CARNATION COMPANY, ) ) Complainant, ) ) v. ) Appeal Number 00-45005 ) SCOT VANMETER, ASSESSOR, ) BUCHANAN COUNTY, MISSOURI, ) ) Respondent. )
DECISION AND ORDER
Holding: The value determined by the Assessor and approved by the Board of Equalization is SET ASIDE. The correct value for the property on January 1, 2000, was $2,300,000 (assessed value: $736,000).
SUMMARY
A hearing was conducted on September 19, 2001, before Hearing Officer Luann Johnson, at the Buchanan County Circuit Courthouse, St. Joseph, Missouri. Complainant appeared by its appraiser, Thomas H. Slack, and by its attorney, Thomas Caradonna. Respondent appeared by his appraiser, Larry W. Jones, and by counsel, Pamela L. Cone.
The subject property is a 39.2 acre tract improved with an irregularly-shaped building containing approximately 278,800 square feet (Tr. 22). The improvements were built in multiple stages in 1969, 1973 and 1981. The property is identified as parcel number 05-7.0-25-003-000-001.000.
Respondent originally valued the subject property at $6,880,060 (assessed value $2,201,620) for tax year 2000. The Board of Equalization affirmed Respondent's original valuation. Complainant appealed asserting a market value of $5,200,000 which was subsequently reduced to $2,300,000 (assessed value $736,000). Respondent asserted a market value of $6,700,000 which was subsequently reduced to a value of $3,900,000 (assessed value $1,248,000) after corrections. The value determined by the Assessor and approved by the Board of Equalization is SET ASIDE. The correct value for the property on January 1, 2000, was $2,300,000 (assessed value: $736,000)
ISSUE
The only issue raised on appeal is: What was the true value in money of Complainant's property on January 1, 2000?
FINDINGS OF FACT
1. Jurisdiction over this appeal for 2000 is proper. Complainant timely appealed to the State Tax Commission from the decision of the Buchanan County Board of Equalization.
2. The subject property is a 39.2 acre tract improved with an irregularly-shaped light industrial manufacturing structure, of average quality, containing approximately 278,800 square feet, and used for the production of pet food.
3. The property is identified as parcel number 05-7.0-25-003-000-001.000, more commonly known as 2017 Southwest Lower Lake Road, St. Joseph, Buchanan County, Missouri.
4. Although there has been some recent development, St. Joseph, Missouri as a whole has suffered an on-going decline in population since 1960. The primary cause of population decline is related to a shrinking economic base in the area. The area has experienced slow employment growth and a loss of industrial jobs due to the closing of various businesses during the 1980s and 1990s (Tr. 35, 36). The subject neighborhood is not in a growth stage and it is further impacted by its location within a 100 year flood zone (Tr. 47).
5. The current zoning and improvements constitute the highest and best use of the property (Respondent's Ex. 1, p. 13; Complainant's Ex. A, p. 13). Although some food processing plants sell for a similar use, it is just as likely as not that this property would sell for a different industrial use. There is no added value because of any special food processing features of the improvements (Tr. 28).
6. The improvements were built in multiple stages as follows: 1969 - 120,000 square feet - used primarily for dry pet food manufacturing and storage; 1973 - 100,000 square foot addition for wet pet food production and for shipping and receiving; 1981 - 58,800 square foot addition for chilled cooler areas (Complainant's Ex. A, p. 10). The improvements suffer from some functional obsolescence due to a variety of different interior walls that limit the adaptability of the property to other uses without significant capital expenditures. There is no reliable market data to quantify external obsolescence or market reaction to functional obsolescence.
7. The cost approach is not a reliable indicator of value for the subject property due to its age and the inability to quantify depreciation from all sources (Tr. 20, 21). The physical layout of the building creates some functional obsolescence (Tr. 14) however, the amount of economic obsolescence is not easily or well quantified. The assertion that market extraction may indicate external obsolescence is not persuasive without a demonstration of market extraction calculations.
8. Although there is some evidence that similar buildings have been converted to multi-tenant use, the income approach is not a reliable indicator of value for the subject property because the size of the improvements do not lend themselves to a single tenant and because the cost of converting the improvements to smaller units makes renovation speculative (Tr. 20).
9. The sales approach is the best available indicator of value for the subject property (Tr. 7, 33-35), in spite of the fact that this property has some unique characteristics and that sales of substantially similar properties are not abundant. The sales indicated a range of value for the subject property between $7.96 per square foot and $15.10 per square foot.
