UGA LLC v. O'Flaherty (Jackson)

The decision of the Jackson County Board of Equalization setting market value for the subject properties at $2,985,000 (assessed value $955,193) for tax year 2001 is hereby SET ASIDE.

The decision of the Jackson County Board of Equalization setting market value for the subject properties at $3,705,000 (assessed value $1,185,600) for tax year 2002 is hereby SET ASIDE.

The correct market value for the subject property on January 1, 2001, was $600,000 (assessed value $192,000); the correct market value for the subject property on January 1, 2002, was $1,250,000 (assessed value $400,000).

Appeals number 01-30127 and 01-30128 were filed prior to the time when the Board of Equalization had made its decision of value for tax year 2001. After the Board of Equalization issued its order for tax years 2001 and 2002, Complainant filed Appeals number 01-30032 and 02-30034 appealing the value for 2001 and filed Appeals number 02-30031 and 02-30033 appealing the value for 2002. Appeals number 01-30127 and 01-30128 are DISMISSED because they were prematurely filed and do not represent the finding of the Board of Equalization for tax year 2001. Tax year 2001 will be handled through Appeals Number 02-30032 and 02-30034.

The issue in these appeals is true value in money of the subject property on January 1, 2001, and January 1, 2002. Within this issue is the question of whether or not the subject property should be valued by the income approach to value or by the cost approach to value. That issue hinges on a determination of whether there are market rents for similar properties or whether the subject property is so unique as to make market rents for other properties inappropriate in determining the market value for the subject property. We hold that the subject property is not so unique as to preclude it from being valued with the income approach to value.

A hearing was conducted on June 3, 2003, in the Jackson County Courthouse, Kansas City, Missouri by Hearing Officer Luann Johnson. Complainant was represented by counsel, David Sperry. Respondent was represented by counsel, Michael LeVota.

The property consists of two parcels, numbers 30-320-09-01 and 30-310-09-33, which form what is commonly referred to as the "Uptown Theater." The parcels contain approximately 64,200 square feet of land and are improved with a 66,953 square foot building.

For the purposes of the hearing and valuation, the parcels are considered as a single unit. With consent of the parties, the Clerk is to assign value equally between the two parcels.

	Assessor's Value		Board's Value
Appeal #	Market	Assessed	Market	Assessed
02-30032	$1,185,000	$ 379,200	$1,138,000	$ 364,372
02-30034	$1,946,000	$ 101,440	$1,846,323	$ 590,823

2001 Combined Value
Taxpayer's Value		Assessor's Value		STC's Value
Market	Assessed	Market	Assessed	Market	Assessed
$600,000	$192,000	$2,985,000	$955,200	$600,000	$192,000

	Assessor's Value		Board's Value
Appeal #	Market	Assessed	Market	Assessed
02-30031	$1,185,000	$ 379,200	$1,379,550	$ 441,456
02-30033	$1,946,000	$ 622,720	$2,325,450	$ 774,144

2002 Combined Value
Taxpayer's Value		Assessor's Value		STC's Value
Market	Assessed	Market	Assessed	Market	Assessed
$1,250,000	$400,000	$3,704,000	$1,185,280	$1,250,000	$400,000

1. Jurisdiction over appeals number 02-30031 through 02-30034 is proper. Complainant timely appealed to the State Tax Commission from the decision of the Jackson County Board of Equalization. Jurisdiction over appeals number 01-30127 and 01-30128 is not proper inasmuch as Complainant filed those appeals prior to the time that the Board of Equalization had issued its decision. Therefore, those appeals are dismissed.

2. The subject properties are combined for purposes of hearing and decision. Combined, the parcels form a tract of land containing approximately 64,200 square feet. The parcels are improved with a three-story building containing 66,200 square feet and a 70 space parking lot. The parcels are identified as number 30-310-09-01, more commonly known as 3700 Broadway, Kansas City, Jackson County, Missouri; and parcel number 30-310-09-33, more commonly known as 411Valentine, Kansas City, Jackson County, Missouri.

