William & Dorothy Firestone v. Bushmeyer (SLCY)

June 13th, 2012

State Tax Commission of Missouri

 

WILLIAM & DOROTHY FIRESTONE)

)

Complainants,)

)

v.) Appeal Numbers 09-20256

                                                                                                          )09-20257

ED BUSHMEYER, ASSESSOR,                                               )09-20258

ST. LOUIS CITY, MISSOURI,)

)

Respondent.)

 

ORDER CORRECTING DECISION AND ORDER NUNC PRO TUNC

 

Upon information of the Cathy Steele, counsel for Complainant, Decision and Order issued June 13, 2012, is corrected nunc pro tunc, as follows:

1.                  In the HOLDING, by striking:

 

Appeal

Number

Address

True Value

in Money

Assessed

Value

09-20256

1032-1042 Sanford

$596,720

$190,950

09-20257

1019 Sanford

$255,720

$81,830

09-20258

1014 Sanford

$255,720

$81,830

 

and inserting in lieu thereof:

 

Appeal

Number

Address

True Value

in Money

Assessed

Value

09-20256

1032-1042 Sanford

$596,720

$113,375

09-20257

1019 Sanford

$255,720

$48,590

09-20258

1014 Sanford

$255,720

$48,590

 

 

2.                  In the ORDER, by striking:

 

Appeal Number

Address

Assessed Value

09-20256

1032-1042 Sanford

$190,950

09-20257

1019 Sanford

$81,830

09-20258

1014 Sanford

$81,830

 

 

and inserting in lieu thereof:

Appeal Number

Address

Assessed Value

09-20256

1032-1042 Sanford

$113,375

09-20257

1019 Sanford

$48,590

09-20258

1014 Sanford

$48,590

 

 

In all other respects the Decision and Order are affirmed as issued.

SO ORDERED June 18, 2012.

STATE TAX COMMISSION

Maureen Monaghan

Hearing Officer

 

DECISION AND ORDER

 

HOLDING

 

In Appeal Number 09-20256, decision of the City of St. Louis Board of Equalization increasing the assessment made by the Assessor is SET ASIDE.In Appeal Numbers 09-20257 and 09-20258, decision of the City of St. Louis Board of Equalization reducing the assessment made by the Assessor is SET ASIDE. The subject properties are classified as residential properties for tax years 2009-2010 and their values are set as follows:

Appeal

Number

Address

True Value

in Money

Assessed

Value

09-20256

1032-1042 Sanford

$596,720

$190,950

09-20257

1019 Sanford

$255,720

$81,830

09-20258

1014 Sanford

$255,720

$81,830

 

Complainant is represented by Counsel, Cathy Steele, St. Louis, Missouri.Respondent is represented by Assistant City Counselor, Richard Kismer.

Decision rendered by Hearing Officer Maureen Monaghan.

ISSUE

Complainant appeals, on the ground of overvaluation, the Hearing Officer enters the following Decision and Order.

EVIDENCE

Complainant

Exhibit

Description

A

Appraisal by Michael Green

B

Written Direct Testimony of Michael Green

 

Respondent

Exhibit

Description

1*

Summary AppraisalsAdam Woehler

2*

Written Direct Testimony Adam Woehler

* Individual appraisals and written direct were provided in each of the appeals.

FINDINGS OF FACT

1.Jurisdiction.Jurisdiction over this appeal is proper.Complainant timely appealed to the State Tax Commission from the decision of the St. Louis City.

2.Assessment .

Appeal Number

Assessor’s Value

BOE Value

Complainant’s Proposed Value

Complainant’s Appraiser

Respondent’s Appraiser

09-20256

$364,316

$733,790

$450,000

$430,000

$940,000

09-20257

$360,000

$344,211

$300,000

$180,000

$414,600

09-20258

$360,000

$344,211

$300,000

$180,000

$414,600

 

3.Subject Property.

All three properties are apartment buildings located in the Clayton-Tamm neighborhood on Sanford Avenue.They are two-story brick buildings with basements.The properties have one bedroom units of 654 square feet and two bedroom units of 738 square feet.The buildings were built in 1940 and have original fixtures.They do not have central air conditioning.The landlord pays for water, hot water, sewer, trash, and common area heat.There are laundry facilities in the basement.No parking is provided.

Appeal No.

Address

Lot Size

# of Units

2 Bedroom

1 Bedroom

09-20256

1032-1042 Sanford

.47 acre

14

2

12

09-20257

1019 Sanford

.2 acre

6

2

4

09-20258

1014 Sanford

.2 acre

6

2

4

 

4.Sales ofApartment Buildings.Property located at 2121 Prather Avenue, St. Louis, Missouri was the most comparable as to date of sale, size, units, condition, and street parking.The property sold in August 2008 for $39,500 per unit.The property is in a less desirable location than the subject properties.

5.Income and Expenses.The history of the property and the market was reviewed to determine rent and expenses.The subject property has a range of monthly rents of $440 to $505 per month.The properties have low vacancy rate probably due to their location and lower rent by comparison.From the 2006 to 2009, the expense ranged from $15,473 to $17,619.The expenses do not include a management fee or a reserve for replacement.

1032 Sanford Ave.

PGI ($470 x 14 units x 12 months)

$78,960

Expenses (30%)

(23,688)

NOI

$55,272

Capitalization rate (8% +1.263%)

9.263%

Value Rounded to:

$596,700

$42,620/unit

1014 & 1019 Sanford Ave

$42,620 / unit x 6 units = $255,720

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.[1]

Presumptions In Appeals

There is a presumption of validity, good faith and correctness of assessment by the CountyBoardof Equalization.[2]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.[3]

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, 2009.[4]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.”[5]

Substantial evidence can be defined as such relevant evidence as a reasonable mind might accept as adequate to support a conclusion.[6]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.[7]

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.[8]True value in money is defined in terms of value in exchange and not value in use.[9]It is the fair market value of the subject property on the valuation date.[10]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.[11]

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.[12]

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.[13]

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.[14]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.[15]

Cost Approach Not Appropriate for Present Appraisal Problem

The valuation of property under the cost approach is based on the estimated reproduction cost of the improvements less depreciation.The approach works best for new improvements and where sales and income data is limited.The improvement is not new and the appraisers provided income data and sales for valuation purposes therefore the cost approach is not appropriate for valuing this property.