10. The following sales were presented in an effort to estimate the value of the subject property:
Complainant's sales:
1. Seitz Foods. Lower Lake Road at Packers. This property was approximately 10 years older than the subject property. Like the subject property, this property was built in multiple stages but, unlike the subject, the square footage of this property was contained within three separate buildings. It was smaller, overall, with better access; comparable to inferior design; and a comparable land to building ratio. This property was under contract during tax year 2001 however the sale was not consummated as of the date of the hearing because the purchaser demanded $7.6 million in industrial development bonds to renovate and expand the facility. Complainant's appraiser made no adjustments, either upward or downward, for any benefit that might result from the issuance of industrial development bonds. The sale price included some equipment. Complainant's appraiser suggested that this contract indicated a value for the subject property of $7.09 per square foot. Gross adjustments were 54%.
2. Quaker Oats. 2811 S. 11th. This property was more than 25 years older than the subject property. It was built in multiple buildings and multiple stages in the 1930s, 1950s, 1970s and 1980s. It was larger and of inferior design because it was a multi-level (10 story) vertical manufacturing structure. It was in a comparable location and had a lower land to building ratio. Complainant's appraiser suggested that this contract indicated a value for the subject property of $8.51 per square foot. This property was under contract on the tax day and had sold prior to the hearing. In exchange for economic considerations, the title to the property was transferred to the city on the date of the sale. (Tr. 30). Gross adjustments were 82%.
3. Sherwood Medical. 100 Airport. This property is similar in age to the subject property but in somewhat superior condition. It sold three years prior to the valuation date. No adjustment was made for the age of the sale. It included special design features including a clean room and lab. It was comparable in size to the subject property; in a more remote location; and had a lower land to building ratio. Complainant's appraiser suggested that this sale indicated a value for the subject property of $7.96 per square foot. This property was tax exempt, but the purchasers were making payments in lieu of taxes (Tr. 31). Gross adjustments were 31%.
4. Morton Pork. 5002 Packers. This property was 20 years older than the subject property and sold three years prior to the valuation date. No adjustment was made for the age of the sale. It was inferior in condition and design, being a similar multiple phase manufacturing plant. It had better access and a lower land to building ratio. Complainant's appraiser suggested that this sale indicated a value for the subject property of $8.64 per square foot. Gross adjustments were 56%.
5. Peachtree Door. 6000 Industrial. This property was the same age as the subject property, but the sale was remote, being 8 years prior to the valuation date. No adjustment was made for the age of the sale. A paired sales analysis which paired this sale with the sale of other properties is not sufficient to indicate that this sale should not require an upward adjustment for age. This sale had a superior design; comparable location and age; and smaller size and land to building ratio than the subject property. Complainant's appraiser suggested that this sale indicated a value for the subject property of $11.22 per square foot. At the time of sale, the property was contaminated. The seller paid $750,000 to $900,000 towards the cleanup costs of the site. Gross adjustments were 33%.
Complainant's appraiser estimated a value for the subject property of $8.25 per square foot.
Respondent's sales:
1. Danisco Ingredients. 3220 Leonard Road. The sale contained only 41,000 square feet on a 3.8 acre site. Its estimated age was 20 to 25 years. It was in a superior location; of superior age; of superior size and in equal condition. On some of his adjustments, Respondent's appraiser erroneously adjusted upward rather than downward. Gross adjustments were 30%.
2. St. Joseph Business Park Corporation. 1310 S. 58th Street. This structure contained 79,300 square feet on a 6.8 acre site. The building is only a few years old and is located in a new industrial park. The property was in a superior location; of substantially superior age; in superior condition and size. On some of his adjustments, Respondent's appraiser erroneously adjusted upward rather than downward. Gross adjustments were 35%.
3. Peachtree Door. 6000 Industrial Road. This sale is also Complainant's comparable number 5. The property is similar in location, age and condition as the subject property but is more desirable due to its somewhat smaller size. Respondent's appraiser also made a 15% adjustment for the age (8 years) of the sale. On some of his adjustments, Respondent's appraiser erroneously adjusted upward rather than downward. Gross adjustments were 25%.
After correcting his adjustment errors, Respondent's appraiser testified that the indicated value for the subject property, based upon his three comparable sales was $15.10 per square foot.
