Tax Review Board

This article is in today's St. John Source, which you should read by going to www.stjohnsource.com.

Judge: Tax Review Board Needs Beefing Up Before Bills Can Go Out
By Ananta Pancham — February 19, 2010

The government's intentions may be good, but after months of hearings, there's still not enough evidence to show that the issue at the heart of its long-standing property tax court battle – whether the territory has a functioning Board of Tax Review – has been resolved, according to District Court Judge Curtis Gomez.

In a 33-page opinion handed down Wednesday, Gomez denied the government's motion to lift the court-ordered freeze on property tax bills and said he will continue to monitor the board on a biannual basis until he determines it is functioning properly and in full compliance with the provisions of the 2003 settlement agreement that granted the injunction and what was essentially a complete overhaul of the territory's property tax system.

At this point, the government needs to prove that the board is meeting regularly and has a process in place to deal with the backlog of appeals that have been pending for more than 10 years, he said.

"To its credit, the government has implemented some of the familiar markers of due process, including providing notice of hearings and scheduling hearings," the judge wrote. "Notwithstanding those inroads, the conditions that motivated this lawsuit have still not been completely addressed. In spite of administrative progress and more frequent hearings, taxpayers with appeals pending for 10 years still have not been provided a full hearing at which to raise their objections to the real property taxes they challenge."

And if the board can't help its "longest suffering taxpayer-appellants," it can't claim to be functioning at "constitutionally required levels," Gomez added.

The whole point of the lawsuit – filed in 2000 by a group of commercial property owners challenging what they claimed were inflated assessments – and the subsequent settlement agreement was to correct the government's "constitutionally violative practices," Gomez wrote. So, the court should only lift or modify the injunction when the Board of Tax Review is able to provide all taxpayers with the due process guaranteed in the Constitution, he added.

And for those residents who have had to wait 10 years for a hearing, it can "hardly be said that a clear and certain remedy is at hand," the judge said.

But that doesn't mean the government can't collect taxes. Repeating what he has said in court for the past two years, Gomez wrote Wednesday that the government can issue bills at the 1998 assessment levels – it just has repeatedly chosen not to do so and "seems content to repeat the unfounded assertion that it cannot collect taxes, as if repetition makes it so."

Government attorneys have contended that it cannot collect taxes at the 1998 levels because of a new government law that sets up a new rate structure and allows the bills to be issued at the revised 2006 levels.

"The government clearly cannot issue bills at the rate that the Legislature has already repealed," government attorney Carol Thomas-Jacobs has said in court.

Gomez has disagreed with the government's position, saying that the territory's tax assessor can determine when the bills will and won't be issued. At most, the new law lays out requirements for how real property in the territory must be assessed, but doesn't force the government to immediately issue the 2006 bills at the new rates.

The court case has prevented property tax bills from being sent out for fiscal years 2006 through 2009, which officials say has heavily contributed to the territory's precarious financial state.

But the government did score one minor procedural victory Wednesday – which may be short-lived since attorneys for the commercial property owners have already filed a motion asking Gomez to reconsider his decision.

In his ruling, Gomez vacated a portion of the settlement agreement mandating that assessments be conducted in accordance with the Uniform Standards of Professional Appraisal Practice -- a national guidebook for real estate, personal property business and mass appraisals.
Gomez said Wednesday that the mandate was tied to a 1936 federal statute that has since been repealed, and therefore doesn't still need to be included among the conditions of the settlement agreement.
The statute required that property be taxed based on its actual value, and prevented the government from taxing real property -- regardless of its classification or use -- at different rates.
Attorneys for the commercial property tax owners lashed back Wednesday, saying the settlement agreement was also based on local law, which now requires properties to be assessed at fair market value.
Both terms – fair market and actual value – mean the same thing so the government's obligation continues, the motion says.