HomeMy WebLinkAboutM112009ok
1820 Jefferson Street
P.O. Box 1220
Port Townsend, WA 98368
William B. Marlow Richard A. Broders Dave Garing
MINUTES
November 20, 2009
William S. Marlow Chairman
Dave Garing Vice - Chairman
Richard A. Broders Member
Chairman William S. Marlow called the meeting to order at 9:30 a.m. in the presence of Vice-
Chairman Dave Gating and Member Richard A. Broders
HEARINGS
Jung & Mary Mok BOE: 09 -43 -R PN: 965 000 220
J & M Mok Living Trust
354 Pinecrest Drive
Port Townsend, WA 98368
Jung and Mary Mok were not present. Appraiser Maryn Gossell represented the Assessor's
office and was sworn in by Chairman Marlow. Under appeal is the land and improvement value
of property located at 354 Pinecrest Drive, Port Townsend.
Currently, the property is assessed at $381,365 ($86,500 for the land and $294,865 for the
improvements). The appellants estimate the value is $372,000 (no breakdown between land and
improvements was provided).
On the petition form the appellants wrote the following reason for appealing the valuation of
their property: "Recent appraisal value is less than the assessed value."
Appraiser Gossell explained that the property is located in Kala Point and the assessment date is
January 1, 2008. The packet of information she provided to the Board included the following
documentation: a letter dated July 13, 2009 to property owners regarding appeals of past
revaluations; a map identifying the subject property; an information sheet including a picture
taken in 1996; and a Statutory Warranty Deed dated March 20, 2007 with a sale price of
$395,000. She also provided two (2) additional Statutory Warranty Deeds of other properties
that sold in Kala Point to show what the Real Estate market is doing in that area. The assessed
Phone (360)385 -9100 Fax (360)385 -9382 jeftbocc(4)coJefferson.wa.us
Board of Equalization Minutes - November 20, 2009 Page: 2
values of both of those properties are less than the sale prices.
The appellants purchased the property in March 2007 and indicated on their appeal form that
they spent $5,000 on improvements. An independent appraisal was done in March 2009 which
is over a year after the assessment date. Appraiser Gossell stated there were not many sales in
Kala Point between 2008 and 2009 however, the sales that did occur were above the assessed
value. She feels the appellants' property is assessed at fair market value.
Hearing no further testimony, Chairman Marlow closed the hearing. The Board will make a
determination at a later date.
Melanie Reynolds & John Wrobleski BOE: 09 -92 -R PN: 988 802 311
1127 Adams Street
Port Townsend, WA 98368
Melanie Reynolds and John Wrobleski were present. Appraiser Maryn Gossell represented the
Assessor's office. After explaining the hearing process Chairman Marlow swore in both parties.
Under appeal is the land and improvement value of property located at 1127 Adams Street, Port
Townsend.
Currently, the property is assessed at $363,470 ($170,500 for the land and $192,970 for the
improvements). The appellants estimate the value is $318,770 ($170,500 for the land and
$148,270 for the improvements).
Mr. Wrobleski testified that when researching information for his appeal he found
inconsistencies between the sale prices of homes in their neighborhood and the assessed value of
those homes. There was an article in the Port Townsend Leader that indicated that the uptown
area of Port Townsend, where their property is located, would only have an increase of 10 %.
They were surprised when they received their assessment and it had increased 36 %. His
research also showed that the assessed value of some of their neighbor's property which have a
better view, more square footage and far superior homes, are only a little bit higher in value than
their assessed value.
Mr. Wrobleski discussed a summary of the sales completed after the assessment date of January
1, 2009. He would be willing to alter his estimate of value to a 26% increase instead of the 36%
increase they received.
Ms. Reynolds said they feel they are being punished for the next four years because they
purchased during the peak of the Real Estate market.
Board of Equalization Minutes - November 20, 2009 Page: 3
Appraiser Gossell briefly reviewed the packet of information she provided to the Board which
included a sales chart of the Uptown area, an appraisal worksheet and a 'report card' for the
appellants' property.
