The Law

A Taxing Situation by Ron Davis A dispute over the tax assessment of a New York State shopping center has ended with nobody all that pleased with the outcome. The shopping center is Hudson Valley Mall in Ulster, and the dispute results from the assessments of the property for the years l999 through 2001. The Ulster tax assessor appraised the shopping center at $79.8 million for 1999, also $79.8 million for 2000, and $80 million for 2001. Those figures were quite different from the ones that the appraiser for the shopping center assigned to the property. He set the values at $49.7 in 1999 to $54.6 in 2001. In response, the Ulster tax assessor hired an outside appraiser, and his estimates of the property’s value were even higher than the original appraisal. The owners of the shopping center challenged the assessment figures, arguing that the Ulster tax assessor and his appraiser did not take certain factors into consideration. The owners argued that the local government calculation failed to deduct amounts in excess of $7 million each year in “tenant concessions.” Those concessions were in the form of tenant rent reduction to cover remodeling costs at the shopping center. Moreover, the center’s owners pointed out that the tax lurk’s appraiser separately valued a 10-acre portion of the center’s parking lot at nearly $3 million. In fact, that property was sublet to Target Stores in 2001, separately assessed, and thus not relevant to the appraised value of the shopping center for that year. Another area of disagreement between the appraisers was the treatment of real estate taxes in computing income. The shopping center’s owners pay such taxes and the tenants reimburse on a prorated basis. In calculating gross income, the local tax assessor included all such payments received from tenants. The center’s owners reasoned that had the tax assessor properly valued the property, the tenants’ payments would have been greatly reduced. The courts pointed out in their ruling that the assessor’s appraiser properly accounted for actual tax recoveries by applying an “equalized tax rate adjustment to the selected overall rate.” The courts took into account the center owners’ arguments, however, and compromised by reducing the appraised value of the shopping center by some $10 million for the tax years involved. (PCK Development Company, LLC v. Assessor of the Town of Ulster, 2005 WL 1580600 [N.Y.A.D 3 Dept.]) Decision: July 2005 Published: July 2005