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HomeMy WebLinkAboutM082306 ()\ tQU.1l ~~% a/~ ~ 0 lXl ~~ ~':. Z ~G1.0 1820 Jefferson Street P.O. Box 1220 Port Townsend, WA 98368 James A. DeLeo William S. Marlow Richard A. Broden MINUTES August 23, 2006 William S. Marlow Richard A. Broders James A. DeLeo Chairman Vice-Chairman Member Chairman William S. Marlow called the meeting to order at 10:00 a.m. in the presence of Member James A. DeLeo. Vice-Chairman Richard A. Broders arrived shortly after the meeting began. APPROVAL OF MINUTES Member DeLeo moved to approve the minutes of July 14, 2006 as presented. Chairman Marlow seconded the motion. The motion carried. ASSESSMENT CORRECnONS/PEnnON WITHDRAWALS Member DeLeo moved to accept the following assessment correction and petition withdrawals. Chairman Marlow seconded the motion. The motion carried. APPELLANT G. P. Middleton, Trustee Steven Fager Susan J. Burch APPEAL NO. BOE 06-01-R BOE 06-02-LO BOE 06-03-E PARCEL NO. 948 311 403 966 900 046 936 905 107 HEARINGS Stephen J. Nielsen 8350 Merrimount Drive Mercer Island, W A 98040 BOE: 06-11-LO 06-12-LO 06-13-LO 06-14-LO PN: 721174012 721174014 721 174 032 721174 033 Mr. and Mrs. Nielsen were present. Appraiser Charley Hough represented the Assessor's office. After explaining the hearing process both parties were sworn in by Chairman Marlow. Under appeal are four (4) bare land parcels located near 2211 Thorndyke Road, Port Ludlow. Mr. Nielsen stated that he feels Phone (360)385-9100 Fax (360)385-9382 jeffbocC@Co.jefferaon.wa.us Board of Equalization Minutes - AU2ust 23, 2006 Pa2e:2 the valuation is too high based on the price he and his wife paid for two of the lots under appeal. In April 2005 the appellants purchased parcels 721 174014 and 721 174033 together for $167,000. At the same time a neighboring parcel sold for $66,000. He feels the parcels which are similar in size and location should be the valued the same as those purchased in April 2005. In looking at the history of market value of property in this area over the last 100 years it shows that values have been volatile and have not escalated on a regular and ongoing basis. When they were considering the purchase of the property they spoke with Realtors about the fair market value of property in the area. In their assessment the potential of the Fred Hill Materials pit-to-pier project is a variable that affects the market value. Mr. Nielsen believes it is critical to the valuation of all their properties, both previously owned and those purchased in Aprilof2005. The exhibits presented by the Assessor's office include sales of properties which pre-date the Fred Hill Materials pit-to-pier project or the potential of that project. The reason the pit-to-pier project would have a significant negative impact on their property value is because their property is situated to look directly at the location of the dock and conveyor belt, should it come to fruition. Their view would change from being one of a very tranquil Hood Canal, to one of an industrial site with a gravel conveyor and a very large pier with ships and barges tied up to it. That has a dramatic effect on both current and future property values. As long as the potential of the project exists, Realtors believe that the market value is lower. An individual is not going to pay the same price for property that has the potential for a view of an industrial site versus property that has a clear view. He noted that a nearby parcel recently sold which is actually closer to the proposed gravel pit, however, due to the curve of Hood Canal the view from that parcel is 180 degrees different than the appellant's. Not all properties in the area should be valued the same because they are all configured differently. Listed below is the Assessor's valuation for each parcel under appeal as well as the appellant's estimate of value for each parcel. Parcel No. 721 174012 721 174014 721174032 721 174033 Assessor's Valuation $130,425 $131,025 $82,135 $82,185 Appellant's Estimate of Value $102,000 $105,000 $70,000 $70,000 Mr. Hough noted that the appellants purchased property from a relative which indicates that the sale may not have been an "armslength transaction". He explained that all the property throughout the area is assessed at the same base rate with the same adjustment and is consistent in value. A map showing a boundary line adjustment for the property was also presented. Mr. Hough questioned why the appellants did not appeal the value of the property on which their house is situated, since it is also valued using the same method as the other parcels. The date ofthe appraisal is January 1, 2003. To say that the market value is affected by the potential of something that may occur in the future, cannot be determined and is not documented evidence. Mr. Nielsen asked what Mr. Hough is implying by stating that some of the sales were from a relative to a relative? Mr. Hough explained that he was questioning whether the sale was an "armslength transaction" (a transaction between a willing buyer and a willing seller), or whether it was a gift from one relative to another relative. Mr. Nielsen reminded everyone that he is under oath and stated that nothing was done "under the table" with regard to the purchase ofthis property. The parties spoke with Realtors to determine the fair market value. He is certain his brother would be willing to testify to this truth as well. Additional evidence in support ofthe appellant's estimate of value is the fact that at the same time they Board of Equalization Minutes - AU2ust 23, 2006 Pa2e:3 purchased their property, his sister sold a similar parcel in the area to an unrelated party for exactly the same price. It would be foolish of them to do a differential ifthere were something going on "under the table". Mr. Nielsen added that a portion of the property was inherited and was subdivided for purposes of dividing an estate, and thereby necessitating a new boundary line adjustment map. He agrees with the Assessor's representative that there was no Pit-to-Pier project when the earlier assessments were made