Appraiser Gossell said that the appellants based their comparable property sales on the amount
of square footage. She explained that the cost per square foot varies depending on the home and
the quality of construction. A land base rate of $150,000 was given to the five comparable
property sales provided by the appellants and was adjusted for individual characteristics. The
appellants' property was built in 1971. She reviewed the appellants' comparable property sales:
Comparable #I was split into two lots that sold separately. One lot was vacant land and sold for
$240,000 and the other lot consisted of two small Accessory Dwelling Units (ADUs) and sold
for $339,000. She pointed out that these two lots are currently assessed at $234,730 and they
sold for almost $600,000; Comparable 42 was built in 1900 and sold in September 2006 for
$379,000; Comparable #3 was built in 1888; Comparable #4 was built in 1900; and Comparable
45 was built in 1951. Age is a major consideration and a lot of weight is put on the age of the
building. Appraiser Gossell feels that a better way to look at the appellants' comparable
property sales is not the square footage but rather the age.
The appellants are requesting an 8% reduction on the improvement value and Appraiser Gossell
would agree to that reduction.
Hearing no further testimony, Chairman Marlow closed the hearing. The Board will make a
determination at a later date.
Dorothy `Lyn' Hersey BOE: 09- 100 -LO PN: 936 903 601
827 57 "' Street 09 -101 -R 936 903 607
Port Townsend, WA 98368
Lyn Hersey was present. Appraiser Charley Hough represented the Assessor's office. After
explaining the hearing process Chairman Marlow swore in both parties. Under appeal is the
value of two parcels adjacent to one another (one improved and one bare land) located at 827
57', Port Townsend. With the approval of the Assessor's representative, Ms. Hersey submitted
additional information.
Following is the current assessment and the appellant's estimate of value for the parcels under
appeal:
Board of Equalization Minutes - November 20, 2009 Page: 4
Parcel No. Current Assessed Value Appellant's Estimate of Value
936 903 601 $130,000 (land only) $110,000
936 903 607 $408,520 ($150,000 land/$258,520 imps) $350,000 ($100,000 land/$250,000 imps)
Ms. Hersey read the guidelines for appealing property assessments and reviewed her background
as a Port Townsend resident and Real Estate agent.
Parcel #936 903 607: Ms. Hersey informed the Board that her home is 1,790 square feet in size
and is situated on a 5,000 square foot lot. She emphasized that there is no water view from the
first floor. Also located on the lot is a detached, single car garage with an Accessory Dwelling
Unit (ADU) with a loft. She then reviewed the following three (3) comparable property sales:
Comparable Property `A' is located at 805 58' Street and sold for $350,000 in September
2007. The lot is 7,600 square feet in size and the house is 1,648 square feet in size. The house
is located 160' from the water and has a water view from the first and second floor. It also has a
detached, one car garage. The current assessed value is $367,370 which is above the sale price.
There are two buildings on this parcel and the Assessor's records show only one site value of
$10,000. She feels there should be two site values.
Comparable Property `B' is located at 880 57t" Street. In January 2009 this property sold for
$250,000. The lot size is 13,600 square feet and was given a 25% reduction in value for lack of
view. Ms. Hersey provided a photo taken from the first floor of this property that shows a small
water view. The assessed value is $249,905 which is close to the sale price. This lot has a land
base value of $100,000 with a 25% reduction in value for lack of view. She questions why her
property has a land base value of $130,000 and no reduction for lack of water view?
Comparable Property `C' is located at 748 55"' Street and sold for $380,000 in September
2008. There is a small water view from the second floor master bedroom only. The lot size is
10,000 square feet and the home is 1,660 square feet. There is also a detached, single car garage
and a detached, two car garage. The Assessor's records show one building site and there are
three (3) buildings on it. The assessed value of $353,490 is below the sale price.
Ms. Hersey stated that the median price of her three comparable property sales is $326,000 and
she is requesting the assessed value be reduced to $350,000.
After researching the assessed values of neighboring properties, Ms. Hersey found that even
though several of those properties have detached garages they are only being assessed for one
site. She feels her property should only be assessed for one site not two sites.
In conclusion Ms. Hersey stated that 1) she should only be assessed for one land site value; 2)
Board of Equalization Minutes - November 20, 2009 Page: 5
the value of her land should be reduced to reflect the lack of a water view from the first floor;
and 3) that her land value be reduced from $130,000 to $110,000 based on the evidence she
provided in her comparable property sales.
