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- The challenges and the impact of a property reappraisal during a pandemic tonight, on Behind the Headlines.

[intense orchestral music] I'm Eric Barnes with The Daily Memphian.

And thanks for joining us.

I am joined tonight by Melvin Burgess, Shelby County tax assessor.

Melvin, thanks for being here.

- Thanks for having me, Eric.

Also, Javier Bailey is Chief Administrative Officer for the Shelby County Tax Assessor's Office.

Javier, thanks for being here.

- Glad to be here.

- Absolutely.

And Bill Dries, reporter with The Daily Memphian.

We'll go through the details of this, the dynamics of property reappraisal.

Property reappraisals happen every four years.

Although the assessor has a proposal to go to a two-year cycle, which we'll also talk about.

But that includes 350,000 give or take properties in Shelby County, everything from vacant lots to homes, to office towers to malls.

And by and large, property values are up, in some cases dramatically, 15 to 20%.

Melvin, let's just start there.

What did you see overall in terms of the drivers of property values being up and of course, the last year has been a crazy year in so many ways.

And so what challenges did that pose that we were in this both the logistical shutdown of a pandemic, but also the economic impact of a pandemic?

- That's a good question, thanks Eric.

Like I said earlier, this office, we were proactive because the numbers were already being looked at here, forecast here at this office.

So we knew that it was gonna be a big jump.

And that's why we took our program on the road.

We visited every municipality, mayor, alderman, said hey look, we're fittin' to see some tremendous growth in your area.

So we wanted to make sure that they were prepared, as they try and do their fiscal year-end budgets as well as giving them a heads up.

And we started early.

We still are doing some more now.

We started early, visiting all these different municipalities, letting them know it's coming.

We did that last year.

So we want everyone to be aware and of course, so you won't be shocked.

But the main thing is that we had a remedy for when you receive your assessment, that we would walk through it with you and provide any kind of assistance, as you try to appeal it or just make sure that you understand and your assessment is correct.

Now we are receiving inquiries in our department.

So somebody will get right back with you if you feel it's unfair.

But at the end of the day, by state law is that I have to bring every property up to market value, and that's what happened this time.

- Maybe I'll bring in Javier on this part or you can kick it back to Melvin.

But in the pandemic, if we just focus on commercial properties, you could have commercial properties that were leased up had successful businesses in them for three of the last four years.

And they lost that tenant a year ago, and they didn't receive any rent.

How did you account for that dynamic when three out of four years were really good and one year was disastrous?

- So without being too technical, this office primarily, historically has valued commercial businesses based upon their income value.

The law allows us to default to a different valuation which we call cost value.

It's the same valuation process that, to explain it in layman's terms, that insurance companies use.

So as Mr. Burgess has said publicly several times, we went to the comptroller first, and asked the comptroller of the State of Tennessee, if there was any way that the assessor could legally provide some outlet, some relief for these commercial property owners.

The controller's response was that the statute is a statute and without some legislative action there was nothing we can do.

So in a large portion of the commercial properties, we are not using income valuation but using what's called a cost valuation.

That's value in the bricks and mortar.

And that provides some relief within the bounds of the statute.

It's the best we could do.

- Let me go back to Melvin Burgess.

One more question before I go to Bill.

To one extent, you are a former county commissioner, you live here in Memphis, obviously in Shelby County.

You're aware that there are a whole lot of people in economic distress, right?

They had to put a foreclosure moratorium in place, the federal government did.

Again, we see a lot of headlines about property values being up and homes selling before they even get listed, but that's not the story for everyone.

Did you have to blind yourself a little bit, the way Javier talked about "The statute is the statute?"

Do you have to blind yourself to the individual economic pain that some homeowners had?

- Yeah, of course.

This office, our motto, when I get here, the mantra that we put out there is, we value people over property.

We felt the pain too, for those ones, like you said earlier, that know that will come out of these distress neighborhoods.

However, we let them know that if you stay on the street and there's some properties vacant or blighted, those can be taken in consideration as we try to do your appeal, or as we try to guide you through the appeal process.

We're trying to get that out there to say, hey look, we want you to appeal it.

'Cause remember this also Eric is that a reappraisal also helps us to get it right.

Like you said earlier, 250,000 parcels, we all make mistakes.

This is a chance for us to get it right.

But the main thing is, is that we want, that we care on the roads that, the different neighborhoods that are distressed if you've got some options and we want them to know those options but just call us and we're here to assist you 100%, whoever you are.

You're right.

I had to be a little blind because the law is the law.

However, there are some exceptions that we did make to ensure that we stayed within the law.

However, it provided some kind of relief.

In some cases with some of our business schedules, we gave them more time to fill it out or they can bring them here we'll fill 'em out or we can go online and do it with them online.

