ÒThe
system is brokenÓ -- Assessor
by
Mike Kroll
City of Galesburg Township Assessor Darrell Lovell
acknowledges with regret that his is elected office is not well loved by many
taxpayers. As assessor Lovell is charged with the responsibility of determining
a fair market value for all non-agricultural real estate within his township
boundaries, that is most of the City of Galesburg. It might surprise you to
learn that Lovell is growing increasingly frustrated by what he sees as an
unnecessarily complex system that is increasingly finding itself manipulated in
ways that challenge Lovell's desire for fairness and equity across taxpayers.
ÒThe system is being abused by companies that exist
solely to profit by securing property tax reductions for large commercial or
industrial real estate holders at the tax paying expense of the rest of us,Ó
explained Lovell. ÒThe system includes a method of protest for tax payers who
believe that their real estate is over valued resulting in higher property
taxes, as it should. But a whole industry has sprung up composed of attorneys,
appraisers and others who in effect speculate in property tax appeals. Often
they file such appeals totally independent of the true property owner and later
split whatever tax savings they can win or negotiate. This sad situation is
very much like an ambulance chasing lawyer filing lawsuits on behalf of injured
parties who haven't even consented to be clients.Ó
Lovell's feathers are well ruffled by property's tax
protests on behalf of commercial or industrial property's submitted by these
outside firms who attempt to bully or intimidate downstate officials into
substantially reducing the assessed value of such real estate, often without
the active participation or knowledge of the property owner. In recent years it
has become standard practice for these professional property tax appeal
companies to file a bunch of appeals on local commercial or industrial
properties. With the increasingly common downsizing or closure of small town
industrial operations these companies have become more and more active.
ÒThe former Maytag warehouse is a perfect example of
what is wrong with the system,Ó asserts Lovell. ÒWith manufacturing buildings
closing right and left across America these property tax consultants are
targeting smaller communities like ours as easy pickings for big bucks appeals.
In many cases they don't even bother to obtain real appraisals or they buy what
amount to sham appraisals written to suit their needs. It is tough to find
comparable industrial properties in smaller communities and these companies see
local officials as less sophisticated and savvy, more likely to be intimidated
and often unwilling to spend local tax money on their own experts to counter
the sham appraisals.Ó
Each spring property owners have the opportunity to
appeal the value of their real estate as determined by their local assessor.
The appeal process is a multi-step process where you first contact the county
supervisor of assessments with you concerns. In the case of a simple error or
oversight this is often all that is necessary to work out a agreeable solution.
But if the property owner still feels the assessment is too high they can file
a formal appeal with the county property tax board of review (BoR). This board
of local citizens sets up hearings where both the property owner and the
assessor state their case and the board rules on an appropriate assessment for
the tax year in question. Remember, property taxes you paid in two payments
this year are actually for the previous calendar year.
Both sides are permitted, in fact encouraged, to bring
evidence and/or experts to support their case for an appropriate property
value. Often this means hiring an outside expert to conduct an appraisal of the
property. Not surprisingly, in the absence of compelling evidence or testimony
to the contrary most hearings result in upholding the property value set by the
assessor. If the tax payer is still unhappy with their property's assessed
value they can appeal this decision to the state property tax appeals board
(PTAB), the last administrative appeal possible before a head-to-head battle in
court.
ÒAs of
property tax years 2000 there was general agreement that the former
Maytag warehouse had a market value of over $15 million. The following year I
still had the property valued at that level and Maytag hired an appraiser,
Salisbury and Associates, as part of their appeal. The Salisbury appraisals
placed a market value of $9.35 million on the warehouses and when the matter
ended up before PTAB they ruled that the fair market value was $10,257,510 for
the 2001 property tax year. Over the next two years neither Maytag nor anyone
else filed any appeals of the property tax bill for the warehouses and as of
January 1, 2004 I had them valued at $10,462,680 due to the 2003 state-assigned
1.02 multiplier.Ó
By this point in time it was well know to all that
Maytag would soon be shutting down operations in Galesburg. The plant would
close for good on September 16, 2004 but the company put the warehouses up for
sale in June, 2004 listing them for $8 million. As is his custom Lovell assumed
that they would not get the full amount upon sale of the property and adjusted
his fair market value down to $7.5 million effective for the 2005 property tax
year.
On February 14, 2005 Deloitte Tax, a Òproperty tax
services group consisting of 400 professionals in 41 cities throughout the
United States and CanadaÓ filed an appeal on the Maytag warehouse's 2004
property tax bill that was payable in 2005. Deloitte took this step independent
of Maytag and was apparently unfamiliar with the local process. They alleged
that the warehouse was worth only $2,124,780 as of January 1, 2004 but they had
not done an appraisal and their paperwork was not complete according to Knox County
Supervisor of Assessments Joyce Skinner and on March 17, 2005 the BoR refused
to grant Deloitte a hearing.
