State Tax Commission of Missouri
| INLAND WESTERN KANSAS CITY, | ) | |
| ) | ||
| Complainants, | ) | |
| ) | ||
| v. | ) | Appeal Number 13-79044 |
| ) | ||
| DAVID COX, ASSESSOR, | ) | |
| PLATTE COUNTY, MISSOURI, | ) | |
| ) | ||
| Respondent. | ) |
ORDER AFFIRMING HEARING OFFICER DECISION
On February 2, 2015, Hearing Officer Maureen Monaghan issued her order affirming the value placed upon the subject property by the Platte County Board of Equalization, and finding the correct market value for the property on January 1, 2013, was $12,750,000. Complainant appealed.
Standard Upon Review
A party subject to a Decision and Order of a Hearing Officer with the State Tax Commission may file an application requesting the case be reviewed by the Commission. The Commission may then summarily allow or deny their request. The Commission may affirm, modify, reverse or set aside the decision. The Commission may take any additional evidence and conduct further hearings.
Issue
Complainant appealed alleging that its opinion of value of $11,800,000 was better supported than Respondent’s opinion of value of $16,150,000, presented at hearing.
DISCUSSION AND RULING
A close reading of the Hearing Officer’s decision reveals that she rejected both Complainant’s opinion of $11,800,000 and Respondent’s opinion of $16,150,000. The Hearing Officer pointed out that Complainant used below market rent and that the parties were reporting tenant reimbursements and expenses differently. She stated: “ . . .At times, the information presented conflicted and contradicted. The Hearing Officer is left speculating as to where the truth lies . . .” In short, the parties failed to persuade the Hearing Officer. Consequently, she affirmed the decision of the Board of Equalization. The Hearing Officer as the trier of fact may consider the testimony of an expert witness and give it as much weight and credit as she may deem it entitled to when viewed in connection with all other circumstances. The Hearing Officer is not bound by the opinions of experts who testify on the issue of reasonable value, but may believe all or none of the expert’s testimony and accept it in part or reject it in part. St. Louis County v. Boatmen’s Trust Co., 857 S.W.2d 453, 457 (Mo. App. E.D. 1993).
Complainant, as the moving party, has the burden to (1) demonstrate that the Board’s value is incorrect and, then, (2) present substantial and persuasive evidence of the correct value. The Hearing Officer found that Complainant failed to persuade her that the Board’s value was incorrect. Complainant has failed to demonstrate that the Hearing Officer’s decision was arbitrary, capricious or an abuse of discretion. Further discussion of the relative merits of two unpersuasive appraisal reports accomplishes nothing.
ORDER
The Decision and Order of the Hearing Officer, including the findings of fact and conclusions of law therein, is AFFIRMED and incorporated by reference, as if set out in full, in this final decision of the Commission.
Judicial review of this Order may be had in the manner provided in Sections 138.432 and 536.100 to 536.140, RSMo within thirty days of the mailing date set forth in the Certificate of Service for this Order.
If judicial review of this decision is made, any protested taxes presently in an escrow account in accordance with this appeal shall be held pending the final decision of the courts unless disbursed pursuant to Section 139.031.8, RSMo.
If no judicial review is made within thirty days, this decision and order is deemed final and the Collector of Platte County, as well as the collectors of all affected political subdivisions therein, shall disburse the protested taxes presently in an escrow account in accord with the decision on the underlying assessment in this appeal.
SO ORDERED this 25th day of August, 2015.
STATE TAX COMMISSION
Bruce E. Davis, Chairman
Randy Holman, Commissioner
Victor Callahan, Commissioner
Certificate of Service
I hereby certify that a copy of the foregoing has been sent electronically or mailed postage prepaid this 25th day of August, 2015, to: Richard Dvorak, 7111 West 98th Terrace, Suite 140, Overland Park, KS 66212, Attorney for Complainant; John Shank, 9800 N.W. Polo, Suite 100, Kansas City, MO 64153, Attorney for Respondent; David Cox, Assessor; 415 Third Street, P.O. Box 20, Platte City, MO 64079; Joan Harms, Clerk, 415 Third, P.O. Box 30, Platte City, MO 64079; Sheila Palmer, Collector; 409 Third, P.O. Box 40, Platte City, MO 64079.
