State ex rel. School Dist. of City of Independence v. Jones

• Decision Date: 31 May 1983
• Docket Number: No. 63781,63781
• Citation: 653 S.W.2d 178
• Parties: 12 Ed. Law Rep. 582 STATE ex rel. SCHOOL DISTRICT OF the CITY OF INDEPENDENCE, et al., Respondents, v. Samuel C. JONES, et al., Appellants.
• Court: Missouri Supreme Court

Page 178

653 S.W.2d 178

12 Ed. Law Rep. 582

STATE ex rel. SCHOOL DISTRICT OF the CITY OF INDEPENDENCE, et al., Respondents, v. Samuel C. JONES, et al., Appellants.

No. 63781.

Supreme Court of Missouri,

En Banc.

May 31, 1983.

John Ashcroft, Atty. Gen., Thomas Schwarz, Madeleine O. Birmingham, Asst. Attys. Gen., Jefferson City, for appellants.

Shirley Ward Keeler, Edward T. Matheny, Jr., Kansas City, Norman Humphrey, Jr., Independence, Jeffrey L. Lucas, Kansas City, Julius M. Oswald, Blue Springs, Harvey M. Tettlebaum, Jefferson City, Donald Earnshaw, Lee's Summit, for respondents.

RENDLEN, Chief Justice.

Defendants appeal the circuit court judgment declaring the State Tax Commission is obligated under § 163.011(4), RSMo., ¹ to consider real and personal property separately in determining the "percent of true value" at which property in each county is assessed and to certify to the State Board of Education assessment ratios applicable only to classes of property studied by the Commission. Defendants contend the trial court erred in (1) overruling their motions to dismiss plaintiff's petition for lack of standing, (2) declaring that § 163.011(4) requires the State Tax Commission and State Department of Elementary and Secondary Education (hereinafter State Department of Education) to consider real and tangible personal property separately in determining "percent of true value," and (3) ordering defendants to pay costs. As § 163.011(4) directly involves disbursement of state funds, we are called upon to construe the state revenue laws and the case falls within our exclusive appellate jurisdiction, State ex rel. Herbert v. Downey, 572 S.W.2d 473, 474 (Mo. banc 1978); Regal-Tinneys Grove Special Road District v. Fields, 552 S.W.2d 719, 720-21 (Mo. banc 1977); State ex rel. Gold v. Dunne, 421 S.W.2d 268, 269-70 (Mo.1967).

Review of this court-tried case is conducted under Rule 73.01, and the judgment will be sustained unless the record reveals no substantial evidence to support it, unless it is against the weight of the evidence or unless it erroneously declares or applies the law. Murphy v. Carron, 536 S.W.2d 30, 32 (Mo. banc 1976). As no objection is raised to the Findings of the Special Master adopted by the trial court, the facts are summarized therefrom.

Plaintiffs are nine Jackson County school districts which, in December, 1980, were notified by the State Tax Commission that the "percent of true value" to be certified for Jackson County and used in the 1981 school foundation formula was 15.2%. The school foundation formula, set forth in § 163.031 ² is the statutory mechanism for distributing appropriated state funds to Missouri school districts. Via the formula, more state money is directed to less wealthy school districts in an effort to provide each school district as many dollars per child as the 85th or 86th or 87th percentile in the state. One factor in the formula is the "equalized assessed valuation of the property of ... [each] school district," as defined in § 163.011(4). ³ The "equalized assessed valuation" of property in a school district is obtained, in part, by multiplying the locally determined assessed valuation of real and tangible personal property in the district times 33 1/3 percent (the percent of true value specified in § 137.115) and then "dividing by either the percent of true value as determined by the state tax commission ... or the average percent of true value for the highest three of the last four years as determined and certified by the state tax commission, whichever is greater," § 163.011(4). The "percent of true value as determined by the state tax commission" is the percent of true value in money at which the State Tax Commission determines property in a particular county (and hence school districts within that county) is actually assessed. For example, the 1980 "percent of true value" certified for Jackson County was 15.2 percent, as compared to the 33 1/3 percent at which property in the county is required by statute to be assessed. Because locally-determined levels of valuation and real and tangible personal property vary from county to county, use in the formula of "equalized" assessed valuations assures a somewhat uniform measurement of school district wealth.

