As Floridians are bombarded by headlines portending 10-30% losses in property values due to the BP oil spill, many property owners are probably wondering how this will affect their property tax bills. This article will explain how and when the oil spill could affect property tax assessments, current litigation regarding these issues, and Governor Crist’s latest Executive Order authorizing interim assessments for affected properties.
How will the oil spill affect my 2010 property tax assessment?
Unfortunately, your 2010 taxes will be based on the value of your property as of January 1, 2010, prior to the explosion on the Deepwater Horizon and the subsequent oil spill. Thus, it is unlikely that Floridians will see any reduction of their 2010 assessments as a result of the oil spill until at least 2011. Some eager class action lawyers have jumped the gun a bit by filing a class action lawsuit against the Property Appraisers of all affected counties, seeking an order requiring them to consider the effects of the oil spill in calculating the 2011 assessments. However, since the Property Appraisers are already required by state law to consider any pretty much any conditions that affect the fair market value of a property, that lawsuit would appear to be a bit premature, to put it nicely.
What if my property value is negatively affected by the oil spill?
The Property Appraisers are required to consider such factors as the condition of the property, the present cash value of the property, and, for income-producing properties, the income from the property. Thus, if sale prices of properties along the Gulf coast decline as a result of the oil spill, or if hotels see greater vacancies, those factors will influence the 2011 assessments. The primary case regarding contaminated property in Florida is Gulf Coast Recycling Inc. v. Turner, in which the court affirmed the value adjustment board’s reduction of the value of an apartment complex to $100 where the evidence showed that the costs associated with the cleanup of the contaminated property exceeded the price that would be paid for the property.
Of course, in the case of an oil spill, the property may not actually be contaminated as of the assessment date, but may suffer a loss in value due to its proximity to the contaminated waters. This is commonly referred to as a “stigma.” While Florida has not directly addressed this issue, other state courts have acknowledged that a stigma factor can affect property even if the contaminants are removed, and that stigma may be considered in determining the property’s value for tax purposes.
Are the Property Appraisers required to make a reduction to properties affected by the oil spill?
While the Property Appraisers are required to assess all property at its fair market value as of January 1st, there is currently no specific requirement that they make a specified percentage reduction to assessments of property affected by the oil spill. That said, last year the legislature passed a statute providing for special tax treatment for property affected by defective drywall. Thus, it is always possible that we will see similar legislation for properties affected by the oil spill.
Didn’t the Governor issue an Executive Order regarding assessment of properties affected by the oil spill?
Today, Governor Crist issued Executive Order 10-169, which authorizes (but does not require) Property Appraisers in the 26 counties in which he has declared a state of emergency to provide “interim assessments” of any properties that may have suffered a loss in value due to the oil spill. These interim assessments will not affect the property owners’ tax bills. Rather, the purpose of the interim assessments would be to assist property owners with documenting the loss in value to their property so as to help substantiate their claims submitted to BP.
I am sure that the Property Appraisers are going to be a bit surprised by this Order, as it is generally not their constitutional duty to serve as expert witnesses in their constituents’ private lawsuits. Also, as the Order is not mandatory, many property appraisers may choose not to provide this extra valuation service. Thus, rather than relying on the county Property Appraisers to assist them with their claims, property owners would be wise to compile their own evidence of any diminution of value, especially if it can be attributed specifically to the oil spill.