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Property Tax Resources

Aug
08

How to Challenge Your Property Tax Assessments

A step-by-step guide from a veteran attorney to navigating the process of disputing real estate valuations by local government.

By Jerome Wallach, Esq.

In most jurisdictions, taxpayers may meet with the assessor or assessor's representative to deliberate and possibly resolve issues concerning taxable real estate valuation.

First, contact the assessor's office to request a meeting. Getting past recorded messages may be a challenge in some instances, but talking to a human being is necessary.

During that initial phone call, be prepared to describe the problem and point of the discussion, then ask for a date and time to meet. Be sure to request the meeting in sufficient advance of filing deadlines for any appeal process.

Before the meeting, identify an objective (typically a lower assessment) and a plan to achieve that outcome. Be optimistic, but recognize that the assessor's office may reject the taxpayer's position. During the discussion, be reasonably flexible; passion and anger are seldom persuasive and will detract from an otherwise sound argument.

Fix the facts

There are a number of valid concerns other than overvaluation which, if properly addressed and corrected, can result in significant savings.

The most obvious reason to discuss the property with the assessor is the need to correct a simple mistake on the part of the assessor's office. Computer-generated assessed values are now widely used and accepted. The resulting values are no better than the data fed into the database, so review assessments with an eye on the broad picture.

Pay particular attention to the address and all measurements, which are common sources of error. Be sure the property hasn't been confused with some other property of greater value. If the property is improved, review the records available on the assessor's website to see if the improvements are accurately described and that the land is properly measured. Call any mistake of fact to the assessor's attention.

Most jurisdictions recognize varying degrees of assessment value depending on property classification. Typical classifications are commercial, residential and agricultural. Each class is assessed at a different percentage of its market value.

Usage is the primary classification determinant. For instance, undeveloped property zoned commercial may be a productive farm, in which case its classification would be agricultural. Point out to the assessor that the property is being farmed and was so used on the tax valuation day. Bring photos and records to establish that farming was the use on value day, and continues to be so.

Make a similar argument in any situation where the assessor classified the property higher than its actual use. Along the lines of classification, some properties are exempt from taxation if used regularly for charitable, religious and educational purposes.

Unless the use is easily recognized and accepted, it is unlikely the assessor's office will alter its opinion in an informal meeting. The meeting is an effort to convince the assessor that the property is overvalued for tax purposes.

Study the concepts

Unless the taxpayer is a valuation expert, it's probable he or she is meeting with someone who knows more about property values than the owner does, or at least believes that to be the case. A fundamental understanding of valuation methods is critical to a meaningful dialogue.

Volumes are written on the subject and the law books are full of cases dealing with value concepts. The following provides a thumbnail sketch of these concepts.

The three approaches accepted by all valuation experts are cost, income, and market or sales comparison. Assessors use these approaches daily, and look at property through these lenses.

Cost. If the property was purchased and improved with a new structure or structures within the last five years, the total cost of acquisition and improvement is a good indicator of what the property is worth and how it should be valued for tax purposes.

In the absence of a recent transaction, a credible opinion of the cost to replace the improvements on the property may be useful. There are manuals recognized by value experts that may assist in obtaining and presenting such an opinion as evidence.

Market. If the house next door, built just like the subject home, sold yesterday, then that sale price is a good indicator of the value of the subject house. On its face, the method of seeing what similar properties sell for seems the simplest and most direct way to determine a property's value.

If only it were so. The more variances there are between the properties, the greater the comparison challenge. Differences can include location, date of sale, condition of the property—the list goes on.

In dealing with the assessor, present listings and recent sales of properties similar to the subject property, if possible.

Income. In short, this is the present value of future benefits, and is the price a knowledgeable person would pay to acquire the future income stream of a given property.

Under this approach, value is typically determined by dividing the net income by the capitalization rate, or the buyer's initial annual rate of return. The capitalization rate, or cap rate, provides a formula for value calculation, and the higher the cap rate, the lower the value conclusion. The assessor will have a firm opinion of the cap rate and is unlikely to be swayed, but it's worth a try.

In many instances, arguing the general market cap rate with the assessor is futile. A better approach may be to show why the assessor's cap rate should be adjusted because of conditions unique to the property. Look for conditions that are beyond the owner's control and constitute risk to future income.

Arguments challenging the assessor's cap rate could include the greater risk of lost income due to external factors, such as a highway change or a major demographic shift.

