State Tax Commission of Missouri

JOHN KOVACH, )

)

Complainant, )

)

v. ) Appeal Number 09-12290

)

MICHAEL BROOKS, )

ACTING 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 AFFIRMED. True value in money for the subject property for tax years 2009 and 2010 is set at $447,800, residential assessed value of $85,080. Complainant appeared pro se. Respondent appeared by Associate County Counselor Paula J. Lemerman

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

ISSUE

Complainant appeals, on the ground of discrimination,[1] the decision of the St. Louis County Board of Equalization, which sustained the valuation of the subject property. The Commission takes this appeal to determine the true value in money for the subject property on January 1, 2009. The Hearing Officer, having considered all of the competent evidence upon the whole record, enters the following Decision and Order.

FINDINGS OF FACT

1. Jurisdiction. 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. Evidentiary hearing was held on June 21, 2010, at the St. Louis County Government Center, Clayton, Missouri.

2. Assessment. The Assessor appraised the property at $447,800, residential assessment of $85,080. The Board of Equalization sustained the assessment.

3. Subject Property. The subject property is located at 39 Picardy Hill Dr., Chesterfield, Missouri. The property is identified by parcel number 20T220445. The property consists of 6,552 square foot lot improved by a story and a half brick and frame, single-family structure of good quality construction. The house was built in 2000 and appears to be in good physical condition. The residence has a total of eight rooms, with three bedrooms, two full and one half baths, and contains 2,844 square feet of living area. There is a full unfinished basement and an attached two-car garage.[2]

4. Complainant’s Evidence. Complainant testified in his own behalf. Mr. Kovach stated his opinion of what he considered to be a fair and equitable value for the subject property when compared to the appraisal values placed on some other properties in the subdivision. That opinion was $402,500. The following exhibits were offered into evidence by the taxpayer:

EXHIBIT	DESCRIPTION	DISPOSITION
1	Comparison Appraised Value to Purchase Price-42 properties	Obj[3] - Received
2	Review of Mass Appraisal Sales Grid	Obj Page 2[4] -Excluded
3	Summary Statement of Complainant	Received

Complainant’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, 2009, to be $402,500, as proposed. Complainant’s evidence was not substantial and persuasive to establish an intentional plan by the Assessor and/or the Board of Equalization to assess the subject property at a ratio greater than the statutory ratio of 19% or the average residential assessment ratio for 2009 for St. Louis County. There was no evidence of new construction and improvements during 2009. Therefore the assessment for 2009 remains the assessment for 2010.[5]

5. Respondent’s Evidence. Respondent presented the appraisal report[6] and testimony of Sarah Curran, Missouri Certified Residential Real Estate Appraiser. Ms. Curran developed the sales comparison approach to arrive at a conclusion of fair market value of $502,000. The properties relied upon by Respondent’s appraiser were comparable to the subject property.[7] The three properties were located within less than two-tenths of a mile of the subject. Two sales were on the subject street. One being the unit attached to the subject. The third sale was located on a neighboring street in the subject subdivision. Each sale property sold at a time relevant to the tax date of January 1, 2009. 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. Appropriate adjustments were made to account for differences between each comparable and the subject.

Respondent’s evidence met the standard of substantial and persuasive to establish the value of the subject, as of January 1, 2009, to be $502,000. However, Respondent’s appraisal was accepted only to sustain the original assessment made by the Assessor and sustained by the Board and not for the purpose of raising the assessment above that value. Respondent meet the standard of clear, convincing and cogent evidence in this appeal to sustain the original valuation of $447,800.

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.[8]

Presumptions In Appeals

There is a presumption of validity, good faith and correctness of assessment by the County Board of Equalization.[9] The presumption of correct assessment is rebutted when the taxpayer, 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.[10] When asserting a claim of discrimination – inequitable assessment – the presumption is rebutted when the taxpayer establishes that the subject property is being assessed at a ratio greater than 19% of its true value in money or at a ratio greater than the average residential assessment ratio for the given county for the current assessment cycle. Complainant failed to present substantial and persuasive evidence to rebut either presumption and prove either true value in money or an inequitable assessment. See, Complainant Fails to Prove Value and Complainant Fails to Prove Discrimination, infra.

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.[11] It is the fair market value of the subject property on the valuation date.[12] 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, Complainant must present an opinion of market value[17] and substantial and persuasive evidence that the proposed value is indicative of the market value of the subject property on January 1, 2009.[18] 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.”[19]

Substantial evidence can be defined as such relevant evidence as a reasonable mind might accept as adequate to support a conclusion.[20] 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.[21]

Owner’s Opinion of Value

The owner of property is generally held competent to testify to its reasonable market value.[22] The owner’s opinion is without probative value however, where it is shown to have been based upon improper elements or an improper foundation.[23] In the present case, the owner did not testify as to what he believed a willing buyer and seller would have agreed to as a sale price on January 1, 2009. The opinion of value proffered was the owner’s opinion of what he believed would be a fair or equitable value in light of the information that was presented in Exhibit 1. Accordingly, the owner’s opinion of value does not meet the required evidentiary standard of testifying as to fair market value. Nor does the documentation given in support of the value of $402,500 provide a value based upon proper valuation elements or a proper appraisal foundation. No probative weight can be given to the owner’s opinion in this instance as it was not an opinion reflective of the Standard for Valuation under which the appeal must be decided. In addition, under questioning by the Hearing Officer, Mr. Kovach admitted that the property had been appraised in 2008 or 2009 for refinancing of a loan. Under cross-examination by Ms. Lemerman, the taxpayer confirmed that the property had appraised out at $470,000 for the refinance. The owner’s own testimony on this point raises serious question that the fair market value of the property under appeal on January 1, 2009, would have been only $402,500.

