The Post’s Aug. 8 front-page article “D.C. settlement surge shrinks developer’s bills ” came to erroneous conclusions regarding the commercial assessment appeals process by the D.C. Office of Tax and Revenue.
We stand by our real property assessment process and, specifically, the assessments of the properties identified in the article. For instance, in the case of the Gallery Place property, the assessor based his initial assessment on the rent that the owner could theoretically charge instead of what was actually coming in under existing rental contracts. This is the kind of error that supervisory assessors are required to identify and correct. Notably, even after this correction, the property’s 2012 assessed value still increased by 6.5 percent over 2011.
It is important to understand that assessors do not always have the benefit of important income information when they complete an initial assessment. This information may not be available even during the first-level appeal. That’s because current law requires that all assessment notices for the coming year be mailed by March 1 — well before the April 15 deadline for taxpayers to submit their latest income information to our office for review. Because of this lag in the filing cycle, revisions based on the new information are often necessary at all levels of appeal.
Whenever the Office of Tax and Revenue reaches an agreement with an owner on the estimated value of a particular property, the Board of Real Property Assessments and Appeals (BRPAA) approves it — as required by statute. This review is an important part of the appeals process, and it helps to reduce the caseload at D.C. Superior Court.
According to the court’s Web site, the number of assessment appeals before the Superior Court increased from 317 to 1,462 between 2007 and 2011. In December, at the request of the court, we agreed to meet with taxpayers and their representatives to find ways to ease this backlog, and both sides resolved to participate in post-mediation case-resolution sessions to settle on reasonable assessments for properties under appeal. These settlements are subject to the court’s review and approval.
The bullets below reflect BRPAA’s annual reductions of commercial assessments from 2007 to 2012, occasioned by decisions, settlements and recommendations from the Office of Tax and Revenue for adjustments. There is nothing unusual about the amount of total commercial reductions by the appeals board for 2012. It is comparable to all years since 2007, other than tax year 2011, which was an outlier resulting from a substantial drop in initial commercial assessments from approximately $68 billion to $59 billion. These lower initial assessments, in the face of a sharply falling market, predictably resulted in lower reductions.
l 2012: $2.77 billion.
l 2011: $1.02 billion.
l 2010: $2.61 billion.
l 2009: $2.82 billion.
l 2008: $2.64 billion.
l 2007: $2.36 billion.
Excluding 2011, the average reduction from 2007 through 2012 was $2.64 billion. This confirms that higher settlement amounts in 2012 did not result in a loss of tax revenue to the District. Whether the reductions came from settlements or contested cases, the outcome for the District was essentially the same.
The Post’s article also suggested incorrectly that a settlement or stipulation automatically represents a loss to the District. Nothing could be further from the truth. Even in cases where the Office of Tax and Revenue was confident that it would win by proceeding to hearing at the appeals board, 33 percent resulted in reductions in assessed value. In many cases, the taxpayer presents documents to support a lower value than the proposed settlement amount.
Rather than risk a greater loss at BRPAA or Superior Court, the Office of Tax and Revenue arrives at reasonable settlements with property owners that reduce the cost of litigation and preserve the District’s tax revenue.
The writer is the District’s deputy chief financial officer for the Office of Tax and Revenue.