According to a recent report from CoStar Group, rents in Boston’s Back Bay and South End fell by more than 9 percent in the first quarter — the biggest drop of any Hub neighborhood — as competition from a handful of luxury properties in the downtown is putting downward pressure on prices. The survey says the rent drop is due to leasing that is underway at The Kensington in Downtown Crossing, AvalonExeter in the Back Bay, The Victor at North Station, 315 on A and Waterside Place in the Seaport District. As the properties bring more than 1,000 new units to the area, renters now have a lot more options to choose from, causing the neighborhoods to lose demand to those buildings and encouraging landlords to offer incentives to lure new tenants.
Las Vegas' economy is finally improving, boosting commercial real estate markets in the first quarter. According to the Las Vegas Business Press, a new report from commercial brokerage Avison Young shows improvements in the industrial, office and retail sectors, and gives a few key trends to look for. Industrial vacancies fell to 11.1 percent in the first quarter, down from 12 percent in the same quarter a year earlier. North Las Vegas was especially hot: The submarket posted the most industrial sales and the third-largest number of leases in the past year, which could boost rents and spark new construction in the area. As leasing activity picks up, lease rates will likely slowly rise marketwide though 2014. Developers will begin to push outside of the metropolitan area, due to a lack of available land. For the office sector, vacancies rose slightly from 19.5 percent to 20 percent year-over-year in the first quarter. Expect office vacancies to decline and lease rates to rise as the local economy continues to improve in 2014, the study said.
This week, the New York City Council proposed a property tax system overhaul, which was part of their $257 million budget request to fund a thousand more cops, free school lunches, and efforts to fight homelessness. The spending would be in addition to the $73.7 billion budget proposed by Mayor Bill de Blasio last February. The mayor will release his executive budget next month, then negotiate with the council to reach a final budget deal by the end of June.
By Aaron Gemoets, Senior Managing Consultant, San Antonio
Important Notice Concerning RPIE Filing Requirements Due June 2, 2014
By Sharif Mitchell, Area Leader / Principal, New York City
Two Michigan townships recently took cases to the Michigan Court of Appeals, where they battled against the property assessment reductions for "big box" retailers. Large retailers such as Target, Menards and Walmart can appeal to the Michigan Tax Tribunal to lower their property assessments to "true cash value," which the tax tribunal defines as the "fair market value or the usual selling price of a property." A number of big box retailers across the state have had their property tax assessments slashed by the tax tribunal, but the decisions to grant lower property assessments for a Home Depot in Breitung Township and a Lowe’s in Marquette Township were the first to be appealed to the Court of Appeals. The reduction for Home Depot in Breitung amounts to a loss of more than 50 percent in taxable value for the property, but the outcome of the case will have implications statewide.
Due to complaints of widespread over-assessments, the Michigan State Tax Commission, which is responsible for setting property taxes, approved plans to overhaul the troubled department. Detroit will go through a $10 million citywide reassessment of all 386,000 parcels, both commercial and residential, by December 2016 as a part of a corrective action plan, a reform the city announced it would implement last fall.
The intricacies of Proposition 13, which voters approved in 1978, has long been a topic of debate in California. A Field Poll released today found that voters strongly support rewriting one aspect of the landmark initiative that alter a 'loophole' that some argue commercial property owners have used to keep their taxes low. When asked if they thought business property should be reassessed whenever it is sold or transferred, just as residential properties are required to do, 69 percent of poll respondents said yes. When Prop. 13 was enacted, it set 1975 as the base year for residential and commercial assessments, then limited property-tax increases to 2 percent a year. When properties are sold, they are reassessed and annual taxes are set at 1 percent of their value. What ends up happening is, owners who have held their property for years typically pay much less in taxes than those who recently purchased their property. And due to the complexities in which businesses are bought and sold, commercial properties aren't always reassessed like residences are.
On Monday, the Colorado House approved a scaled-down personal property tax break that is expected benefit about 28,000 business across the state. According to the Denver Business Journal, House Bill 1279, sponsored by Democratic Reps. Dave Young of Greeley and Dianne Primavera of Broomfield, raises to $15,000 the maximum worth of equipment that a business may own and be exempted from paying any personal property tax on it. The current level of exemption is $7,000. Sponsors originally proposed exempting the first $25,000 of business personal property from the tax for all companies. However, due to the amount it would cost the state, the exemption was slimmed down to only include businesses that own $25,000 or less of such property. That number was reduced again to $15,000 to cut the amount of taxes the state would have to refund through tax credits to $2.6 million. HB 1279 passed the House 60-2, and is now headed to the Senate.
