 1980).

In this case, Complainants did not challenge the BOE’s determination of the TVM of the subject property but challenged the BOE’s determination of classification.  The BOE classified the subject property as commercial.  Complainants presented substantial evidence, “however slight,” to support their argument that the subject property was misclassified by the BOE; thus, the presumption disappears and the Hearing Officer, as trier of facts, receives the issue free of the presumption.  Respondent advocated that the BOE’s classification should be sustained and presented evidence to support the BOE’s classification.

Weight to be Given Evidence

The Hearing Officer is free to consider all pertinent facts and give them such weight as reasonably they may be deemed entitled.  The relative weight to be accorded any relevant factor in a particular case is for the Hearing Officer to decide.  St. Louis County v. Security Bonhomme, Inc., 558 S.W.2d 655, 659 (Mo. banc 1977); St. Louis County v. STC, 515 S.W.2d 446, 450 (Mo. 1974); Chicago, Burlington & Quincy Railroad Company v. STC, 436 S.W.2d 650 (Mo. 1968).

The Hearing Officer, as the trier of fact, may consider the testimony of an expert witness and give it as much weight and credit as deemed necessary when viewed in connection with all other circumstances.  Beardsley v. Beardsley, 819 S.W.2d 400, 403 (Mo. App. W.D. 1991).  The Hearing Officer, as the trier of fact, is not bound by the opinions of experts but may believe all or none of the expert’s testimony or accept it in part or reject it in part.  Exchange Bank of Missouri v. Gerlt, 367 S.W.3d 132, 135-36 (Mo. App. W.D. 2012).

Mr. Lougin testified on behalf of Complainants.  Respondent presented the expert testimony of the Appraiser.

Hearsay

            Black’s Law Dictionary, Seventh Edition (1999), p. 726, defines hearsay as follows: “Traditionally, testimony that is given by a witness who relates not what he or she knows personally, but what others have said, and that is therefore dependent upon the credibility of someone other than the witness.  Such testimony is generally inadmissible under the rules of evidence.”  McCormick on Evidence, Third Edition, (1984), p. 729, defines the term as; “a statement, other than one made by the declarant while testifying at the trial or hearing, offered in evidence to prove the truth of the matter asserted.”  The Courtroom Handbook on Missouri Evidence Missouri Practice, William A. Schroeder – 2012, Principle 800.c, p. 504,

follows the definition given by the Federal Rules and cited by McCormick.  The out-of-court statement can take the form of either oral or written assertions.  Therefore, documents which make assertions of facts are hearsay, just as well, as the speech of another person.

The hearsay rule provides that “no assertion offered as testimony can be received unless it is or has been open to test by cross-examination or an opportunity for cross-examination, except as otherwise provide by the rules of evidence, by court rules or by statute.” Black’s, supra – hearsay rule, p. 726.   The rationale behind the rule is quite simply that out of court hearsay statements are not made under oath and cannot be subject to cross-examination.  Accordingly, when various documents, such as but not limited to, Internet, newspaper and magazine articles are offered as exhibits in a hearing before the Commission, unless the document falls within one of the exceptions to the hearsay rule, upon objection such must be excluded.

Both parties presented documents purporting to be printed versions of Internet websites describing the subject property, which were admitted into evidence.

Discussion

Classification

In this case, Complainants’ evidence was substantial and persuasive to rebut the presumption of correct classification by the BOE and to establish that the subject property was owner occupied and had six or fewer rooms available for rent as of January 1, 2017.  Substantial evidence can be defined as such relevant evidence that a reasonable mind might accept as adequate to support a conclusion.  Cupples Hesse Corp. v. State Tax Commission, 329 S.W.2d 696, 702 (Mo. 1959)Persuasive evidence is evidence that has sufficient weight and probative value to convince the trier of fact.  Cupples Hesse Corp., 329 S.W.2d at 702.  Specifically, Complainants’ Exhibits K and L in conjunction with Mr. Lougin’s testimony established that the following accommodations were available for rent within the subject property:  the Blue Suite, the Fox Suite, the Repertory Suite, the Contemporary Suite, the Sun Room, the Powell Room, and the Sheldon Room.  Counted individually, one might conclude that seven rooms were available for rent as of January 1, 2017.  However, Mr. Lougin’s testimony and Exhibit K established that the Blue Suite and the Fox Suite were connecting rooms separated by a dressing room and could be rented in conjunction as a single two-bedroom suite.  Mr. Lougin’s testimony also established that Complainants did not control a guest’s access to the Blue Suite when the guest rented the Fox Suite or vice versa.  From this evidence, one could reasonably conclude that the Blue Suite and the Fox Suite constituted a single room for rent, and, therefore, the subject property had six or fewer rooms available for rent as of January 1, 2017.[2]