The very next week, following many press inquiries
into their plans Maytag officials in Newton, IA reportedly responded tersely by
e-mail to the Register-Mail. Without acknowledging that this entire appeal was
actually completed independently by Deloitte and that the Maytag corporation
actually had had no role in the process anyway, Maytag announced that it was
dropping the property tax appeal. ÒMaytag has made a business decision to no
longer pursue the property tax appeal issue. Beyond this, we have no further
comment on this matter.Ó
The very next month (April 6, 2005) Maytag sold the
warehouse to Industrial Realty Group for $3.4 million. This sale again prompts
Deloitte to file another appeal of the 2004 property tax bill for the
warehouse. Deloitte has an ÒappraisalÓ completed in June 2005 and in September
2005 they file second appeal of the 2004 property tax bill.
ÒThis appeal wasn't done by Maytag who actually owned
the property in 2004 nor by the company that just purchased the property in
2005,Ó complains Lovell. ÒThe new appraisal appears to be a sham simply using
the sale price to set a property value for the previous year. All Deloitte is
out to do is split the tax savings with Maytag. Maytag has already paid
property tax on my $10.462 million market value and if Deloitte wins this
appeal they stand to split over $300,000 in refunded property taxes and
interest. Because of the 2005 sale there is good cause to reduce the market
value of the warehouse following the sale but there has been no evidence
provided that this property had a real market value less than $10.4 million as
of January 1, 2004 and that is what the 2004 property tax bills must be based
upon.Ó
This past January Deloitte filed another proforma appeal of the tax year 2005
property taxes for the former Maytag warehouse pending the outcome of the
appeal of the 2004 tax bill. The local BoR denied Deloitte's appeal and
Deloitte filed to go before PTAB. Since the local hearing efforts have been
made to negotiate some kind of settlement with Deloitte and avoid the PTAB
hearing but to no avail. Lovell says they now face an October 3rd
deadline and he hopes to meet with Deloitte before then but if things can't be
worked out he wants to fight the appeal at PTAB.
ÒThis type of action isn't fair to the remaining
property tax payers who's own tax bill will need to go up to make up for
whatever savings Deloitte secures on this warehouse. I believe we need to
vigorously defend our property tax assessments and historically my tax
supported bodies have been willing to share in the cost of counter appraisals
and other expenses. It is important that States' Attorney Paul Mangieri and my
township attorney become involved in the process immediately to protect the
interests of our local tax payers. Ultimately something must be done to fix the
system so that the rights or actual property owners are protected while
protecting everyone from these predatory firms who seek to manipulate the
system for private, third-party gain.Ó
Timeline to the Maytag warehouse property tax saga
Jan 1, 2001 –
Market Value per Property tax assessment $15,178,560
June 25, 2002 –
Market Value per Salisbury appraisal $9,350,000 (effective 1-01-01)
Mar 7, 2003 --
Market Value per PTAB ruling $10,257,510 (effective 1-01-01)
Tax year 2002 --
No Change (Maytag doesn't protest Property Tax and 1.0 multiplier)
Tax year 2003 --
Market Value $10,462,680 (multiplier of 1.02)
Jan 1, 2004 --
No Change
June 2004 --
Maytag lists warehouse for sale asking $8 million
Sep 16, 2004 --
Maytag plant closes
Tax year 2005 --
Lovell adjusts warehouse Market Value down to $7.5 million for
2005
property tax year
Tax year 2005 --
Market Value automatically adjusted down to $7,350,000 due to 0.98 multiplier
for 2005 property tax year
Feb 14, 2005 --
Deloitte Tax protests Maytag's 2004 property tax bill alleging
1-01-2004 Market Value of only $2,124,780
Mar 17, 2005 --
Knox County Property Tax Appeals Board rules that Deloitte complaint paperwork is incomplete and denies hearing
Mar 24, 2005 --
Maytag reportedly e-mails
Register-Mail a short response to queries about the status of the 2004 property
tax appeal (ÒMaytag has made a business decision to no longer pursue the
property tax appeal issue. Beyond this, we have no further comment on this matter.Ó)
April 6, 2005 --
Industrial Realty Group purchases warehouse for $3.4 million
Sep 12, 2005 --
Deloitte Tax protests warehouse's 2004 property tax bill claiming 1-01-2004
Market Value of $3.5 million
Jan 1, 2006 --
Deloitte Tax protests warehouse's 2005 property tax bill pending ruling on 2004 tax bill