Just a mile from Atlantic Station, Westside Provisions changed ownership in 2016, and the $128 million sales price reflected its value as one of the city’s premier shopping and dining destinations.
Two years later, however, if you examined the Fulton County property appraisers’ determination about the property, known for restaurants like JCT Kitchen and Ormsby’s, you might conclude that the buyers were fleeced. County assessors sent the new owners, a partnership group that includes real estate powerhouse Jamestown Properties, an appraisal that valued the property at $51.6 million — about 60 percent less than the purchase price.
Such a dramatic undervaluing of a commercial property for tax purposes is not unusual — not in Fulton. In fact, it’s almost the norm, according to an Atlanta Journal-Constitution/Channel 2 Action News investigation that found a pattern of dozens of apartment buildings, warehouses, office complexes and shopping centers in the city of Atlanta that are valued for property tax purposes at far less than what buyers paid for them in recent sales.
Undervaluing commercial properties means that the city, Atlanta Public Schools, Fulton County and community improvement districts may not receive tens or even hundreds of millions of dollars they could be owed in annual property taxes. Critics say that shifts the burden to pay for vital services such as police, fire, the courts and public education to other companies and homeowners.
The county assessor’s office appraises property each year to determine how much it is worth. It then sends an appraisal notice to property owners and a tax assessment. The assessment is 40 percent of the appraised value and is used as the basis for property tax bills.
The AJC and Channel 2 examined 264 multi-million dollar commercial property sales since 2015 that were recorded by the research firm Databank Atlanta. The analysis found 119 properties that sold for more than twice the value they were appraised at by the county.
"The result of that is really the residents of this town are being made fools of by the big-moneyed interests, the big property owners, who are not paying their fair [share] by any means," said Julian Bene, a former board member of Invest Atlanta, the city's economic development agency. "It's this untold story of big money getting away with highway robbery."
The reporters' analysis comes as residential property owners in Atlanta have seen their values soar in recent years. Fulton, meanwhile, is locked in litigation with the state Department of Revenue after the state tax commissioner refused to approve its 2017 or 2018 tax digests after county leaders froze residential values at 2016 valuations.
Meanwhile, the county didn’t freeze commercial values and has maintained that they are accurate after years of failing to keep up with assessments as property values tanked, then rose following the recession. According to the analysis, the county has increased commercial values in subsequent years, though in many cases, they are still significantly lower than sales prices.
Dwight Robinson, the Fulton County chief appraiser, strongly disputed the AJC and Channel 2’s findings. Robinson said “nothing could be further from the truth” than the assumption that Fulton is undervaluing commercial property.
“We don’t go around just valuing properties low because we don’t know what we’re doing,” he said. “I can debunk every last one.”
About a year ago, Bene started to notice after marquee properties in Atlanta sold, the county would routinely assess the property for tax purposes at a value far under the sales price.
He broached the subject with the Fulton commission, the tax assessor’s office and other leaders, he said, but their responses didn’t satisfy him. He then brought his figures to the AJC and Channel 2, which conducted a broader analysis using sales during the past four years.
Bene said the potential undervaluing affects not only recent commercial sales, but properties that haven’t sold. Those properties are valued in part based on comparable transactions, meaning hundreds of other properties might be undervalued by comparison. The result, Bene said, could be that the taxing entities are leaving hundreds of millions of dollars each year on the table.
“What I was finding again and again was that these offices, hotels and apartments and so forth were selling for three- or four- or even five-times what they were assessed for,” Bene said. “I will tell you my house ain’t going to sell for five-times what it’s assessed for.”
Robinson said there are often good reasons for the gap between sales prices and county assessments.
In some cases, he said, values were frozen after a property owner appealed, and he could not raise assessments in that year. In others, the county’s Development Authority owns the land as part of an economic development incentive, and he cannot fully value the property until the January after a certificate of occupancy is issued.
And sometimes, commercial property owners, wary of high tax bills, spend money on lawyers who can argue that their assessments should be altered. While many residents can’t afford to fight their valuations, Robinson said, commercial owners can.
He also said there are instances where sales prices, though high, may not be indicative of a property’s fair market value. In some cases, Robinson said, businesses will trade properties or make other exchanges that show as sales, but really aren’t.
To revalue properties that are sold through something other than an arms-length transaction would be unfair to other owners in an area, he said, who could be penalized based on faulty information.
“You’re not being fair to us if you paint a picture that commercial is low. It is not,” Robinson said. “I would love for you to tell folks that some of those are low for good reasons.”
But the result is the same. English Norman, who lives in Chastain Park, said her property taxes have gone up significantly in seven years. She’s happy to pay taxes if it means roads are maintained and schools are funded, but she wants commercial owners to pay what they owe, as well.
"If they're not contributing their fair share, it just puts the burden back on the homeowner," she said. "I don't understand how they feel comfortable with that. If you're in a community, why wouldn't you want to support a community?"
Norman said the breaks are especially troubling when they go to wealthy developers who are simply increasing their profits when they avoid taxes.
Matt Bronfman, the CEO of Jamestown, said he wasn’t familiar with the assessment for Westside Provisions. He planned to look into it, but did not get back to the AJC before deadline Thursday. But Westside Provisions is far from the only property where the value appears to be low.
A 10-acre parcel next to Two Urban Licks that used to be a Georgia Power facility is another that appears undervalued. In October 2017, developer New City paid $34 million in a bidding war with other real estate companies for the coveted site along the Beltline just south of Ponce City Market and the Historic Fourth Ward Park. It was seen as one of the city's most sure-fire development sites, with Beltline frontage and views of the award-winning park.
Indeed, New City has proposed a $750 million mixed-use development, with offices, retail and apartments. But to Fulton, the land was worth a mere $4.9 million in this year’s tax digest, about one-seventh of what New City paid last year.
And Krog Street Market, which sold in April for $45.8 million, was valued at less than a quarter of that price — $10.7 million — after the previous owner disputed its value in 2016, and won its appeal at the Board of Equalization. With that win, the Fulton Board of Assessors was prohibited from raising its assessment for three years, even as the value jumped. Representatives for New City and for Asana Partners, which owns Krog Street Market, could not be reached for comment.
Lee Morris, a Fulton commissioner, took an interest in the issue after Bene brought him his findings. The fact that some properties appear to be undervalued should make Atlanta homeowners “pretty upset,” he said.
“We’re all in it together,” Morris said. “The commercial property owners make sometimes a very nice living and a very nice profit and ought to be paying their fair share of the general fund services of the city, the county and the school system they’re in. It is a question of fairness.”
Morris said commercial property owners have several structural advantages to maintain lower tax bills. Many of the biggest commercial property owners already get breaks in their taxes, through incentives they are granted in exchange for new jobs and the promise of higher property taxes in the future. The Development Authority of Fulton County and Invest Atlanta routinely offer such tax breaks for big jobs deals.
Critics say local incentives have often become an unnecessary giveaway, and if they aren’t needed, they can also lead to less money for cities, counties and school systems.
J.C. Bradbury, an economist at Kennesaw State University, said undervalued assessments on commercial property act as “a shadow incentive,” even if that’s not the intention of policy makers.
“Homeowners and other business owners who aren’t getting these benefits are the ones bearing the costs,” he said.