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Signs of Inequity

Springfield taxpayers sue the city for allegedly undervaluing billboards and cell towers.

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Thursday, June 06, 2013

The billboard business is a lucrative one; according to rate sheets from Lamar Advertising, the corporation that owns the majority of boards in Springfield, a standard-sized sign on a major roadway in this market rents for between $5,850 to $6,500 per panel for four weeks. Smaller signs rent for $1,200 to $1,500 per panel per month, with “junior posters”—the smallest size, often attached to buildings—going for just under $400 per panel a month.

If Springfield officials decide to allow digital billboards in the city—two applications for permits are now pending—those signs will command even higher rates.

But according to a recently filed lawsuit, the city is not reaping all the benefits it could from local billboards, or from the cell phone towers in the city. Rather, the suit charges, the city’s assessors “have intentionally under-valued parcels which host billboards, cell towers and cell antennae within Springfield by using methods of valuation which are discriminatory and illegal.” And as a result, the suit says, other property owners in the city are left “bearing more than their fair share of Springfield’s municipal tax burden.”

 

The lawsuit, filed this spring in Superior Court, is a so-called “10-taxpayer” case, filed under a Massachusetts law that allows a group of at least 10 taxpayers to sue a municipality for using illegal means to raise revenue. In this case, the plaintiffs contend that the Springfield assessors, by undervaluing properties that hold billboards and cell towers, are under-taxing those property owners and over-taxing others.

The suit actually counts 20 plaintiffs, among them a number of well-known civic activists as well as former School Committee member Bob McCollum. The lead plaintiff is Russell Seelig of Forest Park, who owns a number of investment properties in the city and who has been agitating about billboard valuations for almost a decade.

Seelig first picked up the issue in 2004, when he volunteered in the city’s Code Enforcement department under the Ryan administration. At the time, the department was looking at ways to raise revenue to hire more building inspectors, including a proposal to charge inspection fees for billboards, Seelig told the Advocate.

That effort ultimately failed. But while working on it, Seelig became aware of how much income billboards generate—income “that should have put their value at something astronomically bigger than what was coming into the city tax rolls,” he said. “So I started this nine-year campaign to get the assessors to value these things at fair value, which is state law.”

Seelig’s campaign included meeting with neighborhood councils and other civic groups to discuss the matter, which is how he found his fellow plaintiffs. He also expanded his research to include properties that host cell towers and antennae, which he believes are undervalued as well.

Seelig suggested that political pressures might be helping keep the parcels’ values low. “The billboard companies nationwide have worked very hard to keep their values down, and they fight very vigorously when someone tries to raise the valuation of billboards,” he said. That includes company representatives making campaign donations to politicians who regulate the industry.

 

The lawsuit questions the methodology Springfield’s assessors use to determine the value of these parcels, saying they should follow the “income model” recommended by the Mass. Department of Revenue. That method uses the income generated by the structures, such as fees advertisers pay to billboard owners, to determine their value, which is then added to the value of the land to arrive at the parcel’s overall value, on which its tax bill would be based.

The suit offers, by way of example, a hypothetical billboard that generates a net income of $104,000 per panel face per year. After applying a standard commercial capitalization rate of about 10 percent, the fair value of that billboard would be approximately $900,000 per side, or $1.8 million for a two-sided board.

Instead, the suit charges, the city has valued billboards at much lower rates, in some cases valuing one-sided billboards at $162,500 and two-sided ones at $325,000. Such valuations “[demonstrate] how the Springfield Assessors can, and have, manipulated values to minimize the tax burden of owners of parcels which host billboards,” the complaint says.

The suit also charges that the assessor undid corrective action instituted by the state-imposed Control Board that oversaw Springfield’s finances from 2004 to 2009. According to an example offered in the suit, the Control Board had “compelled” the assessors to increase the valuation of one billboard from $44,000 to $800,000. That resulted in the entire parcel’s valuation increasing from about $1 million to almost $1.8 million. But not long after the Control Board was dissolved, the suit says, the assessors reduced the valuation of that land from $973,900 to just $116,400. While the valuation of the billboard remained the same, the dramatic drop in the land’s value meant the overall valuation of the parcel was actually lower than it had been before the time of the Control Board, and lower than all adjacent parcels, according to the suit.

Similarly, the complaint says, the city grossly undervalues cell towers and antenna; while across the river in West Springfield, for instance, cell towers are valued at $157,000 to $188,400 per antenna, in Springfield they are valued at $50,000 per antenna.

Jeff Morneau, an attorney for the plaintiffs, said the case is about equity. “We hope that the assessors take a closer look at the way they’re valuing these parcels … and recognize that the approach that they’re using is not the approach that will generate the most money for the city, and in fact it would be more fair and equitable for them to use a different approach to assessing these properties and parcels than what they’re currently using,” he said.

The lawsuit seeks an injunction ordering the assessors to value the contested parcels “at their full and fair cash value.”

 

Springfield city solicitor Ed Pikula stands behind the assessors’ approach, noting that the Department of Revenue signs off on the city’s valuations every year. “DOR has found the methodology employed to value these properties meets their certification standards,” he told the Advocate.

The assessors use the income method to determine the properties’ value, and have for about five years, according to Pikula. As with all the roughly 40,000 properties in Springfield, the assessors don’t visit each individual billboard site, but instead use a mass-appraisal system, he said; in the case of billboards, that considers factors such as the board’s size and location.

Pikula denied the lawsuit’s contention that the Control Board forced the city to amend its valuation of certain billboard sites; rather, he said, the value of some properties increased as part of a greater effort to raise money. “When the Control Board was here, we, as the city, were reviewing all available means to increase revenue,” he said. That included looking at a billboard on a piece of city-owned land near the old York Street jail by the riverfront, which the city had been renting for $1 a year to Lamar in exchange for the use of one side of the billboard for public service messages. “In the process of reviewing that, we said, ‘Let’s issue [a request for proposals] for the property to see if we can get bidders competing for the right to use this property,’” Pikula said. Lamar submitted the winning bid and now pays the city more than $4,000 a month to lease the property, he said.

That was also around the same time the city moved to the income method of valuation, he said. “We started looking at these [parcels] and said, ‘These are really valuable. How do we evaluate them for tax purposes?’”

And while the city’s methods meet DOR’s approval, Pikula said, the assessors continue to refine the process. “We can continue to look at [whether there are] better ways to do this which will properly assess the full and fair value in accordance with the law that is fair to the taxpayer,” he said. “That’s what we try to do.”

Asked about the example of the fluctuating valuation of the parcel cited in the lawsuit, Pikula said, “I will say the city disagrees with the factual presentation and the legal conclusion.” And, he added, the city is prepared to defend itself against the complaint in court.•

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