Lake Ozark Village v. Whitworth (Camden)

April 29th, 2004




Complainant, )


v. ) Appeals Number 97-47000, 99-47003

) and 01-47002




Respondent. )



The methodology set forth in Maryville Properties v. Nelson, State Tax Commission Appeal No. 97-74500, as modified by the Western District Court of Appeals, is the correct methodology to determine market value of subsidized properties. The values established for the subject property for tax years 1997 through 2002 are SET ASIDE. The market value for the subject property on January 1, 1997 and January 1, 1998 was $813,170 (assessed value $154,500). The market value for the subject property on January 1, 1999 and January 1, 2000 was $577,220 (assessed value $109,670). The market value for the subject property on January 1, 2001 and January 1, 2002 was $602,770 (assessed value $114,530).


The Commission takes this appeal to determine the true value in money for the subject property on January 1, 1997, January 1, 1999, and January 1, 2001.


On November 24, 2003, the above-entitled matter came on regularly for hearing in front of Hearing Officer Luann Johnson in the Camden County Courthouse, Camdenton, Missouri. Complainant was represented by counsel, Cathy Dean. Respondent was represented by counsel, William Icenogle. Both parties submitted post-hearing briefs on January 30, 2004.

The issue on appeal was the true market value of a 24 unit subsidized housing complex for tax years 1997 and 1998; tax years 1999 and 2000; and tax years 2001 and 2002. All exhibits not specifically objected to on the record were entered into evidence.

At the close of the hearing, counsel for Complainant objected to the introduction of a review appraisal prepared by Mr. Loren K. Woodard for use by Respondent as a rebuttal exhibit. Complainant=s objection to the introduction of the exhibit was taken under advisement. Said exhibit is not admissible into evidence inasmuch as it was not authenticated by Mr. Woodard at hearing and was not used to cross-examine Complainant=s expert.


Jurisdiction is Proper

1. Jurisdiction over these appeals is proper. The taxpayer timely appealed to the State Tax Commission from the decision of the Camden County Board of Equalization.

Maryville Properties Methodology Applies

2. These appeals revisit the issue of the proper way to value subsidized housing developments. The subject property, parcel number 09-3.0-06.1-000.0-001-058-004, is a 24-unit apartment complex constructed under the same subsidized housing section as Maryville Properties. Like the Maryville Properties case, a portion of the units must be maintained for low-income tenants; the owners are subject to program record keeping requirements; and are eligible to receive a 7% interest reduction on their loan. And, as in Maryville Properties, the promissory note between the partners and the government is a non-recourse loan providing:


3. On December 14, 1998, by order of the State Tax Commission, the proceedings concerning the subject property and a number of other similar properties were stayed pending the outcome of Maryville Properties v. Nelson, State Tax Commission appeal No. 97-74500. In order to preserve its appeal rights, in addition to its 1997 and 1998 appeal, the taxpayer timely filed an appeal for tax years 1999, 2000, 2001 and 2002. Those appeals were also stayed by order of the State Tax Commission.

4. A decision was issued by the Hearing Officer and affirmed by the State Tax Commission in the Maryville Properties case in 2000.

5. The decision of the State Tax Commission in the Maryville Properties case was appealed. The Western District Court of Appeals rejected the use of tax credits and accelerated depreciation in calculating market value of subsidized properties, but left the remainder of the State Tax Commission=s valuation methodology unaltered. The Missouri Supreme Court denied application for transfer.

6. Official notice is taken of the State Tax Commission decision, and the Court of Appeals decision, in the Maryville Properties case.

Industry Standards Modified

7. Valuation of subsidized housing falls outside the industry standards for determining market value. Generally accepted industry standards define market value as being a value where: AFinancing, if any, is on terms generally available in the Community at the specified date and typical for the property type in its locale; and 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.@ Under the factors commonly considered when determining real property value, we would be required to ignore the benefits, restrictions and unique financing experienced by the subject property. However, in Missouri Baptist Children=s Home v. State Tax Commission, 867 S.W.2d 510 (Mo. banc 1993), our Supreme Court effectively modified industry standards and guidelines when it determined that the impact of long-term leases must be considered when determining value.

