STATE TAX COMMISSION OF MISSOURI
| ON THE CORNER, LLC | ) | ||||
| ) | |||||
| Complainant, | ) | ||||
| ) | |||||
| v. | ) | 18-33008 | |||
| ) | |||||
| RICK KESSINGER, ASSESSOR, | ) | ||||
| GREENE COUNTY, MISSOURI | ) | ||||
| ) | |||||
| Respondent. | ) | ||||
DECISION AND ORDER
HOLDING
The assessment of Rick Kessinger, Assessor Greene County, Missouri (Respondent) is AFFIRMED. On the Corner, LLC, (Complainant) failed to present substantial and persuasive evidence to establish the true value in money (TVM) of the subject property.
Complainant appeared by Counsel Steven May.
Respondent appeared by Counsel Aaron Klusmeyer.
Case heard and decided by Senior Hearing Officer John Treu (Hearing Officer).
ISSUE
Complainant appealed the valuation of the subject property on the ground of overvaluation. The value as of January 1 of the odd numbered year remains the value of January 1 of the following even numbered year unless there is new construction or improvement to the property. Section 137.115.1[1]. The State Tax Commission (STC) takes this appeal to determine the TVM of the subject property as of January 1, 2018, under the economic conditions that existed as of January 1, 2017.
The Hearing Officer, having considered all of the competent evidence upon the whole record, enters the following Decision and Order.
FINDINGS OF FACT
- Complainant timely appealed to the STC.
- Evidentiary Hearing. The issue of overvaluation was presented at an evidentiary hearing held on July 30, 2019, at the Historic Greene County Courthouse, Springfield, Missouri.
- Identification of Subject Property. The subject property is identified as 88-10-35-302-005 located at 306 East Chestnut Street, Strafford, Missouri. The property is located next to Interstate Highway 44 and Missouri State Highway 125. The land was acquired in October, 2016 for $325,000. The existing structure was raised and the current improvements were constructed in 2017. The site is approximately 2.32 acres. The improvements consist of two commercial buildings with surface parking. The first building consist of units A, B, and C, namely 2 vacant retail units and an occupied restaurant. The building has 7,497 square feet of rentable area. The second building consist of units D and E, namely 2 vacant retail units. The building has 3,100 square feet of rentable area. The vacant units’ exterior is metal/stucco. The framing is steel. The planned drywall interiors of the vacant units remained unfinished on January 1, 2018. The vacant units are plumbed and are set up for forced air heat and central air cooling. The flooring in the vacant units remained uninstalled on January 1, 2018.
- Respondent assessed the subject property as commercial property at a TVM of $1,127,200.
- Board of Equalization. No appeal to the BOE was undertaken due to a late notice of increase in value.
- Complainant’s Evidence. Complainant offered as evidence the following exhibits:
| Exhibit | Description
|
Ruling |
| A | Appraisal Report of Eric Aherin (Aherin) | Admitted |
Rima Walker, one of the owners of Complainant testified. She testified the cost of acquiring the subject property land was $325,000. She testified that the contractor bid to construct the improvements was $1,069,244.49. She testified that the actual cost for the improvements was at least $1,500,000 and more like $2,000,000.
Aherin is an appraiser and owner of Advisor Appraisal Service, LLC. He has been an appraiser since 2009. He is certified in Missouri.
Aherin appraised the subject properties with an effective date of January 1, 2018. Aherin determined the highest and best use of the property as improved was as retail. He developed the income, sales comparison, and cost approaches; although, he noted inadequate data to develop a reliable land value under the cost approach.
Under the cost approach, Aherin developed a valuation for the land reviewing the sale prices of land within the market ($187,000). The appraiser testified that his estimate of land value was weakened due to lack of sales information on land in the market. He estimated the replacement cost new ($1,069,245) and made depreciation deductions for both the land and improvements ($136,934). He assigned a 15% external obsolescence to the improvements with an explanation only of the subject property’s vacancy. Aherin opined an “as stabilized” indication of TVM under the cost approach of $1,119,000.
Under the sales comparison approach, Aherin utilized five comparable properties. He made adjustments to their sale prices for location, visibility/traffic count, effective age, basement use/finish and condition. Although the comparable properties were up to 20 years older than the subject, the appraiser found their effective ages to be 7 years and less. For the subject property, which was less than a year old, the appraiser assigned a full 1 year of effective age. The appraiser only made a ½% adjustment for each year of effective age in the sales approach while he made a 2% adjustment in the cost approach. The appraiser did not make adjustments for the size variance of the comparables to the subject. Comparable 5 is approximately twice the size and Comparable 2 is almost four times the size of the subject. The appraiser made no adjustment for the comparables lack of location by an interstate or for their smaller frontage and access as compared to the subject. The appraiser did not know the traffic count for some roads in proximity to the comparable properties when making his visibility/traffic count adjustments. Aherin opined an “as stabilized” indication of TVM of $880,000.
