Downtown Miami

Does Genting deserve big tax breaks on its land? County argues no

A rendering of Genting's formerly proposed resort-casino rising above the MacArthur Causeway bridge that spans Biscayne Bay between the mainland and Watson Island.
A rendering of Genting's formerly proposed resort-casino rising above the MacArthur Causeway bridge that spans Biscayne Bay between the mainland and Watson Island. Handout

Genting Group, the Malaysian casino conglomerate that bought the Miami Herald’s bayfront campus in 2011 for $236 million, has reaped more than $2.3 million in property tax savings by repeatedly challenging the property’s tax assessment before an obscure and controversial Miami-Dade County board.

The Value Adjustment Board, a quasi-judicial panel that hears property owners’ appeals on tax assessments, has slashed the county property appraiser’s valuation of Genting’s bayfront land in three consecutive tax years. For the first tax year, 2012, it reduced the assessment for tax purposes to $88 million — a fraction of what Genting paid for it, and a whopping 33 percent less than the initial valuation of $132 million by the property appraiser.

For 2013 and 2014, the VAB cut the county appraiser’s initial valuation by 25 percent and 20 percent, respectively.

That has required Miami-Dade tax authorities to issue Genting’s Resorts World Miami subsidiary $2,322,434 in refunds, with $68,984 more pending, according to figures compiled by the county tax collector’s office.

Those dollar figures reflect the difference between what Genting had already paid in property taxes over three years and the lower amounts owed after the board subsequently reduced the assessed value of the properties. Miami-Dade’s tax authorities also had to kick in 12 percent interest, totaling $255,334, on top of the refunds.

The reductions have come at a time when Miami-Dade land costs have soared to historic highs.

It’s not unusual for property owners to successfully challenge valuations by the property appraiser, and assessed values often lag actual market value because increases on commercial property are legally capped at 10 percent a year until a property is sold. But the reductions in the assessments ordered by the VAB and the resulting refunds and interest payments in the Resorts World cases are unusually large — and almost certainly among the largest ever confronted by the county’s taxing authorities.

The county isn’t happy. The county attorney’s office has now filed three separate lawsuits against Resorts World Miami on behalf of county property appraiser Pedro Garcia, contending the reductions ordered by the VAB are excessive and asking judges to reverse them. Resorts World has responded with a countersuit, arguing that the property appraiser’s office improperly inflated the taxable value of the properties in the first place. No hearings have been held in any of the suits.

If the reductions stand, Resorts World likely would save millions more in property taxes in the future. While the property appraiser can still increase the property’s valuation each year, that assessed value will be lower because of caps and because those new market values will be based on the reduced baseline established by the VAB.

Officials in the Miami-Dade property appraiser’s office and the county attorney’s office declined interview requests, citing the ongoing litigation. Resorts World’s attorneys at Rennert Vogel Mandler & Rodriguez in Miami did not respond to emails and a phone message requesting an interview.

The property-tax suits are not the only litigation between Genting and the county. In April, Genting, which has unsuccessfully sought to build a massive gambling resort on the former Herald property, sued the county and Miami-Dade State Attorney Katherine Fernandez Rundle in an effort to force the state to allow card games and slots on an adjacent site it also owns.

The suit asks a judge to pre-emptively declare it lawful for Gulfstream Park to run a casino at the old Omni under an agreement with Genting. That would would preclude Miami-Dade police and state prosecutors from filing criminal charges against the casino’s operators.

County records indicate that Genting began challenging assessments at the former Herald site shortly after assuming ownership in 2011. The casino group’s holdings there comprise nine separate properties, including the bayfront lot at 1 Herald Plaza that was home to the iconic Miami Herald building, which has been demolished. That lot represents the biggest single chunk of the properties’ total value. The old campus also includes several parking lots and the historic Boulevard Shops building on Biscayne Boulevard, now undergoing renovation.

The VAB, which is established by state law, consists of two members of the Miami-Dade commission, one school-board member and two citizens. The board depends on a pool of special magistrates who are certified appraisers and make recommendations on appeals. Like the property appraiser, the magistrates weigh several factors in arriving at a valuation for a property, including comparable sales, location and what can be built on it.

Some attorneys specialize in VAB appeals and work on contingency, charging clients a percentage of any amount they save them in taxes.

