Maritz Corporation v. Jake Zimmerman, Assessor St Louis County

August 18th, 2015

State Tax Commission of Missouri

MARITZ CORPORATION,	)
	)
Complainant,	)
	)
v.	)	Appeal Numbers 09-12900
	)	09-12901, 09-12902, 09-12903 &
JAKE ZIMMERMAN, ASSESSOR,	)	09-12904
COUNTY, MISSOURI,	)
	)
Respondent.	)

ORDER AFFIRMING HEARING OFFICER DECISION

On August 18, 2015, Hearing Officer Maureen Monaghan issued her order setting aside the value placed upon the subject properties by the St. Louis County Board of Equalization. Respondent timely filed an Application for Review and Complainants filed a Response.

Standard Upon Review

A party subject to a Decision and Order of a Hearing Officer with the State Tax Commission may file an application requesting the case be reviewed by the Commission. The Commission may then summarily allow or deny their request. The Commission may affirm, modify, reverse or set aside the decision. The Commission may take any additional evidence and conduct further hearings.

Issue

Respondent alleges Complainant failed to present substantial and persuasive evidence to establish the Board’s valuation was erroneous and establish the fair market value of the property.

DISCUSSION AND RULING

Weight to be Given Evidence

Neither the Hearing Officer nor the Commission is 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 and the Commission 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). In the present appeal, the Hearing Officer simply felt that the evidence presented by Complainant, considered in light of all the evidence, was substantial and persuasive and that Complainant met its burden of proof. Neither the Hearing Officer nor the State Tax Commission are required to apply the valuation method of assemblage.

Opinion Testimony by Experts

The testimony of an expert is to be considered like any other testimony, is to be tried by the same test, and receives just so much weight and credit as the trier of fact may deem it entitled to when viewed in connection with all other circumstances. The Hearing Officer and Commission, as the trier of fact, has the authority to weigh the evidence and is not bound by the opinions of experts who testify on the issue of reasonable value, but may believe all or none of the expert’s testimony and may accept it in part or reject it in part. Beardsley v. Beardsley, 819 S.W. 2d 400, 403 (Mo. App. 1991); Curnow v. Sloan, 625 S.W. 2d 605, 607 (Mo. 1981); Scanlon v. Kansas City, 28 S.W. 2d 84, 95 (Mo. 1930).

Discussion

Complainant presented an appraisal report and the testimony of a general, certified appraiser with extensive experience in the market. The appraiser reviewed the properties subject to the appeal and the market in which they are located. The appraiser concluded that the properties would not sell as an integrated unit as there is little demand for one business desiring a complex with many office and warehouse structures with parking across an interstate highway. The property would be marketed as a multi-tenant office complex. The appraiser therefore determined a value for each parcel. No evidence was presented to the contrary.

The appraiser made an adjustment for the lack of parking for the office and warehouse buildings on the other side of the interstate highway from the parking structure currently used by the owner. The appraiser made an adjustment as a person in the market for an office structure would desire adequate parking near the building. The appraiser based his opinion utilizing the cost to build a parking garage. The Respondent offered no evidence (1) that the market would accept parking across an interstate highway, (2) regarding alternatives to supply adequate parking for the buildings subject to the appeal or (3) that the cost approach used by the appraiser was an incorrect methodology.

The Commission finds no error in the Hearing Officer’s Decision. The Hearing Officer weighed the evidence that was presented at the hearing. The Hearing Officer determined what the appropriate methodology for the valuation of the subject properties to be. Complainant chose to present an appraisal. Respondent chose not to present an appraisal or any other evidence.

ORDER

The Decision and Order of the Hearing Officer, including the findings of fact and conclusions of law therein, is AFFIRMED. True value in money is determined to be $31,000,000, commercial assessed value of $9,920,000.

Judicial review of this Order may be had in the manner provided in Sections 138.432 and 536.100 to 536.140, RSMo within thirty days of the mailing date set forth in the Certificate of Service for this Order.

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

If no judicial review is made within thirty days, this decision and order is deemed final and the Collector of St. Louis County, as well as the collectors of all affected political subdivisions therein, shall disburse the protested taxes presently in an escrow account in accord with the decision on the underlying assessment in this appeal.

SO ORDERED this 15 day of December, 2015

STATE TAX COMMISSION

Bruce E. Davis, Chairman

Randy Holman, Commissioner

Victor Callahan, Commissioner

Certificate of Service

I hereby certify that a copy of the foregoing has been sent electronically or mailed postage prepaid this 15^th day of December, 2015, to: Complainants(s) counsel and/or Complainant, the county Assessor and/or Counsel for Respondent and county Collector.

