STATE TAX COMMISSION OF MISSOURI
| THOMAS R. DOWD & DELOISE T. DOWD, | ) | |
| ) | ||
| Complainants, | ) | |
| ) | ||
| v. | ) | Appeal No. 15-15837 |
| ) | ||
| 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 Thomas R. and Deloise T. Dowd (Complainants) did not present substantial and persuasive evidence to rebut the presumption of correct assessment by the BOE. Respondent Jake Zimmerman, St. Louis County Assessor, (Respondent) presented substantial and persuasive evidence to rebut the BOE’s valuation and to establish the true market value of the subject property as of January 1, 2015.
Complainant Thomas R. Dowd (Complainant) appeared pro se; Complainant Deloise T. Dowd appeared not.
Respondent appeared by Steven Robson, Assistant County Counselor.
Case heard and decided by Senior Hearing Officer Amy S. Westermann.
ISSUE
Complainant appealed on the ground of overvaluation. Respondent initially set the true market value (TMV) of the subject property, as residential property, at $207,300. The BOE sustained Respondent’s valuation. The Commission takes this appeal to determine the TMV of the subject property on January 1, 2015.
The Senior 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. Complainant timely appealed to the State Tax Commission.
- Evidentiary Hearing. The issue of overvaluation was presented at an evidentiary hearing on June 29, 2016, 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 16M340022. It is further identified as 10 Branford Dr., Olivette, Missouri. (Complaint; Exhibit C)
- Description of Subject Property. The subject property consists of a 20,000 square foot residential lot improved by a 1,940 square foot, single-family, ranch-style home built in 1956. (Exhibit C) The subject property includes a total of three bedrooms; two full bathrooms and one half bathroom; a two-car attached carport; one fireplace; and a patio. The exterior consists of brick construction. (Exhibit C) The subject property also includes a 1,320 square foot, attached, second residence or “mother-in-law quarters.” (Exhibit C) One of the bedrooms and one of the full bathrooms is located in the mother-in-law quarters.
- Assessment. Respondent set a TMV on the subject property at $207,300 residential, as of January 1, 2015.
- Board of Equalization. The BOE sustained Respondent’s TMV of the subject property.
- Complainant’s Evidence. Complainant testified in his own behalf. Complainant testified that he had purchased the subject property in 1981 for approximately $80,000. Complainant testified that the subject property was not encumbered by a mortgage. Complainant testified that the subject property had not been listed for sale or appraised within the three years preceding the Evidentiary Hearing. Complainant testified that he had been unable to obtain an appraisal from a certified appraiser due to the lack of comparables because of the configuration of the residence, which includes an attached mother-in-law quarters. Complainant testified that the mother-in-law quarters could not be used as a rental due to restrictions set by local ordinance. Complainant argued that the residence’s configuration with a mother-in-law quarters made the property undesirable to potential buyers. Complainant testified that the plumbing and electrical systems were original to the subject property and needed to be replaced, which would be difficult given that the residence was situated on top of a concrete slab with no basement. Complainant testified that the front porch of the residence is flooded by water runoff from a neighboring property during and following substantial rainfall. Complainant testified that the subject property borders a public bike trail, which had become a nuisance because bike riders would cut through the yard. Complainant further testified that the presence of the bike trail had degraded the privacy of the subject property and had caused an increase in crime in the neighborhood, all of which adversely affected the TMV of the subject property.
Complainant testified that he had tried to obtain an appraisal from 11 appraisers, but each had declined based on the lack of comparables given the mother-in-law quarters attached to the residence. Complainant testified that the residence contained two distinct units, each with kitchens, living/dining combination rooms, one bathroom, and a shared family room. Complainant testified that the larger side of the residence contained two bedrooms and the smaller side contained one bedroom. Complainant testified that three real estate companies had looked at the subject property and had estimated the TMV of the subject property to range from $90,000 (as a tear down) to $125,000 (in its “as is” condition and with the need for substantial improvements). Complainant testified that he had not made any improvements to the subject property between January 2013 and January 2015. Complainant testified that his opinion of the subject property’s TMV as of January 1, 2015, was $118,000.[1]
Complainant offered as evidence to support his opinion of value (1) a series of photographs depicting various interior and exterior aspects of, condition of, and damage to the subject property (Exhibits 1 through 15 ); (2) a typed summary regarding Complainant’s attempts to obtain an appraisal, describing the nature and functional obsolescence of the residence and mother-in-law quarters, listing the names of 11 appraisers who declined to perform an appraisal, copies of letters from real estate companies in which the companies estimated the subject property’s TMV, and a bid from Casey Electric (Exhibit 16); and copies of bids totaling over $66,000 for replacing concrete, landscaping, replacing the radiant heating system and underground water lines, repairing the waste system, installing venting in the roof, replacing the chimney, and repairing the roof (Exhibit 17).
