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HomeMy WebLinkAboutE&R 1999-10-18 I I I ,., 203 MINUTES OF THE 1999 BOARD OF EQUALIZATION & REVIEW OCTOBER 18, 1999 ASSEMBLY The New Hanover County Board of Equalization and Review met on Monday, October 18, 1999, at 11:58 p.m. in the Assembly Room of the New Hanover County Courthouse, 24 North Third Street, Wilmington, North Carolina. Members present were: Commissioner Buzz Birzenieks; Commissioner Ted Davis, Jr.; Commissioner Charles R. Howell; Vice-Chairman Robert G. Greer; Chairman William A. Caster; County Manager, Allen O'Neal; County Attorney, WandaM. Copley; and Clerk to the Board, Lucie F. Harrell. Chairman Caster called the meeting to order and reported the purpose of the meeting was to hear the continued 1999 General Electric tax appeal. He requested the Tax Administrator, Robert Glasgow, to begin the appeal process. APPEAL OF 1999 REAL ESTA TE VALUE FOR THE GENERAL ELECTRIC COMPANY Tax Administrator Glasgow reported that the General Electric tax appeal was scheduled to be heard on July 6, 1999; however, because of changes made by the Property Tax Commission on a 1996 General Electric tax appeal, the appeal was rescheduled to September 20, 1999 and then continued until October 18, 1999 because of Hurricane Floyd. Tax Administrator Glasgow reported that Mr. Charles Mercer from Raleigh and Mr. Joe Taylor from Wilmington, North Carolina would be representing General Electric. He advised the assessed value of General Electric for 1999 was $43,651,618. As a result of the Property Tax Commission hearing and the identification of additional acreage that was identified by General Electric as 385 acres for the primary site, the Tax Department re-examined the actual acreage by using aerial photography on GIS. The Tax Department identified the primary site to be 350 acres instead of the 385 acres allocated by General Electric. This provided an increase from 167.6 acres up to the 350 acres which increased the value of the assessed value. At this time, the Tax Department made adjustments based on the fact that one building was to be used as a joint conversion, which removed it out of service and identified this building on an "A" card. An "A" card is an item that is charged differently and not charged directly to General Electric in the amount of$I,800,000. The Tax Department has identified increases and decreases. The primary increase is land value which is being charged at $20,000 per acre from $18,000 per acre. As a result of information that was provided by General Electric on Friday, October 15, 1999, at4:54 p.m., the Tax Department did not have documentation identifying the disagreement with the tax value. Staff reviewed the information over the weekend and found one area of agreement in miscellaneous improvements whereby the Tax Department had identified those miscellaneous improvements with a specific year. The miscellaneous improvements were changed from 1886 and 1887 and identified as occurring in 1991 for this revaluation. The actual year when the miscellaneous improvements were established ~ 204 MINUTES OF THE 1999 BOARD OF EQUALIZATION & REVIEW OCTOBER 18, 1999 should be changed back to the correct year, which will reduce the 1999 value of the General Electric plant. The Tax Department appreciates the fact that General Electric identified this problem. Another point identified by General Electric was the fact that in the same miscellaneous improvements category, the Tax Department had changed the effective age. In the 1991 Schedule of Values, three categories were shown for the age of value. In the 1999 Schedule of Values, the schedule was enhanced to five actual values, which is the difference in the category change from a Category 3 up to a Category 4. In 1991, the effective age categories were 1, 2, and 3, and in 1999 the categories changed from 1 through 5 which reflected a minor increase. Tax Administrator Glasgow provided the County Commissioners with the information received on Friday, October 15, 1999, and stated that Staff did not have time to thoroughly study the information. A cursory review was made of the documents, and there is one area that needs to be changed by the Tax Department. Vice-Chairman Greer noted that in the material presented to the Board of County Commissioners, the increase in acreage from 167.6 acres to 350 acres increased the General Electric 1999 tax value to $3,350,000. He asked if that value was calculated at $20,000 per acre, and if so, was the acreage based on the same charge per acre. Tax Administrator Glasgow explained that the property is based on a certain amount per acre. In this case, 385 acres were identified at $20,000 per acre; 1,204 acres were identified with a physical depreciation of 10% which means it is at 90% of value; and 170 acres were identified as wasteland at $150 per acre. The total value was $10,134,300; however, there is an adjustment because the Tax Department had initially identified 385 acres and used only 350 acres for the primary site. This reduction has been reflected in the 1999 value. The recommend total 1999 tax value based upon the changes will be $43,226,759 representing a reduction of approximately $612,442. Vice-Chairman Greer said according to the information presented, the Property Tax Commission ruled that