So we try to provide extra help for those, like you say business owners and others that had turned in their different business person and property schedules.

- Let me bring in Bill.

- As we record on a Thursday, I think almost all, if not all of the reappraisals are out have been mailed?

- That's correct.

That's correct.

- And countywide, this is a very diverse county when it comes to property values and many other things where you might have pockets where the value increased.

You might have other pockets, could even be close by where the values decreased.

But county-wide, what is the growth in values in terms of an average percentage?

- It's between, I'd say right at 20% county-wide.

Of course some of the inner city neighborhoods did not experience as large a growth.

And as some of the outlying municipalities such as Collierville and Germantown.

But when you average it out, it's gonna be about 20%.

- And speaking of Germantown, Germantown had had some flooding damage there within the last four years.

And some of those homeowners have rebuilt.

And this is something that happens in all parts of the county at one time or another, this kind of rebuilding after some kind of setback.

What can you tell those property owners because they've seen their values go up and they're going, wait a minute.

I had this flood, I had this damage I had to fix, but my values went up?

- Bill, I'm gonna answer this, Brother Bailey.

So what we did was back, I think June 7, 2019 my team went out, I think to Shady Creek and did several town halls at different locations.

And what they did was, I got it in front of me now, is we documented everyone who was affected from that flood, every last one of them.

So when my team went out there, Bill, of course I saw some things that it said, and it's just untrue.

We can't make promises here because we have to follow the state statutes.

However we did say that we can provide some kind of assistance, right?

So my team went out, they came here we made phone calls because we didn't hear from a lot of them because a lot of them said, hey, I've already fixed my problem, this and that and that and this.

But at the end of the day when we went back to look at some of the sales, Bill, the sales is still the same, regardless of it was a flood or not the sales are still the same.

I just hate that, when stuff is put out there I know it has a political twist to it but tell the people the right information, that we did come out and we spoke with Mayor Palazzolo from Germantown yesterday on a Zoom call.

And he knew that, we did what we could do to help the residents in Germantown but there's only so much that we can do.

And that's what we stated when we went out there.

However, like we said earlier, then we can help you with the appeal process or any kind of documentation that you bring here to help either lower your assessment, we'll look at it more carefully.

I want to thank this office been doing their work.

Because it was ongoing.

We went out there physically, to talk to 'em, and not just that, made phone calls because we didn't hear from everyone this office made phone calls.

So, when I saw the write up in The Daily Memphian, I was kind of disappointed with it because it didn't tell the truth.

And I can't let that take precedent over the employees who work here who do a great job, who've been here for years.

'Cause I saw where it said, Bill, that maybe some of the cause is because this is a new staff.

No, the staff is not new.

This staff's been here 25-, 30-plus years.

They've been through a reappraisal.

They've been through all of the things that floods or any kind of a disaster that could happen.

So I just wanted to make sure that for the record this office did what they could.

And we went out for everybody.

That's what we do for everybody, Bill.

Not just Germantown but Boxtown, Collierville or Whitehaven or whatever.

And we want to make sure that we provide the same service hard service to make sure that everybody's treated the same.

And that property values are equitable, what it said in the oath as assessor of property that that I assessed properties fair as it pertains to the Tennessee code.

- All right, before we go back to Eric, there is of course this proposal that your office has made to go to property reappraisals every other year.

What is the case for that?

And if there are more frequent appraisals what does that do to kind of the sticker shock that we see from people who, after four years of ups and downs say, wow I didn't expect it to increase this much?

- Sure, thanks for that question.

One thing, like I said earlier is that, we went to the state comptroller's office and there was no remedies they could help us with.

That's when Mr. Javier Bailey and his team had to have the appraisers and people put their heads together and say, what can we do?

So that's when a two-year reappraisal hit the floor, because we know that if you see growth in the first two years, why not capture that growth in those first two years, instead of waiting for four years, because those last two years out of the four-year cycle, it could be flat.

You can experience the same thing again waiting another four years versus waiting the two years.

The two years help you capture the growth as it happens.

A lot of your major cities, Bill, Atlanta, Houston, Dallas, other ones, some of them do annual appraisals, some do two years, some do one year, some do every other year.

I think, we're at a time to where we're gonna have to step out there and our leaders, don't politicize this.

We here trying to help people during this time Eric talked about the pandemic.

This is a good remedy, we feel, not just us, but we have support from the state as well CTAS, a consultant to say, hey, look, this is a great idea.

And we feel that if we do go to two-year reappraisal, I promise that I feel that everyone in the state of Tennessee will try to follow this same model, which is good for this time.

You have to change with the time and the economy.

- We all are very close to this.

