UNITED STATES – June 2020

CONTENTS COMMERCIAL PROPERTY TAX ASSESSED VALUES AND APPEALS DURING THE MOST UNUSUAL TIME ...... 4 LOCAL GOVERNMENTS AND THE RECESSION ...... 5 EMPTY HOTELS CREATE $17 BILLION BUDGET HOLE FOR LOCAL PROJECTS ...... 6 A SHARP DECLINE IN TRAVEL DURING THE COVID-19 PANDEMIC WILL COST GOVERNMENTS ROUGHLY $17 BILLION IN REVENUE FROM TAXES ON HOTEL OCCUPANCY, CORPORATE PROFITS AND OTHER LEVIES IN 2020, ACCORDING TO A STUDY BY OXFORD ECONOMICS...... 6 TESLA WANTS A $68M PROPERTY TAX BREAK TO LOCATE ITS CYBERTRUCK GIGAFACTORY NEAR AUSTIN ...... 7 WILL COVID-19 AFFECT PROPERTY TAX REBATES IN THE U.S.? ...... 9 STARTUP AIMS TO MODERNIZE THE PROPERTY TAX EXEMPTION AUDIT ...... 10 POLITICIANS TARGET PROPERTY TAXES AS TOOL TO SQUEEZE MORE MONEY FROM TAXPAYERS AMID RECESSION ...... 11 WHAT KIND OF PROPERTY TAX HELP IS IN THE U.S. CORONAVIRUS AID PACKAGE? ...... 13 DETROIT. NEW ORLEANS. D.C. PREDATORY CITIES ARE ON THE RISE...... 14 ARIZONA ...... 16

PHOENIX GAVE ILLEGAL TAX BREAK TO DEVELOPER OF DOWNTOWN APARTMENT COMPLEX, JUDGE RULES ...... 16 "GPLET IS OBVIOUSLY ABUSED WHEN IT'S USED AS A DEVELOPMENT TOOL IN SOME OF THE MOST SOUGHT AFTER AREAS IN PHOENIX," RICHES SAID...... 18 HOW COVID-19 COULD IMPACT PROPERTY TAXES ...... 18 IMPACT OF COVID-19 ON HOUSE ASSESSMENTS MAY TAKE YEARS TO APPEAR ...... 19 TRUTH IN TAXATION NOTICE EXPLAINED ...... 20 CALIFORNIA ...... 21

SPLIT PROPERTY TAX ROLLS: A SURE LOSER HEADS TO NOVEMBER BALLOT ...... 21 COULD A VACANCY TAX HELP L.A.'S HOUSING CRISIS? MAYBE. BUT NOT THE VERSION THE CITY IS PLANNING ...... 22 SAN DIEGO PROJECTING PROPERTY TAX DIP FROM DELINQUENCIES, FORECLOSURES ...... 24 CALIFORNIA STATE BOARD OF EQUALIZATION DOES NOT ISSUE GUIDANCE ON PROPERTY TAX DISASTER RELIEF FOR COVID-19 ...... 25 CALIFORNIA’S SOLUTION FOR A LOOMING COVID-19 BUDGET DISASTER ...... 26 IT’S NOT THE TIME TO GUT PROPOSITION 13 AND RAISE TAXES ...... 28 PROPOSITION 13 AND THE IMPLICATIONS OF THE CALIFORNIA SCHOOLS AND LOCAL COMMUNITIES FUNDING ACT OF 2020 ...... 30 REVISED CALIFORNIA “SPLIT ROLL” PROPERTY TAX INITIATIVE FORMALLY QUALIFIES FOR NOVEMBER 2020 BALLOT ...... 32 COLORADO ...... 33

REPEAL OF PROPERTY TAX LAW ON NOVEMBER BALLOT ...... 33 NEW COLORADO LAWMAKERS MOVE TO REPEAL GALLAGHER PROPERTY TAX AMENDMENT BALLOT MEASURE APPEARS FAST-TRACKED FOR PASSAGE WITH BIPARTISAN SUPPORT ...... 34 WHAT ARE PROPERTY TAXES LIKE IN ASPEN, COLORADO? ...... 37 COLORADO ...... 38

COLORADO HOUSE TAKES UP INITIATIVE INVOLVING PROPERTY TAXES ...... 38 FLORIDA...... 39

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ADDED PROPERTY TAX FOR NONPROFITS SHOULD BE A NONSTARTER ...... 39 WHAT’S THE MAGIC KINGDOM’S WORTH? DISNEY WORLD IS SUING OVER ITS PROPERTY TAXES — AGAIN ...... 40 THE FUTURE OF FLORIDA’S PROPERTY TAXES AND PROPERTY VALUES ...... 41 CONNECTICUT ...... 42

CORONAVIRUS HAS COST CONNECTICUT CITIES AND TOWNS NEARLY HALF A BILLION DOLLARS SO FAR ...... 42 IDAHO ...... 44

OFFICIALS COME TOGETHER FOR COVID PROPERTY TAX RELIEF ...... 44 GOV. BRAD LITTLE UNVEILS NEW $200 MILLION PROPERTY TAX RELIEF PLAN ...... 44 ILLINOIS ...... 45

PROPERTY TAX STUDY ...... 45 A NEW REPORT PLACES ILLINOIS AMONG THE STATES MOST RELIANT ON PROPERTY TAXES FOR REVENUE...... 45 PUTTING THE BLAME WHERE IT SQUARELY BELONGS WHEN COMMERCIAL PROPERTY TAXES JUMP ...... 46 ONCE THE COOK COUNTY ASSESSOR’S OFFICE WAS RUN ON THE UP-AND-UP, IT WAS INEVITABLE THERE WOULD BE A PAINFUL DAY OF RECKONING...... 46 WHICH COUNTIES IN ILLINOIS ARE OFFERING PROPERTY TAX RELIEF DURING CORONAVIRUS CRISIS? ...... 48 PROPERTY TAXES TOO HIGH? COOK COUNTY ASSESSOR FRITZ KAEGI ISN’T THE PROBLEM ...... 49 6 COOK COUNTY COMMERCIAL PROPERTY TAX BILLS RISE BY $1 MILLION OR MORE ...... 51 CHICAGO MAYOR CONSIDERS PROPERTY TAX HIKES AS RESIDENTS FEAR EXODUS FROM CITY ...... 52 LIGHTFOOT SAYS PROPERTY TAX INCREASE ON THE TABLE AS CITY FACES $700M BUDGET SHORTFALL ...... 53 COVID-19 ADJUSTMENT’ MAY LESSEN COOK COUNTY PROPERTY TAXES IN LIGHT OF PANDEMIC ...... 54 INDIANA ...... 55

HAS YOUR INDIANA PROPERTY TAX ASSESSMENT INCREASED? FOUR REASONS THE BURDEN OF PROOF MAY HAVE SHIFTED TO THE ASSESSOR TO PROVE THE HIGHER VALUE SHOULD STICK. APPEALS DUE NO LATER THAN JUNE 15TH...... 55 LOUISIANA ...... 56

DUE TO CORONAVIRUS, BATON ROUGE AREA ASSESSORS ARE CONSIDERING LOWERING PROPERTY TAX ASSESSMENTS ...... 56 MICHIGAN ...... 57

MICHIGAN CHAMBER OF COMMERCE APPLAUDS LEGISLATURE APPROVAL OF MAJOR PROPERTY TAX RELIEF ...... 58 COVID-19 UPDATE: STATE EXTENDS PROPERTY TAX APPEAL DEADLINE TO AUG. 31, MICHIGAN COUNTIES SET TO RECEIVE $1.3M IN VETERANS AID ...... 58 MAINE ...... 59

UNCERTAIN REAL ESTATE MARKET AND PANDEMIC PUT BRAKES ON PORTLAND REVALUATION ...... 59 MISSOURI ...... 60

COUNTY DEFENDS AGAINST BIG RETAILERS’ TAX APPEALS ...... 60 NEBRASKA ...... 63

AN OVERVIEW OF PROPERTY TAX, POLICIES ...... 63 MANUFACTURING PLANTS IN FREMONT DISCUSS 37% PROPERTY VALUE INCREASE...... 64 NEW JERSEY ...... 65

N.J. TOWNS FEAR COVID-19 WILL SHRINK PROPERTY TAX REVENUE, FORCE PUBLIC WORKER LAYOFFS ...... 65 NEW JERSEY CONSIDERS BONDS PAID FOR BY STATEWIDE PROPERTY TAX ...... 66 THE NEW JERSEY PROPERTY TAX APPEAL DEADLINE FOR THE 2020 TAX YEAR HAS BEEN FIXED FOR JULY 1, 2020 ...... 67 ATLANTIC CITY PROPOSES MUNICIPAL TAX DECREASE ...... 67

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NEW HAMPSHIRE ...... 68

WHY NH MUST STEP UP ITS EDUCATION FUNDING ...... 68 WILL COVID BRING A FLOOD OF PROPERTY TAX ABATEMENT REQUESTS IN NH? ...... 70 MUNICIPALITIES SHOULD BRACE FOR TAX ABATEMENT REQUESTS ...... 72 NEW YORK ...... 74

APPELLATE COURT REJECTS NYC PROPERTY TAX CHALLENGE ...... 74 GOVERNOR CUOMO SIGNS LEGISLATION AUTHORIZING LOCAL GOVERNMENTS TO EXTEND DEADLINE FOR FILING PROPERTY TAX ABATEMENTS TO JULY 15TH ...... 75 NYC LEADERS DEBATE PROPERTY TAX AND INTEREST RATES ...... 75 NEW YORK CITY IS BUDGETING $30.8 BILLION IN PROPERTY TAX COLLECTIONS ...... 77 TAX HIKES UNLIKELY TO GET NEW YORK CITY OUT OF BUDGET HOLE, POLICY EXPERT SAYS ...... 77 SHUTTERED HOTELS COSTING NY $1.3 BILLION IN TAX RECEIPTS, REPORT SAYS ...... 78 OHIO ...... 79

NO MORE TAX BREAKS AWARDED TO MILLION-DOLLAR HOMES? ...... 81 COUNCIL EAGER TO RESHAPE RESIDENTIAL ABATEMENTS ...... 81 OHIO DELIVERS HIGH PROPERTY TAX VALUES ...... 85 PENNSYLVANIA ...... 87

LUZERNE COUNTY’S REAL ESTATE TAX ASSESSMENTS EVALUATED FOR ACCURACY ...... 87 WILL THE COVID-19 OUTBREAK IMPACT YOUR PENNSYLVANIA REAL ESTATE TAX ASSESSMENTS? ...... 88 SOUTH CAROLINA ...... 89

SOUTH CAROLINA PROPERTY TAX EXEMPTIONS: USEFUL TIPS FOR BUYERS NEW TO SOUTH CAROLINA ...... 89 TENNESSEE ...... 90

METRO BUDGET APPROVED WITH 34% PROPERTY TAX HIKE ...... 90 METRO BUDGET APPROVED WITH 34% PROPERTY TAX HIKE ...... 91 LOCAL GOVERNMENTS AVOID TAX INCREASES AMID COVID-19 REVENUE LOSS ...... 92 METRO NASHVILLE COUNCIL APPROVES FY 2020-21 BUDGET, INCLUDING 34% PROPERTY TAX RATE INCREASE ...... 93 TEXAS ...... 94

PROPERTY TAXES A PROBLEM WITHOUT A SOLUTION FOR BUSINESS OWNERS ...... 94 BOARD CONSIDERS AUDIT AFTER PROPERTY TAX PROTESTS RISE IN TARRANT COUNTY ...... 96 FACT-CHECK: ARE TEXANS’ PROPERTY TAXES ‘NO LONGER REALLY DEPENDENT’ ON VALUES? ...... 98 LAWMAKERS SUGGEST PENALTY FOR LOCALITIES HIKING UP PROPERTY TAXES WITH LOOPHOLE ...... 100 WHY PROTESTING YOUR PROPERTY APPRAISAL IS SO HARD: TEXAS HIDES SALES PRICES FROM PUBLIC VIEW ...... 102 WASHINGTON ...... 104

ARE SEATTLE’S EXCLUSIVE PRIVATE GOLF COURSES GETTING A HUGE BREAK ON PROPERTY TAXES? CRITICS SAY IT’S TIME TO RECALCULATE ...... 104 D.C.’S TAX RATE MAZE: AN IMPERFECT SYSTEM HAS INCREASED PROPERTY TAXES FOR MANY REAL ESTATE OWNERS ...... 107 PROPERTY TAX ...... 108 COVID-19 PROPERTY TAX RELIEF PROPOSED FOR CRE LANDLORDS ...... 109 WASHINGTON COMMERCIAL LANDLORDS COULD GET CORONAVIRUS RELIEF ON TAX BILLS UNDER NEW ASSESSOR PROPOSAL ...... 109 WYOMING ...... 111

NATRONA ASSESSOR SAYS RECORD NUMBER OF PROPERTY VALUE APPEALS FILED IN 2020 ...... 111 WYOMING TAXES: MINERALS INDUSTRY CAN NO LONGER PAY FOR EVERYTHING ...... 113

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Commercial Property Tax Assessed Values and Appeals During the Most Unusual Time While you and your business were out of the office, you may have received your commercial property tax assessment.

Don’t let your 2020 tax assessment get buried in the inbox. You could risk your ability to protest if you miss important deadlines.

Even though some jurisdictions are experiencing delays in issuing property tax assessments for tax year 2020, property owners still have only 30 days from the notice issue date to file a property tax appeal.

With rising real estate values in many parts of the country, it is not unusual to see increases in tax assessments for commercial property, given that the January 1, 2020 assessment date is prior to the outbreak of the COVID-19 pandemic.

Here are some items to consider as you review your real estate property tax assessments:

Simple errors. It's possible for assessors to make errors in the physical descriptions of properties. They may list a commercial property as being 10,000 square feet, when it is actually only 9,500. Other common mistakes include errors in building classification that could have a significant impact on your assessed value. For example, your building could be listed as a Class A (a building with superior steel and concrete construction) when it is actually a Class B or C building with a much lower replacement cost.

Improvements. The bill may include assessments for improvements that were never made or are not completed. For example, you are renovating office space that is not yet complete.

Comparable properties. Do you know of similar properties in the same area that are valued differently than yours? The properties should be truly comparable. A retail business isn't the same as industrial property and a storefront can't be compared to a store located in a mall. Unlike homes, which are often built in homogeneous tracts and therefore can easily be compared to surrounding properties, commercial property is considerably more difficult to match.

Special exemptions or credits. Check into whether you are eligible for special rates or credits. Like residential property, some jurisdictions have special provisions for property based on use and location.

Tax Rates. If you find that you're paying more taxes per square foot than a comparable, older store down the street, check to make sure that different tax rates haven't been grandfathered in.

Peer-to-Peer Discussions. Discuss your tax bill with similar commercial operations in your area that aren't competitors. This can help each business determine whether it is paying more than its fair share.

Don't assume that any errors you find are new. Just because your values are unchanged from previous years doesn't mean they are right.

How to Appeal

Different jurisdictions have different systems for tax assessments and appeals. You can generally pursue tax relief in one of two ways: International Property Tax Institute IPTI Xtracts- The items included in IPTI Xtracts have been extracted from published information. IPTI accepts no responsibility for the accuracy of the information or any opinions expressed in the articles.

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Negotiation. The most common remedy is to ask for a negotiation with your local tax authority. Be sure you have documentation for your claims, such as photographs, comparable sales lists, and property records that show discrepancies.

Appeals or protests. Many but not all states hear property tax appeals or protests based on a comparative analysis. A successful appeal can lower your current and future taxes significantly. You may also be able to appeal past property tax bills and get refunds.

As a last resort, if you have substantial proof of an incorrect property valuation but are unable to succeed through negotiation or appeals, you may want to take your case to court. Your CPA or attorney may be able to assist you in proving the true valuation of your property and handling the appeal.

Local Governments and the Recession In response to the crisis, Congress and the Federal Reserve have provided cities and states with hundreds of billions of dollars in aid. But there are calls for more from the Fed chief, lobby groups such as the National League of Cities, and Democrats and some Republicans on Capitol Hill.

News articles are whipping up fears of an apocalypse unless Congress passes another state‐local aid package. Politico claims that states and cities are “slashing” services with “severe” cuts, while Education Week worries about “draconian” cuts to schools. The New York Times says that the virus is “ravaging” state budgets, while Bloomberg worries about California’s looming “budget disaster.”

Such scare stories were common during the Great Recession a decade ago. But we can look back and see that the overall budget adjustments at the time were not that severe, particularly for local governments, which I examine here.

A recent study by the Council of Foreign Relations in support of more state‐local aid gets the history wrong with regard to local governments: “The deep economic recession of December 2007 to June 2009 and slow recovery put many subnational budgets in unusually dire straits … The situation was particularly bleak at the local level, where many balance sheets were battered by the collapse of home values and property tax revenues.”

In fact, nationwide local tax revenues did not fall during the Great Recession, as BEA data from Table 3.21 shows in the chart. Property tax revenues—which account for about 72 percent of local tax revenues—remained robust. Revenues rose during the 2000s, flat‐lined for a few years during the recession, then started growing again. Even though nationwide home prices dropped more than 20 percent from 2007 to 2011, local governments are slow to adjust valuations which smooths property tax revenues over time.

We will likely see a similar pattern this time. Housing prices do not appear to be falling much, so property tax revenues should remain steady. Zillow expects housing prices to fall 2 percent this year, while Realtor.com expects they will rise 1 percent.

However, prices may decline substantially for commercial properties in some areas, thus suppressing property tax revenues for some governments. And some big cities such as New York may face deep financial problems as people and businesses flee to the suburbs and other states permanently in response to the virus, harsh shutdown laws, high taxes, and urban civil disorder.

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For most local governments, however, tax revenues should stay quite strong, as during the last recession. If governments hold spending flat for a couple of years, they should be fine. News stories often call flat spending a “cut.” Let’s say a city passed a budget pre‐virus proposing to increase spending 5 percent from $100 million to $105 million, but now with the recession the city prudently decides to withdraw the $5 million increase. That is not slashing or draconian, but it is often portrayed as such.

Anyway, many cities are making sensible and modest budget adjustments. The City of Boston had planned to increase its budget $154 million or 4.4 percent in 2021, but with the recession, it has trimmed $65 million from the increase by freezing hiring, cutting police overtime, and other adjustments. San Antonio’s budget will be roughly flat next year as it trims such items as street improvement projects and economic development incentives, while imposing a hiring freeze, employee furloughs, and cuts to executive pay.

State and local governments are not subdivisions of the federal government. They have the power to adjust their spending, taxes, and borrowing to handle the recession. They can also speed the return to economic growth by removing regulatory barriers to entrepreneurs who want to start businesses and create jobs. More businesses and jobs mean more revenue for governments.

The more aid that Congress provides, the less incentive for states and cities to improve operational efficiencies and to deregulate to spur broad‐based economic growth.

Empty hotels create $17 billion budget hole for local projects

A sharp decline in travel during the COVID-19 pandemic will cost governments roughly $17 billion in revenue from taxes on hotel occupancy, corporate profits and other levies in 2020, according to a study by Oxford Economics.

The impact has been especially large in California, Florida, New York and Nevada, which are each facing shortfalls of more than $1 billion. Those figures don't include taxes generated by tourist spending outside hotels, another source of local funding.

"These taxes are a significant source of revenue for schools, public safety departments and other services," said Chip Rogers, chief executive officer of the American Hotel & Lodging Association, which commissioned the research. "Local government have used hotels as a significant source of revenue and that's a challenge if hotels aren't operating fully."

Lodging taxes have long been popular with lawmakers because they're mostly borne by out-of-towners. While the levies are often used to fund spending on general items, from street cleaning to fighting fires, some cities earmark hotel taxes for specific initiatives that will see an outsized impact from declining travel.

Houston, for instance, has earmarked hotel taxes to pay for public arts programming. More commonly, governments have used lodging taxes to fund sports stadiums, convention centers and marketing efforts to attract visitors to a given city.

Two years ago, the public entity behind the Washington State Convention Center in downtown Seattle raised more than $1 billion in debt backed by lodging taxes to fund an expansion. At the time, the deal was a sign of confidence in the booming tech town's economy. Now, the project faces a $300 million funding shortfall and is at risk of being mothballed.

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The project needs help from the federal government to help bridge a drop in tax revenue that could last for five to eight years, according to Matt Griffin, the principal at Pine Street Group, which was hired to oversee development of the $1.8 billion project.

"We're in a pickle, for sure," Griffin said. "I don't want to try to sugarcoat it."

Bond investors in the project have been on a wild ride. Subordinate debt due in 2058 fell to as little as 79.9 cents on the dollar in May, but had recovered to 99 cents as of Wednesday. Still, the long-term outlook is negative, according to S&P Global Ratings. On June 12, the ratings firm downgraded the subordinate bonds on the project, citing a "substantial deterioration" in lodging tax revenue because of fewer hotel stays.

Nationally, the projected $17 billion shortfall in tax receipts is just the tip of a much larger problem. Hotels generated $40 billion in direct tax revenue for state and local governments in 2018, according to an earlier research by Oxford Economics. That total increased to $94 billion after including indirect and induced impacts -- like sales taxes collected when hotel guests shop in local stores.

Property taxes, another important source of local revenue, could also see shortfalls if struggling hotel owners skip payments. In New York, an epicenter of the pandemic, the lodging industry has spent months lobbying city officials to defer taxes or reduce levies to reflect low occupancies, said Vijay Dandapani, chief executive officer of the Hotel Association of New York City.

New York hoteliers are in especially dire straits, as the city's tourism industry depends on international flights, large conventions and cultural amenities -- from Broadway shows to high-end restaurants -- that will struggle to rebound in the age of social distancing.

In a normal year, property taxes consume roughly 15% of hotel revenue, Dandapani said. With revenues down, many hotel owners will be unable to cover their bills without forbearance from the tax collectors.

"There's going to be massive levels of defaults," Dandapani said.

Tesla wants a $68M property tax break to locate its Cybertruck gigafactory near Austin

Tesla is seeking up to $68 million in property tax abatement from a Texas school district to build a factory that will be used to produce Model Y crossovers for the East Coast market as well as its upcoming Cybertruck pickup.

The application to the Del Valle School District located in Travis County southeast of Austin was made public by the Texas comptroller’s office Thursday and first reported by the Austin Statesman. The property tax abatement proposal, which the school district has agreed to consider, is one of several potential incentives deals aimed at attracting the automaker to the state. Travis County commissioners are also weighing a possible incentives package, which has yet to be made public. And if the process to approve Tesla’s factories in Nevada and New York are any guide, state incentives are also likely. There are other beneficial rewards Texas could offer Tesla such as allowing the automaker to sell directly to consumers, a method that is prohibited in the state.

For now, the Chapter 313 application is the only public document that provides some details about Tesla’s plans. (Under the Texas Tax Code, Chapter 313 permits a school district to give property tax breaks for economic development projects.) International Property Tax Institute IPTI Xtracts- The items included in IPTI Xtracts have been extracted from published information. IPTI accepts no responsibility for the accuracy of the information or any opinions expressed in the articles.

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Here are the important nuggets of the Chapter 313 application that the school district has agreed to consider.

 The application is filed by Colorado River Project LLC, a new subsidiary of Tesla that was likely created to help keep its activity under wraps.  Tesla would receive up to $68 million property tax abatement over a 10-year period  In return, Tesla would agree to building a 4 to 5 million-square-foot factory that would employ more than 5,000 workers  About 25 of those workers are categorized as “qualifying” jobs and would be paid a minimum of $74,050, while the remaining would below that figure  The location southeast of Austin off of Texas 130 is a collection of parcels that equals 2,100 acres in the Austin Green development.

Tesla does not yet own the land, according to the application. The company does have an option to buy the land, CEO Elon Musk wrote Thursday in a tweet correcting a report that the company had already acquired the property.

The purchase of the land is very much dependent on those incentives, according to language in the application. Here’s a key nugget.

 “For a project to succeed, it must also have an acceptable rate of return to secure the necessary capital and compete in the automobile industry against some very capable competitors that have been longstanding industry players. Therefore, local and state tax incentives serve a critical role in getting the project approved and operating successfully. This is especially critical in Texas due to the high level of real and personal property taxes relative to other states. Since school taxes are the largest component of property taxes, the Section 313 tax limitation is especially critical to create a level playing field between Texas and other states vying for this project. Therefore, obtaining the 313 limitation is a determining factor in the decision whether to locate the project in Texas.”

The timing of the application, which comes just a few months since Musk tweeted that Tesla was scouting locations for a so-called “Cybertruck Gigafactory,” illustrates the pressure the company is exerting and the speed at which the deal is coming together. If approved, Tesla said it will begin construction in the third quarter of 2020.

It also suggests that all gigafactory roads are pointing to Austin. However, the local business community steered clear of celebrating.

“While we have engaged in multiple discussions with Tesla, the company has not made a final decision regarding its next Gigafactory,” Charisse Bodisch, senior vice president, of economic development at the Austin Chamber of Commerce. “The potential location being explored is an underutilized site that is in clear need of revitalization, and it would be a perfect fit for an environmentally focused organization like Tesla. We are home to a talented and diverse workforce, and we are grateful that Austin is being considered. We will continue to make the case for why this would be a win for Tesla and for our community when it comes to job creation, economic impact and workforce development.”

Tesla was eyeing Nashville and had been in talks with officials there. Tesla informed Nashville officials in May that the city is out of the running for its gigafactory location.

That leaves Tulsa, Oklahoma as the remaining dark horse in the race to lock in a factory that could employ thousands of workers. And while many believe that Texas is the sure winner, Oklahoma is still pushing forward.

“Tulsa is in the final running to attract Tesla’s giga-factory. We’ve pulled together a compelling, well-balanced and, more importantly, a responsible performance-based incentives package to attract Tesla to Oklahoma,” Sean International Property Tax Institute IPTI Xtracts- The items included in IPTI Xtracts have been extracted from published information. IPTI accepts no responsibility for the accuracy of the information or any opinions expressed in the articles.

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Kouplen, Oklahoma’s Secretary of Commerce and Workforce Development said in an emailed statement. “Our offer not only includes the standard incentives package presented to companies interested in locating to Oklahoma, but also financial commitments to improve local infrastructure and invest in our workforce, expanding educational programs within our academic institutions to ensure Tesla has a pipeline of qualified workers to recruit.”

Kouplen argued in his statement that Oklahoma’s central location, pro-business stance and Automotive Engineer Workforce Tax Credit would make the state the right choice for Tesla.

“We know we can attract engineers to Tulsa. In fact we’ve already shared with Tesla thousands of resumes from qualified candidates who’d move to Oklahoma for a Tesla job,” Kouplen said. “The State, Tulsa and our community partners have rallied to demonstrate that Tesla would be a most welcome addition to our state. Tulsa Mayor GT Bynum expressed it best when he said, “Tulsa is a city that doesn’t stifle entrepreneurs – we revere them!”

Will Covid-19 Affect Property Tax Rebates in the U.S.? Some states are freezing rebates, others are moving them up

With local U.S. governments spending resources on dealing with coronavirus, will this impact whether people will still receive property tax rebates or credits?

Some states have announced changes to their property tax relief programs. While some states have had to freeze these programs, others are releasing rebates ahead of schedule.

For example, many qualifying homeowners in Pennsylvania will get their rebates early, Gov. Tom Wolf and Treasurer Joe Torsella announced in May. Rebates through the state’s Property Tax/Rent Rebate Program are usually distributed beginning July 1, but the process started in late May this year.

“This common-sense solution gives thousands of our older and vulnerable residents their rebates early, when they need it,” Mr. Wolf said at the time.

The deadline to submit applications to get a rebate next year in Pennsylvania was also extended from June 30 to Dec. 31, 2020. The rebate program benefits eligible Pennsylvanians age 65 and older; widows and widowers age 50 and older; and people with disabilities age 18 and older. The income limit is $35,000 a year for homeowners, according to the state revenue office.

Meanwhile, in New Jersey, homeowners will not be getting the property tax credits they’ve gotten in previous years.

The state has delayed its Homestead Benefit Program for 2020 due to economic concerns caused by the pandemic, State Treasurer Elizabeth Maher Muoio announced in March.

The program was available to New Jersey homeowners on their primary residence. In addition, they must have an income of $150,000 or less if they are over 65 years old or are blind or disabled. Homeowners under age 65 who are not blind or disabled can qualify if they earn $75,000 or less.

The amount of the benefit is between 2.5% and 5% of the amount of taxes paid, according to the state.

The New Jersey Legislature is currently considering a measure that would give the state the authority to seek $5 billion in bonds to help bridge its budget gap. The state assembly has approved the bill, and it’s waiting approval from the senate.

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Gov. Phil Murphy has said that access to that funding may make it possible to reinstate the homestead credits later this year.

Startup Aims to Modernize the Property Tax Exemption Audit By combining a county’s tax rolls with machine learning and more than 80 different data sources, The Exemption Project creates a ranked list of properties likely to have unqualified or unclaimed homestead exemptions.

It’s no secret that out-of-date tax rolls can cost state and local governments millions. Especially in states like Florida that levy no income tax, property taxes are a chief source of revenue, and they depend on an accurate record of homestead exemptions — tax breaks that reduce the amount owed for one’s primary residence, due to life circumstances such as the death of a spouse or deployment by the military. Some people underpay taxes by failing to notify the local assessor when an exemption expires, and others overpay because they don’t apply for an exemption for which they’re qualified. It can be prohibitively labor-intensive for a property assessor to keep regular tabs on this.

Enter The Exemption Project, a startup in Chicago that offers county governments an online portal and data service to identify unqualified and unclaimed exemptions on tax rolls. Launched in early 2019, the company is the brainchild of CEO Tyler Masterson and Chief Data Scientist Joe Walsh, both veterans of government data work who had met the year before, both looking for something socially responsible to do.

Masterson told Government Technology they were specifically looking to start a business, something that would use data science and machine learning to improve an aspect of core government operations, and they came upon homestead exemption auditing.

“County governments, for the last 10 years, have been doing this homestead exemption audit about every three to six years,” he said. “The problem is, people die, they rent their place, they discover Airbnb, they move away, they get divorced … and they become unqualified in that time. So we decided to build a proactively monitoring solution.”

Proactivity is key to the value proposition, Masterson said, because changes to exemptions happen so often that local governments can’t catch most of them by hiring staff once every six years to comb through local obituaries and real estate websites.

“Once you get outside the context of the government’s own data silos, they don’t have access to that data, nor the skills or the tools … to identify who those individuals are,” Masterson said.

To spare them the trouble, The Exemption Project can process a county’s tax roll through more than 80 data sets which the company has either bought, requested or generated: from credit bureaus, public utilities, the IRS, Social Security information, voter records, Postal Service records, court records, foreclosures and vacancies, social media, professional licenses, et cetera. Using machine learning to recognize who in the tax roll might have an unclaimed or unqualified homestead exemption based on that data, The Exemption Project’s software, called TrueRoll, generates a "stack-ranked" list of most likely candidates.

The county can then prioritize and verify each case, removing unqualified people from the automated exemption rolls and placing liens on properties to collect back taxes, if owed.

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It can also work the other way — for unclaimed exemptions, it can start notifying people.

“If we can help them use data to identify pockets of people who are not receiving the exemptions they should be getting, they’re not going to give them back taxes, but they will use it to make them aware,” Masterson said. “‘Did you know, as an active-duty military individual, you can claim a primary residence exemption even when you’re not living here?’”

Not yet two years old, The Exemption Project has customers in Texas, Illinois, Washington and particularly Florida, where rental properties are common and, according to Masterson, every county’s tax rolls are in a standard format.

Eddie Creamer, property appraiser for St. Johns County, Fla., and more than 250,000 residents, said he contracted The Exemption Project for two reasons: first to audit the county’s 84,000 currently approved homestead exemptions for things like additional properties, rental properties and voter registrations in different states; and then for an ongoing monitoring process.

Creamer said phase one kicked off in November, and he’s 90 percent finished sending questionnaires to the 5,500 residences whose exemptions might be expired or improperly claimed. He said the county has placed almost $800,000 in liens for back taxes, penalties and interest so far, and collected more than $200,000 of that.

He said phase two is ongoing monitoring by The Exemption Project, checking the county’s tax rolls against those data sets for the rest of the fiscal year. Creamer said he’s “very satisfied” with the collaboration so far and is open to renewing the contract next year.

“[To monitor homestead exemptions in-house] I would probably have to assign three staff internally, full-time, or hire three new staff, and subscribe to LexisNexis or some service like that, and then go through the process,” he said. “Once it was over and we had removed the exemptions, I would still have the staff and those subscriptions. The efficiency in using [The Exemption Project] is, I get access to all that, they work very well with our staff on a weekly basis, and then my cost becomes variable in the collection process. Once phase one is over, I don’t have that cost anymore.”

The comparison with LexisNexis is one Masterson also made, explaining the role of proactive monitoring. He said in 2016, Chicago paid LexisNexis about $1.2 million to audit the city’s homesteads, and the list “went stale almost immediately,” as he put it, because it was based on data from one point in time.

He added that The Exemption Project signed contracts last month with King County, Wash., home to Seattle, and Cook County, Ill., which encompasses much of Chicago.

Politicians Target Property Taxes As Tool To Squeeze More Money From Taxpayers Amid Recession

2020 has brought a great deal of hardship to many parts of the U.S., but particularly to Nashville, Tennessee. Music City was hit with an early March tornado outbreak that devastated property across swaths of the city. That was follow by the pandemic that shuttered businesses, some permanently, and tanked the economy. Mayor John Cooper (D) and Nashville Metro Council members are now piling on with a 34% property tax hike, which was approved shortly after midnight on Wednesday, June 17.

“Years of gross fiscal mismanagement resulted in this situation,” said Justin Owen, CEO of the Beacon Center of Tennessee, a Nashville-based think tank. “Instead of working to fix the mistakes of the past and chart a better path International Property Tax Institute IPTI Xtracts- The items included in IPTI Xtracts have been extracted from published information. IPTI accepts no responsibility for the accuracy of the information or any opinions expressed in the articles.

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forward, 32 Council members took the easy way out and voted to pass the buck to Nashvillians. Last night is just another indication that many Council members want to see us become another San Francisco or Seattle.”

Owen backs up his assertion of municipal mismanagement in Nashville with receipts. The Beacon Center recently published a report documenting how local government spending in Nashville has grown at an unsustainable clip in recent years, well beyond the rate of population growth.

Nashville spending growth has outpaced population and inflation for more than a decade.

This large property tax hike (Mayor Cooper himself concedes this tax hike is large) in the Volunteer State’s most populous city could very well prompt state legislators to consider property tax limitation measures like those on the books in Texas and other states. The property tax limitation law on the books in Texas, which was just enacted in 2019, recently proved effective in thwarting a property tax hike in Dallas that was much more modest than the one imposed this week in Nashville.

During the 2019 session Governor Greg Abbot and Texas lawmakers approved a reform reducing Texas’ property tax “rollback rate” from 8% to 3.5%. The reduced rollback rate provides greater protection for Texas taxpayers, requiring local government officials to get voter approval if they wish to raise property tax collections in excess of 3.5% annually.

In late May Dallas city council members were considering a proposal to declare an emergency, which would allow the city to raise property taxes in excess of the 3.5% rollback rate. The Texas Public Policy Foundation’s Jame Quintero called the proposal to raise Dallas property taxes by 8% in the middle of a recession “the last thing that should be on the mind of any local official,” adding that “Texans need a helping hand, not a picked pocket.”

Unlike in Nashville this week, Dallas taxpayers got welcome news last month when their city council declined to proceed with the proposal to raise property taxes in excess of the rollback rate. The motion on whether to open the possibility of 8% tax hike failed on May 27 with only 3 out of 14 city council members voting in favor. The way Dallas city council member Cara Mendelsohn saw it, the city’s budget shortfall was no excuse to impose a property tax in excess of what state law permits.

