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Arizona counties will be mailing out their 2013 tax year notices of value for property tax purposes in February 2012. In many cases, however, because of the methodology county assessors use to value property, property tax values will not fully reflect the continued market decline in value.

Arizona law provides two avenues for taxpayers to appeal their values. A taxpayer who elects to challenge their property’s valuation through the administrative process has 60 days from the mailing of the notice of value in February 2012 to file with the county assessor. Each county assessor elects when to mail out notices, so taxpayers with properties in multiple counties should be alert. Taxpayers unaware of the deadlines can easily miss an opportunity to challenge their property’s valuation.

A taxpayer who misses the deadline for an administrative appeal may file an appeal in tax court by December 15, 2012. Moreover, taxpayers who purchase a property after December 15, 2011 but before December 15, 2012 may file an appeal in tax court challenging the 2012 tax year value.

Because failure to file a timely appeal bars any further challenge to the property’s valuation, it is important for property owners to consult with local counsel to ensure that their properties are being valued properly and equitably.

Fee Simple, If Unnumbered - The Saga Continues

The ongoing litigation interpreting the charging section of the Ontario Assessment Act as it defines “current value” (market value) continues.
At issue is the meaning of “fee simple, if unencumbered” as the basis of establishing that value. It has been alleged by the assessment authority that it is a valuation concept incorporated into the legislation. As taxpayers, we are alleging it as a legal interest defined. At issue is whether in valuing significant commercial office buildings it is appropriate to value those buildings as vacant given that the direction to establish value utilizing a fee simple interest, if unencumbered contemplates vacant possession on closing. The taxpayers were successful at the first level (Assessment Review Board). The decision of the Assessment Review Board, however, was overturned by the Divisional Court (first level of appeal). Leave to appeal has been granted, however, to the Ontario Court of Appeal (the equivalent of a State Supreme Court) and the issue will ultimately be determined by that court. Needless to say, millions of dollars are at stake as the decision if favourable to the taxpayers seriously disrupts the valuation principles utilized by the assessment authority for the valuation of significant commercial and industrial property throughout the Province. It is anticipated that the appeal will be heard at the Court of Appeal in June 2010.

In July, the California State Board of Equalization (SBE) issued a draft of Assessors’ Handbook Section 410, entitled “Assessment of Newly Constructed Property,” in late July. Section 410 addresses a variety of topics related to “new construction” which, next to changes in ownership, is the primary driver for property re-assessment under California’s Proposition 13. The draft handbook defines and provides examples of the terminology used to describe new construction. Chapter 3 of Section 410 reviews the methods for valuing new construction. And Chapters 5 and 6 give an overview of new construction exclusions and the handling of new construction when applying for base-year value transfers. The SBE will accept comments on Section 410 until September 30, 2011. The SBE’s draft of Assessors’ Handbook Section 410 can be viewed at www.boe.ca.gov/proptaxes/pdf/lta11025.pdf.

The Colorado legislature has passed new legislation requested by the state county assessors’ offices, effective for tax year 2011. This new legislation requires disclosures within 90 days of the filing of a protest before the Board of Assessment Appeals for cases involving rent-producing commercial property. In the past, parties were not required exchange information regarding the facts of their appeals until ten (10) days prior to a hearing. The new legislation requires the taxpayer to disclose rent and expense reimbursement receipts, expenses and other relevant income and expense information, including rent rolls, for the two prior tax years.

The assessor, in exchange, must disclose both the data and the methods used to determine the actual value of such property. These provisions do not apply to residential apartment properties, which are defined by Colorado law as residential property. This new legislation is intended to have the affect of limiting the filing of appeals to the Board of Assessment Appeals to only those cases which taxpayers are willing to disclose all of the pertinent financial information of the property. In the past, taxpayers have had the luxury of filing a protest without disclosing information, attempting instead to negotiate a plea agreement with the taxing authority prior to spending any time or effort in producing documentation.

Under this new legislation, the taxpayer must determine if it wants to spend the resources in prosecuting its case much earlier in the process. This process will have a chilling effect on the fining of cases by Property Owners.

