Local governments rely on property taxes to maintain infrastructure and provide public services—to fill potholes, pay schoolteachers, and build affordable housing. In Atlanta, funds always seem to come up short. Julian Bene—a retired management consultant who served on the board of Invest Atlanta, the city’s economic development agency—believes he knows one reason why: By his estimate, the city, county, and school system are being shorted millions of dollars a year by high-value commercial property owners not paying their fair share in property taxes.
Bene first noticed something was amiss back in 2018, eight years into his tenure at Invest Atlanta: Atlanta was in the middle of a commercial development boom, but tax revenues didn’t seem to be keeping up with the growth. “We were bringing these big, high-paying jobs into new offices in the middle of Atlanta. I figured it would expand the tax base and pay for stuff we desperately need in this town,” Bene said. “But I started looking at the City’s annual report and saying, Where’s the revenue?”
Where was the revenue?
Bene did a little digging and noticed a pattern: Big-ticket commercial properties were being valued, for property tax purposes, at much less than what buyers were paying for them. Bene took a sampling of major commercial properties that had sold recently and compared their appraised property value to the amount they sold for. He found that, on average, those properties had been appraised at just over half of their market value. This meant, for example, that the owner of a building that sold for $200 million could be paying property taxes as if its value were $100 million.
Bene shared his findings with the Fulton County Board of Assessors, then the Atlanta Journal-Constitution and Channel 2 News—which confirmed and reported on the underappraisals, prompting both the City of Atlanta and Fulton County to investigate. (A subsequent report commissioned by the city council confirmed Bene’s findings. It also showed, on the other hand, that the county appraised real estate valued at less than $250,000 at nearly 98 percent of fair-market value.)
What’s the latest?
Bene recently updated his research to similar results. Bene estimates that these losses, extrapolated across the City’s commercial digest, amount to hundreds of millions of dollars a year.
Atlanta City Council member Jason Dozier said it’s crucial the city and county work to close the gap: “The need for social services has gone up exponentially in the last few years—the need to deliver on goals around affordable housing, to invest in infrastructure to protect our cities, make them more resilient against climate change, and to deliver services that our constituents need. We don’t want to miss the mark on something in such a critical time.”
What’s a recent example of a property that’s been underassessed?
Bene points to 725 Ponce, the 12-story building opposite the BeltLine from Ponce City Market. “This is a luxury, top-of-the-line, trophy office. Cousins bought it for $300 million in July 2021. Its appraisal in 2021 was only $103 million and was not increased in 2022. You’re leaving $200 million out—or, about $3.5 million dollars per year of tax revenue,” Bene explained. “Who are the tenants in there? It’s my old firm, McKinsey, and BlackRock. They are highly profitable firms that have chosen some of the most expensive and prestigious office space in the city. They can and would damn well pay those taxes.”
Is there a reason they’re not fairly valued?
In general, Fulton County commissioner Lee Morris believes many of these valuation gaps are created in the appeals process. If a property owner disagrees with their property’s appraisal, they can appeal and have their property value frozen at the ultimately agreed upon amount for three years. Morris explained: If, with a new and higher property appraisal, your property tax bill increases to $500,000, it could be worth your time and effort to hire a fleet of lawyers and real estate experts to appeal and even take your case all the way to Superior Court. Morris said that, when this happens, the county is often “outgunned and outmanned” by the owners of large commercial properties.
It’d be expensive and time-consuming for the county to fight the appeals, but Bene thinks it’d be worth it: “This could be $200 million we’re arguing back here,” he said. “This is worth hiring your own lawyers and winning the case.” He also suggested the county hire third-party appraisers to solely focus on high-value properties: “If you fixed a couple hundred of the top-value properties, you’d have broken the back of the problem.”
What are local leaders trying to do about it?
In 2020, the Fulton County government worked with state Representative David Dreyer, chair of Fulton County’s legislative delegation, to introduce House Bill 1038, which would have required commercial properties to provide additional information (like recent independent appraisals and income/expense statements) during the appeals process. Morris said this would better equip the county to fight an appeal before it made it to the Superior Court. “The real value of a commercial property, whether it’s retail or office or apartments, is the income stream. The property owner has data about rent, leases, expenses. The county doesn’t have that,” he said. “The county goes into those appeals arguments without the data.” Requiring more equitable access to information earlier could help even the playing field. The bill—opposed by the Georgia Apartment Association—died in committee. Jessica Corbitt-Dominguez, director of the Department of External Affairs for Fulton County, said “this same subject will be one of this year’s priorities” when Fulton County presents its 2023 legislative agenda. (Bene maintains it’s imperative to begin fixing the problem now, without legislation. “We should push assessors to get it right on high-value properties within the existing law,” he said.)
In an October speech outlining his housing agenda, Mayor Andre Dickens acknowledged that commercial properties in the city have gone undervalued. “I will be working with my team and the county to capture and deploy this revenue,” he said.
Morris said he looks forward to seeing what happens when the Assembly convenes in January: “Everybody ought to pay their fair share. Even if it’s just $100 million—what a shot in the arm $50 million a year would be for the school system. That could revolutionize our ability to get these kids the kind of education that they need.”
This article appears in our December 2022 issue.