Several large retailers and other businesses in Jefferson County are appealing their tax assessments, and the county stands to lose about $617,000 annually in tax money if the state upholds the appeals.
Companies appealing their tax rates this year include Walmart, Lowe’s, the Mercy Cancer Center in Crystal City and two apartment complexes.
The Jefferson County Council voted 5-0 with two abstentions at its May 11 meeting to approve a change order to Jefferson County Assessor’s Office’s contract for legal services to allow for additional work to fight 17 appeals.
The meeting was held via a telephone conference call.
The change order adds a maximum of $25,000 to the Assessor’s Office’s contract with the Thurman Law Firm in Hillsboro.
The money is necessary, said Assessor Bob Boyer, because of the anticipated extra work brought about by a larger-than-anticipated number of appeals.
“These appeals are not from homeowners or mom-and-pop businesses,” Boyer said. “They’re from big corporations with out-of-town headquarters.
“Those 17 appeals are from five property owners,” Boyer said. “And appeals to the state are what we don’t want to happen, because then we’re losing local control.”
The County Council in December had approved a contract with the Thurman firm for up to $15,000 of work to defend property assessments this year; the May 11 action increases that limit.
Boyer said appeals of tax assessments are part of the cost of doing business, and the original contract amount reflects that.
“The $15,000 is a three-year average of what we’ve spent on the appeals,” he said.
However, this year, Boyer said, there has been a slew of appeals from large chain retailers, notably Walmart. “Walmart is appealing the assessment of 148 of their 152 stores in Missouri,” he said.
The chain, and others, are typically represented by attorneys who take cases on speculation and are paid from the amount they’re able to save their clients, which makes the process more adversarial than usual.
“When we send out our notices of property values (for the coming year) on June 30, we typically get some calls. A lot of them, our office hears what the taxpayer has to say and we can work things out from there.
“Some don’t call and file for a hearing before the Board of Equalization, but we try to contact them anyway and sometimes we can work out an agreement. If we feel our number is fair, we’ll stick with it, but sometimes someone will bring up information that we didn’t have.”
Boyer said 113 appeals were brought before the Board of Equalization this year, and about 90 percent of those ended there.
Those dissatisfied with the equalization board’s ruling can take their case to the State Tax Commission, which Boyer said big corporations don’t mind doing.
“Those are quasi-judicial proceedings,” Boyer said. “It’s like being involved in a civil lawsuit. There are motions that are filed on both sides, interrogatories and discovery (sharing of evidence) as in every civil lawsuit. It’s a time consuming, expensive process. We always have to figure out what the best way to go is, whether it’s best to settle or defend our numbers.”
Walmart appeal
In the case of the Walmart appeals, Boyer said, he believes it is best for his office to dig in its heels.
“They’ve got a bogus argument for appeal, and they’re trying it all over the state,” he said.
Essentially, Boyer said, the firm representing Walmart is arguing that the value placed on its stores is too high.
“They’re trying to make the case that because of the restrictions placed on their properties, if they were to go out of business tomorrow, their buildings would be unmarketable,” he said. “It’s a bogus argument because they’re not going to shut down and in fact they’re very profitable. But they’re asking for a 40 percent decrease across the board.”
He said if the corporation is successful, the Arnold store would pay $169,000 less in real estate taxes, the High Ridge store $135,000 less, the Festus-Crystal City store $103,000 and the De Soto location $85,000.
“That’s every year,” he said. “And the thing of it is, that won’t affect the taxing entities such as the school districts as much as you’d think, because they have to set their tax levies to bring in enough money to operate. Someone else will pay the difference, and that will be residential homeowners. Their tax rates will go up. Walmart needs to pay its share. If they’re allowed to make this argument, other retailers will follow suit, and there will be a snowball effect. That’s why we need to defend this. We believe our numbers are fair.”
Lowe’s, Mercy
He said his office doesn’t take a hard-line stand in most cases, and cited the case of an appeal by Lowe’s of the assessment of its Festus store.
“When it was built in 2006 or whenever, they appealed the appraisal and it went before the State Tax Commission. The Assessor’s Office won that appeal, and ever since then, their (assessment number) has been set at that amount.
“Lowe’s made the case that they believe their improvements – the building – has depreciated over time, and that they should have a lower assessment. I think I could make the case that with all the development around it recently, it is worth more, but in the end, we differed by about $1 million, so we’re dropping the assessment there from $11.5 million to $10.5 million. It’s still a fair value and the difference won’t affect the taxing entities a great deal, but we won’t have to pay to defend our numbers before the State Tax Commission, and risk it being set even lower at a hearing.”
Representatives for the Mercy Cancer Center are contending that the property should have a full exemption from property taxes – as is allowed for hospitals – rather than the 75 percent exemption the Assessor’s Office wants.
Boyer said the $25,000 difference in tax revenue would mean that the Crystal City School District would have to find a way to make up for the loss of $17,700 each year. School districts typically collect the lion’s share of property taxes.
Appeals to state are costly
Boyer said for each hearing at the state level, his office is required to submit an appraisal, which typically costs about $5,000.
Boyer said the work to defend tax assessments is a specialized job, so an outside law firm is necessary.
Requests for bids for the original contract were sent to 11 law firms, and only three were returned.
A panel that included three county officials, including Boyer, then scored the three requests.
“Because of the specialized work – and you see this in contracts for engineering, architectural services as well as legal services – price is only part of the scoring equation,” he said. “In this case, experience handling tax assessment defense was 70 percent of the score of the firms we considered; price was 10 percent.”
Boyer said his office’s budget for 2020 included money for such contingencies.
“This isn’t robbing Peter to pay Paul,” he said. “This money was in our budget. It just wasn’t included in the contract, because we had no way of knowing at the time that these appeals would be coming.”
Council members Tracey Perry (District 5, Festus) and Brian Haskins (District 1, High Ridge) abstained from the vote.
“I essentially had a ton of questions surrounding this particular contract selection from the beginning,” Perry said, “but my most recent abstention surrounded the possibility of reopening the bid. I realize that we often do change orders but the significance between $15,000 to $40,000 I felt was excessive.”
Haskins agreed.
“I would have liked to have seen new specifications on the bidding so that we’d be able to compare the bidders (on the original contract) better. These bids weren’t very close to each other,” he said.