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Hamilton County communities battle tax appeals

September 13, 2014
Fishers Train Station redevelopment

A $28 million development planned for the former Fishers Train Station site will produce at least $5 million in property taxes over 25 years—regardless of what the Hamilton County Assessor’s Office says the property is worth.

Fishers made sure of that by including a minimum-annual-tax provision in its February project agreement with Loftus Robinson Development. Such guarantees have become standard practice as town leaders try to hedge against post-recession market volatility and the potential for large property-tax appeals.

Its Hamilton County neighbors have similar concerns.

appeals-table.gifNoblesville, for example, requires businesses seeking financial incentives to promise not to appeal their tax assessments while an economic-development deal is in place.

And Carmel Redevelopment Commission boss Corrie Meyer is reaching out to property owners in her jurisdiction directly, asking for their “continued partnership” to make sure revenue projections prove accurate.

The stakes are particularly high in tax-increment-financing districts, where local governments issue bonds backed by future taxes to draw potentially lucrative commercial projects. If the expected income doesn’t materialize, other taxpayers may have to make up the difference.

At one point in July, nine pending property-tax appeals threatened to reduce Carmel’s TIF revenue by nearly $640,000 a year. Meyer said several landowners dropped appeals after she called; others have yet to be resolved.

“They recognize the investment the city already has put into its TIF areas,” she said.

Meyer also has been working more closely with the county Assessor’s Office during the appeal process, sharing data to support existing property values and in some cases helping to negotiate a compromise.

Until recently, local officials may not have found out about an appeal until after the county’s appointed Property Tax Assessment Board of Appeals had rendered a decision.

The five-member board operates independently, evaluating evidence—appraisals, comparable sales and vacancy rates, for example—from both the assessor’s office and the property owner. Its decisions can be appealed to the Indiana Board of Tax Review.

Dickey Dickey

“If we’re wrong, we want to fix it,” said Assessor Robin Ward, who is finishing her first term in office. “If we’re right, we are going to defend it all day long.”

Despite their vested interest in the outcome, cities and towns don’t have legal standing to participate in the appeal proceedings. County assessors aren’t even required to tell local government when an appeal is filed.

That’s something the Indiana Association of Cities and Towns hopes to change in the upcoming General Assembly. The statewide advocacy group plans to seek legislation that would make such notifications mandatory.

“Our members need to be able to gather facts and resources in order to really determine what the assessment should be,” said Rhonda Cook, director of government affairs at IACT, which made property-tax appeals one of its five legislative initiatives for 2015.

The Hamilton County communities began imposing the safeguards in the last couple of years, as development picked up following the economic crisis. They aren’t the only Indiana municipalities taking on an active (if unofficial) role while they await legislative help. But many more—including Indianapolis—have not made it a practice to contest appeals.

Ward and staffers on her newly formed commercial-assessment team said local officials can help verify values by sharing promises developers made when they negotiated incentives. Or, even better, they can avoid disputes altogether by laying ground rules, as Fishers and Noblesville have done.

“We have a little bit of leverage, because when businesses ask for an abatement or TIF [funding] or whatever, they represent what the assessed value of the finished product will be,” said Mike Howard, a municipal attorney who works for the city of Noblesville and the Hamilton County Commissioners.

And even before Noblesville added the covenant prohibiting appeals during abatement periods, he said the city reserved the right to terminate tax deductions if projects didn’t live up to expectations.

Fishers worked with Indianapolis-based CPA firm Umbaugh and Associates to come up with the minimum-tax agreements. Umbaugh generates tax projections based on comparable projects, and officials negotiate annual payments that continue as long as the debt is outstanding. If the owner fails to pay, Fishers can put a lien on the property, said Community Development Director Tom Dickey.

meyer-corrie-mug Meyer

“It injects a degree of predictability into the budgeting process,” said Town Manager Scott Fadness, who will be Fishers’ first mayor when it becomes a city Jan. 1.

Dickey said the town has taken a fairly conservative approach to its TIF funding, borrowing only as much as it can repay with revenue the redevelopment areas already are producing.

Still, appeals can throw a wrench in the works.

The city of Westfield’s TIF revenue fell about $180,000 short of expectations last year because of commercial property-tax appeals, said Chief of Staff Todd Burtron, resulting in less money available for projects such as improvements to South Union Street and Quaker Park.

“We had to adjust—do subtraction,” he said. “There’s so much uncertainty in municipal finance, we have to give ourselves enough room to respond and react to property tax appeals.”

Carmel’s long-term TIF projections were drafted assuming 10 percent of the assessed value in its redevelopment areas would be appealed. Even with that contingency built in, money is tight.

“We’re going to be aggressive in participating in the tax appeal process,” CRC’s Meyer said.•

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