Valuation Methodology

For his valuation methodology, Mr. Kovach listed 42 out of the 86 units in the subject subdivision which were determined from his review of county records to be appraised for the 2009 reassessment at values less than either their original sales prices or their most recent resale prices. From this he concluded that these properties were appraised at 9.4% below their most recent sales price.[24] He then applied this percentage to the appraised value for the subject as determined by the Assessor of $447,800 to arrive at his equitable value of $402,500.[25] This methodology is not recognized as an appropriate appraisal approach, nor has it been established to be a correct methodology to establish an inequitable or unfair, i.e. discriminatory, assessment. Complainant failed to provide the assessment information on the other 43 units in the subject subdivision, which along with the subject apparently had appraised values by the county above the original or latest sales prices. Furthermore, of the 42 properties relied upon by Mr. Kovach, only five had sold in 2008, all others had sold in a time frame from July 1998 to December 2006. None of the sale prices on the 37 properties that had sold more than two years prior to the assessment date of January 1, 2009, would have been sales at a time relevant for valuation in the 2009-10 assessment cycle. In short, Exhibit 1 and the methodology employed by Mr. Kovach fails to establish the true value in money for the subject, nor does the Exhibit established an inequitable or unfair assessment, as will no be addressed.

Complainant Fails to Prove Discrimination

Where there is a claim of a lack of valuation consistency, inequitable, or unfair assessment[26] the Complainant has the burden to prove the level of assessment for the subject property for the applicable assessment cycle. In this appeal the assessment for 2009-10 is the applicable cycle. Proving the assessment level or ratio on the property under appeal is done by independently determining the market value of the subject property and dividing the market value into the assessed value of the property as determined by the assessor’s office.

Furthermore, the taxpayer claiming an inequitable assessment must establish that his property is in fact being assessed at a greater percentage of value than other property, generally, within the same class within the same taxing jurisdiction.[27] Evidence of value and assessments of a few properties does not prove discrimination. Substantial evidence must show that all other property in the same class, generally, is actually undervalued.[28] The difference in the assessment ratio of the subject property the average assessment ratio in the subject county must be shown to be grossly excessive.[29] No other methodology is sufficient to establish discrimination.[30]

In order to establish the average or median level of assessment for residential property in St. Louis County for 2009, there are four steps which must be taken. First, there must be a determination of the market value of a representative sample of residential properties in St. Louis County. This is accomplished by either actual sales data or appraisals for the properties making up the representative sample. The critical factor in this step is that the sample must be representative of all St. Louis County residential properties. A sampling, as was done in this instance by Mr. Kovach of only a select number of properties, in a single subdivision does not qualify as a representative, or a statistically significant sample for St. Louis County. Because of the intentional exclusion of all properties that were appraised by the Assessor above their original or latest sales price, the Kovach sample would not qualify as a representative sample of even the subdivision.

The second step is to determine the assessed value placed on each of the properties in the sample by the assessor’s office for the relevant year. This is necessary to provide the data to arrive at a determination of what the actual assessment ratio for each of the sample properties is. The assessed value on each property is a matter of record in the assessment files. Once the assessed value and the market value for each of the properties in the sample is established, the third step can be performed.

The third step is the simple division of the assessed value for each property by the amount determined to be the fair marked value of the property as of January 1, 2009. This arithmetic calculation produces the level of assessment on each of the sample properties as a percentage of value of the market value.

The final step is to establish the mean and median of the sample assessment ratios.

Evidence of Increase in Value

In any case in St. Louis County where the assessor presents evidence which indicates a valuation higher than the value finally determined by the assessor or the value determined by the board of equalization, whichever is higher, for that assessment period, such evidence will only be received for the purpose of sustaining the assessor’s or board’s valuation, and not for increasing the valuation of the property under appeal.[32] The evidence presented by the Respondent was substantial and persuasive to rebut the presumption of correct assessment by the Board and establish the fair market value of the property under appeal, as of January 1, 2009, to be $502,000. However, under the Commission rule just cited and Supreme Court decision[33] the assessed value cannot be increased above $85,080 in this particular appeal.

Respondent’s Burden of Proof

The Respondent has imposed upon him by the provisions of Section 137.115.1, RSMo, the burden of proof to present clear, convincing and cogent evidence to sustain a valuation on residential property which is made by a computer, computer-assisted method or a computer program. There is a presumption in this appeal that the original valuation, which was sustained by the Board of Equalization, was made by a computer, computer-assisted method or a computer program. There was no evidence to rebut the presumption, therefore, in order to sustain the valuation of the subject property at $447,800, appraised value, Respondent’s evidence must come within the guidelines established by the legislature and must clearly and convincingly persuade the Hearing Officer as to the value sought to be sustained.

