February 2020

UNITED STATES – February 2020

Contents USA GENERAL ...... 5

HOW TO CONTEST PROPERTY TAXES ...... 5 ASSESSED VALUE VS. MARKET VALUE IN REAL ESTATE ...... 6 USA PROPERTY TAXES BY STATE ...... 8

USA - THE PROBLEM WITH PROPERTY TAXES ...... 12 USA - LESSONS FROM AMAZON'S DECISION TO CANCEL NEW YORK CITY HEADQUARTERS ...... 13 USA - SANDERS’ ESTATE TAX PLAN WON’T LIKELY RAISE THE REVENUE INTENDED ...... 14 USA - HOW BIG-BOX STORES BILK LOCAL GOVERNMENTS ...... 15 USA - THESE MAJOR U.S. CITIES ARE SEEING PROPERTY TAX INCREASES THIS YEAR ...... 17 USA - THUNE LEADS COLLEAGUES IN REINTRODUCING A PERMANENT REPEAL TO THE ESTATE TAX ...... 17 USA - SANDERS PROPOSES ESTATE TAX OF UP TO 77 PERCENT FOR BILLIONAIRES ...... 18 USA - THE SELF-STORAGE PROPERTY-TAX CONUNDRUM: ALTERNATIVES TO BETTER OUR COMMUNITIES ...... 19 ALASKA ...... 20

ANCHORAGE PROPERTY TAXES SET TO RISE AFTER ALASKA LEGISLATURE FAILS TO OVERRIDE BUDGET VETOES...... 20 ARIZONA ...... 22

PROPERTY VALUATION AND TAXES ...... 22 CALIFORNIA ...... 24

THE TAX WATCHERS: OLD WORDS OF WISDOM STILL SMART ...... 24 CALIFORNIA SPLIT ROLL BALLOT MEASURE DESTROYS PROP 13 PROTECTIONS FOR CALIFORNIA FARMERS, THREATENS RURAL COMMUNITIES ...... 25 WHY TECH SHOULD PUSH TO CLOSE CORPORATE PROPERTY TAX LOOPHOLES ...... 28 PROP 13 CHANGE WORRY PROPERTY OWNERS, ASSESSOR ...... 29 NO, CALIFORNIANS AREN’T BEING ASKED TO REPEAL PROP. 13’S RESIDENTIAL PROPERTY TAX LIMITS ...... 30 TEACHERS UNION PROMOTES PROPERTY TAX INCREASE ...... 33 PROP 13 SPLIT-ROLL TAX INCREASE WOULD HURT BUSINESS, AND AFFORDABLE HOUSING EFFORTS ...... 39 CALIFORNIA BUSINESSES SHOULD REJECT EFFORTS LEVERAGING THREAT OF SPLIT ROLL FOR OTHER TAX HIKES ...... 40 CHANGING PROP. 13 COULD WORSEN CALIFORNIA’S HOUSING CRISIS. HERE’S HOW ...... 41 CONNECTICUT ...... 43

CONNECTICUT CITIES, SOLAR INSTALLERS LOCKED IN LEGAL FIGHT OVER PROPERTY TAXES...... 43 DELAWARE ...... 44

WITH LATEST COURT RULING, WILMINGTON MAY SEE LARGEST LOSS YET FROM PROPERTY TAX APPEAL ...... 44 HAWAII ...... 46

PROPERTY TAX CHANGES COMING ...... 46

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. P a g e | 2

IDAHO ...... 47

IDAHO LAWMAKER INTRODUCES BILL TO REPEAL PROPERTY TAX STATEWIDE ...... 47 BILL INTENDED TO ADD TRANSPARENCY TO PROPERTY TAX COLLECTION MOVED ALONG ...... 48 ILLINOIS ...... 49

SCHOOL DISTRICTS FILE AMICUS CURIAE BRIEF IN LANDMARK FEDERAL PROPERTY TAX LAWSUIT ...... 49 ILLINOIS GOVERNOR FOCUSES ON ETHICS REFORMS, PROPERTY TAX RELIEF AND OTHER PRIORITIES IN STATE OF STATE SPEECH ...... 49 APPELLATE COURT SHEDS LIGHT ON MURKY TAX SALE PROCESS UNDER PROPERTY TAX CODE ...... 52 PROPERTY TAX HIKES WON’T BE THAT BAD, NEW REPORT SAYS ...... 52 THERE’S NO REASON TO FREAK OUT OVER KAEGI ASSESSMENTS ...... 54 ILLINOIS TAXPAYERS SCORE RARE TIA WIN IN PROPERTY TAX DISPUTE ...... 54 YOUR ASSESSMENT NOTICE AND TAX BILL ...... 55 REAL ESTATE TAX 2019: NEW ASSESSOR, NEW POLICIES ...... 58 ILLINOIS STATE AND LOCAL GOVERNMENTS SPEND MOST IN NATION ON PENSIONS ...... 59 NEW COMMISSIONER WORKS WITH COUNTY ASSESSOR TO MAKE WEBSITE EASIER TO USE ...... 60 PROPERTY TAX RATES NEARLY DOUBLE SINCE 2007 AS RESIDENTS LEAVE HARVEY, ILLINOIS ...... 61 IT'S TIME TO MODERNIZE THE ASSESSOR'S OFFICE ...... 62 WHY ARE FOLKS LEAVING CHICAGO? UNFAIR TAXES ...... 63 INDIANA ...... 64

INDIANA TAX COURT AFFIRMS VOLUNTARY DISMISSALS OF PROPERTY TAX APPEALS, WHERE ASSESSOR HAD NOT INCURRED A “SUBSTANTIAL EXPENSE” ...... 64 INDIANA TAX COURT “CANNOT IGNORE THE PARTIES’ ...... 64 TAX COURT UPHOLDS 26 PERCENT INCREASE IN HOME VALUATION ...... 65 INDIANAPOLIS ...... 66

COUNTIES FIGHT BIG BOX STORES ON PROPERTY TAX APPEALS ...... 66 IOWA ...... 67

AMAZON ANNOUNCES IT'S BEHIND 'PROJECT BLUEJAY,' WILL HIRE 1,000 FOR NEW FULFILLMENT CENTER...... 67 OUTGROWING THE EFFECTS OF PROPERTY TAX REFORM ...... 70 KANSAS...... 71

LEGISLATORS ANNOUNCE PROPERTY TAX TRANSPARENCY BILL ...... 71 MAINE ...... 72

WALMART’S REQUEST FOR A TAX BREAK IN ELLSWORTH COULD TEST THE ‘DARK STORE’ THEORY ...... 72 WALMART’S PUSH FOR TAX CUT GAINS TRACTION...... 72 STATE SEES RECORD LEVEL OF PROPERTY VALUATION, TAX OFFICIALS SAY ...... 74 LAWMAKERS TO DEBATE: SHOULD MAINE'S BIG-BOX STORES BE TAXED AS IF THEY'RE EMPTY OR FULL? ...... 74 DON’T LET BIG BOX RETAILERS BULLY MAINE TOWNS OUT OF MILLIONS IN TAXES ...... 75 MASSACHUSETTS ...... 77

WORCESTER PROPERTY TAX VALUATION APPEALS DECREASED 36% SINCE 2017 ...... 77 CHANGES MAY BE COMING TO PILOT ...... 78 REAL ESTATE TAX REALITY ...... 79 BOSTON CITY COUNCIL WANTS FAIR SHARE FROM PILOT ORGANIZATIONS...... 80 MICHIGAN ...... 81

CLASS ACTION LAWSUIT FILED OVER DELAYED DETROIT PROPERTY TAX ASSESSMENT NOTICES ...... 81 DETROIT FACES RECKONING, LAWSUIT FROM OVER-TAXED HOMEOWNERS...... 83

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UNCAPPING OF COMMERCIAL REAL ESTATE ASSESSMENTS ...... 84 UNDERSTANDING YOUR DETROIT PROPERTY TAX ASSESSMENT ...... 85 MICHIGAN SUPREME COURT AGREES TO HEAR PROPERTY TAX CASE ...... 87 MTA SHARES ASSESSMENT AND PROPERTY TAX BASICS ...... 89 MISSISSIPPI ...... 90

STATE SUPREME COURT RULES ON LOCAL TAX ISSUE ...... 90 MINNESOTA ...... 91

LAND VALUE TAX: A PROMISING LAND-USE TOOL PROPOSED FOR OUR COMMUNITIES ...... 91 MONTANA ...... 92

BILL WOULD CREATE PROP-TAX MORATORIUM FOR NEW BROADBAND CABLE IN MT ...... 92 NEBRASKA ...... 93

NEBRASKA LEGISLATURE BEGINS DEBATE ON MAJOR PROPERTY TAX/SCHOOL FUNDING BILL ...... 93 NEBRASKA PROPERTY TAX FIGHT ...... 94 PROPERTY TAXES REMAIN A PERENNIAL PROBLEM ...... 94 NEW HAMPSHIRE ...... 95

NH BILL WOULD ALLOW MUNICIPALITIES TO UP TAXES ON BUSINESS PROPERTY ...... 95 EVERYTHING YOU ALWAYS WANTED TO KNOW ABOUT YOUR PROPERTY TAXES, BUT WERE AFRAID TO ASK ...... 96 UNFAIR PROPERTY TAXES, BY THE NUMBERS ...... 98 A LESSON IN THE BURDEN OF PROPERTY TAXES ...... 99 NEVADA ...... 100

IS SALES TAX THE BEST WAY TO FUND SERVICES, OR THE ONLY OPTION? ...... 100 NEW JERSEY ...... 102

2020 REAL PROPERTY TAX REVIEW: PROACTIVITY PAYS OFF ESPECIALLY WHEN THE MARKET IS TRENDING UP ...... 102 MOODY’S WARNS PROPERTY TAX CAP VETO COULD HURT SCHOOL DISTRICTS ...... 102 OVER $200K SPENT ON TAX APPEALS FOLLOWING CITY REVALUATION ...... 103 YOUR VACATION TO THE JERSEY SHORE IS ABOUT TO GET MORE EXPENSIVE. BLAME IT ON TAXES...... 104

SOME JAW DROPPING NEW JERSEY PROPERTY TAX NUMBERS ...... 106 NEW YORK ...... 107

COURT CALLS NYC 'DEEPLY SEGREGATED' BUT DISMISSES LAWSUIT OVER UNFAIR TAX BURDENS ...... 107 A NEW YORK ISSUE THAT UNITES LANDLORDS AND THE N.A.A.C.P...... 108 BILLIONAIRES, TAXES AND GOOSE POOP: TOM GOLISANO’S DECADES LONG CAMPAIGN TO PAY THE GOVERNMENT LESS MONEY ...... 109 NYC PROPERTY TAX OVERHAUL WILL BE A BLOW TO REAL ESTATE MARKET, THOSE IN THE INDUSTRY SAY ...... 111 NY SENATE PASSES TWO PROPERTY TAX EXEMPTION STUDY BILLS ...... 111 (MOSTLY) THE RIGHT IDEAS ON REFORMING NYC’S LUNATIC PROPERTY-TAX SYSTEM ...... 112 NYC COMMISSION RECOMMENDS PROPERTY TAX REFORMS ...... 113 WILL PROPERTY TAX OVERHAUL LEAD TO A RUSH FOR THE EXITS? ...... 114 NYC BILLIONAIRES’ ROW COULD SEE PROPERTY TAXES QUINTUPLE UNDER PROPOSED SYSTEM ...... 115 PROPERTY TAX REFORM WILL BE A HEAVY LIFT, DESPITE MAYOR'S OPTIMISM ...... 116 TAX SYSTEM FAVORING CENTRAL PARK CO-OPS AND BROOKLYN BROWNSTONES COULD END ...... 118 BATTLE LINES QUICKLY FORM OVER RADICAL PROPERTY TAX PROPOSAL ...... 120 STATE ASSEMBLY UNANIMOUSLY PASSES LEGISLATION TO COMBAT “DARK STORE” ASSESSMENT CHALLENGES ...... 122 THE ‘WINNERS AND LOSERS’ OF NYC’S PROPOSED PROPERTY TAX PLAN ...... 123 NYC PANEL PROPOSES MORE EQUITY IN REAL ESTATE TAX ASSESSMENTS ...... 124

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TAXPAYERS GETTING BURNED IN LISBON, LOCAL MAN SAYS ...... 125 PIED-À-TERRE TAX GAINS CITY COUNCIL SUPPORT WITH NEW RESOLUTION ...... 126 CHALLENGING YOUR NYC PROPERTY VALUE ASSESSMENT MAY BE EASIER THAN EVER ...... 127 THE $238 MILLION PENTHOUSE PROVOKES A FIERCE RESPONSE: TAX IT ...... 128 NYC PROPERTY TAX OVERHAUL PITS NEIGHBOR AGAINST NEIGHBOR ...... 130 LEVELING THE PLAYING FIELD ON PROPERTY TAXES WON’T BE PAINLESS ...... 133 NORTH CAROLINA...... 133

WHY DO WE HAVE PROPERTY TAXES? ...... 133 HOW TO CONTEST YOUR REAL PROPERTY REVALUATION NOTICE ...... 135 'FUNCTIONAL OBSOLESCENCE’: MECKLENBURG CO. SLASHES ASSESSMENT OF BANK OF AMERICA STADIUM ...... 136 HOW’S THE MECKLENBURG PROPERTY REVALUATION GOING? HERE’S AN EARLY CLUE ...... 136 OHIO ...... 137

AUDITOR CRITICS ASK STATE TO ORDER NEW PROPERTY REVALUATION ...... 137 END EXTRAVAGANT TAX BREAKS FOR THE WEALTHY ...... 138 CRITICS FEAR SYSTEMIC MISTAKES IN LUCAS COUNTY AUDITOR'S HOME VALUES ...... 139 PENNSYLVANIA ...... 143

ALLEGHENY COUNTY PROPERTY TAX APPEAL SEASON RESUMES ...... 143 TENNESSEE ...... 143

TAX ASSESSMENTS EXPLAINED ...... 143 ELECTROLUX UNDERPAID TAXES BECAUSE OF LAND ASSESSMENT UNDERVALUED BY $100 MILLION ...... 145 TEXAS ...... 147

HERE'S WHY YOU SHOULD BE CONCERNED ABOUT PROPERTY VALUATION LAWSUITS BY BIG BUSINESS ...... 147 PROPERTY TAXES CAN BE LOWERED BY KEEPING BEES ...... 148 JUDGE UNDERCUTS CHIEF APPRAISER’S AUTHORITY ...... 149 THE PROS AND CONS OF PROPERTY TAX REFORM IN TEXAS ...... 151 ANALYSIS: HERE’S YOUR PROPERTY TAX CUT, MAYBE. HEADS UP — IT’S EXPENSIVE...... 152 ANALYSIS: SOMETHING’S MISSING FROM THE OPENING BID FOR PROPERTY TAX “RELIEF” IN TEXAS ...... 153 ‘BRING THE POWER OF THE DIGITAL AGE TO THE PROPERTY TAX PROCESS,’ SAYS BAKER INSTITUTE EXPERT ...... 154 TEXAS PROPERTY APPRAISAL SYSTEM NEEDS A MAJOR REVAMP ...... 154 SENATE COMMITTEE STARTS WORK ON REFORMING PROPERTY TAX ...... 156 WHY TEXAS PROPERTY TAXES ARE EXPECTED TO SKYROCKET AGAIN THIS YEAR ...... 156 TEXAS LEADERS' PROMISE OF 'PROPERTY TAX RELIEF' IS A FAR CRY FROM A PROPERTY TAX CUT ...... 158 UTAH ...... 159

UTAH COUNTY OFFICIALS APPROVE REFERENDUM ON CONTROVERSIAL PROPERTY TAX INCREASE ...... 159 VIRGINIA ...... 160

WALMART SEEKING ROLLBACK ON WARRENTON STORE TAXES ...... 160 WASHINGTON DC ...... 162

D.C. PROPERTY VALUES CONTINUE TO SOAR, GENERATING TAX REVENUE WINDFALL ...... 162 WEST VIRGINIA ...... 163

PROPERTY TAX PLAN COLLAPSES. HERE’S WHY...... 163 WISCONSIN ...... 164

BATTLE OVER WISCONSIN'S 'DARK STORE LOOPHOLE' TOUCHES NEW RICHMOND, HUDSON ...... 164

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WISCONSIN MOST RELIANT ON PROPERTY TAXES IN MIDWEST ...... 165 5 ‘DARK STORE’ MYTHS DEBUNKED ...... 165 WISCONSIN GOVERNOR PROMISES TO CLOSE ‘DARK STORE’ TAX LOOPHOLE ...... 167

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USA GENERAL How to Contest Property Taxes

How to contest property taxes. How the value of your home is determined and how to contest property taxes if the assessment on file is inaccurate.

You should know that in some municipalities, real estate taxes and the method the local government uses to determine what you will pay in real estate taxes is pretty cut and dry. But in other areas, the process is quite complicated.

Without getting into the intricacies of how property taxes are computed, you should know that two important factors go into determining your real estate taxes: the characteristics and amenities of your home and your home’s value.

Let’s start with your home’s characteristics and amenities. If the tax collector’s office thinks your home is a 5,000 square foot, 6 bedroom, 6 bathroom home with a 3-car garage but in reality, your home has half the square footage and half the numbers of bedrooms and bathrooms, your taxes are going to be wrong. When it comes to the property tax bill, the size of your home matters as well as many of its characteristics and amenities.

Also, construction materials matter, so whether your home is of brick or frame construction may make a difference, as will the number of bathrooms, whether you have a finished or unfinished basement and attic, if you have an inground pool, tennis court or large garden. There are quite a number of characteristics that may go into the process of determining your home’s value. Making sure the information the taxing authority has is accurate should be your first job.

How to Contest Property Taxes

1. Dig Deeper Into How Your Property’s Valuation Is Assessed

To dig deeper into how your property’s valuation is assessed, you can go online or visit your local tax assessor’s office (or whatever government office handles the valuation of your home) and look at the description they have on file of your home. Make sure all of the items they describe are accurate, including the size of the property, the number of bedrooms and bathrooms, type of construction, number of fireplaces and anything else that is listed for your home or can be listed on the form for your home.

If the information is not correct, you should be able to fill out a form to correct the description of your home. This first step will at least make sure that the government has your home’s attributes correct on their books.

2. Make Sure the Government Valuation of Your Home Is Correct

The second step is making sure that the government has the value of your home correct as well. This is a bit more complicated. In some parts of the country, the value of your home may be based on what you paid for the home and nothing changes from there other than a jump for inflation or other objective criteria. But in some locations, the criteria is or may appear quite subjective. In these subjective situations, you’ll need to compare your home to other similar homes to prove to the governmental agency that your home’s value has been set too high for current market conditions.

Some agencies’ method of computing these valuations is so complicated that only professionals really know how to get around the system to lower your valuation. For example, you can have two homes that are similar next to each other that sold around

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the same time but if one home has 2,200 square feet and the other has 2,300 square feet, these homes may fall into different classifications and may not be considered comparables for the tax valuation process.

While that may seem unfair, you have to work with the system so you know what information you can use and not use to get your home’s valuation reduced.

3. Finding the Information You Need

Having said all, you can also get help by looking at the website of your local governmental agency’s tax assessor’s office or another office that handles the valuation of properties. On some of these governmental websites you can find information on the process you’ll need to go through to contest your real estate taxes and the timeline you’ll need to follow. Those same websites may even permit you to compare your home with other homes in the neighborhood and submit your property tax contest online.

On the other hand, if your local website does not give you these benefits, you may have to go to the governmental office in person to talk to them and see what information you need, what information they can give you and gather together the forms you need to complete to contest your property tax valuation.

5. Enlist the Help of Real Estate Professionals

Finally, if you live in an area where doing it yourself is hard or puts you at a disadvantage in contesting your home’s value, you can always enlist the help of real estate tax attorneys or professionals that make a living at helping homeowners contest their real estate taxes. Typically, these professionals take a percentage of the savings. Beware of the fee structure and what you might be charged in the first year and subsequent years.

Assessed Value vs. Market Value in Real Estate

One determines your property taxes, the other is what your home will likely sell for

A home’s assessed value and its market value can seem similar, in reality these two values are often quite different and have different uses.

What Is Assessed Value?

Assessed value is a value for a property that is determined by an entity, such as a local municipality, a county, or other governmental agency that is determining the value for the purpose of calculating property taxes.

The assessed value is usually based on factors like:

 What are similar properties selling for?  Recent improvements made to the property being assessed.  Income derived from the property such as from renting out a room.  Current replacement cost of the property in the event of a disaster

The assessed value of the property is arrived at by the assessor. Any property tax exemptions that the owner may be eligible for are factored in and then the value is multiplied by the multipliers used by that municipality to arrive at the assessed value for the purpose of determining the applicable property taxes.

Typically, the assessed value is some percentage of the property’s fair market value.

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Politics

Assessments can be tied to the political process in a municipality. The assessment formula can be revised to raise or lower valuations to meet a political agenda such as the need to increase or decrease property taxes.

In many areas the position of assessor is a political position. It may be an elected office, or the assessor may be a political appointee.

Disputing Assessed Value

Homeowners routinely will dispute their property tax bill. They are, in essence, disputing the property’s assessed value. They are requesting a review of their property’s assessed value in hopes of lowering their property tax bill. There are typically any number of attorneys in a major local area who specialize in this area.

What Is Market Value?

At its core, the market value of a property is what a buyer is willing to pay for it and the price that a seller is willing to accept. Determining a property’s market value for the purpose of listing it for sale, or for a buyer looking to make a fair offer, is a bit of a subjective process.

A number of factors go into determining a property’s market value:

 How does the property look? This is known as curb appeal. Does the property offer a good initial visual impression when a prospective buyer drives up to it? What does the exterior of the home look like, are there any distinguishing features?  Internal characteristics of the home. The size, number of bedrooms, a finished basement, number of bathrooms and many other factors are considered here. This can also include things like the newness and quality of any appliances that might be included for the buyer. What is the age of the furnace and the central air conditioning unit if the home has one?  The sale price of comparable homes in the area that have recently sold will be a key factor. If this property is listed at $400,000, but there are no recent comps that have sold for more than $300,000 buyers might consider the price of this property to be high.  The supply of and demand for properties in the local market is key. When there is a glut of homes on the market, this will tend to depress prices. When there is a high demand, especially if combined with a normal or low supply of properties for sale, this will tend to drive up prices in the area.  Interest rates on mortgages may not impact the market price directly, but when interest rates are high it may be harder for buyers to qualify for a mortgage, and the monthly payments will certainly be higher for the same amount borrowed versus when rates are lower.  Location. The saying in real estate is that the most important factor for a property is location, location, location. People buy homes or other types of property in large part because of the location. Families want to live in an area with good schools. People want to be close to where they work, or to an area with amenities like shopping, restaurants and entertainment.

Appraisals

During the process of applying for a home mortgage, the lending institution will generally do an appraisal of the home’s value to determine if the proposed purchase price is reasonable in terms of the amount the buyer is looking to finance. Banks typically will not issue a mortgage for a home they deem to be overvalued in terms of the purchase price compared to an appraised market value.

Lenders want to be sure that the amount of the mortgage requested by the borrower does not represent a situation where they are over-borrowing. This can lead to a problem for the lender down the road should the borrower not be able to keep up

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their payments. If the loan was based on a home value that was overstated, then the lender may not be able to realize enough money from the home sale to cover the outstanding loan balance.

Online Home Valuation Services

Today there are any number of online sites that will assign a value to your home. There is absolutely nothing official about the price they may show, and these valuations should be used as information only. Additionally, if you were to compare the value of the same property at several of these sites, it's likely that you would see a range of values for the same property.

If you are selling a home, it's important to get the most realistic market valuation for your home possible. If you price the property too high, it's likely to sit on the market for a long time, if it sells at all. If you price it too low, you may be leaving money on the table.

As a buyer, knowing what a property is truly worth is crucial as well in terms of obtaining financing and ensuring that you don’t overpay compared to what the property is actually worth.

USA Property Taxes by State

There are several states without an income tax. But property taxes? Those are a part of life in every state across the country.

Property taxes help provide revenue for governments and municipalities -- both at the state and local level. They go toward infrastructure projects, schools, city and state employee salaries, and utilities, and they even pay for local fire, police, and EMT services in many places.

But as these municipalities vary greatly (in size and services provided), so do the property tax rates residents are charged. In some parts of the country, you'll pay just a few hundred dollars per year, while in others, you'll see tax bills well in the thousands (or even tens of thousands, depending on your home's value).

Are you curious about what you can expect to pay for property taxes on your home or investment property? Here's a detailed breakdown of property taxes by state.

Calculating property taxes

Property taxes aren't cut and dry. The basic gist is this: Every year, you're charged a certain percentage of your assessed home value. The exact rate depends on your jurisdiction -- how much it needs for local schools, government operations, utilities, and more. You're usually charged a rate for each one of these individual services, and they're all added up, giving you what's called your effective property tax rate, or mill rate.

These rates diverge significantly from city to city and state to state. One homeowner may pay $5,000 in property taxes on a $250,000 house while another pays the same amount on a $750,000 house. It all depends on where you live and the local services your municipality provides.

States with the highest property taxes

In looking at state tax rates, New Jersey residents deal with the highest charges. According to the U.S. Census Bureau, the median property tax bill in the state is upwards of $7,400, and the average effective tax rate across the state is 2.13%.

Other states that have high effective property tax rates include:

 Illinois (1.95%, median tax bill of $3,995).  New Hampshire (1.94%, $5,100).  Vermont (1.79%, $3,795).  Connecticut (1.68%, $5,327).

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 Wisconsin (1.63%, $3,248).  Texas (1.62%, $2,578).  Nebraska (1.61%, $2,467).  Pennsylvania (1.46%, $2,553).  Iowa (1.46%, $1,916).

Many of these states make up for their high tax rates by scaling back in other taxable categories. In Texas, for example, there's no statewide income tax, and New Hampshire has no sales tax.

New York and Massachusetts have higher tax bills than residents in other states, but that's likely due to the higher median home values in those areas.

States with the lowest property taxes

Homeowners in Hawaii, Alabama, and Louisiana enjoy the lowest effective property tax rates. In Hawaii, residents pay just 0.30% of their home's fair market value. The median bill comes out to just over $1,400, according to the Census Bureau.

In Alabama, the rate's not much higher at 0.37%. And due to the state's low home prices, residents see a median payment of just $543 annually.

Here's a look at the top 10 lowest effective property tax rates by state:

 Hawaii (0.30%, median tax bill of $1,406).  Alabama (0.37%, $543).  Louisiana (0.51%, $707).  South Carolina (0.52%, $798).  West Virginia (0.54%, $607).  Wyoming (0.58% $1,196).  Nevada (0.60%, $1,481).  Mississippi (0.62%, $813).  Idaho (0.72%, $1,246).  Montana (0.73%, $1,652).

In just looking at median property tax bills, Arkansas also ranks among the top. Residents in the state pay just under $700 on their annual property taxes.

Average property taxes by state

Curious how your state measures up to the rest? Trying to decide where to invest or buy a home next? Check out the most current effective property tax rates and median property tax bills per state, according to the U.S. Census Bureau and the nonprofit policy research firm Tax Foundation.

U.S. $2,149 1.05%

Alabama $543 0.37%

Alaska $2,956 1.02%

Arizona $1,356 0.64%

Arkansas $693 0.63%

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California $3,104 0.70%

Colorado $1,489 0.53%

Connecticut $5,327 1.68%

Delaware $1,243 0.58%

Florida $1,686 0.89%

Georgia $1,397 0.88%

Hawaii $1,406 0.30%

Idaho $1,246 0.72%

Illinois $3,995 1.95%

Indiana $1,085 0.82%

Iowa $1,916 1.46%

Kansas $1,849 1.28%

Kentucky $1,042 0.79%

Louisiana $707 0.51%

Maine $2,259 1.24%

Maryland $3,142 1.00%

Massachusetts $3,989 1.10%

Michigan $2,174 1.37%

Minnesota $2,200 1.06%

Mississippi $813 0.62%

Missouri $1,387 0.97%

Montana $1,652 0.73%

Nebraska $2,467 1.61%

Nevada $1,481 0.60%

New Hampshire $5,100 1.94%

New Jersey $7,410 2.13%

New Mexico $1,188 0.62%

New York $4,600 1.32%

North Carolina $1,322 0.81%

North Dakota $1,722 0.90%

Ohio $2,032 1.54%

Oklahoma $1,036 0.87%

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Oregon $2,563 0.91%

Pennsylvania $2,553 1.46%

Rhode Island $3,884 1.43%

South Carolina $798 0.52%

South Dakota $1,879 1.18%

Tennessee $1,062 0.68%

Texas $2,578 1.62%

Utah $1,472 0.58%

Vermont $3,795 1.79%

Virginia $1,948 0.84%

Washington $2,805 0.85%

West Virginia $607 0.54%

Wisconsin $3,248 1.63%

Wyoming $1,196 0.58%

Lowering your property taxes

If you live or own property in one of the higher-tax states, that doesn't mean you have to resign yourself to sky-high tax bills every year. In fact, there are actually quite a few ways you might be able to lower your tax liability.

You can:

 Apply for a property tax exemption, if you qualify. Many states offer full or partial exemptions and deductions for certain groups of citizens, including veterans, seniors, disabled residents, and more.  File for a homestead exemption. Some states also offer what's called a homestead exemption, which lets you lower your tax burden as long as the home is your primary residence.  Protest your property tax bill. If you think your assessed home value is too high, you might be able to appeal. An appraisal may be required to show your home's fair market value is lower than your taxing authority believes it is, but if you win, it could lower your tax bill significantly.

Don't forget: If you itemize your returns, you can write off your property taxes as part of your SALT deductions. You can only deduct up to $10,000 though (including your mortgage interest and other qualifying write-offs), so keep this in mind.

Know your tax rates

Understanding the property tax rates of a community is critical if you're considering buying property there. If you opt to escrow, your taxes will make up a considerable portion of your monthly mortgage payment. If you don't, you'll have a hefty bill come January -- which will likely need some serious budgeting and planning to manage. Make sure you do your research so you're well prepared either way.

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USA - The Problem with Property Taxes

What is wrong with a property tax?

As we continue to explore the reasons behind our efforts to eliminate property taxes, the concerns with a property tax as a means of taxation must be examined.

For those who are just getting involved, this article is the second in a series explaining the basis behind our property tax elimination bill.

The right to personal property sets the United States apart from other nations. Outside the United States, the rights to property have long been subject to the realm of kings and queens – a feudal society of sorts.

There is a tremendous anger surfacing due to the relentless loss of property and our government’s explosive spending binge. Ravenous government spending mortgages ourselves, our children, and our property to an unrelenting assault by a government which is out of control.

The major negatives with property taxes relates to these very issues:

 Property taxes are fixed expense with no regard to the person’s ability to pay.  One’s property serves as collateral for potential unlimited government spending.  Taxes on property value reduce the incentive to maintain property  The regressive nature of the property tax makes home ownership that much more elusive for much of the population.

Taxes on property have been debated incessantly for decades. What started out as an “innocent” means of raising taxes has blossomed into a perceived unlimited source of funds by which government can make promises of future benefits to a select few to the detriment of the remainder of us. Property owners have the choice of either paying the taxes dictated for them by politicians or risk losing their property through foreclosure and tax sale.

Contrary to popular belief, the property tax system started in the United States dates at the time of the founding of our nation. At that time however, it is important to remember the historical context in that only the gifted few owned property. Only property owners at the time of the founding of our nation were permitted to vote.

The evolution of our republic has allowed the opportunity for owning property and of voting rights to expand to most of the population. As such, the antiquated notion of the property tax may negatively impact the very people who are now just beginning to enjoy the American dream evolving in the great experiment of the United States.

The negative impact of a property tax system is that your property serves as collateral for government promises. Ever increasing property taxes have allowed municipal governments and schools to make promises that they could not possibly keep if they did not have such a reservoir of potential funds at their disposal.

These “promises” have precipitated a record number of bankruptcy filings of municipalities since 2010. The settlement of these bankruptcies will most certainly raise the level of debate of property taxes to unparalleled heights. The outcome of this battle will most decidedly determine whether or not American citizens have the right to own property.

With the rapid rise in property taxes needed by most jurisdictions to cover their promises and with lower pay and higher unemployment of taxpayers throughout the nation, the property tax is now forcing millions of Americans to reassess where they live, how they live, and if they can ever retire let alone own their home.

The U. S. Constitution addresses and protects property rights in so many ways: Source: “The Constitution and Property Rights”

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“The Founders were worried that Congress might use the tax system to loot property owners in some states for the advantage of other states. Accordingly, they required that direct taxes (mostly importantly property and income taxes) be apportioned among the states (Article I, Section 2, Clause 3 and Article I, Section 9, Clause 4).

They granted the federal courts jurisdiction over interstate land claims and interstate debts to limit the extent to which state courts could discriminate against the property rights of out-of-staters (III-2-1 and III-2-2).

They added the Full Faith and Credit Clause (IV-1) partly to require state courts to honor property records in other states.

The Founders gave Congress an unlimited power to dispose of public land (IV-3-2), but only limited power to acquire or hold land (I-8-17 and certain incidental powers). This was because they wanted most publicly-owned land to be transferred to the private sector.

They also inserted a number of other checks and balances, designed partly to protect minorities from unfair property confiscations.”

Today, threats to property, particularly your home, are at epic levels and the battle will shape the landscape of our nation forever.

The American dream of home ownership and the liberty inherent in property are at risk.

Ending property taxes will begin to restore the American dream to those most negatively affected by such an antiquated system as a property tax.

USA - Lessons From Amazon's Decision To Cancel New York City Headquarters

 giving tax breaks to specific companies is a bad idea.  local politics and policy can also significantly influence whether a business succeeds

Amazon recently abandoned plans to build half of its “HQ2” in New York City. The company was going to receive about $3 billion in taxpayer subsidies for its New York office, and it appears that a small-but-vocal group critical of the subsidies had something to do with its change of plans.

This whole ordeal was a mess, but hopefully it’s taught companies and governments some valuable lessons.

First, giving tax breaks to specific companies is a bad idea. There’s substantial evidence that such tax breaks are largely a waste of money. They typically don’t have much influence on a company’s final decision and the promised benefits—more jobs, more economic growth—either don’t materialize or would have occurred regardless. Playing the tax-subsidy game is like betting against the house—everyone thinks they’ll win but in the end they’re left with empty pockets and little to show for it.

Second, companies need to think differently about where they locate. From an economic standpoint, New York City is attractive with its highly skilled labor force, dynamic and innovative environment, and huge market. But local economies don’t exist in a vacuum. For better or worse, local politics and policy can also significantly influence whether a business succeeds .

Amazon should have been aware of this considering its experiences in Seattle. Last May, Seattle tried to levy a $275 per- employee tax on Amazon, while several local officials have been vocal about the company not paying its “fair share.” Some also complain about Amazon’s contribution to Seattle’s high housing costs. This despite the fact that Amazon has generated billions of dollars in income for locals, as well as the sales tax and property tax dollars that go along with it.

In light of all this, one would think Amazon would want to hedge its bets by locating part of its corporate operations in a city more open to business. Instead, it doubled down by picking New York City, another city with several anti-corporation officials and community leaders. New York State Senator Michael Gianaris (D-Queens), for example, said that Amazon ruins

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communities and U.S. Rep. Alexandria Ocasio-Cortez (D-Bronx) praised Amazon’s decision to leave as a case of everyday New Yorkers defeating “...Amazon’s corporate greed.”

Of course, some of the backlash against Amazon was due to the tax breaks it was scheduled to receive, which is understandable. But that’s not the whole story. Many New York and Seattle officials think that big companies such as Amazon and their wealthy executives should do more to alleviate the problems that city policies often create or exacerbate.

Take homelessness in Seattle. Sure, it’s always going to take money to build housing in an expensive city. But the city’s zoning rules—heavily tilted towards single-family housing—also must change before enough housing can be built to truly bring down costs for residents. Simply raising taxes on companies like Amazon without allowing more apartments and other multi-family units is not a serious plan.

Or consider subway funding in New York City. Mayor Bill de Blasio wants to raise taxes on the wealthy to fix the dilapidated subway before addressing core problems like the system’s substantial inefficiencies. For instance, it costs about 67% more to move a subway car one mile in New York than it does in London or Paris. Again, any plan to fix the problem via more money alone is not a serious one.

So where might Amazon have gone instead? Several of Amazon’s 20 finalist cities are in the 10 most economically free metropolitan areas, as ranked by economist Dean Stansel in a recent study. These include Miami, Dallas, and Nashville. The New York metro area ranked 49th. Miami or Dallas may lack some of New York’s economic advantages, but from a policy perspective they are likely to be much less antagonistic.

That said, it’s hard to feel too bad for Amazon. It and other companies that clamor for subsidies are an important part of the problem. Amazon’s public announcement for HQ2 bids seems like a mistake now. If it had gone about its business quietly, its investment decisions probably wouldn’t be front page news today.

But public officials who insist corporations are responsible for society’s ills are also in the wrong. Corporations don’t deserve taxpayer money, but big problems like homelessness, deteriorating infrastructure, drug abuse, and joblessness shouldn’t be pinned on them either.

It’s easy for politicians to demonize rich corporate executives and demand they fund solutions. Most of us aren’t rich and thus won’t have to chip in, making for an easy sell. But a lack of money is often not the biggest problem, and solutions that ask more people to contribute force public officials to maintain some fiscal discipline.

It’s not clear how we get to a better place from here, but this Amazon fiasco has highlighted how terrible the current system is and that’s a start.

Adam A. Millsap is the Assistant Director of the L. Charles Hilton Jr. Center at Florida State University and an Affiliated Scholar at the Mercatus Center at George Mason University.

USA - Sanders’ Estate Tax Plan Won’t Likely Raise the Revenue Intended

Today, Senator Bernie Sanders (I-VT) introduced a plan to make the estate tax more progressive, in hopes that this wealth transfer tax will raise as much as $315 billion over ten years, and as much as $2.2 trillion from the estates of current billionaires after their passing. Sanders’ top marginal rate would return the estate tax to its historic high of 77 percent—the top rate that existed from 1942 to 1976.

But despite the progressivity, there is good reason to believe Sanders’ plan won’t raise revenue as intended.

Currently, the estate tax levies a 40 percent tax on the total value of property passed to heirs beyond a roughly $11 million exemption for individuals ($22 million for married couples). Sen. Sanders’ plan would:

 Reduce the exemption to $3.5 million, and tax the value of estates up to $10 million at a rate of 45 percent  Tax estates valued between $10 million and $50 million at a rate of 50 percent  Tax estates valued between $50 million and $1 billion at 55 percent

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 Tax estates valued at more than $1 billion at a rate of 77 percent.

This progressivity could hamper revenue collections for a few reasons.

For one, this tax on the wealthiest would target (0.2 percent of the country, according to Sen. Sanders) with relatively high marginal tax rates that increase with an estate’s value. Because of the high rates and the progressive rate structure, high-net- worth individuals will have a strong incentive to shelter their assets to avoid the tax.

In general, tax avoidance is costly both from an economic standpoint (because it encourages unproductive tax planning) and a revenue standpoint, as people hide their money from tax collectors. But the estate tax generates particularly large compliance costs. In fact, research has shown that the compliance costs associated with estate planning are actually greater than the revenue the estate tax generates.

And perhaps most importantly, Sen. Sanders’ plan is problematic because it would increase the estate tax’s burden on investment, a key driver of economic growth. To the extent that Sanders’ plan encourages people to consume their income instead of invest it, it will reduce economic output, and with it, government revenues on a dynamic basis. This is because reductions in the size of the economy reduce the output available to government to tax.

While progressivity may look appealing—particularly at a time when policymakers in Congress seem to be competing on how best to extract revenue from the wealthiest in the country—it may not raise the revenue intended.

USA - How Big-Box Stores Bilk Local Governments

They lower their property taxes through a surreal trick called “dark store theory.” States are finally fighting back.

A multibillion-dollar philosophy question is rippling through small-town America. If you build something that is fundamentally useless to anyone but you, should you have to pay property taxes on it?

Dozens of big-box stores are arguing the answer is, essentially, no. As the country confronts an epidemic of retail closures, spurred by e-commerce, obsolescence, changing economic geography, and corporate mismanagement, mega-stores are using their shuttered rivals as “comps” in fights with local appraisers in order to reduce their tax bills.

In Escanaba, Michigan, for example, the Wisconsin-based home improvement store Menards has spent half a decade fighting the city’s property tax assessment—by comparing its shop there to, among other sites, two shuttered Michigan Walmarts that were sold as industrial properties. You can see why the Michigan Tax Tribunal bought that argument, knocking the assessed value of the (operating) Menards down from $8.21 million to $3.66 million. The concept is called “dark store theory,” because working stores are compared to closed ones, and it makes a kind of intuitive sense: How do you measure value except by what someone else will pay?

That seems like a fine standard for tax assessments until you look at big-box retailers. The unwieldy, windowless hangars are ill- suited for adaptive reuse. Thousands of them lie vacant in malls around the country, depressing the resale market. To make matters more complicated, many big-box companies will not sell their vacant properties without an anti-competitive deed restriction. One reason the Michigan Walmarts ended up as low-rent industrial properties was because the chain had a stipulation in the deed of sale: no big groceries or discount stores allowed.

It’s a bit like if I hired the Kool-Aid Man School of Door Frame Design to design my house with cookie-cutter apertures of my own body between rooms—then forbid the sale to anyone my height. Even though I had spent a bunch of money on those kooky doorways, the low resale value could be used to justify a low tax bill on all my me-shaped projects.

City and state governments see dark store theory as a huge threat—and are beginning to push back against the scheme. In Wisconsin, new Gov. Tony Evers says his budget proposal will close the dark stores loophole in the state, where the practice was discussed during the campaign. Lawmakers in Indiana are debating a bill on the subject this month. Their peers in Michigan are trying to settle the matter too, based in part on the success of Escanaba in challenging the practice—and convincing a state appeals court to overturn the decision of the Michigan Tax Tribunal.

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They are chipping away at what chain store influence has made a massive problem. In City Lab, Laura Bliss reports that the strategy has been deployed in more than 20 states. There are 300 big-box appeals underway in Indiana alone. In Texas, the state comptroller says the state could lose $2.6 billion a year if the model catches on. Hundreds of millions of dollars have already been shaved from the tax rolls nationwide, according to Standard & Poor’s, forcing cities to raise residential property taxes or cut back on public services. Marquette, Michigan, had to close its library on Sundays to pay Lowe’s back $755,000 after a successful “dark store” challenge to its tax bill.

Elise Nieshalla, a council member in Boone County, Indiana, argues that her county’s dispute with the store Meijer—which is asking for $250,000 in tax refunds—has bigger implications, because dark store theory is contagious. “The impact is not just the impact of Meijer,” she says. “It’s the impact of all the other stores that are going to be at our doorstep seeking a significantly reduced assessed value based on the application of dark store theory to their situation. The time to close this loophole is now.”

Dark store theory is an economic affirmation of architects’ long-held view that big-box stores represent throwaway design, as unappealing after use as an old pair of sneakers. Some empty big boxes have evolved into churches, city halls, data centers, and even a shelter for migrant children. But most are worse than useless: With deed restrictions, outgoing retailers salt the earth, banishing prime commercial land to low-rent uses.

“We’re seeing this theory spread all over the United States,” says Larry Clark at the International Association of Assessing Officers in Kansas City, Missouri. “Especially in a small town where they have one Walmart and that’s their entire retail, if the value is significantly reduced”—decimating the town’s property tax revenue—“they may have to think long and hard before giving incentives to big-box stores.”

Escanaba is a city of 12,500 people in the Upper Peninsula, with a pretty downtown that opens onto Lake Michigan. “It’s such a huge fight, and we’re a small town,” says Patrick Jordan, the city manager. “But we are fighting this fight on behalf of every Michigan municipality, and we’ve passed the hat around and they’re sending money to help us fight.” After victory in a Michigan appeals court, Escanaba and Menards will conclude their five-year battle in front of a three-judge panel this spring, with implications for the rest of the state.

For small towns where property taxes make up most of the budget, the dark store theory challenges conventional assumptions about city planning, in which the attraction of a mall or mega-retailer is seen as a tax base anchor. It’s especially damaging in places like Michigan, where a 1994 constitutional amendment ensures that taxable value can’t rise by more than 5 percent a year. Under the dark store theory, it would take centuries for Escanaba to bring Menards’ assessed value back to its former levels.

In cities where property taxes can be raised, a bigger burden is on the way for homeowners and owners of the locally owned, mixed-use properties downtown that have been put out of business by big-box stores. In Escanaba, some of those buildings date from the 19th century and have happily cycled through dozens of uses. (Ironically, the highway subsidies that made big- box commerce viable in the first place were proposed by planners who had declared the older urban environment obsolete and therefore worthless.)

The dark store argument is a reminder of the structural power that the country’s consolidated retail giants have over local politics and finances. Real estate developers have been captivated by the idea of obsolescence for more than a century, in part to provide a tax break in addition to run-of-the-mill depreciation. That’s one reason they think it makes sense to preclude future competition at a site, even it means losing money on the property sale.

In 2015, the city of Cottage Grove, Minnesota, sought to buy a vacated Home Depot at the mall. The company would only agree to sell if the city committed to ban any nearby rivals—extending a noncompete clause from Home Depot’s mall tenure (standard operating procedure) well past the store’s demise, ensuring a hardware desert. In response, Cottage Grove Mayor Myron Bailey encouraged residents not to shop at Home Depot. “Menards is in my community,” he told the Pioneer Press. “I am going to shop at Menards.”

Over in Escanaba, the roles are reversed. “I talk smack about them whatever chance I get,” Patrick Jordan, the city manager, says of Menards. “I’ll drive 50 miles to shop at Home Depot before I spend money at Menards.”

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USA - These Major U.S. Cities Are Seeing Property Tax Increases This Year

Which major cities are facing property tax increases?

Many U.S. cities are seeing higher tax bills because of gains in the real estate market. Chicago is one of those places, said Andrea Raila of Raila & Associates.

There, properties are reassessed every three years, she said, and the most recent reassessment was last year. The tax on the property is 10% of the estimated market value. For example, a $2 million home has a $200,000 assessment.

Homeowners on the city’s Gold Coast may have seen spikes of 50% or more in their assessments, she said.

In addition, the property tax rate in Chicago went up, according to a statement from the Cook County Clerk’s office.

"Average residential taxpayers in the City of Chicago and the north suburbs should expect to see roughly a 3% increase in their tax bills," it said. "South suburban homeowners will see an average increase of about 5%."

Special initiatives often fuel tax increases, as well, said H. Michael Soroy of the Law Offices of H. Michael Soroy in Los Angeles. There, voters approved a new parcel tax in November, the Measure W tax, a.k.a. the Safe Clean Water Parcel Tax.

Homeowners in L.A. County will see an additional 2.5 cents on each square foot of "impermeable area" of their properties, including areas "covered by hardscape-like materials," according to the city’s website for the program.

That includes buildings, driveways, sheds, pools and other features, but not gardens or "permeable areas."

But although local municipalities can raise taxes for initiatives to fund special projects, property taxes in California are 1% of the value of the home the year it was purchased and increases are capped at 2% a year, Mr. Soroy said.

Property taxes rose for homeowners in L.A. in 2017, as well. The city saw a 7% tax increase in 2017, the 2018 property tax report by ATTOM Data Solutions.

Property taxes rose in 58% of the 217 metropolitan areas analyzed in the report, according to the data. Dallas had an 11% increase, the largest uptick, followed by Houston with a 10% rise, Miami, 5%, and Philadelphia, 4%.

The 2019 property tax report is expected in April, a spokeswoman from ATTOM said.

USA - Thune leads colleagues in reintroducing a permanent repeal to the estate tax

Sen. John Thune announced he is leading an effort to repeal the federal estate tax this week.

The federal estate tax, also called the death tax by some, is a tax on property that’s transferred from a deceased person to their heirs. That property includes both physical and financial assets, such as cash, land, real estate, stocks, bonds and mutual funds.

Thune’s bill, the Death Tax Repeal Act of 2019, has been backed by many of his Republican colleagues, who argue that it can be devastating for farmers, ranchers and family-owned businesses.

“Oftentimes, family-owned farms and ranches bear the brunt of this tax, which threatens families’ agricultural legacies and makes it difficult and costly to pass these businesses down to future generations,” Thune said in a statement.

Gov. Kristi Noem has also been a critic of the federal estate tax, often reiterating the story of how her family almost lost their farm as a result of the tax following her father’s unexpected death.

Noem, along with other lawmakers, have also said they oppose the estate tax because they believe it’s a double tax.

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According to Senate Majority Leader Mitch McConnell, “The estate tax doesn’t serve any purpose except forcing family farms and family-run businesses to waste precious capital on costly tax planning and in too many cases, paying taxes on income or property that have already been taxed once.”

The purpose of the estate tax is to provide a backup to the capital gains tax. Normally, the wealth that accumulates on an asset over time is eventually taxed when it’s sold. The estate tax is designed to tax property that’s accumulated wealth, but won’t be taxed until it’s passed down.

The estate tax has been reduced considerably since the Tax Cuts and Jobs Act was passed in 2017. Under the new law, less than 0.1 percent of estates are required to pay the estate tax, and 90 percent of taxable estates are owned by the top 10 percent of income earners.

Married couples are exempt from the tax if their assets are worth less than $22.4 million, along with individuals with assets worth less than $11.2 million.

According to an analysis from the Tax Policy Center, in 2017, before the new tax act went into effect, an estimated 80 small farms and closely held businesses across the US were subject to the estate tax. The analysis defined small farms and businesses as having less than $5 million in assets.

With the new law, no small farms and businesses under that definition will owe an estate tax.

The higher exemption created by the new tax laws is set to expire in 2025. Thune’s bill would completely eliminate the tax.

USA - Sanders Proposes Estate Tax of Up to 77 Percent for Billionaires

Independent Senator Bernie Sanders is proposing to expand the estate tax on wealthy Americans, including a rate of as much as 77 percent on the value of estates above $1 billion.

Sanders of Vermont, who is considering a second run for president, said in a statement that his plan would apply to the wealthiest 0.2 percent of Americans. It would set a 45 percent tax on the value of estates between $3.5 million and $10 million, increasing gradually to 77 percent for amounts more than $1 billion. The current estate tax kicks in when an estate is worth about $11 million.

The legislation would raise up to $2.2 trillion in taxes from the families of all 588 billionaires in the U.S. with a combined net worth of more than $3 trillion, according to a summary of the plan.

Sanders’s plan comes as potential Democratic challengers to President Donald Trump eye progressive tax ideas intended to reduce income inequality. Senator Elizabeth Warren of Massachusetts has proposed an annual 2 percent tax on households worth more than $50 million. Sanders, who ran in the Democratic primary against Hillary Clinton in 2016, hasn’t yet said whether he’ll run in 2020.

Addressing Inequality

The estate tax exemption was $3.5 million as recently as 2009. The 2017 GOP tax overhaul increased the exemption to $11 million through 2025, and some Senate Republicans are renewing an effort to repeal the tax entirely.

While Sanders and Warren represent one approach to reducing income inequality –- breaking up concentrations of wealth among top earners –- other Democratic candidates are directing their efforts toward the lowest income brackets.

Tax Liability

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Polls show that voters are becoming more receptive to the idea of increasing taxes on the wealthy. Freshman Democratic Representative Alexandria Ocasio-Cortez of New York floated a 70 percent top tax rate on incomes of $10 million or more, an idea that 59 percent of people supported in a Hill–HarrisX poll conducted Jan. 12-13.

The Sanders plan would nearly double the estate tax liability’s that some of the wealthiest Americans would owe under current law, according to calculations released by the senator along with details of the proposal. Amazon.com Inc. founder Jeff Bezos, the world’s richest man, would owe $101 billion based on his current net-worth, up from $53 billion. Facebook Inc. founder Mark Zuckerberg’s estate tax liability would jump to $41 billion from $22 billion.

The Sanders legislation would also end tax breaks for so-called dynasty trusts, estate planning tools that have become more popular under Trump’s tax law, which increased the exemption to about $22 million for a couple.

Break for Farmers

Dynasty trusts can be funded with cash, stock or other assets, and structured to pay each generation only some of the trust’s proceeds while the rest of the money grows free of estate and gift taxes. With the right planning, a trust funded up to the maximum $22.4 million tax exemption can wind up being worth far more than that.

In his plan, Sanders is including a special break for farmers, allowing them to reduce the value of their land by as much as $3 million to reduce or completely eliminate the amount of estate tax they owe. Critics of the estate tax have said land-rich, cash- poor family farmers are hurt by the tax because they don’t have the liquidity to pay the tax. However, the tax hits relatively few family-owned businesses and farms — about 80 in 2017 — according to the Urban-Brookings Tax Policy Center.

The estate tax exemption has been a favorite lever for Congress to adjust in recent tax legislation. The current roughly $11 million exemption for an individual has risen from $650,000 two decades ago. The winners can end up being estate tax advisers as they continually make adjustments to their client’s plans.

“The more you muck around with the exemption amount, the more you mobilize the estate planning industry and pull money into it,” said Kyle Pomerleau, an economist at the Tax Foundation, a Washington-based research group. “People will continue to shift their affairs around to game the exemption changes.” USA - The Self-Storage Property-Tax Conundrum: Alternatives to Better Our Communities

When property taxes deter real estate investing, it has a domino effect that harms our local economy. A self-storage owner and developer offers two solutions—vacancy tax and consumption tax—that can better serve our communities.

In the state of Kansas, property taxes skyrocketed 156 percent between 1997 and 2017. In Illinois, they’ve become such a burden that it would take three decades for a freeze to return property taxes to 1990 levels.

Property taxes are paid by every U.S. citizen, no matter if you’re a homeowner, apartment renter, self-storage owner or real estate investor. The average American household spends more than $2,000 a year on property taxes to help support community parks, roads, schools and much more. But these taxes have become increasingly unpopular over the years, with $14 billion going unpaid annually. In fact, a Gallup poll found that people prefer to pay income tax, state sales tax and Social Security.

It isn’t a surprise that when property taxes deter real estate investing, it has a domino effect that harms our local economy. Investors are careful with their time and money. If a state or region has extremely high property taxes, they’ll avoid it like the plague. When this happens, you can expect to see:

 Poor property values  Property taxes passed off to office tenants, apartment renters, self-storage customers and others who use these properties  Declining communities

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So, what’s the solution? Property taxes aren’t going to just disappear overnight. From my experience as a self-storage owner and developer, I see two alternative solutions that can better serve our communities: vacancy tax and consumption tax. What do they have to offer?

Vacancy Tax

In many cases, investors will purchase property and leave it sitting vacant for long stretches of time. When residential or commercial homes and buildings are left unused, there are less taxes to go around to support community services and initiatives.

This is leading many cities and regions to consider imposing a vacancy tax, which can help deflate investment “bubbles” and moderate speculation in overheated markets. For example, take Vancouver, British Columbia, where there are an estimated 8,500 vacant homes. This led the city to invoke a vacancy tax in 2016, which is expected to generate up to $30 million. San Francisco is also considering vacancy tax to curb the shortage in housing and increase positive revenue in the city.

Consumption Tax

This tends to be considerably undervalued, despite being easy to collect and extraordinarily difficult (if not downright impossible) to avoid. Consumption tax generates revenue on the purchase of goods and services. Unlike property tax, which is billed once per year and is much easier to avoid paying, it’s is collected immediately at the time of sale.

If those benefits weren’t enough, consumption tax can be structured with exemptions for basic products and low-income residents. As taxation expert and economist Curtis Dubay has said, it’s “fair and efficient.” This is especially true when compared to the challenges that come with property taxes.

Lessening the Blow, State by State

For states like Illinois and Kansas, vacancy and consumption tax may heal some of the pain of property tax. Even in states that aren’t currently suffering from high property taxes, these alternatives can help avoid a future crisis.

It’s time to transition out of our reliance on property taxes and turn to more effective solutions that can help drive greater state revenue and improve the communities in which we live and work.

ALASKA Anchorage property taxes set to rise after Alaska Legislature fails to override budget vetoes

Anchorage property taxes are set to go up after Gov. Mike Dunleavy vetoed half of state funding to pay down debt for school bonds and the Legislature failed last month to override the cut.

Andy Ratliff, the Anchorage school district’s Office of Budget and Management director, said the district was able to find about $4 million to ease the burden on taxpayers. That leaves about $16.5 million, which will increase Anchorage property tax bills sent out in May by $48 per $100,000 of assessed property value.

For decades, the state often agreed to pay 60% to 70% of school bond debt for local jurisdictions. The state’s obligation was promised to voters when they approved past school bonds.

This year, the state will pay half of what it originally promised.

