Industry Today: Assess Reality, Not the Dream in Manufacturing Property Tax
Maximizing a facility’s production through efficient operations, necessary capital investment, and regular maintenance is always critical. Over time, however, equipment and buildings wear out, production processes change, and technology advances outpace capital upgrade.
Through all of these changes, property taxes are often a constant and significant budget item, seen as a non-negotiable cost of doing business. As such, we need to start thinking of property taxes as being negotiable agreements between a facility and the jurisdiction.
This was the key theme of a recent Industry Today guest article by Caroline Miner, Manager, Complex Property Tax, Altus Group.
“Facilities pay taxes for the roads they need to deliver their product and the schools and parks they need to attract a stable workforce,” stated Miner. “Jurisdictions gain income and sales taxes from those employees and, in turn, maintain vibrant communities.”
In addition, she offers a step-by-step approach to negotiating with tax authorities, beginning with an understanding that the value of plant and equipment can be driven more by dynamic markets than depreciation. “Don’t limit your thinking,” she advises.
A property tax appeal is actually a narrative drawn from research and supporting information. By soliciting input from all levels of the manufacturing process – including warehouse and floor production heads – plant and equipment issues can be identified. Data can be leveraged to both determine market factors and define how plant and equipment can cope with them. That data can support the narrative, offering with it the kinds of numbers assessors and appeals boards use in their decisions.
From that information, a real market value assessment can be drawn. Your appeal can demonstrate that your case has long-term impacts and that market dynamics can render a depreciation schedule obsolete.
Perhaps most important here is that the assessors and boards should be convinced that your case offers a win-win outcome, rather than just a win-lose competition. After all, that is the essence of negotiating an agreement.