STATE TAX COMMISSION OF MISSOURI
| VSUJ LIBERTY LLC, | ) | |
| ) | Appeal No. 19-32026 | |
| Complainant, | ) | |
| ) | Parcel No. 14-303-00-04-009.00 | |
| v. | ) | |
| ) | ||
| CATHY RINEHART, ASSESSOR, CLAY COUNTY, MISSOURI, | )
) ) |
|
| Respondent. | ) |
ORDER AFFIRMING
HEARING OFFICER DECISION UPON APPLICATION FOR REVIEW
HOLDING
On January 29, 2021, a State Tax Commission (STC) Senior Hearing Officer (Hearing Officer) entered a Decision and Order (Decision) setting aside the decision of the Clay County Board of Equalization (BOE) finding the true value in money (TVM) of the subject commercial property on January 1, 2019,[1] was $1,388,000, with an assessed value of $444,160. Cathy Rinehart[2], Assessor, Clay County, Missouri, (Respondent) subsequently filed a timely Application for Review of the Decision of the Hearing Officer. VSUJ Liberty, LLC, (Complainant) was provided an opportunity to file a response. No response was filed.
We AFFIRM the Decision of the Hearing Officer. Segments of the Hearing Officer’s Decision may have been incorporated into our Order without further reference.
FINDINGS OF FACT AND PROCEDURAL HISTORY
The subject property is located at 8600-8606 N. Church Road in Kansas City, Clay County, Missouri. The subject property is situated near Interstate 35 and Barry Road. The parcel/locator number is 14303000400900. The subject property consists of .79 acres of land improved by a one-story steel frame and brick multi-tenant retail strip center configured for four tenants with 6,000 square feet of gross leasable area constructed in 2004. The subject property was 100% occupied on January 1, 2019. The subject property includes asphalt paved parking adjacent to the building.
Respondent valued the subject property at $1,388,000, as commercial property, as of January 1, 2019. The BOE valued the subject property at $1,388,000, as commercial property, as of January 1, 2019. Complainant filed a timely appeal with the STC, and the case proceeded to an evidentiary hearing.
At the evidentiary hearing, Complainant presented evidence in the form of exhibits and the testimony of Dr. Veeral Bhoot (Dr. Bhoot), managing member of Complainant, and Troy Smith (Complainant’s Appraiser). Respondent presented evidence in the form of exhibits and the testimony of Grant Knauff (Respondent’s Appraiser).
Dr. Bhoot purchased the subject property in May 2018 through a low-interest financing program that allowed Complainant to refinance other property as a reinvestment vehicle in order to acquire the subject property with a minimal down payment but at an above-market purchase price. Dr. Bhoot subsequently refinanced the subject property in September 2018, and the value attributed to the subject property during refinancing was $865,000 to $870,000.
Complainant’s Appraiser initially opined the TVM of the subject property as of January 1, 2019, was $870,000 utilizing the sales comparison and income approaches to value. Specifically with regard to the income approach, Complainant’s Appraiser based his initial valuation on market rents of four rent comparables ranging from $14.50 to $19.22 per square foot. Complainant’s Appraiser calculated reimbursable income; estimated vacancy, collection loss, and expenses; developed a capitalization rate of 8.75% using a market study and the band of investment technique; then adjusted the capitalization rate for taxes to result in an overall rate of 9.10%. At the evidentiary hearing, however, Complainant’s Appraiser changed his appraisal report to reflect the actual rental rates of the four tenant leases for the subject property, ranging from $19.00 to $20.00 per square foot. Complainant’s Appraiser recalculated his TVM under the income approach using $20.00 per square foot, which resulted in a valuation of $1,040,000, as of January 1, 2019.
Respondent’s Appraiser recommended a TVM of the subject property as of January 1, 2019, of $1,336,600, utilizing the cost, sales comparison, and income approaches to value. Specifically with regard to the income approach, Respondent’s Appraiser considered market rents of three rent comparables ranging from $17.09 to $24.40 per square foot plus common area maintenance charges ranging from $5.44 to $8.07 per square foot. Respondent’s Appraiser listed the three rent comparables as Class B+ investment grade property but listed the subject property as Class A- investment grade property. Respondent’s Appraiser reported the rental rate of Class A investment grade property in Clay County was considered to be $22.00+ while the rental rate of Class B investment grade property in Clay County was considered to range from $15.00 to $22.00. Respondent’s Appraiser estimated vacancy, collection loss and expenses and estimated an overall capitalization rate of 9.00% using market surveys. Respondent’s Appraiser concluded the TVM of the subject property under the income approach was $1,336,600, as of January 1, 2019.
