Jack Hoke v. Kessinger (Greene)

State Tax Commission of Missouri

 

JACK HOKE,)

)

Complainant,)

)

v.)Appeal No.07-33009

)

RICK KESSINGER, ASSESSOR,)

GREENE COUNTY, MISSOURI,)

)

Respondent.)

 

ORDER

AFFIRMING HEARING OFFICER DECISION

UPON APPLICATION FOR REVIEW

 

On March 20, 2008, Hearing Officer Maureen Monaghan entered her Decision and Order (Decision) affirming the assessment by the Greene County Board of Equalization.

Complainant timely filed his Application for Review of the Decision.Respondent was given until and including May 22, 2008, to file his Response.No Response was filed.

CONCLUSIONS OF LAW

Standard Upon Review

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 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); 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).

The Commission will not lightly interfere with the Hearing Officer’s Decision and substitute its judgment on the credibility of witnesses and weight to be given the evidence for that of the Hearing Officer as the trier of fact.Black v. Lombardi, 970 S.W.2d 378 (Mo. App. E.D. 1998); Lowe v. Lombardi, 957 S.W.2d 808 (Mo. App. W.D. 1997); Forms World, Inc. v. Labor and Industrial Relations Com’n, 935 S.W.2d 680 (Mo. App. W.D. 1996); Evangelical Retirement Homes v. STC, 669 S.W.2d 548 (Mo. 1984); Pulitzer Pub. Co. v. Labor and Indus. Relations Commission, 596 S.W.2d 413 (Mo. 1980); St. Louis County v. STC, 562 S.W.2d 334 (Mo. 1978); St. Louis County v. STC, 406 S.W.2d 644 (Mo. 1966).

DECISION

A review of the record in the present appeal provides support for the determinations made by the Hearing Officer.There is competent and substantial evidence to establish a sufficient foundation for the Decision of the Hearing Officer.A reasonable mind could have conscientiously reached the same result based on a review of the entire record. The Commission finds no basis to support a determination that the Hearing Officer acted in an arbitrary or capricious manner or abused his discretion as the trier of fact and concluder of law in this appeal.Hermel, Inc. v. STC, 564 S.W.2d 888 (Mo. 1978); Black v. Lombardi, 970 S.W.2d 378 (Mo. App. E.D. 1998); Holt v. Clarke, 965 S.W.2d 241 (Mo. App. W.D. 1998); Smith v. Morton, 890 S.W.2d403 (Mo. App. E.D. 1995); Phelps v. Metropolitan St. Louis Sewer Dist., 598 S.W.2d 163 (Mo. App. E.D. 1980).

Complainant’s Application for Review was an arguing of the conclusions reached by the Hearing Officer.Complainant failed to set forth any legal basis to find the Hearing Officer had abused her discretion or acted in an arbitrary or capricious manner.Complainant’s argument focused on matters related to the sales comparison approach developed by Respondent’s appraiser.However, Respondent’s sales comparison approach was supported by both the cost and income approaches.

Further, 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 assessor’s or Board’s valuation is erroneous and what the fair market value should have been placed on the property.Snider v. Casino Aztar/Aztar Missouri Gaming Corp., 156 S.W.3d 341 (Mo. 2005). Citing to Hermel, supra; and Cupples Hesse Corp. v. State Tax Commission, 329 S.W.2d 696, 702 (Mo. 1959).

The Hearing Officer found the sales selected by Complainant’s appraiser needed extensive adjustments.She further determined the sale utilized in Complainant’s appraisal were not sufficiently comparable to rely on the sales comparison approach alone.A review of Complainant’s four sale properties supports the Hearing Officer conclusion.None of the four properties were suitable to be used in a sale comparison for the subject property.Complainant failed to meet his burden of proof, and therefore, cannot prevail.

The Hearing Officer did not err in her determinations as challenged by Complainant.

ORDER

The Commission upon review of the record and Decision in this appeal, finds no grounds upon which the Decision of the Hearing Officer should be reversed or modified.Accordingly, the Decision is affirmed.

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 date of the mailing of this Order.

The Collector of Greene County shall continue to hold the disputed taxes pending an Order from the Commission as to whether a Petition for Judicial Review of the Order has been filed.

SO ORDERED June 18, 2008.

STATE TAX COMMISSION OF MISSOURI

Bruce E. Davis, Chairman

Jennifer Tidwell, Commissioner

Charles Nordwald, Commissioner

 

 

DECISION AND ORDER

 

HOLDING

The decision of the Board of Equalization setting value at $85,700 commercial (assessed value $27,420) is AFFIRMED.Hearing Officer finds presumption of correct assessment not rebutted.

ISSUE

The issue in this case is the true market value of the residential real property on January 1, 2007.

SUMMARY

The subject property is a two-story Victorian style residence converted to a commercial building and a frame garage on a site consisting of three lots totaling 24,598 square feet.The Assessor valued the land and improvements at $85,700 commercial.The Board of Equalization sustained the valuations by the Assessor.Complainant appealed and proposed a value at the time of the appeal of $42,700.The evidentiary hearing was held on February 28, 2008, in the Historic Greene County Courthouse, Springfield, Missouri. Jack Hoke appeared in person.Assessor Rick Kessinger appeared in person and by counsel Ted Johnson.Evidence was heard and the case was taken under advisement.

