Botched Federal Hill valuation highlights shrinking number of assessors

The imposing three-story home on the 200 block of E. Montgomery St.stands out from its more modest Federal Hill neighbors. The edifice, with 15 front windows and a gated driveway, is noticeably bigger and no doubt much pricier.

But you couldn't tell by looking at the property tax bill.

The government values the house — actually three Baltimore rowhouses combined into one — at $552,000, or close to what it values nearby two-story homes with less than half the square footage. Owner Blake Cordish merged one house with two adjacent rowhouses to create the mega-rowhouse four years ago, but on two occasions the state revalued his expanded home as if the renovation never occurred — giving Cordish an unwarranted tax windfall.

The state Department of Assessments and Taxation discovered its error after inquiries from The Baltimore Sun. The agency now says the correct assessment on the 4,600-square-foot home should have been at least $945,000 — a swing of nearly $400,000.

The mistake cost the strapped city government more than $10,000 in property taxes and casts a spotlight on an agency faced with a shrinking number of tax assessors handling increasing workloads. Those assessors, whose triennial valuations determine how much property tax owners pay, often set those values by looking at comparable sales figures, and without actually inspecting the property.

The revelation comes as other problems have come to light over property taxes. Earlier this month, state officials revoked tax breaks from more than 550 homes in the city, based on a Sun analysis showing owners had been improperly getting the homestead property tax credit on multiple homes. The owners now owe a total of $730,000 in additional taxes for the current year, a sum that could hit $3 million, counting prior tax years.

With Cordish's property, if an assessor had visited Montgomery Street to verify what was in agency files, one glance at the house could have revealed the problem.

"We do not have enough bodies to go out and look at every property every three years," said Robert E. Young, director of the assessments agency. Instead the agency looks for various "triggers," such as building permits that would indicate a rise in value. His staff also investigates complaints about assessments.

In an email to The Baltimore Sun, Cordish indicated he was not aware of the state's incorrect assessment of his property.

"I do know that I have promptly paid every penny of every bill I have received from the City and am proud to have been a Baltimore City resident for over fifteen years," wrote Cordish, an executive with the Cordish Cos. and son of prominent developer David Cordish.

Young suggested the Montgomery Street mistake was an isolated problem. "It's an odd account," he said. "It's not symptomatic across the system."

Yet it's hardly the only case where the state's files do not accurately reflect changes made to a property. Last fall, when The Sun asked Young about 20 city homes that received huge tax breaks, it turned out that five were too generous because assessors had failed to account for major renovations when establishing the homes' value.

State Sen. Barry Glassman, a northern Harford County Republican, said the error on Cordish's home does not surprise him. He said he's been trying for five years to create a statewide task force to review the assessment process, suggest improvements and make it easier for owners to appeal, but that Young's agency keeps quashing it in the General Assembly.

"They come in and oppose any effort to review or shed light on how these assessments are done or the interior workings of that department," Glassman said. "They do have a bunker mentality when it comes to transparency."

Larry Giammo, who co-founded a company that helps homeowners appeal their property valuations, said he has run into enough mistakes in state assessment data that he thinks the error on the Cordish property points to a larger problem.

"Mistakes may happen, but … with any kind of process or procedure, there's almost always going to be ways to improve," Giammo said.

His company, Property Tax Pros, recently released an analysis that questioned the accuracy of assessments in Baltimore and five large Maryland counties. The company looked at homes that were revalued in January 2011 and changed hands during the first half of last year. It found that one-third sold for either 20 percent above or 20 percent below their newly assessed value.

"That doesn't seem like an acceptable level of accuracy," said Giammo, a former Rockville mayor with a management consulting background.

Young defended his assessors, pointing to an analysis by the trade group Council On State Taxation that rated Maryland tops in the nation for fairness of assessments. He says errors should not take away from what he considers his department's quality work. Responding to Glassman's push for a task force, he noted his department has been through several prior studies and took issue with the proposal's details, such as membership and a time frame for reporting.

But Young does not dispute that his staff is stretched thin. His agency had about 280 assessors in 1977, each responsible for 1,600 properties a year. Today the agency's 158 assessors each handle about 4,500 properties a year. Improved technology only partly compensates for the rising workload, he said.