The Hearing Officer subsequently issued the Decision containing Findings of Fact and Conclusions of Law finding that Complainant presented substantial and persuasive evidence rebutting the presumption of correctness of the BOE’s value and, given Complainant’s Appraiser’s recalculated TVM under the income approach utilizing the actual lease rates for the subject property, established the correct value to be placed on the subject property. The Hearing Officer specifically found that the evidence established Dr. Bhoot’s purchase price for the subject property was influenced by unique financing terms and did not indicate the subject property’s TVM. The Hearing Officer concluded the TVM of the subject property was $1,040,000, as of January 1, 2019. Respondent filed a timely Application for Review. The STC thereafter issued its Order allowing the Application for Review and granting Complainant time to file a response. No response was filed.
CONCLUSIONS OF LAW
Respondent’s Points on Review
Respondent asserts the Hearing Officer’s Decision is in error in that:
- The overwhelming weight of the evidence discredits Bhoot’s testimony;
- A failure to rule in favor of Respondent’s evidentiary objections until the Evidentiary Hearing foreclosed Respondent’s opportunity to bring additional evidence;
- The STC’s failure to issue the subpoenas requested by Respondent resulted in procedural unfairness;
- The Hearing Officer failed to apply accepted appraisal methodologies in valuing the subject
Standard of Review
A party subject to a decision and order of a hearing officer of the STC may file an application requesting the case be reviewed by the STC. Section 138.432. The STC may then summarily allow or deny the request. Section 138.432. The STC may affirm, modify, reverse, set aside, deny, or remand to the hearing officer the decision and order of the hearing officer on the basis of the evidence previously submitted or based on additional evidence taken before the STC. Section 138.432.
The Commission reviews the hearing officer’s decision and order de novo. Lebanon Properties I v. North, 66 S.W.3d 765, 770 (Mo. App. 2002); Union Electric Company, d/b/a Ameren Missouri, v. Estes, 2020 WL 3867672 (Mo. St. Tax Com., July 2, 2020); AT&T Mobility, LLC, v. Beverly Alden, Assessor, Caldwell County, Missouri, et al., 2020 WL 3867819 (Mo. St. Tax Com., July 2, 2020). “The extent of that review extends to credibility as well as questions of fact.” Lebanon Properties I, 66 S.W.3d at 770. The Commission “is free to consider all pertinent facts and estimates and give them such weight as reasonably they may be deemed entitled to.” St. Louis Cty. v. State Tax Comm’n, 515 S.W.2d 446, 450 (Mo. 1974).
Commission’s Ruling
For the reasons that follow, the Commission finds Respondent’s arguments to be unpersuasive. The Commission, having reviewed the whole record and having considered the Hearing Officer’s Decision and the Application for Review of Respondent, affirms the Hearing Officer’s Decision.
There is a presumption of validity, good faith and correctness of assessment by the BOE. 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.
- STC, 308 S.W.2d 748, 759 (Mo. 1958). This presumption is a rebuttable rather than a conclusive The presumption of correct assessment is rebutted when the taxpayer presents substantial and persuasive evidence to establish that the BOE’s assessment is erroneous and what assessment should have been placed on the property. Id.
The taxpayer in a STC appeal bears the burden of proof. The taxpayer is the moving party seeking affirmative relief. Therefore, Complainant bears the burden of proving by substantial and persuasive evidence 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. W.D. 1991). 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).
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 Hearing Officer is the fact finder, and 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, 515 S.W.2d at 450; Chicago, Burlington & Quincy Railroad Company, 436 S.W.2d at 650.
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 or she 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).