Appraiser Hough explained that the second site on the appellant's property is for the ADU and
the appellant's comparable property B is in error if it has an ADU and is only being assessed as
one site. He clarified that the appellant's comparable property sale `B' was given a 25%
reduction for an `almost blocked view' not a `completely blocked view' as the appellant
testified. He then reviewed the following comparable property sales that he used to assess the
appellant's property:
Comuarable Property #1
Parcel No.:
972 905 002
Location:
990 57"' Street
Date of Sale:
November 2007
Sale Price:
$398,500
Assessed Value:
$348,435
Comparable Property #2
Parcel No.:
972 904 604
Location:
1009 57"' Street
Date of Sale:
March 2008
Sale Price:
$520,000
Assessed Value:
$454,110
Comuarable Pronertv 43
Parcel No.:
936 904 502
Location:
828 57" Street
Date of Sale:
November 2008
Sale Price:
$515,000
Assessed Value:
$491.735
Market values in this area peaked in August 2008. Land values continue to increase, but the
improvement values have decreased.
When asked about the site value, Appraiser Hough explained that if a single family dwelling has
some type of water and a septic system a value of $10,000 is added to the improved property
value. If there are two dwellings with water and septic on the property then a total of $20,000 is
added. If the properties that the appellant mentioned have more than one dwelling and are only
being assessed for one site ($10,000) than he will have to check the Assessor's records and make
any necessary adjustments.
Board of Equalization Minutes - November 20, 2009 Page: 6
Vice - Chairman Gating asked Appraiser Hough to describe the appellant's property. Appraiser
Hough replied that it consists of a three (3) story home with an ADU on one lot and an adjoining
vacant lot.
Parcel #936 903 601: Ms. Hersey reviewed the following three (3) comparable property sales:
Comparable Property `A' is located at 877 55`h Street and was vacant land at the time it sold,
however a home has since been built on the property. It sold for $110,000 and has a water view
from the first, second and third floor of the home. The base land value for this lot is $120,000
which is $10,000 lower than the appellant's land base rate.
Comparable Property `B' is located at 897 55' Street and was also vacant land when it sold for
$120,000 in November 2005. This lot has a base land value of $120,000.
Comparable Property `C' sold for $125,000 in April 2006. It is currently assessed at
$120,000.
Comparable Property `D' is located at 809 57' Street. It is adjacent to the appellant's property
and sold in February 2007 at the height of the market for $140,000. Ms. Hersey stated that in all
fairness she felt she had to present this comparable property sale to the Board even though it
does not support her case.
In conclusion, Ms. Hersey reiterated that two of her comparable property sales have a water view
and the base land value is $120,000. She feels her land value should be below that amount due
to the fact that she does not have a water view from the first floor of her home.
Appraiser Hough stated that he provided a packet of information for the Board's review and
asked if the Board had any questions. He also provided the following three (3) comparable
property sales:
Comparable Property #1
Parcel No.: 936 904 105
Location:
California Addition (Block 41, Lots 7 and 8)
Date of Sale:
September 2007
Sale Price:
$186,000
Assessed Value:
$135,600
Board of Equalization Minutes - November 20, 2009 Page: 7
Comparable Property #2
Parcel No.: 972 904 003
Location: Montana Addition (Block 40, Lot 2)
Date of Sale:
September 2007
Sale Price:
$120,000
Assessed Value:
$100,000
Comparable Property
#3
Parcel No.:
972 903 707
Location:
5505 Gise Street
Date of Sale:
January 2008
Sale Price:
$166,500
Assessed Value: $287,220
Comparable Properly #4
Parcel No.: 936 904 304
Location:
California Addition (Block 43, Lot 7)
Date of Sale:
June 2008
Sale Price:
$170,000
Assessed Value:
$150,000
Vice - Chairman Garing stated that the appellant's Comparable Property `D' which sold for
$140,000 is pretty strong evidence that the assessed value is fair.
Ms. Hersey replied that one comparable property sale does not set the assessment for the whole
neighborhood. In other words, if one buyer pays an outrageous amount, does it make the other
three sales wrong?
Hearing no further testimony, Chairman Marlow closed the hearing. The Board will make a
determination at a later date.
Lisa Alpine BOE: 09 -102 -R PN: 951 903 709
702 Bay Road
Mill Valley, CA 94941
Lisa Alpine was not present. Appraiser Charley Hough represented the Assessor's office and
was sworn in by Chairman Marlow. Under appeal is the land and improvement value of
property located at 5034 Bell Street, Port Townsend.
Currently, the property is assessed at $352,225 ($100,000 for the land and $252,225 for the
Board of Equalization Minutes - November 20, 2009 Page: 8
improvements). The appellant estimates the value is $275,238 ($47,850 for the land and
$227,388 for the improvements).
