Medventures Property Management Co v. Jake Zimmerman, Assessor St. Louis County

July 18th, 2017

STATE TAX COMMISSION OF MISSOURI

 

MEDVENTURES PROPERTY MANAGEMENT CO., )

)

  
  )  
Complainant, )  
  )  
v. ) Appeal No. 15-13964
  )  
JAKE ZIMMERMAN, ASSESSOR, )  
ST. LOUIS COUNTY, MISSOURI, )  
  )  
Respondent. )  

 

ORDER

AFFIRMING HEARING OFFICER DECISION

UPON APPLICATION FOR REVIEW

HOLDING

On July 18, 2017, Chief Counsel Maureen Monaghan (Hearing Officer) entered her Decision and Order (Decision) setting aside the decision of the Board of Equalization of St. Louis County (BOE) and (1) finding that the true value in money (TVM) of the subject property on January 1, 2015, was $1,040,000; and (2) concluding that Jake Zimmerman, Assessor, St. Louis County, Missouri, (Respondent) did not intentionally assess the subject property at a ratio greater than 32% of true value in money or at a ratio grossly excessive to the average 2015 commercial assessment ratio for St. Louis County.  Medventures Property Management Company (Complainant) subsequently filed its Application for Review of Hearing Officer’s Decision and Order.  Respondent thereafter filed his Opposition to Complainant’s Application for Review.  Complainant filed its Reply in Support of Its Application for Review of the Hearing Officer’s Decision and Order.

We affirm the Decision and Order of the Hearing Officer.  Segments of the Hearing Officer’s Decision may have been incorporated into our Decision without further reference.

FINDINGS OF FACT

As of January 1, 2015, Complainant owned the subject property, a 3.59-acre lot improved by an office-industrial building located at 13222 Lakefront Drive, St. Louis County, Missouri.  The improvement was constructed in 1992 and was in average condition on January 1, 2015.  The improvement consists of 33,240 square feet; one third of the improvement is office space.

Respondent initially determined a TVM for the subject property of $1,334,700, classified as commercial real property, as of January 1, 2015.  The subject property’s assessed value, using the statutory ratio of 32%, was $427,100.  Complainant filed an appeal of assessment with the BOE.

On September 18, 2015, the BOE notified Complainant that the BOE had “reviewed all evidence submitted regarding [the property] and … determined the valuation of [the subject] property for 2015” was $1,334,700, classified as commercial real property.  The assessed value was set at $427,100, consistent with the statutory commercial assessed ratio of 32%.  Complainant filed a Complaint for Review of Assessment with the State Tax Commission (STC).

Complainant’s appeal to the STC was one of several thousand originating in St. Louis County that challenged the BOE’s determination on the grounds of overvaluation of the subject property’s TVM and discrimination[1] (referred to as the issue of commercial ratio).  To expedite the appeals, the STC bifurcated the issues of TVM and commercial ratio.  The issue of TVM of the subject property was submitted on exhibits filed by Complainant and without objection by Respondent.  The issue of commercial ratio was presented as to all commercial ratio appeals at an evidentiary hearing on March 13 and 14, 2017, at 7733 Forsyth Blvd., Clayton, Missouri.

Ratio Studies and Defined Terms

Both Complainant and Respondent presented evidence in the form of ratio studies of the commercial property assessments in St. Louis County for 2015 prepared by experts in the field of appraisal, mass appraisal, and assessment ratio studies.  Ratio studies provide information regarding the level and equity of assessments.  Studies use a statistically significant number of properties within the same class as the subject property and compare an assessor’s value for those properties to a market value proxy for those properties.  The market value proxy is either the sale prices of similar properties in the jurisdiction within a relevant time period or an independent appraisal of randomly selected properties.  In this appeal, the ratio studies utilized recent sales of similar properties.  In the studies, the experts used the following terms:

  • Appraisal Level: Overall ratio of assessor’s values to market values. Level measurements provide information about the degree to which goals or legal requirements are met.  Estimates of appraisal level are based on measures of central tendency.
  • Assessed Value: Legally authorized fraction of market value.
  • Assessment: Determination of true value, classification, and location within taxing districts for ad valorem taxation.
  • Coefficient of Dispersion (COD): Measures the average percentage of deviation of the ratios from the median ratio. A lower COD implies a lesser amount of variability or more equity in assessments.
  • Computer-Assisted Mass Appraisal (CAMA): A process that uses a system of integrated components and software tools necessary to support the appraisal of a universe of properties through the use of mathematical models that represent the relationship between property values and supply/demand factors.
  • Equalization: The process by which an appropriate governmental body attempts to ensure that property under its jurisdiction is assessed at the same assessment ratio or at the ratio or ratios required by law.
  • Mean: The arithmetic average.  It is created by adding together all individual samples and dividing by the number of samples.
  • Median: The middle observation when the values of the data are arrayed. It divides the data into two parts.
  • Price-Related Bias (PRB): It is used to measure assessment equity (regressivity/progressivity). It measures the relationship between assessment-sales ratios and value in percentage terms.  For example, a PRB of .05 indicates that, on average, assessment ratios increase by 5% whenever values double.
  • Price Related Differential (PRD): Itis calculated to measure assessment regressivity or progressivity.  It is found by dividing the mean by the weighted mean.  The comparison tests for equity between low value properties and high value properties.  A PRD above 1.00 suggests that the assessment values placed on high-value parcels are relatively lower than the assessment values placed on low-value parcels.
  • Progressivity: Taxation is imposed in such a manner that the tax rate decreases as the amount subject to taxation decreases.
  • Ratio Study: Sales or appraisal based study designed to evaluate appraisal performance to determine if statutory requirements are met.  Studies can be used to evaluate the degree of discrimination and to adjust assessed values on appealed properties to the common level.
  • Regressivity: Taxation is imposed in such a manner that tax rate decreases as the amount subject to taxation increases.
  • True Value in Money: Also referred to as appraised value, market value, or fair market value.
  • Weighted mean: It is the sum of the assessed values divided by the sum of the individual indicators of market value.

 

Complainant’s Evidence

            With regard to the issue of valuation of the subject property, Complainant presented the testimony of two appraisers, John Hottle (Hottle) and Stephanie Swanson, who considered the three court-approved approaches to valuation:  income, cost, and sales comparison.  Complainant also presented the reports of the appraisers.  The appraisers determined that the cost approach was not viable due to the age of the improvement.  The appraisers developed the income approach and the sales comparison approach.  The income approach resulted in an estimate of value of $1,040,000.  The sales comparison approach resulted in an estimate of value of $1,000,000.  The appraisers reconciled the valuations and opined a TVM of the subject property on January 1, 2015, of $1,040,000.