3. The property was originally developed with the three story "Uptown Theater" in 1928. The original structure has a stone foundation, masonry walls with brick facing, and some decorative stone trim. The roof is basically flat in style with the northeast corner of the roof having a metal doom roof. The original structure was remodeled in the early 1950s and is in fair to average condition. There is approximately 9,922 square feet of first floor theater area and 3,286 square feet of balcony area. The flooring is concrete. Interior walls are plaster painted walls. The ceiling is painted plaster. The stage sits at the back of the first floor. The remaining 24,000 square feet is retail, office and storage space. The retail and storage areas remain unfinished.

4. The interior of the office/retail building first floor is vacant. The interior is dated and will require complete rehabilitation. The second and third floors are serviced with an older four stop, 2500 pound passenger elevator.

5. The front part of the theater first floor area has no theater seating and is, instead, equipped with tables and chairs for receptions. The rear portion of the first floor and the balcony area have typical theater seating.

6. A new addition, containing approximately 29,745 square feet and 70 parking spaces, was added to the west side of the theater in 1999. The addition contains three dressing rooms, a large kitchen, three bars, numerous meeting or party rooms and an office area that includes about one-half of the third floor.

7. As of January 1, 2001, very little interior finish had been completed on the new addition. On January 1, 2002, nearly all of the interior finish had been completed on the new addition. The reported cost of the new addition is $3,500,000.

8. The property suffers from significant deferred maintenance, functional obsolescence and external obsolescence. The property is located in an average neighborhood and lacks adequate parking. "The subject property is an example of an attempt to revitalize a property that has reached the end of it's economic life." (Respondent's Exhibit 1, p. 10).

9. The highest and best use of the subject property is as theater, office, retail and banquet facilities. "Should the income not be sufficient to provide a return on and of the value, the new addition could be converted to an office building and the old office/retail and the theater could be razed for parking." (Respondent's Exhibit 1, p. 15).

10. While there are no comparable rents for a multi-use property such as the subject property, there are comparable rents for office space, retail space, lounges and restaurants, and theaters. Therefore, the income approach provides the most reliable indicator of value for the subject property.

11. The cost approach requires speculative adjustments for deterioration and functional obsolescence and is a less reliable indicator of value for the subject property.

12. The true value in money of the subject property on January 1, 2001, was $600,000, assessed value ($192,000).

13. The true value in money of the subject property on January 1, 2002, after completion of property improvements, was $1,250,000 (assessed value $400,000).

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, 2001, and January 1, 2002, 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).

The subject property is an ornate old theater which has significant historical value but little market value. The theater has suffered a troubled history, including a foreclosure and being taken over by the Land Clearance for Redevelopment Council. Before the current ownership, the theater was offered for sale by LCRC for $1.

The property is located in the old "Central Business District" of Kansas City. Many businesses have moved out of the Central Business District and, like most properties in this area, the subject property suffers from a lack of adequate parking. Revitalization of the area has not been wholly successful.

While recognizing that the owners spent a great deal of money to create the addition to the old theater, the evidence before the Tax Commission is that those owners had historically been heavily involved in attempts to revitalize the old Central Business District, including sitting for a time on the LCRC. The expenditure appears to be more of a labor of love than a business investment.

The decision of the Jackson County Board of Equalization is hereby SET ASIDE. The correct market value for the subject property on January 1, 2001, was $600,000 (assessed value $192,000); the correct market value for the subject property on January 1, 2002, was $1,250,000 (assessed value $400,000).

The Clerk is HEREBY ORDERED to place the new assessed values on the tax books for tax years 2001 and 2002. The new values shall be divided equally between the two parcels.

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 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 Jackson 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 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.

UGA LLC,	)
	)
Complainant,	)
	)
v.	)	Appeals Number 01-30127, 01-30128,
	)	02-30031, 02-30032, 02-30033, 02-30034
MICHAEL O'FLAHERTY,	)
DIRECTOR OF ASSESSMENT	)
JACKSON COUNTY, MISSOURI,	)
	)
Respondent.	)