STATE TAX COMMISSION OF MISSOURI
| UNION CITY HOMES, | ) | Appeal No. |
| ) | 15-62506 | |
| Complainants, | ) | 15-62507 |
| ) | 15-62508 | |
| ) | 15-62509 | |
| ) | 15-62510 | |
| v. | ) | 15-62511 |
| ) | 15-62512 | |
| ) | 15-62513 | |
| ) | 15-62514 | |
| CONNIE HOOVER, ASSESSOR | ) | 15-62515 |
| JASPER COUNTY, MISSOURI, | ) | 15-62516 |
| ) | 15-62517 | |
| Respondent. | ) | 15-62518 |
DECISION AND ORDER
HOLDING
The assessment made by the Board of Equalization of Jasper County (BOE) is SET ASIDE. Substantial and persuasive evidence to rebut the presumption of correct assessment by the BOE was presented.
Union City Homes (Complainant) appeared by counsel Richard Dvorak.
Connie Hoover, Assessor, Jasper County, Missouri, (Respondent) appeared in person and by counsel Norman Rouse.
Case heard and decided by Hearing Officer Maureen Monaghan (Hearing Officer).
ISSUE
Complainant appealed on the ground of overvaluation. The Complainant appealed the valuations to the BOE. The BOE sustained Respondent’s valuations. The State Tax Commission (STC) takes this appeal to determine the TMV of the subject properties on January 1, 2015.
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 STC.
- Evidentiary Hearing. The issue of overvaluation was presented at an evidentiary hearing on March 29, 2017, at the Jasper County Courthouse, Carthage, Missouri.
- Identification of Subject Properties. The subject properties are identified as follows:
| Appeal No. | Parcel | Address |
| 15-62506 | 19-6.0-14-10-006-003.000 | 2205 Indiana |
| 15-62507 | 19-6.0-14-10-006-006.000 | 2219 Indiana |
| 15-62508 | 19-6.0-14-10-006-012.000 | 2309 Indiana |
| 15-62509 | 19-6.0-14-20-004-017.000 | 2016 Kentucky |
| 15-62510 | 19-6.0-14-20-008-008.000 | 2125 Virginia |
| 15-62511 | 19-6.0-14-20-008-009.000 | 2129 & 2131 Virginia |
| 15-62512 | 19-6.0-14-20-010-004.000 | 2109 Kentucky |
| 15-62513 | 19-6.0-14-20-014-001.000 | 2202 Kentucky |
| 15-62514 | 19-6.0-14-20-014-004.000 | 2209 Pennsylvania |
| 15-62515 | 19-6.0-14-20-015-001.000 | 2202 Pennsylvania |
| 15-62516 | 19-6.0-14-20-032-003.000 | 2507 Pennsylvania |
| 15-62517 | 19-6.0-14-20-032-004.000 | 2509 Pennsylvania |
| 15-62518 | 19-6.0-14-20-032-007.000 | 2529 Pennsylvania |
- Description of Subject Properties. Complainant owns thirty-eight single family residences in Jasper County. Thirty-three of the properties are subject to state or federal rent restrictions in regard to rent limitations, operation requirements or other restrictions. Complainant appealed 13 of the 33 properties subject to the rent restrictions. The properties are described as:
| Appeal No. | Description |
| 15-62506 | 1855 square foot improvement built in 2012. |
| 15-62507 | 1898 square foot improvement built in 2012 |
| 15-62508 | 1838 square foot improvement built in 2012 |
| 15-62509 | 1685 square foot improvement built in 2012 |
| 15-62510 | 1506 square foot improvement built in 2012 |
| 15-62511 | 1684 square foot improvement built in 2012 |
| 15-62512 | 1648 square foot improvement built in 2012 |
| 15-62513 | Improvement built in 2012 |
| 15-62514 | 1684 square foot improvement built in 2012 |
| 15-62515 | 1592 square foot improvement built in 2012 |
| 15-62516 | 1518 square foot improvement built in 2012 |
| 15-62517 | 1696 square foot improvement built in 2012 |
| 15-62518 | 1574 square foot improvement built in 2012 |
- Assessment. Respondent set a TMV for the subject properties as follows:
| Appeal No. | Valuation |
| 15-62506 | $98,650 |
| 15-62507 | $93,290 |
| 15-62508 | $100,290 |
| 15-62509 | $78,540 |
| 15-62510 | $72,130 |
| 15-62511 | $72,130 |
| 15-62512 | $70,190 |
| 15-62513 | $91,200 |
| 15-62514 | $72,330 |
| 15-62515 | $75,660 |
| 15-62516 | $66,280 |
| 15-62517 | $61,690 |
| 15-62518 | $66,690 |
| Total | $1,019,070 |
- Board of Equalization. The BOE sustained Respondent’s TMV of the subject properties.