Jacklyn Wood

Legal Coordinator

Contact Information for State Tax Commission:

Missouri State Tax Commission

301 W. High Street, Room 840

P.O. Box 146

Jefferson City, MO 65102-0146

573-751-2414

573-751-1341 Fax

State Tax Commission of Missouri

MARITZ CORPORATION,	)
	)
Complainant,	)
	)
v.	)	Appeal Numbers 09-12900
	)	09-12901, 09-12902, 09-12903,
JAKE ZIMMERMAN, ASSESSOR,	)	09-12904 and 09-12905
COUNTY, MISSOURI,	)
	)
Respondent.	)

DECISION AND ORDER

HOLDING

Decision of the County Board of Equalization sustaining the assessment made by the Assessor is SET ASIDE. Complainant presented substantial and persuasive evidence to rebut the presumption of correct assessment by the Board of Equalization.

True value in money for the subject property for tax years 2009 and 2010 is set at $31,000,000; commercial assessed value of $9,920,000.

Complainant appeared by attorney Paul Woody and Jason Turk.

Respondent appeared in person and by counsel Priscilla Gunn.

Case heard and decided by Hearing Officer Maureen Monaghan.

ISSUE

Complainant appeals, on the ground of overvaluation, the decision of the County Board of Equalization, which sustained the valuation of the subject property. As to appeal number 09-12905, Complainant has abandoned the claim for overvaluation and dismisses any action pending with the State Tax Commission. The Commission takes the remaining appeals to determine the true value in money for the subject property on January 1, 2009. 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 RSMo

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 this appeal is proper. Complainant timely appealed to the State Tax Commission from the decision of the County Board of Equalization.
Evidentiary Hearing. The Evidentiary Hearing was held on July 1, 2015 in St. Louis County, Missouri.
Identification of Subject Property. The subject property is identified by map parcel numbers 26P330140, 26P330122, 26P330113, 26P240182, and 26P210174.
Description of Subject Property. The subject property consists of a 54.6 acre tract of land improved by eight buildings of industrial and office of varying ages and conditions. The buildings have a total gross building area of 1,229,365 square feet with net leasable area of 1,027,594 square feet. The improvements were constructed from 1966 to 1986 and are currently owner occupied by the Complainant, although various buildings have been leased to others in the past. The buildings were identified by the Complainant’s appraiser as follows:
1301 Building: Office and warehouse of 120,822 sq. ft. The improvements were constructed in 1966 and 1975;
1305 Building: Office and warehouse with 83,408 square feet and was constructed in 1984;
1309 Building: The improvements were originally constructed in 1968 as a warehouse but it has been retrofitted to an office with 67,049 square feet of net rentable area.
1315 Building (1325 and 1335 included): The improvement was originally constructed in 1968 as a distribution center. It currently services as a photo studio and back office. It has 106,618 sf of rentable area.
1355/1365 Building. Four story office building with parking constructed in 1968 and 1971. It has 275,700 sf of leasable area. Special features include a 350 seat amphitheater, data center, and print department. The building also contains a large dining room and executive dining rooms. The quality of finish is very good. The building does have a walkway connected to it. The walkway connects to a building on the other side of highway 44.
1375 Building. It is a nine story office building constructed in 1979. It has 136,976 sf of leasable area. It has parking for 31 vehicles.
1385 Building. 2 story building constructed in 1971 of 68,720 net leasable area. It was vacant as of January 2009. The improvements are in poor condition.
1395 Building. 3 level building constructed in 1976 and 1986. It has grade level parking for 185 vehicles. It is 168,301 sf.
Additional Improvements: The property has a total 1,533 parking spaces. The parking is inadequate and the occupants park south of the building and the employer shuttles them to the buildings.

Assessment.

Appeal No.	Parcel No.	True Value	Assessed Value
09-12900	26P330140	$710,500	$227,360
09-12901	26P330122	$292,700	$93,660
09-12902	26P330113	$509,900	$163,170
09-12903	26P240182	$43,000,000	$13,760,000
09-12904	26P210174	$7,169,700	$2,294,000
		$51,582,800	$16,538,190

Complainant’s Evidence. Complainant offered into evidence Exhibits A and B. Exhibit A was an appraisal report. Exhibit B was the written direct testimony of Douglas Zink. Both exhibits were admitted into evidence. Douglas Zink is a certified general appraiser. The value as determined by the sales comparison approach and the income approach was $51,900,000 and $50,537,259 respectively. The appraiser made a deduction for a parking garage to provide adequate parking at the site rather than via shuttle ($16,600,000) and a deduction for updates in the unoccupied building of $3,346,000. The resulting opinion of value for all the improvements was $31,000,000.
No Evidence of New Construction & Improvement. There was no evidence of new construction and improvement from January 1, 2009, to January 1, 2010, therefore the assessed value for 2009 remains the assessed value for 2014. Section 137.115.1, RSMo.
Presumption of Correct Assessment Rebutted – Value Established. The evidence presented by Complainant was substantial and persuasive to both rebut the presumption of correct assessment by the Board and to establish the fair market value of the subject property to be $31,000,000.

