If you live in a modest house in the city of Atlanta, chances are Fulton County assessors can peg the value of your home pretty close to what it’s worth. But the more expensive a property is, the more likely it is that the county’s valuations will come up short.
A report commissioned by the Atlanta City Council found more expensive properties — particularly commercial developments — are typically appraised for tax purposes at a lower percentage of fair market value than lower-priced parcels.
The findings suggest that the city's schools and city and county governments are missing out on tens or even hundreds of millions of dollars they could be owed in annual property taxes, critics say. That shifts the burden to smaller businesses and homeowners to pay for vital services such as police, fire, the courts and public education.
“It is unacceptable that homeowners are stuck with way more of the bill for running our city than our fair share,” said Julian Bene, a former board member of Invest Atlanta, the city’s economic development arm, who has raised questions about the fairness of the Fulton tax digest.
And the taxable value gap widens even further once owners are able to appeal their properties’ worth.The owners of the highest-value real estate — office, apartment, retail and mixed-used developments — have greater incentive to appeal and more resources to outgun the county when they contest their tax bills.
After appeals, a sample of properties of $20 million or greater were only valued for tax purposes at two-thirds of what they are worth, the Atlanta report showed. For real estate valued at less than $250,000, the county’s appraised values were nearly 98 percent of fair-market value.
“If you are the owners of a $250,000 home and you go to contest your (tax assessment), you are probably not going to have the benefit of being represented by top-dollar, silk-stocking lawyers and accountants,” said Atlanta City Councilman Howard Shook, who represents parts of Buckhead.
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The City Council requested the MuniCap report following aNovember investigation by The Atlanta Journal-Constitution and Channel 2 Action News that found dozens of commercial properties, including apartment buildings, warehouses, office complexes and shopping centers in the city were valued for property tax purposes at far less than what buyers paid for them in recent sales.
The AJC and Channel 2 examined 264 multi-million dollar commercial property sales since 2015 recorded by the research firm Databank Atlanta. About 175 — or two-thirds — sold for at least 50 percent more than the county said they were worth that same year.
And 119 of those nearly 175 properties sold for more than double their assessed value, the AJC/Channel 2 analysis showed.
The MuniCap report looked at 176 properties, ranging from those worth less than $250,000 to those worth more than $20 million. The firm found that while appraisers valued the priciest real estate at 81 percent of fair market value, successful appeals pulled down those values to 68.5 percent of what they’re really worth, on average.
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And that reduces the taxable value, too.
At the same time, residential property owners in Atlanta have seen their values soar in recent years. Fulton is locked in litigation with the state Department of Revenue after the state tax commissioner refused to approve its 2017 or 2018 tax digests. County leaders in 2017 froze residential values at 2016 levels following complaints from homeowners about high values.
The AJC/Channel 2 report spurred the City Council to seek an independent review, and the Fulton County commission also ordered an audit. It is pending.
Jon Wiley, a Georgia State University real estate professor, said most current or retired assessors, if they’re being candid, will say their goal is to find the right balance when they’re appraising commercial properties. They want to be near fair market value, but also value properties low enough to avoid triggering costly and time-consuming appeals.
“As a result, almost every jurisdiction in the U.S. has a downward bias between assessed value and market value,” Wiley said.
He said commercial properties such as mixed-use developments with a blend of residential, office and retail are the most complicated to assess, further increasing the likelihood that assessments will be low.
That’s frustrating to homeowners like English Norman, a Buckhead resident, who said she doesn’t mind paying taxes — but wants others to also be on the hook.
“When you have big commercial pieces of property not paying their fair share, it damages the community overall,” she said. “You can’t look at the homeowners and expect us to bear it all.”
Norman said she was disappointed to learn that residential properties were being valued more accurately than commercial.
“Nobody wants to pay more than they have to, but at some point, [taxes are] how our community functions,” she said.
The AJC sought comment from several commercial property owners, developers and trade groups, but none returned messages or agreed to comment by press time.
MuniCap found county assessors do not “systematically under-assess commercial property.” But the consultant found county assessors “tend to under-assess” expensive parcels and the under-assessments widen as properties’ values rise.
The appeals are another factor, and owners can save lots of money if they do so successfully. In Georgia, property owners can appeal their tax bills to their county’s board of assessors based on factors including uniformity of the assessments and on the values themselves. If the board of assessors rejects a property owner’s petition, the taxpayer can appeal that decision to the county board of equalization or to an arbiter or hearing officer.
If the appeal is successful, the property’s value is frozen for three years. It’s a big incentive to appeal.
Fulton has taken steps to increase exemptions for homeowners to try to level the playing field with big businesses, but it’s only a stop-gap measure, said Lee Morris, a Fulton County commissioner who has questioned commercial property values. Ideally, Morris said, commercial values would consistently end up higher.
Shook said he was disappointed the report didn’t calculate potential lost revenue. Municap’s suggested fixes also mostly centered on matters requiring state legislative fixes, Shook said, “otherwise I’d already be drafting local legislation for the city.”
The MuniCap report said legal and other constraints on the county’s assessors are a primary cause of the undervaluing of high-priced Atlanta real estate.
Among those constraints, the report said, are no mandatory requirements for commercial property owners and managers to report all of their income and expenses and the inability of assessors to include the value of tax incentives in their appraisals.
Dwight Robinson, the Fulton County chief appraiser, agreed with the suggestion. He said there were a number of legislative fixes that could improve accuracy — and some that could be implemented on the county level.
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Last year, Robinson strongly disputed the AJC and Channel 2’s findings. This year, he said his office is “under a magnifying glass” when it comes to appraisals.
Robinson said the county could benefit from having a larger, more diverse pool of hearing officers to consider commercial appeals. Fulton only has two, both of whom Robinson suggested are biased toward commercial owners, while neighboring DeKalb County has 10.
“We really need people with fresh perspectives,” Robinson said. “By looking for an influx of hearing officers, we’re looking for a diversity of perspectives.”
Wiley, the Georgia State professor, said additional hearing officers “would likely pay for itself” in new revenue.
Our Reporting
In November, an AJC and Channel 2 investigation found dozens of commercial properties, including apartment buildings, warehouses, office complexes and shopping centers in the city, were valued for property tax purposes at far less than what buyers paid for them in recent sales. Critics said the undervaluations might have shorted local governments tens or even hundreds of millions of dollars in revenue. The report triggered independent studies by the city of Atlanta and Fulton County.
