Peruque LLC v. Shipman (St. Charles)

State Tax Commission of Missouri

 

PERUQUE LLC,)

)

Complainant,)

)

v.)Appeal Nos.07-32728 thru 07-32895

)

SCOTT SHIPMAN, ASSESSOR,)

ST. CHARLES COUNTY, MISSOURI,)

)

Respondent.)

 

ORDER

AFFIRMING HEARING OFFICER DECISION

UPON APPLICATION FOR REVIEW

 

On June 25, 2009, Hearing Officer Maureen Monaghan entered her Decision and Order (Decision) setting aside the assessments by the St. Charles County Board of Equalization in Appeals 07-32747, 07-32777, 07-32779 thru 07-32783, 07-32835, 07-32845 thru 07-32851 and affirming the assessment in the remaining Appeals.

Complainant timely filed its Application for Review of the Decision.By Order issued July 28, 2009, Respondent was given until and including August 28, 2009 to file Response.No Response was filed.

CONCLUSIONS OF LAW

Standard Upon Review

The Hearing Officer is not bound by any single formula, rule or method in determining true value in money, but is free to consider all pertinent facts and estimates and give them such weight as reasonably they may be deemed entitled.The relative weight to be accorded any relevant factor in a particular case is for the Hearing Officer to decide.[1]

The Hearing Officer as the trier of fact may consider the testimony of an expert witness and give it as much weight and credit as she may deem it entitled to when viewed in connection with all other circumstances.The Hearing Officer is not bound by the opinions of experts who testify on the issue of reasonable value, but may believe all or none of the expert’s testimony and accept it in part or reject it in part.[2]

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

DECISION

Complainant’s Allegations of Error

Complainant asserts six errors in the Decision based upon the valuation of the property and rulings on evidence submitted.The errors asserted are:

1.Hearing Officer erred in rejecting Complainant’s bulk sales comparison valuation method.

2.The Hearing Officer erred in concluding that Complainant was required to value the partially developed lots as individual parcels.

3.The Hearing Officer erred in failing to recognize Complainant’s valuation method for the partially developed land as an accepted valuation method.

4.The Hearing Officer erred in sustaining the Board’s valuation of the partially developed land.

5.The Hearing Officer erred in sustaining the Board’s valuation of the developed land.

6.The Hearing Officer erred in admitting the appraisal reports of Respondent’s employee.

Valuation of the Property (Allegations of Errors 1-5)

Fully Developed Lots

The State Tax Commission has treated lots in a subdivided development as individual entities and each lot’s value determined individually, most commonly by the sales comparison approach.[4]In Hammons v. Savage, the Complainant proposed the same methodology as the Complainant in this case.The State Tax Commission, in Hammons, stated that “[n]either Missouri case law nor State Tax Commission decisions have supported a reduced value for developers based on either the volume of unsold lots held by the developers or upon the projected length of time it will take the developers to sell those lots….No statute or administrative rules in Missouri sets forth the development method and it is the Commission’s position that lots in a subdivided development should be treated as individual entities and each lot’s value determined individually, most commonly by the comparable sales approach.”

The Complainant, in his argument, refers to an opinion of STC wherein the development approach was mentioned as one appraisal methodology.Although the approach was mentioned in an opinion, the opinion concludes that the sales comparison approach is the most reliable approach and the development approach is useful to value one, large, undivided parcel of land whose highest and best use would be to plat and develop as a subdivision.The Commission does not recognize the development approach as a valid appraisal methodology.

Further, common ownership of individual parcels should not be a consideration for property tax purposes.The case at bar involves 168 separate parcels, or, in other words, 168 separate assessments and 168 separate appeals.The Hearing Officer is required to value each parcel on its own.A discount is not given to a property owner for owning multiple parcels within a county.To reduce the true value of a parcel because the owner of the subject parcel owns additional parcels in the county would create inequities in the property tax system which places great weight on uniformity and equalization.

