State Tax Commission of Missouri
|MCGINLEY FAMILY LTD,||)|
|v.||)||Appeal Number 13-13774 &|
|JAKE ZIMMERMAN, ASSESSOR,||)|
|ST LOUIS COUNTY, MISSOURI,||)|
DECISION AND ORDER
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 2013 and 2014 is set at $2,150,000, commercial assessed value of $688,000.
Complainant appeared by counsel Thomas Caradonna.
Respondent appeared by counsel Ed Corrigan
Case heard and decided by Hearing Officer Maureen Monaghan.
Complainant appeals, on the grounds of overvaluation and discrimination, the decision of the St. Louis County Board of Equalization, which sustained the valuation of the subject property. The Complainant abandoned their claim of discrimination. The Commission takes this appeal to determine the true value in money for the subject property on January 1, 2013. 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 St. Louis County Board of Equalization.
- Evidentiary Hearing. Evidentiary Hearing in this appeal occurred on February 3, 2016 in St. Louis County at the Administration Building.
- Identification of Subject Property. The subject property is identified by map parcel numbers 19J220304 and 19J220074 It is further identified as 6733 Clayton Rd/937 Concordia Lane., St. Louis County, Missouri.
- Description of Subject Property. The subject property consists of a 1.7 acre tract of land improved by a single story, single tenant retail building located on lighted streets. The gross building area is 20,589 square feet. (14,575 SF is retail space, the remaining is basement storage.)
The building was constructed in 2004. It is a build-to-suit improvement. The features particular to this retail tenant include: (1) higher windows; (2) single customer entrance; (3) higher end electrical; (4) fiber optic network and satellite communications; (5) specified dock/conveyor system; (6) polished concrete; (7) walk in cooler; (8) two lane drive up window with conveyer and communications; and (9) soffits for cooler and lowered ceiling for pharmacy and photo shop.
The lease is for 60 years. The tenant may terminate the lease at the end of twenty years and then every five years thereafter. The lease is not an open market lease and the terms are atypical as compared to other leases in the market. The terms, including the rent, are based upon the cost of construction and a guaranteed rate of return to the owner.
- Assessment. The Assessor appraised the property at $3,040,200, an assessed commercial value of $972,870. The Board of Equalization sustained the assessment.
- Complainant’s Evidence. The Complainant submitted Exhibit A – Appraisal Report – and Exhibit B – Written Direct Testimony of General Certified Appraiser Steven Teague. The appraiser developed the sales comparison and income approaches to value. The appraiser concluded an opinion of value of $2,150,000.
- No Evidence of New Construction & Improvement. There was no evidence of new construction and improvement from January 1, 2013, to January 1, 2014, therefore the assessed value for 2013 remains the assessed value for 2014. Section 137.115.1, RSMo.
- Respondent’s Evidence. Respondent submitted Exhibit 1 – Written Direct Testimony of Angela Falvey, Exhibit 2 – Professional Qualifications of Angela Falvey and Exhibit 3 – Appraisal Review Report. Complainant objected to the exhibits on the grounds of inadmissible hearsay and comment on the credibility of other witnesses. Any statements as to the credibility of the Complainant’s witness or the weight to be given to the Complainant’s evidence were stricken.
The witness is employed by the Respondent as an appraiser. The witness is not a Certified General Appraiser licensed by the State of Missouri to appraise property. An exception to the appraisal statute provides that he may provide an opinion of value in his employment with the county. Respondent’s witness did not provide evidence as to the market value of the property as of January 1, 2013. The witness’s purpose was to provide expert testimony on appraisal practice. The witness did not conduct an inspection of the property. The work was a desk review.
The Hearing Officer placed little weight on the appraisal review report. The report states that an appraiser must develop a land value to establish a highest and best use. Such is not required by USPAP or the Appraisal Institute. The Appraisal of Real Estate only requires that if the market value opinion is developed for improved property, a highest and best use of the property as improved is required. USPAP only requires the appraiser to state the use of the property as of the date of the value and the use of the property reflected in the appraisal. If the appraiser develops an opinion as to the highest and best use, the appraiser must state the use and summarize how the opinion was formed.
The review report states that the cost approach should have been developed. The property is fifteen years old and there were sales of comparable properties and leases of comparable property thereby providing ample data for an appraiser to develop the other approaches which would be more reliable given the participants in the market for properties like the subject.
The witness makes allegations regarding the sales utilized by the licensed certified general appraiser but Respondent did not establish the allegations as true or their relevance.
- Presumption of Correct Assessment Rebutted. Complainant’s evidence was substantial and persuasive to rebut the presumption of correct assessment by the Board and establish the true value in money as of January 1, 2013, to be $2,150,000.
