MERCANTILE BANK,	)
	)
Complainant,	)
	)
v.	)		Appeal Number  99-89506
	)
JAMES STRAHAN, ASSESSOR,	)
TANEY COUNTY, MISSOURI,	)
	)
Respondent.	)

Holding: The best evidence on the record supports a January 1, 1999, market value of $875,000 for the subject real estate. The Commission is not prohibited from relying on any of the three approved approaches to value, and such reliance does not constitute a lack of uniformity within a class or subclass of property.

SUMMARY

The subject property in this appeal consists of a 2.62 acre site, which has 2.21 usable acres, and is improved with a motel. The improvements consist of a building with 103 motel rooms, manager's living quarters, an office/lobby, laundry, breakfast room, paved parking and an outdoor pool. The property is located at Highway 165 and Fall Creek Road in Branson, Missouri.

Respondent originally appraised the subject property at a market value of $1,801,254 ($576,400, assessed) for the 1999 and 2000 tax year. Complainant took title to the subject property pursuant to a foreclosure sale on November 5, 1999. Complainant appealed the assessment on January 3, 2000. The Commission found in its order of September 7, 2000, that the Complainant failed to perfect its appeal for the 1999 tax year. Complainant was thereafter permitted to proceed with its assessment appeal on the 2000 tax year. This decision only affects the assessment and tax obligation for the 2000 tax year. Complainant appeals the assessment on the grounds of overvaluation and proposes a market value of $875,000.

Complainant's Evidence

Complainant presented the appraisal testimony and report of Appraiser, Joe R. Roberts. Mr. Roberts has appraised the subject property three times since 1998. He first appraised the subject property as of May 21, 1998, for mortgage loan purposes, as of October 28, 1999, for a market value estimate as the property was being foreclosed upon, and finally as of January 1, 1999, for market value support in a property tax appeal. In his initial appraisal he opined a market value of $17,500 per room for a total of $1,800,000 inclusive of furniture, fixtures and equipment ($1,650,000 for real estate only). In this appraisal, he concluded that if the motel was closed, distressed, or had low revenues, it could sell for $10,000 per room.

In performing his appraisal update in 1999, he noted that it was clear that the nearby new theater had not been able to boost the revenues of the motel as was anticipated in the earlier appraisal. In his appraisal update, he used 11 comparable sales, six of which were sold after foreclosure. He judged sales 2, 3, and 8 to be the most comparable and they sold for $8,529 to $16,600 per room inclusive of furniture, fixtures, and equipment. Mr. Roberts adjusted the comparable sales prices for differences between the comparable and the subject property which produced an indicated a range of value from $8,955 to $11,618 per room. Mr. Roberts concluded a market value of $10,000 per room or $1,030,000 ($905,000 for real estate only). In rendering his valuation update he also performed cost, income and gross income multiplier approaches to value. Finding the sales comparison approach to be the most relevant, he concluded a value of $905,000 for the subject real estate as of October, 1999.

Based upon the recent appraisal and appraisal update, and the 2000 sale contracts for the subject property, Mr. Roberts opines that the subject real estate had a market value of $875,000 as of January 1, 1999.

Respondent's Evidence

Mr. Strahan presented testimony and evidence in support of his original appraised value of $1,801,254 for the subject real estate. He explained the steps he used in determining a value for the subject property under the Hunnicutt mass appraisal system. He explained that the Hunnicutt mass appraisal system is the costing system which is used in Taney county to value property.

Mr. Strahan also indicated that he has constitutional objections on grounds of uniformity to the use of anything other than a cost approach to value property in Taney County for property tax purposes. He asserted that the Commission is estopped from recognizing or adopting any valuation approach other than the method used by the assessor because the commission frequently uses the cost approach when reviewing property values in Taney county. He further asserted that the Commission's recognition and adoption of taxpayer's valuations which rely on an income or sales comparison approach impermissibly create a subclass of real property in subclass (3) in violation of the Missouri Constitution of 1945, Article 10, Section 4(b). Respondent's Exhibit 2, Questions 30 through 34.

