STATE TAX COMMISSION OF MISSOURI
|LAZARUS REALTY CORPORATION,||)|
|v.||)||Appeal Nos. 15-16292 & 15-16293|
|JAKE ZIMMERMAN, ASSESSOR||)|
|ST. LOUIS COUNTY, MISSOURI,||)|
DECISION AND ORDER
The assessment made by the Board of Equalization of St. Louis County (BOE) is SET ASIDE. Lazarus Realty Corporation (Complainant) presented substantial and persuasive evidence to rebut the presumption of correct assessment by the BOE.
Complainant appeared by counsel Michael Godsy
Jake Zimmerman, Assessor of St. Louis County (Respondent) appeared by counsel Ed Corrigan.
Case heard and decided by Hearing Officer Maureen Monaghan. (Hearing Officer)
Complainant appealed on the ground of overvaluation. Respondent initially set the true market values (TMV) of the subject properties at $2,309,400 and classified them as commercial. The BOE sustained Respondent’s TMV. The State Tax Commission (STC) takes the appeals to determine the TMV of the subject properties on January 1, 2015. The value as of January 1 of the odd numbered year remains the value as of January 1 of the following even numbered year unless there is new construction and improvement to the property. Section 137.115.1
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 the appeals is proper. Complainant timely appealed to the State Tax Commission.
- Evidentiary Hearing. The issue of overvaluation was presented at an evidentiary hearing on February 24, 2017, via telepresence. The Hearing Officer appeared in Jefferson City and the parties appeared in St. Louis. The parties submitted briefs on March 24, 2017.
- Identification of Subject Property. The subject properties are identified by parcel/locator numbers 10K530098 and 10K530087. They are further identified as 9205-9151 Latty Ave, St. Louis County, Missouri. (Complaint; Exhibits B, 1 and 2)
- Description of Subject Property. The subject property consists two parcels of approximately 18 acres improved by a commercial building (manufacturing/office) of approximately 210,000 square feet. The improvement on the subject property was constructed in 1951, is in fair condition and was in need of remediation and repair as of January 1, 2015.
- Assessment. Respondent set a TMV as follows:
Appeal 15-16292: $401,000
Appeal 15-16293: $1,908,000
- Board of Equalization. The BOE sustained Respondent’s TMV.
- Complainant’s Evidence.
The property was purchased in late 2014 for $800,000. The seller was atypically motivated to sell the property and the property sold at a discount due to fast closing terms. At the time of the purchase the property was in need of a new roof at an estimated cost of $600,000, remediation of the tank farm on the property at an estimated cost of $50,000-$70,000, and general debris clean up at an estimated cost of $10,000.
Robert Dodge, a Missouri Certified General Appraiser, testified. He opined a value of the property in an opinion dated November 21, 2014. Mr. Dodge completed the opinion for a bank financing the purchase of the property. Mr. Dodge, as part of his appraisal assignment, developed the income and the sales comparable approach to value. He determined that the property’s value was $1,000,000 as of November 10, 2014. The appraiser also determined that the value as of “January 1, 2015” would be $1,680,000. The appraiser testified that the subsequent opinion of value was not based upon market conditions or any other factor other than completion of the necessary remediation including the new roof, tank repairs and property clean up.
The owner testified as to a market value of $800,000 based upon the purchase of the property in November 2014. The property was offered for $995,000. The owner testified that the lower price was based upon the condition of the property, potential commercial use, location, length of time on the market, and competitive properties for sale.
The owner testified that the remediations to the property did not occur until mid-2015.
To support his opinion of value, Complainant offered as evidence the following exhibits:
|Exhibit A||Resume of Robert Dodge|
|Exhibit B||Appraisal Report|
|Exhibit C||Agreement for Purchase dated 11-14-14|
|Exhibit D||NAI Desco Informational Flyer|
|Exhibit E||Standard Warehouse Lease Agreement dated 12-8-14|
|Exhibit F||First American Title Insurance Company|
|Exhibit G||Real Property Certificate of Value|
|Exhibit H||Correspondence from the Assessor to Complainant dated 12-17-15|
|Exhibit I||Sales Verification Questionnaire|
|Exhibit J||Change of Assessment Notice|
|Exhibit K||Written Direct Testimony of Robert Dodge|
|Exhibit L||Written Direct Testimony of Mark Cusumano (Owner)|
Respondent objected to questions and answers 46-49 in Exhibit L of witness Mark Cusumano. The objection was sustained and the questions and answers were stricken. Respondent objected to Exhibit F. Objection sustained
- Respondent’s Evidence. Respondent offered as evidence the following exhibits:
|Exhibit 1||BOE Decision|
|Exhibit 2||BOE Decision|
|Exhibit 4||Appraisal Report of Robert Dodge|
Complainant objected to Exhibits 1 and 2. Objections were overruled.
