STATE TAX COMMISSION OF MISSOURI
| SHARIQ & AMAL MANSURI, | ) | |
| ) | ||
| Complainants, | ) | |
| ) | ||
| v. | ) | Appeal No. 16-12641 |
| ) | ||
| JAKE ZIMMERMAN, ASSESSOR | ) | |
| ST. LOUIS COUNTY, MISSOURI, | ) | |
| ) | ||
| Respondent. | ) |
DECISION AND ORDER
HOLDING
The assessment made by the Board of Equalization of St. Louis County (BOE) is SET ASIDE. Complainants Shariq and Amal Mansuri (Complainants) did not present substantial and persuasive evidence to rebut the presumption of correct assessment by the BOE. Respondent Jake Zimmerman, Assessor, St. Louis County, Missouri, (Respondent) presented substantial and persuasive evidence to rebut the presumption of correct assessment by the BOE.
Complainants appeared pro se.
Respondent appeared by counsel Steven Robson.
Case heard and decided by Senior Hearing Officer Amy S. Westermann (Hearing Officer).
ISSUE
Complainants appealed on the ground of overvaluation. Respondent initially set the true market value (TMV) of the subject property, as residential property, at $1,398,400. The BOE lowered Respondent’s valuation to $1,090,000. 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 or improvement to the property. Section 137.115.1 RSMo The State Tax Commission (STC) takes this appeal to determine the true value in money for the subject property as the property existed on January 1, 2016, under the economic conditions for January 1, 2015.
The Hearing Officer, having considered all of the competent evidence upon the whole record, enters the following Decision and Order.
FINDINGS OF FACT
- Jurisdiction. Jurisdiction over this appeal is proper. Complainants timely appealed to the STC.
- Evidentiary Hearing. The issue of overvaluation was presented at an evidentiary hearing on February 1, 2017, at the St. Louis County Government Administration Building, 41 South Central Avenue, Clayton, Missouri.
- Identification of Subject Property. The subject property is identified by parcel/locator number 20M210124. It is further identified as 10 Dunleith Drive, Ladue, St. Louis County, Missouri. (Exhibit A; Exhibit 1)
- Description of Subject Property. The subject property consists of 1.85 acres improved by a 6,589 square-foot, ranch style single-family home built in 1981. (Exhibit 1) The subject property includes five bedrooms; five full bathrooms; one half bath; a 3,670 square-foot unfinished basement; a four-car attached garage; a patio; two fireplaces; and no pool. (Exhibit 1) The exterior consists of stucco construction. (Exhibit 1)
- Assessment. Respondent set a TMV for the subject property of $1,398,400 residential, as of January 1, 2016.
- Board of Equalization. The BOE lowered Respondent’s TMV of the subject property to $1,090,000.
- Complainant’s Evidence. Complainants testified in their own behalf. Complainants testified that they had purchased the subject property in May 2012 for $605,000. Complainant’s testified that the subject property had been listed with a realtor and had been publicly advertised. Complainants testified that the subject property was encumbered by a line of credit of approximately $500,000. Complainants testified that the subject property had not been listed for sale or appraised within the three years prior to the evidentiary hearing. Complainants testified that they had not made any improvements to the subject property between January 1, 2015, and January 1, 2016.
Complainants testified that they had performed a major rehabilitation on the subject property for a period of 1.5 years following their purchase of the property. Complainants testified that the work had been licensed and permitted and cost approximately $170,000. Complainants testified that the subject property was located in a “pocket” neighborhood near Huntleigh subdivision and other high-priced subdivisions, which brought up the value of their neighborhood. Complainants also testified that the values of the properties within their neighborhood were suppressed because of restrictive indentures. Complainants opined that the subject property’s TMV as of January 1, 2016, was $780,000.
To support their opinion of value, Complainants offered the following as evidence:
| Exhibit A[1] | The BOE Notice of Decision |
| Exhibit B | Settlement statement for subject property |
| Exhibit C | Building permit/cost of construction from the City of Ladue |
Respondent did not object to Complainants’ exhibits, which were received into the record.
- Respondent’s Evidence. Respondent offered as evidence the testimony of Missouri State Certified Residential Real Estate Appraiser Gerald Keeven (the Appraiser). The Appraiser opined that the subject property’s TMV as of January 1, 2016, was $1,030,000, which was lower than the BOE’s valuation. In support of the Appraiser’s opinion of value, Respondent offered as evidence Exhibit 1, the Appraiser’s report. Complainants did not object to Respondent’s exhibit, which was received into the record.
