Laclede Gas Company v. Cathy Rinehart, Assessor Clay County & David Cox, Assessor Platte County

September 6th, 2017

STATE TAX COMMISSION OF MISSOURI

LACLEDE GAS COMPANY,	) )
Complainant,	)
	)	Appeal No. 14-32002 – 32038
v.	)	15-32018 – 32097
	)
CATHY RINEHART, ASSESSOR,	)
CLAY COUNTY, MISSOURI,	)
	)
Respondent.	)
	)
	)
LACLEDE GAS COMPANY,	) )
Complainant,	)
	)	Appeal No. 14-79000 – 79024
v.	)	15-79013 – 79037
	)
DAVID COX, ASSESSOR,	)
PLATTE COUNTY, MISSOURI,	)
	)
Respondent.	)

ORDER

SETTING ASIDE HEARING OFFICER DECISION

UPON APPLICATION FOR REVIEW

HOLDING

The decisions of the County Boards of Equalization (Boards) of Clay County and Platte County are SET ASIDE. Laclede Gas Company (Complainant) presented substantial and persuasive evidence to rebut the presumption of correct assessments by the Boards.

Complainant appeared by attorneys Carl Pesce and Matthew Landwehr.

Cathy Rinehart, Assessor of Clay County (Respondents)[1], appeared by attorney Patricia Hughes.

David Cox, Assessor of Platte County (Respondents), appeared by attorney John R. Shank.

On September 6, 2017, Senior Hearing Officer John Treu (Hearing Officer) entered his Decision and Order (Decision) affirming the determinations of true value of money (TVM) by the Boards. Complainant subsequently filed its Application for Review of Hearing Officer’s Decision and Order. Respondents thereafter filed an Opposition to Complainant’s Application for Review. Complainant filed its Reply in Support of Its Application for Review of the Hearing Officer’s Decision and Order.

Upon application for review, STC reviews the appeal de novo. It is not bound by the findings of the Hearing Officer and may reach its own conclusions on the basis of the evidence previously submitted. Lebanon Properties I v. North, 66 SW3d 765, 770 (Mo Ct App SD 2002), Section 138.342 RSMo.

EXHIBITS

Complainant offered the following exhibits and written direct testimony (WDT):

Complainant’s Evidence as to Clay County Appeals

(14-32002 through 14-32038, 15-32018 through 15-32097)

Exhibit	Description
WDT	Lindsey Link (Link)
WDT	Robert Reilly (Reilly)
A	Declaration of Property as of January 1, 2014
B	FERC[2] Uniform System of Accounts
C	Declaration of Property as of January 1, 2015
D	Missouri Gas Energy (MGE) Meters Purchased 2013
E	Complainant’s Reponse to Respondent’s Interrogatories
F	Complaints for Review of Assessment
G	List of Property located in Clay County
H	Reilly Curriculum Vitae – 2014 & 2015
I	Appraisal Report of Real and Personal Property 2014 Appraisal Report of Real and Personal Property 2015 I-1: Supplemental Signature Page
J	Deposition of Gary Maurer with Exhibits 1-7, 13 & 14
K	MGE Declaration 2012
L	MGE Declaration 2013
M	Notice of Increase of Assessment 2014
N	Notice of Increase of Assessment 2015
O	Payment to Mika Koyama (Koyama) from Platte Co.
P	Excerpts from Koyama work file
Q	Lake Expo Article – Complainant’s purchase of subject property
R	Moody’s Article re Laclede’s Gas Rating Outlook Changes to Negative
S	Koyama Deposition Notice
T	Koyama Platte County Employment Application
U	2016-2017 Uniform Standards of Professional Appraisal Practice (USPAP)
Rebuttal Exhibits
WDT	Robert Reilly

Complainant’s Evidence as to Platte County Appeals

(14-79000 through 14-79024, 15-79013 through 15-79037)

Exhibit	Description
WDT	Lindsey Link (Link)
WDT	Robert Reilly (Reilly)
A	Declaration of Property as of January 1, 2014
B	Overhead Costs
C	Declaration of Property as of January 1, 2015
D	Complaints for Review of Assessment
E	List of Property located in Clay County – 2014 & 2015
F	Reilly Curriculum Vitae – 2014 & 2015
G	Appraisal Report of Real Property 2014 Appraisal Report of Real Property 2015 G-1: Supplemental Signature Page
O	Payment to Mika Koyama (Koyama) from Platte Co.
P	Excerpts from Koyama work file
Q	Lake Expo Article – Complainant’s purchase of subject property
R	Moody’s Article re Laclede’s Gas Rating Outlook Changes to Negative
S	Koyama Deposition Notice
T	Koyama Platte County Employment Application
U	2016-2017 Uniform Standards of Professional Appraisal Practice (USPAP)
Rebuttal Exhibits
WDT	Robert Reilly

Respondent’s Evidence

Respondent filed the following exhibits, which were admitted into evidence:

Exhibit	Description
WDT	Koyama
WDT	Shelley Lafave (Lafave)
Suppl. WDT	Lafave
Exhibit 1	Valuation Report of Koyama
Exhibit 1-A	A- Complaints for Review of Assessment (Case No.14-79000 thru 14-79024)
Exhibit 1-B	Complaints for Review of Assessment (Case No.15-32018 thru 15-32057)
Exhibit 1-C	Complaints for Review of Assessment (Case No.15-79013 thru 15-79037)
Exhibit 1-D	Assessment Rules -Assessor’s Manual, Code of State Regulations & Missouri Revised Statutes
Exhibit 1-E	Laclede’s Declarations – 2015 Clay County
Exhibit 1-F	Laclede’s Declarations – 2014 Platte County
Exhibit 1-G	Laclede’s Declarations – 2015 Platte County
Exhibit 1-H	Area and County Information
Exhibit 1-I	Federal and State regulatory agency
Exhibit 1-J	FERC Code Descriptions
Exhibit 1-K	Natural Gas Regulation & Infrastructure Replacement Surcharge
Exhibit 1-L	Automatic Meter Reading Systems
Exhibit 1-M	Laclede Company Information
Exhibit 1-N	Laclede 2015 Annual Report
Exhibit 1-O	Asset Acquisition Statement (Form8594)
Exhibit 1-P	Contributions in Aid of Construction (CIAC) Documents
Exhibit 1-Q	2012 Valuation Summary by MGE
Exhibit 1-R	2013 Valuation Report by Duff & Phelps
Exhibit 1-S	Definitions
Exhibit 1-T	Qualification
Exhibit 2	Report of Lafave
Appendix 2- A	MGE/Laclede’s 2014 Declaration
Appendix 2-B	MGE/Laclede’s 2015 Declaration
Appendix 2-C	MGE’s 2012 Declaration
Appendix 2-D	Comparison of Declarations
Appendix 2-E	Excerpts from Deposition of Link
Appendix 2-F	Original costs by FERC code, Bates 103
Appendix 2-G	Calculation of Installation Costs Reported in Years Prior to 1/2/2006
Appendix 2-H	FERC code descriptions
Appendix 2-I	-NONE-
Appendix 2-J	Laclede Sept 30, 2015 10K report, pages 122 and 123 of 239.
Exhibit 3	Excerpts from 10K
Exhibit 4	Correction pages for Exhibit 1
Exhibit 5	MGE 2014 annual report excerpt
Exhibit 6	Laclede 2014 annual report excerpt
Exhibit 7	Supplement to Exhibit 2C
Exhibit 8	Materials regarding useful life
Exhibit 9	Calculation summaries
Rebuttal
Rebuttal WDT	Mika Koyama
Surrebuttal WDT	Mika Koyama

The following exhibits were not admitted into evidence:

Exhibit	Description
Exhibit 10	STC Form
Exhibit 11	Portion of Assessor Manual
Exhibit 12	20 CSR 2245-9.010
Exhibit 13	Portion of Preamble of USPAP 2016-2017 Edition
Exhibit 14	Deposition Transcript of Matthew Voelker
Exhibit 15	Gas Annual Report
Exhibit 16	MGE Work Order Document

Complainant is a regulated utility company that provides natural gas service by means of gas service lines, mains and other facilities to customers in multiple counties throughout Missouri as part of an integrated system. Complainant operated over 600,000 miles of service lines throughout Missouri as of the subject valuation dates.

Complainant is regulated by FERC and the Missouri Public Service Commission (PSC).

PSC regulates investor-owned utilities operating in the state and sets the rates, which must be set at a level that will provide the companies’ shareholders with the opportunity, not a guarantee, to earn a reasonable return on their investment. The utilities report cost of their assets to the PSC, the cost of the assets impacts rates as utilities are allowed to make a return of and on their assets.