Assessors and their staff consider themselves professionals meriting respect as public servants. To achieve any result from conversing with them, they should be dealt with accordingly.

At the conclusion of the meeting, be sure to document any agreement reached.



Jerome Wallach is a partner at The Wallach Law Firm in St. Louis, the Missouri State 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..
Jan
01

Missouri Property Tax Updates

Updated June 2016

Personal Property Statute

On August 28, 2015 the Missouri Legislature enacted Section 137.122.1 which requires county assessors to apply the “standardized schedule of depreciation” to determine assessed value of personal property which will be “presumed to be correct.”

Owners may challenge the assessment by presenting substantial and persuasive evidence of value.

It appears many county assessors are resisting using the depreciation concept in setting assessed value. Only time will tell how this plays out.

Jerome Wallach
The Wallach Law Firm
American Property Tax Counsel (APTC)

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Oct
19

Use Quality Data to Fight Unfair Tax Assessments

Owners appealing unfair tax assessments must aggressively and specifically examine the general economic climate.

"While area bankers express high hopes for the coming year, that optimism is not reflected in actual lending practices for the past year. According to the St. Louis Federal Reserve Bank, commercial and industrial loan volume in the United States totaled $16.4 billion in 2012, up slightly from $14 billion in 2011."

By accident or design, assessors tend to punish commercial property owners by increasing the assessed value of properties that outperform the market, thereby generating more taxes for the local government. The problem arises from real property valuations based upon a cash flow analysis, which fails to take into account intangible qualities that boost cash flow but are unconnected to intrinsic real estate value.

Intangible qualities that can increase a commercial property's cash flow include the skills of the management and general business reputation of the owners. Assessors have a tendency to value the business rather than the real property. Consequently, assessors punish owners for efficient and successful management. In order to guard against such an outcome, owners appealing unfair tax assessments must aggressively and specifically examine the general economic climate. In analyzing commercial property, appraisers dedicate pages within each appraisal report to the local economy. Time after time, appellate reviewers in their rush to focus on the cash flow of the specific property simply skip over the plethora of general economic data that fills appraisal reports.

jwallach

Two measures of local market performance are particularly important in appealing an assessment, however. One metric is retail sales, which provide a clear barometer of general economic conditions. Sales reflect the health of the consumer base and, most notably, employment. With diminished employment, sales fall in the marketplace. The other dataset to examine is the availability of credit for commercial property acquisition and/or development. While valuation authorities rarely acknowledge the relationship, retail sales and credit are inextricably linked.

Follow Sales Tax Receipts

A look at retail sales and availability of credit in the St. Louis marketplace provides a far better foundation for value analysis than do the population counts and various economic facts tacked onto assessors' reports.

In the city of St. Louis, total sales tax receipts increased every year from 2008 through 2012, with just a slight decline in 2010 (see chart). In 2013, however, the trend's trajectory has changed. The city of St. Louis has collected $30.7 million in sales tax receipts year-to-date through May, down 4.9 percent from $32.3 million during the same period a year ago.

Annual sales tax receipts for 2013 in St. Louis based were previously projected to reach just over $120 million based on the actual receipts for the first five months of 2013 and previous years' receipts during the last seven months of the year. However, the closing of a Macy's store in downtown St. Louis in May will dim this picture even further. Banks are feeling regulatory pressure to lower the concentration of commercial real estate loans in their portfolios. Lending to acquire or develop commercial buildings or residential subdivisions tanked during the Great Recession. Today, lenders give more scrutiny to a potential borrower's creditworthiness than before the downturn. The credit quality of borrowers or developers has in many respects become an important factor in the intrinsic value of the project or the real estate itself.

While area bankers express high hopes for the coming year, that optimism is not reflected in actual lending practices for the past year. According to the St. Louis Federal Reserve Bank, commercial and industrial loan volume in the United States totaled $16.4 billion in 2012, up slightly from $14 billion in 2011. Compared to the market's peak loan volume of $26 billion originated in 2008, credit availability in the sector is clearly constrained.

Focus On Fair Market Value

Property owners should keep in mind that the determination of fair market value is based upon not only a willing seller, but also a willing buyer. A willing buyer must obtain financing, and the St. Louis market has tightened up considerably in that regard. A tax appeal based on the scrutiny of credit availability and retail sales will go a long way toward ensuring that careful, prudent entrepreneurship and management will go unpunished by an excessive tax burden.