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“The legislature and the administration continue to deal with an unprecedented budget deficit,” Dunleavy spokesman Jeff Turner said in an emailed statement. “School bond debt reimbursement was still significantly funded at 50 percent in the FY20 budget, an amount that was approved by lawmakers and the administration.”

In February 2019, Dunleavy proposed a budget that cut all promised reimbursement. The Legislature then rejected that idea, approving a package to fund reimbursement in full. Dunleavy in June vetoed half of that funding. In July, the Legislature approved a bill that restored the funding. In August, Dunleavy again cut half of the funding. Finally, last month, legislators were unsuccessful in an attempt to override Dunleavy’s veto.

Since local governments took on the debt directly, school districts statewide are now on the hook for their bond debt. School bonds are used for things like building new schools and maintenance on existing buildings.

In Anchorage, school bond debt adds up to more than $21 million this year.

Had the school district passed the entire $21 million debt on to Anchorage property owners, the owner of an average home would have seen their tax bill go up by about $200. Anchorage Mayor Ethan Berkowitz has said repeatedly that Dunleavy’s budget veto will result in a cost shift to Anchorage property taxpayers.

To date, that warning has been theoretical. That’s likely to change when the tax bills go out this spring.

“That’ll be the first time that people actually feel it and see it written, not in an abstract conversation," said Jason Bockenstedt, chief of staff for Berkowitz.

“We understand the state wants to cut their budget. But this isn’t a cut — this is a cost shift,” Bockenstedt said. “We still have the obligation to pay this back, so you’re not you’re not actually cutting anything. You’re just shifting the cost to everyone else around the state.”

The increase will be automatic and doesn’t require voter approval since voters already approved the school bonds, Bockenstedt said. Anchorage has a tax cap which limits tax increases, but voter-approved ballot measures are under the cap.

In 2015, the state stopped agreeing to help pay down new school bonds. In 2016, Gov. Walker used his veto power for a one- time, 25% cut of school bond debt reimbursement. In Anchorage, that amounted to about $11 million, but the district found money in savings and the general fund so property taxes didn’t increase.

The next year, state resumed paying down bonds voters had already approved.

But Alaska school districts no longer propose bond packages with baked-in agreements from the state to pay a share of the debt.

“We’ve been going in eyes wide open that Municipality of Anchorage residents are responsible for 100% of new bond debt,” Bockenstedt said.

On Monday, the Anchorage school district released its proposed budget, which then goes to the school board, and then goes to the Assembly. In April, the city will set its tax rate based in part on that budget before property tax bills are sent out in May.

Last month, state lawmakers failed in an attempt to override Dunleavy’s budget vetoes. Prior to the vote, some lawmakers referenced a 2018 audit of school districts’ funds to argue schools have enough cash reserves to pay the debt themselves.

Having money in the bank doesn’t mean it’s available to spend, according to a statement the Alaska Council of School Administrators released Thursday. The group said implying money earmarked for capital projects, transportation and unpaid bills is unrestricted cash is “misleading.”

Local jurisdictions could attempt to challenge the state’s reneging in court. But Anchorage district spokesman Alan Brown said Monday that there was no appetite to go to court.

If the state cuts school bond debt reimbursement again this year or in future years, that additional debt could be paid by local taxpayers for decades to come. In 2040, Anchorage taxpayers would still be on the hook for $85,920 in bond debt the state previously agreed to pay, according to information from the Anchorage School District. 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 December, Dunleavy released a proposed 2021 budget that again cuts the school bond debt reimbursement the state originally agreed to by half. That proposal will again have to go through the Legislature’s budget process.

“Are we going to have to do all of it? 50%? None of it?” Bockenstedt said. “That just creates a lot of uncertainty in the budget process, and a lot of uncertainty for property taxpayers.”

ARIZONA Property Valuation and Taxes

Arizona has a two-tiered property tax system consisting of a Limited Primary Value (LPV) and a secondary Full Cash Value (FCV):

 Limited Primary Value (LPV) is a value determined by a statutory formula mandated by the Arizona State Legislature. LPV is limited in the amount of increase in any given year and cannot exceed the property’s Full Cash Value.  Secondary Full Cash Value (FCV) is a reflection of the Assessor’s estimate of the true market value of a property.

How are my property taxes calculated?

Beginning with tax year 2015, the LPV is utilized to calculate property taxes with the exception of Personal Property (excluding mobile homes) and centrally valued properties identified in A.R.S. § 42-12001(1) thru (7) and (11).

Primary and secondary property taxes are calculated from the LPV. The LPV is multiplied by an assessment ratio to reach the property’s assessed valuations (AVs); the assessment ratio for residential properties is 10%. Primary and secondary property taxes are then calculated per every $100 of a property’s AV.

For example, in tax year 2016 (Goodyear’s fiscal year 16-17) a Goodyear home had a LPV of $116,424. To calculate property taxes paid:

 The LPV of $116,424 would be multiplied by 10% to reach the AV of $11,642  Primary and secondary property taxes would then be paid on every $100 of this AV amount ($11,642 / 100 = $116.42)  Multiply $116.42 by the property tax rate to reach the primary and secondary property taxes paid

It should be noted that values listed in one tax year will be used in the jurisdictions’ following fiscal year (FY) budgets. For example, property taxes based off of AVs in tax year 2016 are used in the City’s FY 16-17 budget. See the Maricopa County Assessor’s website for more information on property tax calculations and to locate more details on your property.

What is the difference between a tax levy and a tax rate?

A tax levy is the entire amount of money to be raised by direct taxation as reported by each district. A tax rate is the property tax charged per $100 of assessed value (AV) to arrive at the levy. Each taxing jurisdiction will set their budgets on an annual basis and these budgets will be used to determine the necessary tax levy and tax rate for each district.

Where do my property taxes go?

For Goodyear residents, the majority of property taxes paid go directly to education. Other government agencies receiving a portion of your property tax dollars include Maricopa County, the City of Goodyear, and various special districts. Your property tax bill lists each agency’s tax rate and the exact amount that each agency receives. Visit the Maricopa County Treasurer’s Office for information on reading and understanding your tax bill. 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 chart below is based on average property taxes paid by Goodyear residents.

How does the City calculate its property tax rate?

Each year the Council approves the levy during the budget process based on the amount needed to make debt payments and fund basic services. This levy then establishes the property tax rates. Other agencies collecting property taxes follow a similar procedure.

How does the City use my property tax dollars?

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Primary property taxes provide general funds for basic governmental services like Public Safety, Parks & Recreation, street maintenance, and administration. Primary property taxes comprise approximately 10% of the City’s general fund revenues. Secondary property taxes provide funding for voter-approved bonds which fund construction of public facilities and infrastructure. These two rates together comprise the City’s total property tax rate. The limited property value used to calculate primary and secondary taxes is limited to a 5% increase per year mandated by Arizona state statute.

Why are my property taxes different from someone else who lives in Goodyear?

Differing property values, as established by the Maricopa County Assessor, may be part of the reason. Additionally, within Goodyear there are a number of different school districts and special districts that can lead to wide variances in property tax bills. Within the city of Goodyear alone the following education and special districts can lead to variations in property tax bills:

 Four elementary school districts (Litchfield, Avondale, Liberty, Mobile)  Two high school districts (Agua Fria, Buckeye Union)  Ten Community Facilities Districts  Two irrigation districts (Roosevelt, McMicken)  The Central Arizona Groundwater Replenishment District (CAGRD)

CALIFORNIA The Tax Watchers: Old words of wisdom still smart We have been told over and over again that it’s our duty as citizens to vote in every election. But how often are we reminded to “vote smart?” Not nearly often enough.

Since childhood, we’ve been told to “read the fine print before you sign,” “look before you leap,” but rarely were we told to be sure you understand the issues before you cast your vote. Details matter!

Let the voter beware. There are those who would try to pull the wool over your eyes. Unfortunately, they seem to be motivated by another set of adages: “A fool and his money will soon be parted,” and “there is a sucker born every day.”

Don’t be that sucker. “Fool me once, shame on you, fool me twice, shame on me.”

The March 3 ballot has only one proposition on it, Proposition 13. This is not your father’s Proposition 13.

The Orange County Register editorial board explains, “There’s no better-known statewide ballot measure than Proposition 13, which in 1978 capped property tax rates at a time when soaring property values were literally taxing people – especially the elderly – out of their homes. Thanks to the state’s cyclical system for assigning ballot numbers, a measure named Prop. 13 is once again on the ballot, in March.

“Instead of protecting California taxpayers, however, this $15 billion school bond threatens to significantly increase local property taxes – and embodies the opposite idea from the original Prop. 13.

“This is no ordinary school-construction bond. In addition to creating state debt, it has a hidden and pernicious provision that raises the debt limit for local districts. School districts have repeatedly asked voters to approve facilities bonds – so much so that many school districts have bumped up against state-imposed caps on local indebtedness.

“Unlike the old Proposition 13, which capped property tax valuations, this new Prop. 13 would raise those caps from 1.25 percent of assessed property value to 2 percent for elementary school and high school districts and from 2.5 percent to 4 percent for unified school districts and community college districts. These local bonds lead to direct and significant property-tax increases.”

In addition, there are myriad other problems with “This Proposition 13.” It is a gift to the unions under the guise of yet more school construction. It mandates project labor agreements – PLAs – on all projects. PLAs can typically raise the cost of

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construction by up to 20 percent and exclude many local nonunion workers from getting jobs. Furthermore, the state passed a $9 billion school facilities bond in 2016 that promised to fix these same school conditions, yet officials are back asking for more.

As opponents note in the official ballot argument, “Instead of spending the state’s $21 billion surplus on upgrading school facilities . . ., the governor and the Legislature are wasting our money on their own pet projects.”

This Proposition 13 will affect everyone: taxpayers, homeowners, renters and businesses. Read the fine print. Understand the issue before you vote. We service that debt with our tax dollars. California Split Roll Ballot Measure Destroys Prop 13 Protections for California Farmers, Threatens Rural Communities

Most food items will face higher property taxes several times, as they travel from the farm to processing, packaging, distribution, and grocery store

Agriculture was always considered sacred in the eyes of California’s property taxing agencies, and especially under Proposition 13. But that could change with the split roll property tax ballot initiative in November 2020.

Prop. 13 was a 1978 ballot initiative to cap property tax increases for residential and business properties and provide certainty, so property owners would not be taxed out of their homes and businesses. Passed by 65% of California voters in 1978, Prop. 13 put a Constitutional cap on annual property tax increases. Prior to passage of Prop. 13, many seniors and those living on fixed incomes were forced from their homes because of skyrocketing property tax increases. According to the Howard Jarvis Taxpayers Association, author of Prop. 13, some properties were reassessed 50 – 100% in just one year.

The 2020 ballot initiative misleadingly called the “California Schools and Local Communities Funding Act of 2020,” known more commonly as the “split-roll” tax initiative, would reassess properties and hike taxes on all commercial and industrial properties, including manufacturing plants, retail stores and malls.

The split-roll property tax measure will also remove Prop 13’s protections for California farmers, triggering annual reassessments at market value for all agriculture-related facilities and improvements.

This amounts to a $12.5 billion-a-year split-roll property tax measure, and is backed by the state’s major labor unions, the SEIU, and California Teachers Association chief among them with its $6 million in contributions toward the effort.

Oddly, Attorney General Xavier Becerra’s Title and Summary makes a blanket statement that agriculture is exempted in the split roll initiative. But that is not true.

But it’s for the children…

This is particularly self-serving and devious for counties, which are in desperate need of new sources of revenue for unfunded public employee pension obligations. And it is potentially damaging to the state economy, because under the 1978 Proposition 13 ballot initiative, agriculture properties were not considered commercial or industrial.

Under the split roll ballot initiative to split residential and commercial/industrial properties, tax increase proponents recently admitted that they will redefine commercial and industrial structures to include barns, food processing structures for eggs, broccoli, citrus, lettuces, wineries, almonds, and just about anything that grows in the ground and that Californians and the rest of the country eats.

Milking barns, packing houses, processing facilities, and wineries would all be reassessed annually at current market value. But what these tax increase proponents miss is that almonds, fresh eggs, lemons and oranges and broccoli don’t just get picked in the field and end up on your plate – it takes many processes to make the food ready to sell in a grocery or neighborhood market.

To get an idea of the magnitude of agriculture in California, the California Department of Food and Agriculture reports on the 2018 California Agricultural Production Statistics:

2018 Crop Year — Top 10 Commodities for California Agriculture 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 2018, California’s farms and ranches received almost $50 billion in cash receipts for their output. This represents a slight increase over adjusted cash receipts for 2017 1.

California’s agricultural abundance includes more than 400 commodities. Over a third of the country’s vegetables and two- thirds of the country’s fruits and nuts are grown in California. California is the leading US state for cash farm receipts, accounting for over 13 percent of the nation’s total agricultural value. The top producing commodities for 2018 include:

 Dairy Products, Milk — $6.37 billion  Grapes — $6.25 billion  Almonds — $5.47 billion  Cattle and Calves — $3.19 billion  Pistachios — $2.62 billion  Strawberries — $2.34 billion  Lettuce — $1.81 billion  Floriculture — $1.22 billion  Tomatoes — $1.20 billion  Oranges — $1.12 billion  Proposition 13

Under Proposition 13 in 1978, the specificity of the property tax initiative defined real property as:

1. land 2. fixtures 3. improvements

The new initiative is redefining these three steadfast definitions of real property, and what is taxable.

It’s always been clear that agricultural land is exempt from property tax reclassifications. However, state agricultural businesses are now concerned that any property improvements to their agricultural lands including dairy barns, wine grape irrigation, citrus fruit cleaning processes, or almond processing will no longer be considered exempt under agriculture considerations, and that and and property reassessments will increase property taxes on ranchers and farmers by millions.

This was exposed by proponents Schools and Communities First on their Agricultural Land Fact Sheet:

“Commercial or industrial structures on agricultural land would be taxed at fair market value, unless the property is owned by a small, independent owner. For example, a dairy barn, food processing facilities, and wineries would be reassessed as they are commercial and industrial.”

The initiative would not reassess row crops because those are exempt under the Constitution. However, when these crops go to packing facilities and processing areas, they would face higher property taxes.

And, under the Constitution, vineyards are not permanently exempt, as they are only exempt for the first three years after the season in which they were planted. Orchards are only exempt for the first four years after the season in which they were planted.

Where will the money actually go? Where the proponents say it will? Not so fast…

Here is how this new revenue stream is dispersed:

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1) About $1 billion comes right off the top and goes to counties to pay for administrative costs and paying back the state for loss of income tax revenue, according to the LAO analysis. 2) About 60% goes to unspecified local government services. The legislature can divert the new local government revenues for other purposes, just like they did with the gas tax, the lottery and other revenue streams intended for local government. 3) Lastly, 40% goes to schools with no guarantee that the money makes it to the classroom. There are no reforms and no requirements that the money be spent in the classroom. Take a moment and read the 16 pages of the measure – you won’t find it.

This is particularly alarming because as the State Auditor Elaine Howell revealed in her November 2019 audit of K-12 Local Control funding, California can’t account for billions of education dollars. As a San Jose Mercury News editorial correctly noted, “Rather than specifically helping needy kids, the money has simply been used to boost general spending.”

While public education would receive more funding from higher property taxes, the real outcome is that commercial and industrial property owners, and farmers and ranchers would be forced to pass the increased costs to tenants and on the cost of the food. And since most of the businesses in California are small businesses, whether they rent or own, they will be hit with this tax increase — as will anyone and everyone buying fruits, dairy products, meat, eggs, grapes and wine.

This is somewhat ironic given that Gov. Gavin Newsom’s wife, First Partner Jennifer Siebel Newsom, has been active in supporting Farm to School food programs for the purpose of boosting student nutrition.

Many government employees, organizations and labor unions could also be hit in the retirement pocket book, as public employee retirement managers like CalPERS and CalSTRS, and labor union pension accounts, invest in California commercial real estate properties.

Counties’ Disincentive to be Supportive of Agriculture

The Williamson Act of 1965 allows local governments to enter into contracts with private landowners for the purpose of restricting specific parcels of land to agricultural or related open space use, in exchange for lower property tax assessments. However, there is a disincentive to support agricultural land. Cities and counties throughout the state with massive unfunded pension and retiree healthcare obligations, are already incentivized to take out agricultural land, rezone, and allow commercial and industrial projects to be built which will yield a much higher rate of tax revenue.

According to Californians to Save Prop. 13, A Split-Roll Property Tax Will… Eliminate Prop 13 Property Tax Certainty for Farmers:

• Farming is a risky business, and California farmers have seen rising costs on nearly every aspect of their businesses – from labor and water to regulatory compliance. At the same time, they face volatile commodity prices, concerns over access to international markets and are subject to unpredictable acts of nature.

• Prop 13 protects California farmers by giving them certainty over what their property taxes will be so they can focus on growing the food that feeds the country instead of worrying about losing their farm due to skyrocketing property tax bills.

• According to the 2017 USDA Census of Agriculture, the 65,129 ranch and farm operations in California paid $1.126 billion in property taxes, an average of $17,299 per farm – the most of any state. A split-roll property tax will only increase the burden on California farmers.

• We should reject the split-roll measures and maintain Prop 13 protections that have kept property taxes affordable and provided every taxpayer who buys a home, farm or business property with certainty that they will be able to afford their property tax bills in the future.

California ranks relatively high in property tax rankings, 17th out of the 50 states, even with Prop. 13. California also ranks right up at the top of the 50 states in nearly all taxing categories: income taxes, corporate taxes, gas taxes, sales taxes, wealth taxes, utility taxes… and lawmakers are looking at imposing estate taxes and even exit taxes for people trying to move out of California.

Wednesday, warning that an initiative on property taxes threatens harm to rural communities, the California Farm Bureau Federation voted to oppose it. CFBF President Jamie Johansson said measures that increase costs for family farmers and ranchers undermine their ability to supply jobs, especially in rural California, and their ability to supply food and farm products for customers in California and worldwide. 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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Rob Lapsley, president of the California Business Roundtable and co-chair of Californians to Stop Higher Property Taxes said, “Whether on a tree or vine, at a dairy or at a processing facility, every fresh fruit, vegetable and gallon of milk we buy at the grocery store will cost more under this property tax initiative. At a time when families are already struggling to make ends meet and provide healthy, farm-to-fork options for their families, we simply cannot afford the largest property tax increase in California history.”

Backers of the property tax split roll include labor unions, social justice groups, teachers unions, environmental groups, housing advocates, Democratic Mayors of California cities, Democratic Presidential candidates, and Silicon Valley and San Francisco Bay Area philanthropic organizations: The Chan-Zuckerberg Initiative, East Bay Community Foundation, Liberty Hill Foundation, Northern California Grantmakers Association, The San Francisco Foundation and Silicon Valley Community Foundation.

Why tech should push to close corporate property tax loopholes

Last year, a portion of the gleaming new Park Tower office building at 250 Howard St. — home to the San Francisco office that Facebook leases — sold in a deal that valued the building at $1.1 billion. The buyers were Hines Interests and the Hong Kong Monetary Authority, a sovereign wealth fund. Despite the massive wealth the deal created for its multinational owners, the city and county of San Francisco received a sum total of zero in revenue from the transaction.

In May, it was revealed that the Park Tower buyers exploited a tax loophole that allowed them to avoid paying a transfer tax if less than 50% of the ownership stake changed hands. Hines Interests and the Hong Kong Monetary Authority together purchased 49% of the building, thus exempting them from San Francisco’s 3% transfer tax on deals over $25 million. The city lost out on $16 million.

The loss of that one-time money would be bad enough. But based on the way this deal was structured, the property owners are also set to avoid paying upwards of $6.6 million every year in property taxes because of this very same loophole — revenue that funds critical services that San Francisco desperately needs such as schools, mental health and addiction treatment services and affordable housing.

This type of byzantine dealmaking in San Francisco commercial real estate isn’t unique. In just the past few years, it is estimated that $35 million has been underreported in such high-value sales — enough to close SFUSD’s unprecedented budget shortfall — and that doesn’t count the additional millions the city forgoes every single year because so many older, corporately owned properties aren’t assessed at their current market value. It’s at the root of why, despite the fact that the region’s economy is booming, many residents don’t feel like the massive wealth is creating any opportunity for them.

The tech industry has caught much of the blame for the state and region’s issues, even though the choices we made decades ago — such as the decision to include corporate landowners like the Hong Kong Monetary Authority in the same property tax protections granted to homeowners — are the reason growth results in inequality instead of opportunity for all Californians.

Take the Park Tower building as an example. The $1.1 billion value of the building is derived from the fact that a company as wealthy as Facebook is the anchor tenant, and Facebook is paying its landlords some of the highest office rents in the world. Facebook is creating an enormous amount of value in that piece of real estate — all of which is going into the pockets of global corporate elites and zero of which is going to the residents of San Francisco who are underwriting the ability of these multinationals to build wealth. This structural inequity, multiplied across the millions of square feet of office space that tech companies lease in San Francisco office towers, is a root cause of many of the social ills we see on our streets.

When people wonder: how can California have both the fifth-largest economy in the world and the highest poverty rate in the country? This is why.

Aside from watching their value creation flow to corporate landowners rather than into critical infrastructure investments, this corporate property tax loophole has other negative implications for future-facing businesses in California.

• The decades-long disinvestment in public education that resulted has made it harder to hire skilled workers right here in California.

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• Since this corporate property tax loophole makes housing development more expensive by incentivizing cities to charge impact fees to developers, and by increasing the cost of land, it drives up rents while limiting the supply of new housing.

• Corporate property tax loopholes have made it harder to fund the infrastructure projects, like public transportation expansion and modernization, that growing businesses need to thrive.

Leveling the playing field so that all companies are paying their fair share not only will spur innovation, it will fund the critical infrastructure we need to grow the companies that will be the backbone of California’s economy for decades to come.

Though tech companies may not have caused the affordability crisis plaguing many of our cities, they do have a unique opportunity — and responsibility — to help contribute to solutions. By joining us in supporting the Schools & Communities First initiative to close California’s corporate property tax loophole, tech companies can make a bold statement about how our state’s 21st century economy should look. This initiative would reclaim $12 billion every year for critical local services like affordable housing and schools, while protecting all residential property from tax increases.

We can live in a world where a booming tech economy is creating more opportunity — and wealth — for all Californians, whether they are software developers or not. But it requires us to fix systemic issues, like the corporate property tax loophole, in order to get there.

PROP 13 Change Worry Property Owners, Assessor For the last 42 years, California’s Proposition 13 has kept tax increases for residential and commercial property at a 1% rate of the purchase price, capping it at 2% annual increase per year, but certain groups want to make some changes.

The California Schools and Local community Funding Act of 2020 — the initiative proposal for a split-roll property tax — has been qualified for the November ballot by labor unions and advocacy groups to repeal parts of Prop 13 and increase taxes on business properties, with exemptions on residential and farm land properties.

Anti-Prop 13 groups are currently working to gather more signatures to qualify a second version of the repeal, however, the first initiative will not be pulled until the second initiative qualifies.

California voters passed Prop 13 into law in 1978 to provide more certainty on future tax rates and to help owners from being taxed out of their homes and businesses.

According to the Howard Jarvis Taxpayers Association, some properties were being reassessed 50% to 100% in just one year.

Simply put, both measures raise taxes on commercial and industrial property by requiring reassessment at current market value at least every three years.

Business properties that have a market value of $3 million or more will be subjected to the tax increase in the new initiative.

Should a business owner be in a partnership with another businesses owner, and their combined business properties are valued at $3 million, both businesses will be subject to the increased tax.

David Kline, vice president of communications and research for the California Taxpayers Association in Sacramento, said it is very easy for a business in California to get over the $3 million mark.

“The last thing this state needs is higher taxes, and especially a tax that would increase the cost of everything we buy in California,” Kline said. “The state has $21 billion in reserves, and local property tax revenue has been going up every year for the last nine years, so there is absolutely no reason to add to the cost of living in California with higher taxes.”

Most small businesses rent the property they operate in through a triple net lease, a real-estate lease agreement where the tenant is responsible for the property taxes, building insurance and maintenance.

“Despite what proponents say, the $12.5 billion-a-year tax hike will fall on the backs of small businesses,” said John Kabateck, state director of the National Federation of Independent Business. “Nearly 78% of small businesses do not qualify for the so-

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called ‘small business exemption’ because they rent, and the increased property tax bills will just get passed onto them as part of their lease agreements, making the cost of doing business even more expensive.”

Since the tenant of the property will be the one covering the increased property taxes, they will pass on those costs to consumers.

County assessors would have a big role in the accurate and equitable administration of the split-roll system, as well as finding the adequate funding for additional staff, preparation and implementation.

The California Assessors Association (CAA) commissioned Capitol Matrix Consulting to independently review the results of a 64- question survey of assessors conducted in 2015.

According to Capitol Matrix, as many as 900 new positions would need to be created statewide to manage the increased workload, and that training new appraisers and auditors to assess complex appraisal and business audits typically requires up to five years.

“In my capacity as Fresno County Assessor, my office will be responsible for the implementation of the Split-Roll should it pass in November 2020,” said Paul Dictos, Fresno County assessor/recorder. “Our analysis confirms that I would be required to double my commercial appraisal staff and also add an equal number of supporting staff, to meet the requirements of the split- roll.”

According to Dictos, there is not a big enough pool of qualified candidates to fill the estimated 900 assessor roles. If the split-roll initiative is passed in November, assessors will have 18 months to prepare, which Dictos said is a restrictive amount of time.

Dictos also said that bigger counties like Los Angeles will poach assessors from other areas. He said that he has already had assessors leave for jobs with Tulare County and Kings County because they pay more.

Dictos has said that he is working with local colleges to create a curriculum to train and prepare assessors to meet the possible demand that might arise.

Derrel Ridenour, owner of Derrel’s Mini Storage in Fresno, has been building lots all over the state since the 1960s and currently has about 60 locations around California and another 15 planned to be built in the next five to seven years.

Ridenour said that the proposed changes to Prop 13 would cause his older properties to be reassessed and increase his property taxes, which means he would have to increase his rental rates by 20% to pay them off.

He is also concerned that rising taxes are moving businesses out of the state, and that the government will keep raising rates as they deem fit.

“If this passes, I will stop building,” Ridenour said. “I’m going to have to make some business decisions. It’s going to raise the cost of everything. Everything is going to go up.”

No, Californians aren’t being asked to repeal Prop. 13’s residential property tax limits

Widely-shared social media posts falsely claimed California politicians plan to 'repeal Prop. 13.'

Supporters of a California ballot measure that would remove some of Proposition 13’s tax protections say claims shared thousands of times on Facebook and other social media platforms have distorted their initiative.

The campaign for the California Schools and Local Communities Funding Act of 2020, also known as the "split-roll" measure, is still gathering signatures to qualify for the November ballot. It is backed by a group of union and social justice organizations.

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If approved by voters, the measure would hike taxes on factories, stores and other commercial and industrial real estate by requiring they pay property tax based on current market value rather than the value of the property when it was purchased.

It would raise an estimated $7.5 billion to $12 billion annually, according to an analysis by the nonpartisan Legislative Analyst’s Office. The money would be distributed to schools and local governments.

The proposed ballot measure, however, would not touch tax protections for homeowners.

Yet many claims on social media suggest the initiative would repeal all parts of Prop. 13, stoking concerns that residential property taxes could spike.

Here’s one example posted on Facebook Dec. 31, 2019:

A similar Facebook post by Bakersfield Tuff, a media company focused on racing and rodeo, was shared more than 2,200 times. Others have appeared on the platforms Next Door and We Chat, according to the campaign for the initiative.

Do these claims distort the truth? We set out on a fact check to find out.

Background on Prop. 13

In 1978, voters approved Prop. 13, which slashed property taxes and limited how much they could go up. It also tied tax rates to a property’s purchase price, rather than to the fluctuations of California’s real estate market, ensuring homeowners greater financial stability.

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The law remains popular among homeowners and business groups, who argue it allows neighborhoods to stay intact and older residents on fixed-incomes to remain in their homes rather than being forced out by high tax bills.

Groups such as Californians to Stop Higher Property Taxes have warned that removing Prop. 13’s commercial tax protections will lead companies to pass along any increased tax burden to consumers.

Critics of Prop. 13, on the other hand, say the law has cut too deeply into the foundation of tax revenue for local governments.

Social Media Claims ‘Completely False’

The campaign spearheading the November ballot measure contacted PolitiFact about the social media claims.

"They are completely false," said Alex Stack, spokesperson for the initiative. "It would completely protect and exempt all residential property, that means homeowners, renters and seniors."

That’s backed up by the initiative’s official title and summary prepared by the Attorney General’s office. That document says the measure exempts "residential properties; agricultural properties; and owners of commercial and industrial properties with combined value of $3 million or less."

Becerra's Role

The social media posts claimed Becerra "was putting together plans" to "eliminate" Prop. 13. There’s no evidence to substantiate that.

Becerra and others attorneys general, however, have been criticized for drafting misleading ballot measure titles and summaries. For example, Becerra was accused of giving an earlier version of this measure a friendly write-up. But attorneys general do not initiate ballot measures. A spokesperson for Becerra declined to directly address the social media posts.

Wesley Hussey, a political science professor at Sacramento State University, said the claim about Becerra planning to repeal Prop. 13 is clearly wrong and described the rest of the information as "cleverly fuzzy."

"It’s very intelligently written," he said of the posts, suggesting they may have originated with a political operative. "Only one or two spots are wrong. A lot is political opinion."

There’s no doubting the ballot measure’s significance, Hussey added.

It would be "a dramatic revision" to Prop. 13. "If passed, it would be by far the biggest change we’ve seen" since voters approved the law, he said.

Keith Smith is a political science professor at the University of the Pacific in Stockton, where he studies elections and voting behavior.

He agreed the claim about Becerra was technically wrong. But given that the initiative represents a big change to Prop. 13, some voters may see it as "a gateway" to repealing the measure altogether.

Asked if social media posts were accurate, he replied: "It depends on your perspective. Is [Prop. 13] going away? No, it’s not going away. Is [the ballot measure] proposing to do away with some aspect of Prop. 13 that currently exists? Yes."

The claims published on Facebook and other sites, Smith explained, could be more convincing to voters than any details in the ballot measure.

Earlier this month, ABC 10 Sacramento examined similar claims and found there’s no effort to eliminate Prop. 13.

Adding to the confusion about the proposed November ballot measure, there’s a voter initiative on California’s March primary ballot called Proposition 13, the School and College Facilities Bond. But it has nothing to do with the landmark measure of the same name passed four decades ago. A spokesman for the California Secretary of State’s Office said that the numbers assigned to propositions are reused through the years, sometimes leading to duplicates.

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Our Ruling

Social media posts claimed a November ballot measure would repeal California’s Prop. 13, and that Attorney General Becerra "is putting together plans" to eliminate the historic law.

The proposed measure would undo Prop. 13’s tax protections for commercial and industrial properties with a value over $3 million.

It would be a major change to the law.

But homeowners, small businesses and agricultural properties would not lose their Prop. 13 tax safeguards. That’s spelled out in the measure’s official state title and summary document.

While Becerra’s office writes the legal titles and summaries for voter initiatives, the attorney general does not put forward ballot measures. There’s no evidence Becerra is trying to eliminate Prop. 13.

In the end, the social media posts capture the real concern about potential changes to Prop. 13, but they also greatly misrepresent the specific changes the November ballot measure would make to it.

We rate their claims about repealing Prop. 13 as False.

FALSE – The statement is not accurate.

Teachers Union Promotes Property Tax Increase

‘End the shady tax breaks for corporations and wealthy investors’

Last week what is arguably California’s most powerful political special interest, the California Teachers Association (CTA), or teachers union, held its quarterly State Council of Education meeting at the plush Westin Bonaventure Hotel in downtown Los Angeles.

The CTA reported revenues of $209 million on their most recent IRS Form 990 (results through 8/31/2018), and their total assets increased from $296 million to $334 million. The CTA’s “savings and temporary cash investments” increased from $56 million to $79 million during their most recent year of operations.

Even here in California, these are astonishing sums of money. Moreover, the CTA, operating statewide, only wields about half of the teachers union’s financial firepower deployed in California. Additional financial resources come from the CTA’s national affiliate, the National Education Association, as well as from the dozens of major local affiliates, such as the United Teachers of Los Angeles.

Getting Rid of Proposition 13 Protection for Commercial Properties

A helpful mole inside the CTA’s recent meeting has provided five examples of what is one of the top priorities for the CTA these days, which is to strip commercial properties of the protections they have enjoyed under Prop. 13. To that end, they have endorsed and are major contributors to the “Schools & Communities First” state ballot initiative, likely to face voters in November 2020.

Since 1978, Prop. 13 has limited property assessments to a maximum of 2 percent increases per year when calculating the base on which to impose property taxes. The only time the taxable base value is reset is when a property is sold. If a business property is inherited, to purposes of property taxation the descendants inherit the base value without reassessment.

Let’s be clear, Prop. 13 protection constitutes one of the last, if not the last, advantage businesses have when trying to operate in California. As this first flyer shows, that last bit of relief businesses get in what is the most inhospitable state in America is not as important as putting “Schools & Communities First.”

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A very long time ago, presidential candidate Ronald Reagan famously had this to say about business taxes:

“Some say shift the tax burden to business and industry, but business doesn’t pay taxes. Oh, don’t get the wrong idea. Business is being taxed, so much so that we’re being priced out of the world market. But business must pass its costs of operations–and that includes taxes–on to the customer in the price of the product. Only people pay taxes, all the taxes. Government just uses businesses in a kind of sneaky way to help collect the taxes. They’re hidden in the price; we aren’t aware of how much tax we actually pay.”

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In reality, it’s worse than that, because the corporations that will be able to pass on higher costs to the consumer will be the major multinational corporations, the franchises, the chains, whatever outposts of big business that haven’t already pulled out of California.

The victims, that will not be able to pass on higher costs to the consumer when their property taxes suddenly go sky high are the small family owned businesses. Many of these small businesses are multi-generational, and the only reason they have been able to stay in business is because their property taxes are manageable. But have a look at this next flyer.

According to the CTA, the “Schools and Communities First” Act will “level the playing field for all the businesses that already pay their fair share.” Wrong. It will tilt the playing field in favor of the mega-corporations, taking away the last advantage of the little guys.

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The dirty secret that the CTA in particular and California’s one-party political establishment in general don’t want voters to know is that over-regulation helps big business. The biggest, most financially secure businesses use regulations to consolidate their position at the top, while the smaller competitors die off because they can’t to afford to comply.

If you’re wondering how the CTA intends to get the “Schools & Communities First” Act onto the ballot, have a look at this next flyer. There’s big money behind gathering signatures, but in Los Angeles last week the CTA was making sure every available activist had a chance to get personally involved.

How could anyone refuse this pitch? Look at the boxes that are prechecked: “End the shady tax breaks for corporations and wealthy investors.” Too bad the biggest ones are the least harmed by this change in the law, while the mom and pop businesses are going to drop like flies.

As for “Reclaim over $12 billion per year for K-12 schools and communities,” well, that’s right, the estimated annual proceeds of $12 billion – 100 percent of which will be passed on to consumers in the form of higher prices – will be thrown into the maw of California’s public education budget.

The problem with this is simple: The educational policies supported by the CTA are not going to improve education. In fact one might say it is the educational policies supported by the CTA that have grossly undermined the quality of K-12 public education in California. So we’ll give them more money with no change in these policies?

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This next flyer shows the reach of the CTA, enlisting an army of teachers and other school employees to actively solicit signatures for the “Schools & Communities First” Act. But it’s important to note that the CTA, and the PAC it supports, does not need volunteer assistance.

According to the California Fair Political Practices Commission, the “top aggregated contributions” for the “Schools & Communities First” Act, Measure # 1864, already has collected $11.5 million, which even these days should be sufficient to pay professionals to gather the requisite signatures.

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What Ought to be Preconditions for Increasing School Funding?

The problem with opposing measures like this are rooted in the very human and very virtuous urge most people feel to do the right thing. Who opposes something that will “help the children learn?” Who doesn’t want teachers to receive a “living wage?” The answer, of course, is that nobody apart from the most hardened misanthropes would ever oppose these things. The problem is that the educational policies the CTA pushes are not going to help the children learn, and the pay increases they want to give the teachers will not reward the best teachers.

For example, whether or not all public school teachers are underpaid is debatable, but clearly the finest teachers are underpaid, because the union work rules do not sufficiently reward the finest teachers. The Vergara case, not even heard by the California Supreme Court based on a technicality, offers compelling evidence of the damage caused by these work rules.

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In the case, which challenged statutes governing layoff, dismissal, and tenure policies, the plaintiffs argued that by favoring seniority over merit in layoffs, by making it extremely difficult to fire incompetent teachers, and by awarding tenure after barely a 1.5 years of classroom observation, students were denied quality education. Moreover, the negative impact of these statutes had a disproportionate impact in low income communities. Watch the plaintiff’s closing arguments, made six years ago in a Los Angeles courtroom, to see how persuasive those arguments were and also to realize how much California’s students lost when that case died.

California’s teachers should be paid more when California’s teachers are truly held accountable for their performance and when incompetent teachers are fired.

One may argue endlessly about the effectiveness of union work rules, just like one may argue about Common Core and a host of other curricula that are, depending on who you ask, either necessary preparation for life in the 21st century or divisive and destructive indoctrination. But it wouldn’t matter if parents had a choice about where they send their children to school.

And this brings us to the other big issue, school choice. The CTA opposes expansion of charter schools, making the dubious claim that charter schools take money away from traditional public schools. The problem with that claim is that if the charter schools were defunded, returning that money to the traditional public schools, the charter school students would also return to traditional public schools, making crowded classrooms even more crowded. For much more on the fallacy that charter schools damage the finances of traditional public schools, read “Modest Strike Settlement Nonetheless Puts LAUSD in Even Worse Financial Shape.”

Moreover, why should charter schools, which compete for students, permit diverse educational strategies, and leave power in the hands of fully accountable principals to hire and fire teachers, be the only solution? Why are school vouchers considered a third rail by education reformers as much as by the opponents of vouchers? Why? Why not allow parents to receive vouchers that they can use to pay for their children to go to any accredited school they want, whether it’s public, private, charter, parochial, or home schooling? Why should parents whose children could never thrive in a traditional public school pay taxes to support those schools, then also have to pay tuition for private schools?

The bottom line with the California Teachers Association is that it does not want teachers or schools to be held accountable for their performance, much less to compete for students. They just want more money.

Prop 13 Split-Roll Tax Increase Would Hurt Business, and Affordable Housing Efforts

No longer the ‘Golden State,’ California is the ‘tax-me’ state

California Gov. Gavin Newsom announced during his budget press conference he is on a mission to force cities across the state to build more affordable housing, or risk losing state transportation dollars. But with a Constitutional Amendment initiative on the 2020 ballot threatening to remove tax protections on commercial and industrial properties, Newsom’s affordable housing construction boon may end up being a bust.

In the past eight years, local governments across the state have enacted more than 800 general and special taxes on businesses and residents – perhaps incentivizing cities and developers could be more effective.

The liberal dream to undo Proposition 13

“It has been a liberal dream for decades to undo parts or all of Proposition 13, the seminal California initiative limiting the property tax rate,” the Sacramento Bee reported last year.

Proposition 13 was passed by voters in 1978 because as property values rose rapidly through the 1970s, property taxes also skyrocketed, driving many families and retired couples out of their longtime homes.

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Prop. 13 was so effective when it was passed, within two years, 43 states implemented some kind of property-tax limitation or relief, 15 states lowered their income-tax rates, and 10 states indexed their state income taxes for inflation, the Hoover Institute reported.

With passage of Prop. 13, property tax increases were limited to no more than 2 percent per year as long as the property was not sold. Once the property is sold, it is reassessed at 1 percent of the sale price, and the 2 percent yearly cap becomes applicable to future years, allowing property owners to be able to estimate the amount of future property taxes.

Yet opponents of tax limits continually say publicly that big corporations get away without paying their “fair share” of property taxes. It’s a common theme in California politics.

However, since 1978, all legal challenges to this have been overturned by higher courts of law, according to Jon Coupal, president of the Howard Jarvis Taxpayers Association, named for the author of Prop. 13. Coupal said that Prop. 13 has been one of the most adjudicated laws in the history of the state, yet continues to hold fast.

Opponents of Prop 13 Seek to Split The Tax Protections, Target Businesses

A coalition of organizations supportive of higher taxes qualified a constitutional amendment for the 2020 ballot, to gut one of California’s only remaining taxpayer protections: Proposition 13.

Proposition 13 was a landmark decision by California’s voters to limit property taxes.

However, if the “split roll” is passed by voters, this would tax commercial and industrial properties at market value, rather than when the property is reassessed because of a sale. It’s already a constant challenge for commercial property owners because counties annually attempt to reassess a property’s value without a sale occurring, forcing property owners to appeal the tax amount. And counties are not justifying or quantifying the increase in commercial property values forcing owners to appeal.

Proposition 13 protections for homeowners will remain in place.

Yet, Proposition 13 has stabilized the flow of property tax revenue to local government. It has served as a conduit to stop the volatility of market values from affecting the flow of property tax revenues to cities.

According to Coupal, split-roll proposals will adversely impact the cost of doing business in the state, result in higher prices and reduced employment. Coupal also said that a split roll could have unintended consequences for small businesses, many of which lease property from large business owners.

The state’s politicians have long claimed that Prop. 13 is behind California’s volatile reliance on taxes. And there is a well-worn myth that property taxes disproportionately fall on homeowners instead of commercial property owners. But studies consistently find that commercial and industrial property is being assessed for tax purposes at values that are closer to market values than is the case for owner-occupied residential property.

“Not only did Prop. 13 not slow down the tax burden” on California landowners, Coupal said, “we’re not a low-tax property tax state. We’re in the middle.” Coupal said efforts to rework Prop. 13 would be exactly the wrong message to business and job- creators. California businesses should reject efforts leveraging threat of split roll for other tax hikes

Gov. Gavin Newsom wants to make a deal for tax reform in California. Perhaps echoing his campaign slogan, “Courage, for a change,” he told reporters that Gov. Jerry Brown “had no interest in this, even at the peak of his power, influence and insight.”

Courage is an interesting thing in politics. It sometimes recalls the joke about the most common “last words” in the English language: “Watch this!”

Newsom said he would like to use an initiative that has qualified for the 2020 ballot as leverage in a wider negotiation. The California Schools and Local Communities Funding Act would revoke the protection of Proposition 13 from most commercial

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properties, requiring the reassessment to market value on a regular basis. Under current law, assessments are based on the purchase price of the property and can rise no more than 2 percent annually until a change of ownership occurs.

The proposed measure would create a “split roll” property tax, sparing homes but sharply raising taxes on California businesses, collecting about $11 billion per year for cities and school districts to divide.

“My desire is to use this as an exercise in bringing the parties together to see if we can compromise on a more comprehensive tax package,” Newsom said.

The package would likely include a new sales tax on services similar to one proposed last year by Sen. Bob Hertzberg, D-Van Nuys. Senate Bill 993 was opposed by a long list of business groups, trade associations and taxpayer advocates. It was allowed to die quietly.

Now Newsom is raising the possibility of a grand bargain, a negotiation in which businesses might be persuaded to support a new sales tax on services in exchange, perhaps, for the split-roll property tax measure being withdrawn, or for exceptions and exemptions from the law.

The California Schools and Local Communities Funding Act contains exemptions for certain commercial real estate, including apartment buildings and some small businesses. SB993 contained exemptions for schools, child care facilities, government agencies, and certain businesses including automotive parts and restaurants.

Now, everything is negotiable.

Under a state law passed in 2014, the proponents of an initiative have the opportunity to withdraw the measure after it has qualified for the ballot. This allows advocates to negotiate with the Legislature and the governor for a new law that addresses their issues without a costly election-year battle. Similarly, the Legislature can place a new measure on the ballot by approving it with a two-thirds vote in the Assembly and state Senate.

What this means for ordinary Californians is that their signatures on petitions to place a measure on the statewide ballot are now just one more bargaining chip in a backroom negotiation that will determine who pays, and how much.

California businesses don’t have to play ball with the governor. They could oppose both the property tax increase and the sales tax on services. Homeowners would certainly join them in fighting an attack on Proposition 13, and a sales tax on services has been killed in the Legislature before.

Gov. Jerry Brown cautioned as he left office that the cost of doing business in California is already high. It’s a heads-up that the new governor would be wise to keep in mind. Changing Prop. 13 could worsen California’s housing crisis. Here’s how

For four decades, Proposition 13, the property tax reform that passed in 1978, has been blamed for many of the ills that have befallen California.

Working with Howard Jarvis, a Proposition 13 co-author, and later running his taxpayers association, I have followed the multiple attacks on the measure, many silly and outrageous. Now the attacks are amped up along with a supposed, but flawed remedy.

In discussions of where new money would come from to solve the Los Angeles Unified School District labor dispute and teacher’s strike, a ballot measure designated for the 2020 statewide ballot to change to Proposition 13 often is mentioned.

The initiative promises to split the property tax roll between commercial and residential properties.

If approved, the split roll initiative would come with long-term problems and exacerbate issues that were raised during the teachers’ strike that would affect all of California.

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Implementing a split roll would mean that commercial property would be taxed at market value. That would bring in more revenue to schools and local governments. But supporters of the split roll stop the discussion at that point, and fail to discuss the far-reaching consequences of undoing Proposition 13.

High housing costs were a constant refrain during the teachers strike. The lack of housing makes it more difficult for teachers to live near where they work, a curse for many middle class Californians.

Imagine what would happen if split roll were a reality. What do you think would happen when local governments would choose between green-lighting a commercial venture that would bring in gobs of new revenue for government as opposed to approving a housing project?

Just as taxpayers make adjustments to reduce their taxes, government officials embrace projects that will increase revenue. There are many examples of such behavior on both sides of the tax equation such as the infamous window tax of the 18th and 19th centuries in Europe.

In response, homeowners boarded up windows to avoid the tax. Tax collectors have similar reactions in the opposite direction. They will certainly okay revenue-producing developments ahead of housing projects.

Apparently there was no concession by the teachers’ union in the strike settlement to control pensions and health costs, two items that are driving the district toward insolvency, according to the Los Angeles County Board of Education and Los Angeles Unified School District Superintendent Austin Beutner.

Pension and heath costs are a big problem for local and state governments, just as they are for schools. The alternative is to turn to taxpayers to fund these generous benefits while taxpayers themselves struggle with their own retirement and health care situations.

But there is an element to the troubled pension situation that could be further damaged by a split roll. Many pensions rely on commercial properties to increase portfolios. With raised property taxes, commercial properties will be devalued and another debilitating weight would be added to government pensions holding business properties.

Under Proposition 13, property tax revenues have increased well beyond inflation and population growth. The property tax under Proposition 13 is the steadiest tax in the state because during economic downturns only recently purchased property is re-evaluated downward.

Under Proposition 13, most property taxpayers continue to pay the expected taxes due while both sales and income taxes reduce sharply in a recession.

If all commercial property tax rates are pegged at market value, and a recession hits, commercial property would be reassessed downward and local and school budgets will take a huge hit.

In addition to these problems, business owners forced to pay higher property taxes would pass those costs onto consumers, and that would diminish the state’s economy.

For residential property taxpayers there is another thing to keep an eye on. Is the move toward a split roll the first step to taking away Proposition 13 protections from homeowners?

At a recent speech to the Palos Verdes Chamber of Commerce, noted Los Angeles area economist Christopher Thornberg raised the issue saying he would flip the split roll, keeping Proposition 13 on commercial property and getting rid of it on residential property to help local governments fund services related to homes.

You can bet the idea of eliminating all of Proposition 13 is on the mind of those advocating more and more government spending and the split roll ballot fight will be the first test.

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CONNECTICUT

Connecticut cities, solar installers locked in legal fight over property taxes

Court cases dispute the definition of “private residential use” for exempting solar installations from property taxes.

At least 15 municipalities in Connecticut are locked in court battles with solar companies who say they are wrongfully taxing residential solar installations.

Since 2017, nearly 200 lawsuits involving hundreds of properties around the state have been filed in the state Superior Court. At the root of the challenges is a state statute granting a property tax exemption to renewable energy sources that generate electricity for “private residential use.”

A few years ago, some municipal tax assessors began interpreting that wording to mean that solar panels that are owned outright by the homeowner and/or produce power solely for the property are exempt, while those that feed power onto the grid or are owned by a third party are not.

So they began assessing property taxes on systems in which the homeowner relied on leases or power purchase agreements. In some cases, installations were assessed after having previously been exempted.

“The problem is the statute is very gray and people have different interpretations,” said Shawna Baron, assessor for the town of Cromwell and president of the Connecticut Association of Assessing Officers. “It’s our job as assessors to follow the law and implement it the best we can.”

Cromwell is among the towns being challenged in court. Solar companies argue that systems with leasing or power purchase agreements should be exempt under the law.

Municipalities have a lot at stake: The solar companies are seeking a refund of the taxes they’ve paid out in the past few years. In Cromwell, that adds up to more than $200,000 in revenue so far, Baron said.

Attempts to reach a legislative fix have so far failed. Last year, lawyers for the municipalities proposed legislative language to counsel for the solar companies that would have expressly exempted all residential panels moving forward, while at the same time allowing towns to keep the revenues they’d already collected, according to Donna Hamzy, advocacy manager for the Connecticut Conference of Municipalities, an organization representing all 169 communities in the state.

“They discussed it as the most uniform and equitable way of moving forward,” she said. “It would also eliminate the need for litigation.”

But the municipalities were caught off guard, she said, when a bill suddenly “popped up” that clarified the scope of the exemption but omitted any language holding towns harmless for the previous assessments. It passed the House, but stalled in the Senate.

“Now here we are having had a year pass without any effective legislation to negate the need for continued litigation, which would have saved the towns additional legal fees,” Hamzy said.

Similar legislation is back this year. The sponsor, Rep. Joseph P. Gresko, D-Stratford, said he hopes lawmakers are able to put the matter to rest this session. His town is also a party to the lawsuits, with solar companies seeking to recoup hundreds of thousands of dollars.

“Ideally, I would love to stop this from happening in the future,” said Gresko, who works as sustainability coordinator for the city of Bridgeport. “We could say to the solar companies, ‘We closed the door going forward, but you’re not getting your money back from the towns.’ This is where the compromise would have to come in.”

That’s exactly what counsel for several of the towns asked for at a public hearing on the legislation last week. Attorneys Benjamin Proto and Kari Olson submitted testimony seeking an amendment that would validate the collection of taxes on commercially owned residential solar systems through the October 2019 grand list.

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“With the difficult fiscal situations that municipalities presently find themselves in, as well as the substantial cost to continue litigating these tax appeals for both the municipalities and the solar companies, this amendment is the most appropriate and cost-effective compromise,” they said.

The lawsuits were consolidated late last year and are scheduled to move forward with discovery this year in Superior Court in Waterbury.

Other towns named in the suits include Fairfield, East Hampton, Wethersfield, Bloomfield, Norwich, Rocky Hill, Killingly, Groton, Ansonia, Somers, Greenwich, Naugatuck and Griswold.

In testimony submitted in support of this year’s bill, the Connecticut Green Bank’s legislative liaison, Matt Macunas, argued that assessors were “improperly” denying exemptions to systems with a lease or power purchase agreement. Such arrangements make up the bulk of the solar market in Connecticut, and have been critical to fueling adoption, he said.

Taxing the systems “at this critical stage will render previously constructed projects to no longer be viable and cause many future projects to become uneconomic in paying back a consumer’s investment,” Macunas said in his testimony.

Stephen Lassiter, manager of public policy for the solar giant Sunrun, which has filed about a dozen lawsuits challenging assessments, submitted a repeat of his testimony from last year, in which he argued that the assessors’ interpretation would have a disparate impact on lower-income households.

Those residents who are leasing systems wind up paying the tax as a pass-through cost from the solar company, while “those with the wherewithal to purchase a system outright will be granted a tax exemption,” he said.

DELAWARE With latest court ruling, Wilmington may see largest loss yet from property tax appeal

The owners of downtown Wilmington's Hercules Plaza building say that because they struggle to attract tenants in a stagnant office market, they should have to pay less in property taxes to the city, New Castle County and local schools.

If successful, they could reduce their city property tax bill by nearly $400,000 a year, which would be one of Wilmington's largest revenue losses on a single building in recent years.

A Delaware Superior Court judge has partially sided with owner McConnell Johnson Real Estate, ruling last month that the county tax authority must consider the building's vacancy rates when deciding whether to lower the property's assessed value.

The case is another sign of downtown Wilmington's struggling office market, and the latest crack that Delaware's courts have dealt to the outdated method used by all three county taxing authorities to value real estate.

The Delaware Supreme Court previously ruled that a building's depreciation must also be a factor in assessing a property's value — before New Castle County then calculates what that value would have been in 1983, the last time the county comprehensively valued every property.

Those assessment methods are currently on trial in a separate case before the Delaware Chancery Court, in which school funding activists and Wilmington officials claim all three counties' three- to four-decade-old property values are so inaccurate, they violate the state constitution.

The Hercules case, however, presents a revenue quandary for the city. It loses taxes when declining commercial properties get their assessments reduced, but real estate sources say in an "anemic" local office market, high taxes on those buildings hurt the local economy, too.

"Commercial landlords will not invest in these properties and lenders will not lend" when they see property taxes are high compared to rental income, said Wills Elliman, senior managing director at Newmark Knight Frank.

McConnell Johnson has been trying for the past two years to cut the Hercules building property value nearly in half. 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 12-story office building at 1313 N. Market St. is currently assessed at $41 million, making the owners Wilmington's sixth- highest source of property tax revenue, according to a recent city financial report.

The firm argued to the county, which sets the assessment values that Wilmington and local school districts use for their own taxes, that the property is over-valued.

Neither Paul McConnell nor Scott Johnson, the firm's partners, responded to requests for comment.

Named for the DuPont spinoff that once was its sole tenant, the Hercules Building has struggled to lease space. In 2016, the owners nearly defaulted on a loan used to purchase it, until a Brooklyn real estate investor purchased the mortgage for nearly a third of its value.

The building had a 45% vacancy rate in 2017 and a 33% vacancy rate last year.

Superior Court Judge Diane Clarke Streett left in place most of the county's methods for calculating the building's value, including rental income, but ordered the New Castle County Board of Assessment Review to consider the effect of the vacancy rate.

"New Castle County continually works to ensure the accuracy of its property tax assessments," county spokesman Brian Cunningham said in a statement Tuesday. "New Castle County hired an independent expert who confirmed the accuracy of the County’s assessment of this property."

The Board of Assessment Review will decide whether to re-value the building in an April meeting.

The case is one of several recent attempts to reduce commercial buildings' property values that Wilmington officials say have thrown the city's financial planning into disarray, prompting them to join the pending Chancery Court case asking a judge to force the counties to reassess their properties.

BACKGROUND: A dispute over Delaware's property taxes pits Wilmington against New Castle County

Because New Castle County has not conducted a reassessment of all properties since 1983, owners' tax assessments often have little relation to their properties' value on the open market. Properties countywide have increased or decreased in value since 1983, and at different rates.

Even new and renovated buildings are assigned a best-guess estimate of what they would have been worth nearly four decades ago, as Delaware is one of a handful of states that does not require regular property reassessments.

THE FULL STORY: Delaware homeowners pay taxes that aren't based on actual value of their property

Commercial landlords are the only group that have been able to bring their assessments closer to their buildings' current worth in Wilmington, where older buildings have struggled to compete in an oversupplied market with newer office space over the county line.

The Delaware Supreme Court in 2017 ruled that the county must consider all relevant factors to a building's property value – including depreciation – in setting property values. The ruling opened the door for commercial property owners to get lower tax assessments.

The decision came as the county looked to clear a backlog of assessment appeals. County Executive Matt Meyer has said that case threw the county’s valuation process “into a crazy place, into the twilight zone."

HOW IT WORKS: A quick tour of Delaware's unequal property tax system

The confusion was on full display at a meeting of the Board of Assessment Review on Wednesday. County attorney Nicholas Brannick explained to board members that in the complex formula of determining the worth of an income-generating commercial property, they now had to explicitly factor in vacancy rates, in addition to depreciation.

"You're not valuing the building in 1983," he said. "You're valuing the building today and then transporting it to 1983." 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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He said he expected the additional factors to become "a recurring problem" for the board as more commercial building owners appeal their values.

BACKGROUND: Why are Delaware's property taxes unequal? Politicians haven't acted

In a two-year period that ended in 2018, successful appeals removed $129.5 million of taxable value off the county’s tax rolls, according to data obtained by The News Journal, including $9 million off the value of one of the DuPont Building's tax parcels.

Few of those reductions are as large as the one McConnell Johnson is seeking for the Hercules Building.

Wilmington officials have testified that they struggle to budget for the expected losses from assessment appeals each year.