There are 23 assessors for Baltimore, a city with 237,000 properties that need to be assessed every three years. Though their average load is lower than the state average, Young said the city's many commercial properties are more complicated to value than homes.

Another challenge is that his staff is rapidly graying, with retirements claiming 14 assessors a year. Young says he's in the process of filling 19 vacancies, and Gov. Martin O'Malley's proposed budget contains money for nine more hires starting in July.

That won't free up assessors to do significantly more visual inspections, Young said. But, he added: "We're going to be in a situation where we have an adequate number of people to do the job we have to do."

Local jurisdictions may be willing to pitch in to bolster the state agency's capabilities. Baltimore City and several counties are looking into the idea of paying for more assessors at the agency, known as SDAT.

"We have had several informal discussions with SDAT over the past several years about seeing what the city could do to be helpful in getting additional assessors," said Ryan O'Doherty, a spokesman for Mayor Stephanie Rawlings-Blake.

"Other counties have similar concerns about the issue," he said.

The state currently charges local jurisdictions for almost all of the property assessment costs. Baltimore paid the agency $3.6 million this year, while Baltimore County paid $4.6 million, more than any county in the area.

More accurate valuation would almost certainly mean higher tax bills for some owners and lower ones for others. O'Doherty said city finance officials have pointed out the possibility that the end result could be less money for the city.

Young said he would always welcome additional staff. "Obviously I feel the more employees I have, particularly in the assessing field, we can do a bigger job," he said. "We can look at more properties. We can extend the kinds of checks and things we do."

Such checks might have caught the problems with Cordish's property years ago.

Cordish is a vice president at the family-owned Cordish Cos., which developed the Power Plant and Power Plant Live! retail and entertainment venues downtown, and is building a slot-machine casino at Arundel Mills.

In 1996, he bought a 2,000-square-foot rowhouse on Montgomery Street, property records show. He later acquired the two rowhouses connected to the home. By mid-2007, all three were collectively valued by assessors at $1.1 million.

In 2008 he combined them into one residence, while also moving ahead on plans to build a rear addition and roof deck. State assessors put the value for the consolidated property at $730,000. That was well below the $1.1 million for all three, but Young said the unified parcel was "worth less than the sum of its parts."

The state says its reassessment error occurred soon thereafter. In late 2008, properties across Federal Hill were due for their once-every-three-years revaluation, effective July 2009. Two of Cordish's three addresses no longer existed, having been merged.

When assessors reviewed the consolidated property, for some reason the agency's reassessment file did not reflect the expanded footprint, according to Owen C. Charles, deputy director of the assessments agency. Instead it showed the much smaller square footage of the original house Cordish bought.

So instead of valuing a home with 4,600 square feet, Charles said, assessors based their new calculation on a home of 2,000 square feet.

"There was an error made at the point of reassessment," Charles said. "What it amounts to is the value at the reassessment was calculated on a lesser enclosed area than it should have been."

The flawed calculation led to a much lower assessment of $552,000. While Federal Hill owners that year saw values rise 14 percent on average, Cordish saw his fall by 24 percent. That's where things stood until this month, when owners got the results of the latest triennial revaluation.

Once again, assessors failed to catch the mistake on Cordish's home, working from the inaccurate file and apparently not eyeballing the property. This time his home was assessed further downward to $522,000 for the next tax year beginning in July.

After The Sun inquired this month, assessment officials found the errors. They now say the combined home should have been revalued for 2009 at an amount "no less than $944,932."

Because the higher value would have been phased-in over three years and Cordish got a tax break given to owner-occupants, his net tax bills should have been $10,600 higher than what the city billed him.

On top of that, the state says it also overstated Cordish's homestead property tax credit for the 2008-2009 tax year, saving him an additional $3,200 in taxes. That brings his total windfall to $13,800, based on the revised assessments.

Charles said Cordish will receive a modified tax bill for the current tax year that began last July, and his new assessment will be revised upward as well. But state lawyers will have to determine if Cordish can be billed for earlier years, Charles said, given that the agency missed information sitting in its own files.

"Obviously," he said, "this would be an error on our part."