LITTLE ROCK — The state has suspended funding for property-tax reappraisals in Pulaski County and four other counties after a study found evidence that the counties improperly valued certain types of recently sold property differently from unsold property.
Faye Tate, deputy director of the state Assessment Coordination Department, said officials with Pulaski, Cleburne, Craighead, Perry and Searcy counties were notified this week that their reappraisals are out of compliance with state law and department rules.
The department distributes more than $14 million a year that is divided among the state’s 75 counties to pay for property reappraisals.
To ensure fairness in the setting of appraised values, the Assessment Coordination Department’s rules prohibit counties from appraising a sold property differently from an unsold property, a practice known as “sales chasing.”
In the case of Pulaski County, which receives about $1.3 million a year from the department, the study found that the appraised value of commercial parcels that had not sold in 2010 or 2011 increased by an average of about 58 percent as a result of the reappraisal.
By comparison, commercial properties that were sold increased by an average of about 37 percent.
Tate said the study did not explain the reason for the difference and that her department will investigate further.
The study is “just saying that these numbers here say that there’s an issue there that needs further looking at,” Tate said.
Joe Thompson, chief administrator with the Pulaski County assessor’s office, de- nied setting values for sold properties differently from unsold properties.
He said Assessor Janet Ward will likely appeal the finding of noncompliance to Assessment Coordination Department Director Debra Asbury.
“As I go through this, I’m finding things that lead me to believe that the [study] could have been affected by some things that weren’t taken into account,” Thompson said.
He said that typically, when sales chasing occurs, it results in higher values for the sold properties, rather than lower values.
“If we were going to be sales chasing, we would have done it the other way,” Thompson said.
Representatives of the other counties found out of compliance or their contractors also said Thursday that they disagree with the findings.
Tom Scott, president of North Little Rock-based Arkansas Computer Assisted Mass-Appraisal Technology, which handled the reappraisals for Cleburne and Perry counties, said he was “disappointed” that the department suspended funding to the counties before discussing the findings with him.
“Now I have to fight the perception of I guess being guilty before being proven innocent,” Scott said.
The five counties found out of compliance were among 17 that conducted property reappraisals this year.
After a reappraisal, Arkansas Code 26-26-304 requires the Assessment Coordination Department to conduct a study to ensure the median appraised value is within 90 percent to 110 percent of the median sales price of real-estate parcels sold the previous year.
All 17 of the counties passed that portion of the test.
In Pulaski County, the study found that the median appraised value of residential property was 3.4 percent lower than the median sales price, while the median value of commercial property was 6.5 percent higher than the median sales price.
However, the study, performed on behalf of the department by the property-tax administration consulting firm Almy, Gloudemans, Jacobs & Denne of Phoenix, also compared the average and median increase in value of sold and unsold residential and commercial property and vacant land.
The study found “no meaningful difference” in the change in value of sold and unsold residential property and vacant land in Pulaski County. But it found “unacceptable differences” in the change in value of sold and unsold commercial property.
Thompson said part of the difference could be because the study excluded the top 5 percent of parcels ranked by sales price and appraised value. That likely eliminated most or all of the county’s multimillion-dollar commercial property sales but would still leave plenty of high-priced property that didn’t sell.
“You’re comparing what happened with multimillion parcels with what happened with a $300,000 parcel,” Thompson said. “If a $300,000 parcel went up a little bit, and a multimillion parcel went up a lot, that’s going to skew this.”
The study also could reflect that the assessor’s office this year increased the value of commercial property along U.S. 67/167 in the northern part of the county that had previously been undervalued, Thompson said.
“The properties went up tremendously because the land value went up,” Thompson said.
He said the study also didn’t take into account increases in value that were the result of structures being added to a piece of commercial property.
Searcy County was also found out of compliance because of the difference in values of sold and unsold commercial property, while Cleburne, Perry and Craighead counties were found out of compliance because of differences in the values of sold and unsold vacant land.
Page Kutait, a partner with Total Assessment Solutions Corp. in Little Rock, which performed Searcy County’s reappraisal, noted that the county only had four commercial property sales that were included in the study.
“I’m sure that’s got a lot to do with it,” Kutait said.
Scott said residential lots owned by developers are sometimes valued lower than individually owned lots, which could account for some of the difference between the value of sold and unsold vacant land. He said developers are given a “discount” on land values because they may sell the lots over the course of several years.
Tommy Fisher, president of Delta Mass Appraisal Service, which handled the reappraisal for Craighead County, said his firm increased the value of vacant as well as nonvacant land, in areas of the county that had sales, but did so for sold and unsold property.
He said he plans to meet with Asbury and her staff to explain his firm’s calculations.
“What we’re going to have to do is go in and show them in more detail the process that we went through,” Fisher said.
Front Section, Pages 1 on 09/21/2012