Sales Approach Appropriate to Substantiate Value

The sales comparison approach is appropriate when a number of properties that are similar to the subject have been sold and the sale date is close in time to the valuation date.In other words, the sales comparison approach is only as reliable as there are sufficient sales during a relative time period and location.The sales, although located in a relevant area and sold during a relevant time period, provided a wide range of sales prices.The pricing may have been indicative of the conditions of the sale, the conditions of the interior of the property, or other reason that was not known to the appraiser.Given the wide range, the sales comparison approach can only be used to substantiate a value as determined by the income approach.

Both appraisers found sales and conducted a sales comparable approach.Two of Complainant’s sales were not in the area of the subject, the other sale was in the general neighborhood of the subject but not in as desirable location.The comparable properties, however, were sold in a time period relevant to the appraisal.The Respondent’s comparable sales were closer to the subject however one of the sales occurred in 2005.Another property comparable with the subject sold in 2007 and the buyer paid additional sums for a 1031 exchange.The Respondent’s appraiser was not aware of the condition of the properties or rental terms.

Complainant’s Sale #2 (Prather) was in close proximity of the subject and sold in August 2008.Respondent’s Sale #3 was also in close proximity and sold in December 2008.Respondent’s #3 included parking.The properties sold for $39, 500 (Complainant’s Sale #2) to $70,000 (Respondent’s Sale #3) per unit.

Complainant’s Sale 2 was most similar to the subject and sold at a relevant time period.Although the sales comparison approach is not as persuasive in this appraisal as the sales are impacted by location, market condition, age and condition of properties; the sales can be used to substantiate the value determined under the income approach.

Income Approach Appropriate for Present Appraisal Problem

The strongest and most compelling approach to value for the subject property is the income approach. The income approach is based on the theory that an investor will pay no more for a property than what income may be received from an investment with similar income and risks.

The Respondent’s appraiser located rental units in close proximity to the subject.Rents ranged from $530 to $725 for one bedroom apartments. The Complainant’s appraiser concluded rents of $451 for 1032 Sanford, $453 for 1014 and 1019 Sanford after comparing properties that were slightly farther away than the comparable properties used by the Respondent’s appraiser.The rental history of the subject properties indicates that their rent are in the lower range of their market thereby keeping their vacancy levels low even without necessary upkeep, updates and parking.

The operation of the subject property requires expenditures by the owner for expenses such as insurance, management fees, utilities, and maintenance. The Complainant reviewed the subject property’s historical information and concluded on an expense ratio of 32.32% for 1032 Sanford, 34.83% for 1014 Sanford, and 34.87% for 1019 Sanford.The Respondent reviewedinformation from a similar property who reported their expense ratio was 21%.Without additional market information, the subject’s actual expenses would be the most appropriate ratio to use. An adjustment for management fees and reserves for replacement is appropriate.

Both appraisers determined a capitalization rate.The Complainant’s appraiser reviewed comparable sales (capitalization rate range of 8.31%-10.53%) and investor surveys (capitalization rate range of 6.0 to 12.0%, average of 8.9%) The Complainant concluded on a capitalization rate of 10%.The Respondent’s appraiser surveyed the market and requirements of investors and lenders and concluded on a capitalization rate of 6.9%; the appraiser also reviewed comparable sales and determined the range to be 5.59% – 6.45%.The Respondent concluded on a capitalization rate of 5.5%.Given the range of data provided, a capitalization rate of 8% is found to be appropriate.

Both appraisers determined the effective tax rate to be 1.263%.

Conclusion

The strongest and most compelling approach to value for the subject property is the income approach. The income approach is based on the theory that an investor will pay no more for a property than what income may be received from an investment with similar income and risks.

ORDER

The assessed valuation for the subject properties as determined by the Board of Equalization for the City of St. Louis for the subject tax day is SET ASIDE.

The assessed values for the subject properties for tax years 2009 and 2010 are set at:

Appeal Number

Address

Assessed Value

09-20256

1032-1042 Sanford

$190,950

09-20257

1019 Sanford

$81,830

09-20258

1014 Sanford

$81,830

 

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, MO65102-0146, 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. [16]

Disputed Taxes

The Collector of the City of St. Louis, 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 June 13, 2012.

STATE TAX COMMISSION OFMISSOURI

Maureen Monaghan

Hearing Officer


[1] Article X, section 14, Mo. Const. of 1945; Sections 138.430, 138.431, 138.431.4, RSMo.

 

[2] 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).

 

[3] Hermel, supra; Cupples-Hesse Corporation v. State Tax Commission, 329 S.W.2d 696, 702 (Mo. 1959).

 

[4] Hermel, supra.

 

[5] 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).

 

[6] See, Cupples-Hesse, supra.

 

[7] Brooks v. General Motors Assembly Division, 527 S.W.2d 50, 53 (Mo. App. 1975).

 

[8] 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); See Also, Exhibit A, p. 8 – Definition of True Value in Money.

 

[9] 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).

 

[10] Hermel, supra.

 

[11] 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; Exhibit 1, p. 8.

 

[12] 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).

 

[13] 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).

 

[14] 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).

 

[15] 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).

 

[16] Section 138.432, RSMo.