State Tax Commission of Missouri
LARRY A. & EILEEN F. HOFFMAN,)
v.) Appeal(s) Number 07-32896 through 07-32901
SCOTT SHIPMAN, ASSESSOR,)
ST. CHARLES COUNTY,MISSOURI,)
DECISION AND ORDER
Decision of the St. Charles County Board of Equalization sustaining the assessment made by the Assessor is SET ASIDE.Hearing Officer finds presumptions of correct assessment rebutted. True value in money for each of the subject properties for tax year 2007 and 2008 is set at $81,120, assessed value of $15,410.
Complainant Larry A. Hoffman appeared pro se.
Respondent appeared by Assistant County Counselor,Charissa Mayes.
Case heard and decided by Senior Hearing Officer W. B. Tichenor.
The Commission takes this appeal to determine the true value in money for the subject properties on January 1, 2007.
Complainants appeal, on the ground of overvaluation, the decision of the St. Charles County Board of Equalization, which sustained the valuations of the subject properties.The Assessor determined an appraised value of $104,540, assessed value of $19,860, as residential property, for each of the properties.Complainants proposed a value of $75,600, assessed value of $14,360, per property in their Complaint for Review of Assessment.A hearing was conducted on May 6, 2008, at theSt. LouisCountyGovernmentCenter,Clayton,Missouri.
The Hearing Officer, having considered all of the competent evidence upon the whole record, enters the following Decision and Order.
Mr. Hoffman testified on behalf of Complainants.He stated his opinion of value for each of the properties to be $50,260 as of January 1, 2007, based on an income approach to value.However, for purposes of the hearing he would agree to the value tendered in the Complaint of $75,600 per property.Exhibit A was received into evidence on behalf of Complainants.The Exhibit contained a calculation of value, and supporting documents, based upon the income approach utilizing a market rent, vacancy and the actual expenses for the rental properties.
Respondent placed into evidence the testimony of Ms. Tanya Fipps, Missouri State Certified Residential Appraiser.The appraiser testified as to her appraisal of the subject properties.The Appraisal Report, Exhibit 1, of Ms. Fipps was received into evidence.Ms.arrived at an opinion of value for each of the subject properties of $105,000 based upon a sales comparison approach to value.A cost approach was also developed.
In performing her sales comparison analysis, the appraiser relied upon the sales of six properties which she deemed to be comparable to the subject property. The adjusted sales prices of the comparables fell in a range from $105,000 to $106,000, with a median of $105,650, and an average of $105,470.The adjusted per square foot values were in a range of $87.08 to $88.33 compared to the unadjusted range of $87.01 to $104.08.The percentage of sale price adjustments ranged from 2.3% to 15.2%, with a 12.35% median and a 10.64% average.
FINDINGS OF FACT
1.Jurisdiction over this appeal is proper.Complainant timely appealed to the State Tax Commission from the decision of the St. Charles County Board of Equalization.
2.The subject properties are located at 1333, 1335, 1337, 1339, 1341 and1343 Sunny Slope Drive, O’Fallon,Missouri.They are otherwise known as Sunset AC Condos Phase # 1, Building 6, Units A, B, C, D, E and F.The properties are identified respectively by the following Parcel and Assessor Account Numbers:
1333 SunnySlope Dr.
1335 SunnySlope Dr.
1337 SunnySlope Dr.
1339 SunnySlope Dr.
1341 SunnySlope Dr.
1343 SunnySlope Dr.
Exhibit 1; Complaints for Review of Assessment.
3.The properties combined constitute a single building or structure containing six individual condominium townhouses.In the Sunset development there are 12 – six unit buildings, 1 – five unit building and 3 – four unit buildings.There is a mix of owner occupied and rental units in the complex. Exhibit 1, Testimony of Complainant.
4.Each of the individual townhouses under appeal consists of a two-story brick and frame, townhouse structure of average quality construction.The units were built in 1985 and appear to be in fair condition.Each unit has a total of four rooms, which includes two bedrooms,a bath and a half, and contains 1,200 square feet of living area.There is a full unfinished basement.Ancillary to each unit is an open front porch, a rear wood deck and assigned parking spaces on the street.Exhibit 1.
