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E&R 1993-05-17 /,..,/ ,)(0 MINUTES OF THE BOARD OF EQUALIZATION AND REVIEW MEETING MAY 17, 1993 ASSEMBLY The 1993 Board of Equalization and Review met on Monday, May 17, 1993, at 3:00 p.m. in the Assembly Room of the New Hanover County Administration Building, 320 Chestnut Street, Wilmington, North Carolina. The purpose of the meeting was to hear appeals filed by property owners regarding their tax value assessments. Each appellant was informed that the board would make a decision following the hearings and notification of the decision would be received within a week. Members present were: Caster; William E. Sisson, Chairman Robert G. Greer; Appraisal Supervisor Jim Elmore. Commissioners Sandra Barone; William A. Jr.; vice-Chairman E. L. Mathews, Jr.; Tax Administrator Roland Register; Tax Bethune; and Deputy Clerk Teresa P. Chairman Greer called the meeting to order. TAX APPEAL - FRANK R. AND MARGARET B. PINER, PARCEL R07114-003-001- 000, 621 MOHICAN TRAIL Mr. Frank R. piner spoke regarding his property located in the Tanglewood Subdivision. He stated part of the vacant lot is used for a vegetable garden and is considered part of his home site. The lot is not for sale and it is not required for it to be connected to the sewer system. Mr. piner requested the value to remain at $7,000. Mr. Bethune explained that the value of the vacant lot was assigned a 50% value reduction due to the lot not being suitable for a septic tank system. Now that the sewer system is completed for this area, the condition for the reduction was removed and the value for the lot is assessed at 100%. Mr. Bethune suggested that Mr. piner could re-record the lots as one lot; otherwise, State law requires assigned values to be placed on each recorded lot. Mr. Bethune also informed the Board that the Engineering Department talked with Mr. piner about placing a sewer easement through the lot. If there was an easement, the lot would be deemed unbuildable which would decrease the assessed value. Mr. piner replied that the engineering department wanted to put the sewer easement in the area of his vegetable garden, which would not be acceptable to him. Motion: At the conclusion of the hearings on this date, Vice- Chairman Mathews MOVED, SECONDED by Commissioner Barone, to accept the assessed value of $14,000 as recommended by the appraisal staff. Upon vote the MOTION CARRIED UNANIMOUSLY. TAX APPEAL - WILLIAM RAY AND MARION F. STALLINGS, PARCEL R04914- 005-008-000, 4230 MARKET STREET >'0 I I I 87 ~ MINUTES OF BOARD OF EQUALIZATION AND REVIEW, MAY 17, 1993 Mr. Bethune announced that Mr. Stallings was not able to attend the hearing and staff was requested to give his appeal. Mr. Bethune reported that Mr. Stallings is appealing the assessed value of the property based on the fact that he paid $230,000 for the property in April 1992; therefore, he reasoned that the property should be assessed at the selling price. Mr. Bethune recommended to uphold the value of the property as the law requires all property to be appraised at its true value. At the time of the sale, the property was listed for $335,000 and a MAI appraisal dated July 7, 1990, estimated the value to be $315,000. The actual selling price indicates that the property was sold with the seller being under compulsion to sell. Motion: At the Commissioner Barone uphold the assessed CARRIED UNANIMOUSLY. conclusion of the hearings on MOVED, SECONDED by Commissioner value of $328,659. Upon vote, this date, Sisson, to the MOTION TAX APPEAL - ALEXANDER M. HALL, PARCEL R07100-003-015-003, 4702 SOUTH COLLEGE ROAD Mr. Register reported that Mr. Alexander Hall requested postponement of the hearing until the regular scheduled meeting of the Commissioners on June 21, 1993. TAX APPEAL - WEST CARY INVESTMENT ASSOCIATES, PARCEL R06018-004- 036-004, 1192 HARBOUR DRIVE Mr. Fred Crawley, Executive Vice President of Summit Realty Group, representing the owner, West Cary Investment Associates, spoke briefly concerning Mr. Beck's letter regarding the appeal for Sand Ridge II Apartments. Information was submitted to support the market value of the land and improvements to be $1,665,532. To determine this value, a vacancy rate of 7.5%, an expense rate of 37.5%, and a capitalization rate of .1018 were used in the calculations. Mr. Bethune argued the vacancy rate is more likely at 5%, and expenses should be at 30% of the total income. Expenses are not usually high on newly constructed apartments compared to structures that are 15 to 20 years old. The tax office would consider the cost approach method in determining the value of the property, if the owner provided the actual cost of the construction. Building permits were issued for $1,746,600. Mr. Crawley stated it was real doubtful if a buyer could be found