the 1996 value was $34,874,000. Tax Administrator Glasgow responded the exact figure was $34,874,646 based on a recommendation made by the Tax Department showing a reduction of$490,000. The Property Tax Commission upheld the recommendation of the Tax Department. Vice-Chairman Greer asked if General Electric has $5,500,000 in building permits. Tax Administrator Glasgow responded there are building permits in the amount of$5,500,000 since January 1, 1999. This figure does not include $1,800,000 which is now on-going construction and has not been picked up by the Tax Department. Vice-Chairman Greer said if you add $34,000,000 and $5,500,000 this equals approximately I I I 205 ~ MINUTES OF THE 1999 BOARD OF EQUALIZATION & REVIEW OCTOBER 18, 1999 $40,000,000, and he asked how the remaining $4,000,000 will be calculated. Tax Administrator Glasgow explained that the new Schedule of Values identifies the cost of construction and it will reflect an actual building replacement cost even though the building is one or two years old. This is why depreciation is so important when calculating the tax value. Mr. Joe Taylor, the local attorney representing General Electric in the 1999 appeal, introduced Mr. Charles Mercer, a partner of the Moore & Van Allen law firm in Raleigh, North Carolina, who is the appeals counselor for General Electric appeal. He also introduced Mr. Curtis West, of West Appraisal Analysis, Inc., an expert in tax evaluation in the State of North Carolina. Attorney Taylor advised it is the opinion of General Electric that New Hanover County has just recently improperly classified the primary site at General Electric. The County appraised the General Electric property in 1996 with the primary site being listed at 106.6 acres. This is the correct figure. In 1999, the County presented an appraisal to the Property Tax Commission with the primary site at General Electric being listed at 106.6 acres. When hearing the 1999 appeal, General Electric was informed that the primary site had increased from 106.6 acres to 385 acres. Evidence will be introduced that the primary site at General Electric has not changed. The primary site is still 106.6 acres with some slight variation for a few parkways. Commissioner Howell requested an explanation of how the 167.5 acres came into existence. Attorney Taylor responded this was the County's recent 1999 figure that appeared on the June 1999 tax card. It is counsel's opinion that the primary site is 106.6 acres as presented by the County in a written appraisal. On the 1999 tax card, the primary site appeared at 106.6 acres, and from this point the acreage grew to 385 acres which resulted in an increased tax evaluation of over $3,000,000 for General Electric. No physical change has occurred on the General Electric property. The primary site is the area where buildings, walkways and uses are necessary for operation of the plant with a tax value of over $18,000 per acre. There is no justification or reason for the site to have grown from 106.6 acres to 385 acres. The opinion just expressed by the Tax Administrator about the acreage increase being the result of the Property Tax Commission is incorrect. The Property Tax Commission found that the value of General Electric property was based on a primary site of 106.6 acres. This finding was made in the hearing held this summer. Commissioner Davis informed Attorney Taylor that information received in the agenda packet notes that during the hearing, General Electric identified the primary plant site as having 385 acres. Attorney Taylor said this was not correct. General Electric entered an appraisal of the property which used the term, development site, not primary site. Somehow, this figure was picked up by the County and debated to the Property Tax Commission that the property acreage should be the figure shown on the General Electric appraisal. The development site and primary site are different terms. There is not a place in the General Electric appraisal where the primary site is listed ~ 206 MINUTES OF THE 1999 BOARD OF EQUALIZATION & REVIEW OCTOBER 18, 1999 as 385 acres. This argument was made to the Property Tax Commission, and the Commission found that the primary site at General Electric consists of 106.6 acres. This acreage is in the Property Tax Commission's order. Also, the County's own listing for the 1999 property was 160 acres, which is not an accurate figure. The 106.6 primary site figure is accurate as appraised by the County in 1996 and presented to the Property Tax Commission. Until a few months ago, there was no basic disagreement on the land value of the General Electric site until the site increased from 106.6 acres to 385 acres. If you review what occurred during the hearing before the Property Tax Commission based on 1996 figures, the appraised value of the General Electric plant site by the County was $4,612,000. General Electric's appraisal of this site in 1996 was $4,658,000. This figure was only $40,000 higher and it was accepted by General Electric and County as the land value. This was the figure presented to the Property Tax Commission several month ago. In the order from the Property Tax Commission, it was found that the value of General Electric real estate was $4,612,000, which includes the County's valuation of the primary site of 106.6 