State Tax Commission of Missouri

 

 

MIKE KOZMINSKI,                                      )

                                                                        )

                        Complainant,                            )

                                                                        )

            v.                                                         )           Appeal Number 06-40503

                                                                        )

RONALD CHRISTMAS, ASSESSOR,          )

ANDREW COUNTY, MISSOURI,                )

                                                                        )

                        Respondent.                             )

 

 

DECISION AND ORDER

 

HOLDING

            Complainant failed to present substantial and persuasive evidence demonstrating that his residential real property would sell for no more than $1,100,000 on January 1, 2006.  The value determined by the Board of Equalization is SET ASIDE.  The Commission sets value at $2,100,000, as proposed by Respondent.

SUMMARY

 

            Complainant appeals the assessment of his residential property on the ground of overvaluation and discrimination.  On June 21, 2007, an evidentiary hearing was held before the Tax Commission senior hearing officer, Luann Johnson, at the Andrew County Courthouse in Savannah, Missouri.  Complainant appeared by counsel, Teresa Kidd.  Respondent appeared by counsel, Steven Stevenson.

            The subject parcel had been originally valued by the Assessor at $2,938,800 which was divided into $2,835,600 residential (assessed value $542,564) and $83,200 agricultural (assessed value $9,984).  Thereafter, upon appeal to the Board of Equalization, the Board lowered value to $2,276,100 which was divided into residential having a value of $2,127,140 (assessed value $404,157) and agricultural having a value of $148,960 (assessed value $17,875). 

            At the hearing before the State Tax Commission, Complainant presented an appraisal report which valued only the house.  Respondent presented an appraisal report valuing all of the improvements and land on the parcel.  Complainant asserted at hearing that there was no dispute as to the value of the agricultural land.

EXHIBITS

            Complainant presented the following exhibits:

            Exhibit A          Appraisal Report of D. Bradley Graves

            Exhibit B          Appraisal Report of C. Dean Wilson (excluded)

            Exhibit C          Written Direct Testimony of D. Bradley Graves

            Respondent presented the following exhibits:

            Exhibit 1           Appraisal Report of John M. Howard

            Exhibit 2           Sixteen Photographs of Subject Property

            Exhibit 2A        Contract dated 6-1-04

            Exhibit 3           Property Record Card dated 2-5-07

            Exhibit 4           Written Direct Testimony of John M. Howard

            Exhibit 5           Written Direct Testimony of Phil Rogers

ISSUE

            The issue in this the true value in money of the subject parcel on January 1, 2006.

FINDINGS OF FACT

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

            2.         The property under appeal is a 121 acre tract improved with a two-story home containing nineteen rooms above grade with a finished basement.  The home has some 10,800 square feet above grade and 2,690 square feet of finished basement.  Exhibit A, Exhibit 1.  Additionally, there is some 1,860 square feet of finished attic space above the four-car garage.  Tr. 14-15.  The cost to build the house alone, without the basement finish, was at least $1,550,000.  Tr. 16.   Evidence presented at hearing suggests that additional costs may have been incurred in the construction of the home.   Tr. 43.   The home was built in 2005.

            In addition to the home, the property is improved with a 4,000 square foot pole barn; a 6,552 square foot finished “entertainment barn”; a swimming pool and pool house, a sprinkler system, vinyl fencing, an electronic gate and various other improvements.  Some evidence suggests that the pool and pool house were not completed until after the tax day.

The property is identified as parcel number 12-4.2-19-0-00-03.000000, more commonly known as 14200 State Route D, Savannah, Andrew County, Missouri.

            3.         Complainant’s Sales Comparison Approach Not Persuasive.  Complainant’s appraiser acknowledges that his sales comparison approach does not meet industry standards.  Ex. A, pg. 8.  Specifically, his gross adjustment to his comparable sales are 60.4%, 70.5%, 49.1%, 75.7%, 61.0% and 63.5%.  Ex. A, pg. 3-4.  Industry standards require no more than a 25% gross adjustment.  Ex. A, pg. 8.  In other words, the industry does not recognize sales requiring more than a 25% gross adjustment as being “comparable” to the property being valued.

