Assessments and Local Government and Appeals and County Government and Property taxes and Government & Economic Development and Government and Law

Appeals pay off for biz owners

December 8, 2008
More than one in four Marion County commercial and industrial property owners has appealed its property tax assessments this year, and the challenges often are paying off in a big way.

With only 11 percent of the 6,503 appeals complete, local officials already have agreed to more than $567 million in reductions. That represents a 43-percent drop from the amounts they were challenging.

An IBJ analysis of the 708 business appeals that have been settled found 123 cases where appeals resulted in decreases of $1 million or more. A handful produced assessment cuts in the tens of millions.

The early results may provide encouragement to owners of some marquee properties whose cases are pending. Those include several downtown skyscrapers, such as the OneAmerica Tower.

Owner OneAmerica Financial Partners is fighting to reduce the building's $80.5 million assessment, the largest open appeal in Marion County, even though that figure is 14-percent less than its assessment a year earlier. OneAmerica declined to comment.

How appeals shake out could have a big impact on the division of the property-tax burden between businesses and residential property owners. Reassessment had boosted the percentage of the county's assessed value coming from business properties from 32 percent to 34 percent.

Successful appeals also could reduce the amount of revenue available to local governments. The General Assembly last spring passed property-tax caps that restrict the ability of governments to hike tax rates to raise additional revenue.

Gov. Mitch Daniels last year ordered a reassessment of all Marion County properties for the 2006 tax bills, arguing its nine townships have historically underassessed commercial and industrial parcels.

Marion County paid Portage, Mich.-based Manatron Inc. $1.85 million to reassess its 22,557 business parcels. Reassessment raised their combined value from $14.6 billion to $19.4 billion. From the start, outsiders questioned the validity of the new figures. They worried it was a rushed, botched job.

Businesses appealed to Marion County Assessor Greg Bowes, who so far has shaved $567 million off the assessments. Property owners haven't prevailed in all the completed appeals. Fifteen resulted in no assessment change, and another 161 were withdrawn — sometimes by property owners who didn't like the outcome and opted to live with the original assessment.

Bowes also is responsible for the county's 12,977 residential appeals, though the results of those cases will have less of an effect on the county's overall finances. The appeals represent only about 4 percent of residential properties.

The stakes are far higher on the business appeals.

OneAmerica Tower and other downtown office buildings account for most of the 10 largest appeals outstanding; reassessment raised their combined values $143 million.

Business properties with completed appeals were valued at $869 million before reassessment. That process raised their value to $1.3 billion. However, after appeals, their value dropped to $753 million — $116 million less than where they started.

Bowes said it will take years to sort through all the appeals. In July, his office finally finished the business and home appeals filed after 2002's reassessment.

"We're cranking out between 90 and 100 appeals per month, Bowes said. "If that's the pace, that's a lot of months."

He said the early appeal results don't signal Manatron's reassessment was flawed. He said he started with appeals in which property owners were most upset, which often were the cases where the largest amounts of money were in dispute.

He also noted that business owners have not contested $1.1 billion in assessment increases, signaling many were satisfied with the outcome.

"We've done so few appeals yet that we shouldn't call it a pattern across the board," he said.

But Ball State University economist Michael Hicks said it would be a mistake to assume that uncontested assessments are the same thing as accurate assessments.

For one thing, it's unlikely any underassessed firm would mount a challenge. And firms whose properties are overassessed won't appeal if they calculate the time, hassle and expense is more than they'd save on their taxes.

"Why go out and appeal something that's wrong if the cost of the appeal is at or greater than the actual revenues saved? Plus, there's the possibility you won't be successful," Hicks said. "And none are going to appeal because of undervalue. I suppose some might appeal out of civic pride, but I haven't met one."

A two-way street

Brian Poore, vice president of locally based Eugene B. Glick Co., remembers well the day his firm received its reassessment results. They more than doubled Glick's annual property tax bill, from $3.2 million to $6.5 million.