acres. There is no reason or justification for the plant site being increased to 385 acres. It is impossible to tell the Board how this has happened, but this issue has been fully addressed by the Property Tax Commission with the finding that the General Electric primary site is 106.6 acres as outlined in the written statement. In several meetings held with the Tax Staff at General Electric, the plant site was toured and aerial photographs were taken, there was no disagreement or suggestion that the primary site was larger than 106.6 acres. There was no disagreement until the County read General Electric's appraisal. It appears when the County was reviewing the General Electric appraisal, the term, development site, was transposed into the County's definition of the primary site, which increased the value of the site. Commissioner Howell asked if the General Electric site was comprised of385 total acres. Attorney Taylor responded that the total General Electric site was comprised of 1,770 acres. In the County appraisal, the acreage was divided into the primary site, which carries $18,000 per acre with residual lands valued at $1,800 to $2,000 per acre. Commissioner Howell asked if a development site could be the same as a primary site. Attorney Taylor responded that the term used in the appraisal was development area. He said that aerial photographs show the primary site as 106.6 acres. This figure has been consistently stated to the Property Tax Commission and to General Electric. The change occurred when General Electric submitted the appraisal. Regardless of what the property is classified, both appraisals came out in total agreement as to land value. There was no disagreement between General Electric and New Hanover County in 1996, 1997, 1998, and the original tax card received in 1999. After and during the hearing before the Property Tax Commission, the General Electric appraisal used the term, development area, not the primary site. The County picked up this figure out of the appraisal because the Tax Staff was at General Electric in June. This argument was heard by the Property Tax Commission, and the Commission found that the value of the property was $4,612,000, which is based on a primary site size of 106.6 acres. I I I 207 ~ MINUTES OF THE 1999 BOARD OF EQUALIZATION & REVIEW OCTOBER 18, 1999 Attorney Charles Mercer said he felt that was a misunderstanding on what has been done by the County. In the agenda for the meeting date of September 20, 1999, it was stated by the County Assessor's office that during the property tax hearing, General Electric identified the primary site as 385 acres. After reviewing the transcript and index, which documents have been reviewed by the Deputy County Attorney Kemp Burpeau, there is not a statement oftestimony in the entire transcript where the witness for General Electric used the term, primary site. Two people in the hearing used the term, primary site, Deputy County Attorney Burpeau, and Appraisal Supervisor Jim Bethune. General Electric did not identify the primary site in the hearing as 385 acres, which is not correct and was of great surprise to counsel. In the information forwarded to Mr. Burpeau on Friday, October 15, 1999, there is statement reflecting the 1996 land value that was forwarded to the Property Tax Commission. This statement reflects that New Hanover County had a total 1996 land value of $4,612,620, and Mr. John 1. Connolly, III, Nationwide Consulting Company, representing General Electric had a land value of $4,656,000. The reason for the slight difference is because Mr. Connolly had appraised some additional land which made his value higher. From the transcript of the hearing, Mr. Connolly said the assessed land value was a good indication of the market value for the subject property. This means that General Electric agreed with the land value submitted by the County. For some reason, Mr. Burpeau and Mr. Bethune brought up this item as an issue. The Property Tax Commission found the value at $34,000,000 plus which was less than the County's original value. In the finding of that value, the Property Tax Commission agreed that the value of the land was $4,612,620 based on a primary site of 106.6 acres. Other property was listed at 1,482.4 acres and 170 acres, which were not part of the primary site. When going to the hearing, General Electric was surprised to see new figures from the County. On the June 2, 1999 tax cards, the County had the primary site being 163 acres. In the June hearing, General Electric was astonished to find that the primary site had changed to 385 acres, and then to 350 acres on September 20, 1999. Attorney Mercer advised that in order to address this issue, Mr. Curtis West, of West Appraisal Analysis, Inc., who has testified many times before the N. C. Property Tax Commission and Boards of Equalization and Review as an expert witness, was requested to perform a market analysis based on the appropriate General Electric plant site area. General Electric continues to think the primary area is 106.6 acres, which is in agreement with the decision of the Property Tax Commission. Because of the differences in opinions, Mr. West was requested to perform the analysis using the County's $20,000 per acre value under the County's analysis and applying this analysis to