November 17th, 2006 | by NIGEL JAQUISS News | Posted In: CLEAN UP, CLEAN UP

A Taxes Two-Step in South Waterfront?

     
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BY NIGEL JAQUISS njaquiss@wweek.com


The muckrakers over at Jack Bog's blog http://bojack.org/ turned up a tantalizing bit of information yesterday—a seemingly giant property tax cut in South Waterfront, or Sowa as some now call it.


The purported beneficiary: ZRZ, the property arm of Zidell Marine and owners of a 30-plus acre chunk of waterfront real estate at 3121 SW Moody Ave., just south of the Ross Island Bridge.

Under the headline, "More Sowa Madness," Jack Bog (aka Jack Bogdanski, a law professor at Lewis & Clark's Northwestern School of Law), reported that ZRZ's assessed value had somehow plummeted from more than $10 million in 2005 to less than $100,000 in 2006. That drop in assessed value corresponded to a drop in annual property taxes from about $156,000 to less than $2,000.


That's a pretty nice turn of events in a district where property values have risen more than 10-fold in the past five years as the OHSU tram and Homer Williams' condos have risen.


"I think something funny may be going on," Bogdanski concluded.

Turns out, however, that the revaluation is correct.


Starting about six years ago, according to Multnomah County senior property assessor Randy Walruff, the Oregon Department of Revenue screwed up ZRZ's property tax calculation.

Unlike most properties, large industrial sites such as ZRZ's parcel, where Zidell Marine makes barges, are assessed by the state. For well over a decade, the property has been seriously contaminated, the result of years of scrapping ships on the property.


A little property tax history: In 1997, when Measure 50 went into effect, assessed property values were pegged to 90 percent of 1995 levels and then allowed to increase no more than 3 percent annually except for exceptional events, such as rezoning or additional investment in the property.


In 1995, because of the contamination, ZRZ's 30 acres were essentially worthless, Walruff says. But starting in 2000, the state Department of Revenue began assigning large and steady increases in assessed value, based on what the property would be worth if cleaned up.


Walruff says the county simply took those increasing assessments and billed ZRZ, which paid the ever increasing tax bills.


At one point, he says, ZRZ appealed the increased valuation but then withdrew the appeal for reasons that are unclear. Only earlier this year, after ZRZ hired a lawyer to examine the assessments did county officials realize they had over-charged ZRZ. In May, according to deputy county attorney John Thomas, the county agreed to repay ZRZ nearly $500,000 in over-paid taxes.

Blogsphere conpiracy theories to the contrary, Walruff says, nobody is getting a favor or a special deal. "What we have here is a big mistake," he says.


(The damage to county coffers could have been worse, because ZRZ agreed to waive interest and could not claim a refund for the first couple of years of overpayment).

The big reduction in assessed value helps ZRZ's cash flow but it will not affect the company's battle to pay less for the tram and other South Waterfront improvements. Assessments for those projects is based on square-footage, not property value.


 
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