State Tax Commission of Missouri

RAY-CARROLL COUNTY GRAIN GROWERS, )

)

Complainant, )

)

v. ) Appeal Number 04-82000 thru 04-82005

)

KENT WOLLARD, ASSESSOR, )

RAY COUNTY, MISSOURI )

)

Respondent. )

DECISION AND ORDER

HOLDING

The true value in money of the subject property on January 1, 2004, was $6,000,000 (assessed value $1,920,000).

ISSUE

The issue in this case is the true value in money of an upright concrete grain elevator and fertilizer warehouse.

SUMMARY

On November 1, 2005, an evidentiary hearing was held before senior hearing officer Luann Johnson in the Saline County Courthouse, Marshall, Missouri. For convenience of hearing and because of some similarity in evidence and witnesses, said appeal was combined with Appeal No. 04-48000, Ray-Carroll County Grain Growers v. Wanda Witthar, Assessor, Carroll County, Missouri, and Appeal No. 04-85000, Ray-Carroll County Grain Growers v. Margaret Pond, Assessor, Saline County, Missouri. Complainant appeared by counsel, Wayne Tenenbaum. Respondents Pond and Witthar appeared by counsel, Cathy Dean. Respondent Wollard appeared by counsel, Jim Thompson. A combined transcript was created. However, because each grain elevator is different and is located in a different county, separate decisions are written.

The subject property is classified as “commercial” real property and is assessed at 32% of its fair market value, or true value in money. The subject property consists of six parcels. The subject property was initialed valued by the Assessor at $6,483,900 (assessed value $2,074,840). Complainant proposes a value of $3,870,000 (assessed value $1,238,400). Respondent proposes a value of $7,000,000 (assessed value $2,240,000). The hearing officer finds that Respondent’s sales approach to value is the best indicator of market value and therefore sets value at $6,000,000 (assessed value $1,900,000).

EXHIBITS

The following Exhibits were introduced into evidence:

Complainant’s Exhibits

Exhibit A-48, Appraisal Report, Dennis E. Vogan (Carroll County)

Exhibit B-48, Written Direct Testimony, Dennis E. Vogan (Carroll County)

Exhibit A-82, Appraisal Report, Dennis E. Vogan (Ray County)

Exhibit B-82, Written Direct Testimony, Dennis E. Vogan (Ray County)

Exhibit A-85, Appraisal Report, Dennis E. Vogan (Saline County)

Exhibit B-85, Written Direct Testimony, Dennis E. Vogan (Saline County)

Respondents’ Exhibits

Exhibit 1, Appraisal Report of Alan Schmook (Saline County)

Exhibit 2, Appraisal Report of Alan Schmook (Carroll County)

Exhibit 3, Appraisal Report of Alan Schmook (Ray County)

Exhibit 4, Audited Financial Statements of Farmers Grain Terminal, LLC (1999, 2000)

Exhibit 5, Audited Financial Statements of Farmers Grain Terminal, LLC (2000, 2001)

Exhibit 6, Audited Financial Statements of Farmers Grain Terminal, LLC (2001, 2002)

Exhibit 7, Audited Financial Statements of Farmers Grain Terminal, LLC (2002, 2003)

Exhibit 8, Audited Financial Statements of Farmers Grain Terminal, LLC (2003, 2004)

Exhibit 9, Ray-Carroll County Grain Consolidated Year-to-Date Area Boxscore 1999

Exhibit 10, Ray-Carroll County Grain Consolidated Year-to-Date Area Boxscore 2000

Exhibit 11, Ray-Carroll County Grain Consolidated Year-to-Date Area Boxscore 2001

Exhibit 12, Ray-Carroll County Grain Consolidated Year-to-Date Area Boxscore 2002

Exhibit 13, Ray-Carroll County Grain Consolidated Year-to-Date Area Boxscore 2003

Exhibit 14, Ray-Carroll County Grain Consolidated Year-to-Date Area Boxscore 2004

Exhibit 15, Farmers Grain Terminal, LLC, Request for Financing

Exhibit 16, Operating Agreement of Farmers Grain Terminal LLC 2003

Exhibit 17, Closing Documents, Loan request 2004, obtained 2005

Exhibit 18, Farmers Grain Terminal LLC, Minutes of 12/17/04 & Farmers Grain

Terminal Grain Storage Addition Economics

Exhibit 19, Farmers Grain Terminal, LLC, Resolution to Borrow

Exhibit 20, Ray-Carroll County Grain Growers, Inc. Property, Plant &

Equipment Summary, 9-1-03 through 8-31-04

Exhibit 21, Bin Chart Ray-Carroll Elevator, Richmond, MO

Exhibit 22, Ray-Carroll Elevator Warehouse Diagram, Corner of Main and E. Lincoln St.