In 1980, as has long been its practice, the State Tax Commission determined the "percent of true value" at which property in Missouri counties was assessed solely from samples of real property tracts. The procedure is described in Chapter 8 of an Assessor's Manual developed by the Commission: Every year, a random sample of real property tracts in each county is appraised by representatives of the State Tax Commission; from a comparison of the assessed valuation of the sample tracts to their appraised market value, a "percent of true value" is calculated for the county and certified to the State Board of Education. When notified in 1980, of the Commission's intent to certify a ratio of 15.2 percent for Jackson County, plaintiffs objected and asked the Commission and State Department of Education to calculate an assessment ratio or ratios reflecting assessment levels of personal as well as real property in the county. Defendants' refusal prompted this suit.

After petition and answer were filed, the trial court appointed a Special Master to hear the evidence and submit findings, conclusions and recommendations. At trial, plaintiffs introduced evidence that in Jackson County tangible personal property is assessed at a higher percent of its value than real property. The director of the Jackson County property division, equivalent to the county collector and assessor, testified that the last equalization or reassessment of real property in Jackson County occurred in 1939. ⁴ Unless a tract of real property has come to the division's attention by reason of new construction, remodeling, demolition, etc., the current assessment is the same as that made in 1939 or 1940. Tangible personal property, in contrast, is valued every year in Jackson County. Each January, personal property declaration forms are mailed to all businesses and individuals. These are self-assessment forms on which personal property is itemized by the taxpayer. Items of business personal property, such as machinery, equipment, vehicles and inventory, are listed on the basis of acquisition. Taxpayers supply values, which are presumed to be 100 percent of true value at the time. After an audit procedure, the assessor applies a 33 1/3 percent ratio to arrive at the assessed valuation. If a business neglects to return the form, the reasonable value of that business's property is estimated from prior returns, norms for the type of business and inflationary trends. The estimated value is considered the true value and 33 1/3 of the "true value" is recorded as the assessed valuation. In addition, the personal property of one sixth to one seventh of all businesses, merchants and manufacturers in Jackson County is physically examined each year in the field. Each year, also, the division sends declaration forms to individuals listing the items of individual personal property on the division's books from previous years. If the listing is correct, the taxpayer need not do anything. If it is erroneous, the taxpayer is asked to correct and return the form. Assessed valuations published by the State Tax Commission or the city assessor of Kansas City or valuations determined by the property tax division itself are assigned to items of individual personal property. There was testimony that 80 to 90 percent of the personal property in the state is located in four or five counties and personal property assessments account for 40 to 45 percent of Jackson County's tax base.

For their part, defendants introduced evidence that conducting a statistically valid ratio study of personal property assessments would be impractical if not impossible. Locating a valid sample to examine and appraise would be a major obstacle. Unlike real property, which is stationary and reported in the county of its location, personal property is mobile and reported in the county where its owner lives.

In 1975, State Auditor George Lehr conducted a tax ratio study as part of an audit of the State Tax Commission and determined that the ratio of assessed value to true value for real property varied widely throughout the state. His report caused a stir and in 1977 a special subcommittee was established in the State House of Representatives to study the situation. The subcommittee held hearings during which commission procedures for conducting ratio studies of real property were described in detail. Thereafter, the tax commission acting with the subcommittee and House and Senate Appropriations Committees developed the procedures used in today's ratio studies of real property assessments. In order for these procedures to be utilized immediately, the legislature in 1978 adopted § 163.033, which required recertification of ratios that year.

After hearing this evidence, the Special Master submitted Findings, Conclusions and Recommendations. The trial court adopted the Master's Findings and Conclusions and entered judgment, ruling plaintiffs had standing to maintain the action for declaratory relief and injunction and declaring as follows:

... [T]he Tax Commission is obligated by § 163.011(4) to certify a ratio or ratios for equalization of assessments to which the Tax Commission by its study has determined that it or they are applicable. It is obligated to consider real property and personal property separately. Under the statute the Commission could make separate ratio studies for real and for personal property and then arrive at a composite ratio for equalizing real and personal property assessments in the school district or it could certify separate ratios for equalizing real and personal property assessments in the school district. Either would be permissible under § 163.011(4). If the...