CONCLUSIONS OF LAW
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). It is the fair market value of the subject property on the valuation date. Hermel, Inc. v. State Tax Commission, 564 S.W.2d 888, 897 (Mo. banc 1978).
In order to prevail, a party must present an opinion of market value and then must present substantial and persuasive evidence that its proposed value is indicative of the market value of the subject property on January 1, 2000, in order to have that value accepted. Hermel, Inc. v. State Tax Commission, 564 S.W.2d 888, at 897. Substantial evidence can be defined as such relevant evidence as a reasonable mind might accept as adequate to support a conclusion. See, Cupples-Hesse Corporation v. State Tax Commission, 329 S.W.2d 696, 702 (Mo. 1959). 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).
DECISION
In this instance, both appraisers did an admirable job in attempting to value a property that defies an easy estimate of value.
The subject property is an old, overly large, poorly designed, manufacturing plant located in an area of stagnant or declining growth.
Neither the income nor the cost approach will provide a good indicator of value for this property. The income approach fails because the sheer size of the improvements make it unlikely that it could be leased to a single tenant; the costs of renovating the building for multi-tenant use are large; and there is no indication that there is a pool of tenants available for this space in this economically depressed environment. The cost approach is also an inadequate indicator of value because the age of the building and its multi-stage construction makes estimates of physical, functional and economic obsolescence difficult to measure with any degree of certainty.
Our only hope in estimating a value lies with the sales comparison approach. However, the only "good" comparable sales are not really comparable; as evidenced by the excessive amount of adjustments required to each sale. Those sales also come with additional problems including sales concessions; contamination; and creative taxation schemes. Additional adjustments that should have been made for these factors escaped consideration, and may have increased or lowered the indicated value for the subject property.
Much smaller, newer and better designed structures have been sold recently, but their sales are not useful in determining the value for the subject property. It is simply not possible to compare the sale of 41,000 square foot building or a new 79,000 square foot building to the subject property, having a weighted age of 27 to 30 years and containing 278,800 square feet, and make any reliable adjustments to those sales which would indicate a value for the subject property.
Nor are the appraisers alone in their struggle to value this property. In its appeal to this Commission, the owner proposed a value for the property of $5,200,000. Contrary to assertions by Complainant's counsel, an owner's opinion of value is relevant. An owner's estimate of value can be received into evidence, notwithstanding that the owner may not be qualified as an expert, upon the assumption that it is particularly familiar with its own property and knows of the uses to which the property is adaptable. State ex rel. State Highway Commission v. Johnson, 563 S.W.2d 100, 103 (Mo. App. 1978). However, the fact that an owner's opinion is relevant and admissible is not to say that such an opinion will always be persuasive. Here, that opinion is not persuasive because it is clearly contradicted by both experts. But, it is cited to demonstrate that the value of the subject property is not easily ascertainable.
Although we see significant flaws in Complainant's comparable sales, we find those sales to be more persuasive than the much smaller and newer sales presented by Respondent. Normally, when both appraisals are flawed, we will apply our expertise and correct the miscalculations using information supplied by the appraisers. However, in this instance, neither appraiser provided enough insight into his adjustment calculations to allow us to correct the noted flaws. Consequently, we find that the best indicator of value for the subject property is Complainant's appraisal. We further find that the value of the subject property on January 1, 2000, was $2,300,000 (assessed value $736,000).
ORDER
The assessed value for the subject property for tax year 2000, as determined by the Assessor and affirmed by the Board of Equalization, is SET ASIDE. The Clerk is HEREBY ORDERED to place a new assessed value of $736,000 (true value in money of $2,300,000) on the books for tax year 2000.
A party may file with the Commission an application for review of a hearing officer decision within thirty (30) days of the mailing of such decision. The application shall contain specific detailed grounds upon which it is claimed the decision is erroneous. Failure to state specific facts or law upon which the appeal is based will result in summary denial.
If an application for review of a hearing officer decision is made to the Commission, any protested taxes presently in an escrow account in accordance with this appeal shall be held pending the final decision of the Commission. If no application for review is received by the Commission within thirty (30) days, this decision and order is deemed final and the Collector of Buchanan 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. If any protested taxes have been disbursed pursuant to Section 139.031(8), RSMo, either party may apply to the circuit court having jurisdiction of the cause for disposition of the protested taxes held by the taxing authority.
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 November 28, 2001.
STATE TAX COMMISSION OF MISSOURI
Luann Johnson
Hearing Officer