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May
08

Don’t Forget Obsolescence in Property Tax Appeals

It's critical for owners to identify both economic and functional obsolescence in order to fight unfair tax assessments

By Brian J. Morrissey, Esq.

New technologies, shifting markets and aging buildings can drive economic obsolescence across entire industries. Equally important for the taxpayer, these factors also affect individual property values from a functionality perspective. Understanding both economic and functional obsolescence is essential to properly evaluate tax assessments for accuracy.

Determining functional obsolescence requires an analysis of the property's layout and technologies in use. This exercise attempts to quantify any adjustment in value that amplifies or outpaces downward trends occurring in the market, or accelerates depreciation beyond a straight-line basis. This may include external trends having a unique negative effect on the property's functionality.

Likewise, economic obsolescence can affect a property's value.Such an analysis involves external factors not necessarily specific to the property that may compromise its value on the open market.Declining trends in markets within an industry can signify reasons for impaired values both nationally and regionally.Moreover, international competition may underscore weaknesses within an industry that explain a reduction in a particular property's value.

In ascertaining the decline in a property's value due to economic obsolescence, the analysis must attempt to quantify that decline and offer reasons explaining it.These reasons need to be identified and reasonable, a rationale correlating values assigned to those reasons. For example, a facility may have a decline in excess of industry averages, such as changes in transportation costs and infrastructure in comparison to other supplying markets.It could become much less expensive to ship product from South America than to ship by rail in parts of the United States.

In an uncertain economic climate or a declining or stagnant real estate market, the need to evaluate obsolescence in property assessments is obvious. But even in times of growth and rising real estate prices, taxpayers should consider functionality in reviewing an assessment.

In Georgia, for example, regulations governing property assessments require local taxing authorities to take obsolescence into account. The statute lacks any description of the precise mechanics involved in measuring obsolescence, however, and assessors often forego such an evaluation.

A given jurisdiction's tax return may apply depreciation schedules, but those may not incorporate the concept of functionality. If unaddressed in depreciation schedules, then functional obsolescence needs to be captured as an adjunct to depreciation. Poor economic times or deterioration in a property's utility will exacerbate normal depreciation.

The degree of functional obsolescence is reflected in the utilization of the property. A comparison between full versus actual property usage can indicate the degree of functional obsolescence. Look for evidence of the gap between full and actual historical changes in operating income and production.

Functional vs. Economic Obsolescence

Given that the discrepancy between full and actual property utilization is unique to the facility and not industry-wide, it is functional. This could be explained by technological differences between competing facilities and the subject property. At the same time, external economic factors may contribute to the property's comparative decline.

For example, a printer may use antiquated equipment and technology that require it to keep large facilities for both production and warehousing. Comparisons will identify a gap in functionality between the property and those of more modern competitors using smaller facilities and newer technology. Faster production at newer printing operations may also require less warehousing, because projects are completed more quickly for shipping. The impact of this obsolescence on value is unique to the subject property, reflecting reduced functionality.

On the other hand, great changes are transforming the printing industry. These external factors may be detected in exactly the same way as functional change, but on an industry-wide basis.

Declining demand for an industry overall can impair a particular property's value. Such a sea change can exist within a robust economy, too: In our example, a digital culture has rejected the traditional model for printing to a significant degree, as the widespread use of electronic records and communication has reduced demand for paper printing.

A mine provides another example. Over time, miners extract the most accessible minerals using the least costly means. The layout and operation would have been originally set up to facilitate this process.

As mining continues, the remaining minerals may become more expensive to extract per unit of raw material. This added cost reduces operating income. The mine may require new infrastructure to continue operations. These periodic expansions may be inefficient, again increasing processing costs.

It may be true that, were the mine to be redesigned from scratch, no one would duplicate the existing operation because of the production costs. This reflects deteriorating functionality. On the other hand, industrial demand for the mined product may evaporate due to innovations that make the material unnecessary in processes that once required it.