Proper methods of valuation and assessment of property are delegated to the STC. 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, 564 S.W.2d at 896; 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., 854 S.W.2d at 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 taxpayer in a STC appeal bears the burden of proof. The taxpayer is the moving party seeking affirmative relief. A Hearing Officer sits as the trier of fact with discretion to weigh the evidence admitted into the record. A Hearing Officer may consider the testimony of an expert witness and give it as much weight and credit as he or she may deem it entitled when viewed in connection with all other circumstances. A Hearing Officer is not bound by the opinions of experts who testify on the issue of reasonable value, but may believe all, some, or none of the expert’s testimony and accept it in part or reject it in part. A Hearing Officer is not bound by appraisal industry standards; rather, he or she applies the law to the facts in evidence, weighing the evidence to determine which evidence is more persuasive.
Here, Complainant had the burden of proving that the BOE’s determination regarding the TVM of the subject property was erroneous and establishing the correct TVM to place upon the subject property. The Hearing Officer found Complainant’s evidence substantial and persuasive to rebut the presumption of correctness of the BOE’s valuation and that Complainant’s opinion of value was correct.
In the Decision, the Hearing Officer specifically found Complainant’s Appraiser was credible. Complainant’s Appraiser, who was MAI certified, licensed in 13 states, and had nearly 30 years of appraisal experience, initially concluded a reconciled opinion of value of $870,000 based on comparable market leases. Complainant’s Appraiser’s initial opinion of value was roughly equivalent to the dollar amount attributed to the subject property through the refinancing of the subject property, which occurred subsequent to the purchase in 2018. At the evidentiary hearing, however, Complainant’s Appraiser amended his opinion of the subject property’s value to $1,040,000 to reflect his recalculations using the income approach based on actual lease data of $20 per square foot for the subject property as of January 1, 2019.
To the contrary, Respondent’s Appraiser utilized three comparable properties under the income approach with lease rates ranging from $17.09 to $24.40 per square foot, with common area maintenance charges ranging from $5.44 to $8.07, and with an investment grade of B+. Respondent’s Appraiser listed the investment grade of the subject property as A- and listed the lease rates for property with an investment grade of A at $22.00+. The Hearing Officer found that Respondent’s evidence established that properties with an investment grade of B had rental rates of between $15.00 and $22.00 per square foot but that Respondent’s evidence failed to persuasively establish that the subject property had an investment grade higher than that of the comparables.
With regard to Respondent’s allegations in her Application for Review, i.e., the overwhelming weight of the evidence discredits Dr. Bhoot’s testimony; a failure to rule in favor of Respondent’s evidentiary objections until the Evidentiary Hearing foreclosed Respondent’s opportunity to bring additional evidence; the STC’s failure to issue the subpoenas requested by Respondent resulted in procedural unfairness; and the Hearing Officer failed to apply accepted appraisal methodologies in valuing the subject property, we find these allegations to be refuted by the record and without merit.
First, the evidence as a whole supported the Hearing Officer’s finding that the purchase price of the subject property was not the same as the TVM as of January 1, 2019, in that the purchase price was influenced by the financing mechanism Complainant used to obtain the subject property.
Second, the Hearing Officer admitted all of the exhibits offered by both Complainant and Respondent into the record, including Respondent’s rebuttal exhibits purporting to show that Complainant’s purchase price for the subject property was indicative of the TVM as of January 1, 2019. Respondent fails to explain how a ruling on her objections to Complainant’s evidence at an earlier juncture would have enabled her to adduce additional evidence different from the rebuttal exhibits, which were admitted, or what that additional evidence might have been. Furthermore, as stated above, the evidence as a whole supported the Hearing Officer’s finding that the purchase price of the subject property was not the same as the TVM as of January 1, 2019, in that the purchase price was influenced by the financing mechanism Complainant used to obtain the subject property.
Third, the record reveals that the STC in fact did issue the subpoenas requested by Respondent. On May 21, 2020, at 4:38 p.m., the STC received an email from Respondent’s attorney of record with a formal request for subpoenas duces tecum attached. The formal request for subpoenas duces tecum asked the STC to issue subpoenas directed to Equity Bank and Chicago Title Company requesting specific documents to be produced at the evidentiary hearing. The formal request also asked the STC to appoint a special process server. The email containing the formal request also was sent to the Hearing Officer and Complainant’s counsel of record. On May 28, 2020, at 11:00 a.m., the STC’s Chief Counsel responded to Respondent’s attorney with an email stating:
Please see the attached documents responsive to your requests for subpoenas duces tecum. It is the responsibility of the requesting party to obtain and appoint its own process server; the STC does not appoint process servers.
