STATE TAX COMMISSION OF MISSOURI
| THOMAS L. HUDSON & SALLY A. HUDSON, | )
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| Complainant, | ) | |
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| v. | ) | Appeal No. 17-10079 |
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Parcel/Locator No.
23M110052 |
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| JAKE ZIMMERMAN, ASSESSOR, | ) | |
| ST. LOUIS COUNTY, MISSOURI,
Respondent |
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DECISION AND ORDER
HOLDING
The decision of the St. Louis County Board of Equalization (BOE) is SET ASIDE. Complainants Thomas L. Hudson and Sally A. Hudson 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.
Thomas L. Hudson (Complainant) appeared pro se; Sally A. Hudson appeared not.
Respondent appeared by counsel Steve 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 value in money (TVM) of the subject property at $549,500, as residential property, as of January 1, 2017. The BOE valued the subject property at $500,000, thereby lowering Respondent’s valuation. The State Tax Commission (STC) takes this appeal to determine the TVM for the subject property as of January 1, 2017.
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. Complainant timely appealed to the State Tax Commission.
- Evidentiary Hearing. The issue of overvaluation was presented at an evidentiary hearing on January 31, 2018, at the St. Louis County Government Building, 41 South Central Avenue, Clayton, Missouri.
- Identification of Subject Property. The subject property is identified by parcel/locator number 23M110052. It is further identified as 303 W. Madison Avenue, Kirkwood, St. Louis County, Missouri. (Complaint; Exhibit 1)
- Description of Subject Property. The subject property consists of .36 acres improved by a two story, 2,772 square foot, single family home built in 1915. (Exhibit D; Exhibit 1) The subject property includes four bedrooms; two full bathrooms; two half bathrooms; a 1,516 square foot basement with 565 square feet of finished area; a three-car detached garage; a porch, a deck, and one fireplace. (Exhibit D; Exhibit 1) The exterior consists of frame construction. (Exhibit 1)
- Assessment. Respondent set a TVM for the subject property of $549,500, residential, as of January 1, 2017.
- Board of Equalization. The BOE set a TVM of the subject property at $500,000, residential, as of January 1, 2017.
- Complainant’s Evidence. Complainant opined that the subject property’s TVM as of January 1, 2017, was $450,000. To support Complainant’s opinion of value, Complainant offered as evidence the following exhibits:
| Exhibit A | Complainant’s Real Estate Broker license issued by the Missouri Real Estate Commission
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| Exhibit B | Photographs of the exterior of the subject property; photographs of properties across the street viewed from the perspecitive of the subject property; satellite image of subject property and surrounding neighborhood |
| Exhibit C | Withdrawn |
| Exhibit D | Comparative analysis of eight comparable properties |
| Exhibit E | Withdrawn |
| Exhibit F | Detailed street map showing proximity of comparable properties to subject property |
| Exhibit G | Photographs of the interior of the subject property |
| Exhibit H | Bid proposal in the amount of $5,919 for installation of stainless steel liner in chimney flue to bring chimney into compliance with National Fire Protection Association 211 Standards and International Resident Codes |
| Exhibit I | Photos of the exterior and the interior of 315 W. Madison, next door to the subject property |
| Exhibit J | List of nine additional properties located in Kirkwood with sales dates ranging from 2005 to 2017 for purpose of showing subjective nature of mass appraisal system |
Respondent did not object to Complainant’s exhibits, which were admitted into the record.
Complainant testified that he had purchased the subject property in 1981 for $81,000. Complainant testified that a mortgage encumbered the subject property with a balance of approximately $165,000. Complainant testified that he had not listed the subject property for sale or had it appraised within the three years preceding the date of the Evidentiary Hearing. Complainant testified that no offers to purchase the subject property had been made but that, if he were to list it for sale, he would price it at $450,000 to $475,000. Complainant testified that no improvement had been made to the subject property between January 1, 2015, and January 1, 2017.