Respondent objected to some of Complainant’s testimony regarding the appraisers’ inability to locate comparables and the realtors’ estimates of TMV as hearsay. Respondent also objected to Exhibits 16 and 17 on the basis of hearsay. The Senior Hearing Officer overruled the objections and received the evidence to be given the weight deemed necessary when viewed in context with all of the evidence but cautioned Complainant to testify as to his own personal knowledge. Respondent did not object to Complainant’s other evidence, which was received into the record.
On cross examination, Complainant testified that he had not allowed Respondent’s appraiser to inspect the property to view the condition issues raised by Complainant during his case in chief. Complainant testified that he believed the appraiser to be representing Respondent’s case and in an adversarial position to Complainant; therefore, it would not have been in Complainant’s best interest to allow an the appraiser to inspect.
- Respondent’s Evidence. Respondent offered as evidence the testimony of Missouri State Certified Residential Real Estate Appraiser Gerald D. Keeven, Jr., (Appraiser) along with the Appraiser’s report (Exhibits A, B, and C). The Appraiser utilized the sales comparison approach to arrive at his opinion of value. The Appraiser chose three comparable properties that had sold between November 2012 and October 2014 with sale prices ranging from $153,000 to $195,000. The Appraiser had researched the St. Louis County Real Estate Information database and MARIS/MLS listings to find comparables. All of the comparables were located within roughly a quarter-mile of and in the same neighborhood as the subject property. Like the subject property, all of the comparables had 20,000 square foot lots; were single family, ranch style homes; had been built in either 1956 or 1957; and were rated as C4[2] condition. The Appraiser testified that he had not been allowed to inspect the main residence or mother-in-law quarters of the subject property and had viewed only portions of the exterior, which appeared to be consistent with the C4 rating for condition. The Appraiser made market based adjustments to the comparables to arrive at an opinion of value for the subject property. Specifically, the Appraiser made a $5,000 negative adjustment to account for a water runoff problem with the subject property and a $15,000 positive adjustment to account for the presence of the mother-in-law quarters. The appraiser made additional adjustments for the number of bedrooms and bathrooms; gross living area; number of garage stalls and whether the garage was attached; decks, patios, and screened porches; and number of fireplaces. The adjusted sale prices of the comparables ranged from $176,000 to $214,700. The Appraiser opined that the TMV of the subject property as of January 1, 2015, was $196,500. [3] (Exhibit C)
Complainant objected to the admission of Exhibit C, the Appraiser’s Report, on the ground that it was based on suppositions and/or conjecture. Given that Respondent had laid a foundation establishing the Appraiser’s credentials as an expert in the field of residential real estate appraisal, the Senior Hearing Officer overruled the objection, and the Appraiser’s Report was received into the record. Complainant did not object to Respondent’s other evidence, which was received into the record.
On cross examination, the Appraiser testified that his opinion of the subject property’s TMV was the same even after seeing Complainant’s evidence of condition and bids for repairs. The Appraiser further testified that he had formed his opinion of value by selecting three comparable sales in the neighborhood of the subject property.
- Presumption of Correct Assessment Rebutted – Value Established. The evidence presented by Respondent was substantial and persuasive to both rebut the presumption of correct assessment by the Board and to establish the fair market value of the subject property to be $196,500, assessed (residential) value of $37,335.
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, including the application of any abatement. The Senior 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.
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 Commission, 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 Senior Hearing Officer inquired of Complainant and of the Appraiser.
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.
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 Commission “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 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. Hermel, Cupples-Hesse, Brooks, supra.
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).
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 it also would be applicable to the Respondent.
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 sustained the initial valuation of Respondent, and both Complainant and Respondent are now seeking to change the assessment; therefore, the BOE presumption applies.
