By Elliott Pollack, Esq., Pullman & Comley LLC
Although COVID-19 resulted in the pumping of significant dollars from the federal government into municipal and county budgets, generally speaking, property tax assessment offices remain understaffed and undertrained.
Many assessors recognize these realities and are successful in convincing local leaders to appropriate funds to retain independent contractors to perform various assessment and collection functions. The theory is that these expenditures are non-recurring and are preferable to staffing assessment offices on a full-time permanent basis.
Pullman & Comley LLC
As an example, Connecticut assessors almost always contract with certified revaluation companies to perform statutorily required, community-wide revaluations every five years. They contract with these companies because they simply lack the personnel to do the work themselves. In addition, reliance on outside contractors can, to some degree, insulate municipal staff from angry property owners who are unhappy with their new assessments.
Another perhaps unplanned benefit to retaining outside contractors is that unless communications with the contractors can be made promptly after new assessments are published, at least in Connecticut, property owners are compelled to resort to judicial remedies to challenge their values.
Since court proceedings tend not to conclude for a year or even more, localities obtain the benefit of the use of interest-free excess tax dollars while the case is pending and even if it resolves after a trial. Some Connecticut judges, for reasons not well understood, are reluctant to award judgment interest to the prevailing property owner on its tax overpayments. This occurs even though the municipality is entitled to and charges interest at 18 percent annually for non-payment or under payment of tax levies.
Another problem frequently arises from outside contractors’ work in revaluation. This issue involves the tendency to rely on a cost-based methodology to determine market value, even when an income-producing property would most likely transact on the basis of an income approach, either direct capitalization or discounted cash flow.
Even taking into account the possible wisdom of the cost approach in valuing newly constructed property — as attorney Steven Schneider pointed out in his tax article in the January/February 2023 issue of Northeast Real Estate Business — many newly constructed properties cost far more to build than is warranted by their completed values in the marketplace.
This is due to build to suit or other individualized arrangements designed to carry out owners’ or tenants’ business objectives as opposed to maximizing real estate value per se for a particular owner or tenant. Good examples might be Chick-fil-A or Walgreens stores, which are designed to promote a brand rather than to turn a real estate profit.
Tax professionals who have practiced in the property assessment world for any length of time can probably recount a number of stories about botched assessments, tax billings or defective notices. Recently, this writer learned of a major gaffe by a tax collector halfway around the world at a famous landmark: The Taj Mahal in Agra, India.
Built by the Mughal Emperor Akbar as a memorial to his beloved wife, the exquisite building has enjoyed various property tax exemptions under Mughal, British and Indian law for almost four centuries; it remains exempt today. It must have been with great shock that the administrators of the Taj reacted to a recent notice to them from the City of Agra that a large amount of real estate taxes on the historical wonder remained delinquent.
On investigation, it turned out that a private company to whom various administrative functions had been delegated by the city was the culprit. Although the problem was dealt with rather promptly, the zaniness associated with this mega assessment blunder deserves to be recognized in a book of flubs.
This brings us, finally, to an important lesson. Every communication from the assessor in a given jurisdiction must be read promptly upon receipt and carefully processed. Many communications can appear to be innocuous formalities. On closer reading, however, they may be material to an owner’s valuation and may require action within a very tight time period.
To this point, members of our law firm’s tax and valuation department occasionally find that the person in the owner’s organization designated to receive notices from the assessor does not have sufficient background or training to deal with assessment issues. Occasionally, that individual has departed the company and the assessment letter or email language languishes on his or her desk until it’s too late to act.
A result, a number of communications also are re-routed bureaucratically to someone whom the recipient thinks is the proper person to deal with the issue. Often, significant time is lost, appeal periods can be overlooked and significant monetary losses can be sustained which are not recoverable.
The lesson to be learned are:
1) Staff your assessment/tax facilities with competent knowledgeable individuals;
2) Impose a reasonable degree of redundancy on the monitoring of communications to avoid notices “falling between the cracks”; and
3) Access the municipality’s website periodically to be sure you don’t miss something important; in some cities, actual notice of required actions is not legally required.
Pullman & Comley is a full-service law firm with offices in Bridgeport, Hartford, Stamford and Waterbury, Connecticut, as well as in White Plains, New York, and Springfield, Massachusetts.