Open season on tax assessments.

• Author: Klein, Walter A.

Now may be the time to take on your tax assessor. As a result of the federal deficit, more of the costs associated with public services and with maintaining and developing the infrastructure will have to be assumed by states, counties, and municipalities. This means higher property taxes. More than likely, commercial and industrial property owners will be viewed as possessing the "deep pocket." Unable to market their properties because of a recession, credit crunch, and construction glut, what can these owners do? On answer is to petition for a lower tax assessment, especially when environmental contamination is present.

Simple stated, tax revenues are derived by applying a tax rate to assessed values. Once set, the tax rate (e.g., dollars per thousand dollars of value) is difficult to dispute because it is universal, uniform, and legislated. On the other hand, the assessed value factor is more property-specific and therefore easier to challenge as arbitrary. Not only may assessments originate in a government office long on authority and short on capability, but they also carry inherent weaknesses. Generally, they are out of sync with national trends and business cycles. Assessment methods are generally not very rigorous, and the findings are highly variable. Adjustments are periodic and often accomplished by extrapolation or superficial site inspections. At best, tax assessments are gross valuations intended to coincide with or parallel market prices. In turn, market prices usually conform to appraisals, which are products of reasoning applied to variables such as location, improvements, surroundings, and comparable sales.

So the loop closes: appraisals governing the marketplace, assessments governing taxes -- a cycle of imperfections. In fact, when environmental contamination is present, the end results can be dramatically incorrect. Why? Because neither appraisals nor assessments generally include any discount for environmental problems.

Appraisals traditionally contain a "limiting condition" clause openly acknowledging that environmental conditions are not part of the valuation. Likewise, assessments ingnore the presence of environmental problems, in part because special training and equipment are required to detect pollutants. For example, a microscope is required to identify asbestos; field sampling and laboratory analysis are needed to characterize contaminants; special tests are essential to detect tank leaks and airborne pollutants. These are tasks for environmental specialists, not for tax appraisers.

The big surprise, however, is the number...