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County Council orders audit of process used to assess value of casinos

This article first appeared in the St. Louis Beacon, Sept. 27, 2011 - St. Louis County's Board of Equalization decided Tuesday to stick with its new assessment for Harrah's casino in Maryland Heights, but to revert to the 2010 assessment for Pinnacle's River City casino in Lemay.

The board's decision came as it rejected county Assessor Jake Zimmerman's higher assessments for both properties, while altering its own much lower assessment for River City.

The upshot: Harrah's assessment is set at $215 million, down from Zimmerman's $502 million. River City's assessment is now set at $270 million, down from Zimmerman's $284 million, but up from the board's initial cut to $164 million.

The board also rejected Zimmerman's call for shifting the whole dispute to the Missouri Tax Commission, which already is considering Pinnacle's earlier challenge of River City's 2010 assessment.

Board chairman Leslie Boardnax said the panel's aim is to approach property values accurately. She added that she lamented that the result could cause some taxing districts to face cuts in projected income while some property owners will see higher property taxes.

Meanwhile, St. Louis County Council chairman Steve Stenger has formally asked for the county auditor to examine Zimmerman's method to come up with the higher values.

Stenger, D-Affton, contends that Zimmerman is to blame for igniting the controversy when his staff changed the method used to assess casinos and then presented its conclusions to the Board of Equalization without documentation.

"It appears as though the assessor's office failed to set forth any evidence with respect to value,'' Stenger said in an interview. "The burden is on the assessor to produce value.''

At the same time, Stenger -- whose district includes River City -- said he wants accurate assessments for the casinos and is concerned about whether the county's earlier valuations might have been too low. But Stenger said such conclusions need to be backed up by specifics.

Stenger faulted Zimmerman's approach since he took office, saying the assessor "apparently knows little about assessments'' and largely has hired new staff who "know nothing about assessments."

Stenger said his aim with the audit is to A) "nail down what happened,'' B) determine what is "best practices'' for assessing casinos, and C) figure out "never to have it happen again."

Broadnax also blasted Zimmerman for attacking the Board of Equalization, asserting at the hearing that he was at fault for "creating a problem and then campaigning against it."

Zimmerman replied, "I hope we're not here to engage in a little bit of theater."

Right before Tuesday's hearing, Zimmerman had held a news conference in his office with fire district and school officials whose budgets were being hurt by the board's earlier decision to slash the assessor's earlier assessments of Harrah's and River City

Several of those officials declared at the news conference, and then testified at the board meeting, that property owners in their districts could well face higher property taxes because the casinos' bills have been cut. In the Hancock Place school district, for example, the residential tax rate could go up as much as 61 cents to cover the district's projected loss of income from River City.

Zimmerman, a former state legislator and lawyer who just took office in April, said he sticks by the higher casino assessments. He says those numbers, reached with the help of a consultant, reflect a more expert look at what the real value of casinos should be.

As for Stenger's order for an audit, Zimmerman told reporters, "I think that's great. This should be an open and transparent process."

Battle Over Numbers And Process

Last spring, the county assessor's office set the value of Harrah's casino at $502 million, more than three times its 2010 assessment of roughly $150 million. As for River City, the assessor's new number of $284 million was slightly above the previous 2010 assessment.

Zimmerman contends that Harrah's has been under-assessed by St. Louis County for years, and that its assessment should be closer to that of Ameristar casino in St. Charles County.

Harrah's disagrees, saying Ameristar is much larger.

In any event, the argument between the casinos and Zimmerman stems from his decision since taking office in April to change the method used to assess the value of casinos.

Zimmerman says the industry standard is to focus on casinos' income -- not just the worth of their physical structures, equipment and furnishings. His office also shifted more of the casinos' value so that their assessments feature larger portions for "personal property,'' which includes equipment but also the barges they float on and the structures erected on those barges.

Harrah's, for example, says the value of its eight barges and the structures on them have a personal property value of $21 million. Zimmerman's office set it at $425 million.

Harrah's lawyer Dan Peters contended that it's unfair to base the value of casinos on the business and income they generate, unless other businesses are treated the same.

Zimmerman replied later by pointing out the window of his county government office, where the view is largely of downtown Clayton businesses. He contended that "for 90 percent of them, their assessment is based on their business income."

As for his change regarding casino assessments, Zimmerman said, "We did it because it's the right way."