Jacklyn Wood
Legal Coordinator
State Tax Commission of Missouri
| INLAND WESTERN KANSAS CITY LLC, | ) | |
| ) | ||
| Complainant, | ) | |
| ) | ||
| v. | ) | Appeal Number 13-79044 |
| ) | ||
| DAVID COX, ASSESSOR, | ) | |
| PLATTE COUNTY, MISSOURI, | ) | |
| ) | ||
| Respondent. | ) |
DECISION AND ORDER
HOLDING
Decision of the Platte County Board of Equalization sustaining the assessment made by the Assessor is AFFIRMED. True value in money for the subject property for tax years 2013-2014 is set at $12,750,000 assessed commercial value of $4,080,000. Complainant appeared by Counsel Richard Dvorak, Overland Park, Kansas. Respondent appeared by John R. Shank, Platte City, Missouri. Evidentiary hearing was conducted by Hearing Officer Maureen Monaghan. Case decided by Hearing Officer Monaghan.
ISSUE
Complainant appeals, on the ground of overvaluation, the decision of the Platte County Board of Equalization. The Commission takes this appeal to determine the true value in money for the subject property on January 1, 2013. The Hearing Officer, having considered all of the competent evidence upon the whole record, enters the following Decision and Order.
FINDINGS OF FACT
- Jurisdiction. Jurisdiction over this appeal is proper. Complainant timely appealed to the State Tax Commission from the decision of the Platte County Board of Equalization. A hearing was conducted on January 7, 2015, at the Platte County Administration Building, Platte City, Missouri.
- Assessment. The Assessor appraised the property at $12,750,000, assessed commercial value of $4,080,000. The Board sustained the value.
- Subject Property. The subject property is located at 8600-8658 Boardwalk, Kansas City, Missouri. The property is identified by locator number 19-3.0-07-200-000-001-006. The site is approximately 11.15 acres improved with a multi- retail tenant structure with approximately 115,197 square feet of net rentable area or 122,916 gross building area. The improvement was built in 2004 and includes parking, signage, landscaping and lighting.
- Complainant’s Evidence. Complainant submitted the following exhibits which were received into evidence:
| EXHIBIT | DESCRIPTION |
| A | Appraisal Report |
| B | WDT Troy Smith |
| C | Tax Bill 2013 |
- Respondent’s Evidence. Respondent submitted the following exhibits which were received into evidence:
| EXHIBIT | DESCRIPTION |
| 1 | Appraisal Report |
| 2 | WDT Brian McHenry |
CONCLUSIONS OF LAW AND DECISION
Jurisdiction
The Commission has jurisdiction to hear this appeal and correct any assessment which is shown to be unlawful, unfair, arbitrary or capricious. The Hearing Officer shall issue a decision and order affirming, modifying or reversing the determination of the board of equalization, and correcting any assessment which is unlawful, unfair, improper, arbitrary, or capricious. Article X, section 14, Mo. Const. of 1945; Sections 138.430, 138.431, 138.431.4, RSMo.
Presumption in Appeals
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) The presumption of correct assessment is rebutted when the taxpayer presents substantial and persuasive evidence to establish that the Board’s valuation is erroneous and what the fair market value should have been placed on the property. Hermel, supra; Cupples-Hesse Corporation v. State Tax Commission, 329 S.W.2d 696, 702 (Mo. 1959)
Standard for Valuation
Section 137.115, RSMo, requires that property be assessed based upon its true value in money which is defined as the price a property would bring when offered for sale by one willing or desirous to sell and bought by one who is willing or desirous to purchase but who is not compelled to do so. 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).
True value in money is defined in terms of value in exchange and not value in use. Daly v. P. D. George Company, et al, 77 S.W.3d 645, 649 (Mo. App E.D. 2002), citing, Equitable Life Assurance Society v. STC, 852 S.W.2d 376, 380 (Mo. App. 1993); citing, Stephen & Stephen Properties, Inc. v. STC, 499 S.W.2d 798, 801-803 (Mo. 1973). It is the fair market value of the subject property on the valuation date. Hermel, supra. Market value is the most probable price in terms of money which a property should bring in competitive and open market under all conditions requisite to a fair sale, the buyer and seller, each acting prudently, knowledgeable and assuming the price is not affected by undue stimulus.
Implicit in this definition are the consummation of a sale as of a specific date and the passing of title from seller to buyer under conditions whereby:
- Buyer and seller are typically motivated.
- Both parties are well informed and well advised, and both acting in what they consider their own best interests.
- A reasonable time is allowed for exposure in the open market.
- Payment is made in cash or its equivalent.
- Financing, if any, is on terms generally available in the Community at the specified date and typical for the property type in its locale.
- 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.
