MCI Partners, Congress Building II, Pomona Partners v. Christian (Platte)

State Tax Commission of Missouri

 

MCI PARTNERS, LLC,)Appeal Nos.09-79015 – 09-79032

CONGRESS BUILDING II, LLC,)Appeal Nos.09-79033 – 09-79035

POMONA PARTNERS, LLC,)Appeal Nos.09-79036 – 09-79037

)

Complainants,)

)

v.)

)

DAVID CHRISTIAN, ASSESSOR,)

PLATTE COUNTY, MISSOURI,)

)

Respondent.)

 

ORDER

AFFIRMING HEARING OFFICER DECISION

UPON APPLICATION FOR REVIEW

 

On August 10, 2011, Senior Hearing Officer Luann Johnson entered her Decision and Order (Decision) affirming the assessments by the Platte County Board of Equalization.

On September 2, 2011, Complainants filed their Application for Review, Request for Transcript, and Request for Leave to File an Amended Application for Review and Brief 30 days after receiving Transcript.

On September 7, 2011, Order Upon Filing of Application for Review was issued.

On October 20, 2011, Transcript was filed with the Commission and Order on Transmission of Transcript and Setting Deadlines was issued.

On November 14, 2011, Complainants filed Motion for Extension of Time to File Amended Application for Review and Order Granting Motion was issued.

On December 21, 2011, Complainants filed Amended Application for Review.

On December 27, 2011, Respondent filed Suggestions in Opposition to Complainant’s Amended Application for Review.

Complainants had been given until and including February 13, 2012, to file their Reply.None was filed.

CONCLUSIONS OF LAW

Standard Upon Review

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.^[1]

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 she 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.^[2]

The Commission will not lightly interfere with the Hearing Officer’s Decision and substitute its judgment on the credibility of witnesses and weight to be given the evidence for that of the Hearing Officer as the trier of fact.^[3]

DECISION

Complainants raise a single issue on appeal.Complainants contend that the value placed on the subject properties by the Assessor and sustained by the Board of Equalization should have been reduced by 28% to account for economic obsolescence of having to compete with the tax abated properties in the KCI Intermodal Business Center (totally tax abated properties). Complainants argue that the evidence^[4] presented on their behalf established that rents would need to be reduced by 28% in order to compete with the tax abated properties.

The detailed argument put forth on behalf of Complainants does not establish an error in fact or an error in the application of the law to the facts by the Hearing Officer.Complainants’ argument amounts to simply a disagreement with the conclusion reached by the Hearing Officer. The Hearing Officer was presented with two differing opinions by two experts.The opinion presented on behalf of Complainants was not found to be persuasive by the Hearing Officer.Respondent carried no burden of proof, Complainants did.The Hearing Officer concluded that the opinion of Complainant’s expert and his study did not rise to the level of substantial and persuasive evidence to prove the fair market value of any of the properties under appeal.

A review of the record in the present appeal provides support for the determinations made by the Hearing Officer.There is competent and substantial evidence to establish a sufficient foundation for the Decision of the Hearing Officer.A reasonable mind could have conscientiously reached the same result based on a review of the entire record. The Commission finds no basis to support a determination that the Hearing Officer acted in an arbitrary or capricious manner or abused his discretion as the trier of fact and concluder of law in this appeal.^[5]

The Hearing Officer did not err in her determinations as challenged by Complainants.

ORDER

The Commission upon review of the record and Decision in this appeal, finds no grounds upon which the Decision of the Hearing Officer should be reversed or modified.Accordingly, the Decision is affirmed.The Decision and Order of the hearing officer, including the findings of fact and conclusions of law therein, is incorporated by reference, as if set out in full, in this final decision of the Commission.

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 Platte 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 July 24, 2012.

STATE TAX COMMISSION OF MISSOURI

Bruce E. Davis, Chairman

Randy B. Holman, Commissioner

DECISION AND ORDER

 

HOLDING

 

The values determined by the Assessor and approved by the Board of Equalization are AFFIRMED.Correct values are as follows:

 

 

SUMMARY

The subject properties are office/industrial buildings located near KCI airport.Appeals Number 09-79015 through 09-79032 are MCI Partners, LLC; Appeals Number 09-79033 through 09-79035 are Congress Building, II, LLC; and Appeals Number 09-79036 through 09-79037 are Pomona Partners, LLC.Upon appeal, Complainants asserted a value of zero.

Thereafter, Complainants stipulated that the value of the subject properties should be the county value reduced by any amount which was demonstrated to be external obsolescence.For the reasons set forth below, Complainants failed to demonstrate that the values of the subject properties were, in fact, impacted by economic obsolescence on the relevant tax day.

