State Tax Commission of Missouri
HAROLD SCHUCHMANN,)
)
Complainant,)
)
v. ) Appeal No.11-10253
)
JAKE ZIMMERMAN, ASSESSOR,)
ST. LOUIS COUNTY, MISSOURI,)
)
Respondent.)
DECISION AND ORDER
HOLDING
Decision of the St. Louis County Board of Equalization reducing the assessment made by the Assessor is AFFIRMED.Complainant failed to present substantial and persuasive evidence to rebut the presumption of correct assessment by the Board of Equalization.Respondent failed to presented substantial and persuasive evidence to rebut the presumption of correct assessment by the Board.
True value in money for the subject property for tax years 2011 and 2012 is set at $322,800, residential assessed value of $61,330.
Complainant appeared pro se.
Respondent appeared by Associate County Counselor, Paula J. Lemerman.
Case heard and decided by Senior Hearing Officer W. B. Tichenor.
ISSUE
Complainant appeals, on the ground of overvaluation and, the decision of the St. Louis County Board of Equalization, which reduced the valuation of the subject property.The Commission takes this appeal to determine the true value in money for the subject property on January 1, 2011.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 from the decision of the St. Louis County Board of Equalization.
2.Evidentiary Hearing.The Evidentiary Hearing was held on September 25, 2012, at the St. Louis County Government Center, 41 South Central Avenue, Clayton, Missouri.
3.Subject Property.The subject property is identified by locator number 20O310051.It is located at 2140 N. Ballas Road, Town & Country, Missouri.A complete description of the property is provided in Exhibit 1.[1]
4.Assessment.The Assessor appraised the subject at a market value of $370,000, a residential assessed value of $70,300.The Board reduced the value to $322,800, a residential assessed value of $61,330.[2]
5.Complainant’s Evidence.Complainant prefiled the following exhibits:
|
EXHIBIT |
DESCRIPTION |
|
A |
21 Exterior/Interior Photographs & Cost of Repairs |
|
B |
Article – Hazards of Aluminum Wiring Systems – US Consumer Product Safety Commission |
|
C |
Sales Used for Tax Year 2011 – photos/data |
|
D |
Owner’s Statement – Conclusion |
|
E |
Bids for Repair Work |
There were no objections to Exhibits A, B, D or E.Exhibit C was withdrawn.
At the hearing Mr. Schuchmann offered into evidence Exhibit F – Pool Pictures, Exhibit G – Pool Information, and Exhibit H – Pool Contract, as rebuttal exhibits.Counsel for Respondent objected to Exhibits F, G, and H.Objections to Exhibits G and H were sustained.Exhibit F was received, Exhibits G and H were excluded.See, Ruling on Objections, infra.
Mr. Schuchmann testified and stated the owner’s opinion of value to be $250,000.
There was no evidence of new construction and improvement from January 1, 2011, to January 1, 2012, therefore the assessed value for 2011 remains the assessed value for 2012.[3]
Complainant’s evidence was not substantial and persuasive to rebut the presumption of correct assessment by the Board.
6.Respondent’s Evidence.Respondent presented the appraisal report (Exhibit 1) and testimony of Terry Kraus.[4]Exhibit 1 was received into evidence. Respondent’s evidence did not met the standard of substantial and persuasive to rebut the presumption of correct assessment by the Board.
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.The hearing officer shall issue a decision and order affirming, modifying or reversing the determination of the board of equalization, and correcting any assessment which is unlawful, unfair, improper, arbitrary, or capricious.[5]
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.[6]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.[7]In an overvaluation appeal, true value in money for the property being appealed determined based upon the evidence on the record that is probative on the issue of the fair market value of the property under appeal.
Presumption In Appeals
There is a presumption of validity, good faith and correctness of assessment by the County Board of Equalization.[8]This presumption is a rebuttable rather than a conclusive presumption.It places the burden of going forward with some substantial evidence on the taxpayer – Complainant.The presumption is not evidence of value.
The presumption of correct assessment is rebutted when the taxpayer presents substantial and persuasive evidence to establish that the Board’s valuation is erroneous and what the fair market value should have been placed on the property.[9]Complainant failed to present substantial and persuasive evidence to establish that the Board’s valuation was erroneous or what the fair market value should have been as of 1/1/11.
