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E&R 1997-05-19 I I I t47 -., MINUTES OF BOARD OF EQUALIZATION AND REVIEW, MAY 19,1997 ASSEMBLY The 1997 New Hanover County Board of Equalization and Review met on Monday, May 19,1997, at 1:00p.m. in the Assembly Room of the New Hanover County Courthouse, 24 North Third Street, Wilmington, North Carolina. The purpose of the meeting was to hear appeals filed by property owners regarding their tax value assessments. Members present were: Commissioners Buzz Birzenieks, Ted Davis, Ir., Charles R. Howell; Vice-Chairman William A. Caster; Chairman Robert G. Greer; Tax Administrator Roland Register; Tax Appraisal Supervisor Iim Bethune; Assistant County Attorney Kemp Burpeau; and Deputy Clerk Teresa P. Elmore. Chairman Greer called the meeting to order and welcomed everyone present. Mr. Roland Register, Tax Administrator, complimented his staff for their exemplary efforts in determining the value of properties that had received extensive damage from Hurricane Fran. Instead of a few hundred notices, the Tax Department mailed thousands of revaluation notices to property owners reflecting changes in value. Mr. Register explained the appeal procedure to the new Board members, especially reiterating that the burden of proof is on the taxpayer to prove the assessment is arbitrary. He advised the General Assembly did not intend for property to be revalued every year based on business decisions and that the County is on an eight-year revaluation cycle. He further advised the tax assessments were based on standards adopted by the Board of Equalization and Review in 1990 and cannot be challenged. Appellants were informed that the Board would make decisions following the hearings and notification of each decision would be mailed within a week. TAX APPEAL - EUGENE H. AND IRENE DA SILVA, 3610 BOHICKET WAY, WILMINGTON, NC, TAX MAP NUMBER R06718-001-015-000 Tax Administrator Roland Register reported the appeal was withdrawn. TAX APPEAL - MOHAMMAD MOINI, UNIT 607, SHELL ISLAND RESORT HOTEL, WRIGHTSVILLE BEACH, NC, TAX MAP NUMBER R05218-002-002-096 Mr. Bethune, Tax Appraisal Supervisor, stated Mr. Moini was not present and did not notify the Tax Department that he would not be in attendance. He reported the appeal of value on a unit at Shell Island Resort Hotel was based on the property's having no cash flow on investment. Mr. Moini was unable to obtain a mortgage on the loan and his insurance company had canceled the renewal policy. Mr. Bethune reported although Shell Island Resort was under threat of impending erosion, a lot of money has been spent to save the beach-front property. The properties were unoccupied ~ 148 MINUTES OF BOARD OF EQUALIZATION AND REVIEW, MAY 19, 1997 because of the precarious condition after Hurricane Fran; the storm had completely washed through the first floor. Because of the damages, the assessed values of the properties were reduced by 50%. The appellant's property was reduced to $55,876. The adjusted value is supported on the basis of a unit that sold at $50,000 after Hurricane Bertha. He recommended to affirm the value of $55,876. Commissioner Birzenieks asked if Mr. Moini' s value was further reduced would a precedent be made to reduce the values of other properties at Shell Island Resort. Mr. Bethune responded if a further reduction was made to Mr. Moini' s unit, the other property owners should receive a reduction. The total assessed value of the resort was approximately $10 million. Motion: At the conclusion of the hearings on this date, Yice Chairman Caster MOYED, SECONDED by Commissioner Birzenieks, to uphold the assessed value of $55,876, as recommended by the Tax Appraisal Supervisor. Upon vote, the MOTION CARRIED UNANIMOUSLY. TAX APPEAL - ROBERT E. AND DORIS MCNEILL, ETAL., UNIT 1006, BUILDING 10, OCEAN DUNES, CAROLINA BEACH, NC, TAX MAP NUMBER R09316-002-001-060 Mr. Bethune reported Mr. Robert E. McNeill, owner of the condo unit at Ocean Dunes and an attorney in Fayetteville, was unable to present his appeal because of recent surgery. Mr. McNeill felt his property value should be reduced by 40% instead of the 30% adjustment. Hurricane Fran severely damaged the Ocean Dunes, which is near the Riggins, just north of Fort Fisher. Most of the damage occurred in the utility area on the first level. The homeowners' association, consisting of approximately 90 oceanfront unit owners, accepted the 30 % adjustment, which was uniformly applied to all of the buildings. Mr. Bethune contended the 30% adjustment was reasonable and recommended to affirm the value of $77,852. Motion: At the conclusion of the hearings on this date, Commissioner Howell MOYED, SECONDED by Commissioner Birzenieks, to uphold the assessed value of $77,852 as recommended by the Tax Appraisal Supervisor. Upon vote, the MOTION CARRIED UNANIMOUSLY. TAX APPEAL-LEONM. ANDRACHELLE T. MELVIN, 2216 MASONS POINT PLACE, WILMINGTON, NC, TAX MAP NUMBER R05108-0010005-000 Mr. Leon Melvin, owner of the property at 2216 Masons Point, stated he had purchased the lot in August 1989 and paid the asking price of $150,000. In comparing the valuation of his house and the lot next door, he felt he had paid $50,000 more than he should have paid. The 25% larger lot next door was purchased in February 1989, for $90,000. The front and rear views are similar; however, the neighboring lot has a better view of Howe Creek. Another neighboring lot, which is larger than his, was assessed at $100,000. Lots six, seven, and eight to the right of his I I I -.., 149 MINUTES OF BOARD OF EQUALIZATION AND REVIEW, MAY 19,1997 house have a clear view of the marsh areas, the intracoastal waterway, and the Atlantic Ocean. He stated his view is limited to a small part of Howe Creek and none of the ocean or intracoastal waterway. The lot next door to his has a scenic view of the ocean and was assessed at $170,000. Mr. Melvin compared the selling prices of the golf course lots, which is what his lot is, saying the owners paid $120,000, $134,000, and $109,000; however, these lots were assessed at $100,000 in 1991. In most instances the lots are 50% larger than his lot. It seemed to him that