Changing market forces can impact value. Until recently, the United States was a net importer of natural gas, supporting demand for facilities that enabled the import of liquid natural gas. Now that the United States is a net exporter of natural gas, those same facilities that handled the import of natural gas are more obsolete and less valuable.

Obsolescence is an important consideration in valuing property, regardless of economic conditions. This is especially true for functional obsolescence, but can also be true for economic obsolescence. In valuing property, it is important to remember there is significant overlap between the two, and many factors and influences may explain overall obsolescence.

Brian J. Morrissey is a partner in the Atlanta law firm of Ragsdale, Beals, Seigler, Patterson & Gray, LLP, the Georgia member of American Property Tax Counsel, the national affiliation of property tax attorneys. He can be reached at This email address is being protected from spambots. You need JavaScript enabled to view it..
Mar
28

Property Owners Beware

"The varying directions of price trends demonstrate that now, more than ever, Atlanta property owners should closely review property tax assessments and make specific determinations regarding the correctness of the valuation. General sales trends and perceptions provide insufficient basis for deciding whether or not to appeal the county assessment notice..."

The year following a real estate acquisition is a critical tax year or the property's owner. An assessor will typically latch onto the recent sale price to support a reassessment of the property's taxable value to equal that transaction amount, effective in the following tax year.

When the new assessment arrives, some taxpayers will recognize the familiar sales price amount reflected in the property's assessed taxable value, breathe a sigh of resignation and plan to be taxed accordingly. Yet there is good reason to question the new assessment's accuracy, even if it equals the acquisition price.

Georgia law provides that the transaction amount a buyer pays for real estate in an arms-length, bona fide acquisition shall be the property's maximum allowable fair market value for property tax purposes for the following tax year. Accordingly, purchasers of property in one tax year should expect to receive ad valorem tax assessment notices for the subsequent tax year at a value no higher than the purchase price. In other words, the taxable value may be lower than the acquisition amount.

Differentiate Price, Value

There are several analyses that a wise taxpayer should consider when reviewing the tax assessment received in the year following the property's purchase.

Some county taxing authorities use the purchase price as the taxable value for the next tax year by default. That price may not be an appropriate valuation, however.

Often the assessor is unaware that the purchase price may reflect an analysis of factors other than the value of the real estate alone, and that the price, therefore, may exceed the true fair market value. In that event, the taxpayer should identify and explain those factors to the assessor.

Examples might be special financing arrangements, the financial stability of certain tenants, the duration of existing rental terms, or the transference of non-real estate items such as personal property and/or intangibles. Intangibles may include an in-place work force, favorable contracts for property management or other non-taxable items.

Another potential consideration is that the property's financial performance may have varied from the expectations the purchaser entertained at the time of the acquisition. Perhaps physical changes to the property since the time of purchase have decreased its value; for example, the owner may have razed or demolished part of the improvements in preparation for remodeling or repair that did not occur before Jan. 1.

In short, the purchaser should not blindly accept a transaction value from the previous year as the real estate's de facto taxable value.

Is It Fair?

Be on the lookout for sale-chasing assessors. Sale chasing occurs when a tax assessor changes assessments only on properties sold in a given year and leaves assessments unchanged on similar properties that did not change hands.

Property owners should be diligent, comparing the assessment of newly purchased property relative to assessments of similar properties in the same market that have not sold, to determine if their own assessment is accurate. Compare assessments of similar properties on a per-square-foot basis, a per-key basis, or on a per-unit basis, depending on the property type, to determine if a question about fairness in valuation may exist, and whether further analysis is warranted.

In addition to comparing the assessment of the purchased property to the assessments of comparable properties that have not sold, the wise property owner should also compare the assessment to the assessments of com-parable properties in the same market that were sold in the preceding year.

The taxpayer may need to calculate and compare a gross rent multiplier ratio. To determine this ratio, divide the assessment of the real estate by its annual rental income before expenses such as taxes, insurance, utilities, etc. (It may require a market survey or direct inquiry to acquire that data.)

