Trade Secrets

Cut Taxes: Send Assessors the Right Information
By Robert L. Gordon, Esq.

as published in Apartment Finance Today, April 2007

Today, assessors are looking to squeeze cap rates down as far as possible, which inflates an apart ment property's value based on capitalizing its net operating income. As cap rates drop, slight changes in net operating income will have an exaggerated effect on the final value.

It is critical to report to the assessor only that income directly related to the apartment operation, with all interest and investment income excluded. Likewise, every expense related to the apartment operation should be reported. Owners of multiple properties should ensure that expenses (e.g.. accounting fees), which they may centralize at a corporate level, are fully allocated to the individual properties. Finally, presentation matters. Since the assessor will disregard superfluous items (e.g., intercompany transactions) and excessive expenses (e.g., overstated management fees), including such items may diminish the credibility of everything else the taxpayer presents. The assessor should only receive items directly relevant to the property's tax value.

Robert L. Gordon is a partner in Milwaukee office of Michael Best & Friedrich, LLP, the Wisconsin member of American Property Tax Counsel, the national affiliation of property tax attorneys.
He can be reached at RLGordon@Michaelbest.com