Holnam, Inc. v. Prior (Pike)

April 4th, 2002



Complainant, )


v. ) Appeals Number 99-78504 thru 99-78507





Respondent. )



Decisions of the Pike County Board of Equalization sustaining the assessments made by the Assessor, SET ASIDE, Hearing Officer finds true value in money for the subject properties, combined, for tax years 1999 and 2000 to be $3,207,690, assessed value of $1,026,460.

Complainant appeared by Counsel, Thomas L. Caradonna, St. Louis, Missouri.

Respondent appeared by Counsel, Margaret M. Mooney, St. Louis, Missouri.

Case heard and decided by Chief Hearing Officer, W. B. Tichenor.


The Commission takes this appeal to determine the true value in money for the subject properties on January 1, 1999.


Complainant appeals the decisions of the Pike County Board of Equalization which sustained the valuation of the subject property. The Assessor determined an appraised value of $33,641,203 (assessed value of $10,765,185, as commercial property), for the combined properties. A hearing was conducted on December 12 and 13, 2000, and April 3, 2001, at the Pike County Courthouse, Bowling Green, Missouri. Both parties filed Briefs with Respondent’s Reply Brief being filed with the Commission on October 11, 2001.

The Hearing Officer, having considered all of the competent evidence upon the whole record and the arguments of each Counsel as set forth in the Briefs, enters the following Decision and Order.

Complainant’s Evidence

The following exhibits were received into evidence on behalf of Complainant:

Exhibit A    Appraisal Report of Thomas H. Slack, MAI, Missouri State Certified General Real Estate Appraiser.

Exhibit B    Written Direct Testimony of Mr. Slack.

Exhibit C    U. S. and Canadian Portland Cement Industry: Plant Information Summary, December 31, 1998, Historical Data from 1973 through 1998.

Exhibit D    Code of Federal Regulations: National Emission Standards for Hazardous Air Pollutants from the Portland Cement Manufacturing Industry, June 14, 1999.

Exhibit E    Location Map – Figure 16.1 of Exhibit 1, with location of lands sales numbered 1, 2, 3 and 4 marked on the map.

Exhibit F    Written Direct Testimony of Roy L. Steinmeier, Chief geologist for Complainant.

Exhibit G    Federal Register, March 24, 1998, 40 CFR Part 63 – National Emission Standards for Hazardous Air Pollutants; Proposed Standards for Hazardous Air Pollutants Emissions for the Portland Cement Manufacturing Industry; Proposed Rule.

Exhibit H    Collection of documents relating to testing of raw materials for hydrocarbon content at the subject plant.

All of these exhibits were received into evidence.

Mr. Slack was cross-examined by Respondent’s Counsel and his testimony under cross-examination, in response to questions by the Hearing Officer and in redirect examination constitutes part of the record in this appeal.

Mr. Slack opined a fair market value for the subject property of $4,500,000, based upon a sales comparison approach to value. The Slack opinion of value included the entire 3,710.16 acres which comprise the Complainant’s quarry, plant, loading and shipping facilities and buffer land, but not residential or agricultural improvements on the buffer land, to which the parties had stipulated values (See, Finding of Fact 4, infra and Exhibit 25 – Stipulation for Settlement of Appeals 99-78508 through 99-78520).

Summary of the Slack Valuation

Mr. Slack gave consideration to the three traditional approaches to value in approaching this appraisal problem. However, his valuation was based upon a sales comparison analysis. He considered both the cost and income approaches, but elected not to utilize them.

Cost Approach

He did not rely upon a cost approach due to the age of the improvements, the subject plant being a wet process plant rather than a dry process plant and sales data demonstrating that replacement cost bears no relationship to value. Mr. Slack did present a Recapitulation of the Cost Approach, which gave an indicated value of $2,500,000 for the plant alone (Addendum H of Exhibit 1). The cost approach was calculated based upon Marshall Valuation Services information for replacement for the real estate improvements. Depreciation was applied based upon market extraction calculations from two sales listings for both a dry and a wet process cement plant.

He arrived at a value for the underlying land as if vacant and available for development. This land value component was considered in order to adjust comparable sale information to provide an indication of value at the subject location. The cost approach was only utilized as a cross check for the sales comparison approach.

Income Approach

The income approach was considered but not used. Mr. Slack did not locate any cement plants that were leased. It was his position that analyzing and capitalizing business revenues and expenses would be inappropriate. This was because any such analysis would reflect value of not just the real property, but the machinery and equipment, other personal property, customer relationships, management and employees, along with offsite real and personal property components, including remote terminals, barges, etc.

Sales Comparison Approach

The approach that Mr. Slack employed to arrive at his opinion of value was that of sales comparison. He analyzed the most recent sale of an operating plant, but did not rely upon it due to the sale value being indicative of value in use and there was no allocation of business value which would include factors such as customer lists, licenses, union agreements, pension plans, government approvals, etc. In valuing the subject property under his sales analysis, Mr. Slack relied upon the listings for four cement manufacturing plants, two of the listed plants were dry process and two were wet process like the subject. Comparison was made on the basis of the productive capacity of each of the sale listings to the subject plant. Adjustments were made to each listing to arrive at an indicated value of $3.60 per ton of capacity, for the final opinion of value of $4,500,000. Exhibits A & B; Transcript, 12/12/00, Vols. I & II, pp. 6-95.

Summary of Steinmeier Testimony

Roy Steinmeier has worked for Holnam, Inc., for thirty-five years, as a field geologist and since 1982 as the chief geologist. Mr. Steinmeier is responsible for the raw materials at all of the cement plants owned by Holnam in the United States. He is to insure that the company has adequate geologic reserves for each of their existing plants. He is knowledgeable of Environmental Protection Agency (EPA) regulations and requirements relating to the cement industry. He also oversees testing of raw materials for EPA compliance issues. He is knowledgeable of environmental restrictions on raw material induced emissions and the organic content of the raw materials used at the subject plant.

The raw materials used by Complainant at the subject plant have been tested to determine the carbon content. Carbon content of raw materials can create problems in the burning process creating odor and emission problems. Testing had been conducted in the mid-1970s and again in the 1980s and the 1990s.

The testing in the 1980s was required because the subject plant started burning hazardous fuel. The preliminary testing indicated the plant could not meet the EPA emission standards. The testing also determined that the hydrocarbons that were in violation of the emission standards were coming from the raw material and not from the hazardous fuel.

The significance of the test results was that the plant could burn hazardous waste fuels and be in compliance with EPA standards. However, the emissions at the stack of the kiln were excessively high in hydrocarbons due to the raw materials. Volatile organic carbons in the limestone and the shale that is used at the subject plant create hydrocarbon emissions from the stack.

As of January 1, 1999, Holnam was aware of the proposed EPA regulations relating to the cement industry (Exhibit D). As of January 1, 1999, there was no viable technology in existence to remove the organic carbon content from the raw materials so as to meet the EPA regulations in Exhibit D, nor was there any such technology as of the date of hearing in these appeals. The raw materials which will be used at the new Holnam plant in Ste. Genevieve County, Missouri have been tested and the emissions from the Ste. Genevieve plant will meet the requirements of the EPA. Exhibit F; Transcript, 4/3/01, Vol. III, pp. 113-130.

Respondent’s Evidence

The following exhibits were received into evidence on behalf of Complainant:

Exhibit 1 Appraisal Report of Edward W. Dinan, MAI, Missouri State Certified General Real Estate Appraiser.

Exhibit 3 Qualifications of Mr. Dinan.

Exhibit 4 Missouri Real Estate Appraiser’s License of Mr. Dinan.

Exhibit 5 Qualifications of Ernest K. Lehmann.

Exhibit 8 Production Data for 1994 through 1999 and January thru June, 2000 (Under Seal).

Exhibit 9 Standard Cost Data for 1994 thru 1999 (Under Seal).

Exhibit 10 Production Supply Worksheet for Complainant from 1994 through May, 2000 (Under Seal).

Exhibit 11 Income and Expense Statements 1994 thru May, 2000 (Under Seal).

Exhibit 12 Documents regarding construction of major items in 1997 (Under Seal).

Exhibit 13 Complainant’s documents regarding Major Replacement Projects 1997 through 2000 (Under Seal).

Exhibit 14 Complainant’s Complaints for Review of Assessments.

Exhibit 17 Updated Cash Flow (Under Seal).

Exhibit 18 Corporate Documents.

Exhibit 19 Web Site Information on Complainant.

Exhibit 20 Production Flow Sheet of subject facility.

Exhibit 21 Diagrams with layout of buildings.

Exhibit 22 Construction Drawings for cement dome.

Exhibit 23 Complainant’s Press Release and News Articles.

Exhibit 24 Correspondence from Assessor regarding Changes in value of one parcel.

Exhibit 25 Final Stipulated Values for Appeals 99-78508 thru 99-78520.

Exhibit 26 Assessor’s Record Cards.

Exhibit 28 Written Direct Testimony of Edward W. Dinan.

Exhibit 30 Written Direct Testimony of Ernest K. Lehmann.

Exhibit 31 Chemical and Physical Properties of Selected Stone Resources in Northeast Missouri.

Exhibit 32 Portland Cement Association Plant Acquisition and Ownership Report, 1974 to Present, 1999 Edition, 2 pages.

All of these exhibits were received into evidence.