While this method ignores differences in vacancy rates, if the gross rent multiplier for the taxpayer's real estate is much higher than the multiplier for similar properties that sold in the same market and calendar year as the subject property, then the taxpayer may have a legitimate cause for complaint.

In a hypothetical example, a property sold for $25.3 million in 2014, has the potential to generate $2.5 million in rent annually, and received a 2015 county tax assessment of $25.25 million. The ratio of the county assessment divided by the rent potential results in a gross rent multiplier of 10.1.

Another property sold in 2014 at a price of $27.4 million, has annual rent potential of $3.4 million, and the 2015 county tax assessment on this property was $23.2 million. This second property's gross rent multiplier is 6.82. A third property that did not sell was assessed at $30.68 million for 2015 and its annual rent potential was $4.5 million, resulting in a gross rent multiplier of 6.82.

After making these comparisons, the taxpayer in this example can make a good argument for a lower assessment. It is worth mentioning that taxpayers must adhere strictly to applicable appeal deadlines.

Clearly, sale price does not necessarily equal fair market value. Shrewd taxpayers in Georgia should carefully review, research and analyze their assessment notices to determine whether the county taxing authority has merely made a cursory assessment of the fair market value of their property based solely on the purchase price. If so, an appeal may be in order.

Stuckey

Lisa Stuckey is a partner in the Atlanta law firm of Ragsdale, Beals, Seigler, Patterson & Gray, LLP, the Georgia member of American Property Tax Counsel, the national affiliation of property tax attorneys. She can be reached at This email address is being protected from spambots. You need JavaScript enabled to view it..

Mar
24

Georgia Taxpayers Risk Losing Arbitration Rights in Tax Appeals

IT'S DECISION TIME

"Georgia taxpayers risk losing arbitration rights in tax appeals."

Although the Georgia General Assembly enacted statutory provisions governing property tax arbitration procedures in 2009, counties file motions to dismiss tax-payer arbitration requests.  An appellate court has yet to weigh in on the issue, but a court decision would help to avoid the repetitious filings of dis-missal motions by counties, and put an end to taxpayers having to continually fight for the right to have their appeals heard in arbitration by a licensed professional appraiser.

- - - - -   It is time for an appellate court decision that could well put this matter to rest.   - - -

The arbitration statute provides that taxpayers may elect to have their real estate property tax appeal heard by a real property arbitrator — an appraiser as classified by the Georgia Real Estate Commission and the Georgia Real Estate Appraisers Board.  After hearing evidence, in the style of baseball arbitration, the arbitrator is required to select either the board of tax assessors’ value or the taxpayer’s value as set forth in the certified appraisal.  The law makes the arbitrator’s decision binding and precludes further appeal.

County tax assessors have filed motions to dismiss and briefs in support in more than one county across Georgia contending that the arbitration provisions violate the Georgia Constitution.  The assessors seek to have the tax appeal arbitration statutory provisions declared unconstitutional and the arbitration appeals dismissed.

Here are the assessors’ main contentions, and the taxpayers’ arguments against those same points.

Judicial authority: Assessors con-tend the arbitration statute violates provisions of the Georgia Constitution that require that the judicial power of the state shall be vested exclusively in the courts.  The assessors’ position is that the arbitration statute creates a separate judicial forum that is required to declare what the law is and apply the law to the case.  They contend that in order to determine the fair market value of a property the arbitrator is required to declare and apply Georgia law.

Taxpayers respond that the Georgia Constitution is not violated because the arbitrator is not a court or a judge.  The arbitrator’s actions are authorized because the General Assembly can create administrative agencies which are permitted to perform quasi-judicial functions.

Separation of powers: Assessors argue that the statute violates provisions of the Georgia Constitution that provide for separation of powers.  The assessors contend that by enacting the arbitration statute, the legislative branch has encroached upon the powers of the judicial branch.

