STATE TAX COMMISSION OF MISSOURI
| KEVIN & DAWN DEAN, | ) | |
| ) | ||
| Complainants, | ) | |
| ) | ||
| v. | ) | Appeal No. 17-57024 |
| )
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Parcel/Locator No.
19-7-25.0-0-000-013.800 |
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| TOM COPELAND, ASSESSOR, | ) | |
| FRANKLIN COUNTY, MISSOURI,
Respondent |
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) |
DECISION AND ORDER
HOLDING
The decision of the Franklin County Board of Equalization (BOE) is SET ASIDE. Complainants Kevin and Dawn Dean (Complainants) did not present substantial and persuasive evidence to rebut the presumption of correct assessment by the BOE. Respondent Tom Copeland, Assessor, Franklin County, Missouri, (Respondent) presented substantial and persuasive evidence to rebut the presumption of correct assessment by the BOE.
Complainant Kevin Dean (Mr. Dean) appeared pro se; Complainant Dawn Dean appeared not.
Respondent appeared pro se.
Case heard and decided by Senior Hearing Officer Amy S. Westermann (Hearing Officer).
ISSUE
Complainants appealed on the ground of overvaluation. Respondent initially set the true value in money (TVM) of the subject property at $145,550, as residential property, as of January 1, 2017. The BOE valued the subject property at $145,550, thereby sustaining Respondent’s valuation. The State Tax Commission (STC) takes this appeal to determine the TMV for the subject property as of January 1, 2017.
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. Complainants timely appealed to the State Tax Commission.
- Evidentiary Hearing. The issue of overvaluation was presented at an evidentiary hearing on December 18, 2017, at the Franklin County Government Building, 400 East Locust, Union, Missouri.
- Identification of Subject Property. The subject property is identified by parcel/locator number 19-7-25.0-0-000-013.800. It is further identified as 251 Northwoods Drive, Pacific, Franklin County, Missouri. (Complaint; Exhibit 1)
- Description of Subject Property. The subject property consists of 5.07 acres, improved by a 1,336 square-foot, one-story single-family home constructed in approximately 1987. (Exhibit 1) The subject property includes three bedrooms; two full bathrooms; a full, unfinished basement; a two-car attached garage; two open porches; one patio; and one deck. (Exhibit 1) The exterior consists of vinyl and brick construction. (Exhibit 1) The subject property is located in a rural area of eastern Franklin County. The subject property is situated in a flood hazard zone and is bordered by a creek along the southwest property line, which is a tributary of the Meramec River. (Exhibit 1) The subject property is serviced by a private well and septic system. (Exhibit 1)
- Assessment. Respondent set a TVM for the subject property of $145,550, residential, as of January 1, 2017.
- Board of Equalization. The BOE set a TVM of the subject property at $145,550, residential, as of January 1, 2017.
- Complainant’s Evidence. To support Complainants’ opinion of value, Complainants offered as evidence the following exhibits:
| Exhibit A | Letter from John A Heger of Coldwell Banker Premier Group dated July 13, 2017 |
| Exhibit B | Photo of subject property front elevation with flooding |
| Exhibit C | Photo of subject property garage door with flooding |
| Exhibit E[1] | Photo of interior of subject property with flood damage |
| Exhibit F | Photo of subject property front elevation with flooding |
| Exhibit G | Copy of Franklin County area flood map showing subject property |
| Exhibit H | Letter from Eckelkamp Electric Co. dated January 4, 2016 |
| Exhibit I | Copy of National Weather Service Historical Crests of Flooding for Meramec River near Pacific, MO |
Respondent objected to Exhibit A on the ground that it lacked foundation and constituted hearsay in that the real estate broker who wrote the letter was not present to testify. The Hearing Officer sustained the objection and excluded Exhibit A from the record. Respondent did not object to the remainder of Complainants’ exhibits, which were admitted into the record.
