Value Properties of Branson LLC v. Chuck Pennel, Taney County Assessor

July 30th, 2014

State Tax Commission of Missouri


Complainant, )  
  ) Appeal No. 13-89504
Respondent, )  






Decision of the Taney County Board of Equalization sustaining the assessment made by the Assessor is AFFIRMED.  Complainant does not present 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 $640,000, commercial assessed value of $204,800.

Complainant represented by Aaron Klusmeyer, Attorney at Law.

Respondent represented by William McCullah, Attorney at Law.

Case submitted upon Complainant’s documents and decided by Senior Hearing Officer Luann Johnson.


Complainant appeals, on the grounds of overvaluation, the decision of the Taney County Board of Equalization, which sustained the Assessor’s valuation of the subject property. The Commission takes this appeal to determine the true value in money for the subject property on January 1, 2013. 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.


  1. Jurisdiction. Jurisdiction over this appeal is proper. Complainant timely appealed to the State Tax Commission from the decision of the Taney County Board of Equalization.
  2. No Evidentiary Hearing. By agreement of the parties, this case is decided based upon documents submitted by Complainant.
  3. Identification of Subject Property. The subject property is identified by map parcel number 07-7.0-35-001-002-004.000. It is further identified 3221 Shepherd of the Hills Expressway, Branson, Taney County, Missouri.
  4. Description of Subject Property. The subject site consists of a nearly rectangular 72,750 square foot (1.67 acre) sloping commercial lot fronting the south side of the Shepherd of the Hills Expressway. The site averages around 353 feet deep and is about 200 feet wide, contacting the street for 200.10 feet. Primary access to the subject site is from two driveways to the Shepherd of the Hills Expressway. Ex. A, pg. 55.

The subject property is improved with a 25,051 square foot motel. The improvements consist of 66 exterior access units totaling about 23,277 square feet on four levels. Additionally, the motel contains a 1,774 square foot two level office and three bedroom manager’s quarters. Related site improvements include a paved parking lot, a swimming pool, signage and landscaping.

The improvements consist of two related building. The front building is a two story building with a port-cochure with a main entrance on the east elevation opening into an atrium lobby with a front desk and breakfast bar. The seating area for the breakfast bar is in a sunroom addition to the south. Ex. A, pg. 58.

The rear building consists of two sections. Each rectangular section has 12 conventional exterior accessible motel units on either side of a central utility chase on the upper two floors. Each unit is accessible from a perimeter pre-stressed concrete cantilevered walkway and balcony system, all under a common roof. The lowest level has a total of six units on the southernmost section. The second level has twelve units in the southern section and a laundry room and shop in the portion of the northern section. Ex. A, pg. 59.

The laundry room is lightly finished with unpainted drywall and popcorned concrete ceiling and is equipped with a linen room, two commercial washers, three commercial dryers, a residential grade washer and dryer and extensive shelving.

The two sections are connected by a continuous concrete walkway and balcony around each level. Vertical circulation is provided by two stairways constructed with steel frames with concrete filled pans finished with painted rails and textured treads and one wood framed stairway. Ex. A, pg. 59.

The improvements were constructed in 1993. Particulars of the construction materials and finishes are set forth in Complainant’s Appraisal Report, Ex. A, pg. 59-61.

The overall condition of the subject property is considered to be good. The improvements are without functional defect and develop the site to its highest and best use. However, overall design is dated and does not follow current market desires. Ex. A, pg. 62.

The motel market is overbuilt with motels being foreclosed and resold for less than $10,000 per unit in a market where construction of a new motel meeting current market tastes is expected to cost in excess of $60,000 per unit. However, there are very few new motels in this market. Most motels are now twenty years old and of a design which met market needs of a past era. Ex. A, pg. 87.

5.        Highest and Best Use. Because of her belief that the subject property produces only a “trivial” income, Complainant’s appraiser asserts that the highest and best use of the property is to hold same on speculation of potentially higher future uses. Ex. A, pg. 89. Because the appraiser’s flaws in the income approach (See: Discussion, Complainant Fails to Prove Value), the appraiser’s conclusions of highest and best use are not persuasive. The highest and best use of the subject property is its continued use as a motel.

