In one corner of the Commonwealth, McLean, it seems that those in the most expensive properties have a hidden tax subsidy -- with homes assessed at significantly lower rates than those of their fellow citizens not residing in multi-million dollar residences.The imbalance in tax assessments leads to, easily, $millions of avoided taxes -- taxes that would otherwise go to provide public services, like schools and emergency services and parks. Either that revenue comes from others -- who are paying more than their fair share -- or the County is providing less services than it could with a fair tax situation.
Now, we should ask: Is this situation isolated to McLean or is this a larger issue? I don't know the answer -- but it concerns me that the Mclean situation could be duplicated elsewhere.
As to why there should be concern, follow me over the fold for some details about the McLean situation and see whether you share my concerns ...
Hickory Hill, the famed mansion on Chain Bridge Road that put McLean, Virginia, (in Fairfax County) on the map as the home of the Robert Kennedy family, was put up for sale. It seems to be a true bargain, discounted from the original asking price of $25 million to the more affordable $16.5 million. (Discussed in this early 2006 Washington Post article -- note, a preview of archived article.)
But even more notable than the price cut is Fairfax County's "market rate" 2005 assessment of the house at $5,927,680. (Hickory Hill Tax Assessment Page)
According to its website, Fairfax County "has an annual assessment program where all real property, residential and commercial, is assessed at 100% of the estimated fair market value as of Jan. 1 of each year."
As a Fairfax Country homeowner, my annual assessments have more than doubled in the past five years. They are clearly in the ball park of 100 percent assessments each year.
While not wildly enthusiastic about skyrocketing real estate tax payments, I had always thought the assessment process worked fairly. But after reading about Hickory Hill, I'm not so sure.
In the past six years, most real estate assessments in McLean have increased by double digits every year. But the "fair market value" of Hickory Hill is just 36 percent of its asking price, according to Fairfax County. Does the Realtor really expect a potential buyer to ask for another 60 percent price reduction, to bring the price in line with the tax assessment?
Is Hickory Hill an isolated case, ignored by the tax man because of its sentimental worth to McLean?
It does not seem so.
As of Jan. 30, 2006, there were almost 150 homes with asking prices over $2 million listed for sale in Fairfax County.
After Hickory Hill, the next five most expensive properties on the market ranged from $14 million to $9.75 million. Among these six, only one was assessed at more than 40 percent of its asking price.
For these six properties, whose asking price totals more than $79 million, the combined assessed value totals $29 million.
Taking out the one property that is somewhat fairly assessed (at 80 percent of list price), there is $65.6 million of sales price with just $19.1 million of assessed value.
As a taxpayer who is paying taxes on full assessments, I am outraged.
Where is the equity? On these five 'badly assessed' properties, Fairfax County is missing out on roughly $450,000 a year in revenue -- money that could pay for teacher salaries, county buildings, an energy efficiency program, or tax relief for needy or senior citizens.
This is, of course, $450,000 on just five properties!
Of the six checked properties, only one could be claimed to have anything close to a "fair market" assessment. How many of more than 140 homes listed for sale at more than $2 million are assessed at just a small percentage of their asking (should we say "fair market") price?
And, these are just properties for which public records exists (tax and sales listing prices) that enable the comparison. How many hundreds -- if not thousands -- of poorly assessed mansions are there in Fairfax? How many millions -- or tens of millions -- of dollars of lost tax revenue do these mansions represent?
And, is this outrage isolated to this one community G仟 to this one county G仟 or could similar hidden tax subsidies for the rich and famous be found throughout the nation?
When it comes to McLean, the county leadership should address this outrageous situation. They must ensure that luxury homes are assessed with the same diligence that the Department of Tax Administration takes with mine, and all the rest of the County's homeowners.
G求1147 Chain Bridge: $16.5 million listing price, $5,927,680 assessment. --
G求5825 Doyle: $14 million listing price, $3 million assessment. --- Sold for $11,000,000,
G求1005 Crest Lane: $13.5 million listing price, $10,774,000 assessment. Sold for $11,000,000, with a 3 August 06 settlement.
G求1100 Crest Lane: $12.9 million listing price, $4,980,580 assessment.
G求710 Bulls Neck Road : $12.5 million listing price, $1,755,810 assessment.
G求8303 East Boulevard Dr,: $9.75 million listing price, $3,474,160 assessment.
The Robb's home (Total Sq. Ft 12,560) has a Current Assessed Total of $4,530,170
Saudi Arabia own's the home next door which is less than 600 sq. ft. smaller (Total Sq. Ft 11,975) yet it has a Current Assessed Total more than twice as much as the Robbs at $10,686,730.
