State Tax Commission of Missouri
|J.B. WRIGHT MEMORIAL HOSPITAL, )|
|v. ) Appeal No. 12-58501|
|KATHY VEATCH, ASSESSOR )|
|GRUNDY COUNTY, MISSOURI, )|
DECISION AND ORDER
Decision of the Grundy County Board of Equalization sustaining the assessment made by the Assessor is SET ASIDE. Complainant presented substantial and persuasive evidence to rebut the presumption of correct assessment by the Board of Equalization.
True value in money for the subject property for tax year 2012 is set at $1,160,000, commercial assessed value of $371,200
Complainant represented by Counsel, Richard Dvorak.
Respondent represented by Counsel, Cristine Stallings and Patricia Hughes.
Case decided by Hearing Officer Maureen Monaghan.
Complainant appealed, on the grounds of overvaluation and exemption, the decision of the Grundy County Board of Equalization, which sustained the Assessor’s valuation of the Complainant’s property. Complainant has abandoned the ground of exemption. The Commission takes this appeal to determine the market value for the subject property on January 1, 2011. The Hearing Officer, having considered all of the competent evidence upon the whole record, enters the following Decision and Order.
Complainant submitted the following exhibits:
- Appraisal Report by Shaner Appraisals, Inc.;
- The Ground Lease;
- Testimony of Bernie Shaner;
- Testimony of TJ Hawks;
- Testimony of Gary Jordan;
- Addition to Exhibit A;
- Addition to Exhibit A;
- Additional to Exhibit A; and
- Assessor’s Work File
Complainant withdrew Exhibits D and F. Exhibits A – C and E were filed pursuant to the Scheduling Order. Respondent objected to Exhibit A stating that the Respondent requested materials in the work file that were not provided. Objection was overruled as the time for objections to exhibits had passed, Respondent had not filed a Motion to Compel on any issues of discovery, and the issue was at the hearing. Respondent’s objection to Exhibit A ran with the hearing. Exhibits G –J were offered during the course of the hearing; Respondent had no objections. Exhibits A-C, E and G-J were admitted into evidence.
Complainant submitted an appraisal on the subject property. The appraisal was prepared by TJ Hawks, MAI, a State Certified General Appraiser. The appraiser developed the cost and the income approach. The subject property cost approximately $3,530,024 to build. The appraiser, using Marshall Valuation Service determined an approximate cost new of $3,084,493. The appraiser then reviewed depreciation. No adjustment was made for curable physical deterioration or functional obsolescence. The appraiser used the age life method to determine incurable physical deterioration of $68,544. The appraiser continued with a break down method to determine the external obsolescence. It was the appraiser’s opinion, after reviewing the market, that the market rental rates in the area were inadequate to support the cost of the construction of the medical building. He estimated the external obsolescence by capitalizing the income loss. The appraiser determined a net operating income of $371,866 would be required to make such new construction feasible. The subject property’s net operating income is $131,707, making an income loss of $240,159. The appraiser applied an overall capitalization rate of 11.32% for an estimate of external obsolescence of $2,121,547. Applying the external obsolescence resulted in a valuation indication by the cost approach of $1,160,000.
The appraiser also developed the income approach. The appraiser reviewed the subject’s rent. The appraiser concluded that the actual rents were not appropriate to use in the income approach as the rate and terms were more reflective of financing of the construction and not actual market rental rates. The appraiser reviewed other medical office buildings in the market to conclude a market rent of $20 per square foot or $256,000. The property is occupied by St. Luke’s. The office was constructed to support twelve providers on a full-time basis. Currently three physicians and three nurse practitioners operate full-time out of the space. There are additional providers using the facility on a part time basis. There are two procedure rooms. Only one is being utilized for medical purposes, the other space is being used for storage. There are also exam rooms that are being used as storage. The appraiser determined that there is a 67.75% utilization of the building. Referring to the actual use of the building, he concluded the vacancy and collection would be 30% or $6 per square foot ($76,800). The appraiser then determined expenses of $47,493 or $3.71 per square foot; his basis was on published expense data on the Kansas City Market. The resulting net operating income is $131,707. The appraiser then looked to the market for a capitalization rate and concluded on 9% rate and loaded it with an effective tax rate of 2.32% for an overall rate of 11.32% reaching an estimated value of $1,160,000.