“It’s going to be painful,” Mendelsohn said. “We’re going to have some really tough choices to make, but that doesn’t mitigate the fact that one of those choices shouldn’t be to make it harder for our residents.”

Were Governor Bill Lee (R) and Tennessee lawmakers to institute a property tax rollback rate like the one adopted by Governor Abbott in 2019, the massive property tax hike enacted by Nashville Mayor Cooper this week would not have been possible. In fact, the property tax imposed in Nashville this week is nearly 10 times larger than what would be allowed were Tennessee legislators to pass a Texas-style property tax rollback rate.

California & Colorado Property Tax Caps Under Attack

If government worker unions in California get their way, and they often do in the Golden State, voters will approve a November ballot measure that would repeal the property tax limit on the books in California. Implemented by the 1978 passage of Proposition 13, California law limits annual increases in the taxable value of a property, both personal and commercial, to 2% or the rate of inflation, whichever is less.

Transferred properties are reassessed at 1% of their sale price. In addition to this property tax cap, Prop. 13 also subjects all tax increases to a two-thirds supermajority vote requirement of the legislature.

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With some of the nation’s costliest housing, Prop. 13 provides significant relief to California homeowners and employers. There will be a measure on the ballot this November, one financially backed by government sector labor unions, that would gut Prop. 13 protections for employers. The Prop. 13-weakening measure that will appear on California’s November ballot, which Joe Biden and the California Democratic Party have endorsed, would raise taxes on California employers by as much as $12 billion annually by removing the Prop. 13 cap for commercial properties.

If this ballot measure, officially dubbed The California Tax on Commercial and Industrial Properties for Education and Local Government Funding Initiative, is approved by voters in November, it would repeal Prop. 13 protection for commercial property, requiring it to be taxed at market value. The result would be billions of dollars in higher property tax bills going out to businesses that are already struggling amid the current recession.

"California already has the worst climate for business and job creation in the country,” said Rex Hime, president of the California Business Properties Association. “A split-roll property tax will just increase pressure on many businesses that are already finding it hard to make ends meet.”

California Business Roundtable president Rob Lapsley says that if this ballot measure is approved, the Golden state is “going to have the largest tax increase in California history at exactly the wrong time in our economy to be able to afford it.”

California isn’t the only Democrat-controlled state where politicians are seeking to remove a property tax cap. Colorado Democrats, like their west coast counterparts, are also trying to repeal a state property tax limitation measure.

Whereas Prop. 13 is the target in California, in Colorado it’s the Gallagher Amendment. The Gallagher Amendment, named after the state senator who drafted it, was approved by Colorado votes in 1982. By stipulating the ratio of tax revenue that can be raised from residential versus non-residential properties, the Gallagher Amendment has helped bring down residential property tax burdens over time.

Before adjourning session this week, Colorado legislators referred a measure to the ballot this November that would repeal the Gallagher Amendment if approved by Colorado voters. In the middle of a recession, with unemployment at record highs, it should be a struggle to convince voters that their property tax bills should go up by as much as half a billion annually.

“I think what it comes down to is most Coloradans have seen their property taxes go up over the years, and their taxes will be higher without Gallagher than they would be with it,” said Michael Fields, executive director of the Colorado Rising State Action. “So I think that’s going to be an uphill battle.”

As politicians seek to avoid raising income taxes, sales taxes, and other politically unpopular levies in the middle of a recession, expect more government officials to look to property taxes as a way to shore up government coffers this year and beyond. Public feedback on this approach will come quick, as this November will demonstrate what voters think of the nation’s most longstanding property tax limitation measures, along with the politicians who wish to increase tax collections by targeting business and home owners with higher property tax bills.

What Kind of Property Tax Help Is in the U.S. Coronavirus Aid Package? Federal aid could lead to reductions in taxes for homeowners

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Using funds appropriated by the CARES Act, the Federal Reserve set up a Municipal Liquidity Facility (MLF) that will provide up to $500 billion in short- and mid-term funding to states and municipalities, it announced in early April.

Municipalities that depend on local taxes have seen revenues plummet while the economy has been on pause because of the pandemic. To make up for that gap, the government is providing access to MLF funding. That, in turn, could allow cities, counties and states to provide property tax relief for homeowners and still have access to funding for administration, schools and other services.

Administered by the Federal Reserve Bank of New York, the MLF will purchase up to $500 billion in short-term notes directly from eligible entities. U.S. cities with 250,000 residents or more and counties with populations of at least 500,000 residents are eligible. In addition, states can designate up to four entities that would be eligible for funding, according to Robert Hockett, a law professor at Cornell Law School who specializes in organizational, financial and monetary law and economics.

Those entities may include smaller municipalities or institutions like state universities, he explained.

When the program was announced, only cities of 1 million residents or more and counties of 2 million or more were eligible. But local officials from all over the country lobbied to get those requirements changed, saying they excluded too many areas.

For example, Suffolk County on Long Island, hard-hit by the pandemic, is the country’s 26th largest county by population. Still, with 1.5 million residents, it did not originally qualify for the program. That prompted politicians from Suffolk County, including Congressman Lee Zeldin and County Executive Steven Bellone, to request a lower threshold for eligibility.

That request was granted at the end of April to include cities with 250,000 residents and counties with 500,000, plus the state-appointed entities.

How municipalities use the money will be determined by them. Mr. Bellone has said the program could give the county access to funding that would allow it to extend deadlines for property tax payments and waive late fees. No details have been released about that tax relief or how homeowners can apply for it. The County Executive’s office declined to comment further.

Meanwhile, Illinois became the first borrower under MLF on Friday, Mr. Hockett noted. It plans to issue $1.2 billion of general obligation bond anticipation notes, which will mature in one year and have an interest rate of 3.8%. Gov. J.B. Pritzker has said the state plans to use the money to help make up for a loss of billions of dollars of revenue this fiscal year.

More changes to the MLF could come this summer, Mr. Hockett explained.

Currently, eligible notes have up to 36 months to mature, up from 24 months indicated in the original announcement. That may be extended again to 60 months this summer, he said. Other branches of the Federal Reserve Bank, not just New York’s, may be tasked with administration of the lending program.

Detroit. New Orleans. D.C. Predatory Cities Are on the Rise. Local governments should not shore up their budgets by preying on the very people Covid-19 hit the hardest.

I coined the term “predatory cities” to describe urban areas where public officials systematically take property from residents and transfer it to public coffers, intentionally or unintentionally violating domestic laws or basic human rights.

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Ferguson, Mo., is one well-known predatory city. As a 2015 Department of Justice report showed, the police in Ferguson systematically targeted African-Americans and subjected them to excessive fines and fees. The U.S. Constitution does not allow judges to incarcerate defendants for unpaid debts without first determining their ability to pay. Nevertheless, local courts issued arrest warrants for unpaid fines and fees without these determinations. Minor offenses, like parking infractions, resulted in jail time, although lawmakers did not contemplate or approve such severe punishment. The Ferguson Police Department and courts prioritized revenue raising over public safety, transforming Ferguson into a predatory city.

New Orleans is another. In 2018, a Federal District Court ruled that the revival of debtors’ prisons in New Orleans violated the 14th Amendment. At the time, a key source of Orleans Parish Criminal District Court’s funding was the fines and fees it collected. This created a structural incentive for judges to aggressively and erroneously pursue payment from those with no ability to pay, turning New Orleans into a predatory city.

Washington, D.C., is yet another predatory city. While civil asset forfeiture laws allow the police to seize property that they suspect was involved in a crime, in Washington, D.C., property owners had to post bonds of up to $2,500 in order to challenge the seizure. If the owner could not raise money in time, the D.C. Police Department sold the property, and the money went into its annual budget. In a two-year period, the Police Department made $4.8 million in profit by seizing money from over 8,500 people as well as seizing 339 vehicles. According to a federal court, this abuse of civil forfeiture laws was illegal.

The current pandemic has created fertile ground for predatory cities to sprout. With local businesses shuttered, unemployment skyrocketing, and many people unable to pay their rent and mortgage payments, Covid-19 has brutalized local economies. Michigan’s Treasury Department estimates 2020 tax revenues could plummet by $1 billion to $3 billion, while New York State has projected a revenue shortfall of more than $13 billion. Although many cities must slash budgets to ensure their financial survival, Covid-19 is also intensifying the need for essential, yet expensive, social services.

Stretched to its financial breaking point, Detroit has become a predatory city. Mrs. Sarah Dennis’s story gives a glimpse into how, in the midst of this global pandemic, financially vulnerable local governments prey upon their most vulnerable citizens.

Mrs. Dennis is now 79 years old and has lived in Detroit her entire life. After a long marriage, she became a widow at 47. She then met a widower, Earl Dennis, at the Church of God on Wisconsin Street. She played the piano and he was an usher. They were married in 1990, and she immediately moved into his humble home on Detroit’s east side. Every Easter, the whole family would sing hymns like “Great is Thy Faithfulness,” and Mrs. Dennis would make a sweet potato pie, lemon poundcake, and lemon coconut pie that brought tears to the eyes of grown men.

Covid-19 killed Mr. Dennis, exactly two weeks before Easter, the couple’s favorite holiday. Mrs. Dennis was, once again, a widow, after 30 years of marriage. The funeral home live streamed his home-going service, but Mrs. Dennis could not attend because she was in the hospital fighting Covid-19. She miraculously recovered. Although convalescing, she restarted another battle, this time against property tax abuse in Detroit.

The Dennis home is a quaint, gray brick ranch-style house built in 1954. In January, Mayor Mike Duggan’s administration was prepared to tax the home as if it were worth $26,800. Given the poor neighborhood conditions and the market price of recently sold comparable properties, the city’s estimated market value was far too high. Before becoming ill, Mrs. Dennis sought help from the Coalition for Property Tax Justice’s Pro Bono Property Tax Appeal Project, which I helped to establish. Once the project intervened, the city finally conceded that the home’s market value is $16,000 — 40 percent less than it initially estimated.

Most homeowners do not know about the property tax appeal process or cannot afford representation, so they are stuck with inflated property tax bills. Mrs. Dennis lamented: “They are ripping us off. The property taxes are so high. Most of the people in this area cannot afford the taxes because they were overcharged.” International Property Tax Institute IPTI Xtracts- The items included in IPTI Xtracts have been extracted from published information. IPTI accepts no responsibility for the accuracy of the information or any opinions expressed in the articles.

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Mrs. Dennis is not alone. In a newly released study, the University of Chicago’s Center for Municipal Finance analyzed Detroit’s 2016-2018 assessment data. They find that — while the average home price was $35,600 — the majority of lower-valued homes (less than $19,000 sale price) were assessed in excess of the Michigan Constitution’s established limit. Due in large part to systematic overcharging, Detroit has one of the highest property tax foreclosure rates of any city since the Great Depression. In my recent ethnographic study, “Predatory Cities,” I explain how systemic racism, corporate malfeasance, economic decline, political instability, and poor federal and state level funding opened the door to predation in Detroit. I identify Wayne County and investors who buy homes in the tax foreclosure auctions as the primary financial beneficiaries.

Detroit is not an isolated case. A new national study also completed by the Center for Municipal Finance finds that, across the country, owners of lower-valued properties pay too much property tax while owners of higher-value properties pay too little. This phenomenon got much worse during the Great Recession in the late 2000s. Because of Covid-19, we’re now in another recession. Since property taxes account for about 30 percent of general revenue at the local level, cities may close budget deficits by overtaxing certain homes, succumbing to predation.

All cities are certainly not predatory. But, with Covid-19 exacerbating existing budgetary shortfalls, Senate Republicans must broaden funding for state and local governments by approving the $3 trillion coronavirus relief bill passed by House Democrats in May. If not, cities may buckle under the increasing monetary pressures and become predatory. With a melancholy tone, Mrs. Dennis recalled, “The very last thing my husband said to me, in a small soft voice, was, ‘Who is going to take care of you when I am not here?’ ” Although cash starved, local governments must care for — and not victimize — upstanding citizens like Mrs. Dennis.

ARIZONA

Phoenix gave illegal tax break to developer of downtown apartment complex, judge rules Phoenix promised an illegal tax break to the developer of a 21-story apartment complex under construction in downtown Phoenix, a judge ruled last week.

The decision comes after years of legal proceedings related to the complex dubbed The Derby Roosevelt Row, a micro-unit apartment complex planned for Second and McKinley streets.

In 2016, the Phoenix City Council approved a popular tax incentive for the project, which would have allowed developer Amstar/McKinley to forgo property tax payments for 25 years. Under the agreement, the developer would have paid no property tax for the first eight years and a lesser tax for the remaining 17 years.

This type of subsidy, known as a Government Property Lease Excise Tax or GPLET, are supposed to be used to encourage growth in blighted areas. But they're frequently used in downtown Phoenix and downtown Tempe — which have some of the highest property values in metro Phoenix.

Phoenix officials often argue that GPLETs are still necessary tools to encourage high-rise development — which is substantially more expensive to build than standard midsize apartment complexes — even in more upscale areas.

But others, most notably the conservative Goldwater Institute, which sued Phoenix over The Derby project, claim GPLETs are abused and no longer needed in high-dollar areas.

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After years of legal back-and-forth, a Maricopa County Superior Court judge sided with the Goldwater Institute, ruling that the agreement with The Derby developer violated the gift clause in the Arizona constitution, which prohibits governments from providing benefits to a private entity without an equal returned benefit.

Phoenix is contemplating an appeal, said Nick Valenzuela, a city spokesman.

“Phoenix is disappointed in the ruling issued by the Superior Court. We are still reviewing the decision and determining next steps," Valenzuela said.

City approved tax break in 2016

The Phoenix City Council entered into an agreement with Amstar/McKinley LLC to develop a less-than-one-third- of-an-acre lot in downtown Phoenix in 2016.

According to the developer's proposal at the time, Amstar/McKinley LLC planned to build a $36 million, 19-story tower, with 211 furnished micro-unit apartments which would average about 400 square feet of living space. They were projected to rent for around $1,300 a month.

According to a news release from contractor Hensel Phelps, the new developer, Ascentris, has updated its plans to a 21-story high-rise featuring 222 residential units with an average of 350 square feet.

The developer asked for, and the City Council awarded, a GPLET which allows Amstar/McKinley LLC to transfer the property to the city for 25 years and lease it back. This will allow the developer to forego property taxes, since government-owned property is not taxable.

For the first eight years, the developer will pay no taxes. For the remainder of the 25-year deal, Amstar/McKinley will pay an excise tax that is significantly less than typical property tax. Annual lease payments that escalate in amount start immediately, ranging from $10,000 to $250,000. After 25 years, the property transfers back to the developer, which is then responsible for full property taxes.

The Goldwater Institute filed a complaint in Maricopa County Superior Court in 2017, challenging the constitutionality of the deal on behalf of nearby property owners and businesses, including Angels Trumpet Ale House. The Derby is planned for the vacant lot adjacent to the restaurant.

Goldwater Institute attorney Jon Riches said that when the city awards tax breaks to developers, they overburden surrounding businesses that must make up the missing tax revenue.

He said GPLETS are no longer needed in downtown Phoenix, which is evident because of the plentiful number of large-scale developments going up in the area that did not get tax breaks.

"The evidence was pretty overwhelming in this case that the public was giving up way too much and receiving way too little," Riches said.

Developer's benefit outweighs city's

The lawsuit centered on the gift clause in the Arizona constitution and whether the city gave away taxpayer money, or in this case, forewent tax revenue, without receiving an equal benefit in return.

In his ruling, Maricopa County Superior Court Judge Christopher Coury compared the money the developer would save with the tax break to the amount of money the city would gain under the deal.

In the judge's analysis, the developer came out on top — by a lot. International Property Tax Institute IPTI Xtracts- The items included in IPTI Xtracts have been extracted from published information. IPTI accepts no responsibility for the accuracy of the information or any opinions expressed in the articles.

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Coury found that the city's benefits would be about $5.8 million — which includes lease and excise tax payments — and the developer would save between $20.5 million and $27 million.

Attorneys for Phoenix argued that the court should take into account indirect benefits of the project, including anticipated sales tax generated by the future commercial tenants in the building and anticipated property taxes after the 25-year tax break is lifted.

The judge found that it was inappropriate to include 'indirect" benefits and instead focused only on the direct payments by the developer to the city.

Coury wrote that the benefits to the developer are "grossly disproportionate" to the benefits to the city.

If the city decides not to appeal the decision, Phoenix will have to revoke the tax break it previously offered to The Derby project.

Ascentris did not respond to a request for comment as to whether the development will continue without the tax break.

The Derby broke ground in March.

Has GPLET 'death knell' rung?

Coury's ruling applied specifically to The Derby project and did not address the constitutionality of all GPLETs.

That said, Coury noted that GPLETs may no longer be viable because Arizona law prohibits a city from providing "disproportional benefits" to a developer — but most GPLETs do provide a bigger benefit to a developer because they are, by nature, an incentive.

"This judicial officer questions whether the death knell for the GPLET’s usefulness has rung," he wrote.

Riches said there may be some areas of Phoenix where a GPLET still makes sense, but cities never use them in those areas. He said GPLETs were intended to revitalize areas that were blighted or dangerous. The corner of Second and McKinley streets is neither of those things, he said.

"GPLET is obviously abused when it's used as a development tool in some of the most sought after areas in Phoenix," Riches said.

How COVID-19 could impact property taxes As we struggle through the COVID-19 pandemic, I have been asked how this will affect real estate values in Gila County.

While we are vitally concerned with the health and well-being of the public, our staff, and the future economic recovery, this COVID-19 situation is affecting all of us in the county and city governments, and all of their subdivisions. Everyone is feeling some pain.

But how will it affect our property values?

The valuation discipline that we use relies on historic data to estimate a future value. It is way too soon to have a clear picture of how the virus will affect the real estate market. Having said that, we are already beginning to see the signs of a local economic downturn. International Property Tax Institute IPTI Xtracts- The items included in IPTI Xtracts have been extracted from published information. IPTI accepts no responsibility for the accuracy of the information or any opinions expressed in the articles.

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Building permit activity remains steady, so new construction, remodels and other improvements to property seem to be relatively unaffected so far.

We have noticed the number of deeds that convey property (sales) decline and that can show a weakening of the real estate market.

April showed a 25% reduction in the number of recorded deeds from March, and May was virtually the same as April.

These recordings are happening when the spring weather is warming up and historically, we would see a sharp increase in real estate activity. Obviously, that is not happening.

Are real estate prices declining too? We do not have enough data yet to determine that, but we should have a better picture of the affects of COVID-19 in late summer.

While we do not yet know if the real estate market is declining — but let us assume that it is — how will this affect property values and then affect property taxes?

Arizona’s property tax system is on a schedule known as the “Two Year Roll,” meaning the real estate values and then tax assessment rates are determined almost two years ahead of time.

For instance, this year — calendar year 2020 — we will look at market data and determining assessment values for tax year 2022.

Specifically, we will start the appraisal process (called MASS Appraisal) in June and July, analyze and update values and their multipliers countywide, and then send our results to the Arizona Department of Revenue by Dec. 15.

We will send Notices of Value out to all real estate owners in February 2021, notifying them of their tax year 2022 valuation.

This gives everyone the opportunity to appeal their Full Cash Value (FCV) or Property Classification before Jan. 1, 2022, which is the date the new valuation takes effect.

The benefit to this schedule is that property owners may appeal if they believe their valuations are inaccurate.

The drawback to this is any movement in the real estate market (increasing or decreasing) cannot legally be applied in the current year by the Assessor’s Office.

If the real estate market is negatively affected by COVID-19 and property values are significantly reduced, we will not see those changes until property tax bills come out in the fall of 2022 (assuming our jurisdictions’ tax rates do not increase).

Seniors 65 years or older may qualify to have their assessed values frozen. Widow/widowers and 100% permanently disabled persons may qualify for a property tax exemption. See the Assessor’s Office website or call the office for more information on these programs.

Impact of COVID-19 on house assessments may take years to appear

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COVID-19 has left a lot of economic markers in its wake, but one of the last pockets of the economy where it may appear is in property assessments.

Assessments are done in a two-year cycle. The Pinal County Assessor’s Office finished its assessments for 2021 in March. Next March, staff will begin working on 2022.

While some areas of the economy, such as unemployment, are shaky in the short term, “it is stable revenue for the county,” said Assessor Douglas Wolf.

The CARES Act suspended foreclosures during the pandemic, but they could begin showing up in six months to a year if, in fact, Pinal County property owners suffered serious economic meltdown.

“If we have a lot of foreclosures, and I don’t think that’s going to happen, it could have an impact,” Wolf said.

“Impact,” he said, means negatively affecting assessments by 3%-4%.

The last time assessments took that kind of hit was in 2008. There is no direct comparison with the COVID-19 pandemic, he said, because even when foreclosures finally begin appearing, the banks still pay the taxes.

In the case of the 2008 recession, “There were so many even the banks couldn’t keep up,” Wolf said.

And there was a lot of speculation in the market in those days, whereas now most buyers are just looking for a place to live, he said.

What could also play into future assessments are unknowns such as the general market and decisions by the federal and state government that could affect the local economy. Wolf said that is why he supports the county’s ongoing lawsuit against the U.S. Office of the Treasury to force Gov. Doug Ducey to distribute federal COVID-19 funds to Pinal and other counties.

The local market could also be affected by the collection of the transaction privilege tax. But TPT, also known as a sales tax, has remained strong in Pinal County through the pandemic.

Truth in Taxation Notice Explained The City of Phoenix published the Truth in Taxation notice below as required by state law. The required notice addresses the city's primary property tax, which supports the General Fund services such as police and fire, parks and recreation, libraries and senior and community centers,

The city of Phoenix's proposed primary property tax rate for 2020-21 of $1.3055 per $100 of assessed valuation is unchanged from its 2019-20 rate. However, overall increases in assessed valuation result in a 3% increase in primary property taxes for the average city of Phoenix property owner. Individual experiences may differ based on unique property variances.

State law requires the notice below any time the average primary property tax bill increases, even if the primary property tax rate is reduced.

The Truth in Taxation notice prescribed by state law does not address the city's secondary property tax. The city's secondary property tax rate for 2020-21 will remain constant at $0.8241 per $100 of assessed valuation. Secondary

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property taxes pay the bonded debt service for facilities like libraries, police and fire stations, storm drains and parks.

TRUTH IN TAXATION HEARING NOTICE OF TAX INCREASE

In compliance with section 42-17107, Arizona Revised Statutes, the city of Phoenix is notifying its property taxpayers of the city of Phoenix's intention to raise its primary property taxes over last year's level. The city of Phoenix is proposing an increase in primary property taxes of $5,276,888 or 3.0 percent.

For example, the proposed tax increase will cause the city of Phoenix's primary property taxes on a $100,000 home to be $130.55 (total proposed taxes including the tax increase). Without the proposed tax increase, the total taxes that would be owed on a $100,000 home would have been $126.76.

The proposed increase is exclusive of increased primary property taxes received from new construction. The increase is also exclusive of any changes that may occur from property tax levies for voter approved bonded indebtedness or budget and tax overrides.

All interested citizens are invited to attend the public hearing on the tax increase that is scheduled to be held June 17, 2020 at 2:30 p.m. at the city of Phoenix Council Chambers, 200 W. Jefferson St.

CALIFORNIA

Split property tax rolls: A sure loser heads to November ballot Heedless of informed advice about conditions in California, labor unions behind the Split Roll ballot initiative are now persisting in their attempt to fundamentally alter the landmark Proposition 13.

Their measure would remove the 1978 ballot initiative’s property tax protections from commercial and industrial property, while leaving residential levies untouched. If this passes, commercial land and buildings would be taxed based on current market values, while yearly residential property taxes would still be based on 1% of the latest purchase price or 1% of their 1975 assessed value if ownership has not changed. Residential levies can climb by no more than 2% per year.

This alteration would give local governments and public schools an additional $11 billion to $12 billion annually, sponsors say. It would do nothing about the longtime Proposition 13 inequity which sees neighbors in similar properties paying wildly different property taxes, depending on when they bought.

But the alleged commercial property tax total is fictitious at this moment, the remnant of a bygone era that ended with the coronavirus shelter-at-home order issued in March by Gov. Gavin Newsom. The governor, using emergency powers, coupled his stay-home order with others allowing tenants, both individual and commercial, to delay paying rent for months at a minimum.

With much of the withheld rent money — perhaps 15% of all that tenants normally pay — now in limbo, property owners and appraisers can’t accurately assess the value of commercial property. Owners don’t know how much they will really get if tenants like the Cheesecake Factory restaurant chain, which refused to pay rent while its eateries were shuttered, don’t eventually pay up.

Other commercial tenants withholding rent will likely let it pile up, then negotiate settlements with building managers. Owners of many buildings will never get the full rent they were due.

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Also, because corporations like Twitter, Facebook and many more have told white collar workers to keep working from home as long as they like — and many like it much better than commuting — a healthy percentage of office building owners have no idea how much of their space may soon be vacant.

Taken together, this makes it almost impossible for owners or appraisers to calculate the actual value of much of California’s commercial property, since office buildings' value depends largely on income they produce. This makes the numbers often purveyed by Split Roll sponsors completely speculative.

Into this quagmire steps the new ballot measure, pushing a fundamentally good idea, but one that will be slammed mercilessly in television and social media advertising as landlords fear high taxes that might force them out of business.

When, not if, this proposition loses at the polls, it will become virtually impossible politically to tinker with Proposition 13 for years to come, as the initiative most likely returns to its prior status as the untouchable third rail in California politics.

The measure was nearly sacrosanct in Sacramento for more than 40 years, legislators of all political persuasions fearing the wrath of homeowners, who always cast ballots in higher proportions than other groups.

Standing by to help dump the Split Roll into a deep grave is the Howard Jarvis Taxpayers Assn., named for the more famous of Proposition 13’s two authors.

For decades, this outfit has opposed anything that looks like it might alter even the tiniest aspect of its pet law. The Jarvis organization frequently sends mailers to property owners warning them any attack on any part of Proposition 13 promises to send their taxes through the roof. That’s happening again now, as official-looking mailings from the group turn up from time to time in homeowner mailboxes.

These will become more frequent as November nears. The din around Split Roll might even drown out presidential balloting, which figures to be among the noisiest in years.

The bottom line: Sponsors believe the financial needs of schools in the wake of the coronavirus-caused recession, plus a rising sense of general resentment of injustice, will push this initiative over the top even in this very odd election year. The betting here is that they are dead wrong.

Could a vacancy tax help L.A.'s housing crisis? Maybe. But not the version the city is planning

When Los Angeles City Council members floated the idea last year of a vacancy tax to discourage property owners from holding empty units or lots off the market, the idea seemed worthy of further study.

Now the studies are back and the council is considering putting the “empty homes penalty” on the November ballot. But the case for the vacancy tax being considered is, well, unpersuasive.

The theory behind the penalty makes sense. The tax could push vacant units onto the market and reduce the shortage of homes. It could also nudge property owners to build housing on their vacant lots or sell them so

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someone else could develop the land. For those who pay the tax, the money could help fund the construction of more affordable housing.

The problem is that despite months of research, the city still doesn’t have a solid understanding of how many units or vacant lots are being held off the market or, more important, why.

The city estimated that 1 in 10 high-end units is vacant at the moment. That’s about 1% of the homes in buildings with five or more units in the city, according to real estate data firm CoStar.

Is there indeed a glut of empty luxury apartments because speculative investors don’t want to lower their prices? Or are there more vacancies because these are newly built units just waiting to be rented or sold, or sold but not yet occupied? Are wealthy buyers snapping up real estate to park their money without the hassle of tenancy? The reports didn’t answer these questions, so it’s difficult to predict whether the tax will improve the housing market or change property owners’ behavior.

Few cities in the U.S. have enacted vacancy taxes, so it’s hard to gauge their effectiveness. L.A. would model its tax on the one that Oakland’s voters approved in November 2018, but that city hasn’t reported how much the tax is raising yet. Westside Councilman Mike Bonin, who proposed L.A.’s tax, predicts it could provide a huge revenue stream for the city. But would it?

One study estimated the city had between 85,000 and 100,000 empty residential units, but didn’t assess how many of those would qualify for the tax. Another analysis calculated that the city has about 19,000 empty units and 2,900 vacant lots that could be subject to the tax. The proposal calls for an annual tax of $5,000 per residential property and between $5,000 and $40,000 per vacant lot. Reports put the potential revenue at $100 million to $150 million a year, but that was before the City Council carved out numerous exemptions that shrink the number of taxable properties.

For example, the tax would apply only to homes or residential lots that were vacant for more than 10 months of the year. The council also excluded nonresidential commercial properties, properties owned by nonprofits or low- income or disabled people, and properties in the process of being developed, marketed or sold.

In addition, the City Council voted to exempt single-family homes from the tax unless the house is owned by a corporation. And under the Oakland model the council is currently following, multi-family buildings would be exempt if at least one unit in the complex is occupied — exempting all the half-rented luxury buildings that proponents say they want to target.

With all these exclusions, how many vacant units will be left to tax?

OK, you might ask, perhaps this tax proposal won’t have a huge effect on the housing market, but what’s the harm in trying it?

The harm is the possibility that L.A. will squander money and time on a proposal that won’t deliver the housing reform that the city truly needs. It will cost $12 million to put the tax on the November ballot, require a hard-to- reach 66% of the vote to pass, and even if it does pass, may deliver modest revenue and benefit.

L.A.’s major housing problem is not the small number of homes sitting empty. It’s the shortage of housing affordable to middle- and low-income Angelenos. Council members could make a bigger impact if they focused on streamlining the development process and creating programs that incentivize developers to build housing at all income levels.

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San Diego projecting property tax dip from delinquencies, foreclosures While COVID-19 hits the city’s hotel tax and sales tax revenue streams the hardest, it’s also taking a chunk out of property taxes.

San Diego officials are projecting they’ll take in less property tax revenues based on predictions of a rise in tax delinquencies and in foreclosures linked to the pandemic.

Property tax, the city’s largest and most consistent revenue stream, typically doesn’t begin to dip significantly until a year or two into an economic downturn, because there is a delay in tax assessors re-assessing property values downward.

But city officials say they anticipate fewer people will pay the property taxes they owe during the new fiscal year that begins July 1. They predict San Diego’s delinquency rate will triple from an historically low 0.8 percent to 2.4 percent.

The budget approved this week by the City Council projects $630 million in property tax revenue during the new fiscal year— more than $6 million less than the $636.1 million city finance officials had predicted last winter.

Protesters gathered outside San Diego City Hall to draw 140 chalk outline, representing the 140,000 low-income residents they say are at risk of eviction if their budget demands aren't listened to on June 8, 2020 in San Diego, California. The action came just hours before the City Council was considering Mayor Kevin Faulconer's proposed budget. The advocates asked that some San Diego Police Department funding be diverted to a rental assistance program.

The decrease pales in comparison to the projected drop in hotel tax revenue of $99 million — from $271 million to $172 million — and the projected drop in sales tax revenue of $37 million — from $311 million to $274 million.

But a $6 million decrease in property tax revenue can still have an impact when the city is in budget-cutting mode, because of the significant overall loss of revenue.

That property tax drop is based entirely on the anticipated increase in delinquencies, not a reduction in property values, city officials said. Any reduction in property values would drop the city’s property tax revenue even further.

The most recent data on local home sales released last month show that home prices rose 5.2 percent countywide in March compared to a year earlier. But most of those sales were already in progress when the pandemic began.

Last winter, the city’s Independent Budget Analyst predicted an economic recession would have a significant impact on the city’s property tax revenue.

The analyst, Andrea Tevlin, stressed that it’s difficult to predict which revenue streams will be hit hardest by a recession.

“The actual impact of a recession on the major revenues could be drastically different depending on a variety of factors, including various triggers, severity, duration and timing,” Tevlin said last winter.

Because the 2008 recession was primarily driven by financial problems in the housing market, property taxes were impacted more than usual. Property taxes don’t usually drop during recessions, but their rate of growth slows, Tevlin said. International Property Tax Institute IPTI Xtracts- The items included in IPTI Xtracts have been extracted from published information. IPTI accepts no responsibility for the accuracy of the information or any opinions expressed in the articles.

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Tevlin predicted a recession would cost the city $71.5 million in property tax revenue over a five-year period.

City finance officials had been predicting property tax revenue would rise from $636 million to $666 million in fiscal year 2022, to $697 million in fiscal year 2023, to $727 million in fiscal year 2024 and to $756 million in fiscal year 2025.

In a recession, Tevlin said, those numbers should be revised downward to $657 million in fiscal 2022, $677 million in fiscal 2023, $706 million in fiscal 2024 and $734 million in fiscal 2025.

City finance officials have used a property tax growth rate of about 5 percent for their projections in recent years, but they lowered the rate to 4 percent this spring.

Property values have been rising more sharply within the city than in the rest of San Diego County.

City officials say the delinquency rate on property taxes during the last three fiscal years has been historically low at 0.8 percent, which they credit to the relatively strong economy before the pandemic.

Property taxes typically make up about 40 percent of the city’s annual budget, which is $1.6 billion for the new fiscal year.

CALIFORNIA STATE BOARD OF EQUALIZATION DOES NOT ISSUE GUIDANCE ON PROPERTY TAX DISASTER RELIEF FOR COVID-19

In a 3-2 split vote, the California State Board of Equalization (BOE) voted against issuing formal guidance to county assessors regarding mid-year re-assessments due to declines in value caused by the COVID-19 pandemic.

Similar to a number of other states, California law provides valuation relief for property tax purposes due to calamities, emergencies, and disasters. These property tax relief provisions may be applicable as a result of disaster declarations, stay at home orders, and other mandatory restrictions caused by the COVID-19 epidemic.

Despite the BOE’s decision to forgo issuing formal guidance, taxpayers should still consider filing such disaster relief claims with local assessors.

Background — California Property Tax Disaster Relief

Section 170 of the California Revenue and Taxation Code empowers local governments to adopt ordinances permitting reassessments when damage or destruction to property is due to a “major misfortune or calamity.”

More specifically, under Section 170(a)(1), valuation relief may be available if, among other things:

1. There is a major misfortune or calamity, in an area or region subsequently proclaimed by the Governor to be in a state of disaster; and 2. The subject property is damaged or destroyed by the major misfortune or calamity without the fault of the taxpayer.

For purposes of this specific subsection, “damage” includes “a diminution in the value of property as a result of restricted access to the property where that restricted access was caused by the major misfortune or calamity.”

Application to COVID-19

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On March 4, 2020, Governor Newsom issued a Proclamation of a State of Emergency due to the COVID-19 pandemic, covering the entire State of California.

Under Section 8680.3 of the California Government Code, a “disaster” is defined as a “fire, flood, storm tidal wave, earthquake, terrorism, epidemic, or other similar public calamity that the Governor determines presents a threat to public safety.” (emphasis added). Government Code Section 8558(b) is to the same effect, defining a state of emergency to mean the “existence of condition of disaster or of extreme peril to the safety of persons and property within the state caused by conditions such as air pollution, fire, flood, storm, epidemic, riot, drought, cyberterrorism, sudden and severe energy shortage . . . .” (emphasis added).

Eversheds Sutherland Observation: While the California Constitution, Article XIII, Section 15, uses the words “physical damage,” the constitutionality of Section 170(a)(1) has not been called into question since its enactment in 1979. If any county assessor believes that Section 170(a)(1), and in particular its adoption of “restricted access” as a form of physical damage is unconstitutional, his or her sole remedy is to bring a declaratory relief action under Section 1060 of the Code of Civil Procedure. See Cal. Rev. & Tax. Code § 538. We are not aware that any such action has been brought.

Moreover, in Slocum v. State Board of Equalization, 134 Cal.App.4th 969 (2005), the Court of Appeal suggested that the Legislature’s interpretation was a permissible one – characterizing restricted access as a form of “indirect physical damage.”

BOE’s Formal Position

Despite these provisions, the BOE nonetheless voted to reject taking a formal position on the issue. In its June 9, 2020 meeting, issuing formal guidance to local assessors was one of four options being considered by the BOE.