Without a countywide reassessment, the city cannot make up the lost taxes with an increase in revenue from properties that are currently under-valued, Mayor Mike Purzycki has said.

"This tax appeal decision is a perfect example of what happens when it takes 37 years to conduct a countywide reassessment," Purzycki said in a statement Tuesday.

He said he expects a decision in the statewide reassessment case prior to the Hercules Building's new assessment appeal before the county board.

HAWAII

Property tax changes coming

Eliminating the solar water tax credit, reclassifying small agriculture lots to residential and repealing an obsolete program are three ways the county could generate revenue and make its property tax code more equitable, according to a report to be considered next week by the County Council.

In all, the county would see more than $1.3 million in revenue or savings annually by making adjustments to more than 20,000 lots.

The Real Property Tax Review Working Group is making the recommendations in its third report to the council. The administration agrees with the recommendations, said county Real Property Tax Administrator Lisa Miura.

“Real Property Tax does view these changes as bringing consistency, fairness and equitability,” Miura said.

At least one solar equipment installer, John Collins with Kona-based ProSolar Hawaii, doesn’t see it that way, at least as far as the solar credit.

“I don’t understand what they’re trying to do,” Collins said Wednesday. “There’s plenty of people who don’t have solar water; electric bills are going crazy. Why does the county want to take away the incentive?”

The solar program, which started in 2008, offers a one-time, up to $300 credit off property taxes for those installing a solar water heater. It applies only to retrofitting existing homes, as all new buildings have been required to have solar hot water installed as of 2012.

The county will continue not assessing the value of solar water improvements when it applies property taxes, just as it does with photovoltaic cells for electricity, which carry no county tax credit, Miura said.

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The group researched the possibility of creating a photovoltaic credit, but decided not to recommend a new tax credit, since photovoltaic improvements are also not assessed for property tax purposes, according to the report.

The solar property tax credit cost the county about $25,000 last year.

A second change will bring in much more.

Reclassifying small agriculture lots of less than 1 acre that aren’t doing agriculture and don’t have a preferential dedicated or non-dedicated ag use, or are in the homeowner class, could bring in an extra $1.3 million this year.

“There are properties under 1 acre of land that have been receiving the agricultural class tax rate when the highest and best use is residential,” Miura said. “Three meetings and a lot of discussion occurred over the agricultural zoning of a huge portion of this island while many of these parcels are clearly utilized as residential and have no intent of doing agriculture.”

Miura said the affected property owners will receive a letter in February and will see their tax classification change from agriculture to the higher residential tax rate this year. The current classifications are not applied consistently, leading to unfairness, she said. The tax office can make the change without a change in county code or council action.

“This is consistent with State Land Use Commission statutes which provide for the construction of single-family dwellings on lots existing before June 4, 1976,” the report states. “There are currently 19,604 parcels which will experience a tax class rate change. 6,665 will experience an increase in taxes with the remaining parcels not anticipated to be impacted by the recommendation.”

Property owners in the agricultural class pay $9.35 in tax for every $1,000 in property value, while those in the residential class pay $11.10 under current property tax rates.

A third recommendation would do away with a tax exemption program known as the “non-speculative residential” program, a move advocated by both the working group and the Real Property Tax Board of Review.

A 2008 law closed the program to new property owners, but those who were grandfathered into the 1958 program may have an unfair advantage over other property owners who can’t participate, Miura said. The program allows property owners to freeze their property value for five or 10 years by dedicating it to their own homestead use. The county’s homeowners property class and a homeowners exemption have taken the place of the program for all but 483 property owners.

Recommended steps include informing all owners currently with parcels in this program of the repeal for tax year 2019, allow all parcels currently in this program to automatically convert these parcels to the homeowner exemption program at the 2019 frozen value and explain the 3 percent cap would then be applied to the tax year 2020.

The impact to the real property tax revenue in tax year 2020 based on the current frozen non spec values would be $23,000 total. In addition, the county will save approximately $4,400 per year in staff time allocated to administering the program.

The working group, made up of property owners and managers, general public and planners, with county staff support, was formed in 2017. Among its goals are to increase fairness, incorporate best practices into tax administration and propose additional tax programs. There is also a committee devoted to agricultural issues.

The council Finance Committee is scheduled to consider the recommendations at its 9:45 a.m. meeting Monday in Hilo, with videoconferencing to the West Hawaii Civic Center, the Waimea and Pahoa council offices, the old Kohala courthouse and the Naalehu state office building.

IDAHO Idaho lawmaker introduces bill to repeal property tax statewide

The bill would nearly double the state sales tax in order to make up the lost revenue. 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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One Idaho lawmaker wants to make property taxes a thing of the past. Representative Jason Monks (R-Nampa) is the assistant majority leader in the State House and wants to completely get rid of property taxes but raise the state's sales tax by over 5%.

"I think property tax is kind of an evil tax,” Monks said. "To me, it dates back to the dark ages or the middle ages when the lords of the manor had to pay taxes to the Kings and the Queens otherwise they didn't get to keep their land and frankly that's what we still have that system today.”

Monks wants to do away with the entire thing so he introduced a bill that would do just that. His personal bill would repeal property taxes, and in return, the state sales tax would nearly double from the current 6% to 11%.

“We need to replace that with something else, and 11.3% is parity across the board and that's what it takes,” Monks said.

This means it would take nearly doubling the state sales tax to make up the lost revenue that would be gone if the state eliminated property tax. Because this bill is proposing to upheave the state's entire tax system though, Monks doesn’t expect it to become law this year.

“Big change requires time,” he said. “I call it a thought grenade; we threw it out there and wanted to see how it went and how it works and what the problems are.”

A big reason why Monks wants to start the conversation around repealing the property tax is because of the stories of people being priced out of their homes due to them.

“Especially for those who are on fixed incomes, this is a huge deal for them,” he said. “They can stay in their houses and never have to worry about getting kicked out of their houses because property taxes continue to escalate.”

The state legislature is introducing a lot of possible solutions to the property tax issue during this session. During the interim, a committee met to come up with some possible solutions that would be introduced this year.

Monks told KTVB he doesn’t want his idea to overshadow some of the short-term solutions that are being thought of this year, and that his bill is a long-term solution.

If Monks' bill were to become law one day, it includes a constitutional amendment that Idahoans would get to vote on that would prohibit property taxes from being collected again.

Bill intended to add transparency to property tax collection moved along

The Idaho House Revenue and Taxation Committee approved its first property tax bill of the 2020 session Wednesday on a unanimous voice vote.

Sponsored by Rep. Steven Harris, R-Meridian, the measure requires city and county officials to publicly reserve any foregone property taxes if they want to use them in future years.

Under current law, Harris explained, taxing districts are allowed up to 3 percent annual growth in property tax revenues. If they choose to levy a lesser amount, the unused portion “pretty much automatically” accumulates in the foregone tax balance. It can then be tapped in future years.

Foregone taxes are why taxing districts periodically levy amounts that exceed the 3 percent cap.

Harris’ bill doesn’t change their ability to tap any foregone taxes; however, it does require the districts — including cities and counties — to “reserve” the foregone amount by adopting a public resolution.

“The intent of this bill is to add transparency,” he said. “If they use less than the 3 percent and want to (tap that amount) in subsequent years, they have to reserve it in a public resolution. In my view, it might put pressure on them to not reserve it.”

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No one testified on the legislation during a brief public hearing. The bill was forwarded to the full House with a favorable recommendation.

This was the first property tax bill to make it through the committee this session, but two others are waiting in the wings. One would cap the maximum increase in property taxes at 3 percent per year — including new construction, annexations and property classification changes, but excluding foregone taxes. The second imposes a temporary freeze on any property tax increase, to give the Legislature and stakeholders more time to decide what to do about rising property tax rates.

ILLINOIS

School Districts File Amicus Curiae Brief in Landmark Federal Property Tax Lawsuit

Last week, nine Cook County school districts and Calumet City filed an amicus curiae (“friend of the court”) brief in the Seventh Circuit Court of Appeals in support of rehearing in the case A.F. Moore & Associates Inc. v. Pappas. The amici parties urge the Court to reverse an unprecedented decision which, if upheld, would allow some tax payers in Cook County to challenge property tax assessments in federal court, rather than proceeding through the state administrative and judicial system. Franczek P.C. represents five of the school districts joining the amicus filing. Plaintiffs, a group of commercial and industrial taxpayers, are challenging their real estate tax assessments on constitutional grounds, claiming $27 million in tax refunds. If the plaintiffs are successful, the amici would be responsible for refunding 71% of this amount, making the case a matter of urgent concern to the affected taxing agencies.

The federal complaint was filed in in 2018 after plaintiffs grew frustrated with state court proceedings that remain unresolved after more than a decade. In those state court cases, the plaintiffs allege that other properties were systematically underassessed while their properties were not. As a result, the plaintiffs argue that their constitutional rights were violated.

It is highly unusual for a state court property tax dispute to migrate to federal court. The County and the Assessor’s Office filed a motion to dismiss the federal lawsuit arguing, among other things, that the federal court lacks jurisdiction over state court matters because the Tax Injunction Act prohibits federal court involvement so long as there is a “plain, speedy and efficient” remedy under state law. The district court granted the motion to dismiss. However, the Seventh Circuit Court of Appeals reversed, holding that there was in fact no plain, speedy, and efficient remedy in state court.

After the Court of Appeals decision, the County and Assessor immediately filed a petition for rehearing. In support of that petition, Franczek P.C. and others filed an amicus brief on behalf of several affected school districts and one municipality. In the brief, the amici urge the Court to reconsider its position. The reasons put forward for reconsideration focus on the potential exposure to taxing districts from allowing property tax litigation in federal courts, including attorney’s fees and costs, potential class action lawsuits, and the inability of taxing agencies to budget for refunds. The amici argue that at a minimum, the issue of whether plaintiffs have a sufficient remedy under state law should be referred to the Illinois Supreme Court, which is in a better position to adjudicate this issue.

The outcome of this case will have ramifications for all government units in Cook County that rely on property tax revenue. Depending on the school district, the refund exposure could amount to millions of dollars for the multiple years at issue. We will continue to keep our clients advised of the developments on this important issue.

Illinois governor focuses on ethics reforms, property tax relief and other priorities in State of State speech

Gov. J.B. Pritzker discussed the need for ethics reforms, property tax relief, criminal justice reform and clean energy policies in his State of the State address Wednesday.

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The governor addressed the General Assembly a day after former state Sen. Martin Sandoval pleaded guilty to accepting more than $250,000 in bribes to protect a red-light camera operator for several years. Sandoval's plea agreement requires him to cooperate with prosecutors.

Pritzker didn’t mention Sandoval or any of the other current and former state lawmakers who have been caught up in federal investigations over the past year by name. However, the governor made it clear that he wouldn't tolerate corruption at any level.

“We have to work together to confront a scourge that has been plaguing our political system for far too long,” Pritzker said. “We must root out the purveyors of greed and corruption – in both parties – whose presence infects the bloodstream of government. It’s no longer enough to sit idle while under-the-table deals, extortion, or bribery persist. Protecting that culture or tolerating it is no longer acceptable. We must take urgent action to restore the public’s trust in our government. That’s why we need to pass real, lasting ethics reform this legislative session.”

To that end, the governor said he would support legislation that would prohibit lawmakers from serving as lobbyists while in office and a cooling-off period that would prohibit lawmakers from immediately becoming lobbyists after leaving office.

“It’s time to end the practice of legislators serving as paid lobbyists,” he said. “In fact, it’s time to end the for-profit influence peddling among all elected officials at every level of government in Illinois. Disclosure of conflicts of interest and punishment for breaching them must be included in any ethics package for us to truly clean up government. Most states have a revolving door provision for legislators, and it’s time for Illinois to join them. Elected officials shouldn’t be allowed to retire and immediately start lobbying their former colleagues. It’s wrong, and it’s got to stop.”

Pritzker said other reforms must also be addressed this year and said he expected recommendations form a commission on lobbying practices by the end of March.

“Restoring the public’s trust is of paramount importance,” he said. “Let’s not let the well-connected and well-protected work the system while the interests of ordinary citizens are forgotten. There is too much that needs to be accomplished to lift up all the people of Illinois.

“It’s about how we, as public officials, conduct ourselves in private that also matters,” he said. “Common sense and basic decency need to prevail in the everyday interactions that make government work. People need to treat disgusting suggestions with disgust. The old patronage system needs to die...finally and completely. The input of women and people of color need to be treated as essential to decision making – not as some token show of diversity.”

The governor also spoke about the state’s high property taxes.

“Property taxes in Illinois are simply too high,” Pritzker said. “That’s why it’s time to put the best ideas to work from both sides of the aisle. Local governments continue to max out their levies even when they don’t need to. There are perverse incentives in state law that encourage that.”

Pritzker said laws could be changed to allow local governments to reduce property taxes and allow taxpayers to consolidate taxing bodies.

“We can change the law to support local governments and lower property taxes,” he said. “And with nearly 7,000 units of government in Illinois, it’s time to empower local taxpayers to consolidate or eliminate them. These changes, along with our landmark pension reform that consolidated police and firefighter pensions, can make a serious dent in property taxes.”

Pritzker said clean energy policies would be a priority in the coming year.

“Our spring agenda must also address the pressing issue of adopting new clean energy legislation that reduces carbon pollution, promotes renewable energy, and accelerates electrification of our transportation sector,” he said. “We saw the effects of climate change right here in Illinois last year with a polar vortex, devastating floods, record lake levels, and emergency declarations in more than a third of Illinois’ counties.”

The governor said clean energy measures must be designed to benefit residents.

“I’m not going to sign an energy bill written by the utility companies,” he 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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He also said criminal justice reform will be a focus of his this year.

“That starts with phasing out cash bail and following many of the recommendations made by the bipartisan criminal justice reform commission created by my predecessor, most of whose ideas were never adopted because of the rancor and dysfunction,” he said.

Early in the speech, he highlighted things on his agenda the Democrat-controlled General Assembly passed last year, including what he said was a bipartisan balanced budget and a $45 billion capital construction program paid for with tax and fee increases, adult-use cannabis legalization, more tuition assistance for college students, and raising the legal age for buying tobacco and vaping products to 21, among other things.

“We did big things to help people,” Pritzker said. “Real people who live and work here every day. We raised the minimum wage, advanced equal pay for women and minorities, provided millions of Illinoisans relief from high interest on consumer debt, and expanded health care to tens of thousands more people across the state.”

Pritzker also went after President Donald Trump.

“We stood up for human rights and civil rights when we put Donald Trump on notice that Illinois will not be complicit in his shameful and draconian immigration policies,” Pritzker said.

The governor also had pointed remarks for those who have been critical of the state and its future.

“Those who would shout doom and gloom might be loud – using social media bots and paid hacks to advance their false notions – but they are not many,” Pritzker said. “You see, we’re wresting the public conversation in Illinois back from people concerned with one thing and one thing only – predicting total disaster, spending hundreds of millions of dollars promoting it, and then doing everything in their power to make it happen. I’m here to tell the carnival barkers, the doomsayers, the paid professional critics – the State of our State is growing stronger each day."

Illinois has among the highest property taxes in the nation. It also has the worst credit rating of any state in the nation. And despite improvement in recent years, Illinois' unemployment rate has remained higher than the national average.

Despite data showing the state has led the nation in outbound migration over the past decade, the governor said his policies in the past year were working.

“Jobs and businesses are coming to this state because we are investing in the things that have always made us great: a skilled workforce, modern infrastructure, great public schools, top research universities, a robust agricultural sector, and a culture of innovation and entrepreneurship literally built into the steel frames of our skyscrapers – themselves a symbol of Illinois’ ambition and belief in the future,” Pritzker said.

The governor also referenced his progressive income tax proposal several times during the speech. The progressive income tax question will be on the ballot for voters to decide in November.

The National Federation of Independent Business put a statement out just before the governor gave his address.

“We appreciate Governor Pritzker’s list of accomplishments during his first year in office,” NFIB Illinois State Director Mark Grant said. “However, small business owners face continued headwinds in Illinois with the steep rise in the minimum wage, increased state regulations and the specter of progressive income tax by this time next year.”

“Our members urge the General Assembly and Governor Pritzker to remember that small businesses account for 99.6% of all businesses in the state,” Grant said. “Our leaders should look to the future and focus on creating an environment where our small businesses can grow and create jobs.

Next month the governor will deliver his budget address for the fiscal year that starts July 1.

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Appellate Court Sheds Light on Murky Tax Sale Process Under Property Tax Code

A large and growing source of property tax refunds in Cook County are generated when a Court reverses or vacates the sale of delinquent taxes. A recent Appellate Court decision provides a good overview of the tax sale process and how these sales can generate refunds from Illinois taxing districts. In In re Application of the County Treasurer & ex officio County Collector, the Appellate Court upheld a decision ruling that the County Assessor’s error in a property description on the Assessor’s website did not meet the threshold for “sale in error” as defined under the Property Tax Code. The Court determined the County’s mistake did not threaten the buyer’s investment or void the tax sale. Moreover, the Court stated the Property Tax Code does not mention any responsibility of the Assessor to maintain legal property descriptions on its website.

Facts of case:

At the Cook County 2015 annual tax sale, an investor purchased approximately $1.4 million in delinquent taxes on a shopping center located in Calumet City, Illinois. Due to an error on the Assessor’s website misstating the location of the property as located on Dolton Avenue rather than Dolton Road, the investor petitioned the Circuit Court to vacate the tax sale based on the Property Tax Code’s sale in error provision. The Circuit Court originally granted the petition for a sale in error. Upon reconsideration, however, the Court denied the application, determining the mistake did not affect a substantial right of ownership or rise to the level of a sale in error as intended by the legislature. The investor appealed, claiming the trial court wrongly applied the plain language of the sale in error provision of the Property Tax Code.

Ruling by Court:

Because the issue was based on the interpretation of specific sections of the Property Tax Code, the Appellate Court looked to the language and intent of the statutory provisions in question found in Section 21-310. The Court paid specific attention to the provision for sales made “in error.” Of note, provision (5) allows for a sale to be declared in error when, “the assessor, chief county assessment officer, board of review, board of appeals, or other county official has made an error (other than an error of judgment as to the value of any property).” Plaintiffs argued the plain language of the statute warranted a determination that the tax sale was made in error.

In addition to considering the plain language of the statute, the Appellate Court considered its context, its purpose, the problems it sought to be remedied, and the consequences of construing it one way or another. The Court determined that interpreting the county’s error as broadly as the investor proposed, “would frustrate the purpose of the statute and yield absurd results.” The Court noted the purpose of the sale in error section of the Property Tax Code was meant to protect buyers from suffering an “inadvertent loss” rather than for alleviating any error, even one that is “inconsequential and has no effect on the tax sale process.” The Court determined the legislature did not intend for section (a)(5) to create a loophole for buyers to request a sale in error based on a harmless County mistake that that in no way jeopardizes the investor’s investment or implicates the tax sale process.

The tax sale process is generally invisible to taxing districts and serves as an effective way to get delinquent properties back on the tax-paying rolls. As this case illustrates, there are ways for the investor to unwind a tax sale. Here the Courts have rebuffed an effort to have a tax sale declared ‘in error’ when there really was no error and the investor’s investment in the tax sale was never in jeopardy. The ruling provides some direction to tax buyers and County officials and serves as a mild deterrent for unnecessary or unwarranted property tax refunds.

Property tax hikes won’t be that bad, new report says

Cushman & Wakefield study backs Cook County Assessor Fritz Kaegi in his use of new assessment techniques.

Developers and property owners complained last year higher assessments in Cook County were hurting the real estate market, driving up rents and chilling job creation. 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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But a report issued Wednesday by a leading brokerage said essentially: Never mind!

The report by Cushman & Wakefield said while owners of commercial property indeed are getting sharply higher assessments, they won’t necessarily translate into huge increases in tax bills. It supports Cook County Assessor Fritz Kaegi’s use of techniques to arrive at what he says are more accurate estimates of commercial property values.

“While potentially painful at first, Kaegi asserts that over time, his approach will increase transparency and predictability in Cook County taxes, improving the state’s investment climate and reputation,” the report said. It said data from last year’s reassessment in the northern suburbs support Kaegi’s reforms.

Cushman said commercial properties in that region saw an average 74.4% increase in their assessments. Even with that increase, properties that sold fetched an average price 20% higher than their assessed value, an indication Kaegi was not overshooting his mark, the report said.

“The assessment increases may be unsettling now, but a more transparent assessment process bodes well for the market long term and will undoubtedly pull some investors off the sidelines,” said Paul Lundstedt, vice chairman at Cushman. “In fact, astute investors have sensed an overreaction to the issue and see it as an opportune time to invest in Chicago.”

Much of the report is a refresher on how Cook County property taxes are computed. It notes when assessments increase substantially, the tax rate needed to raise the money that local governments request generally declines. Using Evanston as an example, it estimates a new tax rate of 5.66% vs. 9.41% in 2018.

Therefore, an Evanston property could sustain a 66% increase in its assessment and not see a higher tax bill, the report said. For an assessment that doubled, the tax bill would rise about 20%, it said.

Scott Smith, a spokesman for Kaegi, said, “We have a very complex property tax system in Cook County. We really need third- party data and analysis like this that shows the importance of our work.”

Noting several major commercial sales occurred later in 2019, Smith said investors are shopping for deals in Chicago. He also said his office has been in ongoing dialogue with investors and underwriters and posted a Chicago-specific tax rate simulator tool. “We think this is making a difference when it comes to investor confidence,” Smith said.

Among major recent deals is Sterling Bay’s decision to sell its headquarters at 1330 W. Fulton St. to German investor Commerz Real for a reported $175 million and Beacon Capital Partners’ acquisition of 190 S. La Salle St. for a reported $230 million.

“There are some astute investors that when they dig into it, they see that the situation here is not as draconian as a lot of people are saying,” Lundstedt said.

A major change Kaegi instituted was to recalculate “cap rates,” the expected rate of return from a property sale. Kaegi has said his predecessor, Joseph Berrios, used unreasonably high cap rates, leading to lower estimates for property values.

Lundstedt said Kaegi has made the system more transparent and property investors will overcome their natural fear of such a change.

Cook County property in the western and southern suburbs will be reassessed this year. Chicago’s turn comes in 2021. The report said the same pattern is likely to continue, with large increases in assessments but with lower tax rates cushioning the impact on actual bills.

The report is called “What’s Next: Breaking Down Chicago’s Changing Tax Landscape.” Cushman said it will be updated at mid- year.

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There’s no reason to freak out over Kaegi assessments

Though valuations increased by 74 percent on commercial properties in Evanston, the tax rate is forecasted to drop to 5.7 percent, according to Cushman & Wakefield

Cook County’s commercial property owners can still expect significant assessment hikes under Cook County Assessor Fritz Kaegi but they don’t necessarily need to brace for huge increases in their tax bills, according to a report by Cushman & Wakefield.

Kaegi is living up to his campaign promise to deliver more accurate estimates of commercial property values. His predecessor, Joe Berrios, who is under federal investigation, routinely under-assessed commercial properties.

Kaegi started his three-year reassessment in 2019 with the north and northwest suburbs, where valuations for commercial, industrial and large apartment complexes increased by more than 74 percent, compared to nearly 16 percent for homes.

“With recent commercial property reassessments coming in very high, our clients are understandably concerned about how a dramatic increase in tax liabilities might affect the long-term value of their investment,” Cushman & Wakefield Vice Chair Paul Lundstedt said in a statement. “But as this guide shows, a higher assessed value doesn’t necessarily translate to a higher tax bill. In fact, because the tax rate is likely to fall as assessments go up, some buildings may not see any tax increase and perhaps a tax reduction.”

Evanston is highlighted in the report as a case study for how property taxes may be impacted by higher assessments in other parts of Cook County.

The report forecasts that Evanston’s tax rate for 2019 and 2020 will fall to nearly 5.7 percent, from the actual rate of 9.4 percent in 2018. That means a property whose assessed value rose 66 percent between 2018 and 2019 would not see a change in property taxes, while taxes would increase by about 20 percent if the assessed value doubled or by about 50 percent if they tripled.

This report could ease widespread concerns of the looming assessments — and the uncertainty surrounding them — further slowing commercial property sales.

The south and west suburbs will be assessed in 2020, followed by the City of Chicago in 2021.

Illinois Taxpayers Score Rare TIA Win in Property Tax Dispute

On January 29, 2020, the U.S. Court of Appeals for the Seventh Circuit held the Tax Injunction Act did not bar a federal lawsuit challenging property tax assessments on equal protection grounds because the taxpayers that brought the suit did not have a plain, speedy and efficient remedy in the Illinois state courts.

A group of Illinois taxpayers sought property tax refunds in Illinois state court on the theory that, between 2000 and 2008, the county assessor assessed their properties at the rates set by local ordinance but assessed similarly situated properties at lower rates. The taxpayers argued the differential tax treatment violated, among other things, the Fourteenth Amendment’s Equal Protection Clause.

The taxpayers’ state lawsuit dragged on for more than a decade without moving beyond the discovery phase, prompting the taxpayers to file suit in federal district court. The district court dismissed the case for lack of subject matter jurisdiction based on the Tax Injunction Act, 28 U.S.C. § 1341 (TIA), which prevents federal district courts from enjoining, suspending or restraining the assessment, levy or collection of any tax under state law if a “plain, speed and efficient” remedy is available in the state’s courts.

The Seventh Circuit reversed the district court on appeal. Under Illinois law, when a taxpayer challenges an assessment based on the valuation being incorrect, the court cannot consider the propriety of the assessor’s underlying methodologies or motives. Citing the U.S. Supreme Court’s decision in Allegheny Pittsburgh Coal Co. v. County Commission, 488 U.S. 336 (1989),

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the Seventh Circuit observed that a taxpayer whose assessment complies with state law may still be deprived of the equal protections of the law if similarly situated properties are assessed at a lower rate. The taxpayer bears the burden of proving there is no rational basis for the differential tax treatment which, the court said, “generally requires engaging with the legitimacy of the policy’s state purpose.”

The court concluded that because Illinois law prevented state courts from considering the propriety of the assessor’s underlying methodologies or motives, the taxpayers could not prove their claims under the Equal Protection Clause. As a result, the taxpayers did not have a plain, speedy and efficient remedy available to them in the state courts and the TIA did not bar federal jurisdiction of their claims.

Your Assessment Notice and Tax Bill

What is an assessment notice?

Your assessment notice will look something like the above image.

It contains your home’s Property Index Number (PIN), characteristics, estimated fair market value, and assessed value. It also contains a list of exemptions applied to this property in the past few years.

How often is my property reassessed?

Cook County is reassessed triennially, which means one-third of the county is reassessed each year. This year, the south suburbs will be reassessed. The City of Chicago will be reassessed in 2021. The northern suburbs will be reassessed in 2022. Your property may also be reassessed if there are significant changes due to a permit application, property division, demolition, or other special application.

What is the difference between my assessment notice and my tax bill?

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Your assessment notice usually arrives once every three years after your township has been reassessed. Our schedule of reassessment mailing dates can be found here along with corresponding appeal dates. It does not require any action on your part though you may appeal if you believe the assessment is too high (see below).

Your annual tax bill comes from the County Treasurer’s office in two installments: one is due in February and the other is due in August.

Your reassessment will affect the second installment tax bill the following year. So if your assessment notice arrives in 2020, the tax bill reflecting this assessment will arrive in July of 2021. Any appeals of your assessment will be reflected in the second installment tax bill the following year.

How does the Assessor's Office value property?

We have explanations of our residential valuation and commercial valuation posted on our website.

If I believe the information on this notice is incorrect, how do I appeal?

If the characteristics listed for your home are wrong, if you think your home is worth less than the fair market value on this notice, or if you think there is information about your home that was not taken into account, you can file an appeal of your assessment.

Appeals can be filed with our office or with the Board of Review. Please see our Appeals section for information on how and when to file an appeal with our office. Visit cookcountyboardofreview.com for information and deadlines about appeals with their office.

If my assessment increases, does that mean that my tax bill will increase?

Not necessarily. The assessed value of your property is only one factor in determining your property taxes. Your total tax levy, set by local taxing bodies like schools, is an important factor in setting your tax rate. Your tax rate, assessment, and exemptions together determine your total tax bill.

Your property’s assessed value, tax rate, and exemptions will be used to calculate the second installment of the property tax bill you receive the following year. Property tax bills are sent by the Cook County Treasurer.

We have more information available on how our property tax system works here. To learn more about and apply for exemptions that can reduce your tax bill, visit our Exemptions section.

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Property Tax System

How is my assessment used to calculate my property taxes?

Property taxes are used to pay the levies set by local taxing bodies. Your assessed value determines your share of those levies relative to the total assessed value of your area. The levies and the total assessed value of an area determine the tax rate.

After the Assessor determines the Fair Market Value of your home, the Assessed Value of your home is calculated. For residential property owners, the assessed value equals 10% of the fair market value of the home. For most commercial property owners, the assessed value is 25% of the fair market value. This level of assessed value is the taxable amount of the property, as determined by Cook County ordinance.

Then the State Equalization Factor/Multiplier ("State Equalizer") is applied to the assessed value and this creates the Equalized Assessed Value (EAV) for the property.

Any Exemptions earned by the home are then subtracted from the EAV. Then the Tax Rate is applied to the tax levies for your community. Once those levies are added up, the total is the amount of property taxes you owe.

After any qualified property tax exemptions are deducted from the EAV, your local tax rate and levies are applied to compute the dollar amount of your property taxes. Please remember: each Tax Year's property taxes are billed and due the following year. For instance, 2018 taxes are billed and due in 2019.

Property tax bills are mailed twice a year by the Cook County Treasurer. Your first installment is due at the beginning of March. By law, the First-Installment Property Tax Bill is exactly 55% percent of the previous year's total tax amount. The Second- Installment Property Tax Bill is mailed and due in late summer; it reflects new tax rates, levies, changes in assessments and any dollars saved by exemptions for which you have qualified and applied.

Property Tax System

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Here's an example of how a tax bill could be calculated, for a home with an estimated fair market value of $100,000 and a local tax rate of 10%. Please note the Equalized Assessed Value (EAV) is the partial value of your property. It is the figure on which your tax bill is calculated. Also note that exemptions are deducted from the EAV, which will likely lower your tax bill. The exemption amount is not the dollar amount by which your tax bill could be lowered. [Figures are approximate, based on samples of FMV, EAV and a local Tax Rate. the State Equalizer shown is current until May 2020]

$100,000 Estimated Fair Market Value X.10 Assessment Level (10% for residential properties) $10,000 Assessed Value X 2.9109 State Equalizer $29,109 Equalized Assessed Value (EAV) -10,000 Homeowner Exemption $19,109 Adjusted Equalized Assessed Value X.10 Tax Rate (example; your tax rate could vary) $1,910.90 Estimated Tax Bill in dollars

Property tax savings from a Homeowner Exemption are calculated by multiplying the Homeowner Exemption amount of EAV reduction ($10,000) by your local tax rate. Property tax savings from a Senior Exemption is calculated by multiplying the Senior Exemption amount of EAV reduction ($8,000) by your local tax rate. Your local tax rate is determined by the Cook County Clerk each year, and can be found on your second-installment tax bill or by contacting the Cook County Clerk’s Office at 312- 603- 6566.

Real Estate Tax 2019: New Assessor, New Policies

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Big Changes to Come for Commercial and Industrial Property Owners

For the first time since the 2011 assessment year, Joe Berrios will not be overseeing the release of Cook County property tax assessments or appeals to the assessor's office. After 30 years of making and reviewing Cook County assessments, Berrios was ousted in favor of political newcomer Fritz Kaegi. Kaegi comes to the office without prior assessment experience, but with a mandate for change.

The new assessor has made it clear that he intends to answer the call for change with reforms in both how initial assessments are determined and how appeals are adjudicated. While this is welcomed by many, it creates uncertainty for taxpayers as changes are on the horizon. Property owners need to be prepared for these changes in 2019 and beyond.

The anticipated reforms are especially relevant for those with property in north suburban townships. Those properties are scheduled to be reassessed in 2019 and represent Kaegi's first opportunity to implement changes. The tentative schedule for the mailing of 2019 assessment notices is available online.

Besides modernizing the office and bringing transparency to the process, Kaegi has stated that he intends to "mark to market" so that Cook County assessments accurately reflect market values. While that may seem straightforward, it represents a sea change if it comes to pass. Based on Illinois Department of Revenue studies, Cook County property assessments have consistently lagged behind actual market values. A mark-to-market approach would negatively affect many property owners in Cook County, especially those in high-market-value areas (e.g., north shore suburbs and commercial areas in Schaumburg and the O'Hare industrial corridor). Many properties in those areas have been routinely assessed at 75 percent to 80 percent of actual market value. If Kaegi's mark-to-market approach is installed, those properties could see assessment increases in excess of 20 percent in 2019.

Kaegi has also expressed a desire to put an end to vacancy relief for individual properties. Owners of multi-tenant residential, commercial and industrial properties have long depended on vacancy relief to lighten their tax burdens in difficult times. (The assessor has routinely granted relief to those owners in the form of a reduced improvement assessment for properties that were less than 80 percent occupied for the assessment year.) Abolishing vacancy relief introduces a new level of uncertainty in the property tax assessment process for multi-tenant property owners.

A mark-to-market approach and the end of vacancy relief are only two of the notable changes that the new assessor will likely implement. There will surely be more to come as Kaegi puts his stamp on the office.

Illinois state and local governments spend most in nation on pensions

According to recent data, Illinois spends nearly double the national average on pensions, measured as a percentage of all state and local government spending.

Unfunded pensions for state and local government employees are a growing crisis nationwide. According to the Pew Charitable Trusts, the 50 states have accumulated a total of $1.4 trillion in unfunded pension liabilities, or the gap between money in pension funds and the value of promises made to government workers, not including local pension funds. Only four states’ pension funds have at least 90 percent funding ratios, despite the fact that taxpayer contributions have doubled over the past decade.

Many states are struggling with pension debt as a result of generous retirement benefits, unrealistic investment assumptions and a growing number of retirees living longer. However, Illinois’ pension crisis remains an outlier in its severity.

The most recent data from the National Association of State Retirement Administrators shows Illinois’ state and local governments spend the most in the nation on pension benefits as a percentage of all state and local revenue at 8.71 percent – nearly double the national average.

Illinois spends nearly double the national average on pensions

Illinois and West Virginia also stand out as states where pension spending has grown rapidly from fiscal year 2005 to 2015.

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Total spending compared with total revenues is just one metric showing Illinois’ pension problem is the worst in the nation. Pension debt compared with revenues is another. Last year, Illinois set an all-time high record for state pension debt as a percentage of state revenues, at 601 percent.

The state’s five systems have at least $133 billion in pension debt, which does not even include local pension debt.

All 5 Illinois pension systems are severely underfunded

Pension-related expenditures now consume more than 25 percent of Illinois’ state budget, crowding out spending on social services, public safety and education.

In addition, a number of local governments are already hiking taxes and cutting core government services to pay for ever-rising pension contributions. For example, in 2018:

 The south Chicago suburb of Harvey faced an intercept of state money owed to the city and had to lay off 18 firefighters and 13 police officers. Pursuant to a subsequent settlement agreement, the city will divert certain tax revenues to its police and fire pension funds.  Chicago faced a more limited intercept of state money, and its pension contributions are set to spike by more than $1 billion over the next five years, despite several tax and fee hikes enacted by Mayor Rahm Emanuel to pay for pensions.  The city of Peoria had to eliminate 27 municipal workers and 38 public safety positions to make pension payments. Currently, 85 percent of the city’s property tax levy goes to pensions, and that’s projected to rise to 100 percent in fiscal year 2020.  Rockford was advised to cut police and fire services and privatize the city water system to make pension payments.  Three smaller communities saw special property tax hikes to pay for pensions: Jerome, Geneseo and Norridge.

Despite the severity of Illinois’ pension crisis, commonsense solutions exist that would protect both government workers’ retirement security and taxpayers.

By amending the state constitution to protect earned benefits, but allowing for changes in future benefit accruals, state lawmakers could pass a pension reform package that reduces annual pension contributions and fully funds the pension systems faster than planned under current law. This plan would enable state and local governments to honor promises made to both retirees and current workers – and would not cut a dime from their checks.

A growing chorus of voices has endorsed a constitutional amendment to enable meaningful pension reform. This includes outgoing Chicago Mayor Rahm Emanuel and the Civic Federation, a Chicago-based research organization.

Pension reform is necessary if lawmakers wish to protect those who will be most harmed by pension insolvency: government workers and retirees. Through meaningful reform, lawmakers would also protect taxpayers, stabilize state and local finances, and revive a state economy that for too long has been held back by tax hikes driven by pension costs.

New Commissioner Works With County Assessor To Make Website Easier To Use

Changes suggested by Cook County Commissioner Kevin Morrison (D-15th) to make information on tax assessments easier to find on the Cook County Assessor’s website were implemented at the end of January.

Officials with the assessors office promise more short term changes by next month and said they hope to see further changes by the end of 2019. The website is the central place property owners can find information on assessed valuation of property.

The northern and north central suburbs of Cook County are having their property values reassessed by new County Assessor Fritz Kaegi’s office this year, a process which currently takes place once every three years.

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New assessments for property outside Chicago in the northern half of Cook County are expected to be released this year on a rolling basis, township by township. Those assessments are used, along with taxing district levies, a state multiplier and individual exemptions, to calculate property tax bills.

Morrison, who lives in Elk Grove Village and represents a large part of the Northwest suburbs, said constituents at several property tax assessment appeal workshops expressed frustration that information on land values, building values and square footage were not all in one central place on the Cook County Assessor’s website.

Morrison said when he visited the Schaumburg Township Assessor’s Office late last year, he saw information on properties in a closed database the township assessor had access to, but the general public did not, where that information was in one central place with easy to find data sets.

In early January, Morrison said he reached out to the newly elected Kaegi, who made those initial changes to the website by the end of that month. And more changes to the website are coming.

“Our office will be transparent in how we determine a taxpayer’s assessment,” Kaegi said in a written statement. “We’ll be publishing our models and code in the coming months and relaunching our website at a future date. But there are other smart changes, like this, that we can make immediately. We look forward to continuing a dialogue with Commissioner Morrison and other elected officials on the improvements in our office.”

Scott Smith, chief communications officer for the Cook County Assessor’s Office, told the Journal two additional changes to make data sets easier to find are expected in mid-March, which can be accomplished without major design or programming changes.

Smith said assessor’s staff members are working with county board of technology officials to develop a plan to relaunch the assessor’s website to something “more modern user friendly… within the year.”

Other long term goals include moving reassessments to once a year across Cook County and garnering data on property rent and income.

Smith said future assessment information would also come with explanations for how assessors arrived at their conclusions, both for individual properties and by townships for both commercial and residential property.

Property tax rates nearly double since 2007 as residents leave Harvey, Illinois

Declining home values and a shrinking tax base have created a bigger property tax burden for Harvey, Illinois, homeowners. For their higher taxes, residents get corruption, debt and fewer services.

A legacy of corruption in Harvey, Illinois, is costing residents by quickly growing their property tax burden.

The south Chicago suburb’s struggle with plummeting home values, coupled with a dwindling population, has resulted in a nearly doubling of the amount residents pay in property taxes relative to the value of their homes.

In Harvey, the average effective property tax rate – what homeowners pay in property taxes as a percentage of their homes’ estimated market value – was 82 percent higher in 2016 than it was a decade earlier, according to a report by the Civic Federation, a government financial watchdog.

The Civic Federation report measured changes in average effective property tax rates in Chicago and 28 other northeastern Illinois communities between tax years 2007 and 2016, with those taxes actually paid the following year. Of the 12 Cook County communities included in the study, Harvey property owners in 2017 paid the highest effective rate for both residential and commercial properties at 6.9 percent and 15.4 percent, respectively.

What does that mean for Harvey homeowners? For a resident occupying a home with the city’s median value of $72,400, property taxes paid in 2017 were $4,996. That’s $2,252 more than a house of the same value would have been taxed in 2006, but the double whammy is that Harvey’s median home value fell 28 percent during the decade.

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For a community of about 25,000 where the median household income is less than $24,000, the report’s findings are especially disheartening: As a depressed local economy pushes home values down, residents’ effective property tax rates climb up; and as more residents leave the city, those left behind must shoulder a larger share of the burden.

Harvey’s 6.9 percent residential rate is more than 200 percent higher than the 2016 statewide median of 2.29 percent. While Harvey’s average effective rate has fallen from its 2012 peak of nearly 9 percent, it remains nearly double what it was a decade ago – and among the highest in the state.

The blighted suburb’s inability to keep up with pension contributions for government workers caused property taxes in Harvey to skyrocket. The city owes over $87 million in pension debt, and has already been forced into severe service cuts due to pension pressure, including layoffs for dozens of public safety workers.

In 2018, Harvey’s poor pension funding levels resulted in the state comptroller intercepting $3.3 million in tax revenues. While Harvey eventually reached a settlement with the state, the city still owes $9 million to its police pension fund and $14.2 million to its fire pension fund.

What’s worse, Harvey’s crisis was only the prologue to the state’s grave pension story: A number of Illinois municipalities have since found themselves facing similar circumstances.

Illinoisans face the second-highest property tax burden in the nation, a phenomenon driven primarily by the unsustainable growth in pension costs.

Hiking taxes on a shrinking population has repeatedly failed to rescue the state’s dismal finances. The only path toward stability – and property tax relief – is through serious, lasting pension reform pursued at the state level.

It's time to modernize the assessor's office

With one simple law, Springfield can decrease risks and costs to real estate participants while boosting transparency, creating valuable market data, and improving our state’s investment climate and reputation.

Since being sworn into office in December, I have talked with some of the biggest real estate investors in the world, the CEOs of banks, small business groups and neighborhood economic development organizations. They all share one common refrain about our assessment system: Transparency means predictability. It reduces uncertainty. It brings down the cost of doing business.

The world’s leading institutional investors view the commercial assessment system in Cook County as full of risk and uncertainty. The globalizing real estate market is deterred by the idiosyncrasies and opacity of our system.

This has real economic consequences. Uncertainty hurts lending and leasing terms, resale prices, and investment activity. As a result, investing in Cook County requires a higher premium to enter our market due to this additional risk. This is why investors pass us by time and again.

The solution? Achieve predictable, fair and transparent assessments by requiring property owners to submit basic rent and real estate operating income information at the start of the assessment process.

This would require a legislative change: the passing of H.B. 2217, a bill sponsored by House Assistant Majority Leader Will Davis and Senate Revenue Chair Toi Hutchinson, with co-sponsors from leaders in both houses of the General Assembly. H.B. 2217 would give the Cook County Assessor’s Office—and other Illinois counties that choose to opt in—the ability to require owners of income-earning properties to disclose basic rent, real estate income, and expense information. Those who do not comply would be subject to a fine.

Many smaller properties are exempted, including commercial properties with a market value under $400,000; and residential properties with six or fewer units, or with a market value under $1 million.

Currently, income and expense information is required at the point of appeal. The Board of Review takes in this data and uses it to determine a property’s value, one appeal at a time.

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The Assessor’s Office is in the business of mass appraisal. If we were equipped to require this data up front, at the start of the assessment process, we would be able to determine market-level rents for every part of the County.

In many other parts of the country—New York, Virginia, Massachusetts, and Washington D.C.—commercial properties are required to disclose their income and expenses. Not coincidentally, real estate participants tell us that these are among the best assessment systems to emulate.

Enacting this legislation will allow for richer data, unprecedented transparency, and more predictability for everyone. Developers could require less of a margin of error when deciding whether to invest. Lenders could lend more against a property’s value. Potential buyers could have more confidence in the future path of assessments, and current owners could generate more resale value for their buildings.

The legislation also protects privacy by requiring that sensitive data submitted to the Assessor’s Office not be subject to Freedom of Information requests; it can only be published on an aggregated and anonymized basis.

Once aggregated and anonymized, the data that the Assessor’s Office receives will be of tremendous value throughout Cook County. Chicagoans concerned about the recent closure of retail stores on the South Side, for example, could compare year-to- year retail rent, occupancy, and valuation trends to determine the best plans for development.

For a county the size of Cook, a paper-driven, ad-hoc method of data collection goes against the efficiency taxpayers expect and deserve. With one simple law modernizing our assessment system, Springfield can decrease risks and costs to real estate participants while boosting transparency, creating valuable market data, and improving our state’s investment climate and reputation.

Fritz Kaegi is Cook County assessor.

Why are folks leaving Chicago? Unfair taxes

Chicago's general obligation debt backed by property taxes now stands at nearly $9.9 billion — roughly $3,680 for each of the city’s 2.7 million residents

People moving out of Chicago is a social and economic trend that transcends any one constituency, racial demographic or income level. Yuppies, the elderly, whites, Latinos, blacks, rich, middle class, poor, business owners, consumers and taxpayers all grapple with a complex problem that results in people leaving our city and even our state.

In neighborhoods like Pilsen and other parts of Chicago, long-time homeowners have been forced to move out because of their inability to pay high property taxes. Working professionals, blue-collar workers and small businesses owners and consumers of all ethnic backgrounds feel the intense pressure of extreme taxation and fees on plastic bags, cell phones and so on.

There are other causes worth examining. Lack of economic investment in Chicago neighborhoods, high crime, lack of jobs and job training, a police culture that is not always in step with the residents it protects, a political structure that repels trust from citizens who vote for them. And, without a doubt, the single biggest cause is an inefficient and poorly structured tax system that harms the poor and helps those who can afford tax appeal attorneys connected to the political establishment. This same establishment is responsible for our pension debt problem and the endless borrowing that drains our city finances.

So why do so many people leave Chicago? They can’t afford to live with an unfair tax system and problematic finances that hurt the majority of people.

Worse, we have political and public leaders unable to deal with this core reason. With the election of a new Cook County tax assessor, hopefully the problem will diminish. Serious systematic assessment and tax reforms are needed to even out the playing field.

The next municipal elections should give Chicagoans an opportunity to select someone with the financial ability and experience to approach the Chicago exodus not in a zero-sum scenario, but in a comprehensive way. The newly elected mayor and aldermen will have to make some tough decisions that favor all Chicago stakeholders.

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INDIANA Indiana Tax Court affirms Voluntary Dismissals of Property Tax Appeals, where Assessor had not incurred a “Substantial Expense”

Assessor had spent little time with limited discovery prosecuting case

Point of Interest: Assessor challenged the Indiana Board’s granting of Taxpayer’s voluntary withdrawals following a discovery dispute. Assessor had not filed a counter claim or its equivalent. Tax Court affirmed the dismissals, because no evidence showed that Assessor had incurred substantial expenses in the litigation or was legally prejudiced.

Synopsis: Before the Indiana Board of Tax Review, the Assessor had objected to the Notice of Withdrawal of Appeals filed by Taxpayer (“SBC”), claiming he had incurred substantial expense as a result of discovery disputes and would be prejudiced because the time to seek increases of assessments for the property outside the appeals process had passed. SBC responded that Indiana Trial Rule 41(A)(1)(a) allowed the withdrawal of its appeals without an order from the Board. The Board dismissed the appeals, noting that Assessor did not submit proof of the purported substantial expenses and the proceedings were not yet at an advanced stage.

On appeal (and following the Court’s denial of SBC’s motion to dismiss), the Court first explained that Trial Rule 41(A)(1) governs the voluntary dismissal of cases and specific claims. “The purpose of the Rule is to eliminate evils resulting from the absolute right of a plaintiff to take a voluntary nonsuit at any stage of the proceedings before the pronouncement of judgment and after the defendant had incurred substantial expense or acquired substantial rights.” (citation and internal quotes omitted). Regarding the rule’s application to an administrative appeal, where no responsive pleading is required, the Court observed that its ruling in Joyce Sportswear Co. v. State Bd. of Tax Comm’rs, 684 N.E.2d 1189 (Ind. Tax Ct. 1997), addressed the issue. Whether a voluntary dismissal is permitted depends on “whether the party opposing the dismissal can demonstrate either a substantial expense or legal prejudice.” (citing Joyce Sportswear, 684 N.E.2d at 1193, internal quotes omitted).

The Board articulated specific facts showing the proceedings had not reached an advanced stage. And the facts demonstrated that the Assessor had spent little time over more than two years on the appeal. Moreover, the parties’ limited discovery dispute did not evince that Assessor had incurred substantial expense. The Court, furthermore, stated that “the attorney’s fees incurred in a routine property tax proceeding, like here, cannot, without more, rise to the level of a substantial expense.” (citations omitted, emphasis in original). Finally, without a counterclaim or an equivalent assertion seeking an increase in place, the Court held, “[T]he Assessor did not acquire either a substantive or a vested right to increase [SBC’s] assessments upon the filing of its administrative appeals.”

The Court affirmed the Board’s ruling permitting the dismissals.

Indiana Tax Court “cannot ignore the parties’

The Indiana Board’s misapprehension of the law” – applies 1% tax cap to residence that was eligible for (but not entitled) to homestead standard deduction.

Name: Purdom v. Knox County Assessor, Knox County Property Tax Assessment Board of Appeals, and Indiana Board of Tax Review

Owner was denied the homestead standard deduction for 2013 for a home that she purchased in 2011. The property received the deduction for 2011, 2012 and 2014 – but not for 2013. That oversight was initially challenged by Owner in her First 2013 Appeal. In 2015, the Indiana Board of Tax Review agreed the property qualified as a homestead as Owner’s principal place of residence, but Owner failed to show that she either had properly applied for or was exempt from applying for the deduction. Owner did not further appeal the Board’s ruling in the First 2013 Appeal.

Owner sought the 1% tax cap applied to homesteads for 2013. In 2016, Owner filed a Second 2013 Appeal; this time she challenged the property tax cap applied to the same property for the 2013 assessment date (for taxes payable in 2014) by filing a Form 133 Petition for Correction of Error. (That Form is no longer available, but essentially taxpayers can make the same

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claims using the current Form 130 petition.) The issue raised: whether a 1% tax cap should apply to the property as a “homestead” or, instead, a 2% tax cap as “other residential property.” Assessor argued that the property tax cap for a “homestead” should not apply because the same property did not receive the homestead standard deduction for the same year. The Indiana Board agreed, rejecting Owner’s Second 2013 Appeal.

Eligibility requirements for the 1% tax cap changed in May 2013, after the March 1st assessment date. The Tax Court first noted that, for purposes of applying the 1% tax cap, 2013 was a transitional year in the eligibility requirements. From January 1st through May 10th of 2013, to receive the 1% tax cap the property had to be eligible for the standard deduction. Effective May 11th, the property must have been granted the deduction.

The Indiana Board misapprehended the law. The Indiana General Assembly changed the eligibility requirements for the homestead standard deduction – more than two months after the March 1, 2013 assessment date. Thus, the new requirement – i.e. that the residential property have been granted the standard deduction and not merely eligible for it – was not in effect for the 2013 assessment. The Court held that “the record evidence and the Indiana Board’s own finding indicate [Owner’s] property was eligible, although not entitled, to the 2013 standard deduction because she did not properly apply.” (emphasis added). The Court reversed, ordering application of the 1% tax cap.

Tax Court upholds 26 percent increase in home valuation

The Indiana Tax Court has upheld a 26 percent increase in a home valuation after finding that the homeowners failed to properly rebut the removal of an obsolescence adjustment.

After the assessed value of their home increased by 26 percent to $187,700 in just one year, Vassil Marinov and Venetka Marinova appealed to the Indiana Board of Tax Review, arguing the assessed value was too high. At a hearing, the Tippecanoe County assessor presented an estimate value using a sales comparison approach and a time trend analysis to show that the original 2014 assessed value of $149,000 actually undervalued the property.

Specifically, the assessor argued the higher assessed value of the Marinovs’ home was within the range of the market sales in their subdivision and was in fact, slightly lower. The assessor had removed a 24 percent obsolescence adjustment applied to the property in 2007 that had reduced its value and determined that his 2014 assessed value of $187,700 brought their home in line with the other properties in the neighborhood.

However, the Marinovs claimed other property assessments in the neighborhood had only increased by 0 to 2 percent between 2013 and 2014, while theirs increased by 26 percent. The Indiana Board ultimately upheld the assessor’s value, finding a prima facie case had been established that the assessment was correct. It concluded the Marinovs failed to rebut the assessor’s evidence.

The Marinovs appealed, but the Indiana Tax Court found their arguments to be unpersuasive in Vassil Marinov & Venetka Marinova v. Tippecanoe County Assessor, 17T-TA-23.

“The evidence in the record demonstrates that a significant amount of the increase in the subject property’s 2014 assessed value is attributable to the removal of the obsolescence adjustment first applied to the property in 2007,” Judge Martha Blood Wentworth wrote. “… The Marinovs did not properly rebut the Assessor’s removal of the obsolescence adjustment because they failed to both identify causes of the purported obsolescence and to quantify the amount of obsolescence they claim should be applied.”

The tax court further noted that rather than offering evidence identifying defects and quantifying the amount of obsolescence to be applied to their home, the Marinovs simply stated that when they purchased the property in 2004, it had some “serious defects” that would cost “about $70,000” to fix.

“Without more, these statements are too remote in time and conclusory in nature to be probative,” Wentworth continued, referencing Long v. Wayne Twp. Assessor, 821 N.E.2d 466, 470 (Ind. Tax Ct. 2005). “Therefore, based on the market-based evidence above, the Assessor properly removed the obsolescence adjustment to reflect the subject property’s market-value-in use.”

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INDIANAPOLIS Counties fight big box stores on property tax appeals

For years, Elise Nieshalla has served as an at-large council member for Boone County, where she oversees one of the fastest- growing regions in Indiana.

But 2018 ended with a series of challenges, shifting the perspectives of her and fellow county leaders. And it all started with a popular grocery storefront at the heart of Whitestown.

When Boone County assessors priced the real value of the Meijer grocery store at $14 million, the company came back with a new argument, noting that its properties elsewhere in the state — particularly those in economically distressed communities — were valued at a lower price.

Meijer operates at least 30 locations in Indiana, according to a store locator posted to its corporate website. This sign sits in front of a Meijer store in Franklin, Indiana. Photo by Erica Irish, TheStatehouseFile.com.

Meijer, then, set an ultimatum with Boone County: After the Midwest retail chain received an $11.5 million assessment, the company entered into a lawsuit with the county. A third party appraised the property at $14 million. Meijer then demanded their Whitestown property’s worth by lowered to almost 50 percent less than the appraisal.

Under the original assessment, Boone County taxes the property at $61 per square foot each year. If Meijer succeeds in its appeal, that annual rate would drop to $49 per square foot.

After several hearings in late December 2018, both parties were told it could take up to a year for a final opinion from the Indiana Tax Court, Nieshalla said.

Across the state, county assessors and their communities are facing similar challenges from some of the country’s most popular grocery stores, retail outlets and pharmacies.

In particular, Meijer’s case with Boone County exemplifies what a growing number of assessors are referring to as a “dark box store tax loophole,” a process by which retailers will insist properties valued at higher rates should be assessed at rates equal to their lowest-valued, or “dark,” establishments.

This argument assumes properties like the Whitestown Meijer should be assessed without considering factors like daily business traffic.

“Our focus is to keep prices as low as possible for our customers,” Meijer officials said in a statement about the Whitestown appeal. “One of the ways to do that is by making sure we pay a fair and equitable amount of property tax.”

The company declined to discuss the appeal further.

For those like Nieshalla, this argument is problematic. She and those against the theory argue it unfairly permits large corporations to pay less in property taxes on their most active establishment, which ultimately yields more profit for the company while leaving other groups — like homeowners and competing businesses — to pay additional property taxes.

Many of the property taxes paid by big box retailers fund emergency responders, like firefighters and local police, who often respond to retail locations to handle theft reports. In 2017, Nieshalla said, the Whitestown Police Department responded to 158 service calls at the Whitestown Meijer.

“They are not a dark store as far as their use of public dollars,” Nieshalla said.

This trend is nothing new, if one considers the long, if recent, history of appeals in Indiana’s Tax Court and similar chambers around the country. The track record includes appeals dating back to 2012 within Indiana with states like Wisconsin and Texas reporting numerous appeals in the last decade.

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Appeals proliferated in the state after the Indiana Board of Tax of Review ruled in 2014 that a separate Meijer, located off East 96th Street in Marion County, should have received an assessment at $30 per square foot instead of the $83-per-square-foot rate assigned by the county.

In Indiana alone, there are more than 300 pending appeals that involve big box store retailers. The cases span more than 15 counties, touching all corners of the state.

Nieshalla said Boone County declined Meijer’s offer to settle, fearing the number of appeals with other companies would increase.

“We knew other big box stores would be waiting at our doorstep,” she said about the decision.

Now, leaders in the Association of Indiana Counties say they hope to end the ordeal once and for all this legislative session.

County leaders are seeking a legislative fix that would set a state-level precedent for what constitutes a viable property value comparison, potentially putting a stop to costly county appeals and providing taxpayers with “taxing fairness,” according to a document provided by AIC.