Mr. Dean testified on behalf of Complainants. Mr. Dean testified that Complainants had purchased the subject property in August 2002 for approximately $205,000. The purchase price had included a contiguous second parcel, the assessment of which had been appealed and had been settled by stipulation prior to the Evidentiary Hearing in the instant appeal. Mr. Dean testified that the subject property is located outside the city limits of Pacific and along a tributary creek of the Meramec River. Mr. Dean testified that the home had flooded three times since Complainants purchased the subject property. With regard to Exhibit C, Mr. Dean testified that six inches of water had flooded the garage but not the living space; however, flood water had entered the basement to a height of seven feet, covering the furnace, ductwork, water heater, and drywall. With regard to Exhibit E, Mr. Dean testified that floodwaters “blew out” a sliding glass door in the basement. Mr. Dean testified that the photos were used for making a flood insurance claim. Mr. Dean testified that some of the photos were taken following the flood of December 2015 and some were taken following the flood of May 2017.
Mr. Dean testified that the subject property is encumbered by a mortgage but that he was unsure of the balance. Mr. Dean testified that the subject property had not been listed for sale within the three years prior to the Evidentiary Hearing and that no offers to purchase the property had been made. Mr. Dean testified that he would price the subject property at $125,000 if Complainants were to list it for sale. Mr. Dean testified that the only improvements to the subject property between January 1, 2015, and January 1, 2017, were repairs made due to flooding during December 2015. Mr. Dean opined that the subject property’s TVM as of January 1, 2017, was $125,000.
On cross examination, Mr. Dean testified that even though the home had been repaired or was in the process of being repaired following the most recent flooding in May 2017, the subject property had a “trend of flooding” that adversely affected its market value and no one would be willing to buy the property.
- Respondent’s Evidence. Respondent offered as evidence the testimony of Missouri State Certified Residential Real Estate Appraiser Donald Dodd (the Appraiser). The Appraiser opined that the subject property’s TMV as of January 1, 2017, was $137,000, which was lower than the BOE’s valuation. In support of the Appraiser’s opinion of value, Respondent offered as evidence Exhibit 1, the Appraiser’s report. Complainant did not object to Exhibit1, which was received into the record.
The Appraiser testified that, in arriving at his opinion of TMV, he relied on the sales comparison approach to developing an opinion of value of the subject property.
The Appraiser’s report analyzed three comparable sales. Because no sales of comparable properties within a mile of the subject property were known to exist, the Appraiser broadened the search for comparable sales information to a 12-mile radius. (Exhibit 1) The Appraiser was unable to find any comparables with a history of flooding. The three comparables had sold between September 2016 and November 2016. (Exhibit 1) The sales were verified through buyers, sellers, and/or realtor supplied information. (Exhibit 1) The sale prices of the comparables ranged from $149,995 to $204,700. (Exhibit 1)
The Appraiser made market-based adjustments to the three comparables to account for their similarities to and differences with the subject property. All three of the comparables were given a 10% downward adjustment for location because they were not located in a flood zone. (Exhibit 1) In the narrative description of the adjustments, the Appraiser noted:
The subject property was located in a flood hazard zone. According the the owner, flood waters had reached and entered the basement of the subject property home in or around December 2015. However, no existing damages as well as cost estimates to cure were ever reported by the owner as of the effective date of this appraisal report. In addition, there was no known market data that existed that would support an adjustment with any degree of certainty. Still, the fact that the subject property was in a flood hazard zone and there had been some reported flooding in the past, making no adjustment at all did not seem appropriate either since there will be a stigma, i.e., the property will always be susceptible to flooding, attached to this subject property. In the end, a ten percent adjustment was made to each comparable sale in this analysis for being in more favorable, non-flood zone locations.