Mr. Dinan and Mr. Lehmann were cross-examined by Complainant’s Counsel and their testimony under cross-examination, in response to questions by the Hearing Officer and in redirect examination constitutes part of the record in this appeal.

Mr. Dinan opined a fair market value for approximately 625 acres of the subject property (including the Complainant’s cement production facility and quarry) of $128,000,000, based upon a reconciliation of cost, income and sales comparison approaches, deducting personal property and an amount for business value.

Exhibits 2, 6, 7, 15, 16, 27 and 29 related to the valuation of personal property which was the subject of Appeal 99-78503, said exhibits are not part of the record in these appeals.

Summary of the Dinan Valuation

Mr. Dinan valued the subject property utilizing all three of the traditional approaches to value. The indicated value under the cost approach for the subject property was $150,000,000. A value of $180,000,000 was indicated by the sales comparison method. The income approach calculated an indicated value of $250,000,000. Mr. Dinan reconciled the indicated values to arrive at a final opinion of value of $200,000,000, less $50,000,000 for business enterprise value to arrive at his value of $150,000,000, which included personal property. The valuation was of the going concern of the Complainant’s cement plant from which a business concern value was then deducted.

Cost Approach

Mr. Dinan concluded on a land value of $1,500 an acre in valuing 264 acres of the subject land, the portion which consists of the quarry and the land which directly supports the manufacturing facility. He then estimated replacement cost new for improvements by using base cost figures and multipliers from Marshall & Swift Valuation Service. Improvements were then depreciated at 40% based upon age-life, except for fixtures and roads, parking and lights were depreciated at 20 and 80% respectively. A 5% functional obsolescence factor was then applied to all improvements except fixtures. No deducation was made for external obsolescence.

Sales Comparison Approach

An analysis of 12 sales transactions, involving a undetermined number of cement plants, was performed. The sales transactions were sales of on-going businesses and therefore included various non-real estate assets, including such items as machinery and equipment, spare parts, inventory, customer lists and contracts, employees and employment contracts, etc. Sales prices were indexed upward by an inflation factor. Adjustments were made, where necessary, for plants which were dry process and for use of waste fuel. An adjusted dollar per metric ton of annual capacity for each transaction was calculated. The weighted average dollar of metric ton grinding capacity was then determined. This amount was then adjusted by a further 5% to account for wet process and ability to use waste fuels. A final adjustment of 10% was made to account for the inclusion of terminal facilities in the reported sales. Mr. Dinan arrived at a sale transaction cost of $141.93 per metric ton of capacity to apply to the subject plant capacity to produce the indicated value.

Income Approach

A discounted cash flow analysis was performed for a twenty year period to arrive at the indicated value. Mr. Dinan adjusted the 1999 production data to arrive at a projected cash flow, which he then utilized as his base year annual cash flow for his twenty year projection. This was then increased by a 3% factor each year for the twenty year period. A 17% present worth factor was used to arrive at the present worth of the cash flows for each of the twenty years. Value of the reversion was calculated upon the projected net cash flow in the twenty-first year. This amount was projected based upon the 3% increase per year over the twenty-one years. The projected net cash flow in year twenty-one was then capitalized at 15% to arrive at an indicated gross sale proceeds. Selling expenses were deducted and working capital was added back, which had been deducted in the base year of 1999. The discount factor of 17% was then applied to the net value of the reversion. This was added to the combined present worths of the cash flows for the twenty-year period to obtain an indicated value by the discounted cash flow. Exhibits 1 & 30; Transcript, 12/12/00, Vols. IV & V, pp. 140-269.

Summary of Lehmann Testimony

The written direct testimony of Ernest K. Lehmann (Exhibit 30) was essentially the same as that of Mr. Dinan on points relevant to the valuation methodologies employed in the Dinan appraisal (Exhibit 1). Pursuant to Order issued November 20, 2000, Questions and Answers 24-40 of Exhibit 30 were stricken in response to ruling on Complainant’s objections. The Dinan valuation under both the sales comparision and discounted cash flow approaches was based upon and developed from the analysis and calculations primarily performed by Mr. Lehmann. Mr. Lehmann testified on the subjects of the minability of the Complainant’s reserve of limestone and shale on the subject property, his valuation of mineral rights, his understanding as to emission issues related to the raw material being used by Complainant at the subject facility and his methodology in the sales and discounted cash flow approaches. Exhibits 1, 30, 31 and 32; Transcript, 12/12/00, Vols. II & III, pp. 97-137.


1.    Jurisdiction over this appeal is proper. Complainant timely appealed to the State Tax Commission from the decision of the Pike County Board of Equalization.

General Information as to Complainant’s Clarksville Plant

2. The subject properties, along with other properties the values of which have been stipulated to by the parties, (Order, Approving Stipulation of Parties, 8/8/00) constitute and comprise the Complainant’s cement production facility and limestone quarry at Clarksville, Pike County, Missouri.

3. The specific properties in these appeals are identified as follows (the percentages given after Respondent’s Appraised Values are the percentages for each individual property of the total combined appraised value, round to equal 100%):

Appeal Number   Parcel
Appraised Value
Assessed Value
99-78504   11371   $  8,945,594 (26.60)   $  2,862,590
99-78505   11374   $20,937,906 (62.24)   $  6,700,130
99-78506   11372   $  3,737,500 (11.11)   $  1,196,000
99-78507   11376   $       20,203 ( .05)   $         6,465
        Total Values:$33,641,203 (100%)   $10,765,185


More specifically the subject properties (Clarksville or Holnam Plant) consists of the improvements on parcel 11371 and the land and improvements on parcels 11372, 11374 and 11376.

4. The stipulated values of the other properties which make up the remainder of real property which are part of Complainant’s cement production facility and limestone quarry at Clarksville are as follows (Exhibit 25 – Stipulation for Settlement of Appeals 99-78508 through 99-78520):

Parcel Number   Stipulated Market Value   Stipulated Assessed Value
11377   $       7,400   $       890
1141722   $          200   $         20
114181   $   463,500   $112,060
114193   $   143,000   $  23,370
121125   $   269,800   $  83,540
125157   $       1,500   $       180
126131   $   299,600   $  60,750
126141   $     13,900   $    1,670
126144   $     12,000   $    1,440
126145   $     22,000   $    2,640
126231   $   179,600   $  24,850
126241   $   252,700   $  30,320
127253   $       5,100   $       610
    Total Values: $1,670,300   $342,340


5. There was no evidence of new construction and improvement from January 1, 1999, to January 1, 2000, which would require an adjustment to value for tax year 2000.

6. The Clarksville site consists of a total of 3,710.16 acres, which is devoted to commercial, agricultural and residential uses. A total of 3,446.16 acres, which represents the total acreage of the stipulated parcels (Finding of Fact 4) is generally land that is necessary to buffer the remaining 264 acres which comprise the Clarksville limestone quarry and cement plant. There are 293 acres of land leased from the Army Corps of Engineers, which includes the shipping and loading areas. The Corps of Engineers land is not included in this valuation. Exhibit A, pp. 11A, 15A; Exhibit 25. The 264 acres are improved by various buildings and other improvements which support production, handling, storage and shipping of cement at the Clarksville facility. In 1999, a 61,575 square foot storage dome was completed at the plant. Exhibit A, p. 12; Exhibit 1, pp. 46-50.

7. The Clarksville cement plant opened in 1967 as the largest wet process cement kiln in the world. The kiln is 760 feet long and the plant has an annual capacity of 1,250,000 metric tons of cement. The site includes a 112 acre limestone and shale quarry. Exhibit A, p. 12.

8. The highest and best use of the Clarksville plant site as improved is for continued operation as a cement plant. The highest and best use of the 3,446.16 acres, which serve as a buffer for the quarry and cement operations and whose values were stipulated to by the parties (Exhibit 25) is for farming operations and residential use in conjunction with the farming operations. Exhibit A, pp.18-19; Exhibit 1, pp. 53-54. If vacant and unimproved, the highest and best use of the 264 acre quarry and cement plant site would be for a quarry operation only. Due to excessive hydrocarbons in the Clarksville quarry limestone and EPA emission standards which were proposed as of January 1, 1999, the highest and best use of the quarry and plant site would not have been for development and improvement of a cement plant. Exhibits A, pp. 17-18, D, F, G & H; Testimony of Roy Steinmeier, Transcript, 4/3/01, pp. 113-130.

Factors To Be Considered In Valuing The Clarksville Quarry and Plant

9. The Clarksville cement plant is a wet process plant, which is functionally obsolete and has been obsolete for 25 years. The wet process involves adding approximately 32% water in the mixing process, which results in extremely high energy costs in order to later burn off the water. As an additional consequence, the wet kiln is approximatley triple the length of the dry kiln, raising maintenance costs. As early as 1974, Holnam considered replacing the existing wet processing plant, but it chose not to do so for other business reasons, despite its determination that it was cost efficient to replace the plant. Exhibit A, pp. 5 & 31.

10. In 1973 there were 247 wet process cement plants in operation in the United States and Canada. The total annual clinker capacity of these plants was 45,036,000 tons. Clinker is the material that results when a mixture of limestone, shale or clay and other minor ingredients are heated in a rotary kiln to the point of fusion. Clinker is then ground into a fine powder and this is cement. By 1999, the total clinker capacity from wet process plants had dropped to only 20,563,000 tons annually in 67 plants. No wet process plants have been constructed since 1973. All new plants since that time have been dry process plants. Exhibits A, p. 9 & C; Exhibit 1, p. 19.

