Greater Missouri Builders v. Shipman (St. Charles)

State Tax Commission of Missouri

GREATER MISSOURI BUILDERS, INC.,)

)

Complainant,)

)

v.) Appeal Nos.09-32766 – 09-32768

)

SCOTT SHIPMAN, ASSESSOR,)

ST. CHARLES COUNTY, MISSOURI,)

)

Respondent.)

DECISION AND ORDER

 

HOLDING

Decision of the St. Charles County Board of Equalization sustaining the assessment made by the Assessor in Appeal 09-32768 is AFFIRMED.True value in money for the subject property for tax years 2009 and 2010 is set at $3,982,200, commercial assessed value of $1,274,300.Appeals 09-32766 and 09-32767 are dismissed.[1]

Complainant appeared by Counsel, Apollo Carey, Sandberg, Phoenix & von Gontard, P.C., St. Louis, Missouri.

Respondent appeared by Assistant County Counselor, Bob Hoeynck.

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

Case decided by Hearing Officer Maureen Monaghan.

ISSUE

Complainant appeals, on the ground of overvaluation, the decisions of the St. Charles County Board of Equalization, which sustained the valuations of the properties.The Commission takes this appeal to determine the true value in money for the subject properties on January 1, 2009.The Commission, 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 from the decision of the St. Charles County Board of Equalization.A hearing was conducted on November 23, 2011, at the St. Charles County Administration Building, St. Charles, Missouri by Senior Hearing Officer, W. B. Tichenor.

2.Dismissal of Appeals 09-32766 & 09-32767.On the record, Complainant dismissed Appeal Numbers 09-32766 and 09-32767.

3.Subject Property of Appeal 09-32768.The subject property is located at 1365 Bass Pro Drive, St. Charles, Missouri.The property is identified by parcel number 6-014C-8698-00-1C, Assessor’s account number T020600009.The property consists of 3.75 acres.It is improved by a 79,370 square foot, forty-one year old, single-story, big box retail building. The building was renovated and expanded for the current tenant Bass Pro.

4.Assessment.The Assessor appraised the property under appeal at $3,982,200, a commercial assessment of $1,274,300.The Board of Equalization sustained the assessment.

5.Complainant’s Evidence.Complainant presented the following exhibits which were received into evidence:

There was no evidence of new construction and improvement from January 1, 2009, to January 1, 2010, therefore the assessed value for 2009 remains the assessed value for 2010.[2]

Complainant’s evidence was not substantial and persuasive to rebut the presumption of correct assessment by the Board and establish the true value in money as of January 1, 2009, to be $2,745,000.

6.Respondent’s Evidence.Respondent presented the following exhibits which were received into the record:

CONCLUSIONS OF LAW AND DECISION

Jurisdiction

The Commission has jurisdiction to hear this appeal and correct any assessment which is shown to be unlawful, unfair, arbitrary or capricious.It shall issue a decision and order affirming, modifying or reversing the determination of the board of equalization, and correcting any assessment which is unlawful, unfair, improper, arbitrary, or capricious.[3]

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.[4]The constitutional mandate is to find the true value in money for the property under appeal. By statute real and tangible personal property is assessed at set percentages of true value in money.[5]In an overvaluation appeal, true value in money for the property being appealed must be determined based upon the evidence on the record that is probative on the issue of the fair market value of the property under appeal.

Burden of Proof

In order to prevail, Complainant must present an opinion of market value and substantial and persuasive evidence that the proposed value is indicative of the market value of the subject property on January 1, 2009.[6]There is no presumption that the taxpayer’s opinion is correct. The taxpayer in a Commission 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.”[7]

Substantial evidence can be defined as such relevant evidence as a reasonable mind might accept as adequate to support a conclusion.[8]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.[9]

Weight to be Given Evidence

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.[10]

If specialized knowledge will assist the trier of fact to understand the evidence or to determine a fact in issue, a witness qualified as an expert on that subject, by knowledge, skill, experience, training, or education, may testify thereto.The facts or data upon which an expert bases an opinion or inference may be those perceived by or made known to the expert at or before the hearing and must be of a type reasonably relied upon by experts in the field in forming opinions or inferences upon the subject and must be otherwise reliable, the facts or data need not be admissible in evidence.[11]

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 he 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.[12]

Standard for Valuation

Section 137.115, RSMo, requires that property be assessed based upon its true value in money which is defined as the price a property would bring when offered for sale by one willing or desirous to sell and bought by one who is willing or desirous to purchase but who is not compelled to do so.[13]True value in money is defined in terms of value in exchange and not value in use.[14]It is the fair market value of the subject property on the valuation date.[15]Market value is the most probable price in terms of money which a property should bring in competitive and open market under all conditions requisite to a fair sale, the buyer and seller, each acting prudently, knowledgeable and assuming the price is not affected by undue stimulus.