            With regard to the issue of ratio, Complainant presented the testimony of Robert Gloudemans (Gloudemans), an expert in the field of appraisal, mass appraisal, and assessment ratio studies.  Complainant filed the following exhibits, which were admitted into evidence:

Exhibit Description
A Written Direct Testimony of Robert Gloudemans
B Written Direct Testimony of John Hottle
C Commercial Ratio Study of Robert Gloudemans
D Supplement to Appendix 2 of Exhibit C
  Sur-Rebuttal
E Testimony of Robert Gloudemans
F Testimony of John Hottle
G Impact Notice 10L420653
H Impact Notice 13K520081
I Impact Notice 14N120030, Letters from Assessor
J Impact Notice 15N130407, Letters from Assessor
K Impact Notice 15K240583
L BOE Decision 16M530069, Impact Notice
M Impact Notice 16P610696, Letters from Assessor
N Impact Notice 19Q140113
O BOE Decision 21K331251, Impact Notice
P BOE Decision 22S121644, Impact Notice
Q Impact Notice 23S540286, Letters from Assessor
R Impact Notice 28L640434
S Impact Notice 29H210253, Letters from Assessor

 

To analyze the assessment of commercial property in St. Louis County for tax year 2015, Gloudemans used sales of commercial property in St. Louis County that occurred from July 2014 through June 2015.  (Exhibit C p.1)  The study utilized data from the St. Louis County Assessor’s Office regarding sales of commercial properties.  (Exhibit C p.2)  After narrowing the sales, the number of sales requiring validation was 585 sales involving 768 parcels.  (Exhibit C p.2)  The commercial sales were provided to Hottle for validation per IAAO[2] standards.  (Exhibit C p.3)

Hottle was provided with sales data obtained from the St. Louis County Assessor’s Office.  Hottle worked with Gloudemans to ensure the sales validation process complied with IAAO standard for ratio studies.  (Exhibit C p.3)  Hottle’s appraisal firm validated sales of commercial properties occurring in St. Louis County between July 1, 2014, and June 30, 2015.  (Exhibit B)  The process included verification from a party involved in the transaction, third party information as to the transaction, and evaluation of whether the sale was representative of typical market transactions based on property type and location.  (Exhibit B p.5)  Of the 585 sales requiring validation, 258 sales were found to be valid, arm’s-length transactions.  (Exhibit C p.5)  Gloudemans used the validated sales for his ratio analysis.  (Exhibit C p.6)  Two of the sales were removed from the study as “outliers,” one with a very low ratio and one with a very high ratio.  (Exhibit C p. 9)

Gloudemans computed three measures of central tendency for his ratio study – the median, the mean, and the weighted mean.  (Exhibit C p. 9)  The median is the middle number in a set of numbers.  The mean is the average or the sum of the numbers divided by the total count of numbers.  The weighted mean is the weighted average of the ratios when each ratio is weighted by its sale price, i.e., the sum of the assessed values divided by the sum of the TVM proxy (sale price).

Gloudemans reported the following findings for commercial assessments in St. Louis County in 2015:

Mean     100.3%
Weighted Mean     81.2%
  Assessment Ratio 26%  
Median     95.5%
  Assessment Ratio 30.7%  
PRD     1.235
COD     .308
PRB     -.053

 

Gloudemans found overall ratios of a mean of 100.3%, a median of 95.5%, and a weighted mean of 81.2%.  In other words, the measures indicate an assessment ratio of 32.09%, 30.69%, and 25.98% depending on the measure of central tendency.

Gloudemans relied on the weighted mean as the most appropriate measure of the average level of assessment.  Gloudemans recommended that the STC adopt a weighted mean of 26% as the average level of assessment of commercial property in St. Louis County in 2015.  

Respondent’s Evidence

            With regard to the issue of valuation, Respondent did not present any evidence to rebut Complainant’s evidence of TVM.

With regard to the issue of ratio, Respondent presented the testimony of Patrick M. O’Connor (O’Connor), an expert in the field of appraisal, mass appraisal, and assessment ratio studies.  Respondent filed the following exhibits, which were admitted into evidence:

Exhibit Description
1 Testimony of Patrick O’Connor
2 Study of Patrick O’Connor
3 IAAO Standard on Ratio Studies
4 Spreadsheet – 145 sales used
5 2015 Ratio Study
6 Testimony of Steve Robertson
7 Spread sheet of sales from 1/1/15 to 12/31/15
8 Testimony of Sandy Youtzy
  Rebuttal
9 Testimony of John Gillick
10 CV of John Gillick
11 SLCo sale file of 18K310513
12A SLCo sale file for 12M330315
12B SLCo sale file for 12M330315
13 SLCo sale file for 13J330980.
14 SLCo sale file for 18K310997
15 SLCo sale file for 23T531199
16 SLCo sale file for 28P440441
17 SLCo sale file for 26G112010
18 SLCo sale file for 26K640466
19 SLCo sale file for 17N540851
20 SLCo sale file for 27K111697
21 SLCo sale file for 16H421088
22 SLCo sale file for 09N120191
23A SLCo sale file for 17L441202
23B SLCo sale file for 17L441202
24A SLCo sale file for 24M221111
24B SLCo sale file for 25M543135
25 SLCo sale file for 17N430563
26 Testimony of Patrick O’Connor
  Sur-rebuttal
27 Sur-rebuttal Testimony of Steve Robertson
28 Sur-rebuttal Testimony of Sandy Youtzy
29 St. Louis County Board of Equalization Memorandum of Waiver, dated 8/28/15, as to attorney representing other complainants alleging discrimination

 

O’Connor prepared a report involving:

  1. Sales ratio study as of January 1, 2015;
  2. Statistical review of a separate file of sales prices for commercial properties from 2011 through 2015;
  3. Application of direct market models to a sample of sold and unsold commercial properties as of the valuation date of January 1, 2015;
  4. Performance of a direct market model values-to-sales prices ratio study on a sample of sold properties; and
  5. Performance of appraisal ratio studies of 2015 appraised-to-direct market model values on a sample of sold and unsold commercial properties. (Exhibit 2 p.1)

 

O’Connor’s ratio study used 145 commercial sales from the last three quarters of 2014 and the first three quarters of 2015.  O’Connor determined the following:

Mean     N/A
Weighted Mean     N/A
  Assessment Ratio Not Calculated  
Median     96.5%
  Assessment Ratio 31%  
PRD     105%
COD     16.8%
PRB     -1.2%

 

In analyzing 13 of the 145 properties, O’Connor inadvertently used post-BOE valuations of the properties within the study rather than Assessor’s valuations (pre-BOE) in his study.  The BOE adopted the sales price as TVM as to those 13 properties.  The result is a 1:1 ratio of sale price to BOE valuation.  The use of the properties had no impact on the findings.  O’Connor’s report did not report a mean or weighted mean, but O’Connor testified that his study revealed a 90% weighted mean.

CONCLUSIONS OF LAW

Complainant’s Points on Review

             Complainant’s Application for Review does not allege error in the Hearing Officer’s determination of the TVM of the subject property.  The Application for Review “centers solely on the Hearing Officer’s conclusion that the level of assessment for 2015 was not so grossly excessive as to be inconsistent with an honest exercise of judgment.”  Specifically, Complainant alleged that the Hearing Officer’s Decision is erroneous, arbitrary, capricious, unreasonable, constitutes an abuse of discretion and is contrary to Missouri law in that:

  1. Complainant presented competent and persuasive evidence that Respondent’s valuation of commercial property for 2015 was substantially regressive and, therefore, discriminatory;
  2. The Decision affirmed the use of the median as the preferred measure of central tendency despite the presence of substantial regressivity in the 2015 assessment of commercial property;
  3. The Decision erroneously adopted the median as the appropriate measure of the common level of assessment as a matter of law, based on prior decisions of the STC and on the STC’s Assessor Manual;
  4. The Decision made no findings of fact setting out why the median was the proper measure of the common level of assessment based on the evidence presented at the March 2017 evidentiary hearing.

Complainant’s arguments in this Application for Review are based on “regressivity.”  Complainant’s expert, Gloudemans, testified that “regressivity is the condition in which higher-valued properties are assessed at a lesser percentage of market value than low-valued properties.”  (Gloudemans’ WDT, Q48)  The effect of regressivity is that higher-valued properties have generally lower ratios or effective tax rates while low-valued properties have generally higher ratios or effective tax rates.  Complainant argues that the weighted mean is the proper measure of central tendency because it is the only method that factors in the value of the property and reflects price-related bias.