FINDINGS OF FACT

1. On January 1, 1999, the subject motel and nearby affiliated theater were financially distressed. The motel was in default on its note. The bank tried to foreclose on the property in early 1999 but was delayed by a bankruptcy filing. The foreclosure sale occurred on November 5, 1999.

3. In 1998 and 1999, there were so many foreclosures of motels in the Branson area that they constituted part of the normal market and must be taken into consideration.

4. The subject real estate sold at the foreclosure sale to Complainant for $875,000. There were no other bidders. Complainant's Exhibit E at 2.

5. Complainant attempted to sell the property themselves for a period of time after acquiring the property. They obtained a contract from Pinnacle Ventures, Inc for $825,000 that was terminated in April, 2000. Thereafter, Complainant listed the property with an area hotel broker, Dave Shaffer. Complainant obtained a contract for the purchase of the subject property in May, 2000 for $1,000,000 with $875,000 designated for the real estate. Complainant's Exhibit D at 9; Complainant's Exhibit E at 2.

6. The market data from this time period shows comparable motels selling from $8,529 to $23,154 per room. The three most comparable sales sold for $8,529, $15,287, and $16,600 per room. After adjusting for differences between the comparables and the subject, the indicated range of value was $8,995 to $11,618. The contract price of $9,708 per room after exposure to the open market is a reasonable market value in light of the recent market performance of the subject property.

7. After exposure to the open market in 2000, the subject real estate sold for $875,000. The evidence directs that $875,000 is a reasonable estimate of the January 1, 1999, market value of the subject real estate.

CONCLUSIONS OF LAW

1. Complainant, as movant in the appeal, has the burden of presenting substantial and persuasive evidence that its proposed value is indicative of the market value of the subject property on January 1, 1999, in order to have that value accepted. Hermel, Inc. v. State Tax Commission, 564 S.W.2d 888, at 897.

2. 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).

3. 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).

4. Methods of valuation and assessment of property are matters delegated to the expertise of the administrative agency by the legislature. Quincy Soybean Co., Inc. v. Lowe, 773 S.W.2d 503, 505 (App. E.D. 1989); C & D Inv. Co. v. Bestor, 624 S.W.2d 835, 838 (Mo. banc 1981). "There are various methods that may properly be considered for estimating true value, including actual sale price, comparable sales, replacement cost, and income capitalization. The Commission is not required to adopt any particular valuation technique." St. Joe Minerals Corp. v. State Tax Comm'n of Missouri, 854 S.W.2d 526, 529 (Mo. App. E.D. Apr. 13, 1993). Missouri courts have approved the "comparable sales," "cost of replacement," and "capitalization of income" methods of arriving at fair market value. Quincy Soybean Co., Inc. v. Lowe, 773 S.W.2d 503, 504-505 (App. E.D. 1989). See also, Del-Mar Redevelopment Corp. v. Associated Garages, Inc., 726 S.W.2d 866, 869 (Mo. App. E.D. 1987); State ex rel. State Highway Comm'n v. Southern Dev. Co., 509 S.W.2d 18, 27 (Mo. Div. 2 1974). These three recognized methods "have found general judicial and professional acceptance for use in property appraisal and assessment." Quincy Soybean Co., Inc. v. Lowe, 773 S.W.2d 503, 505 (App. E.D. 1989) (quoting the Commission's decision in the underlying case).

5. The Commission has wide latitude in determining whether there is sufficient similarity in pertinent comparison factors for the sales prices of other lands to be of assistance in determining value. Abeln v. State Tax Comm'n of Missouri, 793 S.W.2d 490, 491 (Mo. App. E.D. Jun 12, 1990); Drey v. State Tax Comm'n, 345 S.W.2d 228, 238 (Mo. Div. 1 1961). Some of the factors the Commission may consider to determine similarity of properties are the character, size, and location of the property sold, the uses to which it may be adapted, the market conditions under which it was sold, and whether the sale was an arm's length transaction. See, Id. at 238, and City of St. Louis v. Vasquez, 341 S.W.2d 839, 850 (Mo. Div. 1 1960).

