General Grant Realty v. Muehlheausler (SLCO)

State Tax Commission of Missouri

 

GENERAL GRANT REALTY,)

)

Complainant,)

)

v.)Appeal Number 03-12172

)

PHILIP MUEHLHEAUSLER, ASSESSOR,)

ST. LOUISCOUNTY,MISSOURI,)

)

Respondent.)

 

ORDER

AFFIRMING HEARING OFFICER DECISION

UPON APPLICATION FOR REVIEW

 

On June 24, 2008, Senior Hearing Officer Luann Johnson entered her Decision and Order (Decision) setting aside the assessment by the St. Louis County Board of Equalization and determining a value of the property of $800,000 and the proper level of assessment for the subject property for the subject tax year was 26.75%, resulting in an assessed value of $214,000.

Complainant timely filed the Application for Review of the Decision.Respondent was given until and including August 25, 2008, to file a Response.Respondent timely filed their Response.

Complainant states as grounds for the appeal:

(1)The Hearing Officer erred in admitting into evidence the appraisal of the Assessor as it is prohibited under Section 138.060, RSMo and

(2)The Hearing Officer erred in her evaluation of the appraisal evidence.

CONCLUSIONS OF LAW

Standard Upon Review

The Hearing Officer is not bound by any single formula, rule or method in determining true value in money, but is free to consider all pertinent facts and estimates and give them such weight as reasonably they may be deemed entitled.The relative weight to be accorded any relevant factor in a particular case is for the Hearing Officer to decide.St. Louis County v. Security Bonhomme, Inc., 558 S.W.2d 655, 659 (Mo. banc 1977); St. Louis County v. STC, 515 S.W.2d 446, 450 (Mo. 1974); Chicago, Burlington & Quincy Railroad Company v. STC, 436 S.W.2d 650 (Mo. 1968).

The Commission will not lightly interfere with the Hearing Officer’s Decision and substitute its judgment on the credibility of witnesses and weight to be given the evidence for that of the Hearing Officer as the trier of fact.Black v. Lombardi, 970 S.W.2d 378 (Mo. App. E.D. 1998); Lowe v. Lombardi, 957 S.W.2d 808 (Mo. App. W.D. 1997); Forms World, Inc. v. Labor and Industrial Relations Com’n, 935 S.W.2d 680 (Mo. App. W.D. 1996); Evangelical Retirement Homes v. STC, 669 S.W.2d 548 (Mo. 1984); Pulitzer Pub. Co. v. Labor and Indus. Relations Commission, 596 S.W.2d 413 (Mo. 1980); St. Louis County v. STC, 562 S.W.2d 334 (Mo. 1978); St. Louis County v. STC, 406 S.W.2d 644 (Mo. 1966).

DECISION

A review of the record in the present appeal provides support for the determinations made by the Hearing Officer.There is competent and substantial evidence to establish a sufficient foundation for the Decision of the Hearing Officer.A reasonable mind could have conscientiously reached the same result based on a review of the entire record.The Commission finds no basis to support a determination that the Hearing Officer acted in an arbitrary or capricious manner or abused his discretion as the trier of fact and concluder of law in this appeal.Hermel, Inc. v. STC, 564 S.W.2d 888 (Mo. 1978); Black v. Lombardi, 970 S.W.2d 378 (Mo. App. E.D. 1998); Holt v. Clarke, 965 S.W.2d 241 (Mo. App. W.D. 1998); Smith v. Morton, 890 S.W.2d403 (Mo. App. E.D. 1995); Phelps v. Metropolitan St. Louis Sewer Dist., 598 S.W.2d 163 (Mo. App. E.D. 1980).

Valuation Evidence Not Prohibited Under Section 138.060, RSMo.