Taxpayers respond that the specified provisions do not apply to local governments, and that there is no prohibition against administrative officers exercising quasi-judicial powers.

Uniform valuation: The assessors further contend that the arbitration statute violates the constitutional requirement that property must be valued uniformly with other property of the same class, because the statute requires that the arbitrator must select either the value set forth by the county tax assessors or the value set forth by the taxpayer.  Similarly, the assessors contend that the arbitration statute violates the equal protection clause of the Georgia Constitution because owners of like properties are not provided equal protection of the law.

Taxpayers respond that just because an arbitrator may possibly not agree with the value set by the county board of tax assessors does not mean that the uniformity provisions of the Georgia Constitution are violated.

The Taxpayer Position

The taxpayers contend that the Georgia Superior Courts have no jurisdiction over the matter because the arbitration provisions only require that the Chief Judge be involved for the purpose of selecting an arbitrator if the parties cannot agree, and issuing an order requiring the arbitration to proceed.  The taxpayers also contend that the tax assessors have no power to sue and cannot obtain a declaration by the court that the statute is unconstitutional.  The taxpayers point out that the assessors have no constitutional rights that have been violated.

At the time of this writing it is unknown which party will prevail, but interesting questions have been raised.  Tax arbitration provisions in various forms have existed on and off in Georgia for more than a century, and if the arbitration provisions are declared unconstitutional, taxpayers will be deprived of a statutory format designed to afford relief from unjust valuations through the mechanism of a decision made by a knowledgeable professional, based on information supplied by the county tax assessors and a certified appraisal obtained by the taxpayer.

It is time for an appellate court decision that could well put the matter to rest, and save taxpayers the need to expend time and effort fighting for their statutorily established right to property tax arbitration.

StuckeyLisa Stuckey is a partner in the Atlanta law firm of Ragsdale, Beals, Seigler, Patterson & Gray, LLP, the Georgia member of American Property Tax Counsel, the national affiliation of property tax attorneys. She can be reached at This email address is being protected from spambots. You need JavaScript enabled to view it..

Jan
01

Georgia Property Tax Updates

UPDATED september 2018

Taxable Estate for Years on Non-Taxable Usufruct?

In Clayton County Bd. of Tax Assessors v. Aldease Atlanta Joint Venture, 2018 Ga. LEXIS 437, (Case No. S18A0430), decided on June 18, 2018), the Georgia Supreme Court affirmed the trial court’s grant of the retail operator’s motion for summary judgment in an ad valorem real property tax suit based on the ruling that their interests in the premises at issue constituted non-taxable usufructs. The comprehensive restrictions on the airport retailer’s right to use the leased space contained in the concession agreement were “fundamentally inconsistent with the concept of an estate for years” and therefore, the agreement at issue created a non-taxable usufruct and not a taxable estate for years. The Court also held that if the county was permitted to impose a property tax on the usufruct created by the concession agreement, it would violate the Georgia Constitution’s uniformity of taxability requirement since the county did not tax other usufructs or other possessory interests in its jurisdiction. Finally, the Supreme Court held that the trial court did not err in failing to find that the retailer owned leasehold improvements, as the retailer held only a usufruct and not an estate in real property..

Lisa F. Stuckey
Ragsdale, Beals Seigler, Patterson & Gray, LLP
American Property Tax Counsel (APTC)

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Oct
30

A Reason to Challenge Tax Assessments

"The varying directions of price trends demonstrate that now, more than ever, Atlanta property owners should closely review property tax assessments and make specific determinations regarding the correctness of the valuation. General sales trends and perceptions provide insufficient basis for deciding whether or not to appeal the county assessment notice..."

There is a common perception among assessors that an increase in real estate sales activity is a sign of an improving economy. For a commercial property owner on the receiving end of a tax assessment increase, however, it is a good idea to analyze how the assessor came to his/her conclusions and then decide if the increase is justified, or if a protest is in order.

