School Districts Across the Country Face Property Tax Refund Exposure

by Franczek Radelet P.C.
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[authors: Ares Dalianis and Scott Metcalf]

It may seem as though paying property tax refunds is only a problem for school districts in Illinois, or perhaps only for school districts in certain parts of Illinois. But school districts across the country face the prospect of having to issue potentially devastating property tax refunds. The Wall Street Journal and The New York Times have recently published articles highlighting the refunds facing school districts in Montana, California, and New York. In some cases the potential refunds facing these school districts are nearly as large as the districts’ total annual budgets.

A recent Wall Street Journal article examined property tax refunds sought by oil refineries in Montana and California. According to that article, half of the $18 million budget of the school district in Laurel, Montana comes from a single oil refinery. The owner of the refinery is seeking refunds of nearly $13 million going back to 2009. And, a Richmond, California school district is currently facing a property tax appeal on an oil refinery that could result in over $150 million in property tax refunds. At issue in these appeals is the profitability of oil refineries, the value of the real estate, and the regulation of the refining process.

A New York Times article, on the other hand, recently reported on the property tax system in New York State. According to the article, the Yorktown Central School District experienced an increase in property tax refunds from $45,000 in the 2008-09 school year to $934,000 in the 2010-11 school year. The superintendent of Hendrick Hudson School District in Montrose, New York stated that since his district does not have cash reserves to cover the payment of property tax refunds his district will have to borrow money to compensate for the $400,000 in property tax refunds expected to impact his district this year. Compounding the problem in New York is that outside of New York City, which reassesses property annually, properties in the rest of the State may not have been reassessed since the 1950s.

With real estate values lower than in previous years and property owners aggressively seeking to save or recover money wherever possible, property tax appeals will continue to impact school districts across the country. While Illinois school districts may have a particular interest in tax appeals due to the State’s heavy reliance on property taxes to fund public education, they are far from alone in dealing with the refunds that can result from these appeals.

 

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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