ST. LOUIS POST DISPATCH,	)
	)
Complainant,	)
	)
v.	)		Appeal Number 02-20039
	)
GREGORY DALY,	)
LICENSE COLLECTOR,	)
ST. LOUIS CITY, MISSOURI,	)
	)
Respondent.	)

Decision of the St. Louis City Merchants’ and Manufacturers’ Tax Equalization Board.

sustaining the assessment made by the License Collector, SET ASIDE, Hearing Officer finds true value in money for the subject property for tax year 2002 to be $907,105, assessed value of $302,368.

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

Respondent appeared by Counsel, Donald Dylewski, Associate City Counselor.

Case heard by Hearing Officer Aimee L. Smashey.

Case reassigned and decided by Chief Counsel R. Randall Turley.

The issue in this appeal is: What was the true value in money as of January 1, 2002, of Complainant’s machinery and equipment?

SUMMARY

Complainant appeals the subject machinery and equipment value set by the License Collector and sustained by the St. Louis City Board of Merchants’ and Manufacturers’ Tax Equalization (Board). The assessed value set by the License Collector was $2,653,333, appraised value of $7,959,999. The Board sustained the License Collector’s value by dismissing Complainant’s appeal.

The evidentiary hearing was held on April 19, 2005 (Transcript of Hearing Received by the Commission 5/20/05), at the St. Louis City Hall, St. Louis, Missouri, before Hearing Officer Aimee L. Smashey. Pursuant to Section 138.431.4, RSMo, this case has been assigned to Chief Counsel R. Randall Turley for rendering of this Decision and Order.

Complainant offered into evidence an appraisal report of Allen D. Bealmear, ASA, CEA (Exhibit A), cost and sales comparison demonstration (Exhibit B) and written direct testimony of Mr. Bealmear (Exhibit C). The exhibits were received into evidence.

Respondent offered into evidence the following exhibits:

All exhibits were received into evidence.

1. Jurisdiction over this appeal is proper. Complainant timely appealed to the State Tax Commission from the decision of the St. Louis City Merchants’ and Manufacturers’ Tax Equalization Board. Complaint for Review of Assessment, 1/27/03; Order, 2/18/03; Exhibit 8.

2. The machinery and equipment, which is the subject of this appeal, consists of a variety of machinery, tools, and appliances utilized by Complainant in its facility at 900 N. tucker Blvd, St. Louis, Missouri. An itemized listing of the various items of personal property can be found at pages 18 through 36, Exhibit A. The property is identify by the account number AL5683220.

3. Complainant’s appraiser valued the items of property in each appeal based on the concept of fair market value in exchange. Exhibit A, pp. 3, 7-9; Exhibit C, p. 7, Line 22 – 8, Line 11. 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, 649 (Mo. App. E.D. 2002).

4. Complainant’s appraiser performed the subject appraisals in conformity with the Uniform Standards of Professional Appraisal Practice (USPAP). Exhibit A, pp. 3, 4, & 40; Exhibit C, p 24, Line 18 – p. 25, Line5..

5. 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 zeroes 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 it as, and therefore, how to approach the cost, sales comparison, and income approaches. Complainant’s appraiser performed a highest and best use analysis for the subject machinery and equipment. Exhibit A, p. 4, 6 & 8; Exhibit C, p. 13, Line 5 – p. 14, Line 5.

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

7. 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 a cost, sales comparison, or 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.

8. Complainant’s appraiser and his staff performed an inspection of all the personal property present at the subject locations. Exhibit A, pp. 7 - 8. He inquired whether there had been any equipment present on the tax date that had since been removed. Where there had been property removed since the tax date, he and his staff made inquiries to determine the type and condition of such equipment and included it in their appraisal. A detail inventory of the property to be appraised was developed. Exhibit A, pp. 18 – 63; Exhibit C, p. 7, Lines 1 – 21; p. 8, Line 12 – p. 9, Line 19.

9. The subject property consists of machinery, tools and equipment that are regularly traded in the used machinery and equipment market. Exhibit C, p. 10, Lines 4 – 14.

