State Tax Commission of Missouri

PAUL & MARGITA DZATKO, )

)

Complainant, )

)

v. ) Appeal Number 07-12177

)

PHILIP MUEHLHEAUSLER, ASSESSOR, )

ST. LOUIS COUNTY, MISSOURI, )

)

Respondent. )

DECISION AND ORDER

HOLDING

Decision of the St. Louis County Board of Equalization sustaining the assessment made by the Assessor is SET ASIDE. Hearing Officer finds presumption of correct assessment by the Board rebutted and finds true value in money for the subject property for tax years 2007 and 2008 is set at $415,000, residential assessed value of $78,850.

Evidentiary hearing was held on August 14, 2008, at the St. Louis County Government Center, Clayton, Missouri.

Complainants appeared pro se.

Respondent appeared by Assistant County Counselor Paula J. Lemerman.

Case heard and decided by Senior Hearing Officer W. B. Tichenor.

ISSUE

The Commission takes this appeal to determine (1) the true value in money for the subject property on January 1, 2007; and (2) whether there was an intentional plan by the assessing officials to assess the property under appeal at a ratio greater than 19% of true value in money, or at a ratio greater than the average 2007 residential assessment ratio for St. Louis County.

SUMMARY

Complainants appeal, on the ground of overvaluation and discrimination, the decision of the St. Louis County Board of Equalization, which sustained the valuation of the subject property. The Assessor determined an appraised value of $561,700, assessed value of $105,720, as residential property. Complainant proposed a value of $325,000, assessed value of $61,750, in the Complainant for review of Assessment. The Hearing Officer, having considered all of the competent evidence upon the whole record, enters the following Decision and Order.

Complainants’ Evidence

Mr. Dzatko testified on behalf of the Complainants. He stated his opinion of value for the property as of January 1, 2007, to be $325,000. This was based upon the 2005 value placed on the property in the assessment process and allowing for inflation. Mr. Dzatko’s argument relative to value was based upon his assertion that his home as an assembly built and not a custom built home, it was worth less than custom built homes. He contended his home should not be compared to custom built homes. He also testified as to various items of deferred maintenance and the cost of repairs and updating to his property.

Complainants offered into evidence the following exhibits.

Exhibit	Description	Action
A	Appraisal Report of David B. Simpson,	Received
B	Repair Estimates for subject property	Received
C	Photos of subject exterior/Neighboring Property Remodeled	Received
D	Photos of interior of subject home	Received
E	Photos of deck and patio of subject home	Received
F	Photos of fence and yard of subject property.	Received

David B. Simpson, Missouri State Certified Residential Real Estate Appraiser, testified relative to his appraisal of the Dzatko property. He gave his opinion of fair market value as of January 1, 2007, to be $350,000, based upon a sales comparison approach to valuation. Mr. Simpson relied upon sales of five properties deemed to be comparable to the subject. The appraiser also developed a cost approach to value with an indicated value of $351,400.

Respondent’s Evidence

Respondent placed into evidence the testimony of Mr. Arthur Froeckmann, Missouri State Certified Residential Real Estate Appraiser for St. Louis County. The appraiser testified as to his appraisal of the subject property. The Appraisal Report (Exhibit 1) of Mr. Froeckmann was received into evidence. Mr. Froeckmann arrived at an opinion of value for the subject property of $428,000 based upon a sales comparison approach to value. In performing his sales comparison analysis, the appraiser relied upon the sales of three properties deemed comparable to the subject property.

FINDINGS OF FACT

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

2. The subject property is located at 135 Highgrove Lane, Clarkson Valley, Missouri. The property is identified by parcel number 21T140092. The property consists of .78 of an acre lot improved by a two-story brick and frame single-family structure of average to good quality construction. The house was built in 1978 and appears to be in average condition. The residence has a total of 9 - 12 rooms, which includes four bedrooms, two and a half baths, and contains 3,079 – 3,399 square feet of living area. The difference in room count is attributable to counting of rooms above grade, as opposed to including basement area rooms The difference in living area is accounted for by rounding of measurements for various rooms There is a full partially (800 square feet) finished basement, with a full bath. The home has an attached three-car garage.[1]

3. Vinyl siding was added during 2007 however the evidence did not establish the extent to which the market would have recognized this improvement. Therefore, the valuation remains the same for the 2007 and 2008 tax years.