- Presumption of Correct Assessment Rebutted – True Market Value Established. Complainant’s evidence was substantial and persuasive to rebut the presumption of correct assessment by the BOE. Complainant’s evidence established TMV of the properties as of January 1, 2015 at $1,000,000 and $1,680,000 as of January 1, 2016 under the market conditions as they existed on January 1, 2015.
CONCLUSIONS OF LAW AND DECISION
The STC has jurisdiction to hear this appeal and correct any assessment which is shown to be unlawful, unfair, arbitrary or capricious, including the application of any abatement. The Senior 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. Article X, Section 14, Mo. Const. of 1945; Sections 138.430, 138.431, 138.431.4, RSMo.
Basis of Assessment
The Constitution mandates that real property and tangible personal property be assessed at its value or such percentage of its value as may be fixed by law for each class and for each subclass. Article X, Sections 4(a) and 4(b), Mo. Const. of 1945. The constitutional mandate is to find the true value in money for the property under appeal. By statute, real property and tangible personal property are assessed at set percentages of true value in money: residential property at 19%; commercial property at 32%; and agricultural property at 12%. Section 137.115.5 RSMo (2000) as amended.
There exists a presumption of correct assessment by the BOE – the BOE presumption.
The BOE presumption operates in every case to require the taxpayer to present evidence to rebut it.
Complainant’s Burden of Proof
To obtain a reduction in assessed valuation based upon an alleged overvaluation, the Complainant must prove the true value in money of the subject property on the subject tax day. Hermel, Inc., v. State Tax Commission, 564 S.W.2d 888, 897 (Mo. banc 1978). True value in money is defined as the price that the subject property would bring when offered for sale by one willing but not obligated to sell it and bought by one willing or desirous to purchase but not compelled to do so. Rinehart v. Bateman, 363 S.W.3d 357, 365 (Mo. App. W.D. 2012); Cohen v. Bushmeyer, 251 S.W.3d 345, 348 (Mo. App. E.D. 2008); Greene County v. Hermel, Inc., 511 S.W.2d 762, 771 (Mo. 1974). True value in money is defined in terms of value in exchange and not in terms of value in use. Stephen & Stephen Properties, Inc. v. State Tax Commission, 499 S.W.2d 798, 801-803 (Mo. 1973). In sum, true value in money is the fair market value of the subject property on the valuation date. Hermel, Inc., 564 S.W.2d at 897.
“’True value’ is never an absolute figure, but is merely an estimate of the fair market value on the valuation date.” Drury Chesterfield, Inc., v. Muehlheausler, 347 S.W.3d 107, 112 (Mo. App. E.D. 2011), citing St. Joe Minerals Corp. v. State Tax Comm’n of Mo., 854 S.W.2d 526, 529 (Mo. App. E.D. 1993). “Fair market value typically is defined as the price which the property would bring when offered for sale by a willing seller who is not obligated to sell, and purchased by a willing buyer who is not compelled to buy.” Drury Chesterfield, Inc., 347 S.W.3d at 112 (quotation omitted).
A presumption exists that the assessed value fixed by the BOE is correct. Rinehart, 363 S.W.3d at 367; Cohen, 251 S.W.3d at 348; Hermel, Inc., 564 S.W.2d at 895. “Substantial and persuasive controverting evidence is required to rebut the presumption, with the burden of proof resting on the taxpayer.” Cohen, 251 S.W.3d at 348. Substantial evidence can be defined as such relevant evidence that a reasonable mind might accept as adequate to support a conclusion. Cupples Hesse Corp. v. State Tax Commission, 329 S.W.2d 696, 702 (Mo. 1959). Persuasive evidence is evidence that has sufficient weight and probative value to convince the trier of fact. Cupples Hesse Corp., 329 S.W.2d at 702. The persuasiveness of evidence does not depend on the quantity or amount thereof but on its effect in inducing belief. Brooks v. General Motors Assembly Division, 527 S.W.2d 50, 53 (Mo. App. 1975). See also, Westwood Partnership v. Gogarty, 103 S.W.3d 152 (Mo. App. E.D. 2003); Daly v. P. D. George Co., 77 S.W.3d 645 (Mo. App. E.D. 2002); Reeves v. Snider, 115 S.W.3d 375 (Mo. App. S.D. 2003).
There is no presumption that the complainant’s opinion is correct. The complainant in a STC appeal still bears the burden of proof. The complainant is the moving party seeking affirmative relief. Therefore, the complainant bears the burden of proving the vital elements of the case, i.e., the assessment was “unlawful, unfair, improper, arbitrary or capricious.” Westwood Partnership, 103 S.W.3d 152 (Mo. App. E.D. 2003); Daly v. P. D. George Co., 77 S.W.3d 645 (Mo. App. E.D. 2002); Reeves v. Snider, 115 S.W.3d 375 (Mo. App. S.D. 2003); Industrial Development Authority of Kansas City v. State Tax Commission of Missouri, 804 S.W.2d 387, 392 (Mo. App. W.D. 1991).
