Opinion ID: 2124844
Heading Depth: 1
Heading Rank: 10

Heading: The Commission's Valuation Standard

Text: The commission accepted the valuation standard and approach proposed by Aztar. The commission relied predominantly on the income approach to value the real property, supported by the comparable sales approach and the replacement cost approach. Aztar based all three of the approaches on use of its property as a country club. Although Aztar's expert conceded that the highest and best use of the property is as a gaming facility, he maintained that because possession of a gaming license is a critical factor in the price actually paid for the property, accepted valuation approaches should be applied to casino property using an alternate second-best use of the property as the applicable standard. In advocating a second-best use standard, Aztar misinterprets the law to hold that property's true value in money is something less than its highest and best use when that highest and best use cannot be enjoyed by anyone who owns the property. It is true that property can only be valued according to a use to which the property is readily available. But this does not mean that in order for a specific use to be the highest and best use for calculating the property's true value in money, that particular use must be available to anyone deciding to purchase the property. Highest and best use does not look at the characteristics of the owner  such as possession of a casino use license or the goodwill of a corporate owner. Highest and best use looks only at the qualities of the property itself  such as the location, improvements and terrain of the property. Because of these rules, Equitable Life Assurance Society, 852 S.W.2d at 381, when addressing the true value in money of a hotel, correctly states: [W]hat is at issue for tax assessment purposes is not the value of the ... hotel; it is the value of the real property which is being used to operate a ... hotel. Therefore, the value of the ... franchise and business acumen must be excluded if one is to value the property. In accepting Aztar's proposed valuation standard, the commission ignored the rule of valuation for tax assessment purposes that a property's true value in money must be determined by valuing the property at its highest and best use regardless of the personal characteristics of a potential owner of the property. Valuing Aztar's property using any other standard undervalues the property. Here the commission undervalued the property by considering the fact that a casino license must be obtained by the property owner to use the property as a casino. That is not a factor in the highest and best use analysis. The parties agree that Aztar's property's highest and best use is as a gaming casino. The commission, however, crafted a new legal standard for valuing licensed gaming facilities  the next most profitable commercial activity. Under the commission's decision, when the highest and best use of property can occur only if a license is issued, the property should be valued according to the next best use  the best use that could be made without the license. By applying one standard to most commercial properties but a different standard to casinos, the commission created a valuation subclass of commercial property. This violates both article X, section 4(b) of the Missouri Constitution and section 137.115. As a matter of law the commission had to use the highest and best use standard when determining the value of Aztar's property for taxation purposes. A determination of the true value in money cannot reject the property's highest and best use and value the property at a lesser economic use of the property. Union Quarry & Const. Co., 394 S.W.2d at 304-307.