Implicit in this definition are the consummation of a sale as of a specific date and the passing of title from seller to buyer under conditions whereby:

1.Buyer and seller are typically motivated.

2.Both parties are well informed and well advised, and both acting in what they consider their own best interests.

3.A reasonable time is allowed for exposure in the open market.

4.Payment is made in cash or its equivalent.

5.Financing, if any, is on terms generally available in the Community at the specified date and typical for the property type in its locale.

6.The price represents a normal consideration for the property sold unaffected by special financing amounts and/or terms, services, fees, costs, or credits incurred in the transaction.[16]

Methods of Valuation

Proper methods of valuation and assessment of property are delegated to the Commission.It is within the purview of the Commission to determine the method of valuation to be adopted in a given case.[17]Missouri courts have approved the comparable sales or market approach, the cost approach and the income approach as recognized methods of arriving at fair market value.[18]Complainant’s appraiser developed both the income and sales comparison approaches to value.Respondent’s appraiser developed the cost, income and comparable sales approaches.

Cost Approach

The valuation of property under the cost approach is based on the estimated reproduction cost of the improvements less depreciation.The approach works best for new improvements and where sales and income data is limited.

The Respondent’s appraiser presented a cost approach.He used a cost manual and determined the cost of the building as a class S discount store building with basic steel and frame construction from which he estimated depreciation.His cost approach is not reliable given the age of the structure and that market data should be available for structures like the subject.

The improvement is not new; it was originally constructed in 1968.It has unique features as when it was updated, the current tenant had specific requirements such as a large fish tank and other specialty items.The approach is not persuasive not only because of its age and unique features but because market data appears to be available as the appraisers provided income data and sales when developing the other approaches to value.

Sales Comparison Approach

Both appraisers presented a sales comparison approach.The sales comparison approach uses the market to estimate value by comparing the subject to similar properties that have recently sold.The strength of the sales approach is that it reflects actual buyers and sellers.For the sales comparable approach to be reliable, it is critical to collect and analyze data, and make reasonable adjustments based upon the market.The adjustments made with each unit of comparison, ie, age of the building, size, date of sale, etc.Sales data should be used to determine those adjustments.The amount of any adjustment is to be derived from the real estate market.The approach is applicable when sufficient sale data is available for similar properties.

Complainant’s appraiser developed his sales comparison approach relying on sales of nine properties from a seven year period.The comparable properties ranged in building sizes from 51,290 to 129,192 square feet.Their ages fell in a range from 8 years to 41 years.The sales prices per square foot were from $24.97 per square foot of building area to a high of $63.12 per square foot.

The Complainant’s appraiser adjusted the sales prices of the comparables for any differences between the comparable property and the subject.The Complainant’s appraiser did not provide an explanation as to any adjustments he made on the comparable sale prices.The adjustment process was summed up as follows:

“Differences in time, physical and locational characteristics have been acknowledged and addressed as necessary in the preceding adjustment grid[19] taking into consideration for each sale relative to the Subject.Based on my investigation and the forgoing analysis, I estimate the value of the property, using the Sales Comparison approach, at $34,000 per gross square foot of building area, including the land, or:$79,370 (sic – 79,370) Gross Sq FT @ $34/Gross Sq Ft$2,698,580Rounded$2,699,000”

The appraisal, the written direct testimony, and testimony at hearing, failed to address the factors of time of sale adjustment, physical and locational characteristics.The Commission has nothing from which it can determine how and why the appraiser concluded on a per square foot value of $34.

The Respondent’s appraisal had similar deficiencies.The appraiser presented sales of six properties he deemed to be comparable to the subject.All properties were located in St. Charles County.The sales occurred in a time period between March, 2004 and September, 2010.The building size ranged from 27,300 to 348,393 square feet.The ages for the improvements were from approximately 10 years to 32 years.The range of sale prices on a per square foot basis was from $16.94 to $104.78.

The Respondent’s appraisal did have an adjustment grid to show the percentage amount for each adjustment.Adjustments were made for the following factors: Time, Location, Building Size, Age/Quality/Condition, Building Utility, and Land to Building Ratio.

The critical deficiency in the adjustment of the sales presented lies in the total absence of any supporting data and documentation for the various percentages of adjustments made to arrive at the concluded per square foot value.The appraiser states in his report “Ideally, each adjustment would be derived from specific, demonstrative market evidence.Unfortunately, we found this type of support to be lacking for most of the adjustments made.”

“Where the basis for a test as to the reliability of the testimony is not supported by a statement of facts on which it is based, or the basis of fact does not appear to be sufficient, the testimony should be rejected.”[20]Given that there was no underlying documentation and facts to support how the price per square foot was derived, the Commission cannot accept the conclusion of value based upon that factor.