Generally, a property owner, while not an expert, is competent to testify to the reasonable market value of his own land. Cohen, 251 S.W.3d at 348-49; Carmel Energy, Inc. v. Fritter, 827 S.W.2d 780, 783 (Mo. App. W.D. 1992). “However, when an owner’s opinion is based on improper elements or foundation, his opinion loses its probative value.” Carmel Energy, Inc., 827 S.W.2d at 783. A taxpayer does not meet his burden if evidence on any essential element of his case leaves the STC “in the nebulous twilight of speculation, conjecture and surmise.” See Rossman v. G.G.C. Corp. of Missouri, 596 S.W.2d 469, 471 (Mo. App. E.D. 1980).
Weight to be Given Evidence
The Hearing Officer is not bound by any single formula, rule, or method in determining true value in money and is free to consider all pertinent facts and estimates and give them such weight as reasonably they may be deemed entitled. The relative weight to be accorded any relevant factor in a particular case is for the Senior Hearing Officer to decide. St. Louis County v. Security Bonhomme, Inc., 558 S.W.2d 655, 659 (Mo. banc 1977); St. Louis County v. STC, 515 S.W.2d 446, 450 (Mo. 1974); Chicago, Burlington & Quincy Railroad Company v. STC, 436 S.W.2d 650 (Mo. 1968).
The Hearing Officer, as the trier of fact, may consider the testimony of an expert witness and give it as much weight and credit as deemed necessary when viewed in connection with all other circumstances. Beardsley v. Beardsley, 819 S.W.2d 400, 403 (Mo. App. W.D. 1991). The Senior Hearing Officer, as the trier of fact, is not bound by the opinions of experts but may believe all or none of the expert’s testimony or accept it in part or reject it in part. Exchange Bank of Missouri v. Gerlt, 367 S.W.3d 132, 135-36 (Mo. App. W.D. 2012).
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, 615 (Mo. App. W.D. 2000); Hermel, Inc., 564 S.W.2d at 897; Xerox Corp. v. STC, 529 S.W.2d 413 (Mo. banc 1975). Missouri courts have approved the comparable sales or market approach, the cost approach, and the income approach as recognized methods of arriving at fair market value. St. Joe Minerals Corp. v. STC, 854 S.W.2d 526, 529 (App. E.D. 1993); Aspenhof Corp. v. STC, 789 S.W.2d 867, 869 (App. E.D. 1990); Quincy Soybean Company, Inc., v. Lowe, 773 S.W.2d 503, 504 (App. E.D. 1989), citing Del-Mar Redevelopment Corp v. Associated Garages, Inc., 726 S.W.2d 866, 869 (App. E.D. 1987); and State ex rel. State Highway Comm’n v. Southern Dev. Co., 509 S.W.2d 18, 27 (Mo. 1974).
“For purposes of levying property taxes, the value of real property is typically determined using one or more of three generally accepted approaches.” Snider v. Casino Aztar/Aztar Missouri Gaming Corp., 156 S.W.3d 341, 346 (Mo. banc 2005), citing St. Louis County v. Security Bonhomme, Inc., 558 S.W.2d 655, 659 (Mo. banc 1977). “Each valuation approach is applied with reference to a specific use of the property—its highest and best use.” Snider, 156 S.W.3d at 346-47, citing Aspenhof Corp., 789 S.W.2d at 869. “The method used depends on several variables inherent in the highest and best use of the property in question.” Snider, 156 S.W.3d at 347. “Each method uses its own unique factors to calculate the property’s true value in money.” Id.
“The ‘comparable sales approach’ uses prices paid for similar properties in arms-length transactions and adjusts those prices to account for differences between the properties. Id. at 348. “Comparable sales consist of evidence of sales reasonably related in time and distance and involve land comparable in character.” Id. (quotation omitted). “This approach is most appropriate when there is an active market for the type of property at issue such that sufficient data [is] available to make a comparative analysis.” Id.
Implicit in this definition are the consummation of a sale as of a specific date and the passing of title from seller to buyer under conditions whereby:
- Buyer and seller are typically motivated.
- Both parties are well informed and well advised, and both acting in what they consider their own best interests.
- A reasonable time is allowed for exposure in the open market.
- Payment is made in cash or its equivalent.
- Financing, if any, is on terms generally available in the Community at the specified date and typical for the property type in its locale.
- The price represents a normal consideration for the property sold unaffected by special financing amounts and/or terms, services, fees, costs, or credits incurred in the transaction.
