A common question we are asked by marina owners is “how do I know if my marina is over-assessed?” That’s understandable when you want to know the answer to the question before you hire the appraiser. In an effort to put the answer out into the public forum, I’ve composed this blog article.
Sign #1 – Land Assessment Changes
You noticed that your land assessment went up in 2007 and 2008 (maybe even 2009), yet as we all know, land development demand dropped off the face of the planet. Not only that, financing has gone dryer than the Sahara desert in summer. Since the percentage of the total assessment attributable to marina land is quite high, that’s a sign that there could be tax appeal savings waiting for action.
Sign #2 – Improvement Assessment Increases
I’ve always found it hard to reconcile increases in assessments for marina improvements. Rarely are they of the caliber or cost similar to office buildings, shopping centers, etc. If the improved assessment increased in 2007 through 2009, you may have an incorrect assessment. Combine that with Sign #1 above and you’ve got an appeal.
Sign #3 – Your Land is Assessed Like a Subdivision
Having been involved with tax appealing marina land that was assessed as a subdivision, I can say that this is simply unfair. There are a long list of reasons why, which I won’t get into. The way to find out is to ask for the assessor’s worksheet. Do you see line items for “lots” on it? Were they subdivision sites?
How much time and cost do you incur to request and read the worksheet? Hardly anything. It’s a good investment.
Sign #4 – You Know You’ve Got Problems
Maybe you need dredging and slip rates are declining as a result. Maybe you’ve got problems with the bulkhead. Maybe you need to replace docks and piles. Whatever the situation, you’re aware that major capital expenditures need to go into your marina and go into them soon. The assessor likely doesn’t know this. This may create another opportunity for an appeal.
Sign #5 – You Know What’s Not Selling
Local marina owners generally belong to a marine trade association or its equivalent. They all know each other. When Marina X goes on the market for sale, everyone knows about it quickly enough. Is that marina comparable to yours? And if so, is it available for sale at less than your assessment? That’s a sure sign that your assessment needs to be reduced… especially when the marina has been exposed to the market for a while. The same goes for any sales that are similar to yours yet sold for less than the assessment. These are great comparables for appraisers and they tell a story… boldly!
Sign #6 – Errors in the Assessor’s Worksheet
So you’ve done what I hope you’ve done and gotten a copy of the assessor’s worksheet. Is the square footage of your buildings materially greater than what you have on the property? That’s an easy administrative appeal (you may not even need an appraiser). Point out the error, let them remeasure and you might find a reduction coming your way.
That was too easy. Let’s try something harder. You look at the assessor’s worksheet and see that they valued the property by the income approach. What was the cap rate? Was it calculated using a mathematical formula like the band of investment or mortgage equity? Reality in today’s soft real estate market is quite different from mathematical attempts to model the market. ‘Been there in court and done that. A one or two percent difference in the cap rate will mean hundreds of thousands of dollars in value… maybe over a million.
What is the operating expense ratio shown on the assessor’s worksheet? Is it much lower than your operating expense ratio? I’ve argued cases where the assessor has used 35 percent when the reality was about 70 percent. Combine that with a cap rate difference and you’ve got actual and market data that makes a very strong statement that a reduction is necessary.
Sign #7 – Your Assessment is High Compared to Your Neighbors
Many times more than one assessor computes marina assessments. As you might expect, that can lead to divergent assessments among similar properties. It’s usually easy to look up assessments on a county, local municipal or state website. If you know your marina is similar to one of your competitors yet the assessment is 20-50 percent higher, you’ve may have enough margin to file on the basis of this difference alone. You might not need an appraisal if you have photographs and put together a convincing document. Diplomatic argument skills help too. It can be difficult for an assessor to argue that both assessments are fair when you have photos and a table showing features and similarity.
Conclusions
There are many ways that a marina may qualify as a tax appeal candidate. I’ve outlined the most obvious reasons for your benefit. What is not a good reason alone is that you need to cut costs or the percentage of gross income that taxes represent seems excessive. That argument holds no weight before a tax board or in tax court. You’ll need facts and data, not financial hardship. You’ll also need help unless you’re filing an administrative appeal based on an error. If you’ve got the signs that a tax appeal is warranted, get some help.
Best of luck!
