State Tax Commission of Missouri
|MERCY HEALTH EAST COMMUNITIES,||)|
|v.||)||Appeal No. 15-14809|
|JAKE ZIMMERMAN, ASSESSOR,||)|
|ST. LOUIS CO., MISSOURI,||)|
DECISION AND ORDER
Decision of the St. Louis County Board of Equalization (BOE) is SET ASIDE.
Mercy Health East Communities (Complainant) presented substantial and persuasive evidence to rebut the presumption of correct assessment by the BOE regarding valuation as of January 1, 2015.
Commercial Assessed Value for the subject property for tax years 2015 and 2016 is set at $857,600.
Complainant is represented by attorney William Clendenin.
Jake Zimmerman, Assessor of St. Louis County (Respondent) is represented by attorney Ed Corrigan
Case heard and decided on the record by Senior Hearing Officer John Treu (Hearing Officer).
Complainant appeals, on the ground of overvaluation, the decision of the BOE. The State Tax Commission (STC) takes this appeal to determine the assessed value in money for the subject property on January 1, 2015. The assessment as of January 1 of the odd numbered year remains the assessment as of January 1 of the following even numbered year unless there is new construction and improvement to the property. Section 137.115.1 RSMo.
Complainant filed the following exhibits, which were admitted into the record.
|B||Written Direct Testimony of John C. Hottle, Sr.|
Respondent filed no exhibits, written direct testimony or objections.
The parties were required to request an evidentiary hearing by February 8, 2017 or the appeal would be taken under advisement on the record and a Decision entered. Neither party requested a hearing.
FINDINGS OF FACT
- Jurisdiction. Jurisdiction over this appeal is proper. Complainant timely appealed to the STC from the decision of the BOE. The appeal was submitted on the record by agreement of the parties.
- Identification of Subject Property. The subject property is located at 20 Legends Parkway, Eureka, St. Louis County, MO, and is identified by parcel number 30V630115. (Exhibit A & B)
- Description of Subject Property. The subject property consists of 2.65 acres improved with a one-story masonry medical office building with 26,024 square feet of gross building area of which 23,133 square feet is rentable. The building was constructed in 2006 and is of average condition and functionality. The subject property is 49% vacant and will require tenant improvements and leasing commissions to lease up the subject property. (Exhibits A & B).
- Assessment and Board of Equalization Values. Respondent determined the true market value (TMV) of property to be $3,839,500. The Respondent classified the property as commercial property. The BOE sustained the assessment.
(Complaints for Review of Assessment).
- No Evidence of New Construction & Improvement. There was no evidence of new construction and improvement from January 1, 2015, to January 1, 2016; therefore, the assessed value for 2015 remains the assessed value for 2016. Section 137.115.1, RSMo.
- Presumption of Correct Assessment Rebutted. Complainant’s evidence was substantial and persuasive to rebut the presumption of correct assessment by the BOE and establish the true value in money of the subject property as of January 1, 2015 at $2,680,000. See, Presumption In Appeal, infra.
- Case Submitted On Record. The parties were Ordered to request a face-to-face Evidentiary Hearing, on or before February 8, 2017 or the appeals would be submitted on the record. Respondent made no request. Complainant responded that it was agreeable to submission of the appeal on the record.
CONCLUSIONS OF LAW AND DECISION
The Commission has jurisdiction to hear this appeal and correct any assessment which is shown to be unlawful, unfair, arbitrary or capricious. The Hearing Officer shall issue a decision and order affirming, modifying or reversing the determination of the Board of Equalization, and correcting any assessment which is unlawful, unfair, improper, arbitrary, or capricious. Article X, Section 14, Mo. Const. of 1945; Sections 138.430, 138.431, 138.431.4, RSMo.
Issuance of Decision Absent Evidentiary Hearing
The Hearing Officer, after affording the parties reasonable opportunity for fair hearing, shall issue a decision and order affirming, modifying or reversing the determination of the Board of Equalization, correcting any assessment which is unlawful, unfair, improper, arbitrary or capricious. Section 138.431.5 RSMo; 12 CSR 30-3.080 (2). The filing of exhibits and written direct testimony establishes the basis upon which opportunity for an evidentiary hearing can be held. The Complainant has the burden to present substantial and persuasive evidence. The Hearing Officer considered all the evidence submitted and then proceeded to ascertain if said exhibits and written direct testimony met the standard of substantial and persuasive evidence to establish the market value of the property.
Basis of Assessment
The Constitution mandates that real property and tangible personal property be assessed at its value or such percentage of its value as may be fixed by law for each class and for each subclass. Article X, Sections 4(a) and 4(b), Mo. Const. of 1945. The constitutional mandate is to find the true value in money for the property under appeal. By statute real and tangible personal property are assessed at set percentages of true value in money. Section 137.115.5, RSMo – residential property at 19% of true value in money; commercial property at 32% of true value in money and agricultural property at 12% of true value in money.
