In Downturn, D.C. Fears Lost Revenue In Tax Appeals
Thursday, February 26, 2009
D.C. property owners are more aggressively seeking reductions in their tax assessments in the struggling economy, said government officials, who expect the city to lose $100 million in tax appeals, almost twice as much as last year.
The number of cases reaching the city's Board of Real Property Assessments and Appeals has soared from 3,400 last fiscal year to 4,300 this fiscal year, said D.C. Chief Financial Officer Natwar M. Gandhi, whose office conducts the assessments. Many of the taxpayers, primarily businesses with vast commercial holdings, have hired lawyers who specialize in such cases, Gandhi said.
"There is a cottage industry of law firms that do nothing but these things," Gandhi said. "The practical implication is that a certain amount of the tax base is eroding."
The lost revenue has generated angst among D.C. leaders as they grapple with major reductions in income and home sales tax receipts. The city faces an $800 million revenue shortfall next year, about 15 percent of its $5.4 billion budget in local funds.
In a meeting with Gandhi yesterday, D.C. Council members questioned whether the quasi-independent appeals board has enough real estate expertise and whether it is caving too quickly to property owners.
"Do we feel the need to explain to the board that what they do directly affects our revenues?" asked council Chairman Vincent C. Gray (D). Some members suggested changing the format and composition of the board.
Towanda Paul-Bryant, interim chairman of the appeals board, did not respond to e-mail or phone messages yesterday.
Attorneys for businesses in property tax assessment cases said that the board is not to blame. Assessments in the District have remained artificially high despite the recession, they said.
"It's no secret that real estate values have plummeted, but it appears to us that the assessors have been slow to recognize that," said Stanley Fineman, a lawyer at Wilkes Artis who specializes in commercial appeals.
Shaun Pharr, vice president for government affairs for the Apartment and Office Building Association of Metropolitan Washington, said the District's assessments are a "chronic problem."
"It all starts with the quality of the property tax assessments," he said. "If they're erroneously high, that's not the city's money. That's the property owners' money. There are no lost revenues caused."
Gandhi said his staff was hamstrung because lawyers can take their cases to court if they are not satisfied with the appeals board's ruling. The D.C. government cannot legally challenge the board's decisions, he said.