Mayor & city council overcharge citizens on real estate taxes and undercharge businesses and hotels
To mayor and members of city council:
Subject: Disparities in City Real Estate Assessments
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.
believe the following points support our call for your attention in this
Flaws in Residential Assessment Process
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
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.
Difficulties With Commercial/Industrial Assessments
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
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.
Hotel Assessment Puzzle
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.
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.
Hotel Assessments Contradict Tourism Reports
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.
department report disclosed that:
occupancy rose to 62.4 percent, an increase of almost 5 percent over
nights booked rose to nearly 2.5 million, an increase of 2 percent.
sales have steadily climbed upward since 1998 to a new high in 2002 of
average daily rate went to about $88.00, an increase of 6.6 percent over
the year before.
occupancy during the shoulder season continued to improve.
finds it hard to imagine that hotel real estate values have hardly risen
in the face of tourism spending.
appreciate your giving attention to the contents of this letter and look
forward to your response. Thank you in advance.