Peter’s Take is a weekly opinion column. The views and opinions expressed in this column are those of the author and do not necessarily reflect the views of ARLnow.com.
That’s the key question after ARLnow.com broke the story last week about Arlington’s skyrocketing commercial property assessments.
Fair market value can rise or fall from year to year, but as Ellis Schaeffer commented last week:
[H]ow do you explain an average of [a] 65.8% increase on the 11 business survey provided in the article? Is it merely a change in methodology? Did I miss the singular event in the past 365 days (i.e., mineral deposits, or a new casino) that made Clarendon properties suddenly SIGNIFICANTLY more valuable?
In one fell swoop, Arlington’s commercial assessment fiasco has cast a dark cloud over all of the following:
- the new initiatives for economic competitiveness touted in the County Board Chair’s New Year’s Day speech,
- the integrity of Arlington’s commercial property assessment process (is it properly insulated from politics?), and
- the reliability of the revenue forecasts in Arlington’s FY 2015 budget (which depend upon the validity of the valuation of Arlington’s commercial real estate).
In the wake of this ARLnow.com bombshell, these are the elements of the public statement that the County Board should have issued:
- are alarmed by the enormous annual increases in so many commercial property assessments,
- are determined to get to the bottom of this, and
- have directed the County Manager to analyze and share with the public relevant information about each of these categories of commercial property:
- all properties assessed at a value 50 percent or more than last year,
- all properties assessed at a value that is between 40 percent and 49 percent more, and between 30 percent and 39 percent more, than last year, and
- all properties which experienced value increases in those same three percentage brackets (30 to 39, 40 to 49, and 50 or more), for each of the prior two years (from FY 2012 to FY 2013, and from FY 2013 to FY 2014).
ARLnow.com profiled 11 commercial properties in Clarendon alone. But, Michelle Cowan, Arlington’s Director of Management and Finance, advised the County Board there were about 90 commercial properties County-wide that increased in value by 50 percent or more.
I find both numbers (11 and 90) to be large and disturbing. But, limiting any review only to those 90 properties — as the County Government is planning — is far too narrow an approach.
To really get to the bottom of this, and ensure transparency, we need a much broader compilation, analysis and public discussion.
The County Board should step up now, and direct the County Manager immediately to broaden the inquiry to include all of the additional categories of commercial property — noted above — that are now conspicuously missing from the announced plan.
Peter Rousselot is a former member of the Central Committee of the Democratic Party of Virginia and former chair of the Arlington County Democratic Committee.
Arlington County will review the big jump in commercial real estate assessments in Clarendon first reported by ARLnow.com last week.
The county said Friday evening that it will take a look at “all commercial real property assessments with a 50% or greater increase from calendar year 2013.”
There are nearly 90 such properties, including Rien Tong restaurant (3131 Wilson Blvd), which saw its assessment increase 197 percent, and Spider Kelly’s (3171 Wilson Blvd), which saw its property valuation increase 83 percent.
The assessments are updated annually and used to calculate county property taxes.
“A small number of commercial property owners did see substantially increased assessments, and this review is meant to correct any mistakes that may have been made,” said county finance director Michelle Cowan, in a press release, below.
Arlington County has begun a review of all commercial real property assessments with a 50% or greater increase from calendar year 2013, including several parcels in the Clarendon area that saw significant increases.
The review will affect fewer than 90 properties, of approximately 3,300 total commercial parcels. Both the original assessments, and the underlying data for each of the affected properties, will be re-examined to determine whether the assessment should be sustained or changed.
“A small number of commercial property owners did see substantially increased assessments, and this review is meant to correct any mistakes that may have been made,” said Dept. of Management and Finance Director Michelle Cowan. “We want to ensure fair and equitable assessments for all property owners.”
Arlington’s Real Estate Assessment office is mailing letters to property owners of all properties whose assessments increased 50% or more. Upon conclusion of the administrative review by the County, property owners will still have the ability to appeal their assessment through the Board of Equalization. It is anticipated that the County’s administrative review will take 30-45 days.
Overall, commercial assessments, which include office buildings, apartments, hotels and retail, grew 5.4 percent over CY 2013, primarily fueled by new construction and strength in apartment properties due to rising rents. The specific parcels that were questioned in the Clarendon area fall into the general commercial category class, which includes retail and other types of properties, excluding office buildings and apartments. The general commercial assessment category increased by 12.4 percent over CY 2013.
Assessments for most commercial properties are based on an income approach and evaluate how much income a property would produce if it were rented as an apartment, store, factory, etc. This approach considers operating expenses, taxes, insurance, maintenance costs, and the profits most people would expect from the rental. The net income after operational costs, plus a capitalization rate, determines the assessment value. It is not based on the profitability of a particular business; rather the assessment value is based on the rents and expenses of the property and building in which the business is located.
