For four years, Duke Energy Center has stood as Mecklenburg County’s largest building in square footage.
Yet for much of that time, Mecklenburg has taxed the building as if it was much smaller – 40 percent smaller – possibly shorting county revenues by millions of dollars.
During its construction, the county assessed the 1.5 million-square-foot building at more than $300 million, County Assessor Ken Joyner said.
But the building’s owner, Wells Fargo, appealed that value, and it was reduced to nearly $260 million by the county’s Board of Equalization and Review, the group of citizens that hears formal appeals to property values.
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The review board’s value was effective Jan. 1, 2011, when the Duke building had been opened just a year and was only 60 percent occupied, said Joyner, county assessor since last October.
County appraisers, he said, never pursued a change because the property is under appeal with the state’s Property Tax Commission.
Joyner said that was a mistake. State law requires the property to be updated every Jan. 1. “For a property under construction, typically we would go back every January 1 and take a look at it,” Joyner said.
Joyner said tax records on the Duke building should have been updated based on occupancy, which would have increased its value.
“If I had been the assessor in 2012 and 2013, I would have said, ‘Guys, this is not the same building it was in 2011,’ ” Joyner said. “In my opinion, the building should have been updated.”
Wells Fargo spokesman Josh Dunn said the bank has discussed the building’s value with state and county officials since 2010. “We continue to work together to evaluate a number of factors that affect valuation,” Dunn said. The bank, he said, will “gladly correct our tax payments, if necessary” once a value has been reached. “We have paid every dollar to the county that is owed and will certainly continue to do that,” he said.
Millions at stake for county
It took a countywide protest of the 2011 revaluation and a state law requiring Mecklenburg to review all of its 356,000 parcels to find the mistake.
During the review, appraisers for Pearson’s Appraisal Service discovered the discrepancy and found that the building is now 92 percent complete, not 60 percent, and should be taxed accordingly, said the firm’s Fred Pearson.
He said the firm preliminarily assessed the current value at $378.3 million, or $119 million above the value set by the review board.
If that value held up, Joyner said, it would bring more than $2 million in additional property tax revenues. “The owner is still appealing the ($259.3 million) value (the BER) had on there, and I guarantee they’re going to appeal the Pearson’s value,” Joyner said. “Pearson’s has and will work on that property through the appeal process to an end.”
Pearson said it will take about two months to work with Wells Fargo and come to a true value as the building approaches full occupancy. At present, he said, only about 10,200 square feet of the building goes unoccupied.
He said he thought the value his firm has proposed is fair. “Whether it will hold up is another question,” he said. “We want to make sure we get the property at the fair market value and that we can defend that value.”
Other properties missed
The Duke building may be the most prominent discovery by Pearson’s, but it’s not the only one missed by county appraisers.
Pearson’s found a First Citizens Bank branch in Huntersville that showed up on county tax books as empty land. It found a new wing of a Marriott Courtyard hotel on Little Rock Road in Charlotte that had gone unrecorded. The firm has also found unrecorded additions, complete renovations and garages to homes.
Pearson said his firm is also looking at buildings owned by nonprofit, tax-exempt hospitals that are being leased to doctors not on the hospitals’ payrolls.
“If the hospitals are taking rent from doctors who aren’t paid by those hospitals, they ought to be taxed on that revenue,” Pearson said. “We’re finding these kinds of things every day.”
Whenever appraisers find properties or changes to properties, they’re recorded and appraised each year back to Jan. 1, 2011, he said. The properties’ owners will be liable for unpaid taxes back to that date.
Because of the continuing discoveries, the review likely will end up as “revenue positive” for Mecklenburg, Pearson said.
Commissioner has questions
The issue was first raised by commissioner Pat Cotham at Tuesday’s Board of Commissioners meeting when she began asking questions of Joyner and Pearson about the Duke building and other unrecorded properties.
The revaluation and approving new values found by Pearson’s had received much discussion by the time Cotham got to ask her questions.
After she asked a few, she was cut off by Chairman Trevor Fuller.
After the meeting, Fuller said the discussion was beginning to stray from the agenda. The issues Cotham raised, he said, were important, “but it just wasn’t the right time for us to be talking about it.”
Cotham said her questions were relevant to the agenda, that she was merely looking for clarification on the Duke building and other properties and wanted to know if appraisers had resources to quickly process the reviews.
“We all knew that the review was going to discover bad things, and we’re trying to get them fixed,” she said. “I wanted to ask about controls that were being put into place so that when we have the next revaluation it will be fair and equitable. But I got cut off.”
Starting from scratch
Joyner said he’s putting those controls in place.
In October, he inherited a department that had absorbed significant public criticism for the 2011 revaluation. The department had not updated property records with on-site inspections in 17 years. The national standard is for every parcel to be inspected once every six years.
A study found that the revaluation was hindered by poor customer service.
Controversy over the revaluation led to the resignation of Joyner’s predecessor, Garrett Alexander, who was reassigned to another county job. It also contributed to the firing of former County Manager Harry Jones.
Joyner said he’s starting plans for the next revaluation “from scratch.”
“We have a huge opportunity to not only look at some of the glaring items that have been out there the last few years, but to improve on things we’ve done well,” he said.
He said county appraisers will give neighborhoods identified by Pearson’s as major problems a “boots-on-the-ground” inspection before the next revaluation, which must be conducted no later than 2019.
After that, all parcels will get a similar inspection at least every six years – the national standard.
“We’ve got a small window to make sure we’re ready for the next revaluation,” he said. “Once we’ve got a good, clean database (of properties) we’ll start doing a percentage each year ... so 17 years down the road we don’t find ourselves facing the same problem.”