Methods of Valuation
Proper methods of valuation and assessment of property are delegated to the Commission. It is within the purview of the Hearing Officer to determine the method of valuation to be adopted in a given case. Nance v. STC, 18 S.W.3d 611, at 615 (Mo. App. W.D. 2000); Hermel, supra; Xerox Corp. v. STC, 529 S.W.2d 413 (Mo. banc 1975) Missouri courts have approved the comparable sales or market approach, the cost approach and the income approach as recognized methods of arriving at fair market value. St. Joe Minerals Corp. v. STC, 854 S.W.2d 526, 529 (App. E.D. 1993); Aspenhof Corp. v. STC, 789 S.W.2d 867, 869 (App. E.D. 1990); Quincy Soybean Company, Inc., v. Lowe, 773 S.W.2d 503, 504 (App. E.D. 1989), citing Del-Mar Redevelopment Corp v. Associated Garages, Inc., 726 S.W.2d 866, 869 (App. E.D. 1987); and State ex rel. State Highway Comm’n v. Southern Dev. Co., 509 S.W.2d 18, 27 (Mo. Div. 2 1974).
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, 2013. Hermel, supra There is no presumption that the taxpayer’s opinion is correct. The taxpayer in a Commission appeal still bears the burden of proof. The taxpayer is the moving party seeking affirmative relief. Therefore, the Complainant bears the burden of proving the vital elements of the case, i.e., the assessment was “unlawful, unfair, improper, arbitrary or capricious.” Westwood Partnership v. Gogarty, 103 S.W.3d 152 (Mo. App. E.D. 2003); Daly v. P. D. George Co., 77 S.W.3d 645 (Mo. App. E.D. 2002); Reeves v. Snider, 115 S.W.3d 375 (Mo. App. S.D. 2003); Industrial Development Authority of Kansas City v. State Tax Commission of Missouri, 804 S.W.2d 387, 392 (Mo. App. 1991)
Substantial evidence can be defined as such relevant evidence as a reasonable mind might accept as adequate to support a conclusion. Cupples-Hesse, supra. 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 Company v. STC, 436 S.W.2d 650 (Mo. 1968).
The Hearing Officer as the trier of fact may consider the testimony of an expert witness and give it as much weight and credit as 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).
Evidence
Both parties presented appraisal reports by certified general appraisers. The subject property is a multi-tenant retail building. The Complainant’s appraiser developed the income approach as a potential buyer would be interested in the property based upon the income generated; the Respondent’s appraiser developed the income and the sales comparison approach.
The sales comparison approach was developed by the Respondent’s appraiser. In his approach, the appraiser presented sales of four properties. The sales occurred from May 2010 to October 2012. Two sales occurred in 2010. In both of those sales, the seller was the foreclosing lender. The four comparables properties sold from $79.69 per square foot to $145.22 per square foot. After adjustments, the resulting sales prices ranged from $110.91 to $137.96 per square feet. The appraiser relied primarily on sales comparables 1 and 2 which were not the foreclosure sales. Those properties were half the size of the subject. Sale 2 was part of a 46 shopping center sale and a “sale price” was allocated to the comparable although the appraiser did not know who allocated the sales price or how it was allocated. The adjusted sales prices for Sales 1 and 2 were $127.47 and $137.96. The appraiser developed a market value for the subject property using the subject’s gross building area of 122,916 square feet. The appraiser was unsure if the sales prices reflected gross building area (GBA) or net rentable area (NRA). The appraiser used the subject’s GBA of 122,916 and applied it to a sale price of $130 per square foot; the resulting indication of value was $15,979,080. If the appraiser had used NRA, the resulting value would have been $14,975,610. Finally if the appraiser used the NRA with the range of adjusted sales prices ($110.91 to $137.96), the resulting range of value indicated is $12,776,499 to $15,892,578.
Given the range of value and lack of comparables, the sales comparable approach can only provide a cross check for another approach developed.
The Respondent’s and the Complainant’s appraisers developed the income approach. The income approach determines the value by estimating the present worth of what an owner will likely receive in the future as income from the property. The income approach is “based on an evaluation of what a willing buyer would pay to realize the income stream that could be obtained from the property when devoted to its highest and best use….” Equitable Life Assurance Society v. State Tax Commission, 852 SW2d 376, 380 (Mo. App. 1993) The approach is most appropriate in valuing investment type properties and is reliable when rental income, operating expenses and capitalization rates can reasonable be estimated from existing market conditions. The appraisers’ use of the income approach for the determination of true value of the subject property was appropriate.