A taxpayer does not meet his burden if evidence on any essential element of his case leaves the Commission “in the nebulous twilight of speculation, conjecture and surmise.”[21]The underlying data and the rational upon which the per square foot factor was concluded is an essential element of making a case for the valuation of the subject property relying on the sale comparison methodology.In this instance, without such supporting information and an explanation as how data was used to make necessary adjustments for the development of this approach, there is nothing but speculation, conjecture and surmise left for the Commission with regard to concluding value based on the sales comparison approach developed by either party.Accordingly, no probative weight is given to the value concluded from this approach.

Income Approach

The income approach determines market value by converting the future benefits of property ownership into an expression of present worth.The buyer of an investment property pays the price in order to receive future benefits – the annual income stream generated by rents.The appraiser must have data as to rental property including rental amounts, terms of the lease including whether the tenant or the lessor is responsible for which expenses, and expenses. The appraiser must have the same data as to the market.Finally the appraiser must have sufficient information from sales or sources to develop an appropriate capitalization rate.

The income approach developed by both appraisers suffers from the same lack of supporting evidence as the sales approach.Given that no substantiating data and calculations were presented by either appraiser as to their comparable rental properties when determining a per square foot rental revenue to establish the asserted adjustments for land-to-building ratio, location, visibility, age and condition to arrive, the Commission finds that no probative weight can be given to the appraiser’s conclusion.[22]

The determination of expenses was also given no weight.Both appraisers failed to provide any supporting data as to the basis for the calculation of expenses.Complainant’s appraiser relied in part on “published expense data for similar property types and expense data of similar properties contained in his files.”What these other sources actually consisted of is left to the Commission’s speculation since it was not further identified or presented as an appendices or addendum to the appraisal.It is unclear what the expense data from these other sources brings to the table that is superior to the actual expenses that have been paid out by Complainant over the course of the subject lease.

Respondent’s appraiser explained the basis for his conclusion of expenses by the statement, “Given our experience with retail space in the St. Charles County area, we feel confident in our ability to project reasonable operating expenses for this property.”In the absence of providing the sources of the underlying data, as well as the actual data from which the

appraiser drew his conclusions, the Commission is not persuaded of the “ability to project reasonable operating expenses for this property.”

Without the supporting documentation as to the source of the expense factor, the Commission is “in the nebulous twilight of speculation, conjecture and surmise”[23] on this critical matter.Absent the establishment of the appropriate expense factor, it is not possible for a persuasive income approach to be developed.Complainant’s and Respondent’s appraisals fail on this crucial item.This results in the Commission not being able to give persuasive weight to either the Complainant’s or Respondent’s conclusion of value under the direct income approach.

Complainant Failed To Prove Fair Market Value

Complainant carries the burden to present an opinion of market value and substantial and persuasive evidence that the proposed value is indicative of the market value of the subject property on January 1, 2009.[24]There is no presumption that the taxpayer’s opinion is correct. The taxpayer in a Commission 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.”[25]A valuation which does not reflect the fair market value (true value in money) of the property under appeal is an unlawful, unfair and improper assessment.

Substantial evidence can be defined as such relevant evidence as a reasonable mind might accept as adequate to support a conclusion.[26]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.[27]

ORDER

Appeal 09-32766 is dismissed and the assessed value of the property of $281,640, as determined by the Assessor and sustained by the Board of Equalization for St. Charles County for the subject tax day is AFFIRMED.

Appeal 09-32767 is dismissed and the assessed value of the property of $249,650, as determined by the Assessor and sustained by the Board of Equalization for St. Charles County for the subject tax day is AFFIRMED.

The assessed valuation for the property in Appeal No. 09-32768 (subject property) as determined by the Assessor and sustained by the Board of Equalization for St. Charles County for the subject tax day is AFFIRMED.

The assessed value for the subject property for tax years 2009 and 2010 is set at $1,274,300.

Application for Review

A party may file with the Commission an application for review of this decision within thirty days of the mailing date set forth in the Certificate of Service for this Decision.The application shall contain specific facts or law as grounds upon which it is claimed the decision is erroneous.Said application must be in writing addressed to the State Tax Commission of Missouri, P.O. Box 146, Jefferson City, MO65102-0146, and a copy of said application must be sent to each person at the address listed below in the certificate of service.

