Fulton is undervaluing some commercial properties; so now what?
By Maggie Lee
The people who are supposed to set the taxable value of Fulton’s buildings are “outgunned” by commercial property owners and hired experts, says a county commissioner.
The next step, said Fulton County Commissioner Lee Morris, is to ask the state Legislature for the right to see more financial information from commercial property owners who are appealing valuations.
Fulton’s commercial property owners, cumulatively, are walking away with property valuations that are lower than property sales prices, according to a new review by Fulton County auditors of 175 properties from 2016 through 2018.
Those properties were appraised at about $2.8 billion together. But, together, they sold for about $4.2 billion.
It follows other reports that found similar under-vaulations of commercial properties.
Fulton needs to ask the Georgia Legislature “to give us the right to get any audited financials from the property owner if they appeal, to get any appraisals that they’ve paid for and get information about their income and expenses, so the playing field will be level,” said Morris, who first asked for the review.
Morris said members of the county Board of Equalization (which hears some appeals from the Board of Tax Assessors) are good, involved citizens, but that they’re laypeople who get little education on the complex business of valuing skyscrapers or huge shopping centers.
The appeals process resulted in commercial valuation reductions of about $7 billion cumulatively over the last three years, according to Fulton’s report. Fulton’s tax property rate has been around 10 mills lately, meaning that had those appeals failed, it would have been worth about $28 million more to the county alone over those three years.
In addition to that, the city of Atlanta and Atlanta Public Schools would also be due perhaps tens of millions more in taxes, if commercial property values were set higher.
Most of the properties under Fulton’s review had a three-year property tax freeze in place. Those freezes by default stay in place even if a property changes hands at a higher price — though the Board of Tax Assessors can unfreeze values if a building is substantially improved, gets more tenants or undergoes other material change.
Jason Esteves, chair and at-large member of the Atlanta Board of Education, said the valuations affect students and their families.
“That’s a lot of money that would give taxpayers relief on the residential side, but would also provide the school system the opportunity to provide students with much-needed resources.”
It’s perfectly legal to appeal valuations, and all kinds of property owners do.
But costly lawyers and real estate experts are a relative bargain for the owner of a Downtown skyscraper with a property tax bill in the hundreds of thousands of dollars, versus the value for a small homeowner. And such professionals are successful.
“We reviewed the effect of having a tax representative, during the appeal process and noted having a tax representative has a significant impact on the success of an appeal,” Fulton auditors reported. That is, a success rate of 59% and 69% in 2016 and 2017 respectively.
The report recommends things like more training for Board of Equalization folks. But the report also makes what sound like hints under the heading “management concerns.” Such as: audited financial statements and appraisals from property owners would give proof of a building’s value if the board had such documents. Or, if appeal hearings were recorded, it could support decisions made or “foster a more professional environment.”
Fulton Chief Appraiser Dwight Robinson agrees with the report and its recommendations, according to his written comment published with it. Though at an unrelated Monday press conference, he urged Fulton residents to read the report itself, because some properties are valued below market rate for proper reasons.
Local rules and state laws behind appraisals are complex; some things can probably be changed by Fulton County (like funding for staff) but some things may require changes to state law.
State Sen. Jen Jordan, D-Atlanta, said she’s glad there’s more attention lately for Fulton’s commercial property tax digest.
“The only thing that we know right now is that the current system doesn’t work, and we are missing out on tax revenue from commercial property owners that ends up costing residential property owners that much more,” Jordan said.
Jordan said the Development Authority of Fulton County needs to stop working within the city of Atlanta, where the city’s own economic development authority works. From January through July of this year alone, the two authorities granted preliminary or final approval for commercial property tax discounts in Atlanta worth $163 million over 10 years. It’s mostly been in Midtown. (Jordan said she thinks the county can cut DAFC out of Atlanta without the state Legislature; but on the other hand, there was an attempt in 2013 to do just that via the state Legislature.)
As for fixing valuations, Jordan said it might be time for some creative thinking. For example, some counties outsource the complex work of valuing commercial properties.
“We really have to diagnose exactly what the problem is and then try to say, ‘OK, is this a legislative fix? Is this some kind of [Fulton] operational fix?,'” she said.
Over in the state House, state Rep. David Dreyer, D-Atlanta, said that about two months ago he asked a staffer to start working with the state Legislature’s in-house counsel to research what might be done under the Gold Dome about assessments. Dreyer said low commercial valuations are unfair to residential property owners.
“Over the last couple years, we’ve really been looking at trying to find equitable property tax relief, property tax relief that gives homeowners who need relive the most relief, the most relief,” said Dreyer.
If Fulton, APS or city of Atlanta leaders determine they want to lobby for some change in state law regarding assessments, that ask would probably be detailed via each one’s “legislative agenda,” documents which would be finalized in November or December. The annual state legislative session starts in January, 2020.
The new Fulton report tracks findings in another one done for the city of Atlanta earlier this year. Reviewing a sample of 176 properties, the company MuniCap found properties worth $20 million or more were valued for tax purposes at about two-thirds of their fair market values. Properties worth less than $250,000 were valued just about right — at about 98 percent of value.
The Fulton report also tracks a report done for the Atlanta Journal-Constitution and Channel 2 Action News last year, as well as the previous analysis of Julian Bene, a management consultant and activist.
“We can’t be letting commercial property roll over us,” Bene said.
He called on the county to own the problem and fix it.
Fulton Tax Assessors Office Review – Commercial Properties
Good piece with one key caveat. It’s not tens of millions that we’re losing from commercial underpayment. It’s HUNDREDS of millions.
The calculation starts with commercial assessments coming in at 56-66% of sale prices, i.e., fair market. They should be coming in at not less than 90% of market, just as homes do.
Getting them there would raise the commercial digest by about 50%.
That’s worth $300M in school, city & county taxes.Report
In the interest of transparency, I’ll explain that I went with the lower number because I was just thinking of the city of Atlanta/APS only; and I don’t know how much of Fulton’s commercial digest is in the city. And also because I was talking about the value knocked off due to appeals, which the report puts more in the high teens.
That being said, yes, please, and thank you for noting: let the record reflect that all reports have said commercial properties’ values are coming in as low below sale prices as you noted.Report
We built the platform http://www.taxfence.com so that homeowners in Fulton, Dekalb, and soon Gwinnett/Cobb will be able to know the close to/exact value of their home for their appeal. We then report back all the data we receive on their appeals back to our consumers. Same transparency should be had for commercial to the Atlanta consumers.Report