Partially Developed Lots

Section 137.119, RSMo provides that “the filing of a real property subdivision plat shall not singularly result in a change in classification or an increase in the appraised value of such property.All contiguous lots and lands for which a plat has been filed shall be combined and valued as a single parcel if no improvements have been made to such lots or lands.”The Hearing Officer made findings of fact that the subject parcels should not be combined and valued as a single parcel.

Admission of the Respondent’s Appraisal Report (Allegation of Error #6)

The Complainant seeks review based upon the evidence submitted by the Respondent.The Complainant did not meet his burden of proof.The Respondent’s Appraisal report was used to reduce the value of fifteen of the lots.Further, the Complainant’s objections go to the weight of the evidence and not as to the admissibility.

Complainant’s Burden

There is a presumption of validity, good faith and correctness of assessment by the County Board of Equalization.[5]A presumption accepts something as true without any substantial proof to the contrary.In an evidentiary hearing before the Commission, the valuation determined by the Board, even if simply to sustain the value made by the Assessor, is accepted as true only until and so long as there is no substantial evidence to the contrary.The presumption of correct assessment is rebutted when the taxpayer 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.[6]The Hearing Officer found that the Complainant did not meet his burden of proof.

CONCLUSION

A review of the record in the present appeal provides support for the determinations made by the Hearing Officer.There is competent and substantial evidence to establish a sufficient foundation for the Decision of the Hearing Officer.A reasonable mind could have conscientiously reached the same result based on a review of the entire record. The Commission finds no basis to support a determination that the Hearing Officer acted in an arbitrary or capricious manner or abused her discretion as the trier of fact and concluder of law in this appeal.[7]

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

ORDER

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

Judicial review of this Order may be had in the manner provided in Sections 138.432 and 536.100 to 536.140, RSMo within thirty days of the mailing date set forth in the Certificate of Service for this Order.

If judicial review of this decision is made, any protested taxes presently in an escrow account in accordance with this appeal shall be held pending the final decision of the courts unless disbursed pursuant to Section 139.031.8, RSMo.

If no judicial review is made within thirty days, this decision and order is deemed final and the Collector of St. Charles 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 December 1, 2009.

STATE TAX COMMISSION OF MISSOURI

Bruce E. Davis, Chairman

Jennifer Tidwell, Commissioner

Bill L. Ransdall, Commissioner

 

 

 

 

DECISION AND ORDER

 

HOLDING

 

Decision of the St. Charles County Board of Equalization sustaining the assessments made by the Assessor SET ASIDE in Appeals 07-32747, 07-32777, 07-32779 thru 07-32783,

07-32835, 07-32845 thru 07-32851. Decision of the St. Charles County Board of Equalization sustaining the assessments made by the Assessor AFFIRMED in remaining Appeals.

ISSUE

The Commission takes these appeals to determine the true value in money for the subject properties on January 1, 2007.

SUMMARY

Complainant appeals, on the ground of overvaluation, the decision of the St. Charles County Board of Equalization, which sustained the valuation of the subject properties.

The Assessor determined appraised value of $44,000 per parcel for 105 parcels or lots in the Carlton Glen Estates, assessed value of $8,360, as residential property.The Assessor determined appraised value of $55,000 per parcel or lot for 63 lots in the Carlton Glen Estates, assessed value of $10,450.In their Complaint for Review of Assessment, Complainant proposed values of $7,000 per parcel or lot for 105 lots, assessed value of $1,330; and $35,000 per parcel or lot for 63 lots, assessed values of $6,650.

A hearing was conducted on January 14, 2009, at the St. Charles County Administration Building, St. Charles, Missouri. Complainant appeared by Counsel Jim Bick, St. Louis, Missouri.Respondent appeared by Counsel, Chris Mayes.Case heard and decided by Hearing Officer Maureen Monaghan.