Real Estate Appraisal Terminology, Society of Real Estate Appraisers, Revised Edition, 1984; see also, Real Estate Valuation in Litigation, J. D. Eaton, M.A.I., American Institute of Real Estate Appraisers, 1982, pp. 4-5; Property Appraisal and Assessment Administration, International Association of Assessing Officers, 1990, pp. 79-80; Uniform Standards of Professional Appraisal Practice, Glossary.
Sale of Subject
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. St. Joe Minerals Corp. v. STC, 854 S.W.2d 526 (App. E.D. 1993). The property was purchased in late 2014 therefore the sale was not remote in time. The purchase was not voluntary or typically motivated. The seller was an atypical seller interested in removing the property from its responsibility and was motivated by the fast closing terms offered.
In this case, Complainant’s evidence was substantial and persuasive to rebut the presumption of correct assessment by the BOE. Substantial evidence is that which is relevant, adequate, and reasonably supports a conclusion. Cupples Hesse Corp., 329 S.W.2d at 702. Persuasive evidence is that which causes the trier of fact to believe, more likely than not, the conclusion advocated is the correct conclusion. Id.
Complainant presented the testimony of a State of Missouri, Certified General Appraiser. The appraiser has approximately 25 years of experience, certified by the State and MAI designated. The appraiser valued the property in November 2014. As part of his appraisal, the appraiser developed the income and sales comparison approach. The appraiser did not develop the cost approach due to the age of the improvements.
The property is a single tenant industrial building. The property, at the time of the appraiser’s inspection, was in need of repairs, remediation and improvements. The appraiser reports that the property suffered from heavily overgrown vegetation, debris, drainage issues (which he believed could be remediated by turning on the existing sump pump), environmental remediation from the former tank farm, and roof replacement.
To opine value, the appraiser utilized four comparable rentals to develop a relevant rental rate. After making adjustments to the comparable rates, the appraiser concluded on a rate of $2.00 per square foot making the potential gross income $421,350. The appraiser then reviewed the market and the subject to establish vacancy, expenses, capitalization and effective tax rates. The appraiser concluded on a value of $1,304,739 prior to adjusting for the necessary deferred maintenance and remediation. The appraiser adjusted upward for the subject’s additional land to finally conclude an “as-is” value of $830,000.
The appraiser also developed the sales comparison approach. The appraiser reviewed five comparable sales, made adjustments for market conditions, age, finish, warehouse stories, building size, and location. The appraiser determined a value of $1,474,724. The appraiser then made an upward adjustment for the excess land and a deduction for remediation to conclude a value of $1,000,000 under the sales comparison approach.
When reconciling the value developed under each approach, the appraiser relied more heavily on the sales comparison approach. The appraiser opined the value of the property as of November 10, 2014 was $1,000,000. The appraiser noted that the price was higher than the pending purchase price of $800,000. The appraiser believed that the seller was not concerned with the asset but concerned with removing the property from its responsibility and was motivated by the fast closing terms offered. The appraiser further opined that if the repairs were made the value of the parcel would be $1,680,000.
The owner testified that his opinion of value was $800,000 – the purchase price of the property. The owner also testified that the repairs were made to the improvements in 2015.
The TMV for the subject property as determined by the BOE is SET ASIDE. The TMV for the subject property for tax years 2015 is set at $1,000,000 and for 2016 at $1,680,000.
|Appeal Number||Parcel Number||TMV||Assessed Value|
|Appeal Number||Parcel Number||TMV||Assessed Value|
Application for Review
A party may file with the STC an application for review of this decision within thirty days of the mailing date set forth in the Certificate of Service for this Decision. The application shall contain specific facts or law as grounds upon which it is claimed the decision is erroneous. Said application must be in writing addressed to the State Tax Commission of Missouri, P.O. Box 146, Jefferson City, MO 65102-0146, and a copy of said application must be sent to each person at the address listed below in the certificate of service.
Failure to state specific facts or law upon which the application for review is based will result in summary denial. Section 138.432, RSMo
The Collector of St. Louis County, as well as the collectors of all affected political subdivisions therein, shall continue to hold the disputed taxes pending the possible filing of an Application for Review, unless said taxes have been disbursed pursuant to a court order under the provisions of Section 139.031.8, RSMo.
Any Finding of Fact which is a Conclusion of Law or Decision shall be so deemed. Any Decision which is a Finding of Fact or Conclusion of Law shall be so deemed.
SO ORDERED April 11, 2017.
STATE TAX COMMISSION OF MISSOURI
Certificate of Service
I hereby certify that a copy of the foregoing has been sent electronically or mailed postage prepaid this 11th day of April, 2017, to: Complainants(s) counsel and/or Complainant, the County Assessor and/or Counsel for Respondent and County Collector.