Sentinel Industries Inc v. Alicia Degase, Assessor Douglas County

July 13th, 2018




SENTINEL INDUSTRIES, INC. ) Appeal No. 17-56000 (11-0.1-11-002-001-002.001)  
             Complainant )    
v. )  
Respondent )    




Decision of the Douglas County Board of Equalization (BOE) is SET ASIDE.  Sentinel Industries, Inc. (Complainant) presented substantial and persuasive evidence to rebut the presumption of correct assessments by the BOE.

Complainant was represented by attorney Mick Wilson.

Alicia Degase, the Assessor of Douglas County (Respondent) was represented by attorney Christopher Wade.

Case heard on the record and decided by Senior Hearing Officer John Treu (Hearing Officer) after briefing.


Complainant appealed, on the ground of overvaluation.  Respondent set the true value in money (TVM) of the subject at $594,900.  The BOE set the TVM of the subject property at $594,900.  Complainant contends the property has a TVM of $425,000

The Commission takes this appeal to determine the TVM for the subject property on January 1, 2015.  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


            Complainant filed the following exhibits, which were admitted into the record:

A BOE Decision
B Appraisal by Robert Norris


The subject property is 12 acres improved with 7 buildings used for retail, office, warehouse and storage.  The site suffers from hazardous waste.  Subject is registered in Missouri Department of Natural Resources Registry of Confirmed Abandoned or Uncontrolled Hazardous Waste Disposal Sites.

Complainant’s appraiser, Robert Norris (Norris) is a Missouri State Certified General Real Estate Appraiser.  Norris is a Member of the Appraisal Institute (MAI).  He has over thirty-five years of experience in appraising residential, commercial and utility property in Missouri.

Norris considered all three approaches to value the subject property.  He did not develop the sales comparison approach due to the lack of comparable properties.  He developed the income approach and cost approach.

Due to the excess land, Norris conducted a qualitative analysis to determine a land valuation.  Norris considered five land sales, but due to location, site and size differences, most weight was applied to sales 1, 2 and 3.  He opined a TVM of the land of $84,000.

Under the income approach Norris considered twelve outside leases with lease rates ranging from $2.40 to $7.50 per square foot and the five subject property leases with lease rates ranging from $1.60 to $4.96 per square foot.  He gave most emphasis to the rates achieved by the subject property. Norris then opined a vacancy and collection loss of 10% based upon the historical occupancy of the subject property and the data he had developed regarding the area.  Norris estimated expenses from other similar properties and the appraiser’s experience.  Norris also included an expense item for the hazardous waste found on the property.  While acknowledging that the specific total cost of future remediation are unknown, that the costs vary from year to year, and that “the contamination has been mostly eliminated” Norris estimated a recurring annual expense allowance of $20,000 based upon typical expenses including labor costs, monitoring/testing costs and fees for an environmental consultant.  He calculated a net operating income (NOI) of $42,163.

Norris then developed a capitalization rate.  Due to the fact that there were no known recent sales of multi-tenant properties in the Ava market and that no sales of similar properties were listed in the Registry of Confirmed Abandoned or Uncontrolled Hazardous Waste Disposal Sites, Norris considered sales of 10 retail-commercial or multi-tenant properties outside of Ava.  Using those sales here developed a range of capitalization rates between 6.58% and 11.49%.  Norris also did a Band of Investment analysis.  Using both methods Norris concluded on a capitalization rate of 8.5% to 9.5% to which he added and effective tax rate of 1.34% for an overall opined capitalization rate (or loaded capitalization rate) of 9.84% to 10.84%

Based upon the foregoing, Norris opined a TVM under the income approach of $388,900 to $428,400.

Under the cost approach Norris utilized the Marshall Valuation Service calculator.  Norris opined a TVM of the improvements after depreciation, of $549,000 to which he added the $84,000 land TVM for a total TVM of $633,000.  However, due to the disparity between his income approach values and cost approach value, Norris concluded that potential external obsolescence was present.  He calculated a rate of between 32% and 39% economic obsolescence.  He concluded on a 35% obsolescence factor, equaling $192,150 which he deducted from TVM as set forth above, for an indicated TVM of $440,850, which he rounded to $440,800.