his lot has been valued at the purchase price and not the 1991 fair market value. His first evaluation of $165,000 included $15,000 for club membership; however, the Tax Department reduced the assessment to $150,000. Mr. Melvin argued the value of the lot should be $100,000. His house, which was built by Old South Builders and completed in February 1996, was valued too high. The same company built a 2,930 square-foot house on lot six. Based on the assessed value of this house, he estimated the assessed value of his house should be $23,000 more than lot six or about $57,000 less than the assessment. Since building costs have increased more than 15 % during the last five years, he estimated the 1991 replacement cost to be $296,000. Currently, James Moore Insurance Company has the house insured for $340,000. Mr. Melvin asked the Board to reduce his assessed value by $60,000 to the 1991 replacement cost of $296,000. Mr. Bethune explained when the tax appraiser reviewed the property as part of the requirements of the Board of Equalization and Review, the structure was discovered to have one and one-half stories. Additionally, the appraiser had double charged for the architectural design of the vaulted ceiling by using an architectural adjustment. After deducting the architectural adjustment and the square footage of an upper level, the value was reduced by $46,000. Mr. Melvin had accepted the revised value of the house. Although he agreed to the reduction in the value of the house, Mr. Melvin felt the value of the lot should also be reduced to the value of other comparable golf course lots. In twenty- seven lots facing the golf course, some being 50 % larger than his lot, the values were assessed at $100,000. The lot next door to his lot was purchased six months earlier at $90,000. He felt the assessed value of $150,000 for his lot was too high. Mr. Bethune responded the County's evaluation is based on mass appraisals and not field appraisals. The Tax Department's strongest support of value is that many people did pay $150,000 for a golf course lot in Landfall. He felt the assessment of $150,000 was reasonable and was supported by the selling prices of other golf course lots in Landfall. Landfall would not have accepted an offer of less than $150,000 for Mr. Melvin's lot. The main difference between Mr. Melvin's lot and the lot next door is lot #six is 30 feet away from the golf course. Mr. Bethune recommended no adjustment to the lot value, but he supported a reduction in value to the structure. j 150 MINUTES OF BOARD OF EQUALIZATION AND REVIEW, MAY 19, 1997 Mr. Melvin responded Exhibit H showed 23 lots on the Dye golf course that were assessed at less than $100,000. In searching the tax records, he found a lot that was purchased in August 1989 for $134,000; however, the tax assessment for the lot was $100,000. Although some of the lots were larger than his property, the tax assessments for each of the lots were $100,000. Mr. Bethune responded Exhibit H was received after the initial review of the appeal and had not been examined. Based on the amount Mr. Melvin paid for his lot and the selling price of other golf course lots in Landfall, the assessed value should be more than $100,000. He pointed out that there are as many golf course lots that sold for $150,000 as Mr. Melvin can find that sold for less than $150,000. Mr. Melvin replied Exhibit H was submitted with the other appeal information on May 9, 1997. At the conclusion of the hearings on this date, Mr. Bethune recommended the assessment on the dwelling be reduced to $310,071, but to uphold the assessed value of the land at $149,999. Discussion was held on Mr. Melvin's concern of his lot being assessed higher than comparable lots. Mr. Bethune explained that Mr. Melvin compared his lot with lots that have different views which are not facing the golf course. His golf course lot has a view of the creek marsh. At the time of his purchase, most prime golf course front lots were selling for $150,000. MOTION: Commissioner Howell MOVED, SECONDED by Commissioner Birzenieks, to reduce the assessed value of the dwelling to $310,071, as recommended by the Tax Appraisal Supervisor. Upon vote, the MOTION CARRIED UNANIMOUSLY. The land value was unchanged. BREAK Chairman Greer called a break from 1:55 p.m. to 2:25 p.m. TAX APPEAL - COLUMBIA CAPE FEAR HEALTIlCARE, WRIGHTSVILLE AVENUE, WILMINGTON, NC, TAX MAP NUMBER R05617-007-008-000 Mr. Bethune reported that by agreement with Mr. Register, the attorneys representing the appellant waived their right of appearance at this hearing, but reserved the right of appeal to the Property Tax Commission. The attorney, located in Raleigh, felt they did not have adequate time to properly prepare for the hearing by the Board of Equalization and Review and preferred to present their appeal to the Property Tax Commission in Raleigh. The appeal is based on the assessed value being in excess of market value. Although they may have paid $46 million for the facility, which includes personal property, the conditions of the sale are not known. The Tax Department recommended to affirm the assessed value of $18,080,997. I I I 151' ~ MINUTFS OF BOARD OF EQUALIZATION AND REVIEW, MAY 19,1997 Mr. Register noted Columbia wanted to protect their right of appeal to the State Property Tax Commission and did not want to indulge the Board of Equalization and Review needlessly. MOTION: At the conclusion of the hearings on this date, Commissioner Birzenieks MOVED, SECONDED by Commissioner Howell, to affirm the assessed value of $18,080,997 as recommended by the Tax Appraisal Supervisor. Upon vote, the MOTION CARRIED UNANIMOUSLY. TAX APPEAL - FRANKHA WKINS KENAN, TRUST, WT A, SECTION 1 B LANDFALL CENTER, MILITARY CUTOFF ROAD, WILMINGTON, NC, TAX MAP NUMBER ROS70~OO8-003-000 Mr. Bethune reported the commercial property is located in the business center at Landfall. The appeal submitted by Mr. Robert Wheeler of Arthur Anderson, L.L.P. was based on the assessed value being in excess of market value; however, no support information was provided. Consequently, the County is unable to consider his argument. Mr. Bethune recommended