Attached to the email were two subpoenas duces tecum, one directed to Equity Bank and one to Chicago Title Company, ordering the documents requested by Respondent to be produced at the evidentiary hearing. The subpoenas duces tecum were signed by the Chairman of the Commission. The STC’s Chief Counsel’s email also was sent to the Hearing Officer and Complainant’s counsel of record.
Fourth, the Hearing Officer found Complainant’s income approach persuasive. The income approach is one of the three court-approved methodologies for valuing real property in Missouri. Complainant’s Appraiser amended his initial valuation during the evidentiary hearing to reflect his calculation based upon the actual lease data for the subject property on the valuation date. The Hearing Officer, as the trier of fact, weighed this evidence against Respondent’s evidence, namely Respondent’s Appraiser’s report, and found Complainant’s Appraiser credible.
The record supports the Hearing Officer’s findings. The Commission finds that a reasonable mind could have conscientiously reached the same result as the Hearing Officer based on a review of the entire record. Hermel, 564 S.W.2d at 895-96; Black v. Lombardi, 970 S.W.2d 378 (Mo. App. E.D. 1998). The Hearing Officer did not err in finding the TVM of the subject property to be $1,040,000 as of January 1, 2019.
ORDER
The Decision of the Hearing Officer is AFFIRMED. Segments of the Hearing Officer’s Decision, including the findings of fact and conclusions of law therein, may have been incorporated into our Order without further reference, as if set out in full, in this final decision of the Commission.
Judicial review of this Order may be had in the manner provided in Sections 138.432 and 536.100 to 536.140 within 30 days of the mailing date set forth in the Certificate of Service for this Order.
If judicial review of this Order 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.
If no judicial review is made within 30 days, this Order is deemed final and the Collector of the Clay County, 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 January 14, 2022
STATE TAX COMMISSION OF MISSOURI
Gary Romine, Chairman
Victor Callahan, Commissioner
Will Kraus, Commissioner
Certificate of Service
I certify that copy of the foregoing has been sent electronically or mailed postage prepaid on January 14th, 2022 to: Complainant(s) and/or Counsel for Complainant(s), the County Assessor and/or Counsel for Respondent and County Collector.
Elaina Mejia
Legal Coordinator
STATE TAX COMMISSION OF MISSOURI
| VSUJ LIBERTY, LLC | ) | Appeal No. 19-32026 |
| ) | Parcel No. 14-303-00-04-009.00 | |
| Complainant, | ) | |
| ) | ||
| v. | ) | |
| ) | ||
| CATHY RINEHART, ASSESSOR, | ) | |
| CLAY COUNTY, MISSOURI, | ) | |
| ) | ||
| Respondent. | ) |
DECISION AND ORDER
VSUJ Liberty, LLC (Complainant) appeals the Clay County Board of Equalization’s (BOE) decision finding the true value in money (TVM) of the subject property on January 1, 2019, was $1,388,000, with an assessed value of $444,160. Complainant claims the property is overvalued and proposes a value of $870,000. Complainant produced substantial and persuasive evidence to rebut the BOE presumption. The BOE’s decision is set aside.1
Complainant was represented by counsel John Lentell. Cathy Rinehart, Assessor of Clay County, Missouri (Respondent) was represented by counsel Patricia Hughes. The evidentiary hearing was conducted on November 17, 2020.
1 Complainant timely filed a complaint for review of assessment. The State Tax Commission (STC) has authority to hear and decide Complainant’s appeal. Mo. Const. art. X, Section 14; section 138.430.1, RSMo 2000. All statutory citations are to RSMo 2000, as amended.
FINDINGS OF FACT
- Subject The subject property is located at 8600-8606 N. Church Road in Kansas City, Clay County, Missouri. The parcel/locator number is 14-303-00-04- 009.00.
