ISSUE

SUMMARY

Complainant was represented by Thomas L. Caradonna, Attorney. Respondent was represented by Paula Lemerman, Associate County Counselor.

Pursuant to Section 138.431.4, RSMo, this appeal has been transferred to Chief Counsel, R. Randall Turley, for entering a Decision and Order. The Chief Counsel, having considered all of the competent evidence upon the whole record, enters the following Decision and Order.

Complainant submitted the following exhibits in support of its positions:

Complainant’s exhibits are received into evidence.

Respondent did not file and exchange any exhibits or written direct testimony in compliance with the Commission Scheduling Order.

1. In calculating the original 2003 assessments, the Assessor determined an assessed value of $175,620 for the business personal property and $2,579,490 for the manufacturing equipment of Complainant.

2. Complainant appealed the assessments to the St. Louis County Board of Equalization. The Board sustained the values determined by the Assessor.

3. Jurisdiction over this appeal is proper. On August 15, 2003, the St. Louis County Board of Equalization issued its decision sustaining the assessments. On September 12, 2003, Complainant filed its Complaint for Review of Assessment with the State Tax Commission, challenging the assessment on the ground of overvaluation.

4. By order dated January 12, 2005, Respondent was given until and including January 25, 2005, to show cause why a Decision and Order should not be entered in this appeal based upon Complainant’s Exhibits. Respondent did not make any response to said Order, and did not request the opportunity to cross-examine Complainant’s expert witness. Respondent did not file any objections to Complainant’s exhibits. Respondent was provided reasonable opportunity for fair hearing in accordance with Section 138.431.4, RSMo.

5. The property under review consists of the tangible personal property owned by Complainant which is located at Complainant’s facility 11700 Dunlap Industrial Boulevard, Maryland Heights, Missouri. This property is identified by the assessor’s office as account no. M0109613A. The items of personal property are further identified in detail at pages 18 through 70 of Exhibit A. In general the machinery and equipment is newspaper printing equipment and supporting machinery and equipment for printing of newspapers.

6. Complainant’s appraiser valued the items of property in each appeal based on the concept of fair market value in exchange. Exhibit A, at 3, 9; Exhibit C, at 7-8. 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).

7. Complainant’s appraiser performed the subject appraisals 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. Exhibits A, Cover letter, at 4; Exhibit C, at 20.

8. 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 properly did a highest and best use analysis. Exhibit A, at 4, 6 & 8; Exhibit C, at 10-11.

9. The valuation of the subject personal property necessarily turns on the use(s) that can be made of the property and the demand that exists for such use(s). The subject property consists of printing machinery and equipment and items of machinery and equipment utilized in support of a printing operation. 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.

10. 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.

11. Complainant’s appraiser performed an inspection of all the tangible personal property present at the subject location on the inspection dates of April 28 through April 29, 2004. Exhibit A, Cover letter, at 2, 6, 7-8; Exhibit C, at 7. An analysis was conducted to determine the Fair Market Value as of January 1, 2003, of an previously inspected assets as well as acquisitions since that time. Any transfers that occurred after the inspection was identified and relocated within the appraisal report code structure. Id., at 8.

12. Complainant’s appraisal primarily relied upon the sales comparison approach.

The data for the sales comparison approach was obtained from sources considered to be reliable in the machinery and equipment appraisal field. Complainant’s appraiser made various adjustments as deemed necessary for factors which affect the conclusion of value. Where sales data was insufficient, the Complainant’s appraiser relied upon 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, Exhibit B, Exhibit C at 13 – 19. Complainant’s evidence produced a substantial and persuasive indication of the value of the subject property in the open market.

13. The cumulative market value of Complainant’s personal property was $3,390,795 (assessed value of $1,330,265) as of January 1, 2003.

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.

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). 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.

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.

"Market value" is defined as "...[t]he most probable price which a property would bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby:

a. buyer and seller are typically motivated;

b. both parties are well informed or well advised, and acting in what they consider their best interests;

c. a reasonable time is allowed for exposure in the open market;

d. payment is made in terms of cash in United States dollars or in terms of financial arrangements comparable thereto; and

e. the price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale."

Federal Register, vol. 55, no. 163, August 22, 1990, pages 34228 and 34229; also quoted in the Definitions section of the Uniform Standards of Professional Appraisal Practice, 1996 Ed.

Comparison of Value in Exchange and Value in Use

"Value in exchange" or "exchange value" is defined as "[t]he value of a commodity in terms of money to persons generally, as distinguished from use value to a specific person." The Dictionary of Real Estate Appraisal, Third Edition, Appraisal Institute, 1993, at 125. "Value in use" or "use value" is defined as "the value a specific property has for a specific use" (Id., at 383) and "the value of property which reflects a value to a specific user, recognizing the extent to which the property contributes to the personal requirements of the owner." The Appraisal of Personal Property, American Society of Appraisers, 1994 at 2.

An exchange value is an objective value determined by transactions between buyers and sellers in the open market. A use value is a subjective value of an owner, user, or potential owner based solely upon his or her personal needs for the property. By definition then, market value is the value determined by the exchange of property between an informed seller and an informed buyer after exposure in the open market and not a subjective opinion of some individual or entity. However, there is a distinction between a value in use to a specific user and a value recognized by a group of informed potential buyers that a property has for a specific use. The latter should be fully considered under a market value appraisal. Further, if there is sufficient demand for the property for the use to which it is being put by the owner, exchange value can be equivalent to the use value to the owner. The market value standard does not require appraisers to discard transactions or market demand for assembled machinery and equipment just because the market finds the property valuable for the same use that it is being put to by the owner. Such evidence should be fully considered in a market value appraisal. Conversely, if there is no evidence that there is demand for machinery and equipment assembled and in place, it would be inappropriate to value the property as assembled and in place since such valuation would not be indicative of a market value in exchange. See, Daly v. P.D. George, 77 S.W.3d 645 (Mo. App. E.D. 2002).

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, 2003. 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 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).

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 reports of Mr. Allen D. Bealmear, a machinery and equipment appraiser. Mr. Bealmear inventoried and inspected the machinery and equipment at the subject site. As part of his inventory, he ascertained which equipment had been added or removed between the tax date and the date of the inspection and inventory and made the appropriate deductions or additions for such equipment. Complainant’s appraisal was performed based upon a fair market value standard. The appraiser concluded that 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, Complainant’s appraiser utilized methodologies, and data sources that are generally accepted in the appraisal community as reliable. Where he had sufficient sales, he utilized the sales comparison approach to provide an indication of value. In all other cases, he used the cost approach to provide an indication of value

Upon review of the testimony and evidence submitted, the opinion evidence offered by Complainant’s appraiser is substantial and persuasive to establish fair market value and rebut the presumption in favor of the assessments determined by the St. Louis County Board of Equalization.

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 value for the subject personal property for tax year 2003 is set at $1,330,265.

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 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 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 February 25, 2005.

STATE TAX COMMISSION OF MISSOURI

R. Randall Turley, Chief Counsel