to affirm the assessed value of $2,954,127. MOTION: At the conclusion of the hearings on this date, Commissioner Howell MOVED, SECONDED by Vice Chairman Caster, to uphold the assessed value of $2,954,127 as recommended by the Tax Appraisal Supervisor. Upon vote, the MOTION CARRIED UNANIMOUSLY. TAX APPEAL - COMPASS GROUP USA, INC., PORT WORTH, WILMINGTON, NC, TAX MAP NUMBER R03400-008-003-000 Mr. Bethune reported Mr. Wheeler of Arthur Anderson, L.L.P. is representing Compass Group USA, the owners of the property. The property consists of a 10,000 square-foot facility on North Kerr Avenue, operating as the Mackie Corporation. No information was given in support of Mr. Wheeler's position for the appeal of value. Mr. Bethune recommended the assessed value of $231,321 be affirmed. In discussion of tax representatives, Mr. Register explained the representatives solicit clients for a percentage. Frivolous appeals are unfair to the County or staff because the Tax Department spends a lot of time in preparing for an appeal. Commissioner Birzenieks asked if the tax representatives are paid by contingency. Mr. Bethune answered most tax representatives are paid 5-15% of the total reduction extended over the valuation cycle. Mr. Register explained some tax representatives make appeals every year, but do not provide any burden of proof. Staff works with the tax representatives to determine if mistakes are made. j 15"-' , ,-. c MINUTES OF BOARD OF EQUALIZATION AND REVIEW, MAY 19,1997 Commissioner Birzenieks regarded this type of appeal as unfair to the citizens of New Hanover County. MOTION: At the conclusion of the hearings on this date, Vice Chairman Caster MOVED, SECONDED by Commissioner Howell, to uphold the assessed, value of $231,321 as recommended by the Tax Appraisal Supervisor. Upon vote, the MOTION CARRIED UNANIMOUSLY. TAX APPEAL - 421 SOUTH ASSOCIATES, MASONBORO COMMONS, CAROLINA BEACH ROAD, Wll.MINGTON, NC, TAX MAP NUMBER R07900-001-001-008 Mr. Bethune reported tax representative, Russell P. Stockton, is representing 421 South Associates, the owners of the property. The property is a strip shopping center near Pilots Ridge. Mr. Stockton wrote a letter of appeal stating the assessed value was not "equalized with other properties;" however, he did not provide any information of support. Mr. Bethune recommended to affirm the value of $1,373,894. MOTION: At the conclusion of the hearings on this date, Commissioner Birzenieks MOVED, SECONDED by Vice Chairman Caster, to affirm the assessed value of $1,373,894.00, as recommended by the Tax Appraisal Supervisor. Upon vote, the MOTION CARRIED UNANIMOUSLY. TAX APPEAL - JOE D. AND BONITA H. FLOYD, LOT 170, SECTION 5, FIGURE EIGHT ISLAND, WlLMINGTON, NC, TAX MAP NUMBER R05211-001-001-000 Mr. Bethune reported Mr. Floyd would not be present for his appeal. In an earlier conversation, Mr. Floyd was informed that the Tax Department would recommend the value be reduced from $174,998 to $87,499, based on the condition of the lot as of January 1, 1997. Since then, Mr. Floyd has renourished the lot and replanted sea oats; accordingly, the value of his property will increase back to the original value for the 1998 tax listing. The reduction in value is supported by photographs submitted as the appellant's exhibits. Mr. Floyd had accepted the recommended reduction in value. MOTION: At the conclusion of the hearings on this date, Vice Chairman Caster MOVED, SECONDED by Commissioner Birzenieks, to reduce the assessed value of the parcel from $131,249 to $87,499 as recommended by the Tax Appraisal Supervisor. The reduction in value is for the current year only. Upon vote, the MOTION CARRIED UNANIMOUSLY. TAX APPEAL - LARRY R. V ANN, 105 HERMITAGE ROAD, CASTLE HAYNE, NC, TAX MAP NUMBER ROI719-001-012-001 Mr. Bethune reported in trying to contact Mr. Vann about his appeal, his wife stated he would withdraw the appeal. Since Mr. Vann was not present, Mr. Bethune assumed the appeal was withdrawn. The property was described as a double-wide mobile home on 150' x 200' lot. The property was appraised according to the schedule of values and supports the assessed value I I I -.., 153 MINUTES OF BOARD OF EQUALIZATION AND REVIEW, MAY 19,1997 of $45,804. He recommended the value be affirmed. In further discussion, Mr. Bethune explained the value of a double-wide mobile home that is located on the owner's lot does increase; however, the value may not increase as much as a conventional home. Generally, the value does not depreciate. Motion: At the conclusion of the hearings on this date, Commissioner Howell MOVED, SECONDED by Commissioner Birzenieks, to uphold the assessed value of $45,804, as recommended by the Tax Appraisal Supervisor. Upon vote, the MOTION CARRIED UNANIMOUSLY. TAX APPEAL - SPIRO J. MACRlS, UNITS B, E, F, AND G OF BUILDING C, SHIPYARD OFFICE PARK, WllMINGTON,NC, TAX MAP NUMBERS R06113-00S-003- 008, R06113-00S-003-011, R06113-00S-003-012, R06113-00S-003-013 Mr. Bethune reported the appeal is on four commercial office units of an office building located at 3722 Shipyard Boulevard owned by Dr. Spiro J. Macris. Mr. Milton Hardison, Dr. Macris's accountant, was at the hearing to present the appeal. Mr. Milton Hardison reported he was presenting the appeal because Dr. Macris was out of town on a planned trip to Greece. Mr. Hardison explained the Tax Department assessed the property at $300,000; however, Dr. Macris purchased the property in Marchi April 1996 for $225,000. He felt the purchase price represented the market value since the market value is normally the amount paid for property. After selling another property, Dr. Macris reinvested his money in this property as allowed in an IRS 1031 Exchange. The office buildings were on the market for $240,000, but he paid $225,000. The Tax Department's assessed value was based on the cost of $85 per foot on the 3,500 square foot office building. However, Mr. Hardison argued the limited number of parking spaces, inadequate signage and access to the property, and large buildings blocking the view were the justifications for a lower market value. Furthermore, the main building has one entrance, which may