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Inspector general's tax report

Inspector general's tax report

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Published by Tim Richardson
Office of the Inspector General: "Review of Montgomery County Commercial Property Tax Assessments" report.
Office of the Inspector General: "Review of Montgomery County Commercial Property Tax Assessments" report.

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Published by: Tim Richardson on Jan 18, 2013
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01/18/2013

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 FINAL REPORT
Office of the Inspector General
Review of Montgomery CountyCommercial Property Tax AssessmentsJanuary 10, 2013
Montgomery County, MarylandOffice of the Inspector General
 
 
Report in Brief 
R
EVIEW OF
M
ONTGOMERY
C
OUNTY
C
OMMERCIAL
P
ROPERTY
 T
AX
A
SSESSMENTS
 
January 10, 2013
B
ACKGROUND
 
Assessed values of realproperty within the Countyare developed by theMaryland State Department of Assessments and Taxation’sMontgomery County Office.Although the Countygovernment does not developreal property assessments,Montgomery County Code§20-41A charges the CountyDepartment of Finance withprotecting the public interestby acting on behalf of thetaxpayers and the County tochallenge inaccurate propertyassessments
.
W
HY
W
E
D
ID
T
HIS
R
EVIEW
 
We received information thatthe Parklawn Building maynot have been properlyassessed. Its assessed valuefell in 2009 to less than half of its 2007 assessed value.Our objectives in this reviewwere to determine (1) whetherSDAT has a consistentprocess for assessing thevalue of commercialbuildings, (2) if so, whetherthat process was followed inthe case of the ParklawnBuilding, and (3) what theCounty’s process is forchallenging inaccuratecommercial propertyassessments.
 
W
HAT
W
E
F
OUND
 
The State Department of Assessments and Taxation (SDAT) is requiredto follow methods set out in Maryland statutes and described in theMaryland Assessment Procedures Manual. In the case of the ParklawnBuilding, which houses the U.S. Department of Health and HumanServices, the information in SDAT files did not demonstrate how theassessment methods were followed. Using available information and therequired methods, we calculated numbers that were significantlydifferent from the final assessed values, which resulted from a settlementbetween the property owner and SDAT. We found no support in SDATfiles for the amounts agreed to in the settlement, such as analyses of capitalization of income, replacement cost, or comparable recent sales.For our sample of 20 commercial properties, we found that assessedvalue was not a good indicator of market value, especially for high valueproperties. Properties with sales prices over $10 million were assessed atan average of 68% of sales prices, while properties with sales pricesunder $700,000 were assessed at an average of 90% of their sales prices.Although the Montgomery County Department of Finance has takensteps during FY 2012 to improve the fairness and accuracy of propertytax records, it devotes significantly fewer resources to challenginginaccurate property assessments than it did during the 1990s and early2000s, and consequently it is significantly less active in carrying out itsresponsibilities under §20-41A. The Department of Finance appealsfewer assessments than it did in previous years, and it does not intervenein or otherwise participate in appeals brought by taxpayers.We recommend that the County Department of Finance review morecommercial property assessments, make more appeals, and participate inmore taxpayer appeals. This would require that more resources bededicated to the property assessment review function
.
The Department of Finance should develop a method for determining if an assessed value is accurate, which can be applied whether or not aproperty has recently sold. Specific recommendations begin on page 21of the Report.
W
HAT
W
E
R
ECOMMEND
 
 
 i
 
Review of Montgomery County Commercial Property Tax AssessmentsFinal Report, January 10, 2013
Table of ContentsIntroduction ..................................................................................................................................... 1
 
Objectives, Scope, and Methodology ............................................................................................. 1
 
Background ..................................................................................................................................... 1
 
Property Taxes in Montgomery County ................................................................................. 1
 
The State Assessment and Appeal Process ............................................................................. 2
 
County Rights, Responsibilities, and Roles ............................................................................ 3
 
Findings........................................................................................................................................... 4
 
Finding 1: Although SDAT is required to use methods set out in Maryland statutes anddescribed in the Maryland Assessment Procedures Manual, the information we reviewedin SDAT files did not support the assessed values and did not clearly reflect how theassessed value was determined in the case of the Parklawn Building. Using availableinformation and the methods required by statute and by the Maryland AssessmentProcedures Manual, we calculated assessment numbers for the Parklawn Building thatwere significantly different from the final assessed values, which resulted from asettlement between the property owner and SDAT. ................................................................... 4
 
State Methodology for Assessing Real Property .................................................................... 5
 
HHS Lease Developments, 2008-2012 ................................................................................... 6
 
The Parklawn Building Assessments ...................................................................................... 7
 
SDAT Records of Parklawn Assessments .............................................................................. 9
 
OIG Parklawn Building Calculations for 2009 and 2010 ..................................................... 10
 
The SDAT Supervisor’s Letter ............................................................................................. 13
 
Finding 2: For our sample of 20 commercial properties, we found that assessed value wasnot a good indicator of market value, especially for high value properties. Properties withsales prices over $10 million were assessed at an average of 68% of their selling prices,while properties with sales prices under $700,000 were assessed at an average of 90% of their selling prices. .................................................................................................................... 13
 
SDAT and CountyStat Measures of Assessment Accuracy ................................................. 14
 
OIG Research ........................................................................................................................ 14
 

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