to purchase the apartments at the assessed value. MOTION: At the conclusion of the hearings on this date, vice- Chairman Mathews MOVED, SECONDED by Commissioner Sisson, to uphold the assessed value of $2,003,592 as recommended by the Tax Appraisal Supervisor. Upon vote, the MOTION CARRIED UNANIMOUSLY. ~ (3 fs MINUTES OF BOARD OF EQUALIZATION AND REVIEW, MAY 17, 1993 TAX APPEAL - LANNY THOMAS WILSON, PARCEL R05118-001-046-000, 1442 QUADRANT CIRCLE Mr. Lanny Wilson spoke concerning the value placed on his newly constructed home. When dealing with new construction, he considered the actual cost to be the best way to determine the value of property. The land was purchased in May 1988 for $90,000, which included $10,000 for membership at Landfall Country Club. Based on the actual cost of construction, he estimated the fair market value of his property to be approximately $600,000. After reviewing Mr. Wilson's construction contract and cost over-run items, Mr. Bethune estimated the replacement cost of the home and land value to be $630,000. Since the construction was not completed until February 1993, he recommended to adjust the assessed value with a 90% completion applying for 1993. MOTION: At the conclusion of the hearings on this date, Commissioner Barone MOVED, SECONDED by Commissioner Caster, to adjust the assessed value to $630,000 with a 90 percent completion applying for 1993 as recommended by the Tax Appraisal Supervisor. Upon vote, the MOTION CARRIED UNANIMOUSLY. TAX APPEAL - NEW HANOVER ASSOCIATES, PARCEL R04920-001-001-000 (OFFICE BUILDING) AND R04916-001-006-000 (VACANT LAND), 5051 NEW CENTRE DRIVE Mr. Alan Toll, an attorney with Stephens, McGhee, Morgan, Lennon and O'Quinn Attorneys and representing the appellant, New Hanover Associates, spoke regarding the appeals. He stated the building is currently in foreclosure because the rental income cannot support the mortgage. The owners requested the assessed value to be adjusted to $713,000, the amount owed on the loan. Recently the sister building sold for $600,000; however, it too was in foreclosure. On the vacant land, Mr. Toll reported that the Corps of Engineers have notified the owners that the vacant and unimproved land around the office building is being considered jurisdictional wetlands. If any construction is done, civil penal ties and criminal charges will be imposed. Needham, Jernigan and Associates are working to prove to the Corps that the vacant land has been altered and should not be considered wetlands. A huge barrow pit was made in the area when the overpass on NC Highway 132 was built. Mr. Toll requested the assessed value on the vacant land to be adjusted to $2,000, since the property is virtually worthless until after the appeals process. Portions of the vacant land area may be removed from the wetland classification, but license and permits will most likely be needed for those areas to be developed. Mr. Bethune responded that the tax department would classify the land as wastelands at $150 per acre; however, there is the I I I ~ 89 MINUTES OF BOARD OF EQUALIZATION AND REVIEW, MAY 17, 1993 possibili ty that the property can be improved by doing certain things to remove it from the wetlands classification. He stated it is feasible for an investor to purchase the land at 50% of the market value if in fact the property can be improved. For this reason, the assessed value is at $3.30 per square foot. If the property is determined to be wetlands, the assessed value will be reduced further. In regards to the office building, Mr. Bethune recommended to reduce the assessed value by $250,000 to an adjusted value of $1,149,622. He explained the design and physical location of the building rendered the heating and cooling system inadequate. Over the years, high utility expenses and repairs have caused frequent turnovers in tenants. It would be a significant investment to correct the problems in the building. Mr. Toll agreed to the recommended reduction in the office building, but felt additional relief was needed on the property classified as wetlands. Purchasing contracts were released because of the Corps' decision to classify the property as wetlands. He stated it will be a long, hard struggle to change the classification. Additional relief was requested for the vacant property. MOTION: At the conclusion of the hearings on this date, Commissioner Caster MOVED, SECONDED by Commissioner Barone, to reduce the assessed value of the office building by $250,000 as recommended by the Tax Appraisal Supervisor. Upon vote, the MOTION CARRIED UNANIMOUSLY. MOTION: After a short discussion on the vacant land, Commissioner Sisson MOVED, SECONDED BY Commissioner Caster, to reduce the value by 50% while the Corps of Engineers is making a determination of the wetlands classification. Upon vote, the