and they have never before made an appeal. He noted that he is a public employee he is happy to pay taxes based on fair value. The reason they are here today is because they think that the current circumstances merit reconsideration of their property value. He encouraged the Board to visit the property and take a look at it. Chairman Marlow asked Mr. Nielsen to review the purchase prices and dates of those purchases. In response to the question posed by the Assessor's representative regarding why they did not appeal the parcel on which their house is situated, Mr. Nielsen explained that he believes in being fair. This particular parcel is an improved piece of property with utilities, a driveway and a house. Therefore, it does not have the same value as the other unimproved properties. Hearing no further testimony, Chairman Marlow closed the hearing. The Board will conduct a physical inspection of the property and make a determination at a later date. Reina Alaska, LLC BOE: 06-04-LO (Kala Point Development Co. & Kala Point L.P.) 06-05-LO c/o David Gooding, C.P.A., Gooding & O'Hara, P.S. 06-06-LO 242 Taylor Street 06-07-LO Port Townsend, W A 98368 06-08-LO 06-09-LO 06-10-LO PN: 965 300 049 965 300 050 965 300 053 965 300 054 965 300 055 965 500 003 965 500 004 David Gooding, C.P.A. was present. Assessor Jack Westerman and Appraiser Robert Shold represented the Assessor's office. Chairman Marlow explained the hearing process and swore in all parties. The property under appeal consists of7 bare land parcels located within the Kala Point development area. Mr. Gooding stated that he is representing both the Kala Point Development Company and Reina Alaska, LLC. He explained that Kala Point Development Company has been under the administrative control of a gentleman named Paul Danker who was one of the original developers and now resides in Germany. In 2003 there were very few properties left, so Mr. Danker decided to wind down the development company and market the remaining properties. After the sale of some properties Mr. Danker found himself left with development rights in real property that was owned by two different condominium associations. So the associations have title to the real property and Mr. Danker, as a developer, retained the right to develop and sell the condominiums. Initially, he attempted to find a builder that would construct the condominiums. The last condominium built in the development was in approximately 1980 by a firm called Kelly Shields. The firm was interested in building the additional condominiums but soon discovered that their insurance policy warranted the units from the time the construction began until the last units were completed. Therefore, ifthey started building in 2004/2005/2006, the warrantee for those original units would fall under their liability. As a result, Kelly Shields declined taking on a project that probably would have worked well. Mr. Danker tried to locate other condominium builders, but, he had Board of Equalization Minutes - AU2ust 23, 2006 Pa2e: 4 difficulty finding a construction firm that would price the condominiums in a manner that there would be any profit for him. So he looked into the possibility of building the condominiums himself through his corporation and found that the liability insurance was going to cost him approximately $40,000 per year. Again, economically this was not going work, so he continued to market the properties and eventually sold four parcels to Kala Bluffs Condominium Association for $12,000.00. It took quite a while to negotiate the terms and conditions ofthis sale agreement. Part of the terms and conditions included an amendment #20 to the condominium declaration. Section 2.04(b) of the declaration specifies that the developer shall retain development rights which shall terminate five years after the recording date ofthe amendment. Therefore, after five years from the date of the sale to the Kala Bluffs Condominium Association the development rights for the remaining parcels disappear and the sites will become common areas. Mr. Danker sold other parcels also located in the Kala Bluffs area to Reina Alaska, LLC, a limited liability company formed in 2001 and registered in the State of Washington. Reina Alaska, LLC is a builder of single family homes and duplexes and employs approximately 20 people. They paid $500 per development right for the parcels in the Kala Bluffs area under the same five year development timeline requirement. In addition to these parcels, there are two parcels located in the Kala Heights division of Kala Point for which they are also up against the same obstacles as far as being able to market those to an outsider or being able to develop them for any profit. The difference being that these two parcels are still under the ownership of Kala Point Development Company/Kala Point Limited Liability Company and there has been no sale of development rights. Listed below is the Assessor's valuation for each parcel under appeal as well as the appellant's estimate of value for each parcel. Parcel No. 965 300 049 965 300 050 965 300 053 965 300 054 965 300 055 965 500 003 965 500 004 Assessor's Valuation $12,500 $12,500 $17,500 $17,500 $12,500 $17,500 $17,500 Appellant's Estimate of Value $500 $500 $500 $500 $500 $500 $500 Assessor Jack Westerman identified all the parcels under appeal on a map of the area. He stated these parcels have been difficult to value because in this area there are no bare land sales, only sales of condominiums. Typically, with condominiums, lenders use a 20/80 split between land and improvement values based on the market value determined by sales. In valuing these bare land lots over the years he explained that he calculated the land value and then gave them an adjustment by reducing the value by 50% because he did not know if they were buildable. He noted that at one point the appellants were trying to market the property for less than the adjusted assessed value. It has been a real struggle determining a value for these parcels because not only are there no bare land sales, but, there is a five year timeline in which