Tax Inequity: Designer "Urban3" Demanding Explanations - TribPapers
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Tax Inequity: Designer “Urban3” Demanding Explanations

This graph illustrates how Buncombe's least-expensive homes tend to be over-assessed, while higher-end homes are typically under-assessed a little. This follows a nationwide trend reported by Dr. Chris Berry of the University of Chicago. Screenshot from Minicozzi's presentation.

AshevilleEditor’s Note: The following constitutes “equal time” for the dissenting parties and is based on prompt, thorough, and credible replies to multiple requests for clarification and elaboration.

All 146 properties in Biltmore Forest have been losing value since 2011. At least their assessments have not been able to keep up with inflation, although some parcels have even taken serious plummets. Meanwhile, owners of “slums” in “historically blighted” neighborhoods have seen their valuations increase fivefold. Urban planner Joe Minicozzi said if the tax appraisals for Asheville’s upscale neighborhoods were even close to accurate, people would be talking about “mansion blight” and wearing T-shirts that said “Save the Mansions” to commissioners’ meetings.

History

Minicozzi’s interest in equity tax assessment became supercharged in 2009, when he was in the employ of Pat Whalen’s Public Interest Projects. He was working with the Asheville Design Center, developing a more community-sensitive alternative for the I-26 connector than the Department of Transportation had proposed, when he became acquainted with how high tax assessments were for people living in one of the city’s poorest neighborhoods, Burton Street. He was living in a nicer neighborhood nearby, on Brucemont, and paying about half as much in property taxes.

While one may fairly question the general appropriateness of valuing residential property in terms of acreage and square feet, these numbers certainly seem a little off.
While one may fairly question the general appropriateness of valuing residential property in terms of acreage and square feet, these numbers certainly seem a little off.

Curious, he started pulling property cards from other parts of the city, looking at celebrity homes, for example. And he was seeing a pattern where owners of run-down homes on small lots were paying more in taxes per acre and per square foot than owners of mansions in the finer parts of town. He recently compared three parcels as an example of the disparity. The modest home of his next-door neighbor in Montford was valued just slightly more (per square foot and per acre) than a mansion on Kimberly Avenue with a view of the golf course and mountains. A third property, a mansion with acreage and a tennis court on top of Town Mountain Road, included a house valued three times higher than the other two properties, but it was paying only about one-sixth as much, per acre, in taxes.

Minicozzi took the matter to the county’s tax assessor, who has since been succeeded by Keith Miller. Minicozzi recalled, “Her immediate response was, ‘Those people use more police services….’” Minicozzi took offense to the culturally-insensitive epithet and asked if the local government didn’t have to pay extra to pump water up to the under-assessed mountaintop mansion with tennis courts.

Urban3 was founded in 2011 to call attention to the ways land use planning and tax policies tend to inequitably burden those who are already the most economically disadvantaged. Although Minicozzi has lived in Asheville for years and considers it home, Urban3 has performed what would now be called equity analyses around the country and in Canada, Australia, and New Zealand.

So, when Asheville and Buncombe County announced they would be paying reparations, the folks at Urban3 were well aware of the way local governments can be better at promoting their promises than following through. So, they saw win-win potential in offering pro-bono what turned out to be about 300 hours of their services to highlight where the inequities were in Asheville’s policies. It was time for the county to reappraise properties, which it does every four years, so the team “pivoted” and focused solely on the fairness, in economic terms, of housing assessments.

Claims

Nobody at Urban3 was surprised at the findings. They were seeing average assessed land values for the lowest quintile of housing values increase by over 700%, while the land under wealthy houses, which are typically well-appointed, rose only by 150%. Homes in the lowest percentile of value quadrupled in assessed value over the last 20 years, as many in the highest percentile were actually losing assessed value. “This is classist. This is just not fair. Period,” said Minicozzi.

While Urban3 was performing the analysis, the New York Times published an editorial by Dr. Christopher Berry of the University of Chicago that showed that what was happening in Buncombe County was occurring in multiple jurisdictions across the country. Berry grouped assessed values as a percentage of sales price (sales ratios) according to sales price and found, by far, low-priced homes were over-assessed and high-priced homes were under-assessed. Minicozzi’s colleague Ori Baber ran the analysis for Buncombe County and found homes selling below $225,000 netted $1.5 million in over-appraisals; those selling above, $4 million in under-appraisals. Whereas the under-valued appraisals missed sales prices by about 3%-4%, “the bottom 15% of inventory” averaged misses of between 10% and 18%.

Minicozzi said the gross errors were essentially a $5.5 million subsidy for the rich.

Baber pulled from county records data to show that, in 2021, 1983 properties were sold in Buncombe County. Some were over-assessed and some were under-assessed, so Baber looked at the difference between the totals of all sold properties’ assessed values before and after the sale. This showed that the county had missed out on $96,218,400 in taxable value. Baber treated appeals the same way and found the county had missed out on another $168,038,200. The sales and appeals have provided data on only 6% of the property in the county. With such grand implications for the tax base, it was difficult for Baber to understand how the county could remain incurious about the other 94%.

Getting back to reparations, Baber explained, “According to our estimates, Buncombe County undervalued residential property by nearly $10 billion in 2021. [For the sake of comparison, the entire residential tax base of Buncombe County is now officially about $30 billion.] Most of this untaxed value exists in higher-valued properties. If Buncombe County were to constitutionally assess property, the added $10 billion in taxable value could translate to a significant decrease in the millage rate – representing a significant break in property taxes for the average homeowner in the county.”