The BOE’s reluctance does not preclude local assessors from accepting taxpayers' claims for disaster relief. In any event, the 3-2 split decision indicates some support from members of the BOE.

Eversheds Sutherland Observation: Under Section 170, California property owners have one year to file a calamity claim with the local assessor. In order to qualify for relief, a taxpayer generally must demonstrate that the COVID- 19 government orders resulted in “restricted access” to their property and also prove that their property was damaged by at least $10,000. The combination of the stay at home orders, social distancing requirements, and maximum group limits have effectively closed many businesses, and such closures may satisfy the “restricted access” standard.

California’s Solution for a Looming Covid-19 Budget Disaster With 45 million children in 43 states already enjoying an extended summer vacation, school boards and legislators are trying to determine how the coronavirus recession will affect K-12 funding for the next academic year and beyond.

Since U.S. lockdowns first began, governors in eight states signed bills to free up funding for disadvantaged students in poorly funded public schools, some where students often arrive hungry or have undiagnosed learning disabilities. Now, six states are considering November ballot measures to boost school funding or change their financing mechanisms.

These include Arizona, where taxes would be raised on incomes above $250,000 to boost teacher salaries; Colorado, which is targeting corporations for at least $151 million in taxes to fund out-of-school learning; and North Carolina, which would issue bonds worth $1.9 billion in part to pay for school capital improvements.

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But it’s a ballot measure in California that may have the biggest effect, upending the business property tax structure to send as much as $12.5 billion annually to public schools (K-12 education currently receives $97.2 billion from state, local and federal sources). The measure, if adopted, could set a new standard for how property taxes are used in other states. It would certainly help California deal with its projected $54 billion shortfall.

Property taxes are a key component of public school funding in America, a fact that has historically created high- performing schools in wealthy neighborhoods and poor-performing schools in poor neighborhoods. Economic stratification in America, often along racial lines, has long been attributed in part to this mechanism of school funding.

California’s ballot initiative wouldn’t change that system. Rather, its proponents say it would make it more fair. Under the state’s heretofore untouchable Proposition 13, which took effect in 1978, property is re-assessed only when it changes hands or is redeveloped, a boon for longtime landowners. The California Schools and Local Communities Funding Act of 2020, however, would assess the market value of some business properties every three years. Given high property values in some parts of the state, this “split-roll” measure could mean big money for public schools.

“We’re ensuring that if you started a business yesterday and the person next to you started theirs 40 years ago, that they don’t pay the same taxes they did 40 years ago,” said Alex Stack, communications director for Schools & Communities First, an organization of school district officials and labor groups behind the initiative. Stack points to a study from the University of Southern California showing that 78% of the revenue generated would come from just 6% of the property owners.

The ballot measure would affect any parcel owned by an entity whose total commercial or industrial land holdings exceed $3 million. The proposal seeks to protect small business owners, while big companies that own a large number of small properties (like a restaurant chain) must pay up. The new law would hold the maximum tax rate to 1% while offering some exemptions.

Proposition 13 has long been defended as a lifeline to senior citizens in California who, without it, might have trouble paying property tax bills. But its most powerful defenders have been corporations and other owners of high-value commercial and industrial properties that have saved billions of dollars over the years.

“We have the highest marginal income tax rate in America, the highest sales tax rate in America, the highest gas tax in America, and the highest corporate tax west of the Mississippi,” said Jon Coupal, president of the Howard Jarvis Taxpayers Association, a lobbyist group which actively opposes the ballot measure. “The costs of businesses are invariably passed along to consumers, and a $12 billion tax increase will simply exacerbate the cost of living situation in California.”

With the recession likely to slash states’ revenue for years to come, schools are going to need help from somewhere. Many are still recovering from the last economic downturn. By 2017, the last year for which complete data was available, spending on elementary and secondary education in 22 states had yet to recover to levels prior to the Great Recession, according to an April report from the Albert Shanker Institute, a Washington-based nonprofit.

As state coffers empty to fight Covid-19, many school districts “will be facing a possibly unprecedented funding crisis while they are still digging out from the last one,” wrote senior research fellow Matthew DiCarlo and Bruce Baker of the Rutgers University Graduate School of Education.

The effects of the 2008 financial crisis were most severe in districts that could least afford the cutbacks, and occurred amid 25-year declines in both state revenue and state spending on education as a share of personal income. This time may be worse.

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“What’s happening now will have a much more significant impact than the Great Recession,” said Phil Vaccaro of the consulting firm EY-Parthenon, partly because of the social-emotional and academic setbacks resulting from a truncated school year, as well as trauma felt by families of the 111,000 Americans killed in the pandemic, the most of any nation by far. “It will be felt disproportionately by students from low-income families, with special education needs, and in earlier grades,” he said.

The $13 billion in aid to K-12 schools nationwide in the federal Covid-19 bailout was about one-quarter of what Washington provided in 2009. The Center on Budget and Policy Priorities, a left-leaning research institute in Washington, calculates state budget shortfalls for fiscal 2021 alone will amount to $290 billion.

California’s schools rank in the middle of states by per-student spending. Before 1978, California was near the top. But in the years after Proposition 13, it fell toward toward the bottom. The recent climb back up is largely a function of other states’ declines.

When it comes to education funding and outcomes, size does matter, Rutgers’ Baker said. “Significant additional investments in schooling have led to better outcomes, and recessionary cuts have led to flattening and declining outcomes.” That’s largely because education is labor-intensive: The biggest line item in school budgets is staff—around 70%, according to Vaccaro—though the average starting salary nationally. is below $40,000. Baker predicted that the California initiative “could serve as a timely counterbalance” to looming revenue falloffs.

Coupal, the business lobbyist, contends California schools are already getting what they need. Rex Hime, president of the California Business Properties Association, added that under the new property tax regime, “there’s going to be a significant upheaval among the smaller owners.”

“Some folks had their property tax in place for 20 years,” Hime said. “Suddenly they’re going to get a tax bill reflecting a 2020 value rather than a 2000 value, and they’re going to be very hard-pressed to make those payments.”

Willie Brown, the former San Francisco mayor and speaker of the State Assembly, agreed. The Democrat wrote in Cal Matters, a news site on state policy, that a significant percentage of California businesses are minority owned, and many rent from entities that will be forced to pay more. (Because of Covid-19 shutdowns, there has already been a 41% decline in black-owned businesses.)

“African American-owned small businesses are nearly twice as likely to fail because they have insufficient cash flow or sales to cover their costs than U.S. businesses as a whole,” Brown wrote. If their landlord qualifies for reassessment, he warned, they will pay the price next time their lease is up.

It’s Not the Time to Gut Proposition 13 and Raise Taxes

Under California law, proposed initiatives must be presented to the California Legislature in an “informational hearing” open to the public. Legislators do not vote on the proposals because these are initiatives that have already qualified for the ballot. The hearings are mostly for the benefit of policy leaders and the public.

Because the infamous “split roll” initiative has now qualified, the Legislature held a hearing in the California Legislature on Thursday. I was pleased to be one of the individuals invited to testify and explain our opposition to the measure, which would remove Proposition 13’s protection from most commercial and industrial properties, sharply raising taxes.

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Howard Jarvis Taxpayers Association is California’s largest taxpayer advocacy organization with over 200,000 members. We are strongly opposed to this initiative. First, taxpayers are also consumers, and we know that taxes on businesses have an insidious way of trickling down to consumers in the form of higher prices for goods and services. California’s cost of living is already way above the national average, and we don’t need to add to that burden for residents who are already struggling to pay the bills.

Even if we resolve the health issues related to the COVID-19 pandemic, higher taxes are the last thing California needs. The state already has the highest income tax rate, highest state sales tax, and highest fuel tax. And when cost of living is taken into account, California has the highest poverty rate in the nation. More importantly, California is not even a low property tax state even with Proposition 13. According to the Tax Foundation, California ranks 17th out of 50 states in per capita property tax collections.

Taxpayers are also worried because the proponents of this initiative have openly admitted that raising property taxes on businesses is just the first step in the complete dismantling of Prop. 13. Homeowners are well justified in fearing that the loss of Proposition 13 for the business community will be followed quickly by proposals to remove protections for income-producing residential property—apartments—and then owner occupied single-family homes.

Let me spend a moment to address how this proposal would worsen one of California’s biggest fiscal challenges, volatility of revenue. We are so overly reliant on a handful of wealthy individuals that in boom times, revenues come pouring in, but in recessionary times, the drop is severe.

Gov. Arnold Schwarzenegger created the California Commission for the 21st Century Economy to work on the problem of revenue volatility. They never came up with a solution, but during the Commission’s hearing process, the Legislative Analyst produced a chart that showed high volatility in income taxes, some volatility in sales taxes and extraordinary stability in the property tax stream.

Indeed, in 2008 and 2009 we had declines in income taxes, sales taxes and declines in market value of property, but property tax collections actually increased. Why? Because long-held properties, if not sold, continued to see their assessed value rise 2 percent per year, and if sold, they were reassessed to a much higher market value. This initiative will make California’s problem with revenue volatility much, much worse, as properties will be repeatedly reassessed to market value, which sometimes crashes.

I’d like to spend a few moments dispelling just two of the many myths about Prop. 13.

First, an often-heard but false argument is that Proposition 13 caused a reduction of per-pupil spending on education. In fact, per-pupil spending in elementary and secondary public schools in California has risen nearly every year and is far higher today than it was in the 1970s. Measured in constant dollars, per-pupil spending is approximately 30% higher now than it was in the mid-70s, a time when there was broad agreement that schools in California were some of the very best.

A second myth is that Proposition 13 created some sort of loophole for business properties. But California has always—at least since 1850 – taxed all property at the same rate. Proposition 13 didn’t change that.

Also, we often hear the assertion that during the campaign in 1978, voters were not informed that Proposition 13 protections would be extended to business properties. Not true. The opponents hammered that argument throughout the campaign and, specifically, in the official ballot pamphlet itself. The fact is that in 1978 voters intended to provide businesses with the same stability and predictability in their property taxes that homeowners desired.

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Finally, we think it’s pretty clear that Californians already believe themselves to be overtaxed. In March, voters rejected a statewide school bond for the first time since the 1990s, and 142 of 237 local taxes and bond proposals, 60 percent, failed in the last election cycle.

Further confirmation comes from the just-released PPIC poll, which shows that Californians oppose tax hikes by a 2-1 margin. It’s clear that the residents and businesses of this state are taxed enough already.

Proposition 13 and the Implications of the California Schools and Local Communities Funding Act of 2020

A proposed California ballot initiative would change how taxes are assessed on commercial real property under roposition 13 (“Prop 13”). This Legal Update summarizes the California Schools and Local Communities Funding Act of 2020 and its proposed changes to the current real property tax system.

I. EXECUTIVE SUMMARY

The California Schools and Local Communities Funding Act of 2020 (ballot initiative 19-0008) (the “Act”) is eligible to appear on the statewide ballot in the November 3, 2020, election. If passed, the Act would materially modify Prop 13, which currently limits (with some exceptions) property taxes to 1% of a property’s value and annual valuation increases to a maximum of 2% per year. The Act would create a split-roll tax changing the current tax treatment of commercial and industrial properties while leaving the tax treatment of residential and agricultural properties unchanged, resulting in significant property tax increases for affected properties.

Under the proposed Act, commercial and industrial real properties would be assessed at their current fair market value rather than their frozen “base year” value (typically, the most recent purchase price plus annual 2% increases) and be reassessed to current market value at least once every three years (which value would likely be substantially higher). Beginning with the 2022-2023 lien date, the new valuations would be phased-in over a three- year period. Property of small business owners with a statewide value of $3 million or less, with an on-site, operating business, would not be subject to the proposed change. Mixed-use properties would be valued in proportion to the amount of commercial property.

II. ANALYSIS

A. Changes to Prop 13

Currently, all commercial, industrial, agricultural, and residential properties are governed by Prop 13—a 1978 amendment to the California Constitution. Under Prop 13, all properties are valued/assessed at their 1975 value plus annual increases limited to a maximum of 2% (“base year” value). Base year values are frozen until a change in ownership or substantial completion of new construction occurs. If passed, the Act would materially alter the current property tax regime in three ways: (1) commercial and industrial property would be subject to reassessment to current fair market value instead of the frozen, base year value; (2) up to $500,000 of business personal property would be eligible for exemption; and (3) roughly 40% of the expected new property tax revenue (estimated to range from $7.5 to $12B per year) would be provided to schools, with virtually no restrictions on how the new revenue will be spent.1

First, requiring commercial and industrial properties to be taxed at their current fair market value rather than their base year value would “split” how commercial, industrial, residential, and agricultural properties are valued and taxed.2 Commercial and industrial property would be dramatically impacted by passage of the Act. The current,

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Prop 13, valuation of residential and agricultural real properties would not change. Property zoned as commercial or industrial but used as long-term residential property would be classified as residential. Only the commercial portion of a mixed-use property would be subject to reassessment to the current market value.

“Commercial and industrial real property” is defined as “any real property that is used as commercial or industrial property, or is vacant land not zoned for residential use and not used for commercial agricultural production.” This does not include properties protected for open space, parks, and recreational areas and those areas intended to preserve scenic, cultural, or historic values.

The Act excludes commercial and real properties that meet three criteria: (1) have an on-site business; (2) have a statewide fair market value of $3 million or less (adjusted for inflation every two years starting January 1, 2025); and (3) are under single ownership.

Second, the Act exempts from taxation the first $500,000 of tangible personal property (i.e., equipment and fixtures) for all businesses and eliminates tangible personal property tax for independently owned and operated businesses with 50 or fewer full-time employees.

Third, per the legislative analyst, the Act is expected to annually generate additional tax revenue ranging from $7.5 to $12 billion, roughly 40% of which would be dedicated to schools. Of the additional revenue earmarked for schools, approximately 11% would be allocated to community colleges and the remaining 89%, to public K-12 schools, charter schools, and county education offices.

B. Phased-In Taxation

Commercial and industrial real properties subject to the Act would see a tax assessment based on fair market value beginning January 1, 2022. Properties, such as retail centers, for which small businesses account for 50% or more of the occupants would be taxed based on market value beginning in fiscal year 2025-2026 or on a later date that the legislature determines.

C. Fiscal Impact

According to the Attorney General of California, a net annual increase in property tax revenues of $7.5 billion to $12 billion is expected in most years, depending on the strength of CA real estate markets. After backfilling state income tax losses related to the measure and paying for county administrative costs, the remaining $6.5 billion to $11.5 billion would be allocated to schools (approximately 40%) and other local governments (60%).3

III. OTHER

A. Two Versions of the Ballot Initiative

In April 2020, over 1 million signatures were submitted to the state to replace the previous ballot initiative (17- 0055), which qualified for the ballot on October 15, 2018. On May 29, 2020, the CA Secretary of State ratified the signatures for the revised ballot initiative (19-0008), replacing the previous version. The initiative would need a simple majority to become law.

This revision updated the proposed timeline to implement the assessments in 2022-2023 and increased the exemption for small business owners with property valued at $3 million, up from the previous $2 million threshold. The revision also clarified that businesses that have 50 or fewer full-time employees, that are independently owned and operated, and that own real estate would continue to have their properties assessed on the base value under Prop 13. International Property Tax Institute IPTI Xtracts- The items included in IPTI Xtracts have been extracted from published information. IPTI accepts no responsibility for the accuracy of the information or any opinions expressed in the articles.

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According to Berkeley Research Group, there have been nearly two dozen attempts to modify Prop 13 and introduce a split-roll tax since Prop 13’s passage in 1978. (See the report for economic impact projections.4)

B. Stakeholders

Business-oriented advocacy groups oppose the measure, predicting small businesses may not be able to absorb rent increases due to the reassessment, and those higher rent costs may then be passed on to consumers.5 Other predictions include California businesses leaving the state, contributing to loss of employment.6 Local school districts, housing advocates, and the California Democratic Party are in favor of the Act as a mechanism to close a corporate tax loophole and generate more funding for schools and local government.7

While the California Assessors’ Association has not taken a position on this specific split-roll initiative, it has released a white paper citing concerns with administering a split-roll system without concurrent increases in resources and new technology.8

1 Text of California Schools and Local Communities Funding Act of 2020.

2 EY. “California ‘split roll’ ballot initiative would reassess commercial and industrial real property at fair market value.” 1 October 2019.

3 Attorney General of California Summary of 19-0008.

4 Berkeley Research Group. “Taxing Commercial and Industrial Property at Full Market Value.” March 2020.

5 CalChamber. “Split Roll Battle.” 20 Jan. 2020.

6 Berkeley Research Group. “Taxing Commercial and Industrial Property at Full Market Value.” March 2020.

7 Schools & Communities First. 22 May 2020.

8 California Assessors’ Association. “White Paper on a ‘Generic’ Split Roll.” 21 March 2019.

Revised California “Split Roll” Property Tax Initiative Formally Qualifies for November 2020 Ballot Supporters of a California initiative to overturn Proposition 13 (which limits property tax increases absent a change in ownership) for commercial properties have formally qualified a revised initiative for the November 2020 ballot had previously qualified for the ballot and would have overturned Proposition 13 by allowing regular reassessment of commercial and industrial property, except for owner-operated commercial/industrial property worth less than $2 million. International Property Tax Institute IPTI Xtracts- The items included in IPTI Xtracts have been extracted from published information. IPTI accepts no responsibility for the accuracy of the information or any opinions expressed in the articles.

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Revised would make a number of changes, including increasing the exemption to $3 million. See below to read a press release issued by Californians to Save Prop 13 and Stop Higher Property Taxes, a bipartisan of civil rights, social justice, business and community leaders.

Special Interests Qualify California’s Largest Property Tax Increase Amid Unprecedented Economic Challenges

Backers of the $12.5 billion-a-year property tax hike officially qualified their state proposition today for the November 3, 2020, ballot. Unless defeated by voters, the property tax increase will be the largest in California history. The special interests backing the state proposition pursued it despite a declining economy with more than three million Californians already out of work and most businesses closed. A bipartisan coalition of civil rights, social justice, business and community leaders is lining up to oppose the tax hike, citing concerns about a rising cost of living for families and an increased burden on small businesses already fighting to stay afloat.

“We need to get Californians back on their feet, not raise the cost of living even higher. The public employee unions behind the largest property tax increase in state history are willing to spend and do whatever it takes, even if it raises the cost of living for families. Everything from groceries, fuel, clothing, day care and health care will cost more if this massive tax hike is approved,” said Rob Lapsley, president of the California Business Roundtable.

“November’s property tax hike will hurt families and small businesses already struggling to make ends meet,” said Reverend Jonathan Moseley of Cedar Grove Baptist Church and president of the National Action Network LAX. “Our community cannot afford anything that raises the cost of living even higher, especially in light of the current COVID-19 crisis and an unpredictable economic recovery.”

In addition to raising the cost of living, the property tax hike includes critical flaws that will hurt all Californians. For example, the state proposition will hurt farmers with skyrocketing property taxes on the improvements needed to bring food from farm to fork – like barns, dairies, processing plants and even mature fruit trees – translating to higher costs for groceries for families.

“Under the November tax hike measure, California farmers could face higher property taxes -and families would face higher prices for food as the increase in taxes moves through processing, distribution and neighborhood grocery stores. Ultimately, the measure could lead to fewer California- grown food choices and higher costs for families,” added Jamie Johansson, president of the California Farm Bureau Federation.

Another flaw is the measure’s lack of protection for small businesses, who will see soaring rents ironically at a time when the federal and state government is trying to provide small businesses with rent relief to keep their doors open.

“Families and small businesses are looking at an uncertain economic future as the world’s fifth-largest economy skidded to a halt and must now re-start,” said Assembly Member Sharon Quirk-Silva (D-Orange County). “With all the insecurity that exists right now, we definitely don’t need to further complicate the situation by adding the state’s largest property tax increase ever to the equation.”

COLORADO

Repeal of property tax law on November ballot

Lawmakers on Friday approved a ballot question for the November election that will ask voters to repeal a constitutional amendment that has driven down residential property tax rates as home values have risen. International Property Tax Institute IPTI Xtracts- The items included in IPTI Xtracts have been extracted from published information. IPTI accepts no responsibility for the accuracy of the information or any opinions expressed in the articles.

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The Gallagher Amendment. adopted by voters in 1982, requires 45% of the state's property tax base to be levied on homes, and 55% on commercial properties.

But with rising home values over the years, the state has had to ratchet down the assessment rate to maintain that ratio.

That's hurt rural communities that rely more on residential property taxes for schools, and forced the state into a situation where it now pays 65% of the cost of public education, with local property taxes covering the rest.

When Gallagher was adopted, that ratio was exactly the opposite.

State property tax administrator JoAnn Groff warned the Joint Budget Committee that the next reduction will result in hundreds of millions of dollars less in property taxes, at a time when the state is already struggling to pay for K-12 education.

In the 2020-21 budget, K-12 was hit with a $612.1 million cut, which was added to the debt already owed to schools, known as the budget stabilization factor.

"Gallagher does not work the way it was intended," said Democratic Rep. Daneya Esgar of Pueblo, who chairs the JBC. Even former Democratic Rep. and Denver City Auditor Dennis Gallagher, for whom the amendment was named, admitted that in an interim committee meeting, she said Friday.

A second measure approved by lawmakers, Senate Bill 223, would freeze the assessment rates if voters repeal Gallagher in November. Those rates are already frozen because they are adjusted only every other year, and the General Assembly last made that decision in 2019.

However, if the repeal is approved, that biannual change would go away.

Concurrent Resolution 1, the repeal measure, needed 44 votes in the House — a two-thirds majority — to make the ballot.

Instead, it got three more than needed, with six Republicans voting in favor, including Colorado Springs Republicans Lois Landgraf and Larry Liston, who is running for the Senate in the fall.

Republican Rep. Rod Bockenfeld, a former Adams County commissioner, argued Friday that a repeal of Gallagher will drive up property taxes for seniors.

"Do not put a complicated measure on the ballot" that will confuse and manipulate the voters, he said, but acknowledged that the Democrats probably had the votes to pass it.

In the Senate, the resolution passed 28-7.

NEW Colorado lawmakers move to repeal Gallagher property tax amendment Ballot measure appears fast-tracked for passage with bipartisan support

In a desperate attempt to stave off further budget calamity, state lawmakers are fast-tracking a landmark ballot measure that would ask voters to repeal the Gallagher Amendment — the property tax-limiting constitutional provision that has provided an estimated $35 billion in tax relief to Colorado homeowners since 1983.

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The bipartisan proposal — which requires a legislative supermajority to pass — represents the nuclear option for tackling Gallagher, a sign that the growing economic crisis is upending long-held assumptions about what is politically feasible in tax-averse Colorado. It is also an indication of just how desperate state lawmakers have become as they face an economic abyss unlike any other in their lifetimes.

Last week, state budget writers put the finishing touches on a proposed spending plan that cuts $3 billion this year and next. And earlier in May, lawmakers learned that Gallagher could trigger an 18% residential property tax cut, which would mean an additional $491 million in cuts to schools and $204 million in cuts to county governments starting in July 2021.

After years of political hand-wringing over Gallagher’s effects on public services across the state, lawmakers said the possibility of a massive tax cut in the middle of a pandemic finally represented a bridge too far.

“We’re in an unprecedented moment,” said Sen. Chris Hansen, a Democrat from Denver. “And when that happens, some of the business-as-usual hurdles often fall away.”

In this case, each side has been energized by different threats. For Democrats, it’s the prospect of deep cuts to local funding for public education, with no assurance there will be any state funding to fall back on. For Republicans, the lower property taxes from Gallagher means another round of cuts to fire and hospital services in the rural communities many of them represent. It also means a potential round of local tax hikes on businesses across the state that are already reeling from the coronavirus shutdown this spring.

A day after the measure’s introduction, lawmakers on Tuesday passed the resolution unanimously out of the Senate Finance Committee, sending it straight to the Senate floor. And after years of inaction, the rapid pace has caught a number of key stakeholders off guard.

A number of local chambers of commerce across the state are in support, but Colorado Counties Inc., a long-time proponent of Gallagher reform that advocates on behalf of county governments, hasn’t taken a position.

Scott Wasserman, who runs the left-leaning Bell Policy Center and supports repealing Gallagher, said he has “concerns” about the measure’s timing. On the political right, the Independence Institute hasn’t taken a stance, while another conservative group, Colorado Rising State Action, opposes it on the grounds that repealing Gallagher won’t address broader inequities in the school finance system.

Moreover, like the failed Proposition CC campaign from a year ago, the subject matter is complicated for voters — with huge implications for public services as well as taxpayers’ wallets. Gallagher affects different communities in different ways, pitting the financial interests of Front Range homeowners against rural fire services, business owners and school funding needs that will trickle up to the state budget.

Nonetheless, policymakers say now is the time to try — if only because they can’t afford to wait any longer. “We’re at the end of the line now,” said Sen. Jack Tate, a Centennial Republican who is co-sponsoring the repeal effort. “We can’t be punishing businesses. We can’t … have them continue to pay a higher and higher tax burden” during an economic downturn.

How the Gallagher Amendment works

Adopted by voters in 1982, the Gallagher Amendment is designed to provide ongoing tax relief to homeowners by limiting residential property to no more than 45% of the total property tax base statewide. It required businesses to pick up the remaining 55% share of the tax burden.

Over time, it has accomplished just what it set out to do — and then some. The residential assessment rate, which is used to calculate property taxes, has fallen from 21% when Gallagher was adopted to 7.15% today. Business International Property Tax Institute IPTI Xtracts- The items included in IPTI Xtracts have been extracted from published information. IPTI accepts no responsibility for the accuracy of the information or any opinions expressed in the articles.

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property is assessed at 29% — meaning businesses pay four times the property tax rate that homeowners do. If the residential rate is cut to 5.88% in 2021 as projected, businesses would be on the hook for five times the residential tax rate.

It helps to imagine Gallagher as a balancing scale, with residential property values on one side, and non-residential property, such as commercial buildings and oil and gas, on the other. Usually, rapidly rising home values are what disrupts the 45% to 55% split, triggering a residential tax cut. This time, home values are indeed on the rise — but it’s a precipitous drop in business values and oil and gas from the current economic downturn that’s expected to tip the scale out of balance.

Even though Gallagher gets less attention than another tax-limiting constitutional provision — the Taxpayer’s Bill of Rights — it has arguably had just as significant an impact on governance in Colorado.

When Gallagher was first adopted in the early 1980s, residential properties were valued at $35 billion, a figure that represented 53% of all the value in the state, according to state property tax records. Nonetheless, businesses still paid 55% of the state’s property taxes, because residential properties were assessed at a slightly lower rate.

Now, amid explosive population growth and rising home prices, Colorado’s residential properties in 2019 had a total market value of $874 billion, or nearly 80% of the statewide total. But thanks to Gallagher, homeowners still pay just 45% of the state’s property taxes.

The tax shift away from homeowners has been staggering. The state Division of Property Taxation estimates that Gallagher has saved homeowners $35.3 billion in property taxes since 1983. In 2019 alone, homeowners paid $2.8 billion less than they would have if the Gallagher Amendment had never reduced the assessment rate from 21%. For context, the state’s school funding shortfall — the so-called negative factor — has never exceeded $1.1 billion in a single year.

But while Gallagher has been a boon to homeowners, who now pay among the lowest effective property tax rates in the country, it has steadily increased the tax burden on businesses, whose 29% assessment rate is set in the constitution.

Many communities have responded to Gallagher-initiated cuts by raising mill levies — the part of the property tax equation that people are more familiar with. In some places, this happens automatically through what’s known as a “floating” mill levy. Each new tax hike now hits businesses four times as hard as residential taxpayers.

Gallagher’s impact varies greatly

Part of what has made Gallagher so resistant to political change is that it affects different communities in wildly different ways, distributing its benefits and its downsides unequally across the state.

That’s because the Gallagher formula triggers tax cuts based on a statewide calculation, without consideration to what’s actually happening to individual taxpayers or specific government agencies.

In metro Denver, for instance, home prices have more than doubled since 2010, rising to $424,051 from $202,896. But Gallagher has triggered only two tax cuts in that period, worth about a 10% tax reduction in total.

For the metro area homeowners, Gallagher hasn’t provided much relief because the rate cut hasn’t come close to offsetting a 109% increase in property values.

From the local governments’ perspective, rising property values in many Front Range communities have largely compensated for any cuts to revenue Gallagher could have caused. In 2019 alone, residential values in Denver

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increased by 20% — more than offsetting Gallagher’s 10% assessment rate cuts over the past decade. On top of that, commercial property values have risen steadily, resulting in even more funding for public coffers.

But in some rural areas, the opposite has occurred. Homeowners have been the beneficiaries of Gallagher’s tax cuts even when their property values may be stagnant or rising slowly. Meanwhile, small public agencies that rely on property taxes, like rural fire departments, hospital districts and county governments, have been hard hit as it squeezes public coffers in places that were already struggling financially.

Complicating matters further, some taxing districts don’t have much commercial property at all, making a residential tax cut that much harder to cope with financially.

Lawmakers looking at four-year tax freeze

While the repeal effort has wide bipartisan support at the legislature — and supporters believe it will win the two- thirds supermajority needed for passage — a companion effort to enact a four-year statutory freeze on assessment rates faces a less certain path.

That bill, which has not yet been introduced, would freeze the residential assessment rate at 7.15% and the business rate at 29% for four years. The rates can’t go up without voter approval under the Taxpayers’ Bill of Rights, so this would effectively limit property tax cuts — at least on paper.

This is largely a symbolic gesture because the legislature could repeal the statutory freeze in the future and approve a new rate. Nonetheless, some county commissioners are pushing for it as a condition of their support, saying it would provide some comfort that their revenue streams won’t be cut out from under them after the immediate crisis has passed.

The reason: In the long-term, repealing Gallagher could have a downside for local governments. The business tax rate, long enshrined in the constitution, would suddenly be a matter of statute, subject to the whims of the state legislature.

“I think there will be enormous pressure on the legislature — and in some respects rightfully so — to reduce the commercial tax rate down from 29%,” said John Messner, a Gunnison County commissioner, in an interview. “It could put local governments in a worse situation than if we did nothing.”

What Are Property Taxes Like in Aspen, Colorado? Home values are assessed every two years in the state, which has the third-lowest effective rate in the U.S.

In Aspen, Colorado, properties are reassessed every odd-numbered year, according to the Pitkin County assessor’s office. Notices of a home’s valuation are mailed on May 1 of odd years, and that value remains the same until the next assessment unless there is a physical change to the residence.

Residential property values are based on comparable sales that occurred in the two years preceding the assessment, according to the county. If data for those years is insufficient, assessors may go back up to five years to find sales data.

Once the actual value has been established, it is multiplied by the assessment rate to get the assessed value. The assessment rate is 7.15%.

The assessed value is then multiplied by the mill levy to get the tax amount.

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In Aspen, the mill levy, a kind of tax rate, is 4.95, according to Jennifer Walker, the city’s deputy finance director. That includes the general property tax, which goes to fund local services, schools and infrastructure, as well as the stormwater fund to help keep polluted water from reaching local rivers and lakes.

So, if a home has an actual value of $1 million, it would have an assessed value of $71,500. After multiplying that value by the mill levy, the tax amount would be $3,537.

Payments can be split into two installments, one postmarked no later than the last day of February, with the second postmarked no later than June 15. Homeowners can also choose to pay in full, and the payment must be postmarked no later than April 30.

Overall, the state of Colorado has the third lowest effective tax rate of any state in the country, according to ATTOM Data Solutions based in Irvine, California. Homeowners paid an average of $2,390, and the state’s average effective tax rate is 0.52%.

COLORADO

Colorado House takes up initiative involving property taxes

The Colorado Senate has passed a measure to ask voters to repeal a constitutional amendment that severely limits residential property tax rates.

The House on Wednesday took up the measure, which is bitterly opposed by fiscal conservatives but gained some Republican support as state and local tax revenues plummet during the coronavirus pandemic.

In the cross-hairs is the 1982 Gallagher Amendment to the state Constitution, which has lowered residential property tax rates since its inception.

Under the amendment, total property taxes are fixed at a 45% to 55% split between residential rates and commercial property rates, respectively. Colorado Politics reports that as statewide home values rise faster than commercial property values, homeowners have paid proportionately less while businesses pay more.

Lawmakers have been forced to reduce the statewide residential tax rate to keep the balance in check, and it's now 7.15% of a property's value. Rural communities with fewer commercial properties have been hit especially hard, with less tax revenue going to schools, fire departments, police and hospitals.

The measure under consideration would freeze residential rates at that lower percentage. It passed the Senate Tuesday by a 27-to-7 vote and, if passed by the House, would not require any action from the governor to appear on the ballot.

Republican Sen. Larry Crowder, who represents rural Alamosa, voted for the measure but warned that “if legislation gets involved in raising property taxes, you’ll see a firestorm like you won’t believe. It’s the one Holy Grail for the citizens,” he said.

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Colorado voters historically have rejected most ballot questions asking them to raise taxes. Colorado Rising State Action, a group that opposes the Gallagher repeal, noted that voters rejected a similar repeal effort in 2003 by 78% to 22%.

FLORIDA

Added property tax for nonprofits should be a nonstarter

The choice by the Sarasota County property appraiser’s office to challenge the ad valorem exemption of several arts and cultural not-for-profit organizations opens a potential Pandora’s box for all Sarasota County not-for-profits in all service sectors.

The Sarasota arts and cultural community consists of over 100 organizations, collectively responsible for 7,500 full- time jobs and contributing $ 300 million to the Sarasota/Manatee economy. By every measure, this community leads the state and the Southeast in both the quality and the per capita quantity of arts and cultural not-for- profits.

Not-for-profits across all sectors provide essential, accessible services to the entire community. In particular, the Sarasota/Manatee community distinguishes itself from other Florida and Southeastern communities with the breadth and quality of its cultural life. This robust sector raises property values, inspires tourism, and employs thousands within the organizations and in the community-based commercial sectors the organizations use in pursuit of their missions.

We must make the point that there is no “profit” in not-for-profit. When a not-for-profit entity reaps revenue in excess of expenses, the excess is reinvested into the organization. No single person, owner, or investor reaps the benefit. The beneficiary is the community served by the organization.

Financial support for not-for-profit entities is challenging in the best of times, and organizations are constantly challenged to find new ways to generate revenue to compliment the community’s philanthropic generosity. Not- for-profits use their inherent innovative spirit to uncover untapped, underused resources — in their properties, facilities and dedicated, creative employees — to generate new sources of income for the singular purpose of providing affordable, accessible benefits to our community.

The Sarasota County government has always been a strong partner and ally of arts and culture in the county, for the greater good of the community. The Arts and Cultural Alliance of Sarasota County is grateful for and proud of this relationship and understands that this partnership is one reason we have a robust cultural life. We stand ready to facilitate a dialogue with the County Property Appraiser’s office regarding this issue, while standing firmly behind our member organizations and supporting all not-for-profit organizations threatened by this new challenge.

The Arts and Cultural Alliance of Sarasota County acts as the source, voice, and advocate for arts and culture in our community. In this role, we state our full and unequivocal support for Marie Selby Botanical Gardens and Historic Spanish Point, Florida Studio Theatre, the Sarasota Opera, Mote Marine Laboratory & Aquarium, the Conservation Foundation of the Gulf Coast, Manasota Matters Inc., and others, to have continued organizational exemption from ad valorem property taxes in Sarasota County, under which they have been operating for decades.

Jim Shirley, executive director of the Arts & Cultural Alliance of Sarasota County, is writing on behalf of the organization’s board of directors.

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What’s the Magic Kingdom’s worth? Disney World is suing over its property taxes — again

In what’s become an annual event, Disney is suing Property Appraiser Rick Singh over its property taxes, arguing the 2019 appraisals are too high.

Disney filed a dozen lawsuits this week in Orange Circuit Court over the tax assessments for its theme parks, resorts, employee buildings and other structures on its sprawling property.

For years, Disney and Singh have clashed on the property assessments, and dozens of courts cases are still pending after Disney has sued Singh every spring dating back to 2016.