Transcript of hearing was received by the Commission on January 9, 2009.Complainant filed a brief on April 15, 2009.Respondent filed his brief on May 29, 2009.Complainant replied on June 23, 2009.

The Hearing Officer, having considered all of the competent evidence upon the whole record, enters the following Decision and Order.

Lots and Valuations

* Combined value for all lots $2,652,000

Complainant’s Evidence

Complainant offered the following exhibits:

 

Respondent’s Evidence

Respondent offered the following exhibits:

 

Complainant filed objections on Exhibits 1A and 1B.The objections were overruled.

FINDINGS OF FACT

1.Jurisdiction over these appeals is proper.Complainant timely appealed to the State Tax Commission from the decision of the St. Charles County Board of Equalization.

2.The subject properties are one hundred and sixty-eight (168), vacant, single-family residential, lots located in the 504 lot Carlton Glen Estates subdivision in Wentzville, Missouri.

3.A real property subdivision plat was filed with the County in 2003.The subject properties are in varying stages of development.

4.Subject properties in Appeal Numbers 07-32729, 07-32796 thru 97, 07-32839 thru 07-32844, 07-32861 thru 07-32871, 07-32878 thru 07-32895 (hereinafter referred to as “fully developed”) have utilities and paved road on all frontage.

5. Subject properties in Appeal No. 07-32728, 07-32748-49, 07-32768, 07-32778, 07-32784 thru 07-32785, and 07-32832 thru 07-32834 (hereinafter referred to as “disputed development”) are adjacent to the fully developed properties.They have paved frontage.If the parcel is a corner lot, one of the two road frontage sides is paved.Utilities are accessible to the lots.

6.Subject properties in the remaining appeals (hereinafter referred to as “partially developed”) have been rough graded and have access to utilities.The parcels are scattered within the 504 lot development.

7.The entire development had been engineered, “blasted”, rough graded, and water mains, sewers and utilities are accessible.

8.The Complainant’s appraiser concluded a value of $50,000 for the thirty-eight (38) fully developed properties.

9.The Complainant’s appraiser concluded a single value for the remaining properties, both partially developed and disputed development properties, of $2,652,000.

10.The Assessor’s appraiser concluded a value of $55,000 per property for forty-eight (48) of the subject properties (fully developed and disputed development) .

11.The Assessor’s appraiser concluded a value of $45,000 for one hundred and twenty (120) of the properties (partially developed properties).

12.Complainant’s evidence was not substantial and persuasive to rebut the presumption of correct assessment by the Board.

13.In Appeals 07-32747, 07-32777, 07-32779 thru 07-32783, 07-32835, and 07-32845 thru 07-32851, Respondent presented substantial and persuasive evidence to establish the value of the property at $45,000.(Previously valued at $55,000 by the Board of Equalization)

CONCLUSIONS OF LAW AND DECISION

Jurisdiction

The Commission has jurisdiction to hear these appeals 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.[8]

Presumption In Appeals

There is a presumption of validity, good faith and correctness of assessment by the CountyBoardof Equalization.[9]The presumption in favor of the Board is not evidence.A presumption simply accepts something as true without any substantial proof to the contrary.In an evidentiary hearing before the Commission, the valuation determined by the Board, even if simply to sustain the value made by the Assessor, is accepted as true only until and so long as there is no substantial evidence to the contrary.

The presumption of correct assessment is rebutted when the taxpayer 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.[10]

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.[11]It is the fair market value of the subject property on the valuation date.[12]Market value is the most probable price in terms of money which a property should bring in competitive and open market under all conditions requisite to a fair sale, the buyer and seller, each acting prudently, knowledgeable and assuming the price is not affected by undue stimulus.

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

1.Buyer and seller are typically motivated.

 

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

 

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

 

4.Payment is made in cash or its equivalent.

