School and municipal officials are waiting to learn the results of property assessment appeals from hotels that could affect revenue from real estate taxes beginning next year.
The SpringHill Suites by Marriott in Butler and the Fairfield Inn and Suites in Butler Township are seeking lower assessments, arguing that it will take four years to recover from a plunge in occupancy and revenue caused by the COVID-19 pandemic.
The Butler County board of assessment appeals recently held hearings on reassessment petitions filed by the hotels' owners.
They are among 185 commercial and residential assessment appeals filed this year. Hearings on the appeals began Aug. 13 and are scheduled through October.
The board hasn't issued decisions on the SpringHill Suites and Fairfield Inn and Suites appeals for which the city, township and Butler Area School District officials are waiting.
Those appeals are based on property appraisals performed by Valbridge Property Advisors of Pittsburgh. The appraisals include revenue projections for both hotels that said they won't fully recover financially from the COVID-19 shutdown until 2024.
The board has the option of approving those appraisals, lowering the appraised values by a different amount, maintaining current appraisals or raising them, said Amy Francis, chief county assessor.
She said the board's decisions can be appealed to Common Pleas Court.
Construction of the SpringHill Suites by Marriott was funded using tax incremental financing. Through the TIF program, Hari Hotels LLC, the hotel owner, pays 80% of its real estate taxes to the state to repay the financing and the remaining 20% to the city, school district and county.
The county assessment office lists the total assessed value of the hotel at $711,120, including the 20%, or $142,220, that is the basis for the local taxes.
Valbridge's appraisal said the total assessed value is $623,583.
The hotel had an occupancy rate of 66.4% in 2019, but the rate plunged to 40% during the first part of this year due to COVID-19, said Mark Shonberg, a Valbridge appraiser who presented the appraisal information on behalf of the hotel to the board.
He anticipated the occupancy rate will increase to 41% next year, 53% in 2022 and 2023 and 65% in 2024.
Revenue projections are $1 million next year, $1.4 million in 2022 and 2023 and $1.9 million in 2024.
The appraisal estimates the hotel's market value to be $4.5 million, far below the county figure of $7.2 million.
The new assessed value the hotel is seeking isn't included in the appraisal, but it can be calculated by multiplying the market value by the county's 8.6% common level ratio that is set by the Pennsylvania Department of Revenue.
Real estate taxes the hotels pay is calculated by multiplying the assessed values by the school district, city and county tax rates.
Based on the market value in the proposed appraisal, the total assessed value would be $390,010 and 20% of that amount is $78,002.
The school district currently receives $14,795 in real estate taxes annually, but that figure would be reduced to $8,114 if the board approves the hotel's appraisal.
The city currently receives $6,151 in taxes, but the amount would be reduced to $3,373 if the hotel's appraisal is approved.
The county receives $3,928 in taxes now, but that figure would drop to $2,154.
“We're monitoring (the appeals) to make sure we're aware of any reassessment that would significantly impact city revenues,” said Butler Mayor Ben Smith.
Valbridge's assessed value of the Fairfield Inn and Suites is $587,870, which matches the county's assessment.
Shonberg said the hotel's occupancy rate in 2019 was 55%. The proposed appraisal said the rate will be 33.5% next year, 46.7% in 2022 and 2023 and 60% in 2024.
Revenue projections are $795,205 next year, $1.1 million in 2022 and 2023 and $1.5 million in 2024.
The appraisal estimates the market value at $2.5 million, less than half of the current value of $6.8 million.
Currently, the hotel annually pays real estate taxes of $61,156 to the school district, $16,240 to the county and $6,613 to the township.
If the hotel's appraisal is approved, the district would receive $22,455, the county would receive $5,963 and the township would receive $2,428.
“We're definitely monitoring,” said Dave Zarnick, township commissioners' board president.
He said the township is waiting for the board to issue a decision before deciding whether to appeal. All three taxing bodies must agree to accept or appeal the decision, he added.
“We keep a close eye on those things because it would definitely impact our budget,” Zarnick said.
The township is also monitoring some residential assessment appeals, he said.
School district Superintendent Brian White said the district is also watching the appeals.
Nick Morelli, acting business director for the school district, said the taxing bodies would have to hire an appraiser to conduct another appraisal if the decision is appealed.
Assessment appeal hearings have also been held for Hyatt Place and Best Western Plus hotels in Cranberry Township.
Jerry Andree, Cranberry's manager, said the township is waiting for the board to render decisions.