The Complainant appealed on the basis of discrimination and overvaluation.Claims of discriminatory assessment are well-known in Missouri law.Savage, supra; Koplar v. State Tax Com’n, 321 S.W.2d 686 (Mo. 1959); Cupples Hesse, supra; and, State ex rel. Platz v. State Tax Commission, 384 S.W.2d 565 (Mo. 1964).If discrimination is shown, and if Taxpayers demonstrate that their property is overassessed, then their property taxes will be lowered. Savage, 722 S.W.2d at 79 (taxpayer has the right to have his “assessment reduced to the percentage of that value at which others are taxed”).Absent such a showing, there is no relief to award to the taxpayer.

To make a successful claim under discrimination, the Complainant must establish that his property has been assessed at a greater percentage of value than other property, generally, within the same class within the taxing jurisdiction for the assessment cycle.Koplar v. State Tax Commission, 321 S.W.2d 686, 690, 695 (Mo. 1959).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 v. State Tax Commission of Missouri, 722 S.W.2d 72, 79 (Mo. banc

1986).No other methodology is sufficient to establish discrimination.Cupples-Hesse Corporation v. State Tax Commission, 329 S.W.2d 696 (Mo. 1958).

To establish discrimination, the taxpayer first has to prove the average level of assessment for commercial property in St. Louis County for subject tax year.This is done by (a) independently determining the market value of a representative sample of residential properties in St. Louis 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 (assessment ratio) for each property in the sample; and (d) determining the mean and median of the results.Koplar v. State Tax Commission, 321 S.W.2d 686, 690 (Mo. 1959).The taxpayer then must prove the assessment ratio on the property under appeal.This is done by proving the true value in money for the subject property and then dividing that into the assessed value set by the Assessor for subject tax year to determine the assessment ratio on the subject property.The difference between the actual assessment level of the subject property and the average level of assessment for all commercial property, taken from a sufficient representative sample in St. Louis County must demonstrate a disparity that is grossly excessive.Savage v. State Tax Commission of Missouri, 722 S.W.2d 72, 79 (Mo. banc 1986).No other methodology is sufficient to establish discrimination.Cupples-Hesse Corporation v. State Tax Commission, 329 S.W.2d 696 (Mo. 1958).

Complainant argues that the Hearing Officer exceeded her authority and violated Section 138.060, RSMo when she admitted into evidence the appraisal or valuation evidence of the Assessor.Section 138.060, RSMo provides that:

“At any hearing before the state tax commission or a court of competent jurisdiction of an appeal of assessment from a first class charter county or a city not within a county, the assessor shall not advocate nor present evidence advocating a valuation higher than that value finally determined by the assessor or the value determined by the board of equalization, whichever is higher, for that assessment period.”

 

Complainant argues that evidence showing market value which is higherthan the valuation determined by the Board of Equalization is inadmissible.Their theory is that once discrimination is shown to exist in the county, the trier of fact must presume that any protesting taxpayer is the victim of discrimination, not a beneficiary of discrimination like all the other properties in the county, and a lower value must be assigned to their property.

Under the Complainant’s theory, if they are able to show countywide discrimination, then every commercial property owner inSt. LouisCountywho sought relief as the Complainant has, would be presumed to be suffering discrimination, and the assessment for that property – and the resulting property taxes – would be reduced.Following Complainant’s argument is inherently inconsistent.If underassessment is so widespread that there is countywide discrimination, why is the Commission prohibited from determining if a particular piece of property is already enjoying underassessment, and, therefore, no harm?The individual property evidence is not only relevant, it is indispensable.

Requiring evidence of value and discrimination is well within the Tax Commission’s authority.Under §138.430.2, the Tax Commission “may inquire of the owner of the property . . . regarding any matter or issue relevant to the valuation, subclassification or assessment of the property.”Evidence of the market value of the property demonstrates whether the Assessor set the property’s value above, below, or right at its market value.If the property is assessed at less than its market value, then the property is actually underassessed, and is enjoying lower taxes.It may not be suffering from discrimination.

