State Tax Commission of Missouri
JAY N. COHEN, TRUSTEE,)
v.) Appeal Number 08-10067
MICHAEL BROOKS, ACTING ASSESSOR,)
ST. LOUIS COUNTY, MISSOURI,)
DECISION AND ORDER
Decision of the St. Louis County Board of Equalization sustaining the assessment made by the Assessor is SET ASIDE.True value in money for the subject property for tax year 2008 is set at $309,150, commercial assessed value of $98,930.Complainant appeared in person and by Counsel, Harvey I. Feldman.Respondent appeared by Associate County Counselor, Paula J. Lemerman.
Case heard and decided by Senior Hearing Officer W. B. Tichenor.
Complainant appeals, on the ground of overvaluation, the decision of the St. Louis County Board of Equalization, which sustained the valuation of the subject property.The Commission takes this appeal to determine the true value in money for the subject property on January 1, 2007.The Hearing Officer, having considered all of the competent evidence upon the whole record, enters the following Decision and Order.
FINDINGS OF FACT
1.Jurisdiction.Jurisdiction over this appeal is proper.Complainant timely appealed to the State Tax Commission from the decision of the St. Louis County Board of Equalization.A hearing was conducted on January 28, 2010, at the St. Louis County Government Center, Clayton, Missouri.
2.Assessment.The Assessor valued the property at $334,400, a commercial assessment of $107,010.The Board of Equalization sustained that value.
3.Subject Property.The subject property is located at 14395 Manchester Road, Manchester, Missouri.The property is identified by parcel number 23Q43130.The property consists of a corner lot of 11,700 square feet, (.27 acre) located at the northeast corner of Manchester and Henry Roads.The property is improved by a 1 story brick office structure built in 1967, containing 3,135 square feet.There is 6,600 square feet of asphalt paved parking.
4.Complainant’s Evidence.Complainant offered the following exhibits into evidence.
Summary Appraisal – Ernest A. Demba – $218,000
Written Direct Testimony – Mr. Demba
Photographs – Interior of Building
Counsel for Respondent objected to Exhibit C on the grounds that the document had not been exchanged in accordance with the Commission’s Exchange Order, documents not provided in response to discovery request, and no prefiled testimony for a witness who had identified the photographs and laid a foundation for their admission into evidence. Objection sustained.
Mr. Demba concluded an indicated value of $215,000 under the sales comparison approach to value and a value of $221,000 relying on the income approach to value.The appraiser’s final opinion of value was $218,000, placing equal weight on each approach to value.
There was no evidence of new construction and improvement from January 1, 2007, to January 1, 2008, therefore the assessed value for 2007 remains the assessed value for 2008.
Complainant’s evidence was not substantial and persuasive to rebut the presumption of correct assessment by the Board and establish the true value in money as of January 1, 2007, to be $218,000, as proposed.Complainant’s evidence was substantial and persuasive to provide a basis for the Hearing Officer to determine true value in money for the subject property.See, Hearing Officer Finds Value, infra.
5.Respondent’s Evidence.Respondent offered the following exhibits into evidence.
Summary Appraisal – Albert A. Lincoln – $334,700
Written Direct Testimony – Mr. Lincoln
Rebuttal – Building Permits 14319 Manchester Rd
Mr. Lincoln concluded an indicated value of $398,600 under the cost approach, a value of $329,200 utilizing the sales comparison approach to value and a value of $334,700 relying on the income approach to value.The appraiser’s final opinion of value was $334,700, relying on the income approach to value with support from the other two approaches.
Respondent’s evidence was not substantial and persuasive to rebut the presumption of correct assessment by the Board and establish the true value in money as of January 1, 2007, to be $334,700, as proposed.Respondent’s evidence was substantial and persuasive to provide a basis for the Hearing Officer to determine true value in money for the subject property.See, Hearing Officer Finds Value, infra.
6.True Value in Money.The property under appeal is valued for the 2008 assessment as of January 1, 2007, under the two year assessment cycle.The true value in money of the subject property as of January 1, 2007, concluded based upon the income approaches to value tendered by the two appraisal experts, was $309,150, a commercial assessed value of $98,930.See, Hearing Officer Finds Value, infra.
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.
Presumptions In Appeals
There is a presumption of validity, good faith and correctness of assessment by the CountyBoardof Equalization.The presumption in favor of the Board is not evidence.A presumption simply accepts something as true without any substantial proof to the contrary.In an evidentiary hearing before the Commission, the valuation determined by the Board, even if simply to sustain the value made by the Assessor, is accepted as true only until and so long as there is no substantial evidence to the contrary.The presumption of correct assessment is rebutted when the taxpayer, or respondent when advocating a value different than that determined by the Board, 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.The evidence in the record taken as a whole is sufficient to rebut the presumption of correct assessment and establish true value in money.
