State Tax Commission of Missouri

Complainants appeal, on the ground of overvaluation, the decision of the St. Louis County Board of Equalization, which reduced the valuation of the subject property. The Assessor determined an appraised value of $235,800, assessed value of $44,800, as residential property. The Board of Equalization set the value at $219,700, assessed value of $41,360. Complainant proposed a value of $188,000, assessed value of $35,720. A hearing was conducted on August 14, 2008, at the St. Louis County Government Center, Clayton, Missouri.

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

Complainants’ Evidence

Mr. Ude testified for the Complainants. He stated the owners’ opinion of value to be $188,000. This was based on the Assessor’s 2005 appraised value of $160,000 plus an adjustment using the Consumer Price Index (CPI) for 2005 and 2006. Mr. Ude also took into account the condition of his home and the matter of erosion in a storm water drainage creek at the back of the Ude property.

The following exhibits were offered into evidence. Objections were made to part of the exhibits on the grounds of lack of foundation, hearsay and relevance. Objections were sustained in part and overruled in part.

Exhibit	Description	Action
A1	Photographs of the exterior of the Ude home	Received
A2	Photographs of 16547 and 16509 Thunderhead Canyon Court	Excluded
A3	Photographs of 16415 Westglen Farms Dr. & 16524 Thunderhead Canyon Ct.	Excluded
A4	Photographs of 2424 Westglen Farms Dr.	Excluded
A5	Photographs of cracking & sinking of driveway of Ude property	Received
A6	Photographs of cracking & sinking of driveway turn around of Ude property	Received
A7	Photographs of trees behind Ude property	Excluded
A8	Photographs of tree across storm water drainage creek behind Ude property	Excluded
A9	Photographs of water damage occurring in 2008 in Ude house	Excluded
B1	Repair Bid for Painting	Received
B2	Landscaping Proposal	Excluded
B3	Repair Bid for driveway and garage floor	Received
C1	Letter dated 8/11/08 to Metropolitan Sewer District - fallen tree & erosion	Excluded
C2	Letter dated 8/11/08 to City of Wildwood - fallen tree & erosion	Excluded
C3	Letter dated 8/11/08 to Trustee Spohn-Westglen Farms-fallen tree & erosion	Excluded
C4	Letter dated 8/11/08 to Trustee-Westglen Farms-fallen tree & erosion	Excluded
C5	Letter dated 8/11/08 to Trustee Sherman-Westglen Farms-fallen tree & erosion	Excluded

The excluded exhibits are maintained in the case file, but do not constitute a part of the evidentiary record in the appeal.

Respondent’s Evidence

Respondent placed into evidence the testimony of Mr. Ross Hackman, Residential Real Estate Appraiser for St. Louis County. He testified as to his appraisal of the subject property. The Appraisal Report (Exhibit 1) of Mr. Hackman was received into evidence. He arrived at an opinion of value for the subject property of $233,000 based upon a sales comparison approach to value. In performing his sales comparison analysis, the Mr. Hackman relied upon the sales of five 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 16518 Westglen Farms Drive, Wildwood, Missouri. The property is identified by parcel number 23V640031. The property consists of a 9,600 square foot lot improved by a two-story brick and vinyl sided, single-family structure of average quality construction. The house was built in 1985 and appears to be in average condition. The residence has a total of eight rooms, which includes four bedrooms, two full and one half bath, and contains 2,066 square feet of living area. There is a full unfinished basement and an attached two-car garage.[1]

3. The Ude’s lot backs to common ground on which is located a dry storm water creek. Mr. Ude has concern about trees falling from the common ground onto his property or into the creek and causing blockage of debris in the creek and possible flooding.[2]

4. There was no evidence of new construction and improvement from January 1, 2007, to January 1, 2008.

5. The Ude’s 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 $188,000.

6. The properties relied upon by Mr. Hackman were comparable to the subject property. The properties were located within less than a quarter mile of the subject. Each sale property sold at a time relevant to the tax date of January 1, 2007. The sale properties were similar to the subject in style, quality of construction, age, condition, room, bedroom and bathroom count, living area, location, site size and other amenities of comparability.

7. The appraiser made various adjustments for differences which existed between the subject and each comparable. All adjustments were appropriate to bring the comparables in line with the subject for purposes of the appraisal problem. The net ranged from less than a minus 1% to -8.4% of the sales prices. The adjusted sales prices for the comparables calculated to $243,000, $224,400, $222,600, $241,700 and $242,600, respectively. Mr. Hackman concluded on a $233,000 value which calculated to a value per square foot of $112.78 compared with the sales prices per square foot of living area for the comparables of $108.14, $108.74, $112.75, $115.20 and $129.60. The comparison of the value per square foot provides a validation check for the appraisal, to demonstrate that the indicated value is consistent with the market for properties such as the subject.

