How New Bedford landlords negotiate six-figure tax refunds

NEW BEDFORD — Why did downtown landlord Rick Miller pocket hundreds of thousands of dollars in tax refunds?

No one will say.

Miller owns some of New Bedford’s most prominent downtown real estate: The former Webster Bank building that towers over Union Street, the former New Bedford Institution For Savings that’s now a coworking space for renewable energy businesses, and the historic Times and Olympia buildings. His portfolio, which he shares with his wife, Rose Miller, includes over two dozen properties.

And over the past four years, New Bedford has given him over $366,000 in refunds on his property taxes, according to records obtained by The Light. The payments stem from legal settlements Miller reached with the city after appealing his tax bill.

Miller received more refunds than any other property owner in the city, but his are just one slice of a larger pie. Since 2020, New Bedford has given back nearly $1 million to resolve tax appeals brought by commercial landlords.

But the reasons for the settlements are secret. None of the main players involved in negotiating the settlements would say why the city gave out the refunds.

Miller declined to answer any questions about the settlements when contacted by The Light last month, saying he didn’t even want to be mentioned in the story. None of the other people or companies that received large refunds returned requests for comment.

A lawyer who represented most of the property owners declined to comment on specific cases. 

The city’s Board of Assessors only discusses settlements in secret executive sessions.

City assessing staff initially said during an interview that they might be able to provide explanations for the largest abatements, but a city spokesperson later backtracked, saying the negotiations are not public.

“We don’t want to compromise our position on any future potential appeals,” city spokesperson Jonathan Darling wrote in a text message to The Light.

During the interview, assessing staff said Miller might have received so many abatements because he owns so much property, but they said they couldn’t remember the exact reasons. 

The city resisted releasing copies of the settlements for five months after The Light requested them in December 2023, even though the settlements are public records and state law normally requires such records to be provided in 10 business days. The city asked The Light to pay a $175 processing fee after nearly two months of negotiation, but the state Supervisor of Records determined that the fee was legally invalid and ordered the city to provide the settlements.

Finally, in April, the city released 13 pages of settlement records. The documents contained basic information like the parcel numbers and revised values, but not the rationale for the agreements.

Another records request by The Light for refund data later revealed that at least 25 settlements have resulted in refunds since 2020, more than the 13 the city released. The city says it has released all the agreements it has on file.

It’s in the city’s best interest to be transparent about tax abatements, said Mary Connaughton, director of government transparency at the Pioneer Institute, a Massachusetts think tank.

“Not cluing in residents about these deals erodes the public trust,” Connaughton said in a written statement. “They are left to feel that abatements are an insiders game.”

But lawyers who litigate these cases at the state’s Appellate Tax Board say the reasons for the settlements should be private. Commercial properties are valued based on their income and expenses, details that landlords generally don’t want to be made public. And the city is barred by law from disclosing those numbers for individual properties.

In total, New Bedford has given back $982,485 in abatements as part of tax settlements since 2020, city abatement data shows. That’s not a high number for a city like New Bedford, according to city assessing staff — it represents a fraction of 1% of the tax revenue the city brought in during those years. Outside experts agreed.

“I can tell you, it’s a very good return,” said Pam Davis, a retired assessor who works as a consultant to the city’s assessing department.

None of the properties that received refunds are owner-occupied homes — they include office buildings, strip malls, storefronts, and manufacturing buildings. In total, 15 property owners received sums ranging from $7,222 to Miller’s $366,000.

A South End strip mall at 1331-1335 Cove Road received abatements totaling $154,746. A representative for the building’s owner, TRT New Bedford LLC, said the property’s tenant is responsible for taxes and would have received the refund. The tenant, a church called New Life South Coast, did not respond to a request for comment. 

The Virginia-based Wheeler Real Estate Investment Trust received a single abatement of $121,591 for its 950 Kings Highway strip mall. A representative for the company did not respond to a request for comment.

The Washington, D.C.-based lawyer Judith L. Harris received abatements adding up to $83,672 for the former bank building at 174 Union St. — which Miller now owns — and some related parcels. Harris did not respond to a request for comment.

