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Wednesday, May 9, 2012

T&G - Worcester councilor questions property valuation method

By Nick Kotsopoulos TELEGRAM & GAZETTE STAFF

WORCESTER —  A city councilor has challenged the method used in setting new assessed valuations for commercial and industrial properties, contending it may be a big reason assessments for those properties have skyrocketed.

District 3 Councilor George J. Russell questioned whether the city was “bullied” by the state to use an income approach to generate a fair-market value for those properties.

While assessments for residential property are largely derived on the basis of sales of comparable properties, the valuations for commercial and industrial property were established differently and were instead based on their income-producing capabilities.

Mr. Russell, who has an extensive background in the real estate field the past 20 years, said business properties should be assessed the same way as residential properties based on comparable sales.

“I want to know if the city of Worcester had a choice at all in picking the process that was used to assess commercial and industrial property,” the councilor said. “The way we put values on these properties was neither fair nor equitable. Did the state force us to use the income approach for businesses?

“The process has to be reviewed,” he added. “I'm frustrated by all heck by this. I'm asking the city to re-visit this issue. This city government should be challenging the state of Massachusetts on this.”

The assessed valuations for most commercial and industrial properties is going up by at least 10 percent — and significantly more in many instances.

Of the city's 2,278 commercial parcels, the assessed valuations for 317 are going up 10 percent to 20 percent; 498 are going up 20 percent to 40 percent; and 540 are increasing by 40 percent to 100 percent, according to city officials.

Meanwhile, 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 is increasing by 10 percent to 20 percent; 98 properties by 20 percent to 40 percent; and 101 properties by 40 percent to 100 percent.

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

By comparison, residential property assessments have decreased by 3.8 percent on average.

City officials have attributed the dramatic increases to the removal of “manual overrides” that were in place for many years for commercial and industrial 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 program on as many as 2,000, or roughly 40 percent, of the city's commercial and industrial properties.

As a result, when the computer-generated values were manually overridden, the new assessments often came out lower.

But one source familiar with the city's assessing practices said the letter “m” that was on the property cards for those commercial and industrial properties did not mean the computer-generated valuations were manually overridden by staff. Rather, the designation meant that the property was assessed through the market (comparable sales) approach.

The dramatic valuation increases have drawn the ire of local business property owners, some of whom contend it will place a significant tax burden on them at a time when they can least afford it.

District 1 Councilor Tony Economou said the dramatic assessment increases could force businesses to layoff employees, reduce work hours and even force some to close their doors.

He also questioned what role the state Department of Revenue played in reviewing the city's past assessment practices.

“We may be on the brink of unraveling everything we've done the past several years,” Mr. Economou said. “There was no planning for these kinds of changes. These kinds of (tax) increases cannot be absorbed by businesses. What I want to know is where has the DOR (Department of Revenue) been in this process?”

Councilor-at-Large Konstantina B. Lukes also raised questions about the legal role of the DOR in reviewing the city's property assessments each year and what legal liability it may have for “misleading us.”

“We are now in a position where we will have to try to correct the culmination of a series of missteps,” she said.

City Manager Michael V. O'Brien said the public disclosure process for commercial and industrial properties ends at 7 tonight.

He said the city must then provide the DOR with all its final revaluation paperwork so it can obtain final certification of its property revaluation. He said the city hopes to receive that certification by next Wednesday.

If that happens, the manager said, the City Council would then be able to hold its annual tax classification hearing May 22, at which time it can finally set the tax rates for this fiscal year, which ends June. 30.

2 comments:

Anonymous said...

Lukes says missteps!Lukes has been a tax evader since who knows when. And she wants to lecture us about responsibility.

Anonymous said...

An even bigger hypocrite is Russell. He knows nothing about valuations, he's a salesman.

Fact is if businesses are pissed about the valuations then they can file an abatement like homeowners and get rejected.