State Tax Commission of Missouri
TERA LYNN WILLIAMS REVOCABLE TRUST,)
)
Complainant,)
)
v.)Appeal Number 09-79003
)
LISA POPE, ASSESSOR,)
PLATTE COUNTY, MISSOURI,)
)
Respondent.)
ORDER
OVERTURNING HEARING OFFICER DECISION
UPON APPLICATION FOR REVIEW
On December 22, 2009, Senior Hearing Officer Luann Johnson entered her Decision and Order (Decision) sustaining the assessment by the Platte County Board of Equalization.[1]
Complainant timely filed her Application for Review of the Decision[2].Respondent timely filed her Response.Complainant timely filed her Reply.
CONCLUSIONS OF LAW
Standard Upon Review
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.[3]The Hearing Officer 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 accept it in part or reject it in part.[4]The Commission will review the Decision to determine whether the Hearing Officer acted in an arbitrary or capricious manner or abused her discretion as the trier of fact and concluder of law in this appeal.
Points Raised in Application for Review
Complainant’s general allegation is that the Decision is erroneous, unreasonable, arbitrary and capricious and an abuse of discretion.The Complainant specifically raised six points in her Application for Review.[5]The six points are identified for purposes of this Order as follows:
1.Complainant’s appraiser provided the most accurate information to establish market value.
2.Subject property does not have a public water main.
3.Respondent’s appraiser did not acknowledge paired sales analysis in the neighborhood.
4.There is no easement to construct the subject street wide enough for two cars to pass.
5.Site coast was $15,000 not $29,000 as listed by Respondent’s appraiser.
6.Hearing Officer erred in using a mixture of market value and cost approach to value the subject.
Specific Points Raised Not Persuasive
None of the specific points alone provide a basis for overturning the Decision.Point 1 is nothing more than Complainant’s opinion that the Complainant’s appraiser proved value.As to Point 2, both appraisals indicate the subject has “Public Water.”Complainant pointed to nothing in the Decision or Record to prove otherwise.The claim advanced under Point 3, appears to be assuming facts not in evidence, since no reference to the record was cited in support of this assertion.
The matter of the lack of an easement for street widening raised under Point 4 was not of sufficient import for either appraiser to make a specific adjustment for this factor.However, both appraisers made location adjustments to the sale comparables.Such a location adjustment would encompass the subject being on a narrow street.The Hearing Officer recognized the matter of the street condition and width.[6]
Complainant’s Point 5 attacks the site cost of $29,000 utilized by Respondent’s appraiser.Complainant’s appraiser put the site value at $35,000.[7]The claim that the site cost was $15,000 is not demonstrated by reference to where in the record that alleged fact was established.Furthermore, it fails to establish the site value as of January 1, 2009, which is the relevant date, not the date of site acquisition a year or more prior to the first of January, 2009.
Point 6 attacks the Hearing Officer’s use of a mixture of market value and cost approach to value the subject.Complainant fails to establish that the use of two accepted appraisal methodologies to arrive at a conclusion of value is in error.
General Allegation
A party subject to a decision and order of a hearing officer may file with the Commission, within thirty days, an application to have such decision and order reviewed by the Commission. The Commission may summarily allow or deny an application for review.If an application is allowed, the Commission may affirm, modify, reverse, or set aside the decision and order of the hearing officer on the basis of the evidence previously submitted in such case, may take additional evidence, or may remand the matter to the hearing officer with directions.[8]
Upon review of the entire record, the Commission sets aside the decision and determines value for the subject property.As the Hearing Officer pointed out in her Decision, the property has unique aspects making it difficult to appraise.The improvement was constructed in 2007/2008 for $360,000.Both appraisers agree that due to the unique nature of the improvement, the actual cost to construct does not reflect the market value of the property.The improvement contains 2,637 square feet on the main level with only one bedroom.The main level also contains a 5’x6’ “cat room,” another unique aspect of this property is the lot.The street is narrow without curbing or sewers.Since there are no sanitary sewers, the property has a septic tank.
Appraisers for the Complainant and Respondent completed a sales comparison approach to determine value.Complainant’s appraiser used three sales and made adjustments from 24% to 44%.The range of adjustments indicates that this sales comparison approach is not a reliable indicator of value.Respondent’s appraiser used six sales.The gross adjustments ranged from 10.63% to 24.5%.After making adjustments to account for the differences in location, gross living area, basement finish, and size of garage, the appraiser concluded a value of $305,000.
Appraisers for the Complainant and Respondent also completed a cost approach to determine value.Complainant’s appraiser concluded on a value of $255,100 using the cost approach.Complainant’s appraiser failed to include the cost to construct the 2,420 square foot basement.Using the Respondent’s appraiser’s determination of cost to build a basement ($49,938), the Complainant’s value is amended to $302,038.
