STATE TAX COMMISSION OF MISSOURI
|Complainant,||)||Appeal No. 21-57001|
|)||Parcel No. 36-3-06.1-0-000-015-00|
|DAWN MENTZ, ASSESSOR,||)|
|FRANKLIN COUNTY, MISSOURI,||)|
DECISION AND ORDER
Joseph Hill (Complainant) appeals the Franklin County Board of Equalization’s (BOE) decision finding the appraised value of the subject commercial property was $106,370 as of January 1, 2021. Complainant alleges overvaluation and proposes a value of $77,400. The BOE decision is set aside. The TVM of the subject property as of January 1, 2021, was $77,400.
The evidentiary hearing was conducted on June 10, 2022. Complainant appeared pro se. Respondent appeared personally and was represented by counsel Mark Piontek.
FINDINGS OF FACT
- The Subject Property. The subject commercial property is located at 8055 AE Spur in Sullivan, Missouri. The subject property consists of a 5.5-acre lot improved with a 15,625-square-foot warehouse constructed in 1955. The building is constructed on a reinforced concrete foundation with concrete block walls covered with cement brick veneer. The building in in poor condition. Complainant purchased the subject property in August 2020 for $77,400.
- Assessment and Valuation. The BOE classified the subject property as commercial with value of $106,370 as of January 1, 2021.
- Complainant’s Evidence. Complainant produced documents labelled as Exhibits 1 through 24, consisting of over 70 pages of Complainant’s notes critiquing Respondent’s valuation of the subject property, photos of the subject property, the subject property’s sale listing, and Complainant’s correspondence with Respondent’s personnel and predecessor. Many of the pages include voluminous handwritten notes. Complainant first produced the documents to Respondent and Respondent’s counsel approximately 10 minutes prior the evidentiary hearing. The September 28, 2021, scheduling order required the parties to exchange exhibits on or before March 4, 2022. Complainant conceded he first produced Exhibits 1 through 24 to Respondent immediately prior to the evidentiary hearing.
Respondent objected to the admission of Exhibits 1 through 24 because the untimely production precluded the opportunity for rebuttal and adequate preparation. Respondent’s objection was sustained. Exhibits 1 through 24 were not admitted into evidence, but were accepted for purposes of preservation in the record.
Complainant testified regarding his direct knowledge of the subject property. Complainant testified his proposed value is based on his 2020 purchase of the subject property for $77,400. Complainant testified the property was listed with a broker and the sale was an arms-length transaction.
Complainant testified the building needed multiple repairs when he purchased it and that those repairs had not been completed as of January 1, 2021. Complainant testified the building had broken windows, a leaking roof, damaged interior walls, no functional interior plumbing, damaged plumbing fixtures, damaged doors, and had been de-energized. Complainant testified the cost to repair the windows was approximately $5,000 and it would cost between $10,000 and $15,000 to repair the interior walls.
- Respondent’s Evidence. Respondent introduced the written direct testimony of Erica Sterling and Exhibit 1, consisting of the property record card for the subject property. Consistent with her written direct testimony, Sterling testified she is a real estate appraiser in Respondent’s office. Sterling testified she did not personally inspect the subject property, but her predecessor did. Sterling testified she is familiar with the subject property. Sterling used the Vanguard mass appraisal system to value the subject property. Sterling testified the Vanguard system utilizes a market-based approach and is commonly used by counties for assessments.
The subject property’s characteristics were input into the Vanguard system, which yielded an estimated land value of $27,900 and an improvement value of $78,740, for a total value of $106,370. (Ex. 1 at 1) Exhibit 1 lists the subject’s condition as “V Poor.” (Ex. 1 at 1) Sterling testified “V Poor” means “very poor” and that this is the lowest condition rating utilized by Respondent’s office. Sterling testified her opinion was that the fair market value of the subject property as of January 1, 2021, was $106,370.
- Value. The TVM as of January 1, 2021, was $77,400, which was the August 2020 sale price of the subject property.