But people sometimes do get confused that, the Shelby County Tax Assessor, the assessor does not collect taxes.

That's done by the trustee.

And the tax assessor does not set the tax rate.

And I'm gonna do a really bad job trying to describe this dynamic, which I do every four years which is that by state law, Shelby County I think every county cannot see a windfall, an increase amount of gross property tax receipts as a result of the reappraisal.

So if all the property taxes are up, or property values are up that's then gonna push down the tax rate.

Is that a fair assessment, summary of how this works and that tax rate is set by County Commission in terms of property taxes for the county and then the individual cities.

How'd I do?

- You did good, but just one thing, Eric, I usually don't say anything about it, but when people call me the tax assessor, see what happens here in the state of Tennessee, they're much smaller than we are.

So guess what?

They assess property and they collect the taxes.

So all I do here is assess the property.

But taking that into consideration, you're correct.

When the reappraisal was done, they're called the state Board of Equalization.

They will come in and lower the tax rate.

I know when I was on the County Commission, in 2017, I went through a reappraisal.

And of course, we resetted back no more, no less.

So it's up to, like you said earlier, you cannot realize a windfall from reappraising.

That's why the state comes in and lower the tax rate.

And what you pay, as far as your mortgage and your mortgage escrow, depends on what the County Commission sets as far as the tax rate.

I think now the tax rate is over five.

So you're exactly right.

- And I can remember in the '08, '09 cycle, a kind of reverse had happened where the housing market had been exploding.

The property market had been exploding, values were way up.

And then the crash came in about '08 but the property tax reappraisal that hit in '09 reflected more of the boom than the bust.

And I can remember your predecessor Cheyenne Johnson talking about how they were kind of stuck.

And because they're on a four-year cycle it was gonna be four years, and she was, I think, interested, I don't wanna put words in her mouth, in the notion of a two-year cycle.

- Yeah, and that's the beauty of the two-year cycle.

Because in the two-year cycle, it's not just catching the upswing but you also reflect the downswing and the homeowner, the everyday homeowner gets the benefit of our being able to bring those values down when they're going down, rather than leaving them stuck at four years, way up.

- I'll stay with you, Javier I think on this.

Just some logistics, again, all of us are very close to this.

Back in the day, I think there was a notion, some decades ago that there were people from the tax assessor's office who went to homes who measured at least the outside of the house, who took pictures.

It was a very manual process.

And if not, I don't know that every property was physically inspected, but there was much, much more of that.

The average person's home, how is it assessed now?

- So we still are required by law to physically do a visual assessment.

That means to lay our eyes on every single piece of property in Shelby County.

We use something called pictometry now.

So what that means is, is we have like GIS or what appears to be satellite type flyovers where we can see the property and view it to see if there are any physical changes.

We likewise have appraisers that ride the street and they literally will go and take a look at every property.

They don't get out and measure it 'cause we can measure it now utilizing other kinds of technology.

But now, if there are any additions or demolitions done, any kind of modification done to a property where a permit is pulled, then we do send someone out to physically lay hands on that property to walk the property to pull tape and measure it as well.

- Just before I go back to Bill, if a property, and we've talked about the appeal process, if they want to know more about the appeal process, they can either go to the website or they can make a phone call, is that correct, Javier?

- Yes, yes.

And we now have added live chat to our website.

- Okay, and the phone number for those?

- 901-222-7001.

- All right, let me go back to Bill.

- Some folks out there, when we talk about an appraisal every other year, they might be thinking, oh, okay, well the assessor's office is going to have to gear up for this.

But the assessor's office, even with a four-year cycle your appraisers don't sit there and wait for four years to roll around to begin looking at property, do they?

- That's right.

Javier, you can answer this.

But what I do know is the technology that we currently have you can do way more, you can do more than normal.

And that's why we went before the County Commission.

Of course, the first thing they ask, will we have to beef up our staff?

No, we have the technology to do that and got the experienced people to make that happen every two years.

- Again, you're not starting from scratch with a reappraisal either, because in those interim three years now, you're still looking at property values and determining it.

It's just that is not part of the formal reappraisal.

- That's right, Bill.

Another important thing is that we always got to present our plan to the State a year ahead.

We're on top of it.

We have to be on top of the reappraisal part just because you're closely looked at by the comptroller's office to make sure 'cause Shelby County's the biggest county.

And we lead the way in a lot of things.

A lot of things were done this time, we had to have more information, which I understand.

But the main thing is, is that we just try to make sure that we stay in compliance with the state comptroller's office.

- Do you understand the hesitancy of the Shelby County Commission?

This is a big decision for them as well and they've requested more information.

And you indicated at the last commission meeting that sure, we'll be happy to provide you whatever you're looking for in terms of mainly looking back at past reappraisals to see the impact of those.