Exhibit 23, Ray-Carroll Elevator Warehouse Diagram, Lane and Front Streets

Exhibit 24, Ray-Carroll Elevator Warehouse Diagram, E. Main and E. Third Streets

Exhibit 25, Ray-Carroll Elevator Warehouse Diagram, Approximately One Mile East

of Carrollton on Highway 24

Exhibit 26, Farmers Grain Terminal Warehouse Diagram and Bin Chart for Slater,

Kansas City Southern Railroad and Highway 240

Exhibit 27, Warranty Deed and Construction Information, Ray-Carroll Grain

Growers, Carrollton, MO

Exhibit 28, Hardin 110 Shuttle Train Loader Economics

Exhibit 29, 1-16-98 Scope of Work & Specifications for Facility Expansion,

Ray-Carroll Grain Growers, Hardin, MO, First Expansion

Exhibit 30, 3-21-01 Scope of Work & Specifications for Facility Expansion,

Ray-Carroll Grain Growers, Hardin, MO, Second Expansion

Exhibit 31, Various Quitclaim Deeds and Other Conveyances to Ray-Carroll Grain

Growers, Inc.

Exhibit 32, Mike Nordwald E-Mail Regarding Patronage Payments

Exhibit 33, Farm Credit Services Documents

Exhibit 34, Written Direct Testimony of Alan Schmook (Carroll County)

Exhibit 35, Written Direct Testimony of Alan Schmook (Saline County)

Exhibit 36, Written Direct Testimony of Alan Schmook (Ray County)

FINDINGS OF FACT

1. Jurisdiction over this appeal is proper. Complainant timely appealed to the State Tax Commission from the decision of the Ray County Board of Equalization.

2. The subject property is identified as parcels 09-08-33-00-000-009.000 (Appeal No. 04-82000); 09-08-33-02-000-014.000 (Appeal No. 04-82001); 09-08-33-03-008-001.001 (Appeal No. 04-82002); 09-08-33-03-009-001.000 (Appeal No. 04-82003); 09-08-33-03-009-003.000 (Appeal No. 04-82004) and 09-08-33-03-010-001.001 (Appeal No. 04-82005). The property is further described and valued as follows:

Appeal Number	Parcel Number	Designation	Board Value	% of Total	STC Value
04-82000	09-08-33-00-000-009.000	East Side R/R Loop	$ 303,760	4.69	$ 281,400
04-82001	09-08-33-02-000-014.000	Land Hwy DD & Hwy 10	$ 3,000	.005	$ 3,000
04-82002	09-08-33-03-008.001.001	Hardin Office	$ 215,730	3.30	$ 198,000
04-82003	09-08-33-03-009-001.000	Hardin Elevator	$4,215,960	65.03	$3,901,800
04-82004	09-08-33-03-009-003.000	F/K/A Excess R/R	$ 22,350	0.35	$ 21,000
04-82005	09-08-33-03-010-001.001	Hardin Seed/Fert.	$1,723,100	26.58	$1,594,800

The subject property contains between 38.49 acres (Ex. A-82, pg. 4) and 40.89 acres (Ex. 3, pg. 1) and is improved with a slip-form concrete grain elevator built new in 1960 with additions in 1999 and 2002 having a total licensed grain storage capacity including pack of 1,455,000 bushels in upright concrete storage and 165,000 bushels in upright metal storage for a combined total of 1,620,000 bushels. The land is both owned and leased and has a 110 car siding serviced by the Norfolk Southern and BNSF railroads. The property is further improved with a warehouse, seed plant and fertilizer facilities. Ex. A-82, pg. 4, Ex. 3, pg. 1.

3. The existence of the shuttle train capability on the property has a significant impact on value. Large grain terminals with shuttle trains are able to accommodate larger and faster shipments due to the ability to load unit trains. This increases the value of each bushel through the reduction of overhead expense from the handling and shipping of grain. Ex. 3, pgs. 28-30.

4. The physical characteristics of the storage capability also impacts value because it impacts the speed at which the shuttle trains can be loaded. The best grain elevators can load 100-110 rail cars in under 15 hours. Tr. 9-11. It takes between 360,000 and 370,000 bushels to load a 100-car unit. Tr. 14. Upright concrete elevators are more efficient and better suited for storage and movement of grain than flat storage units or ground piles. Tr. 11, 13,16.

