By Ivy L. Irwin, Managing Consultant, Atlanta
Just five months after voters struck down The Pinellas Suncoast Transit Authority's attempt to boost the county’s sales tax rate to the highest in Florida to fund a $1.6-billion, 24-mile light rail system, the PSTA new strategy is a property tax increase. The PTSA, an independent special taxing district with authority to levy ad valorem taxes on real property in its transit area, detailed their proposed plan last week. The plan will affect hundreds of thousands of county taxpayers, despite the small fraction of residents that actual utilize public transportation.
The Historic Property Tax Credit, a state income tax credit intended to help developers raise money to restore historic properties, was granted bipartisan approval by the North Carolina House and now moves to the state Senate. The bill, which passed with a 98-15 vote, would offer a 15 percent income tax credit for up to $10 million of the costs of rehabilitating designated historic buildings. It would allow a 10 percent credit on costs between $10 million and $20 million. Additional credits would be available in certain circumstances.
Companion proposals that would eliminate the business personal property tax are circulating in the Wisconsin Legislature. The personal property tax is a levy on business equipment (items not fixed to land, such as furniture, equipment, machinery and fixtures) that is assessed in addition to real property taxes paid by businesses, which the co-sponsors Rep. Bob Kulp (R-Stratford) and Sen. Tom Tiffany (R-Hazelhurst) say is an unfair, costly burden and inhibits additional investment from small businesses. They also believe it is a double taxation, as business already have to pay sales taxes for equipment purchases.
Rising real-estate values are driving more retail companies to consider splitting off their real-estate assets to generate cash, according to the Wall Street Journal. Late last month, Hudson’s Bay Co., the Canadian parent company of Saks Fifth Avenue and Lord & Taylor department stores, announced a $1.7 billion joint venture with U.S. mall operator Simon Property Group Inc. involving 42 department stores. Hudson’s Bay will retain 80% of the joint venture but will lease its store space back from the company. It plans eventually to split off the venture into a real-estate investment trust. Sears Holdings Corp. also said it would split off as many as 300 of its best locations into a separate company by June to raise money. McDonald’s Corp., Dillard’s Inc. and MGM Resorts International are among other recent companies whose investors are pushing for real-estate split-offs.
Categories: Real Property
The New York Supreme Court once again rejected the state's teaches union attempt to get the property tax cap tossed. Enacted in 2011, the cap limits school districts and local governments to annual property-tax increases of 2 percent or the rate of inflation, whichever is lower. The lawsuit was initially rejected last September, but the New York State United Teachers union resubmitted its objections based on a law last year to toughen the tax cap by providing a rebate to homeowners whose local schools and municipalities stayed within the cap. Supreme Court Judge Patrick McGrath of Albany dismissed the latest complaint on March 16.
City and convention center officials are considering property tax breaks to help build a massive hotel complex across from the Boston Convention & Exhibition Center, which would have at least 1,200 rooms and cost roughly $800 million to build. Critics are wary of the a public subsidy being provided for the South Boston waterfront project, however, as the area has emerged as one of the hottest urban real estate markets on the East Coast and argue that the project should be able to attract a hotel company "on its own merits."
The city of Charlotte is facing a $15.6 million shortfall for the upcoming fiscal year, a budget gap larger than what the city faced after the recession in 2008, and elected officials are struggling to find a solution to the unexpected budget crunch. The shortage can be attributed to two main factors: The first is the loss of $18.1 million after the General Assembly repealed the Business Privilege License Tax, which city leaders are skeptical the legislature will replace the tax this year. The second is the ongoing Mecklenburg County Revaluation, which was was required by law to correct errors from the 2011 countywide revaluation, and has resulted in a loss of $14 million, mostly from commercial property.
Commercial property values continued to climb up in the first two months of the year, according to commercial property price indices (CPPIs) from Moody’s/RCA and Green Street Advisors. The Moody’s/RCA CPPI is based on completed “repeat” sales of the same commercial assets. Moody’s reported that in the first month of the year, its national all-property composite index rose by 2.1 percent, while the 12-month jump in values totaled 14.6 percent. Commercial property prices are now about 5 percent above their 2007 peak, Moody’s reports.
Gov. Scott Walker's proposal to shift property assessment duties from municipalities to counties is meeting a lot of resistance. The Wisconsin Towns Association recently voiced their opposition to the proposal, as have The Wisconsin Association of Assessing Officers and the Wisconsin Counties Association. Local governments are not the only ones at risk, however, as taxpayers could be impacted by the double whammy of greater costs and a lesser product. Counties would be allowed to charge municipalities for the services — up to 95% of what they are currently paying for assessments. But most municipalities favor contractors, utilizing private sector competition to obtain highest quality assessors at the most reasonable cost. The proposal requires full market value assessment every year, and a report The Milwaukee Journal Sentinel found that an in-house department might cost $25 per parcel to maintain, while a private company might sign a contract for $6 per parcel.
With 12,392 units that have either opened or are under construction with a 2015 completion date, Seattle apartment developers are on pace to break a production record set in 1989, if they're all up and running this year. Despite the onslaught of new apartments, which includes 56 new residential buildings planned, under construction or recently completed in the downtown area, the vacancy rate in greater Seattle is dropping and rents are rising, according to a new report by Apartment Insights Washington of Seattle. The report says that monthly average rents in King and Snohomish counties increased $28 during the first three months of the year, a significant increase of just over 2 percent.
In an effort to increase revenues for county schools, Prince George’s County Executive Rushern L. Baker III (D) proposed raising property tax rates for the first time in 35 years. He proposes raising the property tax rate from 96 cents per $100 of assessed value to $1.11 per $100 of assessed value — the highest rate in the region. According to the Washington Post, Baker’s proposal would fully fund a $1.9 billion spending request from the county schools chief that would significantly increase per-pupil spending in hopes of bridging the gap in academic performance between county students and those in neighboring jurisdictions. One key issue is whether Baker can circumvent a 1978 law that requires the county to get voter approval to raise property taxes. Baker says there is language in a 2012 school funding law that gives him authority to exceed the property tax cap to fund schools.
