Missouri State Tax Commission Sets Aside Jefferson County Real Estate Tax Assessment

On March 16, 2011, the Missouri State Tax Commission (“STC”) set aside a Jefferson County, Missouri Assessor’s 2009 and 2010 commercial real estate tax assessment.  The subject property, assessed at $3,111,200.00–the equivalent of a true value of $9,741,300.00–was described by the STC as:

a retail center located off Gravois Rd., High Ridge, Missouri.  There are three retail buildings with parking on 8.56 acres.  There is a 59,263 square foot grocery store, 12,536 square foot multi-tenant building, and a 5,058 square foot stand alone building – a total of 76,857 square feet of rentable area.  All buildings are masonry block buildings with steel beams and joists on concrete floors and are in good condition.  There is an additional 1.42 acres of undeveloped land.  The improvements were built in 2003-4 and sold in 2005 for $13,200,000.  At the time of the sale, the site contained 11.23 acres.  The site is now 9.98 acres due to a dedication of a road right-of-way to Jefferson County.

The Jefferson County Board of Equalization (BOE) affirmed the County’s assessment.  Under Missouri law, there is a “presumption of validity, good faith and correctness of assessment by the County [BOE]”

The STC determined that, under the circumstances, the income approach was the most appropriate method of valuation of the subject property.  “The income approach is based on the theory that an investor will pay no more for a property than what income may be received from an investment with similar income and risks.”  The developed income approach considers the market income and expenses as well as vacancy rates and capitalization rate.  The STC declined to consider that market approach or cost approach, because the number of sales of similar properties was limited and the age or obsolescence of the improvement made the cost approach unreliable.

While both parties’ appraisers appraised the subject property under the income approach–$8,000,000.00 (Complainant’s appraiser) and $9,172,900.00 (Respondent’s appraiser), the STC faulted the Respondent’s appraiser for utilizing a capitalization rate that did not include the effective tax rate.  Consequently, the STC ordered that (1) the assessed valuation as determined by the Jefferson County, Missouri Assessor and Board of Equalization be set aside; and (2) the assessed value of the subject property for tax years 2009 and 2010 was $2,578,880, which is equivalent to a true value of $8,059,000.00.

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