5. Volume, commonly referred to as thru-put, also impacts value. The largest source of income to a terminal is the income per bushel of grain sold or the total grain margin. Tr. 41. The subject property has a thru-put ratio of 3.12 while other similar facilities have ratios of 10.00, 3.92, 4.08 and 5.03. However, because this facility has recently been upgraded to a 110-car shuttle train terminal, its turn ratio is expected to increase. Ex. 3, pg. 86.

Cost Approach

6. The cost approach is not considered to be the more reliable indicator of value for the subject property inasmuch as it is not capable of adequately measuring the impact of thru-put on value.

Income Approach

7. Both appraisers calculated value under the income approach. However, no market rent exists for the grain elevator and, thus, an income approach is not a reliable indicator of the market value for subject property.

Sales Approach

8. No similar sales were found in Missouri, but sales of similar grain elevators were found in neighbouring states. Based upon the sales, Complainant’s appraiser determined a value of the subject property of $3,870,000,. Ex. A-82, pg. 91. On the other hand, Respondent’s appraiser determined a value under the sales comparison approach of $6,000,000 based upon determination of (1) overall value per bushel; (2)value per bushel for upright concrete elevators; (3) value per bushel for elevators with shuttle train access; and (4) value calculated based upon put-thru. Ex. 3, pgs. 84-87. Respondent’s concise treatment supports the accuracy of the value.

Market Value

9. The sales approach represents the best indicator of value for the subject property. The correct value for the subject property on January 1, 2004, was $6,000,000.

CONCLUSIONS OF LAW

Highest and Best Use

True value in money is the fair market value of the property on the valuation date, and is a function of its highest and best use, which is the use of the property which will produce the greatest return in the reasonably near future. Aspenhof Corp. v. State Tax Commission, 789 S.W.2d 867, 869 (Mo. App. 1990).

It is true that property can only be valued according to a use to which the property is readily available. But this does not mean that in order for a specific use to be the highest and best use for calculating the property’s true value in money, that particular use must be available to anyone deciding to purchase the property. . . .A determination of the true value in money cannot reject the property’s highest and best use and value the property at a lesser economic use of the property. Snider v. Casino Aztar/Aztar Missouri Gaming Corp., 156 S.W.3d 341, 348-349 (Mo. 2005).

True Value in Money

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 purchased by one who is desiring 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).

Taxpayer has Burden of Proof

In Westwood Partnership v. Gogarty, 103 S.W.3d 152 (Mo. App. E.D. 2003), the court of appeals stated:

There is no longer an automatic presumption regarding the correctness of an assessor's valuation. Section 138.431.3. This statutory change from the previous situation in which the assessor's valuation was presumed to be correct does not mean that there is now a presumption in favor of taxpayer. The taxpayer in a Commission tax appeal still bears the burden of proof and must show by a preponderance of the evidence that the property was improperly classified or valued. Industrial Development Authority of Kansas City v. State Tax Commission of Missouri, 804 S.W.2d 387, 392 (Mo. App. 1991).

In Reeves v. Snider, 115 S.W.3d 375 (Mo. App. S.D. 2003), the court of appeals described the taxpayer's burden as follows:

Taxpayers were the moving parties seeking affirmative relief, and as such, they bore the burden of proving the vital elements of their case, i.e., the assessments were "unlawful, unfair, improper, arbitrary or capricious.” Cupples Hesse Corp. v. State Tax Comm'n, 329 S.W.2d 696, 702 (Mo.1959); Westwood P'ship v. Gogarty, 103 S.W.3d 152, 161[8] (Mo. App. 2003); 84 C.J.S. Taxation §§710, 726. This is true regardless of the existence or non-existence of the challenged presumption. As the Supreme Court of Missouri explained, "even were we to hold that it [the presumption] has been overcome, the burden of proof on the facts and inferences would still remain on petitioner, for it is the moving party seeking affirmative relief.” Cupples, 329 S.W.2d at 702[16]. See also 84 C.J.S. Taxation §710, which states: "Even where there is no presumption in favor of the assessor's ruling, if no evidence is offered in support of the complaint, the reviewing board is justified in fixing the valuation complained of in the amount assessed by the assessor."
To prevail, Taxpayers had to "present an opinion of market value and then ... present substantial and persuasive evidence that the proposed value is indicative of the market value of the subject property on tax day." Daly v. P.D. George Co., 77 S.W.3d 645, 651 (Mo. App. 2002).

Substantial and Persuasive Evidence

Substantial evidence is that evidence which, if true, has probative force upon the issues, i.e., evidence favoring facts which are such that reasonable men may differ as to whether it established them, and from which the Commission can reasonably decide an appeal on the factual issues. 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).