Respondent’s Response to Complainant’s Points on Review

            In his response opposing Complainant’s Application for Review, Respondent argues that the Hearing Officer did not err because (1) the Decision correctly identifies the median as the preferred and appropriate measure for determining the common level of assessment in this appeal; and (2) the Decision contains adequate findings of fact and does not establish a new “rule” of the STC.  Specifically, Respondent argues that Complainant failed to present persuasive reasons for the STC to disregard the median given the lack of evidence showing discrimination and because “regressivity” does not prove discrimination and has no remedy in an individual appeal.

STC’s Ruling

For the reasons that follow, the STC finds Complainant’s arguments to be unpersuasive.  The STC, having thoroughly reviewed the whole record and having considered the Hearing Officer’s Decision, the Application for Review of Complainant, Respondent’s response opposing the Application for Review, and Complainant’s Reply, concludes that the Hearing Officer’s Decision was correct and proper.

Standard of 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.  Section 138.432 RSMo Cum. Supp. 2015; 12 CSR 30-3.080(4).  The Commission may then summarily allow or deny the request.  Section 138.432; 12 CSR 30-3.080(5).  The Commission may affirm, modify, reverse, set aside, deny, or remand to the Hearing Officer the Decision and Order of the Hearing Officer on the basis of the evidence previously submitted or based on additional evidence taken before the Commission.  Section 138.432; 12 CSR 30-3.080(5)(A).

True Value

Complainant presented as evidence of TVM the testimony of two Certified General Appraisers and their appraisal report.  The Hearing Officer found the TVM of the subject property to be $1,040,000, assessed value $332,800 using the statutory ratio of 32% for commercial properties.  Neither party has alleged error as to this claim for relief.

Commercial Ratio (Discrimination)

            A property owner whose property was correctly valued by an assessor may still seek relief under the claim of discrimination  by proving that the assessment was calculated at a greater percentage of value than other property within the same class. Systematic undervaluation, whether by an intentional plan or through use of an assessment ratio so grossly excessive as compared to the average ratio as to be inconsistent with an honest exercise of judgment by state officials of other taxable property in the same class, contravenes the constitutional right of one to be taxed upon the TVM of his property.  See Sperry Corp. v. State Tax Comm’n, 695 S.W.2d 464, 468 (Mo. banc 1985).

To obtain a reduction in assessed value based upon discrimination, the complaining taxpayer must (1) prove the true value in money of the subject property as of the taxing date; and (2) show an intentional plan of discrimination by the assessor, which resulted in an assessment at a greater percentage of value than other property within the same class and the same taxing district, or, in the absence of such an intentional plan, show that the level of assessment is “so grossly excessive as to be inconsistent with an honest exercise of judgment.”  Zimmerman v. Mid–America Financial Corp., 481 S.W.3d 564, 571 (Mo. App. E.D. 2015), quoting Savage v. State Tax Comm’n of Missouri, 722 S.W.2d 72, 78 (Mo. banc 1986).

Missouri courts have consistently held that (1) a taxpayer alleging discrimination must show the [TVM] of his property as a necessary part of his discrimination claim; and (2) the proper method of determining discrimination is to compare the actual level of assessment of the subject property as determined by the assessor to the common level of assessment for the subject property’s subclass.  Mid-America Financial Corp., 481 S.W.3d at 574, citing Savage, 722 S.W.2d at 72.

“By requiring that the level of an assessment be so grossly excessive as to be inconsistent with an honest exercise of judgment in cases in which intentional discrimination is not shown, the courts and the STC refrain from correcting assessments which reflect no more than de minimus errors of judgment on the part of assessors.”  Mid-America Financial Corp., 481 S.W.3d at 571 (internal quotation omitted).  “This standard recognizes that while practical uniformity is the constitutional goal, absolute uniformity is an unattainable ideal.”  Id. (internal quotation omitted).

In deciding whether the assessment of the subject property is “grossly excessive” or nothing more than a “de minimus error of judgment,” the STC must determine the common level of assessment for the class of property at issue within the taxing district.   In Savage, 722 S.W.2d at 79, the Missouri Supreme Court reasoned:

The “common level of assessment” has been defined as a single ratio of true value used in assessing each property in a taxing district.  [citation omitted]  The “average level of assessment” means the “arithmetical mean of the varying percentages of true value applied by . . . the assessor in assessing properties within a taxing district.”  [citation omitted]

A taxpayer has the right to have his “assessment reduced to the percentage of that value at which others are taxed[.]” [citation omitted]

 

The Missouri Supreme Court has held that the proper method of analyzing discrimination compares the common level of assessment for similarly-situated properties to the actual level of assessment imposed on the subject property.  Mid-America Financial Corp., 481 S.W.3d at 571; Savage, 722 S.W.2d at 74.  A necessary component of this comparison is the TVM of both the subject property and the similarly-situated properties, i.e., properties within the same class as the subject property.  See Id.; see also Savage, 722 S.W.2d at 74.  Once the TVM of the subject property and the similarly-situated properties has been determined, the STC can calculate at what percentage or ratio of TVM the subject property and the similarly-situated properties, respectively, have been assessed.  Mid-America Financial Corp., 481 S.W.3d at 571.  This determination requires a comparison not between the common level of assessment and the statutory assessment ratio, but between the common level of assessment and the actual level of assessment for the subject property.  Id. at 574.   Neither Missouri courts nor the STC has established a “bright-line” test to identify what constitutes a grossly excessive assessment as opposed to a mere de minimus error in judgment.  Id. at 575.  The assessment in each given case must be analyzed against the assessment under the median ratio to address the grossly excessive factor.  Id.  The STC has found a 5% disparity between the common level of assessment and the actual level assessment to be de minimus.  Town and Country Racquet Club v. Morton, 1989 WL 41005 (Missouri State Tax Commission) (affirmed on appeal in Town & Country Racquet Club v. State Tax Commission of Missouri, 811 S.W.2d 403 (Mo. App. E.D. 1991).

Measures of Central Tendency

Properly conducted ratio studies are admissible for purposes of proving both the common level of assessment and discrimination in individual cases.  Savage, 722 S.W.2d at 75.  “Assessors, appeal boards, taxpayers, and taxing authorities can use ratio studies to evaluate the fairness of funding distributions, the merits of class action claims, or the degree of discrimination.”  IAAO Standard on Ratio Studies (2013), Part 1.2.3.  “However, ratio study statistics cannot be used to judge the level of appraisal of an individual parcel.”  Id.  Such statistics can be used to adjust assessed values on appealed properties to the common level.”  Id.

In conducting a ratio study to determine the common level of assessment in a given case, three measures of central tendency are used:  the median, the mean, or the weighted mean.  The median is the midpoint of the ratios.  The mean is the arithmetic average of the ratios.  The weighted mean is the average ratio when each ratio is weighted in proportion to its sale price.  See IAAO Standard on Ratio Studies (2013), Definitions.

The Hearing Officer properly found that the subject property had been overvalued and granted Complainant’s claim for relief on that ground. 

 

Given the two-part test for proving a claim of discrimination in the context of ad valorem taxation as stated by Missouri courts, in the instant appeal, Complainant was first required to prove the TVM of the subject property.  The Hearing Officer found that Complainant had presented substantial and persuasive evidence establishing that Respondent and the BOE had overvalued the subject property.  The Hearing Officer set aside the BOE’s valuation and found that the TVM of the subject property as of January 1, 2015, was $1,040,000.  The record supports the Hearing Officer’s determination of TVM of the subject property.  Neither Complainant nor Respondent challenged the Hearing Officer’s finding as to TVM and the granting of relief under the claim of overvaluation.