  1. Assessment. The Assessor appraised the property at $640,000, an assessed commercial value of $204,800. The Board of Equalization sustained the assessment. (Complaint for Review.)
  2. Complainant’s Evidence.   Complainant presented an appraisal report which as market as Exhibit A. Additionally, Complainant produced Written Direct Testimony of Kelly Trimble, a certified general real estate appraiser.
  3. 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.
  4. Respondent’s Evidence. Respondent produced no timely evidence by the deadline of June 30, 2014 set forth in the Scheduling Order. The Respondent subsequently produced the property record card and, at the Hearing Officer’s request, the personal property tax worksheets along with copies of the paid personal property tax statements.

Under the Rushmore method of determining value for hotels and motels, which the Tax Commission has utilized for almost two decades, the personal property declared by the taxpayer forms the basis of calculating the return of and return on personal property in the income approach. Complainant’s appraiser did not utilize this methodology in her income approach to value. (See: Discussion, Complainant Fails to Prove Value).   The county property record cards, the personal property worksheets, and the paid personal property tax statements, are not utilized in this decision.

  1. Presumption of Correct Assessment Not Rebutted. 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, 2013, to be $440,000, as proposed. (See, Presumption In Appeal and Discussion, Complainant Fails to Prove Value.)




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.

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).

Complainant’s Burden of Proof

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, 2013 and January 1, 2014. Hermel, supra. 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.” 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). 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.

“Where the basis for a test as to the reliability of the testimony is not supported by a statement of facts on which it is based, or the basis of fact does not appear to be sufficient, the testimony should be rejected.” Carmel Energy at 783.

A taxpayer does not meet his burden if evidence on any essential element of his case leaves the Commission “in the nebulous twilight of speculation, conjecture and surmise.” See, Rossman v. G.G.C. Corp. of Missouri, 596 S.W.2d 469, 471 (Mo. App. 1980). 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).

Standard of Valuation

True value in money is defined in terms of value in exchange and not value in use. Daly v. P. D. George Company, et al, 77 S.W.3d 645, 649 (Mo. App E.D. 2002), citing, Equitable Life Assurance Society v. STC, 852 S.W.2d 376, 380 (Mo. App. 1993); citing, Stephen & Stephen Properties, Inc. v. STC, 499 S.W.2d 798, 801-803 (Mo. 1973).

It is the fair market value of the subject property on the valuation date. Hermel, supra.

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.
  6. The price represents a normal consideration for the property sold unaffected by special financing amounts and/or terms, services, fees, costs, or credits incurred in the transaction. 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.

Official and Judicial Notice

Agencies shall take official notice of all matters of which the courts take judicial notice.   Section 536.070(6), RSMo. Courts will take judicial notice of their own records in the same cases.State ex rel. Horton v. Bourke, 129 S.W.2d 866, 869 (1939); Barth v. Kansas City Elevated Railway Company, 44 S.W. 788, 781 (1898).

In addition, courts may take judicial notice of records in earlier cases when justice requires or when it is necessary for a full understanding of the instant appeal. Burton v. Moulder, 245 S.W.2d 844, 846 (Mo. 1952); Knorp v. Thompson, 175 S.W.2d 889, 894 (1943); Bushman v. Barlow, 15 S.W.2d 329, 332 (Mo. banc 1929); State ex rel St. Louis Public Service Company v. Public Service Commission, 291 S.W.2d 95, 97 (Mo. banc 1956).

Courts may take judicial notice of their own records in prior proceedings involving the same parties and basically the same facts.   In re Murphy, 732 S.W.2d 895, 902 (Mo. banc 1987); State v. Gilmore, 681 S.W.2d 934, 940 (Mo. banc 1984); State v. Keeble, 399 S.W.2d 118, 122 (Mo. 1966).

