80 Rms, Grt Vu, No Tx
Kolker, Betsy Dance and Claudia
80 Rms, Grt Vu, No Tx by Betsy Dance and Claudia Kolker How property tax assessments let the rich rip off the rest of us Last year, Kingdon Gould Jr., former U.S. ambassador to Luxembourg and...
...And then there were the snapshots...
...I'm doing nothing wrong except to be the best...
...tax reduction...
...Perhaps the board is dumbfounded by the brashness of the argument...
...It wasn't the first time Gould had turned to Peebles...
...But] I have to admit that after I had been on the board for the first year and had the opportunity to hear commercial cases, they were much more interesting...
...Last year, he won assessment reductions from the D.C...
...Higher-priced properties tend to be underassessed more often," says Matthew Watson, former D.C...
...His mom's house, Hayman asserted, had been untouched since the fifties...
...An assessor will tend to be gun-shy on expensive properties, because underassessing means they're less likely to get an appeal and have their work questioned...
...If that's good news for developers, it's devastating for the District, which counts on property taxes for a quarter of its budget...
...You can't put a parking lot in it...
...Some of this stuff gets a little gray, but this one should have gone through...
...And current members would be required to provide written, signed justifications of their decisions...
...People tend to give good breaks to people they know...
...Board members simply didn't care about residential cases," explains a former member...
...government's revolving door—city building owners sliced more than $35 million from their taxes last year, and tens of millions more every year from 1986 to 1989, when D.C.'s commercial real estate market was booming...
...government's Board of Equalization and Review (BER), the very board that reviews the appeals of developers like Auger and Gould...
...Insufficient evidence to justify a reduction," it said...
...Like Gould, he thought the assessment on his row house was a little too high...
...But developers aren't the only ones making out at the expense of the poor...
...Just three years ago, he was chairman of the D.C...
...And for those seeking an explanation of why D.C.'s property tax revenues were $36.8 million short of expectations last year, sending the city government scrambling to curtail programs, this sentence may suffice: "Reduce, board concurs with the petitioner evaluation...
...How must BER members feel, one wonders, when their former chairman, Peebles, who put many of them in their seats, pulls up to the table and tells them, "Hey guys, listen, this building's on top of a Metro...
...those numbers determine each owner's tax bill...
...ambassador to Luxembourg and the Netherlands, got a letter in the mail from the D.C...
...government simply acceded to his clients' complaints...
...In 1991, he took the assessment on the same property from a proposed $36 million right back down to $31 million...
...Yet a surprising number of D.C...
...With developers, that one sentence didn't come up too frequently...
...While all city buildings must by law be assessed within 5 percent of market value, the 31-year-old Peebles, a friend of former Mayor Marion Barry, doesn't sweat it...
...government...
...City assessor Beatrice Gaines explains what that means...
...The bad publicity BER gets is warranted," he says...
...If death is still an inexorable standard in the District, property taxes for the rich are amazingly negotiable—especially when they hire a Peebles...
...auditor...
...Vu, and two prominent hotels...
...How appealing Every year, the District mails all its property owners— commercial and residential—an assessment for the upcoming year...
...They appealed...
...This May, in a room down the hall from where Peebles was pleading a case, Stonestreet and her cousin sat down to discuss their storefront church on a boarded-up stretch of Georgia Avenue...
...For the city, "we're the goose that lays the golden egg...
...Former member Ted Wade sometimes shows up at hearings as the Wilkes, Artis expert witness...
...Far more interesting are the city's 45,000 office buildings and their owners, a significant number of whom appeal their assessments before a spindly D.C...
...It may have an even better reason for forfeiting tens of millions a year to the wealthy while the average man—and anyone dependent on government programs—gets screwed...
...Oh, and Mayor Sharon Pratt Dixon, whose assessment of $253,000 is nearly $100,000 less than her home's market value...
...And two office buildings owned by megadeveloper Charles E. Smith (2101 L and 1101 17th Streets NW) were rolled back $28 million...
...During tax years 1990 and 1991, the bulk of Peebles's cases—and by far his biggest rollbacks— were won when the D.C...
...To understand the process, however, you have to see it at work...
...Among the perennial big winners in this BER giveaway is the ABC News headquarters at 1717 DeSales Street NW, which lopped $15 million off its assessment in four years...
...That's a perfectly reasonable start...
...Commercial cases reach the BER only after savvy owners have gone through the Department of Finance and Revenue's (DFR) "stipulation process," in which a petitioner can win a reduction by claiming that the assessment was based on an "administrative error...
...the current asking price for his neighbor's identical house was $6,000 less than his own assessment...
...The scrappy office of four has a 50 percent success rate with its appeals...
...The assessors are in a powerful position," says a DFR employee...
...My secretaries drive...
...and a dozen others do a brisk business during tax season, making sure developers and wealthy homeowners give as little as possible to the city...