MOTION CARRIED UNANIMOUSLY. TAX APPEAL - MAQ/PINES ASSOCIATES (THE PINES APARTMENTS), PARCEL R06019-006-009-000, 1272 SHIPYARD BOULEVARD Mr. Peyton Cooper, Avtax, Inc, representing the owners of the pines Apartments, spoke regarding the poor condition and problems of the apartment complex. Because the city sewer system is unable to handle heavy runoff of rain during storms, 28 units are routinely flooded. Because of the disrepaired flat roof, IS units suffered water damage from the last storm. A major problem in repairing the roof is the removal of asbestos in the roofing material. It is estimated to cost $1.3 million to remove the asbestos and repair the roof. Mr. Cooper requested a reduction in the assessed value based on the actual income/expense figures. He explained that the high renter turnover rate resulted in higher maintenance and expenses in ~ qc' \0. j ) MINUTES OF BOARD OF EQUALIZATION AND REVIEW, MAY 17, 1993 operating cost. He estimated the assessed value to be $3-3.5 million and asked that the cost of the asbestos removal be deducted from the value. An appraisal by Robert Cantwell estimates the value to be $2.5 million. Mr. Bruce Lifton spoke regarding the problems of the property. Because of the liability of asbestos in the roofing material, the Resolution Trust Corporation will not allow the owners to go into foreclosure. The RTC has cut the mortgage from $3.3 million to $2.1 million, also a floating rate with the payment fixed at $25,OOO/month was given. He stated at the time of the prior appeal, the asbestos problem was not known. He felt Mr. Cantwell's appraisal of $2.5 million is indicative of the property. As expenses continue to rise, it will be difficult to get a buyer for the complex. If problems are not taken care of directly, the problems will increase. Mr. Bethune responded that the existence of asbestos is present in all properties of similar construction built in the same era; therefore, no reduction in value can be assessed for that reason. Also, the March 1993 storm damage does not affect the 1993 assessed value. He surmised that the assessed value is reasonable and fairly supported. Mr. Bethune explained that the decision of the County's 1991 Board of Equalization and Review for this property was appealed to the State Property Tax Commission. Their decision to not include the asbestos issue in the appeal was made because the earlier Board of E&R did not know of its presence. Mr. Bethune commented that the asbestos probably will not ever be removed. Some consideration may be given for monitoring of the situation in the future. At the conclusion of the hearings on this date, discussion was held on the condition of the buildings and the removal of the asbestos. Chairman Greer felt the value of the property should be reduced in the amount of $1.3 million to cover the cost of removing the asbestos. Mr. Register replied that the owners will have to remove the asbestos as they replace the roofs that have deteriorated; however, the other roofs will only need to be monitored for the asbestos. Monitoring cost will be $20,000/year. He stated the income stream has not been effected at all. Occupancy rates are very good and expenses have been low. Mr. Register explained that during the next step of the appeal, an expert from the Department of Revenue will work for a compromise between the County and the appellant. The Property Tax Commission will take advice from the Department of Revenue and then I I I 9 1 """"IIIl MINUTES OF BOARD OF EQUALIZATION AND REVIEW, MAY 17, 1993 send an official order. Mr. Register recommended that the Board allow the specialist with the Property Tax Commission and the Department of Revenue to review the property to make a determination. MOTION: Vice-Chairman Mathews MOVED, SECONDED by Commissioner Caster, to uphold the assessed value of $4,936,424, pending the decision of the Court of Appeals as recommended by the Tax Appraisal Supervisor. Commissioner Barone MADE A SUBSTITUTE MOTION, SECONDED BY Chairman Greer, to reduce the assessed value to $3,636,424. Upon vote of the Substitute Motion, the MOTION DID NOT CARRY. Voting Aye: Commissioner Barone Chairman Greer Voting Nay: Commissioner Caster Commissioner Sisson Vice Chairman Mathews Upon vote of the Motion to uphold the assessed value, the MOTION CARRIED AS FOLLOWS: Voting Aye: Commissioner Caster Commissioner Sisson Vice Chairman Mathews Voting Nay: Commissioner Barone Chairman Greer TAX APPEAL - GREENFOUNTAIN COMPANY (ST. JAMES VILLAGE, SEC. 1), PARCEL R05511-002-035-001 THROUGH R05511-002-035-008, 761-777 SOUTH KERR AVENUE Mr. Alton Lennon, representing the owner, Charles F. Green, III, spoke regarding the appeal on the building. He stated the property was purchased from the builder for use as a general rental office building even though it was