How settlements are reached

The process starts when a property owner gets their tax bill and decides to dispute it. Most often, the owner argues that their property was overvalued. They can also dispute the property’s classification or whether it was valued equitably compared to similar properties.

“There’s a million reasons why an assessment would be off and an abatement would be granted because of that,” said Kathleen Costello, the former Mattapoisett assessor and executive director of the Massachusetts Association of Assessing Officers.

Sometimes assessors made a mistake or didn’t have the right information, leading to a wrong assessment. Other times, the property owner just wants a lower tax bill and is “throwing spaghetti at the wall to see what sticks,” Costello said. 

In New Bedford, some property owners file appeals for every property they own, Davis said.

The property owner submits an application to the city assessor for an abatement. The assessor decides whether or not to grant it. If the city denies them, the property owner can appeal to the state’s Appellate Tax Board.

This is when settlement negotiations begin.

“Part of the negotiations involve what each side is ready and able to prove, and how much effort it will take,” said Richard Jones, a tax lawyer.

The board operates much like a court. It holds hearings, evaluates evidence, and rules on cases when parties can’t agree. But few cases ever go to trial.

Instead, in most cases, the property owner and city settle by coming to an agreement on what the property is worth. Market data can help get them close to a number, but even then, it depends on what data they use and how they interpret it.

“The value of a property — it’s an art, not a science,” said David Saliba, a property tax lawyer.

And that’s why, when a commercial landlord gets their tax bill, they may see room for negotiation.

Valuing a commercial property is much more complicated than valuing a single-family home, experts said. For a home, it’s easy to find similar properties in the same neighborhood that recently sold and use those sales prices to get a sense of the market.

But commercial properties tend to be more unique. How many eight-story office towers with harbor views in the heart of downtown can one city have? Oftentimes, there just aren’t any recent, comparable sales.

The income-generating nature of commercial real estate adds a whole new dimension. Property assessments represent what a willing buyer would pay for it on the open market. How much a buyer is willing to pay depends on how much income the property can generate.

It comes down to income minus expenses. The income of a property depends on how much the owner can ask for in rent. Data on a property owner’s leases and other leases in the area can help assessors come up with that number. Expenses include the cost of upkeep on the building. Other outside factors, like interest rates, also impact the value.

Aspects of a property like its vacancy rate and the state of the building are part of the discussion, experts said. But value is really about how much potential income a property could generate, not how much income it’s actually generating. Just because one property is more or less profitable than the rest of the market doesn’t mean it gets a higher or lower assessment. 

“The market is really what’s key,” Saliba said.

Assessors try to get a sense of the market by sending out forms that ask property owners for their income and expenses. The owners are required to complete the form every year, or face a fine of up to $250.

But in New Bedford, only about one in every five of those forms is sent back, assessing staff said. Other communities across the state face the same problem, they said.

Davis said some property owners might fear that returning the form could directly impact their assessment, but the forms aren’t used to value each specific property. Instead, the city aggregates the data into categories like warehouses and shopping malls, then uses that data to estimate the “norm” within each category.

Property owners might also fear that the information in the forms could become public, Davis said, but the city is required by law to keep the information private.

When New Bedford’s assessing staff can’t get enough income and expense data from within the city, they have to look for data from other communities, which is less accurate. And that can lead to more abatements and settlements, experts say.

“It’s like tying a hand behind your back,” Davis said.

After a property owner files an Appellate Tax Board appeal, the next step is to exchange information with the assessor to show why the assessment may have been wrong. But when New Bedford’s assessing staff ask property owners for more information at this stage, they usually don’t get everything they ask for, Davis said. If they ask for documentation of all income and expenses, the property owner’s lawyer might send them back a copy of the lease.

Despite the city’s information deficit, Davis says she feels “fairly confident” about the final values reached in the city’s settlements. 

“We're not doing it blind,” she said. “Do we feel like we’re giving away the store? No.”

Why cases settle

The vast majority of Appellate Tax Board cases settle, and the board encourages it.

“No one has the capacity to try all these cases,” Saiba said. “It’s expensive, it’s time-consuming, and sometimes they realize that they're not all right or not all wrong.”

When cases go to trial, both sides have to hire an appraiser, which can cost tens of thousands of dollars. Legal representation can add even more costs. 

