State Tax Commission of Missouri

VALUE PROPERTIES OF BRANSON, )

)

Complainant, )

)

v. ) Appeal Number 06-89500

)

JAMES STRAHAN, ASSESSOR, )

TANEY COUNTY, MISSOURI )

)

Respondent. )

ORDER ON RESPONDENT’S MOTIONS TO VACATE AND DISMISS

Respondent moved for dismissal of the appeal on the ground that property taxes were paid after December 31, 2006, thereby being delinquent.

Complainant filed an appeal of the 2006 assessment. The taxes on the property were due on December 31, 2006. The State Tax Commission heard the appeal and rendered a decision on June 5, 2007. Respondent filed Motion to Vacate and Dismiss, received by the Commission June 29, 2007. Complainant filed Suggestions in Opposition to Respondent’s Motion to Vacate and Dismiss on July 5, 2007.

Section 139.031, RSMo, provides that the taxpayer shall pay their current property taxes under protest. Current taxes remain current until they become delinquent taxes on January 1 of the year following the tax year in question. The collector will distribute the taxes not in dispute and impound the remaining taxes pending the appeal on the assessment.

Statutory sections providing the tax appeal procedure must be meticulously followed, strictly construed and enforced. Boyd-Richardson Co. v. Leachman, 615 S.W.2d 46 (Mo. banc 1981); National Investment Corp. v. Leachman, 613 S.W.2d 634 (Mo. banc 1981); Metal Form Corp. v. Leachman, 599 S.W.2d 922 (Mo. banc 1980); Horizons West Properties v. Leachman, 548 S.W.2d 550 (Mo. banc 1977); Ford Motor Company v. City of Hazelwood, 155 S.W.2d 795 (Mo. App. E.D. 2005). Strict construction advances the purpose of Section 139.031 which the courts have determined balances the interest of the taxpayers and the county by assigning duties and responsibilities to each and with public policy favoring certainty in revenue collection. Ford Motor Company v. City of Hazelwood, id.; Nexus Rent-A-Car v. Nash, 747 S.W.2d 683 (Mo. App. W.D. 1988)

ORDER

Respondent’s Motion to Vacate and Dismiss on the ground that property taxes were paid after December 31, 2006, thereby being delinquent is GRANTED.

Complainant may file with the Commission an application for review of this order within thirty (30) days of the mailing of such order. The application shall contain specific grounds upon which it is claimed the order is erroneous. Failure to state specific facts or law upon which the appeal is based will result in summary denial. Section 138.432, RSMo 2000.

If an application for review of this order 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 order is deemed final and the Collector of Taney 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 order on the underlying assessment in this appeal.

SO ORDERED July 11, 2007.

STATE TAX COMMISSION OF MISSOURI

Maureen Monaghan

Hearing Officer

DECISION AND ORDER

HOLDING

Decision of the Taney County Board of Equalization sustaining the assessment made by the Assessor is SET ASIDE. The hearing officer finds true value in money for the subject property for tax year 2006 to be $850,000 assessed value $272,000.

Complainant appeared by counsel., Craig Lowther, Springfield, Missouri.

Respondent appeared by counsel, William McCullah, County Counselor.

Case decided by Hearing Officer Maureen Monaghan.

ISSUE

The Commission takes this appeal to determine the true value in money for the subject property on January 1, 2006.

SUMMARY

Complainant appeals on the ground of overvaluation, the decision of the Taney County Board of Equalization which sustained the valuation of the property. The Assessor determined a market value of $1,268,437, assessed value of $405,900, as commercial property. Complainant proposed a value of $600,000, assessed value of $192,000.

By Order dated September 20, 2006, parties were given until and including February 2, 2007, to file Exhibits. By Order dated February 14, 2007, the cause was dismissed for failure to file exhibits by either party. Parties were given thirty (30) days to request that the Order of Dismissal be set aside. On March 9, 2007, the Complainant requested the dismissal order of February 14, 2007, be set aside. Complainant’s motion was granted. By Order dated March 14, 2007, the parties were given until and including May 1, 2007, to file Exhibits and Written Direct Testimony. On May 2, 2007, Complainant filed Exhibit A, written appraisal report. Respondent was given, by Order dated May 15, 2007, to May 31, 2007, to request cross-examination of Complainant’s witness and if the Respondent failed to respond by May 31, 2007, the case would be submitted on Exhibit A. Respondent did not file exhibits or objections to the Complainant’s exhibit and did not request an opportunity to cross-examine the Complainant’s witness.

The case was assigned to Hearing Officer Maureen Monaghan on May 22, 2007.

The hearing officer having considered all of the competent evidence upon the whole record, enters the following Decision and Order.

