View Full Version : Developers Exemption Unconstitutional



Midtowner
01-31-2008, 08:31 AM
Earlier this week, the Oklahoma Supreme Court ruled 7-2 that the developer's exemption for property taxes violated the Oklahoma Constitution.

60 O.S. 2817 had the following developer's provision:


"[T]he fair cash value of a lot in any platted addition or a subdivision in a city, town or county zoned for residential, commercial, industrial or other use shall be deemed to be the total purchase price paid by the developer of the addition or subdivision for the land comprising the platted addition or subdivision divided by the number of lots contained in the addition or subdivision until the lot with building or buildings located thereon shall have been conveyed to a bona fide purchaser or shall have been occupied other than as a sales office by the owner thereof, or shall have been leased, whichever event shall first occur.".

In sum, the provision allowed developers to only pay the ad valorem taxes on the property at the value the property had when the developer received the property -- not the rate everyone else pays which is based on what the assessor says is the actual value of the property (which depends on a number of factors, but is supposed to arrive at a number resembling fair market value of the land and assuming the land is receiving its highest and best use).

In holding this portion of the statute unconstitutional, the court is now requiring the county assessors to annually appraise all land held by developers the same way the land would be appraised for you or me.

Developers now have as much as a year, probably less to either unload their property, develop it, or be taxed at its current value.

What does this mean?

For areas like Bricktown, where some developers such as Jim Brewer or Cotton have held onto land for extended periods of time, grandfathered in at extremely low rates, they will now be reassessed and forced to pay a pretty penny in ad valorem tax. It's time to either sh** or get of the pot.

jbrown84
01-31-2008, 08:52 AM
Nice!

Midtowner
01-31-2008, 09:05 AM
You should see the Oklahoman's spin on this:


Ruling may inflate new home prices

Schools and counties should benefit by receiving more tax money, but how much more they will receive is yet to be determined, said Louis Bullock, attorney for Cleveland County resident Harold Liddell, who filed the lawsuit because of inequities in property taxation.

Liddell lost in district court and before the Court of Civil Appeals, but the Oklahoma Supreme Court reversed the decision Tuesday.

"School districts should not expect a huge windfall, said Leonard Sullivan, Oklahoma County assessor.

The changes are likely to be gradual, beginning in 2009, Sullivan said.

State schools Superintendent Sandy Garrett will be reviewing the decision with other state officials to determine its financial impact, said Shelly Hickman, spokeswoman for the state Education Department.

Court eliminates tax break

Driving the changes is Tuesday's state Supreme Court ruling that a statutory tax break granted to land developers and builders by the Legislature is unconstitutional.

The rejected tax break has allowed developers and builders to save money on property taxes by freezing the taxable market value of land bought for development to the time of its purchase. The land would remain on the property tax rolls at that value until it was developed and sold or placed into service which could be years later.

The Supreme Court said the tax break is unconstitutional and county assessors must redetermine the market value of land set for development every year just like they do for land owned by other property owners.

^ We can all salute this. Good stuff. The children will have more money going to them. Happy days.

But the Okalhoman's Chamber of Commerce slant must rear its ugly head somewhere...


Home buyers to feel ruling's effects

Since land values generally rise over time, especially if adjoining or nearby lots are sold for houses or businesses, developers and homebuilders will have to pay more property taxes, Means said.

They will pass those increased costs on to home buyers when the homes are sold, he said.

"It raises the cost of houses, Means said. "That just means our affordability index in Oklahoma goes from very favorable to not so favorable anymore. And that's one of our biggest concerns.

The tax increases imposed on developers should not be huge because of another state law that prohibits county assessors from hiking property tax values by more than 5 percent a year unless the property changes hands.

The Supreme Court ruling will not become final until it is published, which will be in February, at the earliest. That means the tax hikes prompted by the decision won't become effective until 2009.

Because of the 5 percent cap, the amount of extra money available to schools is likely to be small in 2009, Sullivan said.

"I don't want school systems to get all excited, he said. "Ten years from now, the amount is likely to be more significant.

The Supreme Court said its ruling does not apply to past tax assessments.

I can already see the paper beginning to lobby for the voters to approve a constitutional developer's exception "to keep new home prices down for the children."

You heard it here first.

Steve
01-31-2008, 09:47 AM
I checked with the county assessor's office. It looks like this only applies to raw land, so Jim Brewer and other developers you cited may not be hit by this.
As for Richard's story, after reading it (I had no involvement with it), it seems like he was only quoting the two sides of the issue - those who stand to benefit and those who might not be happy with it - like Mike Means and the homebuilders.

Midtowner
01-31-2008, 10:00 AM
I checked with the county assessor's office. It looks like this only applies to raw land, so Jim Brewer and other developers you cited may not be hit by this.

How about land with existing, but unused/unusable structures on it? I can think of a few pads in Bricktown/downtown/sourth of I-40 like that.

Here's the statute again:


"[T]he fair cash value of a lot in any platted addition or a subdivision in a city, town or county zoned for residential, commercial, industrial or other use shall be deemed to be the total purchase price paid by the developer of the addition or subdivision for the land comprising the platted addition or subdivision divided by the number of lots contained in the addition or subdivision until the lot with building or buildings located thereon shall have been conveyed to a bona fide purchaser or shall have been occupied other than as a sales office by the owner thereof, or shall have been leased, whichever event shall first occur."

The way I'm reading it is that the property must be "a lot" and it must be in an addition or subdivision. The only other requirement is that the lot be unoccupied, except for as a sales office.

To me, that means empty buildings (is the Dowell building empty?), empty lots, etc.


As for Richard's story, after reading it (I had no involvement with it), it seems like he was only quoting the two sides of the issue - those who stand to benefit and those who might not be happy with it - like Mike Means and the homebuilders.

What got me the most was the story's title. That carries quite a bit of weight with most readers insofaras setting the tone. Maybe I'm being hypersensitive. I tend to be that way.

Here's the case, btw:

OSCN Found Document:LIDDELL v. HEAVNER (http://www.oscn.net/applications/oscn/deliverdocument.asp?citeid=451209)

Steve
01-31-2008, 10:09 AM
I'm not arguing with your interpretation - when I read it I immediately called the assessor to get their take on it. Your reading does make sense. But it's not looking like that's the outcome right now. They're looking at it further, and I'll let you know if I hear anything new.
As for headlines... please, please, please don't judge the writers for the headlines. I'm not arguing how they influence you, but realize they are not usually written by the reporters, and sometimes they can miss the mark.
:)

-Steve

metro
01-31-2008, 10:41 AM
Even if this doesn't include Bricktown owners sitting on properties (which technically they are marketing, just very poorly), then I guess Steve is probably right and they will be exempt), however it should include all the same developers who purchased great areas of land on the Oklahoma River, so hopefully this will spur development sooner on the Oklahoma River.

Oh, and Mid, Rick Dowell is currently re-developing Dowell Center. He got some brownfields grants last year. There is an article on this site somewhere.

Midtowner
01-31-2008, 10:42 AM
-- but not the quality development we were hoping for.

The increases will be gradual according to my interpretation, so hopefully this gives them a ticking clock.. Maybe they can get it right.

jsenter
01-31-2008, 11:51 AM
The rule only applies to undeveloped lots amid a larger plot of land.

Midtowner
01-31-2008, 12:41 PM
The rule only applies to undeveloped lots amid a larger plot of land.

That's not how I read it... It seems like any lot which is part of a platted addition or subdivision in any condition so long as that lot is being held for purposes of future development would be covered.

Is there a further exception for lots which stand alone? Or do they have to pay their own fair share of the ad valorem tax?