This 2018 photo shows downtown Juneau. Commercial property owners filed in 2021 a record number of appeals of a property assessments. (Michael Penn / Juneau Empire File)

This 2018 photo shows downtown Juneau. Commercial property owners filed in 2021 a record number of appeals of a property assessments. (Michael Penn / Juneau Empire File)

Commercial property sees record appeals

The reason for the uproar is assessments for all commercial property were increased 50% for 2021.

Typically it takes a couple of months to hear all of the appeals from Juneau property owners protesting their tax assessments. But the process just recently wrapped up for appeals filed last year, taking nine months longer than normal, because a huge spike by commercial property owners upset at a huge hike in their assessments.

The reason for the uproar is assessments for all commercial property were increased 50% for 2021, based on studies by the city during the spring showing such assessments had remained generally flat during the previous decade.

Which meant a historic downtown building purchased for $1.25 million ended up with a commercial assessment value of about $2.5 million, said Greg Adler, whose Goldstein Improvement Co. acquired the B.M. Behrends Bank building on Seward Street last year.

“It makes no sense without knowing any facts for it to be double,” he said. “They argue it’s uniform…but their modeling is not disclosed.”

The Juneau Board of Equalization finally wrapped up hearing the unprecedented number of appeals in late April, a process that typically begins in May and ends in July of the same year.

“It‘s never gone on that long,” said David Epstein, who’s been a board member since 2012.

Plenty of disputes are still pending as many property owners whose appeals were denied are filing challenges in state Superior Court, which may be where any shifts occur in the dividing line between owners and assessors.

There were 104 appeals of 2021 assessments, all but three by commercial property owners, said Assistant City Attorney Adam Gottschalk. Of those 90 remained unchanged, two appeals were successful, two resulted in increased assessments and the remainder saw partial reductions of sought-for adjustments.

There are 17 cases in Superior Court, although many individual cases are challenging multiple property assessments, none of which are scheduled yet for arguments, Gottschalk said.

The issue of local assessments has been hotly controversial during the past couple of years due to skyrocketing property values at the same time the COVID-19 pandemic has resulted in many boarded-up businesses and other hardships for owners. That’s adding to the longtime argument of many real estate agents and others in the industry who say assessed values of properties often bear little relation to actual market conditions and sales prices.

One area of common agreement when it comes to board appeals is that many property owners aren’t fully informed — but there is a massive chasm about what that information deficit is.

From the city’s perspective it’s knowing the rules and purpose of appeal hearings.

“It’s not like a traditional trial,” Gottschalk said.

In a follow-up email he stated “the general purpose of the board process is to correct errors (e.g. being assessed for a deck that doesn’t exist, being assessed for substantially more than just paid). Under Alaska law, assessors have considerable discretion on methodology; taxpayers challenging methodology have the burden of showing either fraud or the clear adoption of a fundamentally wrong principle of valuation.”

For some property owners there’s suspicion the city’s bureaucratic narratives are hiding the true motives and methods when setting policy and conducting assessments.

“Juneau is seeing losses from the pandemic and they’re doubling commercial property values because somebody said we need the money,” Adler said. “It sure feels like that.”

Adler’s appeal also states Juneau omitted at least 21 properties whose sales prices were lower than their assessed value from its computer modeling when implementing the hike in commercial rates, thus skewing the overall property data. He also claims local commercial property has been over-assessed for decades.

As for taking the next step in court, one case illustrating issues being argued was filed by three family members who are challenging assessments of nine separate commercial properties. The family is accusing equalization board members of bias imparted during their training to hear appeals, relying on ad-hoc procedures, and board members issuing insufficient findings with “no reasoned explanation” with statements that “fail to address and grapple with the specific issues raised.”

The city, in its response to the lawsuit, argues the family was provided with numerous “reasonable opportunities to present facts, evidence, and cogent argument.” Instead, there was “a misguided ‘snippet”’ strategy.”

“Appellants’ counsel used appellants’ board hearings to re-establish information already in the record or irrelevant to these appeals,” the city’s response asserts. “When advised by the board to present facts or evidence of value, appellants’ counsel solely elicited opinion testimony. In contrast, the assessor prepared property-specific reports and provided responses to arguments (to the extent appellants made arguments) that the Board found reliable and, ultimately, persuasive.”

While the appeals from the past year and issues related to them are likely to persist for some time, Epstein said the number of appeals this year appears to be more typical.

“We’re hoping to have this year’s done by July,” he said.

Contatct reporter Mark Sabbatini at mark.sabbatini@juneauempire.com.

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