State Tax Commission of Missouri
| UNIVERSITY TERRACE ASSOC, | ) | |
| ) | ||
| Complainant, | ) | |
| ) | ||
| v. | ) | Appeal No. 13-13165 |
| ) | ||
| JAKE ZIMMERMAN, ASSESSOR, | ) | |
| COUNTY, MISSOURI, | ) | |
| ) | ||
| Respondent. | ) |
DECISION AND ORDER
HOLDING
Decision of the County Board of Equalization sustaining the assessment made by the Assessor is SET ASIDE. Complainant presented substantial and persuasive evidence to rebut the presumption of correct assessment by the Board of Equalization.
True value in money for the subject property for tax years 2013 and 2014 is set at $2,200,000; commercial assessed value of $704,000.
Complainant appeared by attorney Paul Puricelli.
Respondent appeared in person and by counsel Ed Corrigan.
Case heard and decided by Hearing Officer Maureen Monaghan.
ISSUE
Complainant appeals, on the ground of overvaluation, the decision of the County Board of Equalization, which sustained the valuation of the subject property. 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 County Board of Equalization.
- Evidentiary Hearing. The Evidentiary Hearing was held on June 23, 2015 in St. Louis County, Missouri. At the conclusion of the hearing, Respondent moved to brief the issues. The parties agreed that briefs would be filed by July 24, 2015 and reply briefs would be filed by August 7, 2015. Neither party filed any brief.
- Identification of Subject Property. The subject property is identified by map parcel number 18K430172 and has a street address of 8420 Delmar, University City, MO 63124.
- Description of Subject Property. The subject property consists of a 2.19 acre tract of land improved by a multi-story office and retail building of 47,023 square feet of net rentable area with a 2,470 square foot out-building. The improvements were constructed in 1966. The property suffers from higher than market vacancy rates due to the small office space layout and because the retail space lacks cross-traffic – both being undesirable in the market. The HVAC system in the property needs replacement with an estimated cost of $800,000.
- Assessment. The Assessor determined a true value of $3,464,900, a commercial assessed value of $1,108,770. The Board of Equalization sustained the value.
- Complainant’s Evidence. Complainant offered into evidence Exhibits A, B and C. Exhibit A was an appraisal report. Exhibit B was the written direct testimony of William Krodinger,. Exhibit C was the written direct testimony of Daniel Wald. William Krodinger is a certified general appraiser. The value as determined by the sales comparison approach and the income approach was $2,500,000 and $2,000,000 respectively. The appraiser reconciled the approaches concluding a market value for the property as of January 1, 2013 of $2,200,000.
Daniel Wald, as the manager of the property, testified that the property needs a new HVAC system at an expense of $800,000.
- No Evidence of New Construction & Improvement. There was no evidence of new construction and improvement from January 1, 2013, to January 1, 2014, therefore the assessed value for 2013 remains the assessed value for 2014. Section 137.115.1, RSMo.
- Presumption of Correct Assessment Rebutted – Value Established. The evidence presented by Complainant was substantial and persuasive to both rebut the presumption of correct assessment by the Board and to establish the fair market value of the subject property to be $2,200,000.
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.
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.
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.
Weight to be Given Evidence
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. 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 he 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. 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).
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).
Opinion Testimony by Experts
An expert’s opinion must be founded upon substantial information, not mere conjecture or speculation, and there must be a rational basis for the opinion. Missouri Pipeline Co. v. Wilmes, 898 S.W. 2d 682, 687 (Mo. App. E.D. 1995). The State Tax Commission cannot ignore a lack of support in the evidence for adjustments made by the expert witnesses in the application of a particular valuation approach. Drey v. State Tax Commission, 345 S.W. 2d 228, 234-236 (Mo. 1961), Snider v. Casino Aztar/Aztar Missouri Gaming Corp., 156 S.W. 3d, 341, 348 (Mo. 2005).