After reviewing both appraisals, the Commission finds that there was substantial and persuasive evidence that the market value of the property as of January 1, 2009, was $305,000.
ORDER
The Commission upon review of the record and Decision in this appeal, finds the Hearing Officer erred in her determination that the presumption of correct assessment had not been rebutted.Accordingly, the Decision is overturned.
The appraised value for the subject property for tax years 2009 and 2010 is set at $305,000; the assessed value for the subject property for tax years 2009 and 2010 is set at $57,950.
Judicial review of this Order may be had in the manner provided in Sections 138.432 and 536.100 to 536.140, RSMo within thirty days of the mailing date set forth in the Certificate of Service for this Order.
If judicial review of this decision is made, any protested taxes presently in an escrow account in accordance with this appeal shall be held pending the final decision of the courts unless disbursed pursuant to Section 139.031.8, RSMo.
If no judicial review is made within thirty days, this decision and order is deemed final and the Collector of Platte 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.
SO ORDERED July 21, 2010.
STATE TAX COMMISSION OF MISSOURI
Bruce E. Davis, Chairman
Jeff W. Schaeperkoetter, Commissioner
DECISION AND ORDER
HOLDING
Decision of the Platte County Board of Equalization sustaining the assessment made by the Assessor is SUSTAINED.True value in money for the subject property for tax years 2009 and 2010 is $341,750, residential assessed value of $64,933.
Complainant appeared by counsel, Keith Hicklin.
Respondent appeared in person and through her appraiser, Annette Testerman.
Case heard and decided by Senior Hearing Officer Luann Johnson.
ISSUE
The Commission takes this appeal to determine the true value in money for the subject property on January 1, 2009.
SUMMARY
Complainant appeals, on the ground of overvaluation, the decision of the Platte County Board of Equalization, which sustained the Assessor’s original valuation of the subject property.At hearing, Assessor’s appraiser proposed an appraised value of $305,000 (assessed value of $57,950, as residential property).Complainant proposed a value of $250,000 (assessed value of $47,500).A hearing was conducted on November 19, 2009, at the County Administration Building, Platte City, Missouri.
The Hearing Officer, having considered all of the competent evidence upon the whole record, determines that a modified cost approach is the most reasonable way to value the subject property and enters the following Decision and Order.
Complainant’s Evidence
Complainant presented the appraisal report of Thomas Pryor, which report was entered into evidence as Complainant’s Exhibit 1.Additionally, Complainant presented a packet of pictures identified as Complainant’s Exhibit 2.
Respondent’s Evidence
Respondent presented the appraisal report of Annette Testerman, which report was entered into evidence as Respondent’s Exhibit A.
FINDINGS OF FACT
1.Jurisdiction over this appeal is proper.Complainant timely appealed to the State Tax Commission from the decision of the Platte County Board of Equalization.
2.The subject property is located at 3812 NW 67th Terrace, Kansas City, Missouri.The property is identified by parcel number 19-4.0-20-400-001-005-002.The property consists of43,612 square foot wooded lot improved by a one-story brick, ranch, single-family structure of good quality construction.The house was built in 2008 for a cost of $360,000 and is in good condition.The residence has an open floor plan containing 2,637 square feet of living area on the main level.Most notable is that the property has only one bedroom on the main level.The main level also has a 5’ x 6’ “cat room.”The property has a full unfinished walk-out basement which has some stud walls constructed and there is an area subbed in for a future elevator.Additionally, the home has an attached two-car garage.
3.The neighborhood is somewhat unique for this area inasmuch as the streets and other infrastructure are not as well as developed as can be found in other nearby neighborhoods.Complainant complains that her street does not have curbing or sewers which results in water overflowing the base of the street.Complainant further complains that her street is narrow, providing no room for vehicles to pass each other.Complainant shares the street with only one other home.Finally, Complainant complains that there are no sanitary sewers on her street forcing her to have a septic tank.
4.There was no evidence of new construction and improvement from January 1, 2009, to January 1, 2010.
5.Complainant built the property in 2007/2008 for $360,000 and now argues that the property was worth no more than $250,000 on January 1, 2009.Complainant’s appraiser testified that high construction costs were due to the “build to suit” nature of the property.The appraiser further testified that functional obsolescence due to a single bedroom on the main level and the inferior infrastructure in the subject neighborhood decreased the property’s value.
