Quality Investment Property QIP KC Office I & II v. David Cox, Assessor Platte County

May 23rd, 2017

STATE TAX COMMISSION OF MISSOURI

QUALITY INVESTMENT PROPERTIES OF KC )
QIP KC OFFICE I & II, )
                      Complainant, )
)
v. ) Appeal No. 15-79004; 15-79005;
) 15-79007; 15-79008 &
DAVID COX, ASSESSOR ) 15-79009
PLATTE COUNTY, MISSOURI, )
)
                      Respondent. )

 

ORDER

AFFIRMING DECISION OF THE HEARING OFFICER

UPON APPLICATION FOR REVIEW

 

On May 23, 2017, Senior Hearing Officer John Treu (Hearing Officer) entered his Decision and Order (Decision) setting aside the assessment by Platte County Board of Equalization (BOE).

David Cox, Assessor of Platte County, Missouri (Respondent) filed his Application for Review of the Decision.  Quality Investment Property, Missouri (Complainant) filed a Response.

CONCLUSIONS OF LAW

Standard of Review

A party subject to a Decision and Order of a Hearing Officer with the State Tax Commission (STC) may file an application requesting the case be reviewed by the STC.  Section 138.432 RSMo Cum. Supp. 2015; 12 CSR 30-3.080(4).  The STC may then summarily allow or deny the request.  Section 138.432; 12 CSR 30-3.080(5).  The STC 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 STC.  Section 138.432; 12 CSR 30-3.080(5)(A).

The STC, having thoroughly reviewed the record and having considered the Decision of the Hearing Officer and the Application for Review of Complainant, finds that a reasonable mind could have conscientiously reached the same result as the Hearing Officer based on a review of the entire record.  Segments of the Hearing Officer’s Decision have been incorporated into our Decision without further reference.

DECISION

Respondent’s Points on Review

            Respondent’s Points of Review were numbered I through VI.

  1. The Hearing Officer erred by failing to consider the appraisal of Mr. Belke filed in 14-79031, 14-79032, 14-79033 and 14-79035 because Mr. Belke referenced it in his work-file and his 2015 Appraisal, and the Hearing Officer specifically allowed questions about the prior appraisal;
  2. The Hearing Officer’s decision to treat the subject property as a multi-tenant rather than single tenant building violates the highest and best use of the property;
  • The Hearing Officer’s choice of vacancy rate was against the weight of the evidence;
  1. By taking a deduction for the deferred maintenance after already taking a deduction for repairs, maintenance and replacement reserves in order to come to a stabilized net operating income, the Hearing Officer in effect, allowed for the same deduction twice;
  2. Neither Mr. Shaner nor the Hearing Officer placed any value on the unique characteristics of this property; and
  3. The Lease Up Analysis utilized by Complainant’s Appraiser, and apparently accepted by the Hearing Officer, failed to reduce $7,521,208 to present value.

Relevant Facts

Appeals 15-79008 and 15-79009 were dismissed by the Hearing Officer at the hearing for lack of prosecution in that the Complainants presented no evidence.  Appeal 15-76006 was previously dismissed by Complainant.

The subject properties in Appeals 15-79004, 15-79005 and 15-79007 consist of three parcels of approximately 26.48 acres of land with improvements of twin buildings with approximately 263,302 total square feet of gross building area and 231,706 square feet of net rentable area.  The properties were constructed in the mid-1990s as a call center operation for Citibank.  The buildings are connected by a two-story atrium, which is climate controlled. The amenities include uninterruptible power supply, raised floors, emergency generators, sprinkler coverage, cafeterias, conference rooms, some private offices and dock area. There are approximately 1,767 parking spaces on these parcels.

Complainant purchased the properties in December 2013 for $4,000,000 although there was no public asking price and bids were submitted as non-binding letters of intent.  The properties were vacant for almost three years.  In June of 2015, only 25% of the total area of the subject was leased.  The subject’s market area suffers from a vacancy rate of 29.3%.