11. Holnam is in the process of or has recently completed the expansion of four other plants. The one plant that had a dry process was expanded by adding a parallel line of dry process production. The other three plants were expanded by constructing all new dry process plants, then demolishing or abandoning in place the wet process plants. Exhibit A, pp. 10, 31-32; Exhibit 19, Holnam Web Site News Release, 1/21/99.

12. Environmental Protection Agency changes in regulations relating to release of hydrocarbons result in the limestone quarry having no value to a dry process plant. The limestone is high in hydrocarbon content and is not suitable for the dry process. There is presently no technology to reduce the level of hydrocarbon emissions below the standards. Exhibit A, p. 32.

13. Environmental Protection Agency changes in standards, proposed March 24, 1998, would result in the Clarksville wet process plant violating the proposed hydrocarbon emission standards. As of January 1, 1999, there was no technology which would reduce the hydrocarbon emissions to come within the new proposed standards. The proposed rule changes are slated to go into effect by June, 2002. Exhibits A, p. 32, D, F, G & H; Testimony of Roy Steinmeier, Transcript, 4/3/01, pp.113-130; Transcript, 12/12/00, p. 82, Lines 13-21.

14. The proposed EPA rules changes will require Complainant to address the problem of kiln dust created at the facility. The existing landfill will need to be redesigned or a new landfill may be required at a cost of $500,000 to $10 million. Transcript, 12/12/00, p.81, Line 14 – p. 82, Line 5. The projected cost for oxidizers and scrubbers to attempt compliance relating to reducing dioxin furan emissions is approximately $85 million. Transcript 12/12/00, p. 82, Lines 5-9, 22 – p. 83, Line 6, p. 85, Lines 10-20.

15. The Clarksville plant has remained profitable by using low cost waste fuel supplied by Safety-Kleen, a corporation that has recently filed for bankruptcy. Although the waste fuel is still available, any buyer would have to consider the possibility that the availability of inexpensive waste fuel is not likely to continue over the long term. Exhibit A, p. 32.

16. The location of the Clarksville plant was selected primarily due to its ready access to the Mississippi River, with potential for barge shipping to a number of remote Holnam distribution terminals. Holnam does not own the nearly 300 acres that provide it access to river and rail shipping. The land is leased from the Army Corps of Engineers, with only 17 years left on the lease. While the rail access might be moved, a buyer must also consider the possibility of losing access to the river for shipping purposes. As of January 1, 1999 and the date of hearing, Complainant continued in negotiations with the Corps in an effort to resolve the potential problem. Exhibit A, p. 32.

17. Complainant purchased, as of January 21, 1999, in fee or purchased options for the fee interest in a total of approximately 4,000 acres of land in Ste. Genevieve County, Missouri, which also includes access to the Mississippi River. This location is proposed for a 3.0 million ton dry process cement plant. The site features low hydrocarbon limestone. Upon completion, the Ste. Genevieve plant could readily replace the existing Clarksville plant. Exhibit A, p. 32; Exhibit 19, Holnam Web Site News Release, 1/21/99. The Ste. Genevieve site is located approximately 100 to 150 miles South of the Clarksville site.

Probative Value of Appraisal Methodologies

18. The evidence on this record is not substantial and persuasive to establish a value for the subject property under the cost approach to value or a discounted cash flow analysis proffered by Respondent’s experts.

19. The income approach, utilizing a discounted cash flow analysis, is inappropriate for the valuation problem in this case due to the fact that such an analysis reflects the going concern value of the subject business, which includes machinery and equipment, business enterprise value and various offsite real and personal property components. The analysis presented failed to establish that the allocations to non-real property elements and components was appropriate and based upon substantial and persuasive market data. Furthermore, the discounted cash flow analysis presented in this case was based upon various assumptions which were not developed or supported from actual market data.

20. The evidence on this record is substantial and persuasive to establish a value for the subject property relying on sales comparison data, as developed by Complainant’s appraiser. The use of sales listing is appropriate in the valuing of the Complainant’s quarry and cement plant. Such a valuation is supported by a cost analysis to arrive at the replacement cost new less depreciation for the Clarksville plant (improvements).

Conclusion of Values

21. Complainant’s evidence is substantial and persuasive to rebut the presumption of correct assessment by the Board of Equalization and establish the value of the Clarksville property, consisting of 3,710.16 acres of land, with various improvements and the improvements on land leased from the Army Corps of Engineers, to be $4,500,000.

22. Complainant’s appraiser placed a land value of $375 per acre on Complainant 3,710.16 acres, this valuation is supported by substantial and persuasive evidence in this record. The land value for the 3,446.16 acres of land comprising essentially buffer land around the Clarksville quarry and plant facility is $1,292,310 (3,446.16 x $375 = $1,292,310). The value of the Complainant’s quarry and plant facility, which comprises 264 acres, plus the improvements in Appeal 99-78504 calculates to $3,207,690 ($4,500,000 – $1,292,310 = $3,207,690).

23. The value of property in the four pending appeals is allocated based upon the percentages shown in Finding of Fact 3, supra, rounded to the nearest $10, as follows.

Appeal No.   Parcel No.   Calculation       Appraised Value
99-78504   11371   $3,207,690 x .2660   =   $   853,250
99-78505   11374   $3,207,690 x .6224   =   $1,996,470
99-78506   11372   $3,207,690 x .1111   =   $   356,370
99-78507   11376   $3,207,690 x .0005   =   $       1,600

24. The assessed values for each parcel as commercial property (32% assessment ratio), rounded to the nearest $10, are as follows.

Appeal No.   Parcel No.   Appraised Value       Assessed Value
99-78504   11371   $  853,250 x .32   =   $   273,040
99-78505   11374   $1,996,470 x .32   =   $   638,870
99-78506   11372   $   356,370 x .32   =   $   114,040
99-78507   11376   $       1,600 x .32   =   $           510
        $3,207,690 x .32   =   $1,026,460


25. The evidence on this record, taken as a whole, will not support an additional amount of more than $12,000 per acre to account for mineral rights value for the shale and limestone at the Clarksville site. The general land values in Pike County do not demonstrate that similar land demands any such excess value to account for deposits of shale and limestone.

26. The evidence on this record, taken as a whole, does not support adding any additional value for the storage dome which was approximately 90% complete as of January 1, 1999.

27. The evidence on this record, taken as a whole, is insufficient to support a business enterprise valuation of the Clarksville facility of $50,000,000.

28. The evidence presented by Respondent’s experts fails to reach the level of substantial and persuasive to rebut the presumption of correct assessment by the Board and establish a value of $150,000,000 for the Clarksville real property.



The Commission has jurisdiction to hear this appeal and correct any assessment which is shown to be unlawful, unfair, arbitrary or capricious. Article X, section 14, Mo. Const. of 1945; Sections 138.430, 138.431, RSMo. 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. Section 138.431.4, RSMo.

Board of Equalization Presumption

There is a presumption of validity, good faith and correctness of assessment by the County Board of Equalization. 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).

Standard for Valuation

Section 137.115, RSMo 1994, 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. 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, supra, at 897.

Market Value

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 is 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 each 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.

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.

Relevant Factors

Consideration is to be given to all relevant factors in making a determination of true value in money. Stephen & Stephen Properties, Inc. v. STC, 499 S.W.2d 798, 802 (Mo. 1973).

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, 1999. Hermel, supra, at 897. Substantial evidence can be defined as such relevant evidence as a reasonable mind might accept as adequate to support a conclusion. See, 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).

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. 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, supra.

Trier of Fact

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. 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).

Opinion Testimony by Experts

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 of 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 opinion or inferences upon the subject and must be otherwise reliable, the facts or data need not be admissible in evidence. Section 490.065, RSMo; 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. W.D. 1992).



Wet processing cement plants that once dominated the industry have become the dinosaurs of the industry. Exhibit A, p. 9. The Clarksville facility is the brontosaur of all the wet processing dinosaurs that were ever built. The Clarksville plant continues to exist and produce the product for which it was designed, however, there are a variety of factors which must be considered in addressing the issue of the fair market value of this facility as of January 1, 1999.

The valuation problem in these appeals presents a challenge to the appraisers and the Hearing Officer alike. The valuation assignment is not as simple as determining value for a residential property in a subdivision where there are a multitude of recent, reliable and relevant sales. Neither is the assignment as simple as analyzing the income and expense statement for an apartment complex or an office building. Factors and elements, which are very much unique to this property, must be reviewed, consider, examined and weighed to make a final determination of fair market value.

The appraisers have collected, reported, and analyzed data to arrive at conclusions and opinions which resulted in a final determination of value. The Hearing Officer must consider and analyze the evidence thus presented on this record and the arguments advanced by the respective Counsel for each party to render his judgment as to the fair market value of the subject property as of January 1, 1999. This requires a discussion of various sub-issues presented in these appeals.

The strengths and weaknesses of each of the valuation approaches advanced by each party’s experts must be weighed. Furthermore, the following factors each present issues relating to valuation which must be addressed: land value, mineral rights value, EPA regulations, costs for EPA compliance, waste fuel, Ste. Genevieve plant, facility improvements at other Holnam plants and contributory value of the dome. The strengths and weaknesses of the approaches presented will be first addressed, before moving to each of the specific sub-issues.