- Complainant’s Evidence.
To support their opinion of value, Complainant offered as evidence the following:
| Exhibit | Description |
| A | Written Direct Testimony of Troy Smith |
| B | Appraisal Report |
Troy W. Smith is a Missouri State Certified General Real Estate Appraiser. He appraised the 33 properties subject to low income housing tax credit properties (LIHTC), which includes the 13 appealed parcels. For participation in LIHTC, Complainant agreed to accept restrictions on tenant eligibility and rent levels and in return receive credits against their federal tax liability. The restrictions remain in place for 15 years.
The appraiser used a unit value approach as he defined the property to appraise as the 33 properties owned by the Complainant in Jasper County subject to the LIHTC. The properties range from 3 bedroom-2 bath to 4 bedroom-2 bath. Each unit includes an attached garage. The units were constructed in 2012. He utilized the income and cost approaches to value.
As to the cost approach, the appraiser developed an opinion of land ($55,000) and then a replacement cost new utilizing Marshall Valuation Service ($5,426,975). He then calculated the depreciation. ($4,557,746) The cost approach estimated the fair market value at $920,000 for all 33 parcels.
As to the income approach, the appraiser reviewed the rental rates established by the Missouri Housing Development Commission. He then reviewed the actual occupancy rate of the 33 LIHTC properties to establish a vacancy and collection loss. The subject properties are 100% occupied and there is a waiting list. The appraiser used a 5% rate stating the vacancy rate reflects the period between one tenant leaving and preparing the property for the next tenant. The expenses were calculated using the expense information from all 38 homes owned by the Complainant, both subject and not subject to the LIHTC.
To develop a capitalization rate, the appraiser reviewed investor surveys and developed a band of investment method. The appraiser concluded on an 8% rate and loaded an effective tax rate of .88%.
The estimation of value by the income approach was $920,000 for the 33 LIHTC properties. The appraiser reconciled the value of the two approaches at $920,000. After the appraiser opined a value for all 33 units of $920,000, the appraiser allocated a value to each of the 13 parcels subject to the appeal based upon the net rentable area of the parcel.
| Appeal No. | Parcel | Address | Value |
| 15-62506 | 19-6.0-14-10-006-003.000 | 2205 Indiana | $30,680 |
| 15-62507 | 19-6.0-14-10-006-006.000 | 2219 Indiana | $29,650 |
| 15-62508 | 19-6.0-14-10-006-012.000 | 2309 Indiana | $30,680 |
| 15-62509 | 19-6.0-14-20-004-017.000 | 2016 Kentucky | $25,590 |
| 15-62510 | 19-6.0-14-20-008-008.000 | 2125 Virginia | $25,130 |
| 15-62511 | 19-6.0-14-20-008-009.000 | 2129 & 2131 Virginia | $27,330 |
| 15-62512 | 19-6.0-14-20-010-004.000 | 2109 Kentucky | $26,330 |
| 15-62513 | 19-6.0-14-20-014-001.000 | 2202 Kentucky | $29,650 |
| 15-62514 | 19-6.0-14-20-014-004.000 | 2209 Pennsylvania | $27,330 |
| 15-62515 | 19-6.0-14-20-015-001.000 | 2202 Pennsylvania | $26,140 |
| 15-62516 | 19-6.0-14-20-032-003.000 | 2507 Pennsylvania | $27,330 |
| 15-62517 | 19-6.0-14-20-032-004.000 | 2509 Pennsylvania | $26,330 |
| 15-62518 | 19-6.0-14-20-032-007.000 | 2529 Pennsylvania | $26,140 |
| Total | $358,310 |
- Respondent’s Evidence.