Investigation by Hearing Officer

In order to investigate appeals filed with the Commission, the Hearing Officer may inquire of the owner of the property or of any other party to the appeal regarding any matter or issue relevant to the valuation, subclassification or assessment of the property. The Hearing Officer’s decision regarding the assessment or valuation of the property may be based solely upon his inquiry and any evidence presented by the parties, or based solely upon evidence presented by the parties. Section 138.430.2, RSMo



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).

The Supreme Court of Missouri has also held that evidence of the actual sales price of property is admissible to establish value at the time of an assessment, provided that such evidence involves a voluntary purchase not too remote in time. The actual sale price is a method that may be considered for estimating true value. St. Joe Minerals Corp., supra


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).

If specialized knowledge will assist the trier of fact to understand the evidence or to determine a fact in issue, a witness qualified as an expert on that subject, by knowledge, skill, experience, training, or education, may testify thereto.

The facts or data upon which an expert bases an opinion or inference may be those perceived by or made known to the expert at or before the hearing and must be of a type reasonably relied upon by experts in the field in forming opinions or inferences upon the subject and must be otherwise reliable, the facts or data need not be admissible in evidence.

Section 490.065, RSMo; State Board of Registration for the Healing Arts v. McDonagh, 123 S.W.3d 146 (Mo. SC. 2004); Courtroom Handbook on Missouri Evidence, Wm. A. Schroeder, Sections 702-505, pp. 325-350; Wulfing v. Kansas City Southern Industries, Inc., 842 S.W.2d 133 (Mo. App. E.D. 1992).



Complainant Fails to Present Preferred Income Approach

Complainant’s appraiser asserts that “. . .[T] he Income Capitalization Approach is simply not applicable to the appraisal problem.”   Complainant’s appraiser further asserts that:

“The reader is cautioned that the Missouri State Tax Commission, in its Hospitality Valuation Resource Manual, pretty much demands that motels be valued using the Income Capitalization Approach. But, the methodology described in that manual (though technically seriously flawed) requires that the income performance of the subject, and presumably all of the comparable sales, be known, and more or less assumes that the resulting net operating income is substantially positive.” (emphasis supplied).


Ex. A, pg. 166.


Complainant’s appraiser is correct in asserting that we expect an income approach to value, when appraising income producing property. “Income-producing real estate is typically purchased as an investment, and from an investor’s point of view earning power is the critical element affecting property value.” See : The Appraisal of Real Estate, 12th Edition, Appraisal Institute, pg. 471.   Income producing property is bought and sold based upon its ability to generate income. Our preferred income approach methodology is based upon a nationally recognized model.

Complainant’s appraiser further asserts that:

“According to current management” the subject property has been operating with an operating loss for several years, though it has shown a net operating income before deductions for depreciation and interest of about $12,400 for 2011 and $3,107 for 2012 – both trivial amounts in comparison with the scale of the property. Based on these net income figures, the value of the subject property would be nearly zero.”

Ex. A, pg. 164.

The appraiser’s logic is flawed on several fronts. First, income approaches to value must be based on market derived facts – not just actual income and expenses. If actual income and expenses do not reflect the market, the appraiser is required to explain why use of actual income and expenses more accurately represents value. Complainant’s appraiser has failed to present this information.

But, even if we assume that she would be correct in utilizing actual income and expenses, her comments about the income of the subject property do not represent correct appraisal practice. Not only do her numbers include depreciation and interest, they also include real property taxes – all of which are inappropriate in an ad valorem appraisal report. See : The Appraisal of Real Estate, 12th Edition, Appraisal Institute, pg. 521. Further, she includes an unexplained deduction of $144,289 as “room costs”. Ex. A, pag. 165. No effort is made to ascertain what this deduction includes or whether or not this deduction corresponds with market data.

We do not assume that any reasonable person would willingly operate his/her property at a loss. It is more likely than not that a properly prepared income approach would have indicated a positive value for the subject property.