5.There was no evidence of new construction and improvement from January 1, 2007, to January 1, 2008.
6.All six of the units in Building # 6 were originally purchased collectively as rental properties.Complainants purchased the units (Building # 6) from the original investor owner as rental units.The history of the properties since their construction is that they have been rental condominiums and never owner-occupied condominiums.Testimony of Complainant.
7.Complainant’s evidence standing alone was substantial and persuasive to rebut the presumption of correct assessment by the Assessor and the Board and establish the true value in money as of January 1, 2007, to be $57,240 per unit based on the income stream of the subject properties as rental units, accounting for real estate taxes with an effective tax rate, instead of an expense.
8.The properties relied upon by Respondent’s appraiser were comparable to the subject property for the purpose of making a determination of value of the subject property as owner occupied units. The six properties were located within a half block of the subject.All properties were located in the subject complex.Each sale property sold at a time relevant to the tax date of January 1, 2007, ranging from March, 2006 to January, 2007.The sale properties were similar to the subject in style, quality of construction, age, condition, room, bedroom and bathroom count, living area, location, site size and other amenities of comparability.
9.Respondent’s evidence standing alone valuing the properties under a sales comparison approach as owner occupied units met the standard of clear, convincing and cogent evidence in this appeal, under the provisions of Section 137.115, RSMo, to sustain the original valuation of $104,540 per unit presumed to have been made by a computer, computer-assisted method or a computer program.Respondent’s appraisal was accepted only to sustain the original assessment made by the Assessor and not for the purpose of raising the assessment above that value.
10.The true value in money of each property as of January 1, 2007, is set at $81,120, assessed value of $15,410.See, Hearing Officer Finds Value, infra.
CONCLUSIONS OF LAW AND DECISION
The Commission has jurisdiction to hear this appeal and correct any assessment which is shown to be unlawful, unfair, arbitrary or capricious.Article X, section 14, Mo. Const. of 1945; Sections 138.430, 138.431, RSMo.The hearing officer shall issue a decision and order affirming, modifying or reversing the determination of the board of equalization, and correcting any assessment which is unlawful, unfair, improper, arbitrary, or capricious.Section 138.431.4, RSMo.
Presumptions In Appeals
There is a presumption of validity, good faith and correctness of assessment by the CountyBoardof 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).
The presumption in favor of the Board is not evidence.A presumption simply accepts something as true without any substantial proof to the contrary.In an evidentiary hearing before the Commission, the valuation determined by the Board, even if simply to sustain the value made by the Assessor, is accepted as true only until and so long as there is no substantial evidence to the contrary.
Notwithstanding the provision of Section 138.431.3, RSMo – “There shall be no presumption that the assessor’s valuation is correct,” – the Supreme Court of Missouri has held, “A tax assessor’s valuation is presumed correct.”Snider v. Casino Aztar/Aztar Missouri Gaming Corp., 156 S.W.3d 341 (Mo. 2005).Citing to Hermel, supra; and Cupples Hesse Corp. v. State Tax Commission, 329 S.W.2d 696, 702 (Mo. 1959).
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.Snider, Hermel & Cupples Hesse, supra.Complainants’ evidence standing alone rebuts the presumption that the Board’s valuation was correct for the properties as rental units.Respondent’s evidence standing along sustains the presumption that the Board’s valuation was correct for the properties as owner occupied units.
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.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.
Market value is the most probable price in terms of money which a property should bring in competitive and open market under all conditions requisite to a fair sale, the buyer and seller, each acting prudently, knowledgeable and assuming the price is not affected by undue stimulus.
Implicit in this definition are the consummation of a sale as of a specific date and the passing of title from seller to buyer under conditions whereby:
1.Buyer and seller are typically motivated.
2.Both parties are well informed and well advised, and both acting in what they consider their own best interests.
3.A reasonable time is allowed for exposure in the open market.
4.Payment is made in cash or its equivalent.
5.Financing, if any, is on terms generally available in the Community at the specified date and typical for the property type in its locale.
