Assessments

Dear Assessors:

This morning, the Washington Post published an article by Debbie Cenziper, Nikita Stewart, and Ted Melnik entitle “DC Settlement Surge Shrinks Developer’s Bills” in the print edition and “Surge in DC Tax Office Settlements Reduces Commercial Property Owners’ Bills” online, http://tinyurl.com/c487nm5. The article starts, “District officials have knocked $2.6 billion off the taxable value of commercial properties owned by some of the city’s most influential developers through a series of settlements negotiated this year by the Office of Tax and Revenue, The Washington Post found. The settlements — which in most cases went against the earlier recommendations of staff appraisers — reduced the 2012 assessments of more than 500 commercial properties. Some owners saw the value of their multimillion-dollar properties lowered by 40 percent or more, which shaved tens or even hundreds of thousands of dollars off their tax bills. In a city chronically strapped for cash, the settlements represent a $48 million reduction in potential revenue for the 2012 tax year.”

The Office of the Chief Financial Officer disagrees with the Washington Post’s conclusions, and its reply is published below. How do you assess the arguments?

Gary Imhoff
themail@dcwatch.com

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The chart below reflects BRPAA’s annual reductions of OTR assessments from 2007-2012, occasioned by decisions, settlements and recommendations from the Office of Tax and Revenue for adjustments. There is nothing unusual about the amount of total commercial reductions by BRPAA for 2012. It is comparable to all years since 2007, other than tax year 2011. So whether the reductions came from settlements or contested cases, the results for the District were essentially the same. The total BRPAA reduction for 2011 is the only outlier. The decrease in 2011 was the result of the substantial drop in initial commercial assessments from approximately $68 billion to approximately $59 billion. Lower initial assessments, in the face of a sharply falling market, predictably resulted in lower reductions at BRPAA. There was no similar decrease in any other year. The chart below also confirms that higher settlement amounts in 2012 did not result in a loss of tax revenue to the District over what one would have expected on the basis of BRPAA reductions in other upmarket years.

Total BRPAA Changes to Assessed Value (Numbers Reflect Reductions)

Tax Year          Class 1                  Class 2
2012           (184,747,788)     (2,766,778,488)
2011           (237,223,918)     (1,022,373,687)
2010           (432,504,030)     (2,613,789,061)
2009           (249,110,780)     (2,820,523,708)
2008           (197,713,901)     (2,641,667,524)
2007           (202,583,325)     (2,359,094,066)
Totals       (1,503,882,742)   (14,224,226,534)
Averages     (250,647,290)     (2,370,704,422)

The article also incorrectly assumes that a settlement or stipulation automatically represents a loss to the District. Nothing could be further from the truth. Even in cases where OTR was confident that it would win by proceeding to hearing at BRPAA, 33 percent resulted in reductions in assessed value. In many cases, the taxpayer presents documents that support a lower value than the proposed settlement amount. Rather than risk a greater loss at BRPAA or Superior Court, OTR arrived at reasonable settlements in order to reduce the cost of litigation and preserve the District’s tax revenues.

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In Defense of Trees
Mike Overturf, mike.overturt@gmail.com

After the recent derecho storm Brookland looked like a battle zone. It is not surprising that a little PTSD (Post-Traumatic Stress Disorder) sets in, and trees are viewed as a potential threat to life and limb. I can’t blame anyone for keeping an eye peeled to thirty feet above the ground for any potential missiles. A recent news report — everybody carried this story in a big way — was about a large tree that “unexpectedly fell on their vehicle” on Georgetown Pike (CBS News), actually resulting in a person killed (Albert Roeth III). And Pepco, in its multi-million dollar public relations blitz, which was paid undoubtedly out of operating funds, blamed trees for the recent power outages. In fact, a recent bill proposed in April in Montgomery County gives Pepco the right to cut down any tree it wants, regardless of the owner, or where it stands. Pepco claims that the “overwhelming majority of power outages are the result of falling trees” (http://www.gazette.net/article/20120803/OPINION/708039737/0/gazette&template=gazette).