(Exhibit 1)
The Appraiser also made adjustments to the comparables for differences in gross living area greater than 100 square feet; differences in bathroom type and count; differences in porches, patios, and decks; and differences in the existence of an outbuilding. (Exhibit 1) The adjusted sale prices of the comparables ranged from $136,499 to $179,977. (Exhibit 1) In reconciling the comparables, the Appraiser concluded that Comparable No. 3 was most similar to the subject property and, therefore, was given the most weight in the analysis. (Exhibit 1)
- Presumption of Correct Assessment Rebutted – True Market Value Established.
Complainants did not present substantial and persuasive evidence to rebut the presumption of correct assessment by the BOE and to establish the TVM of the subject property as of January 1, 2017, to be $125,000. However, Respondent presented substantial and persuasive evidence to rebut the presumption of correct assessment by the BOE and to establish the TVM of the subject property as of January 1, 2017, to be $137,000.
CONCLUSIONS OF LAW AND DECISION
Jurisdiction
The STC has jurisdiction to hear this appeal and correct any assessment which is shown to be unlawful, unfair, arbitrary or capricious, including the application of any abatement. The Hearing Officer shall issue a decision and order affirming, modifying or reversing the determination of the BOE, 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.
Basis of Assessment
The Constitution mandates that real property and tangible personal property be assessed at its value or such percentage of its value as may be fixed by law for each class and for each subclass. Article X, Sections 4(a) and 4(b), Mo. Const. of 1945. The constitutional mandate is to find the true value in money for the property under appeal. By statute, real property and tangible personal property are assessed at set percentages of true value in money: residential property at 19%; commercial property at 32%; and agricultural property at 12%. Section 137.115.5 RSMo (2000) as amended.
Investigation by Hearing Officer
In order to investigate appeals filed with the STC, the Hearing Officer may inquire of the owner of the property or of any other party to the appeal regarding any matter or issue relevant to the valuation, subclassification, or assessment of the property. Section 138.430.2 RSMo (2000) as amended. The Hearing Officer’s decision regarding the assessment or valuation of the property may be based solely upon his inquiry and any evidence presented by the parties or based solely upon evidence presented by the parties. Id.
During the Evidentiary Hearing, the Hearing Officer inquired of both Mr. Dean and the Appraiser.
Board Presumption and Computer-Assisted Presumption
There exists a presumption of correct assessment by the BOE – the BOE presumption. The BOE presumption requires the taxpayer to substantial and persuasive present evidence to rebut it. If Respondent is seeking to prove a value different than that set by the BOE, then Respondent is required to rebut the BOE presumption. The BOE’s valuation is assumed to be an independent valuation.
In the present appeal, the BOE sustained the initial valuation of Respondent, and both Complainant and Respondent are now seeking to lower the BOE’s assessment; therefore, the BOE presumption applies to both parties.
Complainant’s Burden of Proof
To obtain a reduction in assessed valuation based upon an alleged overvaluation, the Complainant must prove the true value in money of the subject property on the subject tax day. Hermel, Inc., v. State Tax Commission, 564 S.W.2d 888, 897 (Mo. banc 1978). True value in money is defined as the price that the subject property would bring when offered for sale by one willing but not obligated to sell it and bought by one willing or desirous to purchase but not compelled to do so. Rinehart v. Bateman, 363 S.W.3d 357, 365 (Mo. App. W.D. 2012); Cohen v. Bushmeyer, 251 S.W.3d 345, 348 (Mo. App. E.D. 2008); Greene County v. Hermel, Inc., 511 S.W.2d 762, 771 (Mo. 1974). True value in money is defined in terms of value in exchange and not in terms of value in use. Stephen & Stephen Properties, Inc. v. State Tax Commission, 499 S.W.2d 798, 801-803 (Mo. 1973). In sum, true value in money is the fair market value of the subject property on the valuation date. Hermel, Inc., 564 S.W.2d at 897.