6.The price represents a normal consideration for the property sold unaffected by special financing amounts and/or terms, services, fees, costs, or credits incurred in the transaction.
Real Estate Appraisal Terminology, Society of Real Estate Appraisers, Revised Edition, 1984; See also, Real Estate Valuation in Litigation, J. D. Eaton, M.A.I., American Institute of Real Estate Appraisers, 1982, pp. 4-5; Property Appraisal and Assessment Administration, International Association of Assessing Officers, 1990, pp. 79-80; Uniform Standards of Professional Appraisal Practice, Glossary, Exhibit 1, p. 4.
Methods of Valuation
Proper methods of valuation and assessment of property are delegated to the Commission.It is within the purview of the Hearing Officer to determine the method of valuation to be adopted in a given case.See, Nance v. STC, 18 S.W.3d 611, at 615 (Mo. App. W.D. 2000); Hermel, supra;Xerox Corp. v. STC, 529 S.W.2d 413 (Mo. banc 1975).
Missouricourts 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).
In the present appeals, the Hearing Officer is presented with two recognized approaches to value, the income and sales comparison approaches.Each on its own is an excellent indicator of value under the sale premise each methodology advances, i.e. purchase by an investor owner or purchase by an occupant owner.Together the two approaches present the high and low of the range for valuation spectrum that could reasonably be concluded for the subject properties on January 1, 2007.
Respondent’s Burden of Proof
The Respondent has imposed upon him by the provisions of Section 137.115.1, RSMo, the burden of proof to present clear, convincing and cogent evidence to sustain a valuation on residential property which is made by a computer, computer-assisted method or a computer program.There is a presumption in this appeal that the original valuation, which was sustained by the Board of Equalization, was made by a computer, computer-assisted method or a computer program.There was no evidence to rebut the presumption, therefore, in order to sustain the valuation of the subject property at $104,540, appraised value, Respondent’s evidence must come within the guidelines established by the legislature and must clearly and convincingly persuade the Hearing Officer as to the value sought to be sustained.
The statutory guidelines for evidence to meet the standard of clear, convincing and cogent include the following:
(1)The findings of the assessor based on an appraisal of the property by generally accepted appraisal techniques; and
(2) The purchase prices from sales of at least three comparable properties and the address or location thereof.As used in this paragraph, the word comparable means that:
(a)Such sale was closed at a date relevant to the property valuation; and
(b)Such properties are not more than one mile from the site of the disputed property, except where no similar properties exist within one mile of the disputed property, the nearest comparable property shall be used.Such property shall be within five hundred square feet in size of the disputed property, and resemble the disputed property in age, floor plan, number of rooms, and other relevant characteristics.
Section 137.115.1(1) & (2).
Clear, cogent and convincing evidence is that evidence which clearly convinces the trier of fact of the affirmative proposition to be proved.It does not mean that there may not be contrary evidence.Grissum v. Reesman, 505 S.W.2d 81, 85, 86 (Mo. Div. 2, 1974).The quality of proof, to be clear and convincing must be more than a mere preponderance but does not require beyond a reasonable doubt.30 AmJur2d. 345-346, Evidence section 1167.“For evidence to be clear and convincing, it must instantly tilt the scales in the affirmative when weighed against the evidence in opposition and the fact finder’s mind is left with an abiding conviction that the evidence is true.”Matter of O’Brien, 600 S.W.2d 695, 697 (Mo. App. 1980).
If Respondent’s evidence were the only evidence in the record, it would clearly and convincingly establish a value of $104,540, for sale of the properties as owner occupied units.However, the Hearing Officer must consider all other relevant evidence in the record.The indicated value of the properties developed from market rents and actual expenses as rental units cannot be ignored.
Evidence of Increase in Value
In any case in St. Charles County where the assessor presents evidence which indicates a valuation higher than the value finally determined by the assessor or the value determined by the board of equalization, whichever is higher, for that assessment period, such evidence will only be received for the purpose of sustaining the assessor’s or board’s valuation, and not for increasing the valuation of the property under appeal.Section 138.060, RSMo; 12 CSR 30-3.075.Therefore, Exhibit 1, although concluding a value only $460 higher than the value set by the Assessor and sustained by the Board, was received only for the purpose of sustaining that value and not for increase in the value to $105,000.
