SPIRIT ASSOCIATES,	)
	)
Complainant,	)
	)
v.	)		Appeal Number 01-11054 thru 01-11061
	)
PHILIP A. MUEHLHEAUSLER,	)
ACTING ASSESSOR,	)
ST. LOUIS COUNTY, MISSOURI,	)
	)
Respondent.	)

HOLDING

Decision of the St. Louis County Board of Equalization sustaining the assessment made by the Assessor, SET ASIDE, Hearing Officer finds the combined true value in money for the subject properties for tax years 2001 and 2002 to be $8,400,000, combined assessed value of $1,596,000.

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

Respondent appeared by Counsel, Robert J. Droney, Assistant County Counselor.

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

ISSUE

The Commission takes this appeal to determine the true value in money for the subject property on January 1, 2001.

SUMMARY

Complainant appeals the decisions of the St. Louis County Board of Equalization which sustained the valuations of the subject properties. The Assessor determined an appraised value of $9,442,211, for all parcels combined. Complainant proposed a value of $7,600,000. Respondent proposed a value of $9,124,000. A hearing was conducted on April 1, 2003, at the St. Louis County Government Center, Clayton, Missouri. Transcript of evidentiary hearing received by the Commission on April 8, 2003.

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

Complainant's Evidence

Complainant offered into evidence the following exhibits which were received:

Exhibit A    Appraisal Report of Kelly G. Martin, MAI, State Certified General Real Estate Appraiser, indicated consolidated value of subject properties of $7,600,000.

Exhibit B    Written Direct Testimony of Mr. Martin.

Exhibit C    Physical Condition Analysis of subject property.

Respondent's Evidence

Respondent offered into evidence the following exhibits:

Exhibit 1    Mortgage Equity Analysis and opinion of fair market value of Robert Gammon, commercial appraiser with St. Louis County Assessor's Office, indicated consolidated value of subject properties of $9,124,000.

Exhibit 2    Calculation of Net Operating Income.

Exhibit 3    Complainant's Income and Expense Report for 1998-2001.

Exhibit 4    Calculation of fair market value based upon net operating income.

Exhibit 5    Summary of income and expenses and calculation of capitalization rate.

Exhibit 6    Complainant's Budget Comparison Cash Flow.

Exhibit 7    American Council of Life Insurers Commercial Mortgage Commitments Table, January 2001.

Exhibit 8    Written Direct Testimony of Mr. Gammon.

Exhibits 1, 3, 5, 7 and Questions and Answers 1 through 20 of Exhibit 8 were received into evidence. Exhibits 2, 4, 6 and Questions and Answers 21 through 32 of Exhibit 8 were excluded from evidence. Order dated March 13, 2003; Tr. 3, Lines 4-7.

FINDINGS OF FACT

1. Jurisdiction over these appeals is proper. Complainant timely appealed to the State Tax Commission from the decisions of the St. Louis County Board of Equalization.

2. The subject property is generally known as Northwinds Apartments, North St. Louis County, Missouri. The property is approximately 90 acres improved by a 440 unit apartment complex, containing 111 buildings. The apartment complex is approximately 40 years old. The property is residential property and is to be assessed at nineteen percent (19%) of its fair market value.

3. The subject complex suffers from various physical condition elements due to its age and other factors that cause the facility to be expensive to maintain. There are 109 buildings that have basements for each apartment. Basement leaks are prevalent and require significant amounts of maintenance, as do the numerous sidewalks, which are affected by cracking and breaking. Windows are past their useful life and are having to be replaced in basements. Landscape plantings are dying out. Trees are having to be removed and replaced. Main plumbing stacks are beginning to fail and have to be replaced. Siding, fascia and gutters are being repaired and replaced, as is roof replacement. Kitchen cabinets are in need of replacement. Cost to refinish hardwood floors, painting basements and door replacements are costly. The general wear and tear on the units is generally extreme due to tenants usually being young families. Exhibit A, p. 8; Exhibit C.

