The issue of taxable valuation has come to the forefront in Breezy Point in a big way. As I’m sure you are aware the property tax system relies on setting the value of properties that is used, in part, to determine property taxes. In general the higher the value, the more property tax that is payable. The system has a few checks and balances. Each year the values are reviewed and perhaps adjusted to reflect market conditions. Each year cities and counties in the state hold a meeting called the Board of Appeal and Equalization. This meeting is where property owners have an opportunity to question their assessed value.
State law also provides that property owners can use the court system for a tax appeal. This appeal process is outside of the Board of Appeal and Equalization process. It can be undertaken at any time. It involves the filing with the courts an appeal to the value of the property. The subsequent process can get rather involved but the outcome includes a judge making a ruling about the property value under appeal.
In Breezy Point the appeal process has occurred with Whitebirch, Inc. and concluded for all of the properties on February 22, 2011. Whitebirch, Inc is the parent company of Breezy Point Resort. The outcome was a rather large reduction in overall value. The process used included the hiring of an independent appraiser. Appraisers use three factors to determine value when it comes to commercial properties. These include cost, market, and income. With non-commercial properties the income approach isn’t used. In the past a great deal of weigh was assigned to the cost of a property but the other factors were considered. Given the economy we’re presently experiencing the appraisers are now factoring income more heavily. Cost factors seem to be much less of a consideration.
The outcome we talked about resulted in the value of the resort dropping from approximately $22.8 million to $10 million. With the change in values, comes a reduction in taxes payable. With less taxes paid by one entity the burden of taxation then is shifted to other property owners.
A very large concern here is the change in approach towards valuation. The past focused on costs as the primary basis towards valuation. Now the focus is changing to income. This change could result in a tidal wave of taxation adjustments for all commercial properties. Given the already apparent adjustment in the housing market the trend seems to be going lower with a market adjustment in all areas. I would think at some point we’ll see the correction settle to a point of equilibrium but for now adjustments in value in all areas is the name of the game.