The subject property consists of a .79 acre lot and a one-building, multi-tenant retail strip center containing 6,000 square feet of gross leasable area. Complainant purchased the subject property on May 2, 2018, for $1,545,000 (Respondent’s Rebuttal Ex. 2, Page 397) (Settlement Statement) or $1,565,000 (Respondent’s Rebuttal Ex. 3, Page 399) (CoStar).
- Respondent and Respondent classified the subject property as commercial and determined the TVM on January 1, 2019, was $1,388,000. The BOE classified the subject property as commercial and independently determined the TVM on January 1, 2019, was $1,388,000.
- Complainant’s Complainant testified the TVM of the subject property on January 1, 2019, was below the TVM established by the BOE. Dr. Veeral Bhoot, the managing member of Complainant, testified that the purchase price of the subject property has unique financing circumstances, which were in part driven by an available low-interest rate loan program operated by the State of Missouri known as the Missouri First Loan Program. Dr. Bhoot testified that he was able to utilize an existing property he owned (his medical building) as a refinance mechanism to obtain advantageous returns using the subject property as the vehicle for reinvestment. Dr. Bhoot utilized Equity Bank and its services. Dr. Bhoot testified Equity Bank suggested that getting approved through the program would allow him to leverage the down payment to acquire new property with a minimal down payment. Dr. Bhoot testified he paid more for the subject property than TVM. He testified that due to an unfavorable amortization schedule with Equity Bank that the property was refinanced with Wells Fargo and that $865,000 to $875,000 was attributed to the subject property TVM. Complainant submitted the following exhibits:
| Exhibit | Description | Ruling |
| Written Direct Testimony (WDT) | WDT Dr. Veeral Bhoot | Admitted |
| Written Direct Testimony (WDT) | WDT Troy Smith (Complainant’s Appraiser) | Admitted |
| Exhibit A | Appraisal Of Complainant’s Appraiser | Admitted |
Complainant’s Appraiser is president of Veracity Valuation. He is a MAI certified appraiser, licensed in 13 states, who has completed appraisals of all types of properties since 1992. Complainant’s Appraiser employed the sales comparison and income approaches to value. He testified about the aesthetics, landscaping, signage, and nature of the subject parking lot and compared the subject property to the three comparables utilized in Respondent’s income approach, identifying the comparables as superior.
Complainant’s Appraiser conducted a sales comparison analysis in which he utilized four comparable properties. He made adjustments for market conditions, size, and age/quality/condition. His adjusted sale prices per square foot were $150.07, $149.72, $166.11, and $147.90. Complainant’s Appraiser concluded a TVM under the sales comparison approach of $870,000.
Complainant’s Appraiser conducted an income approach analysis in which he utilized four comparable market leases. The four comparables, as listed in Complainant’s Appraiser’s appraisal, had lease rates per square foot of $17.00, $19.22, $15.00, and
$14.50. However, during the evidentiary hearing, Complainant’s Appraiser requested a change to his appraisal to reflect rental rates per square foot for the four leases at the subject property, as of January 1, 2019, of $19.00/sq. ft., $20.00/sq. ft., $19.50 sq. ft., and 19.25/sq. ft. Complainant’s Appraiser also calculated reimbursable income since market leases are generally on a triple net basis. He estimated vacancy, collection loss, and expenses. Complainant’s Appraiser developed a capitalization rate utilizing direct capitalization and the band of investment. Complainant’s Appraiser’s concluded TVM under the sales approach was $870,000.
In Complainant’s Appraiser’s appraisal, his reconciled TVM was $870,000. However, during the evidentiary hearing, Complainant’s Appraiser recalculated his TVM under the income approach utilizing $20.00/sq. ft. based upon the correct lease rates at the subject property. Complainant’s Appraiser testified this resulted in a valuation of $1,040,000, which he would be comfortable with as the TVM for the subject property.
- Respondent’s Evidence. Respondent’s appraiser, Grant Knauff (Respondent’s Appraiser) testified the TVM of the subject property on January 1, 2019, was $1,338,800. Respondent submitted the following exhibits:
| Exhibit | Description | Ruling |
| Written Direct Testimony (WDT) | WDT Respondent’s Appraiser | Admitted |
| Exhibit 1 | Valuation Report | Admitted |
| Exhibit 2 | Valuation Report Appendix | Admitted |
| Rebuttal Exhibits | Rebuttal Exhibits 2-6 | Admitted |
Respondent’s Appraiser is an employee of Clay County and issued his appraisal under the exemption from licensure pursuant to Section 339.501.5(3). Respondent’s Appraiser considered all three approaches in determining TVM. He gave the most weight to the income approach.