Strengths and Weaknesses of Valuation Approaches

Cost Approach

Both appraiser performed a cost approach. Mr. Slack did not develop his cost approach in a narrative form, but only provided a recapitulation of the approach as Addendum H to Exhibit A. This does not detract from the weight to be given his final opinion of value, as he did not determine the cost approach to be appropriate in this appraisal problem. Mr. Dinan developed his cost approach in a narrative format, however, actually gave little, if any, weight to it either. Both appraisers essentially utilized the cost approach as more or less a check against their final opinion of value. The cost approach is not persuasive as the sole determiner of value. However, it does provide a basis upon which a replacement cost new can be estimated for the subject facility.

Replacement Cost New Less Depreciation Problems and Weaknesses

The Dinan cost approach provided a replacement cost new for the real estate improvements of $100,860,429, which he depreciated to $58,044,381. However, in his calculation of replacement cost new, he valued the subject kiln at $69,309,000. The evidence on the record establishes that the cost to replace the kiln with a dry process kiln, instead of reproducing the wet processing dinosaur, would only be approximately $3,000,000. Transcript 12/12/01, p. 57, Line 11 – p. 58, Line 5. If the $3,000,000 replacement cost for the kiln was utilized and depreciated by the same factors as Mr. Dinan applied, the indicated depreciated replacement cost new would have only been $21,958,251.

Mr. Dinan performed a further valuation which relied upon a cost calculation based upon average costs for a cement plant per metric tonnes clinker per year capacity. This methodology includes costs for plant and equipment, so it adds the value of personal property necessary to the operation of a plant. The indicated values under this method, depreciated by 40%, produced an indicated range of value of $98,250,000 to $168,750,000. Mr. Dinan asserts he gave equal weight to both methods to arrive at a depreciated replacement cost for the real property improvements of $124,400,000. This will simply not compute. Placing equal weight on the $58,044,381 value and $98,250,000 value produces a value of $78,147,191. Placing equal weight on the $58,044,381 value and the $168,750,000 value produces a value of $113,397,191.

Furthermore, since the values of $98,250,000 and $168,750,000 included equipment which would not be part of real estate improvements a deduction for this should have been made. If the amount allocated for personal property in the Dinan appraisal of $22,000,000 was deducted from the bottom and top of the indicated range of depreciated replacement value for the entire plant, real and personal property, the range would have been reduced to $76,250,000 to $146,750,000. Giving equal weight to these amounts and the $58,044,381 originally calculated by Mr. Dinan would produce a range of value for the improvements of only $67,147,191 to $102,397,191.

All of the above simply points out the general unreliability of the cost approach in this appraisal problem as developed by Respondent’s appraiser. For this valuation, the cost approach fails to attain the level of persuasiveness to qualify it as substantial evidence of value. The vast majority of the improvements at the Clarksville plant are over 30 years old. The depreciation of such an old facility cannot simple be based upon an age life calculation or estimate. The subject plant as a wet processing plant experiences functional obsolescence which is very difficult, if not impossible to determine from market driven and supported data.

Mr. Slack’s market extraction depreciation data on the one wet process listing (Exhibit A, Addendum H) provides the only market supported analysis to account for all forms of depreciation (95.6%). Applying that depreciation to the highest indicated cost new for a cement plant (improvements and personality) developed by Mr. Dinan would produce of value of only $12,375,000, before a deduction for the machinery and equipment that is personal property. If the Dinan cost calculations are adjusted to reflect the cost of the kiln to be only $3 million instead of over $69 million, then the indicated replacement cost new (Dinan adjusted) less depreciation (Slack extraction depreciation) would given an indicated value of the cement plant, without land, of $1,520,262 ($34,551,429 x .044% = $1,520,262).

Replacement Cost New Calculations

The calculations made by both Mr. Dinan and Mr. Slack as to a replacement cost new of the subject plant, excluding land, actually provide a limited range of value for the plant alone. This range of value can also serve as a check on the other valuation methods.

Mr. Slack’s cost calculation arrived at an indicated value of $37,192,671. However, he did not include any cost for replacement of the kiln. The estimated replacement cost for the kiln is $3 million. Therefore, if the replacement cost for the kiln is added to the Slack cost estimate, the indicated replacement cost for the cement plant real estate improvements alone would be approximately $40,200,000. This does not account for any depreciation, but it does not bring into play any business value, machinery and equipment or other assets which might be included in a sale of the Clarksville business, as opposed to a sale of the Clarksville land and improvements.

Mr. Dinan’s cost calculations included a 15% factor for entrepreneurial profit. Complainant’s plant is an owner-built, owner-occupied facility. There is no evidence on this record from which it can be concluded that cement plants are built by firms which then sell them like a developer would develop a strip-mall or a residential subdivision. Nor is there any evidence to support the conclusion that in a sale of the subject land and improvements that any such entrepreneurial profit would be reflected in a negotiated sales price. Accordingly, the inclusion of a 15% entrepreneurial profit factor in the cost approach in this instance was not appropriate. Mr. Dinan also valued the replacement cost of the kiln at more than 20 times what replacement of the kiln with a dry process kiln would cost.

When the Dinan cost approach is adjusted for the addition of entrepreneurial profit and kiln replacement cost, the replacement cost new is significantly less than the $100,860,429 originally calculated. The indicated replacement costs for the real estate improvements turns out to be only $33,875,792. Even if the entrepreneurial profit is not deducted and only the correction is made for the kiln, the Dinan replacement cost new would only be $37,551,429.

Therefore, the two appraisers’ calculations for replacement cost new of only the improvements would indicate a range from $33,900,000 to $40,200,000. The amount of depreciation to be applied would still have to be generated from a market analysis. Applying the Slack market derived depreciation to the indicated range results in a replacement cost new less depreciation of only $1,017,000 to $1,206,000. Applying the age life percentage, plus a 5% factor for functional obsolescence, as developed by Mr. Dinan, the indicated range of a replacement cost new less depreciation calculates to $19,870,00 to $23,131,000, rounded.

Cost Analysis Conclusions

Of the two cost analysis advanced for the improvements, the Slack analysis would be the approach the Hearing Officer would have relied upon had he been forced to base his decision solely on the cost approach. The calculations set out above which analyze the replacement cost new establishes that this record will not support an determination of value for the Clarksville facility (plant improvements alone) that is in excess of $40,200,000. When depreciation (even if only age life and functional) is applied the replacement cost new less depreciation reduces the value of plant improvements to less than $24,000,000 Therefore, the valuation advanced by Respondent’s experts of $124,400,000 (Exhibit 1, p. 85) simply cannot be supported.

The principle of substitution is that a prudent buyer will not pay more for a property than the cost of acquiring a substitute property of equivalent utility. The principle can be applied to either an individual asset or to an entire facility. The principle applies in either a cost, sales comparison or income approach. Valuing Machinery and Equipment, Machinery and Technical Specialities Committee of the American Society of Appraisers, 2000, pp. 45, 115; Appraising Machinery and Equipment, Machinery and Equipment Textbook Committee of the American Society of Appraisers, John Alico, Editor, 1989, p. 81; Exhibit 1, p. 7. Applying that principle to the present case, the evidence on this record demonstrates that a new cement plant (exclusive of machinery and equipment – personality) which would replace the Clarksville plant could be constructed for $40,200,000 or less. The valuation proposed by the Dinan/Lehmann appraisal for the real property improvements of $124,400,000 is in excess of what any knowledgeable and prudent buyer would pay for a 30 year old wet process cement plant dinosaur.

Income Approach

The only income approach presented on the record was the Dinan/Lehmann discounted cash flow analysis. This is the methodology given the most weight by Respondent’s expert. This is also the methodology which has been specifically rejected by the Commission, first in Lebanon Properties v. North, STC Appeal Nos. 97-64002 – 97-64005 (1998) and more recently, and more relevant in Mississippi Lime Company v. Donze, STC Appeal Nos. 99-84500 & 99-84501 (March 12, 2001). As revealed in both Lebanon and Mississippi Lime, as in the present appeal, there exist certain inherent weaknesses in the discounted cash flow analysis which render it of little, if any, probative value.

General Weaknesses in Discounted Cash Flow

The discounted cash flow analysis proposed in Mississippi Lime was identical to the analysis here presented. The basic assumptions in Mississippi Lime were for a limestone mine and production facility to continue to operate for 20 years with an estimated increase in income and expenses of 3% per year for the 20 year period. The Mississippi Lime analysis was also presented by the same two experts as appeared in the present case. The Commission found the discounted cash flow approach flawed and unpersuasive in both Lebanon Properties and Mississippi Lime. There is nothing in the present record upon which the Hearing Officer can find a substantial and persuasive basis to reject and overturn the reasoning and rational applied in those two prior decisions.

The reasoning of the Commission as stated in Mississippi Lime finds application here.

The critical factor in applying the discounted cash flow procedure is that everything is driven by assumptions which the appraiser makes for constructing the analysis. There are inherent problems within a discounted cash flow analysis due to the assumptions that have to be made…in the present appeals, the Lehmann/Dinan analysis made assumptions that the plant would operate for an additional 20 years with sales and costs increasing by 3% per year over the 20 year period and that there would be no major capital expenditures, only routine maintenance.

Mississippi Lime at 16.