...They kept promising us the data...
...Powerful firms like Wilkes, Artis, Hedrick & Lane...
...I wouldn't call that some kind of money-maker, would you...
...The former owners restored their house perfectly," he wrote, "with new floors, circuit breakers, central air-conditioning, a darkroom, recessed lights, a brand new kitchen, even electricity to their garage...
...Thinking he was in for a $6,000 reduction, the man called the assessor again...
...homeowners, fanatic and otherwise, have tales of assessment frustrations: the figures that jumped inexplicably from one year to the next, the assessments that turned out to be $16,000 more than the sale price a month later...
...Finally, when it was too late for our study, they promised it for next year...
...And BER member Michael H. Jackson, who left the board in 1988, was bringing cases before it the very same year...
...His mom paid her tax...
...But there's a difference between Michael Jordan and R. Donahue Peebles: Peebles takes the court with one hell of an inside advantage...
...Paul Hayes, who left the BER in 1988, explains how the board makes decisions...
...Hence the absence at appeals court of prosperous homeowners such as magazine publisher Bill Regardie, whose house is market-valued at $1.5 million and assessed at $760,000...
...Exactly...
...Take the "administrative error" at 4000 Wisconsin Avenue NW that caused the assessment to plummet from $52 million to nothing in 1988...
...For the Augers, that meant about half a million dollars to spend on something more interesting...
...Five calls, 10 calls—no answer...
...Because many commercial assessment appeals involve proprietary information, virtually all of these discussions are shrouded in secrecy...
...assessment decisions, they have plenty of room to work their magic...
...A BER official is even more frank: "Never, in my experience...
...But what follows should be a process in which tax assessment experts, lawyers, and the like are unnecessary—a process in which citizens can be heard...
...There's an old crank quality to folks like Hayman who obsess over their tax assessments...
...By this time, tax appeal season had almost ended...
...But will assessors admit administrative errors when Henry Homeowner complains...
...is willing to close the loopholes that allow the big guys to get away cheap, the taxpayer whose name lacks the ring of a prominent family or developer—an ordinary person like, say, Constance Stonestreet—will have to pay the difference...
...At the end of the day, they'd discuss the cases among themselves, and one would be assigned the responsibility of writing out the decision by hand...
...If there was information missing at the time of the assessment, if the taxpayer comes in with plans and shows that our dimensions or story heights were inaccurate—that changes things...
...They'd hear probably in the neighborhood of four an hour for six or seven hours...
...Such a process exists, as it happens, just to the north of D.C., in Montgomery County...
...Insufficient documentation," said the BER a few days later...
...And thanks to the the vagaries of BER rules and a stunning absence of any official documentation for D.C...
...And City Council Chairman John Wilson (whose house is assessed at $90,000 less than market value) has proposed legislation toward that end...
...real estate tycoon Calvin Cafritz (MV=$2.8 million, AV=$1.5 million...
...Arent, Fox...
...Wilkes, Artis helped the Arnold and Porter building at 1200 New Hampshire Avenue NW slice $47 million from its bill in three years...
...That little maneuver cost the District $200,000 in taxes, the price of drug treatment for at least 50 people...
...The system tends to neglect residential properties...
...Nor is Peebles the only person to work both sides of the District's tax assessment business...
...At the time, D.C...
...I don't think most citizens could do it...
...Familiarity has a lot to do with it," speculates local housing attorney Eric Rome...
...Residential properties are rarely stipulated," says Peebles...
...Last year alone, 19 government assessors squared off with owners or representatives of 901 office buildings...
...While residential assessments often reflect the sales prices of neighboring houses, commercial owners have the luxury of pleading exceptions based on, among other things, the income they generate, the amount they've shoveled into improvements, and downturns in business...
...It's not friendly to homeowners," admits Peebles, who knows the system as well as anyone...
...What about the tremendous convenience of getting to work...
...When Peebles got all those stipulated tax reductions, he was working with just a handful of assessors...
...During the same period, the assessments of two buildings owned by Calvin Cafritz were reduced by $54 million...
...So it established an Office of the Public Advocate—not just to train citizens how to appeal their own assessments, but also to keep developers from skirting their financial responsibility to the city...
...Last month, it announced plans to cut welfare payments to single women with kids...
...He pauses a moment, and then comes up with a better argument...
...and Attorney General Richard Thornburgh (MV=$475,000, AV=$249,635...
...And they, too, have their inside advantages...
...But until D.C...
...It's more desirable to not be exposed to the elements...
...Amram and Hahn...
...But to Iverson 0. Mitchell III, the new head of the BER, the system is just about as sound as it can get...
...code held that a taxable building had to be "erect and under roof," or 100 percent done...
...During Peebles's tenure, he personally oversaw the appointment of 10 of the board's 15 members— an arrangement that simplified matters for him when he became the guru of D.C...