6. Capitalization of income may be used to estimate true value of property for taxation purposes as, under some circumstances, it more accurately estimates true value of single use realty operated for its ability to produce income stream. St. Joe Minerals Corp. v. State Tax Com'n of Missouri, 854 S.W.2d 526, 529-530 (Mo. App. E.D. Apr. 13, 1993).

7. The Commission is not prohibited from relying on valuation approaches other than the approach used by the assessing official in his or her original assessments. "'The constitutional requirement of uniformity aims at a certain end [market value] and not at the manner or mode of reaching that end.' 1 Cooley on Taxation, Section 304, at 638 (4th ed. 1924). Equality in taxation has been construed to mean that methods of assessment 'are required which produce uniform results.' Cupples Hesse Corp. v. State Tax Commission, 329 S.W.2d 696, 699 (Mo. 1959)." C & D Investment Company v. Bestor, 624 S.W.2d 835, 837 (Mo. banc 1981). "'A difference in the methods or yardsticks or formulas used in ascertaining and determining actual or market value does not prove lack of uniformity if there is a reasonable, practical and just basis for the application of different methods or formulas.'" Cupples Hesse, supra at 699 (quoting Hammermill Paper Co. v. City of Erie, 372 Pa. 85, 92 A.2d 422, loc. cit 429, certiorari denied, 345 U.S. 940, 73 S.Ct. 831, 97 L.Ed. 1367).

DECISION

Valuation

The question that must be answered from the evidence submitted is: What was the market value of the subject property as of January 1, 1999? Market value is defined as "...[t]he most probable price which a property would bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified 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 or well advised, and acting in what they consider their best interests;

3. a reasonable time is allowed for exposure in the open market;

4. payment is made in terms of cash in United States dollars or in terms of financial arrangements comparable thereto; and

5. the price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale."

Federal Register, vol. 55, no. 163, August 22, 1990, pages 34228 and 34229; also quoted in the Definitions section of the Uniform Standards of Professional Appraisal Practice, 1996 ed.

The hearing officer sitting as trier of fact in this appeal has the responsibility to review the evidence presented in order to determine what is the best, most persuasive evidence of the market value of the subject property as of January 1, 1999. The issue is not whether the assessing officials adequately applied the mass appraisal tool in assessing the subject properties.

Complainant's appraisal evidence rises to the level of substantive and persuasive evidence in support of a market value of $875,000 as of January 1, 1999. Complainant's appraisal evidence illustrates the interplay between investor expectations and market demand, and how it is ultimately market supply and demand that determine value in the marketplace. In the May 21, 1998, appraisal, the performance outlook for the subject motel appeared promising with the opening nearby of a 7.3 million dollar dinner theater and the re-installment of competent management. The projected average room rental of $5,000 for the year appeared reasonable. The actual room income for the year was only $2,793 and large number of motels were sold in foreclosure in 1998 and 1999 with the average price per room dropping substantially. In performing the valuation update in October of 1999, it was clear that the theater had not been able to boost the revenues of the motel. Also, the appraiser noted that there had been so many foreclosures of motels in the Branson area in 1998 and 1999 that such activity constituted a normal part of the market and could not be ignored. The market data from this time period shows comparable motels selling from $8,529 to $23,154 per room. The three most comparable sales sold for $8,529, $15,287, and $16,600 per room. After adjusting for differences between the comparables and the subject, the indicated range of value was $8,995 to $11,618.

The subject motel suffered performance setbacks similar to what was occurring in the marketplace. The addition of the nearby dinner theater had not boosted the room income as expected. The average room income for 1998 was low. The owners defaulted on the mortgage. The subject motel was eventually foreclosed on November 5, 1999. Afterwards, it was put up for sale and at the time of submission of the exhibits was under contract for $1,000,000 with $875,000 attributed to the real estate. The contract price of $9,708 per room ($8,495 per room for the real estate only) after exposure to the open market is a reasonable market value in light of the recent market performance of the subject property and is consistent with the transfers occurring in the marketplace.

