REXAM CONTAINERS,	)
	)
Complainant,	)
	)
v.	)		Appeal Number  00-57003
	)
BILL OVERSCHMIDT, ASSESSOR,	)
FRANKLIN COUNTY, MISSOURI,	)
	)
Respondent.	)

HOLDING

Decision of the Franklin County Board of Equalization sustaining the assessment made by the Assessor, SET ASIDE. Hearing Officer finds true value in money for the subject property for tax year 2000 to be $2,105,260, assessed value of $701,051.

Complainant appeared by Counsel, Thomas L. Caradonna, St. Louis, Missouri.

Respondent appeared by Counsel, Mark Vincent, County Counselor.

Case heard and decided by Chief Hearing Officer, W. B. Tichenor.

ISSUE

The issue in this appeal is: What was the true value in money as of January 1, 2000, of Complainant's personal property (machinery, tools and equipment) located in Franklin County, Missouri?

SUMMARY

Complainant appeals the decision of the Franklin County Board of Equalization which sustained the valuation of the subject property (Account Number 014972). The Respondent determined an appraised value of $4,106,415 (assessed value of $1,368,805, as personal property). Complainant presented evidence to support its opinion of value of $2,105,260, as the fair market value of the subject property, assessed value of $701,051. A hearing was conducted on March 27, 2001, at the Assessor's Real Estate Division Conference Room, North Annex, Union, Missouri.

The Hearing Officer having considered all of the competent evidence upon the whole record enters the following Decision and Order.

Complainant's Evidence

Complainant prefiled and offered into evidence the following exhibits.

Exhibit A Appraisal Report of Allen D. Bealmear, ASA, CEA, President of MB Valuation Services.

Exhibit B Written Direct Testimony of Allen D. Bealmer.

Exhibit C Summary Illustration of Appraiser's Cost and Sales Comparison Approaches.

The Hearing Officer received these exhibits into evidence. Mr. Bealmer presented his opinion of value for the subject property of $2,105,260 through Exhibits A, B and C and was subject to cross-examination by Counsel for Respondent.

Respondent's Evidence

Respondent pre-filed and offered into evidence the following exhibits:

Exhibit 1 Appraisal Report of Larry E. Sikes.

Exhibit 2 Written Direct Testimony of Larry E. Sikes.

Counsel for Respondent filed his Objections and Motion to Strike Exhibits 1 and 2 at the Evidentiary Hearing. Exhibits 1 and 2 and the cross-examination and redirect testimony of Mr. Sikes were received under the pending Objections and Motion to Strike and subject to the Hearing Officer's final ruling in this decision on same. Counsel for Respondent was given until and including April 6, 2001, to file response. No response was filed. See, Ruling on Objections and Motion to Strike, infra, pp. 6-13.

FINDINGS OF FACT

1. Jurisdiction over this appeal is proper. Complainant timely appealed to the State Tax Commission from the decision of the Franklin County Board of Equalization.

2. The personal property which is the subject of this appeal, Personal Property Account No. 014972, consists of machinery and supporting equipment used in plastic extrusion (molding and shaping). There are approximately 1,659 items of personal property. The items of property include but are not limited to: extrusion lines, temperature controllers, hoppers, trim presses, granulators, power units, conveyors, die cutters, blowers, pumps, forming machines, drill presses, engine lathes, milling machines, bandsaws, grinders, pipe threaders, welders, chairs, desks, computers, printers files, book cases and other machinery, tools and office equipment used to support the Complainant's manufacturing process. Exhibit A, pp. 18-75. The items of machinery and equipment are sold individually in the market place. They have various uses other than the uses in which they are currently being utilized. Exhibit B, pp. 8-9.

3. The subject equipment was predominantly standard plastic forming and molding machines and related machinery, tools and equipment. Such equipment is regularly traded in the used machinery and equipment market.

4. Complainant's appraisal primarily relied upon the selling prices of comparable machinery and equipment from the used machinery and equipment market. Complainant's evidence provided the best indication of the worth of the subject property in the open market.

5. Complainant's evidence was sufficient to rebut the presumption of correct assessment by the Board.

6. The market value of Complainant's machinery, tools and appliances located in Franklin County was $2,105,260 as of January 1, 2000.