Complainant testified that he is a licensed real estate broker. Complainant testified that he has built and developed homes and has bought and sold homes in the Kirkwood area. Complainant testified that Exhibit B showed a view of the properties surrounding the subject property, which were of lesser value, and an aerial view of the subject property’s proximity to railroad tracks. Complainant testified that the condition of the subject property adversely affected its market value: the kitchen and bathrooms are 28 years old; the remainder of the interior is 97 to 98 years old; the poured concrete foundation has linear cracks that allow some water into the basement; the basement ceiling is low; and the fireplace has a cracked flue and chimney. Complainant testified that the subject property is “nice but not fancy” and that the amenities are lesser than those of the next-door neighboring property but had been assessed at the same dollar per square foot as the next-door neighboring property.
On cross examination, Complainant testified that he had access to the mult-listing service through the St. Louis Board of Realtors. Complainant testified that Exhibit D did not contain any specific data showing sellers and buyers of the comparables but that the sales were valid according to the St. Louis County Real Estate Database. Complainant testified that Comparable No. 8 shown on Exhibit D was not a true comparable property but was used to show the “mismatched” homes in the same neighborhood. Complainant further testified that the 2017 assessed value of Comparable No. 8 calculated to the same dollar per square foot as that of the subject property, $180 per square foot.
- Respondent’s Evidence. Respondent offered as evidence the following exhibits:
| Exhibit 1 | Appraisal report of Sharon Kuelker |
Complainant did not object to Respondent’s exhibit, which was admitted into the record.
Respondent also presented the testimony of St. Louis County Residential Appraiser Senior Sharon Kuelker (the Appraiser). The Appraiser’s qualifications include 16 years of experience as a Missouri licensed real estate salesperson and 15 years of experience as an appraiser for the St. Louis County Department of Revenue. The Appraiser opined that the TVM of the subject property was $495,000 as of January 1, 2017. The Appraiser testified she used the sales comparison approach to arrive at an opinion of TVM for the subject property.
In her report, the Appraiser analyzed four comparable sales situated within one-half mile of the subject property. (Exhibit 1) The sale prices ranged from $425,000 to $574,000. (Exhibit 1) All of the comparables were two-story or two-and-a-half story single family homes built between 1900 and 1922, of the same era as the subject property. (Exhibit 1) The Appraiser made positive and negative market-based dollar adjustments to the prices of the comparbles for specific items that were either superior or inferior in relation to the subject property, such as location; lot size; bedroom and bathroom county; gross living area; basement size and finished area; existence and size of a detached garage; porches, decks, and patios; fireplace; and exterior construction. (Exhibit 1) The comparbles sold between May 2015 to July 2017. The adjusted sale prices of the comparables ranged from $495,500 to $520,000. (Exhibit 1)
In the report, the Appraiser addressed the quality and condition of the subject property:
It is noted, an addition was added in 1991, which includes the kitchen and breakfast room. There is a full basement under this addition that has been finished [into] a recreation room. St. Louis County records did not have the basement and/or recreation area on their county record. The original basement for the main dwelling is an older foundation, which is part crawl space, has some foundation cracks, and has occasional water seepage. The upper level 2 full bathrooms are functional, however[,] dated, and the master bath has some peeling wallpaper. The carpeting throughout shows wear, and could use replacing. The fireplace is non-functional. At the time of viewing, the home was clean, appeared maintained and the overall condition of this home is consistent with the C3 rating.
. . .
Condition ratings for the subject and each comparable property have been determined using the Uniform Appraisal Dataset (UAD). Adjustments have been made based on the differences per these definitions.
The subject and Comps 1, 2 and 4 are considered to fall under the C3 rating for Uniform Appraisal Dataset rating (UAD). An adjustment was given to Comps 1,2 and for having superior updates when compared to the subject and were adjusted accordingly. Comp. 3, was considered to have a UAD rating C2, and required an adjustment.
(Exhibit 1) The Appraiser’s report included the following definition for the C2 and C2 condition ratings:
C2 The improvements feature no deferred maintainance, little or no physical depreciation, and require no repairs. Virtially all building components are new or have been recently repaired, refinished, or rehabilitated. All outdated components and finishes have been updated and/or reqplaced with components that meet current standards. Dwellings in this category either are almost new or have been recently completely nrenovated and are similar in condition to new construction.
C3 The improvements are well maintained and feature limited physical depreciation due to normal wear and tear. Some components, but not every major building component, may be updated or recently rehabilitated. The structure has been very well maintained.
