Dixie Phair, Commercial Real Property Analyst for the Any Municipality County Assessor, was asked about the confusing process of allowing fees & licenses as expenses against income. In response, she first explained that the only true and technical justification for allowing fees & licenses is when they are necessary to occupy or lease a property under Highest and Best Use. Of the following, all but the first two might qualify under Dixie’s test:
|Qualify?||Type of Fee|
|Possibly||Chamber of Commerce dues|
|Yes||Funeral Director license|
|Yes||Real estate associate license (if required to show/lease apartments)|
|Yes||Board of Health fee (for food service, sanitation, safety permits)|
|Yes||Occupancy fee for city permit (office, retail, industrial, multifamily, lodging)|
|Yes||District overlay tax for historic area location|
|Yes||Fire department surcharge for hospital, multifamily, hotel, industrial|
Dixie was then asked the following question: What if the cosmetology license were for a property with a Highest and Best Use as a full service mortuary that would normally offer cosmetology services? To demonstrate how this kind of thing can be drilled down, Dixie explained that while the fees listed above can be a point of argument, they are usually a pretty small part of the whole operating picture.
She also clarified that most expense data collected by property type will have included/allowed some of these types of charges, so both investor calculations of NOI and published expense ratios will likely not have extracted the Chamber of Commerce dues. Dixie then concluded there are two ways to proceed:
Select/deselect these charges on an individual basis per property, which takes time in the assessment process and appeal preparation.
Choose to simply to allow the charges as a matter of practice unless they are significant enough to merit further study.
So while not true and technical as stated above, if you find yourself with a similar dilemma, follow Dixie’s lead and opt for #2. It’s already far too easy to lose a hearing officer’s focus on the big important points. Don’t waste critical time and attention discussing a $50 license fee.