Quality Investment Property v. David Cox, Assessor Platte County

State Tax Commission of Missouri

 

QUALITY INVESTMENT PROPERTY,	)	Appeal Number	14-79031
	)		14-79032
Complainant,	)		14-79033
	)		14-79035
v.	)
	)
DAVID COX, ASSESSOR,	)
PLATTE COUNTY, MISSOURI,	)
	)
Respondent.	)

 

DECISION AND ORDER

HOLDING

 

Decision of the County Board of Equalization is SUSTAINED in part and SET ASIDE in part. Complainant presented substantial and persuasive evidence to rebut the presumption of correct assessment by the Board of Equalization in appeals 14-79031 and 14-79032 only. True value in money for the subject property for tax year 2014 is set at:

Appeal	Parcel Number	True Value	Assessed Value
14-79031	17-7.0-26-000-000-007-000	$662,500	$212,000
14-79032	17-7.0-26-000-000-014-000	$7,220,000	$2,310,400
Total for the Call Center		$7,882,500	2,552,400
14-79033	17-7.0-25-000-000-008-000	$410,000	$131,200
14-79035	17-7.0-25-000-000-007-001	$229,000	$73,280
Total for the Daycare		$639,000

 

Complainant appeared by counsel Richard Dvorak

Respondent appeared in person and by counsel John Shank.

Case heard and decided by Hearing Officer Maureen Monaghan.

 

ISSUE

            Complainant appeals, on the grounds of overvaluation the decision of the Platte County Board of Equalization, which reduced the valuation of two of the parcels and sustained the Assessor’s valuation of two parcels.  The Commission takes this appeal to determine the true value in money for the subject property on January 1, 2013.  The value as of January 1 of the odd numbered year remains the value 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 this appeal is proper.  Complainant timely appealed to the State Tax Commission from the decision of the Platte County Board of Equalization.
2. Evidentiary Hearing. Evidentiary Hearing in this appeal occurred on February 11, 2016.
3. Identification of Subject Property. The subject properties are identified by map parcel numbers:

Appeal	Parcel Number
14-79031	17-7.0-26-000-000-007-000
14-79032	17-7.0-26-000-000-014-000
14-79033	17-7.0-25-000-000-008-000
14-79035	17-7.0-25-000-000-007-001

 

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

4. Description of Subject Property. The subject properties are divided into two categories.  Two parcels make up what is referred to as the “Call Center”.  The remaining two parcels make up what is referred to as the “Daycare Center.”

The Call Center is 21.91 acres of land with improvements of twin buildings of approximately 262,750 total gross square feet constructed for Citicorp in 1994 and 1996. The property is described as a “purpose-built ‘Class A’ call center.”[1] The buildings are two story and have similar layouts.  The first floors have some division but the upper floors are open space.  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 1,256 parking spaces on these parcels.  The associated parcels contain additional parking areas for these buildings.  Given the age of the buildings, maintenance or replacement of items such as the roof and parking lot may be warranted and might be required by a purchaser.

The Daycare Center is approximately 24,000 square feet and sits on approximately 5 acres. The daycare center was in use until June 2013.  The daycare served the employees of the call center.  As a daycare it has unique features for a commercial building: 4 playgrounds, fixtures specially designed for children, and fewer parking spaces than typically found with a 24,000 square foot building.

The buildings were vacated by the single user in 2013.  The buildings were sold in December 2013 for $4,250,000.  The purchaser owns a portfolio of 12 data centers totaling 4.7 million square feet.  The property, as of the date of the hearing, was listed for sale.

5. Assessment. The Assessor valued the property and classified them as commercial.  The Complainant appealed to the Board of Equalization.  The Board of Equalization sustained valuation of two parcels and reduced the valuation of two parcels.

Appeal	Parcel Number	Assessor’s Value	BOE’s Value
14-79031	17-7.0-26-000-000-007-000	$1,527,941	$1,163,000
14-79032	17-7.0-26-000-000-014-000	$18,233,063	$12,661,000
Total as to Call Center		$19,761,004	$13,824,000
14-79033	17-7.0-25-000-000-008-000	$410,000	$410,000
14-79035	17-7.0-25-000-000-007-001	$229,000	$229,000
Total as to Daycare Center		$639,000	$639,000

 

6. Complainant’s Evidence.

Exhibit	Description	Admitted
A	Appraisal Report of Call Center	Admitted
B	Written Direct Testimony of Bernie Shaner	Admitted
C	Written Direct Testimony of Andrew Ruffini	Not Admitted
D	Appraisal Report of Daycare	Admitted
E	Written Direct Testimony of Bernie Shaner	Admitted

 

Complainant offered an opinion of value of $4,570,000 for the call center and $650,000 for the daycare center.

The Complainant presented the testimony and appraisal report of Certified, General Appraiser Bernie Shaner. The appraiser valued both the Call Center and the Daycare Center using the sales comparison and income approaches.

