Vacant Commercial Property Tax Update & Follow‐upCity Council Special MeetingMay 23, 20221
Updated Criteria Based on City Council Comments2•Tax is adjusted annually by CPI•No sunset of the tax•Try to determine where the “unknown” ownership is located (after fixing an error and finding more info, absentee ownership is now up to 82% of the vacant properties).•Name the tax the “Vacant Commercial Property Tax” to be more clear that this is addressing vacancies and vacant land not underutilized properties.•Tier the tax based on the time the property is vacant•Start with a clean slate for all property owners if tax is approved and implemented; or•Based on city records, tax properties on actual time vacant•Have an option to address vacant land differently than a property with structures•Increase the cap on large properties, but look at lowering the minimum for small properties•Provide additional waivers or exemptions•For multi‐unit/multi‐tenant (3 or more) commercial centers/strip malls•Should vacancies in these instances be addressed individually (easier to administer and implement); or•Should the center be addressed as a whole and a percentage of utilization be applied such that if a “majority” of the center is lawfully occupied and being utilized, it is not subject to the tax (difficult to administer and implement)•Timing for vacancies to qualify 90‐days (per our current code)?
Proposed Unutilized Commercial Property Tax Structure continued…Tiered Tax Based on Time Vacant*3Time VacantTax Calculation1 year or lessBase Tax Only1 to ____ years25% of full tax calculation___ to ___ years50% of full tax calculation___ to ___ years100% of full tax calculation* Does everyone start with a clean slate or should language be included that requires long‐time vacant properties be subject to the full tax calculation?
Average lot coverage for recent vacant commercial land developments is 18% (recent developments)Commercial construction valuation PSF is $250 (provided by the Dept. of Planning & Building Services)1. Multiply the vacant lot size and the lot coverage percentage to determine the building area (BA)2. Multiply the building area and the per square foot valuation to get the assessed value for “potential” improvements (AV)3. Multiply the AV by the 1% tax levy, then by the City’s 6.66% levy and 14.96% VLF backfill to determine the lost potential revenue.4. Multiply the Sales Tax Factor ($3.38) by the calculated “potential” building area to get the Per Square Foot Unutilized Property Tax on a reasonable building size instead of the size of the vacant lot.4Proposed Unutilized Commercial Property Tax Structure continued…Vacant Commercial Land Component
Original Calculation (Base + $3.38 PSF)PropertyProperty TypeProperty/Space Size Base UCPT Per Sq. Ft. UCPT Total UCPTProperty 3 Vacant Parcel 12,000 square feet$4,270$40,560$44,830Property 4 Vacant Parcel 65,000 square feet$4,270$50,0002$54,2701Minimum Per Square Foot Tax is $5,0002Capped Per Square Foot Tax at $50,000Separate Vacant Parcel Calculation ComparisonPropertyProperty TypeProperty/Space SizeEst. Bldg. Area (18% LCR)Base UCPTVacant Land UCPTPer Sq. Ft. UCPT Total UCPTProperty 3 Vacant Parcel 12,000 sf 2,148 sf $4,270 $1,161 $7,261$12,692Property 4 Vacant Parcel 65,000 sf 11,636 sf $4,270 $6,289 $39,331$49,8905Separate Vacant Parcel Calculation
Proposed Unutilized Commercial Property Tax Structure continued…Addressing Small and Large Properties/Lease Spaces6Small Property MinimumProperties/Lease Spaces 1,500 square feet or less pay only the base fee per property/lease space.Large Property CapIncrease the maximum tax payment from $50,000 to $65,000
Sample Unutilized Commercial Property Tax (UCPT)With Minimum Tax and Larger CapProperty Property Type Property/Space Size Base UCPTPer Sq. Ft. UCPT($1,094 + $3.38 PSF)Total UCPTProperty 1 Space in Strip Mall Up to 1,500 sq. ft. $4,270$01$4,270Property 2 Stand‐Alone Building 3,400 square feet $4,270 $12,586$16,856Property 3 Vacant Parcel 12,000 square feet $4,270 $41,654$45,924Property 4 Vacant Parcel 65,000 square feet $4,270$220,794 uncapped$65,0002 capped$225,064$69,270PropertyProperty TypeProperty/Space SizeEst. Bldg. Area (18% LCR)Base UCPTVacant Land UCPTPer Sq. Ft. UCPT Total UCPTProperty 3 Vacant Parcel 12,000 sf 2,148 sf $4,270 $1,161 $7,261$12,692Property 4 Vacant Parcel 65,000 sf 11,636 sf $4,270 $6,289 $39,331$49,8901Minimum Base Tax Applied2Capped Per Square Foot Tax at $65,0007
Potential Unutilized Commercial Property Tax WaiversWaiver 1Where the real property owner or lessee obtained a valid building permit andisconstructing improvements in substantial compliance with the building permit not toexceed two years. Failure to complete work authorized by the validly issued buildingpermit within 2‐years will void the exemption and require payment of taxesrequiredby this chapter between the date a building permit is issued and it expires.8
Potential Unutilized Commercial Property Tax WaiversWaiver 2Where the real property owner has demonstrated a good‐faith effort list theproperty/space for sale or lease using industry standard best practices and at a salesprice or lease rate that is supported by current local market data…This waiver is only good for one year.9
Potential Unutilized Commercial Property Tax WaiversWaiver 3Property which has been devastated by a catastrophe such as fire or flood: The ownerhas thirty (30) days to register from the date of the disaster but may be exempt fromthe fees. This exemption is for the duration of one (1) year from the date of thecatastrophe; thereafter all applicable fees are due.This waiver is only good for one year.10