But the system has been controversial. Some critics have alleged that cozy relationships among attorneys and magistrates lead to favored treatment of cases. In 2014, Miami-Dade and school board officials complained that a high number of appeals had led to a massive backlog of pending decisions and tens of millions of dollars in budget shortfalls as taxes collected fell well short of expected revenue. A settlement instituted reforms to speed up cases.

A 2014 state audit report supported a different set of claims: that boards across Florida were rigged against property owners and in favor of preserving revenue for local governments. But it gave a generally good grade to Miami-Dade’s system, concluding it was the one exception that did not unduly favor government.

The report said Miami-Dade’s VAB handled the most taxpayer petitions in the state in 2011 — 91,519 — and granted 49 percent of them.

VAB records show that the Herald’s corporate parent, the McClatchy Company, had unsuccessfully challenged the assessment of $37 million for 1 Herald Plaza in 2010, the tax year previous to Genting’s acquisitions. Most of that represented the value of the land because the assessment put a “token” $100,000 value on the 1963 building, which was considered antiquated.

After the sale to Genting, the property appraiser’s office increased the assessed value of the old building lot for 2011 to $40.9 million. The VAB, though, froze the valuation at the previous $37 million after Genting appealed and a magistrate concluded that comparable sales did not support the hike.

The following tax year, 2012, the property appraiser again tried to up the assessed value of 1 Herald Plaza, to $68 million, and put the total assessed value of all nine lots at $131.7 million. After Genting appealed, the VAB cut that total to $88.3 million, a one-third reduction.

The pattern repeated itself the next two tax years: For 2013, the VAB cut the value of Genting’s holdings from the property appraiser’s preliminary assessment of $132 million to $99 million, a 25 precent cut. For 2014, the VAB again reduced the appraiser’s preliminary valuation of $130 million to $104 million, a 20 percent reduction.

Records of VAB decisions available online provide only bare information and don’t contained detailed arguments over property values. But records in the Resorts World properties cases suggest the casino giant’s attorneys used various arguments in favor of reductions, including sales of comparable waterfront properties that were not specified in the online records. Those sales might supported a reduction if they were at lower prices per square foot or at equivalent values but in better locations or with easier building conditions, for instance.

The records also suggest the attorneys raised issues of ground contamination and limits on how tall Genting could build at the site, which sits directly under Miami International Airport flight paths, given restrictions by the Federal Aviation Administration.

One Miami attorney who specializes in VAB appeals, Barry Sharpe of the Property Tax Appeal Group, said reductions of the proportion Genting won are not unprecedented but are certainly uncommon.

“They definitely sound unusual,” Sharpe said, while stressing that he was not suggesting they’re unjustified. “I’m not privy to the information. But 25 percent is a relatively significant reduction. It’s not typical.”

The tax collector does not compile or compare refund records. But available evidence suggests the Genting refunds dwarf most.

In 2013, while the county and school board were challenging the local VAB system, the Miami-Dade tax collector provided the Miami Herald information on the two largest refunds to property owners at that date based on assessment reductions by the board. Those were $412,000 and $458,000 on two separate properties for a single tax year each. The refund to Genting for the 2012 tax year for 1 Herald Plaza, $572,000, exceeded both by a large margin.

Most clients, Sharpe said, are happy to win a reduction of 10 percent or less, though he said he has on occasion won cuts twice that large. He said determining the assessed value of a property is a subjective exercise, and that skilled attorneys can make a case for a large reduction based not only on comparable sales but other factors that could limit a property’s resale price. Those could include zoning, proximity to busy roads, the view, or the condition of buildings or the land.

Though prices of waterfront land in and around downtown Miami have been soaring, Sharpe said, factors particular to that property could limit how much volume Genting could build on the land or what obstacles the property presents to construction —and thus limit the value of the land.

“The more you can build, the more valuable the land typically is,” Sharpe said.

Garcia’s suits seek a reversal of the VAB decisions for 2012 to 2014 on all nine Resorts World Miami properties.

Garcia also has sought to significantly increase the valuations of Genting’s property, in particular 1 Herald Plaza, apparently on the basis that the VAB’s reductions were invalid. For 2015, his office has upped the taxable value of the former building site to $92.8 million over the previous value of $68 million set by the VAB.

Genting’s attorneys have not filed a VAB appeal on that assessment.