What Assessors Want in a Tax Appeal
Tax appeals are expected to increase significantly due to challenging conditions, such as Covid. Owners are not generally aware they could bypass the tax appeal attorney and consultant and avoid excessive appeal fees by relying on software.
Writes Bill Quinn, a veteran tax appeal industry insider
The tax appeal

Commercial real estate (CRE) owners and asset managers of all property types typically review annually and appeal, when warranted, real estate taxes by challenging the value assessed by local governments – so CRE owners are well versed with this opportunity of lowering real estate taxes. Assessors are also well versed since they deal with an annual onslaught of voluminous appeals.

Commercial assessors are under appreciated by their government leaders

It is a little-known fact by citizens, including local government leaders, the tremendous amount of and the importance of the work done by assessors. They are on the front lines receiving much constructive criticism, albeit in a professional manner most of the time, regarding the output of what is known as a Mass Appraisal System. Suffice to say, assessors do not have the resources to appraise every property in depth; they rely on a Mass Appraisal approach. The amount of work they have to do while under pressure from both internal government leaders and external tax appeal industry representatives (i.e., attorneys and consultants) is truly amazing. Assessors appreciate people who understand the difficult paradigm in which they work. The difficulties of that paradigm are truly unique relative to the government paradigm faced by other government workers.

Accurate and complete data

It is expected that for income producing CRE, the tax appeal evidence includes annual income statements (for the three most recent years) and a couple of rent rolls (at the valuation data and one year before), which enables trend analysis. For certain expense line items (e.g., maintenance, repair, administrative, etc.), it is also expected that the detail line items making up these categories will be included. If capital expenditures are a valuation issue, then the detail line items are expected. At minimum, assessors expect to receive accurate and complete data.

Competent and fair valuation analysis

When an assessor sees a petitioner or appellant (i.e., the owner or agent who is appealing) present a capitalized land lease as the valuation for an income producing improved property, the case is lost. When an assessor sees a petitioner present a capitalization rate of 8% for a property whose single tenant is an S&P 500 company that takes up the entire building, the case is lost. Assessors want to deal with competent and fair-minded agents (e.g., attorneys and consultants) who will not waste time asserting values unsupported by market facts and conditions. A sophisticated assessor from a large city said: “You’d be surprised what I’ve seen from national firms – [this one] doesn’t seem well prepared. They are not adding any value.”

Another assessor from a large metropolitan office said: “Assessors are generally frustrated with appellant agents that operate in a less than forthright manner.” Another assessment official said: “Appeal boards get suspicious of how some agents operate.”

Complete Documentation

Nothing makes the assessor’s job easier than an evidentiary package that is complete. If a petitioner asserts a low market rent, it must be substantiated with market lease transactions that are comparable. If expected future capital expenditures are a factor incorporated in the valuation approach, documented evidence, such as price quotations, should be included. A complete set of documentation means less time and work by the assessor.

The relationship myth

Even when assessors encounter people who a) understand the challenges of the government assessor paradigm, b) submit accurate and complete data, c) present competent and fair valuation analysis, and d) submit a complete set of documentation, they do not establish a special relationship where the special relationship garners premium appeal results. A senior assessment official said this: “Who gives you the information is not important.” Another put it in these terms: “Having an agent doesn’t buy you anything.”

Some tax appeal attorneys and consultants perpetuate a myth that their special relationship with the assessor effects appeal results and justifies their fee. An assessor supervisor for a large metropolitan assessment office put it this way: “With rare exceptions, the assessor does not play favorites, but seeks a correct value for every property, in order to distribute the tax burden fairly to all.”

Also, remember assessors are not attorneys and sometimes have discomfort working with them. An assessor manager said: “Many agents have negative reputations which owners don’t realize.” The data, along with a competent and fair valuation analysis, is what determines the result of an assessment appeal.

CREyield is leading the way
CRE owners should embrace those tax appeal companies that are driving dramatic change to the tax appeal paradigm by applying innovative technology – CREyield is leading the way. Technology can be used to ensure the delivery of accurate and complete data, competent and fair valuation analysis, and complete documentation.

Bill Quinn is CEO of CREyield and formerly Director of Tax & Legal Services at PwC. He has saved CRE owners hundreds of millions of dollars appealing tax values. He can be reached at bill.quinn@creyield.com