Under the income approach, Aherin consider 18 comparable properties. He also considered the property west of the subject property at 101 South Highway 125, which he stated the leasing agent advised took 6 years to fully lease. He did not know whether such lease-up period was during a period of recession. Aherin concluded a market rent of $12 per square foot for the restaurant space and $9 per square foot for the 4 vacant units. The $9 per square foot conclusion was lower than 14 or 18 of Aherin’s selected comparables. He also looked to the market to develop vacancy and collection rate. He looked to the subject property’s current expenses to determine expenses. Aherin opined an “as stabilized” indication of TVM of $976,000.
The “as stabilized” valuations resulted from Aherin making a stabilization calculation of $162,000 utilizing a discount rate of 10%, an average rent loss of 50% and a lease-up period of 5 years (Year 1, 5%; Year 2, 20%; Year 3, 20%; Year 4, 25%; and Year 5, 30%). The appraiser acknowledged that in reality 25% of the 4 vacant units would be leased with each new lease signed. The appraiser made the adjustment in each approach to value.
Aherin reconciled the valuations for an “as stabilized” opinion of TVM of $950,000 and an “as is” opinion of TVM of $760,000.
- Respondents’ Evidence. Respondent offered as evidence the following exhibits:
| Exhibit | Description
|
Ruling |
| 1 | Responses to Respondent’s Request for Production | Admitted |
| 1.1 | Appraisal of August 17, 2016 | Admitted |
| 2 | Amended Responses to Respondent’s Request for Production | Admitted |
| 2.1 | Contractor Bid | Admitted |
| 3 | Settlement Statement | Admitted |
Complainant objected to Exhibit 1.1. Exhibit 1.1 is an appraisal report. The appraiser and author of the report was not present for cross-examination and did not testify to the report. The objection was overruled and the exhibit admitted to be given such weight, if any, that the Hearing Officer deemed appropriate. No weight was given to Exhibit 1.1.
- Presumption of Correct Assessment Not Rebutted. Complainant failed to present substantial and persuasive evidence to rebut the presumption of correct assessment by the BOE and to establish the TVM of the subject property as of January 1, 2018.
CONCLUSIONS OF LAW AND DECISION
Authority
The STC has authority to hear this appeal and to correct any assessment which is shown to be unlawful, unfair, arbitrary, or capricious, including the application of any abatement. The Hearing Officer shall issue a decision and order affirming, modifying or reversing the determination of the BOE, 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.
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 property and tangible personal property are assessed at set percentages of true value in money: residential property at 19%; commercial property at 32%; agricultural property at 12%; personal property at 33.33%. Section 137.115.5.
Weight to be Given Evidence
The Hearing Officer is not bound by any single formula, rule, or method in determining true value in money and 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. State Tax Comm’n, 515 S.W.2d 446, 450 (Mo. 1974); Chicago, Burlington & Quincy Railroad Company v. State Tax Comm’n, 436 S.W.2d 650 (Mo. 1968).
The Hearing Officer, as the trier of fact, may consider the testimony of an expert witness and give it as much weight and credit as deemed necessary when viewed in connection with all other circumstances. Beardsley v. Beardsley, 819 S.W.2d 400, 403 (Mo. App. W.D. 1991). The Hearing Officer, as the trier of fact, is not bound by the opinions of experts but may believe all or none of the expert’s testimony or accept it in part or reject it in part. Exchange Bank of Missouri v. Gerlt, 367 S.W.3d 132, 135-36 (Mo. App. W.D. 2012).
Complainant’s Burden of Proof
To obtain a reduction in assessed valuation based upon an alleged overvaluation, the Complainant must prove the true value in money of the subject property on the subject tax day. Hermel, Inc., v. State Tax Commission, 564 S.W.2d 888, 897 (Mo. banc 1978). True value in money is defined as the price that the subject property would bring when offered for sale by one willing but not obligated to sell it and bought by one willing or desirous to purchase but not compelled to do so. Rinehart v. Bateman, 363 S.W.3d 357, 365 (Mo. App. W.D. 2012); Cohen v. Bushmeyer, 251 S.W.3d 345, 348 (Mo. App. E.D. 2008); Greene County v. Hermel, Inc., 511 S.W.2d 762, 771 (Mo. 1974). True value in money is defined in terms of value in exchange and not in terms of value in use. Stephen & Stephen Properties, Inc. v. State Tax Commission, 499 S.W.2d 798, 801-803 (Mo. 1973). In sum, true value in money is the fair market value of the subject property on the valuation date. Hermel, Inc., 564 S.W.2d at 897.
“’True value’ is never an absolute figure, but is merely an estimate of the fair market value on the valuation date.” Drury Chesterfield, Inc., v. Muehlheausler, 347 S.W.3d 107, 112 (Mo. App. E.D. 2011), citing St. Joe Minerals Corp. v. State Tax Comm’n of Mo., 854 S.W.2d 526, 529 (Mo. App. E.D. 1993). “Fair market value typically is defined as the price which the property would bring when offered for sale by a willing seller who is not obligated to sell, and purchased by a willing buyer who is not compelled to buy.” Drury Chesterfield, Inc., 347 S.W.3d at 112 (quotation omitted).
