10A — April 12 - 25, 2013 —Financial Digest — Mid Atlantic Real Estate Journal
www.marejournal.com
A ppraisal I nstitute By Michael J. Acquaro-Mignogna, Philadelphia Metro Chapter of the Appraisal Institute Philadelphia’s “Actual Value Initiative” falls short on updating tax assessments
O
ver the years, Phila- delphia’s real estate tax assessment system
signed to every property in Philadelphia. These new as- sessments are intended to reflect the full market value of each property, rather than the partial assessments of the past. Since the reassessment is supposed to result in approxi- mately the same amount of revenue, a much lower tax rate will be applied in 2014 to the much higher total tax base. Though most agree the in- tent of AVI is fairness for all, the implementation has been a mess. Residents and small business owners looking at huge tax increases are up in arms. City Council members in
the areas most acutely affected by increases are calling the process flawed and arbitrary. Those anticipating tax breaks are mostly keeping quiet, as would be expected. Much has been written and discussed about AVI “shift- ing” the tax burden from com- mercial properties onto the backs of City residents. But as noted above, assessments of commercial properties were routinely kept more current than those of residential prop- erties. That doesn’t mean the old assessments for commercial properties were accurate: it just means that commercial proper- ties – as a class - were paying more than their fair share of real estate taxes all along. And even if the new 1.3%-1.4% tax rates being discussed result in lower tax amounts than in pre- vious years, owners of commer- cial property should not blithely accept their new “actual value” assessment as accurate. The table above shows repre- sentative appraisals of Phila- delphia properties that I have personally been involved with over the last few years. As can be seen, there is a wide varia- tion between the market value that was estimated and the new “actual values” set by the Office of Property Assessment. From this sampling, it ap- pears as though office proper- ties in particular may be the most prone to over-assessment. Apartment properties seem to be assessed most fairly, while the widely held perception that vacant land has been under-as- sessed is not refuted here. A particular Center City of- fice building is another case in point. It is reported as having sold last fall for $66 million, but the assessors have pegged its value at nearly $81 million. Even though its tax bill will decline by about $200,000 with a new ±1.3% tax rate, that ±$15 million difference translates into an additional $195,000 of taxes that might not be war- ranted. Illustrating the opposite situ- ation, the recent sale of a differ- ent Center City office tower for $110 million was just reported. The AVI assessment of that property, though, is only $88.7 million. At a 1.3% tax rate, a $21.3million under-assessment would translate into $276,900 potentially missing from the City’s budget. For commercial properties in continued on page 16A
has become wildly inaccu- rate. Because the state does not require a set periodic timetable for counties to reassess, and because of the
Michael Mignogna
City’s practice of valuing com- mercial properties more fre- quently than residential prop- erties, ad valorem assessments bore no resemblance to market values. Changes were promised
after considerable media atten- tion was focused on assessment inaccuracies and cronyism at the assessing authority, and
at long last, the “Actual Value Initiative,” or AVI, was rolled out this February. New assessments were as-
Shocked by your new tax assessment in Philadelphia?
Philadelphia’s Actual Value Initiative is being implemented for tax year 2014 and beyond. The new assessments are supposed to be based on 100% of market value.
Has your property been fairly assessed? Let a Member of the Appraisal Institute help you find out.
Why a Member of the Appraisal Institute? x
Appraisers who hold the Appraisal Institute’s MAI and SRA designations have met stringent educational requirements, have considerable professional experience, and are required to adhere to strict standards and ethics of professional practice that exceed those required by state or federal law. x The MAI membership designation is held by appraisers who are experienced in the valuation and evaluation of commercial, industrial, residential and other types of properties. x The SRA membership designation is held by real estate solutions providers who are experienced in the analysis and valuation of residential real property. How can you find a local member of the Appraisal Institute to assist you? x It’s easy: visit www.aiphilametro.org and select the “Actual Value Initiative” link. There you will see a list of our Members who can help you determine whether or not your assessment is reasonable, and whether a formal appeal is warranted.
Made with FlippingBook - Online Brochure Maker