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Property owners complain about pay-to-play tax appeals

Property owners complain about pay-to-play tax appeals Daily Business Review

When Julio Arriaga appealed the 2010 assessed value of his East Doral Park of Commerce, he got a 24.5 percent reduction and his property taxes slid from $2.3 million to $1.73 million.

He tried again when the 2011 valuation of the west Miami-Dade County industrial park came back as $2.3 million, but this time he hit a snag: A new state law required that he either pay most of the contested tax bill by March 31, or lose his right to appeal. He couldn't pay, so he lost the right.

Arriaga, who owns 30 industrial properties from Doral to Hialeah, said the new law could have negative, unintended consequences for owners like him.

"It will not only hurt property owners, but it willalso slow down the normal process of valuation to be corrected," he said. "For the recovery to take place, the valuation of a property has to come up, and one of the main parameters to value a property is the income that it produces. So if the expenses are high, your income is low and, therefore, the values are lower."

Arriaga is one of many commercial and residential property owners who are feeling the pain of the law that took effect this year.

"Now you have to pay to play," said Mason Sharpe, a principal with Real Estate Tax Appeal Group in Hialeah. "So it weeds out all the people who couldn't afford to pay their taxes by March 31."

Sharpe helped Arriaga appeal his 2010 tax assessment.

In mid-April, the Miami-Dade Value Adjustment Board sent out more than 8,300 letters denying owners like Arriaga their right to appeal for non-payment of taxes. That is a small number compared with the nearly 94,000 petitions submitted to the board to challenge the 2011 assessed valuations.

The Broward County Value Adjustment Board sent out 1,159 letters, out of the 2,202 pending petitions. The Palm Beach County Value Adjustment Board sent out 384 letters, out of the 1,600 pending petitions.

Those who received the letters "are stuck paying higher taxes because they don't have the opportunity to petition to lower the tax," said Barry Sharpe, also a principal with the Real Estate Tax Appeal Group.

The new law, approved during the Legislature's 2011 session, requires property owners to pay at least 75 percent of their ad valorem taxes and 100 percent of their non-ad valorem taxes, including recycling and trash collection. Only with payment can the appellate process move forward.

Once an adjustment board rules on a petition, the county must refund any overpayment plus 12 percent interest accruing from April 1. It can take more than a year for the board to rule on an appeal.

Under the old law, petitioners could choose whether to pay their taxes or not while the appeal was pending. If they paid the taxes, the county didn't pay any interest on any refunded amount.

Mason Sharpe said the fact that counties will pay double-digit interest on refunds is good news.

"I am telling my clients,'Don't pay 75 percent, pay 100 percent, because you have the opportunity of making 12 percent in interest if you get a refund,' " he said. "There is no way you can go to a bank these days and get that interest."

William Hardin III, director of Florida International University's Real Estate Programs, has no sympathy for owners who complain about the change in payment rules.

"People were getting a free ride, so why should they be offended when somebody is trying to institute a policy that is normal in most major urban areas?" he asked.

Because petitioners often chose not to pay their taxes during the lengthy appellate process, counties had a hard time setting their annual budgets based on anticipated cash flow, according to a Florida House staff analysis of the new law.

"The government is saying, 'You have the right to appeal but it may take 12 months, and we can't wait 12 months to get paid because we have bills to pay,' " Hardin said.

Boca Raton property appraiser Matthew Chiasson disagrees with Arriaga's assertion that higher 2011 taxes will hurt the value of his income-producing property.

"When you appraise a property, you look at the cash flow for the next 10 years," said Chiasson, with VK Chiasson Real Estate Cos. "If the expenses are high one year, it doesn't mean they are going to be higher next year, too, especially if the assessment could go down with an appeal the following year."

Arriaga was able to pay taxes on some of his other industrial parks, but he could not raise enough money by March 31 to pay about $40,000 in taxes on the East Doral Park of Commerce.

He said he has no problem paying taxes based on an accurate assessed value, but not on an inflated value at a time when the recession and increasing operating costs are eating into his net operating income.

"Many of us property owners have our own challenges controlling costs and maintaining the properties ... windstorm insurance has gone up tremendously," he noted. "So we are trying to maintain all our bills current. But property tax is one of the biggest bills we have to pay."

Paola Iuspa-Abbott can be reached at (305) 347-6657.