Mayor & city council overcharge citizens on real estate taxes and undercharge businesses and hotels

[The following is a letter from the Citizen Action Coalition Inc. to the mayor and council re: disparities in assessments in the city  and the mayor's 'weak' reply which justifies it by 'we need the money and there is no other place to get it than from residential real estate.  Real both letters & make up your own minds.]

To mayor and members of city council:


Subject: Disparities in City Real Estate Assessments 

Mayor's 'head-in-sand' reply

July 8, 2003 

Dear Mr. O'Connor:

Thank you for your e-mail expressing your concerns regarding real estate assessments. Real estate taxes are probably the least popular form of taxation utilized in the United States. Unfortunately, due to policies of the General Assembly, local governments in Virginia are forced to rely more and more on real estate taxes to fund services to our citizens.

Council believes we have a very professional, well-trained and competent Real Estate Assessor and staff; and they perform their duties in accordance with professional industry standards and in the same manner as other assessment officials throughout Hampton Roads and the State of Virginia. Our Assessor and a number of his senior staff are licensed with the State of Virginia and have credentials from various national appraisal institutions and societies. They are very active in the leadership of the Virginia Association of Assessing Officers which, in conjunction with the Virginia Department of Taxation, works to provide training on current appraisal topics to assessment officials throughout the State.  

Our Assessor contacted the City Assessors in Norfolk, Chesapeake, Portsmouth, Suffolk, Hampton, and Newport News and found that in the current housing market and economy, all cities reported experiencing much higher appreciation for residential property than for commercial property. This is a national trend, as well as a regional phenomenon fueled by high demand for housing and extremely low interest rates.

As is standard for the assessment profession, all cities reported utilizing neighborhood sales as the basis for residential assessments. Adjustments are applied for age, quality, size, condition, amenities, lot size and location. Our Assessor reports that in the last 18 months, 11 % of our 130,000 plus homes have sold providing ample data to make market comparisons. Assessment appeals in Virginia Beach run less than 1/3 of 1%.

Likewise, all Hampton Roads cities report they utilize the income approach to assess office, shopping center, hotel and apartment properties as, again, that is the standard for the assessment profession. All cities have the common problem of lack of compliance to request for income data and supplement that data from other sources such as property managers, realtors, other appraisers, national publications and the Old Dominion University Center for Real Estate and Economic Development. Our Assessor also uses data from room and meal taxes to assist in assessing hotels. The income approach also involves analyzing sales of commercial properties and compares the sale prices to the properties= incomes to establish factors to be used in valuing similar income-producing properties.

In regard to oceanfront hotels, our Assessor recently shared with Council recent sales of oceanfront properties, which clearly indicated the assessments were in line with market value. In addition, the City recently purchased the Caton property on the oceanfront at Rudee Loop for the real estate assessment of $10,000 per front foot.

Our Assessor reports that while room rates have risen over time, so have operating costs. Despite the City's efforts at the oceanfront, statistics from the Department of Convention and Visitor Development indicate that average occupancy at the oceanfront has, with a few deviations both up and down reflecting the economy and the weather, remained at 62% to 63% for nearly the past two decades. 

Our Assessor also reports that our few new hotels are obviously a higher end product and their room rates and occupancy are considerably higher than the average. This is reflected in their much higher assessments. The success of these hotels indicates there is a demand for a higher end product at our oceanfront and that is what Council is trying to facilitate with projects at 31 8t Street, Rudee Loop and with our investment in a new conference and convention center. We will continue to monitor real estate assessments, but we believe we have a professional and competent staff.

Thank you for your input and continued interest in the City of Virginia Beach.

Meyera E. Obemdorf Mayor


    The main mission of the City Real Estate Assessor is to appraise all taxable real estate properly, fairly and equitably. The Citizens Action Coalition, Inc. (CACI) believes that mounting evidence points to serious real estate assessment disparities. Disparities that are unfavorable to some residential property owners. Also, some business property appraisals may be understated resulting in lost City revenue.

