Issuing a decision that could have major statewide implications for the New Jersey health care industry, a New Jersey Tax Court judge has denied Morristown Medical Center's challenge to overturn the Morristown tax assessor's denial of tax-exempt status for portions of its operations. The ruling highlighted the difficulty in separating the charitable and for-profit activities of hospitals and other organizations, and nonprofit hospitals across New Jersey could be liable for millions of dollars in annual property taxes. The judge found that Morristown Medical Center had so intermingled its nonprofit and for-profit services and finances that it could no longer qualify for a tax exemption under state law.
Washington County, Pennsylvania is currently undergoing a reassessment of all properties. Tyler Technologies is conducting the countywide reassessment, and values will be set by July 1. Property owners can expect to receive their new valuation notices in early February 2016 (effective tax year 2017), but Tyler Technologies’ project supervisor is already warning all property owners to expect assessment increases. The county is going to tax at 100 percent of market value as of July 1, 2015, and they’ve been taxing at 25 percent of the base year value of Jan. 1, 1981. The market values have gone up over the past 34 years since the last reassessment, and the increase may be shocking.
After the Austin City Council's unanimously voted to file a petition challenging the Travis Central Appraisal District’s valuation of commercial properties, the Appraisal Review Board for the TCAD effectively accepted the "agreed order" between the city of Austin and TCAD – suspending, for the moment, the city's challenge of TCAD's commercial property valuations. This strategy was expected, as it allows the TCAD certification of the current year's tax rolls to proceed by the statutory end of August. It will also allow the city to appeal the ARB decision to state district court, and meanwhile share its discovery information of commercial market prices with TCAD's appraisers. The analysis of TCAD’s commercial valuation estimated that the TCAD's 2015 commercial property values are under market value by 27 percent, while vacant or underdeveloped commercial land is undervalued by 76 percent.
Although New York City was short on hotel supply just a few years back, it could now be facing a bubble, according to pumped-up speculation and forces outside of the hospitality industry. A weak dollar and diversified hotel market helped fuel an explosion in demand over the last seven years, and the number of bed nights (nights spent in a room) increased by almost 8 million, from a total of 33 million in 2009 to 40.6 million in 2014, according to data collected by hotel bench-market STR. Supply will reach its peak this year and continue to rise in 2016 before plateauing, according to STR, but demand is also expected to dwindle at the same time.
After concluding this year's 113-day legislative session, the longest in Kansas history, it turns out legislators aren't quite off the hook yet. Lawmakers inadvertently passed two conflicting versions of a new property tax lid law, and must reconvene June 26th in order to pass a bill addressing the problem, a "technical clean-up." Lawmakers increased sales and cigarette taxes as part of a package expected to raise $384 million during the fiscal year that begins July 1. The higher taxes closed the last part of a projected $800 million budget deficit after numerous other adjustments. The package also included two bills addressing the controversial property tax lid, which will require local governments to seek a vote of the people for certain property tax increases in the future.
American retail has been struggling in recent years, and traditional mall anchors Sears, Macy's, and JCPenney have shuttered hundreds of store locations across the country. Brands like Gap, Abercrombie & Fitch, and J. Crew that use to dominate malls have also been facing plunging sales and profits, and have had to close stores and layoff hundreds of workers as a result. More than two dozen malls have shut down in the last four years and another 60 malls are on the brink of death, according to Green Street Advisors. But despite the struggling retailers and the shift to Internet shopping, a few businesses are benefiting from the mall-closure trend and helping the industry survive.
Over the weekend, Gov. Greg Abbott vetoed a bill that would have made it easier for big corporations to win breaks on school property taxes and would have allowed a company to make one application for projects strung across multiple school districts. Abbott was vocal with his grievances with the 2001 law, which promises the state will repay school districts if they reduce appraisals for big new manufacturing plants and other facilities. Wind farms and petrochemical installations along the Gulf Coast have primarily benefited from the program, but various studies have questioned whether it has actually been effective in job creation.
In an effort to increase public safety, Tallahassee City Manager Anita Favors Thompson is seeking a 27-percent property tax increase, which will help pay for more police officers, fire fighters and equipment. According to the Tallahassee Democrat, the city manager's proposed budget for 2016 is $704 million in operating expenses, compared to the current $697.2 million operating budget, and $143.5 million for capital improvement costs are proposed for 2016. The city has not increased its property tax rate in five years. The current rate is 3.7 mills, and the increase would take it to 4.7 mills. The 1-mill increase will generate about $9.2 million a year, according to the city's budget manager.
