Cities Take Many Approaches to Valuing Tax-Exempt Property

City and county assessors across the country take a range of approaches toward placing a value on tax-exempt property.

Assessors in New York, Los Angeles, San Diego, and several other major municipalities say they spend the same amount of time and effort

evaluating tax-exempt property as they do putting a value on real estate that generates tax revenue.

“Our appraisal practices are standard across the board for all properties,” said Brian Salmon, chief of county assessor records and exemptions in San Diego County. “No one knows what that property’s going to be used for tomorrow. We have a former church in downtown San Diego that’s been a restaurant for years. We have to have an accurate accounting of the property in San Diego County.”

At the opposite extreme, the assessors for the counties that cover seven of the nation’s 30 largest cities — Austin, Tex., Chicago, Detroit, Indianapolis, Milwaukee, Oklahoma City, and San Antonio — say they make no attempt to appraise tax-exempt properties because they have barely enough staff to appraise real estate that generates tax revenue.

Middle Ground

Other municipalities fall someplace in between.

Ken Nolan, chief appraiser at the Dallas Central Appraisal District, said his staff makes no attempt to evaluate increases or decreases in the value of most tax-exempt property. “It makes no sense to waste time and effort on properties that don’t produce taxes,” he said.

Those properties do have values assigned to them, but Mr. Nolan said most of those assessments have not been updated since 1982, when the appraisal district was formed. However, the district keeps an eye on the value of a few properties owned by tax-exempt groups, such as hospitals and office buildings.

Baylor University Medical Center, for instance, rents space in its buildings to private doctors, so part of the property owned by the institution is taxable, he said. “And we’ve had for-profit hospitals acquired by nonprofits and vice versa,” he said. “So we try to keep up with that.”

In Nashville and the rest of Davidson County, in Tennessee, the assessor’s office is now in the midst of an effort to value tax-exempt property owned by nonprofit groups. George Rooker, chief deputy assessor of Davidson County, said he decided to assign a staff member to the job because “I got tired of folks asking how much tax-exempt property is in the county, and not being able to give an answer at all.”

Ronald Rakow, Boston’s commissioner of assessing, said his office tries to keep accurate appraisals of tax-exempt property, but added that doing so is not always a simple process.

“There’s generally three approaches to appraising value: a market approach, where you look at what property sells for when it goes on the open market, an income approach where you capitalize the rental income that a property generates, and a replacement cost approach,” he said. “The first two generally don’t apply to tax-exempt property, because it’s rarely sold and it doesn’t generate income.”

Figuring out the cost to replace Harvard Stadium or the Museum of Fine Arts, Boston, is difficult, Mr. Rakow said, because similar structures that have been constructed recently are hard to find. “My guess is that the values are understated, but it’s difficult to know,” he said.

Because of the differences in how cities evaluate the worth of tax-exempt property, The Chronicle applied each jurisdiction’s tax rate to the assessed value of the properties to determine how much tax revenue is lost in the nation’s largest municipalities.