Section 138.060.1, RSMo does not prohibit the necessary elements of proof in a discrimination case.Section 138.060.1, RSMo does not prohibit a ratio study, nor does it prohibit proof of discrimination by evidence as to market value.Section 138.060 does not prohibit the Commission from requiring proof that the individual property is suffering discrimination.Section 138.060 does not limit the assessor from using valuation evidence “to defend against a claim of disparate treatment.”Nothing in the language of §138.060 prevents the assessor from challenging the ratio study, nor does the statute prevent the assessor from arguing that a taxpayer’s market value evidence for his property shows no discrimination.

Appraisal Evidence

The Complainant argues that the Assessor’s evidence should have been deemed inadmissible and if not inadmissible, incompetent and less reliable than the Complainant’s evidence.The Complainant goes further and argues that the Complainant’s evidence was undisputed and uncontroverted and the Assessor’s evidence was flawed and unpersuasive.

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 she may deem it entitled to when viewed in connection with all other circumstances.The Hearing Officer is not bound by the opinions of experts who testify on the issue of reasonable value, but may believe all or none of the expert’s testimony and accept it in part or reject it in part.St. Louis County v. Boatmen’s Trust Co., 857 S.W.2d 453, 457 (Mo. App. E.D. 1993); Vincent by Vincent v. Johnson, 833 S.W.2d 859, 865 (Mo. 1992);Beardsley v. Beardsley, 819 S.W.2d 400, 403 (Mo. App. 1991); Curnow v. Sloan, 625 S.W.2d 605, 607 (Mo. banc 1981).

The facts upon which an expert’s opinion is based, like the facts sufficient to support a verdict, must measure up to the legal requirements of substantiality and probative force; the question of whether such opinion is based on and supported by sufficient facts or evidence to sustain the same is a question of law for the court.Robinson v. Empiregas Inc. of Hartville, 906 S.W.2d 829 (S.D. 1995).Nance v. Tax CommissionMo 18 S.W.3d 611 (App WD 2000)The Commission is the judge of the credibility of the witness and of the evidence.

The Commission will not lightly interfere with the Hearing Officer’s Decision and substitute its judgment on the credibility of witnesses and weight to be given the evidence for that of the Hearing Officer as the trier of fact.Black v. Lombardi, 970 S.W.2d 378 (Mo. App. E.D. 1998); Lowe v. Lombardi, 957 S.W.2d 808 (Mo. App. W.D. 1997); Forms World, Inc. v. Labor and Industrial Relations Com’n, 935 S.W.2d 680 (Mo. App. W.D. 1996); Evangelical Retirement Homes v. STC, 669 S.W.2d 548 (Mo. 1984); Pulitzer Pub. Co. v. Labor and Indus. Relations Commission, 596 S.W.2d 413 (Mo. 1980); St. Louis County v. STC, 562 S.W.2d 334 (Mo. 1978); St. Louis County v. STC, 406 S.W.2d 644 (Mo. 1966).

Sales Comparison Approach

The Hearing Officer was not persuaded by the Complainant’s sales comparison approach. The Complainant’s appraiser found three sales having sales prices ranging from $49.17 to $96.10 per square foot and adjusted sales prices of $35 to $45 per square foot.The Hearing Officer found the sale with the adjusted sale price of $45 per square foot the most comparable to the subject property.The Complainant’s appraiser used the other two sales with adjusted sales prices of $35 per square foot.The $10 per square foot differential used on a 14,268 square foot building produces a much higher value for the property

The Complainant also claims the Hearing Officer found fault with the appraiser using “net rentable area” as the unit of comparison.The Hearing Officer did not find fault as to the appraiser using “net rentable area.”The Hearing Officer faulted the appraiser for equating net rentable area to gross building area in two of the comparables.The result is an understatement of the value of the subject property.

Vacancy Rate

The Complainant argues that his appraiser’s use of a 35% vacancy rate was supported by the evidence.The Complainant’s appraiser’s evidence showed office vacancy rates of 9% to 20% and retail space vacancy rates of 0% to 5.5%.