Complainants’ Burden of Proof
In order to prevail, Complainants 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 January 1, 2007.Hermel, Inc. v. State Tax Commission, 564 S.W.2d 888, at 897. There is no presumption that the taxpayer’s opinion is correct. The taxpayer in a Commission appeal still bears the burden of proof.The taxpayer is the moving party seeking affirmative relief.Therefore, the Complainant bears the burden of proving the vital elements of the case, i.e., the assessment was “unlawful, unfair, improper, arbitrary or capricious.” See, 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).Industrial Development Authority of Kansas City v. State Tax Commission of Missouri, 804 S.W.2d 387, 392 (Mo. App. 1991).
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).
Owner’s Opinion of Value
The owner of property is generally held competent to testify to its reasonable market value.Rigali v. Kensington Place Homeowners’ Ass’n, 103 S.W.3d 839, 846 (Mo. App. E.D. 2003); Boten v. Brecklein, 452 S.W.2d 86, 95 (Sup. 1970).The owner’s opinion is without probative value however, where it is shown to have been based upon improper elements or an improper foundation.Cohen v. Bushmeyer, — S.W.3d —-, 2008 WL 820938 (Mo.App. E.D., March 25, 2008); Carmel Energy, Inc. v. Fritter, 827 S.W.2d 780, 783 (Mo. App. W.D. 1992); State, ex rel. Missouri Hwy & Transp. Com’n v. Pracht, 801 S.W.2d 90, 94 (Mo. App. E.D. 1990); Shelby County R-4 School District v. Hermann, 392 S.W.2d 609, 613 (Sup. 1965).
In the present instance, the opinion of Mr. Hoffman is based upon proper elements and a proper foundation.It is based upon the development of an income approach to value for the taxpayers’ rental properties.It is recognized the inclusion of the real estate taxes as in expense in the income approach, rather than developing an effective tax rate to be included in the capitalization rate is not the method generally utilized in appeals before the Commission.However, this variance is not fatal to the income approach as presented.A recalculation of Complainants’ income approach accounting for real estate taxes with an effective tax rate, produces a per unit value of $57,237,84, rounded to $57,240.
Mr. Hoffman has extensive actual experience in the management of his own rental properties.If there were no other evidence in this record relevant to value, the owner’s opinion, grounded in the income approach would meet the test for substantial and persuasive evidence.However, just as the Hearing Officer cannot ignore Complainants’ evidence in deciding this case, Respondent’s evidence cannot be ignored.
Hearing Officer Finds Value
The determination of value in this case rests upon what would have been the most likely sale scenario for the subject properties on January 1, 2007.If the scenario would have been sale to an investor owner, then Complainants make the most compelling case for fair market value.However, if the most like sales would have been to occupying owners, then Respondent’s appraisal provides the soundest evidence of value.
The problem simply is the record does not provide compelling evidence from which a conclusion can be reached as to either possible scenario.The actual ownership history of the subject units is one of only investor ownership.The six units have never been owner occupied units.This is a factor which must be considered in the present valuation problem.See, Dzatko v. Zimmerman, STC Appeal Nos. 01-32558 – 32561, H. O. Decision, 1/30/02; Commission Order Affirming H. O. Decision, 4/29/02.
Respondent’s appraiser testified that there had been a sale in 2002 of combined units, however she determined that sale was not relevant because it was a “bulk sale.”The sale year of 2002 presented somewhat of an issue as to the relevance of that sale.However, simply because rental condo units have sold together, does not disqualify that sale as not relevant.
The 2002 sale, notwithstanding being somewhat dated, is certainly relevant to demonstrate the sale history for rental units and/or rental buildings in the subject complex.The Hearing Officer draws a negative inference from the Appraiser not having at least addressed this matter in Exhibit 1 to provide information as to what the 2002 per unit sales prices were and what, if any actual income data was available as to this sale.The reasonable conclusion is that the 2002 sale would indicate a lower value, even if time adjusted, than the value represented by the purchase of units for owner occupancy.