4. Complainants presented no evidence relevant to establishing an intentional plan by the assessing officials to assess the property under appeal at a ratio greater than 19% of true value in money, or at a ratio greater than the average 2007 residential assessment ratio for St. Louis County. Therefore, the claim of discrimination is considered abandoned in this proceeding.

5. Complainant’s photographic evidence and repair estimates do not establish value. Such evidence only establishes the general condition of the property under appeal. Generally, a few photographs of any deferred maintenance will suffice for presentation at the evidentiary hearing. A large number of photographs are not required to support the owner’s testimony regarding needed repairs.

6. Complainants’ evidence was not substantial and persuasive to rebut the presumption of correct assessment by the Board and establish the true value in money as of January 1, 2007, to be $325,000, as testified to by Mr. Dzatko. Complainants’ evidence was substantial and persuasive, on its own in the absence of any evidence by Respondent, to prima facie rebut the presumption of correct assessment by the Board and establish the true value in money as of January 1, 2007, to be $350,000 based upon the Simpson appraisal.

7. Respondent’s evidence was substantial and persuasive, on its own in the absence of any evidence by Complainant, to prima facie rebut the presumption of correct assessment by the Board and establish the true value in money as of January 1, 2007, to be $428,000 based upon the Froeckmann appraisal.

8. The true value in money for the Dzatko property as of January 1, 2007, is $415,000, assessed value as residential property of $78,850. See, Hearing Officer Finds Value, infra.

CONCLUSIONS OF LAW AND DECISION

Jurisdiction

The Commission has jurisdiction to hear this appeal and correct any assessment which is shown to be unlawful, unfair, arbitrary or capricious. 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.[2]

Presumption In Appeals

There is a presumption of validity, good faith and correctness of assessment by the County Board of Equalization.[3] 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 is accepted as true only until and so long as there is no substantial evidence to the contrary. The presumption of correct assessment is rebutted when the taxpayer, or respondent when advocating a value different than that determined by the Board, presents substantial and persuasive evidence to establish that the Board’s valuation is erroneous and what the fair market value should have been placed on the property.[4] The appraisers for both Complainants and Respondent presented prima facie evidence to rebut the presumption of correct assessment by the Board.

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.[5] It is the fair market value of the subject property on the valuation date.[6] Market value is the most probable price in terms of money which a property should bring in 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 are 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 both acting in what they consider their own best interests.

In order to prevail, Complainants must present an opinion of market value established by substantial and persuasive evidence that the proposed value is indicative of the market value of the subject property on January 1, 2007.[10] There is no presumption the taxpayer’s opinion is correct. The taxpayer in a Commission appeal still bears the burden of proof. The taxpayer is the moving party seeking affirmative relief. Therefore, the Complainants bear the burden of proving the vital elements of the case, i.e., the assessment was “unlawful, unfair, improper, arbitrary or capricious.”[11] Respondent, when advocating a value different from that determined by the original valuation or a valuation made by the Board of Equalization, must meet the same burden of proof to present substantial and persuasive evidence of the value advocated as required of the Complainant under the principles established by case law.[12]

Substantial evidence can be defined as such relevant evidence as a reasonable mind might accept as adequate to support a conclusion.[13] 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.[14]

Owner’s Opinion of Value

The owner of property is generally held competent to testify to its reasonable market value.[15] The owner’s opinion is without probative value however, where it is shown to have been based upon improper elements or an improper foundation.[16] In this case, Mr. Dzatko’s opinion of value is not founded upon property elements and a proper foundation. Therefore it can be given no probative weight.

An opinion of value based upon a prior assessor or board’s valuation adjusted by an inflation factor does not meet the standard of substantial and persuasive evidence. No evidence was presented to establish that in point of fact the value set for the prior (2005-06) assessment cycle did represent the true value in money for the Dzatko property as of January 1, 2005. No supporting documentation regarding the unknown inflation factor is present in the evidence. The record fails to establish it was obtained from reliable sources applicable to an increase in value for residential real estate comparable to the Dzatko property. In light of Exhibit A, the contention of Mr. Dzatko that an inflationary adjustment to the prior value is sufficient to establish value for January 1, 2007 is rebutted. Furthermore, the substantial market data on sales after January 1, 2005 presented at hearing establishes that Mr. Dzatko’s reliance on an inflation adjustment to develop his opinion of value is in error.