Walt Disney World Resort “had been undervalued for decades by previous property appraisers,” said Singh spokeswoman Beth Watson in a statement Friday.

“Again this year, the Disney organization has chosen use the court system to dispute the value of its property in Orange County and thereby pay reduced property taxes that would benefit area infrastructure and public schools,” Watson said. "The Orange County Property Appraiser looks forward to defending these values in court on behalf of the citizens of Orange County, so that Disney’s responsibility to the community is upheld.”

In response, Disney spokeswoman Jacquee Wahler said in a statement, “As we have shared before and as a matter of public record, we have challenged the property appraiser’s assessments and we will continue to dispute the errors by the property appraiser as any property owner in Orange County would do."

In the latest round of litigation, Disney said Singh listed the assessed value for the Magic Kingdom — the world’s busiest theme park — at $504 million. Epcot, reportedly about twice the footprint of the Magic Kingdom, was set at nearly $539 million.

Hollywood Studios, which has recently opened the $1 billion Star Wars: Galaxy’s Edge last year, was assessed at nearly $394 million while Animal Kingdom, home of the Pandora expansion, came in at about $435 million, according to Disney’s lawsuit.

Disney’s property tax bill for Epcot alone was about $7.2 million, if it paid by Nov. 30, 2019, according to documents Disney provided with the lawsuit. Disney said it had the paid the 2019 taxes already.

Disney didn’t say what it thought the theme parks’s assessed value should be set at but called Singh’s numbers “excessive," according to the court documents.

The lawsuits criticized Singh for “not following professionally accepted appraisal practices" without providing specifics. “The assessments do not represent the just value of the Subject Property as of the lien date because they exceed the market value,” court documents also said.

Watson defended Singh’s practices.

“Under the leadership of Rick Singh, the Orange County Property Appraiser’s Office is fair and equitable to everyone, and the team of appraisers and analysts who determine the values use professionally accepted appraisal practices with impeccable accuracy,” she said in a statement.

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Last week the Four Seasons Resort Orlando at Walt Disney World Resort also sued Singh and Orange County Tax Collector Scott Randolph over the hotel’s $271 million assessment value, according to another lawsuit filed last week.

Over the years, one Disney lawsuit took the rare step of heading to trial.

In July 2018, Disney won the civil trial as it contested the Disney Yacht & Beach Club Resort’s 2015 assessment. Singh has appealed the judge’s decision that the resort’s value should be cut in half to $189 million. Online court records show the case is still pending. One court filing alone was 2,000 pages long.

This week’s lawsuits come during an unprecedented time in the coronavirus pandemic.

Disney World won’t open back up until mid-July. Closing the Orlando and California theme parks for part of March alone cost the company $500 million, executives disclosed during a quarterly earnings call last month.

But the tourist shutdown in the world’s theme park capital is also financially hitting local government, too. This year, Orange County government will lose at least $100 million in tourist taxes, the levy that’s collected on hotel rooms, officials said in an April update.

The pandemic also affected Singh personally. Singh had contacted the virus and is at home recovering although he expects to make a full recovery.

Re-elected twice since 2012, Singh is running for his third term for his powerful position. He also is awaiting the results of a Florida Department of Law Enforcement investigation over accusations against him of misconduct in office.

The Future of Florida’s Property Taxes and Property Values As the state economy tries to bounce back from closures due to the coronavirus pandemic, many Floridians are worried about how the housing market will be affected in 2020 going into 2021. A new tax bill could have a negative effect for people facing a cash crisis due to being laid off because of COVID-19. With historic unemployment numbers currently affecting people all over the country, how much property values and how much property taxes people will have to pay for their homes remains a mystery.

With that uncertainty comes trepidation. Homeowners are expecting the worst when it comes to how much their house will be worth come next year in 2021. Luckily, the coronavirus pandemic has brought with it some relief for renters and homeowners. Property appraisers say state law requires them to only judge the values from 2019, so a fallout from the coronavirus can’t be considered.

Florida real estate taxes make up 1.1% of the assessed value of the house. This is slightly below the national average of 1.111%. Florida property and sales tax support most state and local government funds since the state does not charge personal income tax. This allows breathing room for homeowners and commercial property owners to make their budgets to pay for everything from police salaries, park maintenance and street repairs.

Florida’s economy relies heavily on seasonal residents and tourism. In addition to sales tax revenue, Florida citizens benefit from exempting the estate from property taxes. This means that seasonal residents, as well as those who own rental and commercial real estate, pay a higher property tax rate than primary residence owners.

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Walton County has the lowest property taxes in Florida, 0.79%, then Jackson County 0.73% and Santa Rosa County 0.77%. Bay and Monroe were connected with the fourth least expensive district at a rate of 0.79%. The three counties with the least expensive property tax rates are Walton, Santa Rosa, and Bay. They are in the northwestern part of the state, otherwise known as panhandle.

Fort Walton Beach in Walton County, Pensacola in Santa Rosa and Panama City in the Bay Area are the best in terms of tax rates and still have the advantage of being in the Gulf of Mexico. Jackson County is also part of the creek, but is located within the country and shares the border with Georgia.

But when many people think about moving to Florida, it is South Florida, mainly Miami or Miami Beach. Key West and the rest of the Florida Keys may also be a desired relocation site. The Miami-Dade area property tax is 1.06%. Its neighbor in the north of Broward County, which includes Fort Lauderdale, is 1.22%.

In Broward County, values increased an average of 6.1%, with some of it attributed to new construction; the top three valued projects came from Fort Lauderdale. The city of West Park had the biggest jump in Broward County at 10.2%. In Miami-Dade County, the average increase is 4.6%; the city of West Miami had the biggest jump for that county at 12%. Palm Beach County taxable property values have increased by 5.51% from 2019 to 2020. The newer city of Westlake, which has new home construction, had a triple-digit jump in values.

New homes built after COVID-19 have more value than they did previously, according to property county appraisers. Mike Pappas, the president and CEO of the Keyes Company, one of the country’s largest real estate companies, said property values are affected when there’s an oversupply of properties on the market with less demand for them. “It’s a supply-and-demand issue,” he said.

Experts say there could be a foreclosure wave next year as companies go out of business “and those jobs don’t come back,” said Chad Van Horn, a Fort Lauderdale-based bankruptcy attorney. That could mean people can’t pay their mortgage to keep their homes. Van Horn said while he doesn’t expect the glut of foreclosures and short sale homes on the market like in the 2008 crash, he expects trouble as people have to deal with multiple financial problems at once, including other debt. “I think property values are going to take a hit,” he said.

CONNECTICUT

Coronavirus has cost Connecticut cities and towns nearly half a billion dollars so far The coronavirus has taken a huge chunk out of Connecticut municipalities’ piggy banks, leaving dozens of towns scrambling for cash and raising the prospect of major property tax hikes one year from now.

Preliminary projections from cities and towns include $407 million in revenue delays or losses and $63 million in added costs, according to data released last week by the state Office of Policy and Management.

“This is a massive hit,” said Joe DeLong, executive director of the Connecticut Conference of Municipalities. The combined $470 million problem is greater than one-quarter of all municipal reserves.

“Every municipal leader that I’ve spoken directly with believes that the next fiscal year’s budget is going to be in far worse shape than the current fiscal year’s budget is,” DeLong said.

Communities were asked to assess the pandemic’s impact on their finances by Gov. Ned Lamont, who last week announced a new $75 million relief fund — fueled with federal pandemic aid — to complement other assistance for cities and towns. Emergency funds can’t be used to supplant lost tax receipts or other vanishing revenues, however. They apply only to clearly invoiced expenses, and those costs have to be above and beyond anything for which communities budgeted.

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Local leaders have been warning since mid-March that the public health crisis, coupled with the associated business and school shutdowns and massive unemployment, would leave their finances in shambles.

Connecticut municipalities receive the overwhelming bulk of their revenues from two sources: statutory state grants and local property taxes.

Municipal leaders have acknowledged that several factors make it extremely difficult to project revenues with precision.

Lamont pushed back state and municipal tax deadlines this spring and summer to assist struggling households and businesses. In other words, some revenue losses actually are only delays.

And while thousands of businesses either closed or scaled back services from mid-March through late May — and even more watched their patronage shrink dramatically — communities can only guess which ones might never reopen due to economic losses.

The results vary significantly.

Connecticut’s largest cities draw a significantly larger share of their funds from state grants versus property tax receipts.

Still, 31 communities, including several with populations below 20,000 in rural eastern Connecticut, reported larger revenue losses than Bridgeport, which spends more than $700 million per year on a population of nearly 145,000.

DeLong conceded that municipalities are in uncharted territory amid this pandemic, and many are uncertain how to fully assess the economic damage.

“But regardless of whether some communities have over- or under-estimated the damage,” he said, “long-term fiscal stability is very much in question.”

The $407 million revenue loss equals 24% of all municipal budget reserves. Once the $63 million in COVID-19 related costs are factored in, the combined $470 million hit equals 28%.

Municipal reserves are crucial to help communities weather recessions and other economic downturns. But Wall Street Credit Rating agencies also demand healthy reserves if communities want to borrow cash cheaply for capital projects or cover operating costs.

Slightly more than one-third of cities and towns — 58 out of 169 — reported they are facing cash flow problems because of the crisis.

Both Lamont and his budget director, Melissa McCaw, said last week that while Connecticut has received pandemic relief funds from the federal government, those resources also must be used to assist more than municipalities and their school districts. Hospitals, nursing homes, other care providers in need of protective gear, and colleges and universities also are high on the list.

“Hopefully, we will soon see federal action that will allow us to backfill lost revenue at the state and local level, as that is critically important but remains unaddressed by the four federal COVID relief bills to date,” McCaw said.

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IDAHO

Officials come together for COVID property tax relief

The No. 1 and No. 2 leaders in Idaho found common ground Tuesday, signifying a cease-fire in a perceived stand- off that made national headlines during the pandemic.

“In these times of a crisis,” Gov. Brad Little said during his weekly AARP-sponsored conference call, “the no-action alternative is not acceptable. Whether it’s the health care, whether it’s the economic prosperity, in all these areas, we have to get things done, and we have to get them done pretty rapidly.”

Little and Lt. Gov. Janice McGeachin joined together during that conference call to champion the governor’s newest plan to provide a modicum of property tax relief through city and county budgets. It’s a move designed to help Idaho property owners by using federal CARES Act funds to pay up to 103 percent of city and county public safety workers like police officers and firefighters, so long as those salaries aren’t funded by property taxes. It’s a proposal in keeping with McGeachin’s public wishes.

“It’s important now that we all work together as we help to rebuild Idaho and the economy in our community,” McGeachin said. “On April 14, I wrote a letter to the governor, and I asked him to consider some things that would be helpful to the people of Idaho in the form of tax relief, whether it was a reduction of sales tax to our citizens, reducing corporate or individual income tax, or a reduction on individual property tax. As a small business owner myself, and having run on a platform to support our business community in Idaho, I wish to thank the governor for agreeing to substantial tax relief to the citizens of Idaho.”

On May 8, McGeachin openly critiqued Little’s stay-home order and Rebound Idaho plan, saying he was abusing his authority by using the police to close businesses. She has also attended rallies that both protested and defied Little’s stay-home orders, twice supporting businesses that opened before the Rebound Idaho staged plan.

A total of 3,220 Idahoans have tested positive for the novel coronavirus, 31 of whom tested positive Monday. Eighty-five Idahoans have died from the disease.

The difference in opinion over how to handle the pandemic made national headlines after Little acknowledged in a May 14 press conference he had not spoken with McGeachin in three weeks. Little downplayed the rift at the time.

This week, citing Little’s response to COVID-19, a petition by was filed with the Idaho Secretary of State’s office to recall the governor; the petition will need over 183,000 signatures in 75 days to successfully get the recall on the November ballot.

But Tuesday, the two joined together in a virtual moment.

Gov. Brad Little unveils new $200 million property tax relief plan "The longer there's not money in people's pockets... the longer it's going to take for us to get back where we want to be," Gov. Little said.

On Friday afternoon, Republican Idaho Governor Brad Little announced a new property tax relief plan during a press conference in Coeur d'Alene.

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The governor's plan would cover 103% of counties' and cities' public safety salary costs if they verify that they're not using property taxes to fund salaries for police, fire, and EMS, up to $200 million. Little said property tax changes have been in the works for a while, but getting more money in Idahoans' pockets now is crucial.

"We all know that the legislature both sides, made a sincere attempt to work on a property tax. There was an interim committee formed that was going to address that," Gov. Little explained. "But nothing happened and when Treasury changed the guidance about how we handle these funds, we saw an opportunity... what we're doing today which is to basically go to counties and cities and say what are you spending on safety police, and fire, EMS - that's three classifications. You certified that you will, that you will take that off your property taxes and walk back to the tune of 103%, to make sure there aren't any gaps. So the net for public safety is, it's going to be fully funded. And on top of that, we're going to provide $200 million of the property tax relief around the state of Idaho."

Little's goal with the new plan is getting people to put money into the economy that would otherwise go towards property taxes.

"The longer there's not money in people's pockets - taxpayers, consumers, all businesses, large businesses - the longer it's going to take for us to get back where we want to be," he said.

Senate President Pro Temp Brent Hill broke down what Gov. Little's various plans and programs are meant to do for Idaho's economy during the press conference.

"Last Friday announced this cashback, this cash bonus, to people to go back to work, what an incredible thing," he said, "and now, today, we're talking about actually reimbursing our partners, city and county governments, for their public safety personnel costs, so that our citizens can be safe and be protected. And they then, in turn, asking them to turn around and give property tax relief to the businesses and families within their jurisdiction."

Hill added that is this only a short term solution for the state and that the plan should encourage legislators to find a long-term property tax relief plan.

Little also defended his plan to give Idahoans who return to work a $1,500 check after it received some backlash.

"We announced Friday, that what we heard from business people is because of the generous announcer in the unemployment, particularly the add on," Gov. Brad Little said. "There were some businesses, were having a hard time getting people back to work. So we put together a program incentive for people to get back to work. I know there's been some criticism of it, but it is so important for people to not be in the habit of not going to work. Every person who studies big economic calamities said that it's people get in the habit of not going to work. You need every incentive for him to go back to work. That's why the PPP program which is run through the Small Business Administration was a priority for Congress, and that's what put our program in to give a financial incentive for people go back to work."

The $200 million plan will use some of the $1.25 billion that the state received from the CARES Act.

ILLINOIS

Property Tax Study

A new report places Illinois among the states most reliant on property taxes for revenue. According to 2017 figures, the most recent data available, compiled by the Tax Foundation, Illinois ranks 11th in that category and no better in other areas.

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“No matter how you're comparing on property taxes, Illinois is always near the top,” said Janelle Cammenga, a policy analyst with the Tax Foundation's Center for State Tax Policy.

She pointed to two previous studies conducted by the organization to support the claim.

“Back in March, we did a [study] comparing property tax collections per capita in fiscal year 2017,” Cammenga said. “Illinois actually ranked number eight in the U.S. on that one and it was number one in the Midwest. Another measure looked at property taxes paid as a percentage of housing value. On that one, Illinois is second in the nation at 2.05%.”

Cammenga says property taxes are just one piece of the puzzle, and other states more reliant on property taxes for revenue still end up having a better overall tax climate that Illinois.

“New Hampshire, for example, basically forgoes both income tax and a sales tax,” Commenga said. “Whereas Illinois has all of the major taxes and their sales tax rates are a sixth highest in the nation, if you look at average state and local rates as well. Illinois is seeing a high tax burden overall in addition to their high property taxes.”

She says these tax policies have consequences for local communities across the state.

“In terms of property tax reliance, it's important to remember that if you have a smaller amount of that local revenue through property taxes, then localities are going to be more dependent on the state to fund their local functions,” Commenga said.

According to the report, New Hampshire, Alaska and New Jersey were most reliant on property taxes for state revenue, while Arkansas and Alabama ranked at the bottom of the list.

Putting the blame where it squarely belongs when commercial property taxes jump

Once the Cook County assessor’s office was run on the up-and-up, it was inevitable there would be a painful day of reckoning.

For decades in Cook County, the size of your property tax bill was dictated way too much by whether you were rich, had the right friends or hired a politically connected lawyer.

Commercial landlords caught a break, as did people who owned North Shore mansions. Middle-class and lower income homeowners got stiffed.

Then, in a historic moment for local political reform, the voters of Cook County in 2018 gave the boot to a county assessor, Joe Berrios, who was notorious for playing the favor game. They replaced him with a straight-shooter, Fritz Kaegi, who vowed to assess all property values fairly and squarely, following the best national practices.

Now, as the first property tax bills based on Kaegi’s reassessments begin to show up mailboxes in north and northwest Cook County, commercial landlords are howling, and anybody can see why. The average tax bill for commercial and industrial properties there has risen 15.8% this year over last, according to Crain’s Chicago Business. The average tax bill for residential properties has risen just 1.1%.

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We understand what a hit this is for commercial landlords, many of whom already were reeling because of lost business due to the coronavirus pandemic. They apparently blame Kaegi, by and large, with one landlord group even running a public relations campaign against him.

But the target of their ire is misplaced.

Who’s really to blame

The true irresponsible parties here are Berrios, Illinois House Speaker Michael J. Madigan — who runs a tax appeals law firm — and a small club of other tax lawyers, including Chicago Ald. Ed Burke (14th). For years, they quietly worked hand in hand to undervalue commercial properties at the expense of residential properties. That’s where the money was. They raked in legal fees and campaign donations.

Once the assessor’s office finally was run on the up-and-up, it was inevitable there would be a painful day of reckoning. From the day Kaegi was elected, everybody knew a big hike in commercial property assessments was coming, and higher tax bills would follow.

Kaegi’s office actually hiked the total assessed value of commercial and industry properties in north and northwest Cook County by 77%, Crain’s reports, and he hiked the total assessed value of residential properties by 14%. But the Cook County Board of Review tempered those increases to just 25% for commercial and industrial properties and 11% for residential properties.

Zero-sum game

It’s important to stress that if commercial property tax bills in northern Cook County had not been increased by as much this year, residential property taxes would have been increased by more. Property taxes are a zero-sum game; a dollar not paid by one taxpayer must be paid by another.

Having reassessed property values in the northern third of Cook County last year, Kaegi’s office is reassessing values in the west and south suburbs this year. Next year, his office will turn its attention to the city of Chicago.

As Kaegi carries on, it will be important to watch not only whether commercial landlords are required to pick up a greater share of the total tax burden, but also whether the wealthiest homeowners are required to do so — because that, too, has been an area of great inequities.

A 2018 a study by the Civic Consulting Alliance found Cook County’s property tax system was so skewed that the mansion crowd got a better deal than the bungalow crowd. The average owner of a $600,000 home in Chicago, to cite a less extreme example, paid an effective tax rate that was 24 percent lower than the owner of a $300,000 house.

And a 2017 Chicago Tribune investigation showed that, as a rule of thumb, the poorer a community in Cook County is, the higher the property tax rate.

COVID-19 complications

What nobody could have predicted when Kaegi began his reform of Cook County’s property assessment process was that a massive disease pandemic would hit, throwing the economy into a deep recession. Now, in response to that, Kaegi’s office has been reminding property owners that they can submit appeals to their assessments.

That is only right and fair.

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It’s also only right and fair that Kaegi’s overall reform effort be supported, putting an end to favors for those who need a favor least.

Which Counties in Illinois are Offering Property Tax Relief During Coronavirus Crisis?

Business owners in Counties of Illinois are struggling to pay their taxes due to June 1st.

Only a few county boards are considering to offer relief.

Coronavirus pandemic is changing our lifestyles. While some employees are working from home, others have filed unemployment. Families and businesses are finding it hard to pay their property tax bills. If you haven’t received your bill yet, it might be on its way.

In times of crisis, it’s fair to question what are the US counties doing to provide financial relief to their people?

What are Business Owners Saying?

The leaders of DuPage Lake and McHenry counties have been struggling to pay their property taxes. Business owners and employers alike regardless of the industry (finance, MFG staffing, IT, fashion, etc.) all are faced financial crunch. Netta Schelden from Grayslake who is the owner of Equidream School of Horsemanship says her school horses are not working. Her riding business has been greatly affected due to the shut-down. She owes $4000 in property tax which must be paid within 2 months. Ms. Schelden thinks she might have to use her retirement money to make the tax payment.

Illinois is a state in the Midwestern and Great Lakes regions of the United States. It has the fifth largest gross domestic product (GDP), the sixth largest population, and the 25th largest land area of all U.S. states. Illinois has been noted as a microcosm of the entire United States. With Chicago in northeastern Illinois, small industrial cities and immense agricultural productivity in the north and center of the state, and natural resources such as coal, timber, and petroleum in the south, Illinois has a diverse economic base, and is a major transportation hub. Chicagoland, Chicago’s metropolitan area, encompasses about 65% of the state’s population.

Property owners in the Lake Country are scheduled to receive their property tax bills and the payment is due by June 8th. Unfortunately, the country broad hasn’t delayed tax collection. They aren’t waving the tax, interest, or late payment fee. The interest rate is set at 1.5% for the 1st month, then 3% for the 2nd and 4.5% of the 3rd.

The country board hasn’t increased the salaries for the elected officials either. The committee suggested to freeze the salary of 7 board members and reduce the salary of the board chair. Schelden and other business owners are hoping the counties show some mercy and realize the business is not operating as usual.

What are Counties Doing about That?

Sandy Hart, the broad chair said, “We wish to do whatever we can to offer the residents help in these trying times. At the same time, we need to be mindful of unintended consequences to the services offered by government agencies.”

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Property owners in McHenry County have been offered some form of relief. The country chair, Jack Franks has announced to waive payment fee and interest rate for up to 90 days. Unfortunately, this is the most help being offered in 6 counties of Illinois.

A business owner from DuPage County, Gena Karpf said that she was hoping homeowners would get some sort of relief. Karpf is a pastry chef in Naperville. She says her industry is hit hard. She owes $10,000 in property tax. Her next payment is due on June 1st and she doesn’t have any money to pay for it.

The finance committee in DuPage County held a meeting to discuss relief options. The county treasurer, Gwen Henry at the meeting said, “The board will wave penalties for ninety days for June 1st. The taxpayers won’t have to pay until September 1st.”

A lot of us are in the same boat. Deferments should understand what’s happening to the economy and how it’s affecting businesses around us. These reliefs don’t seem significant but taxpayers say they would take any form of ease. Let’s hope other counties in Illinois reconsider and offer more relief to taxpayers amidst the COVID-19 outbreak.

Property taxes too high? Cook County Assessor Fritz Kaegi isn’t the problem

When Cook County Assessor Fritz Kaegi was sworn into office in December 2018, he thanked his family at the ceremony but also warned them: “Sorry to say I won’t be offering you any jobs.”

Kaegi, with his primary election victory in March that year, swept out incumbent former Assessor Joseph Berrios, who oversaw a property assessment system entrenched with nepotism and clout; infiltrated by powerful tax attorneys including House Speaker Michael Madigan and Chicago Ald. Ed Burke; and punishing to mostly minority communities that bore the burden of higher assessments to accommodate deals cut at the top.

Kaegi’s victory was a rare toppling of the machine. As a first-time candidate and government reformer, he ousted Berrios, a longtime politician who flouted ethics rules, thrived via backroom deals and leveraged the office’s tradition as a lucrative spigot for campaign fundraising.

But Kaegi’s celebration that day in December was short-lived. The machine immediately went to work discrediting his policy initiatives and questioning his processes. Reversing decades of systemic favoritism in property assessing has proved to be as tough as one might expect.

But the latest salvo seems exceptionally unsavory, even by Cook County’s standards: There’s a clandestine campaign afoot to build mistrust in his assessing capabilities.

A mysterious website

Renew Cook County is a website that launched in March. It describes itself as a nonprofit representing “the voice for tax fairness.” In testimonials on the site, business owners lament their tax bills with a “message for Fritz Kaegi.” He is mentioned numerous times.

The group’s representatives from Resolute Public Affairs, a consulting firm, won’t specify who is behind the website and they don’t have to. But it’s clearly an effort by large-scale property owners to discredit Kaegi and put pressure on an assessment system that needed dramatic overhaul. The corrections on assessments Kaegi has been pushing into the marketplace are costing commercial property owners more, and some residential homeowners too.

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The backlash has been swift, particularly in Cook County where commercial and industrial properties by law are assessed at higher rates than homes, and where property taxes, due in part to lavish government spending on pensions, are among the highest in the country.

“The coalition has come together because of the numbers we’ve seen coming out of the assessor’s office,” Resolute’s Rob Nash told us. “The increases have been dramatic in the northern triad and we know those have real world implications for property tax bills. Especially in this economy, we need to have a real conversation about the challenges in the assessment system because the region will not recover if we have 40% increases based on massively inflated assessments.”

Kaegi says he has been upfront and transparent with property owners about the reasoning behind changes. In many cases in the past, commercial properties were not being assessed based on their actual market values. And if they were, wealthier property owners could hire attorneys and fight for reductions at the county’s Board of Review. Appeals of assessments have been on the rise for decades, long before Kaegi.

“The assessment system is about estimating the most accurate market value so no one gets favored treatment. That’s our duty. That’s what good stewardship means,” Kaegi told us.

The Tax Divide

Kaegi’s ascension to the assessor’s office was driven in part by “The Tax Divide,” an exhaustive 2017 Chicago Tribune investigation that revealed imbalance in the assessment system.

Wealthier Cook County communities and downtown commercial property owners could hire lawyers to appeal their assessments and eventually save money in property taxes. Lower-income communities in the county made up the difference through higher assessments. High property tax rates in poor communities remain the norm. Homeowners in Ford Heights, for example, pay much higher composite property tax rates than homeowners in Barrington.

Kaegi has been trying to correct the imbalance across the board by assessing properties based on their actual market values, a process that is even harder to gauge now, given the COVID-19 shutdown of state and local economies. Last year, he tried to get legislation passed in Springfield that would force large-scale building owners to disclose their rents and incomes so he could more accurately assess their value. That bill got buried.

“I’ve got to say, I have been a little taken aback by the chutzpah of (the Renew) campaign in the middle of COVID- 19 … when all of the dreadful impact of the disparity we see is laid bare, and here they are wanting to double down on the disparity,” Kaegi said. “To continue sweetheart deals under an assessment system they know was failing, to me, that’s chutzpah.”

The real culprits

The reason property taxes are high in this state involves a mixture of elements, not just assessments. And it certainly isn’t a problem that developed since December 2018 when Kaegi took over.

Property taxes are based on what governments charge residents and property owners for services. School districts, libraries, park districts, municipal and county government — they ultimately determine the property tax burden for their taxpayers based on how much they spend. For all of them, a top expense is personnel and for some, that includes paying for the pensions of retired workers. Increasingly in this state, pension costs are putting pressure on local property taxes.

Have the big commercial property owners upset with Kaegi spoken up about that? Have they lobbied Democratic officials who run this state and Cook County to get realistic about costly pension benefits? Have they taken on International Property Tax Institute IPTI Xtracts- The items included in IPTI Xtracts have been extracted from published information. IPTI accepts no responsibility for the accuracy of the information or any opinions expressed in the articles.

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organized labor leaders who aggressively guard pension benefits, even at great expense to state and local finances and taxpayers?

Have they lobbied Springfield to allow for more government consolidation? Have they encouraged school districts to merge? Have they pushed to reduce the numbers of local governments, including townships? Have they pushed hard and consistently to get rid of Cook County’s classification system that charges commercial and industrial properties at a higher rate than homeowners?

Have they questioned the long-standing conflicts of interest between politicians doing side work as tax appeal attorneys and then making, or ignoring, changes to the law that benefit their law practices? Or are the folks funding this new anti-Kaegi effort the same ones attending the Berrios and Madigan and Burke fundraisers?

Easing the burden of property taxes involves a lot more than criticizing the new assessor. The least the wizards behind this latest salvo could do is put their names out there. Instead, they choose to pressure Kaegi anonymously. Gee, wonder who’s behind it?

6 Cook County commercial property tax bills rise by $1 million or more The owners of six commercial properties in Cook County's Northwest suburbs are getting tax bills this month that are at least $1 million more than what they paid last year.

That's according to data released by Cook County Treasurer Maria Pappas' office as part of the second installment of property tax bills due Aug. 1.

The hikes are largely due to significant increases to property values Cook County Assessor Fritz Kaegi's office imposed during the tri-annual reassessment process last year.

The county is broken into three assessment triads: The north, south and city of Chicago. The triads are reassessed every three years. The northern part was the first section reassessed after Kaegi took office.

A data processing center on a 650,000-square-foot parcel in Elk Grove Village saw the largest bump from last year to this year in the northern triad, according to Pappas' records. Last year, the owners of the facility at 2299 Busse Road paid $1.7 million in property taxes. This year, they owe more than $4.5 million, a 167% increase of more than $2.8 million.

Elsewhere, the owners of the Continental Towers in Rolling Meadows saw their tax bill increase by more than $2.8 million as well, up almost 80% from last year's tax bill.

The tax bills for a strip mall at the corner of Schaumburg and Barrington roads in Schaumburg and an office complex on the 10000 block of Higgins Road in Rosemont are also on the hook for $1.2 million more this year, according to Pappas' records.

Properties in Northlake and Northbrook are the others that saw a $1 million-plus increase to their tax bills.

According to Pappas' office, the 100 commercial properties in the northern triad of the county with the largest tax hikes combine to owe $54.6 million more this year than last.

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Pappas posted the new tax bills on her website, cookcountytreasurer.com. Printed bills will start arriving in owners' mailboxes in the coming days.

Many of the assessments on these properties were appealed by the owners and go through the Cook County Board of Review before being finalized, officials in Kaegi's office said.

Kaegi, a Democrat, campaigned on reforming the assessment process after unseating his predecessor, Joe Berrios, in the primary. Berrios was accused of giving breaks to wealthy property owners and shifting the tax burden to owners in lower-income neighborhoods.

"Our office is dedicated to fairer, more accurate assessments, which are driven by data," said Kaegi spokesman Scott Smith. "We don't have an end result in mind that favors one property type over another. But we have promised to correct the mistakes of the past which led to regressive outcomes, which overwhelmingly fell on those least able to afford it."

In addition to commercial property increases, Pappas' records show several suburbs experienced a decrease in the overall tax burden to property owners. Property taxes owed in Barrington Hills dropped by nearly $1.3 million, or 6.9% this year. That's largely due to the average residential property tax bill decreasing by $1,436, according to the treasurer's office.

Property owners in Inverness and South Barrington also owe less in property taxes than last year. Homeowners will see most of the benefit.

Meanwhile, the average Hanover Park homeowner can expect an increase of 6.9% to the tax bill. Park Ridge homeowners can expect to pay on average 6.3% more. Schaumburg and Wheeling homeowners will see their tax bills increase by nearly 4.5% on average, according to the treasurer.

Pappas, who has been a watchdog of local tax spending and municipal debt, said she has concerns about the reliance on property taxes, especially after the COVID-19 created widespread unemployment.

"I don't know how somebody out of work, business or employee, can take any kind of increase when they can't pay the original bill," she said.

All told, property tax bills this year increased by more than $157 on average throughout the county, according to figures from Pappas' office.

Chicago mayor considers property tax hikes as residents fear exodus from city

Laying off city employees could be on the table too

Chicago Mayor Lori Lightfoot said she couldn't keep raising property taxes "off the table" as the city faces a budget shortfall and Chicago businesses struggle to recover from both looting and the coronavirus shutdown.

"I can't take it off the table, but it is truly the last thing I want to do," Lightfoot said at a press conference this week.

Laying off city employees could be on the table too as the city faces an estimated budget shortfall of $700 million.

"Every city in the country is dealing with a loss of revenue," Chicago Deputy Mayor of Economic Development Samir Mayekar told FOX Business. "Cities, unlike the federal government, we have to balance our books. [Mayor International Property Tax Institute IPTI Xtracts- The items included in IPTI Xtracts have been extracted from published information. IPTI accepts no responsibility for the accuracy of the information or any opinions expressed in the articles.

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Lightfoot] has two principles in mind … making sure that the most vulnerable populations of the city aren’t impacted. … She's focused on making sure we’re not driving business out of the city."

But Chicago will likely lose out on hundreds of millions of dollars after coronavirus caused the city to cancel large gatherings including the Lollapalooza music festival scheduled for later this summer, according to the Anderson Economic Group. Canceling Lollapalooza alone will result in 300 fewer jobs for the Chicago economy as well, Anderson Economic Group estimated.

Meanwhile, many business owners are picking up the pieces after looters ransacked their stores on the weekend of May 29.

“A lot of these communities are becoming deserts, a lot of our black communities, and if we don’t keep our businesses flowing in our own communities, we’ll all move out to the suburbs or something like that,” restaurant owner Nathaniel Pendleton told the Chicago Sun-Times. “We are trying to keep our neighborhoods vitalized, and we want our kids to be able to walk around and say, ‘hey, this is where I grew up’ and be proud of that fact.”

Pendleton's business, the New Look Restaurant/The Next Level, will get help from the Chicago Neighborhood Initiatives for repairs to his restaurant that were not covered by insurance, according to the Chicago Sun-Times.

Lightfoot Says Property Tax Increase on the Table as City Faces $700M Budget Shortfall

Lightfoot said April numbers project the budget could fall $700 million short of plans

Chicago Mayor Lori Lightfoot revealed the projections show Chicago is facing a $700 million budget shortfall this year.

Chicago Mayor Lori Lightfoot said she could not rule out an increase in property taxes as the city faces a major budget shortfall due to the economic fallout from coronavirus.

Lightfoot said April numbers project the budget could fall $700 million short of plans.

"That's a sobering number and presents a sobering challenge," Lightfoot said during a press conference Tuesday.

The announcement comes as the city canceled plans to host the Taste of Chicago, Lollapalooza, Air and Water show other major summer events that also bring in revenue.

"While this budget shortfall is grim, what would have been worse is if we had seen more people die ... if we hadn't sheltered in place," Lightfoot said.

Among the industries hit hardest were the restaurant and food service industry.

"All revenue streams have taken a hit," Lightfoot said, noting a "complete change in consumer behavior."

"They're not driving, not consuming goods and services the way they were," she added.

And with the city still not fully reopened, the numbers will likely continue to rise.

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Among the plans to address the shortfall, Lightfoot said the city will use $100 million to refinance savings from the beginning of the year, ID additional refinancing savings and look for further savings in city departments, including reprioritizing hirings for 2020.

But still, that won't keep a property tax increase and staff layoffs from remaining in play.

"I can't take it off the table, but it is truly the last thing I want to do," Lightfoot said.

The news comes as the city prepares for a second surge in cases following days of massive protests that saw large crowds gathered to protest the death of George Floyd.

At the same time, Lightfoot announced plans to seek authority to appropriate $1.3 billion in Coronavirus Aid, Relief and Economic Security Act grant funding to help struggling residents, including the city's homeless, homeowners and those in need of mental health resources. Federal guidance dictates the money must be directed to COVID- related costs, including immediate health expenses and economic and social impacts.

COVID-19 Adjustment’ may lessen Cook County property taxes in light of pandemic Cook County Assessor, Fritz Kaegi recently announced that his office will apply a “COVID-19 Adjustment” to decrease Cook County property values in an effort to reduce property taxes and diminish the impact of the COVID- 19 pandemic. This action follows an increase in Cook County property values reflective of the robust economy of the pre-pandemic world.

The Assessor’s Office plans to first decrease the assessed values of various properties in the south and west suburban regions of Cook County. The decreases in assessed values will apply to condominiums and single-family residences, with assessments decreased by 8 percent to 12.2 percent, as well as apartment buildings and commercial properties (including office buildings, shopping centers and others).

The Assessor’s Office predicts home values to drastically decline due to the increased unemployment rate. The value of two and six unit apartment buildings will be lessened by between 10 percent to 15.2 percent, and the projected 8 percent to 12 percent decrease in home and condominium assessments will be dependent upon a property’s location. The Assessor’s Office plans to implement adjustments to properties located in the City of Chicago and the North Cook County suburbs at a later date.