Deferred maintenance existed as of January 1, 2015, including needed roof maintenance, underground storage tank repair and parking lot repair.

POINT I

The Hearing Officer erred by failing to consider the appraisal of Mr. Belke filed in 14-79031, 14-79032, 14-79033 and 14-79035 because Mr. Belke referenced it in his work-file, his 2015 Appraisal, and the Hearing Officer specifically allowed questions about the prior appraisal.

Scott Belke (Belke), General Certified Appraiser, was presented at hearing by Respondent.  During the cross-examination, Belke was questioned as to where in his appraisal report, Exhibit 1, did he set forth support of his opinion for the property’s use as either a single tenant or multi-tenant property.  Belke testified that his opinion of the highest and best use and support of it could be found in his “original report.”

Complainant appealed the valuation of the property in 2014.  Belke was the expert for the Respondent for that hearing and submitted an appraisal report. (Original Report)  Belke made references to the Original Report in Exhibit 1, however, a copy of the Original Report was not attached to Exhibit 1 or submitted as an exhibit in this appeal.  Complainant objected to the witness making any reference to his Original Report.  The Hearing Officer overruled the objection and allowed Belke to testify.

The Decision includes consideration of all the evidence offered by Respondent: Belke’s appraisal report (Exhibit 1), Belke’s written direct testimony (Exhibit 2), as well as any testimony during the hearing.  The Original Report was not an exhibit nor offered into evidence.  The Hearing Officer found that he would have to speculate with regards to the content of the Original Report since it was not included in Exhibit 1 or submitted as evidence.

The Hearing Officer did not err.  The Hearing Officer considered the testimony of the witness at the hearing.  The Hearing Officer did not take into consideration the Original Report as it was not offered by Respondent for submission into the record.

POINT II

The Hearing Officer’s decision to treat this as a multi-tenant rather than single tenant building violates the highest and best use of said property.

True value in money is the fair market value of the property on the valuation date, and is a function of its highest and best use, which is the use of the property which will produce the greatest return in the reasonably near future.  Aspenhof Corp. v. State Tax Commission, 789 S.W. 2d 867, 869 (Mo. App. 1990).   “It is true that property can only be valued according to a use to which the property is readily available.  But this does not mean that in order for a specific use to be the highest and best use for calculating the property’s true value in money, that particular use must be available to anyone deciding to purchase the property. . . .A determination of the true value in money cannot reject the property’s highest and best use and value the property at a lesser economic use of the property.” Snider v. Casino Aztar/Aztar Missouri Gaming Corp., 156 S.W. 3d, 341, 348-349 (Mo. 2005)   It is inappropriate to determine highest and best use from the standpoint of how the property was used or might develop.  The appropriate question to ask is what would be the highest and best use to one looking to buy the parcel on the tax date in question.  H. Ivan L. Mullenix v. Eugene Zimmerman, STC No. 89-32496 & 90-32673 (1991)

Complainant’s expert, Certified General Appraiser Bernie Shaner, (Shaner), opined that a purchaser of the property on the tax date would most likely be an investor and not a buyer-occupier.   Given the limited number of commercial tenants or buyers that would need 231,706 square feet of open, call center space, the vacancy rate for the market area, the fact the property was vacant for 3 years, and the property’s current vacancy rate of 75%, the subject would likely be operated as a multi-tenant office building.  Shaner concluded that the highest and best use of the subject property would be to cure the deferred maintenance and continue using the property as leased office space.

The Hearing Officer’s Decision was not arbitrary or capricious or against the weight of the evidence.  The relative weight to be accorded any relevant factor in a particular case is for the Hearing Officer to decide.  Platte County v. Security Bonhomme, Inc., 558 S.W.2d 655, 659 (Mo. banc 1977); Platte 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).

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.  Platte 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).