Presumption In Appeal
There is a presumption of validity, good faith and correctness of assessment by the County Board of Equalization. Hermel, Inc. v. STC, 564 S.W.2d 888, 895 (Mo. banc 1978); Chicago, Burlington & Quincy Railroad Co. v. STC, 436 S.W.2d 650, 656 (Mo. 1968). This presumption is a rebuttable rather than a conclusive presumption. It places the burden of going forward with some substantial evidence on the taxpayer – Complainant. The presumption of correct assessment is rebutted when the taxpayer presents substantial and persuasive evidence to establish that the BOE 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).
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, 2015. Hermel, supra. There is no presumption that the taxpayer’s opinion is correct. The taxpayer in a Commission appeal still bears the burden of proof. The taxpayer is the moving party seeking affirmative relief. Therefore, the Complainant bears the burden of proving the vital elements of the case, i.e., the assessment was “unlawful, unfair, improper, arbitrary or capricious.” See, Westwood Partnership v. Gogarty, 103 S.W.3d 152 (Mo. App. E.D. 2003); Daly v. P. D. George Co., 77 S.W.3d 645 (Mo. App. E.D. 2002); Reeves v. Snider, 115 S.W.3d 375 (Mo. App. S.D. 2003); Industrial Development Authority of Kansas City v. State Tax Commission of Missouri, 804 S.W.2d 387, 392 (Mo. App. 1991).
Standard for Valuation
Section 137.115, RSMo, requires that property be assessed based upon its true value in money which is defined as the price a property would bring when offered for sale by one willing or desirous to sell and bought by one who is willing or desirous to purchase but who is not compelled to do so. St. Joe Minerals Corp. v. State Tax Commission, 854 S.W.2d 526, 529 (Mo. App. E.D. 1993); Missouri Baptist Children’s Home v. State Tax Commission, 867 S.W.2d 510, 512 (Mo. banc 1993). True value in money is defined in terms of value in exchange and not value in use. Daly v. P. D. George Company, et al, 77 S.W.3d 645, 649 (Mo. App E.D. 2002), (internal citation omitted). It is the fair market value of the subject property on the valuation date. Hermel, supra. Market value is the most probable price in terms of money which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller, each acting prudently, knowledgeable and assuming the price is not affected by undue stimulus.
Implicit in this definition are the consummation of a sale as of a specific date and the passing of title from seller to buyer under conditions whereby:
- Buyer and seller are typically motivated.
- Both parties are well informed and well advised, and both acting in what they consider their own best interests.
- A reasonable time is allowed for exposure in the open market.
- Payment is made in cash or its equivalent.
- Financing, if any, is on terms generally available in the Community at the specified date and typical for the property type in its locale.
- The price represents a normal consideration for the property sold unaffected by special financing amounts and/or terms, services, fees, costs, or credits incurred in the transaction. Real Estate Appraisal Terminology, Society of Real Estate Appraisers, Revised Edition, 1984; See also, Real Estate Valuation in Litigation, J. D. Eaton, M.A.I., American Institute of Real Estate Appraisers, 1982, pp. 4-5; Property Appraisal and Assessment Administration, International Association of Assessing Officers, 1990, pp. 79-80; Uniform Standards of Professional Appraisal Practice, Glossary.
Weight to be Given Evidence
The Hearing Officer is not bound by any single formula, rule or method in determining true value in money, but is free to consider all pertinent facts and estimates and give them such weight as reasonably they may be deemed entitled. The relative weight to be accorded any relevant factor in a particular case is for the Hearing Officer to decide. St. Louis County v. Security Bonhomme, Inc., 558 S.W.2d 655, 659 (Mo. banc 1977); St. Louis County v. STC, 515 S.W.2d 446, 450 (Mo. 1974).
The Hearing Officer as the trier of fact may consider the testimony of an expert witness and give it as much weight and credit as he may deem it entitled to when viewed in connection with all other circumstances. The Hearing Officer is not bound by the opinions of experts who testify on the issue of reasonable value, but may believe all or none of the expert’s testimony and accept it in part or reject it in part. St. Louis County v. Boatmen’s Trust Co., 857 S.W.2d 453, 457 (Mo. App. E.D. 1993); Vincent by Vincent v. Johnson, 833 S.W.2d 859, 865 (Mo. 1992); Beardsley v. Beardsley, 819 S.W.2d 400, 403 (Mo. App. 1991); Curnow v. Sloan, 625 S.W.2d 605, 607 (Mo. banc 1981).
Methods of Valuation
Proper methods of valuation and assessment of property are delegated to the Commission. It is within the purview of the Hearing Officer to determine the method of valuation to be adopted in a given case. See, Nance v. STC, 18 S.W.3d 611, at 615 (Mo. App. W.D. 2000); Hermel, supra; Xerox Corp. v. STC, 529 S.W.2d 413 (Mo. banc 1975). Missouri courts have approved the comparable sales or market approach, the cost approach and the income approach as recognized methods of arriving at fair market value. St. Joe Minerals Corp. v. STC, 854 S.W.2d 526, 529 (App. E.D. 1993); Aspenhof Corp. v. STC, 789 S.W.2d 867, 869 (App. E.D. 1990).