The statutory guidelines for evidence to meet the standard of clear, convincing and cogent include the following:

(1) The findings of the assessor based on an appraisal of the property by generally accepted appraisal techniques; and

(2) The purchase prices from sales of at least three comparable properties and the address or location thereof. As used in this paragraph, the word comparable means that:

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 AFFIRMED.

The assessed value for the subject property for tax years 2009 and 2010 is set at $85,080.

Application for Review

A party may file with the Commission an application for review of this decision within thirty days of the mailing date set forth in the Certificate of Service. 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. [38]

Disputed Taxes

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 July 2, 2010.

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 2^nd day of July, 2010, to: John Kovach, 39 Picardy Hill Dr., Chesterfield, MO 63017, Complainant; Paula Lemerman, Associate County Counselor, County Government Center, 41 South Central Avenue, Clayton, MO 63105, Attorney for Respondent; Michael Brooks, Acting 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] Complainant did not make the ground of Discrimination on the Complaint for Review of Assessment, however, the evidence presented and the arguments made at hearing were directed toward what the taxpayer characterized as fiar and equitable treatment in assessment related to other properties in the subdivision.

[2] Exhibit A: Sales Grid, Pages 1 & 2 of 4

[3] Objection was made on the grounds of Hearsay, Lack of Foundation, utilization of less than half the subdivision units for the analysis. Objection was overruled, notwithstanding the document was based upon hearsay and no foundation was laid to establish that the methodology was sufficient to establish a claim of discrimination. The exhibit was only received to illustrate the basis for Mr. Kovach’s claim of and inequitable and unfair assessment of his property.

[4] Objection was made on the grounds of lack of foundation as to the methodology shown on the second page. The objection was sustained and the second page was excluded. The County’s mass appraisal data sheet was received, without objection.

[5] Section 137.115, RSMo

[6] Exhibit A

[7] Complainant agreed that the three sales used by Ms. Curran were good comps and the only recent sales in the subject subdivision that could be utilized to appraise the subject.

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

[9] 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).

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

[11] 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).

[12] Hermel, supra.

[13] 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.

[14] Exhibit A – Certification Page

[15] 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).

[16] 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).

[17] Notwithstanding that Complainant was not actually challenging the fair market value of the property, but was asserting the valuation was not fair and equitable because other properties had received a lowered appraised value by the Assessor and the taxpayer’s appraised value had been increased, the Complainant still bore the burden of establishing the market or true value in money of the property as of the valuation date.

[18] Hermel, supra.

[19] 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).

[20] See, Cupples-Hesse, supra.

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

[22] 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).

[23] 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).

[24] For purposes of rendering this Decision, the Hearing Officer assumes but does not find that the data provided in Exhibit 1 is correct.

[25] It is noted: $447,800 x .094 = $42,093, rounded to $42,100. $447,800 - $42,100 = $405,700, not $402,500.

[26] All terms that fall under the umbrella of a claim of discrimination.

[27] Koplar v. State Tax Commission, 321 S.W.2d 686, 690, 695 (Mo. 1959).

[28] State ex rel. Plantz v. State Tax Commission, 384 S.W.2d 565, 568 (Mo. 1964).

[29] Savage v. State Tax Commission of Missouri, 722 S.W.2d 72, 79 (Mo. banc 1986).

[30] Cupples-Hesse, supra.

[31] Savage, supra.

[32] Section 138.060, RSMo; 12 CSR 30-3.075.

[33] The Supreme Court of Missouri has interpreted Section 138.060. The Court stated:

“Section 138.060 prohibits an assessor from advocating for or presenting evidence advocating for a higher ‘valuation’ than the ‘value’ finally determined by the assessor. ... . Because the legislature uses the singular terms ‘valuation’ and ‘value’ in the statute, however, it clearly was not referring to both true market value and assessed value. While the assessor establishes both true market value and assessed value, which are necessary components of a taxpayer’s assessment, as noted previously, the assessed value is the figure that is multiplied against the actual tax rate to determine the amount of tax a property owner is required to pay. The assessed value is the ‘value that is finally determined’ by the assessor for the assessment period and is the value that limits the assessor’s advocacy and evidence. Section 138.060. By restricting the assessor from advocating for a higher assessed valuation than that finally determined by the assessor for the relevant assessment period, the legislature prevents an assessor from putting a taxpayer at risk of being penalized with a higher assessment for challenging an assessor’s prior determination of the value of the taxpayer’s property.” State ex rel. Ashby Road Partners, LLC et al v. STC and Muehlheausler, 297 SW3d 80, 87-88 (Mo 8/4/09)

[34] Section 137.115.1(1) & (2).

[35] Grissum v. Reesman, 505 S.W.2d 81, 85, 86 (Mo. Div. 2, 1974).

[36] 30 AmJur2d. 345-346, Evidence section 1167.

[37] Matter of O’Brien, 600 S.W.2d 695, 697 (Mo. App. 1980).

[38] Section 138.432, RSMo.