By Ted Bayer, Senior Managing Consultant / Principal, San Francisco
Supervisors in Kern County, home to the five most productive petroleum fields in California, have declared a state of fiscal emergency in response to predictions of a massive shortfall in property tax revenues amid plunging oil prices. According to the LA Times, surging oil supplies domestically and weak demand abroad have left Kern facing what could be a $61-million hole in its budget once its fiscal year starts July 1, according to preliminary calculations from the county’s assessor-recorder office.
Morristown, New Jersey has fired a lawsuit against Morristown Medical Center due to its non-profit status, which exempts the business from having to pay property taxes. The case could have ramifications for the millions of dollars in property tax exemptions that now benefit scores of hospitals statewide.
The U.S. hotel industry ended 2014 with a bang, reporting positive results in the three key performance metrics during December 2014, according to data from STR, Inc. Overall, in year-over-year results, the U.S. hotel industry’s occupancy was up 4.8 percent to 52.6 percent; its average daily rate rose 4.3 percent to $113.42; and its revenue per available room increased 9.3 percent to $59.62. Demand for the month was 5.8 percent higher than last year, and Interstate and Suburban hotels even reported demand increases of more than 6 percent.
By Domingos Santos, Managing Consultant, Phoenix
A recent court decision favoring Meijer over Marion County, Indiana could impact the way big box retailers are assessed statewide. According to the Indianapolis Business Journal, the Indiana Board of Tax Review ruled in December that the East 96th Street Meijer store—one of the most successful in the state—should have been assessed in 2012 at the equivalent of $30 per square foot, not the $83 per square foot assigned by Marion County. The decision would hold Marion County responsible to refund $2.4 million to cover the years from 2002-2012. Other county assessors are under no legal obligation to abide by the ruling, but the closely watched case dealt with a fundamental issue in Meijer and other big-box chains’ appeals: Is the value of a store tied to the sales that happen inside, or is it limited to the big, boxy building itself?
A report released by Colorado's division of Property Taxation shows that both residential and business property values, with the exception of natural resources, have risen significantly over the past two years, according to the Denver Post. Based on statewide assessed values between June 30, 2012 and June 30, 2014, the report calculated a 14.3 percent jump in residential property values, 9.4 percent increase for commercial property values, 11.1 percent increase for farmland, and a 5.5 percent increase for industrial property. Oil and gas, on the other hand, saw a 4 percent drop. Those valuations are tied to the underlying commodity, and oil prices are down by more than half since June. While those increases don't play into the 2014 property tax bills going out this month, but they do foreshadow higher property taxes ahead for many in 2015 and 2016.
A Pennsylvania school district is creating significant tension between itself and the Franklin County, Pennsylvania Economic Development Department. In an effort to generate more tax revenue from commercial and industrial properties, the Chambersburg Area School District (CASD) is pushing a reverse tax assessment initiative, in which the district has a consultant that identifies commercial properties as being underassessed. With school board approval, the district pursues an appeal to reassess a property's value at an increased amount -- going back to the point the appeal is filed, and through and beyond the time a settlement is reached or the appeal is won. Specifically, the CASD is targeting large warehouse properties occupied by major corporations such as Sears and Target. Not only is the school district creating a risk of losing large commercial tenants and the jobs they provide, there seems to be little concern about the impact it would have on the economic stability of this mostly rural central Pennsylvania county. Paradigm Tax Group is available to assist taxpayers effected by this trend of reverse tax appeals.
On Friday, Governor Paul LePage announced his two-year budget proposal that would achieve $300 million in savings by 2019 by making huge changes to Maine's tax system. The plan includes reducing the income tax while expanding the sales tax to affect goods and services that are currently exempt, while also eliminating state aid to municipalities via the revenue-sharing program by 2017. In order to make up for the elimination of state revenue sharing in the second year of his biennial budget, LePage's plan would allow communities to tax large nonprofit organizations with valuations greater than $500,000, such as hospitals, colleges and private schools. The organizations would be taxed at 50 percent of the property tax rate for assessed value above $500,000.
As oil prices continue to drop, the success of some office sectors across the country is being threatened. According to the National Real Estate Investor (NREI), the stock market drop by 331 points on Jan. 5, as crude oil dipped below the $50 a barrel mark, showed the nervousness about a possible slowdown in U.S. economic growth. According to two recent studies, by commercial real estate services firms CBRE and JLL, energy firms will reconsider their investment appetites this year, and may be forced to cut back on capital spending and exploration budgets.
Wisconsin developers are wondering what's in store for the state's historic restoration tax credit program, as there was a large spike in demand for the credits over the past year. Developers are concerned the state may limit the program's future, while state officials remain quiet on the subject. The program, which offers a tax credit worth 20 percent of their cost of restoring a historic building, was put on month-long moratorium last year after developers claimed $35 million in tax credit awards, even though legislators were told to expect only a $4 million budget impact. The program's uncertainty will not only affect developers who want the credits for future projects, but also the investors the developers sell those credits to in order to raise money for the developments.
Cincinnati's property tax rate will remain the same in 2016 as it is this year - 5.6 mills - under a tax budget passed by the City Council on Wednesday. According to the Cincinnati Business Journal, that level will provide the city $29 million, the same amount of revenue the city has collected for the last 15 years. Because leaving the rate the same is projected to lead the city to collect the same amount of revenue as this year, there was no fight between council members over rolling back the rate, a policy four of the nine council members oppose. Depending on how you look at it, the rollback policy has led to the city forgoing – or taxpayers saving – $94 million in property taxes since 2001. Cincinnati is the only Hamilton County municipality and major Ohio city that adjusts its property tax rate to bring in a certain amount of tax revenue each year.
Assessment notices have been issued to property owners across the state of Maryland and values have increased since 2011, reflecting a rebounding market. Commercial property values showed an overall average increase of 18.6% statewide. In Maryland, properties are reassessed once every three years. The properties currently being reassessed were last valued for the July 1, 2012 tax year. According to Maryland's Department of Assessments and Taxation, Montgomery County saw the largest increase in commercial values (34.4%), followed by Harford (14.7%), Baltimore City (14.4%), Anne Arundel (13.8%), Prince George's (13.8%), Howard (13.4%), Caroline (13%), Frederick (12.3%), Washington (11.8%), and Baltimore (10.3%).
By Tad Berry, Managing Consultant, St. Louis
While Philadelphia's apartment market performed well in 2014, there are some indications that 2015 might be a different story due to a rising tide of supply. According to the Philadelphia Business Journal, in Center City, landlords of Class A apartments saw rents surge by 3.7 percent to $2,128 a month, or $2.23 a square foot, and the vacancy nudge up slightly to 5.7 percent from 5.5 percent. Although these are healthy metrics, the threat of oversupply looms.
As Texas legislators begin their session next week, they will discuss what to do with the overflowing state coffers, which has as much as $9 billion to $12 billion extra, according to conservative estimates. Some Republican leaders have been pushing significant tax cuts, such as reducing the sales tax rate by 0.25 percent, cutting the franchise tax in half or repealing it completely, and decreasing the property tax rate for school levies by one-third. However, tax cut fever is starting to cool, as oil prices, which help drive much of the state revenue, continue to plunge.