STATE TAX COMMISSION OF MISSOURI
| LYNN BERRY & HENRY L. CLOUSE, | ) | |
| ) | ||
| Complainants, | ) | |
| ) | ||
| v. | ) | Appeal No. 15-10051 |
| ) | ||
| JAKE ZIMMERMAN, ASSESSOR | ) | |
| ST. LOUIS COUNTY, MISSOURI, | ) | |
| ) | ||
| Respondent. | ) |
DECISION AND ORDER
HOLDING
The assessment made by the Board of Equalization of St. Louis County (BOE) is AFFIRMED. Complainants Lynn Berry and Henry L. Clouse (Complainants) did not present substantial and persuasive evidence to rebut the presumption of correct assessment by the BOE. Respondent Jake Zimmerman, St. Louis County Assessor, (Respondent) presented substantial and persuasive evidence to support the BOE’s valuation of the subject property as of January 1, 2015.
Complainants appeared pro se.
Respondent appeared by Steven Robson, Assistant County Counselor.
Case heard and decided by Senior Hearing Officer Amy S. Westermann.
ISSUE
Complainants appealed on the ground of overvaluation. Respondent initially set the true market value (TMV) of the subject property, as residential property, at $211,900. The BOE lowered Respondent’s valuation to $180,000. The Commission takes this appeal to determine the TMV of the subject property on January 1, 2015.
The Senior Hearing Officer, having considered all of the competent evidence upon the whole record, enters the following Decision and Order.
FINDINGS OF FACT
- Jurisdiction. Jurisdiction over this appeal is proper. Complainants timely appealed to the State Tax Commission.
- Evidentiary Hearing. The issue of overvaluation was presented at an evidentiary hearing on May 25, 2016, at the St. Louis County Government Administration Building, 41 South Central Avenue, Clayton, Missouri.
- Identification of Subject Property. The subject property is identified by parcel/locator number 17N520642. It is further identified as 626 Graeser Rd., Creve Coeur, Missouri. (Complaint; Exhibit 1)
- Description of Subject Property. The subject property consists of a .37 acre residential lot improved by a 974 square foot, single-family home built in 1926. (Exhibit A; Exhibit 1) The subject property includes one bedroom and one bathroom. The exterior consists of wood frame construction. (Exhibit A)
- Assessment. Respondent valued the subject property at $211,900 residential, as of January 1, 2015.
- Board of Equalization. The BOE lowered Respondent’s valuation of the subject property to $180,000.
- Complainant’s Evidence. Complainants testified in their own behalf. Complainants testified that they had purchased the subject property in 1988 or 1989 for $119,000. (Exhibit A) Complainants testified that the subject property was not encumbered by a mortgage and had not been appraised within the three years prior to the hearing. Complainants testified that no improvements had been made to the subject property between January 1, 2013, and January 1, 2015. Complainants acknowledged that the subject property was considered a “tear down” property in which a buyer would likely purchase it and demolish the existing house to build a newer house. Complainants argued that the subject property’s TMV should reflect that it is a “flag” lot with strict building lines and no street parking because these factors made it less desirable to potential buyers. Complainants further argued that the configuration of the lot limits the size of the house that could be built on the lot, which makes the subject property less desirable to developers, and decreases the property value. Complainants opined that the TMV of the subject property as of January 1, 2015, was $142,800.
Complainants presented as exhibits: background information about the subject property (Exhibit A); a procedural history of Complainants’ case before the BOE (Exhibits B and C); a detailed written analysis of Complainants’ argument, including the contention that the increase in the assessed value of the subject property’s land was higher than that of comparable properties (Exhibit D); data concerning comparable properties located in Creve Coeur (Exhibit E); a written analysis of a comparable property used by Respondent to support his valuation of the subject property (Exhibit F).
Respondent objected to Exhibits B and C on the ground that they were not relevant for establishing the TMV of the subject property in the current appeal before the Commission. The Senior Hearing Officer sustained the objection and excluded Exhibits B and C. Respondent objected to Exhibit D on the ground that it was not relevant for establishing Complainants’ opinion of the TMV of the subject property. The Senior Hearing Officer overruled the objection and received Exhibit D to be given the weight deemed appropriate in the context of all the other evidence. Respondent did not object to Complainants’ other exhibits, which were received into the record.