Likewise, in Maryville Properties v. Nelson, 83 S.W.3d 608 (W.D. 2002), our Court of Appeals indicated that we must consider Aeconomic realities@ when valuing property. That court further held that factors which have a direct impact on the income of the property should be considered. The economic realities which have a direct impact on the income producing capabilities of a subsidized property are: low equity requirements, subsidized income, subsidized interest, above market expenses and non-recourse promissory notes.

Thus, we find that we must reject approaches to value that fail to adequately deal with the unique characteristics of the subject property=s financing. Market rents, expenses, yield rates and capitalization rates are of no value when determining the income producing capability of subsidized properties. As long as a property remains subsidized, it can never be valued using traditional industry standards and definitions of fair market value which require that we ignore those financing realities. This will, undoubtedly, create problems for appraisers who are accustomed to valuing property based upon industry standards. However, we cannot ignore the dictates of Missouri Baptist Children=s Home and Maryville Properties which, in effect, create a definition of Atrue value@ or Amarket value@ that is outside typical appraisal methodology.

Maryville Properties Methodology

8. With Missouri Baptist Children=s Home in mind, the Tax Commission decision in Maryville Properties set forth the methodology for valuing subsidized properties which considers the economic realities of the financing arrangements and the impact of those financing arrangements on the income stream of subsidized housing. Utilization of data derived from something other than the subsidized property fails to consider Aeconomic reality@ and creates a presumption of mis-valuation. Maryville Properties defines the methodology to be employed as follows:

AAn income approach for subsidized property should use actual income and expenses realized by the subsidized property; it should use the loan-to-value ratio approved by the subsidizing agency based upon the subsidized mortgage rate; it should allow an appropriate equity dividend rate; and the taxes should be included in the capitalization rate.

The advantages of using actual income, expenses and financing terms are clear. An investor will look at the benefits and restrictions the property actually carries when making a purchasing decision. Likewise, by using actual expenses, including the significantly higher management fees, and considering the contributions required for the reserve account, Complainant=s concerns about the high costs of operating the project are appropriately addressed.@ (Finding of Fact #23).


Complainant=s Discounted Cash Flow Unreliable

9. In the Maryville Properties case, the income approach commonly referred to as the Adiscounted cash flow method@ of valuing subsidized housing was found to be unpersuasive. In the best of circumstances, in order to be valid, a discounted cash flow income approach must be based upon trending substantial historical market data from the subject property or substantially similar properties and must have a very short projection period.

In this case, none of the criteria for a valid discounted cash flow have been met. Although the appraiser mentions income and expenses from 6,750 units (Ex. CC, p. 24), he only uses the actual income and expenses from the subject property and an Aaverage@ vacancy rate rather than actual vacancy rates. He then uses a 9% interest rate instead of 1% actually paid – after interest subsidies (Ex. CC, p. 31-32). Finally, the appraiser attempts to trend income and expenses for 48 years through the year 2044.

Complainant=s appraiser asserts that his 15% vacancy rate is an economic reality, but that is simply false. The actual vacancy rate was not 15%.

Complainant=s appraiser does not attempt to characterize his 9% capitalization rate as economic reality but counsel asserts that it is the rate necessary to attract capital investment for this type of property. Again, this is not economic reality.

For these reasons, Complainant’s discounted cash flow is not persuasive.

Complainant=s Income Approach Unreliable

10. Complainant=s appraiser also prepared a more traditional income approach to value. Because there are no market sales of similar properties, Complainant=s appraiser used a mortgage/equity formula for determining the capitalization rate. In this methodology, Complainant=s appraiser did not use the actual interest paid on the subsidized loan but, instead, used a floating rate which he testified was necessary to account for the buildup of equity. And, suggesting that the subject property was a high-risk investment, Complainant=s appraiser asserted that an equity yield rate of 20% would be required to attract investors.

There is no reliable data to support Complainant=s assertion that the subject property would be considered a high-risk investment or that the loan to value ratio would change. These conclusions are purely speculative.

Finally, there is no evidence that Complainant=s appraiser made any adjustment for the favorable interest rate running with the property or the non-recourse nature of the promissory note.