be considered a safety hazard, and the upstairs's area is inaccessible by handicapped individuals. Mr. Hardison compared the property with similar office property at 3802 Park Avenue, which was assessed at $47.00 per foot. However, the Tax Department did not consider the Park Avenue property as valuable as the Shipyard Boulevard property. Mr. Hardison asserted the office buildings on Shipyard were over valued. Mr. Bethune responded the property tax record card shows the six -unit office complex was built in 1988. The value assessed on January 1, 1991, is supported by the schedule of values and the actual sale prices prior to the revaluation in 1991. Page 2 of the report indicated Unit A, ~ 154 MINUTES OF BOARD OF EQUALIZATION AND REVIEW, MAY 19,1997 assessed value of $82,000, was purchased at $91,000. UnitB, an upper unit assessed at $91,700, sold for $105,000 in March 1990. Unit C, assessed value of $91,700, was purchased for $97,000 in December 1989. It is not known if Dr. Macris's purchase was a full arms-length agreement with the seller who was not under any compulsion to sell. Additionally, the Tax Department is charged with appraising property at the January 1, 1991 market value. He noted no evidence was reported on the value being excessive and the sale supports the value of the property. Mr. Bethune told of a letter from Mr. Jim Quinn, the Realtor who handled the sale of the property, that stated the value of the property was $326,300, based on the market capitalization rates and market rents. However, rent payments from the office buildings were below market rents. He also suggested the market value was $275,000. Mr. Bethune reported the real estate listing sheet indicated $278,000 as the offering price for the four units. In a non-revaluation year, the appellant must prove the assessed value was arbitrary or unjust as of January 1, 1991. No justification was submitted. Mr. Bethune recommended the assessed value be affirmed. Commissioner Howell commented on a glut in the rental market of a few years ago. Vice Chairman Caster asked why the Tax Department's square footage of rental space was different than the appellant's. Mr. Bethune explained rental rates and net leasable space do not include common lobby areas, hallways and shared restrooms, etc. From the assessors' standpoint, the square footage is from exterior wall to exterior wall. At the conclusion of the hearings on this date, Chairman Greer asked why the tax assessment was higher than the purchase price. Mr. Bethune explained in a non-evaluation year the value of the property cannot be based on a purchase price. Chairman Greer asked if a fair evaluation of the property would be the offering price of $240,000. Mr. Register stated it is unknown if the agreement was between a willing buyer and a willing seller. In regards to the property's rent being below market rent, he spoke of a court case concerning a Wachovia office building in Winston Salem. The rent was locked in at below market rents, which influenced the selling price. Wachovia argued the value should be based on the selling price. However, the Appeals Court ruled the value could not be determined by bad business decisions of reducing the selling prices in a non-evaluation year. Commissioner Howell commented that based on his knowledge of rental property in the area, the assessment was in line with the value of the property. He suggested Dr. Macris got a I I I 155 ~ MINUTFS OF BOARD OF EQUALIZATION AND REVIEW, MAY 19, 1997 bargain on the purchase because of the market being off that year. Nevertheless, based on market values in 1991 and today, the assessed value was in line with market value. MOTION: Commissioner Howell moved to affirm the assessment. In contrast, Vice Chairman Caster and Chairman Greer felt the tax value should be closer to the purchase price of the property based on the rental income. MOTION: Vice Chairman Caster MOVED, SECONDED by Chairman Greer, to reduce the assessed value to $275,000. In further discussion, Mr. Register reiterated that purchase prices for the properties before 1991 were greater than the assessed .value. 'Moreover, a purchase price is a business decision, which is not a basis for a change from the standards that were adopted in 1991. The appellant was not challenging the standards applied to the office space or land value of the neighborhood. Upon vote, the MOTION FAILED AS FOLLOWS: Voting Aye: Vice Chairman Caster Chairman Greer Voting Nay: Commissioner Birzenieks Commissioner Davis . Commissioner Howell MOTION: Commissioner Howell MOVED, SECONDED by Commissioner Birzenieks, to uphold the total assessed value of $299,964 ($91,700 for Unit B, $72,flJ7 for Unit E, $fIJ,347 for Unit F, and $75,310 for Unit G) as recommended by the Tax Appraisal Supervisor. Upon vote, the MOTION CARRIED AS FOLLOWS: Voting Aye: Commissioner Birzenieks Commissioner Davis Commissioner Howell Voting Nay: Chairman Greer Vice Chairman Caster TAX APPEAL - WNG LEAF MALL ASSOCIATES, 4310 SHIPYARD BOULEVARD, WILMINGTON, NC, TAX MAP NUMBER R06114-004-001-000 Mr. Register reported that the appeal was withdrawn. TAX APPEAL - AGNOFF FAMILY REVOCABLE TRUST, 1221 GREAT OAKS DRIVE, ~ 1 5 ~~ J_ ~ b MINUTES OF BOARD OF EQUALIZATION AND REVIEW, MAY 19, 1997 WILMINGTON, NC, TAX MAP NUMBER R05707-002-028-000 Mr. Bethune reported Mr. Charles Agnoff, owner of a synthetic stucco home in Landfall, reported he had moisture intrusion problems with his home. As required, he provided a moisture intrusion report and a cost estimate for removal and replacement of the stucco. Because the information was received after the Board of Equalization and Review met on April 21, 1997, the Tax Department could not make a change in value. Mr. Bethune requested the Board to give a reduction in value based on the estimated repair cost of $71,900. Normally, repair and replacement on a stucco home will cost 18-20% of the value on the home. Mr. Agnoff s estimate was below the normal cost. He recommended the assessed value be reduced to $822,730. Mr. Charles Agnoff concurred with the adjustment as recommended by the Tax Department. MOTION: At the conclusion of the hearings on