            Additionally, there are errors even within Complainant’s appraiser’s adjustments to his comparables.  For instance, he finds that comparables located on 40 acres and 11 acres should be adjusted downward based upon the assumption that the subject home is located on only 5 acres when, in fact, the subject home is located on 121 acres.  Finally, although he opines that the subject property should have regional appeal, the appraiser does not look beyond a ten mile radius to find comparable properties.

            Complainant’s sales comparison approach is not substantial and persuasive evidence of value.

            4.         Complainant’s Cost Approach Not Persuasive.  Complainant’s appraiser indicates that he used Marshall Swift valuation to calculate the replacement cost new of the house at $1,576,216, a sum similar to the actual construction costs.  Complainant’s appraiser then argues that the subject property suffers from 30% functional obsolescence, as extracted from his sales comparison approach.  Ex. A, pg. 7.   In light of the deficiencies in Complainant’s sales comparison approach, we cannot find that Complainant’s calculation of functional obsolescence is correct. 

            Complainant’s cost approach is not substantial and persuasive evidence of value.

            5.         Complainant failed to value all of the improvements.  At Complainant’s request, Complainant’s appraiser only valued part of the improvements on the parcel.  Complainant’s appraisal report constitutes a restricted appraisal rather than a summary appraisal and is not appropriate for use in a Tax Commission appeal.  Such an appraisal leaves us speculating about the appropriate value of the all excluded improvements and necessarily makes his appraisal report unpersuasive.

            6.         Respondent’s Sales Comparison Approach Not Persuasive.  Respondent presented sales requiring gross adjustments of 61.5%, 76.9%, 61.6% and 105.6%.  As with Complainant’s sales, we do not find these sales to be sufficiently comparable to form the basis for a sales comparison approach to value.

            7.         Respondent’s Cost Approach Persuasive.  Respondent’s cost approach was based upon the actual construction costs of the property and Marshall Swift.  Respondent’s appraiser estimated the life of the property to be sixty years and allowed $32,705 as physical depreciation.  Respondent’s appraiser also opined that the pool and entertainment barn were areas of functional obsolescence and warranted a deduction of $225,000.  After making these deductions, the indicated value of the property was $2,103,692 (say $2,100,000).  Respondent’s cost approach is appropriate and values all improvements.  A cost approach is an accepted method of valuing newer properties and unique or specialized properties.

            8.         The true value in money for the subject parcel on January 1, 2006, was $2,100,000, as proposed by Respondent.

CONCLUSIONS OF LAW

Burden of Proof

            There is a presumption in favor of the Board of Equalization.  Therefore, in order to prevail Complainant must demonstrate, by substantial and persuasive evidence, that the market value of his residential property was $1,100,000 on January 1, 2006.

            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).

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).

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).

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).

DISCUSSION

Complainant Failed to Prove Overvaluation

            The burden is upon Complainant to demonstrate, by substantial and persuasive evidence, that the value determined by the Board of Equalization does not represent the true value in money for his property on the tax day.  Complainant has failed to meet that burden of proof.  Complainant has presented no reliable market data which supports his opinion of value.

ORDER

            The assessed value determined by the Board of Equalization, is SET ASIDE.   The Clerk is hereby ordered to place a new market value of $2,100,000 upon said parcel for tax year 2006.  Inasmuch as there was no dispute as to the value of the agricultural portion, the value shall be divided as follows:  Residential = $1,951,040 (assessed value $370,697); Agricultural = $148,960 (assessed value $17,875).

            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 Andrew 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 September 14, 2007.

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 14th  day of September, 2007, to:   Teresa Kidd, P.O. Box 860451, Shawnee, KS 64485, Attorney for Complainant; Steven Stevenson, Prosecuting Attorney, P.O. Box 377, Savannah, MO 64485, Attorney for Respondent; Ron Christmas, Assessor, P.O. Box 149, Savannah, MO 64485; Dan Hegeman, Clerk, P.O. Box 206, Savannah, MO 64485; Phil Rogers, Collector, P.O. Box 47, Savannah, MO 64485.

 

 

_______________________________

Barbara Heller

Legal Coordinator