Complainant’s appraiser also attempts to determine value using a gross income multiplier of 2.25%. No market data is presented to support this multiplier and Complainant’s appraiser acknowledges that this is not a reliable indicator of market value. Ex. A, pg. 151-154.

Complainant’s Sales Comparison Value Not Reliable

            In her appraisal, complainant’s appraiser gave greatest weight to her sales comparison approach. Ex. A, pg. 167-168.  (However, her written direct testimony indicates that she gives greatest weight to her cost approach – Trimble, Written Direct testimony pg. 5) For her sales comparison approach to value, Complainant’s appraiser used sales of three foreclosed properties. Ex. A, pg. 163. Based upon these three adjusted sales prices ($6,439; $6,548 and $6,654 per unit), Complainant’s appraiser determined the value of the subject property was $6,600 per unit at 66 units or $435,600. Ex. A, pg. 162.

In addition to failing to demonstrate that foreclosures were appropriate to use as comparables, Complainant’s appraiser made numerous adjustment errors to her comparable sales. First, she indicates that:

“[A]lthough each of these properties sold in the absence of an operator or any business value, it is a convention that when valuing motels for tax appeals to make some allowance for any residual business entity value which might still be associated with the property sold.” Ex. A, pg. 159.


Complainant’s appraiser fails to cite to any authority for this premise and this Hearing Officer is not aware of any “convention” that allows a business value to be added to a dark business. To make matters worse, in her adjustments she deducts between $19,960 and $80,600 from the sales prices of these foreclosures to account for business value. In a sales comparison approach, the comparable sales are supposed to be adjusted to reflect the difference between the comparables and the subject property. Inasmuch as only the subject property has any possible business value in this scenario, Complainant’s appraiser should have been adding business values to the comparables rather than deducting same. Thus, assuming there is any validity to Complainant’s appraiser’s calculations, comparable sale number 1 should have been adjusted upward (not downward) by $35,440; comparable sale number 2 should have been adjusted upward (not downward) $19,960; and comparable sale number 3 should have been adjusted upward (not downward) $80,600.

Complainant’s appraiser adjusted her comparable improved sales 10% because of their distressed nature. Ex. A, pg. 163. Although making this financing/condition of sale adjustment, she does not explain how she reached her decision that this was an appropriate adjustment for these improved sales.

Complainant’s appraiser does discuss the impact of foreclosure sales on the local market for vacant property indicating that pair sales analysis show that distressed sales may sell discounted by 10-20%, or more, for unimproved sales. She indicates that she adjusted one of her comparables by 25% because it was a distressed sale. Ex. A, pg. 106-107.   Complainant’s appraiser concludes that:

“The fact that the adjustment for the impact on sales price of the conditions of sale of a bank REO property is largely a matter of judgment on the part of the appraiser and . . that the accuracy and reliability of results of the analysis of such sales may be affected”. Ex. A, pg. 106-107.


From Complainant’s evidence, we conclude that banks discount their foreclosed properties by somewhere between 10% and 25% of market value to get them sold.    We do not know why 10% is a more accurate adjustment than 25%.

Finally, Complainant’s appraiser was required to make extensive adjustments to both sales 2 and 3 (Trimble Written Direct Testimony, pg. 20-21) making them unreliable indicators of value for the subject property.

Complainant’s Cost Approach Not Reliable

            Complainant’s appraiser may have relied most heavily on her cost approach to value (Trimble Written Direct Testimony, pg. 5) but recognized that “the use of the cost approach is typically considered particularly applicable in the analysis of properties, unlike the subject, which are improved with newer structures without adverse economic influences or functional defects which develop a site to its highest and best use. . .The most problematical portion of the analysis is the estimate of depreciation, specifically the estimate of economic obsolescence . Any time economic obsolescence has to be estimated, the relevance of this approach to value must be questioned. . . .although the accuracy of the results of this approach is limited, it is our opinion that the results of this approach should be a reliable indicator of value.” Ex., A, pg. 167. (emphasis supplied).

