Most persistent property owners see property valuations cut

CEDAR RAPIDS - Most of the owners of the 54,111 properties in Cedar Rapids accept what City Assessor Scott Labus says their property is worth.

In 2014, 534 owners, or less than one percent of the total, appealed the valuation set by Labus's office, and most of those were satisfied with the subsequent ruling in the matter - 26 percent saw valuations drop - by the local Board of Review.

In 2013, which included a new revaluation of all commercial properties, 927 owners went to the Board of Review, or 1.7 percent of the total properties, and 28.6 percent of those got some relief.

A scattering of persistent owners, though, push on with their appeals, either to the Iowa District Court or to the eight-year-old Iowa Property Assessment Appeal Board, known as PAAB.

Of this group, Labus said resolution has been reached on 12 of the ongoing appeals, all of which succeeded in lowering the value of property and, as a result, their property-tax bills.

As a group, Labus had valued the 11 commercial properties and one industrial property at $99.9 million, but the owners now have succeeded in having that total valuation lowered by $17.5 million, to $82.4 million, a 17,52 percent decline.

The 12 as a group will pay an estimated $631,316 less in property taxes in the current fiscal year based on the new, lower valuations, according to figures from the Linn County Auditor's Office.

But the sky isn't falling for local governments, Labus said.

The loss in Cedar Rapids valuation is sixth-tenths of 1 percent of the city's $2.78 billion in commercial and industrial valuation, Labus said.

Owners of 11 of the 12 properties were able to reach settlement agreements with Labus's office so they did not need to continue to a District Court or PAAB proceeding.

Seven of the 11 are owned by Hy-Vee Food Stores, and an eighth is a building with a Hy-Vee Food Store as tenant.

In the 12th case, no settlement was reached, and the PAAB decided the case, cutting the valuation of International Paper Co.'s manufacturing plant at 4600 C St. SW by $10.6 million, or 22.6 percent, from $46.8 million to $36.2 million.

Labus said the International Paper decision surprised him because the company had not objected to the $46.8 million valuation in recent years.

Among the 12 properties, the largest percentage decrease of valuation was for a large warehouse owned by Rick Stickle at 5000 20th Ave. SW, which saw its valuation drop 26 percent, from $6.93 million to $5.125 million.

Labus and Beth Weeks, the city's deputy assessor, said the valuation decreases of the 11 settlements and the PAAB ruling in the International Paper valuation are not defeats for the City Assessor's Office.

'Years ago when I started in this, I took it personally,” Weeks said. 'I don't do that anymore.”

Labus and Weeks said that once commercial and industrial property owners push beyond the local Board of Review, the appeal process slows down as both sides can end up hiring two appraisers each to make a determination of value on a property.

Labus said the settlements with West Des Moines-based Hy-Vee generally came with the grocery chain agreeing to the lower of the two appraisals from the city, which were lower than the valuations that Labus has had in place on the properties.

Labus said he reviewed settlements that other assessors were making with Hy-Vee elsewhere in the state, factored in the cost to push the cases into District Court and decided to settle with the grocer.

'Once we started measuring everything, we felt good with the settlements,” he said.

Labus and Weeks said the upside to valuation fights with property owners is that they usually end up learning more about a property than they otherwise had been able to learn.

They pointed to the property at 146-170 Collins Rd. NE, which had been home to a Kmart before its recent transformation into other retail stores, including Hobby Lobby, Fresh Market and HomeGoods.

The owner's appeal of the valuation before the renovation gave Labus's office a better understanding of the maintenance on the building that had been deferred, hence a reduction in valuation from $5.4 million to $4.5 million before the renovations, Labus said.

‘We're not always right'

Labus said large commercial and industrial properties are especially prone to valuation disagreements between assessors and property owners because the properties are of higher value and come with complexities, and there are few sales of similar properties to compare to arrive at a valuation.

Wide variations in appraisals invariably come from reputable appraisals when, for example, big-box-store owners use 'dark sales” - the sale values of long-vacant stores - to try to set a value on a successful big-box commercial property.

Labus said Iowa is a value-and-use state, which means a property must be valued as it is being used.

In recent years, Rockwell Collins's appeals have seen the city's appraiser come up with valuations of $28 million and $38 million for the company's main building and the company's appraisers with valuations of $8 million to $18 million, The matter was resolved somewhere in the middle, he said.

The city went to court with General Mills in recent years with the city's appraisal for its cereal plant in the $24 million ballpark, and General Mills's figure at about $9 million. General Mills has filed a new appeal with the city, Labus said.

Dennis Baldridge, city assessor in Iowa City, said he also has a few pending valuation appeals, including four Hy-Vee properties in Iowa City and, at the same time, he also has settled a few appeals that have lowered commercial valuations.

One was at a Menard's store and one at an older industrial plant now home to an automotive components company, he said.

'We're not perfect. We're not always right,” Baldridge said.

'You want to get them settled if you can because it's a waste of time for us to have attorneys and to pay for appraisals,” he added. 'If you go to a hearing, it usually gets split in the middle, so it's the same as a settlement.”

Labus and Baldridge said some of the regional and national chains often turn over the appeals of property valuations to representatives who specialize in getting commercial and industrial valuations lowered.

By way of example, Baldridge said he can't recall ever dealing with anyone from Hy-Vee on its appeals. He works with an out-of-state representative, he said.

Jessica Braunschweig-Norris, PAAB general counsel, on Monday said appealing a local valuation beyond the local Board of Review to the state board is no guarantee of victory for the property owner against the local assessor.

By way of example, in 2013 the state PAAB received 1,202 valuation appeals. Of those, according to PAAB statistics:

l 28 percent had assessor's valuations affirmed.

l 29 percent resulted in a settlement between the parties.

l 2 percent had the PAAB modify and lower the valuation.

l 20 percent of the cases were dismissed or withdrawn.

l 21 percent remain open.

Iowa City's Baldridge said the emotion around tax appeals has softened over the years, which he attributed to more 'professional” tax representatives.

'Even in the residential appeals, you don't see upset people like you did back in the 1980s and 1990s,” Baldridge said.

But the appeals continue.

Another 22 commercial or industrial properties in Cedar Rapids still have active appeals against Labus's valuations in front of the District Court or the state PAAB.

Labus values the 22 properties at a total of $92.9 million, and the property owners say the total value should be $54.2 million, a 41.2 percent difference.

l Comments: (319) 398-8312; rick.smith@thegazette.com