POINT III

The Hearing Officer’s choice of vacancy rate was against the weight of the evidence

The Hearing Officer’s finding of a vacancy rate of 20% was appropriate.  The subject was 100% vacant on the effective date.  The subject, at the time of the appraisal, was 75% vacant.  The market area of the subject property has a vacancy rate of 29.3%.  According to the Complainant’s certified, general appraiser, the competing properties in the subject’s market area were older and did not have the quality amenities as subject.  After a review of the market, the appraiser stated that an estimated vacancy and collection loss would be below the submarket and a stabilized vacancy and collection of 20% was appropriate.  Respondent’s witness provided unsupported opinion of 5% vacancy rate.  The vacancy rate was based upon his highest and best use analysis as a single user call center occupying the entire property.

The STC has the duty to correct valuations found to be unlawful, improper, unfair, arbitrary or capricious.  Lebanon Property v. North, 66 SW3d 765 (2002)  In correcting those valuations, Courts have stated that the STC is not bound by formulas or rules and may consider all pertinent facts and weigh them accordingly.  St. Louis County v. St. Tax Commission, 515 SW2d 446 (1974).

There was evidence to support the vacancy and collection rate of 20% as used by the Hearing Officer.  The evidence included the vacancy and collection rate of the subject’s submarket, the history of the subject property and the testimony and report of a Missouri certified general appraiser.  The Hearing Officer’s conclusion is based upon sound evidence and therefore the Hearing Officer’s decision was not arbitrary, capricious or against the weight of the evidence.

POINT IV

By taking a deduction for the deferred maintenance after already taking a deduction for repairs, maintenance and replacement reserves in order to come to a stabilized net operating income, the Hearing Officer in effect, allowed for the same deduction twice.

Respondent argues that the Hearing Officer allowed for the same deduction twice.  More specifically, Respondent argues that the Hearing Officer erred by including a replacement reserves as an expense in calculating net income and for making a deduction from the indication of value for repair of the deferred maintenance.

Reserves for replacement is a method of pro-rating annual costs of replacing in the future those items with a shorter life than the improvement itself.  Reserves for replacement is for future costs.  “It provides for the periodic replacement of building components that wear out more rapidly than the building itself.”  The Appraisal of Real Estate, Thirteenth Edition, page 490.

If repairs are required to induce tenants for leasing and required to achieve rents, the expense of the improvements may be included in the operating statement.  The Appraisal of Real Estate, Thirteenth Edition, page 491.  The cost to cure deferred maintenance would influence what a willing Buyer would pay a willing Seller and therefore is appropriate to consider in valuation.

The Hearing Officer’s deduction for deferred maintenance is based upon evidence presented at hearing including a report and testimony of a Missouri certified general appraiser.  The Hearing Officer did not err in his consideration of the deferred maintenance and the impact on market value.  The Hearing Officer’s decision was not arbitrary and capricious.

POINT V

Neither Mr. Shaner nor the Hearing Officer placed any value on the unique characteristics of this property.

Shaner reported the “unique characteristics” of the subject property.  The “unique characteristics” include: uninterruptible power supply, raised floors, double electricity feed, workout rooms, training rooms, emergency generators, sprinkler coverage, cafeterias, conference rooms, some private offices and dock area.  The issue is not necessarily the existence of the characteristics but whether the market would react or pay more for such amenities.  Neither appraiser valued the items separately.  There was no evidence presented as to the market valuation of just the amenities themselves.  The Hearing Officer made his findings based upon substantial and persuasive evidence presented as to the market value of the subject properties, which included all of these “unique characteristics”.

 

POINT VI

The Lease Up Analysis utilized by Complainant’s Appraiser, and apparently accepted by the Hearing Officer, failed to reduce $7,521,208 to present value.

Appraisers analyze the marketability of a property.  When the property is an income generating property, the appraiser determines if the property is leased-up or if the property needs additional time and marketing to achieve market occupancy.  The appraiser determines whether the subject’s absorption rate will be the same as, higher than, or lower than the average.  “The cost to achieve stabilized occupancy….can have substantial lease up costs,…that must be considered.”  The Appraisal of Real Estate, Thirteenth Edition, page 401.