Sales of office, retail, hotel, multi-family and industrial properties in Atlanta increased in number from early 2010 to late 2012, according to CoStar Group, a national researcher. But does that increase automatically result in higher valuations? What trends do the sale prices over this period indicate on a per-square-foot, per-room, or per-unit basis? More importantly, what conclusions, if any, should the taxpayer or assessor draw regarding valuation of individual properties?

Retail properties accounted for the largest number of commercial, arms-length sales transactions in Atlanta from the beginning of 2010 through 2012. Narrowing the focus of sale price data reveals that the average price per square foot paid for retail properties in that period actually decreased by 20 percent. Full-year data for 2013 is not yet available, but sales through July suggest that the downward trend in average price per square foot for Atlanta's retail properties is continuing.

Atlanta's highest percentage increase in number of sales from 2010 through 2012 occurred in the hotel market; despite the uptick in volume, the average price paid on a per-room basis for hotel properties decreased by about 17 percent. Available year-to-date data for 2013 indicates that the average room rate for hotel properties may be increasing, with an associated effect on hotel valuations, but each property will require a closer analysis of the class of property sold, its location, and other relevant facts.
Atlanta's multifamily sector posted a compelling percentage increase in the number of sales completed from early 2010 through 2012. In this group, the average sale price per unit increased over that same period. But again, valuing a specific property would require an examination of all factors, such as quality and location.

The market's office sales increased significantly in number from the beginning of 2010 to year-end 2012. During that time, the average sale price per square foot increased, but like other categories, specific factors must be examined to arrive at a fair value.

Finally, while industrial properties experienced a dramatic increase in the number of sales from the beginning of 2010 to the end of 2012, the average price per square foot for these properties in Atlanta decreased steadily in 2011 and 2012. Whether this trend will continue in 2013 is unknown. Sales would need to be examined for specific industry types or sub-categories of properties in order to draw worthwhile conclusions about the value of a particular parcel.

The varying directions of price trends demonstrate that now, more than ever, Atlanta property owners should closely review property tax assessments and make specific determinations regarding the correctness of the valuation. General sales trends and perceptions provide insufficient basis for deciding whether or not to appeal the county assessment notice.

Research regarding many personalized, property-specific factors and criteria are involved in making a determination of value, including an analysis using the income approach. Atlanta commercial property owners should question any assessor's suggestion that sales volume recovery in the Atlanta marketplace equates to an increase in the value of their properties.

StuckeyLisa Stuckey is a partner in the Atlanta law firm of Ragsdale, Beals, Seigler, Patterson & Gray, LLP, the Georgia member of American Property Tax Counsel, the national affiliation of property tax attorneys. She can be reached at This email address is being protected from spambots. You need JavaScript enabled to view it..

Jun
08

Potential Tax Increase Threatens Georgia Property Owners

"Regardless of property type, commercial owners should vigilantly review assessment notices upon receipt and determine whether the particular property has indeed increased in valuation, or if assessors using mass appraisal techniques have over generalized..."

By Lisa Stuckey, Esq., as published by Southeast Real Estate Business, June 2013

Under a recently enacted law, taxpayers who purchased property in Georgia in 2011 or 2012 face potentially steep hikes on upcoming tax bills. The new statute, which took effect on Jan. 1,2011, provides that the sale amount paid or real estate in an arms-length transaction shall be the property's maximum allowable fair market value for property tax purposes for the following tax year. That means owners of properties purchased in 2011 received ad valorem assessment notices for 2012 at a value no higher than the purchase price.

For tax year 2013, however, the county assessors' offices were free from this limitation on valuation for those specific properties purchased during 2011. For those properties, assessors were required to review the market, make a determination of fair market value as f Jan. 1, 2013, and issue assessment notices based on the new review for those properties. The same is true for owners of properties purchased in 2012. The assessment notices those owners receive for 2014 will be unfettered by the sale amount limitation that held values in check for those properties in 2013. Clearly, new property owners in Georgia must guard against a false sense of security based on property valuations and tax bills received during the year after the purchase of their property.

