Health & Fitness
Will the Barrington Town Council Get a Second Opinion?
The Providence Journal recently ran a story about Barrington’s wrangling with the property tax issues for affordable housing.
The Journal article quotes Carla DeStefano, a Barrington resident and executive director of Stop Wasting Abandoned Property, as saying - “the 8-percent tax limit was established in 1995 as a compromise to settle a multitude of lawsuits in cities and towns about the proper way to assess affordable housing.”
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What the reader is left to believe is that the “8% of rent” property tax assessment is a state mandated “proper way to assess affordable housing”.
Rubbish! There is no court case on record that settles the question that the “8% of rent” property tax assessment is mandated upon any town for newly constructed affordable housing.
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The case that the affordable advocates like to refer to is the 1980’s RI Supreme Court case of Kargman vs. City of East Providence for the Kent Farm affordable housing development. But that case did not settle whether all affordable rental housing is statutorily mandated to be assessed using an 8% of rent formula.
The Kargman case did settle whether the East Providence Tax Assessor used reasonable statistical evidence when he determined the assessment for the Kent Farm affordable housing development. The RI Supreme Court found that the assessor did not use reasonable statistical evidence and thus deferred to Kargman’s more believable evidence using a formula based on the subsidized rental income.
In fact, the RI Courts have ruled that a town assessor is free to choose any one of three assessing methods, where the “percentage of rent” formula (income capitalization) is only one of three accepted methods. What the Court did find in the Kargman case is that whatever method is chosen by the assessor, the assessment has to be backed up by reliable statistical evidence.
If the tax assessor is able to produce reasonable “comparable sales” as statistical evidence, the assessor would be free to choose a “comparable sales” assessment method over the "income capitalization" method (note - the third method is the "cost" method).
This brings up an interesting dilemma for the affordable advocates who claim the 8% of rent method is mandated.
The Kent Farm affordable development in East Providence establishing the Kargman case was just sold in March 2012 to the private real estate investment company, Primerock Capital Investment, LLC, for $19,850,000 (approximately $80,000 per unit for the mostly one and two bedroom rentals). The affordable deed restrictions still apply on the Kent Farm property.
Primerock advertises itself as serving “high net worth” clients, and is certainly not an affordable housing non-profit. Thus if there exists a comparable sale between a willing buyer and a willing seller for a deed restricted affordable development at $80,000 per unit, that could establish a reliable "comparable sale" of 248 affordable rental units.
Many affordable housing advocates have a financial interest in an unchallenged premise that the state mandates the 8% of rent formula for all affordable rental housing. The fact that local residents must carry a higher property tax burden in order to support "8% of rent" affordable housing assessments is of little concern to their agenda.
Barrington needs an objective second legal opinion from a law firm that is not tied into the affordable housing regime. At the moment, the majority Barrington Town Council members appear comfortable with the idea that the matter should be pushed into litigation rather than act with reasonable care and due diligence.
An objective second opinion would certainly cost residents less than litigation in the courts.