Shaner’s valuation was based upon the subject’s operation at stabilization of the property.  Shaner estimated the property would lease up by 2018.  Shaner made an adjustment for the lease up impact on the valuation of the property.  The appraiser estimated a loss of $7,521,208.  A prudent buyer would not likely apply a dollar for dollar deduction to market value for future leases due to vacancy over a period of time.  A prudent buyer would apply a deduction for the costs which must be expended in order to achieve optimal or market occupancy.  The appraiser applied a 5% adjustment  for the total expenses.

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. Black v. Lombardi, 970 S.W.2d 378 (Mo. App. E.D. 1998); Lowe v. Lombardi, 957 S.W.2d 808 (Mo. App. W.D. 1997); Forms World, Inc. v. Labor and Industrial Relations Com’n, 935 S.W.2d 680 (Mo. App. W.D. 1996); Evangelical Retirement Homes v. STC, 669 S.W.2d 548 (Mo. 1984); Pulitzer Pub. Co. v. Labor and Indus. Relations Commission, 596 S.W.2d 413 (Mo. 1980); St. Louis County v. STC, 562 S.W.2d 334 (Mo. 1978); St. Louis County v. STC, 406 S.W.2d 644 (Mo. 1966).

 

 

ORDER

The Decision of the Hearing Officer 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 STC.

Appeal No. Parcel/ Account No. Finding True Value
15-79004 17-7.0-25-000-000-007.001 Affirm HO $98,503
15-79005 17-7.0-25-000-000-008.000 Affirm HO $176,400
15-79006 17-7.0-26-000-000-007 Dismissed $1,163,000
15-79007 17-7.0-26-000-000-014.000 Affirm HO $5,452,260
15-79008 351505 Dismissed $700,000
15-79009 351506 Dismissed $50,000

 

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

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

If no judicial review is made within thirty days, this decision and order is deemed final and the Collector of  Platte County, as well as the collectors of all affected political subdivisions therein, shall disburse the protested taxes presently in an escrow account in accord with the decision on the underlying assessment in this appeal.

SO ORDERED this 31st day of October, 2017.

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 31st day of October, 2017, to: Complainants(s) counsel and/or Complainant, the County Assessor and/or Counsel for Respondent and County Collector.

Jacklyn Wood

Legal Coordinator

 

 

State Tax Commission of Missouri

 

QUALITY INVESTMENT PROPERTY, ) Appeal Number 15-79004 through 15-79007
QIP KC OFFICE I & II ) 15-79008 & 15-79009
)
Complainant, )
)
v. )
)
DAVID COX, ASSESSOR, )
PLATTE COUNTY, MISSOURI, )
)
Respondent. )

 

DECISION AND ORDER

HOLDING

 

Decisions of the County Board of Equalization (BOE) are SET ASIDE.  The parties presented substantial and persuasive evidence to rebut the presumption of correct assessment by the BOE. True value in money for the subject property for tax years 2015 and 2016 is set at:

Appeal Parcel Number True Value Assessed Value
15-79004 17-7.0-25-000-000-007.001 $98,503 $31,520
15-79005 17-7.0-25-000-000-008.000 $176,400 $56,450
15-79007 17-7.0-26-000-000-014.000 $5,452,260 $1,744,720
Total $5,727,163 $1,832,690

 

Complainants appeared by counsel Richard Dvorak

Respondent appeared in person and by counsel John Shank.

Cases heard and decided by Senior Hearing Officer (Hearing Officer) John Treu.