Capitalization Rate

The Complainant argues that their appraiser correctly calculated the capitalization.The Hearing Officer, however, found that the Complainant’s appraiser inflated his capitalization rate to account for the condition of the roof and other repairs rather than using the appropriate method of make a dollar adjustment for the repairs.Further, as the Complainant argues, the Assessor’s expert testified that the Complainant’s appraiser used a preferred method of calculating the base capitalization rate resulting in a range of 8.07% to 11.7%. The Assessor’s appraiser’s base capitalization rate, 9%, was within the range calculated by the Complainant’s expert.

Complainant’s Burden of Proof

The Complainant argues that the entirety of the Assessor’s evidence was inadmissible and even if the Assessor’s evidence was admissible, the Hearing Officer’s holdings are not supported by substantial evidence. The Complainant’s argument disregards the burden of proof of the facts and inferences rests on the Complainant because it is the moving party seeking affirmative relief. Snider, Hermel, & Cupples-Hesse Corporation v. State Tax Commission, 329 S.W.2d 696 (Mo. 1959)The taxpayer in a Commission tax appeal, even after overcoming the presumption, bears the burden of proof and must show that the property was improperly valued.Westwood Partnership v. Gogarty, 103 S.W.3d 152 (Mo. App. ED 2003)Taxpayers must present substantial and persuasive evidence that the proposed value is indicative of the market value of the subject property on the tax day.Substantial evidence is such relevant evidence as a reasonable mind might accept as adequate to support a conclusion.Persuasive evidence is that evidence which has sufficient weight and probative value to convince the trier of fact.The persuasiveness does not depend on the quantity but on its effect.Daly v. PD George, 77 S.W.3d 645 (Mo App ED 2002).

After the review of all the evidence, Hearing Officer found that the Complainant’s evidence did not meet the necessary standard of substantial and persuasive on the issue of fair market value of the subject property.

ORDER

The Commission upon review of the record and Decision in this appeal, finds no grounds upon which the Decision of the Hearing Officer should be reversed or modified.Accordingly, the Decision is affirmed.

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

The Collector of St. Louis County shall continue to hold the disputed taxes pending an Order from the Commission as to whether a Petition for Judicial Review of the Order has been filed.

SO ORDERED September 23, 2008.

STATE TAX COMMISSION OF MISSOURI

Bruce E. Davis, Chairman

Jennifer Tidwell, Commissioner

Charles Nordwald, Commissioner

 

 

 

DECISION AND ORDER

 

HOLDING

 

The assessed value determined by the Board of Equalization is set aside.The Commission finds that the correct assessed value for the subject property for tax years 2003 and 2004 is $214,000.

Summary

 

Complainant appealed its 2003 and 2004 assessment on the basis of discrimination, i.e., that Complainant was assessed at a higher percentage of market value than a statistically significant number of other properties within the same class within the county.The subject property was originally valued by the Board of Equalization at $600,000 with an assessed value of $192,000.An evidentiary hearing was held the week of September 26, 2007, before Senior Hearing Officer Luann Johnson.At the hearing, the parties stipulated and agreed that the proper assessment level for the subject property for the subject tax year was 26.75%.Tr. 351.At the hearing, Complainant asserted a market value of $465,000 (assessed value $124,390); Respondent asserted a market of $800,000 (assessed value $214,000).

The level of assessment was stipulated rather than adjudicated and, therefore is not binding upon the Commission in future cases involving different parties and counsel.The fact that the parties stipulated to an assessment ratio less than the statutory requirement of 32% rebuts the presumption of correct assessment by the Board of Equalization.

ISSUES

The issues in this case are (1) the true value in money of the subject parcel on January 1, 2003, andJanuary 1, 2004; and (2( the proper level of assessment to be applied to those values.

EXHIBITS

Complainant’s Exhibits

 

Respondent’s Exhibits

 

 

Rebuttal Exhibits

 

 

FINDINGS OF FACT

1.Jurisdiction is proper.Complainant timely appealed from the decision of the Board of Equalization.

