ST. CHARLES HOSPITALITY, INC., )
v. ) Appeal Number 01-32601
EUGENE ZIMMERMAN, ASSESSOR, )
ST. CHARLES COUNTY, MISSOURI, )
DECISION AND ORDER
Decision of the St. Charles County Board of Equalization sustaining the assessment made by the Assessor, SET ASIDE, Hearing Officer finds true value in money for the subject property for tax years 2001 and 2002 to be $1,945,355, assessed value of $622,500.
Complainant appeared by Counsel, Richard Magee, St. Louis, Missouri.
Respondent appeared by Counsel, Lisa Leslie, Assistant County Counselor.
Case heard and decided by Chief Hearing Officer, W. B. Tichenor.
The Commission takes this appeal (1) to determine the true value in money for the subject property on January 1, 2001, and (2) whether the subject property was discriminated against in the assessment process by being assessed at a greater percentage of true value of money than other commercial properties in general in St. Charles County.
Complainant appeals the decision of the St. Charles County Board of Equalization which sustained the valuation of the subject property. The Assessor determined an appraised value of $2,373,150 (assessed value of $759,410, as commercial property). Complainant proposed a value of $1,945,355 (assessed value of $622,500). A hearing was conducted on July 2, 2002, at the St. Charles County Administration Building, St Charles, Missouri.
The Hearing Officer, having considered all of the competent evidence upon the whole record, enters the following Decision and Order.
Complainant offered into evidence the following exhibits:
Exhibit A Business Entity Information on Complainant from the Secretary of State of Missouri.
Exhibit B Assessment Data on Hotels in St. Charles County.
Exhibit C Hotel Sales Data on Missouri and Illinois Hotels.
Exhibit D Photographs of subject and comparable hotel properties.
Exhibit E Property Record Cards on subject and comparable hotel properties shown in Exhibit B.
Exhibit F Complainant’s Statements of Revenue and Expenses for 1999 and 2000.
Exhibit G Written Direct Testimony of Bob Maddipati, Licensed Real Estate Broker and Property Tax Consultant.
Exhibit H Written Direct Testimony of Sharad Shah, manager of subject property and shareholder of Complainant.
All exhibits were received into evidence. Mr. Shah and Mr. Maddipati testified under cross-examination.
Respondent did not offer any evidence on the issues of valuation or discrimination
FINDINGS OF FACT
1. Jurisdiction over this appeal is proper. Complainant timely appealed to the State Tax Commission from the decision of the St. Charles County Board of Equalization.
2. The subject property is located at 1377 South 5th Street, St. Charles, Missouri. It is identified by locator number 6014C7641005, Assessor’s Account number A976000111. The property is otherwise known as the Ramada Limited. It consists of a tract of land improved by a 64 unit mid-rate limited service motel, constructed in 1997, with paved parking area, landscaping, signage and lighting.
3. There was no evidence of new construction and improvement from January 1, 2001, to January 1, 2002.
4. The income approach is the appropriate methodology for the valuation of an income producing property such as the subject.
5. The Effective Gross Income for the subject property is $931,819. Exhibit F; Exhibit H, Q & A 6.
6. Allowable expenses, including a 6% management fee and salaries to the owner/partners of $100,000, are $670,347. Exhibit H, Q & A 6.
7. Net Operating Income (NOI) is $261,472. Exhibit H, Q & A 6.
8. The appropriate capitalization rate is 10% and the effective tax rate is 2.23% for an overall capitalization rate of 12.23%. Exhibit H, Q & A 6.
9. The value of furniture, fixtures and equipment (FF&E) that is not to be valued as part of the real property is $192,600. Exhibit H, Q & A 6.
10. The NOI capitalized at .1223 produces an indicated value of $2,137,955 ($261,472/.1223 = $2,137,955). Exhibit H, Q & A 6.
11. Deducting the FF & E gives an indicated value under the income approach for the subject property of $1,945,355 ($2,137,955 – $192,600 = $1,945,355). Exhibit H, Q & A 6.
12. Complainant’s evidence relying on the Income Approach was substantial and persuasive to rebut the presumption of correct assessment by the Board of Equalization and to establish the true value in money as of January 1, 2001, to be $1,945,355, as proposed. Exhibit F; Exhibit H, Q & A 6.
13. The true value in money for the subject property on January 1, 2001, was $1,945,355, assessed value of $622,500.
CONCLUSIONS OF LAW
The Commission has jurisdiction to hear this appeal and correct any assessment which is shown to be unlawful, unfair, arbitrary or capricious. Article X, section 14, Mo. Const. of 1945; Sections 138.430, 138.431, RSMo. 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. Section 138.431.4, RSMo.
