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Burlington Landlords Accuse City of Conducting "Stealth" Tax Reappraisals

Local Matters


Published May 5, 2010 at 10:09 a.m.


When “Steve” bought a three-unit apartment building last year in Burlington’s Old North End, he estimated that its furnace had been installed when Lyndon Johnson was in the White House. So he decided to put in a new, high-efficiency heating system, knowing it would be better for his tenants, his wallet and the environment.

But in order for each apartment to have its own climate control, Steve had to hire an electrician to install separate thermostats. That meant putting in new circuit boxes and new meters, which required an electrical permit. Then, to take advantage of an incentive program offered by Vermont Gas, Steve had to upgrade the insulation. That, too, required a permit.

All together, the bill amounted to several thousand dollars, which was within Steve’s budget. But then he got something in the mail he wasn’t prepared for: a notice from the city assessor’s office telling him that an internal inspection was needed to “properly assess any changes made to this property.” The reason listed on the notice: “permits.”

The inspection request seemed odd to Steve, especially since Burlington had reassessed the property in 2005 during its citywide reappraisal. Then he got another notice on a different property he owns elsewhere in the city where he had also just completed maintenance work — two notices in two weeks. Although Steve has the right to refuse the inspector access to his apartment units, the assessor is still authorized to guess what improvements have been made and adjust the property value accordingly.

“I’m concerned about how small landlords are getting hammered by code enforcement and now tax assessment,” Steve says. “If I get reassessed and there’s a tax increase that’s unanticipated, that could be a real hardship for a small-timer like me.”

Apparently, Steve isn’t the only one being subjected to what he calls “stealth reassessments.” Other Burlington landlords tell Seven Days they’ve noticed a similar trend: After “pulling permits” on their investment properties, they’ve received inspection notices, too, presumably to reappraise their properties for tax purposes. Like Steve, none wanted to be identified in print for fear of “invoking the wrath,” as one landlord put it, of Burlington’s code enforcement officer or city assessor.

What’s going on?

“I think the root cause is money,” says Pike Porter of Castle Porter Real Estate in Burlington, who’s heard comparable stories from two of his clients in the last month. One of them claims that the assessor’s office pulled a photo of his property from Realtor.com, then increased his taxes by 10 percent.

“I’ve never heard of that before,” says Porter. “That’s out of hand … The city is not getting in there just to see how people live.”

Last week, Porter posted an online notice on Front Porch Forum asking Burlingtonians to contact him with tales of similar experiences. A handful of people responded to his email, but as of press time, none had followed up on his invitation to contact Seven Days.

One theory among local landlords is that the city is looking to find money wherever it can, owing to the economic downturn and recent financial woes involving Burlington Telecom.

City Assessor John Vickery says he’s heard similar rumors in the past and dismisses them outright. As he explains, a property review is warranted whenever a building has undergone significant improvements, changes ownership, or is part of a citywide reappraisal.

What constitutes a “significant change?” According to Vickery, the term applies whenever his staff believes the property’s appraised value doesn’t reflect its true fair market value based on recent improvements.

“We look at it from a buyer’s point of view,” he says. “Has the market value for this property changed?”

How does his office figure out when to reappraise a property? The process begins by looking at particular neighborhoods and reviewing the current data on “assumed improvements.” If a data collector is working in a particular neighborhood, he may review other properties nearby, sometimes with a “drive-by” to make sure that the city’s records are correct. He’ll also look at recent property transfers and the relationship between a property’s appraised value and its actual sale price.

Vickery doesn’t deny that his office reviews outstanding and recently closed permits as another method for determining whether market values have changed. However, he says his office prefers to use the “mass-appraisal system.” In other words, his staff runs statistical analyses on properties and classes of properties across the city, breaking them down by neighborhood and building type. Then staffers identify inequities and major outliers and try to correct them.

“We don’t have time to get into every property in town. There’s quite a lot of them,” Vickery says. “But we do want our data to be correct and, more importantly, we want the value to be reasonably fair.”

Vickery also denies that anyone in City Hall is pressuring him to do his job more aggressively.

“The mayor has been really good about staying away from telling us what to do, and I think that’s been a good thing,” Vickery says. “No one is telling us that we need to raise the grand list.”

In fact, Vickery points out that, just last year, some neighborhoods in the city appreciated in value while other property classes went down. Those new valuations were driven by statistics, he asserts, not politics.

But Steve is unconvinced. He says that whatever method the city claims to be using, the end result is that it’s creating a disincentive for landlords to make improvements to their properties — or seek the necessary permits — out of fear of creating a paper trail the tax assessor will follow.

Ultimately, he says, these added expenses will either be absorbed by landlords or, more likely, passed along to tenants in higher rents when their leases come due.

“Some people think that landlords shouldn’t make a profit, that we should just supply housing out of the goodness of our hearts,” he adds. “You’re rewarding homeowners who don’t do anything to their properties. Is that fair?”

“I don’t know if it’s a disincentive,” Vickery counters. “Nobody likes to have higher taxes. But it’s the process we have in place, and I don’t think anyone has come up with another way of doing this.”

On Wednesday, Vickery’s office releases its updated grand list book, listing citywide property valuations and owner names, all of which are public information. Grievance hearings, at which owners can appeal their reappraisals before the board of assessors, are scheduled from May 20 to 26.

Steve says he’ll most likely be going before the board of assessors if his taxes go up significantly.

“We’re small-business owners, just like the owners of a coffee shop or a hot-dog stand on Church Street,” he says. “Small landlords do contribute to a vibrant, well-taken-care-of community. Don’t kill your small landlords.”