According to a recent survey conducted by the Pennsylvania Association of School Business Officials and the Pennsylvania Association of School Administrators, about 70 percent of the state's school districts plan to raise property taxes in the 2015-2016 school year. According to the Pittsburgh Business Times, this will mark the sixth consecutive year in which at least 60 percent of districts statewide have had to raise additional local revenue in order to meet educational needs. One of the largest drivers is increased pension costs. According to the survey, which included responses from 346 of the state's 500 districts, 99 percent of districts project an increase in pension costs for the upcoming school year. As a result of higher costs, 41 percent of districts said they planned to reduce staff through one or more actions. Gov. Tom Wolf's proposed state budget includes increases to basic and special education subsidies; however, these changes hinge on increases in state income tax, sales tax, and tax on natural gas extraction while cutting property taxes.
A new bidding war is breaking out in the self-storage industry, as REITS and other investors are attracted to the sector's stable returns. A 97,000-square-foot self-storage facility in Orlando, Fla., recently sold for $11.8 million to Westport Properties Inc., after a bidding battle among 18 potential purchasers, including several REITs, according to the Wall Street Journal. This situation exemplifies the attention the self-storage market is receiving, as the seller received a price of about $121 a square foot, a significant premium over the $100-a-square-foot average sales price commanded by storage properties in the Orlando market, despite the fact it wasn't an A-quality facility or ideal location.
In an effort to tackle an affordable housing crisis of “epic proportions,” the California Supreme Court unanimously decided on Monday that cities and counties can require developers to sell some housing at below-market rates. Following studies documenting a scarcity of affordable housing in the state, especially along the coast, the ruling said municipalities have “broad discretion to regulate the use of real property to serve the legitimate interests of the general public.” Local governments can require developers to sell a percentage of the units they build at below-market rates as a condition of a building permit. Developers also could be given the option of paying into a fund for low-cost housing.
Some of the Phoenix’s trophy Class A office buildings have higher vacancy rates than the market overall, as well as higher office vacancy rates than other Western U.S. cities such as San Francisco, Seattle and Los Angeles, according to a new report from JLL. While the asking rents at office towers in midtown and downtown are more than 33 percent higher than less prominent office space, the vacancy rates for trophy buildings are also actually higher. The asking rents at trophy buildings in Phoenix’s central business core were $26.53 per square foot in the first quarter compared to $19.87 for non-trophy space, according to JLL. Vacancy rates in those same trophy buildings is currently 24.5 percent compared to to 21.3 percent for non-trophy offices.
Three months in to 2015's peak leasing season, the multifamily sector is performing better than expected. Despite widespread concern of slowed rent growth due to new supply, affordability issues and other factors, a newly released MPF Research report found that rental rates jumped 6.5% in May, which breaks the previous April high for this cycle. MPF's data found that the growth came from both new residents, up 8.4%, and renewals, up 5.1%. MPF’s rent growth numbers are based on lease-over-lease change. Surprisingly (with new construction coming online), average occupancy for stabilized properties (which excludes lease-ups) tightened to 95.7%.
New York City’s 421a property tax program, which allows developers of rental apartments to reduce their real estate taxes on new projects for 10 to 25 years, has become the thorniest issue for legislators, as it has drawn the scrutiny of an ethics panel but is a crucial incentive for the city's real estate industry to build additional units of affordable housing. New York City Mayor Bill de Blasio and Gov. Andrew Cuomo, along with legislators, are divided on the best way to change the program (which is set to expire June 15) and it is unclear whether it will be extended temporarily and negotiated in a special legislative session in several months, addressed next year, or if it will get rolled up into a package with other end-of-session issues and to be voted on at the last minute.
Hotels performance in major oil and gas markets has slowed due to a decline in U.S. oil prices, according to analysis by STR Analytics. Hotel development in oil and gas market tracts have accounted for 25 percent of new supply that has entered the industry since 2010, and have also accounted for 47 percent of Midscale properties and 44.5 percent of Economy hotels developed in the U.S. during that time. The U.S. oil and gas industry has been a boon to the hotel industry for the past half decade, especially in remote locations. The STR analysis found that among prominent oil submarkets, the North Dakota area has reported the largest supply increase since 2010, up 73.4 percent. Midland/Odessa, Texas (+44.4 percent) ranks second followed by the Texas South Area (+37.7 percent) and Bismarck, North Dakota (+36.9 percent). More supply also is reported in the pipeline with nearly 11,000 rooms in construction in the top 20 oil and gas tracts as well as another 24,000 rooms in planning stages.