The Hearing Officer properly found no discrimination in assessment of the subject property.

In this appeal, there was no evidence of an intentional plan of discrimination by Respondent.  Consequently,  the Hearing Officer was left to determine whether Complainant presented substantial and persuasive evidence establishing that the level of the assessment of the subject property was discriminatory because it was so grossly excessive as to be inconsistent with an honest exercise of judgment.  Thus, Complainant was required to prove both the TVM of the subject property and that Respondent assessed the subject property at a greater percentage, i.e., ratio, than other property in the same class as the subject property, i.e., commercial property in St. Louis County.  If discrimination were to be proven, Complainant’s remedy would have been to have the assessment of the subject property reduced to the percentage of the value at which other commercial property had been taxed.

In this application for review, Complainant claims that the Hearing Officer erred in finding no discrimination by relying on the median as the measure of central tendency and finding that the median is the only measure the STC uses in finding the common level of assessment.  Complainant advocates the use of the weighted mean for finding the common level of assessment.  Complainant’s claim is without merit.

First, we note that, in her Decision, the Hearing Officer did not make a determination that the median is the only statistic the STC relies on for finding discrimination has occurred.  Rather, the Hearing Officer, in her discretion as fact finder, found that the average or common level of assessment for commercial properties in St. Louis County in 2015 was 31% of their TVM.  This finding was based upon all the evidence presented by both parties’ experts, including their calculations of the median, the mean, and weighted mean.  The Hearing Officer reviewed the ratio studies of the experts and concluded that, in this appeal, the median of 31% was the most persuasive determination of the common level of assessment of commercial property in St. Louis County in 2015[3] given that each of the experts reported a median, which varied by less than .5%.  Complainant’s expert, Gloudemans, reported a median of 30.7%.  Respondent’s expert, O’Connor, reported a median of 31%.  With regard to whether the subject property had been assessed at a percentage higher than similar properties, the Hearing Officer specifically concluded that the use of the median is an appropriate measure of central tendency and has been relied upon by the STC and the Courts in previous discrimination appeals:

To determine the common level of assessment, the experts looked to measures of central tendency.  In this case, the issue of dispute between the parties is the proper measure of central tendency: the median, mean or the weighted mean.  The same issue was raised in Industrial Development Authority of Kansas City v. John Kelley, Jackson County, 1989 WL 96234 (Mo. St. Tax Comm.)  The STC, in that decision, stated “[i]t is generally accepted that when adjusting individual assessments to the average level of assessment the median ratio should be used.”  The STC has consistently accepted such measure of central tendency.  Zimmerman v. Mid-America Financial Corporation, 481 S.W.3d 564, 577 (Mo. Ct App. ED, 2015) and West County BMW v. Muehlheausler, STC 05-12569.  The STC’s Assessor Manual sets forth that the median is the measure to determine if a county is accurately assessing property.

 

The STC finds that a reasonable mind could have conscientiously reached the same result as the Hearing Officer based on a review of the entire record, and the use of the median as the measure of central tendency in this case is supported by precedent.  The STC has found a 5% disparity between the common level of assessment and the actual level assessment to be de minimus.  See Town and Country Racquet Club, 1989 WL 41005 at *13.

By comparing the actual level of assessment of the subject property as determined by Respondent, 32%, to the median level of assessment for similarly-situated properties in St. Louis County in 2015, 31%, the Hearing Officer properly found that no discrimination occurred.  In this case, the evidence in the record compels the conclusion that a 3% difference[4] between the actual level of assessment as determined by Respondent and the median level of assessment of similarly-situated properties was a de minimus error in judgment.

Second, the testimony of Complainant’s expert, Gloudemans, was equivocal as to whether regressivity was present with respect to the subject property.  Gloudemans, testified that “Regressivity relates to the overall trend or relationship between ratios and property values.”  (Gloudemans Testimony, p. 231)  Even though Gloudemans contended that regressivity is discrimination, Gloudemans also testified that it was unknown whether an individual property is being treated differently than other properties in the same class because “the general tendency is for the more modest or lower-value properties to be over-appraised” but “some of them are under-appraised.”  (Gloudemans Testimony, p. 231)  Gloudemans testified that, assuming regressivity among commercial properties in St. Louis County was present, the regressivity would not be “fixed” if Complainant were to prevail in the instant case.  (Gloudemans Testimony, p. 237)  Respondent’s expert, O’Connor, found little indication of regressivity.  The Hearing Officer was within her discretion to judge the credibility of the witnesses and to weigh their testimony.

Moreover, in our capacity as a quasi-judicial body presiding over an individual tax appeal, the STC cannot provide a remedy for regressivity through isolated and uncoordinated reductions in assessed valuations.  Regressivity may be corrected through systematic county-wide reassessment every two years as prescribed by Section 137.115.  See generally Armstrong-Trotwood LLC v. State Tax Commission, 516 S.W.3d 830, 836 (Mo. banc 2017) (while tax rates are susceptible to uniformity within a class of property, property values are not).  Significantly, even Gloudemans admitted that the solution to correct regressivity is through reassessment in the next assessment cycle.  (Gloudemans Testimony, p. 245)

DECISION

Complainant was granted relief under the claim of overvaluation. Complainant did not seek review of that determination.

Throughout Complainant’s Application for Review in this appeal, Complainant argues that the Hearing Officer should have found discrimination in the assessment of the subject property by using the weighted mean as the measure of central tendency for determining the common level of assessment of commercial properties in St. Louis County in 2015.  However, Missouri courts have held that the proper method in analyzing discrimination in the context of ad valorem taxation compares the common level of assessment for similarly-situated properties to the actual level of assessment imposed upon the subject property.  Mid-America Finance Corp., 481 S.W.3d at 571.  Accordingly, in this case, the Hearing Officer was persuaded that the common level of assessment of commercial property in St. Louis County in 2015 was 31% based upon all of the evidence presented, including all of the measures of central tendency reported by the parties’ experts.  The Hearing Officer concluded that the assessment of the subject property at 32% was not so grossly excessive of the common level of assessment as to be inconsistent with honest exercise of judgment and did not constitute discrimination.  We find Complainant’s arguments to be unconvincing to warrant either a modification or an overturning of the Decision.

Summary & Conclusion

A review of the record in the present appeal provides ample support for the determinations made by the Hearing Officer.  A reasonable mind could have conscientiously reached the same result based on a full review of the entire record. The Commission finds no basis to support a determination that the Hearing Officer acted in an erroneous, arbitrary, capricious, or unreasonable manner, or that she abused her discretion as the trier of fact and concluder of law in this appeal.  Hermel, Inc. v. STC, 564 S.W.2d 888 (Mo. 1978); Black v. Lombardi, 970 S.W.2d 378 (Mo. App. E.D. 1998); Holt v. Clarke, 965 S.W.2d 241 (Mo. App. W.D. 1998); Smith v. Morton, 890 S.W.2d 403 (Mo. App. E.D. 1995); Phelps v. Metropolitan St. Louis Sewer Dist., 598 S.W.2d 163 (Mo. App. E.D. 1980).

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

ORDER

The Decision of the Hearing Officer is AFFIRMED.  Segments of the Decision and Order of the Hearing Officer, including the findings of fact and conclusions of law therein, have been incorporated without reference, as if set out in full, in this final decision of the STC.

