Juneau City Hall on Monday, March 30, 2020. (Peter Segall / Juneau Empire File)

Juneau City Hall on Monday, March 30, 2020. (Peter Segall / Juneau Empire File)

Opinion: Commercial property valuation is ‘out of control’

The CBJ Assembly needs to act now to fix this problem.

  • By Greg Adler
  • Monday, August 29, 2022 12:59pm
  • Opinion

The way in which valuation of commercial property is decided in Juneau is out-of-control. For the most part, Juneau’s Board of Equalization rubber-stamps the city bureaucrats’ commercial assessment process.

The methodology used to value commercial property mostly ignores common sense, deviates from widely accepted standards and is anything but equal.

City bureaucrats are desperately trying to use a peculiar property valuation for commercial property methodology that pumps up assessed values to increase revenue.

The best way to appraise historical commercial property is the income approach. The assessor failed to use the income approach. The second best way is the sales approach using market comparison data based on the sales of similar property as close in time to the assessment as possible. The assessor has cherry-picked higher sales and excluded lower sales to fix his predetermined assessed values.

The assessor’s office has not used standard methods. Its adopted an odd hybrid cost approach for valuing historical commercial property that uses fabricated expenses for building replacement and that adopts suspect capitalization rates that reflect a bias towards increased property valuation. The use of replacement building costs untethered from reality when valuing historic properties in Juneau fails to account for obsolescence and the depreciation of older structures.

This quest to use improper property assessment to determine the fair market value of commercial property has been going on for over a decade. Looking back on how the CBJ Assessor’s Office has valued commercial property since 2005, its obvious a problem exists.

Whether the CBJ Assembly will turn a blind eye to a deeply dysfunctional system for assessing commercial property is an open question.

The tendency for the Assembly is to defer to the bureaucrats who spout off professional sounding terms like how they use the “mass appraisal method” to value commercial property. The Assembly hasn’t dug into what this kind of mumbo-jumbo really means. Instead, the Assembly goes along with the charade. After all, the tax revenue flows in from this distorted process and spending is more enjoyable than fairness.

The mass appraisal method isn’t “mass” at all. The CBJ Assessor’s Office excluded property where the selling price was less than the assessed value. Unequally, the Assessor’s Office included the market busting sale of the Sub-Port property to Norwegian Cruise Line to justify high assessed values for commercial property. Independent observers believe the sale of the Sub-Port property to a cruise line was a one-of-a-kind property sale and an outlier, not a market-making transaction.

The appeal forms, agenda items and hearings seem to fall short of due process for appellants. For example, presentation on value for complex parcels are given a farcical 15-minute hearing. Presentations before the BOE are chopped off. Breaks in the proceedings are not allowed. Any evidence presented to the BOE was met with resounding silence. The assessor threatens higher assessments from their made-up category called “Assessed Value on Notice” to “Full Market Value (May be recommended to the BOE).” The hearings amount to a kangaroo court where the outcome is certain to go against the commercial property owner. Motions for reconsideration were accepted by the City Clerk and then wrongfully denied.

I urge the CBJ Assembly to take a hard look at the assessor’s office and senior management team.

I also urge the CBJ Assembly to stop deferring to City Hall bureaucrats and require implementation of assessment standards pursuant to IAAO standards and acceptance of MAI appraisals submitted by commercial property owners.

The City Manager employs outside counsel to defend a broken system. How much is this waste of public funding to defend a broken system going to cost?

This scheme to raise revenue must be weighed against losing the lawsuits filed by commercial property owners and paying back commercial property owners for the over-assessment and over-taxation of their properties.

Commercial property owners are a vibrant part of the Juneau. We are unwilling to be cheated by bureaucrats operating in a broken system.

The CBJ Assembly needs to act now to fix this problem, not wait while further damage to our economy takes place.

• Greg Adler is a principal in the Goldstein Improvement Co. His family has owned property and conducted business in Juneau since the 1880s. Adler and his family also own a home on Pioneer Avenue in West Juneau. Columns, My Turns and Letters to the Editor represent the view of the author, not the view of the Juneau Empire. Have something to say? Here’s how to submit a My Turn or letter.

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