STATE TAX COMMISSION OF MISSOURI
| RUSTY PARKER, | ) | |
| Complainant, | ) | |
| ) | Appeal No. 21-84001 | |
| ) | Parcel No. 06-90-31-04-033-0002.00 | |
| v. | ) | |
| ) | ||
| ) | ||
| ERIC DUGAL, ASSESSOR, | ) | |
| ST. FRANCOIS COUNTY, MISSOURI | ) |
DECISION AND ORDER
Rusty Parker (Complainant) appeals the St. Francois County Board of Equalization’s (BOE) decision finding the true value in money (TVM) of the subject property on January 1, 2021, was $19,850. Complainant alleges overvaluation and discrimination. Complainant asserts the TVM of the subject property on January 1, 2021, was between $12,000 and $13,000.[1] Complainant did not produce substantial and persuasive evidence proving overvaluation or discrimination. Nonetheless, the substantial and persuasive evidence in the record shows Respondent increased the assessment by more than 15 percent since the last assessment without providing the notice and inspection required by Sections 137.115.10 through 137.115.12. The BOE decision is set aside. The TVM of the subject property on January 1, 2021, was $14,510.
The evidentiary hearing was held on March 17, 2022, at the St. Francois County Annex Building in Farmington, Missouri. The parties appeared pro se.
FINDINGS OF FACT
- The Subject Property. The subject residential real property is a vacant, 21,000- square-foot lot (0.482 acres) located at the corner on South Cantwell Lane in Desloge, Missouri. The subject property is located in a residential neighborhood.
- Assessment and Valuation. The BOE determined the TVM of the subject property as of January 1, 2021, was $19,850.
- Complainant’s Evidence. Complainant introduced Exhibits A through G. Respondent did not object. Complainant’s exhibits were admitted into evidence.
Prior to the evidentiary hearing, Complainant filed a video and photographs with the STC. Internet connectivity issues precluded review of those exhibits at the hearing, and Complainant did not provide hard copies. The parties consented to denominating the items filed with the STC as Exhibits A through F. Exhibits A through F consist of a video showing workers performing street work, two photographs of an intact retaining wall, two photographs allegedly depicting the retaining wall at the subject property, an aerial photo of the “decided property being used for comparison,” and a photograph of a different property with what appears to be an intact retaining wall. Complainant asserts the final photograph shows discriminatory assessment.
Exhibit G was presented for the first time at the evidentiary hearing. It consists of BOE meeting minutes; the complaint for review of assessment; offer sheets and a sales contract for a vacant, city-owned lot near the subject property; a copy of the ordinance authorizing the aforementioned sale; a notice of change in assessed value for the subject property; and printouts from Respondent’s website regarding the assessed values of 12 residential properties and one commercial property. Exhibit G includes no information regarding adjustments for property differences or the median assessment ratio for St. Francois County residential properties.
Complainant testified the sales contract and offer sheets in Exhibit G show the City of Desloge (City) sold a neighboring, identical lot for $14,000. Exhibit G establishes that in May 2019, the City Board of Aldermen passed an ordinance authorizing the City to sell the lot for $14,000. Complainant testified the City acquired the lot when the former owner failed to pay taxes.
Complainant testified his assessment increased by more than 15 percent, triggering the Section 137.115.10 inspection requirement. Complainant testified no inspection was performed and that obstructed views rendered it impossible to determine the property condition without an inspection.
Complainant testified the subject property is adjacent to a collapsed retaining wall. Complainant testified the retaining wall negatively impacts the value of the subject property. Complainant testified the City maintains the retaining walls near other properties but does not maintain the wall near the subject property. Complainant produced no evidence quantifying any diminution of value caused by the allegedly deficient retaining wall or showing that the BOE value does not account for it.
Complainant also testified the subject property lies in a floodplain. Complainant produced no evidence quantifying any diminution of value caused by the alleged floodplain or showing that the BOE value does not account for it.
