Property taxes may affect commercial development

by Christine Ballew-Gonzales

SBJ Contributing Writer

While many Springfieldians agree that property taxes must be considered as part of the overall growth and development picture, opinions vary as to how much property taxes affect development.

"It depends on what happens to our tax base," according to Jack Rhoads, broker at Murney Associates Realtors.

"Even though people here complain about taxes, our taxes here are much lower than other parts of the country. Unless there is an enormous increase in our taxes, it shouldn't have much of an impact on residential growth and development because our taxes are already so much lower than other places."

According to John Johnson, of Wehr, Wehr, Johnson & Bridgeforth, property taxes are a consideration, particularly for business owners.

"The higher the property tax ... it would slow down commercial development because those costs must then be passed on to the customer," Johnson said. "And so a business usually thinks twice about expanding or moving."

Johnson said commercial properties are reassessed every two years to reflect changes in value causing a business owner's tax bill to rise more often than not.

"They're either going to be less profitable or have to raise prices," he said. "There's only so much the market can bear."

Johnson points out that commercial properties are assessed at 32 percent, with an additional $1.04 surtax, while residential properties are assessed at 19 percent with no surtax. According to Johnson, there is considerable resentment among business owners about picking up more than their share of the education tab.

"I think that might be one reason why the bond issues failed" in 1998, he said. "Not only are commercial properties assessed at a higher rate, but we also have the surtax. It's too much of a burden on the business community."

But as Greene County Assessor Jean Twitty notes, neither the city nor the county are empowered to set rates of assessment. In addressing the discrepancy between residential and commercial property assessment rates, Twitty said "I wouldn't dispute that, but those assessments are state-mandated. It's not anything that this office decided."

While the idea that a parcel of commercial property, unchanged, will continue to be taxed at higher rates every two years might bother business owners, Twitty said she does not believe it would have a major impact on development.

"I don't think it would keep people from doing what they want to do," she said. "I think everyone has to consider what their tax liability will be, but the property tax is really not significant in an entire project."

Reassessments, Twitty said, just keep up with the changing economic times. "If our studies indicate that the value of a property has gone up, it will be assessed as such," she said. "Our real intent is to keep up with inflation."

Rather than being seen as a detriment to development, commercial property tax might better be viewed as just another cost of doing business, said Springfield Public Schools Superintendent Dr. Jack Ernst.

"My opinion is that we need to frame the subject with the question 'What are we getting for our dollars?'" he said. "If you're Litton or Positronics, don't you want to have quality employees and not have to go out of town to find them?"

While Ernst acknowledges that business owners are paying a greater portion of the education bill, he said that those tax revenues are an investment.

"Where do they expect to find their well-qualified employees if they don't pay an adequate share?" Ernst said. Another bond issue will be in the local tax future.

"I haven't brought a proposal forward on a bond yet, but I will in the next few months," he said. "From my perspective and the school's perspective, all we're asking for is adequate resources. The bottom line is we need the money."

Twitty is certain that property taxes will continue to be a much-talked-about topic, particularly among the local business community, regardless of their real impact on future growth and development.

"All you have to do is look at the market," she said. "We only see real estate increasing in value. Local property tax is always going to be a hot topic and a sensitive issue because it is at the heart of local government."