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City council hears valuation horror stories

Richard Flaherty has watched the assessed tax valuation for the buildings and properties of his Port Orchard manufacturing firm skyrocket while, he believes, their actual values have plummeted.

He bought four lots with wetlands for $12,500 in February 2006, and their assessed valuation increased to $104,400 in October 2010.

“I was not happy,” said Flaherty, “but I figured that, with an approved short plat and the entitlement rights in place, this was probably high but the cost of receiving the right to install entitlements added some initial value.”

Then the Kitsap County Assessor’s Office upped the land’s value again to $478,150 in 2010.

That really upset Flaherty.

“The property stands today exactly as it stood a decade ago, without any utilities, proper entry road, storm pond or other entitlements other than the approved short plat,” he said. “In its current state, the property is essentially worthless even with the short plat approval and entitlement rights until the wetlands are mitigated and the full range of entitlements are installed.”

He bought seven other lots in 2004 for $230,000.

The next year, they were assessed at $290,240, and increased to $483,750 in 2006.

In 2007, their value shot up to $1.06 million, and they were assessed, in 2011, to be worth $2.4 million.

On those properties alone, Flaherty said, he saw a 1,048 percent increase.

“Your office’s continued pointing to figures and data that are so outdated and antiquated in today’s depressed environment are preposterous,” he wrote in a letter to Assessor Jim Avery. “The unrealistic valuations will cause many job losses and many more businesses to close, relocate and become ‘anti Kitsap,’ which will further the painful downward spiral Kitsap has experienced and now will excel into the future.”

Flaherty has appealed to the county’s Board of Equalization and to the state for several years in a row, without success.

"Do thy listen? No. Do they care? No," he said. "I can tell you, if I’d had 100 percent evidence, I’d have still lost."

And the inflated valuations have had a seriously negative impact on his business as well as others in the area, he said.

“I, for one, will forever remember Jim Avery as the guy who brought businesses to their knees at a time in history when those very businesses needed transparency, support and honesty about the values of their properties,” Flaherty wrote.

He accused the assessor of lowering taxes on property owners and making up for that loss in revenue by jacking up taxes on business owners, he said, at a city council meeting June 15.

He wasn’t alone.

Fred Karakas, owner of Olympic Bike and Skate, on Bay Street, also said his property seemed to be overvalued in his tax assessment, and he asked for the city council’s help.

“The only thing I did question this on was when I got my tax statement,” he said. “I was like ‘Wow, this is crazy. This is like a boom-times increase, and I found that all the other people downtown were getting bigger percentage increases than I was even getting.’”

He questioned the assessor’s model and thinks it’s flawed.

It’s based on one commercial sale and two confirmings in 2007 and 2008 — the only commercial property sales in the past six years, Karakas said.

“That was when everyone was spending someone else’s money,” he said. “The fact of the matter is, it crashed, and we’re still being assessed at boom-time pricing.”

Avery said that the assessment on Karkas’ commercial building seems fair, to him.

It's modeled around the rent that he gets from his units, Avery said, assuming that the building's owners want a 7 to 8 percent return on their overall investment in the building.

They just cross-check the accuracy of the number with comparable sales, he said.

About 10 property owners seemed to leave the meeting unconvinced.

None of the city council members said they’d help them.

“I think that the whole proceeding is a huge waste of the council’s time,” said Councilman Fred Olin. “The only question I want answered, I would like to know when (the county assessor’s) term is up.”

“Three and a half years,” said Avery, who attended the meeting and explained his method of assessment.

“I hope your memory is three-and-a-half years long,” Olin told the property owners, “because (getting Avery out of the Assessor’s Office) is the only way you can change things — and I’m not convinced that that will change anything.”

The city should care a little more than that, said Flaherty.

“This county is ruining the city of Port Orchard,” he said. “It’s hurt our business tremendously. We can’t hire people, and I don’t think Jim sees it.”

Avery said that he wished he had enough power to change the economy, but he doesn't.

“The tax bill on your building went up about $8,000,” Avery said to Flaherty's, “and that's not an inconsequential amount of money. I get that, but it's certainly not enough to pay for a huge number of employees or anything like that.”

The county gets about 500 revenue appeals each year, less than 1 percent of the total completed by the assessor's office, Avery said.

About 200 to 300 of them either “go away” he said, or “we come in with a recommended lower value.”

Another 200 to 250 go through the hearing process, he said.

The county's Board of Equalization, appointed by the county commissioners, rule in favor of the property owner for about one in 10 cases they hear.

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