A hearing was conducted on January 18, 2011, and July 6, 2011, before Senior Hearing Officer Luann Johnson, at the Platte County Administration Building, Platte City, Missouri.Complainants appeared by their appraiser, Laird Goldsborough, and by their attorney, Joseph R. Borich, III.Respondent appeared by his appraiser, Lynne D. Lendo, and by counsel, John R. Shank.

EXHIBITS

Complainant presented the following exhibits:

Respondent offered the following exhibits:

 

 

ISSUE

The issue raised on appeal is: What was the true value in money of Complainants’ properties on January 1, 2009, and January 1, 2010, and, specifically, what impact did the knowledge that a future KCI Intermodal Business Center would be located near the subject properties have on the rents that the subject properties were able to command on January 1, 2009?All other issues were waived.

Complainants argue that, because future buildings located within the KCI Intermodal Business Center would receive a 100% tax abatement, Complainants would be required to lower the amount of rents they could charge for their properties thus reducing the net income and the value of the subject properties.

STIPULATION

Complainants stipulated, at the close of hearing on January 18, 2011, and the beginning of hearing on July 6, 2011, that the correct value for the subject parcels for January 1, 2009, should be the value placed upon said parcels by the Platte County Assessor’s Office, adjusted to reflect any economic obsolescence (reduction in rents) that might be demonstrated as being attributable to knowledge, by potential renters, that the KCI Intermodal Business Center would be built near the subject properties sometime in the future.

FINDINGS OF FACT

1.Jurisdiction.Jurisdiction over this appeal for tax year 2009 and 2010 is proper. Complainant timely appealed to the State Tax Commission from the decision of the Platte County Board of Equalization.

2.Tax Day.The tax day in question is January 1, 2009.[6]

3.Respondent’s Evidence Persuasive.Ms. Lynne Lendo, a licensed real estate appraiser, presented an appraisal report, effective January 1, 2009, demonstrating that tax abated office properties in the subject area were renting for $10.00 to $15.00 per square foot. [7]Non-abated office properties were likewise renting for $13.50 to $16.00 per square foot.[8]Leases of tax abated industrial space ranged from $5.28 per square foot to $9.30 per square foot, with the high number representing significant expenses paid by the owner for office finish.Lease rates for non-abated industrial properties range from $3.00 per square foot to $6.50 per square foot.The predominate lease rate for industrial flex buildings, regardless of abatement, is $5.50 to $6.50 per square foot.[9]Based upon her review of market rents, Ms. Lendo concluded, “ . . .rents for tax abatement properties are not generally lower than non-tax abatement properties, and in some cases the tax abatement rents are higher. . .”[10]Ms. Lendo’s evidence is persuasive because it is based upon the behavior of the market on January 1, 2009.

4.Complainant’s Evidence not Persuasive.Complainant presented the appraisal of Laird Goldsborough.Mr. Goldsborough interviewed real estate brokers who informed him that Complainants would have to charge less rent for their properties because the KCI Intermodal Business Center would be 100% tax abated and that potential renters would use this knowledge to demand lower rents from nearby, but non-abated, properties.Mr. Goldsborough did not perform a paired rent analysis to see what similar abated and non-abated properties were able to charge for rents.Rather, he created a “hypothetical” property within the Business Center that he asserted would draw a rent of $4.00 per square foot.He then prepared some calculations which he asserted represented the tax consequences for abated versus non-abated properties and opined “ . . if the owner of the building located off airport property wanted to compete for those same tenants that are considering a building in the KCI Intermodal Business Center, they would theoretically have to lower their rental rate by the difference between the real estate taxes and the ground rent to make the total cost of leasing equivalent. . .”Mr. Goldsborough argued that rents would need to be reduced by 28%in order to compete with tax abated properties.[11]

Mr. Goldsborough was not required to rely on a hypothetical building to determine if external obsolescence existed because of the potential building in the Intermodal Business Center.It was common knowledge that the Intermodal Business Center existed and that buildings would be 100% tax abated.There are a number of other tax abated properties in Platte County that could have been used to determine if the existence of a tax abatement actually impacted rents charged.We will not speculate as to why Mr. Goldsborough chose not to use the available market data but, because he chose not to do so, we find that Mr. Goldsborough’s opinion does not reflect the actual market rents that were being collected by non-tax abated properties on the tax day and is therefore not persuasive.

5.County Values Correct.The market values as determined by the Assessor and approved by the Board of Equalization, are correct.