    Since the assessor is directly accountable to city council, we recommend that you appoint an independent commission to examine the assessor’s policies, practices, and resulting assessments.

We believe the following points support our call for your attention in this matter:

1.  Flaws in Residential Assessment Process

Residential assessments are about 82.5 percent of the City’s total real estate values and single-family homes make up 72 percent of that total. Most of the 93,000 single-family units are located in the Lynnhaven, Kempsville, and Bayside districts that are the most populated and contain large older neighborhoods.

In the older neighborhoods, it’s not unusual to find that homes vary in size, physical condition, home improvements, landscaping, lot size, and lot location. In assessing these properties, residential sales during a year are the chief factor in arriving at annual assessments. Yet in a given neighborhood there are relatively few sales compared to the total homes being appraised. Often the sample size is so small, appraisals have no statistical validity. This situation causes some property appraisals to be overstated while others may be understated.

2.       Difficulties With Commercial/Industrial Assessments

The average assessment change for commercial/industrial properties for the past two years has lagged far behind residential assessment increases. The assessor’s report for FY 2003 and FY 2004 showed the percentage change for these properties at plus 2.65 and 3.65 percent respectively. But in the same years, residential assessment changes were plus 4.0 and 7.17 percent.

During the City assessor’s recent appearance at your workshop, he acknowledged there were some difficulties in making business assessments. These assessments are based essentially on net income. However, he stated that while income statements are requested only about 50 percent of the owners respond. As a result, his office gathers bits and pieces of information from different sources to develop the needed figures. At best, one can conclude that large numbers of real estate assessments in the commercial/industrial classification are based on an “educated guess”. This same problem exists with hotels.

3.   Hotel Assessment Puzzle

Hotel assessment values at January 2003 totaled about $522.3 million, an increase of  $26.7 million over the prior year. This change included $23.9 for added new construction that excludes the value of land. Also, over the last 5 years, the rate of assessment growth for hotels averaged less than 2 percent per year.  

During the council workshop, a number of you were more than curious about ocean front hotel assessments. Questions were raised about how the assessments were made and land values determined. Some council members seemed puzzled about why substantial City investments for physical improvements and City changes allowing construction of more room density on hotel sites appear to have little impact on assessments over a 10 year period.

      The assessor said that appraisals are based primarily on a combination of hotel profits and land sales at the oceanfront, but  he claimed actual income figures are not always reported by the property owners and his office must develop the data from several sources. Also, sales of properties at the oceanfront have a slow turnover that hampers determining true market value.

       We are also puzzled by the seemingly small amount of positive change in hotel real estate assessments.  Hotel appraisals made in 1993 totaled $433.3 million.  Over the 10 years to 2003, the total net increase was $88.9 million despite a nearly $200 million city investment in public improvements. We, too, are unable to understand why positive changes in oceanfront real estate assessments have barely budged.  

4.      Hotel Assessments Contradict Tourism Reports

The city’s Department of Convention and Visitor Development officials issued a press release on March 11, 2003 that claimed that our town visitation topped three million and those visitors spent a record $698.1 million in Virginia Beach.  We are doubtful that the gains made in tourism spending over the last several years are reflected in hotel real estate assessments.

The department report disclosed that:

·        Hotel occupancy rose to 62.4 percent, an increase of almost 5 percent over 2001.

·        Room nights booked rose to nearly 2.5 million, an increase of 2 percent.

·        Hotel sales have steadily climbed upward since 1998 to a new high in 2002 of $197 million.

·        The average daily rate went to about $88.00, an increase of 6.6 percent over the year before.

·        Hotel occupancy during the shoulder season continued to improve.  

CACI finds it hard to imagine that hotel real estate values have hardly risen in the face of tourism spending.  

We appreciate your giving attention to the contents of this letter and look forward to your response. Thank you in advance.


ROBERT O’CONNOR, President  
Citizens Action Coalition, Inc. 

See also: