Is Commercial Property In Lakewood Under Taxed?

[Bill Call]

It seems so.

The Hollywood Video Building recently sold for $1.9 million. Its appraised market value for tax purposes? $785,000. The curious thing here is that the building sold for $1.2 million in 2005. How can a building that sold 2 years ago for $1.2 million be appraised at $785,000 today?

Drug Mart Plaza recently sold for $5.7 million. Its appraised market value for tax purposes? $2.1 million.

Marc's Plaza has an appraised market value for tax purposes of $5 million.
Give me a break. Drug Mart Plaza is worth more than Marc's Plaza? If the City offered the owners of Marc's Plaza $5 million do you think they would find the offer appealing?

The new Walgreen's on Madison cost $5 million to build and its current tax value is $1 million. Will this slip through the cracks?

The Lakewood Center Building, Pacer's, has an appraised market value of $7.6 million dollars. Wow! A multi story office building is worth just a little more than Drug Mart Plaza? This is actually a good thing. Why?

Well I'm sure that if the City or the school district wanted the property re-appraised at the more reasonable $20 million level the building owners would have reams of data proving that the property is worth only $7 million. Why is that a good thing?

Well, the City could use a new City hall and jail facilities. That could easily cost $20 million. The solution? Buy the Lakewood Center Building for $7 million for the new City hall and sell the current site of City Hall for development.

The building owners would have nothing to complain about. After all, they got the appraised value for their building.

This is worthy of its own seperate post but here it is anyway:

As of 2005 the City had over $4 million in accumulated uncollected property taxes. How can this be?

Please feel free to check my numbers:

http://tax.ohio.gov/divisions/tax_analy ... d2cy05.stm

[sharon kinsella]

It's been so long since I've owned I don't remember - who is responsible for collecting these taxes?

[Donald Farris]

I don't know about now Bill - but when we bought a building during Mayor Cain's administration - they cited us the morning after we moved in to have a laundry list of repairs to be done in 30 days and the school board sued us to go back and get property taxes at the higher rate even before we were owners!!! Our property tax continued to rise while we were there. (Despite the fact that we were located in a blighted area - slated to be turned to dust.)

We thought it was a well organized attack that proved that our bankers were right and investing in Lakewood was not something the city administration seemed to support.

However, it did seem that other commercial properties were way undervalued.

It seems to me a compromise is in order. Yes you are right the buildings should be valued correctly for tax purposes. But we shouldn't do this just when a property transfers. We should thank people for investing in this city when that occurs. Maybe wait a few months before we rain down the law suits and citations.

[Bill Call]

I don't know about now Bill - but when we bought a building during Mayor Cain's administration - they cited us the morning after we moved in to have a laundry list of repairs to be done in 30 days and the school board sued us to go back and get property taxes at the higher rate even before we were owners!!!

It seems to me a compromise is in order. Yes you are right the buildings should be valued correctly for tax purposes. But we shouldn't do this just when a property transfers. We should thank people for investing in this city when that occurs. Maybe wait a few months before we rain down the law suits and citations.

It seems something has changed in the last few years.

I think it is time to do a parcel by parcel reevaluation of Lakewood commercial property.

The pro's are that the City would realize a windfall in new revenue. (Much of which would be wasted).

The con's are that:

1. Property owners would complain that the taxes eat into their profits.

My answer is that rising residential property taxes are never reduced because they eat into residents income.

2. Higher valuations would make redevelopment more difficult.

My answer is that there is not going to be any big redevelopment in Lakewood. And if one was proposed the current owners would insist on a premium of 3 or 4 times the appraised value, effectively killing the project. If the property is worth 3 or 4 times the appraised value when it is part of a redevelopment project then it is worth 3 or 4 times the appraised value at tax time.

I rather like my idea of the City buying the Lakewood Center Building for $7 million. They wouldn't need even half the space and a new office building, subsidized with TIF funds, could house the displaced tenants, if any.

I can understand why income taxes can remain uncollected. If people are broke you're just not going to get the money.

However, I cannot understand how property taxes remain uncollected. Foreclose and the tax man is first in line. There was a house on Hilliard that had 10 years of unpaid property taxes. What's up with that?

[dl meckes]

Isn't property tax collection a function of the county, rather than the city? Isn't foreclosure something for which the county is responsible?

Why does the county wait so long before moving on huge property tax debt?

[Dee Martinez]

DL: You are right. Asssessments are the legal jurisdiction of the county auditor, as are any challenges to assessments. If a property owner of any type chooses to appeal an assessment, the local taxing authorities can appeal the appeal. In the end it is the auditors call and it seems as though the last few auditors have tended to side with property owners.

[Donald Farris]

Hi!

A minor point of correction while the county does do the assessments there is an attorney that works for/with the school board who sues commercial property owners challenging the value of their property. It happened to us and I remember Jim telling us that he knew of another group recently that had this same experience. I can't believe that we are the only 2 people that have had this experience.

If the schools are doing this - why can't the city?

[Dee Martinez]

Hi!

A minor point of correction while the county does do the assessments there is an attorney that works for/with the school board who sues commercial property owners challenging the value of their property. It happened to us and I remember Jim telling us that he knew of another group recently that had this same experience. I can't believe that we are the only 2 people that have had this experience.

If the schools are doing this - why can't the city?

Thats right. Sometimes the sb attorneys win and sometimes they lose (the lawyers of course ALWAYS get paid!).
It may be that the city can be more aggressive in suing for higher assessments I am not disputing that.

