With budgets heavily reliant on commercial property taxes, these cities are under pressure, leaving property owners exposed to rising tax burdens and more frequent appeals. What strategies can property owners use to protect themselves and navigate these challenges?
In previous RethinkTheNews posts, we’ve explored the growing challenges faced by cities like New York, Chicago, and Boston, where declining commercial property values have led to significant revenue shortfalls. However, new insights from a recent Tax Policy Center article, published in May of this year, highlight similar risks in unexpected places - cities such as Austin and Boston, which are particularly dependent on commercial property tax revenue.
What makes this article particularly notable is how it measures the real impact of lower values by creating a correlation between the decline in commercial property values and how reliant different cities are on property tax revenues from this particular asset class. The authors assert that revenue shortfalls were more manageable in places that didn’t necessarily put as much weight on commercial property.
The most vulnerable cities were those that prior to the onset of the pandemic relied heavily on property tax revenue such as Boston, or those cities that experienced particularly high property value growth prior to the pandemic. Austin is a perfect example of such a place. At the other end of the spectrum, cities like San Diego had a much lower reliance on commercial property tax revenue.
The overall impact of this phenomenon is reflected in a chart presented in the article that shows the forecast of budget shortfalls for 13 American cities. Boston, Dallas, and Austin are at the top of the list, whereas San Diego is at the bottom.
A second forecast was conducted trying to estimate how much revenue from other sources would a city need to raise to fund its expected 2031 expenditures. In other words, what is the shortfall if values drop but commercial property tax reliance remains the same?
Of course, these statistics could impose consequences in areas like Austin or Boston where property value declines could be significant. From a high level, revenue shortfalls could result in increased property tax rates, or budget cuts, but more significantly, it increases the risk of assessment inaccuracies.
As cities adjust to the evolving market conditions, there's an increased likelihood of assessment discrepancies. Fluctuating property values make accurate assessments difficult, and this can lead directly to appeals and disputes. These are the precise situations where itamlink could be particularly beneficial in tracking and managing these appeals, ensuring accurate valuation data and minimizing penalties.
Another consequence could result in heightened scrutiny of portfolio owners. In cities like Boston and Austin, where local governments are heavily reliant on commercial tax revenue, there may be increased pressure on property owners to shoulder a larger tax burden. As a result, property owners could face more aggressive assessments, triggering a need for accurate, real-time property tax management software like itamlink to help manage appeals, deadlines, and financial planning across multiple jurisdictions.
By utilizing itamlink, property owners can better manage these risks by centralizing property tax data, thereby ensuring assessment appeals and disputes are handled efficiently across various cities. The software also allows users to monitor real-time changes in tax liabilities, which in turn allows for more proactive financial planning. Its integration capabilities into financial systems like Yardi, Nexus, MRI, and Anybill streamlines the property tax manager’s ability to navigate through complex tax scenarios triggered by fluctuating values and revenue shortfalls.
Together, these features can significantly reduce the risk of overpaying taxes or missing out on opportunities to challenge incorrect assessments.
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