other industrial plants that are over 400,000 square feet. Mr. West has compiled this analysis and found a market base land to building ratio. The findings of the analysis found that the highest value, which is half of what is shown by the County on September 7, 1990 property tax record cards. The Schedule of Values in New Hanover County requires the County to look at market information and market data. The County has failed to properly use their Schedule of Values in applying the land to building ratio to General Electric. Also, the County has failed to conduct its revaluation of real property in accordance with N. C. G. S. 1 05-317(b) which requires the County to consider this market. The bottom line is that General Electric thinks the Property Tax Commission addressed this matter, ~ 208 MINUTES OF THE 1999 BOARD OF EQUALIZATION & REVIEW OCTOBER 18, 1999 and the issue of the primary site came up in questioning by Mr. Burpeau and Mr. Bethune, which was rejected by the Property Tax Commission. General Electric feels that the property value is what was determined by the Property Tax Commission and no more than the highest figure of $5,800,000 as indicated on the analysis performed by Mr. West. Vice-Chairman Greer commented on the analysis prepared by Mr. West and referenced the bottom right-hand corner, and he asked if Mr. West believes the development area is 148 acres. Mr. West responded that based on the market data, the 148 acres was a multiple of 4.18 times the total building area. If you multiply the total building area times 4.18 divided by the number of square feet per acre, the total acreage is 148, which represents the land area necessary to support the use and operation of an industrial building of this size. Commissioner Howell commented on this not being a real number and he asked if this was an average. Mr. West explained that the figure has nothing to do with the number of acres that are cleared or landscaped. The number is based on market perception of a typical industrial plant in North Carolina for this size of building area. Commissioner Davis asked if all comparable were industrial sites and were they similar to the business at General Electric. Mr. West responded that all comparables were industrial sites listed with the N. C. Department of Commerce. These plants are not similar businesses, but they are comparable to the extent they are all considered to be industrial properties as noted by the Department of Commerce. Commissioner Howell noted that 106.6 acres, 167.6 acres, 163 acres, 385 acres, 350 acres, 148 acres and 1,700 acres had been mentioned, which was quite confusing to him. He asked if the numbers could be clarified. Mr. West said ifhe had been preparing an appraisal of the General Electric Plant, he would probably find the appropriate plant site to be approximately 148 acres. After being an appraiser for 30 years and previously working as a tax appraiser and an appraiser for the ad valorem section for the N. C. Department of Revenue, no appraiser can walk over a piece of land and identify the primary plant site. Also, the acreage cannot be determined by an aerial photograph. This is a matter of market perception in determining how much acreage is needed to support the use and operation of 1,000,000 square feet. In appraising industrial property, the land will be either the plant site or access land. Attorney Taylor noted that Mr. West felt the development site for the plant itself should be 148 acres with the remaining 1,700 acres as access land. I I I 209 ,., MINUTES OF THE 1999 BOARD OF EQUALIZATION & REVIEW OCTOBER 18, 1999 Mr. West responded that he did not know the meaning of a development site and stated that his analysis shows the plant site being roughly 148 acres. Attorney Taylor informed the Board that Mr. West was requested to perform a market based analysis because of the increase in acreage form 106.6 to 167 acres, 385, and then to 350 acres. The analysis shows that 148 acres is needed as the primary site for the plant. This analysis was performed using the County's terms. Chairman Caster referenced the data presented and said a 7,000,000 square foot facility is located on a 13 acre site and when comparing land to building ratios, you go from .33 to 9.48. He expressed concern for the data not being thorough enough to conclude that 148 acres is the right size of the primary site. Mr. West pointed out that 385 acres ofland to building ratio as reflected in the County's appraisal would be a ratio of 11 to 1. Discussion followed on the appropriate plant site area. Mr. West said that he felt the appropriate plant site would be 148 acres. Attorney Taylor advised that 106.6 acres comes directly from the County's own appraisal of the site. A copy of the County's appraisal introduced at the hearing before the Property Tax Commission two months ago was shown. This appraisal shows the land value of the industrial primary land site as 106.6 acres. This has been the basic figure used for the General Electric Plant site for years. When looking at the land necessary to operate the plant, the 106.6 acres is correct. In June, the County arrived at these figures. The County saw in the General Electric appraisal a development site listed at 350 acres, and the County reclassified their figures to increase the primary site