The Pima County assessor is suing 30 businesses in Arizona Tax Court, a number of cases without recent precedent. The number of suits is also raising concerns among other county officials, one of whom questioned the ethics of filing so many.
Last year, Assessor Bill Staples was the plaintiff in three State Board of Equalization decisions appealed to the court, which is a part of Maricopa Superior Court and handles tax-related disputes, according to a Star review of online court records.
As of Wednesday, the current year’s total exceeds the total number of cases since 2007 and appears to be the largest number of such appeals filed by any Pima County assessor since at least the early 1990s. Staples filed nine cases — the second highest figure — in 2005, the year after he was first elected. The state board hears secondary appeals of property valuations in Pima and Maricopa counties.
Maricopa County Assessor Paul Petersen said his office rarely files such appeals, and has not done so this year. Appeals are reserved for when he feels the board has “usurped its authority” or incorrectly applied the law in ways that “affect more than just one parcel of property,” Petersen said.
If the assessor wins the cases, that could spell higher tax bills for defendants, as well as a marginally smaller portion of the county property tax levy for other taxpayers to pick up. But losing could spell significant attorney’s fees to be paid by the county, and litigating the cases itself comes with costs.
When asked for comment on this year’s cases, Staples pointed to his oath of office, which requires assessors in the state to “truly and fairly determine the valuation, without favor or partiality, of all the taxable property in said county at its full cash value.”
Other officials interviewed by the Star said a recent decision by Staples’ office to no longer send a representative to State Board of Equalization appeal hearings could be at play. Without a representative in the room, rulings are less likely to go his way and more likely to be appealed by Staples, they said.
County Administrator Chuck Huckelberry said there’s also the possibility that Staples’ suits are intended to dissuade would-be appellants from contesting assessor decisions, something that — if true — would be “marginally ethical. In fact, I don’t think that is ethical.”
Asked about the likelihood that intimidation is a factor, Huckelberry said, “Certainly it would appear so, if the behavior is repetitive and consistent, which it sounds like it is.” Staples declined to respond to Huckelberry’s statements.
In the 30 cases so far this year, Staples is appealing decisions made by the state board to reduce either the full cash or limited cash value of parcels owned by the defendants.
Some of the reductions were substantial, as with a property owned by HSL Tucson National Apartments on North Shannon Road, the full cash value of which was dropped from nearly $42 million to $33 million by the state board. Others were more modest, like three parcels off East Tanque Verde Road owned by the Magna Investment & Development Limited Partnership, which were each dropped $35,000 for a cumulative $105,000. The median parcel reduction was around $300,000, according to figures included in Maricopa County court documents obtained by the Star through public records requests.
County assessors are tasked with determining full cash value, which is intended to reflect market values. While not used for property tax purposes, full cash values set a ceiling for limited cash values, which are used to calculate all county primary and secondary property taxes and whose annual increases are capped by state law. For many of the parcels in the suits, county primary property tax burdens would fall by around $750 for every $100,000 reduction in the limited cash value, according to calculations reviewed by a county finance official.
It appears that in most cases the state board’s decisions would lower limited cash values, and thus property taxes for those properties, but in a number of cases they likely would not, meaning that there are no immediate property tax impacts at stake in those cases.
NOT SHOWING UP
Since last year, Staples has not been regularly sending an office representative to the state equalization board hearings, where they previously were on hand to field questions from hearing officers. Staples has said he made that decision because there is no internet access in the hearing rooms, making it difficult to verify new information sometimes brought by petitioners.
But members of the state board said that not having an assessor representative in the room complicates those hearings, and also may make rulings unfavorable to the assessor more likely.
“I would assume that there is at least the possibility that without an assessor there to answer certain questions, there may be a likelihood that more decisions went in favor of the petitioner, and those would be decisions that Mr. Staples did not agree with,” longstanding board member Ted Sitterley said.
When asked if not sending a representative puts Staples at a significant disadvantage, fellow member George Garcia said, “without a doubt.”
