State Tax Commission of Missouri
|UNION ELECTRIC COMPANY,||)|
|d/b/a Ameren Missouri,||)|
|CALLAWAY COUNTY,||)||13-46500 and 13-46501|
|CAPE GIRARDEAU COUNTY,||)||13-47500 and 13-47501|
|COOPER COUNTY,||)||13-52501 and 13-52502|
|HOWARD COUNTY,||)||13-61000 and 13-61001|
|LINCOLN COUNTY,||)||13-66000 and 13-66001|
|MONITEAU COUNTY,||)||13-71500 and 13-71501|
|MONTGOMERY COUNTY,||)||13-72500 and 13-72501|
|PIKE COUNTY,||)||13-78500 and 13-78501|
|RALLS COUNTY,||)||13-81000 and 13-81001|
|RANDOLPH COUNTY,||)||13-81500 and 13-81501|
|SCOTT COUNTY,||)||13-86500 and 13-86501|
|STODDARD COUNTY, and||)||13-88000 and 13-88001|
|WARREN COUNTY,||)||13-91000 and 13-91001|
DECISION AND ORDER
Decisions of the County Boards of Equalization sustaining the assessments made by the Assessors are AFFIRMED. Complainant failed to present substantial and persuasive evidence to rebut the presumption of correct assessment by the Boards of Equalization.
Complainant appeared by attorney Scott Huber.
Respondent appeared by attorney Richard Reed.
Case heard by Senior Hearing Officer Luann Johnson.
Complainant appeals, on the ground of overvaluation (Tr. 9), the decisions of the Boards of Equalization, which sustained the valuation of the subject properties. The Commission takes this appeal to determine the true value in money for the subject properties on January 1, 2013.
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 Evidentiary Hearing was held on September 17, 2015, in St. Louis, Missouri.
- Identification and Description of Subject Property. Complainant, Union Electric Company, doing business as Ameren Missouri, owns and operates a gas utility division. The division operates in 25 counties in the State of Missouri; 16 counties are subject to the appeal. Complainant reports to the Missouri Public Service Commission and the Federal Energy Regulatory Commission. It is a regulated, monopolistic, utility providing service and as such is entitled to a reasonable return and recoupment of its investment, more commonly referred to as “cost-of-service” pricing.
Complainant maintains 11,352,740 feet of services (taps, pipe in the streets to curb box, pipes to buildings, shut off valves, etc) for retail distribution customers. Real property consists of underground piping and gas mains. The mains are buried underground. The mains are of varying age (1907 to present) and varying material (cast-iron, steel, and plastic pipe). The pipes are as small as 2 inches and as large as 14 inches. Personal property consists of measuring and regulating equipment, meters and regulators. Measuring and regulating equipment reduce the line pressure for distribution. Meters vary in size from small household to large industrial meters.
In 2012, Complainant’s property generated gross revenues of $139,360,937 from their 127,698 customers. (114,332 were residential customers and 13,366 were commercial or industrial customers) Residential sales were $84,931,923. Commercial and industrial sales were $44,030,595. Additional revenue was generated from other sources including transporting gas for others. Complainant reports original cost of the property of $393,580,353, a book reserve depreciation of $136,590,185, for a book value of $256,990,168.
Complainant maintains a mass account which sums the meters, regulators, valves, nuts, bolts, and pipe yokes and allocates the cost to the counties based upon the numbers of customers within the county.
Assessment of the Commercial Real Property in 2013:
|Appeal No.||County||Assessor’s True Value||Board’s Ruling||Assessed Value|
Assessment of the Personal Property in 2013:
|Appeal No.||County||Assessor’s True Value||Board’s Ruling||Assessed Value|
The total valuation for the real and personal property for the sixteen counties was $190,083,436.
- Complainant’s Evidence. The following exhibits were filed in each appeal:
|Written Direct Testimony of||Bruce Lenox|
|Written Direct Testimony of||Pam Schaefer|
|Written Direct Testimony of||Kevin Schroeder|
|Written Direct Testimony of||Joe LaMacchia (Amended)|
|Written Direct Testimony of||Kevin Redhage|
|A||Additions and Retirements 12/31/2011|
|B||Additions and Retirements 12/31/2012|
|C||2012 Additions and Retirements All Divisions Totals|
|E||Retirement and Addition Totals 2012|
|F||2012 GDS Personal Property Cost|
|G||FAS 143 12/31/2012|
|H||FERC Account No. Description|
|I||FERC Form 2 – Gas Plant in Service|
|J||FERC Form 2 Gas Utility Plant|
|K||Gas Distribution County Totals 2012|
|M||Additions and Retirements by County|
|N||2012 Additions and Retirements by County|
|O||Ameren Missouri by County Cost to Assessment|
|P||County Filings by County|
|Q||Letter from Ameren to Collector of Revenue by County|
|R||Board of Equalization Decision by County|
|S||Ameren Missouri Appeal to the Board of Equalization by County|
|T||Gas Distribution 2013 by County|
|U||Gas Distribution 2013 Total|
|V||Revised Comparison County Value to Company Valuation by County|
|W||Revised Comparison of County Value to Company Value – Total|
|X||Missouri Assessor’s Manual 7.4|
- Respondent’s Evidence.
