Due to incorrect property assessments in the years following the housing market crash, the Rutherford County government must refund nearly $435,000 in property taxes to Embassy Suites Hotel and Conference Center in Murfreesboro.
The settlement comprises $315,550 for 2010 and $118,334 for the 2011 tax year, according to records from the Rutherford County Property Assessor’s Office.
In 2010, attorneys representing Embassy Suites filed a complaint with the Tennessee State Board of Equalization arguing that assessors unfairly appraised the site at $67 million, which resulted in the hotel paying higher property taxes.
Given the fact that prices had plummeted when the over-inflated housing bubble burst, attorneys contended property assessors should have taken into account the current economic conditions.
“They were able to prove to the judge that the $67 million assessment was too high,” said Rob Mitchell, who took over as Rutherford County property assessor in September 2012.
The judge, Mitchell said, agreed with Embassy Suites that the property was worth an estimated $36 million.
“We lost the appeal in 2010, and the judge took the numbers that Embassy Suites submitted to the court,” Mitchell said. “We were not able to dispute those numbers in the eyes of the court. The next year was exactly the same, so we decided to settle the appeal.”
Officials decided to settle the 2011 appeal out of court, he said, because it usually helps reduce the amount of money Rutherford County must refund to a complainant.
“History has shown us that we lose substantially less when we can come to a negotiated amount rather than leaving it up to a judge,” Mitchell said, noting the cost to fight an appeal is a factor in deciding how to address the issue.
“The other part of being able to come to a quick settlement is that if Rutherford County loses in court, we have to pay a 1.5 percent per month penalty in addition to the amount owed, which ends up being 18 percent a year,” he said.
The Embassy Suites settlement is just one of 744 appeals that were filed against Rutherford County when former Property Assessor Bill Boner, who could not be reached for comment, was in charge of the department.
“Of those 744 cases, 720 have been resolved,” Mitchell said, adding the rest are under review by an administrative judge with the State Board of Equalization because officials with the Property Assessor’s Office could not reach an agreement with the complainants.
“For those that are wrong, we have worked to address those and get everything corrected,” Mitchell said, “but there are still a lot of appraisals that were done properly prior to my tenure. We are just correcting those that were wrongly appraised under the former administration.”
And although Rutherford County officials knew the Embassy Suites settlement would be coming down the pipeline this year, several commissioners expressed concern about how the impact of numerous tax refunds could affect revenues and the next budget.
During a recent Budget Committee meeting, Commissioner Steve Sandlin was visibly frustrated when he learned about the final settlement amount, saying he could not understand how the original appraisal was roughly $30 million too high.
“How did we get that far off,” Commissioner Steve Sandlin asked Lisa Nolan, who is the finance director for Rutherford County. “This is a lot of money, a lot of lost revenue.”
Commissioner Will Jordan said he is also worried about whether the amount of funds that the administrative judge ordered for the Embassy Suites settlement could set a precedent for future appeals.
“It could have been the same outcome of court,” Jordan said.
When asked about their concerns, Mitchell acknowledged the Embassy Suites settlement is expensive, but he said it was Boner who decided not to settle appeals out of court – a move that has resulted in tense relations between some property owners and assessors.
“We are still trying to reestablish relationships with the tax representatives and administrative judges,” Mitchell said. “It is a complicated process, but we will continue to address any issues that may have popped up in recent years.”