“We maintain that the value of a property to the current user and for the current use is a fair and equitable basis for taxation, rather than skipping to the value of the property to a future buyer purchasing it as a vacant building,” the document reads.

Some lawmakers have already answered the AIC’s call.

In the Senate, Sens. Brian Buchanan, R-Lebanon, and Phillip Boots, R-Crawfordsville, filed a bill to address various property tax matters, including several provisions to solve the concerns voiced by the AIC.

Their bill — Senate Bill 623— would introduce protections for county leaders, empowering them to adopt ordinances that could reimburse assessors’ legal fees in appeals that are “uncommon and infrequent in the normal course of defending appeals.”

Additionally, SB 623 would prevent companies who appeal property assessments from using second-generation properties in sales comparisons. In other words, if the company owns an inactive property — like a vacant grocery store that it rents out to seasonal tenants or holiday retailers — it could not compare that property’s assessed value with active establishments, or first- generation properties.

Buchanan said the bill would only impact new big box store appeals, not the hundreds that are already filed or pending before the state tax board.

“When a commercial retailer chooses to appeal, and that’s their right, the counties are often forced to settle,” Buchanan said. “We’ll protect their right to appeal, but we’re also working hard to find a solution everyone can live with.”

IOWA Amazon announces it's behind 'Project Bluejay,' will hire 1,000 for new fulfillment center

Amazon.com, Inc. finally confirmed a terribly kept secret Thursday morning, announcing it will move into Bondurant's massive new warehouse.

Shrouded under the code name "Project Bluejay" since the Bondurant City Council approved site plans for the building in September, the site will open in late 2020, the company said in a news release. The e-commerce giant plans to hire 1,000 workers, offering them health benefits and wages of at least $15 an hour.

State Sen. Zach Nunn, R-Bondurant, celebrated the announcement at the Capitol Thursday morning, telling reporters the news is a boost to the community.

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"This is really jet fuel for east Polk County's economic development," he said.

The warehouse will serve as a fulfillment center, one of two new Amazon properties in the Des Moines metro. The company posted job listings for a smaller distribution center in Grimes in October.

The company also will also open a distribution center in Iowa City.

Amazon workers receive, pack and ship orders at fulfillment centers. Logistics analyst Marc Wulfraat said robotic transporters called Kivas, which look like orange Roombas, carry yellow shelves full of items to pickers on all floors of the warehouse. On the ground floor, employees package the items and ship them out.

At delivery stations, like the new one opening off Iowa Highway 141 in Grimes, workers sort groups of packages by route.

The fulfillment center will be smaller than the company originally designed, down from five floors to four. It will also be 645,000 square feet, about 20% smaller than the original plans — though still among the largest in the metro.

Thursday's announcement has long been a foregone conclusion. Multiple indicators showed Amazon was the company behind Project Bluejay, including site plans almost identical to those for a new fulfillment center in Prince George's County, Maryland. And in an application for an Iowa Department of Transportation grant, Bondurant officials copied a description from an Amazon Security and Exchange Commission filing to describe the business that would operate at the site.

Wulfraat, owner of MWPVL International, a supply chain, logistics and distribution consulting firm, told the Des Moines Register in early October that the location was "100% Amazon."

Bondurant City Administrator Marketa Oliver said the fulfillment center should open this fall, and Grimes City Administrator Jake Anderson said he expects the city's permitting division to issue a certificate of occupancy for the delivery station in March.

But Kathy Jalivay, a spokeswoman for Ryan Cos., which is developing the fulfillment center, cautioned in an email: "With our Midwest weather it is difficult to pinpoint a specific time frame."

No state incentives

Iowa Economic Development Authority Executive Director Debi Durham said in a statement Thursday that Amazon was not eligible for incentives from the state "due to the nature of the business."

Gov. Kim Reynolds told reporters during a press conference that Amazon picked the Des Moines metro in part because of the local labor force.

"As long as we can provide workforce and some of the other critical aspects of a growing economy, you're going to see businesses within the state expand, as well as new businesses looking to locate in the state," she said.

At the same time, Amazon is entering a tight labor market. As of November, the Des Moines-West Des Moines metropolitan statistical area had a 2.3% unemployment rate. The federal Bureau of Labor Statistics estimated there were only 8,500 unemployed workers in the region.

Nunn, however, said he knows people who want to apply for jobs at the fulfillment center. He also believes college students and workers looking for second jobs will apply.

"People in all walks of life are going to have an opportunity to walk in the door," he said.

Anderson said Grimes did not offer any incentives for Amazon to open the delivery center there. However, the city did give a five-year tax increment financing agreement to the property's developer, Hubbell Realty, in 2018.

The Bondurant City Council approved six years of tax incentives for the warehouse project on Nov. 12. The city will waive 80% of the assessed value in the first year of the agreement, with the benefit decreasing by 10 percentage points annually.

The incentives are a standard package that Bondurant offers to all new commercial development. 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 agreement requires that the property be valued at $75 million, though city officials expect the land will be worth much more when Amazon begins to operate. At that relatively low valuation, Bondurant estimates the incentive package would be worth about $2.6 million to the landowner.

At the same time, the city would receive about $2.1 million more in property tax revenue than it would have before the center's construction.

Bondurant also agreed to improve the infrastructure around the warehouse site, widening roads, adding curbs and gutters and installing street lights. The city estimates the cost will be $15.9 million, about two-thirds of which could be funded through an Iowa Department of Transportation grant. The city will issue a bond to cover the rest of the cost, paying it back with property tax revenue from the warehouse site.

In October, Ryan Cos. purchased the property where the fulfillment center will stand for about $6.7 million, then sold it to Grant Street Project LLC for $60.9 million on Jan. 28. Oliver said the property tax abatement applies to whoever owns the property.

Grant Street Project lists a Dallas address. A spokeswoman for the company did not return a call seeking comment Thursday.

How the deal came together

Oliver said she learned Amazon was interested in the Des Moines metro on Aug. 30, when Ryan Cos. Director of Real Estate Development Andy Moffitt met with her. Within a month, Bondurant's Planning and Zoning Commission and City Council had both signed off on the plan. The council approved the incentive package within three months, giving Ryan Cos. the green light to start building the warehouse.

"That is like lightning speed," Oliver said.

She believes Amazon picked Bondurant because the property has utility hookups and is next to an interstate highway. She said the company also knew that it could get a deal done fast.

When Moffitt approached her, Oliver was putting the finishing touches on turning the property into a certified site, a designation from the Iowa Economic Development Authority that signals it is ready for construction.

Oliver said she began working on the process the same week Bondurant hired her in May 2017. When Oliver interviewed for the job, she said, members of the City Council told her they were looking for an administrator who could increase the value of local commercial property.

To create a certified site, the city needed all of the local property owners — more than a dozen people, in this case — to agree that they would offer their land for sale for at least three years. City officials also needed to conduct a lot of "due diligence" work, like soliciting environmental studies about whether endangered species live on the property.

With that work almost done, Oliver said, the transition to bringing Amazon to town was almost seamless. The only hiccup? An actual announcement. Oliver and the City Council signed non-disclosure agreements and could not discuss the project.

"From a city perspective, we had to respect that and wait for them to determine when they wanted to announce," she said. "There could be issues as a publicly-traded company that I don't even think about."

Amazon: by the numbers

645,000 - Square footage of the fulfillment center the company confirmed Thursday it is building in Bondurant

$295 million - Estimated cost of the fulfillment center

1,000 - Number of employees Amazon says will work at the center

$15 - Minimum hourly pay Amazon says it workers will receive

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6 - Years of tax incentives Bondurant is providing for the facility

$15.9 million - Expenditure by the state and city of Bondurant for infrastructure improvements around the warehouse site

5 - Months it took after the city of Bondurant approved the project for Amazon to confirm it is behind the warehouse project

Outgrowing the effects of property tax reform

One month ago, a lengthy Newton City Council budget work session incited several uses of the phrase “property tax reform” largely attributed to discussions of fiscal year 2019-20 financial cuts and the city’s steady but possibly problematic tax levy.

Although the tax levy has not raised above $17.15 per $1,000 since fiscal year 2016-17, Newton City Administrator Matt Muckler said Iowa’s property tax reform may be starving municipalities’ abilities “to provide basic levels of service” and could compel city staff and council members to be open to the idea of increasing the tax levy in the near future.

City staff reported Newton’s total valuation at about $833.97 million for the current fiscal year, an approximately $11 million increase from last year. The 2018-19 fiscal year reported a similar increase in value. Despite the city’s economic growth, Muckler said the amount of tax dollars the city has to work with is not proportionate to general inflation and the increases to Newton’s total valuation.

Bipartisan-supported legislation signed by former Iowa Gov. Terry Branstad in 2013 (Senate File 295) reduced commercial and industrial property taxes by up to 10 percent over a two-year period. To make up for cities’ and counties’ losses in revenue, backfill payments out of the state’s general fund were distributed to the local governments. Muckler said tax burdens in Newton shifted from commercial and industrial taxpayers to the residential taxpayers since the property tax reform bill took effect.

Muckler’s observations echo staff comments from the fiscal year 2018-19 budget work session, particularly those of City of Newton Finance Officer Lisa Frasier. She, too, said changes to the state’s property tax reform and multi-residential rollbacks would effect the city for several years to come, the Newton Daily News reported in January 2018.

City staff had to enter the fiscal year 2019-20 work session, Muckler added, with budgets lower than ideal. In particular, the Newton Fire Department and Newton Public Library saw several reductions in their initial proposed budgets this year, resulting in council members suggesting budget alterations to both city entities during a Jan. 26 work session.

“All of our departments, all of our divisions are taking cuts,” Muckler said in a Jan. 25 interview with the Newton Daily News. “We did that last year. Down to the bone. We’re at the basic number of employees we need to provide a basic level of service, and our budgets are at that same bare bones — there’s no fluff.”

As a member of the Iowa State Ways and Means Committee, Iowa Sen. Zach Nunn, R-Boundurant, of District 15, said there are a number of communities where property tax “has continued to creep back up and may have stifled economic growth.” The best way to grow the economy, he added, is to make sure communities and their respective property valuations are thriving. Nunn asserts a conversation about property tax reform should also include examinations of valuations and assessments.

“At the same time we want to make sure that our property valuation is not growing at such a pace that it’s putting people out of their homes,” Nunn told the Newton Daily News Jan. 31. “My concern is that we see property assessments raise a level — some in east Polk County alone, my area — by double digits. That means someone who’s a pensioner (or) somebody who is living on a limited budget that may have already paid off the mortgage of their house is finding that the taxes now are what’s going to force them to sell and move to a downsized property.”

Nunn stressed the best way to grow the City of Newton’s budget is to have more people living in the community to spend money to generate sales tax, income tax and property tax. Increasing tax levies to generate more revenue for municipalities, Nunn argued, has the inverse effect, further highlighting Muckler’s desire to not raise the tax levy for citizens unless it is a “last resort.” 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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Raising the tax levy, he continued, could reduce the number of people who are moving to the community, as well as those who are already living in town or are making long-term investments to residential properties. Nunn argued that lowering property taxes could potentially attract new businesses and new builders to town to increase the tax base.

Still, the property tax reform backfill has provided its own set of challenges for cities. Although Newton has seen growth since the legislation passed in 2013, the town has not grown as much as other communities, especially in areas west of Des Moines. Nunn said backfill dollars need to continue supporting communities but questioned if towns that have seen massive economic growth should be tailored off for other areas in need.

“Because it doesn’t make sense that a community that’s shrinking is helping subsidize a community that’s growing,” Nunn said.

State Rep. Wes Breckenridge, D-Newton, of House District 29, acknowledged some cities and counties have seen enough growth “to exceed the numbers they were before” the property tax reform bill was passed.

“Understandably, they maybe don’t need the backfill because their commercial and industrial taxes have grown and that commercial and industrial growth has occurred to help build those dollars back up and past what they were in 2013,” Breckenridge said Wednesday. “Unfortunately for us in Jasper County, that doesn’t appear to be the case.”

Muckler said the City of Newton is experiencing higher valuations and lower overall revenues since the state lawmakers passed property tax reform legislation almost six years ago. In fiscal year 2012-13, the city earned a total valuation of about $837.58 million at a tax levy rate of $14.99 per thousand. Since then, Newton has not surpassed that valuation. Muckler’s goal is to obtain “double digit increases” (like $11 million) every year for the next decade and make a conscious effort to prepare infrastructure for the years to come.

“I’ve got to outgrow the effects of property tax reform,” Muckler said. “What this city has been doing before I got here (in 2017) and has been continuing since I’ve been here is being very aggressive about how we grow and how we make decisions for the long term to make sure that we’re growing.”

The Newton City Council has scheduled a presentation with the Iowa League of Cities in March to further discuss the effect of property tax reform on municipalities in the state.

KANSAS Legislators announce property tax transparency bill

Republican legislators explained their solution to Kansas property tax increases at a press conference Tuesday afternoon.

Members of the Assessment and Taxation Committee said Senate Bill 294 will increase transparency and improve the process to appeal real estate property taxes.

The changes are modeled after programs in Utah and Tennessee.

The Kansas Department of Revenue's findings show property taxes in Kansas increased 164% from 1997-2018. The rate of inflation during that time period was only 49.5%.

Senate President Susan Wagle took the podium citing both senior citizens living on a fixed income, and young people trying to own their first home, need relief from the increased property taxes.

"We will empower homeowners in the case where property taxes would go up, that they would be notified and be able to communicate with their local officials," she said, "This empowers them to have a say and notifies them that if they don't engage with their local officials, their property taxes will go up."

Wagle said they hope to introduce the bill in the Senate soon.

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MAINE Walmart’s request for a tax break in Ellsworth could test the ‘dark store’ theory

Maine lawmakers could limit tactic big-box retailers use to fight local tax bills

The Walmart Supercenter in Ellsworth is appealing the city’s rejection of its request to cut its property tax bill in half. The outcome could be a Maine test case of the “dark store” tax assessment theory, which big box retailers have used nationwide to argue that their properties are worth less for tax purposes.

Walmart, located on Myrick Street, is seeking to reduce its Ellsworth property tax bill in 2017 from about $361,000 to $180,500, City Assessor Larry Gardner said. It appealed the city’s denial of that request to the State Board of Property Tax Review in January 2019, seeking a reduction of the building’s valuation from $20.1 million to $10.1 million.

That board recently denied Ellsworth’s request to dismiss the case.

In appeals Walmart has filed concerning stores in three communities around the state, the company has argued that its properties are not meant to be repurposed and should be valued as if the stores were dark – vacant, up for sale and likely unappealing to prospective buyers. As a result, the company argues, its buildings should have lower property values for local tax purposes. The giant retail chain is also seeking to cut its property taxes in half in Brunswick, and it’s seeking 75 and 80 percent reductions in Farmington and Sanford respectively.

Last year in Bangor, the city reduced the valuation of the local Walmart property to $17 million from $19 million in response to tax abatement requests from the retailer.

“I think that argument should not be in the appraisal world, because what it does is, it looks into the future and says ‘one day, we’ll be gone, and because we will be gone, you should value us the way you would when we’ve left,’” Gardner said.

Attempts to contact Walmart’s attorneys in the case, from the firm Stavitsky and Associates in Fairfield, New Jersey, were not successful Tuesday.

Walmart artificially creates the dark store argument, Gardner said, because it places into the deeds of properties it buys a clause restricting the properties from being used for another big box store. This complicates the city’s use of the approach it uses to assess most properties — by their highest and best use.

“If you’re a big box, the highest and best use is a big box. They take away that use with restrictions on the deed,” Gardner said. “Just when they pack up and leave, they will include these restrictions that are negative to the highest and best use that they had. All the big boxes are doing it.”

Ellsworth has had some success repurposing a big box store, Gardner said. The Jackson Laboratory bought the former Lowe’s home improvement store in 2012, and it opened its new mouse vivarium there in August 2018.

But Jackson Lab bought the 17-acre facility at Kingsland Crossing for $3.2 million — far less than what Lowe’s paid for it, and far less than the city’s $16 million assessed value for the property. Lowe’s shuttered the store after almost four years of operation in November 2011 during a nationwide wave of closures of underperforming locations.

No hearing date on Walmart’s Ellsworth appeal has been set.

In the state Legislature, a bill pending this year would restrict the use of the “dark store” assessment approach by requiring that stores larger than 20,000 square feet be assessed based on their current use.

Walmart’s push for tax cut gains traction

The State of Maine Property Tax Review Board has denied the city’s request to dismiss an abatement appeal by Walmart.

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That decision could eventually result in city assessors lowering the retailer’s property valuation and cutting its tax bill, according to documents filed on Jan. 29.

In 2018, lawyers representing Walmart filed an abatement request with the city for the 2017 tax year asking that the property value of the store be cut in half, from $20.1 million to $10 million. The lower assessed value would have halved Walmart’s $361,000 yearly tax bill.

The state board’s denial of the city’s request to dismiss the case, a unanimous 4-0 vote in favor of Walmart, is based largely on a question of timing. When attorneys for the company failed to send City Assessor Larry Gardner an appraisal of the property by an extended deadline, Gardner considered the request for an abatement denied. However, he did not send a written decision to Walmart’s attorneys indicating that was the case. Walmart then appealed to the local appeals board and, finally, to the state.

“Before the hearing, yet to be scheduled, is now this mediation phase,” said Gardner in an email.

The American was unable to reach Walmart for comment before press time.

Ellsworth is not the first municipality in which the company has sought an abatement.

“Ellsworth’s Walmart assessment of $20 million is the second highest valuation in the state, behind Scarborough, according to Walmart,” said Gardner, “Scarborough was at $23 million and has settled on a reduction of 11.7 percent. Bangor was at $19 million and has settled on a reduction of 11.4 percent.”

He continued: “We are not at that point yet of actual percentage figures being suggested, but I imagine somewhere in that ballpark is probably what Walmart will suggest.”

An 11 percent reduction in the company’s annual tax bill in Ellsworth would mean a loss of roughly $43,000 for the city at this year’s tax rate (the company is slated to pay $390,941 in taxes for fiscal year 2020). It would also mean reduced revenue for the city going forward and possible back payments.

The next step will be mediation between the city and the company’s lawyers.

A large company challenging its property assessment isn’t new. But in recent years, many retailers have been basing their challenges on the “dark store” theory of taxation, which asserts in part that big-box retail locations are so specially built that once the businesses leave them, the properties won’t be worth much to anyone else. Basically, attorneys for the retailers argue, the stores are meant to be built and then discarded, not repurposed.

Even if their appeals are ultimately denied, getting a town into mediation or a settlement may be enough to get the value lowered by even a small percentage, which could mean thousands of dollars in yearly savings for the businesses.

Scarborough has faced a nearly identical situation to Ellsworth in recent years, after Walmart attorneys filed a $10-million abatement request in 2017 that would have roughly halved the then-value of the $20-million Walmart Supercenter in the town, according to previous reporting in The American.

Scarborough’s Town Assessor David Bouffard denied the request, a local board of appeals backed him up and Walmart took the case to the state, which ordered Scarborough officials to attend mediation with Walmart’s lawyers. Bouffard said last April that might mean hiring outside legal help, at the expense of taxpayers. Agreeing to an abatement could mean the loss of revenue going forward and reaching back into town coffers to pay back the company. While the case was ongoing, Walmart also filed another request appealing its 2018 taxes, said Bouffard, requesting a $9.1-million reduction.

“It’s kind of hard to deal with that when the other one is still ongoing,” he said.

State lawmakers heard testimony last Thursday on a bill that would prohibit large retailers from employing “dark store” theory.

“This bill is an attempt to head off that strategy of gaming the system by clarifying the valuation law at the state level,” said Rep. Ryan Tipping (D-Orono), who is sponsoring the bill. As the state’s assessment law is written now, he argued, it is “vague” and creates “opportunities for tax avoidance.” 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 legislation would apply to retail stores with more than 20,000 square feet. It would add language to the state’s definition of “just value,” which would require assessors to consider the property’s “highest and best use” when determining how much the property should be worth, rather than looking at how much a similar vacant property would sell for.

But at the hearing last Thursday, President of the Maine Retail Association Curtis Picard argued that, rather than being undervalued, “The reality is that retail property is being over-assessed.”

Picard continued: “The reality is that large-format retailers are unique, single-use facilities, which have very few prospective buyers. Unlike most homes, which tend to increase in value over time, these unique facilities are worth less than the cost of construction in the marketplace.”

That’s in part because companies often restrict via deed covenants how the property can be used in the future, including limiting the space “from ever being used by any other business that might even remotely compete with them,” said Gardner last year.

Gardner said in an email this week that the bill is “Better late than never, but even if legislation is passed, it will not stop Walmart from fighting any new law on the grounds that it may be unconstitutional. We have very smart legislators here in Maine. I trust they will consider how our state constitution is grounded.” State sees record level of property valuation, tax officials say Maine Revenue Services on Thursday said the state's valuation — the value of all Maine real and personal property — increased by $9.72 billion, or 5.52%, from the previous year.

Growth exceeded 3% in every county except Washington, Lincoln and Piscataquis, according to the analysis, which was based on April 2018 data and typically requires about 18 months.

Annual valuation growth has not exceeded this level since 2008, when the state reported an increase of 9.26%.

“This is the largest annual valuation growth in 10 years,” Kirsten Figueroa, commissioner of the Department of Administrative and Financial Services, said in a news release. “This report shows that Maine’s economy continues to move in the right direction.”

The largest increases were in York and Cumberland counties, where valuations grew 7.05% and 7.52%, respectively.

To compute the valuation, the state determines the assessed value of recently sold properties in each municipality relative to their selling price. Maine Revenue staff visit communities to audit assessing records and verify information.

The municipal valuations are used by the state for various purposes, including calculating state reimbursements, allocating education funds, determining revenue sharing, and apportioning county taxes.

Lawmakers To Debate: Should Maine's Big-Box Stores Be Taxed As If They're Empty Or Full? Nationwide, lawyers for big-box retailers such as Walmart and Home Depot are contesting local property tax assessments, which they argue should be based the value of a store if it were vacant. It’s called the dark store theory, and a bill in the Maine Legislature aims to head off the practice before it gains traction in Maine’s courts and depletes local tax revenues.

In the 2017-2018 tax year, the town of Brunswick assessed the property taxes of its local Walmart at about $17,000,000. But attorneys for the retailer say that because of the dark store argument, its taxes should be nearly half that amount.

Walmart is also arguing for a 75 percent reduction in Farmington and an 80 percent reduction in Sanford.

Last week, Democratic state Rep. Ryan Tipping, of Orono, told lawmakers on the Legislature’s Taxation Committee that the retailers are shortchanging local budgets and increasing taxes for everyone else.

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“Dark store theory is being used to give big corporations tax breaks and increase the burden on our communities to make up for the revenue shortfall,” he said.

Tipping is sponsoring a bill that could limit the use of the dark store argument, which essentially allows retailers to say that their stores should be assessed as if they’re vacant, up for sale and likely unappealing to prospective buyers, even while they’re in business.

Tipping’s bill would ensure that stores larger than 20,000 square feet are valued based on their current use. But Curtis Picard of the Maine Retailers Association says the proposal is effectively a tax increase on big retailers.

“The reality is that retail property is being overassessed,” he says.

Picard says one reason big retailers are fighting town assessments is that their buildings may have value to the current owners, but not to many other businesses.

“The reality is that large-format retailers are unique, single-use facilities that have very few prospective buyers,” he says.

That argument was shared in testimony submitted by the Council of State Taxation, an industry group that includes representatives from large corporations including Walmart.

It’s also the central thrust of an aggressive legal tactic used by big retailers that has gained a foothold in some courts in other parts of the country, so much so that the credit ratings agency Standard and Poor’s warned in a report two years ago that a proliferation of tax appeals by big retailers could hamper the finances of local governments.

Use of the dark store argument in property tax appeals also appears to be on the rise in Maine.

Sarah Austin, an analyst for the left-leaning Maine Center for Economic Policy, says the tax reduction requests by Walmart and other large retailers have grown in recent years — $184 million since 2015, according to a limited statewide survey of municipalities.

Austin says that so far, local assessing boards have defended their tax evaluations of large retailers, but a successful legal challenge could change the dynamic, as it has in other states.

“And once that does happen, it’s much harder to put that genie back in the bottle,” she says.

Local governments in midwestern states have been among the hardest hit, so much so that the dark store argument has spawned legislation in Indiana and Michigan and was highlighted as a priority in Wisconsin Gov. Tony Evers’ state of the state speech last month.

But this kind of legislation faces legal obstacles, including potential conflicts with what are known as uniformity clauses in state constitutions. These provisions require that taxation is applied evenly within a local jurisdiction.

Critics of Maine’s bill say it creates different tax rules for specific businesses — a violation of the uniformity clause.

Supporters acknowledge that it may need some changes, but Austin says the proposal is designed to give legal support for local assessors.

“So that courts and assessors have firmer ground to stand on when they’re looking at how box stores should be valued,” she says.

The Legislature’s Taxation Committee is expected to hold a work session on the proposal on Feb. 18.

Don’t let big box retailers bully Maine towns out of millions in taxes

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Big-box chains benefit from the fire and police protection and infrastructure provided by our municipalities. Their employees and their children benefit from the public education provided by our schools. The retailers who benefit from those investments should pay their fair share, not push more of the cost onto homeowners and small businesses.

But all over the country, large retailers such as Walmart, Home Depot, and Lowe’s have successfully used “dark store theory” to challenge local assessments and slash their property tax bills. Major corporations are beginning to roll out this tactic in Maine: Since 2015, six retailers (Walmart, Lowe’s, Walgreens, Sam’s Club, Best Buy, and BJ’s) have requested $184 million in valuation reductions since 2015.

Last week, the Legislature’s Taxation Committee heard public testimony on a bill, LD 2045, sponsored by Rep. Ryan Tipping of Orono, that would block these large corporations’ effort to rewrite the property tax code for their own benefit. MECEP supports LD 2045 because it would stop the dubious “dark store theory” in its tracks, protecting municipal property tax bases and guaranteeing that large retailers pay their fair share.

How dark store theory works

Large-scale retail is big business. The top 10 large retailers nationally reported more than $1.1 trillion in sales in 2018. But lawyers for big-box retailers say communities should ignore this reality on the ground. They say towns should instead assess their properties as if they were shuttered and vacant “dark stores” in economically undesirable areas.

This is like arguing that your home should be assessed as if the neighborhood had fallen on hard times and everyone had moved out, even if today you live in the most popular, vibrant part of town.

Property taxes are supposed to be based on an apples-to-apples comparison between the property in question and similar situated properties. Dark store theory instead asks local assessors to compare fresh fruit to rotten vegetables.

Part of the argument made by dark store theory is that large retail properties are unappealing to buyers when they hit the market. Large retailers argue their valuation should reflect the much lower value of these dark stores — even while they are still open for business.

Essentially, they say communities should ignore the current value of their property and tax them based on what it would be worth when market conditions at their location are no longer favorable.

Ironically, difficulty selling big-box retail properties is at least partially the result of anti-competitive practices by the retailers themselves. Big-box retailers use restrictive covenants to prevent competition, with the added effect of deflating the value of big-box stores on the open market.

For example, imagine a Walmart closes in one community because the parent company is opening a new Walmart Superstore in the next town over. Walmart’s restrictive covenant on the original property protects it from competition by preventing another large retail business, such as Target or Costco, from opening a store there.

These tactics don’t just protect big-box retailers from competition. By preventing other large retailers from buying vacant big- box stores, these anti-competitive practices drive down the prices of their property on the market. In other words, these corporations are knowingly deflating the future value of their properties, then asking for a tax cut today to reflect the conditions they’ve created in the future.

There’s still time to stop dark store theory from taking hold in Maine

Dark store theory is relatively new but is gaining ground across the country. The theory was first successful in a handful of Midwestern states, where it has been used to slash local valuations by hundreds of millions of dollars. Ambiguity in state assessment laws have led to some state courts allowing dark store assessments to prevail at great costs to local communities. In Michigan, for example, dark-store appeals cost local budgets $100 million between 2013 and 2017.

A 2019 MECEP survey of the Maine towns with the highest retail receipts showed that large retailers are asking for dramatically reduced assessments in line with those sought under dark store theory. Large-scale retailers have requested at least $184 million in reduced property value over the past four years. Those retailers are requesting valuation reductions of between 14 percent and 56 percent, with an average requested reduction of 34 percent.

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In our research, we found that Maine assessors have been largely successful in defending their assessments or settling on abatements that are a fraction of what the retailers sought. When appeals did result in a reduction, the average granted reduction was about 8 percent of property value.

However, Maine should not leave assessors as the lone line of defense against corporate tax avoidance. Large retailers have proven elsewhere that they are willing to challenge local decisions if they believe a court would grant them a more favorable outcome. And once that happens, it’s much harder to put the genie back in the bottle.

Dark store theory exploits a lack of clarity that exists within state assessment laws. LD 2045 would clarify the kinds of property comparisons that should be used in local assessments.

While this bill retains the right of any property taxpayer to challenge their assessment, it establishes guardrails on which comparable properties can be used to arrive at a fair assessment. That clarity will protect municipalities and other property taxpayers in the face of consistent assessment challenges by retail corporations.

MASSACHUSETTS Worcester property tax valuation appeals decreased 36% since 2017

Commercial/industrial real estate tax abatements are down for third straight year.

For the third consecutive year, the number of commercial and industrial tax abatement applications and refunds continued to trend downwards in Worcester, according to data from the city’s Assessors’ Department.

In 2019, applications for those properties fell to 134 in 2019, down from 208 three years ago, a nearly 36% decrease. During the same period, the number of abatements issued was 16, down from 69 in 2017, a 77% dip.

Assessed values are a yardstick for a municipality to collect property taxes. The role of the assessor is to put a fair market value on a property. Landlords have a right to seek an abatement or rebate on the taxes they’ve paid if they disagree on how their property is valued.

“It looks like we are getting it right,” said John Valade, acting city assessor. “We set the property values, and our expertise is doubled checked by the Massachusetts Department of Revenue.”

The combined valuations of commercial and industrial properties in Worcester rose to $2.7 billion last year, up from $2.6 million in 2017.

Thomas Zidelis, the city’s CFO, said assessed values of a home or commercial property typically lags the market. Valuations are calculated at the beginning of the year, 12 months prior to when the tax bills are sent in December.

For example, he said, on Jan. 1, a 100,000-square-foot office building was fully occupied. But by year’s end, a major tenant moved out leaving much of the space vacant. In that case, he said, the landlord may seek an abatement.

The downward trend from the last two years comes as the number of commercial/industrial abatement applications grew to 208 in 2017, up while the number of abatements increased by three.

Valade said that was a time period when rents in large apartment buildings were rising, pushing valuations up.

“We try to make sure we are accurate at the same time the market may be fluctuating up and down," he said.

Starting on Jan. 1, the business tax rate rose to $35.16 per $1,000 in assessed value, up from $34.90. The residential rate will lowered from $18.00 to $17.00.

The split tax rate has been a contentious issue as the Worcester Regional Chamber of Commerce has advocated for the city to move to a single-tax rate.

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The chamber argues a single-tax rate will make the city more attractive to business, which will raise the overall property valuation in the city and generate more tax revenue without the need to raise business or residential tax rates. Changes may be coming to PILOT City Council may move to squeeze more cash out of universities, teaching hospitals

No one disputes the key roles that universities and teaching hospitals play in the city of Boston’s economic success.

But a big potential dispute looms over the roles they should play in funding the city of Boston’s budget.

The City Council is embarking on an aggressive effort to squeeze more cash and community benefits out of these tax-exempt “eds and meds.” Yes, the PILOT program is a perennial punching bag at the council. But this time feels different. This time, we could see the first major changes to the voluntary program for payments in lieu of taxes since it was first put in place nearly nine years ago.

Councilor Michael Flaherty called for hearings on the issue, and councilors Lydia Edwards and Annissa Essaibi George filed an ordinance that would put PILOT reforms in motion. And new City Council President Kim Janey all but assured the big institutions that change is coming by promising during her inaugural address this month that she would create a new council committee charged solely with evaluating the PILOT program. That’s supposed to happen at the council’s next meeting on Wednesday, when it adopts committee guidelines for the year.

First, let’s talk about what is going right. Universities, teaching hospitals, and cultural institutions pumped $34 million into the city’s coffers in the last fiscal year, an amount that has been rising steadily since the start of the current PILOT program. The Lincoln Institute of Land Policy has determined that no other city in the United States is more successful in wringing cash out of its nonprofit institutions, based on the total haul.

The current system was hashed out during former Mayor Thomas M. Menino’s administration: City officials request larger nonprofits, those with at least $15 million worth of real estate, to contribute 25 percent of what they would be paying if their properties were on the tax rolls; half of that amount can come in the form of credit for community benefits they provide.

Sounds good so far. But the PILOT Action Group, a watchdog coalition of activist organizations, reported late last summer that fewer than one-quarter of the nonprofits paid the full amount requested by the city, down from the year before, and well off the peak of 48 percent in 2012.

Critics say that’s just one flaw. Flaherty said most of the valuations used to calculate PILOT requests haven’t changed much since the program’s inception. The same can’t be said of the property evaluations used to calculate the bills of residential taxpayers. Edwards also said she’s worried that city officials are not aggressively adjusting their PILOT requests to reflect new commercial businesses — such as restaurants or stores — that open on tax-exempt properties.

Another sore spot: the community benefits portion. Hospitals already have some industry-specific guidelines, but not colleges and universities. Edwards and Flaherty both said they would like to start a public dialogue to determine whether these big institutional players should do more to address crises that the city faces, such as opioid addiction or inadequate affordable housing.

Then there’s this issue of “institutional creep:” As the big schools expand their land holdings, more properties fall off the tax rolls.

The councilors stress that they want this review of PILOT to be amicable, not confrontational. But some institutions are more likely to go along than others. Boston College, for example, contributed $358,000 in cash last year, or 10 percent of the total request. As a Jesuit Catholic university committed to service, spokesman Jack Dunn said, BC officials believe the best way to help the city is through more than $30 million in community benefits it provides annually instead of PILOT participation.

Boston chief financial officer Emme Handy said the Walsh administration is looking forward to getting closer to 100 percent participation with the City Council’s input. City officials note that after fiscal 2016, they increased the amount they request of the nonprofits every year by 2.5 percent.

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Richard Doherty, president of the Association of Independent Colleges and Universities in Massachusetts, isn’t necessarily spoiling for a fight, either. Doherty was a key player in the discussions a decade ago; he points out that members of the Menino task force at the time agreed participation should be voluntary. The specific benefits that the schools provide go well beyond what they get credited for in the PILOT assessment, not to mention their broader contributions to the city’s innovation ecosystem.

Tish McMullin, head of the Conference of Boston Teaching Hospitals, said her group welcomes the opportunity to continue the conversation. Doherty expressed similar sentiments. He said the city’s nonprofit leaders are happy to have a conversation with councilors about these benefits — but maybe not if that conversation is geared toward undoing their organizations’ tax-exempt status.

Janey, the council president, knows participation is voluntary. But she also knows the numbers: the outdated property assessments, the incomplete participation rates.

Janey said the city simply leaves too much on the table right now. It’s time, she said, for Boston’s nonprofit partners to pay their fair share. Figuring out exactly what that means might not be so simple.

Real Estate Tax Reality It is said that taxes are one of life’s two certainties. The other one isn’t so welcome, either. While the following explanation may not change anyone’s tax bill, I hope it goes some way to educating the public about how taxes are determined. Truth is, Revere’s tax rate, as well as our average single-family tax bill, are among the lower in the region and among comparable municipalities.

Misunderstanding and misconception about how real estate taxes are determined fuels anger. A frequent complaint that comes to any Mayor’s Office suggests that a particular neighborhood was singled out for a substantial increase. Some blame me, or the assessors, or the City Council, as if one of us unilaterally chose to impose substantial burdens on individuals. Those criticisms are simply incorrect.

Property taxes are a product of a comprehensive formula set by Massachusetts law. Property taxes are based solely on the value of a home and the land around it. The tax rate is multiplied for each thousand-dollars of a property’s assessed market value. The recent, rapid, and substantial increase in property values in some parts of Revere triggered, for some, a tax bill increase even though our tax rate dropped to $12.11 in 2019 from $12.96 in 2018. In fact, our current tax rate reflects a dramatic decrease since 2014, when it was $15.55.

I have heard some people complain that real estate taxes are based on real estate values. But Massachusetts law, like that in most every state in the country, requires that property values form the basis of municipal real estate taxes. Quite frankly, real estate values are the most objective measure one can devise to set real estate taxes. A property’s market value is derived from independent market forces, free from government decree or political motivation.

Massachusetts law also requires that tax rates are applied to 100 percent of a property’s assessed market value, which is determined annually. Revere employs the services of an independent real estate assessment company to compile property market value data.

Once a municipality’s tax rate is set, it is applied uniformly across the entire city, as required by state law. In other words, there is no tax rate for one section of a city and another for another section of the city. Massachusetts law permits only two classifications of real estate tax rates: one for residential property and another for commercial property. Every residential property owner pays the same rate, and every commercial property owner pays the same rate. The total amount of the tax is based on the assessed value of the property.

Property taxes are the most significant source of the revenue needed to fund the city’s operation. What do they pay for? Think of every aspect of municipal government: our public schools, our police and fire departments, maintaining our streets and sidewalks and parks, maintaining our public buildings, libraries, providing social services, recreation opportunities, trash removal, snow removal, keeping vital records, making health and safety inspections and enforcing state regulations—all of it, along with the cost to administer and equip every aspect of it.

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Before the start of a fiscal year, a municipal budget process projects the cost to run the city. The budget I submitted to the Revere City Council for the current fiscal year was created after lengthy and careful deliberation with every municipal department. The City Council, which holds the final say on municipal spending, concurred with practically every bit of my budgetary estimates.

Massachusetts law limits a city to raising total the total tax levy by no more than 2.5 per cent each year. Revere’s total tax levy for FY 2019 was $86,416,689. Using that figure, our Assessors take the total assessed value of all commercial and residential real estate in the city, based on market data, and establish a single base tax rate to raise the amount of the total tax levy. Commercial property is then assessed at 1.75 per cent of the base tax rate, the maximum allowed by law. That amount, the commercial tax levy, is applied to the total tax levy, and the remainder determines the residential tax levy.

While this is a very fundamental illustration of how taxes are determined, it largely explains the process. Revere allows exemptions for widows, elderly, veterans, and blind property owners. Revere is one of only two cities in Massachusetts to offer the senior exemption that gives seniors the chance to receive an owner-occupied exemption. Revere also offers the Senior Work-off program which gives seniors another avenue to earning money off their taxes. In addition, my administration remains committed to instituting a tax exemption for all owner-occupied properties.

This will happen only through stringent budgetary practices. In Revere, property taxes will pay approximately 41 percent of the total city expenditures. But our residential property taxes pay some 78 percent of the total tax levy. This is why I am committed to expanding Revere’s commercial real estate tax base, which will alleviate some of the burden on residential taxpayers. One example of this commitment is the redevelopment of Suffolk Downs, which is projected to generate over $40 million in tax revenue for our city.

The remaining amount of money collected to run our City derives from state-sourced funding nicknamed the “Cherry Sheet” revenue, the water and sewer enterprise fund, local receipts of fees, excise taxes, room tax, meal tax, and state and federal grants. We vigorously pursue all sources of revenue to minimize our municipal tax burden.

When all is said and done, Revere’s 2019 residential tax rate of $12.11 is lower than our neighboring communities such as Winthrop ($13.18), Saugus ($12.18), Salem ($15.10), Malden ($13.27), Chelsea ($14.25) and Everett ($12.38). Revere’s 2019 average single family tax bill of $4,581 is lower than nearby communities such as Lynn, Medford, Salem and Saugus. The increase in property values in Revere is a good thing. It proves that our city is thriving. Our fiscal policies, our financial stability, and the prospects for our city’s future all point in a positive direction. When the value of a single family house in a section of our city jumps by 20 or 30 percent, it is an indication that people want to live in Revere.

I agree with them. And I will continue to run our city on as lean a budget as possible, and keep our taxes as low as necessary to run a strong city.

Brian Arrigo is the Mayor of the City of Revere. Boston City Council Wants Fair Share from PILOT Organizations

During the regular city council meeting, the Boston city councilors discussed institutions and organizations that do not pay property taxes and how to get a fair share of financial contributions from them.

Councilors Annissa Essaibi George and Lydia Edwards sponsored the motion, requesting a working session on the topic.

Boston has a PILOT (payment in lieu of tax) program where they ask cultural, educational and medical organizations to make voluntarily contributions since they do not pay taxes. In 2018, the city gained $33.6 million contributions, which was an increase from the year before. However, some institutions are still not meeting the requests by the city. There have actually been several organizations that have given no contributions. The council held numerous meetings last year about the issue.

“We have seen an increase in contributions,” said Edwards on Wednesday. “But we need to be at 100 percent.”

Edwards said the city needs to do new assessments on these organizations’ properties, since the last time the city did so was a decade ago. She also believes the city needs to develop guidelines as to what community benefits are. One of the reasons why these organizations do not pay taxes is because of the community benefits they offer Boston. However, Edwards pointed out

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there is no set standard by the city as to how “community benefits” is defined. She said one organization last year told the council one of their benefits is students do not have to go to Boston Public School because they can go to their school.

“That’s embarrassing,” she said. “That’s insulting.”

Essaibi George thanked the organizations for their contributions, but said they also rely on public services like everyone else.

“They use our infrastructure. When they call police or the fire department, they come,” she said. “This is a call for what is fair.”

The councilor reminded the council that budget season is just around the corner and the city heavily relies on property taxes.

Councilor Josh Zakim agreed with Edwards, saying the city needs to do updated property assessments. He also doesn’t like that the PILOT program is voluntarily.

“That’s a problem,” he said. “They need to pay their fair share.”

MICHIGAN Class action lawsuit filed over delayed Detroit property tax assessment notices

A federal class action lawsuit filed Thursday claims the City of Detroit was late delivering more than 260,000 residential property tax notices in 2017 — a widespread delay that compounded inflated property tax bills the city issued to scores of residents in recent years.

The late notices began going out in mid-February 2017, leaving residents insufficient time to appeal their property tax assessments, which in many cases exceeded the state's legal limit, according to the lawsuit.

"In 2017, Detroiters had no real right to appeal their systematic, inflated assessments due to the city's failure to mail timely notices of assessment and the right to appeal," U.S. Rep. Rashida Tlaib, D-Detroit, said at a news conference Thursday where the lawsuit was announced.

"This is not right. And please, let's not pretend that you didn't hear from residents …we have the data to show that you absolutely were denied your right to appeal and your right to keep your home," Tlaib said.

The class action lawsuit is the latest development in the city's recent struggle to reckon with several years' worth of inflated property tax bills sent to residents following the Great Recession. The city overtaxed homeowners by at least $600 million between 2010 and 2016, according to a Detroit News report last month.

The lawsuit, filed by the Chicago law firm Goldman Ismail Tomaselli Brennan & Baum, names Mayor Mike Duggan, Deputy CFO/Assessor Alvin Horhn, Wayne County and state tax officials as defendants.

"By denying homeowners an opportunity to appeal and lower frequently overassessed property taxes, the Detroit government … compounded a well-documented crisis that has plagued Detroit for years, leaving many homeowners no recourse but to pay more than they should owe, face delinquency, or even fall prey to property tax foreclosure," the lawsuit reads.

Horhn called the lawsuit frivolous. The city mailed notices on Jan. 24 that year and extended the period to appeal by two weeks, he said in a written statement.

To emphasize his point, Horhn's statement included a link to a Free Press article in February 2017 that said the first batch of notices went out that year on Feb. 8.

"This suit has nothing to do with concerns about overassessments in prior years. It refers only to 2017. … Mayor Duggan fixed the overassessments in 2014 in his first month in office and has led efforts starting in 2015 that have reduced tax foreclosures by 90%," Horhn said in his statement.

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Homeowners must follow a multistep process prescribed by city and state laws to appeal their property tax assessments. In 2017, the delayed notices, which contained misleading information, effectively denied Detroit homeowners their appeal rights that year, according to the lawsuit.

The first step of the appeal process — an appeal to the city's Board of Assessors — must be filed by Feb. 15 of a given year. The notices began going out on Feb. 14 in 2017 and the city extended the deadline to Feb. 18, according to the lawsuit. "This extension did Detroit homeowners little good, as almost all notices were mailed just four days before that deadline," the lawsuit reads.

The announcement of the class action lawsuit was part of a news conference downtown at the Coleman A. Young Municipal Center where officials and housing rights activists demanded justice for unconstitutional property tax assessments in Detroit.

Michigan's Constitution prohibits property tax assessments in excess of 50% of a home's market value. City officials have acknowledged previous administrations failed to keep assessments in proportion with home values.

The inflated tax bills contributed to widespread property tax delinquencies and the city's foreclosure crisis.

Detroit resident Sonja Bonnett, who lost her home to foreclosure in 2018, said a fire was lit under her when she learned about the city's inflated property tax bills.

"It feels very personal to lose your home. You feel like you did something very wrong, like you just couldn't keep it together," Bonnett said. "Land is so very important, and they are stealing your land. We cannot let them get away with this yet again because Lord knows they've stolen enough land."

In addition to the class action lawsuit, new research released Thursday shows the city has continued to overtax low-income Detroiters based on inaccurate property values, despite a citywide reappraisal that took effect in 2017.

The findings raise fresh doubts about Duggan's claims that his administration dealt with the problem of inflated property tax bills with the reappraisal three years ago.

"Still to this day, evidence shows that the city is still overassessing low-value homes throughout the City of Detroit," Council President Pro Tem Mary Sheffieldsaid. "Justice and compensation belong to the people of Detroit and we plan to ensure that it is delivered expeditiously."

While the percentage of Detroit homes assessed in excess of the state's legal limit fell from one-half to one-third since the city's reappraisal, the burden of overtaxation has increased on those living in lower-valued homes, according to the study by the Center for Municipal Finance at the University of Chicago Harris School of Public Policy.

The study examined data from the Detroit assessor's office of residential property sales between 2016 and 2018. The data included more than 9,700 transactions and sales prices ranging from $1,800 to $690,000.

Anger and frustration among residents and City Council members has grown since the report put a $600 million price tag on the city's overtaxation.

In response, Duggan's office has pointed out that the mayor has made it a top priority since he took office in 2014 to address the gap between home prices and property assessments.

"The current administration has moved dramatically to correct those deficiencies, investing more than $10 million in a citywide revaluation and providing the (assessor's) department with a nearly 50% increase in staff," Detroit Chief Financial Officer Dave Massaron and Horhn wrote to City Council in a Feb. 5 memo.

While acknowledging past overassessments, the city "believes" the $600 million estimate is inflated, the memo reads. Furthermore, there is no legal remedy for past overassessments.

"If there were a legal means to reopen them, the cost would be so enormous, the only practical means to raise the funds would be a citywide judgment levy on property taxes," the memo reads. "In other words, a huge property tax increase would be needed to fund the repayment of past property taxes."

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The University of Chicago study claims the problem of overassessment persists despite corrective actions under Duggan.

Before the city's reappraisal, homes with the lowest sales prices (between $1,800 and $10,000) were assessed at nearly 90% of their price while the top 10% of homes (those sold at $60,000 and up) were assessed at less than 30% of their price, according to the study. The figures mean that the lowest valued homes were assessed at a rate of about three times that of the highest- priced homes.

Since the reappraisal, the bottom 10% of homes were assessed at a rate roughly four times the most expensive homes, the study found.

Christopher Berry, academic director for the Center for Municipal Finance and one of the study's authors, said it's unfortunate that the reappraisal did not fix the overassessments.

"After having studied a lot of jurisdictions around the country, Detroit is not the only place that has this problem. But it is one of the worst that I've seen," Berry said.

Detroit faces reckoning, lawsuit from over-taxed homeowners

The city of Detroit now faces a reckoning for its history of over-taxing homeowners—and a new class-action lawsuit.

The city admits it over-assessed many homeowners for years after the Great Recession, leading to inflated property tax bills. A recent Detroit News investigation pegged the amount of over-taxation at around $600 million from 2010-2016. Wayne County has foreclosed on around one-third of all Detroit properties since 2008.

Now, some of those homeowners are looking for redress. Five people have filed a lawsuit claiming that in 2017, the city didn’t send out property tax assessments until just days before a deadline to appeal them. The lawsuit also names the offices of Detroit’s chief financial officer and assessor, Wayne County, Mayor Mike Duggan, Assessor Alvin Horhn, and members of the State Tax Commission as defendants.

“In 2017, the city government denied every Detroit homeowner due process when it came to their property tax assessment,” said Sam Schoenburg, one of the attorneys behind the lawsuit.

“The city knew the notices went out late. They tried to announce some halfhearted measures, [such as] an extension that they announced through a press release and a city meeting. This was not enough. This is not constitutional due process,” Schoenburg said.

U.S. Rep. Rashida Tlaib (D-Detroit) worked on the issue as an attorney with Detroit’s Sugar Law Center. She says Freedom of Information Act request data showed the city mailed out assessments on Feb. 14, 2017, and some people didn’t get the information until days after that.

“In 2017, Detroiters had no real right to appeal their systematic inflated assessments due to the city’s failure to mail timely notices of assessment and the right to appeal,” Tlaib said. “This is not right.”

But the city takes issue with the lawsuit’s claims, calling them “inaccurate” and the suit itself “frivolous.”

The lawsuit’s assertions “can be proven false with a simple Google search,” Detroit assessor Alvin Horhn said in a statement. “You can check. The city mailed out the 2017 notices on January 24 in an appropriately timely manner, and the city extended the appeals period by two weeks to last the entire month of February.”

“This suit has nothing to do with concerns about over assessments in prior years. It refers only to 2017, and even the Detroit News analysis does not question the accuracy of our assessments beginning that year,” Horhn said.

2017 was year that Detroit completed a state-mandated re-assessment of every property in the city. But it left most Detroiters with only modest changes in their property tax bills.

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But the groups behind the lawsuit, known as the Coalition for Property Tax Justice, say the city owes over-taxed homeowners more than just a retroactive mea culpa. They want the city to take additional steps to “make it right” for them, especially for the thousands of people who have lost homes to tax foreclosure since 2008—many of whom were illegally over-assessed (the Michigan Constitution says tax assessments cannot exceed 50% of a property’s market value), or would have qualified for a low-income property tax exemption that wasn’t widely accessible or known to most Detroiters until the past couple of years.

The coalition’s demands include:

 An across the board cut of assessments for all properties value $30,000 and under (University of Chicago professor Christopher Berry says he’s found the city continues to assess its lowest-value homes at inflated rates, even after the recent re-assessment);  Making it easier for homeowners to figure out of the city is overcharging them;  A Michigan Attorney General and Detroit Auditor General investigation into illegally inflated property taxes and the resulting tax foreclosure crisis in Detroit;  A state and county compensation fund for Detroit residents;  A stop to the annual Wayne County tax foreclosure auction until faulty assessments and other problems are corrected.

Detroit Mayor Mike Duggan has said that it would be unfair, potentially illegal and too expensive to compensate people who failed to pay property taxes in the past, even if they were over-assessed. Duggan and other Detroit officials do support a proposed program that would offer some relief to all homeowners struggling to get out from under large delinquent tax burdens. That plan, which requires legislative approval, passed the State Senate just this week.

But Sonja Bonnett, a lifelong Detroit resident and activist who lost her home to tax foreclosure, says the city owes its longtime residents better.

“To the city of Detroit: we’ve been here, we’re not going nowhere,” Bonnett said. “Stop treating us like we don’t matter.”

Uncapping Of Commercial Real Estate Assessments Most are aware that the taxable value assessment of a commercial property is uncapped on its sale, but it can also uncap in the event of certain other transfers which do not involve the sale of property and the recording of a deed.

By way of background, Michigan real property taxable value assessments are “capped” and can only increase year-to-year at the lesser of 5% or the rate of inflation. Section 211.27a(6) of the General Property Tax Act defines “transfer of ownership” generally as the conveyance of title to or a present interest in property, the value which is substantially equal to the value of

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the fee interest. Section 211.27a(6) provides a variety of examples of what constitutes a transfer of ownership for taxable value uncapping purposes.

Many are unaware that the sale or transfer of an ownership interest in an entity which owns real property is a transfer of ownership of the entity’s real estate for tax purposes if the ownership interest sold or transferred is more than 50% of the total ownership interest in the entity. In other words, if you sell or transfer more than half of the ownership interest in an entity owning real property, you have created a “transfer of ownership” of the entity’s real property for real estate tax purposes. This provision is applicable to stock in a corporation, membership interests in a limited liability company and percentage ownership in a partnership. Such a sale or transfer will result in the “uncapping” of the property tax assessment of all real property owned by the entity. By way of example, suppose John Doe owns a majority of the ownership interest in Universal Widget and transfers it as a gift to his son, Peter Doe. The transfer will result in the uncapping of the property tax assessment on all real property owned by Universal Widget. If the transfer occurs in increments over time, the lifting of the taxable value cap occurs at the point John Doe no longer owns the majority interest in Universal Widget.

When a majority ownership interest in an entity has been sold or transferred, a Real Estate Property Transfer Affidavit must be filed with the local assessor. Section 10 of the Affidavit states “Type of Transfer: Transfers include, but are not limited to, deeds, land contracts, transfers involving trusts or wills, certain long-term leases and business interest.” Failure to timely file the Affidavit permits the assessor to go back and increase prior tax assessments (after the transfer took place) to adjust the property tax assessment, possibly resulting in (i) an increased assessment resulting in increased property taxes, (ii) interest on the difference on the tax that was paid and the tax that should have been paid and (iii) penalties.

Any time you are contemplating a sale or transfer of an ownership interest in an entity which owns real estate you should consult with your attorney about the means and ramifications of your proposed transaction.

Understanding your Detroit property tax assessment Here’s a guide for everything you need to know about your notice of assessment and property tax bill

With the recent news that Detroit homeowners were overtaxed at least $600 million between 2010 and 2017, and that restitution for those losses is unlikely, homeowners are probably going to take a close look at their property tax assessments this year.

But how do you know if the assessment is accurate? And how do you contest one that seems too high?

Whether you’re a legacy property owner who wants to keep an eye on upcoming taxes or a potential homebuyer trying to budget for the future, this guide can help demystify property taxes, just in time for the arrival of your annual notice of assessment.

“THIS IS NOT A BILL”

Homeowners get their “Notice of Assessment” in the mail at the beginning of the year. On the upper right will be a big note: “THIS IS NOT A BILL.”

But don’t be fooled—the values on this document are key to how your bill gets calculated, so in many ways it’s actually more important than the actual bills you’ll receive later.

The terms

Unless you’re an accountant or lawyer, the legal terms in the notice are not at all obvious. Here’s a definition of what each means.

ASSESSED VALUE: Determined by a property’s market value. This should be half the amount you could sell your house for (the “True Cash Value”). The assessed value x 2 = market value. State law requires that assessments not exceed 50 percent of a property’s market value. This number will go up and down each year and is based on sales studies, not your individual house sale.

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TAXABLE VALUE: The first year you own a house, this number should match the assessed value. This value is “capped” and cannot fluctuate each year beyond the rate of inflation (“Consumer Price Index”) or 5 percent, whichever is lower.

STATE EQUALIZED VALUE “SEV”: This is the assessed value that has been adjusted following county and state equalization. It’s usually the same as the assessed value.

What’s a millage rate?

Simply stated, 1 mill equals $1 for every $1,000 of taxable value. Millage rates are levied by the state, county, and local municipalities, and cities are heavily reliant on property taxes to function. Millage rates vary across cities, and can even vary within the same municipality if there are multiple school districts.

The tax bill

The total annual property tax bill for the year is your Taxable Value divided by $1,000, multiplied by the local millage rate. Here’s the equation:

In July, you’ll receive your summer tax bill, which is the higher of the two bills. You can pay in one payment due August 31 or in two installments in August and December. You’ll receive your winter tax bill in December, and it’s due by January of the next year. If you have a mortgage, all of these bills are generally included in your monthly mortgage payments.

Things to check for

When you get your notice, you should look for a few things.

If you live in a house you own, your Principal Residence Exemption should show 100 percent (if you’re in a duplex it will be 50 percent). This exempts you from paying the tax levied by a local school district for operating purposes, up to 18 mills.

If this is the first year you’ve owned the house (there was a transfer of property last year), the assessed value and taxable value will match. And while the value is based on sales studies, not on your individual sale, it should be around half or lower than the price you bought it for. If it’s significantly more, this might be a sign you’ve been overassessed.

If you’ve owned the house for more than a year, you want to make sure that your taxable value is only increasing by the rate of inflation, which is dictated by the state. The 2020 inflation rate multiplier is 1.019 (or an increase of 1.9 percent). It if has increased more than that 1.9 percent, it could be because your property tax uncapped due to new construction. If there wasn’t an “uncapping event,” then you may have been overassessed.

