In The News › Property assessments still can stray far from market prices in New Orleans

Jan 28, 2010

Source: The Times-Picayune

Filed under: Orleans Parish, Taxation & Assessments

Property assessments still can stray far from market prices in New Orleans

Thursday, January 28, 2010
By Cindy Chang
The Times-Picayune

In April 2005, the seven assessors of New Orleans were so wildly off the mark in valuing the city’s residential properties that the Louisiana Tax Commission ordered them to redo the entire job.

Even with widespread property damage from Hurricane Katrina, the assessors made such significant progress that the City Council was able to reduce the millage rate by 27 percent.

Still, property assessments in New Orleans remain far from perfect. As two district assessors and the top aide of a third vie to become the first citywide assessor, a Times-Picayune analysis of properties now on the market shows that disparities between the assessed value and the list price sometimes can be extreme. Though apparent misses exist in all three of the districts with candidates in the Feb. 6 primary, the instances are not evenly distributed.

Previous surveys have shown that the French Quarter, which experienced minimal Katrina damage, is among the most undervalued parts of the city, with many multimillion-dollar properties assessed at a fraction of what they are actually worth.

As Claude Mauberret seeks to extend his family’s century-long control of the 2nd District, which includes the Quarter, to the rest of the city, that trend continues. The 2nd District properties included in the analysis were assessed at an average of 44 percent below what their sellers would consider their market value.

By comparison, Erroll Williams, another longtime assessor who is running for the citywide position, was under market value by about 21 percent in his 3rd District, and 6th District Assessor Nancy Marshall was off by only 8 percent, the survey found.

Marshall is not seeking the new office but is campaigning on behalf of her protege, Janis Lemle. The two women were partners in the same law firm and Lemle has worked for Marshall as a deputy in the 6th District office since April.

A fourth candidate, Andrew Gressett, is a real estate broker who is not affiliated with any of the assessor’s offices. He is pledging to lower all assessments by 20 percent on the day he takes office, a move that would violate the state law requiring that properties be assessed at fair market value.
New Orleanians voted overwhelmingly in 2006 to end the antiquated seven-assessor system and along with it the district-by-district variations that contributed to inequitable assessments.

But the change to a single assessor is by no means a cure-all. The strengths and weaknesses of the new assessor, who must be able to grasp sophisticated computer modeling software as well as deal evenhandedly with the entreaties of constituents, will stretch across the city instead of being confined to one area. Some businesses and residents — especially those that have recently purchased property — still could end up paying more than their fair share of taxes.

Underassessments generally don’t mean lower taxes for property owners as a whole, because tax rates tend to be set at a level that generates the money government needs to operate. In general, homeowners with lowballed assessments save money, while their peers with more accurate ones pay extra.

“The whole point of consolidating assessors was to institute a new system, to reform the system, to ensure that everyone is paying on the same basis,” said Janet Howard, president and CEO of the Bureau of Governmental Research, a nonpartisan think tank. “One of the questions voters need to pose is, when someone claims they are going to adopt reform is, why didn’t they do it before?”

Help from software

In 2003, the district assessors spent $1.2 million on new technology called computer-assisted mass appraisal, or CAMA, which promised to base assessments on a matrix of data and end shortcuts such as sales-chasing, or simply inputting the latest sale price. But CAMA does not run itself: it needs information, including lot size, square footage and architectural style, for every property in the city, as well as the statistical models that allow it to generate valuations.

Nearly seven years after the acquisition of the CAMA system, it is still not fully operational, in part because of a lack of data. The assessors decided they needed outside help with that, and they spent $11.9 million to hire a private firm to establish a reliable database and then revalue all properties in the city.

Mauberret and Williams, who both opposed the consolidation of the assessor’s offices, now argue that their decades of experience will serve the city well. Each paints himself as a crusader for new technology, citing lack of funding as the main reason why the district offices are not yet up to speed.

Marshall, elected in 2006 as the only successful candidate on a reformist slate, acknowledges that her assessment rolls still contain some inaccuracies. The job of valuing properties has always been difficult, even pre-Katrina, in a city where a stately Victorian, a freshly painted cottage and a dilapidated shotgun double can inhabit the same block.

“Go down Audubon between St. Charles and Magazine. The cross streets are an entirely different world,” Marshall said. “That’s the hardest thing about the job for me, but I do try to assess with the market value.”
Sales price comparisons

There are reasons — storm damage, fire damage, long-term lack of maintenance — why a property might be worth much less than what it sold for in the past. But in the absence of an explanation, an assessment that is lower than a previous sales price raises red flags.
Out of a sampling of 49 commercial and residential properties currently on the market in Mauberret’s district, 15 were appraised for less than the current owner paid for them. The gap between the asking price — what the owner believes the property is now worth — and the assessment was even greater.

In a similar sampling, Williams had only five appraisals that were lower than a previous sale, with most deviating by smaller percentages than the examples in Mauberret’s district.

Marshall’s results were similar to Williams’. Out of 61 properties surveyed in the 6th District, five were appraised at a lower price than what the owner paid.

In one egregious example of apparent underassessment in the French Quarter, 627 Bourbon St. is appraised at $537,030 but is listed on the market for $3.2 million. The Multiple Listing Service, a real estate database available online, describes the 4,100-square foot property as a “historical building, well established seafood restaurant in the heart of the French Quarter, patio faces Bourbon, building is full of old French Quarter charm.” The advertisement notes that both the building and the business are included in the price.

