State Tax Commission of Missouri
SHOW-ME OIL COMPANY, INC.)
v.)Appeal Number 05-44504
TOM SCHAUWECKER, ASSESSOR,)
BOONE COUNTY, MISSOURI,)
DECISION AND ORDER
The value determined by the Assessor and approved by the Board of Equalization is SET ASIDE.Market value for the subject property, as encumbered, on January 1, 2005, and
January 1, 2006, was $1,550,000 (assessed value $496,000).
The issue in this case is the true value in money of a property encumbered by a long term lease.
The subject property was originally valued by the Boone County Assessor at $1,263,800 (assessed value $404,416).Said value was approved by the Boone County Board of Equalization.Complainant appealed asserting a value of $381,700 (assessed value $122,144).Respondent asserted a value of $1,550,000 (assessed value $496,000).
An evidentiary hearing was held at the Boone County Government Center on
September 19, 2006.Complainant appeared by counsel, Thomas Dunlap.Respondent appeared by counsel, John Patton.The case is heard and decided by Senior Hearing Officer Luann Johnson.
Complainant presented the following exhibits:
Exhibit A – Lease of subject property dated September 5, 1967.
Exhibit B – Assignment and Assumption of Lease and Conveyance of Improvementsdated May 31, 1984.
Exhibit C – Assignment of Lessee’s Interest in Lease, dated March 25, 1984.
Exhibit D – Sublease dated March 25, 1994.
Exhibit E -Appraisal Report of subject property by John S. Kirby.
Exhibit F – Written Direct Testimony of Roger Moser, President, Show-Me OilCompany, Inc.
Exhibit G – Written Direct Testimony of John S. Kirby.
All exhibits were accepted into evidence.
Respondent filed the following exhibits:
Exhibit 1 – Appraisal Report of subject property by Allan J. Moore.
Exhibit 2 – Written Direct Testimony of Allan J. Moore.
All exhibits were accepted into evidence.
FINDINGS OF FACT
1.Jurisdiction over this appeal is proper.Complainant timely filed its appeal from the decision of the Boone County Board of Equalization.
2. The subject property is a 3.84 acre tract improved with a 39,024 square foot building, currently used as a grocery store.Said building has an effective age of 20 years.The site is further improved with extensive asphalt paved parking and a billboard on the northeast corner of the site.Ex. 1, pg. 25.Ex. E, pg. 25, 36.The property is identified as parcel number 16-310-00-00-009.00, more commonly known as 705 Business Loop 70 West, Columbia, Missouri.
3.The subject property has a fee simple value of $2,450,000 to $2,650,000.Ex. E, pg. 2.Land value, if vacant, is estimated to be between $1,510,000 and $1,810,000.Ex. 1, pg. 6, Ex. E, pg. 2.
4.In 1967, the owners of the subject property entered into a 93 year lease of the property, commencing in 1973 and ending December 31, 2066.Ex. A, Tr. 5.Under the terms of said lease, the monthly rental on said property was $1,500, or $18,000 per year.The lessee could make improvements to the property and was responsible for all taxes and insurance.The leasehold interest has changed hands over the ensuing years, ending in Show-Me Oil Company, Inc. subleasing the property from Associated Wholesale Grocers in March of 1994.Ex. A, B, C, D.The leased fee interest is currently held by one Janet Belzer, who is not a party in this appeal.
5.Show-Me Oil purchased the leasehold interest in 1994 for $720,000.Tr. 11, 25, 27.
6.The parties agree that the leased fee value is between $350,000 and $368,500.Ex. E, pg. 2; Ex. 1, pg. 5.
7.Respondent asserts a leasehold value of $1,200,000, based upon a rental savings of $14,833 per month or $178,000 per year.Ex. 1, pg. 30-35.Complainant’s appraiser asserts that the leasehold interest has no value because the subtenant has no right to further sublease the property, without the permission of the sublandlord.Ex. E, pg. 63; Ex. D, pg. 7. The appraiser concludes that the only value the property has is the value of the current cash flows and the estimated present value of the reversion at the end of the remaining 60 year lease.Ex. E, pg. 64.
Complainant’s appraiser’s argument is not legally sound. “To limit the value of the property to the value of the leased fee would ignore the value of the leasehold interest.Under Section 137.115, the assessor is required to assess all real property and possessory interests in real property.”Nance v. State Tax Commission, 18 S.W.3d 611 (Mo. App. 2000). The correct leasehold value is $1,200,000.
