STATE TAX COMMISSION OF MISSOURI
| RIVERPORT HOLDINGS, LLC | ) | |
| Complainant, | ) | Appeal No. 19-10397 |
| ) | ||
| v. | ) | Parcel No. 11P320181 |
| ) | ||
| JAKE ZIMMERMAN, ASSESSOR, | ) | |
| ST. LOUIS COUNTY, MISSOURI, | ) | |
| Respondent | ) |
DECISION AND ORDER
Riverport Holdings, LLC, (Complainant) appeals the St. Louis County Board of Equalization’s (BOE) decision finding that the fair market value of the subject property on January 1, 2019, was $387,000. The BOE valued the agricultural portion of the property at $7,400 and the remaining commercial portion at $379,600. Complainant claims the BOE overvalued the subject property because exclusive temporary and permanent parking easements precluded all beneficial use of the commercial property as of January 1, 2019, and require it to be assessed at $0.
The parties waived an evidentiary hearing and submitted the appeal for a decision and order based on a joint stipulation of facts, two exhibits, and briefing. Complainant did not present substantial and persuasive evidence to establish that the commercial portion of the subject property must be assessed at $0 as of January 1, 2019. The BOE’s decision is AFFIRMED.
Complainant is represented by attorney Jason Turk. Respondent is represented by attorney Steven Robson.
FINDINGS OF FACT
- Authority. The BOE issued its decision on October 4, 2019. Complainant filed a complaint for review of assessment on October 18, 2019, within 30 days of the BOE decision.
- The Subject Property. The subject property is real property located at 14150 Riverport Drive in St. Louis County, Missouri. On January 1, 2019, a portion of the subject property was farmed. The remaining portion was used as parking lots.
- Assessment. Respondent assessed the farmed portion of the subject property as agricultural property and the parking lots as commercial property. Respondent determined the true value in money (TVM) of the subject property was $387,000 as of January 1, 2019. Respondent determined the TVM of the commercial portion was $379,600 as of January 1, 2019.
- Board of Equalization. The BOE determined the TVM of the subject property was $387,000 as of January 1, 2019. The BOE determined the TVM of the commercial portion was $379,600 as of January 1, 2019.
- Joint Stipulation of Facts and Exhibits. The parties filed a joint stipulation of facts and Exhibits A and B. Complainant filed a Primary Brief. Respondent filed a Response to Complainant’s Brief. Complainant subsequently filed a Reply Brief.
The subject property is adjacent to a separate parcel located at 14100 Magellan Plaza, Locator Number 11P320170 (Adjacent Property). In 2004, Complainant recorded two exclusive parking easements in favor of the Adjacent Property. The parking easements are in the northeast and northwest portions of the subject property. The easements are not assigned separate tax parcels and have not been assigned a property identification number.
The parking spaces in the northeast portion of the subject property are subject to an exclusive permanent easement The permanent easement grants the Adjacent Property “a perpetual exclusive easement appurtenant to and for the [Adjacent Property] over, in and across the Easement Area” for purposes of parking, ingress and egress on the subject property. The recorded permanent easement plat and the exclusive easement agreement are entered into the record as Exhibit A. The exclusive permanent easement encompasses approximately 25 parking spaces and covers 9,247 square feet (0.212 acres). (Ex. A).
The parking spaces in the northwest portion of the subject property are subject to an exclusive temporary easement. The temporary easement grants the Adjacent Property an “exclusive easement appurtenant to and for the benefit of the Grantee Property over, in and across the Easement Area” for purposes of parking, ingress and egress on the subject property. When the temporary easement was recorded, Magellan Behavioral Health was a subtenant in the building on the Adjacent Property. The temporary easement terminates (1) upon the expiration of the Magellan Behavioral Health sublease, including any amendment thereto, or (2) June 30, 2025, whichever is sooner. On January 1, 2019, the temporary easement had not terminated. The recorded temporary easement plat and the exclusive easement agreement are entered into the record as Exhibit B. The temporary exclusive easement encompasses approximately 130 parking spaces and covers 50,379 square feet (1.156 acres). (Ex. B). Collectively, the easements encompass 1.368 acres and approximately 155 parking spaces.