Long-time businesses, which have not been renovated or sold recently, saw their assessments increase by double digit or even triple digit percentages. The rise in assessments could mean the owners will be forced to pay tens of thousands in additional county taxes this year, barring a successful appeal.
The biggest increase spotted by ARLnow.com was that of Rien Tong Restaurant (3131 Wilson Blvd). The Asian eatery, located across from the Clarendon Metro station, saw its assessment jump from $559,900 to $1,667,600, a nearly 200 percent increase that would result in an extra $12,528 in taxes.
The assessment for Kabob Bazaar (3133 Wilson Blvd), directly adjacent to Rien Tong in a nearly identical storefront, also increased but not as dramatically. The restaurant’s assessment increased from $635,500 to $840,700, a 32 percent rise.
The biggest tax increase as a result of higher assessments goes to Spider Kelly’s (3171 Wilson Blvd), which saw its property valuation increase 83 percent to $5.1 million. The added tax yearly bill: $26,428.
With the exception of Revolution Cycles (2727 Wilson Blvd), which had its building assessment increase 64 percent to $3.8 million, and Azure Day Spa (2420 Wilson Blvd), which increased 55 percent to $1.9 million, the businesses impacted were primarily Clarendon restaurants.
Other big increases include Eventide (39 percent), Clarendon Ballroom (50 percent), Hard Times Cafe and Delhi Club (50 percent), Boccato Gelato (71 percent), Whitlow’s (24 percent), Faccia Luna and Boulevard Woodgrill (56 percent). By comparison, the Clarendon Whole Foods store at 2700 Wilson Blvd saw no increase in its assessment.
Several restaurant owners contacted ARLnow.com about the higher assessments.
“There’s some funny business going on here,” one said, on the condition of anonymity. “This is a money grab, pure and simple.”
Arlington County Director of Communications Diana Sun says that the businesses in question are typically assessed based on a method that takes a look at the income generated by each property. That, however, can’t fully explain the increases.
“Clearly there were some that just look like an anomaly,” she said.
Sun encouraged business owners who think their assessments this year were unjust to file an administrative appeal before the March 3 deadline. Such an appeal could result in a new inspection of the property and a lower assessment. After March 3, or after an unsatisfactory result from an administrative appeal, any appeals must be filed with the county’s Board of Equalization.
The unknowns involved in filing an appeal still have some business owners on edge.
“I have to hire a lawyer now,” one told ARLnow.com “I’m pretty pissed off about it.”
The Right Note is a weekly opinion column published on Thursdays. The views and opinions expressed in the column are those of the author and do not necessarily reflect the views of ARLnow.com.
Yesterday, Arlington County released its real estate assessments. Your tax bill is going up by roughly 5 percent unless the County Board reduces tax rates later this spring. You can look up your home’s assessment here if you want to see what it means to you.
Some may argue that the rise in assessments is good news because your home is now worth more. While true, and certainly helpful whenever you decide to sell your home, we all know that we pay these taxes while we live in our homes. So, the tax increase is effectively a tax on your income, which is one of the reasons you can deduct it from your federal tax return.
Back in November, county budget staff estimated real estate assessments would go up by 2.6 percent, leaving a $20-25 million so-called “budget gap.” They now believe that number is 5.8 percent — a dramatic increase that was clearly unexpected. County Manager Barbara Donnellan said yesterday the increase will narrow the “budget gap,” but the County still faces “pressures” for increased expenditures.
As I have previously written, the “budget gap” is essentially a myth. Every year in recent memory, Arlington County takes in excess revenue over and above the budget that is then spent, rather than returned to the taxpayers. It is spent to give the illusion that the County has spending “pressures” for the following year’s budget so that the Board can then raise our taxes again.
The bottom line is that no real spending cuts would be necessary to allow the County Board to simply hold the tax increase on homeowners to the 2.6 percent anticipated assessment increase level rather than 5.3 percent level. Unfortunately, no County Board member is likely to make that case.
This is because the pressures to spend more are the creation of County Board policies. And, the Board is planning to bring more of these pressures online by locking in huge future subsidies for both the trolley and the aquatics center. These ongoing subsidies will come out of the general fund and will be spent on these priorities rather than on roads or schools or public safety — just like they did for the Artisphere.
Not to worry, when the Board’s priorities run up against the “budget gap”, they will just raise the tax rate to pay for it. As long as Arlingtonians keep voting for people with the same priorities, the cycle will continue.
Mark Kelly is a former Arlington GOP Chairman and two-time Republican candidate for Arlington County Board.