8.The market value for the subject property on January 1, 2005, and January 1, 2006, is $1,550,000 (assessed value $496,000).
CONCLUSIONS OF LAW
Highest and Best Use
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.Aspenhof Corp. v. State Tax Commission, 789 S.W.2d 867, 869 (Mo. App. 1990).
It is true that property can only be valued according to a use to which the property is readily available.But this does not mean that in order for a specific use to be the highest and best use for calculating the property’s true value in money, that particular use must be available to anyone deciding to purchase the property. . . .A determination of the true value in money cannot reject the property’s highest and best use and value the property at a lesser economic use of the property.Snider v. Casino Aztar/Aztar Missouri Gaming Corp., 156 S.W.3d 341, 348-349 (Mo. 2005).
True Value in Money
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 purchased by one who is desiring 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).It is the fair market value of the subject property on the valuation date.Hermel, Inc. v. State Tax Commission, 564 S.W.2d 888, 897 (Mo. banc 1978).
Taxpayer has Burden of Proof
In Westwood Partnership v. Gogarty, 103 S.W.3d 152 (Mo. App. E.D. 2003), the court of appeals stated:
There is no longer an automatic presumption regarding the correctness of an assessor’s valuation. Section 138.431.3. This statutory change from the previous situation in which the assessor’s valuation was presumed to be correct does not mean that there is now a presumption in favor of taxpayer. The taxpayer in a Commission tax appeal still bears the burden of proof and must show by a preponderance of the evidence that the property was improperly classified or valued. Industrial Development Authority of Kansas City v. State Tax Commission of Missouri, 804 S.W.2d 387, 392 (Mo. App. 1991).
In Reeves v. Snider, 115 S.W.3d 375 (Mo. App. S.D. 2003), the court of appeals described the taxpayer’s burden as follows:
Taxpayers were the moving parties seeking affirmative relief, and as such, they bore the burden of proving the vital elements of their case, i.e., the assessments were “unlawful, unfair, improper, arbitrary or capricious.” Cupples Hesse Corp. v. State Tax Comm’n, 329 S.W.2d 696, 702 (Mo.1959); Westwood P’ship v. Gogarty, 103 S.W.3d 152, 161 (Mo. App. 2003); 84 C.J.S. Taxation §§710, 726. This is true regardless of the existence or non-existence of the challenged presumption. As the Supreme Court of Missouri explained, “even were we to hold that it [the presumption] has been overcome, the burden of proof on the facts and inferences would still remain on petitioner, for it is the moving party seeking affirmative relief.”Cupples, 329 S.W.2d at 702.See also 84 C.J.S. Taxation §710, which states: “Even where there is no presumption in favor of the assessor’s ruling, if no evidence is offered in support of the complaint, the reviewing board is justified in fixing the valuation complained of in the amount assessed by the assessor.”
To prevail, Taxpayers had to “present an opinion of market value and then … present substantial and persuasive evidence that the proposed value is indicative of the market value of the subject property on tax day.” Daly v. P.D. George Co., 77 S.W.3d 645, 651 (Mo. App. 2002).
Substantial and Persuasive Evidence
Substantial evidence is that evidence which, if true, has probative force upon the issues, i.e., evidence favoring facts which are such that reasonable men may differ as to whether it established them, and from which the Commission can reasonably decide an appeal on the factual issues.Cupples-Hesse Corporation v. State Tax Commission, 329 S.W.2d 696, 702 (Mo. 1959).
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).
An expert’s opinion must be founded upon substantial information, not mere conjecture or speculation, and there must be a rational basis for the opinion.Missouri Pipeline Co. v. Wilmes, 898 S.W.2d 682, 687 (Mo. App. E.D. 1995).The state tax commission cannot ignore a lack of support in the evidence for adjustments made by the expert witnesses in the application of a particular valuation approach.Drey v. State Tax Commission, 345 S.W.2d 228, 234-236 (Mo. 1961); Snider v. Casino Aztar/Aztar Missouri Gaming Corp., 156 S.W.3d 341, 348 (Mo. 2005).