Complainant=s Sales Comparison Unreliable

11. For whatever reason, subsidized properties do not sell in the open market. Consequently, there is no basis for a sales comparison approach to value. Complainant=s appraiser did attempt a sales comparison approach but utilized unsubsidized sales and attempted to adjust for external and functional obsolescence due solely to the special financing arrangements for the subject property.

In Maryville Properties we specifically found that Afinancing tools do not create external obsolescence@ (Finding of Fact #5). Similarly, financing tools do not create Afunctional obsolescence.@ Rent restrictions and management fees do not limit the ability of the apartment complex to function as an apartment complex.

There is no evidence which suggests that the subject property suffers from any functional or external obsolescence. Complainant=s sales comparison approach is wholly conjecture and is not a reliable indicator of value for the subject property.

Complainant=s Cost Approach Unreliable

12. Complainant=s appraiser also attempted to prepare a cost approach to value.

As in the sales approach, Complainant=s appraiser has attempted to use financing tools to justify a Afunctional obsolescence@ adjustment of $160,000 and an Aexternal obsolescence@ adjustment of $160,927. To the extent that Complainant=s appraiser has attempted to use said financing tools as a justification for a reduction in value under his cost approach, his cost approach fails to state the true value of the subject property.

Maryville Properties Methodology Applied

13. Prior to evidentiary hearing, Hearing Officer Luann Johnson supplied the parties with worksheets for calculating value using the Maryville Properties methodology. Said worksheets are identified as Complainant=s Exhibit AA and Respondent=s Exhibit 26.

14. For tax years 1997 and 1998, the assessor valued the property at $858,684 (assessed value $163,150). Upon appeal, the Board of Equalization reduced value of $700,105 (assessed value $133,020). In his appraisal report, Complainant=s appraiser, Teddy Blaylock, asserts a value of $360,000 (assessed value $68,400). Under the Maryville Properties approach to value, the value for the property on January 1, 1997 was $813,167 (Respondent=s Ex. 26). Although not agreeing with the Maryville Properties methodology, Mr. Blaylock produced a modified version of the Maryville Properties methodology which resulted in a value for the subject property for tax year 1997 of $622,755 (Complainant Ex. AA).

15. For tax years 1999 and 2000, the assessor valued the property at $700,100 (assessed value $133,020). Upon appeal, the Board of Equalization approved the assessor=s value. In his appraisal report, Blaylock asserts a value of $365,000 (assessed value $69,350). Under the Maryville Properties approach to value, the value of the property on January 1, 1999 was $577,218 (Respondent Ex. 26). Under the Blaylock modified version of the Maryville Properties methodology, the value of the subject property on January 1, 1999 was $491,700 (Complainant Ex. AA).

16. For tax years 2001 and 2002, the assessor valued the property at $754,900 (assessed value $143,430). Upon appeal, the Board of Equalization affirmed the assessor=s value. For tax year 2001, Mr. Blaylock asserts a value of $350,000 (assessed value $66,500). Under the Maryville Properties approach to value, the value of the property on January 1, 2001 was $602,772 (Respondent Ex. 26). Under the Blaylock modified version of the Maryville Properties methodology, the value of the subject property on January 1, 2001 was $375,000 (Complainant Ex. AA).

17. The values calculated by Complainant=s appraiser in his appraisal report and his modified Maryville Properties approach to value are not reliable indicators of market value for the subject property on the various tax days inasmuch as Mr. Blaylock has failed to correctly apply the Maryville Properties methodology.

18. The Respondent=s calculations of value under the Maryville Properties methodology are correct and correctly state the value for the subject property on the various tax days. The market value for the subject property on January 1, 1997 and January 1, 1998 was $813,170 (assessed value $154,500). The market value for the subject property on January 1, 1999 and January 1, 2000 was $577,220 (assessed value $109,670). The market value for the subject property on January 1, 2001 and January 1, 2002 was $602,770 (assessed value $114,530).

