EUCLID PLAZA ASSOCIATES LLC,	)
	)
Complainant,	)
	)
v.	)		Appeal Number 03-20042
	)
ED BUSHMEYER, ASSESSOR,	)
ST. LOUIS CITY, MISSOURI,	)
	)
Respondent.	)

The value approved by the Board of Equalization is SUSTAINED.

The issue in this case is the true value in money of a parcel of land improved with an office building.

A hearing was held in the above matter in the City Hall of St. Louis City, Missouri on June 22, 2004, in front of Hearing Officer Luann Johnson. Complainant was represented by counsel, Sean Clancy, and by an appraiser, Steven Goldman. Respondent was represented by counsel, Carl Yates, and by an appraiser, Vincent Knopp.

The assessor originally valued the property at $768,000 (assessed value $245,800). Said value was after the application of a 50% abatement, and was approved by the Board of Equalization. Complainant now asserts a value of $420,000, after 50% abatement, (assessed value $134,400). Respondent asserts a market value of $1,050,000, after 50% abatement, in support of the original value approved by the Board of Equalization.

Complainant and Respondent presented appraisal reports, prepared by state certified appraisers, in support of their opinions of value.

1. The subject property is 26,368 square foot tract improved with a six-story office building. The property is identified as parcel number 3879-05-00901, more commonly known as 4900 Delmar Road, St. Louis, Missouri.

2. The subject property is located in the center of the City of St. Louis in an area commonly known as the Central West End. The neighborhood is known for its unique residential properties and businesses. Many older buildings have been refurbished. Overall condition of the properties in the area fall in the average to well maintained and updated category.

3. The subject property is an 89 year old building originally constructed as a warehouse. Complainant purchased the property in 1998 through a sheriff=s sale. The property is subject to a 50% tax abatement.

4. The property is being rehabbed for use as office space. On the tax day, approximately 75,000 square feet had been rehabbed. The precise net leasable area is unknown. Complainant=s appraiser asserts a net leasable area of 82,500 square feet, but did not take measurements to verify that number. Complainant informed the Board of Equalization that the net leasable area was 86,167 square feet. Respondent=s appraiser is asserting a net leasable area of 90,000 square feet, rounded.

5. On the tax day the subject property was in average to above average condition. Complainant=s appraiser=s assertion that the property was only in Afair@ condition is not supported by the evidence that 75,000 square feet, or approximately 90%, had been rehabilitated on the tax day.

6. The highest and best use of the subject property is as an office building.

7. The layout of the building and office space is functionally adequate.

8. On site parking is not adequate, but parking is being provided in a lot two blocks away. Further, Complainant is involved in litigation to enforce an easement for parking in a neighboring lot. No reliable evidence was presented which would support an adjustment for functional obsolescence due to lack of on site parking.

The parties do not agree about the impact of the lack of on site parking. Respondent would assign no functional obsolescence for this fact, because nearby off site parking is available. Complainant=s appraiser does suggest that functional obsolescence is appropriate but has failed to present a paired sales analysis to measure functional obsolescence. Complainant=s use of actual income and expenses, without comparing same to market data, is not an appropriate way to measure functional obsolescence.

9. Because of the age of the improvements, the cost approach is not a reliable methodology for determining value.

10. The sales approach and income approach are reliable methods of determining value. Complainant presented only an income approach to value. Respondent presented both an income approach and a sales approach to value.

11. Sales of four somewhat similar buildings indicated per square sales prices ranging from $16.65 to $46.11. From these sales, Respondent=s appraiser determined that the most likely sales price of the subject property would be $18.50 per square foot or $2,326,338. However, Respondent=s appraiser has failed to present an adjustment grid demonstrating the differences between the subject property and the proposed comparable sales and has provided only minimal narrative support for his adjustments. Therefore, Respondent=s sales comparison approach carries little weight.

12. Respondent=s income approach is the most reliable indicator of value for the subject property. Respondent=s income approach uses market income, vacancies and expenses to determine net operating income. Respondent=s capitalization rate is based upon overall capitalization rates of both commercial and residential properties. Respondent=s appraiser then added the effective tax rate to the overall capitalization rate to reach a opinion of value for the subject property of $2,060,000. While the methodology employed by Respondent=s appraiser is correct, the accuracy of his calculation can not be determined because of the confusion over the correct net leasable area. Nevertheless, Respondent=s income approach supports a finding that the subject property had a market value of at least $1,536,000 as approved by the Board of Equalization, before application of the 50% abatement.

13. Complainant=s income approach is not a reliable indicator of value for the subject property. Not only did Complainant=s appraiser fail to use market derived income, vacancy and expenses, he also overstated expenses by including real estate taxes in his calculation of net operating expenses. And, Complainant=s appraiser failed to develop any capitalization rates from commercial properties such as the subject property. All of Complainant=s capitalization rates came from the sale of residential properties. Because of his failure to use market data and a market capitalization rate for the subject property, Complainant=s appraiser=s opinion of value under the income approach is not substantial and persuasive.