- Value. The TVM of the commercial property is $379,600. The uncontested TVM of the agricultural property is $7,400. The TVM of the subject property is $387,000.
CONCLUSIONS OF LAW
- Authority
Complainant timely filed a complaint for review of assessment. The STC has authority to hear and decide Complainant’s appeal. Mo. Const. art. X, sec. 14; section 138.430.1, RSMo 2000.[1]
- Assessment and Valuation
In pertinent part, section 137.106.4 provides “Where real property is used or held for use for more than one purpose and such uses result in different classifications, the county assessor shall allocate to each classification the percentage of the true value in money of the property devoted to each use….” Section 137.106.4 authorized Respondent to separately assess portions of the subject property devoted to commercial and agricultural use.
Commercial real property is assessed at 32% of its “true value in money” as of January first of each odd-numbered year. Sections 137.115.1, 137.115.5(1)(c). “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.” Snider v. Casino Aztar/Aztar Missouri Gaming Corp., 156 S.W.3d 341, 346 (Mo. banc 2005) (internal quotation omitted). The fair market value is “the price which the property would bring from a willing buyer when offered for sale by a willing seller.” Mo. Baptist Children’s Home v. State Tax Comm’n, 867 S.W.2d 510, 512 (Mo. banc 1993).
“For purposes of levying property taxes, the value of real property is typically determined using one or more of three generally accepted approaches.” Snider, 156 S.W.3d at 346. The three generally accepted approaches are the cost approach, the income approach, and the comparable sales approach. Id. at 346-48. The valuation of commercial property typically involves consideration of the income approach. Id. at 347.
- Complainant’s Burden of Proof
The taxpayer bears the burden of proof and must show by a preponderance of the evidence that the property was overvalued. Westwood P’ship v. Gogarty, 103 S.W.3d 152, 161 (Mo. App. E.D. 2003). To prove overvaluation, a taxpayer must rebut the BOE’s presumptively correct valuation and prove the “value that should have been placed on the property.” Snider, 156 S.W.3d at 346.
The taxpayer’s evidence must be both “substantial and persuasive.” Id. “Substantial evidence is that evidence which, if true, has probative force upon the issues, and from which the trier of fact can reasonably decide the case on the fact issues.” Savage v. State Tax Comm’n, 722 S.W.2d 72, 77 (Mo. banc 1986) (internal quotation omitted). Evidence is persuasive when it has “sufficient weight and probative value to convince the trier of fact.” Daly v. P.D. George Co., 77 S.W.3d 645, 651 (Mo. App. E.D. 2002); see also White v. Dir. of Revenue, 321 S.W.3d 298, 305 (Mo. banc 2010) (noting the burden of persuasion is a “party’s duty to convince the fact-finder to view the facts in a way that favors that party”). An assessment will not be upheld “where it is clear that the assessment does not take into account all factors relevant to a determination of true value in money.” Stephen & Stephen Properties, Inc., v State Tax Comm’n, 499 S.W.2d 798, 802 (Mo. 1973).
- Complainant Did Not Prove Overvaluation
The parties agree the commercial property is subject to exclusive temporary and permanent parking easements. The dispute centers on Complainant’s assertion the commercial property had no market value on January 1, 2019, because the easements restricted use to the point that neither Complainant nor a prospective purchaser could put the commercial property to any beneficial use. Because the STC “is presented with undisputed facts alleged to have a depreciating effect on the value of property,” the STC first must identify the factors legally relevant to value and then determine whether those factors “in fact depreciate the value of the property.” Stephen, 499 S.W.2d at 804.