Respondent did not present substantial and persuasive evidence that established that the Board’s valuation was erroneous.
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.[10]True value in money is defined in terms of value in exchange and not value in use.[11]It is the fair market value of the subject property on the valuation date.[12]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.[13]
Mr. Kraus concluded value for the subject under the Standard For Valuation.[14]
Methods of Valuation
Proper methods of valuation and assessment of property are delegated to the Commission.It is within the purview of the Hearing Officer to determine the method of valuation to be adopted in a given case.[15]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.[16] Complainants did not present an opinion of value based upon any recognized appraisal methodology.Respondent’s appraiser concluded value by developing the sales comparison approach.
Complainant’s 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, 2011.[17]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.”[18]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.[19]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.[20]
Complainants’ Exhibits
Exhibit A – Photographs & Cost of Repairs Information:The photographs showing the condition of the subject property to establish that the fair market value as of 1/1/11 would have been $250,000 as asserted by Mr. Schuchmann.Photographs are helpful to gain an understanding of condition and items of deferred maintenance.However, they never provide a dollar amount as to how value is impacted.
As to the repair estimates, this does provide a basis for the cost to address the items of deferred maintenance.This can be helpful to an appraiser when making an adjustment for condition.Nevertheless, the total of the bid estimates do not establish what the fair market value of the property on 1/1/11 would have been.
Exhibit A provides no probative evidence from which the Hearing Officer can logically conclude the fair market value of the property as of 1/1/11.
Exhibit B – Aluminum Wiring Article:The fact that the subject has aluminum wiring is a factor what would most likely impact on sale price.However, nothing in Exhibit B provides any data upon which it can be established that the most likely sale price of the subject on 1/1/11 would have been $250,000.There is nothing in the exhibit that provides a basis as to what if any amount of an adjustment should be made to any sales comparables that might not have aluminum wiring.No real probative weight can be accorded this exhibit.
Exhibit D – Owner’s Statement:This exhibit sets forth three reasons why according to the owner “A knowledgeable buyer would not pay over $275,000 for subject property.”The reasons given are: (1) the subject was built as a spec house; (2) subject needs $70,000 in repairs; (3) subject is located on a busy state highway; and (4) subject has a drainage problem and aluminum wiring.The claims made by Complainant are factors that relate to the quality of construction, condition, site and location.However, they do not establish that the fair market value of the property as of 1/1/11 would have been $275,000.
Exhibit E – Bids for Repair Work:The bids simply provide documentation for the cost of repair for the various items of deferred maintenance.Estimates for repairs can be helpful when tied to an appraisal of a property.However, standing alone they only provide an estimate of cost for repairs and do not establish the reaction of the market because the repairs had not been done on the valuation date (1/1/11).Accordingly, the bids standing alone, provide nothing probative from which the Hearing Officer can conclude the fair market value of the property.
Ruling on Objections
Respondent objected to Exhibits F, G and H on the ground that the exhibits were not timely filed and exchanged in accordance with the Commission’s Exchange Order.Objection was also made to Exhibit G for lack of foundation for the facts asserted.
Exhibit F – Pool Photographs:Mr. Schuchmann offered the exhibit as a rebuttal exhibit to Respondent’s’ Appraiser making an adjustment of $15,000 for the comparables not having swimming pools.The objection was overruled.The Exhibit was only received based upon the fact that it addresses the general condition of the subject pool.It is relevant as to the overall condition of the pool.It does not per se rebut the appropriateness of Mr. Kraus’ adjustment.
Exhibit G – Pool Information:The objection was sustained as to this exhibit.This exhibit contains a “Conclusion” of the owner which should have been part of his case in chief, since it sets forth his final conclusion of value as testified to at the evidentiary hearing.While it contains information relating to the pool it is not rebuttal information, it could have and should have been filed and exchange with Exhibits A through E.
Exhibit H – Pool Contract:The objection was sustained as to this exhibit.Like Exhibit G this is not rebuttal, but should have been a part of Complainant’s case in chief and accordingly filed with Exhibits A through E.