On the petition form the appellant wrote the following reason for appealing the valuation of her
property: "Since I had to move to take care of my mom, I've had the house on the market on and
off for 3 years. It has not sold. The only offers that came in were $275K. Agents said that price
is realistic and even a bit high. 3 bedroom /2 bath homes are currently $239K -$314K but they
aren't selling either. The one on Bell is $339 and not selling. Too high. I take care of my 87
year old mom and have had to cut back on my work due to her medical needs. I can't afford a
tax increase especially when the value is LOWER than what I paid for the house, not higher."
Appraiser Hough provided the following three (3) comparable property sales for the Board's
review that support the current assessed value:
Comparable Property #1
Parcel No.:
951 903 126
Location:
5091 Bell Street
Date of Sale:
September 2008
Sale Price:
$388,000
Assessed Value:
$363,290
Comparable Property #2
Parcel No.:
951 903 605
Location:
4720 Bell Street
Date of Sale:
July 2007
Sale Price:
$130,000
Assessed Value: $100,000
Comparable Property #3
Parcel No.: 951 902 907
Location: Fowler's Park Addition Blk 29 Lots 7 and 8
Date of Sale: November 2007
Sale Price: $1225500
Assessed Value: $90,000
The home is currently assessed at 10% more than the appellant paid for it in April 2005. The
assessment date for this property is January 1, 2009.
Hearing no further testimony, Chairman Marlow closed the hearing. The Board will make a
determination at a later date.
Board of Equalization Minutes - November 20, 2009 Page: 9
Klaus Wickl BOE: 09 -103 -R PN: 933 301 605
c/o Nikki Hopkins
6644 Cape George Road
Port Townsend, WA 98368
Klaus Wickl was not present. Appraiser Charley Hough represented the Assessor's office and
was sworn in by Chairman Marlow. Under appeal is the land and improvement value of
property located at 25147' Street, Port Townsend.
Currently, the property is assessed at $354,550 ($85,000 for the land and $269,550 for the
improvements). The appellant estimates the value is $260,000 ($40,000 for the land and
$220,000 for the improvements).
On the petition form the appellant wrote the following reason for appealing the valuation of his
property: "The assessment of 2005 resulted in a tax payment in 2006 of $1,406 and that included
an additional 1 '/2 lots (now 4545 McNeil) after I sold 4567 McNeil its tax payment for 2007
went up to $2,341 and still included 1 '/2 lots (now 4545 McNeil. 2009 - $2,322, 2009
$2,299.86.) So there must have been a raise of assessment in 2006 and I remember it. Which
should not have been done if the cycle is 4 years. With property values down around 20% the
value of my property (which does not include the 4545 McNeil anymore) should be maximum
$260,000."
Appraiser Hough provided the following four (4) comparable property sales for the Board's
review that supports the current assessed value:
Comparable Property 41
Parcel No.: 933 300 301
Location:
Date of Sale:
Sale Price:
Assessed Value
4755 Haines Street
May 2006
$225,800
$230,395
Comparable Property #2
Parcel No.: 933 301 906
Location:
Date of Sale:
Sale Price:
Assessed Value
4316 Haines Street
June 2007
$200,000
$179,715
Board of Equalization Minutes - November 20, 2009 Page: 10
Comparable Property #3
Parcel No.: 933 301 604
Location:
Date of Sale:
Sale Price:
Assessed Value:
4545 McNeil Street
July 2007
$270,000
$247,045
Comparable Property #4
Parcel No.: 933 301 904
Location:
Date of Sale:
Sale Price:
Assessed Value:
4340 Haines Street
May 2008
$227,000
$208,575
When asked for more information on comparable property #3, Appraiser Hough replied that the
appellant's property is a two story home with an attached Accessory Dwelling Unit (ADU).
Comparable property 43 is located adjacent to the appellant's property and is a two story home
that sold for $270,000 in July 2007. The current assessed value is $247,045.
Hearing no further testimony, Chairman Marlow closed the hearing. The Board will make a_
determination at a later date.
Eisenhardt Living Trust 1995 BOE: 09 -77 -R PN: 988 900 404
Paul & Elizabeth Eisenhardt, Trustees
1085 Greenwich Street #3
San Francisco, CA 94133
Paul Eisenhardt was present. Appraiser Robert Shold represented the Assessor's office. After
explaining the hearing process Chairman Marlow swore in both parties. Under appeal is the land
and improvement value of property located at 940 Lawrence Street ( 4404), Port Townsend.
Currently, the property is assessed at $526,800 ($220,000 for the land and $306,800 for the
improvements). The appellants estimate the value is $320,550 ($220,000 for the land and
$100,550 for the improvements).