“That’s why settling is not necessarily a bad thing,” said Bill Mitchell, the assessor for North Andover and the president of the Massachusetts Association of Assessing Officers. “Sometimes it can be in the best interest of the town.”

Cities set aside money every year for abatements in what’s called an “overlay” account, Mitchell said. If there’s enough money in the account to cover a settlement, that might be a more attractive option than the costs and risk of a trial.

The main risk: uncertainty. There’s no way to predict how the board will rule. Settlements are attractive because both sides know exactly what they’re getting, experts said.

Municipalities also have to pay 8% annual interest on any tax refund ordered by the board — another reason why it can be better for the city to settle, Davis said.

Whether municipalities decide to settle or take cases to trial, taxpayers will have to pay the costs, said Costello, the former Mattapoisett assessor.

“You have to look at whether or not this is expedient [to settle], or if this is something you should be drawing a line in the sand on,” she said.

Costello said she would take cases to trial if she thought her assessment was right. But she said it’s best to settle cases right away if there was a misunderstanding or a mistake on the municipality’s part.

The fact that New Bedford has only settled cases over the last few years, never going to trial, suggests that there were inaccuracies in the assessments, she said.

“It’s data that gives you good numbers,” Costello said. “Doesn't matter how good an assessor you are if your data is off.”

As assessors struggle to gather information on property owners’ income and expenses, a growing “army” of tax consultants gathers private-sector data to file abatements on behalf of their business clients, Mitchell said. When they present this data during the appeals process, assessors usually decide to settle, he said.

“That’s gotten worse and it’s only gonna get worse,” he said. “We are certainly at a disadvantage."

Why the reasons for settlements are secret

Both tax lawyers and assessors say the reasons for the settlements should stay secret.

The city is legally required to keep the contents of income and expense forms confidential. But the city’s incentives go beyond that, experts said. 

“The assessors don't want to advertise that they may have gotten something wrong on a certain property, because it may attract attention from other taxpayers,” said Saliba, the property tax lawyer.

Indeed, during an interview with The Light, Davis went off the record to discuss one category of property in the city that is particularly difficult to assess. She asked that her comments on that category not be printed because it might cause every property owner in that category to apply for an abatement.

Municipalities should protect private tax information, Mitchell said. 

Mark Murphy, a tax lawyer who has represented clients in New Bedford, said property owners would suffer if the reasons for their tax settlements were made public.

“If all the rents you’re getting are available to any prospective tenant, then [the tenant is] going to gain a huge advantage in any negotiation in what they’re going to pay in rent,” Murphy said.

Another challenge for assessors

New Bedford has lacked a permanent assessor for two years. The city has received some applications, but none of the candidates were experienced enough to accurately assess the wide range of properties in New Bedford, Davis said.

Judy Serdahl is currently the city’s acting chief assessor. Davis, who retired from the assessor position last year, is helping as a consultant. Davis is highly respected among her colleagues, who say her level of expertise will be hard to replace.

The office is understaffed, city officials said, and there’s a statewide shortage of assessors.

“Nobody says, ‘I want to grow up and be an assessor,’” Serdahl said.

Costello called it the “graying out” of the profession. There aren’t enough young workers going into assessing to replace the seasoned assessors who are now retiring, leaving some assessing offices across the state understaffed and overworked.

“You’re drinking from a fire hose; you’re going to make mistakes,” she said.

Hiring an assessor in 2024 is a cutthroat game. Costello described the experience of one colleague who was poached from his job by another town that gave him “an offer he couldn’t refuse.” New Bedford is already behind in the hiring game because it has a residency requirement for department heads, she said.

Despite short staffing and a persistent deficit of information, city officials say the assessing department does a good job. They say the employees work long hours to complete all their duties, and there is a healthy reserve of money to cover settlements and abatements.

“Our assessing team here is amazing,” said Darling, the city spokesperson, during The Light’s interview with assessing staff. “It’s something that the mayor is proud of, and the residents in the city …”

“Kinda!” Davis interjected, laughing. “We don’t have people coming in, saying ‘Gee, thank you, we’re so grateful.’”

Email Grace Ferguson at gferguson@newbedfordlight.org

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