Georgia property owners need be mindful that tax authorities issue assessment notices in April, May and June, and taxpayers will only have 45 days from the date of the notice to file an appeal if they disagree with the county's valuation. Taxpayers cannot appeal tax bills. If an owner fails to timely file an appeal, there is no further opportunity to appeal the valuation or have any input into the amount of property taxes.

A review of the last few years of commercial sales tracked in the CoStar Group database for tl1e metropolitan Atlanta area, as well as discussions with the major metro Atlanta county assessors' offices, suggests that the property type with the greatest potential for increases in valuation over the next few years is office, but other property types are potentially subject to valuation changes as well.

Regardless of property type, commercial owners should vigilantly review assessment notices upon receipt and determine whether the particular property has indeed increased in valuation, or if assessors using mass appraisal techniques have over generalized. Be aware of the specific attributes affecting the value of the individual property, and ensure that the county appraisal staff has properly considered those factors in determining value.

Worthwhile points to review with the appraiser include a significantly higher vacancy rate at the property compared with other properties in the area, as well as how long the vacant space in the subject property has gone untenanted. Discuss any real or perceived reasons why the vacant space cannot be leased. What rent has been lost? What rent is in arrears, and for how long?

Also make the appraiser aware of any tenant instability or perceptions of tenant instability based on the type of company, and any necessary rent or expense concessions. How does the length of new lease terms compare with older leases? What will be needed in terms of capital improvements cost? And be sure to point out noteworthy or w1usual common area maintenance expenses, or unsuccessful marketing attempts and unsatisfactory responses to that marketing. There are plenty of other fact-specific arguments that will vary by property. When comparing your real estate to sold properties, various important considerations which may be relevant include geographic desirability and demographic comparability (or lack thereof) between the properties; actual and effective age; quality or class of the asset; and size. Consider, too, each property's condition, which may include any physical depreciation or property-specific peculiarities, and the presence of any intangible assets such as branding that affect value. Are the properties functionally equivalent, or is there disparity between the subject and the sold properties, such as differing qualities or quantities of parking, traffic anomalies, and other distinctions?

There are many promising areas for taxpayers to draw from in arguing with county assessors to reduce property valuations, and thus a decrease in the property tax burden. But in Georgia, it is critical for new owners to be diligent about taking appropriate action upon receipt of the county assessment notice.

StuckeyLisa Stuckey is a partner in the Atlanta law firm of Ragsdale, Beals, Seigler, Patterson & Gray LLP, the Georgia member of American Property Tax Counsel, the national affiliation of property tax attorneys. She can be reached at This email address is being protected from spambots. You need JavaScript enabled to view it.

Mar
05

Inaccurate Records Could Inflate Tax Assessments

Taxpayers should review their individual property tax records maintained by the county tax assessor to determine whether the specific facts of their property are accurate. Is the amount of acreage or square footage accurate and up to date, including any additions or demolitions that have occurred?

By Lisa Stuckey, Esq., as published by National Real Estate Investor - Online, March 2012

In this era of computer-generated recordkeeping, Georgia taxpayers should be aware of several areas in which accurate records are critical in the proper valuation of their properties for ad valorem tax purposes. While software and online filing save time, these tools also increase the opportunity for inaccuracy and unfairly high tax bills.

The importance of accurate written records begins with the initial purchase of the property. Georgia law requires property owners to report real estate sales on a PT-61 form, which is filed online with the clerk of the county superior court. This form is transmitted to the county tax assessor, who is required to consider sales in determining the fair market value of property.

Taxpayers should ask themselves if there has been a proper allocation between real and personal property. Examples of personal property include furniture, fixtures and equipment for the operation of hotels. Has there been a proper allocation of tangible vs. intangible property?

A new statute in the Georgia property tax code requires that tax assessors exclude the value of intangible assets such as patents, trademarks, trade names and customer and merchandising agreements. If the reported sale price of a real property contains these intangibles, then inflated tax valuations are likely to occur.

