by Valerie Verkamp
The Platte County Assessor and the Park Hill School District filed court documents to begin a process to review a decision of the Missouri State Tax Commission that could cost the taxing entities more than a quarter of a million dollars in revenue each year.
Platte County Assessor David Cox and the Park Hill School District have petitioned the Platte County Circuit Court urging the court to intervene against a ruling made by the Missouri State Tax Commission that assesses zero property tax against Grady Hotel Investments.
According to court documents, Grady purchased the Kansas City Marriott Hotel, located at 775 N. Brasilia Avenue in Kansas City, in 2015 for $8.5 million. The 384-room hotel is located within the Kansas City International Airport, which is owned by the City of Kansas City.
Under state law, a political subdivision of the state, the city, is exempt from paying property taxes, states court documents. That makes Kansas City exempt from paying property taxes on the airport land. But does that rule extend to those that possess a leasehold interest in property in this domain?
The hotel's previous owner, Host Hotels and Resorts, paid property taxes on the Marriott property, which includes meetings spaces, restaurant and bar, business center, and fitness facility with an indoor pool.
Since the airport property lies within the Park Hill School District boundaries, that hotel tax revenue generated upwards of $1 million for the school district over a four-year period beginning in 2011. With more than 11,000 students enrolled in the district, Park Hill relies heavily on funding generated from property tax assessments.
But following a ruling of the Full Commission of the Missouri State Tax Commission, the true value of hotel will be assessed at $0.00. For the school district, that means a loss of anywhere from $200,000 to $300,000 a year.
Arguably, closer to $300,000 a year since improvements of $1.2 million were made to the hotel property during 2015 and 2016. Following those improvements, the assessor’s office appraised the hotel property at $11,222,000. That was a $2,722,000 increase in value from 2015 to 2016.
The hotel owner disputed the 2016 property taxes and appealed the matter to the Platte County Board of Equalization. The BOE upheld the property assessment, prompting the hotel owner to then appeal the ruling to the Missouri State Tax Commission. Officer John Treu of the Missouri State Tax Commission then decreased the taxable value of the hotel property to $7.3 million.
Despite the property's reduction in value, Grady next appealed to the Full Commission of the Missouri State Tax Commission. Grady Hotels argued their true value in the hotel property was $0.00. Grady Hotel contends although it has an interest in the hotel, they are not the owner of the hotel or land. Court documents state the city is exempt from real property taxes, and Grady Hotels' “leasehold interest has no assessable value.”
The Tax Commission ruled in Grady Hotel's favor, citing the hotel owner's interest in the property is a leasehold interest.
“The decision by the Full Commission of the Missouri State Tax Commission overturned the previous decision in the county's favor by a hearing officer of the Missouri State Tax Commission,” said David Cox, Platte County Assessor.
On July 25, 2018, Cox filed a petition with the Platte County Circuit Court, alleging the hotel owner's interest is “broader than a leasehold and more like an ownership.”
“We have elected to seek judicial review of the decision with the circuit court, as we believe the law better supports our position than it does the decision that was issued,” state Cox. “We believe that this methodology in assessment does not recognize the true market value of the hotel operation, and think it is
worthy of further consideration by our judiciary.”
Robert Shaw, Platte County Counselor, is representing the assessor’s office on this legal matter.
He contends the Full Commission's Order “results in exempting property from taxation, treats property inside and outside of the Kansas City Airport in a non-uniform fashion, conferring a windfall to those inside airport property, and confers an irrevocable grant of special privilege.”
The petition states the Missouri State Tax Commission's order is in violation of the Missouri Constitution and unauthorized by law. It argues that the sale price of $8.5 million is valid evidence of the true value in currency of the “possessory interest” of Grady Hotels.
The Park Hill School District, a proposed plaintiff in the lawsuit, also filed court documents seeking the court to intervene in this case. The district warns if the tax commission's order is not reversed the district will be adversely affected.
“The amount at stake for the school district on this property is between approximately $200,000 and $300,000 each year. This is a significant loss of revenue for the school district and directly affects its ability to educate its students,” wrote Mary Jo Shaney with the law firm Rouse Frets White Goss Gentile Rhodes, P.C.
The petition also points out the school district has a direct “interest in seeing this litigation concluded with the hotel being assessed at the appropriate value,” especially since “it receives the majority of taxes assessed.”
“The county receives significantly less than half of the real property taxes assessed, compared to the higher percentage that goes to the school district,” added Shaney.
Oral arguments are scheduled to be heard before Circuit Court Judge Thomas Fincham at 9 a.m. on June 12 in Platte County Circuit Court.