Jurisdiction

The Commission has jurisdiction to hear this appeal and correct any assessment which is shown to be unlawful, unfair, arbitrary or capricious. Article X, section 14, Mo. Const. of 1945; Sections 138.430, 138.431, RSMo. 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. Section 138.431.4, RSMo.

Board of Equalization Presumption

There is a presumption of validity, good faith and correctness of assessment by the Franklin County Board of Equalization. This procedural presumption is rebutted when the Complainant comes forward with substantial and persuasive evidence to establish value. 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).

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. Mo. Const. Art X, Section 4(b) (1945, amended 1982); 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, supra, at 897.

Market Value

"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:

a. buyer and seller are typically motivated;

b. both parties are well informed or well advised, and acting in what they consider their best interests;

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

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

e. 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.

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, 2000. Hermel, supra, 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).

Ruling on Objections and Motion to Strike

Counsel for Complainant timely filed his Objections and Motion to Strike Exhibits 1 and 2. Counsel for Respondent was given opportunity to file a response but elected not to do so. Complainant's objections were based on the following grounds; (1) exhibits and written direct testimony were filed out of time; (2) the valuation by Respondent's appraiser was under the concept of value in use; (3) the valuation by the Respondent's appraiser was under a mass appraisal methodology and (4) the valuation by Respondent's appraiser was based upon a depreciation schedule which is irrelevant and unreliable. The Hearing Officer will address each objection in order presented by Counsel for Complainant.

Background

By Order entered September 14, 2000, the parties were ordered to exchange exhibits on or before January 5, 2001, and written direct testimony on or before February 2, 2001. Counsel for Complainant timely filed exhibits and written direct testimony. Respondent filed no exhibits on or before January 5, 2001, and filed no written direct testimony on or before February 2, 2001. By Order entered February 5, 2001, the Evidentiary Hearing in this appeal was set for March 27, 2001. On February 10, 2001, Counsel for Respondent mailed a Request for Continuance and Request to File Exhibits and Direct Testimony Out of Time (received by the Commission on February 13, 2001). Counsel for Complainant submitted a letter stating that he would not agree to the request for late filing and continuance. By Order issued February 20, 2001, Respondent was given until and including March 15, 2001, as he requested, to file and exchange exhibits and written direct testimony. Counsel for Complainant was given permission to file written objections on March 27th at the Evidentiary Hearing. Respondent's Exhibit 1, appraisal report, was mailed on March 16, 2001. Respondent's Exhibit 2, written direct testimony, was mailed on March 19, 2001.

Counsel for Respondent, in his Motion to File Exhibits and Direct Testimony Out of Time, gave the good cause reasons to support the motion as (1) Mr. Sikes had surgery in October and was not able to do plant inspections until late October; (2) a new commercial appraiser hired by Respondent did not start work until late December, 2000; and (3) as a result in change of personnel and medical reasons Respondent required additional time to assemble exhibits and prepare direct testimony.

Governing Rules

Commission Rule 12 CSR 30-3.060 provides:

The commission, or hearing officer, may order the exchange of exhibits and written direct testimony of all witnesses in advance of the prehearing conference. The order shall establish a schedule of deadlines and other requirements. .... Any exhibit or written direct testimony which has not previously been exchanged in accordance with this rule will be excluded from admission into evidence at the evidentiary hearing.

Commission Rule 12 CSR 30-3.050(2) & (6) provides:

(2) A written motion which is appropriately filed prior to the hearing, ..., shall be filed with the commission and served on all remaining parties such that each has not less than five (5) days notice before the date specified for the event which stands to be affected by the motion. A filing which does not provide for five (5) days' notice to the parties will be denied unless there is a showing that despite the exercise of due diligence a timely filing was not possible.

...

(6) Any party may file a written motion for a continuance not less than five (5) days before the date specified for the event which stands to be affected by the motion. Continuances will be granted for good cause shown.

Ruling

The Commission rules on exchange of exhibits and deadlines for filing motions for continuance, etc., are intended to assist the Commission and its Hearing Officers in managing the flow of cases filed with the Commission. The rules are also designed to insure a level playing field between taxpayers and assessors with regard to the procedures for handling appeals. When either party ignores the rules of the Commission and the orders promulgated by its Hearing Officers, either by neglect or deliberate and willful inaction, it manifests a clear disregard and disrespect for the authority and responsibility of the Commission in its judicial role of rendering decisions in contested cases.