A new poll conducted by the Public Policy Institute of California found that support is dwindling for removing commercial properties from tax limits imposed by Proposition 13, the landmark property tax initiative approved by voters in 1978. The poll also found that California voters were evenly divided on the idea of extending tax increases imposed under Proposition 30, which was approved in 2012 and temporarily increased the sales tax by a quarter-cent and raised income levies on high earners. The poll's finding come as a newly formed coalition of public employee unions and other liberal groups launched a campaign to put a revision on California’s 2016 ballot that would remove Proposition 13’s protections from commercial properties. The split-roll measure would require the regular reassessment of commercial properties while keeping tax protections for residences in place. Fifty percent of likely California voters said they favor the split roll, while 44% said they opposed the idea, the poll found. In January 2012, 60% of voters supported such a change.
The vacancy levels of downtown Pittsburgh’s Class A office market are expected to reach above 10 percent over the next three years, according to a new Skyline report by Jones Lang LaSalle, that otherwise notes that it ranks among the tightest central business district office markets the firm surveyed. Yet after years of downtown Pittsburgh comparing with cities such as Austin, Texas, Seattle and New York in terms of the strength of its downtown office market, Jones Lang LaSalle expects vacancy to begin increasing in early 2016 and will culminate in Class A vacancy rising above 10 percent by mid-2018, due to a lot of new space entering the market.
Several counties in Pennsylvania are in the process of conducting countywide real property reassessments. If you own property in Indiana County, Lancaster County, Washington County, and/or Blair County, click here to find more information regarding reassessment valuation notices, informal review opportunities and formal appeal deadlines. For property tax purposes, it is crucial that real estate owners ensure their appraised property values are accurate. We highly recommend enlisting a property tax professional to review your reassessment notice in order to achieve maximum tax savings.
California Senate Bill 661 has come under a lot of controversy, as the bill would strip counties of their authority for assessing taxes on the planes that airlines fly in the state, giving that responsibility instead to the state Board of Equalization (BOE). The airline industry is in support of SB 661, because they would only have a single government entity to deal with for property tax issues rather than 11 separate California counties they fly into, which they say has "resulted in unnecessary costs and red tape for taxpayers, governments, airlines and courts.” County assessors oppose the bill, however, saying they already work under a 10-year-old “lead county” system, in which each airline is assigned only one county to work with, and that county does the tax valuations for the other 10.
As Chicago grapples with massive budget problems, it is very likely be a property tax increase will be the solution. While bringing a casino to Chicago, increasing fees, expanding the sales tax, and 'progressing' the income tax are just some of the ideas that have been brought to the table as alternatives to a property tax increase, it is unlikely any of them will be able to generate the additional revenue needed to fix Chicago's financial woes. An accompanying property tax hike will be necessary and the burden will fall heaviest on businesses, making Chicago and Cook County an even less attractive place to do business.
The future is looking positive for the Washington, D.C. office sector as development slows, the economy improves, and millenials move into the city. Office leasing skyrocketed between 2009 and 2006 thanks in large part to the formation of the Department of Homeland Security. But unfortunately, the recession brought government cutbacks, layoffs and consolidation at the same time suburban developments were completed, and the market began to suffer greatly. Today, the vacancy rate for the entire Washington D.C. region is more than 17 percent, with much of the emptiness due to vacated space in the suburbs. Nearer the capital, the vacancy rate is about 11 percent, and the unemployment rate is at 7.8 percent, significantly higher than the national average of 5.5 percent, according to the U.S. Bureau of Labor Statistics.
For the first time since property values were frozen more than four years again, Nassau County is set to conduct a reassessment of every residential and commercial property. New values were to suppose be in place by Jan. 1 of this year, but the reassessment was delayed by superstorm Sandy. The new assessments are expected to take effect Jan. 1, 2018. Prior to County Executive Edward Mangano freezing values in January 2011, property assessments were updated annually. Mangano is upholding his campaign pledge and moving to a four-year countywide assessment cycle.