As to the call center, the appraiser reviewed 8 sales occurring in Missouri, Iowa and Indiana from August 2009 to November 2014. The improvements ranged from 52,651 to 317,732 square feet.  The appraiser gave most consideration to Sales 2, 3, and 5 due to their location.  The subject was considered most comparable to Sale 2 – a property located near the subject, with an improvement of 317,732 square feet, selling in January 2013.  The appraisal indicated a range of $20-$30 per square foot for the property as of January 1, 2013.  The appraiser concluded on $25 per square foot or $5,790,000 as if the property was repaired. The appraiser then made adjustments for the deferred maintenance ($1,210,000).

The appraiser also developed the income approach for the call center. The appraiser estimated income by reviewing the market. The income approach indicated a value of $12,750,000.  The appraiser then made adjustments for the deferred maintenance ($1,210,000)  and lease up discount ($6,970,000) to achieve occupancy.

The appraiser believed the property suffered from deferred maintenance including roof and fire panel replacement and repairs to storage tanks and parking lots that he estimated to be $1,210,000 in costs. The roof is leaking and the storage tanks have been noted as non-compliant by the Department of Natural Resources. According to the owner, the estimate for roof replacement is $1,450,000. The appraiser reviewed Marshall Valuation Services and a previous roof replacement estimate in the appraiser’s file which indicated an expense of $900,000.  The cost to replace fire panels is estimated at $50,000.  The repairs to the storage tanks cost $46,000.  Repairs to the parking lots estimated using Marshall Valuation Services of $120,000.

The appraiser believed both approaches were reliable but placed more weight on the income approach.

As to the daycare center, the appraiser determined that highest and best use of the property was vacant land. The appraiser estimated the land value to be $750,000 and the cost to remove the daycare center would be $100,000, for an indication of value of $650,000.

 

7. Respondent’s Evidence.

Exhibit	Description	Admitted
1	Appraisal Report of Call Center	Admitted
2	Appraisal Report of Daycare	Admitted
3	Written Direct Testimony of Scott Belke	Admitted

 

Respondent offered at opinion of value of $9,000,000 for the Call Center and $1,725,000 for the daycare.

The Respondent presented the testimony and appraisal report of Certified, General Appraiser Scott Belke. The appraiser valued both the Call Center and the Daycare Center using the sales comparison and income approaches.

As to the call center, the appraiser reviewed 10 sales occurring in Missouri and Kansas from October 2007 to June 2013. Five of the sales were call centers and five sales were single occupant office buildings.  The improvements ranged from 41,591 to 369,682 square feet.  The appraiser selected seven of the sales to include in a market grid.  Sales Comparison 4 used by the Respondent’s appraiser was the same property as Sales Comparison 2 used by the Complainant’s appraiser.  The appraiser made adjustments to the comparables’ sales prices for expenditures after purchase, market conditions, location, age, quality and size.  The indication of value was $9,494,962.  The appraiser then made adjustments for the deferred maintenance ($500,000).

The appraiser also developed the income approach for the call center. The appraiser estimated income by reviewing the market. The income approach indicated a value of $15,200,000.  The appraiser then made adjustments for the deferred maintenance ($500,000)  and lease up discount ($3,645,230) to achieve occupancy. The appraiser also discounted the value due to the estimate of 3 years to achieve occupancy.  The resulting indication of value was $8,775,000.

The appraiser believed both approaches were reliable but placed more weight on the sales comparison approach.

As to the daycare center, the appraiser developed both the sales comparison and income approaches. The appraiser placed most weight on the sales approach.  His final opinion of value was $1,725,000.

9. Presumption of Correct Assessment Not Rebutted.  Complainant’s evidence was not substantial and persuasive to rebut the presumption of correct assessment by the Board for the parcels in Appeals 14-79033 and 14-79035 (daycare center).
10. Presumption of Correct Assessment Rebutted. The evidence presented was substantial and persuasive to rebut the presumption of correct assessment by the Board for parcels in Appeals 14-79031 and 14-79032.  Evidence presented established the true value in money as of January 1, 2013 at $7,882,500.

CONCLUSIONS OF LAW AND DECISION

Jurisdiction

The Commission has jurisdiction to hear this appeal and correct any assessment which is shown to be unlawful, unfair, arbitrary or capricious. The Hearing Officer shall issue a decision and order affirming, modifying or reversing the determination of the Board of Equalization, and correcting any assessment which is unlawful, unfair, improper, arbitrary, or capricious.  Article X, Section 14, Mo. Const. of 1945; Sections 138.430, 138.431, 138.431.4, RSMo.

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 Board’s valuation is erroneous and what the fair market value should have been placed on the property. Hermel, supra; Cupples-Hesse Corporation v. State Tax Commission, 329 S.W.2d 696, 702 (Mo. 1959).

Substantial evidence can be defined as such relevant evidence as a reasonable mind might accept as adequate to support a conclusion. See, Cupples-Hesse, supra.  Persuasive evidence is that evidence which has sufficient weight and probative value to convince the trier of fact.  The persuasiveness of evidence does not depend on the quantity or amount thereof but on its effect in inducing belief. Brooks v. General Motors Assembly Division, 527 S.W.2d 50, 53 (Mo. App. 1975).