- Respondent’s Evidence. Respondent offered as evidence the testimony of Missouri State Certified Residential Real Estate Appraiser Gerald D. Keeven, Jr., (Appraiser) along with the Appraiser’s report (Exhibit 1). The Appraiser opined that the TMV of the subject property as of January 1, 2015, was $197,000. [1]
The Appraiser testified that he utilized the market or sales comparison approach to arrive at an opinion of value. The Appraiser chose three comparable properties that were located within one mile of the subject property. The actual sale prices of the comparable properties ranged from $160,000 and $225,000. (Exhibit 1) The comparable properties had sold between December 2012 and December 2014. The subject property and all of the comparables were located in the City of Creve Coeur and in the Ladue School District. (Exhibit 1) The Appraiser used sales that were considered to be the best available due to the lack of comparable lot sales in the Ladue School District, where the subject property was located. (Exhibit 1)
The Appraiser conducted a land appraisal and viewed the exterior of the subject property from the street. The Appraiser made market based adjustments of $65,000 per acre to the comparable properties based on the size of the lots. The comparable properties ranged in size from .46 acres to .53 acres. The subject property had .37 acres, or approximately 16,000 square feet. The Appraiser also made market based adjustments for traffic and for the date of sale. A moderate amount of traffic passed in front of the subject property. A moderate amount of traffic passed in front of Comparable No. 1 while a light amount of traffic passed in front of Comparable Nos. 2 and 3. (Exhibit 1) The Appraiser considered the comparable properties equal to the subject property in terms of all of the comparables had existing homes on the lots prior to their sales; therefore, the Appraiser did not make a dollar adjustment for demolition costs. The Appraiser placed the most weight on Comparable No. 1 due to it being most similar to the subject property and requiring the fewest adjustments. The adjusted sale prices of the comparables ranged from $158,700 to $212,200. Complainants did not object to the Appraiser’s Report, which was received into the record.
On cross examination, the Appraiser testified that he had chosen the comparables because they had lots that were most similar to the subject property with the most recent sale dates. The Appraiser testified that in conducting his analysis he did not compare the homes on the lots but compared only the size of the lots. When questioned by the Senior Hearing Officer, the Appraiser further testified that there had been no market data indicating that the value of the subject property should be reduced because it was a “flag” lot. The Appraiser testified that, generally, a “flag” lot could make a difference in terms of a property’s value, but he had made no reduction in value in this specific case because the lot of the subject property consisted of over 16,000 square feet and was buildable.
- Presumption of Correct Assessment Not Rebutted. Complainant’s evidence was not substantial and persuasive to rebut the presumption of correct assessment by the Board and establish the true value in money as of January 1, 2015, to be $142,800, as proposed. The evidence presented by Respondent was received and considered only for the purpose of sustaining the BOE’s valuation of $180,000 and not for increasing the valuation of the subject property in this appeal.
CONCLUSIONS OF LAW AND DECISION
Jurisdiction
The Commission 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.
Investigation by Hearing Officer
In order to investigate appeals filed with the Commission, the Hearing Officer may inquire of the owner of the property or of any other party to the appeal regarding any matter or issue relevant to the valuation, subclassification, or assessment of the property. Section 138.430.2 RSMo (2000) as amended. The Hearing Officer’s decision regarding the assessment or valuation of the property may be based solely upon his inquiry and any evidence presented by the parties or based solely upon evidence presented by the parties. Id.
During the hearing, the Senior Hearing Officer inquired of Complainant and of the Appraiser.
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.
A presumption exists that the assessed value fixed by the BOE is correct. Rinehart, 363 S.W.3d at 367; Cohen, 251 S.W.3d at 348; Hermel, Inc., 564 S.W.2d at 895. “Substantial and persuasive controverting evidence is required to rebut the presumption, with the burden of proof resting on the taxpayer.” Cohen, 251 S.W.3d at 348. Substantial evidence can be defined as such relevant evidence that a reasonable mind might accept as adequate to support a conclusion. Cupples Hesse Corp. v. State Tax Commission, 329 S.W.2d 696, 702 (Mo. 1959). Persuasive evidence is evidence that has sufficient weight and probative value to convince the trier of fact. Cupples Hesse Corp., 329 S.W.2d at 702. The persuasiveness of evidence does not depend on the quantity or amount thereof but on its effect in inducing belief. Brooks v. General Motors Assembly Division, 527 S.W.2d 50, 53 (Mo. App. 1975). See also, Westwood Partnership v. Gogarty, 103 S.W.3d 152 (Mo. App. E.D. 2003); Daly v. P. D. George Co., 77 S.W.3d 645 (Mo. App. E.D. 2002); Reeves v. Snider, 115 S.W.3d 375 (Mo. App. S.D. 2003).