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. 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. 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 and tangible personal property are assessed at set percentages of true value in money. Section 137.115.5, RSMo – residential property at 19% of true value in money; commercial property at 32% of true value in money and agricultural property at 12% of true value in money.

Presumption In Appeal

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

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).

“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 terms of cash in United State dollars or in terms of financial arrangements comparable thereto; and

The price represents a normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale.” Property Assessment Valuation, IAAO, pp 18-19.

“In reviewing the definition, the following important points regarding market value should be noted:

It is the most probable price. It is not the highest, lowest or average price.
It is expressed in terms of money.
It implies reasonable time for exposure to the market.
It implies that both buyer and seller are informed of the uses to which the property may be put.
It requires an arm’s-length transaction in the open market.
It requires a willing buyer and a willing seller, with no advantage being taken by either buyer or seller. (emphasis added)
It recognizes the present use as well as the potential use of the property.”

Property Assessment Valuation, IAAO, pp 18-19

True value in money is defined in terms of value in exchange and not value in use. Daly v. P. D. George Company, et al, 77 S.W.3d 645, 649 (Mo. App E.D. 2002), citing, Equitable Life Assurance Society v. STC, 852 S.W.2d 376, 380 (Mo. App. 1993); citing, Stephen & Stephen Properties, Inc. v. STC, 499 S.W.2d 798, 801-803 (Mo. 1973) “In estimating use value, the appraiser focuses on the value the real estate contributes to the enterprise of which it is a part, without regard to the highest and best use of the property or the monetary amount that might be realized from its sale……An older factory that is still used by the original firm may have considerable use value to that firm but only a nominal market value for another use.” The Appraisal of Real Estate, 12^th Edition, Appraisal Institute.

Weight to be Given Evidence

The Hearing Officer is not bound by any single formula, rule or method in determining true value in money, but is free to consider all pertinent facts and estimates and give them such weight as reasonably they may be deemed entitled. The relative weight to be accorded any relevant factor in a particular case is for the Hearing Officer to decide. St. Louis County v. Security Bonhomme, Inc., 558 S.W.2d 655, 659 (Mo. banc 1977); St. Louis County v. STC, 515 S.W.2d 446, 450 (Mo. 1974); Chicago, Burlington & Quincy Railroad Company v. STC, 436 S.W.2d 650 (Mo. 1968).

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 he 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).

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). Missouri courts have approved the comparable sales or market approach, the cost approach and the income approach as recognized methods of arriving at fair market value. St. Joe Minerals Corp. v. STC, 854 S.W.2d 526, 529 (App. E.D. 1993); Aspenhof Corp. v. STC, 789 S.W.2d 867, 869 (App. E.D. 1990); Quincy Soybean Company, Inc., v. Lowe, 773 S.W.2d 503, 504 (App. E.D. 1989), citing Del-Mar Redevelopment Corp v. Associated Garages, Inc., 726 S.W.2d 866, 869 (App. E.D. 1987); and State ex rel. State Highway Comm’n v. Southern Dev. Co., 509 S.W.2d 18, 27 (Mo. Div. 2 1974).

Opinion Testimony by Experts

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

The testimony of an expert is to be considered like any other testimony, is to be tried by the same test, and receives just so much weight and credit as the trier of fact may deem it entitled to when viewed in connection with all other circumstances. The Hearing Officer, as the trier of fact, has the authority to weigh the evidence and is not bound by the opinions of experts who testify on the issue of reasonable value, but may believe all or none of the expert’s testimony and may accept it in part or reject it in part. Beardsley v. Beardsley, 819 S.W. 2d 400, 403 (Mo. App. 1991); Curnow v. Sloan, 625 S.W. 2d 605, 607 (Mo. 1981); Scanlon v. Kansas City, 28 S.W. 2d 84, 95 (Mo. 1930).

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 need not be admissible in evidence.

Section 490.065, RSMo; State Board of Registration for the Healing Arts v. McDonagh, 123 S.W.3d 146 (Mo. SC. 2004); Courtroom Handbook on Missouri Evidence, Wm. A. Schroeder, Sections 702-505, pp. 325-350; Wulfing v. Kansas City Southern Industries, Inc., 842 S.W.2d 133 (Mo. App. E.D. 1992).

The Appropriateness of Assemblage

Missouri recognizes that different properties may be valued together if one is an integral part of the other and there is a marketplace for the property when sold together. Bussmann Div. of Cooper Indus. V. State Tax Comm’n of Missouri, 802 SW 2d 543 (Mo. App. E.D. 1991); P.D. George v. Daly, App. No. 99-20262 Mo. Tax Comm. 2/2/01); HYCEL Partners LLP v. Morton, App. No. 90-10798 (Mo. Tax Comm. 9/l1/93).

