Small Businesses Crippled by the Abatement Process

Monday, May 28, 2012

Ashley Klann, GoLocalWorcester Contributor

Small businesses are hoping for relief from high property taxes, but increased property values may force some business owners to file for an abatement. And legal expenses and filing requirements may prove to be too burdensome for local entrepreneurs.

The Process

The abatement process is available to those property owners who believe their property has been incorrectly assessed, causing them to have higher taxes than they may deserve. In the city’s form for filing for an abatement, reasons are given. Property owners may cite overvaluation, disproportionate assessment, improper classification, or statutory exemption. With the increased valuations, assessments are on the rise.

“There will be a number of people seeking abatements concerning the significant increase in rates for industrial properties,” said Dick Kennedy, President and CEO of the Worcester Regional Chamber of Commerce.

"If there is something specific about the property that you don't think we took into consideration, that's what you want to include in your request,” said Bill Ford, City Assessor. “For example, if we listed you in good condition and you say, "Well, the outside looks really good, yes, but inside there are holes in the wall and it needs a lot of work. Here are the estimates. We need specific information.”

While taxes must be paid, property owners can file for some relief based on the reasons they supply. "You're not really aggrieving taxes, you're aggrieving the value at which your property was assessed," Ford said.

While Ford says that the process is a simple one, he is aware that filing for an abatement has caused some confusion for local business owners.

"Some people are confused. For example, they might say we have a property or a building, but we have 50 percent vacancy right now. We're not looking at your vacancy,” he said. “We're looking at the overall value of the property and what it would be worth for a typical holding period. In other words, how long an investor anticipates holding the property and what the value would be to that investor."

The Problems

Confusing and associated legal fees are two of the concerns facing small business owners, especially those who have never gone through the abatement process. Many are nervous about increasing property taxes and having to go through the filing process.

“I know everybody’s nervous about it. We’re all waiting to see how this will play out,” said Steve Vaillancourt, owner of Advanced Cleaning and Restoration on Washburn Street.

“I think anyone who hasn’t been through the process before will need some support,” Kennedy said. “The Chamber will be running a session on that for people who are in that boat – who have not been through the process before. We want to give them as much advice as we can in regards to how they can file and info they need to bring with them to support their claim to get a lower valuation.”

When asked about past assessments being lower and the confusion and anxiety being demonstrated now, Ford said, “I understand that some of the property owners were not knowledgeable of what their property is worth. A lot of them don't pay attention to their values.”

There is, according to Lt. Gov. Timothy Murray, one surefire way to address the issue in the future.

“The best way to mitigate the issue is to help grow small businesses, so it can help the tax base,” Murray said.

Legal Costs

Small businesses who are denied their abatements can choose another route, but according to Kennedy, it will cost them. Either way, they will face hardships.

“It depends on the decisions made on abatements. If little is done about them, the tax burden on these companies will be substantial. They will depend on the historical perspective of what their tax and property valuation was, and we hope that when supported with some data it will justify a revaluation, but it’s depending on what’s done with abatements,” Kennedy said. “If you’re denied, you can go another route. It’s a legal process, and you’d have to go to the appellate board.”

Kennedy said new business owners will have a lot to learn.

“It’s going to be an education for people who haven’t been through it before. It’s going to cost them to get an attorney if they’re going to appeal them,” he said. “I would say that whenever you have something prolonged with legal representation, the cost is going to be significant.”

Nervous Business Owners

Vaillancourt is aware of the nervousness that the process and property assessments have caused owners of small businesses. While he is one of the more fortunate owners who will not have to apply for an abatement, high property taxes have caused him other anxieties.

“I’m not going to have to file an abatement. It’s music to my ears but it all depends what a particular business’s situation is. If you have one renting space in the city, the tax burden is on them if the landlord’s property went up,” he said. “You’ll start seeing businesses go elsewhere. It depends on the valuation. I was surprised. I thought mine would go up 30-40 percent.”

Although Vaillancourt does not have to worry about facing the abatement process, he feels he is being locked into his property due to taxes.

“I’ve been dealing with this issue for a number of years where I’m nervous – with the tax rates going how they have been. I bought this property in ‘05. I started out with $3,000 (in property taxes), now I’m up to $10,000 dollars,” he said. “With a building like mine, when I’m ready to retire, my taxes are going to be $18,000 dollars. Who’s going to buy that building? Nobody. When small businesses are leasing, they’ll leave and go to another town. As with myself, if they own, they get locked into the property if the tax rates stay high. Leasing is better off in the city. You can pack up and move.”

Benefits?

One question Vaillancourt has about the updates to the assessing process is who will be benefiting.

“I think the assessors were doing commercial and industrial property owners a favor. I think they felt that if they had a true valuation up there with a double tax rate that they would have wiped businesses out of the city long ago. I think they’re purposely doing people a favor and the city a favor as well,” he said.