Owner’s Opinion of Value
The owner of property is generally held competent to testify to its reasonable market value.[21]The owner’s opinion is without probative value however, where it is shown to have been based upon improper elements or an improper foundation.[22]The owner never clearly spells out in his exhibits, nor did he articulate in his testimony exactly how he arrived at his opinion of value of $250,000.[23]He cites to four factorsin addition to the condition of the pool that he believes mandate that a knowledgeable buyer would not pay more than $250,000 for the property.However, the Hearing Officer is left with nothing but speculation as to how Mr. Schuchmann actually arrived at that indicated value.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.”[24]
If the amount of $71,000, the asserted cost for all repairs is added to the opinion of $250,000 that results in an indicated value of $321,000.The Hearing Officer concludes that the owner’s methodology was to subtract the estimates for repairs from the Board’s value to arrive at his opinion of value.The fatal flaw in this reasoning is that this is not an accepted methodology for appraising property in an appeal before the Commission.Thus the owner’s opinion is not shown to actually equate to what a willing buyer would have paid for the property on 1/1/11.In other words, the basis for the opinion of value presented does not rest upon proper elements or a proper foundation.Accordingly, it can be given no probative weight.
Summary and Conclusion
Complainant’s opinion of value of $250,000 is not supported by any recognized appraisal methodology.Complainant failed to rebut the Board presumption.Complainant failed to prove the value proffered of $250,000.
Respondent Proves Value
Respondent had no burden of proof in this appeal, as he could have simply rested upon the Board presumption and not presented any evidence on the issue of the true value in money of the subject.However, when Respondent tenders evidence advocating a value different from that determined by the original valuation or a valuation made by the Board of Equalization, he must meet the same burden of proof to present substantial and persuasive evidence of the value advocated as required of the Complainant under the principles established by case law.[25]In other words, the evidence presented must rebut the presumption of correct assessment by the Board and establish what the fair market value of the property should have been.Respondent did not meet this burden of proof in this particular instance.
Respondent’s appraiser developed an opinion of value relying upon an established and recognized approach for the valuation of real property, the sales comparison or market approach.
The adjustments made the Mr. Kraus were consistent with generally accepted guidelines for the appraisal of property of the subject’s type and where persuasive to the Hearing Officer, with the exception of the adjustment for the subject’s swimming pool.All other adjustments properly accounted for the various differences between the subject and each comparable.
An adjustment for the subject’s pool was required to be made to comparables 1, 3 and 4 due to the fact that these properties did not have a pool.Mr. Kraus adjusted each of these sales upward by the amount of $15,000.This adjustment was made based upon the following justification: “This adjustment is based upon buyers reactions to this amenity combined with the quality and upgraded features of pools typically found in this area and price range home.”[26]
The problem that the Hearing Officer has on this point is that he finds no supporting market data as the actual basis for an adjustment of $15,000 to be added to each of the three sales without an inground pool.There is no paired sales analysis between similar properties with and without inground pools.Nor was a replacement cost new less depreciation (RCNLD) analysis presented to justify the $15,000 adjustment.Either one of these methodologies would have provided the necessary support for the justification given.In the absence of such supporting documentation, the Hearing Officer is left in that “nebulous twilight of speculation, conjecture and surmise,” cited to above.On this point, it is just as fatal to the conclusion of values for the 3 properties impacted as it was to Mr. Schuchmann’s opinion of value.
The Hearing Officer does not have any evidence from which he can ascertain an appropriate adjustment for this factor.Mr. Kraus may have, in fact, made an appropriate adjustment, however, without the supporting data; it appears to the Hearing Officer to be the appraiser’s best professional guesstimation.The Hearing Officer simply does not find a guesstimate on this point to satisfy the substantial and persuasive standard.Nor does the Hearing Officer feel that simply eliminating the adjustment from the calculation of the adjusted sales prices for the three non-pool properties is appropriate.Therefore, the Hearing Officer is not persuaded that the opinion of value of $330,000 accurately represents the fair market value of the property as of 1/1/11.Accordingly, the Board presumption is not rebutted by Exhibit 1.
ORDER
The assessed valuation for the subject property as determined by the Board of Equalization for St. Louis County for the subject tax day is AFFIRMED.
The assessed value for the subject property for tax years 2011 and 2012 is set at $61,330.