Appealing your bill

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This process can seem overwhelming, but it is your right, and could potentially save you thousands over the years. The first step in the appeals process is to go to the board of review—in Detroit this begins with the Assessors Review in February.

Homeowners bring information regarding why they are requesting a change in assessment—this information may include photographs, estimates of repairs, sales studies, comparisons, and any other pieces of evidence you think is relevant.

Most appeals dealing with overassessment are looking at property comparisons in the same neighborhood. You can do this yourself by looking up recent sales on sites like Trulia (make sure they are actual sales not asking prices), but an official report from an independent appraiser would hold more weight.

Photos and information explaining the specific property (like structural defects, fire damage, etc.) can also be helpful. Also, if the market price (“True Cash Value”) is much higher than the price you paid, this information may also be relevant.

As long as you start the process, you have the option to appeal again. And this can buy you time when preparing next time, or to engage an independent appraiser and/or lawyer. If you appeal the local Board of Review decision, you will have to pay filing fees to head to the Michigan Tax Tribunal. Though fees range in cost, if the value in contention is $100,000 or less, it’s $250.

Dates to know

The cities of Hamtramck and Highland Park could not say for sure when assessments would be mailed, though they estimated notices would be sent in early February. Detroit has said that notices should be out the last week of January.

Other important dates:

Detroit Assessor’s Review - Feb 1 through 15 (in person or via letter). If appealing, go to the March Board of Review. Hamtramck Board of Appeals - March 9 and Thursday 12 (make an appointment) Highland Park Board of Review - March 9, 11, 12 (walk-in or make an appointment)

Other ways to change your bill, and how to deal with Delinquent Property Taxes

If you cannot pay your taxes due to financial hardship, you may be able to reduce or eliminate your current year’s property taxes with the Homeowner’s Property Tax Assistance Program (HPTAP). HPTAP, also know as Property Tax Exemption (PTE), provides an opportunity for homeowners to be exempt from their current year property taxes based on household income or circumstances.

If you are behind on your property taxes, there are several payment plans and other options that may help you to avoid foreclosure. United Community Housing Coalition offers one-on-one assistance for property tax help and foreclosure prevention.

Who can help?

Detroit Justice Center is helping Detroit residents who wish to appeal—contact their Community Legal Workers at 833-200- 0093 or [email protected] United Community Housing Coalition offers one-on-one assistance, and can help you navigate delinquent taxes and PTE. Visit their website uchcdetroit.org or call their Tax Hotline at 313-405-7726. Reach out to your assessor In Detroit, the City Assessor’s number is (313) 224-3035 and you can find FAQs and more information here.

MICHIGAN SUPREME COURT AGREES TO HEAR PROPERTY TAX CASE The Michigan Supreme Court will hear a case later this year in which officials took a man’s property for $8.41 in unpaid taxes.

The Michigan Supreme Court agreed to hear a case later this year over government officials having confiscated a man’s property for $8.41 in unpaid interest on taxes and kept the $24,500 it fetched at auction.

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Uri Rafaeli failed to pay the interest owed on property taxes for a rental property several years ago. Oakland County, Michigan eventually foreclosed on his property for the $8.41 plus $277 in additional interest and fees. The county sold his property at an auction in 2014 for $24,500 and kept the whole amount.

Rafaeli sued Oakland County for the difference, but a trial court ruled he had forfeited his property. An appeals court agreed.

The appeals court said the officials acted properly under the state’s General Property Tax Act, which requires officials to take property for any amount of unpaid taxes and keep all the proceeds if they sell it.

Fifth Amendment Case

The Pacific Legal Foundation asked the Michigan Supreme Court to review the case on the grounds Michigan’s General Property Tax Act violates property owners’ Fifth Amendment rights, says PLF attorney Christina Martin.

The Takings Clause of the Fifth Amendment to the U.S. Constitution says the government cannot take private property “for public use, without just compensation.”

“The fundamental problem is that the Act fails to recognize that equity in real estate is protected by the Takings Clause in the U.S. Constitution and the Michigan Constitution’s counterpart: Article X, Section 2,” said Martin.

“[The Act] claims the power to entirely swallow that equity, no matter how valuable the property or how small the debt,” Martin said.

‘More Than It Is Owed’

Martin says she hopes the Michigan Supreme Court will rule that when the government seizes property, it does not have a constitutional right to keep more than what the former property owner owes the government.

“We recognize that government has the power to sell property to collect a debt, including statutory penalties, costs, and interest,” said Martin. “But when government takes and sells property to collect a debt, it should not be allowed to keep more than it is owed. But that’s exactly what Michigan’s General Property Tax Act purports to authorize.”

A favorable ruling in Rafaeli’s case would require the government to give him the remaining funds from the auction of his property.

Most states do refund the surplus, says Martin, but Michigan is one of a few states which either require or allow the government to keep all the profits from the sale of private property. Massachusetts, Minnesota, North Dakota, and Oregon have such laws.

“At minimum, to respect the Takings Clause, when the government sells property to collect a tax debt, it should have to refund the surplus profits from the sale of foreclosed property to the former owners,” Martin said.

“In Rafaeli’s case, that would mean the government should have refunded the $24,215 from the sale of [his] house, which exceeded [his] tax debt, interest, penalties, and fees,” Martin said.

‘Poor Discretion’

Although the General Property Tax Act allows for seizure of property, it is against common sense for the government to keep more than it is due, says Patrick Wright, vice president of legal affairs at the Mackinac Center for Public Policy.

“It is fair to say that regardless of the constitutionality, refusing to accept a late payment for $8 is ridiculous,” said Wright. “The county officials seem to have exercised poor discretion in deciding to process this.”

Michigan’s property laws are primarily meant to be sources of revenue, like all tax laws, Wright said. “The presumption would be that people should pay a portion of the tax commensurate with the value of property.”

Oakland County made $22.5 million from tax foreclosure auctions from 2006 to 2015, according to the Detroit News.

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The foundation’s appeal brief is due in February, and oral arguments before the court “will most likely be scheduled for October 2019,” Martin said. MTA Shares Assessment and Property Tax Basics

Shila Kinder is passionate about her job as Assessor for Mecosta County, a profession that requires understanding complex tax laws, organizing large amounts of data, and gracefully discussing tax bills with residents who may disagree with her work.

That passion also extends to teaching elected officials across the state how assessment and taxation work. Kinder gave a four hour workshop on behalf of the Michigan Townships Association in Okemos on Jan. 31, a class that left officials feeling more empowered as conversations of taxes come up in their communities.

Some basic things to know about assessments are:

~ Dec. 31 is the day of assessment for all properties in Michigan. Taxes are based on the value that day. If someone’s house burns down on Jan. 2 or 3, they are still assessed based on the home having been there until the next assessment. The same is true with improvements. If a lot is vacant on Dec. 31, but has a house in Feb or March, the lot is still assessed as vacant until the next Dec. 31.

~Everything is taxable except when it is specifically exempt. Statutory exemptions include religious, charitable, educational, and governmental organizations. There are also exemption programs for a variety of reasons, such as instituting green features, confined animal farming operations, some agricultural applications and more.

~Michigan’s Constitution requires that taxation be based on value of property, and that taxation must be fair. Taxes pay for services like education, roads, police and fire protection, records, administration, parks, downtown developments, libraries and more.

~Municipalities may have their own assessor, they may hire an independent assessor, or they may contract with the county.

~Properties are assessed for actual value, then taxed at the “taxable value,” which is 50% of the actual value.

~Michigan law restricts the increase of property taxes to the rate of inflation. However, when a property is sold, the cap is removed and taxes can go up to be based on the current value. This jump in taxes can be a surprise to a new property owner.

~Properties are classified based on actual use, not on zoning. Property owners may want their classification changed so they can get an exemption, so it’s important to make sure the accurate use is reflected. If a property has multiple uses, the use that adds the most value is the one that is used for classification. For example if a property has $200,000 value in farm land and $100,000 for a home, the property is agricultural. However if a property has $200,000 in farm land and a $350,000 house, the property is residential.

~Assessors determine value by looking at similar properties that have sold in the area. They may also go out to properties to look at additions, modifications, new structures, and other changes.

~Added value of construction is calculated based on official numbers set by the state for cost to build as well as cost of depreciation each year. There is a base number, and each county has a multiplier for that to reflect variances in regional values/costs.

~Values are further refined by an “Economic Condition Factor,” which adjusts values for the local economy, even looking at specific neighborhoods within a municipality. For example, in a city with a lake, the neighborhood with lake would have a different ECF than the neighborhood without the property-value-enhancing views.

~Assessment roles must be completed by the first Monday in March.

~Once an assessor turns in the rolls, they cannot make any adjustments or corrections. Any changes must be done through appeal

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~If property owners disagree with an assessment, they can appeal to the local Board of Review. The Board of Review is made up of community residents, people who know the neighborhoods being discussed.

~An appeal needs to focus on the matter of the value assigned by the assessor. “What is your property worth, and how can you prove it?” Kinder said.

Kinder talked about the value of having an assessor who is skilled at working with the public, including answering questions of city leaders and responding to inquiries from residents and business owners.

“A lot of times residents just want to feel listened to,” Kinder said. “We hear complaints like ‘I don’t like how that assessor talked to me,’ or ‘they didn’t return my call,’ or ‘they didn’t answer my question.” Kinder said good communication builds trust and makes the process easier for everyone.

She also said that appeals are common, and not a reflection of quality of work. She added that appeals often increase when there are more homes being sold, because people are trying to get a lower assessment, or they may simply be surprised by the tax bill.

Also, there can be mistakes made or changes that an assessor may not know about. “That’s why we have this process. It’s why we have these layers of protections and appeals,” she said. “The goal of assessment, and the law, is to have a system that is fair and equitable.”

The Michigan Townships Association offers advanced classes for those who want to learn more about the assessment process, and is particularly useful for residents serving on local Boards of Review. For more on Michigan Townships Association, check out their website.

Property owners in Oakland County who want to know more about assessment and taxation, and to see what data is available for their property, can visit the Oakland County Treasurer’s Website.

MISSISSIPPI

State Supreme Court rules on local tax issue A Mississippi Supreme Court decision determined that a half million-dollar airport hangar in Picayune is exempt from more than $61,000 in ad valorem taxes.

Of the $61,953 in assessed taxes, the company that owns the hangar, G4 LLC, has paid $34,557. The Court agreed G4 should be refunded the taxes that have been paid.

G4 LLC entered an airport lease with the city of Picayune in 2009, and was assessed ad valorem taxes on the land until 2013. The company paid under protest to avoid a tax sale and petitioned for a refund of the taxes it paid. The Pearl River County Board of Supervisors denied the petition and the local Circuit Court agreed with the Board’s decision.

However, in a decision handed down on Feb. 6, the state Supreme Court agreed with G4, that the company was automatically exempt from paying ad valorem taxes on the airport property when the lease began.

The Court cited its decision in Rankin County Board of Supervisors v. Lakeland Income Properties, LLC, where the Court determined that municipal airport authorities in Mississippi can only lease property that serves commercial purposes, so G4’s property would automatically be eligible for the tax exemption provided to companies that lease airport property for commercial purposes.

The Pearl River County Board also argued that if G4 was entitled to the automatic exemption, G4 has run out of time to claim the refund, but the Court did not address that argument because the Board did not provide an argument that applied law to the specific case facts.

The Court also determined that G4 demonstrated it had used the leased airport property for commercial purposes. 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 its petition to the Board, G4 also asked for a refund of ad valorem taxes paid on lots the company owns in the Tin Hill subdivision. The Court agreed with the lower court that G4 is not entitled to a refund of those taxes. The company claimed the lots were assessed at a value higher than they should have been. However, the Court’s decision notes that there is no record evidence that shows G4 objected to the assessment until years after the assessments were finalized and how the tax assessor determined the property’s value is documented.

County Administrator Adrain Lumpkin declined to comment on the Court’s decision.

MINNESOTA Land Value Tax: A promising land-use tool proposed for our communities

Creating sustainable land use involves more than just planning. It also requires incentives. That’s why the North Star Chapter of the Sierra Club has joined with the Minnesota chapter of Common Ground USA to support state legislation that allows towns to create Land Value Tax (LVT) Districts.

The current property tax system taxes the total value of properties. This includes both the land and any structures on top of it. Because the average property has most of its value in the building, the conventional property tax is mostly a tax on building value.

This creates perverse incentives for speculators to buy up vacant and underused sites and to avoid building intensive uses. For the speculator, as long as annual holding costs are lower than the site’s annual appreciation in value, it pays to hold out. For those who want to make the most of the site, the more building value they create, the more they pay in property taxes.

As a result, a significant portion of land in cities, particularly near downtown areas, remains locked up as surface parking lots or other low-intensity uses. This has big environmental implications. Dense, high-intensity land use promotes sustainable transportation habits by making it easier to walk, bike, and take transit. It also limits urban sprawl and the resulting loss of habitat by concentrating development in existing urbanized areas.

LVT Districts would flip the script and tax the land value portion of properties at a higher rate than the building value portion. Places that have done this have experienced tremendous in-fill and redevelopment effects, along with other benefits. In the U.S., Pennsylvania has used this approach the most.

After Harrisburg, once one of the most distressed cities in the nation, adopted this approach in 1975, it saw 5,200 vacant properties restored and taxable businesses rise from 1,908 to 5,900. A number of smaller Pennsylvania towns saw dramatic increases in building permits issued and a majority of residents received tax reductions under the reform. A widely cited study of LVT use in Pittsburgh showed that building construction there leapt ahead of other Rust Belt cities.

The bill we’re supporting enables cities to pass ordinances that, first, identify specific geographic areas or parcels that would be in an LVT district. The district could be citywide or for just a corridor or neighborhood.

Once a district is designated, officials can then calculate its revenue under the conventional property tax system and then set out how to maintain the same level of revenue under a land value tax system.

The example below shows the effects on two properties if the NE Quadrant of downtown St. Paul were placed in such a district. The parking lot’s taxes almost triple, which creates development pressure to put it better use, and the Park Square Court Building’s taxes decrease by 24%, rewarding a land use that contributes to its surroundings.

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Although this reform proposal has been around for a long time and is most associated with Gilded Age reformer Henry George, there has been a recent chorus of voices from the fields of planning, architecture, and economics calling for its widespread adoption. It’s time for Minnesota communities to have this tool at their disposal.

MONTANA

Bill would create prop-tax moratorium for new broadband cable in MT A bill creating a five-year moratorium on property taxes for new fiber-optic cable in Montana would help expand high-speed Internet into underserved areas of the state, its sponsor said Tuesday.

Sen. Jason Ellsworth, R-Hamilton, said the tax moratorium in his Senate Bill 239 could be a key economic driver for the state, particularly rural areas.

“The common kind of call (I’ve heard) is, `How do we keep Montanans employed here?” he told the Senate Taxation Committee. “How do we keep businesses chugging along? This is the way. This is the future.”

Telecom companies and other business interests spoke for the bill, saying it would help offset the high cost of expanding fiber- optic cable to bring both Internet and cell-phone service to more of rural Montana.

“What Senate Bill 239 does is leave more money in my pocket on an interim basis, so I can build broadband connectivity out to more customers,” said Jason Williams, CEO of Blackfoot, a Missoula-based telephone co-op and telecom provider.

Yet local governments and the Bullock administration opposed SB239. They said it’s another property-tax exemption that narrows the tax base that cities and towns rely on for revenue.

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Tim Burton of the Montana League of Cities and Towns said almost 99 percent of property tax revenue in Montana goes to cities, towns and school districts.

“This (bill) probably has a good policy goal, but what we need to do is take some time to look comprehensively at what our tax policy needs to be in Montana,” he said.

Eric Bryson of the Montana Association of Counties also noted that state law already includes a property-tax abatement for new businesses, that can be requested and granted after public hearings. It allows abatement of up to 75 percent of the initial property-tax bill – not an entire moratorium like SB239, he added.

“It’s an incentive for the proponents of this bill to do exactly what they say they want to do,” he said.

Under SB239, new fiber-optic cable and equipment to deploy its use would be exempt from any property taxes for five years. Starting in the sixth year, taxes would be phased in at 20 percent a year for five years.

Geoff Feiss of the Montana Telecommunications Association said one of the group’s members spends about $2.7 million a year on fiber-optic networks. SB239 would save the company about $330,000 over 10 years, he said.

Williams of Blackfoot said his firm would use that money to invest in more fiber-optic cable within its service area.

Doran Fluckiger of Southern Montana Telephone, which is based in Wisdom, said the company has installed more than $15 million worth of fiber-optic cable in the last decade to serve about 650 customers – and that its property taxes have increased 135 percent.

“Many areas don’t provide fiber-optic service due to the high cost,” he said. “Southern Montana is still installing fiber-optic cable for our customers, but the cost is exorbitant.”

The Senate Taxation Committee will vote later on the bill.

NEBRASKA Nebraska legislature begins debate on major property tax/school funding bill The Nebraska legislature began debate this morning on LB 974, a bill to give relief to property taxpayers and reform school funding by providing more state aid to schools.

The sponsor of the bill, Revenue Committee chair Lou Ann Linehan of Elkhorn, said Nebraska farmers need property tax relief.

“We can’t break the back of agriculture in this state with property taxes,” Linehan said. “I have a lot of farmers in my district. They’re paying over 100 dollars per acre. That’s higher than anywhere around us—a lot higher.”

Senator Tom Briese, a farmer from Albion, said Nebraska has a property tax crisis.

“If you don’t believe me, take a trip around the state,” Briese said. “First, go out to rural Nebraska and talk to some ag producers, some of whom are drowning in red ink, partly cause by the third highest property taxes in the country.”

The bill is opposed by many of the state’s largest school districts, who fear it will mean a loss of funding. Lincoln Senator Patty Pansing Brooks says it’s a big concern.

“I understand that we’ll get more state aid. But by cutting the property tax percentages, that is a direct loss to Lincoln’s public schools of tens of millions dollars a year,” said Pansing Brooks.

Under the bill, owners of farm and ranch land would pay taxes on 55 percent of their property’s value, down from the current 75 percent.

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Nebraska property tax fight

Nebraska lawmakers are again battling over property taxes, looking for ways to bring down what experts call some of the highest taxes in the country.

There are three different plans being debated. Senator Tom Briese's plan includes increasing alcohol and cigarette taxes. This plan also adds taxes on candy, pop, and bottled water, bringing in an extra $782 million.

Senator Curt Friesen's proposal would bring in half a billion by increasing alcohol taxes, adding taxes on groceries and car repairs, while providing more state aid to school districts.

Governor Pete Ricketts' plan caps local property tax increases, adds property tax credits, and changes the way farm land is valued. Property taxes remain a perennial problem

Another year, another legislative session; will this be the year Nebraskans get some form of relief?

As I'm writing this in late January, this year's unicameral legislative session kicked off only a few weeks ago. It's a longer, 90-day session this year, and there have been several bills introduced to help address Nebraska's ongoing issue of property tax relief.

This includes LB314 introduced by Sen. Tom Briese, which would adopt the Remote Seller Sales Tax Collection Act and also would add $468 million to the Property Tax Credit Fund — bringing the direct property tax relief fund total to $692 million; LB662, sponsored by Sen. Curt Friesen, which would terminate the Tax Equity and Educational Opportunities Support Act (over time, changes to the TEEOSA formula have led to less state aid going to public schools, leaving property tax payers to shoulder more of the burden); and LB483, sponsored by Sen. Steve Erdman, which would change Nebraska's land valuation system to one that is income-based.

It goes without saying that property taxes are a perennial issue for Nebraska and have been since at least the 1930s — see related article: Property taxes on the mind of state legislators in 1935. It is said that Nebraska farmers pay anywhere from $80 to $120 per acre in property taxes, and Nebraska consistently ranks among the top-10 states for highest property taxes. However, passing legislation providing property tax relief has been a challenge over the past few years.

Last year, several bills that would have provided new revenue for school funding, and that would have established a refundable income tax credit were introduced, but none received the 33 votes needed to break a filibuster. Most were postponed indefinitely and never made it to the governor's desk for approval. Critics argued these proposals didn't provide enough relief.

After no property tax relief was provided through legislation, the Yes to Property Tax Relief Committee collected signatures for a ballot initiative to provide $1 billion in property tax relief by creating a 50% refundable income tax credit for property taxes paid for K-12 education. However, last spring, the group announced it was abandoning its petition drive and would focus on another avenue for property tax relief.

This year, several proposals have been introduced, including Gov. Pete Ricketts' own proposals, which would establish a statutory floor of $275 million for the Property Tax Credit Relief Fund, establish a 3% cap on property tax increases by local governments, and provide $51 million in new property tax relief through the Property Tax Credit Relief Fund.

Ricketts has voiced his opposition to LB314 and the Remote Seller Sales Tax Collection Act, stating he would not raise any taxes to provide property tax relief, and has indicated that meaningful property tax relief packages would need the support of both urban and rural senators — something he said is not likely to happen.

Meanwhile, critics of Ricketts' proposals have argued that they don't provide enough tax relief soon enough, and farmers and ag organizations alike have called for a more balanced three-legged stool of property, income and sales tax.

Of course, by the time this article sees print, one of these proposals may have been signed, and others may have been killed on the floor. Time will tell if any bill providing property tax relief is passed this session.

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While it's fair to say that fixing the property tax issue in the long run will take a big-picture approach by either creating new revenue or increasing taxes on income or sales, it's also true that some relief is better than no relief. We must start somewhere, even if it is a small step forward.

NEW HAMPSHIRE NH bill would allow municipalities to up taxes on business property

Communities could have separate commercial/industrial rates under House measure

New Hampshire businesses might have to pay a lot more in property taxes under a bill introduced Wednesday in the New Hampshire House.

Rep. Robert Harb, R-Plaistow, said he is sponsoring House Bill 1467 because residential property rates have skyrocketed in his town, while commercial/industrial rates have hardly changed at all. His bill wouldn’t change the assessment process, but would enable municipalities to increase the commercial/industrial tax rate by as much as 150% of the residential rate.

“It’s a way to attempt to set right the commercial and industrial rate,” he told the House Municipal and County Government Committee in a late afternoon hearing. “It might help people with their residential tax bills.”

He also added that, because it would be enabling legislation, “no town would be forced to do it.”

That’s the way it’s handled in Massachusetts, where the median commercial rate of $17.50 per $1,000 in assessed value is more than $2 higher than the residential rate. But while many smaller towns have the same rate, Boston’s commercial rate is $24.93, and its residential rate is $10.56. Lowell’s commercial rate is $26.77 compared to a $13.36 residential rate, and Lawrence’s commercial rate is $26.80 compared to a $12.43 residential rate.

While Massachusetts’ constitution allows towns to set disparate rates, in New Hampshire the constitution requires the state “to impose and levy proportional and reasonable assessments, rates and taxes, upon all the inhabitants of, and residents within,” which has been interpreted by the courts as the “the same tax shall be laid, upon the same amount of property, in every part of the jurisdiction levying it.”

When lawmakers asked Harb whether his bill was constitutional, he said he was assured that “it is not unconstitutional.”

“If I had to pay more because I was industrial, I would appeal it,” said Rep. Clyde Carson, D-Warner, who chairs the committee.

“You can’t appeal a rate,” replied Herb. “That is set by the municipality. You can only appeal an assessment.”

Actually, under the bill, the final rate would be set by the state Department of Revenue Administration, as it does now, only it would be guided by the ratio of the commercial-to-residential ratio set by the municipality.

Even without a higher commercial rate, businesses in New Hampshire pay more in commercial property taxes than they do in business taxes.

“We oppose this bill that is designed to shift the tax burden from residents to businesses,” testified David Juvet, senior vice president of public policy at the Business and Industry Association of New Hampshire.

Juvet argued that it was unconstitutional, but more importantly, “It is the wrong road.”

Businesses would shun towns that had higher tax rates, he warned.

That was the same concern of Robert Gagne, who heads the Manchester Assessors Office.

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“The unintended consequences is you might drive development to other towns,” he said, but added that he was not taking a position on the bill.

No one spoke in favor of it.

Everything you always wanted to know about your property taxes, but were afraid to ask

Every property owner knows New Hampshire is more dependent on property taxes to fund governmental subdivision than just about any other state.

And many make the case property taxes are an outmoded form of taxation. When property taxes were instituted, property equaled wealth but that is not true today.

Today property taxes are one of the most regressive taxes in the litany of revenue raisers meaning the greatest impact is on those least able to pay.

Yet for whatever reason, lawmakers every year find new ways to make property taxes more expensive for property owners with an eye toward “the greater good.”

For example, the current use program was established in 1973 with the intent to preserve open space.

Developers were buying farms and woodlots and subdividing them for house lots, changing views and local character forever.

Voters approved a constitutional amendment in 1968 that allowed land to be taxed on the value of its current use, not its market value.

At the time, some municipalities were taxing open space on its potential as building lots forcing farmers and timberland owners to reassess their livelihoods.

The argument was —and is — farmland, animals and forests do not use town services so it is a fair trade.

Today more than half of the state’s land is in current use, which has a far greater impact on rural communities than cities.

In essence, the current-use program shifted the tax burden from large landowners to the other property owners in their communities. A University of New Hampshire professor estimates the shift to other property owners is about $120 million annually.

Although it is a state program, the effects are felt at the local level in higher property taxes, and in some communities that have a high percentage of land in current use like Claremont and Berlin, for example, the shift exacerbates the property tax problems they face paying to educate their children.

Giveaway

Another property tax giveaway by lawmakers that significantly affects local property tax rates is water and air pollution control facilities.

Back when lawmakers wanted to encourage towns and cities to stop dumping their sewage into rivers or burning garbage at the local dump, they passed a law granting an exemption for air and water pollution facilities.

While privately-owned landfills were excluded, over time they were included as they took municipal trash and that could pave the way for lengthy litigation, and the same for fossil-fuel burning generating plants.

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So, while Eversource spent over $400 million on a mercury scrubber at its coal-fired power plant in Bow, the town’s tax base did not increase by $400 million.

Current use and pollution control facilities are big numbers for the communities impacted, but every town and city has a lengthy list of exemptions and property tax breaks that may not be large — elderly, disability and veterans — but shift the cost of property taxes.

This Session

Lawmakers have introduced more than a dozen bills this year that would impact property taxes in any number of ways both to the good and the not so good.

For example, the Senate will vote on Senate Bill 511 Thursday when it meets in session.

The Ways and Means Committee is recommending the bill pass on a 5-0 vote.

The bill would require the Department of Revenue Administration and Current Use Board to make public the formula used to determine current-use tax rates instead of keeping it confidential.

The formula determines what percent of fair market value such things as farmland, hardwood forests, or wetlands are, to set the current use tax rates.

Pollution Control

Several lawmakers have introduced House Bill 1661, which would prohibit electric generating plants burning fossil fuels or that generate high levels of radioactive waste (Seabrook Station) from qualifying for the pollution-control exemption.

The bill will have a public hearing at 1:30 p.m. Tuesday before the House Science, Technology and Energy Committee.

Another bill, House Bill 1631, would require taxes collected on hydro-electric generating facilities to go to the communities where they are located.

The House Municipal and County Government Committee meets Wednesday afternoon to decide what recommendation to make on the bill.

Expanding Exemptions

There is an old adage that if you want to encourage something you subsidize it, but if you want to discourage an activity, tax it.

With property taxes, if you want to encourage an activity or reward those who serve the community, etc., you grant exemptions.

Several bills this session would encourage the use of alternative sources for electricity.

House Bill 1210 would provide a tax exemption for a residence with an electricity storage system equal to the value of 1,000- megawatt hours.

The public hearing on the bill is Wednesday at 9:30 a.m. before the House Municipal and County Government Committee.

Another bill, House Bill 1406, would restrict any property tax exemption for a solar energy system.

In order to qualify for the exemption, the system would have to be used on-site for heating, cooling or generating electricity.

The public hearing on HB 1406 is at 10:30 a.m. Wednesday before the same committee.

Another proposed exemption would encourage first responders to live in town and be close to their jobs improving response time.

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House Bill 1125 would grant a property tax exemption to volunteer firefighters and volunteer emergency medical personnel.

The city or town that adopts the exemption would determine the value of the exemption up to the total property value.

It could be a slippery slope for additional exemptions as you have to ask who is next, police, selectmen, planning board members?

The public hearing on the exemption for volunteer firefighters and emergency medical personnel is Tuesday at 1 p.m. before Municipal and County Government.

House Bill 1197 would provide a 100 percent exemption for a totally and permanently disabled veteran under the Veterans Administration’s definition.

The public hearing at 10:30 a.m. Tuesday before the same committee.

And House Bill 1533 would limit the property tax increase under an exemption for those over 67 years old, the disabled, and totally and permanently disabled veterans to 1 percent a year. A public hearing date has yet to be set on the bill.

House Bill 1139 would establish a study committee to look at eligibility for property tax credits, exemptions, and deferrals available to persons with limited income and their effect on municipalities.

The public hearing on HB 1139 is 11 a.m. Wednesday before Municipal and County Government.

House Bill 1154 would allow communities to exclude the principal in retirement and pension accounts from personal assets in determining eligibility for property tax exemptions.

The public hearing is 9:30 a.m. Tuesday before the same committee.

And there are several bills before the legislature this year to use property tax incentives to make affordable housing more attractive to cities and towns.

Two Rates

Under the state constitution, taxes have to be reasonable and proportional, a key to the state Supreme Court’s Claremont education funding decision that widely varying property tax rates to pay for education is unconstitutional.

A proposal before the House Municipal and County Government Committee may butt up against that provision.

House Bill 1467 would allow communities to have two different property tax rates, one for residences and another for commercial and industrial property.

No public hearing has been set for the bill.

If you are a student of how the state uses property taxes to reward and discourage those who pay or don’t, this coming week will provide many learning opportunities.

Unfair property taxes, by the numbers Last Sunday’s editorial in the Monitor provides information on the unfairness of the property tax in funding education. Here is some data that reflects those concerns:

Costs per pupil, from the Department of Education: Claremont, $16,754; Franklin, $15,548; Merrimack Valley, $15,503; Waterville Valley, $43,732 (not a typo).

Tax rates (the first number is the overall tax rate and the second is the tax rate for the schools): Claremont, $40.20/$6.38; Penacook residents who pay taxes to the MVSD, $34.10/$19.64; Waterville Valley, $14.14 /$1.44.

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Equalized value per student or what each community has available in taxable revenue to pay for students: Claremont, $422,632; Penacook, $528,768; Waterville Valley, $10,897,683.

Median household incomes, from the Census Bureau as of July 2019: Claremont, $46,639; Concord, $61,310 (there is no separate listing for Penacook); Waterville Valley, $98,125.

The current system is not fair. There is no relationship between the ability to pay and what you pay. The argument if you live in a less expensive house your taxes cost less is true. But studies show those in lower income brackets pay a higher percentage of their income on property taxes. Even if the percentages were similar, those with higher income still have significantly more expendable income available.

Education is too important to continue to play political football with year after year. The cost of not teaching our children to be responsible adults, able to function in an ever-changing world, affects them as much as it affects you and me.

Enough discussion and debate already. The Claremont decision is coming up on 23 years. That is more than enough time to have figured out how to fairly pay for educating our youth.

A lesson in the burden of property taxes

When it comes to raising revenue, an old aphorism credited to the late Louisiana Sen. Russell Long, longtime chairman of the Senate Finance Committee, generally applies: “Don’t tax you. Don’t tax me. Tax that fellow behind the tree.”

In New Hampshire, the fellow behind the tree is usually the property-tax payer, so watch your wallet.

Earlier this month, Monitor State House reporter Ethan DeWitt described the difficulties mental health care providers face when hiring and keeping staff. The next day, Brendan Williams, president of the association that represents nursing homes, said the same problem afflicts the institutions, public and private, that provide long-term care for elderly residents who’ve exhausted their financial resources.

New Hampshire’s reimbursement rates under Medicaid, the federal health care program that covers the poor and the indigent, are the lowest in the land. Neither class of institutions can afford to pay what it takes to attract and keep employees. Licensed nurse assistants in nursing homes, for example, make $12 per hour. That’s not a livable wage. Mental health workers, once trained, soon leave for better paying jobs.

Senate Bill 308, sponsored by Democratic Sen. Cindy Rosenwald, would increase the state’s Medicaid reimbursement rate for mental health care, which is matched 50-50 by the federal government, by 12 percent. The price tag, if fully funded, is $115 million. It deserves to pass, but her bill does not address nursing home funding.

Inadequate state funding of mental health care centers and nursing homes transfers costs to property owners in the form of higher law enforcement and incarceration costs at county jails and higher taxes to keep nursing homes afloat. And then there’s the state’s gross underfunding of public education, which unconstitutionally transfers costs to local taxpayers, virtually guaranteeing another school funding lawsuit.

A 2018 study by the New Hampshire Fiscal Policy Institute highlights the unfairness of relying on property taxes to pay for things the state should fund. Under the state’s constitution taxes must be “reasonable and proportional,” so the disparities in the burden inflicted on property-rich and property-poor communities is unconstitutional.

Local tax rates per $1,000 valuation depend on local spending, of course, but the biggest factor is the amount of taxable property per capita. Cities like Manchester, Nashua and Concord have high total property values but relatively low property values per capita.

Communities with resort and lakefront property or a major taxpayer like a power plant or regional shopping mall and relatively small population have very low tax rates. Communities with many people and fewer assets to tax, think places like Franklin and Pittsfield, have very high tax rates.

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Newington led the state, in the institute’s report, with $1,376,078 of valuation per capita. It was followed by Waterville Valley, where Gov. Sununu’s family and associates own a ski area, at $1,333,676. Those communities are outliers. New Castle, with $748,201 per person, came in third.

Contrast those values with $64,132 in property value per capita in Pittsfield, $60,721 in Boscawen, $52,514 in Claremont and Berlin, in last place, at $39,816. Berlin’s 2017 tax rate was $39.19. New Castle’s tax rate was $5.85. The gaps show up in other ways. More than half of Franklin’s students were eligible for reduced-price lunches in 2017. In Bow the figure was 5 percent. Communities with the highest tax rates also tend to have the highest poverty rate as well.

New Hampshire, the nation’s second oldest state, needs fully staffed nursing homes. It sorely needs fully staffed community mental health centers. It needs quality teachers and schools for every student. What it doesn’t need, especially its poorest residents, is higher property taxes.

NEVADA

Is sales tax the best way to fund services, or the only option?

When Clark County Commissioner Tick Segerblom voted to raise the county’s sales tax by an eighth of a percent in September, he knew he was increasing a regressive tax that disproportionately impacts low-income individuals. But the tax hike was one of the only ways the county could boost funding for education and homelessness, two areas commissioners say are in need of extra cash, according to Segerblom.

“If we could raise the corporate income tax, the mining tax, things like that, that would be great,” he said. “But short of that, the simplest and fastest way to raise money is unfortunately the sales tax.”

The commission-approved tax hike brings the sales tax rate in Clark County to 8.375%, an all-time high in Nevada. In the next two years, it could go up even more; the Clark County Education Association (CCEA) is petitioning to raise a portion of the sales tax, known as the local school support tax, by 1.5% to boost public education funding.

With the Legislature having failed to allocate substantial new revenue to education during the 2019 session, another sales tax hike might be the best, most immediate way to increase funding, said CCEA Executive Director John Vellardita. Those criticizing the union’s attempt to raise the sales tax should recognize that lawmakers have not identified an alternative funding source for schools, he said.

“We haven’t seen any effort, any voice, any activity over the last several [legislative] sessions led by those who criticize it as regressive to change the way it is now,” Vellardita said.

These recent efforts to raise the sales tax appear to be part of a larger, years-long pattern in Nevada. Regressive and unstable due to its dependence on consumers’ volatile spending habits, the sales tax has nonetheless been the largest tax-generated source of revenue in Nevada for years. Between 2019 and 2021, 29.6% of all revenue in the state’s general fund was raised through the sales tax, according to the Department of Taxation’s annual revenue report.

But three trends are creating challenges for the state’s reliance on the sales tax, said Jeremy Aguero of the Nevada-based financial consulting firm Applied Analysis.

One pertains to the types of goods subject to the tax in Nevada. With the state’s sales tax base already one of the narrowest in the country, recently approved sales tax exemptions for food, medical equipment and feminine hygiene products have slimmed that base down even more, Aguero said.

There are ethical questions to consider when taxing those products, since most consider them to be necessities. But taxing them also made sales tax revenue more resilient in times of economic downturn, said Marvin Leavitt, a former state lobbyist and former director of finance for the City of Las Vegas.

“If you have a recession, people still buy food, but they don’t buy other things. So [exemptions] make the tax less stable,” Leavitt said.

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Additionally, more Nevadans are spending their income on non-taxable services rather than goods, Aguero said. Unlike many states across the country, services in Nevada—attorneys, electricity, repairs and more—aren’t taxed.

“There have been discussions about trying to apply the sales tax rate to services, but it has never happened,” Leavitt said.

Finally, property taxes—the other major source of revenue for local and state governments historically—haven’t been rising at the same pace as the sales tax. In fact, they can’t by state law.

Amid rapidly increasing property values and taxes in the early 2000s, lawmakers passed two laws in 2005 to ease the burden for taxpayers, Leavitt explained. Under the laws, residential property taxes cannot increase by more than 3% annually, and other property taxes cannot go up by more than 8% annually.

While the measures were beneficial to taxpayers at the time, the benefits have been less apparent since the Great Recession, Leavitt said. During that period, property values plummeted, as did property taxes, but once the economy began to bounce back, property tax revenue could only increase incrementally.

“If a house was valued at $300,000 and the value went down to $200,000, the property taxes would decrease,” Leavitt said. “But then if property values increased, we were limited on how much [taxes] could grow in any one year.”

The limit on property tax growth applies statewide, but fast-growing counties like Clark and Washoe have been affected the most by this, he said.

One of the reasons Nevada has historically relied heavily on sales taxes is because of the state’s high number of visitors. While property taxes are only applied to permanent residents, the more than 40 million people who visit Las Vegas every year contribute to sales tax revenue through in-state purchases, reducing residents’ overall tax burden.

But that point is becoming less compelling when looking at visitation and population trends, Aguero said. Because of Southern Nevada’s ballooning population and declining growth in visitation, the number of visitors per permanent resident is going down. As the state continues to diversify its economy to rely less on hospitality, this trend could become more pronounced, he said.

“If there’s fewer visitors for every man, woman and child, then the subsidy that’s created by visitor activity is spread thin over a growing number of actual, full-time residents,” Aguero said. “That puts stress on the sales tax’s ability to continue to provide services.”

Nonetheless, revenue from the sales tax overall has been on the upswing over the past year or two. Sales tax revenue brought in $1.09 billion to the state in fiscal year 2018, a 4.8% increase from the year prior.

Aguero attributes that high revenue to the taxation of internet sales, approved with a 2018 Supreme Court ruling. A spurt of high-budget construction projects, such as Resorts World and Allegiant Stadium, have also generated substantial revenue because construction materials are subject to the sales tax, Aguero said. The question he posed was whether that trend would sustain itself over the long term, especially if the economy suffers.

As far as Leavitt is concerned, it’s time for lawmakers to examine the state’s tax system, including sales and property taxes. “There are a whole bunch of things, I suppose, that sometime in the future, the Legislature needs to do a lot of work on to see if we have the right mix based on the way the current economy is,” Leavitt said.

But until changes are made, local lawmakers and advocates will continue to push for more revenue for services when needed, even if it’s done through the sales tax. The CCEA hopes to resolve a legal challenge from the Metro Chamber of Commerce to its proposed local school support tax increase and to secure enough signatures from residents to bring its proposal to the Legislature in 2021, Vellardita said.

“In lieu of an alternative, how are we going to fund our schools?” he asked.

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NEW JERSEY 2020 Real Property Tax Review: Proactivity Pays Off Especially When The Market Is Trending Up

In a market where economic indicators continue to show encouraging signs (e.g., sustained favorable employment numbers and rental rates, and continuing low levels of inflation), the prospect that property values will appreciate remains real.

Because of questionable municipal assessment practices, often blindly motivated by the objective of maximizing tax ratables, careful scrutiny of assessments, especially in changing market conditions, is warranted.

Consequently, it behooves commercial property owners to review their property tax assessments with their professionals now to ensure that their assessments are in line with present values and to verify that they are not paying more than their fair share of taxes. At the same time the potential exists that a successful appeal can work to lock in assessments at current property values, even in the face of possible further increasing values.

Because New Jersey law provides for a “Freezing” of assessments for a period of two additional years, beyond any successful year appealed, the tax appeal vehicle has the additional positive effect of providing property owners with the predictability and comfort associated with knowing the expected levels of their tax obligations into the future as well.

In fact, because assessments are generally not modified until a town-wide revaluation or reassessment program is implemented (usually every 5-10 years), there is a real prospect that a lower assessment achieved as a result of a successful appeal could actually remain in place for well beyond the statutorily guaranteed two year “Freeze” period.

As a result, we believe that there continue to be substantial opportunities for property owners to realize significant tax savings and lock in current values for the foreseeable future. In addition, non-profit, religious and certain institutional organizations (e.g. hospitals) can take advantage of real property tax exemptions that apply, either in whole or in part, by virtue of express statutory enactments.

We therefore encourage commercial property owners and organizations who may enjoy exempt status to contact their real estate professionals to determine whether a tax appeal is warranted in 2020. Although the 2020 tax appeal filing deadline is not until April 1, 2020, unless a town-wide reassessment or revaluation is in place, in which case the deadline is May 1, 2020, it is never too soon to take action.

Moody’s warns property tax cap veto could hurt school districts

A Wall Street rating agency warned dozens of New Jersey school districts could find themselves in an increasingly stressed financial position because of a bill the governor vetoed earlier this month.

Proposed Senate Bill 4289 would have allowed those districts that lost state financial aid related to 2018 changes to the school funding formula to make up for losses by raising taxes beyond the annual 2 percent increase cap, without voter approval. Gov. Phil Murphy rejected the measure, arguing that the money could be found by imposing his controversial millionaire’s tax proposal, which has been twice blocked by the state Legislature.

“The governor believes there are other avenues to address the issue of school funding, including a tax on residents making more than $1 million per year, who are in a better position to help fund our education system than the already overburdened middle class,” Darryl Isherwood, a spokesperson for the governor’s office, said in a Thursday afternoon statement.

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Moody’s, in its weekly credit outlook, warned that the measure was perhaps the only option for school districts to make up for losses without raiding their reserves. The agency suggested that the veto could lead to a “credit negative” for school districts in the future, meaning they could see their credit rating dragged down.

“New Jersey school districts also have difficulties reducing their expenditures. Most districts in the state have unions for teachers, administrative and other operating services,” the report reads. “Cutting positions within the fiscal year can be difficult because of legal contracts between the districts and unions.”

The Vernon Township, Great Meadows Regional, Ocean Township, Monmouth Regional, Springfield Township and Neptune City school districts would be the hardest hit, with the amount of state aid that they would lose clocking in at the equivalent of 10 to 62 percent of their current budget—meaning that amount of expenses would no longer have revenue to support them.

The bill’s main sponsor, Senate President Stephen Sweeney, D-3rd District, said in a Thursday statement that the Moody’s report “confirmed” what lawmakers, education officials and proponents of the measure “have been saying for weeks.”

“It was fiscally irresponsible for the governor to veto legislation that would have provided the same cap relief to suburban and rural districts that are losing adjustment aid,” the Senate president said.

The 2018 changes to the school funding formula required that “overfunded” school districts would lose state dollars in order to shift that money to so-called “underfunded” districts that are not receiving the amount of aid determined under the formula.

Upwards of 50 school districts that lost money would have benefited from S4289, according to legislative advocates.

The Jersey City school district, which lost $150 million of state aid, was allowed to enact a 1 percent employer payroll tax to make up for the difference, but that has since been mucked in courts.

Over $200K Spent On Tax Appeals Following City Revaluation

After New Brunswick completed the first revaluation of property in 26 years, municipal leaders were anxious to share news that taxes for many homeowners had dropped.

Mayor James Cahill, in his state of the city address on Jan. 1, touted the city has the second lowest property taxes in the county.

Not everyone was happy with the revaluations, and as a result the city was faced with a slew of tax appeals, and the cost of fighting those appeals.

City council members at their meeting early this month increased allocations from $195,000 to $225,000 to pay for lawyers representing the New Brunswick in tax appeals.

The law firm of Hoagland Longo, Moran, Dunst & Doukas, which is based in the city, handles that work for New Brunswick. There are still appeals that have yet to be resolved.

"Commercial properties have been involved in most of the appeals," said City Attrorney T.K. Shamy.

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According to city figures, there were 452 appeals filed last year, which was actually less than the 471 appeals filed in 2017.

Both of those numbers of appeals are less than were seen in early years, according to Cahill's office. The re-education in appeals is viewed as a positive sign, said city spokeswoman Jennifer Bradshaw.

She said municipalities typically see many more appeals after a revaluation.

“This indicates that our 2017 revaluation had a very high level of acceptance by the city's property owners," Bradshaw said.

Following the new valuation of all city property, the average residential property tax bill dropped about $700, from an average of $6,870 per property in 2016 to $6,164 in 2017, according to figures from the state Department of Community Affairs.

About 2,500 property owners saw their tax bill go down, but another 1,500 owners saw their bill increase. About 1,000 owners saw little or no change through the revaluation.

The effect of the appeals from 2018 is not immediately clear. The city did not immediately respond to questions about whether appeals resulted in significant reductions in property tax bills, or how the appeals would impact city revenues.

Your vacation to the Jersey Shore is about to get more expensive. Blame it on taxes.

Heather Adams and her family live in a suburb of Pittsburgh, a five-hour drive from the Jersey Shore. But they’ve been renting the same house in Wildwood one week every summer for the past decade. Until this year.

Adams said the family won’t have their regular place a block from the beach on East Pine Street come July, and they might even skip the Jersey Shore altogether, thanks to a decision by the state to apply taxes and fees totaling 11.625 percent to certain rental properties for the first time this summer season.

Combine the newly applied tax and fee of $400 for the Adams’ usual rental, with a $400 rent increase the owner was charging, and the resulting $4,300 total cost of the house this summer was simply too high for the Adams family’s budget.

“Now, with the tax, we can’t afford to stay there anymore,” said Adams, 39. “I can actually go to Disney for five days and I don’t have to lift a finger. All my meals are cooked for me, and I don’t have to clean before we leave.”

The sales and use tax of 6.625 percent and motel occupancy fee of 5 percent are being added to properties rented out by their owners through word-of-mouth, local listings or homesharing apps like Airbnb and VRBO. They were both imposed under a $37.4 billion budget deal cut last year between Gov. Phil Murphy and fellow Democrats who control the state Senate and Assembly.

The legislation extending the sales tax and hotel fee to short-term rentals also authorizes certain counties and municipalities to impose a variety of variety of additional, smaller taxes if they choose.

Proponents say imposing the tax and fee levels the playing field between property owners using the increasingly popular home sharing apps and the state’s hotels and motels, which have had to pay sales tax and the occupancy fee, whether they’re a gleaming tower attached to a casino or a cluster of cozy cabins run by Mom and Pop.

And under what’s known as a “carve-out” for licensed real estate brokers, properties rented through a broker remain exempt from the sales tax and occupancy fee, the assumption being that brokers have overhead that already add to the cost of the properties they handle.

For example, as one property owner pointed out, the standard broker's fee paid by owners in Ocean County is 12 percent, just about the same as the combined sales tax and occupancy fee that now applies to properties rented without brokers.

“I think what this new law does is level the playing field, from the hospitality perspective,” said Scott Smith, director of state & local tax at the CohnReznick LLP, a nationwide tax consulting firm. Up until Oct. 1, property owners listing their places on marketplaces like AirBnb weren’t required to collect sales tax, Smith 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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But what the requirement also does, its opponents say, is drive up the cost of renting along the shore, which could price out some families altogether, while leaving others with less to spend if they do still manage to book a place.

And, of course, fewer bookings hurt property owners, whether rent money is their primary income source, or simply a way to offset mortgage payments, maintenance costs and property tax bills on what otherwise serves as their own summer getaway.

A coalition lobbies for repeal

Property owners along New Jersey's beaches have banded together under an umbrella group known as the New Jersey Shore Rental Coalition to lobby for repeal of the new tax and fee on their places.

Versions of repeal legislation have been introduced in the state Senate (S3133) and Assembly (A4520). But both bills await a hearing, and property owners say word of the new tax and fee is already scaring away renters.

“I can tell you, I have lost two bookings that total four weeks,” said Duane Watlington, a Long Beach Island property owner who is vice president of the coalition.

Those four weeks at Watlington’s duplex, which is two doors from the beach and has its own backyard pool, amount to $18,500 in rent, he said. And while he recouped $5,000 thanks to a week-long rental in one of the units, he said it’s now getting late in the season to book higher-end accommodations like his.

The impact of the new tax and fee extends well beyond the Jersey Shore, because property owners and renters live all over New Jersey and beyond.

Jill Kellett lives in Denville, but rents out the house she owns in Cape May.

Kellett said her renters are particularly sensitive to the cost the tax will add to her house, a modified Cape Cod-style 2-bedroom amid the ornate Victorians the resort is famous for. At $1,000 to $1,375 a week, depending on the date, she said her place is one of the least expensive options for budget-conscious visitors to the picturesque and pricey resort.

She also complained that properties rented through a broker are exempt from the sales tax and fee.

“My clients have to pay that 11.625 percent, but if they go through a realtor, they don’t have to pay that,” Kellett said. “A lot of people got scared and just said, ‘I’ll just go with a realtor so I don’t even have to deal with this.’”

Like other property owners, Kellett could rent through a broker, but that would cost her a broker's fee roughly equal to the combined sales tax and fee, plus, she said, "if I go to a realtor, I risk the chance of losing customers that I’ve built up for years."

And while her overhead may be low, Kellett said it's not as if she has no operating costs. For example, she pays Cape May $200 for an annual fire inspection, and another $135 for a mercantile license allowing her to rent her house.

The latter is akin to fees and accompanying registration requirements being implemented or considered by some municipalities in response to the growing popularity of AirBnB and other homesharing apps.

Higher rental costs mean less to spend

Critics of the newly applied tax and fee say it also threatens businesses that depend on overnighters at the shore, either by driving visitors away or leaving them with less to spend at local bars and restaurants, T-shirt and taffy shops, and arcades.

“By doing this, they are not being friendly to businesses,” said Marty Shapiro, a board member of the New Jersey Amusement Association, who is also a former owner of the Gateway 26 arcade in Wildwood, where he still works part time when not treating patients at his chiropractor’s office.

In fact, Gateway 26 is the Adams family’s favorite arcade, where the kids have typically spent most of their $100 vacation allowance. The kids also get a similar allotment for souvenir purchases.

More significantly, Heather Adams added, “We go out to eat every night.” 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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That means at least two dinners at the Hot Spot, a pizza-plus restaurant on Wildwood’s boardwalk, where Adams said her party of eight spends at least $150 per meal. They spend even more at pricier joints, like the $247 they dropped last summer at Wildwood’s Hawaiian-tinged Surfing Pig.

Wildwood’s mayor, Ernie Troiano Jr., said he wasn’t firmly for or against taxing short-term rentals.

The issue is less pressing for Wildwood because most of the lodging there is made up of rooms in the city's famous Doo Wop hotels, which are already subject to the sales and occupancy charges, and could benefit from what some say is now a more level playing field.

“Everybody has a good argument,” Troiano said. “My argument would be that anything that can generate additional revenues for the towns is not the worst thing. Then again, if it’s going to discourage people from coming here, it has to be looked at and figured out.”

Sharing instead

Adams said that while her usual house was now out of the question, she was weighing a cheaper place in Wildwood that’s not as nice. And, of course, there's always Disney World.

Adams did say that, while her family was priced out of their usual summer rental in Wildwood, its owner told her the house was snatched up quickly by takers willing to pay the higher cost.

Rob Stephens, a tax consultant who founded MyLodgeTax.com, doesn't think the state's new tax and fee will keep regular renters away from the Jersey Shore.

“People are going to go to Cape May because they like to go there,” Stephens said. “They’re not going to say, ‘Lets go to Martha’s Vineyard because [the shore's] going to be 11 or 12 percent more expensive.”

And certainly some renters, even those hit hard by this year's added cost, will find ways make it back down the shore this summer, even if things won’t be quite the same.

Jeanne Davis, a single mom who lives in Rockland County, New York, said she usually rents a place in Beach Haven for the one vacation a year she can afford to take with her two daughters, ages 7 and 8.

This year, Davis said, the new tax and fee meant a place of their own would be too expensive, so she and her daughters will be sharing a place with another single mom and her 8-year-old son.

SOME JAW DROPPING NEW JERSEY PROPERTY TAX NUMBERS

If it wasn't for property taxes, would New Jersey be #1 for anything. Well, another publication confirms we're at the top of the property tax mountain.

There are many lists you'd rather not have the state you live in be on top of, and certainly property taxes are among them, and yet once again, our Garden State is the confirmed property tax leader.

This time around, it's 24/7 Wall St. confirming what just about all of us already knew. We pay property taxes in the Garden State that make residents of every single other state in the nation say 'wow'.

The fact that we top this list does not surprise us, but looking at some of the numbers are eye opening at the least, and in some cases downright nauseating. Look at these stats if you dare.

Our effective property tax rate is 2.16%. It's the highest in the nation and one of only two states north of 2% (Illinois is the other).

Per capita property taxes $3074.43. Ouch, that's tops in the nation as well. And it's also one of only two states over $3000, with New Hampshire at about $3054.

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Knowing that the property taxes in New Jersey are through the roof is not news to most of us, but that doesn't make some of these numbers jaw dropping anyway.

I'd love to say it's a small price to pay for living in a great place like the Jersey Shore, but it's not. It;s a very, very high price to pay.

NEW YORK

Court calls NYC 'deeply segregated' but dismisses lawsuit over unfair tax burdens

A New York appeals court on Thursday dismissed a lawsuit saying that New York City's property tax system discriminates against low-income and minority homeowners, even as it called the system unfair and acknowledged that the city is "deeply segregated."

The Appellate Division in Manhattan said the group Tax Equity Now New York did not show how the system has perpetuated racial segregation in the city, which has 8.4 million people, by disproportionately burdening black and Hispanic residents while benefiting owners in wealthier areas with more white residents.

The 4-0 decision came four weeks after a commission set up by Mayor Bill de Blasio and the City Council recommended a broad property tax overhaul addressing some concerns in the 2017 lawsuit.

Jonathan Lippman, a lawyer for Tax Equity Now and former chief judge of the state Court of Appeals, said he was reviewing the decision.

New York City and New York State were among the defendants.

De Blasio has said the property tax system should be fairer, but "believes strongly that reform should be done legislatively, not through the courts," his spokeswoman Laura Feyer said.

A lower court judge had in September 2018 allowed the lawsuit to proceed.

Tax Equity Now complained that a state law capping how fast property taxes could rise has left owners of homes whose values have risen even faster with disproportionately low tax bills.

They said this has fueled higher foreclosure rates in minority neighborhoods, made it harder for minorities there to move out and left many residents in the counties of the Bronx, Brooklyn, Queens and Staten Island overtaxed relative to residents in Manhattan.

But the appeals court said that while the system "does, in many respects, result in unfairness," it did not deny minorities their constitutional right to equal protection, and it was up to legislators to fix the inequities.

"It is undisputed that New York City is a deeply segregated city. Segregation has shamefully divided our neighborhoods for a long time," Justice Cynthia Kern wrote.

But the judge found no "causal connection" between the property tax system and segregation among neighborhoods.

She also said raising property taxes in majority-white neighborhoods would make them "less, not more, accessible to minority residents."

The commission's 10 recommendations included assessing homes at full market value, and eliminating the cap on growth in assessed values. https://www1.nyc.gov/assets/propertytaxreform/downloads/pdf/NYC-AdvCommission-Prelim.pdf 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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A New York Issue That Unites Landlords and the N.A.A.C.P.

A coalition of developers and civil rights activists is pushing hard for property tax changes in New York, but the obstacles are formidable.

In a closed-door meeting in 2013, politically powerful developers told Bill de Blasio that they were planning a lawsuit challenging New York City’s property tax system.

The political system had done nothing to address their concerns for more than 20 years, they told Mr. de Blasio, who was about to be elected mayor. It was time to sue.

Mr. de Blasio agreed that the system was unfair, allowing million-dollar homes in Park Slope, Brooklyn, to be taxed less than far more modest properties near Kennedy Airport in Queens. He asked the developers to give him time to fix things, according to two people with direct knowledge of the October 2013 meeting.

Then, for years, nothing happened.