Property tax assessments determine how the tax burden is distributed amongst all of the Cook County tax payers as the county multiplies the assessment amount by the applicable local government’s tax rate and equalizer to calculate the taxes owed.

Commercial property adjustments will be put into place by changing capitalization (or “cap” rate). Cap rate is equal to property income, divided by property value—in essence, a rate of return. The assessor noted that some commercial properties will not receive adjustments, while commercial property cap rates will be raised by 2 percentage points (or approximately a 25 percent decrease in property value) for commercial properties such as restaurants, hotels and shopping centers that have been impacted by Coronavirus.

In addition, Cook County has waived late fees if taxpayers fail to make their second half property tax bills by August 3, 2020. These tax adjustment modifications will not prove beneficial until 2021 taxes are calculated in accordance with these 2020 assessed values since 2020 taxes were calculated in accordance with 2019 assessments.

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INDIANA

Has your Indiana property tax assessment increased? Four reasons the burden of proof may have shifted to the Assessor to prove the higher value should stick. Appeals due no later than June 15th.

Did you or your company open your property tax bill or assessment notice from an Indiana assessor this spring and experience sticker shock? If so – whether retail, office, apartments, industrial, or something else – you can file a petition to challenge that higher value on or before June 15, 2020. Depending on the facts of your property, its use, and the reason for the increase, the assessor may be obligated to prove on appeal that the new, higher value is correct. If the increase is not adequately supported by probative, credible evidence, the new assessment could be reduced to the prior year’s value. To preserve its right to claim a reduction – or to compel the assessor to defend an increased value – an Indiana taxpayer must file an appeal on or before June 15, 2020. (Depending on the county, the appeal is either for the January 1, 2019 or 2020 assessment date.)

Four laws shifting the burden of proof to the assessor. Typically, a taxpayer challenging an assessment has the burden of proof to demonstrate that (i) the new assessment is improper and (ii) what the correct value should be. In at least four circumstances, however, Indiana law assigns responsibility to the assessor to defend the propriety of the change before the taxpayer, in turn, must submit its own evidence supporting a lower value.

1. The assessment has increased by more than 5% — without a material change in the property or its use. If the assessor raises a property’s assessment by more than 5% year-over-year, the assessor likely has the burden of proof in an assessment appeal if the increase is not due to (i) “substantial renovations or new improvements,” (ii) zoning or (iii) uses that were not considered in the prior year’s assessment of the property. If the assessor fails to meet this burden, at minimum the assessment should revert to the prior year’s original value or its value as corrected (by the assessor, by joint stipulation or on appeal). Taxpayer has the burden of proof to show an even lower value is appropriate. See Ind. Code § 6-1.1-15-17.2(a)-(c). This burden-shifting requirement has been tested in numerous administrative appeals. This post is too brief to review the law’s nuances, but it has teeth, particularly before the Indiana Board of Tax Review.

2. Unless valued using the income approach, any assessment increase following a prior year’s successful appeal. If a property’s assessment was decreased as part of a prior year’s appeal under Ind. Code §§ 6-1.1-15 et al. – regardless of the amount of the increase for the next year – the assessor has the burden of proof to show that the higher value is correct. But no burden shift occurs “if the real property was valued using the income capitalization approach in the [prior] appeal.” See Ind. Code § 6-1.1-15-17.2(d).

3. The assessor reclassifies the land. The Assessor “making the change in the [land] classification has the burden of proving that the change in the classification is correct” in an assessment appeal. If, for example, land previously assessed using the low agricultural base rates now is valued using much higher commercial or industrial rates, the assessor must explain the basis for the change and provide evidence showing the change was appropriate. See Ind. Code § 6-1.1-15-17.1.

4. The assessor changes the “underlying parcel characteristics.” The assessor is obligated to document each change and the reason for each change of a property’s “underlying parcel characteristics” – including changes to the property’s “age, grade, or condition . . . from the previous year’s assessment date.” For such changes, on appeal “the assessor has the burden of proving that each change was valid.” See Ind. Code § 6-1.1-4-4.4.

A recent example: Assessor had the burden of proof, failed to support the increase, and the assessment was reduced to the prior year’s value. On January 12, 2020, the Indiana Board issues its final determination in Ciasto v. Monroe County Assessor, involving the January 1, 2019 assessment (for taxes payable in 2020) of a residential

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property in Bloomington, Indiana. The home’s assessment increased by more than 5% over the property’s assigned value for January 1, 2018. The Assessor conceded that she had the burden of proof on appeal. In an effort to meet that burden, the Assessor offered the testimony of a private contractor. The contractor was not a licensed appraiser and did not prepare an appraisal report. Nevertheless, the contractor presented a sales comparison analysis which, after adjustment, purportedly showed that the home’s value should be increased. The contractor also developed a so-called “uniformity comparison” to calculate a slight downward “uniformity adjustment.”

The sales comparison approach was not convincing, because the contractor failed to show that his adjustments to the sales complied with generally accepted appraisal principles. His analysis did not constitute “probative valuation evidence.” Likewise, the contractor did not show that his “uniformity comparison” complied with generally accepted appraisal principles. The Indiana Board ruled: “Because the Assessor did not offer any probative valuation evidence, she failed to make a prima facie case that the property’s current assessment is correct. [Taxpayer] is therefore entitled to have her 2019 assessment reduced to its 2018 assessed value of $173,700. Because [Taxpayer] did not request a lower value, this ends our review.”

Taxpayers must file appeals by June 15, 2020 to preserve rights to a reduction. Failure to file on time risks waiving a taxpayer’s rights to a potential assessment reduction for the date at issue. While taxpayers have a longer three- year window to petition for the correction of certain errors, there may be ambiguity about which errors qualify for such treatment. Filing by the June 15th deadline may avoid delay caused by any confusion as to the appropriate vehicle to address the valuation issue.

Taxpayers are cautioned to seek advice from their legal or tax professionals before filing any property tax appeals.

LOUISIANA

Due to coronavirus, Baton Rouge area assessors are considering lowering property tax assessments Louisiana's stay-at-home order, from which the state is still gradually emerging, has landed a gut punch on the state 's economy, which has shed jobs, burned through unemployment compensation benefits and sent some retail and business sales plummeting.

But the property tax bill comes every fall, no matter what, and some Baton Rouge-area assessors said they are preparing to give assessment breaks to businesses and, in one case, even homeowners this year due to the virus.

Ascension Parish Assessor M. J. "Mert" Smiley Jr. has announced plans to allow business owners to make a case for a reduced assessment in 2020 if they can show an economic impact from the coronavirus shutdown.

"We're going to help if they can provide documentation to show where they're making less money than they did the year previously," Smiley said.

Livingston Parish Assessor Jeff Taylor said he will offer similar case-by-case consideration for business owners but also plans a 10% across-the-board cut on residential values for the 2020 tax year.

In Ascension, business owners will have to provide at least three years of financial documents, "provide details regarding any government assistance received and any other information needed after an in-person meeting," Smiley's office said.

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The value reductions would come through a concept assessors call "obsolescence," or in other words, if the business lost value due to the poor economy. Evaluating a business's income is one way of assessing property value under state law.

Assessors in East Baton Rouge and Tangipahoa parishes said they were prepared to deal with business owners on an individual basis also but were also trying to assess what is happening in the market.

"Within the mechanics of what it is we do, I'm just going to let the market tell us and right now it's telling us to hold steady because there's just too much doubt out there as far as what's going to happen. Is it going to get worse or is it going to get better," asked Tangipahoa Parish Assessor Joaquin "JR." Matheu.

In Louisiana, assessors don't set the rates for property taxes paid to local governments, sheriffs and school boards, but they establish the property values upon which an individual's tax bill is calculated.

The coronavirus has hit in the quadrennial reassessment year, when assessors around the state take fresh stock of the property values and new growth.

Even with the potential reductions in business values, reassessment is expected to raise combined property values in Ascension and East Baton Rouge parishes due to continued growth. In Livingston, it's unclear, assessors said.

Several assessors said that they expected that many businesses won't be able to seek the reductions. Even though the virus hurt some businesses, others, like Home Depot, Walmart, fast-food restaurants, major industrial operations on the Mississippi River, commercial landlords and others, have remained profitable.

"They've done very well, but other folks have not," East Baton Rouge Assessor Brian Wilson said. "We're taking a look at that as we speak and making some decisions as to how we're going to do this."

In Livingston, Taylor, the assessor, said that the virus has had a small negative effect on the residential market so far but said that continued uncertainty justified a 10% cut in values in 2020. The reduction will lessen the blow of the expected end to a 20% reduction in home values that the Livingston assessor has maintained since the 2016 floods.

Assessors in the other parishes said residential markets in their communities have been performing fairly well or that they were still looking at the performance.

Wilson, in East Baton Rouge, said he was still evaluating how he might legally offer reductions to homeowners.

Under the state Tax Commission's rules for the 2020 reassessment, the period of property sales he must evaluate happened before the outbreak hit the state -- six months before and six months after Jan. 1, 2019.

"I haven't made decision yet as where we're going to go, if there is any obsolescence there or not," Wilson said.

MICHIGAN

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Michigan Chamber Of Commerce Applauds Legislature Approval Of Major Property Tax Relief The Michigan Chamber applauds the bipartisan action taken by the state legislature to provide an extension on paying summer property taxes. The Michigan Chamber championed this legislation that, due to the COVID-19 shutdowns, many businesses would have struggled to meet. The summer property tax is one of the largest annual expenses for business.

"Cash flow and liquidity will be the biggest issues facing businesses as they reopen due to the mandatory shutdown during COVID-19, and this pro-business legislation will help solve those problems by resolving an immediate and significant expense," says Dan Papineau, Director of Tax Policy and Regulatory Affairs. "Additionally, the legislation avoids pushing the cashflow problems facing businesses off on the local units of government but keeps them whole and gets them the revenues they need earlier to operate smoothly."

HB 5761 and HB 5810 will provide taxpayers a 6-month, penalty and interest, free extension to make their property taxes. After the 6-month period a taxpayer can work with their county Treasurer to enter an installment plan if more time to pay the summer levy is needed.

"Without this relief, the summer property tax bill could be the last nail in the coffin for several businesses," said Papineau. "This legislation is an all-around win for negatively impacted businesses, individuals, local governments and schools. It is common sense, comprehensive solutions to real problems like this that our members need more than ever right now".

While further legislation might be needed in the future to work out the mechanics, the legislation passed today is a monumental step forward in providing businesses the help they need.

The Michigan Chamber of Commerce is a statewide business organization representing approximately 5,800 employers, trade associations and local chambers of commerce. The Michigan Chamber represents businesses of every size and type in all 83 counties of the state. The Michigan Chamber was established in 1959 to be an advocate for Michigan's job providers in the legislative, political and legal process.

COVID-19 Update: State Extends Property Tax Appeal Deadline to Aug. 31, Michigan Counties Set to Receive $1.3M in Veterans Aid Michigan has extended its property tax appeal deadline to Aug. 31 and applies to all property types: commercial, industrial, agricultural, and residential.

The extension is an acknowledgement that both government offices and property owners didn’t have the capacity during peak of COVID-19 outbreak in Michigan to respond to previous tax review deadlines.

According to Stewart Mandell, a partner and leader of Honigman’s Tax Appeals Practice Group, says earlier this year a lot of commercial and industrial real estate property owners across the state were having trouble getting their assessment information. COVID-19 precautions caused many government offices to close to switch to limited schedules. In addition, property owners were dealing with other matters.

More than in any prior year, with government offices closed, and the absence of assessment information that is usually online, attorneys have seen taxpayers unable to obtain their 2020 assessment information, not to mention the difficulties of evaluating property taxation. Commercial property owners were simply working to stay afloat.

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The original tax deadline was May 31. The new deadline gives 11 additional weeks to review summer tax assessments and respond.

“Usually, come February, we’re getting inundated with assessment notices, and people were already overwhelmed dealing with the pandemic and didn’t receive their assessments,” says Mandell. “We knew there was trouble.”

The issue was compounded since so many government offices were shut down. Many jurisdictions haven’t gotten their property tax information.

At the end of 2019, a number of properties were in financial distress, which affected their owners’ ability to pay taxes-among them malls, other retail, and hotels. Many office properties also had high vacancy rates. Even late last year, trends with retail and office valuations would cause an owner to consider an appeal; the pandemic exacerbated the situation.

“It’s not just coronavirus driving tax appeals this year,” Mandell says. “There are other things going on that have caused this.”

MAINE

Uncertain real estate market and pandemic put brakes on Portland revaluation

The city of Portland is postponing its property revaluation process until 2021, due to uncertainty about the real estate market and the fiscal implications of COVID-19.

“Given the unknowns with the changes the real estate market will see from the pandemic, it would not be prudent to set new values for the April 1, 2020 assessment date,” Christopher Huff, the city's tax assessor, said in a news release. “We will continue to analyze market data to see what trends emerge as this crisis continues and make necessary adjustments accordingly.”

It was to be the city’s first revaluation in over 15 years.

With skyrocketing property values in some areas of the city over this time, wide disparities have occurred between assessed values and market values, especially within the city’s peninsula neighborhoods.

Huff added, “Achieving uniform, fair and equitable property taxation is the paramount goal for our office, especially with a long overdue revaluation. However, I feel the potential impact to market values from the pandemic outweighs this concern for the coming year. We would not be doing our due diligence if we did not take into account the market changes that develop.”

The city will make any adjustments necessary and set new assessment values as of April 1, 2021, for the fiscal year 2022 tax billing cycle, he said.

The final phases of the current revaluation project were about to get underway when the pandemic hit. New value notices were scheduled to be sent to all property owners in May with informal value appeals set to commence in June. Those activities will still take place, but will occur in 2021 instead. A new timeline and schedule will be posted once these dates are determined.

The goals of a revaluation are two-fold: to set property values at 100% of their fair market value and ensure that property is assessed uniformly and equitably at the same level.

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The current revaluation project began in February 2019 and was set to be concluded in August.

Tyler Technologies CLT Appraisal Services was selected last year to conduct the revaluation, in conjunction with the assessor’s office. The city expects the vendor will continue with the project through its duration next year.

Tyler is a Texas-based government software vendor with offices in Bangor, Falmouth and Yarmouth.

Major real estate deals have moved forward since the start of the pandemic, but the outlook is uncertain.

MISSOURI

County defends against big retailers’ tax appeals Several large retailers and other businesses in Jefferson County are appealing their tax assessments, and the county stands to lose about $617,000 annually in tax money if the state upholds the appeals.

Companies appealing their tax rates this year include Walmart, Lowe’s, the Mercy Cancer Center in Crystal City and two apartment complexes.

The Jefferson County Council voted 5-0 with two abstentions at its May 11 meeting to approve a change order to Jefferson County Assessor’s Office’s contract for legal services to allow for additional work to fight 17 appeals.

The meeting was held via a telephone conference call.

The change order adds a maximum of $25,000 to the Assessor’s Office’s contract with the Thurman Law Firm in Hillsboro.

The money is necessary, said Assessor Bob Boyer, because of the anticipated extra work brought about by a larger- than-anticipated number of appeals.

“These appeals are not from homeowners or mom-and-pop businesses,” Boyer said. “They’re from big corporations with out-of-town headquarters.

“Those 17 appeals are from five property owners,” Boyer said. “And appeals to the state are what we don’t want to happen, because then we’re losing local control.”

The County Council in December had approved a contract with the Thurman firm for up to $15,000 of work to defend property assessments this year; the May 11 action increases that limit.

Boyer said appeals of tax assessments are part of the cost of doing business, and the original contract amount reflects that.

“The $15,000 is a three-year average of what we’ve spent on the appeals,” he said.

However, this year, Boyer said, there has been a slew of appeals from large chain retailers, notably Walmart. “Walmart is appealing the assessment of 148 of their 152 stores in Missouri,” he said.

The chain, and others, are typically represented by attorneys who take cases on speculation and are paid from the amount they’re able to save their clients, which makes the process more adversarial than usual. International Property Tax Institute IPTI Xtracts- The items included in IPTI Xtracts have been extracted from published information. IPTI accepts no responsibility for the accuracy of the information or any opinions expressed in the articles.

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“When we send out our notices of property values (for the coming year) on June 30, we typically get some calls. A lot of them, our office hears what the taxpayer has to say and we can work things out from there.

“Some don’t call and file for a hearing before the Board of Equalization, but we try to contact them anyway and sometimes we can work out an agreement. If we feel our number is fair, we’ll stick with it, but sometimes someone will bring up information that we didn’t have.”

Boyer said 113 appeals were brought before the Board of Equalization this year, and about 90 percent of those ended there.

Those dissatisfied with the equalization board’s ruling can take their case to the State Tax Commission, which Boyer said big corporations don’t mind doing.

“Those are quasi-judicial proceedings,” Boyer said. “It’s like being involved in a civil lawsuit. There are motions that are filed on both sides, interrogatories and discovery (sharing of evidence) as in every civil lawsuit. It’s a time consuming, expensive process. We always have to figure out what the best way to go is, whether it’s best to settle or defend our numbers.”

Walmart appeal

In the case of the Walmart appeals, Boyer said, he believes it is best for his office to dig in its heels.

“They’ve got a bogus argument for appeal, and they’re trying it all over the state,” he said.

Essentially, Boyer said, the firm representing Walmart is arguing that the value placed on its stores is too high.

“They’re trying to make the case that because of the restrictions placed on their properties, if they were to go out of business tomorrow, their buildings would be unmarketable,” he said. “It’s a bogus argument because they’re not going to shut down and in fact they’re very profitable. But they’re asking for a 40 percent decrease across the board.”

He said if the corporation is successful, the Arnold store would pay $169,000 less in real estate taxes, the High Ridge store $135,000 less, the Festus-Crystal City store $103,000 and the De Soto location $85,000.

“That’s every year,” he said. “And the thing of it is, that won’t affect the taxing entities such as the school districts as much as you’d think, because they have to set their tax levies to bring in enough money to operate. Someone else will pay the difference, and that will be residential homeowners. Their tax rates will go up. Walmart needs to pay its share. If they’re allowed to make this argument, other retailers will follow suit, and there will be a snowball effect. That’s why we need to defend this. We believe our numbers are fair.”

Lowe’s, Mercy

He said his office doesn’t take a hard-line stand in most cases, and cited the case of an appeal by Lowe’s of the assessment of its Festus store.

“When it was built in 2006 or whenever, they appealed the appraisal and it went before the State Tax Commission. The Assessor’s Office won that appeal, and ever since then, their (assessment number) has been set at that amount.

“Lowe’s made the case that they believe their improvements – the building – has depreciated over time, and that they should have a lower assessment. I think I could make the case that with all the development around it International Property Tax Institute IPTI Xtracts- The items included in IPTI Xtracts have been extracted from published information. IPTI accepts no responsibility for the accuracy of the information or any opinions expressed in the articles.

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recently, it is worth more, but in the end, we differed by about $1 million, so we’re dropping the assessment there from $11.5 million to $10.5 million. It’s still a fair value and the difference won’t affect the taxing entities a great deal, but we won’t have to pay to defend our numbers before the State Tax Commission, and risk it being set even lower at a hearing.”

Representatives for the Mercy Cancer Center are contending that the property should have a full exemption from property taxes – as is allowed for hospitals – rather than the 75 percent exemption the Assessor’s Office wants.

Boyer said the $25,000 difference in tax revenue would mean that the Crystal City School District would have to find a way to make up for the loss of $17,700 each year. School districts typically collect the lion’s share of property taxes.

Appeals to state are costly

Boyer said for each hearing at the state level, his office is required to submit an appraisal, which typically costs about $5,000.

Boyer said the work to defend tax assessments is a specialized job, so an outside law firm is necessary.

Requests for bids for the original contract were sent to 11 law firms, and only three were returned.

A panel that included three county officials, including Boyer, then scored the three requests.

“Because of the specialized work – and you see this in contracts for engineering, architectural services as well as legal services – price is only part of the scoring equation,” he said. “In this case, experience handling tax assessment defense was 70 percent of the score of the firms we considered; price was 10 percent.”

Boyer said his office’s budget for 2020 included money for such contingencies.

“This isn’t robbing Peter to pay Paul,” he said. “This money was in our budget. It just wasn’t included in the contract, because we had no way of knowing at the time that these appeals would be coming.”

Council members Tracey Perry (District 5, Festus) and Brian Haskins (District 1, High Ridge) abstained from the vote.

“I essentially had a ton of questions surrounding this particular contract selection from the beginning,” Perry said, “but my most recent abstention surrounded the possibility of reopening the bid. I realize that we often do change orders but the significance between $15,000 to $40,000 I felt was excessive.”

Haskins agreed.

“I would have liked to have seen new specifications on the bidding so that we’d be able to compare the bidders (on the original contract) better. These bids weren’t very close to each other,” he said.

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NEBRASKA

An overview of property tax, policies June is the month when new (and possibly higher) real estate valuations usually arrive from the local county assessor’s office. If you received a notice of valuation change or are otherwise wondering what you can do about the assessment of your property, this article is for you.

Just because the total valuation of a taxing entities property goes up does not necessarily mean that taxes you pay will go up. This is up to each board or taxing entity to determine. Recently, ag land values are declining due to lower sales values and residential and commercial properties are going up because sales prices are increasing.

Statewide, county assessors are required to assess all real property subject to taxation on Jan. 1 of each year. This assessment is multiplied by the tax levies of all taxing political subdivisions as determined by the County Board of Equalization in order to arrive at the property tax due as of Dec. 31.

One of the key duties of the county assessor is to establish and maintain fair and equitable value on all real property within the county so that all real property is assessed uniformly and proportionately.

All non-exempt real estate (except agricultural land which is valued at 75 percent of actual value) is to be assessed at “actual value,” which means the market value in the ordinary course of trade. Actual value may be determined using a number of methods, such as a sales comparison approach, income approach, and cost approach. Actual value is to be the most probable price that a property would bring if sold in the open market. In other words “would you sell the property for the appraised value?”

By June 1, county assessors mail notice to the owner of any property if the property assessment has changed from the previous year.

A property owner disagreeing with either a new assessment or an assessment carried over from the prior year may file a written protest with the County Board of Equalization on or before June 30 -- (Property Tax Valuation Protest Form 422).

Between June 1 and July 25, the county board will conduct hearings and decide protests. On or before Aug. 2, the county clerk will mail written notice of the board’s decision to the protesting owner.

An owner who remains dissatisfied with the decision of the board may file an appeal with the Tax Equalization and Review Commission (TERC) which consists of four commissioners appointed by the governor. TERC will hold an evidentiary hearing. The burden is on the property owner to show that the action of the board was both incorrect, and unreasonable or arbitrary.

Tax rates are established as a result of a local budgetary process. Each governmental agency provides a budget that will cover the cost of maintaining its respective agency for a fiscal year. The budget requirements are totaled and that amount is divided by the total assessed value of property for that taxing entity to establish the tax rate. The tax rate is stated as a percent or amount due for each $100 of assessed value.

Will you pay more or less in property tax if your valuation changes? If a taxing entity did not increase spending over the previous year and your property declined in value you should pay less tax. If your property increased in value you would pay more.

During the 2019 Legislative Session, I supported a new law designed to safeguard against increasing county budgets due to aggregate property valuation changes and make the process of setting a property tax request more transparent.

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LB103 requires political subdivisions such as counties and school districts to hold a public hearing if the annual assessment of property within a political subdivision would result in an increase in the total amount of taxes levied using the previous year’s tax levy. That levy will decrease so that the political subdivision’s property tax request is no more than in the previous year.

If the governing body wishes to increase its property tax request, it may do so only after holding a public hearing and by passing a resolution or ordinance. The required hearing notice will include the percentage increase or decrease in valuation, property tax rate and total operating budget from the prior year to the current year.

If you are interested in protesting your property tax valuation, contact your county assessor. Your written protest must be filed by June 30. Homestead Exemption applications must also be filed annually by June 30.

Manufacturing plants in Fremont discuss 37% property value increase As commercial properties in Fremont face a 37% increase in commercial property improvement valuations for 2020, manufacturing plants will see increases, especially those with renovations.

“We invested tens of millions of dollars in this facility in the last six, seven, eight years, and now we’re paying for it on the tax side of things,” Jayhawk Boxes General Manager Steve Rector said. “I know we all have to pay our fair share, but it was kind of gross.”

Jayhawk Boxes, a division of Lawrence Paper Company, recently finished a 28% expansion of its facility in south Fremont.

Rector said although Jayhawk Boxes was initially facing just the 37% increase, that number had gone up to 93% earlier this year.

“When they came through in March to evaluate the property, they noticed that we had some additional concrete work that wasn’t captured in the 2019 valuation, and then along with the 2020 addition,” he said.

Luckily, Rector said he was able to file a protest against the higher percentage.

“We negotiated down to a different number, somewhere in between the 37% and 93%,” he said. “But it’s going to cost us. I figured out it’s going to increase our tax liability by about $32,000.”

Jessica Kolterman, the director of corporate and external affairs at Lincoln Premium Poultry, said it’s the goal of any business to be on equal footing as its competitors.

“I think the one thing I can say is that we appreciate the work Dodge County has done to make this a better situation for commercial property owners in the county,” she said. “At this point, it’s out of Dodge County’s hands and we just appreciate the work they’ve done and the work they’ll continue to do.”

Kolterman said LPP has not held any discussions on if it will protest the increased valuation.

With just the 37% increase, Rector said it’s the biggest he’s seen since he joined the company in 2011. He also said the company isn’t alone, as he’s talked with other manufacturers who are also facing the increase.

“The people that I’ve talked to, and it’s a very limited pool size, were just trying to get the grasp of things here, still trying to figure it out,” Rector said.

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Rector said although Hall County has an average tax rate of 1.75% at a population of about 61,607 in 2018 and Buffalo County has an average of 1.56% at about 49,615, Dodge County is at 1.65%, with a population of just 36,791.

“Nebraska’s already the eighth-highest property taxed state in the nation, so I don’t know if we’re trying to get to number one or not,” he said.

If the following years bring more increases of this size, Rector said he’s not sure what will happen with the facility.

“It certainly makes it harder to invest in the community and draw people here to want to work at our facility,” he said. “We’re a Kansas-based company, and I’m sure my owner, if it came down to a coin flip to invest money in a Fremont location versus one of his other plants in Kansas for the same type of equipment, I’m guessing he might be swayed to move to his Kansas facility.”

Rector said although he wished he had been more aware of meetings with the Dodge County Board of Supervisors that covered the increase, he also wanted to know what the criteria was set to consider that the county was undervalued.

It’s not just the manufacturers around in our area either, it’s a lot of residents,” he said. “I’m hearing a lot of employees talking about how their valuations and how much they’ve gone up. So do we need to build more infrastructure, more schools? What’s it being allotted to?”

The increase will most likely make it harder for Jayhawk Boxes moving forward, whether it’s new equipment or employing more people, Rector said.

“It just puts a strain on everything,” he said. “And is the timing great? No, with everything that’s been going on with COVID and all that stuff. There’s really never a good time to have a 37%-plus increase.”

NEW JERSEY

N.J. towns fear COVID-19 will shrink property tax revenue, force public worker layoffs Despite skyrocketing unemployment and widespread economic pain, New Jersey’s property tax collections have not yet suffered a major blow from the coronavirus pandemic. But municipal officials are bracing for the hits still to come, they said Tuesday.

May property tax payments dropped off somewhat — results varied across the state’s 565 municipalities — though not as much some officials had feared. Local government leaders now are worried, however, about the rest of the year, when escrow accounts may be running dry for homeowners who have skipped or missed mortgage payments.

Towns already are hurting from lost revenue, like hotel taxes and parking and permitting fees, and big declines in August and November property tax collections could force municipalities to furlough or lay off employees and reduce local services.

“If the August collections are significantly down, I think a lot of those plans are going to be executed in the fall,” said Michael Cerra, assistant executive director of the New Jersey League of Municipalities, said Tuesday.

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The crushing economic fallout from the coronavirus pandemic is a nationwide concern for state and local governments, and the pain could be acute in New Jersey, home to the nation’s highest average property tax bill, $8,953.

Municipal leaders said during a virtual news conference Tuesday they’re looking to state and federal government to help them through the next year or two, or longer, of economic trouble. That includes support for more federal stimulus aid and for a bill (A3971) in the state Legislature to allow municipalities and counties to borrow money to make up for lost revenue, which isn’t allowed now, and to cover coronavirus-related expenses.

“We cannot raise taxes enough to cover the deficits we are facing this year and next year there’s no way that we can ask our residents to cover that,” Bridgeton Mayor Albert Kelly said. “The federal government has to step in and help.”

How deep the cuts go will depend on what kind of help they get, officials said.

Bloomfield is out $3 million so far, including about $1 million from its parking utility, Mayor Michael Venezia said. A 3-percentage point drop in its May property tax collections cost another $800,000.

“I’m worried for my community come August or even concerning the November property tax payment,” he said, noting that absent some assistance, 5% of the township’s workforce could be laid off.

“We need the ability to respond to these loss of revenues and we need to do it quickly. The dramatic loss of revenue is beyond anyone’s control and must be addressed.”

As tax collectors for counties and school districts, the municipalities are in a tough spot, said James Perry, Sr., league president. They’re responsible for sending schools and county government their whole shares, regardless of whether property taxpayers pay on time or even at all. Municipalities should be let off the hook, he said.

New Jersey Considers Bonds Paid for by Statewide Property Tax As New Jersey lawmakers grapple with reduced revenues due to the coronavirus pandemic and the related economic downturn, they have turned to an unusual solution: the issuance of bonds that would be repaid, if necessary, through temporarily higher sales and property taxes. A4175, the vehicle for this option, has passed the Senate and moved to the House for approval.

A4175 would allow the state to raise money for the General Fund by selling up to $5 billion in bonds for fiscal years 2020 and 2021, either to private purchasers or to the federal government, to address “financial problems that have arisen as a consequence of the COVID-19 Pandemic.” The bill would be effective immediately upon passage.

When the time comes to pay out these short-term bonds, funding would first be drawn from the existing sales tax, and if that did not provide enough revenue, municipalities would be required to levy an additional property tax, with proceeds going to the state government to facilitate retirement of the bonded debt.

The general sales tax on the state and local levels brought in $10 billion in FY 2019. As the Garden State is highly unlikely to be able to shift almost half of its sales taxes toward bond repayment, additional property taxes will be necessary if the state takes advantage of a significant amount of these bonds.

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Property taxes are already a point of contention for many in the Garden State. In calendar year 2018, New Jersey’s average effective property tax rate on owner-occupied housing was 2.21 percent—easily the highest in the nation. Homeowners may blanche at paying even more than that.

Statewide property taxes were once common, and a century ago were a major—often primary—source of state revenue. Today, however, statewide property tax levies are rare and typically limited to a few classes of property, classes that do not include real property (land and structures). Instead of having New Jersey create its own parallel property tax structure, this bill would require local governments to collect and remit the additional property tax alongside their own, using the same assessments they use in imposing local property taxes.

Property taxes are less economically damaging than most other forms of taxation, so New Jersey lawmakers are prudent to see it as a source of revenue, should that additional revenue be necessary. But in a state where all taxes are already quite high, there are substantial trade-offs with any tax increase. Policymakers should be careful not to see bonding now and potentially raising taxes later as an easy out, or to consider it something less than a real tax increase. They should understand going in that taxes are likely to increase should these bonds be issued and should explore ways to reduce expenditures as well.

The New Jersey Property Tax Appeal Deadline For The 2020 Tax Year Has Been Fixed For July 1, 2020

In order to remove any ambiguity occasioned by prior New Jersey Supreme Court Orders, extending the April 1 and May 1 annual tax appeal filing deadlines for regular and revaluation or reassessment district appeals to “30 days after the Governor lifts the State of Emergency” occasioned by the COVID-19 pandemic, respectively, Govenor Murphy has signed into law legislation fixing July 1, 2020 as the appeal deadline for this tax year. Although this July 1 deadline does not apply to certain limited municipalities located mainly in Monmouth and Gloucester counties, this new deadline will apply for the vast majority of property owners throughout the state.

The passing of this law was intended to provide both property owners and municipalities with the necessary certainty of schedule that will allow all parties, the fair opportunity to decide, on an informed basis, whether to take action. The relevant valuation date for the 2020 tax year is October 1 of 2019 and consideration of property values at that time as compared with the values indicated by their respective 2020 assessments should be reviewed without delay with appropriate real estate valuation experts and counsel experienced in this area of practice

Atlantic City proposes municipal tax decrease Atlantic City Mayor Marty Small Sr. announced a proposed 9.6-cent municipal tax decrease Thursday.

Residents in the resort town of Atlantic City may see their municipal taxes lowered if a proposed tax decrease is passed.

Standing in the courtyard just outside of the city hall building, Atlantic City Mayor Marty Small Sr. announced Thursday a 9.6 cent tax decrease in the municipal tax, a 5.35% decrease from 2019. The 2019 city tax rate per $100 assessment was $1.799. The 2020 rate is 1.703, meaning a home assessed at $100,000 would pay $1,702.72 in municipal taxes, which does not include school or county taxes. It equates to about a $96 cut.

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Being that the city is currently under state control and financial decisions have to be approved by the state, Small Sr. said that Lt. Governor Sheila Oliver had approved the tax decrease and that he expects City Council to pass the reduced rate.

"When the residents get their tax bills, they will know that the city of Atlantic City is not the deciding factor," Small Sr. said. "This is what we did and what we can control. That sends a message that my administration means business."

Small Sr. added that the city's rateable base shrunk slightly but remained at $2.5 billion. The city says it still has a considerable amount of debt in the amount of $566 million. Small Sr. said that the city is working on plans to cut into the deficit, with steps being taken to reduce a decent portion of the amount in 2023.

"We did not get this debt overnight, and it is not going away overnight," the mayor said. "Many of you know the city's long, bad history of tax appeals. We are moving in the right direction and, if we did nothing and the sky does not fall, Atlantic City will be out of debt in the year 2043."

Current city financial plans and models forecast municipal tax decreases for the next three years.

City Council President George Tibbett said that each council member received a copy of the budget Thursday with the tax decrease and expects a vote to take place during next Wednesday’s meeting.

“This is what happens when you have a mayor and his administration, the state and the council that works hard together,” Tibbett said. “This is great news for the city of Atlantic City, a 9.6 cent tax decrease. It’s something that the citizens, the taxpayers, the homeowners, and small businesses really deserve during these times.”

NEW HAMPSHIRE

Why NH must step up its education funding More money from the state is critical to promote reforms, flexibility in municipalities Current conversations surrounding Black Lives Matter and calls to defund the police have spurred a re-examination of the investments made by our communities. Local elected officials across the state and the nation are heeding calls to rethink the ways in which community services in their towns and cities are funded, with activists calling for the creation of new social programs that support community wellness initiatives, and for monies to support these programs to be taken from local police forces.

In New Hampshire, considerations for these efforts should start with an autopsy of how our communities are, in fact, funded.

According to NH Business Review, two-thirds of tax revenue for state and local budgets are funded through property tax. Proponents of this town-by-town reliance on local property taxes claim that it provides local control over spending. However, multiple New Hampshire Supreme Court decisions, such as the series of Claremont cases, provide strong evidence to support the argument that this system of taxation is rooted in injustice and inequity towards many communities in New Hampshire.

The property tax is regressive and burdensome to property-poor communities and communities of color. The current property tax structure not only perpetuates wealth disparities from generation to generation, but it also provides little to no flexibility in the budgets of economically disadvantaged communities, while wealthier communities are allotted lower tax rates and beyond-ample funds to use on city and town initiatives.

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This system of taxation disproportionately leads students of color to be in larger class sizes, with less experienced teachers, have fewer enrichments and extracurricular activities and fewer opportunities.

Reducing or eliminating our reliance on local property taxes to fund our schools is the first step to providing students of color, as well as students who are more economically disadvantaged, equal and equitable opportunities, resources and futures. A reimagining of state-level taxes could finally provide budgetary flexibility to communities that have long operated on shoe-string budgets, and year-to-year cuts in services.