The failure to have assumptions developed from the marketplace and then to lay one non-market based assumption upon another non-market based assumption simply relegates such assumptions to the category of speculation, conjecture and surmise. None of which can be the basis for a determination of value. The discounted cash flow analysis is generally disfavored due to failure to extract viable and relevant information from the marketplace. The more assumptions which are made and the more variables which are used, without having a firm foundation in the marketplace, the greater the likelihood that the analysis will be in error. Mississippi Lime at 19; See also Lebanon Properties.

Specific Weaknesses of Respondent’s Discounted Cash Flow

There is substantial and persuasive evidence in this record which gives rise to serious questions as to whether the underlying assumptions made by Lehmann/Dinan can be supported. Any knowledgeable buyer on January 1, 1999, in conjunction with a due diligence investigation, which would have surely have been performed by anyone seeking to purchase this property, would have been aware of a number of factors, all of which present risks of varying degrees that bring into question whether the Clarksville plant will continue to operate for 20 years with a net cash flow growing by 3% each year and will not incur any major capital expenditures.

Such potential risk factors concerning the Clarksville plant would be: possible costs to bring the plant into compliance with EPA regulations concerning dioxin furan emissions; possible costs for reconstruction of a landfill to address cement kiln dust regulations; possible loss of supply of hazardous waste for fuel; construction of a new state-of-the-art cement processing plant in Ste. Genevieve, Missouri; and access to the Mississippi River over government owned land for the full 20 year period utilized in the discounted cash flow analysis. Each of the elements are potential risk factors which any prudent buyer of the Clarksville facility would take into account in a purchase of the plant and its supporting land. None of these risks were recognized or accounted for in the Dinan/Lehmann discounted cash flow analysis. Transcript 12/13/00, p. 237, Line 9 – p. 256, Line 19.

The only attempt to recognize these risk factors was supposedly by the utilization of the 17% discount rate for the discounted cash flow and the 15% capitalization rate for the reversion. Transcript 12/13/00, p. 264, Line 5 – p. 265, Line 9. However, the Dinan/Lehmann appraisal report did not address any of these risk factors in the discussion of the selection of the rates for cash flow or reversion. The appraisal report indicates consideration of the type of property and specialized management in the selection of the discount rate, however, there is no mention of the various other risk factors set out above.

Specifically, the appraisal report found no unusual degree of risk and no unusual environmental problems to be anticipated. Exhibit 1, pp. 78-79. Since no unusual degree of risk was recognized, the assertion that the 17% and 15% rates were to account for the risks set out above is inconsistent with the actual appraisal. Furthermore, under the band of investment estimation, the equity yield utilized was less than the rate of return on equity for three cement companies for 1999. Exhibit 1, p. 76. The 17% discount rate was only a point above the top of the range for full-service hotel discount rates for the first quarter of 1999. It is concluded that the rates employed did not sufficiently address and account for the risks which a prudent buyer would recognize in the purchase of the Clarksville real property in January, 1999.

The failure to recognize or account for these risk factors in the discounted cash flow analysis presents a serious flaw in the analysis. Furthermore, to simply assume an approximate 100% average production over a twenty year period, (Exhibit A, p. 72; Transcript 12/13/00, p. 267, Lines 9-21) with a constant growth in the income stream of 3% and no major capital expenditures, is not warranted or supported by the evidence in this record. The risk factors weigh heavily against the basic assumptions made in the Dinan/Lehmann analysis, so as to seriously detract from the probative value which the discounted cash flow analysis might otherwise have.

Failure to Utilize Complainant’s Actual Income Data

The Dinan/Lehmann discounted cash flow method is based on production data furnished by Complainant. The production for each of the years 1994 through 1999 was utilized to arrive at a calculated value for Portland cement sold for each year. Respondent’s Exhibit 11 provides the Clarksville Plant income and expenses for the years, 1994 – 1999 and part of 2000. However, Mr. Dinan did not rely upon the actual income figures for the years 1994 – 1999 in Exhibit 11 in performing the discounted cash flow calculations. Transcript 12/13/00, p. 222, Line 12 – p. 224, Line 5. Instead a calculation was made based upon tonnes of cement shipped times a reported average Missouri price per metric ton based upon data from United States Government sources, to arrive at a total revenue figure, before expense deductions. Exhibit 1, Discounted Cash Flow Spreadsheet, Attached, p. 81.

An analysis of the Dinan/Lehmann Spreadsheet and Exhibit 11 as to the item of total revenue for the years 1994 – 1999 reveals that the Spreadsheet grossly overstates the total revenue (before deductions for expenses) applicable to the Clarksville plant. The revenue amounts calculated by the Spreadsheet are in excess of the actual revenue amounts by the following percentages:


Percentage Over Actual Revenue

1994       373.29%
1995       329.29%
1996       298.02%
1997       384.94%
1998       310.62%
1999       287.08%


Accordingly, the average revenue arrived at as a basis for the calculation of the discounted cash flows for the 20 year period was overstated, in comparison to the actual average revenue before deductions for expenses, by 327.16%. Had year 1999 not been used the percentage of overstatement of revenue would have been even greater. Furthermore, had the appraiser started by making income calculations at the end of 1998 (which he should have done for a January 1, 1999, valuation) instead of 1999 even his overstated income projection would have been about 25% less than what was actually used in the Spreadsheet.

This overstatement of actual revenue and the use of calculated 1999 revenue, instead of 1998 revenue, renders the entire discounted cash flow analysis as fatally flawed. No probative value can therefore be placed upon this analysis. The income approach fails to reach the level of substantial and persuasive evidence upon which a determination of value can be made in this case.

Failure to Recognize Actual Production Figures and Trends

The Dinan/Lehmann discounted cash flow analysis is based upon a critical, but flawed assumption. It is assumed that total stone production will remain stable at 2,203,896 metric tons (1,535,057 tons of limestone and 668,839 tons of shale). However, a review of the actual production figures for the period 1994 through 1999 reveals that only in 1994, 1995 and 1997 did total stone production exceed 2.2 million tons.

The 2.2 million tons utilized ignores the fact that total annual stone production dropped from 2,340,349 in 1994 to only 2,111,339 in 1999. This calculates to a decrease of 229,010 tons or a percentage decrease in that six year period of 9.79% or a 1.64% decrease per year. If the actual decreases and increases over the six year period are considered, the following percentages are revealed: 1994-95 – -7.17%; 1995-96 – -9.70%; 1996-97 – +18.37%; 1997-98 – – 7.66%; 1998-99 – -3.06%. This produces an overall net decrease of 9.22% or an average decrease of 1.84%.

Based upon the recent history of the plant, an analysis based upon a sustained production level of stone, instead of recognizing a production level for stone which would decrease by an average between 1.6 and 1.8% per year, causes all the remaining income and expense calculations to result in significant errors as to what the actual cash flow from the Clarksville plant would be. The Dinan/Lehmann analysis is critically flawed in this respect, so as to also render its probative value of no benefit in this case.

Allocation of Business Enterprise Value

The Dinan/Lehmann valuation, after arriving at a value for the Clarksville operation, made a deduction for business enterprise value. Such a deduction, of course, has to be made when the value determined is essentially a value in use to Complainant. However, in making the business enterprise deduction there must be more than speculation and conjecture to support the value assigned to this element.

Respondent’s experts simply estimated that $10,000,000 of income was attributable to business enterprise value. The $10 million was capitalized at 20% to arrive at a $50 million business enterprise value. Exhibit 1, p. 85. The calculation is very basic and elementary. However, there was no analysis to support the $10 million income supposedly attributable to business enterprise value. It was an unsupported estimate pure and simple.

The various elements which would comprise the total business value of the Clarksville operation were not analyzed so as to determine how each would contribute to the going concern value. Respondent’s experts did no such analysis and were unable either in the appraisal report or in written or oral testimony to address the issues of value for such elements as the customer base, goodwill, patents, employees, management, buying power, licenses and permits, and industry reputation. Individually or collectively the value which these elements bring to the Clarksville operation was not analyzed to arrive at the deduction.

Essentially all that the Dinan/Lehmann appraisal does is conclude a value for 264 acres of land at $400,000, depreciated replacement cost of the plant at $124,400,000, value of personal property at $22,000,000 and value of mineral rights at $3,200,000. This totals to $150,000,000. The reconciled opinion for going concern value of the Clarksville plant was $200,000,000. Therefore, it is concluded that the additional $50,000,000 must be business value. However, if the value of land and mineral rights is less than $3.6 million and the value of personal property is less than $22,000,000 and the depreciated replacement cost of the real property improvements (plant) is less than $124,400,000, then the business enterprise value must be much greater than $50,000,000.

All of this results in a conclusion that the allocation of $50,000,000 for business enterprise value is not supported by substantial and persuasive evidence on the whole record. It is essentially an allocation based at best upon unsupported estimation and at worst upon nothing more than conjecture and surmise, therefore it has no probative value for purposes of this appeal.

Sales Comparison Approach

Both appraisals presented a sales comparison methodology. However, the two methods varied greatly, not only in the indicated value obtained, but the manner in which each approach was performed. The two approaches presented have been reviewed and analyzed as to the weight which can be afforded each.

Slack Approach

Mr. Slack performed a national survey of recent sales activity involving cement plants. However, all sales investigated involved the transfer of a business interest. He also reviewed and performed an analysis of a sales transaction for a Seattle area plant, quarry and terminals. The analysis provided an indicator of a value-in-use of the improvements. Exhibit A, Addendum G.