Under the cost approach, Respondent’s Appraiser concluded on a replacement cost new less deprecation of $1,500,308. Under the sales comparison approach, Respondent’s Appraiser utilized four comparable properties. Respondent’s Appraiser listed the sales prices of the four comparables in his appraisal; however, he made no adjustments between the comparables and the subject property and opined no TVM under the sales comparison approach.
Under the income approach, Respondent’s Appraiser utilized three comparable properties. The three comparables had lease rates per square foot of $24.40, $19.87, and $17.09. He listed the common area maintenance (CAM) charges for each at $5.97, $8.07, and $5.44 respectively. He listed the investment grade of the subject as A- and the three comparables all at B+. In a table, Respondent’s Appraiser listed the rental rate for class A property at $22.00+ and the rental rate for class B property at $15.00-$22.00. He estimated vacancy, collection loss, and expenses. Respondent’s Appraiser developed a capitalization rate utilizing market surveys. Complainant’s Appraiser’s concluded TVM under the sales approach was $1,336,600.
Respondent’s Appraiser’s reconciled TVM in his appraisal report was $1,388,800.
- Value. The TVM of the subject property on January 1, 2019, was $1,040,000, with an assessed value of $332,800.
- No Evidence of New Construction & Improvement. There was no evidence of new construction and improvement from January 1, 2019, to January 1, 2020, therefore the assessed value for 2019 remains the assessed value for 2020. Section 115.1.
CONCLUSIONS OF LAW
1. Assessment and Valuation
Pursuant to Article X, Sections 4(a) and 4(b), Mo. Const. of 1945, real property and tangible personal property is 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. Commercial real property is assessed at 32% of its TVM as of January 1 of each odd-numbered year. Section 137.115.5(1)(c). “True value in money is the fair market value of the property on the valuation date, and is a function of its highest and best use, which is the use of the property which will produce the greatest return in the reasonably near future.” Snider v. Casino Aztar/Aztar Mo. Gaming Corp., 156 S.W.3d 341, 346 (Mo. banc 2005) (internal quotation omitted). The fair market value is “the price which the property would bring from a willing buyer when offered for sale by a willing seller.” Mo.
Baptist Children’s Home v. State Tax Comm’n, 867 S.W.2d 510, 512 (Mo. banc 1993). Determining the TVM is a factual issue for the STC. Cohen v. Bushmeyer, 251 S.W.3d 345, 348 (Mo. App. E.D. 2008). The “proper methods of valuation and assessment of property are delegated to the Commission.” Savage v. State Tax Comm’n, 722 S.W.2d 72, 75 (Mo. banc 1986).
“For purposes of levying property taxes, the value of real property is typically determined using one or more of three generally accepted approaches.” Snider, 156 S.W.3d at 346. The three generally accepted approaches are the cost approach, the income approach, and the comparable sales approach. Id. at 346-48; see also St. Louis Cty. v. Sec. Bonhomme, Inc., 558 S.W.2d 655, 659 (Mo. banc 1977).
The income approach “is most appropriate in valuing investment-type properties and is reliable when rental income, operating expenses, and capitalization rates can reasonably be estimated from existing market conditions.” Snider, 156 S.W.3d at 347. “The income approach determines value by estimating the present worth of what an owner will likely receive in the future as income from the property.” Id. “The income approach is based on an evaluation of what a willing buyer would pay to realize the income stream that could be obtained from the property when devoted to its highest and best use.” Id. (internal quotation omitted). “When applying the income approach to valuing business property for tax purposes, it is not proper to consider income derived from the business and personal property; only income derived from the land and improvements should be considered.” Id.