Cost Approach

The cost approach may be based on either reproduction cost or replacement cost. The reproduction cost, or cost of construction, is a determination of the cost of constructing an exact duplicate of an improved property using the same materials and construction standards. The replacement cost is an estimate of the cost of constructing a building with the same utility as the building being appraised but with modern materials and according to current standards, design and layout.

The cost approach is most appropriate when the property being valued has been recently improved with structures that conform to the highest and best use of the property or when the property has unique or specialized improvements for which there are no comparables in the market.

While reproduction cost is the best indicator of value for newer properties where the actual costs of construction are available, replacement cost may be more appropriate for older properties. Snider v. Casino Aztar/Aztar Missouri Gaming Corp., 156 S.W. 3d 341, 347 (Mo. 2005). (citations omitted).

Income Approach

The income approach determines value by estimating the present worth of what an owner will likely receive in the future as income from the property. The income approach is based on an evaluation of what a willing buyer would pay to realize the income stream that could be obtained from the property when devoted to its highest and best use.

When applying the income approach to valuing business property for tax purposes, it is not proper to consider income derived from the business and personal property; only income derived from the land and improvements should be considered. This approach is most appropriate in valuing investment-type properties and is reliable when rental income, operating expenses and capitalization rates can reasonably be estimated from existing market conditions. The initial step in applying the income approach is to find comparable rentals and make adjustments for any differences. Snider v. Casino Aztar/Aztar Missouri Gaming Corp., 156 S.W.3d 341, 347 (Mo. 2005). (citations omitted).

Comparable Sales Approach

The comparable sales approach uses prices paid for similar properties in arms-length transactions and adjusts those prices to account for differences between the properties. Comparable sales consist of evidence of sales reasonably related in time and distance and involve land comparable in character. This approach is most appropriate when there is an active market for the type of property at issue such that sufficient data is available to make a comparative analysis. Snider v. Casino Aztar/Aztar Missouri Gaming Corp., 156 S.W.3d 341, 347-348 (Mo. 2005). (citations omitted).

Experts

An expert’s opinion must be founded upon substantial information, not mere conjecture or speculation, and there must be a rational basis for the opinion. Missouri Pipeline Co. v. Wilmes, 898 S.W.2d 682, 687 (Mo. App. E.D. 1995). The state tax commission cannot ignore a lack of support in the evidence for adjustments made by the expert witnesses in the application of a particular valuation approach. Drey v. State Tax Commission, 345 S.W.2d 228, 234-236 (Mo. 1961); Snider v. Casino Aztar/Aztar Missouri Gaming Corp., 156 S.W.3d, 341, 348 (Mo. 2005).

The testimony of an expert is to be considered like any other testimony, is to be tried by the same test, and receives just so much weight and credit as the trier of fact may deem it entitled to when viewed in connection with all other circumstances. The hearing officer, as the trier of fact, has the authority to weigh the evidence and 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 may 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. 1981); Scanlon v. Kansas City, 28 S.W.2d 84, 95 (Mo. 1930).

ORDER

The assessed value determined by the Assessor and approved by the Board of Equalization, is SET ASIDE. The Commission sets market value of the subject property at $6,000,000, with assessed values as follows:

Appeal Number	Parcel Number	Assessed Value
04-82000	09-08-33-00-000-009.000	$ 90,050
04-82001	09-08-33-02-000-014.000	$ 960
04-82002	09-08-33-03-008.001.001	$ 63,360
04-82003	09-08-33-03-009-001.000	$1,248,580
04-82004	09-08-33-03-009-003.000	$ 6,720
04-82005	09-08-33-03-010-001.001	$ 510,340

The Clerk is hereby ordered to place the foregoing new value on the books for tax year 2004.

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 Ray 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 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 March 10, 2006.

STATE TAX COMMISSION OF MISSOURI

_____________________________________

Luann Johnson

Senior Hearing Officer

Certificate of Service

I hereby certify that a copy of the foregoing has been mailed postage prepaid this 10^th day of March, 2006, to: Wayne Tenenbaum, 4707 W. 135^th Street, Suite 240, Leawood, KS 66224, Attorney for Complainant; Jim Thompson, Prosecuting Attorney, Ray County Courthouse, Richmond, MO 64085, Attorney for Respondent; Kent Wollard, Assessor, Ray County Courthouse, 100 West Main, Richmond, MO 64085; Paul Lynn Rogers, Clerk, Ray County Courthouse, 100 West Main, Richmond, MO 64085; Margie Bowman, Collector, Ray County Courthouse, 100 West Main, Richmond, MO 64085.

_______________________________

Barbara Heller

Legal Coordinator