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Union Electric Co. v. Adams

Court of Appeals of Missouri, Eastern District, Fourth Division

November 7, 2017


         Appeal from the Circuit Court of Cape Girardeau County Honorable Stephen R. Mitchell


          Lisa S. Van Amburg, Judge.

         Ameren appeals the judgment of the circuit court affirming the State Tax Commission's valuation of Ameren's real and personal property for purposes of county tax assessments. We reverse and remand for a determination of value applying proper methodology.


         Ameren is a regulated public utility that distributes natural gas to 25 counties in Missouri. Ameren's pipeline consists of both real and personal property subject to county taxation. This appeal involves its property tax assessment in Cape Girardeau County as a representative case among four in the Eastern District and 16 statewide.

         The Commission oversees tax assessments conducted by individual counties. As part of its regulatory function, the Commission requires assessors to collect "such annual reports as shall enable said commission to ascertain the assessed and equalized value of all real and tangible personal property listed for taxation." §138.380.2. To aid in the collection of such information, the Commission has a statutory duty to promulgate uniform reporting forms and instructions for use by assessors and taxpayers. §138.380(2), §138.320. County assessors must strictly comply with all such instructions issued by the Commission. §138.320. And of course, taxpayers must complete and file the forms in accordance with the instructions.

         In 2013, the Commission published a new form and instructions for natural gas companies to report their real and personal property for purposes of valuation and assessment. Both the form and the accompanying instructions directed taxpayers to start with their original costs, as reported to federal and state regulatory bodies, and then apply depreciation, using IRS guidelines and in specific percentages indicated on the form, to arrive at market value. Prior to 2013, value was determined from original cost only, without depreciation.

         Ameren submitted its report in substantial compliance with the Commission's form and instructions.[1] For its assets in Cape Girardeau County, Ameren reported original costs of approximately $42.9 million and a depreciated value of $19.9 million, for an assessed value of $6.4 million. Noting a decrease in relation to previous years, the respondent Assessor questioned Ameren's figures, believing that Ameren had applied double depreciation. As such, the Assessor used an initial figure of $39.5 million and made no deduction for depreciation, for an assessed value of $12.7 million.

         A similar discrepancy occurred in 15 other counties. In each county, Ameren appealed the Assessor's determination to the county Board of Equalization, which sustained the Assessor's valuation. Ameren then appealed all 16 determinations to the Commission, where the cases were consolidated and the parties appeared and adduced voluminous evidence. As relevant here, Ameren established that its figures reflected its actual original costs, as reported to regulatory bodies, minus depreciation, all as required by the Commission's reporting form and instructions. The Assessors established that the 2013 form and instructions deviated from past practices and acknowledged that their suspicion of double depreciation was unfounded. The Assessors then sought to demonstrate that their own valuations were nonetheless valid, based on an appraisal that they commissioned later using different methodologies. As relevant here, that appraisal indicated that the "reproduction cost new" of Ameren's assets in Cape Girardeau County was $81.4 million, yielding an after-depreciation value of $39.8 million, consistent with the Assessor's initial figures. Thus, the proposed valuations can be compared as follows:





$42.9 M original

$39.5 M original

$81.4 M new






$19.9 M

$39.5 M

$39.8 M

Assessed (32%)

$6.4 M

$12.7 M

$12.7 M

         The Commission affirmed the Assessors' valuations, reasoning that Ameren failed to prove the value of its assets with market evidence whereas the Assessors provided support for their valuations with the appraisal. The trial court affirmed the Commission's decision by the same rationale. Ameren appeals and asserts that the Commission erred in that (1) the Assessor misapplied the cost approach method of valuation by failing to account for depreciation, (2) the Commission failed to review Ameren's claim of methodological error but instead weighed the evidence of valuation under an entirely different method, (3) Ameren did present evidence of value, and (4) there is no presumption in favor of the Assessor's valuation.

         While this appeal was pending, the Western and Southern Districts of this court issued opinions in identical representative cases, reversing the Commission's decision and remanding for a determination of value using proper methodology. Union Elec. Co. v. Estes, No. WD80659, 2017 WL 4244396 (Mo. App. W.D. Sept. 26, 2017), motion for rehearing or transfer denied Oct. 31, 2017; Union Elec. Co. v. Tibbs, No. SD34934 (Mo. App. S.D. Oct. 31, 2017). We now concur with our colleagues in analysis and result.

         Standard of Review

         This Court reviews the decision of the Commission and not the decision of the trial court. Snider v. Casino Aztar/Aztar Missouri Gaming Corp.,156 S.W.3d 341, 346 (Mo. 2005). We review to determine "whether the Commission's decision is supported by competent and substantial evidence upon the whole record, or whether it was arbitrary, capricious, unreasonable, unlawful, or in excess of the Commission's jurisdiction." Id., citing §536.140.2. Determining value is an issue of fact for the Commission. Aspenhof Corp. v. State Tax Commission,789 S.W.2d 867, 869 (Mo. App. E.D. 1990). However, "whether the appropriate standard of value and approach to valuation were properly applied under the particular facts and circumstances of the ...

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