Many police forces, like many schools in disadvantaged communities, are overburdened with responsibility. The conversation surrounding defunding the police is about creating healthier communities, with better, more targeted community health services, and not about creating an unsafe, anarchical society.

Creating these community wellness programs would certainly be a slow process that would require a well-planned transition period of offloading and shifting responsibilities away from our police forces into services that assist with community mental health, addiction, housing, transportation, food and education. Thus anyone who is listening to the voices of Black and Indigenous people of color, need to support those proposed initiatives. The current national conversation is about saving and improving lives.

But with the extensive and never-ending list of needs for many communities, there are too many budgetary holes to be patched and necessary expenses go unfunded. Relying on massive structural change on a community-by- community basis will likely mean that, once again, only the wealthy, and likely white, communities will have the budgetary flexibility to make these changes.

Communities in New Hampshire that have the highest populations of Black and Indigenous people of color, as well as a more economically disadvantaged population, have the highest tax rates. This has been made clear, time and time again, and serves as the basis for the arguments that fuel the education funding lawsuits. This is why New Hampshire needs to intervene and provide more flexibility to communities.

As an educator, I know that the future of community health and safety, and the potential of diverse voices and opportunities, begins in our schools.

My argument here is cities and towns most impacted by structural racism, disinvestment and wealth suppression will not be able to budgetarily and statutorily make these shifts. The same can be said for rural, economically disadvantaged communities.

That is why we need a statewide re-examination of how our tax dollars are being spent and distributed, and we need the state to undergo a dramatic and swift change in how our schools are being funded.

Providing adequate school funding to all communities will help alleviate budgetary constraints on economically disadvantaged communities. Ultimately as well, more budgetary flexibility allows more local control over how to design and implement community wellness initiatives.

As it currently stands, New Hampshire very strictly limits what types of taxes communities can levy against their taxpayers, with the vast majority of local revenues required raised through the property tax.

For example, in Somersworth, the local property tax makes up approximately 73% of revenues. The remaining slivers of the pie were filled with monies raised from interest, penalties, fees, licenses, permits and other local sources. Of the entire budget, only 9% of revenues came from state and federal sources. One or both of these two features needs to change if municipalities ever want to be able to have true flexibilities in their budgets. Right now, the budget funding cycle is more often than not a practice of robbing Peter to pay Paul.

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As a city councilor in one of New Hampshire’s most diverse cities, I’m calling on our leaders in the State House to make serious tax policy changes to address these disparities, inequities, and injustices. It’s about time that we consider a form of taxation that works for not just wealthy white people, but also Black and Indigenous people of color and others who are economically disadvantaged. There are many ways to do this, and many strong minds in the State House that can devise plans to fix this problem. But I strongly caution against politicization and inaction on this issue, as this will only continue to perpetuate injustice throughout New Hampshire.

Will Covid bring a flood of property tax abatement requests in NH?

Municipalities should brace for them as commercial property values are hit

It is expected that in late 2020 or early 2021 there will be an above-normal number of property tax abatement appeals, particularly in the commercial/industrial classification.

Commercial property owners, developers and landlords ponder dropping property values with the changing landscape of commercial real estate as bankruptcies, lack of tenant demand and the inability of some tenants to stay current with lease rent. Over the last couple of years, there has been a shift from the traditional retail shopping mall along with some big-box stores to on-line shopping and home delivery. Paradoxically, it was the growth of this very retail sector some decades ago that ushered in the demise of the central business district anchoring many cities and towns.

Property values retreated, and communities struggled with declining budgets. Over the following decades, vacant downtown locations were repurposed, emerging as a consumer traffic venue with small shops, bars and restaurants.

In March, as the coronavirus pandemic took hold, many commercial establishments closed, resulting in accelerated tenant erosion, and vacated commercial space. Some of the first and hardest-hit were patron-gathering venues, and there are predictions that up to half will not reopen.

For those that do, what will their business model look like if allowed to populate at only a fraction of their former sales area?

The first trending evidence of property tax relief comes from the largest mall developers that use a gross lease model and are responsible for property taxes. When these properties lose market value, one of their first relief remedies is property tax abatement.

An abatement request must be filed in writing with selectmen on or before March 1 after the December tax bill. It is the duty of selectmen, or a named assessor, to appraise all property at market value following state rules. They, and perhaps an advisory board, also serve as overseer and board of initial review for taxpayer grievances and abatement appeals.

If called upon to hear the first level of assessment appeal, it is not surprising that selectmen appear reluctant to adjust assessments they previously approved.

If a taxpayer is denied at this level, or just doesn’t hear back, the appeals process proceeds to the state Board of Tax and Land Appeals, or Superior Court. International Property Tax Institute IPTI Xtracts- The items included in IPTI Xtracts have been extracted from published information. IPTI accepts no responsibility for the accuracy of the information or any opinions expressed in the articles.

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In the tax abatement appeal, the taxpayer has the burden of showing good cause, by a preponderance of evidence, that the assessment was disproportionately high or unlawful.

Market value estimates are defined by the state and national assessment organizations as the standard for assessment.

The primary valuation method for all improved properties is the cost approach to value, with property sales divided between land value at highest and best use, and improvement value.

The cost approach may be reliable when applied to a newer property, but there must be well-supported land value. When reviewing sales from towns around the state, it is obvious there are very few unimproved land sales with which to employ the improvement residual method of the cost approach.

A number of assessors employ the land value residual method to their improved property sales analysis, reversing the process. In this case, careful scrutiny must be applied as to the replacement costs origination along with depreciation estimates.

Assessors also can use an income approach to value method with direct capitalization. The formulation appears disarmingly uncomplicated – net operating income divided by sales equals the capitalization rate).

The capitalization, or cap rate, is derived from available local rental and sales data of commercial/industrial property and their operating expense ratio. It reflects a purchase decision representing a snapshot in time – the rate an investor expects to receive during the first year of ownership. It is evidence of market price, and when used collectively guides the assessor to a market value estimate for a commercial property.

If there is not an adequate sample size in the market area, then relevant data from third-party published sources, or other forms of regional/national sales information, may be considered. Pitfalls abound in the use of any implicit rationale method. A sale property cap rate may be “trailing,” which represents the net operating income generated for the preceding 12-month period. Or it may be a “going in” cap rate reflecting the forecasted net operating income for the first 12 months of ownership.

These and other critical details must be ascertained by the assessor if this method is used correctly to estimate market value.

Once the market value of all assessed property in a municipality is established, the second critical piece of the property tax formula is the application of the state-approved equalization ratio.

Each municipality must measure the quality of assessment performance through sales ratio studies, which involve a comparison of assessments with recent sales in each property classification. The first test is the median ratio of assessments to sale price and should not be less than the minimum ratio of 0.90. Next test is the coefficient of dispersion (COD), best described as the average absolute error of assessments expressed as a percentage which should be less than 20 for all property classes.

Also, the price-related differential (PRD) is employed to determine whether assessment ratios tend to vary by the price of the property as opposed to being uniform. PRDs should fall in the range of 0.98 to 1.03.

An examination of a medium-sized municipality that had undergone a city-wide reassessment for 2019 was recently reviewed.

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As certified by the state in reassessment year 2019, the city-wide equalization rate, PRD, COD and median ratio across all property classes were within prescribed. Independently, the findings show key metrics actually miss their prescribed maximum deviation points by over 11%.

This finding does not imply there may be other instances of issues in assessment practices across the state. However, it does raise the issue that roiling commercial property markets with systematic downward pressure on their values, will result in successful appeals negatively impacting municipal budgets.

Municipalities should brace for tax abatement requests

It is expected that in late 2020 or early 2021 there will be an above-normal number of property tax abatement appeals, particularly in the commercial/industrial classification.

Commercial property owners, developers and landlords ponder dropping property values with the changing landscape of commercial real estate as bankruptcies, lack of tenant demand and the inability of some tenants to stay current with lease rent. Over the last couple of years, there has been a shift from the traditional retail shopping mall along with some big-box stores to online shopping and home delivery. Paradoxically, it was the growth of this very retail sector some decades ago that ushered in the demise of the central business district anchoring many cities and towns.

For those that do, what will their business model look like if allowed to populate at only a fraction of their former sales area?

If called upon to hear the first level of assessment appeal, it is not surprising that selectmen appear reluctant to adjust assessments they previously approved.

If a taxpayer is denied at this level, or just doesn’t hear back, the appeals process proceeds to the state Board of Tax and Land Appeals, or Superior Court.

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In the tax abatement appeal, the taxpayer has the burden of showing good cause, by a preponderance of evidence, that the assessment was disproportionately high or unlawful.

Market value estimates are defined by the state and national assessment organizations as the standard for assessment.

The primary valuation method for all improved properties is the cost approach to value, with property sales divided between land value at highest and best use, and improvement value.

These and other critical details must be ascertained by the assessor if this method is used correctly to estimate market value.

Once the market value of all assessed property in a municipality is established, the second critical piece of the property tax formula is the application of the state-approved equalization ratio.

An examination of a medium-sized municipality that had undergone a city-wide reassessment for 2019 was recently reviewed.

The methods and techniques used by the state to verify and ascertain sales ratio studies was applied. Looking at commercial sales over 11 months following the reassessment, it could be expected that sales occurring during that period would be assessed very closely to their sales price. Quite surprisingly, they weren’t even close. International Property Tax Institute IPTI Xtracts- The items included in IPTI Xtracts have been extracted from published information. IPTI accepts no responsibility for the accuracy of the information or any opinions expressed in the articles.

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NEW YORK

Appellate Court Rejects NYC Property Tax Challenge

In late February, the Appellate Division (1st Department) dismissed a lawsuit filed by an association of property owners and renters known as Tax Equity Now New York (TENNY) seeking a declaration that the NYC property tax system was unconstitutional (Tax Equity Now NY LLC v. City of New York). The court’s decision came at a time of much scrutiny over New York City’s property tax system. The anticipated fallout from the current COVID-19 pandemic and its eventual impact on the New York City real estate tax base will likely further complicate these matters.

TENNY had argued that the city’s property tax system was racially discriminatory, in that taxes as a percentage of fair market values (FMV) were higher in minority neighborhoods than in predominantly white areas. TENNY also claimed that the law requiring residential co-operatives and condominiums be valued like rental buildings favors co-ops and condos at the expense of rentals.

After upholding TENNY’s standing to maintain the lawsuit, the appeals court methodically rejected each of its claims on the merits, determining that unless there was “palpable” arbitrariness or “invidious discrimination” in the city’s property tax system, tax statutes must be upheld by courts so long as there is a rational relationship between the tax system and a legitimate stated purpose.

The court rejected TENNY’s challenge of the assessment caps that apply to tax class 1 (and some class 2) properties, even while acknowledging that these caps — which limit the city’s ability to increase assessed values while allowing market values to rise without restriction — have resulted in dramatic disparities in taxes paid by people owning similar properties.

The court concluded that since the assessment caps apply uniformly to all Class 1 taxpayers, the caps do not violate the state or federal Equal Protection Clauses. The court also rejected TENNY’s argument that the law requiring residential co-ops and condos be valued for property tax purposes as though they were rental properties violated the Equal Protection Clauses. TENNY argued that valuing co-ops and condos built before 1974 by comparing them to comparable rental buildings that are subject to rent regulation undervalues the co-ops and condos in comparison to rentals. The court found there was a “rational basis” for this law, which was to “insure that owners of condominium and cooperative properties would be taxed fairly compared to rental properties held in single ownership and not penalized because of the type of ownership involved.” The court found that the law was consistent with the legitimate governmental purposes of encouraging home ownership and placing homeowners on a level playing field with owners of rental buildings for tax purposes.

Finally, the court rejected TENNY’s argument that the NYC tax system unconstitutionally apportions the overall tax burden among its four classes of property without regard to the relationship of the market value of each class to the total market value of all properties. While accepting TENNY’s observation that Class 1 properties (one-, two and three-family homes) represent 47% of total NYC property value but pay only 15% of total property taxes and International Property Tax Institute IPTI Xtracts- The items included in IPTI Xtracts have been extracted from published information. IPTI accepts no responsibility for the accuracy of the information or any opinions expressed in the articles.

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comparing that to Class 2 properties that constitute 24% of value but pay 37% of tax, the court observed that the law was intended to preserve the share each class paid as of the time the system was enacted, and was, as such, serving a legitimate governmental purpose.

In sum, the court acknowledged that it affords deference to the legislature in the context of “classifications made by complex tax laws,” and that even though NYC’s property tax system “does, in many respects, result in unfairness,” it is up to the legislature “to implement a fair and equitable property tax system.”

It will be interesting to see if either a further appeal to the N.Y. Court of Appeals or action taken pursuant to an anticipated Final Report from the Property Tax Reform Advisory Commission will result in actual changes to the property tax system or whether financial troubles resulting from the COVID-19 pandemic will diminish any appetite for significant reform of the system.

Governor Cuomo Signs Legislation Authorizing Local Governments to Extend Deadline for Filing Property Tax Abatements to July 15th Recognizes Hardships Many Families and Businesses Face as Result of COVID-19 Pandemic

Governor Andrew M. Cuomo today signed legislation (S.8122-B/ A.10241-A) authorizing local governments to extend the deadline for filing property tax abatements to July 15, 2020 in recognition of the hardships many families and businesses continue to face as a result of the COVID-19 pandemic.

"New Yorkers and businesses all across the state have suffered both personal and economic hardships from the COVID-19 pandemic," Governor Cuomo said. "Extending the deadline for filing property tax abatements to July 15th will help provide these individuals and businesses with some much-needed assistance to help recover from the devastating effects of the pandemic as we begin to enter a new normal."

Senator Leroy Comrie said, "I am grateful that Governor Cuomo has signed Senate Bill 8122-B into law; this is a common-sense, fiscally responsible and fundamentally fair proposal that will benefit the greater good. As New Yorkers summon their incredible strength to recover, we must make certain that our government is a proactive and understanding partner that provides difference-making tools and effective assistance. By working with my Assembly co-sponsor Alicia Hyndman, our legislative leaders and colleagues, we are ensuring that all New Yorkers have an extended opportunity to apply and recertify for important property tax abatement programs will provide a stable safeguard for our hardworking families, seniors and homeowners."

Assembly Member Alicia Hyndman said, "The property tax legislation I've introduced and passed in the Assembly is important to homeowners and those alike across my community of District 29 and the State of New York. As the state reopens, many are still feeling the financial impacts of COVID-19 and deserve some relief at minimum. This bill will ensure that no property owner misses out on a real property tax abatement or exemption on their 20221- 2022 assessment due to the pandemic by extending all deadlines for the filing of applications and renewal applications for real property tax abatement or exemption program to be extended to July 15, 2020 at the discretion of local authorities. It also allows for an appeal procedure for appeals regarding denial of exemption or abatement in relation to applications submitted in accordance with the deadline extension of July 15, 2020."

NYC Leaders Debate Property Tax and Interest Rates Property Owners Worry as July 1 Tax Payments Loom

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According to Patch.com, New York City is facing a $9 billion deficit in the weeks leading up to its annual deadline to pass a city budget -- one that is sure to be compounded by projected shortfalls in property tax income. Property taxes are one of the main budgetary items over which the city has decision-making powers, and real estate taxes represented 53% of the city’s annual tax income last fiscal year.

The oversized tax burden on property owners in the city is well documented and discussed; less ballyhooed is the interest rate that has been imposed on delinquent payers since 1991. Since that time, unpaid taxes on large properties have garnered an 18% interest, according to a report in The Real Deal.

But now that the effects of an historic global health crisis have wreaked havoc on an already volatile industry, real estate and other leaders are saying it’s time to reexamine how property owners are charged for being late or delinquent on their tax payments. With inflation and interest rates at historic lows—and with landlords, homeowners, and cooperative corporations receiving less and less of their expected rental, maintenance, and assessment income each month that the shut-down wears on—the question of how late fees should be handled is meriting more attention.

Size Matters

TRD’s reporting indicates that the New York City Banking Commission has recommended an elimination of late fees—but only for properties with an assessed value of $250,000 or less, and only for delinquency on the upcoming July 1 payment date if a COVID-19 hardship can be proven.

City Comptroller Scott Stringer, characterized by TRD as a mayoral contender for next year, has urged the commission to “use every tool at our disposal to provide compassionate relief.” As the third member of the commission (along with Mayor Bill de Blasio and his appointed finance commissioner Jacques Jiha), Stringer appears to be the minority opinion of that body.

For his part, de Blasio has been advocating for relief from other sources, acknowledging that the income from city property taxes—and apparently their late fees as well—is essential to keep essential city services running during the crisis. In a dire projection, he says, “There is literally no way we can solve this problem without federal help, or having to make very painful choices.”

Even with evidence indicating that delinquency is growing, TRD notes that the commission advised keeping the 18% rate for large properties. And in the absence of the proposed legislation, it suggests that the rate for smaller properties without a COVID-19 hardship should be dropped from 7% to 3.25% for the July payment and to 5% for the other three quarters remaining in the fiscal year. “It is in the city’s best interest to encourage the prompt payment of real estate taxes by all taxpayers,” says the commission.

REBNY’s Take

Noting the difficulty that many of its constituents are likely to have in paying their upcoming July 1 tax payments timely and fully, the Real Estate Board of New York (REBNY) has raised the idea of letting owners stretch out payments over time “so there isn’t one big hit in July,” as REBNY president James Whelan says.

Alternatively—or additionally—the painfully high 18% rate could be lowered to account for the crisis. “No one is saying the penalty should be waived,” says Paimaan Lodhi, a REBNY senior vice president, “but in this time of crisis, it should be reduced to not further punish those that are experiencing hardship.”

Even if it approves rate reductions, the Banking Commission’s proposed rate must follow a prescribed formula, according to TRD. It must be at least six percentage points greater than the prime rate, which was 3.25% on May 12. While the commission therefore could have recommended a rate as low as 9.25% percent, it instead opted to maintain the 18% rate. Such a decision was not well received by REBNY and other industry leaders. International Property Tax Institute IPTI Xtracts- The items included in IPTI Xtracts have been extracted from published information. IPTI accepts no responsibility for the accuracy of the information or any opinions expressed in the articles.

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Existing Payment Plans

According to I, for property owners who are delinquent or just don’t want to fall behind, payment plans that run as long as 10 years are available—but interest and any new charges must be paid promptly. Homeowners facing hardships can defer payments in amounts based on the property type: 25% for single-family homeowners and 50% for condominium owners. There are plans for seniors and low-income owners as well.

New this year is an automatic monthly payment plan available to all property owners. Interested parties can find out more about the city’s Property Tax and Interest Deferral (PT AID) Program on the website.

New York City is budgeting $30.8 billion in property tax collections According to the WSJ, New York City is budgeting to collect $30.8 billion in property taxes for fiscal year 2021. These tax bills will go out on June 1 and payments will start becoming due on July 1, which is the start of the city’s fiscal year. Here’s how the collections break down across houses, apartments, and commercial properties:

Overall — and despite the fact that values have softened in the wake of COVID-19 — this year’s property tax budget represents a 5.7% increase over FY2020. The reason for this is that each year the city completes its annual assessments on January 5. And so according to the city’s January numbers, everything is just fine.

Supposedly this January 5 date is usually non-negotiable. A lawyer is quoted in the Journal article saying that under normal circumstances, if your house were to burn down on January 6, you would still have to pay all of your taxes for the upcoming fiscal year.

Time will tell if this time is different. But it is interesting, though not surprising, to note just how significant property taxes are to New York City’s overall tax collections. They represent a little more half of all taxes collected.

Tax hikes unlikely to get New York City out of budget hole, policy expert says As New York City faces its most severe budget crisis ever, lawmakers continue to debate its pandemic agenda. While some progressive Democrats are arguing for higher income taxes for the wealthiest, Nicole Gelinas, senior fellow at the Manhattan Institute and a contributing editor of City Journal, told The Center Square that many of the highest earners have already fled the city to their second homes elsewhere.

“We don't need one more reason for them not to come back,” Gelinas said. “It's a real tough sell: come back to New York City, pay even higher taxes than the existing combined 13 percent existing levy for top earners, sit in an apartment – even a large one – with no cultural events to attend and overcrowded public parks.”

Gelinas said that raising the tax is also impractical right now when it would only raise “a couple billion when we're looking at indefinite multi-billion-dollar deficits.”

“Of the nearly $67 billion in tax revenues that the city had expected to take in for the upcoming fiscal year, which starts July 1st, New York City is likely to lose at least 20 percent, or $14 billion,” Gelinas said. “Its sales-tax and income-tax collections are likely to be down by double digits, and its property tax – about half the city's annual tax revenues – is imperiled in the long term by a lower demand for real estate.”

State Sen. Betty Little, R-Queensbury, recently told The Lockport Union-Sun & Journal that helping small businesses should be at the top of the agenda.

Gelinas elaborated further on what lawmakers should be prioritizing in their agenda.

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“The city needs a hard wage freeze on all employees, temporary furloughs for people who can't do their jobs right now, to transfer them to the federal safety net and save cash, a hard executive salary cap of $200,000, pore through all of the 30,000 jobs, mostly administrative, added over the past seven years to see what is absolutely essential, cancel the $1.5 billion retro pay bonus due to employees in October, then draw up a menu of essential services, including crucial taxpayer amenities such as public parks, for the federal government to help fund,” Gelinas said.

Shuttered hotels costing NY $1.3 billion in tax receipts, report says Severe limitations on travel and the virtual shutdown of the hotel industry during the coronavirus pandemic is wreaking havoc on the treasuries of state and local governments, a sobering new report reveals.

Tax revenues that hotels generate for New York’s state and local governments will crater by $1.3 billion this year, according to an analysis conducted by Oxford Economics for the American Hotel & Lodging Association.

The estimated drop in tax revenues for state and local governments nationwide: $16.8 billion, the report projects.

Among the other hardest hit states include California (-$1.9 billion), Florida (-$ 1.3 billion), Nevada (-$1.1 billion) and Texas (-$940 million).

New York’s hotels have been largely closed. Some hotels have housed recovering COVID-19 patients, emergency medical and hospital personnel and homeless individuals during the pandemic.

The tax receipts from hotels fund government services — such as schools, social services and public safety. The analysis included taxes on lodging and sales tax, corporate levies, personal income taxes, and gaming revenues and unemployment insurance.

The ominous figures from the hotel industry buttress a report by city Comptroller Scott Stringer projecting the city’s budget hole could be as high as $11 billion because of the COVID lockdown, when factoring in reductions in tax receipts and likely cuts in state aid.

Meanwhile Mayor Bill de Blasio is seeking authority from Albany to allow the city to borrow $7 billion to keep the treasury afloat during the crisis — but lawmakers have thus far resisted — and instead are waiting to see if Congress approves a bailout package for state and local governments.

With uncertainty and the public health concerns surrounding COVID-19 lingering, hotel officials said it’ll take years for the industry to rebound.

“Getting our economy back on track starts with supporting the hotel industry and helping them regain their footing,” said Chip Rogers, president & CEO of the American Hotel & Lodging Association.

“Hotels positively impact every community across the country, creating jobs, investing in communities, and supporting billions of dollars in tax revenue that local governments use to fund education, infrastructure and so much more. However, with the impact to the travel sector nine times worse than during 9/11, hotels need support to keep our doors open and retain employees as we work toward recovery.

He continued, “We expect it will be years before demand returns to peak 2019 levels.”

The city’s top hotel official confirmed the dire projections — and urged elected officials to provide cash-starved hotels a break on property taxes.

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“The industry needs the City of New York to realize that revenues have dropped on average 75 percent and likely will end the year at a 60 percent decline. In order to ensure that we survive both a liquidity and solvency crisis, the City needs to allow for real property taxes to be deferred and the interest rate on defaulters lowered from the borderline usurious rate of 18 percent,” said-Vijay Dandapani, President & CEO, Hotel Association of New York City.

The city Hotel Association said the occupancy rate is just under 50 percent. But the numbers are likely worse because 45 percent of the hotels have not reported data, a spokesperson said.

Meanwhile cash-strapped landlords who are unable to collect rent from struggling commercial and residential tenants are also seeking property tax relief from the city. The city Rent Guidelines Board on Wednesday voted to freeze the rent on tenants and state law bars landlords from evicting non-paying tenants during the pandemic.

That leaves landlords holding the bag.

The Real Estate Board of NY and a coalition of business and property owners, civic leaders and community advocates have called on the mayor and City Council to: freeze property tax rates and assessments so that tax bills do not increase; reduce interest penalties from 18 percent to 3 percent and allow property owners to pay their taxes on monthly payment plans.

“As commercial and residential rent collections continue to decline, we need responsible policies that support property owners who continue to pay property taxes that support vital government services while grappling with mortgages, maintaining payroll and covering increased building maintenance expenses,” said James Whelan, president of RBNY.

“The challenges our City faces due to the coronavirus are stark but surmountable. We need thoughtful, data-driven policies, not ideological ones, that can lead our city towards a steady recovery.”

Mayoral spokeswoman Laura Feyer said the huge loss of tax receipts from a reeling hotel industry is worrisome.

“The steep decline in hotel occupancy rates may ultimately cost NYC tax revenue on top of the $9 billion we will lose over two years as a direct result of this pandemic. We need the federal government to step up and fully fund our recovery, and for Albany to grant us borrowing authority, so that we can begin on the road to economic recovery sooner rather than later,” Feyer said.

OHIO Declining farmland tax values expected

There’s a bit of good news for Ohio farmers to counter the ample bad news caused by COVID-19, as well as by last year’s historic rain. In counties scheduled for property value updates in 2020 — about half of Ohio’s 88 counties — the average value of farmland enrolled in the Current Agricultural Use Value (CAUV) program should be about 40% lower than 2017– 2019, or about $665 per acre. That’s according to projections by researchers at The Ohio State University College of Food, Agricultural, and Environmental Sciences (CFAES).

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The same projections say that in counties due for property value updates in 2021 —another quarter of Ohio’s counties — average CAUV values should be about 25% less than 2018–2020, or about $760 per acre. The declines should mean lower property taxes, on average, for most of the farmers in those counties. The projections were published in a May report by postdoctoral researcher Robert Dinterman and Ani Katchova, associate professor and farm income enhancement chair, both of CFAES’ Department of Agricultural, Environmental, and Development Economics.

“Less money paid in property tax will help reduce farmers’ costs and allow them to keep a greater share of the revenues they bring in,” Dinterman said. But he noted that CAUV values are “not exactly equal to the property tax someone will pay.” A farm’s total property tax bill, he said, also depends on how many taxing jurisdictions the land is subject to and the tax rate, or millage rate, within those jurisdictions. There could “certainly be a few cases where an agricultural landowner sees a large reduction in their CAUV value but has a corresponding increase in their millage rate and ends up paying the same in property taxes,” Dinterman said. Ohio counties update their property values, including their CAUV values, every three years on a rotating basis, with about a third of the counties seeing updates every year. The new values then apply for the next three years. The state’s CAUV program allows farmland to be taxed based on its agricultural value instead of its full market value. Enrollment in the program, which is voluntary, “normally results in a substantially lower tax bill for working farmers,” an Ohio Department of Taxation website says. A county’s CAUV values are based, roughly, on a formula using net farm income data from over the past five to seven years. More specifically, the data comes from a hypothetical farm producing soybeans, corn, and wheat during that period. “In a nutshell, CAUV values are high when the previous five to seven years of farm income were high. CAUV values are low when the previous five to seven years of farm income were low,” Dinterman said. Farmers had a boom in net income from about 2010-2014, which was partly a major cause of rising CAUV values in the past, he said. “So now that we have been in a prolonged period of what people might consider low farm incomes, those values start to enter the CAUV formula and in turn lower their values,” Dinterman said. “Clearly a farmer does not want to have low income, but a bit of good news that comes with that is that at least their tax bills will be a bit lower,” he said. Dinterman and Katchova’s report also states that based on early projections, the quarter of Ohio counties scheduled for CAUV updates in 2022 will see only a small decrease in their values, about 1%, to $880 per acre. That ties in with the researchers’ expectation that the CAUV declines won’t continue. “We should give a bit of a warning to farmers that the recent trend we’ve seen in reduced CAUV values has plateaued,” Dinterman said. The reason: a major legislative change to the CAUV formula — related to how capitalization rates are calculated — was started in 2017. The change was phased in, and 2020 marks the end of the phase-in.

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“That phase-in over 2017–2020 helped ease into the lowest CAUV values we’ve seen since about 2012,” Dinterman said. “We’re likely to stay within a range of about $650–$900 for average CAUV values in the foreseeable future.” Read the report at go.osu.edu/may2020cauv.

No more tax breaks awarded to million-dollar homes?

Council eager to reshape residential abatements

New developments are driving up property taxes, forcing long-time to choose between paying for essentials and making their house payments.

Kathy Garrison and her husband have lived alongside many of their Madisonville neighbors for decades, and she’s worried for them.

New development throughout the neighborhood is pushing homeowners’ property tax bills higher, she said. That’s forcing many of her old friends to make difficult choices, especially those who are getting by on a single income because their spouses have died.

“How do you decide, do I buy my medicine? Do I get my groceries? Do I do something different? Do I not pay gas and electric?” said Garrison, a Procter & Gamble Co. retiree who serves as director of the neighborhood’s community arts nonprofit, Artsville.

Kathy Garrison has lived in Madisonville for nearly 60 years.

Garrison said she has seen neighbors reluctantly sell their homes because they simply can’t afford the taxes anymore.

“When these prices continue to climb,” she said, “we can expect more and more people to lose their homes.”

That is exactly what Cincinnati’s Property Tax Working Group hopes to prevent.

The panel of neighborhood activists, real estate professionals and minority business groups was created by a 2018 council motion to study “the issue of rising property taxes in areas experiencing significant levels of development.”

Vice Mayor Christopher Smitherman was the author of that motion and is co-chair of the group.

“I want to see development happening, but I also care, and I know our co-chair Carol Gibbs cares, and the whole Property Working Group, we all care about how it is done,” Smitherman said.

Carol Gibbs is a longtime Cincinnati activist and former CEO of Accountability and Credibility Together.

Gibbs, CEO of Mt. Auburn Community Development Corp., said the Property Tax Working Group is trying to complete its final report by July 23. It will include a recommendation to defer property taxes for seniors or disabled residents who risk the loss of their home due to rising property tax bills caused by new construction around them.

“We talked about having those homes stay at the same tax rate before we started the million-dollar buildings and hold onto those taxes until they sell or they move,” Gibbs said. “And then the new homeowner would assume the cost of those past taxes.”

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‘It’s time to put that all together’

The idea is one of dozens that emerged since last September from an increased council scrutiny of tax abatement deals. The process has already strayed into some of the city’s most intractable problems: The lack of affordable housing, how to improve a low-wage economy, rents that are too low to make a real estate development profitable but too high for tenants to afford.

In fact, an I-Team analysis of ideas generated by the Property Tax Working Group shows only 10 of the 29 proposals would alter tax-abatement policy. The others call for things like creation of a revolving loan pool for home-improvement contractors, changes in zoning to encourage redevelopment of four-family apartment buildings and requiring a social worker to accompany building inspectors in rapidly developing neighborhoods.

The city’s development staff came to similar conclusions in a 60-page report that responded to a January 2019 council motion that asked for ways of “updating our development subsidies and incentives programs” to encourage more equitable development. Four of the report’s 15 ideas involved tax abatements. And many of its recommendations found their way into a “balanced development” proposal passed by council in December. It calls for the city to prioritize subsidies for projects that create living-wage jobs, prevent displacement, encourage inclusion and create affordable housing.

Both of those reports mirrored recommendations in an outside review of local housing policies, published in May by LISC Greater Cincinnati. That report, “Housing our Future,” provides more than 100 recommendations for Cincinnati and Hamilton County to close a 40,000-unit gap in housing units needed but not available to extremely low-income households.

Cincinnati Councilman David Mann said all three reports will influence council’s actions when it tackles the Property Tax Working Group’s recommendations for residential tax abatements. He thinks that could happen as early as next month.

“Obviously, what that group has to say is very important,” Mann said. “What LISC has to say is very important. We got hanging around there the so-called balanced development initiative that Greg (Landsman) put forward. It’s time to put that all together.”

‘A predictable set of rules’

As the I-Team reported last September, the city’s aggressive use of tax abatements helped to finance billions of dollars in new real estate investments in the city since the 2008 recession and reverse a 50-year trend of declining population.

But within that renaissance came seeds of discontent:

Residents of Hyde Park and Mount Lookout were alarmed when developers used abatements to demolish once stately homes for lot splits and condos.

Residents of the West End and Madisonville worried that abatements would gentrify their neighborhoods.

Hamilton County Auditor Dusty Rhodes warned abatements caused a massive increase in the percentage of exempt real estate. His most recent estimate is that $8.5 billion in local real estate is now exempt from taxation. That’s 26.7% of the county’s total real estate value, up from 9.5% in 1991.

Cincinnati Public Schools worried that abatements were causing the district to lose millions of dollars in property tax revenue.

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The school board’s concerns were alleviated in February, when a new deal was struck that increased payments in lieu of taxes that developers must pay to receive tax abatements on commercial developments. The old deal called for developers to pay between 25% and 27%. The new deal raises that to 33%.

Commercial real estate developer Bobby Maly said the new school board deal will increase costs but provide a more reliable framework that could lead to better projects.

“For developers, the most important thing is having a predictable set of rules,” said Maly, CEO of Model Group. “Hopefully, if it’s done well, it would just drive more investment in places where it’s needed.”

‘Every corner of this city’ calling for abatement reform

Most of the reforms undertaken to date have involved abatements for commercial projects. The Property Tax Working Group has targeted its approach to residential development. And on that front, Cincinnati political leaders are eager to make some changes.

Cranley

“Can we reduce the abatements for million-dollar homes? And that is a goal, and I support that as well,” said Cincinnati Mayor John Cranley. “There are tricky questions around, legally, around how to do that. But I think it’s worth pursuing.”

Mann, who recently announced his candidacy to replace the term-limited Cranley as mayor, said council will not let the coronavirus pandemic and calls for police defunding distract it from abatement reform.

“The question is what are we trying to accomplish?” Mann said. “There are only so many times and so many ways you can give away the taxes otherwise due. So, what is it that you want to achieve? If you say, I just want development. That’s one system. If you say, development that’s got affordable housing … Whether the tax abatement option is enough or whether it has to be a deeper public investment is kind of the question.”

Council members P.G. Sittenfeld and Greg Landsman recently proposed the development of a tiered system for awarding residential tax abatements that targets the biggest subsidies for neighborhoods or census tracts with the lowest median income and the highest rates of poverty, foreclosure and housing vacancy.

Cincinnati City Council Member P.G. Sittenfeld in his office on Wednesday, June 3, 2020. Sittenfeld has made several proposed changes to CPD policy in response to the protests of the Minneapolis police killing of George Floyd.

“We want everyone to be able to live in this city, so we need to do a lot more about affordable housing,” Sittenfeld said. “But also if someone wants to come and build a very expensive house in a more affluent neighborhood, we welcome them to the city of Cincinnati, too. But I think the logic is, should we be giving away precious city resources in the form of an abatement to someone who doesn’t need it?”

Landsman said he hopes council can follow up on the working group’s recommendations “quickly and with real intentionality.”

“That desire and need for reform is coming from every corner of this city,” he said. “From Republicans, Democrats, independents, Charterites. You’re hearing it from white, black and brown communities. It is an across-the-board issue.”

Gibbs said she hopes the working group will decide to recommend other changes, too.

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She would like to see more robust abatements available for people who renovate historic buildings, work that can be prohibitively expensive depending on the condition of the property.

“If you take a historic building that’s sitting there and rotting and you turn it into rentals or you turn it into condos, you’ll be rewarded,” she said.

Gibbs also favors a proposal that would encourage the redevelopment of four-family properties scattered throughout the city, she said, especially if those buildings create more affordable housing.

