May 10th, 2017

Retailers With Ohio Properties Should Prepare for Property Tax Valuation Increases

Employment Law 0

By: Nicholas Ray

Over the next several months many Ohio county auditors will complete the required six-year tax appraisal of all properties located in their counties.  This will be the first reappraisal since 2011 and is likely to lead to significant increases in tax valuations.  The actual increase in tax will vary, however, based upon the relative revaluation of all properties in a taxing district and the application of Ohio’s mandated tax reduction factors.

Ohio’s county auditors are required to reappraise all properties in their counties every six years.  There are 28 counties reappraising for 2017, by far the largest number in Ohio’s reappraisal cycle.  Those counties are:

Auglaize

Clinton

Darke

Defiance

Delaware

Franklin

Gallia

Geauga

Hamilton

Hardin

Harrison

Henry

Jackson

Licking

Mahoning

Mercer

Morrow

Perry

Pickaway

Pike

Preble

Putnam

Richland

Seneca

Shelby

Trumbull

Van Wert

Wood

Through online posts and articles in local newspapers, the auditors have begun to prepare property owners for the tax valuation increases to come.

What Should Retailers Know?

The task of reappraising every property in the county is no small task.  Franklin County, for example, will be setting new values for over 428,000 parcels while over 350,000 will need to be re-valued in Hamilton County.  All of this is done through mass appraisal techniques that do not allow for consideration of the unique challenges facing a property.  As a comparison, for the 2011 reappraisal, the fees paid by Hamilton County were between $15 and $20 per parcel per the Hamilton County Auditor.  The cost for a straight forward residential appraisal can range between $250 and $500 while commercial appraisals typically total in the thousands.

Given the challenge of re-valuing all properties in a county, it can be difficult for the auditor’s office to fully understand specific challenges facing a property.  While, for the Columbus market, CoStar reports increases in asking rents between 2011 and first quarter 2017 ranging from 25% for retail to 10% for office, the general increases are not shared by each property in the market.

What Can Property Owners Do?

Since the county has limited ability to  make special considerations for each unique property, part of the responsibility for making sure that properties are fairly assessed falls upon property owners and their advisors.  Property owners need to review their individual assessments to determine if they are truly reflective of market value for that property.  Many of the auditors will be notifying property owners in the mail of the proposed new tax valuations and holding informal meetings to review those valuations prior to finalizing the assessed values.  If a property owner wants to challenge the assessment, this is an important opportunity that should not be ignored.

Do Commercial Property Owners Face Different Challenges?

Adding to the challenges faced by county auditors are the changes made since the last reappraisal to Ohio tax valuation statutes.  These changes are most applicable to commercial property and specify the interest in real estate, the fee simple interest, that is to be valued and lessen the reliance upon recorded arm’s length sales, from a “shall” rely upon to a “may” rely upon standard.  Several cases that will define the application of these changes are pending before the Ohio Supreme Court, but guidance from Ohio’s highest court is not likely to be available before the proposed reappraised values are set.  Commercial property owners should understand how these changes could impact their tax valuations—both up and down.

What Does a Tax Valuation Increase Actually Mean?

An increase in tax valuation does not generally, equate to an equal increase in taxes.  This is because of Ohio’s tax reduction factors that were enacted in the 1970’s.  The goal of these factors was to limit tax increases in periods of rapidly increasing property values.  For most levies, these reduction factors cap the total amount of taxes raised such that when values increase the effective tax rate is decreased.  As a result, the overall impact of tax valuation increases is muted and the impact on an individual property can vary depending upon how an individual property’s value changes relative to other properties in the taxing district.

While proposed values have not yet been released, the valuation date in question is January 1, 2017.  Property owners should start preparing now and consulting with their advisors to be prepared when the proposed values are released so they are prepared to meet with the auditors if such a meeting is appropriate.

About the Author: Nicholas Ray leads the Vorys real property tax group. His practice focuses on real property tax valuation disputes and appeals.  Nicholas has assisted clients in over 40 states in managing real property tax assessments including contesting assessments where appropriate.  He can be reached at nmray@vorys.com.

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