2.The subject property is a 36,000 square foot site improved with a part one-story and part two-story office and retail building over a full basement.The building has poured reinforced concrete footing and foundations, concrete and steel columns, full masonry exterior walls, and a flat roof with composition roofing on a corrugated steel deck carried on steel bar joists.The building has plate glass windows in aluminum frames.The first floor of the building is primarily retail space.The second floor and rear portion of the east end of the first floor are finished as office space.The building has a lower level, about half of which is a parking garage.The other half is enclosed and is used for storage.The building contains a gross building area of 27,190 square feet with a net rentable area of 16,190 square feet and a net usable area of 13,268 square feet.The improvements were built in 1970.Site improvements include asphalt paved parking areas, a concrete sidewalk and yard lighting.Ex. 1, pg. 6.The property is identified as tax identification number 25K531026, more commonly known as8330 Watson Road,St. Louis County,Missouri.

3.The retail space in the subject property is Class B- or C+.The office space is Class C.Tr. 97, 121.

4.In addition to age, the property suffers from deferred maintenance in the form of curable physical deterioration.The subject property suffers from ceiling leaks and window leaks that could be corrected with a new roof and new windows.This deferred maintenance existed prior to the tax day and at the time of hearing.The cost to cure this deficiency is $65,000.Tr. 148.

5.In addition to the deferred maintenance, the subject property also suffers from some external obsolescence.Office space would not be included in a new construction.Tr. 122.Fixing the roof may not fix all of the vacancy issues for a Class C office building.Tr. 97.But, the subject would be competitive with other similar buildings if the roof and windows were fixed.Ex. A, pg. 22.

6.Failure to repair the roof and windows does not demonstrate “responsible ownership and competent management,” an assumption usually required in the determination of market value of property.Tr. 192.Property is not to be deemed worthless because the owner allows it to go to waste.Boom Co. v. Patterson, 98 U.S. 403, 407 (1878).Physical deterioration is deemed “incurable” only if it is demonstrated that it is not generally economical to repair or replace at the time of appraisal.Property Assessment Valuation, International Association of Assessing Officers, 1977, pg. 182.

7.Both appraisers prepared sales comparison approaches to value.Complainant’s appraiser used three sales having sales prices of $49.17 to $96.10 per square foot and adjusted sales prices of $35 to $45 per square foot.The most similar comparable sale was comp #2 indicating a value of $45 per square foot.However, Complainant’s appraiser chose to use the two much less similar comparable sales which indicated a value of $35 per square foot.Applying this $35 per square foot to the net rentable (useable) area of 14,268 square feet produced a value of $489,380 (say $500,000) for the subject property.

Respondent’s appraiser used four comparable sales with sales prices of $49.17 to $56.26 per square foot and adjusted sales prices of $47.69 to $52.64 per square foot.Giving each sale equal weight, Respondent’s appraiser determined a market value for the subject of $50 per square foot.This value was applied to the gross rentable area of 16,190 for an indicated value of $809,500 (say $810,000).

The glaring difference between the two sales approaches is the selection of comparable sales and the adjustments needed to bring them into line with the subject property.Taking a $96 per square foot property and turning it into a $35 per square foot property begs the question of whether or not it was truly comparable in the first place.Standing alone, this is sufficient to disqualify Complainant’s sales comparison approach.

A second problem with Complainant’s sales comparison approach is found in the unit of comparison.Office properties may be compared by price per square foot of gross building area; price per square foot of net rentable area; or price per square foot of usable area.In order to accurately determine value, the price assigned to the subject property must be based upon the same unit of comparison as that extrapolated from the market sales.The Appraisal of Real Estate, 12^th Edition, Appraisal Institute, 2001, pg. 424.In two of Complainant’s comparables net rentable area is designated as being equal to gross building area.On its face, this is highly unlikely and results in an understatement of the value of the subject property when Complainant’s appraiser applies the proposed square foot value to only that portion of the subject property which is defined as net useable area.

For the foregoing reasons, Complainant’s sales comparison approach is not a reliable indicator of the value of the subject property.

8.Both appraisers prepared income approaches to value.Both appraisers found that contract rents were market rents and actual expenses were market expenses.

