Seaford halts sending of tax bills for second time
By Lynn R. Parks
The man who conducted an audit of the city of Seaford’s property assessment values has been warned by the state to stop his assessment business, as he does not have the proper license.
The Council on Real Estate Appraisers voted at its Feb. 15 meeting to send a letter to Randy Westergren, owner of The Delaware Assessor, Milford, warning him that he needs to be licensed. According to James Collins, director of the Delaware Division of Professional Regulation, if Westergren continues in business, the division will forward a complaint against him to the State Attorney General’s office.
Meanwhile, the city of Seaford has put on hold its property tax rebilling of nearly 900 properties, after receiving a complaint that Westergren’s audit of assessment values in the city was illegal and will be overturned in court.
“I do not believe that the method used by the appraiser in reassessing properties can survive a court challenge,” attorney Stephen Ellis wrote in a letter to the city dated Feb. 10.
Ellis is representing Laurence Moynihan, a certified real estate appraiser and owner of Tidewater Properties in Seaford. Moynihan said last week that if the city persists in adjusting the assessed values based on the audit, he “will initiate a lawsuit.”
“I am very sure of my position,” Moynihan added. “I am giving the city one last shot at changing its position.”
Council has voted on issue
The audit of the city’s assessed values was conducted in 2004 by Westergren. In a report to the city council Dec. 14, Westergren said that he had identified 899 properties, about a third of those in the city, whose owners were paying taxes based on assessments that were too low. The city was losing $246,526 every year in tax revenue, he said.
The city council voted to retroactively bill owners of those properties additional amounts for the 2004-2005 fiscal year, based on Westergren’s values. Tax bills for the 2005-2006 fiscal year, due to go out in September, would also be based on Westergren’s values.
Sharon Drugash, tax assessor for the city, began the billing procedure. That procedure was put on hold in late December after Moynihan sent a letter to the city, complaining that the audit was illegal because Westergren is not a licensed appraiser with the state.
After city attorney Jim Fuqua told city council at its Jan. 25 meeting that the state licensing requirement deals only with appraisals for tax years starting after Aug. 1, 2004, and does not apply to the city’s audit because Seaford’s audit was done for tax year 2004-2005, starting July 1, 2004, the rebilling procedure was started up again.
It was stopped again last week after the city received Ellis’ letter. No corrected tax bills for the 2004-2005 tax year have been mailed.
Auditor’s fee illegal
According to the state law, which went into effect in 2004, anyone doing an appraisal after Aug. 1 must be licensed by the Council on Real Estate Appraisers. Westergren, who calls himself an “assessor” rather than an appraiser, argues that that law does not apply to him. “There is no state licensing for assessors,” he said.
The state defines an appraiser as anyone who “advises, consults or prepares analysis with respect to real estate values, uses, sales, developments or disposition...or renders opinions relevant to the marketability of real estate, as a whole or partial vocation.”
The law also forbids basing a fee for real estate appraisals on the results of the appraisal. Westergren charged the city half of the increased revenue due the city, or $123,263. Half of that amount, $61,631, has already been paid; the other half was to be paid when the billing process is complete.
With his fee based on the property assessments, “how could he be objective?” Moynihan said. “There is no way.”
Any values Westergren came up with are therefore “tainted,” Moynihan added.
Procedure also in question
Moynihan also objects to the procedure Westergren used in his audit: Westergren multiplied the county’s assessment of each property, based on 1974 values, by a little more than three to come up with the city’s assessment, based on 1989 values.
“He did this across the board with no consideration of market data from the base year,” Moynihan wrote in a Jan. 12 letter to the city. “The city paid $123,263 to have someone multiply the county’s assessment for each city property by three. Looks to me like something an $8 [an] hour clerk could do in a few days.”
Westergren said that that procedure is called “multiple regression analysis” and added that it is a “very common practice” when a lot of properties are being assessed at once.
“I categorically reject that,” Moynihan said. “I have never heard of that being done anywhere.”
Similarly, John Brenan, director of research and technical issues for the Appraisal Foundation, Washington, D.C., said that he has never heard of that procedure being done. The foundation is a not-for-profit educational organization dedicated to the advancement of professional valuation.
“That is not something that I’ve seen in my experience,” said Brenan, who has been a certified appraiser for more than 20 years.
Instead, Moynihan said, real estate assessments have to be based on real market data for the year from which values are used to determine taxes, in Seaford’s case 1989. That includes information about how much similar properties sold for in that year. In an assessment, each property must be examined and researched separately, he added.
“The Delaware Supreme Court has determined that real estate tax assessments must be based on fair market value,” attorney Ellis wrote in his Feb. 10 letter. “I do not believe that the method used by Mr. Westergren can survive judicial review.”
Moynihan, who owns two properties in Seaford and would have to pay an additional $320 based on Westergren’s audit, said that he regrets that the city might lose the $62,000 it has already paid Westergren. “I was hoping when I started this that they hadn’t paid him yet,” he said. “I understand that the city can’t afford to lose money.”
As for the nearly quarter of a million dollars that Westergren said the city is losing in tax revenue every year, “they aren’t entitled to that money,” Moynihan said.
Last week, city manager Dolores Slatcher said that the city is awaiting an opinion from its attorney, James Fuqua, before resuming the billings based on Westergren’s audit. Fuqua did not return requests for comment.
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