CONCLUSIONS OF LAW
- Assessment and Valuation. Commercial real property is assessed at 32% of its TVM as of January 1 of each odd-numbered year. Section 137.115.5(1)(c). The TVM is “the fair market value of the property on the valuation date[.]” Snider v. Casino Aztar/Aztar Mo. Gaming Corp., 156 S.W.3d 341, 346 (Mo. banc 2005) (internal quotation omitted). The fair market value is “the price which the property would bring from a willing buyer when offered for sale by a willing seller.” Mo. Baptist Children’s Home v. State Tax Comm’n, 867 S.W.2d 510, 512 (Mo. banc 1993). “True value in money is defined in terms of value in exchange not value in use.” Tibbs v. Poplar Bluff Assocs. I, L.P., 599 S.W.3d 1, 7 (Mo. App. S.D. 2020) (internal quotation omitted). “Determining the true value in money is an issue of fact for the STC.” Cohen v. Bushmeyer, 251 S.W.3d 345, 348 (Mo. App. E.D. 2008).
“For purposes of levying property taxes, the value of real property is typically determined using one or more of three generally accepted approaches.” Snider, 156 S.W.3d at 346. The three generally accepted approaches are the cost approach, the income approach, and the comparable sales approach. Id. at 346-48.
- Evidence. The hearing officer is the finder of fact and determines the credibility and weight of the evidence. Kelly v. Mo. Dep’t of Soc. Servs., Family Support Div., 456 S.W.3d 107, 111 (Mo. App. W.D. 2015). “Although technical rules of evidence are not controlling in administrative hearings, fundamental rules of evidence are applicable.” Mo. Church of Scientology v. State Tax Comm’n, 560 S.W.2d 837, 839 (Mo. banc 1977).
Respondent’s objection to Complainant’s Exhibits 1 through 24 was sustained. Exhibits 1 through 24 were first produced to Respondent and Respondent’s counsel approximately 10 minutes before the evidentiary hearing. Under these circumstances, Respondent had no reasonable opportunity to conduct discovery regarding potential rebuttal evidence, introduce rebuttal evidence, or prepare a cross-examination of Complainant regarding information and commentary included in Exhibits 1 through 24. Under these circumstances, admitting Exhibits 1 through 24 would prejudice Respondent and unfairly advantage Complainant. Although Respondent’s objection to the admissibility of Exhibits 1 through 24 was sustained, those Exhibits are preserved in the record pursuant to Section 536.070(7), and Complainant testified regarding his personal knowledge of the subject property.
- Complainant’s Burden of Proof. The taxpayer bears the burden of proof and must show by a preponderance of the evidence that the property was overvalued. Westwood P’ship v. Gogarty, 103 S.W.3d 152, 161 (Mo. App. E.D. 2003). The BOE value is presumptively correct. Tibbs, 599 S.W.3d at 7. The “taxpayer may rebut this presumption by presenting substantial and persuasive evidence that the valuation is erroneous.” Id. (internal quotation omitted). The taxpayer also must prove “the value that should have been placed on the property.” Id. The TVM is “the price which the property would bring from a willing buyer when offered for sale by a willing seller.” Id. at 8 (internal quotation omitted).
“Substantial evidence is that evidence which, if true, has probative force upon the issues, and from which the trier of fact can reasonably decide the case on the fact issues.” Savage v. State Tax Comm’n, 722 S.W.2d 72, 77 (Mo. banc 1986) (internal quotation omitted). Evidence is persuasive when it has “sufficient weight and probative value to convince the trier of fact.” Daly v. P.D. George Co., 77 S.W.3d 645, 651 (Mo. App. E.D. 2002); see also White v. Dir. of Revenue, 321 S.W.3d 298, 305 (Mo. banc 2010) (noting the burden of persuasion is the “party’s duty to convince the fact-finder to view the facts in a way that favors that party”).
“For purposes of levying property taxes, the value of real property is typically determined using one or more of three generally accepted approaches.” Snider, 156 S.W.3d at 346. The three generally accepted approaches are the cost approach, the income approach, and the comparable sales approach. Id. at 346-48. The STC has wide discretion in selecting the appropriate valuation method but “cannot base its decision on opinion evidence that fails to consider information that should have been considered under a particular valuation approach.” Id. at 348.
- Complainant Produced Substantial and Persuasive Evidence of Overvaluation.
Complainant’s proposed value of $77,400 is based on his testimony he purchased the subject property for that amount in 2020 in an arms-length transaction. A property’s sale price is not necessarily conclusive as to its TVM. Stein v. State Tax Comm’n, 379 S.W.2d 495, 498 (Mo. 1964). In other words, in any single sale “you might get a bargain or you might get stung.” Id. Although the property’s sale price is not necessarily conclusive, a recent, arms-length sale of the subject property is nonetheless relevant to establishing value as of the assessment date. St. Joe Mins. Corp. v. State Tax Comm’n, 854 S.W.2d 526, 529 (Mo. App. E.D. 1993). The probative value of the sale depends on the extent of market changes since the sale and whether the sale was a voluntary transaction, with both the buyer and seller “capable and desirous of protecting his interest.” State ex rel. State Hwy. Comm’n v. Rauscher Chevrolet Co., 291 S.W.2d 89, 92 (Mo. 1956).
