Sneaking Suspicions
Archives-- July 31-August 27, 2006

This page includes posts from July 31-August 27, 2006 in the usual reverse order. Each posting on the home page is perma-linked to these archive pages.

August 26, 2006
How not to do property tax reform

Long time readers of this site know that 1974 was the last time Sussex County, Delaware conducted a reassessment for its property tax system.

As a matter of tax policy, that’s just so wrong.

Considering the very local, very personal politics around here, the failure to re-establish property values for over 32 years is also perfectly understandable.

Wrong, but comprehensible.

Most of the small cities and towns in Sussex County also depend on property taxes. Many of them apparently face the same daunting political risks if they decide to do their own reassessment, instead of continuing to rely on Sussex County’s antiquated valuations.

The City of Seaford eventually gave up on that approach, however, and conducted its own reassessment in 1989. Unfortunately, a lot of folks didn’t care for the results, and the city officials decided to take another stab at it.

In 2004 they entered into what I hope was an unusual “reassessment audit” agreement with R. A. Westergren. The self-described “Delaware Assessor” was to review the 1989 tax rolls and determine which properties were “assessed incorrectly or ... escaping taxation.”

The results of this work recently landed Seaford in Chancery Court, in a case heard by Vice Chancellor John Noble. He issued a decision on August 7 that should be read by city managers and leaders across the state.

It’s essentially a primer on how not to conduct property tax reform, and how best to suggest to your voters instead that perhaps someone else could do a better job than you.

For example, you’d think that when a contract says you’re to determine which properties were assessed incorrectly, you would look for properties that were both undervalued and overvalued, and fix them.

Not this time. In fact, the terms of the agreement gave this re-assessor every reason not to take that approach.

That’s because Westergren was to be paid one-half of the total amount of additional property taxes generated in the first year after he completed his work and the City adopted his new valuations.

Westergren testified at trial that, if he found a property that was assessed unfairly on the high side, he would do nothing about it in his audit. His mission, as the Agreement incentivized him, was to find parcels for which the assessment could be increased.


The other major problem was Westergren’s methodology. Essentially, he compared the 1989 assessment values with the prior 1974 values established on the Sussex County tax rolls for the same parcels. By some mechanism that allegedly used multiple regression analysis, he determined that multiplying the 1974 values by three would bring the assessment up to a fair value for 1989.

(For comparison’s sake, I ran a 1974 $100 value through an online inflation calculator, and the 1989 value was $266.73. This took less than three seconds to determine, without any detailed statistical analysis. I could have just rounded that number up and achieved the same result.)

Westergren then compared the 1989 tax assessments to the newly-tripled 1974 values. If the 1989 value was higher than the recalculated number, he left it in place. If the 1989 value was lower, then he bumped it up to the (1974 times 3) valuation. Roughly one-third of all city properties thus saw an increase in assessed value using this method.

So very simple, eh? And in the view of one of the plaintiffs, a licensed real estate appraiser, so very, very wrong. He complained to the city manager, who began emailing Westergren for an explanation. 

The response was perhaps far more revealing than intended:

As far as appeals, I expect about 1% to file and about half of them to even show up and adjust probably only a hand full [sic]. Most folks will just forward the tax bill to their lender anyway to pay out of their escrow account.

With his quiet flair for irony, Noble referred to another statement in another email:

… Westergren, perhaps wisely, advised the City: “At this point, I would like to refrain from e-mail communications.

I respectfully suggest he did enough damage already, don’t you think?

Shortly after receiving their new assessments, the plaintiffs filed administrative appeals, and also filed this suit. The City, to its credit, held up on the appeal pending the outcome of the Chancery Court litigation, where the plaintiffs sought to wipe out all traces of Westergren’s work. Among other arguments, they pointed out that Westergren was not a licensed real estate appraiser, and that his methodology was so deeply flawed that it violated any fair appraisal standards.

Even so, the Vice-Chancellor agreed with the City’s attorneys, who suggested that the litigants had to first exhaust their administrative remedies by finishing their appeal to the Board of Revision and Appeal—and in this case, the City Council is that Board.

In making this ruling, however, the Court noted that the Board’s responsibilities were broader than perhaps some people thought:

Before the Board, the property owner must confront the presumption that the municipality’s assessment is accurate. Typically, the property owner must rebut the presumption by “evidence of substantial overvaluation.” That presumption, however, is premised upon the regularity—the “fair and impartial” process mandated by the City Charter—of the assessment effort. [notes omitted]….

