INLAND PAPERBOARD AND PACKAGING, INC.,	)
	)
Complainant,	)
	)
v.	)		Appeal Number 02-10092
	)
	)
PHILIP A. MUEHLHEAUSLER, ASSESSOR,	)
ST. LOUIS COUNTY, MISSOURI,	)
	)
Respondent.	)

The assessment determined by the St. Louis County Board of Equalization is hereby set aside. The Commission finds the market value for the subject personal property for the 2002 tax year to be $2,485,605 ($828,540 assessed).

The issue in this appeal is: What was the true value in money as of January 1, 2002, of Complainant’s tangible personal property, more specifically, what was the reasonably probable and highest price that could be commanded for the subject property in an open-market, competitive exchange with buyer and seller both acting knowledgeably and prudently?

Complainant appeals the assessment of its machinery, equipment, and other tangible personal property with the exception of supplies (assessed value of $3,210 - $9631/3 = $3,210.34, rounded to $3,210).

The evidentiary hearing in the above-styled appeal was held on Wednesday, January 5, 2005, before State Tax Commission Hearing Officer Aimee L. Smashey, in the Assessor’s Conference Room at the County Government Building in Clayton, Missouri. Mr. Thomas Caradonna, Attorney, represented Complainant. Ms. Paula Lemerman, Associate County Counselor, represented Respondent.

Pursuant to Section 138.431, RSMo, the appeal has been assigned to Chief Counsel R. Randall Turley, Acting as Hearing Officer, for rendering of this Decision and Order. The Hearing Officer having considered all of the evidence upon the record enters the following Decision and Order.

The subject property is located at 1201 North Highway Drive, Fenton, Missouri. The property is identified by Assessor’s Account Number: M0013955A. The assessment history and proposed values for the portion of the assessment in dispute are:

Complainant submitted the following exhibits in support of its proposed valuation:

Exhibit A, Appraisal Report of Allen D. Bealmear, ASA, CEA.

Exhibit B, Cost and Comparable Sales Demonstrations

Exhibit C, Written Direct Testimony of Mr. Bealmear

Respondent submitted the following exhibits in support of his proposed valuation:

Exhibit 1, Appraisal Report of Martina Ragain, Revenue Field Auditor.

Exhibit 2, Written Direct Testimony of Ms. Ragain.

1. The Assessor determined an assessed value of $1,597,720 for the business personal property and manufacturing equipment of Complainant.

2. Complainant appealed the assessment to the St. Louis County Board of Equalization. The Board affirmed the assessed value as determined by the Assessor.

3. Jurisdiction over this appeal is proper. Complainant timely filed its Complaint for Review of Assessment with the State Tax Commission, challenging the assessment on the ground of overvaluation.

4. Complainant is a manufacturer of corrugated cardboard boxes. Respondent’s Exhibit 1, at 6. The personal property under review includes various types of office machinery, and other machinery and equipment utilized in Complainant’s manufacturing business. A complete detailed listing of the 858 items of personal property under appeal was set out at pages 18 through 52 of Exhibit A.

5. Complainant’s appraiser valued the items of property based on the concept of fair market value in exchange. Complainant’s Exhibit C pp. 6 - 8. This is the appropriate concept of value to be applied in the valuation of the subject property. Daly v. P.D. George Co., 77 S.W.3d 645 (Mo. App. E.D. 2002).

6. Complainant’s appraiser performed the subject appraisal in conformity with the Uniform Standards of Professional Appraisal Practice (USPAP), and the Principles of Appraisal Practice and Code Ethics of the American Society of Appraisers. Complainant’s Exhibits C, p. 24, and A, p. 4.

7. A market value appraisal inherently requires a highest and best use analysis. A highest and best use analysis is the mechanism in an appraisal that zeros in on (1) the lawful, feasible 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 valued the property under an appropriate highest and best use analysis. Exhibit A, p. 8; Exhibit C, pp. 10 – 11.

8. There was no market data presented that would indicate a demand for the machinery and equipment as assembled and in place at the subject site.