Norris gave the most emphasis to the income approach because of the nature of the property as income producing property, Norris opined a reconciled TVM of $425,000, as of January 1, 2017.

Respondent filed the following exhibits which were admitted into the record:

1 Deeds to Subject Property
2 Deed of Trust
3 Affidavit
4 Lease Agreement
5 Lease Agreement
6 Lease Agreement
7 Lease Agreement
8 Lease Agreement
9 Income Statement





10 Worksheet of Respondent
11 Picture
12 Picture
13 Pictures
14 Picture
15 Property Record Cards
16 Aerial Photograph of Subject Property
17 Property Record Card of Other Property
18 Affidavit of Respondent
19 Financial Statement Except


In addition to exhibits, Respondent filed a brief.  In the brief, Respondent’s counsel asserts what the industry standard is regarding loans; however, no exhibit or affidavit supports the assertion.  Arguments of counsel do not constitute evidence.

Respondent also offered her affidavit wherein she states that she valued the land in two parts as the environmental notice is for a small portion of the twelve acre parcel. Respondent valued 4.5 acres at $15,000 per acre and 7.5 acres at $2,000.  Respondent stated that for her income approach, she calculated an NOI of $65,052.  Respondent utilized a capitalization rate of 7% because the interest rate at the local banks was 5.5% to which she added a calculated effective tax rate of 1.34%, which she rounded up by .16% to conclude on a total capitalization rate of 7%. This resulted in a calculated TVM of $929,314.29. (Exhibit 10 and Exhibit 18).  Utilizing the Honeycutt Appraisal System, Respondent calculated a TVM of the subject property of $594,900.

The parties agreed to submit the appeal upon the record and briefs.

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


  1. Jurisdiction. Jurisdiction over this appeal is proper.  Complainant timely appealed to the State Tax Commission from the decision of the BOE.  The appeal was submitted on the record by agreement of the parties.
  2. Subject Property. The subject property is located at 412 NW 12th Avenue, Ava, Douglas County, Missouri.  The subject property is identified by map parcel number 11-0.1-11-002-001-002.001. (Exhibit A and Exhibit B)
  3. Description of Subject Property. The Subject Property consists of 12 acres with approximately 365 feet of roadway frontage improved with seven buildings of mixed use by multiple tenants.  According to the Missouri Department of Natural Resources, “the subject property is a former wood treating facility that pressure-treated wood with PCP from 1959 to 1978.  Sludge from the pressure-treating process was deposited in the three on-site lagoons which were closed when pressure-treating wood on-site ceased.  The lagoons were backfilled with soil.”  The subject property was placed on the state’s Registry of Confirmed Abandoned and Uncontrolled Hazardous Waste Disposal Sites on September 11, 1998.  Some remediation occurred prior to January 1, 2017 and “the contamination has been mostly eliminated.  However, concerns continue, especially with the filled-in waste lagoons.  Remediation will continue into the foreseeable future and until the site is removed from the registry.”  (Exhibit B)
  4. Assessment.  Respondent valued the subject property at $594,900, as commercial, as of January 1, 2017.
  5. Board of Equalization. The BOE valued the subject property at $594,900, as commercial, as of January 1, 2017, thereby sustaining Respondent’s valuation.
  6. No Evidence of New Construction & Improvement. There was no evidence of new construction and improvement from January 1, 2017, to January 1, 2018; therefore, the assessed value for 2017 remains the assessed value for 2018.  Section 137.115.1, RSMo. 
  7. Remediation Costs. Complainant failed to offer evidence of the total costs to remediate the subject property.  Complainant further failed to offer historical annual remediation costs.  However, Respondent offered evidence that for year ended August 31, 2016 the estimated environmental remediation liability included $12,000 in oversight cost and $30,000 of bio-remediation liability and that for year ended August 31, 2017 the environmental remediation liability was estimated to include $23,000 in oversight cost and $0.00 of bio-remediation liability.  (Exhibit 19)
  8. Deed of Trust.  Under a Deed of Trust recorded on February 28, 2014, “the total principal amount of obligations at any one time which is secured by [such] Deed of Trust, in addition to any interest and any amounts advanced by Lender for the protection of the security interest granted…is $1,222,500.”  The sole collateral listed is the subject property.  (Exhibit 2 and Exhibit 3)
  9. Presumption of Correct Assessment Rebutted. The parties presented substantial and persuasive evidence to rebut the presumption of correct assessment by the BOE.
  10. TVM of Subject Property. The TVM of subject property as of January 1, 2017, is found to be $428,400 (commercial classification).



