State Tax Commission of Missouri
| TV APARTMENTS, LP | ) | |
| ) | ||
| Complainant, | ) | |
| ) | ||
| v. | ) | Appeal Number 11-20140 & 13-20006 |
| ) | ||
| FREDDIE DUNLAP, ASSESSOR, | ) | |
| CITY OF ST. LOUIS, MISSOURI, | ) | |
| ) | ||
| Respondent. | ) |
DECISION AND ORDER
HOLDING
Decision of the Board of Equalization sustaining the assessment made by the Assessor is SET ASIDE. Substantial and persuasive evidence was presented by Complainant to rebut the presumption of correct assessment by the Board of Equalization and sufficient evidence was presented to establish a true value of:
For tax years 2011- 2012 of $1,010,810, residential assessed value of $192,050;
For tax year 2013 of $588,840, residential assessed value of $106,180; and
For tax year 2014 of $1,067,440, residential assessed value of $202,820.
Complainant appeared by attorneys William Clendenin and Paul Purcelli.
Respondent appeared in person and by counsel Rory O’Sullivan
Case heard and decided by Hearing Officer Maureen Monaghan.
ISSUE
Complainant appeals, on the ground of overvaluation, the decision of the Board of Equalization, which sustained 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, 2011 thru January 1, 2014. The value as of January 1 of the odd numbered year remains the value as of January 1 of the following even numbered year unless there is new construction and improvement to the property. Section 137.115.1 RSMo
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 from the decision of the Board of Equalization.
- Evidentiary Hearing. The Evidentiary Hearing was held on April 29, 2015. After the hearing, the parties submitted post-hearing briefs.
- Identification of Subject Property. The subject property is located at 5050 Highland Ave, St. Louis, Missouri. The property is identified by map parcel number 4504-00-0355-0.
- Description of Subject Property. The property consists of a .622 acre lot improved by a 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. There are 97 one bedroom apartments and 1 two bedroom apartment. The property has been maintained and is in average condition. The property is currently participating in the Housing Assistance Payments program (Section 8) for seniors. The U.S. Department of Housing and Urban Development has provided three loans on the property
- Assessment. In 2011 and in 2013, the property was classified as residential and assessed at $355,680. The Board of Equalization sustained the assessment.
- Complainant’s Evidence.
| Exhibit | Description |
| A | Appraisal Report |
| B | Regulatory Agreement for Insured Multi-Family |
| C | Written Direct Testimony of David Sebelius |
| D | Written Direct Testimony of Steven Stone |
| E | Correction to the Income Approach of Exhibit A |
| F | CBRE Capitalization Rate Study |
- New Construction & Improvement. The property was in need of extensive repairs. In 2011 and 2012, approximately $100,000 was spent in each year. In 2013, HVAC and other repairs totaling $508,600 was necessary. (Exhibit A, p. 11)
- Respondent’s Evidence.
| Exhibit | Description |
| 1 | Appraisal Report for 2011 |
| 2 | Written Direct Testimony of Charsletta Billups |
| 1 | Appraisal Report for 2013 |
| 2 | Written Direct Testimony of Charsletta Billups |
The appraisal report was amended at the hearing.
- Presumption of Correct Assessment Rebutted. Evidence presented was substantial and persuasive to rebut the presumption of correct assessment by the Board and establish the true value in money as of January 1, 2011 thru January 1, 2014.
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. Article X, Section 14, Mo. Const. of 1945; Sections 138.430, 138.431, 138.431.4, RSMo.
Presumption In Appeal
There is a presumption of validity, good faith and correctness of assessment by the County Board of Equalization. Hermel, Inc. v. STC, 564 S.W.2d 888, 895 (Mo. banc 1978); Chicago, Burlington & Quincy Railroad Co. v. STC, 436 S.W.2d 650, 656 (Mo. 1968); May Department Stores Co. v. STC, 308 S.W.2d 748, 759 (Mo. 1958). The presumption of correct assessment is rebutted when the taxpayer 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. Hermel, supra; Cupples-Hesse Corporation v. State Tax Commission, 329 S.W.2d 696, 702 (Mo. 1959).
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. St. Joe Minerals Corp. v. State Tax Commission, 854 S.W.2d 526, 529 (Mo. App. E.D. 1993); Missouri Baptist Children’s Home v. State Tax Commission, 867 S.W.2d 510, 512 (Mo. banc 1993).