(Exhibit 1) The Appraiser placed equal weight on all of the comparables. (Exhibit 1)
On cross examination, the Appraiser testified that Comparable No. 2 had appeared as a comparable property when the subject property had been initially valued by Respondent’s computer-assisted mass appraisal system. The Appraiser’s report showed that Comparable No. 2 had a sale price of $456,000 in July 2017, seven months after the tax date. (Exhibit 1) The Appraiser’s report showed that negative market-based dollar adjustments were made to Comparble No. 2 for sale or financing concessions; location, and condition. (Exhibit 1) The Appraiser’s report showed that positive market-based dollar adjustments were made to Comparble No. 2 for containing fewer bedrooms and bathrooms than the subject property; for having less square footage above grade and in the basement; and for having a two-car detached garage instead of a three-car detached garage. The adjusted sale price of Comparble No. 2 was $492,050. (Exhibit 1)
- Presumption of Correct Assessment Not Rebutted – True Market Value Established. Complainant did not present substantial and persuasive evidence to rebut the presumption of correct assessment by the BOE and to establish the TVM of the subject property as of January 1, 2017, to be $450,000. However, Respondent presented substantial and persuasive evidence to rebut the presumption of correct assessment by the BOE and to establish the TVM of the subject property to be $495,000 as of January 1, 2017.
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.
Board Presumption and Computer-Assisted Presumption
There exists a presumption of correct assessment by the BOE – the BOE presumption. The BOE presumption requires the taxpayer to substantial and persuasive 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 BOE’s valuation is assumed to be an independent valuation.
In the present appeal, the BOE lowered the initial valuation of Respondent, and both Complainant and Respondent are now seeking to lower the BOE’s assessment; therefore, the BOE presumption applies to Complainant and Respondent.
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 STC 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).
In this case, Complainant testified that the TVM of the subject property was $450,000 as of January 1, 2017.
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 advocated a lower value than his initial valuation and the valuation made by the BOE. Respondent advocated that the TVM of the subject property was $495,000 as of January 1, 2017.
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).
Complainant, a Missouri licensed real estate broker, testified on his own behalf. Respondent presented the expert testimony and report of the Appraiser.
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
In this case, Complainant’s evidence was substantial but not persuasive to rebut the presumption of correct assessment by the BOE. 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.
In particular, Exhibit D provided detailed information regarding eight comparable properties. However, the information resembled a comparative market analysis. Exhibit D noted the 2017 assessed value (not a sales price) of each of the comparables and used the assessed value and square footage to calculate the dollar per square foot price of each comparable and the subject property. This method is not one of the court-approved methods for arriving at an opinion of TVM for tax assessment purposes. Although Exhibit D listed some of the details for the comparables that indicated those properties might be considered somewhat superior to the comparable property, Exhibit D did not utilize market-based dollar adjustments to account for the similarities and differences between comparable properties and the subject property to persuade the factfinder that the subject property should have been valued at $450,000.
Respondent presented substantial and persuasive evidence to rebut the presumption of correct assessment and to establish the TVM of the subject property to be $495,000. The Appraiser used the comparable sales method for arriving at an opinion of TVM for the subject property, which is one of the three court-approved methods for determining value for tax assessment purposes. The Appraiser’s report used the sale prices of the comparables and made market-based dollar adjustments to account the similarities and differences between the comparables analyzed in the report and the subject property. Notably, Complainant had argued that the comparable properties TVM should be lowered due to condition issues with the subject property, specifically the dated kitchen and the non-functioning fireplace chimney flue with a repair price of over $5,000. Complainant also had argued that the subject property’s location on the corner of two streets, across from lesser-valued properties and near railroad tracks, adversely affected the TVM of the subject property. However, the Appraiser’s report noted all of these issues and made market-based dollar adjustments for them. Moreover, during the Evidentiary Hearing, the Appraiser testified that, even taking these condition issues into consideration, the overall impression of the subject property was the same as the comparables with “superior” specific features.
ORDER
The TVM for the subject property as determined by the BOE is SET ASIDE. The assessed value for the subject property for tax year 2017 is set at $94,050 residential ($495,000 TVM).
Application for Review
A party may file with the STC 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 March 13 , 2018.
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 13th day of March, 2018, to: Complainants(s) counsel and/or Complainant, the County Assessor and/or Counsel for Respondent and County Collector.
Jacklyn Wood
Legal Coordinator