built as condominium units. The building has never been rented, sold, used or financed as condo units; however, the documents on record show that these are eight separate units with separate appraisals. Mr. Lennon reported that the building is now completely leased. Based on the independent fair market value appraisal by Mr. O. J. Clontz, Jr., the market data approach estimated the value at $430,000, the income approach at $400,000 and the cost approach at $451,000. He concluded that if the property was not legally documented as condo units, the tax department would be more inclined to reduce the tax appraisal value. There is no benefit to Mr. Green to have the property listed as condominiums; however, there is an expense to remove the declaration of condominiums. ~ ~:r- MINUTES OF BOARD OF EQUALIZATION AND REVIEW, MAY 17, 1993 Mr. Bethune responded that the County is required to appraise property as it is legally structured; however, the appellant has based his appeal on an appraisal for an office building. If the property was combined by removal of recordation of "condominium," the tax office would be able to appraise the property as one, with one perimeter wall like other office buildings. This would definitely cause the value to be less than the appraisal with individual units. The assessed value is supported by the price Mr. Green paid for the property in 1987. Comparable sales of office condominiums would support the assessed value. Originally the market price was $92,000 for each unit. It is not an office complex appraised as one building and one tract of land, but condominium units with individual site values. Mr. Lennon reiterated that with Mr. Clontz's appraisal, the property seems to be priced at $115,000 more just because of the legal classification. Also, he felt the owner actually paid too much and a more fair price would have been $525,000. Commissioner Sisson noted that the actual site value raised the value of the property and that Mr. Green could market and sell as individual units. MOTION: At the conclusion of the hearings on this date, Commissioner Barone MOVED, SECONDED by Vice-Chairman Mathews, to accept the Tax Appraisal Supervisor's recommendation to uphold the assessed value of $68,194 per unit or $545,552 for the eight units. Upon vote, the MOTION CARRIED UNANIMOUSLY. TAX APPEAL - ATRIUM LANDFALL LTD., PARCEL R05612-009-008-000, 1410 COMMONWEALTH DRIVE Mr. Al LaMontagne, President of PVG America and representing the owner Atrium Landfall Limited Partnership, stated that based on the pro forma capitalization of income approach, the assessed value of the 60,000 square foot office building should be reduced to $3,418,559. The data used was based on lease agreements made in 1989 with a vacancy rate at 10 percent and expense rate at 40%. The shell of the building was completed in 1989 with leases beginning in October 1989. The building was 72 percent leased in 1991. Mr. Bethune replied the assessed appraisal of $5,115,210 for the office building was determined by the cost approach to value method. In using the income approach to value, this high quality office building would not have a 10% vacancy rate, the potential gross income would be at $13.50/PSF, and expenses are contracted with the tenant to share the cost over and above $3.50/PSF. Using these adjustments and a capitalization rate of 10.25 percent, the income approach to value would be $5,030,798, which strengthens the cost approach to value at $5,115,210. I I I ~ 93 MINUTES OF BOARD OF EQUALIZATION AND REVIEW, MAY 17, 1993 Mr. LaMontagne reiterated that the property should be based on 1991 rent payments. He argued that the current composite rent rate is $3.29; however, Mr. Bethune used the absolute high rent rate of $13.50/PSF which is based on one lease, although it is the major lease. He reported that an exact building in Guilford County is assessed at $1.7 million less. MOTION: At the conclusion of the hearings on this date, Vice- Chairman Mathews MOVED, SECONDED by Commissioner Sisson, to uphold the assessed value of $5,115,210 as recommended by the Tax Appraisal Supervisor. Upon vote, the MOTION CARRIED UNANIMOUSLY. TAX APPEAL - NORTH SOUTH DEVELOPMENT CORPORATION, PARCEL R04911- 001-005-000, R04911-001-006-000, AND R04911-001-007-000, LOCATED NORTH OF MARKET STREET, BEHIND THE HOLIDAY INN AND RAMADA Mr. Bethune reported the owner Mr. A. V. Saffo is not present; however, staff did meet with Mr. Saffo to discuss the problems of the property. Currently, most of the property is not marketable due to excessive expenses required for development and providing a sewer system. Staff proposed a 50% reduction in value for 6.7 acres of Parcel #1, 4 acres of Parcel #2 and the 3.9 acres of Parcel #3. MOTION: At the conclusion of the hearings on this date, Commissioner Barone