Accordingly, this Hearing Officer finds that the evidence on the record best supports a January 1, 1999, market value of $875,000 for the subject real estate.

Constitutional Requirement of Uniformity

Respondent directly challenges the Commission's ability to rely on or use any valuation evidence other than valuation evidence which applies the same method that was used by his office in assessing all property within the relevant classification or subclassification; i.e., the cost approach. In support of his argument, Respondent argues that "in allowing, recognizing, and adopting taxpayer' valuations of commercial real property by the income capitalization approach or the comparable sales approach, while the Assessor values all other commercial real property in Taney County by the cost approach, the State Tax Commission creates, suffers, or allows an impermissible subclass of real property in subclass (3), in violation of the Missouri Constitution of 1945, Article 10 Section 4(b)." Respondent's Exhibit 2, Question 34.

This Hearing Officer does not find Respondent's legal arguments to be persuasive. "'The constitutional requirement of uniformity aims at a certain end [market value] and not at the manner or mode of reaching that end." 1 Cooley on Taxation, Section 304, at 638 (4th ed. 1924). Equality in taxation has been construed to mean that methods of assessment 'are required which produce uniform results.' Cupples Hesse Corp. v. State Tax Commission, 329 S.W.2d 696, 699 (Mo. 1959)." C & D Investment Company v. Bestor, 624 S.W.2d 835, 837 (Mo. banc 1981). "'A difference in the methods or yardsticks or formulas used in ascertaining and determining actual or market value does not prove lack of uniformity if there is a reasonable, practical and just basis for the application of different methods or formulas.'" Cupples Hesse, supra at 699 (quoting Hammermill Paper Co. v. City of Erie, 372 Pa. 85, 92 A.2d 422, loc. cit 429, certiorari denied, 345 U.S. 940, 73 S.Ct. 831, 97 L.Ed. 1367). Accordingly, this Hearing Officer holds that uniformity is achieved in the assessment process by performing fair, market-based appraisals on all properties within the same classification or subclassification. Further, reliance upon more than one or different appraisal methodologies is desired according to appraisal theory. Use of more than one or different appraisal methodologies does not create a lack of uniformity and is not constitutionally prohibited.

ORDER

In this appeal, the Commission only has jurisdiction to determine the assessment for the 2000 taxes. This Hearing Officer found that the subject real estate had a January 1, 1999, market value of $875,000. There was no evidence of new construction or improvements during the 1999 calendar year. The 2000 assessed valuation for the subject real estate is hereby set at $280,000.

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.

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 Taney 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 April 4, 2001.

STATE TAX COMMISSION OF MISSOURI

Aimee Smashey

Hearing Officer

ORDER NUNC PRO TUNC

The Decision and Order, dated April 4, 2001, issued by Hearing Officer Smashey is amended nunc pro tunc as follows:

1. On page 5, Finding of Fact 8 is added to read as follows:

"8. The subject property in this appeal is identified by parcel number 18-1-11-4-2-6.1 for tax year 2000. Exhibit 1."

2. On page 11, the sentence reading "The 2000 assessed valuation for the subject real estate is hereby set at $280,000." is stricken and the following new sentence inserted in lieu thereof; "The 2000 assessed valuation for the subject real estate, identified by parcel number 18-1-11-4-2-6.1 is hereby set at $280,000."

If no application for review is received by the Commission on or before May 4, 2001, the Collector of Taney County as well as the collectors of all affected political subdivision therein, shall refund taxes in accord with the decision on the underlying assessment in this appeal.

In all other respects the Decision and Order of April 4, 2001 is affirmed.

SO ORDERED April 20, 2001.

STATE TAX COMMISSION OF MISSOURI

W. B. Tichenor

Chief Hearing Officer