An outside review of commercial property assessments is the first recommendation from a group working for more efficiency in Terre Haute and Vigo County government.
A 10-member team study team chaired by restaurant owner Scott Womack released a report Wednesday charging that under-assessment is costing the city and county millions of dollars in property tax revenues.
The team called for an independent review of the process to determine whether it is systematically under-assessing commercial property and, if so, to engage the Indiana Department of Local Government Finance to resolve the issue.
The assessment process is one of five topics teams with Terre Haute Competes, a public/private partnership, have been studying for more than a year.
State data found assessed values of Vigo County commercial properties fell by about 20 percent between 2007 and 2016 while residential property values barely grew during that period. Overall assessed values declined 3.4 percent; statewide that number was 12.3 percent.
Examining ratio studies, which determine the large scale variation between sale prices and assessed values, the team found that, between 2015 and 2016, Vigo County assessments did not trend up in response to what many believed was a growing commercial real estate market.
Only 6 percent of sales were included in Vigo County’s 2016 study, the lowest percentage of five counties selected for comparison. Allen County (Fort Wayne) examined 20 percent of sales, Montgomery County (Crawfordsville) 15 percent, Tippecanoe County (Lafayette) 44 percent and Wayne County (Richmond) 29 percent.
Studying so few properties means “it is easy to make this opaque process even more opaque because you don’t know what the inputs are. You don’t know why those six were chosen,” said Nick Weber, a director with Faegre Baker Daniels Consulting, who worked with Terre Haute Competes.
The ratio studies “produce remarkably static data,” he said.
Womack, who has restaurants elsewhere in Indiana as well as Missouri and Ohio, said a problem has existed in Vigo County going back at least to 2001 when he built the IHOP restaurant on South Third Street and it was assessed for 5-10 percent of what it cost. He sold the restaurant a few years ago for $2.9 million and its assessment is $380,000.
He said he paid $1.2 million for the land for his current Popeye’s restaurant in front of Honey Creek Mall and it is assessed at $48,000.
“In all of the other counties where I do business, the assessors have been overly aggressive and we have to go challenge the assessors,” Womack said.
“This is a condition that exists all over the county with these prime properties,” he said. “They are by and large owned by out of state investors; they’re housing national brands; they’re generating a tremendous amount of sales and economic activity and they’re being assessed at a crazy low level.”
In other counties where he does business, Womack said assessors are “overly aggressive” and he sometimes challenges assessments, but property in Vigo County is assessed at 5-10 percent of value.
Vigo County Assessor Debbie Lewis said she will review the report but could not comment in detail until doing so.
“You have to remember we do mass assessments; we don’t appraise individual properties every single year,” she said. “Properties depreciate; our pricing schedules depreciate. I hear a lot of commercial complaints about trending factors going up.”
Lewis said she doesn’t see a huge trend in new commercial structures and many are largely tax exempt. She pointed to the 500 Wabash Ave. public/private Indiana State University student housing project, which she said is more than 95 percent exempt.
“I want the assessments to be fair, whatever that is determined to be,” she said.
Womack agrees assessment should be fair and said “the bigger picture here (is) when you’re talking about lower income folks in this community ... paying fees for this, that and the other and we’re struggling with services … this isn’t just a slight problem, this is a gross under-assessment.”
Other Terre Haute Competes teams will release reports in coming weeks on metropolitan transportation planning, fire department and emergency medical services staffing and billing, sewer utility and storm water issues and combined city/county services.
Dave Taylor can be reached at 812-231-4299 or firstname.lastname@example.org. Follow him on Twitter @TribStarDave.