Industrial Development Authority of Kansas City v. State Tax Com'n of Missouri, WD
| Decision Date | 08 January 1991 |
| Docket Number | No. WD,WD |
| Citation | 804 S.W.2d 387 |
| Parties | INDUSTRIAL DEVELOPMENT AUTHORITY OF KANSAS CITY, Appellant, v. STATE TAX COMMISSION OF MISSOURI, Ralph N. Smith, Van E. Donley, and Robert E. Coleman, Respondents. 43836. |
| Court | Missouri Court of Appeals |
Jerome Wallach, St. Louis, W.H. Bates, Kansas City, for appellant.
William J. Gnefkow, Kansas City, for respondents.
Before GAITAN, P.J., and TURNAGE and KENNEDY, JJ.
This appeal involves the judicial review of a decision and order of the State Tax Commission (STC) in a property assessment appeal. The taxpayer, and appellant herein, is the Industrial Development Authority of Kansas City. The taxpayer claims that STC failed to equalize its property at the true and correct average level of assessment in Jackson County in that the STC's assessment was based on an appraisal ratio study instead of the sales ratio study advocated by appellant.
The appellant has stated three reasons it believes the STC and the trial court which upheld the STC erred. However, we believe the real issue is whether or not the STC's appraisal ratio study was proper and nondiscriminatory. We affirm.
This appeal involves application of revenue laws previously construed by the Supreme Court and therefore is properly before this Court. Affiliated Medical Transp., Inc. v. State Tax Comm'n, 741 S.W.2d 25, 27 (Mo. banc 1987). Our review of the STC decision is to determine whether or not it is supported by competent and substantial evidence upon the record as a whole, or whether it is arbitrary, capricious, unreasonable, unlawful, or in excess of its jurisdiction. Evangelical Retirement Homes of Greater St. Louis, Inc. v. State Tax Comm'n, 669 S.W.2d 548, 552 (Mo. banc 1984). Further, the proper method of valuation and assessment of property are delegated to the STC. C & D Inv. Co. v. Bestor, 624 S.W.2d 835, 838 (Mo. banc 1981). In reviewing the STC decision, the evidence must be considered in the light most favorable to the administrative body, together with all reasonable inferences which support it. If the evidence would support either of two opposed findings, the reviewing court is bound by the administrative determination. Hermel, Inc. v. State Tax Comm'n, 564 S.W.2d 888, 894 (Mo. banc 1978).
Counsel for the commission called James Follina, manager for the Ratio Study Section of the STC, to testify regarding the 1987 Jackson County assessment ratio study conducted by the commission. Follina is in charge of conducting annual ratio studies for the commission for all the taxing jurisdictions in the state. As project director for the 1987 Jackson County study, Follina developed the guidelines and procedures used, instructed personnel, supervised the process from beginning to end, and assured compliance with the procedures.
Mr. Follina explained how a random sampling computer program selected the parcels used in the 1987 Jackson County study. After the parcel numbers for the study were selected at random, an appraiser located the parcels on a map. The appraiser then inspected and appraised each sample property. The appraiser had no access to the assessed values of the properties until after the appraisals were complete. The initial appraisals were put through a mathematical audit at the commission's offices in Jefferson City and were then sent to a review appraiser. The review appraiser determined if the value on the property record card prepared by the appraiser was a fair representation of value for the property. After the review by the review appraiser, the property record cards were reviewed by Mr. Unruh, the assistant manager of the ratio study for the commission.
The appraisers then met with county officials to acquire additional data. Follina analyzed this additional data to determine whether any changes were required in the appraisal.
The raw data, appraised values, and the respective assessed values for the sample parcels were analyzed statistically to extrapolate a number of inferences regarding the class of commercial property. The measures of central tendency for commercial property in Jackson County for 1987 were: mean ratio of 34.39 percent; median ratio of 32.04 percent; and weighted ratio of 31.04 percent. Follina testified that he used the median ratio to adjust an individual assessment.