- Respondent’s Evidence. Respondent introduced Exhibits 1 through 7. Complainant did not object. Exhibits 1 through 7 were admitted into evidence. Respondent’s exhibits are summarized as follows:
| Exhibit 1 | Property Record Card (PRC) for the subject property showing lot size, dimension, location, and an aerial photograph. The PRC includes two photographs of small sheds on the subject property. The photographs are dated “06/11/2021.” The PRC values the subject property at $19,850. |
| Exhibit 2 | PRC for neighboring parcel that sold in June 2019 as vacant parcel for $14,000. Like the subject, this parcel is 21,000 square feet. It sold for $179,900 in July 2021 after a new residence was constructed. |
| Exhibit 3 | Sales letter showing the property referenced in Exhibit 2 sold for $14,000 in June 2019. |
| Exhibit 4 | Sales letter showing the property referenced in Exhibit 2 sold for $179,900 in July 2021. |
| Exhibit 5 | Report of five vacant land sales in Desloge. The sale prices range from $9,500 to $15,000. The $14,000 sale referenced in Exhibit 2 is included. The other four properties are smaller than the subject. |
| Exhibit 6 | Report of sales of improved lots in Desloge. The “extracted land values” range from $8,250 to $21,000. The lots are smaller than the subject. Land values were extracted as 15% of the sale amount. |
| Exhibit 7 | Email to Respondent from the St. Francois County floodplain manager noting the subject property is not in a Federal Emergency Management Agency (FEMA) regulated floodplain. |
Respondent introduced no evidence regarding any notice to Complainant regarding any on-site personal observation and review of all exterior portions of the land. There is no evidence showing such an inspection occurred.
- Value. The TVM of the subject property as of January 1, 2021, was $14,510, which is 15 percent greater than the prior assessment of $12,620 ($12,620 x 1.15 = $14,513).
CONCLUSIONS OF LAW
- Assessment and Valuation. Residential real property is assessed at 19% of its TVM as of January 1 of each odd-numbered year. Section 137.115.5(1)(a). The TVM is “the fair market value of the property on the valuation date[.]” Snider v. Casino Aztar/Aztar Mo. 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). “True value in money is defined in terms of value in exchange not value in use.” Tibbs v. Poplar Bluff Assocs. I, L.P., 599 S.W.3d 1, 7 (Mo. App. S.D. 2020) (internal quotation omitted). “Determining the true value in money is an issue of fact for the STC.” Cohen v. Bushmeyer, 251 S.W.3d 345, 348 (Mo. App. E.D. 2008).
“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 STC has wide discretion in selecting the appropriate valuation method but “cannot base its decision on opinion evidence that fails to consider information that should have been considered under a particular valuation approach.” Id., at 348.
- Evidence. “Although technical rules of evidence are not controlling in administrative hearings, fundamental rules of evidence are applicable.” Mo. Church of Scientology v. State Tax Comm’n, 560 S.W.2d 837, 839 (Mo. banc 1977). The hearing officer is the finder of fact and determines the credibility and weight of the evidence. Kelly v. Mo. Dep’t of Soc. Servs., Family Support Div., 456 S.W.3d 107, 111 (Mo. App. W.D. 2015).
- 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). The BOE’s valuation is presumptively correct. Tibbs, 599 S.W.3d at 7. The “taxpayer may rebut this presumption by presenting substantial and persuasive evidence that the valuation is erroneous.” Id. (internal quotation omitted). The taxpayer also must prove “the value that should have been placed on the property.” 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 the “party’s duty to convince the fact-finder to view the facts in a way that favors that party”).
- Complainant Did Not Produce Substantial and Persuasive Evidence of Overvaluation.
The comparable sales approach is typically used to estimate land value. Appraisal Institute, The Appraisal of Real Estate 364 (14th ed. 2013). “The comparable sales approach uses prices paid for similar properties in arms-length transactions and adjusts those prices to account for differences between the properties.” Snider, 156 S.W.3d at 347-48 (internal quotation omitted).