In September 2013, Complainant acquired the assets of MGE thereby expanding its natural gas operations to thirty-one additional counties in the western half of Missouri. Complainant’s area expanded to include communities in Clay and Platte counties. Complainant purchased MGE due to MGE’s assets proximity to Complainant’s assets. Duff & Phelps, a company providing business valuation and reporting services, provided Complainant with a valuation report at the time of the acquisition. Duff & Phelps’ valuation was a business valuation and not an opinion of value for the real and personal property. They affirmed the purchase price of MGE was within the acceptable range.

The acquisition of the assets of MGE was approved by the PSC. PSC set conditions on the acquisition such as not seeking a rate increase for a period of time. MGE transaction was expected to generate “all types of going forward synergies and economies of scale and post-merger benefits and unique economies of scale,” “realize the benefit of a shared workforce, a shared database, shared gas purchase contracts, below market purchase contracts, shared computer software, shared storage fields, shared storage tanks [and] shared city gait prices.” The prior MGE assets, which make up Complainant’s existing assets in Clay and Platte Counties, were expected to be more profitable due to Complainant’s operations and its more favorable contracts.

Complainant has both real property and business personal property in Clay and Platte Counties. Complainant maintains taps, pipes in the streets to curb boxes, pipes to buildings, shut off valves, etc., for retail distribution customers. Real property consists of underground piping and gas mains. The mains are of varying age, material and size. Personal property consists of measuring and regulating equipment, meters and regulators. Complainant’s property also includes new assets that are being constructed and assets that are provided by others to assist in construction and expansion of the gas distribution system.

Complainant filed its 2014 and 2015 property tax declarations for Clay and Platte Counties. The declarations reported real and tangible personal property owned by Complainant in Clay and Platte Counties. The property report was taken from Complainant’s Fixed Asset Record, which contains the vintage year, FERC account, location of property within Clay and Platte Counties, and the original cost of all property. The information in the Fixed Asset Record is taken from work orders that field workers generate when installing new property – i.e., mains, meters, and service lines. The Fixed Asset Record is audited by accountants with an outside company, Deloitte. They may also be audited by the PSC. The Fixed Asset Record is also relied on by the PSC for ratemaking purposes. The Fixed Asset Record, however, does not include all real and personal property of Complainant because PSC does not allow for a return on items such as contributions in aid of construction and construction work in progress, although once construction work is completed, PSC would approve inclusion of the property for rate base.

Clay and Platte County Assessors rejected Complainant’s 2014 and 2105 declarations and calculated the Complainant’s property valuations utilizing declarations filed in prior years by MGE.

The following values were (1) proposed by the Complainant on their declarations; (2) set by Respondents using MGE’s prior declarations, and (3) determined by the Boards upon appeal:

	Clay			Platte
	2014 Personal	2015 Personal	2015 Real	2014 Real	2015 Real
(1) Complainant’s Declaration	$6,200,000	$6,4000,000	$38,000,000	$13,900,000	$14,600,000
(2) Respondent’s TVM	$11,300,000	$11,100,000	$79,200,000	$20,200,000	$19,000,000
(3) Boards’ TVM	$11,300,000	$11,100,000	$79,200,000	$20,200,000	$19,000,000

After receiving the decision of the Boards, Complainant filed Complaints for Review of Assessment with the STC. Parties were provided schedules to allow time for discovery and submission of appraisal evidence in advance of the hearing on the Complaints.

Complainant presented the testimony of Link and Reilly. Link is employed by Complainant. She maintains the filings with the PSC and county assessors. She utilized the Fixed Asset Record in completing the declarations to the counties in 2014 and 2015. Reilly is employed by Williamette Management Associates. He has a degree in economics and a master of business administration in finance. He is a certified public accountant and a Missouri General Real Estate Appraiser. Reilly has worked with regulated utility companies. He has valued utility companies for over 40 years and has valued hundreds of utility type properties. He has previously testified as an expert before courts and administrative agencies. Reilly has authored articles on public utility valuations. He appraised the properties for the 2014 and 2015 ad valorem appeals.

Reilly used a unit valuation method to value Complainant’s property. In the Unit Valuation Method, the appraiser opines the TVM of the integrated system and then allocates a portion of the value to the unit in question, in this case, allocating to the counties and allocating to real and personal property. As part of his unit valuation, he developed all three approaches to value – cost, income and market approaches.

For the cost approach, Reilly used historical or original costs less depreciation. He used the approach because it is a rate-based approach. Historical costs and depreciation are found in the regulatory filings with PSC. He estimated the life of the assets using life permitted by FERC. He also adjusted for economic obsolescence and intangible assets.

Reilly defined the economic obsolescence in his report as “a reduction in the value of property due to the effects, events, or conditions that are external to – and not controlled by – the current use or condition of the property.” He testified that economic obsolescence is “[w]e wanted to earn X% return. We are actually earning a Y% return. Y is less than X. The percentage difference translates into economic obsolescence.”

Reilly found economic obsolescence in his cost approach for the unit valuation as he opined that Complainant was not earning the full rate of return as approved by the PSC. Reilly’s economic calculations were based upon Complainant’s actual financial information. His estimate of economic obsolescence was calculated using five methods:

Reilly compared an actual return measure with a required return measure. Under this method, the economic obsolescence was determined to be 49% in 2014 and 33% in 2015;
Reilly compared the retun on equity to the cost of equity capita. Under this method, the economic obsolescence was determined to be 56% in 2014 and 44% in 2015;
Reilly compared the actual return on the total unit to the required return on the total unit. Under this method, the economic obsolescence was determined to be 56% in 2014 and 41% in 2015;
Reilly reviewed the economic obsolescence in the natural gas distribution industry. Under this method, the economic obsolescence was determined to be 29% in 2014 and 23% in 2015; and
Reilly analyzed Complainant’s earning ratios. Under this method, the economic obsolescence was determined to be 43% in 2014 and 28% in 2015.

In developing the income approach, Reilly used the direct capitalization method. The general formula for the income approach is dividing the net operating income by the capitalization rate. In calculating the income of the Complainant, Reilly relied on PSC and FERC filings. He reviewed historical income statements from 2010 to 2014 to estimate the net operating income. To calculate the capitalization rate, the long-term growth rate (0%) was subtracted from the yield capitalization rate (7%). Reilly explained that his 0% growth rate was based on the limitations of Complainant in expanding rate base. Reilly further stated that long-term growth rate is not rate increases. For a growth rate, Complainant would need to increase growth in their regulated utility.

Lastly, Reilly developed a market approach by comparing the operating performance of similar companies. In developing his market approach, Reilly used the stock and debt approach and reviewed publicly traded companies and compared their operating performance. His criteria for the companies to analyze included:

SIC code 4920 (regulated gas distribution companies);
The natural gas companies within gas distribution companies;
Revenue no larger than five times Complainant’s and no less than 20%; and
United State companies which are actively traded.

Reilly found five companies meeting his criteria. He then reviewed their stock prices, revenues and earnings before interest, taxes and amortization (EBITA). From the review of information, he selected a price revenue multiplier, price EBIT and a price EBITA.

After developing the three approaches to value, Reilly reconciled the determinations for an opinion of the unit valuation for 2014 and 2015. The resulting determinations of TVM for the entire unit were:

	2014	2015
Cost Approach	$1,280,000,000	$1,610,000,000
Income Approach	$1,110,000,000	$1,590,000,000
Market Approach	$1,350,000,000	$1,620,000,000
Reconciled TVM	$1,226,000,000	$1,604,000,000

After reconciling the estimated valuations from each of the approaches to value, Reilly allocated a portion of the unit value to Clay and Platte Counties. Reilly’s allocation is based upon reported original cost and net book value. The cost data and depreciation are reported in the Complainant’s PSC filings.

The net book value of all of Complainant’s assets as of December 2013 was $1.42 billion. He determined that the assets in Clay County in 2013 were valued at $72.61 million, therefore Clay County had approximately 5.1% of the unit’s value. He calculated the percentage of assets again using original cost instead of net book value and calculated Clay County had approximately 5.51% of the unit’s value. He averaged the two results for an allocated value of 5.3% to Clay County in 2014. From that determination of percentage of unit value in Clay County, he then allocated a value to real property and to personal property. Using a method similar to his allocation to county method, he allocated 14.6% of Clay County’s value to personal property and 85.4 % to real property. Therefore, personal property in Clay County in 2014 was valued at $7.1 million.

He followed the same methodology in 2015 for Clay County and used the same methodology for allocating the value to the real property in Platte County in 2014 and 2015. Reilly opined the valuation of the personal property in Clay County in 2015 was $8.9 million and the valuation of real property was $52,500,000. Riley opined the valuation of Complainant’s real property in Platte County in 2014 was $16,700,000 and in 2015 was $20,800,000.