The subject property was constructed in 2004. It is improved with 115,197 square feet of leasable retail space. As of January 1, 2013, 100,613 square feet was leased (or 87.3%) with lease rates ranging from $12.00 to $30.60 per square foot. A retail anchor tenant recently vacated 19,000 square feet but the space has been leased by a fitness center. Leases signed after January 2009 ranged from $12.00 to $23.46 per square foot.
To determine the potential gross income, both appraisers reviewed the subject’s leases as well as the market rates. The Complainant’s appraiser determined the market rate was $16/square foot and that a weighted average of $14.81 would be appropriate to account for the different sizes of spaces in the subject property. The appraiser used $15 per square foot in his income approach to develop a potential gross income. The Respondent’s appraiser also reviewed the market rates and compared them to the subject’s rates and found the actual rates to be at market. The appraiser used the actual rates and used $16 per square foot for the vacant space. The average per square foot rent used by the Respondent’s appraiser was $17.83. The appraisers range of gross income is $1,727,511 (Complainant) and $2,067,255 (Respondent). If all space was leased at the market rate of $16, the resulting income would be $1,843,152.
The appraisers then looked to other income such as reimbursement from tenants. The Complainant’s appraiser reported the subjects actual reimbursements from prior years ranged from $233,436 to $389,514 and Respondent’s appraiser reported the range of actual reimbursements to be $389,514 to $491,879.
The subject is currently 87% occupied, the submarket of neighborhood centers reports an vacancy rate of 15%. The Complainant’s appraiser estimated expenses of $610,316; the Respondent’s appraiser estimated expenses at $833,177 but such expenses included real estate taxes.
Both appraisers concluded on a cap rate of 9%. The mill levy for the property is 8.9066 resulting in an effective tax rate of 2.85% which should be adjusted due to the terms of lease requiring reimbursement. The resulting cap rate should reflect the risk, desired return and the effective tax rate.
Both appraisers engaged in extensive study of the property and the market in which it exists. The appraisers presented information regarding the subject property and the market. At times, the information presented conflicted and contradicted. The Hearing Officer is left speculating as to where the truth lies (the correct reimbursements and expenses). With the differences in the reimbursements, expenses and income, the range of valuation is from $11,800,000 to $16,150,000. Alone, either appraisal may have provided substantial and persuasive evidence to rebut the correct valuation of the Board of Equalization. Together, the appraisals do not provide guidance to the Hearing Officer as to a definitive true value of the property but provide general support as to the Board’s determination of true value of $12,750,000.
ORDER
The assessed valuation for the subject property as determined by the Assessor and sustained by the Board of Equalization for Platte County for the subject tax day is AFFIRMED. The assessed value for the subject property for tax years 2013-2014 is set at $4,080,000 classified as commercial property.
Application for Review
A party may file with the Commission an application for review of this decision within thirty days of the mailing date set forth in the Certificate of Service for this Decision. The application shall contain specific facts or law as grounds upon which it is claimed the decision is erroneous. Said application must be in writing addressed to the State Tax Commission of Missouri, P.O. Box 146, Jefferson City, MO 65102-0146, and a copy of said application must be sent to each person at the address listed below in the certificate of service.
Failure to state specific facts or law upon which the appeal is based will result in summary denial. Section 138.432, RSMo.
Disputed Taxes
The Collector of Platte County, as well as the collectors of all affected political subdivisions therein, shall continue to hold the disputed taxes pending the possible filing of an Application for Review, unless said taxes have been disbursed pursuant to a court order under the provisions of Section 139.031.8, RSMo.
Any Finding of Fact which is a Conclusion of Law or Decision shall be so deemed. Any Decision which is a Finding of Fact or Conclusion of Law shall be so deemed.
SO ORDERED February 2, 2015
STATE TAX COMMISSION OF MISSOURI
Maureen Monaghan
Hearing Officer
Certificate of Service
I hereby certify that a copy of the foregoing has been mailed postage prepaid on this 2nd day of February, 2015, to: Richard Dvorak, 7111 West 98th Terrace, Suite 140, Overland Park, KS 66212, Attorney for Complainant; John Shank, 9800 N.W. Polo, Suite 100, Kansas City, MO 64153, Attorney for Respondent; David Cox, Assessor; 415 Third Street, P.O. Box 20, Platte City, MO 64079; Joan Harms, Clerk, 415 Third, P.O. Box 30, Platte City, MO 64079; Sheila Palmer, Collector; 409 Third, P.O. Box 40, Platte City, MO 64079.
Jacklyn Wood
Legal Coordinator