In fact, it is generally recognized, the difficulty in estimating depreciation in older properties diminishes the reliability of a cost approach. See: The Appraisal of Real Estate, 12th Edition, The Appraisal Institute, pg. 355. The subject property is about 15 years old. Ex. A, pg. 120.

Complainant’s appraiser used August 2004 Marshall Valuation to determine her base cost. She added height and size multipliers and current cost multipliers along with local market costs multipliers to estimate replacement cost new of $2,334,062 with a $250,077 entrepreneurial profit.   Ex. A, pg. 117 (or maybe $2,504,677 without an entrepreneurial profit; Ex. A, pg. 127). She estimated a 20 year effective age and a 40 year economic life. Ex. A, pg. 120. However, she states that she used a “base” construction cost of mini-storage buildings and residential improvements to calculate her replacement costs new. (Trimble Written Direct Testimony, pg. 10). She did not indicate why it would be appropriate to use construction costs of mini-storage units for motels.

Complainant’s appraiser calculated depreciation from nine sales. She deducted site value and FF&E from the sales prices; deducted the sales prices from her projected replacement cost new, and the difference represents an overall depreciation at time of sale. This percentage of replacement cost new was then divided by the effective age of the property to determine the overall depreciation per year. Ex. A, pg. 124. She then attempted to assign the depreciation between physical depreciation and economic obsolescence. Ex. A, pg. 125. These calculations indicated economic obsolescence of about 40% but she believed that the subject property was in better condition than the sales used for her calculations so she assigned only a 35% adjustment to the replacement cost new to account for the subject property’s economic obsolescence. Ex. A, pg. 122.

The problems with the appraiser’s calculations start with the conditions of her sales:

Sale No. 1 – Cobblestone Inn needed $800,000 in renovations after purchase;

Sale No. 2 – Old Matt’s Guest House needed significant remodeling;

Sale No. 3 – Yellow Rose Motel needed $575,000 remodeling;

Sale No. 4-   Budget Inn needed $126,000 remodeling;

Sale No. 6 – EconoLodge was sold out of foreclosure;

Sale No. 7 – Prince Charles Inn was sold out of foreclosure;

Sale No. 8 – Plantation Inn – details of sale were not confirmed;

Sale No. 9 – Mountain Music Inn was sold out of foreclosure.

Ex. A, pgs. 123, 136-137, 141, 144, 147.


No adjustments were made to their sales prices to reflect the fact that they were possible discounted sales. If you start out with distressed sales, it is nearly impossible to calculate accurate depreciation. “The market extraction method is . . .difficult to apply when the type or extent of depreciation varies greatly among the comparable properties. If the sales analyzed were affected by special financing or unusual motivation, the problem is further complicated.” See: The Appraisal of Real Estate, 12th Edition, Appraisal Institute, pg. 391.

Additionally, “[t]he usefulness of the [extraction] method depends heavily on the accuracy of the site value estimates and the cost estimates for the comparable properties.” See: The Appraisal of Real Estate, 12th Edition, Appraisal Institute, pg. 391.

Complainant’s appraiser recognizes her problems with site value. She states:

“In order for adjustments of this magnitude [6% downward per year] to be reasonably accurate, they need to be small enough that they do not dominate the adjustment process, or rather, the sales must be recent enough to be considered credible indicators of current market values. Unfortunately, most of these sales are a couple of years old or more and require substantial adjustments for market conditions. The most recent of these sales are perhaps the least physically or locationally similar to the subject and would otherwise probably not be considered applicable to this appraisal problem in the absence of strong changes in market conditions affecting the reliability of other sales.” Ex. A, pg. 108.


The appraiser goes on to say:

“ In the absence of data indicating a particular rate, we have applied a downward adjustment to these sales based on a rate derived loosely from both the appraiser’s judgement [sic] and survey and opinion data. . . .This rate [6% downward per year] is used in the absence of clear evidence of a particular rate that would be accurate.” Ex. A, pg. 108, 110.


