Disaster Response Discussion Board

Property Taxes New World

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    Property taxes are a very visible / critical component of investment performance.  As a national property tax service group we have gotten many calls from clients asking, if not demanding, jurisdictions reduce real estate tax payments now due or current and future assessments on properties.  As you are aware most jurisdictions are closed and these demands can not be heard / answered today.

    We are trying to educate clients that any relief will likely be announced at a future date.  We have really only seen one payment change in Iowa where the Governor extended payment dates by weeks. That is far from client expectations who are struggling on larger issues including survival.

    Simon properties recently got some unfavorable press in NJ for appearing to demand both tax payment and assessment reductions in exchange for closing their property. That story is not as bad as first impression due to events happening faster than paper moves.  Unfortunately it will likely linger in the local minds as police were sent to close the mall at the height of the crisis, while the owner appeared to be saying you can not make me. We know this was likely not the intent of ownership, but it will be hard to erase.

    We are going to have to work through this changing world and encourage clients to realize that there is a process and right now we do not really know what it will be for sure going forward.  As consultants we will do all that we can, but industry groups and lobbirsts will be important in dividing the pie again.  Information will be fragmented and originate from local or state authorities. We have encouraged the IAAO, assessors organization, to start the process of thinking about where payments can not be made and assessments reductions demanded.

    Business/debt and equity will be lost, modified and restricted for many. We are only at the beginning of that curve as are jurisdictions.


    For corporations, I do hope they put a timeout on their constant desire to challenge assessments.  Corporations are not liked in this day and age (probably not liked for a long time, in fact), so they will receive major negative press for trying not to pay their fair share of taxes – much of which helps pay for police, firefighters, and teachers.

    As a former assessor and a reviewer of appraisals nationwide for 30+ years, I have factually seen that 99.99%+ of commercial properties are assessed below market value.  Probably the same for residential.  I might see one report a year where the concluded Market Value is below the  current tax assessment.

    The bottom line is corporations do not pay anywhere near their fair share of real estate taxes.  I have long contended that someone can make a fortunate helping municipalities increase their property assessments by 50% or 100% or 200% overall.  It is not unusual to see $1,000,000 properties assessed at $300,000.  Or $15/sf land assessed at $2/sf.  None of these owners are going in and having their assessment raised to market so they can pair just a fair share of taxes.  It is immoral in my opinion.

    As for jurisdictions, I imagine almost all of them have a set date of value (e.g. January 1, July 1) and what happens to a property during the year does not get accounted for during the year.  For example, a building burns down.  As an assessor, I would not change the assessment for this event.  The owner likely has insurance and will be compensated for the value of the improvements (probably more as the existing improvements were depreciated and the insurance provides money for new improvements).  I know we didn’t deal with a retail center losing a major anchor during the year.  The next cycle we would address how the property stood at that January or July 1 date.  Albeit, since brick and mortar is being assessed, many assessors rightfully argue it doesn’t matter if the building is occupied or leased or vacant or who does occupy it.  Brick and mortar doesn’t know any of that.  A debate for another day.

    Hopefully, corporations won’t use this event to try to pay even less of their fair share of real estate taxes.  Any that do deserve negative press and maybe even boycotting (I despise that new fad brought on by the cancel culture).  Hurting the core people of this country that do not make much money is obscene.  This issue to me is way more important than the sustainability stuff they are getting forced to deal with.

    My (recently devalued) two cents.  I will certainly keep an eye out for anything about companies trying to get their assessments lowered due to this crisis.

    Tax payment deferral has nothing to do with assessing, so that is a different issue.  And I believe everyone is trying, and will likely get, deferrals on their various expenses.  This will be a domino effect that hopefully everyone benefits from.  I see it as a 3-month (or whatever period) timeout for the world.  We just start the clock in 3 months and ramp everything up as best we can.

    I hope the world has learned they do not need to be rushing and wanting things faster and faster.  What’s the rush:)  Sit back, chill, relax, taking 6 weeks to do something is no different than taking 4 weeks.  The end event is the same.  Smell the roses.  Enjoy life.

    I hope everyone is well and safe.


    George R. Mann, CRE

    aka The Mann

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