Topic: A Tax to Grind, Property Tax Valuation
Thursday, 28 January 2010 by David H. LeVan
I love a cold beer on a hot day…… a hot beer on a cold day, not so much. According to Larimer County Colorado, Anheuser-Busch is handing them a hot beer on a cold day….a slap in the face. AB is challenging the property tax assessment on its Ft. Collins plant, claiming the $90 million value is too high and a $50 million value is more appropriate. The county is questioning why AB never appealed In the past and why the new owner of AB, InBev, is appealing. Articles on the appeal credit the county with such statements as “We have a new company that is coming in and gaming the system” and “This company would be paying less than its fair share, and everyone else will be paying more than their fair share” and “I think that’s a crappy thing for an employer in Larimer County to do” - Such harsh accusations, not to mention the language.
Now, I’m not privy to all of the facts and assumptions each side is making in their case, or the merits of each case. However, isn’t the discussion and debating of values the reason we have the appeals process…. so that each taxpayer pays only their fair share of the property tax burden? Since when did appealing your property taxes become “gaming” the system? Just because a value hasn’t been appealed in the past doesn’t mean the value is correct – it may just mean that nobody cared or got around to appealing it in the past. If the taxpayer was overpaying in the past, does that mean they should continue to overpay going forward? I’ve seen lots of “crappy” things in my life…. And appealing property taxes is not one of them.
The plant says “we review assessments on our property nationwide on an annual basis and in the current economic climate realize that market values have declined” and “we seek to work with the county to pay our share” – so let them appeal….. it is their right to have their case heard. AB has chosen to skip the local Board of Equalization and go directly to the Colorado Board of Assessment Appeals. According to the articles, Larimer County doesn’t like this. One article describes the Colorado Board of Assessment as “a group often known to reduce assessed values”. Excuse me but isn’t that part of their job? As an objective third party, they listen to both sides of the story and rule to sustain or lower the value based on the merits of the case.
According to the articles the buildings are 1.811 million square feet on 125 acres of land. At $91,798,000 (the county’s value) this equates to about $51 per square foot. At $50,000,000 (the taxpayers estimate of value) this equates to about $28 per square foot. There’s your range of value… now debate it at the Colorado Board of Assessment….. Not in the press! And when all is settled, enjoy a cold, refreshing beer together.
Topic: A Tax to Grind, Property Tax Valuation
Thursday, 21 January 2010 by David H. LeVan
Here’s the scenario…. Your company has a great idea for a new product and the decision is made to construct a new facility. In fact, there is so much excitement around the facility that they decide to put it on the “fast track” and build it in six months instead of the originally planned twelve months. Of course this will add significant cost but the new product produced at the new facility is going to be so big that “fast track” is the only option for the facility. Will this additional cost increase the taxable value of the facility? Depending on who you ask, you might get different answers. An aggressive tax assessor might say yes…. I’m going with no.
Thankfully, property taxes are based on value, not on how much money you might want to throw at a facility. Value requires that we look at the facility through the eyes of a potential investor. Would an investor pay more for a facility that cost more to build because it “had to be completed” in six months rather than for a similar property that incurred more “normal” costs and timeframe to build? I think not.
Generally, excess costs in “fast track” construction will fall into two categories: additional equipment and additional labor. Let’s start with the additional equipment….. A “normal” construction project might require the rental of two large cranes for 12 months. That same project completed on the fast track might require four cranes for 6 months. The short-term rental of four cranes will likely be on a higher “per month basis” due to the shortened timeframe, which will add more cost to the project.
Now, quantifying excess labor costs can be more challenging… People are generally less predictable than machines. Where a “normal” project might utilize one shift of workers per week at standard rates, a fast track project might utilize two or three shifts paid at a premium rate. And then, there is the whole issue of productivity….. A study conducted by Columbia University concluded that as hours increase, absenteeism and injuries also increase. For hours above 48 per week, it takes three hours of work to produce two hours of output….. Go figure. Some of you may be thinking “hey I know people who take three hours of work to produce two hours of output at far less than 48 hours per week”.
Excess costs for “fast track” do not have to add to your taxable value. Do your homework, quantify the costs. If you’re going to take the fast track – don’t get burned.
Thursday, 14 January 2010 by David H. LeVan
In 326 B.C. Alexander III of Mecedon or Alexander the Great was ruler of the known world at only thirty years old. You can imagine the military genius it took to accomplish such a feat, but have you ever thought of Alexander the Great as an excellent tax administrator?
The ancient world of Alexander the Great was burdened with heavy taxes from their governing bodies. Alexander was able to quell the frustrations of the people he conquered by lowering their personal property taxes and investing half of what he collected back into public improvements. Most of the people who fell under his rule paid fewer taxes than before and enjoyed more government financed improvements.
His genius property tax policy prevented many rebellions and contributed to Alexander’s ability to rule those he conquered with relative peace. Who would have thought that good tax reform could be just as effective as a big sword? Well maybe not just as effective….