A presumption exists that the assessed value fixed by the BOE is correct. Rinehart, 363 S.W.3d at 367; Cohen, 251 S.W.3d at 348; Hermel, Inc., 564 S.W.2d at 895. “Substantial and persuasive controverting evidence is required to rebut the presumption, with the burden of proof resting on the taxpayer.” Cohen, 251 S.W.3d at 348. Substantial evidence can be defined as such relevant evidence that a reasonable mind might accept as adequate to support a conclusion. Cupples Hesse Corp. v. State Tax Commission, 329 S.W.2d 696, 702 (Mo. 1959). Persuasive evidence is evidence that has sufficient weight and probative value to convince the trier of fact. Cupples Hesse Corp., 329 S.W.2d at 702. 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). See also, 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).
There is no presumption that the taxpayer’s opinion is correct. The taxpayer in a STC 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.” Westwood Partnership, 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. W.D. 1991).
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. State Tax Comm’n, 18 S.W.3d 611, 615 (Mo. App. W.D. 2000); Hermel, Inc., 564 S.W.2d at 897; Xerox Corp. v. State Tax Comm’n, 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. State Tax Comm’n, 854 S.W.2d 526, 529 (App. E.D. 1993); Aspenhof Corp. v. State Tax Comm’n, 789 S.W.2d 867, 869 (App. E.D. 1990); Quincy Soybean Company, Inc., v. Lowe, 773 S.W.2d 503, 504 (App. E.D. 1989), citing Del-Mar Redevelopment Corp v. Associated Garages, Inc., 726 S.W.2d 866, 869 (App. E.D. 1987); and State ex rel. State Highway Comm’n v. Southern Dev. Co., 509 S.W.2d 18, 27 (Mo. 1974).
“The cost approach is most appropriate when the property being valued has been recently improved with structures that conform to the highest and best use of the property or when the property has unique or specialized improvements for which there are no comparables in the market.” Snider v. Casino Aztar/Aztar Missouri Gaming Corp., 156 S.W.3d 341 (Mo. banc 2005). In such case the Missouri Supreme Court found that due to Casino Aztar’s “recent construction and specialized use, the reproduction cost of the property best indicates its true value in money.” Id. The improvements in such case were 4 years old. Id. “Reproduction cost, or cost of construction, is a determination of the cost of constructing an exact duplicate of an improved property using the same materials and construction standards. Id.
Discussion
The cost approach to value best indicates the TVM of the subject property. In the present appeal, the subject property improvements were less than one year old as of January 1, 2019. When the property being valued has been recently improved with structures that conform to the highest and best use of the property, the cost approach is most appropriate method.
Complainant testified the cost to acquire the subject land was $325,000. Complainant testified the contractor bid to construct the improvements was $1,069,244.49. However, Complainant testified the cost for the improvements was actually at least $1,500,000 and more like $2,000,000. Complainant’s total cost ranged from $1,825,000 to $2,325,000.
Aherin testified that he developed a valuation for the land at $187,000 although he stated that he lacked sales which weakened his opinion of value. He estimated the cost new of the improvements of $1,069,245. The total cost new would be $1,256,245. The appraiser made depreciation deduction of $136,934 for an opinion of value of $1,119,311. The appraiser made another adjustment of $162,000 to account for the cost of leasing the property.
Respondent valued the land at $231,000 and the improvements at $896,200 for a total valuation of $1,127,200.
Both the contractor cost bid of $1,069,244.49 (or a total of $1,394,244.49 with the cost of the land) and, to a greater degree, the actual cost to date to acquire the land and to construct the improvements ($1,825,000 to $2,325,000) support the TVM set by Respondent. Respondent valued the subject property as commercial property at a TVM of $1,127,200.
ORDER
The valuation for the subject property as determined by Respondent for the subject property, as of January 1, 2018 is AFFIRMED.
Application for Review
A party may file with the Commission an application for review of this decision within thirty days of the mailing date set forth in the Certificate of Service for this Decision. The application shall contain specific facts or law as grounds upon which it is claimed the decision is erroneous. Said application must be in writing addressed to the State Tax Commission of Missouri, P.O. Box 146, Jefferson City, MO 65102-0146, and a copy of said application must be sent to each person at the address listed below in the certificate of service.
Failure to state specific facts or law upon which the application for review is based will result in summary denial. Section 138.432, RSMo
Disputed Taxes
The Collector of Greene County, Missouri, 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 16th day of October, 2019.
STATE TAX COMMISSION OF MISSOURI
John Treu
Senior Hearing Officer
[1] All statutory references are to RSMo 2000, as amended.