6.Complainant’s appraiser presented three proposed comparable sales located 1.54 miles southeast, 2.94 miles southeast and 3.19 miles northwest.Those properties contained 2,243 square feet; 2,080 square feet; and 1,677 square feet. One property was two years old; one property was 11 years old and the last property was new.The properties sold for $299,171 in March, 2009; $224,000 in May, 2009; and $312,000 in July, 2009.Complainant’s appraiser testified that time was not a necessary adjustment for these proposed comparable sales.There is no evidence of a declining market.After adjustments, the properties indicated a range of value between $217,500 and $276,000.The properties required gross adjustments of 24.4%; 44.0%; and 37.8%.Complainant’s appraiser testified that the Fannie Mae preferred that adjustments stay below 25%, but would allow excessive percentage differences in situations where other comparable sales were not available. The extent of the disparity between the subject property and the proposed comparable sales indicate that the sales are not truly comparable and are not useful in determining value for the subject property.Complainant’s sales comparison approach is not a reliable indicator of value for the subject property.
7.Complainant’s appraiser discounted evidence of actual construction costs; asserting that the difference in the cost of construction and the market value only a few months later was due almost entirely to the “build to suit” nature of the home.He opined that he had run into a similar situation with his father’s home which was built for $350,000 but which he could only sell for $210,000.But, what is lacking from the appraiser’s testimony are the ‘build to suit” features which account for a difference in value of $110,000.The only unique feature of this home was the 5’x 6’ “cat room” which vented to the outside which he seemed to ignore in his comparable adjustments.
Further, there is no evidence that Mr. Pryor reconciled his cost approach to the actual construction costs.He failed to even include the cost of constructing the basement for the subject property.But, he did include a $24,445 adjustment for functional obsolescence – indicating the maximum “build to suit” obsolescence.
Correcting Mr. Pryor’s cost approach to include the cost to construct the basement, as suggested by Respondent, yields a value of $302,038 ($255,100 + $46,938 = $302,038).
8.Complainant’s evidence was not substantial and persuasive to rebut the presumption of correct assessment by the Board and establish the true value in money as of January 1, 2009, to be $250,000, as proposed.Complainant’s sales comparison approach failed to utilize sufficiently similar sales and is not substantial and persuasive evidence to rebut the presumption of correct assessment by the Board.Complainant’s cost approach failed to include the cost to build the 2,420 square foot basement.Because this Hearing Officer has noted at least one mistake in Complainant’s cost approach and has some questions as to the correct square foot value for improvements on the main level ($90 per square foot vs. Respondent’s $108 per square foot) it will not, standing alone, be deemed to be substantial and persuasive enough to rebut the presumption in favor of the Board of Equalization.
9.Respondent’s appraiser presented six proposed comparable sales located 3.8 miles southwest, 1.59 miles north, 1.30 miles southeast, 1.31 miles southeast, 1.57 miles north and 1.55 miles north.Those properties contained 1,748 square feet; 1,952 square feet; 1,877 square feet; 1.694 square feet; 2,080 square feet; and 1,733 square feet.One property was five years old and the remaining five were one year old.The properties sold for $335,000 in March, 2009; $380,000 in December, 2008; $317,900 in April, 2009; $370,343 in July, 2008; $365,900 in May, 2008; and $394,950 in July, 2008.One comparable had one bedroom, four comparables had two bedrooms and one comparable had three bedrooms. After adjustments, the properties indicated values of $303,430; $363,580; $327,000; $376,263; $343,960 and $386,970.The properties required gross adjustments of 24.50%; 13.58%; 10.73%; 13.75%; 12.82% and 15.37%.
Although acknowledging that the limited number of bedrooms in the subject property created functional obsolescence, Respondent’s appraiser did not adjust for the difference in bedroom count between the subject property and her proposed comparable sales.Turning to Complainant’s appraisal report, we find that the adjustment for bedrooms should be $10,000 per bedroom.Thus, the adjusted prices of Respondent’s comparables should be $303,430; $353,580; $307,000; $356,263; $333,960 and $376,970.Now the gross adjustments are 24.50%, 16.21%; 17.01%; 16.45%; 15.55% and 17.90%.These percentages are still within the maximums recognized by the Fannie Mae as appropriate for comparable sales.But, they are on the high side suggesting that these proposed comparables are somewhat questionable in determining value for the subject property.The adjusted values of the comparable sales would support the Board value of $341,750.
10.Respondent prepared a cost approach to value which concluded a value of $360,419.But while acknowledging functional obsolescence due to the bedroom count, Respondent’s appraiser failed to make an adjustment for functional obsolescence within her cost approach.Therefore, we apply the functional obsolescence proposed by Complainant’s appraiser and reach a corrected value of $335,914 ($360,419 – $24,445 = $335,914).This is a number very similar to the Board value of $341,750.
11.Because of the flaws mentioned above, Respondent’s appraisal report standing alone is not substantial and persuasive enough to rebut the presumption of correct assessment by the Board and to establish the correct value for the subject property on January 1, 2009 as $305,000.Respondent’s assertion of a value of $305,000 is also questionable because Respondent’s own evidence does not support such a value.