Respondent’s evidence indicating that the subject property had seven rooms available for rent was inconclusive.  The evidence of information gathered from websites was somewhat inconsistent in the descriptions of the rooms.  The Appraiser did not inspect the interior of the subject property.  The evidence from the various permits for the subject property indicated that the City of St. Louis would allow for the renting of seven rooms, but the permits did not establish that seven rooms were in fact for rent as of January 1, 2017.

Discrimination Claim

With regard to their claim of discrimination in assessment, Complainants’ evidence failed to establish the TVM of the subject property as of January 1, 2017 – the necessary first step of proving a claim of discrimination in assessment.  Even accepting the BOE’s determination of TVM as correct, there was not substantial and persuasive evidence of an intentional plan of discrimination by Respondent resulting in an assessment at a greater percentage of value than other property within the same class and the same taxing district.  The evidence instead showed that the appraised value and the assessed value of the subject property had increased and decreased repeatedly between 2005 and 2016 in a manner reflecting the rise and fall of the housing market during the Great Recession.  There was no evidence that the level of assessment of the subject property was so grossly excessive as to be inconsistent with an honest exercise of judgment.  Complainants’ claim of discrimination was based primarily upon the change of assessment notices for the subject property.  (Exhibits W, AA, BB, CC, DD, FF, II)  This evidence does not provide any independent information from which one could conclude that Respondent engaged in a pattern of assessing the subject property at a ratio higher than that of other residential properties in the City of St. Louis.  Complainants’ evidence did not establish the ratio of assessment for a statistically significant number of other residential properties within the City of St. Louis. Consequently, Complainants’ discrimination claim fails.

ORDER

The classification of the subject property and its corresponding assessed value as determined by the BOE for tax year 2017 is SET ASIDE.  The proper classification of the subject property as of January 1, 2017, is residential; thus, the subject property should be assessed at the statutory rate of 19% as of January 1, 2017.

Application for Review

A party may file with the STC an application for review of this decision within thirty days of the mailing date set forth in the Certificate of Service for this Decision.  The application shall contain specific facts or law as grounds upon which it is claimed the decision is erroneous.  Said application must be in writing addressed to the State Tax Commission of Missouri, P.O. Box 146, Jefferson City, MO 65102-0146, and a copy of said application must be sent to each person at the address listed below in the certificate of service.

            Failure to state specific facts or law upon which the application for review is based will result in summary denial. Section 138.432, RSMo

Disputed Taxes

The Collector of the City of St. Louis, as well as the collectors of all affected political subdivisions therein, shall continue to hold the disputed taxes pending the possible filing of an Application for Review, unless said taxes have been disbursed pursuant to a court order under the provisions of Section 139.031.8, RSMo.

Any Finding of Fact which is a Conclusion of Law or Decision shall be so deemed.  Any Decision which is a Finding of Fact or Conclusion of Law shall be so deemed.

SO ORDERED June 8, 2018.

 

STATE TAX COMMISSION OF MISSOURI

Amy S. Westermann

Senior Hearing Officer

 

Certificate of Service

I hereby certify that a copy of the foregoing has been sent electronically or mailed postage prepaid this 8th day of June, 2018, to: Complainants(s) counsel and/or Complainant, the County Assessor and/or Counsel for Respondent and County Collector.

 

Jacklyn Wood

Legal Coordinator

 

[1] Although not specifically described or explained by either party, the record in this appeal reveals that the subject property was renovated by Complainants over a period of approximately four to six years in order to be operated as a bed and breakfast.

[2] In his post-hearing brief, Respondent argued that Complainants’ injected the issue of whether they resided in the subject property.  In order for a property to qualify as a residential bed and breakfast under Section 137.016.1(1), the owner of the property is required to occupy the property.  Complainant’s Exhibit N contained a printed version of the AirBnB.com website that Respondent had researched and had used to support Respondent’s re-classification of the subject property from residential to commercial.  Exhibit N specifically stated, “Interaction with guests: Property Management on-site 24/7.”  Additionally, in his WDT and in his live testimony, the Appraiser testified that the subject property was owner occupied and that the decision to reclassify the subject property as commercial was based on the number of rooms for rent.  Based on this evidence, whether the subject property is owner occupied is not in question.