The testimony of an expert is to be considered like any other testimony, is to be tried by the same test, and receives just so much weight and credit as the trier of fact may deem it entitled to when viewed in connection with all other circumstances. The Hearing Officer, as the trier of fact, has the authority to weigh the evidence and 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 may accept it in part or reject it in part. Beardsley v. Beardsley, 819 S.W. 2d 400, 403 (Mo. App. 1991); Curnow v. Sloan, 625 S.W. 2d 605, 607 (Mo. 1981); Scanlon v. Kansas City, 28 S.W. 2d 84, 95 (Mo. 1930).
Complainant Proves Value
Complainant presented substantial and persuasive evidence to establish a fair market value as of January 1, 2013 for the subject property. Complainant’s appraiser developed an opinion of value relying upon an established and recognized approach for the valuation of real property, the sales comparison or market approach and the income approach.
For the income approach, the appraiser reviewed market and actual rents. The actual rents ranged from $12 to $28.66 which was consistent with market rents. The vacancy rate for the subject is 26.7%. The appraiser surmised the vacancy rates were due to the type retail space and office space as not being desirable to the market. The market vacancy rate was 13.5%. The appraiser used a vacancy rate of 15%. The appraiser reviewed the subject’s actual and market expenses to develop at net income. The appraiser utilized a band of investment methodology to develop a capitalization rate – in this appeal 12%. The resulting value was $2,000,000.
For the market approach, the appraiser used three sales of comparable properties. The appraiser made adjustments to the sale prices for any differences with the subject property. The appraiser, under this approach, concluded a value of $2,500,000.
The appraiser reconciled the indications of value and opined a value of $2,200,000.
No contradictory evidence was presented by the Respondent.
Rebuttal Evidence
A Discovery and Exchange Order was issued in this appeal on March 11, 2014. The order provided time for the parties to engage in discovery and required the parties to file any exhibits and written direct testimony on or before December 3, 2014. Any objections or rebuttal exhibits were to be filed by December 24, 2014. On November 25, 2014, the dates were amended so that exhibits were to be filed on or before January 12, 2015 and rebuttal exhibits by February 2, 2015. A hearing date of March 3, 2015 was set. At the request of the parties the hearing date was continued to April 15, 2015 and then again to June 24, 2015. The hearing was held on June 23, 2015 at the request of the Respondent and consent of the Complainant.
On June 17, 2015, (three working days prior to the hearing) the Respondent mailed rebuttal exhibits with a motion to be allowed to file the exhibits out of time – the deadline for rebuttal exhibits was February 2, 2015.
The matter was taken and ruled upon at the hearing. Respondent asked if the appraiser had valued the property previously. Complainant objected to relevance. The objection was overruled. Respondent asked the appraiser for his opinion of value of the property on January 19, 2012. The Complainant objected as to relevance and materiality. The objection was sustained as the issue before the Hearing Officer is the value of the property as of January 1, 2013. Respondent moved to make an offer of proof. The Respondent proceeded with the offer of proof. Offers of proof arise when a party begins a line of questioning that the other side objects to as calling for irrelevant or inadmissible. The offer of proof lasted nineteen minutes of the hearing’s forty-three minutes length. During the offer, the Hearing Officer asked the Respondent to notify her when the offer concluded so that the issue of the opinion of value as of January 19, 2012 and cross-examination upon other issues would be clearly set forth in the record. Nothing in the offer of proof established the relevance or materiality of the value of the property as of January 19, 2012.
Upon conclusion of the offer of proof as to the relevance of the value as of January 19, 2012, the Respondent cross-examined the appraiser on his appraisal report developed for the ad valorem hearing for 2013-2014 tax year.
ORDER
The assessed valuation for the subject property as determined by the Assessor and sustained by the Board of Equalization for St. Louis County for the subject tax day is SET ASIDE. The assessed value for the subject properties for tax years 2013 and 2015 is set at $704,000.
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 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 this 1st day of September, 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 1st day of September, 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