Complainant’s appraiser presented market evidence showing that office vacancy rates were between 9% and 20% while retail space had vacancy rates of between 0% and 5.5%.Respondent’s appraiser used a 10% overall vacancy rate, which was within the range suggested by Complainant’s market evidence.Complainant, on the other hand, used a 35% vacancy rate which was wholly unsupported by the market evidence or the actual vacancy of the subject property on the tax day.Complainant’s appraiser used this extremely high vacancy rate as a method for accounting for the roof problems but apparently never reviewed his calculations to determine if, in fact, the roof problems should rise to the level of incurable physical deterioration.

In addition to this manipulation of vacancy rates to account for what should have been a straight dollar-for-dollar adjustment for roof repair, Complainant’s appraiser also inflated his capitalization rate to account for the sub-standard condition of the property.Finally, Complainant’s appraiser included real estate taxes in his expenses and then added an effective tax rate to his capitalization rate thus further unreasonably inflating his capitalization rate.His final conclusion of value was $465,000 under the income approach.

Respondent’s appraiser, on the other hand, used acceptable appraisal practices; determining the valuation of the subject property based upon market based calculations and then deducting a one time cost to cure from that conclusion of value.Based upon this methodology, Respondent’s appraiser determined that even allowing a $65,000 adjustment for deferred maintenance, the subject property has a market value of $797,000.

Respondent’s income approach is a more reliable indicator of market value than Complainant’s income approach.

9.The true value in money for the subject property on January 1, 2003, and

January 1, 2004, was $800,000 as supported by Respondent’s income and sales comparison approaches to value.

10.The parties stipulated at hearing that the correct level of assessment for the subject property for tax years 2003 and 2004 was 26.75%.Tr. 351.

11.The correct assessed value for the subject property for tax years 2003 and 2004 was $214,000.The subject property was not assessed at a higher percentage of market value than 26.75% and, therefore, Complainant’s discrimination claim fails.

<span
lang=EN-CA style=’mso-ansi-language:EN-CA’><span
style=’mso-spacerun:yes’> SEQ CHAPTER \h \r 1<span
lang=EN-CA style=’mso-ansi-language:EN-CA’>CONCLUSIONS OF LAW

Highest and Best Use

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.Aspenhof Corp. v. State Tax Commission, 789 S.W.2d 867, 869 (Mo. App. 1990).

True Value in Money

Section 137.115, RSMo, requires that property be assessed based upon its true value in money which is defined as the price a property would bring when offered for sale by one willing or desirous to sell and purchased by one who is desiring to purchase but who is not compelled to do so.St. Joe Minerals Corp. v. State Tax Commission, 854 S.W.2d 526, 529 (Mo. App. E.D. 1993); Missouri Baptist Children’s Home v. State Tax Commission, 867 S.W.2d 510, 512 (Mo. banc 1993).It is the fair market value of the subject property on the valuation date.Hermel, Inc. v. State Tax Commission, 564 S.W.2d 888, 897 (Mo. banc 1978).

Market Value

“Market value” is defined as “…[t]he most probable price which a property would bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus.Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby:

a.buyer and seller are typically motivated;

b.                  both parties are well informed or well advised, and acting in what they consider their best interests;

 

c.a reasonable time is allowed for exposure in the open market;

d.payment is made in terms of cash inUnited Statesdollars or in terms of financial arrangements comparable thereto; and

 

e.the price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale.”

 

Federal Register, vol. 55, no. 163, August 22, 1990, pages 34228 and 34229; also quoted in the Definitions section of the Uniform Standards of Professional Appraisal Practice, 1996 ed.Exhibits A-11 and A-12, at 2.