The strength of the Slack method is that the assets in each sale listing were physical plant assets without any business interest or business value which had to be extrapolated. Two of the listings were wet process plants like the subject. Furthermore, three of the listings were for plants which were of a very similar age to the subject. One of the listings was of a plant that was constructed new in the early 1990s, but never put into operation.

The fact that the comparable properties were listings rather than actual sales does not, in this particular case, render the data or the value concluded from such data as non-substantial or non-persuasive. The property being valued in these appeals consists of the subject land and the improvements to the land. The improvements being the various buildings and structures which comprise the Clarksville cement plant. The listings relied upon by Mr. Slack present clear indications of value of cement plant improvements, without having to account for and deduct various items of business interest and non-real property assets.

Mr. Slack made necessary adjustments to deduct for spare parts and machinery and equipment which are not part of the valuation problem in the present appeals. Adjustments were also made to account for the fact that two of the listed properties were dry process plants. The appraiser treated the listing price as not including any real estate value. An adjustment was made to add in a value for real estate to account for the other element which would comprise the total real property value for the Clarksville facility (land plus improvements). Mr. Slack also adjusted each listing to account for the Clarksville facility having a quarry on site.

The indicated price per ton of capacity for the plant improvements, not including the land and a quarry on site, for the four listings ranged from $1.89 to $3.58. This would calculate to a range of value for the physical plant only of $2,362,500 to $4,475,000. The two wet processing facilities had indicated plant values of $1.89 and $2.27 per ton of capacity, or $2,362,500 to $2,837,500.

The range of indicated values, after additions for on site quarry and land, was $4,137,500 to $6,462,500. The low end of the range was based on a wet processing facility like the subject with a smaller capacity than the subject. The high end of the range was based on a new dry process facility of the same capacity as the subject, rather than a 30+ year old wet process plant, like the subject. Exhibit A, pp. 24-33.

The indicated values provide evidence of the value of the physical plant alone (land and improvements), without business value or influence from remote support facilities, terminals or on site machinery and equipment. The listings presented provide the best basis upon which a valuation of the real property can be made on this record. The opinion of value determined by Complainant’s appraiser was founded upon substantial and persuasive evidence which was applicable to and reliable for this valuation problem.

Dinan Approach

The sales comparison approach developed by Mr. Dinan and Mr. Lehmann used actual sales of various cement producing facilities. The sales prices were adjusted to arrive at an weighted average of dollar per metric ton of grinding capacity. The sales relied upon were actual sales of going concerns and included various components of business value, remote terminals, machinery and equipment, etc., which are not part of the real property to be valued in the present appeals. Therefore, the indicated value derived under this method for valuation actually produced a value in use or business value, rather than a value in exchange for the real property alone. This detracts from both the substantial and persuasive value of the concluded opinion of value derived from this approach.

A review of the dollar per metric ton of grinding capacity sale price, unadjusted, reveals wide variances in sales prices. The inflation adjusted sales prices ranged from $27 to $304 per ton of grinding capacity. This is reflective of values other than the basic real property values for the actual production plant coming to play in the sales price which was received in each sale. In other words, each sale was affected by various items of business value as a going concern, which fall outside what the value of the real property alone may be. When addressing an appraisal problem such as the one presented in this case, such variances must be researched and accounted for in making necessary adjustments to arrived at an indicated value.

One transaction involved three plants with a grinding capacity of 2,687,000 metric tons. This sale was for $101 per ton of grinding capacity. Another transaction involving four plants with a grinding capacity of 2,673,000 metric tons, nearly identical capacity as the first transaction, has a per ton of grinding capacity sale price of on $27. This nearly 75% variance in inflation adjusted sale price for two plants with almost identical grinding capacity demonstrates that various factors impacting on value outside of the actual physical plant (land and improvements) are present in going concern sales.

The three sales with grinding capacity closest to the subject produced indicate values of $79, $29 and $84 per ton of grinding capacity. When each of these values are applied to the grinding capacity of the subject facility the indicated values, for the business going concern, would be: $98,750,000, $36,250,000 and $105,000,000. Each of these values are far below what the Dinan/Lehmann opinion of value for only the land, mineral rights and improvements was in their appraisal ($150,000,000).

In point of fact, if the deductions for machinery and equipment and business enterprise value made by Mr. Dinan were applied to the above indicated values, the indicated values for the subject real property would be only $26,750,000, -$35,750,000 and $33,000,000. Such results bring into serious question, what if any weight can be given to a valuation for real property which has as its basis a calculation of going concern or business enterprise value.

The sales comparison approach put forth in the Dinan/Lehmann appraisal lacks persuasive and probative value in this case. The sales comparison analysis utilized sales of businesses, as opposed to real property with cement plant improvements. The business sales used made no adjustments for size, location, condition or physical age of the sold plants. Nor was there any extraction of business value from each sale. No adjustment was made which would have accounted for the machinery and equipment in the sales which cannot be considered as part of the real property valuation.

Values of remote terminals or other support facilities which may have been present in the sales transactions, but would not be a part of the subject facility in the present appeals were not researched, accounted for or addressed in any adjustment. The appraiser was not aware of any allocations between real property, personal property and business value which were made by the buyers and sellers in any of the sales utilized. No attempt was made to account for environmental issues which may impact the subject facility but which would not have influenced the sales prices for any of the properties used in the sales comparison analysis.

Issues In Valuation

The factors of land value, mineral rights value, raw materials, EPA regulations, costs for EPA compliance, waste fuel, Ste. Genevieve plant, facility improvements at other Holnam plants, contributory value of the dome and access to river shipping must also be given consideration in the present appeal. Each of these factors or issues relate to the final determination of value for the Complainant’s cement plant.

Land Value

Mr. Slack correctly viewed the appraisal problem as one involving a tract of land consisting of 3,710 acre of land. Mr. Dinan assumed that he was to only value a land area of 264 acres. The surrounding land which serves as a buffer to the 264 acres on which the Clarksville quarry and plant are situated would have to be included in any hypothetical sale. The fact that the parties had stipulated to a value for 3,446.16 acres does not mean than a valuation of the land contained in this acreage should not have been made for purposes of valuing the Clarksville facility. Each appraiser selected four sales for purposes of making land valuation.

Mr. Dinan settled on a per acre value for the 264 acre tract of $1,500. Mr. Slack valued the entire 3,710 acres at $375 per acre. Mr. Slack’s land sales were all within Pike County and all with sufficiently close proximity to the Clarksville site to serve as good comparables. Mr. Dinan’s land sales were located in St. Charles or Lincoln Counties. None were sufficiently close in proximity to the Clarksville site to serve as good comparables.

No land sales in excess of 1,000 acres in Pike, or a surrounding county, within 3 years of tax date (January 1, 1999) were presented by either appraiser. Mr. Slack’s land sales ranged from 80 to 445 acres. After adjusting for value of site improvements and making a time adjustment to each sale. The indicate per acre values for the four sales comparables fell in a range of $1,050 to $1,216. Mr. Slack adjusted for size by a minus 77% to the three comparables with acreage from 80 to 183 acres. The tract which contained 445 acres, he adjusted by a minus 66%. These adjustments were based on paired sales analysis and calculations set forth in his appraisal. Exhibit 1, pp. 21-22. After making the necessary size adjustments, a range of value of $2242 to $414 was established. Mr. Slack concluded on a per acre value for the 3,710 acres of $375 or $1,400,000 rounded. This amount was then utilized to account for land value in his sales comparison methodology.

Mr. Dinan presented land sales which ranged in size from 37 acres to 418 acres. Adjustments were made in three instances for location and in all instances for size. The adjustments ranged from 17% to 72% to account for differences in location and size. Counsel for Respondent in her Reply Brief, p. 3, calls Mr. Slack’s 66% to 77% adjustments unwarranted. However, her own expert relied upon an adjustment of 72% in his own land valuation. Mr. Slack’s application of his 66% and 77% adjustments for size are well warranted and supported by his analysis, research and calculations which are set forth in his appraisal. No such analysis, research and calculations were provided in the Dinan appraisal.

Counsel also argues that the stipulated value for the various parcels not at issue in this case of approximately $569.87 per acre. The Hearing Officer, based on the information in this record, is unable to confirm that in point of fact that the land values alone stipulated to averaged $569.87 per acre. Even assuming that to be the case, the stipulated value is not binding on either appraiser or on the Hearing Officer, nor can it be given any weight for or against either party in this case.

If the stipulation were to be given any weight then clearly Mr. Slack’s valuation is better supported by the stipulation than Mr. Dinan’s valuation, which is over two and a half times greater than the per acre stipulated value asserted by Respondent’s Counsel. Mr. Slack’s value is approximately 66% of the stipulated value. Furthermore, If the Hearing Officer were to apply the $570 per acre value as the land value for the contested parcels, then Mr. Dinan’s land value of $400,000 would have to be rejected for a valuation of only $150,480.

The Slack land value is well supported by the better land sales and substantial and persuasive analysis for the adjustments which were made to arrive at his final opinion of lane value.

