Big Money Can Avoid Property Taxes….

Thanks to Lobbyists Julie for this post seen in the Plain Dealer

By Michelle Jarboe, The Plain Dealer
on August 12, 2018 at 6:05 AM, updated August 12, 2018 at 9:44 AM
CLEVELAND, Ohio – In April, a Canadian real estate company bought one of downtown Cleveland’s largest apartment buildings, the 407-unit Sphere on East 12th Street.

But no purchase price appears in public records. The sale didn’t produce a conveyance fee, a government-imposed charge on real estate transfers that would have brought in $160,000 to $200,000 on a likely $40 million to $50 million transaction.

Though it’s possible to guess at the price based on a $35.9 million mortgage filing, the cloaked nature of the sale means that Cuyahoga County is missing key data to determine what the property is worth. That makes it harder for the county to raise property taxes on Sphere, which the county’s fiscal office values at only $8.6 million, and tougher for appraisers to treat the building as a benchmark for establishing values for similar downtown properties.

And it’s all completely legal.

In these opaque transactions, real estate investors buy the entity, a limited liability company, that owns a building rather than purchasing the property outright. Such entity sales conceal details about ownership changes and, in turn, limit tax dollars that otherwise would flow to school districts, local governments, libraries and other public beneficiaries.

Entity sales are commonplace in Ohio. But there’s no way to know just how often they happen – or how many millions of tax dollars are at stake every year.

“It’s significant. Big, big money,” said one appraiser, who asked to remain anonymous in order to speak freely. “But it’s impossible to kind of ballpark track. You just don’t know.”

Categories: Real Estate Taxes

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