Hearing Officer Finds Value

The Hearing Officer when presented with appraisal reports from two state certified residential real estate appraisers will generally review both in light of the entirety of the valuation evidence which the reports provide. Unless one of the reports contains such glaring errors as to render it unpersuasive on its own, the Hearing Officer ordinarily will give due deference to both reports and analyze each to arrive at a conclusion of value. Such is the case in this instance.

Froeckmann Appraisal

Each of the Froeckmann comparables, based on date of sale, site, location, design, quality of construction, age, condition, gross living area and other amenities are appropriate for use in the present appraisal problem. The sales all occurring in 2005 and 2006 provide a reliable time of sale for the properties. The site sizes, although requiring some adjustment, were sufficiently close in size to the Dzatko site for comparability purposes. The gross living area of the three properties fell within less than 400 square feet of the subject. This provides a sound basis of comparability, although requiring some adjustments for one comparable. The various adjustments made were reasonable and properly accounted for differences between the comparables and the Dzatko property. The appraiser properly addressed the subject’s deferred maintenance in comparison to the superior condition of the three comparables selected.

The adjusted sale values were $428,200, $438,900 and $427,000, from original sale prices of $420,000, $475,000 and $460,000 respectively. The value settled on by Mr. Froeckmann of $428,000, equated to a per square foot of living area, based on the gross living area utilized by the appraiser, of $139.00. The unadjusted per square foot sale values were $156.02, $152.47 and $148.87. The fact the subject fell approximately$13.45 per square foot below the average of $152.45 is accounted for by the condition adjustment which was required to bring the comparables in line with the subject.

Simpson Appraisal

Each of the Simpson sale properties, with the exception of Comparable No. 3, based on date of sale, site, location, design, quality of construction, age, condition, gross living area and other amenities are appropriate for use in the present appraisal problem. Comparable 3 was significantly below the mean and median both on gross sale price and on per square foot of living area of sale price from the other four properties utilized by the appraiser. This property was clearly an out-lier and should not have been used. It is not considered by the Hearing Officer in arriving at a conclusion of value for the Dzatko property.

Three of the remaining properties sold in 2007. However, two of them were within the first four months of 2007, the other being a September, 2007 sale. Mr. Simpson corrected the date on his appraisal to January 1, 2007, from September 26, 2007, based upon his belief that there was no material difference in indicated value between the two dates. There is no evidence on the record to provide a basis to reject the 2007 sales, since they are all within less than ten months of the valuation date.

Mr. Simpson accounted for the various differences between each comparable and the subject. He accounted for the issue of deferred maintenance (condition) in a slightly different manner than did Mr. Froeckmann. Mr. Simpson made deductions for extras and updating in the sale properties as a separate item, rather than lumping that with an overall condition adjustment. However, in general those adjustments were similar to those made by Mr. Froeckmann for differences in condition with his comparables. The Hearing Officer defers to the appraiser on the various adjustments, with the exception of the site adjustments.

There is no basis either on an acreage or square footage basis for the adjustment for difference in site size provided in Mr. Simpson’s appraisal. The Hearing Officer upon review of the adjustment was unable to find a consistent adjustment factor. Therefore, this adjustment has been recalculated based upon a factor of sixty-nine cents per square foot. This is the factor utilized by Mr. Froeckmann in making his site adjustment. This adjustment equates to the following for Comps 1, 2, 4 & 5, respectively (amounts rounded), -$13,680, -$2,100, +$14,370, and +$12,620.

With this site adjustment, the adjusted sales prices for Mr. Simpson’s comparables calculate to $358,910, $398,880, $354,125 and $347,825. This still supports a valuation of $350,000 as proposed by Mr. Simpson. The $350,000 value equates to a per square foot value of living area of $113.68, utilizing the Froeckmann living area of 3,079 square feet. This is $14.23 below the per square foot average of $127.91 for the unadjusted sale prices of the four Simpson sales deemed comparable by the Hearing Officer. This accounts for the deferred maintenance and lack of updates to the Dzatko property.

