State Tax Commission of Missouri

SIXTH STREET PARTNERS, )

)

Complainants, )

)

v. ) Appeal Nos. 06-30203 thru 06-30220

)

CURTIS KOONS, )

DIRECTOR OF ASSESSMENT, )

JACKSON COUNTY, MISSOURI, )

)

Respondent. )

DECISION AND ORDER

HOLDING

The decision of the Board of Equalization is AFFIRMED.

SUMMARY

The subject property is a subsidized housing project, containing eighteen parcels, in Jackson County, Missouri. Each parcel was originally valued by the Assessor at $127,800, or a total value of $2,300,400. Said values were approved by the Jackson County Board of Equalization. Thereafter, the taxpayer appealed to the Commission asserting a value of $99,600 per parcel or $1,792,800. Pursuant to the Tax Commission Order to pre-file exhibits, Complainant asserted an unsupported opinion that the subject properties had a value of $1,938,500. Thereafter, Complainant was given an opportunity to supplement its exhibits and filed only substitute written direct testimony. The taxpayer has failed to support its opinion of value and, therefore, we sustain the value placed upon the parcels by the Assessor and affirmed by the Board of Equalization.

EXHIBITS

Complainant filed the following exhibits:

Exhibit A Section 42 Worksheet

Exhibit B Land Use Restriction Covenants for Low-Income Tax Credits

Exhibit C Income and Expense Statements – 2003 through 2005

Exhibit D Rent Rolls – 2003 through 2005

Exhibit E Written Direct Testimony of Shari Kuehn

Exhibit F Substitute Written Direct Testimony of Timothy Hickok

Respondent filed no exhibits or written direct testimony and is precluded from offering the same at any evidentiary hearing in this appeal.

FINDINGS OF FACT

1. Jurisdiction is proper. Complainant timely filed its appeals from the decisions of the Jackson County Board of Equalization.

2. Pursuant to Order dated June 5, 2007, Respondent was given until and including June 20, 2007, in which to advise the Commission if he wished to cross-examine Complainant’s witness. Respondent did not so notify the Commission. Therefore, this case is properly submitted upon the exhibits filed by Complainant.

3. Complainant presented a Section 42 worksheet but failed to submit sufficient information to allow the Commission to determine the accuracy of said calculations. Specifically, Complainant failed to support the mortgage/equity ratio or the proposed capitalization rates. Further, Complainant’s worksheet was prepared by an individual whose qualifications to calculate capitalization rates were not demonstrated.

4. On July 5, 2007, this Hearing Officer advised Complainant of these deficiencies in writing. Further, on July 17, 2007, this Hearing Officer had a telephone conversation with counsel for Complainant wherein she explained the deficiencies to counsel.

5. Thereafter, on August 3, 2007, Complainant filed a document which purports to be the written direct testimony of one Timothy Hickok, whom counsel asserts is an owner of subject properties. As an owner, Mr. Hickok may express his opinion of value, but there is no evidence that Mr. Hickok is a licensed appraiser or otherwise possesses expertise at valuing property.

6. Complainant filed no documents which supported its mortgage/equity ratio or its choice of capitalization rates as requested by this Hearing Officer’s letter of July 5, 2007.

7. Complainant has failed to present substantial and persuasive evidence tending to demonstrate that the value placed upon said parcels by the Assessor and Board of Equalization is incorrect.

8. The true value in money for each parcel on January 1, 2006, is $127,800, as approved by the Jackson County Board of Equalization.

CONCLUSIONS OF LAW

Jurisdiction

The Commission has jurisdiction to hear this appeal 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.

Board of Equalization Presumption

There is a presumption of validity, good faith and correctness of assessment by the 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).

Standard for Valuation

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 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); 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.

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 the tax day. 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).

Duty to Investigate

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, sub-classification or assessment of the property. The Hearing Officer’s decision regarding the assessment or valuation of the property may be based solely upon her inquiry and any evidence presented by the parties, or based solely upon evidence presented by the parties. Section 138.430, RSMo.

Weight to be Given Evidence

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 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 she 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).

Opinion Testimony by Experts

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 upon which the expert relies need not be admissible in evidence. Section 490.065, RSMo; Courtroom Handbook on Missouri Evidence, Wm. A. Schroeder, Sections 702-705; pp. 325-350; Wulfing v. Kansas City Southern Industries, Inc., 842 S.W.2d 133 (Mo. App. E.D. 1992).