In Doe Run Company v. Holman, 1999 WL 1253948, App. No. 97-34016 (Mo. Tax Comm. 12/23/99) we looked at a 235 acre parcel improved with a lead smelter plant and found:

The subject smelter is not likely to be purchased on a standalone basis. Rather, its specific highest and best use is as part of an integrated lead producing company. In light of the subject smelter’s specific refining process, the subject smelter’s value is maximized where it operated in an integrated process with Missouri lead mines.

We defined the issue not as what would an informed investor pay for the lead smelter, but “what would an informed investor pay for an integrated lead producing company, and what portion of that price is attributable to the subject smelter?” Not only did we value the subject property along with other property to which it was fully integrated, but we valued the subject property as part of a going concern of an entire lead producing company that included assets and properties that were not included in the appeal with the subject property nor located anywhere near the subject property.

We found that “under the unit concept of value, the fair market value of the relevant property is measured by appraising the whole property as a going concern because it derives its true value not from the sum of its parts, but from the integrated use of the parts to perform its integrated functions and from the investors’ standpoint, generate income.” Burlington Northern Railroad Company v. Bair, 815 F. Supp. 1223, 1227 (S.D. Iowa, Central Division, 1993)

Under such an approach, the appraiser estimates the value of the integrated system and allocates a portion of the value to the specific unit in question. USPAP recognizes that “although the value of the whole may be equal to the sum of the separate parts, it also may be greater than or less than the sum of the parts.”

The property subject to this appeal is not integrated. The buildings, from the standpoint of an investor, may stand alone to generate income. The properties are not part of an integrated system, like a lead smelter, but may operate as stand-alone office space or warehouse space as evidenced by the leasing of parts of the subject properties and the acquisition and retrofitting of the properties over a twenty year period.

Complainant Proves Value

Complainant presented substantial and persuasive evidence to establish a fair market value as of January 1, 2009 for the subject property. Complainant’s appraiser developed an opinion of value relying upon an established and recognized approach for the valuation of real property, the sales comparison or market approach and the income approach – $51,900,000 and $50,537,259. The initial valuation by the appraiser was very close to the valuation by the County of $52,582,800.

The variance in the opinion of value comes down to the deduction the appraiser made to address updates necessary and parking needs. The appraiser opined that unoccupied building (1385 Building) was in poor condition and was in need of updates and repairs of $3,346,000. There was no contradicting evidence as to that issue.

The appraiser also opined that the properties were in need of a parking garage to address the concerns of a potential buyer of lack of parking for the buildings. The appraiser opined that the market would desire parking for the buildings near or on the same side of the highway. He believed the market would not find it desirable to shuttle people across a highway or use a walkway through another building and across the interstate. The appraiser determined that it would cost $16,600,000 to address this issue and a buyer would adjust their purchase price to address the parking needs.

The cost of the parking garage was the issue of contention in the appeal. The County cross-examined the expert as to the need for the parking garage as well as the cost of the parking garage. The appraiser testified that the shuttle service is an inefficient and expensive solution for the lack of parking and therefore the market would desire parking on the same side of the highway as the buildings. The appraiser also testified that the walkway would not be desirable as the walkway was constructed to facilitate access for two buildings, not as a pedestrian thoroughfare for all the buildings on the other side of the highway. He opined that the market would desire convenient, usable parking near the buildings or at least on the same side of the interstate.

The appraiser also stated that he reviewed several alternatives to address the parking needs for the buildings. The appraiser stated that the construction of a garage was the least expensive alternative given that there was insufficient open space to provide the needed 1,500 parking spaces. The appraiser stated that he utilized the Marshall Valuation Service for determining the cost to building a parking structure. There was no questioning as to the cost of the building a garage.

The conclusion of true value of the properties for 2009-2010 is as follows:

Appeal No.	Parcel No.	True Value
09-12900	26P330140	$473,100
09-12901	26P330122	$194,900
09-12902	26P330113	$339,500
09-12903	26P240182	$25,218,600
09-12904	26P210174	$4,773,900
		$31,000,000

ORDER

The assessed valuation for the subject property as determined by the Assessor and sustained by the Board of Equalization for St. Louis County for the subject tax day is SET ASIDE. The assessed value for the subject properties for tax years 2009 and 2010 is set at:.

Appeal No.	Parcel No.	Assessed Value
09-12900	26P330140	$151,390
09-12901	26P330122	$62,370
09-12902	26P330113	$108,640
09-12903	26P240182	$8,069,950
09-12904	26P210174	$1,527,650
		$9,920,000

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 this 18th day of August, 2015.

STATE TAX COMMISSION OF MISSOURI

Maureen Monaghan

Hearing Officer