By Mike Kroll

With economic hard times upon us many assumed local property values would tank almost immediately, but that was not the case. Galesburg area real estate prices held up for a while and the market was active according to Lovell. But this year saw the beginnings of a weaker area real estate market, particularly among commercial properties. "Recently we are noting eight-out-of-ten commercial properties are selling for less than assessed market value and there is steadily increasing pressure by property owners to adjust property values downward." There is a mechanism in place that allows property owners to do just that but City of Galesburg Township assessor Darrell Lovell fears that the process may be getting our of hand in the case of some commercial properties.

It was late in Monday evening's Galesburg City Council meeting that Lovell stood before the council to ask for their support in defending the current assessed market value for a large Galesburg apartment complex. Lovell was reacting to actions by the Knox County Board of Review to reduce the assessed market value of the Hollow Tree apartment complex to $2,139,468 for the 2003 tax year. Lovell's original 2002 market value was $3,427,050 but the owner appealed Lovell's assessment to the BOR where it was reduced to $2,498,100 for the 2002 tax year. In an attempt to defend his original assessment Lovell hired an outside appraiser at a cost of $4,000. Lovell's appraiser determined the market value to be $3,477,834 however the BOR still reduced this amount by nearly a million dollars.

Lovell accepted this and since the above reduced value was submitted to the Illinois Property Tax Appeals Board making it official short of a court challenge by the Hollow Tree owners. What got Lovell excited was a series of "Certificates of Error" prepared by Knox County Supervisor of Assessments Joyce Skinner for the BOR. Skinner says that these were due to some misunderstandings and calculation errors by the BOR and merely insured that the final assessed market value of the property matched the agreement reached between Hollow Tree's owners and the BOR. Three such certificates were issued subsequent to the July 26 PTAB hearing held here in Galesburg. Skinner says that at this hearing the PTAB representative strongly suggested the BOR reach an agreement with Hollow Tree's representative. This was awkward because neither Lovell nor his appraiser were able to attend the hearing and hence were not represented. Hollow Tree stood by their own appraisal but reached an agreement with the BOR. "The man from PTAB said that he was a former appraiser and that he believed there were some significant holes in Lovell's appraisal," commented Skinner.

Lovell acknowledges that some paperwork errors were made by either Skinner or the BOR but insists that $2,480,100 market value submitted to the PTAB on September 20th cannot be changed before the next tax assessment cycle. By Illinois statutes, once the PTAB renders a decision lowering the assessment of a particular parcel that decision is final for the current tax period unless a dissenting court judgment is subsequently awarded. Nevertheless, the BOR completed yet another Certificate of Error on October 5th further reducing the Hollow Tree value to the $2,139,468 value for the 2003 tax year. Lovell maintains that this action was illegal and wants the local tax bodies to join with him in challenging Skinner and the BOR.

This is a case where differing perspective or viewpoint can sometimes blind us to alternative positions that are equally defensible. Lovell sees the BOR actions as costing taxpayers thousands of lost tax dollars but from Skinner's viewpoint this was an unpleasant task she had no way of avoiding. Skinner points out that there is an exception to this rule included in the official rules booklet published by the PTAB. "The [BOR] may revise and/or correct a decision upon its own initiative at any time prior to the expiration of the administrative review filing period... if a mistake in the calculation of an assessment or other clerical error is discovered." From Skinner's perspective she just wants the whole thing completed properly and she shares much of Lovell's frustration. Both understand that this action will undoubtedly prompt a flood of new appeals by Knox County commercial property owners eager to save on their own property taxes.

Another little-known aspect of such appeals that frequently gets the goat of assessors as well as tax bodies is that a substantial number of commercial and industrial property tax appeals are not initiated by the property owner. There are firms that specialize in launching such appeals, often without even the property owner's participation, in hopes or reaping payment of a substantial portion of the resulting property tax savings. Typically these firms are composed of lawyers and real estate appraisers mimicking ambulance-chasing lawyers for a contingency windfall.

For a typical homeowner we may be speaking of a few hundred or thousand dollars at stake but for many a commercial property the amounts multiply by orders of magnitude. It is common for reductions in the hundreds of thousands to be requested and even granted at some point in the process. This can mean substantial property tax savings for the property owner and higher property taxes for the rest of us. You see when taxing bodies set their tax levies they specify not a tax rate but a total dollar amount they need from property taxes. The property tax rate is then calculated backwards such that the necessary levy is met. When property values decrease the tax rate necessary to meet the levy requirement necessarily increases.

When making a case before either a local BOR or the PTAB the best evidence is a history of relevant property transactions establishing a market price but the next best thing is a supporting appraisal. An appraisal from a qualified person or firm can cost thousands of dollars and in the end the final decision is frequently based upon the relative qualifications and presentations offered by these appraisers. Typically, the cost of such appraisals must be borne by either the property owner or tax bodies but these mercenary firms take the risk of completing their own appraisals in the hope of sharing in the resultant tax savings eliminating the risk to the property owner.