Commission Determines Methodology

It is within the State Tax Commission's discretion to determine what method or approach it shall use to determine the true value in money of property. Hermel, Inc. v. State Tax Commission, 564 S.W.2d 888, 896; Chicago, Burlington & Quincy Railroad Co. v. State Tax Commission, 436 S.W.2d 650, 657 (Mo. 1968), cert den. 393 U.S. 1092 (1969); St. Louis County v. Security Bonhomme, Inc., 558 S.W.2d 655, 659 (Mo. banc 1997).

It is also within the State Tax Commission's authority to ascertain the correct or modern means of determining value according to a particular method or approach that it adopts to ascertain valuation, and it is within the Commission's discretion to determine what factors should be considered in fixing the "true value in money" for property under a valuation method or approach adopted for use in a particular case. Hermel, Inc. v. State Tax Commission, supra. The relative weight to be accorded any relevant factor in a particular tax assessment case is for the State Tax Commission to determine. St. Louis County v. State Tax Commission, 515 S.W. 446, 450 (Mo. 1974). State Tax Commission decisions must declare the propriety of and the proper elements to consider in adopting a valuation approach, and must provide a definite indication as to the weight accorded each approach or method, i.e., how the final decision is weighed between the various approaches, methods, elements and factors. St. Louis County v. State Tax Commission, 515 S.W.2d 446, 451(Mo. 1974). The determination of "true value in money" of any property is a factual issue for the State Tax Commission, O'Flaherty v. State Tax Commission, 698 S.W.2d 2, 3 (Mo. banc 1985).

Official Notice

Agencies shall take official notice of all matters of which the courts take judicial note. 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 SW 2d 205 (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).

DISCUSSION

Proper Methodology

The correct methodology for valuing subsidized housing projects is the methodology set out in Maryville Properties. That methodology is accurate because (1) rent restrictions are considered through the use of actual income rather than market income; (2) additional management requirements and expenses are accounted for through use of actual expenses which are in excess of market expenses; and (3) the actual loan-to-value ratio and the subsidized interest rate demonstrates and accounts for any and all risks involved in the property as well as the benefits flowing to the property. It is “economic reality”.

It is within the authority and expertise of the Tax Commission to determine which valuation methodology best represents value in a given situation or for a particular category of properties. Hermel, supra. After carefully considering the benefits and risks associated with subsidized housing, the State Tax Commission, in Maryville Properties, determined that calculating value based upon actual income, actual expenses, and actual interest and capitalization rates was the best way to recognize all benefits and risks associated with subsidized housing.

Complainant Failed to Meet Burden of Proof

Complainant has failed to present substantial and persuasive evidence in support of its opinion of value. An owner’s opinion of value which is based upon improper elements or an improper foundation is without probative value. Shelby County R-4 School District v. Hermann, 392 S.W.2d 609, 613 (Sup. 1965).

Complainant has failed to present the foundation necessary to find that its opinion of value is correct. We do not know what the mortgage/equity ratio was at the time that the loan was entered into. Nothing contained within the submitted documents shows the construction cost of the project. We do not know what the interest is on the mortgage. The submitted documents do not include the mortgage or note. And, we do not know the factors that went into calculating the return on equity. All of these factors are necessary to determine the accuracy of the calculations on the worksheet.

Further, Complainant asserts that the worksheet required no independent judgment or calculations. This is not correct. Someone familiar with the process of determining capitalization rates must review the market and estimate the appropriate capitalization rate for the equity portion of this equation. While an owner may qualify, by reason of experience, to testify as to appropriate capitalization rates, there is no presumption that an owner has this type of expertise.

ORDER

The assessed valuation for the subject properties as determined by the Board of Equalization for the subject tax days is AFFIRMED.

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.

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 Collector of Jackson 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 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 or Fact or Conclusion of Law shall be so deemed.

SO ORDERED September 14, 2007.

STATE TAX COMMISISON OF MISSOURI

_____________________________________

Luann Johnson

Senior Hearing Officer

Certificate of Service

I hereby certify that a copy of the foregoing has been mailed postage prepaid on this 14^th day of September, 2007, to: Richard Dvorak, 7111 W. 98^th Terrace, Suite 140, Overland Park, KS 66212, Attorney for Complainant; William Snyder, Deputy County Counselor, Jackson County Courthouse, 415 E. 12th Street, Room 200, Kansas City, MO 64106, Attorney for Respondent; Curtis Koons, Director of Assessment; Mary Jo Spino, Clerk; Christopher Williams, Director of Collections, Jackson County Courthouse, 415 E. 12th Street, Kansas City, MO 64106; and Bob Ensminger, Real Estate Records, City of Kansas City, 1st Floor, City Hall, 414 E. 12th Street, Kansas City, MO 64106.

_____________________________

Barbara Heller

Legal Coordinator