MEMORANDUM OF UNDERSTANDING SIGNED TO SELL KAUFMAN PARK!

[stephen davis]

So if the sale is greater than the appraised price the owner would owe back taxes. This process is usually started by the School system that is looking for every penny they are owed.

I wish someone could explain this one a little better. Is all property subject to this? Under what conditions? Maybe a School Board member could help with this.

Matt? Ed?



Steve

.

[Dee Martinez]

Were any members of council aware of the memorandum of understanding?

[marklingm]

So if the sale is greater than the appraised price the owner would owe back taxes. This process is usually started by the School system that is looking for every penny they are owed.

I wish someone could explain this one a little better. Is all property subject to this? Under what conditions? Maybe a School Board member could help with this.

Matt? Ed?



Steve

.

Steve,

Below is property valuation in a nut-shell for school purposes.

As a school board derives a large portion of its revenue from local property taxes, tax revenue from any particular property is dependent upon the market value of that property - absent abatement and other related issues.

Every three years the county does its own reassessment of property values in an attempt to capture the true market value of various county properties - commercial and residential.

Once a property is sold, a complaint can be filed with the board of revision arguing that the assessed value of the property should change due to a recent sale. A recent, arm's length sale is presumed to be the best evidence of the market value of a property. The key here is that the sale generally needs to be at arm's length.

For example, if the county shows that Property A has a market value of $100,000 in 2007 and Property A sold for $200,000 in 2007, a complaint could be filed with the board of revision to increase the 2007 market value of Property A from $100,000 to $200,000.

While school boards can file complaints on commercial and residential properties, very few school boards file complaints on residential properties and simply wait for the county to do its three year residential reassessment. It is my understanding that the Lakewood City School District Board of Education does not file increase complaints on residential properties - certain rental properties excluded.

Admittedly, this is a very cursory review but I hope it helps.

Matt

[stephen davis]

Matt,

Thanks for that quick lesson. I figured you would have good answers. Your answers were good enough to make me want to ask more questions. (I’ll soon make you sorry that you jumped in here. )

As a school board derives a large portion of its revenue from local property taxes, tax revenue from any particular property is dependent upon the market value of that property - absent abatement and other related issues.

Sort of unrelated to the topic, but do the Schools have any input on, or control over, abatement?

Every three years the county does its own reassessment of property values in an attempt to capture the true market value of various county properties - commercial and residential.

What happens in a downturn of community property values? If properties sell for less than the County’s determination of market value, can owners go back for a refund of previous years’ taxes?

Once a property is sold, a complaint can be filed with the board of revision arguing that the assessed value of the property should change due to a recent sale. A recent, arm's length sale is presumed to be the best evidence of the market value of a property. The key here is that the sale generally needs to be at arm's length.

What about a property that is overvalued? I think we’ve all seen cases where someone from out of town spends too much on a house. I just heard of a similar situation with a vacant commercial property on Detroit. What if a property is purchased at a higher than usual market price in anticipation of an increase in market value that doesn’t happen? This may be the case with the Drug Mart property. Is there a remedy?

For example, if the county shows that Property A has a market value of $100,000 in 2007 and Property A sold for $200,000 in 2007, a complaint could be filed with the board of revision to increase the 2007 market value of Property A from $100,000 to $200,000.

Is that only for a sale in THAT year? Can they go back to 2006 or 2005? Would they only go back as far as some unique event, or condition, that may have changed the property value?

I guess what I’m asking here partly relates to the topic of this thread. If knowledge of a land deal, or development, that affects a property, or adjacent property, happens on a particular date, would the increased market or assessed value happen on that date? Would the taxes related to the new value be prorated to that date?

While school boards can file complaints on commercial and residential properties, very few school boards file complaints on residential properties and simply wait for the county to do its three year residential reassessment.

Are these complaints only filed after the sale of a property?

It is my understanding that the Lakewood City School District Board of Education does not file increase complaints on residential properties.

Is this a matter of policy or practicality? Is it likely to start?





See? I told you that you’d be sorry to jump in on this one.

Thanks in advance anyway.

Steve


.

[marklingm]

As a school board derives a large portion of its revenue from local property taxes, tax revenue from any particular property is dependent upon the market value of that property - absent abatement and other related issues.

Sort of unrelated to the topic, but do the Schools have any input on, or control over, abatement?