[T]he Court concludes that the Board may—and, if presented with appropriate evidence, must—consider whether Westergren’s approach, incentives, and attitudes preclude or undermine the presumption of accuracy normally given to the assessor’s conclusions. Moreover, the Board is fully capable of assessing the integrity and the reliability of the procedures employed during the course of the “assessment audit.” [notes omitted].

In addition, the Vice-Chancellor found that the issue of Westergren’s credentials could not be addressed, because state law in effect at the time the City entered into the “reassessment audit” did not require the appraiser’s license. 

The lawsuit thus ended, but Noble’s closing remarks should be well-heeded by Seaford and any other city considering a reassessment of its tax rolls:

One cannot confront Westergren’s methodology—taking the higher of two assessments (one of which has been adjusted by a factor)—and not come away wondering if any semblance of fairness—hopefully not a totally naive aspiration— was buried in an attempt to increase the City’s tax base, all premised on the cynical—but, perhaps, accurate—assumption that property owners would be unable or unlikely to bring effective challenges. The Plaintiffs’ efforts, however commendable they are, fail in this venue because questions regarding the fairness, impartiality, and accuracy of the reassessment process should first be evaluated by the Board on which the primary responsibility for decisions of this nature has been conferred.

Reading between the lines, that is a pretty clear signal that the administrative appeal process should look very favorably on this particular appeal, and that the City officials would be well-advised to start all over again.

Maybe the next time, they will insist on using someone with an appraiser’s license, and use a compensation scheme that doesn’t encourage the expert to fudge around.


August 24, 2006
Recommended viewing and reading

Last night I caught most of a C-Span presentation of a discussion held at the National Press Club about the aftermath of last year's hurricane disaster on the Gulf Coast, now at its one-year anniversary.

It's well worth your viewing, if that's possible. The links to the video clip at the C-Span web site weren't working all that well the last time I tried.

I especially recommend the speech by Jonathan Rauch of the National Journal, describing the myriad difficulties of the folks living in St. Bernard Parish, just east of New Orleans. As an attorney who spends much of his time assisting his government client through the various regulatory mazes set up to control how it meets its mission, Rauch's compelling depiction of the totally dysfunctional bureaucratic nightmare facing those who want to clean up, fix up, and move on was particularly impressive.

Rauch's speech showed that the usual framework of regulations and laws that control the land use development and management process are now acting as a second, equally devastating flood over St. Bernard Parish. He suggests an alternative regulatory framework to be used in re-building communities hit this hard by natural disasters that is well worth considering.

Here's a link to a related Katrina piece Rauch wrote for the National Journal's August 11 issue that makes much the same argument.

August 21, 2006
The book meme

Mike Mahaffie tagged me with this meme, and since it’s about books I didn’t really have a choice in accepting the appointment.

One book that changed your life: George Gilder’s Wealth & Poverty was the first general book on macroeconomics that I had ever read, my prior interests at that point being primarily historical or literary. His discussion of the potlatch and his moral defense of capitalism has stayed with me for well over two decades, and continues to influence my thinking on a wide range of social issues.

One book that you’ve read more than once: I have lost count of the number of times I have read Kenneth Grahame’s Wind in the Willows, especially as enhanced by Ernest Shepard’s illustrations. It has to easily exceed two dozen.

One book you’d want on a desert island: Since being first assigned to read Herman Melville’s Moby Dick in a college course on 19th Century American Literature, I’ve tried several times to read it all the way through, and never succeeded. I don't believe this has happened with any other book I have ever read. Perhaps if I’m stuck on an island I would actually finish it.

One book that made you laugh: Dave Barry’s Big Trouble hurt my ribs during several chapters.

One book that made you cry: Anne Tyler’s Accidental Tourist had that effect on me the first time I read it.

One book that you wish had been written: Recapturing the Soul of the Democratic Party, by the ghost of Henry M. Jackson (see this book if you’re not familiar with him).

One book that you wish had never been written: Karl Marx’s Das Kapital was a primary source of the world’s misery in the twentieth century. That may not be fair, in that some of the same persons who used the book to justify their tyranny may have latched onto some other polemic for the same purposes, but we’ll never know.

One book you are currently reading: David Owen’s Sheetrock & Shellac: A Thinking Person’s Guide to the Art and Science of Home Improvement. Mrs. Schranck bought it for me—perhaps she has something in mind.

One book you’ve been meaning to read: We’ve had a copy of Charlie Wilson’s War on our bookshelves for a while now, and I’m still intending to read it.

