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HomeMy WebLinkAboutM040798 a\ IQU4th, ~~~ g~~~ ~ ~ (~ ><) ~ \ ",r: , James A. DeLeo, District 1 William S. Marlow. District 2 Richard A. Broders, District 3 ~_~O~/ ~)/ JEFFERSON COUNTY BOARD OF EQUALIZATION MINUTES April 7, 1998 1820 Jefferson Street PO Box 1220 Port Townsend, WA 98368 Richard A. Broders William S. Marlow James A. DeLeo Chairman Vice-Chairman Member Chairman Richard A. Broders called the meeting to order at 10:00 a.m. in the presence of Vice-Chairman William S. Marlow and Member James A. DeLeo. APPROVAL OF MINUTES Vice-Chairman Marlow moved to approve the minutes of March 10, 1998. Member DeLeo seconded the motion which carried by a unanimous vote. 1997 RECONVENING Ronald Y. Pak c/o Mark Huth, Attorney at Law P.O. Box 303 Port Townsend, WA 98368 BOE: 1997 Reconvening PN: 957301 702 957301 801 957301803 957301 901 957301902 Mr. Pak and his attorney Mark Huth were present. Bob Shold represented the Assessor's office. After explaining the hearing process, Chairman Broders swore them in. The property under appeal is zoned commercial and consists of some bare land parcels and some parcels with improvements. Mr. Huth presented a map and stated that the bare land is known as Indian Point and the parcels which are improved contain the Tides Inn Motel. Mr. Pak purchased the property from Service Activities Corporation (the Pickett Family). The property was on the market for approximately 5 years, at $2.3 million dollars for 3 of those years. After being on the market for so long, Mr. Pak was able to negotiate the purchase price of$1.6 Million for the Tides Inn Motel property and $500,000 for the Indian Point property. The assessed value must reflect fair market value, based on an "arms length" transaction between a willing buyer and a willing seller. This was an "arms length" transaction and his client will testify to that fact. They believe the purchase price more accurately reflects the value than the current assessment of$l,845,390 for the Tides Inn Motel property and $825,000 for the Indian Point property. Phone (360)385-9100 / 1-800-831-2678 Fax (360)385-9382 jeffbocC@Co.jefferson.wa.us BOARD OF EQUALIZATION MINUTES - APRIL 7,1998 Page 2 Mr. Huth asked Mr. Pak the following questions: Mr. Huth: Mr. Pak: Mr. Huth: Mr. Pak: Mr. Huth: Mr. Pak: Mr. Huth: Mr. Pak: Mr. Huth: Mr. Pak: Mr. Huth: Mr. Pak: Mr. Huth: Mr. Pak: Mr. Huth: Mr. Pak: Mr. Huth: Mr. Pak: Mr. Huth: Mr. Pak: Mr. Huth: Mr. Pak: Mr. Huth: Mr. Pak: Mr. Huth: Mr. Pak: State your name for the record. Ronald Y. Pak You purchased the Tides Inn Motel and the property at Indian Point in August of last year (1997)? That is true. Who represented you for that purchase? Terry McHugh, was my buying agent, and Shirley Rudolph was the seller's agent. How did you arrive at the purchase price for the properties? Well, I had been looking for property for ahnost 1 year, and I met with many Real Estate experts and bank people. At the time I knew very much about the value of the property, though I knew I was paying a little higher price, I liked the property and that is why I paid $2.1 million for it. I made that offer based upon the future use and appreciation of the waterfront property. In the long run, that property may be more valuable than it is now, so I paid more based on that potential value, against the advice of individuals in the Real Estate and motel industry. Indian Point at this time, is vacant property? Yes, actually it was a very risky investment, because I knew that there was at one time a fuel tank on the property and the soil could be contaminated. Ifthere is any contamination, I could have to spend $500,000 to clean up the property. How about the potential income generation from the Tides Inn Motel? The Tides Inn has been losing money every year and the building itself is more than 45 years old and in really bad shape. As far as income generation is concerned, the present state of the motel doesn't justify my investment. Do you have a project proposal before the City, to remodel the Tides Inn? Yes. Is that part of the reason why you were willing to pay the $1.6 million dollars for the Tides Inn? Right. That project proposal was part of the package of the purchase, is that correct? Yes, without any potential of project development, I would not buy. When I purchased the property, it was solely based upon the possibility of adding the new 21 units. I knew at the time and was assured by the sellers and everyone concerned, that they got City approval and would not have any problem in getting the permit for the new unit. You are in that process now with the City, you have not received the final approval to begin construction for the renovation? No. In that renovation, you are going to add 21 units, is that right? Yes, the original plan of the previous owner was 24 units, but I sized down to 21 units, because our customers repeatedly ask them to keep the "Officer and Gentlemen" units. So we decided to keep those 3 units and reduce 3 units from the new plan. So the actual value, if you were not able to complete that renovation, would be less than the $1.6 million dollars? Without it I would not even buy at 1 million. Have you also, prior to beginning the renovation, upgraded the facilities even after you purchased it? After I purchased, yes, we did an upgrade. BOARD OF EQUALIZATION MINUTES - APRIL 7, 1998 Mr. Huth: Mr. Pak: Mr. Huth: Mr. Pak: Mr. Huth: Mr. Pak: Mr. Huth: Mr. Pak: Mr. Huth: Mr. Pak: Page 3 Some cosmetic? It is purely cosmetic, like changing the furniture, repainting, fixing plumbing