9. The principle of substitution is that a prudent buyer will not pay more for a property than the cost of acquiring a substitute property of equivalent utility. This can be applied to either an individual asset or to an entire facility. The principle applies in the cost, sales comparison, and income approach. Valuing Machinery and Equipment, Machinery and Technical Specialties Committee of the American Society of Appraisers, 2000, pp. 45, 115; Appraising Machinery and Equipment, Machinery and Equipment Textbook Committee of the American Society of Appraisers, John Alico, Editor, 1989, p. 81.

10. Complainant’s appraiser identified the subject property by performing an inventory and inspection. Complainant’s Exhibit C, p. 7, and A, p. 7. He made inquiries to account for new acquisitions and transfers of equipment between the tax date and the inspection date. Complainant’s Exhibit A, p. 8. As part of his inventory, he observed and evaluated the condition of each item of property. Complainant’s Exhibit C, p. 9.

11. Complainant’s appraisal primarily relied upon sales and sales offerings of personal property that were the same or comparable to the subject property. The data was obtained by contacting buyers and sellers, monitoring auction sales, and contacting manufacturers and used equipment dealers. Complainant’s appraiser has a library of resource materials, which provide information about market sales of personal property, and his firm keeps a database of personal property sales, which catalogs sales by description, type of sale, location, and date. Id., pp. 13 – 14; see also, p. 20 – 21. After the data was gathered, Complainant’s appraiser evaluated and compared the data and made adjustments when judged necessary. Id., p. 15. The data sources utilized in Complainant’s appraisal were those generally accepted by the appraisal community as being reliable. Id., pp. 20, 21. There were only 4 items on which the appraiser was required to utilize the cost approach. Exhibit A, pp. 19 – 20. Complainant’s evidence produced a persuasive indication of the value of the subject property in the open market.

13. Complainant’s appraiser did not omit appraising the two items included in Respondent’s appraisal under Category B, on page 10 of Exhibit 1. Tr. 186, Lines 18 – 22; Tr. 191, Lines 14 – 16; Tr. 212, Line 8 – Tr. 214, Line 6.

14. The cumulative market value of Complainant’s personal property under appeal was $2,485,605 (assessed value of $828,540) as of January 1, 2002.

15. The methodology utilized and rely upon by Respondent’s appraiser was not demonstrated to be a methodology or approach to value that is generally recognized and accepted by appraisers in the field of machinery and equipment appraisal.

The Commission has jurisdiction to hear timely appeals 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 St. Louis 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 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. 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.

"True value in money is defined in terms of value in exchange and not value in use." Daly v. P.D. George Co., 77 S.W.3d 645, 649 (Mo. App. E.D. 2002).

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, 2002. 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).

The trier of fact has the duty to evaluate the evidence presented to determine its sufficiency and persuasiveness in establishing market value. Complainant offered the appraisal report and testimony of Mr. Allen Bealmear, a machinery and equipment appraiser. Respondent offered the appraisal report and testimony of Ms. Martina Ragain, Revenue Field Auditor for the St. Louis County Assessor’s Office.

Mr. Bealmear identified the subject property by performing an inventory and inspection. He indicated in his appraisal that he made inquiries to account for new acquisitions and transfers of equipment between the tax dates and the inspection date. During the inspection, he observed and evaluated the condition of each item of property. From the inventory and inspection, a detailed item by item listing was prepared and set out in the Bealmear Appraisal Report. Exhibit A, pp. 18-75.

Complainant’s appraiser used the sales comparison approach to provide an indication of value for the individual pieces of equipment. Mr. Bealmear was able to find sales data on each item of property valued. He testified that his firm makes efforts to insure the reliability of the sources and data. His firm attempts to confirm data reliability by actual contact with the source along with utilizing sources that perform their own screening and confirmation.

Ms. Ragain also conducted a site inspection and she testified she created her own list of the property under appeal. No detailed list of the property shown to be an inventory created by the appraiser was presented in the appraisal report. The supporting documentation as to individual items of machinery and equipment in Exhibit 1 appears to be from Complainant’s asset list.

Respondent’s appraiser disagreed with the value established by Complainant’s appraiser on only 28 out of the 858 items of machinery and equipment which were under appeal. Ms. Ragain, for all intents and purposes, adopted the value of $1,9,14,640 determined by Mr. Bealmear on these 830 pieces of property. For the remaining 28 items of property, Ms. Ragain subtracted the values Mr. Bealmear had determined for these items from his final conclusion of value.