Respondents presented witnesses Koyama and Lafave. Lafave is employed with Clay County. She values business personal property. Lafave is not a certified appraiser. Lafave testified as to the valuation of Complainant’s personal property in Clay County in 2014 and 2015. Lafave received Complainant’s declarations in 2014 and 2015. Lafave compared the declarations of MGE from 2012 and 2013 to Complainant’s declarations. Lafave noted a decrease in the valuation reported to Respondent. Lafave stated that when she inquired about the decrease in value from year to year, Complainant reported that in review of MGE’s prior declarations, MGE inappropriately reported installation costs of their personal property. Further, Complainant reported all their personal property under the methodology set forth in Section 137.122 RSMo which applies only to property in service after January 2, 2006. Lafave also had concerns regarding Complainant’s reports on the location of the assets within Clay County. Lafave’s orginal determination of TVM was based upon MGE’s declaration from 2012 and any additions reported for 2013 and 2014. Her report, Exhibit 2, sets forth that “[w]e have analyzed the Net Book Value of personal property reported by [Complainant]….I have read and reviewed Ms. Koyama’s sales analysis in Exhibit 1 and believe that it is well documented and an excellent indicator of the market value of [Complainant’s] Personal property in Clay County.”

Her final opinion of TVM for Complainant’s personal property in Clay County was $12,000,000 for 2014 and 2015.

Koyama testified as to the real and personal property in both Clay and Platte Counties in 2014 and 2015. She has worked for Clay County Assessor’s Office since August 2006. She was a commercial appraiser for the office from 2008-2010. Koyama is a Missouri Certified Real Estate Appraiser. Her prior experience includes preparing an appraisal involving a 10-acre vacant lot. She is currently a systems and standards analyst for the computer-assisted mass appraisal system. She does not have experience in the areas of appraising personal property or utility companies.

Koyama used the cost approach to value and she reviewed the sale of MGE to Complainant. She reviewed reports regarding the sale of MGE to Complainant and based upon those reports determined it was a fair market transaction. In her cost approach, Koyama used Complainant’s original cost and a depreciation based upon a 50 year life for the assets with a floor of 20% good.

Her allocation of the value to Clay and Platte Counties was based upon the allocation MGE’s appraiser used in a 2012 appraisal.

Koyama opined the TVM of the personal property in Clay County for years 2014 and 2105 to be $12,000,000. Koyama opined the TVM of the real property in Clay County in 2015 to be $73,763,600. Koyama opined the TVM of the real property in Platte County in 2014 to be $30,118,764 and in 2015 to be $30,566,533.

Summary of Valuations

	Clay			Platte
	2014 Personal	2015 Personal	2015 Real	2014 Real	2015 Real
Complainant’s Declaration	$6,200,000	$6,4000,000	$38,000,000	$13,900,000	$14,600,000
Respondent’s TVM	$11,300,000	$11,100,000	$79,200,000	$20,200,000	$19,000,000
Board’s TVM	$11,300,000	$11,100,000	$79,200,000	$20,200,000	$19,000,000
Reilly	$7,100,000	$8,900,000	$52,500,000	$16,700,000	$20,800,000
Koyama/Lafave	$12,000,000	$12,000,000	$73,800,000	$30,100,000	$30,500,000

ISSUE

Complainant appeals, on the ground of overvaluation, the decisions of the Boards. The STC takes these appeals to determine the TMV for the subject properties on January 1, 2014, and January 1, 2015.

The STC, having considered all of the competent evidence upon the whole record, enters the following Decision and Order.

FINDINGS OF FACT

Jurisdiction. Jurisdiction over these appeals is proper. Complainant timely appealed to the STC.
Evidentiary Hearing. The Appeal was assigned to a Hearing Officer. Evidentiary Hearing was held on March 29, 2017, and March 30, 2017, in Liberty, Clay County, Missouri. The Hearing Officer entered his Decision and Order on September 6, 2017. Complainant filed an Application for Review. The STC granted the application for review of Complainant. The STC reviewed the entire record including the evidence previously submitted and determines that Complainant presented substantial and persuasive evidence to rebut the presumption of correct assessment by the Boards.
Identification and Description of Subject Property. Complainant is a regulated gas distribution company. It has both real property and business personal property in Clay and Platte Counties. Real property consists of underground piping and gas mains. The mains are of varying age, material and size. Personal property consists of measuring and regulating equipment, meters and regulators.
Appeals. Complainant appeals the following types of property in each county for the following years:

Clay County	2014	Personal Property Only
	2015	Both Real and Personal Property
Platte County	2014	Real Property Only
	2015	Real Property Only

Assessment of the Appealed Commercial Real Property and Business Personal Property in 2014 and 2015.

Clay County	2014	Personal Property	$11,323,556 TMV
	2015	Real Property	$7,931,600 TMV
	2015	Personal Property	$11,109,118 TMV
Platte County	2014	Real Property	$20,208,345 TMV
	2015	Real Property	$19,026,476 TMV

Presumption of Correct Assessment Rebutted. Complainant’s evidence was substantial and persuasive to rebut the presumption of correct assessment by the Boards and establish the TMV as of January 1, 2014 and January 1, 2015. The TVM of the subject properties is:

2014 Clay County personal property $7,100,000
2015 Clay County personal property $8,900,000
2015 Clay County real property $52,500,000
2014 Platte County real property $16,700,000
2015 Platte County real property $20,800,000

CONCLUSIONS OF LAW

Jurisdiction

The STC has jurisdiction to hear these appeals and correct any assessments which are shown to be unlawful, unfair, arbitrary or capricious. The STC shall issue a decision and order affirming, modifying or reversing the determinations of the Boards, and correcting any assessments which are unlawful, unfair, improper, arbitrary, or capricious. Article X, Section 14, Mo. Const. of 1945; Sections 138.430, 138.431, 138.431.4, RSMo.

Standard of Review

A party subject to a Decision and Order of a Hearing Officer with the State Tax Commission may file an application requesting the case be reviewed by the Commission. Section 138.432 RSMo Cum. Supp. 2015. The Commission may then summarily allow or deny the request. Section 138.432. The Commission may affirm, modify, reverse, set aside, deny, or remand to the Hearing Officer the Decision and Order of the Hearing Officer on the basis of the evidence previously submitted or based on additional evidence taken before the Commission. Section 138.432.

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 and tangible personal property are assessed at set percentages of true value in money. Section 137.115.5, RSMo –commercial property at 32% of true value in money.

Presumption In Appeal

There is a presumption of validity, good faith and correctness of assessment by the County Boards. 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 Board’s valuation is erroneous and what the fair market value should have been placed on the property. Hermel, supra; Cupples-Hesse Corporation v. State Tax Commission, 329 S.W.2d 696, 702 (Mo. 1959).

TVM

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. “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., 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).

Methods of Valuation

Proper methods of valuation and assessment of property are delegated to the STC. It is within the purview of the STC 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).

The STC 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 STC 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).

Personal Property

Section 137.122 RSMo. provides a statutory standardized methodology for county assessors to “estimate the value of depreciable tangible personal property for mass appraisal purposes” relying upon the federal Modified Accelerated Cost Recovery System (MACRS) life tables to determine the appropriate “class life” of depreciable tangible personal property used in a trade or business or for production of income “to establish uniformity in the assessment of depreciable tangible personal property. . .” Section 137.122 RSMo applies to business personal property placed in service after January 2, 2006. A property is “placed in service” when it is ready and available for a specific use, whether or not actually in use. The methodology presented by Section 137.122 RSMo is a cost approach to value, with more than straight line (normal) depreciation. The statute provides that if the personal property valuation is appealed, “the estimation may be disproved by substantial and persuasive evidence of the true value in money under any method determined by the state tax commission to be correct, including, but not limited to, an appraisal of the tangible personal property specifically utilizing generally accepted appraisal techniques, and contained in a narrative appraisal report in accordance with the Uniform Standards of Professional Appraisal Practice…” Section 137.122 RSMo.