“It could give us thousands of new units of housing,” she said. “Hopefully if not low-income, then affordable.”

Smitherman said he thinks the two biggest problems to address are the lot splits in neighborhoods like Hyde Park and Mount Lookout and how property is assessed when old homes are demolished and how the city can make abatement policy more fair for its most vulnerable citizens – older residents with limited incomes and people with disabilities.

“Making sure that we’re doing it in a moral and ethical way and I think identifying the right cap limits on when tax abatements are given will make it less attractive in some areas and more attractive in other areas,” Smitherman said. “We want development to happen in areas that are very, very troubled, not those areas that are already on the rise or in those areas that are already stable.”

How much is enough?

Ultimately, changes in abatement policy alone will not be enough to achieve all the objectives outlined by critics of the city’s use of its most popular incentive tool. Affordable housing is a prime example.

“The way to create more affordable housing isn’t to suppress the creation of market-rate housing. It’s to create more affordable housing,” Sittenfeld said. “We need to capitalize an affordable housing trust fund not with hundreds of thousands of dollars, not even with millions of dollars, but tens and tens of millions of dollars.”

LISC’s “Housing our Future” report praises the city for establishing an affordable housing trust fund with proceeds from a tax on short-term rentals of properties on sites like Airbnb. But it also notes the fund only has about $700,000 available for local projects so far. The city revised its commercial abatement rules to allow a portion of a developer’s payments in lieu of taxes to flow to the fund. But Sittenfeld said affordable housing units can require subsidies of $100,000 to bring to market.

“Ten million dollars gets you 100 units,” he said. “You then put that in the context of these tens of thousands of units that are needed.”

Some of the Property Tax Working Group’s ideas will require changes in state law that could be difficult to achieve. For example, a new tax break for seniors isn’t likely to garner much support in the Republican-controlled legislature, said Rep. Bill Seitz, majority floor leader in the House.

“It’s just very difficult and cumbersome,” Seitz said. “A deferral is probably better than a discount because you’ll never get the discount back. And if you get a discount, the guy next door is going to pay more. The deferral, at least you get the money eventually, but then it’s an accounting mess.”

Seitz sees more potential for legislation to enable a housing court in Hamilton County, a long-coveted reform that’s endorsed by LISC, the Property Tax Working Group and the city in its December report on development incentives. In fact, he said, it’s “a reasonable possibility” to get enabling legislation passed this year.

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“A Housing Court with appropriate focus and expertise would address structural process issues with nuisance issues, code violations, blight, and crime,” said the report. “Further, such a Court would serve to better safeguard the rights of tenants and low‐income property owners.”

Seitz said he dropped his opposition to the housing court last year after Hamilton County judges told him they wouldn’t oppose the idea and city officials addressed his concern that it could be used to force properties into Hamilton County’s land bank for redevelopment.

“I was satisfied based on the explanations I got from (new interim City Manager) Paula Boggs Muething and the mayor that this is not some new Draconian, star chamber court and it probably would be a good thing to add to the toolbox,” he said.

Garrison said she doesn’t expect solutions any time soon.

As families move into more expensive homes in Madisonville, Garrison said, she’s worried long-time homeowners will begin to get citations for home repairs they can’t afford to make, adding to the financial pressure to sell whether they want to or not.

“You know, whether it’s fair or unfair, that’s the way life is,” she said. “I really hope that we can figure this out. And how do we help those who want to stay in their home? That’s important to me.”

As the debate continues at city hall, Garrison said it could come down to neighborhoods helping their own.

“I would love to see communities say, ‘Look, Ms. Jones down the street really needs her porch fixed. I’ve got a hammer. You’ve got a saw. You’ve got paint. Let’s go help Ms. Jones,’” she said. “Is that an effort that we can begin to look at in this community and help those that want to stay?”

Ohio Delivers High Property Tax Values A recent decision from an Ohio appeals court highlights a developing and troubling pattern in the state’s property tax valuation appeals. In a number of cases, an appraiser’s misuse of the highest and best use concept has led to extreme overvaluations. Given its potential to grossly inflate tax liabilities, property owners and well-known tenants need to be aware of this alarming trend and how to best respond.

In the recently decided case, a property used as a McDonald’s restaurant in Northeast Ohio received widely varied appraisals. The county assessor, in the ordinary course of setting values, assessed the value at $1.3 million. Then a Member of the Appraisal Institute (MAI) appraiser hired by the property owner calculated a value of $715,000. Another MAI appraiser, this one hired by the county assessor, set the value at $1.9 million. The average of the two MAI appraisals equals $1.3 million, closely mirroring the county’s initial value.

Despite the property owner having met its burden of proof at the first hearing level, the county board of revision rejected the property owner’s evidence without analysis or explanation. The owner then appealed to the Ohio Board of Tax Appeals (BTA).

In its decision on the appeal, the BTA focused on each appraiser’s highest and best use analysis. The county’s appraiser determined the highest and best use is the existing improvements occupied by a national fast food restaurant as they contribute beyond the value of the site “as if vacant.” The property owner’s appraiser determined the highest and best use for the property in its current state was as a restaurant.

With the county appraiser’s narrowly defined highest and best use, the county’s sale and rent examples of comparable properties focused heavily on nationally branded fast food restaurants (i.e. Burger King, Arby’s, KFC

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and Taco Bell). The BTA determined that the county’s appraisal evidence was more credible because it considered the county’s comparables more closely matched the subject property.

By analyzing primarily national brands, the county’s appraiser concluded a $1.9 million value. Finding the use of the national fast food comparable data convincing, the BTA increased the assessment from the county’s initial $1.3 million to the county appraiser’s $1.9 million conclusion.

On appeal from the BTA, the Ninth District Court of Appeals deferred to the BTA’s finding that the county’s appraiser was more credible, noting “the determination of [the credibility of evidence and witnesses]…is primarily within the province of the taxing authorities.”

Questionable comparables

Standard appraisal practices demand that an appraiser’s conclusion to such a narrow highest and best use must be supported with well-researched data and careful analysis. Comparable data using leased-fee or lease-encumbered sales provides no credible evidence of the use for which similar real property is being acquired. Similarly, build-to- suit leases used as comparable rentals provide no evidence of the use for which a property available for lease on a competitive and open market will be used. However, this is exactly the type of data and research the county’s appraiser relied upon.

A complete and accurate analysis of highest and best use requires “[a]n understanding of market behavior developed through market analysis,” according to the Appraisal Institute’s industry standard, The Appraisal of Real Estate, 14th Edition. The Appraisal Institute defines highest and best use as “the reasonably probable use of property that results in the highest value.”

By contrast, the Appraisal Institute states the “most profitable use” relates to investment value, which differs from market value. The Appraisal of Real Estate defines investment value as “the value of a certain property to a particular investor given the investor’s investment criteria.”

In the McDonald’s case, however, the county appraiser’s highest and best use analysis lacks any analysis of what it would cost a national fast food chain to build a new restaurant, nor does it acknowledge that the costs of remodeling the existing improvements need to be considered.

If real estate is to be valued fairly and uniformly as Ohio law requires, then boards of revision, the BTA and appellate courts must take seriously the open market value concept clarified for Ohio in a pivotal 1964 case, State ex rel. Park Invest. Co. v. Bd. of Tax Appeals. In that case, the court held that “the value or true value in money of any property is the amount for which that property would sell on the open market by a willing seller to a willing buyer. In essence, the value of property is the amount of money for which it may be exchanged, i.e., the sales price.”

Taxpayers beware

This McDonald’s case is not the only instance where an overly narrow and unsupported highest and best use appraisal analysis resulted in an overvaluation. To defend against these narrow highest and best use appraisals, the property owner must employ an effective defense strategy. That strategy includes the critical step of a thorough cross examination of the opposing appraiser’s report and analysis.

In addition, the property owner should anticipate this type of evidence coming from the other side. The property owner’s appraiser must make the effort to provide a comprehensive market analysis and a thorough highest and best use analysis to identify the truly most probable user of the real property.

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PENNSYLVANIA

Luzerne County’s real estate tax assessments evaluated for accuracy Eleven years after Luzerne County’s reassessment, the real estate values used for property taxation are still well within acceptable accuracy standards, officials said.

This conclusion from county Manager C. David Pedri and Assessment Director Kristin Montgomery is based on the latest annual outside analysis by the State Tax Equalization Board.

In each county, the state board compares assessments to actual real estate purchase prices recorded the previous year to see how values are holding up. The new evaluation is based on arm’s length transactions from 2019.

The ideal “common level ratio” score is 100%, with prices paid closely mirroring assessments.

This year’s county ratio: 94.9%.

County administrators have argued another reassessment is not warranted as long as the ratio remains within a range of 85 to 115, or plus/minus 15%.

Ratios over 100 indicate sales prices are landing below assessed values, while those under 100 are a sign more purchases are exceeding assessments, officials have said.

Montgomery said the new ratio means properties, on average, are selling around 5% more than the assessed values countywide.

Hired as assessment director in December, Montgomery said one of her goals is completion of an in-house impact study to examine sales and assessments by regions, which would help identify if there are any pockets worthy of monitoring.

County officials have not honored a resolution passed by prior county commissioners calling for reassessments every four years to prevent the values from getting stale.

County Manager C. David Pedri said he would not yet recommend a reassessment.

“The new ratio proves we have no need for reassessment at this time. Our numbers are still within an acceptable range,” Pedri said.

Pedri said he does not know what to expect a year from now because that ratio will reflect 2020 sales and the impact the coronavirus pandemic has had on the real estate market.

Last year’s county score was 101.1%.

The county’s percentage started at 99.7 after the reassessment and has since climbed as high as 109.9 in 2013, records show.

The last reassessment, which took effect in 2009, had been the first mass revaluation since 1965. Four years of sales data were used to calculate the worth of more than 165,000 parcels on the fixed date of Jan. 2, 2008. Assessment challenges have led to thousands of value adjustments, most reductions, since then.

Among the 67 counties statewide, Luzerne remains among the accuracy leaders with its ratio score, the equalization board report shows.

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Only three other counties have scores closer to 100%, plus or minus: Adams, 104.5; Blair, 96.2; and Indiana, 98.6. Philadelphia is trailing Luzerne, at 94.3%.

Neighboring Lackawanna is one of three counties in the state with the lowest scores — an indication many property owners are assessed significantly below market value. Lackawanna’s ratio is 9.3%. The percentages are 8.6 in Butler and 8.9 in Bucks, the report said.

Will the COVID-19 Outbreak Impact Your Pennsylvania Real Estate Tax Assessments?

If you are the owner of a retail, office, industrial or other commercial property in Pennsylvania, then now is the time to review the tax assessment for your property against its current market value. The COVID-19 outbreak has caused many property owners to experience declining rents, increased vacancy and the need to become "creative" in leasing vacant space. These and other factors may be grounds to support a reduction in the tax assessment of your property.

Unfortunately, boards of assessments cannot reassess property every year based on the local economy. As a result, the real property taxes assessed against your property by the board of assessment for county, municipality and school district taxes may be out of proportion to the actual value of your property or the value attributable to your property by the county.

What To Do If You Think Your Real Estate Taxes Are Too High?

First, you need to determine whether to file an appeal to the county board of assessment for your property. To do so, you need an experienced real estate assessment attorney and a qualified appraiser. Our office can assist you in performing a preliminary analysis of the fair market value of your property and then, if appropriate, identifying the best real estate appraiser to determine the fair market value of your property, complete an appraisal report and testify at the board of assessment hearing.

Second, you need to multiply the assessment, as determined by the board of assessment, by the state published common level ratio for the county where the property is located to determine the assessed market value.

Third, compare the fair market value of your property to the assessed market value to determine if you have a legal basis to file a tax appeal.

Determining the Fair Market Value of Your Property?

For commercial properties, two calculations often guide the determination as to whether or not to appeal your tax assessment. Capitalization of income and comparable sales gives us the ability to make a preliminary determination as to whether a particular tax assessment is out of line.

The capitalization of income approach is the easiest and quickest test to determine the value of your property; whereas, comparable sales require more information. Up-to-date information on costs, square footage, occupancy, types and number of leases, use, location, mortgage amounts and interest rates, rental income and expenses are all necessary to complete the capitalization approach. Recent comparable sales within the last year or two should be reviewed and analyzed, as well as properties under agreement of sale. Rent abatements, lease defaults and vacancies are also factors that impact the value of a property. International Property Tax Institute IPTI Xtracts- The items included in IPTI Xtracts have been extracted from published information. IPTI accepts no responsibility for the accuracy of the information or any opinions expressed in the articles.

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With the above in mind, now is the time of year to review your real estate tax assessment on any of your commercial properties. If the assessed market value determined by the board of assessment exceeds the fair market value of your property, or if you have experienced rental income problems this past year, or other issues from the COVID-19 outbreak, then an appeal of your assessment this year may be in order.

SOUTH CAROLINA

South Carolina Property Tax Exemptions: Useful Tips for Buyers New to South Carolina This article is to provide information on a little known tax exemption (“6% Exemption”) applicable to real property currently taxed at the 6% tax rate, a tax rate applicable to second homes, rentals and commercial properties. The real estate market in South Carolina appears to be recovering from the COVID-19 crisis quickly with many buyers coming to the low country to enjoy a break from more urban areas and perhaps to realize their retirement dreams a little earlier than planned. With that in mind, we thought it would be useful to alert buyers to the 6% Exemption so that buyers can take advantage of this tax break.

What is the 6% Exemption?

If you currently use real property acquired in 2020 as a second home, rental, or a commercial space and the property was used as either a second home, rental, or commercial space by the seller from whom you purchased the property, then the 6% Exemption likely applies. Applications seeking the 6% Exemption are due by January 30, 2021, to the Beaufort County Assessor.

South Carolina Code Ann. § 12-37-3135 provides that where (1) a property is taxed at 6% assessment ratio prior to a transfer (this generally means a second home, rental, or commercial property); (2) where the property remains taxed at 6% ratio after the transaction; and (3) the purchase price exceeds the value at which the property was being taxed prior to the transfer, then an exemption of up to 25% of the new valuation may be applied in the new year after the sale.

The County will typically reassess properties sold in 2020 and tax them at their purchase price for 2021 forward. This exemption provides that such properties shall be taxed at either the 2020 taxable value or the purchase price less 25% (whichever is greater is used for the 2021 tax bill).

Does this 6% Exemption apply to my 2020 purchase?

If you currently use the property as a second home, a rental, or a commercial space and the property was used as either a second home, rental, or commercial space by the seller from whom you purchased the property, the 6% Exemption likely applies to you for the 2021 tax year. It is possible you are unsure of the previous use of the property prior to your purchase. This can be determined by analyzing prior year tax liability. Your attorney can help.

What is the actual potential savings of the 6% Exemption?

Detailed below is an example to demonstrate the potential opportunity for savings in 2021. Keep in mind that this is an example only. The final tax valuations are determined by the County. In addition, the County uses millage rates that are subject to change every tax year and vary depending on the location of the property within the County.

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Let’s say you purchase a second home on Hilton Head Island for $500,000 in 2020. In 2020, the property was taxed using the market value of $350,000 and the resulting tax bill was around $5,000. The new purchaser in 2020, who paid $500,000, is likely to get a tax bill in 2021 based on the $500,000 market valuation. This will result in a tax bill of roughly $7,100. In order to mitigate the increase, you may apply for the 6% Exemption.

When the County receives the application and runs the numbers, it should look something like this:

1. ATI Market Value (in other words, purchase price): $500,000. 2. Market valuation on the 2020 property tax bill: $350,000. 3. 25% reduction (the Exemption): $375,000. 4. Taxable value (The greater of either the 2020 Market valuation (number 2 above) or 25% reduction (number 3 above)): In this case, the County will use $375,000. 5. Tax due for 2021 using the new valuation of $375,000: $5,377. 6. Absent applying for the 6% Exemption, Beaufort County would have taxed the property at a value of $500,000 resulting in a tax bill of approximately $7,100.

The savings can be quite substantial. Again, keep in mind that these numbers are for demonstration purposes only and do not guarantee a particular result.

Do I need to apply for the 6% Exemption every year?

No. Once the 6% Exemption is applied to your property in the year after purchase, it should apply every year until the property is no longer classified under the 6% ratio or the manner in which title is held changes.

How do I apply for the 6% Exemption?

Beaufort County has an application for this exemption available on its website www.beaufortcountysc.gov. From their homepage, you should proceed as follows:

1. Click on Government. 2. Under the Departments heading on the far left, click on “Assessor”; 3. On the column on the far right, click on “Forms”; 4. Select “Assessable Transfer of Interest Exemption (Point of Sale)” which is the fourth from the bottom. 5. Complete and submit on or before January 30, 2021.

Can someone else file this for me?

Yes; you can appoint an attorney to interact on your behalf with Beaufort County via Beaufort County’s power of attorney form.

TENNESSEE

Metro budget approved with 34% property tax hike Nashville has a new budget, though it wasn’t the one originally proposed by Mayor John Cooper. International Property Tax Institute IPTI Xtracts- The items included in IPTI Xtracts have been extracted from published information. IPTI accepts no responsibility for the accuracy of the information or any opinions expressed in the articles.

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Councilmember Bob Mendes’ alternative budget proposal passed during the June 16 Metro Council meeting, during a night of several failed budget proposals and technical issues.

Mendes’ budget will go into effect instead of Cooper’s proposed budget and will include different allocations of funding and a 34% tax increase compared to the mayor’s proposed 32%.

The budget proposal passed on a vote of 32-8 during Metro council's second-longest meeting on record, according to Vice Mayor Jim Shulman. The longest meeting happened just a few weeks ago and also focused on the city's budget.

The alternative budget includes a 1% cost-of-living increase for Metro employees and $3.4 million allocated to Metro’s rainy-day fund, less than the mayor’s proposed budget.

“This year, the city really is not in great shape, and we need to be able to move forward financially,” Mendes said. “So this is going to be the first property tax adjustment since 2012. Hopefully it’s going to get us back on a firmer footing to be able to get through this current crisis.”

The passed budget did not defund or increase funding for Metro Nashville police, after several days of protests in Nashville called for the police department to have their funding significantly reduced.

Instead, the budget included an amendment, which restored $2.6 million to pay 48 police recruits. It didn’t result in an increase in the number of officers in the department and only balanced the headcount of the department, making up for officers retiring or leaving.

Without the money, Metro police would have needed to drop their headcount below the authorized level.

Cooper kept a close eye on the budget vote. He released a statement and tweeted shortly after the budget passed.

“The crisis budget approved tonight stabilizes Metro’s finances and maintains essential services,” Cooper said on Twitter. “The large tax increase is something I would not have considered were we not facing Nashville’s greatest financial challenge.

"The fiscal year 2021 budget process is proof positive that here in Nashville, we can still have collaborative working relationships in our politics. The end result, a budget built on compromise and full of tough choices, provides stable financial footing for our city’s future."

Metro budget approved with 34% property tax hike Nashville has a new budget, though it wasn’t the one originally proposed by Mayor John Cooper.

Councilmember Bob Mendes’ alternative budget proposal passed during the June 16 Metro Council meeting, during a night of several failed budget proposals and technical issues.

Mendes’ budget will go into effect instead of Cooper’s proposed budget and will include different allocations of funding and a 34% tax increase compared to the mayor’s proposed 32%.

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The alternative budget includes a 1% cost-of-living increase for Metro employees and $3.4 million allocated to Metro’s rainy-day fund, less than the mayor’s proposed budget.

Without the money, Metro police would have needed to drop their headcount below the authorized level.

Cooper kept a close eye on the budget vote. He released a statement and tweeted shortly after the budget passed.

Local governments avoid tax increases amid COVID-19 revenue loss Washington County, Tennessee's budget committee is making tough choices during the COVID-19 pandemic, and they’re not alone.

Stay-at-home orders led to a drop in sales tax revenue, money that would have funded schools. Instead, the county is shelling out more from savings.

"We just hope that that's enough,” Mayor Joe Grandy said. “If they come up short on that line, the general fund will have to make up the difference."

April was the worst month for tax revenue in Tennessee because of the pandemic. State revenue was down nearly 40 percent compared to this time last year.

But local governments, less dependent on big purchases like cars, are doing better. In our region, most counties took in more sales taxes in May compared to last year. Only Sullivan and Washington Counties saw a drop. Kingsport was down 6 percent.

"We kind of went down the path of saying, 'Let's kind of project what we think the worst-case scenario might look like, and then make positive adjustments,” Kingsport City Manager Chris McCartt said of the budget process.

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"What kind of cuts, if any, did you have to make in order to make that work?" News 5’s Caleb Perhne asked McCartt.

"A lot of that centered around freezing positions that were vacant, looking at making cuts to our operating budget,” McCartt said.

Cuts are not enough to make up for losses. Local governments are also turning to savings to avoid a property tax increase.

"People are struggling. businesses are failing, and we're just not certain what this is going to look like through the next twelve months,” Grandy said.

Leaders hoping revenues improve through the rest of 2020 compared to what we're seeing now.

Metro Nashville Council approves FY 2020-21 budget, including 34% property tax rate increase

Following an hours long debate at the June 16 meeting, Metro Nashville Council members approved the city’s fiscal year 2020-21 operating budget that will raise property taxes for the first time since 2012.

Metro Council voted 32-8 to approve a budget sponsored by Council Member Bob Mendes, the budget and finance chair. The budget, which goes into effect July 1, includes a 34% property tax rate increase, or $1.066 per $100 of assessed value.

Overall, the $1.066 rate increase will bring the total property tax rate from $3.155 to $4.221 per $100 of assessed value in the Urban Services District, according to the budget.

For a home appraised at $219,900—the median home value for Davidson County, according to the U.S. Census Bureau’s American Community Survey five-year estimates—a homeowner will see a tax bill increase of about $586 per year under the new rate.

Mayor John Cooper's proposed budget would have increased the property tax rate by about 32%, or $1 per $100 of assessed value.

"The crisis budget approved tonight stabilizes Metro’s finances and maintains essential services," Cooper said in a statement on social media immediately following the vote. "The large tax increase is something I would not have considered were we not facing Nashville’s greatest financial challenge. ... The FY2021 budget process is proof positive that here in Nashville, we can still have collaborative working relationships in our politics. The end result, a budget built on compromise and full of tough choices, provides stable financial footing for our city’s future."

Budget highlights

In addition to raising property taxes, the budget includes $2.1 million for a full deployment of body-worn cameras among Metro Nashville Police Department officers; $450,000 to open community centers on Saturday mornings; $3.5 million for the Metro Arts Commission; and funding for a chief diversity officer and a workforce diversity manager.

Additionally, an amendment sponsored by Council Member Zulfat Suara redirects $8.2 million from Metro Nashville Public Schools' undesignated fund balance to fund step pay increases for school employees.

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Prior to approving Mendes’ budget, council members voted down a budget sponsored by Council Member Steve Glover, which would have included a wheel tax increase and various cuts to nearly 50 departments or programs. Council Member Freddie O’Connell withdrew his budget proposal, which would have relied on federal grants to replace property tax revenue, according to budget documents.

Increased police funding

A budget amendment sponsored by Council Member Russ Pulley included in the final spending plan increased funding for the MNPD by $2.6 million. Officials said the MNPD needs the additional funding to hire 48 recruit positions.

Earlier in the meeting, some council members proposed amendments that would have cut funding for the police department, including Council Member Ginny Welsch's proposal to reduce MNPD funding by $108 million and the Davidson County Sheriff's Office by $3.5 million. Welsch's amendment did not receive council approval.

However, Pulley's amendment also eliminated step increases for Metro employees, according to officials. City employees will still receive a 1% cost-of-living raise.

"The reason I do support this amendment, even though it does reduce step raises, is that the administration has done a very good job of doing what they can to keep Metro employees paid. ... The fact that we can keep our employees employed and not laid off or furloughed is a pretty big deal," Pulley said at the meeting.

TEXAS

Property taxes a problem without a solution for business owners

Texas businesses that own their own real estate face an unsolvable math problem.

Let’s start with one side of the math equation. Property tax appraisals by law are set in January. You may recall January 2020, which we all agree took place about seven years ago. COVID-19 months are like dog years. The lines on my face prove it.

Back in January — the halcyon days, the golden years, the boom time — the stock market indices traded at record highs, the Texas unemployment rate was 3.5 percent, and oil sold at $60 per barrel. The result: Real property tax appraisals went up, compared to 2019.

Those higher appraisals have arrived in the mail. We calculate taxes by multiplying appraisal values by tax rates. The tax rates did not drop. So real estates taxes owed are up. In many cases by a lot.

Meanwhile, the stock market has been — let’s call it volatile. Texas unemployment hit 13 percent in May. Until last week, oil had been below $40 per barrel since March.

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So here’s the other side of the math equation. While results vary, the last three months for many businesses have been terrible. Catastrophic for most in the food and drink, lodging, retail and real estate sectors, as well as oil and gas.

The unsolvable math equation is this: How do already vulnerable businesses stay afloat when they’re sustaining and the one authority they can’t avoid — the tax man — is taxing them on boom-time valuations?

If you start asking around for responsible authorities who can solve this, you quickly get a picture that reminded me of that scene in Quentin Tarantino’s “Reservoir Dogs” in which everybody points the gun at everybody else. A more sophisticated movie critic than me (my wife) points out that Tarantino appropriated that image from movies directed by John Woo. But I digress.

The point is, everybody points to somebody else as the authority to fix it.

I sat down with Bexar County Tax Collector-Assessor Albert Uresti. He said cities and counties have asked the state of Texas to freeze taxes at 2019 levels but the governor has refused.

He also pointed out that the county appraisal district, not his office, sets property value levels in January. By law, those appraisals cannot be changed. Further, taxing authorities — school districts, the county hospital district, the city and county, Alamo Colleges — all set tax rates. Lower tax rates would have to come from them. So there are a lot of moving parts. Uresti’s office merely collects the taxes that others have set.

Roberto Treviño, the District 1 city councilman and chair of the Bexar Appraisal District board, confirmed that cities and counties asked the governor to freeze taxes at 2019 levels. He said Gov. Greg Abbott ignored that request but responded via the news media that tax rates could not be frozen at 2019 levels as requested.

Treviño echoed Uresti’s frustration, saying a freeze or rollback could be done through a specific disaster declaration, but the pandemic, so far, has not been declared a disaster, at least for the purposes of tax relief.

And about those taxing entities?

“I don’t have any evidence that taxing entities are lowering their tax rates,” Treviño said.

Referring to the city — “knowing that our revenue issue is in the hundreds of millions” — he said he saw little chance the city or other taxing authorities will cut tax rates.

More from Taylor: On this scary stock market ride, our only control is over ourselves

So what happens next?

Property owners have until Monday to protest their January 2020 tax valuations. A tax protest could be taken up online or through an in-person hearing, probably no sooner than August. Appraisal offices are currently closed because of the pandemic. As Treviño explained, the appraisal district has been working to make in-person tax valuation appeals possible.

This unsolvable math problem for businesses has severe consequences. As Uresti confirmed, the penalty rate for nonpayment on taxes is 13 percent added to the balance due. Delinquent payers will also eventually become liable for attorney’s fees, which run between 15 and 20 percent of the balance.

Without a disaster declaration, Uresti said, his office is not allowed to waive any of those fees.

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This is particularly bitter for business owners who shut down from March to May. The solutions available to homeowners to soften the blow of real estate taxes do not apply to businesses that own their property.

Uresti touted Bexar County’s 10-month payment plan available to homeowners as an example of his office’s flexibility. However, most business owners with commercial mortgages already set aside tax installments, in escrow, throughout the year. In other words, they’re already on a monthly payment plan.

Homestead exemptions, senior citizen exemptions, health-related exemptions — the programs Uresti’s office is rightly proud of — do not apply to business owners.

They really have no recourse, except to fight their property value appraisal.

Treviño said the appraisal district anticipates plenty of valuation challenges. This year in particular, he said, “We recognize that there is a major flaw in the way tax appraisals are being done.”

But, he said, the appraisal district’s hands are tied by state law.

“We will work with anyone,” he said. “My staff will tell you that I have never, ever once turned away a homeowner or business owner that was sincere and wanting to keep their property. If they come and see us, yes, we’re going to require a down payment. Yes, we’re going to require them to enter into a payment agreement, but we will work with them.”

And yet here’s the thing. Nobody has a solution to this unsolvable math problem for Texas business owners who own property.

Except, I guess, just protest your appraisal value? You have one day left.

Board Considers Audit After Property Tax Protests Rise in Tarrant County

208,000 property owners protested their appraisals in 2019

Following an increase in the number of protests over property value in recent years, the Tarrant Appraisal District Board of Directors is considering an audit for the county.

Directors discussed the matter during a June 5 meeting. In a 3-to-2 vote, the TAD board of directors decided to establish a scope for the audit.

The motion was raised by member Rich DeOtte, who joined in January. Between 2015 and 2019, DeOtte said the number of protests in Tarrant County rose about 265%.

“Our protests in 2015 were 5,700. Now, they’re 208,000. That means 208,000 property owners or accounts were protesting their values,” DeOtte said. “I could come up with 10 or 11 reasons that this could be happening, but the bottom line is if we’ve got 208,000 protests, which we had last year… that number is wasting a lot of time for the property taxpayer to go and protest.”

Comparatively, DeOtte said Harris County’s increase over that same time span was 11%. Bexar, Travis, and Dallas counties showed increases of 27%, 36% and 49.7%, respectively.

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In a letter to the board in late April, State Sen. Jane Nelson (R-Flower Mound) requested they investigate the reasons behind “such a large increase” in Tarrant County.

Specifically, Nelson asked the board to “look into whether software used by the district is playing a role. Troubles with the software were cited in a recent audit, and I would be interested to know what steps have been taken to the address the issues.”

Jeff Law, chief appraiser for the Tarrant Appraisal District, noted the Texas real estate market has experienced increases in property values for several years. When property appraisals increase, Law said that typically increases the number of protests.

“Appraisal districts all across the state have seen increases in the number of protests since 2016. Tarrant is no different. Increases in sales prices appear to have a direct correlation to the number of protest taxpayers file,” Law said in an email.

He confirmed on Wednesday that the TAD had just over 208,000 protests in 2019.

“However, it is important to note that out of that number, approximately 89,000 property accounts were resolved after Appraisal Notices were mailed, but before they were required to file a formal protest with the Appraisal Review Board,” Law continued via email. “While the 89,000 were included in the 208,000 total, they were not actual formal protest. Some counties do not include these informal settlement as protest in the same manner TAD does.”

Real estate broker Chandler Crouch said every county is different when it comes to the protesting process. Generally, the process includes evidence and comparable sales data to prove the value of one’s home is not as high as the county proposes, Crouch said.

“I would say about half of everybody has an incorrect value, just because of the methodology that the appraisal districts are required to use,” Crouch said. “It’s a methodology called mass appraisal. In mass appraisal, they’re not looking at the specific sales in the area that compare to your property. They’re looking at general information.”

Crouch said he personally felt an audit could be helpful in explaining that sharp increase in protests.

“I don’t necessarily think it might be a bad thing. It might a good thing. The point is, we have no idea until we look into that number and figure out why the protests in Tarrant County are so much higher than everywhere else,” Crouch said. “I think it’s important to note that the board of directors and the people at the appraisal district are committed to finding out and making sure they’re doing a good job and making sure they’re running their appraisal process accurately and fairly. And when you go to pay your property tax bill, you want to make sure you’re not paying absolutely more than you have to.”

The two votes against the consideration of an audit at the June 5 meeting were from chairman Mike O’Donnell and secretary Kathryn Wilemon.

Wilemon said she wanted more information, such as the potential cost of an audit. O’Donnell did not clarify why he initially voted in opposition, but he said Wednesday he would support the board in the process forward.

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Fact-check: Are Texans’ property taxes ‘no longer really dependent’ on values? Citing economic concerns from the coronavirus pandemic, some local officials in Texas have asked state leadership to consider freezing property appraisals at their 2019 values to protect against a drastic increase in property taxes.

During a May 24 television interview with reporter Jason Whitley of WFAA-TV in Dallas, Lt. Gov. Dan Patrick said the proposal is “a terrible idea.”

“We don’t want to freeze your taxes, because then they can’t go down,” Patrick said. “This is what the scam is by the cities and counties. It sounds good, ‘We want to freeze your values.’ Well the bill that we passed last year, Jason, says this: Your taxes that you pay are no longer really dependent on your values, it is on their revenue growth.”

Patrick went on to explain that cities and counties have been growing their property tax revenue by 8% or more annually, and that the legislation passed last year prevents them from growing their property tax revenue by more than 3.5%.

“So the value of your house, Jason, or anyone watching, no matter how high it goes up, they have to lower their tax rate to bring their (total revenue growth) to 3.5%. It is a seesaw. The values go up, they have to lower their rate so they cannot grow any more than 3.5% in their budget.”

Patrick gets some parts of his larger explanation right, but his initial claim that property tax bills paid by individuals are no longer dependent on property values needs further examination.

Broadly speaking, property tax bills are based on the value of a person’s home or business (determined by an appraisal district) and the tax rate set by local taxing entities (cities, counties, school districts, etc.). Texas does not have a state property tax.

State lawmakers approved a bill in 2019 that lowers the cap on how much local entities can collect in increased property tax revenue, which affects the property tax rate they ultimately charge. The legislation established an automatic election for entities that want to exceed the cap. Previously, voters needed to petition to prompt an election.

The legislation did not change the formula for calculating property tax bills, which relies on the tax rate and home and business appraisals.

When asked for more information about this claim, Patrick’s spokeswoman Sherry Sylvester pointed to the text of the bill and the lowered cap on increasing property tax revenue.

“Lt. Governor Patrick did not say that appraised values are no longer a factor in the property tax equation,” she said in an email. “What he wanted to make clear is that they are far less important now because local governments can’t just keep the tax rate the same and increase their revenue based on a rising appraisal.”

To be clear, Patrick said: “Your taxes that you pay are no longer really dependent on your values, it is on their revenue growth.”

Examining property taxes

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Dick Lavine, former chairman of the Board of Directors of the Travis Center Appraisal District, said the equation for calculating property taxes is “foundational,” and was not altered by the bill Patrick referenced.

Lavine, who serves as senior fiscal analyst at Every Texan (formerly the Center for Public Policy Priorities), described the process for levying property taxes in an email:

“The city/county determines the size of the pie (total revenue to be collected). Your individual appraisal determines how big your slice (your personal tax bill) is. If your appraisal has gone up more than the average, then your tax bill will go up more than the average. And vice-versa.

“So if the city/county is increasing its total property tax revenue by 3.5%, your tax bill might go up by more than 3.5% or less than 3.5%, depending on how much your appraisal changed compared to everyone else’s.”

The legislation the state adopted last year requires most local taxing entities to seek voter approval through an election if they want to increase property tax revenue (the size of the pie) by 3.5% or more than the revenue collected one year prior. Previously, this limit was set at 8%.

This allows taxing entities to then calculate the annual tax rate, which is applied to individual property values to determine the final property tax bill a resident must pay.

Bruce Elfant, the Tax-Assessor Collector in Travis County, said the first thing taxing entities do is determine where the tax rate needs to be set in order to bring in the same amount of revenue as the year before.

This rate was previously called the effective tax rate, but the bill Patrick mentions renames it the “no-new revenue tax rate.” It is based on properties taxed both years and does not include revenue from new construction.

“So, in theory, if the values rise, this rate should go down and if property values decrease, this rate will go up,” said Susan Zavala, director of the Property Tax Collections division at the Travis County Tax Office.

From there, cities, counties and school districts assess their budgetary needs and decide whether to grow their property tax revenue by changing the tax rate.

The bill adopted in 2019 limits how much taxing entities can increase revenue for maintenance and operations by a different cap, depending on the jurisdiction. For cities and counties, the cap is 3.5%. For school districts, it is 2.5%.

If a taxing jurisdiction wants to increase revenue beyond this cap, it triggers an automatic election. Previously, voters had to petition in order to prompt a “rollback election.”

