Published: July 23, 2011
It is a case that tax lawyers and property appraisers elsewhere in Florida will watch with interest because of the potential for a new legal precedent regarding commercial property assessment. Among the issues likely to be explored is what factors property appraisers should consider when valuing a commercial property.
The lawsuit was filed in 2007, but is now nearing a trial date.
CVS wants assessments on the stores revised for tax years 2005 through 2010. The company claims Property Appraiser Rob Turner over-valued the stores by 10-15 percent. That would translate into $2.5 million in taxes the county could lose if the drug chain wins the case, said Will Shepherd, general counsel for the property appraiser's office.
"It's a big money case," he said.
Besides Turner, other defendants in the case are the state Department of Revenue and the county's Value Adjustment Board. The board hears challenges to county property tax assessments; the revenue department establishes rules of procedure for value adjustment boards.
CVS argues its properties should be assessed, in part, based on what comparable properties are selling for in the same area.
But Shepherd said the company is basing it assessment on what it got for former Eckerd drug stores that CVS acquired in 2004, then sold. The former Eckerd stores brought about half the amount of money it would cost to acquire land and build a new drug store.
Shepherd claims those sales are not a true marker because CVS put a stipulation in the sales contracts that prohibits the stores from being used as drug stores by future owners.
That devalues the properties, Shepherd said, because drug stores are generally built specifically for that purpose on lots larger than is generally needed for other retail stores such as banks, gas stations and auto supply stores.
Therefore, Shepherd said, the sales contract prohibition effectively lowers the value of the property because it won't be used for what it was intended: a drug store.
"They couldn't sell them for that much because they blocked the guy who could pay the most money," Shepherd said. "It's really a case of the highest and best use. You can't block the guy who's likely to pay the most money."
Ben Phipps, attorney for CVS, dismissed Shepherd's argument as "meaningless." Phipps said Walgreen Co., the nation's second largest drug chain after CVS, would probably already have a site nearby and wouldn't be a likely buyer when CVS sells a store it doesn't need.
"What they're saying is, 'You could sell it to Walgreen and Walgreen would pay you more for it,'" Phipps said. "That's not true because Walgreen is already there. Wherever there's a CVS, there's a Walgreen nearby."
Phipps said the county is wrong in trying to value a building and lot based on what type of business is there. He said the state of Florida and most property appraisers value commercial properties as if they were vacant and ready to lease at market rent.
However, among the factors that the state constitution says property appraisers should consider is income from a property and its highest and best use. Shepherd said he will argue that the highest and best uses of the 35 CVS properties are as drug stores.
Phipps said this issue has come up in other states, but he expects the coming trial in Tampa to have more precedential value because experts on both sides will get an opportunity to testify in depth.
"The same issues have been raised before but not at the level and not with the sophistication that they will be in this case," he said.
CVS is asking the court to set aside the assessments, establish new assessments based on what the company believes are legal methods, and refund the difference. The company is also asking the county to pay legal fees. Attorneys for the two sides will hold a preliminary meeting with Circuit Judge Bernard Silver on Aug. 3 to discuss a trial date.
For Property Tax Appeal Help: www.PTAGflorida.com
Tampa Bay Online