A transaction with an eyebrow-raising price tag typically would not have been seen by many eyes.
When Norwegian Cruise Lines high bid on waterfront property was unsealed in September, the transaction’s $20 million price tag was notable since the bid was $7 million more than the next potential buyer — Royal Caribbean Cruises — and almost $16 million more than the City and Borough of Juneau’s bid.
In Alaska, unlike in 39 other states, when property is sold between private parties, there is no law that stipulates either the buyer or seller publicly disclose the transaction price. That information also does not have to be shared with a government entity.
“We would not have likely ever known the sale price of that property if it had sold from a private party to a private party,” said City and Borough of Juneau Finance Director Jeff Rogers in an interview. “The only reason we know what it sold for because it was sold by a government entity, so there was a public process. Even if there wasn’t a public process, the government entity would have reported what they sold if for.”
The property was previously owned by Alaska Mental Health Trust Authority, via a bidding process, and the bids were publicly unsealed. The trust was established by the U.S. Congress in 1956 via the Alaska Mental Health Enabling Act, which transferred responsibility for providing mental health care from the federal government to Alaska. The authority is charged with perpetually managing trust assets and is regulated by Legislature-approved statutes.
Alaska is one of 11 so-called “non-disclosure states,” Rogers said. In five non-disclosure states, the transaction price of a property is still required to be given to either the state-, county- or local-level government depending on the location, and the price is then kept confidential. Alaska is not one of those five states.
In Juneau, and the rest of Alaska, property can sell for millions more than its assessed value, and no one tasked by state statute with formulating the value of the property or similar properties would necessarily know.
That’s why the bid process that led to the Norwegian Cruise Lines purchase was especially informative, Rogers said. Multiple unsealed bids showed other would-be buyers were willing to spend in excess of $10 million on the property. The minimum bid for the waterfront property was $3.6 million, and CBJ bid $4.25 million.
“There is most likely to be some impact to the value of properties that are similarly situated as a result of the application of mass appraisal,” Rogers said.
But he said the assessor’s office will have a lot to consider since there may not be any other private property as well suited for a potential cruise ship dock.
“There’s really not another lot like that that’s privately owned,” Rogers said. “Because of that, it has a special commercial value that won’t just ripple to every other property that happens to be on the waterfront.”
Plugging the information gap
A property’s sale price is not necessarily the same as its assessed value, Rogers said, but that price is part of the data that ideally would be used when making an assessment.
“Government assessors, government revenue staff almost universally agree that mandatory disclosure allows for property values to be more accurate and more equitable,” Rogers said.
In addition to comparisons to similar properties, Rogers said determined value of raw land, the value of improvements to the property and income potential for business can also factor into an assessment depending on the type of property being assessed.
The CBJ assessor’s office has multiple strategies for getting a reasonable estimate for the information that must be shared in most of the country.
One is trawling property listings every day, tracking the initial listing price, the date of sales and any fluctuation in price between an initial listing and when it is sold.
Rogers said generally if a property sells shortly after it is listed, it’s reasonable to conclude it sold for at or above its asking price.
Another strategy is simply asking people if they will share what they paid for a property. CBJ is not notified of a transaction price, but Rogers said CBJ is notified when a transaction takes place and is able to send letters to both buyers and sellers requesting they share the price.
However, that decision is ultimately up to the buyer or seller and Rogers said it’s a “minority” of people who voluntarily share the information.
‘Probably’ undervaluing property
Relying on willingly shared information can create a bias in the sorts of data CBJ collects.
Rogers said if a buyer or seller does share a transaction price, it’s often because the property sold for less than its assessed value, and the new property owner is hopeful a low sales price could lead to a lower assessment and a lower property tax bill.
“We would not have likely ever known the sale price of that property if it had sold from a private party to a private party,” — City and Borough of Juneau Finance Director Jeff Rogers
Relying on people to self-report what they paid for a property makes it less likely that information about Juneau’s most valuable properties is shared with CBJ.
Scouting out listings might not shed much light on such properties either, Rogers said many properties in desirable areas are never publicly listed. They’re quietly sold from one party to another.
“With high-value properties in desirable areas, we know even less because we don’t even see the listing amounts,” Rogers said.
Plus, since by definition there are fewer extra-valuable outliers than there are average residential properties, there’s less comparative information about the price of the more expensive properties.
In effect, they’re more difficult to assess.
“Probably, we are undervaluing the properties,” said City and Borough of Juneau Assembly member Loren Jones in a phone interview.
Jones brought up the topic of Alaska’s nondisclosure status potentially depressing property valuations at a November Finance Committee meeting.
It’s something he said could potentially be changed with an ordinance. City Manager Rorie Watt said while Alaska does not mandate that property sales prices be shared with the public or government, it also does not prohibit disclosure. Similarly, some counties in Missouri are non-disclosure counties while some counties do require disclosure.
Jones said such an ordinance would likely face opposition from people concerned about privacy. While residents in 39 other states people can look up exactly what their neighbors paid for their home or place of business, that information hasn’t traditionally been available to Alaskans.
“The other argument is that by forcing disclosure, people may not want to purchase property,” Jones said. “And it puts a damper on the market.”
Rogers said a report about nondisclosure is expected to be part of Wednesday’s Finance Committee meeting, but Jones said an ordinance making disclosure mandatory in Juneau does not seem to be imminent.
“It’s something we’re mulling over,” Jones said. “I don’t know that any other Assembly member is actively looking at it. I’m not sure it’s something that will ever come to an ordinance in the foreseeable future, but it’s certainly something we want to look at.”
• Contact reporter Ben Hohenstatt at (907)523-2243 or email@example.com. Follow him on Twitter at @BenHohenstatt