Butler County lawsuit examines assessed valuation of low-income housing

POPLAR BLUFF, Mo. -- A summary judgment verdict was requested Friday in a dispute the parties believe could have statewide implications for public entities whose budgets depend on property tax assessments, as well as for occupants of low-income housing.

Judge Michael Ligons expects to rule within the next three weeks on the most recent motion in the four-year court battle between Butler County Assessor Marion Tibbs and Poplar Bluff Associates I. Arguments were heard at the Butler County Courthouse.

The two parties disagree on how valuation should be assessed on 20 duplexes of low-income housing the St. Louis-based company owns on West Maud.

This court case will set a state precedent which will cost the schools and local governments tens of thousands of tax dollars a year if a formula establishing a lower valuation is allowed, according to Tibbs.

If the court ruling forces a higher valuation, Poplar Bluff Associates attorney Richard Dvorak believes owners of low income housing across the state will ask for higher rents. Rent at this type of property is controlled by state regulations and based on income.

The 8.47-acre complex on Route PP was built in 2006 for almost $5.7 million.

The following year, Tibbs used a formula set forth by the State Tax Commission to value the property at nearly $2.7 million. This calculation used actual numbers regarding cost to replace the property and cost to operate the complex.

Property owners appealed the decision to the tax commission, and won a valuation of approximately $888,000. Their experts considered the market value of the property, or what a willing buyer would pay a willing seller.

Tibbs has appealed the state tax commission ruling.

His attorney believes the tax commission violated its own precedent on how these properties are valued. They also say the commission violated the state constitution by creating a taxing classification other than the three established by state constitution -- agriculture, business and residential.

"We ask the court value this housing project in a similar and uniform way to what other properties in the state are valued," said Tibbs' attorney, Patricia Hughes.

Approximately $3.6 million of the money used to fund the project came from the sale of tax credits, Dvorak said, adding the tax commission valued the property as residential. Money from the sale of tax credits may only be used for low-income housing endeavors, making these funds intangible personal property and not subject to taxes, he continued.

Dvorak told Ligons the property generates an income between $11,000 and $12,000 per year. An investor with the freedom to use the original funds in any way would have the opportunity to see a much higher rate of return in other types of projects.

"These type of properties, really what they are is investment properties," Dvorak said.

Hughes disputed the amount considered as income, saying records from the defendant indicate it is about $84,000 per year.

She went on to argue it is the defendants' choice to maintain this property as low-income housing. They would be required to repay money from the tax credit sale if they chose not to operate as low-income housing, but it is still a decision made on their part, she said.

"No one can enter into a contract that would lower the assessed valuation of a property because that treats them differently than other taxpayers in the county," Hughes said. "It taxes differently based on the business you are in and that is not permissible. You have to look at the intrinsic value of the property."

The defendants have entered into a 30-year contract to operate as low-income housing, said Dvorak, adding there is no evidence anyone with this type of property has abandoned their obligation. Only one property of this type has been sold since this system of funding low-income housing was developed in 1986, he said.

Pertinent address:

Poplar Bluff, MO