this date, Commissioner Birzenieks MOVED, SECONDED by Vice Chairman Caster, to reduce the assessed value from $894,603 to $822,703 as recommended by the Tax. Appraisal Supervisor. Upon vote, the MOTION CARRIED UNANIMOUSLY. Commissioner Birzenieks stated that the County should anticipate receiving many more requests for reductions in value because of moisture intrusion problems in stucco homes. Mr. Register replied the County's uniform policy of requiring a water intrusion test and a repair estimate have allowed the County to treat everyone equally. Commissioner Davis asked if the appeals on stucco homes were different than the appeal from Mr. Olsen of Carolina Beach. Mr. Bethune replied the stucco homeowners could make a claim with their insurance carrier. However, Mr. Olsen is not taking issue with the replacement cost of stucco, but with the damage from the storm on the interior of his home. In further discussion on the stigma of the stucco problem in the County, Mr. Bethune explained reductions in value were not given because of the stigma. In considering an appraisal on a property, the market value and obsolescence of above normal wear and tear is applied to make a non-revaluation adjustment. The market value is the selling price if the property did not have the stucco problem. Stucco homes continue to be sold in the county. The stigma of the stucco problem will be considered in the revaluation year. On current sales of stucco homes, none have been sold for less than the assessed value of the home. However, most sales were contingent upon removal and replacement of the synthetic stucco. I I I 1.57 ~ MINUTFS OF BOARD OF EQUALIZATION AND REVIEW, MAY 19, 1997 In any case, Mr. Bethune explained that the State statutes do not allow a change in value in a non-revaluation year because of normal wear and tear. If a property decreases in value because of an existing condition, such as the exterior stucco, an adjustment can be made in a non- revaluation year. Commissioner Davis reiterated that the County's policy in a non-revaluation year is to only reduce property value on properties that have received damage, whether the damage is from a hurricane or water intrusion in stucco. TAX APPEAL - KJAER OLSEN AND CHRISTIAN BIRGIT, 813 CAROLINA BEACH A VENUE, CAROLINA BEACH, NC, TAX MAP NUMBER R03818-002-00S-000 Mr. Bethune reported Mr. Olsen, owner of a unit at Bluewater Townhouse, was present to give his appeal. The property has water damage from improperly installed synthetic stucco and storm damage from Hurricane Fran. His unit had extensive damage because of being an end unit. The Tax Department reviewed the property after the storm and gave a reduction to the assessed value. The president of the homeowners association accepted the across the board reduction. Mr. Olsen's unit was reduced from $87,096 to $51,637. The basis for the reduction was the cost of removing and replacing the exterior synthetic stucco plus the total estimate of damage divided by the 13 units. Mr. Olsen received the same reduction in value as the other unit owners. In reviewing the property two weeks ago, it was discovered that no significant repairs were made. Mr. Olsen did not agree with the original estimates of repairs and had submitted his own estimate of repairs in the amount of $61,000. Mr. Bethune stated the County does not agree with Mr. Olsen's basis for reducing the value of the property. The market value of the ocean front property, in its current condition based on the standards of January 1, 1991, is $51,637. Although most of the units are rental properties for investment, Mr. Olsen lives in his unit. Mr. Bethune felt the County has given a reasonable adjustment and recommended no additional adjustment. Mr. Kjaer Olsen, owner of the townhouse unit, spoke on the extensive damage to the outside of his unit, and asked for additional consideration for the interior of his unit. He felt the Tax Assessor's reduction in value was based on the original estimate by the insurance assessor. Mr. Olsen stated he did not agree with the insurance assessor and was negotiating the insurance loss. Both of the end units had substantially more damage than the inner units because of the severe damage to the roof and end walls. Interior damage of Mr. Olsen's unit affected the ceilings, walls, floors, kitchen appliances and cabinets, and vanities in the bathroom. The costs of repairs would be the same as building a new unit. Mr. Olsen felt the assessed value of his unit should be much lower than the other units. His unit is uninhabitable with no carpet on the floors and uncleaned walls and ceilings, which cannot be repaired until he receives an insurance settlement. The insurance company has inspected his unit seven times; however, he is unable to make all the repairs with the payment the ~ 15tj MINUTES OF BOARD OF EQUALIZATION AND REVIEW, MAY 19, 1997 insurance carrier has offered. Mr. Olsen complained that he and the owner of Unit #1 were not notified of the appeal procedure. The owner of Unit #1 was too late and Mr. Olsen had four hours before the deadline to file his appeal. He felt the owners, the taxpayers, should have been notified of the decisions made by the Tax Assessor. Mr. Register commented that although Mr. Olsen is living in his unit, the Tax Office has San Jose, California as his last mailing address. All notices were mailed to the address on file. Mr. Register asked Mr. Olsen if he wanted the local address used in the future. Mr. Bethune explained the Tax Department dealt with the president of the homeowners association in good faith that he was speaking on behalf of all the homeowners. The only objection received was from Mr. Olsen. Mr. Olsen replied the president of the homeowners association had no authority to represent him in any matter. The other owners did not have as much damage. He had asked for a review of the interior of his unit, but the Tax Assessors said the schedule of values calculated the value based on square footage. Mr. Bethune stated the estimate of repairs is most likely accurate, but it does not support the value of the improvements on the property and is not justification for further