Washington Business Journal: DC Revenue Numbers in Dispute

D.C. commercial assessments debunked?

Washington Business Journal – by Michael Neibauer

Date: Monday, March 7, 2011, 1:23pm EST

  • Michael Neibauer
  • Reporter
  • Email: mneibauer

District folks breathed a sigh of relief last week with the news that D.C. is $105 million less in the hole for fiscal 2012, primarily because commercial property values are expected to rise 16 percent next year.

Not so fast.

The second-in-command of the District’s property assessment appeals panel told a D.C. Council committee Monday that the Office of Tax and Revenue’s assessments are often wrong and many will be chopped on one of three levels of appeal.

In other words, that $105 million may be just an illusion, if the assessments on which they’re based are slashed down the road.

Robert Cooper, vice chairman of the Board of Real Property Assessments and Appeals, offered this damning appraisal of the Office of Tax and Revenue: The agency has "gotten away with avoiding some questioning on the practice of reporting a high assessment to the city council and the mayor and then reducing it later."

"It’s their number," Cooper said. "They’re the professionals. They’re the trained assessors. They’ve gone to school. They’ve gotten the certification. They’ve got the supervisors. They, in the cases that have come before us, 80 percent of the reductions they’ve agreed to. They have stipulated they made an error or that they didn’t have enough information early enough to make a property determination."

Chief Financial Officer Natwar Gandhi, also testifying before the finance and revenue committee, responded that the CFO builds potential appeals into its revenue estimates.

"We always allow for probable appeals and what it would lead to tax reduction on the real property front," Gandhi said. "Our expectation is we have been conservative enough to allow for it."

As for the $105 million revenue gain he touted last week, Gandhi said he is "quite comfortable about that."

"If it wasn’t the case," he said, "I wouldn’t be giving that number."

Real property taxes account for 33 percent of the District’s tax haul, and a mere 105 commercial buildings comprise nearly a third of that figure. There is a huge impact on the District’s bottom line when commercial assessments swing.

Cooper may have a reason to take his shots now — he probably won’t have the opportunity come next year. The BRPAA panel is scheduled to be dissolved by Oct. 1 and replaced with a new appeals commission comprised of full-time city employees. Gandhi backed the legislation establishing the new commission.

But Cooper wasn’t alone in his concerns. Michael Allen, a principal with Ryan & Co., a tax services firm, told the committee that the District is taking out a "forced loan against many of the commercial property owners whose assessments on appeal will be reduced." OTR assessors lack training and resources, he said, and their assessments show it.

The Jefferson Hotel at 1200 16th St. NW, Allen said, is valued by OTR at $100,000 more per key than the Four Seasons in Georgetown, D.C.’s only five-star hotel. It’s a "sniff test," he said, "to pose the question: Are those assessments coming out as good as they possibly can?"

The concerns are valid, said Councilman Jack Evans, D-Ward 2, finance and revenue chairman.

"If they’re betting against that and they’re wrong and we lose the appeals, about two years from now we’re going to have to write a hefty check back to the owners of the commercial buildings," Evans said. "We’re just going to have to see how this all shakes out."

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