to 350 acres. As shown earlier, the County's appraisal and General Electric's appraisal as submitted to the Property Tax Commission were basically identical. Both parties agreed on the land value in June and July. The Property Tax Commission agreed on the land value. Then General Electric receives a new bill from the County in the amount of$4,000,000, which is not right. Attorney Mercer reported on the following errors made by the County in appraising and assessing the General Electric Plant: . Value of Improvements: The analysis performed by Mr. West provides an indicated depreciation percentage of 2.04% based on the data collected. When this percentage is applied, the value of improvements is roughly $26,643,101. The total value on the market analysis utilizing the County's methodology would be the total value of the land and improvements at $31,910,601 instead of the $43,00,000 plus as indicated by the County. When reviewing the County's figures, the depreciation rates used for this particular site should be similar because it is part of the same industrial facility; however, the County has a range of depreciation rates from. 84 to 1.83 and at times a 1 % depreciation rate that would ~ 210 MINUTES OF THE 1999 BOARD OF EQUALIZATION & REVIEW OCTOBER 18, 1999 require buildings to be 100 years old. The 2.04% depreciation rate presented by Mr. West is on the high side, but it must be kept in mind that General Electric buildings were constructed between 1967 and 1984. New Hanover County has not applied its Schedule of Values correctly by not going to the market to look at depreciation rates and not considering all types of depreciation. The Schedule of V alues states that market data must be considered and depreciation rates should be based upon the market as outlined in N.C.G.S. 105-317(b). The amount of depreciation of the subject property considered by the County was incorrect which leads to an excessive value of the property. . Obsolescence: The effect of functional and economic obsolescence should have been considered by the County. The buildings have high ceilings that are no longer needed, and there is not a consistent or wide market for these types of properties because of obsolescence. Companies are not interested in plants of this type. The County did not consider obsolescence as part of the true value, which created a difference in the depreciation rate. . Application of Physical Depreciation: New Hanover County did not apply any additional physical depreciation from 1991 to 1999 for twelve buildings, even though those buildings are eight years older. The tax card numbers have been specified. . Error Made by the County in Miscellaneous Improvements: The County has admitted to the error made in miscellaneous improvements. In admitting this error, the chart showing the comparison on values between New Hanover County's 1996 and 1999 Real Property Assessments show what has occurred: The replacement cost new between 1996 and 1999 changed by only 7%. The depreciation between 1996 and 1999 changed 5.8%. The replacement cost new less depreciation changed by 7.7%. Land increased by 119.7%. Miscellaneous Improvements increased by 143.3%. Attorney Mercer said when reviewing the numbers, it does not make sense for the miscellaneous improvements to increase by 119.7% and the land patterns to increase by 143.3% within a few months. Chairman Caster apologized for interrupting the presentation and stated with the data presented, it was too much information for the Board to absorb. He explained that a Work Session was scheduled at 1 :00 p.m. and the Board was already behind schedule. He suggested adjourning the meeting and convening at another date to give time for the Board to thoroughly review the information presented by counsel representing General Electric. Commissioner Howell agreed with rescheduling the meeting, and he requested the Tax Administrator and both attorneys representing General Electric to meet to see if the differences can I I I 211 ,., MINUTES OF THE 1999 BOARD OF EQUALIZATION & REVIEW OCTOBER 18, 1999 be resolved. He expressed concern for the different figures presented in the acreage of the primary site, and he requested a map of the site when the meeting is rescheduled. Tax Administrator Glasgow informed the Board that he and Deputy County Attorney Burpeau feel the primary site is larger than 106.6 acres, and he agreed with rescheduling the meeting so more information can be presented for the Board to determine the actual primary site. Attorney Taylor said that he and Mr. Mercer would be glad to hold on-site meetings with the Tax Administrator and Staff to see if some of the differences could be resolved. Vice-Chairman Greer requested Attorney Taylor and Tax Administrator Glasgow to work toward some compromise and come up with an agreed upon document. ADJOURNMENT Chairman Caster expressed appreciation to Attorney Taylor and Attorney Mercer for the presentation and he called for a vote to adjourn the meeting. Motion: Commissioner Birzenieks MOVED, SECONDED by Chairman Caster to adjourn and reconvene the meeting at a later date to finish hearing the General Electric tax appeal. Upon vote, the MOTION CARRIED UNANIMOUSLY. Chairman Caster adjourned the meeting at 12:50 p.m. Respectfully submitted, Lucie F. Harrell Clerk to the Board ~