MOVED, SECONDED by Commissioner Sisson, to reduce the assessed value on Parcel #1 to $225,000, Parcel #2 to $40,000, and Parcel #3 to $39,000 as recommended by the Tax Appraisal Supervisor. Upon vote, the MOTION CARRIED UNANIMOUSLY. TAX APPEAL - BALCOR/COLONIAL STORAGE, PARCEL R05508-001-003-000, 426 SOUTH COLLEGE ROAD Mr. Bethune reported that Tax Representative Terry Hughes of Marvin Poer & Company, representing the owner Balcor/Colonial Storage, submitted an appeal requesting a reduction in the assessed value of the mini-storage facility to $683,365. After the 1991 Revaluation, staff met with the owner to review the appraisal and made a $41,806 reduction in the assessed value. The owners accepted the adjusted value at that time so there is no justification for a reappraisal in a non-revaluation year. Mr. Bethune explained that most tax representatives are on a contingent fee basis. Sometimes tax appeals are used as a means of deferring taxes until after the appeals procedure. The Property Tax Commission will ask the General Assembly to require a $100 filing fee for appeals in order to curtail some of the frivolous appeals. MOTION: At the conclusion of the hearings on this date, Commissioner Sisson MOVED, SECONDED by Commissioner Barone, to uphold the assessed value of $877,941 as recommended by the Tax Appraisal Supervisor. Upon vote, the MOTION CARRIED UNANIMOUSLY. ~ g4 MINUTES OF BOARD OF EQUALIZATION AND REVIEW, MAY 17, 1993 TAX APPEAL - WILMINGTON RETIREMENT PARTNERSHIP, PARCEL R06006-00S- 012-000, HOSPITAL PLAZA Mr. Bethune reported that Tax Representative Terry Hughes of Marvin Poer & Company, representing the owner, Wilmington Retirement Partnership, submitted an appeal requesting a reduction in the assessed value to $5,485,681. The appeal is based on the actual building cost of the retirement complex. Mr. Bethune stated that the actual construction cost plus the land value should be the best estimate of market value on a new building. Upon reviewing the actual cost figures and excluding items of personal property and "soft-cost," he recommended the assessed value be reduced to $5,985,989. MOTION: At the conclusion of the hearings on this date, Commissioner Barone MOVED, SECONDED by Commissioner Sisson, to reduce the value of the property to $5,985,989. Upon vote, the MOTION CARRIED UNANIMOUSLY. TAX APPEAL - MUTUAL BENEFIT LIFE INSURANCE COMPANY, PARCELS R04916- 001-006-001, 5041 NEW CENTRE DRIVE, AND R04916-003-002-000, WILMINGTON MARKET PLACE SHOPPING CENTER Mr. John Hunsucker, Real Tax Resources, Inc., spoke regarding the appeals of the owner, Mutual Benefit Life Insurance Company. He withdrew the appeal on the Market Place Shopping Center and spoke about the office building on New Centre Drive. The owners had foreclosed on the property in 1991 and listed to sell the property for $750,000. In March 1993, the property was sold in foreclosure to Jerry Cook in the amount of $600,000. Mr. Bethune stated that the foreclosure price does not reflect the market value. The true market value is somewhere in between the offered price of $859,000 and the actual offer. Staff recommended to reduce the value by $250,000 until renovations and improvements are made to the structure. MOTION: At the conclusion of the hearings on this date, Vice- Chairman Mathews MOVED, SECONDED by Commissioner Sisson, to reduce the assessed value of the office building by $250,000 to $871,433. Upon vote, the MOTION CARRIED UNANIMOUSLY. MOTION: Commissioner Caster MOVED, SECONDED by Commissioner Sisson, to uphold the value of the Market Place Shopping Center. Upon vote, the MOTION CARRIED UNANIMOUSLY. TAX APPEAL - LEROY L. AND MILDRED U. LITTLE, PARCEL ROS408-007-004- 000, 405 STRADLEIGH ROAD Mr. Leroy Little spoke of his concern with high taxes paid in New Hanover County. In 1992, he paid $1,364.80 in property taxes; $671.61 in City taxes and $683.19 in County taxes. He understood the amount paid to the City because it was for services he I I I g 5 -.., MINUTES OF BOARD OF EQUALIZATION AND REVIEW, MAY 17, 1993 received; however, he contested the amount paid to the County for services he did not receive. He noted that BO% of the county budget is for education, human services and courts and public safety. He urged the Board to say "no" to the State and Federal governments for unfunded mandated programs. Mr. Little stated ad valorem tax collecting is a medieval and colonial system of taxation and recommended a study be performed of alternate tax resources. He urged the Board to stop the continual escalation of taxes and reliance on ad valorem taxes. ADJOURNMENT There being no additional appeals, Chairman Greer adjourned the meeting at 5:30 p.m. The Board of E&R will meet again on June 21, 1993, to hear Mr. Hall's appeal. Respectfully submitted, ~~fJ ~ Teresa P. Elmore Deputy Clerk ~