EXHIBITS

Complainant offered the following evidence:

Exhibit A:Appraisal

Exhibit B:Photographs of the Comparable used by Assessor

Exhibit C:Photographs of the Comparable used by Assessor

Exhibit D:Photographs of the Comparable used by Assessor

Testimony of David Mathewson, Certified General Appraiser

All exhibits were admitted into evidence.

Respondent offered the following exhibits:

Exhibit 1:Appraisal for Subject Property.

Exhibit 2:Property Record Card for Subject Property.

Exhibit 3:Ariel Photograph of Subject Property

Testimony of Joe Durnall, Commercial Field Appraiser

All exhibits were admitted into evidence.

FINDINGS OF FACT

1.Jurisdiction is proper.Complainant timely filed his appeal from the decision of the Greene County Board of Equalization.

2.The subject property is identified as parcel number 13111301001, more commonly known as 1923 N. Broadway, Springfield, Missouri. The subject property is a site consisting of three lots with a total site size of 24,598 square feet.The site is improved with two buildings.The primary building is a two-story Victorian style residence constructed sometime in early 1900s and converted to a commercial property.The first floor has approximately 1,800 square feet, the second floor has approximately 1,335 square feet, the attic has 300 square feet and the basement is 300 square feet but has no finish.The improvement as has an enclosed porch of 196 square feet.Only the first or main floor of the improvement and the enclosed porch are usable. The remaining floors are in disrepair or are unfinished space.The improvement is currently used as commercial space.A relative of the Complainant is the tenant.The Complainant testified that he charges the tenant a below market rate of $400 per month and the tenant is required to maintain the space and make all repairs.The improvement cannot be converted into a residence easily since the other floors are in disrepair and the kitchen and bath on the main floor would have to be refurbished.The second building is a 216 square foot garage.

3.Complainant’s appraiser developed a sales comparison approach.In his sales comparison approach, the appraiser used four sales occurring from October 2002 to August 2007 with sale prices ranging from $46,000 to $80,000 or $16.89 – $116.79 per square foot.The appraiser adjusted for time of sales, location, effective age, building size and extras.The net adjustments ranged from -84.3% to 14.4% with resulting adjusted prices of $18.49 – $19.85 / square foot.The appraiser determined a final indicated value of $35,000.

4.Respondent’s appraiser developed an income, sales comparison and a cost approach with a final value of $90,200.

5.Using the cost approach, Respondent’s appraiser determined a value of $85,700.The appraiser first used comparable land sales to determine the value of the site.The appraiser used four sales of land and determined a value of $36,160 as follows:

 

The appraiser also determined the replacement cost new of the improvements using an in-house costing system.The replacement cost new for the improvement residence is $141,600 and for the parking lot $2,800.The appraiser then determined that the cost to cure physical deterioration was $35,400 and the incurable physical deterioration was $59,400.The resulting replacement cost new less depreciation results in an improvement value of $49,600.The appraiser did not observe any functional obsolescence even though the improvement is a residence used as commercial property.

6.Under the Income Approach, the appraiser determined a value of $87,300.The Respondent’s appraiser first estimated the annual gross income at $10,800 based upon market rents and adjusting for location and condition of the property.The appraiser allowed for a 10% vacancy resulting in an effective gross income of $9,720.The appraiser estimated few expenses for the property: a 5% management fee, $700 for insurance and $243 for reserves.The appraiser stated that he used few expenses because the current arrangement for the rental is that the tenant pay all expenses.The appraiser next took the annual net income of $8921 and applied a

capitalization rate of 9.5%. (A discount rate for similar properties had a range of 7-9.5%.A summary of sales in Springfield indicated a range of 9-13.1%.The effective tax rate is 1.92%)

7.The last approach developed by the Respondent’s appraiser was the sales comparison approach.The appraiser had three sales from January 2005 to March 2006 with sale prices ranging from $102,000 to $110,000.The appraiser adjusted for time of sales, condition of the properties and size.The net adjustments ranged from -18% to -9% with resulting adjusted prices of $90,200 to $95,472.The appraiser determined a final indicated value of $90,200.

8.The Respondent’s appraiser placed most weight on the sales comparison approach for a final value of $90,200 which is used to support the Board’s determination of $85,700.

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lang=EN-CA style=’mso-ansi-language:EN-CA’>CONCLUSIONS OF LAW

 

Jurisdiction

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 Assessor, and correcting any assessment which is unlawful, unfair, improper, arbitrary, or capricious.Section 138.431.4, RSMo.

Presumption In Appeals

Notwithstanding the provision of Section 138.431.3, RSMo – “There shall be no presumption that the assessor’s valuation is correct,” – the Supreme Court of Missouri has held, “A tax assessor’s valuation is presumed correct.”Snider v. Casino Aztar/Aztar Missouri Gaming Corp., 156 S.W.3d 341 (Mo. 2005).Citing to Hermel, supra; and Cupples Hesse Corp. v. State Tax Commission, 329 S.W.2d 696, 702 (Mo. 1959).