One of the reasons Connecticut's 169 municipalities do not generally choose to revalue real estate within their precincts more frequently than required by state law, five years, is the cost of doing so. This argument has helped to discourage the General Assembly from mandating more frequent revaluations.
As a result, it comes as a refreshing and indeed slightly surprising development to learn that 8 rural towns in eastern Connecticut decided to join forces and budgets to conduct their periodic revaluations together. The towns of Ashford, Brooklyn, Canterbury, Eastford, Sterling, Thompson, Woodstock (and Sprague in all likelihood) have contracted with Tyler Technologies to accomplish their revaluation responsibilities.
Northeastern Connecticut Council of Governments' Executive Director John Filchak comments in the Tolland Patch, an e-newspaper: "The monies saved for our towns and the efficiencies gained here are impressive and are, we believe, a model for other regions and states." One community's elected official estimates a savings of 25% by participating in this program.
Whether this approach can translate to the more urban communities in the state with substantial numbers of commercial parcels remains to be seen.

The Property Appraiser of Orange County has filed a complaint against the Florida Department of Revenue (“DOR”) to invalidate DOR’s training material which provides that Higgs v. Good does not apply to Value Adjustment Board (“VAB”) proceedings. In September 2011, we wrote about an administrative law judge who upheld the training materials as a valid agency statement and not an improper creation of a rule. This new lawsuit is another attempt to reverse the DOR position.

In Higgs, the court found that if a Property Appraiser requests information from a taxpayer during the appraisal development process and the taxpayer fails to supply the information, the taxpayer cannot use the information in a judicial proceeding. The DOR training materials interpreted this decision to be limited to judicial review and not to VAB proceedings. DOR opined that as long as the taxpayer supplies the information in a timely manner in the VAB proceeding, the information must be admitted as evidence at the hearing.

The Property Appraiser seeks to extend the holding of Higgs in all property tax assessment challenges. The Property Appraiser’s action also seeks to require compulsory disclosure of financial information, although Florida does not currently require compulsory disclosure of this information.

The Idaho Supreme Court recently struck down a “stormwater utility fee” imposed by the City of Lewiston. The challenge was brought by the school district, the local state college, the county, the port district and the irrigation district. Because these governmental entities own property in the city, they were charged the fee along with private property owners. The city began charging the fee on October 1, 2008, to fund the operation and maintenance costs of its stormwater system. The city defined costs broadly to include a variety of interdepartmental charges from the street maintenance department and other divisions at city hall. The Supreme Court found that the fee was an unauthorized tax in disguise. The reasoning of the decision applies to all property owners, not just the other governmental entities who brought the challenge. On December 5, 2011, the city council voted unanimously to refund the nearly $1.2 million collected under the invalid system.

ILLINOIS Property Tax Update
Updated September 2011

Latest Civic Federation Tax Rate Report

In Illinois, the Civic Federation (which is a Chicago-based tax research organization that studies local and state governmental tax policies and which also publishes articles and studies regarding government budgeting, spending and tax policy) has just released its latest study on local property tax rates. The new Civic Federation report covers a ten year period from 2000 to 2009 (and adds the tax assessment and tax rate information for the 2009 tax year-the most recent year for which the information is available in Illinois).

The Civic Federation Report not only provides the actual tax rates and equalization factors, but more importantly, calculates the “effective tax rates,” a ratio which compares the actual taxes paid by a particular property to the market value of the same property. In this regard, the “effective tax rate” ratio constitutes a valuable tool for developing an apples-to-apples comparison of the actual tax burden being imposed on different property types (residential or commercial) or similar property types located in different geographic areas. Moreover, if taxes go up while market values are declining, this will have an immediate upward impact on the effective tax rates in a given location.

For 2009, the Civic Federation study reports that the effective tax rates increased for residential properties in all of the 32 Illinois municipalities studied. In Chicago, the effective tax rates for residential properties increased by a very substantial 10.7%. Commercial properties fared somewhat better with an overall effective tax rate increase of 3%.

Jeffrey A. Brown
Fisk Kart Katz and Regan, Ltd.
American Property Tax Counsel (APTC)