I understand that when we look at what happened here during the storm it seems perfectly reasonable that trees are a constant threat to our well being. So we should be able to prove this by adding up all the losses, injuries, and that old reliable mainstay of social analysis: insurance records. First, the power outages. Trees do take down power lines, of course. Are trees, in fact, the main culprit for unreliable electricity? An analysis by the Washington Post shows that 24 percent of power outages were caused by trees — 44 percent were cause by equipment failures. If we think of the thousands of transformers and capacitors that make up the grid, this is not surprising. Washington’s tree canopy is not super dense, and in areas of the city where ‘the money’ lives, power lines are underground. So, in effect, the PR department at Pepco was seizing on public distress of flying trees and using it as a cover for their own profit motives. In fact, according to Pepco’s own Jim Hunter “No matter what happens, Pepco gets its money,” as they get paid extra for storm damage. Blaming trees deflects and mutes criticism.

How much property and lives are hurt by trees in these storms? An analysis titled “Human fatalities from wind-related tree failures in the United States, 1995-2007,” (Kent State University) shows the District of Columbia suffered two deaths from wind-related tree failures over that twelve-year period, a rate of 3.5 deaths per million population. The American Meteorological Society reports that between 1986 and 2003, there were 153 Derecho storms in the US, causing $1.3 billion in damages with some 153 fatalities. Of these, 5 percent were cause by tree limbs. The majority of deaths were caused by overturned vehicles, mobile homes, camping, and other flying debris.

I’m not belittling or trying to downplay the tragedy of lives lost in a storm, or the wrenching experience of having a tree fall on one’s house. My point is simple: Taken together, trees have an enormous benefit, and a constrained downside. On balance, the good outweighs the bad. By some estimates the lifetime of a single tree will offer $90,000 of direct benefit to its community, not including aesthetic, social, or natural benefits. Some examples: planting strips separate traffic participants, preventing accidents. Businesses on treescaped streets have, on average, 20 percent higher income streams that those on barren streets. And so on. Our very own Brookland-based Casey Trees, a nationally lauded organization, offers a Tree Benefit Calculator (http://www.treebenefits.com) that allows quantification of some benefits by tree type and zip code. The specific benefits include stormwater control, property value, energy, and air quality. I determined the 36-inch Pin Oak tree in my yard benefits at the rate of $275 per year. I can see that as it shades most of my house at 2:00 p.m. every day. Most rational observers will have to agree that the objective value is significant.

It is a fact that neighborhoods with more trees have less crime — this is a common sense observation of you travel the country, and it is actually measurable. In and around Baltimore a GIS Analysis revealed that a 10 percent increase in standing trees correlates to a relative 12 percent decrease in crime. Why, you may ask? People like to walk around trees. More people walking around, more witnesses, less crime. A community that enjoys its environs is less blighted. Closer to home: Wards 3 and 4 have 57 percent and 49 percent tree canopy coverage respectively, Ward 5 has 28 percent, with 1.6, 9.6, and 13 violent crimes per 1,000 population, respectively. It is eerie how closely crime stats follow canopy coverage rates.

Correlation does not imply causation, people say. Ok, fine. In the end, if we don’t like trees, we’ll live in a place like Salton City in the Imperial Valley in California. Desolate, colorless, hot — and really really cheap to live. Without clean water and fresh air, of course. Fear of falling trees is a phobia understandably brought on by witnessing real events, but we should not overreact. Cutting and eliminating trees wholesale will lower the value of our community, increase blight, and in the end lower property values by significantly more than is in question from falling tree parts. The cost of falling trees is already built in to a home insurance payment today, but the benefit of trees is not always so clear, until they’re gone.

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Olympic Gold Medalist Hero Closer to Home
Anne Sullivan, sullyterp@gmail.com

I agree that Gabrielle Douglas’ performance in the women’s gymnastic competition at the Olympic games was thrilling. She is an awesome athlete and deserves all the accolades she is receiving.

If you are looking for an impressive Olympian from the DC area who is from a town much closer than Virginia Beach, please consider the performance of Katie Ledecky, a fifteen-year-old rising high school sophomore who lives in Bethesda, MD. Katie won the gold in the 800M freestyle event. She broke the USA record in the event and came within half a second of breaking the world record, which had previously been set by the woman who won the silver in the event.

Now, I don’t know about you, but it would probably take me hours to swim 800M freestyle, yet this youngest athlete from the entire USA delegation swam this distance in a little over eight minutes. Here is a condensed version of the broadcast: http://www.nbcolympics.com/video/2012/top-nbc-moment-katie-ledecky-sets-american-record.html. The dedication and amount of training this young lady has put into her sport, along with the spectacular result at the London Olympics, is deserving of accolades galore.