2. Thought for the day-- 42.7% of all statistics are made up on the spot. Sage Tax Group For Arizona Commercial Mortgage Lenders Association, February 9, 2010 1

3. 2 Commercial Property Values & Taxes – 2011 Tax Year

4. Sage Tax Group For Arizona Commercial Mortgage Lenders Association, February 9, 2010 3Presenting: Garth Bacigalupi is a graduate of Stanford University with a BA in Political Science. Garth served as a Governor-appointed member of the State Board of Equalization where for 10 years he heard tax appeals concerning commercial properties, land and residences. Garth is a 36-year resident of Arizona and has been an Arizona commercial real estate agent since 1986. He is currently a principal with Sage Tax Group, Arizona’s largest home-based property tax consulting firm, and works Maricopa, Yavapai and Coconino Counties.

5. Sage Tax Group For Arizona Commercial Mortgage Lenders Association, February 9, 2010 4 Topics Tax Year 2011 – Timelines: Values & Taxes. A Summary of the Valuation Process. A Summary of the Administrative Appeals Process. Small Claims Court & Tax Court. Tax Calculations: Full Cash & Limited. Your House.

6. More thoughts-- If you think nobody cares…try missing a couple of payments. Depression is merely anger without enthusiasm. Support bacteria…they’re all the culture some people have. Sage Tax Group For Arizona Commercial Mortgage Lenders Association, February 9, 2010 5

7. 6 What’s The Problem? Why Appeal?

8. This building had a 2009 value of $52,049,975 and paid property taxes of $896,338—not including parking structures and associated grounds. Sage Tax Group For Arizona Commercial Mortgage Lenders Association, February 9, 2010 7

9. Tax DistrictPhoneRate/1002009 Tax2008 Tax County Primary Tax602-506-85110.9909$73,170.27$65,087.58 Educational Equalization Tax602-506-85110.3306$24,412.24$0.00 CITY OF PHOENIX 602-262-71660.7664$56,592.69$47,950.64 State Aid Credit $0.00 Elderly Assistance $0.00 School District Tax DistrictPhoneRate/1002009 Tax2008 Tax OSBORN ELEMENTARY 602-707-20001.886$139,266.41$102,714.38 PHOENIX HIGH SCHOOL 602-764-11002.2747$167,968.95$154,932.11 COMMUNITY COLLEGE DIST 480-731-86210.7246$53,506.08$48,858.23 Primary Tax Totals Rate/1002009 Tax2008 Tax 6.9732$514,916.64$419,542.94 Sage Tax Group For Arizona Commercial Mortgage Lenders Association, February 9, 2010 8 2009 Primary Taxes set by government

10. Sage Tax Group For Arizona Commercial Mortgage Lenders Association, February 9, 2010 9 Tax DistrictPhoneRate/1002009 Tax2008 Tax Flood Control 602-506-15010.1367$15,653.52$16,804.42 Central Arizona Water Conservation 623-869-23330.1$11,451.00$12,292.92 Fire602-506-85110.0057$652.70$651.52 Library 602-652-30000.0353$4,042.20$4,339.40 Health Care 602-344-59780.0914$10,466.20$10,522.74 County Overrides 602-506-85110$0.00 City Overrides 602-262-71660$0.00 Secondary taxes set by taxing districts and issues voter approved.

11. Elementary School Overrides 602-707-20000.2991$34,249.90$39,398.82 High School Overrides 602-764-11000.2664$30,505.48$33,289.24 Community College Overrides 480-731-86210$0.00 County Bonds 602-506-85110$0.00 City Bonds 602-262-71661.0536$120,647.73$130,206.57 Elementary School A Bonds 602-707-20000.6981$79,939.43$43,996.36 Elementary School B Bonds 602-707-20000.0808$9,252.44$53,277.56 High School A Bonds 602-764-11000.2872$32,887.24$19,250.71 High School B Bonds 602-764-11000.1168$13,374.71$21,942.80 Community College Bonds 480-731-86210.1598$18,298.65$20,086.78 $381,421.20$406,059.84 Sage Tax Group For Arizona Commercial Mortgage Lenders Association, February 9, 2010 10 Remainder of secondary taxes

12. Education$603,661.5367.3% City/County$250,410.6927.9% Assorted Districts$42,265.624.7% $896,337.84 Sage Tax Group For Arizona Commercial Mortgage Lenders Association, February 9, 2010 11 Taxes by category--$0.67 of every dollar goes to education.

13. Sage Tax Group For Arizona Commercial Mortgage Lenders Association, February 9, 2010 12 The assessor reduced the 2010 value to $45,145,776—Sage appealed this reduced value based on income. Upon appeal the value was reduced to $25,278,315—with taxes falling to $546,988. This reduction led to a 2010 tax savings of $309,464!

14. When combined with the associated parcels: The 2010 full cash value of $60,438,293 including all parcels was reduced to $33,841,000, with total taxes dropping $1,124,904 to $732,284. This tax savings of $392,620 equals $4,362,444 in value when capitalized at 9%. Sage Tax Group For Arizona Commercial Mortgage Lenders Association, February 9, 2010 13

15. Sage Tax Group For Arizona Commercial Mortgage Lenders Association, February 9, 2010 14 Timelines – Why 2011? Tax Year vs. Valuation Date. Valuation Notices Filing Deadlines Notices of Change, Error, Claim

16. Tax Year vs. Valuation Date. January 1, 2010 is the date of the 2011 valuation upon which the tax bill received in September of 2011 will be calculated. Yes, that is correct—there is a 21-month lag in time between the property’s valuation and issuance of the tax bill. Sage Tax Group For Arizona Commercial Mortgage Lenders Association, February 9, 2010 15

17. Sage Tax Group For Arizona Commercial Mortgage Lenders Association, February 9, 2010 16 Maricopa County 2010 Calendar - Feb 12 th :Assessor mails 2011 values. April 13 th :Last day to file appeal. Jun-Oct 15th:Assessor meetings and SBOE hearings. Sept 30 th :Notices of Amended Value. Oct 25 th :Last day to appeal. Nov 1-21:Amended Value hearings. Dec 15 th :Tax Court deadline.

