When the DeKalb County Tax Assessor Becomes Over-optimistic

Posted by Jill Noelle Olandria on Oct 29, 2015 11:30:00 AM

Many owners and developers of senior housing and assisted living facilities are faced with excessive capacity (i.e., the number of rooms available exceeds the number of actual rooms filled). But these individuals have to deal with the overly optimistic property valuation provided by the DeKalb County Tax Assessor, which means higher taxes on lower income. 

Assumptions Being Made

The high property valuation partly stems from the assessor’s non-critical reading, if at all, of industry publications wherein authors discuss the issues related to excessive capacity. Basically, the assessor assumes that plenty of money can be earned from these facilities based on their size alone without taking into account the occupancy rate. 

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As a result, the DeKalb County Tax Assessor may adopt an approach that will eventually prove unfavourable for the property owner – an income and expense method approach.  The approach will likely be adopted despite the difficulty that property owners face in filling the facilities, a challenge that becomes increasingly obvious in a saturated market but the assessor will not see it in this way. 

Methods Adopted

The DeKalb County Tax Assessor may adopt one or several methods in arriving at over-optimistic property valuation. These include ignoring current occupancy rates; suggest that poor management instead of market forces is responsible for the less-than-ideal occupancy rates; and consider only the size, amenities and features of the property instead of other factors that affect its tax bill.

Property owners of senior housing and assisted living facilities should ideally have tax consultants or tax lawyers on board to deal with these assumptions and methods. With the circuitous tax rules and regulations, it is always best to have an experienced professional to make the law more understandable to laymen. 

Recommended Actions

Fortunately, property owners like you can set things right with the DeKalb County Tax Assessor.  First, adopt a proactive approach. When you know that the assessor will have excessive valuation, you must do your homework.

Develop detailed reports about the number of available and occupied rooms so that comparisons can be made. Get occupancy information from other senior housing and assisted living facilities in your area preferably information with fill-up history. Your purpose: Show the assessor that your fill-up experience is a typical occurrence in the market. 

Second, review the occupancy projections, a likely source of your overly optimistic property valuation. Show the assessor why your projected rate of market penetration (i.e., occupancy) fell short. For example, you may demonstrate the increased competition for a limited number of clients or your construction costs increased such that higher rents have driven potential clients away. 

You may also show the assessor that you are operating senior housing facilities akin to a nice hotel, not a multifamily apartment building. Your self-imposed restrictions on the type of occupants have reduced your available pool of potential clients. 

The bottom line: You may have to educate the DeKalb County Tax Assessor about the dynamics of your business. But don’t just make a valid argument about the high property valuation – you must take a firm stand, too.  Get your tax consultant on your side for this purpose. 

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