Should county ‘go to war’ with Big Box retailers over revised tax values on their local stores?

Tax administrator acknowledges inadvertent undervaluation which he reconsidered based on persistence of critic

“We can’t be cowards here. I think we need to go to war with this.”

– County commissioner Pam Thompson

Some of Alamance County’s elected leaders are girding themselves for an all-out war against the nation’s top big box retailers after the county’s tax office revealed that it has unwittingly undervalued particular stores due to the legal muscle that their owners have been able to bring to the appeals process.

This burst of saber-rattling erupted from the county’s board of commissioners on Tuesday after the county’s tax administrator Jeremy Akins made a penitent admission about what turns out to have been his office’s overly generous treatment of seven large retail chains with stores in Alamance County.

During a regularly-scheduled meeting that morning, Akins informed the commissioners that his office had lowballed the tax values of 10 retail locations owned by Lowe’s Home Improvement, Home Depot, Walmart, Target, Belk, J.C. Penney, and Dillard’s.

Akins added that he only became aware of these unjustifiably low tax values due to the persistent criticism of Barry Joyce – a one-time candidate for the board of commissioners who recently accused the tax office of dealing more favorably with commercial landowners than homeowners during the county’s latest property tax revaluation.

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In his initial reply to Joyce’s remonstrations, Akins had presented the commissioners with data to show that the reval, which took effect earlier this year, had raised the tax values of all property types to match their actual worth as dictated by the real estate market.

Akins also trotted out comparative sales figures to justify his office’s assessment of the Lowe’s store in Burlington, which had been a particular point of contention for Joyce. According to those figures, the tax office seemed to have been on the money when it appraised this store at about $65 a square foot, which was right in line with the extrapolated sales prices of the two recent sales he used for comparison.

During his follow-up appearance on Tuesday, Akins conceded that Joyce has since thrown all of his assumptions into doubt by pointing out that the figures he shared had come from ground leases rather than the sale of the company’s actual stores. This revelation prompted the tax administrator to check back with the staff member who had originally appraised the Lowe’s store in Burlington. As Akins went on to admit, this subordinate hadn’t even consulted the comparative sales data in his assessment.

“His basis was not the market,” Akins confessed. “His basis was what was happening in other counties and on the appeals boards.”

The county’s tax administrator added that Lowe’s Home Improvement has apparently been quite successful in appealing the tax values of its stores across North Carolina. Thanks to its deep pockets and expert attorneys and appraisers, the company has consistently obtained tax values of about $65 a square foot from the N.C. Property Tax Commission – as opposed to the $125 a square foot that Akins retrospectively assigned to the Burlington store. Akins added that the company’s seemingly unlimited manpower and resources have consistently defeated even the most robust defenses that local governments have been able to mount.

“Ten years ago,” he recalled, “counties were going to war, and they willing to fight, and they were throwing money behind it. But today, counties are tired…and what our commercial appraiser did is that he observed the results – what the [appeals] boards were doing, and he used that as his basis.”

“I think that’s completely inappropriate,” the tax administrator said. “I didn’t know that was happening…But I take full responsibility for this having occurred. But I will say that I completely disagree with the assessor’s office taking the role of the property tax commission and trying to guess what that board would come out with at the end of the appeal.”

Fired by this discovery, Akins decided to double check the tax values of other retail establishments to see if they had followed a similar pattern of anticipating the results of appeals. He added that he ultimately found nine other stores with suspiciously meager assessments of about $65 a square foot. He went on to inform the commissioners that these outlets included Lowe’s Home Improvement in Mebane, all three of the Walmart superstores in Alamance County, and the Burlington locations of Home Depot, Target, Belk, J.C. Penney, and Dillard’s

“Only these 10 were affected,” he continued. “We’re not looking at a systemic, across-the the board problem with our commercial appraisals. But these 10 big box retailers were treated consistently at $65 a square foot.”

