Editorial: Commercial property owners should think hard before appealing
It’s easy to sympathize with the commercial property owners in Concord who are upset by the average 13.77 increase in the assessed value of their real estate. Similar shocks have been felt over the years by the owners of waterfront property or, when residential values were skyrocketing, homeowners whose share of the tax tab increased faster than other classes of property.
In some cases an assessment mistake might have been made, but property owners should do the math carefully before deciding to spend a significant sum in hopes of achieving savings by petitioning for an abatement. The complaints are coming from commercial property owners all over the city, which suggests that the assessments of property in any one area are proportional to other, similarly classified property. The city’s commercial property assessments, which are based not just on sales but on lease rates and other factors, are probably pretty accurate.
The state Department of Revenue Administration, which each year equalizes the tax rates among communities, is still analyzing last year’s data, so it can’t definitively say that commercial property, as a class, appreciated faster than other real estate statewide. But anecdotally that appears to be the case. And national surveys suggest that in markets that weren’t devastated by the recession commercial property values have risen significantly faster than home values. Concord’s average home value actually fell by 2.64 percent, according to assessors, a decline likely to be reversed this year.
Residential property changes hands relatively frequently, making it fairly easy to set values by looking at what comparable properties sold for. But commercial property owners tend to hang onto their investments for decades or even generations. That makes finding comparable sales difficult. And that’s why, to determine fair market value, in addition to a building’s condition, assessors determine as best they can, the property owners’ return on the investment through rents and lease rates.
These days, that task is performed using computers and sophisticated assessing software, which has made the process more accurate and less susceptible to favoritism. Today, municipal officials hire professional appraisal companies, but until a few decades ago, selectmen, who under New Hampshire law are charged with appraising “all taxable property at its full and true value in money,” actually tramped around town, tape measures in hand, and did the assessing themselves. That system was believed to be unfair or even corrupt, and sometimes it was. Selectmen were accused of giving friends and relatives low assessments and sometimes ignoring market values. “Old Joe has a pretty nice house, but he doesn’t have any money. We’ll have to go easy on him and stick it to someone else,” a veteran selectman said in describing the practices of that era.
In 1911, to address unfairness, and the gross disparity in the percentage of actual values used by assessors in different cities and towns, the Legislature created a state tax commission. In the words of one report, it would “eliminate every considerable opportunity for favoritism and fraud.” Its successor is the Board of Land and Tax Appeals, which will hear the pleas of Concord’s aggrieved property owners, if they take it that far.
Either way, there is some reason for commercial property owners to take heart. In 20 cities surveyed for the S&P Case/Shiller index of home prices, values went up by 5.5 percent, the biggest jump in six years. Assuming that trend is on its way to Concord, the tax burden will eventually shift again. Help is on the way.