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 January 23, 2018.

 

STATE TAX COMMISSION OF MISSOURI

 

 

Bruce E. Davis, Chairman

 

 

Victor Callahan, Commissioner

 

 

Will Kraus, Commissioner

 

Certificate of Service

I hereby certify that a copy of the foregoing has been sent electronically or mailed postage prepaid this 23rd day of January, 2018, to: Complainants(s) counsel and/or Complainant, the County Assessor and/or Counsel for Respondent and County Collector.

 

[1] Discrimination in the context of the assessment of real property requires a complainant to establish by substantial and persuasive evidence that the assessment is in violation of the Fourteenth Amendment of the Constitution of the United States, as the assessment attempts to deprive and deny the complainant the equal protection of the law, by (1) intentionally assessing the property at a ratio greater than the statutorily set ratio or (2) by assessing the property at a ratio grossly excessive to the average ratio as to be inconsistent with an honest exercise of judgment.

[2] IAAO is the acronym for the International Association of Assessing Officers.  IAAO’s members include government assessment officials and others interested in the administration of property taxes.  They provide education, resources, and standards for ad valorem taxation.

[3] The STC conducted its own certified ratio study in St. Louis County in 2015.  With regard to commercial property in St. Louis County, the STC’s ratio study reported a median of 30.21%.  In a parallel set of appeals (clients of Property Assessment Review) on which the evidence was presented simultaneously with the evidence in Complainant’s case, another expert in the field of appraisal, mass appraisal, and assessment ratio studies, Robert Denne (Denne) testified.  Denne conducted a ratio study for commercial assessments in St. Louis County in 2015 that initially reported a median of 27.4%.  Denne later amended his report and reported a median of 29%.  Denne’s reported medians were calculated using post-BOE valuations of the properties used in the study.  Denne thereafter provided an alternate set of findings reporting a median of 30.8% calculated using pre-BOE valuations.

 

[4] The percentage difference between 32% and 31% is calculated by first determining the mathematical difference between the two percentages being compared, then dividing the result by the original number, then multiplying the answer by 100:  32-31 = 1; 1/32 = .03125; .03125×100 = 3.125 or 3%.

State Tax Commission of Missouri

 

MEDVENTURES PROPERTY )
MANAGEMENT CO., )
                            Complainant, ) Appeal No. 15-13964
)
v. )
)
JAKE ZIMMERMAN, ASSESSOR )
ST. LOUIS COUNTY, MISSOURI, )
                            Respondent. )

 

 

DECISION AND ORDER

 

HOLDING

 

Decision of the St. Louis County Board of Equalization (BOE) of September 18, 2015, is SET ASIDE. The true value in money (TVM) for the subject property on January 1, 2015, was $1,040,000.  The classification of the subject property is commercial.  The subject property’s assessed value for tax years 2015-2016 is set at $332,800.  The Complainant failed to present substantial and persuasive evidence that there was an intentional plan by the assessing officials to assess the property under appeal at a ratio greater than 32% of true value in money or at a ratio grossly excessive to the average 2015 commercial assessment ratio for St. Louis County.

Complainants appeared by Thomas Campbell and Jason Turk.

Respondent appeared by Jeremy Shook.

Case heard by Senior Hearing Officer John Treu and Chief Counsel Maureen Monaghan and decided by Monaghan (Hearing Officer).

ISSUE

The Commission takes this appeal to determine: (1) TVM for the subject property on January 1, 2015; and (2) whether there was an intentional plan by the assessing officials to assess the property under appeal at a ratio greater than 32% of true value in money, or at a ratio grossly excessive to the average 2015 commercial assessment ratio for St. Louis County.

FINDINGS OF FACT

  1. 1. Jurisdiction. Jurisdiction over this appeal is proper.  Complainant timely appealed to the STC.
  2. Evidentiary Hearing. To expedite the appeals, the STC bifurcated the issues of TVM and average level of assessment for commercial properties in St. Louis County (commercial ratio).  The parties submitted the issue of TVM of the subject property on the record.   The issue of commercial ratio was presented at an evidentiary hearing on March 13-14, 2017, at 7733 Forsyth, Clayton, Missouri.
  3. Identification of Subject Property. The subject property is identified by parcel/locator number 09O210082.  It is further identified as 13222 Lakefront Drive, Unincorporated St. Louis County, Missouri.
  4. Description of Subject Property. The property is a 3.59 acre lot improved by an office-industrial building constructed in 1992, which is in average condition. The improvement is 33,240 square feet; one third of the building is office space.
  5. Assessment. Respondent determined a TVM for the subject property of $1,334,700 as of January 1, 2015. (Complaint for Review of Assessment)  The Respondent classified the property as commercial.  The property’s assessed value, using the statutory ratio of 32%, was $427,100.
  6. Board of Equalization. On September 18, 2015, the BOE notified the property owner that it “reviewed all evidence submitted regarding [the property] and … determined the valuation of [the subject] property for 2015” was $1,334,700. The property was classified as commercial.  The assessed value was set at $427,100, consistent with the statutory commercial assessed ratio of 32%.
  7. True Value. The subject property’s true value as of January 1, 2015 is $1,040,000.
  8. Discrimination Complainant failed to present substantial and persuasive evidence that there was an intentional plan by the assessing officials to assess property at a ratio greater than 32% of true value in money or at a ratio grossly excessive to the average 2015 commercial assessment ratio for St. Louis County.
  9. Assessed Value. The assessed value for the subject property is $332,800.

EVIDENCE PRESENTED

To expedite the appeals, the STC bifurcated the issues of TVM and commercial ratio. The issue of TVM of the subject property was submitted on exhibits filed by the Complainant without objection by Respondent. The issue of commercial ratio was presented as to all commercial ratio appeals at an evidentiary hearing on March 13-14, 2017, at 7733 Forsyth, Clayton, Missouri.

Valuation

Exhibit Description
A Appraisal Report
B Written Direct Testimony of John Hottle
C Written Direct Testimony of Stephanie Swanson

 

Complainant presented the testimony of John Hottle (Hottle) and Stephanie Swanson (Swanson) and an appraisal report.  Hottle is a Certified General Appraiser.  He has been appraising property since 1971 and has appraised over 25,000 properties in the St. Louis area. Swanson is a Certified General Appraiser and works for Hottle Appraisal Company.  She has been appraising properties since 2002.

The appraisers valued the subject property.  They considered all three approaches – income, cost, and sales comparison – but determined the cost approach was not viable due to the age of the improvements.  The sales comparison approach and income approach were developed.  For the sales approach, the appraisers looked for sales of properties near January 1, 2015.  The appraisers looked for sales of properties in terms of comparable size and market area.  The appraisers used four comparable properties that sold between May 2012 and October 2014.  The indicated value from the sales approach was $1,000,000.

To develop the income approach, the appraisers researched rental rates in the market as well as occupancy rates, expenses, and capitalization rates.  The appraisers relied on rent comparables of five leases in office-warehouse buildings.  Market surveys were used to develop a vacancy rate and expenses.  A net operating income of $147,492 was calculated.  The appraisers used a capitalization rate of 14.12%.  The resulting estimate of value was $1,040,000.             The appraisers reconciled the valuations and opined a TVM of the property on January 1, 2015, at $1,040,000.