Akins conceded that Dillard’s and Belk are currently appealing even their apparently below-market tax values; they had also appealed the last revaluation. But the other five companies have accepted the county’s assessments – which are, again, consistent with the values of their other locations across North Carolina.

Akins went on to suggest that the commissioners could potentially give him permission to reassess all 10 of these undervalued retail locations. He added that, under state law, the county’s governing board has the power to allow this sort of post-revaluation review provided that new information has emerged to contradict the reval’s original outcome.

The tax administrator’s reading was backed up by Alamance County’s attorney Rik Stevens, who conceded that the commissioners have the right to demand a second assessment of a particular parcel even without an appeal from the property owner.

“I do think we can go back and look at the values again,” he declared. “It’s called discovery…There’s not a requirement in the law. But it gives us options.”

Stevens and Akins went on to concede that a post-hoc review of these tax values is bound to trigger an appeals battle with each of the retailers in question.

“It’s not simply a windfall of money that we’re going to gain by sending the bills out and waiting for the checks to come in,” the county attorney said.

“I guarantee you that we will get 10 out of 10 file appeal,” Akins concurred. “And there is absolutely no way that we could defend teams of lawyers coming in on those appeals with in-house staff. This would be a situation where we would have to get outside support I don’t know how much that would cost. It would depend on how far we go. But I heard that Forsyth spent over $50,000 on just Lowe’s and didn’t get anywhere,”

The tax administrator went on to warn that, even with a high-priced law firm in its corner, the county may not prevail if it challenges the might of this nation’s most prosperous retailers.

“My theory is that the [appeals] board would put it somewhere near where it is now,” he added. “It could be higher; it could be lower…We could get a high enough value to cover all of the legal expenses. Or we could be at a minus at the end of the day.”

Akins suggested that, should the commissioners be reluctant to embroil themselves in these costly battles, they could always wait four years until the county’s next state-mandated reval – at which point he would ensure that his staff sets new tax values for these stores which are in line with what they are likely to fetch on the market.  But this passive response seemed a little too sheepish to Joyce, who shared the podium with Akins during part of his presentation on Tuesday.

“We can’t be afraid to charge people what they owe,” the former candidate exhorted the county’s current board of commissioners. “At some point, you’ve got to stand up.”

Despite the tall odds they would face, a majority of the commissioners were inclined to pursue the more aggressive option that Akins had laid out before them.

“We can’t be cowards here,” insisted commissioner Pam Thompson. “I think we need to go to war with this…I would much rather pay our attorneys to do the right thing.”

“I think it might be a good idea to look at what our costs might be if we defend it.”

– County commissioner vice chairman Steve Carter

“I think it might be a good idea to look at what our costs might be if we defend it,” added Steve Carter, the vice chairman of Alamance County’s commissioners. “When I first heard about it, it really bothered me that we had merchants competing with local merchants in our community getting a benefit that our local merchants don’t get.”

The commissioners went on to instruct the county’s administrators to get some solid figures for the county’s likely legal expenses should they embark on this battle with the seven retailers. Commissioner Craig Turner, a practicing attorney in his own right, went on to hint that he would be inclined to pursue the more combative course once all the numbers are in.

“When this comes up again, I will be supporting Ms. Thompson’s view that we assess the value for what it should be assessed.”

– County commissioner Craig Turner

“When this comes up again,” he said, “I will be supporting Ms. Thompson’s view that we assess the value for what it should be assessed.”

The only commissioner who voiced any misgivings about this call to action was Bill Lashley, who cautioned his colleagues against courting a war whose spoils he said would amount to no more than $380,000 a year in additional tax payments.

“Be careful when you dust up a fight with somebody. It’s going to be very time consuming, and it’s going to cost a lot of money to somebody.”

– County commissioner Bill Lashley

“Be careful when you dust up a fight with somebody,” he added. “It’s going to be very time consuming, and it’s going to cost a lot of money to somebody.”