“’True value’ is never an absolute figure, but is merely an estimate of the fair market value on the valuation date.” Drury Chesterfield, Inc., v. Muehlheausler, 347 S.W.3d 107, 112 (Mo. App. E.D. 2011), citing St. Joe Minerals Corp. v. State Tax Comm’n of Mo., 854 S.W.2d 526, 529 (Mo. App. E.D. 1993). “Fair market value typically is defined as the price which the property would bring when offered for sale by a willing seller who is not obligated to sell, and purchased by a willing buyer who is not compelled to buy.” Drury Chesterfield, Inc., 347 S.W.3d at 112 (quotation omitted).
A presumption exists that the assessed value fixed by the BOE is correct. Rinehart, 363 S.W.3d at 367; Cohen, 251 S.W.3d at 348; Hermel, Inc., 564 S.W.2d at 895. “Substantial and persuasive controverting evidence is required to rebut the presumption, with the burden of proof resting on the taxpayer.” Cohen, 251 S.W.3d at 348. Substantial evidence can be defined as such relevant evidence that a reasonable mind might accept as adequate to support a conclusion. Cupples Hesse Corp. v. State Tax Commission, 329 S.W.2d 696, 702 (Mo. 1959). Persuasive evidence is evidence that has sufficient weight and probative value to convince the trier of fact. Cupples Hesse Corp., 329 S.W.2d at 702. 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).
There is no presumption that the taxpayer’s opinion is correct. The taxpayer in a STC 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, 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. W.D. 1991).
Generally, a property owner, while not an expert, is competent to testify to the reasonable market value of his own land. Cohen, 251 S.W.3d at 348-49; Carmel Energy, Inc. v. Fritter, 827 S.W.2d 780, 783 (Mo. App. W.D. 1992). “However, when an owner’s opinion is based on improper elements or foundation, his opinion loses its probative value.” Carmel Energy, Inc., 827 S.W.2d at 783. A taxpayer does not meet his burden if evidence on any essential element of his case leaves the STC “in the nebulous twilight of speculation, conjecture and surmise.” See Rossman v. G.G.C. Corp. of Missouri, 596 S.W.2d 469, 471 (Mo. App. E.D. 1980).
In this case, Mr. Dean testified that the TMV of the subject property was $125,000 as of January 1, 2017.
Respondent’s Burden of Proof
Respondent, when advocating a value different from that determined by the original valuation or a valuation made by the BOE, must meet the same burden of proof to present substantial and persuasive evidence of the value advocated as required of the Complainant under the principles established by case law. Hermel, Inc., 564 S.W.2d at 895; Cupples-Hesse, 329 S.W.2d at 702; Brooks, 527 S.W.2d at 53.
In this case, Respondent presented the Appraiser’s report and the Appraiser’s testimony as evidence indicating a lower valuation than the value finally determined by the BOE and lower than the value previously determined by Respondent.
Weight to be Given Evidence
The Hearing Officer is not bound by any single formula, rule, or method in determining true value in money and 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 deemed necessary when viewed in connection with all other circumstances. Beardsley v. Beardsley, 819 S.W.2d 400, 403 (Mo. App. W.D. 1991). The Hearing Officer, as the trier of fact, is not bound by the opinions of experts but may believe all or none of the expert’s testimony or accept it in part or reject it in part. Exchange Bank of Missouri v. Gerlt, 367 S.W.3d 132, 135-36 (Mo. App. W.D. 2012).
Complainants did not present expert testimony. Respondent presented the expert testimony and appraisal report of the Appraiser, who opined the TMV of the subject property was $137,000 as of January 1, 2017.
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, 615 (Mo. App. W.D. 2000); Hermel, Inc., 564 S.W.2d at 897; 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. 1974).
“For purposes of levying property taxes, the value of real property is typically determined using one or more of three generally accepted approaches.” Snider v. Casino Aztar/Aztar Missouri Gaming Corp., 156 S.W.3d 341, 346 (Mo. banc 2005), citing St. Louis County v. Security Bonhomme, Inc., 558 S.W.2d 655, 659 (Mo. banc 1977). “Each valuation approach is applied with reference to a specific use of the property—its highest and best use.” Snider, 156 S.W.3d at 346-47, citing Aspenhof Corp., 789 S.W.2d at 869. “The method used depends on several variables inherent in the highest and best use of the property in question.” Snider, 156 S.W.3d at 347.