 

Taxpayer has Burden of Proof

In Westwood Partnership v. Gogarty, 103 S.W.3d 152 (Mo. App. E.D. 2003), the court of appeals stated:

There is no longer an automatic presumption regarding the correctness of an assessor’s valuation. Section 138.431.3. This statutory change from the previous situation in which the assessor’s valuation was presumed to be correct does not mean that there is now a presumption in favor of taxpayer. The taxpayer in a Commission tax appeal still bears the burden of proof and must show by a preponderance of the evidence that the property was improperly classified or valued. Industrial Development Authority of Kansas City v. State Tax Commission of Missouri, 804 S.W.2d 387, 392 (Mo. App.1991).

In Reeves v. Snider, 115 S.W.3d 375 (Mo. App. S.D. 2003), the court of appeals described the taxpayer’s burden as follows:

Taxpayers were the moving parties seeking affirmative relief, and as such, they bore the burden of proving the vital elements of their case, i.e., the assessments were “unlawful, unfair, improper, arbitrary or capricious.” Cupples Hesse Corp. v. State Tax Comm’n, 329 S.W.2d 696, 702 (Mo.1959); Westwood P’ship v. Gogarty, 103 S.W.3d 152, 161[8] (Mo. App. 2003); 84 C.J.S. Taxation §§ 710, 726. This is true regardless of the existence or non-existence of the challenged presumption. As the Supreme Court of Missouri explained, “even were we to hold that it [the presumption] has been overcome, the burden of proof on the facts and inferences would still remain on petitioner, for it is the moving party seeking affirmative relief.”Cupples, 329 S.W.2d at 702[16]. See also 84 C.J.S. Taxation §710, which states: “Even where there is no presumption in favor of the assessor’s ruling, if no evidence is offered in support of the

complaint, the reviewing board is justified in fixing the valuation complained of in the amount assessed by the assessor.”
To prevail, Taxpayers had to “present an opinion of market value and then … present substantial and persuasive evidence that the proposed value is indicative of the market value of the subject property on tax day.” Daly v. P.D. George Co., 77 S.W.3d 645, 651 (Mo. App. 2002).

Substantial and Persuasive Evidence

Substantial evidence is that evidence which, if true, has probative force upon the issues, i.e., evidence favoring facts which are such that reasonable men may differ as to whether it established them, and from which the Commission can reasonably decide an appeal on the factual issues.Cupples-Hesse Corporation v. State Tax Commission, 329 S.W.2d 696, 702 (Mo. 1959).

Persuasive evidence is that evidence which has sufficient weight and probative value to convince the trier of fact.The persuasiveness of evidence does not depend on the quantity or amount thereof but on its effect in inducing belief.Brooks v. General Motors Assembly Division, 527 S.W.2d 50, 53 (Mo. App. 1975).

<span
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style=’mso-spacerun:yes’> SEQ CHAPTER \h \r 1<span
lang=EN-CA style=’mso-ansi-language:EN-CA’>Discrimination

Where there is a claim of discrimination based upon a lack of valuation consistency, Complainant has the burden to prove:

1.The level of assessment for the subject property in 2003.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.

2.The average level of assessment for commercial property in St. Louis County in 2003.This is done by (a) independently determining the market value of a representative sample of residential properties in St. Louis County; (b) determining the assessed value placed on the property 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.

3.That the disparity between (1) and (2) is grossly excessive.Savage v. State Tax Commission of Missouri, 722 S.W.2d 72, 79 (Mo. banc 1986).

Cost Approach

The cost approach may be based on either reproduction cost or replacement cost.The reproduction cost, or cost of construction, is a determination of the cost of constructing an exact duplicate of an improved property using the same materials and construction standards.The replacement cost is an estimate of the cost of constructing a building with the same utility as the building being appraised but with modern materials and according to current standards, design and layout.

The cost approach is most appropriate when the property being valued has been recently improved with structures that conform to the highest and best use of the property or when the property has unique or specialized improvements for which there are no comparables in the market.

While reproduction cost is the best indicator of value for newer properties where the actual costs of construction are available, replacement cost may be more appropriate for older properties.Snider v. Casino Aztar/Aztar Missouri Gaming Corp., 156 S.W.3d 341, 347 (Mo. 2005).(citations omitted).