Mr. Eisenhardt informed the Board that he purchased a condominium unit in the Aldrich's
Market Building in April 2008. At the time of purchase he was under the impression that the
building was of sound construction and passed all City/County building codes, In the summer of
2008 structural issues were discovered. This information was unknown to the Assessor's office
and not reflected in the assessed value.
Board of Equalization Minutes - November 20, 2009 Page: 11
Mr. Eisenhardt stated that some of the structural issues include damage to the primary support
beams that have lead to the closure of the main deck due to the potential of a major collapse; and
the railing systems on all outdoor balconies are structurally unsafe. A summary of the damage
was provided in the appellant's information for the Board's review.
The estimate to bring Aldrich's Market Building up to code is approximately $2.5 million. Mr.
Eisenhardt said that if that amount was pro -rated for each owner, the portion of his unit ( #404)
would be 8% ($200,000). At this time there is no plan to fix the structure because no one wants
to take responsibility. A lawsuit has been filed and is scheduled to be heard in April 2011.
Due to this new information, Mr. Eisenhardt is requesting the Assessor's office perform an
inspection and reassess the Aldrich's Market Building.
Appraiser Shold explained that there were some comparable property sales that occurred in 2008
that warranted increasing the value of the condo units in the Aldrich's Market Building.
However, when he performed an inspection of the property the first thing he noticed were
temporary support beams holding up the ceiling of the building. Not knowing the extent of the
damage or the cost to cure, it was decided that the value remain the same for each unit. He is
willing to work with the Board to equalize the businesses and condo units located in the
Aldrich's Market building and has no objection to the appellants' request.
Mr. Eisenhardt said he has hired Construction Defects Corporation out of Seattle and was told
that this building will always have ongoing problems. He suggested that the value be reduced to
$200,000 which is their portion to fix the damage to the building.
When asked if that was a fair solution, Appraiser Shold responded that at first he thought the
cost to cure would be a fair way to assess the property. However, with the amount of time that
this issue will be tied up in court and no repairs being made he thinks the property would need an
additional reduction.
Member Broders stated that the value would be what a willing buyer would pay for the unit,
even if it is a minimal amount. Appraiser Shold agreed, however the likelihood of a unit selling
until the lawsuit is settled or the damage is repaired is not realistic.
When asked how many condo units are in the building, Mr. Eisenhardt replied that the building
is a four (4) story complex. Aldrich's Market is located on the first floor; the second floor
consists of a coffee shop, a large deck, an indoor seating area and a First Federal banking
location. There are four (4) condo units on the third floor and four (4) condo units on the fourth
floor. All the units are affected by the structural damage of the building. One other condo
owner has filed an appeal with the Board of Equalization citing the same issues.
Board of Equalization Minutes - November 20, 2009 Page: 12
Chairman Marlow questioned if the commercial space and other residential units will need to be
equalized? Appraiser Shold replied yes. In order to equalize, a request to reconvene would need
to be approved by the Washington State Department of Revenue.
Due to the potential of collapse, Mr. Eisenhardt chooses not to occupy the condo unit, instead he
and his wife rent another condo in Port Townsend.
Hearing no further testimony, Chairman Marlow closed the hearing. The Board will make a
determination at a later date.
Lee & Laila Corbin Trust BOE: 09 -72 -R PN: 988 900 304
Lee & Laila Corbin, Trustees
940 Lawrence Street #304
Port Townsend, WA 98368
Lee and Laila Corbin were not present. Appraiser Robert Shold represented the Assessor's
office and was sworn in by Chairman Marlow. Under appeal is the land and improvement value
of property located at 940 Lawrence Street ( 4304), Port Townsend.
Currently, the property is assessed at $496,800 ($190,000 for the land and $306,800 for the
improvements). The appellants estimate the value is $371,400 ($190,000 for the land and
$181,400 for the improvements).
On the petition form the appellants wrote the following reason for appealing the valuation of
their property: "The residential owners of the Aldrich's Market Condominiums are in litigation
regarding extensive construction defects involving both structural issues and building envelope
deficiencies. Attached is the summary of a 19 page detailed estimate of costs to cure these
defects at a total of $2,591,105. We have applied our percentage of ownership to calculate our
decreased value. If our unit is even marketable, any prospective buyer would have to be
provided with this defect information, thus dramatically reducing market value until repairs are
completed."