Attorneys for a group of poor Alabama schoolchildren and their parents are asking the U.S. Supreme Court to considering scrapping Alabama's property tax system, which the group believes to be unfair to minority students. According to Al.com, the group argues that Alabama's property tax system, which collects the lowest taxes in the country per capita, was set up to give wealthy landowners low rates, ensuring limited funding for public schools attended by minority children in Alabama's rural black belt. Although a U.S. District Court in Huntsville and the 11th Circuit Court of Appeals have both sided with the state, the plaintiffs argue the case is important enough for the Supreme Court to take it up. The new petition was filed in Lynch vs. Alabama. Veteran Alabama civil rights attorneys Jim Blacksher, Larry Menifee and Edward Still are continuing to argue the current system is unfair and the lower courts misapplied the law. The cert petition to the Supreme Court is joined by Eric Schnapper, a professor at the University of Washington. Schnapper is listed as counsel of record on the petition.
By James Sutton, Managing Consultant, Dallas
& Bill O’Quinn, Senior Managing Consultant, Dallas
Property tax reform has long been a discussion in Pennsylvania, and it is the topic of conversation once again. Senate Bill 76, also known as the Property Tax Independence Act, is a proposal to eliminate school property taxes and replace them with money from personal income and sales taxes. However, 41 organizations banned together to protest the legislation this week, arguing it has "vast" potential for negative consequences and could hamstring retailers, hurt poor people and leave schools with a volatile funding stream if enacted. Despite the onslaught of criticism, 13 republicans and 13 democrats have already signed on as co-sponsors of the bill. Supporters of the legislation say its "truly the people's bill" and believe it would create a fair system for public school funding.
Providence, Rhode Island and the owner of the Providence Biltmore Hotel are in a legal battle over a revised property tax bill. The dispute is related to a tax stabilization agreement city officials made with the hotel developers who purchased the marquee hotel in 2012. The city claims the hotel's owner owes more than $1.3 million in property taxes, interest and penalties, while the owner argues that the nearly $250,000 they have paid so far is all they are obligated to pay under the agreement. Superior Court Judge Michael A. Silverstein, who is ruling over the legal case, said it could have serious implications for dozens of property tax stabilization agreements Providence has signed dating back 20-plus years.
By Carlos Villatoro, Managing Consultant, Dallas
San Francisco Supervisor David Campos has requested a hearing to discuss the ways the so-called 'Twitter tax break' have impacted the Mid-Market neighborhood. According to the San Francisco Business Times, Campos wants the hearing to consist of “a discussion on the amount of the tax break, its impact on commercial rents, including rents for non-profit tenants, as well as its impact on residential housing prices and tenant displacement in San Francisco, and a discussion on the impacts of the city’s decision not to collect stock based compensation.” The hearing will be April 30 before the budget and finance sub-committee.
Detroit, Michigan - Paradigm Tax Group (Paradigm) is proud to announce its recent acquisition of Diversified Property Solutions (DPS), a property tax advisory firm based in Southfield, Michigan. Principals Edward Blanchard and Frank Giglio founded DPS in 2003 after working together at Arthur Andersen. As part of Paradigm, the DPS team will continue to provide a range of services, with a focus in real estate tax review and appeals, fixed asset inventory and reconciliation, personal property tax review and appeals, multi-state property tax return compliance, and tax abatements and incentives.
New York City's property tax system, described as "irrational, unjust and absurdly complex," is under fire due to a February lawsuit regarding the disproportionate amount of property taxes African-American and Hispanic renters pay in comparison to white, wealthy single-family homeowners, and the owners of condos and co-ops. The lawsuit has banded together the renter-plaintiffs and wealthy owners of the large multi-family buildings that generate income from rent, then pass on the tax burden to their tenants, to challenge the city's system together. Both owners and tenants understand that New York City's extremely high real estate taxes threaten the viability of the city. The class-action suit was filed by Newman Ferrara, and the real estate law firm is covering all expenses, stating that no organized landlord or tenant groups are involved at this time.
By Jerry Heaton, Senior Managing Consultant, Dallas
Chicago Mayor Rahm Emanuel's proposed pension deal with some of its unions that would resolve about half of the city's pension debt crisis would cost property owners much more than city officials initially let on. The proposed agreement would implement a $750 million property tax hike over 5 years (initial statements claimed $250 million), with the city's gross property tax levy destined to rise almost a third by 2020. In fact, this number could increase even more once deals are made to cover city police, firefighters, Chicago Public Schools teachers, or the cost of a recently finalized pact for Chicago Park District workers. With all of that taken into consideration, Chicago taxpayers potentially face hundreds of millions of dollars a year in higher taxes, which will likely impact Chicago's business climate.