(The Center Square) – The Missouri State Tax Commission sided with the City of St. Louis’ Board of Equalization in a ruling against Ikea’s request to lower its property taxes, but it still received a $13 million tax reduction.
The city found the true value in money of Ikea’s 20-acre site with its 376,538 square-foot building to be $75.7 million on Jan. 1, 2019. Ikea claimed the TVM was $23.4 million.
The Commission accepted the appraisal of Patrick White, an appraiser who testified the fair market value of the property was $62.5 million. He based his amount on the “highest and best use” of the property, which was for continued retail use. The Commission report stated an appraisal by Russell Rench concluded the market value was $20 million, the land value with demolition costs subtracted.
Government leaders in 2015 pointed to the new Ikea as proof of the city’s resurgence. It also gave the Swedish furniture retailer $32 million in tax increment financing.
According to the Commission’s report, Thomas McReynolds, an appraiser for IKEA, testified the public subsidy showed the project was “functionally obsolete the day the last coat of paint was put on and they opened for business.” Ikea also claimed the building’s large size and atypical configuration led to its obsolescence, and its best use was “for a large office building, or several smaller office buildings, in keeping with the other developments” in a neighboring business innovation district. Ikea claimed the best use of the land was “to demolish the existing improvements to make the site available for redevelopment… as if vacant.”
During the proceedings, Ikea requested the city’s appraisal be thrown out due to photographs taken from a non-public area.
The Commission ruled Ikea’s case was “unpersuasive” due to a lack of substantial evidence.
White, the city’s appraiser, testified retailers like Bass Pro or Cabela’s could occupy the existing building, making it properly taxable as a retail entity.
“The market may be limited to relatively few purchasers, but a specialized market is still a market,” the Commission report said. “There is no substantial and persuasive evidence indicating the lack of any market for the subject property as improved.”
Commercial real property is assessed at 32% of its TVM on Jan. 1 of each odd-numbered year according to state statute. The Missouri Supreme Court has ruled TVM is the “fair market value of the property on the valuation date and is a function of its highest and best use, which is the use of the property which will produce the greatest return in the reasonably near future.” The definition was the result of a case where a casino claimed its property should be taxed as a country club and not a gambling facility since that required one of 11 state gaming licenses.