 

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

 

6.The price represents a normal consideration for the property sold unaffected by special financing amounts and/or terms, services, fees, costs, or credits incurred in the transaction.[13]

 

Subject Properties

 

The subject properties in these appeals are single-family residential lots located in the Carlton Glen Estates subdivision in the City of Wentzville, County of St. Charles, Missouri.The plat of the subdivision was filed with the County in 2003.The Carlton Glen Estates is a planned residential development of 504 lots. The properties subject to this appeal are 168 of those lots.The entire subdivision has been engineered, rock has been blasted for utility installation, the lots have been rough graded, streets have been laid out and some areas have been paved, sewer and water mains have been added, and electric and other utilities have been run in areas.

Complainant’s appraiser and Respondent’s appraiser agreed that 38 lots were fully developed and 120 lots were partially developed.The fully developed lots had all frontage paved and utilities up to the property.The partially developed have been rough graded, the frontage is not paved and utilities are not run up to the parcel lines.

The appraisers disagreed as to how to characterize the remaining ten lots.The Respondent’s appraiser included the ten disputed development properties in his valuation of fully developed properties while the Complainant’s appraiser included the disputed development properties with his valuation of the partially developed properties.

The disputed development properties are disbursed throughout the development but all are adjacent to lots deemed fully developed by both appraisers.Six of the properties are corner lots.One side of the corner properties has a paved road and the other side has graded land for a road to be laid.The other four properties have one side with road frontage and, according to the appraiser for the assessor who supervised the residential section and was required to monitor development of subdivision properties, the road was completed in front of the properties.Further, the appraiser testified that the utilities were available for the parcels.

The disputed development properties are ready for immediate construction and therefore should be included with the fully developed properties.

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.[14]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.[15]

Valuation of 38 Fully Developed Lots

 

The appraiser for the Complainant was told by the Complainant that there were forty-one (41) fully developed lots and one hundred and twenty-seven (127) partially developed lots subject to the appeal.The appraiser concluded that three parcels were not fully developed as their entire frontage was not developed with streets.The appraiser included those properties with the one hundred and twenty-seven (127) parcels that he was valuing as one parcel.The Complainant’s appraiser valued the thirty-eight fully developed parcels and concluded on a value of $50,000 per lot.

On the thirty eight parcels the Complainant’s appraiser deemed fully developed, the appraiser used two approaches to determine true value of the property: “bulk sale takedown” and a discounted cash flow.The appraiser looked for “bulk sale takedowns” which the appraiser described as being sales of multiple, vacant lots to one buyer.The appraiser used four of these sales that occurred from December 2005 to December 2006 for sales of 11 to 68 lots.The appraiser made adjustments for the discount based upon the number of lots sold, time of sale, market condition adjustment, location, amenities and lot frontage.After adjustments, the range in sale prices ranged from $41,438 per lot to $50,825 per lot.The appraiser concluded on a value of $50,500 per lot.

The appraiser also developed a discounted cash flow analysis on the thirty eight lots.The appraiser looked to the sale of twelve individual lots and concluded a value of $65,000 per lot.The appraiser then calculated a discount rate, the costs per lot sale, and the projected absorption rate.The appraiser applied the rates to his per lot value of $65,000 and concluded a value of $42,000 per lot.

The appraiser relied most heavily on his bulk sale approach to conclude a value of $50,000 per lot.

No statute, case law, or administrative rule in Missouri sets forth the method of determining true value as suggested by Complainant by using a bulk sale or a discounted cash flow.The State Tax Commission has treated lots in a subdivided development as individual entities and each lot’s value determined individually, most commonly by the sales comparison approach.[16]

Complainant’s Valuation of the Remaining 130 Lots or 28.26 Acres at $2,652,000

 

The Complainant’s appraiser valued the remaining one hundred and thirty lots as a 28.26 acres of partially developed land.The property had been engineered, cleared and rough graded.The appraiser broke the 130 lots into two groups Village C (77 lots) and Village D (53 lots) based upon lot size.The appraiser compared the lots with the sales used in the prior analysis and concluded on values of $35,500 for lots in Village C and $46,500 for lots in Village D.The total of all the lots being $5,198,000.At a density yield of 4.6 units per acre, this equates to a maximum of $183,935 per acre.The appraiser assumed a 25% profit margin to the developer reducing the value to $147,148 per acre.The appraiser then deducted the cost to finish the development ($53,311/acre) for a reduced value of $93,837 per acre for the 28.26 acres or a rounded figure of $2,652,000.