Sometimes there is no allocation in county records of the underlying business being acquired as part of a property transaction. For example, portfolio purchases of convenience stores or daycare centers may reflect only the aggregate purchase price and not a proper allocation of the individual components being acquired. Has there been a proper allocation of specific assets in a multi-property sale transaction? Inaccurate sale price allocation among properties purchased as a portfolio often results in improper tax valuations.

A purchaser with ownership and control of a property must make certain that internal recordkeeping is accurate, for both real and personal property. Inaccuracies can expand over time throughout the length of ownership and life of the property. For instance, owners of personal property may carry pieces of property on their books and ledgers that have been sold, disposed of, moved from the county to another facility owned by the taxpayer, or which are obsolete or no longer in use.

County tax assessors rely upon taxpayers to accurately report property held by the taxpayer in the county on Jan. 1 of each tax year by filing the business personal property tax return. If owners carry over historical purchase prices of personal property without analyzing the facts surrounding current ownership, location, and use of the individual pieces of property, the inaccuracies will result in improper tax valuations of personal property by the county tax assessor. Each passing tax year can compound problems if additional pieces of property are disposed of or moved but continue to be reported to the tax assessor as being held in the county by the taxpayer on Jan. 1.

Real property owners should periodically review and make sure their internal records are accurate. For instance, for office, apartment, retail and warehouse properties, does the software used by the taxpayer to maintain rental records accurately reflect both actual contract rents and the current market rent of the property? Dated and inaccurate market rental rates can be misleading to county tax assessors, who review taxpayer rent rolls to obtain market information used to value commercial properties.

Similarly, for hotel properties, is the actual and market room rate data accurate in all fields of the software, or have record-keepers merely carried over historical market rates that could mislead the tax assessor and cause improperly inflated valuations?

Another area of proper record-keeping involves the actual county tax records. The new Georgia statute requiring county tax assessors to issue annual tax assessment notices to every real property owner places an even greater burden on the tax assessor than in years past, which may result in more factual errors in the county property tax records.

Taxpayers should review their individual property tax records maintained by the county tax assessor to determine whether the specific facts of their property are accurate. Is the amount of acreage or square footage accurate and up to date, including any additions or demolitions that have occurred? Does the county have the correct age for the property, including all of the portions of the improvements, which may have been built at different times?

Along that line, does the county have the appropriate percentage breakdown for the various areas of use at the property, such as office vs. warehouse or rentable area vs. common area? Are the wall heights correct for all portions of the property? These are just a few examples of the type of data maintained by the county tax assessor which must be correct to assist in the accurate valuation of a taxpayer's property.

Electronic records offer many advantages. But savvy property owners invest some of the time they are saving through modern technology, and make sure that inaccurate records related to their property aren't contributing to an overstatement of their tax burden.

Stuckey Lisa Stuckey is a partner in the Atlanta, GA law firm of Ragsdale, Beal's, Seigler, Patterson & Gray, the Georgia member of American Property Tax Counsel, the national affiliation of property tax attorneys. She can be reached at This email address is being protected from spambots. You need JavaScript enabled to view it..

Jan
07

Tax Data Reveals Plunge in Atlanta Commercial Property Values

"As of November 2010, 99.1% of appeals from the 2008 tax year had been resolved. For the 2009 tax year, 79.1% of appeals had reached a resolution; while only 16.4% of the cases from the 2010 tax year had been resolved...."

By Lisa Stuckey, Esq., as published by National Real Estate Investor-Online/City Reviews, January 2011

As in many U.S. markets, most property owners in Atlanta believe that commercial real estate values in the local market have been declining, and that the declining trend will continue. What is less clear to taxpayers and taxing entities is the severity of value losses and whether property taxes have come down to a corresponding degree.