The conclusion of Ms. Fipps for not developing an income approach because of a lack of sales of rental units in the subject complex is not a sound basis for not performing an income approach.A lack of rental data would have been.However, rental data on the subject property was clearly available, if not also on other rental units in the complex.Therefore, the presentation of an income approach based on market data relevant to the valuation date would have been most appropriate to include in Exhibit 1.
The Hearing Officer does concur with the appraiser that had she also had sales data on rental units purchased by investor owners this should have been utilize in the appraisal.However, that would have constituted part of a broader sales comparison analysis, or possibly two separate sale comparison approaches.One sales grid, as was developed, for owner occupied purchases and a second sales grid could have been presented as to investor owner properties.Sales of rental units would have also provided a basis for development of a gross rent multiplier.However, so long as an appraiser can access relevant income and expense data, the presentation of an income approach always will provide a more complete appraisal report.
In the absence of substantial evidence to establish the most likely sale of the subject units in January of 2007 to have been to occupying owners Respondent’s conclusion of value is unpersuasive.In the absence of substantial evidence to establish the most likely sale of the subject units in January of 2007 to have been to an investment owner Complainants’ conclusion of value is unpersuasive.The record leaves only one conclusion, it is as likely that the January, 2007 sales would have been to occupying owners as to an investor owner and vice versa.Therefore, the value for the subject units must be set by placing equal reliance on Respondent’s sales comparison approach, and Complainants’ adjusted income approach.The concluded value for each unit is $81,120.
The assessed valuations for the subject properties as determined by the Assessor and sustained by the Board of Equalization forSt. CharlesCountyfor the subject tax day are SET ASIDE.
The assessed value for the subject property in Appeal 07-32896 for tax years 2007 and 2008 is set at $15,410.
The assessed value for the subject property in Appeal 07-32897 for tax years 2007 and 2008 is set at $15,410.
The assessed value for the subject property in Appeal 07-32898 for tax years 2007 and 2008 is set at $15,410.
The assessed value for the subject property in Appeal 07-32899 for tax years 2007 and 2008 is set at $15,410.
The assessed value for the subject property in Appeal 07-32900 for tax years 2007 and 2008 is set at $15,410.
The assessed value for the subject property in Appeal 07-32901 for tax years 2007 and 2008 is set at $15,410.
A party may file with the Commission an application for review of this decision within thirty (30) days of the mailing of such decision.The application shall contain specific grounds upon which it is claimed the decision is erroneous.Said application must be in writing addressed to the State Tax Commission of Missouri, P.O. Box 146, Jefferson City, MO65102-0146, and a copy of said application must be sent to each person at the address listed below in the certificate of service.
Failure to state specific facts or law upon which the appeal is based will result in summary denial.Section 138.432, RSMo 2000.
If an application for review of this decision is made to the Commission, any protested taxes presently in an escrow account in accordance with this appeal shall be held pending the final decision of the Commission and an order to the Collector to release and disburse the impounded taxes, unless said taxes have been disbursed pursuant an order of the circuit court under the provisions of Section 139.031.8, RSMo.§139.031.3, RSMo.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 St. Charles 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.
Any Finding of Fact which is a Conclusion of Law or Decision shall be so deemed.Any Decision which is a Finding of Fact or Conclusion of Law shall be so deemed.
SO ORDERED June 2, 2008.
STATE TAX COMMISSION OFMISSOURI
W. B. Tichenor
Senior Hearing Officer
Certificate of Service
I hereby certify that a copy of the foregoing has been mailed postage prepaid on this 2nd day of June, 2008, to:Larry Hoffman, 1225 Beaver Creek Road, Chesterfield, MO 63017, Complainant; Charissa Mayes, Assistant County Counselor, 100 North Third Street, Room 216, St. Charles, MO 63301, Attorney for Respondent; Scott Shipman, Assessor, 201 North Second, Room 247, St. Charles, MO 63301-2870; Amy Gann, Registrar, 100 North Third Street, Suite 206, St. Charles, MO 63301; Michelle McBride, Collector, 201 North Second Street, Room 134, St. Charles, MO 63301.