...The D.C...
...government staff...
...They're not...
...So he called on R. Donahue Peebles...
...So he took the recommended first step in making an appeal—calling the assessor...
...A few months later, Peebles had haggled a cool $10 million off the assessment, saving Gould nearly a quarter of a million dollars...
...Who'd want a building on top of the Metro station...
...And the record makes it perfectly clear which folks the system aims to please...
...BER may have had a perfectly good explanation for forcing Stonestreet to pay the full assessment...
...I thought the photographs said it all," he says...
...There's lots of power in the assessor's hand...
...When the Capitol Hill house next door to Barry Hayman's mom sold for $170,000 in 1987, her assessment suddenly jumped to $150,000, even though the two Civil War era dwellings were in profoundly different condition...
...Gould and Blackie Auger, then coowners of Washington's Mayflower Hotel, had hired Peebles to ratchet down that assessment too, slicing off more than $11 million...
...Peebles isn't cheap—he takes a nice percentage of the tax savings for himself— but the investment clearly pays off...
...Assessments get reduced, they explain patiently, when assessments are too high...
...If you're not well known, connected, or lawyered—well, no juice...
...tax assessment: They own or co-own at least a dozen downtown properties including Blackie's House of Beef, D?j...
...In 1990, he reduced the Augers' land assessment at 22nd and 23rd Streets NW from $28.5 million to $10.6 million...
...Finally, in frustration, he contacted the woman's supervisor, who promised prompt action...
...Robert Klugel, former chief of the D.C...
...Frequently they were one sentence—Petitioner failed to document case sufficiently.' " Attorney Brendan Sullivan's assessment of $700,000 —$1 million less than market value—may speak volumes about his familiarity...
...We were stonewalled," says Luis Zapata, co-chair of Citizens for Fair Assessments...
...Property found to be in equalization...
...My staff would agree...
...To the city, it meant forfeiting the rough equivalent of six months of intensive job training for 125 unemployed youth...
...But the developers' real payoff came this spring, when the Mayflower, assessed at a modest $65.9 million, sold for more than $100 million (although fixtures, silverware, and other items were thrown in...
...The local Apartment and Office Building Association thinks these assessments are fine...
...That's part of our system," he shrugs...
...Most of the big, classy downtown buildings tend to get assessed by the same tiny troupe...
...Mind you, Peebles isn't the only tax shark in the BER sea...
...How the other half lives The Augers—Blackie, Lulu, and their three kids—have millions riding on their D.C...
...True concessions Thorough, publicly accessible records of assessment decisions—even if they existed—would tell only part of the tax assessment story, though, since folks like Peebles obtain most of their breaks from the D.C...
...Around tax time, they've hired Peebles to keep every cent they can out of the government's grasp...
...They proferred graphs, comparative analyses, old assessments, measurements, and photographs...
...Such adjustments sound innocuous...
...They could become familiar with building owners, they could get chummy with petitioners or their representatives...
...Though the land was prime space just off Pennsylvania Avenue, Gould thought the assessment—and the tax bill it implied—were a little steep...
...I drive," explains Peebles...
...We pick up the difference," snaps homeowner Judy Rosenfeld, who has watched her tax assessment shoot up 216 percent in four years while numerous office buildings around her talked their way into rollbacks...
...By all accounts, office building appraisal demands more art than science: Commercial property owners may successfully dispute anything from rent figures to the tenor of the neighborhood to the price of a good view, gradually chipping away at the assessment...
...If anything could improve the process," agrees another former BER member, "it would be to provide a fairer shake to the small homeowner...
...80 Rms, Grt Vu, No Tx by Betsy Dance and Claudia Kolker How property tax assessments let the rich rip off the rest of us Last year, Kingdon Gould Jr., former U.S...
...He gave up and paid the tax...
...For the first time, departing BER members would be required to cool off for five years before appealing cases before the board...
...They were bored...
...It would be four or five lines at most...
...It takes an anal retentive to do these things properly," says Hayman, who now helps other citizens appeal...
...They were bored...
...It's a normal thing to avoid getting questioned as much as you can...
...So he got out a camera and some paper and prepared a dossier for the BER...
...So follow master-rollbacker Peebles to BER headquarters at Judiciary Square, where he explains to a three-member panel that what really diminishes the value of his client's building is a subway stop...
...Betsy Dance is an intern at The Washington Monthly...
...Steven Skalet is a tax assessment attorney who unhappily lacks Peebles's inside track...
...If that ruffles the feathers of the WASPy business community—so be it...
...government was out $36.8 million dollars...
...Nothing happened...
...Step by step, they laid it out, and then they waited...
...He waited...
...government...
...government gave in—giving up more than $1 million in taxes...
...Although hundreds of customers were streaming in nightly to see Broadcast News and Tequila Sunrise at the building's theater complex, the owner argued that the roof was incomplete...