4. The property under appeal consists of eight (8) different parcels of contiguous properties. The parcels are further identified as follows:

5. The assessed values as determined by the Assessor and the corresponding percentage of the total assessed value for the subject apartment complex are as listed below: (*percentages rounded to total 100%).

6. There was no evidence of new construction and improvement from January 1, 2001, to January 1, 2002.

7. The cost approach is not appropriate for valuing the subject property due to the fact of the subject complex being 40 years old and suffering greatly from accrued depreciation which cannot be easily measured in the marketplace and the cost approach would have little bearing on the investment decision of a potential buyer. Exhibit A, p. 3; Exhibit B, p. 12, Lines 8-18.

8. The sales comparison approach is not appropriate for valuing the subject property due to the fact that it is was not possible to find 40 year old apartment complexes with the unique layout and design (110 separate buildings with 4 units per building, and a maintenance-pool house building) of the subject. Exhibit A, p. 3; Exhibit B, p. 12, Line 19 - p. 13, Line 6.

9. The income approach is the appropriate methodology for arriving at an indicated fair market value of the subject property. Exhibit A, pp. 3, 19-25; Exhibit B, p. 13, Line 7 - p. 14, Line 20.

10. Total Gross Income of $2,785,000, (residential income - $2,770,000 plus retail income - $15,000) less vacancy and concessions of $215,000, plus tenant charges of $65,000 are appropriate based upon the reconstructed operating income and expense statement for years, 1998 through 2000, relied upon by Complainant's appraiser. This produces an effective gross income of $2,635,000. Exhibit A, pp. 20-21.

11. Total Operating Expense of $1,410,500, Total Short Lived Items Expense of $224,100 and Total Reserves for Replacement of $33,000 are appropriate based upon the reconstructed and stabilized operating income and expense statement relied upon by Complainant's appraiser. This produces a Net Operating Income (NOI) of $967,400. Exhibit A, pp. 20-22.

12. An Overall Rate of 11.50%, which includes an effective tax rate, is appropriate based upon the band of investment method of estimating a suitable discount rate. Exhibit A, pp. 23-24. Capitalizing the NOI ($967,400) by the Overall Rate produces an indicated value of $8,400,000 ($967,400/.1150 = $8,412,173.91, rounded to $8,400,000).

13. Complainant's evidence was substantial and persuasive to rebut the presumption of correct assessment by the Board and establish the true value in money as of January 1, 2001, to be $8,400,000. Exhibit A.

14. The combined value for the entire subject complex will be allocated among the various parcels based upon the percentages set forth in Finding of Fact 5, above. Assessed values are rounded to whole ten dollars ($10) to arrive at the total assessed value of $1,596,000 ($8,400,000 x .19 = $1,596,000).

15. The documents submitted on behalf of Respondent were described by Respondent's appraiser as a limited appraisal. Exhibit 8, Q & A - 5. The documents did not constitute a limited appraisal under the Uniform Standards of Professional Appraisal Practice (USPAP - 2001). See, USPAP, Definitions, p. 1. They were not found to be persuasive in the present appeal.

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 County Board of Equalization. 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). There is no presumption that the assessor's valuation is correct. Section 138.431.3, RSMo.

The presumption in favor of the Board is not evidence. A presumption simply accepts something as true without any substantial proof to the contrary. In an evidentiary hearing before the Commission, the valuation determined by the Board, even if simply to sustain the value made by the Assessor (which is not presumed to be correct), is accepted as true only until and so long as there is no substantial evidence to the contrary.

Standard for Valuation

Section 137.115, RSMo 1994, 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).

Market Value

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 is 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 each 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.

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 A, p. 3.

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. 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).

Trier of Fact

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. 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).

Opinion Testimony by Experts

If specialized knowledge will assist the trier of fact to understand the evidence or to determine a fact in issue, a witness qualified as an expert on that subject, by knowledge, skill, experience, training, or education, may testify thereto.