19. Correct calculations are set out in Respondent=s Exhibit 26 as follows:






Rental Income

$ 40,786

$ 45,558

$ 49,203

Rental Subsidy

$ 43,612

$ 45,162

$ 44,421


$ 166

$ 347

$ 297


Potential Gross Income

$ 84,564

$ 91,067

$ 93,921

Less: Actual Vacancy & Collection

$ 5,270

$ 6,198

$ 11,689


Effective Gross Income

$ 79,294

$ 84,869

$ 82,232



Maintenance & Repair

$ 6,600

$ 8,529

$ 7,075


$ 14,281

$ 15,111

$ 13,796


$ 16,233

$ 21,580

$ 27,165


$ 2,399

$ 1,969

$ 2,646

Reserve for Replacement

$ 8,113

$ 15,135

$ 7,720


Total Expenses

$ 47,626

$ 62,324

$ 58,402


Net Operating Income

$ 31,668

$ 22,545

$ 23,830



Loan to Value x Actual Interest Rate




Equity x Equity Dividend Rate




Effective Tax Rate





Overall Capitalization Rate





Net Operating Income

divided by Overall Capitalization Rate

$ 813,167
(say $ 813,170)

$ 577,218
(say $577,220)

$ 602,772
(say $602,770)



The Commission has jurisdiction to hear this appeal and correct any assessment which is shown to be unlawful, unfair, arbitrary or capricious. Article X, Section 14, Mo. Const. of 1945, Sections 138.430, 138.431 RSMo.

Board of Equalization Presumption

There is a presumption of validity , good faith and correctness of assessment by the Board of Equalization. Hermel, Inc. v. STC, 564 S.W.2d 888, 895 (Mo. banc 1978); Chicago, Burlington & Quincy Railroad Co. v. STC, 436 S.W.2d 650, 656 (Mo. 1968); May Department Stores Co. v. STC, 308 S.W.2d 748, 759 (Mo. 1958).

Standard for Valuation

Section 137.115, RSMo, requires that property be assessed based upon its true value in money which is defined as the price a property would bring when offered for sale by one willing or desirous to sell and bought by one who is willing or desirous to purchase but who is not compelled to do so. True value in money is defined in terms of value in exchange and not value in use. Mo. Const. Art. X, Section 4(b); St. Joe Minerals Corp v. State Tax Commission, 854 S.W.2d 526, 529 (Mo. App. E.D. 1993); Missouri Baptist Children=s Home v. State Tax Commission, 867 S.W.2d 510, 512 (Mo. banc 1993). It is the fair market value of the subject property on the valuation date. Hermel, supra, at 897.

Complainant=s Burden of Proof

In order to prevail, Complainant must present an opinion of market value and substantial and persuasive evidence that the proposed value is indicative of the market value of the subject property on the tax day. Hermel, supra, at 897. Substantial evidence can be defined as such relevant evidence as a reasonable mind might accept as adequate to support a conclusion. See Cupples-Hesse Corporation v. State Tax Commission, 329 S.W.2d 696, 702 (Mo. 1959). Persuasive evidence is that evidence which has sufficient weight and probative value to convince the trier of fact. The persuasiveness of evidence does not depend on the quantity or amount thereof but on its effect in inducing belief. Brooks v. General Motors Assembly Division, 527 S.W.2d 50, 53 (Mo. App. 1975).

Duty to Investigate

In order to investigate appeals filed with the Commission, the Hearing Officer has the duty to 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. The Hearing Officer=s decision regarding the assessment or valuation of the property may be based solely upon her inquiry and any evidence presented by the parties, or based solely upon evidence presented by the parties. Section 138.430.2, RSMo.

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 v. Security Bonhomme, Inc., 558 S.W.2d 655, 659 (Mo. banc 1977); St. Louis County v. STC, 515 S.W.2d 446, 450 (Mo. 1974); Chicago, Burlington & Quincy Railroad Company v. STC, 436 S.W.2d 650 (Mo. 1968).

The Hearing Officer as the trier of fact may consider the testimony of an expert witness and give it as much weight and credit as she may deem it entitled to when viewed in connection with all other circumstances. The Hearing Officer is not bound by the opinions of experts who testify on the issue of reasonable value, but may believe all or none of the expert=s testimony and accept it in part or reject it in part. St. Louis County v. Boatmen=s Trust Co., 857 S.W.2d 453, 457 (Mo. App. E.D. 1993); Vincent by Vincent v. Johnson, 833 S.W.2d 859, 865 (Mo. 1992); Beardsley v. Beardsley, 819 S.W.2d 400, 403 (Mo. App. 1991); Curnow v. Sloan, 625 S.W.2d 605, 607 (Mo. banc 1981).