Property values in Arlington rose significantly over the past year despite high office vacancy rates.
Arlington County said today that its overall 2014 real estate assessments rose 5.8 percent. The growth was “fueled primarily by strength in the residential market, as well as new construction of commercial properties,” the county said.
The assessments for residential properties — single-family homes, condos and townhouses — rose 5.3 percent, to an average of $552,700.
Commercial real estate assessments were the biggest surprise, rising 5.4 percent over Calendar Year 2013. County staff projected in November that commercial assessments would be flat.
In addition to new construction, the county said that apartment and retail properties helped lead the growth in the commercial sector. Apartment assessments rose 4.8 percent while general commercial properties (retail) increased more than 10 percent. Office property values “rose slightly.”
Last year, residential property assessments increased 1 percent while commercial property assessments declined by 0.5 percent.
With real estate assessments up 5.8 percent this year, over the 2.6 percent projection, the county should get some welcome wiggle room for its upcoming Fiscal Year 2015 budget. This fall county staff projected a $20-25 million budget gap. The county says it still expects to face a budget gap, but didn’t list any specific projections.
“We are grateful that Arlington continues to show resilience and stability, despite ongoing tensions in the larger economy,” said Arlington County Manager Barbara Donnellan, in a press release. “I am pleased the budget gap is narrowed, but we still face expenditure pressures for both County and Schools.”
The County Board instructed Donnellan to come up with a budget that does not raise tax rates. The higher assessments, however, will serve as a defacto tax hike if rates remain the same — $1.006 per $100 of assessed value.
The county press release says rising school enrollment in particular is putting pressure on county finances.
Arlington also faces a number of expenditure pressures, especially to support aging County infrastructure and Arlington’s population growth. For Fiscal Year (FY) 2015, the pressures include health care, retirement costs, new facilities and contractual cost increases, including Metro. Meanwhile, the County continues to invest in current and new infrastructure to maintain the high quality of services that are important to the long-term sustainability of the County.
Arlington’s largest expense is Arlington Public Schools, which represents approximately 45.6% of local tax revenue, and an investment of more than $18,000 per student. Continued year-over-year growth in school enrollment has put pressure on School facilities and educational costs.
As revenue is again expected to be less than projected expenditures, both the County and Schools will need to determine their priorities within these fiscal constraints. The County Manager and School Superintendent will present their proposed budgets to the County Board and School Board in late February. The County Board will set the real estate tax rate in April.
The real estate assessments were mailed today to property owners and are expected to be available online at 11:00 p.m.
Commercial property values decreased by 0.1 percent in Calendar Year (CY) 2012, coming in at $30.4 billion. Although multi-family rental properties fall into that category and increased by almost 1 percent, the rest of the commercial property types (office, retail, hotel) declined by 0.5 percent. Commercial properties still account for 49 percent of the county’s tax base.
A county press release suggests the drop in commercial property values is due to impacts from the Base Realignment and Closure (BRAC) in Crystal City and concerns about federal budget issues. The budget concerns are expected to have an impact for the next few years. While state and federal grant funding remains uncertain, real estate tax revenues represent approximately 56 percent of the county’s total revenues.
“These assessments reflect the impact that BRAC, and the slow economic recovery, continues to have on Arlington,” said Arlington County Manager Barbara Donnellan in a statement. “While our balance of commercial and residential development continues to keep Arlington’s economic outlook fundamentally sound, we are not immune from the larger economic forces that continue to buffet the nation. As we projected late last year, there will be about a $50 million gap between the County’s revenues and expenses, and both County government and Schools will need to make some tough choices to close that gap.”
Overall, Arlington’s 2013 real estate assessments remained unchanged. The average assessment for existing single-family properties, including condominiums, townhouses and detached homes, increased by about 1 percent, to $524,700.
Real estate assessments will be mailed to all Arlington property owners starting today, and will be available online after 5:00 p.m. Of all residential property owners, 47 percent will see no change in their assessment, 22 percent will see declines of varying amounts and 31 will see increases of varying amounts.
Real estate assessments were mailed out to Arlington residents several weeks ago, but there appears to be a glitch with some of them. A number of home owners reported being confused about why they received more than one assessment.
Assessor Tommy Rice explains that there were errors in some addresses, and unit numbers were erroneously omitted on some envelopes. Although the postal service managed to get some of the mailings to the correct recipients, not all made it to their destinations. Therefore, second notices with complete addresses were sent to all affected property owners. The actual assessments were not altered.
Blame apparently lies with the software used by the county’s print shop. Arlington will be recovering the costs of the duplicate mailings from the software vendor.