There is no presumption that the taxpayer’s opinion is correct. The taxpayer in a 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.” 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 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. 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 Hearing Officer to decide. St. Louis County v. Security Bonhomme, Inc., 558 S.W.2d 655, 659 (Mo. banc 1977); St. Louis County v. STC, 515 S.W.2d 446, 450 (Mo. 1974); Chicago, Burlington & Quincy Railroad Company v. STC, 436 S.W.2d 650 (Mo. 1968).
The Hearing Officer, as the trier of fact, may consider the testimony of an expert witness and give it as much weight and credit as deemed necessary when viewed in connection with all other circumstances. Beardsley v. Beardsley, 819 S.W.2d 400, 403 (Mo. App. W.D. 1991). The Hearing Officer, as the trier of fact, is not bound by the opinions of experts but may believe all or none of the expert’s testimony or accept it in part or reject it in part. Exchange Bank of Missouri v. Gerlt, 367 S.W.3d 132, 135-36 (Mo. App. W.D. 2012).
Board Presumption and Computer-Assisted Presumption
There exists a presumption of correct assessment by the BOE – the BOE presumption. In charter counties or the City of St. Louis, there exists by statutory mandate a presumption that the Assessor’s original valuation was made by a computer, computer-assisted method or a computer program – the computer-assisted presumption. These two presumptions operate with regard to the parties in different ways.
The BOE presumption operates in every case to require the taxpayer to present evidence to rebut it. If Respondent is seeking to prove a value different than that set by the BOE, then it also would be applicable to the Respondent.
The computer-assisted presumption is applicable only if (1) the BOE lowered the value of the Assessor and Respondent is seeking to sustain the original assessment and (2) it has not been shown that the Assessor’s valuation was not the result of a computer assisted method. The BOE’s valuation is assumed to be an independent valuation.
In the present appeal, the BOE lowered the initial valuation of Respondent, and Respondent is not seeking to raise the assessment to the original value; therefore, only the BOE presumption applies while the computer-assisted presumption is not applicable.
Methods of Valuation
Proper methods of valuation and assessment of property are delegated to the Commission. It is within the purview of the Hearing Officer to determine the method of valuation to be adopted in a given case. See, Nance v. STC, 18 S.W.3d 611, 615 (Mo. App. W.D. 2000); Hermel, Inc., 564 S.W.2d at 897; Xerox Corp. v. STC, 529 S.W.2d 413 (Mo. banc 1975). Missouri courts have approved the comparable sales or market approach, the cost approach, and the income approach as recognized methods of arriving at fair market value. St. Joe Minerals Corp. v. STC, 854 S.W.2d 526, 529 (App. E.D. 1993); Aspenhof Corp. v. STC, 789 S.W.2d 867, 869 (App. E.D. 1990); Quincy Soybean Company, Inc., v. Lowe, 773 S.W.2d 503, 504 (App. E.D. 1989), citing Del-Mar Redevelopment Corp v. Associated Garages, Inc., 726 S.W.2d 866, 869 (App. E.D. 1987); and State ex rel. State Highway Comm’n v. Southern Dev. Co., 509 S.W.2d 18, 27 (Mo. 1974).
“For purposes of levying property taxes, the value of real property is typically determined using one or more of three generally accepted approaches.” Snider v. Casino Aztar/Aztar Missouri Gaming Corp., 156 S.W.3d 341, 346 (Mo. banc 2005), citing St. Louis County v. Security Bonhomme, Inc., 558 S.W.2d 655, 659 (Mo. banc 1977). “Each valuation approach is applied with reference to a specific use of the property—its highest and best use.” Snider, 156 S.W.3d at 346-47, citing Aspenhof Corp., 789 S.W.2d at 869. “The method used depends on several variables inherent in the highest and best use of the property in question.” Snider, 156 S.W.3d at 347. “Each method uses its own unique factors to calculate the property’s true value in money.” Id. “The ‘comparable sales approach’ uses prices paid for similar properties in arms-length transactions and adjusts those prices to account for differences between the properties. Id. at 348. “Comparable sales consist of evidence of sales reasonably related in time and distance and involve land comparable in character.” Id. (quotation omitted). “This approach is most appropriate when there is an active market for the type of property at issue such that sufficient data [is] available to make a comparative analysis.” Id.
Implicit in this definition are the consummation of a sale as of a specific date and the passing of title from seller to buyer under conditions whereby:
- Buyer and seller are typically motivated.