The substantial and persuasive evidence in the record establishes Complainant purchased the subject property in August 2020 for $77,400. Complainant credibly and persuasively testified the subject property was listed with a broker and that the transaction was arms-length. Complainant’s August 2020 purchase of the subject property – approximately four months prior to the valuation date – is relevant evidence of value because it is a “voluntary purchase not too remote in time.” St. Joe Mins. Corp, 854 S.W.2d at 529.
Respondent’s evidence did not undermine the persuasiveness of the August 2020 sale of the subject property. To the contrary, Respondent’s Exhibit 1 partially corroborates Complainant’s testimony by listing an August 19, 2020, sale of the subject property for $77,400. (Ex. 1 at 1) Exhibit 1 also indicates the subject property sold in 2006 for $80,000, after selling for $212,800 in 1995. Respondent’s Exhibit 1 shows the subject property has experienced a precipitous, sustained decline in value and last sold for an amount in excess of the 2021 BOE value 35 years ago.
Additionally, Respondent’s Exhibit 1 and Sterling’s testimony show the Vanguard system utilized the cost approach to generate a value of $106,370, the same value determined by the BOE. The cost approach is premised on the principle of substitution, which posits market value can estimated by the cost a buyer would incur to obtain a property similar to the subject property. Appraisal Institute, The Appraisal of Real Estate, 563-64 (14th ed. 2013). A corollary to the substitution principle is that an older, physically deteriorated property with limited utility is less likely to be recreated, thus making the cost approach less useful in estimating value. Id. at 568. Further, “[w]hen improvements are considerably older … the physical deterioration, functional obsolescence, and external obsolescence may be more difficult to estimate.” Id. at 567-68. Missouri law incorporates these fundamental appraisal principles by recognizing “[t]he cost approach is most appropriate when the property being valued has been recently improved with structures that conform to the highest and best use of the property or when the property has unique or specialized improvements for which there are no comparables in the market.” Snider, 156 S.W.3d at 347.
The subject property has not been recently improved. The warehouse building is nearly 70 years old. There is no evidence the building is unique or specialized. Yet, Respondent’s defense of the BOE value, as set forth in Exhibit 1 and Sterling’s testimony, emphasizes a cost approach that is not well-suited for developing a persuasive value estimate. On this record, the August 2020 arms-length sale provides the most persuasive evidence showing “the price which the property would bring from a willing buyer when offered for sale by a willing seller.” Tibbs, 599 S.W.3d at 8. The TVM of the subject property as of January 1, 2021, was $77,400.
CONCLUSION AND ORDER
The BOE’s decision is set aside. The TVM of the subject property as of January 1, 2021, was $77,400.
Application for Review
A party may file an application for review of this decision within 30 days of the mailing date set forth in the certificate of service for this decision. The application “shall contain specific detailed grounds upon which it is claimed the decision is erroneous.” Section 138.432. The application must be in writing, and may be mailed to the State Tax Commission of Missouri, P.O. Box 146, Jefferson City, MO 65102-0146, or emailed to Legal@stc.mo.gov. A copy of the application must be sent to each person 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. Section 138.432.
The Collector of Franklin County, and 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 the disputed taxes have been disbursed pursuant to a court order under the provisions of section 139.031.
SO ORDERED July 1, 2022.
Eric S. Peterson
Senior Hearing Officer
State Tax Commission
Certificate of Service
I hereby certify that a copy of the foregoing has been electronically mailed and/or sent by U.S. Mail on July 1, 2022, to: Complainant(s) and/or Counsel for Complainant(s), the County Assessor and/or Counsel for Respondent and County Collector.
Amy S. Westermann
 Complainant timely filed a complaint for review of assessment. The State Tax Commission (STC) has authority to hear and decide Complainant’s appeal. Mo. Const. art. X, sec. 14; Section 138.430.1, RSMo 2000. All statutory citations are to RSMo 2000, as amended.
 The evidentiary hearing was conducted by a former STC hearing officer. The appeal was reassigned to the undersigned hearing officer for a decision and order. Section 138.431.2.
 The quoted language is testimony cited with approval by the Court to illustrate why a single sale is not necessarily conclusive as to value.