Local appraiser Steven Cole, who represented one of the 30 defendants as a property tax agent when they appealed their valuation earlier this year, didn’t weigh in on what role — if any — Staples not sending representatives to the board hearings is playing in the numerous lawsuits. He did say he has “a lot of confidence” in the board members’ decisions.
Whatever the explanation for the suits, Cole said they could effectively threaten the right of owners to appeal their property values. That’s because defending yourself in tax court can be costly and, for owners of lower-value properties, the potential benefits of fighting their cases may not justify the risk. He said an attorney could cost $5,000 to $7,000 to defend tax court cases, plus additional fees.
“Unless you’re a very, very big hitter, this whole scheme of the assessor has frankly, in my opinion, gutted the appeals process,” he said.
HACIENDA DEL SOL
An Oct. 10 letter sent by partners with the Foothills resort Hacienda del Sol sheds some light on how at least one of these cases has proceeded.
Staples appealed to tax court in January, several months after the state board had dropped the resort’s full cash value from $6.2 million to $3.8 million, one of the larger percentage drops among the 30 cases. Most of the other cases were filed since September.
To avoid a potentially expensive and drawn-out court battle, the resort reached out to Staples to settle the case at the original $6.2 million value, according to a letter sent by the resort’s partners to Huckelberry and obtained by the Star.
“The assessor rejected that offer, instead seeking to increase the value over the assessor’s own value, thereby trying to penalize the Hacienda del Sol for exercising its tax appeal rights in the first instance, and burdening our business with litigation costs,” the letter reads. When asked to respond to this claim, Staples again directed the Star to his oath of office.
“That’s astounding,” Petersen said, responding to a summary of the partners’ letter.
In a Nov. 3 court document dealing with an unrelated 2014 Staples case, Maricopa Superior Court Judge Christopher Whitten wrote that “there is no bar to the assessor seeking a valuation higher than previously sought.”
The Pima County Attorney’s Office, which is representing Staples in this case and most of the others, also subpoenaed the resort’s lender, asking for emails, appraisals and other correspondence, which “risked putting a strain on our banking relationship,” the partners wrote.
“While the city of Tucson and Rio Nuevo District make economic concessions, which encourage competition against ours and other county properties, we are discouraged by the assessor from making further investment,” the letter said.
Michael Stilb, one of four partners to sign the letter, directed the Star to the resort’s attorney on the case for comment. The attorney also declined to comment.
In the spring, Staples hired the firm TS Worldwide to appraise the resort, a contract worth up to $30,000. The first two phases of work were estimated to cost $16,000, and the hourly rate for expert testimony and related work would be $500, according to an April letter from appraiser Suzanne Mellen to Staples. Up to $2,000 in travel costs could also be charged “in addition to our fee.”
Huckelberry said such litigation costs would only be justified if the value determined by the appraiser exceeds the settlement offer enough to “offset” the costs with greater tax receipts.
When asked about resolving the other cases, Staples said his office “will settle all valuation cases at the appraised value (as determined by an independent state certified appraiser), which could be above or below the SBOE value.” As with the resort, he said he intends to hire third-party appraisers for the other valuation cases.
Petersen said Staples is within his right to file the appeals, and that on cases involving millions in valuation, hiring outside appraisers can be sensible. But when the differences in dispute are significantly smaller, “I would want to consider the resources necessary to do that and whether that’s worth it,” he said.
“I just don’t see the cost-benefit analysis, I don’t see the benefit to anybody,” he added later of cases in which the valuation and property tax stakes are low.
When asked if the large number of cases might require the county attorney to hire outside help, Huckelberry said he hasn’t heard any concerns about additional workload. He is concerned that the defendants could ultimately be awarded attorney’s fees in some of the cases.
The board of supervisors is not privy to many case details because Staples is the client, according to Supervisor Sharon Bronson, who told the Star that the assessor is pursuing the cases “on the backs of taxpayers.”
“We need to review what he has cost the county to date and adjust his budget accordingly,” she said.
Staples has previously told the Star that his office is consistently under budget and that appealing state board rulings is sometimes necessary to ensure fairness for all taxpayers.