Nix’s senior commercial appraiser Mike Gildea disputed the first directive from the state for business properties.
“When the state sent their mandate to us to raise residential values 42% they said 0% for commercial and industrial,” Gildea said. “For me, having the experience that I do I knew that was not right.”
Nix said there are several factors that impact commercial appraisals and county auditors have access to much more data that gives a truer picture, “our in-house appraisers can study market rents, occupancy rates, and other trends to justify any moves up or down.”
“The state can mandate residential value increases because they can easily obtain residential sales data through conveyance forms,” Nix said. “The state does not have reliable, apples-to-apples data for commercial and industrial properties. There aren’t enough sales upon which to base numbers, plus commercial and industrial properties are too varied, and the state doesn’t have access to sales between limited liability companies.”
Gildea called the state’s review of conveyance documents “a really benign process” and said just traveling the county you can see all the new industrial properties cropping up and the apartment market is “the hottest it’s been in decades.” He said when he calculated the value increases — which the state accepted — he did account for the decimated office space sector.
“COVID took a pretty strong hit toward certain property classes in the county, like office buildings,” Gildea said. “Office buildings are struggling right now, I think they’re running really low occupancies, than they were prior to COVID. The properties that benefitted during that whole period were industrial and apartments.”
He said there is also a wrinkle in that when commercial properties change hands via a transfer from one limited liability company (LLC) to another — and there are many that choose that option — the sales price can be kept secret. That lowers the sample you are working with.
“It’s a law, it’s absolutely 100% on the up and up, there’s nothing nefarious about it,” Gildea said. “The loophole could be closed, then we could start seeing those sale prices come through. If we had the sales and we had more of them commercially and industrially-wise, we’d have a little bit more sales to hang our hat on.”
Real Estate Director Mike Stein told the Journal-News the business category increases will be slightly beneficial to homeowners.
“Anytime there’s more value it’s going to help spread the load of what needs to be generated, what needs to be collected,” Stein said. “The more value, the more people, the more commercial/industrial properties that have higher values it’s going to lower the amount each of those have to pay proportionately. But when you have 37% compared to 13% the majority is still on the residential side.”
State Sen. George Lang is one of a handful of legislators and local leaders who are working feverishly to mitigate the pain when tax bills arrive early next year. He said he doesn’t agree with any of the procedures used by the state tax commissioner, but he stood up — as he always does — in defense of the state’s business community.
He said for every dollar a resident pays in taxes they are using $1.50 in services, conversely a business is only consuming about 50 cents worth of services because they don’t use the schools.
“The reality is businesses already carry substantially more than their fair share, at least in West Chester,” he said. “The business community has about 35% of West Chester’s footprint, yet that 35% pays about 65% to 70% of all taxes.”
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