8. Respondent’s evidence met the standard of substantial and persuasive to rebut the presumption of correct assessment by the Board and establish the value of the subject, as of January 1, 2007, to be $233,000.

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.[3]

Presumption In Appeals

There is a presumption of validity, good faith and correctness of assessment by the County Board of Equalization. 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] Complainants failed to present substantial and persuasive evidence to rebut the presumption of correct assessment by the board. Respondent presented substantial and persuasive evidence to rebut the presumption and establish the true value in money for the Ude property as of January 1, 2007.

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. It is the fair market value of the subject property on the valuation date.[5]

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 and substantial and persuasive evidence that the proposed value is indicative of the market value of the subject property on January 1, 2007.[8] There is no presumption that 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 Complainant bears the burden of proving the vital elements of the case, i.e., the assessment was “unlawful, unfair, improper, arbitrary or capricious.”[9] Substantial evidence can be defined as such relevant evidence as a reasonable mind might accept as adequate to support a conclusion.[10] 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.[11]

The owner of property is generally held competent to testify to its reasonable market value.[12] The owner’s opinion is without probative value however, where it is shown to have been based upon improper elements or an improper foundation.[13] The opinion of value offered by Mr. Ude was based upon the 2005 appraised value of the property by the Assessor. This 2005 value, according to Mr. Ude was $160,000. It was then adjusted by the CPI for 2005 and 2006 to arrive at the final opinion of $188,000.

The methodology used is flawed. It is not a method for determining value that has ever been recognized by the courts of the state or the Commission for ad valorem taxation purposes. It is not an accepted appraisal approach to finding an indicated value. The method Mr. Ude used assumed that the 2005 value set by the Assessor was correct. Section 138.431.3 RSMo provides there is no presumption that the Assessor’s valuation is correct. There was no market data to establish that residential real estate values in St. Louis County or in the Ude’s neighborhood increased from the 2005 to the 2007 assessment at the CPI rate. Therefore, the opinion of value offered by the owners was not based upon the proper elements and upon a proper foundation and could be given no probative weight.

Mr. Ude’s opinion of value calculates to a value per square foot of living area of only $91. There was no evidence put forth by Mr. Ude that properties comparable to the subject had been selling in the subject neighborhood, at a time relevant to January 1, 2007, for only $91 per square foot of living area.

Complainants’ Exhibits

Exhibit A

Photographs of Houses

The photographs of the subject property are relevant to the extent they provide a depiction of the subject property for the Hearing Officer. In particular, the photographs visually demonstrate the discoloration of the upper floor shutters resulting from a power washing of the subject home.[14] The photographs of other properties which were the sale properties used by the Assessor’s mass valuation computer program are not relevant. The Assessor’s value is not the value challenged in the appeal. The Board’s value is what is before the Commission. Furthermore, photographs of sale comparables without supporting data as is provided, relied upon, utilized and adjusted in an appraisal are of no evidentiary benefit in an appeal before the Commission.

Photographs of Trees & Storm Water Creek

The photographs of the trees along the dry storm water creek and in the storm water creek were taken after January 1, 2007. Therefore, the fallen tree could not have been observed by a buyer in a hypothetical sale at that time. The issue of the erosion along the storm water creek and the potential for trees to fall, either onto Mr. Ude’s property or into the creek is of great concern to Mr. Ude. However, there is no evidence that in the twenty-three years that the Udes have lived on the property that flooding and collection of storm water debris has created a problem. Mr. Ude’s concern is that it may occur in the future. Even if at some time in the future there is sporadic collection of debris and some flooding to the common ground, there is no data upon which the Hearing Officer can conclude the extent, if any, such occurrence would diminish the value of the subject property.

Mr. Ude raised the issue of the devaluation of his property due to potential future erosion, falling of trees, collection of debris, and flooding, therefore, it becomes the burden of the Udes to present evidence to establish any diminution in value. A taxpayer does not meet his burden if evidence on any essential element of his case leaves the Commission “in the nebulous twilight of speculation, conjecture and surmise.”[15] In this instance, the Hearing Officer has only the owner’s concern that a fallen tree is going to cause flooding and collection of debris. There is no reasonable way to determine, if such incidents might occur in the future what if any monetary impact that would have had on what a willing buyer would have agreed to as the purchase price on January 1, 2007. In other words, the Hearing Officer could only speculate on this point. Speculation is not a proper basis for a decision in an appeal.

Photographs of Ceiling Water Damage

Mr. Ude also offered photographs of water damage on the second floor ceiling of his home. This damage occurred in 2008. It could not have impacted the price a willing buyer would have paid for the home on January 1, 2007. Therefore, neither the photographs nor the testimony by Mr. Ude on this matter were relevant.