development must occur or it can never happen for the five parcels in Kala Bluffs division. The two parcels at Kala Heights do not have a timeline or development deadline requirement so there is a distinct difference between the parcels located in Kala Bluffs division and the parcels located in Kala Heights division. Mr. Westerman noted that the sale of the four parcels to Kala Bluffs Condominium Association for $12,000 indicates a value of $3,000. These particular parcels have since been deeded to Board of Equalization Minutes - AU2ust 23, 2006 Pa2e:5 Kala Point Bluffs, therefore, the parcels have become common areas and the development rights have been extinguished. The parcels that Reina Alaska, LLC purchased for $500 each were purchased through a quit claim deed which typically are not considered "armslength" transactions, compared to a real property sale agreement like the one to Kala Bluffs Condominium Association. He would lean more toward a value of $3,000 than $500. With regard to the two parcels at Kala Heights he noted that they do not have the same time requirement for development so he would tend to think they are worth more than $3,000. He does not dispute that they are having a difficult time trying to find a company to build condominiums because ofthe cost of insurance. However, there are several other areas where condominiums are being constructed and those builders must be subject to the same costs. Insurance costs should not be different, unless, like the appellant stated, the Kala Point properties are unique in that any builder must take on the liability of the previous units that were built 25 years ago. He is not certain that a judge would agree ifit were to go to court. In summary, Mr. Westerman stated that his assessment with the 50% reduction seems to be high given the sales transaction to Kala Bluffs Condominium Association and based on the price for which they tried to market the property. He doesn't feel that $3,000 is an unreasonable value, however, the $500 value evidenced by a quit claim deed is not indicative of the fair market value. Mr. Gooding added that he feels a quit claim deed transaction makes for convenience of sale in order to preclude additional costs and maximize your return. They had originally marketed the property for approximately $6,000 per parcel and were unable to sell them. He believes there are economies of scale. The Kala Heights condominium project consists of one duplex building, while the other condominium projects referred to by Mr. Westerman are much larger scale projects. Chairman Marlow asked ifthe condominium projects referred to by Mr. Westerman were all located in Port Townsend? Mr. Westerman replied that they are all located in Port Townsend, and while there are some condominium projects taking place in other locations in the county, there are no projects in Kala Point. Vice-Chairman Broders asked why some parcels are assessed at $12,500 and others at $17,500? Mr. Westerman replied that the difference is based on the view from each parcel. After reviewing all the information submitted and hearing the testimony of both parties, Chairman Marlow closed the hearing. The Board will conduct a physical inspection ofthe property and make a determination at a later date. Harmon/Mulligan Enterprises c/o Property Research Ltd. W. Scott Phinney/Christopher Robinson 1 Mount Jefferson Terrace Lake Oswego, OR 97035 BOE: 05-09-C PN: 948320501 No representative was present on behalf of HarmonlMulligan Enterprises. Appraiser Robert Shold represented the Assessor's office who was previously sworn in by Chairman Marlow. The property under appeal consists of a low-income housing development known as Claridge Court located at 1235 Landes Street, Port Townsend. On the petition form the appellant stated: "This is a low-income housing project Board of Equalization Minutes - AU2ust 23, 2006 Pa2e:6 subj ect to government restrictions. The Washington Court of Appeals has ruled that these restrictions must be considered in the valuation process. Cascade Court Limited Partnership v. Noble, 105 Wn App 563 (2001). 1h a cost approach, adjustments must be made for functional and economic obsolescence resulting from the nature ofthe government restrictions. 1h a market approach, comparable sales must be comparable (e.g., adjusting conventional multifamily sales to account for income loss due to the government restrictions) as well as open market, arm's-length transactions (e.g., preservation transfers of affordable housing projects cannot be used; see below). 1h an income approach, actual, not market, income must be used for valuation. 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. Actual expenses, which best reflect the increased costs resulting from the government restrictions, are preferred. The capitalization rate should be higher than that for conventional properties to reflect the increased risk relating to government control of many ofthe owner's traditional ownership rights, illiquidity, etc. Tax credits and interest subsidies, if any, must be ignored as intangibles or financing provisions that are not part ofthe real property valuation under Washington Law." Currently, the property is assessed at $1,202,350 ($405,950 for the land and $796,400 for the improvements). The appellant estimates the value is $700,000 ($405,950 for the land and $294,050 for the improvements). Mr. Shold stated that this property was revalued in 2005 and was given a reduction in value due to the fact that this property is subject to government restrictions. If it were not adjusted it would have a significantly higher value. After reviewing all the information submitted and hearing the testimony of the Assessor's representative, Chairman Marlow closed the hearing. The Board will conduct a physical inspection of the property and make a determination at a later date. Meeting adjourned. Attest: r? ~f 1t::) ) c.lc.vG . ..0 Erin Lundgren, Cl k of e Board JEFFERSON COUNTY BOARD OF EQUALIZATION Ir- William S. Marlow, Chairman ~L Richard A. Broders, Vice-Chairman ~) /,~'/v,"-..---, .<:,,1 /' ;;0:~ James A. DeLeo, Member v