Appraiser Shold explained that this appeal is the same as the previous appeal (BOE 909 -77 -R)
located in the Aldrich's Market Building. The appellants purchased unit #304 in October 2006
for $555,000 and using that sale the assessed value would have been close to that amount.
However, due to the structural defects of the building he is unsure of what the fair market value
is for this unit.
Board of Equalization Minutes - November 20, 2009 Page: 13
Member Broders asked what is the total assessed value of the entire building? Appraiser Shold
replied that the entire Aldrich's Market building (10 units) is assessed at $5,344,000 including
the commercial space.
Hearing no further testimony, Chairman Marlow closed the hearing. The Board will make a
determination at a later date.
Nor'West Village - PT LLC BOE: 09 -29 -R PN: 948 314 201
c/o Norman Bruns
11912"' Avenue, Floor 18
Seattle, WA 98101 -3438
Nor' West Village Representative Norman Bruns was not present. Appraiser Robert Shold
represented the Assessor's office and was sworn in by Chairman Marlow. Under appeal is the
land and improvement value of property located at 1921 Sherman Street, Port Townsend.
Currently, the property is assessed at $824,080 ($540,100 for the land and $283,980 for the
improvements). The appellant estimates the value is $308,050 ($225,000 for the land and
$83,050 for the improvements).
On the petition form the appellant wrote the following reason for appealing the valuation of his
property: "The Assessor's valuation does not recognize the impact of the government restrictions
upon the use and transfer of the property and its ability to generate net operating income.
This is a low- income housing project subject to government restrictions on use. The Washington
Court of Appeals has ruled that these restrictions must be considered in the valuation process,
regardless of appraisal methodology utilized. Cascade Court Limited Partnership v. Noble, 105
Wn App 563 (2001). As compared to conventional market apartments and other types of income
properties, low income housing projects have significantly more complex operating
characteristics and limitations on ownership control, which has resulted in a lack of open market
transactions for affordable housing projects that reflect the value as restricted that can be utilized
in a sales comparison approach. A representative from the Department of Revenue has testified
in valuation hearings that low income projects are complex properties; under RCW 84.40.030
this directs an appraiser to instead utilize the cost and income approaches.
Furthermore, sales that could be used to value affordable housing projects are precluded from
being used in a market approach RCW 84.40.030, as they contemplate a different highest and
best use. The Washington Legislature recently codified this by making explicit what was already
Board of Equalization Minutes - November 20, 2009 Page: 14
implicit in the preexisting statutory language on true and fair value: `An assessment may not be
determined by a method that assumes a land usage or highest and best use not permitted, for that
property being appraised, under existing zoning or land use planning ordinances or statutes or
other government restrictions.' RCW 84.40.030(1); see also H131450. This prohibition applies
not only to the use of sales of conventional unrestricted projects, but to the use of preservation -
type sales of affordable housing projects where the transaction reflects a hypothetical value
based upon a different and hypothetical highest and best use.
For example, Section 515 Rural Development projects are governed by federal preservation law
pursuant to 12 USC §4101, et seq., a program established by the federal government to ensure
that existing affordable housing projects stay rent restricted and continue to serve the low
income populous. Transfers made pursuant to this preservation process are not open market
transactions. The process is purely administrative. The whole transfer process, including the
preservation transfer price, must be approved by the U.S. Department of Agriculture. An
appraisal of the property being transferred is necessary to facilitate the transaction. What is
important to recognize is that the valuation premise for the appraisal assumes a different highest
and best use of the subject property. In other words, the value premise is a hypothetical one
which assumes that the property is not rent restricted nor subject to the higher expenses due to
the government restrictions. It is valued as if conventional and able to charge market rents. This
valuation premise is mandated by federal law. See 12 USC §4103. It is fundamental to accepted
appraisal methodology that when the sales comparison approach is utilized, you must compare
properties with the same highest and best use. Therefore, if the County Assessor relies upon
these preservation transactions as a basis to support its valuation of the subject property, that
reliance is inappropriate and in conflict with RCW 84.40.030.
Conventional apartments have a different highest and best use than rent restricted properties.
Use of conventional market sales would violate RCW 84.40.030 even if the utilization of
conventional apartment sales was appropriate, in order to meet the requirements of true and fair
value significant adjustments would need to be made that would render the results unreliable.
Lastly, sales of affordable housing projects that are not facilitated through the preservation
process but do involve other non - assessable property, such as tax credits, also can not be used in
a market approach. There, you have not only government restrictions that impact value but the
price involves other consideration that does not constitute real property under RCW 84.40.030.