Respondent knew well in advance (September 14, 2000) of the deadlines for exchange of exhibits and written direct testimony. Respondent had ample opportunity in October to seek a continuance when he became aware of the medical problems of the personal property appraiser. Respondent had ample opportunity for more than two months prior to the January 5th exchange date to seek a continuance. Instead of making a timely motion for an extension of the time to exchange the appraisal, Respondent and his Counsel, for unknown reasons, simply let the time for exchange of exhibits and written direct testimony pass without making any attempt to seek a continuance. No plausable excuse was even offered and indeed none can be made as to why a timely motion for continuance of the exhibit exchange was not made.

According to Respondent's Counsel, Mr. Sikes was sufficiently recovered from his surgery to perform plant inspections in late December. However, the record shows that he elected to not even conduct a plant inspection of the subject property until March 9, 2001, approximately three months after he was able to do such an inspection, more than 2 months after an appraisal report was due, over a month after the Motion for Leave to File Exhibits Out of Time had been filed by the County Counselor, and just six days prior to the date on which his appraisal report was to be filed with the Commission. This course of activity demonstrates at the very least a negligent disregard for both the original Scheduling Order and the revised order (February 14, 2001), if not an intentional ignoring of the Orders for exchange.

Even after the Hearing Officer had permitted Respondent to file exhibits and written direct testimony on March 15th, as requested by Respondent's Counsel, Respondent misses that deadline for exhibits by one day and the deadline for written direct testimony by four days. Respondent simply ignored the deadline which had been established at his request and once again demonstrated a lack of concern and respect for the Hearing Officer's Order.

The Hearing Officer is quite certain that had this course of events been played out by a taxpayer and taxpayer's attorney ignoring scheduling deadlines, Respondent and Respondent's Counsel would have objected in the strongest possible manner and sought the same relief of striking the exhibits and written direct testimony from consideration. Furthermore, had such occurred and the Hearing Officer had not sustained this objection and stricken the exhibits and written direct testimony, Respondent and Respondent's Counsel would have felt that a great injustice had been done by the Hearing Officer. Accordingly, the Hearing Officer is left in the present situation with no good basis and no reasonable ground for not sustaining this objection and striking Respondent's exhibits and written direct testimony, except, it lies within the discretion of the Hearing Officer to overrule the objection and deny the motion. The Hearing Officer will excerise that discretion (although he truly feels it is an abuse of same) in the hope that Respondent, Respondent's staff and Counsel will learn from this appeal that in the future such negligent or willful disregard of orders will not be tolerated and should a similar occurance present itself, Respondent will most likely find himself in the position of having nothing to present as evidence on the record.

Complainant's objection and motion to strike due to untimely filing of exhibits and written direct testimony are most reluctlantly overruled and denied.

Value in Use Concept

The next ground for objection and in support of the motion to strike is that Respondent valued the subject property under the wrong concept of value, i.e. value in use. This objection goes more to the weight which can be given the opinion of value than the admissibility of the exhibit and written direct testimony. As set out below, the valuation made by Respondent's appraiser did not possess sufficient weight to be probative on the issue of true value in money of the subject machinery and equipment to either establish the value developed by the appraiser or sustain the original value made by Respondent. See, DECISION, infra.

Objection is overruled, and Motion is denied.

Valuation under Mass Appraisal Methodology

This objection, like the prior one, goes to weight and not admissibility. Respondent can always elect to rely upon a mass valuation method, however, it is done at a severe and serious risk. Without sufficient market data to establish that the reported acquisition cost is reflective of cost new, the mass valuation system has no probative value in a contested case before the Commission. Without sufficient market data to establish that the standarized depreciation factors are in fact adequate for all of the various types and kinds of machinery and equipment purchased in a given year, the mass valuation system has no probative value in a contested case before the Commission. Without sufficient market data to estabilish that either the individual items of machinery and equipment or the collective assembled machinery and equipment buys and sells in the market place at a value substantially and reasonably similar to that derived by multiplying an arbitrary depreciation factor times a historical acquisition cost, the mass valuation system has no probative value in a contested case before the Commission. As discussed in detail hereafter, neither Respondent's mass valuation methodology nor the mass valuation approach utilized by Respondent's appraiser were substantial and persuasive to sustain the value determined by the Assessor. See, P. D. George v. Daly, STC No. 97-20316 (August 10, 2000); Warner-Jenkinson v. Daly, STC No. 97-20314 & 97-20315; St. Louis Post-Dispatch v. Daly, STC No. 99-20261; Nordyne, Inc. v. Daly, STC No. 99-20263; Lincoln Industrial v. Daly, STC No. 99-20264; Boxes, Inc. v. Daly, STC No. 99-20265 (January 29, 2001); P. D. George v. Daly, STC No. 99-20262 (February 2, 2001).