But the problems with the appraiser’s site values were not merely limited to age adjustments. So many adjustments were made to land sale numbers 1 and 2, they cannot be appropriately classified as “comparable” sites. (Trimble Written Direct Testimony pg. 7-8).

Of course, we do not fault the appraiser for the lack of good market data. But, as she notes, it makes her opinion of the correct site value questionable and, with it, draws her depreciation calculations into question.

Those site value calculations, for the subject property, indicated a range of value between $0.62, $1.44 and $3.97 per square foot. Ex. A, pg. 112. From this, the appraiser determined a site value for the subject property of $1.60. However, she states:

“None of these [comparable site] sales is particularly compelling as an indicator of value for the subject property, and we are not confident in the value indicated. Our lack of confidence in our value conclusion for the site limits our confidence in the results of this approach to value.” Ex. A, pg. 112.


Within her nine extraction comparables, the appraiser utilized site values of $1.00 to $6.00. Ex. A, pg. 124. Only one of the extraction comparable sites was less than this appraiser’s opinion of site value for the subject property. All other extraction site comparables were higher. Complainant’s appraiser does not further discuss comparable site value extractions in her appraisal report.

Finally, Complainant’s appraiser assigns a replacement cost new to her extraction comparables. She states:

“ . . .I was seeking to analyze the depreciation, so I needed to use this extracted improvement sales price to derive an estimate of the depreciation present in the sale’s improvements. To do this, I had to estimate the replacement cost new of the improvements. Since I did not have enough data to do a thorough and detailed estimate of replacement cost, I was forced to use an approximation of replacement cost of about $80.00 per square foot . . . .” (Trimble Written Direct Testimony, pg. 14).” (emphasis supplied).


So, to determine the appropriate amount of depreciation to apply to the subject property under her cost approach, the appraiser took the arguably unreliable distressed sales prices of her extraction comparables and deducted unexplained site values and an allowance of $500 per unit for personal property and determined her extracted building value. She then subtracted this extracted building value from her unsupported replacement cost new to ascertain the amount of deprecation each of the mostly questionable sales were experiencing. She then applied those depreciation rates [divided into physical and economic] to the subject property. Her overall depreciation for the subject property was 87%, a sum exactly in the middle of the calculated deprecation on her arguable distressed extraction comparables. She estimated the remaining value of the building improvements at $324,514 and the site value of $115,000 for a market value of $439,514, say $440,000 under the cost approach. Ex. A, pg 123-129.

With the effective age of the subject property estimated to be 20 years and estimated life of 40 years, the indicated straight line depreciation is $1,167,026 for the building improvements and $136,500 for the site improvements. (Trimble Written Direct Testimony, pg. 12). The additional deduction of $876,693 for economic obsolescence only comes into play if the comparables utilized to get to this number are market sales. Inasmuch as the vast majority of those comparables are questionable, the economic obsolescence adjustment is not based upon substantial and persuasive evidence.

We agree with Complainant’s appraiser. The cost approach is not a reliable indicator of value for this property. Complainant’s appraiser has failed to present substantial and persuasive evidence suggesting that the Board of Equalization’s value is not correct.


The assessed valuation for the subject property as determined by the Assessor and sustained by the Board of Equalization for Taney County for tax years 2013 and 2014 is AFFIRMED.

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 Taney 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 30th day of July, 2014.



Luann Johnson

Senior Hearing Officer

Certificate of Service


Copy of the foregoing mailed this 30th day of July, 2014, to Aaron Klusmeyer, 901 St. Louis St. 20th Fl., Springfield, MO 65806, Attorney for Complainant; William McCullah, 221 Main St., Forsyth, MO 65653, Attorney for Respondent; Chuck Pennel, Taney County Assessor P.O. Box 612 Forsyth, MO 65653; Donna Neeley, Taney County Clerk, P.O. Box 156 Forsyth, MO 65653; Sheila Wyatt, Taney County Collector, P.O. Box 278, Forsyth, MO 65653.


Jacklyn Wood

Legal Coordinator