Board of Equalization Presumption
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). There is no presumption that the assessor’s valuation is correct. Section 138.431.3, RSMo.
Standard for Valuation
Section 137.115, RSMo 1994, 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 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). 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).
Market value is the most probable price in terms of money which a property should bring in competitive and open market under all conditions requisite to a fair sale, the buyer and seller, each acting prudently, knowledgeable and assuming the price is not affected by undue stimulus.
Implicit in this definition is the consummation of a sale as of a specific date and the passing of title from seller to buyer under conditions whereby:
1. Buyer and seller are typically motivated.
2. Both parties are well informed and well advised, and each acting in what they consider their own best interests.
3. A reasonable time is allowed for exposure in the open market.
4. Payment is made in cash or its equivalent.
5. Financing, if any, is on terms generally available in the Community at the specified date and typical for the property type in its locale.
6. 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.
Weight to be Given Evidence
The Hearing Officer is not bound by any single formula, rule or method in determining true value in money, but 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).
Trier of Fact
The Hearing Officer as the trier of fact may consider the testimony of a witness and give it as much weight and credit as he may deem it entitled to when viewed in connection with all other circumstances. The Hearing Officer is not bound by the opinions of witnesses who testify on the issue of reasonable value, but may believe all or none of the testimony and accept it in part or reject it in part. St. Louis County v. Boatmen’s Trust Co., 857 S.W.2d 453, 457 (Mo. App. E.D. 1993); Vincent by Vincent v. Johnson, 833 S.W.2d 859, 865 (Mo. 1992); Beardsley v. Beardsley, 819 S.W.2d 400, 403 (Mo. App. 1991); Curnow v. Sloan, 625 S.W.2d 605, 607 (Mo. banc 1981).
Complainant’s Burden of Proof
In order to prevail, Complainant 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, 2001. Hermel, Inc. v. State Tax Commission, 564 S.W.2d 888, at 897. Substantial evidence can be defined as such relevant evidence as a reasonable mind might accept as adequate to support a conclusion. See, 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).
Owner’s Opinion of Value
The owner of property is generally held competent to testify to its reasonable market value. Boten v. Brecklein, 452 S.W.2d 86, 95 (Sup. 1970). The owner’s opinion is without probative value however, where it is shown to have been based upon improper elements or an improper foundation. Shelby County R-4 School District v. Hermann, 392 S.W.2d 609, 613 (Sup. 1965).
Methods of Valuation
Missouri courts have approved the comparable sales or market approach, the cost approach (replacement or construction) 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).
In order to obtain a reduction in assessed value based upon discrimination, the Complainant must (1) prove the true value in money of their property on January 1, 2001. Koplar v. State Tax Commission, 321 S.W.2d 686, 690 (Mo. 1959); and (2) show an intentional plan of discrimination by the assessing officials resulting in an assessment of that property at a greater percentage of value than other property, generally, within the same class within the same taxing jurisdiction. Koplar, supra, at 695.
Complainant must first establish the market value of the subject property in order to determine the percentage of true value at which it is being assessed. Next, the true value of the other properties generally which it is claimed are assessed at a lower percentage of true value than the subject property, must be established. Evidence of value and assessments of a few properties does not prove discrimination. Substantial evidence must show that all other property in the same class, generally, is actually undervalued. State ex rel. Plantz v. State Tax Commission, 384 S.W.2d 565, 568 (Mo. 1964). Then the ratio of assessed value to true value for both the subject property and the comparable properties must be compared to establish that the subject property is being assessed at a higher percentage of value. This difference in ratios must be shown to be grossly excessive. Savage v. State Tax Commission of Missouri, 722 S.W.2d 72, 79 (Mo. banc 1986). No other methodology is sufficient to establish discrimination. Cupples-Hesse Corporation v. State Tax Commission, 329 S.W.2d 696 (Mo. 1958).
Complainant Proves Value
The valuation issue in this appeal is very simple. A determination of the income stream for the subject property capitalized by the appropriate overall rate, with a deducation for personal property that cannot be valued with the real property provides an appropriate methodology for valuation. The owner’s opinion of value in this appeal, provided by Mr. Shah, who is both the manager of the subject property and co-owner (partner) of Complainant, is based upon the income approach which is recognized both by the Commission and the Courts of Missouri as an appropriate method for valuation.
Mr. Shah’s income approach was based on the actual operating income and expenses for the subject property. An appropriate overall capitalization rate, including the effective tax rate, was utilized to arrive at the indicated value. A deduction was appropriately made for the value of the personal property of the motel.