Objection is overruled, and Motion is denied.

Valuation Based on Irrelevant and Unreliable Depreciation Schedule

Complainant's objection under this point relates to the application of the appropriate standards relating to expert testimony under Section 490.065, RSMo, and the holdings in Daubert v. Merrill Dow Pharmaceuticals, Inc., 509 U.S. 579; 113 S. Ct. 2786 (1993) and Kumho Tire Company, Ltd. v. Carmichael, 526 U.S. 137; 119 S. Ct. 1167 (1998). The Daubert and Kumho rulings address the relevance and reliability of evidence under Federal Rule of Evidence 702. Federal Rules of Evidence 702 and 703 (Missouri Restatement of Evidence, Rules 702 and 703) have been codified by Section 490.065. Kumho, at 147-149 & 1174-1175, applies the gatekeeping obligation of Daubert, requiring an inquiry into both relevance and reliability to not only scientific testimony, but to all expert testimony.

The issue raised by Counsel for Complainant addresses the reliance by Mr. Sikes, Respondent's appraiser, on a depreciation table for machinery and equipment that was apparently developed for use by the state of Michigan. This depreciation table was not in use by the Assessor's office for the 2000 assessment year, but has been adopted for the mass valuation of personal property in Franklin County for the 2001 tax year. Although Mr. Sikes was questioned about the table on both cross-examination and redirect examination, the Michigan study which produced the depreciation tables utilized by Mr. Sikes was not offered into evidence. Counsel for Complainant challenges whether Mr. Sikes' use of this depreciation table is relevant and reliable under the Daubert and Kumho decisions.

Complainant's objection goes to the weight which can be given the Sikes testimony and valuation under a mass valuation methodology relying on the Michigan depreciation factors. As addressed herein (See, Respondent's Approach to Value, infra, pp. 19-22 ) the Sikes valuation as presented relying on the Michigan depreciation factors was unpersuasive to establish value. The objection is overruled.

Market Value

Missouri law requires that property be valued at its market value for property tax assessment purposes. (See, Conclusions of Law, Standard for Value and Market Value).

"Value in exchange" or "exchange value" is be defined as "[t]he value of a commodity in terms of money to persons generally, as distinguished from use value to a specific person." (The Dictionary of Real Estate Appraisal, Third Edition, Appraisal Institute, 1993, at 125.) "Value in use" or "use value" is defined as "the value a specific property has for a specific use" (Ibid, at 383) and "the value of property which reflects a value to a specific user, recognizing the extent to which the property contributes to the personal requirements of the owner." (The Appraisal of Personal Property, American Society of Appraisers, 1994 at 2).

Exchange & Use Values

An exchange value is an objective value determined by transactions between buyers and sellers in the open market. A use value is a subjective value of an owner, user, or potential owner based solely upon his or her personal needs for the property. By definition then, market value is the value determined by the exchange of property between an informed seller and an informed buyer after exposure in the open market and not a subjective opinion of some individual or entity.

However, there is a distinction between a value in use to a specific user and a value recognized by a group of informed potential buyers that a property has for a specific use. The latter should be fully considered under a market value appraisal. Further, if there is sufficient demand for the property for the use to which it is being put by the owner, exchange value can be equivalent to the use value to the owner. The market value standard does not require appraisers to discard transactions or market demand for assembled machinery and equipment just because the market finds the property valuable for the same use that it is being put to by the owner. Such evidence should be fully considered in a market value appraisal.

In the present appeal, Complainant's value in exchange is market value. The reliance upon sales of individual items of machinery and equipment that were not a part of a sale of an on-going manufacturing facility is not detrimental to Complainant's valuation. Complainant's evidence rebuts any assertion or allegation that the Bealmear valuation would be a value of items of property as scrap or salvage or to simply sit idle and not be utilized by a manufacturer in a production or processing facility. Therefore, the Bealmear value is a value in exchange for the machinery and equipment to be put to use. In other words, the Bealmear valuation is based upon sales of comparable machinery and equipment which will be installed in a manufacturing facility and such items will be put to a use of producing income as part of an on-going operation according to the individual designed function for a given piece of machinery or equipment.

