How to Cheaply Determine if Your Marina Tax Assessment is Too High

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We get a common question from marina owners all the time that goes something like this:  how do I know my assessment is too high without paying for an appraisal?  In the upcoming January edition of Marina Dock Age, I’ve written an article on tax appealing your marina.  I’m not going to steal the thunder away, but I will add a few things that we’ve learned to the article.

What is Assessed?

There are two types of assessments that can affect how much taxes are paid by a marina.  Some states like New Jersey base their taxes on real estate only.  Other states like Virginia tax real estate and personal property.  The distinction can be significant.  Personal property at a marina can include expensive heavy-duty forklifts and mobile boat lifts, fleets of boats, boat sales inventory and floating docks.  It is not uncommon to have personal property ranging from 30 to 60 percent of the value of the real estate.

Common Reasons Your Marina Could Be Over Assessed

Penny Wise and Pound FoolishAssessors use mass appraisal techniques to derive assessments.  Mass appraisal techniques work well when there are lots of sales and properties are relatively homogeneous. Rarely can this be said for marinas.  Assessors may not be experienced in valuing marinas and the potential for error increases when this is the case.  Market conditions change but assessments are slow to react, if at all.  The slip count can change due to a reconfiguration and the Assessor may not pick that up.  The assumptions used for income, expenses and the cap rate may not reflect the reality of the marina if the financial statements are optimized to show the lowest profit for tax purposes.  Last, but certainly not least, is land value.  With few or no marina land sales, Assessors may base their land assessment on waterfront residential condominium development.  This can result in substantial land over-assessment.

How to Determine if Your Marina is Over Assessed

I briefly talk about this in the article but since it seems to be such a hot question right now, I’d like to elaborate.

  • Instinct and Common Sense – You’ve got a gut feel for what your marina is worth.  Is the assessment greater than this?  Has anyone made you any verbal offers to purchase your marina that are materially less than the Assessor’s estimate of market value?
  • Do the math – Ask the Assessor for the assessment worksheet and compare its input assumptions to yours.  Did the Assessor use your financial statements to calculate value?  If not, submit it to him/her and request a reduction.  Assessors are usually reasonable and will consider it.
  • Reuse that Appraisal – Did you get an appraisal of the marina for bank financing or some purpose other than tax appeal litigation?  If the market value is less than the assessment, many Assessors will consider that to be credible.  Submit the appraisal to the Assessor and request a reduction.
  • Get the Facts – It is not uncommon for an Assessor to have information on his/her records that differs from what is actually present at the marina.  Get the Assessor’s worksheet and check the measurements on the worksheet against what is really there.  Do they match?  If not, that might be the basis for an appeal if the difference is material.  Many jurisdiction view this as “clerical error” and by statute the assessment must be changed should this be proven.  Another item to consider is the slip count.  If there is a material difference, that can also be significant enough to warrant an appeal based on “clerical error”.
  • Compare Assessments – Research other marina sale transactions and compare the assessments to the sale prices.  This is called the Assessment Ratio.  For instance, if XYZ marina sold for $18,000 per slip and was assessed for $22,000 per slip, the assessment ratio is $22,000 / $18,000 or 122 percent.  Do that for enough properties and you might see patterns.  Let’s say that you find three or four sales where the assessments are always less than the sale prices.  That’s the basis for a tax appeal and a good one at that!
  • Let Someone Else Show Me The Money – You can also hire a third-party at no cost to see if you’ve got a tax appeal.  No cost?  That’s right… tax appeal consultants and attorneys do this every day.  They typically get paid a percentage of the tax savings… only when they win the case.  Instead of waiting for them to come to you, be proactive.  It’s your money.

So, is this free advice?  Absolutely.  OK, I’ll be honest… I get a link to this blog post whenever someone inquires about a tax appeal in an email.  I’ve done my good deed for the day.

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