Planning a tax protest
Friday, January 28, 2011 7:00 AM
Tom Knapp will accept tax protests, but only those that have a good chance of winning. Photo by Duane Tinkey
Tom Knapp is preparing for spring, the season of property tax protests.
Knapp is a property manager for NAI Ruhl & Ruhl Commercial Co. in West Des Moines. He is a former property appraiser with an eye to market trends and how they affect real estate values.
He joined Ruhl & Ruhl in April 2007. It is important to note the year, as county assessors perform their property revaluations in odd- numbered years.
Requests to appeal assessments on commercial properties virtually followed Knapp through the door at Ruhl & Ruhl, and that was a year when the economy was considered pretty sound.
“The numbers have escalated since then,” said Knapp, who guesses that he will be kept busy after tax bills arrive in late March and early April. By law, property owners have between April 15 and May 5 to protest their assessments.
In better times, boards that hear the appeals can turn down any protests that arrive in even-numbered years. That standard has changed with the sour economy and the uneven terrain it has set for the market value of commercial and residential properties.
Just consider that prior to December 2010, Polk County assessors valued million-dollar properties within less than one percent of their sale price, according to a Business Record review of the 50 sales at prices exceeding $1 million.
In the last month of the year, two sales occurred that skewed the numbers against the assessors, but they were great deals for buyers.
Hub Tower at 699 Walnut St. sold out of foreclosure to EMC Insurance for $7 million. When the deed changed hands on Dec. 21, 2010, the skyscraper’s assessed value was $13.2 million. The value of the foreclosed loan was nearly $18 million.
A day later, a California real estate investment trust bought Park Place apartments at 841 6th Ave. for $7.7 million. Its assessed value at the time of the sale was nearly $14.8 million.
Polk County Assessor Jim Maloney noted that the sales “really turned some heads.”
For the year, million-dollar properties sold at 93.5 percent of their assessed value.
Even though county tax assessors generally have little time to place a value on property, compared to the week or so that a private appraiser would spend calculating value, the ratio between sales and assessments generally works in their favor. In other words, they put up some pretty good numbers.
The recession tossed a curve into the works.
Maloney said that overall, commercial property assessments could drop 4 percent this year, with the largest reduction coming in office space. He noted that residential property assessments are likely to decline, also.
Maloney’s assessors are in the field now, crunching numbers based on rental rates, retail sales and the sale of similar properties, if they can be found.
Even private appraisers say they are having difficulty in this economy at arriving at values for commercial properties.
Value might best be determined by the price a willing buyer and willing seller accept for a property. Simple as that.
But the county’s assessors are charged to determine a value based on the best information available. The fact that Knapp will protest some of those valuations is no reflection on the assessors.
“The assessor’s office is not to blame for high taxes,” Knapp said. “Those guys have a job, and the job is to figure the market price into the property. They like to be right, too. They have to do so many parcels in such a short amount of time, they can’t spend the amount of time an appraiser would. They don’t have that luxury.”
Knapp noted that from 2004 to 2008, assessed values typically were 5 to 6 percent below sales values.
Those numbers have been reversed, with the numbers driven down by lenders selling foreclosed properties at discounts as steep as 70 percent, he said.
The market has been so topsy-turvy that Knapp protested assessments on 35 parcels last year and won reductions on 34.
“The average reduction was almost 15 percent and saved my clients over a half million dollars,” he said.
Because it was an even year, the Polk County Board of Review could have denied the protests, which it can do if the original valuation wasn’t protested in the previous year.
“Most everybody accepted the fact that the economy was in turmoil and real estate values were uncertain last year,” Knapp said.
Before 2010 was over – and before new valuations had been submitted – Knapp said he had been contacted by 15 property owners who anticipated initiating a protest this year. He noted that business owners are checking their budgets, and property taxes play a big role.
Knapp said he will hold the line at about 40 protests in all, accepting just the ones that have the best chance of success.
“Number one, you don’t want the assessor’s office thinking that you’re firing everything at the wall and seeing what sticks,” Knapp said. “And number two, at the end of the day it helps your results.”
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