In one corner of the nation, McLean, Virginia, 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, in $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. For some details about the McLean situation, follow me ...
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.)
Typically, houses in the highest end of the market can take months or years to sell if the "right buyer" doesn't show up immediately, real estate experts say.
An example of a property that was expected to sell promptly but hasn't -- perhaps because its original price was excessive, according to some local agents -- is Hickory Hill, the McLean mansion of Ethel Kennedy and Robert F. Kennedy.
Hickory Hill shows up at $16.5 million on the Ultimate Homes ranking ...
Hickory Hill has also been marked down quite a bit from its original asking price of $25 million in October 2003.
Ethel Kennedy dropped the price to $20 million in 2004, and then to $16.5 million last September, according to agent W. Ted Gossett of Washington Fine Properties in Wesley Heights. The house was assessed at almost $6 million in 2005.
This last item caught my attention ... Hickory Hill is on sale for $16.5 million but assessed for tax purposes for "almost $6 million??? That was far more notable than the price cut and sent me to research the tax assessment records which show that Fairfax County's "market rate" 2005 assessment of the house was $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?
The realtor doesn't think that will be necessary as
"We believe it is a very realistic price now," Gossett said.
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 ... to this one county ... 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.
Referenced houses:
*1147 Chain Bridge (Hickory Hill): $16.5 million listing price, $5,927,680 assessment. --
*5825 Doyle: $14 million listing price, $3 million assessment.
*1005 Crest Lane: $13.5 million listing price, $10,774,000 assessment. (Sold for $11,000,000, with a 3 August 06 settlement.)
*1100 Crest Lane: $12.9 million listing price, $4,980,580 assessment.
*710 Bulls Neck Road : $12.5 million listing price, $1,755,810 assessment.
*8303 East Boulevard Dr,: $9.75 million listing price, $3,474,160 assessment.