|2||Written Direct Testimony of George Sansoucy|
|3||Rebuttal Testimony George Sancoucy|
|4||Appendix Table J-1|
|5||Appendix Table J-2|
|6||Appendix Table J-3|
|7||Appendix Table J-4|
|8||Appendix Table J-5|
|9||Appendix Table J-6|
|10||Appendix Table J-7|
|11||Appendix Table J-8|
|12||Appendix Table K-1|
|13||Appendix Table K-2|
|14||Appendix Table K-3|
|15||Union Electric, YE 2002 MPSC Annual Report|
|16||Union Electric, YE 2003 MPSC Annual Report|
|17||Union Electric, YE 2004 MPSC Annual Report|
|18||Union Electric YE 2005 FERC Form 2|
|19||Union Electric YE 2006 FERC Form 2|
|20||Union Electric YE 2007 FERC Form 2|
|21||Union Electric YE 2008 FERC Form 2|
|22||Union Electric YE 2009 FERC Form 2|
|23||Union Electric YE 2010 FERC Form 2|
|24||Union Electric YE 2011 FERC Form 2|
|25||Union Electric YE 2012 FERC Form 2|
|26||Union Electric YE 2013 FERC Form 2|
|27||NARUC Public Utility Depreciation Practices, August 1996|
|28||Depreciation Study for Ameren Missouri’s Gas Plant, 12/31/08|
|29||Detailed Written Direct Testimony of George Sansoucy, PE|
|30||USPAP 2014-2015 Edition|
|31||Gas Distribution Form|
|32||Gas Distribution Form|
|33||Gas Distribution Form|
The Respondents’ proposed value for real and personal property for the entire unit (25 counties) is $360,000,000; the proposed value for real and personal property for the sixteen counties subject to this appeal is $191,084,983
- Presumption of Correct Assessment Not Rebutted. Complainant’s evidence was not substantial and persuasive to rebut the presumption of correct assessment by the Boards of Equalization and establish the true value in money as of January 1, 2013
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. 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 and tangible personal property are assessed at set percentages of true value in money. Section 137.115.5, RSMo – residential property at 19% of true value in money; commercial property at 32% of true value in money and agricultural property at 12% of true value in money.
Section 137.122 RSMo. provides a statutory standardized methodology for valuing business personal property relying upon the federal Modified Accelerated Cost Recovery System (MACRS) life tables to determine the appropriate “class life” of depreciable tangible personal property used in a trade or business or for production of income “to establish uniformity in the assessment of depreciable tangible personal property. . .” Said section applies to business personal property placed in service after January 2, 2006. A property is “placed in service” when it is ready and available for a specific use, whether or not actually in use. The methodology presented by Section 137.122 RSMo. is a cost approach to value, with more than straight line (normal) depreciation. The statute provides that if the personal property valuation is appealed, “the estimation may be disproved by substantial and persuasive evidence of the true value in money under any method determined by the state tax commission to be correct, including, but not limited to, an appraisal of the tangible personal property specifically utilizing generally accepted appraisal techniques, and contained in a narrative appraisal report in accordance with the Uniform Standards of Professional Appraisal Practice…” Section 137.122 RSMo.
Property which is otherwise personal property, can be treated as real property when it is attached to land or a building and is regarded as an irremovable part of the real property. Black’s Law Dictionary, 7th Edition, 199 p. 652. A pipeline may be considered a fixture as it may be regarded as an irremovable part of the real property. Missouri has codified that interpretation in Section 137.010 RSMo in the definition of real property:
137.010. (4) “Real property” includes land itself, whether laid out in town lots or otherwise, and all growing crops, buildings, structures, improvements and fixtures of whatever kind thereon, hydroelectric power generating equipment, the installed poles used in the transmission or reception of electrical energy, audio signals, video signals or similar purposes, provided the owner of such installed poles is also an owner of a fee simple interest, possessor of an easement, holder of a license or franchise, or is the beneficiary of a right-of-way dedicated for public utility purposes for the underlying land; attached wires, transformers, amplifiers, substations, and other such devices and appurtenances used in the transmission or reception of electrical energy, audio signals, video signals or similar purposes when owned by the owner of the installed poles, otherwise such items are considered personal property; and stationary property used for transportation or storage of liquid and gaseous products, including, but not limited to, petroleum products, natural gas, propane or LP gas equipment, water, and sewage; (emphasis added)
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
Substantial evidence can be defined as such relevant evidence as a reasonable mind might accept as adequate to support a conclusion. See, Cupples-Hesse, supra. 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. Brooks v. General Motors Assembly Division, 527 S.W.2d 50, 53 (Mo. App. 1975).