ISSUE

            Complainant Quality Investment Property (Complainant) appeals, on the ground of overvaluation, the decisions of the BOE of three parcels.  The Commission takes Complainant’s appeals to determine the true value in money for the subject properties on January 1, 2015.  The values as of January 1 of the odd numbered year remains the values 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

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

FINDINGS OF FACT

  1. Jurisdiction. Jurisdiction over these appeals is proper.  Complainant timely appealed to the State Tax Commission from the decisions of the BOE.
  2. Evidentiary Hearing. Evidentiary Hearing in this appeal occurred on March 28, 2017.
  3. Dismissal of Appeals. Appeal 15-79006 was previously dismissed by counsel for QIP KC OFFICE I & II.  No evidence was offered at the Evidentiary Hearing regarding appeals 15-79008 and 15-79009.  Additionally, the Hearing Officer was subsequently notified by counsel for QIP KC OFFICE I & II that such appeals should be dismissed.
  4. Identification of Subject Property. The subject properties are identified by map parcel numbers:
Appeal Parcel Number
15-79004 17-7.0-25-000-000-007.001
15-79005 17-7.0-25-000-000-008.000
15-79007 17-7.0-26-000-000-014.000

 

The properties are located at 7920-7930 NW 110th Street, Kansas City, Platte County, Missouri.

  1. Description of Subject Property. The subject properties consist of three parcels of approximately 26.48 acres of land with improvements of twin buildings with approximately 263,302 total square feet of gross building area and 231,706 square feet of net rentable area.  The buildings are connected by a two-story atrium, which is climate controlled.  Complainant purchased the subject properties in December 2013 for $4,000,000 although there was no public asking price and bids were submitted as non-binding letters of intent.  Each building has 100% sprinkler coverage.  Both buildings have cafeterias, conference rooms, some private offices and dock area. The amenities include uninterruptible power supply, raised floors, and emergency generators.  There are approximately 1,767 parking spaces on these parcels.  Deferred maintenance existed as of January 1, 2015, including needed roof maintenance, underground storage tank repair and parking lot repair.
  2. Assessment. The Assessor valued the properties and classified them as commercial, as follows:
Appeal Parcel Number True Value Assessed Value
15-79004 17-7.0-25-000-000-007.001 $229,000 $73,280
15-79005 17-7.0-25-000-000-008.000 $410,000 $131,200
15-79007 17-7.0-26-000-000-014.000 $12,661,000 $405,152

 

  1. BOE. The BOE valued the properties and classified them as commercial, as follows:
Appeal Parcel Number True Value Assessed Value
15-79004 17-7.0-25-000-000-007.001 $229,000 $73,280
15-79005 17-7.0-25-000-000-008.000 $410,000 $131,200
15-79007 17-7.0-26-000-000-014.000 $12,661,000 $405,152

 

  1. Complainant’s Evidence.
Exhibit Description Admitted
A Written Direct Testimony of Bernie Shaner Admitted
B Appraisal Report of Bernie Shaner Admitted

 

Complainant offered an opinion of value of $4,610,000 for the subject properties.  The Complainant presented the testimony and appraisal report of Certified, General Appraiser Bernie Shaner.  The appraiser valued the three parcels using the sales comparison and income approaches.

The appraiser reviewed five sales occurring in Kansas City, Missouri and Earth City, Missouri from May 2012 to June of 2015.  The appraiser considered comparables 1 and 2 to be similar to the subject properties.  The appraiser considered comparables 3, 4 and 5 to be superior to the subject properties.  Comparables 1 and 2 both sold in June of 2015 and had adjusted dollar per square foot sales prices of $17.55 and $24.25 respectively.  Comparables 3, 4 and 5 had adjusted dollar per square foot sales prices between $29.08 and $41.50.  The average adjusted dollar per square foot sales price was $29.68.

The comparables ranged from 52,651 to 317,732 square feet of net rentable area.  The appraiser noted that “due to the steady improvement in market conditions over the past several years, we have adjusted Sales 1 and 2 downward by 5% per year, as these two sales transacted after our effective date of value, and Sales 3, 4 and 5 upward by 5% per year, as these three sales transacted prior to our effective date of value.”  The appraiser gave most consideration to Sales 1 and 2 due to his opinion they were the most similar to the subject properties.  The appraisal indicated a range of $20-$30 per square foot for the property as of January 1, 2015.  The appraiser concluded on $25 per square foot or $5,792,650 as if the property was repaired. The appraiser then made adjustments for the deferred maintenance ($1,180,000).  The appraiser concluded an “as is” value of $4,610,000 under the sales comparison approach.