Level of Assessment – Ratio Studies

Each party presented an expert in the field of appraisal, mass appraisal, and assessment ratio studies (Exhibits A and 1) as well as the experts’ study on the commercial assessments in St. Louis County for 2015 (ratio study) (Exhibits C and 2).  Ratio studies provide information regarding the level and equity of assessments.  Studies use a statistically significant number of properties and compare an assessor’s value for those properties to a market value proxy for those properties.  The market value proxy is either the sale prices of properties in the jurisdiction within a relevant time period or an independent appraisal of randomly selected properties.   In this appeal, the ratio studies utilized recent sales.  In the studies, the experts use the following terms:

  • Appraisal Level: Overall ratio of assessor’s values to market values. Level measurements provide information about the degree to which goals or legal requirements are met. Estimates of appraisal level are based on measures of central tendency.
  • Assessed Value: Legally authorized fraction of market value.
  • Assessment: Determination of true value, classification and location within taxing districts for ad valorem taxation.
  • Coefficient of Dispersion (COD): It measures the average percentage of deviation of the ratios from the median ratio. A lower COD implies a lesser amount of variability or more equity in assessments.
  • Computer-Assisted Mass Appraisal (CAMA): A process that uses a system of integrated components and software tools necessary to support the appraisal of a universe of properties through the use of mathematical models that represent the relationship between property values and supply/demand factors.
  • Equalization: The process by which an appropriate governmental body attempts to ensure that property under its jurisdiction is assessed at the same assessment ratio or at the ratio or ratios required by law.
  • Mean: The arithmetic average.  It is created by adding together all individual samples and dividing by the number of samples.
  • Median: The middle observation when the values of the data are arrayed. It divides the data into two parts.
  • Price-Related Bias (PRB): It is used to measure assessment equity (regressivity/progressivity). It measures the relationship between assessment-sales ratios and value in percentage terms. For example, a PRB of .05 indicates that, on average, assessment ratios increase by 5% whenever values double.
  • Price Related Differential (PRD): It is calculated to measure assessment regressivity or progressivity. It is found by dividing the mean by the weighted mean. The comparison tests for equity between low value properties and high value properties.  A PRD above 1.00 suggests that the assessment values placed on high-value parcels are relatively lower than the assessment values placed on low-value parcels.
  • Progressivity: Taxation is imposed in such a manner that the tax rate decreases as the amount subject to taxation decreases.
  • Ratio Study: Sales or appraisal based study designed to evaluate appraisal performance to determine if statutory requirements are met. Studies can be used to evaluate the degree of discrimination and to adjust assessed values on appealed properties to the common level.
  • Regressivity: Taxation is imposed in such a manner that tax rate decreases as the amount subject to taxation increases.
  • True Value in Money: Also referred to as appraised value, market value, or fair market value.
  • Weighted mean: It is the sum of the assessed values divided by the sum of the individual indicators of market value.

2015 St. Louis County Commercial Ratio

            The Complainant[1] filed the following Exhibits, which were admitted into evidence:

Exhibit Description
A Written Direct Testimony of Robert Gloudemans
B Written Direct Testimony of John Hottle
C Commercial Ratio Study of Robert Gloudemans
D Supplement to Appendix 2 of Exhibit C
Sur-Rebuttal
E Testimony of Robert Gloudemans
F Testimony of John Hottle
G Impact Notice 10L420653
H Impact Notice 13K520081
I Impact Notice 14N120030, Letters from Assessor
J Impact Notice 15N130407, Letters from Assessor
K Impact Notice 15K240583
L BOE Decision 16M530069, Impact Notice
M Impact Notice 16P610696, Letters from Assessor
N Impact Notice 19Q140113
O BOE Decision 21K331251, Impact Notice
P BOE Decision 22S121644, Impact Notice
Q Impact Notice 23S540286, Letters from Assessor
R Impact Notice 28L640434
S Impact Notice 29H210253, Letters from Assessor

 

Robert Gloudemans (Gloudemans) is a partner in Almy, Gloudemans, Jacobs & Denne. He is a tax consultant specializing in property tax assessment administration and has been engaged in such work for over 40 years.  (Exhibit A, pp 1-2) He was hired by Joseph C. Sansone Company[2] to analyze the assessment of commercial property in St. Louis County for tax year 2015, more specifically, to determine the average level of assessment for commercial property as of January 1, 2015. (Exhibit A p.7) Gloudemans prepared a report of his findings.  (Exhibit C)

To analyze the assessment of commercial property in St. Louis County for tax year 2015, Gloudemans used sales of commercial property in St. Louis County that occurred from July 2014 through June 2015. (Exhibit C p.1)  The study utilized data from the St. Louis County Assessor’s Office regarding sales of commercial properties. (Exhibit C p.2)  After narrowing the sales, the number of sales requiring validation was 585 sales involving 768 parcels. (Exhibit C p.2) The commercial sales were provided to Hottle for validation per IAAO[3] standards. (Exhibit C p.3)

Hottle was provided with sales data obtained from the St. Louis County Assessor’s Office. Hottle worked with Gloudemans to ensure the sales validation process complied with IAAO standard for ratio studies. (Exhibit C p.3) Hottle Appraisal Company validated sales of commercial properties occurring in St. Louis County between July 1, 2014, and June 30, 2015.  (Exhibit B)  The process included verification from a party involved in the transaction, third party information as to the transaction, and evaluation of  whether the sale was representative of typical market transactions based on property type and location. (Exhibit B p.5)  Of the 585 sales requiring validation, 258 sales were found to be valid, arm’s-length transactions.  (Exhibit C p.5)

Gloudemans used the validated sales for his analysis. (Exhibit C p.6) Two of the sales were removed from the study as “outliers,” one with a very low ratio and one with a very high ratio.  (Exhibit C p. 9)

Gloudemans computed three measures of central tendency for his ratio study – the median, the mean and the weighted mean. (Exhibit C p. 9) The median is the middle number in a set of numbers.  The mean is the average or the sum of the numbers divided by the total count of numbers.  The weighted mean is the weighted average of the ratios when each ratio is weighted by its sale price, i.e., the sum of the assessed values divided by the sum of the TVM proxy (sale price).

Gloudemans reported the following findings for commercial assessments in St. Louis County in 2015:

Mean 100.3%
Weighted Mean 81.2%
Assessment Ratio 26%
Median 95.5%
Assessment Ratio 30.7%
PRD 1.235
COD .308
PRB -.053

 

Gloudemans found overall ratios of a mean of 1.003%, median of .959 and weighted mean of .812. In other words the measures indicate an assessment ratio of 32.09%, 30.69% and 25.98% depending on the measure of central tendency.

Gloudemans relied on the weighted mean as the most appropriate measure of the average level of assessment. Gloudemans recommended that the STC adopt a weighted mean of 26% as the average level of assessment of commercial property in St. Louis County in 2015.