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.

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).

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).

Standard for Valuation

            Section 137.115, RSMo, requires that property be assessed based upon its TVM 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)

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).


The Hearing Officer is persuaded the concerns relating to and the negative impact of the contamination are proper elements and proper to consider in the valuation of the subject property.  The Hearing Officer finds that the TVM of the subject properties is appropriately diminished not only by continuing monitoring/testing costs, but by potential bio-remediation liability, in addition to the stigma associated with contamination existing on the subject property

Despite the fact that Respondent valued the land in two parts, the subject property remains as one parcel, the entirety of which is subject to the remediation costs and stigma.  Any argument that since no bio-remediation costs were incurred for the year ending August 31, 2017 that none will occur in the future is unsupported by any evidence.  The subject property remains on the Registry of Confirmed Abandoned and Uncontrolled Hazardous Waste Disposal Sites.  Any future potential bio-remediation costs are unknown.  It is this lack of certainty that adds additional stigma to the subject property.

Norris, a Missouri State Certified General Real Estate Appraiser with over 35 years of experience performed both a cost approach and income approach in his appraisal.  The Hearing Officer is persuaded that the $20,000 annual expense for remediation cost in Norris’ income approach reasonably accounts for the property remaining on the Registry of Confirmed Abandoned and Uncontrolled Hazardous Waste Disposal Sites, for the subject property’s continuing monitoring/testing costs, for the potential bio-remediation costs and for the associate stigma attached to the subject property.  The Hearing Officer is also persuaded the other expense estimates of Norris are appropriate.  Norris’ capitalization rate range was based upon appropriate appraisal methodology.  Norris opined a range of TVM of $388,900 to $428,400.

Cost Approach and Income Shortfall

In Norris’ appraisal, he opines that external obsolescence exists in the subject property.  Prior to making any deduction for any such obsolescence Norris concluded a TVM under the cost approach was $633,000.  He concluded that there was obsolescence because property and rental values have not fully recovered from the Great Recession and have not kept pace with construction costs.  He state in his appraisal that “any [external obsolescence] that existed would be inherently reflected in the Income Approach.

This, in essence is an income shortfall methodology which has not been recognized by Missouri courts and has been criticized by other State courts. The following has been stated about such approach:

At best [the] income deficiency method is illogical … [and] at worst [the] income-deficiency method strips the cost approach of its use as an independent determiner of value, because it always will track the result under the income approach.”  Delta Air Lines, Inc. v. Dept. of Revenue of Oregon, 291 P.2d 836 (Oregon 1999)


“A significant problem with [the] income shortfall methodology is that it converts what should be two separate, stand-alone indicators of value (cost approach and income approach), into one indicator of value by adjusting the cost approach with [an] income shortfall.”  Puget Sound Energy, Inc. v. Department of Revenue of the State of Montana, 2012 WL 5906944 (Mont.Tax.App.Bd.)


Additionally in State of Alaska, Department of Revenue v. BP Pipelines, Inc., 354 P.3d 1053 (Alaska 2015), the Court noted a lack of wide recognition of the Income Shortfall Method in authoritative sources.

The Hearing Officer is persuaded that the appropriate TVM under the cost approach is $633,000.  Nevertheless, given the nature of the subject property as income producing property, the Hearing Officer is persuaded that the cost approach does not accurately estimate the TVM of the subject property and that the TVM of the subject property is $428,400.


The assessed valuation for the subject property as determined by the BOE for Douglas County for the tax year 2017 is SET ASIDE.  The assessed value for the subject property for tax year 2017 is set at $137,088 ($428,400 TVM, commercial).

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 Douglas 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 July 13, 2018.


John Treu

Senior Hearing Officer


Certificate of Service


Delivery or Notice of the information contained in this Order was made via email or U.S. Postage on this 13th day of July, 2018, to the following:;;


Jacklyn Wood

Legal Coordinator