Tag five others: Not right now, thanks. Maybe later, if I'm feeling mischievous.

August 20, 2006
A Way or two to go

Last month I noticed a new street sign on my way back from a trial in Seaford, and wrote about it here.

Somehow I missed seeing two other nearby signs on that occasion. Earlier this month I saw them for the first time after completing my trial calendar in the same court:

I assume that the owners of the sign on the right have cleared it with the proper authority.

August 20, 2006
So while I was away

Sometimes it's kind of stunning how a month can slip away from your intentions to post at your blog.

It's not like I wasn't busy, though.

After my last post here, I took off for the annual legal conference of transportation lawyers held by the Transportation Research Board in Chicago.

The conference itself was, as usual, both extremely practical and a pleasant reunion of the folks who share my legal specialty.

There were other notable features of the trip.

It’s not hard to spook the security people at the Crate and Barrel store on Michigan Avenue. I took a couple photographs of a piece of furniture that looked like a promising place to keep our audio equipment, since my bride had not accompanied me to Chicago. A (non-uniformed) guard rushed up and warned me that it wasn’t allowed. Once he explained that the rule was for security reasons, I didn’t have any problem complying, and there were no efforts to delete my digital images. It was a bit startling, though.

I ate three meals at the Heaven on Seven Restaurant on Rush Street. During two of them I sat at the bar and from my perch watched three Central American chefs, working with a Central American expediter, prepare a wide assortment of Cajun and Creole dishes at this bustling Chicago eatery. 

This strikes me as one of the great things about America. 

Turtle soup was on the menu, but it seems that not too many folks make that selection, which is their loss. The waitress brought the bowl to me with a bottle of sherry. Instead of simply leaving the bottle there, as is normal for restaurants that serve snapper soup on the Delmarva Peninsula, she then proceeded to explain to me how sherry is used to flavor the soup, and then ask me if I’d like to try it. The teaspoon she carefully put on top of the broth was fine, but it would have been at least a tablespoon if I had my hand on the bottle.

I also took advantage of a scheduled afternoon off from the TRB conference to attend a matinee performance of Imagine Tap!, held at the Harris Theater in Millenium Park. The dancers were incredibly talented, but the show itself was pretty sparsely attended. I hope that was an anomaly, and that the troupe figures out a way to take the show on a national tour. That kind of dancing skill deserves a wider audience.

I also spent an hour or so at the Jazz Record Mart. I don’t know if Nick Hornsby used this amazing store as the inspiration for High Fidelity, but that’s what came immediately to mind as I walked into the place. The fact that I was able to find and purchase a CD by the New Orleans Ragtime Orchestra was an added, unexpected bonus.

Work picked up in earnest after the trip to Chicago, which also had its effect on posting here. 

In mid-July, for example, two persons and at least one civic association sued the state, a school district, the government of New Castle County, and the Talleyville Girls Softball League. I represented the State of Delaware in the Chancery Court case, where the plaintiffs sought a preliminary injunction to halt the planning and construction process of converting a former school site into an 11-acre, four-field place the League could call its own. All of the Defendants moved to dismiss the case. We filed our legal briefs on August 4 and 11, and the Plaintiffs filed their brief on August 8. We made our oral arguments before Vice-Chancellor Stephen Lamb on August 15, which took a couple hours. We should soon hear what he thinks of our position in the case, which involved several challenges under the State and Federal constitutions against the General Assembly.

In the meantime, there were the weekly deadlines for the golf column. For those interested, here are the links to the most recent weekly pieces that were not book reviews:

Playing with the good ones
August 18, 2006

Heat wave takes toll on Cape Region golf
August 4, 2006

Hot enough for golf?
July 21, 2006

Three generations of golfing Schabs
July 14, 2006

The busy hours at my regular work also cut into time to write new golf book reviews, but I did manage to finish a new one today.

Murder in the Rough: Original Tales of Bad Shots, Terrible Lies, and Other Deadly Handicaps is edited by Otto Penzler. It's a collection of fifteen new short stories centered on golf and other crimes, written by some very good artisans of the mystery genre.

Things did calm down a bit around here after oral argument last Tuesday, and we went out for a short boat ride near sunset on Thursday evening:

Sunset Rehoboth Bay August 17, 2006

No matter how busy you are, it always helps if you can end your day on a pleasant, peaceful note.


Contact Information:

Fritz Schranck
P.O. Box 88
Nassau, DE  19969

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© Frederick H. Schranck 2002-2006