Generally, no. It is important that cities and schools work together on abatement issues. The City of Lakewood and the Lakewood City Schools have a longstanding relationship of working very well together.

There is contractual language that can be added to an abatement to protect the city and school if the company moves out early.

[marklingm]

Every three years the county does its own reassessment of property values in an attempt to capture the true market value of various county properties - commercial and residential.

What happens in a downturn of community property values? If properties sell for less than the County’s determination of market value, can owners go back for a refund of previous years’ taxes?

If Property A and Property B are similar, the owner of Property A can argue that the market value of Property A decreased because Property B just sold for less than the assessed value of Property B. Again, the sale needs to be arm's length.

[marklingm]

Once a property is sold, a complaint can be filed with the board of revision arguing that the assessed value of the property should change due to a recent sale. A recent, arm's length sale is presumed to be the best evidence of the market value of a property. The key here is that the sale generally needs to be at arm's length.

What about a property that is overvalued? I think we’ve all seen cases where someone from out of town spends too much on a house. I just heard of a similar situation with a vacant commercial property on Detroit. What if a property is purchased at a higher than usual market price in anticipation of an increase in market value that doesn’t happen? This may be the case with the Drug Mart property. Is there a remedy?

See post above. As a general rule, a buyer is presumed to know market trends. It is also presumed that a buyer does not "overpay" for a property if the sale is at arm's length.

[marklingm]

For example, if the county shows that Property A has a market value of $100,000 in 2007 and Property A sold for $200,000 in 2007, a complaint could be filed with the board of revision to increase the 2007 market value of Property A from $100,000 to $200,000.

Is that only for a sale in THAT year? Can they go back to 2006 or 2005? Would they only go back as far as some unique event, or condition, that may have changed the property value?

I guess what I’m asking here partly relates to the topic of this thread. If knowledge of a land deal, or development, that affects a property, or adjacent property, happens on a particular date, would the increased market or assessed value happen on that date? Would the taxes related to the new value be prorated to that date?

You can only go back one year.

[marklingm]

While school boards can file complaints on commercial and residential properties, very few school boards file complaints on residential properties and simply wait for the county to do its three year residential reassessment.

Are these complaints only filed after the sale of a property?

See post above.

[marklingm]

It is my understanding that the Lakewood City School District Board of Education does not file increase complaints on residential properties.

Is this a matter of policy or practicality? Is it likely to start?

It is a matter of policy only.

[marklingm]

Matt,

Thanks for that quick lesson. I figured you would have good answers. Your answers were good enough to make me want to ask more questions. (I’ll soon make you sorry that you jumped in here. )

***

See? I told you that you’d be sorry to jump in on this one.

Thanks in advance anyway.

Steve.

No problem. I'm honored to be asked.

[stephen davis]

Matt,

I'm impressed. Thanks for your quick answers. I laughed at the first answer. I thought maybe you had already lost the patience to continue, but you came on strong and finished, one by one.

I'm still a little confused on "arms length".

Glad you're on the Board.

Steve

[marklingm]

Matt,

I'm impressed. Thanks for your quick answers. I laughed at the first answer. I thought maybe you had already lost the patience to continue, but you came on strong and finished, one by one.

I'm still a little confused on "arms length".

Glad you're on the Board.

Steve

Steve,

Thanks for the kind words. I'm glad to be on the Board.

“An arm's-length sale is characterized by these elements: it is voluntary, i.e., without compulsion or duress; it generally takes place in an open market; and the parties act in their own self-interest.â€Â

[stephen davis]

[quote="Matthew John Markling"]“An arm's-length sale is characterized by these elements: it is voluntary, i.e., without compulsion or duress; it generally takes place in an open market; and the parties act in their own self-interest.â€Â

[Lynn Farris]

Thanks Matt for an excellent description.

Regarding abatements. Steve, you may remember with the West End situation that because the abatement (TIF) affected a significant amount of funding for the Schools, the City reached an agreement with the schools to make up a portion of their loss through the city income tax revenues. I'm assuming that when the TIF or abatement is significant - the school board members, PTA and citizens would lobby the city council and mayor to make some sort of accomodation.

Which brings me to my question. There is a large TIF outstanding on the Cliff's project I believe - nothing near the size of the West End. I know that they are using fair size area to pay for it - but I'm not sure how many years. I'm assuming that it hasn't been given yet because the project is delayed. Was there any agreement to assist the schools with this? And will this further compound the revenue situation facing the city.

Thanks