Property tax anger isn’t going away
June 30, 2011 · 2:37 PM
By GARY ANDERSON
For the Independent
Most residents of Kitsap County probably aren’t aware of the debate that’s raging over the increase in property taxes imposed on commercial property property owners in, primarily, South Kitsap.
I’ve been involved in much of the controversy since last fall, when the new assessments for 2011 arrived in mailboxes.
To summarize, the Kitsap County Assessor’s Office performed its required six-year physical assessment of commercial property (the jury’s still out on the “physical” part) last year, and the results were startling to almost every property owner.
In some cases, the values had increased four- and five-fold from the previous assessment, and the corresponding tax bills have been staggering to many.
For example, one industrial property assessment went from $355,690 to almost $1.4 million with no changes in property development.
At a time when commercial property sales are stagnant, leases are renegotiated down to keep tenants in place and values are falling, property owners are mystified as to why they’re paying a tax bill that reflects the value they wish they could get for their property instead of what it’s actually worth on the open market.
The assessor, however, by law has the latitude to go back five years and find comparable sales on which to base a value.
He does say that if he goes back that far he will make compensating adjustments to bring the numbers into reality.
But “reality” only means he has to base his value on January 2010 to determine the assessed value on which you will be paying your 2011 taxes.
In other words, you pay the taxes in the current year for the past year’s valuation.
Now, although the assessor seems to have the law on his side and feels that his procedures are sound, his methodology is the grey area.
This is where his subjective judgment comes into play — and where he probably should be scrutinized.
The assessor’s job is to determine who will pay what portion of the county’s tax revenues. If no new taxes are approved, the tax revenues to the county would be 1 percent more than the previous year.
So imagine a balloon is the total tax revenue due to the county. If you push down on the residential portion, the commercial portion inflates.
That’s what’s going on here.
Keep in mind there are significantly more residential properties that commercial properties, so some minor pressure on the residential side of the balloon causes a significant increase to the commercial property owners.
The overriding question is whether this fair or not.
The real-world result is that residential property owners, as consumers, will have to pay the excess anyway, because businesses survive by passing their overhead costs on.
I attended a public meeting at the Port Orchard City Hall in June at which Mayor Lary Coppola gave some angry business owners the opportunity to air their frustration to Kitsap County Assessor Jim Avery.
It was a lively exchange in which the assessor justified his conclusions and explained that he was operating within the law.
He made his points respectfully, but the taxpayers were clearly unconvinced his methods were sound.
The evening become even more interesting when Councilwoman Carolyn Powers asked what percent of the citizens’ appeals actually resulted in an adjustment to their tax bill.
Avery couldn’t answer that question, but when he finished, Tim Matthes, who chairs the county’s Board of Equalization, took the podium and seemed stern and offended that the board was being called into question.
Powers said she posed the question because taxpayers had complained that appealing to the Board of Equalization was a waste of time because it didn’t listen to their concerns.
Matthes responded sternly that the board operates within the law and that, if a property owner can make a compelling case as to why their property was valued incorrectly, it would be changed.
The meleé continued when a taxpayer asked Councilman Fred Olin what he thought, and he responded that the entire exercise was a waste of the county’s time, since the only way to resolve the matter was to vote Avery out of office.
As I summarize my thoughts on the issue, I can’t help but think this is a microcosm of what’s about to happen all over the country.
As business continues to dwindle and budgets remain tight, the taxing authorities are looking to balance their budgets on the back of companies struggling just to stay afloat.
There is no one to whom you can appeal who cares that the ship is taking on water.
It starts to feel like taxation without representation.
I’m not certain I agree with Olin’s assertion that the discussion was a waste of time, since the taxpayers are searching for someone — anyone — who will listen to their concerns.
If the Assessor’s Office is convinced it’s doing the job right and the Board of Equalization isn’t compelled to change the assessor’s valuation, where does the taxpayer go for a hearing?
You start feeling that whoever is in charge is just fiddling while Rome burns.
Gary Anderson is a Port Orchard commercial real estate broker.