Are you facing high property taxes? As with any car wash operator, your commercial property taxes are your largest cost of occupancy – a cost that many accept without question.
County assessors control 40 percent of your annual occupancy costs through property assessments, and more than 90 percent of real estate holdings are over-assessed. An owner can increase property values by reducing their operating costs, so the impact of challenging and winning a property tax appeal is significant when it comes to cash flow and ultimately the value of your company.
A strategic property management plan ensures assessments are reviewed annually and challenged to preserve corporate cash. The problem is, few companies — even those with the largest real estate holdings — have the inside expertise, talent or time to tackle this massive expense that directly impacts the bottom line. Too often corporate real estate taxes are treated as just another line-item expense, when, in fact, there are many opportunities to significantly reduce your company’s largest cost of occupancy and its largest state and local corporate tax obligation.
However, property taxes are complex and vary from state-to-state. It takes highly specific knowledge of jurisdiction requirements, expertise in the valuation of commercial properties, as well as time to research, assess and unlock the most advantageous tax-savings opportunities. Most businesses do not have these internal resources and should consider bringing in outside expertise to evaluate property taxes.
If you know where to focus your efforts, however, you could drastically reduce your property taxes and your cost of occupancy. Explore the following actions you should take and their potential impact on your expenses.
Encourage capital expenditures
In business, you have to spend money to make money. That principle also holds true with your cost of occupancy. Capital expenditures may cost your car wash operation money up-front, but these expenses hold long-term value.
Consider the example of a car wash operating in outdated facilities with obsolete equipment. If that company invests in a new facility, which comfortably accommodates its business and new technology to provide a better car wash with less effort, they’ll increase productivity and ultimately cash flow.
Review your property assessments
While you can’t control the fact that you have to pay property taxes, you do have a right to appeal assessment increases and potentially decrease the amount you owe. Numerous properties nationwide are over-assessed every year. The best way to protect your company against high property taxes is to regularly review your property’s assessed values.
Take time to re-evaluate the jurisdiction’s assessments to determine if you’ve been over-assessed. Appeal deadlines are relatively short, ranging anywhere from 15 to 40 days from the date of the assessment, so take note of your jurisdiction’s deadline. You must still pay the property tax in full by the due date, but with a successful appeal you could be awarded a drastic refund.
Consider outsourcing your tax management
According to a report published by IBM and CFO Research, 44 percent of finance executives state that effective management of corporate real estate assets is the most important factor for reducing costs. Effectively managing commercial property taxes should be a high priority for any business. However, the property tax appeal and management process is a complex one, whether you’re operating in one state or many.
Jurisdictions have rigid regulations. Deadlines are short. Preparing for an appeal is time-consuming. Consider outsourcing your property tax management needs to experts. It’s often best to put the burdensome task of commercial property tax management in the hands of experienced professionals who know how to handle it strategically and conduct proper appeals.
Your cost of occupancy is not a fixed expense. Too many business owners in the car wash industry accept what they owe in property taxes without taking strides to appeal their assessments. By taking a more strategic approach to your property taxes, you could reap the benefit of significant savings.
Anne Joyner Sheehan, CRE, MAI, is the owner and CEO of Real Property Tax Advisors, a national firm that assists businesses in managing the risk of their property taxes for their real estate assets. Sheehan has over three decades of experience in the commercial real estate industry as a property tax consultant, real estate appraiser, review appraiser and commercial real estate broker.