Also even more than the schools who get no income tax, the city must weigh the income of property tax vs the potential revenue from income tax from employees.
For example if you have two businesses each with a $500,000 property, but one employs 5 workers and the other employs 25, if the owner wants to play "hard ball" a city (any city not just Lwd) will probably ease up on the property assessment to keep the jobs in the city.
I am saying that the city or schools cannot merely snap their fingers and get more money from property owners. Its a matter of judgment more than enforcement

[Donald Farris]

Hi,
M. Martinez, you are right and I find that upsetting. It would be nice if our local government/schools encouraged economic development for all businesses equally. The charge one has to pay for property tax of their commercial property should be consistent.

Often it seems our local government chases new business at the detriment of those that have invested in Lakewood without thought. A bird in the hand is worth 2 in the bush.

Usually, such development assistance is a bit more documented with City Council voting for assessments (all open and above board) as opposed to as you suggest. Recently, a direct competitor to our business was awarded $100,000 to move their business from Cleveland to Lakewood. What the City "gave" to them I had to sell $1,000,000 worth of business to counter. That is market interference that can destroy a small business.

When I first read Mr. Call's post hear I was not really for this universal assessment on commercial property but after reading your post I wish there is a universal and fair property assessment of all commercial property in Lakewood.

[Bill Call]

Often it seems our local government chases new business at the detriment of those that have invested in Lakewood without thought. A bird in the hand is worth 2 in the bush.

That's a good point.

Government subsidized private investment projects distort the market place, support one community at the expense of another and damage a less well connected business to support a well connected business.

It's nice to have a House of Blues but local talent and business suffer because of the subsidy.

The billion tax dollars spent on subsidizing the Euclid Corridor Project will revitalize that street at the expense of other streets and other neighborhoods. The County will spend $60 million dollars for a vacant lot on Euclid Avenue. Is that money well spent?

Lakewood is well placed to prosper with a small number of well designed and well placed projects. To the extent that the County and State subsidize Downtown projects and Avon Lake projects they use OUR tax dollars to decimate OUR neighborhoods.

What does this have to do with the under appraisal of Lakewood commercial property?

1. Out of town property owners don't give a damm about the City and the City shouldn't give a damm about them. They are here to make a buck and that's fine. But they should pay taxes on the appraised value of their buildings. I can't think of any reason in the world to subsidize Marc's Plaza.

2. Out of town owners will insist on a three or four hundred percent premium on their properties if those properties are subject to redevelopment. That's their right. They have no right to insist that their properties are worth less at tax time than at redeveloment time.

For example: To finance the purchase of Drug Mart Plaza the new owners will have to raise rents by 300% The new taxes alone will cost an EXTRA $131,000. When they start losing tenants I am sure they will start complaing that their taxes are too high. My response? I guess you made a bad deal, don't expect the City to pay for it.

3. A parcel by parcel reevaluation of commercial real estate can be used in conjuction with a City wide evaluation of redevelopment opportunity.

4. Residential property values are going to decline (not just in Lakewood). Property taxes on those properties will also decline. The City has escaped the full reality of its spending choices by rising property taxes, when those taxes start decling the City will be facing a fiscal black hole. Proper valuation of commercial properties will offest that decline.

There is more but most people have already stopped reading.

[chris richards]

There is more but most people have already stopped reading.

I haven't stopped reading... As a potential home buyer in Lakewood, I am more than interested this topic and would love to have more information. I agree that property values should be re-evaluated. Since it has been mentioned that the county is in charge of that, I wonder what the city of Lakewood can do to get them in here do such a thing?

[Bill Call]

I haven't stopped reading... As a potential home buyer in Lakewood

Now is the time to buy! Lakewood offers some very good housing values. If you look at comparable communities like Parma or Brook Park or Fairview I think Lakewood offers:

1. Better location. Downtown is entering a new boom cycle. New housing and office buildings will increase the desirability of suburbs close to the action.

2. Better infrastructure. Tom George has done a good job with the planning and implementation of street and sewer development.

3. Better schools. While I don't intend to ever vote for another operating level the reality is that the new school construction program WILL improve the image and performance of Lakewood schools. The schools take a bad rap about some of the standardized test results but those results reflect the performance of a small subsection of the student body.

4. Better housing quality. Your 70 year old Lakewood colonial will last longer than the 1960's ranch or 1950's bungalow.

5. Better opportunity for excellence. It is clear to me that a few well place developments could provide the foundation for Lakewood to be a leader in the renaissance of the upper ring suburb.

6. Better housing appreciation. While Lakewood has lagged in the last couple of years that means that prices are lower than they should be Given the right leadership future housing appreciation could be better than average. Lakewood can get its groove back.

7. HUGE amounts of new tax dollars waiting to be picked up just by properly appraising hundreds of commercial properties!! OK, that one is a bit of a stretch.

Last but not least: Lakewood is a more interesting place to live. You don't want to be bored do you?

[chris richards]

Great selling points, though I've been sold on Lakewood since I moved here 3 years ago. I'm just debating between continuing to rent, or buying. At this point I'm leaning more towards buying.

I'm just wondering how we go about getting a re-evaluation of property values. If we could get commercial property taxes raised to their appropriate level, then that would benefit the city greatly. And wouldn't the county also benefit from property taxes? I am not sure how that works.

I read that the city was thinking about raising residential property taxes but decided against it, which I think is the right move. From what I can tell, we have relatively high residential property taxes, similar to Broadveiw Heights I think. If commercial property taxes were increased to what they should be, then might it be possible to lower residential property taxes to attract more home buyers.

Initially, I was concerned that higher commercial property taxes would make it harder for businesses in Lakewood, but if the city can attract more home buyers and residents in general we would have more people to shop at and support those businesses. Again, I don't know how taxes work, these are just my thoughts.