Conclusion of Value

The evidence presents a range of values from the Froeckmann and Simpson appraisals of $438,900, $428,200, $427,000, $398,880, $358,910, $351,125 and $347,825. The median of these seven properties is $398,880 and the mean is $392,980. The Froeckmann indicators of value fall within a much closer range, from a variance of only $11,900 from the highest to the lowest or a percentage factor of 2.6% of the highest value to 2.8% of the lowest value. The Simpson properties cover a much wider range from a variance of $51,055 from the highest to the lowest. This results in percentage variance factors of 12.8% and 14.7%.

Placing equal weight on each of the Simpson properties provides support for an indicated value of $365,000. Placing equal weight on each of the Froeckmann properties provides support for an indicated value of $431,400. Therefore, allowing for some weight to the indicated value supported by the Simpson properties, but placing a greater probative weight on the indicated value of the Froeckmann properties, the Hearing Officer concludes on a value of $415,000, as of January 1, 2007. The value of $415,000 equates to a per square foot value of living area (3,079) of $134.79, compared with the average of the unadjusted sale prices of $138.29 per square foot for the seven properties.

ORDER

The assessed valuation for the subject property as determined by the Assessor and sustained by the Board of Equalization for St. Louis County for the subject tax day is SET ASIDE.

The assessed value for the subject property for tax years 2007 and 2008 is set at $78,850.

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. Said application must be in writing addressed to the State Tax Commission of Missouri, P.O. Box 146, Jefferson City, MO 65102-0146, and a copy of said application must be sent to each person at the address listed below in the certificate of service.

Failure to state specific facts or law upon which the appeal is based will result in summary denial. [17]

The Collector of St. Louis County, as well as the collectors of all affected political subdivisions therein, shall continue to hold the disputed taxes pending a filing of an Application for Review, unless said taxes have been disbursed pursuant to a court order under the provisions of Section 139.031.8, RSMo.

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 12, 2008.

STATE TAX COMMISSION OF MISSOURI

_____________________________________

W. B. Tichenor, Senior Hearing Officer

Certificate of Service

I hereby certify that a copy of the foregoing has been mailed postage prepaid on this 12^th day of September, 2008, to: Paul Dzatko, 135 Highgrove, Chesterfield, MO 63005, Complainant; Paula Lemerman, Associate County Counselor, Attorney for Respondent; Philip A. Muehlheausler, Assessor; John Friganza, Collector, County Government Center, 41 South Central Avenue, Clayton, MO 63105.

___________________________

Barbara Heller

Legal Coordinator

[1] Exhibit A; Exhibit 1.

[2] Article X, section 14, Mo. Const. of 1945; Sections 138.430, 138.431, 138.431.4, RSMo.

[3] 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).

[4] Hermel, supra; Cupples-Hesse Corporation v. State Tax Commission, 329 S.W.2d 696, 702 (Mo. 1959).

[5] 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).

[6] Hermel, supra.

[7] 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.

[8] 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).

[9] St. Joe Minerals Corp., supra; 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).

[10] Hermel, supra.

[11] See, Westwood Partnership v. Gogarty, 103 S.W.3d 152 (Mo. App. E.D. 2003); Daly v. P. D. George Co., 77 S.W.3d 645 (Mo. App. E.D. 2002); Reeves v. Snider, 115 S.W.3d 375 (Mo. App. S.D. 2003). Industrial Development Authority of Kansas City v. State Tax Commission of Missouri, 804 S.W.2d 387, 392 (Mo. App. 1991).

[12] Hermel, Cupples-Hesse, Brooks v. General Motors Assembly Division, 527 S.W.2d 50, 53 (Mo. App. 1975).

[13] See, Cupples-Hesse, supra.

[14] Brooks, supra.

[15] Rigali v. Kensington Place Homeowners’ Ass’n, 103 S.W.3d 839, 846 (Mo. App. E.D. 2003); Boten v. Brecklein, 452 S.W.2d 86, 95 (Sup. 1970).

[16] Cohen v. Bushmeyer, 251 S.W.3d 345, (Mo. App. E.D., March 25, 2008); Carmel Energy, Inc. v. Fritter, 827 S.W.2d 780, 783 (Mo. App. W.D. 1992); State, ex rel. Missouri Hwy & Transp. Com’n v. Pracht, 801 S.W.2d 90, 94 (Mo. App. E.D. 1990); Shelby County R-4 School District v. Hermann, 392 S.W.2d 609, 613 (Sup. 1965).

[17] Section 138.432, RSMo.