Income 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.The income approach is based on an evaluation of what a willing buyer would pay to realize the income stream that could be obtained from the property when devoted to its highest and best use.

When applying the income approach to valuing business property for tax purposes, it is not proper to consider income derived from the business and personal property; only income derived from the land and improvements should be considered.This approach is most appropriate in valuing investment-type properties and is reliable when rental income, operating expenses and capitalization rates can reasonably be estimated from existing market conditions. The initial step in applying the income approach is to find comparable rentals and make adjustments for any differences. Snider v. Casino Aztar/Aztar Missouri Gaming Corp., 156 S.W.3d 341, 347 (Mo. 2005).(citations omitted).

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.Comparable sales consist of evidence of sales reasonably related in time and distance and involve land comparable in character.This approach is most appropriate when there is an active market for the type of property at issue such that sufficient data is available to make a comparative analysis.Snider v. Casino Aztar/Aztar Missouri Gaming Corp., 156 S.W.3d 341, 347-348 (Mo. 2005). (citations omitted).

Experts

An expert’s opinion must be founded upon substantial information, not mere conjecture or speculation, and there must be a rational basis for the opinion.Missouri Pipeline Co. v. Wilmes, 898 S.W.2d 682, 687 (Mo. App. E.D. 1995).The state tax commission cannot ignore a lack of support in the evidence for adjustments made by the expert witnesses in the application of a particular valuation approach.Drey v. State Tax Commission, 345 S.W.2d 228, 234-236 (Mo. 1961), Snider v. Casino Aztar/Aztar Missouri Gaming Corp., 156 S.W.3d 341, 348 (Mo. 2005).

The testimony of an expert is to be considered like any other testimony, is to be tried by the same test, and receives just so much weight and credit as the trier of fact may deem it entitled to when viewed in connection with all other circumstances.The hearing officer, as the trier of fact, has the authority to weigh the evidence and is not bound by the opinions of experts who testify on the issue of reasonable value, but may believe all or none of the expert’s testimony and may accept it in part or reject it in part.Beardsley v. Beardsley, 819 S.W.2d 400, 403 (Mo. App. 1991); Curnow v. Sloan, 625 S.W. 2d 605, 607 (Mo. 1981); Scanlon v. Kansas City, 28 S.W.2d 84, 95 (Mo. 1930).

DISCUSSION

In order to prevail in a discrimination case, Complainant must establish that it was assessed at a higher percentage of true value in money than a statistically significant number of similar properties in the taxing jurisdiction.Unfortunately, rather than showing over-assessment, the reliable evidence tends to show under-assessment.

ORDER

The value placed upon the subject property for tax years 2003 and 2004 is hereby SET ASIDE.

The assessor is hereby ordered to place the correct value of $800,000 (assessed value $214,000, calculated at the stipulated 26.75% of market value) on the subject property for tax years 2003 and 2004.

A party may file with the Commission an application for review of this decision within thirty (30) days of the mailing of such decision.The application shall contain specific grounds upon which it is claimed the decision is erroneous.Said application must be in writing addressed to the State Tax Commission of Missouri, P.O. Box 146, Jefferson City, 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 appeal is based will result in summary denial.Section 138.432, RSMo 2000.

If an application for review of this decision is made to the Commission, any protested taxes presently in an escrow account in accordance with this appeal shall be held pending the final decision of the Commission and an order to the Collector to release and disburse the impounded taxes, unless said taxes have been disbursed pursuant an order of the circuit court under the provisions of Section 139.031.8, RSMo.§139.031.3, RSMo.If no application for review is received by the Commission within thirty (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.If any or all protested taxes have been disbursed pursuant to Section 139.031(8), RSMo, either party may apply to the circuit court having jurisdiction of the cause for disposition of the protested taxes held by the taxing authority.

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 24, 2008.

<span
style=’mso-element:field-begin’>ADVANCE \d4<span
style=’font-size:10.0pt’>STATE TAX COMMISSION OF MISSOURI

Luann Johnson

Senior Hearing Officer