| 2004
Published Articles
September
2004
Assessments
Can Increase in Tax Appeals
Property
owners appealing their assessments to the Arizona State Board
of Equalization (SBOE) should be aware that the SBOE may increase
a valuation in any proceeding in order to properly reflect its
market value. The SBOE could increase a property’s assessment
to its recent sales price or increase an assessment when a preponderance
of evidence submitted by the assessor reflects that the property
is clearly undervalued.
Prior
to filing an appeal with the SBOE, an analysis should be made
of the property’s market value. This analysis should assess
the potential benefits of a successful appeal against the potential
risk of a higher assessment. Petitioners should understand that
the current valuation has a presumption of correctness and it
is the petitioner’s burden to prove the current valuation
is incorrect.
The
rules of evidence also prevent raising an issue that was not included
in the petition originally filed.
August
2004
High
Court Rules for Apartment Owners
The Arizona Supreme Court ruled in favor of a group of apartment
owners who had sought property tax refunds stemming from the assessor’s
computer program that determined the values of apartments. The
program froze the value of properties if an owner previously had
appealed their valuation. The frozen values would remain in effect
until the assessor revalued the land.
Conversely,
the plaintiffs’ properties were valued by a different computer
program, one that employed a cost model. The plaintiffs provided
evidence showing the frozen properties were valued at 66% of their
full cash value, while the plaintiffs’ properties were valued
at 100%. The apartment owners argued that the different models
were discriminatory and the undervaluation of similar properties
forced them to bear a disproportionately high share of the overall
property tax burden.
The
Supreme Court agreed. The Court also noted that the state’s
constitution requires uniform taxes on property of the same class.
July
2004
Attention to Details Can Win Appeals
This appeal season, assessors are defending their values no matter
how unreasonable. The assessors have resorted to unreasonable
cap rates, vacancy rates, and expense ratios to defend their assessments
of income producing properties. They argue that the “market”
supports their assumptions.
Too
many tax consultants do exactly what the assessor does. They will
provide a few “comparable sales” that support their
appeal position and perhaps run an income approach without much
attention to detail. And they seldom use any market data to back
up their assumptions. These appeals are unlikely to succeed.
An
objective analysis of the market is not nearly as optimistic as
assessors attempt to portray it. Their assumptions don’t
hold up in the marketplace. Successful appeals will not only require
detailed information pertaining to a property, but also will necessitate
an in depth market analysis to both support the taxpayer’s
position and to refute assessor’s unrealistic assumptions.
APRIL
2004
Arizona
- New Assessments Up Significantly
By Todd Parker
Last updated: April 19, 2004 08:24am
Arizona assessors have recently mailed their 2005 values. Taxpayers
may file administrative appeals within 60 days of the mailing
dates.
In Maricopa County, the assessor increased single-family residential
values an average of 12%. Large commercial properties (assessments
in excess of $5 million) have increased an average of 15%. Large
apartment complexes have also been reassessed this year and have
increased an average of 35%. Given the current economic difficulties
in the apartment market, the assessor's increases are onerous
and unfair.
With record-low interest rates, many potential apartment tenants
are opting for single-family homes. As a result, apartment net
incomes are at an all-time low. Many apartment owners are consistently
feeding negative cash flows and see no improvement in market conditions.
Apartment owners would be well advised to appeal their higher
assessments. A comprehensive income analysis supported with market
statistics should result in successful appeals.
February
2004
Arizona
- State Orders Assessors to Increase Land Values
By Todd Parker
Last updated: Feb 27, 2004 05:36PM
The state has ordered the Maricopa County assessor to increase
values for thousands of vacant land parcels in far northwest and
southeast portions of the Valley. After reviewing sales throughout
the county, the Department of Revenue's data concluded that 40,000
parcels fell below an allowable window of 74% to 90% of market
value.
Ironically, the assessor vehemently disagrees with the order and
is appealing the increases. The assessor estimates that the reappraisal
order would generate only $600,000 in additional revenue, but
the figure could grow into the millions if the state orders similar
increases on residential and commercial properties.
The assessor is required to publish the 2005 tax roll by Mar.
1, 2004. Taxpayers have 60 days from the mailing date of the notices
to appeal their assessments. Affected parcels will not be issued
2005 assessment notices until the dispute between the assessor
and the department is resolved.
Phoenix,
Arizona - With a New Year Comes a New Tax Roll
By Todd Parker
Last updated: Feb 11, 2004 10:40AM
With assessors required to publish their new tax rolls by February
28, speculation has begun about what types of property will be
increased and by how much. This year, the Maricopa County assessor
is scheduled to revalue apartments and residential properties.
With homes selling for record prices, the assessor has substantial
market data to increase residential assessments significantly.
Less obvious will be what assessment changes are made to apartments.
Since 2001, apartments in the Phoenix metropolitan area have displayed
dismal operating performances. In spite of this, excess capital
is chasing too few deals, and apartments are selling at near historical
highs.
With the state experiencing a budget crisis, apartment assessments
will probably not decline. Also, the department of revenue has
studied the relationship between sale prices and assessed values
and found that assessments are too far below sales prices. Thus,
they may issue equalization orders requiring the assessor to increase
values further.
January
2004
Phoenix
Arizona - Property Tax Reforms Proposed
By Todd Parker
Last updated: Jan 5, 2004 03:17PM
The Governor's Citizens Finance Review Commission is finalizing
recommendations to change Arizona 's tax code. The goal is to
broaden Arizona 's tax base in order to be less vulnerable to
an economic downturn, such as the current one, which has produced
a billion-dollar deficit. A lower overall sales-tax rate is being
proposed, but currently exempt dry cleaning, hair care, auto maintenance
and various other services may become taxable.
Possible changes to the code include reinstating a statewide property
tax, which was repealed in 1996, eliminating a homeowner's rebate
and eliminating personal property taxes for business. Arizona
's personal property taxes are significantly higher then neighboring
states, and proponents argue that elimination of personal property
makes Arizona more competitive in attracting business.
The property-tax component of the package would shift at least
$600 million from businesses, among the most heavily taxed in
the country, to homeowners, who have relatively low tax rates.
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