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:
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.
Hearing Officer Finds Value
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.
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. The income approaches to value presented by Mr. Demba and Mr. Lincoln provide the most reliable evidence to establish fair market value.The sales comparison approaches were not persuasive.The properties presented as comparables illustrate that there was a lack of sufficient sales data for substantially comparable properties.The Hearing Officer will not burden this Decision with his analysis of why he found the properties lacking in sufficient factors to establish comparability.Ultimately, the income approach must receive the greatest degree of reliance to arrive at value in this appeal.
The development of the Demba and Lincoln income approaches provide substantial and persuasive evidence upon the entire record for the Hearing Officer to conclude value.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.
In a case as was presented in this appeal where both income approaches are sufficiently close in the individual elements of the approach and the final conclusion of value, the Hearing Officer is presented with essentially the two ends of the value range for the subject.The Demba conclusion of value provides the base bracket for the subject’s value.The Lincoln value sets the top bracket of value.The Hearing Officer cannot ignore either conclusion of value, absence a glaring defect that renders a value opinion non-probative.No such defect appears in either of the income approaches present in this record.
Indicated Value Under Income Approach
Mr. Demba arrived at a Net Operating Income (NOI) of $31,741.Mr. Lincoln’s NOI was $33,800.The Hearing Officer gives equal weight to each appraiser’s conclusion.The NOI for the subject for the relevant valuation date was $32,770.Mr. Demba developed a capitalization rate combining the overall rate and the effective tax rate of 11.1%.Mr. Lincoln’s capitalization rate, also accounting for the effective tax rate was 10.1%.A capitalization rate of 10.6% is appropriate.Applying the capitalization rate of 10.6% to the NOI of $32,770 will result in an indicated value of $309,150.
Adjustment for Cost of Repairs
Mr. Demba made a -$65,000 deduction from his indicated value under the income approach to account for what he determined was the cost for repairs for deferred maintenance to
the subject.This matter was addressed on page 24 of the Demba appraisal in the following paragraph:
“It is noted that there are immediate repairs that a purchaser would have to make.Estimates obtained by the owner and verified by Marshall & Swift ValuationServices are as follows:The parking lot of the subject property is in need ofrepair and the cost tore-pave and strip the parking is $15,000.A new roof forthe subject property is estimated to cost $40,000.Together, these two immediateimprovements will cost $65,000.”
Immediate Repairs Not Established
Two items in this conclusion of the appraiser strike the Hearing Officer.First the conclusion of the appraiser that the repairs would have to be made immediately by a purchaser on January 1, 2007, is obviously not the case, given that at the time of hearing the repairs had not been made.The indisputable fact is that the subject building, on January 1, 2007, produced an income stream supporting a value of at least $285,955 and possibly as high as $334,700, without either the parking lot or the roof being repaired as apparently called for under an estimated cost of $65,000.The property is in sufficiently good condition to have support three tenants as of the valuation date.No evidence was presented to establish that the property had become abandoned shortly after January 2007 due to deferred maintenance to either the parking lot or the roof.The conclusion of Mr. Demba that these two items would require immediate repair by a purchaser in January, 2007 was only speculation and conjecture on his part.The income stream of the property and its occupancy rebuts the conclusion.
The evidence did not establish that the repairs would have to be immediately made.There was no evidence that the rents being received on the subject building were below market, reflecting some accounting for a deferred maintenance or condition issue with the subject.The evidence, to the contrary, set the subject rents as market rents.In point of fact, Mr. Demba found the subject rents to be “at the higher end” of the range of market rents.Therefore, no deduction or discount to the value demonstrated under the existing income can be warranted for the asserted cost of potential repairs.
Cost for Repairs
As to the amount of the cost for repair of the two deferred maintenance items, the Hearing Officer did not find any supporting documentation contained in Exhibit A.It is unclear if the appraiser actually viewed the purported repair bids, or simply relied upon the owner’s representation as to the cost for repairs.The assertion that the bids were “verified by Marshall & Swift Valuation Services” is problematic for the Hearing Officer, since Mr. Demba failed to include copies of the repair bids in an appendix to his appraisal or as a separate exhibit and there was no presentation of the asserted verification relying on Marshall & Swift Valuation services.
The Hearing Officer is not suggesting that either Mr. Demba or the owner were misrepresenting the actual amounts set forth in the repair bids.This is not an issue of the veracity of the appraiser or the owner.It is a matter of the Hearing Officer simply having the opportunity to review the data that would support a 22.7% discount to the indicated value derived from the income stream of the subject.