The presumption of correct assessment is rebutted when the taxpayer, or respondent when advocating a value different than that determined by the Assessor, presents substantial and persuasive evidence to establish that the assessor’s valuation is erroneous and what the fair market value should have been placed on the property.Snider, Hermel & Cupples Hesse, supra.

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).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 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 both acting in what they consider their own best interests.

 

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

 

4.Payment is made in cash or its equivalent.

 

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

 

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

 

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.

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, 2007.Hermel, Inc. v. State Tax Commission, 564 S.W.2d 888, 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).See also, 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).

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.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).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).

All three approaches to value are not always relevant or useful in the valuation of every property.The appraiser should consider the relevance of each approach to the subject property, the amount and reliability of the data collected in each approach, and the inherent strengths and weaknesses of each approach.The appraiser should rely on professional experience, expertise and judgment in arriving at the final value conclusion.Although one approach may be most appropriate in valuing property, developing another approach provides support for the valuation by the appraiser.

The comparable sales approach uses prices paid for similar properties in arms-length transactions and adjusts those prices to account for differences between the properties.Comparable sales consist of evidence of sales reasonably related in time and distance and involve land comparable in character.This approach is most appropriate when there is an active market for the type of property at issue such that sufficient data is available to make a comparative analysis.Snider v. Casino Aztar/Aztar Missouri Gaming Corp., 156 S.W.3d. 341, 347-348 (Mo. 2005).

The appraiser for the Complainant developed only one approach in his appraisal.The appraiser stated that “[t]he subject, due to the age and extensive deferred maintenance of the improvements the physical depreciation would be difficult to determine, therefore a Cost Approach was not completed.The subject property being an interim use and noting the improvements are near the end of their economic life the Income Approach was considered but not developed as no comparable income producing properties could be found to determine market rent for the subject property.”

The appraiser only developed a sales comparison approach.As stated in his report, the reliability of this approach is dependent upon the availability of comparable sales data and the degree of comparability or extent of adjustments necessary.The appraiser admitted that there was not much market data available for residences converted to commercial properties.The subject property is a Victorian style residence converted to a commercial property.The first floor has approximately 1,800 square feet with an enclosed porch of 196 square feet.The remaining space is not in a condition to be leased without repairs.The improvement is located in one area of three lots with a total site size of 24,598 square feet. A 216 square foot garage is also on the site.

The appraiser used four sales in his approach. The sales occurred in January 2002, June 2005, December 2005 and August 2007.None of the sales are a Victorian style residence converted to commercial property.The subject property is zoned “LB” Limited Business District.The comparable properties are zoned “HC” (Highway Commercial District), “LI” (Light Industrial), “R-SF” (legal non-conforming, allowable use), and Grandfathered Commercial.The site sizes on the comparables ranged from 4,280 square feet to 15,000 square feet.Comparable 1 has 1,480 square feet however only 685 square feet is on the main level making it significantly smaller than the subject property.Comparable 2 is a two story stone building with a total building area of 1,480.It is not known how much square footage is on the main floor.Comparable 2 also has a two-story concrete block building with 2,960 square feet.Comparable 2 is significantly larger than the subject property.Comparable 3 is a one story building of 1,620 square feet.It does not appear to be a converted residence and was sold in 2002.Comparable 4 is a 2 story building with 1,696 square feet on the main floor.The net adjustments by the appraiser range from -84.3% to 14.4 %.The adjustments were made for date of sales, location, effective age, building size and extras.No adjustment was made for the size of the site or accounting for the subject having additional vacant land.The appraiser did not review the comparables for their income.The comparable properties are owner occupied or vacant.

Complainant failed to meet his burden of proof. The appraiser developed one approach to determine market value.Developing the sales comparison approach is often sufficient when there is an active market for the type of property at issue such that sufficient data is available to make a comparative analysis without necessitating extensive adjustments.However, the appraiser admitted that there was not much market data for residences converted to commercial properties.The sales selected by the appraiser needed extensive adjustments and were not sufficiently comparable to rely on the sales comparison approach alone.

Complainant failed to meet his burden of proof, therefore, the Board of Equalization must be affirmed.

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lang=EN-CA style=’mso-ansi-language:EN-CA’>ORDER

The assessed valuation for the subject property as determined by the Assessor for Greene County and sustained by the Board of Equalization for the subject tax day is AFFIRMED.

The assessed value for the subject property for tax year 2007-2008 is set at $27,420.

A party may file with the Commission an application for review of a hearing officer decision within thirty (30) days of the mailing of such decision.The application shall contain specific detailed 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.

If an application for review of a hearing officer decision is made to the Commission, any protested taxes presently in an escrow account in accordance with this appeal 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 Greene 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.If any 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 March 20, 2008.

STATE TAX COMMISSION OF MISSOURI

Maureen Monaghan

Hearing Officer