- Both parties are well informed and well advised, and both acting in what they consider their own best interests.
- A reasonable time is allowed for exposure in the open market.
- Payment is made in cash or its equivalent.
- Financing, if any, is on terms generally available in the Community at the specified date and typical for the property type in its locale.
- The price represents a normal consideration for the property sold unaffected by special financing amounts and/or terms, services, fees, costs, or credits incurred in the transaction.
Real Estate Appraisal Terminology, Society of Real Estate Appraisers, Revised Edition, 1984; See also, Real Estate Valuation in Litigation, J.D. Eaton, M.A.I., American Institute of Real Estate Appraisers, 1982, pp. 4-5; Property Appraisal and Assessment Administration, International Association of Assessing Officers, 1990, pp. 79-80; Uniform Standards of Professional Appraisal Practice, Glossary.
Highest and Best Use
True value in money is the fair market value of the subject property on the valuation date and is a function of the subject property’s highest and best use, which is the use of the property that will produce the greatest return in the reasonably near future. Aspenhof Corp. v. State Tax Commission, 789 S.W.2d 867, 869 (Mo. App. E.D. 1990). It is true that property can only be valued according to a use to which the property is readily available. However, this does not mean that in order for a specific use to be the highest and best use for calculating the property’s value in money, that particular use must be available to anyone deciding to purchase the property. A determination of the true value in money cannot reject the property’s highest and best use and value the property at a lesser economic use of the property. Snider, 156 S.W.3d at 348-49.
Discussion
Here, Complainants failed to present substantial and persuasive evidence to rebut the presumption of correct assessment by the BOE. Significantly, Complainants’ argument that the subject property’s value should be decreased because the subject property is a “flag” lot and, therefore, is less desirable to potential buyers was not supported by any of the three recognized approaches to determining value or by any market data. The comparables that Complainants presented were not similar to the subject property in that nothing indicated they all were “flag lots” or “tear downs” to be evaluated on the basis of only the lots. Moreover, some of Complainants’ comparables had not been sold through arms-length transactions, and, therefore, the sale prices of those comparables did not necessarily reflect their true market value. (Exhibits E and F)
Respondent’s evidence, however, compels the conclusion that the BOE’s valuation was correct. The Appraiser utilized the comparable sales approach in developing an opinion of TMV of the subject property. The Appraiser analyzed three comparable sales, all of which were located less than a mile from and in the same school district and city as the subject property. (Exhibit 1) The comparables all were evaluated as “tear down” properties with lots similar to the subject property. Although the Appraiser admitted that, generally, a “flag” lot could make a difference in terms of a property’s value, the Appraiser testified that he had made no reduction in value in this specific case because the lot of the subject property consisted of over 16,000 square feet and was buildable. The Appraiser further testified that no market data indicated that the value of the subject property should be reduced because it was a “flag” lot.
Given the evidence, it would be reasonable to find and conclude that Respondent rebutted the presumption of correct valuation by the BOE and that the TMV of the subject property on January 1, 2015, was $197,000. However, Respondent’s evidence was received and considered only for the purpose of sustaining the BOE’s valuation of $180,000 and not for increasing the valuation of the subject property in this appeal.
ORDER
The true market valuation for the subject property as determined by the BOE is AFFIRMED. The assessed value for the subject property for tax years 2015 and 2016 is set at $34,200 residential ($180,000 TMV).
Application for Review
A party may file with the Commission an application for review of this decision within thirty days of the mailing date set forth in the Certificate of Service for this Decision. The application shall contain specific facts or law as grounds upon which it is claimed the decision is erroneous. Said application must be in writing addressed to the State Tax Commission of Missouri, P.O. Box 146, Jefferson City, MO 65102-0146, and a copy of said application must be sent to each person at the address listed below in the certificate of service.
Failure to state specific facts or law upon which the application for review is based will result in summary denial. Section 138.432, RSMo
Disputed Taxes
The Collector of 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 September 20, 2016.
STATE TAX COMMISSION OF MISSOURI
Amy S. Westermann
Senior Hearing Officer
Certificate of Service
I hereby certify that a copy of the foregoing has been sent electronically or mailed postage prepaid this 20th day of September, 2016, to: Complainants(s) counsel and/or Complainant, the County Assessor and/or Counsel for Respondent and County Collector.
Jacklyn Wood
Legal Coordinator
[1] Respondent’s valuation following the Appraiser’s analysis was higher than the BOE’s assessment of the subject property’s value; however, Respondent did not advocate increasing the BOE’s assessment of the subject property’s value.