Opinion Testimony by Experts

If specialized knowledge will assist the trier of fact to understand the evidence or to determine a fact in issue, a witness qualified as an expert on that subject, by knowledge, skill, experience, training, or education, may testify thereto.

The facts or data upon which an expert bases an opinion or inference may be those perceived by or made known to the expert at or before the hearing and must be of a type reasonably relied upon by experts in the field in forming opinions or inferences upon the subject and must be otherwise reliable, the facts or data upon which the expert relies need not be admissible in evidence. Section 490.065, RSMo; Courtroom Handbook on Missouri Evidence, Wm. A. Schroeder, Sections 702-705; pp. 325-350; Wulfing v. Kansas City Southern Industries, Inc., 842 S.W.2d 133 (Mo. App. E.D. 1992).

Commission Determines Methodology

It is within the State Tax Commission’s discretion to determine what method or approach it shall use to determine the true value in money of property. Hermel, Inc. v. State Tax Commission, 564 S.W.2d 888, 896; Chicago, Burlington & Quincy Railroad Co. v. State Tax Commission, 436 S.W.2d 650, 657 (Mo. 1968), cert den. 393 U.S. 1092 (1969); St. Louis County v. Security Bonhomme, Inc., 558 S.W.2d 655, 659 (Mo. banc 1997).

It is also within the State Tax Commission’s authority to ascertain the correct or modern means of determining value according to a particular method or approach that it adopts to ascertain valuation, and it is within the Commission’s discretion to determine what factors should be considered in fixing the “true value in money” for property under a valuation method or approach adopted for use in a particular case. Hermel, Inc. v. State Tax Commission, supra. The relative weight to be accorded any relevant factor in a particular tax assessment case is for the State Tax Commission to determine. St. Louis County v. State Tax Commission, 515 S.W. 446, 450 (Mo. 1974). State Tax Commission decisions must declare the propriety of and the proper elements to consider in adopting a valuation approach, and must provide a definite indication as to the weight accorded each approach or method, i.e., how the final decision is weighed between the various approaches, methods, elements and factors. St. Louis County v. State Tax Commission, 515 S.W.2d 446, 451(Mo. 1974). The determination of “true value in money” of any property is a factual issue for the State Tax Commission, O’Flaherty v. State Tax Commission, 698 S.W.2d 2, 3 (Mo. banc 1985).

Courts Defer to State Tax Commission Decisions.

The Missouri Supreme Court, in Savage v. State Tax Commission of Missouri, 722 S.W.2d 72 (Mo. banc 1986), observed:

Our review of the Commission’s decision is ordinarily limited to whether that decision is “supported by competent and substantial evidence upon the whole record or whether it was arbitrary, capricious, unreasonable, unlawful or in excess of its jurisdiction.” Evangelical Retirement Homes of Greater St. Louis, Inc. v. State Tax Com’n, 669 S.W.2d 548, 552 (Mo. banc 1984); Section 536.140.01, RSMo. 1978. In matters of property tax assessment, this Court has acknowledged “the wisdom of the General Assembly in providing an administrative agency to deal with this specialized field.” State ex rel Cassilly v. Riney, 576 S.W.2d 325, 328 (Mo. banc 1979). Thus we recognize that the courts may not assess property for tax purposes, Drey v. State Tax Commission, 345 S.W.2d 228, 238-9 (Mo. 1961), that proper methods of valuation and assessment of property are delegated to the Commission, C & D Investment Co. v. Bestor, 624 S.W.2d 835, 838 (Mo. banc 1981) and that on review, “[t]he evidence must be considered in the light most favorable to the administrative body, together will all reasonable inferences which support it, and if the evidence would support either of two opposed findings, the reviewing court is bound by the administrative determination.” Hermel, Inc. v. State Tax Commission, 564 S.W.2d 888, 894 (Mo. banc 1978) (citation omitted). When read together, our cases demonstrate that this Court is loathe to substitute its judgment for the expertise of the Commission in matters of property tax assessment. Absent clear cause, we will “stay our hand[s].” Pierre Chouteau Condominiums v. State Tax Commission, 662 S.W.2d 513, 517 (Mo. banc 1984).