- Sure, and also to add to that, Bill, because I sat on the County Commission side of it I know, for the most part how it works.

But my thing is, Bill, is I would hope that people would take the time to understand.

And you can call our office, you can call Mr. Bailey.

Like I told them at the last meeting, we'll come and do a one-on-one with you to see if you understand and not, put your own flair on it and it's not correct.

Because I think when we send out incorrect information, all it does is cause a lot of confusion.

And what I told them too Bill is that there is no Republican way to do assessments.

There is no Democratic way.

This is all about trying to help Shelby County during a really tough time during this pandemic.

And I just hope that people will do their due diligence as leaders.

Because my office can only do so much as we do town halls, you still got a lot of people out there.

But if we can just work together and make sure we get out the right information, I think it'd be a lot better.

- One question I'll have, either of you can take this.

We talk a lot on the show, it's debated constantly in county and city politics the PILOT tax incentives, it's a property tax incentive a reduction in property taxes to spur development.

They are almost always controversial.

There's been some talk of maybe reforming.

But then again there's always talk of reforming and changing the PILOT system.

Maybe it's Javier, can you tell me the dynamics without getting into the politics of it?

If a property gets a PILOT, a ten-year PILOT, reduced taxes, the property was valued at a million, let's say when, when that PILOT was given.

The PILOT reduces the tax burden by 90% or something.

You all do reappraise that, I assume, that property under a PILOT.

Does it impact the value and the taxes that property owner will pay?

- Prior administrations did not put a lot of effort in keeping the market value of properties under a PILOT on the record at market value.

We now, as a result of the Electrolux debacle, that's my term, we now are maintaining these properties at market value.

Of course they don't pay full value in their property tax obligation, but our records are reflecting market value for these properties.

- Electrolux being the big manufacturing facility received a big major PILOT, I don't know, gosh, 10, 12 years ago now.

And ultimately, left the city behind.

But go ahead, I interrupted.

- So yes, those properties are taken into account when we set up our models, and our statistical analysis for valuation.

But they're not reflected in the revenue that the county or city receives.

Now, since you asked, I gotta say it, [laughing] that's a lot of lost revenue.

It's a lot of lost revenue.

And Mr. Burgess has been quite vocal in admonishing and encouraging local leaders to pay attention to the amount of revenue that's being absorbed by PILOTs and not going into the coffers.

Because the governmental obligations for services and public works and so forth, it doesn't end.

And that means that the homeowners and those property owners that are not privileged to get a PILOT are having to carry that burden even more.

- Melvin, again, you were a county commissioner.

You voted, you were, I'm sure, in the middle of various debates about PILOTs and how they're used.

Should those PILOTs be reflective, as Javier just mentioned, they may still be reduced to spur development but incrementally increase as the values increase?

- Sure, that's a good question.

The first thing is that, when I first took this office, I think we made some meetings or some of our first meeting with the County Commission.

We talked about the PILOTs.

And I want everyone to know this, is that this office is not against PILOTs, it's a good thing for cities.

However, they have to be governed by which, let's say, if you had an investment to send your kids to college even before your kid get to college, right, you start taking money out of there, because maybe some repairs need to be done in your home.

Some emergencies might need to be done.

Then all of a sudden it's time for your kid to go to college and guess what?

It wasn't no money put back.

So when we give out PILOTs, what's the economic impact that we can see on paper that we can see as leaders, say, you know what?

This did impact Memphis and Shelby County.

So that's the fight that we always had on the County Commission, because we tried to get a voting member to be on the EDGE board that makes a decision on the PILOTs from the County Commission, but we aren't successful because I think how it was written, that I guess they didn't want no oversight with any elected bodies like City Council and County Commission.

But if I know what I knew today as far as in this office and the city's office in PILOTs and other deductions that I would've done things a lot differently or I would've been a voice a lot different.

But I'm all for PILOTs.

But I think we need to do a better job in governing PILOTs.

- Let me see if I can do another bad job of describing the process from here.

The roles have been presented.

The reappraisal has been presented.

It has to be voted on and accepted by, I believe the County Commission, am I right about that?

And then that appeal process does begin and goes on people, individual homeowners property owners, big owners of multi-family can all appeal that process.

But then it goes to the individual legislative bodies.

The County Commission has to vote to say, all right here's what the tax rate's gonna be, City of Memphis, City of Collierville and so on and so forth.

Once they have that baseline set, of here's where the property values are, right?

- That's right.

- OK. That is all the time we have this week.

Remember if you missed any of the episode today you can get the full episode at WKNO.org or you can download the full podcast of the show from The Daily Memphian site or wherever you get your podcasts.

We'll see you next week.

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