“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 terms of cash in United State dollars or in terms of financial arrangements comparable thereto; and
- The price represents a normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale.” Property Assessment Valuation, IAAO, pp 18-19.
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, at 615 (Mo. App. W.D. 2000); Hermel, supra; 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. Div. 2 1974).
Subsidized Housing
The income approach determines value by estimating the present worth of what an owner will likely receive in the future as income from the property. The income approach is based on an evaluation of what a willing buyer would pay to realize the income stream that could be obtained from the property when devoted to its highest and best use.
For ad valorem purposes, the property should be valued using actual rents and expenses and looking to the market to develop a capitalization rate. The legislature has given us specific direction on the issue of valuing subsidized property. (SCS HCS HB 613, signed by the Governor on 7/6/15). That direction, in the form of a new paragraph 2 under Section 137.076 RSMo., provides as follows:
- In establishing the value of a parcel of real property, the county assessor shall use an income based approach for assessment of parcels of real property with federal or state imposed restrictions in regard to rent limitations, operations requirements, or any other restrictions imposed upon the property in connection with:
(1) The property being eligible for any income tax credits under section 42 of the Internal Revenue Code of 1986, as amended;
(2) Property constructed with the use of the United States Department of Housing and Urban Development HOME investment partnerships program;
(3) Property constructed with the use of incentives provided by the United States Department of Agriculture Rural Development; or
(4) Property receiving any other state or federal subsidies provided with respect to the use of the property for housing purposes.
For the purposes of this subsection, the term “income based approach” shall include the use of direct capitalization methodology and computed by dividing the net operating income of the parcel of property by an appropriate capitalization rate not to exceed the average of the current market data available in the county of said parcel of property. Federal and state tax credits or other subsidies shall not be used when calculating the capitalization rate. Upon expiration of a land use restriction agreement, such parcel of property shall no longer be subject to this subsection.
The first issue to address is whether the property could be considered one with federal or state imposed restrictions in regard to rent limitations, operations requirements, or any other restrictions imposed upon the property. The property is currently participating in the Housing Assistance Payments program (Section 8) for seniors. Further, the U.S. Department of Housing and Urban Development has provided three loans on the property. The property is appropriately valued using the methodology contemplated by the Legislature.
The income based approach used to develop an opinion of value should include the use of direct capitalization methodology and computed by dividing the net operating income of the parcel of property by an appropriate capitalization rate not to exceed the average of the current market data available in the county of said parcel of property.
The appraisals provide sufficient information to value the property under the income approach using the net operating income of the property and a capitalization rate which does not exceed the average of the market data available in the City of St. Louis. The 2010 year end income and expense information (net operating income of $110,740) provided (Exhibit A, p. 77) can be used to conclude an opinion of value as of January 1, 2011. A capitalization rate which does not exceed the average of the market data available in the City of St. Louis was provided in the reports for the 2011 determination of value (Exhibit 1, p 63) – 9.9693%. The 2013 actual income and expenses were the most persuasive financial information to use to determine the net operating income ($101,407) for the calculation of value for January 1, 2013. (Exhibit A p. 61) A capitalization rate which does not exceed the average of the market data available in the City of St. Louis was provided in the reports for the 2013 determination (Exhibit 1, p 63 and Exhibit A p 41) – 9.5%. After reaching a conclusion of value for January 1, 2011 and January 1, 2013, the additional expenses for repairs in 2011, 2012, and 2013 was accounted for by deducting those expense items from the indication of value. No deduction for repairs was necessary for 2014.
ORDER
The assessed valuation for the subject property as determined by the Assessor and sustained by the Board of Equalization for the subject tax day is SET ASIDE.
The assessed value for the subject property is as follows:
For tax years 2011- 2012, residential assessed value of $192,050;
For tax year 2013, residential assessed value of $106,180; and
For tax year 2014, residential assessed value of $202,820.
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 City of St. Louis, 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 this 28th day of July, 2015.
STATE TAX COMMISSION OF MISSOURI
Maureen Monaghan
Hearing Officer
Certificate of Service
I hereby certify that a copy of the foregoing has been sent electronically or mailed postage prepaid this 28th day of July, 2015, to: Complainants(s) counsel and/or Complainant, the county Assessor and/or Counsel for Respondent and county Collector.
Jacklyn Wood
Legal Coordinator
Contact Information for State Tax Commission:
Missouri State Tax Commission
301 W. High Street, Room 840
P.O. Box 146
Jefferson City, MO 65102-0146
573-751-2414
573-751-1341 Fax