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, 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
Complainant’s evidence was neither substantial nor persuasive to support an opinion as to the true market value of the subject property as of January 1, 2015. 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.
First, Complainant did not use any of the court approved methods of valuation to arrive at an opinion of TMV. Complainant testified that he had contacted 11 appraisers who declined to perform an appraisal based on a lack of sales of comparable properties and due to the existence of the mother-in-law quarters. Although Complainant presented evidence of proposed purchase prices from three real estate companies, the real estate companies were not representative of a typical buyer. In their letters addressed to Complainant, none of the real estate companies revealed whether they represented an actual buyer who wished to occupy the subject property in its as-is state or whether the real estate companies intended to purchase the subject property as a tear down or as a renovation project. The real estate companies did not provide Complainant with a market based analysis in arriving at their estimates of value but made generalized statements to buttress their estimates. One of the companies simply stated that its estimate was based on an “inspection and market analysis” and the “nonfunctional layout” of the residence, but no detailed report was included with the one paragraph letter. (Exhibit 16). Another of the companies indicated that an individual employee of the company had spent a week “researching the property and [determined] the best use would be to tear down the existing structure and build a new home” based on that employee’s discussion with “several builders.” Again, no detailed report was included with the one paragraph letter. (Exhibit 16) The last company did not even conduct a market analysis but based its estimate on a personal visit and a review of the condition of the property. (Exhibit 16) Second, the evidence concerning the condition of the property was incomplete in that it did not establish the depreciated value of the subject property in the first instance; thus, it is impossible to know how the replacement and repair costs shown in the bids would affect the value of the subject property. Consequently, this evidence does not adequately support an opinion that the TMV of the subject property as of January 1, 2015, was $118,000. On the contrary, under these circumstances, Respondent’s evidence was both substantial and persuasive. First, Respondent presented the appraisal report and the testimony of the Appraiser, which was supported by the Appraiser’s professional qualifications as a state certified residential real estate appraiser. Second, although the subject property is unusual in that it contains a mother-in-law quarters, the Appraiser’s report analyzed actual sales of comparable properties within the subject property’s neighborhood. In arriving at an opinion of TMV, the Appraiser accounted for potential undesirability of the mother-in-law quarters by making a market based, positive adjustment to the comparables. Third, the actual sale prices of Respondent’s comparables listed in the Appraiser’s report directly contradicted the estimates of value proposed by the real estate companies. The valuations proposed by the real estate companies were stated in terms of generalities and not reinforced with reports of actual sales.
On cross-examination, Complainant attempted to call the Appraiser’s methodology into question and specifically asked whether the Appraiser’s opinion of TMV remained the same after seeing Complainant’s evidence of the condition of the subject property. The Appraiser testified that his opinion, which had been based upon his review of the exterior of the property from the street, remained the same. Given Complainant’s earlier admission that he had not allowed the Appraiser to perform an inspection of the subject property, this line of questioning did not aid in discrediting Respondent’s evidence.
Respondent rebutted the presumption of correct valuation by the BOE and also presented substantial and persuasive evidence establishing that the TMV of the subject property on January 1, 2015, was $196,500.
ORDER
The true market valuation for the subject property as determined by the BOE is SET ASIDE. The assessed value for the subject property for tax years 2015 and 2016 is set at $37,335 residential ($196,500 TMV).
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 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 September 20, 2016.
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 20th day of September, 2016, to: Complainants(s) counsel and/or Complainant, the County Assessor and/or Counsel for Respondent and County Collector.
Jacklyn Wood
Legal Coordinator
[1] At the hearing, Complainant proposed a TMV higher than the TMV proposed on the complainant form, which was $107,000 to $110,000. The proposed TMV of $118,000 reflected an estimate of the subject property’s value proposed by one of the three realtors who had provided Complainant with an estimate based on the “as-is” condition. (Exhibit 16)
[2] The C4 condition rating is defined as the “improvements feature some minor deferred maintenance and physical deterioration due to normal wear and tear. The dwelling has been adequately maintained and requires only minimal repairs to building components/mechanical systems and cosmetic repairs. All major building components have been adequately maintained and are functionally adequate.”
[3] Respondent’s proposed valuation was lower than the BOE’s valuation.