Poore immediately scrambled to file appeals on several dozen Glick properties — mostly apartment complexes — before the 45-day appeal deadline. Their reassessed value had risen from a combined $139 million to $269 million.

"I can tell you there were extreme emotions there," Poore said. "Apartments were hit hard in general, way beyond what was reasonable."

Glick has had good luck so far. It's already settled nine appeals, including one of the largest appeal gains on record. Glick's Chelsea Village apartment complex, which is just inside Interstate 465 near Township Line Road, was valued at $6.6 million before the reassessment. The state certified an increase to $17 million, but, after appeal, Bowes agreed to a $7.6 million valuation.

Even with that victory, assessment appeals still are creating headaches at Glick. It's impossible to predict how its remaining appeals will conclude. So Glick can't tell how much money it should budget for property taxes.

"What it means internally, when you're trying to manage these properties, you're also dealing with mortgage companies that pay your taxes for you. It impacts your escrow payments and affects what you're trying to budget next year for expenses on the property," Poore said.

"If you have a large amount of property, it can impact the ongoing operation until it gets worked out. If a company has reserves, that's one thing. But others do not."

There are complex matters for attorneys and tax consultants to wrestle with on most appeals. After correcting any faulty facts on record, such as square footage, many move on to calculating alternative interpretations of assessment value.

The law allows three methods to determine it.

Property owners can make arguments based on the replacement value of a structure, minus its depreciation. They also can make comparisons against the market prices of similar properties that have recently sold, if any are available. Or they can calculate the income a property produces to derive value.

Todd Shebesta, vice president of Atlanta-based property tax consultancy Easley McCaleb and Associates Inc., used the third method to successfully appeal the assessment of McGregor Woods Apartments, 5320 Churchman Ave.

Owners of the complex hired him after the state certified an assessment increase from $6.4 million to $14 million, raising its annual property taxes from $200,000 to more than $400,000.

Public records for the case show Shebesta argued the property should be valued at $4.5 million. When the appeal concluded, Bowes and Shebesta had agreed to a $6.5 million valuation — which means a $210,000 property tax bill for McGregor Woods.

"There's always a negotiation that goes on with the assessor," Shebesta said. "It's a two-way street in the appeals process."

If taxpayers are unsatisfied with the results they receive from the Marion County assessor, they can take their appeal to the Marion County Property Tax Board of Appeals. Additional appeals would go to state boards and courts and, finally, the Indiana Supreme Court.

Steven Ajame, president of the county's Property Tax Board of Appeals, said that when different valuation methodologies don't agree, judgment comes into play.

"All three [methods] are valid arguments for me," Ajame said. "If systems don't jibe, I guess you have to go with your gut feeing and decide which is the most fair and equitable for the time being, and then go from there."

Growing pains

Wayne Township Assessor Michael McCormack said the record number of business appeals proves what township assessors have long argued: Their judgment and knowledge of their local areas is critical in establishing fair property assessments.

Because Bowes contracted business reassessments to Manatron, township assessors were cut out of the process.

"It looks like the township assessors knew what they were doing," McCormack said. "We sat there and told the state none of this was right. And no one wanted to listen."

But such debates now are academic. On Nov. 3, Marion County approved a ballot measure eliminating township assessors. Bowes now is absorbing their operations into his office. He previously oversaw 17 people and a $1 million budget. He's now adding $9 million in budget and 132 former township employees.

Bill Waltz, the Indiana Chamber of Commerce's vice president of taxation and public finance, expressed confidence that the drawn-out appeals process ultimately will yield more accurate assessments.

But in the meantime, Hicks noted, many local companies are stuck guessing what their property tax bills will be. That's always harmful, but particularly in a recession, when every dollar is tight.

"Businesses dislike uncertainty as much as they dislike bad news," Hicks said. "The uncertainty inherent with this is a problem. To view it as anything other is a mistake."
Source: XMLAr00103.xml
ADVERTISEMENT

Recent Articles by Peter Schnitzler

Comments powered by Disqus