To support their opinion of value, Respondent offered as evidence the following:
| Exhibit | Description |
| 1 | Recorder of Deeds |
| 2 | Rent Roll |
| 3 | Income approach |
| 4 | Income statement |
| 5 | Tax Levies |
| 6 | Income Approach for Appeal 15-62506 |
| 7 | Income Approach for Appeal 15-62507 |
| 8 | Income Approach for Appeal 15-62508 |
| 9 | Income Approach for Appeal 15-62509 |
| 10 | Income Approach for Appeal 15-62510 |
| 11 | Income Approach for Appeal 15-62511 |
| 12 | Income Approach for Appeal 15-62512 |
| 13 | Income Approach for Appeal 15-62513 |
| 14 | Income Approach for Appeal 15-62514 |
| 15 | Income Approach for Appeal 15-62515 |
| 16 | Income Approach for Appeal 15-62516 |
| 17 | Income Approach for Appeal 15-62517 |
| 18 | Income Approach for Appeal 15-62518 |
| 19 | Written Direct Testimony of Larry Carstin |
Larry Carsten testified for the Respondent. He has been employed by Respondent for over 35 years. He testified that the properties are classified as residential and the initial values were determined by the Respondent’s computerized mass appraisal system. The system utilizes a cost approach to determine value; a negative adjustment of 35% accounted for the properties being LIHTC properties.
The witness testified that he utilized an income approach to reach an opinion of value for appeal purposes. He received income and expense information from Complainant. The information included 38 tenant names, monthly lease amounts, income and expense statements for each of the 38 properties.
The witness used actual rent of each parcel. He used a vacancy rate of 3% since the properties are 100% occupied with a waiting list. After reviewing the expense report which reported the expenses in a lump sum for all units, the witness utilized an expense rate of 40%. After studying the market and reviewing the subject properties, the witness selected a capitalization rate of 8.378%. The witness did not believe the properties involved much risk as there was a waiting list for the properties. Using the witness’s determinations and calculations, the value estimations for the properties are opined as:
| Appeal No. | Address | TMV |
| 15-62506 | 2205 Indiana | $38,300 |
| 15-62507 | 2219 Indiana | $50,240 |
| 15-62508 | 2309 Indiana | $42,480 |
| 15-62509 | 2016 Kentucky | $35,320 |
| 15-62510 | 2125 Virginia | $35,320 |
| 15-62511 | 2129 & 2131 Virginia | $35,320 |
| 15-62512 | 2109 Kentucky | $35,320 |
| 15-62513 | 2202 Kentucky | $38,300 |
| 15-62514 | 2209 Pennsylvania | $35,320 |
| 15-62515 | 2202 Pennsylvania | $35,320 |
| 15-62516 | 2507 Pennsylvania | $42,480 |
| 15-62517 | 2509 Pennsylvania | $42,480 |
| 15-62518 | 2529 Pennsylvania | $35,320 |
| Total | $501,520 |
During the testimony of the witness, each counsel questioned him on the income, expenses and his approach to value. Exhibits 20 and 21 were utilized. The exhibits are identical other than the inclusion of a cover page. The exhibits included the land use restriction agreement (LURA) and the 2013-2014 income statements. Exhibit 21 was admitted into evidence.