Official Notice

Agencies shall take official notice of all matters of which the courts take judicial note. Section 536.070(6), RSMo.

Courts will take judicial notice of their own records in the same cases. State ex rel. Horton v. Bourke, 129 S.W.2d 866, 869 (1939); Barth v. Kansas City Elevated Railway Company, 44 S.W. 788, 781 (1898). In addition, courts may take judicial notice of records in earlier cases when justice requires – Burton v. Moulder, 245 S.W.2d 844, 846 (Mo. 1952); Knorp v. Thompson, 175 S.W.2d 889, 894, transferred 167 S.W.2d 205 (1943); Bushman v. Barlow, 15 S.W.2d 329, 332 (Mo. banc 1929) – or when it is necessary for a full understanding of the instant appeal. State ex rel. St. Louis Public Service Company v. Public Service Commission, 291 S.W.2d 95, 97 (Mo. banc 1956).


Proper Methodology

In this case, and all subsequent subsidized housing cases, the correct methodology for valuing subsidized housing projects is the methodology set out in Maryville Properties. That methodology is accurate because (1) rent restrictions are considered through the use of actual income rather than market income; (2) additional management requirements and expenses are accounted for through use of actual expenses which are in excess of market expenses; and (3) the actual loan-to-value ratio and the subsidized interest rate demonstrates and accounts for any and all risks involved in the property as well as the benefits flowing to the property. It is Aeconomic reality.@

It is within the authority and expertise of the Tax Commission to determine which valuation methodology best represents value in a given situation or for a particular category of properties. Hermel, supra. After carefully considering the benefits and risks associated with subsidized housing, the State Tax Commission, in Maryville Properties, determined that calculating value based upon actual income, actual expenses, and actual interest and capitalization rates was the best way to recognize all benefits and risks associated with subsidized housing.

Complainant Failed to Meet Burden of Proof

Complainant asserts that the Commission must adopt its appraiser=s opinion of value because that is the only evidence presented in this case. However, it is the duty of the Commission to find value and there is more than enough evidence in this case for the Commission to make a determination of value using the Maryville Properties methodology. The Commission is not required to adopt the conclusions of the Complainant’s appraiser when actual income, actual expenses, actual loan-to-value rates and interest rates are available.

Complainant has failed to present substantial and persuasive evidence in support of its opinion of value. An opinion of value which is based upon improper elements or an improper foundation is without probative value. Shelby County R-4 School District v. Hermann, 392 S.W.2d 609, 613 (Sup. 1965). Complainant=s appraisal ignores economic realities and, thus, is based upon improper elements and an improper foundation.

Failure to Consider Benefits

Mr. Blaylock made no attempt to calculate the value of the substantial benefits flowing to this property by reason of the favorable financing documents in any of his approaches to value. It is possible to measure the difference in rent obtained from a rent restricted apartment and a non-restricted apartment but that only tells a portion of the story. The benefits of a low interest loan, guaranteed rental subsidizes and a non-recourse loan have yet to be measured by an appraiser based upon market-derived data because these properties are not selling. And, without accounting for the benefits associated with the favorable financing and guaranteed income, Mr. Blaylock=s calculations under the cost approach, sales approach, and income approach necessarily understate the value of the subject property. Mr. Blaylock=s assertions that his adjustments reflect market conditions and economic reality are not well taken.

Discounted Cash Flow Highly Speculative

The discounted cash flow methodology was specifically rejected in the Maryville Properties case and we reject it again in this case. To find that a discounted cash flow approach is reliable, the Commission would be required to find that an appraiser can predict a property=s income, expense and capitalization rate at a point in the future—in this case, 2044. With substantial verified data it may be possible to trend or predict income, expenses and capitalization rates in the immediate future. However, a discounted cash flow analysis is extremely speculative. In this case, there is little historical data in that the project came on line in 1995. The tax years in question are 1997, 1999 and 2001. Based upon this very limited information, we again find the discounted cash flow approach to be unreliable and unpersuasive.