2. Evidence
The hearing officer is the finder of fact and determines the credibility and weight of the evidence. Kelly v. Mo. Dep’t of Soc. Servs., Family Support Div., 456 S.W.3d 107, 111 (Mo. App. W.D. 2015). The finder of fact in an administrative hearing determines the credibility and weight of expert testimony. Hornbeck v. Spectra Painting, Inc., 370 S.W.3d 624, 632 (Mo. banc 2012). “It is within the purview of the hearing officer to determine the method of valuation to be adopted in a given case.” Tibbs v. Poplar Bluff Assocs. I, L.P., 599 S.W.3d 1, 9 (Mo. App. S.D. 2020). 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.” Section 138.430.2. 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. Id.
3. Complainant’s Burden of Proof
The BOE’s valuation is presumptively correct. Rinehart v. Laclede Gas Co., 607 S.W.3d 220, 227 (Mo. App. W.D. 2020). To prove overvaluation, a taxpayer must rebut the BOE’s presumptively correct valuation and prove the “value that should have been placed on the property.” Snider, 156 S.W.3d at 346. The taxpayer’s evidence must be both “substantial and persuasive.” Id. “Substantial evidence is that evidence which, if true, has probative force upon the issues, and from which the trier of fact can reasonably decide the case on the fact issues.” Savage, 722 S.W.2d at 77 (internal quotation omitted). Evidence is persuasive when it has “sufficient weight and probative value to convince the trier of fact.” Daly v. P.D. George Co., 77 S.W.3d 645, 651 (Mo. App. E.D. 2002); see also White
- Dir. of Revenue, 321 S.W.3d 298, 305 (Mo. banc 2010) (noting the burden of persuasion is the “party’s duty to convince the fact-finder to view the facts in a way that favors that party”). A taxpayer does not meet his burden if the evidence on any essential element of his case leaves the STC “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).
4. Complainant Proved Overvaluation
The Hearing Officer was convinced by Complainant that the purchase price paid for the subject property was influenced by special financing and did not indicate the TVM for the subject property. Additionally, the hearing officer was more persuaded by the appraisal of Complainant’s Appraiser than the appraisal of Respondent’s Appraiser. The Hearing Officer was not persuaded that the subject property is an investment-grade A- property, especially compared to the three comparables presented in Respondent’s income approach analysis. Investment-grade depends upon age, amenities, aesthetics, and infrastructure. Nothing during the hearing induced belief in the Hearing Officer that the subject property is an investment-grade A- commercial property. On the contrary, based upon the testimony at the evidentiary hearing, the basic façade of the subject property, the basic signage of the subject property, the lack of landscaping at the subject property, and the nature of the parking lot at the subject property, the Hearing Officer is not persuaded subject property warrants an investment-grade A-. Additionally, Respondent’s evidence established that investment-grade B properties have rental rates between $15.00 and $22.00 per square foot. The $20.00 per square foot figure put forth by Complainant’s Appraiser falls well within this range.
CONCLUSION AND ORDER
The BOE decision is Set Aside. The TVM of the subject property as of January 1, 2019, was $1,040,000, with an assessed value of $332,800.
Application for Review
A party may file with the Commission an application for review of this decision within 30 days of the mailing date set forth in the certificate of service for this decision. The application “shall contain specific detailed grounds upon which it is claimed the decision is erroneous.” Section 138.432. The application must be in writing, and may be mailed to the State Tax Commission, P.O. Box 146, Jefferson City, MO 65102-0146, or emailed to Legal@stc.mo.gov. A copy of the application must be sent to each person 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.
Disputed Taxes
The Collector of Clay 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.
SO ORDERED January 29, 2021.
STATE TAX COMMISSION OF MISSOURI
John J. Treu2
Senior Hearing Officer
Certificate of Service
I certify that on January 29, 2021, a copy of the foregoing was sent via email to Complainant(s) and/or Counsel for Complainant(s), the County Assessor and/or Counsel for Respondent and County Collector.
Elaina McKee
Legal Coordinator
2 The Hearing Officer heard the appeal and drafted this Decision and Order prior to his departure from employment with the STC.
[1] Missouri operates on a two-year reassessment cycle for valuing real property. See Section
- Absent new construction or improvements to a parcel of real property, the assessed value as of January 1 of the odd year remains the assessed value as of January 1 of the following even Id.
[2] The appeal was filed while Ms. Rinehart was the officeholder. The current Assessor of Clay County is Tracy Baldwin.