Canny businessmen are quietly reducing their real estate tax as word gets round Guam that an appeal on property valuation gets an immediate reduction.
In the past six months landowners have been granted tax savings of $800 000 for the past two tax years — and there’s more tax relief coming fast.
Property tax is based on the last government triennial assessment of real property completed in 1993 and put into use in tax year 1995. Guam taxes buildings at 1% of accepted appraised value and land at 0.5%.
But now there is relief in the form of the Guam Board of Equalization.
Elmore “Moe” Cotton principal broker and owner of Century 21 Commonwealth Realty is secretary for the board. He told the Journal “We know that the [real estate] market has gone down — it’s been a 14-year recession so in theory everybody’s property taxes are inflated over the 1993 appraisals.”
He said the requests for reduction that the board is seeing are are coming from owners of large pieces of land and properties such as hotels and sizable condominium projects.
“Not too many people are complaining. There are some small [property] owners who have put in their request for review ” Cotton said. “We review their paperwork and decide whether they are in fact going to get a reduction in their property taxes.”
The board which has only three of its five seats filled has been reducing the tax burden of hundreds of backlog cases that have been dating back to 2001. The board will meet again with its hatchet in February.
John J. Gumataotao property tax appraisal supervisor for the real property tax division of the Department of Revenue & Taxation told the Journal that there have been drastic reductions in property appraisals subsequent to the actions of the board.
“For tax year 2003 there were 18 appeals with a total appraised value [1993 assessment] of $229.3 million ” Gumataotao said. “The board on Dec. 6 approved a total appeal value of $117.8 million representing a loss of appraised value of $181.4 million.”
Property taxes in the year before the 2003 appeals were granted brought the government $738 409. Following board action that figure was reduced to $312 829 — a loss to the government of Guam of $425 580 in property taxes.
One property realizing significant savings was TNN Corp.’s Hotel Nikko Guam which had a land value on the 2003 tax assessment roll of $44.5 million and a building value of $90.6 million.
“They requested [through the appeal process] — and were approved — for a reduction to $11.6 million for the land and $33.8 million for the building ” Gumataotao said. “This is a difference of 73.9% on the land and 62.7% on the building — a drastic reduction.”
The Hotels of the Marianas which does business as the Hilton Guam Resort & Spa filed an appeal in 2002 but because of a lack of quorum did not get its case reviewed until Dec. 6.
Gumataotao said at the time Hilton requested its appeals it had two parcels of land. The first was valued at $14.5 million the other at $25 million with the building pegged at $59.9 million.
“They requested and received a value adjustment of $7.8 million for the first parcel and the second was reduced to $15.4 million while the building value was lowered by the board to $32.9 million retroactive to 2002” Gumataotao said. “Following the recent sale for about $30 million the board agreed to further lower the value based upon the actual sale price and we are waiting for the documentation — so overall they received a hefty reduction and the government took a hit.”
Other properties reduced include the Bayview IV LLC [Gun Beach undeveloped land owned by the Ysrael family] which was valued in 1993 at $29.3 million and adjusted to $6.9 million. The Hyatt Regency Guam only appealed the value of the building that was appraised at $75.1 million — and saw it reduced to $45.8 million
In Hagåtña Colonial Investment Inc. which does business as the Julale ShOpping Center had a land value of $3.25 million and a building value of $4.2 million. The company received an 81.4% lowering of its land value to $600 000 and a 61.9% reduction for the building to $1.6 million.
What the appeals board is doing mirrors the effect a new triennial assessment would have at this time — reducing the value of properties. A new triennial assessment is not planned any time soon Guamataotao said. “The governor is the one that decides whether or not we conduct the triennial. In my opinion if we did one we would see the value of real property on Guam has dropped to the point where the borrowing power of the government of Guam might be reduced to the point that it couldn’t borrow more money.”
He said an average median decrease in land values of 67.76% and on buildings of 55.99% is a figure that could be applied today to all properties and buildings appraised for the 1993 triennial real estate assessment.
Based on the property tax roll for 2004 which was certified Oct. 30 by the board the total aggregate assessed value of all property on Guam is $3.94 billion. Gumataotao said the appraised value (which is the assessed value divided by 35%) is $11.3 billion.
W. Nicholas Captain president of the Captain Co. and Captain Realty was commissioned by the government of Guam to complete the 1993 assessment. He told the Journal he has been watching on behalf of clients what the board has been doing and is glad that the board is functioning for the first time in 10 years.
There are huge reductions taking place in the tax rolls. Right now property taxes are being lowered for those asking for appeals which can make for an inefficiency being built into the market ” Captain said. “There is inequality — because you have one property paying a very high number next door to a property paying a very low number — only because the lower number guy appealed.”
Cotton said the board is slowly working backward to catch up on appeals that have been filed. Gumataotao said there are about 370 left to hear which are sitting in nine large banker’s boxes in his office.
There are only three members sitting on the five-person board and that makes for problems in getting a quorum ” Gumataotao said. “The governor is going to have to appoint — and the Legislature confirm — two members soon.”
The deadline for filing appeals for 2004 was Oct. 15 and Gumataotao said there was a total of 10 applications filed representing 136 accounts.
“The total appraised value for the 2004 tax roll [in appealed property] is $242.2 million and in total they are requesting $133 million or a loss of $109 million — that’s a loss of $458 000 in tax dollars ” Gumataotao said.
Captain said “The big picture is that in reality it is not a lot of tax revenue but the appraised value of land and buildings is being reduced. Guam has a low property tax and if the government wants to collect more all they have to do is increase the tax rate.” MBJ