Complainant produced evidence of a single sale in which the City sold a vacant lot. Complainant testified the City acquired the lot when the former owner failed to pay taxes. While Complainant’s evidence shows the City entertained at least one offer ultimately resulting in the sale of the property, there is no evidence showing the City actively marketed the property or that the City was a typically motivated seller within the St. Francois County real estate market. This single sale lacks the indicia of a typical market transaction and, therefore, is not persuasive evidence of market value.
Complainant also produced evidence of Respondent’s assessment of other properties. The comparable sales approach requires sales. Snider, 156 S.W.3d at 347-48; Respondent’s assessments are not sales. Complainant’s reliance on assessments rather than sales is not a valid sales comparison approach. The STC “cannot base its decision on opinion evidence that fails to consider information that should have been considered under a particular valuation approach.” Snider, 156 S.W.3d at 348. Complainant’s evidence of Respondent’s assessment of other properties is not persuasive evidence of the TVM of the subject property as of January 1, 2021.
Complainant’s testimony that the subject’s value was reduced by the deteriorated retaining wall is also unpersuasive. Complainant produced no evidence providing a way to quantify any diminution of value caused by the allegedly deteriorated retaining wall or showing the BOE value does not account for the deteriorated wall.
Finally, Complainant’s testimony the subject property lies in a floodplain is unpersuasive. Respondent’s evidence shows the subject property does not lie in a federally-designated floodplain. Complainant testified the area is designated by the state as a floodplain, but produced no evidence supporting that testimony. Even if the subject property was in a floodplain, Complainant produced no evidence quantifying the diminution of value caused by the alleged floodplain or showing that the BOE value does not account for subject’s location in the alleged floodplain.
While a property owner’s opinion of value is generally admissible, the opinion lacks “probative value where it is shown to have been based upon improper elements or an improper foundation.” Shelby Cty. R-IV Sch. Dist. v. Herman, 392 S.W.2d 609, 613 (Mo. 1965); see also Cohen v. Bushmeyer, 251 S.W.3d 345, 349 (Mo. App. W.D. 2008) (noting a property owner’s opinion of value loses probative value when it rests on an improper foundation). Complainant did not present substantial and persuasive evidence of comparable sales or other market data showing the TVM of the subject property. Complainant did not produce substantial and persuasive evidence showing a further reduction in value due to the retaining wall or the subject’s location. Complainant did not produce substantial and persuasive evidence of overvaluation.
- Complainant Did Not Produce Substantial and Persuasive Evidence of Discrimination.
Both the United States and Missouri constitutions prohibit discriminatory taxation of similarly situated taxpayers. Savage v. State Tax Comm’n of Missouri, 722 S.W.2d 72, 78 (Mo. banc 1986). To prove discrimination, a property owner must first prove the fair market value of the subject property on the valuation date. Id. After proving fair market value, the property owner can prove discrimination by showing an “intentional systematic undervaluation . . . of other taxable property in the same class.” State ex rel. Ashby Rd. Partners, LLC, v. State Tax Comm’n, 297 S.W.3d 80, 85 (Mo. banc 2009) (internal quotation omitted). In the absence of intentional discrimination, a discrimination claim requires proof that the level of assessment is “so grossly excessive as to be inconsistent with an honest exercise of judgment.” Savage, 722 S.W.2d at 78.
The only evidence of discrimination is Complainant’s conclusory testimony asserting the assessment was discriminatory. To the extent this conclusory testimony is relevant to an allegation of intentional discrimination, it is neither credible nor corroborated by other evidence in the record. Likewise, there is no evidence as to whether a statistically significant number of other residential properties within St. Francois County were assessed in 2021 at a lower ratio of market value than the subject property. Complainant did not produce substantial and persuasive evidence of discrimination.
- Section 137.115. Although Complainant did not produce substantial and persuasive evidence of overvaluation, Complainant established Respondent raised the subject property’s assessed value by more than 15 percent without performing the inspection required by Section 137.115.10.
