In the case of Aida Renta Trust v. Maricopa County the Arizona Court of Appeals recently affirmed a trial court decision finding that Maricopa County engaged in unconstitutional, discriminatory property tax valuation procedures. It appears as though Maricopa County decided to value properties within the same class (apartments) differently. The Decision states: 

“The County did not merely make an appraisal error; it applied a wholly different valuation procedure to properties within the same class. The County acted purposefully. The multiple incidences reaffirm the belief that they are systematic and intentional. We do not believe repeated taxation conduct is a random mistake.”

In the recently decided case of Target Corp. v. Green County Board of Revision, the Supreme Court of Ohio affirmed a BTA decision finding that the taxpayer’s appraiser properly valued a big box retail property by utilizing second-generation sales and lease rates. 

In this instance the appraiser utilized sales and rentals of two abandoned Ames stores and two abandoned Kmart stores to arrive at an opinion of value. The decision reads: 

“After a lengthy discussion of big-box marketability, the appraisal states that ‘the fee simple market value of these properties is substantially lower than replacement costs, not only due to physical depreciation but also obsolescence. This obsolescence occurs the day they are completed thus even brand new big box stores are worth less than their cost to rebuild’” 

This is a good case for big box taxpayers in Ohio. I think it fairly and realistically addresses the market value for big boxes after “the name” vacates the property.

Yesterday Governor Charlie Crist signed HB 521 into law. The legislation supposedly shifts the burden of proof (at least in part) to the property appraiser relating to property tax appeals. The Governor’s press release states: 

“This bill makes it easier for Floridians to challenge property appraisers’ valuation of their properties and also helps to ensure a more fair valuation. Previously, Florida law left the burden of proof to the taxpayer and presumed an appraiser’s assessment was correct. This legislation provides that taxpayers who can present evidence that is more convincing than the property appraiser’s assessment will be entitled to a revised assessment.” 

However, the actual language of the bill is not quite as clear. 

Section 1 states: 

“In any administrative or judicial action in which a taxpayer challenges an ad valorem tax assessment of value, the property appraiser’s assessment is presumed correct if the appraiser proves by a prepondeance of evidence that the assessment was arrived at by complying with s. 193.011, any other applicable statutory requirements relating to the classified use values or assessment caps, and professionally accepted appraisal practices, including mass appraisal standards, if appropriate.” 

So far so good. The property appraiser needs to prove that the assessment is correct, hence placing the the burden of proof on the property appraiser. 

But then section 2 states: 

“In an administrative or judicial action in which an ad valorem tax assessment is challenged, the burden of proof is on the party initiating the challenge” 

Is it just me or is there a contradiction here?

In the recently released case of J.C. Penny Corporation v. Town of Manchester the Connecticut Appellate Court affirmed the trial court’s decision denying J.C. Penny’s appeal of it’s personal property assessment, finding that J.C. Penny failed to meet the burden of proof that it had been aggrieved by the assessor’s actions. 

J.C. Penny filed an amended declaration of it’s personal property assets along with a statement indicating that the declaration contained a large amount o ghost assets and that they reserved the right to appeal the assessment after a physical inventory was completed. The assessor then established the assessment according to the filed declaration. J.C. Penny appealed the assessment administratively, to Superior Court and then to the Appellate Court. 

The Appellate Court’s decision states: 

“The critical document in the present case is the plaintiff’s amended declaration, filed with the assessor on December 5, 2005. There are, in effect, two ways in which to characterize the plaintiff’s amended declaration: (1) as a complete filing of all of its personal property for the given tax year; or (2) as an incomplete filing. In either respect, the plaintiff has failed to meet its initial burden of demonstrating that it has been aggrieved by the actions of the town assessor.” 

The decision then goes on to indicate that it is a taxpayer’s obligation to file a timely, complete and accurate declaration. If the taxpayer fails to do so then the assessor is entitled to rely upon the best available information in valuing the property. Therefore, by seeking a reduction after filing the amended declaration the taxpayer was essentially requesting a “do-over”, which is not permitted by law. 

I would be interested to hear your take on this case.

This past weekend I came across two interesting articles: 

Programs across county at risk if GM wins tax appeal focuses on the potential impact of Genesee County municipalities if GM wins it’s tax appeals seeking a cumulative reduction of it’s assessments from $140.5 million to $36.1 million. 

Mercer rocked by tax appeals; corporate giants contest their bills provides opinions on tax appeals by Bristol-Myers, Merrill Lynch, J.C. Penny, Macy’s and other “corporate giants”. 

