Rinehart v. Laclede Gas Co.

• Decision Date: 18 August 2020
• Docket Number: WD 83105
• Citation: 607 S.W.3d 220
• Parties: Cathy RINEHART, Assessor Clay County, Missouri, Appellant, v. LACLEDE GAS COMPANY, Respondent.
• Court: Missouri Court of Appeals

607 S.W.3d 220

Cathy RINEHART, Assessor Clay County, Missouri, Appellant,

v.LACLEDE GAS COMPANY, Respondent.

WD 83105

Missouri Court of Appeals, Western District.

OPINION FILED: August 18, 2020

Patricia L. Hughes, Liberty, MO, for appellant.

Carl J. Pesce, St. Louis, MO, for respondent.

Before Division Three: Gary D. Witt, Presiding Judge, Lisa White Hardwick, Judge and Thomas N. Chapman, Judge

Gary D. Witt, Judge

Cathy Rinehart, Assessor of Clay County, Missouri, ("Assessor") appeals from the Circuit Court of Clay County's judgment affirming the State Tax Commission's ("Commission") Order finding the true value in money ("TVM")¹ of Laclede Gas Company's ("Laclede")² personal property was $7,100,000.00 in 2014, and $8,900,000.00 in 2015. The Commission determined the assessed value of Laclede's personal property was $2,366,667.00 in 2014 and $2,966,667.00 in 2015. The Commission also found the TVM of Laclede's real property was $52,500,000.00 in 2015, and its real property's assessed value was $16,800,000.00 in 2015.³ We reverse and remand.

Factual and Procedural Background

Laclede is a utility company that provides natural gas service throughout Missouri by means of gas service lines, mains, and other facilities, and it is regulated by the Federal Energy Regulatory Commission ("FERC") and the Missouri Public Service Commission ("PSC"). Laclede reports the cost of its assets to the PSC, which impacts the rate Laclede charges its customers for its service.

In September 2013, Laclede purchased both real and personal property from Missouri Gas Energy ("MGE") located in Clay County, Missouri.⁴ Its real property consists of underground pipes and gas mains of varying ages, materials, and sizes, and its personal property consists of meters and regulators. Laclede's property also includes new assets that are being constructed and assets that are provided by others to assist in construction and expansion of Laclede's gas distribution system. A dispute arose between the Assessor and Laclede as to the proper TVM of Laclede's real and personal property located in Clay County.

Lindsay Link ("Link"), a Laclede accountant, prepared Laclede's tax declarations using Laclede's Fixed Asset Record, which is filed with the PSC and audited by an outside accountancy firm. The Fixed Asset Record contains the vintage year,⁵ FERC account number, location of property within Clay County, and the original cost of all property. However, the Fixed Asset Record does not include all of Laclede's real and personal property because the PSC does not assess rates based on construction work in progress and assets used during construction. Link determined that prior to Laclede's purchase, MGE had improperly included its meter installation costs in its personal property tax declarations, which resulted in the over-valuation of MGE's personal property.

Rochelle Lafave, Director of Personal Property for the Assessor, disagreed with Laclede's personal property tax declarations and calculated the TVM of Laclede's personal property utilizing MGE's 2012 personal property tax declarations. Gary Maurer ("Maurer"), a general appraiser for the Assessor, disputed Laclede's real property tax declarations. Maurer determined a gas line's life expectancy to be between 50 and 75 years, and Maurer applied a 70-year depreciation schedule to Laclede's assets. Maurer testified that in calculating the TVM of Laclede's real property, he used 1997 as the vintage year of all property installed before 1997 because the data provided by Laclede to the Assessor did not include any vintage years for property installed before 1997.⁶ Maurer acknowledged that the inaccurate vintage years would affect the depreciation schedule and therefore result in a higher assessed value for the older personal property.

Laclede's declared TVM and the Assessor's TVM were as follows:

2014 Personal	2015 Personal	2015 Real
Laclede's Declaration	$6,200,000	$6,400,000	$38,000,000
Assessor's TVM	$11,300,000	$11,100,000	$79,200,000

Laclede appealed the Assessor's valuations to the Clay County Board of Equalization ("Board"). The Board adopted the Assessor's valuations. Laclede appealed the Board's valuations to the Commission, and this appeal was heard by a Senior Hearing Officer on March 29, 2017, and March 30, 2017.

At the hearing, the Assessor called Mika Koyama ("Koyama"), a Systems and Standards Analyst for the Assessor's Office, to testify as an expert as to her valuations of Laclede's real and personal property. Koyama utilized the Unit Value Method⁷ using the cost approach in calculating Laclede's TVM. Koyama determined that Laclede purchased MGE for $975,000,000 and she subtracted the value of MGE's intangible assets, $370,000,000, from the sales price for a total value of the property being $605,000,000. She then determined that 14% of MGE's assets were located in Clay County. Koyama applied a fifty-year depreciation schedule with a 20% floor. Ultimately, Koyama determined the TVM of Laclede's personal property to be $12,000,000 for both 2014 and 2015, and the TVM of Laclede's real property to be $73,763,600 for 2015.