Respondent’s appraiser then proceeded to do a sales comparison analysis on the 28 items of property for which she found one or more sales or listings of property she deemed to be comparable. Ms. Ragain averaged the sales or offering prices she had located for each of the 28 items, assuming there were two or more sales or offerings. There were 13 items on which the appraiser only utilized 1 sale or offering. There was 1 other item on which an offering was used, instead of being averaged with an actual sale. No adjustments were made to any sale or listing for factors which might affect value. This analysis produced what the appraiser determined to be the fair market value of the particular item of property. The individual values thus determined on the 28 items of property were totaled and added back to Mr. Bealmear’s value on the other 830 items to arrive at a total indicated value of $3,917,330.

The only difference of opinion on value in this appeal relates to the 28 items Ms. Ragain selected to perform her sales comparison analysis. Respondent’s appraiser in effect endorses the expertise of Complainant’s appraiser in the valuation of approximately 96.7% of the items to be appraised. As between the two appraisers, Mr. Bealmear possesses superior training, experience and expertise to offer an opinion of value developed from a sales comparison for which adjustments were made based upon the appraiser’s training and experience. Exhibit C, pp. 15 – 16; Exhibit A, p. 11. Furthermore, the methodology employed by Ms. Ragain of selecting a limited number of items for valuation, while essentially adopting the opinion of value of another appraiser was not shown to be a methodology generally accepted in the appraisal field. Tr. 199, Line 17 – Tr. 201, Line 15.

Upon review of the testimony and evidence submitted, the opinion evidence offered by Complainant’s appraiser persuades this Hearing Officer. Complainant’s evidence evaluates the marketplace, market supply and demand elements, sales of like or similar equipment, and calculates the machinery and equipment values based upon the most comparable market data. Complainant’s evidence provides a persuasive indication of how and at what price the subject machinery and equipment would sell. Accordingly, this Hearing Officer concludes that Complainant’s evidence is sufficient to rebut the presumption in favor of the assessment determined by the St. Louis County Board of Equalization and is substantial and persuasive in support of Complainant’s proposed market value.

Ms. Ragain also added $57,390 for two items she asserted were not found in Complainant’s appraisal. The appraiser was questioned extensively with regard to these two items. Tr. 186, Line 18 – Tr. 192, Line 7. Mr. Bealmear was also questioned in rebuttal with regard to the two alleged omitted items. Tr. 212, Line 8 – Tr. 214, Line 6.

Respondent raised this matter, therefore, it was the burden of the Respondent to provide sufficient evidence to establish that in fact approximately $57,000 of machinery and equipment had been omitted from the Bealmear appraisal. The entire basis for the conclusion of Ms. Ragain that an omission had occurred is that on page 4 of the Complainant’s 1/1/02 Detailed Report of Fixed Assets (Exhibit 4 of Exhibit 1), there appear the following two lines:

LS-262A     LS262 STACKER UPGRADES     37074 101     14,009

SA-217        ASC STACK ASSIT                     37165 101     46,398

From these two entries, Ms. Ragain concluded that Mr. Bealmear had omitted these items because she could not find them listed at pages 18 through 52 of his appraisal report. There was no testimony by Ms. Ragain that she did in fact locate at Complainant’s facility, during her inspection, any such items. The testimony of Ms. Ragain established that she did not know what these items were.

There was no reference to the list of property Ms. Ragain apparently compiled which identifies either of these two items and thus establishes that they were either at Complainant’s facility or not. The testimony of Ms. Ragain was that she was unable to match items in Exhibit A with descriptions or numbers on the Fixed Asset Listing. Exhibit 2, Q & A 22. The inability to match a detailed inventory taken by an appraiser with a fixed asset list, does not establish that the appraiser has omitted items of property.

The evidence fails to establish that Mr. Bealmear omitted the two items. Accordingly, there is no need to add the values determined by Ms. Ragain to the appraised value of the Complainant’s property.

The assessed valuation for the subject property as determined by the St. Louis County Board of Equalization for the subject tax day is SET ASIDE. The assessed valuation for the subject personal property for the 2002 tax year is hereby set at $828,540 (assessed value of $3,210 for supplies is not included in this amount).

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 2000.

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 May 25, 2005.

STATE TAX COMMISSION OF MISSOURI

R. Randall Turley

Chief Counsel