14. No evidence was presented which would indicate that there had been any new construction or property improvements between January 1, 2003, and January 1, 2004, which would warrant a change in the assessed value of the subject property.

15. The correct value for the property on January 1, 2003, and January 1, 2004, after the 50% abatement, was $768,000 (assessed value $245,800).

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.

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).

Section 137.115, RSMo 2000 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 value and then must present substantial and persuasive evidence that its proposed value is indicative of the true value of the subject property on January 1, 2003, in order to have that value accepted. Hermel, Inc. v. State Tax Commission, 564 S.W.2d 888, at 897. ASubstantial@ 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). APersuasive@ 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 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).

The Hearing Officer as the trier of fact may consider the testimony of any expert witness and give it as much weight and credit as she may deem it entitled to when viewed in connection with all other circumstances. The Hearing Officer is not bound by the opinion 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. Beardsley v. Beardsley, 819 S.W.2d 400, 403 (Mo. App. 1991); Curnow v. Sloan, 625 S.W.2d 605, 607 (Mo. banc 1981).

A party does not meet his burden of proof if evidence on any essential element of his case leaves the Commission Ain the nebulous twilight of speculation, conjecture or surmise.@ Rossman v. G.F.C. Corporation of Missouri, 596 S.W.2d 469, 472 (Mo. App. 1980).

There is a presumption in favor of the Board of Equalization. In order to overcome that presumption, Complainant must present substantial and persuasive evidence demonstrating that the value approved by the Board of Equalization does not represent market value. Complainant has failed to meet that burden.

The income approach is based on the premise that the value of an income-producing property is equivalent to the present worth of the net income it may be expected to provide during a normal term of ownership over its remaining economic life. Hypothetical potential gross income is based upon market or economic rent, not the actual rent being realized by the property. (Property Assessment Valuation, IAAO, 1977, p. 204-105). Likewise, the vacancy factor for any particular property must be determined by a study of other comparable properties and an analysis of their rental histories, as well as the recent history of vacancies in the subject property. (Property Assessment Valuation, IAAO, 1977, p. 212). Income and expenses shown by an accountant on an operating statement prepared for income tax purposes cannot be taken for use in the income approach to value without careful analysis and determination regarding their propriety. In the case of expenses, only the reasonable and typical expenses necessary to support and maintain the income-producing capability of the property should be allowed. A prediction is being made of the stabilized annual net income that the property is expected to produce assuming competent management and a typical year. Operating expenses for the subject property must be compared to operating expenses for comparable properties. (Property Assessment Valuation, IAAO, 1977, p. 215-216). Finally, since an appraisal is likely to affect the resulting assessment, real estate taxes should be removed as an expense item and included later in the effective tax rate. (Property Assessment Valuation, IAAO, 1977, p. 223).

Complainant=s appraiser asserts that he did not use market data in his income approach because there were no similar high rise office buildings in the market area; because substantial rehabilitation is required before the property can generate economic rents; because the lack of on site parking is not normal for office building and because the age and location of the building increased repair costs, utility costs and security costs. However, Complainant=s appraiser did not support any of his conclusions with any market data showing that other office buildings were substantially different than the subject which would warrant a deviation from normally accepted appraisal methodology. No evidence was presented which would allow the Commission to measure the accuracy of the appraiser=s conclusions.

Nor do those conclusions seem particularly persuasive. The City of St. Louis is large enough that an appraiser should have been able to find a similar office building of similar age in a substantially similar market if he had chosen to look for one. Respondent=s appraiser found at least three.

Likewise, the assertion that economic rents were not appropriate because substantial rehabilitation was required is not persuasive. First, by Complainant=s own testimony, rehabilitation was at least 90% complete on the tax day. And, second, the amount of rehabilitation remaining goes to the proper amount of vacancy adjustment, not the economic rent.

Finally, Complainant=s argument that the lack of on site parking made use of economic rent unacceptable is not well taken. Complainant produced no evidence which suggested that economic rent would be impacted by the subject property=s lack of on site parking. The subject property has adequate parking within two blocks. The only way to measure whether the parking impacted on rents would have been to conduct a paired analysis - which Complainant did not do.

The value initially determined by the Assessor and approved by the Board of Equalization is AFFIRMED.

A party may file with the Commission an application for review of a hearing officer decision within thirty (30) days of the mailing of such decision. The application shall contain specific detailed grounds upon which it is claimed the decision is erroneous. Failure to state specific facts or law upon which the appeal is based will result in summary denial.

If an application for review of a hearing officer decision is made to the Commission, any protested taxes presently in an escrow account in accordance with this appeal shall be held pending the final decision of the Commission. If no application for review is received by the Commission within thirty (30) days, this decision and order is deemed final and the Collector of City of St. Louis 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 August 10, 2004.

STATE TAX COMMISSION OF MISSOURI

Luann Johnson

Hearing Officer