Highest and Best Use

Inherent in a market value standard is the necessity for a highest and best use analysis because the standard requires a well-informed potential buyer and a well-informed seller each acting in his or her best interest. While there may be several markets for the property, a well-informed seller looking out for his or her best interest will choose to sell in the market that produces the highest value. In contrast, there may be few markets for the property and a well-informed buyer will not pay more for the property than the amount it will command in a market with sufficient demand. A highest and best use analysis is the mechanism in an appraisal that zeroes in on (1) the use of the property that will produce the highest return in an exchange; and (2) whether there is sufficient demand to make such an exchange probable. This analysis shows the appraiser what to appraise the property as, and therefore, how to approach the cost, sales comparison, and income approaches.

Complainant's appraiser testified in his direct examination there was no market evidence to support the premise that the subject property sells as assembled or as a complete unit. Exhibit B, p. 9. No market evidence was presented by Respondent that challenged or rebutted this conclusion by Mr. Bealmear. No market evidence was presented by Respondent to establish that the subject property in use would sell for a value greater than that concluded by Complainant's appraiser. Furthermore, no market evidence was presented upon which a conclusion can logically be reached that the depreciated cost to acquire, either under the Assessor's original depreciation table or the Michigan depreciation table, is in fact reflective of what a willing buyer and seller would agree to as a selling price for the subject property as it is currently being used by Complainant. The lack of any such market data prohibits arbitrarily adding or subtracting value based on the subject machines, tools and equipment being in place/in use.

Complainant valued the individual items of property on the basis that their highest and best use was what each item was designed to do by the manufacturer. The sales utilized by Mr. Bealmear are sales which indicate that each of the sold items would continue to be put to the designed use of the manufacturer and that use would indicate the use that will produce the highest return in an exchange. In short, the Bealmear sales were sales where each item of machinery or equipment would continue to be put to use, just as each of the individual items of the subject personal property are presently put to their designed use (i.e., to be used in and as a part of a manufacturing and business operation). Furthermore, the fact that the appraiser was able to find sales of so many of the various items being appraised clearly supports the conclusion that there is a sufficient demand to make the exchanges not just probable, but actual.

Complainant's Approach to Value

Complainant offered the appraisal report and testimony of Mr. Allen D. Bealmear, a certified machinery and equipment appraiser. Mr. Bealmear's appraisal and testimony indicates a fair market value of $2,105,260 for the subject machinery and equipment as of January 1, 2000.

In conducting his appraisal and arriving at an opinion of value, Complainant's appraiser performed the following:

1. Personally inspected each and every item of machinery and equipment being valued. Exhibit B, p. 7, Tr. 10, Lines 21-22.

2. Valued each individual piece of property. Exhibit B, p. 9.

3. Found market data on which he based his opinion of value for the overwhelming majority of the individual items of machinery and equipment. Exhibits A, pp. 18 - 103, & C.

4. Provided specific illustrations of how market data of comparable items of machinery and equipment were utilized and made adjustments to arrive at his opinion of value for each item of property. Exhibits B, pp. 20 - 21 & C.

5. Established a market for what the individual items of machinery and equipment sell for in the market place. Exhibits A, B & C.

6. Found no market evidence for assemblage value, or sales of complete lines of property working together similar to the subject property. Exhibit B, p. 9.

7. Properly considered each recognized approach to value and properly utilized market data of transactions involving comparable property to arrive at his opinion of value. Exhibits A, B & C.

8. Utilized data sources generally accepted by the appraisal community as reliable. Exhibit B, pp. 22 - 25.

9. Used the value concept of fair market value. Exhibits A, p. 9 & B, pp. 7-8.

Mr. Bealmear defines "fair market value" as "[t]he estimated amount expressed in terms of money that may reasonably be expected for an item of property between a willing buyer and a willing seller with equity to both, neither under compulsion to buy or sell and both fully aware of all relevant facts." Complainant's Exhibit A at 9. He further clarified his concept of value by indicating that it is synonymous with a value in exchange and varies from other concepts of value as follows:

Q: Is fair market value synonymous with fair market value in exchange?

A: Yes.