Complainant’s Evidence

Complainant filed the following exhibit:

Exhibit A – Appraisal Report of Kelly Trimble, State Certified General Real Estate Appraiser.

Complainant filed no written direct testimony.

Respondent’s Evidence

Respondent did not file any exhibits or written direct testimony.

FINDINGS OF FACT

1. Jurisdiction is proper. Complainant timely appealed to the State Tax Commission from the decision of the Taney County Board of Equalization.

2. The subject property is a 1.67 acre tract improved with a 66 unit franchised motel and parking lot. The property is identified as parcel number 100-07-7.0-35-001-002-004.000, more commonly know as The Eagle’s Lodge, 3221 Shepherd of the Hills Expressway, Branson, Missouri.

The improvements on the subject property were constructed in 1993 and consist of two buildings. The first building is a 1,774 square foot two level building containing the motel office, a three-bedroom manager’s quarters, a breakfast room and sunroom. The second building is a four level, 23,277 square foot, sixty-six unit motel building with laundry room and a shop.

The property is further improved with 43,000 square feet of paved parking, a swimming pool, a 24 x 36 porte cochure connected to the lobby entrance, a sign, and landscaped grounds.

The improvements are in good condition and effective age is approximately fifteen years, close to its chronological age. Typical life span of motels in this area is thirty-five to forty years.

3. Complainant purchased the property in March 2005 for $850,000.

4. Complainant’s appraiser prepared a cost approach, an income approach and a sales comparison approach to value.

5. Under the cost approach, the Complainant’s appraiser determined the value of the subject real property to be $900,000.

The appraiser first valued the land using land sales comparison. The appraiser compared the subject site with three other sites. The appraiser made adjustments to the comparable properties for time, location and size.

The appraiser reported a sharp increase in land values in the past two years which he believes is accelerating. The appraiser adjusted the comparable sales up at a rate of “1% per month in this analysis based on a paired sales analysis retained on this file.” Exhibit A, p. 110.

The appraiser adjusted for location “based largely on the perceived relative developmental potential of each tract due to its position in the market and due to the positive or negative economic influences from the immediate environment of the tract.” Exhibit A, p. 110.

The appraiser adjusted for sizes of the sites. The appraiser reported that a larger site will sell for less per unit that a smaller site and ascribes this to declining marginal values typically ascribed to diminishing returns.

The second step for the appraiser was to calculate the replacement cost new minus depreciation to determine a value for the improvements. The appraiser used a comparative unit method to estimate the replacement cost new of the improvement. The appraiser then estimated the physical deterioration and the economic obsolescence. The appraiser did not find functional obsolescence with the subject property.

6. The Complainant’s appraiser developed an income approach relying on a survey of existing income and expenses from competing properties in the subject’s market area, and data from the lodging industry. The appraiser also analyzed the history of the subject property as to its income and expenses.

After reconstructing the operating statement and calculating a net operating income, the appraiser determined a capitalization rate. The capitalization rate was derived from rates from motels in the Midwest. Applying the rate to the net operating income, the appraiser calculated a value of $969,008.53. The appraiser then deducted the contributory value of personal property of $69,000. How the appraiser calculated or determined the contributory value of the personal property is not known.

The appraiser concluded, using the income approach, that the value of the subject property was $900,000.

7. The appraiser also used the sales approach. He compared the subject property to sales of five motels in the area from 2003 through 2005, including the sale of the subject property on March 9, 2005, for $850,000.

The appraiser made adjustments on the comparable sales for location and condition. The appraiser did not made adjustments for time, size or franchise. The appraiser concluded that the value of the property is $917,400 and then deducted contributory value of personal property and determining a final value of $850,000. Once again, we are left to ponder how the appraiser determined a value of personal property of $69,000.

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. 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.

Board of Equalization Presumption

There is a presumption of validity, good faith and correctness of assessment by the 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). There is no presumption that the assessor’s valuation is correct. Section 138.431.3, RSMo.

A presumption is not evidence. A presumption simply accepts something as true without any substantial proof to the contrary. The presumption of correct assessment is rebutted when the taxpayer presents substantial and persuasive evidence to establish that Board’s valuation is erroneous and what the fair market value should have been placed on the property. Snider v. Casino Aztar/Aztar Missouri Gaming Corp., 156 S.W.3d 341 (Mo. 2005), Cupples Hesse Corp. v. State Tax Commission, 329 S.W.2d 696, 702 (Mo.1959).

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. 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. STC, 564 S.W.2d 888 (Mo. banc 1978).

Market Value

Market value is the most probable price in terms of money which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller, each acting prudently, knowledgeable and assuming the price is not affected by undue stimulus.

