T&G - Commercial values going up in Worcester

By Nick Kotsopoulos TELEGRAM & GAZETTE STAFF

WORCESTER —  The assessed valuations for most commercial and industrial properties will be going up by at least 10 percent — and significantly more in many instances — based on the “pending preliminary certification” the city received from the state Department of Revenue yesterday for commercial, industrial and mixed-used property values.

Of the city’s 2,278 commercial parcels, the assessed valuations for 317 will go up 10 percent to 20 percent; 498 will go up 20 percent to 40 percent; and 540 will go up 40 percent to 100 percent, according to city officials.

The valuations of 174 commercial properties will increase by more than 100 percent.

Of the 598 industrial properties in the city, the assessed valuation of 58 of those properties will increase by 10 percent to 20 percent; 98 properties will increase 20 percent to 40 percent; 101 properties will go up 40 percent to 100 percent.

The assessed valuations of 60 industrial properties will more than double.

City Manager Michael V. O’Brien said one of the key reasons for the dramatic increases is the removal of “manual overrides” in place for many years for those classes of properties.

While the assessed valuations for commercial properties were being updated as part of the city’s triennial property revaluation, it was discovered that assessors for years had been manually overriding valuations set by computer programs. As a result, when the computer-generated values were manually overridden, the new assessments often came out lower.

While assessments for residential properties are largely derived on the basis of sales of comparable properties, establishing valuations for commercial and industrial properties is much different: Assessors use the industry-standard income approach to generate a fair-market value. The income approach is most applicable to real estate that is normally bought and sold on the basis of its income-producing capabilities.

In the process of modernizing the city’s property revaluation systems, city assessors uncovered the practice of manual overrides on as many as 2,000, or roughly 40 percent, of the city’s commercial and industrial properties, according to the city manager. He said those overrides allow an assessor to manually enter a data element or formula into the assessment system and override the resultant valuation that should have been calculated by the system.

As a result, commercial and industrial property values would be based on an artificial override and not on the internal calculations of the system.

Mr. O’Brien said all of those manual overrides have been completely removed because they have no relevance based on the current parcel or market conditions.

He said another practice that was uncovered during the review was an “unjustifiable obsolescence” applied to a parcel.

He said functional and economic obsolescence entries ended up reducing the value of a property because of certain existing physical characteristics or conditions beyond the property itself, such as negative economic forces.

The city received “pending preliminary certification” of its residential property values in early April; certification of commercial and industrial property values was delayed upon the discovery of manual overrides.