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9/11 Tax Break
by Ron Davis

Did the terrorists’ attacks of September 11, 2001, cause certain shopping center properties to decline in value? A Minnesota tax court apparently thinks so. In a recent ruling on the tax value of a portion of a Minneapolis-area shopping center property, a court factored in the impact of the 9/11 events and lowered the tax bill accordingly.

The property owner is a Pep Boys automotive service and parts business that is located on an out lot of Riverdale Commons shopping center. Pep Boys bought the property in 1999, then constructed the building that houses the operation.

When the county’s first property tax bill came due for 2000, the Pep Boys operation objected to the assessment. Similar objections occurred when tax bills arrived for 2001 and 2002. Pep Boys argued that because of economic forces and stiff competition from other retailers, the business had suffered a decline in sales during the two previous years.

The basis of the county assessor’s figures was the market value of the property. The assessor’s appraisal, however, was several hundred thousand dollars per year higher than that of a property-tax expert that Pep Boys hired. The county then also hired an independent property-tax expert, and his appraisal of the value of the property was much higher than those of either the county or the Pep Boys consultant.

Pep Boys appealed, and the tax court determined that both the county’s assessor and the county-hired tax expert did not take into account certain outside influences on property values. Explained the judges, “The economic outlook for the United States has changed substantially since September 11, 2001. A real-estate research corporation post-9/11 survey indicates that the overall economic outlook fell from 4.3 to 3.1 on a scale of one to 10 points. In addition, 9/11 is not the cause of the subsequent recession, but it exacerbated what was in process.... We are in fact more persuaded that events of 9/11 did more to impact the value of the subject property than an excess supply of competitive properties.... Specific to this case, a 5-percent reduction in value can be determined to be reasonable due to the impact of 9/11 for the 2002 assessment” (Pep Boys v. County of Anoka, 2004 WL 2436350 [Minn.Tax Regular Div.])

Decision: November 2004
Published: January 2005



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