“Each method uses its own unique factors to calculate the property’s true value in money.” Id. “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. Id. at 348. “Comparable sales consist of evidence of sales reasonably related in time and distance and involve land comparable in character.” Id. (quotation omitted). “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.” Id.
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.
Discussion
In this case, while Complainants’ evidence was substantial, it was not persuasive to rebut the presumption of correct assessment by the BOE. However, Respondent presented substantial and persuasive evidence rebutting the presumption of correct assessment by the BOE and establishing the TVM of the subject property to be $137,000 as of January, 1, 2017. Substantial evidence is that which is relevant, adequate, and reasonably supports a conclusion. Cupples Hesse Corp., 329 S.W.2d at 702. Persuasive evidence is that which causes the trier of fact to believe, more likely than not, the conclusion advocated is the correct conclusion. Id.
Mr. Dean testified in detail about the flooding that had occurred on the subject property during the approximately 15 years Complainants had owned the property. Mr. Dean presented evidence in the form of photographs depicting flooding on the subject property and flood damage to the home. Some of the photographs depicted flooding that had occurred in May 2017, five months after the tax date at issue. However, the TVM of the real property on January 1, 2017, is the basis for the assessed value. See Section 137.075 (Every person owning or holding real property or tangible personal property on the first day of January, including all such property purchased on that day, shall be liable for taxes thereon during the same calendar year). Any damage from flooding in May 2017 would not have adversely affected the TVM of the subject property on January 1, 2017. Mr. Dean acknowledged that, after the May 2017 flood, he realized that he needed to contact Respondent’s office to report the “trend” of flooding. Mr. Dean testified that Complainants possessed a flood insurance policy for the subject property and that damage from a flood in December 2015 had been repaired and necessary replacements had been made prior to January 1, 2017. Consequently, from Mr. Dean’s testimony concerning flood insurance, the reasonable inference is that Complainants had been made whole for the physical damage to the subject property caused by the December 2015 flood event.
Respondent presented the expert testimony and the appraisal report of a state certified residential real estate appraiser. The Appraiser used one of the three court-approved methods for valuing residential property to arrive at an opinion of TVM for the subject property, the sales comparison method. The Appraiser issued a report analyzing sales data from the chosen comparable properties. Importantly, the Appraiser made a significant negative adjustment to each of the comparable properties, which were not located in flood zones, to account for the subject property’s location in a flood zone. Furthermore, based on the comments in the narrative segments of the Appraiser’s report, it is clear that the Appraiser considered the subject property’s location in a flood zone in arriving at an opinion of the TVM of the subject property. All of the comparables were similar to the subject property, but Comparable No. 3 was weighted in the analysis as most similar to the subject property and had an adjusted TVM of $136,499. From this substantial and persuasive evidence, it is reasonable to conclude that Respondent rebutted the presumption of correct assessment by the BOE.
ORDER
The TMV for the subject property as determined by the BOE is SET ASIDE. The assessed value for the subject property for tax year 2017 is set at $26,030 residential ($137,000 TVM).
Application for Review
A party may file with the STC 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. Section 138.432, RSMo
Disputed Taxes
The Collector of Franklin 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 13, 2018.
STATE TAX COMMISSION OF MISSOURI
Amy S. Westermann
Senior Hearing Officer
Certificate of Service
I hereby certify that a copy of the foregoing has been sent electronically or mailed postage prepaid this 13th day of February, 2018, to: Complainants(s) counsel and/or Complainant, the County Assessor and/or Counsel for Respondent and County Collector.
Jacklyn Wood
Legal Coordinator
[1] Exhibit D was withdrawn.