State Tax Commission of Missouri
TV APARTMENTS L.P.,)
v. )Appeal No.09-20117
ED BUSHMEYER, ASSESSOR,)
ST. LOUIS CITY, MISSOURI,)
AFFIRMING HEARING OFFICER DECISION
UPON APPLICATION FOR REVIEW
On March 13, 2012, Hearing Officer Maureen Monaghan entered her Decision and Order (Decision) sustaining the assessment made by the St. Louis City Board of Equalization.
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.
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 she 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.
The Commission will not lightly interfere with the Hearing Officer’s Decision and substitute its judgment on the credibility of witnesses and weight to be given the evidence for that of the Hearing Officer as the trier of fact.
Complainant set forth the followings grounds in support of its Application for Review:
1. The Hearing Officer erred in failing to follow controlling precedent relating to the valuation of subsidized housing to ascertain the economic reality of the property.
2. The Hearing Officer erred in concluding that the evidence proffered by Complainant and Complainant’s appraiser did not constitute substantial and persuasive evidence to overcome the presumption of validity afforded the Board of Equalization’s assessment.
The Commission is not persuaded by either of the grounds advanced.
Complainant’s first line of argument rests upon its contention that the Hearing Officer was in effect bound to follow the decision in Lake Ozark Village v. Whitworth, STC Appeals 97-47000, 99-47003 & 01-47002 (April 29, 2004).While prior decisions of the Commission provide guidance, they do not constitute precedent to bind hearing officers, in the manner in which case law provides precedent to courts.The Hearing Officer might have found guidance in the Lake Ozark decision and applied it in this appeal.However, it is obvious she did not.The Commission has no basis upon which to substitute its judgment on this point for that of the Hearing Officer.Complainant’s point is not well taken.
Persuasiveness of Evidence
Complainant’s second point is simply a disagreement as to the conclusions reached by the Hearing Officer relative to the persuasiveness of Complainant’s evidence.The opinions of Complainant’s representative and appraiser were not binding on the Hearing Officer.As has been cited above, she could accept or reject the testimony of each in whole or in part.The Hearing Officer weighed Complainant’s evidence and found it to be lacking.The Commission sees no basis as a matter of law upon which it should overturn the determinations made by the Hearing Officer.Complainant’s point is not well taken.
Summary & Conclusion
A review of the record in the present appeal provides support for the determinations made by the Hearing Officer.There is competent and substantial evidence to establish a sufficient foundation for the Decision of the Hearing Officer.A reasonable mind could have conscientiously reached the same result based on a review of the entire record. The Commission finds no basis to support a determination that 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.
The Hearing Officer did not err in her determinations as challenged by Complainant.
The Commission upon review of the record and Decision in this appeal, finds no grounds upon which the Decision of the Hearing Officer should be reversed or modified.Accordingly, the Decision is affirmed, exemption is denied.The Decision and Order of the hearing officer,
including the findings of fact and conclusions of law therein, is incorporated by reference, as if set out in full, in this final decision of the Commission.
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 ofSt. Louis City, 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 24, 2012.
STATE TAX COMMISSION OF MISSOURI
Bruce E. Davis, Chairman
Randy B. Holman, Commissioner
DECISION AND ORDER
Decision of the St. Louis City Board of Equalization reducing the assessment made by the Assessor is SUSTAINED.True value in money for the subject property for tax years 2009 and 2010 is set at $1,872,000, classified as residential.Complainant appeared by Counsel, Paul Puricelli.Respondent appeared by Associate City Counselor, Rich Kismer.
Case heard and decided by Hearing Officer Maureen Monaghan.
Complainant appeals, on the ground of overvaluation, the decision of the St. Louis City Board of Equalization, which reduced the valuation of the subject property. The Commission takes this appeal to determine the true value in money for the subject property on January 1, 2009.The Hearing Officer, having considered all of the competent evidence upon the whole record, enters the following Decision and Order.
Summary Appraisal Report – Ernest Demba
Regulatory Agreement for Multi-Family Housing
Housing Assistance Payment, Interim Market to Market Renewal
Written Direct Testimony of Ernest Demba
Written Direct Testimony of Steven Stone
Steven Stone and Ernest Demba testified on behalf of the Complainant.
Mr. Demba is a certified general appraiser.He appraised the subject property.The appraiser noted that the property was subject to a HUD-insured loan.The balance of the loan as of January 1, 2009, was $3,797,110.51.The property was also subject to a Regulatory Agreement for Multifamily Housing Projects.The agreement requires a reserve requirement of $4,702.92 per month.The HUD HAP Contract provides for rents of $691 for the one bedroom apartments and $813 for two bedroom apartments.The rents were scheduled for increases to $724 and $883 on January 1, 2009.
It was his testimony that the owners were not receiving any income from the property given the reserve requirements and amounts needed to serve the loan.He further testified that the value of the property was less than the loan balance.
Mr. Demba completed a Summary Appraisal Report for the subject property.The appraisal report was 41 pages.His valuation of the property was 5 paragraphs.Mr. Demba did not undertake a sales comparison approach because he could not find sales of transactions of “Section 8 apartments encumbered with loan debt and sales restrictions as they exist.”Mr. Demba did not undertake an income approach to valuation because the owner had no net income yield.Mr. Demba did not undertake a cost approach because of the use and age of the improvements.