Mineral Rights Value

Mr. Slack considered the mineral rights value for the limestone at the Clarksville facility to be included in his land sales analysis. Mr. Dinan relied upon the determination of mineral rights value calculated by Mr. Lehmann. The valuation made by Mr. Lehmann was an estimate based upon the royalty method. A three percent royalty was estimated on the value of the limestone and shale produced from the quarry. The limestone value was estimated at $5.00 per ton and the shale value was estimated at $2.50 per ton based on the average price of limestone received by quarry operators in the St. Louis market in 1999. The royalty rate was adjusted by an inflation rate and capitalized using a 10% discount rate. This resulted in an estimate of mineral rights value of $3,200,000. Exhibit 1, p. 82, Transcript 12/12/00, p. 98, Line 15 – p. 103, Line 17.

Applying the estimated mineral rights value to the 264 acres of land valued under the Dinan/Lehmann valuation calculates to approximately $12,120 per acre mineral rights value. Adding this to the base land value, determined by Mr. Dinan, one would expect to find land sales of tracts which adjoin the Clarksville site to be selling for an amount in excess of $13,600 per acre, to account for the value of the mineral rights (shale and limestone). However, no such land sales were shown. The calculated mineral rights value proposed by the Dinan/Lehmann appraisal does not find support in actual land sale transactions in Pike County. Nor was it established that when the subject site (3,710 acres) was purchased in the 1960’s for the purpose of establishing the limestone quarry and cement plant that any type of mineral rights premium was paid.

In point of fact, a purchase by Holnam in 1996 calculated to only $800 per acre for land which would be underlaid with limestone, as is most of the land in the area around the subject site. Two sales of a 25 and a 1.7 acre tracts for $1,000 per acre in 2000 along the northern boundary of the Clarksville property fail to establish any recognition of additional value for mineral rights.

The valuation of the mineral rights was essentially based upon Mr. Lehmann’s opinion that the shale and limestone at the subject quarry have additional value over and above the same minerals contained in adjoining property because Complainant was only quarrying certain land in the valley area. However, this supposition by Mr. Lehmann was rebutted by the testimony of Holnam’s chief geologist that the quarrying is not down in the valley, but on the edge of the valley and up in the hills area. Transcript 4/3/01, p. 125, Line 14 – p. 126, Line 14.

The addition of more than $12,000 per acre to account for the mineral value for the shale and limestone is not demonstrated and supported by market transactions either in Pike County or other counties within the region where limestone is quarried, either for cement production or other purposes. Therefore, no additional value for mineral rights can be established as part of the valuation of the 3,710 acres of Clarksville land, quarry and plant.

Raw Materials

Involved within the valuation in this case is an issue as to whether the raw materials being utilized at the Clarksville facility possess a level of hydrocarbons which result in certain emissions which would violate proposed EPA regulations. Respondent’s geologist was of the opinion that there was no hydrocarbon content in the raw materials which would result in emissions that would not be in compliance with EPA standards. He concurred that if the raw material could not be utilized for the making of cement because of emissions in violation of EPA regulations that the value of the raw materials would be impacted in a negative manner. Transcript 12/12/00, p. 125, Line 15 – p. 126, Line 15.

Mr. Lehmann’s opinion was based upon his review of information contained in a report from the Missouri Department of Natural Resources (Exhibit 31). However, the data in the DNR report came from samples taken from section 24, not section 18, where the subject quarry is located. The DNR samples relate to land which is approximately a mile distant from the Clarksville quarry. Transcript 12/12/00, p. 121, Line 8 – p. 124, Line 6. Furthermore, Mr. Lehmann opined that any hydrocarbons would come from the burning of waste fuel and not from the raw materials. However, no investigation was done by Mr. Lehmann as to kiln sampling that had been done by Holnam regarding the source of emissions. Nor was any consideration given to the hydrocarbon quality of the raw materials when the income analysis was performed. Transcript 12/12/00, p. 135, Line 11 – p. 137, Line 3.

Mr. Steinmeier, Holnam’s chief geologist, testified as to the sampling that had been conducted to address the matter of hydrocarbons in the raw material. His testimony refuted the opinion presented by Mr. Lehmann relative to the source of hydrocarbon emissions. The raw material problem relates to volatile organic carbons in the limestone and shale that creates hydrocarbon emissions from the kiln stack. Transcript 4/3/01, p. 114, Line 8 – p. 124, Line 11. This raw material problem is clearly a matter which a well-informed buyer of the Clarksville quarry and plant would have been aware through a due diligence investigation for a purchase in 1999. The hydrocarbon emissions resulting from the raw material would impact what a willing buyer would pay for the Clarksville facility. This is a factor which would have to be accounted for in both Respondent’s discounted cash flow analysis and the proposed value for the mineral rights by the Dinan/Lehmann appraisal. It was not done.

EPA Regulations

The proposed EPA regulations, Exhibit D & G, would have been known to any prospective buyer of the Clarksville plant in January 1, 1999. A due diligence investigation by a knowledgeable purchaser would have discovered that the proposed regulations could and most likely would impact upon the ability of the plant to continue at its past level of cement production. The evidence on this point is sufficient that Respondent’s experts should have given recognition to this potential risk in their income analysis.

It is not the burden of Complainant to demonstrate the exact financial impact from the imposition of the proposed rules, since Complainant’s expert was not basing his opinion on an income approach to value. It is sufficient that the regulations had been proposed and if enacted and enforced, there would be a negative economic impact on the Clarksville facility. Since Respondent’s experts were relying on the discounted cash flow analysis to arrive at a business value, the element of EPA regulations and the potential economic effect on the projected stream of income could not be ignored. Failure to address this issue and account for it is another fatal weakness in both the income and sales comparison approaches presented on behalf of Respondent.

Costs for EPA Compliance

A discerning purchaser would have investigated beyond the proposed rules to arrive at what the reasonable indicated costs for EPA compliance might total. The potential cost for EPA compliance to address the issue of dioxin furan emissions could run as high as $85 – $100 million. There could be other costs running from $500,000 to $10 million to address the matter of a landfill for cement kiln dust. Transcript 12/12/00, p. 78, Line 25 – p. 86, Line 20.

The potential compliance costs are another factor which would impact what a buyer would be willing to pay for the Clarksville real property in January, 1999. Neither one of these potential costs were considered in any manner under the Dinan/Lehmann valuation approaches. This failure to recognize the potential for significant costs due to required environmental compliance issues is another factor which presents a fatal flaw to the opinion of value determined by Respondent’s experts.

Waste Fuel

The financial viability of the Clarksville plant is greatly dependent upon its access to and utilization of hazardous waste fuel. Holnam is not a self-supplier of this commodity. A third party (Safety-Kleen) is the supplier of these fuels which Holnam burns to operate its wet process facility. Without this fuel source, the Clarksville facility might well become unable to continue its operation. Safety-Kleen is in bankruptcy. Although, as of January 1999, the supply of waste fuel had not been terminated or interrupted in any manner so as to have a negative impact on the Clarksville production, this is a factor of risk which a potential purchaser would certainly take into consideration. The exact extent to which the waste fuel issue would impact the sales price is difficult to quantify. However, it certainly is a factor which would have to be given some type of consideration under the discounted cash flow analysis proposed by Respondent’s experts. This issue was not addressed by the Dinan/Lehmann valuation. The Slack valuation, because it did not start with a business valuation analysis, but instead based the valuation on a value for the plant facility alone, did not have to address the waste fuel matter. However, Mr. Slack certainly recognized this factor when making his conclusion of value. Exhibit A, p. 32.

Ste. Genevieve Plant

A well informed purchaser of the Clarksville site and facility would have become aware that Holnam had under consideration the construction of a state-of-the-art facility with a capacity of nearly two and a half times larger than the Clarksville plant. A due diligence investigation would have learned that this proposed facility would be located 100 to 150 miles south of Clarksville on the Mississippi River. This is a factor which could not be ignored in any valuation analysis of the Clarksville facility. The acquisition of 2,600 acres in Ste. Genevieve County was announced in late January, 1999. However, information relative to this proposed acquisition and plant construction would have been discovered and considered by any prospective purchaser in late 1998.

Mr. Slack took into account this factor. Exhibit A, p. 32. Mr. Dinan and Mr. Lehmann did not. This weighs on the side of the Slack valuation and against the Dinan/Lehmann appraisal. This factor would impact the value of the Clarksville site, especially since Holnam will be developing and operating the new facility. The proposed facility greatly brings into question whether the assumptions under the discounted cash flow analysis performed by Respondent’s experts can be given any weight. The Clarksville plant’s operation for the next twenty years would have to be considered in light of the Ste. Genevieve plant coming on line at some point during those twenty years, possibly sooner, rather than later.

Facility Improvements At Other Holnam Plants

Another factor which a prudent buyer would consider in a purchase of the Clarksville plant is the fact that Holnam had, during the year to year and a half prior to January, 1999, undertaken various plant expansions and improvements to its other facilities in various locations in the United States. Exhibit 19. However, no such expansions or improvements had been made at the Clarksville facility. In light of possible EPA compliance issues, it is understandable that Holnam might not wish to invest further in the Clarksville wet processing dinosaur, but would rather complete new and expand existing dry processing plants and their support facilities in other locations.

Here again, the Slack valuation recognized this factor. Exhibit A, pp. 31-32. Respondent’s experts did not account for this factor in the discounted cash flow analysis, nor in their final conclusion of value.