Complainant=s Maryville Properties Calculations Unreliable

At the Hearing Officer=s request, both parties prepared income and expense calculations using the Maryville Properties methodology, although Complainant deviated from the methodology at several points.

Complainant asserts that the Maryville Properties methodology is not the correct way to value property but, with some changes, would not be an unreasonable methodology. Complainant asserts that the vacancy rate should be averaged; that partnership management fees should be included in expenses as a third category of management fees; and that the loan to value ratio should be adjusted annually. Such deviations are inappropriate and misrepresent the value of the subject property.

A calculation of actual income includes an adjustment for actual vacancy rate. Applying an artificial vacancy rate results in an understatement of value. Inasmuch as value is calculated every two years, changes in vacancy rates will automatically result in appropriate changes in value. It is not necessary to speculate about vacancy rates when actual rates are available for use in the Maryville formula.

Partnership management fees are clearly not a management fee of the property. The fact that a partnership may only own one asset does not mean that that asset is responsible for paying the costs of maintaining the partnership.

Finally, Complainant=s assertion that a new purchaser would not be able to get a 95% loan for the subject property and might only be able to acquire the property through an assumption of the original loan, is unsubstantiated speculation, is contradicted by the evidence, and is entitled to no weight whatsoever.

Mr. Blaylock testified that, for the Maryville Properties case in 2000, he had spoken with a Mr. Marks from Rural Development and was told that a refinance with a 95% loan would only be available if the property had been Acompletely rehabbed@., i.e. made new. (Tr. 15). Mr. Blaylock later testified that Mr. Marks= exact words were Athey would only make a 95% loan if the property was substantially rehabbed@. (Tr. 58). No evidence was presented which tended to show how Rural Development defined Arehabbed@ or which would tend to clarify when a rehab was required. But, for our purposes, the distinction is immaterial.

The subject property was almost new on the original tax day and, at hearing in 2003, Mr. Blaylock testified that it suffered from very little physical deterioration (Tr. 38) and a reserve for replacement was maintained by the partners. In his appraisal report, Mr. Blaylock states that the purpose of the reserve for replacement was to Areplace roofs, carpets, cabinets, appliances, air conditioning, heating, water heater, tile floors, etc.@ (Complainant=s Ex. CC, p. 25). Even assuming that the government would require rehabilitation, it is obvious from the taxpayer=s testimony little rehabilitation is needed and that the funds have already been earmarked for that rehabilitation.

Respondent=s Maryville Properties Calculations Reliable

The decision of the Commission in this case is based upon the formula set forth in Maryville Properties. And, in particular, the calculations made by Respondent. (Respondent=s Ex. 26). Respondent=s calculations precisely follow the methodology set forth in Maryville Properties. The calculations, as presented by Respondent, are accurate and are adopted by the Commission.


The assessed valuation for the subject property as determined by the Board of Equalization for the subject tax days is SET ASIDE.

The market value for the subject property on January 1, 1997 and January 1, 1998 was $813,170 (assessed value $154,500). The market value for the subject property on January 1, 1999 and January 1, 2000 was $577,220 (assessed value $109,670). The market value for the subject property on January 1, 2001 and January 1, 2002 was $602,770 (assessed value $114,530).

A party may file with the Commission an application for review of this decision within thirty (3) days of the mailing of such decision. The application shall contain specific grounds upon which it is claimed the decision is erroneous. Failure to state specific facts or law upon which the appeal is based will result in summary denial. Section 138.432 RSMo.

If an application for review of this decision is made to the Commission, any protested taxes presently in an escrow account in accordance with these appeals shall be held pending the final decision of the Commission. If no application for review is received by the Commission within thirty (30) days, this decision and order is deemed final and the Collector of Camden 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 these appeals. If any or all protested taxes have been disbursed pursuant to Section 139.031(8), RSMo., either party may apply to the circuit court having jurisdiction of the cause for disposition of the protested taxes held by the taxing authority.

Any Finding of Fact which is a conclusion of Law or Decision shall be so deemed. Any Decision which is a Finding or Fact or Conclusion of Law shall be so deemed.

SO ORDERED April 29, 2004.


Luann Johnson

Hearing Officer