Mr. Demba’s final conclusion of value was $0 as the “subject property is unmarketable with the current restrictions and encumbrances, economic, legal and financial.”
Steven Stone also testified.He is the president of Delco Investments, which is the general partner of TV Apartments LP.According to Mr. Stone, TV Apartments has owned the subject property for 28 years.
Mr. Stone testified that the property failed a REAC inspection and HUD informed them that the property would need $1,200,000 in repairs to keep the property in compliance with the Housing Assistance Payment Contract.There is not sufficient reserves to make the repairs and there were 17 units they were not permitted to rent.HUD began foreclosure on the property.
Mr. Stone testified that Mr. Demba’s valuation is consistent with his opinion of value.Mr. Stone disagreed with the City’s appraisal arguing that the City’s appraisal did not consider the reserve requirements or the effect of the debt service requirements for the loan.Mr. Stone also took issue with the City’s capitalization rate but did not offer a rate.
Written Direct Testimony of Charlesetta Billups
Written Direct Testimony of Vincent Knopp
Ms. Charlesetta Billups testified for the Assessor’s Office.She is a real estate appraiser for the City of St. Louis and has acted in that capacity since 1999.
She valued the property at $2,700,000 after consideration of all three approaches to value.Because of the age of the property, Ms. Billups did not develop the cost approach.She developed the sales comparison and income approach.
For the income approach, Ms. Billups obtained income and expense, vacancy, collection statements for the past 3-5 years from market data.She developed a capitalization rate based upon sales of other income producing properties, interviewing appraisers and using sources such as Korpacz and RGS.The value indicated for the subject property was $3,000,000.
She determined a value of $2,300,000 using the sales comparison approach.The appraiser used three sales occurring July 2006 to May 2007 with square foot sale prices of $7.81 – $35.17 per square foot.. The three apartment buildings are within 1.5 miles of the subject property. The buildings range in size from 88,149 to 110,033 square feet and from 25 to 40 years in age.The appraiser considered the subject property to be in average condition while the comparables ranged from poor to fair/average condition.The adjusted price per square foot ranged from $10.71 to $44.45.The appraiser concluded on a $20 per square foot price for the subject ($2,300,000).
Ms. Billups put the most weight on the income approach and arrived at an opinion of value of $2,700,000.
FINDINGS OF FACT
1.Jurisdiction.Jurisdiction over this appeal is proper.Complainant timely appealed to the State Tax Commission from the decision of the St. Louis City Board of Equalization.Evidentiary hearing was held on May 17, 2011, in the assessor’s Conference Room, City Hall, St. Louis, Missouri.
2.Subject Property.The subject property is located at 5050 Highland Ave, St. Louis, Missouri.The property is identified by map parcel number 4504-00-0355-1.The property consists of .622 acre lot improved by an 114,240 square foot apartment building.The building is 8 stories with a 14,280 square foot basement and a sub-basement.The structure was constructed in 1951 and rehabbed in 1984.There are 97 one bedroom apartments and 1 two bedroom apartment.The property has been maintained and is in average condition.The owner is replacing carpeting and making other cosmetic updates as there are vacancies in the units. 
The property owner received a loan from the U.S. Department of Housing and Urban Development in 2003.The outstanding balance on the loan on January 1, 2009, was $3,797,110.51.The owner also entered into a Housing Assistance Payments contract (Section 8) setting rents for the apartments which appear to be higher than market rates.There are 17 units not eligible for the Section 8 housing subsidy due to their condition.
The rents for the apartments are $724 for one bedroom units and $883 per month for two bedroom units
3.Assessment.The Assessor appraised the property at $2,208,422 true value ($1,104,211 after application of the tax abatement provision in 2009) and classified it as residential.The Board of Equalization reduced the value to $1,872,000 true value ($936,000 after application of the tax abatement provision).
4.Valuation.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 $100,000, as proposed in the Complaint for Review of Assessment, or $0 as testified to by Mr. Demba at hearing.
CONCLUSIONS OF LAW AND DECISION
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.
Presumptions In Appeals
There is a presumption of validity, good faith and correctness of assessment by the CountyBoardof Equalization.The presumption in favor of the Board is not evidence.A presumption simply accepts something as true without any substantial proof 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.The evidence submitted on behalf of Complainant failed to meet the standard of substantial and persuasive to rebut the presumption of correct assessment and establish the true value in money of the property under appeal.
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.True value in money is defined in terms of value in exchange and not value in use.It is the fair market value of the subject property on the valuation date.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.
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.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.
Each valuation approach is applied with reference to a specific property’s use. Apartments and duplexes are valued using an income approach, based upon market income. Low income housing property should be valued and assessed based upon the same criteria as any other housing in the state.The value of housing should not be discounted because the owner has agreed to enter into unfavorable financing and/or rental agreements.
Complainant Fails To Prove Value
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, 2009.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.”