In pertinent part, Section 137.115.10 provides “[b]efore the assessor may increase the assessed valuation … by more than fifteen percent … the assessor shall conduct a physical inspection of such property.” (Emphasis added). In other words, the statute expressly conditions a valuation increase of more than 15 percent (“[b]efore the assessor may increase the assessed valuation … by more than 15 percent”) on a mandatory physical inspection (“shall conduct a physical inspection”). Because a physical inspection is a condition precedent to a valuation increase in excess of fifteen percent, an assessor is precluded from increasing an assessment by more than 15 percent without conducting the statutorily required physical inspection. It follows that the failure to conduct a sufficient physical inspection negates any increased valuation to the extent it exceeds 15 percent.[2]
The necessary elements of a Section 137.115.10 physical inspection are set forth in Section 137.115.11 and Section 137.115.12. In pertinent part, Section 137.115.11 requires the assessor to provide the property owner with “clear written notice” of the right to an inspection. The inspection “shall include, but not be limited to, an on-site personal observation and review of all exterior portions of the land.” Section 137.115.12. “Mere observation of the property via a drive-by inspection or the like shall not be considered sufficient to constitute a physical inspection as required by this section.” Id.
The 2021 assessment of the subject property increased by approximately 57 %, from $12,620 to $19,850. There is no evidence Respondent provided “clear written notice” to Complainant regarding his right to an inspection as required by Section 137.115.11. Complainant testified Respondent did not perform a physical inspection. Respondent did not testify or introduce exhibits contradicting Complainant’s testimony. There is no evidence Respondent or Respondent’s staff performed the “on-site personal observation and review of all exterior portions of the land” required by Section 137.115.12. While the PRC for the subject property includes photographs taken in June 2021, the photographs do not show any inspection “before” the assessment was increased by more than 15% as of January 1, 2021. On this record, there is no reason to conclude Complainant is mistaken and that Respondent did in fact provide notice and perform the required inspection.
The substantial and persuasive evidence in the record shows the assessment of the subject property increased by more than 15 percent without the required notice and physical inspection. Consequently, the assessment is unlawful to the extent it exceeds a 15 percent increase from the prior assessment. Section 137.115.10. Because Complainant did not otherwise satisfy his burden of proving overvaluation, the TVM is set at 15 percent above the prior assessment of $12,620. The TVM as of January 1, 2021, was $14,510 ($12,620 x 1.15 = $14,513).
CONCLUSION AND ORDER
The BOE’s decision finding the TVM of subject property on January 1, 2021, was $19,850 is set aside. The TVM as of January 1, 2021, was $14,510.
Application for Review
A party may file 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.
Failure to state specific facts or law upon which the application for review is based will result in summary denial. Section 138.432.
Disputed Taxes
The Collector of St. Francois 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 April 22, 2022.
Eric S. Peterson
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 April 22, 2022, to: Complainant(s) and/or Counsel for Complainant(s), the County Assessor and/or Counsel for Respondent and County Collector.
Elaina Mejia
Legal Coordinator
Contact Information for State Tax Commission:
Missouri State Tax Commission
421 East Dunklin Street
P.O. Box 146
Jefferson City, MO 65102-0146
573-751-2414
Fax 573-751-1341
[1] Complainant timely filed a complaint for review of assessment. The State Tax Commission (STC) has authority to hear and decide Complainant’s appeal. Mo. Const. art. X, sec. 14; Section 138.430.1, RSMo 2000. This authority includes the obligation to “correct any assessment or valuation which is shown to be unlawful, unfair, improper, arbitrary or capricious.” Id. All statutory citations are to RSMo 2000, as amended.
[2] This conclusion is confirmed by considering the converse: if the failure to conduct a physical inspection does not negate a valuation increase in excess of fifteen percent, then the condition precedent to increasing the assessment by more than 15 percent – “[b]efore the assessor may increase the assessed valuation” – is rendered superfluous. See Bateman v. Rinehart, 391 S.W.3d 441, 446 (Mo. banc 2013) (courts “must presume every word, sentence or clause in a statute has effect, and the legislature did not insert superfluous language.”)