The Appraiser testified that, in arriving at his opinion of TMV, he considered the cost approach and the income approach in developing an opinion of value but determined these approaches were neither reliable nor applicable to the subject property due to its age and type of property. The Appraiser relied on the sales comparison approach to developing an opinion of value of the subject property because that approach reflected the actions of typical buyers and sellers in the local market, which was relatively stable. (Exhibit 1) In his report, the Appraiser noted that no sale or transfer of the subject property had occurred within three years of the date of the appraisal. The Appraiser conducted a partial exterior inspection of the subject property. The Appraiser noted that, at the time of viewing, “the exterior appeared consistent with the C2 rating” and that the appraisal was based on the “extraordinary assumption” that the interior condition was the same as the observed exterior condition. (Exhibit 1)
The Appraiser’s report analyzed four comparable sales. The four comparables had been sold between June 2013 and May 2016. (Exhibit 1) The sale prices of the comparables ranged from $1,000,000 to 1,125,000. The Appraiser made a market-based adjustment to Comparable Nos. 2, 3, and 4 due to their superior location (ingress/egress to a four-lane divided highway with a concrete divider and designated U-turn lane). Comparable No. 1, located within the subject property’s neighborhood, was a 1.5-story single family home while Comparable Nos. 2, 3, and 4 were ranch-style single-family homes. The Appraiser found that no market based adjustment to Comparable No. 1 for design/style was required because “Comp 1 is a 1.5 story home that is considered equal to the subject.” The Appraiser found that Comparable Nos. 2 and 3 were of superior quality of construction, which required a market-based adjustment. The subject property and Comparable Nos. 1 and 4 had quality of construction ratings of Q4. (Exhibit 1) The Appraiser’s report included the definitions for quality of construction. The rating for Q4 was defined as:
Dwellings with this quality rating meet or exceed the requirements of applicable building codes. Standard or modified standard building plans are utilized and the design includes adequate fenestration and some exterior ornamentation and interior refinements. Materials, workmanship, finish, and equipment are of stock or builder grade and may feature some upgrades.
The Appraiser found that Comparable No. 2 was inferior in condition to the subject property due to the recent updates and remodeling to the subject property, which required a market-based adjustment. The subject property and Comparable Nos. 1, 3, and 4 had condition ratings of C2. The Appraiser’s report included the definition for condition. The rating for C2 was defined as:
The improvements feature no deferred maintenance, little or no physical depreciation, and require no repairs. Virtually all building components are new or have been recently repaired, refinished, or rehabilitated. All outdated components and finishes have been updated and/or replaced with components that meet current standards. Dwellings in this category either are almost new or have been recently completely renovated and are similar in condition to new construction.
The Appraiser noted that Comparable Nos. 1, 3, and 4 were all within one mile of the subject property and Comparable No. 2 was within 1.5 miles of the subject property. The Appraiser placed equal weight on all four of the comparable sales and concluded that all of the comparables were located in the same or similar marketing areas of the subject and, therefore, provided a reasonable value estimate. The Appraiser further noted that additional market-based adjustments were made for age; bedroom and bathroom count; square footage of the living area; basement size and finish; number of attached garage stalls; number of fireplaces; exterior wall construction; and whether the comparables had pools. (Exhibit 1) The adjusted sale prices of all of the comparables ranged between $953,200 and $1,225,500. (Id.)
- Presumption of Correct Assessment Rebutted – True Market Value Established. Complainants’ evidence was not substantial and persuasive to rebut the presumption of correct assessment by the BOE. However, Respondent’s evidence was substantial and persuasive to rebut the presumption of correct assessment by the BOE and to establish the TMV of the subject property as of January 1, 2015, to be $1,030,000.
CONCLUSIONS OF LAW AND DECISION
Jurisdiction
The STC has jurisdiction to hear this appeal and correct any assessment which is shown to be unlawful, unfair, arbitrary or capricious, including the application of any abatement. 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 property and tangible personal property are assessed at set percentages of true value in money: residential property at 19%; commercial property at 32%; and agricultural property at 12%. Section 137.115.5 RSMo (2000) as amended.
Investigation by Hearing Officer
In order to investigate appeals filed with the STC, the Hearing Officer may inquire of the owner of the property or of any other party to the appeal regarding any matter or issue relevant to the valuation, subclassification, or assessment of the property. Section 138.430.2 RSMo (2000) as amended. The Hearing Officer’s decision regarding the assessment or valuation of the property may be based solely upon his inquiry and any evidence presented by the parties or based solely upon evidence presented by the parties. Id.
During the hearing, the Hearing Officer inquired of Complainants and of the Appraiser.
Board Presumption and Computer-Assisted Presumption
There exists a presumption of correct assessment by the BOE – the BOE presumption. In charter counties or the City of St. Louis, there exists by statutory mandate a presumption that the Assessor’s original valuation was made by a computer, computer-assisted method or a computer program – the computer-assisted presumption. These two presumptions operate with regard to the parties in different ways.