For the second year in a row, Arlington’ assessed property values have gone up. Overall, 2012 real estate assessments increased by 6.6 percent.
Commercial property experienced significant growth, increasing by 13.5 percent. That puts the commercial tax base at its highest level ever, accounting for 49% of the county’s real estate tax base.
“Our commercial properties are in strong demand, particularly apartment and office buildings,” Arlington County Manager Barbara Donnellan said in a statement. “This is our second year of economic recovery — very good news for our community.”
Single family properties, including condominiums, town houses and attached homes, saw a more modest increase of 1.8 percent.
Real estate assessments will be mailed out today to all Arlington property owners. They will also be available online starting at 5:00 p.m.
The increase in property assessments will mean additional revenue for Arlington County, in the form of higher real estate tax payments, in Fiscal Year 2013. Donnellan’s proposed budget for FY 2013 will be presented next month.
For years now, one has been able to input an address into an Arlington County web page and find information like how much the property is assessed for, how much it has sold for in the past, and the name of the property owner.
According to the Sun Gazette, however, county leaders are now deciding whether including the owner’s name in the county’s public real estate assessment database presents privacy concerns.
Over the weekend, the County Board responded to a resident’s complaint about its online property records system by asking county staff to “look into options for redacting the names of property owners” from the search results, according to the paper.
The system, an internet-based version of the real estate records available at the county courthouse, is similar to Fairfax County’s property records system in that it is only searchable by address, not name. However, a speaker at Saturday’s County Board meeting complained that unlike Fairfax, Arlington does not offer residents the option of having their name withheld from the records upon request.
What do you think should be done?
Rhodeside Grill Owners Eying Restaurant on the Pike — The owners of Rhodeside Grill and Ragtime are close to signing a deal to open a restaurant on the ground floor of the Sienna Park apartment building, across from Bob and Edith’s Diner, reports the new Pike Wire blog. [Pike Wire]
Most Board Member Assessments Stay the Same — All Arlington County board members are homeowners. But most bucked the upward trend in residential assessments this year. Of the five county board members, one saw his assessment fall, three saw their assessment stay the same, and one saw her assessment rise dramatically. [Sun Gazette]
Developer to Discuss Va. Square Apartment Project — A representative from the Dittmar Company will discuss its recently-announced Virginia Square Towers project at tonight’s Ballston-Virginia Square Civic Association meeting. Representatives from the county’s finance office will also be on hand to discuss the upcoming county budget process. [BVSCA]
Overall property values increased 6.3 percent during Arlington’s latest round of real estate assessments, which will be mailed to homeowners and released on the internet later today.
The increase is expected to bring in an addition $30 million in tax revenue for the county, which should help to offset this year’s estimated $25 million budget gap. The county budget office was originally expecting an approximately 1 percent increase in property values.
“It certainly… makes it easier for us to balance the budget,” said Michelle Cowan, Director of the Dept. of Management and Finance, who added that stepped-up commercial lending and property sales helped to drive the increase. “We consider ourselves very fortunate.”
However, Cowan cautioned that continued expenditure pressures — like rising health care, benefit and retirement costs — could still make the upcoming budget process challenging. She also said that other county revenue sources, like sales taxes, are unlikely to post significant increases.
The rise in property values is primarily due to strength in Arlington commercial real estate sector. Commercial assessments were up 12 percent, led by a 22 percent increase in hotel assessments and a 15 percent increase in office assessments. Apartment assessments were up between 8 and 9 percent, Cowan said.
Residential assessments, including single family homes, condos and townhouses, increased 1.4 percent this year. The average home in Arlington is now worth $510,200, up from $503,200 last year. The average property tax bill will now be $4,888, up $67 compared to last year.
Homeowners can appeal their assessments here.
Overall assessments were down 7.2 percent in 2010. Residential values were down 3.25 percent last year and commercial values declined 12.7 percent. County budget personnel say this year’s increase will put property values in the county “close to break-even” compared to two years ago.
County Manager Barbara Donnellan will present her proposed budget to the county board in February. The board will then hold public hearings in March, followed by budget adoption in April.
No word yet on how rising property tax revenues may affect Donnellan’s initial pledge to bolster this year’s budget with spending cuts and revenue increases.
Arlington County will release its 2011 real estate assessments this Friday at 5:00 p.m. Property owners will be able to search for their new assessments on the county’s tax assessment web page (appropriately, the word “DREAD” is prominently featured in the web address).
Assessments are expected to rise this year as the real estate market improves. The Sun Gazette reports that the average home sale price rose 4.6 percent in 2010.
Property owners who want to challenge their assessments should be able to do so via an online form any time before March 1, although the form does not appear to be online at the moment. More information on real estate assessment appeals is available here.