By Nick Kotsopoulos TELEGRAM & GAZETTE STAFF
The only manual overrides Mr. Allard said he was aware of were for large tax-exempt properties, such as colleges and hospitals.
WORCESTER — A former city assessor insists that computer-generated valuations for commercial and industrial properties were not manually overridden by staff during his tenure at City Hall to produce artificially lower assessments for business properties.
Robert J. Allard Jr., who served as city assessor from 2002 to 2009, said valuations for the city's 3,000 commercial and industrial properties were always determined by using the industry-standard income approach.
He said it was never a practice of his office to override the computer-generated data for commercial and industrial properties and establish lower assessments, and he is unaware of any instances of it ever happening.
“There is absolutely no truth to that,” Mr. Allard said in a telephone interview from his home in California.
But city officials stand by their contention that assessors for years had been manually overriding valuations set by computer program on as many as 2,000 of the city's commercial and industrial properties.
City Manager Michael V. O'Brien said the data and information shows there was “human intervention” to reduce the assessed valuations of those business properties below what was called for by computer programs.
“Things were done (in the Assessor's Office) that did not follow the standards of the (state Department of Revenue) and I have the charge of cleaning it up,” Mr. O'Brien said.
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. The income approach is most applicable to business 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 said they uncovered a practice that 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, they said, commercial and industrial property values were based on an artificial override and not on the internal calculations of the system. All of those manual overrides have since been removed, and what has resulted is a dramatic increase in the assessed valuations of many commercial and industrial properties.
But Mr. Allard said it is inconceivable that there could have been as many as 2,000 manual overrides of commercial and industrial properties because there are only roughly 3,000 such properties in the city. Of other commercial properties, he said there are 600 mixed-use (residential and business uses); 1,100 residential properties with four to eight units; and about 200 residential properties with nine units or more.
He said the letter “m” that was put on many property cards meant that the respective property had been assessed by using the market approach — determining valuation through comparable sales — and did not signify that the assessed values for those properties had been manually overridden.
In many instances, he said, the “m” designation was applied to apartment buildings.
Mr. Allard said the designation was also given to vacant commercial and industrial properties. He said the income method of assessing business properties could not be used on those properties because they were not generating any income.
He said the only manual overrides he was aware of were for large tax-exempt properties, such as colleges and hospitals.
By law, the city is still required to assign assessed valuations to non-taxpaying properties. Instead of assigning personnel and spending money to go out in the field to inspect and assess those properties, the Assessor's Office used financial statements from those institutions to set property valuations as best it could.
But William J. Ford, who succeeded Mr. Allard as city assessor in 2009, said the documentation the city has clearly shows that some 2,000 commercial and industrial properties had a manual override on them that drastically affected the value of the property.
“Having not been here, I cannot speak specifically to the what, whys and when,” Mr. Ford said yesterday. “I do not have any backup documentation or notes in the file to say when these changes and adjustments occurred. There could have been reasons at one time or another, but when you review the property as it stands today, there is no place in law or DOR regulations for this override to exist.
“I cannot speak for previous assessors,” he added. “All I know is that when I came on board I was asked to do a top-to-bottom review of the (assessing) division. I found property cards that indicated that properties had not been inspected for more than 25 years, some dating back to 1985.
Meanwhile, District 3 City Council George J. Russell 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.
Mr. Russell questioned whether the city was “bullied” by the state to use an income approach to generate a fair-market value for those properties.
“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 at Tuesday's City Council meeting. “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 revisit this issue. This city government should be challenging the state of Massachusetts on this.”
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Thursday, May 10, 2012
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.
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.
Tuesday, May 8, 2012
T&G - Businesses shocked by tax assessments
Some increases higher than 100 percent
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.
Sunday, May 6, 2012
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