Janesville business owners question assessment increases
Commercial assessments rose an average of 27 percent in the first citywide revaluation since 2002, but some business owners saw much larger increases.
Assessments doubled for some.
Given the economic downturn, some business owners are asking how that can be correct.
Taxpayers should not look at the percentage increases in valuations but rather at whether assessments accurately reflect the values of the properties, said Richard Haviza, manager of the city assessing department.
The city last did a citywide valuation in 2002, so the 2010 assessment listings really are 2002 values, Haviza said. Even new construction was assessed using 2002 values, he said.
And while property values have declined in the last few years, they increased before that.
“It really gets back to the question, ‘What’s a reasonable and equitable value of that property?’” Haviza said.
“Our job is to value property based on the valuation methods and practices outlined in state law.”
Nobody knows how assessments will affect taxes because levies and tax rates are not yet set. Generally speaking, taxes go up when assessments rise above the average increase.
A chilling effect
Higher taxes could have a chilling effect on businesses struggling in this economy and, consequently, the people they employ, some business people and experts say.
The Speakeasy Lounge and Restaurant, 19 N. High St., saw an assessment increase of 101 percent, from $326,400 to $656,500.
“I thought somebody hit the wrong button on the keyboard,” said Anita Karl, who owns her restaurant’s building.
Karl said her business would survive, but higher taxes might prevent her from giving raises or buying new equipment for a new bakery. She’ll be lucky to avoid layoffs, she said.
“I’ve got a pastry chef in the wings, and I’d like to bring him on board,” she said. “Having this uncertainty makes me a little hesitant, now, to move forward in this arena. It’s a big chunk of change to come up with.”
Karl took her assessment to open book, where residents can question the city about assessments. She has not yet heard whether it will be adjusted.
Karl said she was told that her building was assessed from an income-generating perspective and that she could rent out space for $20 a square foot. She finds that unrealistic, as did several people contacted by the Gazette.
One of the positives of downtown, with its older buildings and shortage of parking, has been the low cost of retail space.
Bill Mears, a principal and founding partner of Coldwell Banker Commercial McGuire Mears & Associates in Janesville, said some of the “newer stuff” near Interstate 90/39 is renting at $20. But he noted the vacant Damon’s in that area has been empty for a year.
“And $20 for a building downtown?” he asked. “Even though they (the Speakeasy) did a nice job with it, I’m sorry. I wouldn’t take the listing if it were for 20 bucks a square foot.
“I just don’t think it’s realistic.”
Haviza said he didn’t know about the $20-per-square-foot figure because he didn’t sit in on the Speakeasy open book meeting. He said the city’s file on the business shows the value of the real estate was listed at $900,000 in a 2009 property transfer from Karl and her husband to her corporation.
That transfer cannot be considered in an assessment because it isn’t an “arms-length sale,” Haviza said.
“But it is a red flag,” he said.
Theresa and Art Eklund own Associated Collectors, 113 W. Milwaukee. Their assessment went from $192,800 to $381,500, a 98 percent increase.
“Honestly, we just thought it was an error, that instead of 28 they hit 98,” Theresa said.
Art said he understands the city needs a tax base to pay for services. He just wants to be treated fairly.
“I’m thinking, ‘How can we be doing things so much differently than they do three doors down to justify this?’ ” he asked.
Larry Siker owns Plaza Furniture at 55 S. River St. His assessment went from $245,500 to $498,400, up 103 percent.
“The city should be working with business to make sure they survive and not kill them,” he said.
Beckord called some of the increases in the business community “eye popping.”
“I don’t think there’s any doubt that the overwhelming opinion of the business community is that the numbers associated with the assessments of commercial and industrial (do not accurately reflect) what the market is saying they’re worth,” he said.
He agreed that downtown real estate is not leasing at anywhere near $20 per square foot.
Forward Janesville, for example, is trying to rent out 1,500 square feet of high-end space with parking. It’s asking for $11 per square foot and has no takers, he said.
Beckord doesn’t think the city deliberately made an effort to squeeze more revenue out of the commercial and industrial sector to balance its budget.
“I think the crux of the matter is the (criteria) used to evaluate the true value of a property and how that is connected to what it is worth.
“That’s the question mark in the minds of many people,” he said. “If I were to call an appraiser because I want to sell the property, what would that appraiser in this current economy say this property is worth? That really is the bottom line.”
‘A tough job’
Russ Kashian, an economics professor at UW-Whitewater, said virtually every property in the United States has lost value. But to reflect that with lower tax assessments would drive up tax rates to fund government services.
Determining the value of a property is an art and a science, and it’s a tough job, he said.
“You don’t see me lining up to be a city assessor,” he said.
“There’s a certain art to understanding where the value really is. Do people care if they’re going to lunch in a restaurant that is brick or wood? But they’ll put value on those things.”
Generally speaking, communities have to be “very, very careful when it comes to taxing business,” he said. “A lot of these businesses are highly portable.”
“The short term gain they get from over assessing will be overwhelmed by the long-term loss in the lost business.”
Haviza said the staff in the assessing office doesn’t calculate taxes.
Commercial properties are evaluated by income-producing potential, and the city requested business income and expense information for the last two years, he said.
“We didn’t single out any group of property owners, we didn’t single out any locations. We hired competent professionals to assist us. We just aren’t making this stuff up.”
It’s hard to believe that in a down economy that values can be going up, he acknowledged. But he pointed to several developments, especially around the Interstate.
“I’ve heard the land value there is 15 bucks a square foot,” he said. “That’s a pretty good rate. The economy has taken a hit, but it hasn’t stopped.”
The business climate downtown also has improved over the past decade, Haviza said.
“Are we, through the assessment process, trying to kill the downtown?” he asked.
“Absolutely not,” he said. “The downtown is at a different point in its life cycle.”
Karl is contemplating how to compensate for what is expected to be a bigger Speakeasy property tax bill.
With sales down and fuel and food costs up, Karl said she wouldn't be able to pass on the cost to customers.
“I can only charge so much for a cheeseburger or a hamburger,” she said.
John Becker, president of Forward Janesville, agreed.
“In many case, it’s very difficult to pass that cost along,” he said. “In an ideal world, you’d be able to increase your prices or sell more product. Right now, with salaries stagnant, it’s a huge challenge.”
One area Karl said she’d cut is live music.
“When crunching, you have to let go of things that are not your core business,” she said.