Exhibit B

Bid proposals which are on a company letter head, dated and signed by an employee of the company preparing the repair bid are generally accepted into evidence in hearings before the Commission. Notwithstanding the hearsay nature of such repair bids, they are accepted under the general exception that they are more probative on the point for which they are offered than any other evidence which a homeowner can procure through reasonable efforts and the interests of justice will be served by allowing the taxpayer to introduce the repair bids.[16] However, repair bids are only a tool that can be utilized in making a adjustment for condition or other factors in an appraisal. They do not establish what the market will recognize related to value for the existing condition for which repairs are proffered.

In other words, in this instance, a repair bid of $750 for painting of shutters does not equate to a negative adjustment to each sale comparable in an appraisal for this factor. The market might not recognize that amount for the faded shutters. In like manner, the replacement of the concrete driveway, turnaround and garage floor does not establish what the market would recognize for the condition of a twenty-two year old driveway and garage floor. The cost for replacement does not equate to the amount of an adjustment that might be required to sale properties for this factor. In point of fact, the properties used by Mr. Hackman in his appraisal are all of similar age to the subject. The photographs of the sale properties reveal very similar driveways. It appears the sale comparables like the subject, all have their original driveways. It is expected that an average twenty to twenty-two year old driveway will have ordinary wear, cracking and settling. There is no evidence that a new driveway or garage floor had been installed for any of the comparable properties that would require any adjustment to account for such a factor.

The landscaping proposal is not in the nature of a repair bid. It was therefore excluded from evidence. The condition adjustment made by Mr. Hackman sufficiently addressed the difference in landscaping between the subject and the comparables and other condition factors of the Ude’s home.

Exhibit C

The packet of letters in Exhibit C addresses the issue of erosion along the dry storm water creek and the tree which fell across the creek in 2008. Mr. Ude testified on this matter. The fact that he wrote a group of five letters about this to county, city and neighborhood officials has no relevance to the issue of what the fair market value of the Ude property was on January 1, 2007.

Conclusion

Mr. Ude failed to present substantial and persuasive evidence from market data to establish the value of $188,000 presented. Therefore, he did not rebut the presumption of correct assessment by the Board. The concern related to erosion of common ground and possible collection of debris in the storm water creek

Respondent Proves Value

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.[17] Respondent presented substantial and persuasive evidence to establish a fair market value as of January 1, 2007, to be $233,000 for the Ude property. The adjustments made the Mr. Hackman were consistent with generally accepted guidelines for the appraisal of property of the subject’s type. The adjustments properly accounted for the various differences between the subject and each comparable.

Respondent’s evidence rebutted the presumption of correct assessment by the Board and established fair market value as proposed in Exhibit 1.

ORDER

The assessed valuation for the subject property as set 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 $44,270.

Complainants may file with the Commission an application for review of this decision within thirty 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.[18]

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 August 22, 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 22^nd day of August, 2008, to: David Ude, 16518 Westglen Farms Drive, Wildwood, MO 63011-1857, Complainant; Paula Lemerman, Associate County Counselor, County Government Center, 41 South Central Avenue, Clayton, MO 63105, Attorney for Respondent; Philip A. Muehlheausler, Assessor, County Government Center, 41 South Central Avenue, Clayton, MO 63105; John Friganza, Collector, County Government Center, 41 South Central Avenue, Clayton, MO 63105.

___________________________

Barbara Heller

Legal Coordinator

[1] Exhibit 1.

[2] Exhibit 1; Testimony of David Ude.

[3] Article X, section 14, Mo. Const.; Sections 138.430, 138.431, RSMo.

[4] 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); Cupples-Hesse Corporation v. State Tax Commission, 329 S.W.2d 696, 702 (Mo. 1959); May Department Stores Co. v. STC, 308 S.W.2d 748, 759 (Mo. 1958).

[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] 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; Exhibit 1.

[7] 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); 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).

[8] Hermel, Inc. v. State Tax Commission, 564 S.W.2d 888, at 897.

[9] 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).

[10] See, Cupples-Hesse Corporation, supra.

[11]Brooks v. General Motors Assembly Division, 527 S.W.2d 50, 53 (Mo. App. 1975).

[12] 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).

[13] Cohen v. Bushmeyer, 251 S.W.3d 345, (Mo.App. E.D. 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).

[14] Testimony of Mr. Ude.

[15] See, Rossman v. G.G.C. Corp. of Missouri, 596 S.W.2d 469, 471 (Mo. App. 1980).

[16] Courtroom Handbook on Missouri Evidence – 2008, Willaim A. Schroeder, Principle 807 – Residual Exception. Pp. 627-629.

[17] Hermel, Cupples-Hesse, Brooks, supra.

[18] Section 138.432, RSMo 2000.