Respondent submitted the following exhibits:
- Assessor’s Property Record Card and Appraisal;
- Deed dated July 16, 2009;
- Ground lease;
- Occupancy Permit showing Trenton MOB LLC as Owner;
- Application and Certification for Payment showing Trenton MOB as owner;
- Trenton MOB LLC Articles of Incorporation;
- Excerpts from Wright Memorial Hospital web site;
- Discovery question and answer;
- Trenton Area and KC area free clinic web site excerpts;
- For-profit hospital web site excerpts; and
- Salaries and bonuses in 2010 and 2011 as report in Schedule J, Form 990 for St. Luke’s of Trenton.
- Written Direct Testimony of Don Stotts
Substitute Exhibit 13: Written Direct Testimony of Kathy Veatch
14. Discovery Motions
Exhibits 1-12 and the original 13 were filed in advance of the hearing pursuant to the scheduling order. At the hearing, Respondent moved to file a substitute Exhibit 13. Exhibit 13 is the written direct testimony of the assessor. Don Stotts was the Assessor when the appeal was filed.
Kathy Veatch subsequently took office. Complainant objected to the exhibit being filed on the day of hearing. Complainant acknowledged receiving the documents prior to the hearing but argued that it was part of settlement negotiations and he was not aware that the exhibit would be offered. The objection was overruled. The objection ran with the hearing. Substitute Exhibit 13 included testimony that the Respondent was withdrawing Exhibits 8 – 12. Exhibits 1-7 and Substitute Exhibit 13 were admitted into evidence. Exhibit 14 was presented during the testimony of TJ Hawks. There was not a motion for Exhibit 14 to be admitted into evidence. Exhibit 14 is a motion filed with the State Tax Commission and is part of the file.
The assessor used the cost approach. Cost new is $3,011, 290. The assessor concluded there was no depreciation as the building is new.
FINDINGS OF FACT
- Jurisdiction. Jurisdiction over this appeal is proper. Complainant timely appealed to the State Tax Commission from the decision of the Grundy County Board of Equalization. Complainant appeals on the ground of overvaluation.
- Identification of Subject Property. The Complaint for Review of Assessment identifies the subject property as being located at 191 Iowa Blvd, Trenton, Missouri. The Complaint gives the locator number for the property to be 11-05-22-02-00-502.
- Description of Subject Property. The property is a single story medical office building that is part of the J.B.Wright Memorial Hospital in Trenton, Missouri. The building was constructed in 2011 of brick and steel framing at a cost of $3,527,910. The building contains 12,800 ft square feet of gross building area. The improvements include a 1,020 sq ft. canopy, 368 ft. sq portico and parking. The site, 26.6 acres, for the hospital, subject property and parking is owned by Citizens Bank & Trust and leased to Trenton MOB, LLC. The lease for the land for the subject property was effective April 10, 2010 and it has a 50 year term with a rent rate of $1.00 annually.
- Assessment. The Assessor determined the true value of the property to be $3,011,290, an assessed commercial value of $963,610. The Board of Equalization sustained the value.
- Presumption of Correct Assessment Rebutted. Complainant’s evidence was substantial and persuasive to rebut the presumption of correct assessment by the Board and establish that the market value of the property.
- Market Value of the Property The market value of the property as it existed on January 1, 2012 as if it was completed on January 1, 2011 is $1,160,000.
CONCLUSIONS OF LAW AND DECISION
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.
Presumption In Appeal
There is a presumption of validity, good faith and correctness of assessment by the County Board of Equalization. This presumption is a rebuttable rather than a conclusive presumption. It places the burden of going forward with some substantial evidence on the taxpayer – Complainant. Substantial evidence can be defined as such relevant evidence as a reasonable mind might accept as adequate to support a conclusion. Persuasive evidence is that evidence which has sufficient weight and probative value to convince the trier of fact. The persuasiveness of evidence does not depend on the quantity or amount thereof but on its effect in inducing belief.
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. True value in money is defined in terms of value in exchange and not value in use. It is the fair market value of the subject property on the valuation date. 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.
Mr. Hawks conducted his appraisal of the property under appeal consistent with this standard.
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. 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.The Hearing Officer is persuaded that the valuation presented in the appraisal is based upon appropriate and sound appraisal practice and therefore constitutes substantial and persuasive evidence to establish the value.