The appraiser also developed the income approach for the subject properties.  The appraiser considered five rent comparables with dollar per full service gross square foot between $12.83 and $17.06.  The appraiser noted that by excluding the top and bottom figures the three remaining full service gross square foot prices ranged from $14.30 to $15.50. The appraiser then concluded that the subject property “should fall within the range of $15.00 to $16.00 per square foot on a full service gross basis.”  The appraiser estimated income by reviewing market data.

The appraiser calculated a stabilized net operating income of $1,494,964.  The appraiser utilized a vacancy/collection loss rate of 20% after conducting a market analysis by reviewing multiple “recent local market surveys” published by multiple sources.  Utilizing the Band of Investment technique the appraiser concluded an unloaded capitalization rate of 8.75%.  He then utilized an “estimated mill levy of .087500, which represents a slight incline from the 2014 actual mill levy.”  He then multiplied this number by the assessment ratio of 32%, resulting in a 2.80% and added such to the unloaded capitalization rate to conclude a weighted loaded overall capitalization rate of 11.55%.  The appraiser concluded on a value of $12,943,411 as if the property were repaired.  The appraiser then made adjustments for the deferred maintenance ($1,180,000) and lease up discount ($7,521,208) to achieve occupancy.   The appraiser concluded an “as is” value of $4,610,000, which was the same value concluded utilizing the sales comparison approach.

The appraiser gave primary weight to the income approach.  He noted that both approaches were considered reliable and that they were supportive of one another.

  1. Respondent’s Evidence.
  Exhibit Description Admitted
1 Appraisal of Scott Belke Admitted
2 Written Direct Testimony of Scott Belke Admitted

 

Respondent offered an opinion of value of $9,350,000 for the subject properties.  The Respondent also presented the testimony and appraisal report of Certified, General Appraiser Scott Belke.  The appraisal filed and admitted was Exhibit 1.  Exhibit 1 references and relies upon a prior appraisal by Mr. Belke, which appraisal was not filed in these appeals and was not offered into evidence.  Respondent’s failure to file the prior appraisal resulted in Complainant being unable to cross-examine Mr. Belke regarding the prior appraisal.  Exhibit 1 is in compliance with 12 CSR 30-3.065.  Without the benefit of the prior appraisal, the Hearing Officer would have to participate in speculation, conjecture and surmise as to what the prior appraisal contained.  The Hearing Officer will only consider that which is contained in Exhibit 1.  Within Exhibit 1, the appraiser valued the three parcels using the sales comparison and income approaches.

As to subject properties, the appraiser reviewed eight new sales occurring in Missouri and Kansas with dollar per square foot sales prices of $24.29 to $180.93.  The comparables ranged from 58,316 to 317,732 square feet of net rentable area.  The appraiser, referencing an “updated Market Grid analysis,” which grid was not attached to his appraisal report, concluded that “accounting for deferred maintenance at the subject property, the concluded market value of the fee simple estate by Sales Comparison Approach as of January 1, 2015 is estimated at $9,350,000 or $35.59 per square foot.”

The appraiser also developed the income approach for the subject properties.  The appraiser reviewed three additional leases to augment the eight leases he states he utilized in his original appraisal report, which report, as previously noted, was not filed and was not offered into evidence.  He utilized a vacancy rate of 5%, expenses and a replacement reserve, all of which he states was utilized in his original appraisal report.  The supporting documentation for each of these items was not included in Exhibit 1.  A breakdown of the deductions to effective gross income to conclude on a net operating income was not included in Exhibit 1.  The appraiser utilized a 9% unloaded capitalization rate.

The appraiser concluded on a net operating income of $1,404,426 and divided such by the 9% unloaded capitalization rate to reach concluded value of $15,600,000.  He then subtracted “owner re-tenanting costs” including real estate taxes for thirty months and then applied a “discount factor”.  The appraiser set forth the State Tax Commission value for the subject properties for tax year 2014 of $7,882,500 and the resulting real estate tax bill of $208,502.87.  This calculated to a 2014 mill rate of 8.266%.   The appraiser concluded on a true value in money of $9,335.000 under the income approach.