10. Complainant’s appraisals primarily relied upon the selling prices of matching or comparable machinery and equipment from the used machinery and equipment market. Where such data was unavailable, Complainant’s appraiser relied on the indicated value under the cost approach. The condition ratings, appraisal approaches, and data sources utilized in the appraisals were those generally accepted by the appraisal community as being reliable. Exhibit A, pp. 4, 8, 10-11; Exhibit B; Exhibit C, p. 10, Line 24 – p. 13, Line 4; p. 14, Line 6 – p. 17, Line 9; p. 23, Lines 18 – 22.

11. Complainant’s evidence was substantial and persuasive to establish the fair market value of the subject property as of January 1, 2002.

12. Respondent’s witness did not establish the methodology upon which his opinion of value was based to generally be recognized and accepted by appraisers in the field of machinery and equipment appraisal.

13. The true value in money (fair market value) of Complainant’s machinery and equipment is $907,105, assessed value of $302,368. Exhibit A; Exhibit C, p. 24, Line 9 – p. 25, Line 2.

14. The Commission takes official notice that

(a) The methodology employed by Complainant’s appraiser was specifically found to constitute substantial and persuasive evidence to establish fair market value in the case of Daly v. P.D. George Co., 77 S.W.3d 645, 649 (Mo. App. E.D. 2002). Original decision issued 3/21/00; Commission Decision affirming methodology and result issued 8/10/00; Court of Appeals Decision issued 4/16/02.

(b) Complainant appealed to the State Tax Commission for the (i) 1999 (99-20261, 1/29/01 – Commission Decision); (ii) 2000 (00-20062, 7/16/02 – Hearing Officer Decision, sustained by Commission, 9/18/02); and (iii) 2001 (01-20281, 11/19/03 – Hearing Officer Decision, sustained by Commission, 4/14/05) tax years;

(b) Complainant’s opinion of value in each appeal was based upon an appraisal performed by Allen D. Bealmear, who inspected, and inventoried the property under appeal and the appraisals were performed in conformity with the generally accepted standards and practices for appraisers in the field of machinery and equipment valuation;

(c) Mr. Bealmear reached an opinion of value in each appeal based on what used machinery and equipment would command in the open market, and concluded a value by application of a sales comparison or cost approach to value for each item of equipment.

(d) The Commission was persuaded by Complainant’s evidence in each of the referenced appeals and Complainant was successful in each appeal in getting the valuation of its machinery and equipment established at the amount established and supported by the appraisals performed by Mr. Bealmear;

(e) The true value in money for Complainant’s property that was successfully appealed to the Commission was: $1,050,625 – 1999; $1,059,215 – 2000; and $976,045 – 2001.

(f) Respondent was on actual notice from the issuance of the Commission Decisions as to the true value in money and the methodology used to arrive at the value in the 1999 and 2000 appeals before setting value in the present appeal.

15. The fundamental methodology relied upon in reaching the decisions for tax years 1999, 2000 and 2001 was the application of a sales comparison approach where there were sufficient sales of comparable used machinery and equipment, and in the alternative, the application of a cost approach using the depreciated replacement cost, as derived from market data, as an indicator of value.

16. Respondent, in assessing the property of the Complainant that previously was successfully appealed to the Commission in 1999, 2000 and 2001, did not use the methodology or the value determined by the Commission for the 1999 or 2000 assessments as the basis for the assessment by the License Collector or the Board for the subject property in 2002. Tr. 170, Line 12 – Tr. 177, Line 23.

The Commission has jurisdiction to hear this appeal and correct any assessment 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 City Merchants’ and Manufacturers’ Tax Equalization Board. 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).

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 License Collector - 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.

There is no presumption that the assessor’s (License Collector) valuation is correct. Section 138.431.3, RSMo. Notwithstanding the statutory provision of section 138.431.1, enacted by the legislature in 1992 (SB 630), the Supreme Court of Missouri has held, "A tax assessor’s valuation is presumed correct." Donna Snider v. Casino Aztar/Aztar Missouri Gaming Corp., SC86181, 3/01/2005. Citing to Hermel, supra; and Cupples Hesse Corp. v. State Tax Commission, 329 S.W.2d 696, 702 (Mo. 1959).

