Opinion: Commercial property valuation is ‘out of control’

The way commercial property valuation is decided in Juneau is out of control. Essentially, the Juneau Equalization Board automatically approves the business assessment process of city bureaucrats.

The methodology used to value commercial property mostly ignores common sense, deviates from widely accepted standards and is anything but equal.

City bureaucrats are desperately trying to use a particular property assessment method for commercial property that inflates assessed values ​​to boost revenue.

The best way to value historic commercial property is the income approach. The appraiser did not use the income method. The second best way is the sales approach using market comparison data based on sales of similar properties as close to valuation as possible. The appraiser selected the highest sales and excluded the lowest sales to set his predetermined estimated values.

The evaluator’s office did not use standard methods. It has taken a hybrid odd cost approach to valuing historic commercial properties that uses fabricated expenditures for building replacement and adopts suspect capitalization rates that reflect a bias towards higher property valuation. The use of unrealistic replacement construction costs when appraising historic properties in Juneau fails to account for the obsolescence and depreciation of older structures.

This quest to use an inappropriate property assessment to determine the fair market value of commercial property has been going on for more than a decade. Looking back on how the CBJ Assessor’s office has appraised commercial property since 2005, it’s obvious that a problem exists.

Whether the CBJ Assembly will turn a blind eye to a deeply dysfunctional commercial property valuation system is an open question.

The Assembly’s tendency is to defer to bureaucrats spouting professional-sounding terms like how they use the “mass appraisal method” to value commercial property. The Assembly has not dug into what this kind of gibberish really means. Instead, the Assembly accepts the masquerade. After all, tax revenue comes from this distorted process and spending is more pleasant than fair.

The mass evaluation method is not “mass” at all. The CBJ Assessor’s Office excluded properties whose sale price was less than assessed value. Unevenly, the assessor’s office included the rampant sale of the sub-port property market to Norwegian Cruise Line to justify the high appraised commercial property values. Independent observers believe the sale of the subport property to a cruise line was a one-of-a-kind and outlier property sale, not a market-making transaction.

Appeal forms, agenda items and hearings appear to be inconsistent with due process for appellants. For example, the presentation on the value of complex packages gets a wacky 15-minute audience. Presentations to the BOE are cut. Interruptions of the procedure are not allowed. Any evidence presented to the BOE was met with resounding silence. The appraiser threatens higher valuations from their invented category called “Assessed value on opinion” to “Total market value (may be recommended to BOE)”. Hearings are tantamount to kangaroo court where the outcome is certain to go against the commercial property owner. The motions for reconsideration were granted by the City Clerk and then wrongfully denied.

I urge the CBJ Assembly to carefully consider the assessor’s office and the management team.

I also urge the CBJ Assembly to stop deferring to City Hall bureaucrats and demand the implementation of appraisal standards in accordance with IAAO standards and acceptance of submitted MAI appraisals by business owners.

The city manager employs an outside lawyer to defend a failing system. How much will this waste of public funds cost to defend a failing system?

This revenue-generating scheme must be weighed against the loss of lawsuits brought by commercial owners and the reimbursement of commercial owners for the overvaluation and overtaxation of their properties.

Commercial property owners are a vibrant part of Juneau. We don’t want to be cheated by bureaucrats operating in a broken system.

The CBJ Assembly must act now to fix this problem, not wait for our economy to suffer further damage.

• Greg Adler is director of the Goldstein Improvement Co. His family has owned property and conducted business in Juneau since the 1880s. Adler and his family also own a home on Pioneer Avenue in West Juneau.