...At first, Barry Hayman tried calling the assessor to straighten things out for his mother, but his queries went unanswered...
...That's a gross building error...
...The stipulation process is perfectly built for informal bribes, since assessors work by neighborhood and building type...
...The stairs tilted into the parlor, the fixtures were antiquated, the kitchen lacked a dishwasher, the pine floors had never been sanded or carpeted, and the unfinished basement consisted of dirt walls and floor...
...It was a $22.1 million tax assessment for a sweet chunk of land he owned near 9th and D Streets NW...
...I went on that board expecting to bring some justice to residential property owners," recalls a former BER member...
...Each committee—normally two or three people—would schedule one hearing every 10 or 15 minutes," he says...
...I don't think that any system could be designed to please everyone," he says...
...But only 2,096 of D.C.'s 122,000 residential owners wound up before the BER last year...
...The vast majority of those with complaints simply give up in the face of the unresponsive board...
...Which is why that letter must be rewritten...
...government office that oversees assessment policy, now presents cases before the BER as a consultant for Marvin F. Poer & Co., one of the region's largest assessment appeals specialists...
...Or perhaps they aren't really listening...
...Board members simply didn't care about residential cases...
...By the time the game was over, the D.C...
...They were for big dollars...
...Instead, after appearing before a BER panel, Hayman received a form with two handwritten lines...
...About the same time Gould received his annual letter, another longtime resident received his...
...The inevitable errors made in the process are what the BER, composed of fiveyear mayoral appointees with real estate backgrounds, is supposed to correct...
...But citizens see it another way...
...That same year, he trimmed the assessment on a property at 2115 M Street NW from $34 to $31 million...
...Claudia Kolker is a Washington writer...
...tax reform...
...The problem is, guys like Auger, Gould, and Peebles may be the only ones who know exactly what those reasons are...
...She told him to call her back if the identical house sold—which it promptly did, at the asking price...
...while their numbers are few, their photos, graphs, and conspiracy theories are many...
...For single-family homes, the city's procedure is simple but crude: A rough calculus factors in past assessments, market trends, and the sale prices of nearby homes...
...In 1974, tired of the complaints of red-tape-tangled residents and wary of all the bucks it was losing to developers, the county decided to help ensure that the Blackie Augers paid as fair a share as the Barry Haymans...
...There are wide discrepancies in assessments and on appeals— decisions based on a lot of factors, from the quality of the presentation to how the panel feels about the property...
...While the building was under enough roof to show movies on six screens, the ballast hadn't been laid...
...Their assessment more than doubled from 1988 to 1991, and while their neighbors pay $26 and $19 per square foot, they pay $48...
...government in almost 90 percent of the cases he brought before it—keeping millions of dollars from the coffers of the financially strapped D.C...
...government before they even get to BER's table...
...But the net result of such negotiating is illuminating: Nearly 30 percent of appealing office building owners manage to roll back their assessments...
...This year, the assessment office even stymied a citizens' group's efforts to get general data for its annual neighborhood survey...
...This whole town runs on that kind of juice...
...All these people are friends of mine," he said recently of the BER...
...That would explain why no one asks the most obvious questions: What about the revenue that will undoubtedly pour in from the subway—the businesses that will inevitably open nearby...
...Reducing the influence of the well-connected is the first step in D.C...
...Of course, so many "administrative errors" might be plausible when you consider that many of those assessors were hired with little to no training in the field...
...But even when you get your numbers right, you may still find yourself on the wrong side of a BER decision, because, compared to the well-heeled lawyers, little guys like Hayman can be pretty annoying...
...For the lawyers and other wizards such as Peebles, the incentive to fight for a hefty rollback is high because they often work on commissions of anywhere from 10 to 35 percent...
...But without a paper trail, there's no way to know anything about those members' feelings— or anything else...
...Yet Rome sees the phenomenon in context...
...Those benefits simply don't come up...
...Attorney Brendan Sullivan's assessment of $700,000—$1 million less than market value—may speak volumes about his "familiarity...
...But when eyebrows rise at his success, Peebles cries foul: "No one ever criticizes Michael Jordan for being the best...
...It's more desirable to push a button and take the elevator downstairs...
...When questioned about his success, Peebles points out, "I stay within the letter of the law...
...It's pretty complicated to accumulate and process the information...
...A lot of it seems to be based on how the members feel...
...They are administrative errors, mathematical errors...
...Thanks to a growing cottage industry of real estate attorneys many still dizzy from the D.C...
...Whenever the possibility of lawyers looms large—whether in cases involving developers or simply the wealthy—defensive city estimators guess low...
...One Wisconsin Avenue building owner represented by Peebles actually got his assessment reduced twice in one month—from $7 million to $5 million and then to $3.3 million...
Vol. 23 • July 1991 • No. 7