The BOE presumption operates in every case to require the taxpayer to present evidence to rebut it. If Respondent is seeking to prove a value different than that set by the BOE, then Respondent is required to rebut the BOE presumption.
The computer-assisted presumption is applicable only if (1) the BOE lowered the value of the Assessor and Respondent is seeking to sustain the original assessment and (2) it has not been shown that the Assessor’s valuation was not the result of a computer assisted method. The BOE’s valuation is assumed to be an independent valuation.
In the present appeal, the BOE lowered the initial valuation of Respondent, and both Complainants and Respondent are now seeking to lower the BOE’s assessment; therefore, the BOE presumption applies.
Complainant’s Burden of Proof
To obtain a reduction in assessed valuation based upon an alleged overvaluation, the Complainant must prove the true value in money of the subject property on the subject tax day. Hermel, Inc., v. State Tax Commission, 564 S.W.2d 888, 897 (Mo. banc 1978). True value in money is defined as the price that the subject property would bring when offered for sale by one willing but not obligated to sell it and bought by one willing or desirous to purchase but not compelled to do so. Rinehart v. Bateman, 363 S.W.3d 357, 365 (Mo. App. W.D. 2012); Cohen v. Bushmeyer, 251 S.W.3d 345, 348 (Mo. App. E.D. 2008); Greene County v. Hermel, Inc., 511 S.W.2d 762, 771 (Mo. 1974). True value in money is defined in terms of value in exchange and not in terms of value in use. Stephen & Stephen Properties, Inc. v. State Tax Commission, 499 S.W.2d 798, 801-803 (Mo. 1973). In sum, true value in money is the fair market value of the subject property on the valuation date. Hermel, Inc., 564 S.W.2d at 897.
“’True value’ is never an absolute figure, but is merely an estimate of the fair market value on the valuation date.” Drury Chesterfield, Inc., v. Muehlheausler, 347 S.W.3d 107, 112 (Mo. App. E.D. 2011), citing St. Joe Minerals Corp. v. State Tax Comm’n of Mo., 854 S.W.2d 526, 529 (Mo. App. E.D. 1993). “Fair market value typically is defined as the price which the property would bring when offered for sale by a willing seller who is not obligated to sell, and purchased by a willing buyer who is not compelled to buy.” Drury Chesterfield, Inc., 347 S.W.3d at 112 (quotation omitted).
A presumption exists that the assessed value fixed by the BOE is correct. Rinehart, 363 S.W.3d at 367; Cohen, 251 S.W.3d at 348; Hermel, Inc., 564 S.W.2d at 895. “Substantial and persuasive controverting evidence is required to rebut the presumption, with the burden of proof resting on the taxpayer.” Cohen, 251 S.W.3d at 348. Substantial evidence can be defined as such relevant evidence that a reasonable mind might accept as adequate to support a conclusion. Cupples Hesse Corp. v. State Tax Commission, 329 S.W.2d 696, 702 (Mo. 1959). Persuasive evidence is evidence that has sufficient weight and probative value to convince the trier of fact. Cupples Hesse Corp., 329 S.W.2d at 702. 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). See also, 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).
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.” Westwood Partnership, 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. W.D. 1991).
Generally, a property owner, while not an expert, is competent to testify to the reasonable market value of his own land. Cohen, 251 S.W.3d at 348-49; Carmel Energy, Inc. v. Fritter, 827 S.W.2d 780, 783 (Mo. App. W.D. 1992). “However, when an owner’s opinion is based on improper elements or foundation, his opinion loses its probative value.” Carmel Energy, Inc., 827 S.W.2d at 783. A taxpayer does not meet his burden if evidence on any essential element of his case leaves the STC “in the nebulous twilight of speculation, conjecture and surmise.” See Rossman v. G.G.C. Corp. of Missouri, 596 S.W.2d 469, 471 (Mo. App. E.D. 1980).
Respondent’s Burden of Proof
Respondent, when advocating a value different from that determined by the original valuation or a valuation made by the BOE, must meet the same burden of proof to present substantial and persuasive evidence of the value advocated as required of the Complainant under the principles established by case law. Hermel, Inc., 564 S.W.2d at 895; Cupples-Hesse, 329 S.W.2d at 702; Brooks, 527 S.W.2d at 53.
In this case, Respondent presented the Appraiser’s report as evidence indicating a lower valuation than the value finally determined by the BOE and lower than the value previously determined by Respondent; thus, the Appraiser’s report was received to be considered in light of Respondent’s argument that the BOE’s valuation of the subject property should be lowered to $1,030,000 as of January 1, 2015.