The presumption of correct assessment is rebutted when the taxpayer presents substantial and persuasive evidence to establish that the License Collector’s or Board’s valuation is erroneous and what the fair market value should have been placed on the property. Snider, Hermel & Cupples Hesse, supra.

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. True value in money is defined in terms of value in exchange and not value in use. Mo. Const. Art X, Section 4(b) (1945, amended 1982); Daly v. P. D. George Co., 77 S.W.3d 645, 649 (Mo. App. E.D. 2002); 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.

"Fair market value" is defined as "...[t]he estimated amount, expressed in terms of money, that may be reasonably expected for a property in an exchange between a willing buyer and a willing seller, with equity to both, neither under any compulsion to buy or sell, and both fully aware of all relevant facts, as of a specific date. Valuing Machinery and Equipment: The Fundamentals of Appraising Machinery and Technical Assets, American Society of Appraisers (2000), p. 3; Exhibit A, p. 9.

The price that the property would bring when offered for sale by a willing seller who is not obligated to sell, and purchased by a willing buyer who is not compelled to buy. It is the value in exchange and not value in use. Daly v. P. D. George Co., at 649, supra.

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, 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).

In order to investigate appeals filed with the Commission, the Hearing Officer has the duty to inquire of the owner of the property or of any other party to the appeal regarding any matter or issue relevant to the valuation, subclassification or assessment of the property. The Hearing Officer’s decision regarding the assessment or valuation of the property may be based solely upon its inquiry and any evidence presented by the parties, or based solely upon evidence presented by the parties. Section 138.430.2, RSMo.

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 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).

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).

Agencies shall take official notice of all matters of which the courts take judicial notice. Section 536.070(6), RSMo.

Courts will take judicial notice of their own records in the same cases. State ex rel. Horton v. Bourke, 129 S.W.2d 866, 869 (1939); Barth v. Kansas City Elevated Railway Company, 44 S.W. 788, 781 (1898). In addition, courts may take judicial notice of records in earlier cases when justice requires - Burton v. Moulder, 245 S.W.2d 844, 846 (Mo. 1952); Knorp v. Thompson, 175 S.W.2d 889, 894, transferred 167 S.W.2d 105 (1943); Bushman v. Barlow, 15 S.W.2d 329, 332 (Mo. banc 1929) - or when it is necessary for a full understanding of the instant appeal. State ex rel. St. Louis Public Service Company v. Public Service Commission, 291 S.W.2d 95, 97 (Mo. banc 1956).

The word "county" includes the City of St. Louis in any law which is general in its character to the whole state. Section 1.080, RSMo. The City of St. Louis is a county of the first class. Section 48.020, RSMo.

In counties within the first class where a taxpayer has appealed to the state tax commission "...the assessment of the taxpayer’s property, real or personal, and that appeal has been successful, then in the next following and all subsequent years the basis upon which the assessor must base future assessments of the subject property shall be the basis established by the successful appeal and any increases must be established from that basis." Section 137.345.5, RSMo.

The term "basis" is defined as: "1 the base, foundation, or chief supporting factor of anything; 2 the principal constituent of anything; 3 the fundamental principal or theory, as of a system of knowledge." Webster’s New World Dictionary 115 (3rd college ed., 1988).

In such cases, evidence establishing the License Collector’s failure to use the fundamental methodology relied upon by the Commission in recent decisions affecting the subject property in establishing such property’s new assessed value, provides substantial proof refuting the new assessment and any Board decision which substantially relies on the deficient assessment. Allied Health Care et al. v. Daly, STC Appeals 01-20267 et al, (11/19/03).

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 of Mr. Allen D. Bealmear, a machinery and equipment appraiser, with approximately thirty years of experience. Mr. Bealmear and his appraisal staff inventoried and inspected the machinery and equipment at the subject site. He inquired whether there had been any equipment present on the tax date that had since been removed. Where there had been property removed since the tax date, he and his staff made inquiries to determine the type and condition of such equipment and included it in their appraisal.