Wallach90 Jerome Wallach is a partner at The Wallach Law Firm, the Missouri 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.

May
13

Direct Impact

Highway 40 reconstruction will reduce property values

"Local authorities appear to believe the interference with the traffic pattern will cause a short-term loss and a very positive long-term potential gain. However, the Federal Highway Administration concluded in a recent study that such projects result in "noise, loss of access, loss of parking, diversion of traffic, odors and emissions, loss of business profits and good will, interim construction loss, loss of use and loss of visibility."

By Jerome Wallach, Esq., as published by Midwest Real Estate News, May 2007

Owners of real property in the east-west corridor leading into the core city of St. Louis and the core city itself face a double "whammy" in 2007. First, on January 1, the two-year assessment tax cycle begins in Missouri. Then, in the spring of this year massive $535 millions rebuilding starts on the primary artery into the core city from the west. This reconstruction project on Highway 40 (also known as Interstate 64) is scheduled to close 10-and-a-half miles of this major artery into the city for at least three years. Past experience with highway projects has shown that forecasted completion dates are most often way too optimistic.

With assessors already in the process of reevaluating property for tax purposes and a major reconstruction project beginning in spring, assessors face the task projecting the impact this reconstruction project will have on property values along the Highway 40 corridor and in the core city. Office buildings, service businesses, light manufacturing and residences will suffer from dramatically decreased access, traffic jams, indirect routes extending commuting time and loss of traffic for retail and service outlets.

And all this happens just as the core area of St. Louis is beginning to feel the impact of the dramatic revitalization that has been ongoing over the last several years. One need only look at the new baseball stadium, the approved Ballpark Village with its shops and residences, the dynamic loft developments of shell buildings in the near downtown area and the expansion of Barnes Hospital in the West portion of the city. The revitalization has resulted in rising property values, representing good news for owners and investors. The good news turns bad for property values as the area contemplates the long reconstruction process.

Local authorities appear to believe the interference with the traffic pattern will cause a short-term loss and a very positive long-term potential gain. However, the Federal Highway Administration concluded in a recent study that such projects result in "noise, loss of access, loss of parking, diversion of traffic, odors and emissions, loss of business profits and good will, interim construction loss, loss of use and loss of visibility."

The negative aspects brought about by the reconstruction may well force owners of residential and commercial properties to offer rent abatements in order to hold onto tenants along the Highway 40 corridor and in the core city. Many commercial and residential tenants may just move out because of traffic snarls, noise and the mess of construction. Then, too, commercial tenants may just not be able to tolerate the diminished traffic and attendant loss of revenue and profit. All of this disruption means lower market values, which must result in lower property taxes if taxpayers are to be fairly taxed during the reconstruction period.

Owners should be alert and prepared to react to the new 2007 assessments with an appropriate tax appeal challenging the assessed valuation of a property that may be affected by the reconstruction project. The Missouri Highways and Transportation Commission itself has recognized the decline in business and in occupancy that will result from the project. Comments by public officials demonstrate that various other government agencies know the project will prove bad for business on a short-term basis. Just how bad is an open question. Therefore, taxpayers with property in the Highway 40 area and in the core city must carefully review their assessments to ensure that the assessors have taken into account in their 2007-2008 valuations the negative impact of the reconstruction.

The due date for filling appeals from the assessments is the third Monday in June for St. Louis County and the second Monday in May for St. Louis. Two separate jurisdictions assess properties in the 40 corridor and the core city —- St. Louis County and the city of St. Louis. Taxpayers may find both take the position that the long term effect of a new highway will be beneficial to property values, thus, no interim dip in assessed values are appropriate. The contrary argument, and the one that makes the most sense, holds that in the next two years the market value of most properties in the reconstruction area and the core city will decline. To state it another way, the income stream of commercial properties will not grow until the highway projects is completed.

Since reassessment comes in the odd numbered year of the two-year cycle, the assessors have another shot at determining value as of January 1, 2009. The market at that time will tell the world whether property values have held constant, grown or declined during the reconstruction, which will still be in progress at the end of 2008. Until that time, taxpayers should be on guard and proactive in seeking proper reduction of their tax burden.

Wallach90Jerome Wallach is the senior partner in The Wallach Law Firm based in St. Louis, Missouri. The firm is the Missouri member of American Property Tax Counsel, the national affiliation of property tax attorneys. Jerry Wallach 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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