An analysis of Atlanta-area commercial property valuations and property tax appeals in years past was conducted to determine if, indeed, the perceived drop in property values has occurred, and if so, what effect that drop had on property taxes. Possible new trends can also be extrapolated from the data.

LStuckey_graph

Measuring loss: Which yardstick?
A review of commercial property sales tracked by CoStar Group confirms that asset values have declined since 2008. Yet the degree of decline varies depending on whether the data are broken down by the number of properties or by square foot.

On a per-unit basis, sale prices for multifamily, retail, office, industrial, healthcare, flex, hospitality and specialty properties in Atlanta-area zip codes fell 25% from the beginning of 2008 through the start of 2010. Looking at those same property types on a per square foot basis, it appears that values fell 15%. Taking those results together, we can say that commercial values have decreased by 15% to 25%, or about 20% on average, from Jan. 1, 2008 to Jan. 1, 2010.

The pool of commercial tax parcels in the city of Atlanta has remained fairly constant over the past three years. The number of commercial parcels in the city was 16,347 for tax year 2008, 16,280 for tax year 2009, and 16,184 for tax year 2010.

Appeals fluctuate
In 2008, 5,069 property owners in Atlanta filed tax appeals, representing approximately 31% of all commercial properties. For tax year 2009, the number of appeals filed by taxpayers fell to 2,087, or approximately 13% of all commercial properties; the number of appeals increased to 3,467 for tax year 2010, representing approximately 21% of the commercial properties.

One possible and likely explanation for the marked decrease in the number of appeals filed from tax year 2008 to tax year 2009 is that Fulton County mailed assessment notices for the revaluation of all commercial properties for tax year 2008. That gave city of Atlanta taxpayers the opportunity to file appeals from the notices. However, for tax year 2009, the County did not issue widespread assessment notices. Only taxpayers who received notices were informed enough to file returns of their opinion of value with the tax assessors and, thereby, were assured of receiving assessment notices from which to appeal.

As of November 2010, 99.1% of appeals from the 2008 tax year had been resolved. For the 2009 tax year, 79.1% of appeals had reached a resolution; while only 16.4% of the cases from the 2010 tax year had been resolved.

In cases from the 2008 tax year, resulting valuations averaged 30% less value than the original assessments. In the 2009 appeals, the average reduction in value was 25%. The few cases resolved from the 2010 tax year brought down the original assessments by an average of 29%.

Clearly then, Atlanta property values as well as Atlanta property taxes have dropped. On a weighted average basis across the three years, assessments reflect a reduction of approximately 30%.

In spite of the inherent limitations of analysis with many appeals still waiting for resolution, the available data from concluded appeals shows a clear trend: A significant number of commercial property owners in the Atlanta area have achieved substantial valuation reductions in the past three years.

New rules kick in
Under a change to state law effective in tax year 2011, which began on January 1, county taxing authorities will send notices of assessed property values to all Georgia taxpayers for each tax year. With this change to the law, property owners will no longer be required to file a return of their opinion of their property value with the county tax assessor in order to receive an assessment notice from which to appeal.

Based on an examination of the past years' data, it appears that approximately 16,000 assessment notices will be mailed to commercial property owners in Atlanta. Judging from recent trends, anywhere from 15% to 30% of those assessments will be appealed.

If the current trend of reductions in property values continues, then it is also to be expected that the filed appeals will result in valuation decreases for tax year 2011 as well.

LStuckey_web90Lisa Stuckey is a partner in the Atlanta, GA law firm of Ragsdale, Beals, Seigler, Patterson & Gray, the Georgia member of American Property Tax Counsel, the national affiliation of property tax attorneys. She can be reached at This email address is being protected from spambots. You need JavaScript enabled to view it..

American Property Tax Counsel

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Knowing what to look for in monitoring your assessments can help avoid over taxation.  

By Gilbert D. Davila

As robust occupancies and escalating investor demand in many markets drive up property tax bills for multifamily housing, apartment owners must continue to monitor their assessments to avoid overtaxation. Knowing what to...

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