Fighting For The Underdogs In Commercial Property Tax Appeals

Part I: Are commercial property tax hikes coming?

On Behalf of | Mar 15, 2021 | Commercial Property Tax Appeals

State, county and city governments are being subjected to unprecedented budgetary strains by the pandemic and the ways in which it has altered how the nation works, shops, dines out and finds entertainment.

Twenty-six states reported budget shortfalls last year, according to the Washington Post and other news outlets. To try to make up the shortfalls, many are resorting to a combination of cuts to services and state payrolls.

Minnesota has slashed 7 percent from its state workforce, according to the Post. Some states have made much more drastic cuts: New Hampshire has slashed 26 percent of state workers, Colorado has cut 17 percent and Ohio has trimmed 14 percent of its state employees.

Minnesota’s good news

Minnesotans recently received good news from state economists who flipped their two-year forecast from a $1.3 billion deficit to a $1.6 billion surplus. Minnesota Management and Budget said its dramatic projections reversal is due to an improved national economic outlook – including the federal government’s recent stimulus measure.

Gov. Tim Walz hailed the news, but Senate Minority Leader Sen. Susan Kent cautioned that “additional funding” will be required to address “growing disparities” in our state – and that legislators might be “asking the wealthiest and most profitable of Minnesotans to pay their fair share.”

It is likely clear to many Minnesota commercial property owners that they are included in the “most profitable” category, whether the label is accurate or not.

Irresistible temptation?

A statement in a recent article penned by a South Carolina property tax attorney will ring true for many: “Governmental temptation to increase the tax burden on commercial properties will be difficult to resist.”

Of course, commercial property tax owners are similar to local governments in the sense that they, too, face unprecedented challenges. Many owners of properties used for hospitality, retail, restaurant and offices now wonder to what degree those uses will continue post-pandemic.

Some of those properties will need to be repurposed, but owners wonder: repurposed to what? One possibility under consideration by some property owners is to convert hotels to apartments or condominiums.

Focusing on value

Attorney Morris A. Ellison notes in his article for Commercial Property Executive that “real estate taxes reflect both taxation rates and assessed values, but property tax appeals must focus on a property’s value.”

Ellison argues that because the property tax system assumes gradual changes in property values, “commercial property owners clamoring for immediate property tax reductions will likely be disappointed” – at least until valuation dates postdate the onset of the pandemic.

We will publish the second part of this post soon. Please check back with our Minnesota Commercial Property Tax Appeals Blog.