The Easements are Factors Relevant to Value
An easement is a “non-possessory interest” in the real property of another that confers the right of use for a general or a specific purpose. Suedkamp v. Taylor, 578 S.W.3d 408, 414 (Mo. App. E.D. 2019). The parking easements, therefore, grant to the Adjacent Property a non-possessory interest in the subject property for the specific purpose of parking. Complainant, as the servient owner, retains the right to use the property encumbered by the easements so long as such use does not “substantially interfere with the dominant owner’s reasonable use of the easement.” Maasen v. Shaw, 133 S.W.3d 514, 520 (Mo. App. W.D. 2004). Because the easements are exclusive, they exclude Complainant – and any prospective purchasers – “from participation in the rights granted to the dominant owner.” Id. at 518. The easements are factors relevant to value because they restrict use of the commercial property and thereby diminish the value of the subject property relative to its value without the easements. Cf. Stephen, 499 S.W.2d at 802 (noting a special use permit limiting income generating capacity and the field of potential buyers is a factor relevant to value); see also Clough v. Sec. Reserve Corp., 153 S.W.2d 93, 98 (Mo. App. 1941) (the calculation of damages for breach of warranty against encumbrances requires determination of the “decrease in the market value of the land…caused by the existence of an easement”).[2]
The Easements Do Not Negate All Market Value
Because the exclusive temporary and permanent parking easements are factors relevant to value, the inquiry turns to whether those factors “in fact depreciate the value of the property.” Stephen, 499 S.W.2d at 802. Complainant argues the commercial property had no market value on January 1, 2019, because Complainant “could never sell those portions of the property for value while the easements are in force.” (Compl. Primary Br. at 1). Complainant’s argument is foreclosed for two independently sufficient reasons.
First, Complainant’s analysis is premised on the erroneous assumption value is solely a function of the range of permissible uses on January 1, 2019. Market value, however, is partly a function of potential future use and income. In other words, “[t]he income approach determines value by estimating the present worth of what an owner will likely receive in the future as income from the property.” Snider, 156 S.W.3d at 347. Because present value is partly a function of potential future income, “[f]ailure to consider future income would contradict the principle of anticipation, which holds that value is the present worth of future benefits.” Appraisal Institute, The Appraisal of Real Estate 471 (11th ed. 1996). Complainant’s focus on the permissible uses on January 1, 2019, fails to account for the fact market value is partly a function of potential future income.
The stipulated facts demonstrate the problem with Complainant’s argument. The temporary parking easement expires no later than June 30, 2025. At that time, either Complainant or another owner would be free to utilize approximately 85% of the commercial property (1.156 acres) in any manner that does not substantially interfere with the permanent parking easement. Although estimates of future income are inherently uncertain, Complainant submitted no appraisal or market analysis demonstrating that potential future use of the 1.156 acres of commercial property subject to the temporary easement was so speculative and uncertain that it had zero market value on January 1, 2019. Similarly, Complainant presented no comparable sales analysis demonstrating that similar exclusive temporary easements wholly negate the market value of comparable properties. Complainant not only failed to rebut the BOE’s presumptively correct valuation, but also failed to prove the “value that should have been placed on the property.” Snider, 156 S.W.3d at 346.
Second, by asserting the commercial property had zero market value, Complainant leaves no middle ground to account for the possibility the commercial property retained residual market value from uses not precluded by the easements. Although the easements restricted Complainant’s use of the property on January 1, 2019, Complainant retained the legal right to utilize the commercial property in any manner that did not “substantially interfere with the dominant owner’s reasonable use of the easement.” Maasen, 133 S.W.3d at 520. While the value of the commercial property was likely diminished possibly impacted due to the substantially restricted range of permissible uses on January 1, 2019, the record does not show that no value accrued to the commercial property from remaining permissible uses. Complainant did not prove overvaluation.