and gas pipes, residing and installing new windows and insulation. All that was necessary because of the age of the building? Yes, it was absolutely necessary, because at one point, part of the building was about to collapse. When you said that prior to purchasing the property you contacted individuals in the motel business, did you have them give you an opinion on what the current income producing value of the property was? Yes, according to the people in the industry, when this type of property is put on the market, the method of assessment is based on 3 to 3.5 times the gross income of the motel. This is very common practice. What was the yearly gross income prior to your purchase? Awful, approaching $400,000 So, the 1.6 million was approximately 3.5 times that? Yes. Mr. Huth asked ifthe Board had any questions or ifMr. Pak would like to add any other comments. Mr. Pak added that he is here to get a fair assessment of his commercial property. He has no intention of paying less than what is fair, he just wants the value to reflect what he paid. Mr. Shold stated that the property was revalued in 1997 and the assessment was not changed from the 1993 valuation. It appears that the sale of the Tides Inn Motel and the Indian Point property were concurrent, even though they were recorded as two separate transactions. The assessed value is approximately $600,000 higher than the purchase price, and considering the sale was an "arms length" transaction, he feels it is reasonable to figure out an equitable method to lower the value to reflect the purchase price. He continued by stating that this property is unique. The Indian Point property is the largest undeveloped piece of waterfront in that area and it is questionable whether or not the City will allow the development of that property. As for the Tides Inn property, he explained that for convenience sake, the value of the motel is recorded on one parcel even though it is built over two parcels. He stated that he would like to work with the Board on distributing the values between the parcels, once the Board has made a value determination. Mr. Shold asked ifthere have been any studies conducted on the potential contamination of the Indian Point property? Mr. Huth answered that there has been a preliminary study conducted. Mr. Shold stated that in past experiences with contaminated property, it has been learned that the cost for cleaning up property can be very high depending on the level of contamination and what clean up procedure is needed. Mr. Huth stated that the purpose of this appeal is to get the value reduced based on the purchase of the property. However, if there are development problems with the Indian Point property in the future, than the valuation may need to be reconsidered at that time. BOARD OF EQUALIZATION MINUTES - APRIL 7, 1998 Page 4 Mr. Shold stated that according to the testimony, Mr. Pak had knowledge of the potential contamination at the time of the purchase, which was a factor in the final purchase price. Mr. Pak replied that was correct and stated that approximately 50% of the Tides Inn property is in the water, making it unusable. In summary, Mr. Shold stated that the Assessor's office would like to adjust the Assessed value to reflect the purchase price. Discussion ensued regarding methods of distributing valuations. Chairman Broders stated that it appears that Mr. Pak feels there is some speculative value which may exceed the market value. Mr. Huth stated that is correct. Knowing that it was available to be renovated, Mr. Pak paid above the current income value. The potential income value is a little higher than the current income value. Chairman Broders questioned whether speculative value is market value. He asked if the appellants considered the $2.1 million purchase price, fair market value? Mr. Huth stated no. IfMr. Pak is unable to develop the Indian Point property, than the Tides Inn property will not have been worth the $2.1 million purchase price alone. Mr. Pak is optimistic about being able to do some development on the Indian Point property to fulfill its potential value. After hearing the testimony of both parties Chairman Broders asked the Assessor's office to provide some information, or a recommendation, on an equitable method of distributing the figures between the parcels. The Board concurred to conduct an inspection of the property and make a determination at a later date. Mr. Shold noted that the property will be assessed for new construction this year and advised the appellants that there may be some added value at that time. HEARING Laura Clement 232 Sherman Street Port Townsend, W A 98368 BOE: 97.63.E PN: 948329102 Ms. Clement and David Beck were present. The Assessor Jack Westerman was also present. After explaining the hearing process, Chairman Broders swore them in. This appeal is based on the denial of a Senior Citizen and Disabled Persons Exemption by the Assessor's office. Ms. Clement stated that her main reason for appealing is that she was given the exemption while she was attending school, prior to her moving from the area. Now that she has moved back to the area she is being denied the exemption on the basis that the Assessor's office believes she is able to pursue an occupation due to her ability to attend school. She has been going to school for the past 8 years. Initially, her intention was to increase her education to enable her to work part-time, however, she has had more complications with her illness. Now she is continuing her education with hopes that she will get better, or if she does not, for her own