The Complainant did not present substantial and persuasive evidence to establish the Board’s valuation was erroneous as to the daycare center. The Complainant did present substantial and persuasive evidence to establish that the Board’s valuation was erroneous as to the call center.  Complainant’s evidence established that the Board’s valuation was incorrect as to the call center.  The evidence presented by both parties established the valuation of the property.

Complainants’ Burden of Proof

 

In order to prevail, Complainants 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, 2013. 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.

Complainant’s evidence established that the Board’s valuation was incorrect as to the call center. The evidence presented by both parties established the valuation of the property. Complainant’s evidence did not establish that the Board’s valuation was incorrect as to the daycare center.  The Board concluded a market value of $639,000.  The Complainant concluded the valuation was $650,000.

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); citing, Stephen & Stephen Properties, Inc. v. STC, 499 S.W.2d 798, 801-803 (Mo. 1973).   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.

 

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. 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); and State ex rel. State Highway Comm’n v. Southern Dev. Co., 509 S.W.2d 18, 27 (Mo. Div. 2 1974).

Sale Price

The Supreme Court of Missouri has also held that evidence of the actual sales price of property is admissible to establish value at the time of an assessment, provided that such evidence involves a voluntary purchase not too remote in time. The actual sale price is a method that may be considered for estimating true value. St. Joe Minerals Corp., supra Neither appraiser relied on the sale of the property for determination of true value as of January 1, 2013.

Comparison of Value in Exchange and Value in Use

            “Value in exchange” or “exchange value” is defined as “[t]he value of a commodity in terms of money to persons generally, as distinguished from use value to a specific person.” The Dictionary of Real Estate Appraisal, Third Edition, Appraisal Institute, 1993, at 125.

 “Value in use” or “use value” is defined as “the value a specific property has for a specific use” (Ibid., at 383) and “the value of property which reflects a value to a specific user, recognizing the extent to which the property contributes to the personal requirements of the owner.” The Appraisal of Personal Property, American Society of Appraisers, 1994 at 2.

 

An exchange value is an objective value determined by transactions between buyers and sellers in the open market. A use value is a subjective value of an owner, user, or potential owner based solely upon his or her personal needs for the property.  By definition then, market value is the value determined by the exchange of property between an informed seller and an informed buyer after exposure in the open market and not a subjective opinion of some individual or entity.  However, there is a distinction between a value in use to a specific user and a value recognized by a group of informed potential buyers that a property has for a specific use.  The latter should be fully considered under a market value appraisal.

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).

Evidence of Value

            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.   The sales comparison approach is the most persuasive approach as presented by the appraisers.

As to the call center, the Complainant’s appraiser reviewed eight sales of properties occurring from August 2009 to November 2014.  The properties ranged in size from 52,651 square feet to 317,732 square feet of net rentable area.  The sale prices ranged from $1,800,000 to $15,046,500 or $12.18 to $69.85 per square foot.  Of the comparable properties, the appraiser believed comparable 2 was the most similar to the subject.  Comparable 2 was located in the area of the subject property and sold in January 2013.  The appraiser did a “qualitative analysis”.  In the end, the appraiser gave most weight to comparable 2 and two other comparables.  The appraiser opined that the value would fall within a range of $20 to $30 per square foot.  The Respondent’s appraiser also developed the sales comparison approach.  As to “Comparable 2” (Respondent’s comparable 4) the appraiser made adjustments for property rights, conditions of sale, location, age, quality and size.  The property sold from $26.44.  For sales comparison purposes, the appraiser adjusted the sale price to $25.00.  The Complainant’s appraiser believed the property suffered from deferred maintenance  including the roof, storage tanks, fire panels, and repair to the parking lots.  The appraiser opined the roof repair would be $990,000, tanks $46,000, fire panels $50,000, and parking lot repairs $120,000 for a total of $1,210,000 in repairs.  The Respondent’s appraiser also determined there was deferred maintenance.  The Respondent’s appraiser made an adjustment for the deferred maintenance of $500,000.

A review of the evidence presented by both appraisers provides substantial and persuasive evidence for establishment of true value. A valuation of $30[2] per square foot would account for the market value and the deferred maintenance of the buildings.

ORDER

The assessed valuation for the subject property as determined by the Board of Equalization for Platte County for the subject tax day is SET ASIDE.

The value for the subject property for tax year 2014 is set at:

Appeal	Parcel Number	True Value	Assessed Value
14-79031	17-7.0-26-000-000-007-000	$662,500	$212,000
14-79032	17-7.0-26-000-000-014-000	$7,220,000	$2,310,400
14-79033	17-7.0-25-000-000-008-000	$410,000	$410,000
14-79035	17-7.0-25-000-000-007-001	$229,000	$229,000

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 July 19, 2016.

STATE TAX COMMISSION OF MISSOURI

 

Maureen Monaghan

Hearing Officer

 

Certificate of Service

 

I hereby certify that a copy of the foregoing has been sent electronically or mailed postage prepaid this July 19, 2016, 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

[1] Sale Brochure found in Exhibit 1

[2] Respondent’s appraiser determined the square footage to be 262,750.   262,750 x $30=$7,882,500