Prior to adjustments for bedroom count, only one of Respondent’s comparable sales would have supported such a low value. The only comparable that supports Respondent’s value is 6118 Double Eagle Court, Parkville, Missouri.
After adjustment for bedroom count, only two out of six of Respondent’s comparables would support such a low value:the property at 6118 Double Eagle Court, Parkville, Missouri and a property at 6304 North Britt Avenue, Kansas City, Missouri.Two comparable sales within the proposed value range are very slim evidence in support of Respondent’s opinion of value.
12.The potential values for the subject property are $302,038 (Complainant’s corrected cost approach); $305,000 (Respondent’s sales approach/two of six comparable sales); $335,914 (Board of Equalization/Respondent’s cost approach/four of Respondent’s six comparable sales); $341,750 (Board of Equalization/Respondent’s cost approach/four of Respondent’s six comparable sales); or $360,000 (actual cost of construction/three of Respondent’s six comparable sales).Complainant’s comparable sales approach is simply too far away from acceptable to be correctable and is therefore rejected.
Because the parties had to go outside of the subject neighborhood in order to find sales to attempt to adjust; and because Complainant asserts that neighborhood infrastructure is a significant factor in property value; and because the property was very recently constructed; and because the evidence established that the market was not declining; the Hearing Officer finds that the cost approach is a more reliable indicator of value than the comparable sales approach.
As between the two available corrected cost approaches, the Respondent’s cost approach is also supported by sales; with the value of $335,914 sitting directly in the middle of the six listed sales ($303,430; $353,580; $307,000; $356,263; $333,960 and $376,970) .Complainant has no market data in support of her cost approach.Therefore, we find that Respondent’s cost approach is more reliable than Complainant’s cost approach.
Having rejected Complainant’s suggestions of value, we are left with $335,914 (Board of Equalization/Respondent’s cost approach/four of Respondent’s six comparable sales); $341,750 (Board of Equalization/Respondent’s cost approach/four of Respondent’s six comparable sales); or $360,000 (actual cost of construction/three of Respondent’s six comparable sales).
None of the above values are more supportable than another, and Respondent’s corrected value and the Board’s value are virtually identical.Therefore, we find that the value originally determined by the Assessor and approved by the Board of Equalization is supported by substantial and persuasive evidence.The decision of the Board of Equalization is sustained.The correct value for the subject property on January 1, 2009, and January 1, 2010, is $341,750 (assessed value $64,933).
CONCLUSIONS OF LAW AND DECISION
Jurisdiction
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.[9]
Official and Judicial Notice
Agencies shall take official notice of all matters of which the courts take judicial notice.[10]
Courts will take judicial notice of their own records in the same cases.[11]In addition, courts may take judicial notice of records in earlier cases when justice requires[12] or when it is necessary for a full understanding of the instant appeal.[13] Courts may take judicial notice of their own records in prior proceedings involving the same parties and basically the same facts.[14]
Presumptions In Appeals
There is a presumption of validity, good faith and correctness of assessment by the CountyBoardof Equalization.[15]
The presumption in favor of the Board is not evidence.A presumption simply accepts something as true without any substantial 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, is accepted as true only until and so long as there is no substantial evidence to the contrary.
The presumption of correct assessment is rebutted when the taxpayer, or respondent when advocating a value different than that determined by the Board, 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.[16]
Standard for Valuation
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 bought by one who is willing or desirous to purchase but who is not compelled to do so.[17]It is the fair market value of the subject property on the valuation date.[18]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 are 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 both 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.[19]
Duty to Investigate
In order to investigate appeals filed with the Commission, the Hearing Officer has the duty to 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.The Hearing Officer’s decision regarding the assessment or valuation of the property may be based solely upon its inquiry and any evidence presented by the parties, or based solely upon evidence presented by the parties.[20]
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.[21]
Trier of Fact
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 he may deem it entitled to when viewed in connection with all other circumstances.The Hearing Officer 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 accept it in part or reject it in part.[22]
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.[23]
Missouricourts have approved the comparable sales or market approach, the cost approach and the income approach as recognized methods of arriving at fair market value.[24]
Opinion Testimony by Experts
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.[25]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.[26]
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.[27]
If specialized knowledge will assist the trier of fact to understand the evidence or to determine a fact in issue, a witness qualified as an expert on that subject, by knowledge, skill, experience, training, or education, may testify thereto.
The facts or data upon which an expert bases an opinion or inference may be those perceived by or made known to the expert at or before the hearing and must be of a type reasonably relied upon by experts in the field in forming opinions or inferences upon the subject and must be otherwise reliable, the facts or data need not be admissible in evidence.[28]
Respondent’s Burden of Proof
Respondent, when advocating a value different from that determined by the original valuation or a valuation made by the Board of Equalization, 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.[29]
Complainant