Q: Explain the concept of fair market value in exchange.

A: Basically it's the willing buyer and willing seller both aware of the use of and value of the property.

Q: Does your appraisal report explain this concept?

A: Yes.

Q:    How does fair market value in exchange differ from other concepts of value?

A:     Fair market value in exchange doesn't make any assumptions regarding the cost of installation, nor does it assume the cost of removal.

Q: Does fair market value in exchange simply reflect what a willing buyer will pay a willing seller for the property?

A: Yes.

Q: Does the subject property have various uses other than the use as to which it is currently being put by the tax payer?

A: Yes.

Q: Can the subject property be sold individually in the market?

A: Yes.

Q: And is the subject property, in fact, sold individually in the market?

A: Yes.

Exhibit B, pp. 8-9.

His appraisal sets forth the procedures used in estimating the value.

1. We performed a field examination to physically inspect the subject personal property (FFM&E) commencing on or about October 17, 2000. As an adjunct to that inspection, an in-depth analysis was conducted to determine the Fair Market Value as of January 1, 2000 of any previously inspected assets as well as acquisitions since that time. Additionally, any transfers that occurred after the inspection date have been identified and relocated within the appraisal report code structure. Both the field examination and in-depth analysis was performed by Certified Appraiser(s) knowledgeable in the valuation of personal property (FFM&E).

2. We identified market adjustments to arrive at Fair Market Value, including but not limited to: comparable sales when available and an evaluation of potential purchasers.

3. We conducted a comprehensive analysis of the subject personal property (FFM&E) composition, including an analysis of all pertinent factors pertaining to the values as of the valuation date of January 1, 2000.

Exhibit A, pp. 7-8.

Complainant's appraiser judged that the subject property was, on the whole, standard plastic molding and shaping machinery and related machinery, tools and equipment. It was the type of machinery that is regularly traded in the used equipment market. On that basis he appraised it as if it were individual pieces of machinery and equipment available for sale and, relying primarily on the sales comparison approach, concluded a market value of $2,105,260.

Respondent's Approach to Value

Respondent's appraiser applied a value in use standard in his appraisal, not a value in exchange. Exhibits 1 & 2. Mr. Sikes appraised the subject property under what he described as the cost approach by using depreciation tables developed as a result of a study authorized by the state tax department of Michigan. These depreciation tables had not been adopted by Franklin County for the 2000 tax year.

The Sikes appraisal consisted of multiplying the original acquisition cost as reported by the Complainant in their asset list by a depreciation factor based upon the year of acquisition to arrive at his value in use for each item of machinery and equipment. Tr. 38, Line 23 - Tr. 39, Line 4. The appraiser arrived at a final opinion of market value of $7,213,00 for the subject property. Exhibit 1, p. 12 & Exhibit 1 to Exhibit 1, pp. 1 - 6; Exhibit 2.

Although Mr. Sikes did not admit that his valuation was a mass appraisal, it was and is for all intents and purposes a mass appraisal, or more correctly mass valuation, of the subject property. The only line of demarcation which Mr. Sikes drew, attempting to distinguish his approach from a mass valuation methodology, was that in the valuation of the subject property for his report the property was identified and the owner was questioned concerning the condition of it. Tr. 41, Lines 18-23.

Mr. Sikes simply performed the mathematical function of multiplying a set of depreciation factors times reported acquisition cost. Tr. 38, Line 23 - Tr. 39, Line 4; Tr. 41, Lines 2 - 17; Tr. 58, Line 24 - Tr. 59, Line 5; Tr. 71, Lines 7 - 25. This is the same methodology employed in performing a mass valuation, whether the mass valuation is of all manufacturing equipment in a given county or in a given facility. Reliance on the mass valuation system, without support provided by market data, is not appropriate in an appeal before the State Tax Commission. See, P. D. George v. Daly, STC No. 97-20316 (August 10, 2000); Warner-Jenkinson v. Daly, STC No. 97-20314 & 97-20315; St. Louis Post-Dispatch v. Daly, STC No. 99-20261; Nordyne, Inc. v. Daly, STC No. 99-20263; Lincoln Industrial v. Daly, STC No. 99-20264; Boxes, Inc. v. Daly, STC No. 99-20265 (January 29, 2001); P. D. George v. Daly, STC No. 99-20262 (February 2, 2001).