Respondent’s Evidence

The Respondent filed the following Exhibits which were admitted into evidence:

Exhibit Description
1 Testimony of Patrick O’Connor
2 Study of Patrick O’Connor
3 IAAO Standard on Ratio Studies
4 Spreadsheet – 145 sales used
5 2015 Ratio Study
6 Testimony of Steve Robertson
7 Spread sheet of sales from 1/1/15 to 12/31/15
8 Testimony of Sandy Youtzy
Rebuttal
9 Testimony of John Gillick
10 CV of John Gillick
11 SLCo sale file of 18K310513
12A SLCo sale file for 12M330315
12B SLCo sale file for 12M330315
13 SLCo sale file for 13J330980.
14 SLCo sale file for 18K310997
15 SLCo sale file for 23T531199
16 SLCo sale file for 28P440441
17 SLCo sale file for 26G112010
18 SLCo sale file for 26K640466
19 SLCo sale file for 17N540851
20 SLCo sale file for 27K111697
21 SLCo sale file for 16H421088
22 SLCo sale file for 09N120191
23A SLCo sale file for 17L441202
23B SLCo sale file for 17L441202
24A SLCo sale file for 24M221111
24B SLCo sale file for 25M543135
25 SLCo sale file for 17N430563
26 Testimony of Patrick O’Connor
Sur-rebuttal
27 Sur-rebuttal Testimony of Steve Robertson
28 Sur-rebuttal Testimony of Sandy Youtzy
29 St. Louis County Board of Equalization Memorandum of Waiver, dated 8/28/15, as to Keefe

 

            Witness Patrick M. O’Conner (O’Connor) testified on behalf of the county. O’Conner is a Certified General Real Estate Appraiser. (Exhibit 1 p.1)  He has been involved in mass appraisal since 1973. (Exhibit 1 p. 2)

He prepared a report involving:

  1. Sales ratio study as of January 1, 2015;
  2. Statistical review of a separate file of sales prices for commercial properties from 2011 through 2015;
  3. Application of direct market models to a sample of sold and unsold commercial properties as of the valuation date of January 1, 2015;
  4. Performance of a direct market model values-to sales prices ratio study on a sample of sold properties; and
  5. Performance of appraisal ratio studies of 2015 appraised-to-direct market model values on a sample of sold and unsold commercial properties. (Exhibit 2 p.1)

 

O’Connor’s ratio study used 145 commercial sales from the last three quarters of 2014 and the first three quarters of 2015. O’Connor determined the following:

Mean N/A
Weighted Mean N/A
Assessment Ratio Not Calculated
Median 96.5%
Assessment Ratio 31%
PRD 105%
COD 16.8%
PRB -1.2%

 

O’Connor inadvertently used post-BOE TVM rather than Assessor’s value (pre-BOE) in his study on 13 of the 145 properties. The BOE adopted the sales price as TVM as to those properties. The result is a 1:1 ratio of sale price to BOE valuation. The use of the properties had no impact on the findings.

O’Connor found little indication of regressivity.

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. 

Official and Judicial Notice

Agencies shall take official notice of all matters of which the courts take judicial notice. Section 536.070(6), RSMo.

Courts will take judicial notice of their own records in the same cases.  State ex rel. Horton v. Bourke, 129 S.W.2d 866, 869 (1939); Barth v. Kansas City Elevated Railway Company, 44 S.W. 788, 781 (1898).  In addition, courts may take judicial notice of records in earlier cases when justice requires or when it is necessary for a full understanding of the instant appeal. Burton v. Moulder, 245 S.W.2d 844, 846 (Mo. 1952); Knorp v. Thompson, 175 S.W.2d 889, 894 (1943); Bushman v. Barlow, 15 S.W.2d 329, 332 (Mo. banc 1929) State ex rel St. Louis Public Service Company v. Public Service Commission, 291 S.W.2d 95, 97 (Mo. banc 1956).  Courts may take judicial notice of their own records in prior proceedings involving the same parties and basically the same facts. In re Murphy, 732 S.W.2d 895, 902 (Mo. banc 1987); State v. Gilmore, 681 S.W.2d 934, 940 (Mo. banc 1984); State v. Keeble, 399 S.W.2d 118, 122 (Mo. 1966).

Presumption of Correctness of BOE

 

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).   This presumption is a rebuttable rather than a conclusive presumption.   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).

Duty to Investigate

In order to investigate appeals filed with the STC, the STC 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 Commission’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. Section 138.430.2, RSMo.

 

Weight to be Given Evidence

 

The STCs 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 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).

Trier of Fact

The STC as the trier of fact may consider the testimony of an expert witness and give it as much weight and credit as they may deem it entitled to when viewed in connection with all other circumstances. The Commission 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

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, but 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).

Complainant presented the testimony of two experts as to the TVM of the subject properties. The experts on valuation were Certified General Appraisers with extensive experience in the St. Louis market.  No evidence was presented by Respondent to challenge their expertise or opinion of value.

Three expert witnesses were presented at hearing as to the average level of assessment of commercial property in St. Louis County in 2015[4].  All experts had experience in appraisal and mass appraisal for ad valorem tax purposes as well as the review of valuation by mass appraisal.

Complainant’s Burden of Proof

The taxpayer is the moving party seeking affirmative relief, therefore, the taxpayer bears the burden of proving the vital elements of the case, i.e., the assessment was “unlawful, unfair, improper, arbitrary or capricious,” by substantial and persuasive evidence. 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).

Substantial evidence can be defined as such relevant evidence as a reasonable mind might accept as adequate to support a conclusion. See, Cupples-Hesse Corporation v. State Tax Commission, 329 S.W.2d 696, 702 (Mo. 1959). 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).

Valuation

Complainant presented as evidence of TVM the testimony and report of two Certified General Appraisers and their appraisal report. Both appraisers have extensive experience with appraising property in the St. Louis area.  Complainant’s evidence in the form of testimony and reports of two Certified General Appraisers with extensive experience appraising property in the St. Louis area was substantial and persuasive to establish the TVM of the subject property at $1,040,000.  Respondent presented no evidence rebutting their determination of value.

Ratio/Discrimination

In addition to disputing the valuation of their property, Complainant alleges discrimination. The issue is whether the assessment is in violation of the Fourteenth Amendment of the Constitution of the United States, as it attempts to deprive and deny the Complainant the equal protection of the laws.  “The purpose of the equal protection clause of the Fourteenth Amendment is to secure every person within the state’s jurisdiction against intentional and arbitrary discrimination, whether occasioned by express terms of a statute or by its improper execution through duly constituted agents.” Sunday Lake Iron Co v Wakefield Tp, 247 U.S. 350, 38 S. Ct 495, 62 L.Ed 1154 (1918)

The Commission is required to correct any assessment or valuation that is arbitrary, capricious, improper, or unfair. Section 138.430 RSMo.   To prevail on a claim of discrimination in assessment, the Complainant must (1) prove the true value in money of their property on January 1, 2015; and (2) show an intentional plan of discrimination by the assessing officials resulting in an assessment of that property at a greater percentage of value than other property, generally, within the same class within the same taxing jurisdiction or show that the level of an assessment is so grossly excessive as to be inconsistent with an honest exercise of judgment. Savage v. State Tax Commission, 722 S.W.2d 72 (Mo. banc 1986); Westwood Partnership v. Gogarty, 103 S.W.3d 152 (Mo. App. E.D. 2003.)

When an assessor estimates TVM lower than the actual market value for a significant number of properties of the same sub-classification within the jurisdiction, the consequence is that the taxpayers whose properties were undervalued pay less than their fair share of taxes, while the taxpayers whose properties where either accurately valued or overvalued pay more than their fair share of taxes. When such disparity is so grossly excessive as to be entirely inconsistent with an honest exercise of judgment, it has the effect of intentional discrimination.

There is no evidence that there was an intentional plan of discrimination by the assessing officials, so we must determine if the Complainant presented substantial and persuasive evidence to show that the level of their assessment is so grossly excessive as to be inconsistent with an honest exercise of judgment.

 

Appropriate Measure

It is established under Missouri law that when a taxpayer’s property is subject to an assessment proportionately higher than other property in the same class, the assessment should be reduced. See, e.g., Koplar v. State Tax Commission, 321 S.W.2d 686 (Mo. 1959). The Constitutions of Missouri and the United States require that the subject property be assessed at a ratio no higher than the common level or average for the same class of subject. Fourteenth Amendment, U.S. Constitution, Article X, Sections 3, 4(a), Missouri Constitution 1945; Breckenridge Hotels v. Leachman, 571 S.W.2d 251, 252 (Mo. banc 1978); May Department Stores Company v. State Tax Commission, 308 S.W.2d 748, 762 (Mo. 1958).