reduction in value. Mr. Olsen felt the value needed to be reduced by the amount of the costs of repairs. The repairs will make the value to be comparable to market value. He felt the value should reflect the interior damage. The total cost of the outside repair is divided among the 13 units. At the conclusion of the hearings on this date, Mr. Bethune stated Mr. Olsen did have more damage in both the interior and exterior of his unit than the other units. Mr. Olsen accepted the reduction of $35,459 for the exterior damage, but wanted an additional reduction for the interior. Chairman Greer commented the other ten owners will need repairs of $50,000, but it will cost Mr. Olsen $75,000 to repair his unit. He asked if Mr. Olsen's value should be $25,000 less than the other units since his cost will be more. Mr. Bethune explained the reduction was based on the original estimate of repairs. The estimate does not have anything to do with the value of the property as of January 1, 1997, if it had not been in that condition. MOTION: Commissioner Birzenieks MOVED, SECONDED by Commissioner Howell, to I I I ~ 159 MINUTES OF BOARD OF EQUALIZATION AND REVIEW, MAY 19,1997 uphold the assessed value of $51,637 as recommended by the Tax Appraisal Supervisor. Upon vote, the MOTION CARRIED UNANIMOUSLY. TAX APPEAL - GENERAL ELECTRIC COMPANY, 2117 CASTLE HAYNE ROAD, CASTLE HAYNE, NC, TAX MAP NUMBER ROI700-001-001-000 I B0790G135 Mr. Register reported Mr. Doug Turner, General Electric's Manager of Property Taxes called earlier in the day to request postpOnement of the appeal hearing. Mr. Turner was told the appeal hearings were scheduled by the Board of Equalization and Review and could only be rescheduled by the Board. Mr. Register noted that adequate notification had been given to General Electric to allow for preparation. of the appeal hearing. Mr. Register summarized earlier appeals made by General Electric over the years. Several years ago, an audit report had shown that 17-18% of the personal property listings were misclassified and commingled with the real estate listings. The Board of Commissioners had voted three to two against the recommendation of the Tax Office and the County Attorney's office to accept the findings of the auditors. However, a private individual appealed the Board's decision to the North Carolina Property Tax Commission. Moments before last year's deadline, GE submitted another appeal on the real estate value. Tax Listing Supervisor Bethune had expressed concern that GE was unwilling to work with the County tax appraisers to resolve their issues, and that they may come before the Board with an unusual plea that the Tax Department had not reviewed. Mr. Register felt it was unfair to the Commissioners and staff to revisit the same disputes again. GE is a unique operation, Mr. Register said and he noted that they had been given fair benefit of its operations. All property items included in the machinery act were considered as elements of value. For their backup data, GE used tax information from the State of California. It was pointed out that only the General Assembly of North Carolina can determine the tax laws on properties in North Carolina. Mr. Doug Turner, Property Tax Manager of General Electric Company, spoke of his request to delay the appeal to the Board. He explained that he wanted to present more detailed information on an item and he needed a GE representative from the Fort Myers office to attend the hearing. Although Mr. Register perceived that he had been uncooperative, Mr. Turner felt that he had needed additional time because he had been in his position for only eight months. During his two visits to the Wilmington area, he had investigated the capital improvements made to the GE facilities. Mr. Turner objected to Mr. Register's statement that he was being uncooperative. He had called to see if he could procedurally reschedule the hearing and Mr. Register's response was the Board of Equalization and Review did not work at his discretion. He recognized the legal counsel with him to ensure his appropriate responses to the County. He said he was offended by Mr. ~ 16() MINUTES OF BOARD OF EQUALIZATION AND REVIEW, MAY ~9, 1997 Register's attitude. Mr. Turner stated GE's four basic issues of concern were: obsolete equipment, equipment exposed to radiation, depreciation of equipment applied by the County, and GE's mixing real property values with construction in progress. Although GE had a different opinion from the County on what constitutes real property versus personal property, some of the circumstances should be considered. For one, he suggested the issue of $9,075,389 in the investment of a new process, which is a construction in progress. Because of the many changes and improvements made in the process, it is not known if the new building will be considered real or personal property. He asked for a postponement of the appeal to determine the correct value of new construction, which is to be completed by July. Mr. Turner explained how a California study on market analysis prepared by a group of taxpayers is used to determine the useful life of some computer equipment. Most jurisdictions in the United States apply a faster write-off instead of using fair market value analysis. GE used the study in their analysis because it closely approximates fair market value and illustrated the kinds of information available in assessment offices in other jurisdictions. The data supports their contention that computer equipment has a shorter economic life than the County's assessed value and that it should be categorized as obsolete equipment. The new process line is creating an obsolescence of the existing process line in the nuclear facility. Some of the obsolete equipment had marginal value, if any, on the open market. If the new process proves successful, equipment in the former process will be held in inventory for proprietary reasons and in accordance with regulatory guidelines. Some equipment was exposed to radiation and is rendered obsolete and unmarketable. The company's schedule of values and calculations were provided to the Board for consideration. Mr. Turner