Follina stated, and it was undisputed, that the International Association of Assessing Officers considers a ratio within ten percent of the statutory level to be within acceptable standards.
Timothy Beyer, the appraiser who valued the sample parcels for the 1987 Jackson County commercial ratio study, testified as follows. During August and September of 1987, Beyer worked for more than 20 days (8 hours per day) to complete his responsibilities of inspecting the properties and their respective neighborhoods and gathering information regarding these properties. Beyer relied on commission and county sales files, realtors and real estate brokers, property managers, and anyone with information on the sample properties. Beyer submitted the finished appraisals to the commission for a mathematical audit after which they were sent to the review appraiser.
While Beyer admitted he relied on the commission's sale and rental files to obtain information for the appraisals, evidence of comparable rentals is admissible in valuing property for tax purposes. Frontier Airlines, Inc. v. State Tax Comm'n, 528 S.W.2d 943, 948 (Mo. banc 1975). He did not personally verify sales information from the commission sales file. On properties for which no specific sales information was available, he consulted with realtors and brokers familiar with the property regarding land values. Beyer testified that in his opinion as an expert appraiser, the final appraised values stated on the property record cards reflect the true value in money of the subject properties on January 1, 1987.
Alfred C. Thomas was the review appraiser. He reviewed all of Beyer's appraisals for conformance with appraisal procedures. After the review was completed, Thomas obtained the assessed values of the sample properties.
Thomas testified that he compiled and maintained the sales file on which Beyer relied for his appraisals. Thomas verified the data in the file and relied heavily on the Jackson County sales files as well. He made it a point not to include unreliable information in the file and noted that it is common practice to rely on sales data from other appraisers.
Thomas testified that the purpose of meeting with the county assessor is to hear the assessor's side and convey it to the commission. He stated that he has never tried to match the property values and assessments to achieve a particular ratio.
On cross-examination, Thomas testified that he did not know the people Beyer talked to when doing his appraisals and that that information could not be determined from the property record cards. Thomas noted that appraisal is not an exact science and that appraisal reports interpreting specific data are glazed over with a layer of subjectivity. Thomas admitted that it is a tough job to appraise odd parcels and the appraiser can get to the point where he must pick a number based solely on his judgment.
Dr. D. Richard Madsen, professor of statistics at the University of Missouri-Columbia, testified concerning the statistical soundness of the commission's sampling procedure. A basic tenant of statistical theory is that a sample must be randomly selected. Without randomness, reliable inferences regarding the underlying population are seriously questionable. If a random sample is drawn from the entire population of commercial property there would tend to be a mix of different types of property in the sample close to the mix in the underlying population. Accordingly, Madsen testified that the key to accuracy in the commission study was the randomness of the selected properties. Dr. Madsen testified that the commission sampling procedures produced good randomness. He stated that randomness and representativeness are not interchangeable concepts. Randomness can be quantified mathematically, whereas representativeness is a more subjective concept.
Madsen testified that the same statistical rules would apply whether one is doing an appraisal or a sales study, including drawing a random sample. When the sample is drawn only from property which has sold that would be the only group for which inferences can be drawn, and those inferences do not necessarily indicate the assessment level of all the commercial property in the county.
James T. Job, an appraiser called by appellant, testified that the sales used were distributed throughout Jackson County and were spread over a large price range. Job had never participated in a ratio study before and received no written instructions regarding this study. His only instructions for doing the study were verbal communications which he passed on to his associates. After eliminating a number of sales for various reasons, he arrived at a sample of 31 sales. He stated that it is a common practice among appraisers to utilize and rely on sales data gathered by other appraisers without personally verifying the data. He...
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...preponderance of the evidence that the property was improperly classified or valued. Industrial Development Authority of Kansas City v. State Tax Commission of Missouri, 804 S.W.2d 387, 392 (Mo.App.1991). Taxpayers did not present substantial, competent evidence to meet this burden of proof......
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