Two luxury condominium complexes alongside Baltimore's waterfront will have to pay nearly $2.3 million in additional property taxes this year, thanks to new assessed values that acknowledge — four years after the first residents moved in — that the buildings' empty units actually exist.
The almost 190 units still owned by the developers of the Ritz-Carlton Residences and
had been taxed as if they were empty lots, even as residents were paying high-end prices – frequently more than $1 million in the case of the Ritz — to live in other condos in the same buildings.
But the state assessments agency changed the tax values after The Baltimore Sun wrote about the
complexes' bills in April, and new tax bills were mailed early this month.
The tab for each Ritz condo, which had been $1,309, rose as high as $74,000. Silo Point units jumped from $238 tax bills to as much as $24,000.
If the Ritz and Silo Point assessments had reflected market value from the start, the city would have collected more than $10 million in additional taxes over the last several years, according to a Sun analysis that relied on recent sales data.
This year's tax bill on the properties is about fifteen times higher than the $170,000 due on the same condos last summer.
"Wow," said William Rich, who analyzes the city condo market for real estate research firm Delta Associates. "That gives them a lot of incentive to sell the units faster, whether it's by enhancing the marketing or by reducing price."
Officials at the state Department of Assessments and Taxation said the low values assessed over the last several years were not mistakes. Assessors weren't convinced the condos were "substantially completed," the point at which a property's assessment can be raised to account for new construction.
But city permits officials felt confident on that score years ago. They gave the OK in 2008 and 2009 for the condos to be occupied — after the developers requested it.
Legislators told The Sun they see the condos' tax bills as another example of why the entire property-tax system needs a re-assessment of sorts.
At what point new construction ought to be fully taxed is just one of the issues that should be addressed as the city tries to grow rather than shrink, they say.
"I think we really need to use this moment to have a broader conversation about property tax credits and development in Baltimore City — and property taxes in general," said state Sen. Bill Ferguson, a Democrat who represents South and Southeast Baltimore.
Owen C. Charles, deputy director of the state assessments agency, said in April that the department would increase the assessed values on the vacant Ritz and Silo Point condos in time for the July property tax bills and had intended to do so even before the Sun inquired. It's not that anything changed about the units. The motivating factor, Charles said, was that so much time had passed since the developers received occupancy certificates.
The typical new assessment for the Silo Point condos, each previously valued at $10,000, is about $420,000. The Ritz assessments jumped from $55,000 each to a median value of $480,000 — with two penthouses surpassing $3.1 million.
Other Baltimore development projects, including the 414 Water Street condos downtown, didn't get the same years-long reprieve from higher tax assessments. Williamsburg-based Bush Construction Corp., which built 414 Water Street, still has about 125 units
left to sell,
all of which were valued by the state as substantially completed soon after they were built in 2007.
Such differences upset developers and concern political leaders.
"At a minimum it should be consistent," said state Del. Samuel I. Rosenberg, a Baltimore Democrat who has pushed for reforms and audits of property-tax credits.
Andrew Viola, who oversees 414 Water Street, was outraged when he heard about the bills at Silo Point and the Ritz. He said last week that he's asked the state assessments agency to reduce his property's tax value retroactively — essentially to give him the same deal the other developments got.
"I know it won't happen, but certainly
need to know that [the disparity] flies in the face of what should have been fair and reasonable," Viola said.
He's still tallying up his property-tax total for this year, but last year it was $800,000, he said. He chuckled when informed about the two project's new bills.
"Well, it's about time," he said. "New construction values for old construction."
The Maryland Assessment Procedures Manual defines substantially complete as "buildings under roof with completed walls." But an
report in 2004 said individual assessors have considerable discretion about when to declare a property
close enough to finished, causing uniformity problems.
John J. Hentschel, a real estate valuation consultant who wrote that report, said consistency is critical so developers can plan accordingly. He worries that the big tax increase at the Ritz and Silo Point, with little advance notice, could put the projects at risk.
Both projects were planned during the housing boom and finished during the bust. The city condo market is improving, but prices continue to fall, Delta Associates says.
"What's problematic is the developer thought his expenses were going to be X and now all of a sudden, it's multiple times X," said Hentschel, who is not consulting for either project. "If you didn't budget for that, what are you going to do? The city obviously needs money, there's no question about it. But at the same time … we're looking at a market that still is not enormously healthy, and a hit like that can really have devastating effects."
If development projects go under, lenders take over, putting more downward pressure on home values, he said.
Neither developer has appealed the new assessments, according to the state. The deadline to appeal is July 27.
The increased property-tax bills fall more heavily on developer RXR Realty, which received them for 116 of the Ritz's 190 units. Its bill is just over $1.7 million, up from about $152,000 last year for the same units.
But RXR said it can cover the increased tax.
"We have always complied with the city's tax assessment policy and continue to pay our annual bill from the city in a timely fashion," Joseph Graziose, senior vice president at RXR Realty, said in a statement. He declined to answer other questions.
, whose Turner Development Group
built the 228-unit Silo Point, did not return messages seeking comment. The bill for the 70 units that city tax records show he holds is about $743,000. Last year it was just under $17,000.