Much like residential assessments are based on the sale of comparable homes, Zimmerman said that business assessments should be based, in part, on "what would it be worth if it's sold on the open market."

Broadnax blamed Zimmerman's changes for igniting the controversy. She said his approach may be be superior, but that he needed to bring evidence to back it up.

Zimmerman said his office has rarely produced such documentation for the Board of Equalization, and deputy Sara Howard noted that Harrah's and Pinnacle didn't produce documentation at Tuesday's hearing backing up their claims.

In the case of Pinnacle and River City, Zimmerman said, the assessor's office has assembled documentation for their battle before the state Tax Commission. His office doesn't want to disclose that information ahead of time, he said.

Zimmerman said his office's casino assessments reflect information acquired by a consulting firm that specializes in casino assessments, Hospitality Real Estate Counselors Inc.

The firm is aiding the county in the River City case before the tax commission and helped advise Zimmerman on Harrah's and River City's valuations in 2011.

Stenger, however, contends that Zimmerman's decision to hire the consultant only for 2010, and not 2011, raises questions about the 2011 assessments.

Zimmerman said that 2011 assessments are based on 2010 values, so there's no reason to "waste the taxpayers' money'' to pay the consultant this year.

County Executive Charlie Dooley, who appointed the Board of Equalization members -- but has no control over their actions -- also has faulted Zimmerman for declining to provide the board with more information about his procedures.

Zimmerman said during Tuesday's hearing that he's aware that he's become the prime target in the casino dispute.

"If you want to portray me as the Grinch who stole the children's Christmas candy, go ahead,'' he said, addressing Broadnax. "I don't care who did what here. I just want to get to the right value."

Democratic Backdrop Adds To Tensions

Although all the officials involved deny that politics is influencing their decisions, most of them -- or their allies -- acknowledge that the political backdrop has heightened the perceptions, if not the rhetoric.

In this case, all the major players are Democrats.

Dooley has yet to announce if he's running for re-election in 2014, but allies note that he's raising money. Still, Stenger and Zimmerman already have been been touted as potential challengers to Dooley in the 2014 primary.

Zimmerman dismisses such talk, while Stenger doesn't rule out such a candidacy -- but emphasizes that he's now focused on what could be a combative bid for re-election in 2012. Stenger's district in south St. Louis County is swing territory; he defeated a Republican in 2008.

Zimmerman, meanwhile, is the county's first elected assessor in more than 50 years.

The dispute over the casinos' assessments reflects the first controversy since he took office. The matter also validates the observations of political pundits in 2010 that the county voters' decision to make the assessor post an elective job would also make it political.

Board of Equalization chair Broadnax also is a Democrat and lost to Zimmerman when county Democratic leaders gathered last winter to choose their nominee for assessor.

Broadnax said that episode didn't affect her view of the current dispute. What got her riled at Zimmerman, she said, is that "I took offense at being thrown under the bus."

Stenger said that the Board of Equalization's decision Tuesday should tamp down the controversy. He contended that Zimmerman lost. "At the end of the day, he came to a hatchet fight without a hatchet,'' Stenger said.

Zimmerman and deputy Howard disagree. Said Zimmerman: "While I would have liked to see the board also reconsider their position on Harrah's, it is my hope that today's decision means that both of these cases will now go before the State Tax Commission, which is the appropriate venue in which to deliberate these kinds of complex commercial assessment disputes.

"The bottom line is that the stakes are just too high for the school districts and fire districts to make decisions on these casinos based on a 30-minute hearing -- because if you make a bad ruling, it is the families and businesses of St. Louis County who pay the price."

Jo Mannies has been covering Missouri politics and government for almost four decades, much of that time as a reporter and columnist at the St. Louis Post-Dispatch. She was the first woman to cover St. Louis City Hall, was the newspaper’s second woman sportswriter in its history, and spent four years in the Post-Dispatch Washington Bureau. She joined the St. Louis Beacon in 2009. She has won several local, regional and national awards, and has covered every president since Jimmy Carter. She scared fellow first-graders in the late 1950s when she showed them how close Alaska was to Russia and met Richard M. Nixon when she was in high school. She graduated from Valparaiso University in northwest Indiana, and was the daughter of a high school basketball coach. She is married and has two grown children, both lawyers. She’s a history and movie buff, cultivates a massive flower garden, and bakes banana bread regularly for her colleagues.

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