Storage Dome

The storage dome at the Clarksville site was approximately 90% complete in January, 1999. Its total cost was approximately $11 million. This storage dome, like the Clarksville wet processing dinosaur, is the largest in the world. Holnam would no doubt hope to recover the cost of what it had expended on the construction of the dome in a January, 1999, sale. However, there is no evidence upon which a finding can be made that the market would support a $9 million sale price for the dome as part of the Clarksville plant. Holnam’s own internal analysis indicates the value in use to Holnam of the dome was only about $3.7 million.

The dome has a value to Holnam because it can be utilized to meet heavy customer demand in the summer months. The storage dome allows Holnam to produce more cement in the winter, to store it and then ship it during May to October, during the heavy construction period. Exhibit 23. Without Holnam’s customer base the dome would have little if any value to a prospective purchaser. It appears that the white elephant dome may only have in use value to the Holnam wet processing dinosaur, and Holnam’s ability to store cement produced at some of its other facilities, but no real value to another entity which would be purchasing only the Clarksville site, without purchasing Holnam in tack.

Mr. Slack did not attribute any additional value to the dome in his sales analysis. Neither did Mr. Dinan and Mr. Lehmann account for any additional value in either their income or sales comparison approaches. The existence of the dome certainly does not increase the grinding capacity of the plant. Nor does the dome increase the annual stone production at the quarry. There is no evidence to demonstrate that in point of fact the dome adds contributory value to what the Clarksville facility would bring in an open market sale. Accordingly, there is no foundation upon which the Hearing Officer can or should arbitrarily include any additional value for the dome.

Access for Shipping on the Mississippi River

The Clarksville facility currently benefits from a lease with the Corps of Engineers which provides access to shipping on the Mississippi River for the next seventeen years. Information and details as to possible termination of the lease prior to the seventeen year period, extensions of the lease, assignment of the lease, disposition of improvements on the Corps’ land if lease is terminated, and other elements which a prospective purchaser would have researched were not presented on the record. Ongoing negotiations between Complainant and the Corps are occurring. However, the results of such negotiations would be nothing more than speculation. The leased land, with the Complainant’s shipping improvements, is a factor which would impact upon the price a prospective buyer would pay for the Clarksville facility. Without more detailed information on the various elements cited above, it is nearly impossible to make a definitive monetary allocation to this potential element of risk. Even with adequate information, this is a risk factor for which is difficult to ascertain the monetary value. The risk of maintaining continued shipping access may be slight or great from an economic perspective, however, it is an element of risk that cannot be ignored. Without, direct access, either by means of land as a riverfront purchase or a perpetual easement, the Clarksville facility is negatively burdened as to its value.

Arguments From Briefs

The discussion heretofore presented has attempted to address all of the various issues argued and discussed by Counsel for the respective parties in their briefs. A more detailed point by point analysis could be grafted into this Decision. However, it would only result in additional pages of discussion, elaboration and detail, which have all ready been addressed above.

Counsel for Respondent did advance one argument that has not been addressed in the prior discussion. That argument asserts that transmissible value constitutes taxable real property. The argument essentially is that one buying the real estate necessarily gets the business. The foundation for this line of reasoning is proposed by Counsel to rest in the case of Public Service Company of New Hampshire v. New Hampton, 136 A.2d 591 (N.H. 1957).

A review of New Hampton fails to reveal that the concept of transmissible value (whatever that may actually be) is set forth or defined in the cited case. Furthermore, the case does not stand for the proposition that for purposes of Missouri ad valorem valuation that transmissible value is taxable. New Hampton provides no precedential value for this case. The assertion that the purchaser of real property gets the business simply cannot be concluded in the pending case.

A purchaser of the Clarksville real property would no doubt have the ability to quarry and produce cement. However, without the machinery and equipment, remote distribution terminals, a sales force, established customers and other elements existing because Holnam owns and operates the Clarksville facility the purchaser would not necessarily be in a position to market the product in the same volume as Holnam. In short, it would be operating a cement production facility, but not the Holnam-Clarksville plant. If, in point of fact, Holnam was able to meet the demands of its customers from other sources, under its existing contracts, a purchaser of the Clarksville real property, might be faced with operating only a limestone gravel quarry and not a cement production facility.

Respondent’s transmissible value argument is neither persuasive, nor applicable in the present case.


It is important in arriving at the value for the subject property to keep the actual valuation issue in focus. The valuation of the going concern or in use value of the Clarksville facility is not at issue before the Commission. The issue is the value of the Clarksville real property, the 3,710 acres of land and the improvements on the land which make up the Clarksville cement plant. The valuation of 3,446 acres, with their improvements were stipulated to by the parties, however, for purposes of valuing the Clarksville plant, a sale of the 3,710 acres, improved by the plant is to be assumed in order to apply the fair market value standard. The stipulated values for the various tracts which comprise the 3,446 acres, which buffer the Clarksville quarry and plant, some with and some without improvements, some used as residential land, some used as agricultural land, is not determinative for purposes of valuing the property under appeal in this case.

The valuation exercise in this decision must assume a 3,710 acre tract of land, with a quarry, which would only be improved by the cement plant, consisting of the various plant buildings with support improvements and the loading and shipping facilities on the leased land. In making such a valuation, the cost approach provides a benchmark for the reconstructed cost new of the improvements. That benchmark, with corrections to both appraisals for the replacement cost of a dry process kiln, instead of the wet process kiln, was established to be at approximately $40,000,000. This figure is, without any deductions to account for depreciation and with the addition of land, including mineral rights, the most that the Clarksville plant can be worth.

Assuming for the sake of discussion only, that no depreciation would even be applied and further assuming for the sake of discussion only, that the land value, including mineral rights, would be as proposed by the Dinan/Lehmann appraisal, the total value for a newly constructed facility on the 3,710 acres would be less than $50,000,000. ($40,000,000 – improvements value; $8,765,000 land, including mineral rights value) This is assigning a $1,500 per acre land value to the entire 3,710 acres. In other words, under the principle of substitution, no knowledgeable buyer would pay more than $50,000,000 for a new cement plant on the 3,710 acres at Clarksville. Therefore, any proposed value in excess of this amount cannot be supported on this record.

The simplest, most direct methodology for valuing the subject plant (facility improvements) is found in the sales comparison approach presented and developed by Mr. Slack. The use of actual sales listings of cement plants (not cement businesses) is especially appropriate in this case. The cement plant listings completely avoid suppositions, conjectures, and speculation in attempting to develop a going concern value from which various deductions would have to be made to arrive at the basic real property value. In valuing the subject real property, the avoidance of extraneous and irrelevant values intrinsic to valuing an income stream or a going concern as was done in the Dinan/Lehmann income and sales comparison analysis is important, if not critical.

There are simply too many variables, which cannot be developed and supported from the market, related to starting from a going concern/in use valuation methodology. This is the critical and fatal flaw in the opinion of value presented on behalf of the Respondent. It was simply not necessary to start by seeking to arrive at a value in use to Holnam for the Clarksville plant. The business at Clarksville was not and is not what is being valued in this appeal. Real property, simple land and improvements, is what must be valued.

The best starting point in such an exercise is to determine a land value based upon the best available sales data of tracts as close in size to the 3,710 acres and as close in location as is possible. In a perfect appraisal world, there would have been three or four sales of tracts of 2,500 or more acres, in close proximity to the Clarksville site, or at least located in similar counties which were underlaid with limestone. There is not generally, and was not in this instance that perfect appraisal world. Therefore, valuation of the best land sales, although smaller than the 3,710 acres, and adjusted to account for the fact that larger tracts of land will generally sell for less per acre than smaller tracts of land, were required to be made. Complainant’s appraiser presented the most persuasive evidence on the issue of raw land value.

Once the land value was determined, the value which could reasonable be attributable to the various improvements was to be determined. The replacement cost new, less depreciation extrapolated from the market, provides both a benchmark and check for sales data. The only data relating to sales, not of businesses (going concerns/in use) but of the plant facility alone, was the evidence of sale listings presented on behalf of the Complainant. Here again, in a perfect appraisal environment, there would have been access to three or four sales of only plants, without additional property or business value. However, such data was not presented. The sales data offered by Respondent’s experts all related to the value of business, without data upon which an allocation to only the physical plant and land could be made.

Taking into consideration all of the relevant factors which would impact upon the value of the subject real property and its improvements, the valuation presented by Complainant’s expert met the standard of substantial and persuasive to establish the value for the land and physical improvements constituting the Clarksville cement plant.


The assessed valuations for the subject properties as determined by the Assessor and sustained by the Board of Equalization for Pike County for the subject tax day are SET ASIDE.

The assessed value for the subject property in appeal 99-78504 (Parcel 11371) for tax years 1999 and 2000 is set at $273,040.

The assessed value for the subject property in appeal 99-78505 (Parcel 11374) for tax years 1999 and 2000 is set at $638,870.

The assessed value for the subject property in appeal 99-78506 (Parcel 11372) for tax years 1999 and 2000 is set at $114,040.

The assessed value for the subject property in appeal 99-78507 (Parcel 11376) for tax years 1999 and 2000 is set at $510.

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. Failure to state specific facts or law upon which the appeal is based will result in summary denial. Section 138.432, RSMo 1994.

If an application for review of this decision is made to the Commission, any protested taxes presently in an escrow account in accordance with these appeals shall be held pending the final decision of the Commission. 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 Pike 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 these appeals. 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 April 4, 2002.


W. B. Tichenor

Chief Hearing Officer