To determine the common level of assessment, the experts looked to measures of central tendency. In this case, the issue of dispute between the parties is the proper measure of central tendency: the median, mean or the weighted mean. The same issue was raised in Industrial Development Authority of Kansas City v. John Kelley, Jackson County, 1989 WL 96234 (Mo. St. Tax Comm.)  The STC, in that decision, stated “[i]t is generally accepted that when adjusting individual assessments to the average level of assessment the median ratio should be used.”  The STC has consistently accepted such measure of central tendency. Zimmerman v. Mid-America Financial Corporation, 481 S.W.3d 564, 577 (Mo. Ct App. ED, 2015) and West County BMW v. Muehlheausler, STC 05-12569.  The STC’s Assessor Manual sets forth that the median is the measure to determine if a county is accurately assessing property.

The inquiry in a discrimination appeal is to determine a single ratio representing the assessments of varying properties within the same classification – the average or common level of assessment.  Complainant argues that the assessments in St. Louis County in 2015 for commercial properties were regressive – assessment ratio decreases as the value of the property increases.  Complainant argues that when regressivity is present, the weighted mean is the only appropriate measure.

The Complainant is one of more than 2,600 claims of discrimination by commercial property owners in St. Louis County for the 2015-2016 assessment cycle. The valuations of the properties vary.  The STC cannot look at any particular property value and determine that all properties in excess of that value are subject to discrimination; “there is no dividing line”. (Tr. Vol II. P. 231)  The evidence did not establish a point estimate for all properties within the subclass, i.e. there is no common level of assessment. Commercial properties, according to the Complainant’s study, are over assessed, accurately assessed, and under assessed.  Isolated and uncoordinated reductions in selected assessments could produce additional disparities.

All the experts calculated a median. The calculated medians ranged between 30.7% and 31.1%.  The parties’ median levels of assessment are within 1% of each other.  Only one measure of central tendency indicated a disparity in commercial assessments.  Such is not substantial and persuasive evidence.

The experts’ consistent findings as to the median assessment are the most persuasive. The median level of assessment in St. Louis County for 2015 was approximately 31%.  In previous decisions, the STC found 5% disparity to be de minimus. Town and Country Racquet Club v. Morton, 1989 WL 41005.  Such disparity between the statutory level of assessment and the average level of assessment is not so grossly excessive as to be entirely inconsistent with an honest exercise of judgment and, hence, does not prove discrimination.

 

Conclusion

In this appeal, the substantial and persuasive evidence presented by Complainant established that the subject property was improperly valued at $1,334,700 then assessed at the statutory rate of 32% or $427, 100. The subject’s true value as of January 1, 2015 was $1,040,000; therefore, the assessed value of the property should have been $332,800.

ORDER

The assessed valuation for the subject property as determined by the Assessor for St. Louis County for the subject tax day is SET ASIDE. The assessed valuation for the subject property for tax years 2015-2016 is $332,800.

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 July 18, 2017.

STATE TAX COMMISSION OF MISSOURI

 

Maureen Monaghan

Hearing Officer

 

Certificate of Service

I hereby certify that a copy of the foregoing has been emailed or mailed postage prepaid on this 18th day of July, 2017, to:  Thomas Campbell, Polsinelli, 100 S. Fourth Street, Suite 100, St. Louis, MO  63102, Attorney for Complainant; Jason Turk, Blitz, Bargett & Deutsch, LLC, 120 S. Central Ave, Suite 1500, St. Louis, MO  63105, Attorney for Complainant; Jeremy Shook, 1 Brentwood Blvd, Suite 800, Clayton, MO  63105, Attorney for Respondent; Jake Zimmerman, Assessor, County Government Center, 41 South Central Avenue, Clayton, MO 63105; Mark Devore, Collector, County Government Center, 41 South Central Avenue, Clayton, MO 63105.

 

Jackie Wood

Legal Coordinator

 

 

Complainants represented by PAR Tax Representative and Counsel Patrick Keefe filed the following exhibits as part of the hearing to determine the common level of assessment (ratio) for commercial properties in St. Louis County in 2015:

Exhibit Description
A Written Direct Testimony of Robert Denne
B CV of Robert Denne
C Assessment Ratio Study
D Written Direct Testimony of Timothy Schoemehl
E Qualifications of Timothy Schoemehl
F CD ROM St Louis County Assessment Roll
G CD ROM St Louis County Assessment Roll 2016
H Excel File – Commercial Sales 2014 – 2015 (on CD)
I Excel File – Revised Sales List(on CD)
J Excel File – Stratum Cods(on CD)
K PDF Locator – Neighborhood Chart(on CD)
L Real Estate Data Extract
M Excel File – ComlOnlySalesWork data file (on CD)
N Excel File – Supplemental List for Tim (on CD)
O Commercial Sales Review Form
P Codes
Q CD ROM Deed Images from Metropolitan Title Data, Inc
R DVD-ROM Assessor’s Certificates of Value (2014 & 2015)
S DVD-ROM Assessor’s Sales Research Packages (2014)
T DVD-ROM Assessor’s Sales Research Packages (2015)
U Excel File Worksheet Draft 9-7-2016 (on CD)
V Validated Sales from Tim (on CD)
W Validated Sales from Tim with trim notes (on CD)
X IAAO Standard on Ratio Studies 2013 (on CD)
Y IAAO Standard on Verification and Adjustment of Sales (on CD)
Z STC Assessor Manual, Chapter 4, Ratio Studies (2016) (on CD)
Rebuttal
AA Rebuttal Report of Robert C. Denne
BB Written Direct Testimony of Robert C. Denne
Surrebuttal
CC Written Direct Testimony of Timothy Schoemehl
DD Sales Verification Questionnaire – 21 N. Meramec
EE Sales Verification Questionnaire – 32K130454
FF Real Estate Information 12M330315
GG Article dated May 1-7, 2015
HH Commercial Sales Summary
II Real Estate Information 16H421088
JJ Sales Verification Questionnaire
KK Press Release
LL Press Release
MM Deed
NN Phillips Edison   SEC Report
OO Written Direct Testimony of Reobrt C. Denne
PP Study using pre-BOE valuations
QQ Study using pre-BOE valuations
RR CD Rom – 2015-2016 Commercial Assessments
SS BOE Decision 19Q130163

 

 

 

[1] Two sets of Complainants presented evidence at the hearing as to the ratio of assessment of Commercial properties.  The groups were labeled by the parties for ease of reference as “PAR” Complainants and “Sansone” Complainants.  Complainant, Medventures Property Management Co, is in the Sansone group.  Exhibits filed on behalf of PAR group are listed at the end of this Decision and Order.

[2] Representative for tax purposes of the Complainant.

[3] IAAO stands for the International Association of Assessing Officers.  Its members include government assessment officials and others interested in the administration of the property tax. They provide education, resources and standards for ad valorem taxation.

[4] Witness Robert Denne also testified at the ratio hearing.   Denne is the expert witness for Complainants (“PAR” Complainants) represented by Attorney Patrick Keefe.  Denne has training, experience and education in the field of appraisal, mass appraisal and mass appraisal review.  The witness conducted a ratio study for the 2015 commercial properties in St. Louis County.  He used 306 sales in his study comparing the verified sale data to post-BOE valuations.  (Transcript p. 95)