When the Revenue Committee voted on the proposal to reduce the taxable value of agricultural land from 75 to 65 percent of market value on Wednesday, only two of eight members voted for it. The committee did, however, endorse a proposal to lower personal property taxes – that could include everything from farmers’ tractors to business computers. The proposal is a personal property tax credit geared more toward small businesses and the production of ag land – not the owners of ag land. In other words, the break would go to someone who owns a tractor or combine, not someone who owns a section of land. It would also go to businesses that own personal property, like machinery.
JP Morgan Chase, the nation's largest bank, announced plans to close roughly 300 branches by the end of 2016, roughly 5 percent of its overall footprint. According to the National Real Estate Investor, JP Morgan Chase is looking to cut costs and optimize its branch network and plans to change how it services its retail customers by emphasizing mobile banking and more tech-savvy automated teller machines, illustrating a larger trend within the banking industry: a greater focus on branch efficiency and technology. The commercial real estate industry is taking note, as this means thousands of shuttered branches.
Many commercial property owners suffered from sticker shock last year when the District changed its assessment methodology of office buildings and apartment buildings, basing assessments on pools rather than individual building data such as vacancy and rental rates. Many tax property owners have yet to experience any relief, as the 2016 assessment notices issued earlier this month were still based on financial information that is more than a year old and likely does not reflect the true value for office buildings and their current vacancy rates. This is largely due to the fact that property owners are not required to submit income and expense data for their buildings until April 15, meaning assessors are working off 2013 income and expense information.
In the heat of a tight mayoral campaign, City Council budget chairman Alderman Carrie Austin, a key ally of Rahm Emanuel, said the mayor will have to raise property taxes to cover city’s looming budget gap and ballooning pension payments. Austin said she has talked to the mayor about his spending plans going forward, and according to the Chicago Tribune, when pressed on whether those plans included property tax increases, Austin responded: “I believe we can truly say that it will happen, but it’s all in the ‘how much.’ ... Nothing is off the table, and I think we should be honest with the people to let them know that everything is being considered.” The statement was made during Emanuel's campaign news conference on Monday to blast challenger Jesus “Chuy” Garcia, a Cook County commissioner, who has yet to offer any specifics on he plans to address the city's budget and pension issues.
Top Texas business leaders, representing the industrial sector and 46 percent of business taxpayers, sent a letter to Lt. Gov. Dan Patrick and state senators last week, complaining that the Senate tax-reduction package "falls short" when it comes to incentives to continue growing the state's economy. The letter address the growing split over the proposed tax-cutting plans being considered by the Legislature. Both the Senate and House are looking at cuts to school property and business franchise taxes, but the Senate's recently released details of the plan have provoked concern among lobby groups and lawmakers, as Senate leaders pledged to push ahead to provide significant tax relief for both homeowners and businesses.
Walgreens, CVS, and other big drugstore chains have been challenging property tax assessments in courts around the country for the past decade, with little national notice. Kentucky tax officials, in particular, have been battling Walgreens over property assessments since 2012. The drugstores argue that the rent they pay their commercial landlords doesn’t accurately reflect property values, and when successful, get their tax bills slashed. The onslaught of appeals has spiked controversy, and according to Bloomberg Business, Kentucky assessors are not only concerned about the potential cost of hundreds of millions of dollars if they start losing the tax assessments on all of these leases, but they worry other national retailers will follow suit, further threatening the budgets of already struggling school districts. Last month, a Kentucky circuit court judge ruled in favor of Fayette County over Walgreens, concluding the latest skirmish in a long-running battle between national drugstore chains and tax assessors.
A report by The Allegheny Institute found that there were 10,226 appeals of property values heard by the Allegheny County (Pennsylvania) Board of Property Assessment Appeals and Review in 2014. All together, the pre-hearing assessed value of these 10,226 properties was just above $2.6 billion. Appeals of values brought by governing bodies on the basis they were too low resulted in assessments being raised by $340 million. Appeals of values brought by property owners on the basis they were too high led to reductions totaling $180 million—for a net taxable rise of about $160 million countywide.
New York City's hotel sector has been growing for years and has long-been an attractive market for developers and investors. However, New York City hotels have been struggling recently, and industry experts are concerned about a number of factors that could make the market unattractive to investors. For starters, a sustained strengthening of the dollar and a weak global economy could curb tourism, according to the New York Times. Analysts agree that international tourism will most likely be affected if the dollar remains strong, which is bad news for New York, as the city is particularly dependent on international tourists. Industry leaders also expressed concern about the effects of foreign exchange rates on the city's tourism.
As the New York property tax cap is set to expire next year, a coalition of education groups is urging the state Legislature to overhaul the system, saying the restrictions are straining school budgets. Installed in 2011, the cap (with some exceptions) limits the amount local governments and most school districts can increase property taxes to either two percent or the rate of inflation, whichever is lower. Gov. Andrew Cuomo wants to make the cap permanent, however, arguing it has helped limit the growth in property taxes in a state with the highest costs in the nation.
In an effort to cure Atlantic City's reeling gambling industry, which has seen about half its revenue disappear since 2006, a plan was introduced three months ago that would make sweeping changes to the way casinos pay property taxes. Rather than paying property taxes, casinos would cumulatively make $150 million in Payments in Lieu of Taxes (known as "PILOT") annually for two years, then $120 million for each of the next 13 years. But despite bipartisan support from Atlantic County officials, the plan continues to languish in the Legislature.