18. Sage Tax Group For Arizona Commercial Mortgage Lenders Association, February 9, 2010 17 Basis of Valuation & Appeal - Market. Cost. Income. Equity. By Statue.

19. Sage Tax Group For Arizona Commercial Mortgage Lenders Association, February 9, 2010 18 Cost – Computer Modeled. Actual Cost. Components.

20. Sage Tax Group For Arizona Commercial Mortgage Lenders Association, February 9, 2010 19 Market - Comparable Sales Similar Use Code Similar Age, Size & Construction Similar Market Area

21. Sage Tax Group For Arizona Commercial Mortgage Lenders Association, February 9, 2010 20 Income Previous 3 Years of Income. Rent Roll and Occupancy History. Dept. of Revenue Form 300. Cap Rates.

22. Sage Tax Group For Arizona Commercial Mortgage Lenders Association, February 9, 2010 21 Equity Similar Properties in Similar Market Areas Should Be Valued Similarly. Your Competitor’s Full Cash Values Do Matter.

23. Sage Tax Group For Arizona Commercial Mortgage Lenders Association, February 9, 2010 22 By Statute - Shopping Centers. Special Use Properties. Trade Zones. Exemptions.

24. Think quick-- The early bird may get the worm, but the second mouse gets the cheese. 99 % of lawyers give the rest a bad name. A day without sunshine is like…night. Sage Tax Group For Arizona Commercial Mortgage Lenders Association, February 9, 2010 23

25. Sage Tax Group For Arizona Commercial Mortgage Lenders Association, February 9, 2010 24 The Administrative Appeal - Who Can Represent You Agency Authorization. Prepare Forms & Evidence. File Timely With Assessor.

26. Sage Tax Group For Arizona Commercial Mortgage Lenders Association, February 9, 2010 25 Meetings & Hearings - Assessor Meeting (A-level). State Board of Equalization (B-level - SBOE).

27. Sage Tax Group For Arizona Commercial Mortgage Lenders Association, February 9, 2010 26 Litigation - Tax Court. Small Claims Court. Cost & Time.

28. Sage Tax Group For Arizona Commercial Mortgage Lenders Association, February 9, 2010 27 Tax Calculations - Full Cash & Limited Values. Assessment Ratios. Limited Value. - Rule A - - Rule B -

29. Sage Tax Group For Arizona Commercial Mortgage Lenders Association, February 9, 2010 28 Ratios Residential: 10% Vacant land: 16% Commercial: 21% for 2011—110% more than residential.

30. Sage Tax Group For Arizona Commercial Mortgage Lenders Association, February 9, 2010 29 Mixed Ratios Properties with a larger than average building to land ratio, or with mixed uses, may qualify for a mixed ratio. By recent statute, a residence may qualify up to 40 acres for a 10% ratio.

31. Sage Tax Group For Arizona Commercial Mortgage Lenders Association, February 9, 2010 30 Tax Calculation FCV times ratio, divided by 100, times the secondary rate. Limited Value times ratio, divided by 100, times the primary rate. Total.

32. Sage Tax Group For Arizona Commercial Mortgage Lenders Association, February 9, 2010 31 Valuations The full cash value (FCV), by statute, equals market value. A statistical analysis allows a 16% leeway. The limited value can increase only 10% per year unless there is a significant change to the property.

33. Sage Tax Group For Arizona Commercial Mortgage Lenders Association, February 9, 2010 32 Your House - Is Your FCV Greater Than Your Purchase Price, or the Sale Price of Similar Homes in Your Neighborhood? Website: Maricopa County Assessor. Your Valuation. Neighboring Values, Square Footage, Lot Plat, Aerial. On-line Forms and Instructions.

34. Sage Tax Group For Arizona Commercial Mortgage Lenders Association, February 9, 2010 33 Summary Valuations and Appeals are becoming increasingly complicated. Evidence Must be as complete as possible. The deadlines are not negotiable. -and- The majority of properties appealed are valued significantly less than similar properties not appealed.

35. And finally-- Inside every older person is a younger person wondering what the hell happened. --and-- He who laughs last…thinks the slowest. Sage Tax Group For Arizona Commercial Mortgage Lenders Association, February 9, 2010 34

36. Sage Tax Group For Arizona Commercial Mortgage Lenders Association, February 9, 2010 35 Where to Get More Information Garth Bacigalupi: (480) 480-231-4259 Website: www.sagetax.comwww.sagetax.com email: garth@sagetax.com.garth@sagetax.com State Board of Equalization: (602) 364-1600 Website: www.sboe.state.az.us/www.sboe.state.az.us/ Maricopa Assessor: (602) 506-3406 Website: www.maricopa.gov/assessor/www.maricopa.gov/assessor/

37. Sage Tax Group For Arizona Commercial Mortgage Lenders Association, February 9, 2010 36 Or go to - www.Sagetax.com