Opinion Testimony by Experts
The facts upon which an expert’s opinion is based, like the facts sufficient to support a verdict, must measure up to the legal requirements of substantiality and probative force; the question of whether such opinion is based on and supported by sufficient facts or evidence to sustain the same is a question of law for the court. Robinson v. Empiregas Inc. of Hartville, 906 S.W.2d 829 (S.D. 1995). The STC cannot ignore a lack of support in the evidence for adjustments made by the expert witnesses in the application of a particular valuation approach. Drey v. State Tax Commission, 345 S.W.2d 228, 234-236 (Mo. 1961), Snider v. Casino Aztar/Aztar Missouri Gaming Corp., 156 S.W.3d, 341, 348 (Mo. 2005). The testimony of an expert is to be considered like any other testimony, is to be tried by the same test, and receives just so much weight and credit as the trier of fact may deem it entitled to when viewed in connection with all other circumstances. The Hearing Officer, as the trier of fact, has the authority to weigh the evidence and is not bound by the opinions of experts who testify on the issue of reasonable value, but may believe all or none of the expert’s testimony and may accept it in part or reject it in part. Beardsley v. Beardsley, 819 S.W.2d 400, 403 (Mo. App. 1991); Curnow v. Sloan, 625 S.W.2d 605, 607 (Mo. 1981).
Complainant Proves Value
Complainant presented substantial and persuasive evidence to establish a fair market value, as of January 1, 2015, for the subject property. The evidence included an appraisal report and testimony by a Missouri State Certified General Appraiser. Complainant’s expert developed an opinion of value utilizing both the income and sales comparison approaches to value, as stabilized. The appraiser determined the subject property is 49% vacant and will require tenant improvements and leasing commissions to lease up the subject property. The appraiser developed “as is” values under both approaches to value.
Under the income approach the appraiser utilized four comparable leased properties with fourteen different per square foot lease rates within such leased properties to develop a stabilized valuation. The lease rates ranged from $17.50 per square foot to $38.00 per square foot. The appraiser selected a $30 per square foot rate to utilize in the income approach. Actual expenses were utilized. A loaded capitalization rate of 13.44% was selected as appropriate for use in the direct capitalization formula. This rate was made up of a 10% market capitalization rate based upon the sales of six comparable properties and an effective tax rate of 3.44%. To develop an “as is” valuation the appraiser deducted the present value of vacancy shortfalls, tenant improvements and commissions and concluded on a value of $2,680,000.
Under the sales comparison approach, the appraiser utilized three sales of comparable properties to develop an “as stabilized” value for the property. Adjustments were made for property rights, building size, age/condition, land to building ratio, building class, and for whether there was a single tenant or multiple tenants. The adjusted sales prices per square foot ranged from $113 to $170. To develop an “as is” valuation the appraiser deducted the present value of vacancy shortfalls, tenant improvements and commissions. The appraiser made a further negative adjustment of 10% for entrepreneurial incentive to account for the amount an entrepreneur would typically desire for providing assuming the risks associated with the development, expertise and coordination. The appraiser concluded on a value of $2,840,000.
After considering the values determined under the income approach, “as stabilized”, under the income approach, “as is”, under the sales comparison approach, “as stabilized” and under the sales comparison approach, “as is”, the appraiser opined that the income approach method, as is provided the most reliable estimate of value. Consequently, the appraiser opined a retrospective value of the property as of January 1, 2015 to be $2,680,000
The assessed valuation for the subject property as determined by the Board of Equalization for St. Louis County for the subject tax day is SET ASIDE. True Market Value and Assessed Value for the subject property for tax years 2015 and 2016 is set as follows:
|True Market Value||Commercial Assessed Value|
Application for Review
A party may file with the Commission an application for review of this decision within thirty days of the mailing date set forth in the Certificate of Service for this Decision. The application shall contain specific facts or law as grounds upon which it is claimed the decision is erroneous. Said application must be in writing addressed to the State Tax Commission of Missouri, P.O. Box 146, Jefferson City, MO 65102-0146, and a copy of said application must be sent to each person at the address listed below in the certificate of service.
Failure to state specific facts or law upon which the application for review is based will result in summary denial. Section 138.432, RSMo
The Collector of St. Louis County, as well as the collectors of all affected political subdivisions therein, shall continue to hold the disputed taxes pending the possible filing of an Application for Review, unless said taxes have been disbursed pursuant to a court order under the provisions of Section 139.031.8, RSMo.
Any Finding of Fact which is a Conclusion of Law or Decision shall be so deemed. Any Decision which is a Finding of Fact or Conclusion of Law shall be so deemed.
SO ORDERED this 14th day of March, 2017.
STATE TAX COMMISSION OF MISSOURI
Senior Hearing Officer
Certificate of Service
I hereby certify that a copy of the foregoing has been sent electronically or mailed postage prepaid this 14th day of March, 2017, to: Complainants(s) counsel and/or Complainant, the County Assessor and/or Counsel for Respondent and County Collector.
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