The testimony of an expert is to be considered like any other testimony, is to be tried by the same test, and receives just so much weight and credit as the trier of fact may deem it entitled to when viewed in connection with all other circumstances.The hearing officer, as the trier of fact, has the authority to weigh the evidence and 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 may accept it in part or reject it in part.Beardsley v. Beardsley, 819 S.W.2d 400, 403 (Mo. App. 1991); Curnow v. Sloan, 625 S.W.2d 605, 607 (Mo. 1981); Scanlon v. Kansas City, 28 S.W.2d 84, 95 (Mo. 1930).
Limitation on Encumbrances
It is against public policy to allow property owners to unilaterally act in such a manner as to preclude the taxing authority from collecting the appropriate property tax.Nance v. State Tax Commission, 18 S.W.3d 611 (Mo. App. 2000).
Limitation on Use of Contract Rents
Projected actual income may be adjusted to reflect current market conditions where actual rent substantially distorts the property’s true value.Missouri Baptist Children’s Home v. State Tax Comm’n of Missouri, 867 S.W.2d 510 (Mo. banc 1993); Nance v. State Tax Commission, 18 S.W.3d 611 (Mo. App. 2000).
In order to prevail, Complainant must present substantial and evidence tending to show that the value determined by the Board of Equalization is incorrect and that the value it is proposing is correct.Complainant has failed to meet its burden of proof.
Complainant argues that the leasehold interest has no market value because the lease cannot be transferred by the sublessee without the sublandlord’s permission.Thus, Complainant argues, there cannot be a “market.”And, if there cannot be a “market” then the leasehold interest cannot have market value.
Obviously, there is a substantial economic benefit in saving some $178,000 per year in rental payments.That creates value in the leasehold.Actions by the parties in limiting the transferability of the leasehold interest cannot be used to create an unlawful exemption from taxation.
The evidence clearly shows that if the property was unencumbered, it would have a market value of some $2,450,000 to $2,650,000.Complainant proposes only a value for the leased fee and no value for the leasehold interest.Respondent proposes a value for both the leased fee and the leasehold interest.Respondent’s appraiser determined the leasehold value by actually examining the market rentals for similar properties to determine the benefit realized by the Complainant.Respondent’s appraiser then determined that an 11% discount rate was appropriate based upon the additional risk associated with a subtenant position and the fact that no reversionary interest existed; resulting in a value of the leasehold interest of $1,372,310.He then added the contributory value of the sign site of $40,000 and deducted the cost of a new roof, for an indicated value of $1,202,310 (rounded to $1,200,000).Adding in the $350,000 value of the leased fee, Respondent’s appraiser concluded that the value of the subject property, in its encumbered state, was $1,550,000.This evidence, based upon market data and observed condition, is substantial and persuasive to overcome the presumption in favor of the Board of Equalization and to establish market value.
The assessed values determined by the Board of Equalization, are SET ASIDE.The Clerk is ordered to put the new assessed value of $496,000 on the subject property for tax years 2005 and 2006.
A party may file with the Commission an application for review of a hearing officer decision within thirty (30) days of the mailing of such decision.The application shall contain specific detailed grounds upon which it is claimed the decision is erroneous.Failure to state specific facts or law upon which the appeal is based will result in summary denial.
If an application for review of a hearing officer decision is made to the Commission, any protested taxes presently in an escrow account in accordance with this appeal shall be held pending the final decision of the Commission.If no application for review is received by the Commission within thirty (30) days, this decision and order is deemed final and the Collector of Boone County as well as the collectors of all affected political subdivisions therein, shall disburse the protested taxes presently in an escrow account in accord with the decision on the underlying assessment in this appeal.If any protested taxes have been disbursed pursuant to Section 139.031(8), RSMo, either party may apply to the circuit court having jurisdiction of the cause for disposition of the protested taxes held by the taxing authority.
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 December 19, 2006.
STATE TAX COMMISSION OF MISSOURI
Senior Hearing Officer
Certificate of Service
I hereby certify that a copy of the foregoing has been mailed postage prepaid this 19th day of December, 2006, to:Thomas Dunlap, 13 E. 5th Street, Fulton, MO 65251, Attorney for Complainant; John Patton, County Counselor, 601 East Walnut, Room 207, Columbia, MO 65201, Attorney for Respondent; Tom Schauwecker, Assessor; Wendy Noren, Clerk; Pat Lensmeyer, Collector, Boone County Government Center, 801 E. Walnut, Columbia, MO 65201.