personal enrichment. Recently she had a Social Security Disability Review which resulted in a determination that she is still disabled. She feels that the Social Security Disability Board is more qualified than anyone to make that determination. Student disabled services has helped her with schooling and she has found an education program which is very flexible, by allowing her more time to BOARD OF EQUALIZATION MINUTES - APRIL 7,1998 Page 5 complete her work. She is involved in another program which is not as demanding as a traditional academic program. She currently spends a few hours a day reading. This quarter she was unable to complete her work. Ms. Clement's friend David Beck stated that he has known Laura for approximately 7 years and he has helped her periodically with transportation to and from school. He is closely acquainted with the nature of the illness that she has, which is a systemic form of arthritis that was diagnosed when she was 18 years old, although she has shown symptoms since she was 12 years old. This form of arthritis originates in the spine. In Laura's case, the lower part of her spine has been fused and the arthritis moves throughout her body and at different times it flares up causing problems with her hips and knees. This type of arthritis called "Ankylosing Spondylitis" is usually more common in men which made it all that more difficult to diagnose for Laura. She has a life-long diagnosis of this systemic arthritis. At times he has observed her innnobilized for periods of months. She finds some relief with the use ofa hot tub, however, she is unable to stand or sit for longer than Y:, an hour without locking up in that position. While attending school she has permission from her professors to get up and walk around when needed. Based on his observation, he does not foresee any type of work that she would be able to perform that requires either sitting or standing. He does not believe there is a question of whether or not her disability is legitimate, as she has a doctor's report documenting her condition. Much of her schooling consists of independent studies as she is unable to attend school. Mr. Beck stated that Laura is also on medication. Ms. Clement stated that she was not prepared to discuss her illness, as she felt the reason for the denial was based on the fact that she is attending school. She explained that she has a systemic form of arthritis, which causes her to have low grade fevers, fatigue, and overall aching in her joints. Approximately seven years ago she was bed ridden for several months and required the use of a wheel chair for almost a year. During this severe flare up she experienced rheumatic arthritis which affected her knees, ankles, and feet. As a result she has had hormonal imbalances and digestive problems. It takes a great deal of her time just to function normally and continue with life. Even though her illness progresses and she is unable to do certain things that she was able to do in the past, she tries to maintain her health and keep an optimistic attitude. Jack Westerman presented the history of the taxation of this property. The Assessor's office is responsible for the administration of the Senior CitizenlDisabled Exemption program. Individuals applying for the exemption must provide proof of income and disabled persons must also provide proof of their disability. The Assessor's office takes their responsibility seriously. The best way to maintain the program is to insure that it is not being abused. He is not making any assumptions about Ms. Clement's intentions, but in general, the best way to assure that the program benefits the individuals which quality, is to make sure that it is not abused. In this unique situation, the Assessor's office contacted the State Department of Revenue, Property Tax Division to fmd out if any other County had dealt with a similar case. The State Department of Revenue recommended that a hearing be held to decide the matter. Mr. Westerman explained that initially Ms. Clement's parents owned the property and were enrolled in the Senior Citizen/Disabled Exemption program. In 1993 the property was transferred to Ms. Clement who was Jiving in the residence at the time and attending school part-time. She applied for the exemption due to her disability and was approved and enrolled in the program for 1993 and 1994. When Ms. Clement moved to Bellingham during 1995 through 1997 she was removed from the program, since you must reside on the property in order to receive the exemption. Ms. Clement moved back to the area in the spring of 1997 and is once again living on the property and requesting the exemption for 1997. He read the following definition of "physical disability": "The condition of being disabled, resulting in the BOARD OF EQUALIZATION MINUTES - APRIL 7,1998 Page 6 inability to pursue an occupation because of physical or mental impairment. A doctor's signed statement constitutes proof of such disability and shall be required before the exemption may be granted. This statement shall indicate the expected period or term of the disability." In this case, Ms. Clement is hoping to feel better as time goes on, and maybe at some point in the future she will be able to work full time. Nobody wants that more than Ms. Clement, and he is sure that she would gladly give up the exemption to feel good all time. The Assessor's office does not question that, and they are not trying to make her life any more difficult than it is now, they just felt that there needed to be a hearing on this unique situation. He also presented information