Significant adjustments would need to be made that would again render the results unreliable.
Consistent with Washington law and accepted appraisal practice, if there are no open market
sales with the same highest and best use as the property being appraised, the focus then shifts to
the cost and/or income approach.
Board of Equalization Minutes - November 20, 2009 Page: 15
If the cost approach is utilized, adjustments must be made for functional and economic
obsolescence resulting from the nature of the government restrictions. It is also important to
note that the State Board has ruled that the adjustments for functional and economic
obsolescence must be property specific. Therefore, an arbitrary 20% Blaine Manor adjustment
is not appropriate. One way to specifically quantify economic obsolescence would be the
percentage difference between the net operating income of the comparables and the subject
property being appraised.
In an income approach, the restricted contract rents must be utilized. The rental income shown
on the attached operating statement reflects the maximum rents the project can charge as of the
assessment date pursuant to its governmental regulatory agreements. Historical stabilized
expenses best reflect the increased cost resulting from the government restrictions. Therefore, to
arrive at a true and fair value of the property under the income approach, both restricted rents
and historical stabilized expenses of the property being appraised should be utilized. The
capitalization rate should be at least at the upper end of the range of conventional multifamily
capitalization rates to account for the loss of control and increased risk. The loss of control
relates to differences in liquidity and lack of appreciation, among other factors. Tax credits and
interest subsidies, if any, must be ignored as intangibles or financing provisions that are not part
of the real property valuation under Washington law.
For additional guidance, please see Property Tax Advisory 15.0.2008 and the corresponding
Low - Income Housing Valuation Guide issued recently by the Department of Revenue."
Appraiser Shold explained that Nor'West Village is a subsidized housing unit and the
assessment date for the property is January 1, 2009. The appellant filed an appeal with the
Board of Equalization prior to the Change of Value Notice even being sent out.
Over the past several years there have been quiet a few appeals on subsidized housing units in
Jefferson County which were appealed to the State Board of Tax Appeals. Some of these have
ended up being appealed to the Thurston County Superior Court. In 2008 Jefferson County
settled with the appellants and agreed upon a stipulated value. Late in 2008 the Washington
State Department of Revenue released guidelines on how to value these types of properties.
Two similar subsidized housing units sold in 2008. One of them sold for more than the stipulated
value that Jefferson County agreed to and the other was slightly less. In light of this information,
the assessed value of the subject property remained the same as the 2008 stipulation.
Hearing no further testimony, Chairman Marlow closed the hearing. The Board will make a
determination at a later date.
Board of Equalization Minutes - November 20, 2009 Page: 16
Bishop Park Port Townsend, LLC BOE: 09 -30 -R PN: 948 320 501
c/o Norman Bruns
11912" Avenue, Floor 18
Seattle, WA 98101 -3438
Bishop Park Representative Norman Bruns was not present. Appraiser Robert Shold represented
the Assessor's office and was sworn in by Chairman Marlow. Under appeal is the land and
improvement value of property located at 819 Hancock Street, Port Townsend.
Currently, the property is assessed at $831,000 ($320,100 for the land and $510,900 for the
improvements). The appellant estimates the value is $450,000 ($300,000 for the land and
$150,000 for the improvements).
On the petition form the appellant wrote the following reason for appealing the valuation of his
property: "The Assessor's valuation does not recognize the impact of the government restrictions
upon the use and transfer of the property and its ability to generate net operating income.
This is a low- income housing project subject to government restrictions on use. The Washington
Court of Appeals has ruled that these restrictions must be considered in the valuation process,
regardless of appraisal methodology utilized. Cascade Court Limited Partnership v. Noble, 105
Wn App 563 (2001). As compared to conventional market apartments and other types of income
properties, low income housing projects have significantly more complex operating
characteristics and limitations on ownership control, which has resulted in a lack of open market
transactions for affordable housing projects that reflect the value as restricted that can be utilized
in a sales comparison approach. A representative from the Department of Revenue has testified
in valuation hearings that low income projects are complex properties; under RCW 84.40.030
this directs an appraiser to instead utilize the cost and income approaches.