Frustrated, some of the same real estate moguls who had weighed legal action long before — including top-dollar political donors like Douglas Durst, Scott Rechler and Stephen Ross — decided to resurrect their plans to sue, hoping to lessen the high share of taxes borne by commercial and rental properties.

But, knowing many others also saw the system as unfair, they decided to try broadening their fight.

Calls went out to a former city finance commissioner and a veteran Albany lobbyist. They hired the law firm of Latham & Watkins, where the former chief judge of New York State, Jonathan Lippman, is of counsel. They recruited overtaxed homeowners from each borough.

“The whole idea was a big-tent approach, even odd bedfellows,” Mr. Lippman said. “Everybody hates the system.”

By the time their lawsuit was filed in 2017, they had formed a broad and unexpected coalition of plaintiffs that included city landlords, urban planners, budget hawks and even the N.A.A.C.P., which had for years complained of racial inequities in the property tax system.

“This is nothing new that just happened in the last two or three years,” said Hazel N. Dukes, president of the New York State chapter of the N.A.A.C.P. “But we weren’t getting any traction.”

A year after the lawsuit was entered, Mr. de Blasio and the City Council formed a commission that recently proposed the first real changes to the property tax system in nearly three decades.

The commission recommended that the city assess most homes, including co-ops and condominiums, at full market value, and remove a cap on how much the value of a property can increase each year. Under that plan, many property owners can expect to pay less in taxes, but hundreds of thousands of homeowners may pay more.

Changing the city’s property tax formula would first require approvals from the mayor and the City Council, and ultimately the State Legislature and Gov. Andrew M. Cuomo.

Although many of those lawmakers have said that they generally support the notion of a more equitable property tax system, few seem eager to deal with the potential fallout of imposing the changes.

The forces behind the 2017 lawsuit, which is still ongoing, say that political realities suggest that the report will not directly lead to changes in the property tax system; they believe that the only way to force change is through their lawsuit.

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“The reason for the litigation is that the political will to do this does not exist,” said John Gallagher, a spokesman for the group, known as Tax Equity Now New York.

It would not be the first time that a lawsuit paved the way for meaningful change in New York City policy: A court battle ended the overuse of stop-and-frisk tactics by the New York Police Department; a lawsuit also brought about the end of the city’s Board of Estimate.

Indeed, the property tax issue barely registered in Albany earlier this month, even for Mayor de Blasio, who has vowed to get property tax changes done before his term ends on Dec. 31, 2021.

In private meetings with state lawmakers last week, Mr. de Blasio did not bring up property tax changes at all, or barely mentioned it, according to three people with knowledge of the discussions.

The subject did come up in separate State Capitol meetings last week between legislators and backers of the lawsuit, including Mr. Lippman, who were accompanied by Jacqui Williams, a veteran lobbyist. (Mr. Gallagher said the meetings were about the lawsuit and did not constitute lobbying because no legislation exists; no one is registered to lobby for the group.)

Elected officials, even those supportive of change to the property tax system, said nothing was imminent.

“I am absolutely not optimistic that there will be legislation this session,” said Senator Brian Benjamin of Harlem, one of at least three state senators interested in eventually carrying a bill to remake the system. “This is going to be an important conversation that you cannot rush.”

Mr. Benjamin this month introduced a more modest proposal that could raise property taxes for some homes after they are sold — and lower them for others. But even that could spark resistance from homeowners, he acknowledged.

Homeowners can organize locally and quickly, elected officials said, and they vote disproportionately. Already on online message boards like Nextdoor, debates have kindled over a proposal floated late last week by the city commission, which was convened by the mayor and the City Council speaker, Corey Johnson.

“Political Science 101 would tell you that people are much more likely to mobilize around a concentrated threat than they are around a small benefit,” said John Mollenkopf, a professor of political science at the City University of New York Graduate Center.

Billionaires, Taxes And Goose Poop: Tom Golisano’s Decades Long Campaign To Pay The Government Less Money

Tom Golisano hates taxes – really, really, really hates them — and he’s willing to take extreme measures to avoid paying them.

Take the great goose poop incident of 2018. A couple of years ago, the billionaire founder of Paychex arrived at his $6 million- dollar vacation home on Canandaigua Lake in South Bristol, New York to a horrific scene. As he pulled into his driveway with his wife, former tennis star Monica Seles, he spotted the intruders, 100 in all, wreaking havoc on his five-acre lawn.

“It was scary! My whole yard was covered,” says Golisano from behind his leather-topped desk in his family office in Pittsford, New York. “Do you know anything about geese? Each goose defecates two pounds a day. I pay $140,000 in taxes a year, and I can’t use my yard because geese [crapped] all over it!”

Most people would have stopped after ringing up their lawn service, but Golisano, who sports brilliant white hair and a net worth of $4 billion, decided the real problem was he was paying too much in taxes. Known for building Rochester-based payroll processor Paychex and running for New York State governor three times, Golisano attempted to leverage his feathered visitors into a lower tax bill. He withheld $140,000 from South Bristol, arguing that the geese hurt his property value and the government had a responsibility to get rid of the waterfowl or lower his tax assessment. He lost the fight, but the battle with South Bristol was only the latest skirmish in Golisano’s decades long war against the taxman.

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In 2009, Golisano moved his permanent residence to Florida to lower his income taxes. “I save $13,800. A day,” Golisano says. And when his time comes (Golisano is 78), his family will also benefit from Florida’s lack of estate taxes, especially compared to New York’s rate of 16 percent.

In 2010, Golisano won a years-long battle against the town of Mendon, New York, where he owns a 9,600 square-foot home on 38 acres of land, to lower his property’s tax assessment from $6 million to $1.9 million. He performed a similar feat on behalf of his daughter’s home.

“He’s looking at different angles to reduce his tax bill,” says a member of the local school board where Golisano owns his lake house. The official, who asked to remain anonymous, says Golisano also tried to redistrict homes on Canandaigua Lake in order to avoid paying school taxes in the 1990s.

Golisano even ran for governor of New York State – three times! – in order to…yep, you guessed it…lower taxes. During his three failed campaigns as an Independent in 1994, 1998 and 2002, his main pitch to voters was to lower local property taxes by 20 to 30 percent.

But don’t accuse Tom Golisano of being a cheapskate billionaire who doesn’t want to pay his fair share. He bristles at the phrase “fair share” before producing a manila folder containing a spreadsheet detailing his income, taxes and charitable donations from 2000 to 2018.

On $1.2 billion of income over nearly two decades, Golisano claims he’s paid $211 million in taxes and donated $255 million to charity over almost two decades. Three children’s hospitals, two in New York and one in Florida, bear his name and he’s also been generous to the Special Olympics.

“I’ve paid my fair share. What else does Elizabeth Warren want?” Golisano asks. According to the 2020 presidential hopeful’s “calculator for billionaires” what Senator Warren actually wants from Golisano is $200 million in taxes – each and every year.

At lunchtime, Golisano drives his white Mercedes Benz to the Village Coal Tower, a cash-only diner in Pittsford that serves his favorite $5 cheeseburger. After his meal, he sits on a bench along the Erie Canal, lights up a Padron 1964 Anniversary cigar and he brings up Warren again. “I started Paychex with $3,000 and a few credit cards and created 15,000 jobs. [She] never did anything except live off the public trough,” Golisano says. “And I have to listen to her? I’m not paying my fair share. I wish someone could define fair share.”

Golisano’s idea of a “fair” tax rate would be if “everyone pays the same.” When asked why taxes are such an issue for him, he says: “I’d rather spend my money the way I want to spend it, and not give it to the government to spend for me.”

When asked about the “cancel billionaires” movement and proposed policies to tax the rich, Golisano says all the Democratic presidential candidates are “nuts” and have invented “fruit cake issues” to manufacture support. For him, Bernie Sanders’ and Warren’s idea to pay off student debt and provide free high education is “ridiculous” — even though he benefited from a tuition-free education at Alfred State College, which didn’t start charging students until 1963. “I don’t think they understand the importance of creating competition and ambition. You want people to outperform their neighbor, that’s what gives us this great standard of living,” he says. “When has socialism given us a good standard of living?”

For those who want more, Golisano has detailed his ideas in a new book entitled Built, Not Born: A Self-Made Billionaire’s No- Nonsense Guide for Entrepreneurs which HarperCollins published earlier this month. A sample: “If you own a business in the United States, you have a not-so-silent partner in your business that puts up no capital, shares none of the risk with you, but expects to regularly take a significant percentage of your hard-earned profits. All of this, while at the same time making your business life a whole lot more difficult than it needs to be. That partner, of course, is the federal government.”

As Golisano puffs away on his cigar, he says he won’t be running for political office again, but he will be voting for President Trump a second time. Golisano, who will be living in Florida until May in order to qualify for no New York State tax, says he’s worried about the ideas coming from the Democratic candidates. “When you start to have more takers than givers, that’s generally the start of the demise.”

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NYC Property Tax Overhaul Will Be A Blow To Real Estate Market, Those In The Industry Say

A New York City mayoral commission released a report last week that recommends massive changes to the way residential properties are taxed across the five boroughs.

The recommendations from the NYC Advisory Commission On Property Tax Reform are designed to lessen the tax burden for low- and moderate-income homeowners while shifting it to those in wealthier neighborhoods.

Under the current assessment system, single-family homes are taxed on their sales value, while co-ops and condos are grouped together with large rental buildings and are assessed based on the potential gross annual income they would receive if rented.

The tax on one- to three-family homes have also been capped, keeping assessments low even when the market value of a property increases. This means that homeowners can pay the same in property taxes even if the value of their homes drastically differ.

The commission's proposal would tax co-ops, condos and rental buildings with fewer than 10 units the same as one- to three- family homes, which would be assessed on the sales price and taxed on 100 percent of the market value.

Those in the industry say while the changes make sense, the implementation will dampen an already soft market.

"If it does happen and we see real changes, I feel that it may result in many more properties on the market, as I do feel that there will be people who have been paying very low taxes in townhouses, may be or feel forced to sell as they have thus far been able to stay in homes for generations due to the low cost of ownership," says Lindsay Barton Barrett, a broker with Douglas Elliman. "It could also certainly have a chilling effect on purchases of townhouses with those low rates. Even the current discussion could do the same."

Rowena DasGupta, an agent Warburg Realty thinks that the changes will drive many homeowners out of the city.

"This proposed tax system will drive many out not least because it’s becoming increasingly expensive to live here," DasGupta says. "But perhaps this is another form of class warfare where those who can afford to stay will do so."

The changes would be a blow to property owners, particularly in the middle class, already reeling from the cap on the SALT deduction, says Christopher Totaro of Warburg Realty.

"When you couple that with ... an income tax rate of 32%, 9% sales tax, rising energy costs — 4% in 2020 — insurance rate increases, building repair costs for newly-implemented code compliance laws and building maintenance increases every year, it’s dangerously close to the tipping point of an exodus of owners and a reduction in sales due to sales being taxed immediately at the proposed rates," Totaro says. "I believe people will reconsider buying. Also, rental buildings would see higher taxes and rents will increase."

Mark A. Hakim, a real estate attorney with Schwartz Sladkus Reich Greenberg Atlas LLP, says that while the property tax system in New York City, the proposal, like the Housing Stability and Tenant Protection Act of 2019 passed last year by the New York State legislature, doesn't consider the "realities of the marketplace."

"Obviously something should be done," Hakim says. Under the current proposal, "tax bills for some will decrease but will, for others, increase drastically, making their homes and apartments unaffordable and possibly even unsaleable. The legislature needs to slow down and consider the actual effect on individuals who will benefit and those who will not. I truly understand the need for fairness, but a knee-jerk, feel-good legislation, without ample consideration of the real estate markets and economy in general, would be foolish and shortsighted. We already have many people investing and moving to droves more affordable states and there is no need to further push New York into a downward spiral."

NY Senate Passes Two Property Tax Exemption Study Bills Two bills sponsored by New York State Sen. Pete Harckham (D, WF-40th District) that will study the use of tax exemptions and the burdens they cause to municipalities and taxpayers were passed on Feb. 11 by the State Senate.

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Both bills now await passage by the State Assembly and approval from Gov. Andrew M. Cuomo before they can be enacted.

One bill passed by the Senate—S.3679A—will establish a property tax exemption task force, which be focus on the different property types and classifications eligible now eligible for exemption, whether the exemptions are partial or total, and the total value of each exemption. Also, the bill calls for an analysis of the exemption process. Federal exemptions and those granted by local Industrial Development Agencies will be evaluated as to whether they should be continued or modified.

The property tax exemption task force will consist of seven members appointed by the Commissioner of Taxation and Finance, the Comptroller, Attorney General, temporary Senate President, Assembly Speaker, and each minority leader. The group will be charged with issuing its report within a year.

About 33% or real property in New York State is currently exempted from one of more types of taxation, and it’s now time to see how much of that total can be returned to the tax rolls, State Sen. Harckham noted.

The second bill that passed the Senate—S.5312A—directs the State Board of Real Property Tax Services to study the economic impact upon different municipalities that are dealing with high percentages of tax-exempt property, usually caused by state parks and facilities within their tax districts. The study will include an assessment of how the housing market and economic development are affected by the concentration of exemptions. The bill requires that a report with recommendations on how to reduce tax burdens be completed within a year.

“Our fiscally-challenging times definitely necessitate a re-evaluation of how widely we should be granting exemptions on property,” said Harckham, who is a member of the Senate’s Local Government Committee. “I am pleased that my Senate colleagues have moved forward these two bills, both of which will offer greater clarity on whether certain exemptions are unfairly impacting our taxpayers and what gain, if any, they offer to our communities.”

(Mostly) the right ideas on reforming NYC’s lunatic property-tax system

All fair-minded New Yorkers should applaud almost all the recommendations of the de Blasio administration’s property-tax- reform commission.

Its recent report recounts how, for decades, legislators have resisted the sensible system that most jurisdictions around the country follow: taxing property at the full and fair market value and regularly reassessing to adjust those values and keep taxes fair.

Fear of the changes that would result from the first reassessment in some 40 years has contorted the system, as have nonsensical tax breaks for high-end co-op and condo owners, which are taxed as if they were rent-stabilized units.

The commission enters its own dangerous territory, however, in suggesting a dramatic departure from property tax logic: It wants to link tax bills to a homeowner’s income. The logic is tempting: The commission argues that no owner should be forced from a neighborhood because of rising values — and thus rising tax bills.

But this income link ultimately opens a Pandora’s box.

First, there’s the obvious drawback of discouraging property owners from increasing their household income — or encouraging them to hide it. Why would a city that has long been associated with upward mobility want to build a disincentive to work into the property-tax system (which accounts for almost half the city’s tax revenue)?

This is the same logic built into the subway “fair fares” card (reduced fare for lower-income residents), as well as public housing, where rents go up as household income rises.

The report also overlooks the obvious fact that full market values don’t always go up, and that a fair tax system should, on occasion, lead to lower tax bills. Indeed, if city government can control its expenses, property values could rise without tax bills going up as well.

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Even if all property values rise, which would be evidence of a healthy city, some will rise more than others — and, if the budget stays on an even keel, properties with bigger bumps in value will protect those with lower ones from steep tax jolts.

Moreover, linking income to property taxes would inevitably spark opposition from those above any income limit — and risk inviting new charges of unfairness like those that have dogged the tax system since it was last re-examined at the state level in 1981.

Reformers must build a coalition around a simple, fundamental improvement: basing the property tax on full-market values and regular reassessment.

A statewide fair-market approach will draw support in high-cost suburban areas. In many cities and towns in Westchester and Nassau counties, no reassessment has been done in decades. Instead, property values are set through an arcane, indirect system called “equalization”: State officials determine how much values have risen in any one jurisdiction — and adjust the “assessed” values of all properties there accordingly.

This means that homes with values that have actually dropped sharply in relation to others nearby face artificially high tax bills.

In my role on the City of Rye Board of Assessment Review, I regularly see cases of older homeowners whose ranch houses were once new and desirable but have since lost market value. Their assessments continue to be set in lockstep with the town’s McMansions — helping to drive out older homeowners, who sell out to builders undertaking “tear downs.”

Yes, neighborhoods change over time, and longtime owners whose property values rise may end up with higher tax bills than they’d prefer. Change can be difficult — but more than anything, the city should avoid taking steps to freeze neighborhoods in place. That leads to underutilized homes and barriers to newcomers seeking a homestead.

Ironically, progressives elsewhere are concerned about exactly that problem. A new study by a Boston regional planning group found that families with children are “crowded in and priced out” because empty-nesters stay put in homes bigger than what they need.

Gov. Andrew Cuomo should be sympathetic to the city’s new proposals. But let’s keep it simple and avoid introducing tempting new flaws that will undermine real reform.

NYC Commission Recommends Property Tax Reforms

The New York City Advisory Commission on Property Tax Reform recently released its preliminary report with an analysis of the city’s property tax system and a set of 10 initial recommendations for system reforms. The report marks the first review of the property tax system by a government-appointed commission since 1993.

Mayor Bill de Blasio and Council Speaker Corey Johnson announced the formation of the Commission in May of 2018. The Commission was charged with developing recommendations to reform the existing property tax system to make it simpler, clearer, and fairer, while ensuring that there is no reduction in revenue used to fund essential city services.

Since its creation, the Commission conducted public hearings across the city for members of the public to testify on their view of the challenges with the existing property tax system, as well as for experts to share insights on specific issues such as mechanisms to provide relief to homeowners. In total, the Commission sponsored 10 public events, including these hearings and two public meetings where overviews of the system were presented by expert staff at the Department of Finance and City Council Finance Division. The Commission will hold additional public hearings in each borough to solicit public input before issuing its final recommendations.

The Commission reached consensus on 10 initial recommendations:

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1. The Commission recommends moving co-ops, condominiums, and rental buildings with up to 10 units into a new residential class along with one- to three-family homes. The property tax system would continue to consist of four classes of property: residential, large rentals, utilities, and commercial. 2. The Commission recommends using a sales-based methodology to value all properties in the residential class. 3. The Commission recommends assessing every property in the residential class at its full market value. 4. The Commission recommends that annual market value changes in the new residential class be phased in over five years at a rate of 20 percent per year, and that Assessed Value Growth Caps should be eliminated. 5. The Commission recommends creating a partial homestead exemption for primary resident owners with income below a certain threshold. The exemption would be available to all eligible primary resident owners in the residential class and would replace the current Coop-Condo Tax Abatement. 6. The Commission recommends creating a circuit breaker within the property tax system to lower the property tax burden on low-income primary resident owners, based on the ratio of property tax paid to income. 7. The Commission recommends replacing the current class share system with a system that prioritizes predictable and transparent tax rates for property owners. The new system would freeze the relationship of tax rates among the tax classes for five-year periods, after which time the city would conduct a mandated study to analyze if adjustments need to be made to maintain consistency in the share of taxes relative to fair market value borne by each tax class. 8. The Commission recommends that current valuation methods be maintained for properties not in the new residential class (rental buildings with more than 10 units, utilities, and commercial). 9. The Commission recommends a gradual transition to the new system for current owners, with an immediate transition into the new system whenever a property in the new residential class is sold. 10. The Commission recommends instituting comprehensive reviews of the property tax system every 10 years.

Will Property Tax Overhaul Lead to a Rush for the Exits?

Will property tax reform send co-op and condo owners rushing for the exits?

The initial report by the commission studying property tax reform in New York City is barely a week old – and actual changes are probably years away – but many brokers believe the sky is already falling.

One of the commission’s more earth-shaking proposals is to tax all co-ops, all condos, and rental buildings with fewer than 10 units the same as one- to three-family homes. All properties in this class would be assessed on the sales price and taxed on 100 percent of the market value. Under the current arcane system, co-ops and condos are grouped together with large rental buildings and are assessed based on the potential gross annual income they would receive if rented. For some co-ops and condos, particularly those at the high end, the proposed change would result in radically higher property tax bills.

"This proposed tax system will drive many out, not least because it’s becoming increasingly expensive to live here," Rowena DasGupta, an agent at Warburg Realty, tells Forbes.

Christopher Totaro of Warburg adds that many property owners, particularly in the middle class, are already reeling under the cap on state and local tax deductions under the Trump tax “cuts” of 2017. “When you couple that with an income-tax rate of 32 percent, 9 percent sales tax, rising energy costs – 4 percent in 2020 – insurance rate increases, building repair costs for newly- implemented code compliance laws and building maintenance increases every year,” Totaro says, “it’s dangerously close to the tipping point of an exodus of owners and a reduction in sales due to sales being taxed immediately at the proposed rates. I believe people will reconsider buying. Also, rental buildings would see higher taxes and rents will increase.”

Mark Hakim, a real estate attorney with Schwartz Sladkus Reich Greenberg Atlas, notes that, under the commission’s proposal, "tax bills for some will decrease but will, for others, increase drastically, making their homes and apartments unaffordable and possibly even unsaleable. I truly understand the need for fairness, but a knee-jerk, feel-good legislation, without ample consideration of the real estate markets and economy in general, would be foolish and shortsighted. We already have many people investing and moving in droves to more affordable states. There’s no need to further push New York into a downward spiral."

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NYC Billionaires’ Row Could See Property Taxes Quintuple Under Proposed System

Stakeholders in the city’s luxury housing industry are balking at new recommendations to overhaul a perplexing and unfair tax equation

When media executive Lachlan Murdoch paid $150 million for a mansion in posh Bel Air in December, a record price for Los Angeles, he did so presumably knowing he would owe over $1.3 million a year in property taxes, public records show.

It’s an effective tax rate of around 0.9%—about the same as a fellow record-breaker in distant Palm Beach, Florida, where that same month, hedge funder Steven Schonfeld snapped up a mega-mansion for $111 million, taking on a property tax liability of around $1 million, public records show.

The two mega-mansions stand in stark contrast to New York City’s blockbuster $238 million condo sale last year—the most expensive home deal ever in the U.S.—for when the owner, hedge fund manager Kenneth Griffin, settles his $531,797 tax bill this year, he’ll pay an effective tax rate of only 0.22%.

That rate is lower than Laredo, Texas, the cheapest property tax jurisdiction in the country, according to a report from ATTOM Data Solutions. More importantly, the billionaire pays a fraction of what working-class homeowners in the neighboring Bronx pay, relative to their home values, according to a city commission that’s calling for a major overhaul to the city’s convoluted property tax law.

“There can be vast differences in how properties are classified, valued and assessed, lending credence to the widely held characterization that the system is overly complex, opaque and arcane,” commissioners wrote in their preliminary recommendations published at the end of January.

The changes would tax co-ops, condos and one- to- three-family homes in a unified way and do away with certain tax caps, which would in effect raise property taxes on high-end real estate in affluent areas while lessening the tax burden on lower- income homeowners. They would also bring the city in line with standard practice elsewhere, such as Los Angeles and Palm Beach counties, for example, where all homes are assessed and taxed at full-market value.

One of the quirks in the current antiquated system makes some co-ops and condos, assessed using comparable rental buildings, vastly undervalued for tax purposes. That means uber-luxe condos currently paying tax on a fraction of their market value would see the most dramatic increase in property taxes under the proposed changes.

Mr. Griffin would see his tax bill grow more than fivefold to nearly $3 million a year, according to a hypothetical example in the commission’s report.

Using that same calculation, Mansion Global looked at the top 10 most expensive condo sales last year, and how their tax bills would rise under the proposed changes.

Top Ten Most Expensive Condo Sales of 2019 Would See Property Taxes Soar Source: Top ten sales of 2019 provided by Miller Samuel Note: Calculation based on example provided in the New York City Advisory Commission on Property Tax Reform's Preliminary Report

220 CPS 50220 CPS 50220 CPS PH73220 CPS PH73212 5th Ave. PH/21A/21B212 5th Ave. PH/21A/21B432 5th Ave. 64A432 Park Ave. 64A220 CPS PH16220 CPS PH16520 Park Ave. DPH54520 Park Ave. DPH54220 CPS 49A220 CPS 49A220 CPS 47A220 CPS 47A220 CPS 46A220 CPS 46A220 CPS 48A220 CPS 48A

Among them, some trophy homes along Billionaires’ Row in Midtown Manhattan—an already softening segment of the city— would see tax bills more than quadruple. That includes the home of music star Sting, who snapped up a penthouse in the same

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tower as Mr. Griffin last year for $65.75 million. He would see his tax bill grow 489% from roughly $140,000 to a little over $825,000. Further downtown, Amazon CEO Jeff Bezos, who bought the penthouse and two neighboring condos at luxury development 212 Fifth Avenue for $81 million last year, would owe the city over $1 million, more than doubling his current tax bill.

“It will wreak havoc,” said Douglas Elliman agent Holly Parker. “It would just cause absolute pandemonium. You can’t change people’s obligations that dramatically, even with a phase-in period.”

Manhattan’s luxury segment has slowed considerably over the past two years, after federal tax reform in effect eliminated state and local tax deductions for high-income jurisdictions such as New York City and limited the amount of mortgage interest homeowners could write off. The market is also digesting a hike in the mansion tax that went into effect in July.

Ms. Parker said two of her biggest clients, wealthy families from Thailand and the Middle East, have decided to stop doing business in the city because of an array of new regulatory and tax changes. She predicted a spike in property taxes would only drive other affluent investors out of the city. “If you’re sitting in the middle of an empty movie theater, do you then raise the price of a ticket?” she said.

Of course, nothing will happen overnight. The commission will hold public hearings on the proposals over the next few months before issuing a final report, which would have to win approval from Mayor Bill de Blasio and the City Council before heading to the State Legislature and Gov. Andrew Cuomo. At the moment, the proposals are still missing key details, including what the tax rates would be, the length of the transition period for existing homeowners before they see the full effects of the change, and various provisions and abatements for primary homes and low-income residents.

At the moment, the current proposals don’t do enough to address the overwhelming number of households—of all income levels—that bought property in pockets that have undergone intense price appreciation and gentrification, said Donna Olshan, president of Olshan Realty.

“There are many, many New Yorkers whose net worth is tied up mostly in their real estate, and if their property were assessed at market value, it would be like serving them an eviction notice,” she said. Such areas include highly gentrified parts of Brooklyn, such as Prospect Park and Cobble Hill, as well as co-op buildings on the Upper West Side and Upper East Side, where property taxes have remained relatively low.

“You have an older population of middle- and upper-class people whose homes are now worth maybe a couple of million dollars. If you want to create a hornet’s nest, you just start with their property taxes,” said Ms. Olshan, adding that the proposals would create such a political minefield she doubted they’d be adopted.

Frederick Peters, CEO of Warburg Realty, said the motivation to create a more equitable and transparent system was noble, but feared its implementation would be haphazard and would certainly affect the amount people are willing to spend on New York City real estate.

“If the taxes are much higher, then the monthly mortgage has to be lower. If the mortgage has to be lower, than the price will have to be lower. There has to be some reversion to the mean,” Mr. Peters said.

Property taxes alone are unlikely to drive someone to sell their home, Mr. Peters added, except “if it feels to people like the straw that breaks the camel’s back, because they’re already paying more in city, state and local income taxes and an extremely high capital gains tax, and they could move to Florida where much of that is mitigated.”

Property tax reform will be a heavy lift, despite mayor's optimism Mayor Bill de Blasio promised Friday that reforms to the city’s lopsided property tax system will get done before he leaves office, but the politically treacherous task faces a tough road ahead — and much of it is out of the mayor’s control.

The reform commission de Blasio convened with the City Council a year and a half ago proposed an overhaul on Thursday that would shift the tax burden away from modest homeowners who pay more than their fair share under the current system, and

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hit owners of more expensive properties with higher tax bills. The preliminary plan came after months of delay on an issue de Blasio first vowed to address during his 2013 mayoral campaign.

“This is something I believe can and will be done during my administration,” the mayor said in a radio interview on WNYC’s "The Brian Lehrer Show." “We are in the business of getting laws passed that will change our property tax system.”

As of next week, de Blasio has 23 months left in his mayoralty.

The commission’s initial plan lays out a framework for reform, but is in many ways the first step of a long process, which will ultimately need approval in Albany — a venue where the mayor has had limited success in the past. Another round of public hearings are set to be held in the coming months, after which the commission will further discuss and release final proposals. City and state political leaders will have to reach consensus on a reform plan and actual legislation will need to be drafted for passage by the state Legislature.

That’s to say nothing of the political difficulty of advancing a plan that will raise taxes on a sizable share of people, even as it lowers them on others — a tough sell for city and state politicians seeking reelection. State lawmakers are up for reelection later this year, and the next mayoral election will be in 2021. Even though de Blasio has little left to lose politically, he lacks the cachet in Albany to spearhead a push for such drastic changes.

“The political calendar always weighs against something getting done, because there are elections, other issues that come up that take priority over this, that are sexier than tax reform and less of a third rail for politicians,” said political consultant George Arzt.

He noted a 1975 court decision that laid the groundwork for the existing system. The judge in that case agreed the property tax system was in violation of state law and tasked state lawmakers with its reform. But after six years of deliberation, Arzt said, the system ultimately adopted was even more inequitable than the one that came before.

The tax regime has remained largely the same since then and the last serious reform effort took place in the early 1990s, but ultimately went nowhere.

The new reform commission proposed removing kinks in the system that skew its impact on different kinds of homeowners. One of these is a cap on how much the assessed value of one-to-three family homes can increase annually. That has benefited homeowners in gentrifying neighborhoods where market values have accelerated in recent years while their tax bills have stayed roughly the same. The mayor himself — who owns two homes in Park Slope — is a big beneficiary of the system and said Friday he’s comfortable with paying more under a new regime because “fair is fair.”

But it’s far from an easy calculation.

State Sen. Brian Benjamin (D-Manhattan), chair of the senate’s budget and revenues committee, cautioned against unintended effects on longtime property owners in gentrifying neighborhoods.

“I think what we have to do is really chronicle out who are the losers and what is the impact of those losses from a human standpoint,” he said.

“I represent one of the districts that’s been a net beneficiary of this component of it and I would be very concerned if there weren’t safeguards in place for some of the longtime Harlem owners, who bought property when no one else wanted to buy property,” he continued. “I’m not OK with the longtime homeowner who now will end up having to sell their brownstone in Harlem because they don’t have the income to pay the property taxes.”

The commission recommended certain provisions, or circuit-breakers, to help lower-income owners, but did not go into many further specifics.

“There are still a lot of details to be ironed out and you need to know what those details are to really assess what the implications will be,” said Ana Champeny, director of city studies at the Citizens Budget Commission, a fiscal watchdog. “When we say, ‘let’s have a circuit breaker,’ what do we mean?”

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There are two legislative sessions left before de Blasio leaves office, and given the open-ended nature of the initial plan, it’s unlikely much progress will be made at the state level this year. Benjamin and Champeny are hopeful a more concrete plan will be complete by the time the 2021 session rolls around.

But critics are skeptical that the inequities in the system will ever be resolved by politicians looking out for their next job.

The backers of a lawsuit against the system, which alleges it perpetuates racial and economic disparities, have long attempted to make the point that serious reforms have little chance of success without a court mandate.

“If it took 18 months for them to put out a report that basically says what we said in our lawsuit, I don’t know in all honesty how they’re then going to get this adopted in time for the mayor’s administration," said Martha Stark, a former finance commissioner and director of policy for the Tax Equity Now New York coalition, which filed the lawsuit.

“What I see happening is likely nothing but discussion for the time being,” said political consultant Hank Sheinkopf. “Resolution in an election year or a mayoral election year is unlikely.”

Tax System Favoring Central Park Co-ops and Brooklyn Brownstones Could End

New York City property taxes, long considered inequitable, could face a big overhaul under a plan from a mayoral commission.

New York City’s antiquated method of calculating property taxes has long allowed owners of multimillion-dollar brownstones in Brooklyn and high-rise co-ops by Central Park to pay less in taxes than working-class homeowners in the South Bronx, relative to the value of their properties.

Now, a high-level city commission empowered by the mayor and City Council speaker is proposing a major overhaul that would fundamentally shift the tax burden to those wealthier neighborhoods and lessen it for low- and moderate-income homeowners.

In a preliminary report posted online Thursday, the commission recommended that the city assess most homes, including co- ops and condominiums, at full market value. Such a formula, while commonplace in many cities and counties, is foreign to New York City, where property taxes are often capped.

The changes, which could affect 90 percent of all homeowners in New York City, according to the commission chairman, would have to overcome many hurdles, including approvals from the mayor, the Council, the State Legislature and the governor, before taking effect.

The new system would raise the same amount of tax revenue for the city; it would just redistribute who pays what.

The inequities in the current system can be stark: A five-bedroom brownstone facing Prospect Park in the Park Slope section of Brooklyn is currently listed for sale at $8 million. But it has an extremely low assessed value, leading to an annual property tax bill of $20,165 despite its huge market value.

By comparison, the owner of a ranch-style home in Fieldston in the Bronx would pay roughly the same in property taxes on a house with a market value of about $2 million. So would the owner of a $900,000 home just north of there, in Yonkers in Westchester County, according to tax records.

“I’m happy to be part of a historic revisiting of a situation that has been inequitable for a quarter of a century,” said Allen P. Cappelli, a lawyer from Staten Island who served on the commission. “People who live in similarly valued homes ought to be paying the same amount of taxes.”

Mayors including Edward I. Koch and David N. Dinkins have tried to tackle the issue, leading to combustible reactions but few results. Mr. Dinkins also formed a commission; it delivered its report during his last days in office.

Twenty-five years later, Mayor Bill de Blasio and Corey Johnson, the current Council speaker, created a commission in 2018, but it remains to be seen whether they will forcefully support the panel’s recommendations.

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On Thursday, the mayor and Mr. Johnson already appeared to be wary of embracing the recommendations, mindful perhaps that any significant change would surely set off a flurry of lobbying, angry town-hall-style meetings and pressure from state lawmakers.

Mr. Johnson called the plan “a work in progress” and said that he wanted to examine how the system would affect renters as well as how best to address luxury housing.

“I’m eager to hear the public’s feedback on these recommendations,” Mr. Johnson, a Democrat, said in a statement.

Mr. de Blasio, a Democrat in his second and final term, praised the commission’s work, but he stopped short of a full-throated endorsement.

“The commission’s recommendations are the most significant reforms proposed in 40 years and will bring a much needed level of fairness, transparency and simplicity to the entire system,” Mr. de Blasio said in a statement. “I thank the commission for its hard work tackling these issues head on and looking forward to their final report.”

In addition to making the system more equitable, the commission’s proposal seeks to simplify it. In the process, it could disrupt an unspoken rationalization that many city homeowners make: Even though the cost of living in New York City, which includes city income taxes, is astronomically high, property taxes are still much lower than in neighboring suburbs.

The proposal follows the federal government’s imposition of a $10,000 cap on federal income tax deductions for state and local taxes, a move that disproportionately affected wealthy, high-tax states like New York and sent some residents to other states.

Freddi Goldstein, a spokeswoman for the mayor, said that the administration did not “believe this will cause a massive exodus of any kind.”

The recommendations call for removing the cap on how much the value of a property can increase each year. The proposal did not specify the specific rates that homeowners might pay, but it was clear that the suggested changes would create winners and losers.

One high-profile potential loser would be the mayor himself. Mr. de Blasio owns two homes in Park Slope, each worth more than $1 million. Homes with skyrocketing prices will be taxed more under the plan, said Marc V. Shaw, the commission’s chairman.

“The expectation is that taxes on his property will go up significantly,” Mr. Shaw, a onetime top deputy to Michael R. Bloomberg, the former mayor, told reporters in a phone call on Thursday.

Another homeowner who could face a higher tax bill is Kenneth Griffin, a hedge fund billionaire who owns a $238 million Manhattan condo. Co-ops and condos are not taxed at their true market value under the current system, but rather on the income generated by similar rental buildings.

Mr. Griffin’s property taxes on the condo are about $532,000 now. If the property were to be taxed at its market value, his tax bill would be about $3 million.

The commission’s proposal would have significant consequences for parts of New York City where market values have risen drastically over the past four decades, notably Park Slope and Manhattan neighborhoods around Central Park.

Park Slope is dotted with single-family brownstones near Prospect Park that sell for millions of dollars, but the property taxes on the homes have remained relatively low even as their real value has soared. The commission’s proposal would eliminate those benefits and would require owners to pay property taxes based on full market value.

“Park Slope is the classic example,” said James A. Parrott, the director of economic and fiscal policies at the Center for New York City Affairs at the New School and a commission member.

Some homeowners would see relief under the plan. Mr. Shaw said that those who could pay less included some single-family homes in Queens and Staten Island and certain co-ops and condominiums in parts of the Bronx.

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The commission recommended two provisions for owners with lower incomes. One, a “partial homestead exemption,” would help people who live in their homes with income below a certain level that has yet to be determined. Out-of-town homeowners would not qualify.

“People who own a pied-à-terre in Manhattan will be paying more,” Mr. Parrott said.

The second measure, called a “circuit breaker,” would limit tax bills to a certain percentage of household income.

Members of the commission were already cautioning on Thursday that it could take years to adopt the changes, and that they would be phased in slowly. The panel plans to hold public hearings in the coming months to receive feedback on the proposal and to then issue final recommendations later in the year.

Under the current system, most residences with up to three units, including single-family homes, are taxed under a complicated equation that begins with their market value, which is determined by the city based on recent sales prices for similar nearby properties.

A property’s assessed value is then calculated at 6 percent of the market value, but it cannot increase more than 6 percent a year or 20 percent in five years. That helps people who own property in neighborhoods like Park Slope where values have surged. Tax exemptions and credits, if they exist, are then applied and that total is multiplied by a variable tax rate that is currently around 21.17 percent.

Battle Lines Quickly Form Over Radical Property Tax Proposal

A New York City commission’s recommendations for reform divide homeowners and elected officials.

On a stretch of 11th Street in Park Slope, Brooklyn, two houses — one a modest two-family, and the other a three-bedroom clapboard home — could be Exhibits A and B in why New York City is now considering a sweeping proposal to overhaul its property tax system.

The homes are each worth roughly $1.75 million, but the combined property tax bill is slightly under $9,000 — far less than homes of comparable value in less gentrified parts of New York, like the Bronx or Staten Island.

Yet the owner of the houses, Mayor Bill de Blasio, said on Friday that he welcomed a chance to make the property tax system more equitable.

A few blocks away, Daniel Fountaine was more uncertain. He bought a two-bedroom apartment in a co-op building with views of Prospect Park in 1985 for only $175,000. As the price of his home soared, he became, at least on paper, a millionaire.

But Mr. Fountaine, an 84-year-old former accountant, is retired and on a fixed income. He said he can barely afford his annual $5,000 property tax bill — still far less than similarly priced homes in the suburbs, or even in Canarsie, Brooklyn, just six miles away — and cannot afford to pay significantly more.

“It’s too stressful to move,” he said on Friday. “What the hell are you going to do?”

All over the city, people had starkly different reactions to a high-level city commission’s recommendations, issued in preliminary form Thursday, to assess most homes, including co-ops and condominiums, at full market value — a seismic change that would shift the property tax burden to wealthier neighborhoods and lessen it for low- and moderate-income homeowners.

The proposal is far from a done deal, but Mr. de Blasio said on Friday that his goal was to get the changes approved by state and city lawmakers by the time he leaves office in a little under two years. While acknowledging that property taxes are an “extremely complex and emotional issue,” Mr. de Blasio insisted that the current system was unfair.

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“The recommendations will lead to me paying more in property taxes, period,” he said in a radio interview, “and I believe that’s fair.”

It remains to be seen whether Mr. de Blasio, a Democrat who has suffered sagging approval ratings since returning from a failed presidential run, has the political capital to marshal backing for the plan, which could affect 90 percent of all homeowners in New York City.

On Friday, some lawmakers signaled support, though the plan was not immediately embraced by state leaders who said they were reviewing the details. A spokeswoman for Gov. Andrew M. Cuomo said only that he would review the proposal.

Democratic leaders in the State Senate said the same thing, noting they were proud to have passed a statewide property tax cap last year to help homeowners. Kerri Biche, a spokeswoman for Carl E. Heastie, the Assembly speaker, said the plan was a “first step in the city coming up with a more fair and equitable property tax structure.”

The seeming reluctance to embrace such far-reaching changes to the property tax system is predictable, especially to those who have fought for years to change the system.

“The political powers that be see this as a third-rail issue,” said Martha Stark, policy director for Tax Equity Now NYC, a group that filed a 2017 lawsuit seeking to force the city to address the property tax inequities.

“We have no reason to believe this is going to actually translate into legislation to be adopted anytime soon, and especially not during this administration,” said Ms. Stark, a former city finance director under Mayor Michael R. Bloomberg.

The city commission, which was created in 2018 by Mr. de Blasio and Corey Johnson, the City Council speaker, recommended eliminating the cap on how much a property’s assessed value can grow each year — a cap that helped keep taxes low, even as a property’s market value soared.

Elected officials who represent neighborhoods that could see higher taxes faced difficult decisions over whether to support the proposal.

Robert Jackson, a Democratic state senator who represents parts of the Upper West Side and Harlem, said he liked the plan, even if it hurts some of his constituents.

“I am concerned about anyone’s tax bills going up, but the bottom line is that New York City must have a system that is fair for everyone,” he said.

Councilman Joseph Borelli, a Republican from Staten Island, was less circumspect about voicing his support.

“Outer-borough homeowners, especially black and Latino homeowners, have been subsidizing woke progressives in posh neighborhoods and billionaires in high rises,” Mr. Borelli said. “If you buy a $3 million home, condo or mansion you should pay taxes on a $3 million home, condo or mansion. It shouldn’t matter whether you are in Mill Basin or Midtown.”

I. Daneek Miller, a councilman who represents Southeast Queens, where black residents have a high homeowner rate, said the property tax system made it difficult for black people to accumulate generational wealth.

“It’s about building wealth through homeownership,” he said. “If this proposal doesn’t come together, we won’t be able to hold on.”

The city commission has recommended two provisions for owners with lower incomes: a “partial homestead exemption" for owners below an unspecified income level, and a so-called circuit breaker that would limit tax bills to a certain percentage of household income.

Nonetheless, some homeowners feared that the changes would alter the neighborhood. Mark Chalfin bought a three-story brownstone near Prospect Park for $125,000 in 1980. In the past two years, the brownstones on either side of his home sold for around $4 million each.

“This neighborhood was affordable,” said Mr. Chalfin, 69, a lawyer. “Teachers, social workers, retirees.”

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Now his home has a market value of $4.63 million, but his property taxes have remained low, at about $12,000 a year, because of the cap placed on how much residential property taxes can increase every year. He said he could afford to pay more, but worried that it would make Park Slope further out of reach for people like his three children.

“That’s a disappointment,” he said.

Homeowners in the Morris Park section of the Bronx stood to benefit from the proposed changes; they typically pay an effective tax rate at least three or four times higher than in Park Slope or twice as much as the Upper West Side.

“If they’re well-to-do and have beautiful places and they’re not paying what we pay, it’s not fair,” said Roseann Deluccia, standing on the steps of her fenced two-story house that she hopes to sell within a year.

Her property taxes are $5,114 on a home with a market value of $584,000, according to city records.

She has lived alone since the death of her husband a year ago, and wants to move in with a daughter on Long Island. The high property taxes are a contributing factor in her desire to move.

“It’s not easy keeping a place,” she said.

State Assembly Unanimously Passes Legislation To Combat “Dark Store” Assessment Challenges

Bill Would Ensure Assessors Follow Common Sense Guidelines When Utilizing Assessment Methods

The New York State Assembly unanimously passed legislation this week that would establish clear and unambiguous guidelines for assessors to utilize when formulating assessments (A4752-C).

This bill is in response to the proliferation of the use of the “dark store” strategy by businesses, particularly big box retailers in New York. The “dark store” strategy is where commercial property owners challenge their tax assessment by using vacant stores or properties as comparable values; arguing that their value should be aligned with properties that are not in use. The approach is expected to spread to other states and to include small retail stores, auto parts stores and fast food chains.

This strategy has succeeded in several court challenges throughout New York resulting in a sharp reduction in tax assessments for big box retailers; shifting the tax burden to homeowners.

As competition from online retail continues to grow, brick-and-mortar retailers are seeking ways to cut costs, including appealing property assessments. This strategy could stress the budgets of suburban towns and school districts including Rockland’s that rely on retail to pay the bills at a time when big boxes are closing their doors at an alarming pace.

“When big corporations skirt their taxes through high paid attorneys, homeowners foot the bill,” said Assemblyman Ken Zebroski, who introduced the bill. “The dark store theory threatens our tax base by allowing businesses to exploit the assessment challenge process by comparing the current use of a business to vacant lots. The argument, that vibrant businesses should be valued as if they are closed, is incomprehensible. This bill puts into law guidelines and standards by which assessments should be based; providing courts with common sense direction in valuing properties.”

The legislation would require that properties selected as comparable properties for an assessment must be similar in use, size, location and other characteristics. These standards are currently used by assessors in formulating assessments and by placing in law, will provide guidance for courts evaluating competing assessments.

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Lawyers for big box retailers argue that their fully functioning stores should be valued the same as vacant stores when it comes to charging local property taxes. Dark store advocates want a ‘sales comparison’ approach, where a store’s value is determined by examining the selling price of comparable properties

Those amounts are much lower than the values town assessors come up with. Assessors apply a formula that relies on a potential cost per square foot, as if the stores leased the buildings. But assessors know, the stores are not really leased.

Typically stores are valued based on the purchase price of the land plus construction costs, minus any depreciation.

The dark store theory argues that approach doesn’t consider the role of “functional obsolescence” in a big box store’s value.

Assemblyman Ken Zebrowsky, a Democrat from Rockland County, introduced a bill earlier this year at the urging of the New York State Assessors’ Association and the New York State Association of Counties. It does not have a companion bill in the Senate.

The ‘winners and losers’ of NYC’s proposed property tax plan

City officials are proposing a massive overhaul of the property tax system that would result in changes for 90% of homeowners -- with some people facing significant increases while many in the Bronx, Queens and Staten Island would enjoy tax cuts.

City officials are proposing a massive overhaul of the property tax system that would result in changes for 90% of homeowners — with people like Mayor Bill de Blasio, who owns properties in Brooklyn’s brownstone-laden Park Slope, facing significant increases while many in the Bronx, Queens and Staten Island would enjoy tax cuts.

“There are going to be winners and losers,” said Marc Shaw, chair of a commission that released the preliminary report on property tax reform Thursday after nearly two years of deliberations.

The Advisory Commission on Property Tax Reform that was created following a still-pending lawsuit by plaintiffs who claim the current system is unfair — as the owner of a $9 million Carrol Gardens, Brooklyn building pays the same $4,300 in annual taxes as the owner of a $500,000 Elmhurst, Queens, split-level home.

The overhaul requires state legislative approval that could take another several years. The famously opaque property tax system was last reviewed by a government commission in 1993. Changes would be phased in over five years with annual increases capped at 20%.

There’d also be tax breaks for low-income New Yorkers and residents as opposed to owners who don’t live in the city full time.

The thrust of the reforms would treat all residential properties — from single-family homes to co-ops, condos and small rental buildings — the same for tax purposes to bring “simplicity and fairness to the system,” according to Shaw.

Right now they’re taxed at different rates.

Bronx Assemblyman Jeffrey Dinowitz said he was pleased that co-ops and condos would be treated the same as one- and two- family for tax purposes.

“That’s something we have long advocated for. Condos and co-ops are assessed at a higher rate,” Dinowitz said.

The properties would also be taxed at their full-market values instead of the current system, which calculates payments using a complicated value including the assessed and market values.

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The changes mean that New Yorkers like de Blasio, who pays just $4,000 a year for each of his Park Slope homes because he brought them years ago before neighborhood prices skyrocketed, will owe “significantly” more in taxes, Shaw said.

One percenters will also be hit by the changes. For example the buyer of a $100 million penthouse at One57 who paid about $500,000 in property taxes last year, would be on the hook for $2.5 million under the proposed reforms, Shaw said.

Owners of co-ops and condos in the Bronx would see their tax bills slashed, he said.

Sen. Andrew Gounardes (D-Brooklyn) welcomed the report but cautioned key issues still have to be addressed.

“While in principle some of the Property Tax Commission’s ideas will address the long-standing inequities of the current system, including two ideas I’ve already proposed through legislation, a circuit breaker and lifting of assessment caps, critical questions still remain: what are the proposed rates? What are the thresholds for the homestead credit? What controls are in place to prevent another decade of runaway budget growth? What is the timeline for a final report?,'” Gounardes asked.,

“I applaud the commission for its work – but it’s not done yet. The commission should brief the legislature on its recommendations and give us a roadmap with specific details so we can finally take action after 40+ years of inaction,” he said.

Martha Stark, Policy Director for Tax Equity Now New York said the commission’s report and recommendations “expressly recognize that the current system is unfair, opaque, and arbitrary.”

“As such, the commission’s conclusions vindicate many of the criticisms that led us to bring suit 3 years ago,” Stark said in a statement.

“But talk isn’t enough. Commissions have come and gone in the past with no action. And the commission’s recognition that the current system is deeply flawed makes even more critical that New York’s courts should rule on TENNY’s claims, and thereby provide crucial guidance on what the law requires – guidance critical to achieving the reform the report makes clear is essential to achieving a property tax system that is transparent and just.”

NYC Panel Proposes More Equity in Real Estate Tax Assessments

New York City’s real-estate tax program, unchanged for decades as skyrocketing property values favored owners of homes and apartments in gentrified neighborhoods, may be about to get more equitable.

The New York City Advisory Commission on Property Tax Reform, impaneled in May 2018 by Mayor Bill de Blasio and the City Council, issued a preliminary report recommending sweeping reforms. The changes would base taxation and assessments on fair-market value, not fractions or percentages depending on the type of housing being assessed.

Spiking prices of single- to three-family homes, co-ops and condominiums in parts of Brooklyn, Queens and Manhattan have combined with state assessment caps to give those residents lower taxes compared with home and apartment owners in stable-priced areas of Staten Island, the Bronx and other parts of Queens, the commission found.

De Blasio, a longtime owner of two homes in Brooklyn’s Park Slope, where prices have sharply appreciated, would pay more, said Marc Shaw, the panel’s chairman. The mayor, whose properties were assessed at about $3.7 million, paid just under $8,000 in real estate taxes last year, according to the city Finance Department.

Residents in neighborhoods where prices have held steady would see tax bills decrease, Shaw said.

“There are going to be winners and losers,” said Shaw, a former city budget director and deputy mayor. “At the end of the day, the property tax is a wealth tax.”

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Real estate taxes are the only major levies controlled by the City Council, and produced about $26.5 billion in revenue last year, Shaw said. The new tax system would be “revenue neutral,” he said, meaning it wouldn’t raise or reduce the amount the city reaps from the levy.

Shaw said state approval would be necessary to achieve one of the panel’s key recommendations: allowing the city to eliminate or change the state’s cap on assessment increases, which are 6% a year and 20% over five years.

The panel’s recommendations are the first step in what city officials expect to be months of public hearings and debates. Officials expect a final plan by year-end.

The commission’s goal was to make the system more equitable, not to raise more tax revenue, said James Parrott, one of its 11 members and director of Economic and Fiscal Policies at The New School’s Center for New York City Affairs.

“Home values are out of whack with the taxes collected on them, so that affluent homeowners in gentrifying neighborhoods are paying comparatively less while those whose homes have experienced static or gradual appreciation are paying more than they should,” Parrott said.

In eliminating those caps on assessment increases, the panel would ease the shock to people paying higher taxes by spreading the added tax liability over five years. For example, an owner whose home value has increased 8% in a year would pay that extra 2% phased-in over five years.

Homeowners with fixed or modest incomes whose property has spiked in value would be protected by a so-called “circuit- breaker,” which would exempt them from paying drastically higher taxes. Resident owners of condominiums and co-ops would also get a partial break on their tax bill, while absentee owners of such apartments who rent them out as investments, or whose residences are outside the city, would not qualify for such exemptions.

Taxpayers getting burned in Lisbon, local man says

A closer look at assessments and exemptions should be looked at within the Town of Lisbon. Solar panels producing electricity assessed at $2.5 million all tax exempt thanks to the Town not requiring them to enter into a PILOT agreement (Payment In Lieu of Taxes). That’s over a million dollars in taxes for our school, town and county in a 15-year period for the life of their solar exemption.

What’s more troubling is there was a backslash number provided for the panels by the county that had a land value added in 2018 of $88,900. This value was granted the solar exemption even though land value is not exempt from taxation, only the value of the panels. More troubling is these land value evaporated for the 2019 roll.

The land itself where these panels sit are still classified as “rural vacant” with a taxable value of only $17,000. So 25.5 acres with 2.5 million worth of solar panels producing thousands of dollars of electricity is only worth 17k? Why is this still classified as residential vacant land with a nominal value? Solar companies are paying up to $2,000 per acre per year to lease land and usually a 20-year lease. So this land is only worth 17k total that is making $51,000 annually in income?

Fun fact is the owner of this property is the town assessor. Maybe he is new, but from what I hear that’s not the case. According to the County Office of Real Property website it assists local assessors, “The office trains and assists local assessors in the annual preparation of assessment and tax roll.” So why can such an unethical situation go unnoticed? Maybe it helps to be friends with the county director of real property?

A look at the Assessor’s previous residence that just sold in 2019. 8963 County Route 27 in the Town of Lisbon. A taxable value on the 2018 assessment roll of $82,500 and recently sold for $165,000. How can someone have such an error of his own assessment? Does he not know how the interior is? The bigger question is if he can’t get his own assessment right how accurate is he with the other properties? If he’s not assessing himself at full value, then why should anyone else, be assessed at their full market value?

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I can’t see how this is fair to the taxpayers of the Town of Lisbon and I especially don’t know why these issues are not being looked? One thing is for certain though the taxpayers are getting burned twice! Not only are the rest of the town paying his fair share, but we are paying him, as the assessor for the town, to do it!

Thank God we have a new town supervisor! Maybe Mr. Nelson can address these issues for us and restore some confidence in local government.

Pied-à-terre tax gains City Council support with new resolution

A record-breaking $238 million condo sale has galvanized support for the “oligarch tax”

City Council members are leveraging ire over billionaire Ken Griffin’s purchase of a $238 million Central Park South penthouse to galvanize support for a stalled state bill aimed at creating a new tax on part-time New York residents—dubbed the pied-à- terre tax.

Council members Mark Levine and Margaret Chin, who respectively represent the Upper West Side and Lower Manhattan, plan to introduce a council resolution in support of the tax, which was originally introduced by State Senator Brad Hoylman in 2014. Under the bill, the pied-à-terre tax (a pied-à-terre is a unit kept for occasional use) would levy an annual tax on non-primary residences valued at more than $5 million and could rake in some $650 million per year for city coffers, according to city Comptroller Scott Stringer.

“It’s simply not right that we are forgoing this revenue from people who can well afford it at a time when our city has such pressing revenue needs on so many fronts,” fumed Council member Mark Levine at a Monday news conference on the steps of City Hall. “We want to show that there is broad political support for this basic measure of fairness.”

The council resolution comes after Griffin’s purchase—which is the most expensive apartment in not just New York City, but the country—sparked state-wide outrage that the swanky four-story pad at 220 Central Park South will likely not be Griffin’s primary residence and thus not subject to local income tax.

Hoylman’s pied-à-terre tax would work on a sliding scale, with a 0.5 percent tax levied on homes between $5-6 million with a maximum of 4 percent plus a $370,000 fee for homes valued higher than $25 million, according to Hoylman. The tax revenue generated from the pricy part-time pads would go toward funding municipal necessities.

“I like to call it an oligarch tax because there are foreign owners currently purchasing property in New York City—tens of millions of dollars—not contributing to city services,” said Hoylman, who has re-introduced the bill this legislative session. “It’s not just our firefighters and our police that make this city safer it’s our laws, and they’re benefiting from the rule of law by knowing that their dollars are kept preserved [in New York City.]”

New York already has what is commonly referred to a mansion tax—a one percent tax on homes worth more than $1 million— but fervor for the levy is gaining steam after Griffin’s penthouse purchase. Griffin, who is worth $10 billion and is 45 on Forbes’ list of top 400 wealthiest Americans reportedly purchased the multi-million dollar unit “as a place to stay when he’s in town,” his representatives told the Wall Street Journal. A chorus of elected city and state officials were quick to pounce on the astronomical purchase and call for a pied-a-terre tax. Gov. Andrew Cuomo is also open to the tax, according to the New York Times.

“We’re talking about the 1 percent of the 1 percent and those folks can afford to make New York a better place,” Assembly member Harvey Epstein, who supports the bill, said Monday. “If we’re going to talk about fairness and equity ... this is one step forward in being progressive—progressive taxation for those who can afford it.”

Other major municipalities have made similar moves including Vancouver, which enacted a similar tax last year—the Empty Homes Tax. The levy brought in $38 million in additional funds for the city and reduced the number of vacancies by 15 percent. London, Paris, Hong Kong, and Sydney have also implemented some sort of tax on non-primary homes—in Hong Kong property owners pay 15 percent of their home’s value while in Paris they pay a prodigious 60 percent.