which was downloaded from the Internet and may have been provided by Ms. Clement, on "Ankylosing Spondylitis" which is the type of arthritis Ms. Clement is dealing with. In this information it states that... "Almost all people with ankylosing spondylitis can expect to lead normal and productive lives. " Ms. Clement stated that she did not provide that information to the Assessor's office. Mr. Westerman stated that the information came from the Department of Orthopaedics, University of Washington in Seattle. He clarified that while the information makes the above statement, not everybody will lead normal and productive lives. However, according to this information, it appears that there are differing levels of disability that this disease can cause. At this point in time, Ms. Clement may not be in the majority. The Assessor's office does not feel qualified to make the decision of whether or not Ms. Clement should be allowed the disability exemption. Ms. Clement added that it is true that most people with "Ankylosing Spondylitis" only have it mildly. However, in her case, she has x-rays showing where it has moved up her spine and into her neck. This progression takes approximately 20 years. It has fused her lower spine as well as the middle part of her spine. She does not have it mildly, she has a severe case. Mr. Westerman added that just like all valuations, the situations of the individuals enrolled in the program are reviewed every four (4) years. If the Board has a difficult time in determining whether or not to accept Ms. Clement into the program, not knowing what her situation may be in the future, he advised them that her situation will be reviewed periodically, and if Ms. Clement moves, the exemption would be removed. Vice-Chairman Marlow asked if the issue is her eligibility based on whether or not Ms. Clement was living on this property since the spring of 1997? Mr. Westerman answered that it is a combination of her living on the property and whether or not she is disabled from gainful employment? When she moved to Bellingham the Assessor's office assumed it was to become a full-time student, which prepares you for a job. Is she now permanently disabled from gainful employment due to a physical disability? The Assessor's office does not question that this is her permanent residence. They only question whether or not she should qualifY for the disability exemption given that she is a student and has been a student for the past three (3) years? Member DeLeo commented that the information presented to the Board contained a letter which stated that if a person can attend school, they can hold a job. He doesn't think that makes much sense. It would seem that attending school is much easier, as a person can attend school whenever they want, but a job requires attendance. BOARD OF EQUALIZATION MINUTES - APRIL 7, 1998 Page 7 Mr. Westerman agreed that might be the case in this situation, however, in general, for most people if you can attend a traditional academic school than you can also work. Someone could have a home business on the Internet working a few hours at a time. There are many home business which offer individuals some flexibility. Ms. Clement stated that schools are required by law to make exceptions for individuals with disabilities. There are disabled student services that help individuals work with their professors. It is not that disabled individuals do not demonstrate that they are learning and making progress, it's just that they can change the way that they go about it. Vice-Chairman Marlow asked Ms. Clement if she is able to earn other income while receiving social security for disability? Ms. Clement answered that she has received information from the social security office that states if she becomes able to return to work, she can do so and still receive disability payments for three (3) years to assist with the transition. There are copies of that information in the Board's packets which show how much a disabled person can earn and still receive social security disability payments. Mr. Beck added that Ms. Clement purchased a voice-activated software program for her computer thinking that it would allow her to walk around and she would not have to sit at the computer. She has found that the program does not perform all that well, but she is hopeful that some day she will fmd something like that to work for her. After hearing the testimony of both parties the Board concurred that an inspection of the property is not necessary in this case. The Board will review all the documentation presented and make a determination at a later date. REQUEST FOR RECONVENING The Board received a "Request for Reconvening" from Carole Riegle based on the condition being met pursuant to WAC 458-14-127 RECONVENED BOARDS-AUTHORITY (l)(c) which states Boards of Equalization may reconvene on their own authority to hear requests or appeals concerning the current assessment year when the request or appeal is filed with the Board by April 30 of the tax year immediately following the Board's regularly convened session and when a bona fide purchaser or contract buyer of record has acquired an interest in real property subsequent to the first day of July and on or before December 31 of the assessment year and the sale price was less than ninety percent of the assessed value. Vice-Chairman Marlow moved to approve the reconvening request. Member DeLeo seconded the motion which carried by a unanimous vote. Meeting adjourned. ~1S0N~JY BOARD OF EQUALIZATION Richar~ ~~~an ATTEST: ;J; I ~Z- ~. ':t"//l/~ ~ fCL'undgren, Cle;r;theioard