Furthermore, sales that could be used to value affordable housing projects are precluded from
being used in a market approach RCW 84.40.030, as they contemplate a different highest and
best use. The Washington Legislature recently codified this by making explicit what was already
implicit in the preexisting statutory language on true and fair value: `An assessment may not be
determined by a method that assumes a land usage or highest and best use not permitted, for that
property being appraised, under existing zoning or land use planning ordinances or statutes or
other government restrictions.' RCW 84.40.030(1); see also HB1450. This prohibition applies
not only to the use of sales of conventional unrestricted projects, but to the use of preservation -
type sales of affordable housing projects where the transaction reflects a hypothetical value
based upon a different and hypothetical highest and best use.
Board of Equalization Minutes - November 20, 2009 Page: 17
For example, Section 515 Rural Development projects are governed by federal preservation law
pursuant to 12 USC §4101, et seq., a program established by the federal government to ensure
that existing affordable housing projects stay rent restricted and continue to serve the low
income populous. Transfers made pursuant to this preservation process are not open market
transactions. The process is purely administrative. The whole transfer process, including the
preservation transfer price, must be approved by the U.S. Department of Agriculture. An
appraisal of the property being transferred is necessary to facilitate the transaction. What is
important to recognize is that the valuation premise for the appraisal assumes a different highest
and best use of the subject property. In other words, the value premise is a hypothetical one
which assumes that the property is not rent restricted nor subject to the higher expenses due to
the government restrictions. It is valued as if conventional and able to charge market rents. This
valuation premise is mandated by federal law. See 12 USC §4103. It is fundamental to accepted
appraisal methodology that when the sales comparison approach is utilized, you must compare
properties with the same highest and best use. Therefore, if the County Assessor relies upon
these preservation transactions as a basis to support its valuation of the subject property, that
reliance is inappropriate and in conflict with RCW 84.40.030.
Conventional apartments have a different highest and best use than rent restricted properties.
Use of conventional market sales would violate RCW 84.40.030 even if the utilization of
conventional apartment sales was appropriate, in order to meet the requirements of true and fair
value significant adjustments would need to be made that would render the results unreliable.
Lastly, sales of affordable housing projects that are not facilitated through the preservation
process but do involve other non - assessable property, such as tax credits, also can not be used in
a market approach. There, you have not only government restrictions that impact value but the
price involves other consideration that does not constitute real property under RCW 84.40.030.
Significant adjustments would need to be made that would again render the results unreliable.
Consistent with Washington law and accepted appraisal practice, if there are no open market
sales with the same highest and best use as the property being appraised, the focus then shifts to
the cost and/or income approach.
If the cost approach is utilized, adjustments must be made for functional and economic
obsolescence resulting from the nature of the government restrictions. It is also important to
note that the State Board has ruled that the adjustments for functional and economic
obsolescence must be property specific. Therefore, an arbitrary 20% Blaine Manor adjustment
is not appropriate. One way to specifically quantify economic obsolescence would be the
percentage difference between the net operating income of the comparables and the subject
property being appraised.
Board of Equalization Minutes - November 20, 2009 Page: 18
In an income approach, the restricted contract rents must be utilized. The rental income shown
on the attached operating statement reflects the maximum rents the project can charge as of the
assessment date pursuant to its governmental regulatory agreements. Historical stabilized
expenses best reflect the increased cost resulting from the government restrictions. Therefore, to
arrive at a true and fair value of the property under the income approach, both restricted rents
and historical stabilized expenses of the property being appraised should be utilized. The
capitalization rate should be at least at the upper end of the range of conventional multifamily
capitalization rates to account for the loss of control and increased risk. The loss of control
relates to differences in liquidity and lack of appreciation, among other factors. Tax credits and
interest subsidies, if any, must be ignored as intangibles or financing provisions that are not part
of the real property valuation under Washington law.
For additional guidance, please see Property Tax Advisory 15.0.2008 and the corresponding
Low- Income Housing Valuation Guide issued recently by the Department of Revenue."
Appraiser Shold explained that the Bishop Park Apartments are a subsidized housing facility
located in Port Townsend. The assessment date for the appellant's property is January 1, 2009.
The Assessor's office kept the assessed value the same as the 2008 stipulated value determined
from the Thurston County Superior Court case. All of the information is the same as the
previous hearing (Nor' West Village BOE 09- 29 -R).
Hearing no further testimony, Chairman Marlow closed the hearing. The Board will make a
determination at a later date.
Vice - Chairman Garing moved to adjourn the meeting. Member Broders seconded the motion
which carried by a unanimous vote.
JEFFERSON COUNTY
ATTEST: BOARD OF EQUALIZATION
eslie R. Locke, Clerk of the Board William S. Marlow, Chairman
Dave Garine. Vi e-Ghai an
Richard