Complainant’s appraisal was performed based upon a fair market value standard. Mr. Bealmear reviewed the market place for comparable sales and an evaluation of potential purchasers. He then analyzed the use that would produce the highest return in an exchange where there was sufficient demand to make an exchange probable. He concluded the subject property should be valued as individual pieces of standard machinery and equipment available in the used equipment market. In valuing the machinery and equipment, the appraiser utilized methodologies that are deemed reliable by the appraisal community, placing primary reliance on the sales comparison approach. The sources used for his appraisal data, were sources that are generally accepted in the appraisal community as reliable.

Complainant’s appraisal evidence evaluates the marketplace, market supply and demand elements, sales of like or similar equipment and calculates values based upon the market data under either the sales comparison or cost approach. Mr. Bealmear’s appraisal provides a persuasive indication of how and at what price the subject machinery and equipment would sell. The evidence is substantial and persuasive in support of Complainant’s proposed market value. Accordingly, the evidence is sufficient to rebut the presumption in favor of the assessment affirmed by the Board.

Respondent presented evidence with regard to the original assessed value for the subject property for 2002 that was affirmed by the Board, derived from a mass appraisal of the property. Tr. 169, Lines 16-18. This type of valuation has been specifically rejected for purposes of an appeal before the Commission in numerous cases over the past several years. Sunline Brands, a/k/a Nestle USA, Inc, v. Daly, STC Appeal No. 99-20269, p. 5, Finding of Fact 9; See also, Nestle USA, Inc. v. Daily, STC Appeals 00-20055 & 01-20274, rejecting Respondent’s methodology.

The determination of value under the mass valuation system relied upon by Respondent does not conform to generally recognized and accepted appraisal practice for the appraisal of machinery and equipment in a contested appeal before the Commission. The mass valuation system is beneficial, as its name implies, in mass valuation of property from different and varied manufacturers. Its benefit as an appraisal tool in the valuation of a specific collection of machinery and equipment, such as Complainant’s property here under appeal, is of essentially no probative value.

The multiplying of original reported costs times a standard depreciation schedule based upon year of acquisition to arrive at value is not consistent with sound appraisal practice in the machinery and equipment field. The mass valuation methodology, as relied upon by Respondent, does not develop a complete itemized inventory or a highest and best use analysis, it does not research the market for sales data or for data from which to perform a true cost approach. It does not employ a market approach to value. Tr. 168, Line 23 – Tr. 169, Line 18; Tr. 174, Line 7 – Tr. 175, Line 11.

It was not established that Respondent’s basis for value was derived from market data, accordingly, it does not establish true value in money (fair market value).

The record in this appeal is clear that the valuation of Complainant’s property for 2002 did not comply with Section 137.345.5, RSMo. Both the 1999 and 2000 Commission Decisions setting both fair market and assessed values for Complainant’s property, predate the setting of the assessed value on Complainant’s property for 2002, as per the 2002 Manufacturer’s Tax Bill, dated 11/27/02, and the setting for hearing of Complainant’s 2002 appeal before the Board in January, 2003. Exhibits 5 & 8. Although, the prior Decisions were available to the Respondent and the Board to serve as the basis, both as to true value in money and the proper methodology for arriving at fair market value, the testimony of Respondent’s witness establishes that the provisions of Section 137.345.5 were not followed. Tr. 170, Line 12 – Tr. 177, Line 23. This results in the assessment made by the License Collector and sustained by the Board as being refuted as representing fair market value. See, Prior Commission Decisions Affecting Value, supra.

The assessed valuation for the subject property as determined by the Merchants’ and Manufacturers’ Tax Equalization Board for St. Louis City for the subject tax day is SET ASIDE.

The assessed value for the subject property for tax year 2002 is set at $302,368.

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 License Collector of St. Louis City, 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: August 24, 2005.

STATE TAX COMMISSION OF MISSOURI

R. Randall Turley

Chief Counsel