Fixtures

Property which is otherwise personal property can be treated as real property when it is attached to land or a building and is regarded as an irremovable part of the real property. Black’s Law Dictionary, 7^th Edition, 199 p. 652. A pipeline may be considered a fixture as it may be regarded as an irremovable part of the real property. Missouri has codified that interpretation in Section 137.010 RSMo in the definition of real property:

137.010. (4) “Real property” includes land itself, whether laid out in town lots or otherwise, and all growing crops, buildings, structures, improvements and fixtures of whatever kind thereon, hydroelectric power generating equipment, the installed poles used in the transmission or reception of electrical energy, audio signals, video signals or similar purposes, provided the owner of such installed poles is also an owner of a fee simple interest, possessor of an easement, holder of a license or franchise, or is the beneficiary of a right-of-way dedicated for public utility purposes for the underlying land; attached wires, transformers, amplifiers, substations, and other such devices and appurtenances used in the transmission or reception of electrical energy, audio signals, video signals or similar purposes when owned by the owner of the installed poles, otherwise such items are considered personal property; and stationary property used for transportation or storage of liquid and gaseous products, including, but not limited to, petroleum products, natural gas, propane or LP gas equipment, water, and sewage; (emphasis added).

Real Property

“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). 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). “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

The Supreme Court of Missouri has also held that evidence of the actual sales price of property is admissible to establish value at the time of an assessment, provided that such evidence involves a voluntary purchase not too remote in time. The actual sale price is a method that may be considered for estimating true value. St. Joe Minerals Corp. v. STC, 854 S.W.2d 526, 529 (App. E.D. 1993)

The income approach determines value by estimating the present worth of what an owner will likely receive in the future as income from the property. The income approach is based on an evaluation of what a willing buyer would pay to realize the income stream that could be obtained from the property when devoted to its highest and best use. When applying the income approach to valuing income-producing real property for ad valorem tax purposes, it is not proper to consider income derived from the business and personal property; only income derived from the land and improvements should be considered. This approach is most appropriate in valuing investment-type properties and is reliable when rental income, operating expenses and capitalization rates can reasonably be estimated from existing market conditions.

The cost approach is based upon the premise that a potential user of real estate would not pay more for a property than it would cost to build an equivalent. The basis is the cost of construction of the property minus depreciation, plus land (for real property). The 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.

The cost approach may be based on either reproduction cost or replacement cost. The reproduction cost, or cost of construction, is a determination of the cost of constructing an exact duplicate of an improved property using the same materials and construction standards. The replacement cost is an estimate of the cost of constructing a building with the same utility as the building being appraised but with modern materials and according to current standards, design and layout. The cost approach to value provides an indication of value that is the sum of the land value and depreciated costs of improvements. The steps of the cost approach include estimating the value of the land, estimating the cost new of improvements including direct and indirect costs, and estimating the depreciation attributable to physical deterioration, functional obsolescence and economic obsolescence. Economic obsolescence is a loss in value as a result of impairment of utility and desirability. One method of measuring the depreciation is the capitalization of income method. Under the income method, an estimate of depreciation is calculated by capitalizing the net income of the subject property into an estimate of value and deducting the site value. The indicated improvement value is compared with the cost new estimate to estimate the percentage of improvement value remaining.

Complainant’s Burden of Proof and Evidence

In an appeal before the STC, the taxpayer is the moving party seeking affirmative relief. Substantial and persuasive controverting evidence is required to rebut the presumption of correct assessment by the Boards, with the burden of proof resting on the taxpayer. Cohen, 251 S.W.3d at 348. 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 tax day. Hermel, Inc., v. State Tax Commission, 564 S.W.2d 888, 897 (Mo. banc 1978).

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).

Weight to be Given Evidence

STC 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 STC 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).

Opinion Testimony by Experts

An expert’s opinion must be founded upon substantial information, not mere conjecture or speculation, and there must be a rational basis for the opinion. Missouri Pipeline Co. v. Wilmes, 898 S.W. 2d 682, 687 (Mo. App. E.D. 1995). The STC cannot ignore a lack of support in the evidence for adjustments made by the expert witnesses in the application of a particular valuation approach. Drey v. State Tax Commission, 345 S.W. 2d 228, 234-236 (Mo. 1961), Snider v. Casino Aztar/Aztar Missouri Gaming Corp., 156 S.W. 3d, 341, 348 (Mo. 2005).

The testimony of an expert is to be considered like any other testimony, is to be tried by the same test, and receives just so much weight and credit as the trier of fact may deem it entitled to when viewed in connection with all other circumstances. The STC, as the trier of fact, has the authority to weigh the evidence and 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 may accept it in part or reject it in part. Beardsley v. Beardsley, 819 S.W. 2d 400, 403 (Mo. App. 1991); Curnow v. Sloan, 625 S.W. 2d 605, 607 (Mo. 1981); Scanlon v. Kansas City, 28 S.W. 2d 84, 95 (Mo. 1930).

Discussion

Complainant presented the testimony of Link and Reilly and an appraisal report of Reilly. Link[3] identified all the real and personal property within the counties. Reilly valued the properties. Reilly has significant experience in valuing utility properties and has testified as an expert witness before federal and state courts. Reilly has authored articles and manuals on the subject for IAAO[4] and the Institute of Property Taxation.

Reilly applied all three property valuation approaches to opine a TVM. Reilly valued the properties using the Unit Valuation Method. The method is recognized in the State of Missouri and is used by the Missouri State Tax Commission when valuing state assessed utility and railroad property. The methodology is generally accepted as the appropriate way to value utilities because the assets are physically, functionally, and economically interdependent. In the Unit Valuation Method, the appraiser opines the TVM of the integrated system and then allocates a portion of the value to the unit in question (county).

In developing the cost approach, Reilly used historical cost less depreciation. Reilly testified he used the approach because it is a rate-based approach. Historical costs and depreciation are found in the regulatory filings with PSC and FERC. He estimated the life of the assets using life permitted by FERC. Reilly also analyzed other obsolescence and intangible assets of Complainant.

Reilly also developed the income approach to TVM using the direct capitalization method. The general formula for the income approach is dividing the net operating income by the capitalization rate. In calculating the income of the Complainant, Reilly relied on PSC and FERC filings. Historic income and expenses were used to develop the net operating income. To calculate the capitalization rate, the long-term growth rate (0%) was subtracted from the yield capitalization rate (7%).

In developing his sales approach, Reilly used the stock and debt approach and reviewed publicly traded companies and compared their operating performance. His criteria for the companies to analyze included:

SIC code 4920 (regulated gas distribution companies)
Natural gas companies
Revenue no larger than five times Complainant’s and no less than 20%; and
United State companies which are actively traded.

Reilly selected five companies meeting his criteria. He then reviewed their stock prices, revenues and earnings before interest, taxes and amortization (EBITA). From the review of information, he selected a price revenue multiplier, price EBIT and a price EBITA.

After development of all the three approaches to value – the sales, income and cost approaches, he reconciled the indications of value. Once he concluded a valuation of the entire unit value of Complainant, he then allocated the value to the counties and then to the classification of property – real or personal. Reilly’s allocation is based upon reported original cost and net book value. The cost data and depreciation are reported in the Complainant’s PSC filings.

Respondent presented witnesses Koyama and Lafave. They are employees of the counties and testified as to the cost of approach to value utilizing a methodology within the Assessor’s Manual for mass appraisal purposes.

Lafave testified as to the TVM of Complainant’s personal property in Clay County in 2014 and 2015. Lafave received Complainant’s declarations in 2014 and 2015. Lafave compared the declarations of MGE from 2012 and 2013 to Complainant’s declarations. Lafave noted a decrease in the valuation reported to Respondent.

Lafave determined the TVM using MGE’s declaration from 2012 and any additions reported for 2013 and 2014. Lafave testified that she endorsed Koyama’s determination of TVM.

Koyama testified as to the real and personal property in both Clay and Platte Counties in 2014 and 2015. Koyama used the cost approach to value and she reviewed the sale of MGE to Complainant. In her cost approach, Koyama used Complainant’s original cost and a depreciation based upon a 50 year life for the assets with a floor of 20% good.

Koyama did not do a sales comparison approach. She reviewed reports regarding the sale of MGE to Complainant and based upon those reports determined it was a fair market transaction.

Her allocation of the value to Clay and Platte Counties was based upon the allocation MGE’s appraiser used in a 2012 appraisal.

Conclusion

While both parties presented the testimony of certified appraisers, the education and experience of the experts as well as their supporting documentation must be considered when weighing the evidence. Reilly is a certified appraiser that has been valuing utility companies for over 40 years. He has extensive experience, education and training in valuation of complex utility properties. He has valued hundreds of utility type properties. He valued the property utilizing documents filed with the PSC and FERC. His appraisal report and opinion of value are compliant with the Uniform Standards of Professional Appraisal Practice (USPAP). Koyama, although a certified appraiser, has no experience with utility valuation.