Mauberret put the value of the property at $537,030 even though the owner, Tho H. Nguyen, bought it in 2003 for $2.45 million. The building’s tenant, Sammy’s Seafood, gave $2,000 to Mauberret’s campaign in 2006 and another $2,000 in 2008. When questioned about the assessment, Mauberret responded that 627 Bourbon was bought at an inflated price, still has Katrina damage and was assessed against comparable properties. Campaign donors are not the only French Quarter property owners to receive favorable assessments. The St. Peter House Hotel at 1005 St. Peter St. sold in 1987 for $550,000 and is currently on the market for $1.875 million, but it is only appraised at $364,830 by Mauberret’s office. According to the MLS listing, the building is a 10,790-square-foot, historically significant Creole townhouse with three courtyards and a wrap-around balcony. Furnishings for the hotel’s 29 rooms are included in the sale price.

Mauberret said the assessment is lower than the 1987 sale price because the hotel was purchased fully furnished with antiques and is now going out of business. Assessments are not supposed to include the value of furniture, which is considered “movable property.”

In conducting its survey, The Times-Picayune assumed that properties on the market were worth on average 85 percent of the asking price. But even when 15 percent is trimmed from the asking prices of 2nd District properties on the market — most in the French Quarter, not in flooded areas — Mauberret’s assessments are under the likely sales prices by an average of 44 percent.

Though Mauberret’s district includes storm-damaged Treme and parts of Mid-City and Lakeview, the most glaring instances of undervaluation in the newspaper’s survey are in the relatively unscathed French Quarter. Still, he said the main reason for any discrepancies between his assessments and fair market value is Katrina damage.

Sales of commercial properties in the Quarter can be complicated by whether they include the on-site business and furnishings, while the ups and downs of the hotel industry account for some inflated post-storm sales prices, Mauberret said. He also disputed the analysis’ reliance on list prices.

“Ninety-five percent is because the city is still reeling. Lakeview didn’t have a grocery store. It was like a war zone,” Mauberret said. “The Quarter didn’t have water damage, but it had a tremendous amount of wind and rain damage.”

3rd District

Williams’ district is by far the largest of the seven and includes flood-ravaged swaths of New Orleans East, Gentilly and the 9th Ward. His explanations for why some assessments seem off the mark mostly have to do with post-Katrina renovations.

The commercial building at 5437 Crowder Blvd. in eastern New Orleans is appraised for $59,600 but was sold in 2005 for $220,000, and is now on the market for $328,000.

Williams provided data showing that the property was appraised for $220,000 — the same amount as the sales price — in 2005. The assessment was later scaled drastically back due to Katrina damage, Williams said, noting that the owner obtained repair permits but has yet to receive a certificate of completion from the city.

“The fact that it was listed for sale at $328,000 in November 2009 indicates that it is now obviously completely repaired and this will be taken into account when we make our 2011 assessment review,” Williams wrote in an e-mail message.

Another property, a cottage at 3045 Burgundy St. in the Bywater, is owned by Douglas Qualey, who has contributed to Williams’ campaigns. Qualey purchased the house in 1979 for $35,000, but 25 years later, it was appraised at only $42,000. After Katrina, Williams reduced the valuation to $36,900, and the storm damage had not been repaired when the neighborhood underwent a review in 2008.

Williams acknowledged that the cottage, which has a fresh coat of blue-gray paint, has since been spruced up and is likely worth more than its current assessment would indicate.

“We will revalue this property for the 2011 tax year at the same time this neighborhood is rescheduled for a review,” he wrote.

Some lag time between renovations and an upward adjustment in a property’s assessment appears to be an inevitable part of the post-Katrina landscape, though assessors are supposed to keep track of the changes.

Williams disputed the accuracy of the newspaper’s analysis, which put him at an average of 21 percent below the adjusted list price. He said he tracks real estate listings, tweaking the rolls each year.

“It can’t be, if you took 85 percent off the asking price. There’s no way I should be 20 percent under. There’s no way that works.”

6th District

Lemle referred questions about the 6th District to Marshall, who was the most accurate of the three assessors included in The Times-Picayune’s analysis. Like the other assessors, Marshall attributed some deviant assessments to the difficulties of keeping up with post-Katrina renovations.

A house at 5418 South Miro St. in Broadmoor, for instance, is valued by Marshall’s office at $280,000, even though it sold for $320,000 in 1993. It is currently on the market for $795,000. Another house, at 6316 Story Street near the Tulane University athletic fields, is appraised at $100,000 but has a list price of $569,000.

Marshall’s Uptown district largely escaped Katrina’s wrath, but both the Miro and Story Street properties were in neighborhoods that flooded. Their list prices clearly indicate that they have been renovated, Marshall noted, but a lax city permitting process makes it hard for assessors to keep up with such changes.

“Typically, this is part of the problem when trying to assess in New Orleans,” Marshall wrote. “We cannot tell what is going on inside the houses, since the permit department does not issue permits for most things.”

Jan 28, 2010

Source: The Times-Picayune

Filed under: Orleans Parish, Taxation & Assessments

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