This is the rollback rate, renamed the “voter-approved tax rate” under the new law. This rate allows taxing jurisdictions to grow their revenue and collect on debt that has already been approved by voters, Zavala said.

But, all things considered, Zavala said property values are “still part of calculating how much taxes you will owe and it definitely can affect how much you pay in taxes.”

State Sen. Paul Bettencourt, who authored the new tax law, said the bill is about “changing the culture” by putting “more emphasis on the tax rate setting than on the value setting.”

Historically, Bettencourt said taxpayers were fixated on appealing appraisals and “committing jitsu” to keep their values low, even though values are just one part of the equation. He said the bill puts “a complete flashlight on the tax rate setting process.”

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“Basically, we’re taking the elected official’s setting of tax rates and bringing it up to at least the same level of importance as the value itself,” said Bettencourt, R-Houston. “Because both sides of the equation times each other, equals the bill people pay.”

He said this is a “really subtle problem” the legislature has been fighting, so many of the changes in the new law are about “transparency in tax rate setting.”

“If (Patrick) had said ‘completely’ dependent versus ‘really,’ I don’t think anybody would be arguing,” Bettencourt said.

Dale Craymer, president of the Texas Taxpayers and Research Association, agreed.

“In fact, all your appraisal does is determine what your share of the jurisdiction’s desired amount of property taxes is,” Craymer said in an email. “If your home is 1% of a jurisdiction’s tax base, you’re going to pay 1% of whatever revenue the jurisdiction wants to raise, whether they want more money or less. Your value doesn’t turn into a tax bill until jurisdictions adopt the tax rate that will apply against that value. No matter what your value is, your tax bill is zero until jurisdictions adopt their tax rates.”

Our ruling

Patrick said a 2019 law adopted in Texas means that property taxes in the state “are no longer really dependent on your values, it is on (city and county) revenue growth.”

The bill Patrick mentioned limited how much taxing entities can increase property tax revenue before triggering an election, but it did not change the role property values play in any part of the calculation. Property values remain essential to the process.

The law’s author said the bill was more about shifting culture than changing the literal calculation for taxes, as it increases transparency and requires an automatic rollback election.

But regardless of where the bill shifted focus, property values dictate what a person’s tax bill will be each year and they are part of the equation for cities and counties when they calculate the annual tax rate.

We rate this claim Mostly False.

Lawmakers Suggest Penalty for Localities Hiking Up Property Taxes with Loophole While the Texas Municipal League asserts localities are exempt from the new limits, state leaders maintain the opposite and are applying pressure to prevent increases in the first place.

In April, The Texan reported a possible loophole in Senate Bill 2 (SB 2) — the state legislature’s property tax reform bill passed in 2019 — that could allow cities and counties to raise property taxes above the new 3.5 percent increase caps set by the 86th Legislature.

The statute provides an exemption to localities if a disaster declaration is made in their area. But after Governor Abbott declared a statewide disaster due to COVID-19, entities like the Texas Municipal League (TML) believe all cities and counties qualify for the exemption, enabling an up-to 8 percent property tax increase without triggering a referendum election by voters.

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The Legislative Budget Board did confirm to The Texan at the time that this loophole applies to every city and county due to the governor’s statewide declaration.

However, Republican state leaders, including Governor Abbott himself, say this exemption only applies to physical damage (such as from a natural disaster) and not economic damage that has accompanied the COVID-19 fallout.

An opinion issued by Attorney General Ken Paxton’s office reiterates this assertion, adding that nothing in the statute describing levels of qualified property damage “evidences an intent on the part of the Legislature to address non-physical damage to property by allowing an exemption in such circumstances.”

The Texan Mug

And thus, state leaders assert cities and counties across the state must adhere to the new 3.5 percent voter- approval.

However, SB 2’s House and Senate authors — Rep. Dustin Burrows (R-Lubbock) and Sen. Paul Bettencourt (R- Houston) — have a plan to reprimand any localities who choose to utilize the loophole.

On Lubbock radio host Chad Hasty’s show Monday, Burrows said that he and Bettencourt have discussed a penalty for any locality that takes advantage of the disaster exemption. That penalty, Burrows stated, is legislation offered in the 87th Legislature that would force a lower property tax rate on any locality that circumvents the new limits this year.

Just as specific localities benefit from the de minimis rate, legislation could be crafted to focus on certain localities and specifically the ones who circumvent the SB 2 limits. That could come in the form of a post hoc voter-approval rate adjustment the following year by the legislature for those specific entities.

Rep. Burrows told The Texan, “While I think the spirit of SB 2 clearly intends to stop cities and counties from exceeding the 3.5 percent rate without a vote of the people — virus or no virus — the Texas Municipal League keeps pushing cities to go up to eight percent.”

“As long as they’re pushing, or if they’re successful, I will push for a like-kind decrease in the voter-approval rate for 2021-2022 to offset these hikes and penalize those trying to impose massive tax hikes on Texans when they can afford it the least,” he concluded.

The pair of legislators, as well as the rest of state leadership, is hoping to avoid the situation entirely by insisting the localities stick to the SB 2 limits.

The City of Dallas recently considered the option but voted it down overwhelmingly — a decision which Bettencourt and Burrows applauded in a joint press release afterward.

Sen. Bettencourt reacted to Burrows’ comments in a tweet, saying, “Chair [Burrows] is correct that TML is wrong to be pushing high 8% voter approved limit vs SB2 3.5%. Maybe future penalties & other options on table now. [Dallas Mayor Eric Johnson] rejects TML resolution to raise [property taxes] massively during COVID-19! Down in flames 11 to 3!!”

Public pressure helped spur the Dallas City Council into voting down the option to consider a higher rate increase, and Burrows and Bettencourt are speaking out on this to try and disincentivize other cities and counties from exploring this option.

This issue could find its way into the courts for resolution on the statutory question.

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By urging others to emulate Dallas and decline consideration of the possible loophole, state leaders hope to head off large property tax increases at the pass at a time when unemployment in Texas has drastically risen.

Why protesting your property appraisal is so hard: Texas hides sales prices from public view The Watchdog shows you a work-around to get neighborhood numbers.

Texas is one of about a dozen states that doesn't make public the final sales prices for residential, commercial and industrial properties. The Watchdog argues that this secrecy hurts residential homeowners who try to protest their taxable value.

Watchdog, I’m preparing for my protest at the appraisal district in the coming weeks. I want to use comparable sales prices in my neighborhood but can’t find them. Do you have any idea why there seems to be no sales price listed publicly on properties, and why it appears that the appraisal district has access to those prices and I don’t?

Oh, man. You struck a nerve. When I rant that the Texas property tax system is rigged against us little people, this is one of the easiest ways to show it. Texas is one of about a dozen states that don’t require the final sales price on a home or commercial property to get listed publicly.

Really? That explains why I couldn’t find my neighbors’ comparable sales prices.

Yes, they call those “comps” — and with these neighborhood sales prices, it’s often easier to show that the appraised value that you’re being taxed on is out of whack when compared with homes that sold recently nearby. Right now thousands of property owners are doing what you’re doing: trying to figure out how to convince your appraisal district that the taxable value of your property is too high.

Watchdog, last year at my hearing my appraisal district knew the sales price of my new home, which meant my value jumped. I didn’t tell them. If it’s not public, how do they know?

They have their mysterious ways, and they’re not always happy to tell you. When I put that question to the Dallas Central Appraisal District this week, spokeswoman Cheryl Jordan answered: “We get our sales from a myriad of sources for which we are not at liberty to disclose.”

Hmm. Why the mystery?

Your guess is as good as mine. There is a way for you to get the numbers you need, and I’ll show you that in a moment. But first I want to answer your original question: Why are sales prices not disclosed?

Answer: It’s against the law in Texas. The given reason, as explained to me by Tray Bates, vice president of governmental affairs for Texas Realtors, the state association, is privacy. “We typically are not interested in compelling disclosure of private databases to governmental entities. Most Texans really appreciate their privacy.”

Now, I don’t buy that. Appraisal districts get the information, and we don’t? It’s more than privacy.

You’re right on. It’s about who controls what information in this unfair taxing system. District appraisers make a best-effort guess about what they believe a property is worth without ever going inside.

How do you change the law?

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You get the Realtors association to back down on its opposition. Realtors have a lot of power in the Texas Capitol because they are in every community, and their association is known for making lots of campaign donations to state lawmakers.

Watchdog, can we fight the Realtors and make sales prices public?

Let’s try. The only way to win without matching their donations dollar for dollar is, I guess, to embarrass them in the coming 2021 state Legislature.

Watchdog, you’re good at that. Can you give them one of your funny nicknames?

How about real-price-tors instead of Realtors?

Uh, it’s a start. Another question: A friend in Austin told me that the Travis Central Appraisal District froze many, many residential taxable values back at 2019 levels, so those owners’ taxable values didn’t go up this year. Is that true? And if so, how come we didn’t get that in North Texas, where many values did go up, sometimes by a lot? That sure would have helped in these economic times.

They did freeze in Travis but not because of tough economic times. The appraisal district down there did it because it’s at war with the Austin Board of Realtors over this very issue of private sales prices.

See, the district has always wanted access to the Multiple Listing Service sales prices owned by Realtors. But the Realtors wouldn’t let them have it, they say, for privacy reasons. The district got access to the MLS database anyway.

How?

The district hired a middleman company to buy it, and that company gave it to the district. Realtors were irate and ordered the district to delete all the information showing final sales prices. They’re still fighting over this. Travis’ appraisal district contends that it couldn’t do proper appraisals this year because, in part, it lost access to the MLS.

Why does this matter to me?

It shows the ridiculousness of the entire system. In Travis, they don’t want the appraisers to know the final sales prices. But elsewhere, say in the Collin Central Appraisal District, the MLS is purchased and used. Collin Realtors don’t mind. But in the Dallas district, MLS is not used. So you see, it’s all over the place. No standardization. Very unfair.

Again, this matters to me how?

The lack of transparency favors commercial and industrial property owners because, when sales figures are mostly kept secret, it can help them avoid paying a larger and fairer share of the tax burden. Real estate experts say that business properties worth millions of dollars can have a much lower taxable value that doesn’t reflect market reality. And studies have shown this means a loss of billions in tax revenue. So the tax burden falls more on residential owners. This also hurts home buyers who pay top price for a property. If the appraisal district finds out, their taxes are usually higher.

What other ways do appraisal districts find final prices?

When you buy a property, the title company may stick in that thick stack of documents you sign one called “Consent to Share Buyer Closing Information.” You don’t have to sign it.

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Aren’t sales price records available at the county courthouse?

Not sales price. The amount of a mortgage is listed in a deed, and that’s public. But you can’t figure sales price from it because you don’t know the down payment.

Watchdog, you promised to share a work-around to get comps.

There are a couple of ways. The first is your appraisal district’s review board that runs your hearing is supposed to supply you with comps that they’ll use in your hearing. Sometimes, it’s not easy to get them. And I’m suspicious enough that I believe it’s possible they’ll show the comps that help them and possibly leave out those that help me.

What’s the other way?

You can ask any Realtor to dig into your county MLS and send you the comps from your area. I’ve never heard of a Realtor who says no to this request, even from strangers.

How much does this cost? It’s free. It’s a way for a Realtor to develop a relationship with you, and maybe you’ll hire them down the road. This is the best way to compile evidence if you’re using the comps argument in your protest. Good luck and go get ‘em!

WASHINGTON

Are Seattle’s exclusive private golf courses getting a huge break on property taxes? Critics say it’s time to recalculate

2020 may be a year of reckoning for King County’s private golf courses, or at least for their tax bills. The King County Assessor, heeding calls from urban density advocates who have long said the courses pay less than they ought, has pledged to reexamine how golf courses are valued — potentially raising their tax liabilities.

On average, land in the most affordable neighborhoods in Seattle is taxed at 71 times the rate of private golf course land, according to a Seattle Times analysis of county property records. And since property tax rates are calculated, roughly, by dividing the local government budget by the total appraised property value in that district, private courses’ proportionally lower appraised values mean other property owners are paying more.

In other words, homeowners and commercial landlords are subsidizing private courses’ tax bills — despite the fact that most taxpayers will never see inside some of the exclusive clubs, said Shaun Scott, who in 2019 campaigned for City Council on a platform that included raising taxes on private golf courses to fund investments in transit, multifamily housing and green energy.

Scott lost a close race for the District 4 seat. But his plan to raise the taxes on the county’s 28 private courses caught King County Assessor John Wilson’s ear.

“As I’ve looked at it in more detail, I have questions about the value … The rates, particularly at Sand Point and Broadmoor, make you go, ‘Those seem low,'” Wilson said in a June 12 town hall. He’s postponed setting values on golf courses for the next tax cycle until his office reviews how it appraises them.

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The call to raise taxes on private golf courses has new urgency. The coronavirus has devastated the tax base. Many local officials have proposed new taxes on high earners and corporations to pay for things like affordable housing. Meanwhile, the anti-racism protests that have swept the nation are focusing scrutiny on institutions founded in discrimination, including some of the county’s private golf clubs.

The land of Sand Point Country Club, in Northeast Seattle, is appraised at $1.03 per square foot. Broadmoor Golf Club, in Madison Park, at $0.76 per square foot. Across the county’s 27 private golf courses and one driving range, the average appraised land value is $0.49 per square foot, according to county data.

Meanwhile, homeowners in some of the most diverse, affordable parts of the county bear a much higher tax burden.

In ZIP code 98108, the Duwamish Valley, land under single-family residences is appraised at $34.90 per square foot, according to county assessor data. In Auburn, ZIP code 98002, land under single-family homes is appraised at $12.85 per square foot.

Public golf courses — which don’t pay taxes, but are appraised just in case the city decides to sell them — also carry a higher valuation. At Seattle’s four public courses, land varies in value from $12.50 to $62.50 per square foot.

“This is the pattern around the entire U.S.,” said Paul Chapman, a Microsoft manager and vocal advocate for raising taxes on golf courses. “Private golf courses have historically gotten massive tax breaks.” Property taxes on many courses in California, for instance, are frozen at 1978 levels, the result of two legislative exemptions.

If Broadmoor were appraised like a backyard in Auburn, the course would end up paying nine times more in property taxes than the $73,947.95 it was assessed in 2020. Half that bill was for taxes on the 32,000-square-foot clubhouse. (The course was also assessed $242,721.09 in other fees, largely for surface water management.)

“When it comes to golf, you’re talking about a sport that has really, really deep roots in neighborhood segregation,” said Scott. “In the middle of tumultuous times, the idea that we’re giving away acres on top of acres and millions on top of millions is ludicrous.”

Broadmoor and Sand Point have emerged as particular focal points of the debate, in part because of their proximity to dense Seattle neighborhoods and intense exclusivity — Broadmoor’s links are ringed by razor wire.

Those will be the first two courses the assessor’s office investigates for revaluation, Wilson said. The directors of Broadmoor and Sand Point declined to respond to questions for this article.

At its founding in the 1920s, the subdivision surrounding Sand Point had a racist covenant prohibiting “any Hebrew or any other person of the Malay, Ethiopian, or any other negro or Asiatic Race” from owning a home. Broadmoor had a substantially similar covenant. (That language became unenforceable in 1948.) Private country clubs proliferated in the first half of the 20th century in part because public clubs had been ordered to desegregate. Many Seattle golf clubs restricted membership to white players only through the late 1960s.

While the sport has given more opportunities to Black players in recent years, tax subsidies for private courses are remnants of golf’s inequitable beginnings, Scott said.

In King County, appraisers pinning values on golf courses first examine recent golf course sales. But because those occur rarely, appraisers also rely on comparisons with recent sales of large, rural parcels.

That kind of land sells for pennies per square foot. Three huge parcels in Carnation that sold for $0.49 per square foot helped appraisers value golf courses in 2017. International Property Tax Institute IPTI Xtracts- The items included in IPTI Xtracts have been extracted from published information. IPTI accepts no responsibility for the accuracy of the information or any opinions expressed in the articles.

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Of course, golf courses aren’t rural. Were any of the clubs to sell their courses, they’d likely score well over the appraised value. One big transfer of largely undeveloped Seattle property — the 2000 sale of 17.8 acres in Laurelhurst to a company associated with telecommunications magnate Bruce McCaw, which is moving forward with plans to build 65 single-family homes on the site — netted $20.14 per square foot.

As local and state governments around the country search for new revenue sources, King County isn’t the only place taking a hard look at golf courses.

In New York, Democrats proposed a bill last year that would have given local governments the option to assess golf courses as if they were other, more valuable types of property, including homes. That bill died after golf industry executives complained it would close courses.

Though Wilson said he’s reconsidering how his department values golf courses, actually getting them to pay higher taxes might require action from voters or the state Legislature. And clubs would likely challenge any action from the assessor that could boost their liability.

The state Supreme Court has twice ruled that if golf club members or surrounding properties restrict the course’s use, development or sale, the course’s market value may be effectively zero.

Chapman scoffed at that logic.

“It feels like a massive one-percenter tax dodge to say, we want to keep our course so we’re going to put restrictions on it that make it free for us to keep maintaining it,” Chapman said. “I would love to put a restriction on my house that says I’m the only one who can live here, therefore my house has no value. But that wouldn’t be ethical, moral or legal.”

For decades, the assessor’s office has appraised golf courses as if they have such restrictions, which has helped keep values low. Now, the assessor is reinvestigating. Wilson has asked all the county’s clubs whether their courses have use restrictions.

Eight of the county’s golf courses have reduced their tax burden by arguing that open space is a public good, winning them a so-called “current use” exemption. Others could do the same.

But it’s unclear why a private golf course is a public good, Chapman said. At courses like Broadmoor, Sand Point, and Overlake and Sahalee on the Eastside, guests must be accompanied by a member. Membership fees can range into the six figures.

Scott said his goal isn’t to eliminate golf courses from the map — but he would be fine if many shrunk from 18 to 9 holes as a consequence of higher taxes.

“The ideal scenario is that for people who do enjoy playing the game, we should hold on to it,” he said. “But that shouldn’t come at the expense of questions that are being asked about housing and equity.”

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D.C.’s Tax Rate Maze: An Imperfect System Has Increased Property Taxes for Many Real Estate Owners If you own or manage real property in the District of Columbia and are wondering why your real estate tax bill has gone up in recent years, you are not alone. One common culprit is rising assessed value, but that may not be the main or only source of an increase.

A less obvious contributor may be a new, different, or incorrect tax rate. Since tax rates vary greatly depending on a property’s use, staying diligent when it comes to your real estate’s tax class and billed rate is critical.

The District of Columbia applies differing tax rates to residential, commercial, mixed-use, vacant and blighted properties. Why is this important? Because the classification can make a considerable difference in annual tax liability – even for two properties with identical assessment values.

For example, a multifamily complex assessed at $20 million incurs a tax liability of $170,000 per year while the same property, if designated as blighted, incurs an annual tax liability almost twelve times greater at $2 million. Therefore, the assessed value is just one piece of the puzzle.

Keeping a sharp eye on a property’s tax bill for the accuracy of any tax rate changes is paramount. This requires knowledge of current rates, the taxpayers’ legal obligations, and how to remedy or appeal any issues that arise.

New rates for commercial property

Property owners in the District should be aware of a recent change to tax rates on commercial real estate. The Fiscal 2019 Budget Support Emergency Act increased rates for commercial properties starting with Tax Year 2019 bills.

Prior to the enactment of this legislation, the District taxed commercial properties with a blended rate of 1.65 percent for the first $3 million in assessed value and 1.85 percent for every dollar above $3 million. The new measure replaces the blended rate with a tiered system, taxing a commercial property at the rate corresponding to the level in which its assessed value falls. Those levels are:

 Tier One: For properties assessed at $0 to $5 million, taxed entirely at 1.65 percent;  Tier Two: For properties assessed at $5 million to $10 million, taxed entirely at 1.77 percent; and  Tier Three: for properties assessed above $10 million, taxed entirely at 1.89 percent.  The residential tax rate for multifamily properties remained flat at 0.85 percent.

Mixed-use

The District of Columbia Code requires that real property be classified and taxed based upon use. Therefore, if a property has multiple uses, taxing entities must apply tax rates proportionally to the square footage of each use. However, it is ownership’s legal obligation to annually report the property’s uses by filing a Declaration of mixed- Use form. Owners of properties with both residential and commercial portions should be hypersensitive to this issue.

The District typically mails the Declaration of mixed-use form to property owners in May, and the response is due 30 days thereafter. If the District fails to send a form to an owner, it is the owner’s responsibility to request one. Remember, the owner must re-certify the mixed-use asset each year. Failure to declare a property as mixed-use

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may result in the entire property including the residential portion being taxed at the commercial tax rate (up to 1.89 percent).

Vacant and blighted designation

If you have ever opened a property tax bill and faced a staggering 5% or 10% tax rate, congratulations, your property was taxed at one of the District’s highest real estate tax rates.

Each year the Department of Consumer and Regulatory Affairs (DCRA) and the Office of Tax and Revenue are charged with identifying and taxing vacant and blighted properties in the District. The D.C. Code defines vacant and blighted properties for this purpose, and there is a detailed process governing why and when DCRA may classify a property as vacant. Nonetheless, in each tax cycle DCRA wrongfully designates properties as vacant or blighted, so it is paramount that the taxpayer understands their appeal rights.

To successfully appeal a vacant property designation, an owner must comply with one of the specifically enumerated and highly technical exemptions. One such exemption applies if the property is actively undergoing renovation under a valid building permit. However, the taxpayer should consult with an attorney, as there may be other requirements to qualify for an exemption. An owner wishing to appeal this designation must file a Vacant Building Response form and provide all applicable supporting documentation to DCRA.

Moreover, an owner may appeal a property’s blighted designation by demonstrating that the property is occupied or that it is not blighted. Since an appeal of a blighted designation requires a more detailed review of the condition of the property itself, photographic evidence must be used to supplement any documentation provided.

Fixing erroneous rates

When dealing with local government and statutory deadlines, time is not on the taxpayer’s side. It is important that as soon as an error is identified, the property owner understands the next steps. In some situations, the D.C. code or official government correspondence will lay out the process precisely for the property owner, identifying the who, what, where, when, why and how’s of appealing a property’s tax designation. However, sometimes a taxpayer will receive a bill without explanation.

Property tax Your county assessor and treasurer administer property tax. County assessors value (assess) your property, and county treasurers collect property tax. The Department of Revenue does not collect property tax. We oversee the administration of property taxes at state and local levels.

Nonprofit exemptions  Renew your property tax exemption.  Locate the status of an exempt nonprofit property.

Paying your property tax You should pay your property taxes directly to the county treasurer's office where your property is located. We’ve provided contact information for Washington’s 39 counties to assist you. Learn more about paying or appealing your property tax. International Property Tax Institute IPTI Xtracts- The items included in IPTI Xtracts have been extracted from published information. IPTI accepts no responsibility for the accuracy of the information or any opinions expressed in the articles.

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Can I appeal my property valuation? You may appeal your property’s assessment to the county board of equalization in the county where your property is located.  Learn how residential property is valued.  Learn how business property is valued.  Learn how to appeal your property assessment.

What if I can't pay my property tax? If you live in Washington and meet certain criteria such as age and income, you may be eligible for either an exemption or deferral.

How does funding schools impact my property taxes? About one third of your property tax goes to funding education. The Legislature passed Engrossed House Bill (EHB) 2242 in 2017, in response to a Supreme Court order to fund education. This bill makes changes to:  property taxes imposed by the state.  voter-approved property taxes imposed by school districts.  state funding for certain school districts. In 2018, the Legislature made additional changes to lower the levy rate for taxes in 2019.

Where does your property tax go? Property taxes make up at least 9.4 percent of the state’s General Fund, which supports public services for Washington residents. Revenue at a Glance provides more detail on property taxes and how they help fund these services.

COVID-19 Property Tax Relief Proposed for CRE Landlords Commercial and multifamily landlords in King County could see a reduction in property tax bills under a proposal by the assessor’s office. Assessor John Wilson is asking the Washington State Legislature to reduce the tax burden in an effort to help property owners weather the coronavirus pandemic.

The proposal, which is expected to be voted on at a special legislative session later this year, would reduce King County property tax collections by 2.5%, or nearly $155 million. If passed, it would apply to property tax bills for the second half of 2020, which are due in October.

The idea is to let counties reduce the taxable value of commercial properties for owners that couldn’t collect rent as a result of a business being closed because of statewide stay-at-home orders. Reductions would be based on the amount of rent each property lost due to the COVID-19 shutdown.

Rent collections for retail tenants in May were just 59%, according to research by Datex. Meanwhile, the National Multifamily Housing Council (NMHC) reported 80.8% of apartment households made a full or partial rent payment by June 6.

Washington commercial landlords could get coronavirus relief on tax bills under new assessor proposal As pandemic-stricken business tenants fall behind on rent, the King County assessor has a new proposal that could help commercial and multifamily landlords get some much-desired relief on their property tax bills.

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Assessor John Wilson asked the state Legislature Thursday to allow counties to move more quickly to lower the taxable value of commercial properties whose owners have been unable to collect rent since the statewide stay-at- home order shuttered most storefronts.

If the proposal passes in a special legislative session later this year, it could reduce King County property tax collections by 2.5%, or nearly $155 million.

The reductions would apply to the second half of 2020 property taxes, due in October. The specific impact on individual properties would depend on how much rent they’ve missed out on.

The values on which commercial buildings are taxed are in part tied to rent collections. But many business tenants, Wilson said, are “precariously hanging by the edge” due to the coronavirus and have stopped paying rent, with retail and short-term lodging hit the hardest.

Homeowners, though, wouldn’t get any relief under the new plan. Wilson said his reasoning is that residential property values have stayed more or less flat from 2019. He added he’s required to assess home values based on the sale of comparable properties.

Nationally, landlords only collected 59% of rent from retail tenants in May, according to research from commercial real estate analytics firm Datex. Some major national chains, including 24 Hour Fitness, AMC Theaters, Bed Bath and Beyond, Old Navy and H&M, didn’t pay a cent in May. Lynnwood-based retailer Zumiez said early during the lockdown it would stop paying rent on more than 700 locations in order to negotiate with landlords.

At Harvard Market, a small shopping center on the corner of Pike Street and Broadway on Capitol Hill, rent collections have fallen by roughly 30% from 2019, said owner Morris Groberman.

“My property, because I’m not getting my rents, is not as valuable,” he said. “But I’m still responsible for paying all my taxes, all my [maintenance costs] and my mortgage.”

The assessor’s plan, he said, could help him offer more flexible payment plans to tenants like nail salons and hairdressers that have been closed since mid-March.

The economic pain of the pandemic, though, hasn’t been equally distributed. Industrial, multifamily and office properties have largely been spared, according to data on commercial mortgage delinquencies from research firm Trepp. The assessor said his plan accounts for that, and that he wouldn’t give freebies to businesses that weren’t impacted — or to those already underwater before the pandemic hit.

Commercial property owners who’ve seen a 20% or greater drop in rent collections since the start of the coronavirus emergency could petition for a reduction in their tax bill, according to the proposed legislation. The amount of the reduction would be based on how long businesses in the space were closed due to the state’s “Stay Home, Stay Healthy” order.

At the Ben Lomond building on Capitol Hill, some tenants participated in a rent strike in April and May, and it’s been hard to rent empty units because of the pandemic, said owner Matt Bolin. Property taxes jumped by 16% in 2020, and he estimated rent collection is down 25%.

“I’d surely pass through any savings I could to these tenants who are hurting,” he said. “It’s a mess for all of us.”

Bolin may be one of the few apartment building owners to qualify for the tax exemptions, though. Residential rent collections have stayed relatively high. Only 4.3% of Washington households paid no rent in April, according to the state Multifamily Housing Association.

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The Legislature is currently recessed; Wilson asked that his proposal be considered in a special legislative session later this year.

Lawmakers and Gov. Jay Inslee have acknowledged a special session could be necessary to address the economic fallout of the virus. Republicans are pushing for a session as early as possible, but Democrats haven’t yet committed.

WYOMING

Natrona assessor says record number of property value appeals filed in 2020 Natrona County Assessor Matt Keating attended the Casper City Council’s Tuesday, June 23 work session to discuss property assessments.

Keating was asked to speak to the city council after the City of Casper received numerous complaints from citizens regarding changes to their property valuations.

Keating told the council that about 3,000 appeals were filed from people disputing their property valuations this year, saying this year saw a “record” number of appeals. He said that 1,748 “informal” appeals were received by the Natrona County Assessor’s Office in 2019.

Councilman Bob Hopkins asked whether Keating’s office made accommodations to allow people to file formal appeals amid COVID-19 when access to Natrona County offices was limited.

Keating said that there were other means for people to file appeals, such as online. He said the county allowed access to his office starting May 11. He pointed to the approximately 3,000 appeals filed as evidence people had adequate means to file.

Hopkins also asked whether a summary of county-wide changes in valuation would be provided for the public to review. Keating pointed to a document posted to the Natrona County Assessor’s webpage which he said summarizes how people’s property valuations were reached.

When the meeting began, Keating said he thought it would be difficult for anyone but the Wyoming Department of Revenue and the 23 county assessor’s offices across Wyoming to really understand how property valuations are calculated. He said he didn’t expect the Natrona County Commissioners or the city council to be able to fully understand.

Vice Mayor Khrystyn Lutz noted during the work session that if the formulas and language that go into determining the values are too difficult for the average person to understand that the Wyoming Legislature may want to work to make it less complex to understand.

Lutz noted that she has a bachelor’s and master’s degree in accounting, and if it was difficult for her to completely follow Keating’s explanations, it would likely be difficult for others to follow as well.

Keating said that when he became the Natrona County assessor, the office was “broken.” He said that work needed to be done to clean up software used to track the over 47,000 accounts the office

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manages. Keating repeated an argument he made in 2019 that the Natrona County Assessor’s office has less staff than Laramie County, though Natrona is much larger geographically.

He said the Natrona County Assessor’s office has 13 staff while Laramie County has 21 staff. Because of the staff size, Keating said it would take some time to work through all of the appeals which the office had received.

Keating defended his office’s approach to determining the property values, saying that they were following state statute.

“We are coloring inside the lines,” Keating said, borrowing a phrase from Councilman Mike Huber. “We are implementing the mass appraisal per state statute. If legislation changes, then fine.”

Councilman Steve Cathey said that the main complaint he has heard from people is in regard to increases to their land valuations specifically. Keating said that 1,000s of accounts in Natrona have not had their valuations “updated in a number of years.”

Keaitng said that since the process involves “mass appraisals,” he acknowledged that the assessor’s process may have gotten things wrong in certain instances, but defended the valuations overall.

“Every value that we sent out this year was based off of [2019] sales,” he added. He also tried to explain the formulas used to reach the property valuations. “Do we miss some stuff? Absolutely, without a doubt.”

“I’m very proud of the work that we have done.”

Keating said that the Natrona County Assessor’s Office would hold phone calls with the State Board of Equalization on Wednesday to review the county’s property valuations. He said he expected that board to ultimately approve the county’s abstract.

He added that he expected the Natrona County Board of Equalization to meet in September, adding that his office would defend their assessments.

Cathey said that his own land values were appraised at over three times what he initially paid for it, adding that he’s received a number of complaints from people that their land values have doubled and tripled.

Keating said that his office has re-stratified Natrona County, regrouping property areas in a manner consistent with state law. He said the assessments are based off of sales “of what somebody paid for something similar.”

He said that his goal was to assess values in a uniform and equal way that follows Wyoming law.

Mayor Steve Freel said his own land values had increased $120,000. He used his own property as an example to ask Keating how such a large change was possible.

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“We had 1,000s of properties that the land hadn’t been revalued in a number of years,” Keating said. “Your property is one of those.”

Freel also said people have expressed concern that their building values could “possibly drop $30-50K” while land values had increased. He asked Keating to outline the formula being used to apply to properties in the county.

An employee with the assessor’s office said that it is “not going to be just one simple formula.” She said that land values are considered separately from assessing improvements on people’s properties.

The county is divided into “not more than 20” grouped areas and that about 10 such areas are in the City of Casper, the employee estimated. Land is also valued on a square footage or acreage basis with the price per acre going down the larger the area is. Assessments are adjusted based on the area in which a property falls in the county.

Huber encouraged Keating to reach out to the public to help them better understand what is happening with their property values. He said there is a perception among some that the assessor’s office is “out there willy-nilly just guessing and throwing numbers around.”

“I’m not saying you are, but that is a perception that’s out there,” Huber added.

Keating said he has been open to discussing things with people, including communicating with local media and that three meetings have been scheduled for people who have concerns about their valuations.

Wyoming law requires that all property be listed, valued and assessed on an annual basis. Assessment notices must be mailed to taxpayers “on or before the fourth Monday in April, or as soon thereafter as practicable,” according to the Natrona County Assessor’s Office.

“Wyoming Statute 39-13-109(b)(i) requires persons wishing to contest their assessment to file (not later than 30 days after the mail date or postmark) a statement with the Assessor outlining their reason for disagreement with the assessment,” the Natrona County Assessor’s Office adds.

Wyoming Taxes: Minerals Industry Can No Longer Pay For Everything My knowledge of the Wyoming tax system began 40 years ago when I was elected to the state legislature and was appointed to the revenue committee. Taxes in Wyoming were based on a three-legged stool principle.

The three legs were sales tax, tourism, and property taxes, of which mineral taxes was a large component.

Wyoming, because of its physical nature, does not lend itself to an organized community as most other states do. It is rather a group of widely separated communities tied together by the railroads and agriculture interests.

Larger populations were in the southern tier along the UP railroad and a few communities in the central portion. These generally prospered along with some others where oil and gas were discovered.

Oil became a major contributor to the property tax portion and soon became a dominant portion of the property tax component. This caused large disparities of wealth within counties and especially in the school systems.

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The discrepancy has been mostly corrected by an equalization of the school portion of the tax. There is a problem with the way the property taxes on minerals were collected, because the taxes were not paid until about 18 months after the oil was sold.

The operators were then able to use that lag for payment of their operations and to pay the taxes out of next year’s production. This process worked fairly well because of growth and stable prices.

Problems could arise if an operator failed and could not pay last year’s taxes. This problem did make itself known in recent times because of the drastic increase in prices and also in the coal industry, which is subject to the same accounting.

I have spent my life in the oil industry and could see a problem arise. I have tried for some 30 years to get the legislature to make a change in the way property taxes are collected on mineral production.

This lack of change caused the loss of over $100 million in recent years, most of which would have gone to schools. The revenue committee finally did it recently with thanks to efforts of Mike Madden and Cale Case.

There are major changes which still need to be addressed though. The people of Wyoming are beneficiaries of a welfare system from which they receive about $6,000 worth of service but only pay less than $2,000 in taxes.

The people and the government are going to have to learn to live with a reduction of this 60% subsidy to their taxes.

This discrepancy occurred because of the high prices for energy and the coal bonus prices, which are in a steep decline.

We have built some of the finest schools in the nation but are starting to have trouble maintaining them.

There is a need for value-added industry, but the basic nature of the state does not lend itself to that type of industry. The state spends large sums of money to entice companies to locate here, but the state receives no revenue from these companies other than a little property tax because of the way our system works.

There is only one other source for increased funds, and that is from the people. We could start with a business income tax. Many of the businesses in Wyoming are owned by out-of-state firms.

Most of these firms are domiciled in states that have a business tax, so they wind up paying tax on the money they earn in Wyoming to their home state. Mineral extraction companies would be exempt because they pay about 25% tax on their gross income without any exemptions.

The other main source could be a personal income tax starting at $100,000. An amendment in the Constitution requires that lower income people would not pay income tax because their sales and property taxes would be a credit against any income tax.

Taxes are always unpleasant to discuss, but they are a necessary part of the world in which we live. The legislature could return the power and duty of personal taxation to the city councils and county commissioners where it really belongs.

The property valuation factor could be raised either in increments or all at once. The mandatory school levies would need to be adjusted for this to happen.

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The people of Wyoming have long been fortunate to have many of their services paid for by the mineral industry, but our needs and desires have outgrown the ability of that industry to carry us.