Complainants’ Burden of Proof
In an appeal before the State Tax Commission, the taxpayer is the moving party seeking affirmative relief. The taxpayer bears the burden of proof. In order to prevail, Complainants 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, 2013. Hermel, supra. A valuation which does not reflect the fair market value (true value in money) of the property under appeal is an unlawful, unfair and improper assessment.
Complainant argues that they were “challenging the market valuation and subsequent assessment of its natural gas distribution system…” (Tr.9) They allege that the counties failed to make the appropriate depreciation adjustment. (Tr. 9) Complainant, however, did not present any market evidence. “[Ameren is] not planning on providing an appraisal today or any testimony regarding an appraisal that has been completed,…” (Tr. 15) Without presenting 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, 2013, Complainant fails to meet their burden of proof.
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).
The State Tax Commission provides supervision of assessing officers and assessment practices in the state. In implementing its supervisory role, the Commission assists assessors in the performance of their duties including providing a manual. Included in the manual are guidelines to assist the assessors’ offices with the valuation of unique properties, including natural gas distribution companies. The State Tax Commission has developed forms to assist the assessor in the gathering of data for assessment. The data gathered may be used in a cost approach valuation. The cost approach may use original costs. “Original cost” is defined in Section 137.122 RSMo as the price the current owner, the taxpayer, paid for the item without freight, installation, or sales or use tax. Once original cost is determined, depreciation, based upon the life of the asset is calculated.
Complainant reported a cost figure to the county assessors. Complainant’s “original cost” figures took the cost new and removed the freight, installation and labor. Complainant later made an additional downward adjustment in an amount of the original cost of the retiring, depreciated asset it was replacing. There is no appraisal authority for making this adjustment. Since the retiring asset is no longer declared as property for property tax purposes, the Complainant is no longer being taxed on that property. Crediting the original cost of the replaced asset against the new asset does not establish market value, is not recognized appraisal practice, and is not logical.
Although Respondent has no burden of proof, Respondent presented evidence in support of the Boards’ presumed correct valuations. Respondent proferred the testimony and appraisal report of George Sansoucy, hereinafter referred to as “appraiser”. The appraiser has a masters in civil engineering and is a general certified appraiser with the State of Missouri and eleven other states. He has over thirty years of experience in planning, design, financing, construction, operation and management of hydroelectric plants, transmission and distribution facilities, and other utility areas.
The appraiser developed all three approaches to value. The appraiser developed the cost approach, two sales comparison approaches and four income approaches. The value estimates ranged from $290,547,000 to $469,492,600; the latter being the cost approach without consideration of the economic obsolescence. The appraiser reconciled a valuation of the real and personal property in all twenty-five counties in which the Complainant’s property is located of $360,000,000.
The cost approach was developed using the cost new less physical depreciation, functional obsolescence, excess operating and maintenance expenses, and economic obsolescence. Regulated utilities such as Complainant are required to maintain records of direct and indirect costs of construction and the costs are reported in code of accounts. To develop cost new, the appraiser utilized the accounts and adjusted the historic costs using trending factors developed for utility construction. The appraiser utilized depreciation studies required by regulatory authorities for his depreciation deduction. The sales and income approaches were utilized for calculating external obsolescence. Lastly, the appraiser adjusted the cost new for functional obsolescence.
The sales approach was developed using six sales in the past five years of gas utility properties The appraiser developed a value estimate by concluding a sale price to net book ratio and an estimate by concluding a sale price to earnings before interest, taxes, and amortization (EBITDA) ratio. The appraiser reviewed the dates of the sale, price, net property, plant and EBITDA to develop his estimates.
Lastly, the appraiser developed three income approaches: direct capitalization, yield capitalization and regulatory capitalization. The revenue and expense figures reported by Complainant to regulatory agencies were utilized. The indicated value ranged from $290,547,000 under the yield capitalization method to $368,559,000 under the regulatory capitalization method.
The appraiser reconciled his indicators of value to opine a unit value of the real and personal property in all twenty five counties of $360,000,000. (Exhibits 9 & 10) Although the Respondent had no burden in this appeal, their evidence supports the Boards’ presumed correct valuation.
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. Complainant is the moving party seeking affirmative relief and therefore bears the burden of proof. Complainant failed to meet their burden of proof in that they failed to present evidence that their assessments were unlawful, unfair and improper and failed present any evidence of the market value of their property on January 1, 2013.
The assessed valuations for the subject properties as determined by the Assessors and sustained by the Boards of Equalization are AFFIRMED.
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 County Collectors, 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 this 20th day of October, 2015
STATE TAX COMMISSION
Bruce E. Davis, Chairman
Randy Holman, Commissioner
Victor Callahan, Commissioner
Certificate of Service
I hereby certify that a copy of the foregoing has been sent electronically or mailed postage prepaid this 20th day of October, 2015, to: Complainants(s) counsel and/or Complainant, the county Assessor and/or Counsel for Respondent and county Collector.
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
 The property is combined valuation of personal and real property.