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.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. [27]
Disputed Taxes
The Collector of St. Louis County, as well as the collectors of all affected political subdivisions therein, shall continue to hold the disputed taxes pending the possible filing of an Application for Review, unless said taxes have been disbursed pursuant to a court order under the provisions of Section 139.031.8, RSMo.
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 October 3, 2012.
STATE TAX COMMISSION OFMISSOURI
_____________________________________
W. B. Tichenor
Senior Hearing Officer
Certificate of Service
I hereby certify that a copy of the foregoing has been mailed postage prepaid on this 3rd day of October, 2012, to:Harold Schuchmann, 2140 N. Ballas, St. Louis, MO 63131, Complainant; Paula Lemerman, Associate County Counselor, Attorney for Respondent, 41 South Central Avenue, Clayton, MO 63105; Jake Zimmerman, Assessor, 41 South Central Avenue, Clayton, MO 63105; Eugene Leung, Director of Revenue, County Government Center, 41 South Central Avenue, Clayton, MO 63105.
___________________________
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
573-751-1341 Fax
[2] BOE Decision Letter, dated 9/23/11, filed with Complaint for Review of Assessment; Exhibit 1, Addendum Page 1 of 4 – Assessment Information and Tax Data.Residential property is assessed at 19% of fair market value (true value in money, appraised value) – Section 137.115.5, RSMo
[4] Mr. Kraus was recognized at hearing as an expert witness.Mr. Kraus, a Missouri State Certified Residential Real Estate Appraiser is by his education, training and experience an expert in the appraisal of residential real property.See, Exhibit 1 – Professional Qualifications.
[8] 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)
[9] Hermel, supra; Cupples-Hesse Corporation v. State Tax Commission, 329 S.W.2d 696, 702 (Mo. 1959)
[10] 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).
[11] 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).
[13] 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.
[14] Exhibit 1, Page 4 of 4 – Definition of Value – Market Value; DEFINITION OF “TRUE VALUE IN MONEY” AS SET FORTH BY THE STATE OF MISSOURI
[15] 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).
[16] 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).
[18] 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).
[19] See, Cupples-Hesse, supra.
Substantial and persuasive evidence is not an extremely high standard of evidentiary proof.It is the lowest of the three standards for evidence (substantial & persuasive, clear and convincing, and beyond a reasonable doubt).It requires a small amount of evidence to cross the threshold to rebut the presumption of correct assessment by the Board.The definitions, relevant to substantial evidence, do not support a position that substantial and persuasive evidence is an extremely or very high standard.
“Substantial evidence: Evidence that a reasonable mind would accept as adequate to support a conclusion; evidence beyond a scintilla.”Black’s Law Dictionary, Seventh Edition, p. 580.
The word scintilla is defined as “1. a spark,2. a particle; the least trace.” Webster’s New World Dictionary, Second College Edition.Black’s definition at 1347 is “A spark or trace <the standard is that there must be more than a scintilla of evidence>.”There must be more than a spark or trace for evidence to have attained the standard of substantial.Once there is something more than a spark or trace the evidence has reached the level of substantial.Substantial evidence and the term preponderance of the evidence are essentially the same.“Preponderance of the evidence.The greater weight of the evidence; superior evidentiary weight that, though not sufficient to free the mind wholly from all reasonable doubt, is still sufficient to incline a fair and impartial mind to one side of the issue rather than the other.”Black’s at 1201.Substantial evidence is that a reasonable mind would accept as adequate to support the conclusion.Preponderance is sufficient to incline a fair and impartial mind to one side of the issue rather than the other, i.e. support the proposed conclusion.
[21] Rigali v. Kensington Place Homeowners’ Ass’n, 103 S.W.3d 839, 846 (Mo. App. E.D. 2003); Boten v. Brecklein, 452 S.W.2d 86, 95 (Sup. 1970).
[22] Cohen v. Bushmeyer, 251 S.W.3d 345, (Mo. App. E.D., March 25, 2008); Carmel Energy, Inc. v. Fritter, 827 S.W.2d 780, 783 (Mo. App. W.D. 1992); State, ex rel. Missouri Hwy & Transp. Com’n v. Pracht, 801 S.W.2d 90, 94 (Mo. App. E.D. 1990); Shelby County R-4 School District v. Hermann, 392 S.W.2d 609, 613 (Sup. 1965).