Failure to state specific facts or law upon which the application for review is based will result in summary denial. [28]

Disputed Taxes

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

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 13, 2012

STATE TAX COMMISSION OF MISSOURI

 

 

____________________________

Maureen Monaghan

Hearing Officer

 

Certificate of Service

 

I hereby certify that a copy of the foregoing has been mailed postage prepaid on this 13^th day of June, 2012, to:    Apollo Carey, 600 Washington Ave., 15^th Floor, St. Louis, MO 63101-1313, Attorney for Complainant; Robert Hoeynck, Assistant County Counselor, 100 North Third Street, Room 216, St. Charles, MO 63301, Attorney for Respondent; Scott Shipman, Assessor, 201 North Second, Room 247, St. Charles, MO 63301-2870; Ruth Miller, Registrar, 201 North Second Street, Room 529, St. Charles, MO 63301; Michelle McBride, Collector, 201 North Second Street, Room 134, St. Charles, MO 63301.

 

 

___________________________

Barbara Heller, Legal Coordinator

 

Contact Information for State Tax Commission:

Missouri State Tax Commission

301 W. High Street, Room 840

P.O. Box 146

Jefferson City, MO 65102-0146

573-751-2414

[1] Order Vacating Order Granting Motion to Dismiss Appeals and Reinstating Appeals, dated 2/21/12

 

[2] Section 137.115.1, RSMo.

 

[3] Article X, Section 14, Mo. Const. of 1945; Sections 138.430, 138.431, 138.431.4, RSMo.

 

[4] Article X, Sections 4(a) and 4(b), Mo. Const. of 1945

 

[5] Section 137.115.5, RSMo

 

[6] Hermel, supra.

 

[7] See, 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. 1991).

 

[8] See, Cupples-Hesse, supra.

 

[9] Brooks v. General Motors Assembly Division, 527 S.W.2d 50, 53 (Mo. App. 1975).

 

[10] 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).

 

[11] Section 490.065, RSMo; State Board of Registration for the Healing Arts v. McDonagh, 123 S.W.3d 146 (Mo. SC. 2004); Courtroom Handbook on Missouri Evidence, Wm. A. Schroeder, Sections 702-505, pp. 325-350; Wulfing v. Kansas City Southern Industries, Inc., 842 S.W.2d 133 (Mo. App. E.D. 1992).

 

[12] 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).

 

[13] 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).

 

[14] Daly v. P. D. George Company, et al, 77 S.W.3d 645, 649 (Mo. App E.D. 2002), citing, Equitable Life Assurance Society v. STC, 852 S.W.2d 376, 380 (Mo. App. 1993); citing, Stephen & Stephen Properties, Inc. v. STC, 499 S.W.2d 798, 801-803 (Mo. 1973).

 

[15] Hermel, supra.

 

[16] Real Estate Appraisal Terminology, Society of Real Estate Appraisers, Revised Edition, 1984; See also, Real Estate Valuation in Litigation, J. D. Eaton, M.A.I., American Institute of Real Estate Appraisers, 1982, pp. 4-5; Property Appraisal and Assessment Administration, International Association of Assessing Officers, 1990, pp. 79-80; Uniform Standards of Professional Appraisal Practice, Glossary.

 

[17] See, Nance v. STC, 18 S.W.3d 611, at 615 (Mo. App. W.D. 2000); Hermel, supra; Xerox Corp. v. STC, 529 S.W.2d 413 (Mo. banc 1975).

 

[18] St. Joe Minerals Corp. v. STC, 854 S.W.2d 526, 529 (App. E.D. 1993); Aspenhof Corp. v. STC, 789 S.W.2d 867, 869 (App. E.D. 1990); Quincy Soybean Company, Inc., v. Lowe, 773 S.W.2d 503, 504 (App. E.D. 1989), citing Del-Mar Redevelopment Corp v. Associated Garages, Inc., 726 S.W.2d 866, 869 (App. E.D. 1987); and State ex rel. State Highway Comm’n v. Southern Dev. Co., 509 S.W.2d 18, 27 (Mo. Div. 2 1974).

 

[19] No adjustment grid was provided in the appraisal.

 

[20] Carmel Energy at 783.

 

[21] See, Rossman v. G.G.C. Corp. of Missouri, 596 S.W.2d 469, 471 (Mo. App. 1980).

 

[22] “Where the basis for a test as to the reliability of the testimony is not supported by a statement of facts on which it is based, or the basis of fact does not appear to be sufficient, the testimony should be rejected.” Carmel Energy, Inc. v. Fritter, 827 S.W.2d 780, 783 (Mo. App. W.D. 1992)

 

[23] See, Rossman v. G.G.C. Corp. of Missouri, 596 S.W.2d 469, 471 (Mo. App. 1980).

 

[24] Hermel, supra.

 

[25] See, 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. 1991).

 

[26] See, Cupples-Hesse, supra.

 

[27] Brooks v. General Motors Assembly Division, 527 S.W.2d 50, 53 (Mo. App. 1975).

 

[28] Section 138.432, RSMo.