It’s interesting how two articles that were published a day apart, focusing on different areas of the country with very different tax systems and pertaining to different property types are actually quite similar. 

Call it a glimpse into the current property tax appeal environment.

Don’t be surprised if the assessor’s office doesn’t welcome you with open arms when you file an appeal this year. Times are tough all around and taxing jurisdictions are no exception. Sales and income tax revenues are down and everyone knows that property taxes are in for a beating. When exactly the beating will take place seems to be a point of contention. If the volume of appeals being filed is any indication, taxpayers are claiming that the decline in values should be recognized now. Whereas, it appears as though assessor’s offices are claiming that value declines have not yet been reflected in the market. In other words, they seem to be taking the position that taxpayers will need to prove a decline in value. I discussed this issue in my earlier post Quantification Is King. 

So, what can we expect for 2009 appeals? 

• Due to assessor’s offices throughout the country receiving appeals near or at record numbers, large backlogs will be the norm. 
• Taxing jurisdictions may be reluctant or unwilling to settle cases due to budgetary concerns or time constraints.
• Assessor’s offices will, most likely, rely on the fact that a taxpayer carries the burden of proof in an appeal and proving values may be difficult due to the lack of recent transactions. 

For these and other reasons diligence and creativity will, no doubt, prove to play a very important role in 2009 property tax appeals.

Why we need to be diligent in conducting property tax assessment reviews. 

There are situations where, because of the ridiculous run up on property values over the past few years, a property’s assessment may have lagged behind the market and may have been under assessed. Even with the recent dramatic declines in property values the property may still be equitably or under assessed. 

Let’s say that you receive your 2009 assessment notice indicating the assessment of a property to be $1,000,000. The property was assessed at $1,000,000 for the 2008 tax year as well. Some might immediately say that there is no way the property is worth the same amount in 2009 as it was in 2008 and an appeal needs to be filed. However, let’s say that in 2008 the actual market value of the property was closer to $1,500,000, not the $1,000,000 that it was assessed at. If the value of the property has decreased by 30% between 2008 and now, the property might still be fairly assessed at $1,000,000. 

Without a proper review of the current and past market values of the property you might find yourself trapped into an unwarranted appeal. At best, money and resources are dedicated to an appeal with no savings potential and, at worst, you could find yourself fighting an increase. 

There are many savings opportunities out there and, of course, we need to be aggressive in discovering and pursuing them. However, we also must maintain a rational and diligent approach.

This is the first of a few posts I will make over the next few days to share my thoughts on a few issues that I think are worth consideration as we work our way through the 2009 appeal season. 

The 2009 property tax appeal frenzy is well underway. It’s sure to be one of busiest years in recent memory. There’s also no reason why it shouldn’t prove to be one of the most productive years in a long time. However, I think that there may be some misconceptions about what to expect and, perhaps as important, what not to expect.

 I think we all agree that values have declined. It’s close to impossible to argue otherwise. That said, we are not going to find ourselves ”shooting fish in a barrel”. 

There’s more to it than simply raising our arms and saying, “we all read the papers, we all watch the news…” Of course values have declined in virtually every sector. Companies and entire industries are facing double-digit loses. Closures and layoffs are rampant. Need I go on? 

So, why isn’t it as simple as filing an appeal and waiting for a refund check?

Quantification is king! 

Probably the most important issue that must be taken into consideration for tax appeals in 2009 can be summed up in one word: 

PROOF

Taxpayers carry the burden of proof in a tax appeal. They must prove that the assessment is excessive and in order to do that they must present evidence. However, thanks to the chaos in the capital markets and the resulting credit freeze, transactions are scarce, to say the least. An excerpt from a recent CoStar article reads:

“with the capital markets in disarray and few comparable transactions upon which to build a foundation, buyers and sellers can’t agree on pricing. 

In fact, one widely watched transaction-based index published at the MIT Center for Real Estate couldn’t even produce a retail index for the fourth quarter due to the dearth of transactions. The overall sample size for various other property markets was “scarily low,” acknowledged David Geltner, director of research at the MIT Center for Real Estate. ”

So, although we may all agree that values have declined, proving values for the 2009 tax year becomes more challenging due to the lack of reliable market information. 

2009 presents a great opportunity for companies to significantly reduce their property tax liabilities. However, It is not realistic to think that appeals will be a walk in the park simply because of the current economic conditions. If anything, 2009 tax appeals will require more work, diligence and creativity than in the past. The good news is that it will be worth it.