Most owners of diverse real estate holdings would jump at the chance to organize their property tax records and be able to access tax-related information for specific properties easily. And all owners of real estate would want to reduce their property tax burden wherever possible. Users of Property Tax Office (PTO), a software program from MultiPoint National Property Tax, LLC, can do just that and save users money at the same time, according to MultiPoint’s president, Richard Nearhood, a tax attorney in Scottsdale, Ariz.
Nearhood (below) purchased the company WHAT YEAR? that marketed PTO after investigating the property tax management software market. Of just a handful of such software programs on the market, PTO is unique in that it is a real property tax management system rather than a personal property tax system. The latter is based on an accounting and inventory of existing personal property. Jurisdictions that levy personal property tax require and collect a rendition of property holdings, convert the inventory into a list of taxable property, apply a depreciation schedule and value and levy the tax based on the fixed asset schedule.
“Our system was designed to keep track of all the essential elements and components of the real estate, the assessments and appeals, as well as prepare budgets and tax projections and other things real estate owners need,” says Nearhood. PTO is a true multi-jurisdictional system, which also distinguishes it from other property tax system, Nearhood relates. The software handles tax rules and rules changes associated with more than 80,000 state and local taxing jurisdictions across the entire United States.
The current version of the software was completed in March 1998. PTO Online is a companion product that users access via the Internet under an outsourcing arrangement with MultiPoint. These clients log onto MultiPoint’s server in Scottsdale to review their property tax records and download reports, and MultiPoint staff manage the property records and other data management tasks.
Cost Benefit Analysis
Users of PTO primarily are real estate investment trusts (REITs), including Equity Office in Chicago. PTO Online users also include REITs that prefer the outsourcing option, as well as non-real-estate-related companies with extensive real estate holdings. Corporate real estate departments are a logical market for the product in cases where the complexity of the real estate assets can justify the cash outlay. Purchasing PTO for use in-house costs about US$200,000. Nearhood says this isn’t such a stretch given the diverse costs associated with hiring internal and/or external experts to manage the property tax function.
“One prospect told me he uses one outside consultant for an appeal in Indiana and another one for an appeal in Missouri,” Nearhood illustrates. “For questions about a tax bill, he calls accounts payable in the right region, and he has to call accounting in another region for other properties. For budgeting, he calls different people in property management who convert numbers into the budget. Property projection work is delegated to more outside consultants.” The cost of the record keeping services alone on a per property basis was in the neighborhood of $500 to $1,000 per year, and the company in question owned about 600 properties, Nearhood recalls.
A REIT client with 800 properties had to generate five budgets per year on those properties, using property-specific values and tax rules. The client than had to convert the budget data to a cash flow model and produce reports. Even with electronic spreadsheets, the task was onerous and time-consuming. Nearhood figures the REIT spent about $500 per property per year producing those budgets, costing it about $400,000. PTO runs the numbers using built-in values and rules and can sort the budget reports by asset class or jurisdiction type.
“The REIT wasn’t cognizant of what it was spending internally on this function,” Nearhood says. “PTO represents the same cost savings that other fields have discovered, such as hospitals, which have gone from manual records entirely to largely electronic files. You don’t need three people entering the same information, like a nurse administering a shot to a patient, into a system when entering it once electronically is sufficient, and it’s billed automatically.”
Still, most corporations would likely take the outsourcing option, Nearhood surmises, because the trend is away from licensing major software systems that require maintenance and support. “Companies’ in-house financial and technology people are saying, ‘If you’re going to obtain a high-tech solution, then it’s going to be the online version, not the in-house version, because we don’t want to license and maintain any more software,'” Nearhood explains. Pricing for PTO Online is based on an annual subscription basis and varies according to the number of properties in the portfolio. Nearhood says the range is roughly $150 to $300 per property per year.
Key features of PTO include:
• a simple, mouse-driven graphical user interface;
• a virtual customizable file room for storing property tax files — files are stored in a familiar “tab/file folder” format;
• a secure online environment for retrieving tax files via the Internet;
• dynamic labeling of values and rates based on the conventions of local jurisdictions;
• a tax calculation module; and
• a comprehensive, customizable appeals system based on the relevant jurisdictions’ appeals procedures.
In many cases, customers use the latter feature and other PTO features in appeal cases aimed at reducing corporations’ tax burdens. “It’s a unique opportunity to have the benefit of two disciplines that generally have been pretty far apart,” Nearhood relates. “That is, local, legal expertise and high-tech information.”
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