Implicit in this definition is the consummation of a sale as of a specific date and the passing of title from seller to buyer under conditions whereby:

1. Buyer and seller are typically motivated.

2. Both parties are well informed and well advised, and each acting in what they consider their own best interests.

3. A reasonable time is allowed for exposure in the open market.

4. Payment is made in cash or its equivalent.

5. Financing, if any, is on terms generally available in the Community at the specified date and typical for the property type in its locale.

6. The price represents a normal consideration for the property sold unaffected by special financing amounts and/or terms, services, fees, costs, or credits incurred in the transaction.

Real Estate Appraisal Terminology, Society of Real Estate Appraisers, Revised Edition, 1984; See also, Real Estate Valuation in Litigation, J. D. Eaton, M.A.I., American Institute of Real Estate Appraisers, 1982, pp. 4-5; Property Appraisal and Assessment Administration, International Association of Assessing Officers, 1990, pp. 79-80; Uniform Standards of Professional Appraisal Practice, Glossary.

Methods of Valuation

Missouri courts have approved the comparable sales or market approach, the cost approach and the income approach as recognized methods of arriving at fair market value. St. Joe Minerals Corp. v. STC, 854 S.W.2d 526, 529 (App. E.D. 1993); Aspenhof Corp. v. STC, 789 S.W.2d 867, 869 (App. E.D. 1990); Quincy Soybean Company, Inc., v. Lowe, 773 S.W.2d 503, 504 (App. E.D. 1989), citing Del-Mar Redevelopment Corp v. Associated Garages, Inc., 726 S.W.2d 866, 869 (App. E.D. 1987); and State ex rel. State Highway Comm’n v. Southern Dev. Co., 509 S.W.2d 18, 27 (Mo. Div. 2 1974). Proper methods of valuation and assessment of property are delegated to the Commission. It is within the purview of the Hearing Officer to determine the method of valuation to be adopted in a given case. See, Nance v. STC, 18 S.W.3d 611, at 615 (Mo. App. W.D. 2000); Hermel, supra; Xerox Corp. v. STC, 529 S.W.2d 413 (Mo. banc 1975).

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 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).

Trier of Fact

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).

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, 2006. Hermel, Inc. v. State Tax Commission, 564 S.W.2d 888, 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).

Appraiser for Complainant analyzed the subject property using the cost approach, the sales comparison approach and the income approach. Under the cost approach, the Complainant’s appraiser determined the value of the subject real property to be $900,000.

The cost approach is not the preferred approach when valuating properties fourteen years old. The appraiser also used the sales comparison approach. He compared the subject property to sales of five motels in the area from 2003 through 2005. The appraiser made adjustments on the comparable sales for location and condition. The appraiser did not make adjustments for time, size or franchise. The appraiser concluded that the value of the property is $917,400 and then deducted contributory value of personal property and determining a final value of $850,000. The appraiser did not explain how he determined that the contributory value of personal property of $69,000. One of the comparisons the appraiser did use was the subject property. The sale occurred on March 9, 2005, for $850,000.

The last approach used by the appraiser was the income approach. The income approach is appropriate for these properties. In his report, the appraiser stated that the history of the subject did not accurately reflect the net operating income likely to be produced by the property. Using income and expenses from competing properties in the subject’s market area, data from the lodging industry and the income and expenses of the subject property, the appraiser reconstructed the operating statement and calculated a net operating income. Next, the appraiser determined a capitalization rate. Applying the rate to the net operating income, the appraiser calculated a value of $969,008.53. The appraiser then deducted the contributory value of personal property of $69,000. How the appraiser calculated or determined the contributory value of the personal property is not known.

After consideration of all approaches, the appraiser concluded that the value of the subject property was $850,000.

All three approaches used by the appraiser had limitations. However, they do support the recent sale of the property at $850,000.

DECISION

The taxpayer has the burden of proving (1) that the value placed upon the property by the Board of Equalization is incorrect; and (2) that the value proposed by the taxpayer represents market value.

In this instance, the taxpayer has established that the property sold, at a date relevant to the tax day for $850,000. The County failed to appear and present evidence supporting its opinion of $1,268,437. We find the evidence of the prior sale and the lack of evidence in support of the County value to be sufficient to overcome the burden in favor of the Taney County Board of Equalization.

ORDER

The assessed valuation for the subject property as determined by the Assessor and sustained by the Taney County Board of Equalization is SET ASIDE. The Clerk is ordered to place the market value of $850,000 (assessed value $272,000) on the subject property for tax year 2006.

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 2000.

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 Taney 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 of Fact or Conclusion of Law shall be so deemed.

SO ORDERED June 5, 2007.

STATE TAX COMMISSION OF MISSOURI

Maureen Monaghan

Hearing Officer