proposed the assessed value should be $76,145,684, instead of the County's $81,954,960 assessment. He separated the inventory into four main categories: E-10 Material Handling Equipment, Data Processing Computers, K -10 Furniture and Fixtures, and Manufacturing Machinery and Equipment. Adjustments were made for obsolete equipment in the different categories. The County assessed computer equipment at $4,494,673, whereas GE calc111ated the value at $2,363,509 as presented on Appellant's Exhibit 4-A. Some of the E-10 Material Handling equipment, data processing computers, furniture and fixtures was inventoried as Equipment Exposed to Radiation (EER) and was zeroed out in the obsolete category. Mr. Turner reported that the numbers were adjusted to reflect the non-value added because of EER. The exposed equipment does not have any value because it is considered obsolete. At one time the State and New Hanover County held some equipment at 25 % residual value. Later, I I I ,.., 161. MINUTES OF BOARD OF EQUALIZATION AND REVIEW, MAY 19, 1997 the State agreed to a 15 % residual value. He felt the residual value should be 5 % because the equipment is more obsolete than before. Additionally, the E-I0 Material Handling Equipment category has both EER and obsolete equipment. He stated an adjustment should apply to the $2.3 million equipment listed under the heading of First Cost. He proposed an adjustment of $616,205 for EER and $410,198 for obsolete equipment. Commissioner Davis asked if the County's v31ue was less than GE's calculations. Mr. Turner responded that the County's calculations does not include all of the depreciation. GE took the depreciation out of the costs because the equipment is obsolete and has little value. He further explained that the Construction in Progress should not be taxed as personal property. Although he had tried to separate into categories earlier, some of the construction value was included in the real property assessment. He felt some doubling of real property had occurred. Mr. Register pointed out that Mr. Turner's Exhibits 4a and 4b showed the County had valued the property at $9,075,389. However, using the proper trending scale, the County valued the property at $7,714,081. Mr. Turner said the E-lO Material Handling Equipment was valued at $1,079,890. Using the proper trending schedules, the County assessed the equipment at $964,289. Chairman Greer asked why GE's figures were different from the County's. Mr. Register explained GE's statement is for the overall value. For the appeal, Mr. Turner compiled new spreadsheets rather than use the Tax Department's assessment based on trending schedules set by the NC Department of Revenue. For uniformity, the County is restricted to the laws of North Carolina as defined by the General Assembly. The Institute of Government and the Department of Revenue provide the guidelines and training for assessors in County Tax Offices. Chairman Greer commented that GE was a unique operation and not many businesses in North Carolina manufacture nuclear fuel. Mr. Register replied that the County addressed this issue with GE several years ago. Equipment, such as computers, are commonly in use, whether at a nuclear facility or elsewhere. He apologized for his impatience, but said proper information was not given in defense of the GE appeal. Mr. Register stated Mr. Turner is the fourth tax manager from GE who has been told the County's position. Ducharme, McMillan and Company, a tax representative firm, presented the initial appeal. At that time, Mr. Register visited the GE facility to assess property in the manufacturing and heavy equipment areas. Mr. Register was familiar with manufacturing facilities because of his experience as a comptroller and production analyst at Babcock and Wilcox. He had spoken in detail about the value issues with GE's industrial engineers and representatives from the Ft. Myers office. Based on the fact that GE is a unique facility, he had ~ 1 f)~i MINUTES OF BOARD OF EQUALIZATION AND REVIEW, MAY 19, 1997 recommended that the Department of Revenue give a 15 % residual for obSolescence instead of the normal 25 % . The Department of Revenue agreed. . State statutes allow counties to consider the taxpayer's, state and federal income tax records. In examining the productivity and obsolesCence records, 49.4 % of the pre-1989 acquisitions still remain on asset records of the facility, which was built in the late 1960s. In the appeal documents, GE reported the current line was installed in 1984 and that the Operating Fuel Division was operating at 44 % capacity. They were askitl.g' for a 15 % residual obsolescence on equipment used in the manufacturing of nuclear fuel and exposed to radiation. Now, Mr. Turner states a 5 % residual reflects the market. As he had noted in 1989, equipment that is not exposed to radiation or not designed to make fuel sales should not receive special obsolescence. Normally, the State's trending schedules assign 25 % of the original cost as the residual value. Overall, the facility is not treated differently than any other industrial facility, except in the fuel manufacturing division, which receives 15 % residual. Chairman Greer asked if GE records the disposal of equipment exposed to radiation. Mr. Turner said he assumed that special documentation would be required to keep track of exposed equipment. He said as he understood it, the old process line will be sealed and confined when the new line is productive. He requested the- Board to find a fair market value to apply to the equipment and computers, and not to use an arbitrarily pre-determined schedule of values. Furthermore, he felt the number of GE representatives who have discussed the issue previously with Mr. Register was irrelevant. He felt he was entitled to a review because he had been charged with defining the value of the facility. Mr. Register apologized that Mr. Turner was not privy to information that was given to other GE representatives over the years. The issues were addressed in detail and accepted by GE. By statutes, the County can use reports that are given to the State and Federal Governments for