Tax Detectives

Falling property values and rising tax appeals are a boon for lawyers and accountants, but they’re causing major headaches for businesses and communities across metro Detroit.

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Nino Licari is a popular figure these days. Like many city assessors in metro Detroit and elsewhere, Licari’s office is being overrun by tax reps — a collection of lawyers, accountants, and tax advisers who are seeking property tax reductions for their clients.

As Troy’s assessor for 31 years, Licari has been through the drill a thousand times before. But this time, things are different. “It’s a huge business right now,” he says. “When the market goes down, there’s a greater chance for these guys to make some money. When the market is skyrocketing, it’s a lot harder to get an assessment reduction and, subsequently, save their clients some money. When the market goes down, these guys come popping up out of the woodwork.”

In August, the Southeast Michigan Council of Governments (SEMCOG) reported property values in the region fell by $16 billion. The overall taxable value in Wayne, Oakland, Macomb, Washtenaw, Monroe, Livingston, and St. Clair counties was $149.6 billion, a 10-percent decline from the $166 billion recorded in 2009. The previous year saw a 3.5-percent drop in taxable values — the first such decline in history.

“In my 35 years of practicing real estate, this is the most dynamic drop in residential, commercial, and industrial property valuations that southeastern Michigan has ever experienced,” says Mark McGowan, a partner at Plunkett Cooney, a large law firm in Bloomfield Hills. “Our practice has grown as a direct result of this.”

However, the trend has put many communities in a bind. As appeals pour in for property tax relief, municipalities already strapped for cash due to falling tax receipts must marshal their limited resources to defend the current values. Escalating the number of appeal filings is the growing legion of tax reps, who take a percentage of any reductions in tax bills they find for their clients.

Smaller communities, which don’t have the internal capacity to handle the entire tax appeal process, are being hit especially hard. Last July, for example, Orion Township authorized spending up to $50,000 to hire a special appraiser to combat appeals involving more than $60 million worth of properties.

“A lot of times tax reps will just sign up a bunch of people, appeal taxes for all of them, and then they will start sorting through the (financial) data to see if they have a case,” Licari notes.

Such broad-brush tactics are a sharp contrast to the methods employed by tax detectives like Tim Miscovich, managing partner of Hospitality Asset Advisors in Clarkston, with clients that include national hotel chains, country clubs, golf resorts, and office centers.
In a suit and tie, spectacles on his nose, and a briefcase full of documents, Miscovich looks like the accountant that he is — someone who would seemingly relish nothing more than spending hours on end wading through file after file of tedious financial records.

But his professional appearance can be deceiving. Miscovich prides himself on getting out in the field and tromping around properties to gauge their physical characteristics. He also talks to employees and neighboring property owners to learn all he can about a particular operation. His mission? Look for unaccounted situations that affect property tax values.

Miscovich’s field trips have paid off for his clients in millions of dollars in tax reductions that could not have been found sifting through financial records or property appraisals.

Take, for instance, the case of two northern Michigan golf clubs where Miscovich got substantial tax relief for the owners. In one situation, a club had 325 acres that the assessor had classified as commercial and developable land. By walking the property, Miscovich noted that 120 acres of the property was protected wetlands that had no potential use and should not have been included as developable in the assessor’s calculations.

At a second golf club, Miscovich surmised during a walkabout that the course had a lot fewer paved cart paths than the assessor had cited in calculating the improvement value he assigned. The course had 2.8 miles of paved paths — not the 17 miles listed by the assessor. That discrepancy meant a sizable reduction on the tax bill.

“Unless you physically go out there, put your boots on, and walk around and look at things, you won’t find those reductions,” Miscovich says. In his nearly two decades in what once was a specialized field, assessors and his clients have come to appreciate his approach.

“A lot of times (tax reps) are shooting from the hip to see where things are going to fly,” says Independence Township Assessor Beverly Shaver, “whereas Miscovich has already [done] his homework, and we have a base to start talking from when he gets in here. It’s not just friendly chitchat and feeling each other out to see where we go with this.”

Larry Burnell, CFO of White Lodging Services Corp. in Merrillville, Ind., which owns nine hotels in Michigan, including the Auburn Hills Marriott Pontiac at Centerpoint (White Lodging operates 50 hotel chains in 22 states), says Miscovich is a valued consultant. “It’s a specialized business in terms of understanding and evaluating the appropriateness of real estate and property tax assessments, and because of that you have to have a tremendous attention to detail,” he says.

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