STC, as the trier of fact, is not bound by the opinions of experts but may believe all or none of the expert’s testimony, accept it in part, or reject it in part. STC weighed the testimony and evidence presented by both parties. Portions of Reilly’s report are subject to disagreement. The disagreements include the methodology used to calculate economic obsolescence. The method has been criticized in its application and calculation as the income factors used to calculate the economic obsolescence influence the indication of value under the cost approach thereby lessening the independence of the determination of value under that approach.

Although disagreements may arise as to the adjustments or portions of the development of one approach, the overall methodology and opinion of value rendered by Reilly is persuasive. Complainant’s evidence was of sufficient weight and probative value to adequately support their conclusion and convince the STC of the TVM of the subject property as of January 1, 2014 and January 1, 2015.

ORDER

The TVM for the subject property as determined by the Boards is SET ASIDE. The TVM for the subject property is:

	Clay			Platte
	2014 Personal	2015 Personal	2015 Real	2014 Real	2015 Real
TVM	$7,100,000	$8,900,000	$52,500,000	$16,700,000	$20,800,000
Assessed Value	$2,366,667	$2,966,667	$16,800,000	$5,344,000	$6,656,000

Segments of the Decision and Order of the Hearing Officer, including the findings of fact and conclusions of law therein, have been incorporated without reference, as if set out in full, in this final decision of the STC.

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 mailing date set forth in the Certificate of Service for this Order.

If judicial review of this decision is made, any protested taxes presently in an escrow account in accordance with this appeal shall be held pending the final decision of the courts unless disbursed pursuant to Section 139.031.8, RSMo.

If no judicial review is made within thirty days, this decision and order is deemed final and the Collector of Clay County and the Collector of Platte 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.

SO ORDERED this 7th day of August, 2018

STATE TAX COMMISSION OF MISSOURI

Bruce E. Davis, Chairman

Victor Callahan, Commissioner

Will Kraus, Commissioner

Certificate of Service

I hereby certify that a copy of the foregoing has been sent electronically or mailed postage prepaid this 7th day of August, 2018, to: Complainants(s) counsel and/or Complainant, the County Assessor and/or Counsel for Respondent and County Collector.

Jacklyn Wood

Legal Coordinator

[1] Due to consolidation of the appeals for hearing, “Respondents” references both assessors.

[2] Federal Energy Regulatory Commission

[3] Link is an accountant with Complainant. She completed the initial property declarations to the counties. Respondent takes issue with her declarations for, among other things, removal of installation cost from the real property and failure report contributions in aid of construction and other assets. Reilly performed a unit valuation considering all three approaches to value. His cost approach was not a summation approach relying on Link’s listing of assets. Since he is the expert whose opinion Complainant is relying upon to establish TVM and whose testimony is deemed substantial and persuasive by the STC, a discussion of Link’s testimony and initial declarations are not set forth in this Decision.

[4] International Association of Assessment Officials

State Tax Commission of Missouri

LACLEDE GAS COMPANY,	)
	)
Complainant,	)
	)
v.	)
	)
CATHY RINEHART, ASSESSOR,	)	Appeals	14-32002 through 14-32038
CLAY COUNTY, MISSOURI,	)		15-32018 through 15-32097
	)		(15-32059,15-32065 &
Respondent	)		15-32092 dismissed])
	)
and	)
	)
DAVID COX, ASSESSOR,	)		14-79000 through 14-79024
PLATTE COUNTY, MISSOURI	)		15-79013 through 15-79037
	)
Respondent.	)

DECISION AND ORDER

HOLDING

The decisions of the County Boards of Equalization (Boards) of Clay County and Platte County are AFFIRMED. Laclede Gas Company (Complainant) failed to present substantial and persuasive evidence to rebut the presumption of correct assessments by the Boards.

Complainant appeared by attorneys Carl Pesce and Matthew Landwehr.

Cathy Rinehart, Assessor of Clay County (Respondents)[1], appeared by attorneys Patricia Hughes.

David Cox, Assessor of Platte County (Respondents), appeared by attorney John R. Shank.

Case heard by Senior Hearing Officer John J. Treu (Hearing Officer).

ISSUE

Complainant appeals, on the ground of overvaluation, the decisions of the Boards, which sustained the valuations of the subject properties. The State Tax Commission (STC) takes these appeals to determine the true value in money (TMV) for the subject properties on January 1, 2014, and January 1, 2015.

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 these appeals is proper. Complainant timely appealed to the STC.
Evidentiary Hearing. The Evidentiary Hearing was held on March 29, 2017, and March 30, 2017, in Liberty, Clay County, Missouri.
Identification and Description of Subject Property and Description of Accounting. Complainant owns and operates a gas utility. It is a monopoly. Complainant is a regulated by the Federal Energy Regulatory Commission and the Missouri Public Service Commission (PSC). Public utility rates are regulated. As a regulated utility, Complainant is entitled to a reasonable return and recoupment of its investment. Public utilities in Missouri can seek rate increases from the PSC.

Complainant has both real property and business personal property in Clay and Platte Counties. Complainant maintains taps, pipe in the streets to curb box, pipes to buildings, shut off valves, etc., for retail distribution customers. Real property consists of underground piping and gas mains. The mains are buried underground. The mains are of varying age, material and size. Personal property consists of measuring and regulating equipment, meters and regulators. Measuring and regulating equipment reduce the line pressure for distribution. Meters vary in size from small household to large industrial meters.

In September 2013, Complainant acquired the assets of Missouri Gas Energy (MGE). The PSC approved the acquisition of MGE. In order to acquire MGE, Complainant had to agree to certain conditions, such as not seeking a rate increase for a period of time. Complainant made the internal decision to accept such conditions and proceed with the acquisition of MGE. The acquisition of MGE’s assets expanded Complainant’s operation by thirty-one additional counties in the western half of Missouri and permitted Laclede to take over delivery of natural gas to over 155 western Missouri communities, including communities in Clay and Platte counties. [2]

Complainant’s appraiser, Robert Reilly, testified that he talked with Complainant’s management to assist in his appraisal. Reilly stated that Complainant’s management said that the MGE transaction was expected to generate “all types of going forward synergies and economies of scale and post-merger benefits and unique economies of scale.” (Transcript, Pg. 311) Complainant’s appraiser also stated that Laclede was close enough to MGE geographically to “realize the benefit of a shared workforce, a shared database, shared gas purchase contracts, below market purchase contracts, shared computer software, shared storage fields, shared storage tanks [and] shared city gait prices.” (Transcript Pgs. 311-12) The prior MGE assets, which make up Complainant’s existing assets in Clay and Platte Counties, were expected to be more profitable by Complainant integrating the prior MGE’s assets into Complainant’s system, taking advantage of Complainant’s sophistication and its more favorable contracts.

Appeals. Complainant appeals the following types of property in each county for the following years:

Clay County	2014	Personal Property Only
	2015	Both Real and Personal Property
Platte County	2014	Real Property Only
	2015	Real Property Only

Assessment of the Appealed Commercial Real Property and Business Personal Property in 2014 and 2015.

Clay County	2014	Personal Property	$11,323,556 TMV
	2015	Real Property	$7,931,600 TMV
	2015	Personal Property	$11,109,118 TMV
Platte County	2014	Real Property	$20,208,345 TMV
	2015	Real Property	$19,026,476 TMV

Complainant’s Evidence[3]. The following evidence was filed by Complainant:

Complainant’s Exhibits and Written Direct Testimony (WDT) (Clay County)