Substantial evidence can be defined as such relevant evidence as a reasonable mind might accept as adequate to support a conclusion.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.
The owner of property is generally held competent to testify to its reasonable market value.The owner’s opinion is without probative value however, where it is shown to have been based upon improper elements or an improper foundation.
Steven Stone, testifying for the Complainant, did not present a valuation methodology that is accepted for valuation of real property for ad valorem tax purposes by the courts or by this Commission.Complainant’s appraiser presented an opinion of value of $0 without developing any of the three recognized approaches to value.The appraiser did not use the sales comparison approach as “there have been no sales transactions of similar Section 8 apartments encumbered with the loan dept and sales restrictions as they exist.”The appraiser did not use the income approach because “there is no net income yield to the investor.The substantial HUD-mandated reserve requirements prevent the property from generating income.”The appraiser did not use the cost approach as “the cost approach is not applicable or reliable in the valuation of the subject property” due to “the use of the subject and overall age of the improvements.”The appraiser opined that “the subject property is unmarketable with the current restrictions and encumbrances, economic, legal, and financial.These all limit the sale of the property.Therefore, if there is no market, under the definition of market value there is no value to the subject property.”
The appraiser failed in that he presented no evidence for which he based his opinion and he has misconstrued the appraisal problem.For ad valorem tax purposes, the fee simple interest of the property is appraised, ie as if all ownerships rights and interests are attached.Whether or not a seller would be willing to sell the property for less than the loan amount or would be unable contractually to sell the property without HUDs approval, is not part of this appraisal problem.
Complainant’s appraiser also testified that he is familiar with the area and that there is no market for real estate in the area of the subject property. Complainant’s evidence is not persuasive given (1) that he presented no market evidence that there have not been sales in the area; (2) the Respondent’s presentation of sales of three apartment buildings within 1.5 miles of the subject property; and (3) the appraiser himself has sold property in that area.
The Complainant failed to present any evidence of market value.Complainant having failed to carry his burden of proof, there is no need to perform a review and analysis of Respondent’s evidence.Respondent had no burden of proof in the appeal.
The assessed valuation for the subject property as determined by the Board of Equalization for St. Louis City for the subject tax day is SUSTAINED.
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, MO65102-0146, and a copy of said application must be sent to each person at the address listed below in the certificate of service.
The Collector of St. Louis City, 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, 2012.
STATE TAX COMMISSION OF MISSOURI
 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).
 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).
 Black v. Lombardi, 970 S.W.2d 378 (Mo. App. E.D. 1998); Lowe v. Lombardi, 957 S.W.2d 808 (Mo. App. W.D. 1997); Forms World, Inc. v. Labor and Industrial Relations Com’n, 935 S.W.2d 680 (Mo. App. W.D. 1996); Evangelical Retirement Homes v. STC, 669 S.W.2d 548 (Mo. 1984); Pulitzer Pub. Co. v. Labor and Indus. Relations Commission, 596 S.W.2d 413 (Mo. 1980); St. Louis County v. STC, 562 S.W.2d 334 (Mo. 1978); St. Louis County v. STC, 406 S.W.2d 644 (Mo. 1966).
 Hermel, Inc. v. STC, 564 S.W.2d 888 (Mo. 1978); Black v. Lombardi, 970 S.W.2d 378 (Mo. App. E.D. 1998); Holt v. Clarke, 965 S.W.2d 241 (Mo. App. W.D. 1998); Smith v. Morton, 890 S.W.2d 403 (Mo. App. E.D. 1995); Phelps v. Metropolitan St. Louis Sewer Dist., 598 S.W.2d 163 (Mo. App. E.D. 1980).
 Property was subject to a tax abatement in 2009.Hearing Officer is not charged with determining or finding the abatement.Therefore, only the true value in money and classification is set forth in the Decision and Order.
 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).
 Daly v. P. D. George Company, et al, 77 SW3d 645, 649 (Mo.App E.D. 2002), citing, Equitable Life Assurance Society v. STC, 852 SW2d 376, 380 (Mo.App. 1993); citing, Stephen & Stephen Properties, Inc. v. STC, 499 S.W.2d 798, 801-803 (Mo. 1973).
 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.
 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).
 See, 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).Industrial Development Authority of Kansas City v. State Tax Commission of Missouri, 804 S.W.2d 387, 392 (Mo. App. 1991).
 Cohen v. Bushmeyer, 251 S.W.3d 345, (Mo. App. E.D., March 25, 2008); Carmel Energy, Inc. v. Fritter, 827 S.W.2d 780, 783 (Mo. App. W.D. 1992); State, ex rel. Missouri Hwy & Transp. Com’n v. Pracht, 801 S.W.2d 90, 94 (Mo. App. E.D. 1990); Shelby County R-4 School District v. Hermann, 392 S.W.2d 609, 613 (Sup. 1965).
 “I had a few Section 8 properties in that area, but basically participated as a market participant in that area, owning properties and managing properties from the early 1970’s, up until probably three years prior to the effective date of valuation, when I successfully sold the remaining properties.I managed over 100 properties, owned probably 100 tenant units, and they were all basically in this area, a few south St. Louis.”(transcript)