The appraiser believed the sales comparison approach to be the most reliable and that the income approach provided a “check for reasonableness for the more appropriate Sales Comparison Approach.”  His concluded retrospective true value in money for the subject properties was $9,350,000.

  1. 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.
  2. Presumption of Correct Assessment Rebutted.  The evidence presented was substantial and persuasive to rebut the presumption of correct assessments by the BOE for the subject properties.  Evidence presented established the true value in money as of January 1, 2015 at $5,931,336.

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 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, RSMo. 

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); May Department Stores Co. v. STC, 308 S.W.2d 748, 759 (Mo. 1958). The presumption of correct assessment is rebutted when the taxpayer presents substantial and persuasive evidence to establish that the BOE’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).

The parties presented substantial and persuasive evidence to establish the BOE’s valuations were erroneous as to subject properties.  The evidence presented by both parties established the valuation of the properties.

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), citing, Equitable Life Assurance Society v. STC, 852 S.W.2d 376, 380 (Mo. App. 1993.   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:

  1. Buyer and seller are typically motivated.

 

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

 

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

 

  1. Payment is made in cash or its equivalent.

 

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

 

  1. 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.

 

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); 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).

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.  Platte County v. Security Bonhomme, Inc., 558 S.W.2d 655, 659 (Mo. banc 1977); Platte 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).

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.  Platte 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).

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).  A valuation which does not reflect the fair market value (true value in money) of the property under appeal is an unlawful, unfair and improper assessment.

Evidence of Value

Ultimately, the evidence presented by both parties established that the BOE’s valuations were incorrect.  The evidence presented by both parties allowed the Hearing Officer to establish the valuation of the properties.  Both parties presented the testimony of certified, general appraisers with significant experience.  Both appraisers valued the property using the sales comparison and the income approach.

After considering all the evidence, the Hearing Officer concludes the income approach was the most persuasive method for valuing the subject properties.   The Hearing Officer also concludes that a value of $16 per square foot on a full service gross basis is the most appropriate.  Such value fell within both the broad range set forth by Complainant’s appraiser of $12.83 to $17.06 per square foot on a full service gross basis and the more narrow range set forth by Complainant’s appraiser of $15.00 to $16.00 per square foot on a full service gross basis.  By then applying a 20% vacancy rate, a loaded capitalization rate of 11.295%, consisting of Complainant’s appraiser’s Band of Investment market rate and a loading percentage of 2.645% (actual 2014 mill rate times 32%) and subtracting the unrounded deferred maintenance and lease-up adjustment calculated by Complainants’ appraiser, a total value of $5,727,163 is reached.

ORDER

The assessed valuations for the subject properties as determined by the BOE for Platte County for the subject tax day are SET ASIDE.

The values for the subject properties for tax years 2015 and 2016 are set at:

Appeal Parcel Number True Value Assessed Value
15-79004 17-7.0-25-000-000-007.001 $98,503 $31,520
15-79005 17-7.0-25-000-000-008.000 $176,400 $56,450
15-79007 17-7.0-26-000-000-014.000 $5,452,260 $1,744,720
Total $5,727,163 $1,832,690

 

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 Platte 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 May 23rd, 2017.

STATE TAX COMMISSION OF MISSOURI

John Treu

Senior Hearing Officer

 

Certificate of Service

 

I hereby certify that a copy of the foregoing has been sent electronically or mailed postage prepaid this 23rd day of May, 2017, to: Complainants(s) counsel and/or Complainant, the county Assessor and/or Counsel for Respondent and county Collector.

 

Jacklyn Wood

Legal Coordinator

 

Contact Information for State Tax Commission:

Missouri State Tax Commission

301 W. High Street, Room 840

P.O. Box 146

Jefferson City, MO 65102-0146

573-751-2414

573-751-1341 Fax