Exhibit	Description	Offered	Admitted
WDT*	Lindsey Link	Yes	Yes
WDT*	Robert Reilly	Yes	Yes
Rebuttal WDT*	Robert Reilly	Yes	Yes
Exhibit A	Declaration of Missouri Gas Energy, a division of Laclede Gas Company, Property as of January 1, 2014 (Filed as Clay County Ex. A, 14-32002-15-32097)	Yes	Yes
Exhibit B	FERC Uniform System of Accounts for Natural Gas Companies; Code of Federal Regulations Title 18, Chapter 1, Subchapter F, Part 201 (Filed as Clay County Ex. B, 14-32002-15-32097)	Yes	Yes
Exhibit C	Declaration of Missouri Gas Energy, a division of Laclede Gas Company, Property as of January 1, 2015 (Filed as Clay County Ex. C, 14-32002-15-32097)	Yes	Yes
Exhibit D	Missouri Gas Energy Meters Purchased 2013 (Filed as Clay County Ex. D, 14-32002- 15-32097)	Yes	Yes
Exhibit E	Laclede Gas Company’s Responses to Respondent’s First Interrogatories (Filed As Clay County Ex. E, 14-32002-15-32097)	Yes	Yes
Exhibit F	Complaints for Review of Assessment (Filed as Clay County Ex. F, 14-32002-15-32097)	Yes	Yes
Exhibit G	List of Real and Personal Property located in Clay County as of January 1, 2014 and January 1, 2015 (Filed as Clay County Ex. G, 14-32002-15-32097)	Yes	Yes
Exhibit H 2014	Robert Reilly Curriculum Vitae attached to Reilly Report re Personal Property As Of January 1, 2014 (Clay) (Filed as Clay County Ex. H, 14-32002-38)	Yes	Yes
Exhibit H 2015	Robert Reilly Curriculum Vitae attached to Reilly Report re Real and Personal Property As Of January 1, 2015 (Clay) (Filed as Clay County Ex. H, 15-32018-97)	Yes	Yes
Exhibit I 2014	Robert Reilly Fair Market Value Appraisal Report re Personal Property As Of January 1, 2014 (Clay) (Filed as Clay County Ex. I, 14-32002-38)	Yes	Yes
Exhibit I 2015	Robert Reilly Fair Market Value Appraisal Report re Real and Personal Property As Of January 1, 2015 (Clay) (Filed as Clay County Ex. I, 15-32018-97)	Yes	Yes
Exhibit I-1 2014	Supplemental Signature Page for Robert Reilly Fair Market Value Appraisal Report re Personal Property As Of January 1, 2014 (Clay) (Filed as Clay County Ex. I-1, 14-32002-38)	Yes	Yes
Exhibit I-1 2015	Supplemental Signature Page for Robert Reilly Fair Market Value Appraisal Report re Real and Personal Property As Of January 1, 2015 (Clay) (Filed as Clay County Ex. I-1, 15-32018-97)	Yes	Yes
Exhibit J	Deposition Transcript of Gary Maurer with Deposition Exhibits 1, 2, 3, 4, 5, 6, 7, 13, and 14 (Filed as Clay County Ex. J, 14-32002-38 and 15-32018-97)	Yes	Yes
Exhibit K	Missouri Gas Energy 2012 Return for Clay County (Filed as Clay County Ex. K, 14-32002-38 and 15-32018-97)	Yes	Yes
Exhibit L	Missouri Gas Energy 2013 Return for Clay County (Filed as Clay County Ex. L, 14-32002-38 and 15-32018-97)	Yes	Yes
Exhibit M	Clay County Assessor Notice of Increase in Assessment for 2014 (Lafave Depo. Ex. 8) (Filed as Clay County Ex. M, 14-32002-15-32097)	Yes	Yes
Exhibit N	Clay County Assessor Notice of Increase in Assessment for 2015 (LaFave Depo. Ex. 4) (Filed as Clay County Ex. N, 14-32002-15-32097)	Yes	Yes
Exhibit O*	Platte Payment to M. Koyama (Koyama Depo. Ex. 8) (Filed as Ex. O, Clay 14-32002-15-32097 and Platte 14-79000-15-79037)	Yes	Yes
Exhibit P*	Excerpts from Koyama Work File (Koyama Depo. Ex. 13) (Filed as Ex. P, Clay 14-32002-15-32097 and Platte 14-79000-15-79037)	Yes	Yes
Exhibit Q*	Lake Expo Article re Laclede Purchase of Missouri Gas (Koyama Dep. Ex. 14) (Filed as Ex. Q, Clay 14-32002-15-32097 and Platte 14-79000-15-79037)	Yes	Yes
Exhibit R*	Moody’s Article re Laclede Gas Ratings Outlook Changes to Negative (Koyama Dep. Ex. 15) (Filed as Ex. R, Clay 14-32002-15-32097 and Platte 14-79000-15-79037)	Yes	Yes
Exhibit S*	M. Koyama Deposition Notice (Koyama Depo. Ex. 17) (Filed as Ex. S, Clay 14-32002-15-32097 and Platte 14-79000-15-79037)	Yes	Yes
Exhibit T*	Koyama Platte County Employment Application (Produced on March 6, 2017, after M. Koyama Deposition) (Filed as Ex. T, Clay 14-32002-15-32097 and Platte 14-79000-15-79037)	Yes	Yes
Exhibit U*	2016-2017 Uniform Standards of Professional Appraisal Practice (Filed as Ex. U, Clay 14-32002-15-32097 and Platte 14-79000-15-79037)	Yes	Yes

Complainant’s Exhibits and WDT (Platte County)

Exhibit	Description	Offered?	Admitted?
WDT*	Lindsey Link	Yes	Yes
WDT*	Robert Reilly	Yes	Yes
Rebuttal WDT*	Robert Reilly	Yes	Yes
Exhibit A	Declaration of Missouri Gas Energy, a division of Laclede Gas Company, Property as of January 1, 2014 (Filed as Platte County Ex. A, 14-79000-15-79037)	Yes	Yes
Exhibit B	Explanation of Overhead Costs (Filed as Platte County Ex. B, 14-79000-15-79037)	Yes	Yes
Exhibit C	Declaration of Missouri Gas Energy, a division of Laclede Gas Company, Property as of January 1, 2015 (Filed as Platte County Ex. C, 14-79000-15-79037)	Yes	Yes
Exhibit D	Complaints for Review of Assessment (Filed as Platte County Ex. D, 14-79000-15-79037)	Yes	Yes
Exhibit E	List of Real and Personal Property located in Platte County as of January 1, 2014 and January 1, 2015 (Filed as Platte County Ex. E, 14-79000-15-79037)	Yes	Yes
Exhibit F 2014	Robert Reilly Curriculum Vitae attached to Reilly Report re Real Property As Of January 1, 2014 (Platte) (Filed as Platte County Ex. F, 14-79000-24)	Yes	Yes
Exhibit F 2015	Robert Reilly Curriculum Vitae attached to Reilly Report re Real Property As Of January 1, 2015 (Platte) (Filed as Platte County Ex. F, 15-79013-37)	Yes	Yes
Exhibit G 2014	Robert Reilly Fair Market Value Appraisal Report re Real Property As Of January 1, 2014 (Platte) (Filed as Platte County Ex. G, 14-79000-24)	Yes	Yes
Exhibit G 2015	Robert Reilly Fair Market Value Appraisal Report re Real Property As Of January 1, 2015 (Platte) (Filed as Platte County Ex. G, 15-79013-37)	Yes	Yes
Exhibit G-1 2014	Supplemental Signature Page for Robert Reilly Fair Market Value Appraisal Report re Real Property As Of January 1, 2014 (Platte) (Filed as Platte County Ex. G-1, 14-79000-24)	Yes	Yes
Exhibit G-1 2015	Supplemental Signature Page for Robert Reilly Fair Market Value Appraisal Report re Real Property As Of January 1, 2015 (Platte) (Filed as Platte County Ex. G-1, 15-79013-37)	Yes	Yes
Exhibit H-N	Reserved to keep consistent labeling for additional Exhibits applicable to both Clay and Platte County Appeals	Yes	Yes
Exhibit O*	Platte Payment to M. Koyama (Koyama Depo. Ex. 8) (Filed as Ex. O, Clay 14-32002-15-32097 and Platte 14-79000-15-79037)	Yes	Yes
Exhibit P*	Excerpts from Koyama Work File (Koyama Depo. Ex. 13) (Filed as Ex. P, Clay 14-32002-15-32097 and Platte 14-79000-15-79037)	Yes	Yes
Exhibit Q*	Lake Expo Article re Laclede Purchase of Missouri Gas (Koyama Dep. Ex. 14) (Filed as Ex. Q, Clay 14-32002-15-32097 and Platte 14-79000-15-79037)	Yes	Yes
Exhibit R*	Moody’s Article re Laclede Gas Ratings Outlook Changes to Negative (Koyama Dep. Ex. 15) (Filed as Ex. R, Clay 14-32002-15-32097 and Platte 14-79000-15-79037)	Yes	Yes
Exhibit S*	M. Koyama Deposition Notice (Koyama Depo. Ex. 17) (Filed as Ex. S, Clay 14-32002-15-32097 and Platte 14-79000-15-79037)	Yes	Yes
Exhibit T*	Koyama Platte County Employment Application (Produced on March 6, 2017, after M. Koyama Deposition) (Filed as Ex. T, Clay 14-32002-15-32097 and Platte 14-79000-15-79037)	Yes	Yes
Exhibit U*	2016-2017 Uniform Standards of Professional Appraisal Practice (Filed as Ex. U, Clay 14-32002-15-32097 and Platte 14-79000-15-79037)	Yes	Yes

Respondents’ Evidence. The following evidence was filed by Respondents:

Exhibit	Description	Offered?	Admitted?
WDT	Mika Koyama	Yes	Yes
WDT	Shelley LaFave	Yes	Yes
Suppl. WDT	Shelley Lafave	Yes	Yes
Rebuttal WDT	Mika Koyama	Yes	Yes
Surrebuttal. WDT	Mika Koyama	Yes	Yes
Exhibit 1	Valuation Report of Mika Koyama	Yes	Yes
Exhibit 1-A	STC Appeal Form (Case No.14-79000 thru 14-79024)	Yes	Yes
Exhibit 1-B	STC Appeal Form (Case No.15-32018 thru 15-32057)	Yes	Yes
Exhibit 1-C	STC Appeal Form (Case No.15-79013 thru 15-79037)	Yes	Yes
Exhibit 1-D	Assessment Rules -Assessor’s Manual, Code of State Regulations & Missouri Revised Statutes	Yes	Yes
Exhibit 1-E	Laclede’s Declarations – 2015 Clay County	Yes	Yes
Exhibit 1-F	Laclede’s Declarations – 2014 Platte County	Yes	Yes
Exhibit 1-G	Laclede’s Declarations – 2015 Platte County	Yes	Yes
Exhibit 1-H	Area and County Information	Yes	Yes
Exhibit 1-I	Federal and State regulatory agency	Yes	Yes
Exhibit 1-J	FERC Code Descriptions	Yes	Yes
Exhibit 1-K	Natural Gas Regulation & Infrastructure Replacement Surcharge	Yes	Yes
Exhibit 1-L	Automatic Meter Reading Systems	Yes	Yes
Exhibit 1-M	Laclede Company Information	Yes	Yes
Exhibit 1-N	Laclede 2015 Annual Report	Yes	Yes
Exhibit 1-O	Asset Acquisition Statement (Form8594)	Yes	Yes
Exhibit 1-P	Contributions in Aid of Construction (CIAC) Documents	Yes	Yes
Exhibit 1-Q	2012 Valuation Summary by MGE	Yes	Yes
Exhibit 1-R	2013 Valuation Report by Duff & Phelps	Yes	Yes
Exhibit 1-S	Definitions	Yes	Yes
Exhibit 1-T	Qualification	Yes	Yes
Exhibit 2	Report of Shelley LaFave	Yes	Yes
Appendix 2- A	MGE/Laclede’s 2014 Declaration	Yes	Yes
Appendix 2-B	MGE/Laclede’s 2015 Declaration	Yes	Yes
Appendix 2-C	MGE’s 2012 Declaration	Yes	Yes
Appendix 2-D	Comparison of Declarations	Yes	Yes
Appendix 2-E	Excerpts from Deposition of Lindsay Link	Yes	Yes
Appendix 2-F	Original costs by FERC code, Bates 103	Yes	Yes
Appendix 2-G	Calculation of Installation Costs Reported in Years Prior to 1/2/2006	Yes	Yes
Appendix 2-H	FERC code descriptions	Yes	Yes
Appendix 2-I	-NONE-	Yes	Yes
Appendix 2-J	Laclede Sept 30, 2015 10K report, pages 122 and 123 of 239.	Yes	Yes
Exhibit 3	Excerpts from 10K	Yes	Yes
Exhibit 4	Correction pages for Exhibit 1	Yes	Yes
Exhibit 5	MGE 2014 annual report excerpt	Yes	Yes
Exhibit 6	Laclede 2014 annual report excerpt	Yes	Yes
Exhibit 7	Supplement to Exhibit 2C	Yes	Yes
Exhibit 8	Materials regarding useful life	Yes	Yes
Exhibit 9	Calculation summaries	Yes	Yes
Exhibit 10	STC Form	Yes	No
Exhibit 11	Portion of Assessor Manual	Yes	No
Exhibit 12	20 CSR 2245-9.010	Yes	No
Exhibit 13	Portion of Preamble of USPAP 2016-2017 Edition	Yes	No
Exhibit 14	Deposition Transcript of Matthew Voelker	Yes	No
Exhibit 15	Gas Annual Report	No	No
Exhibit 16	MGE Work Order Document	Yes	No

Respondents’ Exhibits 10 through 16 were excluded from the evidentiary record as they were not pre-filed and because they did not comply with the provisions for filings of certain specific documents after the evidentiary hearing as set forth by the Hearing Officer and agreed to by the parties.

Presumption of Correct Assessment Not Rebutted. Complainant’s evidence was not substantial and persuasive to rebut the presumption of correct assessment by the Boards and establish the TMV as of January 1, 2014, or January 1, 2015.
Complainant’s Appraisals. The Hearing Officer herein did not find Complainant’s appraisals persuasive. The appraisals did not induce belief in the Hearing Officer. As discussed further below, Complainant’s appraisal approach included the use of an income shortfall method, which Complainant’s appraiser deducted as economic obsolescence in his cost approach to value. Complainant’s appraiser’s income approach presumed a zero percent growth rate. Complainant’s appraiser failed to provide a persuasive explanation for this presumption in light of Complainant’s own management’s expectations of additional profitability on the assets in place on the tax dates.

Specific to Complainant’s appraisal regarding Platte County Real Property in 2015, Complainant’s appraiser opined TMV of $20,800,000. This amount exceeds the Platte County Board of Equalization TMV determination of $19,026,476. Consequently, Complainant’s evidence was not substantial and persuasive to rebut the presumption of correct assessment.

CONCLUSIONS OF LAW AND DECISION

Jurisdiction

The STC has jurisdiction to hear these appeals and correct any assessments which are shown to be unlawful, unfair, arbitrary or capricious. The Hearing Officer shall issue a decision and order affirming, modifying or reversing the determinations of the Boards, and correcting any assessments which are 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

Personal Property

Fixtures

Methods of Valuation

Proper methods of valuation and assessment of property are delegated to the STC. 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).

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. 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).

Opinion Testimony by Experts

The testimony of an expert is to be considered like any other testimony, is to be tried by the same test, and receives just so much weight and credit as the trier of fact may deem it entitled to when viewed in connection with all other circumstances. The Hearing Officer, as the trier of fact, has the authority to weigh the evidence and 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 may accept it in part or reject it in part. Beardsley v. Beardsley, 819 S.W. 2d 400, 403 (Mo. App. 1991); Curnow v. Sloan, 625 S.W. 2d 605, 607 (Mo. 1981); Scanlon v. Kansas City, 28 S.W. 2d 84, 95 (Mo. 1930).

Presumption In Appeal

There is a presumption of validity, good faith and correctness of assessment by the County BOE. 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 BOE’s valuation is erroneous and what the fair market value should have been placed on the property. Hermel, supra; Cupples-Hesse Corporation v. State Tax Commission, 329 S.W.2d 696, 702 (Mo. 1959).

Economic Obsolescence (External Obsolescence)

Economic obsolescence, also called external obsolescence, is a term of art within the appraisal industry and “is the impairment of desirability or useful life arising from economic forces, such as changes in highest and best use and legislative enactments that restrict or impair property rights and changes in supply and demand relationships. It is sometimes referred to as locational obsolescence.” Economic obsolescence is generally not curable. Property Assessment Valuation, International Association of Assessing Officers, 1977, p. 160. External obsolescence is a temporary or permanent impairment of the utility or salability of an improvement or property due to negative influences outside the property. The Appraisal of Real Estate, 12^th Edition, Appraisal Institute, 2001, pg. 363. It must be external to the property and outside the control of Complainant.

Complainants’ Burden of Proof and Evidence

In an appeal before the STC, the taxpayer is the moving party seeking affirmative relief. The taxpayer bears the burden of proof. Complainant bears the burden to show the Boards’ values to be erroneous. Additionally, in order to prevail, Complainant must present an opinion of TMV and evidence which is both 1) substantial and 2) persuasive that the proposed value is indicative of the market value of the subject property on applicable tax date. Hermel, supra. A valuation which does not reflect the TMV of the property under appeal is an unlawful, unfair and improper assessment. Substantial evidence can be defined as such relevant evidence as a reasonable mind might accept as adequate to support a conclusion. See, Cupples-Hesse, supra. 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).

“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.” Carmel Energy at 783. 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.” See, Rossman v. G.G.C. Corp. of Missouri, 596 S.W.2d 469, 471 (Mo. App. 1980).

In the present appeal, Complainant did not meet its burden of proof. The Hearing Officer was not persuaded by Complainant’s evidence, independent of any evidence presented by Respondent, that the Boards’ valuations were erroneous.

Complainant’s Methodology

Complainant’s appraiser developed the cost approach, the income approach and the sales comparison approach. As stated above, 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). Nevertheless, the Hearing Officer gave such consideration to Complainant’s appraiser’s opinions as deemed appropriate.