For all I know, maybe the Saudi's have solid gold faucets and Egyptian marble, but there seems to be a disconnect.
The home referred to above, at 1005 Crest Lane (Total Sq. Ft 13,161) which sold for $11,000,000 on August 3, 2006, should give an idea as to the comparable value of homes in that area.
Saudi Arabia is probably paying taxes on the full value of their home, while the Robbs may not be.
If someone knows why a 12,560 sq. ft. mansion is valued at less than 50% of a 11,975 sq. ft. mansion right next door, please let me know.
Kind of joking about that one--although there is more than a little bit of truth to this (swimming pools greatly increase insurance premiums and generally decrease property value).
The main thing to go by is acreage. 75-80% of the value along that stretch in McLean is going to be due to the size of the lot of land--not due to the size of the house. It's my understanding that the Saudis' estate(s) consist of two 6+ acre lots. The Robb's mansion sits on a little over 1 acre adjacent to a couple acres of undeveloped land. The property is probably a little undervalued, but not grossly so. If a developer was able to come in and get the rights to build 3 to 6 houses on the 3 acre lot, it's likely that the land would go for $6 to $8 million. However, it's doubtful that the neighbors would allow this to happen. I'd say $4 to $5 million isn't completely ridiculous for the 3 acres and the mansion.
Your point re Robb's home fits exactly with my point:
And, these are just properties for which public records exists (tax and sales listing prices) that enable the comparison. How many hundreds -- if not thousands -- of poorly assessed mansions are there in Fairfax? How many millions -- or tens of millions -- of dollars of lost tax revenue do these mansions represent?
I, again, only did the research where I could lay out what the County was assessing a property against what someone sought to sell it for. This was a public statement as to value that could be laid face to face and calculated. I would agree that Robb's house looks to be seriously under assessed, from first glance ... problem, in terms of "calculating", when writing the above is how to provide exact percentages to how this is off.
But, in fact, this diary is part of a three part series. What you provided is a contribution for the half-written third part -- thank you.
I have lived in Fairfax County since 2000. Since then, what was a modest home became a half a million house. The house hasn't changed. The services haven't changed. Hey! my income hasn't changed either! :)
Yet I have to deal with an over 100% real estate tax inflation since getting the house.
Have services in Fairfax County improved 100% during this time? If they have, I haven't noticed.
I am not opposed to paying taxes. I understand that they are necessary. And i would happily pay more if my income had grown with inflation. It didn't, and this is straining me financilly. But we are all going through this, right?
No, we are not. It looks like I am subsidizing the wealth of people who are a lot better off than I am. While I am struggling to pay real estate taxes, those could can afford them are getting tax breaks.
And the tax relief is ridiculously unfair as well. I learned that if I were over 65 years old, I would get a tax break if I made double the income that I currently make.
Unfortunately I am 35 years away from that age, raising a family with small children. I get no tax relief, but I get to subsidize the tax break of people who make more money than me, either who own multimillion dollar houses or are over 65.
I wrote to my county supervisors on this issue. One never answered back, from the other I got a letter that I can summarize it in one sentence, the title of a song in a musical, "it sucks to be you." Thanks!
But you are right, let's discuss this after the election. :)
The Saudis, for example, have a separate structure of 1816 square feet (a second home, if you will, of 1800 sq feet -- which adds probably $350-500k to value) and a pool structure of 7750 sq feet (relatively cheaper than a finished home, perhas, does this add $1 million????).
And, of course, the Saudi's have signficantly more land.
Finally, should consider that Robb is listed with two properties -- one just land -- and that the land adds in several $million more, placing Robb at about $7 million in assessment with less land, a (slightly) smaller main house, and significantly less in terms of other structures on the property.
I saw Robb's second property. (1.82 acres + 2.1 acres)
So, while each Saudi property, individually, is about 6 acres, Robb's two properties, combined, total almost 4 acres.
Robb also has an indoor pool (5500+ sq. ft.), storage shed, tennis court, attached garage, etc., which (combined) adds several thousand sq. ft.
For value purposes, all these properties (including Crest Lane) are "riverfront" overlooking the Potomac, which is reflected in the property records as "waterfront."
Heck, this alley-front Capital Hill home is priced a more than half a million dollars, which means these riverfront mansions are probably under assessed! :-)
I am tempted to continue doing these comparisons but will not be able to do much more for about a month due to other commitments.