D.C.'s finance chief seeks revamp of real estate tax board
The District's finance chief is urging elected officials to abolish an obscure but powerful tax board that he says is overwhelmed by appeals from residential and commercial property owners. The panel's tax-bill trimming decisions, according to Chief Financial Officer Natwar M. Gandhi, are eating away at the city's largest source of revenue when the government is scrambling for dollars to close a projected $523 million budget shortfall.
"The amount of money we are losing is of great concern," Gandhi said. "When dollars are scarce, you're looking for leakages in the system, and this is a major leakage."
The District and other governments in the region are caught in a perfect storm: a continuing reduction of property values in a down economy and aggressive challenges to assessments that, in some cases, are sapping municipal coffers. In the past three years, the number of tax protest cases reaching the District's Board of Real Property Assessments and Appeals has risen 85 percent to 5,969 in Tax Year 2010, resulting in a loss of at least $51 million, according to the board. In Alexandria, city officials said they are also experiencing a rise in appeals that coincides with the declining economy.
At Gandhi's request, D.C. Council Chairman Vincent C. Gray (D) and Finance and Revenue Committee Chairman Jack Evans (D-Ward 2) have introduced legislation that would replace the part-time, 18-member board of real estate professionals with a commission of a dozen full-time employees who would be required to have greater expertise in valuing complex properties.
Gandhi said the current board of political appointees is often too lenient in siding with taxpayers and outmatched by a "battery of high-priced lawyers, who do nothing but appeal."
The board's administrative officer provided statistics about the number of appeals but did not respond to questions about the legislation. In written testimony to the council, chairwoman Towanda Paul-Bryant noted that many of the city's assessors do not have the credentials that the pending legislation would require of commission members.
Paul-Bryant, who was appointed by Mayor Adrian M. Fenty (D), questioned the cost and the wisdom of remaking the board with full-time employees for what she said is the equivalent of five months' work and "unnecessarily paying this specialized group to handle residential appeals, which is the board's heaviest workload."
Both the appeals board and the Real Property Tax Administration, which conducts assessments and reports to Gandhi, acknowledge that the city has been inundated with protest cases because property owners believe their values are inflated in the declining market.
They differ, however, in how they calculate the impact on the city. The tax administration includes the entire appeals process in its figures and estimates a loss of almost $69 million for Tax Year 2010, compared with the board's claim of $51 million.
Former appeals board member Lawrence Smith, who quit in protest last year over what he said was Paul-Bryant's lack of experience, said the city's tax assessors "do not have the ammunition or the resources to match" the attorneys and consultants who line up before the board on behalf of property owners. Smith, a lawyer, suggested a hybrid commission, with professionals assigned to evaluate cases involving the most complex, high-end properties.
Lawyers and tax consultants who represent the owners of the District's hotels, apartments and office buildings say the problem is not the board but flawed assessments that do not accurately reflect the battered commercial market, in addition to a government office stripped of experienced employees after a tax-refund scandal.
"If you got it right to start with, you wouldn't have so many reductions," said Michael Allen, a principal with Ryan, a tax consulting firm, who regularly represents clients before the board.