income tax purposes. As long as the assets remain on GE's tax records and are not written off according to normal a~counting principles, the assets are taxable by New Hanover County. The inventory GE reports to the State and Federal Income Tax Revenue departments is subject to property tax by New Hanover County. GE has been asked to update their accounting records by writing off assets that are obsolete. When properly disposed of, the assets should be written off. If the assets are on the accounting records, then the State statutes say the assets should be considered for taxation. The County should receive a listing of any items that are written-off. Mr. Register spQke of another statute concerning personal property value when the item is in use. If the property is over seven years old, the value is at 15 % obsolescence. When the contaminated and obsolete inventory is sealed, the building will have no value. As long as the inventory is in use and on the books, it has value. The Internal Revenue Service regulates the I I I 163 ~ MINUTES OF BOARD OF EQUALIZATION AND REVIEW, MAY 19, 1997 proper way of writing off assets. Mr. Register spoke concerning the $9 million of Construction in Progress. Instructions to Schedule A-2 apply to the listing of personal property and clearly state not to list any real estate. Apparently, GE in the Ft. Myers' office completed the form listing the commingled assets. However, Mr. Turner has not provided 'any information showing the commingled inventory. In conclusion, Mr. Register stated. the Board of Equalization and Review should not have allowed GE to appeal the valuation. GE "received notification of its valuation last August and should have appealed to the Commission~..sno later than the last meeting in December. The appeal was filed the last week of December 1996. In discussing with the Assistant County Attorney, Mr. Burpeau, the Board had a right to hear the appeal because the statutes does not clearly state the procedures of the Board of Equalization. Last year GE did not have knowledge of their values. He agreed that it would be fair .to allow GE to come before the Board this year. Mr. Turner was told in January that he .would be allowed to appeal to the Board of Equalization and Review and he had over four months to prepare the appeal. The County has addressed these same issues before; nevertheless, another decision will need to be made by the Board. Mr. Turner was concerned with Mr. Register's opinion on some of the properties' value in use. Although some equipment was taxed according to predetermined guidelines, the State does allow the Tax Assessor to consider other factors. He contented that GE was requesting a fair market value adjustment and that factors were presented. to prove the value in use was wrong. Chairman Greer asked Mr. Turner to provide the Tax Department with a list of contaminated equipment that has been reported to the Nuclear Regulatory Agency for disposal, in order to receive an adjustment from the County. Mr. Register reiterated if the equipment is abandoned and no longer an asset for the purpose of depreciation, GE can receive the remaining depreciation for that year and dispose of the assets. Mr. Turner pointed out the list of asset identification numbers in the appeal documents that were submitted to the Tax Department. He asked that the equipment be assessed at market value since the State allows the value of personal property to be the value in exchange. He requested the Board to reevaluate "the personal property and work with GE to reach a viable solution. Chairman Greer commented that he did not want anyone to be mistreated by the County regardless of the number of representatives or questions that were asked. He pointed out that Mr. Register's responsibilities included dealing with taxpayers in a polite and proper manner. However, in Mr. Register's defense, the Tax Assessor was usually correct in his knowledge of tax issues. ~ 164 MINUTES OF BOARD OF EQUALIZATION AND REVIEW, MAY 19,1997 At the conclusion of the hearings on this date, Mr. Register summarized that Mr. Turner had requested a postponement of the appeal on personal property records of December 31, 1995. These records were not reconciled and Mr. Turner stated he did not have time to reconcile the records. The County allowed GE the right of appeal and yet GE was unprepared. Mr. Register did not feel he was rude to Mr. Turner, but that he was adamant about the request for a postponement because adequate time had been given to prepare for the appeal. Earlier in the day, Mr. Turner had called from Atlanta and had no intentions of coming to Wilmington for the hearing. Mr. Register felt that GE representatives would rather come before the Board instead of work with Staff as an act of intimidation. If staff ignores the intimidation, it is being uncooperative. In working with small and large businesses over the years, the Tax Department seeks to treat all taxpayers equally and uniformly. Furthermore, the meetings of the Board of Equalization and Review are scheduled at the convenience of the Commissioners and not for the appellants. Vice Chairman Caster asked if GE can appeal the Board's decision. Mr. Register requested the Board to uphold the 1996 assessed value of GE's personal property and to recognize that the appeal does not constitute an audit. If the Tax Department re- examines or audits GE's records further, other discoveries can be made if necessary. The Department of Revenue will intercede and work with GE on their tax records. Any appeal of personal property can be reviewed for the current year and five years back. MOTION: Commissioner Birzenieks MOVED, SECONDED by Commissioner Howell, to affirm the 1996 Business Personal Property assessment of $81,356,078, as recommended by the Tax Appraisal Supervisor. Upon vote, the MOTION CARRIED UNANIMOUSLY. ADJOURNMENT Chairman Greer expressed appreciation to the staff of the Tax Department for the orderly and professional presentation of the appeals. There being no further appeals, Chairman Greer adjourned the meeting at 5:00 p.m. Respectfully submitted, J~ fJ~ Teresa P. Elmore Deputy Clerk to the Board