Section 137.119, RSMo provides that “the filing of a real property subdivision plat shall not singularly result in a change in classification or an increase in the appraised value of such property.All contiguous lots and lands for which a plat has been filed shall be combined and valued as a single parcel if no improvements have been made to such lots or lands.”The Complainant cites In State Highway Commission v. Williamsville Stone Company[17] as support for his valuation of the lots as a single parcel. The case is not supportive of his position.The parcel of property in that case was an unplatted parcel.The property was not platted for a residential subdivision and no improvements had been made to the property to prepare it for development.The Courts have found that property may be improved by physically changing the property, grading the land, installation or sewers, paving, landscaping, building, etc.[18]

The subject property had been improved.It had been engineered, “blasted”, rough graded and water mains and utilities were found.Further the lots are not contiguous.Exhibits C and C1 color code the lots as fully developed and partially developed.The map shows some of the parcels grouped continuously but it is not one area consisting of 28.26 acres; it is several areas, made up of numerous lots, that when one adds up their square footage of each lots totals 28.26 acres.

Because a plat has been filed, improvements have been made and the lots are not contiguous, a single valuation for the property is not proper.

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, 2007.[19]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.”[20]A valuation that is not reflective of the true value in money is then by definition unlawful, unfair and improper.

Substantial evidence can be defined as such relevant evidence as a reasonable mind might accept as adequate to support a conclusion.[21]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.[22]

The Complainant has failed to meet his burden of proof.As to the fully developed lots, the Complainant presented valuation approaches that are not recognized by the State Tax Commission as persuasive in determining the true value of money for a parcel of property.As to the partially developed lots, the Complainant should not have valued the parcels as one property, but should have valued them individually.

Valuation of parcels in Appeal No.07-32747, 07-32777, 07-32779 thru 07-32783,

07-32835, 07-32845 thru 07-32851 – Decrease in Value

 

Respondent, when advocating a value different from that determined by the original valuation or a valuation made by the Board of Equalization, must meet the same burden of proof to present substantial and persuasive evidence of the value advocated as required of the Complainant under the principles established by case law.[23]

Respondent has presented persuasive and substantial evidence that the parcels in appeals 07-32747, 07-32777, 07-32779 thru 07-32783, 07-32835, 07-32845 thru 07-32851 have a market value of $45,000.The Respondent originally valued the properties at a higher amount.As part of this appeal, the appraiser reviewed the properties and determined that the parcels should be valued with the partial developed properties and therefore the true value is less than the true value for fully developed properties.

The Respondent’s appraisal developed a sales comparison approach.The appraiser used 18 comparable properties.Twelve of the properties were located in the same subdivision as the subject parcels.The price per lot in the subject subdivision ranged from $44,550 to $49,770.The appraiser concluded on a value of $45,000 for the subject parcels.

ORDER

The assessed valuation for the following subject properties as determined by the Assessor and sustained by the Board of Equalization for St. Charles County for the subject tax day are SET ASIDE.The assessed values of the properties are as follows:

 

The assessed valuation in the remaining appeals as determined by the Assessor and sustained by the Board of Equalization for St. Charles County for the subject tax day are AFFIRMED.

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 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, MO65102-0146, 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 appeal is based will result in summary denial. [24]

The Collector of St. Charles County, as well as the collectors of all affected political subdivisions therein, shall continue to hold the disputed taxes pending a 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 June 25, 2009.

STATE TAX COMMISSION OFMISSOURI

Maureen Monaghan

Hearing Officer