Hoylman’s bill went nowhere when it was originally introduced in large part because of pushback from the real estate industry—insiders previously slammed the idea as “nothing but a bad idea” for the market. Hoylman pushed back on skeptics

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who charge that the tax would scare off wealthy prospective buyers from sinking millions into city units that won’t serve as their primary residence.

“The amount of money is so small compared to the value of the apartment that I don’t think [the tax is] going to make an appreciable difference,” Hoylman said of those mulling purchases. “And individuals who use New York City to stash their cash should pay a premium on it.”

Challenging Your NYC Property Value Assessment May Be Easier Than Ever

Last month, all property owners in New York City received property value assessments from the city’s Department of Finance. The value, which is determined based on past data submissions, current market conditions and other factors, determines the real estate taxes that will be charged for the upcoming year.

Property value assessments often increase annually but do not coincide with the actual financial conditions of the property for the year of assessment. For this reason, these assessments can be appealed to the New York City Tax Commission, which will perform an independent administrative review.

How to Challenge Your Assessed Property Value

To challenge the property value assessment for an income-producing property, a Real Estate Tax Certiorari filing can be made. Working together with property owners and their respective attorneys, a certified public accountant can assist in preparing the information necessary to determine if filing a certiorari is the right action for the upcoming year.

Changes to Certiorari Filings

The type of certiorari filing to be used depends on the property class. The most common is Form TC201 for “income-producing property” and presents general information on the property, rental occupancy and the income and expenses schedule.

On January 24, 2019, the New York City Council approved a measure that reduces the filing burden for properties assessed under $5 million. Prior to the ruling, income-producing properties with assessed values of $1 million or more and income exceeding $100,000 required an accountant’s certification (Form TC309) to accompany Form TC201. That actual assessed value threshold has now been raised to $5 million. Therefore, if the property’s actual assessed value (not transitional) is under $5 million, only Form TC201 is required.

If your property value is assessed at $5 million or more, Form TC309 will still need to be completed by an independent certified public accountant who will perform an audit of the information provided by the property owner on Form TC201 and reconcile any items that are not included in the income and expense schedule.

Behind the Numbers

The information reported on the certiorari form is governed by the Tax Commission of the City of New York and will not reflect the exact operations as they appear on the real estate owner’s internal financial statement. Some of the most common items needing to be reconciled on the accountant certification are estimated allowances and projections, building depreciation and interest income and expenses, along with amortization of mortgage costs.

The certiorari process does not end with the certiorari filing. Once the report is filed (by March 22, 2019) the property owner’s attorney files a petition, upon which questions may be raised by the city’s Tax commission related to matters such as the increase and decrease of income and expenses from previous years.

Time is Running Out

If you have not already, it is important to review your current property value assessment in light of your annual year-end financial position. Consult a CPA and an attorney who specialize in the real estate industry and can help guide you through the process of identifying the best plan for your property, complying with upcoming deadlines and potentially discovering real estate tax savings for the following and upcoming years.

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The $238 Million Penthouse Provokes a Fierce Response: Tax It

The sale of a $238 million penthouse apartment at 220 Central Park South in Manhattan has spurred discussion of a possible pied-à-terre tax.

For the last five years, a bill that would create a so-called pied-à-terre tax in New York has languished in the State Legislature, where proposals for new taxes often go to die.

But after Kenneth C. Griffin, a hedge fund billionaire with an estimated net worth of $10 billion, added to his personal real estate portfolio last month by closing on a $238 million apartment on Central Park South, things may soon be different.

The record purchase — surpassing the cost of the next most expensive home in the United States by more than $100 million — was a stark reminder that when wealthy buyers like Mr. Griffin purchase expensive apartments as second homes or investments, New York City and the state get less financial benefits. If the buyers live out of state, they are not subject to state or city income taxes, and do not pay New York sales tax while outside the state.

A pied-à-terre tax would institute a yearly tax on homes worth $5 million or more, and would apply to homes that do not serve as the buyer’s primary residence.

Large cities around the world have been grappling with how to make wealthy absentee property owners pay for the privilege of owning secondary residences, a recent report from the Real Estate Institute of British Columbia shows. Sydney, Paris and London have all recently added or increased taxes on the purchase of secondary homes.

In Hong Kong, nonpermanent residents pay a 15 percent fee on the value of the home, and foreigners pay an additional 15 percent fee. Singapore has restrictions on the purchase of residential property by foreigners and a 15 percent tax. In Denmark, foreigners are required to obtain permission from the government to purchase secondary homes.

In Vancouver, where the greatest concentration of vacant properties is downtown, owners of empty residential properties are charged a 1 percent tax based on the assessed value.

In 2018, the number of vacant homes declined by 15 percent and about $33 million in taxes is expected to be collected — a revenue stream earmarked for affordable housing.

“The best level to do this at is the city level, because the taxes can go right back into fixing the problem,” said the mayor of Vancouver, Kennedy Stewart, who favors increasing the tax to 3 percent.

Until recently, elected officials in New York have been less receptive to a pied-à-terre tax. The bill, first introduced in 2014 by State Senator Brad Hoylman, a Democrat who represents some of the wealthiest neighborhoods in Manhattan, has been blocked by the ruling Senate Republicans.

But Democrats seized control of the Senate in November, and legislative leaders are now considering the bill.

“It’s something we haven’t discussed in the conference yet, but we will,” said Mike Murphy, a spokesman for the Senate Democrats.

Michael Whyland, a spokesman for the Assembly speaker, Carl E. Heastie, said the legislation, sponsored in the Assembly by Deborah J. Glick, will be “closely” reviewed as part of the budget process.

Richard Azzopardi, a senior adviser to Gov. Andrew M. Cuomo, said the administration was open to it as well.

Senator Hoylman acknowledged that the nearly quarter-billion-dollar apartment was a perfect poster child for his bill, saying that stratospheric sales like this “are the gifts that keep giving.”

In three previous tries, State Senator Brad Hoylman of Manhattan has seen his pied-à-terre tax bill die without even coming to a floor vote; he hopes this year will be different.

“A $238 million purchase puts things into perspective,” he said.

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Indeed, the City Council speaker, Corey Johnson, said he planned to urge legislators in Albany to authorize the pied-à-terre tax when he testifies there during budget hearings next week. Mr. Johnson’s support suggests that if the Legislature passes such a bill, the Council would then give its approval to implement it, if necessary.

“I saw the story about the $238 million penthouse that someone might not even live in, and said now is the time to renew the call on this,” Mr. Johnson said in an interview. “I think this is doable and we should start the conversation now.”

It’s time for a pied-a-terre tax. We should tax luxury non-primary residences, like this one likely will be.

Mr. Johnson, who is exploring a run for mayor in 2021, said that in his district, which includes the High Line, there are “apartments that are crumbling and apartments 50 feet away that are selling for millions of dollars.”

Mr. Hoylman’s legislation would create a sliding tax surcharge: For properties valued between $5 million and $6 million, a 0.5 percent surcharge would be added on the value over $5 million. Fees and a higher surcharge would apply to homes that sold for more than $6 million, topping out at a $370,000 fee and a 4 percent surcharge for homes valued at more than $25 million.

The office of the city comptroller, Scott M. Stringer, estimated that a pied-à-terre tax would bring in a minimum of $650 million annually if enacted today. “For us, $650 million a year is a lot of money to deal with things such as our subway crisis,” Mr. Stringer said, “but it’s a rounding error for the people who own these expensive part-time apartments.”

The people most likely to be affected by the tax are the “international elite” who can afford it, he said.

There were 75,000 pieds-à-terre in New York City in 2017, up from 55,000 such units in 2014, according to the New York City Housing and Vacancy Survey. In spite of the increase, the share of pieds-à-terre that comprise vacant units unavailable for sale or rent remained at about 30 percent in both years.

Mark Levine, a city councilman who represents Upper Manhattan, will propose in a forthcoming white paper that money from a pied-à-terre tax should be dedicated to fixing the city’s public housing stock and to create affordable housing. “Even the Victorian-era robber barons who built all these mansions were living there,” Mr. Levine said.

And because the city’s property tax system is antiquated, co-ops and condos are not taxed at their true market value, but on the income generated by similar rental buildings. A property tax reform commission is currently studying how to revise the city’s tax system.

“I would argue they need to pay more than the baseline property taxes because the value of the real estate depends on the viability of New York City, the quality of the public services, and they are not effectively carrying their weight for that,” said James Parrott, director of economic and fiscal policies at the Center for New York City Affairs at the New School, and a member of the property tax reform commission.

New York City is the second largest location of Mr. Griffin’s firm, Citadel. The company has been expanding in the city, recently acquiring more space at an under-construction Midtown office tower on Park Avenue; company officials suggested that commercial real estate taxes, combined with the taxes that Mr. Griffin will pay on his apartment, amounted to a significant contribution to New York City. Zia Ahmed, a spokesman for Mr. Griffin, declined to comment.

Mr. Parrott, who wrote a 2014 paper for the Fiscal Policy Institute that was the basis of Mr. Hoylman’s legislation, estimated that Mr. Griffin would have to pay $8.9 million per year if there was a pied-à-terre tax.

New York State does have a so-called mansion tax, a 1 percent tax levied on homes that sell for $1 million or more. That tax brought in $1.1 billion for New York City from the 2016 fiscal year to present, according to the Department of Finance.

Mayor Bill de Blasio, a Democrat who says income inequality will be the most important issue leading to the 2020 presidential election, has called for an expansion of the mansion tax, using Mr. Griffin’s apartment purchase as an example of what is “fundamentally broken in our country.”

Yet some people believe that this is not the right time for a pied-à-terre tax in New York. Kathryn Wylde, president of the Partnership for New York City, said many wealthy people had made the decision to leave the state after President Trump’s tax

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legislation reduced the amount of deductions that can be taken for state income and property taxes to $10,000, an amount easily surpassed in higher-tax states like New York. NYC Property Tax Overhaul Pits Neighbor Against Neighbor

‘Revenue neutral’ requirement means winners and losers

Disparities within tax classes leave every owner fending for self

The push to reform New York City’s property tax system is a zero sum game that has various types of home owners, developers, investors, and even renters jostling with each other for a leg up.

The commission formed to update the city’s complicated tax structure for the first time in more than 20 years is instructed to make any proposals “revenue neutral.” That means tax cuts for one group have to be balanced with increases for another group—places in Staten Island pitted against Manhattan; condo owners versus investors; even a state assemblymember against Mayor Bill de Blasio over whose cuts get offset with increases.

“If you’re going to keep the revenue the same, roughly half the people are going to be winners and half are going to be losers,” Mark Willis, a policy fellow at New York University’s Furman Center for Real Estate and Urban Policy, told Bloomberg Tax. “Potential losers tend to be more motivated to object to the change, making for a difficult political fight.”

The revenue restriction is meant to ensure that the city doesn’t suddenly find itself on the short end of a plummeting tax stream. Property taxes account for an estimated $26.4 billion in the current fiscal year, or 45 percent of total city revenue. But the requirement also creates an “every owner for himself” situation that’s likely to ratchet up political and legal debates and slow any proposals to level the playing field.

‘Punished’ for Rent Stabilization

Competing owners and interest groups have been taking their cases to the advisory commission.

Kara Kelly, who’s family has owned a ten-unit apartment building on Manhattan’s Upper West Side for some 75 years, told the commission at a hearing last year that new buyers snatching up buildings and converting them to luxury living spaces have driven up her property taxes and put her business at risk. She also said she can only pass on a limited amount of the cost to renters in units covered by the city’s rent stabilization program.

“We are being punished for being part of a system that helps keep rent affordable, a system which on principal which we generally support,” Kelly said. “Why are we taxed like these ultra luxury single-family mansions when half of our units are rent stabilized?”

New York City property owners are divided into four classifications, pitting those classes against each other as natural rivals in the reform process. Condominium and cooperative housing owners (lumped with large residential properties in Class 2), for instance, often complain that a larger share of their property value is taxed than is for single-family and small home owners (Class 1). Others point out that condo and co-op rates are based on rental income values, which are typically lower than the sale values used to calculate taxes for other residential properties.

The system has also generated significant differences in tax bills within classes, as a maze of caps and exemptions limit increases and favor owners in neighborhoods where property values are surging. That has owners in places like Staten Island and the Bronx complaining that their effective tax rates are a much larger percentage of their property’s value than for homes and commercial space in Manhattan and Brooklyn that could fetch a bigger price tag on the open market.

“That makes it incredibly challenging,” Ana Champeny, a researcher at the nonprofit Citizens Budget Commission and former city Finance Department tax analyst, told Bloomberg Tax of the disparities. “We say the owner-occupied properties should have the lowest tax burden overall, but if you were to reduce some of the differentials you’re likely going to need to increase the share of the levy for some of those owners.”

The city advisory commission, formed last year by de Blasio (D) and City Council Speaker Corey Johnson (D), has held a series of public hearings so far as it works on drafting a set of recommendations.

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Game of Homes

One trigger for the commission’s creation was a lawsuit alleging that the current property tax rates and assessments scheme discriminates against owners in minority-heavy neighborhoods. The court battle highlights some of the competing interests at play.

A group called Tax Equity Now NY (TENNY) is focusing its lawsuit largely on the negative impact of high property taxes on single- family home owners and renters. But the organization also represents investors, developers, and residential and commercial property owners most likely to benefit from any reduction.

TENNY’s members include some of the city’s largest property owners, like the Durst Organization, RXR Realty, the Related Companies LP, Two Trees, and Silverstein Properties Inc. Civil rights groups like the National Association for the Advancement of Colored People, the Black Institute, and LatinoJustice are also involved in the organization.

“It’s true that there are likely to be winners and losers,” Martha Stark, the group’s policy director and a former city finance commissioner, told Bloomberg Tax. “What brings us together is that the current tax structure is untenable and unfair. Our group really believes in a fair tax system.”

Co-op and condo owners were left out of the group. “We weren’t invited to participate in the lawsuit,” Mary Ann Rothman, executive director of the council of New York Cooperatives and Condominiums, told Bloomberg Tax. “The lawmakers seem to have assumed when they created the system that single-family homes are where the voters are, but we would suggest that condo owners also own homes, we vote, and we are involved.”

Large residential rental (Class 2) and commercial (Class 4) property owners say they’ve been left holding a disproportionate share of the tax bill. Those properties are taxed at 45 percent of a property’s market value, while single-family homes and residences with two or three units are assessed at 6 percent of their value.

Class 4 owners currently pay more than 42 percent of the city’s entire property tax levy, despite representing a little more than a quarter of the total property market value, according to the finance department. Class 2 owners represent another quarter of market value and pay about 37 percent of the citywide levy.

Class 1 property owners, which account for more than 46 percent of the market value, pay 15 percent of the citywide levy. Class 2 owners, utility companies, represent 3 percent of the market value and pay 6 percent of the levy.

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The Real Estate Board of New York, a formidable industry trade association, wants the city to alleviate the tax burden on income-producing properties.

“A fair real property tax system requires not only an equitable distribution of the levy but an equitable burden based on value and ability to pay,” Michael Slattery, REBNY’s senior vice president told the advisory commission at an October 2018 hearing.

The commission, led by former city housing chief Vicki Been and Marc Shaw, a deputy mayor in Michael Bloomberg’s administration, also has to consider disparities within the property classes.

Lags in assessments and caps on how much rates can be increased—6 percent a year and 20 percent over five years; 8 percent a year and 30 percent over five years for condos and co-ops with 10 units or fewer—have made where the property is located perhaps more important than what it’s worth for tax purposes. Even when a Class 1 property is sold, that might not have much impact on its tax assessment. Caps remain intact and values are based on comparable sales in the area, including but not limited to the sale of the property itself.

Critics of the system often point to De Blasio’s property tax bill as an example of the disparity. The mayor and his wife last year paid a total of $7,000 for two homes in the Park Slope neighborhood of Brooklyn reportedly worth more than $3 million combined. That’s less per home than what many Staten Island residents say they pay for property worth a fraction of the market price.

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For instance, State Assemblymember Nicole Malliotakis (R) last year paid nearly $5,500 in property taxes on her single-family home in the Great Kills section of Staten Island. The property was assessed at a value of roughly $560,000, according to staff for Malliotakis, a frequent critic of the tax structure.

“Low- and middle-income neighborhoods are subsidizing the property taxes of homeowners in more affluent and expensive neighborhoods in our city, and that is wrong” Malliotakis told the commission at a hearing on Staten Island.

A spokesman for De Blasio didn’t return a request for comment this week.

Carol O’Cleireacain, an economic consultant and advisory commission member, said at a recent hearing that the panel is being asked to “completely change a system that was put in 40 years ago for a different economy and a different set of housing.” Because tinkering with one area of the system will necessarily impact others, the stakes are high.

“Do you know how much damage we could do if we break it?” O’Cleireacain asked witnesses at the hearing. Leveling the Playing Field on Property Taxes Won’t Be Painless

Property tax notices for the upcoming 2019-2020 fiscal year have been sent out by the city’s Department of Finance. That’s the bad news. The Advisory Commission on Property Tax Reform is due to come out soon with proposals for the first major overhaul of the city’s opaque and unloved property tax system in more than two decades. That may be even worse news.

Why? Because, as Bloomberg Tax reports, property taxes feed $26.4 billion into the city’s treasury every year, nearly half of all revenues, and the commission has been instructed to make any reform proposals “revenue neutral.” That means a tax cut for one of the city’s four tax classes will have to be balanced with increases to one or more of the other classes. For every winner, there will be a loser. Leveling the playing field will not be a painless exercise.

“If you’re going to keep the revenue the same, roughly half the people are going to be winners and half are going to be losers,” says Mark Willis, a policy fellow at New York University’s Furman Center for Real Estate and Urban Policy. “Potential losers tend to be more motivated to object to the change, making for a difficult political fight.”

The revenue restriction is meant to ensure that the city doesn’t suddenly find itself on the short end of a plummeting tax stream. But the requirement also creates an “every owner for himself” situation that’s likely to ratchet up political and legal debates. Condominium and cooperative housing owners (lumped with large residential properties in Class 2), for instance, often complain that a larger share of their property value is taxed than is for single-family and small homeowners (Class 1). Others point out that condo and co-op rates are based on rental income values, which are typically lower than the sale values used to calculate taxes for other residential properties.

One thing is certain: the fight over the tax commission’s recommendations is going to be a dog-eat-dog affair. Tax reform, it turns out, is one of those areas where you should be careful what you wish for.

NORTH CAROLINA Why do we have property taxes? Sometimes we receive news that is both good and bad. I did recently when I was informed of the new tax value of our home. It had gone up over 25 percent in the last four years.

The good news is my wife and I will likely get more money whenever we sell our house. The proceeds from the sale will be an important part of our retirement nest egg. The bad news is, in the meantime we will likely pay more property taxes to our local governments each year.

Notice I said “likely pay more” property taxes. This is because your property tax bill depends on two factors. One is the value of your property, the most important of which is usually your home. The second factor is the tax rate per dollar of property value set by locally elected officials.

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This means it is possible your property tax bill could not change at all if local leaders reduced the property tax rate to counter the rise in property value. Yet while local leaders often do reduce the tax rate, they generally don’t reduce it enough to prevent a jump in property tax payments.

There’s a reason for this which goes to the core of why property taxes are used. Property is one of several economic bases that can be tapped to generate public revenues. These include income, spending or sales and wealth. Of course, wealth includes the value of property but also comprises financial wealth such as stocks and bonds.

Some say there’s been a kind-of unwritten agreement among different levels of government to reserve certain tax bases for certain governmental levels. For example, taxes on income produce the greatest amount of revenues for the federal government. Most states rely on sales taxes, with some – such as North Carolina – also administering a state income tax. Property taxes are almost exclusively used by local governments like counties and municipalities.

There’s a natural tie-in between property taxes and local governments. Two of the major functions of local government – police and fire protection – involve protecting private property. Therefore, levying a tax on the value of a household’s property provides revenues proportionate to the amount of property protected.

Additionally, in North Carolina local county governments are responsible for constructing and maintaining public school buildings. Building new schools usually involves purchasing local land as well as paying for building materials and labor. These are the same inputs that go into the value of local residential and non-residential buildings. Once again, it is therefore logical to use the same private source – here private property values – to fund public property.

There are, however, challenges in using local property as a financing source for local governments. Perhaps the biggest challenge is measuring property values. Certainly, when a property sells, the sales value can be used as the same value for tax purposes. But most properties like homes don’t sell every year. The last time our home sold was 34 years ago when we bought it. This means in the years between sales of a particular property, local governments must estimate the value.

Estimating property values is a tedious process, which is one reason why North Carolina counties are only required to do it every eight years. Yet this long lag between property revaluations creates another problem. In many counties, but especially those that are growing, property values rise over time. Using outdated property values to provide revenues paying for the current costs of land and construction materials creates shortfalls. To close the shortfalls, local leaders often increase property tax rates until the next property revaluation. This can create confusion among property owners over why the tax rates are rising.

When I served on a Wake County citizens’ group a dozen years ago we addressed this issue by recommending the county cut in half – from eight to four years – the time between property valuations. Wake County Commissioners adopted the recommendation, and several other counties also have shortened the time periods between the revaluations of local property values.

Some experts think modern information technology could eventually allow inexpensive annual revaluations of local properties. If this could be achieved in an acceptable way for property owners, it could allow property tax rates to remain more stable over time as values rose to keep pace with the property-related expenses of local governments.

I’ll close this column addressing another issue related to property taxes. Although owners of properties with high values often have high incomes, this is not always the case. A good example is a retiree who owns a high-valued property, but who now has less income to pay the property taxes.

One option is for the owner to downsize by selling the high-valued property and purchasing a smaller, lower-valued property with more affordable taxes. Of course, there may be sentimental losses suffered when this is done, especially if the owner lived in the property for a long time. Another option is special reduced property tax rates for elderly households. But this option can create conflicts over fairness with non-elderly property owners who don’t get the tax break.

Property taxes are the most important local tax in North Carolina. Understanding how and why they work can help you decide if they should be kept or changed.

Dr. Mike Walden is a William Neal Reynolds Distinguished Professor in the Department of Agricultural and Resource Economics at North Carolina State University who teaches and writes on personal finance, economic outlook and public policy.

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How to Contest Your Real Property Revaluation Notice

Did you recently receive a real property revaluation notice? Wake County, along with 10 other counties[1] in North Carolina, recently revalued all of their property for ad valorem tax purposes. In Wake County, property values increased by 20% for residential property and 33% for commercial property.

These property values will remain in effect for between 4 and 8 years, depending on your particular county’s revaluation schedule. In Wake County, a revaluation is done every 4 years. In other counties, the next revaluation may not take place for another 8 years. This is important because that means your tax valuation will be locked in until the county’s next revaluation. If you do not appeal during the revaluation year – within the prescribed timeframe – you will be stuck with the county’s new assessed value until the next revaluation.

Typically, counties send out their notices of revaluation within the first couple of weeks of January. The revaluations are sometimes incorrect, and it is critical that you understand the process of how to contest the revaluation of your property.

First, you should review the notice of revaluation to ensure it’s accurate, and that the revaluation reflects the fair market value of the particular property. The fair market value is the most probable price a property would be exchanged for in a competitive and open market. Revaluation values are determined by comparing what similar properties are selling for, replacement costs, and the potential income or highest and best use of the specific property. Frequently, land that’s undergone improvements, such as adding utility infrastructure, can see a big jump in value. But there may be other factors the county appraisers have failed to account for that could mitigate those increases.

If the county’s revaluation of your property does not reflect fair market value, you should initiate the informal appeal process by contacting County Assessor staff. The informal appeals process in counties across the state typically takes place between February and March. The informal deadline for filing informal revaluation appeals to the Wake County Assessor is May 30, 2020. The sooner you file your informal appeal, the better chance you have at a successful outcome. During this meeting, you can point out errors, provide comparables, or explain factors that the County Assessor failed to take into account in assessing your specific property. Often, the informal appeals process can provide the best opportunity for taxpayers to get a reduction in the assessed value.

Next, in the event the County Assessor’s office doesn’t revise the assessment, you must file a formal appeal to the County Board of Equalization and Review (Board of E&R). This review board is a special county board appointed to handle property tax appeals from taxpayers. This level of the appeal is more formal, with the taxpayer being allotted a specific amount of time to present his or her case and the county also having time to present its side. The Board of E&R may choose to decide the appeal immediately or choose to delay its decision and deliberate further.

Requests for a hearing before the Board of E&R must be made in writing or by appearance prior to the Board of E&R’s published date of adjournment. In Wake County, the date of adjournment is May 30, 2020. A failure to make an appeal request for hearing before the Board of E&R will result in a dismissal of the appeal request. The result of a dismissal is that the taxpayer’s property at issue will remain at the county’s revaluation assessment until the next assessment (typically 4-8 years).

In filing both informal appeals and formal appeals to local Boards of Equalization and Review, having legal representation is beneficial, because often attorneys have developed relationships with county assessors and attorneys and are also aware of statutory and administrative nuances in the law. In addition, obtaining legal representation helps the taxpayer avoid the many pitfalls in the appeals process.

Finally, if the taxpayer’s assessment is affirmed at the Board of E&R, you then may appeal to the North Carolina Property Tax Commission (Commission). The Commission is similar to a trial court. Like any trial court, it is required to follow the North Carolina Rules of Evidence. When a taxpayer appeals, the taxpayer has the burden of proof. Taxpayers may present their own cases before the commission, but are encouraged to hire an attorney. After the commission, a taxpayer may appeal a decision of the commission to the state court of appeals and state supreme court, but those bodies may choose to not hear the case as the grounds for appeal are more limited.

[1] The other North Carolina Counties with a 2020 revaluation include: Bertie; Cabarrus; Carteret; Cherokee; Dare; Halifax; Madison; Montgomery; Pamlico; and Pitt.

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'Functional obsolescence’: Mecklenburg Co. slashes assessment of Bank of America Stadium

Bank of America Stadium is in "average condition," has "functional obsolescence" and "does not easily accommodate non- football events," according to arguments made by people representing the Panthers at the Board of Equalization and Review meeting.

The Panthers challenged Mecklenburg County's assessment of Bank of America Stadium. The land the stadium sits on is owned by the city of Charlotte and provided to the Panthers at a rate of $1 per year. The assessment in question specifically dealt with the stadium and its worth.

The county and team differed on its value.

"As an individual who has attended the stadium on multiple occasions, I find the stadium to be very adequate for the purpose it is set," Tax Assessor Ken Joyner said.

The county originally set the value of the stadium at more than $572 million. After the informal review, the figure was slashed to $472 million. The tax assessor's office proposed a value of $384.3 million during the BER meeting Friday.

Part of the reason the county slashed the figure so dramatically is because the city owns many of the improvements that have been made to Bank of America Stadium over the years. For example, the city owns the escalators that were installed in the stadium during the most recent round of renovations.

To challenge the county's assessment, the Panthers hired an independent appraiser. The team argued that the stadium is actually only worth $87.5 million.

"We have the oldest stadium in the NFL, we are getting older," Panthers COO Mark Hart said. "Things like concrete and joints, those things deteriorate. That's just the natural state of where we are."

After a five-hour hearing before the BER, the board decided to slash the assessment to $215 million. That means the Panthers owe a property tax bill of $2.1 million, based on the 2019 city and county property tax rates.

But when you look at what the figure that was originally proposed, cutting more than $357 million off the value means the Panthers are saving $3.4 million in property taxes.

"As a dollar amount I think it would have to be the largest drop we have seen," Joyner said.

Hart said the Panthers considered the BER decision a “good step forward.” No decision has been made whether the team will appeal.

How’s the Mecklenburg property revaluation going? Here’s an early clue

Mecklenburg County owners received their new tax values for the first time in eight years with notices being mailed on Wednesday, January 23, 2019. The median increase for residential property was 43% with commercial property at 77%.

Remember the 2011 Mecklenburg County revaluation? We do. It was a nightmare of municipal incompetence and crisis mismanagement. By the time it was over, more than 41,000 property owners had filed appeals of their property values, and the county was forced to undergo a costly and embarrassing do-over.

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Fast forward to 2019 and a new revaluation. Property owners learned their new tax values late last month. Are things different this time around? Here’s a number that provides the biggest clue:

As of last Friday, 5,489 appeals have been received by the Mecklenburg Assessor’s Office since values went out on Jan. 23 — less than half the 5,000-a-week pace at this point in 2011. Even better: After hitting an early peak, the number of total appeals per day has begun to decline. Certainly, that pace could change as a May 20 appeals deadline approaches, but all signs indicate that the county is going to get far fewer than the 2011 number and something more in line with the 18,000 who appealed in 2003. That’s good news.

“From my standpoint, that’s how it feels right now,” Mecklenburg assessor Ken Joyner told the editorial board last Friday. Joyner is reluctant to drop the confetti at this point — it’s early, after all, and his office is receiving some legitimate complaints on values. But we regularly explore on these pages how things don’t go the way they’re supposed to in government. Let’s spend a few moments on when they do.

What’s different with Reval 2019? Several things, Joyner said, but the biggest is also the most basic: Assessors are looking at more properties with their own eyes. Sounds simple, but before Joyner took over he assessor’s office in 2013, many Mecklenburg properties hadn’t been physically examined in 10-15 years. The industry standard is six years.

Now, officials have completed a physical walkaround of 82 percent of Mecklenburg’s 306,000 taxable parcels. That includes all the properties that had major or minor valuation issues eight years ago. “We’ve gone back to Assessment 101,” Joyner says. “We’re trying to get the system back to a standard of what our peers are doing across the country.”

Another big difference from 2011: Joyner, with encouragement from County Manager Dena Diorio, has dramatically changed how information is communicated to the public. He has overhauled the county’s reval website and simplified the reports that are mailed to property owners. Joyner also has made staffers available to people coming in off the street with questions about their valuation, and his office has held or scheduled information sessions for 148 neighborhood associations, civic clubs and other organizations.

Not all is going smoothly, certainly. Social media is dotted with valuation complaints, and there are reports of whole neighborhoods being questionably valued, including one in Pineville where houses surrounding a pond were suddenly deemed “waterfront property.” Mecklenburg commissioners also appear to be headed toward raising property taxes above a “revenue neutral” rate to support an ambitious agenda that includes universal pre-K and more money for schools.

Joyner’s office isn’t a part of those decisions, however. “I have no skin in the game,” he said of the relationship between revaluation and taxes. “All I want is for your value to be correct.”

So far, for the most part, that appears to be happening. Good job.

OHIO

Auditor critics ask state to order new property revaluation

A retired employee from the Lucas County Auditor’s office believes the latest countywide property revaluation was done so poorly that he has asked Ohio’s tax commissioner to order a do-over.

Toledoan Jerry German, who served as the chief assessor and director of real estate during his nearly 30-year career with the county auditor’s office, submitted a complaint Sunday to Tax Commissioner Jeff McClain alleging “misfeasance and malfeasance” by Lucas County Auditor Anita Lopez during her six-year revaluation completed in December.

He and his former colleague Brian Jones have been independently reviewing Ms. Lopez’s work, and they contend there are widespread inequities. Mr. German and Mr. Jones identified hundreds of homes that shared the same square footage, year built, condition, and neighborhood but differed in value after the reappraisal.

“It’s so totally inequitable,” he said.

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He also contends Ms. Lopez did not follow the state’s requirement to have certified appraisers do a final in-person review of all properties in Lucas County before values are set, an accusation Ms. Lopez rejects.

“I am asking the tax commissioner to re-look at it, and, if he finds that there is fraud, to order a new reappraisal,” Mr. German said. “And don’t let her office try again on this. I’m saying order her to have it done by an outside firm.”

Ms. Lopez continues to defend her values as fair and said she believes Mr. German and Mr. Jones are attacking her credibility out of personal bitterness. Both left the auditor’s office after Ms. Lopez, a Democrat, defeated the Republican incumbent Larry Kaczala in the 2006 election.

Ms. Lopez said she has not seen a list of properties that Mr. German believes are improperly valued, but she would be willing to look through it and defend her valuations or fix legitimate inequities.

“Do not try to do this at the taxpayers’ expense,” she said. “If you have a problem, run against me in 2022.”

Lucas County has historically conducted its six-year revaluation in-house rather than hire a mass appraisal firm like most other Ohio municipalities do, and 2018 was no different. She said it would cost about $4.5 million in taxpayer money to completely redo the work.

“If we’ve made an error, we’ll fix it,” Ms. Lopez said. “But I am not going to entertain the thought of spending taxpayer dollars in Lucas County on a personal vendetta by Jerry German and Brian Jones.”

Shelley Wilson, a tax program executive in the state’s department of taxation, said her department doesn’t have the authority to order any county to redo its reappraisal.

They do review and sign off on an auditor’s aggregate values before they can take effect, and officials did eventually approve Ms. Lopez’s aggregate property value increases for Lucas County’s 22 municipalities after unprecedented back-and-forth in December.

Ms. Wilson had to order Ms. Lopez to raise her aggregate values to match what the market called for, something she can’t remember needing to do in her nearly 25-year-career. In the end, the aggregate values met the state’s standards.

“They complied, and we approved those values,” Ms. Wilson said. “I think that was our position on the results of the reappraisal.”

She suggested Mr. German take his complaints to the state auditor’s office if he believes Ms. Lopez has acted improperly while in office.

End extravagant tax breaks for the wealthy

Cincinnati officials are once again rushing through millions of dollars in tax breaks for businesses as emergency ordinances.

Cincinnati City Hall has generated a 20-year flood of more than $3 billion in tax abatements since 1999. The city and The Cincinnati Board of Education now have an opportunity to assure that all Cincinnati property owners pay their fair share to support the Cincinnati Public Schools (CPS) and other key local services.

In 1999, the city and the school board entered into a 20-year tax abatement agreement soon to expire. The big issue facing the city and the school board in 1999 related to lost property tax revenue arising from the construction of two new "tax exempt" stadiums on the riverfront. The city agreed to pay $5 million annually to CPS to compensate for lost tax revenue. In return, CPS agreed that the city could grant tax abatements on as much as 100 percent of improved property value for up to 30-year terms.

Abated commercial developers would enter into PILOT (payments in lieu of taxes) agreements to pay the equivalent of real estate taxes on just 25 percent of improved abated value. Other recipients of property taxes, such as indigent care, child, family and children services, the zoo and library, got nothing.

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It’s a challenge to pin down the number of abatements granted by the city since 1999, the Cincinnati Federation of Teachers estimates that the city has granted at least 300 abatements under the Community Reinvestment Act, and about 1,400 additional residential abatements. There have been dozens of additional tax increment financing and Port Authority abatements.

The Hamilton County Auditor reports more than $3.4 billion in abated commercial and residential property value in the city. That is about 20 percent of all commercial and residential property value in the city. In other words, real estate taxes are not paid on about $1 of every $5 in commercial and residential property value in Cincinnati.

CPS relies on local real estate taxes to provide a quality education to more than 36,000 students. Important local institutions also rely almost exclusively on property taxes, including the library, the zoo, children’s, family and senior services, indigent health care, county parks, etc.

If tax abated property owners paid the same real estate tax rates that most Cincinnati homeowners pay, they would pay about $100 million more in taxes. About $66 million of that would go to CPS. That’s money that CPS could use to provide more crossing guards or school security, repair older buildings, or reduce class sizes.

Tax abatements place an unfair burden on the shrinking percentage of taxpayers who don’t get the sort of "discount" granted to so many wealthy developers and homeowners. For example, why should someone who owns a new home in Hyde Park valued at about $800,000 pay about the same real estate tax as the owner of an older $240,000 home in Westwood or Pleasant Ridge?

Owners of brand new $1 million-plus McMansions and condos are getting comparable tax discounts, while many of our members struggle to pay ever-increasing taxes. That’s exactly the sort of inequity that the current tax abatement system delivers.

Tax abatements were originally presented as a way to encourage development in blighted neighborhoods. So why do most residential abatements go to new homes in Hyde Park, Mt. Lookout, Mt. Adams or Over-the-Rhine?

It’s time to end the era of extravagant tax breaks for the wealthy and well connected. Any new abatement agreement between the city and CPS should include the following elements:

 Increase the annual payment from the city to CPS to at least $15 million to fairly compensate CPS for lost tax revenue due to the extensive abatements granted since the 1999 agreement.  Any future abatements (commercial, residential, TIF or Port Authority) should be limited to 50 percent of improved value (not the 100 percent now allowed) and should last for no more than 10 years (as opposed to 30 years now allowed).  Future abatements should be granted only in lower income neighborhoods that truly need development incentives.  Advance public disclosure and public hearings allowing input from the school board and impacted community councils before any tax abatements are approved.  Establish a Tax Abatement Oversight Committee with the power to review and make recommendations on future tax abatements and abatement policies, with representation from the Board and other institutions impacted by tax abatements.  The school board should be empowered to specifically approve or reject any individual development calling for a tax abatement in excess of $1 million.

The city and CPS should end the era of tax abatement handouts. All city property owners should pay their fair share to support our schools and public local services.

Critics fear systemic mistakes in Lucas County Auditor's home values

There are two homes in Toledo’s 4200 block of Hunters Trail that look nearly identical, both in sight and on paper.

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Both were built in 1971 in a raised ranch style with the same square footage. Both feature four bedrooms, one full bathroom, and one half bathroom.

But there’s one thing very different about the houses: their property values.

One is valued at $80,800, while three houses down the other is valued at $48,800. One owner pays just over $2,000 in annual property taxes; the other pays about $1,300.

Hunters Trail isn’t the only street in Lucas County where nearly identical homes differ widely in value. There are hundreds of examples in Toledo, with more in Holland, Maumee, Oregon, Springfield Township, Sylvania, Sylvania Township, Waterville, and Whitehouse.

County Auditor Anita Lopez said there are several reasons values may differ — home remodels, foreclosure sales, citizen feedback, or human error — but her critics fear there is something systematically wrong in the way she assigns values to each property.

Valuations in Toledo can vary greatly even within the same neighborhood. All of the highlighted homes are the same size and were built in 1975.

Looking at the data

State law requires county auditors to reappraise all property every six years to determine its fair market value on which to base property taxes.

It’s a cumbersome process that requires auditors to essentially scratch all property values they had on the books and determine new values based on the physical characteristics of a property, its location, and recent sales.

Ms. Lopez completed her sexennial revaluation in December, but two former employees of the Lucas County auditor’s office are so concerned about possible inequities in home values and property taxes that they’ve launched their own investigation into how she revalued roughly 175,000 residential properties in 2018.

Jerry German, a Republican, retired after nearly 30 years as the director of real estate when Ms. Lopez, a Democrat, defeated Republican incumbent Larry Kaczala in the 2006 election. Brian Jones also left the office after Ms. Lopez took over. He now works for the Wood County auditor.

Both have spent their careers doing mass appraisals, and for the past couple months they’ve been combing through Ms. Lopez’s reappraisal data for inequities.

What they found are hundreds of examples of houses that share key characteristics but which have property values differing by the tens of thousands of dollars.

“The people who have identical houses should be paying identical taxes and have the identical value,” Mr. German said. “It’s just not fair.”

They looked for assessor blocks — portions of neighborhoods with similar characteristics — that had two or more properties identical in square footage, year built, construction quality, condition, and number of stories.

They identified about 7,400 homes that fit those parameters and were in assessor blocks where the highest and lowest valued houses differed by at least $5,000. More than 5,300 were part of assessor blocks that recorded differences of at least $10,000 between the highest valued property and the lowest.

More than 3,000 were in groups with differences of $20,000 or more; 590 saw a difference of $50,000 or more in their assessor block; and six were in groups with differences of more than $100,000.

“Her tagline is ‘fair and equitable.’ She says that all the time,” Mr. Jones said, referring to Ms. Lopez. “It’s not even close. This is off the chart to be bouncing around like that with the values.”

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Mr. German and Mr. Jones contend that if Ms. Lopez did her revaluation correctly, residential properties with the same basic attributes would share the same value, and their owners would pay the same amount in taxes.

“The only way to fix this, truly fix it, is to completely scrap everything that she’s done and completely redo it,” Mr. Jones said.

‘Nature of the game’

Lucas County’s 2018 revaluation wasn’t a smooth process, but Ms. Lopez stands by her work.

It was marked by a dispute with state taxation department officials, who told her she wasn’t raising overall property values enough for what the market called for.

She countered that her values were more equitable to taxpayers, but the state in an unprecedented move ordered her to increase most of the aggregate values of Lucas County’s 22 municipalities. She eventually complied in December after it became clear the county would otherwise lose critical state funding.

Despite the controversy, Ms. Lopez said she is “absolutely confident” in her revaluations. She said state officials did not order a new revaluation, only an increase to each municipality’s aggregate values.

“If the state had a problem with our revaluation, they would have said that,” she said. “The state said the values were too low. They did not question the process.”

Ms. Lopez said Mr. German and Mr. Jones have harbored “bitterness and anger” toward her since she won the 2006 election, and she believes they are attempting to undermine her credibility.

“When are they ever going to accept the fact that I’m not going to operate the way they did?” she said. “They went for the highest values. I promised the citizens that I won’t overinflate values.”

Every county’s reappraisal must be approved by the state’s taxation department before the new values are set in place and tax bills can be sent out. Although it was a rocky process, state officials said they did not see anything seriously amiss with Lucas County’s sexennial revaluation.

Mass appraisers are required to assess a home in person, but they aren’t required to look inside a property like they would if they were appraising for a home loan. Most Ohio counties contract with professional firms to conduct their sexennial revaluations, but Lucas County is one of the few that handles the work in-house.

Shelley Wilson, the state’s tax program executive in the tax equalization division, said her department does not have statutory authority over individual parcel values, so they don’t review them. But they do compare an auditor’s aggregate values to the real estate market to make sure they’re in line before they give a revaluation their stamp of approval.

“I think that if there were anything systematically wrong with a reappraisal, we would be able to tell something in our review,” Ms. Wilson said. “But to discover individual instances where two houses quote-unquote should have similar values, that’s not something we would find.”

Mr. German contends the issue isn’t the aggregate values, it’s the disparity between individual properties. And for that he blames Ms. Lopez, not the state.

“The big problem is taxpayer to taxpayer. There’s no equity,” he said.

Ms. Wilson said setting property values isn’t an exact science. Mr. Jones may believe two properties should be valued the same, but an appraiser may think differently.

She said one could likely find examples of homes in every Ohio county that have similar characteristics but were assigned different values, but it’s not necessarily an indication of a broken system.

“Even in the very, very best mass reappraisal,” she said. “It’s just the nature of the game.”

‘More feedback’ 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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Ms. Lopez acknowledged there are homes that on paper look like they should share the same value, but she said there are a number of reasons why in reality they do not.

She puts a lot of stock in citizen feedback. For example, a homeowner may argue that their value should be lower than a neighbor’s value if they haven’t done any home renovations but their neighbor has.

Because mass appraisers don’t set foot inside the homes they’re assessing, it’s up to citizens to provide those types of details, Ms. Lopez said.

“If you think someone is not in line with everyone in your neighborhood, contact us,” she said. “The more feedback we get from citizens and the business community, the better. We want people to feel confident in their values.”

Ms. Lopez said a recent foreclosure is another reason why a home may appear too low in value. On paper, it may have the same characteristics as its neighbor, but it wouldn’t be able to sell for the same price.

There’s also the possibility the auditor made a mistake. On Feb. 6 a homeowner reported a property in Toledo’s 7000 block of Altonbrough Drive likely was valued improperly. The home has historically been worth more than $200,000, yet the revaluation put it at $145,000.

Ms. Lopez said her employee intended to type in a value of $245,000 but entered it incorrectly. Because of citizen feedback, she said, they were able to correct the mistake.

“I am not claiming we’re perfect,” she said. “When something is brought to my attention, we will fix it.”

Feud continues

Because the state Department of Taxation does not investigate disputes involving individual properties, the only option for Mr. German and Mr. Jones is to file complaints with the Lucas County Board of Revisions regarding each property they believe is improperly valued.

The board is comprised of representatives from the county auditor, county commission, and county treasurer who reconsider values based on evidence such as building conditions or recent sales.

Frances Lesser, executive director of the County Auditors’ Association of Ohio, said citizens often become invested in the sexennial revaluation process because it impacts personal property and personal finances.

“There are heightened emotions during the valuation process. People care about it,” she said. “The fact that people in Lucas County are interested is a positive. It’s an important thing.”

Mr. German and Mr. Jones also are waiting for Ms. Lopez to respond to several outstanding public records requests, including a list of dates to confirm when each Lucas County property was reviewed in person during the 2018 revaluation process. They have also requested emails between Ms. Lopez and her employees, as well as copies of Board of Revision complaints and copies of informal property value challenges.

Mr. German on Feb. 12 filed a complaint with the Ohio Court of Claims stating the auditor has failed to provide more than half the materials he asked for.

Ms. Lopez said that she has not denied any of their requests and is complying with public records law, just not as quickly as the former Lucas County employees would like. She said inundating her office with public information requests is part of the more than decade-long “bitter, political feud” between them.

“We’re not going to be intimidated by a political opponent,” Ms. Lopez said.

Mr. German maintains the investigation is about getting the values right, not about politics.

“When you see the inequity that’s been introduced into the system, it makes me kind of sick,” he said. “We tried very hard. If we weren’t completely up to value, at least we were fair from house to house to house.” 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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PENNSYLVANIA Allegheny County Property Tax Appeal Season Resumes

In Allegheny County, only two things are certain in life: death and property tax assessment appeals. Every year, County property owners have the opportunity to file an assessment appeal, and as always, an appeal may provide an opportunity for a reduction in your taxes.

Foremost, owners should determine if their property has actually decreased in value over the past several years. Buildings may need renovation. Your home or business property may be in areas that are not “hot spots” relative to the rest of the County. For commercial parcels, increased vacancies or rent reductions caused by market conditions can lessen a parcel’s value.

Also keep in mind that in Allegheny County, as in every other county in Pennsylvania, assessments are subject to the “common level ratio.” Very roughly speaking, this ratio is like a deflation factor so that owners do not face assessment increases merely because the cost of living has risen.

For 2020 the ratio in Allegheny County is 86.2%. That means that if you have a property that has a fair market value of $100,000, for assessment purposes, the property should be taxed at $86,200. As a result, even if a property has remained the same in value or has undergone marginal value increases over the past few years, taxpayers still may be eligible to achieve an assessment reduction.

Assessment reductions are usually proven through recent sales of comparable properties, or if the parcel produces income, through the property’s income and expense statements. Owners should use common business sense in considering whether to file an appeal. If properties in your area are selling for $1.5 million and your assessment is $1 million, careful consideration should be made before filing an assessment appeal.

The officials hearing your tax appeal at the Board of Property Assessment (the first stage of the assessment process in Allegheny County), or at the Board of Viewers (the second stage) are very knowledgeable about local real estate. But if sound reasons exist, opportunities should be pursued and retention of legal counsel knowledgeable about Allegheny County tax appeal law and practice should be considered. The appeal deadline is March 31, 2020.

TENNESSEE Tax Assessments Explained

The Davidson County Tax Assessor’s office re-appraises Nashville properties every four years. We asked Nashville Property Assessor Vivian Wilhoite to explain why.

“Since the reappraisal in 2013, to date market values have changed but not uniformly across the county. Reappraisal restores equity in values. Without it, property owners in a “cold” or depressed market area pay more than their fair share of the tax burden,” Wilhoite said.

State law prescribes how this is done. Wilhoite said an assessment is related to a property’s appraisal, an estimate of its sales price, and both impact your tax bill, due February 29, 2020.

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“We must have both. Here’s why: an appraisal is the value of the property. The assessment is a percentage of the value. By State Constitution, Tennessee is a fractional assessment state. So, for residential, 25% of the value is the assessed value; for commercial, 40% of the value is the assessed value and for personal property, 30% of the value is the assessed value,” she said.

A property’s value will rise in a hot real estate market. The average home price in Nashville has risen steadily for several years. Land values have increased, too. Elderly homeowners are selling to developers because the small lots their homes sit on are sometimes worth more than the house. They will usually be torn down and two tall and skinnies will replace them.

A property’s value can rise when the homeowner makes some improvement like an addition or dormer. And values can also decrease if the foundation cracks or some other issue reduces its worth.

Tax Relief Programs

The State of Tennessee has three programs that help seniors, disabled persons, and disabled veterans who are tax-burdened. Wilhoite said the property owner must live in the home. These programs are administered by the Trustee’s Office.

Tax Freeze—a program for those 65 and older with incomes below $42,620. It locks in the amount of your current tax bill.

Tax Relief—a program for those 65 and older with incomes below $29,860. Property owners will get a waiver to pay lower taxes.

Tax Deferral–a program that works like a reverse mortgage to help residential property owners pay their taxes. Tax Deferral defers payment of taxes until the property owner no longer qualifies for the program, the property is sold, or the owner dies.

First-time applicants for any of these programs must sign-up in person. They need to bring documents to prove they meet the income and age restrictions, including 2018 tax returns or 2018 bank statements, a Drivers license, and Medicare card. Proof of residence is also needed such as a Voters’ Registration card or utility bill.

Homeowners can call 615-862-6330 to make sure they bring the right paperwork. The Metro Trustee’s office is open Monday through Friday from 8 am to 4 pm. It’s located at 700 2nd Ave. South on the second floor. The deadline to sign up for these programs is April 5, 2020.

Tax Appeals

Property owners can appeal their assessments to three different agencies. The first is Wilhoite’s office. “It does not cost any money to request my office to conduct an informal review. As a matter of fact, a property owner can request an informal review right now. The deadline is April 24, 2020 by 4 p.m. We will provide the results of our informal review by mid-May 2020,” Wilhoite said.

If the property owner is not satisfied with the decision by Wilhoite’s office, they can appeal to the Metropolitan Board of Equalization (MBOE). MBOE is composed of five members appointed by the Mayor and confirmed by majority vote from the Metropolitan Council. If the property owner doesn’t like MBOE’s decision, they can appeal to the State Board of Equalization (SBOE). At each stage, assessed values and appraised values can be adjusted. An administrative law judge conducts SBOE hearings. The Assessment Appeals Commission is a 5-member panel that acts like an appeals court. They can affirm or remand a case back to the judge.

In an assessment year, the SBOE gets swamped with appeals and hundreds of 2017 appeals are still being adjudicated. Wilhoite said most of the review requests to her office are from residential property owners. She said more commercial appeals were filed with MBOE. By state law, property owners can request an informal review or a formal appeal each year.

Many commercial property owners appeal directly to the SBOE. The Tribune looked at 1500 of the highest valued properties in Davidson County. Only a few were single-family homes. Most were commercial properties. We found an appeals rate of 10%. The first 25 owners who appealed their assessments from the list of the top 1500 properties saved a total of $1,553,783. Eight properties have zero savings because those appeals are still pending. (see chart). 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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Since 2016, Wilhoite’s office has conducted more than 150 community outreach and presentations to inform homeowners about what they do. “We appreciate the opportunity to assist property owners and to hear from them regarding any concerns that they may have about their property,” Wilhoite said.

Electrolux underpaid taxes because of land assessment undervalued by $100 million

Property values for Electrolux's land and factory in southwest Shelby County were underestimated by about $100 million, County Assessor Melvin Burgess told county commissioners Wednesday morning.

The property value, which determined how much the company owed in taxes, was estimated around $40 million but that number failed to account for the modern factory and the robotics, machinery and raw materials inside it, Burgess said.

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That means while Electrolux's tax burden was already lowered through a payment-in-lieu-of-taxes (PILOT) incentive that saved the company about 90 percent of its city taxes and 75 percent of its county taxes, it paid even less than it owed because of the underestimated property value.

Including the PILOT meant to reduce its taxes for 15 years, Electrolux received more than $188 million in incentives to open the Memphis factory and create 1,240 jobs paying an average of $14.65 per hour.

The company announced last week plans to close the Memphis plant by the end of 2020. All 530 employees have until then to find new jobs. The closure announcement sparked the further scrutiny that revealed the property was undervalued.

Over the next 10 days, the assessor's office will re-evaluate the exact worth of the building and the land to determine how much Electrolux will need to pay in taxes until it leaves Memphis.

Understaffing led to underestimated property value

In 2011, before the factory was built, an application for incentives listed the value of the land at $8 million.

The property was set to be reassessed under previous administrations in 2013 and 2017. The assessment was first rescheduled and then, when it was conducted later, the focus was placed on the land and not the building due to staffing issues, said Yvonne Parron, senior director of communications for the Shelby County Assessor of Property.

"An audit revealed that Electrolux's unique characteristics were not accounted for," Parron said. "That's why those numbers were significantly undervalued, and it was technically an oversight due to understaffing. Those 23 vacancies did contribute obviously to that oversight."

The assessor's office can go back and reassess the value of the Electrolux property for up to two years. It's not yet clear if the company will be required to pay back taxes on the new, accurate value, said Javier Bailey, chief administrator for the assessor's office. The staff will work with the county attorney to determine if that is legal.

"What this whole Electrolux endeavor has shown us is that we're not sure about the values that have been placed on some of the larger PILOTs," Bailey said.

He added that in PILOT projects that started out as empty land that a company planned to build up, previous assessors didn't not visit the land again to perform an in-person evaluation. Instead, they would either estimate the new value based on the size of the building and comparable projects or another nominal value estimation. That's what happened in the case of Electrolux, he said.

"Electrolux was way off base," Bailey added.

Other PILOT projects may also be undervalued

Based on the Electrolux example, the assessor's office believes other projects that received PILOT incentives may also have been undervalued.

"If there are any issues, we plan to include those in our reappraisal in 2021 because right now, we just don't have the manpower," Burgess said.

While the 23 positions were open, the county saved nearly $700,000 in salaries. That money will go to create a training program to fill those empty positions to ensure there is enough staff to accurately value property by 2021.

Burgess said it's too soon to estimate how many of the more than 250 PILOT projects in the county may have been undervalued.

Despite the issues, a PILOT study conducted by the assessor's office found that PILOTs are not overused and are a valuable tool for attracting businesses to Shelby County, contributing about $1.1 billion in gross value to the economy and creating countless jobs.

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TEXAS Here's why you should be concerned about property valuation lawsuits by big business

Rising property taxes are a hot topic across Texas. The state Legislature appears to remain the battleground for much of this debate. Many state officials blame cities and counties for rising taxes. Others blame the state and its continuing reduction in the support of public education.

This debate is poised to continue when the Legislature meets again in January 2021.

A number of important issues that impact property taxes are not receiving much attention or public discussion. One of those is the subtle but continuing shift of the property tax burden from big business to homeowners and small business. This has been happening slowly and methodically in our state for more than two decades.

Big business is very sophisticated in reducing operating costs. Their efforts to reduce their property tax burden are just as focused. Various examples include local property tax abatements, tax exemptions on various types of property, public infrastructure investment deals, and lawsuits challenging the property valuations.

Tax abatements and incentives have gone from being the purview of only big industry, to quickly becoming a relatively common development request in many communities. From proposed new retail and commercial developments to new housing developments, these and other project developers come to local governments requesting government incentives, abatements or publicly funded infrastructure improvements.

These requests are very often positioned to create a “bidding war” between communities or regions. Often, local governments find themselves in competition with other communities or regions to provide the most lucrative tax incentives to the developer or industry.

This is an unsustainable long-term trend. The ultimate cost that local (or state) governments pay is the continuing shift of the tax burden to others.

Another troubling and recent trend is for big business to take advantage of numerous state and local tax incentives and abatements, and then later mount expensive legal challenges to their property tax appraisals. While every taxpayer deserves the right to challenge their property valuation, big business has recently become quite skilled in the art of playing hardball with our county appraisal districts.

County appraisal districts have limited budgets and resources. Big business knows this. Since each appraisal district’s budget is a matter of public record, any business can quickly determine if an appraisal district has the financial resources to fight an expensive lawsuit. A number of appraisal districts in our state have made unreasonably low settlements with industry when they simply could not afford to fight the pending legal challenge to the property valuation.

There are literally hundreds of millions of future tax dollars at stake in these property valuation battles. This growing trend is creating “fertile fields” for law firms that specialize in this type of lawsuit. Ultimately, and almost inevitably, the losers in these battles are the existing homeowners and local small business owners who must pick up the tab for a larger business’ unfairly low valuation.

The San Patricio County Appraisal District has been preparing for these potential challenges for several years. Through the cooperation with our various taxing entities within the county, we have funded a significant legal defense reserve fund. Since outside experts are hired by the appraisal district to perform the tax valuation of all major industrial properties, the valuations of big industrial properties are rarely off the mark. The San Patricio County Appraisal District will to continue to vigorously defend any attempt by industry to unfairly shift the property tax burden to homeowners and other local business owners.

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Bill T. Wilson II, an architect, is vice chairman of the San Patricio County Appraisal District, a Portland city councilman and past chairman of the San Patricio County Economic Development Corporation. He submitted this article unsolicited.

