Adam Siegel
2006-11-29 08:00:00.0
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WASHINGTON -

Fairfax County is not fairly applying real estate assessment rules when it comes to luxury homeowners. Non-luxury homes seem to be assessed far closer to actual sales prices, while tax assessments for many of the county’s high-end homes are far lower than the required “100 percent of the estimated fair market value.”

Fairfax County’s failure to assess luxury homes at full value means lower taxes for wealthy homeowners — and a greater tax burden for everybody else.

On luxury streets in McLean such as Crest Lane, Chain Bridge Road and Ballantrae Farm Drive, one finds numerous examples of homes that appear to be significantly under-assessed relative to their “fair market value.”

For example, on Jan. 12, 2000, Vice President Richard B. Cheney bought a property for $1.35 million on Chain Bridge Road, one of the top-end streets in McLean — one of the richest parts of Fairfax County, which is one of the richest counties in the United States. The 2006 assessment is $1.045 million — or less than 80 percent of what the Cheneys paid for the home.

For the past six years, a time period in which the average Fairfax homeowners’ assessments increased more than 10 percent annually, Cheney’s tax assessments were lower than what he paid for the property in 2000. His land assessment did go up 25 percent this year, but the assessment on the land portion of my property went up 50 percent.

When the Cheneys bought the property, the tax assessment was $841,600 — of which $413,200 was for a structure they immediately had torn down. The 2001 assessment for just the land then fell to $450,000 — a $21,600 increase (less than 5 percent) over the 2000 land value.

To believe that the Cheneys’ tax assessment has been reasonable over the past six years requires an assumption that the land was worth less without the structure than with it — when their first action after purchase was to tear it down. Any Realtor knows a “tear-down” is valuable for the land it sits on; the existing structure actually has negative value because it costs money to have it torn down.

Realtor acquaintances estimated the land value of the Cheney’s property between $2.5 and $6 million. If that estimate is accurate, Cheney has been underpaying his fair share of real estate taxes by anywhere from $15,000 to $50,000 each year for the past six years — while the McLean inside-the-Beltway real estate market was easily averaging 15 percent annual increases.

If one were to take the Cheneys’ $1.35 million purchase price as their own “fair market value” assessment of the land’s value, its fair market value as of Jan. 1, 2006, is $3 to $4.5 million — right in the sweet spot of my realtor acquaintances’ estimates.

Assessments on other luxury homes seem totally out of line with “fair market value.” For example, Carlyle Group chairman Frank Carlucci’s home on Crest Lane is assessed at $340,080 — less than $14,000 higher than it was assessed in 2000 during a period in which the community saw a 10 to 20 percent annual growth in real estate prices.

One might have expected the value of Carlucci’s five-bedroom, 6.5-bath, three-fireplace home to have easily doubled rather than falling behind the general inflation rate. This 2,292-square-foot property also has a tennis court, pool and garage. In contrast, my own four-bedroom, three-bath, 1,695-square-foot home is assessed at $351,780. And, while a lovely home for my family, we sadly have no tennis court, pool or garage.

Similar under-assessments can be found for homes belonging to former Secretary of State Colin Powell (whose appraised value is roughly 50 percent of comparable sales prices in the neighborhood), and Supreme Court Justices Clarence Thomas and Antonin Scalia.

In April, former National Security Advisor Zbigniew Brzezinski faced a rather public discussion over the county’s desire to buy a 240-foot strip of land to build a pedestrian path. The county offered Brzezinski $19,000 for an easement, basing the bid on the $1.7 million appraisal.

As part of the negotiations, Brzezinski argued that the offer wasn’t fair since it was not based on the “actual selling price” of nearby properties. He understood that his taxes were anything but based on the “fair market value” the law requires.

How many millions in tax revenue is Fairfax County leaving uncollected by not fairly assessing luxury homes?

Adam Siegel, who is neither rich nor famous, lives in McLean.