"Huge victory for course owners"
Indiana property tax assessment reform ends unfair comparison
It was almost two years in the making and “a lot of pump priming,” according to Randy Ballinger, owner of Walnut Creek Golf Course in Marion, IN and board member of the Indiana Golf Course Owners Association (IGCOA), but Indiana’s part-time legislature passed a budget bill in August which included a provision for applying income capitalization appraisal to assessing golf courses for property taxes.
The legislation will go into effect in 2010.
“This is a huge victory for course owners throughout the state,” exclaims Errol Klem, owner of Winchester Golf Club in Winchester, IN and IGCOA president. “The value of a course will now be based on its earnings potential rather than comparable sales or totally arbitrary criteria.”
“Assessors would look at course signage, nicely printed scorecards, an impressive logo, or flower beds leading up to the clubhouse, and say this is a great place. Let’s assess it high,” says Ballinger. “It was supposed to be fair market value, but there really was no rhyme or reason to how courses were being assessed. Some counties have more robust counties than others, some are primarily rural or primarily urban, but none of these critical elements mattered in the way courses were being assessed.”
Successful passage of the legislation was an effort by course owners only. “We didn’t partner with other groups because this was a situation unique to golf courses,” says Klem.
The climax in the whole saga was a 30-minute presentation to the Indiana State Tax Commission in October 2008. “We were able to get that opportunity because of relationships with legislators, particularly a powerful state senator on the commission,” he says. “We were last on an agenda which was devoted primarily to hearings on alleged gas gouging – a hot topic at the time because of the high price of gas. But that probably worked in our favor. The commission welcomed hearing about something else and our presentation was very powerful, persuasive, and to the point.”
In addition to Klem and Ballinger, Linda Rogers, owner of Juday Creek Golf Course in Granger, IN, IGCOA vice president, and a National Golf Course Owners Association board member; Sam Taylor, owner of StonyCreek Golf Club in Noblesville, IN and an IGCOA board member; and Cathy Moritz, owner of Shady Hills Golf Club in Marion, IN and IGCOA treasurer, were driving forces behind the legislation, which eventually was attached to the budget bill to attract as little notice as possible. A separate bill would have been more risky even though, Ballinger says, opposition was non-existent.
About three years ago, Indiana’s property tax assessments went from replacement cost value to fair market value, which allowed assessors to use a comparable sales, cost, or income approach. “But how do you compare sales of golf courses?” asks Ballinger. “There aren’t many course sales to begin with and there are too many variables to say one sale is similar to another.”
As a result, says Rogers, county assessors didn’t use that method and they didn’t understand the income approach. Instead, they went back to replacement cost. “It was a mess,” she says.
“Anytime I could get face time with a legislator, I’d tell them about the plight of course owners in trying to get a fair method of valuing a course for property tax purposes,” says Ballinger.
“We’ve been planting the seed for years with our elected representatives that privately owned golf courses need a level playing field when competing against municipal courses that don’t have to pay taxes or worry about the bottom line,” adds Rogers. “All we wanted was some fairness in the process. Capitalization of income was the only way to arrive at a course’s true market value and property tax assessment.”
It looks as if course owners have achieved that.
The IGCOA is now negotiating with the state’s Department of Local Government Finance to develop a formula utilizing income capitalization rates which may vary from county to county. The state will present an outline of the new assessment procedure at the chapter’s mid-November conference in Indianapolis. “We are trying to attract as many members and non-members as possible to attend that meeting,” says Rogers.
“We think the end result will be very favorable,” says Klem. “The department has been good to work with and we both want to make it as simple as possible for course owners and county assessors, who are responsible for such valuations in Indiana.”
Depending upon the capitalization rate that will be used in his county, Klem estimates he could see a 50% cut in his course’s property taxes. “That’s only my rough calculation and the rates will vary throughout the state, but the outlook is for potentially huge savings for all courses,” he says.
(The IGCOA also is gearing up for the introduction of legislation – probably in early 2010 – that would prohibit the opening of schools earlier than the fourth week of August. School districts now have the authority to open anytime, as long as the school year is 180 days long. According to Randy Ballinger, “opening day has been inching up over the years” so that in many cases it’s now the second week of August, which adversely affects golf courses. The chapter has helped draft the legislation as part of a grassroots effort called Save Indiana Summers that is supported by the tourism industry.)