Mr. Sikes did not prepare any detailed inventory of the property being valued. The itemized listing provided in Exhibit 1 was simply the asset list provided by the taxpayer, less items that had been disposed of or removed from service and were idle. He made no independent judgment of the condition of the individual pieces of machinery, tools and equipment being valued. No independent judgment of the condition of the assembled machinery, tools and equipment was made by Mr. Sikes. He relied upon the representations made by an employee of Complainant concerning the condition of any item of machinery or equipment. His report does not reflect in any instance where an adjustment was made to any piece of machinery or equipment due to a condition factor. He did not analyze or research the cost to replace each and every piece of the subject machinery, tools and equipment, nor did he analyze or research the cost to replace the assembled machinery, tools and equipment. He did not research what the property sells for in the market, either on an individual piece of machinery basis or on the basis of the assembled machinery, tools and equipment. Mr. Sikes did not value the property under any of the approaches to value recognized by The Appraisal Institute, nor did he do a valid cost approach to determine market value. Tr. 29, Line 15 - Tr. 76, Line 13.

The valuation performed by Mr. Sikes relied upon a depreciation schedule that had not been used by the Assessor's office in making the original valuation of the subject property. There was no supporting evidence that the depreciation tables used by Mr. Sikes taken times the reported acquisition costs would produce market value. Respondent presented no evidence to establish that the original depreciation schedule used by the Assessor to arrive at value and relied upon by the Board of Equalization in sustaining the Assessor's value, was reflective of the market. Tr. 83, Line 18 - Tr. 84 - Line 10.

There is no hard market data which demonstrates the validity and soundness of Respondent's original valuation or Mr. Sikes' revised valuation. The valuations presented on behalf of Respondent are unsupported by the market and leaves the Hearing Officer in the nebulous twilight of speculation, conjecture and surmise. Rossman v. G.F.C. Corp. of Missouri, 596 S.W.2d 469, 472 (Mo. App. 1980). Valuation of the subject property cannot be founded upon speculation, conjecture and surmise.

It is not prudent for Respondent to limit his evidence to the production of depreciation schedules. The presumption in favor of the Board is not sufficient to overcome market data demonstrating that the value for items of property is different than that suggested by depreciation tables. Such is the case in this appeal. Complainant's market data rebuts the indicated value determined under the depreciation table. Furthermore, Respondent's evidence demonstrates the Board presumption is based simply upon the depreciation methodology employed by Respondent in originally valuing the subject property. Tr. 83, Line 18 - Tr. 84 - Line 10.

Conclusion

The Hearing Officer has the duty to evaluate the evidence presented to determine the sufficiency and persuasiveness of the evidence in establishing market value. The Hearing Officer concludes that Complainant's evidence was sufficient to rebut the presumption in favor of the Board of Equalization and to establish value. Complainant's evidence was substantial and persuasive because:

1. The equipment on the whole was standard plastic molding and forming machines and related and supporting machinery, tools and equipment.

2. Such equipment is regularly traded in the used machinery and equipment market.

3. Complainant's appraisal primarily relied upon the selling prices of comparable machinery and equipment from the used machinery and equipment market.

4. Complainant's appraisal valued the items of machinery and equipment on the basis that they will continue to be utilized for the specific purpose or function for which each is designed. The personal property was not valued on a salvage or scrap basis, but recognizes that the machinery and equipment will continue to be used in a manufacturing process by relying primarily on sales of comparable machinery and equipment that is bought and sold to be used in an on going manufacturing operation.

5. No evidence was presented, derived from market transactions, which would establish that the subject property would sell for a value greater than that determined under Complainant's sales comparison approach.

Complainant's evidence provided the best indication of the worth of the subject property in the open market. Respondent relied on a mass cost methodology without showing how or why this methodology provides a good indication of market value.

ORDER

The assessed valuation for the subject property as determined by the Assessor and affirmed by the Board of Equalization for Franklin County for the subject tax day is SET ASIDE.

The assessed valuation for the subject machinery, tools and appliances for the 2000 tax year is hereby set at $701,051.

A party may file with the Commission an application for review of this decision within thirty (30) days of the mailing of such decision. The application shall contain specific 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. Section 138.432, RSMo 1994.

If an application for review of this 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 Franklin 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 or all 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 May 16, 2001.

STATE TAX COMMISSION OF MISSOURI

W. B. Tichenor

Chief Hearing Officer