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. 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. Mr. Hawks appraised the property developing both the cost and income approaches to value. The methodologies utilized were appropriate for the appraisal problem presented in the present appeal.
Complainant Proves Value
In order to prevail, Complainant must present an opinion of market value and substantial and persuasive evidence that the proposed value is indicative of the market value of the subject property on January 1, 2011. 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.” A valuation which does not reflect the fair market value (true value in money) of the property under appeal is an unlawful, unfair and improper assessment.
The Complainant’s appraisal evidence meets the required evidentiary standard to rebut the presumption of correct assessment by the Board and to establish the true value in money as of January 1, 2011 of the subject property. Therefore, Complainant has establish a fair market value for the property under appeal and the assessment of same must be made based on that value.
Respondent Moves to Reopen the Hearing
Respondent, in her brief after the hearing, moved to reopen the hearing if the Hearing Officer did not affirm the Respondent’s value to provide the Respondent an opportunity to present additional evidence. In other words, the Respondent is requesting a contingent “second bite of the apple.” The Complaint for Review of Assessment was filed August 23, 2012. The hearing was conducted February 19, 2014. The parties were provided with ample time to prepare any evidence to establish true value of the property. The Respondent did not make the request in a timely manner and did not meet the strict requirements of such a request. The Respondent stated that she wanted to present sales of medical buildings but she is not presenting an appraisal of the property. Presentation of sales without an analysis by an appraiser does not establish market value of the property and does not establish that the evidence will substantially affect the merits of the case. In addition, the protested taxes remain in escrow, not available to taxing districts or the Complainant, until such time as the matter is disposed.
The assessed valuation for the subject property as determined by the Assessor and sustained by the Board of Equalization for Grundy County for the subject tax day is SET ASIDE.
The assessed value for the subject property for tax year 2012 at: $371,200.
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 application for review is based will result in summary denial. 
The Collector of Grundy 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 this 10th day of July, 2014 .
STATE TAX COMMISSION OF MISSOURI
Certificate of Service
I hereby certify that a copy of the foregoing has been mailed postage prepaid on this 10th day of July, 2014, to: Richard Dvorak 7111 W. 98th Terr., Suite 140 Overland Park, KS 66212, Attorney for Complainant; Patricia Hughes, 17 W. Kansas, Liberty, MO 64068, Attorney for Respondent; Cristine Stallings, Prosecuting Attorney, 115 E. 8th Street, Trenton, MO 64683, Attorney for Respondent; Kathy Veatch, Assessor; Betty Spickard, Clerk; Colleen Williams, Treasurer and ex officio Collector, Grundy County Courthouse, Trenton, MO 65683.
Contact Information for State Tax Commission:
Missouri State Tax Commission
301 W. High Street, Room 840
P.O. Box 146
Jefferson City, MO 65102-0146
 The value as of 1/1 of the odd year remains the value as of 1/1/ of the even year unless there is new construction and improvement to the propert which shall be valued as though they had been completed as of January first of the preceding odd-numbered year. Section 137.115.1 RSMo.
 Article X, Section 14, Mo. Const. of 1945; Sections 138.430, 138.431, 138.431.4, RSMo.
 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)
 See, Cupples-Hesse, supra.
 Brooks v. General Motors Assembly Division, 527 S.W.2d 50, 53 (Mo. App. 1975).
 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).
 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).
 Hermel, supra.
 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.
 Grundy County v. Security Bonhomme, Inc., 558 S.W.2d 655, 659 (Mo. banc 1977); Grundy 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).
 Grundy 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).
 See, Nance v. STC, 18 S.W.3d 611, at 615 (Mo. App. W.D. 2000); Hermel, supra; Xerox Corp. v. STC, 529 S.W.2d 413 (Mo. banc 1975).
 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).
 Hermel, supra.
 See, Westwood Partnership v. Gogarty, 103 S.W.3d 152 (Mo. App. E.D. 2003); Daly v. P. D. George Co., 77 S.W.3d 645 (Mo. App. E.D. 2002); Reeves v. Snider, 115 S.W.3d 375 (Mo. App. S.D. 2003). Industrial Development Authority of Kansas City v. State Tax Commission of Missouri, 804 S.W.2d 387, 392 (Mo. App. 1991).
 Section 138.432, RSMo.