“Where the basis for a test as to the reliability of the testimony is not supported by a statement of facts on which it is based, or the basis of fact does not appear to be sufficient, the testimony should be rejected.”In the matter of the $65,000 discount to value being warranted because of “immediate repairs” the statement supporting this is an unsupported conclusion by the appraiser.That is not a sufficient basis in fact for the testimony to be given any probative value.Furthermore, the Hearing Officer is not required to accept asserted costs for repairs based upon hearsay upon hearsay.The best evidence to address such a significant matter in the final conclusion of value by Mr. Demba was to provide both the detailed repair bids for the parking lot and the roof work, as well as the analysis and calculations, with supporting documentation on the Marshall & Swift Valuation Service methodology of verification.
Summary and Conclusion
A taxpayer does not meet his burden if evidence on any essential element of his case leaves the Commission “in the nebulous twilight of speculation, conjecture and surmise.” An essential element of Complainant’s case was the $65,000 deduction for the asserted “immediate repairs.” The appraiser’s claims on this point have left the Hearing Officer with nothing more than speculation, conjecture and surmise. The two income approaches establish a fair market value, as of January 1, 2007, of $309,150. There is no sound basis for making any additional adjustment due to any deferred maintenance issues.
The assessed valuation for the subject property as determined by the Assessor and sustained by the Board of Equalization for St. Louis County for the subject tax day is SET ASIDE.
The assessed value for the subject property for tax year 2008 is set at $98,930.
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. 
The Collector of St. Louis County, as well as the collectors of all affected political subdivisions therein, shall continue to hold the disputed taxes pending the possible filing of an Application for Review, unless said taxes have been disbursed pursuant to a court order under the provisions of Section 139.031.8, RSMo.
Any Finding of Fact which is a Conclusion of Law or Decision shall be so deemed. Any Decision which is a Finding of Fact or Conclusion of Law shall be so deemed.
SO ORDERED March 11, 2010.
STATE TAX COMMISSION OF MISSOURI
W. B. Tichenor
Senior Hearing Officer
Certificate of Service
I hereby certify that a copy of the foregoing has been mailed postage prepaid on this 11th day of March, 2010, to: Harvey Feldman, 9666 Olive Blvd., Suite 395, St. Louis, MO 63132, Attorney for Complainant; Paula Lemerman, Associate County Counselor, Attorney for Respondent; Philip Muehlheausler, Assessor; John Friganza, Collector, County Government Center, 41 South Central Avenue, Clayton, MO 63105.
 See, Rossman v. G.G.C. Corp. of Missouri, 596 S.W.2d 469, 471 (Mo. App. 1980).
 Section 138.432, RSMo.
 Exhibit 1, pp. 10-11; Exhibit A, pp. 22-24.
 Exhibit C excluded from evidence, the document is maintained in the case file, but is not evidence to be relied upon in rendering a decision in this appeal.
 Exhibit A, pp. 35-51.
 Exhibit A, pp. 52-61.
 Exhibit A, p. 61.
 Section 137.115.1 RSMo.
 Exhibit 1, pp. 13-19.
 Exhibit 1, pp. 20-24.
 Exhibit 1, pp. 25-33.
 Exhibit 1, p. 34.
 Section 137.115.1, RSMo.
 $309,150 x .32 = $98,928, rounded to 98,930.
 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).
 Hermel, supra; Cupples-Hesse Corporation v. State Tax Commission, 329 S.W.2d 696, 702 (Mo. 1959).
 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 SW3d 645, 649 (Mo.App E.D. 2002), citing, Equitable Life Assurance Society v. STC, 852 SW2d 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.
 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).
 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).
 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).
 See, Cupples-Hesse, supra.
 Brooks v. General Motors Assembly Division, 527 S.W.2d 50, 53 (Mo. App. 1975).
 Effective Gross Income, Total Expenses, Net Operating Income, Capitalization Rate.
 $32,770 ÷ .106 = $309,150.94, rounded to $309,150.
 See also, Exhibit A, p. 59; Exhibit B, Answer 20 – “deduction of immediate cost of repairs”.
 Exhibit A, p. 24.
 Exhibit A, p. 57; Exhibit 1, p. 26.
 Exhibit A, p. 57.
 Repair bids and calculations relying on Marshall & Swift Valuation Service.
 $65,000 ÷ $285,955 = .227.
[137 Carmel Energy at 783.
 See, Rossman v. G.G.C. Corp. of Missouri, 596 S.W.2d 469, 471 (Mo. App. 1980).
 Section 138.432, RSMo.