Laclede called Robert Reilly ("Reilly") as its expert witness, and Reilly calculated Laclede's property value utilizing the Unit Value Method using the cost approach, the income approach, and the comparable market approach, giving 40% weight to the cost approach, 40% weight to the income approach, and 20% weight to the comparable market approach. Reilly calculated the total unit value was $1,280,000,000 (cost approach); $1,110,000,000 (income approach); and $1,350,000,000 (comparable sales approach). Applying his assigned weights, Reilly calculated the combined total unit value was $1,226,000,000.

From the total unit value, Reilly subtracted the total value of financial assets and intangible assets ($310,000,000) for an adjusted total unit value of $916,000,000. Reilly calculated that the property located within Clay County was 5.3% of the total unit value for a sub-unit value of $48,500,000. He then found that 14.6% of the sub-unit value comprised Laclede's personal property ($7,100,000) and 85.4% of the sub-unit value comprised Laclede's real property ($41,400,000).

The Commission summarized the relevant valuations as follows:

2014 Personal	2015 Personal	2015 Real
Laclede's Declaration	$6,200,000	$6,400,000	$38,000,000
Assessor's TVM	$11,300,000	$11,100,000	$79,200,000
Board's TVM	$11,300,000	$11,100,000	$79,200,000
Reilly's Testimony	$7,100,000	$8,900,000	$52,500,000
Koyama's Testimony	$12,000,000	$12,000,000	$73,800,000

On September 6, 2017, the Hearing Officer entered his Decision and Order ("Decision"), affirming the Board's TVM. Laclede appealed to the Commission, and on August 7, 2018, the Commission entered an Order Setting Aside Hearing Officer Decision upon Application for Review ("Order") adopting the valuations set forth by Reilly. The Commission determined Laclede's TVM and Assessed Value as follows:

2014 Personal	2015 Personal	2015 Real
Commission's TVM	$7,100,000	$8,900,000	$52,500,000
Commission's Assessed Value	$2,366,667	$2,966,667	$16,800,000

On September 5, 2018, the Assessor filed a Petition for Review in the Circuit Court of Clay County. The circuit court conducted a hearing on July 12, 2019, and entered its Judgment affirming the Commission's Order on August 2, 2019. This appeal timely followed.

Standard of Review

"On an appeal from a judgment of a trial court addressing the decision of an administrative agency, we review the decision of the administrative agency and not the judgment of the trial court." Union Elec. Co. v. Estes , 534 S.W.3d 352, 365 (Mo. App. W.D. 2017) (" Estes ") (quoting Rinehart v. Bateman , 363 S.W.3d 357, 362-63 (Mo. App. W.D. 2012) ). "This court reviews the decision of the [Commission] and not the hearing officer[.]" Rinehart , 363 S.W.3d at 363 (quoting Cohen v. Bushmeyer, 251 S.W.3d 345, 350 n. 4 (Mo. App. E.D. 2008) ).⁸ "Notwithstanding, in our mandate, we reverse, affirm or otherwise act upon the judgment of the trial court." Estes , 534 S.W.3d at 365 (quoting Rinehart , 363 S.W.3d at 363 ). We must determine "whether the [Commission's] findings are supported by competent and substantial evidence on the record as a whole; whether the [Decision and Order] is arbitrary, capricious, unreasonable or involves an abuse of discretion; or whether the [Decision and Order] is unauthorized by law." Id. (quotation omitted). However, "we review the [Commission's] conclusions of law and its decision de novo , and we make corrections to erroneous interpretations of the law." Id. (quotation omitted). "Whether the appropriate standard of value and approach to valuation were properly applied under the particular facts and circumstances of the case is a question of law." Id. (quoting Snider v. Casino Aztar/Aztar Mo. Gaming Corp. , 156 S.W.3d 341, 346 (Mo. banc 2005) ).

Discussion

The Assessor raises one point on appeal asserting that the Commission erred in setting aside the Board's valuations because Laclede failed to meet its burden of proof to present substantial and persuasive evidence to rebut the presumption of correct assessment by the Board in that the evidence of TVM produced by Laclede failed to properly apply accepted appraisal methodologies. Laclede first argues that the General Assembly legislatively abolished the rebuttable presumption that the Board's valuations are correct, and even if the presumption persists Laclede met its burden to rebut them. Therefore, we must first determine whether the 1992 legislative amendments abolished the presumption in favor of boards of equalizations' valuations.

I. The legislative amendments to section 138.431 preserved the presumption in favor of the Board's valuations.

While no statute establishes the rebuttable presumption that the boards of equalizations' valuations are correct, historically the judiciary has recognized a rebuttable presumption that the assessments of county assessors, boards of equalization, and the Commission are correct. State ex...