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. 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).
Substantial evidence can be defined as such relevant evidence as a reasonable mind might accept as adequate to support a conclusion. See, Cupples-Hesse, supra. 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).
Complainant’s 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, 2013. Hermel, supra. 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). A valuation which does not reflect the fair market value (true value in money) of the property under appeal is an unlawful, unfair and improper assessment.
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). 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). 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 a 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:
- 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.
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).
The Complainant presented an appraisal report and the testimony of a licensed Certified General Appraiser Steven Teague. The appraiser has 35 years of experience in commercial real estate appraisal. He is licensed in Missouri and is MAI designated member of the Appraisal Institute. Appraiser Teague developed the income and sales comparison approach to value.
The appraiser did not develop the cost approach due to the age of the building and the special features of the subject. The special features do not necessarily mean the subject property is a special use or specialty property. The special features, such as the drive thru, are items which may not be desired by the market participants. Since the property is not a specialty property or a new property and market data is available to develop the other approaches, the cost approach is not the most reliable approach to develop an opinion for this property.
The appraiser valued the subject property using the sales comparison approach and the income approach. The appraiser, in the income approach, reviewed five comparable rentals as well as market data. The appraiser did not use the property’s actual lease as it was not considered an open, market lease. The actual lease is a long-term lease of a build to suit property with terms that are not typically found in market leases. The lease, dated September 10, 2001, is for 60 years and the tenant (Walgreens) may terminate the lease at the end of 20 years.
The rents from the five comparables, after adjustments, ranged from $13.62 to $15.24. The comparisons were not identical to the subject. The properties varied in areas such as size, age, and condition. Some of the differences required adjustments. The adjustments were based upon market data and the amount of adjustment had a market basis. The appraiser evaluated sales of properties of varying size, age, condition and quality to base his adjustments. The location was the only adjustment that was based upon the appraiser’s 35 years of experience and judgment. Some differences between the subject and rental comparisons did not require adjustments. The appraiser reviewed sales and found that the existence of the two lane drive thru was not a feature sought by the market nor disfavored by the market and therefore the appraiser made no adjustment for that feature. Another difference between the comparable properties and the subject was number of parking spaces; again, the appraiser determined that as long as the property had sufficient parking, an adjustment for any difference in number of spaces was not necessary.
The appraiser determined that the rental amount of $14.00 per square foot was appropriate for the retail area. The appraiser also included a rental rate of $2.50 per square foot for the basement storage. The appraiser selected a vacancy and collection rate of 5% which is supported by the market vacancy rate of 5-6%. The expense information and capitalization rates were obtained from comparable properties, market data and from publications. The appraiser conducted his own survey of commercial property sales to develop a capitalization rate. The appraiser also reviewed an authoritative source, Realty Rates. The source cap rate survey supported his findings of a market cap rate. The income approach’s indication of value was $2,158,000
For the sales comparable approach, the appraiser reviewed four comparable sales. The adjustments as to size, etc were based upon market data and the amount of adjustment had market basis. The location of the property was the only adjustment made based upon the judgment and experience of the appraiser. However, the adjustment had a basis in data in that the appraiser reviewed traffic counts. Traffic count is an important factor for retail properties. The appraiser concluded an indication of value of $2,113,000.
Reconciliation of Value
The appraiser gave more weight to the income approach resulting in an opinion of value of $2,150,000. The income approach was given more weight as the information collected by the appraiser regarding rental properties was better. The sales approach was given less weight as there were a limited number of sales of free standing single tenant retail buildings of the subject’s size. The sales comparison approach supports the opinion of value developed with the income approach.
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).
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, 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).
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 appraiser supported his adjustments with market information. The location adjustment was the only adjustment made without sales analysis and made on the basis of the appraiser’s 27 years of experience and information such as traffic count.
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 Respondent’s employee presented points to consider but nothing presented refuted the findings of the expert and no opinion of value was offered.
The Hearing Officer as the trier of fact considered the testimony of the expert witness and weighed the evidence accordingly. Complainant presented 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, 2013.
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 property for tax years 2013 and 2014 is set at $688,000 (13-13774: $654,080; 13-13775: $33,920).
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
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 31st day of May, 2016.
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 31st day of May, 2016, to: Complainants(s) counsel and/or Complainant, the county Assessor and/or Counsel for Respondent and county Collector.
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
 There were twenty-seven appeals involving single tenant retail properties leased to Walgreens as of January 1, 2013. The same appraiser, Certified General Appraiser Steven Teague, valued the properties in all of the appeals. The parties agreed that the record in one appeal would apply to the other appeals. The appeals include: 13-13767 thru 13-13794, 13-13796 thru 13-13798, 13-13814 and 13-13830.