There is, of course, no presumption that the Assessor correctly valued this property. Section 138.431.3, RSMo. It is not known what was the basis upon which the Board determined that the fair market value of the property was the same as that determined by the Assessor. One could reasonably assume that whatever evidence of value was presented by the Assessor at the Board hearing which was found to be persuasive would have been offered into evidence before the Commission. However, no such evidence was forthcoming.
In any event, Complainant’s evidence rebuts the presumption that the Board correctly assessed the subject property. The presumption in favor of the Board is not evidence. A presumption simply accepts something as true without any proof to the contrary. In an evidentiary hearing before the Commission, the valuation determined by the Board, even if simply to sustain the value made by the Assessor, which is not presumed to be correct, is accepted as true only until and so long as there is no proof to the contrary.
Once the Complainant comes forward with credible evidence, especially evidence under a recognized methodology for valuing property, which demonstrates a lower value than that set by the Board, the presumption is gone. It possesses no further weight, unless evidence is put on the record which rebuts Complainant’s evidence of value. If no such evidence is forthcoming, as was the case in the present appeal, then the only evidence on the record upon which a determination of value can be made is that presented by the Complainant.
The evidence presented by the co-owner as to actual income and expenses for the subject property was clearly credible evidence. In point of fact, such evidence is the type of information that a prospective purchaser of the subject property would first look to when considering a purchase of the subject. None of the facts and data presented by the owner were rebutted, contradicted or disputed in any way by Respondent. For all intents and purposes, the facts relating to the most probative and persuasive method for valuing the subject property stand admitted by Respondent in this appeal.
The evidence on this record provides for only one determination of value. That conclusion is that the fair market value of the subject property as of January 1, 2001, was $1,945,355 as advocated by the co-owner and as supported by the income approach to value. This appeal could have easily been resolved without an evidentiary hearing by the Respondent’s staff making the simple calculation of value based on the income approach as done by Mr. Shah.
Where there is a claim of discrimination based upon a lack of valuation consistency, Complainant has the burden to prove:
1. The level of assessment for the subject property in 2001. This is done by independently determining the market value of the subject property and dividing the market value into the assessed value of the property as determined by the assessor’s office.
2. The average level of assessment for commercial property in St. Charles County in 2001. This is done by (a) independently determining the market value of a representative sample of commercial properties in St. Charles County; (b) determining the assessed value placed on the properties by the assessor’s office for the relevant year; (c) dividing the assessed value by the market value to determine the level of assessment for each property in the sample; and (d) determining the mean and median of the results.
3. That the disparity between (1) and (2) is grossly excessive. The difference between the actual assessment level of the subject property and the average level of assessment for all commercial property, taken from a sufficient representative sample in St. Charles County must demonstrate a disparity that is grossly excessive. Savage v. State Tax Commission of Missouri, 722 S.W.2d 72, 79 (Mo. banc 1986).
Complainant’s evidence established the fair market value (true value in money) of the subject property to be $1,945,355. The subject property had been given an assessed value by the Assessor, which the Board sustained, of $759,410. In other words, the subject motel was assessed for 2001 and 2002 at 39% of its fair market value instead of 32% as required by Section 137.115, RSMo (759,410/1,945,355 = .39).
Complainant offered into evidence the Property Record Cards (PRC) on thirteen other motel properties in St. Charles County. Exhibits B and E. The PRCs establish that each of these properties are being assessed at 32% of the fair market value as determined by the Assessor. No attempt was made by Complainant to establish that any of these properties, or that the properties as a whole were overvalued or undervalued. Complainant was, in effect, agreeing that the fair market value of these properties as determined by the Assessor was appropriate.
Therefore, there is no basis upon which the Hearing Officer can assess the subject property at a lower percentage of true value in money than 32% as required by statute and which is the assessment ratio utilized by Respondent in assessing the thirteen motels listed by Complainant in its Exhibit B. Complainant’s claim of discrimination is satisfactorily addressed by applying the statutory assessment ratio to the true value in money determined in this decision.
The assessed valuation for the subject property as determined by the Assessor and sustained by the Board of Equalization for St. Charles County for the subject tax day is SET ASIDE.
The assessed value for the subject property for tax years 2001 and 2002 is set at $622,500.
A party may file with the Commission an application for review of this decision within thirty (30) days of the mailing of such decision. The application shall contain specific 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. Section 138.432, RSMo 1994.
If an application for review of this 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 St. Charles 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 or all 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 August 26, 2002.
STATE TAX COMMISSION OF MISSOURI
W. B. Tichenor
Chief Hearing Officer