Weight to be Given Evidence
The Hearing Officer is not bound by any single formula, rule, or method in determining true value in money and 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. St. Louis County v. Security Bonhomme, Inc., 558 S.W.2d 655, 659 (Mo. banc 1977); St. Louis 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 deemed necessary when viewed in connection with all other circumstances. Beardsley v. Beardsley, 819 S.W.2d 400, 403 (Mo. App. W.D. 1991). The Hearing Officer, as the trier of fact, is not bound by the opinions of experts but may believe all or none of the expert’s testimony or accept it in part or reject it in part. Exchange Bank of Missouri v. Gerlt, 367 S.W.3d 132, 135-36 (Mo. App. W.D. 2012).
Methods of Valuation
Proper methods of valuation and assessment of property are delegated to the STC. 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, 615 (Mo. App. W.D. 2000); Hermel, Inc., 564 S.W.2d at 897; 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. 1974).
“For purposes of levying property taxes, the value of real property is typically determined using one or more of three generally accepted approaches.” Snider v. Casino Aztar/Aztar Missouri Gaming Corp., 156 S.W.3d 341, 346 (Mo. banc 2005), citing St. Louis County v. Security Bonhomme, Inc., 558 S.W.2d 655, 659 (Mo. banc 1977). “Each valuation approach is applied with reference to a specific use of the property—its highest and best use.” Snider, 156 S.W.3d at 346-47, citing Aspenhof Corp., 789 S.W.2d at 869. “The method used depends on several variables inherent in the highest and best use of the property in question.” Snider, 156 S.W.3d at 347.
“Each method uses its own unique factors to calculate the property’s true value in money.” Id. “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. Id. at 348. “Comparable sales consist of evidence of sales reasonably related in time and distance and involve land comparable in character.” Id. (quotation omitted). “This approach is most appropriate when there is an active market for the type of property at issue such that sufficient data [is] available to make a comparative analysis.” Id.
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:
- Buyer and seller are typically motivated.
- Both parties are well informed and well advised, and both acting in what they consider their own best interests.
- A reasonable time is allowed for exposure in the open market.
- Payment is made in cash or its equivalent.
- Financing, if any, is on terms generally available in the Community at the specified date and typical for the property type in its locale.
- 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.
Discussion
In this case, Complainants’ evidence was neither substantial nor persuasive to rebut the presumption of correct assessment by the BOE. Substantial evidence is that which is relevant, adequate, and reasonably supports a conclusion. Cupples Hesse Corp., 329 S.W.2d at 702. Persuasive evidence is that which causes the trier of fact to believe, more likely than not, the conclusion advocated is the correct conclusion. Id.
Complainants primarily argued that the subject property’s TMV should be based upon the property’s purchase price in 2012 plus the cost of the approximately $170,000 major rehabilitation to the subject property in 2012 and 2013. However, Complainants’ Exhibits B and C, the settlement statement for the subject property and the building permit from the City of Ladue, were the only evidence Complainants presented to support this theory. Complainants did not present detailed evidence indicating the use of the cost approach to determining value, such as bids and paid invoices for the work performed. Although Exhibit C listed the estimated cost of the general renovations that were subject to the permit, Exhibit C did not provide a list or description of the work to be done under the permit or the nature of the renovations themselves. This information was not substantial or persuasive on the issue of TMV.
On the contrary, Respondent presented substantial and persuasive evidence to rebut the presumption of correct assessment by the BOE. The Appraiser, a state certified residential real estate appraiser, used one of the three court-approved methods for valuing residential property to arrive at an opinion of TMV for the subject property, the sales comparison method. The Appraiser’s report analyzed sales data from comparable properties in the same geographic area as the subject property. Comparable No. 1 was located within the same neighborhood as and similar to the subject property and had been remodeled. The Appraiser testified that he performed an exterior inspection only of the subject property, but he did review the St. Louis County records regarding the property and saw evidence of “enlargement and a siding change.” The Appraiser further testified that in analyzing the comparable properties, he learned that the subject property, a 6,000+ square foot ranch-style home, was considered large for a ranch-style home in Ladue. Notably, the Appraiser testified that he did not use the 2012 sale of the subject property as a comparable sale because as of the January 1, 2015, tax date, the subject property was a “totally different” house than it had been at the time of purchase in 2012.
ORDER
The TMV for the subject property as determined by the BOE is SET ASIDE. The assessed value for the subject property for tax year 2016 is set at $195,700 residential ($1,030,000 TMV).
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 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 St. Louis 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 March 28, 2017.
STATE TAX COMMISSION OF MISSOURI
Amy S. Westermann
Senior Hearing Officer
Certificate of Service
I hereby certify that a copy of the foregoing has been sent electronically or mailed postage prepaid this 28th day of March, 2017, to: Complainants(s) counsel and/or Complainant, the County Assessor and/or Counsel for Respondent and County Collector.
Jacklyn Wood
Legal Coordinator
[1] Complainants later withdrew Exhibit A.