T&G - Businesses shocked by tax assessments

Some increases higher than 100 percent

T&G Nick Kotsopoulos Politics and the City

Marc Tsourides’ boat dealership (USA Marine Inc.) has been on Route 20 (200 Southwest Cutoff) since 1990.

In recent years, the 2-1/2-acre property, with its 22-year-old building, has been assessed by the city in the range of $600,000 to $800,000.

But then Mr. Tsourides received a notice in the mail from the city on Wednesday — as did all 4,707 commercial, industrial and mixed-use property owners — informing him that his building and property was now being assessed at nearly $2.5 million.

He was told the new assessment for his building is $1.56 million — an increase of 130 percent over its previous valuation — while the land is now being assessed at more than $800,000.

With that, Mr. Tsourides said his business is now looking at the prospect of having to pay up to $40,000 more in property taxes which is roughly double what he pays now.

Needless to say, the new assessed valuation figure staggered Mr. Tsourides in more ways than one.

“I don’t understand how (the city) can do this,” Mr. Tsourides said in an interview last week. “There is absolutely no justification for that kind of increase. We haven’t added on to our building and no improvements have been made to it. How did they determine that our property is all of a sudden worth $2.5 million?”

“I couldn’t get $2.5 million if I put it up for sale today; I don’t think I could come close,” he added. “The way I feel right now, I have to ask myself if we want to stay in Worcester. I don’t mind paying my fair share of taxes, but this is going to make it tough for me to keep our doors open here. If I could get $2.5 million, I’d move the business to Shrewsbury and put up a new building there.”

Mr. Tsourides is not alone. He said he has been in touch with several of his business neighbors along Route 20 since the assessment notifications went out and like him, their new valuations have “gone through the roof” as well.

Business property owners are indeed perplexed about what is going on.

Unfortunately, they are now paying the price for past sins by the city in the way it assessed business properties and kept the assessed valuations for a large percentage of those properties artificially low.

While the assessed valuations for commercial and industrial properties were being updated as part of Worcester’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 than what they were supposed to be.

Manual overrides were found on as many as 2,000, or roughly 40 percent, of the city’s commercial and industrial properties. Those overrides allowed assessors 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, City Manager Michael V. O’Brien said, those property values were based on an artificial override and not on the internal calculations of the system. He said all of those manual overrides have now been completely removed because they have no relevance based on the parcel or market conditions.

The manger said another practice that was uncovered during the review was an unjustifiable “obsolescence” applied to a parcel. He said functional and economic obsolescent 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.

With the removal of the manual overrides and the elimination of obsolescent entries, Mr. O’Brien said all properties are now assessed consistently, with the exact same set of stands as established by law, regulation, statute, policy and industry.

But the end result is not pretty for many businesses.

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

Meanwhile, the valuations of 174 commercial properties have increased by more than 100 percent.

Of the 598 industrial properties in the city, the assessed valuations of 58 of those properties have increased by 10 percent to 20 percent; 98 properties went up by 20 percent to 40 percent and 101 properties shot up 40 percent to 100 percent.

In addition the assessed valuations of 60 industrial properties have more than doubled.

Mind you, residential property assessments have decreased by 3.8 percent on average compared with the previous year.

Business property owners will have an opportunity to address concerns and questions they have about their new assessments with city assessors during a public information session tomorrow in Cotsidas Auditorium at St. Spyridon Cathedral, 102 Russell St. The session will go from 3:30 p.m. to 7 p.m.

But Mr. Tsourides questions just what will be accomplished by meeting with assessors. He doesn’t believe for a second that the city will lower his property assessment.

There are going to be those who will have little sympathy for business property owners who have been whacked with much higher assessments; after all, it appears their properties were being under-assessed for some time. But to be hit with such dramatic assessment increases could be crippling for many businesses.

Why wasn’t this discovered during other triennial property revaluations, and where was the state Department of Revenue, which is supposed to review the revaluation work done by the city? Somebody dropped the ball on this, but who? Where was the oversight?

There are indeed a lot of questions; unfortunately, no one has offered any answers.