City continues effort to bring property values in line

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9,600 properties to be reassessed as part of 2013 compliance plan

OCEAN CITY ­­–– The city will undergo another round of reassessment by the end of the year in an effort to bring the most over-assessed properties in line with their true market value. It’s called a compliance plan, and it’s all about determining fair market value.

Through the compliance plan, the city hopes to reassess as many as 9,600 properties in an effort to re-establish value island-wide.

In 2011, the city completed a 2012 compliance plan that targeted homes in the bay and beach areas, reassessing about 3,200 properties in order to avoid future tax appeals by these property owners.

At its Thursday, Sept. 13 meeting, City Council approved a professional services contract for $46,134 to J. Ravitz Associates, Inc. of Cape May Court House for commercial appraisal services.

“We’re going to do a large majority of the compliance plan in-house,” said city finance director Frank Donato. “The commercial properties are more complicated and take more time, so we are contracting that part out.”

The commercial area includes the downtown along Asbury Avenue from Sixth to 14 streets, certain portions of West Avenue and other properties; more than 230 in total.

Donato said it will take a few years to reassess every property on the island using the compliance plan method.

“It takes a couple of years to do this,” he said. “We have to do the island in chunks to do it.”

The faster option, a complete island-wide revaluation, would have been costly, he said.

“It could have easily cost $1.5 million and we didn’t think that was a wise use of taxpayer money,” he said. “To do this in-house is basically the least expensive option. A full revaluation would have included and inspection of every one of the 19,000 properties.”

This, Donato said, would have been overkill.

“We know in Ocean City that the part of the property that needs adjustment is the land value, not the buildings,” he said. “The buildings are all where they need to be. The result of the housing collapse is the market value of the land. When the demand is not there, the land is most affected. It’s much better to let the assessor go through the properties and reduce the land value to bring it all into line.”

Sometime during November, Donato said he and Elliott would make a presentation to council, outlining the 2013 compliance plan.

Property owners will be assessed in 2013 based on the value of their property on Oct. 1, 2012 – Oct. 1 is the “valuation date” in the tax assessors world, Donato said.

“So after Oct. 1 comes and goes, we’re going to put an application into the Cape May Board of Taxation for a compliance plan to reassess more property,” Donato said.

Donato said about 650 property owners filed tax appeals last year, compared to 240 the previous year and more than any other community in Cape May County. The appeals resulted in a loss of $113 million in ratables, he said.

The compliance plan has helped the city to gradually re-establish market value without drastically affecting the tax rate.

About 90 percent of those who filed appeals saw their properties reassessed. In addition, the city reassessed about 3,200 properties through its first compliance plan, including the island’s most valuable and least valuable parcels.

“That included a combination of the beachfront and bayfront, and what we call ‘condotels,’ motel rooms that were converted to condominiums,” Donato said. “These properties were over-assessed, the largest and the lowest were the most out of whack, so we started with them. We thought 3,200 properties was about all we could bite off and chew last year, so we started with them. We wanted to at least try and do something proactive.”

What remains is essentially the middle of the island and the middle of the market. Ocean City has about 19,000 taxable properties, so about 15,800 could be in need or reassessment.

“The rule is that you can’t adjust more than 50 percent of the town through a compliance plan, so we’re going to get as close as we can,” Donato said. “That means somewhere between 9,500 and 9,600 properties. We are going to apply to the county to reassess these properties.”

Which properties will be reassessed remains to be seen.  Donato said the city’s tax assessor, Joe Elliott, and officials in his office have been studying real estate transactions throughout 2012.

“They will continue to study the transactions,” he said.

Through this exercise, he said, Elliott will be able to best determine which 9,600 properties are most in need of reassessment, based on their valuation on Oct.1 of this year.

“Once all of the data is analyzed, they will decide which neighborhoods to reassess,” he said. “That will be dictated by which neighborhoods have experienced the most deviation. It’s not subjective, it’s not biased; it’s based on real numbers.”

Some, Donato said, have questioned “why we took care of the beach and bayfront first.”

“It’s straight by the numbers; they have had the largest deviation,” he said. “We developed a ratio, sales price to assessed value.”

The larger discrepancy, he said, meant that some of these property owners were paying thousands of dollars more than fair market value.

“It’s the result of the real estate market fall-out. Naturally, it hits those properties the hardest,” he said. “When the market is not good, these properties become the least affordable.”

The last compliance plan decreased the city’s ratable base by $500 million, but caused an increase in the tax rate by 1.7 cents, despite the fact that the overall tax levy actually decreased by $213,112.

The loss in ratables, Donato said, “is why we don’t have a tax decrease.”

Over 19,000 properties were valued at $12,852,000 last year; this year that figure is $12,171,000 and the $681,000 loss has affected taxpayers.

“You are dividing that levy into a smaller base,” he said. “Any time you divide into something smaller, that number goes up.”

The reduction in ratables, he said, is delayed from the actual loss in market value that the city experienced over the past several years.

“The real estate market peaked in 2005,” he said. “The bottom started to fall out after that.”

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