Property taxes can be lowered by keeping bees

Property taxes on small acreages can now be lowered by keeping bees on the property.

Texas law allows bees and beehives to qualify for reducing property taxes on plots ranging from five to 20 acres similar to livestock or raising hay.

Dennis Herbert drafted the original legislation for the current bee law that allows small acreage landowners to receive their agricultural valuation if they wish to raise bees on their property. He shepherded this bill through the legislature in 2011 and it became law on Jan. 1, 2012. He has been a beekeeper in Bell County for 15 years.

Herbert will be at the 12th Annual Beginning Beekeeping School to be held on March 21 in Brenham. He will host several sessions that will discuss this law and how people can use beekeeping to qualify for the property tax savings. He will share the history of the law and answer questions from landowners.

Other aspects of beekeeping that will also be available at the school include how to start keeping bees, how to harvest honey and how to raise queens. There will also be a session that allows participants to put on a bee suit and gather around a beehive while it is examined by a beekeeper.

The morning sessions will include lessons for beginning, intermediate and advanced beekeepers. The afternoon sessions will have over 65 time slots and more than 45 different topics from which to choose. For more information and to register, visit www.tinyurl.com/2020BeeSchool or call 979-277-0411.

Interview with founder of the Flow Hive

Cedar Anderson, co-inventor of the Flow Hive, will join the Central Texas Beekeeping School by Skype from Australia on March 21. His company, Flow, has also donated a Flow Hive 2 to be given away during the school. This is an opportunity to speak directly to Anderson and ask him questions about the benefits of the Flow Hive.

The Flow Hive is a way to harvest honey without opening the hive. It was invented in February of 2015 and funded by the most successful campaign ever launched on Indiegogo. In a matter of months, over 20,000 kits had been ordered. As of the end of 2019, over 65,000 Flow Hives were in use in more than 130 countries.

The concept for the Flow Hive originated when Anderson felt bad about crushing bees during honey harvest, was sick of being stung, and having to spend a whole week harvesting his honey. He and his father Stuart came up with an idea that worked and have dedicated their time to pursuing this invention.

Nanette Davis, Flow experienced master beekeeper from Houston, will be on hand to demonstrate how a Flow Hive works. The Skype session will take place at 4 p.m. during the Flow Hive demonstration.

Other subjects taught at the school include Langstroth and Top Bar Hives, Managing Your Beehives, Raising Queen Bees and Beekeeping Safety. There will be sessions for beginning, intermediate and advanced beekeepers.

The school starts at 8 a.m. and will end at 5:30 p.m. The cost of the school includes a catered meal and a school book with information about beekeeping. For more information and to register, go to www.tinyurl.com/2020BeeSchool.

The Central Texas Beekeepers meets the fourth Thursday of each month at 6:30 p.m. at the Washington County Fairgrounds. Anyone interested in beekeeping is welcome at the meetings.

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Judge undercuts chief appraiser’s authority

Court order means chief appraiser must seek board approval for each individual case in which she wants to challenge value decisions made by Travis Appraisal Review Board

Austin property tax attorney Lorri Michel of Michel Gray & Rogers on February 11, 2020, won a significant decision that overturns a three-year-old policy of the Travis Central Appraisal District (TCAD). (Cause No. D-1-GN-19-006394).

Her plea filed January 24, 2020, in TCAD vs. Texas Disposal Systems Landfill Inc. stated: “Failure to obtain written approval of the board of directors to appeal the Appraisal Review Board order determining TDSL’s 2019 protest on the property at issue deprives the trial court of jurisdiction.”

After considering TCAD’s filing and TDSL’s plea to the jurisdiction, on February 11, 2020, District Judge Catherine Mauzy signed a court order and final judgment that dismissed TCAD’s lawsuit against TDSL.

Michel’s plea pointed out that Tax Code Section 42.02(a) states, “On written approval of the board of directors of the appraisal district, the chief appraiser is entitled to appeal an order of the appraisal review board….”

The chief appraiser did not have written approval for that specific appeal, or others like it. Instead, she relied upon a board resolution issued nearly three years ago.

On May 30, 2017, the TCAD board of directors voted unanimously to pass a resolution that authorized the agency’s chief appraiser—on her own initiative—to appeal value decisions made by the Travis Appraisal Review Board (ARB).

The TCAD board chair and secretary-treasurer who signed that resolution are no longer on the board.

Chief Appraiser Marya Crigler, who’s been employed by TCAD for 30 years and was named chief appraiser in November 2011, has used the 2017 resolution as authority to file at least six lawsuits to overturn ARB decisions, according to research.

While that’s a relatively small number of lawsuits, the expense involved, and TCAD’s record of losing expensive litigation, raises questions about the TCAD board’s decision to cede blanket authority to the chief appraiser.

Court decision to bind future appeals

As a result of Mauzy’s decision, the chief appraiser will have to seek specific board authorization each time she wants to appeal an ARB value decision.

That will require putting a request on a board agenda, discussing it in a closed-door executive session, and having the board vote in an open meeting. All that would have to be done before the chief appraiser could issue a legal Notice of Appeal to the ARB and the property owner, then file suit in district court.

“I think Judge Mauzy got it exactly right. I think it [Judge Mauzy’s order] is legal precedence that TCAD must obtain written approval from its board of directors in order to sue a taxpayer,” Michel said. “The chief appraiser cannot rely on a general board resolution issued years before the taxpayer’s protest is even filed as authorization to sue a taxpayer.”

“The chief appraiser can’t appeal whatever she wants to appeal,” Michel said. “The statute was clearly intended for the decision to appeal to be specifically made by TCAD board of directors. It’s an important check and balance to the powers or abuse of power of the chief appraiser.”

Austin attorney Bill Aleshire, who represents property tax consulting firms Texas Protax and Five Stone Tax Advisers, as well as The Austin Bulldog, said, “As this case shows, the Tax Code does not allow an appraisal governing board to delegate its job to the chief appraiser in deciding to file suit against taxpayers who won their ARB protest hearing.

“This is just another example of the TCAD Board shirking its job of oversight of the chief appraiser. The law expects the Board to review each request from the chief appraiser to file suit against a taxpayer.”

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Michel said, “TCAD is appealing Mauzy’s order to the Third Court of Appeals in Austin, asking the court to reverse the order. I am confident the Third Court will affirm her ruling.”

TCAD was represented by Austin attorney Mary Sanchez of Everett & Sanchez, and Mark Ryan Trachtenberg. Neither Sanchez or her partner, Karen Evertson, have responded to requests for comment.

In response to this story, TCAD Communications Officer Cynthia Martinez on February 18, 2020, provided a statement to be attributed to Chief Appraiser Crigler: “We will continue to pursue the legal fight to ensure that businesses in Travis County pay their fair share of property taxes.”

Landfill value a longstanding dispute

In this particular case, TCAD sought to overturn the ARB’s decision about the value of the Texas Disposal Systems Landfill (TDSL) located on 345 acres in far south Travis County, just west of Creedmore.

TCAD’s challenge to the ARB’s decision about the landfill’s value seems all the more questionable because, as reported by The Austin Bulldog July 16, 2019, TDSL won a lawsuit against TCAD that cost nearly a million dollars—and lopped off about 90 percent of the market value TCAD had assigned to the property.

The refund to TDSL for taxes it had previously paid on the landfill in 2011 and 2013, with interest, cost about $800,000. That money had to be refunded—not by TCAD but by Del Valle ISD, Travis County, Travis Central Health, and Travis County Emergency Service Districts 11 and 15.

TDSL also won attorney’s fees of $105,000 in that case. TCAD’s own legal expenses were almost $88,000.

TDSL won final judgment in its lawsuit June 6, 2019, including a determination of the landfill’s value to be $1.4 million. But TCAD didn’t skip a beat in issuing a 2019 Notice of Value for $21.7 million—more than 15 times that value.

Using that court decision as evidence, Michel represented TDSL in its formal protest over the landfill’s 2019 valuation. After a hearing the ARB order issued August 26, 2019, determined the 2019 taxable value of the landfill was $2.8 million.

Despite getting smacked with a $1 million loss to TDSL over the landfill’s value just a few months earlier, on September 20, 2019, Crigler filed suit (Cause No. D-1-GN-19-006394). She did so without seeking permission from the current board of directors.

TCAD’s pleadings in that case state, “The market value of defendant’s property is greater than the [$2.8 million] determination of the ARB and the value set by the ARB results in unequal appraisal of subject property.”

Other TCAD suits could be tossed as well

Every still-active lawsuit the chief appraiser filed that relied on the 2017 board resolution is vulnerable to dismissal.

Research indicates four other lawsuits filed by the chief appraiser to appeal an ARB value decision are currently pending:

The Domain Mall—D-1-GN-17-004710 and D-1-GN-18-006672, TCAD v Domain Mall. Attorney Mark Hutcheson, a managing partner of Austin-based Popp Hutcheson, said, “We have also filed suit and we’re trying to work them out. We’re close to getting the cases resolved for the taxpayers at issue.”

Hill Country Galleria—D-1-GN-19-006776 TCAD v Hill Country Galleria. The defendant is represented by Dallas attorney Amy Sallusti of Geary Porter & Donovan PC. She did not return telephone messages seeking comment.

Airport Fast Park—D-1-GN-19-008152 TCAD v Airport Fast Park Austin LP. Dallas attorney Tracy Turner of Brusniak Turner Fine, said she would need to get her client’s permission before commenting.

TCAD sued Catherine Apartments in Cause No. D-1-GN-19-005676. Attorney Michel also represented Catherine Apartments. She said the parties reached an agreed judgment in that case January 8, 2020.

TDSL challenging other ARB values 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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Two other TDSL lawsuits are still pending against TCAD:

Cause No. D-1-GN-04-004240 for tax years 2014, 2015, 2016, and 2019. This case is set for trial April 6, 2020, Michel said.

Cause No. D-1-GN-17-003382 for tax years 2017 and 2018. No trial date has been set for this case.

The Pros And Cons Of Property Tax Reform In Texas

Local officials are split between those who favor Senate Bill 2 for giving more power to voters, and those who fear it will starve cities and counties of funds to pay for services.

Texas property values are skyrocketing. As a result, the state’s property tax burden is now roughly tied with Illinois’s as the second-highest in the country, behind New Jersey’s. Governor Greg Abbott named property tax relief as one of his emergency items for the 2019 legislature. Since then, a reform measure has been sailing through the Senate.

Houston Republican Sen. Paul Bettencourt chairs the chamber’s property tax committee and is the author of Senate Bill 2. “We’re not just fighting for the Texans that are – we’re fighting for the Texans that will be,” Bettencourt said. “We’re fighting for the Texas Dream, which is the number one job creation engine for the country. And right now, property taxes is one of the largest threats to that.”

Bettencourt tried, but failed to cut property taxes in the 2017 session. This time could be different. “We have two identical bills filed on a tax issue in the House and the Senate,” the senator said. “Now that speaks to [not only] the cooperation and the leadership, but more importantly the determination to get this problem resolved.”

The bills would cap the maximum rate property taxes can increase per year, the so-called rollback rate, at 2.5 percent. Anything higher would have to be approved by the voters. Fearing homeowners wouldn’t vote to pay more taxes, cities with growing populations testified against the bills.

“Dallas has acknowledged that we need to hire more uniformed officers and increase pay for all first responders. Think of what a 2.5 percent rollback rate would do,” said Elizabeth Reich, chief financial officer for the City of Dallas. “Not only could we not keep pace with current response levels, we would not be able to increase staffing or salaries to the levels we need.”

Houston Mayor Sylvester Turner and Harris County Judge Lina Hidalgo have issued similar statements. But not all local leaders share their fears. Chris Hill is County Judge of Collin County, overlapping Dallas. His county’s population has soared over the past six years, putting pressure on public services from courts to road maintenance.

“Many will lament that Senate Bill 2 will cap our property tax revenues and violate the sacred principle of local control,” Judge Hill said. “But quite frankly, we know here that the purest form of local control is allowing our citizens to vote on these property tax increases.”

Homeowners and business leaders largely weighed in for the bill. Dan Allford, owner of ARC Specialties, has manufactured robots and industrial machinery in Houston for 35 years.

“We build big machines that require big buildings. We operate out of three buildings totaling 100,000 square feet. Last year property taxes were our third-highest expense, costing over $5,000 per employee,” Allford said.

Allford said that limits his ability to expand and hurts his customers’ ability to buy his products. He said he’s constantly bombarded by opportunities to move his production offshore, but he hasn’t – yet. “I’m an unapologetic free market capitalist,” he said. “I don’t fear competition. I crave it. I can beat the competition, but I can’t beat tariffs and taxes.”

Texas has been drawing more and more heavily on property taxes to pay for education. Efforts to reform school finance, and have the state pay more, are intertwined with property tax reform. There’s a lot riding on getting it right. Dick Lavine, a fiscal

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analyst with the progressive Center for Public Policy Priorities, pointed to what happened in California, when residents voted for a measure known as Proposition 13, capping tax growth much as Texas is considering now.

“When I was in high school and college, which was in the 1960s, California was well known for the best schools in the country,” Lavine said. “That’s no longer true, and I think it’s directly because of Prop 13 and undue restrictions on the ability to raise property taxes.”

In the end, the committee easily approved the bill. Next stop, the full Texas Senate. Analysis: Here’s your property tax cut, maybe. Heads up — it’s expensive

A new proposal to cut school property taxes in Texas perfectly outlines the political problem facing lawmakers: It's terribly expensive, and other taxes have to be raised to pay for it.

Willing to give up some sales tax exemptions to pay for a cut in your local property taxes?

That proposition, from state Rep. Drew Springer, R-Muenster, is the first serious stab at a statewide property tax cut in the current Texas legislative session.

Lawmakers in the House and Senate are already working on legislation designed to slow the growth of property taxes. But those bills, pushed by the governor, lieutenant governor and speaker of the House, wouldn’t lower existing taxes; instead, they would require voter approval for tax revenue increases of more than 2.5 percent.

Springer wants cuts. But it would cost a small fortune, more than $6 billion a year, and he’s a Republican, and he certainly doesn’t want to try to persuade a conservative Legislature to raise taxes. He wouldn’t actually cut them, either: He’s proposing a swap, cutting local school property taxes by getting rid of some popular exemptions to state taxes.

Springer wants to raise $6.4 billion a year, mostly by getting rid of sales tax exemptions and rules that are in current law. The list has some darlings on it — popular exemptions that might be hard sells in the Legislature and in lawmakers’ districts. Springer would tax sales of motor fuel, on top of existing gasoline taxes; over-the-counter and nonprescription drugs; “non- nutritional” foods, like potato chips, coffee and tea; newspapers and magazines; cuts and stylings at beauty and barber shops; and auto maintenance and repair. The proposal would also end things like prompt payment discounts for retailers remitting sales taxes and the loophole for hybrid and electric vehicle registrations.

Each of those things has a constituency: sometimes a mob of people who’d be affected, sometimes a small group of powerful people who would lose a business advantage.

Previous runs at sales tax exemptions have fallen to pieces under resistance from taxpayers — or, to be more precise, non- taxpayers — who benefit.

But with his other hand, Springer is offering prizes for property taxpayers. Springer says he would give a 50-percent homestead exemption on school property taxes, exempt retail inventories from property taxes and use the balance to “compress” school property taxes by 10 cents — or to 90 cents per $100 property valuation, whichever is higher.

His legislation hasn’t been filed yet, but Springer says the average Texas homeowner’s property taxes would be cut by $1,400. This is a good time to remember the last time state lawmakers spent a bunch of money and promised big cuts in property taxes. The savings promised by then-Gov. Rick Perry in 2006 was $2,000 per homeowner. It didn’t work out to be anywhere in that vicinity when the accounting was all in, and that experience has made some lawmakers skittish about promising property tax relief.

Springer apparently isn’t one of those. He also says his idea would lower the number of districts that pay locally raised property tax money to the state — a system called “recapture” by the education experts and “Robin Hood” in most political town-hall meetings. He also projects that the state would carry a bigger load of public education spending than locals as a result.

If this was a commercial for a new prescription drug, it would have to carry some fine print at the bottom. Something like this:

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May cause commercial and industrial property owners who don’t receive the full benefits to revolt, or throw up, or throw up and then revolt; depression among renters who might see no benefits at all in return for their higher sales taxes; a sudden descent on the Texas Capitol by car dealers, auto shop owners, and people with scissors and hair dyes; angst among car owners paying a sales tax on top of a gasoline tax when they fill up; and tears to the eyes of the kids who grab a bag of chips on the way home from school every day.

The plan could ease the pain of property taxpayers. The question is whether this — or other proposals like it that might be in the works — are worth the new pains they cause.

Analysis: Something’s missing from the opening bid for property tax “relief” in Texas

The property tax legislation unveiled by state leaders this week carries an implicit promise — that local school districts will get more state money — but doesn't say where that money might come from.

State leaders are picking up property taxes right where they left the issue in mid-2017, proposing a requirement that voters approve any local property tax increase of more than 2.5 percent before it can take effect.

Need a quick refresher on why this is still on the table? The House wanted a 6-percent limit in 2017. The Senate wanted 4 percent. The governor wanted 2.5 percent. And by the end of the legislative session, the governor, lieutenant governor and speaker of the House were in such a snit over that and other issues that they suspended their customary once-a-week breakfast.

Their eggs and ham had, in effect, gone green.

Two things stood out at Thursday’s joint appearance of Gov. Greg Abbott, Lt. Gov. Dan Patrick and newly elected House Speaker Dennis Bonnen. They are still in sync on everything like taxes and breakfast. They and the legislative sponsors of property tax bills — Sen. Paul Bettencourt, R-Houston, and Rep. Dustin Burrows, R-Lubbock — gathered for the news media to say they were on the same wavelength, filing identical bills in the House and Senate.

That brings us to the other notable thing: They were so tuned in to their harmonic convergence, they didn’t talk much about what their legislation would actually do, leaving the details to the bill sponsors to explain later.

They did say they were going for a 2.5-percent growth limit on property taxes in local school districts, cities, counties and other government bodies. It’s aimed at overall taxes, a leash on the overall mix of property values and tax rates that determine what happens to the average taxpayer’s bill. Anything that increases a local government’s property tax revenues by more than that would trigger an automatic November election asking voters for permission.

You might wonder how public education is going to get more financial help, as proposed by this same group of elected officials, if the state is going to limit school districts’ ability to levy taxes.

The short answer is that the state’s going to pay for it. The House’s proposed budget for the next two years adds billions to what the state is spending on schools. The Senate’s plan doesn’t spend as much, but the increases are significant (and in one case, more specific: Patrick has proposed $3.7 billion in teacher pay raises). Abbott floated the idea of holding down local taxes and tax increases — an answer to loud and persistent complaints about property taxes — and increasing state spending to fill the gap. And Comptroller Glenn Hegar, the fourth official at those weekly breakfasts, has proposed requiring the state to pay at least 40 percent of the cost of public education, along with any increases due to inflation.

But they haven’t said where the state money will come from. Nobody in the state government’s high places has proposed raising a tax, cutting other state spending to produce money for education, or weeding through the state’s tax exemptions and loopholes to shore up the state’s share of the public education load.

Another number from Hegar: The state will pay 36 percent of the cost of public education in the 2018 fiscal year. It would have to spend money — and apparently have it to spend, this time — to bring its share to 40 percent, and more still to cover regular inflation increases.

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None of that is in this first piece of legislation. This one, with the ambitious title “Texas Property Tax Reform and Relief Act of 2019,” isn’t about school finance and doesn’t address what might happen to the local governments that need more money than the proposed caps allow, other than persuading their voters to approve bigger increases.

For now, it’s a fresh attack on the rising property taxes — an attack encouraged by voters across the political spectrum in Texas. They don’t like property taxes.

Despite the show of togetherness among state leaders, this was just their opening bid. Property tax reform won’t include property tax cuts. Local governments would like to end unfunded mandates from the state before they consider state limits on how they raise money. School districts, which weren’t included in the 2017 legislation, might be expected to raise the same kinds of objections the cities and counties raised last time.

Caps like these were a hard sell two years ago and ultimately fell short. The camaraderie of state leaders is a selling point. The content of the legislation is the hard part.

‘Bring the power of the Digital Age to the property tax process,’ says Baker Institute expert

Texas state lawmakers have introduced legislation to bring more property owners into the process of setting tax rates and giving taxpayers better notice about their proposed rates.

Tax expert Jennifer Rabb from Rice University’s Baker Institute for Public Policy provided testimony on the legislation before the Texas Senate Committee on Property Tax at the state Capitol today. She is available to discuss the issues involved with the media.

Rabb, who is the director and fellow of the McNair Center for Entrepreneurship and Economic Growth and previously served as a tax policy adviser in the Office of the Lieutenant Governor of Texas, said there are three ways to improve the process:

“Eliminate from appraisal notices the estimated property tax levy based on the current year’s assessed value and the prior year’s tax rate, and thereby help property owners understand that the appraisal process is separate and distinct from the tax rate process.

“Bring the power of the Digital Age to the property tax process by creating an individualized, timely, electronic tax rate notice that contains the actual proposed tax rate and effective tax rate, applied to the taxable value of the individual owner’s property. The tax rate notice would be analogous to the appraisal notice under current law in that it would deliver accurate, customized information to property owners about how the tax rates proposed by their local governments would affect their property tax bill.

“Create a system for property owners to provide feedback electronically to local elected officials on the proposed tax rate, and thereby transform the process for opposing property tax increases from a fragmented, time-consuming process requiring a community effort to a consolidated, streamlined process that every property owner could undertake independently and conveniently.” Texas property appraisal system needs a major revamp

Texas property owners pay some of the highest taxes in the country, and that’s not likely to change soon. One reason is how the state revalues property for tax levies.

Annual appraisals tend to push the value of properties, and property taxes, higher, even if the actual tax rate does not change. Local governments are not inclined to reduce the tax rate because they need more revenue to support the state’s economic and population growth which leads to more schools, road expansions and other infrastructure growth.

It’s a flawed system that pushes the cost of living and doing business in the state higher and leaves many property owners with few alternatives other than litigation to try to keep those costs under control, says Rahul Patel of Patel|Gaines, one of the state’s leading property tax attorneys.

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Overworked, understaffed

Each appraiser working in Harris County, the third-most populous county in the nation, has to place a value on about 5,500 parcels every year. That amounts to an overwhelming workload of about three parcels per hour, Patel argues in a column for the Houston Chronicle, and leads to inaccuracies in appraisals.

“Because the state and the local jurisdictions choose to re-appraise property more frequently than they were before, the number of protests has gone up,” Patel says.

In 2018, the Bexar County Appraisal District raised taxable property values an average of 9 percent. More than 100,000 property owners in that district wound up protesting their new property values.

Some of those protests may have been a simple disagreement over how much a property was worth. But others resulted from such inaccuracies as misidentified parcels, failure to take state-allowed exemptions into account or lack of information, such as occupancy rates, that affect the value of commercial real estate.

The inaccuracies are linked to the volume of work, Patel says. With appraisers responsible for so many properties, the appraisal districts lump properties into categories, ratios and valuations that don't always make sense for a specific property. And the cost of rectifying those errors through protests lands squarely on the property owner.

Under-qualified appraisal review boards

The appraisal review boards (ARB) that decide disputes between the appraisal districts and property owners are composed of volunteers from the community. In many cases, Patel says, ARB members lack the education and experience to determine the merit of a commercial property owner’s argument, and their decisions tilt in favor of the appraisal district.

“We genuinely have a shortage of quality folks who are signing up to be appraisal review board members,” he says. “There are issues of understanding the complexities of cap rates and occupancy, vacancies, how to deal with distressed assets that have mortgages and deficiency issues, and types of funding that are in place. If you do not have an appraisal review board that understands all those complexities, then you have a fundamental problem of getting your point across.”

Patel adds that as appraisal review boards are currently set up, the appraisal districts have a home-court advantage. Many members of the appraisal review boards have been in place for years, are located in appraisal district offices, and are comfortable with the officials at that office. Further, the current system lacks transparency, with voting records of appraisal review board members unavailable to the public.

“You have to realize as a property owner that you’re at a home-court disadvantage,” he says.

It’s a system that leads to litigation, as commercial property owners go to court to get the expertise and individual attention to their case that’s needed for a favorable outcome.

Appraisal review board solutions

A possible solution that could at least reduce the number of appeals that go to court is to revamp local appraisal review boards while adding transparency to review board members’ voting records.

“I think we’re better served as a solution to say, ‘Let’s use a portion of our budget and maybe hire qualified folks to sit on special panels, panels that deal with industrial, commercial, high-rise office buildings, medical facilities, things that require a breadth of information to sit and digest and come up with a better valuation,” says Patel.

He has advocated allowing property owners to pay a fee to have their appeals heard in outside jurisdictions, thus offsetting the home-court advantage. Some of that fee could be used to pay for more highly-qualified appraisal review board members as well.

“The best system starts with having the most educated folks with regard to the types of property that are being heard at the appraisal review board level,” he says.

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That means panels of experts should be set up to review valuations for different types of property.

“Right now, appraisal review boards can hear anything from a residential house to a piece of vacant land to a $150 million mixed-use development. When you go to undergraduate school, you don’t all jump into the same class together,” he says. Senate Committee Starts Work On Reforming Property Tax

Voters would have the power to prevent their local governmental bodies from increasing property taxes by more than 2.5 percent per year under legislation introduced in the Texas Senate and House on Jan. 31.

Senate Bill 2 and identical House Bill 2, both 116 pages in length, propose to amend the current law, in which local taxing authorities may increase taxes up to 8 percent each year before a rollback election would be required. Cries for relief are widespread, given the leeway current law affords and the fact that county appraisal districts may increase the value of property at the same time.

Lt. Gov. Dan Patrick, who presides over the Senate, said, “People desperately need property tax reform, our businesses need property tax reform, and we have set out, on this date, early in session, with a major piece of legislation. We are setting the tone for the rest of the session on this issue,” Patrick added.

In the introduced versions of SB 2 and HB 2, taxing authorities that bring in less than $15 million in annual revenue would be exempt from the new requirements.

Sen. Paul Bettencourt, R-Houston, chair of the Senate Property Tax Committee, said, “The vexing problem facing taxpayers is that tax bills are going up at least two or three times faster than they can handle. I think that the concept of having a two and a half percent rollback rate across the board means there’s a universal solution.”

According to the Senate News Service, local elected officials have turned out in force to oppose caps on taxing growth, saying it harms their ability to deliver on needed services in their home communities. So far, those efforts have succeeded, as similar measures have failed to reach the governor’s desk in previous sessions.

Patrick said that while he hopes local officials will work with the state on this issue, ultimately property tax reform is coming. “We have been stopped time after time in the past by a total resistance to reform,” he said. “The days of saying, ‘No, we’re going to kill the bill because we don’t want change’ . . . that day is over.”

The Senate Property Tax Committee will meet this week to discuss SB 2. House Speaker Dennis Bonnen soon will assign HB 2 to a committee. HB 2 author Rep. Dustin Burrows, R-Lubbock, chairs the House Ways & Means Committee, which is scheduled to meet this week. Why Texas property taxes are expected to skyrocket again this year

Texas property taxes have surged for the past several years and are likely to do so again in 2019.

“Commercial properties have seen a double-digit increase year over year,” says Rahul Patel of Patel|Gaines, one of Texas’ leading property tax attorneys .

Texas has one of the highest property tax rates in the country. That’s not likely to change. This year, property values are expected to increase again because several of the state’s critical funding needs remain unresolved.

Rising property valuations drive tax increases

Property valuations in Texas are unlike those in most states. The state re-evaluates all commercial real and business personal property annually. Annual increases in property values raise the property taxes for property owners statewide.

County governments could offset the impact of higher property values by lowering the property tax rate, but they need more tax revenue to support the growth in the state’s economy and its rapid population growth, which has increased the demand for everything from housing to roads to schools to public infrastructure, and, most notably, to healthcare.

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That demand means local governments don’t pull back on tax rates when the assessed value of real estate rises. This results in a commercial property owner’s taxes going up even when the rate stays the same.

A recent report indicates that 1,800 businesses moved to Texas in 2016 from California alone. Another report shows Texas’ population grew by 379,128, the most in the United States, from July 1, 2017 to July 1, 2018.

“We have a statewide issue that we don’t really have a grasp on,” Patel says. “We have new schools. We have new infrastructure. Rolling back the tax rate really isn’t an option, but this continued increase is not sustainable.”

And the valuation increases aren’t always accurate. That means some property owners are stuck with a higher tax bill based on incorrect valuations.

Another factor driving incorrect valuations is the state’s practice of including the amount of income the property generates in the valuing process — or, in other terms, the “income approach” — not properly extracting business intangible value not associated with real or personal property.

For instance, a surgeon and a non-profit operating out of identical buildings could generate vastly different incomes, and because of that, they will have extremely different valuations even though the buildings and land are identical, Patel says.

Determining an accurate valuation of properties is also hampered, he says, because members of the panels that review property valuations, known as appraisal review boards (ARB), often lack the complex commercial real estate knowledge necessary to determine a fair valuation for commercial properties.

When to protest

Property owners who feel their property is inaccurately valued can request a review by their local appraisal review board. That is the first step in the process that may ultimately lead to litigation.

“If you have a commercial property, you should always have someone look at (the new valuation),” Patel says.

Texas has two types of valuations for properties. One is the fair market value. The other is a provision of the tax code that requires real estate to be equally and uniformly appraised to similar properties.

Property owners are entitled to the lower of those two measures, Patel says. So, if one property is valued at $200 per square foot and others like it are valued at $180 per square foot, the higher valuation should be adjusted.

Here are some questions to consider when deciding whether to protest a property’s valuation:

 Is the square footage of the building accurately reflected in the appraisal?  Is the age of the building correct?  Is the location and acreage of your property accurately recorded?  Are all improvements to the property accurately reflected?

“A lot of times there will be simple mistakes in a mass appraisal system. So, it is important to ensure accuracy as reported to or by the county,” Patel says.

Another factor to consider when protesting a valuation is whether you qualify for an exemption that entitles you to a lower property tax rate. Not every property owner is an expert on deciding when and how to protest a property valuation. Commercial property owners need to consult with an expert.

“We have clients who, for the last seven years, email us as soon as the notices come out to have us review their appraisal, and then we determine whether we need to file a protest or not,” Patel says.

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Texas leaders' promise of 'property tax relief' is a far cry from a property tax cut

The message handed down Thursday from the three top political leaders in the Capitol and two influential state lawmakers could not have been more clear:

We intend to deliver on our promise to bring property tax relief to tens of millions of Texas. Period. Paragraph. End of story.

So serious were they that they named their top legislative priority for the 2019 session that's about to enter its fourth week "The Texas Property Tax Reform and Relief Act." So let's all start counting the money we're going to save, right?

Eh, not so fast.

The "relief" offered by the legislation in question, House Bill 2 by state Rep. Dustin Burrows, R-Lubbock, and its identical upper chamber companion, Senate Bill 2, by Houston Republican Paul Bettencourt, is not a tax cut. It simply calls for slowing of the pace of rising property tax collections by city councils, school districts, counties, community college districts and other local authorities that live and breathe on the money raised through levies tied to the value of real estate.

The politics of tax relief

Under the plan announced at a news conference in Gov. Greg Abbott's Capitol reception room, taxing authorities would need approval from voters if their proposed tax rate would increase collections by 2.5 percent or more from one year to the next.

Abbott and Lt. Gov. Dan Patrick have been calling for such a slowdown since they first took office four years ago. And now they are joined by the new House Speaker, Dennis Bonnen of Angleton. And all three Republicans are starting out in lockstep.

That increases the chances that their measure will pass. But not a cinch. School districts, cities and such, most of who elect their council members and trustees without regard to party affiliation, have already begun campaigning against it.

The legislation will likely be the subject of marathon committee hearings. And although the measures started out identical, each chamber can be expected to tweak the details and perhaps even rewrite their respective versions based on what members hear from their constituents.

It could easily end up being the most intensely lobbied legislation of the session between now and May 27 when lawmakers close shop.

Who's paying for public schools?

Complicating the equation is the question of how Texas will pay for public schools. Ten years ago, the state kicked in about half the cost of public educations and the local districts, through property taxes, made up the difference.

But now, the state's share has dwindled to well under 40 percent. So if lawmakers cap what local districts can collect, somebody's going to go hungry unless the state doles out more money. And tax relief legislation, as introduced, does not identify a reliable revenue stream for the state to increase its share of the cost.

Asked if there's a plan in the pipeline to deliver more state money to local schools, the Republican leaders responded, in effect, trust us.

"We're very confident in the governor's plan of 2½ percent," said Patrick. "And we will pass it. Will find the funding to fund it, and we already have many ideas along those lines."

Asked to share a few of those ideas, Patrick parried: "That's what the session is for."

Bonnen was a bit more forthcoming. He noted that projections announced last month as lawmakers were returning to work suggested the state would have some $7 billion more to spend in the two-year budget cycle that begins in September.

"The Senate and the House have agreed already that we will be using billions of those dollars to support our local school districts," he said.

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It remains an open question whether those billions will be enough to make up the gap, and whether the booming economy that showered those billions upon the state will continue indefinitely.

So we're still awhile away from breathing a sigh of (tax) relief.

UTAH

Utah County officials approve referendum on controversial property tax increase

Utah County residents will need to collect around 20,000 signatures by March 2 if they want a say in deciding whether or not the county should increase property taxes.

After the Utah County Commission voted 2-1 in December to adopt the upcoming year’s budget, which included a 67.4% tax hike on the county’s portion of property taxes, Payson resident Julie Blaney sought a referendum proposing to freeze the budget at the same level it was in 2018.

Public support was immediate, and Blaney recalls spending the following 14 hours talking on the phone with other Utah County residents interested in helping gather signatures and getting word out about the effort. The referendum was approved this week.

The budget’s tax hike will raise property taxes about $7 a month on an average Utah County home with a value of $334,000. For a year, the same resident’s tax bill would be about $83 more.

The increase will generate an additional $19.3 million, bringing the Utah County 2020 budget to about $104 million, with those extra funds going primarily toward staffing county offices and specific departments’ budget requests.

The Utah County Commission’s decision, which was made in mid-December, attracted public outcry. More than 100 residents showed up at a public hearing prior to the vote, many of them urging commissioners to vote against the budget because of the tax hike.

Blaney was among them.

“Everyone that was at those meetings spoke against the tax increase,” she said. “The citizen voice was loud and clear, ‘Do not increase property taxes, instead look within the county to see where you can make departments more efficient.’”

Blaney said raising property taxes will particularly hurt businesses and residents living on a fixed income, such as senior citizens who might not have an extra $100 hanging around at the end of the year. She also expressed concern that many business owners don’t understand that the tax hike will also impact their personal property tax on their company. According to her, this will likely harm consumers because businesses may be forced to raise prices to account for tax increases.

Utah County last raised property taxes in 1996, and despite being the second-most populous county in the state, has collected one of the lowest taxes and fees per capita, according to 2018 data from the Utah Taxpayer’s Association. This would likely remain so even after the property tax hike, according to county officials.

Blaney said numerous businesses were warm to the idea of hosting signature packages. Signature gathering will begin Friday and Saturday — high traffic days in stores.

According to her effort’s website, called Residents for Responsible Government, residents can sign the petition at storefronts throughout Utah County such as Payson Market, Kohler’s in Lehi, or Meier’s in Highland. She is currently having conversations with other stores and said more may confirm in the coming days.

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Utah County Clerk/Auditor Amelia Powers Gardner said the referendum will go on the November ballot if county residents get the required number of signatures by the deadline. However, what would come next would be complex as the referendum regards the entire 2020 budget, not specifically the property tax hike.

The budget would already have been in effect for almost 11 months.

“Even if they get the signatures, we’re not going to go fire people on the off chance it might get on the ballot,” Powers Gardner said. “If it goes on the ballot, and if it were to pass, the county would actually go into debt and we’d have to bond against that debt.”

She said the commissioners will look at the property tax value in June and set the rate based off of what the county’s properties are worth, what revenues are received and the projected revenues.

County commissioner Tanner Ainge told the Deseret News in December that he proposed the tax hike to help push Utah County toward a more sustainable financial future, as well as respond to the “irresponsible management” of prior county officials.

According to Ainge, previous county officials allowed the tax rate to decrease repeatedly each year and forced the county into deficit spending, meaning county officials dipped into “rainy day fund” reserves. This year’s budget, he said, will “end deficit spending and start saving for the future” for the first time in three years by “cutting spending and adjusting revenue.”

Besides the property tax hike, the budget also cuts $200,000 from the county’s justice court, around $20,000 for the sale of four county vehicles, $103,000 from the auditor/clerk’s office, and thousands more from other areas.

Ainge, who voted in favor of the budget, declined to comment on the referendum.

Commissioner Bill Lee, the sole vote against the budget, said he neither encourages or discourages the referendum. He is taking a neutral stance because the county faces some risk with the referendum out there. For this reason he feels a duty to step back, he said.

Lee said he voted against the budget because he felt the tax hike was extreme and he disagreed with the philosophy of “just ripping the Band-Aid off.” He’d proposed a different plan that also raised property taxes, but “substantially less than the 67%.”

Lee said he thinks the county commissioners could potentially have to sit down and have a conversation if the signatures are obtained by the deadline. That conversation would revolve around what the commissioners should do because if the referendum went on the ballot and passed, the county can’t spend money it doesn’t or might not have. He added that the commissioners would likely need to “pull back and reevaluate” what to do going forward.

“That would need to be a conversation that we’d have, and it would be an uncomfortable conversation obviously, so that’s kind of the route I’d assume we’d have to take,” Lee said.

VIRGINIA Walmart seeking rollback on Warrenton store taxes

Walmart’s lawsuit seeks county tax refunds totaling $344,000 over the last four years. The Walmart theory is somewhat of a new one. They’re doing it across the country.

The world’s largest retailer claims it pays too much in Fauquier County taxes.

Walmart recently filed a lawsuit challenging its Warrenton store’s real estate tax assessment and seeking a refund of more than $344,000, plus interest.

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The county’s assessment company values the big box store and 21-acre site at $15.5 million.

But, Walmart contends the property has a total value of $6.9 million, according to an 11-page suit its lawyers filed Dec. 26 in Fauquier County Circuit Court.

The company pays more than $152,000 a year in county real estate taxes.

Walmart contends it should pay just $68,000 a year.

The Wal-Mart Real Estate Business Trust, which owns the store, appealed its 2018 assessment — conducted by Wampler Eanes Appraisal Group Ltd. of Daleville — to the Fauquier County Board of Equalization. The board denied the appeal.

The county and the board “committed manifest error by failing to apply generally accepted appraisal practices,” Washington, D.C., lawyer Ilene Boorman wrote in the lawsuit.

Walmart deems the appraisal “invalid or illegal, valuing the property using the cost approach to value, even though the improvements on the property were built in 1999 and were too old for valuation using the cost approach,” according to its lawsuit.

In other words, the value of the building should decline with age and dwindling demand for huge stores, the company contends.

Its lawsuit challenges the $15-million-plus assessments in four years, 2015-18.

Walmart and other big-box retailers have used the same strategy to cut local tax bills across the nation, according to a recent New York Times story.

In part, the big retailers contend little market exists for vacant, “dark stores” that have grown in number, reducing the value of still-active buildings.

“We’ve had plenty of challenges to assessments,” County Attorney Kevin Burke said. “The Walmart theory is somewhat of a new one. They’re doing it across the country.”

Walmart’s attorney, Ms. Boorman said by email: “I am not authorized to speak to the press on Walmart’s behalf. It would be best if you contacted their media relations team.”

In the suit, the company seeks to lower its property assessment and to receive tax refunds averaging $86,000 annually over four years. It also seeks 10-percent annual interest, the same the county charges for unpaid tax bills.

The statute of limitations allows taxpayers to challenge assessments going back no more than four years, according to Mr. Burke.

The county’s Walmart assessments have consistently exceeded $15 million, going back at least seven years, according to real estate records.

Although Walmart filed its suit about seven weeks ago, it has yet to formally “serve” the county, which would trigger the need for Fauquier to respond. Thus, the court so far has scheduled no action on the lawsuit.

Fauquier County reassesses real estate once every four years.

The Town of Warrenton also taxes the Walmart property. The company pays about $7,750 a year to the town, with a tax rate of just 5 cents per $100 assessed value.

The Warrenton Walmart does more than $33 million in grocery sales to lead the Fauquier market. Information about the rest of the huge store’s sales remains unavailable to the public.

The world’s largest retailer, Walmart rang up 2018 global sales of $495.76 billion — more than three times that of Amazon, according to the National Retail Federation. 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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WASHINGTON DC D.C. property values continue to soar, generating tax revenue windfall

Property values in D.C. continue to reach new heights, generating a windfall for District coffers, the city’s latest financial data show.

The results of D.C.’s Comprehensive Annual Financial Report for fiscal 2019 paint a rosy picture of the city's economic health, including a roughly $11 billion jump in total property values compared with a year ago. Commercial properties saw a more than $3.3 billion appreciation, with a total value of more than $94.4 billion, while residential holdings saw a roughly $5.4 billion increase to more than $125.6 billion.

The biggest single beneficiary looks to be Midtown Center, owned by Carr Properties' affiliate 1100 15th Street LLC, which saw a more than $110 million increase in value from a year ago, up to $586.1 million. That makes it the fifth most valuable property in the city, up from eighth overall a year ago, largely thanks to Fannie Mae's new presence there.

And all that change has juiced tax revenue for the District — the D.C. government collected more than $2.87 billion in real, personal and rental property taxes in 2019, a roughly $166 million increase from a year ago. That includes a $146.2 million increase in real property tax revenues, the biggest increase the District has seen since 2016, even before a planned tax hike on commercial property owners went into effect for the new fiscal year. Income tax collections shot up by more than $300 million to roughly $2.94 billion.

It helped contribute to an overall growth in tax revenue of more than $681 million, up to $8.5 billion in all. That has District leaders beaming, considering they’ve been able to devote much of that new revenue to the city’s “rainy day” fund, ensuring that D.C. has 60 days’ worth of cash on hand for the first time ever.

“The District is in the strongest financial position in its history,” D.C. Chief Financial Officer Jeffrey DeWitt wrote in a statement. “As a result, the District is more financially resilient than ever before.”

And the city will automatically contribute about $161.8 million of surplus revenue to its Housing Production Trust Fund, a loan program to back the development of affordable homes, according to Council Chairman Phil Mendelson. Mayor Muriel Bowser made increasing contributions to the fund a key part of her budget proposal last year, though she butted heads a bit with the council over how exactly to send more money to the program.

A few other notable details from the CAFR include:

The District didn’t see many other changes among its principal property taxpayers from last year, though George Washington University dropped off the top 10 list after joining it at No. 10 in 2018. Warner Investments LP took its place, powered by its 501 13th St. NW, valued at more than $462.6 million.

The Inter-American Development Bank overtook the International Finance Corp. in owning the top tax-exempt properties in the District, with a value of more than $707 million.

The District’s list of largest employers remains largely unchanged, with a top three of Georgetown University, Children’s National Hospital and MedStar Washington Hospital Center. The latter institution leapfrogged George Washington University for the third spot, compared with a year ago.

The city also collected about $147 million in hospitality-related tax revenue to fund Events D.C., the agency that manages the District’s convention center and sporting venues — a $6 million increase from last year. The agency’s revenue has received intense scrutiny in the course of the last year, with Mendelson successfully leading a charge to pull away millions of its reserve funds by arguing that it holds onto more cash than it needs. The council will hold a hearing Feb. 24, when lawmakers will debate the status of the agency's reserves going forward.

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WEST VIRGINIA

Property tax plan collapses. Here’s why.

The effort to phase out the state’s property taxes on machinery, equipment and inventory, and on vehicles has died in the Senate.

Proponents—all Republicans—failed to get the two-thirds vote necessary to advance the resolution to the House. It died on an 18-16 tally, with two Republicans joining the Democrats in opposition.

This was always going to be a heavy lift for a variety of reasons.

First, the approval process was difficult. Property taxes are in the State Constitution so to change that, proponents needed two- thirds majority from both chambers and approval by voters in the next election.

Second, the plan created a potential hole in county budgets. When fully phased in, counties and county school boards that receive the bulk of the property taxes would have lost an estimated $300 million in revenue.

The school systems would be kept whole through the school aid formula, but that money has to come from somewhere. Republicans promised counties would be fully funded by revenue from increases in the tobacco taxes and an increase of one- half of a percent in the sales tax, to six-and-one-half percent.

That only covered two-thirds of the lost revenue. The rest, proponents said, would be made up by natural growth in the state budget and cuts in state spending.

However, county government leaders didn’t buy that. County commissioners and assessors put a lot of pressure on their Senators to oppose the plan, and they were an effective lobbying group.

Third, Republicans focused on the decreases in the business taxes and the personal property tax on vehicles. But remember there were also tax increases. Supporters struggled to make the point that, yes, some taxes would go up, but the hated annual property tax on vehicles would disappear.

Some would go up, some would go down. It got a little confusing.

Fourth, business has benefited from tax changes in recent years—a lowering of the corporate net income tax and elimination of the business franchise tax. Those were appropriate moves, but supporters were often guilty of overselling the benefits to the state’s business climate.

Now, when the state’s economy has slowed primarily because of coal and natural gas, it’s more difficult to argue that business just needs one more tax reduction.

And finally, there were just too many moving parts; an amendment to the State Constitution, some taxes going down, some going up, uncertainty about the revenue projections, a distrust that future legislatures would treat county governments fairly, a fear that other local property taxes would rise to make up the difference.

In the end, it collapsed under its own weight.

But its failure should not change this fact; The property taxes on machinery, equipment and inventory are anti-growth. They are taxes on the value of the property, so businesses have to pay them regardless of whether they make a profit. That’s money businesses could otherwise use to invest in higher wages and new equipment.

The tax is so bad that West Virginia is one of just two states that imposes it. Frequently West Virginia’s Development Office creates a “work around” for new businesses coming to the state so they won’t have to pay the 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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The vehicle tax is also a burden. It’s an additional expense to vehicle-intensive businesses and to every West Virginian who owns a car or truck. When they buy a vehicle they pay a sales tax, a tax on the gasoline they use, payments for the vehicle itself, insurance, as well as upkeep and maintenance.

And then every year there is a personal property tax bill on the value of the vehicle that must be paid before you can get your license renewed!

Republicans failed to get their plan out of the gate, and there were legitimate questions about the wisdom of their approach. Governor Justice was cool to the idea, so that didn’t help either.

But at least this necessary debate has begun.

WISCONSIN Battle over Wisconsin's 'dark store loophole' touches New Richmond, Hudson

An issue that municipal officials in St. Croix County say is putting the squeeze on local coffers is being targeted by the Tony Evers administration. The Democratic governor earlier this month said he would include a measure to close the so-called "dark- store loophole" in Wisconsin. A 2008 Wisconsin Supreme Court ruling allows retailers to have open stores assessed at the rate of a vacant store, allowing them to pay lower property taxes.

Democrats at the Capitol note the effort has been successful for retailers in Fond du Lac, where Menards saw its assessment reduced by $4 million and a CVS Pharmacy in Appleton received a $350,000 property tax refund after an assessment challenge.

The issue has brought legal action in Hudson and New Richmond, where big-box retailers have sued those cities to recoup taxes under the ruling.

"That's a big one," New Richmond City Administrator Mike Darrow said last week of the issue.

City of New Richmond officials are working with the Wisconsin League of Municipalities to overturn the law.

Walmart filed suit in September 2018 against the city of New Richmond. The lawsuit alleges the $11.35 million value set by the New Richmond city assessor's office exceeded the $4.25 million value claimed by Walmart.

That case was consolidated with an identical 2017 suit brought by Walmart alleging the city of New Richmond incorrectly valued the building at $11.35 million. That year's value should have been $7.79 million, according to the company.

Sen. Patty Schachtner, of Somerset, has been among Democrats backing Evers' proposal. She cites the League of Wisconsin Municipalities in a news release, saying Hudson residential taxpayers could be on the hook for a 9 percent property tax increase "if the dark store strategy is fully implemented."

Menard's filed a suit in December 2018 against the city of Hudson, alleging the 2018 value of its building there was worth no more than. $4.4 million. The city assessor valued the same property at $10.3 million. It seeks a refund of the property taxes— plus interest.

"An actual and justiciable controversy exists as to the 2018 value of the property and Menard's right to a reduction in the value" under state statute, the company stated in its court filing.

Menard's alleges the city's Board of Review didn't grant a waiver it sought and provided only a 90-minute notice in advance of a hearing on the matter.

In its response, the city contended it properly denied the waiver due to non-appearance. 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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Menard's filed a similar lawsuit against the city of Hudson in 2017, alleging the $9.7 million valuation set by the assessor was incorrect. It alleges the correct value in 2017 was $6.4 milion.

Opponents of the effort to overturn the ruling, including the Wisconsin Manufacturers & Commerce (WMC) group, say they're protecting businesses from "overly aggressive assessors."

"These companies challenge the illegal assessments in court to bring their taxable amount back to an appropriate amount," a WMC news release states.

"Dark store" legislation was introduced last year at the Capitol, but never got a full vote.

Rep. Shannon Zimmerman, R-River Falls, said he backed efforts to close the loophole last year, but has since taken a more contemplative approach.

He said he's awaiting the new bill to see if its provisions have changed.

"Before saying I'm all in, I want to do my due diligence and review the language," Zimmerman said, adding that he wants to evaluate the argument from businesses "that this claim is really not an issue, but local municipalities creating or finding ways to obtain needed revenue."

For now, "I'm all in investigation mode right now," he said.

Wisconsin most reliant on property taxes in Midwest

Wisconsin’s municipalities rely on property taxes far more than most states, according to a new report.

The state’s municipalities received about 42 percent of their revenue from property taxes, Wisconsin Policy Forum said in a study released Thursday. The national average totals around 23 percent, according to the nonpartisan research group.

The study ranks Wisconsin seventh in the country and top in the Midwest for its reliance on property taxes, the Milwaukee Journal Sentinel reported.

Property taxes account for twice as much revenue for local governments as state aid, the report found.

The findings also show Wisconsin’s property tax caps, which have been in place for more than a decade, appear to be tighter than other states as reliant on the revenue.

“It’s a classic good news-bad news story,” said Rob Henken, the group’s president. “I don’t think there’s any question that the property tax caps have been a contributor to the successful effort to reduce the property tax burden in the state of Wisconsin.”

But Henken said the state is starting to see unintended consequences from the property tax caps, such as rising debt and increased use of wheel taxes.

Local governments have limited options for raising funds when needed, and borrowing provides one of the few avenues of relief for local officials.

In most states, sales taxes are commonly used by municipalities to fund operations. Wisconsin’s sales tax, which is set a 5.5 percent in most parts of the state, is the lowest rate in the Midwest, according to the report.

Henken acknowledge that local spending should be considered, but expenditures weren’t included in the report.

5 ‘Dark Store’ Myths Debunked

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MADISON – Gov. Tony Evers announced last week that he would include a proposal in his budget to close the so-called “dark store loophole.” Unfortunately for the governor and taxpayer-funded lobbyists, there is no loophole to actually close.

The myth of the “dark store loophole” was created by taxpayer-funded lobbyists in an attempt to increase taxes on local businesses, and they have spent an immense amount of taxpayer dollars on advocacy campaigns and lobbying to convince the public that there is a problem needing to be fixed.

However, the misinformation is not based in fact. To correct the record, Wisconsin Manufacturers & Commerce (WMC) is releasing the following Myth vs. Fact information on the issue.

“It is unfortunate to see Gov. Evers taking the sides of local governments whose singular goal is to raise property taxes,” said WMC Senior Vice President of Government Relations Scott Manley. “The so-called ‘dark store’ proposals would do nothing other than make it more expensive to do business in Wisconsin by unfairly targeting small businesses, local retailers and hometown manufacturers.”

Dark Stores: Myth vs. Fact

Myth #1 Big-box stores are using a loophole to significantly lower their taxes, and local governments are losing revenue because they need refund large corporations.

Fact #1 Overly aggressive assessors are using an illegal strategy to dramatically increase the taxable value of local businesses, resulting in larger than normal tax assessments. These companies challenge the illegal assessments in court to bring their taxable amount back to an appropriate amount. They continue to win because local governments are breaking the law. If they would assess property correctly, they would not need to refund property taxpayers in the first place. Additionally, these overassessments are not just on large “big box retailers,” but also impact small businesses, local main-street retailers and manufacturers. A change in the law could drastically increase property taxes for all businesses, and likely homeowners, as well.

Myth #2 Retailers with new stores are successfully using sales of run-down and empty properties to justify lower property tax assessments.

Fact #2 No judge would accept the sale of a physically deteriorated property as a good indication of value or a comparable sale for a newer building. Municipalities have yet to provide an example where a taxpayer has prevailed in court using sales of physically deteriorated vacant properties to justify a lower assessment of a new occupied property.

Myth #3 In recent years there has been a significant property tax shift to homeowners as a result of businesses challenging their tax assessments.

Fact #3 There has not been a statewide shift in the property tax burden to homeowners. According to the Wisconsin Department of Revenue, over the past 10 years there has been over a two-percent shift in the statewide property tax burden the other direction – from homeowners to businesses. Businesses are paying a higher percentage of the property tax burden than they were 10 years ago.

Myth #4 The “dark stores theory” has led to double-digit percentage increases in residential homeowners’ property tax burden.

Fact #4 A study conducted by the Wisconsin Policy Forum using data from the Wisconsin League of Municipalities showed that only $3.1 million was refunded in all business related property tax challenges in 2017. That represents 0.03 percent of property tax revenue collected, an infinitesimal portion of the tax. Local governments are still collecting over 99.9 percent of property taxes without incident. Wisconsin’s current property tax system is not broken.

Myth #5 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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Businesses use a disproportionate amount of local services compared to what they pay in taxes.

Fact #5 According to a 2018 study by the non-partisan Council on State Taxation, Wisconsin businesses pay approximately 48 percent of local taxes and fees in the state. Proponents of the bills have provided no evidence to suggest businesses consume roughly half of fire, police and EMS services in localities, and they rarely use a wide variety of local services such as parks, libraries, etc. Wisconsin businesses are paying their fair share of the local tax burden.

Wisconsin Governor Promises to Close ‘Dark Store’ Tax Loophole

Walmart, Target, and other big-box retailers around the U.S. are deploying “dark store theory” to slash property taxes. Now the state at the center of this fiscal threat may take action.

In November, CityLab investigated the practice of “dark store theory,” the novel legal argument big-box retail chains like Walmart, Target, and Menards use to slash their property taxes by assessing active stores as if they were vacant. The practice has resulted in the loss of millions of dollars in taxable value to communities in Wisconsin, Michigan, Minnesota, Indiana, and beyond.

Now Wisconsin Governor Tony Evers is pledging to shut it down: His proposed state budget will close the “dark store” legal loophole.

CityLab’s story was followed by additional reports about the issue by the New York Times, Slate, and others. These articles, and the practice itself, have generated vigorous debate about what big-box properties that proliferate across the urbanized U.S. should be worth.

Lawyers representing retailers say that big-box stores are effectively worthless at the point of sale, which should be reflected in the taxes they pay—even while the stores are still active. And many companies file repeat tax assessment appeals until municipalities capitulate. Tax assessors say that this argument defies common sense, and that the lost revenue will eventually force a heavier tax burden onto other homeowners.

State tax boards weighing the two sides have largely been split about who’s right. And municipal finance experts have warned that fiscal havoc lies ahead for local governments across the U.S. if the issue isn’t resolved by state tax laws.

The commitment to close the loophole by Evers, Wisconsin’s newly elected Democratic leader, also follows statehouse lobbying by the Wisconsin League of Municipalities and the Wisconsin Counties Association, two groups representing the interests of local units that levy property taxes. In 2018, state lawmakers considered a bill that would have blocked the practice, but the measure failed to reach a vote.

“Having large big box stores have the property tax levied at a level as if the building is empty is absolutely a non-starter with me," he told reporters this week. "It should be fair for all and in order to do that we have to close that loophole.”

Still, this element of Evers’ budget proposal is likely to find a challenger in Wisconsin Manufacturers & Commerce, the trade group representing retailers that have benefited from this tax appeal tactic. And Indiana, the only state that has enacted legislation to combat dark store theory, has continued to see challenges by commercial property tax payers using the same type of argument.

To Robert Hill, a Minnesota-based attorney who is perhaps the nation’s top lawyer propagating dark store theory on behalf of big-box stores, the issue is a matter of rebalancing the property tax burden that currently weighs too heavily on successful businesses. Corporations must defend themselves from being “discriminated against” by assessors, Hill told CityLab last year.

“We eat what we kill,” he said. “We kill only because they need to be killed.”

Evers’ budget proposal is expected later this month.