Faced with the prospect of spending significantly more money fighting the case in court than capitulating will cost, the Ulster Town Board on Aug. 15 announced a settlement with Florida Samas Venture, Inc., to reduce the assessment on a property occupied by Home Depot from $6.91 million to $6.5 million.
The 21-year old Home Depot property at 100 Massa Drive is a 115,834-square-foot building on 11.7 acres. The agreement allows the property’s assessment to remain $6.91 million for the years 2015-2018, with the reduction coming into effect for 2019. The assessment will remain at $6.5 million through 2022 under the terms of the agreement.
“I want to note that if the town was to proceed to litigation, the general fund would incur expenses approaching $20,000 for appraisal fees and for lawyers to go to trial,” sad Supervisor James Quigley III. “The net effect to the town general fund is a reduction in revenues of less than $1,850. So it would be 10 years for the town to recover the litigation costs if we were to go to litigation and prevail and not reduce the value. So in the bottom line, I think this presents a compelling economic argument for the town board to accept the proposed settlement.”
Last week, Quigley said that whether the Town felt it could win in court or not wasn’t relevant, as opting for the settlement represented a savings.
“This was a straight cost-benefit analysis,” he said. “The cost of fighting the lawsuit and the uncertainty of a court trial versus a loss to the general fund of [around] $1,800 in a tax in tax revenue. So when you do the math, the settlement side of the equation is lower than the court trial.”
Quigley added that while it “mathematically makes sense,” he’s not happy with the settlement because of where it comes from.
“The bottom line is there are companies out there that practice this every year where they hire a lawyer on contingency and he plays roulette, filing these claims throughout their portfolio,” Quigley said. “And they pick off the locales that have the most to lose at a court trial. This is standard practice, business as usual.”
Quigley likened the practice to the Dark Store Theory, which nearly two years ago the late Town Assessor James Maloney said was used by big box retailers who moved from one location to another to reduce their property taxes.
“Let’s say you have a big box, and they came in 10 years ago and then the road was rerouted so now it’s no longer an advantageous place,” Maloney said in an October 2017 interview. “So they build another one.”
According to the theory, the retailer restricts the deed on the property they’re vacating that prevents other competing big box retailers from moving in, thus forcing the potential sale price of the building down well below what they original paid for it.
“At the end of the day is you wind up with an indoor rummage sale or something like that, so the building sells for very, very little because it’s so deed=restricted,” Maloney said. “What people are doing is using the shuttered big box store that sold for $1 or $2 million as opposed to the $12 million that it cost to build it, and they’re using that as a comparable against the brand new big box.”
Quigley credited Maloney with pushing for legislation at the state level to outlaw the Dark Store Theory’s being put into practice in New York. Florida Samas Venture was initially seeking an assessment adjustment to $4.3 million for the years 2015-2018, but Quigley said that the settlement showed that they were happy for even the more modest decrease because as those come through on other properties across the country, the savings add up to something greater.
“The Home Depot case was built upon a valuation of the existing Home Depot as if it was dark, and until the state legislature makes a change and prohibits the use of the Dark Store Theory of appraisal in tax certiorari cases, communities’ commercial tax bases will continue to be at risk from these predatory practices,” said Quigley.
The settlement resulted in other tax adjustments as well.
- The KCSD’s school taxes for the year 2019-20 was reduced by $11,740 to $254,037.
- Town of Ulster taxes were reduced by $2,689 to $58,187.
- Ulster County taxes dropped by $1,610 to $34,852.
- Ulster Hose Fire District taxes were reduced by $632 to $13,677.
- Ulster Sewer District taxes were dropped by $457 to $9,879.
- Ulster Water District taxes fell by $332 to $7,197.
- Albany Avenue Lighting District taxes dropped by $63 to $1,367.
- Ulster Library District taxes were reduced by $89 to $1,944.
Florida Samas Venture, Inc. could not be reached for comment.
There’s no such animal as “Dark Store Theory” in the entire Assessor Manual of the State of New York. What is there are the three methods of valuation, of which the “cost to build” is but one. The other two are “recent sales” and “income capitalization”. IF the assessor does not use one of those three, then he makes another one up, and see who swallows it hook, line and sinker.
[…] by Hudson Valley One, Aug. 29, […]