All Kinds of Property Appeals Come to BOARD OF EQUALIZATION

“if you think my property is worth that much I’ll happily sell it to you and you can suffer with it!” So begins a common appeal to the Anchorage Board of Equalization. A newly-appointed member, I’ve been learning an aspect of citizen-level government that gives me hope that Joe Citizen actually has a chance when he feels the powers-that-be are lined up against him.

The Board of Equalization is the group that hears appeals of a municipality’s determinations of property value for tax purposes. There are counterparts to the Anchorage board all over Alaska, wherever there are property taxes. The group is appointed by the Mayor and subject to confirmation by the Assembly.

The long-term Anchorage board chair is Rick Kauzlarich, a right of way specialist for the Dept. of Transportation. The rest of the members are appraisers and real estate agents. The group jealously guards its independence from both appellants and from the government: sometimes the Board’s decisions drive one or the other party nuts.

Now is the time of year that the cycle begins, as the Municipality finishes a mass appraisal process. The culmination is early in the year when notices go to every property owner allocating assessed valuation between land and improvements. (The cards have been white for years, but people still call them “green cards”.)

Mass appraisal is different from the individual appraisal people see when they buy a property or refinance it. That more familiar appraisal process involves a direct comparison of the property under study with the characteristics of comparable sales. Differences are quantified, even making adjustments for site and view and the number of bathrooms.

Mass appraisal involves modeling each property on the basis of its most salient characteristics. To that model is applied the characteristics of dozens or even hundreds of available comparables. Rather than directly relate one variable to its counterpart, the Municipality uses a statistical technique that accommodates many variables at once. It’s called “multiple regression analysis” and if you ever got exposed to it in college you were either very math-proficient or brain dead shortly thereafter. Since almost nobody but a math whiz can understand multiple regression, it’s little wonder that dozens of appeals begin with statements like “I don’t have a clue where you got this number for my property”.

Anyone who disagrees with the valuation can appeal it. The card gives directions and stresses that appeals must be filed on time to be considered. Most appeals are resolved at the staff level. The property owner talks to an assessor. The assessor can correct factual errors about the property its files may contain. The assessor can consider comparable sales the Municipality didn’t have. If the property owner says the property is in poor repair, the assessor can review cost estimates. A mutually-agreed adjusted value ends the appeal.

If not satisfied with results at the staff level, the property owner appeals to the Board of Equalization. The most common appeals begin with dissatisfaction with the amount of increase in the assessed value. Anchorage has enjoyed a slowly appreciating market for about seven years. In most market segments properties have been increasing in value about one to three percent per year. It’s little wonder, then, that some property owners find it hard to swallow increases that are as much as ten times that rate.

The word “improvements” on the assessed value determination often triggers an appeal. To real estate people “improvements” is a trade word meaning the structures on a piece of land. To the average property owner, however, “improvements” means a change that the owner has recently made to a structure. These kinds of appeals often begin with: “My assessment went up 20% for the improvements and I haven’t done a thing to this property for years!”

A case that alleges an excessive percentage increase of an assessment from one year to the next has some initial appeal. It tends to shift the burden to the Municipality to come forward with market data that supports an assessment at that level. Most appellants discover, however, that the Municipality does in fact have data to offer. From its files the Municipality will offer sales of properties it believes to be comparable. Under the property assessment laws the appellant has the ultimate burden to show that the assessment is incorrect.

The better-prepared appellants enlist some help from other real estate professionals. These people can sometimes provide comparable sales data and other relevant arguments to make. There is no law that requires property sales prices to be publicly disclosed. This means that the Municipality has only some comparable data, leaving other unreported sales that Realtors know about to assist appellants with their cases.

Where the condition of the property is the issue, contractor estimates and reports of inspectors can document what’s wrong and what it might cost to fix it. The message that sometimes doesn’t seem to be heard, however, is that the appellant has the burden to use evidence make a case. It’s usually not enough just to say “my house needs a new roof”. If it comes out that the appellant would not let the assessor in to take a look, and the appellant doesn’t come forward with his own inspection report and repair bid, there is little the Board of Equalization can do but accept the valuation put before it.

Commercial cases involving income streams from leases become more technical. Operating income statements require close examination. Then it’s necessary to establish a typical ratio between the incomes of other properties that have sold and their sales prices. This ratio, known as the cap rate, can then be applied to the property under appeal as an indicator of value. Cost per foot of the improvements is another indicator of value in these cases.

Cost per foot of raw land is another common appeal. The Board of Equalization will compare similarly zoned parcels and take into account factors affecting value such as soils conditions, access and utilities and other locational considerations.