- Presumption of Correct Assessment Rebutted – True Market Value Established. Evidence presented was substantial and persuasive to rebut the presumption of correct assessment by the BOE and to establish the TMV of the subject properties as of January 1, 2015, as follows:
| Appeal No. | Address | TMV |
| 15-62506 | 2205 Indiana | $38,300 |
| 15-62507 | 2219 Indiana | $50,240 |
| 15-62508 | 2309 Indiana | $42,480 |
| 15-62509 | 2016 Kentucky | $35,320 |
| 15-62510 | 2125 Virginia | $35,320 |
| 15-62511 | 2129 & 2131 Virginia | $35,320 |
| 15-62512 | 2109 Kentucky | $35,320 |
| 15-62513 | 2202 Kentucky | $38,300 |
| 15-62514 | 2209 Pennsylvania | $35,320 |
| 15-62515 | 2202 Pennsylvania | $35,320 |
| 15-62516 | 2507 Pennsylvania | $42,480 |
| 15-62517 | 2509 Pennsylvania | $42,480 |
| 15-62518 | 2529 Pennsylvania | $35,320 |
| Total | $501,520 |
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.
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).
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).
Method of Valuation
In 2015, the legislature provided specific direction on the issue of valuing subsidized property, Section 137.076 RSMo. provides as follows:
“2. 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….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.”
Subject properties should be valued using the income approach, utilizing the actual rents and expenses of the parcel and looking to the market to develop a capitalization rate. Both witnesses developed an income approach. Complainant’s appraiser defined the appraiser problem as the valuation of 33 parcels of property of LIHTC nature located in Jasper County. Complainant’s appraiser developed a valuation for all 33 parcels and then allocated the unit value to the 13 appealed parcels based upon net rentable area of each property. The Respondent’s witness opined a value by developing an income approach for each parcel individually.
The pertinent language in the statute setting forth the appropriate methodology for valuing LIHTC properties directs the valuation be performed 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.” (emphasis added)
The legislature set out that the income approach shall be developed utilizing the actual income and expenses of the parcel of property. “…[T]he primary objective of statutory construction is to ascertain the intent of the legislature from the language used and to give effect to that intent if possible. In so doing we consider the words employed in the statute in their plain and ordinary meaning.” Citizens Bank & Trust v. Director of Revenue, 639 S.W. 833, 835 (Mo. 1982)
The witness for the Respondent developed an income approach that is more consistent with the plain meaning of the language in Section 137.076 RSMo. The Respondent’s witness used the information provided by Complainant to ascertain the actual income and expenses of each parcel. Further, the Respondent’s calculation of capitalization rate was based upon market data available in the county of said parcel of property and did not exceed the average of the current market data.
ORDER
The TMV for the subject properties as determined by the BOE is SET ASIDE. The assessed values for the subject properties for 2015-2016 are set as follows:
| Appeal No. | Parcel | Address | Assessed Value |
| 15-62506 | 19-6.0-14-10-006-003.000 | 2205 Indiana | $7,277 |
| 15-62507 | 19-6.0-14-10-006-006.000 | 2219 Indiana | $9,546 |
| 15-62508 | 19-6.0-14-10-006-012.000 | 2309 Indiana | $8,071 |
| 15-62509 | 19-6.0-14-20-004-017.000 | 2016 Kentucky | $6,711 |
| 15-62510 | 19-6.0-14-20-008-008.000 | 2125 Virginia | $6,711 |
| 15-62511 | 19-6.0-14-20-008-009.000 | 2129 & 2131 Virginia | $6,711 |
| 15-62512 | 19-6.0-14-20-010-004.000 | 2109 Kentucky | $6,711 |
| 15-62513 | 19-6.0-14-20-014-001.000 | 2202 Kentucky | $7,277 |
| 15-62514 | 19-6.0-14-20-014-004.000 | 2209 Pennsylvania | $6,711 |
| 15-62515 | 19-6.0-14-20-015-001.000 | 2202 Pennsylvania | $6,711 |
| 15-62516 | 19-6.0-14-20-032-003.000 | 2507 Pennsylvania | $8,071 |
| 15-62517 | 19-6.0-14-20-032-004.000 | 2509 Pennsylvania | $8,071 |
| 15-62518 | 19-6.0-14-20-032-007.000 | 2529 Pennsylvania | $6,711 |
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 Jasper 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 April 11, 2017.
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 11th day of April, 2017, to: Complainants(s) counsel and/or Complainant, the County Assessor and/or Counsel for Respondent and County Collector. NORMAN ROUSE, RICHARD DVORAK and CONNIE HOOVER
Jacklyn Wood
Legal Coordinator