Complainant appraiser stated that “this is a textbook example of a special purpose property and a special purpose property you give more weight to the cost approach.” He went on to state “[a]so this is an income producing property. With an income producing property you give more weight to the income approach.” (Transcript, Pgs. 320-21). Complainant’s appraiser gave 40% weight to the cost and 40% weight to the income approach.

Complainant’s appraiser also considered the market approach (sales comparison approach) and noted the comparables he utilized are different from Complainant’s in that they are first physically different and secondly geographically different, thus impacting the longevity of the assets based upon such geography. He further observed that his comparables are different from Complainant’s because they are subject to different regulatory regimes. Thus, Complainant’s appraiser only gave 20% weighting to the market approach. (Transcript, Pg. 320)

The Hearing Officer, after considering the comments of Complainant’s appraiser regarding the market approach, determines that in the present appeals, the sales comparison (market) approach is not an appropriate or reliable indicator of value. Rather, the Hearing Officer determines the cost approach is the most appropriate, accurate and representative method to reach TMV in these appeals, while factoring in the income approach as a consideration.

Cost Approach

Regarding Complainant’s proffered cost approach, Complainant’s appraiser calculated an Income Shortfall (Income Deficiency) Deduction as External Obsolescence. Missouri Courts have not recognized or approved an income shortfall methodology. Furthermore, the Hearing Officer finds this deduction to be unpersuasive and improper. The following has been stated about such approach:

“At best [the] income deficiency method is illogical … [and] at worst [the] income-deficiency method strips the cost approach of its use as an independent determiner of value, because it always will track the result under the income approach.” Delta Air Lines, Inc. v. Dept. of Revenue of Oregon, 291 P.2d 836 (Oregon 1999)

“A significant problem with [the] income shortfall methodology is that it converts what should be two separate, stand-alone indicators of value (cost approach and income approach), into one indicator of value by adjusting the cost approach with [an] income shortfall.” Puget Sound Energy, Inc. v. Department of Revenue of the State of Montana, 2012 WL 5906944 (Mont.Tax.App.Bd.)

Additionally in State of Alaska, Department of Revenue v. BP Pipelines, Inc., 354 P.3d 1053 (Alaska 2015), the Court noted a lack of wide recognition of the Income Shortfall Method in authoritative sources. In Transcontinental Gas Pipe Line Corp. v. Bernards Township, 545 A.2d 746 (New Jersey 1988), the Court questioned the practice of comparing rate base return to actual return to show economic obsolescence.

First, Complainant did not offer evidence which the Hearing Officer found persuasive, that the income shortfall was external from the properties. The Hearing Officer would be required to participate in speculation, conjecture and surmise to determine the income shortfall was external of the properties and not due to factors within the control of Complainant, including, but not limited to, information Complainant’s appraiser obtained from Complainant’s management, and relied upon, to prepare his appraisal. Such factors would include exploitations of synergies, economies of scale, post-merger benefits, shared workforce, shared database, shared gas purchase contracts, below market purchase contracts, shared computer software, shared storage fields, shared storage tanks, and shared city gate prices which were expected due to the MGE acquisition in September of 2013.

Complainant’s management decision, to agree with the PSC that Complainant would not seek rate increases for a period of time, in order to obtain the PSC approval of the proposed acquisition of MGE was within the sole control and discretion of Complainant. Again, Complainant’s evidence was not persuasive and did not instill belief in the Hearing Officer.

By simply reversing out the income shortfall deduction, the resulting TMV of the real and personal properties, if appealed, in Clay and Platte Counties on 1/1/2014 and 1/1/2015 support the independently determined values by the Boards. (See Chart Below). As to the subject properties, the Hearing Officer finds the cost approach to be highly persuasive.

County	Year	Prop. Type	Boards Values	Comp. Appraiser	Recalculated Value
Clay County	2014	Personal Prop.	$11,323,556	$7,100,000	$15,117,529
	2015	Real Prop.	$79,310,600	$52,500,000	$81,249,186
	2015	Personal Prop.	$11,109,118	$8,900,000	$13,668,089
Platte County	2014	Real Prop.	$20,208,345	16,700,000	$35,523,653
	2015	Real Prop.	$19,026,476	20,800,000	$32,093,205

Income Approach

Regarding Complainant’s proffered income approach, Complainant’s appraiser made a simplified presumption of a zero percent growth rate based upon a conclusory premise that a fixed set of assets in a rate-based regulated utility can have no growth and that growth can only be realized by expansion of Complainant’s rate base and through additional capital expenditures. Complainant provided no authoritative documentary evidence in support of the conclusory premise. Consequently, the Hearing Officer did not find Complainant’s appraiser’s simplified presumption to be substantial and persuasive.

The general formula under the income approach is , with “g” representing the growth rate. Under this formula, any failure to account for “g,” if any, in the denominator may have a great impact on the ultimate determination of TMV of a property. Complainant’s appraiser testified that Complainant did not realize the rate of return Complainant had expected, which expected rate was less than the rate of return allowed by the Missouri PSC. However, Complainant’s appraiser also stated Complainant’s management expected synergies, economies of scale, post-merger benefits (shared workforce, shared database, shared gas purchase contracts, below market purchase contracts, shared computer software, shared storage fields, shared storage tanks and shared city gate prices) due to the MGE acquisition in September of 2013.

Despite this evidence and other evidence indicating additional positive expectations of Complainant, Complainant’s appraiser made a simplified presumption of a zero percent growth rate to determine TMV on 1/1/2014 and 1/1/2015. Complainant’s appraiser testified he had discussion with Complainant’s management in order to prepare his appraisal. Complainant’s appraiser did not testify that Complainant’s management or that he determined through independent analysis, that all growth would be derived solely from expansion of the rate base and through additional capital expenditures. Consequently, Complainant’s conclusory evidence was not persuasive to the Hearing Officer. Ultimately, Complainant’s proffered income approach was of little value.[4]

Respondents’ Evidence

Respondents offered the Valuation Report of Mika Koyama (Exhibit 1) as well as other WDT and Exhibits. Complainant specifically challenges whether Ms. Koyama qualifies as an expert witness for multiple reasons, including, but not limited to, the limited number of appraisals she has performed, that her Valuation Report was not USPAP compliant and the circumstances and timing of her employment with Platte County[5]. Complainant contends Respondents’ evidence was not substantial and persuasive.

As determined above, Complainant’s evidence was not substantial and persuasive. No determination, by the Hearing Officer, whether Respondents’ evidence was substantial and persuasive is necessary.

Conclusion

The presumption of correct assessments by the Boards were not rebutted with substantial and persuasive evidence. The methodology of Complainant’s appraiser did not induce belief in the Hearing Officer. Consequently, the valuations by the Boards are AFFIRMED.

ORDER

The assessed valuations for the subject properties, as determined by the Boards, are AFFIRMED.

Judicial Review

If no judicial review is made within thirty days, this decision and order is deemed final and the County Collectors, 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.

SO ORDERED, September 6, 2017.

STATE TAX COMMISSION OF MISSOURI

John J. Treu

Senior Hearing Officer

Certificate of Service

I hereby certify that a copy of the foregoing has been sent electronically or mailed postage prepaid this 6th day of September, 2017, to: Complainants(s) counsel and/or Complainant, the County Assessor and/or Counsel for Respondent and County Collector.

Jacklyn Wood

Legal Coordinator

[1] Due to consolidation of the appeals for hearing, “Respondents” references both assessors.

[2] Laclede Gas Company is a wholly owned subsidiary of Laclede Group, Inc. (Spire as of March 2016) which is a public utility holding company. Laclede Group, Inc. is traded on the stock exchange. It reported record net economic earnings per share in the first half of fiscal year 2015 and reported it was on pace to achieve 6%+ growth in fiscal year 2015 and 2016. It also announced its dividend would be raised by 4.5% constituting its 12th consecutive increase in dividends and that it had significant growth in the first half of fiscal year 2015 with EBITDA up 62%. Laclede Group, Inc. has two principal business segments, such being gas utility and gas marketing. The gas utility segment accounts for approximately 83% of all revenue. (Transcript, Pgs. 235-36 & Exhibit G, Pg. 13).

[3] *Same exhibit applicable to both counties.

[4] Assuming even a small growth rate, and inserting such into the formula for determining TMV, the resulting TMV of the real and personal properties in Clay and Platte Counties on 1/1/2014 and 1/1/2015 would support the BOE valuations as did the cost approach proffered by Complainant’s appraiser after corrected.

[5] As to whether Ms. Koyama, fell under the exemption under Section 339.501.5 RSMo

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Laclede Gas Company v. Cathy Rinehart, Assessor Clay County & David Cox, Assessor Platte County

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