Lakewood Village
Complainant’s reliance on Lakewood Village Property Owner’s Ass’n v. Savage, 1981 WL 11960, at *6 (Mo. St. Tax Comm’n, March 26, 1981) does not dictate a different result.[3] In Lakewood Village, the STC concluded that common areas owned by a homeowner’s association must be assessed at zero value because the restrictions imposed by appurtenant easements deprived “the subject properties of any practical market value.” Id. Specifically, each association owner or member was granted an easement “of enjoyment in and to the common areas which are appurtenant to and pass with title to every lot or property interest.” Id. at *2. Further, the subject property could only be conveyed to a “governmental agency, authority, or public or private utility” with the approval of the easement holders, namely “two-thirds of each class of members.” Id. Finally, upon dissolution of the homeowner’s association, the common areas had to be donated to another nonprofit association. Id. Under those specific circumstances, the STC determined “the subject properties only have value for property tax purpose insofar as they benefit the dominant estates” and the association had no “beneficial interest in the property, but rather possesses bare legal title.” Id. at *5. Because the record showed “the subject property is encumbered to the point where it has no market value[,]” the STC concluded the common areas should have been assessed at zero value. Id. at *6.
Lakewood Village is materially distinguishable from the facts of this case. Unlike the easement in Lakewood Village, the exclusive parking easements in this case are specifically limited to ingress and egress for parking and do not grant the Adjacent Property a general easement for “enjoyment in and to” the commercial property. Unlike Lakewood Village, Complainants are not limited to selling the commercial property to a limited set of potential buyers upon approval by the easement holders. Unlike Lakewood Village, Complainant’s dissolution does not trigger an obligation to donate the property to a nonprofit association. Finally, unlike the common area in Lakewood Village, the vast majority of the commercial property is subject to a temporary easement that expires on June 30, 2025, and does not wholly negate the residual market value of the commercial property. Contrary to Complainant’s argument, the logic of Lakewood Village neither governs this case nor dictates that the commercial property be assessed at $0.
CONCLUSION AND ORDER
The BOE’s decision is affirmed. Complainant did not produce substantial and persuasive rebutting the BOE’s presumptively correct valuation and proving the value that should have been placed on the commercial property as of January 1, 2019. The BOE’s decision finding the fair market value money of the subject property on January 1, 2019, was $387,000 is affirmed.
Application for Review
A party may file with the STC an application for review of this decision within 30 days of the mailing date set forth in the certificate of service for this decision. The application “shall contain specific detailed grounds upon which it is claimed the decision is erroneous.” Section 138.432. The application must be in writing, and may be mailed to the State Tax Commission of Missouri, P.O. Box 146, Jefferson City, MO 65102-0146, or emailed to Legal@stc.mo.gov. A copy of the application must be sent to each person listed below in the certificate of service.
Disputed Taxes
The Collector of St. Louis County, and 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 the disputed taxes have been disbursed pursuant to a court order under the provisions of section 139.031.
SO ORDERED October 16, 2020.
Senior Hearing Officer
State Tax Commission
Certificate of Service
I hereby certify that a copy of the foregoing has been electronically mailed and/or sent by U.S. Mail on October 16, 2020, to: Complainant(s) and/or Counsel for Complainant(s), the County Assessor and/or Counsel for Respondent and County Collector.
Elaina McKee
Legal Coordinator
[1] All statutory citations are to RSMo 2000, as amended.
[2] Respondent notes the easements do not have parcel locator numbers and asserts there can be “no taxation of an easement on a piece of real property in Missouri.” (Resp. Br. at 5). The fact the easements are not assigned property identification numbers is irrelevant because the issue not whether the easements are taxable property. The issue is the effect the easements have on the value of subject property.
[3] Administrative agency decisions “are not from courts of law and are not precedential.” Cent. Hardware Co. v. Dir. of Revenue, 887 S.W.2d 593, 596 (Mo. banc 1994). Therefore, an administrative agency “is not bound by its previous decisions, so long as its current decision is not otherwise unreasonable or unlawful. Laclede Gas Co.’s Verified Application to Re-Establish & Extend the Fin. Auth. Previously Approved By the Comm’n v. Mo. Pub. Serv. Comm’n, 526 S.W.3d 245, 252 (Mo. App. W.D. 2017). Lakewood Village is persuasive authority, not legal precedent.