The facts or data upon which an expert bases an opinion or inference may be those perceived by or made known to the expert at or before the hearing and must be of a type reasonably relied upon by experts in the field in forming opinions or inferences upon the subject and must be otherwise reliable, the facts or data need not be admissible in evidence. Section 490.065, RSMo; Courtroom Handbook on Missouri Evidence, Wm. A. Schroeder, Sections 702-505, pp. 325-350; Wulfing v. Kansas City Southern Industries, Inc., 842 S.W.2d 133 (Mo. App. E.D. 1992).

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, 2001. 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).

Respondent's Burden of Proof

Respondent, when advocating a value different from that determined by the original valuation or a valuation made by the Board of Equalization, must meet the same burden of proof to present substantial and persuasive evidence of the value advocated as required of the Complainant under the principles established by case law. Hermel, Cupples-Hesse, Brooks, supra.

Methods of Valuation

Missouri courts have approved the comparable sales or market approach, the cost approach (replacement or construction) and the income approach as recognized methods of arriving at fair market value. 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).

DECISION

The information, data, analysis and conclusions placed on the record by Complainant's expert provides substantial and persuasive evidence to establish value for the subject property. The Hearing Officer was not persuaded that a decrease in total effective gross income of approximately $30,000 was warranted based upon the prior three years experience of the subject complex. A modest and conservative increase in residential income of approximately three percent (3%) is justified based upon past experience. The hypothetical buyer on January 1, 2001, would no doubt anticipate rental income to continue upward.

The other adjustments made by Mr. Martin have been accepted for purposes of arriving at value under the income approach. Given the age, general physical condition and need for deferred maintenance items to be addressed, the Hearing Officer is convinced that a prospective buyer would factor in the expenses for replacement, renovations, and improvements in accordance with Mr. Martin's estimations. The conclusions reached by Mr. Martin relative to these various expense items are, of course, matters of his opinion, as in virtually all appraisal assignments. Due to the age and unique characteristics of the subject complex, it was not possible for the appraiser to make an analysis of sales which would provide the kind of supporting data that is generally desired. Accordingly, the Hearing Officer defers to the experience and expertise of Complainant's appraiser on these matters.

After allowing for the three percent (3%) increase in rental income and then accepting the appraiser's adjustments for vacancy, concessions, tenant charges, expenses, replacements, improvements and reserve, the Hearing Officer concluded on the indicated market value of $8,400,000 as of January 1, 2001.

ORDER

The assessed valuation for the subject properties as determined by the Assessor and sustained by the Board of Equalization for County for the subject tax day are SET ASIDE.

1. The assessed value for the subject property in appeal 01-11054 (12 G 530031 - 9501 Abaco Court) for tax years 2001 and 2002 is set at $339,470.

2. The assessed value for the subject property in appeal 01-11055 (12 G 520232 - 9492 Glenark Drive) for tax years 2001 and 2002 is set at $31,120.

3. The assessed value for the subject property in appeal 01-11056 (12 G 520223 - 1834 Bahama Court) for tax years 2001 and 2002 is set at $71,340.

4. The assessed value for the subject property in appeal 01-11057 (12 G 520214 - 1803 Andros Court) for tax years 2001 and 2002 is set at $375,060.

5. The assessed value for the subject property in appeal 01-11058 (12 G 510064 - 1701 Andros Court) for tax years 2001 and 2002 is set at $344,580.

6. The assessed value for the subject property in appeal 01-11059 (12 G 510031 - 9510 Glen Owen Drive) for tax years 2001 and 2002 is set at $198,700.

7. The assessed value for the subject property in appeal 01-11060 (12 G 230511 - 1701 Windward Court) for tax years 2001 and 2002 is set at $114,270.

8. The assessed value for the subject property in appeal 01-11061 (12 G 230474 - 1802 Bahama Court) for tax years 2001 and 2002 is set at $121,460.

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 these appeals 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 St. Louis 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 these appeals. 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 April 29, 2003.

STATE TAX COMMISSION OF MISSOURI

W. B. Tichenor

Chief Hearing Officer