Or, as Minicozzi colorfully explained, by maintaining the current assessment system, the city and county are enforcing a $5.5 million “subsidy” for the rich at the expense of the poor, while catching the spotlight for setting aside $0.45 million for reparations, which remain as yet to be defined. While it seems an equity study, by definition, should focus on identifying and uprooting practices that unjustly repress people inequitably, the modern idiom emphasizes differential disadvantaging of people of color. Acknowledging that the problem at hand harms people with the least wealth most, Minicozzi also showed that black people suffer more from Buncombe’s existing policy than whites. What’s more, Urban3’s work in other cities has shown that today’s disadvantages are “baked in” to practices and policies developed intentionally with racism in mind back in the days of redlining.

Difference of Opinions

Minicozzi thought the ad hoc committee the county convened to look at the reappraisal process through an equity lens was structurally flawed. For one thing, the bylaws allowed the tax assessor to be involved in the review of his own work. Minicozzi also thought the selection of committee members was biased. Two of the seven appointees sold real estate for Christie’s, “where they don’t deal with anything under $1 million,” and another sold commercial real estate. Minicozzi raised his concerns to Buncombe County Chair Brownie Newman, saying he could understand having one upper-end real estate agent on a committee tasked with investigating equity, but not two with nobody who specialized in low-income real estate.

In their public comments before the county commissioners, Minicozzi and Baber criticized county staff for ignoring their data and recommendations and instead supplying committee members with a report by Tom Tveidt of Syneva, which they said was irrelevant and flawed. Asked to elaborate, Minicozzi first spoke about the way Tveidt’s analysis partitioned the county. Tveidt created 27 sections, which Minicozzi said were not sufficiently small to tease out cove-to-cove nuances. Worse, these sections were gerrymandered. He said the study divided Shiloh in half and diluted another of the most impoverished regions, Emma, by combining it with the neighborhoods to the west. On the wealthy end, Minicozzi observed, Black Mountain and Montreat were grouped together, watering-down what appeared to be vast under-appraisals in the latter.

Minicozzi repeatedly criticized the county for only viewing samples in establishing market rates. For years, the two main methods used to appraise residential real estate were to either use a property’s recent selling price or to look at comparable properties that had sold recently and add and subtract for various features. As an aside, Minicozzi said if the county discovers a huge discrepancy between a property’s assessed value and its selling price, general statutes not only give the assessor the right to raise the property values for the next billing cycle, the way Minicozzi reads them, they say the assessor must bill the party that hasn’t paid fairly retroactively for five years. The county is not doing this.

Regardless, thanks to modern technology, Urban3 can bypass all the fault-finding to which sample selection is susceptible. It is possible to view the property cards of all parcels in Buncombe County, which include 10-year tax billing histories, on its GIS (Geographic Information Systems) website. Still, nobody in their right mind would sit for days clicking around to open all the property cards. That’s why Urban3 acquired the spreadsheet behind the user interface.

Minicozzi said Urban3 obtained its copy from the county, and they perform their analyses with the same query software the county uses, Esri. Mincozzi describes it as a powerful tool, and Baber is quite proficient at using it. “You can ask it random questions, and it will spit out a map, and you can see the spikes,” he said. “You can [even] query who’s losing value.”

By way of contrast, Minicozzi said the county “runs its model and throws [the assessment] in our laps and says if you have a problem, you can appeal.” Unfortunately, most people don’t have the time, money, or knowledge to do that. To illustrate, Minicozzi spoke of an over-assessed, disabled, black, veteran neighbor. When Minicozzi told him he should appeal, he replied, “‘What fair shake am I going to get?’” Attempting to come to terms with why the government, with the same database and the same software, can’t use them for more accurate and equitable reappraisals before sending out the next round of bills, Minicozzi suggested, “Practitioners in government haven’t caught up with the sophistication of the software.”

Minicozzi said he isn’t attacking anybody in the tax department directly. Appraisers are just going through the motions, putting numbers into a system that was developed 100 years ago with “baked-in biases.” Unfortunately, Minicozzi and Baber spent many hours debating with the county tax appraiser and his staff, each party only to remain convinced that the other’s analytical methods were flawed. Minicozzi still hasn’t recovered from the time the county publicly displayed a PowerPoint slide that read, “Urban3 used the wrong data.”

Baber said Tax Assessor Keith Miller’s public criticisms of their analysis were not true. “Our approach is really quite simple and is clearly outlined in the International Association of Assessing Officers (IAAO) Standards on Ratio Studies.” Baber said the method the county is using, “is bad practice according to the IAAO. It’s known as sales chasing.”

Miller had remarked to the commissioners publicly that he didn’t have enough time during the meeting to explain why Urban3’s analysis was wrong. A call placed by the Tribune to the assessor’s office was intercepted by an answering machine that apologized for the current tremendous call volume. As of the filing deadline, the call had not been returned.

Minicozzi said he was understanding of why tax assessors might be hesitant to get onboard. He, too, was once a government employee, with citizens backed up outside his office waiting to negotiate. He said if the county were to change its valuation process and roughly double income taxes on its most-connected (donor-class) citizens, Miller would have every lawyer (and every real estate agent threatening to lawyer up) standing in line to see him.