CONCLUSIONS OF LAW

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.[12]

Official and Judicial Notice

Agencies shall take official notice of all matters of which the courts take judicial notice.[13]

Courts will take judicial notice of their own records in the same cases.[14]In addition, courts may take judicial notice of records in earlier cases when justice requires[15] or when it is necessary for a full understanding of the instant appeal.[16] Courts may take judicial notice of their own records in prior proceedings involving the same parties and basically the same facts.[17]

Presumptions In Appeals

There is a presumption of validity, good faith and correctness of assessment by the County Board of Equalization.[18]

The presumption in favor of the Board is not evidence.A presumption simply accepts something as true without any substantial proof to the contrary.In an evidentiary hearing before the Commission, the valuation determined by the Board, even if simply to sustain the value made by the Assessor, is accepted as true only until and so long as there is no substantial evidence to the contrary.

The presumption of correct assessment is rebutted when the taxpayer, or respondent when advocating a value different than that determined by the Board, 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.[19]

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.[20]It is the fair market value of the subject property on the valuation date.[21]Market value is the most probable price in terms of money which a property should bring in competitive and open market under all conditions requisite to a fair sale, the buyer and seller, each acting prudently, knowledgeable and assuming the price is not affected by undue stimulus.

Implicit in this definition are the consummation of a sale as of a specific date and the passing of title from seller to buyer under conditions whereby:

1.Buyer and seller are typically motivated.

 

2.Both parties are well informed and well advised, and both acting in what they consider their own best interests.

 

3.A reasonable time is allowed for exposure in the open market.

 

4.Payment is made in cash or its equivalent.

 

5.Financing, if any, is on terms generally available in the Community at the specified date and typical for the property type in its locale.

 

6.The price represents a normal consideration for the property sold unaffected by special financing amounts and/or terms, services, fees, costs, or credits incurred in the transaction.[22]

 

Duty to Investigate

In order to investigate appeals filed with the Commission, the Hearing Officer has the duty to 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.The Hearing Officer’s decision regarding the assessment or valuation of the property may be based solely upon its inquiry and any evidence presented by the parties, or based solely upon evidence presented by the parties.[23]

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.[24]

Trier of Fact

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.[25]

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.[26]

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.[27]

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.[28]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.[29]

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.[30]

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.[31]

Complainant’s Burden of Proof

In order to prevail, Complainant 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, 2009.[32]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.”[33]

Substantial evidence can be defined as such relevant evidence as a reasonable mind might accept as adequate to support a conclusion.[34]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.[35]

Owner’s Opinion of Value

The owner of property is generally held competent to testify to its reasonable market value.[36]The owner’s opinion is without probative value however, where it is shown to have been based upon improper elements or an improper foundation.[37]“Where the basis for a test as to the reliability of the testimony is not supported by a statement of facts on which it is based, or the basis of fact does not appear to be sufficient, the testimony should be rejected.”[38]

DISCUSSION

The taxpayer has the burden of proof in a tax appeal.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.”[39]

It is a fundamental appraisal concept that the use of market data is the best way to avoid unnecessary speculation as to the value of a piece of property.Where a party argues that the market recognizes a certain fact as creating external obsolescence, it is incumbent upon that party to actually present market data supporting that assertion.Here, Complainants’ appraiser neglected to look at the available market data.

It is not enough for an appraiser to assert that he/she is an expert.The facts and methodology used should be that which is typically used in the industry.Complainants’ appraiser was given an opportunity – after the close of the hearing – to present learned treaties which would support his methodology in computing external obsolescence.The material he submitted was no more than general comments.Nothing submitted would support his contention that his methodology was appropriate to measure external obsolescence when market data was otherwise available.

ORDER

The assessed value for the subject properties for tax year 2009 and tax year 2010, as determined by the Assessor and affirmed by the Board of Equalization, is AFFIRMED.

A party may file with the Commission an application for review of a hearing officer decision within thirty (30) days of the mailing of such decision. The application shall contain specific detailed grounds upon which it is claimed the decision is erroneous. Failure to state specific facts or law upon which the appeal is based will result in summary denial.

If an application for review of a hearing officer decision is made to the Commission, any protested taxes presently in an escrow account in accordance with this appeal shall be held pending the final decision of the Commission. If no application for review is received by the Commission within thirty (30) days, this decision and order is deemed final and the Collector of Platte 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. If any protested taxes have been disbursed pursuant to Section 139.031(8), RSMo, either party may apply to the circuit court having jurisdiction of the cause for disposition of the protested taxes held by the taxing authority.

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 August 10, 2011

STATE TAX COMMISSION OF MISSOURI

Luann Johnson

Senior Hearing Officer